USA Economy, Something is really wrong!

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Peter Faber

USA Economy, Something is really wrong!
May 30, 2003

The USA imports more than it exports. This means there is more money leaving the country than there is going into the country.

If that difference is just small it would not be such a big problem, BUT lets see what the figures are. The USA exported in 2001 for 723 Billion dollars, and imported for 1148 Billion dollars!!! That is a difference of 425 BILLION Dollars. That can not go on for ever.

But why is this happening? Why is the USA importing so much more than it exports?

Part of the reason is the expensive dollar of the last years. An expensive dollar makes that foreign products are cheap. So competition of foreign product is strong.

But then there is also the "American way". A very free market brings more risks. (Of course it also brings inovation, especially in technology, something in which the USA is the leader in the world.) The very free market of the USA allows foreign products to come in relatively easy, and there for people have more access to foreign products.

Consuming products is also one of the problems,.. The USA is the consumer market in the world. Not only because of its size, but also because Americans consume a lot of products, and throw away things quite easily. For example, Europeans throw a way less easily than Americans, and in less rich countries people re-use and re-use over and over again, much more than in Europe and far much more than in the USA. It seems like the richer a country, the more careless they are with what they consume. The figures for energy consumption give a good indication as well. The USA uses far more energy per person than any other country in the world.

So what to do now?

Well, one thing is already changing. The Dollar is getting cheaper again, so competition of foreign products will be less strong.

Protection of the market? Seems like a possibility but this goes against everything Americans believe in. (Even though Bush sometimes decides to protect some parts of the market, going against his own religion.)

Consume less? Makes no sense, since that will mean also consume less native products, which is bad for the economy.

Consume less foreign products. Sure, but why buy native products when foreign products are cheaper? Won’t work.

Increase exports!! That would work. The problem is not just that there are a lot of imports. The problem is also that there are not enough exports. But how do you increase your exports? Well, the cheaper dollar will help already. But that is not enough. American products don’t do too good at the moment, considering all that is going on in the world now. So they need to be cheaper. But that is a problem too. How you get them cheaper if you live in a country that is so rich the minimum wage is high (compared to many other countries). One way is to improve technologies so that less people are necessary for the same amount of work.

The unions won’t like that because that means people will loose their jobs. And here we come to a point which is very important! Even though the USA is technological the most advanced country in the world, it seems that that is just partly the case. Many people do jobs that should have been mechanized long time ago. But the unions in the USA are so powerful they block these advancements in some areas.

A very simple example: In many states, elections are still done by hand count and/or machines that were made in the sixties (remember the bush - gore problem!) Brazil, a third-world country has all of its voters, vote electronically, but the USA seems to think that it is better to count by hand. How come that this is not done electronically in all of the USA? (part of the answer: Unions and oh well, we can afford to hire many people to those counts by hand)

So American products often are very expensive, while they don’t really need to be. Solving this problem will help a lot, but it is also the most difficult problem to solve.

If anybody believes I am not making any sense here, then please let me know. I am not an economist, but I do believe to be a good analyst. I try to put 1 + 1 together and end up with 2. But maybe I do not have all the details I should have. If you do reply, don’t tell me that there are more matters that influence this process. I know that already. What I would like people to think about is the need for mechanizing more jobs in order to reduce costs and make American products more competitive, not just in the USA but also outside the USA. Because that is a real problem.

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Peter Faber is Dutch and has recently moved to Brazil. Visit Peter's Advise the World. Email Peter: getting_there@uol.com.br

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