Tag Archives: trade imbalance

Optimists Rise Up!

Here is yet more news that shatters the cynical incantations and pat nostrums of  both the right and the left.  In April, the Development Committee of the World Bank set the goal of ending extreme poverty worldwide by the year 2030. Does that sound naive and delusionally utopian? Jeffrey Sachs in the New York Times shows a strong case that this goal can (roughly) be met and indeed is being met.

Optimists“According to the World Bank’s scorecard, the proportion of households in developing countries below the extreme-poverty line (now measured as $1.25 per person per day at international prices) has declined sharply, from 52 percent in 1980, to 43 percent in 1990, 34 percent in 1999, and 21 percent in 2010. Even sub-Saharan Africa, the region with the most recalcitrant poverty, is finally experiencing a notable decline, from 58 percent in 1999 to 49 percent in 2010.”

Sachs shows that “…anti-market sentiment is no friend of poverty reduction. But neither is free-market fundamentalism. Economic growth and poverty reduction can’t be achieved by free markets alone. Disease control, public education, infrastructure creation and protection, anti-monopoly market protection, the promotion of new science and technology, and protection of the natural environment are all public functions that must align with private market forces.”

Read this.  It supplements Steven Pinker’s work on the incredible decline in worldwide per-capita violence since 1945.  It shows what we might still accomplish, if vigorous, pragmatic and non-dogmatic ambition and goodwill take hold…

… and especially if we thwart the grouches and cynics of both right and left whose dyspeptic and demoralizing grumbles make them by far the worst enemies of humanity and Planet Earth.

Kennedy-Problems-of-the-worldAs President John F. Kennedy said: “The problems of the world cannot possibly be solved by skeptics or cynics, whose horizons are limited by the obvious realities. We need men who can dream of things that never were and ask, why not?”

To whom might I — and Kennedy — be referring?  Read a fascinating rumination about how “southern white notables”… the local white aristocracy across the U.S. South… is not only still fighting the Civil War, but has had winning strategies for most of the last 150 years — with a result that their region still lags bitterly in every metric of economic, social and personal health.

While combatting the current madness in that direction, remember. There were (and may again be) other enemies of the future like communists. Staring venomously in just one direction is blinkered and deliberate blindness. Sanity and adulthood — both wary and hopeful in all directions — are our hopes.

==The vanishing U.S. trade imbalance: what does it mean? ==

Want more optimism?

My friend the brilliant and popular economics-investment pundit John Mauldin publishes economics insights from what might be called an “Eisenhower Republican” perspective — rock-ribbed and skeptical of debt, but also well-distanced from the Murdochian Madness that has hijacked today’s GOP.  John’s latest report appraises how a combination of resurgent oil and gas production in the U.S., Obama Administration policies and a rapid return of high-tech manufacturing to U.S. shores, is already having huge effects upon the American balance of trade, a lingering deficit that has spanned a human lifetime.

HowAmericansSpentThemselvesA deficit that – by the way – I call deliberate, and one of the most important contributions of Pax Americana to world history. A deficit that propelled export driven growth across the world, uplifting generations first in war-torn Europe and Japan, then Taiwan, Korea, Singapore… and so on until U.S. trade is now the chief force lifting China and India at the same time.

Mauldin shows how the trade imbalance appears to be going away more rapidly than anyone expected: With the US current account deficit continuing its fall, we need to be alert for the next crisis abroad. It is very difficult to predict exactly when, where, and how markets will panic, but taking US dollars out of the trading system is akin to losing a chair in a game of musical chairs. Someone is going to be left out. It could be Europe or Japan –  but more likely it will be emerging-market countries loaded with a lot of external debt denominated in US dollars who struggle to keep a seat at the table.”

