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Japan, Saudi Arabia, and the USA

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Japan, Saudi Arabia, and the USA (Originally Posted 2/22/2011)

Living in Japan in the early 1990’s, we often read and heard that Japan is a “small island nation with no natural resources (No. 1 on their list is fish.) and that the people must work hard to produce and export goods for economic success.” I suspect that Japan’s strong work ethic, low unemployment, and half century of economic expansion have been primary results of that powerfully motivating common national understanding. However, high costs resulting from that economic success, the need to import all energy, and a shrinking population of working age citizens have made it increasingly difficult for Japan to compete in the global economy, and their own economy has never fully recovered from the crash that followed their real estate bubble of the 1980’s.

At the other extreme is Saudi Arabia which owns the world’s largest oil reserves and doesn’t have to do any work at all or produce anything. The royal family just cuts deals with developed nations to exploit their oil reserves, hopefully by using some of it within the “Kingdom” to produce derivatives of the crude oil and perhaps create some jobs. Saudi’s two big challenges have been keeping minds and bodies meaningfully occupied and sharing the wealth of the country just enough to avoid rebellion. Perhaps the only thing that has grown faster than the national bank account is the royal family (Tens of thousands of members with several thousand entitled princes according to this article.), some of whom are probably lying awake nights now that civil unrest is being openly expressed in the Middle East. In the 911 attacks involving several young Saudi’s, we have seen ample evidence of the truth of that old saw about idle minds or hands and the Devil’s workshop.

In contrast to problems in Japan and Saudi Arabia, the United States has considerable energy resources and an adequate workforce. We have simply chosen to handicap ourselves through failure to develop and use our own energy resources, failure to educate our workforce and align it with some national purpose, and through implementation of a tax and regulatory environment that encourages even American companies to move their operations to lower cost parts of the world and to reinvest their foreign earnings in those countries.

The idea of conserving rather than using our own natural resources may be good, but, for our own security and success we should be exploring and developing and making ready for use every single proven resource (oil, coal, natural gas, and nuclear) we can identify. Even if we were to suddenly double our known oil reserves, we could and probably should continue to import oil just to conserve our own for later decades when the price per barrel is sure to be much higher. Besides, for now, it is a way for us to share our wealth with less developed nations. Well, there is that little problem of funding terrorism.

And we have clearly been on the wrong track in development of our tax and regulatory environment. Examples range from major items such as the ridiculous 35% tax on repatriated earnings of American corporations earning money in other countries, motivating them to reinvest the earnings there instead of here, and futile attempts to change the environment by restricting CO2 emissions, again encouraging investment in other countries rather than here, to trivialities such as a recent example in The State Newspaper of local Richland County zoning requirements that forced a company to build a $50,000 sidewalk along a public road but inside the company fence, a sidewalk from and to nowhere.

IF we are to maintain our leadership in the world and remain wealthy enough to have something to spread around, both at home and in developing nations, and to be able to fund research into such dreams as clean energy and high-speed rail and immortality through health care, we are going to have to focus on making things and doing things, providing goods and services, that are needed NOW around the world and doing a better job of it, at lower cost, than the competition. It’s a big “if” because I am afraid we are becoming more interested in the spreading than the generation of wealth, more interested in social networking than in business and productivity, more interested in administration and control than in execution and accomplishment, and those are sure signs of trouble.

And if we fail to maintain our leadership position, who will pick up and carry the banners of freedom and democracy that are enshrined in our founding documents and under which we have operated for more than 200 years and which have made us the desired home for millions from all over the world? Will it be China or India? Is the Middle East ready?

I think we had better get to work.