JUNE 2003
Greetings & Salutations:
Of late, our sagging economy has been the subject of much
conjecture and debate. Countless solutions have been offered
to supposedly solve the problems and revitalize our economy -
BUT ...
Until we return to the economic heritage of this country,
we will (as always) be doing the same ol'thing but expecting
different results.
Of course, before we can return to our economic heritage,
we need to understand what it is - SO, here's ...
A SHORT HISTORY OF THE AMERICAN ECONOMY
If it wasn't for international trade, there probably wouldn't
even be a United States of America.
Ferdinand and Isabella didn't finance the Columbus expedition
to satisfy his urge to travel. They invested their money
to find new, more profitable trade routes and discover new sources
of natural resources to develop.
Although the landing of the Pilgrims at Plymouth Rock, to
escape religious persecution, may lend moral justification to
the founding of our country, their activities did little to create
the country we know.
It was the international merchants of that time who funded
the settlement of the new world. They hired and paid people
to live and work in the Americas.
The colonization and settlement of the new world happened
because it was easily possible for the colonists to produce more
than they could consume. Production, in excess of consumption,
was then available for export back to the old world countries
at a profit.
America became the land of opportunity because anyone with
a strong back and willing spirit could prosper. All they
had to do was turn the abundant natural resources in the new
world into products and raw materials to be exported back to
England, or Spain, or wherever.
Exporting was the foundation upon which the United States
of America was built. As long as the people produced more
than they consumed, the world was ready and willing to buy the
excess.
In the earliest days of colonization and settlement, consumption
was limited, making an abundance of goods and materials available
for export. Later, as the country expanded, the population grew
and goods that were produced in excess of consumption in one
area were shipped domestically to be consumed in other areas
of our country. - That's why our founding fathers declared
that there would be no tariff duties between the states of the
union.
As the country expanded westward, the natural resources available
in the frontier areas were developed. Raw materials were
shipped eastward where they were processed, or fabricated, or
consolidated. Production in excess of domestic consumption
was exported.
Believe it or don't ... until the 20th century, our economy
was largely export driven. We exported far more than we
imported. Ours was a "producer" nation, supplying
the markets of the world with goods and materials "Made
In The U.S.A."
What happened? - How did we become a "consumer"
nation?
Contrary to allegations made by the fringe elements of our
society, American workers have NOT become lazy or non-productive.
Even during times of war and economic crisis (from depression
to hyper-inflation), American workers have always been able to
produce more than we can consume. - Are they to be blamed because
our factories are operating at far less than capacity?
The fact of the matter is ... we, as a nation, have simply
forgotten about exporting. We have abandoned the world
markets and limited our production to supplying only the domestic
demand.
What? - How could a whole country forget about something as
vital as international trade?
Consider this abbreviated sequence of events.
In the beginning, the vast majority of factories, processors
and fabricators established in the new world were formed for
the sole purpose of exporting goods and materials back to the
old world countries.
As the country grew and expanded from coast to coast, it suffered
through various economic growing pains. There were times
when domestic consumption absorbed most of the production; leaving
less to sell in the international marketplaces.
But, the entrepreneurs of those times were true to their export
heritage. They simply formed more, and better, factories
to meet the export demand.
The Great War (World War I) marked the turning point. - It
was the first international war effort. Citizens were asked
to consume less so factories could be converted to produce essential
war materials.
When the Great War ended, domestic demand was, of course,
at an all-time high. Satisfaction of that domestic demand
generated the opulence of the 1920's.
The entrepreneurs of that era, being the progeny of their
export oriented predecessors, expanded their production to meet
the domestic demand and provide an excess for export. Unfortunately,
due to the deep economic depression in Europe, the anticipated
export markets never fully materialized.
With the domestic demand satisfied and excess inventories;
originally earmarked for export, on hand, production was curtailed.
Supply exceeded demand. Unemployment soared. - The economy
crashed.
Rolling with the punches, U.S. manufacturers geared their
production to domestic consumption. Production for export
was on an as-needed basis. - In other words, goods for export
were only produced after they were demanded overseas.
By 1940, supply and demand in the domestic marketplace had
begun to stabilize. Employment was increasing. Economic
recovery was at hand. Then, World War II happened.
Again, citizens were asked to sacrifice (consume less) for the
war effort. Factories were, again, converted to the production
of essential war materials.
At the end of World War II, the domestic demand for goods
and materials was even greater than after the first war.
