March 20, 2008
With Many Troubles at Home, U.S. Exports Carry the Economy
In addition to Georgia, the rest of the country needs to be rooting for growth in global markets; PPI explains why:
Posted by John at 3:34 PM | Comments (0) | TrackBackIn total, exports accounted for a third of last year's 2.2 percent GDP growth. As waves of bad news began to wash in last winter -- foreclosures, tumbling dollar, falling retail sales, more recently investment bank rescues -- exporters were the only thing keeping the national nose and lips above the recessionary waters. (The domestic economy shrank by -0.3 percent between October and December; export growth accounted for 0.9 growth; ergo, barely positive national 0.6 percent growth.)
Those searching for scarce good news can find some in January's trade report. This suggested another export-boom year ahead, with sales to China, Russia, Europe, and the Middle East all continuing to soar, while exports to Mexico, Canada, and Japan began to perk up. Interesting note as well: Last year's U.S.-Peru Free Trade Agreement entered into force in January, and exports to Peru hit $420 million, nearly double the $240 million for January 2007. Worsening news from the real estate, financial-market, and consumer sectors mean exporters may not be able to fend off a national recession this year. But their likely trio of round-number records -- $1 trillion in manufacturing exports, $500 billion in services exports, $100 billion in farm exports -- will ease its ferocity.
March 19, 2008
Alabama Attracts U.S. Migration
Due to its strong economic performance, driven in part by its embrace of the opportunities of a global economy, Alabama has joined Southeastern neighbors Georgia, Tennessee, and North Carolina as a recipient of strong net migration. Net gains of out-of-staters moving to Alabama has tripled over the last three years. More from the Birmingham News.
Posted by John at 6:00 AM | Comments (0) | TrackBackMarch 18, 2008
U.S. Gains Intellectually (and Otherwise) From Indian Immigrants
Indian nationals in the United States, including those allowed in the country on student and H-1B visas, have contributed to almost 14% of all U.S. global patents. [Source: Economic Times].
It's a benefit, extraordinarily difficult to quantify but tangible nonetheless, worth remembering as we debate caps on H-1B visas.
Posted by John at 4:54 AM | Comments (0) | TrackBackMarch 8, 2008
NAFTA and Unemployment in Ohio
Don Boudreaux has the numbers; unemployment in Ohio was 6.5% and falling at the time NAFTA took effect on January 1, 1994. The state's unemployment rate hit a low of 3.9% by February 2001, and is currently 5.8%.
In other words, it's hardly evidence of tremendous harm done by freer trade between the U.S., Mexico, and Canada.
Posted by John at 11:43 PM | Comments (0) | TrackBackYes, We Can . . . Expect Some Better Facts on NAFTA
Philip Levy makes the case, in an essay in The American I recommend you read in full:
Posted by John at 11:35 PM | Comments (0) | TrackBack. . .what about the factory workers in Ohio? Are they just imagining those lost jobs? Of course not. Manufacturing employment in the United States did hit a peak and then begin a steady decline. The problem is that the peak was in 1979, 15 years before NAFTA came into force. The long-term decline of American manufacturing jobs has much more to do with technological change than with trade. We’re producing more stuff with fewer workers.
But is there any harm if someone decides to run the same old Washington textbook campaign, take a few shortcuts of reasoning, and hold NAFTA responsible for the pain of displaced workers? There is. It offers false hope. It leads beleaguered citizens to think that a U.S. withdrawal from NAFTA would make their lives better, when it would almost certainly make their lives worse.
Can we demand better analysis and a more responsible approach from our aspiring political leaders? Yes, we can.
February 17, 2008
Sovererign Wealth Funds and "America the Cheap"
A combination of absolute asset values down and a weak dollar have made investment opportunities in America attractive to sovereign wealth funds. Thomas P.M. Barnett argues we should welcome this development, certainly as compared to the alternatives:
. . . There's no question that sovereign wealth funds (SWFs) do this now to protect themselves down the road (no one wants a U.S. recession) and to take advantage. But the larger function is very real too: this is how a rich country gets bailed out of a financial crisis. Bitch about it all you want, but tell me the alternative that beats it.
I know, I know. We need to spend less and save more. Stipulated. But how do you want the pain of that lesson transmitted?
As for getting scared of these funds, the fear remains misplaced. The same money could be used for military buildups and all sorts of scary or stupid stuff. Instead, it's being re-invested in America. Again, paint me the better alternative. . . .
As for their big size, SWFs remain about 2% of the world's $165 trillion world of securities, and they're collectively tiny compared to the combined weight of the three heavies (insurance companies, mutual funds and pension funds). . . .
For now, the bulk of the SWFs emanate from oil-rich countries . . . but that just means those countries are financially diversifying, which makes a lot of sense. What oil country should keep all its wealth in oil? That's like having your entire pension with Enron.
Clearly, this evolution bears watching, but suspicions about SWFs being run for national reasons over financial ones will make their impact self-limiting—as in, that's a recipe for financial failure.
The Economist hits the nail on the head when it says, the real danger of SWFs right now is that they may trigger stupid protectionism instead of acceptance as yet another balancing mechanism in our increasingly globalized economy—something it's doing right now quite nicely.
The Economist article Barnett cites, quite extensive and worth your perusal, make similar points:
Posted by John at 9:37 AM | Comments (0) | TrackBackA broad, politicised hostility to foreign direct investment would come at a high cost. Such investment spreads financial capital, know-how and technology. It helps the world economy adjust to imbalances and gives countries stakes in each other's prosperity. By contrast, as the dispute over DP World showed, conflicts over one investment can rapidly become generalised to others—either directly or through bodies like the Committee on Foreign Investment in the United States, which weighs up the implications of takeovers on national security. That spreads uncertainty, which could even spill over into the trade of goods and services. The European Union, for instance, now wants such a committee of its own.
