Noah Smith: Will the World Ever Boom Again?

gavinfielder said:

New technologies and disruptive innovation has the potential to reverse the trend, I think. That's what happened with the internet.

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Do you have any documentation showing that the rise of of the internet has caused less wealth/income inequality? I have not seen any bending of the curve....and there are a number of examples where some very rich guys have utilized (cheating with) the tech to increase their wealth, ie high speed trades.

There are 1.3 billion Chinese. They have gone from peasant farmers to IPhones in 2 generations. Over a billion Indians...a million of them don't starve anymore every year. Indonesia, Malaysia...the same. People don't line up for shoes in Russia. Brazil has cars, food on grocery shelves. Kids in Mexico aren't skinny and emaciated.

The world is booming beyond anything previously imagined. I lived in the UK and Grrmany as a kid...they are WAY more affluent today. Poland, Spain,Italy, etc. We're not even first world economies.

There is way more food available. Way more variety of food available. Food is way cheaper as a percent of income. A few billion people used to scrounge for a bowl of rice or bread...every day. Today those same people push grocery carts down an aisle and talk about getting a car.

Iamjesus said:

There are 1.3 billion Chinese. They have gone from peasant farmers to IPhones in 2 generations. Over a billion Indians...a million of them don't starve anymore every year. Indonesia, Malaysia...the same. People don't line up for shoes in Russia. Brazil has cars, food on grocery shelves. Kids in Mexico aren't skinny and emaciated.

The world is booming beyond anything previously imagined. I lived in the UK and Grrmany as a kid...they are WAY more affluent today. Poland, Spain,Italy, etc. We're not even first world economies.

There is way more food available. Way more variety of food available. Food is way cheaper as a percent of income. A few billion people used to scrounge for a bowl of rice or bread...every day. Today those same people push grocery carts down an aisle and talk about getting a car.

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You are describing primarily....distribution, ie globalization, the lowering of distributional costs via containerization. No doubt that S. America (and Africa/India) have seen declines in inequality, but that is not true for the EU or the US.

gavinfielder said:

I would certainly disagree with Smith in that there isn't actually anything special about manufacturing in that it alone can create economic growth and prosperity. New technologies and disruptive innovation have the potential to reverse the trend, I think. That's what happened with the internet.

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The more an economy develops, the less manufacturing component there is. In the US, it is barely a third nowadays.

Which means what? After all, manufacturing has always generated some pretty well-paying jobs. My parents' job manufacturing sunglasses in Central Massachusetts helped put me and my sister through university.

What happened to those jobs, back in the 1970s is indicative of a long-term trend that started then. They moved south, then to Mexico and finally to China. Frankly, some of those jobs putting sunglasses together could come back to Central Mass. if they were highly automated. I don't see that happening, but it could.

The other side of the sad jobs-coin is that Services Industries, which generate the other 70% of employment, do not provide all that well-paying jobs. Just walk into any Wal-Mart or Macdonalds to witness that sad fact.

What's a country to do? If I had a magic formula answering that question, I'd patent it.

But a formula exists nonetheless, and it is an emphasis on Tertiary Education that will provide the sorts of sufficiently-well-paid jobs at decent salaries. Which is why we see the tidal-wave of students studying at MBA-classes. Frankly, I teach classes in International Business, having had just that as a career. I find MBA-programs supercilious in nature. You do not need an MBA to go out and sell a super-computer.

Whatever your product/service, you need a talent for matching a customer's needs with that product/service, to convince the customer of the necessity to buy your proposition. And nobody is going to teach you that observational skill if you don't have it innately.

Fortunately, there are a good number of other Services Industries (See the list here). My point being that there will be plenty of choice for those who are sufficiently ambitious.

But a blind belief that technology will be there to provide the jobs a nation will need to assure full employment has been shown to be a false prophet. The Information Technology industry started just post-WW2 in the US and has come full circle. IBM's revenues no longer come from computer sales as much as providing Computing Services. Computer manufacturing companies are a diminishing breed. The cloud is everywhere and systems-interconnect with ultra-large systems that do the number-crunching is easy to do.

So, what is the NBT (Next Big Thing)? I dunno. I keep looking, but I see nothing with real "legs" generating jobs far into this New Millenium.

Maybe Electric Cars for the masses, but that's not sexy - just long overdue.

So, sorry to say, but I cannot share your enthusiasm for New Technologies, which will create substantially well-paying jobs for all and sundry. Some yes, but certianly not all ...

PS: Frankly, I suggest we need slower population growth, and better jobs/lives for the lower population of Americans.

