1. Political / Social Uncertainty
2. Education / Training
3. Conservative Banking
4. Leadership that is not "Web-Aware"
5. Corruption
6. A Declining Population Base
7. The Over Taxation and Regulation of
new businesses.
8. Low GDP
9. The New Realities...
1st Sgt. stationed at Camp Dragon in Bagram, Afghanistan.
Thanks so much for your interest in what we are doing here at Bagram
Air Base. It is Friday night here. We are 9 1/2 hours (yes, 9 1/2) ahead
of you in Eastern Daylight Savings Time in Ohio. So while it is 10:30 a.m.
Friday morning in Ohio as I am writing this, it is 8 p.m. Friday night
here.
Since Afghanistan is in the northern hemisphere, we have winter when
you do. And we are approximately in the same latitude so the weather is
not significantly different than yours. We are at approximately 5,000 feet
altitude so it is much like being in Denver. The weather here in the
winter months of November, December, January was fairly cold - teens at
night, 30s in the day - higher when the sun was out.
The temperatures are much more consistent than in Ohio. We don't get
the ''dipsey-doodle'' temperature/weather variations that you had this
winter. And there is not the humidity here, either. It's a much ''dryer''
cold.
Bagram, an air base built by the Soviets during their invasion in
the 1970s, is surrounded by Afghan villages. It is located in a very large
valley of many square miles with towering, desolate mountains on all
sides. It was the scene of major fighting when the Soviets withdrew in the
late 1980s and so the surrounding villages still show the devastation of
that military action.
The houses are constructed of mud bricks covered with more mud and
the villages have walls around them for protection. So the effect is one
of sameness: brown structures rising from the earth.
Of course, the Taliban then took over after the Soviets left and
this area was not rebuilt since it was more sympathetic to the Northern
Alliance faction of the Mujahadeen.
This valley was fertile, a source of grapes and raisins, until a
drought eight years ago. Once the drought is over, this valley will
flourish again both agriculturally and economically. Now that the U.S. is
here, we are helping them with the rebuilding process, but the people
still live in tremendous poverty.
I arrived here in November. My formal duties are that of first
sergeant of a headquarters company.
My mother grew up in Ohio and went to Harding, and her father grew
up in Ohio and attend the old Central High School. She attended college in
California where she met my father right after World War II.
They married and lived there and in Oregon until 1958 when they
moved to the west side. I was 9 years old then and went to Horace Mann
Elementary, attended West Junior High and Harding High as a sophomore and
junior. I chose to be in the first graduating class of Ohio Western
Reserve.
I attended the Kent State branch, then went into the Army. Upon
returning from Vietnam, I attended Kent branch and transferred to State
University. I met my future wife in 1972 (at Lefty and Jim's - if anyone
alive still remembers that place!), and we were married that year. She is
a native of Niles and graduated from Niles High, and Kent State
University. She taught English from 1972 until 1976 when a new job took me
to Akron. The next year, another job took us to Middle Tennessee.
I am expecting to return to Tennessee this year.
I talk with my mother, father, and sister routinely by phone and
e-mails. The same with my family in Tennessee.
We pass the time by working - there is no place much to go - except
an occasional trip to Kabul (very interesting).
But morale here is very good. We all know why we are here and know
that besides defending the United States we are helping the Afghans. Very
gratifying. Sure it gets lonely, but the ability to communicate helps
tremendously.
Again, many thanks for your thoughts and prayers. Greet Ohio for me.
Best regards,
1st Sgt.
ESS sends prayers and wishes good luck and a
safe return to the 1st Sergeant and all of those serving abroad.
A new litmus test for
federal spending, tax and economic policy - what will the effect on jobs
be?...November & December
2002, Santa Monica, CA
Being part of
the staffing industry ess has always been interested in employment trends
and forecasts. As part of this practice a study has been conducted on
employment trends of the past ten years in the United States. The
following findings represent a call for a new priority at the federal
level:
-
Unemployment rates
consistently underreport the actual number of unemployed
-
The unemployed are
undertaking longer job searches than ever before
-
Select regions in the
country are experiencing long periods of zero job growth
-
Trends indicate what appears to be an ongoing
permanent contraction of employment
Unemployment
rate reporting...
Several factors have skewed
employment figures. Perhaps the first was the inclusion of the Armed
Forces as part of the calculation in the Regan administrations. When
comparing present rates to historical ones you should remember that right
now the U.S. has publicly stated that there will be 250 thousand troops in the
Persian Gulf alone - that is relative to the 3 to 6 million or so present
figures state are unemployed.
More
recently, as mentioned in the last edition of the ess newsletter, the BLS
is undertaking a conversion of the method used to reach the national rate.
Without getting technical, they are mixing two totally different methods to reach
the unemployment number and no one is quite sure what the result will be -
or how relevant the number will be. Just this quarter the Bush II
administration has stopped issuing quarterly reports on corporate layoffs.
This was a separate, advance hard number - not an estimate - used by many
to gauge white collar unemployment and business trends.
Always a factor, those who
get discouraged and stop looking for new employment are not represented in
the unemployment figures no matter the method - at the local, regional and national
level. You can add to this number the growing legions of unemployed
undocumented émigrés who are below the radar of all of these statistics.
Hallmarked by phony social security cards and a lack of cooperation with
any authority figure, their role and employment
status in the increasingly service oriented economy is unreported even as
their numbers grow as evidenced by recent census numbers.
The underemployed - those
who would prefer full time employment rather than part time and others,
for example those who have college degrees but can not find work at that
level and discouraged job seekers, are not officially counted by the BLS at all (some past estimates
based on 1992 statistics put the figure 7 percentage points over the
reported unemployment rate for the measured period):
Is there a measure of underemployment?
With these factors and the
others mentioned here that have changed in the last decade in
mind, the historical figure of 6% as "an acceptable level" of unemployment
in our market economy needs to be revisited. Many now tout the present
employment figure as meeting this historical standard, even though there is
a distinct skew to present data when viewed historically. Concepts of GDP growth, which recently at 6% was viewed by some,
including some Federal Reserve members, as "unsustainable", need to be
updated as well. Certainly China's economy is enviably able to sustain this rate
of GDP growth indeterminately.
Longer
periods of unemployment...
There is an alarming
increase in the long term unemployed. That is to say the period between
losing one job and finding another for many is growing longer and longer
and has reached historical highs for many. The segment of the population
that is experiencing ruthless long term unemployment is growing as well.
These segments of the working population for whatever reason; location,
skill set, discrimination, ageism etc., have met with an increasingly
hostile employment environment. As mentioned previously, these
discouraged workers, increasing in number, are not represented in
unemployment reports.
Stagnant
geographic regions...
