Inert America: Crossroads to the Future

by Gary Griffin

  110. Socialism is the economic system. Communism is the political system.

  111. The Austrian school is a school of economic thought that emphasizes the spontaneous organizing power of the price mechanism or price system. Austrians hold that the complexity of human behavior makes mathematical modeling of the evolving market extremely difficult and advocate a laissez faire approach to the economy. Austrian school economists advocate the strict enforcement of voluntary contractual agreements between economic agents, and hold that commercial transactions should be subject to the smallest possible imposition of forces they consider to be coercive (in particular the smallest possible amount of government intervention).

  112. Friedrich August von Hayek (8 May 1899–23 March 1992), was an Austrian-born economist and philosopher known for his defense of classical liberalism and free-market capitalism against socialist and collectivist thought.

  113. See Heilbroner, The Wordly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers, 1999, 291-292.

  114. I didn’t think I could do this description of Dr. Schumpeter’s work justice, so I greatly relied on Heilbroner‘s The Wordly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers, See 293-295.

  115. See Mills, 2000, 346.

  116. See the McKinley Tariff and the Dingley Tariff as examples.

  117. Weber, 2006.

  118. Krugman, 2009.

  119. Supply and demand is an economic model of price determination. In a competitive market, price will function to equalize the quantity demanded by consumers, and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity.

  120. The factors of production are productive inputs that are resources used to produce goods and services. They facilitate production; however, they don’t become part of the product. Earlier economists of the nineteenth century thought of factors of production as land or other natural resources that came from nature, human labor, and capital goods such as tools and equipment. More recent theories have also added entrepreneurship and human capital.

  121. Many people equate the profit motive as simply a politically correct way of say that business owners are greedy. Certainly greed may be a factor, but to a pragmatic business owner the purpose behind the business is to make money. Without it, you don’t stay in business for very long. When businesses close, jobs are lost.

  122. Alan Greenspan was listed by Time magazine as number three on a list twenty-five top people to blame for the financial crisis of 2008. See Time, Inc., 2010.

  123. See CBS News, 2009.

  124. See Heilbroner, The Wordly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers, 1999. This is where I originally saw this quoted.

  125. The government spending as a part of the stimulus plan put into place by President Obama and the Democrats in 2009 is a classic example of Keynesian economics.

  126. I’m referring to the infrastructure projects created by FDR during the 1930s, the interstate highway system for example. This type of infrastructure made the mass production and mass consumption society of the 40s, 50s, and beyond of the baby boomer generation possible.

  127. See Keynes, 1997, 89-91 where he defines the propensity to consume as a functional relationship between consumption and level of income in relation to the intersection of aggregate demand and aggregate supply resulting in the volume of employment within a community.

  128. The gold standard is a monetary system in which the standard economic unit of account is a fixed weight of gold. After the Second World War, a system similar to a gold standard was established by the Bretton Woods Agreements. Under this system, many countries fixed their exchange rates relative to the U.S. dollar. The United States promised to fix the price of gold at $35 per ounce. Implicitly, then, all currencies pegged to the dollar also had a fixed value in terms of gold. Under the regime of the French president Charles de Gaulle up to 1970, France reduced its dollar reserves, trading them for gold from the U.S. government, thereby reducing U.S. economic influence abroad. This, along with the fiscal strain of federal expenditures for the Vietnam War, led President Richard Nixon to end the direct convertibility of the dollar to gold in 1971, resulting in the system’s breakdown, commonly known as the Nixon Shock.

  129. Admittedly this is not my own thought. I have borrowed it but can’t find its original author. I first read it in Heilbroner, The Wordly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers, 1999.

  130. I discuss this new model of education in more detail in chapter 10. Suffice it to say here, that the current model doesn’t work. The number of high school dropouts and the unemployment rate demonstrate the how and why it doesn’t work in the information society and knowledge-based economy.

  131. I can’t remember the exact details of the study. What was striking however was the proportion of ten-year-olds who didn’t have the basic skills for a twenty-first-century society.

  132. These numbers are proven out by the dropout rate every year. More details are presented in the next section.

  133. These are the retirees known as the baby boomers. At somewhere around eighty million, this represents about one-third of the American population. As I argue in a latter section, they may be in retirement, but in an economic system of production, they are essentially unemployed and unproductive.

  134. As I have alluded to in chapter 2, poverty level is important, because it directly influences the standard of living in the United States.

  135. See Bridgeland, Dilulio, and Morison, 2006, 1.

  136. The percentage reported in the report was 47 percent. Almost half of the people who dropped out reported that the classes were not interesting. In short, the students weren’t being challenged.

