The Dow Jones Industrial Average almost fell to 9200 points today.  That level is sure to be broken before the market begins its slow recovery. 

What needs to change in the American form of capitalism?  Bob Herbert has some thoughts.

…the need to stabilize the financial system is obvious. But the U.S. economy is never going to be really healthy until the country figures out how to provide work at decent pay for all, or nearly all, of the men and women who want to work.

Certainly, the job market is crumbling, but getting it back to where it was just a year or two ago isn’t enough.  There needs to be fundamental changes in the way Americans do business.

The tight credit markets are the near-term problem, but the long-range problem is that we borrow too much.  “We” meaning American business and American individuals.  Obviously, there’s a problem with how we borrow for homes.  The home construction business, along with real estate agents, mortgage brokers, and banks have all conspired to sell the idea that we should all own a home.  And that it must be a detached home or at least a duplex, with a plot of earth to call our own.  Really?  Is that what we want or what we’ve been programmed to want.  Obviously, it’s not always a good investment.  My wife and I bought our first Virginia home in 1989 and sold it six years later for a loss.  The same was true of a house we bought in Texas.  It’s not always a good investment, much like the stock market.  (If you invested in a S&P index fund 10 years ago, you would have lost money as of today.)

But our borrowing binge goes beyond houses.  Cars, furniture, electronics, vacations, home improvements, all paid by incurring debt.  Many folks will say so what?  That’s normal.  It may be normal but it’s what helped get us here.  My folks became if not wealthy, certainly “well-to-do.”  Once my father retired at age 62, he was set for life.  He’s gone, but my mother, 87, can live wherever she wants at a very comfortable level even if she lives to 110.  Their financial secret wasn’t good investing.  It wasn’t luck, or even a great career.  My mother never worked; my father was a government bureaucrat, a job he was glad to have given his lack of even a high school education.  They made their money the really old fashioned way:  They saved it.  He was tight with a buck, although most severely on himself, not his family.  And he always paid cash.

Having just moved my mother near us, I’ve become guardian of the family papers.  Going through one box I found the deed for their first home — $7,750 and a $29 a month mortgage.  But after a couple of years, they realized they would be paying a couple thousand dollars in interest.  So they paid it off early.  They bought three houses after that one, all by cash.  He never bought a car on credit, much less furniture or a TV.   

Our country’s savings rate fell below break even a few years ago.  We weren’t saving more than we were spending.  And it shouldn’t be necessary that American business needs huge credit lines to survive.  In the last couple of weeks, credit has tighten too much, but businesses, too, can wean themselves from chronic credit.

If there is one thing President Obama must challenge Americans to do is to wean themselves from excessive credit.

Do we have the discipline for that?  Do we understand the consequences of mortgaging our future to foreign capital?  Do we realize that our position as the global market leader is at stake?  It’s a lesson someone needs to teach us.

Why isn’t a recovering economy allowing workers to recover jobs lost over the past two years? Read David Ignatius’ column today and listen to Diane Rheam’s show on WAMU and syndicated nationally. (It’s repeated tonight at 9:00 on WAMU and can be listened to — scroll down to the program for Feb. 24 — on the Internet.)

You can argue, as the Dems have, that we shouldn’t give tax incentives to companies for transferring jobs oversees, but the problems are systemic and won’t be solved by eliminating those incentives.

The problem is that we can’t compete with wage levels overseas, unless we want to pay higher prices for whatever industry we protect. The long-term answer is educating workers for jobs for which we can compete. On Rheam’s show, there’s a good discussion among Jared Bernstein, a senior economist at the Economic Policy Institute, Kevin Hassett, director of economic policy studies at the American Enterprise Institute, and Jonathan Weisman, economic policy writer for “The Washington Post.” Worth a listen.