Peck’s main thesis is that major deflations and inflations put a stamp on a society. This one, without intelligent responses on our part, is likely to produce even greater inequalities in wealth and income, a reduction of men employed in the workforce, increased bread-winning roles for women, more tensions about race issues and immigration, later marriages and parenthood, the economic weakening of cities without unique and competitive assets, potentially ineffective political leadership, a protracted recovery and more.

Some in the workforce find themselves in “occupational ghettoes” where it is hard to find and step onto the next rung to upward mobility. Working poverty will likely become even more common. And, moderate-income families are starting to resemble inner-city households, rather than the middle class – joblessness, family conflict, drug and alcohol abuse, divorce and single-parenting all characterize these Americans.

Unlike the Great Depression, this economic era may drive us apart, culturally and politically, as well as reinforce current trends toward widening economic segregation. It could even encourage mass radical movements. At this point, these are more likely to be of the right-wing populist sort than of the leftist social movements sort. But, who knows? Mass apathy and weakened links of solidarity may be much more likely, given present trends.

The book’s final chapter offers humbly a manifesto for action. Advance short-term economic stimulus by government, Peck argues, while making plans for significant federal deficit reduction during the medium-term. Public subsidies should be provided for businesses to hire the long-term jobless. Make bigger investments in public works. Explore the development and application of regulatory reforms which would speed the process of R&D through commercialization. We must get a handle on health care costs. The wealthy should be taxed at a higher rate. Career academies should be established in order to smooth the transition from secondary schools to a job. Another experiment: wage insurance to “top up” the salaries of those persons who took a job that paid less than their previous employment.

Peck regards our present situation as dire, not desperate. Avoiding the latter danger is a function mainly of our coming together again as a people that are committed to each other. The proposed programs just listed would help immensely, but even more important is timely cultural change.

To quote Hill:

The American economic picture remains very grim. The recovery from the Great Recession can only be called “tepid” – especially on the job creation front. New cuts in government spending resulting from budget shortfalls are only making matters worse by eliminating more jobs in the short run.

At the same time, the nation is experiencing divided government – both electorally and philosophically – with little consensus on what should be done for the economy and jobs.

Given these facts, the parameters for action are quite narrow – particularly for those that wish to see public action to create significant job growth.

To break through this logjam will not be easy.

Whereas most Americans would have happily supported strong public action to create jobs a few decades ago, attitudes and perceptions of joblessness in the U.S. have shifted. Today, sadly, Americans are not as accommodating of serious government interventions to expand employment opportunities as they were a few decades ago.

Indeed, much of this economic pain and woe of the last few years has been self-inflicted, even unnecessary. The debt ceiling debate was the classic example. It did nothing about our most pressing problem – unemployment.

Unfortunately, several decades of well-funded conservative propaganda has taken its toll. Today, a collection of widely-held, conservative myths are at the root of these failures of understanding and action. (This is not to say that there aren’t economic myths on the left as well. Some people, for instance, still cling to the myth that government can solve all problems.)

Right now, however, it is not an overreliance on government that is at the heart of our problems; it is rather a series of conservative illusions about macroeconomics.

First and foremost, is the failure to comprehend the differences between household and public finance. For ordinary families, assets are good and liabilities are bad. This is an easy-to-grasp concept and it’s perhaps understandable that so many want to apply it directly to the public sphere. But it is a mistake to apply such an idea simplistically on a large scale.

At the national economy level, assets and liabilities simply reflect different ownership groups — bond sellers and buyers.

In other words, analogies can mislead. Household common sense is not always right. The world is often paradoxical.

Here’s another illusion – the notion that the widespread pursuit of “self-interest” always promotes the common good. In fact, collective failures in the marketplace frequently occur when individual households act “rationally” in the near term for the good of their family but ultimately, despite their good intentions, lower productivity or magnify inequities.

Think about household savers and home builders, for instance. When conditions lead to more saving and less buying, these events will only slow the economy further. At such points, the seemingly rational act of more household saving is akin to hoarding, not building a nest egg for the future.

And, of course, economy-wide failures, such as various “bubbles” abound. Stock buyers can get too excited and overreach, thereby sending stock values to unrealistic prices, or act, like an escaping herd, selling at the same time.

Pejorative wording and dogmatic doctrines can harm too. Too often, politicians and policy makers fall back on simplistic ideas they think sound good or bad – terms like “sound finance,” “gold standard,” “free enterprise,” “balanced budget,” “wasteful spending,” “budget deficit” and “property rights.”

