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The Great Reset: Why tomorrow may not be better than today

Hard truths about our values, the economy and the outlook for the future.

Growing up in the waning days of the Carter administration, I remember a societal malaise that was pervasive to the point of toxicity. A common sentiment then was that our best days were behind us.

How did we get there? Most fundamentally, a paralyzing period of stagflation meant double-digit interest rates and no economic growth.

However, it was also fed by an energy crisis; the first signs of Islamic fundamentalism’s assent; and a lengthy political hangover that followed a scandal in the White House.

But as they say, it’s darkest before the dawn, and in a flash, the malaise was gone.

To be sure, the next 30 years brought with it booms, bubbles and bursts, but the general sense, and one’s expectation, was for a better tomorrow.

Today, however, I’d argue that our present no longer sits at such a simple, logical place where tomorrow is necessarily better than today.

Simply put, our society is undergoing a “great reset” where for many the future is a very scary place.

Understanding The Great Reset

Systemically speaking, these are confusing times. The recession is technically over, and you can tangibly see that fact from an economic growth perspective.

Yet, two-and-a-half years later, one has to ask, “Where are the jobs, and equally worrying, where are the drivers of job growth?”

Now I don’t have to tell you that a jobless recovery is an unacceptable indicator of systemic success when you consider the sheer size of the unemployed, not to mention, the under-employed.

Similarly, is there any question that a certain chunk of society is getting dis-proportionally squeezed by the system on numerous fronts?

Case in point, over the past couple of years I have heard a troubling number of stories from people that I know well. More often than not, these are highly educated, historically successful people that have gone from flush to crushed, simply because their geographic region or industry has lost its footing, or because they’ve hit a certain age where they are no longer desired as a named employee.

1099 is the new W-2

1099

The uncomfortable truth, in fact, is that everyone is now an entrepreneur, whether they like it or not. 1099 is the new W-2, which says something when you see how even basic services like insurance become exponentially more expensive when written as an individual policy vs. a company policy.

What type of hit does that represent to our national health, both metaphorically speaking and literally, in the pocketbook?

Homeless children: do we really care?

Along these lines, I was drawn to tears watching a recent CBS “60 Minutes” report about the growing ranks of homeless children, and what that life is like for all parties involved.

It is gripping stuff in that it raises tough questions about what kind of society we want to build, and how much we feel pain when others needlessly suffer.

This all seems so abstract until you ponder its effect in broader terms. Case in point, in the book “Outliers” Malcolm Gladwell brilliantly shows how those coming of age during the depression never fully recovered; yet those coming of age in the boom times of a Post-WWII America flourished, making this a generational imperative.

Tough questions, weak answers

This is the Great Reset, and an entire generation’s outlook for a better tomorrow lies in the balance with it.

Remember the audacity of hope? It’s been replaced with cynical, political pragmatism where big corporations necessarily get stronger on the premise that trickle down and laissez-faire are universal absolute truths.

Equally troubling, there’s a sense of there being a protected class — seen in many forms across taxation, lobbying, generally accepted conflicts of interest, and low-touch regulation and enforcement.

Consider that it is no longer assumed to be fundamental that there be basic codicils protecting individuals from intentional harm, predatory behavior and malfeasance (read Matt Taibbi’s damning “The People vs. Goldman Sachs” for more fodder on this topic).

Nor do the penalties meet the crime when this class crosses the line. Why not commit the crime if you don’t fear doing any time?

As a result, the rest of us are getting the shaft. Health Insurance is more expensive and offensively priced than ever. It feels almost evil that we went through the Obama Care discussion, only to “win” universal coverage that results in insurance providers simply upping their premiums 40% or more, in some cases pushing 2-3 rate increases in a single year!

Want to really mess with people’s minds? Threaten the availability of their health care coverage, both for themselves and their families.

On a lighter note, at least we aren’t suffering from inflation in this recovery. Yes, I am being ironic.

So what’s changed this go around?

I remember when I started my first career in real estate back in 1988, and the savings and loan crisis was in full force (it was a much smaller version of our current banking imbroglio).

