Phaseology

Oh, the United States is just going through a phase, a course correction. The impact of the Sequester, as modified by Congress, will slow us down for a while, but this too shall pass. All true. There will be a recovery, but where I believe that recovery will take root is fascinating. The U.S. economy grew at a negligible 0.1 last quarter, and the cut in government spending we are seeing will take its toll with a probable negative growth factor in the next quarterly measurement. So what; we are used to short term pain. But analysis of who and where a recovery is likely to take place is vastly more interesting.

Some regions – most notably the European Union nations – are shooting themselves in the foot (and other vulnerable parts) and taking themselves out of the game. The EU movement towards capping bonus pay in the financial sector will undoubted help more businesses transfer to the U.S. and other markets, and the press for severe austerity without growth stimuli is factionalizing the EU well beyond anyone’s wildest dreams. Their debt crisis is not only out of control, it seems to be just beginning as the recent Italian election suggests, effectively leaving that nation without near-term direction (expect another election soon). The contraction in EU growth (it’s actually a recession) and the massive unrest from even more massive unemployment do not augur well for this battered region.

So where is that “growth and recovery” likely to occur in the United States? Clearly, despite the continued and growing negative toll on the environment, fossil fuel exploration and extraction is a hot area. But so are commodities in general as a hungry world sees population increases and a rising ability to pay for better quality agricultural goods. Globalized financial services will face the ups and downs of the markets, but those at the top will just fire those at the bottom when the going gets rough.

You can expect medical services and technologies (including pharmaceuticals) to do reasonably well, and for those companies on the edge of technology, expect continued leadership, particularly for inventions that travel well. But with China pouring money into technical and higher education – creating a cadre of people with college educations that will soon exceed the entire population of the United States – expect to see serious challenges to our ability to innovate and lead in the very near term.

Yet there are several factors that are pushing back, policy and priority restructuring that will continue to divide the United States into two increasingly separating constituencies of haves and have-nots. Those with invested assets and relevant educational skills will be the success stories of the future, particularly if the values they create are not dependent on American buying power, which is expected to continue to decline.

Our failure to curtail the disproportionate cost increases and borrowing realities in higher education coupled with the plunging standards in our primary and secondary school systems (where we used to be first, we are now 25^thin math skills in those critical years) are dropping the earning power of what used to be a vastly bigger middle class. Further, our willingness to allow infrastructure to decay without repair and to avoid adding infrastructure to support growth will expand the great earnings divide even more. That our legal system has literally created two taxation systems and differentiated rights and abilities based on financial factors is only accelerating this polarizing inequality.

The other factor, one that will claim land mass and decimate existing values at an increasingly accelerating rate, is climate change. We all know the big stories of fire, storm surges and hurricanes… but this little vignette from the February 27^th New York Times, impacting a Cargill meat processing plant in Plainview, Texas, will provide a microcosm of what agribusiness and large tracts of once productive American farms in our heartland are likely to face in the coming years: “The lack of significant rainfall has slowed the rush of cattle that came to the largest employer here, a beef processing plant that employed 2,300 people in a town of 22,343. When the plant shut this month, it took with it an annual payroll of $15.5 million.

“The closing has challenged families who had worked at the plant off Interstate 27 for generations. Sons and daughters stood alongside their fathers and mothers, husbands next to wives. Many are Mexican-Americans whose families have long called Texas home. They spent decades rising into the middle class on an average hourly pay of $14.27 and becoming highly skilled at the grisly process of turning slaughtered cattle into beef products, though many lacked high school diplomas. Their Spanish had a Texas twang, and they formed the blue-collar heart of a windswept town almost 50 miles from Lubbock.

“Now those families have been fractured as some relatives stay in Plainview and others leave. Dozens of former plant workers have already moved, finding new jobs with the plant’s owner, Cargill, or other companies outside Plainview or outside the state, many pulling their children out of the town’s 12 public schools.” It’s the third worst Texas drought since 1895, but there is this sinking feeling that this one might actually reflect a more permanent weather pattern by reason of climate change. Plainview itself might not survive.

The bigger question is how those two factions of America will live together. How will once middle class workers and families, with lifestyles and opportunities cut rather literally in half, co-exist with an enhanced upper class (at least in earning power and wealth) that only seems to see increasing economic betterment. Where do bitterness, anger and a Second Amendment gun-toting society combine to effect change… or do they? Is this really just a phase that will self-correct? Do those with drops in the quality of their lives just suck up and take it or do they take action as their homes, jobs and the very land they live on drop in value or just plain disappear? Is there an economic intervention that can reverse this course, and does the body politic have the wherewithal to take the appropriate steps… particularly in a slogan-infested world seeking that silver bullet?

I’m Peter Dekom, and if America dissipates our accelerating polarization and unifies to build a strong America for all of us in the future, we can do it… but we are increasingly looking like a sinking ship with factions screaming, “Every man for himself.”