Whoa, dude! We is slipping back into recession, or at least stagnant drift, or -- gasp! -- double-dip recession. The housing recovery hasn't taken off. Manufacturing is sputtering. Jobless rate is up (again). Horrifying federal deficit and debts dampen future prospects. China faces slowdown or inflation. Europe continues to expose financial problems like a small pox epidemic. Fabulous prosperity everywhere is limited to coastal enclaves where the super-rich can ski or sunbathe or shop, do lunch, show off luxury automobiles, and sell their signature houses at ridiculous prices owing to their association with the celebrities who have dined, bedded, or died therein. Meanwhile, for the rest of us, not so much. The question is, why.
There are two traditional answers to this question of economic performance. Values or economics. Obviously, in the anthropologically rich real world, value and economics are intertwined, interrelated, intermeshed, bound up, and otherwise symbiotically mutually dependent. Nonetheless, scholars have tried for centuries to separate the two factors, because in the real world, if you want to change a situation, you have to know where to push. The modern debate began in the nineteenth century. Early capitalists, such as Spencer, argued that economics was the primary factor of economic change. Change the economic rules and conditions, economic performance changes. The advocates of laissez-nous faire policy thought that economic growth, widespread of economic wealth, and social prosperity would follow up unleashing free capitalist enterprise. Marx disagreed about the benefits of capitalism, of course, but agreed as an economist that, once the fundamental relationships of private capital ownership were established, economics ruled economic and social change.
The mighty blast against the economists came from the sociologists and, later, anthropologists, leading off with Max Weber. Weber argued that values drove economics. Persons obtained a set of values (he thought from religious belief) that encouraged behavior appropriate to prospering economically, such as honesty and building trust in relationships, hard labor, saving money, and investing for the future. Without the values, all the economic policy manipulation in the world would fail.
This historic debate is at the core of the problem of interpreting the economic indicators today. Economists and governmental policy bureaucrats argue that the sluggishness of growth is entirely the product of macro-economic conditions and prosperity can be restored by manipulation of those conditions, especially federal monetary and fiscal policies. If this philosophy is working, it is not working well, hence the public anxiety.
Other observers, such as c'est moi of Body Parts, argue that underlying social deterioration is rotting the economic foundation of America's historic economic prosperity. This is an argument I have made consistently for years. Specifically, the labor class is losing the values -- the beliefs and attitudes -- that sustained it. The faith in working hard, even at less than satisfying jobs, saving, and investing for the future is eroding. The conviction that economic independence is rooted in family formation, integrity, and success has been eroded. As a result, belief that the economic escalator of upward mobility will work and is the preferred means of betterment has been weakened. This weakening is reinforced by the prolonged economic recession and stagnant "recovery". This critique is not just an opinion based on anecdote, it is also the finding of scholarship. Charles Murray, at the Enterprise Institute, has completed a long-term study of values and behavior of the white labor class and finds just these results. Recently, in his Bradley lecture, he argued that over the last half century, the labor class has lost its historic values that made America a unique country and prosperous economy. He speculates, as one would expect from his early books, that is is the rise of the welfare state that has eroded the basis of the labor class. All of this obtains my concurrence.
So what we face in America today is a financial crisis on top of an economic crisis, driven a profoundly fundamental crisis in our social values. The collapse of the white labor class is the signal of what is wrong, and it is paralleled by precisely similar developments in the black labor class. We are in danger of losing our soul, so to speak.
As a last point, let me note that this fundamental crisis sets up the issues for the 2012 presidential election. Politicians will be deployed along its fault lines. Some politicians (e.g., President Obama, former governor Mitt Romney) will argue that technical manipulation of governmental policy and policy regulations, especially economic ones, will solve the crisis. I believe they are wrong (see above) and will only prolong the crisis and make it more difficult to solve, or even put a fundamental solution beyond reach. Other politicians (e.g., let us hope, former governor Sarah Palin) will argue that social values are the real basic issue, that we must attend to them first and revise economic policy and regulation on that basis. I agree with her. We will see this debate played out in the half dozen years, regardless of who wins in November 2012, and I will help explain the debate in the terms I have outlined above.
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