Gimmesometruth said:

Do you have any documentation showing that the rise of of the internet has caused less wealth/income inequality? I have not seen any bending of the curve....and there are a number of examples where some very rich guys have utilized (cheating with) the tech to increase their wealth, ie high speed trades.

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Not one shred of evidence. But there are reasons to believe that the internet could be somewhat of an "equalizer" between small businesses and jumbo business, at least in some industries.

REVOLVING DOORS in LaLaLand ON THE POTOMAC

imagep said:

But there are reasons to believe that the internet could be somewhat of an "equalizer" between small businesses and jumbo business, at least in some industries.

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US Industry economically has been on a "consolidation binge" for a donkey's age, which simply means that as companies enlarge by "buyout", they influence prices upon more of the market and institute what economists call "Sticky Pricing". Which occurs because there is less competition.

When prices get "sticky", who pays that additional cost? You, me and anyone who is a consumer. So, the benefit of market-consolidation goes to whom? Certainly not the consumer, but corporate management and the stock-owners.

Not all of us are rampant stock-owners, so we are the real "sucker in the game". And that game can only be arrested (or slowed) by the Federal Trade Commission or the Anti-Trust unit at the Department of Justice that investigate markets before conosidation for "sufficient competition" - and not after they consolidate.

And given the revolving-doors at these institutions in LaLaLand on the Potomac, we know why it is not quite living up to its mandate. The revolving-door must stop, and no reentry to a market once overseen by anyone leaving either of the two institutions mentioned for "greener pastures" should be allowed without a waiting period of at least three- or five- years*.

Which will make recruiting at those agencies one helluva lot harder, but, so what ...?

*Surprise, surprise, guess what Barry's friend who ran the DoJ is doing nowadays from luxious offices in Las Vegas ...?

WHAT ABOUT TPP?

Let's not be surprised that the DoJ-people either don't know what is their purpose in life as regards market competition, or that they are shackled in performing that duty.

The guidelines on mergers are well-established at the DoJ (since 1997), see here.

Excerpt: "The Agency will consider only those efficiencies likely to be accomplished with the proposed merger and unlikely to be accomplished in the absence of either the proposed merger or another means having comparable anticompetitive effects. These are termed merger-specific efficiencies. Only alternatives that are practical in the business situation faced by the merging firms will be considered in making this determination; the Agency will not insist upon a less restrictive alternative that is merely theoretical."

Sounds good, but economic evidence suggests (but do not prove) otherwise ... my perusal of the relating documentation, unfortunately, is not conclusive as regards the subject-matter.

What I can write, however, is that the Chinese are seeking very frequently patent-protection of their R&D-results and they are substantial. Which is why, after all the media hoopla, TPP is indeed an important international treaty - and China was not asked to participate in its elaboration. Which means (I suggest) it was a target intentionally of the measures incorporated in the treaty.

China has notoriously refused to observe foreign patents, which is why there are so many knock-off products issuing from that country.

Iamjesus said:

The world is booming beyond anything previously imagined. I lived in the UK and Germany as a kid...they are WAY more affluent today. Poland, Spain, Italy, etc. We're not even first world economies.

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Then why are so many willing to risk their lives to leave Africa and the Middle-east to get (preferably) to either Germany or the UK.

Your selection of examples is not wrong. Those people cited are indeed generally living better. That is happening everywhere - obesity levels are rising throughout the world. (Because obesity is the opposite of emaciation, of which you remarked.)

My point is that it's selective, however generally it may apply. There are parts of the world that either mismanagement or religious conflict have maintained at sub-standard levels of human existence.

The Great Post-war Boom has come to an end in the US. So, let's worry about what the future needs to bring us. And, if Income Disparity - and our refusal to obtain a hands-on solution to it - remains, then we are resigned to a declining economy. And with it, a highly unstable socio-economic context for the country.

Watts Redux! Can't happen on a national scale?

Why not? For the present, we, the sheeple, are so fed up we no longer even vote. Which shows our disdain for what has become the "democratic system" in the US. From that disdain to civil disobedience is just a hop, skip and a jump.

All it takes are White Cops with blind hatred to kill a bunch of blacks in some northern city ...

PS: No, I do not write scenarios for blockbuster Hollywood movies. Life mimics fiction and not the reverse in this Brave New World of ours ...

imagep said:

Not one shred of evidence. But there are reasons to believe that the internet could be somewhat of an "equalizer" between small businesses and jumbo business, at least in some industries.

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The Internet changed the marketing equation by making it easier to shop on-line, thus people did not have to make a conscious decision to go looking for the product physically everywhere they thought it "might be available".

