Tuesday, July 24, 2012

Targeted infrastructure spending our way out of recession

 Time Magazine U.S./ Freed Zakaria, Editor at large, 7/23/12.  "Tax and Spend."

Big company capitalism tool - ship jobs overseas
"The most troubling aspect of June's job numbers--only 80,000 jobs were created last month--is that they are part of a new normal. Over the past two decades, U.S. economic recoveries have tended to be slow and jobless. In every recession from 1945 to 1990, jobs came back to prerecession levels six months after the economy returned to its prerecession level. But after the recession of the early 1990s, jobs came back 15 months later--though then employment grew vigorously. After the slowdown of the early 2000s, jobs took 39 months to come back. And this time, it may take about 60 months--five years!--for employment to return to prerecession levels, according to an analysis by McKinsey.

What happened? Over the past quarter-century, two large forces have swept the world: globalization and the information revolution. They have produced economic growth and innovation that has lifted tens of millions of people out of poverty in countries like China and India. They have helped make American businesses bigger, more global and more productive. They have given us consumer goods and services that were unimaginable at cheap prices. But these forces make it much easier to produce economic growth by using machines or workers in lower-wage countries. Hiring high-wage workers--that is, workers in Western countries--becomes a last resort.

...   One of America's best businessmen has an answer. Fred Smith, the founder of Federal Express, argues that the key to job growth is stimulating private spending on capital goods and services. "There is only one statistic that is almost 100% correlated with job creation," he says, "and it is private investment in equipment and software." But what makes companies spend on equipment and software? More orders from customers or a better climate for business? The two are related. Sometimes businesses will simply create products, which then creates demand. Nobody asked for the iPad; Apple just created it. But most of the time, businesses hire workers once they see that customers are ordering their products again.

....  But if the investment produces jobs, why not also increase government investment? President Obama should announce a growth agenda that combines incentives for businesses to spend with policies that also get the government back in the business of investing--in bridges, highways, airports and other aspects of the U.S.'s aging infrastructure. If the goal is jobs and growth, it can't hurt to try all the best ideas, no matter where they come from."  Read Article.

Related Daily Show interview with Jon Stewart, 6/7/11, 6:27 minutes.  "Fareed Zakaria looks at the effect that technology and globalization have on the American worker."

Posted by Kathy Meeh

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