Free trade has been a cornerstone of American international economic policy for the last 50 years. But is it really free trade when one side opens its markets and the other side keeps its markets closed? Almost 20 years ago America faced a protectionist Japan which claimed to be a free trading country.
Today we face an even greater foe in a former communist, current dictatorship that is willing to do anything to acquire product market share at our expense - China. China represents a much greater challenge then anything we've faced before. Since China is not a democracy it's government does not respond to its citizens complaints the same as a democratic country. China controls it currency at an artificially low level with respect to the dollar which gives Chinese manufacturers an advantage by making their products cheaper on the international market when compared to US manufacturers. The end result is that Chinese citizens are paid less then they are worth on the open international market and thus live poorer lives while Americans suffer through job losses because Chinese manufacturers can produce products cheaper than American manufacturers can ever imagine. China's citizens are the slaves of the world and the American worker is paying for it.
Add to the previous facts that Chinese manufacturers don't pay social security, Federal or State unemployment taxes, nor taxes to cover a military industrial complex that eats 1 trillion dollars (1,000 billion or 1 million million dollars!) yearly, or absorb the costs associated with the release of toxic agents into the environment and a not so pretty picture is painted of a US supported totalitarianistic system that American workers can never compete against. The cards are stacked against American workers and American jobs while American politicians foam at the mouth about how Americans are fat, lazy, stupid, and uncompetitive compared with the nimble, smart, hard working Chinese companies and workers. The fact that Chinese manufacturers don't incur these costs represents in essence a tax that makes US manufactured goods substantially more expensive than Chinese made goods even if we could transplant Chinese workers here and pay them the average Chinese wage of $0.57 per hour. In other words, our government policies make us less competitive no matter what the average American worker concedes in wages and benefits.
So what do we do about this? Let our industries pollute our waterways and air all in the name of international competitiveness? Kill off social security and our unemployment safety net so we can compete with the Chinese? My vote is no; however, we don't need to give foreign countries unfettered access to our markets. We can regulate who has access and how much it is going to cost them to have access to our markets. We need to raise tariffs especially on Chinese goods equal to the amount of money that our own domestic manufacturers must pay in order to play in their own backyards (i.e. our US market). The playing field must be level and fair; that is all that Americans must insist upon.
If we ever try to implement protectionist policies for domestic manufacturers you can be sure that politicians will rail against these anti free market forces and that in response, countries like China, Malaysia, & Taiwan will erect trade barriers of their own and cost US export jobs. We just have to keep in mind that we buy much more from the world then we sell to it; the net effect would be that the loss of export jobs would more than made up with new jobs created by domestic manufacturing. Countries like China would have no choice but to work with us to address our valid grievances or risk losing their best customer. Americans need to decide if Walmart and General Electric run our country or if we do.
Tuesday, March 9, 2010
Saturday, February 27, 2010
The Generation Gap
Americas elders are in a generational war with today's kids, and they are winning. As I stated before in an earlier blog:
Now take the baby boom, those born between 1946 and 1964, which is a large part of the current population and one can visualize an overwhelming chunk of the population extracting money from society when they start to retire in a few years. This population bubble surfing through our demographics will rapidly reduce the ratio of workers to retirees - originally 42 workers per retiree in 1945 and currently only 3.3 and eventually approaching 2. If we don't make the tough decisions now then taxes will have to double to keep "entitlements" at the same level. Anyone interested in doubling their taxes out there? Also, do you honestly think that a society that is becoming less white and more brown, whose kids are taught in substandard inner city schools to grow up to work as cashiers in Walmart, is going to have a tax base that can support all those old white people? I don't think so.
