Between a Rock and a Hard Place

Between-a-Rock-and-a-Hard-Place

The U.S. has painted itself into a corner. Because the Chinese are our creditors, we have no ability to force the Chinese to stop pegging the Yuan to the dollar and manipulating their currency to the detriment of our exporters. We have no ability to enforce human rights standards in China or any other part of Asia. We have no hope of stopping Europe from subsidizing their industrial core. We have no effective method for forcing the oil cartels to increase supply.

We are hamstrung simply because of our reliance on foreigners for capital and credit, for basic goods and services, for employment, and for defense supplies. As illustrated above, these trends and the slowing interest in foreign direct investment in the U.S. are heralding the beginning of a major change for the American superpower as we have come to recognize it.

From problem to solution, protecting fledgling or recovering industries is clearly not the same as protecting established, fully competitive industries. Many examples in our history have shown the merits of using protectionism to allow new or recovering industries the time to build up their technological base and their capital infrastructure to compete with established global industries.

U.S. industries such as steel, chemicals, semiconductors, glass, textiles, automobiles, and agriculture were all forged out of opportunities afforded by protectionism. Furthermore, there is little risk that companies formed in this way will run rampant over domestic buyers given the size and competitive nature of the U.S. market and the anti-trust system that is at work domestically.

American citizens are most alarmed at the risk protectionism poses to their own standard of living. This is certainly a valid concern. Given the fact that most of the products we now purchase are either made overseas or composed of components that were imported from abroad, it is probable that under protectionist policies in the short term, the U.S. will experience a net decrease in buying power until domestic industries can take up the demand. The alternative is to allow our position to deteriorate to the degree that the value of the dollar is so deflated that our buying power will have the equivalent effect of tariffs albeit at a pace we cannot control.

We have reached a point where we cannot afford to continue in our current practice. Though we all value the lush consumer markets and freedom of choice we have in this country, these things must come at a price. This price is the mortgaging of our future as we exchange sustainable wealth creating assets for short term luxury and a perishable standard of living. This is not opinion. This is fact.

Other combinations of subsidies, tariffs, quotas, and similar policies will also likely result in discomfort to the U.S. buyer. We are confronted with a bitter pill or a degenerative terminal illness. We can control the industrial recovery in this country or we can allow it to take a natural course. In either scenario, there seems to be no pain-free alternative.

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