Short Term Gain, Long Term
Pain
Ron Robins
alrroya
written 31 Mar, 2011
Unacknowledged as key causes of most developed countries' growing
and unsustainable debt is their citizens' lack of happiness and
well being. This induces people to seek immediate comfort in
material goods, drugs, and activities and lifestyles that eventually
cause them, and their societies, great harm, ill health, and
massive debt!
After decades of study, Robert E. Lane, the Eugene Meyer Professor
Emeritus of Political Science, at Yale University in the US,
found that it is a lack of happiness and well being that is eating
away the moral fibre of the populations in advanced market democracies.
In Professor Lane's seminal book, Loss of Happiness in Market
Democracies, he writes, "amidst the satisfaction people
feel with their material progress, there is a spirit of unhappiness
and depression haunting advanced market democracies throughout
the world, a spirit that mocks the idea that markets maximise
well-being and the eighteenth-century promise of a right to the
pursuit of happiness under benign governments of peoples choosing."
Continuing, "the haunting spirit is manifold: a postwar
decline in the United States in people who report themselves
happy, a rising tide in all advanced societies of clinical depression
and dysphoria [anxiety, malaise], especially among the young;
increasing distrust of each other and of political and other
institutions, declining belief that the lot of the average man
is getting better, a tragic erosion of family solidarity and
community integration together with an apparent decline in warm,
intimate relations among friends."
It is these conditions which Professor Lane observes that give
rise to individuals seeking immediate comfort any way
they can. Hence, most developed countries' populations gravitate
to instant solutions that might ameliorate their lack of happiness
and anxieties. This, no matter the long term monetary, psychological,
or physical consequences and costs to themselves or society.
Professor Lane believes it is imperative for western democracies
to give the highest priority to improving the happiness and well
being of its individuals. And this means their focus should be
on human psychological health and relationships - not about income
levels.
By looking for hedonistic joys in the present, many developed
countries' individuals seek excessive material consumption which
then creates unsustainable levels of consumer debt. In the US,
though to a lesser degree in other developed countries, consumer
debt has grown far faster than individual earnings gains over
the past several decades. Despite a respite in consumer debt
growth during the past two years, signs are emerging that US
consumer debt might well begin to outpace actual earnings gains
again in 2011, thereby creating conditions for yet another future
financial crisis.
Also, and again much ignored in the debate concerning debt, are
other individual behaviours that induce it. For example, to provide
a modicum of happiness and to make life more bearable, people
in America (and in many developed countries) consume drugs (legally
and illegally) in extraordinary amounts. These drugs - alcoholic
beverages, marijuana, cocaine, cigarettes, prescribed and non-prescribed
medications, etc. - often create dependencies that impair health,
brain and psychological functioning. These dependencies then
lead to greater crime to support drug habits, increase prison
populations and criminal/legal costs, raise the number of accidents
everywhere, and encourage unhealthy lifestyles that in turn produce
epidemics of obesity, diabetes, heart disease and all manner
of health problems.
Americans spend more on healthcare, by far, than anyone else.
In 2009, according to the Centers of Medicare and Medicaid Services,
Americans spent $8,086 per person on healthcare, equal to 17.6
per cent of their economic output or gross domestic product (GDP).
And such expenditures continue spiralling 4 to 10 per cent a
year, far faster than GDP itself. Thereby they add inexorably
to future unfunded US federal government medical liabilities
that Boston University's Professor Laurence Kotlikoff believes
is about $125 trillion over an infinite timeframe. To fund that
liability would require every man, woman and child in America
to pay about $407,000 to the US federal treasury!
And among public companies a short term focus on near term profits
that potentially create longer term costs and debt has been endemic.
Consider this 2001 quote by Maryann Keller on the US automobile
industry. In Forbes magazine, she said, "[That] Chrysler,
GM and Ford spent billions of dollars to buy their stock in the
open market... It was always obvious that product spending [developing
new autos] was being sacrificed to provide trading liquidity
[ease of selling stock] for big investors while boosting earnings
per share. GM, Ford and the Chrysler Group today [in 2001] find
themselves with growing gaps in their product portfolios as they
lose market share..."
Thus, the US automobile industry preferred to spend profits on
supporting their near term stock prices rather than developing
new products for longer term profits. By 2009 all but Ford were
bankrupt. After losing tens of thousands of jobs and engaging
in a massive automobile industry restructuring program, the US
government bailed out the industry (for now?) at a cost of about
$85 billion. (Canadian governments also supported GM and Chrysler
to the tune of $13.5bn CAD.)
Total societal US debt (private, corporate and government) is
now likely to continue moving higher again as consumers are forever
encouraged to spend now while saving is discouraged due to artificially
mandated low rates. Increasing employment, though welcome, is
not likely the answer to mounting unsustainable societal debt.
In fact, it might well exacerbate it if former long term trends
of debt growth outpacing income gains continue.
The US, like most other developed countries, is on a
path to increased human suffering and tragic financial circumstances
unless it deals with the fundamental issue: enabling individuals
and families to become intrinsically happier and experience feelings
of greater well being. Only then can the compulsion
towards short term thinking and gratification - which builds
huge unsustainable long term debt - be stopped.
###
Ron Robins
Founder & Analyst
Alrroya - Investing for the Soul
email: r.robins@alrroya.com
website: alrroya
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