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Smoking the Green Shoots
Question for the day: Where is the economic recovery going to come from?
We are still at the stage of the recession where economic downdrafts are producing more downdrafts. Reduced purchasing power leads to fewer retail and factory sales and more layoffs, further reducing consumer demand. The Obama stimulus package, about 2.5 percent of GDP for each of two years, doesn't make up enough of the difference. But the federal deficit, caused mainly by falling revenues and not by increased public spending, is alarming the budget hawks. The administration worries, correctly, that deficits will be high for several years to come and wonders who will keep lending Uncle Sam the money. Yet cutting back spending before recovery comes would be suicidal.
In addition, the financial sector has not yet returned to health, despite outsized profits (and bonuses) reported by the likes of Goldman Sachs. This is the kind of purely financial engineering that caused the collapse. The fevered activity at Goldman is a sign of lingering economic illness, not economic health. The rest of the economy, which depends on the financial sector for real investment capital, is still deeply depressed.
Louis Uchitelle's piece in Sunday's New York Times provides some instructive numbers.
Every major sector that reflects the purely private economy has been losing jobs, the only exception being energy extraction plus a tiny increase in computer systems design and management consulting. All of the other expanding sectors that are actually adding jobs reflect government spending - education, health, general government. But the declines in the workhorse parts of the private economy such as manufacturing, construction, and retailing are huge.
With purchasing power still declining and unemployment still rising, where will the recovery come from? White House economic chief Lawrence Summers, in a major speech at the Peterson Institute July 17, emphasized the good news.
"We were at the brink of catastrophe at the beginning of the year but we have walked some substantial distance back from the abyss," he said. And, ever the empiricist, Summers reported that a Google search revealed that "hits for economic depression have returned to baseline levels." That's nice, but what Summers did not forecast was a robust recovery.
And if we stay on the present path, recovery will not come for a long time. Federal deficits will be large enough to raise questions about who will keep lending us the money - but not large enough to power a real recovery that increases real incomes and provides good jobs. The last time we had a massive financial meltdown like this, it took the hyper-stimulus of a war - World War II - to recapitalize industry and re-employ workers.
What, then, is the moral equivalent of war for the 21st century? Let's think way, way outside the box.
We might begin with a serious strategy for rebuilding American manufacturing. American corporations and politicians have been cavalier about just letting manufacturing go. Uniquely among advanced and developing nations, we have no national strategy for nurturing manufacturing at home. There's even an office in the Commerce Department that helps companies outsource.
As a result, even a modest uptick in purchasing power will not produce enough American jobs because there are so many things that America no longer makes.
We could start with clean energy, and move on to mass transit, and reclaim America's capacity to make things. Right now, even if we massively shifted to wind and solar energy, other nations would get most of the production jobs because most solar panels and wind turbines are not made here, while Americans would just get the temporary installation jobs.
We could also get serious about insisting that other trading nations not coerce or bribe our manufactures to locate facilities overseas as a condition of doing business - a flagrant violation of trade law. We could start having a real industrial policy for commercial industry in the way that we have long had a tacit industrial policy for products deemed essential to the military.
The administration is confused about how to reconcile industrial goals with trade law. It had to do a lot of backing and filling so that tens of billions of taxpayer dollars to modernize the auto industry didn't end up subsidizing more outsourcing of jobs to China. If trade law interferes with our ability to revive American manufacturing, then there's something wrong with trade law and let's change it.
For a fine summary on how to revive domestic manufacturing, take a look at the new book, Manufacturing a Better Future for America, edited by Richard McCormack and written by some of America's best experts on reviving manufacturing.
The book is published by the Alliance for American Manufacturing.
After manufacturing, we need to get serious about investing in a new generation of public infrastructure - everything from smart-grid electrical systems to broadband and modern water and sewer and transportation systems. That will produce lots of good jobs, and make for a more efficient and productive economy.
As far as the deficit is concerned, it will probably need to get bigger before it gets smaller. During World War II, when the nation was a lot poorer and nearly half of our national output went to defeat the Axis powers, my parents and grandparents and tens of millions of Americans like them bought war bonds.
We didn't depend on foreign borrowing, even though the deficits were far larger. Today, the government should create Recovery Bonds and market them to Americans, so that we can finance our own social investment and cease to be financial wards of foreign dictatorships.
The good people at Goldman Sachs can demonstrate their patriotism - not by offering to make money as financial middlemen - but by buying the first issue of these bonds as an investment. The government needs no investment bankers to market these bonds. It can sell them directly to citizens
Gentle reader, we are in a national economic emergency. This is not just about talking up the economy by emphasizing good news. The administration needs to stop smoking its own green shoots and offer strategies equal to the magnitude of the crisis.
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13 Comments so far
Show AllThe author seems to be afraid to use the word "tariffs". Japan, China and Korea all use high tariffs to keep manufacturing domestic-- as did the U.S. back when we had a strong manufacturing base. The "green shoots" they are smoking are the flatulations of multinational corporations repeating endlessly that "Protectionism" is a curse and Globalization is the way to go. But globalization actually translates into a race to the bottom for real people and their jobs and wages. Only Nations can protect the interests of their people against the interests of multinational capital, which mainly benefits themselves while harming nations, cultures, environments, and people.
