Excel or Just Sell

[stewstewstewdio.livejournal.com]

There has been a lot of talk since the financial meltdown at the end of 2008 regarding how the government should handle it. Many have been resistant to the government doing anything at all. Libertarians and ultra-Conservatives, I am talking to you. You insisted that the free market would take care of it naturally. 

At that time, there was resistance to things that were urgently needed like TARP and the American automobile industry. Nancy Pelosi and Harry Reed had to pork barrel up the TARP in order to get it past the Republican resistance.

Right now, China is going through incredible financial growth. They have recently bypassed Japan as the second most powerful financial force in the world. They are now knocking on our door. With the US unemployment rate at 9.5%, China is actually facing employment shortages and the workforce has become a reckoning force with negotiating power. 

It is no secret that we have exported a huge part of our economy and employment to China and the rest of Asia. Despite our consumption slowdown and China’s need for raw materials and foreign products at an increased rate, our trade deficit is as lopsided as ever. We apparently don’t have the market power and draw to fit China’s needs.

We have gone through transitional changes in this country that have been voted into place and executed by President Obama. He has successfully installed much of his agenda, as promised, already, including the centerpiece of his agenda, the healthcare system. All of the legislation has been incredibly watered down due to petty demagoguery, but still was installed nonetheless. Besides healthcare, there has been financial reform, which was very obviously needed, but still resisted by the financial industry without remorse. The banks, Wall Street and the auto industry have been somewhat stabilized. GM is talking about having the largest Initial Public Offering in history to hail in the newly restructured auto industry. 

All this has been done with the Republican half of Capitol Hill sitting with their thumbs up their asses. They have been resisting any movement in any direction and have been fantasizing about a miraculous return to prior market forces. They have been advocates of an unregulated free market system without regard to evidence that it was a lack of regulation that brought about the current market downturn. They point to symptoms such as the failure of Fannie Mae and Freddie Mac. They disregard that fact that these institutions became nothing more than a toxic waste dump for the banks' irresponsible perversion of the free market principles of capitalism.

Many have faulted Franklin Roosevelt’s handling of the Great Depression. These people credit World War II for delivering us from that era. Many brave soldiers lost their lives and many Americans lost loved ones while the free market thrived. They forget the fact that a war is 100% government spending. They also forget that we haven’t had a declared war since then and have only indulged ourselves with military half measures that we hoped would be effective, but usually weren’t. The one thing that seemed to have saved our bacon in that era is that America had a rallying point with the war.

Among other things, the rallying point is missing from our current situation. We are hearing a whole lot of bitching, but few are coming up with effective resolutions. There seems to be a common conflict between those that think cutting taxes and those that think more stimulus are the solutions. Those have turned into lame and ineffective rallying points that are the type of empty solutions that plague us.

Few are recognizing that the government is done. They have pretty much done all they can. Other than some remaining stimulus money to be spent, there is nothing more they can do. The jobs they have created or saved are national infrastructure jobs such as police, firefighter, teacher and infrastructure construction jobs. The Fed has used almost their entire inventory of tools to bolster the economy. Many of their more effective tools, such as lowering interest rates, were used up before the economic standstill of 2008.

Now it is entirely up to the magical American free market system to step up. Currently, it seems, private industry is waiting for us to become the new China, with cheap and desperate labor and cheap unregulated products. Meanwhile, China is going ahead with a pledge for $700 billion over the next 10 years for clean technology while we still wallow in fossil fuels.

At the same time, US corporations are sitting on $1.8 trillion of cash with nowhere to invest it. Our claims to fame are empty financial paper and war machines. Success in today's market seems to go to the most skilled blowhard hustler. Business these days stresses all sell and no excel. It's all hype with little substance. Other than that, we have started the new century with next to no innovation whatsoever. Everything we produce is just the same old crap repackaged. iPhones? iPads? High Definition everything? These are nothing but a mish mash of currently existing technologies.

What we need is something Americans can sink their teeth into. We need something on an innovation level of the Internet. We need something amazing and revolutionary, such as a working cold fusion technology that sets us above the rest of the world again. We appear to have a choice. We can go on our current path and prove to the world that socialism can trump capitalism and that capitalism is inferior; or we can get off our asses and get back in the game. What does the community think it will take for the free market to get us back on top? Or, alternatively, do you think this is all a fantasy and we should just succumb to the rampant defeatism that prevails today?

 

Comments

[eracerhead.livejournal.com]

Biotechnology is a good candidate. But we can't excel at that until we stop putting restrictions on things like stem cell research and cloning.

[mijan.livejournal.com]

A good point.

