Tuesday, October 21, 2008

Introducing Grandma-nomics

Actually, Grandma-nomics (tm) is, like Grandma, not as simple as you think. Not all about simple ideas like thrift and saving, though I do think that it is appropriate right now for the piggybank to be blue. Blue for, well, blue. Aren't we all? Those of us who saved our money somewhere other than the mattress have watched its wild decline and wished we had bought a Rhoomba while we had all that imaginary wealth. Those who didn't save money but lived on credit are finding that at the end of that rainbow there is not a pot of gold but a credit limit and a sheriff changing the locks on the doors, or however they foreclose in your neighborhood.

But enough about them. Let's go more abstract, into one of the assumptions that have crumpled like stilts in a tsunami and let this economy collapse. Notice, I didn't say "the market," but "this economy"---our collective customary ways of buying and selling, and the thoughts that underlay those habits.

It was called "the consumer economy." That meant most profit was made when individuals (consumers) bought things (either real things or services like facelifts and massage). This fundamental point is interesting to think about. Let's start with things. As just about every Grandmother knows, you get to a point in life where you have way too many things already.

Young people haven't got there yet. They still believe in things. So they sigh, talking about how, when they closed out Mother's estate, they found closets full of new clothes, nice clothes they gave Mom for her birthday or Christmas over the years. Why wouldn't she wear them? Well, that would have to be addressed on a case-by-case basis. But I feel safe postulating that many a Mother finds, in the course of a long life, clothes she feels comfortable in, both physically and as an expression of her self. Those are what she wears. New clothes? You have to cut off all those tags, wash the chemicals out of them. But first you have to try them on, and since they are the wrong size in the first place, think about returning them. For now, they hang in the closet in the spare bedroom.

The consumer economy postulated that we would always want more things---think redecorating---and always be able to purchase more. I have suggested that for some of us, less has become more desirable, so let's proceed to the second assumption. It leads me to the concept of credit.

I was fascinated to read again this morning that small business in America depends on short-term loans to run itself. I thought of the macroeconomic movement, in which an organization like Heifer may give an impoverished family a start in small business, such as a goat or a flock of chickens. You can do this for, oh, $50. It makes a nice Christmas gift for the grandmother who doesn't wear the pretty sweaters people give her. If you don't know how much $50 worth of chickens can contribute to survival, what with laying eggs and growing more chickens, eggs and chickens you can trade for rice, maybe, and old chickens for the pot . . . if you don't know how that can stand between a family and starvation, ask your grandmother.

If a family can develop a business on a $50 gift, why does Joe the Plumber (ah, there he is!) need small loans in the many thousands just to meet his payroll? Hmm. Maybe his receipts lag behind the actual work. He doesn't demand payment at the time. According to bailout theory, I, Grandma Jeanne, should now bail him out with a small loan.

But I imagine a different scenario; Joe says to his men, you collect when the work is done. If you don't, I won't be able to pay you. With unemployment rising, a lot of people would assent to that. I mean, people drive their own cars to deliver pizza for a lot less than plumbers make.

And in my scenario, I say to Joe in the first place, wait, why should I, the taxpayer, finance your strike-it-rich idea? Instead, you could work for someone else and learn how the plumbing business goes. Save your money until you can strike out on your own. Build a solid reputation for good work and reliability (which will always have stable value), and keep saving some of what you earn. Then, if you must have more, you can hire someone else and make a little profit on his work, until he gets smart and starts his own business too. Simple.

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