The Economy:
What's Ahead?
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The American economy was booming in the 1920s. There were 23 million cars on the roads, and folks were buying consumer goods – especially those new-fangled radios – as fast as the nation’s factories could turn them out. The stock market was soaring, climbing from a Dow Jones average of 88 in 1924 to 381 in September 1929, and prompting one of the nation’s leading economists to say that stock prices “had reached what looks like a permanently high plateau.”
Then came the historic stock market crash of October 29, 1929.
A record 16.4 million shares of stock changed hands that day (a record that would stand for 40 years) and almost all of them traded at a huge loss. In some cases, that loss was almost unbelievable. United Cigar stock fell from $113.50 to $4 a share – prompting the firm’s president to jump to his death from the window of his New York hotel room.
The aftershocks of 1929 put Franklin Roosevelt in the White House and, despite the impact of his New Deal reforms, would continue to hang over the U.S. economy until the outbreak of World War II.
In recent months, the stock market has slumped dramatically (although of late it’s fortunately been on the upswing again). Many businesses, large and small, have closed their doors. Others have survived but have been forced to hand pink slips to many of their workers. And thousands of Americans have lost their homes to foreclosure. Economists and average Americans alike agree that this adds up to the nation’s worst economic crisis since the Great Depression.
Yes, the economy has experienced other serious the deepest recession since the recessions in the past, particularly in the mid 1970s and early 1980s. But the current recession, which economists date from December 2007, is the longest this country has seen since the Depression. Moreover, it’s surely Depression. According to the Federal Reserve, 86 percent of the nation’s industries have been forced to cut back production since November.
In the following pages, Capacity looks at the current recession – or, as some people have taken to calling it, the Great Recession – and efforts to cope with it.
As President Obama has correctly said, the challenge confronting us is to chart, not just the road to recovery, but “the road to prosperity.” And if we’re to find our way to that high road, we must, as Obama says, “ensure that we’re educating and preparing our people for the new jobs of the 21st century.”
That, of course, is a prime part of our mission here at the Robert C. Byrd Institute for Advanced Flexible Manufacturing (RCBI) and we stand ready to meet President Obama’s challenge to ready the next generation of our workforce.
We’re proud, too, of our close working relationship with West Virginia’s legendary U.S. Senator Robert C. Byrd, our namesake, and we’re heartened by his pledge that today the economic renewal of West Virginia is his top priority. “I have worked to create new job opportunities for those who want to stay in their native West Virginia, and to provide richer, fuller lives for their children,” the Senator says. “Rest assured, those efforts will continue.”
Preserving West Virginia jobs and creating new ones is also uppermost in the mind of Gov. Joe Manchin, who confidently predicts that the Mountain State will weather the current economic storm and “come out of this recession stronger than almost any state and better prepared to take advantage of new opportunities when the national economy rebounds.”
As important as government action may be if we’re to get our national economy back on track, ultimately it’s cooperation between government and the private sector that will make it happen.
GE Chairman Jeffrey R. Immelt is absolutely on target when he urges joint government-private action on five fronts: “invest in new technology; win where it counts in clean energy and affordable health care; become a country that is good at manufacturing and exports; embrace public-private partnerships, and promote leaders who are also good citizens.”
And Immelt is on target, too, when he warns that if we’re going to keep technological pace with the rest of the world, “we’ve got to do a much better job training the next generation of innovators, future engineers and scientists.”
Since taking over as president of the College Board, Gaston Caperton has used that bully pulpit to preach a similar message about education. “We need to prepare young people for success,” says the former two-term governor of West Virginia, “and the best way to begin is to fortify the education pipeline with well-educated teachers”
– especially math and science teachers.
Other articles in this issue explore related aspects of the recession and the quest for what Obama has described as “the road to prosperity.” A common theme running through all of them is the importance of innovation and the critical role to be played by entrepreneurs.
Consider the following companies: Burger King, MTV, CNN, FedEx, Intel and Microsoft. What do they have in common?
“Each opened during a period of economic downturn,” notes Amy Wilkinson, a public policy scholar at the Woodrow Wilson Center. “Today, these companies employ thousands of people worldwide.”
Look back in American business history and you’ll find countless examples:
Candlemaker William Procter and soapmaker James Gamble joined forces to start a new business during the Panic of 1837, one of the shakiest periods in the nation’s economic history. Their venture didn’t just survive, it thrived. In 2008, consumer-goods giant Procter & Gamble grossed $8 billion in revenue.
Similarly, the Panic of 1873 doesn’t seem like a good time to open a laboratory. But Thomas Edison didn’t let that discourage him. In 1896, Edison’s General Electric Co. landed a spot on the first-ever Dow Jones Industrial Average. Today, GE is the only remaining company of the original 12 that were listed.
In 1929, the year the stock market crashed, a group of investors formed a company that grew to become today’s United Technologies Corp., one of the biggest corporate names in aviation and aerospace and the maker of a long list of other products, including Otis elevators and Carrier air conditioners.
From the day George Washington founded his own whiskey distillery, America has been an entrepreneurial nation. And that secret weapon, if carefully nurtured, will lead us out of the current recession, put us on the road to recovery and, ultimately, on the “road to prosperity.”