The upshot of all this is that the American economy would be much better off if more leaders and citizens understood and promoted the pragmatic and flexible, but activist, prescriptions of the great economist John Maynard Keynes. Indeed, reliance upon a consistent Keynesian position on all these issues is more likely to promote economic health during periods of both deflation and inflation.

Though frequently blasted by those on the far right, Keynes was no leftist. He was very open to changing his mind and disagreed with many orthodox left ideas. In addition, Keynes wrote a great deal on probability and did not believe that economics could escape from risk. He would not be surprised by the recent financial crisis.

He would have also conceded that even if we act appropriately in the current situation by designing and executing a strong stimulus package, many key decisions (things like magnitude, timing, implementation/administration, the mix of tax and spending measures) will be more akin to an art than a science.

Ultimately, though, he would have agreed with one overriding fact: More must be tried to help the jobless and speed the recovery. Mere reliance upon hoary clichés and simplistic bits of “common knowledge” is a recipe for continued economic stagnation.

Use the comments section below to share your thoughts on this piece.

The world of economic development has changed dramatically in the past few decades. After being virtually synonymous with the practice of “smokestack chasing,” the field has broadened to include small business development, technology transfer, business retention, manufacturing modernization, applied research development and even education reform. Scores of new program efforts have been adopted by states ranging from Maine to Hawaii.

At the same time, an almost opposite judgment could also be reached – that nothing big has changed and that the more things change, the more they stay the same.

Examples abound. The costs of subsidy packages that attract businesses are constantly in flux. Meanwhile, the attachment to the traditional view of what constitutes a good business climate – low taxes, no unions, weak environmental regulations and low wages – emphasizes costs, rather than quality of the goods or services.

The real business climate challenge, then, is figuring out how our communities, regions and states cope and even flourish in the new global, informational service economy.

More specifically, in your community, do you have a business climate conducive to cultivating new firms in the fastest growing sectors? Do you have an entrepreneurial economy where firms are seeking to shift their resources from lower to higher uses? Are you developing those talents, traits and attitudes that are, after all, uniquely American – flexibility, resourcefulness and optimism?

Just as these new initiatives have spread across the nation and begun to sink deeper institutional roots, many policymakers have started to ask tough questions about their performance. It appears that more and more states are “doing the right thing.” Can programs that states can actually afford assist enterprises across the state with an adequate level of service? Do their efforts really make a difference?

Increasingly, discussion about the gap between promise and performance rests on the nature of today’s “public technologies” and not just their level of funding (the usual culprit)?

Perhaps, government policymakers, managers, critics and advocates are focusing mainly on the “soft” technologies, such as the “machinery” of management, monitoring, accountability, service delivery, staff training, evaluation and data collection.

In some respects, these developments could be regarded as the private sector management strategies being adapted to the public (and nonprofit) sectors, as well as partnerships between all three –approaches like TQM, Six Sigma, re-engineering and others. Treating employees as assets rather than cost centers, along with moving toward product customization, value chains and balanced scorecards are the rage.

Moreover, during our lifetime, government has chiefly responded to development and employment challenges by creating a “program.” Rules are written, eligibility is established, budgets are approved and departments are created. After all these changes, programs are left alone to fix the problem, but whether or not these problems enjoy solutions depends.

Depends on what? First, there is no decent mechanism for customer feedback. Second, too little monitoring of the right kind of data takes place. Third, few incentives to producing quality services are in place. Fourth, there are insufficient rewards for producing quality services. Finally, failure to mobilize constituents creates larger problem solving challenges.

The result all too often is an inflexible bureaucracy, which is equipped to deliver standardized programs that change little over time (social security checks). Programs are Balkanized and often isolated from their customers. At the same time, growing needs for better referrals and brokers of aid from other institutions emerge. This type of organization is the least likely to perform well in a rapidly changing world.

What we need is to find ways to inject elements of markets, competition, adaptability and self-governing while rationing capital to those that perform better.

This transformation is described in many varied ways – the New Governance, integrated program delivery and the Third Wave are just a few examples.

It’s all about having the know-how and not just the know-what. At the same time, an almost opposite judgment could also be reached – that nothing big has changed and that the more things change, the more they stay the same.

Examples abound. The costs of subsidy packages that attract businesses are constantly in flux. Meanwhile, the attachment to the traditional view of what constitutes a good business climate – low taxes, no unions, weak environmental regulations and low wages – emphasizes costs, rather than quality of the goods or services.

