Economic Recovery through the Creation of Jobs
A Proposal for a
Hurricane Katrina Regional Economic Recovery Plan
Objective: Create an Economic Recovery Zone Featuring Government Investments and Tariff Protections to Develop a Textile Industry Comprised of Dozens to Hundreds of Businesses Employing Tens of Thousands of Workers
The Situation is Bleak, and Not Improving:
Hurricane Katrina created personal and economic devastation unparalleled in modern US history. Millions of people have been left homeless and jobless. The Louisiana and Mississippi areas had already been among the poorest in the nation and have been among the worst in education for the last 100 years. Many of those who have been hit the hardest – the homeless, the jobless, the displaced – lack the educational and job skills to successfully seek employment in most industry sectors having job growth. Even worse, they lack the educational background for re-training in high-tech jobs. In 2008, eleven years after the Louisiana Department of Labor was revamped to make it easier for the unemployed to get training, there are an estimated 100,000 jobs available in the state; but even though there are 100,000 unemployed, they are too lacking in skills to fill those jobs. Combined, Louisiana and Mississippi need 200,000 jobs suitable for semi-skilled and unskilled workers.
The few large employers of the hardest-hit regions, mostly casinos, are unlikely to reestablish themselves and to restore their former employment levels in the foreseeable future. There are no other industries or employers likely to site facilities in the impacted regions sufficient to absorb any noticeable level of unemployment. Therefore, without aggressive government action, the prospects are bleak of restoring the economic viability of the region to even the low level that existed prior to Hurricane Katrina. Further, without government intervention in a fashion that will create jobs in those regions, the economy of the entire United States will continue to suffer as we struggle to support the impacted population through tax-derived welfare, unemployment, medical aid, FEMA, temporary housing, and other programs.
Central Concepts of this Proposal:
Welfare and other forms of public assistance are not a substitute for jobs, not for the individuals, not for the economy, not for the country. Economic recovery requires jobs. Once jobs are created, these regions will turn from a net drag on the US economy to a net benefit – the citizens of these regions will not only be able to pay their own way, rather than requiring welfare and assistance, but in addition will become taxpayers of sufficient magnitude to help support others in need. New businesses will be provided with startup capital, grants, loans, and operational subsidies financed by the Federal Government, and administered by the State Governments of Louisiana and Mississippi.
To be meaningful in the context of the magnitude of the problems, job development must be of a dramatic scale, sufficient to employ a significant percentage – even a majority – of those needing help. Achieving the necessary scale of job development will require a systematic approach to create at least one entire industry capable of supporting dozens or hundreds of individual businesses and employing tens of thousands of people. A traditional smattering of small developments characteristic of state economic development authorities could not create the required environment or momentum, and would not succeed, even over several decades.
For international tariff and trade rule purposes, the businesses fostered by the Economic Recovery Zone must focus on a definable industry. Developing an industry will require a holistic approach so that all of the needs of this nascent industry are anticipated and measures put in place to accommodate them – from capital formation for the foundling businesses to pre-wired assurances of market acceptance and retail sale for the finished goods. Creating such an industry will require the coordinated actions of federal and state governments working from a unified plan with a long-term commitment – a minimum of 20 years.
Creating such an industry will require much more than simple tax incentives – it will require significant direct and indirect subsidies, tariff protection, and import restrictions, as well as the cooperation of other domestic regions that already participate in the selected industry. Domestic businesses already in the designated industry but not geographically located in the Economic Recovery Zone will benefit from tariff protection and import restrictions which will apply to that industry. The over-arching goal of creating an industry is more than just creating jobs in these depressed regions; it is to create an industry with an American work force that can compete successfully in the domestic and international markets. Success in this project will require the hand-in-hand cooperation of federal, state, and local governments, as well as the participation and commitment of existing businesses in the distribution and retailing of the resultant products.
Necessary Industry Characteristics:
The majority of the new jobs must be suitable for unskilled labor; that means manufacturing jobs, and that means the creation of a manufacturing industry. At the same time, that industry will provide employment, hope, and opportunity for all walks of life. To provide stable employment over decades, the chosen industry should provide staple products – not fad products like cell phones or mp3 players that might be replaced with the next technology innovation.
The target markets should be of significant size to be able to absorb the output of many new businesses. The industry should not require high tech skills for most potential employees and should have a minimum of technology and engineering requirements for entry by new businesses – thus, manufacturing automobile engines would have onerous entry requirements, whereas manufacturing textiles or clothing, while requiring the purchase of modern equipment, is essentially a low tech industry.
The industry should not be one that requires enormous capital investment, nor should it be one whose economics favors giant corporations – which, as we have all seen, are fickle, and are driven by the next quarter’s profits rather than the good of the employees or the good of the country. Depending on a giant corporation puts the success of the entire project and the welfare of the nation at the mercy and goodwill of a single board of directors.
The Target Industry – Textile, Clothing, Shoes:
The target industry will produce finished goods of clothing, bedding, towels and linens, shoes, and other items of apparel such as belts and handbags that can be synergistically produced and marketed, as well as other types of fabrics such as drapes, curtains, and furniture coverings. The industry sub-segments will include both horizontal and vertical production from growing the raw materials, to production of rolls of fabrics, to manufacture of retail products. The Hurricane Katrina Economic Recovery Zone of Mississippi and Louisiana is in the cotton belt, and so the textile industry will be a natural extension of existing industries and knowledge base in that area. Since a great percentage of finished goods are made wholly or in part from cotton, the proximity of the raw material to the other stages of manufacture will provide a further advantage to the development of a textile and clothing industry in these regions.
