It’s the “elephant in the room” that needs to be addressed. The economy, including manufacturing, is being hit hard as I write this column. The headlines and financial news tell you all you need to know. Record sales losses-the most in 17 years-by all the major automotive manufacturers, including the once-thought invincible Toyota and Honda. Congress’ offering up as much as $50 billion in aid to the automotive industry in exchange for “oversight.” The record drops in the stock market-the most since 1987. The 12 point contraction of manufacturing during October to 38.9 (50 is growth), the lowest since September 1982.
To top off this negative news, we have an incoming Administration and Congress that are on the record for proposing more than a trillion dollars in new spending and using taxes to get there-taxes on the very people and industries who need as much of their money as possible to aid in this economic recovery. Even if those taxes are postponed until an economic recovery is achieved, this same incoming Administration and Congress advocate government infusions of cash to troubled automakers, financial institutions, credit card companies and anyone else who can fill out the proper forms from the U.S. Treasury Department, http://www.ustreas.gov/press/releases/reports/applicationguidelines.pdf. This would give the government a financial stake in these institutions a lá socialism.
There are sane voices who are counseling more healthy advice. Economists Milton Friedman, Thomas Sowell and George Stigler have written extensively on what makes the economy run so soundly in the United States. Even Alan Greenspan has long held that the way to economic recovery is through policies that encourage private investment and the free market rather than government intervention. Senator John McCain recently said that “the fundamentals of the U.S. economy are sound” and was scoffed at for being out of touch. McCain knows that what lies at the heart of the U.S. economy’s robustness are the principles of individual entrepreneurship and letting people keep as much of their money as possible.
In his book, “The President, The Pope and The Prime Minister,” John O’Sullivan focuses on how President Ronald Reagan, Pope John Paul II and Prime Minister Margaret Thatcher worked to successfully defeat the Soviet Union during the Cold War. While the book focuses on military, cultural and economic means of fighting the former Soviet Union, it is in the economic arena that Reagan and Thatcher not only outdid the Soviets, but fostered policies that resulted in an unprecedented economic growth of more than two decades in the United States and Great Britain. They were so successful that the Asian Tiger countries of Singapore, Taiwan, Hong Kong and South Korea adopted these policies and became the economic powerhouses they are today. Reagan and Thatcher privatized businesses (in Thatcher’s case) and cut taxes to leave more money in the hands of businesses and individuals. These strategies encouraged existing companies to expand and reinvest, and provided the incentive for individuals to start new businesses.
The socialistic model was shown to be ineffective-it failed and was rejected. So, why should the United States rush to embrace it now through government-sponsored bailouts and buy-ins?
This issue becomes relevant to you in quality and manufacturing in two ways. First, with more than $4 billion in projected spending for 2009 (see p. 18) it is in your hands to continue or restart the economic growth by continuing investment in the quality areas relative to your manufacturing processes. You and your company can choose what technologies and products have marketability and will make you successful, rather than some bureaucrat in Washington, D.C., who hasn’t an idea about your industry.
Secondly, and more importantly, by holding fast to ideas of Reagan, Thatcher, Sowell, Friedman, Greenspan and others, the U.S. economy will not only survive this downturn, but recover much more strongly and be in a better position to resume the economic growth we have experienced during most of the past two decades.
There is risk involved of course. Some companies will succeed and some will fail. Failure could include some difficult consequences, but success can yield unheard of benefits. This is not the time for backing away from the very dynamics that have made the United States and its economy successful.
O’Sullivan quotes the late Pope John Paul II, who for the first time addressing millions of faithful who were reeling with uncertainty about the world around them, told the crowds to “be not afraid.” These words hold a message for us in our current economic situation. There is no reason to let fear take hold, and in the process sacrifice short-term economic security for long-term economic freedom.
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The Last Word: Be Not Afraid
November 24, 2008