September 03, 2003


So Iím reading something Pejman Yousefzadeh linked to from the NYT about the US economy:

The American economy grew at a revised annual rate of 3.1 percent in the second quarter, the government reported today, and the unexpected strength is leading economists to raise their forecasts for the rest of the year.

And itís full of sound economist stuff, to which Pej adds reasonable commentary. Meanwhile, what does Australiaís ABC tell me?

Consumers today in the United States, in Britain, in all parts of the world, are holding up very heroically and very dutifully, spending, borrowing and spending and propping up economies. Now when those economies fall down those very same heroic consumers will be left with very high levels of debt in what will be a deflationary environment where the possibility of there losing their jobs is very, very high. We've watched in the United States as unemployment has roared ahead in the last two years, and the rate of growth of unemployment in the US is higher than it's ever been since the Great Depression. Unemployment is rising in Europe, and under these conditions, when people start to lose their jobs, and haven't got the income with which to repay their debts, and in a deflationary environment those debts become extremely painful.

Misery and disaster lay in wait for all of us! Thatís according to Ann Pettifor, interviewed on yesterdayís AM program. Pettifor represents the anti-free trade, down-with-the-First-World New Economic Foundation in London. She herself is a veteran of the Jubilee 2000 project, which sought to forgive Third World debt. Was any of that revealed to the ABCís listeners? Was any context provided at all?


Posted by Tim Blair at September 3, 2003 02:34 AM

"[T]he rate of growth of unemployment in the US is higher than it's ever been since the Great Depression."

Boy is that misleading. Is going from 4% to 6% unemployment much worse than going from 6% to 8.5%, or from 8% to 11%? Does it mean you're in a worse situation? Apparently it does if you're Ann Pettifor and the ABC.

Posted by: John Thacker at September 3, 2003 at 03:58 AM

That caught my eye, too, John.

Rate of growth. Weasel words?

Can't say 6% v. 25%, can we? And considering how many millions fewer population we had in the 30s.....

Posted by: Sandy P. at September 3, 2003 at 04:23 AM

OHMYGOD! It's the Carter Administration all over again! 10% unemployment! 12% inflation! Lowered thermostats and ugly sweaters! The return of disco!


reality could set in.

Posted by: Ken Summers at September 3, 2003 at 05:41 AM

To be sure the Republicans are doing their best to create new jobs. Trouble is they're in



Communist China

Considering the latter is run by a communist party with a human rights record that makes Saddam Hussein look like playful kitten, which brutally invaded and occupied Tibet, and has a rather large arsenal of WMD, why is there so little criticism here or in the corporate media?

Answer - brutal dictatorships are fine, as long as they're good for shareholders, and you lot won't complain about them until Faux News tells you to.

Posted by: Analogue Voter at September 3, 2003 at 06:37 AM

What the hell? For cripes sakes, unemployment in 6.5% here in the States and interest rates have all but disappeared. You'd think a nation where everyone has a cell phone and nobody has heard of the term "bread line" wouldn't be doing too shabby.

Posted by: Matt from Vegas at September 3, 2003 at 06:40 AM

Yeah really...we seem to have an overwhelming number of poor and unemployed citizens with huge asses and big bellies.

Posted by: Drake at September 3, 2003 at 07:03 AM

Actually unemployment in the US declined slightly last month to 6.2%. Compare that to the 9.6% and 10.4% unemployment rates in France and Germany respectively where non-governmental job creation is low due to excessive regulation and companies won't hire workers during good times because they can't lay them off during bad times.

Posted by: Randal Robinson at September 3, 2003 at 07:17 AM

But Randall, Europe is seeing a record growth in its core industries: sneering and snobbery.

Posted by: Robin Roberts at September 3, 2003 at 08:05 AM

Looks like I had a case of premature evaluation when I tipped Cathy Sherry for the next Nobel prize in economics, for her discovery that housing prices are determined by the interaction between demand and supply.

Ann Pettifor's discovery that assets can exceed income is surely just as worthy. I guess these two gals will just have to share the prize. Or mud-wrestle for it.

Posted by: Alex Robson at September 3, 2003 at 09:43 AM

Well communisto does like to bang on about Evil Amerikka.Ironically, the report applies well to Western Europe: one has run this line like the beat of a drum but once more, Europe France and Germany are heading for an almighty depression,the difference is, now the day is looming fast.The rpice of socialism.

