Gr's Economic Future

[Freddy C]

What is the medium term future of Metropolitan Grand Rapids given that it is so strongly linked to sector of the American economy that is losing its comparative market advantage to China, India and other developing nations? It once was the case that our innovation and quality compensated for our higher production cost related to labor and environmental restrictions, but that advantage of ours is dissipating.

If Grand Rapids is to a 21st century success story...it will have to rapidly diversify away from Manufacturing and intensely start to build and market itself in the none tradable, non export economy of health care and services. That does not mean that GR needs to jettison its manufacturing, but that GR needs to see the hand writing on the wall in regards to global realties and the lose of US comparative advantage.

[superNOVA]

I think that they do get it. However, the doom and gloom reports of the US economy and manufacturing are just that. Almost every sector is still growing, and it will not vanish. Couple that with the fact that most overseas growth is owned by American companies. If Steelcase were to move 5,000 employees to China, they would still be bringing the profits back here. When a corporation profits, it spends the money in various ways - usually towards higher level development and design. What we will see will be more tedious industrial jobs leaving while skills based job grow at home - along with the profitability of the business.

What we really need to work on is education, to make sure that tomorrows workers are prepared to do more than just press a button for the rest of their lives. This is not a GR issue, it is a national issue. But there is no reason to believe that the next generation will not rise to the challange. That is the beauty of America - you are self made, and you do only as well as you want.

[Freddy C]

I think that they do get it.  However, the doom and gloom reports of the US economy and manufacturing are just that.  Almost every sector is still growing, and it will not vanish.  Couple that with the fact that most overseas growth is owned by American companies.  If Steelcase were to move 5,000 employees to China, they would still be bringing the profits back here.  When a corporation profits, it spends the money in various ways - usually towards higher level development and design.  What we will see will be more tedious industrial jobs leaving while skills based job grow at home - along with the profitability of the business.

What we really need to work on is education, to make sure that tomorrows workers are prepared to do more than just press a button for the rest of their lives.  This is not a GR issue, it is a national issue.  But there is no reason to believe that the next generation will not rise to the challange.  That is the beauty of America - you are self made, and you do only as well as you want.

<{POST_SNAPBACK}>

I think as an issue of national security, America cannot allow its manufacturing base to dissipate. It needs to be able to mobilize and ramp up during times of serious wars (not like Iraq), but with a nation like China or Russia. It would not be wise to let our manufacturing infrastructure crumble. That having been said, America has lost its comparative advantage in most manufacturing. Manufacturing that relies more on robotics and artificial intelligence might remain to our advantage.

In the global market for labor was unconstrained, one would find that the American worker could not maintain its high standard of wages and salaries. The law of supply and demand in a free market of labor would severely bring down American wages towards the global equilibrium point. Currently, the supply of labor globally far exceeds the demands in not only unskilled labor or uneducated labor, but in skilled and educated workers. Globalization is a means to move closer to a global free market for labor.

Currently, American companies ARE fueling the growth of opportunities in Asia, as you stated, however, soon, these nations will not NEED American companies to provide these jobs. Soon, this nation will develop home grown companies that compete with the American companies...and will not need the American companies anymore. When that happens, not only will American jobs be lost, but also the viability of American corporate profitability will be eroded as well.

Given that America as a whole ranks somewhere around 16 globally in the test scores in math and science of the youth, while Asian nations lead the pack....the long term picture is clear. We have been talking as a nation for years about improving education...and it

[daniel nudnik]

I think you are both right in a sense, and that the city is moving in the right direction in any case.

First of all, the future is in services. Specifically that means education and healthcare. In the "mid-term" - the next 30 years - the greatest growth in the state's economy will be in medical and health-care research, service provision, and financing particularly. While the Detroit area continues to see its specialist clinics and research hospitals closing and contracting, Grand Rapids expands those very sectors. The future promises increasing research funds flowing into the area, especially with the location of MSU's medical school and the ongoing development at the cancer centers, heart clinics, and of course the van andel institute.

Education is also going to be huge. I can't predict for sure if the state will capitalize on our (astounding) institutions, but the potential is there (if they stop building freeways for example) for tremendous development in the life sciences, urban planning, liberal arts research, and engineering fields. The first step is to get both the Governor and the state House/Senate to take funding increases seriously. This does NOT mean raising taxes, it means setting priorities better.

