Sunday, November 25, 2012

Are You Ready for Y2K? No, I Am Not Kidding

I am not sure why we love zeroes.  But, we do.  It’s noteworthy when the stock market hits a milestone, when our odometer goes over 100,000 or when our age passes a decade mark.  The granddaddy of them all?   Y2K!  It was supposed to be a big deal.  And…

Nothing significant happened.  Sure, the stock market crashed.  But that’s hardly unusual.

We shouldn’t be surprised.  It has been the years ending in 1-3 that have been significant in our history.

In 1813, our nation was at war.  That, in and of itself, is not surprising.  But the War of 1812 was the first time the nation fought as the United States of America.  The Revolutionary War had been fought by separately governed colonies united in a common cause.

The defeat of a superior military force, twice in a generation, solidified U.S. dominance of the North American continent.  The economic expansion that followed – known as the Era of Good Feelings – was driven by immigration, cheap land and laissez-faire capitalism.  The military hero of the war was future President Andrew Jackson, whose efforts to decentralize banks financed the growth of an agricultural economy for half a century.

The passage of the 16th amendment to the U.S. Constitution, authorizing the federal income tax, was the watershed that marked the year 1913. The Progressive Woodrow Wilson, inaugurated that same year, ushered in the era of big government. 

Progressivism was a reaction to corporate abuse leading to the creation of the Federal Reserve Bank, the Federal Trade Commission and a variety of federal financing schemes to help the little guy.  All were funded by a tax of 1% of income above $3,000 rising to 7% of income above $500,000.

The expansion of the U.S. military began with WWI and continues to this day.  Large-scale public works projects, the passion of Herbert Hoover, were expanded during the New Deal.  LBJ’s Great Society created new entitlement programs building on FDR’s legacy. Over the last 100 years, government has grown inexorably to become the force it is today.

The evolution of corporate interests drove the reforms of the 1910’s just as the evolution of the global economy over the last two decades has set the stage for 2013.  

Despite the massive loss of U.S. manufacturing jobs (from 18 Million to 12 Million over the last decade), the volume of manufactured goods is increasing.  Automation has allowed U.S. companies to repatriate their factories if not the jobs that went with them. 

A recent study by the McKinsey Global Institute outlines the impact succinctly:   Two key priorities for both governments and businesses are education and the development of skills. Companies … will need qualified, computer-savvy factory workers … policy makers must work with industry and educational institutions to ensure that skills learned in school fit the needs of employers.”

So, at a time when many have started to question the value of a college education, as tuitions rise and jobs are not abundant, companies will look for different skill sets.  I expect that many who are not eligible for the top academic programs that lead to Wall Street or the Silicon Valley will opt for specialized programs that will train them as welders who understand metallurgy, fabricators who understand computer aided design and repair technicians who deal with the software that runs a modern factory. 

Concurrently, the International Energy Agency projects that the U.S. could become the world’s largest oil producer by 2020.  The combination of new technology and the discovery of abundant oil and gas resources offer hope of energy independence within a couple of decades.  These developments will have a major impact on our foreign policy and military strategies as the Middle East becomes less important as a provider of natural resources even as terrorism remains a strategic threat. 

For the first time in history, a majority of people lives in cities, 3.3 Billion people according to the World Bank. In the United States, the trend toward urbanization has created entrepreneurialism and innovation.  Our best educated students are flocking to cities like Palo Alto and Boston if they are tech oriented; or, to New York or Chicago if they are financially oriented.   But, even cities like Pittsburgh, a symbol of rust belt decay a generation ago, have undergone a renaissance of entrepreneurialism. 

Journalists and pundits tell us that in 2012, the electorate has chosen the status quo.  The president was reelected and the makeup of Congress was hardly affected by the election three weeks ago.  But, it was the states with large cities that reelected the president.  And it is the urbanization of the electorate will engender social change.  When Bill Clinton was elected 20 years ago, the WW II generation was a significant factor in the electorate.  Now most of them are gone, replaced by the millennial generation with open attitudes toward social issues and a drive to create new ventures in a more connected world. 

The forces that will overcome our financial crisis are in place.  Capital will be invested and investors will get a return.  

Jobs will be created.  The world will be a better place.  And, when that happens, our short-term petty squabbles will fade away.

And, a hundred years from now, no one will remember the fiscal cliff or why gay marriage and immigration reform were controversial.

1 comment:

  1. Amen, brother. I hope you're right.