Another outcome. When the US is no longer shipping tsunamis of dollars overseas, the countries of Asia will need another currency to trade with each other.  China is already preparing to set up its renmimbi (yuan) as a new reserve currency to stand next to the dollar.  This will be accelerated, so long as China does not collapse because America is buying fewer Chinese goods.  It can get complicated. For example the impact any China slow-down is going to have on commodities like metals, on countries like Canada, on countries like Australia.

It probably is time for the development teat of U.S. trade deficits to start shutting down. It was fun, buying trillions of dollars worth of crap we never needed, so that manufacturing jobs would cycle through the planet leaving new middle classes rising in their wake. (Foreign aid via Walmart.)

But America needs to attend to finishing the latest outbreak of its ongoing (and psychotic) civil war — a task of self-purging and healing that’s going to take a while, before we can go back to helping move the world forward.

== Making optimism general and ongoing ==

SocialPyramidHow has our rare and unique Enlightenment – with its vibrant, win-win markets and democracy and science – managed to stay in business, given that human nature routinely seeks to destroy it? Across 99% of human history, the classic social pattern was a pyramid of power with a narrow owner-elite controlling teeming masses below them.  The classic Power Pyramid is clearly a stable system since it dominated everywhere that humans developed both farms and metals.  We are descended from the harems of guys who managed to pull off that trick. Human males are good at it and it should come as no surprise that they are always conspiring to bring it back.

Problem is: while the Power Pyramid may be “natural” to humans it also sucks at governance, at statecraft, at delivering peace, wealth, happiness, freedom, science or progress. We have six millennia of violent, horrifically stupid history that testifies to that pure and proved fact.

Our diamond-shaped society, with a dominant and confident Middle Class, is rare and (alas) not inherently stable, which is why earlier experiments failed.  It is, however, fabulously successful at creativity, wealth-generation, and fostering the spectacular positive sum games of democracy, science and competitive-open markets. No combination of human societies ever accomplished a fraction of what we have, with enlightenment methods, in just 200 years.  But in order to keep the experiment going, careful design and management and relentless fine-tuning have been required.

Adam_Smith_Wealth_of_NationsNumber one among those methods – as prescribed by Adam Smith and the American Founders – was divided power.  You sic the mighty against each other!  Break up monopolies and insist that companies fight it out in the market place with new goods and services, for example. That’s hard! So naturally, their CEOs try to collude and connive while strolling the golf course.  So we sic regulators on them, and lo!  They turn and use a myriad methods to “capture” the regulators… as happened when the railroads turned the old Interstate Commerce Commission into their own private brothel.

(Ironically, it was democrats who disbanded the ICC and the horrid old Civil Aeronautics Board (CAB) and who did every other major DE-regulation of the last century except in one industry.  Finance.  Republicans led the charge deregulating that area, for the simple reason that regulation of finance is desperately necessary to prevent massive raids on our economy.  And sure enough, major raids on the economy happened right after each of those GOP-led “deregulations.”

Which brings us to: Meet the Flexians: A new professional class of movers and shakers—people who serve overlapping roles in government, business, and media with smiling finesse—is controlling the flow of power and money in America.” See the article by Lisa Margonelli in Pacific Standard.

PredatorsParasitesScary huh?  To which I can only respond with “Um…. duh?”  Predators and parasites and oligarchs will use monumental cleverness to game any system – whether it is feudal or mercantilist or “communist” – and help pound the diamond into a pyramid of power and control.

We should not despair that clever people learn to game whatever system we create.  It is a good thing that our species creates clever individuals who are able to spot opportunities, form teams and compete well!  We must merely stop them from doing the toxic thing that such teams always did across six thousand years of wretched feudalism, conniving to CHEAT and prevent the competition from continuing!

“No, that is not how we will let you succeed,” we must tell them. “Go and innovate new goods and services. Compete with each other to manage creative enterprises without unfair advantages. You may not win by conniving our systems.”

Let’s take our example from professional sports.  Praise this year’s champions. Reward them with riches.  And break up concentrations of excess power so that the game continues to be interesting. Vibrant and fun.


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