Many hope that President-elect Barack Obama will help uplift the American spirit and inspire a new “can-do” attitude toward remedying our serious economic problems. This, of course, is no easy task. But if successful, Obama’s encouragement will have awoken a uniquely American attribute currently lying dormant in the American psyche.

We Are Americans

Recent months have been marked by gloom and doom. And when emotionally beaten down to the depths of the Dow Jones Industrial Average, uplifting attitudes are hard to come by.

In an October 17th New York Times op-ed, Warren Buffett, one of the world’s wealthiest men and greatest investors of all time, reaffirmed that “The financial world is a mess, both in the United States and abroad.” But in the same article, the Oracle of Omaha also said now is the time to buy U.S. equities.

What does he know that others don’t?

“In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignations of a disgraced president. Yet the Dow rose from 66 to 11,497,” he said. What Mr. Buffett knows, Americans also know. But somewhere over the years it has been forgotten.

Deep down, we know that America always gets back on its feet, regardless of how hard it’s been knocked down. And we’ve proven it over and over again.

The Land of Immigrants

America is a land of immigrants. In many cases they were young people who left their homelands with little hope of ever seeing their parents again, but with tremendous hope of securing a better future. They understood the difficulties they would incur, but possessed the necessary courage and resolve to persevere. This strength and determination continues to be reflected in all that is American.

We are an entrepreneurial and confident people, who believe anything is possible if we put our collective mind to it. We also are flexible and dynamic. And we know how to adapt to change and adjust to new challenges. As a result, America continues to be the destination of the world’s hungry—as well as the world’s brightest.

A Nation of Strength

The framers of the Constitution were brilliant. They understood the importance of transparency, rule of law, separation of church and state, and balance of power. These factors—which promote political stability and opportunity regardless of individual differences—are many of the reasons why America is the most powerful nation on Earth.

Thus, it’s no mystery why the United States is the world’s primary destination of foreign direct investment year after year. It’s also no mystery why the dollar actually strengthened during the global financial crisis. Even though our country was down, foreigners still had more faith in America than in their own countries.

The Power of Fear

Fear immobilizes, seizes all creativity and puts us at our worst. And who would know this better than Franklin D. Roosevelt. In his first inaugural address on March 4, 1933, when the Depression reached its depth, he said, “This great nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself.” Franklin Roosevelt was right then, and he’s right now.

We Are Not Protectionists

The new 111th Congress will begin in January. For very good reasons it will adopt new regulations designed to stabilize our financial sector, and perhaps establish new policies to safeguard other industries in an attempt to promote American prosperity. The problem is not with the intention, but with the execution, as well as the unintended consequences.

As such, it is essential that fear does not dominate Congressional thinking and wrongly lead to protectionist measures as part of the solution. The last time this occurred, the results were disastrous.

In the 1930s, U.S. industrial production began to fall and American farmers felt the effects of foreign agricultural competition. European agricultural recovery after World War I resulted in overproduction. As a result, international agricultural prices fell.

The solution: on June 17, 1930, President Hoover signed the Smoot-Hawley Act that raised tariffs nearly 60 percent over their existing high rate of 44 percent. Although the act seemed like a good idea at the time, it effectively killed international trade. Within two years following the act’s implementation, U.S. exports decreased by nearly two-thirds.

In anticipation of Smoot-Hawley’s passage, France, Italy, India and Australia passed their own protectionist legislation. Others, such as Spain, Switzerland and Canada, followed suit.

The result: export markets dried up and domestic industries slowed down. For the next eight years international trade declined. The unemployment rate in the United States rose to 25 percent in 1933. What began as a sincere attempt to aid U.S. industry made an international crisis of the highest order more severe.

Although the Great Depression occurred generations ago, an important lesson holds: protectionism and economic isolation do not work.

America possesses tremendous strengths that make this country great. And when faced with difficult challenges, we rise to the occasion. Now is not the time to retreat and curl up in a fetal position—now is the time to reach into the depths of Americanism to recapture the confidence to remain globally engaged and overcome the obstacles ahead.

This article appeared in Impact Analysis, November-December 2008.
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, emerging risks, and the latest economic trends. He's also founder of both the ManzellaReport.com and Manzella Trade Communications, Inc. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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