ECONOMIC RECOVERY - A "MEXICAN STAND-OFF"

At the heart of the expression is the question: “Who will blink first?” That pretty well encapsulates the dilemma of high unemployment and a sluggish, if not comatose, recovery, in the United States. (Their recovery is pivotal to our future economic health.)

The New York Times Sunday edition ran a story that should be obvious to everyone. It is a wonder to me that vote-hungry politicians are still fighting about it. The story maintains that at the heart of the stumbling “recovery” is the American consumer, traditionally the big spender who keeps (or kept) the economy rolling. The consumer has virtually disappeared. No one wants to spend, certainly not while times are still perilous. The story says that car sales in America will drop by more than 25%! That will be trouble for the already troubled auto industry, one of the last bulwarks of American capitalism.

The “standoff” obviously is that corporations are waiting for people to start buying. Buyers are waiting for corporations to start hiring,. The slogan should be: “You start hiring - we start buying.”

I have said many time in my blogs, that it should not be up to American business to fund the American economic recovery. In practical terms, they are businesses, not charities. But wait.

If the old principal of paying a decent wage, pioneered by the otherwise intractable labour-hater Henry Ford, still has legitimacy, then corporations perhaps do have a role to fill in the economic recovery. It is not altruism. It is good business sense.

The consumer is either unemployed and without spending power, or employed but worried about the permanence of the next pay cheque. (Add to that the mindless, uninformed, politically-maneuvered deficit “crisis.”)

The standoff continues, and the only ones who can end it are the corporations. In America they simply will not accept that government could do it. Interesting is the fact that America does not need more houses, or more cars – both of which are the biggest generators of jobs. We sometimes forget that construction is the major job provider in both our countries and the bursting of their real estate bubble precipitated the great recession in 2008. Both of those industries generate prosperity and profits. The only other enterprise that does not generate immediate profit – aside from war that is – is the creation of a modern infrastructure with the building of projects that do not bring immediate profits, the way making a product and selling it for profit does. They don’t develop a technology and market it for profit. They do modernize and improve society as a whole. Most of all, they hire people.

Forget it. It is not going to happen.

The alternative is to have corporations hire people, expand payrolls and benefits, and generate the capital required to turn Americans back into consumers and buyers of the very products and services these rejuvenated hirers will create.

I am not a conspiracy theorist so I would not dare suggest that private industry, by withholding job creation, can magnify the unemployment crisis that grips the Obama administration. What I do see is that major corporations are fattening their treasuries; that the stocks of these companies are thriving on the stock market, that profits are better than ever, that maintaining staff reductions and continuing the spiral of cost-cutting makes them healthier than they have ever been.

But unless they start to hire, the structure will weaken and collapse. Some suggest that government should create such enormous tax advantages that business could not resist hiring, But the critics of that will wail that Big Government is taking over.

The stand-off continues. Will it be “adios” or “hola?.”