At a dinner party in New York last weekend, a friend who works for one of the national polling organizations asked me how I would characterize the times we live in.I told him it was too soon to tell. There are so many changes occurring and issues being debated that it's hard to form an accurate, enduring and meaningful opinion. If anything, I told my friend, going by the early evidence, this period may be known as the "Age of Ironies."
Case in point: the nation's dreadful and unacceptably high unemployment rate, currently 9.7%. The U.S. -- a private-sector-dominated-and-proud-of-it economy -- ushered in globalization. Its multinational corporations in many cases serve as the global standard -- THE operational model -- in key sectors. The U.S. standard began to be mirrored by foreign companies across the sea, and globalization -- i.e., free markets -- increased international trade. More trade increased the transfer of production to lower-cost labor centers around the world, to emerging-market economies in Latin America, Asia and elsewhere. Millions of jobs left the U.S. as a result, pushing American unemployment up. And who do Americans blame?
The U.S. government.
OK, not all of today's most vocal critics of the economy are blaming the federal government. They're blaming President Obama. Or Speaker Nancy Pelosi. Or the Democrats. Or liberals. Or perhaps they're blaming the public sector for "getting in the way, and preventing what the free market is capable of doing."
Did I mention the word "irony?"
Folks, the free market has been doing what it's capable of doing, and it will continue to do what it's capable of doing. The result, at least for a while, is going to be more structural changes to the U.S. economy -- and more dislocation. Dislocation is a fancy, policy-wonk word for "job losses."
Be Careful What You Wish For . . .
In an interview on Bloomberg Radio a couple weeks back, Morgan Stanley Asia Chairman Stephen Roach posed the rhetorical question: "If the American people knew in 1989 this is what globalization would look like in 2010, would they have signed up for it then?"
True, the terrible 2007-09 recession has triggered more than 8.4 million job losses, and some may argue that it's the recession that has caused the job losses, nothing else. Well, if that's the case, jobs that were curtailed during a period of weak demand in the recession typically are reinstated when the economy snaps back. But guess what? Many of those 8.4 million lost jobs aren't coming back. And in many cases, it's due to globalization.
Some Americans may be opposed to globalization. However, from the media coverage of this era's most vocal critics of economic and public policy, the Tea Partiers, you'd think that every American favored the new, interconnected, international economy in which call centers servicing the U.S. are based in India, and even Mexico -- of all places -- is losing jobs to lower-labor-cost China.
Shred the Federal Safety Net
You don't have to look hard to discern what many, if not most, Tea Partiers think of globalization: Their first plank is free market/limited government. So it's go, globalization, go!
Further, Tea Partiers would no doubt be thrilled to see a simultaneous dismantling of the federal social safety net.
The problem with that latter stance is that it's the exact opposite of the direction the nation needs to go in. As Financial Times Columnist Martin Wolf, an economist, points out, one critical policy task for President Obama and Congress is improving the inadequate and very limited U.S. social safety net. Given the speed and scope of job losses caused by globalization, Wolf says, the U.S. must establish universal health care, more generous unemployment insurance and increase support for those with low wages.
In addition to Wolf's recommendation, I would add more federal support through grants, student loans and tax credits for retraining and education, basic research and serious infrastructure upgrades.
Thanks, Free Market
There's little evidence to suggest that the structural changes occurring in the U.S. economy are going to stop. If anything, they'll accelerate, which means millions more jobs will shift overseas, many never to return. And if we use foresight, the resilient, flexible U.S. economy will -- as it has in previous generations -- create new jobs in new sectors that will also serve as engines of growth. That means millions of Americans will need to be retrained to meet those new skill requirements. Hence, the need for retraining and a better safety net.
Getting back to my friend's question at the dinner party concerning the current state of things in the U.S. -- a very vocal group, their free market philosophy triumphant, is now blaming the federal government for the unemployment the free market put in motion. And this same group is now also simultaneously opposing the critical public policy programs that would both cope with the dislocation caused by the free market forces and also help retrain Americans for new jobs in their surely different economy.
Did I mention the word "irony?"
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