America -- What position on the economic see-saw do we want to occupy?
The United States is an exceptional country.
Tom Watkins
Yet, simply because we have been the most free and prosperous nation in modern history, this is no guarantee that we will remain so. Just because we have danced to greatness does not mean we will remain on the global dance card forever.
BRIC countries (Brazil, Russia, India and China) along with Indonesia, Turkey and other emerging economies are now striving to obtain their equivalent to the "American Dream."
China, now an economic superpower, continues its forward thrust. All major global events will eventually intersect at the corner of the U.S. and China.
As Henry Kissinger, former secretary of state and U.S. national security adviser under Presidents Nixon and Ford, reminds us in his new book, "On China”: "China produced a greater share of total world GDP than any society in eighteen of the last twenty centuries."
If we don't change course we will end up occupying the lower position on the economic see-saw into the future
Having recently returned from China, where I have traveled for nearly a quarter of a century, let me assure you they are not slowing down in spite of our recent debt crisis and the subsequent economic stumble that our elected leaders have failed to remedy.
It has recently been reported that the Brazilian economy, formerly an economic basket case during much of the latter 20th century, has now overtaken the United Kingdom economically according to The Centre for Economics and Business Research (CEBR).
The CEBR also reports that Russia moved up one spot in its league table to ninth in 2011, predicting it could rise to fourth spot by 2020, and India, the world's 10th biggest economy in 2011, might well become the fifth largest by 2020.
In the global economy, any country that slows down long enough to pat itself on the back might soon be surpassed.
If we wish to remain in the dance of greatness, we need to continue earning our place as a nation each and every day. Nothing worth having is easy. Competition with BRIC countries and other emerging countries is fierce and promises to remain fierce as the 21st century unfolds.
So, while we Americans celebrate the new year and the freedoms we have worked so hard to earn, we must remind ourselves that neither freedom nor a robust economy are easy to acquire or maintain.
If we want to remain an exceptional country, we need to “suck it up” as the young say, and begin behaving as if we have been surpassed on the global stage -- before we actually are.
We should not have to be hit by a BRIC to wake up.
Tom Watkins is a U.S./China business and educational consultant. He served as Michigan's state superintendent of schools from 2001-05 and president. He can be reached at: tdwatkins88@gmail.com.
Comments
hank
Fri, Jan 20, 2012 : 2:13 p.m.
Whew,some pretty lofty economic explanations are being extolled about this article. My take is a bit simpler. China ,India and Brazil are all countries with large populations needing employment. These people live with three generations under one roof. They have no or superficial laws concerning work safety or children in the work environment . They will work for low pay and long hours. American corporations are sending jobs to these countries to take advantage of these people and make a larger profit. Americans are investing in these countries and not in the US. Environmental protections don't exist. To top it all off our technology and intellectual property is being stolen. So is Watkins proposing this is what Americans have to mirror in order to play in this new world market and suck it up? I sincerely hope not!
RedWhiteBlue
Sun, Jan 15, 2012 : 9:09 p.m.
(3 of 3) On its face, as a grand national strategy, derivatives look brilliant: not constrained by natural resources, not limited by labor, "new products" galore come forth from the "ingenuity" of the new-fangled breed of financial engineers, and growth looks unlimited, basically constrained only by the salesmen's ability to sell. But a "minor detail" is that unlike most other business endeavors, derivatives do not produce anything. $700 Trillion in derivatives did not produce a shirt, a tire, or even a single hamburger. It is purely redistributive - one side wins, and the other loses, with the croupier (banker) taking a cut as intermediary. Derivatives, in other words, is PURE GAMBLING - and it is now done at a scale almost 50 TIMES the GDP of America. Moreover, it looks like rigged gambling. The "contracts" are typically crafted by the best Wall Street prospectus writers, and not even the salesmen can really explain them. The suspicion is unavoidable that if they are truthfully explained, nobody would buy them. The products are typically sold on the age old "confidence" basis - "Hey, this is a sophisticated business instrument coming from one of the world's largest financial institutions, what can possibly go wrong? Just trust me." Worse yet, money induces the smartest (even if not the wisest) of America to join the "industry". In 2010 I believe the total reported "banking" profits for American entities was US$1.4 Trillion. Most of the best minds of America, instead of going into physical innovations, went on to become "Masters of the Universe". If the $700 Trillion did not produce anything, so the money has to be taken from those producing. Do you think that is good for the world, or even good for America? Unless the tide is turned back, it is difficult to see how other industrial policies can be funded, or be made to work. Question is how how Main Street can take back the initiative and
RedWhiteBlue
Sun, Jan 15, 2012 : 9:04 p.m.
