The Herman Trend Alert|
March 12, 2003
Uncertainty Inhibiting Economic Growth
The economy is poised for significant growth in 2003. The American economy has inherent strengths, and many other countries are influenced by economic activity in the United States. If trends had continued as forecasted in 2000, we would be experiencing more rapid growth and lower unemployment.
Why is out economy not more positive? From our observations as trend watchers, there are several significant factors. The first problem is the high level of attention given to stock market fluctuations. Stock markets are similar to gambling casinos. Judgments about the economy should not be based too heavily on wagers placed on the relative value of stocks.
A second inhibitor is the level of political unrest around the world. Difficulties in Iraq, the Middle East, North Korea, the South Pacific, and parts of Africa distract our attention and misallocate our resources that could drive economic engines. Globally, the shadow of terrorism looms large, allowing a small number of zealots to keep us off-balance and fearful.
The third factor is corporate leadership's inability to overcome uncertainty to make clear and incisive decisions. For several years, senior executives have been increasingly reluctant to make commitments that would stimulate forward movement. Their strategies have been more protective than expansive, more conservative than creative. They have been reluctant to invest in new products, facilities, or people. Visionary perspectives have been overcome by intense short-term focus.
In speeches, client advisories, and journalist interviews over the past few months, we have emphasized the factors causing economic doldrums. The shift will come when corporate executives exercise bold leadership to move beyond uncertainty. Some leaders are beginning to think and act more aggressively, but others are making career-influencing decisions to ignore taking a stronger long-term view.
Recently Alan Greenspan, Chairman of the United States Federal Reserve, made a statement aligned with our view: "The heightening of geopolitical tensions has only added to the marked uncertainties that have piled up over the past three years, creating formidable barriers to new investment and thus to a resumption of vigorous expansion of overall economic activity."
As we move past uncertainty later this year, watch for significant economic growth.
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