Periodically, we revisit the aftereffects of the “Great Unpleasantness” and how they are playing out in the global economy. One of the challenges in drawing conclusions based on macro-economic data is that it hides profound local consequences in the shifting of percentage points. In most first-world nations, the current game is watching the unemployment rate. A tick up a few tenths of a percentage point, and the hand-wringing and gnashing of teeth commences. A few ticks down, and a corresponding sigh of relief—if not mild euphoria—in the media is exhibited. Unfortunately, the focus on this sole metric is of little value, as it provides little insight into deeper fundamental challenges at play.
The recent unrest in Egypt resulting in the reluctant relinquishing of power by the former-President-for-Life Muhammad Hosni Sayyid Mubarak is in large part due to rising unemployment and economic disenfranchisement among the educated youth. Strangely, the reported Egyptian unemployment rate of 9.4 percent was a near-perfect match for the USA’s at this time, yet there is no protest marching in Washington, D.C., or any other US city for that matter.
A possible reason for that difference is that in the US, there still exists a hope that job growth will come, that the current economic downturn will end, and that people still retain the freedom to reinvent themselves in order to better their present circumstances. This positivity may be the result of the wide range of people affected by unemployment stretching across demographics and therefore not finding commonality among local peers, or the usual buoyant “can-do” US attitude. The current long-term economic outlook would tend to contradict positivity.
It’s a recession when your neighbor loses his job; it’s a depression when you lose yours.
- Harry S. Truman
This is partly due to the depressing news presented to us by those we know and love struggling to come to terms with long-term unemployment, especially among the approximately 7 million people who have joined the 99 Club in the USA: people who have termed out of the available unemployment benefits. They represent slightly less than half of all unemployed…
Source: Bureau of Labor Statistics
The unemployment figures don’t take into account a larger swathe of people. The current figure under-represents the chronically underemployed (those working multiple part-time jobs) or those who are contingent (both seasonal workers and contract workers to whom unemployment benefits are unavailable). While the reported unemployment figure of 9.4 percent converts to 14.5 million people, the true picture is closer to 26 million, when the 2.6 million people marginally attached to the workforce are added along with the number of persons employed part-time for economic reasons (sometimes referred to as involuntary part-time workers), which was at 8.9 million as recently as December 2010.
The hole we must innovate our way out of is a lot deeper than most people recognize. Except, perhaps, for the people at the bottom of it looking up. Where does this leave us?
Dig and ship versus design and build
We must start with the reality that corporations cannot guarantee anyone a lifetime job any more than corporations have a guarantee of immortality.
- John Snow
Jobs have gone. It’s not that they have been left unfilled, simply awaiting an economic turnaround. The jobs have gone, never to return. Whether replaced by technology-created efficiencies or exported to lower-cost economies, old mainline manufacturing jobs and data processing jobs have disappeared. The auto industry in the US is probably most emblematic of the shift in the US economy. Take the rapid bankruptcy or near-bankruptcy induced reduction in the number of vehicle models in production. This reduction had a cascade of effects up and down each auto manufacturer’s supply chain, from design and raw materials sourcing through to delivery, sales, and distribution—the number of people required to bring products to market has been significantly reduced. Those jobs are not coming back.
One reason is that local economic factors are tied to global economies now more than ever. Chrysler’s part ownership by Fiat means that cars that would have originally been designed in-house are now shared as platforms across the entire Fiat/Chrysler network. Similarly, General Motors has availed itself of the cover of bankruptcy to increase its investment in global partnerships, perhaps best represented by the success of GM in China. This is represented by the Chinese-designed Buick Lacrosse in the Chinese auto market, where it’s considered a direct competitor to BMW and Mercedes Benz as a luxury vehicle. It’s also seen in the manufacturing joint venture SAIC-GM-Wuling Automobile, which successfully sells minivans under the Wuling badge.
