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Beyond recession: It's a structural fix.

Is it, or isn't it? Here we sit (at year's end when this was written) wondering when the good times will roll again, debating whether or not the country is technically in a recession-as if "technically" it made any difference. Business was off. Companies were laying off employees. There was hope, but it was shrouded with an apprehension of waiting for the other shoe to fall.

A recession, according to my dictionary, is a temporary falling off of business during a period when activity has generally been increasing. In the parlance of some economists, it is a technical correction of the economy. Describing it that way makes it sound too simple, too insignificant. When General Motors decides to shutter 21 factories and cut 74,000 jobs... when IBM, burdened with a tradition of never laying anyone off announces it'll cut its workforce by 20,000 in 1992... When TRW reports it plans to cut 10,000 jobs, 14% of its workforce, over the next 18 months... it should be obvious that the problem is more than a "technical correction."

What's more, recessions usually hit on the factory-floor help but leave management pretty much unscathed. That's not the case this time. Only 30% of the layoffs are Blue-collars. Dan Lacey, editor of "Workplace Trends" newsletter calculates that since October, corporate staff cuts have been coming at the rate of 2600/day. Audrey Freedman, Conference Board economist, agrees that layoffs are hitting managerial, administrative, technical, and professional jobs harder than in the 1981-82 more-classical recession.

And, recession or not, most of those jobs will not be coming back because layers of management have been eliminated. That's a structural shift in the way we run business in the US. It was forced by the globalization of competitive factors that goes beyond recession-survival tactics. In announcing Gm's restructuring, Chairman Robert Stempel made it clear such drastic steps were necessary to permit the company to be competitive over the long haul.

There are other global developments that go beyond traditional recessionary factors that will continue to impact the way the US climbs out of its economic stagnation. With the Peace Dividend, as welcome as it is, comes the dismantling of the industrial-military complex and the jobs and investment it spurred. And what of the competitive impact of a united Europe; the challenge of a demographic shift which will find workforce entrants at the turn of the century dominated by nontraditional elements including immigrants, the unskilled, and women?

There is more eating at the underpinnings of the US economy than recessionary economics. There are structural adjustments that defy a quick fix; that, like the unemployment brought about by downsizing, will take a generation to work through.

Traditionally, the tendency during a recession is to pull in the sails and ride out the storm. That won't work this time. With the structural changes taking place, managements that take a wait-and-see attitude run the risk of being left behind. It's a time for action, not reaction; for searching out and investing in new solutions rather than waiting for outdated economic theories to take hold.

Stanley J Modic Editor-in-chief
COPYRIGHT 1992 Nelson Publishing
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Modic, Stanley J.
Publication:Tooling & Production
Article Type:Editorial
Date:Feb 1, 1992
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