The Global Economic Outlook In 2013 Compared To 1999
History is a marvelous tool. When we look back to what shaped events of the past and compare them to today is often where we find the answers for the questions we have today as to how to solve current problems. Take a look back just almost 15 years ago to 1999 right before the new millennium. In 1999 the full impact of NAFTA has not yet hit home, consequently the US economy was practically the only healthy one. But, even that is stretching it. The far east in Japan had been hit with a banking crisis, subsequently the whole economic picture there turned pretty bleak. Europe was struggling with high unemployment while China whose own economy had yet to produce the economic boom many expected. In 1999 the biggest reason why the US economy has been not as rough as in Japan or Europe is Wall Street. When the Dow is gaining, wealthier consumers are spending more readily and major businesses find it easier to raise capital for investment which in turn keeps the stock market strong.
That's the bright side. Underneath this cloak of deception where the middle-class has been disappearing at alarming rates but was so well hidden under the façade of Wall Street gains laid a mounting juggernaut of economic peril that was about to hit the United States and send the already fragile global economy into a tailspin.
The troubling signs of global instability were already beginning to surface. In the United States one of the key factors behind the mounting economic deterioration is the dwindling of real household income and the increase in poverty. The end result of our trade policies, governmental over regulation, and corporate greed since the early 1990's.The United States was already experiencing a prolonged labor market slump that really began in 1994 and not 2001 as some would like you to believe. Although the job market seemed to expanded consistently, a very slow dribble. But, the true nature of this so called expansion was never revealed to the general public. The labor market report in 2004 shows the US only gained an addition of 1.5 million workers between 1999 and 2004. What is not indicated is that all these jobs created the wages were far below middle-class earning power. Subsequently, a rejuvenation of working poor and an acceleration of the widening wage disparity gap that has only has gotten wider. Sounding familiar? It should, because today the highest percentage of jobs available the corresponding wages are at best at the poverty level.
The troubling signs continue. In 1999 the US prison population was at an all time high. We had just reached another milestone, in that the United States had the most people incarcerated, more that any other nation around the world. The prospects that our prison population will decrease any time soon is grim at best. One of this nations leader in the construction industry, Caterpillar Industries has announce layoffs because of the slow demand for high grade large machinery. Fleet Bank when it took over Bank of Boston resulted in more layoffs. Dupont when it bought out US Steel resulted in many more layoffs. Due to almost no accountability by US drywall manufactures to keep pace with the construction industry opened up the door for imported Chinese Drywall that we know today infected so many homes with inferior grade drywall that the majority of newly constructed homes that had Chinese dry wall installed had to be demolished. Chevron laid off over 400 workers as well as Boeing cut an additional 6,800 workers. Now, that one mass layoff sent a signal that the US economy was starting to "really" come apart.
Meanwhile, overseas with global deflationary pressures unfolding in 1999 were continuing to choke American profits. When that happened it made share prices look even more overvalued. The troubling signs of things to come when the financial crisis of 2008 hit were first initiated in 1999. A big concern in 1999 was that the world's economy now that the World Bank having successfully scotched that inflation will prove too slow only to come to grips with the prospect of deflation sent a clear message of troubling times ahead.
In 1999 South America was experiencing it's own economic crisis. In Ecuador, it was preparing for a run on it's banks after they closed their doors for a week to stem the tide of cash strapped citizens. In Venezuela the economic recession forced over 35% of it's manufacturing plants to close sending thousands into the streets looking for any kind of work. Brazil when the IMF allocated a 41 Billion Dollar rescue package did little to stimulate it's once prosperous economy. When Mexico imposed steep tariff cuts it created more discontent and ushered in a period of very sluggish almost non existent economic growth. To the north, Canada was trying to cope with an unemployment rate at well over 15%. Meanwhile in other parts of the world Indonesia faced the prospect of a bank run much like Ecuador in shutting more the 40 of it's major banks, Russia was experiencing it's own economy troubles while Italy and Greece GDP kept falling.
If this wasn't troubling enough using the Williams Economic Recovery Chart in 1999 the United States manufacturing base had dwindled to only about 7% while service and information industries rose to over 60% with retail a close second at over 20%. What we have witnessed in just the span of a decade is a deterioration of labor industries that don't produce the balance in the economy that promotes growth and prosperity for the majority of workers. In 1999 inflation was sweeping into and grabbing up what ever left over funds were left in personal budgets all across the country. Inflation today is another major reason why so many people still have so little disposable incomes. Today, using the Williams Economic Recovery chart as a guide the United States economy is still way out of balance.
What happened in 1999 holds merit today in that the cost to produce goods and services rose in 1999 to 5% while consumer prices at only 1%. A fall of 4% which meant the cost of raw materials kept rising but most of the cost wasn't carried over to the consumers. Seemingly, that was the only good part. But, still the cost for consumers kept increasing anyway. When most of the cost was incurred by industry that meant that too many Industries carried more of a debt to credit ratio which only meant companies had to go further in debt by obtaining more credit for production. This extension of credit kept diminishing expansion and overall economic growth. Banks had less available cash to grant credit to industry further diminishing economic expansion.
With the government bail out of 2009 to the tune of billions to the financial institutions again did not produce the economic revival that the government expected. Instead, these same too big to fail banks to this day have used that infusion of, incidentally borrower money, to invest, primarily overseas, and make more profits. But, in order to that they have virtually eliminated extending any type of credit to smaller industries especially the small entrepreneur, the true engines of economic growth. The only ones now receiving credit are still the big conglomerates which continue to their expansion not here in the US but overseas. This is where labor is cheaper and less regulated which further exasperates any chance that real economic growth will occur in the United States today.
The similarities of economic conditions some 15 years apart are striking. As in 1999 major corporate dominance has only continue to rule and control the purse strings of State and Federal legislatures. With the continued budget cutting mentality then as today they have managed to whittle away at small business expansion. They have practically eliminated the SBA effectiveness in every state across the country. So what needs to be done to fuel the flames of economic expansion not only here in the United States but elsewhere?
We have to remember four keys points for International stability in countries all over the world. The first key is: eliminate hunger. In reality, even though it seems an almost impossible task nations working together have the capability of doing just that. Secondly: nations have to increase their own Bell Curve. This is because intelligence quotes are directly proportional to income levels. In the United States our own Bell Curve has been receding faster with each new generation ever since the mid 1970's. Three: there has to be a proportionate 2 to 1 wage stimulation. An example would be: for every cent increase of the cost of durable and non durable goods and services wages increase 2 cents to keep the balance for economic expansion and stability. Four: An economically secure and stable society has to have a standard of morality in all phases of their society. An example would be in accordance with the rules and regulations set by the Federal Communications Commission 45 years ago what we see on TV today would be completely unacceptable back then. The base morality of the United States has really declined and when there is a decline of base morality in any society the economic stability and security are jeopardized.
When we implement these four key points in society and in the United States combine them with National Economic Reform the end result will be a rebirth of economic growth. The likes of which this country hasn't seen since the mid 1950's and 60's. What is happening today is very reminiscent of the economic scenario played out just 15 years ago. If we don't adapt and implement corrective measures and really change the course this nation is headed we will repeat mistakes made and continue to squander what ever hope we have left of ever turning the corner onto a path toward economic growth and prosperity for all.