Manufacturing is not the future but it is not going to disappear either. 100 years ago agriculture ceased to be the most important sector of the country's economy. 100 years later we still have farmers. Likewise, Michigan can and will retain some of its manufacturing infrastructure, but probably not without considerable state support (tax breaks, incubators) and active assistance.

As for corporate profits, once executive wealth reaches a certain level, that money ceases to pour into the local economy. Case in point, the Lacks family doesn't have nearly as much cash as the DeVos family does, but they donate nearly as much every year. Trickle-down economics is a fraud.

The good news is that the growth areas of Michigan's economies are pouring money into Grand Rapids. The good news is that for the development of either of those sectors there is no pressure / need to cut revenues for valuable services, or lower environmental standards for everyone. We are now able to preside over a new generation of development in which everyone in the state and city can share and gain. The key is making sure nobody tells us to the contrary.

[superNOVA]

As for corporate profits, once executive wealth reaches a certain level, that money ceases to pour into the local economy. Case in point, the Lacks family doesn't have nearly as much cash as the DeVos family does, but they donate nearly as much every year. Trickle-down economics is a fraud.

You are confusing personal profits and corporate profits. Lacks and DeVos own their own companies, neither are public. Hence all profit does eventually make it to them. In the real world (outside of the fiercly independant GR market) there is a lot more corporate ownership. You don't have the DeVos's, you have CEOs, and shareholders. By spreading this money out, it is divested into a diverse amount of interests. Most divested money is reinvested elsewhere - spreading the wealth.

This is one of the basics of capitalism, and an explanation as to how this nation has weathered so many of these economic 'bumps'.

[daniel nudnik]

you're right about my confusion, but still the theory of capital investment in the context of corporate profit holds true most reliably when it comes to smaller business. in larger business enterprises, substantial research evidences very little actual shareholder control. (see galbraith's "innocent fraud" and "affluent society.") some of that research dates to the 1950s.

tyco and enron would be two examples of the theft of investment power from shareholders into the hands of CEOs who then personally take the wealth out of circulation. but I'm afraid that digression is out of the scope of the grand rapids discussion at hand. better to be considerate to the other readers than continue exploring this here.

You are confusing personal profits and corporate profits.

[Freddy C]

You are confusing personal profits and corporate profits.  Lacks and DeVos own their own companies, neither are public.  Hence all profit does eventually make it to them.  In the real world (outside of the fiercly independant GR market) there is a lot more corporate ownership.  You don't have the DeVos's, you have CEOs, and shareholders.  By spreading this money out, it is divested into a diverse amount of interests.  Most divested money is reinvested elsewhere - spreading the wealth.

This is one of the basics of capitalism, and an explanation as to how this nation has weathered so many of these economic 'bumps'.

<{POST_SNAPBACK}>

I think the old adage that it takes money to make money is apropos here. To really make money in stocks you have to have a considerable amount of money invested in the first place, which the average Joe does not have. One can get lucky speculating on an IPO and radically increase their return on investment, but that is not the norm.

I think American economy pulled all of its levers to sustain itself from decline. There are no more levers to pull. Interest rates were reduced to historical lows. Taxes were cut. The reserve requirement for banks has been lowered. Banks have lowered their income to debt ratio in leading for mortgages. Our country debts are being financed via foreign investment...and still the economy sputters along. The dollar is dropping without having the effect of reducing the trade deficits, as they hope that it would. As it continues to fall it could crash the dollar in currency market from a sell off of major holders of dollars, such as China and Japan. Ergo, the Euro is coming into fruition as the future currency reserve that replaces the dollar. The period of cheap oil has come to an end according to leading geologist and all economies are dependant upon energy to fuel their engine of growth.

In summary, the US is structurally weakened economically and most people do not realize the REAL threat that our economy is under going forward. It is very unstable and we have used up all the fiscal and monetary policies needed to stimulate growth. This cannot be sustained.

[mrknowitall]

there are more belle tires in gr than retail shops downtown.. we need more retail here.

like an old navy next to the new musem hole. i see that hole everyday from my office.

old navy or a another china resturant. i miss yen ching, even tho their chicken was the cube kind....usually brown meat and grissle.

[superNOVA]

in larger business enterprises, substantial research evidences very little actual shareholder control.

