There are those both outside and inside America who are rubbing their hands with glee at this nation's supposed collapse. That realization smacked me in the face Monday morning when I taped an interview with two economists -- one in Frankfurt and the other in Hong Kong -- for Russia's RTTV, scheduled to be broadcast seven times on Sept. 8. America, in their view, is so bankrupt that it has become irrelevant. One cites Ron Paul as the only U.S. politician who's in touch with this reality.
The premise of the RTTV segment was to explore whether America is heading into a double dip-recession. But if you enjoy watching sharks chomping at chum-filled pools of blood in the water, you'll want to watch this segment, because F.W. Engdahl, an American economic researcher living in Frankfurt, and Martin Hennecke, a German senior manager of private clients at Tyche who lives in Hong Kong, went on the attack against America.
America's failure, they say, came because the country is so loaded with government debt and running such a huge deficit that it's bankrupt. Engdahl believes that America had a chance to save itself in 2008 by letting Wall Street collapse. In his view, America sealed its doom by bailing out Wall Street.
Is America an Economic Basket Case?
Hennecke voiced the view -- echoed by Boston University professor Lawrence Kotlikoff -- that when you factor in the liabilities for Social Security and Medicare, our true national debt is $202 trillion, 15 times the official figure. He joins Engdahl in the belief that America has outsourced its brains and its manufacturing industries, leaving it nothing but a few agricultural commodities worth exporting to the rest of the world.
Among other things, Hennecke is certainly wrong on the facts of U.S. exports. According to the CIA World Fact Book, agricultural products constituted a relatively small proportion of 2009's $1.04 trillion worth of U.S. exports, which were distributed as follows:
Capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment, etc.) 49%;
Industrial supplies (organic chemicals, etc.) 26.8%;
Consumer goods (automobiles, medicines, etc.) 15%; and
Agricultural products (soybeans, fruit, corn, etc.) 9.2%.
While I'm concerned about America's debt and deficit, and its economy's failure to rebound robustly, I don't share Engdahl and Hennecke's pessimism about America. In my view, the economy is still in the recession that began in December 2007, yet we have enjoyed economic growth since the summer of 2009 -- albeit not sufficient to create the 300,000 jobs a month needed to reduce our unemployment rate significantly.
How Will America Create Jobs?
In my view, America's greatest economic strength is its ability to take powerful new ideas and turn them into business ecosystems. That's a topic Babson College professor Srini Rangan and I addressed in our June 2010 book, Capital Rising: How Capital Flows Are Changing Business Systems All Over the World. Unfortunately, it has been about 10 years since the nation has been able to put that strength to use creating jobs.
We could achieve economic growth if we could create such ecosystems that would draw capital investment from the corporate sector into new technologies that boost business productivity. We achieved that goal in the 1960s (mainframes), 1970s (minicomputers), 1980s (networked PCs), and 1990s (Internet).
The Internet helped create 22.4 million jobs during the latter half of the 1990s. We haven't witnessed business investment in a technology of that job-spurring magnitude since -- but companies have accumulated $1.84 trillion in cash that they could invest if such an innovation emerged. It's up to engineers and scientists, collaborating with government, business, and investors to create it.
And if such technologies do emerge, a wave of successful initial public offerings would unlock venture capital to invest in them. But Engdahl and Hennecke don't believe there's any relevance to that view. Hennecke suggests that investors should avoid buying anything in America and should instead invest in gold, silver, and commodities. He sees Ron Paul and the Tea Party as the only people in the U.S. with the sense to realize that America's best days are behind it.
Engdahl sees opportunity for Russia and other countries that control natural resources to sell their commodities to China, which in his view is the only possible source of global growth.
Are you with those who believe that America is economically irrelevant? If so, where are you investing? If not, what do you think will spur a revival of American growth?