As anyone who reads this column understands, I am an optimist, particularly when it comes to the economy. I believe in the nature of cycles, and, although no economic cycle is exactly like another economic cycle, all have a general movement that is similar. When looking at the economic cycles in our history one can easily see the similarities. Having said this, I will also say that no economic cycle is exactly like another because the historic time in which each cycle occurs is different. Each time-period has particular elements that are different from any that have come before.
I have in the past compared this current recession to that of the 1980-83 recession, which, by any standard, was a difficult and stubborn recession, much like the one today. The similarities are many; however, one difference is now emerging that should make us all reflect about our long-term economic future – exports.
… the Commerce Department said the broadest measure of the U.S. trade deficit widened for the fourth straight quarter. The current account trade deficit grew to $123.3 billion in the April-to-June period, a 12.9 percent increase from the first quarter. A year of growth could be viewed as a healing sign for the U.S. economy as Americans slowly regain their appetite to spend.
Unfortunately, even though the above seems positive, it is not. Buying goods from abroad means we are not buying goods here, which means we are exacerbating the decline in manufacturing that began thirty years ago in that difficult 1980s recession. Exporting goods is far more beneficial to our economy than importing goods. There is good news, however. The current administration has focused on this problem and with its “National Export Initiative,” the goal is to double our exports within five years. Below is an excerpt from its first report.
Exports are an integral part of the U.S. economy. In 2008, American exports accounted for close to 7 percent of our total employment. Nearly 1 in 3 jobs supported by exports are manufacturing jobs. In the first four months of 2010, exports grew almost 18 percent compared to the same period last year. Additionally, exports accounted for more than one percentage point of GDP growth (at an annual rate) in each of the four quarters of recovery, outpacing consumer consumption and fixed investment
The news is good, but, like the economy, we are far from healed in this area. As an optimist, though, I am encouraged that we might just turn this pending disaster around, that we just might come to understand, once again, that our true economic power lies in manufacturing, the creation and distribution of goods. The fact that the first excerpt above deems it good news that our trade deficit widened (consumers are spending money on imported goods) tells me we have a ways to go. At least, though, the current power structure seems to recognize that the path we have been on for thirty years leads nowhere but to a service economy dependent on buying goods from everyone but ourselves. From a market perspective, I guarantee you, this is not where we want to go.
Trade in the day; invest in your life …
