It appears as though President Obama’s warning of a “New Normal,” which means a new economic model in which a higher level of unemployment, 10% instead of 5%, is taking hold in America. The Feds have shot their bolt in trying to improve job prospects. However, while they have stopped the slide down in the economy, they have so far failed to generate sufficient jobs to quiet the concerns of the American public.
It seems as though we can produce sufficient goods and services with a lower number employed than previously. This comes form a combination of improved worker efficiency and lower demand. Improved efficiency is no doubt a result of workers being more focused on their tasks due to the spectre of losing one’s job. But it is also the result of more efficiencies being introduced when there are no factors working to delay them, e.g. union rules. Reduced demand comes from a general effort to cut costs in family budgets and from failure to return to the high levels of easy credit that fueled high levels of consumption until 2007.
Since all the “tried and true” methods have failed to increase employment we should spread our search further. One possibility is suggested by the Feds experience with using the TARP money to acquire a stake in American industry including banks, insurance and auto makers. Perhaps what we need is a “New Corporate State,” the economic model throughly descredited by Mussolini’s “Fascism” and Hitler’s “State Socialism.” But this time the term could be changed to present a new economic model in which the state takes a direct role in creating, developing, nurturing, and profiting from actual ownership of industry.
Or course this idea will bring Libertarians and Tea Bag Party minions to the barricades. In their mantras there must be no government involvement in industry. But this could be a way to better manage our economy, which is nothing more than a system to satisfy the needs of the people. This is not religion or philosophy, this is simply a matter of making the machine deliver the goods and services.
Look at the record. Fed investment in the banks saved them from a “financial meltdown” and put them on a sound footing in a matter of months, not years. The Feds also earned a tidy profit from the venture since it borrowed the required funds at less than 2% interest and loaned them at 5-6% interest. Moreover it sold the shares it acquired in the banks at a profit. The Feds also saved our auto industry and in the process earned money from the spread between the cost of funds borrowed and return on funds lent, as well as a profit on its sale of GM stocks it acquired. Now it appears that the Feds will also make a buck or two from its takeover of AIG, the giant insurance company. The lesson learned is that Fed acquisition of private business not only served the common good, i.e. saved our economy, it also earned a profit.
Now I ask you, what is wrong with Uncle Sam earning a profit on his investment in US industry? Moreover, beside earning a profit, direct Fed ownership of industry could be a means to channel industrial growth and influence the nature of our economy. Want to be more green? The Fed could invest directly in those activities that are more environmentally friendly. Want to stimulate research and development, invest in high tech activities. Want to influence education, invest in for profit schools. Want to improve health care, invest in hospitals, health insurance companies and others in the health care field - Gold’s Gym?
Some years ago when the Vatican was being criticized for investing in private business, with property development a main pursuit, friends, knowing that I am a Catholic, asked me what did I think of the Vatican being heavily involved in private business? I responded that, if the Vatican investing in property development lessened the need for me to fill the collection basket, than I was delighted.
Who knows, maybe the main result of having the Feds invest more in American enterprise could be to eliminate the need to collect taxes. And who would argue with that?