It used to be the rust belt
that came to mind when approaching this subject. To be sure that region of
the country has not rebounded from the de-industrialization of the 70's
and 80''s. Alarmingly, new regions can be added to this list on an
ongoing basis. The Pacific Northwest is suffering from an extended slump
with no light at the end of the tunnel. Silicon Valley is in a very bad
way with no turnaround in sight. Both regions here are in large part
victims of the internet bubble. Certainly there are business cycles, but
the new trends emerging indicate that some regions simply never recover
fully from downturns. They never return to their previous levels of
employment in quality or quantity in any meaningful timeframe.
Permanent workforce
reductions...
Many years ago before JIT inventories there was a
time when manufacturing facilities would build inventories and then, when
there was a slow-down, workers would be "laid off" for a period of weeks
and then recalled back to work at their same positions with the same
companies once the inventory was worked down. This unemployment
compensation model was very effective in this more primitive manufacturing
economy. Most people think of this system when they hear the term layoff.
This is no longer true. Layoff has become a euphemism for fired in the
present economy. Few if any present day laid off workers are ever recalled
to their old positions. Virtually none are laid off and called back to
balance inventories.
As mentioned in this column previously, when
the dot com employment bubble is smoothed out of the employment data one can see a
very dismal record of actual overall job creation over the last ten years.
This trend was underway before the internet bubble was a factor.
The U.S. economy is becoming more productive and efficient, but it has
stopped creating new jobs in the process. The new U.S. product; the
"layoff". The unemployment system, originally designed for the more
primitive manufacturing model, has now become a temporary safety net
for employees whose positions no longer exist.
As
always some proposed solutions...
Perception can be reality.
Many major construction projects must submit an environmental impact
statement for prior approval. These statements project what impact the
project will have on the existing surrounding environment. To put the
topic of job creation on the top of the list with law makers an
"employment impact statement" protocol for all pending legislation could
be developed. One model could be the financial impact statement that we
are all familiar with that accompanies many local ballot issues.
Should this new economic
impact statement have the force of law? No. Should the public
have access to the information? Definitely. Could it be accomplished with
existing resources (OMB) with a minimal capital outlay? Yes. Would it make
a difference? It would put the issue in proper perspective and link a bias
on the issue to specific laws and legislators. This would especially be
true for legislation that is not openly touted as an economic stimulus.
It could also indicate who is doing what for the country as a whole, as
well as their own constituents. The goal is a standardized format, easily
understood and distributed to the voters, perhaps via the web. A benchmark
if you will, with a simple rating system.
From a historical
perspective it seems the legislature has lost the need to improve the
infrastructure of the country to advance the economy. Early legislative
efforts, such as the paved national road or canal systems to transport
goods, were often focused on this goal with little lip service to the
"invisible hand". The type of infrastructure may have changed, but role of
government has not and accountability is called for.
A review of the existing
unemployment system is called for as well. The present system was
developed for a primitive manufacturing based economy. This system may be
a model for present day China, but its implementation in the United States
is out of step with the realities of our economy. One possible
change; offer relocation assistance. A variation of the Regan era "Vote
with your feet" mantra, in many cases relocation is required to get a
career back on track. A more mobile workforce would benefit the entire
economy. A relocation benefit may be an answer, perhaps a lump sum
payment of all expected unemployment benefits provided as an option to those with
prospects in other regions of the country to facilitate their relocation.
Again this iniative can be accomplished with a minimal capital outlay
without a major change to the existing system.
Long term unemployment and
underemployment are internal threats as serious as any external threats
that face our republic. We should approach these issues as seriously as we
do others that threaten our way of life and personal freedom.
Industrial capacity utilization is at 75%. ESS estimates the actual
number of job seekers at 13%. We need employed consumers to
raise these utilization numbers, prompt business spending and trigger a long term expansion.
De ja vu all over again -
looks like - well the closest thing is the 70's - do lessons learned then
apply today?...October 2002, Santa Monica, CA
The 'Perfect Storm" we are
experiencing in the economy presently can only be compared in recent
history to the oil embargo of the 70's. At that time main issue was oil.
That challenge could be updated today to read international policy:
-
At that time we faced staggering unemployment as a
result. In the present era the percentage of unemployed, at least by
government figures, is lower, but the duration of the unemployment episode
is longer
-
Due in part to international issues including changes
in trade and defense.
-
In the 70's interest rates and
inflation surged as suddenly everything was made from crude oil or had a
crude oil component.
-
Today rates are the lowest in
decades and inflation is tame.
-
The cost for this is growth in
the job market. There has been what many call and airtight job market for
almost eight quarters. This economy is not producing jobs at any rate.
-
In an aside, the bursting of the
housing bubble should it take place will likely be caused by this state of
affairs - not a rise in interest rates.
-
A 1000% increase in a basic
commodity rocked the manufacturing sector in the 70's.
-
Today perhaps the international
competition the manufacturing sector is facing is having a more devastating effect.
The sector does not seem to be rebounding.
-
Indeed even countries that won
this war are fighting it again. Mexico is considering filing WTO charges
against China for unfair practices.
What lessons can be
applied from the 70's today?
The best past example of what a
company should do during these times is the automobile sector strategy. In
the 70's it was given that the U.S. auto industry would no longer exist in
ten years. This was seen as an economic certainty by many.
The auto industry reinvented
itself taking the best ideas from competitors, changing manufacturing
methods and creating new products that met consumers needs. Oh, it also
asked for and got more than a little help from the federal government and
the unions.
Flash forward to today. The auto
industry given the current economy is doing very well. How did they do it?
New products, lower prices, innovative marketing. They again are meeting
the demands of their customers - that want a deal on an exciting vehicle
to part with their cash.
Firms in other sectors would do
well to follow their lead. Michael Dell obviously has played a market
simulation game or two (well maybe not but he may have an MBA working for
him that did). Now is the time to grab market share with lower prices and
other incentives.
We can't leave luck (preparation
meeting opportunity with proper execution) out of the
equation though. At least one reason the auto sector is pursuing this
winning
strategy is the contracts with the UAW that force them to keep the plants
running. If not for these agreements the sector would be mothballed.
The Japanese had it too - they just happened to be building the perfect
car for the U.S. market when crude went up 1000%.
Undeniably, luck simply cannot be
ignored or discounted. Recognizing and acting on a lucky break, even in
trying times, is truly one of the keys to success in our personal and
professional lives.
How can executives
looking to make a career move read the new trends?
First of all companies that are
doing well in this environment will likely be the first to expand with a
rebound in the economy. Not only them, but their suppliers, consultants
and other symbiotic sectors as well. Fertile ground for a career move.
You are a product in a sense. How
can you make yourself more attractive to your customer? Is there a feature
you can add? A certification perhaps? Or can you offer value - a lower
entry model price - by moving to a lower level of responsibility in a
growth area with upside potential - special financing in a sense ? How can
you be an "exciting" candidate that stands out from the crowd?
Lastly, how can you make the
employers "purchase" easy? Have your resume up to par, do your research,
apply for positions that "fit" your experience.
Conservation - a lesson
we all may have to learn...
