I'm not a very political animal being more of an amused (or is it bemused) observer of the circus that is politics but sometimes there is real risk of politicians actually having an impact and I get pretty frustrated - now is such a time.
I moved to the U.S. in 1991 full of admiration for the open economic system that rewarded (and punished - but not too harshly) risk taking. Free trade, entrepreneurial activity and a tolerance of failure all seemed very smart to an Englishman who had grown up watching labour unions hold the U.K. to ransom in the 70's (doing homework by candlelight as all the power workers were on strike remains a vivid memory). During that time the government ended up owning most of the U.K. economy - Rolls Royce, British Airways, British Telecom, British Leyland (effectively the whole U.K. car industry) gas, electric, and water utilities, the railways were all mismanaged by the government. Not so in the good ole' US of A.
Now what's happening:
- Greed and stupidity in the financial markets reaches such an egregious level that the government bails most of them out with our money. These supposedly very smart (and certainly still very rich) wizards lament about unprecedented events that their ever-so-smart models failed to anticipate and we pay! I guess that's one form of democracy isn't it?
- The automotive industry which has been under attack from the same two forces for forty years (nimble foreign competitors and sky-high labour costs) finally throws its hands up and says it not really our fault we haven't fixed any of these problems, please bail us out as well.
- after forty years of American manufacturing jobs moving overseas in search of cheaper labour costs, government now wants to offer tax breaks or construct trade barriers to keep jobs in America. All sounds very laudable except these artificial subsidies are really a sort of economic Berlin Wall; and we all now how that ended. Surely the reality that U.S. consumers either won't or can't pay higher prices for American-made goods is clear by the surge in Wal-Mart's sales during the current downturn. Wal-Mart's shelves heave under the weight of cheap, but not necessarily poor quality, goods made anywhere but the U.S.
So what's the answer? Well if I knew that I would either be very rich or President-elect, but here a few thoughts from my humble perspective:
- Why can Warren Buffett get terms on his loans (to GE and Citigroup amongst others) than the U.S. government? I guess he must have more clout than Uncle Sam. If the government is going to step in and help it has an obligation to seek out the best economic deal for me, the taxpayer as possible. No false subsidies for failure please.
- We tried protecting our automotive industry in the U.K. back in the 70's and it went the way of disco and flares. British Leyland, home of iconic brands, such as Rover, Triumph, Austin, Morris and the like sucked up billions and merely delayed the inevitable. How about taking the money people want to use to prop up the industry and invest in the biggest employee retraining program in history. It will be painful but the short sharp shock followed by hope of new careers as Michigan and Ohio become the environmental and medical Silicon Valleys of the world would be preferable to another few years of death by a thousand cuts. If anoyone can do this America can, just look at how quickly the country mobilized both the military and civilian sectors at the outset of WWII - it took months not years.
- Same answer for trade and keeping jobs in the U.S. Two hundred years ago everyone was a farmer, within a few short years the whole economy transformed itself into a manufacturing powerhouse, fifty years ago the service sector exploded. Invest in where the world is going not where its been.
Does anyone in Washington get it? Probably, but here's another election in two years...
