A National Will to Power

February 8, 2015

 

 

A National Will to Power:

Restructuring Domestic Consumption to Rebuild Economic Power

Justin R. Stofko

 

The concept of the will to power in its simplest terms is that history is a force driven by human ambition to increase ones power. The drive for power can be adaptable to national aims. Before this essay embarks on that, it must first off establish why economic power equates to political power. Power is the ability for a nation to determine its course of history rather than be dictated how it will file in history. Since the end of the First World War the United States has been in the position of global leadership and consolidated this grip with the creation of the Bretton Woods system. Power is more than leadership however—power equates to sovereignty.

 

Sovereignty resides within two concepts. In the traditional sense, sovereignty is the idea that a nation is able to protect itself and maintain its institutions through its own determination. In the liberal concept, sovereignty is the embodiment of the people’s will in the governing structures of the state. In the United States, the people’s will is supposedly the force that creates sovereignty. This is not always the case. More so, even comprehending a peoples will becomes a task. For this essay’s purpose, it will be assumed that the peoples will is embodied in the Declaration of Independence, to which all people of this land seek to attain life, liberty, and the pursuit of happiness.

 

An increase in economic power will allow the United States to maintain its sovereignty in a globalized economy by bringing it more bargaining power to foreign relations as well as an increase in the living standard which is directly related to the pursuit of life, liberty and happiness. First off an evaluation of the current state of the US economy will provide a picture of the challenges that will be faced when the roll of property defines economic power.

Current Composition of the US Economy          

 

Following the repeal of the Glass-Steagall Act, the growth of a poorly regulated private sector of banking entailed the ability for investors to gain high returns on investments. Given the liberal profit motive, investors will seek to create wealth through the quickest and highest returns on their investments. The amount of investment then becomes clear where it is going: into thin air through financial investments.

 

Data collected by the Bureau of Economic Analysis indicates that manufacturing represents today roughly 12% of GDP (qtd. in National Association of Manufacturers, 2015). Manufacturing, however, is an absolute truth; it adds the most wealth through commodities that one can see, feel, touch, and utilize to one’s advantage. Manufacturing has a higher money multiplier effect. This money circulates around the economy to create an additional $1.37 worth of economic activity per dollar (the highest of any other sector according the National Association of Manufacturers) from buying inputs to paying workers of both the suppliers and the producers of the goods (i.e. workers who buy food, pay for homes, clothing, cars etc.) (National Association of Manufacturers, 2014). Coupled with the higher wages from manufacturing, this is a good thing. The profit margin varies by industry, but at the same time is providing national wealth.

 

Financial profits are purely the exploitation of money demand through usury and accumulated amounts of interest on imaginary money created through the interest. This interest is essentially a compensation for the labor put into transfers of financial capital. For the middle class, this interest takes away from their total incomes and reduces their buying power. For the lower class, it is detrimental to incomes. If a person borrows 100 dollars, they have to repay the 100 dollars and for instance, a 5% interest rate (the total is not $105). Take this in a larger picture of the economy as a whole and this predatory use of interest creates a weak dollar because money is a finite commodity with a set supply.

 

In order to compensate interest, the Federal Reserve has to print more money to be able to afford the payments of interest, which in turn weakens the dollar’s value further, occurring from the increased demand for money. In a finite money supply, available funds are based on what the bank has available to loan, money supply one (M1). In order to increase the money supply, the Federal Reserve will reduce interest rates on bonds and purchase bonds with printed money which then enter into circulation of the public sphere. Increasing the money supply to meet new money demands causes artificial inflation, which weakens the buying power of money further.

 

Having a strong dollar is a good thing for a countries domestic economy. Buying power is the fuel to any economy. In terms of a globalized economy, a strong dollar not only equates to a higher standard of living, but also to a stronger position for trade demands as the dollar can buy more inputs. For this essay’s purpose though, focus will remain on the domestic market.