Then, three things came about in its aftermath:

  1. Real structural change.
  2. A functioning marketplace for getting rid of non-performing assets.
  3. Readily identifiable perpetrators went to jail.

Not this time. Not only did the perpetrators not go to jail or even lose their jobs, but they got raises and got to keep their bonuses. This, even though the “profits” were disproportionately derived from a guaranteed arbitrage gifted by the U.S. government.

Even worse, most would agree that the reforms to the system were largely cosmetic, with the clean up of toxic assets occurring behind the public curtain with even more financial engineering.

Netting it out, we went through the worst financial crisis since the depression, and the only one who went to jail was Bernie Madoff — the guy who stole from the rich! That should tell you something.

Looked at holistically, it raises some troubling questions:

  • Is “Too Big to Fail” just a black hole that sucks our economy dry? You can certainly see the ripple effect at the level of state and local governments.
  • Does it matter if we have a middle class? Do we really care? Are our national priorities right?
  • What happens to all of the places in America that don’t find real industry on the other side of The Great Reset?
  • What if it turns out that the Google Economy is a better destroyer of wealth and jobs than a creator of the same? Apocryphal, sure, but it’s a fair question, given the number of industries that have been wiped out over the past decade.
  • Do we miss the video store, record store, book store, consumer electronics, newspaper, yellow pages and whatever intangibles they brought? What do we lose as a society when any brick and mortar business whose product or service can be digitized or improved by logistics (ease and convenience of access), or sold less expensively online simply goes away?
  • Is this the end of serious politics (real solutions, real compromise), and is the wall between government and private industry gone forever? Check out “Inside Job” and “Food, Inc.” to see how two different industries have been re-shaped by this dynamic.
  • In the bigger picture, can we “afford” cheap Walmart goods, or does the race to the bottom actually destabilize our way of life by destroying domestic industries and permanently funneling those jobs overseas?
  • Would the Earth stop spinning if the Amazon sales tax exemption was lifted, putting local retail on closer footing with Amazon? Wouldn’t this seem to lead to more local sales?
  • What “upside surprises” might occur from a prolonged period of creative destruction in terms of our consumption patterns, happiness index and/or new industry growth?

Some of this raises uncomfortable truths about the values of a society, how that society holds its leaders accountable, whether opportunity is expanding or contracting, and whether the value that our economic base is creating is sustainable or illusory.

Similarly, it begs the question: what is the proper role of government? For example, is it possible that in the same way that the government provided the funding that led to the Internet and, before that, our national highway infrastructure, that our leaders could seed new types of infrastructure investment in transportation, energy, health and education?

A sobering thought. Take a moment and watch this chunk of Eisenhower’s farewell speech where he warns about the rise of the military industrial complex, and the threat that it represents to society and our way of life (while acknowledging it’s essential inevitable).

Now, replace “military industrial” with “Wall Street” and “mega corporations” and ask yourself if history is repeating. It’s kind of disturbing.

Like any diagnosis, the patient (and its guardians) has a say in the treatment. But ignoring the fact that The Great Reset is upon us in the hopes of not upsetting the apple cart of a strong stock market (the Skinner Box of our age) is akin to letting cancer metastasize to avoid the pain that treatment might bring.

Photo: Reset switch by renaissancechambara, on Flickr

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  • Tim

    Regarding jobs, I was recently on a flight from Frankfurt to the U.S., and it contained a large number of young engineers from India (which I surmised from reading materials and discussions).

    It seems that one goal of H1B (and raising its cap) is to create new taxpayers and tax revenue, with the side-effect of a more competitive technical jobs market. I’m not necessarily arguing against this, but what effect does it have on U.S. engineers and U.S. engineering students?

    Are we gradually destroying our internal engineering capability by continually off-shoring or on-shoring technical jobs? I know many older (unemployed) engineers who think so…

  • Anonymous

    Yes, there is a new normal coming, and it will not be pleasant or easy. The rich have sucked us dry. Will it take an absolute collapse to stop them? Will that “stop” all of us, or only enable them to gain a greater advantage? And don’t forget we’re also making the planet unlivable, creating animosity between nations and religions and races, and running out of farmland and fuel and water.