It is not about control, it is about money. A corporation exists of workers and owners. Owners hire workers to make them money. There is not a huge need for control when higher level workers are also owners. By making them partial owners you are giving them a stake in the company, you make it part of their interest to make it work.

It is not about greed, or paying them an unfair amount, or giving them more compensation. If you have someone running your company, you need to give them incentive. A CEO needs much more incentive than a line worker because the fact of the matter is, they are infinitely more important to the organization.

tyco and enron would be two examples of the theft of investment power from shareholders into the hands of CEOs who then personally take the wealth out of circulation.

And what about the other 10,000,000 large and medium corporations in the US that are not experiencing these issues. This is an example of a media blowout during a slow media cycle. These events are rare, yes, they happen, but they are rare.

I think the old adage that it takes money to make money is apropos here. To really make money in stocks you have to have a considerable amount of money invested in the first place, which the average Joe does not have.

Yes, but even owning a single share is ownership, and selling that share for something else is divesting, and reinvesting. The common man plays a huge role in this as they have more diverse investments and expenditures. Not to mention, these common people account for a great percentage of ownership. Current 401K programs and IRA programs the common man now has more pull than the seasoned investors.

Ownership is the basis for responsibility.

I think American economy pulled all of its levers to sustain itself from decline. There are no more levers to pull. Interest rates were reduced to historical lows. Taxes were cut. The reserve requirement for banks has been lowered. Banks have lowered their income to debt ratio in leading for mortgages. Our country debts are being financed via foreign investment...and still the economy sputters along. The dollar is dropping without having the effect of reducing the trade deficits, as they hope that it would. As it continues to fall it could crash the dollar in currency market from a sell off of major holders of dollars, such as China and Japan. Ergo, the Euro is coming into fruition as the future currency reserve that replaces the dollar. The period of cheap oil has come to an end according to leading geologist and all economies are dependant upon energy to fuel their engine of growth.

You buy into a lot of media hype. Taxes are still higher than what they were ten years ago. Foreign debt is a fraction of the world average, the European average is almost two times ours - and they seem fine. Japan's debt load is way above ours. Just two decades ago, comparatively, out debt load was more than two times what it is today (adjusted for inflation).

The economy is fine. The dollars correction is already correcting. The Euro is extremely overpriced. If you think that the dollar is bad, why would you buy a currency for a region that has not experienced economic growth in almost fifteen years? At least the US can manage a meager 3% growth rate during even the worst of times.

In short, we are just fine. The economy has been fine for almost two years. Unemploment is below perfect employment which is technically rare. What we have a people still spoiled by the late 90s and a media that is looking to give Bush a black eye every chance they get. I suggest really looking into the economic indicators - you would see an entirely different picture than that painted in the media.

[snoogit]

I dont know if anyone mentioned this, but if it has been it merits repeating.

Outsourcing for all of its profitable benefits has had a bad sideeffect on business, they they are losing customers. Most customers when they realize that a product was made elsewhere associate it with bad quality, and they don't buy it. If the Unions did something right it was convincing Americans that only good quality products come from America.

Also, I think GR is on the verge of landing a big name Pharmaceutical/Medical company to either move to or put a large regional office in Grand Rapids. I don't know who, but with all the revitilization going on in the Medical sector someone is bound to move here, or make a large presence here. Michigan St. is integrating itself more to the city then ever before.

[daniel nudnik]

you're right about outsourcing costing companies customers...not only for the reasons you mentioned, but also because nobody can afford to buy things when their job has been relocated to india and they have no income!

with the growth of the life sciences and medical research in grand rapids, who knows, maybe the city will give birth to a pharmaceutical firm of its own. it happened in michigan before (upjohn, now pfizer) when we were leaders in medical research at the beginning of the century. no reason it can't happen again!

quote=snoogit,Mar 15 2005, 07:02 AM]

I dont know if anyone mentioned this, but if it has been it merits repeating.

Outsourcing for all of its profitable benefits has had a bad sideeffect on business, they they are losing customers. Most customers when they realize that a product was made elsewhere associate it with bad quality, and they don't buy it. If the Unions did something right it was convincing Americans that only good quality products come from America.

