To watch What We Can Learn From Canada and Denmark Click Here
Arianna Huffington - Editor In-Chief of The Huffington Post, compares Pompeii to United States. From her trip to Italy, she visited Pompeii, a city that was destroyed by a volcanic eruption. She states that, "There were a lot of signs that something was wrong...an earlier earthquake, dogs were running away, birds were not singing, water was not flowing...but yet people continued to stay there minding their own business." However, she does not mean to say that United States is going to be destroyed by a volcanic eruption too. The middle class in America is the hardest hit, which is going to increase poverty.
Why? First, "Public, private and corporate debt far exceeds any previously known dimensions." (Steingart) As we know, from the news, the Bankruptcy of many real estate companies because people are borrowing much more money than they can pay back. The effect is being felt by firms and the people of the United States. Secondly, Globalization is starting to back fire on the United States, because of the production shift to countries that provide cheaper services. This is making a lot of people loose jobs, local industries shutting down and some production maker leaving U.S. for good. In addition, with the strength of the US dollar, companies have a hard a hard time exporting goods and making profits.
This puts the Middle Class at the highest risk without financial support to support their families. As Arianna Huffington states, "What are we doing, not put this in the forefront of our agenda? Half of the bankruptcies in this country are because of healthcare costs." So, the warning signs are there but what we do to make them better now plays an important role in the future. Its not only the President who should put in work, there should be a unity in the development and the voice of the public is still being ignored by companies. Optimistically, things may get better, but as Arianna Huffington states, "I don't want to sound like Cassandra (Trojan Princess), because it is not fun being Cassandra, but Cassandra was right and the cheer leading Trojans were wrong and very dead at the end."
In relation to this video, I found another interesting connection with the words of Bill George, Professor of Management, Harvard Business School.
Recognizing what went wrong can help identifying problems, which paves a path for solutions. So What Went Wrong in America? Careless Consumer Spending, where companies did not take control of. Bill George states, "I don't think we can become just a service economy. We need to get back not trying to drive consumer spending to a higher percentage in Gross Domestic Product (GDP). We need to lower that and put some money out there for investment....We need to work on creating an investment and innovation economy." Following from good examples, is also something that would help. For example, Canada and Denmark are two good examples of a good economy. Canada and Denmark discourage mortgages with less than 20% down payment. This shows that consumer spending is under control by making sure consumers have money to spend and be financially secure.
As a beginner in Economics, I can relate this to two things, Leakage and Injection. Leakage includes saving, taxes and imports. In leakage, the income recieved within the circular flow (i.e. - flow of consumer spending and factor incomes such rent, wages, interest profit) does not flow directly back. Where as, Injection involves investments, exports, and government spending regardless on the level of income. Bill George insists on injections for the economy, by companies investing to build on the future. As he states, "What are we building here? ...This country was build on investments, in the 80s and 90s it was built on entrepreneurial companies building up".
The whole point of this topic is to focus on long term goals, and working towards them instead of short term profit gains, and spending.
In relation to the United States, What are the warning signs in your country and how is the society and the government playing a role in the recognizing these issues and solving them?
References:
"Editor's Choice of Top 10 Videos of 2009 |." Big Think. Web. 04 Jan. 2010. .
"The pros and cons of the dollar being strong - Stocks & economy- msnbc.com." Breaking News, Weather, Business, Health, Entertainment, Sports, Politics, Travel, Science, Technology, Local, US & World News- msnbc.com. Web. 04 Jan. 2010. .
"A Superpower in Decline: America's Middle Class Has Become Globalization's Loser - SPIEGEL ONLINE -
News - International." SPIEGEL ONLINE - Nachrichten. Web. 04 Jan. 2010. .
Good job with your blog! Lots of deep questions here and I'll keep reading!
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