Non-Obvious Opportunities to Accomplish the Mission

 

Now consider the non-obvious opportunities to accomplish the Mission. They are represented on the model by arrows with Roman numerals.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

These opportunities could be formulated as follows:

 

I. Provide an opportunity for domestic producers to compete successfully with imports despite the fact that they do not want to change anything.

 

II. Find the alternative ways to ensure high purchasing power of the population instead of setting high tariffs on imported goods.

 

III. Ensure high purchasing power of the population despite the fact that the production of goods abroad is less expensive.

 

IV. Provide the people with goods without engaging them in production.

 

We consider each of these opportunities separately: how could they be realized?

 

Competitiveness of domestic manufacturers

 

I. Provide an opportunity for domestic producers to compete successfully with imports, despite the fact that they do not want to change anything.

 

How can tariff increases ensure competitiveness?

 

Increased import tariffs exceed the difference in the cost of imported and domestic goods. Prices for imported goods are higher than prices for their domestic counterparts. Domestic goods begin to be in greater demand than imported ones. Additional income from increased sales can be used to support innovations related to improving the quality and reducing the cost of domestic goods.

 

How does the unwillingness of domestic manufacturers to change anything hinders the potential improvement of their competitiveness?

 

Instead of using the increased price of imported goods for more successful sales of domestic goods, the domestic producers simply raise prices for their goods. As a result, having lower quality and reliability at comparable prices to imports, they continue losing in the competition. A short-term “surge” in revenues caused by higher prices does not allow sustainable financing of projects to improve the quality and reduce the cost of their products. The competitiveness of domestic manufacturers continues to fall.

 

How can this unwanted scenario be prevented?

 

1. Prevent manufacturers from raising prices uncontrollably.

 

To this end, the state should establish control over domestic producers and quality of their products. This control could be justified with "symmetry": we provide you with conditions for improving the quality, but you should ensure the promised improvement. Instead of “creating favorable conditions for producers” government signs the contract with producers, with mutual rights and obligations.

 

This idea could be described as follows: Government contract with producers: the government provides temporary favorable conditions, and producers improve quality and reduce costs during this time. Otherwise, the severe punishment follows.

 

2. Do not allow tariffs to exceed the difference in the cost of domestic and imported goods.

 

Raise tariffs so that domestic goods still lag behind imported ones at cost, and gradually reduce these tariffs as soon as domestic goods can compete with imports until tariffs are completely eliminated.

 

Call it dynamic tariff management.

 

3. Prevent domestic manufacturers from not changing anything in their production.

 

Shift from “habitual” production of goods to more efficient one. Either a radical change of technology or a radical change of goods. This approach allows the domestic producers seriously and permanently securing a significant competitive advantage.

 

We will present this idea as a change of technology and a change of goods.

 

The purchasing power of the population-1

 

II. Find the alternative ways to ensure high purchasing power of the population instead of setting high tariffs on imported goods.

 

If one sets high import tariffs, the country begins to increase production and increase employment in the manufacturing sector. Those who work earn decent income. Their purchasing power increases. Actually, the purchasing power depends on two factors: incomes of the population and the cost of goods. To increase purchasing power, one should increase revenues and reduce the cost of goods.

 

What corrective actions could increase the purchasing power of the population? Perhaps they have nothing to do with the rise in production in the country.

 

1. How to increase household income without raising production?

 

People should do something that could be exported. The Internet today has created the conditions for this. It is necessary to raise the level of education of the population.

 

This idea is called to involve the population in the Internet services.

 

2. How to reduce household spending on goods?

Rent some goods instead of buying them. This approach is very popular in the US.  

 

We’ll call this idea rental of goods.

 

The purchasing power of the population-2

 

III. Ensure high purchasing power of the population despite the fact that the production of goods abroad is less expensive.

 

We assume that increasing the purchasing power is possible in two ways: increase employment and, accordingly, the wages of the population, and reduce the cost of goods. Employment can be increased if imports do not compete with domestic production of goods.

 

How can one produce goods so that imported goods cannot compete?

 

It is necessary to produce those goods that are not imported. In the current global economy, it is very difficult to find such products. It must be something very innovative. True, competitors overseas start copying very soon, therefore, such innovative production should constantly evolve.

 

We call this idea “proactive” production of innovative goods.

 

Products for the unemployed

 

IV. Provide the people with goods without engaging them in production.

 

What can the population do if it is impossible to engage it in production?

 

The population should be engaged in non-productive activities, more precisely, activities not related to material production. For example, the intellectual one. However, it requires teaching the people to think. Alas, there is a serious obstacle. Nowadays more than two-thirds of the adult population of the United States is not able to understand the article or even read it...

 

But we’ll write down the idea anyway: employ people in intellectual work.

 

Before, when material production moved to other countries, an attempt had already been made to engage the “released” people in non-productive activities. The share of people employed in service began to grow sharply. Alas, it turned out that this approach has its limitations. It is impossible that "everyone served everyone."

 

Intellectual work presents more opportunities for employment, but one should first fundamentally change the education system ...

Obvious Opportunities to Accomplish the Mission | Financial and Systemic CrisesSuggested Solutions

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Len Kaplan

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