The problems of the US economy have their genesis in Reaganomics, the reckless ideology of small government, obsession with the power of unregulated markets to efficiently allocate resources, tax cuts to the wealthy. And more recently the economy has run into a vicious head wind of huge Federal deficits and debt, thanks to the Bush and now Obama wars and more importantly the housing bubble that catastrophic mortgage crisis generated by sub prime lending.
The US economy is a veritable complex problem to which simplistic solutions are attempted. Like all complex self organizing systems, the US economy is organizing around new attractors. The construction and retail jobs that fueled the illusion of prosperity will never return. Hence the unskilled pools of labor needed for these jobs are not needed any more. These jobs will never return.
The" new economy" will self organize around machines and software. Logically, the jobs that are likely to be created by the "new economy" will need computing and engineering training. These are skill areas that the US has a crippling and shameful shortage of. And more importantly, the American worker must be freed of the shackles of their homes to be able to move to where the "new economy" creates new jobs.
This will take time, loads of time. According to a new study by McKinsey Global Institute, only in the most optimistic scenario will the US return to full employment before 2020.
When Speaker Boehner talks about what I think is an ideological and simplistic GOP plan to create jobs and jump start the economy, I wonder weather US politicians understand just how complex the problem really is.
I am also astounded by the bipartisan intellectual paralysis and idiocy in Washington.
But the American public is not innocent. Books like Richard Hofstadter's "Ant-Intellectualism in American Life", Al Gore's "The Assault on Reason", Susan Jacoby's "The Age of American Ureason" and Charles Pierce's Idiot America are very instructive.
The thesis of these books is that American culture and mind set is at odds with Enlightenment and is largely characterized by a veritable flight from reason, disdain for logic and evidence.
An article by Thomas Friedman in the New York Times is a brilliant articulation of what is a complex complex problem replete with uncertainty. He is also the author of
my two favorite books;"The World is Flat" and "Hot Flat and Crowded".
The Uncertainty Tax
By THOMAS L. FRIEDMAN
Published: June 12, 2011
If you want to understand why the unemployment rate has been stubbornly lodged around 9 percent, a good place to start is with the eye-popping mortgage statistics released last week by the economic analysis firm CoreLogic: 38 percent of homeowners with second mortgages are underwater. They borrowed against the value of their homes, and they now owe more than their houses are worth. The total number of underwater homeowners in America, with first and second mortgages, is a stunning 22.7 percent. In Nevada alone, 63 percent of all mortgaged properties are worth less than the owners paid; in Arizona 50 percent, Florida 46 percent, Michigan 36 percent and California 31 percent.
When people are so underwater, they find it hard to move to take new jobs, they find it hard to borrow or raise cash for education or start-ups, and banks become even more cautious about lending. Until we as a country figure out how to divvy up these losses on housing and let these markets clear and move on, they will be a serious drag on employment.
Indeed, this mortgage mess just feeds the three other big problems undermining U.S. job growth today: weak aggregate demand, structural impediments and an epidemic of uncertainty about what the future holds for everything from health care to the rate of taxation to Social Security and Medicare spending to the availability of credit to the general direction of the economy - the sum of which has people holding back and thus undermining the government's stimulus.
We need to be working on all three at once, and urgently. How? Others have focused on the aggregate demand problem, so I'd like to address some of the structural impediments and uncertainty.
On Friday, the McKinsey Global Institute released a long study of the structural issues ailing the U.S. job market, entitled: "An Economy That Works: Job Creation and America's Future." It begins: "Only in the most optimistic scenario will the United States return to full employment before 2020. Achieving this outcome will require sustained demand growth, rising U.S. competitiveness in the global economy and better matching of U.S. workers to jobs."
Over the last 20 years, McKinsey notes, with each recession more employers have used the downturn to replace workers with machines and software, so it takes much longer for full employment to come back. I've been working on a book that required talking to a lot of entrepreneurs and have been struck by how many told me some version of: "I used the recession to downsize and get really efficient. None of those jobs are coming back. I am doing a little hiring now, but for people with more skills."
At the same time, you talk to U.S. companies doing advanced manufacturing and many will tell you they struggle even now to find workers with the blue-collar skills they need to replace their retiring employees. Thanks to a credit bubble over the last decade, we created a lot of jobs for people - in construction and retail - who did not have globally competitive skills or post-high school degrees. Those workers will need retooling.
McKinsey says its research found that "too few Americans who attend college and vocational schools choose fields of study that will give them specific skills that employers are seeking. Our interviews point to potential shortages in many occupations, such as nutritionists, welders, and nurse's aides - in addition to the often-predicted shortfall in computer specialists and engineers."
The report concludes, "Progress on four dimensions is needed: Ensuring that the work force acquires skills needed for the jobs that will be in demand, finding ways for U.S. workers to win 'share' in the global economy" - by encouraging more foreign investment in the U.S. and by getting companies who have off-shored jobs to take advantage of falling telecom prices to on-shore them to low-cost American cities and towns instead - "encouraging innovation, new company creation, and scaling up of industries in the United States, and removing unnecessary impediments that slow business investment and job creation."
Today, everything from patent delays to overlapping or conflicting land use regulations inhibit start-ups and factory creation. According to the World Economic Forum, America now ranks 27th on the ease of getting a construction permit, behind Saudi Arabia.
But do not underestimate uncertainty as a silent jobs killer. Congress and the White House seem paralyzed in deciding the future of taxes and spending. Where are we going in these areas? Investors and companies who have to make hiring decisions have no clue. "The economy is paying a high uncertainty premium right now," says Mohamed El-Erian, the C.E.O. of the world's largest bond fund, Pimco. "With such uncertainty, people delay as many decisions as possible."
Any good news? Yes, U.S. corporations are getting so productive and sitting on so much cash, just a few big, smart, bipartisan decisions by Congress on taxes and spending (and mortgages) and I think this whole economy starts to improve again. Workers with skills will be the first to be hired.
Sent from my BlackBerry® smartphone from Zain Kenya