A) ECONOMIC - SUSTAINABILITY (and LEVERAGE):

Lesson - Marxist economic policies are neither leveragable nor sustainable, as evidenced by the collapse of the Soviet Union, followed by no resulting global economic impact from that loss.  A globally integrated capitalistic economic system in whole or in part is necessary for sustained economic growth, the cornerstone of any core ideology (including communism) survivability. And one that leverages built-in globalization.  

The Soviets having neither economic sustainability nor leverage, accordingly never posed a global economic threat. In fact, the Soviet Union’s collapse was effectively a non-event as respects the global economy and global markets.  

Analyst’s Note: For those that may say what about the Long Term Capital debacle? That was triggered by the “Russian” financial crisis in 1998, not the “Soviet Union” collapse in 1989. 

Instead, the Soviet Union possessed a tired, dying, inwardly focused economy with no linkage to the global economy per se, except arms sales. The imbalance or better characterized as the dislocation between being a military superpower and a third world economy then became the principal reason for the Soviet Union collapse. It possessed no economic juice to fuel its ambitious geo-political plans.  

The Chinese astutely learned that critical lesson and instead are seeking to achieve a healthy “superpower balance” on both major fronts, ironically leading with being a global economic superpower threat, and leveraging that to military superpowerdom. Evidence this principal focus on economic power, consider for example, the U.S. Census Bureau, Foreign Trade Division, reports the U.S. imported just $4.8 billion in goods from China in 1986. That exploded to an annual $288 billion in 2006, trending towards $325 billion for 2007. Couple that with both the huge manufacturing infrastructure that U.S. and western companies have either put or contracted  in China, and China being overwhelming now the U.S. Treasury’s number one customer and lead purchaser of all U.S. debt, collectively provides a chilling conclusion. The U.S. is in rather lackadaisical fashion setting the stage to expose its economy, its lifeblood, to be taken hostage.  

The magnitude of this impending crisis will only worsen with U.S./WEAST insatiable appetite and dependency on cheap (a collective function of tax/tariff inequities, artificially (non-float) undervalued Yuan, low cost labor and evident many recent news reports, poor product quality standards/controls) Chinese imports and manufacturing off-shoring growing by the day, as does the U.S. dependence on China disturbingly being its dominant creditor. On the latter, China is a close second behind Japan in aggregate U.S. debt purchased, but is now in real time, buying U.S. debt in absolute terms at a pace (amount) exceeding Japan. Case in point, the U.S. Treasury Report of June 21, 2007 used in House Budget hearings notes Japan’s U.S. purchased debt increased 97% between Jan. 2001 and April 2007 from $312 billion to $615 billion. This compared to China’s robust 573% increase for the same period from just $61.5 billion to $414 billion. 

An additional note on the continued and seemingly encouraged exporting of the U.S. manufacturing base to China, which further fuels Commulism. Instead of pursuing responsible efforts to aggressively mitigate and/or cease it, the U.S. instead weakly continues a mindset to only further cushion the painful effects on the increasing numbers of displaced employees, and therefore a fait accompli that offshore manufacturing migration will continue. The October 2007 House legislation to “strengthen” the Trade Adjustment Assistance (TAA) program with H.R. 3920 – the Trade and Globalization Act of 2007 is disheartening in this regard as it arguably signals a further weakening in the U.S. employment base. The reason being that it reflects an effort to increase benefits to the growing legions of displaced workers rather than it or any other measure seeking to stem the reason for needing a TTA at all - manufacturing base outflow.   

Rather than this “Tylenol-like action” to simply further dull the pain, Congressional action should instead be directed at fixing the disease – manufacturing base outflow. A contributing factor to all this being “non-competitive” free trade agreements around the world. In addition to other measures to be discussed in later parts of this series, these trade agreements deserve an immediate “re-look and re-engineer”, to promptly level the playing field for the U.S., particularly as respects a prized and precious resource - its workforce. Bottom line, “free” trade should not come with a heavy “cost” - U.S. jobs. 

 1  |  2  |  3  |  4