Word of The Week: Moribund?

Moribund. Work the word around in your mouth. Pronounce it carefully. Mull it over. Moribund.

It’s the perfect word to describe so much of our economy. Take housing for example.

Moribund is the perfect word to describe real estate right now. Yesterday we read the homebuilder’s report. This is a survey of developers and others in the construction business. It measures their level of optimism. As with many such indices a result of over 50 implies that more than half of those surveyed saw business improving. September’s index reading edged down one point suggesting that the industry took a slight turn for the worse. Then again it’s hard to imagine how much worse things could be because after that slight decline the index now stands at 14. Yes. 14. If that isn’t a good description of a moribund industry I don’t know what is. And it isn’t as if this is a temporary phenomenon: the index has hovered between 13 and 16 for the past six months.

As if to rub salt in the wounds, we learned today that new home construction is sagging even further. Builders began construction of only 571,000 new homes in August, down 5% from July. The damage was spread across the country, but the Northeast was particularly hurt. Starts there suffered a sharp decline, especially in the construction of multi-home buildings. For most of this summer construction has limped along at about half the rate we would expect in a robust economy.

And there is no sign of improvement on the horizon.

Millions of households are locked into homes with their mortgage higher than the home value. So they cannot move without recognizing a loss. This takes away a great deal of activity in the real estate market: American typically change homes about every five years. Clearly in our era of depressed activity that amount of movement is a thing of the past. No only this but the lingering problems in the jobs market and the continuing rotten wage outlook so dampen the prospect for recovery in construction that the word moribund sounds almost optimistic.

What to do?

Well don’t ask our politicians or our business leaders. Their ideas are definitely moribund. Perniciously so.

Apparently our elite has decided to engage in a re-enactment. Instead of debating today’s issues and tossing around some new ideas to energize the economy, engender growth, and solve the malaise, they have decided it would be cool to re-visit the arguments of bygone eras.

Some of them talk as if we are in the 1970’s. These are the ones who are terrified of inflation and want to scrunch down on the economy before we are swept away in a tidal wave of hyper inflation. Most of our central bankers seem to belong to this group. Paul Volcker being the latest to dredge up the inflation ghost from his far too vivid imagination. While core inflation has ticked up a tad recently, its current pace – about 2.0% – is hardly the stuff of Weimar proportions. I doubt we will be needing those wheelbarrows to carry our cash any time soon. So quite why Volcker and his ilk have decided to terrify us with tales of gloom and to pile on the agony of austerity 1970’s style I have no idea.

But at least those folks are relatively modern.

There are others, my favorite Republicans mainly, who have gone back further. They want to re-run the late 1800’s. They depend upon ideas developed by an odd mix of Central and East European thinkers who were commenting upon and reacting to issues in that part of the world before industrialization and democracy had altered the economy much. Those thinkers were driven crazy by the specter of peasants running amok and asserting rights that might muck up the smooth workings of the landed aristocracy and the newly emerging heroes of what appeared to be a brave new world: the entrepreneurs of early capitalism. Worse still, the decaying authoritarian regimes of the various empires that cluttered the political landscape provided those thinkers with a demon to argue against: the state was the enemy of modernization because the state was embodied, not in a democratic representative government subject to regular elective overthrow, but in a dynastic, parasitic, hereditary regime bent on self-preservation. No wonder the economic theories that emerged from that era are deliberately constructed to “prove” that markets benefit society and that governments are all evil, error prone, distractions. The conflict between the early classical economists, and especially the Central European members of that group, and the ancien regime was a worthy fight to have. Back then.

But, to mock Louis XIV, l’etat is decidedly not moi anymore. The dynasties are gone. That fight is old, and the weaponry used in that bygone age is dull, rusty, and, frankly, inappropriate, in our modern societies replete with representative government. No matter how inefficient that government might appear, it is representative. To argue that it is the enemy, is to suggest that democracy itself is the enemy.

In America with its republican, anti-democratic heritage – don’t tell me you think the Senate is democratic – those antiquated arguments against royal imposition still resonate. They have re-surfaced potently in our contemporary Republican party. They are of no use in solving our much more modern problems. Voters have spoken in favor of those entitlement programs. That a few sullen anti-social and anti-democratic libertarians view the taxes needed to pay for such programs as equivalent of 1800’s style imposition is quaint, but when baked into policy today, dangerous.

Yet here we are re-enacting the overthrow of the house of Hapsburg.

No wonder we aren’t making progress.

Moribund indeed.