Why We Will Not Be Able to Recover From This Recession

The title says it all.  With all the talk in the media these days about the end of the recession (France, Germany, and Japan have all already officially come out of recession and economists are predicting that growth reports for this past quarter will see the US officially come out as well), what will the effects be on us here in the Mohawk Valley once economists see our economy has grown in the past quarter and declare our troubles null.  There seems to be no denial over the fact that we will most likely have a "jobless" recovery, as firms refuse to hire more individuals due to fears of the economy declining again, but will we begin to see prosperity again jobs aside?

What got me thinking about this was the fact that energy prices are expected to rise once again as the economy gets back on its feat and demand picks up.  Right now we are still technically in a recession and as of this morning crude oil is trading for $79.15 on the New York Index.  This will only increase once demand picks up once again.  To make matters worse, one can only expect to see oil speculation push the price higher than ever as people attempt to profit off of what they see as a safe investment since we will use more oil as our economy improves.  Ahhhh how we all love rational actors in the economic market place.  

Over the past two years the United States has seen the amount of vehicle miles travelled (VMT), and carbon emissions decrease due to the combination of higher energy prices and the recession.  The main reason for this being that fewer people are making the daily commute or taking driving trips on weekends since they have either no job or fewer resources.  As this has taken place we have yet to begin to construct any kind of infrastructure to curb our dependence on oil, and more disturbingly, individuals seem to be lapsing into their habits of old as SUV and truck sales are up for the first time since the gas price spike two summers ago.

This is a toxic combination, for over the past two years, and especially with the stimulus package, we had the ability to begin to "oil proof" our economy to ensure that our economy would not be subjected to the harm that comes from spikes in the price of oil.  We had the resources to do so, but chose not to, meaning that once oil prices go up, our economy will have even less resources to deal with this issue.  The more money that we spend on gas, the less that we all have to spend on other goods and services.  So instead of going out to breakfast on a Sunday morning to Donna's Diner, we will have spent that money on gas, meaning that local businesses will feel the hurt.

It has been a conscious choice by us as Americans to continue down this path of oil dependence that has created a ceiling that will limit our economies ability to grow in the future.  Once oil prices go up we have no alternatives than to spend our scarce resources on oil, meaning that we will be spending less on other things, and the economy will shrink once again as firms go out of business and oil companies and speculators make more money.  

We have literally placed a cap on our economic growth.  Sure there are areas, such as the New York City metro area, that will be able to handle higher oil prices, but we here in the Mohawk Valley will not be able to, and it is our businesses and local economy that will suffer the most.  We have set our selves up for destruction as once oil prices go up this time there is no ability to find the funds to create alternatives to using oil as we have already gone into mountains of debt in the past two years with nothing to show for it.  

It is not rational or reasonable to tell individuals what they can and cannot do, that just isn't the American way, but by creating alternatives to the consumption of gas in personal vehicles we are actually protecting our way of life by safe guarding our economy from economic ruin.  When gas prices rise again some people will find it hard to find the funds to continue to drive to work, and as a result a large portion of their disposable incomes will be spent on fuel instead of other goods.  As these funds are spent on fuel they also do not have the ability to save up to provide an alternative for themselves (a more fuel efficient gas powered car, possibly a hybrid or electric vehicle, etc.).  This turns into a positive feedback loop whereby it is individuals that loose, and when individuals loose, our entire economy looses along with them.  

So while our economy is just beginning to show some signs of life again we need to think long and hard about how our collective lifestyle is going to effect our future local economy.  We need to begin to seek alternatives, things as simple as creating bike lanes and parking in our villages and cities for those who live in town.  

We should also begin to think about more long term solutions that are tailored to our local condition.  An example of this would be beginning to form an infrastructure for electric vehicle charging.  As a rural area whose residents are not used to utilizing public transportation it would not make sense to create a full fledged public transit system, yet by creating the infrastructure for electric vehicles we allow people to continue their same lifestyle as they enjoy now, while ensuring that our economy is not held hostage by high gas prices.  A public-private partnership could be set up whereby the government constructs charging stations in certain areas and private industry does on their property as well.  This will also encourage people to begin to purchase electric vehicles as they come on the market beginning next year, for who is going to buy an electric car if the only place that they can charge it is in their garage?

So while we may find ourselves in desperate straights right now, yet we are still at the stage where we can pull ourselves out of this situation before it gets any worse, but this will take having local leaders who have the vision of making this happen.  If we as a community are going to be successful in the 21st century economy we need to have a proactive policies in place, as opposed to reactionary one.  And if we decide to go it alone as individuals, I strongly recommend that you purchase a large amount of shares in Suncor Energy. The way things seem to be going in our region I don't know if I hold out much hope for our economic future, but here's to keeping the faith anyway.