America needs a new economic model and inspiration from Pres. Obama
I hope Pres. Obama could inspire again America.
Early on, South Korea sent armies of workers in Asia, Middle East and Europe to work on massive infrastructure projects to earn foreign currency for their beloved country. Then they used the money to buy a second hand factory from Germany and transferred it to South Korea to start their manufacturing and heavy industries – now Korea is the leader in steel, shipbuilding and electronics, way ahead of Japan.
The Chinese did the same thing. They bought a car manufacturing plant in England and dismantled it and assembled it again in China using its own technicians up to the last bolt and screw. Now, China is the leader in electric and fuel cell hybrid cars, high speed trains (magnetic levitation) and in renewable energy manufacture (mini-hydro turbines, wind turbines, solar PVs) that Pres. Obama, US Congress and American Unions would like to be punished for producing so cheaply because of state-supported weak Chinese currency.
The Brazilians invested heavily into renewable energy and bio-fuels, so they developed their bio-ethanol industry and alcohol-powered cars so much so that they saved on precious dollars in not buying expensive OPEC crude oil.
The Thais, Indonesians and Filipinos devalued their currency during the 1997 Asian Financial Crisis to balance their international trade to make imports expensive and exports competitive and earned precious foreign exchange by sending their domestic helpers, carpenters, construction workers, computer technicians, computer programmers, engineers, physical therapists, nurses, dentists, doctors, accountants and financial analysts to get jobs abroad or earn more than they are currently earning in their countries.
Their responsible governments also refrained from printing currency without sufficient backing of gold holdings and foreign exchange earnings, unlike the US Fed that is printing $600 billion to buy back its debt using a depreciated dollar to hopefully pump prime their domestic economy.
What they are doing are typical of WB-IMF prescriptions to developing countries that included reducing subsidies (education, public transport, oil and energy products) and public sector spending (downsizing bureaucracy), improving tax collection efficiency as well as raising taxes such as customs duty, excise tax, value added tax (sales tax on all goods and services including oil, electricity and other forms of energy), property tax, donor’s tax, inheritance tax, capital gains tax and corporate income tax in order to reduce budget deficit (by increasing government revenues) and to fund investments in new technology and improving public infrastructure. In short, they protected their predictable sources of revenue and invested in the future in order to reduce public debt and ensure a brighter tomorrow.
One thing in common among its people – they love their country so much that they are willing to buy domestically produced goods and services even if more expensive than imports, hence the jobs remain in their home country.
Contrast this to USA and Europe – their citizens more often select the cheapest goods to stretch their incomes mostly derived from financial services and augmented by heavy use of credit cards (they spend 106% of their income) so they could enjoy a month of paid vacation in the tropical paradises in Thailand, Malaysia, Philippines and Indonesia as well as in the Bahamas and Acapulco.
So the challenge is: Is America and Europe willing to undertake the necessary but painful reforms? Your answer will determine whether you will succeed in getting out of your economic recession, budget deficit and public debt.
So I guess we need to move on and start working, study new knowledge, and don’t be afraid to embrace serious and necessary economic reforms.
4 Responses to “America needs a new economic model and inspiration from Pres. Obama”
Leave a Reply