The economy and the power of hindsight

July 8, 2008
By: Tim Heston

Reading the campaign news this week, I was reminded of a West Wing episode years back when the president"s personal aide, Charlie Young, asks what President Bartlet was doing. The president replied, I"m doing basically what the president does: Asking people for things, and then thanking them.

He was, in fact, signing notes to key legislators thanking them for support, but his comment implied much more. The president can propose ideas and ask Congress to support them, but thanks to checks and balances, he can"t implement them on his own.

Presidential power has ebbed and flowed between administrations, and debate over checks and balances could fill a legal library (the Guantanamo Bay issue alone would take up an entire floor). But generally speaking, constitutionally the executive branch can"t dictate a broad swath of policies; a president still must ask people for things, and then thank them for following his lead.

That said, can presidents affect short-term economic change? Listening to the presidential candidates last week, you might think they can. But according to many, they really can"t.

The factors that influence the business cycle are so myriad, powerful, and unpredictable that not even an executive as muscular as California Gov. Arnold Schwarzenegger could bend them to his will, wrote Newsweek columnist Daniel Gross last week. He explains that while presidential policy can have negative economic effects, in the short term presidents alone can"t drive America"s economic engine.

Myriad factors bring about economic change, including world politics (end of the Cold War, Middle East unrest, etc.), and game-changing technologies like the computer. According to a U.S. government publication in the 1990s, as cited by Daniel Sichel"s The Computer Revolution: An Economic Perspective, Computers may be the most profound technology since steam power ignited the Industrial Revolution. The computer is altering the form, nature, and future course of the American economy, and launching an information highway that is leading to globalization of product and financial markets. (Note: The book was published in 1997, before the Internet bubble burst, hence the optimistic tone; but it still can"t be argued that computers changed the way we do business.)

Is there another game-changing technology on the horizon? No one can say for sure, but we can speculate that new methods in power generation may play a role. If someone could develop a cleaner, safer, and cheaper way to provide energy for this power-hungry world, that would indeed change the economic game, and manufacturers everywhere would likely benefit. (In the meantime the next best thing might be nuclear energy, as evidenced by recent reports from media, as well as organizations like the National Association of Manufacturers and the Edison Welding Institute; EWI"s Nuclear Fabrication Consortium is to hold their first meeting next week.)

Although not everyone is optimistic, manufacturers overall don"t seem overly worried by the current economic conditions. They"re cautious to be sure, but according to a NAM survey of North American manufacturers, 44 percent intend to expand production in the U.S. over the next three years. And 57 percent of U.S. manufacturers say they will become more globally competitive over the next five years across the supply chain from sales, marketing, and customer service to engineering and information technology, according to a NAM release.

That"s a bright ray among the dark economic news of late. Will this growth actually happen, when will the economy get back on its feet, and what confluence of events will make it happen?

One thing"s for sure: Today we"ll hear rhetoric about how politicians will fix our economic troubles. And eventually, the business cycle will head back upward toward growth.

How will it all happen? A decade from now, hindsight will tell us.

Tim Heston

Tim Heston

Senior Editor
FMA Communications Inc.
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