America Pay Up
Most of us have been acutely aware that our wallets, bank accounts, and retirement funds are under siege from unseen forces. Everyday increasing numbers of people are losing their jobs and the stock market feels more like skydiving than a roller-coaster ride. Some are declaring this the second Great Depression while others say no. Rohm Emmanuel told the WSJ, “You never want a serious crisis to go to waste.” While we fret about our personal economic futures, there are people around the world working overtime trying to exploit this crisis.
Wednesday, British Prime Minister Gordon Brown addressed a joint session of the U.S. Congress. Previous British PMs have focused on foreign policy issues but today’s political issues are quite different. Brown barely made more than a passing mention of the Middle East or Iran, and mentioned no other international issues. Instead, Brown chose to focus on the global economic downturn. It’s not a surprising and even quite appropriate.
In this address Brown shied away from actually blaming America for the crisis. Rather he only eludes to it, “we need to understand what went wrong in this crisis, that the very financial instruments that were designed to diversify risk across the banking system instead spread contagion across the globe. And today’s financial institutions are so interwoven that a bad bank anywhere is a threat to good banks everywhere.” We know which banks led the charge.
Brown appealed to the Obama administration not to become protectionist but rather join Britain in leading a global economic stimulus. “So should we succumb to a race to the bottom and a protectionism that history tells us that, in the end, protects no one? No, we should have the confidence that we can seize the opportunities ahead and make the future work for us.” I know I am flying in the face of my economic education and the majority of Americans, however, it is my opinion that the abolition of import tariffs and excise fees are at the root of the global economic crisis.
What? How could this be? Aren’t the housing bubble bust, subprime mortgages, bank deregulation, and the war in Iraq to blame? Everyone seems to have come to this conclusion. Rather than rehash the same rhetoric, I will summarize, free trade shifts government revenues from foreign imports to individual and corporate taxpayers. Free trade makes first-world labor too expensive and third-world labor extremely attractive. As manufacturing, textiles, mining, and oil production leave a nation it erodes the ability of the first world to produce things and this undermines the foundational economic strength. Furthermore, when a nation no longer knows how things are manufactured, innovation is stifled. Can an engineer design something to be efficiently manufactured if he or she has never seen a factory? No, the engineer must be flown to plants halfway around the globe, an expensive process that must be repeated often. Any smart company will eventually figure out that it would be cheaper to hire R&D engineers close to manufacturing, thus eventually the first-world loses that ability as well. (I suspect someday this theory will be recognized but I will get no recognition for it.)
Thus, I don’t buy it when PM Brown says, “America and Britain will succeed and lead if we tap into the talents of our people, unleash the genius of our scientists and set free the drive of our entrepreneurs. We will win the race to the top if we can develop the new high-value products and services and the new green technologies that the rising numbers of hardworking families across our globe will want to buy.” While I agree the U.S. and the U.K. still have the “genius” to develop new high value products and green technologies, I disagree with who profits. These products will be manufactured in China or some other developing nation that employs virtual slave labor and the profits will benefit only the top brass of multinational corporations and their stockholders. The U.S. certainty doesn’t benefit in job creation, since clearly no one here will be building anything. A few service and sales jobs perhaps, but hardly three million.
But let us return to Brown. When Brown said, “America knows from its history that its reach goes far beyond its geography. For a century you have carried upon your shoulders the greatest of responsibilities: to work with and for the rest of the world. And let me tell you that now more than ever the rest of the world wants to work with you,” he meant, you rebuilt the world after WWII and now we expect you’ll foot the bill again. Sure a few paragraphs later he claims, “America and a few countries cannot be expected to bear the burden of the fiscal and interest rate stimulus alone. We must share it globally.” But how does the following line, delivered only a few seconds later fit in? “Let us … [help] the emerging markets rebuild their banks…” I believe this would require a sizable injection of capital from some major nation, maybe a cash cow like the United States.
But wait, that’s not all, he wants the U.S. to finance the education of “every child in every country of the world.” Did you catch the “do it for the children” appeal? Brown understands how to play the American audience, suckers and idiots all. Besides the sheer cost of such an undertaking, there are implications that far exceed the kind sentiment. There are national sovereignty issues, religious, and cultural issues. Some have gone so far as to suggest that Brown’s address laid the groundwork for a single world government proposal. I hate treading on that ground but it could lead us into that discussion.Read the full transcript along with British opinion at: http://www.guardian.co.uk/politics/2009/mar/05/martin-kettle-brown-speech-analysis