I have been an entrepreneur in the web development field for the past decade. Prior to that I earned my PhD in History and Policy from Carnegie Mellon University. I studied the role of innovation (both technical and financial) in creating regional economies. I argued that the rise of western Pennsylvania as the leader in Iron and Steel was the result of new forms of capital being deployed to fund new advances in technology around the railroad industry. Then, as a political scientist I asked the question: When did western Pennsylvania begin to decline, why did it experience decline, and what can be done by policy makers to mitigate the impact on the region’s economy?
I argued that the data show western Pennsylvania (centered around Pittsburgh) began a long period of relative decline in 1907, followed by absolute decline in the post-war period. The revolutionary aspect of this argument is that conventional wisdom pegs decline in western Pennsylvania to the 1950s and 1960s with the introduction of cheap foreign steel, the decline of the railroads, the shift from urbanism to suburbanism, and the end of artificial stimulation brought about by World War I and World War II.
My purpose in starting this blog is to provide commentary on the current state of our political economy and sound a clarion call for complete re-evaluation of how the United States approaches fiscal and monetary policy. I argue that the American Century is over, and that the United States is entering perhaps the greatest economic crisis in the history of the republic. While I cannot foretell the timing of this, I can tell you it will happen as we have set the stage for crisis of massive proportions by our wanton borrowing, runaway health costs, destabilized job markets, and financial industry deregulation. In fact, I wrote to the New York Times in March 1995, that then Secretary of the Treasury Robert Rubin’s push to repeal Glass-Steagall would usher in a new era of Robber Barons–I think the credit crisis of the past 18 months is testimony to my perspicacity.
Though you may see my comments as being overly pessimistic, please realize I am not a pessimist, cassandra, doomsayer, or defeatist. Far from it. I am a realist who subscribes to the theory of Long Waves in capitalism. What this means, in short, is that there are multiple levels at which the macroeconomic cycles of prosperity and contraction that propel the fortunes and misfortunes of any capitalist society are interacting. Think about seasonality in a particular business–there are lean times and there are times when the business is generating incredible cash flow and internal rates of return. Now think about whole sectors of the economy–there are times when a sector like high tech (1992-1999) is white hot, and times when demand trails off and the sector contracts as it cools off. Now think about long term macro cycles–there are decades of prosperity, followed by years of economic contraction. Now think about the long wave of capitalism–it is the broadest of these cycles.
These factors are impacted by all manner of externalities as well as intrinsic laws of supply and demand, profit maximization, conservation, and innovation. As governments monitor the activity of their economies –through data on money supply, interest rates, inflation rates, employment rates, foreign exchange rates, trade balances, debt obligation, and sector spending across consumers, producers, and government–they try to “steer the ship” by enacting legislation, enforcing regulations, and influencing large institutions by increasing or decreasing access to capital. The effects of this during “normal times” are to keep things basically on track. But, if they make a wrong bet, or if things heat up beyond the ability of governmental levers to have a tangible impact, the trajectory of the economy speeds up and the wild swings of the business cycle become susceptible to amplification.
