Just about two years ago the global economic crisis played out in special news alerts and onscreen headline crawls, and continued for months in financial statements and shutdown notices, so that hardly anyone could have missed the point: there is not enough money to cover all of our debts. That remains the essence of the ongoing crisis.
In the United States, however, the crisis has been taken to mean a lot more than a widespread shortfall: it has been addressed as a finance crisis, a trade crisis, an employment crisis. All this is worth recounting as we prepare for a new federal approach to foster a recovery. The U.S. government first wanted to stabilize financial markets, so it expanded credit offerings and regulatory efforts. Next, it wanted to stimulate business activity, so it launched a massive public spending program. Then, it took controlling interests in some major manufacturers, to hedge further job losses. Now, it’s eying a range of measures to boost U.S. manufacturing exports — tax penalties on offshore manufacturing, wider use of tariffs, and (via the Federal Reserve Bank) ongoing currency devaluations.
Whatever arguments may back these measures, none of them goes very far to returning U.S. businesses, consumers, and investors to the economic standing they enjoyed prior to 2008. Federal officials and regulators are focused on stabilizing the domestic economy within the larger global market, but the great problem for U.S. businesses today is not their competitiveness but their poor prospects for growth.
U.S. businesses, including manufacturers to a very large extent, spent a decade or more prior to 2008 adapting themselves to the reality of global competition. This was evident in their investments in new design, production and process control technology to reduce the time and costs needed to deliver finished products to customers. It wasn’t just their investments that made it happen, however: there was a lot of creative thinking that preceded their plans; a lot of product research and development; and of course a lot of hard work to perfect their production efforts.
The upside of all this was evident whenever a manufacturer attained or renewed its quality certifications, or landed an important new order. In short, U.S. businesses have generally acknowledged and responded to global competition. They have done it for all the right reasons, but always for the most fundamental reason: to keep growing.
There have been rewards for all this but there have been high costs, too. The manufacturing sector has been the scene of a relentless and generally pitiless consolidation pattern in the past decade. Sometimes a start-up manufacturer would gain market-share and drive old-line operations out of business. In other cases a competitor would buy or merge with its rival in order to reduce their risks or insure their market position. What could be described accurately as “growth” for one company very often amounted to failure for another one.
The crisis of 2008 represented failure on a very wide scale as opportunities dried up, and two years later we’re still struggling to recover from those losses because all the legislative and regulatory efforts to stimulate economic activity are responses to failures (or perceived weaknesses), not incentives to growth.
Growth is a result of individual initiatives, not a response to stimulus. A government can make itself more or less hospitable to these initiatives (as various governments do, of course) but it cannot direct them — at least not in a free-market economy where investors and consumers have choices about where to place their money. Businesses and individuals are generally self-interested; they’re not motivated to take part in some comprehensive restructuring of the domestic economy. They want to return to the confidence and success they enjoyed up until September 2008. And if they can, we’ll all benefit from the growth they will spur. It may not be perfect, but it will be progress.
