Wednesday, September 24, 2008

Sloop - what an old boat has to do with economic policy

With regard to the Economy, and its current state:

I recently published a book about the restoration of an old sailboat built by the Herreshoff Manufacturing Company in Bristol, Rhode Island, in 1938. (The book (Sloop) was brought out in June, 2008 by Simon and Schuster).

I bring this up because one of the policies, written in stone, that John B. Herreshoff and his brother Nat (Nathanael G.) Herreshoff followed as businessmen was: Never buy anything that couldn't be purchased with cash on hand. They didn't extend themselves to creditors, ever, and so their company lasted and flourished as long as they did, and longer.

They contracted with millionaires like J.P. Morgan, and with the U.S. Navy, and with normal people too, and they didn't ever go out on a limb. They played hardball in the major leagues, as it were, and they always played within themselves, understood their limits, and insisted on fiscal discipline. And they are in the Hall of Fame, when it comes to building boats.

This sort of reasoned behavior was common practice at one time - never to over-extend oneself. Perhaps it was common practice because those who practiced it had not yet forgotten the actual feeling (first had when they were children) of being too far out on a literal tree limb. It is a bad feeling, when one climbs a tree with too much enthusiasm, and finds oneself swaying on a too-thin limb. A feeling one hopes is not punctuated by a crack! and a thump!

I make light, yet I knew a man who grew up in a rural community in Scotland, and fell out of a tree as a boy. He broke his arm badly, a compound fracture, and because his family lived so far from medical facilities, he lost the arm. It had to be amputated. This was very sad for him, yet he grew up to be a great strong man, with a wonderful family, a professor of geology. It turned out that he missed his arm, but that he forged on.

In these shaky economic times, I wonder why it is that the Fed. (and Mr. Bush, and Mr. Paulson, and Mr. Bernanke) feel it is such a priority to encourage the continued behavior of going too far out on a limb. Americans, it seems to me, have become too used to being able to borrow money at unrealistic interest rates in order to have things (like new cars and gazebos) which, sadly, many can't really afford.

Rather than shoring up investment banks that have failed through poor practice, and encouraging our fellow Americans to live beyond their means, we ought to be encouraging people to think differently about how to live. This may cause the economy to contract in the short term, and cause some businesses that can't survive without government subsidies to disappear. But this is what adults would do.

Aren't we supposed to be about encouraging people to live within their means, and encouraging businesses that improve people's lives in tangible ways, and so are in demand and sustainable by a real economy? In the beginnings of this nation, people, by and large, produced useful products, and food, and were paid for that.

Now, one (as a broker) can trade bundles of high interest loan futures, back and forth, and make a pile of cash, at least until someone (an investor, perhaps) says, "Hey, wait a minute, I want to know what's in this bundle that I've bought, and which has been bought and sold many times before."

When it's found out that the commodity in question is not corn or whale oil or lumber or stone, but just a concept of something with no inherent value, that this is the kind of commodity upon which we've built our economic temple, then we're in real trouble. We're not way out on a real limb. We're too far out on the limb of a tree that doesn't even exist.

My actual old boat still sails, well-built in a time when that was more prevalent in this country, and we've got to get back to that. And away from thinking that a new car, or a new anything, is going to be what makes us happy. We've got to start living like adults. Like mature, weathered, mortal, sagacious adults, who understand that happiness comes from noticing the riches already inherent in our surroundings, in the beauty of things as we find them, rather than in the shine of a new car's paint.

If we can transform our notion of richness, and of wealth, and begin again to include community, personal discovery, family, friends, and experience in that equation, rather than what predominates at the top of the consciousness of this nation - aquisition of new stuff - then we've got a chance to turn this thing around.

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