We celebrate Independence Day on July 4th but how independent are we really . . . financially speaking - Part 2?Another thought provoking article by Ernie McDaniel - as seen in Forum News. |
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In short, the answer is “not very”. We are in fact quite interdependent with many nations. That interdependence may have consequences we don't like but it has others we very much do, so it is a trend that may continue. Why is the United States so economically entangled with other nations? The contributing factors are complex and themselves entangled:
o Because the primary sources of oil, our main energy source and an essential in the production of many synthetic materials, are outside the country.
o Because cheaper labor (much, much cheaper) is available outside our borders. Major populations of the world heretofore cut off from global commerce (think China, for example) are now participating.
o Because international corporations, aided by modern communications and equipment and laws, are better able than ever to connect one nation's people and products and markets to another nation.
o Because you and other good American citizens want to own stock in highly competitive and profitable corporations in order to increase the value of your retirement accounts. As stockholders you expect these companies to acquire the lowest cost energy, raw materials, manufactured goods and services available, even if from nations such as China, India and Russia. And you expect these companies to grow and expand by finding new customers in other nations as well.
o Because you yourself want to buy high quality, inexpensive goods and services from these same corporations.
Nations don't necessarily set out to be as interdependent as we describe but Adam Smith's “invisible hand” of economic forces has repeatedly proven of greater influence than the intention of nations.
The public, of course, doesn't want to hear this. We understandably become upset about loss of our jobs or falling prices on what we sell or rising prices on what we buy -- and we demand that our politicians “do something”. Historically, they have. For example, they have at times put into place protective tariffs; that is, they have heavily taxed imports, effectively making them more expensive for the consumer and thus reducing the competing nation's sales. Bad for the American consumer. Bad for the competing nation's citizens who are only trying to pull themselves from poverty by means of honest, hard work.
There may be no simple or painless or quick solutions to modern international trade problems. Let's hope, though, that our generation of politicians will do better than previous ones in finding smart, kind, realistic, balanced and long-term ways to address the tensions that will surely arise as a result of America's growing economic and financial interdependence.
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