Here's How To Deepen the Recession

Gary Shapiro: Washington’s Fear of Failure Threatens To Foster Bad Economic Policy

(CBS)  Gary Shapiro is the president and CEO of the Consumer Electronics Association, which represents more than 2,000 U.S. high-tech companies and produces the International CES, the world’s largest event for consumer technology.

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The U.S. government's series of recent corporate bailouts threaten to undermine one of the most important elements of a successful market economy: failure.

In the technology industry, failure has been a powerful force for advancement. Technologies are displaced as newer, better ones emerge to meet the changing needs of consumers and our society. The VCR gave way to DVD players, which in turn have been challenged by Blu-ray devices and Internet streaming. The beneficiaries of these failures are consumers and by extension, the economy itself.

Economist Joseph Schumpeter described this process of disruptive innovation as "creative destruction." For the technology industry, creative destruction forces even the most established players to adapt to the changing demands of the market or risk fading away. The American economy and consumers have historically benefited from this perennial cycle of improvement. Innovations get better, faster and less expensive for consumers. Meanwhile, more jobs are created to make room for new opportunities and evolving consumer demand.

The innovation cycle is much like life itself - the best lessons come not from success but from failure. In Washington, our lawmakers seem to have forgotten that important rule. As Congress has rushed to bail out failed banks, life insurers and car companies, it has embraced a market system where failure is not an option.

The government is now said to be considering whether to open up funds from the $700 billion bank bailout to small businesses. Of the 2,000 technology companies represented by my organization, 80 percent are small businesses. Many are hurting in today's tough economic climate, and some will undoubtedly go out of business. It is incredibly tempting to enact policies that protect organizations large and small from filing for bankruptcy and laying off employees.

Government intervention sounds comforting when you're on the down and out, but it is not a sustainable national strategy. If we continue on this course of bailing out failed companies - some which have failed to innovate and adapt to market changes for years - we will only serve to deepen the recession.

By staying its current course, the government will create a business environment where healthy companies are forced to compete with government-subsidized competitors. Good ideas and innovations will be slower to come to market. Prices will remain higher. And America could very well lose its competitive edge to other countries.

Instead, we need to allow the market to function properly and give entrepreneurs room to rise to the top. For entrepreneurs to usher in the next great company that will create jobs and economic opportunity, we need to let failed companies - fail.

Congress has an important role to play in the U.S. economic recovery, but first our lawmakers need to have more faith in the innovation economy and free market system. Indeed, policy action is needed to strengthen the economy, create jobs and ensure long-term economic growth. We should eliminate trade barriers for U.S. businesses exporting their products overseas. We should reform H1B visa policies to allow more of the best and brightest immigrants educated at American schools to remain here as American employees. We should reward investment in new technologies and particularly encourage growth in alternative energies and broadband.

Fear of failure will destroy future economic success. For the technology industry, as Schumpeter taught us, failure is part of the innovation cycle. For the U.S. government, allowing - and even hoping for - some failure should be part of the plan.

This makes way for new technologies, new business models, and new companies. Indeed, although not immediately intuitive, failure should be part of what drives our economic recovery. Without it, we are stagnant, and if we are stagnant, we are already falling behind.

[g-gfather]

NO! Not with out their contribution to that end. Morality isn't just a concept to mock. Instead it is the core values that a society survives by. Dependency on others to fulfill ones responsibility is an immoral act that weighs heavy on the world today. Teaching non dependency by providing the tools and seed is what I do. If the tools are corrupted in there use and the seed eaten,so be it,welcome to the triage line. For the children. Great-Grandfather.

[eyesC]

Big Business is so use to feeding Congress so much money through LOBBIST that now they want some of that money back! Our congress is just as ADDICTED to lobbist as americans are to BIG CARS & OIL. Congress doesn't want to lose the BIG BUSINESS anymore than they do the LOBBIST.

[hoosierhysteria]

This jerk CEO is basically saying bring back the Bush and Cheney administration and all of its corporatist, deregualtory attitudes that redistribute wealth from the middle class to the ultra rich. This CEO's comment is nothing more than an advertisement to buy his product, in fact buy 100 of his products, and charge all of them on a 24.99% variable rate APR credit card while you are at it. To this I say to all right-wing corporatists out there, No Thank You.!!!

[diggyzazz]

The reporter is a shill for the business lobby. There are thousands of highly-qualified AMERICAN engineers looking for work. The only reason to bring H-1Bs (who are all in their 20s and unmarried) is to force down wages.

Employ American workers to lower unemployment and end the recession, idiot.

[sjc_1]

We have lost much of our manufacturing and we were told that the service sector would provide the jobs, but they did not tell you that those jobs do not pay as well. Then to compensate for the poor wages they had sub prime mortgages so the real estate people could continue skimming off the top...money for nothing. Once we get back to productivity backed prosperity, we will be fine once again.

