Market Overview

Komunumo: Investing in Hope for the Future


Extraordinary problems often require extraordinary solutions.

Whereas the global financial crisis appears to be entering a new phase since the crisis began in 2008, many are looking forward to a global recovery in the coming years, but others are losing hope. I am optimistic going forward that the market will adjust itself owing to changes in the global economy. And through these changes, we may very well be on our way towards a recovery, but that does not necessarily mean that the approaching recovery will be a return to the ideologically-polarized materialistic consumerism in which American society has been steeped in the past several decades.

In light of such an economic recovery, a few questions must be raised. First, is our current way of life in the US sustainable? Second, what are some viable options for economic sustainability on regional, national, and global levels? Third, how can we invest today in viable economic structures and institutions to prepare for the future? I believe in light of the answers to these questions, far from the prospects of doomsday or extinction, there is economic hope -- but such hope will require societal action towards economic sustainability, functionality, and viability.

I. Is Our Way of Life Sustainable?

You wake up in the bedroom of your suburban house or apartment, you take a 10-minute shower, and get dressed. You then have a cup of coffee, eat a bagel or some toast for breakfast, and kiss the wife and kids goodbye. You head out to the garage to start up your car for the half-hour commute to work. Might this "great American morning routine" be on its way out in the near future?

For the time being, gasoline is the linchpin of the US economy. The Drudge Report's headline for the morning of Feb. 14 was ominous: "Get ready for $5 gas." Aside from issues of food, water, health care, or real estate, perhaps the most imminent socio-economic issue facing the US is the price of gasoline. Owing to the fact that gas is how we get to work, how we get to the grocery store, how products move, and how commerce flows, a rising price of gas extends to most areas of the American consumer's life. To say the least, much of American society is set up in such a way where the ability to travel via automobile is necessary in order to function. In the near future, astronomically high gas prices may signal the need for American society to radically adjust in order to adapt to new norms with respect to transportation and commerce.

Zero Hedge recently reported that the average gasoline price in the US has risen to its highest level in five months. As US consumers are squeezed by rising food costs and gas prices, "the US consumer's retail spending has been far weaker than expected in November and December...primarily due to gas purchases." If gas prices continue to rise in 2012 and 2013, the US consumer will most likely be left with less funds for discretionary spending (entertainment, luxury, retail items, vacation) -- thereby providing a formidable roadblock to a robust economic recovery in the coming years.

A recent Zero Hedge article from Phoenix Capital Research portends that "asset prices will fall, while the cost of living will rise". Phoenix Capital Research: "In truth the Fed is now trapped. Because of political pressure, it cannot announce QE3 or any other large monetary program without a crisis first erupting." Even further, "Things are only going to get worse." The article suggested that owing to the fact that the Federal Reserve is focused on preventing deflation, it has "let the inflation genie out of the bottle resulting in higher costs of living and civil unrest around the globe."

To say the least, it appears that the Western norms and way of life that we have become accustomed to are changing, i.e., declining. This may not come as welcomed news to many Americans. Jonathan Owen of the UK's Independent discussed in a January 2010 article that in terms of materialistic consumerism, "our way of life is 'not viable'". Owen: "Ditch the dog; throw away (sorry, recycle) those takeaway menus; bin bottled water; get rid of that gas-guzzling car and forget flying to far-flung places. These are just some of the sacrifices we in the West will need to make if we are to survive climate change." Owen discussed that a 2010 report from the Worldwatch Institute stated that "[p]reventing the collapse of human civilisation requires nothing less than a wholesale transformation of dominant cultural patterns. This transformation would reject consumerism...and establish in its place a new cultural framework centred on sustainability." Thus, "Habits that are firmly set -- from where people live to what they eat -- will all need to be altered and in many cases simplified or minimised... From Earth's perspective, the American or even the European way of life is simply not viable." Even aside from the issue of climate change, a growing human population will create increasing demand for resources, goods, and services as developing nations evolve towards consumerism.

