Systems Thinking and the Economy

Some time ago I read The Fifth Discipline and was struck by beauty and power of systems thinking.  Now I'm reading The Fifth Discipline Fieldbook and trying to hone my skills in using system archetypes to describe and analyze organizational behaviours.

So for some practice I decided to try describing the current US economic situation in terms of a system archetype.  My analysis is pretty simplistic, and I know that there are a lot of different ways to do this (mostly determined by your political stance), but it's an attempt, so let me know what you think.

First off I selected a "Shifting the Burden" model to describe the situation.  In this archetype you start with a balancing loop that describes the actual problem, its effect on the system, and the basic behaviour needed to correct it.  Then you have another counter-balancing loop that describes "quick fix" actions that are taken to treat the symptom but not the cause of the problem.  The application of these quick fixes invariably has unintended consequences which ultimately make the actual problem much worse.  This sets up a reinforcing loop whereby more and more of the quick fix is applied each time conditions worsen.

So let's start off with the first balancing loop, the Problem Correcting Process.  I offer that the problem symptom is high unemployment, the root cause is a lack of consumer demand, and the corrective action is to increase consumer and business confidence.  So my first balancing loop, indicated by a "B" looks like this:

Next comes the second balancing loop, the Symptom Correcting Process.  In my analysis, the federal government is called on to intervene and "fix" the problem of unemployment.  They do so with economic stimulus, which can in fact have a positive (if temporary) impact on unemployment by creating new jobs.  This has effectively shifted the burden of the problems in the economy (the system) to the federal government.  Now our model looks like this:

Of course the unintended consequence of this costly stimulus is a mounting national debt.  Such a soaring debt and the attendant uncertainty tends to lower confidence and drive down demand again.  This leads to more unemployment, which leads to more calls for stimulus, which adds to the debt...  You get the picture.  This is known as a reinforcing loop and is depicted in the final view of the model below.

The truly frightening thing about all this is the projected outcome.  The Fifth Discipline Fieldbook suggests that in this type of situation the "fix" is applied at an ever increasing rate as the problem oscillates but continues to get worse on the whole.  This leads to a gradual degradation in the ability of the system to fix itself through natural means.  This is shown in the graph below, reprinted without permission:

A sobering analysis to be sure, and I'll leave any suggestion as to the remedy for another day.  But impending global calamity notwithstanding, what do you think?  How did I do for my first official effort to apply systems thinking and system archetypes to the real world?