Economic issues – Page 9

Denmark

Wikipedia

Those who say that the United States is on a course toward European-type socialist democracies could be right. Let’s take a look at Denmark…

In the past eight years I’ve made two business trips to Denmark and spent four weeks there. I helped install a Danish publishing system at the San Francisco Chronicle, so I worked closely with a Danish company, and lots of Danes, for several years. This publishing system, by the way, is the system that’s also used at the New York Times and the Washington Post. The Danes are fantastic engineers and smart, honest businesspeople.

Most of these factoids about the Danish economy come from the Wikipedia article on Denmark:

— Denmark has a free market economy.

— Denmark has a large welfare state.

— Denmark has one of the world’s highest levels of income equality.

— Danes are very productive, and Denmark’s GDP per capita is 15 to 20 percent higher than the United States.

— Denmark holds the world record for income tax rates.

— All college education in Denmark is free.

— 80% of employees belong to unions.

— Denmark spends about 1.3 percent of GDP on defense, compared with about 4 percent in the United States.

— The national health service is financed by an 8 percent tax. This is a local tax on income and property.

— According to Statistics Denmark, the unemployment rate in Denmark in January 2009 was 2.3 percent.

— In some surveys, Denmark is ranked the happiest place on earth.

— Denmark was ranked the least corrupt country in the world in the Corruption Perception Index.

— According to the World Economic Forum, Denmark has one of the most competitive economies in the world.

I realize that Denmark’s model probably would not scale up in a workable way for the United States. Still, in my opinion, we should be studying some of the European models and not let ourselves be scared by them. They work.

So the New York Times confirms my guess…

New York Times: A Los Angeles neighborhood where the creative class wiped out

It looks like I beat the New York Times by two days on this trend. The Times has a story today about the retreat of the creative class:

The deep recession, with its lost jobs and falling home values nationwide, poses another kind of threat: to the character of neighborhoods settled by the young creative class, from the Lower East Side in Manhattan to Beacon Hill in Seattle. The tide of gentrification that transformed economically depressed enclaves is receding, leaving some communities high and dry.

I wrote earlier this week about my fear that, when times get hard in cities, the creative class will be the first to go.

Let’s keep in mind, though, that the energy of the young and creative will always go somewhere. It is irrepressible. In the 1970s it took on a rebellious tone and went into place such as communes, or ghettoes such as Haight-Ashbury. During the decline of Rome it took on a more reclusive tone and went to abbeys and monasteries. We will soon start to learn what the creative class will do during this downturn. Will it be rebellious? Reclusive? Nerdy? Super-green? The response of the creative class will be a key factor in setting the tone of American culture for the coming era. If the response is constructive and creative, that could be a wonderful thing. If the response is angry and rebellious, watch out.

Which is scarier, the city or the woods?

Yes, that’s scary… (Arthur Rackham, Hansel and Gretel)

Is this scary, or inviting? … (Anne Anderson)

This is not too scary… (Dover Publications)

The chart is very scary!

For years, I have had a recurring dream. Something has gone wrong with the world, and there is danger. In the dream, I am traveling through the woods at night, alone and on foot, with no light other than starlight and moonlight, keeping clear of any signs of people, and looking for a refuge. In some of these dreams, I find a refuge. It is an abandoned little house in the woods, in disrepair. I go in and build a fire. I decide that, if I am quiet and don’t make too much smoke, I can probably stay here for a while without being found or challenged.

Watching the new version of the movie War of the Worlds got on my nerves. Tom Cruise, fleeing from the city, kept leading his daughter toward crowds of people. I kept yelling at the television, “Get away from all those people, you idiot! Go into the woods!”

Now you know where the name of my blog came from. So who knows. Maybe I was only fooling myself in thinking that my house-in-the-woods project, into which I put several years of planning, was a rational project. Maybe I was just unconsciously being manipulated by dreams.

And what, after all, is wrong with that? I admire people who can find a way to make a dream real, even a small one. I recently discovered the blog of some very magical people in Britain who put a little fairytale cottage on wheels and are roaming the countryside.

