No pain, no gain, the old saying goes. This was a recession that we were destined to have, and if we are smart, it will be good for us.
The ”if” looms large. We may not be as smart as we think we are, and we may simply resume our old, losing way of economic behavior when the recession ends.
Not many people know it, but you can still go downhill while you are growing. It seems a paradox, but it is true. That`s because people don`t see the economic process as a race, which it is.
Great Britain continued to grow even as it lost an empire. Other nations, most notably the United States, grew much faster and overtook it as the world`s economic leader. The same thing could happen to us.
False prosperity, brought about by tax cuts that temporarily boost economic output, would be the worst thing that could happen to us right now.
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It would merely lengthen the ”denial” stage of economic illness. For the last few years, few people have wanted to admit that the U.S. economy is in deep long-term trouble and in need of some strong medicine.
Recessions are supposed to serve the purpose of wiping out all pretenses that the economic malaise isn`t real, deeply rooted and of a long-term nature. For many, many months, the Bush administration and Congress served up these pretenses. But now that they have reversed themselves and understood there`s a problem, they`ve reverted to their old reflexes: Let`s give them one big tax bill to fix everything.
It won`t, even if it contains some incentives for investment.
The slowdown in the American standard of living is a more complex matter. It is, perhaps least of all, a financial question. It is more of a cultural issue involving social, economic and political institutions.
Let`s put it this way. When politicians in Washington want to ”improve” the economy, they began to look at lower interest rates, lower tax rates, or various financial incentives. They rarely begin with people, and the institutions that they rely on.
If they took this approach, their programs would be different. The fear now enveloping families and individuals is based on the disturbing long-term trends of the U.S. economy and the lack of a strategy to deal with them.
It would lead them to an immediate, strong demand for educational reform, one that would guarantee turning the lackadaisical U.S. work force into the world`s finest. For a decade at least, people have pointed to this as our greatest economic weakness. But it`s always been a good ”talking point,”
never a good ”doing point.”
But if America wants to prevent itself from turning into a country with a vast cadre of low-paid, disposable workers, it should turn immediately to overhauling the way it educates and trains its workers.
Too many politicians live in the past and believe that we can regain those industrial jobs that did not require wide education and skills. But in today`s world, even blue-collar jobs need a solid educational background.
What should one say of a corporate world that hires and nurtures workers and then spits them out on the street the moment their bottom line is threatened? One thing we can say is that it is only following the signals from Washington, that ”human resources” are not a highly valued economic input.
Washington needs to recognize that aggressive layoff and cost-cutting policies do not constitute good, long-term productivity gains for the country. Companies may see their bottom lines improve, but the people who have been laid off become drags on our public resources, corporate and individual.
A poorly performing economy is divisive internally, touching off conflicts between class and race, between the haves and the have-nots. At the rate we are going, we are developing a Third World economy within our own country.
But it makes no sense to force companies to take on workers who would cut profits. Firms must be persuaded that additional hiring will improve their economic positions. For this to happen, the U.S. should focus on policies that foster innovation, efficiency and new products and services produced at home. A more effective jobs policy would strengthen our companies and remove their obsession with the short term. It would encourage domestic investment on a scale not seen in this country since the 1960s. This would require a wide variety of tax and regulatory changes, and even new forms of corporate ownership.
It must be recognized that the U.S. cannot have a well-functioning economic system with a broken financial system. If Bush and Congress are truly serious about a solid, long-term recovery, they should approve banking reforms as soon as possible.
Our banks have become vast black holes that suck up money and hold it hostage from people who would like to start businesses and build up existing ones. This money winds up bidding up stock prices, rather than building companies that would hire people and provide a solid reason for a high stock value.
More than anything else, this recession should make all of us wake up and look at the long term. Bush and Congress will try to avoid it at all costs. It`s up to us to keep their eyes properly focused.