Economic Breakdown and Recovery
We all understand that the current economy is somewhat broken. I decided that surviving 5 recessions in my career has been a learning experience but I evidently haven’t quite learned enough.
I have been reading about this recession being wicked and threatening America as we know it. The end of our way of doing business is being predicted as being at an end by some (who also applaud that possibility) I decided to supplement the media reporting by doing some serious studying of the facts. I started my home study course with “ Economic Breakdown and Recovery” by John Cornwell. I’m not ready for a final exam with yet more reading scheduled but Cornwell and other sources have provided me with interesting facts to think about.
What started me on this course was an interesting comment about unemployment I heard in a presentation by an economist on a talk show. Not yet into my academic mode I missed his name and credentials but since I am not an academic purist I will move ahead without those accreditation details.
The U.S. economy in a normal year loses about 7,000,000 jobs. Yes, that’s seven million.
We don’t hear about that as a problem because in that same normal year start up businesses and expansions provide about the same number of new jobs. Those new small business start ups and expansions are financed by loans from banks, family members, angels and in the larger cases public offerings. The economist making the presentation made the point that with the current credit crunch Google would have probably not been able to properly finance their start up. The unemployment rise is in part due to this lack of funding availability for new bright ideas as business start ups. Also remember that what is considered to be full employment usually has about 3% to 4% unemployed. Those folk are between jobs, moving or have decided not to work for one reason or another. Our move to 7% unemployment is about a 3 & 1/2% addition to what is considered full employment. This does not make it any easier if you are part of that group, but a few facts need to be added to the pronouncements concerning a “wicked recession” by the media.
I’m wading through Cornwall’s “Economic Breakdown and Recovery” and am finding that his work belies the description of economics as, “the dismal science”. He deals with the benefits of public intervention and the debt created for that purpose and I am learning much that I had never even considered. I think that the economic reporting could benefit from some study before using terms (wicked) designed to incite rather than inform when describing economic conditions There are some unemployment comparisons by Cornwall that are particularly interesting.
In the U.S. between 1980 and 1991 the unemployment average was 7% and between 1950 and 1991 there were 15 years where unemployment exceeded 6% .
Cornwall gives detailed information concerning the strategy of various countries in the world in attacking unemployment problems. I’m finding it fascination and recommend the work to anyone with serious interest in the subject. I hope those in the new administration are refreshing their memories of those studies in school as to what worked and what didn’t and are using Cornwall and others for that purpose.
It will be interesting to see the results of the new president’s stimulation policies on the unemployment problem. There are no signs yet, that the banks are loosening credit so that the private sector can once again assume it’s position as the primary provider of new jobs in the American economy. President Obama needs to develop a “jawboning” strategy to work on the banks. They have closed the credit doors while opening their back door to accept billions in our money to bail out their poor management. This needs to change if employment growth is to be revived.
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