Yet the amusing thing is that a shockingly large portion of our biotech and biomedical researchers are foreign imports, especially from... CHINA. (And I work in the Biomedical research industry, and have worked on both the corporate AND academic sides of that industry. Trust me, it's true.)

[a-new-machine.livejournal.com]

I'm ginning up to post about stem cell research, as it's been in the news. There was a pretty sweeping decision recently that will likely shut down most stem cell research, and may have broader implications for science funding.

[enders-shadow.livejournal.com]

really? that's disappointing

i was hoping stem cell research would advance once Bush was gone

i await your post (tho a link for now might be nice)

[a-new-machine.livejournal.com]

http://arstechnica.com/science/news/2010/08/stem-cell-research-on-hold-in-wake-of-federal-court-ruling.ars

The issue appears to be somewhat technical, basically a Scalia-style ruling run amok. Some guy bought a dictionary and decided he knew what "research" meant, and that anyone who was losing on a grant could sue for the loss. It's actually, like most of my posts, going to end up being about something else entirely - probably legislative interpretation.

[johnny9fingers.livejournal.com]

I think China may just be getting the better of the argument as well as the economy.

http://www.guardian.co.uk/books/2010/aug/29/ha-joon-chang-23-things

(The 'may' means I'm hedging my bets until my copy of the book comes through.)

[abomvubuso.livejournal.com]

Thats one helluva interesting book.

*tips hat*

[stewstewstewdio.livejournal.com]

Okay, so now we have a vote for defeatism. There is nothing we can do to re-establish our financial position. Capitalism vs. Socialism doesn't matter, excellence doesn't matter. We just kind of wait for China and other Asian markets to wash over us? If your premise is the case, why isn't the combined power of the EU dominant? And why hasn't the fluid flowed freely into Africa?

[stewstewstewdio.livejournal.com]

So there is room for ambition and excellence in decision making. It isn't as pre-ordained as you make it out to be. What you are describing is a utopian-style equilibrium that has been sought and promised but never achieved. The problem with this is that it doesn't take into account the competitive nature of man. If this were a natural order of things, this would have been achieved millenia ago.

[mahnmut.livejournal.com]

Because of unfair trade/production barriers (http://community.livejournal.com/talk_politics/172752.html) and dirty diplomatic tricks (http://community.livejournal.com/talk_politics/409250.html).

[malasadas.livejournal.com]

Why does your metaphor give me a terrible urge to go and relieve my bladder?

[ccr1138.livejournal.com]

Precisely. And once global markets are equalized and stabilized, the wealth of the world will be stretched thin among 6 billion. The only way America sustained its high standard of living was on the backs of a lot of very, very poor people. With globalized markets, those people can compete for jobs and start getting cars and refrigerators and roads and health care and "stuff." But it's always going to be at the expense of the higher-paid workers whom they displace.

The scary thing is, the planet doesn't appear to have enough resources to provide America's standard of living to everyone. What will happen when other countries realize all the "stuff" is gone?

[malasadas.livejournal.com]

The scary thing is, the planet doesn't appear to have enough resources to provide America's standard of living to everyone. What will happen when other countries realize all the "stuff" is gone?

[underlankers.livejournal.com]

*If* the wealth of the world is equalized it will be primarily focusing on the Third World, where the majority of the population is. There is but one country palatable to US citizens there, the Republic of India. The rest of them are various shades of dictatorships which really don't like us that much.

And as to what will happen? This will:



As when the ability to sustain our heavily urbanized society goes, the cities will once again wither on the vine.

[squidb0i.livejournal.com]

Excellent analogy.

[underlankers.livejournal.com]

Actually the USSR was a good example of a country that tried to do too much with too little. It attempted to maintain a global empire while rebuilding from WWII. Due to the scale and severity of its losses it could do one or the other, not both at once. However the true believers who led the USSR believed they could do both, hence the USSR imploded from overstressing its system beyond what it could bear.

Where the USA was in the exact opposite situation-like the USSR we got global power and influence by virtue of WWII and our role in the defeat of all three Axis Powers. Unlike them we were the only pre-WWII Great Power to end the war better off than we began it, where the war cracked British power permanently and dealt a mortal wound to the Soviet Union before the Cold War even started.

Our power was always a chance thing. And it was always on borrowed time, and now that time is running out because the rest of the world was not going to remain in the nightmare of '45 forever.

[sagittipotens.livejournal.com]

Free trade shouldn't give people the right to be asses.

Ergo that other beloved libertarian and conservative doctrine
"Freedom isn't free"
that the elite sometimes forgets applies to them too.

