To every thing there is a season, and a time to every purpose under the heaven.
Ecclesiastes 3:1 (KJV)
Anyone who has been close to the edge knows what “survival mode” is like. Small flashes of adrenaline propel you from one day to the next. Each fitful dawn is a mix of dread and possibility, all of them taken one at a time. Next week? Worry about it when it comes. Next month? Forever away.
Many people find themselves in “survival mode” through this Depression, especially those without either work or unemployment bennies. For them it is a slowly unfolding tragedy, but in great numbers they become a society, a culture, and an economy that is unable to function. That’s because a free market only reaches equilibrium in the long run, actually running on small differences in the short term. But in the very longest term the magic of market forces become something else altogether.
Everything has its own time. When we start to understand that “The only thing we have to fear is fear itself” it helps to appreciate the short, long, and very long term that are all whipping us through each day and all of our days.
It’s considered gospel only among Republicans that a free market is the only economic and social system that guarantees freedom. Democrats are never sure, living among the fruits of the free market while often criticizing its shortcomings. Both sides have extremely valid points that come together when you consider time scales.
A “market” exists when someone needs something that another person has for sale. Say you really want an apple and your neighbor has an tree that has produced a lot of them. In the very short term, things are out of whack – you have a craving and your neighbor has to move before rot sets in. But then you negotiate the price for a few apples, eat your way into craving-sated bliss, and the world is back in harmony once again.
That’s the power of a market where buyers and sellers can hook up freely. It always moves to harmony.
While that may seem like a strong endorsement of the Republican position, it’s important to note that we all have to eat. If you don’t have any money the price of an apple may be steep no matter how hungry you are. What Democrats understand, even though they are lousy at framing the discussion, is that many people live in the inharmonious short term. “Survival mode” hits all of us, at least in small doses.
This is important not simply because there is truth to both sides of the common political debate in the US. While the free market clearly works best in the long run, “In the long run, we’re all dead” as John Maynard Keynes famously observed. And in the very long term, love for the great power and freedom of a truly free market creates a different kind of problem that requires even more continuity.
No one doubts that there are business cycles or that we are currently in a downturn – call it a “Kondratieff Winter” or a “Secular Bear Market” or a “Depression” as you like. The great waves that run in cycles stretch just long enough to forget the wisdom our grandparents were trying to teach us.
I have to admit, I have been hard on “supply side” economics as put forth by the Reagan administration in 1980. But as I think about it, a lack of capital was exactly the problem back during the “Summer” phase of the K-Waves. That does not mean it’s the right thing to do now, of course, as the world is awash in both cheap capital and innovative ideas. In the very long run, there is another disharmony that sets into the system – one that has yet to even be mentioned in our politics.
But this very long run tells us what we should be doing. This is a time to restructure and prepare for the next economy.
There is considerable evidence that while this has been a Managed Depression, the experts managing it have been treating the symptoms far more than the underlying condition. We are running through this phase of the business cycle with no strong push forward to the future – because nothing is pushing.
Far too many people are currently in “survival mode” outside of the time scale where a free market does them much good – they need to know what they will eat tomorrow. In better times, the longer run of the free market is a wonderful thing. But in the longer run yet it breaks in ways that seem mysterious.
It all comes down to scale. Those who understand the importance of a free market would do well to explain how it can whipsaw us if we aren’t paying attention. Those who understand how hard it can be to make it through one day would be wise to understand how time scales change perspective. And all of us would do well to pay attention to the very longest time scales of all – including those that reach way back to the wisdom of King Solomon in the book of Ecclesiastes.
Footnote: The realization the other day that we are on a pace to reach something like full employment by 2017, right on schedule for a typical “Secular Bear Market” or business cycle phase to end, has shaken me to my core. It’s amazing how accurate these predictions can be.
This post does not deal with the biggest cycle yet, the rise of the Developing World. I will deal with that omission later as it is at least as important as how business cycles run through in the Developed World.
Solomon had nothing on you. Great blog.
Thank you. But this is something I think we need to discuss a lot more as a nation.
Freedom isn’t free. Education about what a free market is and why capitalism is so powerful are essential. You are right that if people are stuck in survival mode they will demand destructive handouts. That doesn’t mean they should get them. Teach a man to fish don’t give him a fish I am fine with that. That is a far cry from the socialism, yes I said it that democrats always fall back on. People do need to understand this and it is good that you have a way to talk about this but make it a bit simpler so that everyone can understand it and you will really have something. I agree this is a good blog.
Thank you, I am working on this. I think that time scales go to the heart of the matter and I will try to make it as simple as I can. I think a lot of people understand “survival mode”, especially these days, since we’ve all be stuck in it at some point in our lives.
This is why the message of “Hope” was so powerful, BTW. It’s the antidote to “survival mode”. It’s just so hard to repeat it after four years of a lot of drifting. However, I should also add that I think that whoever is elected this time will probably look like a genius for reasons that are not going to be their doing at all.
Thanks again – any assistance you can provide in making this message more clear is very helpful.
A lot of people are living day to day and it is a serious problem. I will think about what you said about the free market not working on their time scale. It seems right but I think there is more to it. Thought provoking to say the least.
The long time scale is definitely something we miss all the time. Bernanke is able to think in that scale, but I don’t think many others are.
Very few people are thinking in the very long term. Google “secular bear market” and I think you get a complete list. 🙂
Rest in peace, Chris Stevens, 1960-2012, Ambassador to Libya.
He was trying to change the world.
“To those who are given much, much is expected.”
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