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THE CORNER

Homilies abound about ‘turning the corner’ but accurate manifestations are often elusive. These days, it is difficult to predict anything with reasonable certainty, but I continue to envision what might be relative to what is. In other words, hope springs eternal, but must be moderated by reason and analysis.

To be sure, we have entered a zone that is rife with swindles, exotic business deals, political jousts, global protests, sectarian conflict, revolution, resource depletion, climate change and unsustainable financial mischief that is leading nowhere. While this may seem negative, just listen to the news or read any sensible journal. Of course, the U.S. housing market is enjoying a moderate rebound, the DOW remains reasonably strong, consumer confidence is beginning to recover, and business is hiring. The central question pertains to sustainability.

Reports conflict over whether there is growing geopolitical harmony or if the fenders are rattling more than meets the eye. Dispassionate analysis indicates little real progress and a growing ‘reality avoidance’ posture. Who knows what the real story is in Greece, Spain, Italy, France, England, and the rest of the EU? Some sources indicate a culture of ‘false positives’ that are being reported to boost nationalism and continental morale. What is really happening and how it may impact this country is anyone’s guess. The same is true with China, Russia, India, Brazil, Mexico and other struggling economies. Are they reasonably healthy and will they contribute to a stronger global economy?

A June 15 New York Times article (Even Pessimists Feel Optimistic about the American Economy) touted “the start of a new era of cheap energy,” in the overblown assertion that the worst is behind us. ‘Cheap’ oil was historically less than $20 per barrel and allowed massive progress throughout the 20th Century. Current prices rarely fall below $90 and can whimsically soar to over $100 (recently $107). Plus, current oil supplies are expensive to extract and refine, so expect prices to escalate. Oil will not be cheap; nor will education. Quoting George Mason University professor Tyler Cowen, that same article blathered on about how learning is being transformed by on-line education, which opens new doors to those without the means to take traditional university courses. However, the value of many on-line degrees remains highly questionable, regardless of the price. America needs technicians, scientists, engineers, doctors, mathematicians, physicists, chemists, and machinists. It’s difficult to produce talent in these fields through on-line courses.

Turning the corner requires thoughtful analysis of various realities and how those realities factor into an uncertain future. The number of U.S. citizens living in poverty is at an all-time high. The cost of living is high and inequality among various social strata is America’s greatest cultural and economic de-stabilizer. While many are doing well, the vast majority is not. Wages have not kept pace with the cost of living, health care is expensive and the best methods of providing affordable care are constantly debated; the U.S. remains far behind other countries in educational performance; our crumbling infrastructure needs a $2 trillion infusion; and the economy remains based on service instead of on value-generating production.

In a recent Charlie Rose interview, co-chairman of Pimco Bill Gross expressed that the headwinds were strongly against wage increases for American workers as the competition between man and machine accelerates. More jobs will be lost unless re-shoring gains momentum and new production facilities are built. Deleveraging has reduced personal, business and sovereign debt but has also reduced the inclination to invest, at least until there are stronger signs that 3 to 4 percent returns are possible.

The remainder of 2013 will be relatively strong, with general stability and cautious optimism. The U.S. will see slightly higher inflation, marginally higher interest rates, around 2 percent growth for the year and perhaps over 2.5 percent in 2014. As with all probability forecasting, there are too many ‘Black Swan’ variables that may enter the equation. In my view, the corner has not been turned and we may not be building enough momentum to generate a robust 2014. For the remainder of this year, the best course is to invest in planning, careful analysis and conservative opportunities, while building a stable platform for a stronger 2014. There are highly volatile forces at play, so stay focused and prepared.

JFL Pic Blue Shirt-Yellow TieWith over three decades working in and with federal, state and local government, John Luthy understands public agencies. Known for his real world, straight talking style, he is a leading futurist specializing in city, county, state, and federal long-range thinking and planning. John is the author of Operations Planning: A Guide for Public Officials and Managers in Troubled Times, and The Strategic Planning Guide, both published by the International City/ County Management Association (ICMA). Reprints of his book, Planning the Future – A Guide to Strategic Thinking and Planning for Elected Officials, Public Administrators and Community Leaders (2010) has sold out three times. An innovative and dynamic presenter, John is frequently asked to speak and consult on how to prepare public organizations and communities for emerging challenges (public futures at http://www.futurescorp.com).

Evolving America

During the Great Depression, there were common themes that defined the experience for virtually every citizen. Economic and climatic upheavals surged across the land, affecting young and old, rich and poor. Very few were untouched. The value of such broad, catastrophic social suffering was that it forged bonds that would inadvertently prepare the country for the horror of a World War that it had tried so hard to avoid. When it came, the nation was more ready than it realized.

