The Age of Turbulence
In his book, “The Age of Turbulence,” Alan
Greenspan speaks of the inherent tension between stability and the creative
destruction, and accompanying economic growth benefits, of free market
capitalism. He elegantly creates a word
picture of this tension as the difference between
The pace of creative destruction fundamentally alters the individual and collective calculus in regards to risk benefit and, with no structural or environmental offsets, increases risk over benefit calculations. This decreases investment and risk taking, especially for those with the most to lose. As those with the most to lose are in the advanced economies, and these economies have relatively robust social safety nets for the least well off, a double whammy results. Those out of the work force choose to remain so as reentry would result in less pay and security. Those participating in the work force and with capital means choose to preserve their positions against the higher perceived risks of embracing change through less risk taking, global competition and rapid change greatly increasing the risks of those entering the fray.
A triple whammy ensues if nothing is done to correct the perception of elevated risk, in nations with aging populations. A decrease in the labor participation rate ensues as this graying, in the face of an ever increasing pace of change, leads those near to retirement to drop out of the work force rather than reinvent themselves for the nth time and uproot themselves and their families to greener employment pastures.
Granted, Mr. Greenspan’s book is now not contemporary, less so as the pace of change has remained unabated. Having listened intently to his insights, regardless of the calumny heaped on him for our current economic malaise, I would welcome seeing his services sought by an upcoming presidential contender should his mental capacity remain in spite of his advancing years. Given his rather late focus on the international economy, as attested to in his book, and his persistent intellectual curiosity in understanding economic issues as they pertain to our countries well being, I suspect he has some rather good ideas he might share to address current realities.
Those current realities are these. Our national debt, at $18+ Trillion. Our labor participation rate at 30 year lows. Our government dependence rate at nearly 48%. Our real wage growth for median income households stagnant over 15 years. Our total national debt to GDP ratio at around 334%. Our biggest too big to fail banks derivatives liabilities out of sight, and the swaps push out rule abandoned. Add to this a deep seated, persistent distrust in government, a press which is no longer free, a government assault on the rule of law as constitutional principles are systematically made null and void, and a baby boomer generational cohort which, because of all of the above, as well as their greying status, are all too inclined to leave the race to the rats. Having gained a new respect for Mr. Greenspan from reading his book, I suspect some of his recommendations might resemble these.
● Restore the rule of law
► Our nation has sacrificed far too much liberty in the name of security
● Restore trust in our institutions of government
● Restore a truly free, and independent press
● Change risk benefit calculations by providing risk incentives
● Decrease the perception of risk
► Stabilize and under-gird our social safety nets
► Enable change acceptance by providing the hope of individual capability to respond to rapid change
► Decrease national debt
● Increase respect for property rights through a decrease in government usurpation of the same through regulation and legislation
● Increase real punishment for government and business corruption rather than simply imposing monetary fines
I suppose this list could get quite