A Rising Tide, Floats All Boats

Globalization means countries are working together for mutual success
Globalization means interdependence between countries and regions, opening up Foreign Direct Investment flows between participating countries. Image courtesy of: www.wittenborg.eu

by John Brian Shannon

As the world economy improves, national economies are being lifted up by a rising tide of success in other countries.

Now that we are living in an evermore globalized world, nations are no longer entities unto themselves. While they were once insulated from the economic successes or failures of other nations, that is profoundly no longer the case.

A recent example is the United States financial crisis of 2008 which was at first confined within the U.S., but later spread to Europe, Japan and China, with those countries experiencing varying degrees of economic malaise directly attributable to the original fall of the U.S. sub-prime mortgage segment.

Had a financial crisis of this sort taken place within the 1950-1980 timeframe, it would have been seen as an ‘America only’ affair as the (then) economic islands of Europe and Asia had little interest in the internal workings of the American economy.

How the world has changed in the 21st century

Recently, ‘America sneezed’ and most of Europe along with Canada ‘caught the cold’ – and while Asia felt unwell, it didn’t miss a day of work.

Globalization is a process. Every year, countries are harmonizing their diplomatic relations, international trade and laws, walking through the remaining issues towards true interdependence between nation-states.

Along the way, we have seen dramatically lower prices for consumers within the participating nations and a strong downward pull on inflation within the globalized community. Foreign Direct Investment (FDI) flows toward nations with lower land, factory and labour costs, while competition ensures that prices reflect those newfound cost savings.

One of the unfortunate effects of globalization from the Western perspective are the jobs that have fled the West to Asia. Over the span of (almost exactly) four decades, millions of manufacturing jobs have gone to the nations which feature low cost land, factory, and labour rates.

The transition of trillions of dollars from the West to the Emerging Market economies and Frontier Market Economies has spawned a rising economic tide in the Middle East, much of Asia, and in India. In fact, the rise of the BRICS nations are easily traced by the FDI inputs into their nations, as a welcome effect of, (but certainly not the primary cause of) their success.

Since 1998 China and India have been described as the two economic engines of Asia, and during recent recessionary times were noted as the economic engines of the entire world. Even as some nations were falling away from their traditional economic rankings, the unprecedented demand for raw resources and high-tech originating from the ‘rising tiger’ economies, slowed the fall of the Western economies and have even spurred their quicker recovery.

Historically, it was axiomatic that when the United States was doing well, Europe, Japan, Canada, Australia and New Zealand were doing well — as the U.S. economy had the power to float those economies no matter the ‘local’ economic conditions.

America is no longer alone with this power

Now, not only can American demand float the economies of countries or entire regions — the combined demand of the BRICS nations can float national economies and regions.

The U.S. population seems ‘torn’ at this juncture, with some in that country lamenting the loss of the unipolar world which was theirs since the end of the Cold War, whilst others welcome the strengthening and broadening-out of the world economy into a truly interdependent and open economic model.

For those Americans who believe in the open economic model (which is the name given to the ‘free enterprise’ system by economists) the strengthening and broadening-out of the world economy is exactly in line with their beliefs and is seen as an adjunct to American economic and political clout.

“We told you the open economic model was the way to prosperity, and now you are ‘our firm converts’ to that, and to the democracy which necessarily accompanies successful free enterprise systems.”

For those Americans who secretly or publicly wish for a closed economic model (known as the ‘communist’ or ‘statist’ economic model by economists) globalization is the root cause of all American economic woes — when in fact, America’s recent economic problems were caused by a perilously-lacking regulatory environment in but one segment of the U.S. economy and poor decision-making by a handful of individuals.

As nations advance towards interdependence they will see rising demand in their own countries from other partner nations (as at any given time, certain of them will be experiencing growth) thereby helping to balance-off the occasional lack of demand in their own country.

De-facto; Interdependence between nations means facilitation of effort, FDI, and countless other forms of assistance towards whatever is the weakest link of the chain.

This contrasts with the decades of ruthless competition which played itself out (even between allies) and ruled every diplomatic and national economic decision. De-facto, that was a ‘sink all the other boats first, before we get sunk’ game, played out in the global economy.

Wherever interdependent nations are working together to improve upon an open economic model, they are in effect working to create a rising tide for all of the participants within that interdependency, because it is simply and profoundly in their best interests to do so.

Interdependency is creating the incoming tide that will float our boats.

From Wikipedia, the free encyclopedia

“The aphorism “a rising tide lifts all boats” is associated with the idea that improvements in the general economy will benefit all participants in that economy, and that economic policy, particularly government economic policy, should therefore focus on the general macroeconomic environment first and foremost. The phrase is commonly attributed to John F Kennedy,[1] who used it in a 1963 speech…”

JOHN BRIAN SHANNON

To follow John Brian Shannon on social media – place a check-mark beside your choice of Facebook, Twitter or LinkedIn: FullyFollowMe/johnbrianshannon

America: Why the High Unemployment?

by John Brian Shannon

In 1970, of the 89,244 new cars and trucks sold in the U.S.A., 84.9% of them were built in North America, while only 15.1% of them were manufactured in other countries and shipped to this continent for purchase and registration.

