This time, even though many banks received the assistance they needed, other aspects of the economy lost ground in the fallout of the Great Recession. Nominal spending in particular took a dive, while the dysfunctional supply side factors which led to a growing finance sector in the first place, were never addressed.
Among those supply side issues: building components in many circumstance and locales, have yet to receive the benefits of innovation or technological gains. Plus: not only is there a need to rethink labor force participation in services, but knowledge based growth needs to happen on measurable and understandable terms. As Jason Furman recently noted, neither Larry Summers or Ben Bernanke addressed productivity growth in their stagnation debate. And Furman believes that productivity growth is the most important economic question facing the nation.
For one thing, production reform is not a top down responsibility to be dictated from either national or state levels. Instead, new forms of local organization would integrate services and asset formation for coordinated results through the same monetary means. By way of example, these groups would not be dependent on pension or retirement funds which attempt to "predict" a future based on investment strategies which work in the present. Instead, risk sharing through the coordination of local time based aggregates, could bring a greater measure of predictability to the later years of one's life. The safety nets generated by monetary means, would also be augmented by time investment.
Developed and developing nations alike need new strategies for knowledge based services, which recognize a common set of rights for the use of human capital. Given the fact that developed and developing nations might build knowledge based communities at the same time, they could seek mutual benefit from the sharing of infrastructure options for similar income levels.
One can only hope that nations do not give in to a globalization backlash in the near future. Nations need to remain open to the positive benefits of tradable goods from everyone concerned, and doing so would make it much easier to implement new strategies for non tradable goods in local communities. However, the financial activity which had previously been globalized, is not as beneficial. Many aspects of non tradable investment activity would need to be internally driven. By so doing, knowledge use communities would be able to use investment planning to generate ongoing projects for the long run.
A recent E21 article suggested that the states should take a larger role in the economy. While this (somewhat political) strategy sounds good on paper, it helps to remember that state governments are in circumstance similar to that of Washington, regarding their commitments to special interests. As a result, most states aren't yet in a position to determine means for increased labor force participation, for instance. From the E21 article:
The solution is to move the provision of welfare benefits back to the states, who can better evaluate which residents need help.Right now this would not work, because states remain quite dependent on Washington for the limited services marketplace of the present. Instead of rushing to shift responsibility, a better strategy would be to seek states approval to implement knowledge based communities projects. Decentralization needs to take place through incremental means. Success stories in this regard could help states to make room, for both citizens and municipalities which suffer from limited economic access.
Nations are more likely to remain open to one another for trade possibilities, if they are able to generate new growth at home through production reform. Productivity needs to be better understood, at the level of non tradable goods and service sectors which became so important in the 20th century. Done right, non tradable goods sectors could provide a strong backbone for economic structure, instead of contributing to the downfall of tradable good sectors as has been so often the case. This is no time to give up on globalization and continued growth. Both just need a second chance.