June 8th, 2016 // 12:08 am @ Oliver DeMille
Washington’s “Grin and Bear It” Message About an Economy that’s Still Struggling
The Need/Desire Question
In a 1927 issue of Harvard Business Review Paul Mazur of Lehman Brothers wrote the following prescription for the nation: “We must shift America from a needs to a desires culture.” How? “People must be trained to desire, to want new things, even before the old have been entirely consumed. We must shape a new mentality in America. Man’s desires must overshadow his needs.” (Cited in The Happiness Equation by Neil Pasricha, p. 78.)
What a thing to say! And it has happened, just as Mazur recommended. But in the process, something else happened as well. Not only were people convinced to want more and newer things, but government got caught up in the same quest. And people began desiring many more and new things from government as well. This changed our entire culture.
More recently, President Obama has assured the nation that a slow growth economy is the new normal. But is this good news? Or very bad news masked by a smile? Truth: it’s certainly not good news. (See the new report: “The World is Flat: Surviving Slow Growth” in the March/April issue of Foreign Affairs)
But before we address this, let’s take a little quiz. Just for fun.
Messages and Meanings
The following quote is about what nation?
(1) “_____________ will not be able to grow its economy…without…privatizing state-owned companies, [and] loosening regulations…”
Or consider this:
(2) “It may have…an undervalued currency, a debt-to-GDP ratio of 250 percent, and an average annual GDP growth rate over the last decade of less than 1 percent…. [but] Life expectancy is among the highest in the world; crime rates are among the lowest. The…people enjoy excellent health care and education.”
(3) “Middle-class wages stopped rising more than 30 years ago, but…low interest rates…and easy credit obscured the problem, allowing people to bridge the gap between their stagnant incomes and their spending.” How? By going into massive debt.
What is most interesting to me about all three of these quotes is how applicable they are to the United States today. Just re-read item 1 above. It could be a very realistic (and important) “To Do” list for Washington in 2016. Yet it was written about today’s Russia under Putin. (Foreign Affairs, May/June 2016, p. 20)
Still, Washington does need to heed its message:
- privatize state-owned companies that are a drain on taxpayers and gum up the free market
- loosen regulations that are killing small business and sending investment capital to other nations
Item 2 above could also seem to be about the United States, but in fact it describes today’s Japan: “It may have…an undervalued currency, a debt-to-GDP ratio of 250 percent, and an average annual GDP growth rate over the last decade of less than 1 percent…. [but] Life expectancy is among the highest in the world; crime rates are among the lowest. The…people enjoy excellent health care and education.” (Foreign Affairs, March/April 2016, p. 50)
The intended message here is clear: “If the people have good health care, education, and a stable economy, everything is good. A growth economy isn’t necessary.”
Starts and Stops
In fact, in the United States, “Middle-class wages stopped rising more than 30 years ago, but…low interest rates…and easy credit obscured the problem, allowing people to bridge the gap between their stagnant incomes and their spending.” (Ibid., pp. 50-51)
But how have Americans masked falling wages? The answer is illuminating:
- By going into massive mortgage debt (eventually leading to the housing bubble crash and the Great Recession).
- By using credit cards, car loans, student loans and building up major consumer debt. The average U.S. household has over 97 thousand dollars of debt and growing. (The Motley Fool, January 2015)
- By more than doubling the amount of work they do, with both parents typically now in the full-time workforce, instead of just one breadwinner.
- By working longer hours. The average workweek in the United States is now 46.7 hours, not the 1950s model of 40 hours and a crisp 9-5 workday. (USA Today: Modern Woman, Fall/Winter 2015) Over the course of a month, that’s an extra 29 hours—almost an extra workday every week compared to American workers of the 1950s.
- By depending on increasing amounts of government support, including “free” public school education, “free” health care for those who qualify, and a number of even more direct government programs and assistance.
In all this, according to Gallup, less than 20 percent of U.S. workers love their job. Around 80 percent are in jobs they hate, dislike, or feel less than passionate about. Moreover, most Americans don’t believe that their current job will ever get them ahead financially. They’re just barely paying the bills—if that.
