It was some years ago that the economists declared that the American economy had moved from one producing goods and services to a consumer spending driven economy.  Was that a good move?  I don’t think so.  How many times have we heard that consumer spending must drive the economy?  Has anyone looked at how people must earn the money that they need to spend in order to drive a consumer economy?  Maybe this happens after they find money growing on a tree.  The explanation has been that Americans cannot compete with economies where wages and working conditions are inferior to ours.  As long as manual labor is concerned, this is true.  But technical innovation has transformed industry into one where programmed machines now do much of the work that was previously done by a human.  What does this mean to the labor market?  It means that the high paying manual labor jobs are now gone and done by machines.  The work for humans is now to design, program and to keep the machines operating.  These jobs require a technical skill that did not exist years ago and pay good wages.

Unions are like communism.  They destroy incentive to excel and compete.  Communism supposedly provides equally for everyone no matter how good or how hard a particular individual may work.  The motto is to “produce according to ability and receive according to need”.  Once an individual recognizes that hard work does not pay, why work hard?  Communism refuses to recognize human nature.  That is why it always fails.  It also destroys incentive.  With it comes low standards.  After all, if the standard is too high, very few people will be able to meet it.  So we will work down to the standard instead continually trying to improve and excel.

If it takes an hour of manual labor to perform a task to produce the proverbial widget, then we would agree that we cannot compete with the foreign sweatshops.  Does that mean we must bring back sweatshops so we can compete?  Obviously, the answer is no.  Since we are Americans and we believe that “necessity is the mother of invention”, what we need to do is use our American ingenuity to find a way to successfully compete.  The key is technology.  We need to use technology to do what is done manually elsewhere in order to produce more widgets per man hour.  When we do this and transportation costs are included, then our American product can be competitive or cheaper and of higher quality. And when we develop this new technology, we must keep it here and not export it.

In today’s world, China has become the Japan of post World War II when the product produced was cheap and not very good.  To Japan’s credit, they improved and in recent years their products were of higher quality than the American counterparts.  This especially became true in the automotive industry when the foreign quality was higher than domestic and people stopped buying American cars.  America finally woke up and now their quality compares to the foreign cars.  It appears that China may also be learning that lesson.

We sit here today seven years after the 2008 financial meltdown. It has been five years since the government declared that the recession was over and the recovery had started.  The way I see it, the government does not want a real recovery with four to six percent growth and large gains in employment and income.  If this were to happen, how could they get millions of people dependent on the government so that they will vote for the political party that gives them these “benefits”?

How do we accomplish what I have proposed?  We start by deregulation of small businesses.  We all know that small businesses are the engine that creates the most jobs and where much of the new innovation occurs.  We have to create an environment where these small businesses can start up and flourish.  Since we are proposing these businesses innovate, the venture capitalists and investors along with the banks must make available the capital to start up these businesses.  Lacking these traditional ways, it might take a new form of raising capital.

The Internet has proven to be a source of raising funds for causes.  Now if shares of startup companies were sold online bypassing Wall Street and traditional capital sources, it could be a quick way of raising capital.  The public safeguards would the toughest hurdle to prevent fraud.  The new company must write and issue a business plan stating the company objectives and estimated startup costs.  Any change in this business plan must be approved by a majority of stockholders with only the sold shares eligible to vote.  To discourage fraud, the maximum percentage of shares owned by any one stockholder would be limited to 15%.  Violation of this provision would be punished by ten years in prison.  Should a buyout offer be made, the existing stockholder must have the option of being paid in cash even if the buyout offer is a stock exchange.  Since electronic communications are legal, when a company share is sold, a stock certificate would be issued and the money held in escrow by a fiduciary third party such as a bank until the requested capital goal was reached.  The escrow bank must have capitalization and deposits equal to more than five times the size of the business plan’s estimated company capitalization.  There would be a time limit on how quickly these shares must be sold before the money must be returned to the sender minus a small bank handling fee.  This capital formation method must be legal.

Another capital investment plan would be for the unions to spend their member dues on creating and owning new high tech companies instead of buying politicians.  The unions would be both the boss and furnish the worker.  These companies could be the vehicle to retrain their union members, if necessary, for the high tech industry.  One of the issues with this plan would be to avoid union corruption.

We need to rebuild our industrial businesses that produce a product instead of a service.  This does not necessarily mean that we must compete worldwide, but what it does mean is that when all costs are included for any imported product, we are competitive–but possibly on a much smaller scale.  We no longer make high pressure vessels, large electrical transformers, etc. in this country.  If these businesses were restarted, they may not be able to compete on a world market, but they must be competitive domestically.  Should we have a worldwide money crisis, we need to have critical businesses here.  Production capacity does not have to be world-class, only competitive.  If the dollar goes to hell, we must be able to continue to function as a country.  And we need an educational system to educate and train—not indoctrinate–the engineers and technicians we will need to operate these businesses. We need to figure out a way to bring these businesses back and at the same time provide American workers with good paying jobs.

CAUTION:  Don’t expect big government to help with this.  Bureaucrats do not have a reputation for solving problems—only trying to build empires.  They are an expense for which everyone pays, produce no goods and very little service.  Based on the news reports, many bureaucrats in the current federal administration have already demonstrated that they can be easily corrupted and don’t give a damn about you and me.