The real business climate challenge, then, is figuring out how our communities, regions and states cope and even flourish in the new global, informational service economy.

More specifically, in your community, do you have a business climate conducive to cultivating new firms in the fastest growing sectors? Do you have an entrepreneurial economy where firms are seeking to shift their resources from lower to higher uses? Are you developing those talents, traits and attitudes that are, after all, uniquely American – flexibility, resourcefulness and optimism?

Just as these new initiatives have spread across the nation and begun to sink deeper institutional roots, many policymakers have started to ask tough questions about their performance. It appears that more and more states are “doing the right thing.” Can programs that states can actually afford assist enterprises across the state with an adequate level of service? Do their efforts really make a difference?

Increasingly, discussion about the gap between promise and performance rests on the nature of today’s “public technologies” and not just their level of funding (the usual culprit)?

Perhaps, government policymakers, managers, critics and advocates are focusing mainly on the “soft” technologies, such as the “machinery” of management, monitoring, accountability, service delivery, staff training, evaluation and data collection.

In some respects, these developments could be regarded as the private sector management strategies being adapted to the public (and nonprofit) sectors, as well as partnerships between all three –approaches like TQM, Six Sigma, re-engineering and others. Treating employees as assets rather than cost centers, along with moving toward product customization, value chains and balanced scorecards are the rage.

Moreover, during our lifetime, government has chiefly responded to development and employment challenges by creating a “program.” Rules are written, eligibility is established, budgets are approved and departments are created. After all these changes, programs are left alone to fix the problem, but whether or not these problems enjoy solutions depends.

Depends on what? First, there is no decent mechanism for customer feedback. Second, too little monitoring of the right kind of data takes place. Third, few incentives to producing quality services are in place. Fourth, there are insufficient rewards for producing quality services. Finally, failure to mobilize constituents creates larger problem solving challenges.

The result all too often is an inflexible bureaucracy, which is equipped to deliver standardized programs that change little over time (social security checks). Programs are Balkanized and often isolated from their customers. At the same time, growing needs for better referrals and brokers of aid from other institutions emerge. This type of organization is the least likely to perform well in a rapidly changing world.

What we need is to find ways to inject elements of markets, competition, adaptability and self-governing while rationing capital to those that perform better.

This transformation is described in many varied ways – the New Governance, integrated program delivery and the Third Wave are just a few examples.

It’s all about having the know-how and not just the know-what.

Like most economic development professionals, my metric of success is more akin to a decent baseball batting average than a respectable field goal completion record in basketball. This might just reflect my incompetence, but, based on my assessments of other consultants’ efforts, comparisons do not seem to encourage me to head to the nearest minister or mental health professional and confess my sins and career doubts.

Fortunately for me, reforms and other changes come slowly to this field and many old ideas still have legs. Indeed, many have not even been tried yet, despite sustained advocacy. And, the gap between promise and performance is still large, even in the somewhat novel areas, such as entrepreneurship and social capital investments, small business and microenterprise development. These shortfalls are increasingly being blamed not just on the usual culprit – the level of funding – but instead on the nature of today’s “public technologies.”

During our lifetime, the way government typically has responded to business development needs is by creating a “program.” Rules are written, eligibility requirements established, budgets approved and departments created to administer them. But after that, programs are left alone to fix any problem. There is seldom a mechanism for customer feedback, there are too few incentives for producing quality services, there are insufficient rewards for employees who respond quickly and creatively to small business needs and there is rarely a simple way to shut down programs that are no longer needed. The result often is an inflexible bureaucracy. Traditional bureaucracies perform well in delivering standardized programs that change slowly, if at all, and need to be isolated to some degree from the demands of clients. This is, however, the kind of organizational system least likely to perform well in a rapidly changing world.

We need to move beyond this program-by-program approach where we are still hindered by limited impact (many still are under-served), where we lack scale, where we do not customize services or respond well to changing conditions, where agency and program fragmentation creates turf and confusion, where programs take on a life of their own and so on.

Here are some not-so-old ideas that are worth, in my view, piloting in some states or regions. Although none of them strike me as certain to succeed, some have features that are designed to leverage other resources and programs, others try to create a market and customers for a particular product or service, and some foster feedback loops for improving performance.

These proposals go beyond the most commonly proposed options for dealing with government inefficiencies and program fragmentation problems – coordination strategies and improved evaluation processes.