[gunslnger.livejournal.com]

Free trade shouldn't give people the right to be asses.

It doesn't. Mere existence does that.

[underlankers.livejournal.com]

I have about six or so quibbles with this.

First, I believe Chinese growth is really a rotten structure that one good kick would topple. A one-party dictatorship of this sort, like the Tsarist autocracy will run aground when it deals with the pressures of its middle classes. It is very much possible to have a dictatorship and capitalism, but there's a reason they are usually military juntas as opposed to party states.

Second, given that Japan has traditionally been a backwater next to China, that the Chinese surpass them is a surprise to no-one with common sense and some knowledge of obvious differences between the two countries.

Third, FDR handled the Great Depression the way he wanted to: he saved the capitalist system and prevented either Fascism or Communism from taking over. Neither the Silver Shirts nor the Commies got anywhere then. That was the purpose of the New Deal, not anything more or anything less.

Fourth, what needs to happen is to end both wars. We have spent over 1 trillion dollars on blowing up Bedouin tents for aims we could not accomplish by means inadequate to the task. The endless conflicts tighten credit and the private sector really isn't interested in extending credit so long as both the Iraq and Afghanistan wars continue.

Fifth, business has always had a great deal of the PT Barnum in it. This is a sad thing but it's not a new or unprecedented thing. It's capitalism at its finest. There's a reason the phrase caveat emptor exists.

Sixth, there's one glaring difference these days nobody likes to mention, but it's that our global economic power was strictly due to being the only pre-WWII Great Power to get all the good of the war without the massive devastation that reduced huge swathes of Asia and Europe to a Mad Max-level scene and of course the USA was a colonial power, which meant it avoided the crapsack legacies of colonization.

As the larger economies recover from the first half of the 20th Century the USA will decline. *If* South America *ever* gets back on its feet, too, that will sink North America as well. North America in Indigenous times was a human backwater exceeded only by Australia in that sense. As the other economies recover we'll be right back in that situation. What we were in 1945 we will never be again unless the rest of the world blows itself to ruin a third time while we escape any real damage from it again.

Regarding your first point

[stewstewstewdio.livejournal.com]

If all it's going to take is one kick to topple it, who is going to kick it? Apparently, we aren't. As a matter of fact, we are propping it up and enabling it.

Re: Regarding your first point

[underlankers.livejournal.com]

The Chinese themselves will.

Re: Regarding your first point

[http://users.livejournal.com/-wanderer-/]

Eventual transformation of the political structure doesn't mean the economic engine will collapse (not that we should hope it does anyway).

Re: Regarding your first point

[underlankers.livejournal.com]

*looks at the history of the former Qing Celestial Empire.*

You were saying?

Re: Regarding your first point

[http://users.livejournal.com/-wanderer-/]

I didn't say that a political change never causes an economic change, merely that it doesn't have to be the case. In the case of the Qing, the economic collapse directly led to the political collapse, but that doesn't have to be the case.

A better analogy is that of some former Eastern Bloc states. A political transformation brought short-term economic panic, but didn't lead to the collapse of the economy in the medium-term.

Regarding the rest of your points

[stewstewstewdio.livejournal.com]

Actually, everything you mention and address are nothing more than anecdotal symptomatic illustrations of my point. The overall question I am posing here is: have we reached a wall as a civilization much like the Egyptians, Mayans, Romans and even the Soviets? Have we over-expanded to the point where our society is going to be decimated and will die? That is the real question posed by the original post.

Re: Regarding the rest of your points

[underlankers.livejournal.com]

We never expanded. We were just the only guys left mostly unharmed after WWII. There was never any possibility of maintaining this forever, and with the revival of the EU and other such areas once-devastated we'll be reduced to the backwater North America has tended to be.

To use your various examples-

Egypt did not reach a "wall" for 3,000 years. A string of Pharaohs from Narmer to Nectanebo II kept that civilization going for longer than the entire span from the Battle of the Milvian Bridge to now. The fall of Pharaonic Egypt was due to its strengths and weaknesses and both being incapable of matching the rising Persian society.

Second, the Mayans hardly "fell" as they're one of the Indigenous groups who not only survived colonialism without the degree of extermination others went through, they're still fighting Indian Wars to the present.

Third, Rome collapsed........in 1922. The Western Empire was a house of cards because it obliterated indigenous civilizations and never rooted the Graeco-Roman model very firmly in the post-apocalypses of their own devising. It was the ass-end of the Roman Empire and remained an ass-end until it had the last laugh by looting and pillaging America and killing all its natives.

