Just getting this far in the rebalancing has required high levels of unemployment and stagnant or falling incomes for most Americans even while the rich grow richer. Completing the adjustment will require more of the same for several years to come.
What will it entail? Some wages and prices will have to fall, even as others rise. The exchange value of the dollar will have to drop against Asian currencies, resulting in more expensive imports even as exports rebound. Residential and commercial property values may have to fall further, making them more affordable for some even as current owners and their lenders write off billions of dollars more in losses. In industries still saddled with overcapacity, more companies will close their doors.
And because the economy is complex and interrelated, all of these things will affect all the others in ways that no one can accurately predict, creating winners and losers.
Here’s a small example:
Last week’s Bloomberg Businessweek had a cover story about the “dirty jobs” that are vacant — cleaning fish, plucking chickens, washing dishes, picking tomatoes — because illegal immigrants have left and even unemployed Americans refuse to do them.
The business community is inclined to think this a supply-side problem — that Americans are spoiled and lazy and protected by an over-generous safety net. But it is equally plausible that, in the post-bubble, post-illegal immigrant era, fish and chicken wholesalers, tomato farmers and restaurants will have to offer better wages, benefits and working conditions to attract the workers they need, even if it means charging higher prices. And if those higher prices mean that people will buy less fish and chicken, and fewer tomatoes and restaurant meals, well . . . that’s just part of the free market’s natural adjustment process.
Don’t get me wrong: Such adjustments can be painful and disruptive and can seem quite unfair, particularly when they require people to give up something they already had, or thought they had.
That is why NBA team owners and players may be willing to cancel the season and give up $4 billion in revenue over remaining issues that, at most, involve the annual distribution of a couple of hundred million dollars.
It is why Europeans can’t agree on the modest sacrifices necessary to save the euro and prevent the European economy, along with global financial markets, from collapsing.
And it explains why a partisan stand-off over a $50 billion a year in tax increases in a $15 trillion economy prevents Congress from reaching a long-term budget agreement that everyone knows is necessary to prevent our own calamity.
From the point of view of an Indian rice farmer or a Kenyan goat herder or a Mexican factory worker, we must all look like millionaire team owners and millionaire ball players squabbling over how to divide the box-office loot. Something to think about this week of national thanksgiving.