All posts tagged economic growth


The New Normal

A few weeks ago 60 Minutes aired an interesting and insightful segment on the rise and role of robots, and their impact on the job market. Despite the steady rebound of the U.S. economy, soaring corporate profits, and a strong stock market the nation’s unemployment numbers remain steadily high in the aftermath of the 2008 financial crisis. Initially this ‘new normal’ in the job market was seen as sign that companies have learned to operate and succeed in uncertain and tumultuous economic times by downsizing their workforces and thinning their labor expenses. Though the economy has rebounded, jobs have not, and this segment illustrates one of the unknown and growing factors which has attributed to the continued problem of joblessness in the country. Robots are cheap, efficient, and practical solutions for expanding economic growth in the U.S., especially manufacturing, while at the same time keeping costs to a minimum.

Opponents may decry this as yet another way for corporations to squeeze out more profits and deny workers fair pay. However, though the short term effects of such a transition to robotics may continue to hurt the job market, this should be a welcoming sign to the U.S. economy for a number of reasons. First, it has been a major catalyst and boost to the U.S. manufacturing industry which until recently has been steadily declining over the decades. Second, these new robots- though they may replace a worker- are eliminating the need for low-wage and low-skill jobs, thereby creating a need for more high-skill and technical jobs. Though these jobs may be less in number, they are more productive and pay better. This is the kind of job market we should we working towards, and not against. The simple and low paying manufacturing jobs of the past are gone, and will not come back. This is a practical fact that no company or political will say, but all know is true. Instead of burying our heads in the sand and hoping for companies to one day wake up and rehire the unemployed- which they will not- we must recognize the practical reality. We are going through the growing pains of a shifting economy. The quicker we understand this, adapt to it, and train our workers for it then we will be better off, perhaps not in the present but we will be poised for a better future.

This is a benefit and success for U.S. innovation, which has always been the main driver of our economic growth and success, both domestically and internationally. Though many may lament this new innovation, they should not  fear it but embrace it. It is not a threat to us or our workforce, these are not jobs we want, nor need. The real losers of this innovation are the low paid workers of the developing world, primarily India and China, and can bring about a turn of the tide in reducing out-sourcing and foreign manufacturing. By lowering the cost of production U.S. companies can reinvest in the U.S., hire skilled workers which will be trained here, and contribute to our economy. This new economy will require more investment in education and a better economic strategic plan, however it is a signal in the right direction and a positive new normal that we should embrace.


Start Thinking America

It is a new year, and with the exit of the 112th Congress (one of the worst in our history) and the political haggling of the first of many ‘fiscal cliffs’ now over, America seems to be facing a new and potential hazardous future if it chooses to stay on the same destructive course. With the upcoming inauguration of Barack Obama for his second term, the newly sworn in 113th Congress, and three new fiscal nightmare scenarios looming, we once again stand at the precipice of doing what is necessary, versus what will suffice the status quo and political power grabs.We often get caught up in media cycles and do not look at the big picture.  Sometimes what is necessary is for a look in from the outside, such a view sometimes puts things into perspective.

 

Time to Start Thinking: America in the Age of Descent

 

With that in mind everyone interested in the future of the U.S. should read Edward Luce’s Time to Start Thinking: America in the Age of DescentLuce, who is the Washington Bureau Chief for the Financial Times and a former speechwriter for former Treasury Secretary Lawrence Summers, outlines the problems facing the U.S. as the rest of the world continues to grow and our economic, and political, strength continue to diminish. He outlines the social, economic, and cultural decline that the nation faces– mourning the decline of American pragmatism which has seen the nation push through past crisises and threats of decline.

This time around he, as well as a litany of other experts he cites, are not so hopeful. In the New York Times review of the book, Jonathan Rauch summarized some of the main points outlined in the book. Summarizing Luce’s arguments, he states

where does that leave the country? Not in a great place, if Luce is right. Jobs are disappearing, median household income is declining, skills are in short supply, health costs hobble competitiveness, outsourcing and offshoring and automation marginalize working-class men, and through it all political leaders either sit by helplessly or actively oppose remedies. And that’s just in Chapter 1. Later sections bring us dysfunctional schools, demoralized government, burdensome debt and deficits, failing innovation, hidebound regulation, crumbling infrastructure, a paralyzed Congress, a broken campaign-finance system and more, much more.

Though the book does a great job listing all the doom and gloom scenarios facing the U.S., its best asset is that it illustrates that our decline is relative. It is relative to the rest of the world which is still struggling to find its bearing and inherit its newfound political and economic power. We have time to adjust, to make the necessary changes, and to adapt the U.S. for a new decade and century before it is too late. The book highlights some of our largest threats and challenges of the past century– the Cold War, the emergence of Japan in the 1990’s, and now a globalized world and the emergence of China.

The U.S. has weathered the same alarmist voices which speak of America’s decline for decades. What the book does is raise the alarm against absolute decline. Winston Churchill once said that America always does what is necessary when it has exhausted all other options, yet again our backs are against the wall and our leaders must act to reemerge from a financial crisis and political paralysis.Before the fall of the Soviet Union, Georgi Arbatov, Gorbachev’s close aide told the U.S. “We [the USSR] will do a terrible thing to you; we will deprive you of an enemy.” This time around America faces the worse enemy in its history– itself. Over a century ago Abraham Lincoln envisioned this decline from within when he stated  “America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.”

Luce makes a number of good points, raises a number of valid questions, and offers some pragmatic solutions for the future of the U.S. Let’s hope someone is listening. Reading this book would help.


Xi’s the One

Get used to this name, Xi Jinping(pronounced SHEE Chin-Ping).

Last week China’s Communist Party anointed Xi as the next President of China, succeeding Hu Jintao who has overseen a decade of remarkable growth. This change represents a major shift in the leadership of China as a new generation of leaders headed by Xi take over the  Politburo Standing Committee who governs the nation, primarily by consensus. Xi, who was said to have been  favored by previous Chinese leader Jiang Zemin, has risen to a position of prominence in China partly due to his background as a Princeling, a relative of one of the founders of the Chinese Communist revolution.  This process has been quite lengthy and long awaited, here is an interactive and comprehensive look at the transition in China, as well as background on the new leaders of the Standing Committee. Read more…


Competing Models

Nicholas Kristoff, of the New York Times, makes a strong argument against Mitt Romney’s suggested economic model. However, the argument is part of a much larger debate. Republican’s and Romney make a strong argument in favor of austerity and a Hayekian /Austrian School  economic model, while Democrat’s and the President have been in favor of a pro-stimulus Keynesian model of deficits and spending.

The evidence for, or against, both economic models have been illustrated in Europe since the global financial crisis. The GOP has embraced the austerity of Great Britain and other nations and has seen their economies shrink and remain stagnant, while the US as other nations embarked on stimulus spending and are showing signs of GDP growth, however minimal.

In the last few years, Germany and Britain, in particular, have implemented precisely the policies that Romney favors, and they have been richly praised by Republicans here as a result. Yet these days those economies seem, to use a German technical term, kaput. Read more…