Saturday, January 16, 2010

The Economy is...funny?

I read a lot. A few nights ago, I came across this article in Businessweek (as an aside, recently Businessweek was bought by Bloomberg and is now called Bloomberg Businessweek. Some of the layout has changed, and something else that I can't quite put my finger on. Not better or worse, but something has definitely changed.).

I have taken at least four econ classes, but I don't recall ever learning about the misery index. And I think I would remember that sort of thing because it sounds so funny--like something I'd say. As in, well, the misery index is at a 7.8 today. Two because I have to make dinner, 3 because the bathtub needs scrubbing, 1.8 because, well that's just inflation, and 1 because my sister is annoying. Of course, annoying=living, so maybe the misery index is just a 6.8.

Anyone care to guess what the misery index actually is? I'll give you a hint: one of those things I listed is included. Another hint: the pic answers the question! That's right! The misery index is the unemployment rate + the inflation rate. Yes, thinking about that is enough to make anyone miserable.

The article says this rate is rising, which is especially problematic because "the anxiety generated by the actual or anticipated loss of a paycheck alongside accelerating prices could leave average consumers unable or unwilling to spend enough to keep the economic recovery alive."

For those of you unfamiliar with general economic tenets, or for those of you who, for whatever reason, don't think your brains work the same way as economists' brains do, here's a news flash: you can't save your way out of a recession. I'm not actually an advocate of the buy, buy, buy mentality, but I do understand that for the economy to work, people have to buy stuff. And not just stock. Although, if any of my readers have an excess of cash right now, I strongly suggest you invest it. Call me if you can't come up with any ideas on your own.

I'm not going to rehash the article I cited; after all, if you're really interested, you can just read it (it's short). The really important bits are that the misery index is 11.8 right now, with inflation being the 1.8, or about 15% of the total amount. This is important because in other recessions, inflation was a much larger component of the misery index. And given the jobless nature of the nascent (and questionable) recovery, the misery index might stay high.

During the great depression of the 1930's, government spending eventually led to a recovery. Among other things, the Tennessee Valley Authority was created, which was a recovery agency designed to modernize the area. Also, WWII created a lot of jobs and then educational opportunities that enabled families to grow and spend a lot.

Except that we're already at war, and it's not helping the economy, and we have a gigundo budget deficit, so it's not like the government can afford to fix things like bridges and roads, or build really useful things like public transportation systems.

If I were an optimist, I'd actually see all of this as an opportunity. No, I'm not joking. I've read Malcom Gladwell's Outliers: The Story of Success, and for those of you who haven't, here's the general synopsis: people at the top really aren't better than the rest of us, they're just good with a lot of lucky breaks. As in Bill Gates couldn't have founded Microsoft if he had been born in a different generation, had different parents, grew up in a different state, etc. He's hella smart, sure, but he's also hella lucky.

Another case Outliers makes is for merger and acquisitions lawyers in New York. Most of the really good ones are Jewish, born around the great depression, and went to public school in New York. Here's the deal: they had access to arguably the best educational system in the world during a time when birth rates were low and really, really smart women still couldn't get a better job than teaching K-12, so they had a crazy good education. And then, because they were Jewish, and the traditional WASP-y secondary schools wouldn't admit them, they went to City University in New York. And then, because they were Jewish, the traditional WASP-y law firms wouldn't take them, so they had to take what jobs they could get. And the traditional WASP-y law firms wouldn't touch M&As because that was considered undignified business. So in the 1980s, when M&As started to grow, and in the 1990s when M&As became really big business, those same stupid WASP-y law firms had to turn to the lawyers they rejected, because they had been doing this sort of "dirty" work for decades. Thus people who would have been good lawyers anywhere became great (and rich) M&A lawyers.

I'd like to take a moment and back up to that bit where I said "and really, really smart women still couldn't get a better job than teaching K-12," because I had a male college professor say the exact same thing: that he wouldn't be nearly as smart and well-trained as he was if he didn't have very smart female teachers who just simply couldn't be the doctors/lawyers/CEOs/whatever they should have been. He is rather chauvinistic, and implied in his discussion on this issue that because women now can have other careers, the quality of education in America has declined. The three women in the classroom were really pleased with this. Did I mention it was an MBA class? Right, because we were selfishly depriving his children of a good education by thinking that we were worth not just one, but two degrees.

Ok, so that was a major digression.

So I'll get on with why this might be an opportunity. First of all, just like during the great depression, people are planning for, and having, smaller families. This is a big help on so many levels. First, parents with fewer kids will be able to spend more time raising each of them. Second, teachers will be less stretched, mentally, emotionally, and time-wise and therefore will be able to provide a better education to smaller classes (I am not knocking teachers, or blaming them. I have many friends and relatives who teach. It's a tough career, but it would be a little less tough if there were a few less kids in each class). Third, by the time these kids get out of high school, all of the boomers should be both retired and old. Retired boomers will open up job opportunities. Old boomers will need stuff to make their lives better (remember, the boomers were that huge generation born after WWII who are used to having a disposable income, and are likely to live to their 80s...this will open up huge markets in medical care and devises, as well as home aids, and probably a number of things that have yet to be imagined).

I know, this doesn't really help the unemployed or underemployed right now, and it doesn't make anyone feel better about their significantly smaller portfolios. Also, estimations suggest that the economy will never recover to the excess of the dot-com boom or the housing boom. (Personally, I'm going to reserve judgement on that one.)

Eventually, however, the economy will get better. And in the mean time, there's nothing misery loves more than company, except maybe a sense of humor.

No comments:

Post a Comment