Tuesday, March 10, 2009

The Cure Is Development: You Can't Fix an Economy by Focusing on the Symptoms

In case you missed it, you can keep up with the output of the fine folks who produced "The Giant Pool of Money" and "Another Frightening Show About the Economy." The most recent episode is titled "Bad Bank," and is best overview of our banding system that I've ever come across. You can listen at http://www.thisamericanlife.org/Radio_Episode.aspx?sched=1285

This was pretty good as far as describing some of the toxic issues but it is focusing on symptoms and not a cure. Put another way, talking about assets—declining or otherwise—is not the same thing as talking about development. Now for some personal opinion informed by long-term observation:

What everyone seems to not understand is that there is a difference between lending for projects that produce geometric increases for goods and services, such as massive development projects and consumer debt, which tends to be less useful in terms of generating additional dollars. (The housing market is a good generator of additional goods and service dollars but for sake of argument, I will leave this out.) Whether you have a gold standard or a speculator-limited monetary credit system, an understanding of what generates additional goods and services—what generates jobs, etc., is key. Long-term development tied to a long-term vision of what human industrial development should consist of could generate tens of millions of new jobs if tied to creative long-term global thinking. (The social consequences of a rapidly expanding world economy might also do much to lessen tensions around the world.)

I'll give you one small example of what I mean. I recently had the opportunity to ride on the maglev (built by Germans by the way) from China's Shanghai airport to downtown Shanghai. This about 45 miles and it took about ten minutes to travel at 280 mph or 4.6 miles per minute. Let me give you some idea of what this might mean for travel times in the US if such a system were widely implemented by giving a few examples.

Travel between San Francisco and Sebastopol: 13 minutes
Travel between San Francisco and LA: one hour and 26 minutes
Washington DC to New York: 43 minutes
Front Royal, VA to Manassas: 9 minutes

Based on the notion of issuing development bonds for such a project and/or adding a modest user tax to ticketing--over time--the enormous costs of implementing such a system nationwide would and could be vastly reduced. The stimulus effect of such a project would be profound. Millions of tons of cement, steel and hundreds of other products coupled with hundreds of thousands of new jobs and lateral job creation on the supply and service side would do more to revitalize an economy than all of the dike plugging that is going on now in the Obama administration. Add to this, potential water projects from the water-rich Canadian North to the US and massive nuclear development, you might have a perfect storm of economic development that would benefit businesses around the world.

Now why aren't we doing things like this? It is my belief that Americans have lost any vision for development--if they ever had one. Special interests that don't believe in growth—particularly environmental interests and other slow-growth groups, pin-headed economists and politicians who don't understand anything other than re-election and standard dog whistle politics (which is basically herd thinking dressed up in the rhetoric of independent thought) all contribute to the economic inertia we are presently seeing. Additionally, valuable political capital is currently being wasted on self-limiting issues like gay marriage, global warming, and endless litmus tests for conservatives based on what they think about the infanticide described as "choice". In short, and in my opinion, no one is talking about real problems, they are talking about ideologies and fighting over a dwindling pie instead of trying to figure out how to increase the pie.

My recommendation for the Obama administration: create a cabinet level position for Development and give it some real teeth so that when a project is decided on, it can go to ground immediately without lawsuits, environmental red tape and/or other frivolous nonsense that holds up growth. A development Czar who has the best interest of the people at heart and the will of the Republic behind him would go a long way to alleviating the cancer of self-doubt that is tying this country up in knots.

“One who recognizes all men as members of his own body is a sound man to guard them…”
--Lao Tzu

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