The
families of my two sisters are Green Bay Packer fans, which would not
be remarkable if they lived in Wisconsin. But they both live in
Utah. Why would families in Utah cheer for a team a thousand miles
away? Denver, Seattle, San Francisco and Oakland all have NFL teams
and are close in proximity to Salt Lake.
My
two brothers-in-law are both a little older than I am. That means
that they had their coming-of-age years in the 1960s. For those of
you not familiar with professional football, in the 1960s, the decade
was dominated by the Green Bay Packers. They won the championship in
1961, 1962, 1965, 1966, and 1967. The last two championships were
the first two Super Bowls.
It
was natural for all young men of that era to cheer for Starr, Taylor,
Davis, Kramer, and of course their coach Vince Lombardi. He is,
after all, the coach the Super Bowl trophy is named after. Even
after the Packers were no longer good, those that lived through the
1960s still, somehow, always perceived the Packers as winners.
Perceptions
can take a long time to change.
For
example, if I asked you who was the greatest producer of petroleum in
the world, you might say Saudi Arabia, Russia, or Kuwait. All of
these would have been good guesses five years ago. But today the
country producing the most petroleum is the United States. We are
first in natural gas and will also be first in oil in just another
year or two.
In
fact, with the help of our neighbors Mexico and Canada, we are energy
independent. We no longer need oil from the Middle East.
Isn’t
that great news? So why do we not hear about it in the news media?
In fact, the U.S. is producing so much oil that the Saudis and the
Russians have decreased their production to prop up the price. And
this change has happened without the help of the government.
The
increase in production has come from private lands. The current
administration is not thrilled that we can produce so much oil. You
know, with climate change and all.
Ponder
on what this change means. If we wanted, we could drive down the
price of oil and gas. The consumer would have more money to spend on
other goods and services. Companies would have more money to invest
and hire new employees. The countries in the Middle East would have
less money to support extremists.
The
list of what is possible just expanded. Will we ever get a
government that knows how to use this windfall strategically?
Remember
when North Dakota was the place where everyone wanted to live and was
a great vacation destination? Of course that never was true. North
Dakota was one of those places where, for years, their population was
actually decreasing.
Well,
it is time to change your perception of North Dakota. They are
leading this energy boom. Unemployment is around 1% (full employment
is 4% for comparison). A strategically placed Motel 6 is getting
$435 per night. A Motel 6! And the hotel is paying the cleaning
people $26 per hour.
A
robust economy is the best friend of the employee. When companies
have to compete to get an employee, wages rise. If the motel did not
pay their cleaning people $26 per hour, they would have no one to do
the cleaning.
OK,
one more perception needs to be changed.
China.
When
you see that word, what do you think of? I think of them as this
manufacturing behemoth that is accumulating all the world’s
production. That was true for the past decade or two, but times are
changing in China.
Remember
that a robust economy is the best friend of the employee. That
statement is also true in China. The wages in China have increased
to the point that the amount that their manufacturing is actually
decreasing.
And
the winner of this change for China is … Mexico.
Manufacturing in Mexico is booming. There are two reasons why there
are fewer immigrants coming from Mexico. One is our economy flat
stinks. The second is that there are jobs they can now get in their
homeland. Companies like having their manufacturing close. It
allows them to react quicker to changes in the market.
For
about the past 20 years, some economists and experts have predicted
that the Chinese economy would quickly surpass the U.S. I always
thought this was folly. The Chinese government is too corrupt.
For
example, consider the plight of the business person in China. In
order to get things done they need to pay bribes to government
officials. OK, but with the decrease in manufacturing, the government
is also prosecuting those that pay bribes.
How
does this turn out? In the past year there have been 30 Chinese
officials that have committed suicide and 80 leading businessmen.
Half the people in China with a net worth over $1.5 million plan to
immigrate and 70,000 students that went to study abroad have no
intention of going back.
Corruption
has always been part of China’s economy. Even during the great
dynasties. The Chinese have a lot of work to do to change the
countries mores before they will be able to challenge the U.S.
economy.
One
last fact that may change your perception of a country. Russia’s
economy is the same size as New Jersey’s. Mull that one over
and consider what is means to the U.S. and Europe.
I
hope this article has helped change some of your perceptions of the
current state of economic affairs. The few I have mentioned in this
article will have lasting impact for the next few decades.
Adam Smith is obviously not the actual name of the author of this column. The real author has
worked for two Fortune 500 companies, one privately held company, and a public accounting
firm. His undergraduate degree was in accounting, and he earned an MBA for his graduate
degree. He also has completed coursework for a PhD. in finance. He continues to be employed
by one of the Fortune 500 companies.
The author grew up in the Washington D.C. area but also lived for several years in Arizona. He
currently resides with his family on the East Coast.
The author has held various callings in The Church of Jesus Christ of Latter-day Saints.