The State of American Competitiveness The State of American Competitiveness
Effect on Jobs
America must compete for goods, services, and economic power in a complicated and energized global marketplace. The first level of competition is production, the core generator of wealth. The measurement of success is the amount of value added at various points on the supply chain.
The State of American Competitiveness
The second competition is for products (goods and services),
driven by speed, innovation, and integrity. Given a supply of products, the third competition is the formation and expansion
of domestic and international markets. These competitions play out on three major fields, global, government, and business.
All are part of the problem and must be part of the solution.
We like these definitions:
"Ability of a firm or a nation to offer products and services that meet the quality standards of the local and world markets at prices that are competitive and provide adequate returns on the resources employed or consumed in producing them". www.businessdirectory.com
"The existence of competing organizations that serve international customers. Access to global customers has increased through enhanced communications, improved shipping channels, reduction of barriers, and centralized finance authorities". www.businessdirectory.com
The competitive consequences on a national economy are pervasive. The following illustration, based on 1980s and 90's data, shows a healthy economic forest, with all components performing at supportive levels. The Federal government consumes (depending upon the source), about 20% of GDP. Manufacturing is a healthy 20-25% of GDP. Investment money flows to productive uses, and the economy moves through cycles of recession and growth, but for the most part, regardless of growing regulations, continues to expand. America had a production based society and manufacturing profits helped fund numerous social initiatives. The leaves falling from this tree are greenbacks, and wealth and investment are proportionate. In a broader context, the expansion of the American industrial system was responsible for creating the middle class by providing jobs for the less-educated workers.
Since then, the Japanese cracked the domestic markets, trade with China was renewed, and Mexico became a haven for
manufacturers seeking low cost production while circumventing environmental regulations. The first level of production flight from
the USA occurred through NAFTA, not trade with China. Eventually, the lure of greater profits and promise of entry into China's markets
greased the skids, and the global economy gobbled up a substantial share of American manufacturing. One of the more significant effects
was the loss of the high-paying factory jobs supporting the middle class.
The economic tree in the following illustration shows American manufacturing in autumn colors, after companies fled to greener opportunities. Manufacturing dropped to 11.9 percent of GDP, less than 50% of the pre-global competition levels. Our balance of trade, normally somewhat balanced, shifted dramatically as consumers purchased goods, once made in America, from foreign manufacturers. With a less robust manufacturing foundation, America converted to a consumer based society. The economic model collapsed in 2008, as consumers, saturated with debt, were unable to overcome the housing crisis. The Federal government expanded to 25% of GDP, burning through money needed for investment in more productive purposes. On this economic tree, there are fewer dollars accruing for investment or generating wealth. The effects are slow job growth and stagnation.
America has dropped from first to seventh in global competitiveness since 2008, the start of the recession. The World
Economic Forum provided the following assessment.
"While many structural features still make the economy extremely productive, the numbers of escalating weaknesses have lowered the US ranking over the last two years. The evaluation of institutions has continued to decline. The report states that the public does not demonstrate strong trust for politicians, and the business community remains concerned about the government's ability to maintain arms-length relationships with the private sector and considers that the government spends its resources wastefully."
The rankings were deleted from the quote because they lack context unless defined. Readers compelled to analyze these data in detail are encouraged to visit http://reports.weforum.org/global-competitiveness-report-2012-2013/. It is worth taking the time and offers an opportunity to acquire useful strategic information.
China is the greatest economic threat to the United States in multiple ways. Following are excerpts from our new book, Freedom and Opportunity- Stop Redistributing and Downsizing America.
China continually hacks into every American system. China unveiled the Shenyang J-31 Falcon Eagle, a direct clone of the U.S. Joint Strike Fighter, while President Obama was visiting China. America spent billions of dollars developing the fifth-generation fighter, but the Chinese can market theirs as a low-cost alternative, in competition against U.S. manufacturers. Our government will remain silent.
If the Chinese can hack into every other database, why not the National database of you and me? Perhaps North Korea beat them to it.
The last line shows the ratio of pollution percentages vs. manufacturing output in total between the two countries. The
ratio of GHG emissions per output amount is much lower for the United States than for China.
Our white paper, The New Great Wall of China, written in
2008, is relevant today. The sad conclusion is that nearly all the situations and predictions became a reality, and China's gain was at our
In March of 2015, China reiterated its contempt for intellectual property rights, selling knock-offs of the new Apple smart watch just days after the product announcement. Their system of "mountain forts, or Shan Zhai," can rapidly reverse engineer and manufacture products. These knock-offs are sold for a fraction of the price required by the original manufacturing corporation.
Effect on Jobs
The following data is from the Center for Budget and Policy Priorities
These data show that America is still experiencing the most difficult recovery from any recession in the last thirty-three years, partially because of our relationship with China. In 2007, the unemployment rate was 4.6%, and in 2009 soared to 9.5% as the recession ripped the job market apart. The Bureau of Labor Statistics reports as follows.
The February 2015 unemployment rate was officially 5.5%, indicating America is finally recovering from the recession. Since
this statistic excludes people who have left the workforce, the true rate is closer to 12.6%, and even this fails to put the situation into
perspective. The statistic treats part-time and under employment the same as a full-time job with benefits.
The United States was first in industrial output since the end of WWII. Last year, China, with greater than four times our population, lower wages, and a mercantile model, passed our output.
When core systems deteriorate and job formation falters, all other systems are negatively affected. The social engineering path America is traveling will potentially destroy our capitalistic, entrepreneurial way of life. One of the major symptoms is economic stagnation. While many call this the new normal, it is neither normal nor new. History is replete with examples of countries unable to sustain economic viability. Reviewing the competitive data provides sharp indicators of the rise and fall of powerful factory systems and the benefits that accrue to countries that make durable products. The new normal is a destructive course, and a choice not a given. Potentially, society moves from a growth base to net sum mentality, where the economy fails to expand wealth, and the citizen's fight for shares of the available economic pie. Logically, those with wealth and power increase their share. The middle class and poor, in response to lost manufacturing jobs, either lose or fail to keep up. This is the opposite of growth economics, where wealth expands, providing everyone more opportunities.
Positive governmental actions are required to keep the factory system at home, grow its contribution to GDP, and perform at high competitive levels. It demands knowledge, technology, and innovation managed by purpose driven leadership and entrepreneurship. It requires pro-business government policies enabling growth and job formation.
In Freedom and Opportunity- Stop Redistributing and Downsizing America, we discuss the frightening and unprecedented collapse of the American factory system, and take a hard look at the reasons. It is painful and ugly. We must face the realities, and dig out the root cause to fix the situation and avoid a recurrence. Once the situation is clear, the focus must then change to building consensus for a national mission. One potential mission is to rebuild an opportunity driven country, premised on using high technology coupled with environmental stewardship. This will be our new, green economic forest, with the cost of government reduced to 20% of GDP. The world will be better off if the Fourth Industrial Revolution springs from the loins of our free-enterprise system, rather than spewing from the coal-burning smoke stacks of Communist China.
Affinity Systems LLC, Phase Four Graphics LLC, and CompetitiveAmerica.us are dedicated to the cause of rebuilding a green, sustainable, American industrial system. Achieving this mission will return opportunities to our children and grandchildren, and help protect our earth from the environmental consequences of China's run-a-muck production system.
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