The world needs evolutionary transformation, not economic nationalism
The developing wave of economic nationalism across the world has reached disconcerting levels. President Donald Trump's recent move to raise tariffs on import of steel and aluminium into the US signalled the pinnacle of the global shift towards protectionism.
 
To be fair, the US is the least protectionist large economy in the world and singling it out might seem hypocritical, especially by more protectionist nations. However, the point remains that there simply exists no economic logic behind the move. There are no economic gains to be made, even by the US, through higher tariffs. Moreover, the costs for the US and the world far outweigh the benefits that can be had from them.
 
Take the US economy. The tariffs have been imposed to pander to the sentiments of Americans who have been led to believe that their jobs are being taken away by cheap labour in emerging economies. However, the immediate impact of raised tariffs would be a rise in steel and aluminium prices in the US as firms cannot expand capacity overnight. So, the cost of goods that use these products as inputs will rise and be passed on to the consumers. In turn, if they decide to reduce their consumption due to rising prices, jobs will be lost in the process.
 
Moreover, according to the US Bureau of Labour Statistics, the number of Americans employed in sectors that consume steel and aluminium far outnumber those that are directly employed in those sectors. The costs borne by Americans due to a rise in inflation would, therefore, far outweigh any gains that the people employed in the industries concerned would make. So, raising tariffs of these sectors is either ill-thought-out or no more than a political gimmick to appease the voter base.
 
Now, consider the world economy. China was the obvious target of the move, considering the fact that it is the world's largest steel exporter and has been widely accused of dumping cheap steel in global markets. However, China has been reducing its overcapacity in the steel sector due to ecological and economic reasons -- shutting down about 50 million tonnes of its production in 2017. To put things in perspective, the US imported less than a million tonnes of steel last year. Therefore, US tariffs would hardly affect the US economy.
 
Instead, Trump will end up hurting his closest global allies in Canada, South Korea, Japan and the EU. The three countries will be affected on account of being the largest suppliers of steel to the US, while the EU fears that exports meant for the US would now be diverted to Europe and affect local producers. This might force retaliatory tariffs from countries around the world and, in an unlikely eventuality, could also result in a full-blown trade war.
 
Even if no trade wars ensue, the economics of protectionism does not hold water in an already globalised world. First, international commerce is now driven by knowledge flows that are not affected by tariffs. Second, manufacturing is dependent on global supply chains, which Trump means to attack. However, in economist Richard Baldwin's words, imposing tariffs is like building a wall in the middle of the factory floor that only decreases efficiency of production and benefits no market.
 
Finally, the era when countries were building on the foundation of manufacturing jobs is nearing its end. As automation and robotics make rapid advancements, the nature of work is fast changing and the protectionists that promise the return to past glory of the 20th-century factory floors are selling nothing but snake oil.
 
India has also shown a growing proclivity towards protectionism, most recently in the Union Budget that increased customs duty in more than 10 sectors. However, the same arguments hold true for India as well. In fact, in 2016 India raised tariffs on imported steel to protect domestic producers against cheap Chinese imports. However, manufacturing firms using steel inputs lost their export markets and had to lay off workers.
 
More importantly, India cannot hope for a manufacturing revolution that defined the economic success stories of East Asia and even China. Quite a significant proportion of blue-collar jobs will be lost to automation and modern emerging economies have to adapt to these conditions. Countries that choose to close themselves off to foreign competition are bound to lose their innovative edge. Such inward-looking policies have not helped in the past and they are not expected to do so now.
 
The perception that globalisation is a zero-sum game needs to be dropped as it has repeatedly been seen that open borders have been beneficial for most stakeholders. A better strategy would be to improve social security of workers exposed to risk in open markets, as the Nordic countries have successfully done. The political mood of restoration of past glory needs to be dropped. The times call for evolutionary transformation.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 

 

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    Can America restore a liberal vision? –Part 2
    Do We Need a New Vision that Will Better Fit the Reduced Global Level of American Power and Influence?
     
    If our government’s financial resources are strained to the point where the government periodically faces a possible shutdown, the government needs to change our priorities!  The first step is for the US to give up its role of being the global policeman. This means reviewing the military defense budget that accounts for 54% of all federal discretionary spending. According to the Peter G Peterson Foundation, the US spends more on defense than the next eight countries combined.  This awareness has prompted President Donald Trump to insist that other allies and nations share more of the defense burden.  
     
    According to Ron Paul, the US military "is in 130 countries. We have 900 bases around the world."  This made sense during the Cold War when the Soviet Union was trying to bring every country into its camp and US and Soviet conflict could take place anywhere in the world. Today the US needs far fewer than 900 bases in 130 countries. Wars will be fought in the future in new ways, including robots instead of soldiers, drones in the sky, and artificial intelligence centers in the US setting the foreign bombing targets. 
     