Still, the current message from Washington and labor experts is that things are fine, that the economy has improved under president Obama’s leadership, and that we should be grateful. Most people won’t see financial increases anytime soon, “but don’t sweat it.” Like people in Japan, we are assured that we should just be happy for general stability and get used to a stagnant economy.
Fewer jobs, more college-grads who are unemployed or (underemployed) and living with their parents, more three-generation households, falling home values, rising costs of food and necessities—these are the new normal. “And it’s okay,” Washington assures us. “If things get really bad, there are more government programs than ever to help you make ends meet.”
Don’t worry, be happy.
Regulations or Solutions
“Don’t desire so much anymore,” we’re told. “Make do with less. Except when it comes to big government. We’ll give you more of that!”
But how does this message from today’s Washington jive with the reality? Truth: “An economy that grows at one percent doubles its average income approximately every 70 years, whereas an economy that grows at three percent doubles its average income about every 23 years—which, over time, makes a big difference in people’s lives.” (Foreign Affairs, March/April 2016, p. 42)
Factor inflation into these numbers—on the basics like food, housing, education, and transportation—and one percent growth means the average household falls further behind each and every month. At three to four percent growth, in contrast, like the overall average from 1945-2005 in the United States, families can improve their standard of living over time—and even help their kids do better than themselves.
Right now this level of growth is found mostly in Asia, certainly not in North America or Europe. Thus the increasing American realization that our children and grandchildren are likely to be worse off than we are, while their Chinese counterparts will probably experience upgraded lifestyles and standards of living in the decades ahead.
But this isn’t a static reality. It is based on the current policies and agendas of Washington. These can be changed. For starters, just adopt the suggestions Westerners often give to Russia, as outlined above:
- reduce/remove numerous government regulations that are killing small businesses and driving investment capital and high-growth corporations—and jobs—to other nations
- stop federal overspending in so many government agencies by simply cutting their budgets—significantly—to spark increased investment and business growth
Just these two changes would significantly reboot the U.S. economy.
Americans can become a more frugal and a resilient people once again, no doubt. But they would rather be a more innovative and entrepreneurial people—and they have proven that they are incredibly good at it—if government will just cut away the red tape and let free enterprise thrive again.
May 25th, 2016 // 6:12 am @ Oliver DeMille
Parties, Issues, and Funds
Mitt Romney was right about a number of things. One of the most important, even though it got him trouble with some voters, is that a solid 47% of the nation is against the Republican candidate for president (whoever he or she is), simply because a large group depends on government programs to financially make ends meet. In fact, the number appears to be increasing.
According to one report, “Nearly half of Americans would have trouble finding $400 to pay for an emergency.” The same article notes that “47 percent…would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all.” (“My Secret Shame,” The Atlantic, May 2016)
Indeed, in 2014 only 38 percent of Americans thought they could come up with the money for a $500 car repair. (Ibid.) In other words, the number 47 percent (who needed government help to survive in 2012) may now be closer to 62 percent.
High and Low
This is a challenging dilemma. On the one hand, those with a sense of needing more government support and programs to make ends meet are a lot more likely to vote for Hillary Clinton or even Bernie Sanders than for any Republican. As the electorate becomes more financially strapped, it tends to swing to candidates promising more government help.
On the other hand, it is the liberal (Bill Clinton/Barack Obama) and moderate (Bush I/Bush II) policies—growth of government intrusion in the economy and poorly-constructed education, health care, banking and other programs—that have brought our economy to this point. As more people vote for bigger government, the government naturally grows and the economy further stalls. It’s a self-fulfilling negative cycle.
In a truly free enterprise economy, entrepreneurship would create a lot more jobs and prosperity. It brings approximately 80% of new jobs in the United States—but the sheer mountain of red tape a business start-up now faces (based mostly on the policies of the four presidents just mentioned, and more from Obama than the others), has significantly gummed up the economy. Obamacare is making it even worse, with the most damaging (job-killing) parts of the Affordable Health Care Act still slated to go into effect in 2017.
Between 2003 and 2013 the median net worth of Americans dropped an amazing 38%. (Ibid.) And it’s still going down.
In short: Big government isn’t helping—it’s adding to the problem.