I'll leave you with this. Finland was a relatively poor agrarian based economy. The Finns dropped a protectionist economic model in the early 1970's and established a capitalism based economic model. Also, Finland passed the equivalent of the US's No Child Left Behind educational program in 1968 and have been tweaking it ever since. Finland made education a top priority and they pay for it with real money whereas we only provide lip service to education in the US: e.g. Finland's teachers salaries are more than those who earn other degrees; only 1 in 10 teaching applicants is accepted into an educational degree program. The result: Finland's students are #1 in the world (here, here, here). The US isn't even in medal contention scoring statistically significantly below average (between 24th to 35th place!) in our 2006 science rankings thus placing us with such educational and technical powerhouses such as Thailand, Slovak Republic, and Azerbaijan. We haven't been improving either: in 2001 we finished 14th in science, 19th in math, and 15th in reading when only 31 nations were ranked. We, like Finland did over 40 years ago, need to reprioritize our children's education as our top focus; we have to front load societal success (our children) rather than back load (our elderly) our society into oblivion.
Our children consistently score far lower on international comparative tests because they must attend substandard underfunded schools. So what do we do to ensure that our children will grow to become adults that can compete with their Chinese, Japanese, Korean, and German counterparts? We transfer money from the young to the old: For every $7 we spend on the elderly (65 & older) we only spend $1 on a child (under 18).Direct spending on the elderly suck up tremendous amounts of money. 1 out of 3 federal dollars goes toward social security (elderly welfare) and medicare (free medical care). An elderly person receiving social security checks receives far more in benefits than they paid into the system. Essentially after a few years most social security beneficiaries have received all that they paid into the system plus interest so they are essentially receiving generous welfare payments thereafter. Add the generous medicare insurance benefits into this package and one can see that seniors are getting undeserved payments that are depriving their children and grandchildren of their futures.
Now take the baby boom, those born between 1946 and 1964, which is a large part of the current population and one can visualize an overwhelming chunk of the population extracting money from society when they start to retire in a few years. This population bubble surfing through our demographics will rapidly reduce the ratio of workers to retirees - originally 42 workers per retiree in 1945 and currently only 3.3 and eventually approaching 2. If we don't make the tough decisions now then taxes will have to double to keep "entitlements" at the same level. Anyone interested in doubling their taxes out there? Also, do you honestly think that a society that is becoming less white and more brown, whose kids are taught in substandard inner city schools to grow up to work as cashiers in Walmart, is going to have a tax base that can support all those old white people? I don't think so.
I'll leave you with this. Finland was a relatively poor agrarian based economy. The Finns dropped a protectionist economic model in the early 1970's and established a capitalism based economic model. Also, Finland passed the equivalent of the US's No Child Left Behind educational program in 1968 and have been tweaking it ever since. Finland made education a top priority and they pay for it with real money whereas we only provide lip service to education in the US: e.g. Finland's teachers salaries are more than those who earn other degrees; only 1 in 10 teaching applicants is accepted into an educational degree program. The result: Finland's students are #1 in the world (here, here, here). The US isn't even in medal contention scoring statistically significantly below average (between 24th to 35th place!) in our 2006 science rankings thus placing us with such educational and technical powerhouses such as Thailand, Slovak Republic, and Azerbaijan. We haven't been improving either: in 2001 we finished 14th in science, 19th in math, and 15th in reading when only 31 nations were ranked. We, like Finland did over 40 years ago, need to reprioritize our children's education as our top focus; we have to front load societal success (our children) rather than back load (our elderly) our society into oblivion.
Sunday, February 21, 2010
Manufacturing
Here is a little thought experiment and maybe the start of a bad joke you once heard in a bar.
3 islands. The first island is populated only with lawyers, the second island is populated only with physicians, the third island is populated with engineers. Come back in 500 years and which societies are thriving or even exist. My guess is that the lawyer and physician islands died off shortly after the experiment started. I think that only the engineers survived because they can actually make stuff: houses, fishing nets, animal pens, horse drawn carts, et cetera.
So why do this little thought experiment? Basically to insult doctors and lawyers? No. I want to bring to light the importance of making stuff. Over the last half century our economy has shed manufacturing jobs (33% of jobs in the 1950s) whilst simultaneously increasing the number of service sector jobs (see page 49 of the PDF). The number of manufacturing jobs in 2004 was 17.5% and has fallen every since (to about 12%).
Media generally portrays this shift as 1) inevitable and 2) desirable. One has to ask oneself, "What is the desirable ratio of manufacturing jobs to service sector jobs?". How low do we have to go with the number of manufacturing jobs before we realize that we've pre-industrialized our economy?
