Why not export to ourselves?
Despite hopes from many of his initial supporters, President Obama is clearly demonstrating his allegiance to a horribly austere view of our world and our future. Here he is in his radio address last Saturday:
Here’s the truth about today’s economy: If we’re serious about fighting for American jobs and American businesses, one of the most important things we can do is open up more markets to American goods around the world.
Leading the world in innovation. Opening new markets to American products. That’s how we’ll create jobs today. That’s how we’ll make America more competitive tomorrow. And that’s how we’ll win the future.
We’re living in a new and challenging time, in which technology has made competition easier and fiercer than ever before. Countries around the world are upping their game and giving their workers and companies every advantage possible. But that shouldn’t discourage us. Because I know we can win that competition. I know we can out-compete any other nation on Earth. We just have to make sure we’re doing everything we can to unlock the productivity of American workers, unleash the ingenuity of American businesses, and harness the dynamism of America’s economy.
Is this the path we’re supposed to follow? It’s one of unending and brutal competition for export growth in which prosperity is always threatened by some other state’s cost structure, vagaries of where multinationals choose to locate, world growth patterns, and many other variables. It’s a 19th century mercantilist position that can easily be criticized on many levels.
Paul Krugman takes up the challenge and rejects the ideology of competition.
…talking about “competitiveness” as a goal is fundamentally misleading. At best, it’s a misdiagnosis of our problems. At worst, it could lead to policies based on the false idea that what’s good for corporations is good for America.
He goes on to address the absurdity of thinking exports can be an ultimate solution.
It’s true that we’d have more jobs if we exported more and imported less. But the same is true of Europe and Japan, which also have depressed economies. And we can’t all export more while importing less, unless we can find another planet to sell to.
This is of course true, but let’s not be too fast to drop the other planet idea. There’s an extremely important point buried in this off the cuff comment and it relates directly to my recent post regarding the need to overthrow our existing financial orthodoxy and, to put it bluntly, print money. Interplanetary exports, interestingly, provide a different approach into that argument.
So, what if a planetary civilization outside of earth was willing and capable of importing all our production. Would our problems be solved? Certainly China, southeast Asia, Germany, and many other countries have used exports as the major means of achieving a degree of prosperity. Paul implies that if such an interplanetary society did exist then it would solve much of our problems and I’m sure most “experts” would agree. But if we accept this as true,we’re led directly to the conclusion that printing money is a better solution.
For what’s the purpose of exports? There’s only one that most care about – it’s to create purchasing power. A means to an end. The exported goods are of no use to the exporting nation except for the purchasing power, the jobs, it enables. What do exports do? They rain money, i.e. purchasing power, onto an economy from a source outside it. But the thing is, if we desire this extra purchasing power, do we really need to look outside of our own society to find it? Isn’t it more than just a little silly to think our problems would be solved if only there were another planet to take our production? The answer should be clear: we don’t need another planet or another country to buy our products. We have it well within our power to generate our own purchasing power without collapsing into a bitter global competition for an ever receding prosperity.
I’m not arguing necessarily for a closed world economy as the US and other major countries or regions could, with modifications, combine relatively open trade with domestic monetary creation. One thing for sure, though, is that we need to send back to the kitchen Obama’s foul smelling concoction of neo-liberalism and neo-mercantilism. And then ask: why not export to ourselves?