by Jeff Thomas, International Man:
I’m frequently asked by Americans how long I think the “recovery” will take. From my point of view, the answer is obvious, but then, I don’t spend my evenings watching American news programmes that have, since 2010, been endlessly claiming that a genuine recovery is right around the corner.
It would seem logical to me that when the news anchor who cried wolf (claimed the imminence of recovery over and over with no result) proved to be either exaggerating, or just plain misinformed, my faith in him, his programme, and his network would diminish considerably.
But, what if all the news anchors on all the programmes on all the networks claim that a recovery is unfolding? Surely, there must be truth in the claim.
To be sure, there are some indicators that imply increasing confidence, such as a rising stock market and reports of new jobs being created. However, rather than take these reports on face value, we find that, since 2008, governments have been buying up stocks and even the companies themselves have been buying back their own stocks. In both cases, this has been done to give the appearance of a recovery, to hopefully trigger an actual recovery. It hasn’t worked.
And, if we hear a report that the number of barmen and barmaids has increased significantly, this is not a sign of renewed prosperity, but rather a sign of diminished hope. (In the Great Depression, the numbers of purveyors of alcohol increased as well. When people are confident, they drink. When they’re worried, they drink more.)
So, are these “indicators” evidence of a decline? Well, no, but neither are they evidence of a recovery. In attempting to predict the future of America’s economy, we should not look to peripheral symptoms, but to fundamentals.
So, then, let’s have a look.
For decades, American wages have risen above those of most other countries, making American goods more expensive without necessarily being better. Also, more and more people have been promoted on seniority than ability, causing inventiveness to lag. At the same time, state and federal regulations have expanded dramatically, creating a web of red tape and stumbling blocks that slowed production, increased the cost of production, and in some cases eliminated production. To ice the cake, the US corporate tax rate is the highest among the 35 industrialized nations.
There’s an old saying that business goes where it’s most welcome and, of course, that means that both production of goods and money itself can be expected to do the same. As such, for quite some time, American manufacturers have built factories in other countries, where costs and regulations are more favourable than in the US. In addition, they’ve outsourced both production and services to companies overseas. Understandably, these forward-thinking manufacturers have gained the greatest market share in the US, as they’ve had the lowest prices and the greatest profits. The condition has existed long enough that very few of America’s most essential goods are actually produced in the US.
More to the point, these industries are unquestionably not coming back. On the American news, much is being said about “making America great again” and a significant component of that concept is intended to be the return of American business.
This is all well and good for political rhetoric, but for businesspeople, “once bitten, twice shy.” A token return may be implemented by some American companies seeking favour from their government, but a true return will not take place unless the fundamentals change. Literally thousands of recent regulations must be rescinded, and the government is loath to rescind what it sees as its power base. In addition, a major number of these regulations are based upon perceived environmental and humanitarian needs. The pressure to maintain these perceptions will not be going away and neither will the voters who support them.