Trade Relations

 

When the dollar is weak, the domestic market becomes flooded with cheap goods produced in countries of which most could not find on a map. These imported goods allow for the illusion of an increased living standard because the dollar can buy more commodities. Trade deficits occur in times of weakened dollars. During times of trade deficit, the demand for US dollars decreases in the world market, which decreases the demand for exports from the United States, as other countries are better able to compete with the prices of American goods.

 

In the 2014 State of the Union speech, President Obama addressed the nation’s economic downfalls by stating the intention to increase the quantity of exports. Such a task is no easy feat to accomplish. Consider the most recent available data collected by The World Bank that indicates the United States imports roughly 26% of its total GDP while exporting 13%, as a share of GDP (World Bank, 2015). Increases in imports comes from an inability of the domestic market to satisfy suppliers demand caused by a lack of manufacturing power within that market.

 

The first step to gaining export-led growth, that is, the increase in exports to spur employment through manufacturers of goods and services, requires a domestic market. In order to achieve this goal, America must focus on rebuilding a strong middle class of entrepreneurs who can then create jobs for the working and lower classes. Attention must be turned to demand for goods and services in the domestic market.

 

The Role of Economic Nationalism

 

The purpose of an economy is to serve the state, and in turn, to serve the people. Increasing domestic manufacturers to add to the Nation’s power in a globalized economy is the function of the economy. This concept was the initial idea behind the economy by the founders of this Nation. As Alexander Hamilton wrote in his report on manufactures, “Not only wealth; but the independence and security of a Country, appear to be materially connected with the prosperity of manufacturers. Every nation, with a view to those great objects, ought to endeavor, to possess within itself all the essentials of national supply” (Qtd. In Spannaus & White 1996, 432). Guided by Hamiltonian ideas industry grew, competed, and continually elevated the standard of living to attract people from all over the globe to come to the US. To achieve the independence Hamilton spoke of, the process will involve two steps: import-substitution and export-led growth.

 

Import Substitution: The Buy American Campaign

 

To shift the domestic demand for goods, a change in consumer behavior is required—their preferences must shift to buying domestic stock. The core problem stems from our education system. Within US universities the school of business indoctrinates their pupils in two main way. First, from the production side, which seeks the lowest costs in production to turn the most profit. Thus a global race occurs to find the cheapest labor and inputs occur. Secondly, economists justify the consumer consumption of imports by stating that it is rational for consumers to maximize their utility by seeking the highest consumer surplus in savings on price, equating to buying imports rather than domestic goods. The role must be reversed.

 

Import-substitution operates under the pretext of cooperation with domestic manufacturers and government regulation with support through tariffs, subsidies, and public-private partnerships. The idea is to create, grow, and harvest the manufacturing of goods domestically that are currently being imported from other countries. This would shift consumption of imports to domestic firms by increasing the supply of domestic manufacturers to overtake the imported manufacturers. This is to be done until import sales are lower than domestic sales.

 

For the United States, import substitution is a form of economic warfare against other nations. The World Trade Organization holds penalties for developed countries that violate trade agreements. While this is discouraging in foreign trade relations, the objective is to secure for the American Republic sovereignty of economic management. In doing so, tariffs will be utilized for goods of which American manufacturers can create in order to push the price of imports up so that consumers will demand less of the imports and move towards purchasing domestics. Hamilton wrote that such tariffs are to be utilized to “undersell all their foreign Competitors” with the added benefit of “being a source of revenue” (Qtd. In Spannaus & White 1996, 437). An additional source of revenue will provide additional investment funding for public-private partnerships.

 

Given that factors of production today may come from various nations across the globe, one would have to pay attention to the willingness of buyers to pay for the item in question. In these cases where demand is elastic—affected by price changes drastically—high tariffs would be utilized. Instances where goods cannot be made at home, or manufacturing for such goods has not been established, a moderately low tariff proposed by Patrick Buchanan (1998) would be implemented, not as a behavioral preference adjustment, but as a revenue generator.

