The State of America

[Surferbeetle]

Why can't America be more like, well, America?, by Richard McGregor, 30 September, 2011, Financial Times, www.ft.com

America’s problem is not that it does not work like China. It is that it no longer works like America. The latest threat of a federal government shutdown this week drove the point home.

Depending on how you count them, the US has had three to four budget showdowns this year, each threatening to close down the government or trigger a default on the country’s debt. Given that the government is funded only up until November 18, there will be at least one more such fight this year. On top of that, on November 23, a bipartisan congressional committee that was set up as part of a compromise deal over lifting the US government’s borrowing limits in August, is due to report on how to cut $1,200bn from the budget over the next decade. If they cannot agree, a new set of battles could ensue until the end of the year.

Short-term measures passed by Congress to fund the government are nothing new in the US, nor is political posturing over budget spending. But in the words of one budget specialist, the spending negotiations have gone from being “routine and procedural to political and partisan”.

Washington’s budget battles have turned into something like the Israeli-Palestinian peace process, a euphemism for a process in which there is no peace and each side is continually nourished by the dreadful wrongs committed by the other.

As in the Middle East, violence begets violence.

[slapout9]

Why can't America be more like, well, America?, by Richard McGregor, 30 September, 2011, Financial Times, www.ft.com

"Why cain't America be more like,well America?" what a great line and that is the real problem. Globalization obliterates the very concept of Countries.

[Fuchs]

Hardly.

Globalization is a scapegoat for the inability of governments and cultures to adapt to changes within decades.

Look at the "Globalization" keyword from the perspective of an Opium Wars-era Chinese. You'd -from that point of view- probably blame globalization for making China impossible to rule and for undermining all state authority.
The problem wasn't globalisation, though. It was their inability to do anything about their problems in any competent manner.

[slapout9]

Hardly.

Globalization is a scapegoat for the inability of governments and cultures to adapt to changes within decades.

We did not have a single problem that we did not or could not solve in the USA before NAFTA,China,and the repeal of Glass-Steagall. Once you change the laws so you can move money, patents and technology at the speed of light around the world countries become irrelevant and begin the long or short decent into chaos.

[Surferbeetle]

Fuchs, Slapout,

As I have been wandering around the world over the course of the last decade I have been thinking about, watching, and participating in number of development activities. At this point I don't claim to have any answers, but I have some observations that might be of interest.

Walt Whitman Rostow, came up with an economic growth model called the Rostovian Take-Off Model. As with any model, it incompletely describes reality...'all models are wrong but some are useful'...but the take away I get is that human societies move from nomadic, to agricultural, to industrial, and eventually to service based ways of livelihoods (all of which favor different types of political systems). Reality is not continually static, and there are always multiple layers and multiple regressions, pauses, and advancements occurring simultaneously.

A quick google search on ecology resulted in the following link...ecological systems theory...new to me, but interesting

What do you guys 'see' out there as we try and describe the elephant?

[Fuchs]

... and eventually to service based ways of livelihoods (all of which favor different types of political systems). R

Service-based or not (and if anything, we're agriculture- and mining-based):

You're in deep trouble if you continue to consume and invest more goods than you can afford. It doesn't matter whether your service sector has a gazillion volume. If it cannot export enough value to make up for the deficit in goods trade, you're not in a sustainable mode.

http://www.bea.gov/newsreleases/inte...ime_series.xls

[Fuchs]

We did not have a single problem that we did not or could not solve in the USA before NAFTA,China,and the repeal of Glass-Steagall. Once you change the laws so you can move money, patents and technology at the speed of light around the world countries become irrelevant and begin the long or short decent into chaos.

Dunno Glass-Steagal, but Germany happens to be quite fine with China and EU free trade.

The U.S. problems have been exposed and magnified by trade liberalisation, not created.

You guys weren't capable of producing cars that fit the European market back in the 30's, you didn't learn it in the 50's and back in the 70's you pretty much gave up. Later on you invented SUVs, but the European SUV market is now dominated by non-U.S. companies. The only U.S. carmaker with products developed in the U.S. and capable for the world market is the 4wd niche company Jeep.
That's a snapshot, but it's a representative one.

Your services stuff is competitive, most of your industry isn't.
A pipe system water flow regulator-producing company somewhere deep in a German rural area is more adapted to the world market than all U.S. companies that you and I would recognise.

The U.S. needs to produce 20-25% more goods to afford its goods consumption (not gonna happen, especially as long as there's such a resistance to resource efficiency intitiatives) or it need to crash the goods consumption of its middle class by at least a third (the rich people won't cut back and the poor people cannot).
You think this was a bad crisis? It's the foreshock.


That's the result of a refusal to think beyond the own market's (perceived) culture and refusal to develop world market-quality goods.
The free trade exposed and punished this, but without it you'd have rotten in your inefficiencies as the USSR did in its COMECON economic capsule. Globalisation is barely the catalysator for the downfall.


Shape up in regard to export-relevant manufacturing (= for export or for substituting imports) and you could rip off foreign trade partners with market dominance instead of getting ripped several new ones by Chinese companies.


