Home-Based Economics

We don’t want to be all doom and gloom here but if you’re looking for a job that will let you work from home , or if you’re thinking about starting a home based business , or launching a freelance career, you need to consider how the state of the economy fits into your plans. As we said a couple of days ago, the future ain’t what it used to be .

Like the proverbial frog in a sauce pan, many people haven’t noticed that our economy is in hot water because the bubbles have taken some time to rise to the surface. Fact is though, the dollar is in a world of hurt, our trade deficit is growing, and a recession is on the horizon–if not already here. The consumer boom we’ve enjoyed for the past five years has been largely financed with credit and that chapter is about to end.

Face it, people use credit to plug the gap between their lifestyle and their income. In fact, household debt has been growing by $4 billion every day for years. Americans are now “saving” a net negative 0.4% of their disposable income. Simply put, we’re spending more than we make. And we’re talkin’ we the people here, not government–that’s aother whole story.

The real estate crisis has clobbered the banks in a ‘what goes around comes around’ sorta way, and it’s making stock markets nervous although so far, inexplicably, they continue to climb. The mortgage crisis will soon spread to credit card providers, we suspect, and then to car manufacturers, furniture makers, appliance sales, and others that depend on consumer credit.

Meanwhile, believe it or not, the Federal Reserve has encouraged banks to go on taking risks, and has been adding cash into the banking system for about 6 months so that consumers can keep on spending.

Now, if our economy were doing well in foreign markets this all might not be so bad; but it isn’t, and hasn’t been for a long time. The dollar’s weakness makes imports into the U.S. more expensive and makes our exports cheaper in foreign markets, so you’d think we’d be doing great. But we aren’t. Manufacturers are finding it hard to sell their products, and the trade deficit has continued to grow. We imported $62 billion more than we exported in February alone, an increase of 6% in just one month. Gulp.

Still not convinced we have a problem? Consider these facts from Is America Falling Off the Flat Earth?

– The US share of the world’s leading-edge semiconductor manufacturing capacity dropped from 36% to 11% in the past 7 years.

– Chemical companies closed 70 facilities in the United States in 2004 and were in the process of closing 40 more the following year. Of the 120 new plants costing over $1 billion each that were under construction at that time, 50 were in China and one was in the United States.

– The U.S. Big Three automakers announced the closing of 26 plants in the United States over the next several years, while Japan-based companies are opening four new plants in the United States between 2006 and 2008.

– In Business Week’s ranking of the world’s information-technology companies, only one of the top 10 is based in the United States.

– Nearly 60% of the patents filed with the US Patent and Trademark Office in the field of information technology now originate in Asia.

– Once-mighty Ford and General Motors both have junk-bond ratings, and each has laid off over one-third of its dwindling North American workforce in the past 5 years alone.

– Toyota brought to an end the notion of the U.S. Big Three automakers when it sold more vehicles in the United States than Chrysler, and the next year ended General Motors’ 75-year reign as the world’s largest auto manufacturer.

– Only one of the 25 largest initial public offerings last year took place on American exchanges.

– China is on track to build 108 new airports between 2005 and 2010, including the world’s largest. The United States, in spite of stifling congestion, has built only one major airport in the last third of a century.

– Low-wage firms, such as Wal-Mart and McDonald’s, created 44% of the new jobs in America during one recent period–a period during which high-wage firms produced only 29% of the new jobs.

– In 2000, the number of foreign students studying physical sciences and engineering in U.S. graduate schools surpassed, for the first time, the number of U.S. students.

– The Los Angeles Times reports that in the past 16 years two high-rise buildings were constructed in Los Angeles as the city executed its accelerated urban-renewal plan. In the past 10 years, 5,000 were built in Shanghai.

– Some foreign universities are now conducting their engineering and business classes in English to promote recruitment of faculty and students and simplify access to technical information. In contrast, the working language in the back halls of many U.S. engineering schools is Chinese.

– The United States is falling relative to its economic competitors in broadband Internet access. As recently as 2000 it was in first place; now it ranks 16th in the fraction of citizens having broadband connections and 61st in the use of mobile telephony per capita. South Korea has nearly twice the broadband penetration (subscribers per capita) of the United States.

– Toyota now has over 5 times the market capitalization of General Motors and Ford combined.

– The United States ranks 17th among nations in high-school graduation rate and 14th in college graduation rate.

– Foreigners finance about two-thirds of US domestic investment, compared with about one-fifteenth a decade ago.

– China has supplanted the United States as the world’s number 1 high-technology exporter.

– The German firm that a decade ago purchased one of America’s Big Three automobile makers, Chrysler, for $36 billion decided after 9 years that it didn’t want the company after all and in effect paid nearly $700 million to get someone else to take it away (along with its pension liability).

– Of the new R&D sites planned for construction in the next 3 years by the 177 companies queried in one recent survey, 77% are to be built in China or India, often using US corporate financing.

Okay. Now you’re convinced. The point is that if we realize it, we can plan appropriately. If there’s anything America’s entrepreneurs have proven, it’s resilience. Good times and bad, there is opportunity. The important thing is to have your eyes open not just croak blindly along until one day you wake up and find it’s too late to do anything about your predicament.

What businesses and opportunities do you see in a declining economy? Do you think our economic woes will foster or impede the growth of work-at-home jobs? We’d love to hear from you.

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