Private-sector employment increased by 217,000 from January to February on a seasonally adjusted basis, according to the latest ADP National Employment Report released today. The estimated change of employment from December 2010 to January 2011 was revised up to 189,000 from the previously reported increase of 187,000. This month’s ADP National Employment Report suggests continued solid growth of nonfarm private employment early in 2011. The recent pattern of rising employment gains since the middle of last year was reinforced by today’s report, as the average gain from December through February (217,000) is well above the average gain over the prior six months (63,000).
The fears of a jobless recovery may be receding but the US economy has a long way to go before pre-recession employment levels are achieved. As we stated previously the economy needs to create over 200,000 jobs per month for 48 consecutive months to achieve pre-recession employment levels. The six month average of 63,000 is still well below the required rate of job creation for a robust recovery to occur. The Unemployment Rate still exceeds 9%.
The February report is encouraging because it points to an accelerating pace of job creation. The post Christmas season employment surge represents a 30,000 job gain over January’s strong report that triples the six month moving average. The service sector accounted for over 200,000 of the job gains. The manufacturing and goods producing sector combined to create 35,000 jobs. Construction continues to mirror the moribund housing market shedding an additional 9,000 jobs during the month. The construction industry has lost over 2.1 million jobs since its peak in 2008.
The robust recovery in the service sector is welcomed but sustainable economic growth can only be achieved by a robust turn around in the goods producing and manufacturing sectors. Service sector jobs offer lower wages, tend to be highly correlated to retail consumer spending and positions are often transient in nature. Small and Mid-Sized Enterprises (SME) is where the highest concentration of service jobs are created and the employment figures bear that out with SMEs accounting for over 204,000 jobs created during the month of February.
Large businesses added 13,000 jobs during the month of February. The balance sheets of large corporations are strong. The great recession provided large corporates an opportunity to rationalize their business franchise with layoffs, consolidations and prudent cost management. Benign inflation, global presence, outsourcing, low cost of capital and strong equity markets created ideal conditions for profitability and an improved capital structure. The balance sheets of large corporations are flush with $1 trillion in cash and it appears that the large corporates are deploying this capital resource into non-job creating initiatives.
The restructuring of the economy continues. The Federal stimulus program directed massive funds to support fiscally troubled state and local government budgets. The Federal Stimulus Program was a critical factor that help to stabilize local government workforce levels. The expiration of the Federal stimulus program is forcing state and local governments into draconian measures to balance budgets. Government employment levels are being dramatically pared back to maintain fiscal stability. Public service workers unions are under severe pressure to defend employment, compensation and benefits of workers in an increasingly conservative political climate that insists on fiscal conservatism and is highly adverse to any tax increase.
The elimination of government jobs, the expiration of unemployment funds coupled with rising interest rates, energy and commodity prices will drain significant buying power from the economy and create additional headwinds for the recovery.
The principal macroeconomic factors confronting the economy are the continued high unemployment rate, weakness in the housing market, tax policy and deepening fiscal crisis of state, local and federal governments. The Tea Party tax rebellion has returned congress to Republican control and will encourage the federal government to pursue fiscally conservative policies that will dramatically cut federal spending and taxes for the small businesses and the middle class. In the short term, spending cuts in federal programs will result in layoffs, and cuts in entitlement programs will remove purchasing power from the demand side of the market. It is believed that the tax cuts to businesses will provide the necessary incentive for SME’s to invest capital surpluses back into the company to stimulate job creation.
The growing uncertainty in the Middle East and North Africa is a significant political risk factor. The expansion of political instability in the Gulf Region particularly Iran, Egypt and Saudi Arabia; a protracted civil war in Libya or a reignited regional conflict involving Israel would have a dramatic impact on oil markets; sparking a rise in commodity prices and interest rates placing additional stress on economic recovery.
Political uncertainty tends to heighten risk aversion in credit markets. The financial rescue of banks with generous capital infusions and accommodating monetary policies from sovereign governments has buttressed the profitability and capital position of banks. Regulatory uncertainty of Basel III, Dodd-Frank, and the continued rationalization of the commercial banking system and continued concern about the quality of credit portfolios continue to curtail availability of credit for SME lending. Governments are encouraging banks to lend more aggressively but banks continue to exercise extreme caution in making loans to financially stressed and capital starved SMEs.
Highlights of the ADP Report for February include:
Private sector employment increased by 217,000
Employment in the service-providing sector rose 202,000
Employment in the goods-producing sector declined 15,000
Employment in the manufacturing sector declined 20,000
Construction employment declined 9,000
Large businesses with 500 or more workers declined 2,000
Medium-size businesses, defined as those with between 50 and 499 workers increased 24,000
Employment among small-size businesses with fewer than 50 workers, increased 21,000
Overview of Numbers
The 202,000 jobs created by the SME sectors represents over 90% of new job creation. Large businesses comprise approximately 20% of the private sector employment and continues to underperform SMEs in post recession job creation. The strong growth of service sector though welcomed continues to mask the under performance of the manufacturing sector. The 11 million manufacturing jobs comprise approximately 10% of the private sector US workforce. The 20 thousand jobs created during February accounted for 10% of new jobs. Considering the severely distressed condition and capacity utilization of the sector and the favorable conditions for export markets and cost of capital the job growth of the sector appears extremely weak. The US economy is still in search of a driver. The automotive manufacturers have returned to profitability due to global sales in Latin America and China with a large portion of the manufacturing done in local oversea markets.