Small anecdote:

I was monitoring a the European market for a specific product. Someday I got into contact with a U.S. company which said it was leading on the U.S. market and intended to export to Europe. They sent samples to me.
I refused to do anything with the samples, as they were defect (that was 100% not a transport issue and it took me about a second to learn about the disastrous quality issue).
They produced new samples, sent them over and I relayed them to a lab for tests. The product was below average in quality, while they believed it to be top notch. They closed that whole business unit a few months later.
Without these tests -without this exposure to competition- they would have kept producing their low quality stuff for years.


There are a couple good U.S. goods export companies and your services exports are about 110% of your services imports, but in the end the U.S. manufacturing sector has badly failed. That wasn't about exchange rates or wages; it was about competence. Many of your companies got smashed on the world markets by companies which had worse exchange rates, higher taxes and comparable wages.

[Steve the Planner]

Great thread. Great inputs.

Fuchs: Check your math. If the US trade imbalance is 25%. It only needs to change it by 12.5% if output is substitutional to inbound trade.

The magic of international trade.

The US has so many more resources (arable but unused land, underground deposits, water, etc...) but it is almost like an unrecognized "Resource Curse."

Because we don't recognize it, we take few steps to counter it. Because it is so abundant, we sometimes squander what we have.

My math: The US still has so many more relative resources and advantages that it is just cruel to watch how badly they are being mangled and abused.

Fortunately. the current idiots do little that cannot be rectified as long as they stop before we reach the crisis stages like the British Empire did at or about WWI (when it cost more than they had, and was worth less than it cost).

[Dayuhan]

America doesn't work like our idealized notion of how America works. Did it ever?

A pipe system water flow regulator-producing company somewhere deep in a German rural area is more adapted to the world market than all U.S. companies that you and I would recognise.

Maybe you wouldn't recognize Caterpillar or Boeing, to name a couple, but most of us would.

Many Americans would be surprised, but the US actually runs a trade surplus in capital goods.

US manufacturing certainly has its issues, but it's not a basket case; there are strengths to build on and numerous competitive areas. The single greatest distorting factor, the outrageously overvalued currency that prevailed for the better part of a half century, has already been largely corrected, though it will take a decade or more to correct the accumulated impact of that extended distortion.

Of course it will be very difficult for the US to ever move to a trade surplus until the vast expenditures for energy imports are addressed, but that's another story...

[Ken White]

Just old, I guess...

You guys weren't capable of producing cars that fit the European market back in the 30's, you didn't learn it in the 50's and back in the 70's you pretty much gave up. Later on you invented SUVs, but the European SUV market is now dominated by non-U.S. companies. The only U.S. carmaker with products developed in the U.S. and capable for the world market is the 4wd niche company Jeep.
That's a snapshot, but it's a representative one.

Two factors, one is geography and concomitant distances -- US and European automotive needs and development differed considerably and the US domestic market was and is big enough that 'world class' is not really necessary. That factor affects many things. You in Germany, an area of 357K Km² (slightly smaller than just one of the 50 US states, Montana), can afford silky smooth, precisely engineered autobahns and you naturally want cars that take advantage of them. We on the other hand at 9.83M Km² simply cannot afford that highway quality, thus our cars must withstand rougher treatment, more miles driven and as quality to support that is prohibitively expensive, have opted for more easily replaceable cheaper and thus of lesser quality automobiles. You also want and successfully fill high speed Trains and must therefor produce the precision engineering to support that -- in the US, high speed Trains are a joke other than two or three limited areas. Different strokes, as they say. Second factor below.

I was monitoring a the European market for a specific product. Someday I got into contact with a U.S. company which said it was leading on the U.S. market and intended to export to Europe...The product was below average in quality, while they believed it to be top notch. They closed that whole business unit a few months later. Without these tests -without this exposure to competition- they would have kept producing their low quality stuff for years.

A BMW 750i is top notch worldwide -- for about US $85K. For most Americans an admittedly inferior Ford Mustang GT is top notch enough for US users at about US$35K. (so I can buy two Mustangs and have 10K left for other things ).

German engineering is legendary and rightly so. US Engineering is only generally adequate by design. There are a number of reasons for this, most of which you are as aware of as I. That is, of course, the second factor, adequate design versus premium design. If you want high quality stuff, US made, it is available -- and it is costly. For most of us, the cost benefit ratio inclines toward less expensive and certainly lower quality stuff. It's a trade off and one we have made willingly. You may not agree with that willingness -- and whether the US government should is a different thread -- but the majority of Americans with whom I've come in contact are comfortable with it.

Add our size and conformation, income patterns and usage factors and one arrives at a different conclusion than will one from looking at small, crowded and generally wealthier Europe.

Having noted those two factors, this:

That wasn't about exchange rates or wages; it was about competence. Many of your companies got smashed on the world markets by companies which had worse exchange rates, higher taxes and comparable wages.

Is sort of correct. Not competence in most cases; more like both inability to foresee required changes in market patterns (due in large measure to US insularity, bred by distance...) and, even more so, unwillingness to adapt due to lack of need.