But, I admit, that my suggestions do not utterly solve the big challenges discussed earlier. They show promise and potential. Sometimes, this is the best we can do.

Progressive policymakers and advocates have been pining for a book that maps the “high road” to a more democratic America for some time. American Society: How It Really Works, authored by University of Wisconsin Professors Erik Olin Wright and Joel Rogers, meets this need. Designed to be a critical introduction to sociology, political science, public policy and social problems classes, the book also succeeds in being an entrée to the major policy controversies of our time. Encyclopedic in its scope, the textbook addresses 18 topics ranging from persistent poverty to gender inequality, from the environment to taxes. Framed by a clearly stated set of progressive values, the book is grounded in current facts and stats, as well as tightly argued. It treats the major barriers to progressive reform, including media concentration, lobbying by vested interests, escalating electoral campaign spending, the decline of unions, racism, militarism and the national security state. Especially compelling are the chapters on “The Capitalist Market: How It Is Supposed to Work” and “The Capitalist Market: How it Actually Works.”If you are searching for a book that makes an intelligent case for alternative ways to view U.S. society and to “close off the low road and pave the high,” this is the book for you. Warning: The book is not padded but is 494 pages long, divided into 23 largely stand-alone chapters. Also, it considers only national reform options (not state and local), discusses wealth inequities briefly but thoughtfully and advocates reforms in business subsidies but says little explicitly about asset building or protection policies. The book is published by W.W. Norton Books.

“Every person of full age neither owning nor having owned 50 acres of land, shall be entitled to an appropriation of 50 acres or so much as shall make up what he owns or has owned 50 acres in full and absolute dominion . . . Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise. Wherever there is in any country uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right . . .

I am conscious that an equal division of property is impractical. But . . . the earth is given as a common stock for man to labor and live on.

Dependence begets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the design of ambition.” -Thomas Jefferson

This article’s title and thesis are far from surprising, but Jefferson’s is a proposition that requires periodic restatement, emphasis and elaboration. According to Jefferson, without widely held property, public education for economic success and civic participation, and laws and institutions that protect citizens from predations by large and powerful private and public interests, the American experiment in self-government would fail. National independence rests on citizen independence and capacity. These views account for his ambivalent reactions to pre-revolution France, where he served as an ambassador. He loved the city and its cultural assets, but he was appalled by the size of the inequalities between rich and poor. Moreover, he worried about the dangers posed by mob violence and revenge, as well as manipulation of the masses by elites and their own grassroots leaders.It is for these reasons that Jefferson was so troubled by Hamilton’s efforts to create a National Bank, enact tariffs to support a bigger government and public goods (e.g., canals) and encourage the development of manufacturing. Despite Jefferson’s worshipful statements regarding farmers as the chosen people, his mature opinions were not so nostalgic. He appreciated that the U.S. needed to possess a balance of agriculture, commerce and manufacturing. He believed that the middle class was what made America great. Feudalism had been left behind and most people working in the marketplace were self-employed. What worried him was the potential destruction of the middle class by the concentration of wealth and power among those who knew more about how to play the game.

Foremost were his fears regarding creation of a lumpen-proletariat, a class characterized by few skills, inadequate education, no property, degrading poverty, dependence on others for employment and susceptibility to being pushed around by bureaucratic fiat and taken advantage of by shysters and the special interests. Jefferson feared the centralization of governmental power and saw clearly the need for the protections provided by the Bill of Rights. However, despite his commitment to limited government, he was not a libertarian.

He also thought that a system of small ward governments would create the conditions of a participatory democracy, akin to Vermont town meetings and with real power over certain policy issue areas. Jeffersonian rights emphasize humanity’s social nature and democratic deliberation more than the typical free marketer’s “government get out of my face.” This perspective is displayed most fully in his support for federalism and its devolution of power and action to states.

Likewise, as reflected in the quotes above, Jefferson thought that some redistribution would be required to make this new nation work. But he further believed in more of a “hand-up” approach, not a “hand-out” approach, when it came to leveling the playing field. This does not imply that he saw purely private economic rights as trumping human rights and allowing for the accumulation of unlimited amounts of wealth and power.

This is also made apparent in his drafts of the Declaration of Independence where Jefferson deviates from the writings of John Locke, which are almost exclusively concerned with freedom from governmental interference.

The parallels with asset-based anti-poverty strategies are obvious. Their goals are to aid economically disadvantaged citizens in their pursuit of a lasting escape from poverty’s grasp and an increase in freedom, independence, opportunity and security.

