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The Next Economy

The economy is in transition.  Many of you think we’re headed straight downward, but there’s always a chance that better times lie ahead.  But what will the next economy look like?  Barataria has always taken a punt on this, stating that no one can possibly know what the Free Market™ will do.  But over time a few trends have become clear and we can be sure that a few changes are coming.

Why does this matter?  Because the sooner we can prepare for the next economy the sooner we can master it – and make the next business cycle one of prosperity for everyone.  There is work to do, but we have only started to do it.

Some of the most obvious changes were already incorporated into the Restructuring Plan laid out back in June.  But it’s time to explore the logic behind those and make the efforts we need much more clear.

Flexible Work Force  More and more companies are relying on temps and freelancers to get their work done.  This trend has accelerated during the Depression because of uncertainty – companies won’t hire workers if they think the need for them is only temporary.  But a technology driven economy is going to be a change driven economy, meaning that skills will be needed off and on to adapt to changes and set up new infrastructure in companies.  That work will always be temporary and project based.

The workplace regulations, taxation, and just about everything are not set up to handle this well and will have to be reformed to make this far more efficient.  Health care cannot continue to be tied to an employer if we are going to have a flexible work force as well.  We can see these changes coming already, but there is no reason to believe that the trends will do anything but accelerate.  That means major policy changes for governments everywhere.

Imports Our balance of trade has been terribly negative for a long time, and becoming much worse in the last decade.  That will change one way or another because wealth cannot leave any nation at this rapid clip without it gradually becoming poorer – and thus less able to afford imports.  Either the US Dollar falls in value or we will simply have less to spend.

That means that our manufacturing sector has to step up and claim a bigger share of what we consume here in the US, either because we make more or consume less.

Globalism Despite the likely decline in US imports, the rest of the world will rely more on trade as developing nations take a larger share of world product.  That means more containerized cargo and more niche opportunities for the US at the same time.  Not only could we import less in the future, there’s a reasonable chance that we might become an exporting nation once again as technology developed here starts to be made here and markets for it are increasing globally.

Our largest export, food, will continue to be a great strength for us in this world – but the more we can add value to food products rather than relying on bulk shipments the better off we’ll be.

Energy Independence  One big share of our imports is energy, and it is unlikely that we will be able to sustain ourselves if alternatives are not found.  The best way to tackle this is through challenge grants, but ultimately it will be driven by the Free Market™.

That’s not to say we might be completely energy independent, however, as oil will always be a globally traded commodity.  Our largest source of oil now is Canada, with Mexico coming in third.  Those imports within the close economies of North America will likely continue no matter what.  But to the extent we start to rely on our own sources and probably move to a methane based economy the more we can say we are not beholden to lands we do not have such a close relationship to.

Education Our school system is still very much designed to steer kids towards “careers” that require specialized skills that they learn in a tech school or college.  A truly flexible workforce will have access to constant retraining and the acquisition of new skills.  That will mean more adult education – and better ways to afford that investment in people.  It also means that kids would be better off knowing more about how they learn and acquiring critical thinking skills than to have their heads crammed with knowledge on certain topics.  When constant education becomes a necessary part of life, the most important basic skill is a curious mind.

These are a few of the changes we can see happening and accelerating around us right now.  There may be a few more.  What do you think the next economy will look like?  How can we change our policies to start mastering that economy today?

28 thoughts on “The Next Economy

  1. Education may be your last category but certainly not the least in importance. More & more it seems to be the poor relative in governmental budgeting. Our parents thought it important…why now do we treat it they way we do?

  2. You didn’t say anything about infrastructure but you have in the past. Clearly the decaying roads, bridges, water lines and so on are a big part of the next economy. I don’t know if we have to wire fiber optic lines up to every house but it might make a big difference.

  3. Jack: These aren’t in any particular order, and yes I agree with you. It seems that just about every discussion I’ve ever had on the next generation or the next economy always becomes a discussion of Education specifically. There is a very universal thread here that spans all political ideologies, too.

    Jim: I don’t know that infrastructure needs tell us much directly about the next economy, but we certainly have to be better at keeping up with them than we have been. I left it out because I couldn’t make a direct connection. If you have some ideas I’d love to hear them!

  4. I also want to say that education is far more important than all the others. The tax system is not designed for 1009 workers at all but it will make do for now. The rest of the changes in labor law have a huge bureaucracy built around them and probably can’t change quickly no matter what so they will have to do as well. The rest will probably take care of themselves as you point out. Education is the one thing that we can’t do without right now and as boomerjack said it is totally short changed.

  5. Anna: Because changing our employment rules will take time and necessarily move slowly, I would contend that this makes getting started now even more imperative. I think we are many years behind already. Besides, I really hate the “Self Employment Tax”. 🙂

    But I agree on education – no one is happy with the state of education, it seems. That is very telling.

  6. I think the new economy will have a greater focus on buying local. Rather than write more about this, here is another lazy link for anyone interested
    The Return of “Made in the U.S.A.” I think this buying local idea has broad appeal, as a conservative blogger I read is a big proponent.

    I also think the pace of change is going to accelerate, within schools especially, as they make education more individualized through the use of technology. I also think the growing networks created through social media will contribute to more rapid changes and help with the adjustment to the new economy.

  7. I was pleased to see that you mention both the trade imbalance and the need for a greater energy independence, I don’t think this drag on the economy can be overstated. In 2010, the trade deficit was around $500 billion of which around half was petroleum products.

    Like Social Security, Americans’ dependence on the personal automobile has a “third rail” quality in politics. Dissin’ the car may be bad for getting re-elected, but our motormania perpetuates energy dependence, ties up enormous amounts of personal wealth, is bad for the environment and squanders enormous land resources.

    If someone wanted to jumpstart the economy, make some real infrastructure changes to mass transit and get more cars off the road.

  8. Bruce: Thanks! It is a natural fit to start building rail lines, especially with so many construction workers part of the unemployment roles. Better to pay them to do something! I haven’t been on this one for a while but it is really important for our future.

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  17. I especially like the comment about education. I find that students are unable to synthesize the data/information they encounter to form new ideas. They are conditioned to “Google” everything and not remember, ruminate, and create. I realize that this doesn’t seem to relate to skill acquisition, but it’s basic requirement.

    • I think this does relate to acquiring new skills in a flexible economy. Information is one thing, but the faster you can absorb that information and put it into a framework that makes sense for you (your experience, style of learning, methods of remembering, etc) the sooner it can become a skill. To me it’s like the critical difference between science and technology – one is learning, the other is skill (techne in Greek). I think you are right at the heart of the problem here!

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