Lower income levels particularly need innovation in building components, infrastructure and service formations on completely new terms. Many without advanced degrees are locked out of prosperous regions, which are moving beyond what had been middle income levels. Unfortunately, many regions continue with traditional building formations as if pay structures were not diverging towards opposite poles. Where are the up and coming communities, for the kinds of work so many employees will be able to hire for in the near future?
While supply side factions prefer to cater to the most successful, natural income variations make it impossible for this pattern to generate much needed growth. Investment and innovation need to be loosed to reflect quickly changing realities. Strategies are also needed, which make it possible for individuals to move up the economic ladder on incremental and stable terms.
Building components can be mass produced (or locally generated through 3D printing) which make it possible for individuals with low level incomes to maintain sustainable living and working options. Mass production can also assist in creating the local infrastructure grids which would lock building components into place. Where grid components would be brought in by various transportation means, many building components would be portable enough for a single person to carry and work with. Building components can be reconfigured as needed for a wide variety of economic activities. Only consider the multitude of environments everyone seeks out in the course of a lifetime, for ideas in building adaptation.
Why alternative equilibrium, instead of direct competition in general equilibrium? Growth has stagnated in primary equilibrium, where entire marketplace segments are weighed down with inflexible pricing structures. Supply side rigidities lead to business cycle fluctuations which otherwise would not be necessary.
These rigidities are now creating problems for traditional investment. However, the natural inclination is to look at the process and assume these problems are solely financial and monetary. Economists such as Barry Eichengreen believe this to be a major factor for stagnation. In a recent paper, he emphasizes the relative decline in the price of investment goods as the fourth "cause" of stagnation. Eichengreen adds:
A long term view from economic history is most supportive of the last of these four views.Rigidities in long term asset structures, could explain why Eichengreen questions the validity of monetary stability, as noted in my last post. When structural reforms don't make the public agenda, "middle out" political solutions tend to be the response. However, further enhancement of primary equilibrium consumption is a continuation of the 20th century approach. The continued imbalance only adds to the Fed's reluctance, to strengthen aggregate spending capacity. The production capacity of time use needs to be brought to the table as well.
Unfortunately, nations can be slow to move forward when they become bogged down with structural issues. Indeed, needed innovation gains after depressions can take decades to materialize, and populations can be quite vulnerable to social unrest in the meantime. Even though the Great Recession was partially contained, structural issues remain which are more reminiscent of those in an actual depression.
It can be hard to think about incremental growth and the monetary stability associated with it, because of the anything but incremental demands of so many finance structures. For instance, non profit housing groups such as Habitat for Humanity are limited in their contributions to economic access, because their customers prefer as close an approximation to primary equilibrium as is humanly possible. While assistance with "sweat equity" means a slightly greater chance of economic access, further growth through these traditional means is only possible at the margins.
Hence incremental investment needs to take a completely different strategy, which would provide more access than is possible in primary equilibrium. Not only would living and working structures look completely different from what already exists, they would be put together with materials which are lightweight and strong. One could buy and sell portions of living and working structures as needed. Separate ownership shares would be held by local citizens, which represent holdings in the overall building component and grid structure of the local community.
This alternative equilibrium would exist as an option for citizens without adequate means in primary equilibrium to meet their life challenges. The best part? There would be more room left within primary equilibrium, for all who remain comfortable with the status quo. This would relieve considerable price level pressure on everything from services needs to real estate in the most desired regions, as knowledge use systems become more widely available. Last but not least, I would be remiss in this post if I did not reiterate the most important investment of all - the investment of our time. With a little luck, time use can become the most important wealth starter of all.