Saturday, August 15, 2009

U.S. Productivity rises in Q2?

Last week, the Labor Department announced that the amount of output per hour of work rose by an annual rate of 6.4% in the 2Q while labor costs dropped by 5.8%. According to many economists, this is viewed as a healthy increase in productivity because "it means companies can pay their workers more with the wage increases financed by rising output."

Huh? Obviously, our esteemed economists have learned little from what has happened to the U.S. and Global economies over these past two years. I wonder how anyone could surmise that this "improvement in productivity" means that companies can pay workers more when it clearly states from this Labor Department data that labor costs have dropped by 5.8%.

Looking at the economic environment outside of the banality of the logic of economists, jobs are harder to find, which means that companies don't have to pay as much to hire a worker than as before. With workers having less discretionary income as a function of lower wages, consumers are spending less, which has a negative multiplier impact on the economy. How this can be classified as an environment of rising productivity can only make sense to an economist living in an ivory tower.

Truth be told, productivity will rise when companies manufacture products within a local jurisdiction, enabling a positive multipler effect to occur. Higher wages are offered, consumers have more discretionary income, which means that they go out to dinner more, buy more items, get more haircuts, and so on. This generates wealth and growth within an area that creates real productivity.

It's bad enough that our economists supported this faux definition of productivity in the first place, but what's worse is that we didn't learn from its effect. When will we learn that productivity is derived from more production, not less spending?

Friday, July 10, 2009

"The Death of Management" book

I'm excited to announce that my new book, "The Death of Management: Restoring Value to the U.S. Economy" is available to the public!

In the non-fiction business genre, it's the only book on the market that correctly identifies that a lack of classical management in business today is the root of our economic ills. While most books on the market today that discuss the U.S. economy have identified the "free market" to be the problem, the "Death of Management" has identified the lack of a proper leader influence over the U.S. Corporation to be the real problem. Today's managers are forced to follow a set of rules that are much different than the rules that applied when "classical management" was enabling terrific growth in the US, with the development of a powerful middle class.

Please tell me what you think of the book. It's based upon a thorough review of the data and history of the relationship between the principles of management and economic growth in the U.S. Further, the data and U.S. history points to a prosperous period for our future if "classical management" principles are re-applied, and we seek to grow manufacturing once again as the cornerstone of our economy.

Friday, May 8, 2009

The End of Capitalism?

All over the world, there is a 'marching forward' of state branded capitalism as a response to the out of control globalism that is largely blamed for cratering the world economy. So the question I'm posing is this - should the cure for unfettered capitalism be state sponsored capitalism, or should it be the perceived monster that is being blamed for causing the mess in the first place?

Let's take a look at both sides. Today, governments are the owners of the largest oil companies, and control 3/4ths of the world's known energy reserves. Sovereign Wealth Funds (SWFs) have become chic for the past five years or so now, and are becoming increasingly powerful in the global marketplace. The world's strongest economy is largely under control of the Chinese Communist Party, and I can tell you through my professional experience that more and more business people are not seeing anything wrong with this. Asia and Europe are increasingly looking at the government to do more than just police the private sector, but to overtake it.

But before America rushes to join the fray, it this really what we want? In my upcoming book, "The Death of Management", I suggest that our 1930's approach to capitalism is the answer, not a replication of what other countries are doing today. Since when has the U.S. sought to lead the world economy through playing upon the strengths and strategies of Western Europe and Asia? This just doesn't make any sense at all.

In the late 19th century, and past World War II, the U.S. economy became the most powerful economy of the world by playing upon the strengths of our land and our people. If we seek to escape this recession through copying the strengths of others, we will be streaming forward to our demise as a second rate power. Our strength in the past was largely based upon manufacturing and a sacred covenant between our citizens, workers, managers and owners. This is what we should return to, not to copy others.

Friday, January 25, 2008

Stimulus Package - Handout or Help?

