We are facing a decade of Reverse Reaganomics, a decade when the economic health of the nation and the media industry will suffer from the trickle down effect of a return to federal oversight and increased regulatory control of business, massive deficits, tax increases and other governmental impositions resulting from eight years of Bushleaguenomics.
Here are just a few of yesterday's headlines:
· Fed in $85 Billion Rescue of AIG
· Lehman Fire Sale
· Morgan Seeks to Stem Fall
· Feds Try to Find a Buyers for WaMu
· Goldman's Net Off 70%
· G.M. and Ford Officials Seeking U.S. Loans
· Fallout from Bankruptcy Trimming Hedge Funds
· Money Market Fund Warns Its Customers Face Losses
· Gasoline Prices Rise
"This is a once-in-a-half-century, probably once-in-a-century type of event," former Federal Reserve chief Alan Greenspan commented on ABC's This Week, referring to the bail out mortgage giants Freddie Mac and Fannie Mae. "There's no question that this is in the process of outstripping anything I've seen, and it still is not resolved and it still has a way to go," Greenspan said. Greenspan made his comments before the government's historic bailout of AIG and BofA's proposed acquisition of Merrill Lynch.
As each of us churns along in our respective jobs (assuming you still have one), we can't help but be confronted by an obvious reality. The U.S. economy, unarguably the strongest and most stable in the world just eight years ago, has been systematically decimated and destabilized to the point of near-bankruptcy. Even as the Fed bails out company after company, the toll on taxpayers becomes progressively more untenable. We - you and I - simply cannot continue to underwrite wars on multiple fronts, payback of the national debt (with interest), bailouts of failed institutions, repairs to the national infrastructure, education, insurance and medical costs, environmental initiatives, our basic cost of living and so much more.
While the average American consumer has little direct connection to yesterday's headlines, the trickle down impact will be sustained and very real. Unemployment will increase; real personal income will decline; retail sales will suffer; discretionary spending will dry up. The next two years will be troubling for American and global business, no matter which political party controls the administration and Congress.
Why is this Reverse Reaganomics? President Ronald Reagan's economic policies contributed greatly to the creation of the cable television industry, companies like Turner Broadcasting, Viacom and News Corporation, Financial Times Managing Editor Lionel Barber told me in 2004. Reagan's economic policies supported entrepreneurial initiatives, creating an environment that spawned most of the big cable networks, several important print titles, the videogame industry, and the earliest stages of Internet development. The policies of the past eight years and their long-term implications will have a reverse impact.
In the next 36-months we will witness a stream of company shut-downs and corporate consolidation. Venture backed companies will be forced into fire sales. Debt-saddled media companies will be restructured, assets will be sold off, and massive multi-media conglomerates will shrink. Ad budgets will be shifted to short-term promotional spending and budgets targeted to experimental opportunities will instead be returned to the bottom line. Wall Street valuation of media companies will be recalibrated, as unrealistic demands for quarterly growth are moderated and the value of long-term strategic vision and brand health is finally acknowledged. The media and advertising industries are far more healthy than the auto, real estate, financial and other categories. But growth has been spurred by three decades of investment and entrepreneurialism that economic realities can no longer sustain. Executives need to quickly adjust to a reversal of economic strength and entrepreneurial enthusiasm.
The next decade will reward those who are playing for long-term stability and relevance rather than short-term exit strategies and financial windfalls.
About Jack Myers: For more than two decades, Jack Myers has been the media industry's leading analyst, researcher and consultant on relationships among marketers, agencies and media sellers, providing business development services and custom insights on relationship best practices to more than 250 marketers, agencies, media companies and industry service providers. Jack can be reached at firstname.lastname@example.org
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