The Last Word: Goodbye to Misery

March 2, 2009
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“Misery loves company.” – John Ray, English naturalist (1627-1705)

John Ray is credited with this adage, although there is evidence that this proverb dates back to Publilius Syrus, a first-century B.C. writer. The age of this truism is proof that it’s common for unhappy people to be their happiest when others are miserable as well.

To hear it from the mainstream media, there is nothing about which to be cheerful. The news focuses on benefit cutbacks, layoffs and plant closings. The President and U.S. Congress tell us that we are headed into catastrophic times that have not been seen since the Great Depression. At times it’s enough to make you want to stay in bed.

We definitely are facing a recession. But, is it as bad as we have been led to believe? Evidence would suggest it’s not as bad as it has been in the past.

In his article, “It’s a Recession Not a ‘Catastrophe’,” Alan Reynolds, a senior fellow with the Cato Institute (www.cato.org), says Congressional Budget Office Director Douglas Elmendorf told the House Budget Committee that if the economy is still contracting by mid-2009, then this recession will be worse than the recessions of 1981-1982 or 1973-1975, each of which lasted 16 months. Reynolds disagrees with Elmendorf’s use of time to measure the severity of the recession, and he instead uses the current “misery index” to point out that the current recession was mild until last September, and that the severity of the downturn is not as harsh as Elmendorf and others would have one believe.

The misery index, a measure devised during the Kennedy years, uses the unemployment rate and the inflation rate to determine the health of the economy. As I write this, the current misery index stands at about 7.6. And while some economists project unemployment could reach 10% by the third quarter of 2009, that would still be less than the 22 that the misery index reached during 1981-1982 (the recovery from the Carter years) and the 20 the index reached during 1973-1975. The current misery index of 7.6 could climb, because inflation, which currently stands at about 0, will increase as the Obama so-called stimulus package takes effect and floods the market with newly printed money.

Reynolds also cites the current real GDP and industrial production numbers, -1.1 and -6.1, respectively, vs. those numbers reported in 1981-1982, -2.7 and -9.9, and 1973-1975, -3.1 and -13.0, to show we have a long way to go before we get near something that resembles the Great Depression.

It’s understandable one could believe that this is the worst economy we have ever seen because there are many people who are hurting. But as the facts point out, it’s not as bad as it has been in the past.

It’s tempting to get stuck in the fact that despite a stellar year for manufacturing and manufacturing technology consumption for most of 2008, the headlines that many will focus on are those that report that the year finished down from 2007.

It’s tempting to believe that the stimulus package that recently passed the U.S. Senate and House of Representatives will create jobs and improve the economy. It won’t, as the government never creates genuine, long-lasting wealth and regenerative employment (just look at how many “economic plans” the Soviet Union went through before its fall in 1995), and the “jobs” being proposed are “make work” programs that will eventually disappear.

Instead of giving into these and other pessimistic temptations, recognize that industry and the economy have come back stronger from far worse situations. Real recovery will come from the private sector, not government. Many of you have told me how you are creatively working to generate new business. You aren’t abandoning your core competencies, but instead finding new ways to leverage those things you do well.

Rather than being paralyzed by the negative and falling in a doom-and-gloom mode, it helps to look for some of the bright spots-they do exist.

As I am writing this column, Intel (Santa Clara, CA) announced it was planning $7 billion in factory upgrades. This investment will be spent on machinery and salaries in the United States. G&G Steel Inc. (Russellville, AL), one of the largest steel fabricators in the United States, is opening a plant in Tishomingo County, MS. Wells Fargo (San Francisco), fresh off its successful buyout of Wachovia, purchased New York-based Capital TempFunds. Numerous defense and aerospace companies reported they have seen and are expecting to see significant increases in revenue. Many of the suppliers that you see within the pages of Quality Magazine, have reported expansions, acquisitions and new business.

Misery may indeed love company, but it’s an acquaintance that none of us has to endure.

Share your thoughts with me at williamst@bnpmedia.com.

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