All Out Economic War?

As you may have noticed, I am an observer of political trends and cultural phenomena, and comment on them from time to time from my perspective as a history major.  Here is what I think about recent statements and actions by the government of China:

Full Scale Economic War?

Is China planning to wage full-scale economic war against the United States?  The increasingly hostile rhetoric coming from Beijing in recent months suggests that China believes it can flex its economic muscles and force the United States to do its bidding.  The prospect of being the vassal of a Communist dictatorship doesn’t seem very appealing.   Nothing that happens in China is a random or chance event.  The statement that the U.S. is responsible for inflation in China because America is printing too much money was a clear signal that China believes it can dictate economic policy to Washington, D.C.  Downgrading the credit rating of the entire United States should definitely be taken as a shot across the bow of the American Ship of State.

How should America respond to this threat?  First, because of the deep economic distress of the entire country, it presents a rare opportunity to change the course of U.S. economic thinking and make a long over due course correction in both Public and Private Sector economic policy.  Let’s face it, the American Economy is broken, and following the same policies that got us in the closest thing to a depression this generation has seen will only exacerbate the malaise.

What course corrections am I talking about, and what changes in thinking and policy am I suggesting?   Well, the wisdom that “low price is everything” needs to be questioned.  If Americans can only buy poor quality products produced in other countries, the consumer will indeed buy what is offered if it even partially meets their needs.  But what is the overall cost of this?  First, a consumer driven economy depends on dollars in the pocket of consumers.  If the majority of goods for sale are produced in other countries, that means there must be jobs in areas other than manufacturing to put dollars in the hands of consumers.  The current trend to out source work to countries with lower average salaries than the U.S. means there are fewer and fewer jobs available to fuel the consumer driven economy.  The continued outflow of money makes America weaker and other countries more powerful.

What do we do to stop the bleeding?  We must stop wasting money on war.  A war economy only benefits the defense contractor shareholders and the very rich who have surplus money to invest.  It is inflationary because everyone must compete with the government to borrow money, and that drives interest rates up.  The Vietnam War caused mortgage rates to climb over 15%.  We are seeing the first signs of the effects of huge deficits, as inflation becomes an issue even in the midst of a deep recession.  It will get worse unless we take action.

If we put Americans to work making products people need, it will accomplish several important things.  American businesses will have new opportunities and their shareholders will benefit from increased sales and profitability.  American businesses would be challenged to innovate in order to compete with imported products.  These innovations would finance new research, which would create advances in technology and production efficiency. American made products would become the choice of savvy consumers all over the world.  This can’t happen just by waving a magic wand or making campaign promises.

American business leaders must reject the “bottom line is everything” thinking instilled by whatever MBA factory they attended.  They need to take a broader view and see that if there are no jobs for American Workers, the American Consumer won’t have any money to spend.  Business executive must be brave and bold in trying times, and shareholders must look to the future rather than at whether this quarter will be above or below analyst expectations.  Shareholders should ask themselves,  “Do I want the business to survive?  Do I want the United States to survive?”  If so, then shareholders must not file suits against management teams who are trying to position their companies for future growth and insure the survival of their company.

We have to do something different, and business as usual just won’t get the job done.  If American companies invest in new, efficient, and ecologically responsible production facilities, that investment would create jobs in construction and machinery manufacturing.  Investment in production capacity means dollars going into the pockets of American workers, who then have money to spend.  When new facilities start production, more workers will have income to spend.  This relieves the burden of Unemployment Benefits payments that are bankrupting many state governments.  Tax revenue will increase as businesses and individuals begin generating income again, and state and local budget shortfalls will be erased.

Americans also need to look at the model the U.S. Economy is based upon.  A system that demands continuous consumption and disposal is not sustainable or even possible in a world with increasingly scarce resources.  Building things to last, making it right the first time, and engineering repairability into products is just as important as energy efficient operation and ecologically responsible manufacturing processes.  Advertising to create artificial demand for things people don’t really need has to stop.  Truth in advertising similar to the line from a movie, “It’s boxy, but it’s good!” would be a start toward a responsible and sustainable economic model.