My real point, though, or at least my rational point, is that I am very concerned about how the economic downturn will affect people who live in cities. I had been thinking about Richard Florida, his theory of the “creative class,” and how the creative class stimulates cities. I was wondering if the creative class really matters that much in a severe economic downturn. Then a few days ago I learned that Florida has a piece in the March issue of The Atlantic: How the Crash Will Reshape America. Florida seems optimistic about cities. He just seems to think that it’s a matter of figuring out which cities are going to win and which cities are going to lose. I am skeptical. If city life ever became too hard or too dangerous, the creative class would be the first to leave. I have no idea where they would go, but if things get that bad, that’s a trend we’ll want to watch. In an earlier post, I pointed out that, when Rome was falling apart and its cities became too miserable and too dangerous, the creative class went to abbeys and monasteries, and that’s where they stayed for hundreds of years, until they returned to the flourishing cities of the Renaissance.

ABC News is more pessimistic about cities than Richard Florida, with America’s Top 15 Emptiest Cities: These Once Boom Cities Are Now Quickly Turning Into Recession Ghost Towns. Atlanta, by the way, is third on this ugly list. Greensboro, North Carolina, not all that far from me, is fourth.

If you’re not doing it already, it couldn’t hurt to check in from time to time with the worried folks at Survival Blog and see what they’re thinking about cities. If you’re up for a very scary movie depiction of cities fallen into chaos, watch the dystopian science fiction film Children of Men.

The woods are dark and scary, and sometimes I hear howling in the night. But cities scare me more.

The dropouts: Who will they be this time?

Tintern Abbey in Wales [Wikipedia]

I realize that there’s a long tradition of making facile comparisons to one’s own time and the fall of Rome. Still…

From History of Rome, Michael Grant, Scribners, 1978:

“In the vain hope, then, of keeping their armies in the field, the imperial authorities ruined the poor and alienated the rich. They also alienated and then very largely destroyed the solid segment of the population that came in between — the middle class…. But the external invasions and internal rebellions of the third century A.D. had dealt this middle class terrible physical blows, while the accompanying monetary inflation caused their endowments to vanish altogether…. The cities of the empire, their public work programs cut to nothing or severely restricted, began to assume a thoroughly dilapidated appearance; and then in the fourth and fifth centuries, despite contrary efforts by Julian and others, their position still continued to worsen, and the old urban civilization, especially in the West, plunged into a sharp decline….

“So throughout the last two centuries of the Roman West there was an ever-deepening loss of personal freedom and well-being for all except the very prosperous and powerful…. The authorities sought to impose maximum regimentation, to pay for the army and prop up the imperial structure. And yet all they thereby achieved was to hasten the ruin of what they wanted to preserve, by destroying the individual loyalty and initiative that alone could have achieved its preservation….

“There were also various other causes of the downfall of the western empire, secondary and peripheral, though not altogether unimportant. One of these was the proliferation of dropouts who refused to participate in communal and public life. There were many people who found the social and economic situation intolerable and in consequence went underground and became the enemies of society. A large number of them became hermits and monks and nuns, who abandoned the company of their fellow human beings….”

I’ve asked several friends for their thoughts on what form the dropout phenomenon might take this time. The social and economic dislocations of the 1970s led to the hippy and communal movements, and many people (including me), remember that period and were influenced by it. Whatever the shape of the new dropout movement, a neighbor pointed out two attributes that I’m sure we can count on. The new dropouts will be connected by the Internet, and they will be green, very green.

This spooky chart from the Bureau of Labor Statistics makes it pretty clear that this recession is far worse than anything we’ve seen in a long time. Job loss is in free fall, dramatically worse than the 1990 and 2001 recessions.

It’s not to late to plan your victory garden.

Merrill Lynch calls it a Depression

Above: Household debt-to-income ratio [Merrill Lynch]

Above: Personal savings rate [Merrill Lynch]

I am strongly of the opinion that economic literacy is a personal survival skill, like knowing how to cook, or fix a leaky pipe. This recent article from Merrill Lynch does an excellent job of pulling together and charting some of the factors and trends that point to very hard times ahead. The report says that this is probably a Depression, not a mere recession, and it attempts to define the difference.

One of the most unpredictable areas, it seems to me, is the tension between deflation and inflation. Prices for many things are dropping as global demand drops and supply exceeds demand. But already the American Federal Reserve is buying treasury bonds, which means that we are printing dollars. Printing dollars can only lead to inflation. And yet, this is a global phenomenon, and it’s possible that the dollar will remain relatively strong compared with other currencies. Personally I fear that we’ll be whipsawed as deflation quickly reverses into inflation at some point. Some economists argue that there can be no severe inflation without a wage-price spiral, and wages aren’t going anywhere. No one knows. But we have to keep trying to look ahead.

