I've got three points to make, so stick with me.
The New York Times had a story on the economy over the weekend that is getting a lot of attention. It says, in part:
As government data revealed that 651,000 more jobs disappeared in February, a sense took hold that growing joblessness may reflect a wrenching restructuring of the American economy.The unemployment rate surged to 8.1 percent, from 7.6 percent in January, its highest level in a quarter-century. In key industries — manufacturing, financial services and retail — layoffs have accelerated so quickly in recent months as to suggest that many companies are abandoning whole areas of business.
“These jobs aren’t coming back,” said John E. Silvia, chief economist at Wachovia in Charlotte, N.C. “A lot of production either isn’t going to happen at all, or it’s going to happen somewhere other than the United States. There are going to be fewer stores, fewer factories, fewer financial services operations. Firms are making strategic decisions that they don’t want to be in their businesses.”
Rather than riding out the storm, economists said the time is rapidly approaching to retool the economy and train workers for the next generation of jobs.
In short, we will not be returning to business as usual.
It’s not a great depression, neither is it a great recession we’re going through now. At the Brite conference this week, Umair Haque called it a great "compression" as an economy built on perceived value reconciles with actual value ...
I try to argue in my book that what we’re living through is instead a great restructuring of the economy and society, starting with a fundamental change in our relationships - how we are linked and intertwined and how we act, nothing less than that.
Yes, entire swaths and even sectors of the economy will disappear or will change so much they might as well disappear:
America may well not be in the auto industry soon.... Financial services will have to be completely remade (by government). ...Large-scale retail will shrink and consolidate and then be transformed by a search-and-buy economy ... Residential and commercial real estate will have to restructure around a new capital structure ... Consumer productsof all sorts will have to change in the face of empowered customers and, in some cases, with competition from small competitors given the benefits of scale on platforms (see: eBay, Etsy, Amazon, et al) ...Government will grow but thanks to the empowered populace, it, too, will face fundamental change.
There are opportunities here, of course. There always is in change if you’re willing to see and seek it.
This is the time when startups start. I agree with Reid Hoffman that founding new companies is our way out of this mess. Given the profound nature of the restructuring, starting new businesses - not fixing old, doomed ones - is the only sensible path.
Ah, yes, the sensible path. The road not often taken here in Western New York.
Look folks, the hand writing is on the wall. We're going to get hammered. In fact, it's already happening.
What are we big on? The legacy manufacturing and financial services that many economists say are going bye-bye.
And where do we come up short? Technology and entrepreneurship - the future according to Jarvis and others.
We've got two choices.
We can keep doing what we're doing - which is the choice we always seem to take. As in: "Hang on to what we have, regardless of the cost, both in dollars and lost opportunities."
Or, we can look around and start to retrofit our regional economy, building off our legitimate strengths to meet the needs and demands of the economy that emerges from the current carnage.
It's going to take some time to figure things out, but that's no reason not to get started. The government subsidy programs we've come to rely on, in lieu of lower taxes and other steps other states have taken to make themselves more conducive to economic growth, are a good place to start.
They were mostly out of step and ineffective before the economy started to tank. They're even moreso today in the face of the Great Recession.
Think about it: The Empire Zone program is widely regarded as a failure - the whining of local developers like Rocco Termini notwithstanding about reforms proposed by Gov. Paterson. But even those reforms, which in part would focus future benefits on industry and financial services, look suspect, given the prospect of a permanent decline of those very sectors. I think this means the reform requires reform.
It doesn't stop there.
The New York Power Authority expects to open negotiations later this year with more than 100 local industries regarding the sale of low-cost hydro-electricity. The major customers are pushing hard for long-term extensions and NYPA boss Richard Kessel, for all this talk of reform, keeps sending signals that suggest he will oblige, despite the wasteful subsidies showered on some of the largest customers whose best days are far, far behind them.
These subsidy programs represent a finite resource. Every megawatt of power given to a fading industry is a megawatt that can't be provided to help power a company with growth prospects. Every tax break given a developer to put up a building whose tenants will employ people at sub-par wages means another project that might create good-paying jobs goes without them.
We've got some things going for us as we look at the pending new world economic order. Our access to fresh water. Our capacity to generate renewable sources of energy. A similar capacity to retool some of our industrial wherewithal to service that renewable energy sector. Our proximity to Toronto, a mega-region that has long been spitting out investment dollars we haven't figured how to attract. Colleges and universities churning out a lot of educated people. Our border location - despite our ineptitude in exploiting the opportunities it presents.
Look at who we've helped bankroll of late through subsidies.
Citigroup, whose stock is now worth the price of merchandise you can pick up at the Dollar Store.
General Motors, whose financial books left auditors holding their noses.
Olin and Occidental chemical companies, whose best days were back in Happy Days.
Folks, we've got to be a lot smarter. 'Cause if you think the last 25 years haven't been pretty, you ain't seen nothing yet.
taggedEconomic Development | Economics | Subsidies