You Be the Judge


Increasingly, Fareed Zakaria has turned his attention from foreign policy to economics where his distinctive lack of insight into or understanding of American politics, policy, or, frankly, what’s actually going on in the world serves him in good stead. Today he turns to export trade as a beacon for future job growth in the U. S., praising the president’s leadership in that area:

Exports are growing at an annualized rate of 16 percent, which means that U.S. exports should double earlier than 2014, the goal President Obama set in 2009. Labor productivity in the United States is now the highest among Group of 20 countries, and this boost means that unit labor costs in the United States have dropped more than in any G-20 country except Taiwan.

The graph above from the invaluable FRED site of the St. Louis Federal Reserve depicts real U. S. exports of goods and services. Do you see a 16% annualized rate of growth? Me, neither. 16% would mean roughly $250 billion more. It’s just not there. The kindest interpretation I can come up with is that if you only look at growth from the trough of the recession and if you only consider dollar growth rather than real growth there might have been 16% growth from 2009 to 2010. That this has anything to do with any individual president’s policies is fatuous. What I see is a return to trend.

I am skeptical that inflation-driven nominal export growth is likely to be a major producer of new jobs.

I’m completely in favor of the U. S. exporting more, especially more finished goods. We should mine more, pump more, drill more, make more, grow more, provide more services, and sell more of what we mine, pump, drill, make, grow, and provide to overseas customers. But the numbers are against our doubling our real exports for the foreseeable future. For that to take place either a) there would need to be an unimaginable increase in world income or b) we would need to secure a much larger market share than we currently hold. We already export a lot. Doubling that will be a tall order and I seriously doubt that the other major export-driven economies will sit idly by while we increase market share.

Virtually every other economy (including China’s) is slowing. Can we expect 16% real annualized growth in a slowing global economy?

Mr. Zakaria goes on to single out Germany as a model to emulate:

The German system gives incentives to train workers and keep them employed; in contrast, the U.S. system emphasizes flexibility, the ability to hire and fire, and keeping wages low. Jacobs points out that, in a world filled with cheap labor, rich countries are better off with highly skilled workers, making premium products, with a focus on long-term growth and social stability. The German system, in other words, might be a better fit for the globalized world.

I don’t know what German labor laws are now but I’m very familiar with what they used to be. It used to be the case that it was practically impossible for a German company to fire a German national. Imagine academic tenure spread over an entire country and it might give you the picture.

German companies responded to this as you might expect: they were more likely to hire foreign workers than German nationals. There have been a lot of developments since then, namely the EU and the euro. Germany has pursued a mercantilist, beggar-they-neighbor policy to the point where its neighbors, in particular Greece, have become beggars. The euro ship is headed aground with Germany at the helm. Vada a bordo, cazzo! Get back on board, dammit!

I do think that there are some things Germany is doing that we might want to emulate. For example, in Germany there’s far less emphasis of the importance of college education and more on skilled trades. Germany has apprenticeship programs. However, I think we might want to reserve judgment on the German model for a few years.

21 comments… add one
  • Icepick

    That this has anything to do with any individual president’s policies is fatuous.

    President Gardiner’s mere presence in the Oval Office is the reason for the growth, not something as trivial as policy.

  • Icepick

    For example, in Germany there’s far less emphasis of the importance of college education and more on skilled trades. Germany has apprenticeship programs.

    I have been told repeatedly, by people of Drew’s ilk (here, at Calculated Risk and elsewhere), that any apprenticeship programs will completely destroy the American economy – under no circumstances must any employer ever be expected to shoulder ANY of the burden of training any workers. This is why entry level positions basically don’t exist in this country anymore – the recession killed whatever was left of such programs.

  • Icepick

    Also, I believe this post probably has the most cynical first sentence of any post that Schuler has written.

  • Also, I believe this post probably has the most cynical first sentence of any post that Schuler has written.

    It reflects how tired I’m becoming of people who know nothing of either business or economics getting paid by prominent and prestigious institutions to write on subjects of which they very evidently know little. I don’t object to economists that I disagree with getting paid to air their views but I do object to amateurs who know less than I do getting paid to bloviate from a platform with national visibility on business or economics.

    I think it reflects the bunk idea that Ivy Leaguers can write authoritatively on any subject.

  • This is why entry level positions basically don’t exist in this country anymore – the recession killed whatever was left of such programs.

    This is a battle I have been fighting, literally, for decades. I cannot seem to persuade managers that junior engineers grow up to become senior engineers and that when most or all of the jobs for junior engineers are in China, Taiwan, Japan, South Korea, or Thailand there will come a day when all of the senior engineers and designers are there, too. Management won’t be far behind.

  • Icepick

    Your story of trying to convince management about the junior engineers reminds me of a story I read recently about some computer company (I forget which, and I’m too lazy to look it up) that kept outsourcing production of components to a company in Taiwan (I believe it was) and then was astounded when that company started producing its own computers sold under its own name. Duh.

  • Icepick

    I think it reflects the bunk idea that Ivy Leaguers can write authoritatively on any subject.