One problem that manufacturing has is a perception (also here) that making stuff is part of the industrial past rather then the driving force behind technology. Ask any kid: do you want to be a lawyer or make shoes? What do you think they will answer? (I wonder what an executive of Nike Corporation would say?). This perception drives students to choose service industry careers (lawyers, physicians, nurse health care aides, managers of McDonalds, insurance salesman, et cetera) because a life of physics, applied math, and engineering is too difficult, boring, underpaid and not as sexy as having that corner office and a business suit.
While Chinese students flood (also here) our graduate science & engineering schools the number of Americans enrolled in graduate engineering & science education hits new lows.
So why should we care? I'll ask you to walk into Walmart, Target, Radio Shack, CompUSA, or Best Buy. Try just to find one item made in the USA. How does that make us any different than Ghana or Uruguay? What happens when the number of manufacturing jobs hits 1% and China decides to sell what it makes to its own internal markets? What then?
3 islands. The first island is populated only with lawyers, the second island is populated only with physicians, the third island is populated with engineers. Come back in 500 years and which societies are thriving or even exist. My guess is that the lawyer and physician islands died off shortly after the experiment started. I think that only the engineers survived because they can actually make stuff: houses, fishing nets, animal pens, horse drawn carts, et cetera.
So why do this little thought experiment? Basically to insult doctors and lawyers? No. I want to bring to light the importance of making stuff. Over the last half century our economy has shed manufacturing jobs (33% of jobs in the 1950s) whilst simultaneously increasing the number of service sector jobs (see page 49 of the PDF). The number of manufacturing jobs in 2004 was 17.5% and has fallen every since (to about 12%).
Media generally portrays this shift as 1) inevitable and 2) desirable. One has to ask oneself, "What is the desirable ratio of manufacturing jobs to service sector jobs?". How low do we have to go with the number of manufacturing jobs before we realize that we've pre-industrialized our economy?
One problem that manufacturing has is a perception (also here) that making stuff is part of the industrial past rather then the driving force behind technology. Ask any kid: do you want to be a lawyer or make shoes? What do you think they will answer? (I wonder what an executive of Nike Corporation would say?). This perception drives students to choose service industry careers (lawyers, physicians, nurse health care aides, managers of McDonalds, insurance salesman, et cetera) because a life of physics, applied math, and engineering is too difficult, boring, underpaid and not as sexy as having that corner office and a business suit.
While Chinese students flood (also here) our graduate science & engineering schools the number of Americans enrolled in graduate engineering & science education hits new lows.
So why should we care? I'll ask you to walk into Walmart, Target, Radio Shack, CompUSA, or Best Buy. Try just to find one item made in the USA. How does that make us any different than Ghana or Uruguay? What happens when the number of manufacturing jobs hits 1% and China decides to sell what it makes to its own internal markets? What then?
Thursday, February 18, 2010
What this blog is about
I've been stewing in this economy for the last 40 years along with the rest of you. America, the land of opportunity, has become, more and more, just like any other country, and that sad fact has spurred me to action. This great country has stood by and passively watched its economy and society decline into mediocrity.
Look at automobiles. The US, once the dominant manufacturer, now has a company called GM which is not the same one we all grew up with from childhood. GM had 54% of US market share in the 1950's and it has been down hill ever since. Today GM is number 2 behind Toyota only because of a massive bailout by the federal government. Who do we blame for this? Slovenly overpaid corrupt uneducated union workers? That's too easy a target but certainly union antagonism toward GM was an important factor. Entrenched, ineffective, outrageously compensated buffoons parading as corporate executives? Simplistic again but definitely a contributing factor. Allowing other countries access to US markets without reciprocal access to their markets? Hmmm - this is a path worth exploring.
Look at US Federal Government spending. You don't need to be a rocket scientist in order to understand that the data in this graph spells trouble: federal spending has outpaced median income by a factor of 9 over the last 40 years. Median household income grew by only 32% while federal spending ballooned 221%. Remember that the line on the bottom pays for the line on the top.
