Tuesday, November 17, 2015

The State of the Economy-A Harvard Professor's View

I had the pleasure of reading Michael Porter's interview about the state of the economy in USA Today.  Dr. Porter is a professor at Harvard University and a top economic expert. Reading the economic news I have come across great opinions and those opinions that have no basis in economics. Dr. Porter's analysis of the economy and the Trans-Pacific Partnership appears to be accurate and based on well thought out logic.

Trans-Pacific Partnership:

Consider the need to ensure the U.S. has a level playing field in international markets. We have great potential in this country, and still maintain that potential, but have failed in our and foreign policies. This failure is sometimes based in the misconception that other countries must follow our rules while at other times we develop poorly designed policies that don't protect our own future.

Countries have engaged in unfair trade practices that have damaged our economy through tariffs, product dumping, subsidies, and other policies seeking short-term advantages. Getting respite for these grievances through the World Trade Organization can be difficult at best and muted in their impact. The central power being the ability of this country to connect countries to our economy in ways that benefit both parties fairly.

The need for a broad based economic platform has been in the making for some time. Our policies have been someone short-sighted and seeking to hen pick the market. The Trans-Pacific Partnership is an attempt, albeit imperfect, to create a broader framework to ensure that we have access to resources while opening markets for our products.

Wages and Value:

Secondly, the discussion on wages is beneficial. In disagreement, with Dr. Porter I can say cost of wages does have an impact, but in agreement with him, I can say the ultimate value of a wage is its ability to be productive, adaptable, and innovative. Wages are only a measure of the value of output. Problems arise only when wages and output are not in alignment.

Low wages are great...but high value output with solid wages is even better if investment from overseas is drawn back to the U.S. and contribute to taxes, spending, and quality of life. Treaties should seek to ensure American workers are maximizing their earning potential through full human development and economic engagement.

Our economy is complex but does fundamentally rest on how we use resources such as raw materials, physical, and informational components to make market leading products. All of this is dependent on our intellectual and human capital and its ability to use these materials wisely. Government must ensure all of their policies have the focus of creating the best environment for using human potential to maximize returns on resource investments. The problem with economics up to this point is not the ability of businesses to compete but the way in which we allow them to do so.

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