Where IS the beef?
Original post made by Tom Cushing on Oct 19, 2011
The fundamental problem that ails this country's economy is the steady decline of the Middle Class in numbers, well-being, and crucially, in spending power. The rapid rise of the US in the 20th century was fueled by vibrant middle class demand that gobbled-up the products of an expanding business sector from suburban houses, to cars, to appliances, and onward to leisure products. We made stuff and built stuff as diverse as skyscrapers, roads, rockets, and the majority of the world's great universities.
Of course, the US was abetted by world wars whose massive destruction that barely touched our shores. Industry expanded to supply our allies and then our own war machinery usually in ways that could be converted to civilian uses upon conclusion of the hostilities. And it's of unquestioned advantage to be the last economy standing, with much of the rest of the world's capacity in ruins.
The US also stood for innovation. As recently as the 1990s, its systems were poised to lead a post-cold war world economy into unprecedented prosperity. In his brilliant book, "The Lexus and the Olive Tree," Tom Friedman crowed that if you set out to design an economic engine that would power a globalizing world, it would look a Lot like this one. The title of his most recent, less brilliant tome laments "That Used to be Us."
UC Berkeley's Robert Reich has been an early seer of many trends most recently, he has been the best analyst of our current economic travails he even anticipated the rise of Tea Party AND the Occupy movements from opposite ends of the political spectrum, in his book "Aftershock:"
"…Widening inequality, coupled with a growing perception that big business and Wall Street are in cahoots with big government for the purpose of making the rich even richer, gives fodder to demagogues on the extreme left and the extreme right. They gain power by turning the public's economic anxieties into resentments against particular people and groups. …willing to sacrifice overall prosperity for the sake of achieving their ends, such demagogues and the movements they inspire can cause great harm" (pgs. 127-8 for those of you following at home).
Does that sound like any of the current and emerging crop of demagogues? It does to me.
But even Reich is woefully long on diagnosis, and short on cure. Only twelve pages of 174 go to remedies and his prescriptions mostly offer Progressive financial policies that would send The Right straight into cardiac arrest.
Nobody is talking effectively about The Big Question: how do we restore the great American Middle Class? The GOP? Their candidates stand for tired, cynical blather about tax rates and regs curtailing the noble Job Creators from their appointed rounds. C'mon folks historically low rates haven't shaken loose those jobs, and captains of industry, being sophisticated human beings, are motivated by many, many things other than just money. Regulations that keep us from choking on our own fumes didn't just happen, either. Their roll-back would serve the selfish needs of well-heeled contributors who don't have to breathe those fumes, but do not a thing to address real problems.
The Dems, to their limited credit, are at least seeking to prime the economic pump with stimulae like the Jobs bill. That may be good counter-cyclical policy that responds to the recurrent fluctuations in a healthy economy, but it doesn't address the Big Picture either our enduring, festering structural problem of the decimated Middle Class. We cannot promote permanent prosperity by cutting each other's hair it does not add permanent value to the system.
Nobody is talking about IT precisely because IT's an incredibly difficult, and maybe impossibly large, problem. The US needs a renaissance that will require huge, disparate and coordinated elements from many places in the culture some short term and others very long term and none of which will get anybody (re-?)elected next year. Both Parties are serving us stale burgers, hold the meat.
Next week, I'll take my best shot at some answers and you can poke 'em. In the meantime what are Your suggestions of a top two or three things America ought to do to address the fundamental structural problems of the "hourglass economy?"
on Oct 19, 2011 at 1:54 pm
Our global economy invites USAmerica to innovate and commercialize technologies emerging from our universities and national laboratories using global venture funds distributed in our region by private equity, strategic capital, venture capital and business banking groups. We have the components of such innovation and commercialization in our corporations but not the will to pursue new technology ventures. We have skilled professionals among our unemployed and underemployed that can manage, engineer and market commercialized innovations but lack the "gathering of resources" leadership needed to make new corporations. We have PROOF of the ease of such commercialization in Apple who does more product packaging/marketing than technology innovation. We have PROOF failure of innovative commercialization in H-P's focus on logistics volume in their sales of near-obsolete products.
What we lack, especially in our bay area, is the ability to come together in "hockey-stick ramps" of new low-to-high tech companies. Global funds are available to build USAmerica's new corporations, professional management and staff are available, and technologies are waiting for commercialization as "results-product."
Our governments, national to local, lack any real skills to foster such innovation and commercialization with most economic development focused on real estate development. Our governments foster failure because they lack timely ability to innovate environments that foster successful new companies at the scale needed in our economy.
Immediate timely steps for our economy are 1) gather our new technologies, 2) accept global investment and participation, 3) gather our human resources capable of commercialization, and execute results-products in global markets using "silicon valley (as a verb)" to ramp new products in 5-7 months.
It is what the world expects from us.
on Oct 20, 2011 at 6:12 pm
Manufacturing is the key to restoring middle class jobs. The largest cost variable for manufacturing is energy. Coal is the cheapest form of energy at $0.04 per kwh, compared to other energy sources like solar at $0.22 per kwh. America has nearly an inexhaustible supply of coal, by far the largest coal reserves of any country in the world, nearly double the reserves of China. China is building a new coal power plant every 7 days, on average, in order to meet their energy demands. If we were willing to destroy our environment like the Chinese, we could greatly expand the use of coal and drive down the cost of energy to a point where many Chinese goods were no longer cost competitive compared to U.S. made goods. This plan is flawed, of course, as we prefer that pollution occurs elsewhere so we don't have to see it and be reminded that all the cheap goods we buy were made at great environmental cost. If we don't see pollution, then we can congratulate ourselves that our environmental laws are working.
Your Wendy's hamburger analogy is brilliant, although perhaps not in the way you intended. Everyone knows hamburgers are bad for you. Wendy's is trying to repackage their product so you'll forget they're unhealthy. Maybe Wendy's should instead focus their efforts on a better product. And if Wendy's can't adapt, maybe it wouldn't be so bad if Wendy's went bankrupt and a healthier restaurant became all the rage. Similarly, is it really so bad that we've lost all these middle class manufacturing jobs? Our air and water is so much cleaner now than it used to be.