Bill Crutchfield's Troubling Thoughts about the 'New Economy'
Even if the economy does not fall into a technical recession, most economists agree that we will not return to the red-hot economy of the past few years. This is partly a result of people like me—company CEOs. A large number of my counterparts feel as I do and are being very conservative regarding both capital investments and hiring. In our case, I postponed our new call center and directed that our hiring be sharply reduced. Many companies are even more aggressive in preparing for a slower economy and are actually laying off employees. As companies continue to slow or stop hiring and, in some cases, lay off employees, the unemployment rate will continue to rise. As unemployment increases, consumer confidence should fall reflecting people's insecurity about their own future. Obviously, people react by cutting back on spending. Since consumer spending represents two-thirds of the economy, this pullback in spending will continue to weaken the overall economy and hurt retail in particular.
For all of these reasons, I am not taking the early stages of this correction lightly. Danger signs are clearly visible. Therefore, executives throughout our industry as well as others should apply the same business fundamentals today that have worked successfully since the ancient Phoenicians started the earliest businesses. They include a healthy appreciation of risk, basing value on realistic perceptions, strong management, an appreciation for profit and a total commitment to the highest ethical principles.
On a brighter note, I feel that we are on the threshold of an exciting new world. Once the economic aberrations of the 1990s are worked out, our economy will grow to new heights. Hopefully, future generations will not fall into the trap of believing that they are living in a "new economy" that allows them to forget certain time-honored fundamentals.