 

ariffs, quotas, and other various mechanics must be employed to bolster the domestic manufacturer’s goods in the domestic market against foreign goods. In some cases, outright bans on goods can be utilized to keep foreign goods out. Depending on the elasticity’s of the goods, most should be subject to a taxation, i.e. tariff, to control the amount of foreign owned goods being sold on the domestic shelves. Raw materials for output would be an exception. It is a little known fact by most American’s that we ran tariffs up until the Lend-Lease Act approved by Franklin Roosevelt, which reduced tariffs with trading partners in Europe in order to get needed military supplies to aid our allies in their efforts to defeat the Nazi’s. It is time to bring tariffs back.

 

A system of protection allows for home manufacturers to develop their industries without the fear of competition from abroad. Few of our industries today are protected as they once were. Under the rulings of the World Trade Organization, nations which enact tariffs are punishable under the WTO’s conflict resolution court. The World Court subjects nations to fines, boycotts, and other various methods of disrupting a nation’s sovereignty in the management of their economic welfare.

 

In the case of the United States, which is considered a developed nation, any enactment of national self-defense in terms of trade are not allowed. The point of economic nationalism is to protect our domestic firms from unfair competition, particularly in both labor markets and tax havens. Many companies have found it profitable to ship American jobs overseas to countries that have a surplus population of unemployed making wages cents on the dollar. Firms have also found a more favorable tax atmosphere. The former will be referred to as labor dumps, with the latter as tax havens.

 

Export-Led Growth: The Return to Hobson Imperialism

 

In the 2014 State of the Union speech, President Barack Obama addressed the nation on many key points. One point that will be discussed is the idea of export-led growth. The issue is that the American economy is not manufacturing like it used to decades ago. In order to have success with export-led growth, the United States must take a step back and begin with import-substitution. Once the domestic manufactures have situated themselves and are meeting domestic demand, the next step is to move to exporting. Export-led growth creates jobs, giving the state tax revenue from incomes and other various taxes. Taxes increase sovereignty as less debt instruments are issued by the government to procure funds to cover public expenditures from the government, indebting the people to private interests.

 

Increasing the exportation of commodities, for sale and consumption, to foreign lands is what economist J. A. Hobson called imperialism. The rational is simple enough: it is preferable to have nations indebted to the US than vice versa. One issue with export-led growth is that it ties nations economically together, creating a dependence on the other for mutual economic gains. A good example is our relationship with China. The US is over $314 billion in debt to China as of the year November, 2014.  China is our second largest trade partner, accounting for 19.8% (#1, followed by Canada) of all imports while taking 7.5% of our exports (third place behind NAFTA partners) (United States Census Bureau, 2014).

 

To rebalance the trade deficit, America will need to increase its exports. This can be achieved only after it has corrected its domestic consumption of goods through the increasing of its productive laboring classes and adjusting the labor market to reflect the increases in productivity. The state must take a more active role in both education of the work force and investment lending to entrepreneurs. An argument proposed by Fraser and Freeman (2011) articulates a long-term commitment to support domestic manufacturers through a “state-sponsored program of high-tech, energy efficient reindustrialization” composed from “[i]infrastructure redevelopment, worker training, targeted government investments and credit, research programs, and domestic content provisions in government procurement” (93).

Fixing the Labor Market

 

The role of finance in the economy is to allocate financial resources from those who have a surplus, to those who do not. Financiers, optimally, should be supplying the middle class with the funds they need to create jobs and hire workers. This does not occur when banks begin to bet on other bank’s failures to make money; such as the 2008 financial crisis showed. A nationalized system of banking would entail a solution to the current problems of the financial system which often works against the national interests. Such a system would also promote class solidarity as the middle class finances the working classes living standard by alleviating unemployment.

 

As stated before, finance has been diverted from job creation directly to wealth creation. Wealth accumulates at the top incomes, and is used to finance the creation of more wealth through interests on loans. These loans range in purpose, but investments into domestic firms pay out a fraction percentage compared to other financial instruments which garner higher rates of return. This creates a lack of investment opportunities for businesses to grow; lower interest rates allow for a safer atmosphere for businesses to take the loans. However investors want higher rates for increased profitability.

