An Excellent Job!

Two years ago, during his SOTU address, Barack Obama promised double American exports in the next five years. So far, the first two years of that time period has seen an increase of just under 30 percent or an increase from 140 billion a month to 180 billion a month. At this pace, the president will get close to or achieve his goal. Why is this happening and why is this a cause for optimism?

Tyler Cowen has the answers in his fantastic new piece, "What Export-Oriented America Means."

First, it is the United States that is leading the way in high tech machines that populate the manufacturing industry worldwide. Countries from around the world need to buy them and we make the best ones. But it's not as simple as that.

The more the world relies on smart machines, the more domestic wage rates become irrelevant for export prowess. That will help the wealthier countries, most of all America. This logic works on both sides. America is using less labor in manufacturing, but China is too, even as its manufacturing output is rising. The fact that Chinese manufacturing employment is falling along with ours means that both our higher wages and their lower wages are becoming less relevant for the location of manufacturing decisions. The less manufacturing has to do with labor costs and relative wage levels, the greater the comparative advantage of the United States.

Bingo. But won't this hurt American jobs?

You’ll hear the word “insourcing” more, too, to join the far more familiar “outsourcing.” For instance, in one manufacturing survey from November 2011, almost one fifth of North American manufacturers claimed to have brought production back from a “low-cost” country to North America. The corresponding number from early 2010 was one tenth of those companies, partly because of rising labor costs in developing nations, and partly because labor costs don’t always matter so much anymore.

The core political truth about this, however, is a little awkward: So many of the jobs vulnerable to foreign imports have already vanished that there is little left for voters or less powerful manufacturing-based labor unions to fear from free trade. The new job growth has been in health care, education, services and government, areas that are largely insulated from foreign competition and that will themselves seek out export markets. American higher education is in demand around the world, too, and has little to fear from foreign colleges trying to expand offerings in the United States.

This would be why I constantly harp on education. If you are a low skilled laborer in this country, learning how to operate high tech manufacturing machines should be your number one goal in life-stat! Developing countries of the world will need you to train their workforce.

Second, as I have discussed previously, the US may become the new Saudi Arabia in terms of energy exports. With the shale and natural gas industry starting to boom due to recent discoveries, we are poised to be able to take advantage of world demand and truly become a dominant, energy power.

This demand isn't just limited to energy. The third cause for optimism is that the developing countries themselves As BRICS, for example, continues to develop, their demand for our products to help them in their development is going to grow exponentially.

The leading categories of American exports today—civilian aircraft, semiconductors, cars, pharmaceuticals, machinery and equipment, automobile accessories, and entertainment—are going to be in the sweet spot of growing demand in what we now call the developing world.

That's right. Put all of this together and what do you get?

Export success will resurrect the United States as a dominant global economic power. America will be wealthier, its products will have greater global reach, and it will largely cure its trade imbalance with China. The fear of American foreign policy being determined by Beijing, or constrained by the financial resources of the Chinese central bank, will be forgotten. No one will view the United States as the borrowing supplicant in the U.S.-China economic relationship, and, all else equal, our exports to China will increase friendly feelings toward that country.

No more boiling pit of sewage. Thank goodness!!

All of this shows that we are well on the way to achieving the president's goal and promise that he made. In light of all of this information, saying that he is "destroying free enterprise," is simply not true. In fact, he has shown that his method of governing (the combination of  government partnership and knowing when to stay out of the way) has clearly produced positive results.

When it comes to the issue of helping to increase exports, the president has done an excellent job!