Sneering at “globalists” has become an instinct among many Trump supporters. It was globalism that ruined this nation, they argued, and the only way to make America great again is to cut off the rest of the world. On the other side, there is an almost equally instinctual support for immigration and trade as much out of tradition as it is the thinly held belief that the system in place obviously made the nation strong.
Where is the truth? Like most debates, somewhere in the middle – or just off to the side a little. America is wealthier and better as part of the world, but the expense of trying to run the planet and tell everyone what to do is killing us. More to the point, it’s falling on working people who are expected to support it as a vanity project and chant “U-S-A!” while the benefits accrue to those with a lot more money to start with.
It can be changed. It has to be changed. It will change – either by design or by collapse.
We have discussed before at great length how the value of the US Dollar is warped. As the global standard currency, there is more demand for it than there would be otherwise. This makes the dollar more valuable generally.
It may seem strange to think of the US Dollar as nothing more than another product, but that’s what it is. It goes up and down with supply and demand like anything else, at least as far as the rest of the world is concerned.
How much more? By comparing ourselves with Europe, an equally developed trade partner, we can see that the Dollar is valued about 8.4% higher and the trade deficit is about 8.4% as a result. We can reasonably assume that there would be about the same amount more sold if we didn’t export Dollars as much as we do but instead made manufactured goods.
Currently, about 11 million jobs in the US come from exports, so there would be about 900,000 more jobs if the US Dollar was not the currency standard. That would have lower the unemployment rate about 0.6%. More importantly, many of those jobs would be in manufacturing and thus high-paying. Many would be in Ohio and Michigan, the industrial heartland.
At the US average rate for manufacturing jobs of $21.39 per hour, this is about $40 billion per year.
But this is far from the only way the US dominates the world. Our military is not only the strongest in the world, it completely dominates everyone. At a cost of over $650 billion every year, or nearly $6,000 per household, it should.
If that seems like a lot of money, consider this – it’s all borrowed anyway. Take a look at this chart of the deficit, turned to a positive, in red with defense spending in blue:
Notice that outside of the deepest part of the last Depression our deficit has been always just a little bit less than our defense spending since 1973. In essence, the cost of telling the world to do what we say or else we’ll shoot has been financed by selling bonds to the rest of the world bearing discount interest. It makes it all sound a little more like robbery put that way, but who is really stuck with the bill?
Given that it’s largely being put on the American Visa Card, it’s our kids that are stuck with it.
Does this mean that globalism carries with it a huge price tag that we just can’t afford? It certainly does to the extent that we have to dominate the planet. Between the net loss of jobs due to our love of being the world currency, which is to say the ability to buy cheap stuff at Wal-Mart, and the cost of maintaining a ridiculous defense infrastructure working people in America are very much getting stiffed with the bill for it all.
Either we find a way to tax the very wealthy to support this or, a better idea, accept that dominating the world is simply too expensive for us to continue. It’s one or the other. By that, I mean that this can’t continue forever and it does indeed have to stop. Either we do it graciously and gradually or something will fall apart. It is simply a matter of time.
To highlight again, the article on the cost of being the world currency is here and the cost of our defense is here.
Good blog. Put a price on it.
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