Our McThird World Economy

I've been wondering about the Bush/McCain weak dollar policy, and it's effect on our economy. Exports have indeed been rising pretty consistently, but jobs continue to bleed just as profusely.

Now we know why:

Exports are the bright spot this year in an otherwise bleak economy. But the world is not suddenly snapping up made-in-America goods like aircraft, machinery and staplers. The great attraction is decidedly low-luster commodities like corn, wheat, ore and scrap metal.

This helps explain why manufacturing jobs are continuing to disappear by the tens of thousands and factories are closing even during a miniboom in exports. While the surge in commodities is a welcome relief, it is an unreliable prop for an industrial power.

“The historical data tell us clearly: don’t get too used to commodity export booms; as any third world country will tell you, they tend to go away pretty quickly,” said L. Josh Bivens, a trade expert at the labor-oriented Economic Policy Institute.

We can also now attribute some of the rise in food prices to more than just the weak dollar's effect on transport costs (fuel mainly):

“What amazes me,” said Robert L. Thompson, an agriculture specialist at the University of Illinois, “is that we have been able to greatly increase corn exports while also using it for ethanol. Only by increasing the acreage devoted to corn have we been able to do this, and by squeezing down the use of corn for domestic livestock feed.”

And we can confidently say that the conservative/neo-liberal free trade policies - or the jobs lost in Ohio and elsewhere - will not be much affected by a weaker dollar:

Many American manufacturers argue that as factories spread across the globe, exporting is no longer an effective means of competing against sophisticated and ever more numerous local manufacturers. In addition, as American companies set up operations in, say, China, they insist that their suppliers locate nearby, for quick and efficient delivery — and that draws more manufacturers overseas.

It is certainly a reason that Parker-Hannifin, a Cleveland-based manufacturer of hydraulic pumps and industrial controls, is expanding overseas, said Tim Pistell, the chief financial officer. “Our customers just love for us to make our stuff near their new operations,” Mr. Pistell said, “and if we do, they reward us with a lot of business.”

Parker-Hannifin’s overseas sales have risen to 55 percent of its annual revenue, up from 33 percent in 2002, Mr. Pistell says. Exports, on the other hand, contribute no more than $400 million of its $12 billion in annual revenue, about half the percentage of a decade ago.

Currency fluctuations rarely alter these long-term commitments, and profits stay abroad. “Most of the money we make overseas, we keep there,” Mr. Pistell said, “and then plow it back into growing the business overseas.”

And yes, this is the Bush/McCain weak dollar policy. Considering the deficits St. John plans on generating, you can expect the U.S. Peso to fall even further.