The Lost Decade(s)
by Tommy Haws
Let me tell you a story. This is about a country with a once great economy that began to decline. They were once the envy of the world but they had an “asset bubble,” meaning the assets they were using to grow were overvalued. The liquidity of the system made it easier for banks to lend without caring about the quality of the credit and there was a lending bubble. This bubble burst and the economy began to struggle. To keep things going, massive amounts of money was poured into the economy by the government, claiming that there were important companies “too big to fail.” To insure depositors, the banks were propped up by the government. The government also decided to make sure that there was a stimulus in the economy with government spending. A budget surplus quickly became a deficit and government debt soon reached 100% of GDP – meaning the government borrowed as much money as was in the entire economy.
At first blush, you might be thinking I just told you the story of the American economy starting the late 2000s. The story is very similar; however, it is really the story of the Japanese economy of the early 1990s. They call the 90s the lost decade because they were never able to rebound to the former starting points of the economic downturn. Things started to look up in 2001, but it fell again in the 2000s and so the lost decade has become the lost DECADES.
What are our lessons? There are many and I encourage you to research and get your own lessons, but these are some of the standouts for me.
- Not all recessions are the same. Some last longer. Allowing the markets to correct problems, while sometimes painful, actually might allow for a quicker and more healthy recovery. We did soften the blow in our country by some of our policies in the short term, but that very well could be at the expense of our long-term economic health.
- There are a lot of tools to use in combating the financial problems in an economy, but some tools are better than others.
- When you fail to learn from history, you must repeat it.
There is a great set of articles that was given to me, recently published by Time Magazine, that directly attacks many of the myths that are out there with regards to the recovery we are all hoping for. I will not rehash all of the points, but there are some good ones. If you care to look for it, you can see it in the June 20, 2011 Time Magazine written by Rana Foroohar.
In my mind, it comes down to one primary driver: housing. Housing inventories are way too high and until this stabilizes, there will be no real recovery. This is nationally, of course, but also can be a problem in a city like ours.
Final question to ask ourselves is whether or not we are going to get things going in the right direction when we can’t get elephants and donkeys to talk to each other, especially with an important election coming up. Nobody wants the other side to get credit for the good things and wants to blame the bad on someone else, so not much gets done. But the longer we wait, the longer people are unemployed, etc.
It is time to start worrying about what is right instead of who is right. Start worrying about good things happening instead of where the credit is given.
So to bring it local, where do we start? It is time for Gallup to become serious about economic development that is not solely dependent upon government, grants and cash infusions. We need jobs just like everyone else. We need a workforce that can fill those jobs if they do come.
Will we be part of the solution or will we have our own lost decades?