Indeed, to break the cycle of poverty, a person needs more than income support. Assets are needed as well. Savings, credentials, and enhanced human and social capital – all count. We at CFED believe it is possible and profitable – within a generation – to provide every American, including every child at birth, the opportunity and resources to pursue higher education, start a business, buy a home and save for the future.

Thus, asset building and protection are a 21st century form of the political economics of Thomas Jefferson.

This is a good place to start a major effort to bridge the job gap.

**My peers at CFED have developed this body of work. I have been comparatively a second or third violin, regarding this third idea. Thanks to Nancy, Gene, Bob and many others.

Timothy Bartik’s “Investing in Kids: Early Childhood Programs and Local Economic Development” builds on his earlier work on the topic by describing a unique angle – why and how localities can benefit from effective programs that aid disadvantaged toddlers and youngsters.

Rachel Connelly and Jean Kummel’s work on “The Time Use of Mothers in the United States at the Beginning of the 21st Century” provides insights on how mothers choose to spend their time – paid and unpaid work, care giving, their own further schooling, and so on. It then explores the public policy implications of this phenomenon, including reforms in taxation, education and child cares subsidies.

Andrew Feldman looks at “What Works in Work-First Welfare”, examining the issues involved in providing more successful employment services in New York City.

In the fall of 2010, the Upjohn Institute held a conference on the causes and consequences of unemployment. A number of fine papers were presented, which drew the following conclusions:

For more information, go to www.upjohninst.org. More details, regarding the conference research findings can be found in the January 2011 issue of Upjohn’s “Employment Research” newsletter. Books can be ordered there as well.

Many claim that they are done with the general reader in mind. But they deal with a tough, complicated subject for the uninitiated in High Finance.

Two recent books move to the top of the list, regarding Meltdown 101 – Howard Davies’ “The Financial Crisis: Who Is To Blame?” and David Skeel’s “The New Financial Deal: Understanding the Dodd-Frank Act and its (Unintended) Consequences.”

The first volume does a superlative job of summarizing 38 different causes of the Meltdown – some that were more flippant (video games) and some were large, serious and even after the reform, hard to avoid in the future (“The Rich Get Richer, the Poor Borrow”). These three dozen-plus factors and events were grouped into 7 big categories:

Howard Davies, the current Dean of the London School of Economics, sought to present the origins and key traits of the so-called “Great Recession” in a fairly objective manner, while leaving space for some opinionated judgments when the time and specifics were right.

The book is based on materials collected for readings on a course on the Meltdown at LSE. Each of the 38 chapters identifies about half of a dozen, well-selected and current readings.

Since the book is a summary, it is a bit difficult to summarize. So, I will now just note a few of the issues and trends that seemed to matter, when trying to get a handle on the root causes of the recent recession.

Especially disturbing is the fact that we are still very ignorant about the causal chain of events, the “weight” of many of the factors, the identification of the most needed and efficacious reforms.

The Skeel book provides very little reassurance to the reader, who waded through the Davies text, regarding whether the problem has been really fixed.

The author is a bankruptcy attorney and law professor, with ties to the American Enterprise Institute. “The Financial Deal” is the first book-length independent analysis of the Dodd- Frank law. On the negatives, he notes the following points:

The legislation was designed by many of the parties involved in “making” the Meltdown happen and developing the first response to the liquidity crisis.

The last few chapters and its conclusion outline the author’s reform recommendations. Although I do not agree with all the author’s suggestions and assessments, he is very thoughtful and the book is a judicious summary of a very big law.

Gov. Beverly Perdue has made a start in identifying potential cuts. Her plan is to "remake" state government by consolidating 14 state agencies into eight and privatizing functions such as information technologies.

No figures for possible cost savings have been suggested, which is to be expected. The effort to enact a new balanced budget will take time.

However, these actions do not guarantee significant cost savings. Moreover, there exists no "natural law" that programs are made more cost-efficient and effective by being housed somewhere else.

Privatization is not even a sure strategy. Sometimes it has worked and sometimes, not. And there are many perils along the way. Big spending cuts could harm North Carolina's most economically vulnerable citizens. Disinvestment in education and infrastructure could undermine or market position in the global economy. Moreover, the administration and the General Assembly could miss an "opportunity" for transforming governance and services.

A few years ago, the state of Washington's governor and its Office of Financial Management used a process that sought to "buy" the best results for their budget dollar and closed a $2 billion budget gap.

