For four years the U.S. has been in a slow motion economic recovery. Unemployment remains chronically high with little sign of improvement. Annual GDP growth is below 2 percent and is expected to remain at that level for some time. This week, the U.S. Federal Reserve had to undertake its third quantitative easing initiative in the last few years, along with committing to holding interests low until 2015, to try to get the economy untracked.
The U.S. election is less than two months away. While the two major political parties have very different views on a range of social issues, there should be some common ground on the economy. The fact is that there is a desperate need to rapidly increase economic growth and reduce unemployment.
While I am not a trained economist, it seems to me that there are a set of economic paths that America needs to embark on to right the ship. It would certainly help if government and industry leaders had a shared vision of the paths that need to be taken. Here are a few thoughts.
Both Presidential nominees talk in lofty terms about an American manufacturing renaissance. Governor Romney has talked about creating 12 million new jobs over the next four years which would far exceed the 80,000 to 100,000 jobs per month that are currently being created. It is almost impossible to conceive how this large number could be achieved with a projected growth rate of 1.5 to 2.0 percent GDP growth.
While this writer and others have written about an upswing, this year, in manufacturing jobs in the United States, the fact is that manufacturing has been in decline in the U.S. economy for three decades. Over the past 12 years, U.S. manufacturers have cut 31 percent of their workforce, or nearly 6 million workers. This should not imply that the U.S. should give up on manufacturing. Rather, it suggests that industry and government should focus on those sectors where the U.S. has the best chance of succeeding and leading in the world.
Some of the opportunities for U.S. growth are highlighted in the book, That Used to be Us by Thomas Freidman and Michael Mandelbaum. Here is my short list.
1. Focus on the Core Industries where U.S. manufacturing has the best chance of success
Certainly technology and the automotive sector would be two sectors to consider. America has and should lead in the design of great technology and great cars, particularly energy efficient cars that will become increasingly popular in the years ahead. These are both growth industries with great potential, so long as bets are placed on the right products.
2. Craft a Diversified Energy Strategy
America is in the process of finding new reserves of crude oil. North America has an abundance of natural gas, coal and other fuels. Being the world leader in energy procurement, energy development and energy efficiency would seem to be a critical component of the country’s business strategy. While American cannot and probably should not think about being energy independent, it should reduce its energy dependence. This would have significant economic and political benefits.
3. Master Supply Chain Excellence
While manufacturing may be more cost effective in other countries, Americans still need to export their goods efficiently and import goods from other countries as cost effectively as possible. Winning countries and companies will be those that master supply chain excellence. This requires a combination of excellent education and training, leading edge technology for both shippers and carriers and a strategy of being the masters of supply chain process efficiency.
4. Improve Transportation and Infrastructure
While supply chain strategy deals with the processes of moving goods globally, as quickly and cost effectively as possible, America’s infrastructure and transportation systems must also be Best in Class to make supply chain mastery a reality. Transportation excellence will require significant improvements in port, road and rail infrastructure, addressing the looming driver shortage problem, developing the most cost effective truck engines, reducing carbon emissions and a host of other related topics. If America can focus on supply chain excellence while running the world’s most efficient transportation network, this will create jobs, reduce costs and improve the profitability of companies in agriculture, manufacturing and the service industries.
5. Reduce Trade Barriers
It is in America’s best interests to obtain preferred trading partner status with many countries around the world. This allows American companies to reduce their costs of importing goods from other countries and reduce the costs of marketing their goods in foreign markets. This should be near the top of the list of whichever political party wins the upcoming election. Free Trade deals make it easier for American industry to succeed.
America is at a crossroads. It is going through a period of transition as it tries to reinvent itself. Political gridlock, the housing crisis and several other factors have held back the economy from moving forward at a faster pace. It is likely that whichever party wins the upcoming election will have its own set of tax cuts and revenue growth (or loophole removal) strategies. Nevertheless, if both parties can at least consider this business strategy blueprint and work with industry leaders to make this happen, America could likely achieve a brighter future, sooner rather than later.