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| Visions and Revisions |
Finding Fortune’s Favor
Jan Alexander
04/01/2004
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This is an event that will
happen if we keep running on a large trade deficit. True, American deficits are
fundamentally different in nature from those of other countries because of our
status as the powerhouse in the global economy. Conditions that would have long
ago produced a crisis in any other country have not yet produced a crisis in
America. But our trade deficit means that every year money has to be borrowed to
pay for this deficit and to pay interest on past borrowings. Mathematically this
cannot continue indefinitely.
We could minimize the risk of a hard landing
by increasing national savings. The way to solve the problem of the deficit,
however, is to insist that Europe and Japan adopt policies that will help them
grow faster so that they can be bigger export markets for U.S. goods.
That
brings up Japan’s crisis. What has happened there has been capitalism’s worst
disease, deflation, which now threatens to spread to Europe and America. Unless
the Japanese deal with their massive debt by embracing bankruptcy, nothing else
will work. Companies on the edge of bankruptcy do not have the funds to invest
in high-risk new activities; without a mechanism for restructuring their debt,
they are essentially in limbo. Japanese laws currently allow bankruptcy, but
there are cultural prohibitions against it.
The third big threat to the
global economy would be an epidemic such as AIDS or SARS. If a disease got out
of control, as SARS threatened to do last year, it would create serious problems
in supply-chain manufacturing. AIDS is a potential crisis that could be kept
under control with drugs. Yet we prevent the drugs from going where they are
most needed because third world countries cannot afford them, nor do we allow
them to make their own generic versions because of intellectual-property rights
laws.
Knowledge is the most important resource in the global economy, so intellectual-property rights violations are a serious threat to competitiveness.
It is absolutely true that knowledge is the most important resource. One
of the issues we should be examining is how to put into the public domain
products of the knowledge-economy that are so important that everyone should
have access, the prime example being AIDS drugs. We have to design a system that
allows poor countries to copy some things to catch up, so that we can resolve
the inherent tensions between having the incentives for new inventions versus
the free use of new ideas. We could use the concept of eminent domain, whereby a
third world country is allowed to buy first world patents, and if the two
parties cannot agree on a price, a judge determines a fair price.
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