    Some US military leaders have been complaining about excessive increases in defense expenditures. The US Navy did not ask for more anti-aircraft carriers but Congress decided that the US Navy should have more carriers. The US has more nuclear weapons and produces more munitions and military equipment that it needs for itself and to sell abroad. The cruel fact is that Congress had authorized military manufacturing sites in all 50 states. Each member of Congress can claim a good record of bringing more jobs into his or her state. Once these facilities are established, they have to be fed with continuous orders coming from our allies abroad. The U.S. economy depends on being run as a military/industrial complex; President Eisenhower did his best to warn against this.
     
    The solution is clear. Let us stop being the world’s policeman. Let us cut down on our production of guns and munitions. Take the same money out of defense and put the money into fixing our deteriorated infrastructure, and fixing our inadequate health and public education system, and improving the living level of our poor and low-income families. This amounts to repeating “Let’s Make America Great Again” but giving it an entirely new meaning, not just more jobs but better lives for more people. 
     
    What should America’s foreign policy be after it reduces its overly broad presence around the world? The answer is to focus on improving the lives of the one billion people living in the Americas. The Americas comprise the continents of North and South America, usually thought of as the Earth’s Western Hemisphere or the New World. People living in the Americas share Christianity and much of Western European background and ideas. The Americas contain must wealth and the US can gain much by pushing Inter-Americas trade further. The US should maintain a second focus on Europe hoping to increase trade between European and Americas’ nations. Europe is the cultural homeland of America and should be viewed now as its second homeland.
     
    As for the rest of the world – the Asian Pacific, Russia, China, the Middle East, and Africa – the US needs to carry on normal trade relations. US brands hopefully will continue their strength in most other nations.
     
    This scenario, of the US deciding to get out of global policing, and reallocating its budget from defense to improving the American economy, and focusing foreign development mostly on the other Americas, and secondarily in Europe – constitute an alternative vision of where the US should put its values and future energy. 
     
    Can We Restore a Liberal Vision for America?
     
    As an alternative, we can try to recapture and reinstate America’s global role prior to Trump but with some new awareness and discipline. We played too big and costly a role in defending the rest of the world and now we must get our allies to share more of the defense costs. If we succeed, our defense budget can be cut and the government can use the money to make a better life for more Americans.  
     
    The US would continue to promote democracy and human rights around the world. It would continue to be a melting pot of different cultures and applaud diversity and its benefits. It would work closely with the United Nations, the World Bank (WB), the International Monetary Fund (IMF), the European Union and other major world organizations.
     
    Is There an Alternative Libertarian Vision for the US?
     
    The Duke University historian Nancy MacLean recently published a scholarly study called Democracy in Chains. Her thesis describes a 60 year-old radical right’s stealth plot to change the character of America’s Democracy. It starts with James Buchanan who won the 1986 Nobel Prize in Economic Science. Buchanan had been a student in the University of Chicago’s economics program. He entered as a “Libertarian socialist”  but after taking a course with U of C’s famous professor Frank Knight, Buchanan converted into a “free market” economist. Buchanan believed that all people, including elected government officials, operate out of self-interest. When political candidates run for election, they will promise many things to get elected. And they will promise more to keep elected. The result is that government grows bigger, deficits increase, and taxes increase to prevent further deficits. Meanwhile taxes are seen by the wealthy class as confiscating their wealth so that government officials decide, not wealth owners, what to do with their money.
     
    Buchanan’s work was later noticed by the wealthy rightest Koch brothers who then chose to finance the cause of keeping government small and taxes low. Democracy in Chains documents the 60 year history to turn our democracy into a libertarian paradise where freedom reigns for the rich, income inequality continues to grow, and the income and social needs of average citizens remain at low levels. This Libertarian vision has already been sold to Trump’s followers, and many elected officials in the Republican Party. One only has to note that in recent years, President George W Bush and now Paul Ryan have tried to dismantle our Medicare and Social Security programs. 
     
    Where do we Stand?
     
    Our democracy today stands at a crossroad. We have already abandoned one vision that we should return to a country welcoming the world’s poor. There are four other visions to consider.  We cannot just apply Yogi Berra’s quip, “When you come to a fork in the road, take it!”  Consider the following four competing visions:
     
    1. “Make America Great Again” with its emphasis on creating jobs, dealing toughly with other countries, building a Wall to keep out Mexicans and using immigration law to keep out Muslims and other “undesirables” who come from “shit-hole” poor countries. Get our allies to share more of the defense cost burden.  Cancel or drastically revise badly made past agreements such as NAFTA, the Iran Nuclear Agreement, the Paris Climate Agreement, and the Trans-Pacific Partnership Agreement.  Welcome mostly wealthy or well-educated people into our country.
     
