Sometimes it seems that there are no new ideas to spur economic growth and business stability, that we’re stuck with all the familiar disfunctions that have restrained manufacturing over the past few years: inflation, unreliable supply chains, skilled labor shortages, overregulation, unfair trade practices, and various other problems that linger on to keep metalcasters and most manufacturers wary about future prospects. It’s the lingering that is most frustrating, it seems. Nothing, or no one, breaks through the stasis to cause us to reimagine how metalcasting, or manufacturing in general, is or will be done – as seems to happen in high technology, or energy, or biotech sectors.
One week last month there was a buzz among the intelligence sources and discussion groups that I access to keep myself alert to trends and other nascent ideas. It seemed everyone was sending it to me, urging it on me, asking for my response. It was not really an idea, but a restatement of things we know. It came from an economic consultant named Bruce Mehlman, and it’s tied to his argument that the global economy is static but also tense because over the past two decades the U.S. and other free markets have been trapped by “four addictions”: over-reliance on China for cheap manufactured goods; over-commitment to digitalization; over insistence on low-interest financing; and over-confidence in debt financing to cover future liabilities.
It’s surely a provocative analysis, one that I commend to the attention of anyone who similarly wonders why some problems get no relief, show no sign of easing, or attract any better approaches.
To clarify, it’s no revelation to identify these problems. The novelty is in identifying the four addictions as a single problem – one that defies resolution because all the individual elements are in a sort of deadly tension. For example, there are compelling reasons for U.S. manufacturers (and consumers) to break the economy’s dependence on low-cost goods produced in China: that would create new opportunities for domestic manufacturers, which then could increase capital spending and hiring, promoting more local and regional economic growth. There are various promising examples of this shift already.
But how that break-up with China might happen is quite uncertain, and any such move brings new risks to the U.S. economy, including potential trade wars and other market restrictions. There are similar risks, maybe even greater risks, to the global economy and security if economic engagement with China becomes more strained than it is now.
The other addictions are no simpler to break. The “digital revolution” has made organizations more efficient and productive, created more access to information and streamlined many essential activities. But digitalization has also destabilized many jobs, increased businesses’ and individuals’ vulnerabilities, and promoted a range of sociological ills. While there are obvious advantages to Artificial Intelligence, its emergence now is amplifying our awareness of how it might endanger individual rights – and all the efforts to regulate AI suggest censorship and authoritarian actions that Americans would surely resent. And, because the digital landscape that already exists will surely continue – it makes all businesses and individuals vulnerable to retaliation if the engagement with China is downgraded.
That’s just two of the interlocking addictions. Now mix in the expectation that capital should be easy to borrow. Spending and investing spurs economic growth, as we have learned to appreciate over recent decades – but the inflation that has gripped the U.S. and global economies over the past two years is not abating.
The only known solution to rampant inflation is to make borrowing more difficult, more expensive, and that limits economic growth. Building a new domestic manufacturing base is difficult enough without the higher interest rates crimping the return on investments. And higher interest rates also make other things more expensive, such as labor, energy, new technology, and foreign trade. How can we alter our addictions to Chinese goods and digitalization if we cannot invest in new organizational plans?
Higher inflation also accentuates the last addiction… debt. Even during periods of strong economic growth, debt was a chronic problem for individuals, businesses, and governments. Simply put, debt limits all the other choices one can make – which means opportunities for improvement, for growth, are fewer.
Unfortunately, the consultant’s point seems to be analysis, not advice. But characterizing these problems as “addictions” necessarily means they require some resolution that is decisive and accountable, something more than new policies. We need to reckon with these pathologies and their consequences before we can identify any breakthroughs.