    A lot of Ed. School graduates believe that because they’ve got teaching degrees they can teach anything regardless of actual subject knowledge. (I’ve actually had a few of them tell me this through the years.)

    As for the Ivy Leaguers, don’t you know they’re the bestest and the brightest? Why wouldn’t they be able to understand everything just because they can string some words together and convince other Ivy Leaguers that the words sound pretty?

  • …I do object to amateurs who know less than I do getting paid to bloviate from a platform with national visibility on business or economics.

    Word of advice, never read anything written by Kevin Drum.

  • Brett

    For example, in Germany there’s far less emphasis of the importance of college education and more on skilled trades. Germany has apprenticeship programs.

    I wonder about that, though. This is anecdotal, but some of the Germans I’ve spoken to weren’t too hot on the whole apprenticeship system – its graduates supposedly have some of the highest unemployment rates in the country.

  • steve

    I read hedgehogs and foxes. There is a place for both.

    Steve

  • Ben Wolf

    “The great winner of this recession has been Germany. That country faced a crash just as dramatic as all others; in fact, Germany’s GDP declined more than that of the United States in 2008, yet its unemployment rate rebounded fast. There are many explanations for German success, but as Elisabeth Jacobs details in a new paper from the Brookings Institution, government policies that created incentives for business to think long-term, value their workers and invest in capacity all helped. The German system gives incentives to train workers and keep them employed; in contrast, the U.S. system emphasizes flexibility, the ability to hire and fire, and keeping wages low. Jacobs points out that, in a world filled with cheap labor, rich countries are better off with highly skilled workers, making premium products, with a focus on long-term growth and social stability. The German system, in other words, might be a better fit for the globalized world.”

    This is perhaps the most shallow analysis of German policies I have seen. No mention of the vast covert subsidies the German government grants its corporations via the workshare program, or that German employment and GDP rebounded only after the government yet again violated the Maastricht Treaty via deficit spending and loose monetary policies it won’t allow the rest of europe to utilize. The German “miracle” so many swoon over is finished: I am confident projecting that German growth is slowing dramatically and stands an excellent chance of falling into recession by the end of the second quarter, if it hasn’t already.

    German economic planning over the last two years has amounted to expecting the U.S. consumer to become buyer of last resort yet again so the export splurge can continue. It ain’t going to happen.

  • German economic planning over the last two years has amounted to expecting the U.S. consumer to become buyer of last resort yet again so the export splurge can continue. It ain’t going to happen.

    We’re largely in agreement on this, Ben. I might add that it’s a heckuva lot easier to take a long view if you’re not paying estimated taxes every quarter. For many American managers the longest view that the federal government will allow them to take is one month.

  • Do I think Obama wants to retard jobs growth. Of course not. I just don’t think he has a clue what to do, and misunderstands the knockon effects of his policy stance.

    I don’t think that either the president or the Congress intentionally slows job growth but that’s the effect of their actions. I can give any number of examples of this. Why are Davis-Bacon wages required for projects paid from with stimulus money? Why do we subsidize sectors that produce fewer jobs for each dollar spent rather than more jobs? Why do we subsidize ethanol, solar energy, etc.?

    Why do we have a military that spends far more than is required for our actual security needs? Why does the TSA spend an order of magnitude more than was spent on boarding security prior to 9/11 to produce what is, essentially, security theater?

    All of these things cost jobs rather than create them. The president’s fumbling arguments about green jobs were addressed a century ago in Bastiat’s parable. As were the arguments made by the sultans of intellectual property in defense of SOPA.

    Add to those the vast number of job-reducing measures by state and local governments. A whopping 30% of all jobs in the U. S. require licenses, for pity’s sake.

  • Icepick

    Why do we have a military that spends far more than is required for our actual security needs?

    Partly that is the dreaded M/I complex at work, but it is also a question of a lack of vision on what constitutes US security from some quarters, and a maximally expansive view of the same from other quarters.

    Some just haven’t rethought what we should be doing in a post-Soviet world.

    And some people honest-to-God believe that the US will be more secure here if we act as the world’s policeman everywhere. Partly it is the belief that by extending our power we will make trade more secure, and partly the belief that we need to keep order so that failed states don’t create problems for us both directly and indirectly. There’s something to be said for both these lines of thought, but they never seem to want to analize negative consequences of those actions.

    And finally, at this point there just aren’t that many people left alive that remember when the USA wasn’t the main power in the world. Those old enough to remember when the giant slept aren’t great in number, and are completely inconsequential in influence*. For all the rest of us world-wide American power projection is just a matter of mental habit.

    * I don’t believe there are any Armand Hammer types around anymore, and it would take someone very old and very influential and still somewhat vibrant to remember such a time and push for it in policy circles.

  • steve

    Dave- Most non-ideolgoical writers realize that job creation has been a problem for the US for a long time. I think it pretty clear it is multifactorial. Globalization and the modernization of the third world. Loss of cheap energy. Transitioning to a service economy. And so on. I think the private sector is no longer as able or willing to produce jobs. It can still produce profits. Poor governance is also a problem, but I dont really know if it is the result or cause of our problems. Maybe both.

