Posts Tagged ‘consumption tax’

Further Thoughts on the Economy

November 19, 2010

THE CHINA PLAYBOOK

– A Ten-Year Agenda for a Basis to Compete Head-On

How is the US going to compete with China and prosper in the future global economy? The US may have to play a new game with new rules put forward by China as they ascend the ladder to become the next great, global economic superpower. Our standard of living depends on working with new concepts of economy management to optimize growth, new concepts of intellectual property rights to improve the rate and scope of innovation of products and services, and new approaches to taxation. The US government must abandon the “old-world” rulebook and adopt a “New-World” framework – a ‘new “Playbook” for global competition and economic survival.

A Conversation

I asked a long-standing client these questions a few days ago – the questions weren’t quite as specific, but the train of the conversation was centered on these questions:

  • Is your company investing enough in new product development? How do you know?
  • Is your company investing in new products that meet global requirements broadly enough, or are you more focused on domestic requirements?
  • Are your company’s foreign markets expanding more rapidly than your domestic market? Is your domestic market contracting, and if so, why?
  • Where is your company deriving more profit from, foreign markets or your domestic market?
  • Are your manufacturing assets fully deployed or nearly so? If not, is unused capacity growing or shrinking?

The answers were simply vague.

I was looking for a clear sense of current strategy, and I was looking for statistics and measures that would support a rational and defensible strategy. I was also looking for evidence of a sustainable strategy. What I heard from my client is that the future is not sufficiently stable or secure enough to plan confidently. Before I take a step forward on the pressing micro issues for my client, I think we will take one step backward together to understand some macro issues and how they drive the micro issues my client is asking about…

As I was about to turn the conversation to less “heady” topics over a beer, my client asked me, “Brian, how am I going to compete with China? They play by different rules…”, and that set my brain to think…

The Economy Mission of a Government

My client’s company is confronting much the same conundrum of macro issues that face national economies such as the US economy. Substitute “country” for “company” and “industry” for “product” in the questions I asked my client, and you have significant questions for a National economic policy to address. Unlike my client, I think I can clearly discern the answers to some of the questions as they pertain to the US economy today. To a great extent, I think that the US economy is stuck in an “old-world”. I wish I had more facts to support my casual observations, but facts are hard to find – I will endeavor to look harder! And this is a “fuzzy” observation. Let me draw some conclusions and propose some new strategies for a ten year agenda for modernization of the US economic system to compete in the “New-World” marketplace with new superpower economic players.

With China’s emergence as an economic superpower, it becomes critically important to evaluate how “the rules of the game” are changing, and to recast strategies, competitive tools and expectations. There are seven frameworks or “eco-pillars” for a more modern US economy to compete head-on in a “New-World”. On the surface, they are all familiar. Currently cast in the “old-world”, though, these frameworks require substantial revision.

1) Investors, enterprises and consumers must all be “willing and able” to participate in the economy.

2) Investors, enterprises and consumers must expect a “square deal” in an efficient market.

3) The economy must grow for investors, enterprises and consumers, and the growth must be sustainable.

4) Essential infrastructures and services must be accessible, reliable and effective for every economy participant.

5) Ownership and control of intellectual property must allow for easy access and efficient exploitation by all economy participants; exploitation of private information must allow for control by the individual owner.

6) Investors, enterprises and consumers must pay the Government for the benefits they derive from the Government.

7) The workforce must be adequately and suitably skilled and continuously trained.

Is Less Government Better?

I have wondered this for decades: “Is less governmental participation in the economy better than more?” Like the three bowls of porridge, the challenge is to find the bowl that is “just right.” The lawless tendency of opportunists in the “Wild West” demanded a host of new laws and measures to enforce those laws. Things haven’t changed, really. The irresponsible risk taking that created the mortgage debt crisis is a good example of reckless speculation and profiteering and how it is harmful – the “Wild West” has simply been recast in the modern-day world. It is clear to me that there is a mandatory economic regulatory and management role for the Government to play in the “New-World”. In this sense, more is better – but it must be a much more wisely crafted role for the Government than currently exists today.

See this blog by Dr. Robert Reich, past Secretary of Labor for President Clinton:

Robert Reich

See also in one of his books: Aftershock, Knopf, 2010.

Dr. Reich is demanding change, and I think he “gets it” like few others do.

I am reminded of an observation many, many years ago in elementary school:

“Too many rules, and you can’t play the game.”

And another reminder also from elementary school:

“When you can no longer play the game, it’s time to tip the board off the table and start over (press the reset button),” and that generally creates an ugly confrontation…

You can read my entire proposal for a ten-year agenda here if you are inclined:

7-Eco-Pillars

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