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Robert Reich @ ACG world markets conference

Wednesday 26 March, 2008

I attended the Association for Corporate Growth’s “Middle Market Growth in Uncertain World Markets:  Risk & Opportunity” event which featured former Secretary of Labor Robert Reich as keynote speaker. Here’s what I gleaned from his talk:

-Unlike our last recession in y2k-2001, which was an investor-led recession, our current recession is consumer demand led which has been building for years.  Real wages haven’t risen since the 1970’s, but spending & debt has. This is reflected in what RR terms DINS:  double incomes, no sex-couples with 2 incomes & no time for conjugal pleasures.  Despite the fact that we work 450 more hours/year than the Europeans, Europe doesn’t have a demand problem, but we’re now decoupled economically from Europe.  RR predicted the crash in Oct., 1987 & has been making the same prediction for the last 4 1/2 years.  Current fiscal incentives like the tax rebates due in May are worthless-the fate of the economy lies with the Fed.

-Globalization:  there is currently a backlash against trade & immigration, but NAFTA is not the problem because they are not 0 sum games.  Expertise, innovation & skill are still more important than wages in making location decisions, so education is key to economic success.  Technology has displaced more jobs than globalization, so that even China is losing manufacturing jobs.  The problem is not the # of jobs lost, rather the quality of jobs.  Local service jobs are the only shelter.  US demographics/baby boomers retiring dictates that we’ll need immigration, which means we’ll need education & health care.  Social Security will be a much smaller problem than Medicare.

In sum, our budget debt creates problems in global capital markets, but our problems are solvable if we invest wisely.

In Q&A,  here are a few more points

-the Fed is a part of the subprime problem in that there was no oversight for such low interest rates & cheap $

-there will be legislation for alternative energy soon, but timing is key

-low capital gains taxes are not a problem, but unsupervised hedge fund risk/leverage is

-immigration quotas are unnecessary because in 1900 15% of our population was immigrants & now it’s only 12%

-we shouldn’t impose restrictions on incoming foreign capital

-the Clinton budget deficit of 5% puts our current deficit in perspective

-education in a slow crisis is a whipping boy, but is a state/local problem.  We need smaller classes & more authority/accountability for teachers.  No Child Left Behind teaches students to test well, but doesn’t give them a well-rounded education.

Despite what he says, even as an economist, RR has more personality than most any accountant I know.

I was educated as an international economist, so I’m not going to debate him.  I took notes @ the presentations I attended & ACG captured all of the presentations in digital video, but since they’re only available to ACG members, my notes won’t do you any good.  If you have any particular questions, just let me know.

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One comment

  1. Though RR did not dwell on the education issue, this goes to heart of the US competitive advantage. Our partners and competitors in India, China and elsewhere are racing to move further upmarket to higher levels of technology and know-how, requiring an increasingly well-educated workforce.

    Many of these societies are pursuing education with a vengeance, and the US benefits through the many who come to the US for graduate school and the stll significant numbers who choose to stay and contribute to our economy. Is the US racing to improve the education of our own society to be able to operate at the highest levels of bright ideas and innovation – key factors in our continued success?

    We need leaders who can frame this as a national priority in the context of our economic future – this is not just a matter of trying to do good for the lesser-advantaged in the US (though we are in further trouble if we do not bring a larger segment of our own communities into the mainstream).



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