Doom and Gloom and Other Problems

Scott Greenfield was all doom-and-gloom yesterday:

This year, I’m less sanguine.  Not because the value of our Constitution is diminished, or because the struggle is less worthy, but because of my macro-view of Mazlow’s Hierarchy of Needs. Today, our nation is faced with very basic problems that will consume our energies and focus.  Our economy is in shambles.  Wars continue, even raging worse now than before.  Food and fuel have become a crushing burden, and the jobs that remain fail to maintain real wages even as unemployment.  Foreclosure has left many in fear of losing their homes, whether they deserve them or not. All of these issues address basic human needs.

I agree with Scott about the drag on our economy from the huge fuel costs, and war is always a negative sum game. (I’m not so sure about rising food costs—I suspect this is due to bad Soviet-Union-style agricultural planning.) However, I have a rosier view of the general state of the American economy.

Our economy is bad only when set against its own amazing performance in the recent past. I haven’t seen many second-quarter figures, but so far the worst we can say about economy as a whole is that it is growing slower than usual. It only seems bad because we’re used to so much better.

Unemployment is up to 5.5%, which is higher than it’s been lately, but not very high when you look back a few years, and it’s nothing if you look back a few decades.

As for the housing crisis, it’s not as if banks are going to bulldoze foreclosed homes into the ground. Our housing stock isn’t going to shrink. Every time someone loses a home, someone else will eventually get to buy it at a reduced price. And the people who lose their homes won’t be out in the street, they’ll be in rental housing. A lot of money and houses will change hands, but the overall housing situation will remain about the same.

But the economy itself isn’t really Scott’s point. He’s worried that people unhappy about the economy will give up on higher-order concerns, such as freedom and social equality:

Americans will not be deeply concerned about freedom in our 232nd year.  They will be concerned about eating, jobs, gas and keeping a roof over their children’s heads.  Abraham Mazlow explains why higher order concerns take a back seat to basic needs. For most of its history, America did a superb job of feeding and housing its citizens.  But in this flat world, where our dreams are counted by the price of a barrel of oil, we may have run out of American miracles.

If I understand what Scott’s getting at, I’m pretty sure he’s wrong in theory, because even an unprecedented failure of the U.S. economy wouldn’t be anything we haven’t seen before.

At the height of the Great Depression of the 1930’s, our economic production declined about 25%. Suppose the coming hard times are twice as bad, and our economy collapses to half its current production level. That sounds bad, but keep in mind that we’ve already been there, and not too long ago: Gross Domestic Product per person, in constant dollars, was half as large as it is today as recently as 1971.

If my half-remembered history is accurate, we were actually pretty serious about our freedom in those days: Important cases such as Gideon and Miranda had passed a few years before, the civil rights movement had taken off, as had the free-speech movement, and the military draft was about to end.

So it seems unlikely that even a spectacular collapse of our economy would push us far enough down Mazlow’s hierarchy of needs to endanger our freedom.

And yet…I’m not reassurred…and I’m having a hard time explaining why. (Thus the reason this post did not appear on the 4th.)

I guess it comes down to two things. First, I think we’re likely to over-react to sudden changes, even if the true magnitude of the change is pretty small. Second, I think the presidential election process amplifies this over-reaction.

I hate that I feel this way, because I’m generally pretty positive about the American people: Despite all the wrong turns, we have always seemed to find a way to greater liberty. I guess that’s a third thing: I worry that we’ve lost our way.

I hope I’m imagining it.