It’s Middle America Stupid!
By: Rene Velez Feb. 19th, 2009
Overtime I have come to realize that all of us have to some extent a disconnect on many matters. I have one when it comes to the Hip Hop fashions today’s kids wear. I just do not see the glamour or why its “cool” to wear pants that are falling off your waist. You can’t even walk down the street without your pants falling off, much less run for the bus. Why is it that making people look at your underwear as your pants hang on the shelf of your buttocks cute, or cool. If you’re going to do that hey, just cut out the patches of cloth and let the cheeks hang out altogether. At least the pants will fit. You know there was a movie made about a designer who did that when designer jeans were the fashion.
I realize some of this is generational. When I was a teen bell bottoms were in. Man, I would not be caught dead wearing straight leg pants. The bigger the bells the cooler those pants were. But at least I wasn’t baring my anatomy. I confess, my parents had the same expression on their faces as I do now about Hip Hop fashion.
Today’s Major Economic Disconnect
As I look at all these bailouts and the focus on American big business, the more I see that our leaders truly have a disconnect about the core of Americas economic engine. To paraphrase a Clintonite expression, “It’s Middle America Stupid”! I well realize the importance of our banking system, of our automotive industry, of capital liquidity. I realize the profound ripple effects that these bailouts and government programs have in terms of the potential positive ripple effects throughout our economy. However, I also see clearly that our government does not understand, nor do they seem to know how to reach the innovative powerhouse of middle class America and the multitude of small businesses that make up a significant portion of our economy. It’s Americas middle class families that make up a significant portion of our national economy, It’s the innovation and super-efficient small businesses that have created real value in an economy where manufacturing and many industrial jobs have gone to other countries. For all the money that you may put into American big business, a large part of that will wind up spent not in our country but to overseas companies that manufacture the component parts, if not the whole product, at cheaper labor rates than is available here in the states. My feeling is that a bigger bang for the buck can be achieved by investing in the small companies that manufacture products and provide services hear in the states than to Americas big businesses. It’s these smaller scale companies that manufacture just in time components, or odd lots, or special order items, or provide valuable hands on service, that make their cost affordable and effective compared to large corporations that can only exist through economies of scale and by outsourcing production to other countries with cheap labor.
The Tie in to the Disconnect Factor
So you might ask, why money doesn’t flow to these small and mid sized companies? I should make note that when I speak of small and midsized companies I am talking about companies with 10 to 200 employees with revenues of between $5 and $25 million dollars. Although many could be called small that are in the $100 million and under. I think there are several reasons. One thing that comes to mind is that these companies have small budgets. They exist and make money because they are generally private companies (non public companies) who’s owners earn a salary and make a living but may not have much left after all operating expenses. As a consequence they do not have lobbyist and political activists working for them. They are under the radar. These companies have small voices in terms of making political waves for the political leaders who oversee their geographic region. So to the extent their inequities do not receive any response, the likelihood that an elected official may face a negative nudge on votes come re-election is a minor risk for elected officials. Of course many elected officials seek out and do have members on their staff that assist them in attracting the largest amount of support for any favors that they may be able to dole out. You can well say that it’s a way of buying votes. Our political leaders are more inclined to be sensitive towards big business and to take votes and positions in their favor because of their campaign contribution and how they can swing votes than they are for small middle American and typically non public companies. So there is a redundant disconnect factor towards small business. This disconnect comes from the limited resources of the business and from elected officials lack of interest for small to medium sized businesses.
The Economy of Scale in a Bailout
Another issue with regards to bailing out Middle America is the cost. From a business perspective most people are not aware of the billions of dollars that are spent on marketing and corporate intelligence of figuring out markets, market niche’s or even what type of gadget a consumer would purchase at say Best Buy. In fact they even know that a certain color of packing is more attractive than another depending on whether the buyer is likely to be a man or a woman.
The potential cost of figuring out which small business is worthy of a bailout or an injection of capital is enormous. In fact so much so that it generally precludes the governments ability to approach a bailout to this sector of the economy. Wallstreet, venture capitalist and private equity firms spend billions of dollars in a given year simply to find, analyze and structure financing for small to medium sized businesses. This process is so involved that even when done correctly, even spending large sums of money and employing MBA’s, attorney’s, accountants and a host of other professionals there are many failures or at best low returns to make the effort not viable. To think or suggest the government could potentially take on this task and do it better than the number of firms that do this professionally is for the most part foolish.
In order for the government to address the economic downturn on the scale that is currently the case, the best and least costly not to mention the fastest way to institute programs and policy is by starting at the top of the food chain. So big business, with lobbyist and the political influence will and do have an upper hand to being bailed out despite their sins. Not that I think this is at all fair however, it may be the best our government is geared to do.
Conclusion
This situation and the inequity of government to be for the people speaks much towards how we are trying to resolve 21st century issues using 19th and 20th century strategies. At no time in the history of the United States has there existed such a mass of economic power that has been so important towards achieving the innovative and economic objectives of our nation as there are today via small to mid sized businesses. And yet government fails to be able to represent or to harness the great potential of this vital sector of our economy. Obama won the election because he represented change and everyone wants that change. Everyone knows change is needed. But how to come about that change still eludes us. In our current condition I don’t expect that this problem will be fixed. It is more likely that small to mid sized businesses will address and fix there own problems than government coming to their aid any time soon.