Moreover, they were also able to quicker employ price-comparison, which made competition stronger. Which is goodness (for consumers).

Sites like Amazon then had the brilliant idea to ask customers for their appreciation of the product/service which enters strongly into the customer's decision to buy.

Lafayette said:

The Internet changed the marketing equation by making it easier to shop on-line, thus people did not have to make a conscious decision to go looking for the product physically everywhere they thought it "might be available".

Moreover, they were also able to quicker employ price-comparison, which made competition stronger. Which is goodness (for consumers).

Sites like Amazon then had the brilliant idea to ask customers for their appreciation of the product/service which enters strongly into the customer's decision to buy.

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And it was all dandy until they learned they could use data to give customers a custom price they're likely to pay for an item.

gavinfielder said:

And it was all dandy until they learned they could use data to give customers a custom price they're likely to pay for an item.

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they do that?

gavinfielder said:

And it was all dandy until they learned they could use data to give customers a custom price they're likely to pay for an item.

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"Caveat Emptor", the rule since Roman times. (Let the buyer beware.)

Shop around, they can't fool all the people all the time.

Moreover, "they" need to know who you are. If you browse the Internet with an "incognito window" (in Chrome), and you put up "Ghostery" as an add-on (in any browser you employ), they cannot "track you".

Of course, there are some other "options" when browsing (that you may or may not use whilst incognito) that will be affected by the fact that sites cannot read your "internet identity" and thus track-you.

PS: This is not, btw, an invitation to get up to mischief yourself.

Your identity is supposedly known by your Internet Providor, and if not it certainly can pinpoint from where you are entering the Internet.

Snowdon was right all along ... now he's paying the price for being right about an America that has been all-wrong for quite some time about "personal information".

There are, I find, damn few things France does right about regulating markets (labor, competition, trade, etc.), but one thing it does get right is "privacy" (both personal and corporate). For which, a long time ago (1960s) it passed a law that protects private rights.

The American Embassy in Paris has been kind enough to explain the law in English, here.

imagep said:

they do that?

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Among other things, yeah. ecommerce is driving the data mining boom.

I don't think the world will ever boom again because there are not that many industries left to exploit that can't be done by cheap labor in the third world or by robots. We're tapping out all our available resources that can be used to employ people.

Ancient Herald said:

industry really cannot survive without farmers.

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I beg to differ on that one. Germany has a comparatively small farm-group, and yet it's industry competes well enough even with America.

American farming is "very large scale". The small farmer has a "small" percentage of the total market. In fact, most of farm produce (cereals and meats) are done on a very large scale intensively, sufficiently large to be characterized as "industries". The size of the US farm is almost 170 hectares against the 13 in the EU's 27 countries.

In fact, as a percentage of GDP, the Agricultural Sector of the US is 1.2%, whilst in Europe it is 1.8%. Probably because the newer EU-countries are still more farm-intensive than industry-intensive.

Moreover, there is a trend in Europe to privilege local-farming because of the disturbing news about food-products employing intensive-farming techniques. Not all the produce is consider that safe for human consumption long-term ...

imagep said:

Then it's not causing inflation because it's parked and not chasing production.

But congratulations for having excess money. That's something that most of us never have.

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Yeah, and the next time the market crashes and stocks get really low, that cash can be used to propel you ahead as those below you cry about the inequality.

I ****ing love the free market.

Ancient Herald said:

I am aware of that problem too. The downside to that is less jobs, more people out of work, more people homeless and on the streets.

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How is that a "downside" if people are working at better-paying production/services jobs?

The point is that farming is a low-tech industry (despite the equipment employed), whilst most production/services industries require some rather sophisticated talents for which a postsecondary degree is mostly needed.

The point being, if a child does not want to obtain at least a postsecondary vocational degree, then they commit themselves to a lower lifetime job payscale. They should make that decision consciously, because it is a crucial.

I am retired, but I can remember my immigrant father (a shepherd in the old-country) who, having immigrated to the US, insisted that his children attend university. We, his children, thank our lucky-stars for that sentiment ...

akrunner88 said:

I don't think the world will ever boom again because there are not that many industries left to exploit that can't be done by cheap labor in the third world or by robots. We're tapping out all our available resources that can be used to employ people.

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The thing that really drove the boom with China is that China wanted to develop into an industrial and then post-industrial society. If that particular boom wasn't as legendary as the first one, it was still significant because of China's large economy in the first place.

While I think that other developing economies will want to develop, raise national income and wages for themselves, I agree that the world may never boom more for the fact that there is no longer any player large enough to make that step of modern industrialization. Which if I remember correctly is Noah Smith's point.

