Recently I have been thinking about the seemingly intractable problems our country faces in the world, socially, economically and politically. And, I think I have it all figured out. Well, at least some of the economics. Keep reading. What follows is the world according to Will.
Being an optimist, let me say that I believe our free society and free markets will eventually overcome whatever obstacles we encounter. Our country is like a great river. When it comes upon a boulder in its path, it gradually adapts our path around the impediment, assimilates it, and things keep right on going. Zen types might say “we become one with the boulder.”
As long as our politicians don’t fiddle too much with the free markets, in the long run I expect that we will adapt to whatever comes along. However, in investing, as in life, long term outlooks might be favorable, but the short term gyrations can kill you.
Paul Samuelson, Nobel Laureate, and a leading economist of the 20th Century said “The Longer one invests the more likely they are to encounter a catastrophic market event. Risk does not go down with time, it goes up!” As a designated worrier, these kind of statements make my spine tingle, especially with so many problems on the horizon.
For the last century or so, the US has led the world in just about every category. We have been the economic driver, the political model, and a social beacon to most of the world. So, why do things seem so gloomy these days?
Our perspective is a bit warped, that’s all. After World War II we had the only economy in the world that had not been bombed to smithereens. The economic leadership we gained back when we had the only economy left standing gave us a 50 year head start over the rest of the world. Our standard of living reflected this leadership. It raced ahead while the rest of the world was stuck doing construction. Our financial markets boomed with only an occasional bust. We were on top of the world, literally.
What we are feeling now is the other areas of the world catching up with us economically. German engineering has matured, China’s huge pool of low cost labor mixed with capitalism is breathtaking to watch in action, educated India is attracting many jobs, and Persian Gulf petro-dollar economics are creating a boom in the deserts. None of this was barely imaginable 60 years ago. Now these are all major influences on the world economy.
We adults have never known a world where the US was seriously challenged, and this is where our perspective has gotten warped. The real world has been rebuilt over the past 62 years, and it is baaaaaaaack.
The beautiful part about free market economics is that for China or India or Iran to get a bigger piece of the pie, they don’t have to take ours. The global economic pie is continually expanding so new economies create their own slices without taking anything away from our standard of living.
For 60 years our standard of living was the envy of the world. Now there are other countries whose standards of living are approaching ours, and it causes us all to feel a little less special. When our poverty level includes people who have air conditioning, microwaves and color TV we are doing OK.
Hand-wringing journalists would have you believe that our manufacturing industry is drying up as manufacturing in China rises. Not so! I read recently that the manufacturing output of the United States has risen 20% in the past 10 years, to a new record high. We are manufacturing more than ever. But since we can’t remember ever having manufacturing competition like we have from China, we are all shocked. We are doing fine, but so is the rest of the world, and that is what is different.
So, the point of this article is to say, “Relax. It’s OK.” Things are not as bleak as the newspapers would have you believe. In fact, things are not bleak at all.
This is America, and I am grateful to be here.