By: Rene Velez Feb. 19th, 2009
Overtime I have come to realize that all of us have to some extent a disconnect on many matters. I have one when it comes to the Hip Hop fashions today’s kids wear. I just do not see the glamour or why its “cool” to wear pants that are falling off your waist. You can’t even walk down the street without your pants falling off, much less run for the bus. Why is it that making people look at your underwear as your pants hang on the shelf of your buttocks cute, or cool. If you’re going to do that hey, just cut out the patches of cloth and let the cheeks hang out altogether. At least the pants will fit. You know there was a movie made about a designer who did that when designer jeans were the fashion.
I realize some of this is generational. When I was a teen bell bottoms were in. Man, I would not be caught dead wearing straight leg pants. The bigger the bells the cooler those pants were. But at least I wasn’t baring my anatomy. I confess, my parents had the same expression on their faces as I do now about Hip Hop fashion.
Today’s Major Economic Disconnect
As I look at all these bailouts and the focus on American big business, the more I see that our leaders truly have a disconnect about the core of Americas economic engine. To paraphrase a Clintonite expression, “It’s Middle America Stupid”! I well realize the importance of our banking system, of our automotive industry, of capital liquidity. I realize the profound ripple effects that these bailouts and government programs have in terms of the potential positive ripple effects throughout our economy. However, I also see clearly that our government does not understand, nor do they seem to know how to reach the innovative powerhouse of middle class America and the multitude of small businesses that make up a significant portion of our economy. It’s Americas middle class families that make up a significant portion of our national economy, It’s the innovation and super-efficient small businesses that have created real value in an economy where manufacturing and many industrial jobs have gone to other countries. For all the money that you may put into American big business, a large part of that will wind up spent not in our country but to overseas companies that manufacture the component parts, if not the whole product, at cheaper labor rates than is available here in the states. My feeling is that a bigger bang for the buck can be achieved by investing in the small companies that manufacture products and provide services hear in the states than to Americas big businesses. It’s these smaller scale companies that manufacture just in time components, or odd lots, or special order items, or provide valuable hands on service, that make their cost affordable and effective compared to large corporations that can only exist through economies of scale and by outsourcing production to other countries with cheap labor.
The Tie in to the Disconnect Factor
So you might ask, why money doesn’t flow to these small and mid sized companies? I should make note that when I speak of small and midsized companies I am talking about companies with 10 to 200 employees with revenues of between $5 and $25 million dollars. Although many could be called small that are in the $100 million and under. I think there are several reasons. One thing that comes to mind is that these companies have small budgets. They exist and make money because they are generally private companies (non public companies) who’s owners earn a salary and make a living but may not have much left after all operating expenses. As a consequence they do not have lobbyist and political activists working for them. They are under the radar. These companies have small voices in terms of making political waves for the political leaders who oversee their geographic region. So to the extent their inequities do not receive any response, the likelihood that an elected official may face a negative nudge on votes come re-election is a minor risk for elected officials. Of course many elected officials seek out and do have members on their staff that assist them in attracting the largest amount of support for any favors that they may be able to dole out. You can well say that it’s a way of buying votes. Our political leaders are more inclined to be sensitive towards big business and to take votes and positions in their favor because of their campaign contribution and how they can swing votes than they are for small middle American and typically non public companies. So there is a redundant disconnect factor towards small business. This disconnect comes from the limited resources of the business and from elected officials lack of interest for small to medium sized businesses.
The Economy of Scale in a Bailout
Another issue with regards to bailing out Middle America is the cost. From a business perspective most people are not aware of the billions of dollars that are spent on marketing and corporate intelligence of figuring out markets, market niche’s or even what type of gadget a consumer would purchase at say Best Buy. In fact they even know that a certain color of packing is more attractive than another depending on whether the buyer is likely to be a man or a woman.
The potential cost of figuring out which small business is worthy of a bailout or an injection of capital is enormous. In fact so much so that it generally precludes the governments ability to approach a bailout to this sector of the economy. Wallstreet, venture capitalist and private equity firms spend billions of dollars in a given year simply to find, analyze and structure financing for small to medium sized businesses. This process is so involved that even when done correctly, even spending large sums of money and employing MBA’s, attorney’s, accountants and a host of other professionals there are many failures or at best low returns to make the effort not viable. To think or suggest the government could potentially take on this task and do it better than the number of firms that do this professionally is for the most part foolish.
In order for the government to address the economic downturn on the scale that is currently the case, the best and least costly not to mention the fastest way to institute programs and policy is by starting at the top of the food chain. So big business, with lobbyist and the political influence will and do have an upper hand to being bailed out despite their sins. Not that I think this is at all fair however, it may be the best our government is geared to do.
Conclusion
This situation and the inequity of government to be for the people speaks much towards how we are trying to resolve 21st century issues using 19th and 20th century strategies. At no time in the history of the United States has there existed such a mass of economic power that has been so important towards achieving the innovative and economic objectives of our nation as there are today via small to mid sized businesses. And yet government fails to be able to represent or to harness the great potential of this vital sector of our economy. Obama won the election because he represented change and everyone wants that change. Everyone knows change is needed. But how to come about that change still eludes us. In our current condition I don’t expect that this problem will be fixed. It is more likely that small to mid sized businesses will address and fix there own problems than government coming to their aid any time soon.
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