 

When businesses are allowed to grow they increase the demand for labor as output will need to increase. The increased demand for labor will lead the labor market to meet demand at an increased cost. The demand for labor will inevitably raise wages and increase consumer purchasing power as demand for goods increases. If this growth is not allowed to occur due to foreign competition and slave wages from third world labor, American labor will continue to work for wages lower than their value. This allows for large employers to monopolize the labor market. Further competition in the wage market pushes wages down to match what was have referred to earlier as labor dumps. This effect is an externality of wages: when one firm that offers more jobs is able to force wages down to subsistence (minimum) while employing a large portion of the available labor market, other employers will be able to reduce wage rates to compete with the low wage payer. An example of this is Wal-Mart.

 

Not only is foreign competition suppressing wages, but American workers need to be equipped with the skills for tomorrow’s industries. Unskilled workers are another cause of declining wages and deindustrialization. Education will be crucial to the manufacturing of tomorrow’s technologies. In so, education needs to become available to those who have proven to be capable of obtaining their education and the investments by the state to ensure their education is obtained with financial help.

 

The Coming Corporate State

 

The above methods for shifting demand to domestic production to meet domestic consumption is a means to an end. While serving the needs for an increasing living standard for American workers, it also serves the benefit of socially responsible employers. The objective of buying American is not only to empower the nation’s dollar, rebalance the trade deficit to surplus, and increase the lot of existence of many Americans, but in the long run also establish the ability for labor to have bargaining power. Collective bargaining allows for workers to form associations of labor and, through these associations, use their strength of numbers to overpower the interests of their employers. Historically, this is a fact. In order to balance these interests, however, a third party must be involved to maintain contracts of equity between these interests. The corporate state operates under this context.

 

The question must be asked then, how can corporatism be a viable alternative to capitalism given American labor’s low participation in organized labor? For the past half century, capital has been busy trying to dismantle labor unions, and, in turn, unions were busy trying to maintain their foothold by continually raising the prices of wages; eventually raising them to the point of outsourcing. Today labor union participation in the private sectors is at its lowest, 7.6%, while the public sector holds over a third of the labor force as union members (Bureau of Labor Statistics, 2014).

 

The first step towards an economic renaissance is to align demand for goods with domestic production. This is to be done in two fronts. One, through personal consumption and two, through government cooperation to ensure that businesses have an atmosphere in which they can thrive and have a profitable rate of return on their investments. Without the entrepreneur, the worker will have no job and thus no material subsistence for which to live on.

 

The next step will be the formation of the corporate state. To achieve the corporate state, as it certainly will not come about overnight, will require foundations for a corporate structure to build from. Another three fronts will occur in the struggle for labor. First, labor must be organized. That organization, however, must be for national ends and not class related political ends. An issue regarding unionization is the fact that workers can easily shift their interests to a class consciousness and embark on the very opposite goals set forth by this essay. It is a risk that confronts the possibility for the corporate state.  Second, government must establish an atmosphere in which workers have the right to organize and are better protected in doing so. This protection would effectively strengthen the Taft-Hartley laws, but also protect producers to allow the firm to work in an atmosphere free from unfair competition posed from firms utilizing exploited third world labor to undercut prices. Third, the legal ramifications for the construction of the corporate state will occur. This will depend and vary based on the representative powers in office. It is not necessarily true that corporatism accompanies Fascism, as examples of Mexico and Europe prove. It will however depend on the academic ability of these ideas to compete with liberalism.

In Closing

 

It is our duty to protect our citizens from threats, both foreign and domestic. Cheap labor is among one of the largest threats to the American standard of living which multiplies its effects not only on the purchasing of goods of inferior quality (slavery has never been synonymous with quality), but also through the loss of profits being shipped offshore. It is time for the American people to reclaim their country and to enact a democracy that is of the people’s interests. Idealism has, for the greater part of the century, lead America down a path that has driven up profits for corporations that chose to abandon their home country at the cost to the labor that once produced their goods. Through our purchasing power we can vote with our consumption to support the American manufacturer and the work force that produces our wealth. With our dollars, we will fight back through supporting those companies that have not forsaken this land and its people. Our future depends on our will to be sovereign, for our will is our right to existence.

 

 

 

 

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