Even now, suspicion of sovereign-wealth funds comes at a price. The investments in Wall Street have helped to stabilise the banking system, making this an ideal moment for active shareholders to be crawling all over the banks, asking what went wrong in the credit crunch and how to prevent the next. Instead, the banks have taken on large, friendly, long-term shareholders who cannot easily kick up a fuss. If the new investors were to become disgruntled, they may find it costly to sell in a hurry. And most of the funds know that if they cause trouble, people in Washington will soon get to hear about it.
February 14, 2008
Valentine's Day Spending
An estimated $17 billion will be spent in the U.S. on Valentine's Day candy, gifts, cards, and other goods this year, according to the National Retail Federation. This amount is roughly equal to the entire GDP countries such as El Salvador, Tanzania, and Estonia. [Source: PPI]
Posted by John at 3:49 PM | Comments (0) | TrackBackFebruary 12, 2008
Immigrants to Comprise an Increasing Share of a Growing United States
The Pew Research Center has released a new report on U.S. population trends; some of the key findings include:
Posted by John at 5:20 AM | Comments (0) | TrackBack--A continuation of current trends would result in a U.S. population of 438 million in 2050, up from 296 million in 2005. 82% of this increase will be due to immigrations and their U.S. born descendants.
--By 2050, roughly one in five Americans will be immigrants. By 2025, the foreign born share of the U.S. population will exceed the peak reached during the last great wave of immigration a century ago.
--The country's Latino population is forecast to triple in size by 2050, reaching 29% of the population by 2050, up from 14% in 2005.
--Because of the increasing role of births in Hispanic and Asian population growth, a smaller percentage of both groups will be foreign-born in 2050 than is the case today.
--The elderly population in the U.S. will double from 2005 to 2050, and the "dependency ratio" (the number of children and elderly relative to the number of working-age adults) will rise from 59 per 100 in 2005 to 72 dependents per 100 working-age adults by 2050.
Arizona's Economy Feels the Effect of Anti-Immigrant Legislation
Like Oklahoma, Arizona is starting to feel the effects of anti-immigrant legislation passed last year. the New York Times reports:
While data for the last month or so are not available, there were already signs of migration out of Arizona at the end of last year. In the fourth quarter of 2007 the apartment-vacancy rate in metropolitan Phoenix rose to 11.2 percent from 9 percent in the same quarter of 2006, with much higher rates of 15 percent or more in heavily Latino neighborhoods.
"You have many people moving out, but they are not all illegal," said Terry Feinberg, president of the Arizona Multihousing Alliance, a trade group for the apartment and rental housing industry. "A lot of people moving are citizens, or legal, but because someone in their family or social network is not, and they are having a hard time keeping or finding a job, they all move."
In the wake of this fallout and continued inaction on immigration reform at the federal level, a group of Arizona legislators have introduced legislation which would create a state-run temporary worker program.
Posted by John at 5:00 AM | Comments (0) | TrackBackFebruary 11, 2008
Barnett Combats the Blues
Since we in the U.S. now seem to have the "war-weary, fearful of Chindia, how low will housing prices go" blues, Thomas P.M. Barnett offers a friendly reminder of what we've got to be thankful for:
We enjoy a wonderfully resilient global economy that's processed numerous financial panics (e.g., Asian flu, Internet bubble) and significant slowdowns by major players (Japan, Europe) over the past two decades while consistently growing.
As a result, poverty has been dramatically reduced around the planet and, as the Economist points out, we've got twice as many fast-growing economies right now as we did during the go-go '80s and '90s.
Yes, it stings having Arab sovereign wealth funds bail out Wall Street firms in the sub-prime crisis, but I dare you to think of a more painless way of re-injecting liquidity back into our markets. . . .
Anyway, by entering at bargain prices, these oil-rich regimes are simply doing what we've long advised: diversifying holdings and connecting their economies more broadly to globalization. It sure beats the alternative of white-elephant projects or military build-ups.
Speaking of guns, let me also remind you that our planet has never been more peaceful: fewer wars, less civil strife and the smallest-ever percentage of humanity engaged in or preparing for mass violence. Washington may wage global war, but nobody else is.
Not surprisingly, while we're polling glum, the rest of the world isn't. Global opinion trends over the past half-decade portray a rising tide of human happiness among nations that have opened up to globalization and thus enjoyed increasing per-capita income.
Across the Islamic world, we also see a broad decline in popular support for terrorism and, in particular, al-Qaida's brutality. We're losing old allies over Iraq, but Osama bin Laden is losing the future. . . .
. . . I say thank God for those whiz kids on Wall Street - you know, the ones who seem to come up with some new, dazzlingly complex risk management scheme every 10 years or so.
I'm not being facetious. It's that type of edgy innovation that keeps the United States the most competitive economy in the world, triggering not just our booms but also the necessary corrections. . . .
Read Barnett's complete commentary here.
Posted by John at 5:24 AM | Comments (0) | TrackBackFebruary 9, 2008
The Tide Turns: Prices of Chinese Imports Rising
Posted by John at 8:05 AM | Comments (0) | TrackBack. . . A confluence of events -- the weakening dollar, soaring domestic inflation, new labor laws, the end of some government export subsidies, the increasing cost of raw materials, more stringent product safety regulations, and bad weather -- means the cost of goods produced in Chinese factories is rising fast.
Those increased costs are already showing up in import prices. After falling for years, the price index of goods from China rose 2.4 percent in 2007, according to the U.S. Bureau of Labor Statistics division of international prices. That's the largest annual increase since the index was first published four years ago. . . .
America's Trends are Good
Michael Lind of the New America Foundation, writing in the UK's Prospect magazine, argues that our future is much brighter than the pessimists allow, and our focus is largely on the wrong problems. Myths of our decline, Lind writes, include forecasts of takeovers by religious fundamentalists, worries of racial and ethnic divides (caused in part by immigration), and predictions that the country cannot financially absorb the wave of baby boomer retirement. In other words, the liberals, the conservatives, and the moderates, respectively, all have a piece of this "America in decline argument".
