THE ENTERPRISE
THE US ECONOMY IS NO LONGER THE ONLY BIG FACTOR
A lead article by Michael Mandel in Business Week's Nov. 20, 2006 issue makes many interesting points about how the US economy once was THE dominant world economy. Those days are waning fast. It used to be that our government's actions totally influenced the world's economy. Now we are just one of several large factors, and the day is coming (we'll struggle with realizing this) that we are not the dominant factor any more. Or at least so Mandel contends.
CONSIDER THESE POINTS ABOUT GLOBALIZATION
Since 1995 US imports have risen from 12% of GDP to 17%. Foreign investment now finances 32% of US durable investment, up from 7% in 1995. This means that the US economy is both more open to, and more influenced by our neighbors in the World. Further, the proof is questionable whether US investment in research is going to benefit US workers. It may not. It will, if successful, generate growth. But this growth may result in jobs elsewhere in the world. Currently real wages for a young American with a bachelor's degree have declined by 8% over the past 3 years. Nobody knows why with any certainty, but at least one factor has to be the flood of cheap, degreed workers in India, China, etc. competing for the work. India and China are increasingly attractive places to do research, and technology makes it easier than ever.
HEALTH CARE EXPENDITURES--BANE OR BOON?
All we've heard for years is how much our health care costs are climbing, how they are undermining our economy and killing companies. Maybe. And maybe not nearly as much as we thought. All of the US net job growth over the past 5 years has been concentrated in two industries: housing (which is now sagging badly) and health care--and the vast majority of jobs were created in health care. It is also a current, and prospectively a growing source of technology innovation. Perhaps spending on the ability to live longer and healthier lives is not such a bad investment. Maybe it just needs some "fine-tuning."
FINALLY--SOMEONE IS STEPPING UP--ELECTRONIC HEALTH CARE RECORDS
I felt like cheering out loud as I read the article on page B1 of Wednesday's Wall Street Journal. In case you missed it three large employers are collaborating on a plan to provide digital health records to their employees. British Petroleum, Intel and Wal-Mart (yes, the same one so many people love to hate) announced an initiative to create what Craig Barrett, Chairman of Intel called "the building block to modify the US health industry" into a more responsive and more cost-conscious system. Later, ten more employers are expected to fund $1.5 million each to construct a massive data warehouse to store the records.
WHY IS THIS GOOD?
Simply eliminating duplicate tests and erroneous or lost information would dramatically lower administrative overhead. Can you imagine not having to fill out that paper form over and over, and then realize that each time you do, several people downstream have to enter that data into some kind of system--WHEN IT IS ALREADY THERE! More important, this can save lives. it is estimated that just the electronic prescription part of the system will help prevent many of the 98,000 serious illnesses or deaths that come from prescription and drug interaction errors. There are no "reliable" estimates of unnecessary deaths due to medical records and medication errors, because no one wants to be exposed to the liability associated with the number, but I've read estimates of 40,000 annually!
WILL SOMEONE PLEASE TALK SOME SENSE INTO THE "WATCHDOG" GROUPS?
Of course, whenever someone wants to do something positive, there is a special interest group to oppose it, This time it's the Patient Privacy Rights Foundation that is worried about your medical record privacy. I wonder if they worry when people suffer and die because there is no database to consult. Next, some group will accuse these leading companies of some sinister motive--like trying to reduce the amount of money they spend on health care. Of course they are. They should be. The goal is (or at least should be) to provide the best possible health care for the least amount of money spent--isn't it? The neat part of this initiative is that these companies know how to get things done, and this kind of system puts the health care control back in the hands where it belongs--the individual whose health is involved--with information at his/her fingertips.
GOOD NEWS AND (maybe) BAD NEWS ON THE FUTURE OF THE ECONOMY
Some forecasters think the housing "collapse" is nearly over. Some think the overhang of housing inventory will make it last lots longer. Many are happy that the stock market is up and inflation is tame. Oil prices has settled down (for now anyway). But we are not out of the woods yet. Wal-Mart's lackluster comp store sales (slightly down for the first time ever) is just one warning. The Fed is not going to reduce interest rates anytime soon, either. Christmas sales will be OK, but not exciting. As usual for the past year or two, they'll be spotty and uneven.
A NERVOUS EARLY/MID-2007
I am still sticking with a nervous prediction about a 2Q-3Q slump in '07. Not a deep one, but too close for comfort to what could be technically called a "recession." Watch January reports--Christmas sales especially. Then watch the earnings reports for the year that start coming out in Feb. (or more appropriately, warnings of shortfalls ahead of earnings releases). Maybe the US economy can skate through. Neither Congress nor the White House can do much to help this close-in time frame. The announcement of some kind of withdrawal from Iraq might help the nation's psyche--if it is done with the utmost care. Until then, follow the motto--"expect the worst, plan to deal with it, be prepared to capitalize on the best, and hope to be pleasantly surprised."
Stay tuned...
Best, John
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