OMB: Owner-Managed Business

Even as the pundits proclaim an end to the recession, jobs continue to be a problem. "Yes, but they are a lagging indicator," you'll hear them say, "look at GDP instead." GDP, unfortunately, isn't really the best measure. A measure of the economy should capture the impact on the "average joe". Yet, according to the article, GDP has risen for two consecutive quarters.

Have you seen it? No? Neither have I, and neither have any of the people I talk with. GDP growth may be happening, but it is a Mardi Gras mask, hiding a hideous and deformed face behind a comic smile.

What I find surprising is that the article nowhere alludes to the drastic change in the nature of the industries still existing in our nation, which equals an equally drastic change in the number and types of jobs that may become available over the next several years. We have literally shipped the bulk of our manufacturing overseas, along with technical support, billing, and other usage of "call centers". We are very nearly at the point where we'll all work at that big blue discount store, selling each other imported goods made with slave labor. (I'm reminded of a scene in Demolition Man, where Sylvester Stallone's character learns that "all restaurants are Taco Bell.")

The people who worked at Chrysler? The ones who've lost their jobs will never regain them. The ones still working are likely to lose their jobs in the next year or two. General Motors? Not quite as bad, but not much prospect of returning to the go-go years of a Cadillac Escalade and a Chevrolet Suburban in every driveway, either.

A decade ago, we thought "tech jobs" would save us. But that doesn't seem to be the case. Semiconductors were gone even then, computer hardware followed suit. Software jobs? Moving overseas with surprising alacrity, after first importing underpaid foreigners to this country in order to reduce industry pay levels.

Finance jobs? Many of them remain, but increasingly, they report to overseas bosses and owners. It is only a matter of time before everyone except the paid-on-commission sales agent will be overseas.

In every case, it was poor management and cost-cutting strategies that lost the jobs. American management is simply awful. I often wonder why our management hasn't yet bankrupted every single business, putting unemployment levels near 100%. They are that clueless.

The solution, as I see it, is to get back to smaller, locally-owned businesses (SLOBs), who sell locally-produced products and services and provide local jobs. Instead of buying products that were shipped 5,000 miles, we need to be buying products that come from within 100 miles of our doorsteps. We need to be pressuring our state and local governments to stop trying to entice large, out-of-area corporations (LOOACs) to open a local branch, and to provide part-time, low-wage jobs, and to allocate those resources to building and growing SLOBs that will provide local jobs (hopefully better paying jobs than the LOOACs).

This is an interesting admission. Some of the jobs lost are not your usual business-cycle hire-too-many then layoff-too-many jobs. Some jobs that would be part of the economy's stable bedrock that are gone for good.

I still question the idea of most job losses during this econolypse being cyclical. There were a lot of jobs tied to the financial services / real estate bubble that will stay gone until the next time a bubble hits those fields. Those jobs, then, aren't cyclical; they are symptomatic. The auto industry is very cyclical, but most of the job losses there are probably permanent. With Chrysler's likely failure later in 2010 or early in 2011, even more of these losses are likely. Technical support (call center) jobs were already moving offshore, as were programming jobs. Airlines have been merging and cutting jobs since 2001, at least. Other manufacturing jobs lost were also mostly just exported overseas, and therefore, are not coming back.

I see a few construction / real estate jobs and some freight jobs (trucking, warehousing, railroads, port workers) as being the primary cyclical jobs that will return. Also, some of the higher-priced retailers and restaurants will recover and start hiring again. Other than that, I'd guess that nearly all the jobs lost in this recession are gone for good.

As far as economic recovery goes, I would not expect even their 3% forecast to come true this year, simply because seventy percent of the economy consists of consumer purchasing, and a good twenty percent or more of consumers are under severe financial stress. Without higher sales, retailers won't hire more workers and won't buy more merchandise. Without more merchandise coming into stores, wholesalers won't hire more workers and won't buy more merchandise and trucking companies won't buy more trucks or hire more workers to work in their warehouses or drive their trucks. Without more merchandise heading for wholesalers, manufacturers won't hire more people to work on the assembly lines, and there will be fewer people employed in railroads and in shipping ports.

