What 'Goes Up

In its October 27th issue, Business Week ran an article called, “It’s not a crisis of confidence”. In it, the writer raised the question, “What if the financial meltdown is a symptom, not a cause? What if we face a wrenching readjustment of the worldwide economy?” That’s a wrenching thought.
It’s one worth considering. For most of my lifetime, since World War II, we’ve basically run world finances our way. It was almost as if whenever there was a pie to be split, we cut it in pieces, ate the one of our choice, tucked most of the rest away for later, and let the rest of the world sniff the platter.
We helped ourselves to 50% or more of the world’s energy in 1950; we had just about the only unbombed factories on the planet. We fed the planet—at a price. We rebuilt Japan and Europe—using our money to buy materials from our companies.
Did you want to buy oil or machine parts? You used American dollars (the “gold” of the Twentieth Century) that you got from us. Our companies built (and sold) the most TVs, autos, machines, shoes and clothing. We controlled the International Monetary Fund and the World Bank.
We got so used to this life style that, as the older generation that had known a different era died off, we assumed it was God-ordained to go on forever. We never seemed to notice that as the rest of the world rebuilt its ruined factories (or built totally new ones) we were losing, inch by inch, our supremacy. First one business, then another went overseas—almost under the radar.
The world went on pegging everything to dollars. It loaned us the money to buy goods we used to make. The national leaders of what we called the Big Eight got together to discuss world finance, it seemed to us like the Big One and the seven dwarves.
Like a species of animal growing in an environment with no predators or natural enemies, we forgot all about the fact that such things might somewhere, sometime exist.
But somebody did finally offload a boatload of predators on our island. At first they were small and we hardly paid attention. Oh, when Japanese auto companies began to bite into Detroit’s market share, a few rowdies might chase an oriental looking guy down the street in Detroit.
Some Detroit suppliers wouldn’t allow Toyotas and Nissans to park in the lots outside their factories. But basically as our TVs came from Asia, our cars from abroad and our shoes and clothes from outside the country, we began to feel a bit of a chill. Nothing major, nothing to change our world view.
Then the tech support guys from Oregon and Upper Michigan went away. We found ourselves talking to people who hardly spoke English. We griped, we complained, and we muttered. But our basic perception of the world that had existed since the 1940s remained unchanged.
You still bought oil in dollars. The shrinking auto giants of Detroit went on being called, “The Big Three”. (We somehow ignored the fact that Chrysler was “big” only by comparison to a couple of car companies in Eastern Europe. And Ford was no longer second in the world. GM’s market share was halved.)
What Business Week is suggesting is that we may have reached a tipping point. Is the teeter totter really changing from up to down? Do the other guys finally really weigh more than we do?
Did the collapse of the overleveraged housing market merely expose a deeper—more frightening—reality? Are we going to have to start sharing that cake?
Do we have to deal instead of dictate? The gubernatorial race in Michigan two years ago brought something out that I found fascinating. The Republican challenger was the son of one of the founders of Amway, a mult-billion manufacturing and marketing firm.
Michigan was already in recession. DeVos’s campaign was premised on the fact that he had built a huge company in Michigan and he knew how such things were done. The Democrats gleefully pounced on the fact that he had built a factory in China that employs thousands there.
“He stole jobs from Michigan” was the cry. (It killed him at the polls.) No one seemed able to hear what he had to say. By making a DEAL with China in which he built a factory there, he was able to get them to agree to buy product from his plant in Michigan—thus saving four thousand US jobs.
No one heard. That got lost. His foes wanted the old system back. We cut up and keep the pie—you get to lick the crumbs. They couldn’t hear DeVos saying, “The world has changed”.
Business Week is essentially asking, “Is DeVos right?” Has the world really changed that much? Has the rest of the planet caught up with us? Does it have the power to demand and take a bigger piece of that pie?
It will be a wrenching change of we have to start sharing—if we can no longer dictate. Most of us aren’t going to enjoy it (even those of us who keep jobs) any more than a laid off Detroit auto worker does. It’s never fun to go from number one to one among many. It’s downright wrenching. That, more than greed on Wall Street, may be the cause of the loud ouches we hear from all over America.