Don DeLillo’s prophetic 1991 novel, “Mao II”: “The future belongs to crowds.
” Movements will be massive. The street will rise and push.
It’s no secret the American worker has been dashed on the rocks of globalization.
The trifecta of global protectionism; Japan, S.Korea, and China have built up large,
advanced economies on the back of tariffs and non-tarrif trade barriers. The U.S.
rightly looked the other way to help Japan and later S.Korea get back on their feet
after the devastation of WW2 and later the Korean War. The American steel and
automotive industries took the largest hits. We are now in a 3rd decade of a
depression in American manufacturing.The production of automobiles (not sales) is
less than it was 20 years ago. The U.S. is a laughing stock when it comes to steel
production and infrastructure. Most great American cities look stuck in time.
Japanese won’t buy Korean cars and Korean’s will not buy Japanese cars. Neither one
of them will buy American.
Both countries have put massive amount of government money into displacing American
firms in new technical fields. An American shipping or shipbuilding industry, they
is none. Need Advanced machine tools? You will need to talk to the Germans or Japanese.
This caniblization of American markets is but one tool in the toolkit. Your companies
have trouble, just devalue your currency. Currency manipulation, government funded
R&D, government funded access to low interest loans and of course structural delays
at customs, not to mention outright theft of R&D. All weapons in the ongoing trade
war that America forgot to fight.
Then along came China. Twenty times the size of Japan. Free trade and global
integration were to bring the Chinese into the global order. It didn’t work.
The Chinese will politically do what is best for them and guess what, they like
Unlike the American allies of Japan, and South Korea the Chinese market has been
relatively open but yet tightly controlled. The banking system, oil & gas, vehicle
production, technology are all examples with government ownership and control.
Most of these areas are locked out to foreign companies. Many foreign companies
have benefited in China not just by selling into the market but by doing their
manufacturing here. In fact, half of the U.S. trade deficit with China is due to
American companies manufacturing and shipping back from China.
The American consumer has benefited greatly as the Walmart’s,Autozones,and virtually
every other company started importing every type of consumer good from China.
Under this world order the Americans have continued to live far above their means
with massive current account and trade deficits. The Dollar has stayed strong as
these Asian currencies continue to prop it up with large purchases of U.S. Treasury
Bills. The reason for that is to keep their own currencies low of course and vendor-
finance there countries products into the American market.
The issue we have now is that no system lasts for ever. America has 100m people of
working age that don’t work. The millennial class are suffering from government-
induced disasters of health care and education expenses. There is no ladder for
young people to the middle class and the middle-class is shrinking rapidly. So you
get what we have here which is people hitting the streets.
What they protest for doesn’t matter. The mobs will find a cause,any cause, to
displace the current social order.
With that being said, we recommend the U.S. solution is to just do what China does
best. Copy. Start by copying every tariff on U.S. goods in the China market and bar
access to the U.S. market which is not an open market in China. You then modify
the tax structure to fund the government through consumption taxes and not productivity.