49. THE GLOBAL ECONOMY

Every so often there is a global economic shift. When it happens, it unfolds quickly and lives are changed dramatically. For example, in Thomas Jefferson's time 83% of the people in America lived on farms, whereas by the mid twentieth century only 3% did. Today we are in the midst of a similar transition that will put us in a new, almost unrecognizable world. Just a few decades ago America was the manufacturing capital of the world. Even workers of low skill could get good jobs and support their families with only one parent working. But manufacturing is not only being increasingly automated, it is being moved elsewhere in the world. As a result, notice how few one-working-parent families there now are. More dollars are floating around, but the value of those dollars is less and less. To maintain a standard of living they think they deserve, both parents must work or try the financially ruinous acrobatics of credit.
 
Large companies are also now struggling to survive and tens of thousands of workers are being laid off. Inflated wages as well as corporate waste and extravagance cannot compete in a world market. In contrast, manufacturing and economic power is blossoming in parts of the world that had been considered backward and impoverished twenty years ago.
 
These remarkable changes are a manifestation of the inevitable pressures toward one world. The globe has finite resources so if in one area the standard of living rises, in another it must fall. This historic global shift is the macro-cause for the job disruptions and lowered standard of living in communities across America.
 
The nations now growing the fastest in the new Industrial Revolution (perhaps better termed job dislocation) are those in Southeast Asia, China and India. People there are working hard and saving—something Americans used to do. Instead of reinvigorating a work ethic and innovation, many Americans are attempting to sustain the lifestyle they think they are entitled to by second mortgages, consolidating debts, maxing out credit cards, lotto ticket purchases, get-rich quick schemes, lawsuits, and playing the market. Industry is moving elsewhere, while banks, credit institutions, and investment venture groups make hay with the artificial manipulation of domestic wealth.
 
In 1991, Singapore's national savings rate was 43%, compared to 3.2% in the U.S. From 1980-1990 there was an annual budget surplus in Singapore of 10.5%. In the U.S. deficits averaged 4%. If we had Singapore's surplus instead of our deficit, Washington would now have trillions of extra dollars in their coffers instead of owing that much.1
 
The American middle class is taxed to death to support the progression toward socialism. The starting income tax rate in Singapore is 3%, and half of their taxpayers pay less than $150 per year. In America, a person's combined taxes can reach 60% or more. Per capita annual income has increased five-fold in
 
Singapore since 1975, while our income has actually fallen in real terms since 1973.2
 
Similar revolutionary things are happening in Thailand, Malaysia, and China. China, in fact, if it attains even the per capita wealth of Taiwan, will be a larger economy than the rest of today's industrial world combined. Presently almost one-half billion dollars per day are being invested in China by foreign interests.3
 
There are many reasons for the rising success of these economies. These reasons provide empirical proof that short-sighted socialistic trends do not work. Only to the degree that China subverts its socialism with free enterprise does it become economically prosperous. Also, the cultural beliefs of these developing nations do not accommodate free rides. People there are much closer to the reality of what is required to survive: tend the chickens, gather the eggs, hoe the fields, or starve. They think paying people welfare for not working is a drug that has sapped the vitality out of the West. Asian governments also spend very little on health and social security. This creates a mindset in workers that they are responsible for themselves and must work hard, save, and manage money wisely. American entitlements and union guarantees create the exact opposite mentality.

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For those who might believe that life is unduly harsh in these countries, consider that a baby born in Hong Kong can expect to live two years longer than an American or British baby. Families in the Far East save and provide for their own and let government spend its budget on education, industry, and infrastructure. Asia's secret is this: Get skilled, work hard, save, tax little, make quality products the world wants at affordable prices, and invest in good schools and a strong infrastructure.
 
This global economic shift is an attack on status quo in America. Our immediate reaction is to keep things as they are and deny the inevitable. This is manifest in the "buy American" movement and the outcry about outsourcing jobs to other countries. But these are like the final convulsions of a sinking ship. We are sitting atop a historical correction that is bigger than any cries of protest.
 
Prosperity will not return or be secured by a union vote, a law mandating economic isolation, or refusing to buy anything manufactured in whole or in part outside the country. This would be like a company trying to save its market share and fat salaries by sending a letter to customers demanding that they continue to purchase the company's products.

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America became prosperous because of entrepreneurship, creativity, and hard work. Once prosperity came, its inertia permitted a generation to ride the tide and receive much for very little. But a something-for-nothing economy is a bubble that must burst. The fat prosperity America once enjoyed will never return to its inflated size. But we can at least be competitive if we return to the ethic of value given for value received and if government unleashes free enterprise by curtailing socialistic parasitism and disincentives.
 
American businesses and their employees cannot have the high failure rates they do in the face of a world economy. Businesses fail in principle, if not literally, when money, rather than a worthwhile idea, is the objective. Employees fail in large part because they do not see that they are in the business of selling worthwhile services and are not merely entitled to wages.
 
Business owners are often frustrated by not being able to give employees a sense of what it is like to start a business from scratch, that jobs do not just appear out of thin air, and that success is not automatic or just the result of being 'busy.' A business is like a living creature that needs understanding, nurturing, kindness, creative feeding, and protection. It is not a horse to ride into the ground.
 
Unfortunately, many people have come to believe that mere presence at a job, past experience, or academic credentials are sufficient to justify wages. The notion that they should actually produce something that could at least translate into their wage does not even register. This is in large part because there is this chasm of understanding between those who have the responsibility of business on their shoulders and have no guarantees, and those who receive a guaranteed wage. Couple this lack of employee understanding with politically fueled class warfare—corporations vs. public; rich vs. poor; white collar vs. blue collar; salary vs. hourly—and the seeds for malcontent and business ineffectiveness are sown.
 
Everyone must see the reality: Something must be accomplished or produced quickly enough so that return exceeds the costs and wages of the project. Otherwise, expenses are not covered, there can be no wages, no growth, and ultimately no jobs or business. It's a simple equation but few people take it to heart in our guaranteed wage and entitlement-leaning age.
 
Businesses must be especially careful to not become part of the 85% that fail within the first few years. Such a dismal statistic is not by accident, bad luck, or fate. If the beginning idea is good and there is a market, there can be success. But there is much more to it than a good idea, printing a logo on pens to give away, and calculating that if only 0.001% of the population buys a product and the margin is X%, that profits and success are a cinch…so why not borrow money and enjoy the fruits of success now?
 
Succeeding in business is neither easy nor glamorous. Too often, aspiring entrepreneurs look glassy-eyed at effects: the envious lifestyle and income of those who have succeeded. They don't see the hard work, failures, sacrifice, disasters, risks, and time that even modest success requires. Nor do they see the litter of dashed dreams and devastated personal assets scattered over the failed business landscape.
 
Business and employees must face the reality that there are no guarantees other than that good results come from hard, smart, and relentless work. That employees and employers find themselves at odds makes no sense, particularly in the face of the limitless competition of the new global economy.

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