Wednesday, July 7, 2010

Jobs = income = demand = profits. Not vice versa.

Yesterday I attended a leadership meeting for the Merage School of Business at the University of California Irvine, where I serve as Vice Chair of the Dean's Advisory Board.

At the meeting Paul Merage, whose gift and vision has helped propel the school's progress, reiterated his vision that the U.S. is in the midst of its third economic epoch. The current Innovation Economy is radically transforming our country from its earlier roots in its industrial and agrarian based economies. As Paul points out, our country faces twin challenges if it hopes to succeed in this economy: we need a new generation of executives to lead in a global innovation economy and we also need a well educated work force to ensure these innovation-driven jobs stay at home.




This same theme is put forward in a must-read article in Business Week by Andy Grove, former CEO of Intel. The legendary Silicon Valley leader makes a compelling case for why we need to fix America through jobs and not Wall Street profits, particularly when there is 10x more tech jobs in China for every one in the U.S. Sure, our jobs pay more, but left unchecked this is the path toward wider class and economic divisions in our country — a highly unsustainable economic and social model.

While Henry Ford is rightly credited with pioneering mass production, what he actually created was a viable middle class to consume these mass-produced and newly affordable cars, appliances and, later, TVs. Higher paying manufacturing jobs creates real income which fuels consumption which underpins demand. QED.