It's important we get a grip on what our problems really are, Lind argues, so we can address those challenges instead of getting bogged down in misfortunes which never come, to paraphrase Amy Lowell:
Barring catastrophes, the US in 2050 will be much more racially integrated; will remain culturally and linguistically quite homogeneous; and will be much richer, easily able to afford to pay for social security and decent healthcare. And partly as a result of this unity and prosperity, the US will continue to be a major power, though not a solitary hegemon. . . .
Posted by John at 7:14 AM | Comments (0) | TrackBackWhy is there such a gap between the conventional wisdom about America's future and the actual trends? Part of the answer involves the bias toward sensationalism that afflicts all commercial media. Another factor is the distortion of the facts by special interests. For example, the myth of the social security crisis has been spread by, among others, people in the securities industry who would like to see this successful public pension programme privatised.
The US is facing major challenges—but they are not the ones usually identified. Long-term racial and linguistic balkanisation may not be a problem, but class lines in the US are hardening; there is now less social mobility in the US than in Europe. The US is not in danger of becoming a theocracy, but it is in danger of becoming a plutocracy. Social security does not threaten to bankrupt America, but healthcare cost inflation does. The US is not going to be eclipsed any time soon by another superpower, but it may exhaust itself by allowing its commitments to exceed the resources that the public is willing to allot to foreign policy. The sooner the mythical problems can be dismissed, the sooner the genuine challenges to America's future can be identified and addressed.
February 6, 2008
Detroit is a Contrarian's "Buy"
I love posting items in Tidbits which run counter to the conventional wisdom. Here's one that is truly a contrarian opinion: Detroit is poised for a comback. That's what The American's Tom Bethell writes after an extended tour of the city. His analysis is quite lengthy; a taste of it follows:
Posted by John at 4:36 AM | Comments (0) | TrackBack. . . The metaphor that comes to mind in Detroit is the stock that has fallen so far that it’s a “buy.” Something that Daniel Howes said as he drove me across the city made me think that Detroit as a city may indeed be a buy now. He said the big change, taking place even as we spoke, with the new labor contracts at the auto makers, is that all the major players are now on the same page. . . .
By the major players he meant City Hall, the Big Three auto companies, and Big Labor. They all realize that finding scapegoats and strategies of evasion cannot continue. City Hall has been chastened by white flight, by the realization that the responsibility that comes with power cannot be postponed forever. The Big Three have been chastened by the Toyoda clan—by the global economy. And Big Labor, in the form of the UAW, has been chastened by its loss of a million members.
This sentiment was echoed later by David Cole, the oft-quoted chairman of the Center for Automotive Research in Ann Arbor. As a result of the new labor agreements, he said, “What we are witnessing is the transformation from a confrontational way of working to one of collaboration, which is absolutely necessary.”
Badly run companies do go out of business, but Detroit is a historic, physical reality that will be with us for some time. “Up” is about the only direction it has left to go, and that may happen sooner than most people think.
February 5, 2008
U.S. Not Ready for Panana Canal Expansion
. . . and if we don't get our act together, it will cost all of us, in the form of higher prices than is necessary; the Dallas Morning News has an extended piece worth your attention. A tidbit follows:
That lack of preparedness could mean higher prices than necessary for imported goods, costly delays in moving U.S. exports out of the country – and economic benefits for Caribbean seaports that might otherwise flow to Houston, Corpus Christi and inland to Dallas.Port directors, shipping company managers, government leaders and financiers at a conference in Tampa, Fla, last week described a slew of problems facing the ports and transportation companies on the Gulf and East coasts as they seek to capitalize on what should be a golden opportunity. . .
The Panamanians are moving ahead to double the capacity of the canal by 2014, said Tampa Port executive director Richard Wainio, "and we're all sitting around not knowing what we're going to do."
Bernard Grossglose, chief executive of the South Carolina Ports Authority, said many U.S. ports need deeper channels to accommodate a giant new class of container ships that will use the expanded Panama Canal. But channel-dredging projects typically take as long as 20 years from proposal to completion because of regulatory and funding delays, he said.
"Panama is like lightning compared to what we deal with," he said. . . .
Shippers like ZIM American already take their largest container ships to the deeper port of Kingston, Jamaica, said ZIM sales representative Thomas Haeussner, where they offload containers to smaller vessels that then sail to Houston, Tampa, Mobile, Ala., and other Gulf Coast ports. . . .
Posted by John at 3:57 AM | Comments (0) | TrackBackMore shipping companies will follow that example if U.S. ports don't solve their dredging problems, said Robert West of Global Insight, a Massachusetts forecasting firm.
"The shippers are going to go into trans-shipment in the Caribbean in a big way," Mr. West said.
Mr. Wainio, who used to work with the Panama Canal Authority, said that would lead to unnecessarily higher prices for U.S. consumers.
"The cargo will move," he said. "But you're not going to get the economies of scale, so you're going to be paying more than you should." . . .
February 3, 2008
Charlotte Small Businesses Meet in the Cultural Middle
The Charlotte Observer reports on the need both Hispanic-owned and Anglo-owned small businesses respectively feel to move beyond their traditional markets:
Pascual Gonzalez and Donnetta Hopper run different businesses on North Tryon Street but face the same challenge. To grow, they must attract people from a culture different than their own.
So the Taqueria Guadalajara restaurant near Sugar Creek Road, which Gonzalez manages, will soon add meals that appeal to non-Hispanics, he said last week.
And the Liberty Tax Service near Eastway Drive, which Hopper manages, offers tax services to both Spanish- and English-speaking clients. Hopper practices her Spanish every chance she gets -- even with the waitresses at Taqueria Guadalajara when she eats lunch there.
"They speak English, so I ask them, `What is this? What did you say that stuff is?' " Hopper said. "I tell them to say it in Spanish and I learn from that."
After years of living side by side but apart, some Hispanic-owned and non-Hispanic-owned businesses near Sugar Creek Road and Eastway Drive are slowly expanding their markets by bridging the language and cultural barriers.
For traditional businesses, the move reflects the growing awareness that Hispanics are here in ever-increasing numbers and often are replacing former residents and customers.
