Monday, September 5, 2011

Dear Mr. President: Focus Your Thursday Speech on Creating Products - Not Jobs

I recently had long conversations with two successful entrepreneurs. One lives in Florida and the other in Missouri. Both are deeply troubled and concerned about the economy. Both had the same message. Its the product, stupid, not the people!

Their point is America needs to be a net producing nation and not a consuming nation. Jobs will not be created unless and until companies, large and small, produce and sell more of their products and related services. To stop the recession business must be set free to manufacture more products to the point that the market demand causes them to hire more people to manufacture more products and related services.

On January 15, 2009 the U.S. Business and Industry Council submitted to President Obama's transition team a report that stated, "America’s economy is in danger because Washington and Wall Street have forgotten the bases for successful capitalism and sustainable prosperity – creating genuine wealth by producing, and thus supporting first-world living standards with earnings. For too long, consuming, borrowing, inflating assets, and reshuffling paper wealth were treated as adequate substitutes." [My emphasis]How prophetic these words are today.

The Business and Industry Council went on to say:

The top priority of any stimulus or economic recovery plan must be refocusing American business on producing the goods and related services that Americans want and that can generate middle-class incomes for the great majority of working families. And if these goods and services are not produced at home, they won’t generate the needed incomes at home.

Achieving this goal requires greatly strengthening domestic manufacturing – which (a) dominates the economy’s genuinely productive segment; and (b) is also the only sector of the economy with a proven record of enabling large numbers of working class Americans to earn middle class wages and benefits."
[My emphasis]

The focus of government on "jobs" is looking at the result rather than the cause of the recession. The less American companies produce the fewer people they need.

Here are just a few of the key points the U.S. Business and Industry Council made:
1. Strategies emphasizing only repairing financial markets and restoring credit flows will simply re-create the house-of-cards, bubble economy that existed prior to the current crisis – in which America and its citizens borrowed and consumed until the bubble burst.
2. There are only three basic ways to create wealth:  manufacturing, resource extraction, and agriculture.
3. “[G]reen manufacturing” does not, as widely assumed, entail that many radically new materials or processes.  It is also susceptible to the same off shoring trends that infect all domestic manufacturing. And many other countries are also pursuing it intensively.
Finally the report warns, "Unless the production and use of domestic goods is maximized in the economy, any federal stimulus programs could primarily reflate the over-borrowing and over-consumption cycle – without repairing the economy."

Simply put Mr. President, It's the product, stupid, not the people." I hope you address ways of making America a net producing nation.

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