Improve the SPP Beyond WMD*

The United States with 5% of the World’s population consumes 25% of the World’s resources. Due to low energy costs and plentiful natural resources, since World War II the United States has implemented manufacturing methods that are dirty, inefficient and worker unfriendly compared to what is possible today. Production functions that were relatively efficient and clean by 1985 standards are outdated now, and we are still exporting 1985 production functions.

Since the collapse of colonialism, the Berlin Wall and the emergence of Tom Friedman's' FlatWorld - billions of people in the developing world visualize and want to enjoy an American middle class standard of living. Multinational corporations understand how to deliver this kind of prosperity in 'cookie-cutter' fashion – utilizing low cost labor in high unemployment countries to manufacture products, selling some locally but mostly selling to America and Western Europe at handsome profits. Mainstream America is encouraged to consume these products and to passively invest family savings & equity in established publicly traded stocks & bonds, available to non-accredited investors. These investments help fund new rounds of offshore manufacturing and some expansion in developing country distribution chains. Unfortunately this kind of investment does not create high paying jobs for middle class Americans – in fact it is a silent form of foreign aid, paid in large part by working and retired Americans On the other hand, Wall Street's money managers gain substantial fees and equity positions from this draining of offshore investment to large population countries situated lower on the development scale.

The priorities of developing country governments and their central banks is to focus on long run internal stability by: 1) maintaining substantial hard currency reserves as security against future financial crises, and 2) by stimulating factory employment growth while restraining domestic consumer spending, especially on goods manufactured abroad. U.S. dollars are bought in volumes that exceed safety stock targets to keep the exchange rates of domestic currencies from rising. This tactic keeps export demand-up for artificially less expensive products manufactured by developing country labor. The effect is worse and prolonged current account trade deficits in the United States, delays in delivering the middle class dream to large segments of the developing world, managed growth in the developing world that lessens consumer demand for energy and scarce raw materials, and a financial burden on developing country banks and treasuries created by buying US dollars at an artificially high exchange rate. Eventually the ‘lucky’ working citizens of developing countries will demand more consumption for their labor, pressuring their leaders to nationalize US plants located in their countries, and or to at least demand greater say in US Corporate strategies by buying U.S. securities and other investment assets through Blackstone investment bank and other legal means. In face down situations – our service industries, private armies and money flows versus their production capacities for tangible items - developing countries are left scrambling to build bombs.

Bluntly put, advanced economies must evolve and grow beyond the above situation. American and British professionals in Main Street firms must increase innovation at home, creating clean products to be exported abroad. We must export products rather than services; otherwise our middle class communities face a decline in prosperity. Currently, rising expectations in the developing world cannot be met, as the existing economic model is unsustainable. Unless we in the developed countries implement big technology changes and millions of smaller clean-green tweaks, at best 20% of the world’s population will attain a U.S. standard of living while 50% of the world’s population will become worse off – increasing terrorism, civil wars, confrontations and environmental destruction. An encouraging example of creative change in the right direction is IBM designing a very high capacity, energy efficient computer chip architecture. Without such new technology, more money would be spent in the U.S. in 3 to 5 years on powering Internet server farms than on new hardware and software, constraining future computer usage and expansion of the production possibility frontier.

Multinationals are not by definition good or bad. They will do their thing, often big things, to achieve their priorities; but given our family challenges, opportunities and time frames that is not enough for us. By waiting primarily for large trans-nationals and bedrock national institutions to 'trickle-down' their solutions to our problems is abdicating a future that is far below what is possible for earth’s inhabitants

------------ Your Advanced Economy Local Participation Is Needed and Respected -----------------

* Definitions: 1) SSP is the Security & Prosperity Partnership of North America. 2) WMD is weapons of middle class destruction.