Friday, September 16, 2011
What usually happens when we have downturns is that our President and elected representatives, Democrats and Republicans alike, flail about while they wait for the economy to get better on its own, not because of and often in spite of the billions we may have wasted with misdirected, ineffective policies and programs. Whoever’s in office when the recovery occurs takes credit for it, and we move on. That’s not happening this time, that is, the economy isn’t recovering fast enough on its own because there are structural issues, big things wrong with the economy which will take time for it to fix, time we don’t have.
Every now and then, I take myself way too seriously. I find myself facing what appear to be difficult, complex problems, the kind that make your head hurt when you think about solving them. But then eventually, thank goodness, there comes a moment. You know what I’m talking about. It’s the one when I blow my diet on the grounds that stress is more harmful to my health than fat, after an hour or two of mindless TV, followed by a pass-out nap on my couch. It’s the moment when I realize that the problem wasn’t that complicated after all. I strip the problem of its extraneous detail and focus on its core elements, and a simple, reasonable, often elegant albeit sometimes radical sounding solution presents itself. This is one of those times.
Countries are no different. We have a national migraine called “unemployment,” and are reacting, in the White House and halls of Congress, like it’s a really, really hard problem that can only be solved by nothing less than a Rube Goldberg collection of government programs, not one of which has previously proven itself worthy of the task. If we could just breathe. Give everyone in Washington a pint of Ben & Jerry’s. Watch some CW. Make nice for a few weeks. We’ll all be good.
Let’s just step through this together. When we’re done, I dare you not to agree with me. By the way, this is a serious piece.
The problem is that too many people are unemployed. Please, don’t start telling me about all the other problems we’re up against. The big problem right now is that there are too many people unemployed, and let’s just leave it at that. We solve this problem, a lot of the others will begin to fix themselves.
Who is it that we need to hire these people? Businesses, large, medium and small.
What will encourage a business to hire anyone? The answer is not tax credits, lower unemployment insurance, cheerleading by the CEO of Starbucks or anything else other than, let’s spell it together… D E M A N D. Businesses will hire more people when the demand for their goods and services exceeds what they can currently produce with the people already working for them. It’s just that simple.
Okay, how do we make that happen? The answer, as it turns out, is as simple as the problem it is intended to resolve. We need to make some customers to buy more stuff than our employers can currently manufacture. ..There. Whew. I don’t know about you, but I feel great.
“Thank you. Thank you very much.” ..What? You don’t know how to make customers? “Jeez, Mr. President, do I have to tell you everything?” Okay, okay. I’m a team player and I love this country. Here’s what we do.
We’re going to use the core power of capitalism, the essential, nuclear forces of “microeconomics,” to bring us around.
We’re going to start by sorting our families in descending order by their “propensity to consume.” The more technically needy they are, that is, the more likely they are to spend any money we give them, the higher they are on our list. There’s no point in putting money into the economy – money we don’t have, no less – unless we’re sure it’s going to work for us.
At the same time, we’re going to sort all our firms – the ones that make consumer products because their suppliers will be coming along for the ride – in descending order by the likelihood that increased demand for their goods and services will produce new hires. We are, in other words, going to put them in order by their “propensity to hire.” The more and the faster, the better.
And then, step 3 in this 3 step program. We’re going to use every dollar we can get our hands on to encourage the people from the top of the first list, the ones who currently aren’t spending any money (except maybe their unemployment benefits) to buy the products and services manufactured by the companies on the top of the second list.
What we’re doing is creating new demand. It’s got to be new demand so that we’re not creating sales for some companies at the expense of others. We’re creating new demand for precisely those businesses where it will effect the greatest, most immediate increase in employment, and doing it without any serious side effects.
Let’s do just one example that will help me explain how we will accomplish that last, crucial step, the one where we match up the lists. Nobody panic at what I’m about to propose. Just listen and remember that nothing else, none of the traditional programs Washington has funded or is proposing, has worked.
Let’s say we have an all-American clothing manufacturer, an otherwise solid company whose business has been trashed by the recession, not to mention foreign competition. Well, I’m going to give our target families, the ones with the highest propensity to consume, a coupon, a chit worth a given amount specifically for the purchase of that clothing manufacturer’s products. Other coupons will be more general, focusing demand on groups of companies in specific industries and/or geographically defined markets. In any case, the effect of what we’re going to do is to lower the price of this specific firm’s goods to our special customers to encourage them to buy this firm’s products. When they do, the company will sell more t-shirts to customers who need them and who weren’t able to afford to buy them before the program. New demand creates new hires. Bingo.
“What was that? You’re not seriously proposing that we…” Oh, yeah. You’ve got it right. I’m going to use nothing more sophisticated, but no less powerful than the ordinary coupon to give our families who aren’t spending any money a reason to buy the specific products and services of the companies who are most likely to hire our unemployed. I’m not going to give these special families cash they could spend, or save, any and everywhere they want. That might work, eventually. No. I’m going to take essential financial support for the un- and under-employed to the next level by temporarily directing new demand they originate to specific companies.
Put another way, I’m going to unleash the pent up demand of American families to buy the goods and services of certain specific companies, in certain specific sectors and locales of the economy, by creating compelling, irresistible price advantages which these coupons will define. The effect will be the same as when Proctor & Gamble or Coke use coupons to increase sales – with one very significant difference. We’re going to do it, not by stealing business from other companies, but by creating new, additional demand for products and services.
“Uh, I don’t know. This doesn’t sound like any monetary or fiscal policy I’ve ever heard of.” Probably not. It’s way too practical, isn’t it, too business-like. More to the point, what have those traditional policies done for us lately?
Will it be hard? Yes. Is our government up to it? Ab-so-lutely not. They have neither the daring or imagination to think in these terms, nor have they the experience or creativity to pull it off. But our private sector, working with our government, can. And when it works, we will have an exciting new “microeconomic” fiscal policy tool at our disposal.
Careful. Under no circumstances am I suggesting that we protect, for the long-run, companies and industries whose time is over, nor that we concede one iota of control over our private market mechanisms to our government. Not even close. All I’m suggesting is that, as an emergency measure, we give un- and under-employed families short-term incentives to buy specific goods and services at a discount. Not such a big deal, is it?
Think of it as Groupon for the unemployed. Enough already. Let’s get back to work.