This situation really seems more similar to the 1930s than anyone wishes to admit. There was a period in the 1930s when unemployment wouldn't go below 24%, no matter what they did. According to ShadowStats, unemployment is over 20% now, or if you use the government's U6 number, it is around 16% recently, 21% in California. You do have to be aware that the numbers used back then are not strictly comparable to today's values, however. What we have today is more like the beginning (that is, 1930) of what they had back then.

My point, however, is that these economists are belatedly starting to realize that something else is going on. First they were late to recognize the impending recession. Then, they were late to recognize the recession's onset. Next, they are still quibbling over the causes of this particular recession (and yes, I believe it is more than just the business cycle, although the cycle is a part of it). Finally, they are late to recognize that some of the job losses are forever. And they are still clinging to the fantasy that recovery is coming this year.

If 70% of GDP consists of consumer spending, and sixteen percent of consumers are unemployed or underemployed, it isn't likely that this part of the economy is going to grow very much until jobs recover. And yet, businesses won't hire people to produce goods and services that they cannot sell, so consumer spending is very much the tail that wags the dog.

Now to lay out a way for the desired economic recovery to take place:

We start with restoring justice. Many of our financial companies, like other corporations, are amoral. The only way to corral them into performing their duties in a moral and ethical manner is to arrest and imprison executives and to claw-back ill-gotten gains.

• First, any consumer debt that is more than a year past due, we cancel immediately, with the exception of federally-guaranteed student loans. The chances of collecting those debts are small, anyway. This takes some pressure off of consumers. It will also force some of the most unscrupulous lenders out of business.


• Secondly, we cap consumer interest rates at fifteen percent, with a state's lower rate cap taking precedence. We require that federally-chartered financial institutions comply with the state consumer-protection laws where the affected consumer lives.


• Third, we stop turning a blind eye to corporations that abuse consumers or their employees. A few SWAT-style raids on corporate headquarters buildings, followed by marching CEOs in leg irons and orange jumpsuits before TV cameras, and prosecutors asking for asset forfeitures and the noose--you'd be surprised how many companies will suddenly change their behavior. This is the most important part. In order to succeed at respawning economic growth, we need to arrest and charge hundreds of CEOs, managers, officers, and directors.


• Fourth, have the AG issue an opinion letter that consumers' information is the proprietary property of those consumers and may not be sold or otherwise disclosed without their prior written consent, nor sent across national borders with or without consent. Have federal prosecutors "saber rattle" about charging companies that have consumer data going to divisions or contractors that are outside of US jurisdiction, and then watch all the call centers and credit processing centers suddenly moving back into this country.


• Fifth, cancel all federal subsidies to large corporations. Then take those whose workforce (inclusive of outsourced labor) is predominantly overseas and extract "workforce impact fees" to offset the salary, benefits, and taxes that are not being paid because of overseas work. Announce (and carry out) stepped up arrests and prosecutions of managers in firms that knowingly hire illegal aliens (including those who should know, but choose not to).


• Sixth, we declare certain industries vital to our defense, including semiconductors, computers, software, and other high-tech fields. Because of this, we then mandate that a certain percentage of the US market (that is, sales of that product or service) must consist of companies which are at least 50% domestic-owned, whose products are made in domestic factories, using domestic labor and parts. You'll say, "That sounds like protectionism. You're not conservative!" To which I say, I'm not pro-corporation, if that's what you mean. I'm pro-small business, because that is good for the American people, and I am pro-American people. Protecting the future of America's people may require some restrictions on imports, which is what China, Japan, Taiwan, Korea, and nearly every other country on earth does. I don't want to stifle improvement or competition, thus I don't want to push imports out of the market.


• Seventh, and lastly, restructure the laws, so that Stalinist-structured, top-down, you-work-for-peanuts-so-the-CEO-can-have-a-bonus management costs company shareholders a percentage of profits (on top of other taxes, and not offset-able) which must be reported in bold print on the first page of the annual report and the 10-K.