The Eastern one survived transitions to Christianity and Islam and outlasted the Third Rome.

Fourth, the USSR imploded because of overstressing itself in the aftermath of WWII. It did not so much reach a wall as overreach beyond what it could reasonably hope to do.

[rasilio.livejournal.com]

Lol your grasp of economics is simply astounding.

"At that time, there was resistance to things that were urgently needed like TARP and the American automobile industry."

Says who? At best opinion among economists was evenly split on the first and the second was a pure payoff to the Unions.

"They have recently bypassed Japan as the second most powerful financial force in the world."

China, 1.339 Billion people
Japan, 0.127 Billion people

And yet their GDP's are just now equalizing? Really easy to experience "incredible financial growth" when you are starting at the bottom of the economic barrel. Come back and talk to us when China can reach the GDP Per Capita of Hungary, till then there economic power is purely a matter of their size and not a function of their economic strength.

"It is no secret that we have exported a huge part of our economy and employment to China and the rest of Asia."

We have? Gee then where were all the unemployed in 2007 and 2008 when we had Unemployment below 5% or are you trying to argue that all of that shipping of jobs occurred in the last 2 years?

"Despite our consumption slowdown"

Except Consumption hasn't slowed appreciably...
http://www.cato-at-liberty.org/tysons-keynesian-confusion/

"there has been financial reform, which was very obviously needed, but still resisted by the financial industry without remorse."

Where do you get this stuff? The biggest banks were the biggest winners in that debacle known as financial reform...
http://www.huffingtonpost.com/2010/08/11/goldman-sachs-may-not-los_n_678199.html

" The banks, Wall Street and the auto industry have been somewhat stabilized. GM is talking about having the largest Initial Public Offering in history to hail in the newly restructured auto industry. "

Lol yeah and you don't think that was a politically motivated stunt to win PR points by the Obama Administration? Fact is it is WAY too soon for GM to be issuing an IPO and odds are that it is going to cost taxpayers somewhere around $50 billion because the sale price needed to recoup all of the government money would give it a market valuation greater than Ford and Toyota combined.

"They have been resisting any movement in any direction and have been fantasizing about a miraculous return to prior market forces."

Lol yeah we had a free market before. Freddie, Fannie, CRA none of them had ANYTHING to do with the crash. That is almost as funny as the idea that Republicrats are friends of the free market. Still that said their opposition to the idiotic economic policies while likely politically motivated are all that has stood between up and some truely dangerous laws being passed.

"They have been advocates of an unregulated free market system without regard to evidence that it was a lack of regulation that brought about the current market downturn."

Got a quote from ANY Republican congressional leader advocating that? Further how was it a lack of regulation that lead to the crash when banking is one of the most heavily regulated sectors of the economy?

"They disregard that fact that these institutions became nothing more than a toxic waste dump for the banks' irresponsible perversion of the free market principles of capitalism."

Um, don't you realize that that is EXACTLY what they were set up to be? That the very existance of Freddie and Fannie is government intervention into the marketplace that causes market distortions and leads to a lowering of lending standards? Further don't you realize that Freddie and Fannie set the terms that banks can issue notes on and not the other way around? Freddie and Fannie (that is to say the Government) Told banks to issue garbage notes for them to buy and so the banks did as they were told.

Maybe the problem with the financial system wasn't that it was under regulated but that too many people are too stupid to recognize regulation when it is staring them in the face?

[http://users.livejournal.com/-wanderer-/]

Come back and talk to us when China can reach the GDP Per Capita of Hungary, till then there economic power is purely a matter of their size and not a function of their economic strength.

Before industrialization and capitalism, economic strength was more or less a function of population. China actually had the world's highest GDP up until about 1900, when the United States pulled ahead. Once other countries develop functional capitalistic systems, there is every reason to think that population again will become the main force that determines economic strength (though not the only force, obviously). So I think your distinction between the size of a country and economic strength is moot: in the future world of truly developed global capitalism, large sized economies will be the strong ones, after accounting for natural resources. Mechanisms that allowed smaller countries to box above their weight, so to speak, will be obsolete once larger but previously undeveloped economies adopt these measures as well.

[rasilio.livejournal.com]

In the long run you are likely correct, the point however is that China's "miraculous" growth has less to do with how special they are or how screwed up the US is than it has to do with just how damn poor they were prior to Tienanmen.

As with most growth curves you achieve 80% of the growth in the first 20% of the time and China is still probably a good 2 - 3 decades from reaching that 80% mark and that assumes that the communist party controllers in Beijing let them get there since getting there requires granting the people WAY more freedom than they currently have.