The offshore manufacturing of US brands is also symptomatic of a greater shift. Brands may reflect national origins, but their point of manufacture may be many thousands of miles from their “home.” The only jobs that seem to be staying put are those that cannot be moved: resource extraction (minerals, metals, and ores), domestic food production, and direct support services (such as trucking, healthcare, hospitality services). The US economy is sliding into a mode in which it provides raw materials to other resource-hungry nations, exporting low value-added ingredients for what will eventually become consumer goods that it will turn around and import. Either that or we’re becoming the Vanna Whites of the global economy.
It’s not the most intellectual job in the world, but I do have to know the letters.
- Vanna White
Recapturing and fostering the spirit of design and build is a necessity if the massive unemployment is to be addressed in any full measure. Which is the whole point: this is a spirit not to be created, but reinvented and restored to the heart of the US economic engine.
The best way to appreciate your job is to imagine yourself without one.
- Oscar Wilde
One of the other factors influencing the US jobs situation is the very same “can-do” attitude that kept it ticking over for so long. The problem is that now, given the US’s wholesale exporting of its culture via consumer products, TV, film, and the Internet, that “can-do” attitude has been exported, too. Most recently this has been reflected in a book by Anand Giridharadas, India Calling. Based on his own search to discover his roots as a US-born child of both Northern and Southern Indian parents, Giridharadas recounts the way in which a brain drain of talent is gaining momentum, where Indians are returning to India as they see greater opportunities there than are available in the US. In essence, the US has begun exporting hope.
Previously, the United States was seen by the entrepreneurial as a promised land. For those with the ingenuity and the willingness to apply themselves, the sky was he limit. The best and the brightest came from around the world to attend its universities, and many stayed, helping to build some of the biggest and most high-performing companies in the world. In recent years, however, the desire of university graduates to stick around has diminished. Yale University professor and immigration researcher Vivek Wadhwa has discovered that many foreign-born workers in high-tech industries are returning home or contemplating such a return. The reasons for this are many, including better economic prospects or job opportunities. That the US, and other developed nations, have seen only recent anemic economic growth compared with developing nations like China or India is not lost on young entrepreneurs or individuals in the early stages of their careers.
The US is no longer seen as the only place to forge a future for oneself, because it has done such a phenomenal job of exporting its value system to the world. Not necessarily the values of consumerism and voyeurism, although they have been exported too, but primarily the values of hard work, self-reinvention, and yes, innovation. Which leads us to the US response.
Job security is gone. The driving force of a career must come from the individual.
- Homa Bahrami
In his most recent State of the Union address, President Obama noted that this is the time for another “Sputnik Moment” for the US, a time during which there must be sharp realization that complacency and half measures simply will not have the desired effect:
…The only way to move to full employment is to lay a new foundation for long-term economic growth, and finally address the problems that America’s families have confronted for years. We cannot afford another so-called economic “expansion” like the one from last decade—what some call the “lost decade”—where jobs grew more slowly than during any prior expansion; where the income of the average American household declined while the cost of health care and tuition reached record highs; where prosperity was built on a housing bubble and financial speculation…
… You see, Washington has been telling us to wait for decades, even as the problems have grown worse. Meanwhile, China’s not waiting to revamp its economy. Germany’s not waiting. India’s not waiting. These nations aren’t standing still. These nations aren’t playing for second place. They’re putting more emphasis on math and science. They’re rebuilding their infrastructure. They are making serious investments in clean energy because they want those jobs.
The US economy, for so much of the last century the bulwark of the global economy, needs revitalization. In thousands of businesses large and small, the path to success lies in creating space for the millions of underemployed and unemployed, so that these disenfranchised can add their intellectual weight to the economic transformation that must take place. How can we grow, smartly, wisely, and in such a way that we don’t need to strip jobs out of our enterprise every time there is a hiccup in global trade? We must find a way to make innovation not an addition to our enterprises, but the engine at the heart of what makes us successful. We have done it before. Others have learnt from that success.
We must remember what we have forgotten and get busy.