If you want to know what's wrong with America and why record numbers of Americans are telling the pollsters that they're fed up, just take a look at how we trade with China. Our major import is nearly $50 billion of computer equipment while our major export is about $8 billion of waste paper and scrap metal. Yes, that's right. We're swapping garbage for computers with China -- and lots of other countries as well.
Our trade has taken that shape because we have gutted the foundations of American prosperity as a result of our embrace of laissez faire globalization and our dogged allegiance to the flawed notion that free trade -- even when it is unilateral -- is always a win-win. The truth is that free trade is not always win-win and globalization is not working out at all as expected. Nor is it presently working at all in America's favor. How are the 10 million Americans now out of a job and those who lost their retirement investments going to recover if the US economy continues down the ruinous path it has been following for the past thirty years?
It was to address this question that President Obama was elected in the midst of the worst economic crisis since the Great Depression. Yet, despite its overriding importance, the question is not even a blip on our national political radar screen. Instead we talk of bank reform, stimulus programs, and supplementary unemployment benefits and even of "green jobs." But there is no strategy to assure that we will continue to have good jobs in a world class American economy fully competitive with the economies of China, India, Germany, or any other country. This is the main issue facing our country today.
Developing a new globalization strategy is more important than Afghanistan, Iraq, health care, banking reform, fixing climate change, and stopping Iran from getting the bomb, as none of these questions can be addressed if America is poor and uncompetitive. It is to spark the development of such a strategy that I have written the forthcoming book: The Betrayal of American Prosperity: Free Market Delusions, America's Decline, and How We Must Compete in the Post-Dollar Era.
For nearly fifty years, as a diplomat, businessman, U.S. trade negotiator and author, I have been watching the steady erosion of U.S. competitiveness. As I recently told a group of high ranking Obama administration officials, this erosion is now accelerating because all the incentives in the global system encourage the off-shoring of the production of tradable goods and the provision of tradable and services out of the United States. These wrong-headed incentives include undervalued currencies that subsidize exports; investment incentives like tax abatements, capital grants, and free land, and de facto access to foreign markets that is conditional on the transfer of technology to those markets.
Take the recent examples of GE and BP moving photo voltaic solar cell production from the United States to China. This is not shirts and shoes. These are the industries and jobs we were told by our top economists and business leaders were supposed to be in our future.
America still has time to recover. It has better cards than any other country, but it needs to play them a lot better than in the past. While this does not mean turning our backs on globalization, it does mean we must stop fooling ourselves that globalization will be a panacea. The move of photo voltaic cell factories from America to China may be a win for China, but it is definitely not a win for the United States.
In this game, the winner is the country that ends up with the technological leadership and the low-cost production based on enormous economies of scale. The United States needs to start playing much smarter. The first steps must be to negotiate or enforce fair currency valuation, to establish a fund to match the investment incentives of other countries, to make U.S. corporate taxes internationally competitive, and to enforce full market opening reciprocity.
This below-linked essay is from February 2009, pretty much the bottom of the recent financial crisis. It represented an attempt to take ideas from both right and left, and somehow come up with a new paradigm that would allow us to address this larger globalization issue, ideally in a fashion that would not involve protectionism. Maybe it would work or maybe it wouldn't. But with a U-6 unemployment rate of 19.2%, and more and more well-paying white and blue collar jobs being outsourced every day, and likely never coming back, I don't see how tweaking around the edges is going to have much on an impact on America's long-term economic prospects.
http://hpleft.com/020109.html
Historically, one of our problems nationwide is that people expect to get paid 20, 30, 40 bucks an hour, and more. But, by all appearances, the money just isn't there, especially when the competition overseas is working for 1,2,3,4 bucks an hour, and they don't have rafts of labor and fair wage laws to throw at these corporations. Further, if you can't find qualified employees, and there's any kind of restriction on your hiring, vis a vis visas, and you're the CEO, and you know that in country X, not ONLY do they have qualified people, they're willing to work for half price, and twice the hours of the obese, unmotivated, entrenched, well-fed competition, well, that's when the idea of loading your entire enterprise on a cargo boat/plane and heading for foreign shores starts looking pretty appealing, especially when you sweeten the sauce with relaxed environmental restrictions. Interesting times we live in...and there are no guarantees of anything, in life...
1) An important first step is to recognize the problem. I agree the problem is bleeding money, technology, know how, etc.
2) Learn from the success of competitors. If China's success could be attributed to:
. Contributing lavishly to military alliances even after the common foe has disintegrated
. Being embroiled in endless wars half way around the world
. Bad mouthing other nations and thereby offending all nations
. Using trade as a privilege we grant to nations we like according to a criteria which is utterly inconsistent
Then we should do even more of these things.
3) Stop self-congratulating ourselves for what we are not. E.g. adaptive. When was the last time US adapted to anything. Indeed our politician's discourse precludes flexibility. I cannot think of any future possibility that is not portrayed as 'unacceptable', 'end of civilization', etc.
America has to change with the world, not the other way around. Life is about Choices. America indeed is blessed with much. But every time you ask for a card to play, dogma blocks it. Take digging dirt and exporting - the Aussies are doing a great job of that and you certainly cannot call them a 3rd world nation. But environmental law and misplaced "dual use" restrictions block any hope of America prosperly by the natural resources. America even restricts the export of HELIUM gas, on the theory that it can be used for military purposes!! So why is anybody surprised that China is mimicking the move with rare earths?
There is certainly hope for America to export more and export profitably. First thing that should happen is to REMOVE all export controls. Sell whomever whatever they want to buy - yes, military technology included. Think of it: whatever is exported will perforce be at least a couple of generations behind, and America will be selling the profitable replacement parts for decades to come; AND those who need you replacement parts cannot war against you. This move would add 10 million export jobs over 5 years, and good paying manufacturing and R&D jobs at that.