Americans experienced a decade plus of very low inflation, low unemployment, cheap energy, abundant cheap food, and cheap products largely manufactured overseas. Covid was a jolt, but even before the pandemic economists could tell you that the 2000’s were quite different than the 50-70 years before it.
Structurally, the forces which made the low inflation/cheap stuff world possible are all changing now:
- Policy decisions and reactions to Russia’s invasion of Ukraine will keep energy costs high for years to come for the western world.
- Labor costs continue to climb. Generally, they don’t go down again.
- Higher energy prices make everything more difficult and expensive. Especially food production. Transportation is a significant fraction of your food costs. Many people don’t realize the synthetic fertilizer is derived from fossil fuel sources. Same for plastics.
- Over and above geopolitical power concerns, China has structural demographic and economic problems which mean it can’t ‘forever be’ the low-cost manufacturing center of the world. Other countries will pick up part of this load.
Governments printing money are adding to inflationary pressures (more money chasing fewer goods) but politicians are pressured to live up to promises made and ‘solve’ problems with money so they aren’t voted out of office. This has been going on a long time; it’s not the realm of any one party or political leaning. I’m hopeful that more people will realize modern monetary theory is a crock. There is no “happy story” in history of countries paying off greater-than-GDP debt levels. The US federal debt-to-GDP ratio was 137% in December 2021. The total debt picture with unfunded obligations is much higher.
It’s likely that we’ll return to thinking 4-5% inflation is a good number, 5% unemployment will be considered low, and many goods and services will be expensive enough that we have think hard before buying them. That’s not all bad. My concerns lie with anticipating a fearful route to getting there!
Given these macro factors, coupled with unease, uncertainty, and lack of unity on much of anything, we’re going to have a rough adjustment to new realities. The sense of “going backwards” will be palpable. I have access to information about agriculture and food situations globally. It’s a mixed story. There will be more hungry people in the next few years than the past decade. There is high correlation between a hungry population and uprisings against the standing government. Political leaders will be hard-pressed for ‘solutions.’ One of the lessons of system dynamics is that what looks like the easy way out always reinforces the status quo.
We’re back to long-asked questions: “How should we then live?” “What are we willing to sacrifice?” “What should we do differently in the future?” “How do we raise children and future leaders and workers?” “What must the Church be and do?”
Critically important: We must succeed through inspiration and imagination coupled with grit, not anger, nor making others feel insecure.
I woke up the other morning with this question in my mind: “What must you do now to become better prepared to lead in your sphere of influence going forward?”
I continue to ponder this intriguing description of men who came out to follow King David: “Of Issachar, men who had understanding of the times, to know what Israel ought to do, 200 chiefs, and all their kinsmen under their command.” (1 Chronicles 12:32)
