Ok what then? Do you want to take the protectionist approach? Well this topic has nothing to do with the recession for crying out loud.
I think the American invention of the internet and all the investment is definately something to be proud of. It has brought the best of America to the world, freedom of speech, better media, etc. It has brought without any doubt more freedom than any premptive war has done...
I also think it had brought more jobs to America that if they would have patented it or used some form of protectionism. I think the investment in the free, sharing and open qualities of the net has not only payed out itself financially, but also intellectually and morally.
The reason America once prospered as worlds wealthiest creditor nation.
They had a comparative advantage in economic freedom. Taxes were much
lower and the government was less intrusive. They borrowed a lot of money
from the Europeans in the 19th century. America used that money for like
infrastructure and factories; they did capital investments. And by
building factories they became the worlds leading manufacturer and
exporter of high quality, low cost consumer goods, also even when the paid
the highest wages in the world. And because they made productive use of
the money they borrowed of the Europeans, they were able to repay the debt
by selling those manufactured consumer goods to Europeans. By 1980
Americans owned more foreign assets than all the creditor nations in the
world combined, they were the worlds most wealthy lenders with a high
savings rate.
Today is the exact opposite. They no longer flood the world with low cost
high quality goods, but they flood the world with dollars. The United
States routinely borrows from the poorest nations in the world. The
relationship is now: America consumes and everybody else produces. America
borrows and everybody else saves. Without American consumption, what would
all these Chinese do for jobs? Well it's not about jobs. You don't want
jobs so you can work, you want jobs so you can consume; a higher
standards of living. The fact that the Chinese get jobs in exchange for
the products they give us doesn't do any good for the Chinese. The Chinese
are perfectly capable of consuming their output themselves. They don't
need their government to artificially suppress the exchange rate of the
Yuan so that they can artificially elevate the value of the Dollar so that
the Americans get to consume all the goods that the Chinese could have
consumed had it not been for that monetary policy.
This current dynamic where Americans don't save and not produce is not
viable. America convinced the foreigners painting their fence and pay them
is a privilege. But the minute the Chinese, the Japanese stop buying
these Dollars, the show is over.
All this borrowed consumption is going to have to be paid. American
consumers are now loaded up with debt to their eyeballs, and the very
nature of that debt.
It is stupid from the governent to stimulate ownership of residential property by stimulating people and banks to use NINJA-mortgages(No Income, No Jobs or Assets). Credit for people with no money is insane, ofcourse they cant pay back. Ofcourse that means trouble for banks, and so on. Predatory lending also took a part of the blame. Also not wise was to use the value of a house as a kind of slot machine. It was a mania on the housing marktet that made it to a bubble bound to collapse.
I can strongly advice you to read the standard economic work of Niall Ferguson:
"The Ascent of Money" . Innovation in financial products has always followed a bust and boom cycle.
Having no supervision on complex financial products like derivations is insane, even by any measure of common sense. The innovated product of securitizes mortgages in trenches for mortgages give to people with no income, no jobs or assets is also insane. Especially when it gets a AAA stamp from the American credit rators. Ofcourse that means that people will find out those products are hard to put a price on later when buyers understand that junk NINJA mortgages shouldnt have an AAA rating. The Fed didn't supervise the deratives market. Of course it was a wild west there.
People should have saved. The Fed should have supervised the deratives market. The Government shouldn't have made NINJA mortgages posible. America maybe cannot produce cheaper (wages of Chinese and Indians are way lower), but maybe Amerricans can better products. If Americans can't, bad luck. That is called competition. Don't be lazy to think that America has threw money away at the internet at the expense of america resulting in the current crisis. That's total BS. Instead: save, invest, export and compete!
By the way, siolationism and protectionism have been ore hurtful to the economy than the openess of the internet. The Great Depression got bad for a big part because of protectionism. And patents didnt helped innovations so much either. Mind sharing and investment in R&D did work. America has just to figure out again how to use the money wisely and invest it in R&D, education and in all openness and freedom. The internet again is only a good example.
