Category: Economic Crisis

Towns Flourish When Entrepreneurs Want to Live in Them

(p. B1) SIDNEY, Neb. — The forest green roof and pair of bronze stags frozen in combat are impossible to miss as you drive down Interstate 80.

. . .

For 54 years, Cabela’s made its home here, a juggernaut that kept the town humming. But in 2017, the sporting goods store sold for $5 billion to Bass Pro Shops — a takeover that eventually made 2,000 jobs vanish in a town of roughly 6,600 residents.

. . .

But Sidney’s staying power still surprises experts, who say it’s driven by two factors.

One: Former Cabela’s employees opening their small businesses, diversifying the economy in a formerly one-company town.

Two: A recent influx of new (p. B3) residents, both retirees and remote workers.

. . .

Each spring, high schoolers from Nebraska and neighboring states flock to Sidney searching for the perfect prom dress. Their destination: Charlotte & Emerson, a downtown boutique — and one example of Sidney’s rebirth from the ashes of Cabela’s.

Co-owner Sarah Kaiser and husband Kurt Kaiser both worked at Cabela’s. When the company was swallowed by Missouri-based Bass Pro, the family relocated there as Sarah Kaiser ran the combined company’s human resources.

But in 2020, they decided to return to Sidney, her hometown. Sarah Kaiser opened Charlotte & Emerson with her sister. Her husband launched an online fitness store, Frost Giant Fitness. They’re two of many Sidney-based companies run by ex-Cabela’s employees who decided to stick around and start something new.

“The corporate experience of these young folks really was key to this particular recovery,” said David Iaquinta, a Nebraska Wesleyan University sociology professor who has researched Sidney’s economic development. “. . . they combined that talent with a strong desire for the lifestyle that they had. They said, ‘We’re here. We’re rooted here.’”

Budding companies are being boosted by E3, a Nebraska Community Foundation program meant to aid entrepreneurship in rural Nebraska.

Already, new businesses have remodeled once-dilapidated buildings, said Sarah Sinnett, the program’s community lead.

. . .

Economic development in Nebraska “used to be about cheap land, cheap labor and cheap incentives” to nab big companies, Stinnett said.

Now: “If you want small towns to start thriving … really it needs to be focused on entrepreneurship,” she said.

For the full story, see:

Natalia Alamdari, Flatwater Free Press. “Sydney Shows Staying Power.” Omaha World-Herald (Sunday, April 23, 2023): B1 & B3.

(Note: ellipses between paragraphs, and bracketed date, added; ellipsis internal to paragraph, in original.)

(Note: the online version of the story was updated April 28, 2023, and has the title “Six years after ‘Cabela’s debacle,’ Sidney’s lights are still on.”)

78% of Americans Not Confident Children Will Be Better Off

(p. A2) An overwhelming share of Americans aren’t confident their children’s lives will be better than their own, according to a new Wall Street Journal-NORC Poll that shows growing skepticism about the value of a college degree and record-low levels of overall happiness.

The survey with NORC at the University of Chicago, a nonpartisan research organization that measures social attitudes, showed pervasive economic pessimism underpins Americans’ dim hopes for the future. Four in five respondents described the state of the economy as not so good or poor, and nearly half said they expect it will get worse in the next year.

. . .

For more than three decades, NORC has asked Americans whether life for their children’s generation will be better than it has been for their own using its General Social Survey. This year 78% said they don’t feel confident that is the case, the highest share since the survey began asking the question every few years in 1990.

. . .

Some 56% of respondents said that a four-year college degree wasn’t worth the cost because people often graduate without specific job skills and with heavy debt.

For the full story, see:

Janet Adamy. “In U.S., Most Doubt Their Children Will Be Better Off, a New Poll Finds.” The Wall Street Journal (Saturday, March 25, 2023): A2.

(Note: ellipses added.)

(Note: the online version of the story has the date March 24, 2023, and has the title “Most Americans Doubt Their Children Will Be Better Off, WSJ-NORC Poll Finds.”)

The poll mentioned above can be viewed at:

WSJ/NORC Poll (March 2023).

