Morris R. Beschloss 2013-09-11 02:58:06
What’s the cause? According to the latest statistics relating to the nation’s wholesale inventory values, there has been a notable shrinkage in the amount and value of stock retained by this critical factor in the United States’ distribution channel, considered the outstanding network of its kind anywhere in the world. In normal times, this would be considered a positive since it would seem to indicate a bullish demand to which the wholesale sector was not replacing its stocks fast enough. But in analyzing the second quarter of 2013, it appears sales have flattened out as the American distribution system as a whole is pulling in its horns. While the overall industrial, commercial and consumer demand factors are maintaining a slightly positive incline, the morale of America’s tens of thousands of distributors overwhelmingly comprised of independent businesses cite the oncoming specter of Obamacare, as well as financial and climatic regulations as causes for concern. This is topped off by federal enforcers more interested in restraining rather than engendering a positive growth environment. Unlike what has existed in previous post-recessionary economic snapbacks, America’s current economic forward direction is L-shaped rather than reflecting the U or V symbols. These have proven symptomatic of almost every post-recession comeback since the post- World War II period that ushered in America’s most dynamic growth ever. It’s ironic that the U.S. cannot take significant advantage of its growing natural resource predominance, as well as the potential infrastructure and conversion into finished goods that any global nation was ever in a position on which to capitalize. The shortage of monetary liquidity, which is estimated to be $3 trillion on business/industrial balance sheets with another $1 trillion reposing in the vaults of America’s powerful banking system, is not to blame here. Rather, it’s the fear of what’s coming down the pike in further regulatory imposition in health care, the unrestrained heavy-handedness of the Environmental Protection Agency and a fear of uncertainty militating against expansion and/or acquisition. This has put a practical halt in the entrepreneurial risk-taking so predominant in the long-term growth of the private business sector. The many distributors with whom I stay in constant touch with are practically unanimous in their hope that a future business-oriented leadership will create a badly needed positive economic climate. Such a happening would again awe the world with what America’s capitalist entrepreneurial economy can accomplish. Only business, not a ponderous government can and will someday accomplish this reachable objective. The new world economic power center When the smoke clears from the current White House/Congressional squabble over a comprehensive immigration bill, it might be time to dwell on the world’s emerging economic power center — the North American Free Trade Authority membership that includes the U.S., Canada and Mexico. Statistically speaking, no other world trade alliance comes close. With a population of less than 7% of the world’s seven-billion total, the three NAFTA partners generate more than 25% of the world’s combined gross domestic product. Although the U.S. comprises the overwhelming component of this total, each of its two partners currently generate in excess of $1 trillion gross domestic product. Even more significant, only a handful of world nations can make this claim. Also of importance is the annual interchange of exports/imports between these partners. While the passage of NAFTA’s world landmark legislation in 1993 heralded a new era of interdependence on America’s northern and southern flanks, the past 20 years have seen Mexico’s and Canada’s remarkable surge, eclipsing percentage-wise even that of the United States. In the case of Canada, the mother lode of tar sands oil discovery in its Alberta province has evolved this underpopulated, but world’s second-largest acreage giant into the top ranks of oil reserves. Our northern neighbor also numbers its five huge banking giants among the best-managed and best-performing global financial centers. Mexico, with a population in the 100 million-plus range, has enjoyed an unparalleled economic awakening, propelling it into the top tier of the world’s most productive economies. Mexico’s rare membership in the trillion-dollar gross domestic product club is not the result of natural resources (oil, rare metals and agriculture), but the development of a significant professional middle class and an escalating upshot of entrepreneurial business enterprises. While the massive population flight over Mexico’s northern borders has created the current undocumented alien glut in the U.S., this influx has come to a near halt this year. Much of this is because of the economic upswing that has allowed Mexican workers to find better job opportunities within their country. Another plus that has greatly benefitted the Mexican economy is its cost effectiveness in relation to previously unbeatable competition from Southeast Asia. Additionally, its proximity to American markets and expanding U.S. manufacturing maquiladoras (free trade and low tax zones) have added a major thrust to the economic interchange between the U.S. and Mexico. With the debilitating drug gang problem and the political concerns swirling around the fear of growing Hispanic political power in the U.S. underscoring the only negatives, North America’s economic and international tranquility represents an extremely dynamic world power that supersedes any comparable regional combination anywhere else on the globe. Germany’s energy dominance Although worldwide renewables (wind, solar, biofuels and geothermal) still are primarily tax-subsidized and only supplemental to fossil fuels, Germany, Europe’s largest economy and among the global gross domestic product leaders, has set very ambitious longterm goals for renewable energy supremacy. Having decided to shut off its nuclear reactors by 2022 and further slashing greenhouse and gas emissions, Germany requires of its population the world’s most ambitious renewable energy expansion. Last year, Germany generated 22% of its electricity from renewable sources, up from only 8% a decade ago. This is twice as much as the U.S., the United Kingdom or Japan. Germany’s goals under its “energy evolution” are to generate at least 35% of its electricity from renewable sources by 2020 and at least 80% by mid-century. Berlin hopes to make this happen while cutting its total energy consumption in half by 2050. Such an ambitious strategy is questioned even by “renewable advocates,” who now look to Germany as a key genesis for the rest of the commercial/industrialized world to follow. On the other hand, doubters criticize this approach for imposing additional high costs on households and industries that already pay far more for electric power and its usage than those in similarly advanced industrial nations. A part of Germany’s success is that smallscale energy producers are dominating the growth of the country’s renewable energy sector. Households with solar panels, already profuse throughout Germany, and farms proficient in biofuel conversion account for 35% of the country’s renewable energy supply. Another 25% is contributed by the producers of green energy such as ethanol and geothermal. Germany, even under an advanced modern democratic form of government, still is unique in its goal-setting. Its highly ambitious objectives shouldn’t be taken lightly, but as a template for other nations who don’t exhibit the same sense of national discipline. The recent history of Germany’s zeal for the use of solar and wind power in a nation that has far less availability to those elements than other nations with more plentiful natural capabilities, arises out of a desire to shed nuclear energy, especially after the Chernobyl disaster of the 1980s and the Japanese Fukushima catastrophe in early 2011. Although instigated under socialist Chancellor Gerhard Schröder and now implemented by conservative successor Angela Merkel, Germany will totally nix nuclear energy in the next decade. This is based on Germany’s traditional record of successfully achieving its economic goals; but it will be doing so at a much higher cost per energy unit than now exists. It’s estimated these ambitious energy objectives are already the highest cost-wise in Europe and three times more costly per unit than the U.S. This eventually could generate a popular pushback. With exports proving the main key to Germany’s economic achievements, any impact on its future global competitiveness could eventually instigate a reassessment of its laudable energy programming. Veteran industry analyst and writer Morris R. Beschloss is the industrial PVF columnist for Supply House Times and the American Supply Association’s industry analyst. Beschloss, whose career in the industrial pipe, valve and fittings sector spans more than five decades, was the recipient of the 2012 ASA Fred V. Keenan Lifetime Achievement Award.
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