Posted by: dstieglitz | September 30, 2009

Shooting Ourselves in the Foot

     Leaders sometimes take actions that get in the way of the changes they want to make. Ending the current recession is an example at the national level. Everyone wants it to end quickly, but our leaders persist in rhetoric that prolongs it. According to a survey by the Human Resources Association, even with the Fed’s rosy economic forecasts, employers are less optimistic about the future today than a year ago. They are skeptical and cautious, with many planning to freeze salaries and delay hiring. Even worse, they also continue to curtail investments in the capital equipment and R&D that will produce future jobs.

     The economy’s decline is slowing, but nearly seven million Americans have lost their jobs in the last 18 months and unemployment has risen to 9.8 percent. Just last week 500,000 more filed first-time unemployment claims – the lowest number in a year, but still headed in the wrong direction. The recession will be history when unemployment returns to normal levels – say five percent – and the economy consistently generates enough new jobs to keep up with population growth. Despite the $787 billion stimulus act, employment is still way down in manufacturing, hospitality, retail, and construction. Many of the manufacturing jobs probably are gone forever, either off-shored or replaced by new technologies.

     But where will seven million new jobs come from? Name an industry that could create a million new, high-paying jobs in the next year. You can’t because there is no such industry – and we need seven of them to replace jobs lost in the last 18 months, and about one a month thereafter to keep up with population growth. But we have done it before. For example, the U.S. economy created over 20 million jobs during the 1990s dot-com boom, and millions more in the early 2000s during the boom in financial innovations. Unfortunately, today U.S. businesses are keeping their heads low after a barrage of attacks.

     Why are recruiting departments on vacation? When big business is ruthlessly maligned, they retrench which delays the recovery. According to popular opinion driven by Washington rhetoric:

  • Financial companies caused the economic meltdown,
  • Oil companies caused the astronomical increase in fuel prices,
  • Insurance companies caused high health care costs, and
  • U.S. automobile companies were grossly mismanaged.

Unquestionably, those industries contributed in a big way to the crises. But so did Congress, federal agencies, labor unions, consumers, and doctors. Until big business (where most of the seven million jobs were lost) begins to rehire, high unemployment will persist – so we are shooting ourselves in the proverbial foot with never-ending attacks on big business!

     It is convenient to blame the recession and job losses on big business. But the real cause is that we have not been creating enough new jobs. American companies have been off-shoring for decades, but we bounced back from recessions in the 1980s and 1990s by generating millions of new jobs through emerging technologies such as personal computers, the Internet, and cell phones. But in recent years, off-shored manufacturing and software jobs have been replaced mostly by low-paying jobs in the retail and service industries.

     The challenges we face today in health care, global warming, food and water supplies, renewable energy, and transportation are actually opportunities for the Federal government to stimulate research investments by dozens of Fortune-1000 companies. We need government-business cooperation like we had on the Apollo Program which not only produced short-term jobs; it also developed computing, communications, fuel cell, and digital-imaging technologies from which whole new industries emerged. Big companies like Exxon-Mobil, General Motors, Microsoft, DuPont, IBM, Hewlett-Packard, Cisco, and Google (to name only a few) aren’t enemies of our economy – they are our economy.

    What can we do to put the economy back on track? Rather than belittle and over-tax industry, government must create a dynamic public-private partnership of research and innovation with supportive actions such as:

  • Specific national goals for health care, renewable energy, and other challenges
  • Massive R&D spending at government agencies like DOE, DARPA, and national labs
  • Multi-billion dollar program where government matches industry’s R&D investments
  • Tax credits for corporations that invest part of their R&D budgets in basic research
  • Increased spending on education, especially graduate-level research fellowships.

These actions will create lucrative and satisfying jobs by the millions every year but, unfortunately, they will take time to ramp up given today’s anti-business environment.

     President Obama faces enormous challenges. But sometimes his speeches make it seem like political gains from vilifying big business are a higher priority than partnering with business to generate jobs, re-establishing our position as the global technology leader, and ushering in new long-term prosperity. Challenging frontiers like renewable energy, the energy grid, high-speed broadband, and health care could become platforms on which entrepreneurs build new companies, generate millions of jobs, and create new prosperity for all.

     Ironically, the recession itself is an opportunity – U.S. presidents have broad leeway to make bold moves in bad times. Eisenhower started the interstate highway system during the Korean War; FDR provided electrical power in rural areas during the Great Depression; and Lincoln started the transcontinental railroad during the Civil War. Those infrastructure investments created jobs and produced whole new industries in their time. The good news is we’ve started down this path in the stimulus act, and we aren’t that far behind our global competitors. If we stop shooting ourselves in the foot by business-bashing, government and big business can cooperate to build new industries that will rekindle prosperity in our time.

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