The US economy: death by a thousand cuts?

 

The fabled "death by a thousand cuts" refers to a traditional method of slow, lingering, extremely painful execution used for over a millennium in China, right up until last century.  In theory at least, no one cut would be lethal in and of itself (unless the executioner had been bribed, or was feeling merciful);  rather, it was their cumulative effect that eventually overwhelmed the body's ability to resist.

That can be applied to economies as well.  It certainly describes very well the state of the US economy at this moment.  The "cuts" are different economic problems that all have the same outcome;  damaging parts of our economy, hampering their ability to resist, and increasing the drain on the whole economy in the process.

Consider these developments, all of which have been thoroughly documented in news media over the past couple of years:

• The economic contraction caused by COVID-19, which appears to have reduced economic output by at least 25% in the short term.
• The loss of jobs and income by those laid off during that process.
• The urgent provision of funding to help those laid off, leading to uncontrolled "money printing" by the Federal Reserve.
• The explosion in government spending to make up for the private sector economic contraction, but which has also caused massive inflationary pressures.
• The supply chain crunch, caused by the economic destabilization initiated by the COVID-19 crisis.
• The shortage of workers, as many employees decided it would be more to their advantage to stay at home, draw unemployment benefits and live off COVID-19 economic assistance payments.
• The closure of literally tens of thousands of smaller businesses, who did not have sufficient financial reserves to cope with the economic downturn, and who took with them hundreds of thousands of jobs that have not yet come back.
• International geopolitical pressures, including the Ukraine war, commercial competition with China, a worldwide economic contraction caused by COVID-19, competition for scarce natural resources, and so on.
• Natural disasters such as storms, volcanoes, droughts, floods and other events that have had a crippling local and regional effect.

Any one of those evils might hurt an economy, but not to the point of wrecking it.  However, they all have a cumulative effect;  and as an economy is more and more injured by each successive event, it becomes less and less able to respond to or resist the next one.  It's like a person suffering from multiple health issues.  Each can be controlled by medication and/or other factors;  but if one gets out of control, it puts additional strain on the body, making it less able to resist another of those issues.  If two or three of them get out of control, their cumulative effect may be to make it impossible for the body to resist the others.  The same applies if the medication(s) needed to control one such issue react negatively with those used for another health problem, making it difficult or even impossible to treat either of them.  A single illness may lead to such progressive disease, or a combination of illnesses, but the outcome is the same . . . death.

That's where the American economy is right now.  We've had too many individual pressures that on their own, might not be too difficult to withstand;  but, in combination with each other, they're putting us under enormous strain.  Each new adversity makes it more and more difficult for the economy as a whole to cope with it.  The most recent, the sudden, almost uncontrolled increase in fuel prices, may be the worst - particularly since left-wing, progressive politicians see it as a positive, rather than a negative development.  They want to reduce our use of fossil fuels;  and what better way to do it quickly than to deliberately make those fuels too expensive for the average person to afford?

I don't think we'll see a sudden and complete implosion of the entire US economy.  However, I do believe we'll see the implosion of sectors of the US economy.  To name just a few examples:

• The entire motor vehicle sales industry has been built up around the concept of individual dealers who take cars from the manufacturers, sell them to customers, and support them after sale by offering service, repairs, etc.  However, those dealers at present - and for the foreseeable future - can't get enough stock from the manufacturers, to sell enough vehicles, to make enough profit to sustain themselves.  They're trying to survive by charging more per vehicle, so that the excess profits from fewer sales can keep their heads above financially troubled waters;  but this can't be a long-term solution, because if they become (or remain) too expensive, people will simply stop buying vehicles.  How are dealers to survive?  Is the dealer model of vehicle sales ultimately doomed?  Literally millions of jobs have been built around that core.  What will happen to them?
• Agriculture has evolved into a market where relatively low profits are made by the producers of food.  Most of the profit goes to industrial-scale food processors and distributors, who "add value" to the raw product by slaughtering, preparing and marketing it in myriad ways.  However, with the collapse of the traditional two-pronged market approach - one the consumer, the other the restaurant and fast-food industry - supply lines have shifted, and may never return to what they were.  What's more, interruptions and vastly increased prices for inputs such as fertilizer, diesel fuel (to power farm machinery), and so on, are severely impacting farmers, whether family or corporate.  Will our food production, processing, distribution and consumption models withstand such pressures, or will they have to be modified (at very great expense and disruption)?  Will geopolitical pressures such as the collapse of food exports from Russia and Ukraine lead to unbearable pressures on other food producers - not to mention possible political upheavals in consuming nations?
• The transport industry has been thrown into turmoil by, first, a sudden and drastic reduction in volume when COVID-19 hit, then a "rebound effect" of vastly increased traffic when distributors and retailers hastened to rebuild their inventories.  That's still going on, and shows no sign of slowing.  Sea cargo costs have skyrocketed;  air freight has done likewise;  road and rail transport simply can't cope with the vastly increased demand.  A system built for "just-in-time" manufacturing and distribution can't cope with current conditions, but it's not possible to change it "on the fly" without causing even worse disruption.  Everybody in that industry is so busy trying to cope that they can't spare the time or resources to look for better ways to do things.  They're running so hard to stay in place that they can't make any forward progress - and if they try to slow their pace to examine how to make better progress, they'll end up going backwards.