Clinto is attributed with ensuring the U.S. economic engine steamed ahead. The facts are rather to the contrary. That doughty duo, Dole and
- oh blast the name of the other gentleman has just slipped me - well, they galvanised Republicans in Senate and Congress and stopped a long sheet of `plans' by Billy the Kid Clinton who, properly, should be facing criminal trials on charges of high treason,which would have secured the Democrats their ambition , the realisation of a fascist govt., and sunk the U.S.economy below the plimsoll line.

Yet, there are a number of disturbing things amply demonstrated by Europe, noteable also of Australia's fed., states' and local governments.The first is high government consumtion which comes at the cost of capital investment - which also means, reduction in jobs.

Peter Costello blinked into the cameras yesterday and piffled on over the decrease in genuinely wealth creating activity.No, Peter, each tier of government is spending Australia into recession.Moreover, thanks to pandering to the greens- the locking up of land - greenie friendly petrol,in Victoria, windmills, and so forth, the costs of government rocket further up.

Now we come to the next one and what an irony: consumer spending as the driver of economic growth; no it isn't. Consumer spending is a function of capital. Australia's tax regime, matching the thieving confiscatory levels of government spending, punishes capital.But then , there are a few monstrous sacred cows like medicare, free universities and lots of them, DSS, IRC, free schools, free transport, and lots of wilderness au naturale, armies of social workers(sic), money hungry police forces,and on and on - oh free entertainments - commonwealth games, grand prixs, olympic games, `national insitute ' of sport, an expensive military academy - (Duntroon, for example, was sufficient), lots of `government office buildings' , which all need slaughtering.

Next, common law, is being overthrown by the regulatory regimes of each tier of governments cheered on by activists in the learned profession. The force of this is not to be underestimated. In the U.S., all but 2 states have struck down common law.Activist judges using the courts to promote the fascist aims of the Democratic Party are causing mayhem, as also state legislatures. Add protectionist policies on top and it is a dynamite cocktail.

On a related matter: the ministress of `health' asserted, smoking costs the `community' $20 billion' per annum, to Australians. Ministress, if one wishes to listen to cock and bull stories one would go to the local pub.And stop using those presumptuous socialisto expressions, `our health', `the nations health' - ditto `our children' , `Australian national character and spirit'.

But Steve Bracks and his gang of Maoists in Spring street, including the reverend Pike ,are set to do to Victoria what Cain and Kirner did in the eighties. One has a suggestion: instead forcing Victorians to pick up the tab of your spending spree,including windmills, fast trains, commonwealth games, and other good money after bad schemes,you and your party, and all those wombats who voted for you pack of communisto spivs, should pay it directly out of your own pockets.

As for you anti-smoking laws and other things, stub it up your cracks.

Posted by: d at September 3, 2003 at 11:08 AM

Analhog rooter. A quick look at the US Bureau of Labor statistics reveals the following: from Jan 2001 to present, 5,000,000 more Americans employed -- 2,000,000 more full-time, 1,750,000 40 hours+ but at two or more jobs; Jan 2001 emplyment 66.8% of available work force, last month 66.8%, average employed percent 1993-1997 66.5%, average employed 1997-2001 66.9%; Increase increase in non-institutional population (i.e neither incarcerated in a prison, mental institution, or other nor in the full-time military) 8,000,000.

So. 8,000,000 new people in the past 2.5 years enter the population, some 2.5M of which are under age 18 (many are, of course, babies) and 5,000,000 new employees. Total percentage of available labor employed roughly unchanged since around 1985.

Of course, we don't have as many textile or shoe-making jobs, but then the vacuum-tube making industry, the slide-rule industry and the buggy whip manufacturing have likewise been decimated (well, it's actually worse than that. they're essentially gone, not decimated). This says nothing about good union jobs making milk bottles, shoe horns, horse-shoes, or the entire tanning industry.

Obviously we're a lot worse off here in the states than we were back in, say, 1925. or 1935. Or 1945. Or 1965. Or 1975. Or 1985. Or, well, most of you get it.

In 1979 I can remember short-term loan rates for small businesses reaching 22.5% God, how we wish for the return of economic bigbrain Jimmah Carter.

