“We've indulged in this fiction that we can build a vibrant economy by deregulating the financial sector, and cutting taxes, and putting off investments in things like infrastructure and education and our kids. But we can't anymore. And now we have to ask the question about what really went wrong.” Sen. Elizabeth Warren (D-MA), from Rana Foroohar's “Makers and Takers” (2016)
To solve this pressing and systemic problem, the last place to look for insight is to any big government progressive like Elizabeth Warren. Likewise, to her fellow travelers of Congress's spendthrift establishment (of both parties). In truth, the insulated beltway bubble has no clue regarding what fundamentally remains wrong with America's economy. Ms. Warren's so-called solution, “investments in things,” is code for increased federal deficit spending. Yet, the government is flat broke: thanks, in large measure, to the already-tried-and-failed policies of Barack Obama, and Ms. Warren's fellow Democrats. In fact, over President Obama's two terms the average annual GDP growth was a measly 1.48%. Another disgrace was his virtual doubling of the nation's debt by a whopping $9.3 trillion. Funding wasteful schemes like his American Recovery and Reinvestment Act of 2009 (more commonly known as the Economic Stimulus Act) injected $787 billion into the marketplace, but to no avail. The economic malaise persisted because ill-equipped people—making wrongheaded decisions—were in charge. Simply put, Obamanomics conclusively demonstrated that Washington cannot tax, borrow or spend the nation into prosperity.
Politically, what's the definition of insanity? Electing the same types of people doing the same things, but expecting a different outcome. (Thus, perhaps the main reason Donald Trump was elected president, in 2016, is neatly explained.) More to the point, on an economic level, what's the definition of insanity—other than doubling-down on what has been done previously? Thanks to President Trump, and the promise of Republican tax cuts, the tide—superficially—has started to turn. However, a record-setting Wall Street is not the same thing as a booming Main Street. After all, Wall Street is based upon the return on investment by stockholders. That's rather far removed from real-life factors like creating homegrown American businesses, generating highly skilled domestic jobs or providing Americans opportunities to advance up the socioeconomic ladder. So, the true test of a strong economy is an expanding, upwardly mobile middle class. Yet, this all-important demographic has been declining for more than 40 years:
“After more than four decades of serving as the nation’s economic majority, the American middle class is now matched in number [read: statistically equivalent to] by those in the economic tiers above and below it. In early 2015, 120.8 million adults were in middle-income households, compared with 121.3 million in lower- and upper-income households combined, a demographic shift that could signal a tipping point, according to a new Pew Research Center analysis of government data.”
For context, in 1971, 61% were in the middle class compared to only 50% in 2015. This disturbing trend depicts the downward spiral rotting the fundamentals of our economy from the inside out. What is it that we did better in those prior years that we're not doing now? Back then, did we not produce competitive products—products that truly satisfied one or more customer's needs better than what was produced by international competitors? In other words, did American made products and services not dominate global markets—and did that not naturally result in sustained economic prosperity for the majority of our society?
As our middle class is clearly hollowed out, that's not happening today. Indeed, the anecdotal evidence is literally in everyone's face. Are the devices that populate your daily existence constructed by American hands, or others? (On a related note, how about the manufacturer of your vehicle?) After all, what customers chose with their wallets is meaningful. Thus, one can reasonably infer that a common sense reason exists as to why American businesses are not patronized as they were by past generations. Logically, at its root is the reality that the consumers' needs are no longer being met so they have looked elsewhere. What's also apparent is that, generally speaking, American companies are being outcompeted by their international counterparts for the world's largest market share.
How is that happening? It's because U.S. businesses rely upon financial shell games designed to generate profits on their balance sheets. This has the superficially positive effect of artificially buoying the stock price (benefiting executives' salaries and stockholders' investments), while inversely gutting the real-world ability of a company to compete in the global marketplace. If that is not the case, why do American corporations widely participate in cost-slashing measures like corporate inversion, using inferior components in U.S. products (read: bailed out GM's Ignition Switch Scandal) and outsourcing jobs?
Contrast that mind-set with fundamentally producing products and services that excel at satisfying one or more customer needs for a true competitive advantage in the worldwide market. Instead, U.S. companies engage in modern-day finance-based parasitic behavior: absorbing weaker firms, often stripping them of their employees and selling off divisions for quick infusions of cash to elevate the “almighty” stock price. In popular culture, this dynamic was immortalized by the contentious exchange between corporate raider Edward Lewis (Richard Gere), and embattled “old-time” business owner Jim Morse (Ralph Bellamy) in “Pretty Woman” (1990):
Morse: “Mr. Lewis, if you were to get control—and I don't think you will—but if you did, what do you plan to do with the company?”
Lewis: “Break it up and sell off the pieces.”
Morse: “I'm sure you'll understand I'm not thrilled at the idea of your turning years of my work into your garage sale.”
Lewis: “At the price I'm paying for this stock, Mr. Morse, you are going to be a very rich man.”
Morse: “I'm rich enough. I just want to head my shipyard.”
Morse represents the only viable direction by which America can rightfully regain her former glory as an economic superpower—exploiting technology more effectively than the competition for products and services that have a true competitive advantage in the marketplace—technology-based planning. By contrast, Lewis is just manipulating the finances to produce a profit. He doesn't create anything of value to society; he exploits capitalism simply to further enrich his moneyed class.
As an analogy, following “Lewis's lead” is where so many U.S. corporations have gone wrong. In truth, such “monkey business” only produces an artificial competitive edge, and being artificial it is not sustainable. Eventually the company—as the country—runs out finances to manipulate and everything comes crashing down. A true competitive advantage in the worldwide market—as demonstrated by countries like China—is a result of exploiting the technology more effectively the competition. This is mandatory for businesses to thrive in the 21st century—and beyond!
How does one achieve this illusive key to lasting success? For that answer, one must look to Ronald Reagan's Commission on Industrial Competitiveness, circa 1985. Remarkably, this forward-thinking president was troubled by the overt financialization of the U.S. economy, and specifically, its adverse impact on American competitiveness. In response, Reagan launched a then classified initiative known as the Socrates Project with the mission of transitioning the U.S. back to technology-based planning—and away from the type of financial shenanigans mentioned above. It was so astonishingly effective that it far surpassed what countries like Russia, Japan and China were executing or could execute in the foreseeable future.
In turn, the Socrates Project developed the Automated Innovation System. Today, it can map global technology—high-tech, low-tech, “no”-tech –in real time. In function, it operates like a digital four-dimensional chessboard showing foreign organizations' and countries' plans for exploiting worldwide technology. Specifically, it details the full range of present and future technology opportunities, and constraints, that can be exploited by U.S. public and private organizations for the essential competitive advantage to bring true and lasting economic prosperity back to America. How wonderful would it be for President Reagan’s vision to be finally realized in 2017! If spearheaded by the Trump administration, private industry and government can adroitly outmaneuver foreign competitors in the exploitation of worldwide technology at will.
Furthermore, the Automated Innovation System dictates how funds, manpower and natural resources etc. must be deployed to generate the all-important competitive advantage. Specifically, the System shows how money, and the wide range of other resources, should be appropriately allotted, while simultaneously detailing up-to-the-moment strategies that block competitors with equivalent aims. Vitally, it operates in the time frame before a new product or service comes to market—from a few months to several years. That's important because this ability eliminates the sudden emergence of so-called disruptive technology that, at present, consistently catches flatfooted American corporations unaware.