The Great Comeback, Part 6: Environmental Assessment: Government Involvement

June 4, 2009
In this installment of my series of posts on the Great Comeback, I'm going to outline the worldwide government actions and plans that you need to consider when planning for your organization's post-recession strategy. Already I have outlined a five-part ...

In this installment of my series of posts on the Great Comeback, I'm going to outline the worldwide government actions and plans that you need to consider when planning for your organization's post-recession strategy.

Already I have outlined a five-part process for the Great Comeback, or returning to increased market share, growth and prosperity when the Great Recession ends. This post explains more about the environmental assessment part of that process and specifically, how government involvement can affect your business.

There has been much presented on the specifics of the approaches taken by the major industrialized nations of the world, so a discussion here of the dollars allocated does not add much value. What is of value, however, is to understand the underlying philosophy of economic stimulus in the different countries.

The United States, several countries in Europe, China and many other countries have all created a stimulus spending plan and have a strong desire to stabilize the banking system.

The three main economic stimulus weapons these governments will use are:

* Interest rate cuts

* Tax cuts

* Direct government spending

The quickest and most certain stimulus weapon is direct government spending. The vast majority of the government stimulus in the United States and China is direct government spending; whereas in Europe, the majority is in tax cuts.

Let's break down each country or region specifically, and also consider the impact of the G-20 Summit and its financial strategies:

United States -- The United States government has characterized its efforts to reverse the economy's downturn as a three-legged stool:

* Economic stimulus

* Minimize home foreclosures

* Bring stability to the banking system


Real U.S. government spending will grow between 2.5% and 3% in 2009 and into 2010. The impact of this spending will be a growth in 2009 GDP of 0.6% to 0.9%, and in 2010, a GDP of 1% to 2%.

This U.S. government spending points to a budget deficit in 2009 and 2010 of over $1 trillion. This budget deficit presents a real threat of inflation which must too be considered when developing the Comeback Plan.

In the United States the dual objectives are to preserve and create jobs (transportation, infrastructure and health care) and to pursue the agenda of "Change" of the new administration (financial industry recovery, energy/green initiatives, tax burdens, trade regulations and labor.)

The United States Treasury has put in place plans that are assuring both investors and banks of its commitment to resolve the banking crisis. Good progress is apparent here, which further enhances the claim that the worst of the Great Recession is behind us, and we are beginning the recovery. Just yesterday Treasury Secretary Timothy Geithner provided the assessment that "the vast majority" of the banks could be considered well-capitalized.

Jim

Tompkins Associates

About the Author

Jim Tompkins | CEO

Dr. James A. Tompkins is an international authority on leadership, logistics, material handling, outsourcing, and supply chain best practices. As the founder and CEO of Tompkins International, he provides leadership for Tompkins globally.

His 30-plus years as CEO of a consulting / integration firm and his focus on helping companies achieve profitable growth give him an insider’s view into what makes great companies even better. Listen to an interview of Jim Tompkins on the Business Leader Radio show.

As a high-level business advisor, his unique perspective prepares corporations and executives for the future.

To share his knowledge and provide up-to-date information on supply chain and business trends, he developed the GoGoGo! Blogand Global Supply Chain Podcast.

He has written or contributed to more than 30 books and eBooks, including Caught Between the Tiger and the Dragon, Bold Leadership, Logistics and Manufacturing Outsourcing, The Supply Chain Handbook, andNo Boundaries. Jim has been quoted in hundreds of business and industry magazines such as The Journal of Commerce, Supply & Demand Chain Executive, and FORTUNE, and he has spoken at more than 4,000 international engagements.

Jim has served as President of the Institute of Industrial Engineers, the Materials Management Society, and the College-Industry Council on Material Handling Education, and Purdue has named him a Distinguished Engineering Alum. He has also received more than 50 awards for his service to his profession.

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