Economic Shifts What They Mean for You

By Martin Brown

In 2008 there was a lot of talk about “change.” Spurred undoubtedly by President Barack Obama’s campaign for the presidency, what was a political marketing slogan last year is quickly becoming the watchword for this year.

And It’s not partisanship that makes 2009 a year for change; it is, to borrow that old phrase, “the economy,  Stupid.” Granted, over time mature economic structures break down, and new realities take root in their place. But this has never been truer than the shift occurring right now in America.

This has never been truer than the shift we are now.

Change is both frightening and exhilarating. How you feel about change has a lot to do with your own unique character and disposition. But be assured that as we prepare to enter the second decade of the 21st Century, the world is changing in profound ways, from America’s Main Street, to the dusty alleyways of the Middle East.

How much of this change will be driven by the new administration in Washington is debatable. Definitely there is a sea change in tone and rhetoric. Much of that change think is long overdue, and generally welcomed by the American people. But as historic a moment as Obama’s election has been for America, the changes taking shape now are even more profound.

Here are three major economic changes that I believe you will see emerging fully between now and January 2011:

1. Consumer behavior is undergoing a dramatic and lasting shift.

This obviously has already begun, what with the reduced levels of consumer spending, and it will increase in the coming months and years.

The principle forces driving this change are:

• A drastic fall in home equity values, which has in turn cut banks loaning on the collateral of a home’s increased value; and

• A downshifting in the American mindset regarding spending.

With the exception of some relatively mild downturns in the last ten years, this has been a period of excess. But that’s not going to be the case for the foreseeable future. Recent years have seen the only time in American history that our rate of savings fell below zero in a boom economy. Historically we have seen the opposite, with savings rising in a boom period, and falling in a tight economy.

Today excessive spending has been replaced by bargain hunting. For those who think spending lavishly is built into the American DNA, they’re in for a surprise:

Frugality is in the America’s genetic code as well.

2.  A sharp increase in domestic spending that will impact essential areas of the American way of life.

From the roads we drive on, to the schools our children attend, to the way in which we seek and receive healthcare, America is in for many economic changes. These areas, however,  are most notable, because they are where the America system is now truly broken.

The interstate highway system, built during the Eisenhower Administration, is crumbling from Maine to California. Thousands of other road projects that require state and city repairs will need Federal assistance funds to get done. Steel and concrete will take only so many seasons and, as an Intestate bridge in Minneapolis proved, at some point neglect becomes a matter of life and death.

As for our public schools, many of them are crumbling as well. The mark of a truly Democratic society is the opportunities afforded to individuals of all economic backgrounds to build a successful future. That future begins with a quality education, which in many places in America is no longer a reality.

There is no better example of a broken system in America’s healthcare.  Because of its spiraling costs in this dire economy, single-payer government-managed healthcare will become a reality in America, not necessarily born out of anything other than the failure of our private system to be able to provide for the healthcare needs of 300 million Americans. Healthcare that is unaffordable to all but America’s wealthiest citizens is not a sustainable situation. Look for substantial changes here sooner, rather than later.

3. Energy use, delivery, and its connection to the Middle East.

Here again, we see the confluence of many factors and an unsustainable system that must change. An petroleum-based energy system will begin to change fundamentally over the next 24-month period, ending one chapter in society’s industrial history, and opening another.

The great oil shock of 2008 – followed by a deep recession and enhanced by increasing concerns over climate change – has put us inextricably back on the road to the electric car. Undoubtedly the technology will change in many ways, but all car companies – even the world’s leading manufacturer, Toyota – knows the name of the game is fundamental change. In fact, later this year Toyota will introduce the first plug-in model Prius. From that point on, the race for survival in the world of auto manufacturing will heat up. Ford’s popular Fusion is introducing a car that will get well over 70 miles per gallon, and GM is soon releasing the Volt.

This is not distant future; this is all in the coming year.

Solar cells are changing profoundly as the technology becomes miniaturized. On the immediate horizon are desert-based solar farms, and a new technology power grid that will support delivery of this new green energy. As all this moves forward, fossil fuel will be seen more clearly as the principle energy source of the 20th, as opposed to the 21st, Century.

This spreading shift in energy production will begin to tilt the geo-political balance away from the relatively small number of Middle East nations. Turmoil will no doubt continue to pour out of the Middle East, but as the money spigot tightens on the Saudis and others, their political realities will begin to shift as well.

2009 rings in an era of change. And change in one area bring changes others. Look for the volume on Fortress America: the Bush Years to be turned down, and America: the leader in Green Technology to be turned up.

However it all plays out, I can guarantee you it will be one interesting ride.