Beginnings or Endings
Remember the 2012 presidential debates where Romney suggested that Russia is a major strategic threat to the United States and Obama scoffed and lectured Mitt about not knowing what he was talking about? Three years later, guess what? Russia a major strategic threat. (See Foreign Affairs, May/June 2016: “Putin Returns to the Historical Pattern,” “The Revival of the Russian Military,” “The Quest to Restore Russia’s Rightful Place,” “Why Putin Took Crimea.”)
The same is true in economics. Bigger government, thousands of additional business- and job-stifling regulations on the books, and more red tape, don’t help the economy. They hurt it.
And a majority of Americans are now feeling the effects. Fifty-five percent of households don’t have enough savings to make it for even one month. (Op Cit., The Atlantic) If the middle twenty percent of households, the true middle class in America, lost their income right now, they could, on average, continue their current lifestyle for just six days. (Ibid.) That’s six days!
The sudden 2016 “defaults on subprime auto loans indicate that the American willingness to just keep buying…can’t lift us out of this [economic] pickle…. The general default rate for all subprime auto loans jumped from 11.3 to 12.3 percent in just a month—exactly the kind of ‘can’t pay my bills’ phenomenon that triggered the  housing collapse.” (“The Portfolio,” Esquire, May 2016)
Recently announced: Sports Authority is filing chapter 11 bankruptcy, Staples is closing 50 stores, Fairway is near default, American Apparel filed for bankruptcy, and even Walmart is closing 154 stores. (Ibid.) The list of other companies on the brink or downsizing and cutting jobs is long.
The economy is sputtering.
All this in the midst of a presidential election year. I don’t know what Donald Trump will or won’t do in the Oval Office (whether he’ll be just another politician or really lead out and reboot the economy). But one thing is very clear: If Senator Clinton is our next president, the number of Americans who require government support to make ends meet by the year 2020 probably won’t be 47 percent, or even 62 percent, anymore.
It will be a lot higher.
May 19th, 2016 // 8:19 am @ Oliver DeMille
We need to start.
First, it is clear to almost everyone that the Drone Revolution has drastically changed the world—probably in ways that we can’t really undo. Whatever other functions they’ll eventually fulfill, drones are the ultimate war machine. They can be programmed to do things unimagined in earlier wars, like search out specific people from certain races, religions, viewpoints, business or educational backgrounds, etc.
They can be programmed to target a specific person. And all his/her friends. Everyone he/she loves. Those who agree with him/her on political issues. Governments can use drones on their own people, as well as in battle.
Very few people are taking this very seriously. On the one hand, it’s so potentially monstrous that we don’t like to think about it. Imagine drone technology in the hands of a Stalin, a Hitler, a Nero, Caligula or Mao, Saddam Hussein or an ISIS sympathizer in your neighborhood. If history has taught us anything, it’s that bad guys do sometimes rise to great power.
It will happen again, and drone tech combined with computing power is a recipe for disaster.
On the other hand, if we did want to stop it, what would we do? Most people believe it’s a fait accompli. No chance of turning it around. They’re probably right.
Second, the Crowdsourcing Revolution isn’t over—it’s just beginning. It has largely put the newspaper industry on the ropes, and the book industry is also now under the gun as Amazon grows. In fact, many brick and mortar malls are increasingly empty as Internet sales on many types of products and services soar. Education at all levels is facing serious competition from free online learning sources, and big swaths of the health care sector are being crowdsourced as well.
The good side of crowdsourcing makes a lot of things less expensive, easier to find, and quicker to obtain (or learn). The downside is that the large companies that control the data have algorithms that can influence us in ways we never imagined. For example, a man texts his wife to find out where a certain kind of cereal is in the pantry, and within minutes his smartphone chimes and offers him a coupon for the same cereal—from the supermarket closest to his home. Or if he texted from the office, it lists the grocery store nearest to his work.
This kind of data-mine-marketing is becoming a commonplace experience for those who use certain apps, and while it might feel a bit creepy at first, over time people get used to it—and even grow to expect it. Very Minority Report. How much governments and private organizations are using this kind of tech is unclear, but it’s growing. Add personal location tracking technology to the mix, and we really are living in a surveillance state.
