You can not win a Nobel Prize in economics unless you are deeply deluded about humankind's future on the Planet Earth. Michael Spence of NYU's Stern School is no exception. Spence has a new book out, and is selling it on the obligatory promotional tour. Thus the Daily Ticker's Dan Gross and Aaron Task interviewed Spence yesterday in Why Globalization Is Good for America.
The rise of emerging markets, most notably the 'BRICs', is seen by most as a relatively recent phenomenon dating back only two decades or so. In reality, rapid growth in the developing world is part of a 100-year process that is only halfway done, says Nobel Prize winner Michael Spence, author of The Next Convergence: The Future of Economic Growth in a Multispeed World...
Starting with post-war Japan, continuing with South Korea and then moving onto Singapore, Hong Kong, etc. Asian countries have been steadily modernizing and raising their standard of living for the last 50 years, says Spence, a professor at NYU Stern School of Business...
Fostering the human capital in these countries has allowed them to create the infrastructure, technology and education systems needed for economic expansion. Spence says these principles which started with Japan and are now catching on in more Asian nations, most notably in India, South America and even Africa and will continue to do so for the next 50 years or so.
What does this mean for America?
In its simplest form, "We're looking at people joining us in the advanced country world," which Spence believes translates into a different but positive economic future for America. "We have to get used to not being dominate anymore" but overall the globalization tide will lift all boats and perhaps lift America's the most.
What has made America dominant — a "flexible, innovative" economy — will continue to benefit it in the future, he says.
Some views of the world that are so nonsensical, so divorced from reality, that I can not easily refute them. The task seems too large. Where does one start? If you're dealing with a schizophrenic in a psych ward, and this guy believes he is Jesus, do you start re-assembling reality brick by brick, all the while explaining to this poor nut case what the world looks like? No! You shoot him up with thorazine and check back on him later. That's how I view Michael Spence's learned opinion that the globalization tide will lift all boats, and perhaps lift America's the most.
What makes this all the more poignant is that Gross and Task did two interviews with Spence, and in the second one he explains why globalization is not good for America, although he does not put it that way. This second interview was called Nobel Laureate Spence: U.S. May Have to Live with Slow Employment Growth.
"Major employment problems in the near future are a near certainty."
That's one of the conclusions of a March report co-authored by Nobel-Prize winning economist Michael Spence...
A study [Spence] conducted for the Council on Foreign Relations with co-author Sandile Hlatshwayo, entitled "The Evolving Structure of the American Economy and the Employment Challenge", paints a pretty bleak picture. It broke down jobs in the U.S. into two very large sectors: tradable and non-tradable.
Tradable jobs are ones that can be done by anyone around the world: manufacturing, back-office operations, pharmaceuticals, engineering, finance, consulting. Non-tradable jobs are those that really can only be done by people in the U.S., such as retail, health care, food service, government, and construction.
Looking back on the period from 1990 to 2008, the co-authors found that 97 percent of the 27.3 million U.S. jobs created were in the non-tradable sector. (The five largest non-tradable sectors, mentioned above, contributed 65 percent of the 1990-2008 jobs growth.) "The employment creation occurred mostly in non-tradable sectors — where we don't have international competition," Spence said.
On the one hand, that's good news. It means the overwhelming majority of the new jobs created can't be offshored easily. But the report notes that powerful forces may inhibit further growth in these areas. The two leading employment sectors, after all, are government and health care, which accounted for 40 percent of the incremental jobs created between 1990 and 2008.
Due to high deficits and rising pressure on health care spending, those areas aren't likely to be huge sources of job growth going forward...
In other words, if a job was tradable, that job was created overseas, and not in in the United States! And an astonishing 40% of all new jobs created over those 18 years were in government or health care! For your convenience, I have included Mish's graph of total non-farm (private sector) jobs in the United States from January, 2000 to April, 2011.
Data from the Bureau Of Labor Statistics. We're still trying to get back to where we were in January, 2000.
What are we to conclude about Dr. Spence? I don't know about you, but I think the use of thorazine is not only warranted here, but absolutely necessary if he is to successfully get through the rest of his book tour. He definitely has my vote—clueless economist of the year!
And now here's the video in which this madman Nobel Laureate explains how we are only halfway through 100 years of astonishing economic growth on the Planet Earth.
"overall the globalization tide will lift all boats and perhaps lift America's the most."
That has got to be the most idiotic statement that I have ever heard an egghead make.
Go down to the factory floor, or better yet, to the bars where the unemployed workers now hang out, and make that argument!
Nope, I don't want that on my conscience, let me just tell this Nobel Prize winner, if he did what I suggested earlier, he would probably get his ass beat until his nose bled.
Thanks Dave for this great post and I apologize for taking advantage of your kindness by my language earlier.
Posted by: William Mcdonald | 05/18/2011 at 12:15 PM