It’s a New World Economy

We are living in a new world economy. It is changing the way we look at industries, jobs, and careers. Can the United States compete and survive in it? The computer and the Internet, both invented and spread worldwide by the United States, have brought this situation about. Will our ingenuity and flexibility allow us to stay ahead of the curve? So far the answer is yes, but will we continue given some of the trade, political and the cost barriers? Read Robert Freer’s article below to get his thoughts on how we must react politically to stay ahead of this game.

By Robert E. Freer, Jr., President of The Free Enterprise Foundation

As a result of technological changes both in computational and information technology, the world has been transformed over the past decade from one of fixed economic assumptions to one of global ever-changing dimensions. Winners will be those who master information flow and supply products and services to meet the need of the moment most economically. Markets by natural processes seek efficiency.

The computer and the Internet have given us a truly global village.

Though economic troubles in the past decade and more recent outsourcing of jobs to other nations have raised doubts about the success of the U.S. economy, the truth is that our economy reflects the skills we have as a people. As a society, we have become best at supplying managerial and service sectors that support the level of individual consumption that has become identified with the American lifestyle. Many lower tech industries have seen their workforces displaced by our inability to provide the lowest cost per unit for a number of everyday products. As consumers we have all benefited from this in lower prices while providing a needed improvement in lifestyle in those parts of the world that can provide lower cost labor, but that is of little comfort to those displaced. To protect them and our economic stability, we need to understand and manage these forces better.

On one hand many “smokestack” and “silicon based” companies have been seriously impacted in the last decade, while on the other our society created more than 2.4 million new jobs in 2004, and many of these jobs are in new businesses in industries and services that didn’t even exist ten years ago. Many of these companies are now ideally suited to play key roles in disaster relief, worldwide distribution, communication, and management of the new economy being created by technology.

Like death and taxes, business cycles still exist, but free economies like that in the United States are the best option to meet the world’s ever expanding need for products and services. Going forward with all the old “isms” discredited, there is no alternative to a free market in which technology is encouraged in order to ensure freedom and financial security.

Our challenge is to encourage the forces transforming our society while not leaving displaced workers behind. Free trade must also be fair trade. Europe discriminates unreasonably against our gene enhanced agricultural products. China enforces quirky customs classifications that force our companies to engage in a tedious process with Chinese customs officials. IP continues to be a problem in terms of enforcement in China, India and Brazil, and some countries just outright favor key product sectors regardless of WTO.

Our continued reliance on a complex personal and corporate income tax system doesn’t help either. Our system does not match up well to those consumption and value added tax systems used elsewhere that routinely exempt taxes on export products while our attempts to level the playing field are often found to violate WTO rules. Few disagree that our tax system needs to be simplified and be friendlier to capital formation, yet inertia and interests that are vested in the outdated system have prevented our making these improvements.

Common wisdom seems to have changed. Where before we expected to work for a single employer for most of our working lives, today we expect to have several careers. Being a machine operator is not a prescription for a secure retirement. The machines change, even disappear to be replaced by a need to understand computational process and organizational dynamics. As a society we need to focus on these forces and encourage industries facing them to retrain and hold onto their workers rather than abandoning them for whatever the new wave brings. The dynamic that sees middle aged workers being shunted aside is wasteful and unfair. As the populace ages, it will also become politically untenable.

Copyright © 2007 by Robert E. Freer, Jr. All rights reserved

About the author: Robert E. Freer, Jr. is President of The Free Enterprise Foundation. He is a Visiting Professor, at The Citadel and elected in 2005 to be their first John S. Grinalds Leader in Residence. A regular contributor to the Mercury, He can be reached by E-mail at The Citadel . Copies of his earlier columns can be found The Free Enterprise Foundation.

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