Posted on 09/03/2003 1:58:43 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
Al-Qaeda is attempting to exploit the uncertainty about the cause of the recent electrical blackout that plunged 50 million people into medieval darkness. In the London daily Al-Quds al-Arabi and on various radical websites, the claim is made that the Abu Hafs al-Misri Brigades hit two electrical generators that triggered the shutdown and caused an estimated $10 billion in losses.
It is doubtful that terrorists had anything to do with the blackout. What is of interest is that, as in the case of the World Trade Center attack, al-Qaeda said they were targeting the American economy, which they rightfully understand is the foundation of U.S. political and military power in the world. The question is whether American officials have this same understanding, because the U.S. economy has been under sustained attack for years, and on a much larger scale than any jihad the al-Qaeda thugs could visualize in their darkest nightmares.
The United States is faced with a race between the “twin deficits” of international trade and the Federal budget to see which is the largest. Both are in the $450-500 billion range. The trade deficit slows the economy, which expands the budget deficit, which constrains the ability of the government to meet national needs – whether it be the projection of military power abroad or the expansion of critical infrastructure at home. A slower economy also deters private capital investment in new plant and equipment that would boost national capabilities in the future.
Business Week reports on the negative impact of the trade deficit in its August 25 issue:
“The latest data illustrate what growth is up against. In the second quarter, real GDP grew at an annual rate of 2.4%. U.S. exports fell for a third consecutive quarter, as imports surged. Without the sharp widening in the trade deficit last quarter, the economy would have grown 1.6 percentage points faster.
That extra growth would have been sufficient to support more jobs, especially in the trade-sensitive manufacturing sector. But in July, payrolls fell for the sixth month in a row. Since the recovery began, in late 2001, the economy has grown at an annual rate of 2.6% but has lost 1 million jobs. Excluding the $128 billion increase in the trade gap, growth would have been 3.2%, a clip that would have stanched those payroll losses and maybe even allowed for some gains.”
World trade is mainly about manufactured goods and there is an intense rivalry between nations to dominant this sector. American is losing this competition.
Unfortunately, despite all the talk of “global capitalism,” there seems little appreciation of the role of conflict in economic theory. Writing in the Atlanta Journal-Constitution (Aug. 17), economics professor emeritus Donald Ratajczak of Georgia State University trotted out the old saw, “Trade is mutually beneficial because it is done willingly and helps both sides” but he was writing about exchange between buyers and sellers, not competition between producers which is the core of the international economic system. Who wins this competition determines where the jobs, industry, and wealth are created; and where investment flows to finance innovation. It is nothing less than the process which determines which societies advance, and which stagnate or decline. In this larger sense, trade is a zero-sum game.
When Airbus sells another airliner, it means Boeing did not. When a customer buys a Toyota, it means he did not buy a Ford. And when American transnational corporations invest $72 billion in China, it means those funds did not go to expand production capabilities in the United States. Renowned scholar Samuel P. Huntington has noted, “The idea that economics is primarily a non-zero-sum game is a favorite conceit of tenured academics. It has little connection with reality.” He then asks, “Why are the economists out in left field? They are there because they are blind to the fact that economic activity is a source of power as well as well-being.”
Academic economists and business journalists often seem to forget the first premise of economics and the reason the field of study even exists: the law of scarcity. There is never enough to go around to satisfy everyone´s needs and wants. Not enough things, not enough money, not enough time. Though supplies can be increased over time, allowing more needs and wants to be met, at any point in time the allocation of currently available resources is critical. The larger the share a person or company or society can get, the more it can do – both now and in the future.
If the “gains from trade” were large enough to solve the global economic problem of scarcity, it would then be a foundation for peace. But the world is far, far removed from such a happy state. In the real world, economics is at the heart of the international struggle for primacy and progress. The trade policies formulated by China and the European Union are explicitly aimed at undermining what they see as the insufferable American preeminence in world affairs.
In this global struggle, the plots that really menace America´s future are not being hatched in Afghan caves, but in plush office suites, genteel country clubs, and 5-star hotels. Terrorism is the weapon of the weak, whereas trade wars are waged among the strong. A Homeland Security department has been created to protect American communities from suicide bombers. The Commerce department is supposed to provide similar protection from economic assault. But with Commerce Under Secretary for International Trade Grant Aldonas saying recently that Americans should “resist demonizing China” on trade issues, it is clear that the rules of engagement at Commerce permit U.S. government officials to open the floodgates and walk away from their posts.
William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.
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