In the 70's it was energy - your
heating bill - the gas pump. Today it is cash. Conservation - using less -
reducing overhead and cutting costs - is a priority for business and
individuals. Efficiency - getting more output from the same input -
another 70's concept in full effect today in the workplace and job search
arena. Competition is increasing for scarcer resources - this time it's
jobs and revenues rather than gasoline and heating oil.
One thing anyone who lived
through the 70's learned was that many lessons become part of your way of
life. A lack of inflation, or even deflation, and maintaining revenue or
income in that environment may be what we take from this storm.
Let's not forget luck and little help from the government - critical
components to look for in a clearing perfect storm scenario.
A missing ingredient?
The events of 9-11 imply that the government role in
fostering a rebound should be the largest it has been since the
depression. It is not. A display of confidence, stimulus and
economic leadership from the Federal sector focused on the economy when it
is in need is one reason we pay taxes.
Was it an internet bubble -
or a jarring transition to a post industrial economy?...September 2002, Santa Monica, CA
Much has been made of the
internet bubble and the fallout it has deposited on the economic
landscape. Obviously there has been a negative effect, but
there have been hidden successes as well. Productivity gains can be almost
entirely attributed to internet applications. The airline, travel and more
recently housing and auto markets have been transformed undeniably by the
internet.
Those familiar with venture capital
often see 70% to 80% of
the funded efforts in risky unregulated new sectors, read dot coms here, fail.
It is an accepted gold rush mentality. Is the internet really to blame for our economic woes?
In the economy of the past the
internet would have been viewed as nerdy. Think about it - telecom -
modems - spending your free time on a computer at home - html - ugh - science fair stuff. How did it
become sexy (in an economic sense) and take over the economy? True nerds, I am guilty here, knew
of and used the internet for years before the dot com craze (does anyone
remember Dialog?). What really happened here?
The Big Bang Theory
One view of the theory of the
creation of the universe holds that there was such an absolute state of
nothingness that the big bang and creation of the universe was an
inevitability. That nature demanded that something just had to fill that void. Was this
the case with our economy?
The downturn we are experiencing now
started before the terrible crime of 9/11 (see the AMA study in the past issues
of the ess email newsletter) and the recovery of the last recession circa 1991 was
essentially jobless and growth-free, when discounting dot com bubble employment, as this one appears to be.
Reinforcing this point, about 25%
of those who exhausted all of their unemployment benefits and extensions
in the 91 recession did not find employment for, unbelievably, an
additional three years. That time frame coincides roughly with the start
of the dot com bubble.
Was it simply that there was such
an utter lack of substantive opportunity during this decade of downsizing,
deficits
and hiring freezes, such an absolute state of relative economic
nothingness in the U.S. economy that the dot com "big bang" was an
inevitability? If we look at the decade from 91 to 01 there is a part of
the puzzle that is missing from current analysis that could hold the
answer.
NAFTA, WTO et al...
It was during this decade that
the U.S. took a strong stance on free trade and enacted NAFTA and went on
to promote MFN trade status with China and courted other previously untapped
trade partners. These
agreements have kept prices down for American consumers and business, the PPI was flat
last month at -0.1%, but there has been a trade off;
-
Mexico, since NAFTA, has on an
ongoing basis the lowest metro unemployment rates since it started
keeping records.
-
China since these initiatives has
a GDP which has been pegged at 6% growth and will be, it appears, for the
next generation there at least.
-
China presently has the single
largest trade deficient with the U.S.
-
Recent surveys indicate that
China has overtaken the U.S. as the most attractive foreign investment
destination.
-
The U.S. manufacturing sector has
lost employment for the last 26 consecutive months.
-
The majority of recent U.S. job
growth has been associated with the government sector.
-
U.S. job creation has been running
at 40,000 per month, with 100,000 to 150,000 new jobs per month necessary to simply
break even with new entrants into the workforce.
-
In 2001 1.96 million jobs were
eliminated from the U.S. economy
-
In the U.S. to date in 2002 just
over 1 million jobs have been lost
-
To date this year U.S. companies
went public at the slowest pace in 25 years.
-
Footnote 11/1/02: From BLS figures for Q3 02 - Factories shed jobs for a
27th straight month and manufacturing employment is now lower than at any
time since November 1961.
-
Footnote 12/9/02: China is Volkswagen's second-largest market after
Germany, and General Motors' sales of Buick-branded vehicles in Shanghai
will rise 90 percent this year. China posted third-quarter economic growth
of 8.1 percent.
Post industrial
economy...
Under all the talk of dot com
bubbles, housing bubbles and CEO corruption is what could be closer to the
truth; the United States is moving into a post industrial period.
Americans, as I am fond of saying, will do anything and put up with
anything for job security.
Stable employment or the lack of
it dictates marital status and crime rates in addition to defining one's
economic standard of living. With no new economic paradigm filling the job void
are we are simply moving from bubble (dot com) to bubble (housing) trying
to find our economic footing and new career paths?
The new economy, which is post
industrial not dot com, has not yet found a way of replacing the
manufacturing sector in quality or quality. Indeed it is unlikely that a
single example of a successful outcome of this post industrial transition
can be found in the rust belt or elsewhere.
Manufacturing pay rates are
higher than other sectors and each manufacturing job produces 1.5
to 4 spin off positions in the service and construction industry.
Manufacturing pay rates can easily double the averages in these sectors as
well. Even with higher levels of automation and productivity manufacturing
employment still produces these results.
MBA programs would have you
believe that the U.S. economy is completely fluid and infinitely
adaptable. The reality is that fundamental change can be glacial. Recently an
executive with a successful firm commented that it takes 40 years to build
a substantive company. An economic
transition that maintains standards of living and employment levels guided
by the 'invisible hand" is not necessarily an inevitability - in any
meaningful time frame.
One proposed solution...
The consumer, as we have seen, can keep the economy
afloat by taking on debt, but consumer spending alone does not create
employment. We can safely say the same for education, that it enhances
competitiveness, but it does not necessarily create employment outside of
academia.
For the moment small business is the potential savoir
and main catalyst. A start at forming the post industrial society could be
a new federal tax, grant and loan structure that would encourage the
formation of new small companies that create jobs. Much like the program on internet taxes, a moratorium
on employer contributions to payroll and other federal taxes for the first three years of a new firm, or
on the payroll expansion of an existing firm, is one idea.
Government backed loans or grants focused on
experienced executives and others with new ideas in need of funding is another. For
example matching the private investment of an entrepreneur that is
creating employment with a government backed private loan similar to the
student loan program now in use. New associated guidelines to overcome
excessively conservative banking, another major threat to job creation in
a transition,
would be a plus for the economy as well.
Both of these ideas, and others like them, would not require massive direct
outlays or cut exiting receipts so the federal deficit would not increase
dramatically as a result. Lastly, tax receipts from newly created jobs would help fund
the war. We should view the individuals who have the ability to create
employment as the heroes they really are and provide them with the tools
they need.
