Updated July 27, 2019 –
Technology in the gig economy has brought remarkable change. Too bad it hasn’t transformed politics.
“If you want something new, you have to stop doing something old,” Peter Drucker once admonished us.
At the author of 39 books, the late Dr. Drucker, of course, was the world’s premier business philosopher.
But in Congress, too-few Republicans and Democrats, and business, have heeded his simple advice.
Firstly, let’s consider business. With the long decline of former market stalwarts General Electric, General Motors and Proctor & Gamble, you might think the companies would have been quick to change.
For instance, during the Digital Age we’ve been seeing the emergence of artificial intelligence and robotics.
You might also think GE and GM would have been leaders in both. But no, they haven’t.
Meantime, the companies have fallen further behind the market capitalization of many other companies. Indeed, stocks have jumped significantly after the election of Donald Trump.
Certainly, the psychology of his policies on pro-growth tax reform, eliminating onerous business regulations and rebuilding the infrastructure along with strong earnings have motivated investors.
So much has been written about the growth of the stock market and U.S. economy during the era of Trumponomics. Growth has returned in the gross domestic product.
The economy seems poised to achieve the high levels we haven’t enjoyed since President Reagan’s tenure in the 1980s.
Profit growth has propelled stock market gains. The S&P 500 continues to trade at around 25 times earnings.
The U.S. economic forecasts are mostly positive, though not the case abroad.
So many analysts believe corporate earnings will continue to grow in double-digit percentages for the near future.
Of course, this means the aggregate price to earnings ratio will be around 18. Concurrently, investors will likely continue to be bullish on stocks. It’ll be a fait accompli after tax reform and a corporate-tax cut.
Inflation has been almost unbelievably low.
So, as technology in automation has greatly impacted business, intellectual property has become increasingly important.
Bricks and mortar are less important in the Digital Age. Amazon has become a dominant factor in B2C and B2B sales. Online banking is prevalent. Car dealer showrooms are affected by the Internet.
All of this means lower operational costs, which is why big businesses are making bigger profits.
Economic red flags
But despite the improvements brought by Trumponomics, there is an economic red flag. Many members in Congress seem unaware of Dr. Drucker’s common-sense warning.
Literally, with the exception of the Trump tax reform, Congress has accomplished very little. The Democrat-controlled House continues to waste time on impeachment to no avail.
But reforms in health care and federal spending are desperately needed.
If not, the nation’s electorate might vote for the return of President Obama’s socialistic policies and culture of entitlements.
Already, entitlements – food stamps, Medicaid, and Section 8 housing subsidies for physically fit adults without small children as well as Social Security disability benefits – consume nearly 60 percent of federal revenue.
Unless there’s a new cultural approach, it will only get worse.
With such recipients eligible to vote for such pork and fiscally irresponsible politicians, the federal debt is unsustainable. It continues to skyrocket ever split-second:
For the time-being, the nation’s economy must grow to offset such problems. President Trump’s economic leadership will prove to be effective long-term, if political leaders stop blinking or balking on the important issues.
Short of that and sans the psychology of Trumponomics, voters will react predictably. Then, everybody will lose. The nation’s culture must change.
Hence, the reminder: “If you want something new, you have to stop doing something old.”
From the Coach’s Corner, see these public-policy articles.
“Culture eats strategy for breakfast.”