Today, as it has always been, the current economy of the country is a major issue. New solutions always come up, only to be of little value. Politics often keep people from doing the best course of actions. But no matter what we are doing, the economy of the U.S. is still sliding downhill. Here are three main reasons:
The "paper" industries- Manufacturing and agriculture are just barely getting by. They are dying off in the U.S. Instead, people are constantly looking to get rich quick in the rising "paper" industries: stock trading, banking, legal, and insurance. These are just finance businesses, they handle money, in the simplest terms. They together are worth countless sums of money. Unfortunately, you can't export accounts, you can't transport insurance plans, you can't sell lawyers to other countries. The products of these industries are just characters on paper. Industrial powerhouses such as Japan and Germany are not full of brokers, accountants, stock traders, and lawyers. No offence to anybody but, these people are not always the best. It can't be good when just some advise can cost thousands of dollars. After all, they are just words, they dissapear. Service industries only involve a 1-way flow of resources. Let's say you go to a lawyer for counseling. He tells you some stuff and you have to pay money for it. That counseling is not a product, it does not enter an economy. The money you have to pay does enter the economy. Basically, this is the problem with service industries, a huge part of the economy is in the hands of the service people, while the rest get less and less of it. More and more resources just move to one direction.
Dependent Industries- The biggest industry in the U.S. today is everything involved with the medical industry, a huge part of it is again service. It is big because of two reasons, it is inflated by the "paper" industries, and by government support. This brings together legal aspects and politics into the medical field. Insurance corporations, politicians, and lawyers are practically as important as a doctor here. When the government comes in, it infects the field with its own instability and bureaucracy. Paper industries add inefficient complexities. All of this makes resources move through the medical industry at a snail's pace. In a typical capitalist economy, money and other resources are constantly moving rapidly throught the economy, this improves the chance people will have money when they need it. They can then spend it and the cycle continues. But here we have $2 billion dollars of the United State's economy in one of the most slowly moving sections of the economy. It is also growing rapidly. In the best scenario, about as many resources flow in as they flow out. In here, tons flow in, thanks to the paper industries and bureacracy, but very little flows out.
Small businesses- In today's global economies, small businesses are not good. Foreign markets are becoming as important, if not more, as domestic markets. Small business do not have the resources to expand themselves into the international market. It is not true that they encourage competition, small businesses only have enough resources to stay local. There will only be a few of them for a particular industry where you live. Although there are tons of them, those that are too distant don't have the resources to reach your neighborhood. Wonder why we export more than we import? The large corporations of foreign nations have the strenght and resources to expand their markets into the U.S. and then compete successfuly. I don't think a small business could do that. Small businesses are like subsistence businesses, they do enough to provide their goods or services to their local areas, but they can't go beyond. There aren't many surplus goods to be exported and there aren't many businesses that have the resources to successfuly do that.
These are three major problems, there are countless other ones. Rising gas prices will continue as worldwide demand rises more and more, while the profits stay in the Middle East. The trade deficit means we have tons of foreign goods here because we buy so much, but little capital because we sell so little. We are trillions of dollars in debt, and debt always hurts. It leads to higher interest rates and inflationary money. Interest is rarely good, as it calls for more money than is available. The computer industry is being beaten by foreign competition. Tons of regulations on practically everything, slow inefficient bureaucracies, and ever-increasing paperwork for everything is slowing the economic flow down severely. Our GDP is more and more backed by services, which do not produce solid, well-supported products with value, that can continue to flow in the economy.
Our efforts to turn all this around have been incompetent and simple-minded. A toddler could understand tax cuts. And tax cuts mean little. Money will always find other ways to penetrate the bureaucracy of government. There it will always be slowed down to a near-stop, pretty much taking money away from the real economy. Subsidies and other measures to protect certain industries can badly hurt others.
What we really need to do is study the current economic situation, really understand it. Find out all the patterns, systems, and relationships. Then we have to go over several sollution, find out what their possible effects are. We should reduce the bureaucracy, end unneccessary regulations that just put more paperwork and cause delays, reduce politico-legal influences on medicine and free the money trapped in there. We should help corporations that can effectively compete globally and benefit people here. The regulations should now be placed on the "paper" industries, reducing their size in the economy. Instead, industries that truly promote the capitalist cycle should be the priority. There are probably many more solutions but these are some according to my opinions. I probably have not been accurate in everything so please tell me your thoughts about this.
2 comments:
"We should help corporations that can effectively compete globally and benefit people here."
Unless you mean deregulation and the abolition of subsidies and tariffs, this is synonymous with a) forcing consumers to pay higher prices for these goods, b) removing the incentive for these industries to efficiently satisfy the wants of the consumers, c) inviting retaliation from other countries, d)inviting expansion of such interventionary measures as other industries seek "protection" from the negative effects of these measures, at the expense of consumers, and e) making each day of "support" render businesses that much more inefficient and therefore much more politically damaging to leave open to competition, when the consumers will compell the businesses to either go bankrupt or innovate.
"The regulations should now be placed on the "paper" industries, reducing their size in the economy."
The "paper" industries exchange shares of capital. They perform the necessary function of diverting capital toward the most productive uses to satisfy the wants of consumers. The existence of a stock market is the defining feature of a capitalist economy: the ability of entrepreneurs to perform economic calculation to most efficiently use scarce resources to satisfy the wants of others. Any attempts to cripple such transactions, will make it harder to divert capital from unproductive ventures. Any attempt to hamper these markets is equivalent to mandating that a business must suffer an "acceptable loss" before it can be liquidated.