Confusing U.S. economic
policies indicate changes are necessary...August 2002, Santa Monica, CA
In the United States it is
looking like the executive team in charge of the economy is in need of
some turnaround experts:
-
Recent edicts require CEO's to
sign off on financial reports, and they now face mandatory prison
sentences for some misstatements. At the same time accounting firms who
prepare these reports somehow escape any real reforms such as separating
consulting from auditing, or minimum sentences for preparing false
statements.
-
Recent reforms involving the
accounting of options are under consideration and other restrictions are
being considered on how and when options can be exercised. In 1993 CEO and
executive cash compensation was effectively limited by changes in the
federal tax code designed to do just that. The goal of the government; a
push towards options, a more rewards based compensation method, resulted
in the present model under attack.
-
Stanley Tools was recently
chastised for attempting to relocate headquarters to the Caribbean, while
at the same time a fast track free trade proposal is under consideration.
Oddly Stanley is free to move plants anywhere, but not headquarters.
There is little doubt that many factors, including
national security, weigh on the economy. These polices and others like
them, and the war against the CEO being promoted recently, create
uncertainty.
All of these factors simply remove risk taking and
innovation from the economy - the last thing we want to do as these are
vital ingredients in any recovery. The health of the economy is a security
issue as well. In a corporate model serious questions would be
raised by this state of affairs.
About posting your resume
with conventional on line services - why exec.nu is different and why you
should care...July 2002, Santa Monica, CA
From the start of the web exec.nu
has derided the practice of public resume databases. These are career
sites that allow public or near public access to all the resumes in them
and the group includes just about every career site - even many major
retained search firms...
The policy at exec.nu has always
been:
-
keep all candidate information
confidential
-
release information on candidates
only with prior express permission
-
do not have candidate data
directly accessible from the internet
To be sure, sticking to these
principles has been expensive and at times made exec.nu look out of step
with the industry.
It is becoming increasingly clear
that executive candidates, especially those currently employed, need to
take care. The exec.nu
Talent Pool was created for these professionals to provide the
security and confidentiality they require.
What follows is and excerpt from
a major career site, a "small print link" that you may have missed with
information about posting your resume:
1.
You need
to ensure that your current employer doesn't discover that your resume is
posted on the Internet.
There are documented cases of individuals being called into the boss's
office, presented with a copy of their resume that the boss retrieved from
an Internet Employment Site, and asked some pretty embarrassing questions
like, "Aren't you happy here?" or "How could you even consider leaving
here in the middle of this project?" These are not career-enhancing
discussions.
There's
also the new, and potentially disturbing , practice of some companies to
hire what are referred to as "Employee Salvagers." Employee Salvagers
surf the Internet looking for the resumes of company employees. When they
find the resume of a company employee on the Internet, it's referred to
the employee's boss, or the Human Resources Department, so the company can
determine what actions are necessary to "salvage" the employee.
2.
You want
to maintain control of your resume, or minimize the damage when you lose
control. Some
Internet Employment Sites sell or swap resumes in order to increase the
size of their resume database. Other Employment Sites use "Resume Robots"
or "Resume Spiders" to surf the Internet looking for resumes posted on
Personal Web Sites or in unprotected Resume Warehouses. The robot/spider
then copies these unprotected resumes into other sites. The problem this
creates for job seekers is this: Once your resume has been transferred to
sites you are unaware of, you are no longer in control of the resume.
3.
exec.nu does not store candidate data on the internet, nor is exec.nu
candidate data directly accessible from the internet. There is no direct
access to exec.nu candidate data, and exec.nu does not release candidate
data without prior express permission. exec.nu is a service designed for
practicing professionals and executives with confidentially in mind, the
only one of its type that adheres to these privacy principles...for good
reason...
Secretary of the Treasury
tours ...June 2002, Santa Monica, CA
U.S. Treasury Secretary Paul
O'Neill and Bono from rock group U2
are currently in Africa on a four-country tour that will take them to
Ghana, South Africa, Uganda and Ethiopia between May 20-31....meanwhile...
METROPOLITAN AREA EMPLOYMENT AND
UNEMPLOYMENT: APRIL 2002
In April, 290 metropolitan areas had higher unemployment rates than
a
year earlier, 31 areas had lower rates, and 10 areas had rates that were
unchanged, the Bureau of Labor Statistics of the U.S. Department of Labor
reported today. Thirteen metropolitan areas posted jobless rates of
10.0
percent or more, eight of which were located in California's Central
Valley. Twenty-one areas had unemployment rates below 3.0 percent,
with
eight in the South, seven in the Midwest, and four in the Northeast.
The
national unemployment rate in April was 5.7 percent, not seasonally
adjusted.
Metropolitan Area Unemployment (Not Seasonally Adjusted)
Fifty-six metropolitan areas recorded unemployment rates of at
least
6.5 percent in April, up from 31 areas a year earlier, while 44 areas had
rates below 3.5 percent, down from 122 areas in April 2001. Yuma,
Ariz.,
posted the highest jobless rate, 17.0 percent, followed by six areas in
California--Merced, 16.2 percent, Visalia-Tulare-Porterville, 15.7
percent,
Fresno and Yuba City, 14.8 percent each, Bakersfield, 12.1 percent, and
Modesto, 11.8 percent. Bryan-College Station, Texas, and Columbia,
Mo.,
two areas with large universities, again posted the lowest unemployment
rates, 1.6 and 2.1 percent, respectively.
Fayetteville-Springdale-Rogers,
Ark., followed closely at 2.2 percent....
Over the year, employment growth was most prevalent in government
and
services, with increases in 185 and 161 metropolitan areas, respectively.
Manufacturing continued to be the weakest industry division, with 243
metropolitan areas experiencing employment losses over the year.
About limiting CEO compensation and options...May 2002, Santa Monica, CA
With ERON, and to a lesser
extent HP, there has been a hue and cry to rethink CEO compensation, stock
option plans and other compensation factors:
-
The CEO of HP has had her email and phone
conversations scrutinized by a third party and, hard to believe in a
democratic capitalistic society, had to testify in court about her actions
as an independent businessperson.
The best in the world -
with the numbers to prove it...
Every
few years these notions arise and, thank goodness, in the past the
grumbles have been vented and business moves on as usual. This time it
looks more dangerous. We have a SEC and State's Attorney Generals
looking into this - and they want some "red meat" to fuel their political
careers. If an existing law or GAAP has been
broken - approach it as that and leave the corporate governance and
compensation system alone.
The executive leadership of
the U.S. company, public or private, has proven to be the best in the
world bar none. The whole world hangs on our GDP for
good reason. An absolute certainty is that those now throwing stones
at the system that has produced these super-geniuses have had nothing to
do with this economic advancement. These individuals might best be
viewed as the "team mascots" of capitalism, cheering on the sidelines
without ever having been in the game.
Hard decisions -
with the stockholders in mind...
There have been many CEO's in
history that have made hard decisions that seemed unpopular at the time,
but were right and were made to benefit the stockholders. The prime
example of this is the CEO who switched the entire Volkswagen product line
from air cooled to water cooled engines. He was derided at the
time, eventually forced out with a golden parachute that could be
legislated away in these times, but his vision was correct and it saved
the company.