Also, I think GR is on the verge of landing a big name Pharmaceutical/Medical company to either move to or put a large regional office in Grand Rapids. I don't know who, but with all the revitilization going on in the Medical sector someone is bound to move here, or make a large presence here. Michigan St. is integrating itself more to the city then ever before.

<{POST_SNAPBACK}>

[Freddy C]

You buy into a lot of media hype.  Taxes are still higher than what they were ten years ago.  Foreign debt is a fraction of the world average, the European average is almost two times ours - and they seem fine.  Japan's debt load is way above ours.  Just two decades ago, comparatively, out debt load was more than two times what it is today (adjusted for inflation).

The economy is fine.  The dollars correction is already correcting.  The Euro is extremely overpriced.  If you think that the dollar is bad, why would you buy a currency for a region that has not experienced economic growth in almost fifteen years?  At least the US can manage a meager 3% growth rate during even the worst of times.

In short, we are just fine.  The economy has been fine for almost two years.  Unemploment is below perfect employment which is technically rare.  What we have a people still spoiled by the late 90s and a media that is looking to give Bush a black eye every chance they get.  I suggest really looking into the economic indicators - you would see an entirely different picture than that painted in the media.

<{POST_SNAPBACK}>

People argued that the economy was fine prior to the stock market crash caused the great depression. The thing to note is the COMBINATION of negative variables firing at once, not the facts in and of themselves. The economy is driven by many different variables, working interdependently. The threat is that so many variables, in combination, are bad at once. For example, the housing industry and refinancing has helped to insulate the economy from a more severe recession. However, the cash out refinancing boom is petering out. Interest rates will rise and the housing sector will not be able to sustain the economy as it did. When interest rates, rise, credit money in the economy is reduced which ultimately reduces spending. Look at consumer debt levels and the stagnation of REAL income growth. There are many, many variables that are all pointing south.

[superNOVA]

Outsourcing for all of its profitable benefits has had a bad sideeffect on business, they they are losing customers.

They are also increasing customers. A more wealthy third world is a more capable customer base. Sure, companies that think that America is their only case may be losing out due to higher costs, but those with Global goals will see great gains in the buying power of the general population around the world. There is a short term price to pay to bring the world to equity and improve the standards of living for everyone.

There is always the option to be isolationist but that is neither in the best interest of our citizens, or our businesses. The best thing we can do is try to help the developing nations make it through this process as quickly as possible. As soon as that happens wage pressures will develop there, jobs will once again become liquid - skill will determine where something is made, not labor costs. Until the equity exists (or is close to existing) you will have companies focusing on costs.

[superNOVA]

Interest rates will rise and the housing sector will not be able to sustain the economy as it did. When interest rates, rise, credit money in the economy is reduced which ultimately reduces spending. Look at consumer debt levels and the stagnation of REAL income growth. There are many, many variables that are all pointing south.

So, the economy no longer needs to housing boom, or low rates to keep moving. Every single economic indicator (including the famous laggers (jobs)) are very positive at this point. Average borrowing rates are not muh different than they always are, you are just being scared into thinking that there is a borrowing crisis. Furthermore, the US has one of the lowest per capita debt ratios in the world - when you include government debt as well as personal debt.

As a matter of fact, compared to the world (with the exception of China) we are the only nation that has seen growth in the last five years. Economic growth does not occur when conditions are not favorable for it.

I am willing to bet that if Hillary wins the White House that the media's perception of the economy takes a sharp U turn.

Just for reference, I do have a BBA in Economics.

[Freddy C]

So, the economy no longer needs to housing boom, or low rates to keep moving.  Every single economic indicator (including the famous laggers (jobs)) are very positive at this point.  Average borrowing rates are not muh different than they always are, you are just being scared into thinking that there is a borrowing crisis.  Furthermore, the US has one of the lowest per capita debt ratios in the world - when you include government debt as well as personal debt.

As a matter of fact, compared to the world (with the exception of China) we are the only nation that has seen growth in the last five years.  Economic growth does not occur when conditions are not favorable for it. 

I am willing to bet that if Hillary wins the White House that the media's perception of the economy takes a sharp U turn. 

Just for reference, I do have a BBA in Economics.

<{POST_SNAPBACK}>

I think that one of the biggest diversionary successes of propaganda from elites is to get the populous consumed with politics. Problems and issues are framed in the context of Republican or Democrat ideologies causing the problems. The problems that are inherent to our system are structural and born from capitalism and the changing events in the world. Left vs right politics prevents people from seeing the reality.

