Thursday, July 31, 2008

Realistic Malaise versus Irrational Exuberance


I recently listed to a podcast featuring a speech of President Jimmy Carter. The speech was given on July 15th, 1979, where he spoke about the growing energy crisis in the United States and our crisis of confidence that followed. This speech was dubbed the Malaise Speech and was universally derided as being very depressing. Given the energy crisis and the Iran Hostage Crisis of Carter's term in office, it is little wonder that Carter's entire presidency is thought of as a thoroughly depressing time.

Unfortunately, much of what Carter spoke about and focused on turned out to be prophetic.

One of my biggest criticisms of our democracy is that it has become a quick fix style of governance. Given the 2 and 4 year election cycle, our politicians are more focused on immediate concerns rather than long term problems and planning.

This reminds me of learning to drive. When I first got behind the wheel, I had a steering problem. I used to look at a spot right in front of the car. This made me swerve back and forth a lot. Some instructor or family member figured it out. They told me to look at a point down the road a ways and aim for that. This single comment immediately fixed my driving irregularities. I steered smoothly after that, with no jerkiness or shaking of the passengers.

The ship of state has a similar rudder problem. With a classic battle of one side yanking the tiller in one direction and the other yanking it in the opposite direction, as well as panicky naysayers screaming "iceberg!" every few minutes, we are jerking around all over the place.

The problem here is that people with long vision first have to take an objective and realistic look at where we are now, what we are doing, and where we need to be and what it will take. Some of these harsh realities are tough for people to swallow. People tend to plug up their ears and chant "I can't hear you!" when you say something they don't like. It is almost impossible to get elected on harsh realities.

I believe history has proven that leaders with a long view were the best thing for our country. Many people do not know that Abraham Lincoln was very unpopular through much of his presidency. Lincoln had a long term vision which was largely responsible for the eventual success of the Union in the Civil War. He also had a kinder reconstruction plan which was never put into place after his assassination. We'll never know how much racial turmoil may have been forestalled if he had lived through his second term.

Unfortunately, we now seem to be in an era of quick fix, short term, or unsustainable movements. Alan Greenspan called it Irrational Exuberance. He was referring to an unwarranted boom in the market, which eventually reversed and fell. The warning was not to get too excited about the latest economic fad, not to fall prey of schemes to make a quick buck at the expense of rational, safe, or slow plans. I think it's fair to say that the last 12 years have had a fair dose of these economic fads. The dot.com boom and bust, the stock market roller coaster ride, and the highly speculative real estate market are just a few examples. The unfortunate reality is that when people look around and see that someone has figured out a way to make a pile of money, there is a rush of people copying these tactics. Unfortunately, history has proven that most quick rises are followed by devastating falls.

So the person counselling conservation and development of alternate energies (including Nuclear - most people forget that Carter advocated nuclear energy and was himself a navy trained nuclear submariner) gets no credit for having the right ideas at the right time, and those with wild schemes to get rich quick or solve long term problems with short term fixes will never be short of followers.

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