For Hispanic businesses, the change may help soften the economic hit that's flowing through the construction trades. . . .
The rest of the article can be found here.
Posted by John at 5:18 PM | Comments (0) | TrackBackJanuary 30, 2008
Despite the Gloom, Buying in the Auto Industry
Brian Wesbury, in his bullish take on the U.S. economy, noted that Wilbur Ross is a buyer. He's not just a buyer; he's buying Detroit:
Wilbur Ross remains confident that there is money to be made in the automotive industry even as the industry faces down a national recession that could cause vehicle sales to drop.. . .
Ross, who made billions of dollars in the 1990s reorganizing steel companies, predicts U.S. vehicle sales will fall by 750,000 units this year, but said his firm continues to look for supplier bargains. . . . [Source: Crain's Detroit Business]
Ross's International Automotive Components now has over $5.5 billion in revenues, produced by 28,000 employees working in manufacturing facilities located in 16 different countries around the world.
Posted by John at 5:56 AM | Comments (0) | TrackBackIt's the Economy, Stupid, and It's in Remarkably Good Shape
Brian Wesbury, as he often does, cuts through the gloom about the U.S. economy:
. . . .If the U.S. financial system is really as fragile as many people say, why should we go to such lengths to save it? If a $100 billion, or even $300 billion, loss in the subprime loan world can cause the entire system to collapse, maybe we should be working hard to build a better system that is stronger and more reliable.
Pumping massive amounts of liquidity into the economy and pumping up government spending by giving money away through rebates may create more problems than it helps to solve. Kicking the can down the road is not a positive policy.
The irony is almost too much to take. Yesterday everyone was worried about excessive consumer spending, a lack of saving, exploding debt levels, and federal budget deficits. Today, our government is doing just about everything in its power to help consumers borrow more at low rates, while it is running up the budget deficit to get people to spend more. This is the tyranny of the urgent in an election year and it's the development that investors should really worry about. It reads just like the 1970s.
The good news is that the U.S. financial system is not as fragile as many pundits suggest. Nor is the economy showing anything other than normal signs of stress. Assuming a 1.5% annualized growth rate in the fourth quarter, real GDP will have grown by 2.8% in the year ending in December 2007 and 3.2% in the second half during the height of the so-called credit crunch. Initial unemployment claims, a very consistent canary in the coal mine for recessions, are nowhere near a level of concern.
Because all debt rests on a foundation of real economic activity, and the real economy is still resilient, the current red alert about a crashing house of cards looks like another false alarm. Warren Buffett, Wilbur Ross and Bank of America are buying, and there is still $1.1 trillion in corporate cash on the books. The bench of potential buyers on the sidelines is deep and strong. Dow 15,000 looks much more likely than Dow 10,000. Keep the faith and stay invested. It's a wonderful buying opportunity.
Wesbury's essay is worth reading in full for its explanation of the differences between the Great Depression and where we are today.
Posted by John at 5:45 AM | Comments (0) | TrackBackJanuary 24, 2008
Why the Miami Chamber of Commerce Owes Hugo Chavez One
The New York Times reports on the substantial relocation of many middle- and upper-income Venezuelans to Miami since Hugo Chavez came to power:
Posted by John at 11:12 PM | Comments (0) | TrackBackAccording to census data, the Venezuelan community in the United States has grown more than 94 percent this decade, from 91,507 in 2000, the year after Mr. Chávez took office, to 177,866 in 2006. Much of that rise has occurred in South Florida, making the Venezuelan community one of the fastest growing Latino subpopulations in the region this decade. In many ways, the Venezuelan influx is reminiscent of the Cuban migration spurred by Fidel Castro’s overthrow of Fulgencio Batista in 1959 and his imposition of a socialist state. . . .
Sinking their roots into the South Florida soil, Venezuelans have shifted their money into American banks, married and divorced, opened businesses, become active in local politics, and seen their children graduate from American schools. . . .
The growing Venezuelan population has been a windfall for Miami banks, as many Venezuelans bring their money here. Ken Thomas, a banking analyst in Miami, said the amount of that capital flight was unclear, although he said it was “clearly in the billions.”
January 22, 2008
Innovation and Creativity Don't Mix with Politics
Richard Florida has some depressingly accurate comments on how little our political system and its politicians care about innovation and creativity, two big subjects which have a lot to do with our future prosperity:
Posted by John at 5:26 AM | Comments (0) | TrackBackInnovative businesses have realized that politics is beyond dysfunction. I learned a lot in my short years in Washington DC. Nobody cares about this stuff. And that goes way, way beyond the Bush Administration, people: just try to find someone on Capitol Hill who cares. Cutting edge companies are walled off in Silicon Valley and many are globalizing to gain access to the talent they need. Their bets are well hedged. The US is a collection of innovative, talent attracting region, embedded in a nation and political system that is increasingly, if strangely, at odds with their needs and requirements. . . .
Who among the current crop of candidates - in either party - has a theory of America's role in the world economy? Who among them has said a word about creativity and innovation? Who among them has uttered a peep about how to extend the innovative, creative, and entrepreneurial regional engines of the economy into a broad and shared prosperity. Silence, as the old adage goes, is deafening - and also very, very telling.
January 18, 2008
Boomer Demographics Don't Bode Well for Housing
The Economist explores the end of the "generational housing bubble", the effect aging Baby Boomers will have on housing prices in coming years:
This phenomenon will unfold differently across the country. Some states will begin the sell-off later than others. In 15 southern and western states—including the retirement magnets of Florida and Arizona—the elderly do not become net sellers until their 70s. Expensive states such as California and the cold states of the midwest and north-east are likely to lose them more quickly. The mismatch between buyers and sellers may be most acute in the rustbelt, where numbers of young people and immigrants are rising slowly, if at all, says William Frey of the Brookings Institution, a think-tank.
The equation is pretty simple: Baby Boomers haven't reproduced fast enough to have enough people to buy their homes for what they paid for them. Immigrants, anyone?
