Friday, October 06, 2006

Change of Heart: Bring It On, Dude

I've changed my mind. In an epiphany (of sorts) overnight, I have dramatically shifted my mindset from one of "outrage" and "blame" regarding neo-mercantilists' self-serving treatment of the international monetary system to a "take charge"attitude of "Bring it on Dude - The More The Better". Let the Japanese and Chinese play their petty mercantilist games, but we too can play and win. They may have won this battle whereby they escaped with a sizable amount of America's manufacturing base, but looking forward with some skill, scheming, and Muhammad Ali rope-a-dope tactics, American can yet win the war.

Here is my plan: America should subsidize and encourage Disney, Dreamworks, etc. to dump as much Bambi, SpongeBob and "Friends" as well as Video games (e.g. Grand Theft Auto) upon China & Japan. Encourage their piracy for THEIR domestic markets - since the more distribution the better. The lamer, more hynotic and saccharine the plot, the more we should encourage its consumption. Next, we should subsidize and encourage the export of our world-class Processed Food. Oreos. potato chips, Nacho-flavored Bacon Bagels, Chocolate Chicken Nuggets, TV Dinners, BigGulp Sodas, Campbell Soup, Philly Cheese Steak Pizzas, and loads and loads of ice-cream. With fertility rates already low in Japan & China, and their darling little spolied children already over-indulged getting fat and lazy, hanging about in Yoyogi Park dressing like Elvis and slacking with computers & pop culture, we are already half there. Then we need to send them skateboards and snowboards. And perhaps AC/DC or The Scoropions, Kurt Cobain or something else rad to accompany it. Gen-X-J & Gen-X-C!! Brilliant, huh? Oh a couple of more things. We need to train lawyers for them. Lots and lots of lawyers. If we can get their lawyer-to-population ratio up to where we are in the USA, we can really throw a proverbial spanner in their works. And we should try to teach them the benefits of LObbying within government giving them the whole spiel on aggregation of interests and how it breeds efficiency. Maybe they'll bite. Finally, we must encourage the promulgation of CNBC China, and stealthily encourage E-Trade & all manner of on-line brokers to expand & grow in Asia. We could even send Maria Bartiromo over there and make trading "free". The combination of hypnotic pseudo-financial news and essentially "free" on-line gambling coupled together would be absolutely toxic and would grind work and efficiency to a slow halt since we know that both cultures are already inveterate gamblers. Together, these things, in the absence of government policy, will drive convergence on the Asian side.

But that's only half my plan, not to mention half the battle. Causing convergence on the eastern edge of the Pacific will be tricky, and for this we must use reverse psychology and counter-intuitive methods. The USA must encourage the Asians to continue to accumulate dollar reserves and make our dollar even stronger. We will at once both raise rates, and taxes upon the rich to ease our fiscal deficit. This will cause the dollar to soar and will be like putting one's balls into a vise and squeezing. The dead will awake from the excruciating cries of pain, but this time something different will emerge. Not the historical moaning and whinging about cheating and unfair competition, but a John Wayne-like gritty determination to figure out ways to compete and win. Whereas in the past companies simply up and left, moving to China, this time they'll stay and fight. Like in Iwo Jima. Or the beaches of Normandy. This time, like the Japanese and the Germans, capital will take a haircut on returns and invest in training, new and more efficient plant & equipment, while management takes across-the-board paycuts, especially at the executive levels. Labour too will work longer, harder, more efficiently discarding all remnant lines work demarcation that are vestiges of the UAW and labour struggles of the past. And most importantly, management, labour and capital will work together to figure a way to best their neo-mercantilist competition. The Federal government will also pitch-in. They'll unburden companies of their current and legacy pension and healthcare obligations, finally placing US companies on equal competitive footing with their European and Japanese counterparts, and taking a huge burden off of the day-to-day worries of labour, finally letting everyone focus on how to improve and get better, cut the fat, make production processes leaner and more intelligent, with less waste. They can also perfect the Japanese art of "our rice is different" and "your meat smells funny", or the Chinese skill in protecting "key" or nascent industries from competition, by resurrecting any number of non-tariff barriers, security checks and port-controls for Asian cargos to make sure there are no Zerba Mussels or Japanese Beetles aboard. Americans have historically been up to meeting a challenge. But the narcotic effect of affluence, unrequited indebtedness (and, yes, Taco Bell) have numbed our ability to respond to a such an important challenge. In fact they've even numbed our ability to know we're being called out!.