These reforms are not easy. Liberals and conservatives will both raise objections. Here, however, are 10 steps that deserve consideration:

This is an admittedly ambitious agenda and there is not much time to act. Worse still, the standard budget process is already underway.

Fortunately, we do not need to start from scratch. North Carolina has experience with these activities and tools. With hard work, open minds and realistic expectations we can make a real difference in meeting the quality and cost concerns of our citizens.

But the subject should get more of their attention for a number of reasons.

Despite the “foreign” quality of macroeconomic policy and the central role of microeconomics in the field of economic development, there are lessons to be learned and applied from the former.

This chain of events did not surprise me, but the scale of the reaction was much larger than I expected. I thought that this might be a minority reaction, and not a response of a significant portion of the electorate.

My worries were expressed in two articles I wrote during November of 2009. I stated a strong concern that the Bush Recession was becoming an Obama problem and that more needed to be done, regarding aiding and persuading the people that the President was talking all necessary action. Couple this state of affairs, with the easier-to-succeed strategy that conservatives had to execute, "just say, no," the chronic problems that the Administration had in generating awareness and excitement about its accomplishments in general, and the difficulty that the average citizen has in grasping Keynesian economics, then you have a tough set of cards to play.

Sadly, there were other mistakes as well. The major one was packing the stimulus package with too many long-term investments. At first, I thought that this approach had some clever angles. President Obama took office with a major recession going on and few funds to keep his promises and make the sorts of public investments that he wanted to, regarding education, electronic health data, research and development, and so forth.

But it turned out that things were so bad, that there was the opportunity to use the stimulus package as a vehicle for doing what he wanted to do anyway (public resources permitting.) Obviously, given the crisis, this would have made his political base happy, as well as the Democratic Congress (who, largely, crafted the legislation). Moreover, it was much easier to execute this strategy in our ideologically conservative body politic. (Americans tend to be philosophic conservatives and liberal pragmatists.)

A deep recession and slow job recovery backfired. Support from independents fell. Eventually, taking this course meant that Republicans were able to paint the package as tax-and-spend, liberal business-as-usual. Moreover, a lot of the spending would take quite a while to happen, since many of the investments were more competitiveness programs and projects, not economic stabilization initiatives. Conservatives could even claim that the many might take so much time that they would turn out to be pro-cyclical and not-counter-cyclical. It could even be argued that they could turn out to be inflationary, if the Administration was successful in their efforts to spur recovery and it was really happening in the same time frame of the longer term investments.

Not intending to be a smarty-pants Monday morning quarterback, I still believe that something more successful could have been launched. (And in spite of the fact that I liked many of the long-term investment alternatives and viewed them as needed on their own grounds. It might turn out that a decade from now, this approach was a big success.)

Let's start with a few political points.

Consequently, the package should have replaced most, if not all, of the longer-term investments (even culling the public works projects since they are expensive and slow to implement) with more anti-recessionary fiscal assistance to states and cities to keep schools, the police, and other critical public services largely intact, tax incentives for work-sharing, support for youth conservation corps in rural and urban settings, hiring subsidies for business (both large and small), increased availability of money for post-secondary education, incumbent worker retraining, transitional public service jobs, and microenterprise. I would also throw in direct tax cuts for households (temporary payroll tax holidays for individuals) and direct grants — a few thousand of taxable monies for families.

Maybe next time.

Tags: Economic Development, Ideas in Development

“Demanding Work” follows the trends since the eighties, regarding five dimensions of job quality – skill requirements, work effort intensity, job autonomy, wages, and employee security. His findings are mixed – some traits are getting worse, while others are improving or holding their own. For instance, job insecurity has not risen on a secular basis. It does increase during downturns of the business cycle. However, there is an increased use of part-time employees as a means of lowering costs that is troubling for those seeking or retaining full-time jobs.

In Britain, worker discretion, or the ability to make decisions and have a “say,” declined in all occupational groups, but especially for professionals. At the same time, job skill requirements have increased since the mid-1980s. And it appears that the increased use of computers and skill-biased technological change are the major causes.

Interestingly, work intensity has definitely risen for public employees. Two-income households in general are experiencing lots of work stress and family versus work conflict. Declining employee bargaining power in the US has contributed to a steady American trend to fail to share broadly the fruits of productivity gains during the last couple of decades. Green also discovers evidence of skill polarization – lots of good and bad job creation, with little in the middle.

