Friday, April 29, 2011

Weekend Reading from The Economist

I'd like to highlight a series of thought provoking articles in The Economist, which long time readers of FMMF will find familiar to many themes we have promoted here since 2007.  Due to the length of some of them, I'll just tag the headline and provide a little blurb.

1) Angst in the United States - What's Wrong with the American Economy?  (read here)

Its politicians are failing to tackle the country’s real problems. Believe it or not, they could learn from Europe.

A careful reading of the polls suggests that Americans’ worries stretch well beyond the next couple of years: about stagnating living standards and a dark future in an economy slow to create jobs, saddled with big government deficits and under threat from China.  Are these worries justified? On the plus side, it is hard to think of any large country with as many inherent long-term advantages as America: what would China give to have a Silicon Valley? Or Germany an Ivy League? But it is also plain that the United States does indeed have long-term economic weaknesses—and ones that will take time to fix. The real worry for Americans should be that their politicians, not least their president, are doing so little to tackle these underlying problems. Three failings stand out.

2)  Botox and Beancounting  (one of my long time pet peeves! [Apr 23, 2008: Barry Ritholtz on Disappearing Economic Indicators].  [May 10, 2008: Finally Some Mainstream Reports are Figuring Out the Spin from Government] [Dec 16, 2010: Inflation as Measured in the 1980s would be 8%+, as measured in 1990, 4%])  (read here)

Do official statistics cosmetically enhance America’s economic appearance?

COSMETIC surgery is more popular in America than in Europe. Statistics, too, may be making things there look less saggy. For several headline economic gauges, America uses a different (and more flattering) measure from that employed on the other side of the Atlantic. The number-crunchers are not deliberately massaging the figures but the effect of some of America’s official statistics is to Botox its performance relative to Europe’s.

3) Still Full of Ideas, but Not Making Jobs  (read here)

America needs to share the benefits of innovation more widely.

America’s ability to innovate and raise productivity remains reasonably healthy. The problem is that the benefits of that innovation and productivity have become so narrowly concentrated that workers’ median wages have stagnated.

4) Life in the Slow Lane (read here)

Americans are gloomy about their economy’s ability to produce. Are they right to be? We look at two areas of concern, transport infrastructure and innovation.

America, despite its wealth and strength, often seems to be falling apart. American cities have suffered a rash of recent infrastructure calamities, from the failure of the New Orleans levees to the collapse of a highway bridge in Minneapolis, to a fatal crash on Washington, DC’s (generally impressive) metro system. But just as striking are the common shortcomings. America’s civil engineers routinely give its transport structures poor marks, rating roads, rails and bridges as deficient or functionally obsolete. And according to a World Economic Forum study America’s infrastructure has got worse, by comparison with other countries, over the past decade. In the WEF 2010 league table America now ranks 23rd for overall infrastructure quality, between Spain and Chile. Its roads, railways, ports and air-transport infrastructure are all judged mediocre against networks in northern Europe.

5) Decline of the Working Man (some scary statistics here as many of the jobs outsourced or erased via technology are traditional male roles; one just hopes we are not on the path of Japan [Jul 29, 2009: Japan's "Herbivore" Men - Young American Men's Future?])  (read here)

Why ever fewer low-skilled American men have jobs.

The project is at the sharp end of one of America’s biggest economic problems: the decline in work among men. Of all the big, rich Group of Seven economies, America has the lowest share of “prime age” males in work: just over 80% of those aged between 25 and 54 have a job. In the late 1960s 95% worked.

To count as unemployed, you have to be looking for work, yet ever more men have simply dropped out of the recorded labour force. Some, it is true, work “off the books”; but many receive disability insurance, are in prison, live on spouses’ or partners’ incomes, or have otherwise given up looking for a job. America has a smaller share of prime-age men in the workforce (ie, in a job or seeking one) than any other G7 economy.

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