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the future of the US economy
Pi-r8
Registered User regular
Registered User regular
As everyone knows, the US economy is not doing well right now. Sure, The GDP is growing again and the stock market is back up, but our unemployment is over 10%. And that's just the official number- the real number might be twice that high (link). So basically, the rich are still rich, but the middle class is taking it in the shorts.
I'm not an economist, and I've never taken a single class in economics. So all I have to go on is common sense and internet research. But it seems to me that this recession might not be just a temporary blip for the US- it might last a lot longer than the Great Depression did. A valid comparison might be with Japan- it's stock market crashed in 1992, and the economy there still hasn't really recovered to what it used to be. In other words, there's no guarantee that just because an economy used to be good, it will always be good.
I'm particularly worried about where jobs are supposed to come from for the majority of middle-class Americans. It seems like for most of the last century, most Americans could easily get a job either in farming or manufacturing. These days farming has been industrialized so that just a handful of people can feed everyone else. We're still the world leader in manufacturing, but that's disappearing rapidly. 1 in 6 US manufacturing jobs have been lost since 2000. It's just so easy for a company to set up a factory in China or some other developing nation, pay the workers 1$/hour, and ship the goods back here for 1/10 the price. I don't see how the US can hope to compete in manufacturing, unless we resort to massive tariffs.
We've traditionally been a world leader in high-tech industries, thanks to a well educated workforce and a lot of government funding in R&D. Bush pretty much ended the latter, and a lot of other countries are catching up to us or surpassing us in education. We're sort of coasting right now on immigrants that come here to get their degrees and then stay here to work, but more and more of those people are going to be finding work back in their home countries.
Finance is another area which where the US has always been a world leader. Well, I think we all now how that's worked out. I'm not sure what will happen here, exactly, but the financial crisis has really shaken our assumptions that the financial industry can be widely profitable. A few people can get very rich their, sure, but it's not some sort of magic money-making machine.
Computers were supposed to increase our productivity, and they have, but that just means that companies need fewer employees to function. What might have needed 10 secretaries typing on typewriters in the past, now just needs 1. Meanwhile, the internet means that an awful lot of jobs can be outsourced to India for a fraction of the wage that would be paid here. That's why i don't think that IT will ever be a mainstream industry here.
So what's left for Americans to DO? We're still the world leaders in entertainment, I guess. Movies, music, and more recently video games are all huge industries. We've also got the largest (and best? at least the most expensive) higher education system in the world, so more people can work in academia I guess. The only industry that seems to be really expanding fast right now is healthcare, but that's more of a statement about the inefficiency of our system and our aging population than anything else.
The bottom line: I do not think we can remain a first world nation with 1/3 of our population retired, 1/3 taking care of the retired people, and 1/3 struggling to find employment. There just isn't any industry here, anymore, where an average guy can easily find work, be productive, and earn enough to support his/her family. It really worries me.
I'm not an economist, and I've never taken a single class in economics. So all I have to go on is common sense and internet research. But it seems to me that this recession might not be just a temporary blip for the US- it might last a lot longer than the Great Depression did. A valid comparison might be with Japan- it's stock market crashed in 1992, and the economy there still hasn't really recovered to what it used to be. In other words, there's no guarantee that just because an economy used to be good, it will always be good.
I'm particularly worried about where jobs are supposed to come from for the majority of middle-class Americans. It seems like for most of the last century, most Americans could easily get a job either in farming or manufacturing. These days farming has been industrialized so that just a handful of people can feed everyone else. We're still the world leader in manufacturing, but that's disappearing rapidly. 1 in 6 US manufacturing jobs have been lost since 2000. It's just so easy for a company to set up a factory in China or some other developing nation, pay the workers 1$/hour, and ship the goods back here for 1/10 the price. I don't see how the US can hope to compete in manufacturing, unless we resort to massive tariffs.