Third, there’s a new buzzword floating around in economic circles: “Crowd-Based Capitalism.” The idea is that in the emerging 21st Century economy we’re evolving a whole new economic model. Not socialism. Not capitalism. Certainly not free enterprise. A new approach. As one book from MIT put it, we’re moving into a “Sharing Economy,” where “the end of employment” is being replaced with “the rise of crowd-based capitalism.”
The idea that employment as we’ve known it for the last six decades is increasingly outdated. For example, in the May 2016 issue of The Atlantic an article showed how one couple used up their entire life and retirement savings—and the entire life savings of the husband’s elderly parents—to put their two daughters through college. The idea of college training being essential is now being taken to incredible levels: The savings of two couples wiped out, just so their offspring could graduate with a degree—in an economy that doesn’t value degrees like it used to. (See “My Secret Shame,” The Atlantic, May 2016)
A truly new economy is emerging, but most people haven’t realized it yet. They’re still caught in the old—and paying for it in tragic ways.
Another example: When 2016 presidential candidate Ted Cruz said the following, “The less government, the more freedom. The fewer bureaucrats, the more prosperity. And there are bureaucrats in Washington right now who are killing jobs…”, the response was immediate. Two professors, one from Yale and the other from Berkeley, replied that the opposite is true: The bigger the government, the more freedom, and the bigger the bureaucracy, the more prosperity. (“Making America Great Again,” Foreign Affairs, May/June 2016)
A lot of people actually believe them.
But reality is still reality. Crowd-based capitalism means more government, and this isn’t the path to a great economy. The thing that is actually rising to replace the 1945-2008 era of employment it is a reboot of entrepreneurship and small business ventures.
The new economy can go in one of two directions:
- Government reduces the amount of anti-business and job-stifling regulations, and spurs a major entrepreneurial boom. This will create a lot more jobs, opportunities, and incentives for increased global investment in the U.S. economy.
- Government keeps increasing business-stifling regulations and takes the profits from businesses (big and small) to create a “sharing economy.” This will create a much higher rate of dependency on government welfare and state programs, reduce the number of people fully employed (making enough to live in the middle or upper class), and drive investment to other nations.
How the so-called “sharing economy” differs from socialism is actually academic. Yes, on paper it has a somewhat different structure than Marxian socialism. But for the regular people it’s going to feel pretty much the same. A few wealthy and powerful elites at the top, a small middle class of managers and professionals who work mostly for the elites, and a burgeoning underclass living largely off government programs.
Two books* on this topic are: (1) The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism by Arun Sundrarajan, and (2) Saving Capitalism: For the Many, Not the Few by Robert Reich.
For the other side of the argument—why freedom and free enterprise are the real answer—see my latest book, entitled Freedom Matters.
Middle America is still experiencing a serious economic struggle. Things are getting worse, not better. As one report on the heartland put it: “On every sign, in every window, read the vague and anxious urgings…Remember the Unborn; …Don’t Text; Don’t Litter; Buy My Tomatoes (Local!); Let Us Filter Your Water; We Can Help With Your Bankruptcy. Then bigger gas stations sprawled on crossroad corners, unoccupied storefronts…another consignment store.” (“The Country Will Bring Us No Peace,” Esquire, May 2016)
As an ad for Shinola products reminds us: “There’s a funny thing that happens when you build factories in this country. It’s called jobs.” We haven’t seen very many factories built here for a long time. Crowd-based capitalism isn’t a solution.
Together, these three changes in our world are a very big deal:
- The Drone Revolution
- The Crowd-Sourcing Revolution
- The Post-Employment Economy
If you have more ideas on these important developments, share them. If not, learn more about them.
The future can be determined by a few elites who think about such things, or by all of us. The more regular people engage such important topics, the more influence we’re likely to have.
The truth is, we’ve forgotten Watergate and Kent State. (See “The Cold Open,” Esquire, May 2016) We’ve forgotten Nixon and that the 2000 presidential election was decided by the intervention of the Supreme Court. (Ibid.) We’ve forgotten a lot of things.
As one report put it: “We’ve forgotten how easily we can be lied to.” (Ibid.) If we let them, Washington and the media will just tell us what the elites want us to know—and think.