Sustainability festival

The local Hare Krishna community has taken a strong leadership role in sustainable and alternative living. Today they had an all-day “Local Sustainability Festival” at their temple near Sandy Ridge, about eight miles from my place. There were speakers on gardening, rainwater harvesting, farming with draft animals, and seed-saving techniques. Stokes County’s Hare Krishna community has been here since, I think, the 1980s. Most of them have settled in a beautiful little valley well away from the main roads.

Livestock

One of the sessions on sustainable farming

The end of an American (and Carolina) tradition

One of my two Carolina Porch Rockers, on my back deck

The North Carolina company that made the famous Kennedy Rockers is going out of business. Last month, the P&P Chair Co. of Asheboro, North Carolina, said that it’s closing after 82 years. Partly it was the recession, and partly it was the death of Bill Page Jr., son of one of the founders of the company.

John F. Kennedy bought some of P&P’s rocking chairs in 1955 after Kennedy’s doctor recommended the chairs for Kennedy’s back. The doctor’s belief, the story goes, was that the rocking chair helped relax the back muscles because it kept the muscles in motion. The chairs became famous when Kennedy became president and took one of the chairs to the Oval Office in the White House. The chair has often been called the most famous chair in America. My grandmother had one of these chairs.

There were two basic models — the indoor chair with a woven seat and back, and the porch rocker. The chairs are identical except for the seat and back.

About 10 years ago, I wanted to buy rocking chairs as a gift to my mother, for her porch. When I told my older sister that I was looking for heirloom-quality rockers and asked her what I should buy, she responded immediately that I should get the Carolina Porch Rocker from P&P. She knew, though I did not, that the Carolina Porch Rocker was the same chair as the Kennedy rocker. Before I started construction on my new house, my mother let me know that she was giving the chairs back to me for the new house.

The chairs really are made to last a lifetime or longer. My chairs have a bit of patina from sitting on a porch, but they’re just as tight and sturdy as when they were new. All these chairs have the P&P label stamped underneath the chair’s arm. The chairs were never cheap, and though they’re not rare, I imagine that their value just went up considerably because of P&P’s closing. I’m even thinking of permanently bringing one of my chairs indoors to sit near the fireplace.

The P&P stamp on one of my chairs

John F. Kennedy in a Kennedy Rocker

William Page Jr., who died in November (AP)

I’m lucky to have two of these chairs. They are symbols of a different era, and trophies from North Carolina’s lost golden age of manufacturing.

So the deflationists were right

The Baltic Dry Index measures the cost of shipping by sea. All of a sudden, worldwide shipping has drastically slowed.

The cost of commodities like copper have fallen rapidly.

It has been clear for two years that an economic calamity lay ahead. What was not clear, though, was whether the bust would be accompanied by inflation or deflation. It’s now clear that, at least in the near term, the deflationists were right. People and businesses have stopped buying things, so prices are falling. Even the prices of many foods are falling. Credit has frozen, so this makes it even clearer just how much stuff was being bought with borrowed money.

Given the vast amount of government borrowing and “stimulus” that will be required to get the economy going again, it seems all too likely that, longer term, inflation will return. But for now, deflation is a fine stroke of luck. Now’s the time for people to think about what they need to get through the hard times ahead and stock up.

I’m even going to price copper gutters today. A few months ago, copper gutters would have been completely out of the question.

Economic honor roll

Nouriel Roubini, top of the honor roll

Some of you may have noticed that I have deleted all my old posts about the economy and the politics thereof. My intent was to draw attention to an inevitable train wreck that independent observers could see clearly months and years in advance, but which partisan sources (and the mainstream media) denied or ignored. No one denies it now, so I am backing off on this subject. I have little to add, except maybe about the importance of making ready, according to your own individual circumstances, to get through the hard times ahead. Now is the time for getting to know our neighbors, and cooperating with them, rather than arguing with them.

If you’re interested in independent, nonpartisan sources of information on the economy, check out this article. My primary source of economic analysis for the last two years has been Nouriel Roubini. Roubini used to be scorned as ridiculously pessimistic. Now the media are all over him, because he foresaw it all and explained it in tedious, academic detail.

This raises the question, how can you tell when someone is doing their best to tell you the truth vs. when someone is telling you what they want you to believe? I’m afraid that’s a trick question. We’re all on our own.