The President and Congress believe that providing rebate checks to 117 million families, and $50 billion in incentives to businesses will prevent our economy from going into a recession. In an election year, there is bi-partisan agreement on both sides of the political aisle that it is a handout that Americans need, and a handout they shall have. A handout?

Yes, a handout. In my mind, a rebate conveys that the receiver of the money did something productive as a result, and for this, the taxpayer will be rewarded. But in this case, the taxpayer did nothing except noddingly approve that perhaps it would be a nice idea to receive a check either in May or August for $600.

What will the taxpayer do with this money? Invest (too small), buy stuff, or pay off debts? Smart money people say that the average American owes almost $10,000 in credit card debt, and should pay off as much as this balance as the person can to avoid as much of the $1,400 a year in interest that he pays for carrying the debt. Obviously, our politicians want the taxpayer to go out and buy a new computer or couch, and to continue to live beyond this means, including carrying this ridiculous interest payment every month.

So the Chinese ought to really be loving the thinking of our politicians - giving every family a check to buy Chinese goods that we can't afford to buy, and as a result, have to borrow from the Chinese in order to live beyond our collective means. Great thinking by our policymakers.

Anybody ever thought of focusing to improve our declining productivity that really impacts our economy? Improving productivity can actually move more money into our economy through true productivity and job growth - but in comparison to other world economies. Stimuli packages that simply move money from one U.S. pocket to another doesn't do this.

It's time for clear thinking and a focus on productivity in the United States - no more gimmicks and election year gamesmanship.

Wednesday, January 16, 2008

Fed: Economy Lost Momentum....

"The Federal Reserve's new snapshot of business conditions around the country, released Wednesday, suggested that the strains from a persistent housing slump and harder-to-get credit are affecting the behavior of individuals and businesses alike -- making them more cautious."

Our economic signals continue to point our economy towards a recession, if not worse. Last night (I hope that it was a dream), I heard a pundit on Fox or CNN (I switch back and forth) mention signals similar to 1929. Of course, that is very much an exaggeration, but isn't it just as much of a fairy tale to assume that no serious correction actions need to be put forth for our economy? Do we really believe that a short-term stimuli such as tax cuts, interest rate reductions, and/or spending measures will make a difference?

More trouble - the CPI rose .3% in December, which means that inflation concerns are rising - even with this being the case, the Fed will move forward with interest rate cuts to spur the economy. Doesn't anyone see that really serious measures need to be enacted.

My book, "An Easy Out" predicted this, and pointed to what America really needs - productivity and competitiveness. That's the only true solution.

Tuesday, January 15, 2008

2008 US Economy - Recession or Recovery?

Are we heading towards a recession in the U.S.?

Economic signs are troubling: 5% unemployment (two year high) potentially rising to 6.5% by 2009, a horribly weak dollar, consumer lending woes, and a declining trade competitiveness leading to a rising current account deficit.

How will our politicians respond to these problems? So far, they believe that short-term, temporary stimuli will work, even though efforts from the past (low interest rates) did nothing but potentially make the problem worse. Tax cuts, spending packages, and lower interest rates simply mask the true problems. Our corporations will continue to try "addition through subtraction" by their band-aids (eg, outsourcing) versus true productivity efforts. Our schools will ask for more funding instead of seeking reform. Nobody will address solutions from our past that have worked before.

Productivity is a "lost art" in America today. Rarely is this term used as a solution today within our businesses (outsourcing instead is proposed), schools (more spending proposed), government programs (cuts/more spending), and labor unions (win-lose propositions).

What would you think if you heard of a solution that wasn't the same packaged solution that hasn't worked before? Would you as a manager, worker, student, teacher, politician, and consumer be willing to sacrifice and work for it, or are you only willing to pretend to seek new solutions? Would you be willing to sacrifice and work hard for productivity, or do you simply want the "easy out" for whatever you do?

Our nation's ability to compete rests with all individuals and institutions. Are you willing to change to make it happen, or will you buy the same "easy out" solutions as before?