November 27, 2007


Follow the Fundamentals (DAVID BROOKS, 11/27/07, NY Times)

Recently the World Economic Forum and the International Institute for Management Development produced global competitiveness indexes, and once again they both ranked the United States first in the world.

In the World Economic Forum survey, the U.S. comes in just ahead of Switzerland, Denmark, Sweden and Germany (China is 34th). The U.S. gets poor marks for macroeconomic stability (the long-term federal debt), for its tax structure and for the low savings rate. But it leads the world in a range of categories: higher education and training, labor market flexibility, the ability to attract global talent, the availability of venture capital, the quality of corporate management and the capacity to innovate.

William W. Lewis of McKinsey surveyed global competitive in dozens of business sectors a few years ago, and concluded, “The United States is the productivity leader in virtually every industry.”

Second, America’s fundamental economic strength is rooted in the most stable of assets — its values. The U.S. is still an astonishing assimilation machine. It has successfully absorbed more than 20 million legal immigrants over the past quarter-century, an extraordinary influx of human capital. Americans are remarkably fertile. Birthrates are relatively high, meaning that in 2050, the average American will be under 40, while the average European, Chinese and Japanese will be more than a decade older.

The American economy benefits from low levels of corruption. American culture still transmits some ineffable spirit of adventure. American students can’t compete with, say, Singaporean students on standardized tests, but they are innovative and creative throughout their lives. The U.S. standard of living first surpassed the rest of the world’s in about 1740, and despite dozens of cycles of declinist foreboding, the country has resolutely refused to decay.

Third, not every economic dislocation has been caused by trade and the Chinese. Between 1991 and 2007, the U.S. trade deficit exploded to $818 billion from $31 billion. Yet as Robert Samuelson has pointed out, during that time the U.S. created 28 million jobs and the unemployment rate dipped to 4.6 percent from 6.8 percent.

That’s because, as Robert Lawrence of Harvard and Martin Baily of McKinsey have calculated, 90 percent of manufacturing job losses are due to domestic forces. As companies become more technologically advanced, they shed workers (the Chinese shed 25 million manufacturing jobs between 1994 and 2004).

Meanwhile, the number of jobs actually lost to outsourcing is small, and recent reports suggest the outsourcing trend is slowing down. They are swamped by the general churn of creative destruction. Every quarter the U.S. loses somewhere around seven million jobs, and creates a bit more than seven million more. That double-edged process is the essence of a dynamic economy.

These are happy teams for those of us who believe men fundamentally ineducable. 2007 is virtually indistinguishable, rhetorically, from 1987.

Posted by Orrin Judd at November 27, 2007 8:56 AM

When I was a young policy wonk at the Heartland Institute, I learned that raw rankings (where even accurate) were less important than the direction things where heading.

Our labor markets are becoming less flexible, our "venture capital" industries are engaging in climactic 'rent-seeking' while Sarbox is chasing some entreprenuers overseas to more?? !! dynamic !! markets.

The dollar's crash is less important than the lack of a scenario where it reverses course, and most of all, our "values" are in near total free-fall, as the once value-oriented middle class is out there defending the most corrupt education system in the world while that system is attacking our values AND assimilative culture.

(see Seattle schools attacking Thanksgiving, all schools attacking the founding fathers, and Portland Main schools giving your daughters birth control and abortion services with out parental notification)

Can we survive? Sure, it's easy. Destroy our foul public education system and replace it with 100% fully-funded scholarships for every child.

Posted by: Bruno at November 27, 2007 10:30 AM

When ideology fails blame the facts.

Posted by: oj at November 27, 2007 11:30 AM

Deficit exploded, so did GDP. It is much better if we weigh our deficit as a percentage of our GDP.

When the greenback falls, we worry about a free fall; when the greenback rises, we worry about losing competitiveness.

You know what: the Europeans are worrying about the same thing about their Euros.

In the '80s, a booming economy was a culture of greed. In the '90s, turning a thousand dollar to a hundred thousand over night in cattle future was savvy investment. In the '80s, we had unmanageable homeless problems; in the '90s, the homeless were miraculously gone, but returned since Jan. 2001.

Conclusion: everything will be fine as soon as a Democrat is in the White House.

Posted by: ic at November 27, 2007 3:54 PM