We've traditionally been a world leader in high-tech industries, thanks to a well educated workforce and a lot of government funding in R&D. Bush pretty much ended the latter, and a lot of other countries are catching up to us or surpassing us in education. We're sort of coasting right now on immigrants that come here to get their degrees and then stay here to work, but more and more of those people are going to be finding work back in their home countries.
Finance is another area which where the US has always been a world leader. Well, I think we all now how that's worked out. I'm not sure what will happen here, exactly, but the financial crisis has really shaken our assumptions that the financial industry can be widely profitable. A few people can get very rich their, sure, but it's not some sort of magic money-making machine.
Computers were supposed to increase our productivity, and they have, but that just means that companies need fewer employees to function. What might have needed 10 secretaries typing on typewriters in the past, now just needs 1. Meanwhile, the internet means that an awful lot of jobs can be outsourced to India for a fraction of the wage that would be paid here. That's why i don't think that IT will ever be a mainstream industry here.
So what's left for Americans to DO? We're still the world leaders in entertainment, I guess. Movies, music, and more recently video games are all huge industries. We've also got the largest (and best? at least the most expensive) higher education system in the world, so more people can work in academia I guess. The only industry that seems to be really expanding fast right now is healthcare, but that's more of a statement about the inefficiency of our system and our aging population than anything else.
The bottom line: I do not think we can remain a first world nation with 1/3 of our population retired, 1/3 taking care of the retired people, and 1/3 struggling to find employment. There just isn't any industry here, anymore, where an average guy can easily find work, be productive, and earn enough to support his/her family. It really worries me.
Pi-r8 on
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They never said that the economy had a healthy prostate.
Anyway, we're probably doomed in the short term, because Congress is dysfunctional and unable to react to serious problems with anything resembling, you know, seriousness.
I don't even really blame trickle-down economics so much as globalization. For a long time the US was the world leader in almost everything (or at least tied with Europe). But it's so easy for a third world nation these days to pick one specific industry, take over our market share by paying their workers peanuts to do the same thing. Distance is no longer a protective barrier.
Umm, manufacturing hasn't declined at all. If anything we're still a world leader. So you don't want tariffs against China, you want to outlaw robots.
Service sector jobs of varying requirements, primarily.
I'm going to assume you meant can't there, and frankly this is simply an issue of the previous administration's policies and the current recession. As the economy expands more jobs will be created than destroyed and thus 'average guys' will easily find work. Until the next business cycle hits at which point woe are we once more.
Well, I dunno about easily. We need something like ten million jobs created to restore full employment + jobs for all the new people joining the workforce every month. So it's going to be a while.
http://www.youtube.com/watch?v=OyiGej2vFUw
The President is currently working (or talking) with employers all over the nation trying to figure out how we can get more jobs in. Our GDP growth is artificial - it was mostly achieved in the laying off of workers.
I am using them as a resource. Once devoured and after supplying me with energy, I'll market the fecal matter they turn into as a new product for farms and gardens. LIMITED SUPPLY, ACT NOW.
FUCK MARKET EFFICIENCY!
And for centuries distance was, in fact, what allowed protectionism and infant industry to work as a starting point. The United States surely had the resources to manufacture most of its needs and the advantage of importing goods diminished as more infrastructure was built and populations increased. In the time it took to import something from England you could invest the same capital in the United States at a lower cost and reap the reward once the capital expense was paid. Why import coal and iron from England when the Appalachians and Great Lakes States provided these things? Why import steel when you could build a plant on a body of water (like Pittsburgh) and benefit from all the infrastructure being built to support other budding steel mill operators, tool and die factories, etc etc. When there are limitations on how quickly inventories are refilled through trans oceanic transport, domestic production has obvious benefits.
With decreased transport times, you don't have a barrier that makes domestic production competitive and invariably you see political pressure to level the playing field for the domestic producers while hurting domestic consumers (and of these Quotas are more pleasing than Tarrifs to most parties). Except the problem with these political barriers is that they have unforseen (well that's a misnomer given that we've seen outcomes from tarrifs, protected industries, and unlevel domestic and international playing fields) consequences that result in less goods, lower quality goods, and less innovative goods from those receiving protection.