    2. Stop playing the role of the world’s policeman and cut the number of our military bases and countries, lower our defense budget and use the money to improve our infrastructure, health care system, public education system, and social benefits and programs that benefit poor and low income citizens.  Turn our focus away from world affairs and focus on improving trade, conditions and wealth in the Americas, with a secondary focus on the well-being of European countries.
     
    3. Restore the Liberal role that America has traditionally played in the world of promoting democracy, the rule of law, and human rights. The US needs to support the aims of major global institutions such as the United Nations, World Bank, International Monetary Fund, and European Union.
     
    4. Move the country’s values toward a Libertarian model of small government, low deficits and taxes, and the full freedom of individuals and families to make their own financial decisions rather than leave so many decisions in the hands of the government. 
     
    Which fork in the road do we take?  It is really too early to choose. Each vision needs further refinement not only about its underlying beliefs, values and preferences but also for the implications on how different groups will fare under each system. The need now is to encourage more informal and formal public discussions of these alternative visions. We need to encourage high level public debates about the advantages and disadvantages of each vision. We need our two political parties to debate the merits of different visions. Hopefully a major consensus will eventually emerge for one of these visions and rise to prominence and conviction.
     
    (This is concluding part of a two part series)
     
    Read the first part here…
     
     
    (Dr Philip Kotler is the SC Johnson & Son Distinguished Professor of International Marketing at the Northwestern University Kellogg Graduate School of Management in Chicago. He is hailed by Management Centre Europe as "the world's foremost expert on the strategic practice of marketing.")
     
     
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    America Needs a New Vision; The Old One is Obsolete –Part1
    Before the Trump Presidency, US citizens had a fairly solid vision of what the country stood for.  Our country believed in democracy, the rule of law, and human rights. We fought against hunger, bigotry, and social injustice. The nation took a liberal view of the changing economic, technological, political and social forces and we wanted to keep up and adapt.
     
    Dr Martin Luther King gave a powerful voice to what America should be.  He said that we should fight against the triple evils of racism, militarism, and materialism. He said that we should build a movement to challenge the concentration of economic power at the top of our society. A child's future should not be predetermined by their parents' wealth, education, or zip code. It is about eradicating the institutional barriers that have kept people of colour and those who speak other languages from the prosperous livelihood we call the American Dream.
     
    Within this year as our new President Donald Trump made statements, took actions and favoured legislation that were clearly about changing what American citizens and foreign friends thought were the core values and beliefs of the country. I believe that Donald Trump has done irreparable damage to the country’s mission and vision. We need to fight back and restore our vision of our destiny or we will morph into an unfamiliar country bearing only a poor resemblance to what the US stood for.
     
    Our Original Heritage
     
    We started as a nation that believed in the need for a Constitution that would create a balanced tri-part government of a Presidency, a Congress, and a Court System. Laws would be enacted that our citizens would follow and support. Citizens would be free to design their lives and occupations as long as they conformed to the laws and norms of “civilised” behaviour.  
     
    Our new country needed more than a Constitution and set of laws. We needed more people to build a productive and prosperous new country. We opened our doors to immigrants from many countries. In 1883, poet Emma Lazarus wrote a sonnet that was later engraved on a bronze plaque and mounted inside the new Statue of Liberty’s pedestal’s lower level.  It read:
     
    “Give me your tired, your poor,
    Your huddled masses yearning to breathe free,
    The wretched refuse of your teeming shore.
    Send these, the homeless, tempest-tossed to me,
    I lift my lamp beside the golden door!”  
     
    The US opened its doors millions of immigrants, who preferred to leave their hard life conditions in European countries - Ireland, Italy, Germany, Poland, Hungary, and more – to settle in this new country that advertised itself as a “A Land of Opportunity.” These immigrants would need to learn a new language and a new way of life. The result of our liberal immigration policy produced a unique mix of cultures that had to learn how to live together. The country’s rapid growth and the intense need for labour helped immigrant groups assimilate peacefully without resorting to territorial conflicts.
     
    Can this Open Immigration Premise Remain America’s Vision? 
     
    So many people in the world, especially poor people from poor countries, would want to move to and settle in the US. Over 11 million Mexicans illegally entered the US to build a new life. Many other Central and South American citizens have done everything possible to resettle in the US.  
     
    The truth is that we are not likely to return to an open immigration policy. We have a new view gaining attention and adherents about who to invite into the United States. There is growing opinion that the US should only consider citizenship and visas for educated and often wealthy foreigners. We do not need unskilled workers as much as we need highly skilled foreign engineers, scientists, computer experts, and top business people to come to the US. If a time arises when we need more unskilled workers, immigration rules will be pressured to change.
     