The American worker needs to take a good look at themselves and realize that they have been a big part of the economic problem.  A “for profit” company must receive value from the workers it employs.  The company does not exist for the purpose of giving workers jobs so they can web surf, text, or do personal business.  The company needs productive effort from its employees.  Instead of teaching businesses in other countries how to pretend they are giving good customer service, American workers need to see how retail employees in countries like the Philippines do provide excellent customer service and actually take an interest in solving a customer’s problem.  These people are earning less than the U.S. minimum wage, and are working 10 to 12 hours per day, six or seven days a week.  Personally, I think it reduces the productivity of an individual to demand such long hours, but my point is that American workers have it pretty good, and they really need to take an interest in the success of the company that is paying them.  They need to provide value through productivity for their employer.


It can be done.  The owner of Polartec knew his company's success depended on innovative materials and highly trained, very productive workers.  He kept his plant in the U.S. and has achieved continued success through high quality products that are efficiently produced by American workers.  There are other success stories such as Kwik Trip, Inc of La Crosse, Wisconsin, which is increasing the amount of goods and services it produces internally to supply its convenience stores in Wisconsin, Iowa, and Minnesota, all with local workers.  This is doable and the results are reproducible.  Why hasn’t a big retailer or an auto manufacturer tried this?  Because all the executives went and got an MBA, and the current curriculums are the same in every MBA program.  It’s very similar to the early days of Mainframe computing, when most programmers would tell the CFO something couldn’t be done because the programmers all took the same programming course and there wasn’t an example that showed how to write a program that would fulfill the request in their workbook.  Consultants, like Keith Avise, who grew up in Des Moines, Iowa, made above average incomes by listening to the executives’ requests, working to understand the business need behind the request, and then writing programs that gave the executives data products with the information needed to make informed business decisions.  While the cookie cutter approach and the concept of interchangeable parts have a place in product and manufacturing process design, they are not an efficient approach to high tech problems.  Engineers and designers need to be able to think independently and creatively, business executives need to be able to see beyond the bottom line and understand the real impact of their business decisions, and assembly line education does not allow divergent thinking or teach creative problem solving. 

The Health Care system in the U.S. is worse than broken.  It consumes and wastes huge sums of money, and the average American is no healthier or less likely to be treated incorrectly for a medical problem than a person in a developing country.  From my perspective as an uninsured patient, people with only a moderate income in the Philippines have access to state of the art medical care that exceeds what is available in most U.S. hospitals, and public hospitals in Manila provide care equal to any big city public hospital in the U.S.   An uninsured patient in the Philippines will pay 1/10 what an insured patient would pay in the U.S.  There is no reason why a public and private health care system could not peacefully co-exist.  If a doctor has superior skill, and wants to be in private practice, those who believe the higher cost is justified by the value received will provide a demand for the doctor’s services.  A public health care system would meet the needs of most people if it was run efficiently and medical decisions were made by doctors and patients, not by bureaucrats or dictated by Federal laws, which are subject to political expediency, pressure from special interest groups, lobbyist influence, and Congressional corruption.  If the system is designed to provide direct, basic care for all citizens, not an insurance scheme like Medicare, and so that fraud is either impossible or not economically rewarding, then I believe a better level of care would be available for more people for about an equal exchange of elimination of health insurance premiums for increased taxes.

It seems to me that America is bent upon becoming a “Third World” country.  The widespread rejection of education, ethical behavior, and good manners by the popular culture is destroying the core goodness of the American way of life.  When America was “the workshop of the world” most workers saw their employment as a partnership between themselves and their employer that would last for their entire working life.  They believed that if they did an honest day’s work for their pay, their employer would run the company prudently so they would continue to have a job, and that pension funds would be safe and available to help take care of them in their old age.  The management knew the employees, and valued their dedication and good work.  Informal “pats on the back” were regularly and routinely given so the worker knew they were seen as a real person who contributed to the success of the business.  This work ethic and the idea that the employer had a responsibility to the employee was the key to the success of American business in the age of industrial manufacturing.  When business becomes impersonal, the employee feels no emotional connection with the cold corporate persona, and so there is little motivation to give an honest day’s work for pay perceived as too low, when compared to executive excess and ornate, palatial corporate headquarters.  The ethics and beliefs held by people of that time were instilled by their parents and by the public schools.

