Forums: Discussions for entrepreneurs and small business.

I`ve been following the forums here for a couple of years. During that time, we`ve entered into what many people say is a downturn, others say is a core change to the global economy.

Throughout it all, we hear about "productivity."

The word seems mysterious, but it really only means "to produce things." American productivity has been falling for decades. But what does that mean?

It comes down to what do we, as a nation, actually produce? We used to build things, invent things, and sell it all to the rest of the world. The great industrialists, those who made empires and tremendous fortunes, all had real and tangible products.

Except for the bankers, and they`re a special case.

But people like the Rockerfellers, Vanderbuilts, Pratts, Whitneys, Woolworths, and so on, became tycoons because they really built things. The result of their work was tangible, concrete products.

That`s all changed. In the past 50 years, America moved towards a service industry, and an information culture. We started selling services and offering "know-how" and consulting to people.

We started buying all the new stuff from overseas. The words "foreign exchange" and "trade balance" refer to how much we`re buying from someone else, versus what we produce and make, then sell to someone else.

The whole concept of putting together a business and making money on ad-words, advertising, or whatever, begins with lack of product. It`s a decision to continue with no productivity, and hoping that someone else will pay for nothing much at all.

Will this work in today`s economy? I don`t think so.

The economy is going to start rebuilding itself when there are real things being made. Corporate "downsizing" involves laying off people who move paper from one desk to another. Manufacturing jobs are rapidly going overseas, and even the services are being outsourced.

What`s left? If we don`t start making things again, nothing`s left.

There`s a tremendous price for convenience. And when people don`t have much money anymore, then one of the things they stop is paying for that convenience. When they`ve got money, they go to restaurants and fast-food places.

With less money, people learn to cook at home. They learn to repair things. They learn to make their own things. And that means businesses offering niche-level convenience are going to have real troubles.

What are your thoughts? Will we bounce back from this so-called recession, and go back to "normal?" Will that mean an ongoing slide into producing nothing and only buying things from the rest of the world? Where will we get the money to buy those things?

Hey there Ricky :-)

It`s true the life goes in circles, or perhaps gyres and spirals. What I think most people totally ignore (or forget) is that "circles" don`t at all have to mean a few years.

In most cases, a pattern or circle involves 100 years or perhaps more. I`m recently being fascinated by the concept of a seculum, which is a long human life of about 80 years and four generations.

What we`re seeing today is almost identical to the conditions just prior to the American War of Independence from England. Only this time, it`s Washington not "the Crown" that`s initiating the unrest. But the people living in 1750 and thereabouts were doing about the same as we`ve been, back around 1990.

The same events, same tax problems, same financial problems, and so forth, gradually built the pressure for the colonies to declare their independence. Just so, we`re starting to hear about secession, local state governments talking about invoking State`s Rights to ignore Washington directives, and so forth.

The "tea parties" are another example. Washington is more disconnected than ever before from the citizens, particularly productive people. Barney Frank, yesterday, said that making money isn`t his problem. Congress isn`t there to help people make money! How insane is that!?

Another cycle took place in 1893, carrying forward through WW1, then WWII where it finally ended. There too, unions were doing severe damage to businesses, just like GM and the UAW. Anarchists wanted everything to fall apart, and the federal government was confiscating whatever they could.

So yes, life does go in cycles. But not 10 year cycles. Keynesian economics is responsible for the short-length cycles of "boom and bust," better known as inflation-recession. Those aren`t the cycles that will return the US to a productive nation, though.