The Mouse Trap
The Mouse Trap
The Mouse Trap
The Mouse Trap
Frenchy Shaprio
It was once said that if you build a better mouse trap the world will beat a path to your door. This has been true throughout the beginning of the United States. What I mean is that the economic success of the United States has always depended on building better mouse traps. The first of several mouse traps for the US was the locomotive engine of the mid-nineteenth century. It sustained our economy for nearly forty years.
The locomotive engine and the railway system that went with it revolutionized travel and created the economic backbone for the United States. Goods could be transported across the country quicker and cheaper; what a concept. It created thousands of jobs from running the railroad to building them. Spin- offs of the locomotion revolution included steam shipping. Now goods could be transported safely, quicker and cheaper across oceans; amazing.
However, by the late nineteenth century the locomotive economy became saturated. Today we would say that economic bubble burst. There was no worry though, because right around the corner was the next mouse trap, the automobile. This new innovative way of travel again spelled jobs for hundreds of thousands if not millions of people, between building cars, retrieving oil and gas, roads, rubber for tires, stop lights and laws and regulation. Dove-tailed with the automotive industry was aviation. This next mouse trap sustained the US economy through the last part of the nineteenth century up until the Great Depression.
During the lost years of the Great Depression there was no new technology to revive our faltering and fragile economy. It could be argued the financial practices that lead to the Great Depression were to sustain a faltering economy because the automobile bubble burst and there was nothing to replace it. Sound familiar? Let's continue and see. Despite monumental economic policies our economy wasn't rejuvenated until our entrance into WWII. Though there was weapons innovation, most of the emergence of a strong US economy was based on the production of a colossal war machine which was able to beat back the enemies of freedom effectively.
After WWII, though the United States did slide into a recession. Since there was no need for war materials any longer and troops were returning to the work force, and considering that the US was the only industrialized nation with an intact infrastructure, it was able to become the initial producer of goods for a war ravaged world. Adding to our prosperity was the invention of the transistor radio which was quickly followed by the mass production of television - the mouse traps of the 50's and 60's. A whole new media industry was invented, which allowed the entertainment industry to develop into its own economic force which is such a big part of the world economy today. Don't believe me? You should watch "Mad Men" on AMC.
During this time of prosperity the United States developed a standard of living not seen anywhere else in the world. This unprecedented standard of living was fueled by the fact that labor demands were never challenged since there was no competition from the global markets yet. Europe and Japan were too busy digging out from WWII. This was also the period where many said that we've seen to most progressive tax policies of the United States. Why not? The sky's the limit the United States was on top of the economic world.
In the late sixties there were those who believed that if the United States was to remain competitive in the world market for the last quarter of the twentieth century, manufacturing needed to automate and emphasis needed to be put on research and development. Unfortunately opposing forces such as the UAW and the Steel Workers Union believed that it was unnecessary and that the American labor force was untouchable.
Then came the seventies and flaws in our system became visible. We could no longer ignore foreign competition. Europe and Japan finally dug out of WWII, and transoceanic shipping became affordable. The once indestructible US auto industry became threatened by upstarts such as Datsun, Honda, Toyota and Volkswagen. Steel could be bought in Germany and shipped here for less than it cost to make here. Foreign countries had the new mouse trap, manufacturing goods cheaper and more efficiently. America had lost its edge.
There were those in the eighties that were able to help us escape the doldrums of the seventies. Lee Iacocca, for one, revitalized Chrysler by investing in automation, research and development. Still there were those that opposed such a concept; these are the ones that wish for the status quo in an ever changing world. You know the type - the thirty five year old nurse who thinks the best time of her life was when she was the head cheerleader in high school.
With this renewed confidence we were able to develop a new mouse trap, IT. Through the nineties the United States once again had the world beating a path to its door. Soft ware engineers became millionaires overnight, commanding outrageous prices for their work because, once again, the lack of competition.
The United States itself was also prosperous with a project budget surplus. This occurred for two reasons; one- higher taxes, the other and more importantly -billions of dollars invested into the free market. IT experts didn't mind paying more taxes because they were making six figure salaries. Many investors believed they would be able to retire by the turn of the century on their IPO investments. These people took money from savings where it really couldn't be taxed much and put it into the free market. Once in the free market tax revenues could now increase. Why? Those invested dollars were now allowed to work creating tax revenues in the form of sales tax, payroll tax and income tax, which would not have been possible if it had remained in savings.
Unfortunately this technologic evolution occurred very rapidly and with the advancement of globalization the rest of the world caught up with us quickly. Suddenly million dollar software firms found themselves competing with Yuri in Odessa and Sandeep in Sri Lanka working on their kitchen tables(just like this article is being written) giving clients the same quality product at a fraction of the cost.
Late in 2000 the .com economy bubble burst. Since that time what has been there to replace the last mouse trap? Nothing, forget about it. The powers that be decided one possible way to keep the economy going was to invest in the housing market. Now the disenfranchised poor could afford to buy a home with no money down, allowing them to fulfill the American dream of owning their own home. In a classic robbing Peter to pay Paul scheme, investment bankers actually bet on mortgage failure hoping to invest in the next mouse trap before it all came crashing down on everyone. In other words the gamble was for home construction to bolster the economy until the United States came up with the next mouse trap. Unfortunately it didn't, and the crash of 2008 happened.
In 2009 a massive stimulus package was passed by congress in order to revive the economy. This is based on Keynesian economics which believes that if you give someone a dollar, they put into the economy and it multiples into two or three dollars. On paper this sounds good, but in reality it's been shaky. Even Christina Rohmer, the former director of President Obama's economic advisors, believes the multiplier is .8 at best. In other words we're only getting eighty cents for every dollar we invest, which is not good. The hope was that things like shovel ready jobs and tax breaks for commuters using mass transit would stimulate the economy. Unfortunately, what's the use of a new road or mass transit if there isn't a job at the other end?
Why may you ask? When people talk about Keynesian economics, the phrase that gets thrown around is that we are priming the pump, sort of like investing in an idea with a payoff in the end. The way I see it, you can prime that pump all you want, it's not going to do any good if the well is dry. That's right - from a new technology point of view, the US is out of ideas. There still isn't a new mouse trap in the pipeline, which equals a dry well.
Some would ask what about green jobs? Is that the next mouse trap? Well not really. Unfortunately green jobs are a little like re-inventing the wheel. Let me explain before Green Peace tries to burn my effigy at the stake. Over the centuries the wheel has sort of been re-invented. Compare a caveman pushing a boulder over round logs to a Ferrari on Michelins - same concept, different outcomes. It's the same with green technology, the same technology just more energy efficient and better for the environment. Really how long will it take for the wind turbine technician market to become saturated? I give it three years.
We need to be innovated and creative but, I have concerns. Why? A lot of people know what Snookie said last night on Jersey Shore, but can't tell you what contributions George Washington Carver made to science. High school students have no trouble naming twenty beers, but can't tell you the last five Presidents. Entrepreneurship is being stymied by regulation, taxation and a fear of competition. If this country is to survive legislation and politics will only help so much. If you don't believe me, remember that all of the net jobs created in the last thirty years were because of new business. We need a better mouse trap and we need it fast.
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