Readers should not regard these facts fatalistically. The countries studied exhibit a lot of differences in their performance, management philosophies and strategies, trade union power, and public policies. For instance, Scandinavian countries are doing the best at encouraging and retaining good jobs.

“Demanding Work” is also exemplary in its subtle discussions of methodology and data. It makes a persuasive argument for doing more comprehensive surveying of the labor force in an effort to collect the data needed to monitor trends in good jobs availability and access.

David Kusnet’s “Love the Work, Hate the Job”(2008) looks at a segment of the workforce: those who express their unhappiness with their jobs, despite the fact that their work has become more intellectually challenging and less physically overwhelming. The author tracks workers in four Seattle-based companies: Microsoft, Boeing, Kaiser Aluminum, and Northwest Hospital. The employees are not as focused on pay and benefits as one would think. Instead, they are far more concerned about respect and a say in shaping the future of the business. Ironically, in each case these are highly skilled employees, who are critical to any effort to pursue the high road to economic growth by competing on the basis of quality, not lowest costs.

Likewise, circumstances arose that led to a less than ideal situation for both workersand management and financiers. Boeing professional workers went on strike. At Microsoft, employees became annoyed about the thousands of “temporary” workers that were hired, with lower pay and more meager benefits. These “perma-temps” appeared to undermine the security of the original workforce, as well as the quality of the Microsoft product line. At the local hospital, employees believed that patient health was being sacrificed to the bottom line and became so frustrated that they elected to join a union. Similarly, Kaiser workers were involved in a protracted labor-management squabble that dragged on for two entire years, leading eventually to a new employee alliance with environmentalists.

Thus, in each example, workers felt thwarted in their aspirations to be “real” professionals. They want to do the work they care about and enjoy, but they are put off by shrinking health coverage, shaky pension plans, workplace autocracy, “short-termism”, and decreasing company loyalty to their labor force.

There will always be a gap between what really is the case and what we think is true.  And despite the importance and impact of more rigorous methods, more available quantitative data, and the lower costs and greater power of today’s information technologies, there is no way we will eliminate the factor of human insight in making connections and reaching decisions.

Our reading, our experience, our peculiar perspectives and biases, and our autobiography all count in separating those with keen instincts from those without, when it comes to identifying economic development problems and opportunities, devising more relevant, effective, and feasible strategies and managing their implementation.

Moreover, we must avoid letting increasingly sophisticated methodologies determine what’s important to study and evaluate.  There is also a certain point at which the advantages of using more quantitative rigor slows down and then takes a turn in the direction of the negative.  After all, you can study some problems and alternatives to death.  When it comes to almost everything in this world, there comes a time for a leap of faith, albeit while keeping an open mind.

We can only try our best to look at what really happened and listen to the responses of our economic development peers.  Yet, what we want from researchers and evaluators is not utter neutrality: we always will bring into any development challenge our larger commitments, our values, our pet ideas, and past experience.  At the same time, we can still try to be as objective as possible by facing the facts, heeding our critics, being clear about our value premises, and seeking the truth.

Do not ignore good intuition.  Your most intensive inquiries will rarely provide definitive answers.  Furthermore, differences between your “gut” and your most sophisticated studies must be always confronted.  Call it intuition, insight, best judgment, or just plain common sense, these help to frame the entire analysis, to define how you choose to measure key concepts and later to probe and test your data outcomes. 

There is nothing like a financial crisis to spur the publishing world to generate new books, both good and bad, on the subject.  Some tomes stick close to the causes and consequences, while others explore a variety of related topics.  Indeed, a number of writers use today’s Great Recession as an opportunity to raise fundamental concerns about the theory, policy, methods, validity, and truth of mainstream neo-classical economics.

Many of these new works are all-too-predictable.  This is not the case with the newest edition, which could be called both an “insider” and an “outsider” book.  The author, Amar Bhide, possesses a hands-on knowledge of the subject matter, without losing his dissenting point of view.  He wants transformational change, but is very concerned that many of the reform proposals head in either the wrong direction or make small changes that will be absorbed and neutralized by the very powerful financial services industry.

Amar Bhide’s  A Call for Judgment: Sensible Finance for a Dynamic Economy, is, in some respects, a continuation of the author’s last work, The Venturesome Economy, a very illuminating study of innovation and entrepreneurial  initiative among large and small firms, new and old.  In this new book, though, he looks in detail at a major constraint on these dynamic factors in growth – contemporary Wall Street finance.

