For companies to do well, they must turn a profit. The United States has been in the red -- a trade deficit -- for decades. In the first decade of the twenty-first century the United States lost $6.4 trillion. By comparison, we owe foreign nations over $4 trillion or our current $15 trillion debt.
Rather than creating wealth by manufacturing, we are pretending to create wealth by printing money. This is not sustainable.
In the real world, things have value. When a company makes a product and sells that product, both the buyer and the seller exchange something of value -- dollars for goods.
This exchange of valued items creates a better economy for the manufacturers as they can use the dollars they earn to increase production, pay workers higher wages and invest in the future.
In contrast, in a service economy, as seen in America today, once the service has been rendered, there are no lasting goods. Payment rendered for a washed car gives money for the service but ads nothing of new value. The car will get dirty again, and can be washed for a price but it is still the same car. All this does is prolong the value of the car, It does not add anything of value to the economy as a whole.
This is what we see happening in the global economy. The United States buys foreign products and the money these nations earn from our purchases is then reinvested to improve the foreign nation. This can be done through investing in infrastructure, manufacturing or foreign investment (buying U.S. companies for example). These nations have an economic plan and invest in their future.
However, America has no plan, which is why the U.S. economy is in a downward spiral. Services are rendered, but nothing of value is being added to the economy. The nation is just bleeding wealth year after year to the tune of hundreds of billions of dollars that could have been reinvested in the America economy.
Unlike the dollars used to buy foreign goods, the products are limited in their capacity to create new wealth. As wealth leaves the country new dollars must be printed to keep up the appearance and lifestyle of a manufacturing economy. But inflation inevitably catches up, wages go down, revenue falls and then only those at the very top find a profit -- this is creating the current failing economic trend.
This is why America is failing -- we don't make anything of real value anymore.
For America to succeed, the government must become more involved. Tax reform is needed to provide incentives to bring American manufacturing back. Companies must be given disincentives for offshoring American jobs. Most importantly, the backing must go to American companies, not to foreign-owned American-registered companies.
Until the nation learns to keep the dollar home and balance its trade at the very least, we will just keep failing.
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