paradox of whatever
I was going to title this "paradox of thrift" , alluding to Keynes' description of how a set of actions undertaken by inviduals can, in aggregate, redound to negative consequences. But I decided not to participate in "Keynes abuse", wherein partly educated persons like me dress their opinions in the garment of the Keynesian lexicon.
But I do want to write about a paradox. I'll call it a casual form of the prisoner's dilemma . The paradox is that when each firm in my industry (information technology) is laying off hundreds or thousands of employees--a seemingly good move for individual companies--the cumulative effect of these layoffs is bad for the economy and, ultimately, the individual firms.
I've written before of a possible means of reducing or avoiding layoffs. I'm encouraged to read about proposals for pay cuts for State of California employees as one step in addressing our truly dire budget situation here in California. (Disclosure: my wife is a public school teacher and thus would be [or should be] subject to such cuts.) But I'm beginning to bore myself when I write of pay cuts.
What can companies do to benefit the greater economy while not harming themselves? Are individual firms doomed to lock up in a fight to the death, then, together, fall into the abyss? Wrong questions, you might say. A corporation's only obligation is to do the right thing for its own financial health. The weak firms will disappear, while the strong, after sustaining some wounds, survive and prosper.
I can imagine a scenario wherein, per the rule above, Google, Microsoft, Intel, and other cash-rich, wide-moat or monopolistic companies survive and return to growth, while a number of now-familiar names disappear. I can also imagine a lot of paths between here and that point of eventual equilibrium and most of them look pretty ugly.
My father, still lucid at 88, talks about the Great Depression. (I leap in here to reassure that I don't predict an event of that magnitude.) His family suffered greatly, to the point where obtaining food was an issue. What my father recalls, in addition to the various privations, was the gnawing uncertainty. Chaos had been unleashed and there was no assurance that the republic would survive.
I think we're stumbling rapidly into a situation where chaos will be unleashed once more. Yes, we start at a "higher" (i.e., richer) point and, yes, we have unemployment insurance, Social Security, and food stamps. But to emerge from this we're going to have to take some unprecedented steps. Or, I should say, additional unprecedented steps. (As a US taxpayer, I may soon be a holder of GM preferred stock.) As distasteful as it will be to many, cooperation among private firms--whether self-initiated, government-induced, or government-mandated--will have to be among these steps.