The deprivation that defined the years from the mid-1920s through the end of WWII created a determined, if not fully unified society of survivors, entrepreneurs, and warriors. This unique combination has carried America forward over the past 65 years and created a foundation for a nation that can, and should, endure. Clearly, there are signs that the fabric is fraying. While there remain some that continue to celebrate all that America is and was, there are just as many who offer cautionary counterpoints suggesting decline is underway.

Much like the Great Depression, the Great Recession of 2008 has reshaped America. After a profligate six decades, debt has been reduced, savings are growing, and there is evidence that more people are considering the long view and their legacy as citizens of a planet under duress. More importantly, collectively concerned voices are being raised over poor educational performance, political gridlock, public health, infrastructure decline, reduced economic vitality and wars that seem both constant and irrelevant. This century is being defined not by “imperial overstretch” as noted by Paul Kennedy in his 1988 book The Rise and Fall of the Great Powers. In that superb book, Kennedy raises the point that “the sum total of the United States’ global interests and obligations is nowadays far larger than the country’s power to defend all simultaneously.” It appears that all but the most jingoistic citizens would concur that the U.S. has a more important domestic agenda that needs immediate attention. While few advocate isolation, there is growing advocacy for more intervention here at home and less in the affairs of others.

Containing only 5 percent of the global population, the U.S. still produces a quarter of the world’s economic output. This has remained unchanged even during the 5 years of difficult economic recovery. While we might cautiously celebrate the ‘rise of the rest’ we have also proven quite capable of competing successfully in volatile global markets. More importantly, there are signs that America’s entrepreneurial power is being reenergized. It now seems humorous that, in 2008, German finance minister Peer Steinbruck strongly stated that “the United States will lose its status as the superpower of the global financial system.” Since that time, the EU has struggled, the DOW is above 15,000, and U.S. financial institutions and industry continues to cautiously recover.

Perhaps the greatest benefit of this recession and recovery is that it returned many citizens to their roots and away from habits that lead to fiscal disability and instability. While some generational variations exist and educational levels remain a factor in employment, there are evolutionary signs that bode well for America. Overseas production costs and issues continue to rise, encouraging U.S. on-shore industrial resurgence; technical education is being seen as equally essential to this new American Century and more students are opting for careers based on technical know-how; talent clustering has become a reality, creating magnetic cities and regions that attract highly educated and technically gifted people and industries that hire them; agriculture continues to grow as the U.S. remains a central global breadbasket; auto and home sales are up; and home debt is down, confidence is up, and consumers are beginning to cautiously spend. There is trepidation, but there are signs that America is on the move.

For those who review the data, I would ask you to consider whether it has been wiser to slowly work out of this recession and if deliberate growth might not still be the best course? It would appear that it is sensible to have more savings, less debt, and fewer factors that could derail a family, community or business. While austerity has proven to be a poor substitute for conservative investment and spending, it should provide a touchstone for why we spend and what value accrues. Public and private entities must seek long-term value and a return on every investment. Rapid expansion fueled by easy money and profligate consumers devolves into giant Ponzi schemes that have doomed entire communities. An evolved America must seek consistent, sound growth platforms fueled by technology, education, long-term investment, and entirely new methods of collaboration. Individuals, business and communities must live within their means and learn to thrive on stable foundations characterized by innovation, sharing, collective will, common vision, and discipline.

There are signs that we are evolving back to the level of sensibility and rational thought that defined the Greatest Generation. Frugality can coexist with entrepreneurial energy and conservative ideals can provide curbs that can keep us on a progressive path. It is essential to understand that a lot is happening in the global ecosystem and the ripples will continue to wash upon these shores. But the real key is to take the point and lead during uncertain and troubled times. America has done this and done it well. It can do it again if it maintains a clear vision of the desired future…but rest assured that it will be simultaneously challenging, frightening, enlightening and rewarding.

 

JFL Pic Blue Shirt-Yellow Tie With over three decades working in and with federal, state and local government, John Luthy understands public agencies.  Known for his real world, straight talking style, he is a leading futurist specializing in city, county, state, and federal long-range thinking and planning. John is the author of Operations Planning: A Guide for Public Officials and Managers in Troubled Times, and The Strategic Planning Guide, both published by the International City/ County Management Association (ICMA). His new book, Planning the Future – A Guide to Strategic Thinking and Planning for Elected Officials, Public Administrators and Community Leaders, was released in October 2010. An innovative and dynamic presenter, John is frequently asked to speak and consult on how to prepare public organizations and communities for emerging challenges (public futures at http://www.futurescorp.com).