I disagree with him only for the possibility of a major disruptive innovation. I do think the coming second space race has the potential to eventually constitute one.

MODERN INDUSTRIALIZATION AND LINGERING UNEMPLOYMENT RATES

gavinfielder said:

While I think that other developing economies will want to develop, raise national income and wages for themselves, I agree that the world may never boom more for the fact that there is no longer any player large enough to make that step of modern industrialization.

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China has recently re-orientated its economy towards internal growth, where it has much room to improve, especially given the monumental percentages of the population that still live in the countryside - and yet illegally move into the larger cities to find jobs.

Moreover, let's not forget that China does not have the ability to produce food in tremendously huge quantities as do the great-plains of the US or even Russia. Which is why they have turned to east-African countries for production.

The country is graduating a mind-boggling number of engineers annually, and many of them have no work. If this continues in other sectors as well, a more educated China will find the heel of state suppression far more difficult to accept. I see a Tiananmen Square II on the long-term horizon, because the state (run by a coterie of administrators on the highest council, many who have become immensely rich) wont be able to suppress future uprisings without significant bloodshed.

China needs a western-style representative democracy, but its leaders haven't the foggiest notion of how to build one. China has been run from the top-down (by emperors and now the Communist Party) for centuries.

Act II in its history will be a great deal more difficult to undertake than Act I, which was based upon massive exportation of fairly unsophisticated goods to western economies that craved them.

The Chinese has proven a certain engineering know-how in massive construction projects, so that particular barrier is not present - as it is in many developing countries with only mineral resources to exploit. They are preparing the future by massively turning to nuclear-generation of electricity, and hi-speed transport lines most of which is being built by foreign know-how, which the Chinese employ simply to obtain said know-how. Once a technology is mastered, they continue on their own applying it - which is not as "normal" as many would think.

It is now time for China to turn internally and fix a lopsided economy that has benefited a finite portion of the the population, but certainly not all. Far too many Chinese still live in abject poverty. From a recent Guardian article (here): "China lifted nearly 40 million people out of poverty last year, by its own measure, but more than 82 million rural Chinese still get by on less than $1 a day, a senior government official said.

“Poverty is still a salient problem in China,” Zheng Wenkai, a vice-minister at a government office responsible for poverty alleviation and development, said at a news briefing Tuesday, according to the state-run China Daily newspaper. About 200 million Chinese, or 15% of the country’s population, would be considered poor by international poverty measures, set at $1.25 a day"

gavinfielder said:

I disagree with him only for the possibility of a major disruptive innovation. I do think the coming second space race has the potential to eventually constitute one.

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I beg to differ on that one. Space is not the Next Economic Frontier as many would have us think. The challenge is massive in difficulty.

The planet must simply get a handle on producing babies that it cannot feed - which could mean per-country quotas ...

Let's understand that whilst the Internet has made some people millionaires overnight, it's greatest asset has been to renovate commerce. Which has simply created higher levels of unemployment since fewer people are needed in traditional "bricks 'n mortar" commercial centers.

Long-term unemployment remains a problem in the US (and EU), and the Internet is a real contributor to the problem.

See this Bureau of Labor historical statistic: "Long-term unemployed as a percentage of total unemployed" (the red-line rate of 2-year unemployed), which indicates that 10% of the "working-population" remain in that classification. Who are these people.

They are not the younger generation graduating from a tertiary-education with good skills/competencies. But older people who never obtained those skills. What is their prospective? Rather bleak, I think.

And the present rhetoric of our ongoing political campaigning is not addressing in the least the problem. Because nobody has a real answer to it.

So, when you see the elderly bagging your produce at the supermarket, do try to understand why they are there - despite their age, they still have to work in order to "make a living".

I find that a significant failure of America that we are overlooking - and all the media-hoopla regarding "overnight Internet millionaires" loses much of its sense until we find a suitable solution.

Nobody, but nobody, deserves that indignity at that age ...

One of the symptoms that we are seeing as the current world order does is the constant creation of and then popping of bubbles, which we can expect to continue, but the main trend is onto the ground. Over time the bubble making should slow down as instability does its work.

Lafayette said:

MODERN INDUSTRIALIZATION AND LINGERING UNEMPLOYMENT RATES



China has recently re-orientated its economy towards internal growth, where it has much room to improve, especially given the monumental percentages of the population that still live in the countryside - and yet illegally move into the larger cities to find jobs.

Moreover, let's not forget that China does not have the ability to produce food in tremendously huge quantities as do the great-plains of the US or even Russia. Which is why they have turned to east-African countries for production.