The stock market continues to perform well. The Fed is optimistic that the QE2 initiative will allay bankers credit risk concerns and ease lending restrictions to SMEs. A projected GDP growth rate of 3% appears to be an achievable goal. The danger of a double dip recession is receding but severe geopolitical risk factors continue to keep the possibility alive.
Interest rates have been at historic lows for two years and will begin to notch upward as central bankers continue to manage growth with a mix of inflation and higher costs of capital. The stability of the euro and the EU’s sovereign debt crisis will remain a concern and put upward pressure on interest rates and the dollar.
As the price of commodities and food spikes higher the potential of civil unrest and political instability in emerging markets of Southeast Asia, Africa and Latin America grows. Some even suggest this instability may touch China.
The balance sheets of large corporate entities remain flush with cash. The availability of distressed assets and volatile markets will encourage corporate treasurers to put that capital to work to capitalize on emerging opportunities. The day of the lazy corporate balance sheet is over.
Solutions from Sum2
Credit Redi offers SMEs tools to manage financial health and improve corporate credit rating to attract and minimize the cost of capital. Credit Redi helps SMEs improve credit standing and demonstrate to bankers that you are a good credit risk.
For information on the construction and use of the ADP Report, please visit the methodology section of the ADP National Employment Report website.
You Tube Video: John Handy, Hard Work
Risk: unemployment, recession, recovery, SME, political
When Joe Wilson belched his infamous catcall “lair” during President Obama’s address to a joint session of the legislature, he revealed himself to be a poor example of a mature adult. Puddenhead Wilson’s emotional outburst may have played well with die hard Obama haters, indeed the next day his campaign war chest swelled by a million dollars; but it also sent a terrible message to America’s youth that its acceptable to disrespect your teachers, coaches, police officers or parents if you disagree with what they are saying. The fact that his campaign coffers swelled with contributions as a result of his offense compounded the power of the negative message it sent to youths and to the perpetrator himself. Awarding Puddenhead Wilson for his bad conduct only encourages him to repeat his offensive disrespectful behavior. It also sends a very poor message to America’s youth that bad behavior is OK and childish emotional outbursts may in fact find reward from enabling adults.
New Jersey Governor and emerging GOP superstar Chris Cristie, recently revealed himself to be a poor role model for the youth of America when he told a gathering of students that teachers greed was to blame for the lack of supplies and educational resources available for public schools. The Governors injection of politics into his presentation to Trenton students is a bit ironic. In his crusade against the teachers union, Christie has charged educators with using school children as “drug mules” to carry the message about the danger of funding reductions for public education. It would seem that the good Governor Christie needs to deliver a couple of kilos of his own to his adoring fans in the Tea Party and his financial backers in the GOP.
Putting partisan politics aside Christie’s message to public school students is extremely damaging. The public schools are under incredible pressure. All social institutions are engulfed in severe challenges and are fully engaged in crisis management mode. America’s public schools are not exempted from these pressures. The complex confluence of political, cultural and economic factors plaguing society are acutely manifested and constantly working to undermine the public school system. Governor Christie’s political rant to students throws gasoline on a combustible pile of institutional challenges confronting teachers and administrators. Like Puddenhead Wilson, the Jersey Doughboy gives tacit approval and encouragement for students to question the authority and motives of their teachers. Christie has just provided under-performing students a ready made excuse for failure and disruptive malcontents a lit match to throw onto a gasoline soaked pile of kindling encircling our public schools.
Christie’s partisanship places the context of his egregious mismanagement of the Race to the Top DOE grant in a new light. Perhaps Christie’s $400 million blunder was an intentional action to reduce resources to the public schools to undermine greedy teachers and their gluttonous union. Why would Christie enable the funding of whip cracking greed driven drug mule drivers? And like his killing of the DOT funded ARC tunnel project, Christie enhances his conservative street cred by punching the construction unions in the nose and telling the socialist government in Washington to spend its money elsewhere.
Like Puddenhead Wilson, Christie is cashing in on his actions and is building a nice portfolio of economic and political capital for himself. His remarks about the greedy teachers provide a convenient cover and solemn absolution for the grand practitioners of greed and avarice that have led this country to the brink of fiscal insolvency, cultural destitution and political bankruptcy. Christie’s narrative of blaming the needy plays well with large contributors who will be moved to put good 527 Corporation resources at his disposal to underwrite his political rise.
Christie’s midterm election barnstorming tour in service to the GOP booked him on a coast to coast tour that even his hero Bruce Springsteen would envy. Though Christie’s mojo clearly failed in helping Meg Whitman and Carly Fiorina win election, the Jersey Doughboy’s political stock has risen so quickly that he felt compelled to send out a few tweets to deny he would run on a ticket with Sarah Palin for president in 2012.
