WASHINGTON. — Washington.-- Joseph Schumpeter, the iconoclastic economist of an earlier day, thought capitalist economies needed a good, cleansing recession now and then.
Economists think like this. They're dismal oracles who have the unique skill of removing themselves from the travails of the human race and audaciously telling us suffering is not only good, but also absolutely necessary at times. Their sackcloth gospel makes them unpopular when times are good and despised when times are bad.
And, yet, they often go to the painful, disturbing truth about recessions: We must adjust, or fall further behind. The hardness of this message often causes many to shrink away in horror. But those who accept it adjust faster.
The message has a corollary, which many people frankly have a hard time believing. Adjustment might bring lower income to some individuals, but it often means a wealthier economy as a whole because of greater efficiency.
Try and sell this story now in our broken-down economy, to the millions out of work, and you will either evoke anger or shocked disbelief. Gloom has such a grip on people that they can see no good outcome to this lingering economic malaise.
But there can be. To those who see opportunity in disaster, this recession could bring many positive changes in American economic attitudes and behavior.
Don't misunderstand. Recessions are terrible and painful. But they are forced corrections to unsustainable trends. We couldn't go on buying as we did in the 1980s, nor could we continue our rate of piling up debt. The misuse of capital by the banking system, by overinvesting in real estate, is a national disgrace. Neither could we go on much longer with a white-collar work force that was, for all intents and purposes, non-productive and non-competitive. The cold, harsh realities have made this clear.
Who needs to adjust? Practically everyone. This recession has taught us the folly of living off one's laurels. To apply this to a corporation, take IBM. Much too late did it discover that its business strategy was too wedded to reputation and the past.
But IBM's huge restructuring does not mean the giant firm has truly adjusted to the demands of the market. So far, it is only cutting its work force. Many other firms also believe that people-slashing alone will save them. If U.S. management doesn't reinvigorate, even re-invent, itself in this recession, we will lose the global competitive game.
This recession has had a profound impact on the American work force, even deeper than the 1981-1982 downturn when the unemployment rate was higher, but concentrated in manufacturing.
All the pain and suffering of job-seeking during the last year and a half will not be in vain. The exercise is causing practical workers to seek new fields, go back to school for more training or discover what adaptations they have to make to become employable.
The American people are beginning to put pressure on #i institutions to make adjustments. For example, families and students are focusing new attention on the inadequacy of today's college degree as a solid entry to the modern workplace. They are demanding a better organized curriculum and a faculty more in touch with today's economy.
People are adjusting in other positive ways. They are paying down their debt, and some, fearful over their jobs in the future, are beginning to save more. The wide-open consumerism that dominated American culture in the 1980s has diminished, and may not come back with the same force for many years.
Here in Washington, President Bush and Congress are keenly feeling the pressure to do something to fix the economy. This is the trickiest part of successful adjustment to a new economy. They could muck it up badly or fail to do the right thing.
A middle-class tax cut sounds nice, for example, but it doesn't adequately respond to the economic troubles at hand. Any economic stimulus plan should put emphasis on investment, whether in individuals, in public facilities or in technological improvement.
William Neikirk is a columnist for the Chicago Tribune.