Only the Long Term Matters

Worldwide commentary would make it appear as if the United States has become a global economic burden. Dire predictions of sharply reduced military strength and shrinking political influence abound. Alas, these commentators are sadly mistaken.

All too often, forecasters are looking only at the short term. Their long term usually means next week. Yet, the world turns much slower than the typical media blurb makes us believe.

Leading powers always suffer from voices of discontent – but other than key players in the past, the U.S. encouragement of free speech leads to global discussion rather than to underground communication. Think of how the U.S. was attacked globally in word and action in 1917, in 1942, and many times since then.

Over the past 60 years, the U.S. has consistently been the key contributor to the world economic growth and welfare. In the 1940’s, its leadership created the World Bank, the International Monetary Fund and the General Agreement on Tariffs and Trade – now the World Trade Organization. These three pillars reduce global poverty, support financial flows and set fair rules for all participants in international trade. In the 1970’s, U.S. courage and conviction led the move from gold related fixed exchange rates to floating ones. This shift allowed money supply to grow and gave rise to world economic abundance.

The country's willingness to be the largest marketplace to the world has provided opportunities for innovation, growth, profit, and enjoyment to many. And all this has been achieved within a system which provides for political adjustments and transitions without unchecked power, bloody battles or economic destruction.

The U.S. remains the land of opportunity where one can realize dreams under open skies. It continues to be a key destination for immigrants, because they know that vision is admired, that effort is rewarded, and that achievement is supported.

These are the factors which set the U.S. apart from other nations, and affect the investment behavior of the world. But after years of predicting economic decline, some forecasters have even breathed a sigh of relief that their dismal future has finally been sighted.

There is no reason to lose heart due to temporary setbacks. The United States continues to present new and special opportunities to the world. It offers the security and safety that have, sadly, been unattainable for most people on earth. It presents a vision, flexibility and capability to adjust to new conditions which are the envy around the globe. Let us use a long term perspective to appreciate past effects and future prospects. Global investors are not foolish when they show their reluctance to turn away from the dollar. What determines the value of money in the long term is the trust, promise and the future that a nation offers to those holding its currency. To the forecasters full of dismay I suggest: Don’t write the US off too soon – remember the Roman Empire lasted more than 500 years – the Ottoman Empire almost 600. Yes, it’s sometimes lonesome at the top!

Too Soon to Let Computers Replace University Libraries

There is a growing trend in modern times to shift from ink and paper to digital publishing and research. It is good to see new technology. But what are the repercussions of this shift? I am thinking about this from various perspectives: Teacher, researcher, author and reader.

When I became a doctoral student, my department chairman sent me a list of 45 books for the summer before by studies commenced.  Today, whenever I assign two chapters of a book to my students for our next meeting, I get requests for clarification. I know that I am becoming outdated in my reading demands.

We use books to learn what others before us have thought -- which forms the basis for our research. But do we really need books for that? Computers are quite well equipped to help manipulate, search, collate, extract, compare -- something that only vandals can do with books. Yet, is our understanding weaker because of changes in the process?

Sources and citations used to be a scholar's stock in trade, but just like the grinding skills of lens crafters, these talents are not much sought after anymore today -- machines are so much better at it. By going to Google Scholar one can find citations typically in 0.4 second or less. My students barely cite "hard" copies of journals anymore; their reference sections come from the Web.

Yet, Web research places an awesome responsibility on scholars and their search engines. How do we avoid the thinking that if something does not show up on a computer search it simply does not exist? How do we steer clear of consigning writings into oblivion just because they are either less recent or not in English, or not cited often enough?

Will such practices permanently affect our capacity to innovate and to spread new thought or will we create a reader's "Mayan" syndrome where later generations will wonder why we abandoned existing knowledge?

As a writer of books, their removal from libraries saddens me. But textbooks can cost more than $100 today, a price at which publishers are telling me that they barely can survive. By contrast, a CD with dynamite programs that allow interactivity offer wonderful colors and online work, weighs very little, and costs only a fraction of a book. Yet payments for software and online activities are not as well worked out as they are for books; illegal downloads are rampant.

Many CDs are actual adaptations of existing books. We have publishers unwilling to invest, authors who may know their content but are not computer experts and a market where compensation is uncertain. These factors raise questions about who will make the effort to write the new texts, who will review them for quality and who will publish them?