    This naked sentiment burst into full expression on Wednesday, 10 January 2018 when President Donald Trump at a semi-public meeting rejected bipartisan proposals to be more lenient to illegal Mexicans and other groups wanting to come or staying in our country. He lashed out at the proposals and describes African nations, as well as Haiti and El Salvador as “shitholes” and questioned why so many of their citizens had ever been permitted to enter America! In that brief outburst, American citizens and the world recognized that the leader of the free world was a racist and that he was busy undoing most of America’s beliefs and values.
     
    Mexico’s former President, Vicente Fox, tweeted “America’s greatness was built on diversity”. He added that Trump’s mouth was “the foulest shithole in the world. With what authority do you announce who is welcome in America and who is not? America’s greatness is based on diversity, or have you forgotten your migration background, Donald?”
     
    Groups at the United Nations (UN) and around the world were shocked and stunned that such crude remarks could be made in a semi-public meeting by the president of the United States. 
     
    Is Our New Vision to be an Educated Country of White Americans?
     
    Clearly, a large group of Americans, maybe one-third of our citizens, subscribe to Trump’s view to exclude poor, low educated foreigners from entering our country. Trump’s followers don’t’ seem to be aware that we need many caretakers for an aging population and we need landscapers, farm hands, and other unskilled and semi-skilled persons to meet the needs of many low income, middle income and wealthy Americans. Yet this shortage of unskilled workers presumably will be self-correcting over time.
     
    The bigger question is what vision do we need to guide America’s destiny? This article will distinguish four highly contrasting vision of what America should be. Let us start with the one that comes out of Trump’s vision of America.
     
    • Trump wants us to buy into “Make America Great Again” and “America First.” Every policy should create more jobs for Americans, even if they involve resuscitating the coal and oil industry and neglecting their negative climate effects. Trump would prevent our companies from opening manufacturing facilities abroad and pressure them to relocate their manufacturing here. Remember the pressure that Trump put on Carrier Corporation not to send hundreds of its jobs to Mexico. Carrier agreed but more recently, it cut these jobs and moved more manufacturing to Mexico to meet the realities of global competition.

     

    • Trump aims to revise our relationships with our allies and other nations. He sees our allies as having taken advantage by not sharing more of our defense costs and by taking to much of our foreign aid. He views many of our agreements as “bad deals” that need to be renegotiated or terminated. This includes our North American Free Trade Agreement (NAFTA) signed with Canada and Mexico in 1992, our Iranian Nuclear Deal of 2016, our Paris Climate Agreement signed by 173 nations, and other agreements. The net result of his turning against many allies is to make them more cautious in their future dealings with the US. The bigger net result is that China is growing ever more powerful and attractive to other countries ever since Trump killed Obama’s 12-Nation Trans-Pacific Partnership Agreement. Trump is destroying our power and position in Asia.

     

    • Trump’s wish to build a Wall separating Mexico and the US at a cost of $18 billion is an extension of his racist wish not to have more Central and South Americans getting into the US. He has no way to get Mexico to pay for it. What is worse, the Wall cannot stop foreign persons from coming in. They will find ways to climb the wall, bomb the wall, parachute in or come in from the Pacific or from the Atlantic.

     

    • Trump and the Republicans clearly favour more of America’s wealth going to the wealthy class. The recently adopted Republican income tax reform proposal clearly improves the wealth of the wealthy and does little to improve the initial objective to improve the income of the middle class. Trump and the Republicans still promote that “all boats rise when the tide rises” along with the false message that the wealth created at the top will “trickle down.” If anything, the wealth at the bottom has been “trickling up” to the wealthy.

     

    • Trump and the Republicans believe that the American poor and lower income classes have been over-coddled. The Republicans want welfare beneficiaries to get a job or lose benefits. They favour making cuts in health care, public education, Social Security, some children programs, and food stamps. When asked why they favour these cuts, they either point to waste and malingering, or they confess that there is not enough money to pay for these benefits.

     

    • Trump Republicans prefer a society of white educated Christian Americans. The irony is that Republicans are doing more to make the wealthy wealthier than to improve the lives of their own low income voters. Sooner or later, Trump followers will realize that they have bought snake oil from a snake salesman.
     
    (This is first part of a two part series)
     
    Here is second part...
     
    (Dr Philip Kotler is the SC Johnson & Son Distinguished Professor of International Marketing at the Northwestern University Kellogg Graduate School of Management in Chicago. He is hailed by Management Centre Europe as "the world's foremost expert on the strategic practice of marketing.")
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