America can regain her competitive feistiness, but it will take pain. Not pain for the sake of masochistic pleasure, but pain for the sake of regaining our senses. How can one know pleasure if one doesn't feel pain? How can we overcome our parochial selfishness if we are not forced by circumstance to work together?? Ok besides meditation, is there a route? And in an increasingly hedonisitc world, this lack of ability to sense and react accordingly will be our undoing unless she can regain a sense team spirit, rejuvenate her ability to manufacture, innovate, and compete effectively, and collectively rise to the occasion.


beebs said...

Ain't gonna happen.

Imperial America is tied down with capital destroying wars.

pi said...

And the wealthy and the influentials will allow taxes on themselves???!!! Dream on ...

It's more important America guard her openess, freedom, democracy and pursuit of happiness. Why? Because Japan and China are corrupt and will ultimately lead to stasis. Japan is already half-way there by turning into retirement home. And China is turning into Bob Marley's lyric "No Woman, No Cry".

Anonymous said...

Back in the '70s and early '80s I thought that when the Japanese had finally completely knocked out US consumer electronics manufacturing and gotten a monopoly they would jack up prices and gouge us for all they could. But it never happened, except in one market for a brief time when they were able to rig DRAM prices.

One reason was (apparently) that they were unable to prevent the outflow of technical knowhow to the Koreans (I read that Japanese engineers were accepting bribes to sell trade secrets).

Another reason seems to have been that, having built the capacity to satisfy the demand generated by the lowball pricing -- capacity not only in the form of too many factories, but also in terms too many firms -- they couldn't face the drops in unit volumes that would inevitably have come if they had raised prices.

And when they started out on their campaign of buying up US real estate, they not only were not able to buy the US for a song (as so many feared), they instead ended up paying unsustainably high prices and losing big bucks.

The flip side of their mercantilist exchange rate manipulation is that, because money is truly just a medium of exchange, when they accept a dollar in return for (say) 117 yen worth of goods whose equivalent in value could never be bought from US sources for a dollar, they have lost real value -- and they've lost it at that very instant, not at some unknown time in the future when the exchange rates finally shift and force an accounting write-down (which some will claim to be just a paper loss, but in fact will be delayed recognition of the real loss of the past).

Although to some extent their loss is our gain, if one believes that prices are the signals by which markets act to optimally allocate resources and effort, then it seems to me that one must also believe that prices rendered false by exchange-rate manipulation must subvert those market mechanisms and lead to suboptimal allocations, such that all of us lose.


Cassandra said...

beebs - it is 'tongue in cheek.

pi - I disagree that Japan is "corrupt" in the classical sense. They are a lot of things (conniving, shrewd team game-players, etc.) but they are fair and corrupt only in the sense that they - organizationally - do not find it inconsistent to collude and scheme to win (for the society and their respective organizations). The kernel of truth in the tongue-in-cheek post IS that over the past two decades (since Plaza) Germany & Japan have probably gained inherent comeptitiveness and vibrancy from appreciating currency. They had to innovate, and had to invest and be cleverer, leaner, fitter to survive and compete. 'Rent seeking' through tariffs, admin relief etc. is always easier, but its a dead-end in the longer-term.

anonymous - I agree with absolutely evetrything you have so articulately described. I myself bought a Subaru in 1993 knowing full-weel that Fuji Heavy Industries lost several billion USD holding the line on prices to avoid market share losses which I calculated at @$2000 for my vehicle which was 20% of the cost. Thei operating loss was magnificent and I gladly accepted their subsidy!!

The web of mis-allocative dependencies is not limited to FX, and needless to say there are so many untineded consequences. The housing bubble, excess capacity, rising asset prices throughout are giant flashing yellow lights or a matador's equivalent of a red cape, tormenting the herd. As a "citoyen du monde" or a "Seer without a country", it is not the screwing up of the USA that lament, so much as the sub-optimal use and really piss-poor waste of resources when poverty remains rife in so much of teh world.

Anonymous said...


I post here as 'anonymous' only because I can't use my preferred username of 'jm' on

I am going to try to make a trip to Japan sometime later this year -- it's been far too long since my last trip in May 2000. I've been associated with Japan in various ways since 1971, and am fairly fluent in the language, so don't like getting too out of touch. Would like very much to meet you on my next trip. Any possiblity?


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