Saturday, November 6, 2010

Elections and the fate of empires

In the recent elections, voters sent Obama a clear message about their dissatisfaction of the way he handled the economy. Republicans celebrate. But to satisfy voters, Republicans, too, will have to examine, and often let go of, their most fundamental beliefs.
  • It was the belief in minimal government intervention which created the credit crisis that led to the current state of the economy.
  • It is the belief in free markets that moved jobs to cheaper places and increased unemployment. Many of the richest republican supporters, who blame the Obama administration for the job losses, have sent abroad jobs from their own businesses.
  • It is the belief in maximizing profits, above anything else, that shifted profits to low tax countries, and deprived the US government of needed tax.
These ‘old’ ideas have already been proven devastating. But there are more:

If China keeps the value of its currency unchanged, America will not be able to compete with cheap Chinese import. As a result, we pressure China to appreciate its currency. If it does, however, its investment in the US will suffer. This will make any future investment in the US less attractive. It is the Chinese investment in the US that keeps sponsoring our growing deficit.

If US innovation keeps focusing on efficient manufacturing, assembly lines and cheap products, following Adam Smith’s philosophy, the pressure to reduce labor cost will only accelerate. This can only lead to one of three outcomes:
  1. shifting more jobs overseas, and thus increasing unemployment
  2. importing cheap labor from overseas
  3. lowering workers’ compensation.
Any of these options will continue the erosion of the middle class, and will turn the US into a society with a small mega rich class, supported by the poor – a typical a third world country.

No one has a solution. To seek a solution, we must first recognize that long term trends have changed, and short term pain-killers will not provide the cure we need.

It is not about Republicans or Democrats. It’s about old ideas that do not hold any longer. It is about acknowledging that political and economical philosophical should not be a religion, and ideas established during the industrial revolution, may not be valid any more.

All historical empires disappeared; they kept following the same strategies that made them empires, even when these strategies became useless. Will US democracy be flexible to change itself enough, or will we insist on following old ideas, wherever they may take us?


yun yi said...

Even though I am not into politics I do understand every words you said. Very precise!
I think if you started a thread in BC it would stir some good discussion. I guess you may not have time. Maybe you wouldn't mind me to start a discussion with a link to your post?
Have a nice weekend!

ranfuchs said...

thanks yunyi,

I have not been on BC for long time, but of course I will be happy if you start a discussion there

yun yi said...

ranfuchs, i started a thread:

there are some discussion going on. take a look if you have time.