The story of the 1800s and early 1900s was that a few, generally-unscrupulous people were able to get control of most of the wealth and resources of our nation. The story of the mid-to-late 1900s was mostly how we moved to block the unfair and anti-competitive actions of those wealthy few. Now, we are faced with having to rein in the behavior, not of the wealthy, but of the high-income managers who now run the companies. If we allow them to do so, they would send the last job overseas, then when we couldn't buy their products and services, they would move themselves and their companies out of the country and watch the collapse from afar.

(No, wealth and income are not the same thing. Wealth is how much more you own than you owe. Income is how much is coming in every year.)

With this announcement, the President himself joins the effort to keep "Banana Boat" Ben Bernanke in office. Mr. Bernanke is the foremost expert on the Great Depression (the 1930s), and with the so-called recovery being a no-go, we may indeed need his expertise in the near future.

Yet, this ignores some serious errors in judgment. Whether it was Banana Boat Ben, Tim Geithner, or someone else, deciding to bail out the big financial companies merely rewards their reckless behavior. Yes, allowing them to fail would have caused an exceedingly deep recession, much deeper than what we are currently experiencing, but I am sure it would be ending by now.

The smaller financial institutions, the ones that were, for the most part, run more conservatively, are now facing high regulatory costs and other financial pressures that are squeezing them out of business, even as the big guys that caused the problem are able to report improved financial conditions. This is, in my view, an intentional choice that someone made. To preserve the largest institutions, even at the expense of the well-run and the local institutions that keep American small business's doors open.

Rather than this, a smart move would have been to issue an immediate freeze on foreclosures, followed by a mandatory re-pricing to market for owner-occupied residential properties. Yes, this would have wiped out most of the bigger institutions, and would have threatened many of the smaller ones also. But winding down the big guys in an orderly fashion would have benefited everyone, redirecting investment capital into local institutions that lack "market power".

In other words, re-confirming Mr. Bernanke will be seen as a reward for incompetence.

And yet, Mr. Bernanke wasn't the only one involved. The entire financial hierarchy really should be fired outright and forced to beg in front of the last surviving K-mart store.

Amazingly, sites like MarketWatch look at these things and think that somehow, the economy is going to turn right around and start growing again. Tell me again why people trust their analysis. I think I missed something.

So here's the story. 70% of the economy is consumer spending. More than 10% of the workforce is out of work (some estimates say more than 20%). So that is an automatic loss of between 7 and 14% of our economy's earning power. Now, of course, there is unemployment insurance and the underground economy, which help to prevent that part of our workforce from starving to death.

Still you've got to wonder about those on-the-air financial pundits who tell us that things are about to change for the better. How could that be? The banks and other finance-related industries didn't fix their problems--they used tax money to cover up their weakened condition, together with accounting rule changes that allow them to pretend that the market value of the real estate (collateral for the loans they've made) hasn't fallen--and will not "recover" for long. Companies like GM haven't dealt with their problems, either--neither fuel-consumption, nor repairs & maintenance costs, nor emissions, nor the high prices of their products relative to most people's incomes, nor even the high compensation of their executive ranks relative to the people who actually make their products--and will not "recover" for long. (I wouldn't be surprised if Chrysler went into Chapter 7 bankruptcy later this year.)

And on top of all that, we have these massive job losses. In many cases, only low-skill, low-wage service (including retail and restaurant) jobs are available, so those who can get replacement jobs are taking 60% to 80% losses in their incomes. Let me tell you, it is quite different making $8,000 per year than it is making $64,000 per year. If I was an investor, I'd be putting my money into ramen noodle factories. I'm not an investor, in part because I view the markets as being manipulated. If I want to give money away, I'll buy a state lottery ticket. At least I'll know that 50% of the money goes to the schools.

No, the econolypse--the unveiling of the incompetence and manipulation that is at the core of our financial system--continues. We will see its effects return to the stock market in another year or two. In the meantime, we had better be preparing for a future in which only a few people have corporate jobs. We need to be unshackling homeowners from bothersome restrictions that would prevent them from launching business enterprises in their homes. We need to be eliminating the tax incentives given to draw corporations into our towns and cities (which amount to money taken from individuals and small businesses [those least able to afford to pay higher taxes] and given to large, out-of-area corporations [LOOACs] that could easily live without the subsidies).