Posted by John at 5:45 AM | Comments (0) | TrackBackEconomic Consequences of Local Immigration Laws Continue to Spread
The New York Times takes a look at Waukegan, Illinois, as a microcosm of the effect federal immigration enforcement raids are having on not just undocumented Hispanic immigrants, but on legal citizens and local economies as well:
From Illinois to Georgia to Arizona, these families are hiding in plain sight, to avoid being detected by immigration agents and deported. They do their shopping in towns distant from home, avoid parties and do not take vacations. They stay away from ethnic stores, forgo doctor’s visits and meetings at their children’s schools, and postpone girls’ normally lavish quinceañeras, or 15th birthday parties.
They avoid the police, even hesitating to report crimes.
Stores catering to Hispanic immigrants in places like Atlanta and Cincinnati have closed because of the drop in customers. Michael L. Barrera, president of the United States Hispanic Chamber of Commerce, said anecdotal reports had indicated that small storefront businesses had been the hardest hit by a sharp decline in spending by immigrants.
“The [federal immigration] raids have really spooked them in a big way,” said Douglas S. Massey, a Princeton demographer who has studied Mexican immigrants for three decades.
There are economic consequences to be paid for the stance some communities and states have taken toward immigrants, and we're seeing it, vividly, across the country. In case you missed the story, Oklahoma has been particularly affected.
Posted by John at 5:30 AM | Comments (0) | TrackBackJanuary 17, 2008
Getting More Bang for the Buck in Asia
Since 2002, the $240 billion gain in U.S. energy imports equals and may exceed, depending on year end trade statstics, the total growth in imports, over the same time period, from China, Hong Kong, Taiwan, Japan, Korea, and Sinapore combined. [Source: PPI]
It's fair to say that our Asian trading partners are giving us a lot more for our money, too. While the tab for energy imports has tripled over the last five years, our actual usage has increased only 10%.
Posted by John at 4:19 AM | Comments (0) | TrackBack
January 10, 2008
"Dust Bowl" Immigration Legislation in Oklahoma
Oklahoma is already feeling the economic effects of immigration-related legislation passed last year, even though some provisions of the law have yet to take effect. USA Today reports:
Posted by John at 10:18 PM | Comments (0) | TrackBack. . . "I've already had customers who came in here and told me they've fired employees because they didn't know if they were here legally," says Tim Wagner, an owner of Cocina De Mino, a Mexican restaurant in Oklahoma City. He predicts industries such as agriculture will face worker shortages.
Widespread reports of vanishing employees and schoolchildren suggest thousands of illegal immigrants have left Oklahoma for neighboring states or their native countries. Cotton gins, hotels and home builders have lost workers. Restaurant and grocery store owners complain of fewer customers.
Some businesses and lawmakers are warning that the economic effects will hit consumers hard. Having a smaller pool of workers for certain jobs will cause delays and create competition among employers, leading them to raise wages and prices, Davis and others say.
Republican state Rep. Shane Jett, who opposed 1804, offers a more dire prediction. Without changes, the law "will be the single most destructive economic disaster since the Dust Bowl," he says. . . .
January 9, 2008
The "16 Year Itch"
Michael Barone explains, in demographic terms, why voters' emphasis in this presidential election cycle is on "change":
Posted by John at 9:36 AM | Comments (0) | TrackBack. . . over a period of 16 years, there is enough turnover in the electorate to stimulate an itch that produces a willingness to take a chance on something new.
Over time, the median-age voter in American elections has been about 45 years old. This means that the median-age voter in 1976 was born around 1931--old enough to have experienced post-World War II prosperity and foreign policy success, and then to have been disgusted by Vietnam and Watergate.
The median-age voter in 1992 was born around 1947 (the same year as Dan Quayle and Hillary Clinton, one year after Messrs. Clinton and Bush, one year before Mr. Gore). These voters came of age in the culture wars of the 1960s. They experienced stagflation and gas lines of the 1970s, and the prosperity and foreign policy successes of the 1980s. Mr. Clinton persuaded these voters to take a chance on change by promising not to radically alter policy. They rebuked him when he tried to break that promise, then for 14 years remained closely divided along culture lines as if the '60s never ended.
The median-age voter in 2008 was born around 1963, so he or she missed out on the culture wars of the '60s, and on the economic disasters and foreign policy reverses of the 1970s. These voters have experienced low-inflation economic growth something like 95% of their adult lives--something true of no other generation in history. They are weary of the cultural polarization of our politics, relatively unconcerned about the downside risks of big government programs, and largely unaware of America's historic foreign policy successes. They are ready, it seems, to take a chance on an outside-the-system candidate. . . .
The U.S. Stake in an Expanding World Economy
From the Christian Science Monitor:
Posted by John at 5:30 AM | Comments (0) | TrackBack. . . A growing global economy is providing the best source of momentum America has right now, as the nation's consumers struggle to cope with high oil prices and a downturn in the housing market.
How big is the momentum? Enough to offset much of housing's negative impact. Over the year that ended on Sept. 30, a rise in US exports has equaled the decline in residential construction that represents the biggest portion of housing's current drag on growth . . .
December 17, 2007
Turning Our Back on Globalization Will Extract a Heavy Price
So argues New York Mayor Michael Bloomberg, in a Financial Times editorial:
Posted by John at 4:44 AM | Comments (0) | TrackBackThe US economy has turned downward. People are feeling insecure. There are grave concerns about jobs moving overseas and about losing ground to Asian countries. Heavy pressures are mounting on the presidential candidates in both parties to pander to protectionist and even isolationist sentiments. The year, however, is 1992. Fortunately, the two parties’ candidates – Bill Clinton and George H.W. Bush – refuse to cave in to the pressure. They resist the special interests and stand strong for the long-term health of the American economy – and the country begins one of the greatest economic expansions of our history.
Today, we would do well to remember this lesson. It is easy to say that times have changed and take a more protectionist viewpoint. In fact, times have changed. Dramatic advances in technology and increased global trade are creating enormous economic opportunities, but also challenges. If America is to remain the world’s economic superpower, it must capitalise on the opportunities and confront the challenges. Countries that run away from globalisation in the 21st century – as with those that ran away from capitalism in the 20th century – will pay a heavy price for decades to come. . . .
