DELIVERING THE GOODS
September 18, 2009
The United States rose up from a handful of rebellious colonies to become the richest and most powerful nation in the world. Why? Because we led the world in production. For 200 years, America delivered the goods.
But, in the 1970’s, all that suddenly changed. For the first time in history, the U.S. started having trade deficits. That means our net consumption exceeded our net production. And, every single year since 1975, our nation has consistently consumed more than it produced. It doesn’t take a rocket scientist to know that’s not sustainable.
The depressing truth is America is no longer a world leader in production. We are trailing the pack. We are now a debtor nation, and our biggest creditor is China. -- What the hell happened? And how will we ever recover? And, the more disturbing question is, what will happen to America if we don’t?
If we ever want to restore America to its proper place in the world, the first thing we need to understand is why we no longer have a productive economy. It’s pretty simple, really. -- Because we no longer produce. Why not? – If we take a good hard look at the nature of production, maybe we can figure that out. The three key elements of production are capital, labor, and raw materials.
First, you need capital for research and development. To develop a new product that meets a real need in the marketplace takes a lot of research. It may take many years to develop. Research and development is extremely expensive, and there’s no guarantee of success. There has to be an enormous potential return on investment to justify that kind of risk.
That kind of return on investment is what our current administration refers to as “excessive profits.” And they have this notion that “excessive profits” should be punitively taxed. When government puts a lid on the potential for return on investment, what happens? The investors take their capital and invest it someplace else, -- someplace that welcomes production, and wants to build up their economy and provide employment for their population. (Unlike the United States, it would seem.)
The second thing you need for production is raw materials. No matter what you want to produce, you need some combination of raw materials to produce it, whether wood, paper, metal, glass, fiber, or petroleum products. All raw materials come from the earth; they don’t come out of the air, or some genius’ imagination, or the printing presses at the Federal Reserve. They all come out of the ground, either through timber, mining, or agriculture.
Here, in Southern Oregon, we live in one of the richest areas in the country, in terms of natural resources. We’re rich in timber. We’re rich in minerals. But, if this part of the country is so rich, why is it so poor? Why is unemployment so high? Because we’re not allowed to use the natural resources with which we’re abundantly blessed. Overregulation, and the endless environmental litigation it has spawned, has all but curtailed the timber and mining industries, -- the very industries that provide raw materials for every sort of production on which our economy relies. And the overregulation doesn’t stop there. It’s hobbling the manufacturing industries, too.
The third thing required for production is labor. We’ve actually got a surplus of that. Look at our unemployment numbers, nationwide. Private sector jobs are steadily declining because our industries are stymied by excessive regulation and punitive taxation. So how does our government address that issue? It tries to replace the jobs lost due to declining production by creating new jobs in the public sector.
The trouble is those jobs do nothing to restore our national productivity. Public sector jobs and service jobs don’t create any new wealth. They just swirl money around in the economy. And, as that money swirls around, more and more of it leaks out to other countries, as we buy foreign-made products because we can’t or don’t produce enough at home.
As the real wealth leaks out of our economy, the Fed prints up more and more new money, which only dilutes the value of the money we already have in circulation, leading to higher and higher inflation. As long as we consume more than we produce, there is no way to add real value back into our economy, and our currency will continue to lose whatever value it has. We must restore production to have a sustainable economy.
This country was founded on the sacred principles of liberty and freedom. Not just individual freedom, but economic freedom. America became a world leader because America delivered the goods. That’s what it’s all about. That’s what it’s always been about. We have to stay solvent to preserve our liberty. If our economy fails, we’ll lose our freedom. Stifling production smothers the economy. And that's what our government is doing.
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� 2009 Margaret Goodwin - All Rights Reserved