Thursday, December 4, 2008

The Situation Economy

For nearly half a century, the situation comedy was the most popular kind of entertainment on television. From the late 1950s till the late 1990s, three generations of Americans were hypnotized by this peculiar genre of video fiction in which nothing ever really changes from one week to the next. As I wrote last week, watching situation comedies night after night has left people in a “situation comedy trance” in which they expect the same rules to apply in real life. This is the main reason people are so skeptical of the possibility of change in their own lives and the world around them. People see change happening but still believe that somehow things will go back to the way they were before.

To people in a situation comedy trance, there is no such thing as taking responsibility for change. How can you manage change when significant lasting change is impossible? Instead, people in a situation comedy trance tend to take reckless chances, not believing that there are any real consequences. At the same time, they tend to ignore chances to solve problems once and for all, not believing that any significant problem can ever really be solved.

Some of President George Bush’s most distressing failures seem to be the result of situation comedy thinking. It seems likely that:

  • For seven years he went to great lengths to discredit global warming because he did not believe that climates could ever really change.
  • He embarked on the disastrous occupation of Iraq, and the equally disastrous deficit spending that went with it, because he did not believe there would be any real consequences.
  • He wound down all energy conservation programs when he took office because he really believed that it was impossible to get people to change their lifestyles.
  • He failed to react to the slow-motion collapse of the world economy for nearly three years, with warning signs for two years before that, because he did not believe the economy could go down without coming right back up again.
  • He tolerated and participated in the general lawlessness and corruption of his administration because he did not believe he could get into any real trouble.

And it is not just Bush. Virtually everyone who has had a job managing the U.S. economy in the last four decades has suffered from the same kind of situation comedy thinking. As a result, there has been little progress in the U.S. economy during that time. The best we have done is stabilize the economy — taking action to prevent changes — in order to allow a slow rate of economic growth to take place. That was the simplistic approach to the economy that we got from Bill Clinton and Alan Greenspan — keep things under control, and we’ll get a little bit of growth. It is very clearly the wrong approach in theory, yet it would hardly be fair to criticize Clinton and Greenspan when their results were so much better than the results of those who preceded and followed them.

In the “situation economy” real progress is impossible. Real wages stay about the same. Real economic growth is barely faster than the growth of the work force. Reputable economists have put forth theories that purport to explain why sustained unemployment rates below 6 percent are impossible and why productivity growth will rarely exceed 3 percent.

Yet the situation economy is a state of mind. Our choices are not really between the Clinton approach of stability and slow growth and the Bush formula of turmoil and stagnation. Things could really change. Conventional economic theory holds that 10 percent annual economic growth, or the kind of productivity improvement that would allow us to work three days a week instead of five, is impossible. But in reality, those kinds of things are possible. We hold ourselves back by viewing the economy in situation comedy terms. To move forward again, all we have to do is turn off the TV in our minds.