Stimulating the Zombieconomy
Via Brad Delong, Mark Zandi says stimulus's effects are about to fade.
What we need more than stimulus is institutional reform. Stimulus sans reform is going to merely produce what we've got today: a jobless, meaningless so-called recovery.
Why? It's time to wise up to the simple fact that we built a Ponziconomy. Authentic prosperity under its regime has hit its limits - as the last post on jobs begins to show. Value isn't created by the institutions of industrial age capitalism as much as its transferred.
What's the magnitude of that value transfer? As Raghu Rajan notes in his new book Fault Lines: “of every dollar of real income growth that was generated between 1976 and 2007, 58 cents went to the top 1 per cent of households”. 60%? And that's not even counting costs to the environment, tomorrow's generations, etc. Industrial age capitalism isn't, any longer, a value creation machine - it's a broken machine that transfers value instead. Hence, the term Ponziconomy: it's a game of musical chairs (to put politely).
Stimulating a zombieconomy and bringing it back to life is a poor choice to make. It's not yesterday's tired, lame, brain-dead organizations we need to keep on life support, and resurrect. Sowing the seeds of organizations that can create radically meaningful work, life, and play for the 21st century? That's the challenge - and it's less about stimulus than about building a new set of institutions for a radically interdependent economy.
Double-dip? Recovery? Wrong question. Investing in Constructive Capitalists - whether countries, blue-chips, or startups is where today's most significant and enduring returns are found - because they're rebooting capitalism from the ground up.