Recession For Dummies

All this recession talk is off the mark. Interest rates. Tax rates. Bonds and equities. Blah, blah, blah. It's all a bunch of nonsense. The causes. The cures. Who's to blame, who's not to blame? Well, I know why there's a recession, and so do you. I know why there's no consumer confidence. It's simple, though they've tried to make it complicated, like they've tried to make everything complicated lately.

There's a recession because nothing works. I'm talking about the New Economy here. Cell phones. Satellite TV. PDAs. Computers. The stuff that was supposed to make us rich but won't make us rich because it doesn't work.

Let's speak plainly while speaking plainly is still possible. Let's use no acronyms. Let's leave out politics.

Remember the Old Economy? Things worked then. Steel didn't break. Refrigerators cooled food. A pound of wheat was a pound of wheat, and people could grind it into flour and eat it. A hamburger consisted of two buns and a patty of ground meat, and a cheeseburger was a hamburger plus cheese.

Now suppose we applied the reliability standards and pricing schemes of New Economy products to the items above. One-inch-thick steel would only be 1 in. thick on weekend nights and holidays. During weekday business hours, it would be one-third of an inch thick; and if one carried the steel outside one's "area," it would cost six times as much. Refrigerators would chill eggs and butter for only three or four hours before they "crashed," entailing a call to an 800 number. A pound of wheat would be a pound of wheat*--meaning that it would neither weigh a pound nor be composed of grain without the purchase of a 12-month contract. A hamburger would be defined as two buns around a paper coupon promising the delivery of a meat patty as soon as meat-patty technology was rolled out nationally.

Until about a year ago, people believed that this situation was their fault. Take me and my cell-phone plan. It promised two free phones for a monthly charge of $50. Then one of my two free phones broke, and the company would not replace it. My fault, because I'd stupidly assumed that two free phones meant two free working phones. Or take my wife, who called an electronics store and had it install a satellite dish on our roof that would, allegedly, bring in zillions of channels but, in reality, brought in only seven. Her fault, because she assumed that the store would repair the transponder and aim it properly. As it happened, the store was just the "agent" for a regional company. What services did this company provide? Only one, we discovered: billing.

It was all our fault. For not reading the fine print. For not noticing the asterisks. When my wife bought a first edition of Sinclair Lewis' Main Street on eBay and the book arrived and was not a first edition, or even a second or third, the blame was hers--for not being suspicious. And when I used an online broker to buy shares of Micron Technology at 40 1/4 and received a confirmation five minutes later that I'd purchased the shares at 43, the blame was mine--for not knowing that "real-time quotes" aren't so real time.

But then something changed, and people began to realize, by the millions, that it wasn't really their fault that nothing worked. They came to see that Old Economy products like automobiles worked much better at their very worst than New Economy goods, such as handheld Internet devices, worked at their very best.

So people stopped buying stuff. Voila: recession.

The question of fault remains, of course. Why does nothing work? Because what we've been buying all these years is the prospect of workability, which we valued more highly than workability itself. Which would you pay more for? A glass of immediately drinkable water 1.0 or a glass of water 2.0 that can't be drunk for six months but will by then, you've been promised, have turned to wine?

High-speed Internet connections, Web-enabled cell phones and billion-pixel-per-sq.-in. TV monitors are water 2.0. Not only don't they work (except for certain rumored customers in certain districts in certain unnamed cities), they're also substitutes for those things that do work (hard drives, basic long-distance service) but have come down so far in price over the years that these products are now known as "commodities," and no one can make money selling them.

It's a mess, all right. The profitable things don't work, while the unprofitable things still do, except no one wants to make them now, and those who use them waste them. Consider electricity. While half the U.S. was earning paper millions dreaming up Tom Swift gizmos, the business of generating raw megawatts was neglected, turning a former commodity into a luxury. Now, in parts of California, the electricity doesn't work either. This is bad.

Recessions have a function, experts say--restructuring the economy to prepare it for new growth. Recessions are very complicated, see. Let's just hope this one works.