I read an itneresting article in the Associated Press about the economic doldrums affecting the United States. There is a lot of cause for pessimism. Employment is sky high with almost 20% of real unemployment/ underemployment, people are not shopping and families are struggling. What I found really interesting was this quote:
To some economists, the United States is starting to look eerily like Japan. The Japanese economy fell into a recession in the early `90s. It has never fully returned to health, largely because of policy mistakes. The government raised taxes after declaring victory over the downturn prematurely. And U.S. economists, including current Fed Chairman Ben Bernanke, criticized the Japanese central bank, the Bank of Japan, for being too passive to turn the economy around.
Economists are trained to look at numbers. When I was an economics major at the University of Illinois I spent a lot of time analyzing graphs and charts. That is probably why I ended up switching over to become a theater major at New York University! I agree that sound policies do have a positive impact on the economy. However, the economists miss one difference between the North American economy and the Japanese. In both Canada and the U.S. economic success is based on innovation. It is innovation that is the key element of growth. The Japanese are very good at process improvement such as Kaizan and creating well built products (i.e. Honda). What they lack, however, is the diversity and entrepreneurial spirit that has built North America into the world’s leading economy for over 75 years. Advances in software, the internet, biomedical technology and telecom have mainly come from North America. The succes of its economy is people having new ideas and then have the freedom to implement them.
What is hurting the U.S. more than anything is regulation that stops entrepreneurship. You see it in Europe where it is very hard to start a business because of all the regulations and bureaucracy that a person has to go through to start one. Yes, many of those regulations are necessary but many are not. If we want to kickstart the economy, the best way is to streamline regulations and bureaucracy and invest in small businesses and new ideas.
Americans and Canadian have always been creative problem solvers and it is for this reason that I believe that the economic gloom we are facing is temporary and I am optimistic that our creativity will ultimately create an economic turnaround.