An American in Davos
By James O'Keefe
Commentary Published: 2/15/06
The Daily Targum
Weathering a storm dumping seven feet of snow on the Alps, my train
ascended north into the alpine village of Davos, Switzerland, and I was
amongst 2,500 delegates from 90 countries at the 35th World Economic
Forum two weeks ago. Although there was the usual WEF schmoozing inside
the conference room amongst global elites exchanging business cards, the
talk of pervasive growth and highly-skilled labor in India and China
was particularly ominous. With massive American trade deficits,
declining domestic investment and its effect on American buying power,
Western leaders with a stake in the United States were biting their
nails and forecasting the greatest shift of global economic power the
world has ever seen.
Among those I met were Swedish auto-part manufacturers losing their jobs
to Imatra Kilsta of India. High-tech entrepreneurs from New York spoke
of how difficult it was to raise venture capital for their "ideas." One
software engineer from Silicon Valley lamented on moving to Lake Tahoe
and taking up snowplowing where "[management] can't move the white stuff
out east."
While my ears and eyes would typically glaze over vocabulary words like
"deficits" and "currency" to topics like the Danish cartoon strips,
which are far more sociologically captivating, everyone was worried
about the emerging skilled workforce in India and China.
As I write this now, headlines in The Wall Street Journal Europe and
London Financial Times read "American Giants Push for Nuclear Sales to
India" and "Toyota Expands in U.S. as GM and Ford Retreat."
Monday, the WSJ reported the U.S. trade deficit at a record $725.75
billion - some 7 percent of our gross domestic product - and deficits
with China alone are rising 25 percent in one year to $201.62 billion.
Some commentators think this is a practical joke. "I have a 'trade
deficit' with my grocery store; victuals are exchanged for scraps of
American green paper," said economist Walter WilliamsWilliams.
Cute analogy, but tell it to the central banks that are overflowing with
"scraps of American green paper" and treasury bonds we have no
intention of paying back. The east is in talks of developing its own
currency, following in the footsteps of the European Union with the Euro
- the first European currency since the time of the Romans. The
International Monetary Fund hints Asian banks are backing up their
fortunes with gold, and this week's reports indicate emerging markets in
Singapore and Hong Kong acquired western companies at $9.3 billion in
2005. Meanwhile, our investors are pouring money into the east for
better returns at America's expense. Since we import everything from
China, a future decline in the value of our currency would be
devastating for our way of life and on U.S. consumption - which the
world economy depends heavily on.
The inevitable increase of the accompanying interest rates to offset
hard times would have worse long-term consequences for our stocks,
inflated by get-rich-quick-pitches to management about exporting the
whole caboodle to India and saving pennies on the bottom line of the
balance sheet. Outsourcing is justified by the remainder of "high-tech"
and "service jobs," but skilled labor abroad is now jeopardizing those.
Our de facto economic strategy should not just be reducing costs, nor
should it be protectionism. American management should be creating value
for the customer, and our government should be pursuing a long-term
accountable economic policy of balanced trade, with an emphasis on
high-technology innovation. President George W. Bush is taking only one
step in the right direction in his State of the Union Address, by
putting emphasis on the latter.
Whether or not our current trend of outsourcing will present a crisis
will be debated among economists. Not even the Europeans deny America is
currently the most powerful, influential nation the world has ever
seen. We boast an $11 trillion GDP and consume 40 percent of the world's
output. We have the strongest military on earth, which defeated Hitler
and is now spreading democracy in regions that stone women alive. Our
art, music and literature currently dominate the Eastern and Western
hemispheres the same way blue jeans and rock 'n' roll brought down the
Berlin Wall. I've seen long lines at McDonalds in Geneva, heard Kelly
Clarkston blast throughout Milan train stations and, on Sunday, saw
American snowboarders win gold and silver medals in Torino, Italy. But
after attending the WEF in Davos and seeing first-hand our remaining
highly-skilled engineers running to the ski slopes - pun intended - it
is disconcerting to think all that power and influence could soon
change.
James O'Keefe is a Rutgers College senior, studying abroad in Switzerland.