The country is graduating a mind-boggling number of engineers annually, and many of them have no work. If this continues in other sectors as well, a more educated China will find the heel of state suppression far more difficult to accept. I see a Tiananmen Square II on the long-term horizon, because the state (run by a coterie of administrators on the highest council, many who have become immensely rich) wont be able to suppress future uprisings without significant bloodshed.

China needs a western-style representative democracy, but its leaders haven't the foggiest notion of how to build one. China has been run from the top-down (by emperors and now the Communist Party) for centuries.

Act II in its history will be a great deal more difficult to undertake than Act I, which was based upon massive exportation of fairly unsophisticated goods to western economies that craved them.

The Chinese has proven a certain engineering know-how in massive construction projects, so that particular barrier is not present - as it is in many developing countries with only mineral resources to exploit. They are preparing the future by massively turning to nuclear-generation of electricity, and hi-speed transport lines most of which is being built by foreign know-how, which the Chinese employ simply to obtain said know-how. Once a technology is mastered, they continue on their own applying it - which is not as "normal" as many would think.

It is now time for China to turn internally and fix a lopsided economy that has benefited a finite portion of the the population, but certainly not all. Far too many Chinese still live in abject poverty. From a recent Guardian article (here): "China lifted nearly 40 million people out of poverty last year, by its own measure, but more than 82 million rural Chinese still get by on less than $1 a day, a senior government official said.

“Poverty is still a salient problem in China,” Zheng Wenkai, a vice-minister at a government office responsible for poverty alleviation and development, said at a news briefing Tuesday, according to the state-run China Daily newspaper. About 200 million Chinese, or 15% of the country’s population, would be considered poor by international poverty measures, set at $1.25 a day"

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Lafayette said:

I beg to differ on that one. Space is not the Next Economic Frontier as many would have us think. The challenge is massive in difficulty.

The planet must simply get a handle on producing babies that it cannot feed - which could mean per-country quotas ...

-snip-

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For being long-winded, your basic response seems to be that low wages, poverty, and unemployment are barriers to a boom.

Well, yeah.

As much as the industrialization boom has to do with, well, industrialization, its lynchpin is of course wages and a broadening of the income base to support a consumer economy. I realize that China has a difficult step with this still, but I don't see your point in saying it. I never claimed there would be another boom from China in the first place.

Nor do you give real reasons to refute the space race being capable of a boom. There's ten times more metals in one mid-sized asteroid than have been used throughout human history. That wealth will fuel quite a number of enterprises across the globe as they race to achieve a sustainable foothold in extraterrestrial resources and future infrastructure development. It might not employ enough people to be considered a boom, but it most certainly is the next economic frontier. That there's plenty of barriers left to get there is irrelevant; space isn't going anywhere. But if you think it's still multiple decades off you haven't been paying attention to industry news.

Lafayette said:

I beg to differ on that one. Space is not the Next Economic Frontier as many would have us think. The challenge is massive in difficulty.

The planet must simply get a handle on producing babies that it cannot feed - which could mean per-country quotas ...

Let's understand that whilst the Internet has made some people millionaires overnight, it's greatest asset has been to renovate commerce. Which has simply created higher levels of unemployment since fewer people are needed in traditional "bricks 'n mortar" commercial centers.

Long-term unemployment remains a problem in the US (and EU), and the Internet is a real contributor to the problem.

See this Bureau of Labor historical statistic: "Long-term unemployed as a percentage of total unemployed" (the red-line rate of 2-year unemployed), which indicates that 10% of the "working-population" remain in that classification. Who are these people.

They are not the younger generation graduating from a tertiary-education with good skills/competencies. But older people who never obtained those skills. What is their prospective? Rather bleak, I think.

And the present rhetoric of our ongoing political campaigning is not addressing in the least the problem. Because nobody has a real answer to it.

So, when you see the elderly bagging your produce at the supermarket, do try to understand why they are there - despite their age, they still have to work in order to "make a living".

I find that a significant failure of America that we are overlooking - and all the media-hoopla regarding "overnight Internet millionaires" loses much of its sense until we find a suitable solution.

Nobody, but nobody, deserves that indignity at that age ...

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Well said.

gavinfielder said:

For being long-winded

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Isn't it a great shame that economic challenges cannot be explained and resolved in a "sound bite"? Like most politicians and a horde of people on this forum.

If you think that complex economic problems can be understood in a few sentences, then you are gravely wrong. (And perhaps in the wrong forum?)

The subject is complex in ways that are often impossible to imagine.

And yet, its single-most important component can be summarized in one simple equation: GDP = Consumption + Investment + Government (spending) ...