U.S. Bailouts Could Spur Asian Economies

By Irwin Greenstein

The trillions of dollars that Washington is throwing at beleaguered American industries could have unforeseen consequences in the longer term viability of domestic investment opportunities. Washington’s handouts may come at the expense of funding important R&D projects that could give the U.S. a long-term competitive edge that it appears to be losing to Asia.

If in fact this scenario plays out, emerging markets in Asia could prove to be the superior play in the coming decades as they surpass America’s R&D investments.

R&D is the cornerstone of sustained growth. For example, China recognizes this by launching a branding campaign that turns the pejorative “made in China” to a higher value added “created in China.”

While some of the R&D numbers coming out of Asia today still may pale compared to the U.S., the important criteria is the percentage of GDP and overall growth that these emerging markets are investing in innovation.

For example, South Korea said last week it will allocate $8.3 billion on R&D in 2009. While that’s a drop in the bucket when measured against Washington’s $99 billion budget, the bottom line is that South Korea’s budget is an increase of 11% while the American budget is a decline of 0.34%.

A recent article in The Economist said that approximately $1 trillion is spent on R&D every year in computing, telecommunications and electronics of which the U.S. accounts for over 30%. But while corporate R&D in America and Europe grew by 1-2% between 2001 and 2006, in China’s R&D soared 23%, The Economist reported. And as a percentage of GDP, China’s corporate R&D spending is almost on a par with the European Union’s (around 1%).

The Economist said that in 2007, South Korea’s Samsung spent more on R&D than IBM. The company has jumped to second place in the number of patents granted by America’s patent office (just behind IBM).

The trend could become irreversible if Washington favors bailouts over innovation.

The Georgia Institute of Technology’s bi-annual “High-Tech Indicators” study concluded that China improved its “technological standing” by 9 points over the period of 2005 to 2007, with the U.S. declining to of 6.8. In Georgia Tech’s scale of one to 100, China’s technological standing is pegged at 82.8, versus the U.S. at 76.1. The U.S. peaked at 95.4 in 1999. China has increased from 22.5 in 1996 to 82.8 in 2007.

Innovation is the fuel for growth and generates profits for investors. That could make Asia a better long-term play than the U.S. for investors.

Comments

[flashrob:]

HOW TO START FIXING THE GLOBAL ECONOMY:

1. China is sitting on about "two trillion U.S. DOLLARS!"

2. China's main market to export to (and what has largely been responsible for their fantastic growth) is the now DECLINING U.S. market.

3. China can embark on a MASSIVE spending program (some ideas are "improving environmental spending - air, water, automobile pollution, etc." INSTEAD OF WEEPING OVER THE DECLINE OF THEIR "TO" U.S. EXPORT MARKET! I am suggesting they become a MAJOR IMPORTER of American and European technology, services, and expertise, thereby helping the U.S. to improve economically, and helping themselves for a return of EXPORTING TO THE U.S.

The huge STOCKPILE OF DOLLARS is just sitting there anyway.

Now, their government has the MONEY already to embark on a MASSIVE INFRASTRUCTURE "plus" PROGRAM... and JUMP-START THE REST OF THE WORLD'S ECONOMIES!

In essence, I am suggesting that the Chinese government, along with this infrastructure program WOULD FUND (act as a replacement employer... say via "low cost loans" via their banks to EMPLOYERS whose exports to the U.S. are drying up. The NEW ADDITIONAL CONSUMER would be THE EMERGING MIDDLE-CLASS OF CHINESE CONSUMERS...if they can sell it to you at Target, Walmart, etc... IT SHOULD BE GOOD ENOUGH TO SELL TO THIS NEW MIDDLE-CLASS CHINESE CONSUMER...

...probably do this by ISSUING CREDIT-CARD consumer spending on a massive scale... I'm sure Visa, MasterCard would be glad to contract with them along with some of our investment banks to HELP RUN THE WHOLE THING...

This way they don't LET DRY UP AND DIE ...all those manufacturers WHO PREVIOUSLY SOLD MOST OF THEIR PRODUCTS TO THE U.S. they'll gain some of this export mkt back eventually when they import goods, services, AND U.S. and European "MANAGEMENT EXPERTISE" ...thereby helping the U.S. in particular, and also other global economies/entities to recover.

4. Since, they have the money, they don't need to "deficit spend" like the U.S. and Europe, etc.

5. Also, we could SELL THEM SOME U.S. assets (NOT BAD DEBT PAPER) but hard type assets. President Obama could look at this with respect to reducing the "taxpayer's bailout!"

It would also prevent some of these BUSINESSES and say BIG APARTMENT COMPLEXES FROM GOING UNDER ANYWAY...

We could sell them "minority percentages" in BIG ENTERPRISES...like electric utilities, oil and gas, windmills, etc. (just throwing out a few ideas...

Bottom line: they have the money in DOLLARS... so let's cut them some deals, let them buy shares in our economy, instead of the "taxpayer" having to pony up for everything!

...the ideas expressed here, are just summary simplifications, BUT THESE ARE THE BASICS OF HOW TO START RESTORING THE GLOBAL ECONOMY!

...need more detail...I can probably consult if I have to...

FLASHROB

Jan 10 04:18 PM