I applaud any organized effort to back away from “Free-trade”and a dollar we have stripped of all defenses. However, I don’t think that a list of foreign “bad guys” followed by whack-a-mole actions constitute an organized or effective way to deal with the problem. I had hoped that CPA might exert some leadership in developing strategic thinking around the issue of sustainable trade relations between nations, where we change how we operate in a systematic and open manner so that we return to balanced trade of goods, services, money, jobs and information.
As I see it, this opinion piece has too much Trump and too little substance.
Edwin Lee commented on Support House Resolution 37: Eliminate The U.S. Trade Deficit! 2017-03-30 13:07:45 -0400My problem with this resolution is that Congress hasn’t a clue as to how to implement it. They will find villains in other countries and play whack-a-mole with them while accomplishing nothing productive.
The primary reason for our chronic trade deficits is our failure to maintain well-regulated borders for goods, services, jobs, money, people, and information. Breton Woods, Free-trade policies, and a global internet are three contributors to trade deficits and loss of middle-class jobs. We can drastically reduce all the problems described in the article without requiring other nations to change their behaviors. We re-install well-regulated borders which will retain critical assets while maintaining a healthy, but a reduced level of trade. For example, we impose (ramping up over five years) an across the board 30% duty on all imports, no exceptions. We encourage all other nations to do the same. We also need to regain control of our currency and undo its operation as a global currency. We should impose a tax on money crossing our political borders for loans or investments.
If we wait much longer, we will accumulate enough deficits to trigger a rapid exodus of loans and investments which destroy our economy.
Neither the USA nor any other nation, can maintain its autonomy without well-regulated borders. The Chinese understand this and have prospered while we have declined. The need for borders is as true of nations as it is of individuals. We each need our personal well-regulated borders of skin, intestinal linings, lungs, etc. to maintain ourselves in a community of others who compete with us and cooperate with us for resources in an environment filled with pathogens, parasites, and poisons.
Edwin Lee commented on China’s Plan to Build Its Own High-Tech Industries Worries Western Businesses 2017-03-09 11:20:22 -0500To sustain national autonomy we must maintain self-sufficiency in key industries. The Chinese government understands this. We don’t. We rail at what they are doing instead of learning from them. They are in an enviable position because they have controlled their currency and the flow of information across their borders. We have, foolishly, bathed ourselves in free-trade and in an internet without national boundaries. We have been wandering into the future following short-term corporate profits and cheap goods instead of planning to sustain our national autonomy.
I’ve read enough of the MAC paper by John Hansen to see it as a good starting point for discussing and correcting our chronic trade deficits. However, he based his MAC solution on a combination of evidence-based assumptions and erroneous conventional wisdom. For one thing, he claims (para 3) that our deficits and manufacturing decline “are the result of the serious overvaluation of the US Dollar.” That is a manageable factor, but not the cause. I assert that the causes include: the friction-less flow of products (Free Trade), money (the US $ as global currency), cost-free and riskless (?) US gov’t borrowing, manufacturing jobs, and information (exacerbated by a border-less global internet). On the other hand, we are overreacting to the flow of people into our nation and overdoing the direct friction to stop it. Friction is a crucial element for maintaining coherence and regulating any dynamic system. Try driving a car on ice or without braking.
MAC does produce an element of friction for inflows of capital. However, it does nothing to address the outflows. When people or nations decide to move money out of any country or any bank in a panic, that system fails. We’ve seen it happen in Asia. It is an imminent threat to the US Economy. Furthermore, it is a single source of friction which makes it relatively easy to game. Sustainable solutions require multiple, overlapping sources of friction.
I suggest that all attempts to find a simple solution, such as MAC have an underlying assumption that stability and optimum growth are desirable and can be managed rationally over the long haul. As I see it, this assumption is bogus and nowhere supported by evidence in living systems. They rampantly overproduce, ruthlessly prune and relentlessly recycle to produce robust systems without net growth. Those processes are at work in all adult humans, for which growth merely means getting fat and less fit.
The biosphere, our host environment upon which we utterly depend, is a multi-billion year example of dynamic stability, growth, and resilience which comes from diversity and redundancy, not from hierarchical management. It is diverse and redundant in outcomes, processes, feedback loops, scales, concentrations, etc. which produce homeostatic balances of dynamic processes which can recover from severe perturbations. A sustainable global society needs diverse and redundant economies, politics, and cultures. To maintain this, we need to re-impose diverse and multiple degrees of drive and friction in all areas of exchanges between nations so that each nation can continue to govern itself or fail without bringing down the system.
Globalization and rational, centralized, efficient management would produce a system which rapidly becomes inflexible, collapses, and implodes the human population. However, on the positive side, that sequence will give the remaining human beings another shot at diversity.
A nation is a self-governing system whose priorities are the protection of and economic prosperity of its citizens. (Basis for US Constitution). An essential element for both priorities is well-regulated borders. Borders for what? Anything whose density within the system differs from that outside the system and which must be maintained, managed or protected in order to support self-government. I suggest that this includes: people, property, money, jobs, and information. I will suggest that a nation’s political and economic borders must be congruent. Free-trade requires nations to annihilate their borders for property and jobs. A global internet destroyed national borders for information. The US dollar as a global currency has annihilated this nation’s ability to manage its currency. Note that China has continued to manage its borders for all these elements and has prospered while the USA has declined. I suggest that the Chinese, with regard to maintaining an effective self-governing system, has done the intelligent thing while we, with the hubris that comes from too many years of being top dog, have thrown away structural elements required to maintain national integrity. Breton Woods began our problems by making the US dollar a global currency and thus unmanageable by this nation.
You and I have the same requirements as nations; we are all autonomous systems in host environments. We too have well regulated (and multi layered) borders to prevent the dissipation of our internal resources and to protect us from external threats while we conduct essential exchanges with the rest of the world.
Trump hasn’t a clue about how to right the ship strategically. (Nor did any previous President since Breton Woods) It is pointless and counterproductive to argue over rules for manipulating currencies. In fact, there are times when a nation must manipulate its currency to maintain its autonomy. It is healthier for politics, trade, and particularly international lending to take this possibility into account on an ongoing basis. The world as a whole would be more stable. Trump’s approach leads to scapegoating and wars because it seeks to change the other guy rather than ourselves. Instead, we need to rethink what it takes to maintain our own national autonomy while maintaining essential political and economic exchanges with the rest of the world. Thereafter, change how we do politics and business and lead by example.