[g-gfather]

Please think more deeply than this. Any economy based on ever increasing consumption will drown all of us in our own excrement.
We should not to be at each others throats,but at this time of waning resources, be in service to all humanity in use of those resources remaining seeking sustainability in economic policy that recognizes the extinction all humanity faces on our present course.

For the children. Great-Grandfather.

[John_Merritt]

That is all well and good, but humanitarian efforts are fruitless unless you are going to put food on another person's table, and clothes on their children's backs, and healthcare. RU willing to do that?

[Madia45]

6 Million are out of work. Do you mean to tell us that out of 6 million people you can't find any "best and brightest". It was Americans that built most of these companies asking for foreign laborers - all of a sudden they all became not the best and brightest? I find these excuses insulting to Americans and we ought to remember these companies when we are at the market and the politicians who support them when we vote.

Microsoft and IBM were built into what they are today by US citizens. If someone from another country wants to come here to work, live, raise a family, then welcome to America. But if you come here to take someones job away your are not welcome. Unfortunately that is exactly what happens with many of these folks who come here as temps. This economy cannot sustain without the US middle class - keep putting us out of work and watch your profits dwindle. http://www.madnamerica.com Time to change the trade laws and tax laws to protect American jobs instead protecting companies abusing the system.

[John_Merritt]

You are so right. We built the infrastructure, those days are gone. But now, the companies have been built and now they are looking for system efficiencies which they can do with the limited number of domestic workers, and rely on foreign workers for the 'nuts and bolts' technology. They will keep as many of the brightest and best they can, but they will rely on the the most cost effective way to stay competitive.

[Jake Leone]

The boom-and-bust cycle started by Greenspan, and encouraged by lax regulation of the Bush Administration caused the current economic crisis.

All companies, around the world, are suffering, many foreign auto companies are asking for government help (need I say more).

The overall truth is that we have included nearly 2 billion more workers, in China and India into our economy. These people will work, at slave-labor, for food (and that's not right because it undercuts healthy middle class growth).

If we want to keep on growing, then we need to increase raw-material and energy production. We need also to print more dollars, as not doing so will just cause deflation (AKA boom and bust), which will lead to more foreclosure and damaged, impotent, industries.

A hundred years ago you could fill the backseat of your carriage with food with 3$. Now we have 6 times the number of workers, and that same amount of food costs 200$? Yet we still prosper.

When you increase the size of your workforce, you need to increase both the raw material, energy, and dollars in your economy, or risk massive, destructive deflation, that only scars industries and hampers future growth.

We can either do nothing and take a mental vacation while more Ghost towns are created in the United States (which is what the fool who wrote this article is actually advocating). Or we can meet the challenge head-on and whip it, with common sense and experience.

[renojmc]

We need to print more dollars??!! Are you nuts? You're obviously another clueless liberal who has no understanding of basic macroeconomics.

[Jake Leone]

No, you are clueless. In fact many people don't realize that the fed just ordered the printing of nearly a trillion dollars to beef-up the margins of banks.

The bank of England is openly discussing printing more pounds as response to the deflationary economic crisis.

The heavy borrowing of the Federal Government is an attempt to boost the amount money by increasing the money supply through borrowing. But it can only go so far, until the U.S. runs out of credit, then a real Depression will ensue.

BTW, where do you think the extra money in the economy comes from? It isn't just margins or circulation that turned the penny that could by a meal in the 19th century, to the 10$ that you need today.

Right now we are experiencing deflation, which is far more destructive than modest inflation. The U.S. is not experiencing inflation right now, because million of workers in China and India are willing to work at slave wages.

To actually boost their standard of living, as well as ours, we need to print money as well as make available more natural resources. In fact, I recommend, printing another trillion and investing the proceeds in energy and resource production. The result would actually be very beneficial to the world and it's working class.

Without increased energy and resource production, as well as more dollar the next crisis will either be heavy inflation or massive deflation caused by the federal governments inability to pay back the 10 trillion dollars we have borrowed. So fool take your pick, because you are stuck in mental trap of (dollars must be equated to some standard like say gold or silver, well that was 70 years ago, when we last had depression), or you can choose the only alternative that will work.

[Jake Leone]

If you want to create jobs in the United States, instead of seeing millions of jobs removed from the United States, you need to heavily limit the usage of H-1b by companies that are actively removing jobs from United States soil.

The H-1b Visa is called the "Out-sourcing" visa by Senior Indian government officials.

http://www.iht.com/articles/2007/04/12/business/visa.php?page=2

Check out the following:

http://www.businessweek.com/bwdaily/dnflash/content/feb2007/db20070208_553356.htm

http://www.msnbc.msn.com/id/17048048/

The H-1b visa is being used to remove jobs at all levels within the United States.

[sjc_1]

International CES is a cesspool of gadgets. We used to produce wonderful capital equipment in Silicon Valley that enabled the advancement of other industries and had leverage. Now they produce cellphone and video games for the attention deficit challenged crowd. This is a bad trend toward consumer technology and away from valuable capital asset advancement.

[voxpopulus]

How to deepen the recession? Listen to Republicans.