May 19th, 2015 // 6:40 am @ Oliver DeMille
A college-level education is increasingly important in the new economy. Higher education has long created a significant divide between the “haves” and “have nots,” and by all indications this trend will intensify for the next three decades.
The gap between the affluent (we’ll call this the A Economy) and the middle class (the M Economy) is growing, and higher education is one of the clearest differences between these groups. The ranks of the lower classes (the R Economy—with R standing for “Risk”) are swelling, as more in the middle class find themselves caught in high debt and paycheck-to-paycheck living. Again, higher education marks the divide between those in the A Economy and almost everyone else.
Moreover, as North Americans compete for well-paying jobs and economic success in an increasingly global marketplace, the old system of “college degree = secure job with good benefits” no longer holds. Fewer graduates are able to maintain their parents’ lifestyle, and the middle class is dwindling.
As a result, those in the Middle Economy are left with a choice: rise to the Affluent Economy or join the Risk Economy. With career opportunities increasingly elusive for young people in this environment (in both North America and Europe), higher education has become even more important.
There is much more to this article – including where the different classes are heading; various ways of getting a great education; finding where to get your college-level education; and more!
January 30th, 2015 // 5:42 pm @ Oliver DeMille
Some (Widespread) False Traditions about College, Grades, and Career
A Good Plan?
President Obama proposes making two years of community college free for everyone. As The New York Times reported (“Expanding Community College Access”), the Administration’s “preliminary plans…call for an estimated $60 billion in new spending over ten years…” That’s right. Just throw more money at it and things will get better, right?
Actually, no. What if, instead, we didn’t raise taxes $60 billion for the program (plus the extra funds necessary to administer it) and left these resources in the hands of the private economy?
This gets to the crux of one of our deepest and most pressing problems today. When we see a need in society—almost any need, it turns out—someone proposes a government program. The costs of such programs, and the regulations of implementing them, make our economy less inviting for investors and innovators. Naturally, jobs, capital, and opportunities go to other nations.
The result? The economy struggles even more. And, behold, a politician in Washington takes note of the increased struggles and suggests yet another economy-killing government program.
This downward cycle is literally fueling our national decline. These types of government programs have had real results: Where one wage earner in a household made enough for the family to live on in the 1950s, today it takes two wage earners plus a steadily increasing amount of debt for households to pay for a lesser standard of living.
Cause and Effect
Such government programs are touted as real benefits, but the more of them we implement in society, the wider the gap grows between the rich and the rest.
If this new community college program is adopted, the results are predictable:
- The quality of community college education will decrease (just as high schools did when government made them free and ubiquitous)
- More community colleges will be built (requiring tax increases)
- Fewer educational entrepreneurs will offer true educational innovations
- More people will get two years of college
- Two years of college will become much less beneficial
- More young adults will live in their parent’s basement—for longer
- S. citizens will lose more jobs to international competitors
- The U.S. standard of living will further decline
- There will be a few good community colleges, and a lot more poor ones, and national leaders will talk incessantly about “solving the community college crisis”
- The quality of education in most high schools (not just community colleges) will further decrease
“But how can you say these things?” the proponents of the new program will ask. “More jobs today require some college education, so how can free community college be anything but a great plan?”
Actually, more jobs require a higher level of education. But calling it “college education” is just labeling. The level and quality of education students received in four years of high school in 1930 or 1953 was higher than nearly all college juniors have today.
Why did high school education decline? Mostly because of the many government programs that got in the way of market forces and educational quality.
So why are we proposing more of them? We shouldn’t be.
Part II: The Real Issue
But let’s go deeper into college education. Specifically, let’s deal with the real issue. The true concern. It is right in front of us, but only a few people are talking about it. This is vitally important.
Sometimes our most common beliefs in society turn out to be wrong, or at least different from the reality. For example, a lot of young people today are told that the key to a successful life is a good career, and the way to ensure a good career is getting into a good college, picking the right major, and getting good grades.
Many high school and even elementary students busily study each night to prepare for the SATs and such life success—based on this oft-repeated promise. They spend years sure that good grades will lead to promotions, wealth and status.