"Instead, industries that truly promote the capitalist cycle should be the priority."
So long as businesses are accountable to the will of consumers, they are THE capitalist system. Note that the only manner in which businesses can be unaccountable to the will of consumers, is by force: only by hiring thugs, or by hiring thugs by proxy of a government, can a business prevent consumers from going elsewhere, and potential competitors from opening up. Only such acts of force can allow a business to survive, earn "monopoly prices," and not suffer the effects of consumers and competitors diverting their resources. Even mines, the traditional "monopoly industries," cannot perpetrate such acts, for each mineral has literally thousands of competing materials.
" The computer industry is being beaten by foreign competition."
This is nonsensical. All it means is that Americans are producing things for which the Japanese will exchange computers, and which we would rather buy than make ourselves. We value their computers more than they value their computers, they value our products more than we value them. "There are two ways of making cars: either by manufacturing or by growing them. One way requires building factories, mines, plants, and hiring many thousands of men. The other way requires only a couple guys ploughing a field, loading the harvest on boats, waiting 6 months, and seeing the boats come back loaded with cars."
Ask yourself: does it matter where on earth someone innovates, what he looks like, what language he speaks, and what nationality he calls himself? Innovation is innovation. To attempt to erect arbitrary boarders is irrational: try doing it on a smaller scale. Suppose that you act in terror when your neighbor can grow vegetables more easily than you can, more abundantly than you, and he acts in similar terror when he finds that you can make better shoes than him. Would you still behave as if it was a loss that now each of you can trade so as to benefit the both of you?
"The trade deficit means we have tons of foreign goods here because we buy so much, but little capital because we sell so little."
It means that Americans are buying from other countries what we would rather not make, and that other countries are receiving American currency with which to eventually import our products.
"Interest is rarely good, as it calls for more money than is available."
Interest is an expression of time-preference, a weighing of men's ability to plan into the future and calculate risks. It is essential to a market economy for the same reason other prices are, and like other prices cannot be hampered without destroying men's ability to plan ahead.
"The large corporations of foreign nations have the strenght and resources to expand their markets into the U.S. and then compete successfuly."
Last time I checked, they were competing by offering goods that people voluntarily purchased, not with thugs and guns. People chose to spend their time and money on these large, multinational corporations, rather than on mom-and-pop stores. Is it not obvious that hampering these corporations will mean that people will have to choose alternatives they value less? Is it not obvious that artificially propping up these small businesses will remove their incentive to innovate, and make them even less valued alternatives to consumers?
"Our GDP is more and more backed by services, which do not produce solid, well-supported products with value, that can continue to flow in the economy."
You are confusing the values individuals recieve from services, and the tangible goods they represent. Is it not obvious that you value a doctor's medical care, even if it is mostly "intangible"? The benefit individuals receive from services are no less real than those they receive from "tangible" industries. And the fact that America has shifted toward services and away from manufacturing, means that Americans, even though we could manufacture better and provide better services than the rest of the world, is a result of our choice to specialize in what we are comparatively better in.
"Subsidies and other measures to protect certain industries can badly hurt others."
Subsidies hurt all industries. They force consumers to buy products and services they value less, they force the subsidized industries to avoid innovation, and they force other not only the consumers, but those who own businesses, to bear a burden. All so that foreigners can more easily acquire our goods. Subsidies are a funny thing: they let the host country burden itself with helping out other countries. It is a blessing when another coutry grinds itself into pieces in order to provide us stuff. I welcome other countries ripping themselves apart in order to make my shopping easier, at least until the population realizes what idiocy their politicians have been engaging in.
I think you're equating "production of goods" with "economic production", and I think that's a mistake. Without going on at great length, I'd suggest that a modern economy is not possible without "paper" industries, like banking, the law, insurance, and stock and bond markets. Without banking, for example, commerce is restricted to how much coin or barter goods you can carry with you. Without insurance, the pool of investors willing to invest in, say, transatlantic shipping gets pretty small pretty fast. Without the law, my refusal to pay for your goods, or services, after you've delivered them leaves you with no recourse. Without stocks and bonds, companies who employ people have a tough time finding investors, since it's kind of hard to travel cross-country collecting coins or barter goods from prospective investors. The production of goods is only one facet of an economic system.
And a word on tax cuts...you are right, tax cuts ultimately result in money flowing back to the government, which is why tax cuts ultimately INCREASE rather than DECREASE tax revenues. See, I've got an extra few hundred bucks, so I buy a washing machine, or a set of tires, or clothes for my kids, so that means somebody has to produce another washing machine, set of tires, or clothes, which means somebody is employed to do so. That employee (or the company that imports the goods) then pays income tax, I pay sales tax, the shipping companies involved get paid, and in turn pay their employees, who pay income tax, etc. etc. Tax cuts lead to economic expansion, which leads to increased tax revenues while decreasing the tax burden on each taxpayer. But in my immediate sphere of activity, damn, I'm glad I had the extra money to buy that washing machine! No more trips to the laudromat, improved quality of life, and I don't care if the ultimate effect is more tax revenue to the government. They're taking less of mine.
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