We have regular private communication with over 20% of the locally owned businesses in our area about their business and their markets. This does put us in a position to share some generalizations about what is happening real time. The meltdown in the financial markets began in July 2007. We have communicated to our business customers since then that this is a very serious situation and that it will affect them. There is no such thing as a financial sector, which exists, independent of the “real economy”. Nevertheless, most of our business customers have stood outside the financial meltdown regarding it with a mixture of concern, curiosity and a little fear. They are now no longer outside looking in.
Many retailers saw sales fall off the table beginning somewhere in late September and early October. Manufacturers and service providers directly supplying retailers reached the edge of the table 30 days later. Some manufacturers and service providers have a very long sales and delivery cycle. Many of them have strong backlogs to carry them into 2009. Nearly every company I know of is now planning for a very difficult operating environment for the next several years. This means they are delaying investments and looking for ways to manage fixed costs during a period of lower volume. We are now seeing the white-collar layoffs this implies.
Most businesses I know are very well managed these days. Manufacturers who have survived the last 15 years in Wisconsin are generally smart, tough operators. They stay ready for problems and they know how to react. They are entering this period in good shape. They are anxious, but they also know that the next few years hold great opportunity for those with capital and the guts to see it through. Easy money chases out smart money. Easy money is gone and smart money will be doing those things that two years from now others will wish they had done.
As recession spreads out from the financial sector, the impact becomes much more obvious and much more personal. Several people I know well have lost their jobs recently and it is not going to be easy to find new ones. I have had two gut wrenching conversations with small family businesses in the last week. These both involve very hard working, passionate people who live quite frugally. They involve generous families that are the backbone of a healthy community. They aren’t people who look for someone else to solve their problems. What do you do when your business declines 50% overnight and is not likely to come back for quite a while? My guess is that they will both figure it out. It isn’t going to be fun or easy, but it will be fruitful.
I confess to feeling a new round of anger. There are a lot of people who made a lot of money doing things that never should have been done. There are plenty of people standing around looking for a handout, but there are also a lot of really good people who are going to suffer a lot of pain that they did not cause. It is happening now. I have half an ear tuned into the dialogue in Washington. I have a pretty good idea of what when wrong on Wall Street. I also think I have a pretty good idea of what goes wrong on K Street and Capitol Hill. I see plenty of finger pointing in DC, much of it deserved. The President does look clueless. Congress looks worse. Congress’ fingerprints are all over this mess, but they are donning their white robes preparing to present themselves as our faithful guardians. I would like to see a serious spirit of introspection before we sign on for more congressional “solutions”. Sometimes I wonder if any of these guys in New York or DC have ever sat with a neighbor who just lost his job at the front end of recession or talked to farmer who may lose his farm and his livelihood. These people are not photo ops for a new law you want to put your name on. The community fabric in this area remains pretty strong. It will be severely tested.
There must be some very serious changes that come out of Washington. I especially believe that we must much more carefully regulate any institution that is “too big to fail” (these are called “Toobtofs”). I will be pushing as hard I can for heavier taxation of any institution whose failure poses a systemic risk. As one commentator said after the election,”When Goldman Sachs is looking for a federal bailout; it is not surprising that the American people want one too”. I acknowledge the need for federal action, but want to caution against the belief that Washington will fix it (especially if congress refuses to acknowledge its complicity).
I also want to remind us of what we know. Real life is lived from the bottom up. It is people, families and communities that will actually have to put humpty dumpty back together again. Beware of congressmen bearing gifts. Washington needs to discourage bigness through taxation and regulation. Every other economic policy should promote the freedom and responsibility of individuals and families. We need community-based solutions to the pain caused by this New York/Washington centered mess. The help we get from Washington will cost far more than it is worth. They will pass laws named after them. Then they will tax us to make themselves feel good about pretending to help us live through the nightmare they created. As for Wall Street, most people in the Midwest should have no interest in parroting a bunch of lightweight free market rhetoric on behalf of large corporations.