America evolves, Dow does too

The Dow Jones Industrial Average–the face of American industry–just got a major facelift. Finance types don’t take such changes lightly, and the globe is abuzz with discussion on how the changed Dow reflects the changes in Uncle Sam’s economy.

Ah, change. The evolution, survival and deaths of various industries are a compelling story these days, after the computer geeks uncorked an economic genie that has rocked the world. While the CNMI remains mired in a static economic posture, the United States is three innings into a new industrial revolution.

The Dow is comprised of 30 major industrial stocks, and the prices of these stocks are blended into a single number that provides a yardstick of how the market at large is behaving. If someone tells you the “stock market closed at 10,302 yesterday,” the number being thrown at you is the Dow.

The new stocks on the list reflect high-tech industry, as Microsoft and Intel were admitted to the exclusive Dow club. Home Depot–a new wrinkle in retailing–also joined the club, as did SBC Communications.

If you’ve never heard of SBC Communications, don’t feel bad. I never heard of them either. If they’re so good at communicating, why haven’t we heard of them?

When admitting these four rookies to the roster, the Dow had to kick off some of the old farts. Sears Roebuck, a stale and stagnant retailer, was put out to pasture. Wal-Mart, by the way, a competitor of Sears, remains on the Dow.

If Sears had any sense it would (1) spin off its Craftsman tool division, then (2) burn down all of its cheezy, polyester packed stores, then (3) collect the fire insurance money, then (4) invest the proceeds in Wal-Mart stock and maybe a quart of Mogen David 20/20 rot gut to ease the pain of utter failure.

Industrial giants Goodyear, Chevron, and Union Carbide also got booted from the Dow.

In general, then, the smokestack industries are having to share the limelight with the pencil neck geek industries. Big brains, not big knuckles, are what the new economy is all about. But don’t sell old fashioned industrial muscle short: the United States is still a manufacturing powerhouse (hello, Ford, hello, Boeing), and without this industrial base, the high tech field would have not taken root.

American industry, in a word, is cool. It drives the entire global economy. Taking a fresh look at the Dow reminds me of how innovative, productive, and hard-working these companies are. The industrial base is evolving and getting stronger as you read these very words.

The success of American industry wasn’t launched by committees of bureaucrats dreaming up dingbat economic ideas. Nobody “planned” the path of American industry. Entrepreneurs and innovators–largely left alone to do whatever they want– are the ones who ushered in the continuing waves of prosperity. Most of the world won’t ever learn that lesson, and will sit on the economic sidelines grinding its teeth in seething envy at the fruits that economic freedom produces. It’s a lesson the Commonwealth may want to ponder as economic evolution marches on.

Stephens is an economist with Stephens Corporation, a professional organization in the NMI. His column appears three time a week: Wednesday, Thursday and Friday. Mr. Stephens can be contacted via the following e-mail address:ed4Saipan@yahoo.com.