The Coal Mine Canaries Have Been Dropping Off Their Perches For Months Now

In case you missed it: a PI report on the ongoing bloodbath in architecture. For instance, this nice building is going to feel pretty roomy for a while.

And lest you forget, architecture is leading indicator, duly noted by commenter BrianK:

“Architects and engineers are the canary in the coal mine when it comes to the 2nd largest industry in the world, which is construction. If we aren’t getting new work, you can quite be sure the thousands of people in our region who build buildings won’t have any either.”

Ah yes, it’s the cyclic nature of capitalism kicking our collective butts once again, and kicking harder, it would seem, than it has for several generations. But then again, it’s perhaps worth contemplating whether or not “cyclic” is a actually a euphemism for dumb-greedy-humans-falling-for-a-bubble-again. Apparently we are slow learners.

Human nature notwithstanding, we are told that capitalism is inherently cyclic. There’s just one pesky problem with that: Those cycles are not good for people. Obviously, the stress is severe on the down-cycle when we wonder if our jobs are going to disappear. But stress can also creep in on the up-cycle when we have to work like crazy because firms can’t find enough help.

Moreover, you’d think that even a Scroogy, bottom-line economist, to whom people’s silly feelings are of zero consequence because they can’t be represented in a mathematical formula, would acknowledge that severe cycles are to be avoided simply because they are inefficient. Investments in recruiting, training, specialized experience, team building, client relationships, etc, are all flushed down the toilet when a downturn forces layoffs. And add to that all the energy wasted when people have to search for new jobs.

Well that’s capitalism, the best of both worlds: inefficient and inhumane! Not that I’m a socialist or anything. Heavens no. No Europe-worshipping on this blog. Mustn’t upset the good Americans…

Um, sorry about that lapse, and now back to the point: How can we do better job of controlling the vicious cycles of capitalism? Is there any answer other than tighter regulation?

10 Responses to “The Coal Mine Canaries Have Been Dropping Off Their Perches For Months Now”

  1. Dan Staley

    How can we do better job of controlling the vicious cycles of capitalism? Is there any answer other than tighter regulation?

    According to all historical evidence and most ways of knowing,

    no.

    But surely some will call me a ’socialist’ fer sayin’ this. Thus the problem.

  2. S. Teacher

    See this week’s New Yorker magazine (www.newyorker.com) for a piece called “The Pits” about the abandoned construction sites around that city.

  3. Brad

    going from the abstract to the specific: any update on Meuller’s developments (on 23rd/union and at former Deano’s building, and the twilight exit?)

    If none of those buildings come to be, I’m going to be seriously bummed. Even if just one of the three sights are developed, I’ll be happy at this point.

  4. Matt the Engineer

    I’m not often in the position of defending capitalism, but what is the alternative to this swing? Paying people to continue to design buildings even though there is no money to build buildings? Pay them to sit on their hands? Or do we also pay to build buildings we don’t need?

    I’m a fan of safety nets (unemployment insurance, universal health care, cheap/free schooling etc.) and am generally supportive of unions. But I believe the only thing wrong with our capitalism is that we let the capitalists write their own rules.

  5. Joshua

    While we’re at it, I would also like to know how we can control the vicious cycles of personal relationships, the weather, The Office episodes, etc. These up and down cycles are strenuous on me personally – I’m either overly happy or overly depressed – and I’d like someone else to please offer some regulatory measures that will help me maintain a steady frame of mind. Anyone?

    Oh, wait – I sound like a libertarian. Scratch what I said above.

  6. Chris

    Its not capitalism per se that caused the exaggerated boom/bust cycles that we are experiencing. Rather, IMHO, terrible government policies were as much if not more responsible for the misallocation of resources into the housing sector that should have been directed to productive endeavors like business growth and job creation, and the current set of policy choices that may unhinge our economic foundation looking ahead.

    Terrible decision #1: Fed keeps interest rates too low, too long, in an effort to inflate an asset bubble that would replace the dot-com bubble

    #2: Graham Leach Bliley breaks down the “Chinese Wall” between investment banking and retail banking, allowing additional leverage into the banking system and creating the system by which “financial engineering” could create the toxic mortgage securities we are dealing with now

    #3: Government refuses to regulate CDS, or even creating a transparent marketplace for CDS, which places companies in the positions of being counter-parties to so many swaps that they are “too big to fail” – AIG.

    #4: Fannie and Freddie are able to gear up to 40-1 leverage, becoming de factor hedge funds, all in the name of housing “affordability”. They are supported by an “affordable housing” constituency of do gooders who have apparently never taken economics class (and some crooks)

    #5: Gov’t responds with absurd, inconsistent policies like TARP, an alphabet soups of Fed lending programs, and nationalization of key industries intended to support the financial system but come at the cost of trillions ($7.7 at last count all told including guarantees) that will hamstring our recovery with additonal debt, especially as borrowing costs will eventually be forced to rise.

    #6 Now, having cut rates as far as possible and spent almost all of the TARP authorized to date, deflation is still banging on the door and Bernanke now is wants to have the Fed by long-date treasuries to aid borrowing (eg reinflate the bubble), but which will, eventually, trash the currency, as the Treasury sells bonds, to raise money to lend to the Fed to buy bonds. Hugely inflationary once this long, painful bout of recession ends.

    Basically the taxpayers and savers are being robbed blind by crony capitalism to the benefit of a few elite monied interests – which is just as much a failure of governance as it is a failure of capitalism.

  7. BrianK

    I’d like to invite all those who think human systems can self-regulate to try driving on a “deregulated” freeway. Or have their children ingest “deregulated” medication imported from China. If their logic is solid, they have nothing to worry about – the power of the all-knowing “market” always sorts everything out for the best!

    Meanwhile, according to a recent 9-page Portfolio.com expose on the calamity we all refer to as Wall Street, things like this were happening in our glorious “free” market:

    “In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.”

  8. Dan Staley

    Its not capitalism per se that caused the exaggerated boom/bust cycles that we are experiencing. Rather, IMHO, terrible government policies were as much if not more responsible for the misallocation of resources into the housing sector that should have been directed to productive endeavors like business growth and job creation, and the current set of policy choices that may unhinge our economic foundation looking ahead.

    Where have I read this “Free” Market screed before…hmmm….sounds like a templated talking point…

    Capitalism and cheap energy has driven high-paying jobs offshore. Bubble creation is a function of unregulated markets, thus the long, long history of countries adopting laws to prevent them. The new administration is making a lot of noise about creating green jobs – with federal stimulus. This is, historically, how things work.

    Deregulation – viz. Enron, Global Crossing, etc – has generally bad outcomes. We see the cost savings of regulation when we examine the positive public health outcomes of the Clean Air Act, for example.

    Sure th’ gummint can misallocate. No one is saying they can’t. But deregulation pushes capital upward, as the expense of the bottom.

  9. GW

    It’s not laissez faire or deregulation that causes the swings (those things tend to reduce volatility and risk, not increase them).

    It’s credit and banking policy: maturity transformation in particular. You could call this entire economic calamity “Von Mises’ Revenge.”

  10. John of Humdinger

    Let’s get a little more specific.
    What type of law do you folks propose to stop the sheeple from buying too many sofas this year and/or too few sofas next year?

Leave a Reply