Thursday, July 19, 2012

We all know how the economy works

“I know how the economy works” has become a clarion cry in this presidential election. As Americans look at job numbers, the economy has been deemed by some to be a jobless recovery. In actuality, we are not in a jobless recovery. In fact, the Bureau of Labor Statistics has stated that there are presently over three million jobs left unfilled. The question is not the creation of jobs but how to fill the ones that are available. When we add in a proposal to repair America’s infrastructure and to put public employees such as teachers, firefighters and cops back to work, the answer to bringing the unemployment rate down lays right before our very eyes.

The truth of the matter is that we all know how the economy works. It is not a revelation from on high. Our economy works from a supply and demand context. When there is demand someone will satisfy it. We all know that capital is necessary to start or expand  a business. Unfortunately the conversation about the economy has taken an absurd turn.

When CEOs complain about uncertainty or regulations, red flags should go up in the minds of Americans. The truth of the matter is that hiring is slow not because of uncertainty or regulations, but because of corporate America’s ability to fulfill present demand for their products with their present workforce. The issue is not about uncertainty, it is about demand.

During a time when politicians speak about uncertainty, Americans should think about how the stock market doubled, corporate profits reached a record high, CEO bonuses reach record levels, and even the Congress itself experiencing tremendous growth in their wealth.  Not bad for a time of uncertainty.

 Americans must contend with the fact that the role of corporations is not to create jobs. When a CEO is hired he or she is not asked how they are going to create employment but how they will increase profit and market share. For a corporation, employment is simply the cost of doing business.  Whenever I hear certain presidential candidates speak about the economy as if CEOs are just waiting to hire more people, that is at best laughable and at worse a sign that those who claim to understand it really haven’t a clue.

It should be noted that during the time when the stimulus package was being debated, the Obama administration wanted a buy American clause placed in the legislation. Unfortunately, this was fought tooth and nail by the United States Chamber of Commerce, the lobbying group for American business.

Despite the difficulty, from a political perspective, to change the economic debate, Americans must begin to understand that the economic climate is not about joblessness there are millions of jobs available as told to us by the Bureau of Labor Statistics and CEO’s do not cite regulations or uncertainty in filling these jobs but people not having the right skills.

Secondly, Americans should not accept the idea of American companies holding on to trillions of dollars with an explanation that they are uncertain about the future. CEOs have not been uncertain about taking multimillion-dollar bonuses. Corporations have not been uncertain about their great profitability over the last three and half years and the stock market has not been uncertain about the fact that it has almost doubled over the last 3 1/2 years. Americans should not allow themselves to be blackmailed by political parties who say companies are willing to invest the trillions of dollars that we have in America if they are given carte blanche to do exactly what they want to do with an expectation of taxpayer bailout if they screw up again.   

When Gov. Romney says his CEO experience is his sole qualification for the presidency of the United States, someone must ask the question wasn’t it CEOs that got us into the financial crisis that the nation experienced three and half years ago. Despite experiencing the excesses of  three and half years ago, J.P. Morgan  under CEO Jamie Dimon was still engaging in risky bets which has cost them up to $7 billion in the last quarter. Does that experience really qualify anybody to be president. Apparently the lessons were not learned.

Americans must understand that the economy is slow but it is growing. Contrast that with the fact that three and half years ago the economy was not growing, it was actually contracting and jobs were being lost at a rate of 300,000 jobs per month. Now compare that to a economy that is growing albeit slowing but growing. Contrast that to the fact that 4 million new jobs have been created in the last 3 1/2 years.

It is possible that a larger debate is at hand here. One candidate runs on the simplistic notion of I know how the economy works as if a revelation has been handed to him from outside. The problem with this is that everyone knows how the economy works. It is a concept that we have known since we were all in high school when we took economics. The second problem is the context in which one sees the economy is simply through the eyes of profit. Profit is not contingent upon a company hiring more employees. In fact, many companies that are traded publicly are rewarded on Wall Street by downsizing and streamlining in order to have their balance sheet in proper order. The second part of this debate however is who should the economy benefit. In recent decades we all know that the economy has been benefiting a shrinking sector of the American populace. The question is how can the economy benefit an ever-increasing sector of the American populace.

America does not need a one-dimensional candidate who sees everything in the American landscape as a function of capitalism and profit. Capitalism is a part of the American landscape but it is not the whole landscape. Alexis de Tocqueville once said “As one digs deeper into the national character of the Americans, one sees that they have sought the value of everything in this world only in the answer to this single question: how much money will it bring in? “

To a pure capitalist this quote by Alexis de Tocqueville explains their whole mentality and approach to life. The question is will the average American allow this to be the prevailing ideology of a nation that is built on much more than a profit and loss statement and balance sheet. This election will answer that question.