In the 1930s and early 40s, the biggest threats to peace and prosperity were worldwide events such as the Great Depression followed by Hitler, Pearl Harbor, D-Day and the end of World War II. Then came the decades long Cold War with Russia.
And for a long time, Russia was seen as the clear obstacle to a peaceful and prosperous period of worldwide stability.
Along the way, Vietnam and Watergate happened, and then the nation's worries largely centered on oil prices and OPEC, domestic inflation and economics.
The so-called smart money bet on Japan as the model for economic prosperity. Of course, the smart money was wrong then, and it's wrong again by placing its bet on China and other emerging markets.
And here's why. Perhaps Pogo said it best, "We have met the enemy and he is us."
Simply stated, America's future is in the hands of Americans. We're in charge of our own destiny, as always. Period.
You see, we Americans truly are part of a unique and singularly exceptional nation. And it's all about a free market economy with free individuals doing their own thing. Both morally and financially, that market and morality based individual set of freedoms is vastly superior to state run economies and political systems.
Although historical evidence of that simple truth of MOM over OPM is self-evident, let's look closer at what's been going on in the world's emerging market economies and stock markets recently.
How Emerging Markets Lost Their Mojo is subtitled 'Investors have once again come to see state companies as slow-witted giants, prone to overinvest and overbuild:'
"Emerging economies have lost nearly $2 trillion in stock-market value since the global financial crisis hit in late 2007. The full blame for this meltdown, and then some, can be placed at the door of their state-owned companies, which account for a third of these economies' roughly $9 trillion market capitalization.
Over the past five years, the value of private companies in emerging economies—including Brazil, Russia, India and China, as well as Mexico, Indonesia and Turkey—has remained broadly stable. Meanwhile, the value of state-owned companies (defined here as companies with a government ownership stake of at least 30%) dropped by more than 40%. Today there is only one state company (PetroChina) among the 10 most valuable companies in the world, down from five in 2008.
These losses suggest that the global markets don't buy the conventional wisdom of the postcrisis years when magazine covers heralded "The Rise of State Capitalism" and books forecast "The End of the Free Market." Most of these forecasts started with China, which responded to the growing financial crisis by pushing state-owned banks to lend to priority industries at cheap rates. Beijing also directed state-owned firms to lend and invest aggressively, and otherwise expand state control over the corporate sector.
When China escaped the global recession relatively unscathed, it emboldened governments in emerging markets from Russia to Brazil to follow the Chinese example, and many are still promoting state capitalism. They may be forced to reconsider. Investors have been voting with their money and exiting their markets. But it isn't only stock prices that are in decline. Lower profits for state-owned companies mean less money for the government and lower productivity growth for the broader economy.
During the mid-2000s, a rising tide of liquidity was flowing out of the U.S. and Europe, and investors began indiscriminately bidding up the stock prices of emerging-market companies, private and state-owned. Betting that rising demand from China would continue to drive up prices for industrial commodities, investors poured money into any company involved in energy or raw materials—industries often controlled by the government in the emerging world.
All this changed after the crisis. Investors refocused on profitability, and they have once again come to see state companies as slow-witted giants, prone to overinvest and overbuild. . . . investors now value government-run companies at about half the price of private firms in the same industry . . . .
World-wide, investors are also shifting money to technology from commodities. This helps to explain why the U.S.—a center of tech innovation—now accounts for nine of the 10 most valuable companies in the world. Meanwhile, state-owned companies in the emerging world aren't being able to keep pace. Technological innovation has never been a forte of bureaucrats....
Since taking office in March, Chinese Premier Li Keqiang has been talking about the need for a "self-imposed" revolution to reduce his government's power and promote "market mechanisms" for growth. In the West, many commentators still marvel at how China appeared to dodge the global recession by implementing a huge half-trillion dollar stimulus program in 2009. But in China the evolving view is that the funds were misdirected to wasteful projects like unneeded steel and aluminum plants. The state-run Xinhua News Agency has even been running editorials about how another stimulus would be self-defeating. . . .
To get their mojo back, governments in emerging markets would do well to also count the mounting costs of state capitalism and start cutting back the role of the state, and putting more of their state-owned companies in private hands. Otherwise, these companies will keep destroying wealth, and undermining the economic growth prospects of emerging nations."
Summing Up
It's true that American led private sector MOM trumps public sector OPM every time. It's the system, Stupid!
So when will We the People and the government centered "progressives" among us learn that the few 'smartest guys in the room' can never be a match for the millions of free people acting on our own and in accordance with our own best interests? That's the only real question facing Americans today.
The free market works for all of us but only when allowed to do so. Government knows best elitism and control will never work to the benefit of We the People.
A freedom based individualist MOM approach always beats a 'slow-witted' government bureaucratic OPM driven way.
That's my take.
Thanks. Bob.
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