Chinese and Indian Scientists Welcomed Home with Open Arms
The San Diego Union-Tribune offers an extensive look at the loss of top Chinese and Indian scientists, due to visa problems and more attractive research funding offers from their homelands:
. . . One-fourth of all patents filed in the United States are filed by foreigners, [Vivek] Wadhwa said.
"Those are the people we are sending back home, where they will compete with us," he said.
Returnees are coveted employees because they bring with them the experience of working in U.S. industry.
Yu Liang Huang has the experience on both sides of the Pacific that Chinese companies wanted and U.S. companies are just now growing to appreciate. After pursuing postdoctoral work at Ohio State University, he worked for several years as a consultant to British and U.S. biotechnology companies trying to do business in China and, later, at the now-defunct San Diego bioprocessing company Egen.
Posted by John at 4:22 AM | Comments (0) | TrackBackBut when Huang decided to start his own bioprocessing company, Generon, he did it in his native China.
The company licenses early-stage compounds out of U.S. companies or research institutes or forms strategic partnerships that allow the clinical development of the drug in China. The goal is to complete early clinical testing and then bring the drug back to the lucrative U.S. market.
Labor costs in China are cheaper than in the United States, and the local and central governments of China offer monetary support, help making necessary business connections and assistance in securing licenses and other needed approvals, Huang said.
"It is hard to get to this level in the United States," the 45-year-old CEO said. "So right now we have to enjoy that advantage provided by China, and maybe later we can return to the U.S."
December 3, 2007
Atlanta = Argentina
To illustrate the immense amount of economic activity which occurs in America's largest cities, Mark Perry at Carpe Diem compares GDP data for America's largest metropolitan areas with comparable sized countries around the world:
--The top ten largest U.S. cities, if they were one country, would have a GDP comparable to Japan, the second largest economy in the world.
--Any of the top ten U.S. cities individually would rank among the top 30 economies in the world.
--New York's economy is comparable in size to Brazil; Boston's economy is about the size of Ireland's; Atlanta, my home, is comparable in economic size to Argentina. Iran, a country many in this country seem awfully worried about, is no larger than San Francisco.
Read more in Perry's complete post here. It will help you appreciate the marvelously incomparable economic locomotive we enjoy in the United States.
Posted by John at 9:13 PM | Comments (0) | TrackBackDecember 1, 2007
Underestimating Our Dynamic Economy: An American Tradition
Frederic D. Schwarz, writing at the American Heritage blog, comments on Daniel Walker Howe’s new book, What Hath God Wrought: The Transformation of America, 1815-1848, and highlights a delicious irony of timing in American history.
Henry Leavitt Ellsworth, the U.S. commissioner of patents from 1836 to 1845, issued a particularly in-depth annual report of the Commission's activities in 1843:
Posted by John at 10:12 AM | Comments (0) | TrackBackThis report was greatly expanded from earlier ones, with a description of every patent issued during the year and sections written by examiners who specialized in particular fields. Evidently moved by the richness of America’s inventive spirit, Ellsworth surveyed the great reductions in cost of common items over the past 30 years: Shirt cloth down from 62 cents to 11 cents a yard; hooks and eyes reduced from $1.50 a gross to 15 cents; horseshoes, formerly handmade by blacksmiths, now manufactured and sold at five cents a pound.
Then Ellsworth made a statement that has been misquoted, misattributed, and misinterpreted ever since: "The advancement of the arts, from year to year, taxes our credulity, and seems to presage the arrival of that period when human improvement must end." If this sounds vaguely familiar, you’ve probably heard the garbled version in which a patent commissioner supposedly asked Congress to abolish his office on the grounds that "everything that can be invented has been invented." . . .
. . . the year in which Ellsworth marveled at the wonders of progress and invoked “the arrival of that period when human improvement must end” was 1843. The following year [Samuel] Morse demonstrated his telegraph, and as Howe explains, in less than a decade, you could barely recognize the United States as the same country.
To be sure, Morse’s telegraph was hardly unknown to Ellsworth in 1843. Morse had received several patents on his invention and gotten government grants to develop it . . . Yet its success was far from assured; other inventors had been trying to send messages with electricity since the 1820s. Ellsworth’s rhetorical flourish, vague as it was, did convey a sense that technology might soon be expected to reach its limits. Instead, within a few months, it took a huge leap forward, which in turn led to many more huge leaps. That’s how technology works, and however many unforeseen directions it may take in years to come, it is sure to continue working the same way—and surprising people in the process.
November 29, 2007
Let's Put Out the Welcome Mat for Petrodollars
The FT's John Gapper observes that Arab wealth being reinvested in the West is being done rationally, and we should welcome it:
. . . Domestically, it makes sense for the Gulf governments to invest their financial holdings into a variety of assets and to take risk. Many oil-rich states suffer the “resource curse” – the tendency for oil wealth to lead to corruption and lassitude. Gulf states such as the UAE and Qatar are trying to escape the curse by diversifying their economies and assets.
They are doing so in a professional manner. As I wrote last week about Dubai, the Gulf states are buying in expertise in the form of expatriate professionals from consulting and financial firms. According to one banker who has worked with the ADIA, it has hired 1,300 professionals from Wall Street and City firms in the past five years. It does not simply take the word of companies and banks that roll up asking for cash.
They are also getting better at navigating the sensitivities raised by Arab governments investing in western companies, after the fiasco of DP World having to shed its management of US ports when it acquired P&O last year. The recent Gulf investments in financial institutions, and in AMD, the US chip company, and Sony of Japan have not raised too many hackles.
There is no reason why they should – quite the opposite, in fact. Funds such as the ADIA have a clear rationale for taking stakes in US companies and are content not to insist on board representation or strategic control. If these investments work, it will help them to broaden their economies and to avoid the social instability common in oil-dependent countries. . . .
Gapper's complete commentary can be found here.
