Hard Economic Choices:
Are They Getting Harder?


Mohammad O. Farooq, PhD
Associate Professor of Economics and Finance
Upper Iowa University

 

A fundamental premise of modern economics is scarcity--the mismatch between unlimited wants and limited resources to meet those wants. The assumption of unlimited wants may be debatable, but our wants do far outstrip the available resources. Thus, scarcity necessitates choice--we are forced to make choice in our lives. That is why wise people subject themselves to the discipline of a budget, a truly difficult challenge, indeed.

Take the case of the United States. Similar to everywhere else in the world, people face scarcity and make choices even in this enviable American economy of abundance. The U.S. government, a large component of this economy, spends so much on education, defense, health and so on. The country is already embroiled in bitter debates about making choices. One fact is clear: the U.S. government has a budgetary process, to the discipline of which it has not strictly subjected itself. Consequently, this largest economy of $6.5 trillion also has accumulated a public debt of $4.5 trillion, the largest anywhere in the world, and it is already so large that 20% of all government revenues is currently spent as interest on public debt. Interest payment would claim the largest percentage of public expenses in a few decades.

Senator Tom Harkin recently remarked: "It's time that we pass on to our kids more opportunity, not more debt." Unfortunately, to talk about reducing budget deficit has become increasingly fashionable and politically rewarding, but the reality is masked by adept political rhetoric. The current administration claims credit for deficit reduction. In reality, it is not an absolute reduction in deficit, but merely a reduction in the growth of deficit.

The balanced budget issue is exposing the country to hard choices about priority in allocation of resources. The post-cold war peace dividend was supposed to enhance its socio-economic agenda, but the influential defense industry and others who have a stake in America's strong global military presence soon discovered new threats to America and the West. The public was told that although the Berlin Wall has come down, the statue of Lenin in Moscow has been removed, the once super power, Soviet Union, has become a pauper, still the threat and insecurity around the globe have not diminished. Indeed, to weaken the defense capability of the country would be unwise, disastrous. Thus the big pie of peace dividend was rededicated to the altar of a militarily strong superpower.

The reallocation of peace dividend to non-peaceful ends did not make the hard choices go away. American military had to be downsized; military bases around the country had to be closed or consolidated. Many regular soldiers are coming out of the uniform and joining the civilian ranks. The last American war against Iraq at the cost of $61 billion dollars drove the point home that economically it would be very difficult for the US to engage in an expensive and prolonged war. The paltry US foreign aid has already been drastically cut and still is coming under strong legislative scrutiny. Several presidential hopefuls are talking about putting America first. Japan, Germany and other allies are being urged to put up their share of cost, if the US is to do their global police work. US simply cannot afford to allocate vast resources any more to international causes, military or humanitarian.

On the home front, politicians now recognize that irresponsible fiscal behavior is pushing the economy to an inevitable crisis. That does not mean that they are ready to face up to the challenge and dare the political consequences. There are several deep undercurrents that deserve closer attention.

The material achievement of the American society is simply unmatched. The high standard of living for the vast majority of its large population is truly remarkable. However, a relative, if not absolute, decline in the standard of living in America is already underway. In the past, a single earner family could achieve the legendary American Dream -- a dream of owning an independent house, a private automobile, and college education of children. Now in most families both spouses have to work to achieve and maintain the same. And even then, majority of the families are struggling to do just that. Very few among the younger generation believe now that they would be able to enjoy the kind of standard of living they have seen their parents to enjoy.

Thus, the hard economic choices that the society faces are real and with passage of time they will get only worse. People need to realize that the standard of living that has become the envy of the world is not sustainable. But will this society become miserable if it cannot be sustained? That's a cultural question. Are people better and happier with so many electronic gadgets for comfort, convenience, and enjoyment? While poverty is not desirable, are we to conclude that people of earlier generations who did not have TV, VCR, or camcorders were less worthy and happy than us?

When standard of living is measured in terms of material consumption alone, we expose ourselves to the unrelenting forces of technology and market, where few among us changes the technology and the rest, the great majority, simply become the subject of change. We then have little control over our life. May be once we reach the peak -- some argue that we already have -- we might have an opportunity to decide for ourselves that the pursuit of super-affluence is not the gateway to happiness. That may help us better to cope with the impending changes, but it will not make our choices any easier.

[This article was previously published in the Minaret, July 1995.]

HOME
Index of my writings
Have you visited my site on Kazi Nazrul Islam?
Genocide 1971 Page?
 Hadith Humor Page?