Those who don't understand
the individuals that aspire to and fill the CEO role don't understand that
compensation is never an issue. These are driven, smart, experienced
professionals with a real vision of where a company should go. They take
the outcome of their tenure personally. Oversight in a
conventional sense is preposterous.
The issue of CEO and officer
level compensation does need to be addressed. With the Dow at 10,000 and
the U.S. dominating the world economy - with the complexity of the
internet and a global economy - CEO's are not paid enough. The
contributions they and other senior executives make in U.S. firms are not
being rewarded fairly.
Business is not a democracy - for a
reason...
To see how government
intervention in business works look at India. A great
country with one of the best educated and innately intelligent populations
in the world. An entrenched bureaucracy there regulates and manages all
businesses with endless permits and rules - ask that really smart guy or
girl from India that works at your company.
A practical example: the
creator of Hotmail, who by the way sold the venture to Microsoft for $500
million and literally changed the way the world communicates, had to close
down his new venture in India for six months after a successful launch to
wait for a series of government issued licenses and permits to wind their
way through the system.
Stockholder rights are
important, but stockholders must have faith in their senior management and
boards or
sell their positions. The corporate structure is a
de facto dictatorship for a reason - the CEO has one vision and holds that
role because of that vision, and ultimately has to answer for the
results.
What the unemployment
number really means - a call for urgent action by the Federal Government...
April 2002, Santa Monica, CA
The recent news on
employment has been seen as modestly positive. Some reports are actually
upbeat. Although the goal here as always is to propose solutions and not
simply provide negative feedback, a reality check is called for.
The Unemployment rate should be viewed as a less
than perfect indicator of the job market. First of all this calculation,
after some revision during the Regan administration, includes service men
and women as part of the ranks of the employed and is skewed. It also only
counts those who are receiving unemployment benefits actively.
Once benefits run out you are no longer counted.
It does not matter if you have found a job or not. In part the recent rise
in unemployment was due to an extension that was grated. Individuals re-applied and again became part of the
system and were counted. Although they had been jobless since their
benefits ran out they were not part of the unemployment statistic until
the extension was granted. In the same
vein those who are not eligible for benefits, illegal aliens and part time
workers for example, and those who do not apply for benefits, due to
relocation for example, are also not counted.
Why TV reporters should
stick to simpler topics...
The
lack of relevancy of the unemployment rate can be demonstrated by a TV
program in which a report by John Stossel went into detail about how a
community had rebounded and reinvented itself economically. He cited how
the unemployment rate had fallen and how this all happened without
intervention from the government.
This was a rah-rah piece of
ham-fisted economics 101 from an ill-informed TV reporter looking for
simplistic sound bite answers to complex questions. On the surface of
course the report seemed factual. The actual situation proved somewhat
different...
The truth here was that the
unemployment rate dropped mainly for one reason; population decline. The "job creation"
reflected in the unemployment rate was actually the region's population
shrinking to fit the available job pool, and not employment or job growth
per sae. This finding was proved by the census report for the region
indicating a large population loss, which was not available at the time of
this TV program's airing.
If we were to make a
thorough analysis of today's unemployment figures we would see that the
"airtight" job market is continuing under the surface of seemingly good
news. Nonfarm payroll employment (a better measure than unemployment) grew
58,000 in March after falling 2,000 in February. Sounds good right?
To see
how insignificant this positive March number is realize that from March 01
to January 02 Nonfarm payroll employment fell an average of 144,000 per
month - every month for that six month period. Since just March 01 the
Nonfarm payroll has lost 1.4 million jobs.
Corporate Revenues are the
solution...
When
one reads this piece one must realize that the Federal Reserve's silver
bullet has been shot. The funds rate is at a 40 year low and will likely
move up from here. Should actions be taken in the middle east that raise
commodity prices this rate hike seems inevitable. Mr. Greenspan also may
decide to raise rates - just so he can lower them again should the U.S.
roll on Iraq.
The Federal government must
now take action on the jobs front. This needs to become priority
number two behind homeland security. It is unfair, unwise and risky for
the Federal Government to shift this fiduciary responsibility to unsecured
consumer debt as it has done thus far. To be sure, this consumer
debt based economic stimulus strategy faces challenges from mounting bankruptcies, and
the impending collapse of the housing bubble, at the very least.
In a downward trend revenues will not
increase and CEO's will not move without revenue, no matter the GDP - and
a corporate revenue rebound will lead any recovery. With
the economy on a wartime footing decisive government intervention is
appropriate and called for - the steps taken so far are too
timid for the circumstances...corporate revenues must show substantial growth one way or the
other for this economy to prosper...
A tip for job seekers...
The
Moral of this story: When in a job search during a downturn look for
population changes rather than relying totally on unemployment figures for
a region. A old standby here - check with U-Haul and see if people are
coming or going. Look for population increases and job creation
figures (Nonfarm payroll employment) to find opportunities - not just low
unemployment figures.
Steel - the Federal Government takes the right action...
March 2002, Santa Monica, CA
The recent announcement of up to 40% tariffs on
imported steel was long overdue. Free trade is the key to a prospering
world economy. We cannot, however, allow sectors of the U.S. economy
to subsidize the inefficient basic industries of other nations. For the
market to work the lowest cost, best managed, highest quality producer
must succeed. In the case of Steel the United States is the clear winner
with the most state of the art facilities, staff and management. The
Steel industries of our competitors, as the world will see, are little
more than public welfare programs disguised as industry. As the
United States has done, these countries must also bite the bullet of
welfare reform. We are in fact helping these countries to become
better capitalists through these tariffs in many ways.
For those crying
foul - trade war...
There is an easy solution
for those countries that are crying foul as a result of these tariffs.
They can all easily gain access to the U.S. market and avoid tariffs all
together - simply relocate to the United States. There are many idle
facilities here with state of the art equipment - the result of the
massive numbers of bankruptcies in the sector over the past five years.
Unlike some countries, the U.S. is open to foreign investment and these
firms are more than welcome to make a commitment. Many U.S.
corporations site manufacturing facilitates in foreign countries - take GM
for example. It is time for other global corporations to see
the U.S. for what it is - a great place for a true competitor to flourish.
A template for
future trade resolutions...
The recent tariffs are a
step in the right direction. Care needs to be taken to insure that no
unnecessary tariffs are levied to be sure, but swift action to protect
sectors of the U.S. economy damaged by unfair trade needs to become a
cornerstone of our foreign policy. It is the duty of the
Federal Government to protect all Americans from real and substantial
threats at home initiated from abroad, this duty includes economic
threats. As the role of the United States becomes ever larger in the
world a sound and secure domestic economy is paramount and should be a
primary goal of our foreign policy and homeland defense efforts. Trade is
a boxing match - not a street fight or a free for all. All the
parties here have agreed to the
Marquess of Queensberry rules
equivalents - and no one should begrudge the U.S. for enforcing them.