Where is majority of this money going?: the elderly and the military and the military-industrial complex. We spend billions fighting 2 wars and trying to build democracies in countries that despise us but want the yankee dollar to modernize their morally bankrupt, socially backward societies while decrepit US bridges fall from neglect (look here and here).
Our children consistently score far lower on international comparative tests because they must attend substandard underfunded schools. So what do we do to ensure that our children will grow to become adults that can compete with their Chinese, Japanese, Korean, and German counterparts? We transfer money from the young to the old: For every $7 we spend on the elderly (65 and older) we only spend $1 on a child (under 18).
There is plenty of blame to go around: republican and democrat, liberal and conservative. Just look in the mirror and think - what special interest group are you a part of that has dipped into the till and withdrawn more than to which you are entitled. Politicians know that even talking about cutting social security, medicare, or entitlements is politically akin to touching the subway's third rail. They also know that talk of slashing military spending gets one branded as some sort of commie pinko leftist sellout even though the US represents over 41% of the world's military spending and spends more than China, France, England, Russia and the next 10 largest military budgets combined!
So I'll leave you with these questions.
1) Why do we spend billions of dollars in manpower and equipment defending Germany, Japan, Israel, and South Korea? Why can't the citizens of these rich countries pay more taxes to defend their democracies?
2) Why can't we cut Federal spending (adjusted for inflation) to 1980 levels? Do we really need that much bigger a Federal government compared to that time period?
3) Why don't we take our entire foreign aid budget and invest it in our children?
This blog will discuss these and other important issues. I would like to have guests submit their own discussions or supply links that I can post on these same issues. We need to solve these problems; the politicians on the left and the right are failing us.
Look at automobiles. The US, once the dominant manufacturer, now has a company called GM which is not the same one we all grew up with from childhood. GM had 54% of US market share in the 1950's and it has been down hill ever since. Today GM is number 2 behind Toyota only because of a massive bailout by the federal government. Who do we blame for this? Slovenly overpaid corrupt uneducated union workers? That's too easy a target but certainly union antagonism toward GM was an important factor. Entrenched, ineffective, outrageously compensated buffoons parading as corporate executives? Simplistic again but definitely a contributing factor. Allowing other countries access to US markets without reciprocal access to their markets? Hmmm - this is a path worth exploring.
Look at US Federal Government spending. You don't need to be a rocket scientist in order to understand that the data in this graph spells trouble: federal spending has outpaced median income by a factor of 9 over the last 40 years. Median household income grew by only 32% while federal spending ballooned 221%. Remember that the line on the bottom pays for the line on the top.
Where is majority of this money going?: the elderly and the military and the military-industrial complex. We spend billions fighting 2 wars and trying to build democracies in countries that despise us but want the yankee dollar to modernize their morally bankrupt, socially backward societies while decrepit US bridges fall from neglect (look here and here).
Our children consistently score far lower on international comparative tests because they must attend substandard underfunded schools. So what do we do to ensure that our children will grow to become adults that can compete with their Chinese, Japanese, Korean, and German counterparts? We transfer money from the young to the old: For every $7 we spend on the elderly (65 and older) we only spend $1 on a child (under 18).
There is plenty of blame to go around: republican and democrat, liberal and conservative. Just look in the mirror and think - what special interest group are you a part of that has dipped into the till and withdrawn more than to which you are entitled. Politicians know that even talking about cutting social security, medicare, or entitlements is politically akin to touching the subway's third rail. They also know that talk of slashing military spending gets one branded as some sort of commie pinko leftist sellout even though the US represents over 41% of the world's military spending and spends more than China, France, England, Russia and the next 10 largest military budgets combined!
So I'll leave you with these questions.
1) Why do we spend billions of dollars in manpower and equipment defending Germany, Japan, Israel, and South Korea? Why can't the citizens of these rich countries pay more taxes to defend their democracies?
2) Why can't we cut Federal spending (adjusted for inflation) to 1980 levels? Do we really need that much bigger a Federal government compared to that time period?
3) Why don't we take our entire foreign aid budget and invest it in our children?
This blog will discuss these and other important issues. I would like to have guests submit their own discussions or supply links that I can post on these same issues. We need to solve these problems; the politicians on the left and the right are failing us.
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