NOTES from COG Executive Director Jeff Kiely, 6/21/11

               It’s not an easy thing to figure out Economics.

                But there’s hope.  The emerging star journalist for Time magazine, Rana Foroohar, is writing some of the most cogent and insightful material on economics these days.

               Here's a summary discussion of her two most recent articles. 

June 20th:  A major think-piece that’s been getting a lot of buzz, “Don’t Hold Your Breath,” in which Rana debunks a number of “myths” about the economy [ever hear the term, “No Silver Bullet”?].

Myth #1.      This is a temporary blip … Rebounds historically took 6 months.  This one will take 5 years or longer.  Lingering unemployment is not getting solved:  “We would need to create 187,000 jobs a month, growing at a rate of 3.3%, to get to a healthy 5% unemployment rate by 2020. At the current rate … we would maybe get halfway there by that time.”

Myth #2.      We can buy our way out of this …  “It’s clear that the stimulus-induced recovery hasn’t overcome the structural challenges to large-scale job creation.”

Myth #3.      The private sector will make it all better … Big companies are “flush,” while American workers are earning less and losing their homes.  The “emerging-market nations are churning out 70 million new middle-class workers and consumers every year.  That’s one reason unemployment is high and wages are constrained here at home. … From 2000 to 2007, the US saw its weakest period of job creation since the Great Depression.”  “Clearly, it’s a myth that businesses are simply waiting for more economic and regulatory ‘certainty’ to invest back home.”

Myth #4.      We’ll pack up and move for new jobs… It’s no longer the case that, “if you build jobs, people will come.”  Labor mobility is getting increasingly less, rather than more.  It’s also the case that “the available skills in the labor pool don’t line up well with the available jobs. … ‘There’s a tremendous mismatch in the jobs market right now.’” 

Myth #5.      Entrepreneurs are the foundation of the economy … As the “financial sector” has gotten bigger, new-business creation has been contracting.  Lending is tight.  Fixing the housing market could be “Job No. 1.”  Youth unemployment is 3 times the national average, and a generation is in jeopardy of being marginalized from the economy.  “There’s an argument for a good system of technical colleges, which would in turn require a frank conversation about the fact that not everyone can or should shell out money for a four-year liberal-arts degree that may leave them overleveraged and underemployed.” 

Also, we need “good industrial policy” – not about command-&-control like China, but “about the private and public sectors coming together at every level, as in Germany, to decide how best to keep jobs at home.”  Germany may be a good model to look at:  “Today Germany has not only higher levels of growth but also lower levels of unemployment that it did pre-recession.”

“How we deal with the longer-range crisis – the crisis of growth and unemployment – will define our economic future for not just the next few quarters but the next few decades.”

Food for thought?  What are the implications for our regional leadership mission?

June 27th:  A shorter, but likewise insightful, piece that re-focuses on the enduring importance of local in the global economic scene.  Take a look at her case for regionalism:  “More than half of global trade, investment and migration still takes place within regions.”  Of course, her “regions” are huge compared with our little Four Corners/Southwest niche.  But the point is worth remembering.  She also notes the rich-poor divide.  Although “emerging economies” are beginning to stake their claims to the world’s riches, there is still the perception (perhaps the reality?) that “the benefits of globalization flow mainly to the rich down the street.”

Implications for us in terms of the local-regional-global dynamic?   I’m led to the perennial strategic question:  What can we do collectively—regionally and locally—“on purpose,” that will make a difference in the economic systems of our region(s)?

Let me know what you think!

Jeff
jkiely@nwnmcog.com