Seconds out.
Further action is
required and well within the reach of the Federal government...
Many individuals who worked
and retired from the steel industry are now losing their health insurance
and other vested, contractual benefits. Pensions formerly fully funded
have been liquidated as a result of the bankruptcies forced on the sector
by unfair foreign competition. No decision has been made yet on
exactly how these senior citizens who made the steel for our tanks and
shells in World War II, Korea, Vietnam and Iraq will be cared for.
One
Suggestion; The remaining steel industry could
receive tax credits from the Federal Government for these costs up to and
including a corporate form of the earned income tax credit. A private
sector pool to finance these legacy costs could be established - funded by
the industry - backed by these tax credits and rebates. This or a similar
effort could well prove to be the final part of the policy template we use
to combat unfair trade practices in the future.
K-Mart, Enron, Andersen,
Dot-Bombs - Investment Bankers that backed them- is professional executive
recruitment as we know it failing America?...
February 2002, Santa Monica, CA
All of the entities above
have represented massive failures in capitalism of late. K-Mart's
inability to compete with massive market share, Andersen's lapses in
fiduciary responsibility, Enron's "there's no - there" business model, the
90% plus failure rate of the dot com's, the investment bankers who
financed these efforts - what do they all have in common? They all
employed top executive search firms to fill their executive ranks to one
degree or another. What does this say about conventional executive
recruitment? The type of service offered by the so called top 20 executive
search firms? We all know the answer - executive search as we know it is
failing U.S. CEO's, corporations, stockholders and the U.S. economy.
To be sure
it appears as though many of these major executive search firms are
starting to "self-select" out of the sector as Jack Welch
( perhaps not the super genius we assumed either in light of his recent
contract and accounting issues ) would put it. One brand name retained
executive search firm just had to renegotiate its line of credit with Bank of America
to insure funds for the remaining staff's bonuses. A second well
known retained search firm has given up on its well publicized internet
recruiting arm, it no longer exists as a
stand alone entity, and the firm's
offices in the North West are being closed, with remaining staff being
asked to work from their homes.
These publicly traded companies recently reached lows,
and seem to benefit only from sector momentum play on Wall
Street. Oddly enough, actually not surprising when one thinks about it,
these firms and other name brand firms are losing their top remaining talent to competitors as
one after another of their un-downsized staff jumps ship.
It is difficult to
understand why clients would seek out the help of companies who cannot
even seem to captain their own ships. Perhaps some of the worst executive placements in the history of
capitalism, not just once, but over and over again, key
executives placed as a result of conventional retained search have
failed stockholders.
Executive candidates
and corporations seeking them should reconsider who is providing their
recruitment services. The hyper-competitive global marketplace, and the
competition it has produced domestically, has sealed the fate of the
"style over substance" recruiting practitioners - and those that retain
their services - lest they want to be part of the next ENRON....the big
question for your search firm in 2002 - did you do any work for a)
Andersen b) Enron c) dot bombs d) K-Mart?
A tax cut that makes sense...
January 2002, Santa Monica, CA
As we all know the
economy is in need of ongoing stimulus. ESS determines from both the input of
candidate resumes, and requests for proposals that the economy is not on
course for a true rebound soon. Almost without fail, retained executive
search activity is a leading indicator - and it is not indicating a
meaningful expansion yet.
A Proposal:
The federal government should re-institute
the income tax deduction for credit card interest payments. This would
reward consumers who have spent, encourage new spending and help those
that must rely on their credit line in a tough job market. This cut
would directly target consumers who now are basically responsible for
GDP, and could do for consumer debt what Paul Volker did for commercial
banking debt. To insure competition and spur lower rates on the lending
side:
- Require credit issuers to more clearly state their
interest rates and fee's
- Allow more entities to issue unsecured
credit
- Make it easier to transfer balances between
unsecured accounts
- Allow the deduction for two years to start
- this year and next year.
A cloud is hanging over consumer debt
repressing consumption and this is one way it can be addressed. Trade
has eliminated inflation, the web now improves productivity, even in a
recession, and Federal Reserve actions seem impotent. A new approach is
called for.
Predictions for 2002:
"Where
do we go from here..."The
Band...
December 2001, Santa Monica, CA
From the perspective
at exec.nu the next year
looks like this:
- A combination of the productivity gains
enabled by the web coupled with an undeniable shift in the population
curve ( as the baby boom becomes the grandpa and grandma
generation ) will force consolidations.
- There is simply a smaller pool of consumers
coming to the market - those past 40 just don't buy that much stuff.
As a result profits are harder to find and overcapacity is prevalent.
Recent international events have revealed just how thin operating
margins are at many firms.
- Free trade policies and China entering the
WTO will make competition for the cash cow American consumer even more
fierce.
- The international situation will bring even
more pressure as US Military actions continually take center stage,
likely for at least the first half of the year - perhaps longer.
- Chairman Greenspan has used every arrow in
his quiver with perhaps one more cut in the prime rate pending. Although the US will not face the banking problems Japan
has with bad debt, it may see a similar problem with consumer credit
card debt and this in turn could keep the consumers out of the stores
blunting any quick recovery.
- 2002 looks like a year that will
require management of the downside risk for most situations.
- Trade will remain a key issue to most manufacturing
throughout the year and will force more consolidation like that being
forced on the domestic steel industry, displacing large numbers of
workers who will lose benefits and face dim prospects. A new
issue here; legal protections established under NAFTA and WTO were not
enforced to buffet the US Steel industry from dumping -
intentionally.
- We are in real danger on this front with
the winners and losers being selected anonymously in back rooms
through a perverse form of "economic jury nullification" if
you will. Under these circumstances we are implementing the failed
Russian model where steel production and manufacturing capacity were
set by bureaucratic decree and not the market, as this is exactly what
is happening with U.S. steel capacity as you read this.
Congressional investigations are called for, as is quick action to
save the remaining US steel industry - and the other sectors that will
follow shortly.
- The administration's Lassie Faire
style will likely have little effect on these and other events as they occur.
Welfare reform will become a major issue and may be reversed, more
deficits are likely - deficit spending may derail
Social Security reform. It will be up to congress to move on economic
policy from here and half measures at best can be expected.
- A massive change is in progress in the US
economy. We are moving into an era with fewer consumers in the United
States in the prime age groups, the demise of manufacturing as we
know it, a trend towards staying home and migration to major
population / employment centers (or conversely the diminishment
of opportunities in smaller population centers).
- No new technology, with the exception of broadband,
hopelessly mired in never ending turf battles, looms on the horizon to
spark a new economic expansion.
- "Cocooning" is one growth
area that is bearing fruit as we speak; real estate, mortgage banking
and related industries, DVD technology..
- More young men than young
women in the prime demographic is another growth area. See X box, PS2 and Game Cube...
- A potential bright spot; semiconductors and
services in the computer inter/intranet sector are showing signs of
growth and should lead any recovery.
