[Peace-discuss] Threat to US economy?

[Paul M. King]

Peter Morici levels this view with his excellent critique:
"...the shift of work to overseas operations weakens the U.S.
labor market, depressing earnings, and discouraging those with
skills in short supply in global economy from coming here to
produce more wealth."

If we cannot create new wealth to replace what we deplete,
then our economy is simply not sustainable. Relying on GNP
rather than GDP is another clever way of faciliting the flight
of capital from America's middle class into the coffers of
global corporations. The source of capital is almost entirely
irrelevant. Where is it and what is it doing? These are the
important questions, it seems to me.

..:: Paul King

---- Original message ----
>Date: Thu, 21 Apr 2005 22:39:25 -0500
>From: "C. G. Estabrook" <galliher at alexia.lis.uiuc.edu>  
>Subject: [Peace-discuss] Threat to US economy?  
>To: peace-discuss at lists.chambana.net
>
>[Some people think that the world position of the US economy
is precarious
>enough that further US imperial adventures may be ruled out.
Here's a
>suggestion that that view is, so to speak, optimistic.  --CGE]
>
>	http://www.money.cnn.com
>	CNNMoney.com
>	April 11, 2005 Monday 1:59 PM EST
>	Trade gap: made in the USA
>	By Chris Isidore, CNN/Money senior writer
>
>U.S. companies looking for the source of much of the nation's
trade gap
>need only to look in the mirror.
>
>A study by the McKinsey Global Institute, a think tank arm of
the business
>consultant firm McKinsey & Co., finds that about one-third of
the nation's
>current account deficit would disappear if we eliminate the
trade with the
>foreign operations of U.S. companies, according to the group.
The current
>account deficit is a broad measure of trade and capital flows
between
>nations.
>
>"A large and growing share of the deficit simply reflects the
>international reach -- and success -- of the strongest US
companies," said
>the recently published study. "An automaker importing cars
assembled in
>Mexico, for example, or a bank using call centers in India
...may add to
>the nation's trade imbalance, but they also create
significant value for
>U.S. customers, companies, and shareholders."
>
>The trade deficit will get a new attention Tuesday when the
Commerce
>Department releases its monthly trade report. Economists
surveyed by both
>Briefing.com and Reuters have a consensus forecast of a $59.0
billion
>trade gap for February, up from $58.3 billion in January. But
one third of
>the 21 economists surveyed by Reuters expect the gap to top
the $59.4
>billion figure from November which stands as a record.
>
>The McKinsey study argues that trade gap is overstated, and
that the
>government should change the way it measures trade, taking an
>ownership-based view of trade and categorizing companies by
where they are
>owned rather than by where their goods are produced. It said
that would
>help the debate on trade be more constructive.
>
>"Today's debate over the U.S. current-account deficit misses
the mark,"
>said the study. "Focusing on (U.S. companies' foreign
operations')
>activities is unhelpful and distracts attention from fiscal
>irresponsibility in Washington--which poses a far bigger
threat to the
>future economic health of the United States."
>
>But other trade experts argue that where the goods or
services are
>produced does matter for the nation's economic health, and
the well-being
>of its citizens.
>
>"If an activity moves abroad and becomes an import, all that
labor is
>lost," argues University of Maryland Professor Peter Morici,
one of those
>forecasting a record trade deficit report Tuesday. "It really
doesn't
>matter very much who owns the plant that makes the imports."
>
>He argues the shift of work to overseas operations weakens
the U.S. labor
>market, depressing earnings, and discouraging those with
skills in short
>supply in global economy from coming here to produce more wealth.
>
>"It doesn't matter who owns the assets. You can get capital
to build a
>plant anywhere. What matters is where the plant is," said Morici.
>
>Jay Bryson, global economist for Wachovia Securities, agrees
with the
>McKinsey study that the U.S. economy is better off in the
long run due to
>investment in overseas operations by U.S. companies.
>
>"It's good for efficiency gains in the economy," he said.
>
>But he disagrees that the government reports are looking at
trade from the
>wrong perspective. He said where the goods or services are
produced is
>still the most important way to look at trade for the purpose of
>estimating what it means for the nations' economic growth, as
well as the
>value of its currency. That's why gross domestic product,
which measures
>the value of all goods and services produced in the United
States, is the
>broad reading of the nation's economic activity, not gross
national
>product, which measures the activity of U.S.-owned
operations. GNP is
>still measured but now virtually ignored by economists.
>
>"To extent that we are buying things from abroad that we used
to buy here,
>income isn't going to be as great here," he said. "That trade
gap needs to
>be financed and that financing needs to come from abroad."
>
>Ashraf Laidi, the chief currency analyst for MG Financial
Group, also
>agrees that the McKinsey study highlights something important
that is
>often lost in the overall trade figures. But he said even
looking at trade
>from the perspective they suggest shows that there is a
widening trade gap
>for the United States.
>
>"They put their finger on something," he said. "But at the
end of the day
>you are seeing imports growing to one-and-a-half times
greater than
>exports, and the trend is continuing."
>
>	###
>
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