It has been noted that this is no ordinary economic downturn. One of the reasons it seems unlikely that the American economy will emerge from current conditions anytime soon is that there are no sure bets for growth. Some would suggest that we can magically repair the damage by reducing the deficit; not a bad idea, but this will have a negligible impact on, say, jobs — especially in the short-to-medium term. How did we get here? An almost religious conviction in systems that should have been recognized as unsustainable.
This has happened before, albeit on a smaller scale. The bad news is, when a collapse of this size occurs, recovery doesn’t happen overnight. Just ask the music industry, which has been trying to go back to its heyday of control and collusion for more than a decade. The problem is, the more they cling to their old systems, the worse it is for the actual creators. Just like the more policymakers attempt to peg progress to Wall Street’s whims, the more American workers are imperiled.
Had anyone made the connection, the music industry’s response to its paradigm shift could have told us a lot about how to deal with the financial meltdown. The root causes are more similar than not: a misguided belief in the ability to engineer permanent growth. In fact, Peak Music was a part of the very same Wall Street philosophy that pushed us to the brink of disaster.
The record industry in the 1990s was rapidly consolidating, with large multinational corporations getting into music as a portfolio-enhancing diversification. From there, executives sought new ways to produce shareholder growth. The music business became like the movie business, but instead of s’plodey movies with big opening weekends, you had spendy boy bands with huge debut Tuesdays. Manufacturing consumer consent was fairly easy, especially with distribution locked down and broadcast media owned by just a handful of companies. You could practically plot a year’s returns with just a handful of guys in a room.
With radio a hyper-concentrated market dominated by payola and retail under the thumb of the major labels, the consumer became trained to accept what was spoon fed to them. $18.98 a CD with a single good song on it? No problem!
Then the unexpected happened. The Internet came along.
The recorded music industry, like Wall Street following the banking crisis, had no clue how to respond. Most kids, when they find out that there is no Santa Claus, go through a period of grief and disaffection, but then they get over it. The music industry has been trying to find a new Saint Nick for more than a decade. I worry that our policymakers will do the same with the American economy.
The old ideas won’t work. That’s the nature of paradigm shift. You can’t build anything lasting according to the previous blueprint. No matter how hard you try, no matter how much money you throw at the problem (or at policymakers), any edifice constructed using the old engineering will not stand. Sure, you can prop it up for a little while, or set to rebuilding over and over and over, but the exercise is ultimately fruitless. Eventually, the way forward will reveal itself, but the will be little continuity between the old and the new, other than the fact that the replacement construct will eventually fail, too.
Repeat after me: you cannot engineer away failure.
But you can prolong the mighty crash by accepting the natural rhythms of growth and contraction. Had the Wizards of Wall Street not entered the dangerous game of financial derivatives, we surely would have experienced recession-like events, but there’s would have been far less danger of a total systems collapse. Had the music industry focused on offering the best product in a reasonably open marketplace, they may have been able to retain some consumer loyalty when the internet came along (their response to the technology itself is its own separate topic).
At the end of the day, the true tragedy is who bears the brunt of these traumas. In the music business, it’s largely the creators (though I do know for a fact that a lot of good people in the industry lost out, too). With the overall American economy, it’s the majority of the public.
None of this was an inevitability. Something for the next generation of wizards to consider.