A UN High Panel recently discussed establishing viable patterns of human economic activity in a report entitled "Resilient People, Resilient Planet: A Future Worth Choosing". From the Panel's Vision: "The truth is that sustainable development is fundamentally a question of people's opportunities to influence their future, claim their rights and voice their concerns... The peoples of the world will simply not tolerate continued environmental devastation or the persistent inequality which offends deeply held universal principles of social justice. Citizens will no longer accept government and corporations breaching their compact with them as custodians of a sustainable future for all." Even further, "international, national and local governance across the world must fully embrace the requirements of a sustainable development future... Central to this is including young people in society, in politics and in the economy." In light of possible climate change, a growing world population, limited resources, and growing technology, new cultural norms may have to be established in order to deal with a changing globe. And as can be seen through history, if individuals remain unwilling to make necessary economic changes themselves, in the end the market will effectively force them to make the necessary changes.

II. Options for Economic Viability.

Whereas it may be easy for some in the midst of the intimidating and precarious global situation before us to proclaim that doomsday is near and that we should all prepare to live in the world of "Book of Eli", I believe that there is yet hope for a functional future for humanity. That hope rests in one word: community.

While American society may not always be the most cohesive society on the planet, I think a stronger sense of community with respect to everyday life may be beneficial. With respect to community, taking the present into an historical context can help. For most of humanity's existence on the planet, the community was paramount; it was how our ancestors survived. Of course, as humanity has developed since the dawn of capitalism 500 years ago, this notion of communal existence has waned in favor of individual rights and survival-of-the-fittest economics. However, in the process, the free market has left the globe in quite a dangerous and precarious situation, not only in terms of overpopulation and limited resources, but also in terms of economic functionality and viability.

In this way, the emerging Zeitgeist of human history seems to be leading our species away from capitalism -- not in the spirit of limiting freedom, but in the spirit of self-preservation and survival. As such, taking into account the aforementioned ideas, one might say that the free market is causing the human self to revert back towards a sense of community. Obviously, for some cultures in the world, a strong sense of community is not new. In an article from December 2011, Colin Woodard discussed the communalistic attitude of the Inuit in the Arctic. In many ways, the communalism of the Inuit was most likely a collective-conscious response to harsh living conditions with limited resources. That being the case, there may be something to be said for a sense of humanity and community (even in a global sense) given the formidable challenges and harsh realities of the world today. We are, after all, all members of a greater human family.

In America's current socio-economic environment, the crux of community may not appear feasible, but as I have previously discussed, owing to market dynamics, the essence of a communal context for American society may evolve from being a utopian fantasy into becoming an economic necessity. With the cost of living increasing while wages stagnate, the only reasonable solution appears to be socio-economic transformation (globally on macro-historical and superstructural levels) towards a greater sense of community. Whereas free-market capitalist thinkers have long criticized Karl Marx's ideas regarding the collapse of capitalism, the missing piece to Marx's historical materialism (as to how a society could function without market self-interest or why individuals would communally contribute to the common good) could very well be an emerging global consciousness that some form of communalism may be necessary for functional human economy, i.e., the missing piece is the evolution of the human consciousness towards community.

Even in the context of current global economic issues, if the free market is unsustainable and the options are communalism, human extinction, or a doomsday scenario, which really is the most practical option? Bertell Ollman has framed the question another way: "In presenting the choice before humanity in the coming period as between communism, barbarism, ecological suicide and nuclear annihilation", what is humanity going to choose? Even aside from ideological quarrels, what is the most economic viable alternative for humanity going forward as a species? The answer to that question depends on market dynamics and the strength of the human conatus.

III. Investing in Viable Economic Structures.

From this macro-historical perspective, there are opportunities aplenty for investors. Whereas the basic human needs are food, water, shelter, clothing, and medicine, the most viable investment avenues will center around these needs. If the global economy continues to deteriorate owing to financial conditions and increasing demand, commodities related to discretionary spending may very well be relinquished in favor the basic necessities. Ergo, if the economy continues to deteriorate, a collapse of the retail sector should be no surprise to investors; arguably, we are already seeing the signs of such a collapse in retail.