So New Jersey is stuck with the doughy mess of big money winner take all partisan politics of Christie’s ideologically driven governorship for at least the next two years. Enjoying popular support for now, Christie’s considerable body mass currently displaces enough water to ride the wave of Tea Party conservatism. But if the fickle citizens of New Jersey make a slight left turn off Exit 16E on Thunder Road, Christie’s fortunes will drop faster then a lead sinker placed into the rancid brew seeping to perfection in a gaudy Royal Dalton Tea Pot.
You Tube Music Video: Bruce Springsteen, Born to Run (Live Acoustic Version)
Risk: political, labor unions, public education, consensus
The following research paper on The Hamilton Plan was written by Deepak Verma, a business student at Baruch College. To our knowledge it is the first scholarly research that incorporates the Hamilton Plans theme of a focus on SME manufacturing.
ISSUES MANAGEMENT PROJECT
Prof. Michael Kirk Stauffer
The Societal and Governmental Environment of Business
Baruch College, the City University of New York
December 16, 2009
Table of Content
Topic Page No
1. Executive Summary 2
2. The Issue: Shrinking Manufacturing Base 3-4
3. The Origin of the Issue and Solution 4-5
4. Small & Medium Enterprises; Catalyst of Sustainable Growth 6
5. Initiative for Development of SMEs 7-8
6. Future of SME and SMEs in USA 9
7. Appendix : References 10
Living beyond means is not sustainable. One of the primary reasons of prolonged Economic and Credit Crisis in United States is its low manufacturing base and American way of consuming more than what is produced. This research paper will examine issue of shrinking manufacturing base of USA, unfair and unethical business practices adopted by countries such as China to boost export thereby causing trade deficit to USA, reasons for low manufacturing base and role of small and medium enterprise (SME) manufacturers in developing a sustainable manufacturing base of the US economy.
Prior to coming at Baruch College for pursuing MBA in finance and investments, I worked for over 10 years with Small Industries Development Bank of India (SIDBI), an apex financial institution of India engaged in the development and financing of SMEs and micro financial institutions. Having worked with this financial institution, I realized the importance of SMEs in bringing sustainable economic development and employment creation, particularly in a mixed economy like India.
The paper will discuss on public-private initiative in USA for development of SMEs, their efforts and capital investment for empowerment and financing of SMEs. Various initiatives taken by private and public sector will be analyzed. Efforts have been made to forecast future of SMEs vis a vis manufacturing sector, role of community development financial institutions (CDFIs), and flow of commercial bank credit and private equity investment in SMEs in the United States.
THE ISSUE: SHRINKING MANUFACTURING BASE
Why should shrinking manufacturing base be an issue in a market driven service oriented economy like US? Federal Reserve Chairman Ben Bernanke stated on Feb. 28, 2007, “I would say that our economy needs machines and new factories and new buildings and so forth in order for us to have a strong and growing economy.” Strong Manufacturing base is the only solution to rising trade deficit and industrial job loss. Manufacturing promotes innovation which leads to investments in equipment and people, research and development, improved products and processes and increase in productivity and higher standards of living. Increase in manufacturing leads to increase in demand for raw materials and other commercial services.
United States has transitioned from an agricultural economy to Industrial economy to a service economy. Over a period of this transition US has lost its manufacturing base substantially and has been importing goods from around the world which has resulted into huge trade deficit and industrial job losses. IMF has categorized the US current account deficit as unsustainable. Warren Buffet also once commented “The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil… Right now, the rest of the world owns $3 trillion more of us than we own of them.”
Since the United States joined the WTO, US trade deficit has risen from $150.6 billion in 1994 to $817.3 billion in 2006. US reliance on imports ranges from electronic items to apparels and other consumables. For example, electronic items sold in United States are developed by companies such as Philips, Toshiba, Sony, Hitachi, Samsung and Sharp. We have lost significant market share in Auto Industry also. Toyota has surpassed General Motors to become leading auto manufacturer in terms of global sales. Ironically, items such as clothing and apparel where USA had its dominance are also being imported from foreign countries. Over 90 percent of clothing and shoes sold in the United States are made in foreign countries. US economy has thrived on consumerism which has led to increase in demand for goods over the years but production of domestically manufactured goods has been declining, thereby giving rise to imports from foreign countries and loss of industrial jobs.
Critics of the argument say it is the increase in production efficiencies, resulted from technological innovation and advancement that has resulted in loss of jobs. Additionally, it is the increase in consumption which is the root cause of import deficit rather than shrinking manufacturing base. Undoubtedly long term data indicates an increase in US manufacturing, but the way we are loosing our manufacturing share from last 2 decades and if we continue shrinking, we will soon have no choice but to consume whatever is dumped in our market and will be on the mercy of foreign imported goods. Increase in manufacturing has not kept pace with global growth in manufacturing in USA. Since 2000 global manufacturing growth has been 47%, whereas USA has recorded a growth rate of only 19%.
