BALTIMORE – So far, so good.
2017 is shaping up nicely… at least from the point of view of an amused cynic.
Rarely have so many people believed so much that isn’t true.
Telling companies where to put their factories will not really protect or create jobs…
…Ramping up the stock market won’t make U.S. companies more profitable…
…Reducing the trade deficit will not really boost U.S. economic growth…
…Putting Wall Street billionaires and military-industrial cronies in positions of power in Washington will not reduce the influence of the Deep State…
…“Revenue-neutral” tax cuts will not really increase business profits or cause a boom…
…The Russians did not really swing the election in Trump’s favor…
…The next four years will not be a repeat of “Morning in America”…
We could go on and on. Practically every major public aspiration at the dawn of 2017 is a dangerous delusion.
Underappreciated, said a writer in The Wall Street Journal recently, is the second law of thermodynamics.
The law is expressed and understood in many different ways. But it stems from an observation: If you want to keep the soup hot, you have to turn on the heat.
Left alone, soup cools to room temperature. Over time, without more energy inputs, everything – even your editor – goes to room temperature.
We eat food. The food feeds the furnace. We convert some of this food energy to heat. Some to locomotion. And some to brain activity. Take away the food… and we’re finished.
The second law of thermodynamics has a parallel in economies and markets: Stocks do not go up by themselves. It takes sales, profits… or inputs of cash.
Take away the hot money and the hot, hot bubble cools, deflates… or crashes.
Progress in Reverse
Economies need inputs, too.
Normally, people save… and use their savings as fuel, putting them to use in new projects. Some investments succeed. Some fail. Net, they create new wealth and push the economy forward.
But if too much of the nation’s real surplus – its real savings of time, money, and resources – is put into bad investments, crony wars, insider payoffs, or zombie-support programs, growth slows.
Progress can go into reverse, too… Venezuela, for example, is backing up rapidly.
There’s no standing still; you need energy even when you’re in a coma.
As Norman Mailer put it, you can resist change, but you will “pay more for remaining the same.”
Over the past three decades, U.S. economic growth has been cut in half. The reasons for that are widely debated. Demography? Debt? Technology?
Bloomberg Markets reports, for example, that more and more baby boomers are retiring… that is to say, leaving the productive economy:
More and more baby boomers begin the new year with nothing on their schedule but plans to golf, travel, and spend more time with the grandkids.
The number of Americans aged 65 or older without a disability that aren’t in the labor force rose by 800,000 in the fourth quarter of 2016, marking the resumption of a long-standing trend: the exodus of their generation from the work force and into retirement.
In other words, the energy is draining away. America is paying more for standing still.
Elites, Cronies, and Zombies
Distantly related to the second law of thermodynamics is Bonner’s third law: The older the tree, the more bugs, worms, and squirrels take advantage of it. Mr. Trump’s curiosity cabinet has all sorts of plans and schemes in mind. Some good. Some bad.
They promise to give Americans a “better” deal that will “Make America Great Again.” But it doesn’t work that way. The American government is an old tree – long past the point of declining marginal utility. What is needed is not better deals, but fewer of them. Deals take energy and provide shelter for parasites.
Wall Street and military contractors are already counting their money; you see it in the price of their stocks, now at all-time highs.
Over time, the apparatchiks, the elites, the cronies, the zombies, the planners, the improvers, the insiders, the schemers, and the dreamers – all promising “better” deals – take up more and more energy.
A deal is made to keep a factory in Ohio. The feds take over the pensions to get a private company off the hook. Planes, ships, and computer systems are ordered… not because they are really needed, but because the lobbyists, spin doctors, and glad-handers have done their work.
Paperwork is required. Tweets are sent. Lawyers are hired. The “heat loss” from unnecessary friction and dead-end “investments” increases.
And the whole system slows, cools, and rots until the limbs fall off.