Introduction.

Our podcast today is titled The U. S. Covid Economic Recovery Plan, and begins with an alternative to the conventional political view that the U. S. economy will “bounce back” to pre-lockdown levels.

We tend to abstract from the conventional economic wisdom that “bouncing back” to the economy that existed prior to March 17, 2020 is a great idea.

The economic structure in America was already deeply flawed and damaged from 20 years of economic integration with the rest of the world and particularly China. (Vass, Laurie Thomas, U.S. National COVID Economic Collapse and the Collapse of the U.S. Dollar. (April 14, 2020). Available at SSRN: https://ssrn.com/abstract=3575761).

The rate of private capital investment had already begun to decline in the last two quarters of 2019, primarily due to the structural weaknesses in the economy that limited capital investment opportunities in small, high tech ventures.

Nondurable goods manufacturing decreased 3.1 percent in the 4th quarter, primarily reflecting a decrease in food and beverage and tobacco products manufacturing.

Durable goods manufacturing decreased 2.4 percent, which was more than accounted for by a decrease in motor vehicles, bodies and trailers, and parts manufacturing.

The last two quarters of 2019 economic performance would not represent the kind of economy that would be desirable to “bounce back” to, and while we do not dwell on the logic or reality of the arguments supporting the “bounce back” view, we disclose our ideological predisposition that the entire notion of “bouncing back” is wildly naïve and Pollyanna optimistic.

 

We argue that the 70% of the U. S. economic structure that was locked down resembles the shambles of the German economy after May 8, 1945.

Part of the German economy that was connected to large global corporations was still functioning, but the domestic economic structure in Germany had been reduced to rubble.

The full extent of the U. S. economic damage has not been experienced yet, because the economic damage to the commercial rental market and the mortgage loan market have not yet been reflected in the data on the number of citizens who no longer have an income to pay rent or mortgages.

We argue that the domestic spending part of the U. S. GDP has been reduced to rubble by the covid lockdowns, but that 30% of the corporate crony capitalist economy that is connected to the global economy is still functioning.

Something like the Marshall Plan is required for the U. S. economy, to repair the economic damage caused by the lockdowns. The goal of the covid economic recovery plan is to build a free enterprise, new venture creation, entrepreneurial economy in each metro region that operates independent of the global crony corporate capitalist system.

One mission of the Marshall Plan was to prevent the spread of Communism in Europe.

We argue that the contemporary U. S. covid recovery plan must also prevent the spread of Chinese communism, which entails a policy response to limiting the damage caused by the promotion of the China trade deals by crony corporate capitalism, such as the members of the Business Roundtable and the U. S. Chamber of Commerce.

The political power of global corporate crony capitalism is responsible for implementing the trade deals with China, which weakened the industrial diversity of the U. S. domestic economy, leading to a bifurcation between a global corporate part, and a domestic consumer spending services sector part.

As a result of the bifurcation, the domestic services sector accounted for 70% of all GDP, and 80% of total civilian employment. The economic effect of the lock down was worsened because of the lack of economic diversification in the U. S. economic structure.

The economic recovery plan aims to restore a balance in the GDP between domestic investment in manufacturing and consumer domestic spending. Private domestic annual  investment in manufacturing should be increased from around 12% of GDP to about 25%, as a result of this plan.

Total private employment in the services sector should drop from around 80% to around 60%, or to about 50 million workers.

Total manufacturing employment in both direct production and indirect supply chains should increase from around 12 million workers to around 20 million workers, or to around 16% of total private employment.

We argue that the U. S. covid economic recovery plan has the following policy goals:

Target private sector capital investment in the 280 metro regions with a population over 150,000, the minimum size for self-renewing, self-generating entrepreneurial economic growth.

Target private sector capital investment to new product technology commercialization and new venture creation, within those 280 regions.

Integrate the current Trump economic opportunity zones policy into an advanced technology cluster strategy in each metro region, so that technology firms that like to located close to each other can trade with each other and share tacit knowledge.

Integrate the existing Trump advanced skill training apprenticeship program into the advanced technology cluster strategy so that future new ventures, in each metro region, have a consistent supply of highly trained technology workers.

Provide each region’s private commercial real estate consulting firms with new econometric models developed by the Bureau of Economic Analysis to order to target capital investment to the development of regional industrial value chains and inter-industry supply chains that service the new technology clusters.

Modify the existing SEC crowdfunding rules for raising private capital by broadening the scope of the existing Reg D Rule 506, and creating new forms of regional closed end funds that target capital to the region’s new and existing firms in the emerging technology clusters.

Implement an explicit system of regional tacit technology knowledge creation and diffusion using blockchain technology to share regional technological knowledge among investors and entrepreneurs.

The great economic benefit of the U. S. covid economic recovery plan is that it is private-sector driven, allowing private financial and business interests in each region to select the policy approach best suited to that region.

By fixing the regional economies in 280 metro regions, the nation’s economic weakness of over-dependence on consumer spending, and inadequate business investment would be fixed. In addition, the rate of capital investment in small, high tech firms would increase, leading to a recovery in America’s technological superiority, that would not be easily stolen by the Chinese Communists.

In other words, we argue that this plan does not require much Federal government oversight, regulations, or increased federal taxes to implement.

The Federal government’s role is to collect the economic data, and organize the data into regional econometric models that can be used by citizens interested in promoting regional economic growth in each metro region.

This introduction is a part of a much longer podcast, available for free, for one week, at www.clpnewsnetwork.com.

The other sections of the longer podcast include:

Section 1. An Economic Policy Dispute With the Neo-classical Productivity School.

Section 2. Re-Envisioning Regional Economies as the Blockchain Knowledge Creation Engines of Economic Growth.

Section 3. Using BEA Models to Target Regional Capital Investment to High Growth Technology Clusters.

Section 4. Commercial Real Estate Regional Industrial Technology Parks and the Regional Geographic Scope of the Economic Recovery Plan.

Section 5. Regional Capital Market Infrastructure.

The entire historical archive of all CLP News Network podcasts are available for an annual subscription of $30.

I am Laurie Thomas Vass, and this is the copyrighted CLP podcast for May 20, 2020, and is titled, The U. S. Covid Economic Recovery Plan.