YOU S., WALL STREET AND THE REST OF THE WORLD.
This is the view of an informed outsider. Academicians might find much to balk at, but I feel the view of the man in the street needs to be respected more. I am writing from India because the actions of the US have global impact.
The USA’s land area is about three times that of India. Its population is about one fourth. The average US citizen owns twelve times as much air, earth and water as the average Indian. Naturally the per-capita GDP of an American must be twelve times that of an Indian. On Purchasing Power Parity basis, the per-capita GDP of an Indian is around $ 4000/, that of an American is approximately $ 51,000/. There, you have it. Twelve times 4000. is 48,000/. Off the mark by just 3000. (Frankly, I have not tested if this will hold water for other countries. So I am not proposing this as a general theory. Let professional economists see if they can make something of this)
On the other hand, what are the actual GDPs in monetary terms? Of the US it is $ 52000/, of India it is $ 1500/. The US’s is higher than the ’12 times’ ‘norm’ by $ 34,000/. There is an explanation for this.
THE THREE AMERICAN DRIVERS:
The difference represents the greater amount of will that an American exerts on global affairs than does the average Indian. Not the ‘Red’ Indian but the ‘brown’ one from India. Historically that assertion has manifested itself in three ways:-
One is the aspiration to a greater being: bigger, healthier, wealthier and longer-living. The American man had a greater engagement with and enjoyment of the material world. The natural resources at his disposal were exploited more than by the Indian; and he innovated and invented to enhance his engagement – in both production and consumption.
The second is a superior work ethic which translated into higher productivity. His innovations and inventions increased his productivity further through the tools – like the tractor, the telephone, the computer – that multiplied the capacity of man much more than what the Indian had.
The third is the projection of power. The American parlayed what he had into a globally present cultural influence that has largely determined the way the whole world lives now; and also translated that wealth and influence into political and military clout which in turn reinforces the cultural influence. The influence, in its turn, added premiums to the prices the US could charge for its goods and services. The Indian’s performance in this respect has been poor.
A NEW NEW DEAL:
What the US needs to do now is to start a new New Deal to strengthen the three forces.
As a first step, enable the average American to regain the ability to dream the American dream of working hard and making good. It seems ‘working hard’ has been replaced by ‘pulling strings’ and ‘getting drafted into the right circles’ more. Otherwise all the hard work a man undertakes still leaves him in debt with a barely satisfactory life on hands. He will be forever in debt for his education, his car, his home.
As a second step, shift economic weightage a bit, away from leisure & entertainment and into better education, retraining and motivation of the workforce. (Well, I do not mean the normal channels of leisure and entertainment). A disciplined and skilled workforce will enhance productivity and competitiveness. Jobs in manufacturing will rise. Job drain will decrease. To support this increase in available labor in the nascent stage, create jobs through higher government spending to support infrastructure projects that improve agricultural productivity, improve transportation efficiency (achieving lower unit costs without reducing quality) and improve availability of cleaner Energy (achieving lower unit costs and higher share in total production). This will lead to more jobs, GDP growth, and higher revenues.
The result of the above two reforms will be the increase of global influence for the US. A new positive cycle of the three forces will be established. If accompanied by wiser international engagement, this positive cycle can benefit the whole world. The US will be able to import more from other countries, and correspondingly export more of what it is good at.
Everybody will be happy. Wall Street gets more investment opportunities. People get more jobs and higher spending power. Government gets more revenue and balances the budget. The brighter ones get to live the American dream. The rest of the world gets more business. It is win-win for all. Peace and prosperity indeed!
So YOU S. of A., it is possible for you to make the world a better place. It is time to act.Think of these before tapering and QE.
Jacob J. Mappilacherry