Two carefully prepared contestants battled it out with words, innuendoes, and body language for 90 minutes this week, but, at the end of the debate, we Americans were no better off. As in Macbeth, it was “full of sound and fury, signifying nothing”. No one is suggesting that these were “tales told by idiots," but Shakespeare would have cringed. Each man was on his game, so to speak, reciting oft-repeated phrases from stump speeches that may have sounded new to the millions watching, but to those of us that follow this “charade," it was disappointingly repetitive and lacking in new ideas.
Forget about who may have won the debate. Various polling methods have produced “bragging rights” for both sides. In the end, we Americans, unfortunately, were the losers. Neither party is near any semblance of a compromising position. There was not one hint that new negotiations could lead to workable solutions on any front, no matter who might be leading the torturous exercise. Neither party gets it. Our country is at war on the global economic front. Jobs will only come from focusing on this singular issue and making the major structural changes that will produce solid long-term results.
Short-term “gimmicks” or presciently delivered sound bytes may woo a few undecided voters, but they do nothing to fix the problems at hand. Both parties are responsible for creating this economic morass over the past forty years, but neither shows the willingness to understand the issues or to propose anything close to being a corrective measure. All we hear are the same worn out ideas of more tax incentives, fewer regulations or more deficit spending to encourage the business sector to do what is right domestically. It is time to think outside the box to reverse disturbing global trends.
The International Monetary Fund (“IMF”) publishes its annual “World Economic Outlook” in April of each year. The report is filled with charts, analyses, and projections for every country and every region of the world. The best aspect of this report is that their staff goes to great lengths to ensure that the sum of the parts actually equals the whole. In other words, there is no room for “inflated” expectations in one region if the impacts do not reconcile with the entire global picture. Even foreign exchange rates are forced to balance in this “snapshot” of how individual economies may progress over time.
Recent reports have focused more on current attempts to right the global ship after the world’s most developed economies faltered, resulting in the “Great Recession." Their 2010 report reflected how GDP growth has trended for both advanced, as well as, emerging and developing economies since 1970. The lines diverged in 1990 when China turned up the heat after years of off shoring activities had begun to reshape cross-border commerce. The chart lines create a large “X” over time, with us on the downside.
In this new era of globalization, national and regional economies are all entwined as never before. Markets are interconnected to such an extent that a “hiccup” in China will cause supply-chain disruptions down the line. The world is like one big assembly line where developing nations are forcefully inserting themselves into the scheme of things on a daily basis. The only problem is that consumption is driven by consumer demand in the developed world, which in turn is driven by per-capita disposable income in the West, our part of the equation. Western market disposable-income growth, however, has been flat for a decade or more.
What is the issue? Stated succinctly, off-shoring activities have enabled the greatest redistribution of wealth across the planet that mankind has ever witnessed. In one significant IMF chart, Western GDP growth started at 4% in 1970 and declined thereafter, gradually down to 2% over the last four decades, while emerging markets rocketed up to 7%. All economists attest that our present level of growth barely provides enough jobs for new entrants into the work force, but future projections are just as disheartening. If these trends continue, experts expect China to surpass our economy in 2020 and nearly double us by 2030.
At this point in the argument, many would point to our stock market and take solace in the fact that it has doubled during President Obama’s tenure in office. These results are undeniable. Corporate earnings have been at their highest levels in years. Revenues for companies that make up the S&P 500 index, however, are not fully based here. More than 50 percent come from overseas operations, and the related jobs and profits remain outside our shores. Our 401K’s may have benefited, but our domestic economy is still languishing and highly in need of a jolt of adrenalin.
What is the solution? It may sound too simple, but most economists proclaim that we must learn to make things again. For this scenario to occur, however, the devil is in the details that neither party wishes to attack. To his credit, Obama’s plan calls for longer-term restructuring, but without Republicans willing to join in with necessary changes to trade tariffs, hiring incentives, and resurrecting our manufacturing base, these plans are easy marks for China, India and others to dismantle. We need our parties to work together for our combined good, not for their personal political gain.
Republican proposals, unfortunately, would foster more of the same -- more incentives for offshoring -- more reasons for capital to take flight beyond our borders. Democrats have moved to the middle, but Republicans have chosen to charge to the extreme right. Updated conservative views may sound extremely “innovative," but moderation is the order of the day.
Hopefully, Republicans will heed the advice of one of their former leaders who said, “Extremes to the right and to the left of any political dispute are always wrong.” None other than Presidentauthored these words to live and thrive by. They were right in the 1950s, and they are right today. Time to wake up, Republicans!
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