Economics is a behavioral science, not an exact science. It (our system) is driven mostly by the behavior of the consumer. That is why consumer confidence is such a key barometer for future economic activity and realties. Ergo, one can create a self fulfilling prophecy by foreshadowing future hard times for the economy. What would you think would be the resultant effect if Alan Greenspan came out and said that our system was structural weak and that hard times were ahead? Consumers would immediately contract spending in an attempt to hunker down and protect themselves. Such reduced spending would in turn would result in reduced production. Reduced production would in turn reduce employment. Reduced employment would in turn reduce income and hence reduce spending more and create a downward snow ball effect upon the economy. Thus, it stands to reason that responsible economist and leaders would not foreshadow gloom even if it were true. This is why they are always optimistic and upbeat...they are attempting to create the self fulfilling prophecy of good times by boosting consumer confidence. Remember, consumer consumption constitutes 2/3 of GDP.

Whether people want to come to the realization or not, America economic zenith has peaked. Why, because other nations and people now can produce equal quality goods and services at a fraction of the cost. Capitalist and capitalism is fueled by greed and hence will follow the path of least resistance to profit maximization...which is other nations more and more. Furthermore, leading Geologist are saying that the period of cheap oil is over, because the demands of growing third world economies like China and India will deplete supply relative to demand. A successful and growing economy is dependant upon energy. The inflationary effect of rising oil price will radically change our economic prospects. Not surprisingly, that is why we are and have singled out Oil rich nations as EVIL and ripe for military intervention. When are trying to get those government to become pro American in the face of the needs of China and India who are aggressively seeking drilling and oil rights in the Middle East, to fuel their future economic needs and growth. Who ever controls the oil will control the future fate of economies. This has nothing to do with politics...its all economics.

Reference to your BBA degree notwithstanding. You may have simply been taught to think within the BOX.

[daniel nudnik]

Right on freddy. Agreed 100%.

I think that one of the biggest diversionary successes of propaganda from elites is to get the populous consumed with politics. Problems and issues are framed in the context of Republican or Democrat ideologies causing the problems. The problems that are inherent to our system are structural and born from capitalism and the changing events in the world. Left vs right politics prevents people from seeing the reality.

Economics is a behavioral science, not an exact science. It (our system) is driven mostly by the behavior of the consumer. That is why consumer confidence is such a key barometer for future economic activity and realties. Ergo, one can create a self fulfilling prophecy by foreshadowing future hard times for the economy. What would you think would be the resultant effect if Alan Greenspan came out and said that our system was structural weak and that hard times were ahead? Consumers would immediately contract spending in an attempt to hunker down and protect themselves. Such reduced spending would in turn would result in reduced production. Reduced production would in turn reduce employment. Reduced employment would in turn reduce income and hence reduce spending more and create a downward snow ball effect upon the economy. Thus, it stands to reason that responsible economist and leaders would not foreshadow gloom even if it were true. This is why they are always optimistic and upbeat...they are attempting to create the self fulfilling prophecy of good times by boosting consumer confidence. Remember, consumer consumption constitutes 2/3 of GDP.

Whether people want to come to the realization or not, America economic zenith has peaked. Why, because other nations and people now can produce equal quality goods and services at a fraction of the cost. Capitalist and capitalism is fueled by greed and hence will follow the path of least resistance to profit maximization...which is other nations more and more. Furthermore, leading Geologist are saying that the period of cheap oil is over, because the demands of growing third world economies like China and India will deplete supply relative to demand. A successful and growing economy is dependant upon energy. The inflationary effect of rising oil price will radically change our economic prospects. Not surprisingly, that is why we are and have singled out Oil rich nations as EVIL and ripe for military intervention. When are trying to get those government to become pro American in the face of the needs of China and India who are aggressively seeking drilling and oil rights in the Middle East, to fuel their future economic needs and growth. Who ever controls the oil will control the future fate of economies. This has nothing to do with politics...its all economics.

Reference to your BBA degree notwithstanding. You may have simply been taught to think within the BOX.

