« Top Headline Comments 12-7-10 | Main | White House Blames Congressional Dems for Tax Deal »
December 07, 2010

Hard choices all the way around [Fritzworth]

William Gross has a disquieting article over at PIMCO that says our current economic problems are profoundly structural and are not going away anytime soon. He even provides his own summary points:

  • The global economy is suffering from a lack of aggregate demand. With insufficient demand, nations compete furiously for their share of the diminishing growth pie.

  • In the U.S. and Euroland, many policies only temporarily bolster consumption while failing to address the fundamental problem of developed economies: Job growth is moving inexorably to developing economies because they are more competitive.

  • Unless developed economies learn to compete the old-fashioned way – by making more goods and making them better – the smart money will continue to move offshore to Asia, Brazil and their developing economy counterparts, both in asset and in currency space.

We here in the US have spent the last 25 years or so talking about our transformation from a manufacturing economy to a "knowledge" economy. In retrospect, we appear to have been trying to make a virtue out of an inevitable trend. The problem is, consumers by and large don't buy "knowledge" -- they buy tangible things.

Perhaps the most disturbing part of the article is that Gross's solution is for the US to become competitive in manufacturing again:

The constructive way is to stop making paper and start making things. Replace subprimes, and yes, Treasury bonds with American cars, steel, iPads, airplanes, corn – whatever the world wants that we can make better and/or cheaper. Learn how to compete again. Investments in infrastructure and 21st century education and research, as opposed to 20th century education are mandatory, as is a withdrawal from resource-draining foreign wars. It will be a tough way back, but it can be done with sacrifice and appropriate public policies that encourage innovation, education and national reconstruction, as opposed to Wall Street finance and Main Street consumption.

This solution ignores Gross's own analysis, which points out "By many estimates, Chinese labor works for 10% or less than its American counterparts." Furthermore, we have much stiffer quality, environmental, labor and workplace standards here in the United States, all of which increase the cost -- sometimes prohibitively -- of building things to be sold. Short of some truly miraculous breakthroughs in manufacturing technology -- and we're talking about pre-Star-Trek-type breakthroughs -- there is just no way we can rebuild our manufacturing base in such a way as to undercut China as China currently exists.

So while I disagree with some of Gross's solutions and conclusions, that is exactly why I believe his article is well worth reading in full: because it underscores the profoundly structural nature of the economic problems we face here in the West. To a large extent, we can consider the last 30 years to have been a "meta-bubble" in which we burned through a lot of different types of "credit" in building a lifestyle and a level of general public wealth at all levels (leftist naysayers notwithstanding) never before seen in the world.

That meta-bubble started deflating 10 years ago, with the tech crash of 2000. We have continued to pump up other bubbles (e.g., subprime loans, the great equity drawdown, the college education bubble, QE2) to maintain that lifestyle, but they all keep popping as well. We are a bit like the cartoon character falling from a plane who -- after two or three parachutes have failed -- keeps digging through his parachute pack, hoping to find something to stop the descent and coming up with increasingly improbably -- but inevitably useless -- objects.

And beneath our feet, the unforgiving ground rushes up ever faster. ..fritz..

P.S. OK, I probably shouldn't blog at 5 in the morning; I just get a bit too dark.
P.P.S. Did some minor edits to tighten up a few things.


digg this
posted by Open Blogger at 07:26 AM

| Access Comments




Recent Comments
qdpsteve: "Not foist!! ..."

Grump928(C): "[i]I just found two cans of sauerkraut that is two ..."

qdpsteve: "Foist!! ..."

The Political Hat: "Progressive Utopia: Fake Science; Evil Words; Auth ..."

penguin with ice cream on his face: "[i]I'm sealed on the Privy[/i]Interesting. ..."

qdpsteve: "Bertram: will the commercial feature Ted Nugent?? ..."

Skandia Recluse: "Posted by: Skandia Recluse at October 19, 2017 09: ..."

Pug Mahon, Gentleman Drunkard: "Looking like a Yankees-Dodgers series. YYYAAAAA ..."

Bertram Cabot, Jr.: " [i]Just saw a commercial for Abby's...venison sa ..."

Aetius451AD Work Laptop: "Murdering millions of people from ideological hatr ..."

boulder terlit hobo: "here's Macc Lads for the 'nettes - https://www. ..."

W. J. Clinton: "[i]How bulgy is the can? Posted by: Bitter Clinge ..."

Recent Entries
Search


MuNuvians
Polls! Polls! Polls!
Frequently Asked Questions
The (Almost) Complete Paul Anka Integrity Kick
Top Top Tens
Greatest Hitjobs

The Ace of Spades HQ Sex-for-Money Skankathon
A D&D Guide to the Democratic Candidates
Margaret Cho: Just Not Funny
More Margaret Cho Abuse
Margaret Cho: Still Not Funny
Iraqi Prisoner Claims He Was Raped... By Woman
Wonkette Announces "Morning Zoo" Format
John Kerry's "Plan" Causes Surrender of Moqtada al-Sadr's Militia
World Muslim Leaders Apologize for Nick Berg's Beheading
Michael Moore Goes on Lunchtime Manhattan Death-Spree
Milestone: Oliver Willis Posts 400th "Fake News Article" Referencing Britney Spears
Liberal Economists Rue a "New Decade of Greed"
Artificial Insouciance: Maureen Dowd's Word Processor Revolts Against Her Numbing Imbecility
Intelligence Officials Eye Blogs for Tips
They Done Found Us Out, Cletus: Intrepid Internet Detective Figures Out Our Master Plan
Shock: Josh Marshall Almost Mentions Sarin Discovery in Iraq
Leather-Clad Biker Freaks Terrorize Australian Town
When Clinton Was President, Torture Was Cool
What Wonkette Means When She Explains What Tina Brown Means
Wonkette's Stand-Up Act
Wankette HQ Gay-Rumors Du Jour
Here's What's Bugging Me: Goose and Slider
My Own Micah Wright Style Confession of Dishonesty
Outraged "Conservatives" React to the FMA
An On-Line Impression of Dennis Miller Having Sex with a Kodiak Bear
The Story the Rightwing Media Refuses to Report!
Our Lunch with David "Glengarry Glen Ross" Mamet
The House of Love: Paul Krugman
A Michael Moore Mystery (TM)
The Dowd-O-Matic!
Liberal Consistency and Other Myths
Kepler's Laws of Liberal Media Bias
John Kerry-- The Splunge! Candidate
"Divisive" Politics & "Attacks on Patriotism" (very long)
The Donkey ("The Raven" parody)
News/Chat
Archives
Powered by
Movable Type 2.64