A 50 year plan: Trade and job creation
As you'll see, this is another subject that was on my radar awhile back.
April 14, 2007
To begin this chapter of the 50 year plan, let me say that I’m in favor of free and fair trade. The idea behind NAFTA and other trading alliances is a sound one. Those who are protectionists don’t seem to understand that the economy is a global one and discouraging competition by enacting high tariffs and other barriers to free trade hurts our economy in the long run.
On the other hand, I also feel that we’re giving away too much of our industrial base by shipping production of a myriad of items out of America. If you purchase an electronic product, chances are it’s made in China, and many other items are made across the border in Mexico. But with the cost of labor becoming more and more a share of the total product price, businesses need to create profitability for themselves and their stockholders. And I’m a supporter of a capitalist system.
We also have some bright spots in our manufacturing economy. With our skilled labor force and a prosperous population because of these skills, America attracts many of the top global industrial giants, particularly in the automotive field. Many cars with Japanese nameplates are made right here in America, and these factories spawn thousands of ancillary jobs in both manufacturing of parts and associated service jobs created by the influx of foreign capital.
At this juncture I want to take a look at just a few of the major products that America imports and exports and make my forecast on the direction we need to go to maintain our prosperity despite competition from huge Asian markets like China and India.
The trading commodity that probably affects us on the Eastern Shore most is agriculture. While the romanticized American Gothic version of the farmer is long gone and has been replaced by the modern-day Internet-literate and degreed farmer working on his (or her) multi-thousand acre spread, it’s still a fact that American farmers are able to supply our country’s basic nutritional needs many times over. Thus we’re able to send millions of tons of grain around the globe. Conversely, while America has many areas suitable for citrus crops and truck farming, more and more of those products arrive from overseas. Long gone are the days of “in season” vegetables and fruits; most items are available year-round both because of rapid air shipment from the Southern Hemisphere and technological advances that enable some fruit (like apples) to be maintained and retain flavor for much longer timeframes.
There are some dark clouds on the horizon, though, for which American farmers need to be prepared. As environmental regulations become more onerous the competitive advantage we enjoy is eroded. Fertilizers may have to change composition and could become less effective. Further restrictions on waste disposal could hamper poultry, pork, and cattle farmers as well as egg producers. Another possible threat is the takeover of prime agricultural land by suburban sprawl.
A third pitfall could be the reduction in food yield as millions upon millions of bushels of corn exit the food chain and become automotive fuel. Ethanol production continues to increase markedly and, if present trends continue, corn may be as rare a commodity on the table as fresh strawberries in December used to be.
As farming continues to evolve into being a less and less labor-intensive task due to the twin influences of technology and a shrinking real number of farms, job creation in the agricultural field needs to be concentrated on research in two realms of study. One path would be to discover ways to make crops more disease-resistant, improve yields, and make them more adaptable to poorer soil conditions. The second path is searching for ways to make biomass (or waste products) more useful in the energy field. It’s a known fact that methane gas from animal waste is a huge emission source – the trick is finding a method to utilize this resource and keep it out of the watershed. On a local level, while Salisbury University does not have an agricultural program, UMES has a program that can become a leader in such research if given a good level of support.
Moving back to a national level, a vital import of ours is oil. While America has a lot of oil still left underneath its lands and territorial waters, overblown environmental concerns have prevented us from taking advantage of our own resources – hence, we now import almost 2/3 of our daily oil consumption. And the list of countries we buy our oil from is a list of states not necessarily in agreement with the strategic goals we’ve set globally. With the exception of Canada, we’re at odds in some way, shape or form with most of the remaining main suppliers.
Further, while oil is generally refined into the fuel that drives our transportation industry, we can’t forget that this resource has many other uses, particularly in the manufacture of plastic products. So to me, it’s vitally important that we work out some sort of compromise between the environmental issues and the national interest that we all have in maintaining a free supply of domestic oil. Our current situation, where some stalwarts in Congress place the needs of caribou above the needs of our economy, has passed the ridiculous stage and is quickly closing in on dangerous. Even if ANWR, Pacific, and Gulf drilling were allowed tomorrow, we’ve lost (and will continue to lose in the short-term future) tremendous amounts of capital that could’ve been left in the domestic realm instead of paying OPEC their sheik’s ransom for black gold.