Older entrepreneurs, remembering the over-production at the
end of World War I limited their production to the satisfaction
of domestic demand. Export production was, again, accomplished
on an as-needed basis only.
The generation of entrepreneurs of that post-war era were
the progeny of that older generation. They had been schooled
in production for domestic consumption. And, with post-war
domestic demand beyond their wildest imagination, exporting was
really unnecessary to their bottom line profits.
Progeny of that generation of entrepreneurs ... the entrepreneurs
of today ... have only been schooled to satisfy domestic demand.
Factories, fabricators and processors are now founded for the
sole purpose of supplying domestic demand.
Is it any wonder that, for at least the past 40 years, only
15% to 20% of U.S. businesses have been involved in export.
We, as a nation, have literally FORGOTTEN our export heritage.
EXPORTING TODAY
Today ... and for at least the past 40 years ... only from
15% to 20% of U.S. businesses have been involved in exporting.
That doesn't mean that 15% to 20% of our "production"
is exported. It means that only 15% to 20% of the businesses
in this country export their goods and materials.
For illustration purposes, let's pretend that there are only
1,000 businesses in the U.S. - Less than 200 of them would be
"exporters."
Of the 200 exporters, just 30 of them (15%) would account
for 85% of the dollar value of all U.S. exports. - One hundred
of them (50%) would export to only one (1) foreign country. -
And, only 40 of them (20%) would export to more than five (5)
foreign countries.
A bleak picture indeed when you consider that there are about
5.5 Billion people in the world. Only about 250 Million
of them live in this country. - That means for every person living
in this country, there are 22 people living in other countries.
The picture looks even worse when you realize that today ...
right now ... the United States of America has more production
capacity than any other six countries in the world. - We just
don't use it. Having forgotten our export heritage, we
limit our production to supply only the domestic demand.
You would think U.S. businesses, seeing a market 22 times
larger than the domestic market, would be eager to offer their
goods and materials to this vast, untapped market. But,
they don't.
Why not? - What makes them shy away from a market 22 times
larger than the market they currently serve?
There are a number of reason. One of them is nothing
more than a "learned response."
Each generation of entrepreneurs is the progeny (offspring)
of the preceding generations. They learn to do what they
do; and how they do it, by emulating (copying) what they have
seen the generations before them do.
If you will recall, beginning in the depression of the 1930s,
U.S. businesses began handling exports on an as-needed basis.
If an export order came in, they would produce and ship the order.
They did not, however, aggressively pursue export orders because
the European markets were, at that time, suffering through their
own depression.
For that reason, later generations of entrepreneurs got the
mistaken impression that export orders just came in unsolicited.
What they didn't realize was that the unsolicited orders their
predecessors were receiving were the result of years of building
a customer base overseas.
Because of that mistaken assumption, the vast majority of
U.S. business people honestly believe, "If they want my
products overseas, they will send me their orders." - BUT
- If they ever do get an inquiry from overseas, they don't know
how to handle it.
Another reason U.S. businesses don't actively pursue international
markets for their products is because they mistakenly believe
that "people overseas can't afford to buy our products"
- or - "U.S. products are too high priced for the international
marketplace."
This misconception is widespread in the U.S. It is largely
due to repetition by otherwise well informed, respected people
who have heard it said and repeated it without knowing the facts.
Their notable credentials add credence to the myth.
However, in every society; whether here in the U.S. or any
other country, the middle classes are the "buyers."
And ... believe it or don't ... every developed nation in the
world has middle-class people who can and will readily pay for
what they want or need - no matter the cost ... especially products
"Made In The U.S.A." (still a mark of distinction around
the world).
Think about it ... if middle-class people in this country
can somehow afford to buy Color TeeVee sets, new cars, homes,
jewelry and all the other things they buy, it is utterly ridiculous
to think that middle-class people in other countries can't somehow
afford to buy what they want or need.
What do they want or need?
Name it! - Just like middle-class Americans, they want items
that will make their lives more comfortable, give them pleasure,
or make their job easier. Simple things. Things we
use every day and take for granted. Things they don't have.
It's not that people in other countries can't afford our products,
or that our products are too high-priced. Those people
simply do not know that our products exist ... we quit telling
them about our products well over 60 years ago. We take
those products for granted and forget that people in other countries
have never seen them.
Unfortunately, the same respected people who tell us that
U.S. products are too high-priced, also tell us that ...
