In identifying and designing solutions to help turn around the U.S.’s rapidly degrading situation, the Obama Administration would benefit from the Drucker approach. Peter Drucker, known as the father of modern management, suggested that when we focus on investing in problems, we miss opportunities. The Obama administration needs to follow Drucker by first defining the results we want and then work back from there to identify programs that will work.
We have an opportunity to create vibrant communities of people with the skills and the infrastructure they need to thrive in the 21st century. That is the result we want. Achieving it will involve finding unconventional solutions for these unconventional times. Here are four ways to start.
1. Revitalizing the Flow of Credit.
Goal: Unfreeze the loan system to create many new jobs.
What to do: Collaborate with community banks that can channel federal investment to small businesses – the entrepreneurs and community-based enterprises that create more than 70 percent of the new jobs in our country. This is the most efficient investment we can make, and the businesses that will benefit are those that reside in our communities. It is a great form of public-private collaboration that really works. These small businesses employ local people and serve them as customers; they are the building blocks of vibrant communities. The community banks, unlike the large commercial banks, are focused on helping our economic engine thrive. Note to Congress: Their chairmen don’t travel on private jets. Often they walk.
2. Investing in Undervalued Homes.
Goal: Keep people in their homes and avoid mortgage defaults, rather than having families displaced and creating a large stock of vacant housing that depresses everyone’s housing prices.
What to do: Support and provide financing to entrepreneurs, venture capitalists, and community-based public-private collaborations that will buy the foreclosures, thereby limiting the supply of housing available on the market. The entrepreneurs can employ construction workers to fix-up the homes, then rent them to people who might eventually own them via a rent-to-buy program. They can hold on to the houses and manage the market supply over the next five years, so that the market is not flooded. With inherent demand and population growth, the houses will gradually increase in value. A house that sold for $500,000 three years ago may be worth $250,000 today and may sell for only $125,000 at auction after foreclosure. In five years, that house might possibly sell for $250,000 again.
3. Restoring the Health of the Stock Market.
Goal: Increase medium- and long-term investment in the market, rather than quick speculation, to increase available capital.
What to do: Enact a rule that new investments made in the stock market over the next 18 months and held for at least five years are exempt from capital gains tax. Help people think about investing. Let people choose which companies they believe in and want to hold onto for some time. The program should bring substantial new capital into the stock market, and as the market improves, the taxable gains that result will more than pay for this real stimulus.
4. Building skills for the 21st century.
Goal: Re-engage and open doors for the new unemployed, including many white-collar workers over age 40.
What to do:
- Pay degreed people to go back to school and encourage colleges to offer programs in green architecture, web skills, biotechnology technician training, community banking, teaching for tomorrow, and other skills geared to the 21st century. Pay people while they are attending school and reimburse them the tuition for classes they complete. Encourage life-long learners for the world of tomorrow.
- Help them determine how to apply their skills to benefit their communities, and create a Volunteer Corps focused on community-based efforts. Volunteers could help many people navigate the system and attain new mortgages, health care, health insurance, etc. Other volunteers could contribute to education, health care support, child-care, green community projects, coaching for owners and employees of local companies, and advising small businesses and entrepreneurs. And the Volunteer Corps need not be strictly “volunteers”; participants could be paid in lieu of collecting unemployment.
Only when we let go of the past can we embrace, imagine, and build tomorrow.
©Elizabeth Edersheim