Those are just a few areas where the "thousand cuts" are crippling our economy.  It could withstand one, or a few, or even a moderate number of them, but there are now so many that it's faltering.  Those who speak of economic collapse tend to look at a single major factor, or a few big factors, as precipitating a sudden decline.  The reality is that each "little" problem has its effect, and makes the effect of the next "little" problem that much worse.  We traditionally speak of "the last straw that breaks the camel's back".  I fear that's precisely what we're currently seeing in our economy as a whole.

So . . . what can we, as individuals, do about it?  All I can suggest is to look at our own needs as individuals and families, and prepare for hard times in those areas.  That way, we'll insulate ourselves as best we can from the current crisis, and protect ourselves if it gets worse.  There's no "one-size-fits-all" solution;  each of us must analyze our own situation, and react accordingly.  A few examples:

• If I'm dependent upon prescription medication to stay healthy, I need to make every effort (including scrimping, saving and sacrificing in other areas if necessary) to accumulate a reserve of those medications, to help get through shortages that might otherwise be dangerous to my health or even life-threatening.  I'd say that at least a 90-day supply of such medications is warranted;  if possible, 180 days.  Even non-prescription needs (e.g. over-the-counter painkillers, anti-allergy pills, cold and flu relief, etc.) and personal hygiene items (sanitary napkins, deodorant, toothpaste, denture fixative, soap, etc.) may be in short supply.  Stock up accordingly.
• If I have food allergies or food-related health conditions (e.g. gluten allergies, inability to digest certain foods, etc.), I should stock up on foods I can eat, so that if their supply is interrupted, I can maintain my health for at least a while.
• If I see supermarkets and other retail channels getting short of what I need, and/or becoming too expensive, I need to investigate alternatives.  Can I grow food in my own back yard to help supplement my diet?  Can friends come in on that with me, so that we all grow something, help each other with the daily tasks involved, and share the harvest?  Can we learn together to preserve food through home canning and other techniques?  Every little helps.
• If fuel becomes too expensive to permit unrestricted travel, can I carpool with friends and co-workers to save money?  Can we coordinate joint trips to the supermarket to do our shopping?  Can I buy a bicycle, put a small basket or other cargo-carrying receptacle on it, and ride it to local shops?  That might be good for my health as well as my wallet.

Our economy as a whole is currently facing "death by a thousand cuts".  So are we, in our individual economic circumstances.  We can either sit back passively and wait for it to happen to us, or we can be proactive and prepare ourselves to resist and withstand it as best we can - and even fight back, together with our friends, co-workers and neighbors.  I know which option I'm choosing.

Understand, too, that the powers that be don't want us preparing to cope with such hard times.  We're already seeing official warnings not to "hoard" supplies, and assurances that there will be enough to go around.  If you believe that, there's this bridge in Brooklyn, NYC I'd like to sell you . . .  Making preparations to cope with what's clearly, unambiguously staring us in the face is not hoarding - it's prudence.  When our government fails to protect us against economic storms, we'd better protect ourselves . . . or be destroyed by them.  (As part of that prudence, be very careful not to let too many people know that you have reserve supplies of essentials.  If things get bad, authorities will probably try to confiscate them for "redistribution" - and even if they don't, you can expect your neighbors to demand that you share with them.  Refusals may not be well received.  Keep a low profile.  When everyone around you is tightening their belts and their stomachs are growling with hunger, it's not a good idea to grill steaks on your backyard barbecue, sending the smell wafting over the neighborhood!)

We're undoubtedly in for hard times, and I don't think they're only short-term.  I won't be surprised if it takes a decade or more for us to dig our way out of our present troubles.  Let's buttress our defenses as best we can before the crisis gets any worse.

Peter