To Win Our Job War, American Governance Must Again Be Restructured

One theory suggests the unrestrained rise of multinational corporations will lead to worldwide monopolies that transfer all wealth above worldwide sustenance levels of employees to capitalists.  What are the deterrents to this endpoint?  The most significant deterrents are both regionalism, defined by age-old civilizations, cultures and religions, and nationalism, defined by historical norms and governance.  

Representative democracy is America’s chosen governance of and by its people. Capitalism is America’s chosen economic system.  Democracy is both our supporter of the best of capitalism and our deterrent to capitalism run amuck.  When a country’s governance is too greatly influenced by its economic system, whether capitalism or other, it ceases to be able to protect its people from the economic system’s abuses.

America has risen to power both by the freedoms and protections of its democratic governance and the strength of its capitalism.  One leg of our success is now threatened on two fronts. First, our democracy has become unduly influenced by our capitalists.  And secondly, our democracy is becoming less effective at protecting our nation’s people from the globalization of capitalism.     

America’s social and material health has been affected by our governance and economic decisions yet our people are unaware of how unhealthy we are.  One reason for this is that we have not publicly measured, disseminated and debated our governance health metrics.   Metrics that grade the universal health of our government should include our citizens’ health, wealth and ability to exercise freedoms expressed in the U.S. Constitution.  

As a governance system, American representative democracy, with all its faults, would measure dynamically positive against universal metrics, with the possible exception of our past few decades. We moved from the institution of slavery to universal suffrage. Our live spans doubled, and our rule of law matured to perfect our exercise of freedoms. The material wealth of our country expanded. More recently however, the ability of our representative government to protect social and material wealth of all its citizens has been questioned, and we are struggling to improve our governance health metrics.

America’s economic system, begun as laissez-faire capitalism, evolved into a mixed economy in which the government regulated and tariffed for the general welfare. Material wealth improved initially for all citizens but grew for capitalists at a higher pace, the price of capitalism. However, by the late 1920s our capitalist system had evolved into multiple monopolies and oligarchies, exacerbating wealth disparity.

From 1776 until 1929, capital had slowly accumulated, aggregated, and concentrated under the watch of our representatives without measurement of government health metrics and without each successive change of government being held accountable for universally improving our health metrics. As a result of our governance system’s failure to steward our economic resources for the benefits of all its citizens, our democracy and capitalism was overhauled in the 1930s.

America’s restructured system of governance seemed to improve its health through the 1960s. However, in the 1970s, our economic system decoupled from our system of governance, once again with tacit approval from our representatives. With the rise of the multinational corporation, our democracy’s ability to regulate production, support GDP growth, balance social growth, and redistribute material wealth for the benefits of our citizenry was wounded.

Additionally, our government’s decoupling of its authority and what some might call reckless desire to spend from its fiduciary responsibility to balance spending with taxation, and its choice of borrowing and dollar devaluing to cover tax shortfalls, created rampant fiscal irresponsibility that ballooned our debt.

Our current government health metrics are antiquated and opaque. As a result, our citizens are severely unaware of the depth of our problems. Can we openly measure, disseminate and debate our governance health metrics including these newest, greatest threats to our democracy?  Government must now transparently reinvent itself to stop its deficit spending and to protect its citizenry from the ills of multnational corporations.  If it cannot, the people must insist through elective and constitutional convention means if necessary that government heal itself.

Will America’s Lack of a Multinational Corporation Policy Bring a Resurgence of War? (Part 1)

World history has been dominated by trade wars and military interventions to resolve trade conflicts. From the 15^th through the 19^th centuries, shipping merchants became wealthy competing for trade routes and exploiting price differences between nations’ captive markets.  Wealthier nations financed mercantilism to increase their gold coffers at the expense of other nations that lacked merchant ships and navies to protect them.

In the 19^th century, those nations of Europe and America that had accumulated wealth through mercantilism, now invested in the transformative industrial innovations of their time.  For much of the 19^th and 20^th centuries, the industrial revolution compounded the wealth of these nations, and advanced the theoretically achievable wealth of the entire world.  However, a concentration of industrial strength by relatively few countries led to export surpluses that drove countries to compete for trade routes, and that eventually caused an eruption of war. 

In the 20^th century, technology advances supported worldwide business capability, yet wars, government corruption, and misguided trade barriers dissuaded businesses from expanding to other countries. But the wars did temporarily thrust underground the notion that trade differences should be settled through bloodshed.  Nonetheless, the United States pursued military dominance.  As the 20th century ended, the U.S. emerged the sole superpower, creating a unique opportunity.  For the first time in history, the entire world could peacefully pursue economic parity.

The world responded by leveraging wage imbalances between the world’s rich and poor nations.  Entire civilizations altered age-old governance systems so their people could participate in world wealth redistribution.  China created a capitalistic engine to support its socialist goals as the center of the ASEAN economy.  India reduced the pressures of its caste system to benefit from newfound prosperity.  And we are witnessing today the Middle East standing up to dictatorships that have shielded their people from participating in the world’s economy

Europe’s and America’s businesses reacted by aggressively expanding into global markets through direct foreign investments of multinational corporations (MNCs). Their expansion resulted in the transfer of both wealth and jobs to other countries, and created a formidable force that wounded America.  As we face down this force, America should be asking the following questions 1) through our military support of world stability, did we better America’s future?, 2) can we simultaneously innovate to advance our nation’s wealth frontier while supporting the rise of the rest of the world?  And 3) have we determined an economic path forward that will protect the world from a reemergence of military struggles?  The answer to these questions will depend on the ability of United States to develop a coherent policy regarding MNCs.

China and India are Winning the Jobs War

China and India are winning the “jobs war”.  American jobs are being lost most to developing countries where the average wage is less than $3,000 per year. What is the impact of trade deficits on jobs? With a trade deficit of about $700 million, and with about 45% of trade volume representing labor and private sector multipliers of 2.0, America’s trade deficit represents about 14 million lost American jobs. 

Do trade deficits harm America? Since the average income for major trade surplus countries is under $3,000 versus the average American at $43,000, many products overseas can be manufactured at far less costs than in America. If all wage differences were passed back to American consumers, our consumers would benefit from lower prices by about $280 billion. But if we net out the loss of $630 billion in lost American wages, America still loses $350 billion every year. 

Which Americans benefit and which are penalized by trade deficits? Laid off workers lose because they collect only a portion of their wages in unemployment. Their unemployment payments are paid by all Americans, so taxpayers lose. Lower wage consumers benefit more by lower prices than by the taxes that they are required to pay, so their households benefit perhaps as much as $2,000 a year. Of course in the long run, trade deficits are borrowed, causing loan rates to go up for both consumers and government, so all America is penalized. 

Does freeing up trade benefit America? Certainly, more American goods and services can be sold to other countries and more foreign goods can be purchased by American consumers. However, unless our government negotiators are savvy enough to remove specific trade restrictions that will reduce our trade deficits, the large differences in wages between America and developing countries would suggest we will not benefit from more free trade. 

Freeing up trade should grow the volume of trade, and therefore the trading class should benefit. The working class American who has a job may also benefit from some consumer savings at the expense of all Americans. Of course, many Americans who no longer have jobs will not benefit. And until the rest of the world’s wages catch up to America’s, or free trade increases innovation to allow Americans to purchase more goods at less cost, it seems that for a period to come, America will lose financially.