If we didn't hire these people in India and China: 1) they would be dragging the world economy down; and/or 2) the jobs would just totally disappear. The point is, three kinds of jobs end up going to India and China: 1) the kind that will only exist with very low paid labor if they exist at all (China and some third world countries); 2) the kind that require labor that is in short supply in the US but not in India or China but that we don't wish to import bodies for (India, some help centers, backroom banking functions, etc); and 3) the kind which _could_ be done in the US but which get substantial cost/benefit profit breaks (some programming, for instance in India).

Maybe you should use Cuba as a better example. Everything is damn near perfect there, just ask Castro or any of those idiotarians from Hollywood who visit but don't stay. That's why Cuba has such strict immigration (oops, emigration) laws.

Oh, well.

Posted by: JorgXMcKie at September 3, 2003 at 11:25 AM

According to international/OECD stats, Americans are the most productive workers in the world. Our economy is the most vibrant and creative. With this innovation and productivity, however, comes dislocation and job loss. The creative destructionism, as Schumpeter called it, is most obvious here. Some folks are still hurting - but the hurt here is much smaller than out friends on the left characterize it (or wish it to be).

We're coming out of the Clinton recession and the hi-tech stock bubble burst and slowly building steam up again. We've got a $11 trillion economy that takes a while to pickup steam again. We suffered a nearly $1 trillion loss in the stock market following 9/11 but have recovered that.

We're doing fine. Sorry, lefties - we're here to stay. One million years from now, the principles and ideals of America will still be here, even if American itself is not.

Thanks for our Aussie friends for helping us through these tough times. Your losses and sacrifices are greatly appreciated.


Posted by: SteveMG at September 3, 2003 at 11:43 AM

I just want to say that I am stunned that Tim reads my stuff. Thanks for the link, good sir.

Now, about adding me to your blogroll . . .

Posted by: Pejman Yousefzadeh at September 3, 2003 at 12:11 PM

Hey D, spot on the money re Victoria. Last time the collective ran the state it became known as the Albania of the south. I thought that since the Soviet collapse that would no longer be an apt description. Then I checked out a current outline of Albania at Lonely Planet's web site:
"Crime is rampant, with armed gangs operating particularly . . . Armed robberies, assaults, mobster assassinations, bombings and carjackings have been reported, and street crime (particularly at night) is a problem across the country. Visitors should avoid all large public gatherings and street demonstrations. Driving in Albania is hazardous due to atrocious road conditions and the inexperience of local drivers.''
Yup, Albania of the South still applies.

Posted by: slatts at September 3, 2003 at 12:41 PM

Yesterday's Australian had an article by Alan Woods that covered similar doom and gloom:

This sort of cyclical economic analysis is fine as far as it goes. But even if we put aside doubts about how strong and persistent recovery in the US and world economy might be in 2004, there is still a medium-term issue hanging over this economy....

What has come to the fore now as the medium-term issue for policy is household balance sheets, with the rapid expansion of borrowing in the '90s...

Over the past year or two the bank has been increasingly concerned that more and more households are becoming financially vulnerable...

We might not know when it will happen, but sooner or later a recession is inevitable, and the impact on highly leveraged household balance sheets is likely to make it a lot worse than it otherwise would be...

This seems to cover the same sort of area as the ABC report you criticize: houshold debt is increasing, the outlook may not be as rosy as believed, if recession comes then households are going to be be hit harder.

Given that someone appearing on an ABC program casting warnings on the economy is sufficient to label the ABC as "anti-business", should we label The Australian as "anti-business", too?

Posted by: Geoff at September 3, 2003 at 01:24 PM

What a pity that Timmy doesn't know enough economics to actually tackle the argument that this person is making ... or even enough to recognise that it's a fairly common observation about the source of recent growth and the danger it poses (albeit expressed in unnecessarily emotive terms).

But it's so much easier just to divide the world into goodies and baddies and cheer and boo accordingly.

Posted by: Mork at September 3, 2003 at 03:10 PM

"America has been running a trade deficit for so long that it has ceased to be worthy of note. Yet the consistent inability of so many American companies in so many sectors to compete against their foreign rivals surely exposes faults in our approach to investment and productivity. From cars to aerospace, industrial gases to cell phones, American companies lag behind their European competitors in technology, production savvy and rate of innovation.

Ford and GM are a decade behind Volkswagen in the sophistication of their production techniques. Nokia has 39 percent of the world mobile phone market, more than twice that of Motorola, its nearest rival--despite Nokia's being based in the highly taxed, highly unionized, generous welfare state of Finland. Boeing's government subsidies through its military contracts, grants and tax breaks comfortably match the diminishing support proffered Europe's Airbus, but it is Airbus that is pioneering the next generation of civilian aircraft and whose market share is larger. British Rolls Royce is the trailblazer in aero-engines. And so on.

