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December 21, 2010

Economy of the America's Largest Export Continues

President Obama met Wednesday with corporate leaders today in an effort to control America's leading export over the past couple of decades, namely jobs. But what will be the result?

With unemployment rates stubbornly high and large businesses sitting on record piles of cash, the it is expected that the president will exhort business leaders to begin hiring again. However, structural changes to how business is done may preclude that.

While the American economy is dependent on consumer spending for growth and jobs, American businesses increasingly no longer need that same domestic spending for growth, thanks to their international sales. International sales account for about 47 percent of their revenue, according to a survey of the Standard & Poor's top 500 index.

Many of these companies have off shored and outsourced in order to seek lower wages, leading many to assume that it isn't possible to compete with low wages and regulations. However, Germany, one of the world's leading exporters, pays its manufacturing workers an average of $48 per hour (including benefits).

Reforming our economy is clearly possible without moving to a service economy or sacrificing wage rates. Manufacturing is an important part of any developed nation. If a nation is simply exporting raw materials (as the United States is the world's largest food exporter), and is importing all of its finished goods, then it is essentially a colony state for mercantilist producers, also known as a banana republic.

Manufacturing has declined from making up over 20 percent of employment a couple decades ago, to less than ten percent today, according to the Bureau of Labor Statistics. It is impossible to support a middle class without a strong manufacturing base to provide quality jobs. Our present economic trajectory is resulting in a polarization of wealth, and the top earners in America continue to own a larger percentage of total wealth.

President Obama must realize these facts as he works to turnaround the American economy. A good place to start if by choosing a replacement for the outgoing director of the National Economic Council, Larry Summers. As Wall St. and big businesses profit off of trade policies that fail the average American, these cannot be the voices whispering in the president's ear. There are many qualified economists and manufacturing CEOs who could do a much better job.

If change is to come to our economic policies, our leaders must stop listening to those who currently profit from them. Voicing your support for such policies will also help. If only lobbyists, bankers and the executives who routinely outsource jobs are the only people speaking out, then we will remain on track to becoming a ruined nation.