GDP Growth has been a Myth

For decades I’ve noticed that GDP growth has been the same as inflation.  The Federal Reserve prints and releases new money at 4% to fund federal government overspending.  Businesses plan a 4% increase in prices and employees lobby for a 4% increase in wages.  Company CEOs plan for a 4% increase in sales revenue and profits.  Then we hand out bonuses and start all over again.  There is always some variation to the numbers, but it does average out.

I’ve also noticed that tax policy has an effect on staffing in large companies.  When corporate taxes were oppressive before the 1980s and profit margins were around 5%, companies over-hired to get some benefit rather than pay more in taxes.  I saw this at Monsanto and started packing more meaningful work into job descriptions. I was looking to increase productivity and job satisfaction and improving processes.

Over the years I’ve looked at operating costs to find ways to lower cost through job enrichment and process simplification.  I always said that I would rather hire 6 employees at $10 per hour than 10 employees at $6 per hour.  I would look for better tools, automation and process changes.  At Schwan Foods in the 1970s, I replaced security guards walking clock rounds with 2 Officers; one inside watching camera monitors and sensors and one outside in a car and replaced keys with card entry.  The sensors on the ammonia refrigeration units lowered our insurance costs. Using the card keys to record entry allowed me to free office staff from having to manually add the timecards for 1400 employees.

Manufacturing operations make money by building useful things. Good employees using the best tools and processes can build things for less than the products will sell for.  That value-added element gives companies the profit they need to keep upgrading the tools and processes.  Putting a 3D, laser reading Coordinate Measuring Machine in Firearms Training Systems allowed for much faster, documented, more accurate inspection of machined parts.

GDP does have some value, but it isn’t as important as productivity increases.  It helps keep track of economic activity, but much of this economic activity isn’t really necessary.  Those who watch GDP are paranoid about asset prices, not building the real economy.

Norb Leahy, Dunwoody GA Tea Party Leader