In terms of everyday life, this may mean an eventual evolution away from materialistic and consumeristic demands. Of course, there will always be those who would sacrifice a daily meal for an iPod or the ability to use the Internet, but such aspects of life may move more towards the realm of the community. Far from having to rely on gasoline for the daily commute, more individuals and firms may pursue the ability to work from home. Even further, to avoid the cost of transportation for education, municipalities and educational institutions may pursue home-schooling systems via the Internet in the near future to cut down on fuel costs. Thus, as per the aforementioned example, the "great American morning routine" will probably become leaner and less dependent on gasoline in the coming decades.

The crux of a free-market capitalistic economic system goes back to land, housing, and the ability to use land for producing food. In light of our current discussion, the housing crisis in the US brings to light falling demand in the midst of a greater financial crisis; obviously, if home-builders can make more money in constructing mansions, then they're not going to construct affordable housing for low-income citizens. That being the case, we now find ourselves in a situation where many young people cannot afford housing while older citizens may have two or three houses and many other houses go vacant. Obviously, in terms of economic functionality, such a situation can only go on for so long before demand for substantial change swells. Something's gotta give.

That being the case, I am not going to pretend like I have the ultimate solution for housing issues in the US, but I can say that there are viable avenues to help restore a sense of stability to the US housing market. MarketWatch recently discussed Federal Reserve Chairman Ben Bernanke's push "for programs to convert foreclosed homes into rental units to help revive the housing market." Even then, such actions would only appear to move the problem.

The real issue of housing cuts to affordability and jobs. In this light, it would be interesting to see what would occur were trusted entrepreneurs or even religious and social organizations to use funds to purchase homes and/or land in the US in order to provide communalistic residences for struggling American families. Such a move by entrepreneurs or religious organizations could very well be considered an investment in hope -- and societal insurance against poverty and unrest. Preliminary projects could begin with two or three families. These communalistic residences could then be used as farms, factories, or schools for the sake of economic production and functionality; this sort of living arrangement would also reduce the families' need for fuel. From cultural, socio-economic, and macro-historical perspectives, this sort of investment in hope and the community would go far to restore a sense of economic functionality in the US. And in some ways, private entrepreneurs and religious organizations would be in the best position to make such investments.

Far from banks, were the government to provide trusted entrepreneurs, charitable organizations, and religious organizations with suitable housing with the possibility of future investment in food production, goods production, and/or education, perhaps the underlying social issues of poverty, hunger, and homelessness could be alleviated. And in the process, the government would be investing in not only hope, but also a functional society thereby possibly decreasing unemployment, crime, hunger, and social unrest.

You can only kick the can down the road for so long. A friend of mine recently compared the historical process in humanity growing out of capitalism to the emerging global demand for social justice. As demand for social justice increases, like any other commodity for individuals and countries, at some point the pent-up demand begins to be the focal point of the individual's or the country's very existence -- an obsession. If the pent-up demand is not addressed and grows and swells to a breaking point, at some point the populace declares in a loud voice, "No more bread and circuses, I want social justice now! I'm not taking anything else! I'm not leaving till I get it! I want social justice now, now, now!" This leads into a period of social transformation. Such social transformation may not come for hundreds of years, but the important thing is to see that even abstract phenomena can work like commodities in an economy.

In taking into account socio-economic issues in the US and abroad related to limited resources and economic viability, the question of social transformation moving from the individual to a sense of community depends on how much demand for such social transformation increases. Whereas some may say that the eventual result of the free market's running its course is human extinction, barbarism, or some other doomsday scenario, maybe humanity has other options -- better options that could lead to better lives for everyone and a viable economy.

Posted-In: Entrepreneurship Politics Psychology Topics Economics Media Personal Finance General Best of Benzinga


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