The Next Big Thing
Posted on February 19, 2009
The Next Big Thing
So, what is the next big thing that is going to get us out of this economic malaise that we are currently enduring?
The big boondoggle known as the economic stimulus package had a lot of little things that added up to a big waste of money. There was a little money for “green jobs”, a little money for transportation, a lot of money for the states (which will go to expand the welfare state at the local level), some money for education (which will likely go down the rat hole known as the Department of Education), and a big laundry list of projects long desired by David Obey and his friends on the House Appropriations Committee.
The only big thing that it will create is a big deficit.
But big recessions end when something big happens that inspires investors to start investing again.
The Great Depression ended with the Second World War. Certainly not the best way to get out of an economic downturn, but it worked.
The Big Recession of the late 70’s and early 80’s ended with Ronald Reagan’s deep tax cuts.
The Long Depression of the late 1800’s ended with the promise of riches in westward migration (that and a more rational monetary policy).
The economic slowdown of the early 90’s stopped with the tech explosion, and when the tech bubble burst, the hot housing market took up the slack.
Now, the housing bubble has badly burned the world economy. The banking industry is reeling, and it’s not the only industry that is facing great distress.
The auto industry is on the ropes, with even Japanese automakers contemplating lay-offs. The media industry is also facing extinction. It can’t afford to give away its content for free, but the new digital world almost compels it to.
As often happens in global economic downturns, the dark clouds of protectionism have gathered on the horizon. Our new President talked down the positive aspects of free trade on the campaign trail, and his allies in Congress recently attempted to attach damaging “Buy American” provisions that would have sparked a global trade war to the stimulus package.
But as just about any business leader worth his (or her) salt will tell you, America cannot prosper with a closed marketplace. Growth only really happens with global trade.
The next big thing will be the thing that helps restore confidence in the global marketplace. It will inspire investors to get back into the game, and encourage them to risk their fortunes for the promise of even bigger fortunes in the future.
The next big thing will happen in the private sector, not the government. Sure, the government can give some seed money to help move things along, but it is really only the promise of a healthy profit that will help create the next big thing. And the government abhors a profit.
Will the next big thing really be a really little thing? Perhaps in the field of nanotechnology?
Or will the next big thing be in the field of microbiology or genetics?
Or will it be the green technologies often cited by our new President? Perhaps a break-through in battery technology so that we can break our dependence on foreign oil?
Whatever it is, we need to policies that will promote private sector investment in the next big thing, the right immigration policies so we can attract the smartest people in the world to work on it, a smart tax code that will give investors a reason to invest in it, the right regulatory framework so that the next big thing doesn’t get stifled by dumb regulations, smart laws that promote and protect the inventor as well as the investors and free-trade policies so we can export the next big thing to the rest of the world.
The Obama Administration has done a good job of talking about the next big idea, but other than a few measly tax incentives, they have done nothing to create a government structure that makes it easier for the next big thing to happen in the private sector. In fact, their tax, trade and regulatory policies might make it harder for the next big thing to ever get off the ground.
Republicans should hold the President’s feet to the fire and make him take steps to allow the next big thing to prosper in the private sector.