Facing The Challenges of a Modern Economy
Truth be told, our economy is evolving so fast that many people are struggling to keep up. An economy that used to be driven by productivity and labor is now driven by three things: consumption, innovation and transaction. Because of globalization, companies are able to take advantage of lower wages abroad, which negatively affects the job market at home, but also drives down costs and allows American to buy more goods and services than ever before. Companies that are able to come up with new products, or to market their goods/services in a way that generates demand, are succeeding. Those enterprises that are unable to capitalize on innovation — be it in product design, manufacturing, marketing or delivery — are being left in the dust.
Additionally, financial markets that used to reward the creation of real value, now value more the ability to package financial vehicles and disseminate them among as many handlers as possible. Someone gets a cut of virtually EVERY transaction, regardless of the underlying value of what is being bought or sold. In 2008, we saw what can happen when such emphasis on “transactionality” goes unchecked. Despite regulatory efforts to reign in some of the more unscrupulous practices of Wall Street, there is still a tremendous appetite for maximizing the number of transactions and the number of people who become wealthy from buying, selling and trading value, rather than actually creating it.
In all of this, the American worker is easily left behind. Employees are seen essentially as “overhead,” and managers and owners are driven to reduce these costs. Businesses are driven to reduce the number of employees and to extract more productivity from the employees they have. Because jobs are viewed as scarce, a downward pressure is placed on wages. It is THIS combination of factors that is making life difficult for American workers. What is often lost in the economic discussion is that one company’s worker, is another company’s customer. The strength of our economy comes from the ability of people to earn sufficient wages to participate in a consumption economy. As the buying power of Americans erodes, so too does the overall health of the economy, regardless of any short-term indicator of economic strength, like the Dow Jones average.
No single member of Congress can shift all these factors back into favoring employees. No single piece of legislation can do it either. Rather, a committed leadership team can make regulatory, tax, trade and legal policy that increases, rather than decreases, the ability of working-class Americans to fully participate in the evolving economy. Cutting education funding is FOLLY. Cutting health care coverage is FOLLY. Cutting job training programs is FOLLY. Cutting investments in research and technology is FOLLY, no matter how beneficial it might seem in the short term. Such cuts sabotage our economy in the long run. The guiding principal of economic policy shouldn’t be adherence to some rapacious theory advanced by Ayn Rand, or some short sighted loathing of anything that could be viewed as a “tax.” The guiding principal of policymaking should be this: DOES THIS HELP AMERICANS GET WORK AND EARN WAGES? If the answer to that question is NO, the notion should be abandoned. It is really that simple.