Structure Anyone?

So in the last post we talked about a systems approach to our current economic conditions. There's a lot of news out there now, some negative, some positive. There is much talk of government doing more and talk of cutting government back. As we said last time, let's first understand the nature of the problem. 

Are our current problems just a particularly long and severe business cycle? Are we undergoing something more fundamental, that is a structural shift in our economy that is prolonging our current problems and delaying real growth? I would proffer that we are seeing some significant structural changes that will work themselves through, but until that time real growth (GDP in the 3-3.5% range) and a return to more "normal" unemployment levels of 5-6% are going to be elusive. Some things that are shifting;

• Home Ownership - Americans ideas and attitudes of owning a home have shifted. Many have found that it is not the "guaranteed" investment that so many household balance sheets can be built on. Also, a new generation of buyers is discovering that a home is actually an impediment to a mobile career and/or life. 
• Consumerist Attitudes - The attitude of American consumers has downshifted in a fairly significant way since the financial downturn. Most consumers have found that more and more stuff is not a path to prosperity but just the opposite.
• Technology - Always the ever present wild card in our market economy, technology continues to drive shifts in how everything is done. Technology has changed how we work, where we work and critically how we shop. This is beginning to drive major changes in commercial, and especially retail, real estate.
• Government Deficit Culture - The deficits don't matter culture has finally run into a wall. Deficits do matter when they begin to grow to high percentages of GDP. Coupled with the fact that entitlement programs are now seeing the effects of several previously predicted demographic trends.

There are many other trends out there can could also be effecting the recovery, but these four clearly prove our current conditions are structural shifts, not just a bad cycle. So what do you think, can we really declare the current problem to be driven by structural shifts in our economy? By knowing this, could it change how government should respond? Does the government need to get out of the way and let the private sector return to a less uncertain business climate?

The Economy Stupid?

This phrase was coined by James Carville during Bill Clinton's campaign in 1992. Most pundits claimed it helped Clinton connect with those imperiled by the recession that was underway then, or not, as was later shown to be the case. It is still up for debate how much this helped, versus say a strong third party challenge from a certain peculiar Texan.

This begs the question today. Most who proffer this think the economy needs to be "fixed" by government intervention. Things like stimulating consumer demand or spending on infrastructure. The theory is that these create demand that gets the economic machinery moving. This is true, but typically true as a 5K vs a marathon, in other words it is short-lived and typically not sustainable. Like it or not, this is a tool that could be used, but like all tools, it should be only applied in the right application.

The ups and downs of a market economy are driven in part by two distinct types of disruption; Cyclical and Structural. Cyclical disruptions are driven by the business cycle. This cycle is constantly seeking, or oscillating around, a balance between supply and demand. Structural disruptions are driven by big changes in the structure of an economy. These are typically large shifts in supply and/or demand driven by technology, war, political shifts, or major behavioral shifts. I contend that government intervention may ease a cyclical disruption, but that it will aggravate a structural shift. So what was the 2008/2009 Recession and it's aftermath, cyclical or structural? What do you think about government policy shifts and their effect?

So following a "systems thinking" approach, we would approach these questions in a logical sequence;

1. Determine the nature of the problem.
2. Determine an application or technique to solve said problem.
3. Execute application to solve problem.
4. Test or analyze results.
5. Verify and close, or modify plans and approaches and return to Step #2.

These steps will be subject of future posts where we'll explore these questions in the context of the current economic situation in the US. Hopefully lively and enlightened discussions will ensue.

Introduction

This is my first foray into the blogosphere. I plan to use this space to share writings and links in the general theme of looking at life in a whole or "systems" view. I will explore links, books and articles that help make sense of the "logic" around us and find new ways of applying it. I believe that there are profound principles in the world of "systems management" that can be applied much broader and by non-traditional audiences. My nearly 30 years of engineering and aerospace experience give me a birds-eye view of the traditional application and a heart for the journey of non-traditional applications.

Let me know what you think!