Friday, April 03, 2009

The Dissipating Wealth

In the comments on yesterday's post, an anonymous commenter made an important point that brought to mind a clearer explanation of the problem the Jewish community now faces.

The great majority of the Jewish community who work are in white-collar, service industries. Lawyers, accountants, finance and real estate businessmen; even teachers, therapists, psychologists, and doctors. Within the community as a whole, almost no goods are produced other than those meant to be sold within the community itself. There are almost no goods produced within the Orthodox Jewish community that are designed to be sold to the mass public.

What this means for us as a community is that when we go to a store and buy a product, whether food or a toy or some home accessory, we are either sending money into a circle within the community [such as baker -> grocer -> shipper -> factory -> factory owner -> baker], with any profits and earnings in between siphoning off a portion to government, or we are just sending the money straight out of the community to companies that are not part of the Orthodox Jewish community.*

The only way for us to produce even those goods that remain within the community and the only way for us to import the goods that are from outside of the community is by bringing wealth into the community. There are two ways to bring wealth into a community:
  • 1) Export goods outside of the community in exchange for money or goods; or
  • 2) Be a service provider of some sort, whether financial services, medicine, etc., to those outside of the community.
The Orthodox Jewish community does not do almost any of the first option, which makes us fully dependent on the second option. Money comes into the community from those specific sectors, and that money is then passed around the community as each section buys the goods they need from one another. Unfortunately, Option 2 is not something that we can control whatsoever, as it requires there to be a desire for the services we provide. In a down economy such as the one we are in, service industries are often the hardest hit. With this spigot of wealth turned off, the entire community dries up. There's no wealth coming in, which means there's no wealth to send around the community to let each segment buy the goods they need. Very quickly, we switch from a position of affluence to a position of poverty.*

What is especially difficult about this is that at present, we don't have a direct solution to this issue. Our professionals and service providers will have to patiently wait out the downturn for the most part. There are only two real offsets that can be reasonably pursued - cutting costs, which we should certainly be doing regardless, and creatively coming up with ways to produce more: And that production has to be directed not just at our own community but at the broader world.**

Finally, and most importantly, we don't have much time.

* 1) I am not at all advocating the idea of "we must buy only from frum stores". If other places can produce the same goods for less, we should certainly not pay extra to get those goods.
2) Particularly because it costs us more to produce those same goods, we end up with an inflated internal economy. Jewish stores charge higher prices to cover their costs, and since our wealth is coming from outside the community while we spend inside, we don't have an accurate sense of what these things should cost, so we're not even fully aware of the built-in inflated cost. Once the wealth is gone, we're still not only missing the wealth, but paying inflated prices on what we need, too.

** This is probably the main reason smaller Jewish communities tend to be far more stable economically than larger ones. In addition to the reduced inflationary spending within the community, any businesses are directed far more at the greater public than at the Orthodox Jewish segment, meaning that they are bringing wealth from outside sources into the community.