"The only way the U.S. can compete in the international
marketplaces is by exporting our technology and hi-tech products
and re-training our workers for hi-tech jobs."
Rubbish and Hogwash! - I don't care how sophisticated we are
(or think we are), there will always be more people who can use
hammers, nails, shovels, saws, can openers, wire and twine than
hi-tech gadgetry.
We may make a substantial profit exporting ONE hi-tech gadget
- but - we could make the same profit on a few thousand claw
hammers. And, the claw hammers would be easier to sell
... with more people ready, willing and able to buy them worldwide.
I'm not saying that we should let our workforce stagnate.
But, we must never forget that American workers are the most
adaptable in the world. They will adapt to the job market.
They always have and always will. - Remember, it wasn't that
many years ago that automobiles represented hi-tech; over the
horse and carriage. The workers then adapted, so the workers
of today will adapt; as necessary.
Besides, better technology makes jobs easier to learn and
do ... not more difficult.
As an example: When I first became involved in the Printing
business, I learned to operate an offset duplicator (printing
press) that required a multitude of physical adjustments when
preparing to print a job. Years later, most of those physical
adjustments were done by simply pushing 2 or 3 buttons on the
machine. Today, running an offset printing press is so
simple that, in many offices, small printing jobs aren't even
sent to a print shop. The jobs are run right in the office
by the office personnel. The only thing that keeps the
vast majority of businesses from having their own printing press
is not the lack of training for their employees but, rather,
the cost of the equipment. It simply isn't cost effective.
- It's the same way in most industries.
Rather than focusing energy on re-training our workforce,
we should be selling the thousands upon thousands of products
that we haven't been selling into the world markets. That
will create jobs to pay for the updated training of the next
generation.
There is nothing demeaning in doing an honest job. But,
it is demeaning to eliminate those jobs because we are too sophisticated
to sell needed and wanted products to people around the world
who want or need them.
Beyond that, when we export technology, we also export the
resulting jobs.
As an example: I'm sure you've seen a Video Cassette
Recorder (VCR), haven't you? You'll find them in most of
the homes in this country.
Guess what? - The VCR technology was created and developed
right here in the good ol'U.S. of A. But, we exported that
technology.
Today, there are NO manufacturers of VCRs in this country.
- We exported the technology. - Now, every time someone in this
country buys a VCR, more of our money leaves this country and
goes to another country.
What would happen if we made massive exports of more technology
like that?
By the way, although the manufacture of the component parts
of hi-tech gadgets does require skilled technicians, for every
technician there are 10 to 20 necessary workers doing the assembly,
packing, warehousing, shipping, etc. - Technicians need to know
why and how their hi-tech gadgets work. The assemblers
only need to know where to put the component and how to connect
it. - If all of our workers (or even a majority of workers) are
re-trained for hi-tech jobs, who will do those essential low-tech
jobs?
These learned responses and myths about U.S. production, pricing,
technology and workers keep most U.S. businesses from even exploring
the vast, untapped international marketplaces. While, according
to the Department of Commerce, every $45,000 worth of U.S. exports
creates a new job in America ... BUT ... it takes over $90,000
in domestic sales to create that same job.
Everybody says "Buy American."
But, all that does is keep our money at home.
What would happen if, in your business, all you did was "buy"
from yourself?
You wouldn't make very much money ... would you?
Think about it! - That's exactly what this country would be
doing if we only "Buy American."
If you understand human nature at all, you have to accept
the fact that people are always going to buy the things they
need at the cheapest price they can get. Beyond that, in
our "disposable" society, "quality" is of
little concern. If something wears-out or quits working,
it is simply discarded and another cheap replacement purchased.
On the other hand, if, in your business, you "sell"
to everyone (the more customers the better), you at least have
a chance of making some money.
That's why, in order to salvage our economy for future generations;
not just for ourselves, we must return to our economic heritage
and ...
SELL AMERICAN
Get people in other countries to "Buy American."
Every time we "sell" an American made product in
the international marketplace, those dollars come back into the
U.S. economy ... increasing profits ... creating jobs ...
making America stronger.
While the governments discuss the issues of world trade, it
is up to us as merchants (entrepreneurs) to meet the challenge
head-on with action, instead of talk.
As an American entrepreneur, you should make it your responsibility
to ...
"Sell American" ... create new jobs ... increase
profits nationwide ... Bring Our Money Home Again!
Copyright - 2003, J.F. (Jim) Straw. All rights reserved.