The next growth area for the economy

The optimism is rushing in as the new cadre for the future of the American economy, most of which was given a lift thanks to the new employment numbers for March.  While many report on the green shoots that help point to the one, rosy conclusion there still remains the question of where our growth will come from. From Slate, an article on “Why the U.S. recovery will be bigger, faster, and stronger than economists and politicians expect” gives a clue as to what the next new growth area for the economy will be: infrastructural efficiency.

In the short term, the ruthless pursuit of efficiency translates into the uncomfortable—and unsustainable—dichotomy of rising profits and falling employment. But the focus on efficiency is creating new business opportunities for smart companies. At BigBelly Solar, a Needham, Mass.-based firm whose solar-powered trash compactors reduce the need for both labor and energy, sales doubled in both 2008 and 2009. “Cities and institutions like universities and park systems are eager to do more with less,” says CEO Jim Poss. Leasing 500 compacting units has allowed Philadelphia to cut weekly pickups from 17 to five and will save it $13 million over 10 years. BigBelly employs fewer than 50 people, but like many businesses in fast-growing markets it indirectly supports a much larger number of jobs. At Mack Molding, an Arlington, Vt., contract manufacturer, 35 workers are kept busy on two shifts producing compactors. “When you add the employees at the more than 50 component suppliers, this work is supporting another 180 jobs,” says Joan Magrath, vice president of sales and engineering at Mack Molding. BigBelly compactors, which are entirely made in the United States, have been exported to 25 countries. It’s a drop in the bucket. But thousands of start-ups and small businesses are trying to crack the markets developing at home and abroad.

The value added is obvious. More waste can be processed at a lesser cost.  In the case of Philadelphia, the $13 million dollar savings can now be allocated to provide more value regarding something else, providing more momentum for growth in either the public or private sector.  While traditional waste handlers may be out of a job, the article notes that much higher skilled, production jobs are created in order to produce the automated receptacles.

The short-coming of this article is that it doesn’t delve any deeper into the potential that efficiency systems like this can create for the economy.  This blog has detailed some incredible ideas at maximizing efficiency, either by finding value in waste or building economies of scale.  The author misses how important infrastructural efficiency will be for the economy, especially since a lot of this efficiency will result in energy savings, usually not propelled by cost, but towards providing a greener future.  The more value we can squeeze per unit of (insert labor or widget here), the higher productivity the U.S. will enjoy which will entail higher income per individual.

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