First, I’m not an economist.  Rather, I collaborate with smaller businesses to help make them perform as well as the corporations I meet with weekly.  Which means I need to be in tune with the economy.  We’ve witnessed an improvement in the economy, in the stock market, and in the job market for some time now.  I’ll leave to the side for now the not-so-incidental factors that the growth has been languid and that unemployment figures are probably not accurate.  The question I’m asking is will the economy continue to improve?  I feel that the answer is yes, because the items which are causing them to improve are increasing.  What are those factors? They are an increase in corporate productivity, a decrease in costs, and affordable financing.

But when we examine the underlying factors we find a few disturbing elements.  For one, the increase in corporate productivity is occurring due to fewer employees working harder and longer, and, second, automation.  The results of the first is a decrease in quality of life, and ultimately a decrease in lifespan, caused by increased stress and inadequate recovery.  So this becomes an example of growth being bad.

Second, automation is removing jobs.  And the result has been an increase in suicides, drug abuse and civil hostility caused by a disruption of the workforce.  This is the same type of disruption we’ve witnessed in other industrial revolutions.  So, this too becomes an example of growth being bad.

Finally, the increase in productivity and GDP growth is accruing to the wealthy more than profits have accrued in the past.  Why? Because fewer employees mean fewer stakeholders.  Moreover, almost unrelated, we’ve seen an increase in privately held companies, thus reducing further the number of stakeholders.  So the wealthy grow wealthier but the general population stays the same or grows poorer.  So, this too becomes an example of growth being bad.

Overall, then, the economy should continue to improve.  But the elements fueling that growth are bad for most of us.

Michael Emerald, CFA

Wall Street Security Analyst and Owner, Performance Business Design

Articles appear in every major business and economics periodical opining on the loss of free trade being heralded by Trump’s criticism of US trade contracts; China’s requirement to source a minimum percentage of domestic raw goods; and Brexit (Britain’s exit from the European Union).  While experts far knowledgeable about the subject than yours truly opine that any loss of free trade is a bad thing, I myself abide by two tenets:

Don’t Shoot Yourself In The Foot, and Use Common Sense.

While my first principle doesn’t apply here, the second one does.  Specifically, we’ve witnessed the manufacture of US goods get outsourced to the extent that, as Donald Trump stated, paraphrased “When I bought TVs for my hotels I was forced to buy Samsung because the US doesn’t make TV sets anymore.”  Or, pick up any good and ask yourself where was it made.  Or, witness that there are websites, albeit few of them, which sell only US made goods.

And so, I ask, “What is the result from having absolutely everything produced overseas?”  The result is not good, since without plants and factories we lose the bedrock of the country, and more generally the bedrock of any company.  As Harvard Business Review in its December issue showed, a company without assets, i.e. a technology company, doesn’t remain a leader for very long.

And so Common Sense suggests that we need companies here producing things.  To what extent?  Rarely are things black and white and I feel that we need sufficient companies to regain competitiveness globally and to increase manufacturing employment to a level which economists agree is fundamental to the long term.

Michael Emerald, CFA

Consultant, Wall Street Securities Analyst.