ORIGIN OF THE ISSUE & SOLUTION
What is causing shrinking manufacturing base in the United States? Is it purely competitive and cheaper products manufactured in Asia and Europe or some other factors are also responsible? Undoubtedly competitive global business environment has severely affected domestic production in the United States, this crisis in large arises due to unfair and unethical business practices adopted by its trading partners mainly China. Some of those practices are significant government subsidies, currency manipulation, large-scale dumping in the U.S. market, and other market-distorting practices. Additionally, unfavorable govt. policies, tax structure, increase in cost involved in healthcare, litigation, and regulation has significantly affected the bottom line. Increase in cost and strict regulation forced manufacturing units to move their facilities to other countries where companies do not face those kinds of impediments. Companies operating in the U.S. started outsourcing low-value tasks like simple assembly or circuit-board stuffing, but lower cost of outsourcing and shrinking margin lured them to continue outsourcing sophisticated engineering and manufacturing capabilities that are crucial for innovation in a wide range of products. As a result, the U.S. has lost or is in the process of losing the knowledge, skilled people, and supplier infrastructure needed to manufacture many of the cutting-edge products it invented.
Is there any way to bring back our manufacturing base? The view that the U.S. should focus on R&D and services is completely flawed. Manufacturing is part of the innovation process and United States has to expand its manufacturing base to remain a world leader.
Following may be suggested to address the issue:
(1) Increase the tariffs on foreign goods so that they are more expensive than domestic goods.
(2) Demand the same level of quality in all foreign goods as American goods.
(3) Diplomatic measures should be taken to create pressure on foreign countries particularly China to stop manipulating their currencies.
Efforts should be made to open up foreign consumption markets adequately to U.S. producers so as to increase export and minimize trade deficit and should endeavor to combat predatory foreign trade practices aimed at undermining U.S. producers in their home market. Next big step is to promote small and medium enterprises to set-up manufacturing units.
SMALL & MEDIUM ENTERPRISES (SMEs); CATALYST OF SUSTAINABLE GROWTH
The issue of shrinking manufacturing base in the United States has been discussed by economist, policymakers, industrialists, and think tanks since economic integration and various measures to improve domestic manufacturing base have been suggested. But considering our free market dominance no sincere efforts were made to expand manufacturing base. Alarming rise in trade deficit and current economic and credit crisis which resulted in to massive industrial job loss has called for immediate intervention of private-public participation to protect and develop domestic manufacturing base for long term sustainable economic growth of United States. It is this time only that the role of SME manufacturers was felt inevitable to address this alarming issue.
President Obama during an interview said “We’ve got to make sure that we’re cultivating small businesses and entrepreneurs who are going to be driving employment growth,” the President said, “so that 20 years from now we can look back and we can say, ‘This was the pivot point, this is where we started to turn the corner.”
US need to change course at this point of time and need to develop a network of small and medium enterprises focusing on cleaner and green technology. The U.S. can explore strategies used in emerging markets for development of SMEs. According to Hau L. Lee, a professor at Stanford Graduate School of Business, “America needs large industrial zones devoted to specific industries–similar to zones in Taiwan, Singapore, Malaysia, and much of China. Such areas offer tax breaks, cheap or free land, workforce training, plenty of water and power, and agencies that serve as one-stop shops for all of the necessary permits and regulatory approvals.” A national level specialized financial institution may be created to provide low cost credit to newly setup SMEs in the manufacturing sector. US strength lies in high end technology, innovation, R&D, robust infrastructure, and know-how.
INITIATIVE FOR DEVELOPMENT OF SMEs
US govt. runs a number of programs for providing technological know-how, contracting opportunities, counseling and assistance, financing, and R&D facilities to small and medium enterprises. Some of the prominent programs run by US department of commerce are Manufacturing Extension Program, Advanced Technology Program, Technology Transfer, and Small Business Innovation Research (SBIR) Program. State govt. and number of govt. agencies are deployed for implementation of these schemes across the United States. SBA provides technical and financial assistance to SMEs through its partner lending institutions.
On November 17, 2009 The Goldman Sachs Group, Inc. launched 10,000 Small Businesses — a $500 million initiative for development of 10,000 small businesses across the United States. The plan envisaged to provide greater access to business education, mentors and networks, and financial capital to small businesses. Lloyd C. Blankfein, Chairman and CEO of Goldman Sachs quoted “Small businesses play a vital role in creating jobs and growth in America’s economy.” Warren Buffett, CEO of Berkshire Hathaway also mentioned “Our recovery is dependent on hard working small business owners across America who will create the jobs that America needs. I’m proud to be a part of this innovative program which provides greater access to know-how and capital – two ingredients critical to success.”
Sum2 LLC, a firm which assists SMEs in implementing sound business practices by offering a series of programs and products, announced The Hamilton Plan on Labor Day. The Hamilton Plan is a ten point program to foster the development of manufacturing in the United States by tapping the entrepreneurial energy of small and mid-size enterprises (SME). The Hamilton Plan requires concerted focus of investment capital to fund development and establishment of an SME Development Bank (SDB) which will focus, manage and administer capital formation initiatives to incubate and develop SME manufactures.
