Trying to make America more self-sustaining – Part II

The more we produce, the wealthier we are, unless our appetite for consumption grows at a faster rate than production. It’s a relatively simple ratio that is essential to the basic concept of making  America (or any other society) more self-sustaining.

Demographics are a critical determinant in the capacity of a society to be self-sufficient.  In Haiti, for instance, an inordinate percentage of the population is below the age of fifteen (38% compared to 21% in the U.S.).  To the extent possible (which is currently very limited), they must be fed, housed, and clothed.  Most schools in Port-au-Prince were destroyed in the January earthquake; it will take years to reconstruct and staff them.  Children must be supported but cannot, and in fact should not, be counted on to be producers.

Additionally many Haitians are infirm, suffering from malnutrition, or are emotionally traumatized and thus not capable of working.  There are others who may be healthy, but who never developed the skills to be productive.  Compounding the limited assets of Haiti to produce is the fact that the country has been stripped of much of its natural resources after years of excessive deforestation.  While charity may now be the most effective way of addressing the extreme poverty in Haiti, the long-term solution is similar to that in any other country. The capacity to produce as many goods and services as the population needs to survive must be developed.  There must be opportunities to be productive which will result in opportunities for people to work.  In a country with 80% unemployment, this is a long overdue must.

The United States is not immune from demographic changes.  As you can see in the table below, according to the U.S. Census Bureau, in 2050 the percentage of the population that is over 80 years of age will be over four times what it was in 1960.

Percentage of U.S. Population over 80 years of age
1950 1.8%
2010 3.8%
2050 7.5%

The acceleration of this problem was cited by New York Times columnist Thomas Friedman on April 4, 2010:

It was just reported that Social Security this year will pay out more in benefits than it receives in payroll taxes — a red line we were not expected to cross until at least 2016.

Fortunately, some people over the age of 80 are productive.  In fact, they produce more for society than they consume.  At the same time, many people are retiring from work at earlier ages.  In the U.S. in 1910, the average age at which people retired was 74-years-old (although many did not live that long).  In 2002, the average retirement age had dropped a dozen years to 62.  While this may be a healthy development – rewarding people for “jobs well done–” it means that fewer people are pulling the wagon uphill to ensure that we adequately provide for all citizens.

If we have fewer people producing for our “society of consumers,” each one of these people must produce more.  Perhaps more importantly, he or she needs to produce “more smartly.”  In other words, as a society we must ensure that what is produced meets at least the basic needs of all citizens.  A fundamental tenet of a free-market system is that production will be driven by that for which people are willing to pay.  If you’re a smart entrepreneur, you can take advantage of this phenomenom, but it may not be particularly helpful to society at large.

For instance, a company such as Pinnacle Casinos can build a new casino (possibly in a flood zone), and make a large profit from the operation of the gambling mecca.  However, such a development can result in significant societal harm, as the people who can least afford to lose money do so.  They may then not be able to feed their children, meet a mortgage payment, or even be productive at work, if they are consumed with their gambling losses.

Similar reservations might be raised about the production of guns, alcoholic beverages,  pornography, and a host of other items that at the very least should come under closer societal scrutiny as to their value.  I am not advocating the prohibition of any of these items; only that we see them in a different light from what is needed to provide basic needs for everyone.  If it does not already exist, we need a metric that excludes the production of dysfunctional goods and services from the measurement of positive production in our society.   Perhaps such a measurement should even give them a negative value, because in the long run they weaken us.

As we examine the true benefits of what we produce, let us not forget the distortion that Wall Street shenanigans brings to our society.  When sub-prime mortgages are bundled together as an investment, and a financial institution purchases these “bad assets,” it does not add to our wealth.  Rather it weakens us, while a few individuals game the system.  When these bundles are insured by a company like AIG, we should not count the premiums they receive as wealth.  They really represent a foreboding of financial disaster for the most gullible among us; they have negative value.   As we all know,  speculators who have made money by swindling people, have  been rewarded by the government for “ceasing and desisting,” and then finally they go back to their play houses and start another round of swindling.

Sustenance for a nation, or for the world, involves many complicated variables.  But what remains simple is that we must at least produce as many goods and services as we need to survive.   The demographics of this equation are different from what they were at the beginning of The Great Depression in 1929; we have fewer producers.  Perhaps more alarming is producing items that can be detrimental to our society.  When guns are produced at the same time that we lack adequate health care facilities in inner cities or rural areas, we are in trouble.  When alcohol is a money-maker for businesspersons, but building adequate housing for low-income people is not profitable, we are in trouble.  When a casino can be built in a flood zone, we are in trouble.

The “Producers” Now Need to Pull Harder

We need to not only produce more, but to produce “more smartly.”  This process  involves judgments that at times will restrict some individuals’ freedoms.  It certainly will harm those who peddle vices as well as frivolous items.  We may not yet be ready to go full throttle in this direction, but at least we have to widen the conversation.  Necessary economic incentives must be provided for investment opportunities to produce what is healthy for our society.   These decisions are rarely easy, but the price we pay for ignoring them is too high for us to justice to both our own population and those who live outside our borders.