Economic Triumvirate

Net economic growth of a society only occurs through the engine of the economic triumvirate. Background and rationale for this are described below.

The recent economic upheaval has been 60 years in the making. By the end of WWII, the US was the only major country that had largely escaped the tread of enemy boots and bombs. Beginning in 1945, the rest of the world bought our goods and technology with relish. Each car and crane we sold overseas enabled the repair and rebuilding of countries and continents.

The value that these US made goods provided easily offset the prices we charged. Goods, such as construction equipment or its underlying technical innovation, have no intrinsic value. Their value instead stems from the task performed. In those cases where equipment, as was the case in post WWII Europe, replaced a pile of rubble with a productive school or factory, the value is enormous. Consequently, eager, worldwide markets bought a steady stream of US goods. As the foreign economies improved, they could buy more products. This trade would run unabated until the foreign markets catch up. And catch up they have, leading to widespread off-shoring both of manufacturing and innovation.

Off shoring of manufacturing is a function of more than just the high living standard in the US. That is, if the high relative cost of living in the US was causal, manufacturing would have been off-shored to half of Europe and Mexico over 40 years ago. There are really two reasons for off-shoring; convenience and necessity. Initially, manufacturing is off-shored as a convenience to improve profits, as has occurred over the past few decades lead by the foreign manufacture of toys, shoes and clothing. Ultimately, tasks are off-shored of necessity, because we simply can't perform them in any economically viable sense, as has happened in the past few years (steel, cars, computers, etc). Neither case is driven by the "invisible hand" a la' Adam Smith.

Adam Smith with his "invisible hand", has been the motivation to the claim that foreign trading will be and should be employed if it is more profitable relative to local trading. Realistically, there is no and never was an "invisible hand". Joseph Stigliz ("the reason that the invisible hand often seems invisible is that it is often not there") almost got it right. In Smith's day, England grew and prospered through colonization, slave trade (permitted in England until 17 years after Smith's death) and imperialism. This is what fueled the economy on which Smith's model was based. It was not, more efficient, inherently lower cost foreign good and labor, but rather coercion which drove the economy in Smith's day. Through the lens of Smith's perspective, this may have constituted an invisible hand. Nonetheless, it patently did not represent cooperation without coercion as Milton Friedman came to suggest. Instead the prime economic engines for millennia have been the economic triumpherate: exploitation, innovation and conquest.

Free markets and invisible hands are nothing without this triumvirate. The US grew markedly by conquest (ie. acquisition of the lower 48), exploiting new resources (ie. previously untapped labor resources, newly discovered oil in Pennsylvania), and developing new technologies (ie. electricity, cars, telegraph, planes, computers). Similarly, the UK's explosive growth throughout the 19th century was fueled by the industrial revolution and colonization. Easter Islanders, as a counter point, traded stone tools and food stuffs amongst themselves for centuries, and, never having leveraged this economic triumvirate, were ultimately subjugated.




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