Economic change is ahead, but what kind?

One economic truth in the United States (and probably in other countries as well): when you advocate reform you receive a lot of criticism.

Students that yours truly has taught at the college level in U.S. government, international relations, and in other subjects are quick to confirm the above: change, almost in any form, and certainly regarding the economy, does not come easily in the states. Even when a better, more-rational policy or way of organizing and marshaling resources is presented, students, like other American citizens, more than likely will adhere to "the status quo," even, in some cases, to the detriment of the nation or the society at large.

A status-quo culture

The above is part of the status quo culture and the incremental policy process in the United States, and it certainly holds true regarding the economy: absent a crisis, anything outside of small change is all-but-impossible, and even then, the status quo frequently prevails. There are many reasons why the status quo prevails a lot in the United States. Briefly, Americans (students included) don't believe their economic system is perfect, but they do adamantly believe it's the best economic system in the world. And when you believe you're the best in the world, you don't change easily.

Still, it's important for investors to know that the United States is at a moment or period in history when substantive change -- big change -- is possible on the economic front.

President Obama recognizes that the nation is in such a period -- indeed his victory in the November 2008 presidential election personifies that economic change -- but that does not mean the final shape/direction of that change is known, and anyone who tells you differently -- that they know precisely what's ahead -- isn't telling the truth. If economic, political, and cultural cycles mean anything, this era most likely will be characterized by liberal activism after a period of conservatism that began in 1981.

For the economic conservatives and the market absolutists, the change that has to occur ahead is less federal government spending, lower taxes, and deregulation. Anything that doesn't conform to the above represents an error and must be avoided. The problem, the economic conservatives say, is government. Get the federal government out of the way. The federal government is muscling-out consumers.

The counter argument to the above, and what events in the months and quarters ahead may demonstrate to the economic conservatives, is that the problem is not the federal government muscling-out consumers, but that there are no consumers.

And if the latter is the case -- and we don't know that yet -- the reforms ahead will be far more wide-ranging than anyone has imagined, college students, investors, and typical citizens included.


Financial Editor Joseph Lazzaro is based in New York.

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