Corporate Fraud Index “Is the Highest in Over 40 Years”, Portending Economic Woes

(p. A2) Manipulation of earnings from Corporate America is on the rise, an ominous omen for the U.S. economy.

That is the conclusion of new research on accounting fraud, using a technique that flagged Enron as an earnings manipulator several years before the energy company’s spectacular 2001 implosion.

Unless you study accounting, you have likely never come across the M-Score, which is the number underlying both the Enron episode and the economywide concern now. The “M” is for manipulation, and uses a company’s financial statements to determine whether it is engaging in manipulation.

. . .

“We think this is a measure of misinformation in the economy,” said Dr. Beneish. The new aggregate measure was published in a December [2022] paper, and the latest data—compiled in March [2023] and shared with The Wall Street Journal—shows that the collective probability of fraud across major companies is the highest in over 40 years.

For the full commentary, see:

Josh Zumbrun. “Signs of Fraud Flash Warning for Economy.” The Wall Street Journal (Saturday, March 25, 2023): A2.

(Note: ellipsis, and bracketed years, added.)

(Note: the online version of the commentary has the date March 24, 2023, and has the title “THE NUMBERS; Accounting-Fraud Indicator Signals Coming Economic Trouble.”)

The December 2022 paper mentioned above is:

Beneish, Messod D., David B. Farber, Matthew Glendening, and Kenneth W. Shaw. “Aggregate Financial Misreporting and the Predictability of U.S. Recessions and GDP Growth.” The Accounting Review (Dec. 2022), DOI:10.2308/tar-2021-0160.

Yale Economist Says Stagnant Japan Would Benefit from Mass Suicide of Elder Citizens

A growing number of so-called “progressives” are advocating an end to economic growth. I do not believe that most of them understand how much more suffering and death the world will experience if their advocacy succeeds. (I remember decades ago seeing a beautiful but troubling Japanese movie with my friend Hajime Miyazaki, in which the loving, aging matron of a starving family was willingly carried up a mountain by one of her sons and left there so the other members of her family would have more to eat.)

(p. A1) In interviews and public appearances, Yusuke Narita, an assistant professor of economics at Yale, has taken on the question of how to deal with the burdens of Japan’s rapidly aging society.

“I feel like the only solution is pretty clear,” he said during one online news program in late 2021. “In the end, isn’t it mass suicide and mass ‘seppuku’ of the elderly?” Seppuku is an act of ritual disembowelment that was a code among dishonored samurai in the 19th century.

. . .

(p. A10) Given Japan’s low birthrate and the highest public debt in the developed world, policymakers increasingly worry about how to fund Japan’s expanding pension obligations.

. . .

In Japanese folklore, families carry older relatives to the top of mountains or remote corners of forests and leave them to die.

. . .

In broaching euthanasia, Dr. Narita has spoken publicly of his mother, who had an aneurysm when he was 19. In an interview with a website where families can search for nursing homes, Dr. Narita described how even with insurance and government financing, his mother’s care cost him 100,000 yen — or about $760 — a month.

For the full story, see:

Motoko Rich and Hikari Hida. “Scholar Suggests Mass Suicide for Japan’s Old. Does He Mean It?” The New York Times (Monday, Feb. 13, 2023): A1 & A10.

(Note: ellipses added.)

(Note: the online version of the story has the date Feb. 12, 2023, and has the title “A Yale Professor Suggested Mass Suicide for Old People in Japan. What Did He Mean?”)

Dependent, Missionless Resignation Can Be “Fundamentally Degrading”


(p. A13) At the Harvard Business Review, Joseph Fuller and William Kerr wrote this spring that the Great Resignation was an “unprecedented mass exit” but also the reversion to a long-term trend, one we’re “likely to be contending with for years to come.” Quit rates have been rising steadily for a long time. When the pandemic first hit, workers held onto their jobs for fear of layoffs and recession. But by 2021 stimulus money hit the system and uncertainty abated. That’s when the Great Resignation hit. “We’re now back in line with the pre-pandemic trend.”