From the creation of the first public school in America until the 1970s, if a child misbehaved at school, it was very likely they would be punished much more severely at home than at school.  Now, we have parents cursing at school administrators when they are informed their child committed a criminal act at school.  The American public school, in general, is based on an assembly line, industrial manufacturing age model.  The goal was to churn out workers literate enough to hold an assembly line job.  This approach is obsolete in the information age, and that is why it is so ineffective.  There will always be a need for assembly line jobs, but most of those jobs are not in the U.S. any more.  We need engineers, scientists, inventors, chemists, environmental experts, and computer hardware and software engineers and inventors to power a real economic recovery.  Our students are lazy and disagreeable most of the time and have no idea the opportunity they are squandering in favor of video games, texting, and so called music that celebrates criminal activity.  This comes directly from a lack of parental involvement and guidance.  Parents have abdicated their responsibility to teach their children how to behave in a civilized way because they are either too tired or too self absorbed to put out the effort it takes to be an effective parent.


A high school exchange student from India lived with my family for a year.  He was enrolled in all of the highest-level classes available in a good high school in North Carolina.  He laughed at how easy the classes were and found that his teachers were not able to discuss subjects on the level he needed because it would confuse the American students.  He told me that academically, the year was a complete waste of his time, and that even if he studied very hard, he probably not be able to pass the examinations for his junior year when he returned to India.  Without the serious effort that is a direct result parental involvement, the public schools will continue to fail, no matter how good the facilities, how high tech the equipment, and no matter how well prepared, dedicated, and talented the teachers.   We see the serious student effort needed from Asian American and Indian American students, and it directly correlates with values taught at home and parental involvement in the student’s life and education.

The perception that winning the lottery or selling dope is the path to economic success has replaced the belief in hard work and honest effort.  America is pouring billions of dollars and gallons of American blood onto desert sands, while telling the tax payers that there is not enough money to keep schools open, or fix the roads, or keep bridges from falling down, or provide basic health care.   We must change, or be doomed to fail and fall.

Ross Perot was seen by many as indecisive, and thus unelectable, but he saw the truth of our situation many years ago.  We can’t have it all.  We can’t have our cake and eat it too.  His solution was to get people to think and talk together so Americans could decide what is most important and what has to be a lower priority.  If we have consensus on our direction, we can go forward with united purpose.  This approach goes beyond sound bites and 30 second attention spans.  That’s why nearly everyone in a high tech office, full of highly educated employees, regardless of their normal politics, saw Mr. Perot as “their candidate.”  

Regardless of the silly, pseudo-patriotic rhetoric that followed the 9/11 tragedies, America would be in deep trouble if there were an attack by a capable and determined opponent.  If a force equipped with modern weapons systems and manned by skilled professional soldiers with dedication comparable to that of the World War II era forces of the Japanese Empire or Nazi Germany, attacked the U.S. today, I don’t believe there is enough of the national resolve or integrity, that was present in the U.S. in 1941, to bring the country together in the way Americans went to work to win World War II.  I am not sure our nation could survive such an onslaught now, let alone win an all out World War III without giving in to the temptation to use nuclear weapons and risk the extinction of all life on planet Earth in an attempt to win at all costs.

We need to rebuild our families, stop creating a market for any type of media that encourages anti-social and criminal behavior, invest in our schools, and rebuild our infrastructure.  All of the things President Obama has proposed will help America recover from the current economic disaster that is a direct result of 8 years of looting the U.S. Treasury by the puppeteers pulling the strings of their front man, George W. Bush.  For Mr. Obama’s plans to work, and to really fix what is wrong with the American Economy, we have to stop fighting among ourselves and realize that we have had full scale economic war declared upon us by a very powerful and capable opponent.  We have to find the strength and integrity to make the hard choices, do the hard work, and reinvent American Public Education, American Business, and the U.S. Economy to compete in the modern world.