  • http://www.unicornlabs.com Mark Sigal

    @Tim, my personal bias is that you need the best brains possible, wherever they come from to create new industry. I personally would rather have the best and brightest — wherever they come from — working here for us, creating US businesses than somewhere else in the world creating opportunity outside of the US.

    We need to raise the bar, not lower it by creating false barriers, IMHO. After all, the dynamic success of the US over the years has been directly defined by the melting pot, land of opportunity quality that is uniquely American.

    Thanks for the perspective.

  • Canuck

    It’s too tempting to fall into a myopic, US-only perspective on this. Yes, the US will be declining for a while (along with other rich countries like my own), because it has hogged a disproportionately large share of the world’s wealth for a few generations, and now things are regressing to the mean — the American Anomaly is ending.

    For much of the developing world, however, where most of the population lives, that means that life is getting better, because wealth is being more evenly distributed (off-shoring isn’t a dirty word in developing countries), healthcare and education are improving, people are (on average) gaining more freedoms, etc.

    A more even distribution, however, means that the minority of the world’s population that lives in rich countries will inevitably become a bit poorer, or at least will get richer more slowly. Blame any bogeyman you want – big government, big business, unions, banks, socialists, capitalists – but it’s going to happen regardless. You might as well try to fight back the sea.

    I expect that my grandchildren might live in apartments rather than houses, spend much more of their income on food, and ride in bicycles instead of cars, but the world they live in — for the its population as a whole — could well be a far better place. I’d gladly give up my house and car to see that happen.

  • Other Tim

    Spot on. Alvin Toffler was laying out this scenario over thirty years ago. The writing has been on the walls ever since.

    Unfortunately, our future is going to look a lot more like Blade Runner than Star Trek, at the rate we’re going.

  • http://angelpitchguy.com Anonymous

    Do you want to ix the banking industry problem you described? Press for a new Glass-Steagall Act. Too big to fail will no longer apply, less powerful thieves do go to jail. While you are at it, press for cross states competition for all types of insurance and setup a federally backed mutual insurance company (FNMA style) to make sure there is competition

  • http://www.thenetworkgarden.com Mark Sigal

    @Canuck, the typical retort on any article of this sort is that it’s too-myopic US focused, but that assumes that these dynamics are unique to the US, and also creates the false dichotomy that the topic is of either/OR nature. To your last point, it will be interesting to see if these trends increase happiness by shifting our attention away from accumulation and consumption, or just make us more miserable knowing what we’ve lost. You know the axiom that ignorance is bliss. The opposite is also true.

    @Anonymous, the examples you raise are clear — and good — to the point of obviousness, which is to say that the reason such solutions aren’t being implemented is an example of protected classes at work. Perhaps if we could reduce these two rallying cries to ‘poster children’ examples of a broken system, we might make a sound bite digestible enough for our short attention spans in the age of social media.

  • Tim

    @Mark Sigal, What you say is true, and I’m a proponent for our melting pot. But I have a genuine concern that off-shoring/on-shoring is beginning to be the default choice rather than trying to hire talent locally. Finding for the best talent is obviously the right choice, but it shouldn’t disadvantage the very large talent pool that we have here at home.

    I’d like to see the Government provide funding for start-ups, similar to the way that SBIRS operates (but with a reach outside of the beltway). It would be an alternative to unemployment and has the potential for future tax revenue.

  • Patrick

    Thank you for this interesting article. For the outside observer it offers an interesting peek at the american state of mind.

    It is striking how different peoples’ (or nations’) worries are. In my geographic region — Western Europe — the great recession of 2008 is something most people heard about, but haven’t really felt the impact of. Also, outsourcing or declining industries are not hot topics at all (but rest assured, there is enough to discuss). For me it’s surprising how a nation that prides itself on openness and free trade has such a hard time getting to terms with the fundamentals of economic development.