. . .

. . . political economist Nicholas Eberstadt of the American Enterprise Institute . . . notes that recent workforce changes follow a postwar pattern. Usually after recessions, male labor-force participation drops, and when the recession ends it ticks up, “but never gets back to where it was.” Labor-force participation for both sexes, he notes, peaked in 2000 at 67%. We’re now 5 points lower than that.

The work rate for those in their prime working years, 25 to 54, has been declining since the turn of the century. The economic implications are obvious—slower growth, less expansion—and the personal implications are dire. “By and large, nonworking men don’t ‘do’ civil society,” Mr. Eberstadt says. They stay home watching screens—videogames, social-media sites and streaming services. There is something “fundamentally degrading” in this, and Mr. Ebestadt refers to an “archipelago of disability programs” that help make not working possible.

Staying apart, estranged from life and not sharing a larger mission can create “really tragic long term consequences,” Mr. Eberstadt says. These young people aren’t taking chances, leaving a job to start a small business. They aren’t finding themselves. They aren’t even looking.

For the full commentary, see:

Peggy Noonan. “DECLARATIONS; The ‘Great Resignation’ Started Long Ago.” The Wall Street Journal (Saturday, July 23, 2022): A13.

(Note: ellipses added.)

(Note: the online version of the commentary has the date July 21, 2022, and has the same title as the print version.)

Entrepreneurs Find New Uses for Bacon Grease and Waste Crabs

(p. A1) OCEAN CITY, Md.—Kristie Williams sells Bumble Soap at her health-food store in this beach town. Its unusual main ingredient, she said, is hard to detect—unless you’re a dog.

“I can’t smell the bacon in the soap,” she said. “My dogs can. Whenever I bring one home, they go crazy.”

The yucky-sounding soap bars are being cooked up less than 4 miles away from Ocean City Organics at Sunrise Diner, . . . (p. A10) Owner Sam Delauter said he branched into soap making when the price of a case of bacon jumped to $90, from $45 last year.

Thinking he could squeeze a few dollars out of his bacon grease in a time of high inflation, he dusted off his great-grandmother’s soap recipe from the Great Depression. He sells the bars for $5.99.

. . .

Searching for new sources of revenue and greener ways to deal with waste, business owners have started coming up with some funky new products. Vodka distilled from dairy-making waste. Compost made from crabs. Reactions from consumers range from enthusiastic to aghast.

For the full story, see:

Harriet Torry. “Inflation’s Byproducts: Bacon Soap or Dairy Vodka, Anyone?” The Wall Street Journal (Wednesday, July 27, 2022): A1 & A10.

(Note: ellipses added.)

(Note: the online version of the story has the date July 26, 2022, and has the title “Inflation’s Funky Byproducts: Bacon Soap or Dairy Vodka, Anyone?”)

Resilient Entrepreneurs Quickly Rebuilt Chicago After “Great Fire” of 1871

(p. C8) Along with the San Francisco earthquake of 1906, the Great Chicago Fire of 1871 stands as one of America’s foundational urban legends, a story of death and rebirth, a monument to the resiliency of the nation’s character.

. . .

Photographs taken immediately after the fire show the utter devastation facing residents: a flattened, rubble-strewn landscape, with only the jagged husks of buildings jutting into the smoky air. But “Chicago’s Great Fire” goes beyond the disaster and its cause to recount the remarkable way the city sprang back. An energizing sense of optimism and opportunity, along with a heavy dose of boosterism, had fueled the city’s explosive growth, and those elements quickly went to work. “Almost immediately,” Mr. Smith writes, “many Chicagoans paradoxically came to see the heroic destruction of their city as an unexpectedly positive event, a stage in its irresistible upward development rather than a dispiriting setback.”

“CHEER UP,” exhorted the headline on an editorial in the Chicago Tribune’s first postfire edition, three days after the inferno started. Even while tens of thousands of residents remained homeless, an emissary assured Eastern financiers that the city warranted a new round of investment. Local entrepreneurs built crude shacks in the rubble to sell necessities. Debris not used for rebuilding was dumped on the edge of Lake Michigan, thus enlarging the size of the downtown.