Additionally right now China is not some shining star of economic growth to hold up as an example for the US. Right now for all the economic growth they have experienced they are entirely dependent on foreign consumption because they have never allowed their internal markets to develop.

This is VERY dangerous territory for them because if the Industrial economies of the west go down China comes crashing down with them and they will crash harder and faster.

Given another 20 - 30 years of economic development and they can probably overcome this risk but till then, their economic fates are essentially tied to the weakest economy between The US, Japan, Germany, Britain, and France because once one of them goes down the rest will topple like dominos.

[http://users.livejournal.com/-wanderer-/]

and that assumes that the communist party controllers in Beijing let them get there since getting there requires granting the people WAY more freedom than they currently have.

The CCP is more responsive to public opinion than people give them credit for (though obviously I'm not saying that this responsiveness takes any liberal democratic form as we know it). The common consensus is that an improving economy is what keeps them in power now, so they have every incentive to expand freedoms insofar as it is necessary for economic growth (though obviously this would preclude a fully liberal democratic system, barring other factors). I think you'll see the CCP doing whatever they can realistically do to stay in power, and now that most ideological constraints are out the window, more freedoms are likely to emerge (and indeed citizens test the waters all the time without serious repercussions).

[rasilio.livejournal.com]

"Many have faulted Franklin Roosevelt’s handling of the Great Depression. These people credit World War II for delivering us from that era."

As well they should. However it was not the government spending of the war effort that got us out of the great depression it was that after the war ended the US had a massive surplus of manpower and the only functioning industrial economy in the world. If Germany, France, and Britain had not had their economies blasted back to pre-victorian levels in the war the 1950's never would have been the "Golden Age" that they ended up being and we would likely have seen a very quick return to depression levels of unemployment.

"Few are recognizing that the government is done. They have pretty much done all they can."

No most of us recognize quite well the job the government has done on our economy by using Keynesian economics to push us from bubble to bubble for the last 40 years at least and never allowing the market to correct. One can only hope that they are finally done.

"The jobs they have created or saved are national infrastructure jobs such as police, firefighter, teacher and infrastructure construction jobs."

ROTFL

You really like Kool Aid don't you. Let me clue you in. At best the Stimulus bill was job neutral merely shift. see there is this little thing that since the government does not have any way of producing money without first taking it from someone else (even printing new money does this by devaluing all of the money in existance) and therefore unless there was a 1 trillion dollar store of money sitting around under mattresses that they tapped into back in 2009 (and there wasn't) all they did was diverted cash from one place where it would have generated jobs to the jobs the government preferred.

"The Fed has used almost their entire inventory of tools to bolster the economy."

Yeah and that inflation of the money supply that went on for more than 10 years couldn't possibly have any reason why we had an asset crash could it?

"At the same time, US corporations are sitting on $1.8 trillion of cash with nowhere to invest it."

Yeah and the reason they are siting on it couldn't possibly have anything to do with paraylsis caused by regulatory uncertainty could it? Health Care, Financial Regulation, Expiration of the Bush Tax cuts, Possible addition of a VAT or other new taxes based on the findings of the debt comission, Possible carbon taxes, and a hundred other proposed or pending law changes since Obama took office are making it simply impossible for businesses to predict what the rules will look like 18 months down the road and so they are sitting on their cash and waiting for signals before acting. see...

http://dallasfed.org/news/speeches/fisher/2010/fs100729.cfm


You want a solution? Elect the Republicrats to control over both houses of congress but not filibuster proof control over the senate. Not because they are preferable to Democans but because it will give us a couple of years of real gridlock in Washington so that no meaningful laws get passed and business can have a couple of years of regulatory and tax stability in which to plan a course forward. Then the recovery can truly begin.

[gunslnger.livejournal.com]

Now it is entirely up to the magical American free market system to step up.

Sure, you tie a guy to a chair, use lots of rope and chains and then ask him to step up and see where it gets you.

[mrbogey.livejournal.com]

I've given up. It's almost as if I don't speak the same language as some people.

[mendaciloquent.livejournal.com]

It is a mistake to think that a higher standard of living necessarily comes with a new revolutionary technology, or that new technology or production mechanisms are required to restore growth re: median QLI (or whatever metric is being used). What we are talking about is productivity. It is true that a highly inefficient economy, from a public welfare point of view, can benefit from large increases in productivity. But where this is lacking, it is entirely possible to simply make the productive resources we have more conducive to the public good.

Of course, this latter option requires social innovation, which as it turns out is much harder to accomplish than technological innovation.

In the spirit of your talking points post

[reality-hammer.livejournal.com]

You lie