<{POST_SNAPBACK}>

[joeDowntown]

The one thing that Grand Rapids DOES have, whether it is industrial design or furniture design, is some of the most innovative designers in the world. While the "push a button" type job may go the way of the dodo, I still think Grand Rapids will have a major role in the development of products around the world. Plus, continual innovation usually keeps you ahead of the curve no matter what the price. Hopefully Grand Rapids can become a design center for products outsourced, and a manufacturing power in highly precise, high quality products.

I honestly think Grand Rapids needed these last 5 years to shake the rust off and re-calibrate. Leaner, meaner, innovative companies will create high paying jobs in the long run. Honestly, I do not know a single person who is unemployed or even "under" employed. I think the media overplays the downturn in the economy.

Joe

[superNOVA]

Economics is a behavioral science, not an exact science. It (our system) is driven mostly by the behavior of the consumer. That is why consumer confidence is such a key barometer for future economic activity and realties. Ergo, one can create a self fulfilling prophecy by foreshadowing future hard times for the economy. What would you think would be the resultant effect if Alan Greenspan came out and said that our system was structural weak and that hard times were ahead? Consumers would immediately contract spending in an attempt to hunker down and protect themselves. Such reduced spending would in turn would result in reduced production. Reduced production would in turn reduce employment. Reduced employment would in turn reduce income and hence reduce spending more and create a downward snow ball effect upon the economy. Thus, it stands to reason that responsible economist and leaders would not foreshadow gloom even if it were true. This is why they are always optimistic and upbeat...they are attempting to create the self fulfilling prophecy of good times by boosting consumer confidence. Remember, consumer consumption constitutes 2/3 of GDP.

Agreed, there is a firm foundation in behavior. However, you fail to recognize that most economic factors are built into the economy before the news ever hits the street. do you think that Wall St. missed the rising oil prices? Do you really think that it has come as a surpise. There is perfect information and and imperfect information - the public does not get perfect information - it has already been diluted and accounted for by the time it reaches them.

I do agree with your concept however. Who ever is the face of the economy, usually the President or Greenspan, and sometimes Congress or the Media can control the general flow. However, true hard numbers exist for a reason, they are not flawed by emotion. Economic indicators tell us what the economy is really doing, what stage of boom/recession we are in (they all follow essentially the same five stages), and what the general feeling on the street is. The only importance of the street is to know where and when to make adjustments.

This is in essence why tax cuts are so historically successful at growing the economy - they have never resulted in a long term reduction of income for the government. You must understand the stage of the economy, you then study the behaviors of the spenders, and you impliment a plan to give them just enough money to get things moving. It is all about the flow and liquidity of money. It is a concept born out of the study of both hard numbers and soft behaviors.

However, it is very dangerous to imply that economics is simple the whim of the people. It is not.

Whether people want to come to the realization or not, America economic zenith has peaked. Why, because other nations and people now can produce equal quality goods and services at a fraction of the cost. Capitalist and capitalism is fueled by greed and hence will follow the path of least resistance to profit maximization...which is other nations more and more. Furthermore, leading Geologist are saying that the period of cheap oil is over, because the demands of growing third world economies like China and India will deplete supply relative to demand. A successful and growing economy is dependant upon energy. The inflationary effect of rising oil price will radically change our economic prospects.

Also agreed. Every empire has its dawn and evening, we are at about 5:00 right now. However, things can change, and the state of world labor will determine this. As low wage jobs flow out of America they will be enriching the third world. The third world will go through the same development pains that we have - just a bit faster. At some point, the system will level out once again and we will have a true world economy.

The inflationary effect of rising oil price will radically change our economic prospects. Not surprisingly, that is why we are and have singled out Oil rich nations as EVIL and ripe for military intervention. When are trying to get those government to become pro American in the face of the needs of China and India who are aggressively seeking drilling and oil rights in the Middle East, to fuel their future economic needs and growth. Who ever controls the oil will control the future fate of economies. This has nothing to do with politics...its all economics.

Well yes, and no. There are economic reasons, but the US economic relationship in that region are still very strong. China is a threat, fortunately for us, they are not that great at diplomacy and have yet to really step out onto the world stage.

Whatever the case, pure economics will drive us away from oil sooner rather than later. As prices rise expect to see a quick shift towards alternative solutions. The basic drive of capitalism guarantees this. When option (a) gets too expensive, option (B) becomes much more reasonable.

[Freddy C]

Agreed, there is a firm foundation in behavior.