In 2012, of the 14.4 million new cars and trucks sold in the U.S.A., 44.5% of them were built in North America, while imports accounted for 55.6% of registrations. Read here.

By any measure, this is an ongoing paradigm shift — which directly relates to American unemployment statistics since 1970.

A total of 15.4 million car and light truck sales are expected in the U.S. for calendar year 2013 — the best year since 2007. By 2014, U.S. sales are expected to reach 16 million, with imports continuing to increase their market share in the U.S.

Since the first Model T Ford rolled off the Dearborn, MI assembly line, millions of  workers have been employed by American automakers – including some workers who worked for the same company their entire career. Fathers who worked at Ford, GM or Chrysler from their childhood until retirement, found their sons and daughters good-paying jobs with their old employers. Unemployment in the 1945 – 1975 era was generally quite low — and that, in the midst of an economically damaging Cold War which negatively affected many parts of society including the unemployment rate, not incidentally.

Generally during the post-war boom, everybody worked, everybody earned a paycheque, and almost everybody contributed to the economy. About late 1973 or early 1974 this began to profoundly change in the United States and in the Western nations generally.

Not to blame the American auto manufacturers for the Arab Oil Embargo, as the Big Three had been assured of low petroleum prices by foreign governments and several domestic administrations — hence the big, V-8 powered cars of the era and their consequently-low MPG figures were popular with both manufacturers and consumers.

But American consumers are a fickle lot. Once the gas price shot upwards in the aftermath of the Arab Oil embargo, Datsun (now Nissan), Toyota and Honda nameplates began selling as fast as the ships could deliver them from Japan.

If only the foreign vehicles were of inferior quality! But they’re not. If only they used more fuel than their U.S. equivalents. But they don’t. The corporate fuel economy average for foreign and domestic makes still favours imported vehicles. Not by the wide margin it once did — and not that GM and Ford haven’t scored impressive MPG victories in some categories, because they have.

But, to put it bluntly, many employed Americans prefer their foreign-built cars. (“And those millions of now-chronically-unemployed Americans will just have to get by.”)

It’s not just cars and trucks either. Historically, most home electronics sold in the U.S.A. including televisions, smartphones and computers were also ‘Made in the U.S.A.’  — but not these days.

Most of the clothing, plastics and extruded metals purchased in the U.S. are now manufactured in Asian and Southeast Asian nations, where countries like Indonesia rely heavily on textile exports to us and other Western nations.

Much of the American conversation these days revolves around the old austerity vs. stimulus debate which reporters and op/ed journalists are required by their respective organizations to cover.

Meanwhile the 80-ton elephant in the room is the trillions of manufacturing dollars which have transferred from the West to Asia since 1970 — and the manufacturing jobs that have gone with them.

President Obama: Restoring the Dream

by John Brian Shannon

President Obama advertised that he would bring “Hope and Change” to the U.S.A. when he campaigned for president first time around and he did, in fact, bring about momentous change during his first term.

I know this, because in my area of specialty — earth-shaking change has occurred. Change that by some accounts, was too much to hope for in an entire lifetime!

Sometime after his 2009 inauguration, the 44th President of the United States laid out his (then-controversial) positions on energy, energy security and sustainable energy as they related to the United States.

In fact, he wrote me a letter back in March 2012 outlining his energy plans. It is a profound document and is available at: johnbrianshannon.com

At the time, these seemed like grand but unreachable goals. But not now — less than a year later! In hindsight, it is now obvious that President Obama had a strong, overriding vision of a self-sufficient and energy-secure America. For an overview, visit: The Biggest Energy Story of 2012

It is also enlightening to read the Reuters report on what the IEA has said about President Obama’s startlingly successful energy, energy security and sustainable energy policies: U.S. to overtake Saudi as top oil producer: IEA

“(Reuters) – The United States will overtake Saudi Arabia and Russia as the world’s top oil producer by 2017, the West’s energy agency said on Monday, predicting Washington will come very close to achieving a previously unthinkable energy self-sufficiency.” (Reuters excerpt)

President Obama promised positive change in America’s energy future — and he delivered unprecedented positive change! Energy industry experts are still reeling.

Which gives me hope.

Hope that with some cooperation from U.S. politicians and from America’s allies, this President and his administration can overcome the economic damage that has threatened the ongoing success story that is our Western society.

How to do that over the long term? And how to do it without throwing billions of dollars at temporary solutions and then ending up in a similar position 10 or 15 years later.

Many Americans and America’s well-wishers around the globe are unhappy with increasing inequality in the U.S.

Initially the U.S. became great on account of the opportunities to citizens (first) and immigrants (second) and its trading partners around the world (third). What built America was the hopes and aspirations of several generations who saw the opportunities offered to those who worked smart and hard, and who also invested their time and resources well.

