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Friday, November 28, 2008

It's the Economy, Stupid. Er, The Economy OF the Stupid

When Gracie asked me the other day why the economy was in such a mess, it took me awhile to explain it, and I'm not really sure I did. She's 20, and smart enough to understand a lot of things, but I can't say that I'm smart enough to figure it out for myself.

It's hard to believe that only five months ago, we were actually standing on the street where it all began to unravel; Wall Street, in New York. Oh, I know there's more to the economic mess than the greedy guys on Wall Street, but I remember sitting in a cafe in the financial district looking at all of those young men walking around in their light blue shirts and black slacks and thinking to myself at the time that this was a whole different world from mine. Little did I know then that their world was going to impact my world so drastically.

I was in the middle of writing my last blog entry here when I got an email from my husband titled "No Joke". So of course, I thought it was a joke of some sort...or a forward, or some link to a funny video. But it wasn't. He and his entire department had received their layoff notices.

Suffice it to say that he works in the television industry, and we all have to admit that TV has been on the decline for a few years now. As far as my viewing habits, I watch the news and a couple of shows that I like, and that's about it. I have the TV on when I'm working in my office, but only in the background to keep me company because I work alone so much. Television isn't what it used to be to me and to everyone else. There are a lot of reasons for that, but I won't go into it here. 

The sudden downturn in the economy gave the brass at my husband's company an excuse to lay off hundreds of their employees, even though many of their financial troubles were their own to begin with. And these financial troubles they've acquired gives me pause for thought. This is the root of our economic mess...even on a personal level, we have stopped taking financial responsibility for ourselves. As companies and as individuals, we can't just blame a bunch of greedy CEO's in some far away place like Wall Street for this horrible mess...we are each accountable in some way.

We don't know how to handle money! We having been living in a culture of easy credit for too long. There are two people in my life who are perfect examples of what not to do...they think a credit card is free money, even though LOGICALLY they know it isn't. But they can't resist the temptation to HAVE NOW and PAY LATER. The only problem is that they are always having now, and never paying it off because they can't possibly keep up with their own spending when later comes.

I was in a similar position when I was younger. When I first moved away from home, I didn't have a credit card and didn't have any desire to get one...that was my saving grace at the time. But one day an interesting thing happened: I wanted to buy a car, a fairly big purchase at the time, but I couldn't get a car loan until I had established credit. So, in a sense, I was obliged to get a credit card in order to get my car loan. And of course, once I had that card, I got pretty used to using it whenever the urge to have something hit me. And over time I managed to get myself into a certain amount of debt that took me awhile to recover from.

This happened to me a couple of times before I finally got it under control. So I understand how it happens to others and I can see how some people would just never get a grip on their spending urges.

On a larger scale, corporations have to start thinking not just in terms of saving themselves from financial ruin, but recognizing the impact of their actions when it comes to the bigger picture. I've had a theory for awhile now called "The Refrigerator Theory", although I know there are many other versions of my theory out there devised long ago by others who are a lot smarter than I am. 

In simple terms, the theory is that companies, especially the larger ones, can actually choose to impact the economy in a small way, or in a big one. Sometimes one CEO earns more than a dozen employees, and even more. And when you lay off the dozen employees, that's a dozen fewer refrigerators that they are not going to buy because they have no money for it. If you lay off one CEO instead, it's only one less refrigerator. Does that make sense?

In other words, laying off a dozen people has more impact on the economy than laying off one top level person. And not only do you impact the economy by laying off lots of lower-level employees, you begin to destroy what might otherwise be a healthy work environment, which in turn impacts their production and your company! Why don't they think of that?

Even the poor sods left behind after their co-workers have been axed will probably stop buying refrigerators because they are too afraid that they will be next. Again, why don't these companies realize that? It's called short-sightedness and it has long-term impact.

It is unnerving to sit here and not know where this global economic mess is going to leave us all. I believe, as most do, that we will eventually recover, not just my little family, but the global community too. The question is...will we learn anything from it? Will we start to use our brains when it comes to our spending habits and will corporations do the same?

Maybe those greedy Wall Street guys actually gave us a wonderful opportunity to learn something that will change things for the better. This is going to be a very different Christmas.

IJ