You cannot shrink to greatness

I often borrow the phrase “you cannot shrink to greatness,” which I first heard when companies downsized to make their numbers. When leaders don’t know how to grow revenue or if market conditions do not support revenue growth, they cut staff. Lately, I have been using it to define the goal of nationalist thinkers who believe by restricting global trade, they can make things great.

On the whole, global trade is accretive to growth. Yes, we need to constantly review trade agreements to protect workers, but even trade agreements like NAFTA add value and jobs. If NAFTA were done away with, the state of Texas and the US would suffer, as would our key trading partners on our continent.

A venture capitalist said it succinctly. “Do you know what creates jobs? Customers.” The more trade, the more customers. It is that simple. As for the job losses which subtract from trade related gains, we do need to review the causes and effects. Many jobs have been lost dating back to the 1980s. Companies chase cheap labor, always have. So regardless of trade agreements, the companies were offshoring just as our President has done with his clothing lines and ball caps.

Also, where we are losing more jobs is to technology gains. We do much more manufacturing here, but with far fewer workers, than we did in the 1980s. These technology improvements will continue. So, before we blame trade agreements and throw the baby out with the bath water, we need to understand the metrics. What jobs are created, which ones are lost and why?

The other factor that does not get enough airplay is just as US companies are building products closer to customers, so are foreign companies here. Think of all the foreign cars and trucks made here in Tennessee, Kentucky, South Carolina, Alabama, etc. and think of foreign companies like Doosan, Mitsubishi, Michelin, Husqvarna, to name only a few, who have facilities here in the states. These are additive jobs to our economy.

Reducing trade is not conducive to growth. If you recall the movie “A Beautiful Mind,” about the schizophrenic John Nash, who won the Nobel Prize for Economics, ask yourself why he won? His theory called the Nash Equilibrium proved very useful in global deals in growing the pie bigger. The Nash Equilibrium says if we look to maximize only our own gain, while others do the same, the competition squashes trade. Yet, if we work together to make everyone benefit, the economic pie gets larger.

Reducing trade is also not conducive to greater security. The more commerce you do with countries that may not be an ally, the more you both will work to keep the commerce successful. So, military interventions would be harmful to that trade.

So, retrenching from the global markets, would not only be dilutive to growth, it would make us less secure. This is the argument that should be very visibly discussed as we look to improve agreements. Because no agreement is not a good course as it will cause a shrinking effect. And, you cannot shrink to greatness.

 

140 Characters and Global Risk

This number equates to twenty words of seven letters or symbols. Or, twenty-eight words of five letters or symbols. Irrespective of the combination, 140 characters typed in impatience is not conducive to well-thought out communication.

Yet, when in the hands of an ego-maniacal, less informed than needed and thin-skinned man who does not filter his thoughts, it is dangerous. People react to these few words that cannot possibly reflect context and subtlety and, in many cases, should not be typed without much thought and input from expert advisors. It is a bumper sticker approach to policy statements and governance.

But, when these character limits are deployed with national security messages, they are a recipe for disaster. The author has been advised on more than one occasion by another country how troubling these communiques are, most recently by China about his tweet on North Korea.

If this author is intending to govern by tweet with his temperament, this should give every person on the planet pause. But, don’t take my word for it.

On the BBC World News America earlier this week, Ian Bremmer, the founder of the Eurasia Group, an organization who measures risk, said the greatest global risk this year is an independent or retrenching America from the global scene. Bremmer said it would be akin to removing the guard rails on the global highways.

This is the stated posture of the President-elect to look more within. Imagine that concept being executed in the hands of the same less-informed, ego-maniacal and temperamental tweeting man. What could possibly go wrong?

 

Our next President may want to give more attention to the larger economies

It seems our President-elect is more consumed with Russia than he should be. Why the undue dalliance is something that the analysts should evaluate. Yet, Russia is not even in the top ten economies in the world.

Of course, we should endeavor to have commerce with countries as bilateral trade breaks down barriers. But, I would be more concerned with our larger partners – China, Japan, Germany, UK, France, India, Brazil Canada, and Italy. These and other trading partners like Mexico have a major impact on the US economy and job markets.

