Capitalism will survive: Why America will remain the #1 global superpower

growth-graphic

[take a look at the updated version of this article on http://www.whatmattersweblog.com/2009/02/27/capitalism-will-survive-why-america-will-remain-the-1-global-superpower/]

Who’s to blame for the current economic crisis and anything else which is in a mess right now?

Exactly! Corrupt bank managers, investment bankers and generally all the people who are involved in finance. That’s a growing sentiment supported by politicians who prefer calling greedy CEOs responsible for all the mess to working out solutions in order to solve the problems.

Though some Wall Street executives acted irresponsibly and took too much risk, it’s primarily the politicians’ fault who didn’t counteract the looming disaster. In fact, many politicians welcomed excessive private and public debt. Debt fueled economic growth for decades as it supported excessive consumption. People have gotten used to living beyond their means. Low interest rates usually create bubbles in the medium term. Now, we face the challenge of how to turn off the debt spigot and stabilize the financial system without sending the economy in a deep recession.

Politicians around the world are calling for more regulation and government-control. The point is that simply more regulation – as could be seen after the burst of the dot-com bubble – won’t help much and could make things even worse. Besides, nationalizations are no good choice either, as government officials tend to manage businesses even worse than the dumbest managers. In Germany, e.g. it was the partly state-owned banks that burned the most money and fell victim to the crisis earliest. Generally, we should beware of overly eager politicians who want to save the world, like the French president Nicolas Sarkozy who called for a European “economic government” and obviously aims at getting control of the (still) independent European Central Bank.

Capitalism and globalization have lifted hundreds of millions of people out of poverty around the word in the last decades. Reversing it would send millions back into poverty again, reduce wealth in the West and create social instability in emerging nations. Consequently, politicians should not support anti-capitalist sentiment, but come up with thought-through solutions.

Another thing that stands out is that most of the people who lost their money due to the market melt-down, lost their money primarily due to a lack of basic economic knowledge. For sure, many financial advisers didn’t explain all the risk involved to their customers and issued credit to those, who could never afford to pay back. But this wouldn’t have been possible, if the average citizen had more economic basic knowledge.

With the crisis having its roots in America, a whole bunch of populist politicians hoped to see the U.S. lose its influence and power. However, now disappointed leaders in Russia, Iran and Venezuela are seeing that America’s power is not diminishing. Quite the opposite is the case. We didn’t see a shift of power to Arabia or China. In contrast, especially oil -exporters Russia, Iran and Venezuela struggle with lower oil prices. China still has robust growth rates, although they dipped decisively due to falling demand from America. Now, China has to turn to its gigantic domestic market for growth. Actually, capital is flowing into the United States and the value of the USD is rising. People around the world are buying dollars as the value of their currency is plunging. This is happening in South America as well as in Eastern Europe. Obviously, people rather rely on America’s recovery than on politicians who want to save the world by tightening their grip on the economy and society.

The bottom line is that capitalism will always recover as it is based on the joined effort of the people in a free society.

Undoubtedly, the U.S. has to reduce its trade deficit and better balance its imports and exports by becoming more competitive. This can only be achieved in new branches of business. The car industry as we know it today, is far from becoming a contributor to new growth. Quite in contrast, the American car industry is in a life threatening crisis at the moment. The computer and Internet business has been creating jobs and revenue for a long time and the U.S. is still dominant in these areas of business, represented by global corporate giants like Microsoft and innovative service providers like Google and many other creative Silicon Valley corporations. But America cannot only rely on the IT industry for future growth. It is the energy technology sector that is most likely to become the #1 job and revenue generator of the future. The energy tech sector could quickly become the next key industry in the Western World. The drop in oil prices in recent months does not change the long-term energy outlook. Peak Oil is on the horizon. Global energy consumption is rising steadily. The sources of energy we have relied on for so long are first, inefficient, second, becoming more expensive, third, harmful to the environment and finally, mostly in the hands of unstable and hostile governments. Now is the time to come up with alternatives which will not only be more sustainable, but also cheaper in the medium-term. Electric cars are just one example. Electric cars are much more efficient than cars running on gasoline. Their driving range will inevitably be competitive in the matter of years. Alternative ways to generate electricity are essential to future prosperity and sustainability. For the Western world and the United States in particular, energy technology is a promising new industry that will generate tremendous amounts of money by meeting demand in the U.S. and especially in emerging nations. There will be a gigantic global market for sophisticated energy technology products and the technology leaders will be cashing in on that development.

Other articles on this or on similar topics:

on the global crisis

OPEC’s plan to cut oil output to keep prices from falling emphasizes the urgency for the western world to get independent from the cartel

Our prosperity hangs by a thread as it is based on a limited resource – oil

Electric vehicles are competitive with gasoline-diven vehicles

Advertisements

5 Comments

Filed under Economy, Global Issues, Politics

5 responses to “Capitalism will survive: Why America will remain the #1 global superpower

  1. America is indeed a super power. Its economy crisis affect the world over even the markets of other countries. Hope Obama turns around America for the better.

  2. I don’t disagree that the U.S. and the world will recover and I don’t disagree that globalization has lifted millions out of poverty, but where all this leads is what bothers me. Globalization is simply the process of producers seeking the lowest cost of production, stated otherwise, the most exploitable labor force. We saw the rise of China and then even before this downturn Chinese jobs flowed to Vietnam and elsewhere that offered even cheaper labor. Jobs will eventually move to Africa and then somewhere else and once the U.S. is desperate enough they’ll return there but at dramatically reduced wages and benefits. What is left in its wake is people in debt they can’t repay, people that were moving up the economic ladder only to have the rug pulled out from under them. We’ve seen it in the U.S. and the Chinese have seen it in the tens of millions of once employed but now unemployed. Globalization is making the worker powerless to negotiate. The U.S. autoworker is watching their pay and their benefits erode as they are forced to accept concession after concession as they watch their jobs being exported. Places like WalMart offer low prices and hundreds of millions of jobs in China resulting in a reduced tax base in the U.S. and ever increasing national debt. Those that blindly believe in market forces forget that once giants like WalMart vanquish all competition, they have no reason to offer low prices and no reason to offer reasonable wages. Small towns all across America have been devastated when WalMart moves in because the local retailers can’t compete and once thriving Main Street becomes a ghost town and the city coffers run dry. Perhaps this is what we want, perhaps we really do want ugly cookie cutter strip malls and mega stores and an economy where everyone competes for jobs waiting tables in return for cheaper goods from China. Perhaps we need to look past the blue-light specials to see where all this leads.

  3. Pingback: Every left leaning American should read this - TDR Roundtable

  4. If you ever want to hear a reader’s feedback 🙂 , I rate this post for 4/5. Decent info, but I have to go to that damn google to find the missed bits. Thanks, anyway!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s