Tuesday, January 29, 2013

Betting on America

I have read a lot of woeful talk from conservatives and libertarians in the wake of Obama's victory, the fiscal cliff negotiations and the debt limit deal, GOP softness on amnesty and the leftist grab for guns.  I think optimism is more appropriate for two broad reasons. First, the might of American capitalism is likely to bail out Obama from his own folly.  Second, the United States retains all the key advantages in the global economy.  If time permits, I might also add that the changes we have seen aren't as drastic as the press would have us believe.

Ayn Rand was the first writer to alert me to the irony that capitalism is so powerful that it can sustain huge amounts of government interference before it ceases to be an engine of growth.  This is unfortunate, because it begets the leftist fantasy that there is no limit to the amount of plunder they can extract from the economy without killing it.  Of course, the redistributive ethic of this President couches the argument in the name of "fairness," but what is really fair about stealing the hard earned wealth of one group and giving it to another?  But we appear nowhere near such an end.  Huge finds of oil and natural gas in North America are making chemical manufacture and similar industries viable again.  The oil and gas boom is by itself an engine of economic growth.  Eventually, the oil from Canada's tar sands will find its way to market.  There is nothing Obama or Hillary Clinton can ultimately due to stop it.  This will benefit America either through trade with Canada or to the extent that the oil comes through our lands.  Manufacturing is also increasing in America as companies realize that separating engineering design teams from the factory doesn't always work.

America's natural advantages are also great.  First, we have a high birth rate compared to the nation's that we compete with on a global scale, although not on an absolute scale.  Germany will not sustain its high rates of growth when its birth rate is at 1.4, among the lowest in the world, for example.  Next, the competitive advantage that Asian nations have in wage rates is eroding rapidly.  Coupled with transportation costs, the cost differential of producing products in China is diminishing.  Manufacturing wages in America have been stagnant for almost a decade while Chinese wage manufacturing wage inflation has been close to 15% for the same period.  Additionally, the advantage of cheaper labor is eroded as less labor is used in each unit produced.

Finally, in spite of increased regulation and a capriciousness, Obama has not killed freedom nor the rule of law in this country.  It remains the best place on earth to live, which is why it attracts the best people from around the globe.  We desperately need to reform our immigration policy to allow more educated and skilled immigrants to come here.  I don't think that will happen until we deal with the illegal immigrant situation.  That's why I am hopeful for a deal that gets the border really secured and doesn't grant citizenship to illegals (there has to be some price for their illegal entry).

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