Martin Luther King once said "Over the bleached bones and jumbled residue of numerous civilizations are written the pathetic words: 'Too late.'"

I think it is more likely that the final words were "We've always done it that way."

Civilization makes progress by trial and error. If it works, do it again; if it doesn't work try something else. Common sense says that it's more likely to work this time if it worked before than if it didn't work before. As creatures of habit, however, we eventually assume that if something has worked well for a long time, then it will keep on working forever. Doing what has always been successful becomes a mark of virtue, of acceptability, of stability. We become so set in our ways that we succeed in ignoring accumulating evidence that doing it the way we have always done it no longer works. The world changes. We are changing the world. The sad and fascinating history of Easter Island is a metaphor for the inability to change leading to virtual extinction.

Nature works the same way. Organisms that over-specialize frequently die off when the environment changes. They cannot adapt quickly enough.

The economy of the United States cannot continue as it is, but we have remained uncomfortably oblivious to trends for which we ought to be preparing. Because the governmental and private institutions involved are still driven by the same economic assumptions they have held for forty years, the world economy, including the U.S. economy, is likely to have a nasty downturn before long. Have we forgotten what monsters slink out of the gutters and caves when the economy goes south? The last major economic convulsion, the Great Depression, ended in WWII.

Thomas Palley, an unabashed Keynsian, explains in reasonably simple terms what is now happening in the economy and why it cannot continue. The usual remedies of fiscal and monetary fixes will shortly be inadequate to insure stability worldwide.

For the past five years the global economy has been flying on one engine. That engine is the U.S. consumer who has been on a consumption binge financed by borrowing, in turn backed by a housing price bubble. This situation poses the threat of a serious hard landing when that engine eventually stalls, as it must. Ever inflating house prices and rising debt-to-income levels are not sustainable. And as the late Herbert Stein, Chairman of President Nixon’s Council of Economic Advisers, wryly observed: “If something cannot go on forever, it will stop.”

Let us hope that economic policy makers have some workable ideas on how to soften that landing.