A race to the bottom is the term I used for globalization from the beginning!
"Right to Work" and all the other Orwellian terms that came out of it!
Tariffs and taxes and jobs, oh my!
We came out on top of WWII.
We tried to save the economy by starting the current occupations, but the outcome is a terrible weight on our shoulders.
Half of our tax dollars go to "offense" spending, the rest goes to, who knows where.
To have a strong economy we need to export something besides death and destruction!
Vast sectors of the economy of the United States are counter-productive. Foremost would be the deployment of the military of the United States to more than 700 foreign bases. This deployment is a vast drain on the Federal Treasury and these funds would go far in rebuilding America’s aging infrastructure.
The United States imprisons a far higher percentage of its population than any other developed nation. About half of those imprisoned are there on drug charges. The war on drugs is a civil war that America is waging upon itself. Decriminalizing drugs and treating those addicted is a far saner policy.
The era of dragging around 4,000 pounds of steel, glass and plastic to transport one human being is over. The United States needs to rebuild its transportation system for moving people from the ground up. The railroad company CSX reports that it can transport one ton of cargo 427 miles on ONE GALLON OF FUEL. Returning much of the materials now transported in trucks to transportation by rail is a must.
Finally America’s economy must be rebuilt to meet the environmental challenges we are currently facing. Foremost is global warming/peak oil; we must give up our addiction to fossil fuels and convert our economy into an economy that functions on solar, wind, tidal, hydro and renewable energy.
Finally-Finally the World’s greed driven corporations that decide how the economy functions need to be rebuilt to operate to meet the long range goals stated above instead of operating to maximize short run profits. As we celebrate the 40th anniversary of Man’s landing on the moon it reminds us that there are other economic models that can achieve amazing long range goals.
Finally to the third. The concept of responsibility needs to be reestablished among the top decision makers in both the economy and the government. People that were instrumental in both the Bush eight year crime spree and the Ponzi scheme financial meltdown need to be brought to justice.
By the title of this article,I was hoping you were referring to an economy that includes cannibis sativa, indica and hemp.
All the commentators above make good points, however I would like to add dismantling the Federal Reserve and going with the Treasury department dictating the money supply. Better a government with deficits collects the interest to be made than pay it out to already rich, unaccountable plutocrats.
Mission accomplished...!
Milton Friedman's free market capitalism without oversight has caused great misery. Spending on Iraq, Afghanistan and military bases around the world will bankrupt us. England, France and ancient Rome saw their empires dissolve. Ours will too.
Milton Friedman's free market capitalism was a misnomer. It was really the fried market capitalism. Everyone but Milton and his buddies got turned in to golden brown crispy critters.
the problem we're facing isn't a dying economy, it's a dying planet due to our economy...
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Can you imagine a world without money????
Why does everybody talk about economic recovery,when we have reached the end-game of consumer capitalism.
Oh...I understand the monopoly game ended because all the money is currently at broadway and wall street. So we start another game in China and India. The same M.O. except the names have changed, America is now third world, where we are a service industry ,we do laundry,shine shoes,kill each other for food and shelter. The only thing we do is grow wheat,rice,and soybeans so we can trade our grain for enough
oil to fertilize our mega-farms to grow enough grain to import enough oil to fertilize the mega mega farms so that we can trade..............
The emerging paradigm shift is beyond the vision of three hundred million people. Because they cannot imagine that consumer capitalism is now retro-grave.
If we build "CITIZEN CENTRAL" we can be on the crest of the paradigm shift that is occurring.
By the way does anybody remember Mr. Reich from the clinton years.He just won the award for being the only economist that understands we are fucked , and has the balls to say it.
Yep,
We are way past band aides here. Nothing is going to re-float the Titanic Consumer Economy (70% consumer-spending based.) We can play soothing music outside and pretend everything is under control, but the unspoken truth is that there aren't enough lifeboat for everybody on board the SS system and in a couple of hours (years?) it's going to get ugly. We have only witnessed the tip of the iceberg of DEBT which, a few brave House Reps on CSPAN where showing a chart four years ago depicting that bush had timed all the debt interest to become due the day he stepped out of office. But nobody listened.
Witness now the sickening tilt of the deck as dishes crash and Industrial Smoke stacks tumble. If even God cannot sink the Titanic Economy, then how come every CEO in the country is taking poison pills and popping their Golden Life Preservers? They are all stuffing their bonuses and ill gotten loot in their pockets to the ruin of us all, Because they know something we don't: Everything made of Iron-Plated lies can sink, and it most certainly will.
I think I'll stroll down the grand staircase and into the bar for a stiff drink.
Don't bother trying to give me a life preserver, I'm going down with the ship.
TJ
"All tyranny needs to gain a foothold is for people of good conscience to remain silent." - Thomas Jefferson