For the full review, see:

Richard Babcock. “A Cow, a Lantern, a City in Flames.” The Wall Street Journal (Saturday, Oct. 17, 2020): C8.

(Note: ellipsis added.)

(Note: the online version of the review has the date October 16, 2020, and has the title “‘Chicago’s Great Fire’ Review: Rising From the Ashes.”)

The book under review is:

Smith, Carl. Chicago’s Great Fire: The Destruction and Resurrection of an Iconic American City. New York: Atlantic Monthly Press, 2020.

Argentines Prefer “Cratered” Cryptocurrency Over Hyperinflating Pesos or Hauling “Large Stashes” of Dollar Bills

(p. A4) Even though the cryptocurrency market has cratered in recent months, many Argentines see it as a safe haven ‌in a country where surging inflation and a grinding economic crisis have battered the national currency, the peso, and people’s bank accounts.

“Money here is like ice cream,” said Marcos Buscaglia, an economist in Buenos Aires, the capital. “If you keep a peso for too long, it melts in terms of how much you can buy with it.”

. . .

Across the world, people in low-income and emerging countries have become the biggest users of cryptocurrencies, according to various reports, overtaking the United States and Europe.

Digital coins are prized in countries where the local money is volatile and where governments have made it harder for citizens to buy foreign currencies.

. . .

Argentina provides some clues about the appeal of cryptocurrencies.

Argentines have long looked to the dollar as a safe haven. Saving in dollars “is tattooed into our DNA,” said Daniel Convertini, 34, who works in communications for a ride-hailing company. “I learned to do it from my dad and my grandfather, not because I read it in some financial newspaper.”

. . .

. . . digital currencies provide an advantage by not requiring people to haul around large stashes of bills.

For the full story, see:

Ana Lankes. “Crypto Is Tumbling. But to Argentines, It Still Beats Pesos.” The New York Times, First Section (Sunday, August 21, 2022): A4.

(Note: ellipses added.)

(Note: the online version of the story has the date Aug. 20, 2022, and has the title “Crypto Is Tumbling, but in Argentina It’s Still a Safer Bet.”)

Minorities, Disabled, Less-Educated, and Felons Are First Laid Off in a Recession

(p. A1) Black Americans have been hired much more rapidly in the wake of the pandemic shutdowns than after previous recessions. But as the Federal Reserve tries to soften the labor market in a bid to tame inflation, economists worry that Black workers will bear the brunt of a slowdown — and that without federal aid to cushion the blow, the impact could be severe.

Some 3.5 million Black workers lost or left their jobs in March and April 2020. In weeks, the unemployment rate for Black workers soared to 16.8 percent, the same as the peak after the 2008 financial crisis, while the rate for white workers topped out at 14.1 percent.

Since then, the U.S. economy has experienced one of its fastest rebounds ever, one that has extended to workers of all races. The Black unemployment rate was 6 percent last month, just above the record low of late 2019. And in government data collected since the 1990s, wages for Black workers are rising at their fastest pace ever.

Now policymakers at the Fed and in the White House face the challenge of fighting inflation without inducing a recession that would erode or reverse those workplace gains.

Decades of research has found that workers from racial and ethnic minorities — along with those with other barriers to employment, such as disabilities, criminal records or low levels of education — are among the first laid off during a downturn and the last hired during a recovery.

For the full story, see:

Talmon Joseph Smith and Ben Casselman. “Job Gains for Black Workers Could Reverse in a Downturn.” The New York Times (Wednesday, August 24, 2022): A1 & A14.

(Note: the online version of the story has the same date as the print version and has the title “What Will Happen to Black Workers’ Gains if There’s a Recession?”)

“Maverick” Chinese Entrepreneur Zhou Hang Dares Criticize Zero Covid Policy

(p. B1) China’s entrepreneur class is grappling with the worst economic slump in decades as the government’s zero Covid policy has shut down cities and kept would-be customers at home. Yet they can’t seem to agree on how loudly they should complain — or even whether they should at all.

