Economic dogs and tails

If Uncle Sam’s economy slides down the toilet, the Commonwealth’s fortunes will get the flush as well. In terms of the direct impact, the U.S. is our market for garment exports, and Uncle Sugar–i.e. the federal government–gives us about $46 million a year in direct freebies so we can afford new T-100 trucks. Not a bad deal at all.

But the indirect economic links merit attention also. The U.S. is a major consumer for Japanese goods…and Japan is a major consumer of CNMI tourism….as is Korea, for which Japan is a major market for its exports. And to buy these Korean goods, the Japanese need to sell their own goods in America.

Indeed, there’s no way we can get around our links–both direct and otherwise–to the world’s largest economy.

And there’s also no way we can get around hearing about Uncle Sam’s latest economic scare: Namely, that consumer confidence in the usually smug confines of the Prozac nation has plunged to a four-and-a-half year low.

“Consumer confidence” is one of the elements in the index of leading economic indicators. This index–as the name suggests–is supposed to let us know where the economy is heading.

I, for one, am not a big follower of consumer confidence. One reason it attracts so much attention is that it has an air of pop-psychology about it, which makes it fashionable for the public and for journalists alike. Your average journalist doesn’t know, say, what money velocity is, but sure can track the speed of public opinion.

Related to this is the insistence from the airhead faction that macroeconomics is nothing but the pecuniary branch of mob psychology. Well, it ain’t.

For all its obnoxious undertones, though, we can’t entirely discount the consumer confidence realm. And, when it serves to validate other indications of economic trouble, the tea leaves are getting hard to ignore. America is heading for a recession. Maybe it’s already in one. The folks on Wall Street aren’t happy, and the folks on Main street aren’t either.

And, therefore, directly and indirectly, the CNMI is going to face a continued squeeze in economic activity. As you survey the remainder of 2001, you’d be wise not to succumb to wishful thinking.

So keep a jaundiced eye on the financial picture for the foreseeable future. America is shaky (but still rich), Japan is really shaky (and may not always be rich), and the Commonwealth–unable and unwilling to steer its own economic course–will merely be the tail wagged by these two economic dogs.

As for here, then: Business as usual, as the economic slide continues. As for there–the United States–with Bush at the helm of state, there is reason for optimism in the long term. Investors will continue to have more, not less, reasons to pass up the CNMI for places that are serious about forging modern economic policy.

Ed Stephens, Jr. is an economist and columnist for the Saipan Tribune. “Ed4Saipan@yahoo.com”