Millions of people were self-incentivized to be productive, to contribute to the betterment of the nation and to add value to their lives and to their communities. Having the opportunity to succeed — allowed and created all of the success that citizens and trading partners of the U.S.A. have enjoyed over the past hundred years or more.

For those who can be honest about it, those opportunities have dissipated alarmingly in recent decades.

Rarely can one finish their education, begin a career at one level and years later, finish their career as a CEO or owner of a large and prosperous business. People have little upward mobility and for those born into poverty situations, the vast majority of them continue to live in poverty until they pass out of this world — no matter how great their work ethic.

This has been well-documented elsewhere, so I won’t go on about it at length here.

But if anything is going to help restore citizens faith in the American dream, and restore the faith well-wishers of the United States around the world, it will be a healthier and better-educated American society.

One of the best ways to improve peoples economic standing, (according the the UN and other organizations expert in governance and human development) are by society-wide improvements to health and education.

It needn’t cost a trillion dollars — but it does need direction.

The same sort of direction that President Obama used to take his country from a nation perilously addicted to foreign oil and turn it into an net exporter of oil and gas — in the process making it an almost energy self-sufficient nation and a nation on the forefront of sustainable energy worldwide. All accomplished during a time of unprecedented worldwide economic upheaval. By any standard, a monumental accomplishment! Congratulations are in order, Mr. President.

So, where are we now and what could we hope for?

  • An energy-secure America. Done. Check.
  • A uniformly healthy America. In progress, gaining momentum.
  • A uniform minimum education of ‘one-college-level-degree’ or ‘one-vocational-certification’  for all Americans. Let’s hope.

If this President’s first term accomplishments are remembered as making America energy secure combined with a well-begun universal health-care plan — then let us hope that his second term will be remembered by a “Done. Check.” on a uniformly healthy society and a college or vocational education plan for all American citizens — so that all citizens can become part of America’s overall economic success.

Good health, a good education and plenty of career opportunities for citizens, will thereby and effectively remove present inequality, restore the hope of opportunity for success to the American people and improve the nations economic health. These are not new ideas. These have worked before, and profoundly, are what made America great from its beginning.

Let’s restore the American Dream, but this time let it be a Sustainable American Dream and one that will work for all U.S. citizens — not just the wealthy.

JOHN BRIAN SHANNON

To follow John Brian Shannon on social media – place a check-mark beside your choice of Facebook, Twitter or LinkedIn: FullyFollowMe/johnbrianshannon

Excerpt of Prime Minister Stephen Harper’s WEF speech this morning in New Delhi

by John Brian Shannon
Here is a short excerpt of the speech the Prime Minister of Canada, the Right Honourable Stephen Harper delivered at the World Economic Forum, November 7, 2012 in New Delhi, India:

[“It is also a pleasure to be back at the World Economic Forum, a place where a great many people who want to make a difference regularly come to meet.

“And I am delighted to see that you have also chosen to be in India, a place where globally important decisions are increasingly being made.

“Almost a year ago, during your last Davos gathering, I highlighted some of Canada’s economic strengths and challenges.

“On the former, on the strongest, Canadian banks remain the soundest in the world.

“The World Economic Forum is one of several organizations that says so.

“Canada’s net debt-to-GDP ratio remains the lowest in the G-7, and the lowest by far.

“Thus Canada’s top credit rating has been reaffirmed by all of the major rating agencies.

“Among G-7 countries, Canada now has the lowest overall tax rate on new business investment.

“Canada also possesses a diverse yet harmonious society, with public institutions and a public service noted for professionalism and integrity.

“All of these assets, as Borge mentioned, and others have helped Canada better weather and better recover from the global recession.

“Indeed, despite the uncertainty of the times, the Canadian economy has now added more than eight hundred thousand net new jobs since July 2009.

“Still, we remain acutely aware of the difficult global trends, especially for many developed countries.

“As I said to the World Economic Forum in January, many countries with which Canada is traditionally aligned continue to be weighed down by debts they cannot seem to control, by entitlements they can no longer afford and by growth which threatens to remain sluggish for the foreseeable future.

“As I said in January, it is high time we realize that:

“The wealth of western economies is no more inevitable than the poverty of emerging ones.”

“As these last four years have revealed, the wealth we enjoy today in the West is not inevitable.

“Our standard of living will be based on – and will be based only on – strong, growth-orientated policies and on getting the hard choices right.

“That is why, over the past year, the Government of Canada has committed itself to a series of determined actions, we want to help ensure that growth, job creation and economic prosperity will be there for Canadians over the long term.]

End excerpt.

This information was provided by the Prime Minister’s office (Official News Feed, November 7, 2012)

JOHN BRIAN SHANNON

To follow John Brian Shannon on social media – place a check-mark beside your choice of Facebook, Twitter or LinkedIn: FullyFollowMe/johnbrianshannon