“The telecom boom was typical of many others. In a boom, you overbuild and allow too many people in. All of a sudden, there is a shakeup. We are past that now.” — Wachovia Chief Economist John Silvia.
RALEIGH — Frank Rich, the provocative columnist from The New York Times, and John Silvia, chief economist at Wachovia, could have a very interesting conversation about the war on terror.
“Does anyone still remember the war on terror?” Rich writes to begin his column in Thursday’s edition.
“Yes, especially American businesses,” is what Silvia would likely say in response.
Silvia was in Raleigh on Wednesday to deliver a general upbeat message at the Greater Raleigh Chamber of Commerce’s annual economic forecast. (He predicted 3-3.5 percent growth in gross domestic product this year.) One of his slides that reviewed the economic rebound in 2004 showed huge spikes in growth — equipment and software sales were up 17 percent in the third quarter alone.
After the seminar, I asked Silvia if such growth was sustainable, especially given the importance of software and high-tech gear to the state’s high-tech and financials services communities.
“Oh, yes,” Silvia replied with a firm voice.
“The first thing is security,” Silvia said. “You cannot have any kind of failure. You cannot have anyone fooling around with the stuff.”
Silvia, a longtime veteran of financial and political wheeling-and-dealing in Washington before joining Wachovia, said American businesses did learn many lessons from the 9-11 terror attacks and are continuing to emphasize means to prevent fallout if or when another major attack occurs.
He cited Wall Street firms in particular as having learned the necessity of having backup data in secure locations more than a block or two away, noting that “a quarter of lower Manhattan” was basically wiped out from an infrastructure point of view as the World Trade Center fell.
North Carolina is seeing a direct benefit from that. In October, Credit Suisse First Boston announced plans to build a Global Business Center in RTP.
Silvia also said corporations are taking to heart cyber threats to data and are helping drive improvements in communications. People looking for growth opportunities should be looking at security software and networking as a result, he added.
Telecommunications and networking firms are also coming back from the 2001 nuclear winter, in Silvia’s view.
“The telecom boom was typical of many others,” he said. “In a boom, you overbuild and allow too many people in. All of a sudden, there is a shakeup. We are past that now.”
Silvia pointed to consumers’ demands for more features in cell phones as an example of the rebound — and growth opportunities. “Look at what all a phone can do today,” he said, “and people’s expectations for them.”
The latest statistics from the CTIA, a trade association focused on Internet and wireless technology, show that more than 170 million Americans now use cell phones. And the demand for smartphones — virtually a laptop in your palm — is skyrocketing.
But in his talk and in the later interview, Silvia stressed two points that he said could hurt North Carolina’s future in growth related to high tech, software and services. He said high school education needs to be improved and added that the state’s business income tax rates are too high, helping drive businesses out of state or choosing someone other than North Carolina for expansion or relocation. The state won Dell’s new computer plant, for example, but at what costs?
“Lower rates,” Silvia said, “will lower the base. I’m all for aggressive recruiting, but the best recruiting is lower tax rates.”
Rick Smith is managing editor of Local Tech Wire.