Talk of recession is in the air and the issue that now concerns voters the most is the economy. Many in the lower and middle classes understandably feel uneasy about the market. Unemployment has reached 5 percent, oil prices are consistently near $100 a barrel, and the stock market has experienced one of the worst Januarys ever. Globalization, free trade and low taxes have all been pegged as the culprits. However, they are all essential components to improving the economic well-being of the U.S. The problem is that the benefits are not readily apparent and do not affect everyone in a positive fashion. Adjustments need to be made in order to ensure that the advantages of an open economy are not lost on the American people.
The first step in regaining support for the economic principles that have made the U.S. economy great is to change the message. It is easy to bash corporations for their large profits and it is no wonder that people are angered when they read about the compensatory packages of CEOs. Rather than consistently bragging about profit margins, there needs to be an effort on behalf of both corporations and politicians to boast about how business can help the economy. The mechanism behind creative destruction –
in order to have progress and enhance productivity, we need to destroy what is old – is corporations. It is certainly painful to witness the decline of American manufacturing, but this has resulted in the birth of Silicon Valley and higher wages for more skilled workers. As countries and workers begin to specialize and corporations take risks, there will be higher wages and in turn higher standards of living. Corporations and politicians alike do not effectively express these concepts. The message of success through creative destruction and risk taking needs to be better communicated.
In addition to altering the message that is conveyed to the American people, there must be a willingness to concede to the idea that the government should cushion the blows of globalization. Job training programs should be established so that those workers who become unemployed can train to re-enter the workforce in a more efficient manner. This type of program will ensure people that if they become victims of globalization, they stand to be re-employed and have a higher salary in a more competitive sector.
Furthermore, the U.S. education system needs to be revamped. Some may call for vocational education, but in today’s world of ever-changing technology, many jobs run the risk of being obsolete in the near future. The number of hours in school should be extended and substantial financial incentives should be offered to teachers who perform well. An improved education system may help to increase the supply of high-skilled jobs, and thus reduce the discrepancy between wages of low-skilled and those of high-skilled workers.
Stories of corporate greed and excess are abundant. This leads to increased regulation of business by the government. However, free markets and globalization lead to increased productivity and growth. When considering levels of regulation or taxes, one must consider both costs and benefits. The benefits of continued globalization and free trade are tremendous, but of course there need to be international rules in order to ensure that each nation is competing fairly. Nonetheless, in order for the ideas of free trade to gain traction, there needs to be a different approach. Only then will Americans embrace the economic principles that will allow our economy to expand.