How to Jump-Start a MicroCell Economy

Our economy is not an automobile (car), and thus it cannot be jump-started like one. Still, there is something that we can learn from comparing the way we used to jump-start our cars in the past to how we jump-start them today. In the old days, when an automobile stalled, we would manually push the car to get it started. This was a very labor-intensive process. Today, we jump-start cars using jumper cables, portable chargers, and designer chargers that meet the precise specifications of the automobile manufacturers. The reason for the difference here is due to the fact that the times have changed; most cars today have automatic transmissions and digital technology, and thus the process has changed from one involving a manual push to a more technologically-based method.

If the new economy (digital) was like a car, we could recharge it with a stimulus plan and tax breaks, and thus expect it to return to normal growth. Unfortunately, the economy is more complex than a car, especially given that it is not a man-made machine. Economists think that they can solve economic problems based on established theories and past economic experiences. The problem with this type of thinking is that the environment is constantly changing, and the old theories and approaches are quite simply ill-suited to stimulating the new economy.

We learned a lot from the great depression of 1929, after which we realized that managing the economy involves jointly establishing monetary policy and fiscal policy, overseeing the financial health of the various institutions involved, and maintaining market efficiency in the financial markets. If we look at our economic policies of the last decade, the Federal Reserve has maintained the discounted rate at zero for a long time in order to loosen the requirements of credit and maintain a more consistent circulation of funds in our economy. In addition, the federal government has bailed out failing financial institutions in order to maintain confidence in the system and thus the availability of credit to businesses. The government has also injected billions into the economy by investing in additional infrastructure through federal and state sponsored projects.

The question arises as to why it took us this long to recover from the economic crises of 2008. The answer may depend on the economic school of thought that is adhered to, along with the assumptions that economists make when explaining particular economic situations. The average citizen or business is not interested in a debate between two different schools of economic thought. Instead, an average citizen is simply interested in finding a well-paying job that provides an income to support his or family, a house to live in without the worries of foreclosure, and credit to buy goods or services for enjoying life to the fullest, as well as the freedom to pay for smaller impulse items and entertainment along the way. In contrast, businesses are interested in producing more goods and services in order to create increasing wealth for their shareholders.

The traditional economic policy of economic recovery can best be explained using the jump-start process of restarting a car. The car in this case has an automatic transmission and digital technology, but it has stalled, and we are ignorantly trying to start the car with a manual push like we used to in the past.

We need to realize that we have a new (digital) economy, and we cannot apply the monetary and fiscal tools as we have previously used in agricultural and industrial economies. In this new economy, we first need to recognize that we are part of both a global and a digital economy. Second, we need a monetary policy that maintains the liquidity in the microcells of our economic system. Third, the fiscal policy should support a trickle-up approach rather than a trickle-down model.

A fiscal policy that is based on the trickle-down approach results in investment in our country’s infrastructure that superficially stimulates the economy. Any investment in the country’s infrastructure is still a “good” investment, but such investments may not always stimulate the economy as effectively as they may have in the old days. For example, construction is a more technologically-based process these days. What this means is that a construction project that may have required 1,000 employees before can now be accomplished by a little over 100 people. The raw and prefabricated materials are now imported from other countries. The heavy equipment used may be leased from a foreign subsidiary. The trickle-down effect is going global due to extensive U.S. investments in infrastructure. However, this economic line of thinking will take years to establish solid economic growth. This trickle-down economic policy is from the past, and will not effectively solve the economic problems of the new (digital) economy, which is formed by micro-cells.

To stimulate economic growth, we need to adopt a more behavioral economic approach, which would allow us to understand the role of digital technology in the economy and recognize that our economic system has changed to a micro-cell system. In a digital economy, the focus of economic policy should be on the millions, not on just the few. Millions of people make the nation prosperous, not just a few so-called multinational or global companies, or essential industries.

Ultimately, the new economy is a micro-cell economy. In a microcell economy, the growth of the economy depends on the growth of the micro-economic cells. The growth of each microcell depends on various factors such as education, intellectual capital, monetary capital, digital technology, and communication links. To stimulate the new economy, we need to stimulate the microcells by deploying fiscal and monetary tools that function at this microcell level. Furthermore, it is important to provide other economic resources in order to stimulate growth in the microcells. The process of stimulating the microcells of the economy to further boost growth in the economy is referred to as the trickle-up approach. A trickle-up approach is needed to stimulate a microcell economy rather than a trickle-down approach.