Finally, some thoughts from a reader's perspective. To me, books feel good. Reading aloud with my daughter and turning a page is special. Seeing a book again after many years is like running into an old friend -- it brings back memories, and helps me make a connection between temporal distances. When visiting someone I always like to glance at the books. A look at their "holdings" gives me a good sense of what we share, what we can talk about and what direction any future relationship would take.

So here we are. Time marches on relentlessly and perhaps this is the dawn of a new era. Johannes Gensfleisch Gutenberg and his invention of the printing press have had a good run. Yet, I think books will be with us for a while yet. The person you see at the beach reading in the breeze and not worrying about moisture or grains of sand may well be me. Feel free to set up your computer!

International Trade is Crucial to Revival of Global Economy

President Obama concentrates on his economic stimulus plan. Nations around the world attempt to stabilize their economies as well. Typically, each nation’s emphasis rests with domestic issues. Though politically understandable (GM is more important to us than Toyota), a successful plan must reflect the powerful influence of international trade on the national economy. In the U.S., for example, trade related activities comprise more than 25 percent of its economic activities – which is more than the housing and banking sectors combined. Trade also accounted for the entire U.S. economic growth in the past year. Trade issues definitely qualify for the major leagues, but seem to be neglected so far. 

The world depends on continuity in trade. The global economic outlook, competition and consumer choice are shaped by trade flows and currency values. Competitive devaluations, for example, provide unfair advantages to exporters. For us, the promotion of U.S. exports must have a central place in the economic recovery package. 

The national debate about economic recovery includes many lessons from the Great Depression. The clearest of these is to avoid the beggar thy neighbor policies and the protectionism of the Smoot Hawley tariffs that turned a market crash in the U.S. into a global Great Depression. 

Global leaders give lip service to this conventional wisdom but there is a gap between communiqué language and on-the-ground practices. Indonesia and Russia have already begun to raise their protection of domestic industries – to the detriment of global trade. The Doha Round of international trade negotiations continues to be stalled – even though eight years of negotiations have placed great benefits within reach. 

The U.S. experiences some difficulties in its global position, but around the world there is hope, expectation and willingness for a re-emergence of US leadership. There is growing concern among U.S. trading partners that the new leadership in the Congress and in the White House might introduce a new era of U.S. protectionism. Global markets are parsing any announcement for signs of what the Obama Administration will mean for them.

The world economies are intertwined. Any stimulus measure of one nation is likely to rapidly affect others, and trigger responses. Economic activity is highly concentrated among a few players. The United States, European Union, Japan, China and Canada account for more than 75 percent of the world’s economy. A good domestic stimulus should not become an international distortion. Subsidies paid to farmers in one country, for example, can affect dairy related industries around the world. Once introduced, protectionism can quickly become contagious and be emulated around the world. 

The economic recovery plan is both an opportunity to send a signal to markets about what they can expect in terms of U.S. trade, and a chance to reassert U.S. leadership on a global stage. Discussions of U.S. economic improvements must include a focus on global recovery. Countries must be able and willing to buy each other’s goods – in an increasing quantity – if economies are to blossom. 

Here are some recommendations :

• Countries need to make unambiguous, consistent and clear statements that industry bailout packages will not include protectionist measures. In the U.S., the newly appointed performance czar should assess economic stimulus measures by the U.S. and its trading partners for any inappropriate subsidies of exports or discrimination against imports.
• We need a renewed commitment to the World Trade Organization and its stalled Doha Round of trade negotiations. Rules need to be consistent and strong. The key players in world trade need to re-energize the negotiations by making major commitments and taking “early harvest” of potential agreements on a plurilateral basis. One first step could be the elimination of tariffs on environmental goods and services.
• The U.S. must lead its economic partners on the basis of trust and fair play – applied to trade and investment rules as well as to currency values. We’re in this together. Many policy objectives – be they health care, education, retirement – require a sound economy which depends on global collaboration on trade.

Trade success can provide the momentum which keeps the U.S. economy from stalling out before the rest of the stimulus can kick in. Trade issues must move up to the front burner.

The First Post

This is the first post in my blog which I hope will become a forum for my viewpoints, thoughts, comments, and a place for discussion. Please subscribe and comment.

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