The author is a former management consultant at McKinsey and company, a specialized stock broker at E. F. Hutton, and a professor of business at Columbia University.  Currently, he is based at the Fletcher School at Tuft’s University.  Known as a major contributor to studies of innovation and new product development, Bhide is much more focused on modern global and domestic finance, per se, than most experts on the entrepreneurial field.

Moreover, he is neither a single-note market beater nor a fanatic for laissez faire economics.  He likes capitalism, and he worries that the wrong sort of reforms could harm startups, sap entrepreneurial energy, and hinder small business growth by making the system of deal appraisal even more rigid, centralized, and impersonal than it already is.  Bhide argues that the regulatory system of the past few decades regulated commercial banks too laxly and the securities industry in too procrustean of a fashion. He believes that the Frank-Dodd law continues this habit: it still goes too far in some respects and not far enough in others.  There is a danger that some elements of the new law might further magnify an already existing, disturbing trend, such as believing that better risk management can be almost eliminated by feeding more data into a computer.

Like economist and historian Joseph Schumpeter, he is anxious about the possibility that further bureaucratization could kill the essential engine of capitalism – the entrepreneur.  The financial services industry made so much money through arm’s length securitization, that he fears, given their power, they will do it again.  He proposes that we “restore real finance.”  Or, to be more specific, the author terms it – “traditional relationship-based banking.” This concept makes the author sound like a “small is beautiful” fan or a Luddite, but this is far from the case.  He wants bankers to have the ability to do big deals and small deals, and he does not think this can be done very well through traditional anti-trust means that draw often arbitrary lines of allowable firm size.

His analysis, historical account, critique and proposals seek to find the right set of rules and structure that does not demand heroic efforts by regulatory staff; the regulator need not be omniscient.

The author elaborates this perspective by presenting his ideal capitalism, then discussing the forces and changes that have made this ideal less likely.  A few quotes will clarify these points.

Our prosperity requires the enterprise of innumerable individuals and businesses that exercise their imagination and judgment—and bear responsibility for the outcomes.

Well functioning capitalism creates widespread prosperity through a widely inclusive system of innovation in which many contribute to – and benefit from – the development and use of new products and technologies.  Inclusiveness is achieved through decentralized judgment tied to responsibility:  individuals and businesses exercise their imagination and wit to undertake uncertain initiatives, but also bear the responsibility for outcomes – good or bad.

A financial system that supports the real economy, {Bhide} argued, will have identical features: decentralized judgment tied to responsibility, with prices, dialogue , relationships, and organizations that strike the right balance between control and autonomy – all sustained by good laws and regulations.

This balance has been lacking for more than two decades.  The result is a much more centralized, mechanistic, and arm’s length finance.  The rewards have been massive for upper management and the financial services sector, but with little personal downside risk.  These features hinder dynamism in the real economy, undermine the legitimacy of capitalism, and make the financial system more prone to crisis.

According to Bhide, US banks and other deposit-taking institutions (credit unions, money market mutual funds, etc.) must be limited to basic lending and nothing else.  He adds that depositors in money market mutual funds should not be able to withdraw their funds for less than 30 days.  Temporarily idle government funds, pension funds, and endowment funds that seek places to deposit in guaranteed accounts should be regulated regarding their behavior.  At the same time, he contends, this separation of commercial and investment banking has to be accomplished in a manner that does not impede a return to relationship-based, case-by-case judgment and due diligence.   Evaluating a proposition for finance will not solely rely on quantitative credit scoring techniques that are deceptively objective and all too rote.

There is nothing mechanical or routine about financing new business prospects.  Finance theory went wrong, when it tried to use mainly past events and probabilities to overcome genuine uncertainty and convert the deal into a simplified problem in risk management.  To paraphrase Donald Rumsfeld – there are many things that you know you don’t know, as well as those that you don’t know that you don’t know.  And these surprises may turn out to bite you when you least expect it!  You cannot anticipate most of these sorts of events, but you are better off using intuition and a broad understanding of the way the world works as additional inputs into your decision making.  Thus, loan officers should also draw upon their knowledge of the owner’s character and overall competence, the firm’s management strategy, quality of financial “books,” trends in specific industries and regions, particular market conditions, and so forth.

Lastly, the book also provides a clear introduction to modern financial theory and action, a history of government regulation of finance, a good treatment of the events that led to market mayhem, a thoughtful critique of President Obama reforms, and Bhide’s own proposals.

These are just a few of the highlights in this intelligent, business savvy book.