The stark contrast between the ever more troubled world economy and a United States that. statistically at least, is holding up just fine has completely flummoxed most of the economics and business world. After all, we’ve had intensive globalization for decades. All countries are now interdependent. The vast majority of the world’s consumers live abroad. American businesses earn big chunks of their profits overseas. No country can be an island. Yes, the United States may be the proverbial least dirty shirt in the laundry, but surely the woes of sagging Europe, stagnant Japan, slowing China, and floundering emerging markets will catch up to America sooner or later. Or so we keep hearing.
As I’ve suggested in a previous post, though, these pillars of the conventional wisdom could be completely, and from a policy standpoint, perversely wrong. Interdependence with all its benefits and costs, opportunities and risks, clearly is an inescapable fact of life for most countries. That’s because they’re either too small or too poor or some combination of the two to prosper through their own devices. If they’re simply too small, they need extensive trading to achieve the efficiency advantages that come with specialization. If they’re too poor, they need investment and technology from wealthier countries to raise income levels, and foreign markets to supply consuming power that their own populations simply can’t generate.
The United States, however, isn’t like most countries. It’s big enough to be sufficiently diverse to create needed specialization within its own borders. And it’s wealthy enough to fund its own continuing innovation and to provide all the demand its producers need. That’s not to say that global commerce is always a loser for America, or that it can’t provide substantial benefits – if done with a modicum of skill and intelligence of course.
But it is to say something that U.S. leaders urgently need to hear, especially when so many foreign economies have soured so much more than America’s: Except for items that the nation literally can’t produce enough of in any remotely efficient way, and for which there are no adequate substitutes even on the horizon, U.S. global economic engagement is a function of choice, not necessity.
More specifically, it’s to say that Washington’s recent reported decision to try to buoy other economies by tacitly permitting them to weaken their currencies and thus gain trade advantages is simply inexcusable. For the big hit is going to be taken by productive sectors like manufacturing that are still underperforming by historic standards. And although the elites that run national policy continue to thrive, the recovery hasn’t uplifted nearly enough other Americans to justify such charitable giving.
Similarly, the reality of globalization by choice warns against seeking new trade deals with Europe and Asia. History teaches clearly that, in the best of times, these countries ignore their new obligations, the United States observes its own rather scrupulously, powerful new job-offshoring incentives are created, trade deficits soar, grow is slowed, and the most important income-producing sectors of the economy pay the highest price. With prospective trade deal partners now increasingly desperate for growth, all these costs and risks loom even larger.
When developing Asia and Russia became engulfed in financial crises a decade-and-a-half ago, then Fed Chairman Alan Greenspan justified a similarly over-generous strategy by a largely unaffected America by arguing “it is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress.” I pointed out soon after, in my book The Race to the Bottom, that Greenspan sounded as if he was pleading for events to deliver a comeuppance to his country, and show it the folly of recognizing its inherent strengths. Otherwise, how could he and the rest of the economic policy establishment continue successfully defending their longstanding policy of deepening America’s integration with foreign economies conspicuously becoming most noteworthy for their weaknesses?
Today, it looks like U.S. leaders are just as determinedly prioritizing the preservation of their globalist ideologies – and indeed, worldviews – over hardheaded calculations of American national interest. Fortunately for them, the Mainstream Media as always will help them disguise their agenda or cloak it in innocuous-sounding language. For imagine the firestorm if the riffraff found out that Washington’s economic strategy is now — needlessly — “America Last.”