    A voice not often heard: our western wealth has been of great benefit to people in developing countries, and in turn their rapid economical ascent will be of great value to us. There will be no need for us to forgo cars or houses (unless by _choice_). Our political power may decline, but western economies will still shine.

    Your comments about the financial bosses ring true. But of course the root of the problem lies not with the banks, but with the political overlords. The start of the 21st century has seen the weakest US government in memory. Even very willing observers would call the 2000-2008 government’s actions at least severely misguided. While holding the nation (and the world) hostage by waging 2 dubious wars its stewardship of the economy and society suffered. It’s no surprise then that accidents happened as they did.

    It seems that U.S. government officials (rather than banks) are to too big too fail. Perhaps that should change too.

  • http://www.thenetworkgarden.com Mark Sigal

    @Tim, I am not blind to this scenario, but would err to the side of policy that ensures that those who are educated, and have valued technical skills come to America. Specific to your point, Food, Inc. looks at how NAFTA has impacted this domain in unexpected/detrimental ways.

    As to government providing direct funding for startups, I am dubious that the least efficient, most seriously conflicted bureaucrats would recognize the difference between truly innovative businesses with real promise for job growth, and sinkholes from which dollars would flow only one way.

    By contrast, there are interesting mechanisms like Enterprise Zones, Tax Incentives for key tech industries, and efforts like XPrize that spur competitive innovation along the ‘let a thousand flowers bloom’ concept, which seem more likely to bear fruit.

    Obviously, there are big gaps that could be filled between Government Grants, Venture Capital, and the current inability of small businesses outside this scope to secure loans or even credit.

    @Patrick, great comments, and a rich perspective that those of us sitting in America (myself included) lack. I love the riff on US government officials being the ‘too big to fail’ entity. Never underestimate the power of individuals and collectives to convince themselves of false truths when their livelihood depends upon it.

  • Xico Watson

    assent -> ascent

  • Rick Turner

    Thank you for the interesting commentary, but I am somewhat surprised it lacks one very important factor: Citizen’s United.

    We can decry Wall Street excess all we want but, to use an analogy, when we see a child run amok in a public place should we look askance at the child or the parent who allows such activity?

    The Supreme Court decision to allow virtually unlimited, and anonymous, contributions to so-called “super pacs” has allowed the corporate community to run amok, much like the analogy I mention. Our representatives in office must campaign continuously to maintain standing, and that requires money. With spending limit laws in place the vacuum is filled with these anonymous contributions. Vast, slanted media buys. Did I mention unlimited, and seemingly inexhaustible, funds? The indebtedness of representatives in Washington it’s only surpassed by the legislation foisted on the American people, who have such a declining influence is even now lost in our monuments to democracy. What democracy, I say?

    This is all lobbying to the nth degree. To a corporation a mere line-item in their budget.

    As long as this atmosphere reigns supreme, nothing in America will change with the exception of a further erosion of the working class. There really exists a sort of agnostic political ideology.

    With banks, lending institutions, and corporations harboring unprecedented funds, and yet not freeing them except to reward shareholders, we will not as a nation see growth nor hope.

    Please forgive my negative slant, but though I disagree with others on solutions I acknowledge the right of the process. What I wish is that the fervent on both sides recognize they are being bludgeoned by a corporate hammer.

  • Ingrid

    I am so glad that people have started to voice these serious issues. These changes have been apparent for some time, but it takes someone like Tim to give it a name that puts it all in perspective. And to make people sit up and take notice. Right now our leaders in government are hellbent on doing everything to make the giant corporate complex thrive even at the expense of everyday people. It will take time but eventually they will realize that you can’t gut the earning capacity of middle and working class people and thrive. What goes around eventually comes back around. And everyone gets hurt. And people forgot the sixties. Stand together and you do have power.

  • Rube Suckerman

    I find the lack of prosecution of financial crime to be one of the most damaging aspects of this period.

    I was the victim of fraud a couple of years ago when I was swindled out of my small business and about half a million dollars in a crooked acquisition deal. Before this transaction, I had a home and a comfortable middle class life. After, I ended up flat broke, in foreclosure, with no access to health care or a vehicle, and had my life and family completely wrecked by the experience.

