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.
Centrally-planned "not-for-profit" transmission systems, run by government bureaucrats who's only loyalty is to their retirement fund.
As opposed to prehistoric, Renaissance or 20th century darkness?
More buggy whips! We don't want this kind of industry in the U.S.! Better off without it. I'll take cheap consumer goods to American employment anyday.
(still practicing to go as a Free Trader on Halloween. Gettin any more credible yet?)
"Protectionism" (i.e. tarrifs) aren't a cure. They aren't intended to prevent foreign competition (except, possibly, as advocated by a very few absolutists). They aren't even meant to competely offset the regulatory, tax,labor cost, environmental and monetary manipualtion advantage the entire third world has on us. They are just meant to make the 'playing field' slightly more equtiable so that we can compete with countries and cultures that consider living in cardboard shacks with no plumbing acceptable for the workers and ignore environmental destruction by industry. So that we only have to play on a moderate uphill slant instead of the side of a mountain. They're only intended to keep us from dying of the diesase while we seek a cure; before a cure is found.
The alternative is that we just give up and accept a position alongside the third world in our lifestyle, environment, and freedoms (something that won't come easy to a well armed population).
That's an absurd response - the post that you were commenting on made no such suggestion, and so your straw-man argument is disingenuous.
How so?
To use a blanket assumption (I doubt I need to say the old ditty about assumptions), that regulations and taxes are problems with our economy and therefor if we rid ourselves of the our over regulation and the god forbid, taxing businesses (for the pleasure of making money in this country.) we would be in a better posistion itself is a misnomer.
The problem isn't the regulations persay, but rather these regulations are placed upon businesses by a large number governmental agencies, from the federal government, then the state government, the county government, city government, and then down to whatever local special district you happen to live or do business in. And then to top it off many of these regulations are on the books due to a percived need or worse due to previous actions of businesses or corporations of ill-respute.
Lastly there are regulations that many of us are unwilling to go without or we as a people feel we need with many of them them going back to the start of the industrial revolution.
In that last regard the strawman is a perfectly valid arguement since there are some companies or businesses that have no problem working with suppliers who would not be held to many of the regulations we feel we need. Because of that should we automaticly remove those regulations that protect those would work or live near certain industries, simply because businesses cannot compeate against foreign suppliers who need not follow such regulations?
Are you in favor of "regulatory and tax policy stupidity"? If not, then why are you arguing against the original poster's premise?
But your original response was a target-rich environment, beyond merely the flawed straw-man argument. For example, there's your assertion without evidence that most of the regulations on the books were imposed in reaction to past corporate "malfiance" (sic), which blissfully ignores all of the other agendas that are factored into government regulations. But then this discussion has strayed pretty far from the topic of the original article, and so I'll let it rest.
The problem with the position that you have taken is that gradualism has lead to the creation of a structural and cannot be attacked piecemeal. It is difficult to argue agains each and every regulation. The problem is the total burden placed upon economic activities of tax, law and regulation. Another way of asking the question is what fraction of the employed population is engaged in producing goods and services that would trade freely on the open market? Every economy has an "overhead" of folks engaged in "non-productive" transactions. That is part of life. The question is, when the cost of all of non-discretionary non-value-added transactions makes goods and services strongly uncompetitive how do you unwind the problem. The answer is that it is not easy. It used to be, in a more or less closed economy where raw-materials and finished goods were traded that you could win by debasing your currency. In the global economy you decrease the cost of your labor, but increase the costs of everything else involved in production. In fact, if your own country is not adding most of the value to the final product, you loose. There are a number of undue structural burdens that the individual entrepreneur cannot control:
1. Burden of the legal system - which is not to claim we do not need this. This includes cost of lawyers, courts, and insurance liabiltiy and malpractice premiums.
2. Cost of regulatory complience- this includes the cost of folks to fill in paper work, as well as the burden on your core of expert who must provide everyone else the information they need to take care of compliance issues.
3. Cost of capital and financial services - this is more subtle than just the cyrrent interest rate. It means the cost of all the things that you have to do to keep your stock price up, avoide hostile takeovers, deal with in-house financial irregularites, stock price manipulation, pay extortionate compensation to top management and key players, etc. Warren Buffett estimates that 1/3 of all corporate profits are consumed by the financial services industry. I would bet in recent years it is a lot higher than that.
Tax burden. If it just started and ended at the federal and state income tax it would be sort of ok. But you and everyone else knows that the list just goes on and on. Recently - well, since he took office - Greenspan has been inflating the money supply. Most recently real-estate prices have skyrocketed. The immediate impact of that is that cities and counties are busy reassessing property values to increase property taxes. Some predict that this bubble like the stock-markte bubble will burst - because no new net demand or economic activity has been added. It will take years for personal and corporate incomes and the property taxes to adjust back to some sort of similarity to the status quo.
They aren't called free traitors for nothing, eh Willie?
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