(2 of 3) The 2008 debacle complicated things a bit. The world witnessed how even 100 year old financial houses can go belly up overnight with derivatives gambling. Lehman Bros. had $60 Billion of derivatives on its books, lost 3% or $2 Billion, which wiped out its equity. WHAT is the significance of that? 3% of $700 Trillion is $21 Trillion, which is more than the TOTAL equity of ALL American financial companies. AND you would never know when it would hit, or even which bank it might hit. MF Global is just the latest example - total wipeout with very little prior warning - something to be routinely expected when gambling with a leverage of over 50 times equity. After 2008, both Germany and China ordered their banks to stop massive gambling in derivatives. Both of their economies recovered. America bet the farm, and counted on EXPANDING the scope of the casino, betting heavily that (a) in the name of FREE TRADE or other trade arrangements (such as TPP), other countries will be forced to open their markets to this contagion, and (b) the American banks would always win HUGE against foreigners, as they did in the decade before. The $7.77 TRILLION in subsidies (in the form of no cost or very low cost loans) to the American banking industry also complicated things (Bloomberg reported the practice after 2 years of FOIA requests). Now the foreigners are going to point to that as an violation of WTO rules, and refuse to allow the American banks to come in and maraud. As an aside, against that backdrop, disputes over merchandise trade (a billion here, a few hundred millions there) are rather irrelevant. The real economic "battleground" in this 21st century is going to be over industrial policies in a post industrial world - mostly over the financial industry. Eyes will converge on the unpublicized features of TPP, requiring the removal of government control over things like capital flow (thereby removing sovereign protection against financial looting).
RedWhiteBlue
Sun, Jan 15, 2012 : 9:02 p.m.
(1 of 3) America had already chosen an industrial policy for the post-industrial world. In place of pushing particular technologies, America, with bipartisan support, chose ultra highly leveraged FINANCIAL ENGINEERING as a post-industrial era "industrial policy", and in the last 15 years has staked the policy with the full faith and credit of the nation, and the best minds the country can offer. Bloomberg reported the size of the derivatives casino reached US$700 TRILLION (50 times the American GDP) by June 2011. When you consider that the American banking sector has only $16 Trillion in total balance sheet assets, gambling at this level of $700 Trillion (about 44 TIMES assets) is RECKLESS. And yet Washington acts as if the irresponsibility is a good thing. This festering financial cancer is affecting not only America, but the entire world. Today, American banking is synonymous with "trading", mostly in unregulated OTC derivatives. I believe it was reported that B of A made 90% of its profits in 2010 on trading; the number of SBA loans made also dropped very substantially from previous levels. American banks don't bank (lend) anymore, they trade. They are not really banks anymore, but malignant forms of their former selves. There is no sign of abatement, even after the 2008 debacle. With the American mutual funds industry now (year end 2011) pushing for massive adoption of derivatives, and the Commodities Commission promulgating regulations to allow the small guys to join the fun, the derivatives casino is going to be US$1.5 QUADRILLION in no time. That would be 100 times the size of the American GDP, and more than the entire world's total GDP!! That is sheer MADNESS. What is scary is that many in Washington believe that there is method (and good) in that madness. They are counting on this high leverage (14.7 Trillion GDP? Chickenfeed. America will have $700 Trillion going on to $1.5 Quadrillion!!)
KP CHEN
Sun, Jan 15, 2012 : 6:40 p.m.