Once again, technology plays a role in allowing us to begin moving past an oil-based economy. Just like steam-powered vehicles were replaced by gasoline-powered ones early in the 20th century, somewhere out there is the key to the next generation of transport. In a future installment, I’m going to look at education and its role in the next 50 years, but it’s going to be incumbent on the next two generations to solve these issues through rigorous research.
America does have one export that maybe not everyone thinks of as a tradable commodity, but it creates a huge amount of capital. As a country, the United States is almost certainly the world leader in intellectual property – a term I’ll adopt as shorthand for all of the books, movies, television, and musical recordings that are created by Americans and exported around the world. In many cases, revenues made overseas by films can exceed the domestic take. And sometimes musical artists considered obscure here are major players in various foreign nations.
One of our major trade gripes with China at the moment is their laxity when it comes to stopping the sale of pirated movies. Black market copies of Hollywood films are big sellers there but the studios never receive a cut of the take. And with the evolution of “on-demand” movies, downloads of songs for personal use, and increased internet bandwidth (not to mention services like YouTube) major film studios and record labels are going to find it more difficult to maintain a revenue stream using models developed 30 to 50 years ago. However, on the flip side music is more accessible than ever. I know some of my favorite local groups would’ve had a lot more difficulty having their music heard prior to the advent of Myspace and the internet in general. While we have the phoniness of “American Idol” (which actually originated “across the pond” in Great Britain) there is still quite the untapped market out there for America to export intellectual property.
But now I want to complete the circle and discuss our manufacturing capability again, this time by reviewing a little history.
In the century-and-a-quarter from 1845 to 1970, Americans changed the world. Starting with Samuel F.B. Morse revolutionizing communications with the telegraph, on our shores we created invention after invention that made our society as we know it (while America also fought and won two world wars in that era), culminating with Neil Armstrong and his small step for man. And while America is still a powerhouse when it comes to innovation, many of the more recent advances have occurred offshore. It seems to me like we’ve settled on mediocrity, doing research in order to secure the next government grant instead of being truly innovative.
It’s long past time for Americans to make stuff again. But the idea in this go-round is not necessarily to make the cheapest product, it’s to make the most cutting-edge product that has the quality and construction to last for decades. In turn, American consumers need to reward these efforts and consider quality as much (if not more) than price. Maybe a better term for this consideration is life-cycle cost.
The next two generations have the potential to allow America to be a leader once again, just like it was not all that long ago. Before we cede our crown to those in China or India, we need to remember that there’s a reason that Japanese auto makers put their trust in us to build many of their best-selling cars. Japan became a world leader in industry by taking both the American know-how that built up their industry after we defeated them in World War II and the can-do spirit that still existed in America at that time, and allowing these to evolve by putting an emphasis on manufacturing goods of high quality and innovation. We can do the same (again) by putting our minds to it and telling those who wish for us to remain mediocre (like those interested in big government and not creative capitalism) to get out of the way.
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There are some areas on this one which have become dated. Unfortunately, we still use way too much of our corn crop for ethanol, but advances in technology (this piece was written just before the fracking revolution) made both oil and natural gas viable export products as opposed to almost strictly an imported commodity. Unfortunately, present policy threatens both the energy independence we enjoy and the availability of farmland, given the incentives for developers to convert raw land to fields of solar panels.
And while Maryland does do something about their animal waste by-products, the simple fact is their solution is taking it somewhere else - hence, the springtime phrase I often utter, “smells like Delaware.”
Another thing is that I’m not quite as sure we can get past the oil-based economy anytime soon. It’s realistic to say that battery and EV technology is better than it was in 2007, but not realistic to say it can serve our overall needs as effectively as the ICE can.
It’s also worth pointing out that our onetime advantage in intellectual property is gone, thanks to both the enhanced technology that allows almost anyone to be a filmmaker and the absolute garbage mainstream Hollywood puts out. The Pink Floyd lyric “I’ve got 13 channels of shit on the TV to choose from” comes to mind, although it’s more like 213 these days.
But I still believe we should get back to making stuff, if for nothing else the security it provides when we’re self-reliant. This is one aspect where the world has really changed in 17 years, and in some ways I went along with it.
In the meantime, though, you can Buy Me a Coffee, since I have a page there now.
Pretty good vision there. The dangerous to national security new problem is all the farm land and farms being bought up by the Chinese and Bill Gates, who is THE largest owner of farm land.