It Isn’t a Zero-Sum Game

The dollar's forty percent decline from its 2001-2002 peaks has been our greatest source of economic strength.  June's export growth was our most rapid in years. Further devaluation would foster our exports and reduce those of other countries by slowing our imports. These actions would slow the growth of demand for commodities, relieving inflationary pressures.   For example, more than half the dollar value of China's manufacturing exports consist of raw materials purchased internationally.  China's huge trade surplus with the United States both offsets their cumulative trade deficit with the rest of the world and provides China with a net surplus.

 Our politicians have demanded that China adjust the value of  the remnimbi higher (and devalue dollars) but we have trade deficits with many countries so we need a general devaluation. To help the dollar descend, the Federal Reserve Board should again cut interest rates, which would cause some money to flow out of the United States, reducing demand for dollars. Banks don't want to make more loans so rate cuts would not expand the money supply as they normally would, leading to inflation.  Developing country commodity demand is causing inflation, not domestic borrowing.   Lower Fed rates would also widen interest spreads and replenish bank capital with earnings.

Longer term, we need a "Marshall Plan" for research and development spending. China and India now graduate more than five times as many engineers as we do.  At this rate, by 2011 ninety percent of all the engineers in the world will be in Asia. If Asia combines the largest pool of technical brainpower with the largest pool of low cost labor, our trade deficits will become irreversibly larger and Asia's continued rapid growth will drive global commodity prices higher, triggering inflation everywhere.

Bob Lutz, head of global product development at General Motors
The U.S. economy has remained remarkably resilient over the years, often in the face of dire predictions. However, I do feel that there are very alarming signs that we should heed, including the decline in industrial activity, and the nation's focus on the lowest possible consumer prices for goods. That focus, of course, favors imports from low-wage countries, often also those that keep their currencies low in value (making their products cheaper). Much of the erosion of U.S. cost-competitiveness has been driven by exchange rates, not a lack of quality or productivity in the United States.

When American producers of goods-from sneakers to airplane parts-compare the cost of importing products from a low-wage and low-currency country to producing in the U.S., they typically make a rational decision that the product should be imported. This may have been very beneficial for consumer prices but has resulted in an undeniable hollowing out of our traditional manufacturing base. Whenever I read that the U.S. is still the world's largest manufacturer of goods, I find myself asking, "like what, for example?"

The trade deficit shows we're importing vastly more than we're exporting. We're like the family using its credit card to maintain a lifestyle that it is not really earning with the wages and salaries generated by its members.

The decline of the dollar gives us an opportunity to reestablish competitive manufacturing in the United States. While the opportunity exists, it would behoove us to push for more industrial exports, instead of more agricultural exports, where we've always led. The maintenance of the United States as the world economic power is by no means guaranteed, but with the right policy and direction from political leadership, the game is not lost and can, in fact, be won.

Marissa Mayer, vice president of search products and user experience at Google
In order to remain an economic leader, the Unites States must attract and hone the best talent, training leaders who are worldly enough to understand a global economy. But our restrictive immigration policies are in danger of stifling that process.

At Google, I founded and help run two programs for managers. (Similar programs exist at many other successful companies). In two years, we train people with bachelors or masters degrees and less than three years of experience to be great product managers or product marketers and eventually take on management positions. This is our sixth year of offering the associate program, and a number of leaders have emerged to run large projects such as our personalized homepage, iGoogle.