GDP as a measure, very likely, U.S. would become 2nd in a few more years, but U.S. will remain number 1 in many other areas. What's more worrisome, perhaps, is we no longer can readily inspire ourselves and others. Say, we create more problems than solve problems, and countries around the world give us bad presses and project many negative perceptions, justifiably or not. Tom observes a midterm trend; he likes to counter it. Technologically wise, China can learn from many countries other than U.S.: Germany, Canada, Australia, Japan, S. Korea, Taiwan, Europe, Russia, Arab, Mid East ... My counterpoint is that, U.S. can build a new Cultural Interface as an a new untapped infantile industry. Just like Apple II in late 1970s or early 1980s. What triggered that (I.T.) revolution starting with only a raw Operating Systems S/W and a very basic 8-bit microprocessor.
cgerben
Sun, Jan 15, 2012 : 3:06 p.m.
With all due respect, what is this column other than a vacuous polemic, propped up by the thinnest gloss of statistics and personal anecdotes? Honestly, where is a column like this--with the apparent payoff for readers to "suck it up" (meaning what exactly?)--granted status as a publishable, serious bit of quasi-argument? Had the author brought up salient issues to consider: prioritizing education, addressing income inequality and debt, or even a bombastic turn to xenophobia, this all might have made sense. Otherwise it's just a confusing shell of fear based on the metaphor of world domination and competition. What does this column accomplish exactly?
Arborcomment
Sun, Jan 15, 2012 : 5:05 p.m.
You nailed it cgerben. The sheer number of question marks in the comments section points out how vapid the op/ed is. This follows a similar pattern from him last week on education challenges - 950 words in a vacuum. As a former state superintendent of schools, and now a "US/China business consultant", not a reassuring picture of where we've been and where we are going. Recommended reading: "The Next Convergence" The Future of Economic Growth in a Multispeed World by Micheal Spence (Nobel prize - economics)
Gorc
Sun, Jan 15, 2012 : 2:05 p.m.
A majority of people in our society are to selfish and have an overwhelming sense of entitlement in order to get our financial house in order.
klondike
Sun, Jan 15, 2012 : 1:49 p.m.
I'm sorry, but I seem to have missed the point of this piece. Is the point to "suck it up"? I do not know what Mr. Watkins means by that. His definition of sucking could be different than mine. Is it to scare us into buying more stuff? Sorry, got everything I need. Is it to encourage people to work for lower wages? No thanks, I'd rather not participate in the race to the bottom. Is it to instill some sense of concern that another country might have a higher GDP than the U.S.? I care more about having clean air and rivers, thank you very much.
1959Viking
Sun, Jan 15, 2012 : 2:34 a.m.
Thank you Tom. I'm glad that somebody is making the case that we need to hear. We can't go back to the way things were, but the future doesn't have to be bleak. Innovation and reinventing ourselves has been what American's have done best. These days we seem to be spending a great deal of time trying to figure out who to blame, or what would have happened if we had done something different. Nothing we do is going to change the past, we need to find our place in the future.
jcj
Sun, Jan 15, 2012 : 2:25 a.m.
I must have missed the part where he tells us how to "suck it up"!
trespass
Sun, Jan 15, 2012 : 2:05 a.m.
China was a failing economy on the verge of another famine until America began inviting Chinese scientists and engineers to our Universities. University of Michigan engineers had a lot to do with saving the Chinese economy. UM continues to give huge amounts of technology to China but now it is endangering our economy. Much of the technology is on the export control list but because universities have extensive exemptions from our export laws, most of what we give China is not illegal but our administrators need to know that what is not illegal is not necessarily wise. Read more at <a href="http://www.china-threat.com" rel='nofollow'>www.china-threat.com</a>
Arborcomment
Sun, Jan 15, 2012 : 12:57 a.m.
Mr. Watkins, Thank you for review of your travels, I'm sure the slideshow will be interesting. When I was younger, there used to be 1 cent bubblegum, individually wrapped, with a slip of a comic on one side, and pithy sayings on the other. This op/ed reminds me of that.