Re: US debt and long-term savings strategy - what do you think ?

On Mar 29, 12:21 pm, Dr Tormento <r...@xxxxxxxxxxx> wrote:
Stop believing such silly politically driven propaganda. The US is and
most likely will remain the fastest growing developed economy. No other
country even comes close in innovation and flexibility.

<snip lengthy and completely groundless moaning>

Check out the total compensation figures for American workersftp://ftp.bls.gov/pub/suppl/eci.ecconstnaics.txt

The only declines, a tiny fraction of one percent, occurred in 2006. They
were undoubtedly due to energy based inflation adjustments. There simply is
no rational justification for moaner laments about long term pay
degradation or economic decline.

Thanks Dr. Tormento. I live overseas and I can tell you for the most
part countries ape the USA. But of interest is if the Protectionists
get into power in the US, they might try and stop immigration and free
trade--with possibly disasterous consequences. Already the Wall
Street Journal is reporting backlash to globalization from some
academics (see below).

RL

WSJ
As Globalization's Benefits Grow, So Do Its Skeptics
March 29, 2007; Page A6

For the past few years, the world economy has been growing faster than
it has for decades, and that growth has been spread across the globe.
Yet accompanying this prosperity is mounting skepticism about
globalization -- the unfettered flow of goods, services, people and
money across borders. The current round of world-trade talks is
stalled, and the Democratic Congress is toughening its conditions for
blessing Bush-backed trade pacts with Panama, Peru and Colombia,
hardly economic powerhouses.

Free trade has never been popular. Dwight Eisenhower struggled to
restrain the protectionist wing of the Republican Party during the
1950s. But why such resistance to free trade now, particularly in the
U.S.? After all, the American economy has been growing for more than
five years, and the unemployment rate is a comfortably low (unless
you're out of work) 4.5%.

Partisan politics plays a role, of course. Some Democrats figure if
President Bush is for something, they're against it. But that's a
small part of the story. Elected politicians, even some Republicans,
see widespread voter angst, much of it well-founded, about the
unsettling pace of globalization and technological change. And those
who see trade as a proven way to boost living standards around the
globe are fumbling their efforts to find a convincing response to
those worried about their livelihoods and their children's.

But why now?

Free trade in decades past wasn't sold so much on the economics but as
a way to achieve a foreign-policy end. After all, the economics of
trade have always been a hard sell. Even its most fervent admirers
concede trade creates winners and losers. Franklin D. Roosevelt's
secretary of state, Cordell Hull, led the pre-World War II effort to
lower tariffs because he believed trade led to peace. After World War
II, the European Union was created to avoid another war between France
and Germany, and the U.S. pursued trade deals to win the Cold War. And
while President Bill Clinton talked loudly about the jobs the North
American Free Trade Agreement would create, his Treasury secretary,
Lloyd Bentsen, saw the trade pact as a way to assure a pro-U.S. regime
in Mexico.

"Today," says Douglas Irwin, a Dartmouth College trade historian,
"there is no major foreign-policy reason to be for trade." For some
reason, few in the U.S. see trade with China as a foreign-policy tool
to influence that rising power. And post-Sept. 11 paranoia has
increased Americans' fear of foreigners.

Changes in the global economy aren't making the case for trade any
easier. A recent Wall Street Journal/NBC News poll found only 35% of
those with at least a four-year college degree believe "that the U.S.
is benefiting from the global economy." And these people are more
likely to be winners.

For the first time in generations, says Lawrence Summers, the former
Treasury secretary, the U.S. is trading on a huge scale with places
where wages are 20% or less of American wages. "We've never had that
before on as large a scale," he says. That's unsettling. So is the
pace of all this. "Because of the Industrial Revolution, within a
single human life span (then only about 40 years), it was possible to
imagine that living standards would increase by 50% to 75%," he says.
At recent growth rates in China, he added, "living standards don't
double in a single human life span...they rise 100-fold, or 10,000%."
That's good for the Chinese, good for the American worker whose
employer sells to China, not so good for the American whose job can be
done in China.

While economists argue whether technology, globalization, deregulation
or changing social mores are most to blame for the widening gap
between economic winners and losers, the public has no such doubt.
It's far easier for an American worker to damn the Chinese for his
falling wages than to damn the personal computer in his den. "In
public perception," says Mr. Irwin, "we have widening inequality, a
widening trade deficit and trade is a greater percentage of the
economy. It's easy to say trade is part of the problem. So it's part
of the solution."

The changing nature of trade plays a role, too. Technology makes it
cheap and easy to hire workers in, say, India to do tasks once done in
the U.S. and to ship the work back to the U.S. by fiber-optic cable or
satellite, a phenomenon likely to grow in years to come, as Princeton
University economist Alan Blinder points out loudly. This production
of services at a distance makes it easier for owners of capital in the
U.S. to reap the rewards of globalization even if many American
workers do not.

The issue, in this light, isn't whether trade makes the world as a
whole richer. It does. The issue is the distribution of those gains.
If American workers sense they are at risk of being losers -- even if
those fears are overstated or ignore the benefits they get from
imports as consumers -- the political consensus for encouraging
further globalization will evaporate.

Mr. Wessel responds to reader comments at WSJ.com/CapitalExchange. Or
email him at capital_at_wsj.com.


.

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