Posted by John at 3:59 AM | Comments (0) | TrackBackNovember 27, 2007
Indian Investment in the U.S. is Getting Significant
According to India's Economic Times, 34 firms headquartered in India, representing a wide variety of industries, have invested $6 billion in the U.S. this year alone. These firms employ 40,000 people in a wide variety of industries, including hotels,
Tata Group alone has made $2 billion of acquisitions in the U.S., employing 16,000 people, 5000 of which are local. Among the Tata holdings in this country are call centers in Milton, FL and Reno, OH which operate around the clock. Both centers are hiring, by the way.
Posted by John at 4:02 AM | Comments (0) | TrackBackNovember 24, 2007
Barbershop Creativity
Richard Florida found out his Toronto hairstylist was formerly a mechical engineer in GM product design, and finds this circumstance a metaphor for an important principle of creativity and economies: creativity is not the province of some elite class:
One of the great fallacies of modern times is the idea that creativity is limited to a small group. Most people, the belief goes, don't want to be creative, couldn't do it if asked and would be uncomfortable in an environment where creativity was expected of them.
This is false. Creativity is a virtually limitless resource that defies social status. I saw this in the 1980s in my studies of high-performance Japanese manufacturers such as Toyota and Honda.
Years ago, Konosuke Matsushita, founder of the great electronics company, laid down the real competitive challenge facing the world. Western factories had started out with better technology, better-trained engineers and managers and more aggressive chief executives. The key to Japan's success, he said, lay in mobilizing the knowledge and intelligence of its factory workers. The rest is history.
Yet our society continues to encourage the creative talents of a privileged minority. We systematically neglect the creative potential of the 60 to 70 per cent of the population that lies outside a narrow view of the creative class. There are fewer and fewer rewarding jobs for people without college degrees. This amounts to a huge inefficiency in our system for harnessing creative energy and turning it into wealth and productivity capacity.
The great challenge of society is to tap the creativity of much larger segments of the work force. It's here that openness, diversity and self-expression play their greatest role. For creativity is the great leveller — it defies gender, race, ethnicity, sexual orientation and outward appearance. We cannot know in advance where the next Steve Jobs, Jimi Hendrix, Jim Balsillie or Leslie Feist will come from. . . .
You can read Florida's complete commentary here; he goes on to note that the ultimate success of cities and countries will be their ability to use all of their creative resources to transform the city or country itself.
Posted by John at 8:33 AM | Comments (0) | TrackBackNovember 18, 2007
The Economic Value of Diversity
Philippe Legrain explains why diversity is not some fuzzy headed feel-good notion, but an important source of economic vitality:
The biggest economic benefit of diversity is that it stimulates new ideas, which are the source of most economic growth, which in turn pays for the good schools, hospitals and other public goods that we value.
The exceptional individuals who come up with brilliant new ideas often are immigrants. Instead of following the conventional wisdom, immigrants tend to have a different point of view and notice new details. As outsiders, they are more determined to succeed. Of Britain’s Nobel-prize winners, 21 arrived in the country as refugees.
Most innovations nowadays come not from individuals, but from groups of talented people sparking off each other – and foreigners with different ideas, perspectives and experiences add something extra to the mix. If there are 10 people sitting around a table trying to come up with a solution to a problem and they all think alike, then they are no better than one. But if they all think differently and bounce new ideas and reactions off one another, they can solve problems better and faster, as a growing volume of research shows. . . .
You can find Legrain's complete essay here.
Posted by John at 10:24 AM | Comments (0) | TrackBackNovember 11, 2007
Perspective on the Nostalgia for Lost Manufacturing Jobs
Posted by John at 12:46 PM | Comments (0) | TrackBackWhen I had my political awakening in high school debate in the 1970s, all of the complaints from the left were about how horrible blue collar workers had it in manufacturing jobs. At that time, manufacturing jobs were labeled by leftish critics as dirty and dangerous, and, most common, as repetitious and boring (in the Fredrick Taylor legacy). OK, so now that they all have nice clean service jobs, we are unhappy that they don't have those old manufacturing jobs? These are folks whose agenda has nothing to do with the words they are actually speaking, and everything to do with creating dissatisfaction to facilitate government takeover of economic functions . . .
Thank Goodness for Globalization
Robert Samuelson explains why:
Posted by John at 12:10 PM | Comments (0) | TrackBackFor years, the U.S. economy was an engine of global economic growth. Americans were the shoppers of last resort. Other countries boosted production and jobs by exporting to us. No more. In the second quarter, U.S. consumer spending grew at a meager 1.4 percent annual rate. Just last week, the International Monetary Fund said it expects the world economy to grow 4.8 percent in 2008, more than double the projected U.S. growth rate of 1.9 percent.
"At a time of subdued U.S. consumption," [Goldman Sachs economist Jim] O'Neill writes, "the world is helping the U.S. economy."
There is a larger lesson. We wrongly blame globalization for much that ails us. It's easier to denounce faceless forces beyond our borders. But globalization is not, as another IMF study shows, the chief culprit in rising economic inequality. New technologies probably deserve that distinction by widening pay gaps between skilled and unskilled workers. . . .
November 8, 2007
Actual Facts on Trade and the Middle Class
Dan Griswold of the Cato Institute explains the facts--which naturally run counter to electioneering myths--on the how the U.S. middle class has fared over the last decade as global trade and competition has increased:
The critics have it all wrong: The middle class isn't disappearing - it's moving up.
The Census reports that the share of U.S. households earning $35,000 to $75,000 a year (in '06 dollars) - roughly, the middle class - has indeed shrunk slightly over the last decade, from 34 percent to 33 percent. But so, too, has the share earning less than $35,000 - from 40 percent to 37 percent.
It's the share of households earning more than $75,000 that's jumped - from 26 percent to 30 percent.
Trade has helped America transform itself into a middle-class service economy. Yes, the country's lost a net 3.3 million manufacturing jobs in the past decade - but it's added a net 11.6 million jobs in service and other sectors where average wages are higher than in manufacturing. Most of these new jobs are in better-paying categories, like professional and business services, finance and education and health services.
