Here’s the real problem, folks: U.S. economy is struggling to sustain growth absent real investment and absent new technological improvements. It is that simple. And the jobs markets are starting to show the strains of this. Productivity growth being weak, while employment rising and remaining high amidst rising labour costs means only one thing: the U.S. is currently running above its potential rates of growth. It is, in other words, overheating. And that at roughly 2% annual growth rates against pre-crisis averages above 3%. One of two things will have to happen:True EconomicsGood luck taking an investment strategy on one. Which leaves us with taking a strategy on two… or going defensive on an expectation that stagnation will be setting in...
- One: employment moderates and labour costs growth abates; or
- Two: business investment has to rise (note: explicitly not public investment, because raising public investment in these labour markets conditions will simply exacerbate the twin problem of tighter labour markets and low productivity growth).
Three Facts from the U.S. Labor Markets & Reality of the U.S. Economy
Constantin Gurdgiev
5 comments:
This is the disgusting and aggravating thing about economics commentary. So I'm reading this guy's post and its pretty dry, pretty good. And then I get to that point when his economic analysis runs smack into his ideological assumptions and all faith I might've had in this person's ability to realistically judge and understand how the economy works goes right into the toilet:
"Here’s the real problem, folks: U.S. economy is struggling to sustain growth absent real investment and absent new technological improvements. It is that simple. And the jobs markets are starting to show the strains of this. Productivity growth being weak, while employment rising and remaining high amidst rising labour costs means only one thing: the U.S. is currently running above its potential rates of growth. It is, in other words, overheating. And that at roughly 2% annual growth rates against pre-crisis averages above 3%. One of two things will have to happen:
One: employment moderates and labour costs growth abates; or
Two: business investment has to rise (note: explicitly not public investment, because raising public investment in these labour markets conditions will simply exacerbate the twin problem of tighter labour markets and low productivity growth)."
The idea that Govt investment necessarily reduces productivity growth is nothing but an ignorant and dishonest article of faith. Its just so damn frustrating trying to find good economic commentary. The state of general knowledge about economics is so filled with propaganda and willful ignorance that it blows my mind.
Hopefully Mariana Mazucatto's work will reverse this perception that public investment doesn't raise productivity. This is especially true of infrastructure and R&D.
Moreover, government spending in total reduces demand leakage and stimulates demand. Increasing demand drives increasing investment.
The problem of productivity still remains though unless investment is targeted to increase productivity, and that hasn't been happening.
The conditions can be created for innovation, but firms need to innovate.
It fails on just about any level.
Consider the example of an Medicare fraud investigator. Lets say that given the current software, integration, and hardware capabilities allow this person to 5 cases a day.
If you invest in new software and processes, maybe you can double that to 10 cases a day. Yes it costs money, but it doubled the productivity!!! I mean this is the simplest example imaginable and the idea that it would take a book to demonstrate to people something so ridiculously obvious is itself damning evidence of the state of our economic understanding.
Ever go to a DMV and see these people using antiquated computers, printers and software? People get mad at the workers as if thats their fault. But we dont talk about Govt performance using metrics like numbers of people served per worker per hour, we only focus on the money spent.
And increasing public investment a la Mazucatto means the deficit needs to be higher?
And increasing public investment a la Mazucatto means the deficit needs to be higher?
Either that, or else raise taxes, or (inclusive disjunction) cut spending elsewhere. The books have to balance.
It's also a question of multipliers.
Post a Comment