DOING BUSINESS BETTER. TOGETHER

Fortune favours the fearful

30 Jan 2008 12:00 AM | Anonymous
Here is a statistic for you: 15 out of every 100 dollars spent in the world are spent by Americans, but they do not save at a similar rate. US workers famously have a powerful work ethic, with long hours and short holidays, but economies such as India and China now offer both a skills base and manufacturing might at a fraction of the cost. Indeed, one economist recently argued that China is exporting 'disinflation' to the world.

Fuel bills and food prices are soaring higher than wages worldwide, but China and India are building domestic generating capacity for both at a staggering rate. Eastern Europe, meanwhile, is buying ever deeper into gas production. Gold prices hold steady above volatile and nervous markets (and will rise further as power outages in South Africa close down local production), and one thing India knows how to buy is gold.

All of this goes some way to explaining why Americans from the dustbowl to the Superbowl will turn on the offshoring industry at the drop of a dime: as we examined last week, they think it's solely about American jobs and dollars heading East.

While we know this isn't true, a survey in Fortune magazine proves that people believe that it is, and these are the people whose spending power has been the financial engine of the world. Signs are that the US is becoming increasingly protective of the venerable old economy held between its jagged shores.

It's a familiar joke about the US that people in the 'square states' never travel, while people on the east and west coasts are much more connected with world affairs. However, economic anxiety has affected the US to the extent that Americans of all shapes and sizes feel as though they are now the victims of global competition – a claim other parts of the world might scoff at, perhaps, but belief can be a dangerous thing. Fortune reported that 68 percent of those surveyed felt America’s trading partners are benefiting most from free trade – that's free trade – rather than the US.

The magazine surveyed 1,000 people this month and found that the US was on the “verge of becoming a country of economic nationalists”, with nearly 55 percent believing that growth in international trade has harmed American business, and 78 percent that it has worsened the lot of American workers as jobs fly, so they believe, overseas.

“That sense of victimhood is changing America’s attitude about doing business with the world,” said the Fortune editorial. “We are a nation crawling into a fetal [sic] position, cramped by fear that America has lost control of its destiny in a fiercely competitive global economy. The fear is mostly about jobs lost overseas and wages capped by foreign competition.”

It's a fear that is beginning to play a role in the forthcoming US election, and one that demonstrates how inexactly US politics map onto those of Western Europe, as Democratic candidates talk up the issue more than the Republicans. (In the UK in particular, economic isolationism is more usually the preserve of the conservative Right.)

Presidential hopeful Barack Obama accepted his recent win in Iowa by pledging to end the outsourcing of jobs, while Princeton economist Alan S Blinder is on record as saying that communications technology risks 40 million jobs being shipped out of America in the next twenty years. The Democratic mantra is now “fair trade, not free trade”, said Fortune.

This is all very well, and the US is lucky to have candidates with the power, intellect, passion and charisma of Obama and Clinton battling to wrest power away from the Republican old guard, but any such grandstanding to the local electorate by candidates – of any party – simply plays an easy card. In economically turbulent times we are surely more connected than ever in a global market.

If proof of turbulent times was needed, one website reported this week that 75% of all the trading sessions on Wall Street this year have seen triple-digit moves in either direction. That's volatility of an almost unprecedented nature, and the US should be wary of rocking the boat catastrophically in its efforts to steady it, at a time when they are no longer the only boat out there worth getting on board.

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