Job Security and the China Threat

The China export juggernaut has now engulfed other nations besides America. Foreign investment from around the the world into Chinese manufacturing infrastructure is paying off for multinationals . About two years ago- for the first time ever- global investment funds for manufacturing were larger in China than America. Those plants are now humming with Chinese workers reading the Chinese symboled instructions of operation. The Industrial Revolution which created the middle class in England in the 19th century has now moved to China with a resulting decline in the middle class in America and elsewhere.

On April 8, 2005 China Customs( official agency) posted the results of a worldwide trade surplus of $10.9 billion through the first two months of 2005 versus a $7.9 billion deficit in 2004(same period). China always ran a huge surplus with the U S which was enough to offset deficits with other nations. But now it is running surpluses with mostly everyone.

What is being done? Protectionist legislation is working it's way through Congress including a 27.5% tariff on Chinese goods if China does not revalue its currency (yuan) from a perceived 40% undervaluation. A revaluation would be a superficial fix. One should never confuse the sympton for the cause of a problem. The non-competitive governments in the West are the basic problem.

America for example can't compete because of a legal system that rewards delay and overvalues equal rights without equal obligations-our welfare system. Our cost of government including Medicare and Medicaid raise the poverty level to $18,000 per year for a family of four.. A manufacturing worker in China earns about $1,500 per year. This is why America is not attracting investments for manufacturing.

What should be done? Low-cost adaptive behavior will translate into jobs being retained in America.

Here are some thoughts.

1) The cost of our national government is too expensive and cumbersome. State and local government are more cheap to run and are more responsive to changes. All politics are local. Shut down the federal government in the areas that can be done by state and local governments..

2) Our legal system needs a "loser pays" provision( like the rest of the world). We would be more competitive. The legal system should also reward expedited solutions and penalize delayed costly ones.

3) The low-cost producer will always survive. Darwin's observation is valid for workers also. The low-cost producer in the future will use barter as part or all of it's business model.

4) Abolish the tax code and replace it with a Nationa Sales Tax of about a 15% rate (check out Cato Institute's plan). A sales tax would reward savings. More savings domestically will mitigate the need to borrow from abroad. Everything has a cost-a sales tax is a recognition of the cost to the environment. A sales tax insures everyone will pay.

America created the circumstances of it's non-competiveness. We can fix it.