I don’t know about you, but I find it a little disturbing when I see politicians stand up and say that the administration’s entire economic team should be fired because they haven’t created enough jobs. First of all, governments don’t create jobs, businesses do. Secondly, governments can create environments that promote jobs, but its effectiveness is still a couple of steps removed and often comes with a long time lag. Do they really think we’re that stupid?
If we want to be honest, and I think we should, there is plenty of blame to go around for the predicament the US finds itself in today. We severely damaged our financial system through greed, ineffective regulations (notice I’m not saying a lack of), and a over zealous homeownership policy; we somehow forgot that economies and businesses work in cycles; and we all (people, businesses, and gov’t) failed to heed the wise advise of paying down debts when times were good.
Such a significant amount of economic damage requires corrective adjustments that will simply take a bit of time to work through the system. There’s nothing wrong with a slow and steady recovery. It certainly beats a continual decline or a Japanese style decade of stagnation. What’s is wrong are politicians trying to use the slow recovery to get ahead in the poles by scaring the public into thinking the sky is falling again. That may get you elected, but it will only harm the recovery because it breeds fear and continues to divide us. Fear affects confidence, and confidence can either have a positive multiplier effect or a negative one (Its our choice).
Let’s first look at what is NOT going to drive us out of this recession; and yes it’s the list of things that works in most recoveries, just not this one. It’s not going to be the housing market, since it was part of the problem. We are still in an adjustment period of getting people out of homes that really couldn’t afford them in the first place. There simply isn’t going to be much unmet demand until after the economy gets going again. Consumerism is another area where we got out over our skis and adjustments are necessary to find a sustainable level. I never really understood why the government chose to incentivized people to buy houses and new cars as a way to stimulate the economy . . . it just seems a little counter intuitive to me. The stimulus was definitely warranted, but we could have come up with some smarter programs. But since the government owned big chunks of the banks and automakers, perhaps one can see their logic . . . conflict?
Now, where’s the potential, the upside, the areas we can focus on that can produce meaningful results. Some economists are saying that we need investments in businesses (boosts productivity) and a focus on exports, which I agree with for the most part. We can use the demand that is stronger in other parts of the world to help create enough economic activity in the US, which in theory should help jump-start our own demand. That’s the beauty of globalization.
We can also look to trends, future needs, and how this new era of globalization is shaking out to find those niche areas that require capital. Anything that is working toward solving global issues, utilizing technology in innovative ways, and meeting the needs of people in lower socio-economic stances is likely a good investment. I can promise you, the companies working on the $1,500 car and mobile banking/markets for the developing world, will look like geniuses 25 years from now. We may actually be creeping up on the inflection point where it is actually more risky to bet on an investment that focuses on traditional methods of growth in developed markets than it is to explore the frontier where there are bucket loads of unmet demand . . . the bottom of the pyramid.
Success for the US in the 21st century requires a new way of thinking, a new mindset, and paying far less attention to what the politicians are saying.
