There is plenty of evidence that the recession of 2008-2009 is over. Stock indexes are rising steadily. Unemployment is slowly declining and consumer retail activity is slowly increasing, according to recent U.S. Commerce Dept. data. Thanks to the Institute of Supply Management, we also know that domestic manufacturing activity expanded by 3.1% in March. With the ISM’s Purchasing Managers Index documenting rises in new orders, production rates, supplier delivery totals, and inventory levels, March was the eighth consecutive month of expansion in manufacturing. And, it delivered the fastest rate of growth for that sector of the economy for any month since July 2004.
So, we’re in a growth mode now, aren’t we? I pose this as a question because to anyone looking for employment, or overwhelmed by the demands of a job in a scaled-down company; to any operation or organization struggling to return to profitability; to anyone trying to regain the financial footing lost almost two years ago, the facts that demonstrate economic progress exist apart from our daily experience. There is the sense that we’re not moving forward, if we’re moving at all.
Some of this doubt indicates nothing more than a profound lack of confidence. Much more than wealth was lost between September 2008 and July 2009 (to use the point from which ISM tracks the manufacturing revival.) Consumers and businesses alike lost the their willingness or ability to tolerate risk, to calculate how to convert ideas and resources into viable opportunities for themselves and their enterprises. Instead, everyone stood still. Individuals cancelled plans and businesses cancelled projects. Everyone sought ways to reduce costs and obligations.
This, in itself, is worth understanding because even if the standard analysis of the recent recession is true — that the economy was due to fail because there was too much debt being accumulated and too much risk being assigned — standing still will not correct these problems. If overconfidence made us vulnerable, skepticism is not an effective response.
There is more to the problem than our confidence in the future of the economy; it’s plain that the confidence we lack concerns the indications about the direction of the economy from our financial and political leaders.
It was controversial enough, though plausible, to extend federal credit to save the economy from total collapse, but choices and decisions from 2008 have grown less defensible in the subsequent months because they are not supported by actions that will encourage economic growth.
There is a nearly permanent debate over whether financial policies should favor consumers (with low inflation) or businesses and investors (with steady currency that encourage sustained capital investments). But, the policies pursued since 2008 seem to ensure that neither side is favored: everyone will bear the burden of paying for the extraordinary growth in the federal deficit and the reckless increase in federal entitlement programs. Hints of carbon taxing, value-added taxing, and firmer grips on the financial dealings of corporations project this frightful indecision into the future.
What’s needed is an acknowledgment of the permanence of a global economy, and that fact turns these alternatives into a false choice. It’s not possible to maintain economic growth on the pace that will secure competitiveness for domestic products, together with the level of consumer choice that has driven economic vitality for more than half a century. We must have policies that favor businesses and consumers, so that both portions of the economy can drive growth. If the government shrinks in the process, that seems like a choice worth taking.
Forgers understand this: they sell products to businesses and manufacturers who will benefit if capital investments rise steadily. But, they know too that sustained economic growth must have the resiliency that will be ensured only by steady consumer spending. A company that makes its revenues supplying forgings for oil-and-gas exploration or processing will see its boom cycles go bust if consumers cannot afford to gas up their vehicles. A similarly poor choice affects forgers serving automotive OEMs.
Consumers and businesses are demonstrating confidence in their own ability to operate within a lessthan- stable economy. They would gain confidence knowing our leaders have a similar vision.
