The economic shoe

Some people on Saipan, or at least who have some involvement with Saipan, are probably going to profit very nicely from the world’s changing economic order. Overall, as the U.S. economy falls (more on that in a moment), the size of the world’s economic pie will shrink. But, within that shrinking pie, some players will get growing slices. Saipan has some savvy people who are knowledgeable and experienced and connected in Asia, and that’s where the action is going to be.

Let’s take first things first, and I’ll note I’m no bandwagon Bozo on this topic: I warned numerous times in this column, including a piece on Feb. 13, 2004, that the U.S. financial markets posed a dire risk.

I’d say I was a mighty rare voice back then, eh? Where were the others? Nowhere. And my logic was correct back then, so I’m not willing to abandon it now.

So it’s you and me against the world, dear reader. Ain’t life grand?

Anyway, here we are: Uncle Sam’s economic problems haven’t even started yet. Not in earnest, anyway. All we’ve seen thus far is mostly financial stuff; bonds, stocks, and mortgage paper.

But that’s not the important story, believe it or not. After the financial shoe drops, the economic one will. That’s the real story. For a lot of reasons, it is going to get harder, a lot harder, to manufacture, grow, sell, or distribute goods and services in the U.S. You can count on that.

As a result, the average American is going to wind up with a far lower standard of living than they expect.

That’s not a “recession.” It’s a transition. Big difference.

It’s going to be a stressful life for most people. The population will spend more effort fighting each other (via the ballot box) for goods and services than they’ll spend actually producing them. That’s where all this is headed. Think Europe.

And let me interject this: I’m not objecting to any policies, politicians, or political programs. In fact, I don’t think the government is the real driver behind all of this. We’re merely up against the life-path of a mature economy, in which the terminal bureaucratization of everything, notably corporations, is inevitable.

In fact, the government, in many cases, is more competent than some large corporations. That’s no violation of free market theory, it’s merely a reality of structure: Managers run corporations, but shareholders merely vote for the directors who appoint the managers. These guys (directors and managers) all belong to the same country clubs, as did their daddies. Do you think the corporate barons lay awake at night in their mansions worrying about some dude holding 1000 pissant shares in common stock in his retirement account? Ha!

Overall, the go-to guy for the general situation is Joseph A. Schumpeter, who penned Capitalism, Socialism and Democracy. This isn’t a text on economics, but it’s more like, well, a big-picture parlor discourse. It’s easy to read. There’s no math. No formulas. No graphs. So anyone and everyone can follow it. I steer my pals, or any other interested parties, to Part II of this work, which (in my edition) is only 103 pages. Those pages are so ripe with wisdom and insight that my copy has been annotated and dog-eared to death.

OK, so much for America. And how about Asia? Well, for one thing, as U.S. productivity falls, and U.S. influence in Asia wanes, I’ll pick a random item on my list, and mention that an Asian arms race is likely as Asian nations scramble to shore up their interests. There will be lots of money in that.

Furthermore, capital will flow from the U.S. to more productive economies, notably, Asia.

Talent will, too, if Asia will welcome it.

As it is right now, frankly, I find business far easier to do in Hong Kong than in the U.S. China is still a challenge for me, but the trends are undeniable, and are in Asia’s favor.

Of course, in the immediate term, Asia is going to endure unhappy economic echoes from America’s problems. But as long as Asia’s economies can remain structurally sound, they’ll eventually emerge ready to lead the world. By contrast, the fundamental U.S. economic structure is far weaker than most people realize.

Those of you in Saipan who have inroads into Asia will, I think, find some exciting opportunities when things sort themselves out. So, save your money. Read your Schumpeter. Your time will come.