Dr. Forbush Thinks

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Location: California, United States

Thursday, July 10, 2008

Expectations and Economics

It’s not what you have, but what you believe you can have that drives the American economy.

We should all understand that Republican fiscal ideology is focused on benefits for the wealthy. It costs the wealthy too much to help out those down on their luck, so we shouldn’t do it is the Republican mantra. However, in marketing this to the common man the Republicans normally drop “the wealthy” modifier and change “down on their luck” to “welfare cheating scum buckets” or some other derogatory adjective.

As Senator Phil Gram, the former Texas A&M economics professor, tells us that the economy is not as bad as we are imagining. Senator Gram said, “We have sort of become a nation of whiners. You just hear this constant whining, complaining about a loss of competitiveness, America in decline despite a major export boom that is the primary reason that growth continues in the economy.” Now, Senator Gram is pulling a Republican fast one on us here. What is more important to the average man, being able to feed his family or Apple being able to make a huge profit selling more iPods? If the man is an executive at Apple then the question is one and the same, but if he isn’t there will be layers of a complex economy clouding the issue.

If your paycheck has been constant over the last few years, and the price of gasoline and food have gone up, then you will be feeling the pinch. If your pay check has gone up by more than the cost of gasoline and food over the last few years, then I would venture to guess that you aren’t hurting so bad. So, I’ll ask - is Senator Gram right when he says, “the constant drubbing of the media on the economy's problems is one reason people have lost confidence.” Maybe it is one reason, but I’m guessing that to those on the lower end of the economic scale will be feeling more than what they are told by the media.

In America, though, we have some expectations when it comes to economic status. Expectations may be good, and they may be bad. Either way we need to remember that they are expectations and not reality. In fact success in America is measured by certain expectations. If a person meets or exceeds those expectations we have celebrations and fan fare. And, when those expectations are not met, then a person’s fiscal failings are kept in the shadows, something that we would rather not talk about. Fiscal failings are considered a source of embarrassment for the man down on his luck. But, if this information is kept hidden and not spoken about, then no one really knows if the expectations are even reasonable.

In America people have accepted that they should be better off in every proceeding year from the last. A small cost of living raise serves as an illusion to this expectation, while it shows a rising wage, it doesn’t always even match inflation. When a company is doing well they will often compensate the employees, but these compensations aren’t always justified in their distributions. Truth be told, fiscal failings behind common expectations are the rule rather than the exception. Americans have discovered how to continue the illusion in the face of this failure to meet expectations. Americans have taken to borrowing money in order to appear that they have exceeded expectations.

American expectations plaque the American economy in many ways.

The entire mortgage crisis that has recently burst the housing market bubble was caused by people meaning to appear to meet the expectations of the American dream. People bought into the idea that things were going to be better further down the road. They deluded themselves into believing that five years down the road they would be able to pay the mortgage when the payment jumped in their sub-prime loan.

Let me take the example of our neighbors, who confided recently that they will be moving out of their house. Five years ago when they bought the house they were able to do so by borrowing the money at a low interest rate. Even with that low interest rate they still had to make a $3000 per month mortgage payment. I don’t really know what they were thinking when they were told that in five years the payment would jump to $6000 per month. They were able to make the $3000 per month payments by having several families live in the same house and pool their resources. In addition one of the women in the house opened a day care in the house to take care of the children a raise a bit of extra cash. I could imagine that they might have been thinking that they could increase the number of children that they took in to significantly defray the cost when the payment jumped. They could have been thinking that they would all be making double their wages in five years and hence have the additional money needed when the payment jumped. Maybe they were thinking that they could double the number of occupants in the house over the next five years so that they could make the payment when it doubled. I don’t know what they were thinking, but whatever it was they were not able to make it happen; so they will be moving out of their house shortly.

The whole story above was forced into play by unreasonable expectations. The people moved into that house because they had expectations that they should be living in this house that was beyond their means. But, in America we have expectations that anyone should be able to “make it” if they work hard. They people living in this house accepted those expectations and proceeded the best way they knew. They set up an illegal day care and tried to make some extra cash. They work extra long hours putting in as many as they could, leaving in the morning before sunrise and getting home long after sunset. The main obstacle was not motivation or ingenuity. Their main obstacle was the expectation.

Expecting success often delivers success. A person is often motivated to work hard just believing that success will find a way. Many people, myself included, have operated under this premise. The ugly truth, however, is that many people also fail to meet these expectations following these same principles. Success or failure is not conditioned on how much work is put into an endeavor. Success or failure happens for many unforeseen reasons. And, because the reasons are unforeseen each individual that succeeds succeeds mainly because of luck. And, the entire concept of success is nestled in the expectations for the endeavor itself.

So, American entrepreneurial spirit is based on expectations. Entrepreneurs expect to invest time, energy and resources into a risky venture and succeed in producing something new and novel. This type of expectation is good for America and infects the American society with the can-do rags-to-riches mentality. But, if everyone in the country comes to expect that they to can become wealthy by selling shlock that no one wants or needs to the next guy, then that entrepreneurial spirit has changed from a net positive to a net negative for American society as a whole. And, the only real thing that has changed in this equation is the expectation. People once believed that innovation was a key to make a new product worthwhile has been changed into the belief that slick marketing can sell any old crap to anyone and make the seller wealthy. People won’t by crap was once the counter to this argument. But the real life counter example to that argument is how many people bought Windows computers and operating systems instead of much better alternatives such as Unix. The legacy lives on unfortunately. Marketing outmaneuvers substance.

Marketing after all is all about expectations. Marketing starts out by telling you what you should expect, then it claims to fill that expectation with the perfect product. Since America is the capital of the capitalist world we shouldn’t expect anything different than the marketing of many unfulfilled expectations and products that can’t fill them.

Since the Great Depression and FDR calling for Americans to expect a chicken in every pot our expectations have continued to grow with American marketing machine. Chickens in our pots, Cars in our garages, houses on our golf courses and yachts on our rivers and lakes we finally expect that we should control the world itself. Obviously we can always create expectations that are higher than we can realistically achieve and we most likely will continue to do so. And, when we do so how will we be able to know which expectations are reasonable and which ones are not?

Well, perhaps Senator Gram has an answer for that as well. When he lashes out and calls us a nation of whiners, then perhaps we will know that our expectations are a bit too high. Or, perhaps his expectations are too low?


Don't forget what Stephen Colbert said, "Reality has a well-known liberal bias."

Cross Posted @ Bring It On, tblog, Blogger and BlogSpirit