I would be more concerned with impacting trade with China than anything else. That could have a huge bearing on US jobs. Like the mistake with Brexit, we must not forget the jobs created here by foreign companies. Companies wanting to tap the US market have figured out it is more cost effective to build big things here rather than ship them from abroad – think Nissan,  Honda, Mercedes, BMW, Volvo, Hyundai, Husqvarna, Doosan, etc.

An economist said in 2015, China’s slowing growth has a bigger impact on the economy than similar percentage declines elsewhere. Yet, we should seek trade with other partners as well, to diversify and tap other markets. More commerce with Russia is a good thing, just as more commerce with Cuba and Iran is. Conducting trade creates relationships and builds more unity. Countries will be less inclined to upset applecarts. And, in Iran  the median age is 35, so the opportunity to change the future relationship in a positive way exists.

I recognize fully that there are leaders and countries we need to be highly skeptical of such as Russia, Iran, The Philippines right now, Syria and North Korea, e.g. Duterte is a thug, Putin is conniving and Little Kim is bat shit crazy, so we need to be leery of these folks

So, before our President-elect accepts Putin’s offer as a prom date, he may want to consider dancing better with our other successful partners.

 

Two misconceptions need to be challenged

“Innovation is portable,” said David Smick, an economic advisor to Congressman Jack Kemp and Presidents Ronald Reagan and Bill Clinton, in his book “The World is Curved.” In essence, innovation will occur where it is welcome and the initial jobs will be created around it. We should not lose sight of this observation as we discuss our economic future.

Smick surprised many when he noted in his book the similarities in Bill Clinton and Ronald Reagan, who were the number one and three best job creating Presidents, in that order. They both loved global trade and hated deficits. And, they were known for their collaboration with Congress, even with an opposite majority in power. Collaboration is essential to getting buy-in and understanding of the problem and possible solutions.

With this context, we need to challenge some notions that do not tell the whole story and, as a result, could lead us down the wrong path. We need to look at holistic causes to problems, so that we can address them effectively. Our problems are not solvable by bumper sticker solutions, no matter how loudly and forcefully they are espoused.

Here are two of those simplistic notions and challenges to think about:

Immigration is taking jobs away. This is far too simple a statement. Our history has been built on immigration, who have tended to be hard workers and spawned a higher relative percentage of entrepreneurs. As noted in the famous play “Hamilton,” by Lin-Manuel Miranda based on the book by Ron Chernow, immigrants tend to work hard to make it in our country, as they did not have such opportunity from whence they came. Our economy actually flourishes more with immigration. But, as we look to better govern immigration, we should look at the whole picture. And, on the subject of illegal immigration, a concerted study of the impact of curtailing such on certain industries – housing construction, landscaping, agriculture harvesting, etc. – is critical as we move forward with better governance.

Global Trade is bad for domestic jobs. Global trade is actual good for a domestic economy creating more jobs around the world and here. The downside is companies tend to chase cheaper labor and always have, but an even greater threat to jobs is technology advances. A CFO said in the book “The Rich and the Rest of Us,” an employer will hire no one if he could make it work. Yet, what creates jobs more than anything else is “customers,” per Nick Hanauer, a venture capitalist. And, more trade means more customers. When we look to better govern trade, we need to look holistically at the jobs created domestically versus the ones lost. The ill-fated Brexit decision failed to consider all of the foreign companies who have European Headquarters, distribution and manufacturing sites in the UK. These companies are now reconsidering locations should Brexit move forward.

Of course, we need to better govern immigration and global trade, but we must guard against throwing the babies out with the bath water. Let me close with three thoughts.

First, we cannot shrink to greatness. Retrenching from your global market share makes little sense.  Second, think of all of the foreign companies who employ people in the US like Michelin, BMW, Mercedes, Husqvarna, Doosan, Volvo, Nissan, etc. who do so to keep manufacturing near distribution of its goods to their customers. Third, as an example, Steve Jobs is the biological son of Syrian immigrants. Had he not been in America, would Apple exist today at all or as an American company?

We cannot govern off bumper stickers. Our issues are complex. People who tout such ideas are doing a disservice to the problem and citizens through false promises.