Rx FOR THE NEW ECONOMIC ORDER

Article by Herb Rubenstein
CEO, Herb Rubenstein Consulting

The economy of the 21st Century is not what we envisioned on January 1, 2000 when the Internet was still a blossoming child, technology workers were scarcer than hen’s teeth and consumer confidence was still rising. Now, March 9, 2000 and September 11, 2001 were arrows that caused huge gaping holes in the hot air balloon whose ride we were enjoying on January 1, 2000.

The economy of the 21st Century faces three serious problems. First, in the developed world middle class individuals already have more “stuff” than they will ever need and are learning that they have more “stuff” than they really want. Second, the long expected increase in purchasing of travel, recreation, leisure, personal services and other services has not materialized as shown by the quick demise in the internet based, home delivery grocery business and the isolated pockets of improvement in travel, recreation and leisure.

September 11, 2001 just dramatically increased the cost of all long distance relationships, the personal ones, the business ones and the harm to the travel and leisure industry will be deep and long standing. As with all problems, a good diagnosis can yield some insights to the best prescription to keep the US economy growing. During the past week the Bush administration has taken responsibility for combating terrorism for two reasons. First, we are its greatest victims. Second, we are the only ones in the world with a chance of defeating this insidious threat to the safety and security of everyone on the planet.

Today, with our government now focused on war, an important question arises for the average citizen. What can we, as individuals, as business owners, as employees, as non-profit directors and as consumers all, do to keep the US economy growing. First, we need to understand that the world depends on the US economy. We buy more goods from other nations in the world than any other country. We have the greatest access to capital and the strongest financial infrastructure in the world. We have the most transparent accounting systems in the world and allow investors the greatest amount of information upon which to evaluate risk and potential reward before making investments. And we have the most stable and reliable government in the world with the capacity to influence financial markets in a positive direction. As citizens of the greatest economic power at the dawn of the Century of Capitalism, it is clear that we have a duty to contribute to the economic success of our country and by doing so contribute to the economic success of the free market economies that share our values. But how do we do it?

There are three key roles the average consumer can play starting right away. First, assess your income to debt ratio to insure that you are not overextended with credit. If you are overextended, consolidate debt, renegotiate with lenders and move very aggressively to reign in your debt and debt service payments. Second, if you are not overextended with debt, make a list of all of the purchases that you intend to make in the next 24
months and begin today to investigate those purchases and consider making these purchases sooner than later. You may want to seek longer term financing on durable goods that will last several years, seek deferred payment options provided they do not have hidden interest charges. Third, and most importantly, create a family or personal budget that calls for wise spending, investing 10% of your income in “current” investments, 10% of your income set aside for retirment, donating 5% of your gross income to charity and spend generously on education, training and skill development for you and each member of your family.

As a country we can no longer afford wasteful spending, but we can also not afford to stop spending for the things that will make us better individuals, improve our businesses and non-profits and make our economy stronger. Some believe that the conspicuous consumption movement of the 20th century made waste fashionable. What needs to be fashionable in the 21st century is aggressive, wise spending that results in significant returns on investment not only for the companies from whom we purchase goods and services, but also significant returns on investment for us, the comsumers. As long as consumers “invest” their money each time they spend it, rather than mindlessly waste it on needless items, strong consumer spending will benefit each of us individually as well as be the best Rx for the 21st century economy.

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