I contacted James McCallum, CEO of Sum2llc to discuss the issue of shrinking manufacturing base and how SMEs can help in restoring manufacturing base in the United States. In response to my comment here is what he stated “It is pretty amazing that the United States has not done more to specifically encourage and address the unique needs of this critical economic driver. Many Asian countries are miles ahead of the US in SME banking and capital formation. These banks have extensive portfolios of finance products and technical assistance they provide to SME’s. The reasons that the US lacks focus in this area are many. US commitment to free market forces has badly warped our economic infrastructure. SMEs in the US have primarily relied on community banks for financing. Most of which went for real estate and construction projects. SME manufactures have just about disappeared from the economic landscape of the US. The credit crash and the economic malaise are awakening our understanding of the critical nature of SMEs and our need to manufacture products. Goldman’s 10,000 Businesses Initiative coalesces nicely with the Hamilton Plan we developed in 2008.”
USA MANUFACTURING & SMEs IN YEAR 2030
With the concerted government efforts for promotion and development of SMEs and private sector initiatives such as “10,000 Small Businesses plan” by Goldman, SMEs will be largely benefited having access to innovative financial products and services from a network of financial institutions. Ten point program suggested in Hamilton plan, if implemented, will bring cluster based development of SME manufacturers. Cleaner and green technology will drive long term sustainable growth, increase national income and result in employment creation. Healthy SMEs will be focusing on export of goods thereby reducing the trade deficit and offer a new market for commercial banking sector. High-tech growth oriented SMEs will also have access to private equity investments and will offer a new avenue of diversification to private equity industry.
But the task of SME development is a challenging task and requires strong will on the part of different stakeholders. SMEs are considered to be the riskiest segment of borrowers from a financial institution’s perspective and thus struggle for timely and adequate credit. Access to technical and market information, financial assistance and trained and educated workers is the biggest challenge for SMEs. Future SMEs require sound business practices such as corporate governance, risk management, stakeholder communications and regulatory compliance.
I believe that SMEs are sine qua non for manufacturing sector & I can foresee a bigger space for SMEs in next 20 years from now. I am so intrigued with the idea of SMEs development and their contribution in the economic growth that in the long run I wish to work as a freelancer offering consultancy and advisory services on financial and strategic matters to SMEs. I would work with a network of financial institutions, venture capitalists, engineers, environmentalists, social workers, suppliers, and policy makers so as to offer SMEs a comprehensive set of services.
U.S. Needs to Return to Its Manufacturing Base
Securing America’s Future: The Case for a Strong Manufacturing Base, A Study by Joel Popkin and Company, Washington, D.C. June 2003, Prepared for the NAM Council of Manufacturing Associations
President predicts it will take decades to revive declining U.S. manufacturing base?
Manufacturing & Investment Around The World: An International Survey Of Factors Affecting Growth & Performance, ISR Publications, revised 2nd edition, 2002. ISBN 978-0-906321-25-6.
Economy Watch: Economy, Investment & Finance Report
USA Manufacturing output continues to increase (over the long run), Curious cat, Investing and economics blog
Alliance for American Manufacturers http://www.americanmanufacturing.org/issues/manufacturing/the-us-manufacturing-crisis-and-its-disproportionate-effects-on-minorities/
Can the future be built in America? http://proquest.umi.com.remote.baruch.cuny.edu/pqdweb?index=28&did=1860761601&SrchMode=1&sid=2&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1259505905&clientId=8851
TO SAVE AMERICAN MANUFACTURING: USBIC’S PLAN FOR AMERICAN INDUSTRIAL RENEWAL BY Kevin L. Kearns, Alan Tonelson, and William Hawkins
Goldman Sachs Launches 10,000 Small Businesses Initiative
Goldman Sachs as Social Entrepreneur http://sum2llc.wordpress.com/
Hamilton Plan by Sum2llc http://sum2llc.wordpress.com/2008/09/03/sme-development-bank/
You Tube Video: Isley Brothers, Work to Do
Risk: SME, manufacturing, economic revitalization, social wealth
The deal is closed. American democracy has been sold. The US Constitution, discovered in a discount bin at a cheap dollar store at the Mall of America will now be fully privatized to serve the greater corporate interests of America. The deal will enable the global fraternity of capitalists to finally unlock and fully realize the hidden value of an unencumbered American dream. Profit-Us-Maximus will replace E Pluribus Unum as the national slogan. Undoubtedly it will appear on our national currency for the freedom of commercial interests and the uninhibited power of capital has triumphed. Commercial interests have trumped “we the people”. American liberty, a political currency once recognized as the worlds leading example of representative democracy has been severely devalued.
The Supreme Courts decision overturning laws that restrict corporate freedom of speech now allows corporations the unrestricted right to financially support candidates for public office. This paves the way for an installation of a more corporate friendly oligarchy to rule over the citizens of the worlds first and now defunct representative democracy. The courts ruling in the Citizens United vs. the US Federal Election Commission overturned existing laws that prohibited corporations from exercising free speech. The ruling now sanctifies the corporate purchase of air time to fund media campaigns that support or attack candidates running for public office. The wisdom behind the overturned law was to protect the interests of citizens from a corporations ability to use its considerable capital resources to finance and influence the election of political candidates favorable to their corporate interests. That law is yesterdays newspaper.
The decision opens the possibility that the governance of our nation, states and townships will be administered by elected officials financed and paid for by corporate largess proffered with the proviso to do their bidding. America risks becoming one giant company store. Once free citizens endowed with the protection and empowerment of a Constitution and a Bill of Rights will become beholden to the whims of corporate paternalism.
