The decline of the foreign exchange rate of the U.S. dollar approaching ten percent this year contributes to broader American anxiety about the U.S. economy. Despite the stock market’s high level and many economists’ reassurances that the economy is doing well, that national anxiety persists. Americans’ unease is due to the real estate market’s slump, the sharply rising costs of rent, food, and fuel, and fear that an inflation-driven recession might be over the horizon despite many economists’ reassurances to the contrary. Such economic concerns on the part of many Americans may or may not prove to be plausible. Time will tell. One can only hope that those economic experts who are positive about the country’s future are correct.
One indication that things will work out well for the economy is how the relative decline of the dollar is helping the economy by making U.S. exports more competitive internationally due to their lowering comparative costs. It is becoming increasingly obvious that, if handled correctly, the dollar’s decline could become a major asset for Americans’ economic future. What is far less obvious is how there may well be hidden geopolitical virtues embodied within the dollar’s decline.
An indication of such virtues is how the shift in the exchange rates between the U.S. dollar and nearly all major foreign currencies is rapidly improving the ways consumers in other countries perceive the “Made in USA” label on products. One major exception to that trend is China’s refusal to join the floating exchange rate system, thereby keeping the yuan and the U.S. dollar tied to each other in ways that continue to make Chinese products cheap in the United States and fails to make the “Made in USA” label as financially attractive in China. Overall, however, the exchange rate situation helps American owned and operated companies producing products made by American workers export them to those foreign consumers who see them as good buys.
These circumstances augur well for reinvigoration of the United States’ formerly lagging industrial base, enabling Americans to be far more competitive within a global economy by ironically pursuing what amounts to a more nationally focused approach to industrial self-reliance. Although this form of economic competitiveness will help restore the United States’ industrial manufacturing base, thereby bolstering the already strong service sectors of the U.S. economy, it also will inject a dose of nationalistic pride into the “Made in USA” label and instill positive caution about naively excessive forms of free trade. That “Made in USA” trend may well be bolstered by widespread concerns about tightening border security in the context of global terrorism, socio-economic pressures for a well structured legal “guest worker” program, and American consumers’ cautionary reactions to the tainted reputation of many “Made in China” products.
While the “Made in USA” virtues of a declining dollar within global exchange rates are fairly obvious, other aspects of its consequences are more hidden. One salient result of a declining dollar is the rising costs for American tourists who want to travel beyond U.S. borders. There has been considerable media coverage of how the major increases in costs for hotels, restaurants, etc. for Americans traveling abroad including nearby Canada has caused many complaints by these Americans. There also has been a fair amount of coverage about how more tourists from Europe, Canada, and prosperous countries in Asia are coming to the United States because of the attractive low costs of staying in U.S. resorts, seeing the sights, and shopping. Logically these comparative costs are not lost on most potential American tourists excluding the very wealthy who increasingly opt to not travel as much outside the United States and, instead, engage in what could be labeled an “America First” brand of tourism.
While the domestic tourism business for obvious marketing reasons does not utilize that “America First” label, the more American travelers choose to not go abroad because of higher costs, the more the hidden geopolitical virtues of a declining dollar will become evident. As Americans become less inclined to travel to other countries deemed to be too expensive, the more likely such Americans are to question the logic of the United States being substantially entangled in these wealthy countries’ national security as part of American commitments to internationalist geopolitical paradigms.
The more that many Americans become aware of how expensive it is to be a tourist in these countries because of the foreign currency exchange rates, the more likely it will be that such Americans shall raise questions about how expensive it is for the U.S. government to continue to be a strategic benefactor for such countries. Becoming more conscious of these exchange rates may well cause a growing number of Americans to think about the rising costs in U.S. dollars of maintaining extensive military bases and some very large diplomatic posts with substantial security perimeters in Europe, Asia, and the Middle East which includes paying local supplies, transportation, and infrastructure bills as well as the salaries of numerous local employees. This will become even more evident as “host nation support” programs are cut back due to serious questioning about their virtues in several strategic partners. The more the exchange rate between the U.S. dollar and the currencies of these allied states shifts in those states’ favor, the more expensive the United States’ strategic burden shall become. Similarly, as Americans become more conscious of this situation, they may well raise questions about the growing costs of large scale U.S. foreign aid programs in diverse countries due to how currency exchange rates influence the U.S. dollar’s buying power overseas. In turn, this may cause Americans to ask why other wealthy countries are not doing more in this regard.
If Americans become more willing to question the fiscal rationality of such growing internationalist costs, a major example of a hidden geopolitical consequence of the dollar’s decline in the international currency exchange system would be how it could create incentives for Americans to press the U.S. government to save money by refocusing upon truly “national” national defense. The more Americans become fiscal conservatives who are aware of, and sensitive to, the growing costs of interventionist international strategic commitments the more likely they are to exert political pressure on the U.S. government to shift the high costs of defending existing allies to all those countries’ own national and regional defense programs. Just as Americans are being attracted to a de facto “America First” brand of less expensive domestic tourism as they become conscious of the high costs of traveling abroad, so too may Americans be attracted to a literally “America First” brand of defending their own country utilizing a “Made in USA” form of defense industrial base due to the excessively high costs of being an overly generous strategic benefactor for a number of countries around the world. Whether the currency exchange rate shift proves to be of short or long duration it can teach useful lessons to Americans about genuinely conservative U.S. priorities internationally.
Read more by Edward A. Olsen
- Non-Interventionism Is Conservative – February 20th, 2008