  137. See Alliance for Education, 2009, 1.

  138. This is one of many costs reported in Alliance for Education, 2009. See complete report for other reasons. The point to be made here is that education does have an economic impact.

  139. Austrian economist such as Frederick A. Hayek argues that unemployment stems from government intervention in the economy and the more the government intervenes the worse it gets.

  140. It is important to understand that Keynesian economics and this type of thinking about unemployment is what many monetary and fiscal policies were based on during the 1930s under FDR and during the Great Depression. Social policies of that time period followed these ideas about the economy and the role of government in the economy. With this recession and the election of President Barack Obama in 2008, there has been a revival of interest in Keynesian economics. To address the current economic crisis, it appears that the play books from the 1930s that included President Roosevelt’s policies as well as Keynes economic theories have been reinstated. I argue this is the wrong approach for 2010. It’s a different time. See remaining 3 chapters of the book for more details.

  141. See America in 2010—enough said.

  142. See chapter 10 in the section on the economy of the twenty-first century where I discuss the effects of GDP based on the current macro level trends identified in chapter 1.

  143. See www.heritage.org for this and many other useful analyses on how the retirement of baby boomers will impact the American economy in this next decade.

  144. Andre Gunder Frank has argued that globalization existed in the third millennium B.C. between Sumer and Indus Valley Civilization. Another example in during the Hellenistic Age when commercialized urban centers were focused on Greek culture influenced a wide range that stretched from India to Spain with such cities as Alexandria and Athens. Other examples can be found between the Roman Empire and other empires of that period, during the Islamic Golden Age, the Mongol Empire, The Age of Discovery that included the discovery of the Americas in 1492, and the nineteenth century imperialism where industrialization began to reach its heights of production and allowed the creation of cheap products that were readily available to masses of populations who demanded such
commodities.

  145. The Bretton Woods conference led to the creation of a system of monetary management established the rules for commercial and financial relations among the world’s major industrial states in the mid–twentieth century. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states. Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all forty-four Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference. The delegates deliberated on and signed the Bretton Woods Agreements during the first three weeks of July 1944. Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group. These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement. The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold and the ability of the IMF to bridge temporary imbalances of payments. Then, on August 15, 1971 the United States unilaterally terminated convertibility of the dollar to gold. This action created the situation whereby the United States dollar became the sole backing of currencies and a reserve currency for the member states. In the face of increasing financial strain, the system collapsed in 1971.

  146. It is important to recognize that in the early formulation of these institutions that the ideas of John Maynard Keynes played a role in their development. This is the same man who created Keynesian economics, the basic underlying theories that supported these institutions and their development. Although they have changed somewhat over the last almost 100 years, they still persist today. Most people think of these institutions as representing globalization.

  147. See Friedman T. L., 2007, 9-l0.

  148. See chapter 4 and also Descartes,:1993.

  149. Falling back to the playbooks of the 1930s, President Obama and the Democrats pushed through a one trillion dollar stimulus bill in 2009. Unfortunately, the primary focus of this investment in America was on what he called “shovel-ready projects.” The twenty-first century is the same time or place, and what we need as a country is a renewed effort to develop the infrastructure of computers and communications networks, such as wireless access to the Internet from anywhere within the United States. This should be free. Education should include free course on how to use the Internet to find jobs. Computers should be passed out to every child enrolled in public education. This is a stimulus for America in the twenty-first century.

  150. See Friedman T. L., 2007, 580-588 for a complete description of this process.

  151. Although the exact amount of total dollar cost of theft over the Internet using identity theft and other scams, it has been estimated to be well over $100 billion.

  152. See chapter 8 in section where I talk about the entitlements due to baby boomers over the next decade as they enter into retirement and are dependent on social security and Medicare.

  153. The Lisbon Strategy was an action and development plan for the European Union (EU) between 2000 and 2010. Its aim was to make the EU “the most dynamic and competitive knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion, and respect for the environment by 2010.” The Lisbon Strategy is intended to deal with the low productivity and stagnation of economic growth in the European Union, through the formulation of various policy initiatives to be taken by all EU member states. It was set out by the European Council in Lisbon in March 2000 and by 2010 most of its goals were not achieved. This should be viewed as a temporary setback, in my opinion.

  154. See White, 2009 from the Associated Press dated March 25, 2009, where “the head of the European Union slammed President Barack Obama’s plan to spend nearly $2 trillion to push U.S. economy out of recession as ‘the road to hell’” that EU governments must avoid.

  155. See Karrar-Lewsley and Said, 2009, in the Wall Street Journal report that indicated that OPEC was denying that they were in secret talks to replace U.S. dollar with a basket of currencies to price oil.