Sure, there have been Tarrifs and Quotas since mercantilism started but at that point in time, the biggest barriers were time and resource availability. Get a few colonies with unclass laborers like Europe, or have a vast expansive landmass which you wreck for 150 years while building your countries' infrastructure and industries and you could be pretty much set, petty tarrif or not.
Things have changed to the point that there are not "free resources" to be exploited anymore and there is nary the will of major powers to fight over them with weapons as much as treaties. A third world country can lead the world in textiles because they don't have the same costs or standard of living as the first world and the infrastructure required isn't nearly as expensive to build up. Smaller, more homogeneous countries can remain competitive because the political capital and will dedicates itself to a group that mostly wants the same things out of life and the government. Some of the things we love about our country, cost a lot of money and have less than optimal outcomes due the nature of how resources are distributed at the government level.
And I say all this to stress one point. Globalization is inevitable and fighting it through political means is going to be more painful than gracefully adapting.
I've heard worse ideas.
This is the topic that turns me into TFS in a way, where I say shit like "Death to Wallstreet" and such.
So your problem isn't with globalization, as you stated, but with technology?
...you do realize that the service industry is quite a bit larger than just the wait staff at a restaurant or register monkeys, right? It includes architects, engineers, scientists, professors, doctors, researchers, lawyers, bankers, hoteliers, logistics, all the IT stuff that doesn't involve a clean room...
Yeah because that's a conflict we can afford.
We can if they pay for it.
Win-win.
Let's ask Germany how they did it.
I've always thought that the real way but seemingly impossible way is to change the values in the United States so that consumption isn't a end unto itself.
Considering how many large problems there are to fix in order to reduce the negative impact (for us) of globalization, I have little hope that the slide will abate. Our political representatives, both sides, are practically a wholly owned corporate subsidiary at this point and unwilling to change the status quo.
On the bright side, the eroding of our middle is fueling a titanic increase in the global middle class and is uplifting a shitton of people out of poverty. Overall, it's probably for the best, just not best for us.
You actually think that technological advancement is a problem... Okay.
It is an index of industrial production. All the crap that we manufacture gets counted and represented there, similar to how GDP is an index of all the crap we produce generally. So if the 1950's were the apotheosis of US manufacturing somebody forgot to tell all the manufacturers since they have continued to manufacture more and more things every year (barring recession) rather than less.
o_O Then how do you define it? All of those various professions, among others, produce a service rather than a good. That's the definition of a service industry.
We already do employ a huge chunk of our populace in service industry jobs.
Manufacturing as a whole employs 8.9% of the workforce, or 13.4m people. The same as hospitality and leisure. So...yes, we already are.
Well, nothing changes spending habits like a really bad recession, but once things get "back-to-normal" companies will be happy to encourage people to spend money they don't have on things they don't need.
Which is why we need ludicrously high interest rates to quash any consumption that depends on credit.
Not a bad idea. Unless it's a big ticket item like a car or a house, I really don't understand why people purchase things on credit and don't pay it off at the end of the month.
Because our economy relies on lending money to people who can't afford it.
- A progressive tax system
- Inheritance tax and capital gains tax increases
- A complete overhaul of the standards we set for public schools (we should be teaching more, earlier)
- Changes to how we teach, not just what
- Push science and math more aggressively (your average high schooler should be graduating with something more complicated then Algebra I under their belts)
- Community college at the least should be free to those who can maintain a 3.0 while there and state schools as well, really
Going forward manufacturing/production jobs are just going to shrink down fewer and fewer as both robotics and industrial tools in general become cheaper/more efficient/more sophisticated and can take on even more of the work we use them for now.
Not to mention passing laws to re-regulate our financial sector, a long look at current labor laws in regards to how unions and employers interact (I still want unions, but the system as it stands has glaring flaws on BOTH ends).