. . .

Their approach, the equivalent of an ostrich sticking its head in the sand, doesn’t make sense to Zhou Hang. Mr. Zhou, a tech entrepreneur and a venture capitalist, has questioned how his peers can pretend it’s business as usual, given the political and economic upheaval. Stop putting up with the ridiculous reality, he urged. It’s time to speak up and seek change.

Mr. Zhou is rare in China’s business community for being openly critical of the government’s zero Covid policy, which has put hundreds of millions of people under some kind of lockdowns in the past few months, costing jobs and revenues. He’s saying what many others are whispering in private but fear to say in public.

“The questions we should ask ourselves are,” he wrote in an article that was censored within an hour of posting (p. B4) but shared widely in other formats, “what caused such widespread negative sentiment across the society? Who should be responsible for this? And how can we change it?”

He said the lockdowns in Shanghai and other cities made it clear that wealth and social status meant little to a government determined to pursue its zero Covid policy. “We’re all nobodies who could be sent to the quarantine camps, and our homes could be broken into,” he wrote. “If we still choose to adapt to and put up with this, all of us will face the same destiny: trapped.”

. . .

Mr. Zhou, 49, is known as a maverick in Chinese business circles. He founded his first business in stereo systems with his brother in the mid-1990s when he was still in college. In 2010, he started Yongche, one of the first ride-hailing companies.

Unlike most Chinese bosses, he didn’t demand that his employees work overtime, and he didn’t like liquor-filled business meals. He turned down hundreds of millions of dollars in funding and refused to participate in subsidy wars because doing so didn’t make economic sense. He ended up losing out to his more aggressive competitor Didi.

He later wrote a best seller about his failure and became a partner at a venture capital firm in Beijing. In April [2022], he was named chairman of the ride-sharing company Caocao, a subsidiary of auto manufacturing giant Geely Auto Group.

A Chinese citizen with his family in Canada, Mr. Zhou said in an interview that in the past many wealthy Chinese people like him would move their families and some of their assets abroad but work in China because there were more opportunities.

Now, some of the top talent are trying to move their businesses out of the country, too. It doesn’t bode well for China’s future, he said.

“Entrepreneurs have good survivor’s instinct,” he said. “Now they’re forced to look beyond China.” He coined a term — “passive globalization” — based on his discussions with other entrepreneurs. “Many of us are starting to take such actions,” he said.

For the full story see:

Li Yuan. “A Solitary Critic on ‘Zero Covid’.” The New York Times (Saturday, June 11, 2022): B1 & B4.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the story has the date June 10, 2022 and has the title “A Chinese Entrepreneur Who Says What Others Only Think.”)

Chair of Obama’s Council of Economic Advisers Worries that the Huge Covid Stimulus Spending Is Causing “Permanently Higher Inflation”

Jason Furman, quoted below, was the Chair of President Obama’s Council of Economic Advisors. He is now a professor of economics at Harvard.

(p. B1) The United States spent more aggressively to protect its economy from the pandemic than many global peers, a strategy that has helped to foment more rapid inflation — but also a faster economic rebound and brisk job gains.

Now, though, America is grappling with what many economists see as an unsustainable worker shortage that threatens to keep inflation high and may necessitate a firm response by the Federal Reserve. Yet U.S. employment has not recovered as fully as in Europe and some other advanced economies. That reality is prodding some economists to ask: Was America’s spending spree worth it?

. . .

“I’m worried that we traded a temporary growth gain for permanently higher inflation,” said Jason Furman, an economist at Harvard University and a former economic official in the Obama administration. His concern, he said, is that “inflation could stay higher, or the Fed could control it by lowering output in the future.”

For the full story, see:

Jeanna Smialek and Ben Casselman. “Same Relief Goal, Different Costs.” The New York Times (Wednesday, April 27, 2022): B1 & B3.

(Note: ellipsis added.)

(Note: the online version of the story has the date April 25, 2022, and has the title “Rapid Inflation, Lower Employment: How the U.S. Pandemic Response Measures Up.”)