by Scott Pape - April 25th 2009
I’m sitting on a plane. Again. Kevin’s on the in-flight news talking about his latest performance, which I’ve tentatively titled Stimulus Three. (Is it just me, or is this all starting to feel like a Police Academy movie?).
The bloke to my right (who’s getting good value from every inch of his economy seat, might I add) digs his equally well-proportioned wife in the ribs and says, “Looks like another nine hundred bucks is on the way, love!”
Keynesian economics
The news item said that some commentators were questioning why the Government was floating yet another stimulus plan (this time set to be announced in the Budget) when the results of the last two handouts have yet to fully work their way through the economy.
But that misses the point completely.
The Australian Government, like that of almost every other nation, is subscribing to an economic theory called Keynesian economics, which at its core states that when consumers put away their wallets the Government must step in to fill the gap. Or, put another way, that the Government can help pull us out of a severe recession by spending money it doesn’t have.
You’d be hard pressed to find a politician who isn’t an advocate of the Keynesian stimulus solution. What’s better than spending other people’s money? The Rudd Government is popular with the populace because it’s seen to be doing something to avert this downturn.
Yet encouraging people to spend (especially with the disastrous First Home Buyers Bribe) could soon come back to bite them in the polls when unemployment spikes. If this economic crisis goes deeper and longer than any of the economists (who failed to predict the downturn) suggest, it could spell trouble both for voters and the spendthrifts in Canberra.
Japanese stimulus aftermath
A few months back I visited Japan and spoke to locals about the stimulus packages their government had implemented after their bubble burst in the nineties. All were angry at the fact that, despite the government spending trillions of dollars (and in the process racking up the largest public debt on earth), their economy was still faltering, and is said to be facing depression.
Truth be told, I’ve been gloomy about the global economic outlook – and skeptical about the claims of those in charge – since I took my round-the-world journey in November 2007, just as the subprime crisis was taking hold.
Having the ability to get up close and personal with people in so many different parts of the world gave me a perspective that I couldn’t get from the 24-hour cable news channels.
Global lessons
In China I saw the massive amounts of wealth that were being created for the (relatively) fortunate few who called Beijing and Shanghai home. I also saw the majority (kept away from the tourist trail) who weren’t sharing in this wealth and who are now struggling to find work because China Inc’s best customer has run out of dough.
As I toured the US, the official word from Washington was that the subprime crisis was contained. Most of the experts agreed. Yet as I took a helicopter from Las Vegas to the Grand Canyon, we flew over masses of housing developments with hundreds of almost identical homes that were all in the final stages of being built, but there was barely a car on the streets.
As I journeyed through Europe, I marvelled at the bustling bars of the London finance workers at Canary Wharf. They were full to overflowing with young kids making more money in a day than their parents made in a month. Most of them didn’t see it coming.
The English newspapers in Spain were full of property developers selling villas to British baby boomers, who were being encouraged to take the equity out of their cashed-up homes in the UK and invest in a cheaper country.
Yet while every country I visited was different, the one constant I discovered was that the consumerist culture, which I assume was born in America, had now spread to every pocket of the world that I visited. Ads for an interest-free deal look pretty much the same regardless of whether they’re written in Japanese, Italian or Chinese.
Uh-oh. The trolley dolly is now forcefully warning me to turn off my computer and bring my chair back to the upright position. We’re about to land in Los Angeles.
It’s been a year and a half since my last trip, and I decided to come back and see for myself how the Land of the Free is holding up against the might of the Great Recession.
Signs of life?
While most of the media is talking up the doom and gloom they’re facing, I’ll be checking for signs of life. The one character trait that stood out for me last time (apart from just how much food they consume) was just how much of an entrepreneurial society this is – they’re capitalists to the core. Now, after copping a financial flogging it’ll be interesting to see if that spirit still holds true, or if their mood has lowered in line with their asset prices.
The best way to find this out to really discover the States – is behind a wheel. So over the next month or so I’m going on the ultimate road trip – getting my kicks (partially) on Route 66, travelling 5000km from Los Angeles to New York.
As I make my way through the American heartland I’ll be chatting to people who don’t have an agenda – the local barber, waitresses, farmers, beauty queens oh, and investment legend Warren Buffett, whose company’s annual general meeting just happens to coincide with my road trip.
Now, if I manage to get my hire car out of the Los Angeles airport, I should be set for quite an adventure.
Tread your own path!
Photo: www.flickr.com/photos/stuckincustoms/953669278/
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