Economic recovery in the United States is now very dependent on the state of mind of the American public and its business leaders, according to William R. Berkley, founder, chairman and CEO of W.R. Berkley Corporation.
“No one in Washington seems to understand that economic theory is not numbers theory, but rather driven by peoples’ state of mind,” said Berkley, a keynote speaker at the National Association of Surplus Lines Organizations (NAPSLO) annual convention in Atlanta. “Washington needs to rethink what they’re doing in a bipartisan way. To give us, the business people of America, the business establishment of the world, confidence, predictability. It is only such confidence that will get us to hire more people, expand our businesses and make investments in what we see as a brighter future.”
Berkley said if he had to choose a few words to describe the current state of economic and political environment, they would be: “volatile, uncertain and constant change.”
Though he expressed the belief that the economy is slowly getting back on track, he said progress will be slow until there is a general “confidence that things are going to move forward.”
He stressed that his “complaint is not about Democrats or Republicans. It’s about the extreme partisan politics that currently exists in Washington. And the focus of one party or the other on their goals as opposed to what needs to be done for our nation.”
Still, despite the comparisons, particularly in the media, of the current state of the economy to that of the 1930s, economic conditions now are not like that of the Great Depression, Berkley said.
“The economy is improving. Business is getting better. There are very few real indications that things are slipping back,” he said. “Business has substantial liquidity. Profitability is generally good. And inventory controls are tight. Productivity is high and there’s no significant decline in employment expected. Most businesses have been extremely constrained in new hiring. In fact it is just such caution that is preventing a strong recovery from taking place.”
Only at the point where businesses become “concerned about a loss of profits from sales not made because of inadequate inventory or lack of productive capacity” will a true recovery take place. “Businesses must be more worried about missed opportunities and competitive pressures than they are about overhead and over expansion,” he said.
One big sticking point is the housing sector. While problems with commercial real estate have largely been ameliorated, he said, the housing industry continues to be a drag on the economy.
“We need to start to clear the block of foreclosed homes and people unable to get new mortgages and transfer houses,” Berkley says. “Until we clear that block, we can’t get homebuilding going, we can’t give people the mobility they need to change jobs.”
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