Why are We Still in Recession?

Why are We Still in Recession?

February 10th, 2011 // 4:39 pm @ Oliver DeMille

Why was it that scientists were so excited to discover facts that farmers had known for generations and generations?” —Brandon Sanderson, The Way of Kings

The Wisdom of Crowds or Crowns?

There is a technical definition of economic “recession,” but many Americans don’t know exactly what it is. Nor do they accept the experts’ assurances that the Great Recession is really over.

Indeed, in the view of many, it was the experts who led us into recession while predicting something else.

The same experts promised that stimulus would fix things, and now they continue to confidently promise and predict as if their record should somehow bolter our trust.

In many ways, America’s elites consider regular Americans uninformed and ignorant. But there is another kind of wisdom, not based on expertise and therefore seldom understood by the elite class (most of whom were convinced some time before or during college that erudition is a matter of credentials, titles and peer consensus).

The “other” wisdom is based on an innate or experiential understanding of principles, of knowing things like these: Increased government size and spending is out of control; and like the housing bubble, the big-government bubble will have to burst at some point.

In the governmental model as erected by the American Founders, the wisdom of the masses is a critical and even central feature of republican government.

The American founders so trusted this type of wisdom above that of experts that they put the regular citizens in charge of elections and our direct representatives in charge of the nation’s purse strings.

They also gave the federal government only 20 specific powers and left the rest to the states and people.

Many, especially the upper classes of Europe, argued that such an arrangement could not succeed, that nations must be led by elites and their specialized agents.

History proved the Founders correct in this debate.

A Second Type of Recession

There is also another kind of “recession” not defined by economists but very real nonetheless — a recession where most people feel deep and overwhelming economic anxiety, where few families have as much money now as three years ago but more expenses, and where the majority feels deep down that things will get worse before they get better.

This kind of recession doesn’t move charts or graphs, but it does operate on a real logic: When the experts are wrong over and over, stop following them.

It should be noted that the people who use this type of reasoning generally have great respect for expertise and the experts, but not a blind faith.

Such wisdom holds that if individuals, households and businesses must tighten their belts, live within their means, and rise to a more self-reliant and entrepreneurial approach now that times are hard, the government needs to do the same.

If Washington refuses such common sense, it is deluding itself — and forcing us to pay the bill.

This “other” wisdom realizes that we have lived beyond our means for some time, and that we can only really build a new model if the old system is deeply changed.

The far Right and far Left argue that such progress can only come from the ashes or ruins of our broken system “after it falls,” while more moderate voices believe that a few fundamental shifts in worldview and policy can get us back on track.

We can move from nanny state to free enterprise, according to this view, from big government to smaller and more effective government, from a nation of dependents to a nation of innovators.

Such arguments sometimes sound untrained and unsophisticated to elite ears, partly because the privileged class wants America to look good to the European eye — but mainly because these type of arguments are often untrained and unsophisticated.

But we should not make the mistake of considering them naïve or ineffectual.

Sometimes the simple solution is best — especially when one of the most daunting problems is how complex our government and economy have become.

Expecting any single expert or government official to have a full grasp of it all is truly unrealistic, and depending on large teams of specialized experts doesn’t work without leadership from those who grasp the entire reality and envision something better.

Citizen Leadership

Grassroots wisdom from the people as a mass accomplishes this more effectively than any party, politician or intellectual class. This is the linchpin of freedom. The citizens must truly lead, or freedom does not last.

In times of crisis, wisdom is more important than expertise. Both are essential, but wisdom is most vital.

The American people, however uninformed they may appear to elite tastes, have wisdom in spades. They make mistakes, as Jefferson and later Tocqueville put it, but they always correct them.

In the governmental model as erected by the American Founders, the wisdom of the masses is a critical and even central feature of republican government.

One central reality stands out right now: People are struggling a lot more than the experts admit or the numbers show.

The economy may be in a slow recovery, but the American people are stuck in recession. And they know it.

Families and communities are experiencing more hurt than gets reported, and many people feel that things are getting worse. The middle-class standard of living is collapsing, and the worst of the housing bubble appears to still be ahead. Moreover, the government bubble is real and eventually it will burst.

Unemployment is worse than the numbers show. For example, many of the job losses are in middle- and high-paying jobs while most new jobs are low-paying. With the real unemployment rate (which includes those who have given up even trying to find a job) over 12 percent and the underemployed rate above 18 percent, we are more than halfway to a depression (traditionally defined by 25 percent unemployment).

Yet our leaders spend, borrow, and spend. The Chinese have continued to lend us more, as we figuratively hung ourselves and our posterity with an unyielding cord of debt.

Washington regulates more roadblocks to business growth, and tells us that 10 percent unemployment is the new normal. Then politicians pile on more regulations that hinder global investment in the U.S. and send it to friendlier markets.

American firms go abroad and find lower taxes, reduced regulatory environments, and more plentiful capital.

As unemployment lingers in the wake of these policies, we are assured that more government programs will care for those without jobs.

Most Americans find this more alarming than comforting. Consumers don’t spend. Businesses close. A drive down Main Street, Anywhere, USA is a museum tour of boarded-up windows.

We elect one party’s leaders with high hopes, then we try the other party—back and forth, without lasting success. Things worsen. Inflation may follow, as the Fed prints more money and further devalues our currency.

Many Americans feel the afterglow right after a major election, but the anxiety returns when the bills keep coming and they try to balance their checkbooks and plan for the years ahead. Call this recovery if you want, but the American people aren’t convinced.

Next Steps

The good news is that when pushed the American people take note and take a stand. The great American entrepreneurial spirit is rising, and it is our only real hope.

Elections come and go, but cultivating the values and skills of free enterprise in ourselves and others builds for the long term. It creates a solid foundation that works.

The election of 2010 is over, and the elections of 2012, 2014, 2016 and beyond will not have near as much impact on America’s future as the entrepreneurial spirit (or the lack of it) among the mass of regular citizens.

To the extent that elections help free the economy for growth, they can greatly benefit our prosperity and freedom.

But ultimately America’s success and affluence will depend upon the initiative, innovation, creativity, tenacity, resiliency, ingenuity, enterprise and entrepreneurial spirit of the regular people.

This is the true wisdom of crowds, and only the regular people can make this happen.

China may rise in prominence and even to superpower status in the decades ahead. If so, it will do so by applying these very entrepreneurial traits. The same is true of India, Brazil, Europe, other places, and the United States.

Our future depends on the rise of these entrepreneurial values and characteristics. The adoption of these will signal a true economic Recovery and put a real end to the Great Recession.

Whatever the politicians, parties and experts say, the world of 2020, 2030 and 2040 will be a world of our making, and the nations which rise in prosperity, freedom and power will be those where the entrepreneurial spirit flourishes.

With this in mind, I am convinced of at least two things: Our future is bright, and there is a lot of work ahead for all of us.

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Oliver DeMille is a co-founder of the Center for Social Leadership, and a co-creator of Thomas Jefferson Education.

He is the co-author of the New York Times, Wall Street Journal and USA Today bestseller LeaderShift, and author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, and The Coming Aristocracy: Education & the Future of Freedom.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

 

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