Funding the Project:
In that the regions included in the Economic Recovery Zone are incapable of funding the development of this industry, costs will be borne by the federal government. There are numerous direct and indirect ways of providing funding by the federal government. However, to ensure that all government participants live up to the requirement for a long-term commitment, one method that will be successful will be for state governments and/or agencies to sell long-term bonds, the repayment of which will be guaranteed and paid by grants from the US government.
The administration of the actual development activities should be left to the individual states and their respective appointed agencies. Each state should charter one or more Economic Development Authorities, which, in conjunction with oversight committees from industry and academia, will manage the administration of the funds. The charters of the Economic Development Authorities will be laid out in sufficient detail to ensure that the actions of the agencies will be consistent with the goals of this proposal, in its final form, as endorsed by each state and the US Congress. The individual Economic Development Authorities will be responsible for reviewing business proposals, funding the selected proposals, monitoring the performance and success of the new businesses, and otherwise ensuring that the actions taken are clearly targeted to the over-arching goal of creating a successful and profitable domestic and international industry.
A Protected US Industry in an International Arena:
Globalization has caused US Corporations to invest overseas, rather than domestically, which has undermined employment opportunities within our borders. It is our obligation as Americans to create an environment that fosters domestic employment and business opportunities. The successes of first Japan and now China in developing international industries has been a result of the active intervention of the respective governments in the protection of the emerging industries through tariff manipulation, direct and indirect subsidies, management of exchange rates to favor their pricing, and other obvious and subtle schemes. The American worker has been disenfranchised as a result of these deliberate actions of these and other foreign governments.
A significant percentage of textile clothing products now sold in the United States are produced in China (some believe, close to 100%) – we, collectively, have allowed the circumstance where China can succeed industrially, but we cannot. We can succeed, however, by employing the same protective techniques as Japan and China – there is no rational reason why China should be developing full employment at the expense of America. We may choose to erect trade importation limits and tariffs, slanted to defend against those countries which hold a balance of trade in their favor, and targeted to protect our industries from major international competitors, while not impacting trade with less threatening countries such as those in the Caribbean.
While low wages have been a partial contributor to the success of China in the clothing and textile industry, an equally important factor has been the deployment of the most modern technology in Chinese textile factories, resulting in the efficient production of low-cost goods with minimal manual labor per article. Given a proper investment and subsidy arrangement, as outlined in this proposal, we, as well, can offer our new businesses the opportunity to acquire the latest technology so that our products also are produced in the most efficient manner possible.
Constructing an Industry to Assure Success:
Establish the Technology Infrastructure: Create industrial engineering and consulting companies, specializing in industry sub-segments, to aid new manufacturing businesses in the selection and procurement of equipment, to help design factories and the manufacturing processes for individual items, and to provide other getting-started engineering services. Similarly, create product design firms to aid in the artistic design of fabrics and finished goods. Create technical “centers of excellence” to foster the development of new technologies – new materials, new fabrics, new design and manufacturing processes, etc.
Establish Guaranteed Distribution Channels: Obtain commitments of major manufacturers and retailers (Sears, Wal-Mart, The Gap, Old Navy, Target, Nike, Wrangler, Levi’s, etc.) to partner with, and establish long-term commitments and purchase contracts with recovery businesses. Participation of the private sector will be motivated through direct and indirect economic incentives. In addition, use political forums, PR, and other marketing and promotion channels to promote awareness and encourage active support.
Link Success to Investment and Ownership: Promote private sector minority ownership in the new businesses by existing manufacturers and retailers so that their long-term success is tied to the success of the recovery businesses. Create marketing and consulting companies to forge partnerships between new businesses and existing manufacturers and retailers. Create recovery businesses with local ownership funded by grants and other subsidies.
How to Begin
Assemble an academic “think tank” comprised of experts in business and industry, marketing, international trade, international law, and associated subject matters from colleges and universities in Louisiana and Mississippi.
The “think tank” role: Create a detailed analysis of this proposal to financially model the opportunity, and determine the level of federal funding required; Propose the necessary tariff and trade restrictions; Recommend Congressional actions required to assure success; Draft proposed legislation for the US Congress; Draft proposed laws in Louisiana and Mississippi; Develop the charters for the Economic Development Authorities and the roles and participants of the respective oversight boards; Create a marketing and promotion plan to inform the American public of the Economic Recovery Zone plan and its advantages; Seek initial state funding from the states of Louisiana and Mississippi for the marketing and promotion plan
- Establish a Hurricane Katrina Economic Recovery Zone
- Provide subsidies within the Recovery Zone to establish new businesses in the textile industry
- Protect this textile industry with trade barriers and tariffs
- Expand the role of state Economic Development Authorities to oversee the development of this industry
- Enlist the participation of the private sector, especially existing manufacturing, distribution, and retailing businesses within the textile industry
- Establish a Think Tank comprised of industry and academic experts within the region to provide guidance, monitoring, and reporting for this project
- Create Centers of Excellence to develop new techniques, technologies, and materials in the textile industry
- Create a marketing and promotion plan to inform Americans of this project
The Bottom Line:
What is the alternative, other than to continue as we are, extending the despair? Ultimately, this demands a choice between China versus Louisiana and Mississippi – there is no other option.