But the truth is often very different. A report from the Chronicle of Higher Education showed the reality of what employers look for when hiring:
- “Health care companies care most about your major”
- “White-collar companies care the most about your GPA”
- “Media and communication companies are gaga for internships and…indifferent toward your classes”
- “Ironically, education employers care the least about grades” (quotations from Derek Thompson, “The Thing Employers Look For When Hiring Recent Graduates,” The Atlantic)
This is not what most young people are told—by teachers, school administrators, academic counselors, even parents. How can they make good career-prep choices when most of what they are told about the relationship between schooling and career success is inaccurate or at best incomplete?
I’ve long taught that schooling should focus on great education, not the growing trend of “hire education,” but this view is in the minority. Many people believe the main purpose of education is career prep, and students are often frustrated when the reality turns out to be something different.
In an economy where many graduates are already without jobs, these false traditions (e.g. “the key to a successful life is a good career, and that comes from attending a prestigious college, picking the right major, and getting good grades”) take on increased importance. Many young people believe in these ideas as promises, not urban myths.
The Chronicle of Higher Education report showed the following (ibid.):
- On a scale of 1 to 100, the importance of your college’s reputation to prospective employers is 5.
Not 85. Not 55. Not 50. Not even 15. Just 5. How can 5 out of 100 be worth all the focus people give it?
- Using the same scale, the importance of your GPA is 8.
That’s right, 8. All the work, the effort, the tears and struggles to get top grades, and they’re only an 8 to employers? Not 8 out of 10, mind you, but 8 out of 100! As top students know, the difference in work and effort required between A- and A is about the same as between C and A-. So, it’s no surprise that students are stunned to learn how little employers actually think or care about grades.
- Even your college Major only scores 13 on this scale.
But it gets worse. This score of 13 is actually driven up by the health care industry. If your career is in health care, it’s quite a bit higher, but if you’re in a different industry, it’s much lower.
In short, for most people, the gatekeepers that bring you in to (or keep you out of) a great career don’t care about what school you went to, your GPA, or your major.
The Forgotten “Why”
So what do prospective employers look at? Again, according to the Chronicle report:
- The number one thing is internships.
- Number two is employment experience.
Really? Then why are so many young people counseled to avoid work and put all their time into getting good grades? And why are they told to put most of their efforts into admittance to the most prestigious schools?
The focus should be on internships and work experience. Amazing.
This is a major departure from what most educators tell their students. It’s very interesting, and something any parent should consider.
It also brings me back to my original view. Use schooling, reading, and other learning to get a great, truly excellent education. That’s why schools were invented, after all. The rest is, literally, minor. The research now proves it.
The Real Solution
The solution—unless you work in the health care field—isn’t two more years of government-funded schooling, but better education in the years before college. Followed by the same increased quality during college, or even instead of college. We don’t need more mediocre schooling—we need a drastic improvement in what we already have. Seriously.
Get a great education before you turn 18 by reading, studying, digging into the classics, etc.—and then continue it in college or working directly with great mentors instead of college—and don’t let 5%, 8%, and <13% things like the “right” school, GPA, and the “right” major determine (or get in the way of) your education.
And, along the way, get some great experiences with internships and work experiences. Include a number of important classics in your reading. This will bump your whole education to a higher level, and with a better education and better experiences, your career options will only improve.
This is the real solution, regardless of whether or not the government adopts some costly new education program that won’t help very much and will in fact send a lot more capital, innovation, and jobs abroad. The program will only make things harder—for education, and for the economy.
Washington, please keep this plan to yourself. Literally: Put your kids through it if you want. Leave the rest of the economy alone.
Oh, and parents, pass this along to young people. A great education will greatly boost your career prospects, and for most careers a great education is not the same thing as your college, major, or GPA. Not at all. Whatever you do about these things, do what it takes to get a great education.
Oliver DeMille is the New York Times, Wall Street Journal and USA Today bestselling co-author of LeaderShift: A Call for Americans to Finally Stand Up and Lead, the co-founder of the Center for Social Leadership, and a co-creator of TJEd.
Among many other works, he is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, The Coming Aristocracy, and FreedomShift: 3 Choices to Reclaim America’s Destiny.
Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.