I have been following this issue for some weeks now—-the recent slowdown of the U.S. economy—-and wanted to blog about it so eagerly but wasn’t able to due to time constraints; what with the perniciousness of task at work. Presently, I am being the overall coordinator for the conduct of a symposium on International Relations and Foreign Policy slated this coming Friday, and things to be done had become more urgent as the date approaches so nearly.
When the news on the U.S. economic slowdown finally became widespread, after weeks of speculation and foreboding, I got a glimpse of U.S. President George Bush speaking about it in a news conference in the White House, and I could fairly note the grimness of the situation through the heavy face that he had wore that particular moment. Often, action speaks louder than words.
It is simply the worst time for this to happen. Election time is fast approaching in America and the war crises in Iraq are far from over. An economic downturn is the last thing that President Bush would need right now. If he could not resolve this economic woe, President Bush would probably have to contend to a scenario where he have to exit his post with a dark shadow following him—-mismanagement of the economy and an unresolved war in Iraq.
Perhaps, he had given so much focused on his war campaign in the Middle East that he had forgotten that his people had also needed much attention from him.
Right now, the U.S. Congress had approved a bill allowing nearly $160 Billion worth of funds to be inputted into the American economy, putting money in the hands of middle income Americans, hoping that they would spend it on consumer products, pump priming the economy with sustained economic activity.
But what if this strategy wouldn’t work at all? Too much or abrupt increased in spending could result to high-inflation, doing more harm than good in the process.
If that happens, a prolonged slowdown would inure to a full recession, where the U.S. economy would shrink by so much that jobs would continue to be lost and productivity could move towards a downward spiral.
And everyone knows what happens when the America catches cold. The rest of the world sneezes. Even as we speak, stock markets across the world have suffered due to this debacle in the American economy. It is then of grave concern for all of us. In our turf, President Gloria Macapagal-Arroyo had just approved a 75 Billion pesos stimulus fund, hoping to shield and immunize our economy from the global effect of the slowdown in America. And it comes now at issue on where does our government get such huge amount of money when in fact we have lingering problems in our balance of payments and our offshore debts remain at a scandalously high level. It had amazed me to no end on how our President could easily announce the release of such huge amount of money, just like eating peanuts in the park—-when we all know that money in our treasury is of no significant amount.
Perhaps, it would amaze us more in the coming weeks when we try to find out where this money from the so-called stimulus fund had gone. I hope not. Or we’ll be having yet another useless Senate inquiry on this. (Isn’t it often funny to observe how our Senators are always asking some Malacañang official about some money and where did it go, and in the end, they’d be finding none? Senators ought to be smart and not gullible, aren’t they? But they seem always to end up like Wily Coyote, continuously putting traps here and there, and yet, Mr. Road Runner always come out unscathed and scot-free. I could always see a Wily E. Coyote scenario in our Senate.)
So where were we?
In my analysis—-I could see some form of irreversibility in the recent economic woes of America. International political analysts have always put forward the idea about how there would come a time when economic power would shift away from America, transferring wealth and productivity might towards other important players in international economics like China, India or EU and it seems to me that as elementary as these views are, such prognosis seem to become more and more patent and appertaining, not in the near future, but even now as we speak, where the wheels of change has started rolling so furiously. It is in the decline of American economic right happening right before our very eyes.
It is of great note how writers have begun to write about the gap between rich people and poor people in America—-on how it continues to widen, causing major and systemic economic problems there—-when in fact, just about a decade ago, there is no such term as the “poor people in America”. But now, there are the so-called “poor people” in the land of milk and honey.
Times are but a-changing.
In my readings, this most recent economic turmoil in America had been caused by the increased prevalence of joblessness and high-cost of housing there. Of course, it goes to say that when many Americans are unemployed or underemployed, not many of them could afford to buy houses, driving prices upward in the process as demands decreases. I understand that housing is a very huge and palpable sector in America. House mortgages and loans are main activities in the financial system, becoming therefore a major economic catalyst. If the housing sector is slow there—-or at worse stagnant—-then the whole U.S. economy suffers.
But then, it all boils down to joblessness in America. It is of common knowledge that a great bulk of the manufacturing sector there had outsourced their main production activities overseas, towards China primarily and to many other locations in Asia, such as India or Vietnam. Such is the trend happening for more than a decade now and the very low labor cost in Asia had compelled every American business to look eastward, or face obsolescence as they would become so hard-pressed to compete in terms of sales. How would Nike for example level up with Reebok when Nike continues to pay high-wage American workers while Reebok could lower their sales prices benefiting on very cheap labor cost in China.
With technology transfer easily transmuted nowadays, from one continent to another, the level of workmanship in America is easily replicated in areas like Taiwan and China.
This way, American companies have no other recourse but to shift manufacturing overseas in order to remain competitive. As a result, a huge portion of jobs in America would be lost, thereon spurring lower spending among the population and a continued meltdown of the U.S. economy is most likely to happen. Like I said, there is an irreversibility in all of these. The decline of the once so mighty American economy has started and shift in economic power would be given way.
And decades from now, even political and military power would soon follow.
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