    Steve

  • Drew

    I don’t think that either the president or the Congress intentionally slows job growth but that’s the effect of their actions. I can give any number of examples of this

    This of course informs my smaller rather than bigger government worldview…

  • Drew

    There’s something to be said for both these lines of thought, but they never seem to want to analize negative consequences of those actions.

    And there is good reason for that…………..sorry ……..on the road all week, multiple cities, trains, planes, cabs (and caught this evening in Obamas fundraising mess on the upper east side) you get a bit slap happy….

  • Andy

    Why do we have a military that spends far more than is required for our actual security needs?

    Partly that is the dreaded M/I complex at work, but it is also a question of a lack of vision on what constitutes US security from some quarters, and a maximally expansive view of the same from other quarters.

    Some just haven’t rethought what we should be doing in a post-Soviet world.

    I think Ice is pretty much right. What are our security needs? Like so much else in the US right now, there’s little consensus.

    There is also a difference between present needs and future needs. One could argue we haven’t spent enough considering we’ve been fighting two man-power intensive wars without adequate numbers of troops and the main reason we haven’t grown the military substantially for these wars is due to money.

    Going forward, however, the devil is in the details. It’s one thing to say we overspend on the military, it’s quite another to determine what level of funding will meet our needs and what those needs are in terms of military capabilities. To give you an idea, most of Europe spends about 1/2 as much per capita as the US. If we halved the defense budget, you can look at Norway or France to get an idea of the kind of capabilities that would leave us with.

    Anyway, on pundits, I think ignorance is part of the job description. By definition they must be able to talk about anything – even stuff they know nothing about. Still, I think Fred Barnes is the clear winner among no-nothing pundits for this quote in 2003 on Iraq:

    “The war was the hard part. The hard part was putting together a coalition, getting 300,000 troops over there and all their equipment and winning. And it gets easier. I mean, setting up a democracy is hard, but it is not as hard as winning a war.”

  • Partly that is the dreaded M/I complex at work, but it is also a question of a lack of vision on what constitutes US security from some quarters, and a maximally expansive view of the same from other quarters.

    Quite right here. The M/I is a fine example of rent seeking and what can happen when you combine private profits and the government.

    And some people honest-to-God believe that the US will be more secure here if we act as the world’s policeman everywhere.

    The irony of this statement….

    Considering that our police act very much like our military…kicking in doors, using grenades, tanks, machine guns. Taser use is ubiquitous, force protection vs. protecting the public.

    Yeah, that mindset is really…well fucked up. We need to change that and it will also likely improve our security situation in the long run as well.

    There’s something to be said for both these lines of thought….

    Yeah, stupid. That is what you can say about that kind of mindset. Trying to prop up a failure is like trying to polish a turd. Trying to make trade more secure via force isn’t likely to work either. By going in and running those kind of operations, if anything, create a more volatile situation not less.

    Yeah, yeah, yeah oil. Well some of the people who point to oil are also the same dunderheads who complain about global warming and GHGs. You want oil to be cheaper? Really? And making the U.S. more oil independent? Higher prices and a less stable supply sure would help with that too. Sure, you could argue that,

    1. We’ll keep prices low, and
    2. Do research into alternatives.

    Problem is that the low prices basically discourage that kind of research aside from politically driven research. Which do we think will work better research driven by politics or profit? I’ll go with the latter Monty.

  • Brett

    @Steve Verdon

    Yeah, that mindset is really…well fucked up. We need to change that and it will also likely improve our security situation in the long run as well.

    I blame the Drug War. It’s the main reason for the “militarization” of the police force.

    Yeah, stupid. That is what you can say about that kind of mindset. Trying to prop up a failure is like trying to polish a turd. Trying to make trade more secure via force isn’t likely to work either. By going in and running those kind of operations, if anything, create a more volatile situation not less.

    It’s not stupid to be worried about the ramifications if the US’s security strategy undergoes a drastic change. I think it has to be done, but I’m still concerned about what the short-term costs will be as it up-ends all of our existing strategic relationships.

  • Icepick

    Yeah, stupid. That is what you can say about that kind of mindset.

    Failed state in Afghanistan => 9/11/2001. It isn’t ridiculous that thinking cleaning up such messes might provide long-term security benefits. It might be wrong, but it isn’t ridiculous. The fact is that Afghanistan had no beef with us, but decided to allow for a massive terror attack on US soil & citizens to be run from that country.

    As for military force helping trade: That has been a truism since the British Royal Nazy ruled the seas. Cleaning up piracy & privateering, amongst other things, certainly helps trade. I’ll note that we seem to be failing in that now, perhaps due to undo focus elsewhere.

    These ideas are not ridiculous, and there are historic analogies that support them. Whether or not specific & concrete policies NOW will be effective in the current world is up for debate, but these ideas do have some grounding. (Not to mention humanitarian arguements.)

    Just calling them stupid out of hand is lazy at best.

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