    Care to guess what happened to the CEO who did this? Not a goddamned thing, which is ironic, because I would go to jail for pilfering a store. Two other people also lost homes and were financially ruined. However it is A-OK to swindle someone out of their business and livelihood via legal trickery. Unfortunately, I couldn’t afford to litigate a civil case, so I was stuck with watching these people walk off with my business.

    This sort of behavior will only continue and get worse until prosecutors start putting financial criminals away for 10-20 years. The damage they cause is immeasurably worse than petty theft.

  • Jim

    Wow, now that is what I call taking the truth and stretching it so far that it just sounds like a lie.

    The issue that we have did not come from the back or financial institutions, it came from the politicians who got bought off by lots of different places, and implemented rules and laws that encouraged, if not FORCE, the bank and financial institutions to what they did.

    if someone should be going to jail, it should be a boat load of Senators and Congressmen.

    And I’d be more than happy to slam the door behind them!

  • gregorylent

    waaayy too linear .. you need to hang out with more mystics

    short version … the entire systems falls apart, because it is unsustainable, and a new one takes form, more in line with the true nature of human consciousness.

    energetically it has already happened, we are beginning to see the ripples on the gross physical plane.

    it is the greatest thing in our lives, all that we will live through the next two decades.

    keep centered. and enjoy.

  • Sean

    I don’t think that the answer to the online-retail-sales-tax debate is to shackle everyone with sales taxes.

    The states already have the ability to give their brick-and-mortar retailers even footing with online retailers. Five states already do it: NH, DE, MT, OR, and AK collect no sales taxes.

    Sales taxes are terribly regressive — they diminish the purchasing power of all consumers, and poorer people necessarily spend more of their purchasing power on consumption. They also contribute to un- and underemployment of those who might otherwise compete for jobs in the retail setting.

    On the other hand, property taxes are inherently progressive: the distribution of wealth is far more skewed than the distribution of consumption or the distribution of incomes. A property tax can be made economically efficient by exempting improvement values, as in a Land-Value Tax. Such a tax encourages those who hold valuable land to develop it — which employs more people, and gives more places of employment.

    Competition between the states acts as a natural limit for sales and income taxes, and this is a good thing. Competition from un-taxed online retailers is also a good thing – we don’t get wealthier by building walls, or by “building false barriers”. We adapt and become more efficient. We have a clear means of becoming more efficient *and* increasing demand for local labor — we can have our cake and eat it too.

  • Jay Dugger

    What on earth does this post’s topic have to do with O’Reilly’s core market?

    I value O’Reilly Radar for its thoughtful and on-topic analysis. Regardless of the merits of Mr. Sigal’s piece, similar texts lie just a single search away from a variety of sources. Please return to and stick to relevant material.

  • Evan

    those coming of age during the depression never fully recovered; yet those coming of age in the boom times of a Post-WWII America flourished

    I’m not questioning your reading comprehension skills, but I think your phrasing is a little off here. The depression caused an imbalance between the size of the old infrastructure and the population using it. For instance, schools had smaller classes, marginal teachers were cast aside, people with PhDs were teaching high schoolers instead of college students, etc. The people in a position to take advantage of this disparity were given quite a leg up later in life (he argues).

    I guess it boils down to your definition of “coming of age”

  • http://www.thenetworkgarden.com Mark Sigal

    @Rube, Agreed. One of the core takeaways from the very excellent book, ‘The Big Short’ by Michael Lewis is that what you INCENT is what you reap. By disconnecting risk (going to jail, losing your money) from reward (getting a $10M bonus), we have created a system where the incentive is to bet big, irrespective of the risks.

    @Evan, I don’t dispute that there are other macro drivers in the disparate outcomes of those coming of age during the Depression v. Post-WWII, and to be clear, the notion is not mine. It’s Gladwell, and frankly, I don’t remember if the cut point of “coming of age” is entering the workforce, entering college, high school or what. Intuitively, the concept makes sense, though, and Gladwell argues the point cogently, I think.