Also we need to aggressively push for single payer healthcare, civil liberties and figuring out how to get everyone in this country easy computer and broadband access if not outright providing it as a government service as well.
Broadbands basically the new leg of our countries infrastructure and like every other leg it needs to be worked on and available to everyone.
Oh and we have to become energy independent, but thats more for national security reasons as I see it.
Come Overwatch with meeeee
It would be more accurate to say that lending money is so incredibly profitable that they'll lend it to anyone. It's the direct cause of the current recession.
Every boom (and bubble) regenerated attitudes that we were in a "new economy" and that the trend was unstoppable, indefinite success and wealth that would likely never crash. Again, verified in surveys among the populace, too.
I do think that globalization will have a balancing effect, but overall that just means other countries will grow faster than we do, not necessarily that we will be brought down any more so than the current cycle dictates.
The beauty is, so much of Wall Street's shennanigans is enabled by cheaper credit and looser standards of lending that follows (when you're borrowing from a risk free source at 10% are you going to lend that money out to anybody at 13% or are you going to lend it out to the best credit risks at a 300 bps spread?) Take away the punch bowl and let credit quality work itself out.
None of those things except maybe the broadband thing have more than a snowballs chance in hell of actually happening in the foreseeable future. Of course I could be wrong, but based on the actions of our congress for the last few decades, probably not.
It makes so much sense, but corporations aren't rewarded for safety.
I mean, I work in low to moderate-income finance, and I agree.
We push too many people into borrowing $200k+ when they would be better off putting 5-10k into the market.
Bubbles only rarely happen without cheap credit and the ensuing destruction of credit quality.
This is why some recessions and busts can linger for years and years. You can make money cheap again but you still haven't rectified who is a good credit risk because so many people and businesses were affected. One of the reasons the Dot Com Boom and Bust didn't have quite the same impact is that almost all speculation was contained to the stock market, margin for stock and options wasn't inexcpensive at the time, and the ability to lower interest rates to ensure cheaper lending allowed other, non bust companies to still continue business despite a retraction in the economy.
The problem is, the cheap credit was available for far too long and not really ever taken away to the point that a bank didn't worry about loan quality in issuing loans because their borrowing rates were so low, they could also bundle them in a MBS with other stuff. Cheap credit essentially allows the ability for people to act stupid consequence free until the cracks start to surface.
The biggest problem with the housing bubble is that it was rooted in emotional national values. People want to own a house no matter what financial sense it may or may not make. In most cases post 2003 it didn't make sense based on traditional metrics of affordability, but by 2005-2006 people weren't just buying houses because of the ingrained social value of home ownership but also because of the additional benefit of absurd appreciation one could achieve. Without home buyers, none of the stuff on Wall Street matters. There are no mortgages,MBS, CDOs, CDS or anything really to be produced. Without dubious mortgage products, none of these wannabee home buyers could afford it.
You don't have this same thing in the stock market. There isn't a national psychological attachment to the stock market, people generally live through at least one crash in their life, and when a specific sector is in a bubble, its crash doesn't handicap other business sectors immediately (unless it's finance or in the case of the Japanese, otherwise traditional manufacturing companies are buying stocks and bonds instead of selling products.)
This entire fiasco impacted the bond market, the housing market on which many trillions of dollars in bonds originate, the stock market, and consumer credit markets. It's ridiculous and hasn't been fixed at all despite what the stock market shows. If anything, so many resources have been devoted towards restoring us to 2004.
Bull. Shit.
The Housing Bubble was routed in cheap credit. It only existed because people were desperate to find places to invest money and they settled on the Mortgage market. This led to larger, easier loans, which led rising housing prices, which led to people wanting bigger loans.
In the end, the Housing Bubble was caused by the Financial Sector being SO desperate to loan out money, they'd give it to ANYONE. Fuck, they created NINA loans specifically for this purpose! (For those wondering, NINA = No Income / No Asset. That's right, it's a loan you can get without having to prove you have money now or will have money in the future)
The continued attempts to pass the blame onto the home owners is fucking sickening.