If your a shareholder in one of the corporations this is a bullish market event and your equity position has surely appreciated in value. The special dividend of political power born from purchased access to legislators will accrue favorable returns to investors in The United Corporate States of America. No longer will senators hail from the great state of Georgia or the Live Free or Die State of New Hampshire. It’ll be the senator from “Do No Harm” Google or “Have It Your Way” Burger King.
There will be a million unintended consequences resulting from this decision. How government administers and delivers services and how institutions fulfill their social mission will drastically alter. Institutions and functions that serve and support education, military, roads and infrastructure, health care, consumer and environmental regulations, labor protection laws and provision of social services will be transformed. The very nature of the liberal nation state will change.
This decision will create conditions for the privatization of governmental assets and institutional service structure to accelerate at mind numbing speed. The New Jersey Turnpike can now be sold to a private equity firm from China. Drilling and the exploitation of resources found on National Parks will proceed without prohibition. Public schools will be offered on a Dutch Auction hosted on e-bay; attracting the participation of a well capitalized confederation of publicly traded Charter Schools. The mission to acquire the listless brick and mortar carcass of a once venerated public school system will commence. The promise of the systems renewal with the breath of a new life fired by entrepreneurial zeal and taxpayer support will create a new Dow Jones Index constituent, Education Inc. Many functions of government will be downsized and outsourced to sophisticated data processing and business process companies. Military units will also be privatized, becoming mercenary divisions of corporate security firms. This will enlarge their market opportunities because they will no longer be beholden to exclusively serving the needs of a single client, the USA.
As Keith Olbermann pointed out in his Special Comment concerning the Supreme Court decision, the parallels with Dred Scott Decision are ironic. The decision ruled that Dred Scott was not a man, but merely a commodity to create wealth for a person with full rights of citizenship. Now corporations are blessed with all the rights and privileges of a person and the rising ascendancy of their power will soon supplant the interests of individuals. In so doing, the Supreme Court has once again proven itself to be an activist political tool to protect the interests of political and economic elites.
We can at least be thankful that the Supreme Courts decision allows us to dispense with the charade of participatory democracy. Rampant cynicism about the unfair influence of money on the political process has always been understood as a problem. This has undermined the people’s trust in the electoral process. It has eroded a collective sense of political enfranchisement. It has contributed to creating a pervading malaise of ambivalence within the electorate. The monied interests with fathomless pockets can now come out into the open and make their presence plain for all to see. It remains to be seen how this will alter the structure of K Street.
A new business model for how money is dispensed to politicians will need to be considered . Perhaps a new derivative called a PIMP, (Politician In My Pocket) should be considered. A PIMP Exchange could be set up in Washington DC. This future exchange would surely prosper and would propel Washington DC as the fast rising global financial center on the come. PIMP trading would be recognized as a fast growing emerging market. The trading in PIMPs would attract capital from all over the world and may even rise to supplant the future pits in Chicago as the place “where the world goes to manage risk.”
The PIMP Exchange will add that much needed transparency on how the political influence market is performing and what the going price is to buy and sell politicians. We should be grateful to the Supreme Court Decision that laid the judicial foundation that will finally shine light on this aspect of our political process. Now that its out in the open its all above board. No more under the table deals will be necessary. This ruling and the PIMP Exchange makes it very easy to follow the money. Perhaps legislation should be considered that require senators and congressmen to wear the corporate logos of their three largest sponsors. If a corporation wishes to remain anonymous feeling that the interests of their shareholders are better served they can continue to operate under the radar. A Generic Omnibus Politician In My Pocket or a (GO PIMP) will be designed specifically for this purpose.
The laissez faire approach to freedom of speech unfortunately confers all the power to those with the deepest pockets. “Politicians will be bought and sold by the gross”, according to Alan Grayson a congressman from Florida. Mr. Grayson is proposing legislation to protect citizens rights from being trampled by an avalanche of corporate money. The first amendment guarantees citizens that no one shall abridge or prohibit the free and open expression of ideas. Unfortunately money speaks the loudest and facilitates access to media channels and distribution. The free and open internet provides an individual little protection. The tussle in China between Google and the government is an instructive warning of what we can expect to occur as corporate control of the internet grows. It is an indication of a growing rift born from competitive postures of power capitalist institutions.
Our birthright of liberty was orphaned by a pervading cynicism and the seeming ambivalence of citizens who cared little for the rights democratic republics confer and understood less about the responsibilities required to guard them. The decision by the Supreme Court is a watershed event. Our political culture has changed. The United States model for governance is moving closer to the Chinese model of governance. The state capitalism of the United States is is a mirror image replication of the Chinese model. A ruling oligarchy of economic interests acting in concert with its hand picked governmental representatives is common to them both.