  156. See chapter 8 in the section on the Welfare State.

  157. See Hobbes, 1985. I use the reference here to simply illustrate that an out-of-control government that depends on taxation of income, which comes from work, will eventually find itself without the means to sustain itself. This seems like the logical conclusion based on the current path we are on in the United States.

  158. This is a quotation by John Emerich Edward Dalberg Acton, first Baron Acton (1834–1902). The historian and moralist, known simply as Lord Acton, expressed this opinion in a letter to Bishop Mandell Creighton in 1887: “Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.”

  159. See Starr, 2007. I would point out that Dr. Starr uses the term liberalism, and as a result most would equate this to mean socialism, however, liberalism is not socialism. It is only through liberalism that we can truly come to realize what it means to have freedom in the United States. Liberalism is freedom of choice, and it is this freedom of choice that guarantees liberty. Our power as individuals comes when we have complete freedom of choice.

  160. Heads of the G20 at their recent London summit pledged to abstain from imposing any trade protectionist measures. Although they were reiterating what they had already committed to, last November in Washington, seventeen of these twenty countries were reported by the World Bank as having imposed trade restrictive measures since then. In its report, the World Bank says most of the world’s major economies are resorting to protectionist measures as the global economic slowdown begins to bite. There is a growing fear that protectionism will slowly sneak in and grow in the wake of the crisis.

  161. America’s education system needs a total transformation in order to prepare students for work in the twenty-first century. The institution is stuck in the twentieth-century way of delivering education, and this just doesn’t work. As I noted in chapter 8, students are bored. Teachers are still trying to teach using traditional methods that just don’t apply to a twenty-first century style of living.

  162. See Bell, 1999 and Griffin, 2009.

  163. See Kirsch, Braun, Yamamota, and Sum, 2007.

  164. See Partnership for Twenty-First Century Skills, 2007.

  165. Ibid. They provide an excellent framework for a new education model that fits with twenty-first century education model.

  166. The digitization of facts that involve the people, places, and processes involved in education can only provide the needed information to for the effective delivery of educational services by leveraging high quality data.

  167. The second law of thermodynamics is an expression of the universal principle of entropy, stating that the entropy of an isolated system which is not in equilibrium will tend to increase over time.

  168. I am not trying to provide readers with a course in physics here. I doubt that I could do an adequate job on this subject. I am simply trying to illustrate that American society is a system, and as such it must comply with the same universal laws that all systems must comply with—human creations cannot violate these laws. If we wish to understand the Inert America condition, and more importantly how to change it, then we must realize how these concepts apply to American society, at least on a basic level of understanding.

  169. This is referring to the invention of the Ford Model T, which was produced from 1908 until 1927, but this age of invention of transportation also included the airplane. Orville and Wilbur Wright conducted their first successful flight in 1903.

  170. See the article CBS News, 2009. The $115 is hig
h, but the price of oil has been as high as $150 dollars a barrel. In the report conducted by 60 Minutes on January 11, 2009, entitled “Did Speculation Fuel Oil Price Swings?” a detailed analysis is provided of how and why the price per barrel rose so high in such a short time frame. The result was average gas prices in America of around $4.00 dollars a gallon. Such a drastic rise in gasoline forces everything else to rise – housing prices, food prices, etc. This makes it increasingly difficult for the average American to meet needs of food, shelter, and clothing.

  171. The Strategic Petroleum Reserve (SPR) is an emergency fuel store of oil maintained by the United States Department of Energy. The U.S. SPR is the largest emergency supply in the world with the current capacity to hold up to 727 million barrels.

  172. A server farm or server cluster, also called a data center, is a collection of computer servers usually maintained by an enterprise to accomplish server needs far beyond the capability of one machine.

  173. See Keynes, 1997 and my discussion in chapter 7.

  174. See Logon and Molotch, 1987 for an excellent description of time and place as a commodity. They focus this on urban places, which in my mind are all but eliminated based on the three macro level trends I identify in chapter 1.

  175. See Proverbs 29:18.

  176. See Norton and Kaplan’s work on the Balanced Scorecard to understand the necessity of and role of a strategy map.

  BIBLIOGRAPHY

  Able, Thomas. “Measuring Health Lifestyles in a Comparative Analysis: Theoretical Issues and Empriical Findings.” Social Science and Medicine, 1991: 899-908.

  Adler, Mortimer J. Aristotle for Everybody: Difficult Thought Made Easy. New York: Macmillan Publishing Co., Inc., 1978.

  Afifi, A.A., and Virginia Clark. Computer-Aided Multivariate Analysis. New York: Van Nostrand Reinhold Company, 1990.

  Alamaki, Ari. Technological Reasoning as a Human Side of Technological Innovation. University of Turku, 2001.