Trade and globalization have also helped bolster the balance sheets of American households by delivering higher incomes, lower interest rates and wider investment opportunities. From 1995 to 2004, the real median net worth of U.S. households jumped by 31 percent, boosted by rising home values and stock prices. (Even with the recent housing slump, average home values remain more than 2.5 times what they were a decade ago, according to the S&P/Case-Shiller index.)
Despite frequently heard worries, American families are not "drowning in debt." Yes, total household debt has risen in the past decade - but total assets have risen in value even faster.
On average, U.S. households spent 14.4 percent of their income on debt payments in 2004, not much different from the 14.1 percent they spent in 1995. The bulk of what we've borrowed hasn't paid for groceries or big-screen TVs but for housing - which, again, has appreciated strongly in the last decade. . . .
Critics of trade repeat as a mantra that real wages have been stagnant since the 1970s. But the data on real wages exclude benefits - which have been rising as a share of worker compensation. Those data also rely on a cost-of-living index that has systematically overstated inflation and thus understated real income gains.
The U.S. Bureau of Labor Statistics reports that the average real hourly compensation earned by Americans has actually grown by 22 percent during the past decade - even as trade and other measures of globalization have grown rapidly. . . .
Griswold's complete essay can be found here.
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November 4, 2007
Are U.S. Students Really Behind in Math and Science?
Vivek Wadwa, writing in BusinessWeek, looks at a report which shatters the myth on the math and science skills of U.S. students:
The authors of the report, the Urban Institute's Hal Salzman and Georgetown University professor Lindsay Lowell, show that math, science, and reading test scores at the primary and secondary level have increased over the past two decades, and U.S. students are now close to the top of international rankings. Perhaps just as surprising, the report finds that our education system actually produces more science and engineering graduates than the market demands. . . .
. . . Their report shows U.S. student performance has steadily improved over time in math, science, and reading. It also found enrollment in math and science courses is actually up. For example, in 1982 high school graduates earned 2.6 math credits and 2.2 science credits on average. By 1998, the average number of credits increased to 3.5 math and 3.2 science credits. The percent of students taking chemistry increased from 45% in 1990 to 55% in 1996 and 60% in 2004. Scores in national tests such as the National Assessment of Educational Progress, the SAT, and the ACT have also shown increases in math scores over the past two decades.
And the new report again went against the grain when it compared the U.S. to other countries. It found that over the past decade the U.S. has ranked a consistent second place in science. It also was far ahead of other nations in reading and literacy and other academic areas. In fact, the report found that the U.S. is one of only a few nations that has consistently shown improvement over time.
Wadwa goes on to point out that over-emphasis of math and science over the humanities is not in the country's long-term best interest, as we need a workforce which is broadly educated. I couldn't agree more, particularly since a broadly-educated workforce lends itself more readily to creating the unplanned innovation we need to prosper.
Posted by John at 8:59 AM | Comments (0) | TrackBackOctober 25, 2007
Air Conditioned Nation
In 1970, the first year such data was compiled by the federal government, just 36% of all U.S. households had air conditioning. Only 11% of the country's households had central air conditioning. In 2005, 82% of all households below the poverty line had air conditioning, while 52% of such households had central air. [Source: Cafe Hayek, from the American Housing Survey]
Posted by John at 11:05 PM | Comments (0) | TrackBackOctober 24, 2007
More Megafires to Come in the Western U.S.
One of the reasons for such a prediction, naturally, is climate change, but the "we know what's best" philosophy of the U.S. Forest Service has something to do with it as well:
Posted by John at 5:04 PM | Comments (0) | TrackBack. . . Longer term, climate change across the West is leading to hotter days on average and longer fire seasons. Experts say this is likely to yield more megafires like the conflagrations that this week forced evacuations of at least 300,000 resident in California's southland and led President Bush to declare a disaster emergency in seven counties on Tuesday.
Megafires, also called "siege fires," are the increasingly frequent blazes that burn 500,000 acres or more – 10 times the size of the average forest fire of 20 years ago. One of the current wildfires is the sixth biggest in California ever, in terms of acreage burned, according to state figures and news reports.
The trend to more superhot fires, experts say, has been driven by a century-long policy of the US Forest Service to stop wildfires as quickly as possible. The unintentional consequence was to halt the natural eradication of underbrush, now the primary fuel for megafires. . . .
Redefining An Aging Population and Its Economic Impact
Stanford's John Shoven argues for a different measurements of a aging population in lieu of the simple years-since-birth. Mortality risk and remaining life expectancy, Shoven argues, place a much different perspective on what has been characterized as a major demographic cliff and a looming financial disaster:
The current practice of measuring age as years-since-birth, both in common practice and in the law, rather than alternative measures reflecting a person's stage in the lifecycle distorts important behavior such as retirement, saving, and the discussion of dependency ratios. Two alternative measures of age are explored: mortality risk and remaining life expectancy. With these alternative measures, the huge wave of elderly forecast for the first half of this century doesn't look like a huge wave at all. By conventional 65+ standards, the fraction of the population that is elderly will grow by about 66 percent. However, the fraction of the population that is above a mortality rate that corresponds to 65+ today will grow by only 20 percent. Needless to say, the aging of the society is a lot less dramatic with the alternative mortality-based age measures. In a separate application of age measurement, I examine the consequences of stabilizing labor force participation by age with alternative age definitions. If labor force participation were to remain as it is today with respect to remaining life expectancy (i.e. if the length of retirement stayed where it is today) rather than labor force participation remaining fixed by conventionally-defined age, then there would be 9.6 percent more total labor supply by 2050 in the U.S. This additional labor supply could help finance entitlement programs amongst other things. GDP would be between seven and ten percent higher by 2050 if retirement lengths stabilize. . . .
Shoven's complete research paper can be found here (pdf). Thanks to Marginal Revolution for the pointer.
Posted by John at 5:57 AM | Comments (0) | TrackBack