July, 2010

Is Support for Free Markets Withering?

Posted by admin on Jul 21, 2010 in news | 0 comments

Andy Grove, retired co-founder of Intel, gave a fascinating interview to Bloomberg Businessweek earlier this month questioning the continued wisdom of America’s longstanding commitment to free trade.  He begins by challenging a recent Thomas Friedman column in The New York Times entitled “Start-Ups, Not Bailouts,” in which Friedman argues that vibrant, innovative start-up companies are the key to job creation, not tired old manufacturing companies.

Start-ups are unquestionably wonderful, says Grove.  The problem is that once a great new product is created, most of the resulting jobs invariably go to overseas factories, mostly in Asia.  America in particular is home to an impressive percentage of the world’s entrepreneurs and inventors, yet they are just a tiny percentage of our workforce.  If the U.S. can’t find ways to create jobs for everyone else, Grove argues, we’re in big trouble.  His prescription: Government must adopt economic policies that are strongly jobs-centric, and if that means irking the Chinese and the Indians, so be it.

Could prolonged economic stress undermine our nation’s support for free markets and effect fundamental change in our global outlook?  Stranger things have happened.

Here’s the link: (http://www.businessweek.com/magazine/content/10_28/b4186048358596.htm)

Corporate Leaders and Speechwriters Take Note: Debt Isn’t Necessarily Evil

Posted by admin on Jul 2, 2010 in news | 1 comment

This week’s Economist magazine contains a thoughtful and provocative special report on debt, arguing that “for the developed world, the debt-financed model has reached its limits.”  While the report is beautifully conceived and written—what else would we expect from The Economist?—it is also off base.

Debt per se is not a social, moral or economic evil.  Rather, it is the uses to which borrowed capital is put that can cause problems.  Borrow money to build a more productive factory or develop a better mousetrap and the world will reward you handsomely; but borrow money to play the slots in Las Vegas, and your creditors are apt to become deeply distressed.  Borrowing and lending money to make sound long-term investments is and ever shall be good practice; not so borrowing and lending for short-term gratification or speculation.

Corporate leaders in developed nations are failing to deliver the all-important message that long-term investment in productive assets remains both necessary and possible.   We wallow in pessimistic assessments of our economic prospects, accepting the media’s dyspeptic view that nearly every nation this side of China is doomed to decades of stagnation and declining living standards.    Corporate and governmental leaders need to fire up their speechwriters.  Our institutions have not lost the capacity to control their own destinies.  They’ve merely forgotten how to do it.  Investing and working toward solid, long-term ideas and objectives is still the best way forward—indeed, it is the only way.