- Faith Popcorn predicted "cocooning"
ten years ago, but we've not dealt with this set of circumstances before.
A decisive military outcome could turn everything upside down, or
should I say downside up. Uncle Sam are you listening?
- "A love of tradition has never
weakened a nation, indeed it has strengthened nations in their hour of
peril; but the new view must come, the world must roll forward."
Sir Winston Churchill (1874 -
1965), speech in the House of Commons, November 29, 1944
ESS sends prayers and deepest
sympathies to all of those who have lost friends and loved ones in the
tragic events of 9/11/01 - let's roll.
Is Greenspan
pushing on a string?...
July
2001, Santa Monica, CA.
Recent rate hikes have
not spurred consumer confidence or corporate profits. The
unemployment rate is at a recent high, and in some sectors, namely
manufacturing, at a twenty year watermark. It is always true that fed rate
cuts take a year or more to take effect, but remember Japan dropped interest rates effectively to zero
with no effect on consumer confidence or the general economy whatsoever in
any time frame.
The slump in
manufacturing is severe. There is
unlikely to ever be a significant rebound here unless trade policy is
reviewed and or enforced. One must remember that manufacturing finished
products from raw materials, such as is the case in a primary steel facility,
it the most effective way to generate the greatest wealth for the largest
number of people in a capitalist economy. This is why the service
economy exists ultimately to serve manufacturing. Emerging Asian economies,
for example, understand this basic economic tenet.
Another real problem is
the blow manufacturing's decline will deliver to consumer confidence. Many of the people
losing these jobs are from firms which will file bankruptcy. They will
likely lose any severance or other benefits past employees in their
situation received, they are facing hiring freezes that have not been seen
since the 70's and they will face unprecedented public assistance reforms.
This specter played out on the nightly news is cause enough for special government
re-training and other efforts to be applied as soon as possible to help affected
workers.
What is the solution? From a business point of view;
provide your customers with products and services that cut costs. The new
reality is not only does a product have to work and provide value to the
customer, it must go the extra mile and provide a savings benefit as
well. Review and reengineer offerings to reflect this point of view.
From a macro economic
point of view the solution is not clear. There is no way to revive consumer
confidence with a rising unemployment trend line. The recent tax rebate will
likely become little more than a transfer payment to energy firms,
for whatever reason, in the consumer's eyes. Lower interest rates are doing little at this point to
encourage consumer spending (a troubling metric here - a decline in online
sales). Chairman Greenspan, like Oz, has only so many levers he can
pull.
Re; Leadership - Greenspan can't
do it all...
Follow the lead the
EC provided on the GE merger; play hard ball on trade and protect American
manufacturers to the full extent of existing international agreements. Set a precedent.
Approach this urgent problem urgently.
Back up recent tax
cuts and rebates with efforts that will provide consumers with more discretionary
income. For example, lower federal energy taxes and surcharges,
eliminate surcharges and lower taxes on telephone bills such as the tax
levied on the extra phone line use for internet access, or the surcharge
added to finance the Vietnam war for example. Make structural changes that will lower fees to business.
Lower real costs for
your customers; U.S. citizens and business. Tax cuts will take years.
These efforts and others can be
enacted quickly and consumers and business will see the results in black
and white.
To the leadership, respectfully,
Ike said always smile no matter what and act confident. This got him
through WWII, and the cold war, and is a lesson worth repeating. TR
said a leader must project invincible optimism...
Take action;
simply not acting has ended many a promising senior executive's career -
and smile and act confident...
Why board members
should be interested in my recent travels...
June
2001, Santa Monica, CA.
Having recently returned
from two weeks of travel I took stock of the events across the country and
a thought occurred; If I were a board member I would be raising some
issues. The number one job of a CEO is to address urgent problems urgently
to insure increases in shareholder value...
The Midwest,
one of several destinations, is undergoing some urgent problems in the manufacturing
sector. For one the steel industry is about to be exported out of the US
economy en-masse. Many thousands of individuals are losing
positions and retirement benefits directly (no doubt this will trickle
throughout the entire region's economy and the service sector eventually) with little chance of
any short or long term economic solution. Welfare reform could prove to be an issue this winter when benefits
are terminated for these individuals and other affected in the region.
Back on the west
coast, I returned to the threat of black outs. Again
in the sixth largest economy in the world disposable income is being
consumed by doubling and tripling energy bills in every area including;
electricity, natural gas and gasoline prices. Many businesses in the
region are now seriously considering relocating to other states -
including across the border to Mexico. Most experts feel the crisis will
last 18 months, and at least 45 days of rolling blackouts are expected
this summer alone. Another 100% increase in power rates is being considered.
State income taxes will have to be increased to buy power as California's
bond ratings plummet - displacing yet
more disposable income from the cornerstone of the state's economy - the
consumer...in the sixth largest economy in the world...
Of particular note, the
cab drivers at Los Angeles airport have their own indicators and they are
not good. According to my cabbie business travel at LAX has slowed to a
crawl. On most days cabs are rushing in and out picking up fares - this
trip - there was actually a long line of cabs sitting still waiting for
fares upon my return. I have seen this before - for example - when flying
on Christmas day.
Of course we don't want
to have a knee jerk reaction to these trends and take a short term
perspective on solutions - on the other hand in the long run we are all
dead. Board members -
take note - new leadership may be required to deal with upcoming economic
challenges. Executive search is more important than ever.
Random notes: a.)
you read it here first - the internet is back - no kidding b.) China, Spy
Planes and the steel industry...
May
2001, Santa Monica, CA.
The Internet
has been much maligned of late and many have dismissed the technology to
the point of ridicule. I am reminded of an Esquire cartoon from the 60's -
a business man leaning out of the window of a sky scraper shouting down to
Wall Street "You are all the victims of a monstrous hoax".
Well ESS has done some analysis on profitable
dot coms and there are many. Over 60% of the e-commerce sites with income
from $100K to $1MIl are profitable. Furthermore the stigma of buying
on line with a credit card is gone. Analysis of ESS web site traffic
indicates a maturing of the media and an acceptance of "all things
web". The froth of early VC funding, and perhaps the inbreeding of
early ventures - read funding based on association rather than competence
- have been worked though for the most part.
Who said it - everything looks like a failure
in the middle. If Priceline or Amazon posts a profit the world is going to
change for real this time - this or a similar event will happen soon.
Forget
the missile defense shields and the spy planes - a prudent step
has to be taken to protect basic American industries required for the
national defense.
The Pacific
Rim including China, Japan, Korea, and Taiwan was
the single largest importer of steel to the United Sates late in 2000. The
figure is shocking. The number is for example; nearly double the steel
imported from Europe, double what we import from south and central America
together, triple what we import from Canada, and five times what we import
from Mexico. You get the idea - we are dependent on the region for
materials vital for our basic national defense.