Did we awaken this morning to the sober realization that American’s best hope is a trust in a benevolent corporate paternalism? Can we believe that the rule of unencumbered enlightened capitalists is the way to realize the promises of a post scarce society? Can we still believe in the promise that innovation and social progress and our democratic impulses will continue to inform America’s historical evolution? Has America and the rest of the world arrived at a tipping point, a harbinger of a dystopian future where property right trumps human rights and the hard edges of economic deprivation, class marginalization and political disenfranchisement are ills that continue to infect society. We need a doctor. We need a strong antibiotic to cure this disease metastasizing in the body politic.
You Tube Music Video: Tennessee Ernie Ford: 16 Tons
As we start the second decade of the new millennium, innovation is understood as a critical driver to overcome the economic malaise plaguing the global economy. Economic stasis and political factionalism has made it increasingly evident that faltering economic and social institutions cry out for sweeping reform. These reforms can only be achieved with innovative approaches in policy and practice. Innovation is realized by giving flight to uninhibited thought and the clear application of ideas with decisive action. Though most agree that we badly need reform, we remain at painful odds as to what those reforms should be and how to implement them. The destructive legislative debates on health care and the ugly political theater of town meetings that occurred in the United States over the summer accomplished little in regards to meaningful reform. The exercises only served to drive a deepening wedge into the ability of a democratic culture to form a transformative consensus.
Our society is a complex ecosystem comprised of many competing interests. The classic definition of politics, “the means to decide how limited resources are allocated to disparate interests” is clearly a truism that must be applied if we are to realize the reform that we desperately need. In a post scarcity society that definition may seem a bit crude or antiquated. America’s history is marked by a culture of innovation and the incubation of industry. Innovation and its commercial expression in entrepreneurialism is a national asset that tempers the hard edges of stringent allocation or resources and has been the source of our great social wealth. Democracies continually require citizens to arbitrate how competing interests are reconciled and converge. As a self professed democracy the United States must break down the barriers that inhibit innovation by confronting the challenges posed by convergence.
Convergence has been the watch word in the tech industry for the past few years. Convergence aggregates, joins and aligns discreet trends, competencies, technologies and missions to spawn innovation and progress. Masters of business innovation understand that a precondition of convergence is the ability to collaborate. Collaboration requires extended conversations and dialog to understand how competing interests can be reconciled and brought together so that innovation and progress can be achieved. Marketeers invent neologisms like coopetition to brand the idea and lend heft to its thrust. We believe that innovation borne from convergence is the path to rebuild our economy, heal cultural wounds and take a step toward political maturity the United States needs to sustain the great experiment of our democratic republic.
With that in mind we offer a list that outlines the inhibitors to innovation. It is hoped that our nations leaders and people can begin an earnest conversation to address these barriers to growth. Maybe I’m wrong with offering this modest list but I remain willing to discuss it, hopeful that people of good will with a different viewpoint will be open to correct my thinking and contribute to my enlightenment.
1. War: War is inherently wasteful. The current wars in Iraq and Afghanistan are grievous examples of waste and national distraction that hampers the United States economic recovery. At an Ecumenical Memorial Service held at Yankee Stadium following the 9/11 terror attacks a Buddhist Monk stated that he believed “it was wiser to drop refrigerators on Afghanistan then bombs”. Almost a decade later and two wars on I can’t help but to think what a meager $100 billion investment in Afghanistan would have returned to the United States tax payers. More importantly it would have shown the world that above all else America values the sanctity and preservation of life. It would have also minimized the rising toll of casualties of both citizens and soldiers. We developed some great bunker buster bombs but we can’t figure out a way to stop a suicide bomber with exploding underpants. We succeeded in stirring up a hornets nest of angry insurgents and failed to build innovative pathways to peace with steadfast bridges to secure allies and pacify combatants.
2. Politics: To be sure politics is omnipresent but the politicization of faith institutions and government functions is a great separator of people. When politics infects faith institutions their ability to breach the social divide and join people together is seriously compromised or downright destructive. The Catholic Church’s practice of denying the Eucharist to parishioners based on political biases of the communicant places politics at the center of the Lords alter. The recent occurrences of radical Islamists burning down Christian Churches in Malaysia is tragically ironic. The violence, a response to the Christians appropriation of the word Allah as a name for God; is a violent rejection of language convergence of two great faith traditions. It would seem that unity is a threat that God cannot abide and is a growing threat that must be abolished. In the secular world government agencies were instructed to withhold scientific climate change research of the National Science Foundation because it did not conform with the politics of the party in power. The extent of the politicization of the judicial branch of government under the Bush Administration was a seditious move worthy of dictatorships. Innovative application of constitutional law in defense of civil liberties is one of the greatest challenges the war on terror poses to this country. The creation of kangaroo courts to support the politics of the ruling party would undermine our system of justice. It would transform our judiciary into a repressive apparatus of the state, our laws into stale dogmas ill suited to meet the legal challenges of our time and a justice system that is indistinguishable from the justice offered by our opponents.
3. Ideology: Only good ideas need apply. Deng Xiaoping said it best “does it matter if its a communist or capitalist mouse trap. The question is, does it catch mice?” Seeing this as a threat, Mao Zedong unleashed the cultural revolution and routed the capitalist roaders as a threat to the Great Proletarian Revolution. After the death of Mao, Deng would be rehabilitated and play a key role in China’s adoption of a market economy and its current ascendancy as a world economic power. In my mind there is a striking resemblance to the debate about heath care. Socialized medicine is bad. Do you want to turn into France? Canadian health care is too expensive. UK heath care system is overloaded and can’t cope with demand. These problems would be solved however after the death panels had a chance to meet and decide who shall live and who must walk the plank.
