Saturday 20 September 2008

Saving Jobs, Restoring Prosperity

No shortage of the transatlantically transferable in this, by Right Democrat:

Economy in Crisis [www.economyincrisis.org], America' daily economic report, presents a plan to revive America's industrial capacity and restore a widespread prosperity:

• Appoint an economic minister, a major cabinet post, to develop policies that protect our economy from foreign predatory practices. This will create conditions to make manufacturing competitive and profitable through government sponsored research, tax changes and subsidies.

• Create an industrial research and development division similar to government sponsored National Institute of Health (NIH) in medicine or the Manhattan Project in World War II or as they do currently in Japan's Ministry of International Trade & Industry (MITI) to focus on needs and development procedures for new and existing industries.

• Selective use of tariffs to prevent the loss of strategic and endangered industries. Tit-for-tat tariffs should be used against outdated WWII era policies like the VAT tax. As of summer 2008, 149 nations used the tax as a de facto subsidy for their exports entering the U.S., and a tariff against imported American goods.

• Free trade has been a disaster. It must be replaced with intelligent trade that prevents foreign predatory practices and better serves U.S. interests.

• Change the tax structure for select industries that are vital to strategic American interests - steel, etc.

• Amend or get out of the agreement with the WTO. This agreement puts America's domestic trade laws in the hands of a non-transparent, undemocratic organization.

• Control the balance of trade deficit.

• Analyze every international trade deal by considering if it benefits America; currently most deals do not.

• Curtail subsidies foreign owned companies receive from state governments.

• Discourage technology transfer and outsourcing manufacturing that results in the loss of industries.

• Prevent the sale of strategic companies or institutions to foreign ownership.

• Faster depreciation on capital equipment investment - it will lessen the need to outsource manufacturing.

OTHER SUGGESTIONS AND THINGS TO CONSIDER:

• Strive to become competitive, otherwise America must exist on imports with more debt, accompanied with high unemployment.

• American owned companies have lost their edge and, on balance, are not as productive or as protective as many other foreign companies. This must be corrected.

• It must be profitable to manufacture in America otherwise domestic companies will not do it.

• America is losing a major economics war by relinquishing management and control of the economy through effects of our balance of trade deficit, outsourcing, subsidized insourcing and foreign tax benefits.

• Consider the consequences of losing whole industries such as publishing, autos, movies, steel, electronics, clothing and how it impacts national security and living standards.

• Analyze and correct negative effects of WTO rules and decisions regarding their impact on our economy.

•Analyze and correct violations of WTO rules practiced by other countries to our detriment.

•Analyze and correct restrictions imposed by foreign governments on American exporting companies.

http://69.36.11.118/content/solutions

1 comment:

  1. Our enormous trade deficit is rightly of growing concern to Americans. Since leading the global drive toward trade liberalization by signing the Global Agreement on Tariffs and Trade in 1947, America has been transformed from the weathiest nation on earth - its preeminent industrial power - into a skid row bum, literally begging the rest of the world for cash to keep us afloat. It's a disgusting spectacle. Our cumulative trade deficit since 1976, financed by a sell-off of American assets, is now approaching $9 trillion. What will happen when those assets are depleted? Today's recession may be just a preview of what's to come.

    Why? The American work force is the most productive on earth. Our product quality, though it may have fallen short at one time, is now on a par with the Japanese. Our workers have labored tirelessly to improve our competitiveness. Yet our deficit continues to grow. Our median wages and net worth have declined for decades. Our debt has soared.

    Clearly, there is something amiss with "free trade." The concept of free trade is rooted in Ricardo's principle of comparative advantage. In 1817 Ricardo hypothesized that every nation benefits when it trades what it makes best for products made best by other nations. On the surface, it seems to make sense. But is it possible that this theory is flawed in some way? Is there something that Ricardo didn't consider?

    At this point, I should introduce myself. I am author of a book titled "Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America." My theory is that, as population density rises beyond some optimum level, per capita consumption begins to decline. This occurs because, as people are forced to crowd together and conserve space, it becomes ever more impractical to own many products. Falling per capita consumption, in the face of rising productivity (per capita output, which always rises), inevitably yields rising unemployment and poverty.

    This theory has huge ramifications for U.S. policy toward population management (especially immigration policy) and trade. The implications for population policy may be obvious, but why trade? It's because these effects of an excessive population density - rising unemployment and poverty - are actually imported when we attempt to engage in free trade in manufactured goods with a nation that is much more densely populated. Our economies combine. The work of manufacturing is spread evenly across the combined labor force. But, while the more densely populated nation gets free access to a healthy market, all we get in return is access to a market emaciated by over-crowding and low per capita consumption. The result is an automatic, irreversible trade deficit and loss of jobs, tantamount to economic suicide.

    One need look no further than the U.S.'s trade data for proof of this effect. Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!

    Our trade deficit with China is getting all of the attention these days. But, when expressed in per capita terms, our deficit with China in manufactured goods is rather unremarkable - nineteenth on the list. Our per capita deficit with other nations such as Japan, Germany, Mexico, Korea and others (all much more densely populated than the U.S.) is worse. In fact, our largest per capita trade deficit in manufactured goods is with Ireland, a nation twice as densely populated as the U.S. Our per capita deficit with Ireland is twenty-five times worse than China's. My point is not that our deficit with China isn't a problem, but rather that it's exactly what we should have expected when we suddenly applied a trade policy that was a proven failure around the world to a country with one sixth of the world's population.

    Ricardo's principle of comparative advantage is overly simplistic and flawed because it does not take into consideration this population density effect and what happens when two nations grossly disparate in population density attempt to trade freely in manufactured goods. While free trade in natural resources and free trade in manufactured goods between nations of roughly equal population density is indeed beneficial, just as Ricardo predicts, it’s a sure-fire loser when attempting to trade freely in manufactured goods with a nation with an excessive population density.

    If you‘re interested in learning more about this important new economic theory, then I invite you to visit my web site at OpenWindowPublishingCo.com where you can read the preface for free, join in the blog discussion and, of course, buy the book if you like. (It's also available at Amazon.com.)

    Please forgive me for the somewhat spammish nature of the previous paragraph, but I don't know how else to inject this new theory into the debate about trade without drawing attention to the book that explains the theory.

    Pete Murphy
    Author, "Five Short Blasts"

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