I find this op-ed today on exports more than confusing. Essentially, the author, a business professor and former chief economist at the Dallas Fed named W. Michael Cox, says that President Obama's call for the U.S. to compete more effectively on that basis should not focus on boosting manufactured goods.
But it seems to me that our so-called comparative advantage in services that Cox says is a sufficient source of GDP growth has in fact put us at a disadvantage to countries such as China and Germany.
At least some of these so-called high-value services involve finance, and that hardly produces the sort of growth that will help get the U.S. out of the bind it is in. Reinsurance? Come on, dude, much of that is no different than what got AIG into trouble. And the growing financialization of the economy, where more and more of its income goes to banks with the addiction of the consumer to cheap credit as a result, is why AIG is just the tip of the iceberg.
Indeed, the underlying issue here isn't the country's trade deficit per se, but the lack of wage growth that accompanied or was even a product of that financialization.
Cox doesn't address that, of course. But Thomas Geoghegan, a labor lawyer writing in the latest issue of Harper's does (sorry, no link).
Geoghean says Obama is right to focus on manufacturing exports because that will do more to boost wages. The problem is how to get there from here, and that's where Geoghegan suggests something quite controversial: namely, that the sort of worker input one sees in German companies should be the rule here as well.
Many CFOs would freak out at the idea, of course, since so-called "co-determined" boards of directors where representatives of the rank and file get half the seats would mean management would have a much tougher time reducing wage costs through plant closures and off-shoring.
But as we suggested above and have done elsewhere, that's ultimately a beggar-thy-neighbor approach that's macro-economically unsustainable. And the fact is, workers have an interest in advancing U.S. manufacturing.
Yes, more worker involvement in corporate governance smacks of "socialism," that all purpose-bugaboo with which to tar healthy European economies like Germany's with the same brush applied to Soviet central planning (though why China's greater heavy handedness here never get slammed this way is beyond me.)
At some point, management is going to have to recognize that stakeholders other than shareholders ultimately have as strong a claim on a company's assets as shareholders do, and those stakeholders include employees.
It's not as if CEOs and CFOs don't currently talk up the idea when they cite the importance of human capital and intangible assets and the like, but until those "assets" are given a seat at the table, the talk will amount to no more than lip service, and the U.S. will continue to fall further and further behind China and Germany.