4. Entrenched Commercial Interests: Though we are ardent believers in capitalism as an engine of innovation the dictatorship of ROI, entrenched concentrations of capital and an unwillingness or inability to adopt longer term investment horizons hamper innovation. The failure of the United States automobile industry to develop fuel efficient vehicles is a good example of market intransigence. The development of junk bonds by Michael Milken and Drexel Burnham Lambert dismantled the manufacturing base of the US economy accelerated the countries decline as a net exporter of products creating the foundation of a debtor nation. During the presidency of Jimmy Carter solar panels were installed on the roof of the White House. The succeeding administration had them removed. Imagine where the alternative energy industry would be today had it developed this leading edge idea and capitalized on this first mover advantage.
5. Unbridled free markets: The economic carnage of the banking meltdown is a startling example of the excesses the pursuit of profit will create. The boom in commercial and residential real estate construction created massive stocks of unused inventories that misdirected and wasted enormous resource. The energy and capital expended on these wasteful endeavors misdirected funds and created huge social hazards that requires massive amounts of capital to mitigate. Also worth mention is the development of video gaming. Lots of energy and creativity is being expended on the best techno music to use while your Mafia Avatar bashes open the head of your opponent with a baseball bat. We are not suggesting censorship or a prohibition of video games nor centralized economic planning. Its a compensation and social value issue. Perhaps a communicants denial of participation at the Lord’s Table lead them to leave the church and miss the message about social values.
6. Technology: It may seem odd to include technology as an inhibitor to innovation but technology for technology sake may inhibit the development of innovative applications solutions that are not technological in nature. The technorati of the world is transforming technology into a religion. Deprived of its human dimension it can become a dogma that grows in an antagonistic relationship with its human masters. The United States continues to trumpet its technological prowess as the deciding factors in its war in Afghanistan. But that paradigm was explored during the war in Viet Nam where pungi sticks ultimately trumped napalm bombs. The power of an idea and how it connects and motivates people is force that is mightier then the sword.
7. Fundamentalism: The Pharisees once asked Jesus, “is it lawful to heal on the sabbath?” Jesus answered that it was always the right time to heal those who are sick. The world recoils in horror at the capacity for destruction fundamentalism regularly visits upon the world. The denial of equal civil rights to LGBT people creates a bifurcated system of citizenship. It is an ugly stain on our democratic heritage. The gravest peril to democracy is the abridgment and denial of civil rights to any group of citizens. Democracy necessitates that all republicans enjoy equal access and rights in order for it to function. The denial of that right based on a fundamentalist reading of religious scriptures makes it particularly abhorrent because civil rights of citizens in a secular democracy is not an issue that is decided by theologians or the adherents to a particular theology.
Tolerance and consensus are both antithetical to the precepts of fundamentalism. Fundamentalism is not the sole province of religion. It has its secular and ideological adherents as well. Fundamentalism is a pillar of dictatorship; either of a political or theocratic nature both are enemies of secular democracy. Secular democracies require tolerance to respect the diverse ideas and competing viewpoints require in the democratic process. Secular democracies require the trust to converse and hash out the best ideas that serve the greatest good. This is only possible if consensus can be achieved. It is how “out of many becomes one”. It is the true genius of America. It is a worthy innovation of governance that every freedom loving citizen should jealously guard and consciously pursue.
8. Public Education: The public education system that the United States built is the true arsenal of democracy and the nations source of wealth and its many contributions it has made to the world. Without the vast network of learning institutions built and supported by successive generations of Americans the worlds great experiment in representative democracy would have long ago perished. The public schools sole charter is to create an enlightened citizenship with the skills to discuss, discern and decide in a civil and constructive manner the ever evolving dialectic of a democratic consensus placed at the service of the republic. It is one of the true geniuses of America and remains her enduring strength.
Today public schools are under attack by forces whose agendas are the pursuit of parochial goals that first and foremost seek their enrichment and interests at the expense of the greatest good of the republic. The charter school movement is a trend that threatens the public school system by privatizing some of the systems assets and draining away much needed resource and financial support. It forces public schools to dispense with curriculum offerings like music and arts, sports programs and civic excursions that will convey an understanding of how institutions interact and support the greater social good. This aspect of the educational experience is supplanted by an exacting examination regime that destroys the love of learning. Secular learning is also being threatened through the introduction of theological precepts like creationism into the science curriculum of public schools. Religion and faith are important precepts to offer in a public educational curriculum; however theology that masquerades as science is an ideological stricture that has no place in public schools. These trends are pose great challenges to the public schools mission to form enlightened citizens free to think and free to act in the sole service of liberty and participatory democracy. Innovation and progress is in danger of becoming a secular sin a disease of the soul that needs to be eradicated from the public schools as its threatens to infect the greater body politic.
You Tube Music Video: Louis Armstrong, I Get Ideas
Risk: innovation, convergence, progress, tolerance