Be aware that this past quarter saw a really sharp contraction, and that this current quarter is likely to see a similarly sharp contraction. Over a year or so, at these rates, the economy would lose about 1/20 of its size. And continued over a couple of years, some of us would be in danger of living in third world conditions.

Wake up! Get yourself going with your own small, locally-owned business (SLOB) and with your own home-based garden. Get active in your local government, pushing hard for a community garden and food bank. Don't forget to work for some kind of locally-based energy independence. Get active in your local church or synagogue, pushing for a "we're all in this together" effort to keep the whole congregation alive. We've seen a little bit of a rough time, but nothing like what our nation saw in the 1930s (nor, by my own memory, what we saw in the late 1970s through middle 1980s).

Turn off the television. Shut the newspaper. Avoid that news site. Not that I'm encouraging you to be ignorant. Instead, I'm urging you to be careful what information you allow to reach you. We already know that most of our news sources are tainted with someone's spin. It will get even worse as things become more and more clearly broken. The only way you'll be able to think clearly is if you make it a point to skip those news sources that you know to be filled with spin.

A good job? Oh, please. You have to understand just what passes for "broadband" and what we mean by access in order to understand the double-talk in that statement. 384 kb/sec downstream is considered broadband in the United States, even though our graphically-enhanced sites can take several minutes to load at that speed. Note that most U. S. providers don't provide upstream speeds that match their downstream speeds, either. The low speeds hurt our national competitiveness, as does the imbalance between upstream and downstream. This, too, is hurting our national competitiveness, including educational and economic competitiveness.

The problem? Generally, the same company that owns the lines that connect to one's door provides the connectivity that allows us to use whatever services we get. Thus, there is no incentive to invest in the kind of infrastructure that would make true broadband widely available and nearly universal in this country. Indeed, Comcast, one of the largest broadband providers in the nation, is well known for its penchant to arbitrarily cut customers off for "overuse" of so-called unlimited plans. Comcast, like most of our Internet providers, makes most of its money selling us services that use the broadband connection, rather than making its money by building "fat pipes" to every home. And so we read about Internet providers poisoning downloads / uploads, blocking competing Internet telephone services, and terminating "Internet hogs".

The solution isn't just "give them federal money". The solution is to bifurcate pipeline providers from the Internet providers that sell connectivity using those pipes. In this way, the pipeline providers make more money by making their pipes faster, not by blocking Skype so that consumers have to buy the provider's VOIP service in order to have connectivity. This would mean that the pipeline owners would have to offer their pipelines on a non-discriminatory basis to any qualified Internet providers. The Internet providers, in turn, would not be as concerned about the enthusiastic reception that their products receive--increasing capacity would be someone else's problem--nor should they be allowed to block paying customers from using competing services over those lines. Meanwhile, for every "class" of broadband (from the 1.5 to 3 megabits/sec to the over 20 megabits/sec), most communities need to have two pipeline providers that offer it. The competition will force providers to either increase speeds or reduce prices.

It may seem counter-intuitive, but the truth is, this would serve to expand the broadband footprint in our nation, plus allow a wide variety of Internet service providers to thrive. One provider might specialize in easy set-up, another in family-friendly (filtered) service, another in customizable access, and another in enabling the use of non-theft peer-to-peer services. Then, when Internet service provider (ISP) A decides to raise its prices, users would have real alternatives. If ISP B decides to try and ratchet down user connection speeds, consumers could obtain other ISPs using the same hardware that is already installed in their homes, a less interruptive method of changeover than the current system.

What the government should be doing is divorcing ISPs from both the pipeline itself and from specific applications (such as VOIP--Internet telephone service--and video on demand). The specific applications part can be done through a "Chinese wall" and non-discrimination requirement. We have already seen the foot-dragging and the interference with consumer usage of the Internet connectivity we are paying for. This is what happens when the government bends us over and spreads our butt-cheeks for large, out-of-area corporations (LOOACs). It is time for our government to represent us instead of protecting the corporations.