Rescuing Banks vs. Creating Wealth: Are We Building a Sustainable Economy?
Two Minnesotans who are expert observers of business and strong advocates for manufacturing see only short-term grains from federal financial rescue and economic stimulus packages unless they put people back to work producing goods and services.
"Let's just say I'm 'underwhelmed' by what we (America) have done so far," said University of St. Thomas professor emeritus Fred Zimmerman, who held faculty positions in both business and engineering. Getting financial markets and the nation's credit markets working may help get us back to consuming again, but it doesn't assure that we will become great producers again.
America has three sectors that are productive, and they coincide with Minnesota's economy, he said. "Agriculture, mining and manufacturing are our productive sectors ... that's where we should be 'investing' public policy if we are to do anything."
A collaborator of Zimmerman's on manufacturing studies, however, takes a more cautious, less critical approach to recovery efforts even though the two agree that America and Minnesota's economies must restore manufacturing vigor.
Neither Minnesota's nor the nation's industries can bounce back unless the financial markets recover, said former St. Paul Pioneer Press business editor Dave Beal. It isn't a matter of either (banks) / or (industry), he said. The two are inseparable.
"Economists will tell you that we have to make the financial institutions strong because they hold up the entire global economy. That has to happen or we won't have manufacturing," Beal said.
"I would agree with the economists," he added.
Zimmerman and Beal coauthored a book, Manufacturing Works: The Vital Link Between Production and Prosperity (Chicago: Dearborn Trade Publishing, 2002), that argued strongly that the economy was on dangerous footing if we keep losing manufacturing jobs.
They were right, and job losses have reached epidemic proportion in the recession.
Beal writes occasional columns for the St. Paul Pioneer Press and currently serves as interim director of the Society of American Business Editors and Writers (SABEW) professional journalism organization. Zimmerman, meanwhile, has worked on projects with the University of Pittsburgh, St. Cloud State University and University of Minnesota since retiring from St. Thomas in 2006.
Their book's points are even more important today as government leaders seek ways to infuse capital into stimulating consumer markets for housing, autos and goods - the latter largely imported from abroad.
While Zimmerman might concede Beal's economic view on financial rescue measures, he vents frustration from a different route. "If we got manufacturing going again, the banks would straighten out," he said.
Using federal recovery dollars on infrastructure, such as roads, bridges and rail lines, will be good uses if these "shovel-ready" projects lead to increased manufacturing and permanent job creation down the line, he said. But in the short term, these projects are merely creating temporary jobs that, while necessary now, are not sustainable in the future.
Their comments should help shape how public debate is framed over support for industries. For instance, Zimmerman uses Minnesota backyard industries as examples. Our agriculture is strong, for various reasons. Our manufacturing is weak. The latter spills over and harms mining.
Innovation in the steel industry put Minnesota mines back in business until the recent recession, he said. And that innovation came mostly from new companies adapting and developing new technologies, "not from reviving the old steel companies," he said.
"The 'Zombie Banks' we're bailing out look a lot like the old steel companies to me. Where's the innovation? Where's the productivity going to come from? Jobs?"
Lost in most current public debate, Zimmerman said, is how emergency policies might lead to permanent jobs and development. What's more, he said, watching the federal rescue of insurance giant AIG has him believing there is more than humor involved "in what we used to tell our students:
"Don't trust anyone east of Cleveland, south of St. Louis, west of Omaha, or above the third floor."
That does help frame a public policy argument.