Wednesday, August 24, 2011

Winter Knows What Summer Has Forgotten


Do you remember the new economy? In the late 1990s nearly all of the Business magazines and business sections of the newspapers trumpeted nearly nonstop that the economy had changed meaning that the stock market could only go up. A number of phrases became common knowledge: manufacturing was no longer important, stock momentum mattered more than profit, and the business cycle had ended. As we have learned in the last few years, much of the conventional wisdom of the new economy was really temporary trends and not a timeless truth. The new economy really did succeed for a while and some people today are still wealthy from it, but it did not change the economic rules the way that we thought it would. No matter how often people repeat that the business cycle is dead, it still rolls on as it always has.

Will there come a day when the racial, ethnic, religious, and cultural tolerance that seem so strong and inevitable today will reverse and become unfashionable?

 
In a similar fashion, we were told by too many experts that the value of houses simply could not go down. As Alan Greenspan famously said, “a destabilizing contraction in nationwide house prices does not seem the most probable outcome...nominal house prices in the aggregate have rarely fallen and certainly not by very much.” Pundits and business magazines said that the chances of house prices falling on a national scale were a million to one, but still they fell. 

What we should learn from these two examples is that even short term trends begin to be seen as inevitable and the way things will always be. America has been a world leader since World War I and the predominant superpower since World War II and it will always be that way. We must assume that America has some trait that makes it unique so that it will never diminish. The US stock market has trended upward for well over one hundred years (except for a small blip in the 1930s), which means that economics is now a well understood science and stocks will always be a good investment. Food has been inexpensive in the US for decades so we should assume that agricultural technology will always keep food cheap. Is it really safe to assume that when a trend go on for several decades it means that the world has fundamentally changed and the trend will always continue?

If we are to assume that the trends of US dominance, ever increasing wealth from stocks, and low cost food will always continue can we also make the following assumptions? Three months ago it was January 1st and for the past 90 days each day has been getting longer at an ever faster rate. I must assume that one day in the near future daylight will last for fifty hours at a time. I have also noticed that my son who is 30 days old has grown at an alarming rate. I figure that in a few short years he will be as large as an elephant. 

Of course these examples are ridiculous. We know that days grow longer for six months and then grow shorter for six months. We also know that newborn babies grow very fast, but as each month goes by, their growth slows down until they stop growing altogether. We can safely assume that there are many cycles in nature that wax and wane over days, months, years, centuries, and eons. Just because something has increased or decreased for as long as you can remember, does not means that it will always be this way. The flowers of summer were born in the spring and have always known a world of warm sunlight and plentiful rain. They are unaware that one day frost will come.

We could look at many cycles such as housing prices or glacial volume and talk about periods of growing and shrinking. However, there is one cycle in particular that will have a profound impact on all of humanity. This is the cycle of altruism (kindness) versus competition. Every person, every community, and every nation has the capacity to be either cooperative or competitive with those around them and at all of these levels we constantly see both at work. Each person, community, and nation is both kind and cruel on a continual basis. Sociologists and evolutionary psychologists are still trying to understand under what conditions a person or group is cooperative and friendly as opposed to being unfriendly and competitive. The details are still somewhat of an unsolved puzzle, but it often is related to resources. Those who have much tend to be more giving, while those who have little tend to be more stingy. We know that there are many exceptions, but the rule seems to hold often true.


Could altruism and competition on a national or global scale be something that waxes and wanes? The United States has been a very generous country for decades. We have a generous welfare system; there is general good will among the different races, religions, and cultures; and overly competitive people are seen as being in some way defective. Is it safe to say that the Western world has developed a new political or social system of universal harmony? Have our souls been made better in some way so that competition and conflict between different groups has been expelled from our culture? Or, is it possible that this trend of the past few decades could be reversed? Will there come a day when the racial, ethnic, religious, and cultural tolerance that seem so strong and inevitable today will reverse and become unfashionable? The answer may very well be yes and if so, it will change humanity in ways that are fundamental and far reaching.


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