Nutritious Food for the Economy

U.S., Europe Differ in Approach to Getting Back on Growth Track

http://online.wsj.com/article/SB125772042679937143.html?mod=djemITP#articleTabs%3Darticle

In a response to the above article someone writes:

WSJ: "So this crisis offers a rare case study in how governments should respond to maintain potential growth. If the recession turns out to have been brutal but not seismic in terms of forcing a major adjustment, then Germany's focus on maintaining labor supply may be right. If, however, the fallout means new industries drive growth, then allowing resources to be reallocated while cushioning the effects on demand -- the U.S. response -- will be validated."

The weakness of the US position is that new industries are not being created with the extra profits from productivity gains. Instead they are being reinvested overseas. As a result, we will suffer a deterioration of labor skills and depressed consumer spending from having so many people out of work.


What's missing?
The commenter is correct about the reinvesting overseas but it would be good to better nail the problem.

Business invests as do individuals to get a return on their investment. They also invest to produce products that can sell at a given price point (think "economic utility"). Thus, it makes no sense to invest (say in the US) to produce a product that will have to sell for say $1,000 when the product could be produced offshore (by this business or a competitor) to sell for $800 or $400.

(If the product isn't made offshore, then a competitor will make it and the US producer will go out of business. This was clearly seen in the GM case where they couldn't produce small cars profitably in the US, etc.).

Thus, what's the choice?

1) It's as simple as looking at the production equation, looking at the variables and tuning them up with fiscal policies that promote capital formation, labor qualifications, technological innovation.

Production Cost = Labor Costs + Capital Costs + Raw Materials Costs

What we have with Pelosi and Obama is an administration that is driving up all three of these costs: the falling dollar raising material costs.

Whether a Democrat, Republican or Independent, Americans should be concerned that policies are being put in place and debts increased that negatively impact the ability to bring jobs back to America by overspending and spending too much on consumption.

One can't blame industry any more than one can blame a mother for trying to feed her children nutrition food. What you can blame is a government that deprives the mother of the raw ingredients to make nutritious food.