In the meantime US Steel
companies are being staggered by energy prices and claim dumping
(selling below production cost) by importers, especially those in the
Pacific Rim. Government programs favorable to the industry which provide
bridge loans to keep facilities operating are under attack from all
sides. Seven major primary steel manufactures have filed bankruptcy
and shut down in the last year and we are in danger of losing the
entire industry. So explain it to me real slow, in light of recent developments
why are we allowing
this to happen?
Why 2001 looks a
lot like 1974 in California -
technology is going to have to rescue technology -
and the rest of us... April
2001, Santa Monica, CA.
Some of us remember 1974 as a turning point in
the economy and perhaps in the way of life in America. The catalyst for
the change was energy. Back then it was oil prices. The United States had
for the most part a manufacturing based economy (all economies are
ultimately based on manufacturing since no other activity can produce as
much wealth for as many people directly - but we won't get into that
here..). Oil went from $4.00 a barrel to $40.00 essentially overnight as
OPEC did what a cartel does- raised prices 1000% (that was in 1974 dollars
and represents an astronomical increase). This shock to the
economy was felt until the current boom started in 1993, propelled in many
ways by a cut in the same oil prices. It took almost twenty years to
absorb this fundamental change which included altering the entire U.S. ,
and in many ways, the global economy.
The Governor
just announced that utility rates will rise again in California,
putting the total increase to date at about 50% in a matter of three
months, and there is still no solution in site - a major utility just
filed bankruptcy.
If one extrapolates this trend you can see
that the hike in energy prices in California could easily reach the 1000%
level oil reached in 1974 - do the math. This is a problem much like the
one faced by the federal government in 1974. The governor here just gave a
speech that championed conversation of energy - almost exactly like Jimmy
Carter's famous sweater speech capitulation. The state government has
essentially given up on the issue and made it clear that more rate hikes
are forthcoming and there is little else that can be done. New
generating facilitates are being built but it will be at least three years
until they are on-line. These new facilities will do little more
than keep up with demand for the state's swelling
population. Conservation really isn't much of an option with
electricity in a state with low heating costs and a mild climate.
What we can expect...
For those who did not live through the
energy crisis in 1974, let me give you an idea of what you can
expect:
- Virtually every manufacturer in the country
raised prices. I can remember buying a new flash for a camera - the
price of which went up literally overnight - the sales person's answer;
"There's oil used in the manufacturing of the plastic in the
case" - you can substitute "components came from California
- as in microprocessor" here.
- Operating your car suddenly went from a
small budget item to a major expense. Substitute "server
farm" for car here, or if you like "web hosting
service" whatever...
- It was cold everywhere. Everyone everywhere
turned down thermostats- not so much to conserve per sae - but to
limit the crushing utility bills - substitute web use - or technology
project implementation maybe? Any way you define it consumer
confidence and discretionary spending was crushed.
Why technology has to save
itself- and the rest of the country.
The federal government has
made it clear that they will not act on this topic and will
allow the invisible hand of the market take over. "Bad
laws" have been sited as the problem. True - evidently the
legislation that allowed this de-control was passed very late
in the session. The proponents went for all the could never thinking
they would get it - and the opposition never really showed up - or
if they did it was the end of the session and they wanted to get
home and just passed it - no kidding. It may never be un-done as
legislation. The genie is out of the bottle - especially if the
federal government refuses to act.
Of course the problem here
is that California is the 6th largest economy in the world and the
global seat of technological development. In a weakening
global and domestic economy problems here could be a disaster for
the world economy.
In the same view, technological innovation is the only thing that
spurs the overall economy and the lack of it spells disaster as
well.
Well silicon valley here is
the situation: Deregulated electricity is very expensive and likely
here to stay. You are in the same situation the steel industry was
in 1974 (oddly a sever farm takes the same amount of energy to run
as a steel mill). No real federal or state help is forthcoming.
What will you do? It's important - your answer will likely set the
economic tone for the next twenty years...
One idea
on what to do with the federal budget surplus that you have not heard
yet...February
2001, Santa Monica, CA.
The
pause in the economy ( the "r" word will not appear here)
should spur some re-evaluation of plans for the distribution of the
budget surplus. Specifically:
Japan has lowered prime interest
rates effectively to zero with little effect on the economy
there -interest rates alone are not a silver bullet.
The U.S. consumer will trade high
tax rates, low savings rates, limited wage growth
and any other questionable government policy for one thing
- job security - and that translates into spending and
positive GDP - look at the last 10 years.
The U.S. economy, as clearly demonstrated
by recent figures, is losing its industrial base and, by
default, diversity in its economic portfolio.
This is threatening all other
sectors of the economy, and ruining consumer confidence and
spending - 2/3'rds of GDP.
So why don't we use part
of the surplus to give U.S. consumers what they really want?
A Midwestern state
senator has proposed a bill that requires state funded construction
projects to use steel produced in the United States only.
Would it be reasonable to make a similar federal law? Of course,
steel would not be the only focus. Why not develop a federal policy
that states federal purchases of manufactured goods (the details
here need some work, admittedly) must be from manufacturing facilities
based in the United States. That's it. Use part of the surplus to develop
a simple enforcement program with a simple test - are you on the
ground assembling or manufacturing in the USA?
A big impact on consumer
confidence...
There would be no need to
pick individual winners or losers. The policy would simply put all
providers on the same playing field - which is what the steel and
other industries have asked for all along. It would not close the
economy to companies based in other countries. To the contrary, the
Koreans or any other country that wanted a part of the U.S.
"Federal Market" would be encouraged to build a facility
in the states to enter the market. For example; Want to sell
laptops to the IRS - you have to assemble the units for
federal use here - build a facility. How about supplying steel reinforcement
bars for new federal buildings - got to make the federal steel here
- build a plant - or buy one...Cell phones for the white House Staff
- assemble them here- or contract an American based firm to assemble
them for you.
What it would do...the end
result...
This segment of the
economy, Federal manufactured purchases, would be restricted to domestically
based suppliers of any national origin. The end result
would be that a portion of the industrial base would be
devoted to serving Federal needs. A number of manufacturing jobs
would be stabilized. One thing is certain, if an effort like this
did provide some level of general job security it would be
welcomed. Since manufacturing jobs pay well and support many
service sector jobs, it would have a great multiplier effect.
Another reason it might
make sense...
There is another argument
dealing with national defense requiring these manufacturing capabilities
that I will not even address, although it could rationally be the
entire reason for a program like this, and perhaps would best define
the guidelines of any policy...
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The Unemployment Insurance
system has to be enlarged and the length of available benefits extended
to put cash into the hands of weary U.S. consumers. Retraining subsidies and on
the job training subsidies need to be implemented as well as tax credits
for small companies hiring new employees. Additionally, coverage should
be expanded to part time workers. This arguably would be the
single best route to quickly regain world confidence in the U.S. economy
and banking system. For every Unemployment Insurance dollar spent $1.64
in GDP is created - the second most effective transfer payment the
government can make.
no one else on the globe who was
available, arguably, had
more to offer an employer. His compensation package reflected this fact.