Beyond the sheltered world of America's defense industrial complex, where fat Pentagon contracts helped create outstanding technological leadership in weapons and the Internet, there is scarcely a high-tech sector where US companies can claim systematic leadership over their European competitors--a truth you would scarcely know from a casual inspection of the American business press.

America's once proud culture of business building has given way to a culture of financial engineering, a doctrine of shareholder value maximization and a cult of the takeover. The game is to keep the share price up, and every sinew of the organization is bent to that end; shortcuts are ever tempting, and inevitably some companies resort to straight fraud. Nevertheless, the conservative inclination is to overlook one or two bad apples like Enron and WorldCom and to celebrate the rule of America's capital markets. It is Wall Street constantly holding corporate managements to account that drives up innovation and productivity, or so runs the conventional argument, with companies that fail to keep up facing a takeover.

Yet the evidence is that takeovers fail to raise shareholder value; consultant KPMG reports in a survey of 700 takeovers that more than four out of five either added no value or lost it. Still, investment banks continue to seduce overpaid CEO after CEO into believing that his deal will be the exception. And with share options that will provide fortunes if the deal comes off and golden parachute clauses that will secure an equally good pay-off if it bombs, most CEOs fall prey to the seduction.

Despite a welcome wave of criticism of this febrile, amoral atmosphere, few took note in the heady days of the dot-com and telecom bubbles that this system was hollowing out the US economy. It is coming back to haunt the United States now.

American productivity measured as output for every person-hour worked is now lower than in France, the old West Germany, Belgium and Holland. Most other parts of Europe are catching up with the United States fast, a trend that began in the late 1960s and has been continuing ever since. Economist Julian Callow of Credit Suisse First Boston calculates that after adjusting for the very kind way American statisticians compute productivity compared with those in Europe, Europe's growth in productivity outstripped the United States during the 1990s.

This is the reality behind the ballooning current account deficit numbers. The US economy may boast an innovative IT sector and technological leadership in the military industry; beyond that, its claims for universal competitive strength are more and more dubious. Of course, America is home to some great companies, but not so many to justify the fawning acceptance that the American Business Model is better in every respect than the European one."

When was the last time you bought a product "Made In The USA"?

Having just seen "Finding Nemo" (which I throughly recommend, not least for the crabs as classic Aussie hoons), I reckon the US should give up on making things and focus on what it does best - intellectual property (films, software, music, games, TV, celebrity scandals etc) and which already accounts for around 50% of its exports.

Posted by: Elitism For The People at September 3, 2003 at 03:10 PM

I don't know, my last bottle of Jack Daniels probably came from New Zealand.

Posted by: pooh at September 3, 2003 at 03:53 PM

Geoff: re `highly leveraged households':

sensible house owners raise debt agianst their how to invest - but this is risk taking entrepeneur stuff.

Alp is running the losers' line: when about to retire, cash in super, pay of mortgage and live on good ol taxpayer provided pension.Crrrraaaaapppp.

There are a lot of businesses and investments which have been raised because, fortunately, there are still some Ozzies who don't live in wombat land; but this also illuminates why CGT is vile.You stump up you little all.

Now, if Ato doesn't get you first in on a range of `business taxes', states governbments will. Next, if you succeed, ATO man steps in and collects. For govt, inb other words, governments collect risk free capital gains and inccome streams(per revenues tacxes including, for the states, that great swindle, payroll tax).

Notice, commerce is physics in action. Probability, risk, is a reality. ATO man, collects until the day, if risk is realised you fail. ATO man is nonplussed because their are other realtaxpayer suckers kepping alive the blimp of bloated nanny state government and its army of mendicant peasants to hit for a fistful of moolah more.

Wood's piece on `highly leveraged households' is, in other words, meaningless.Since much of the leveraging is in the sort of stuff the spivs in Spring St. suck up and send down the toilet drain in shiploads. Oh, unions and IRC too, on the wage fixing scam and protctionism for the bruvvers.Simon Crean, don't forget was a big bruvver. Meanwhile, the little wendy birds greens and dems. vote on and on for any measure confiscatory.

Posted by: d at September 3, 2003 at 04:06 PM

Someone forgot to turn the d off again.

Posted by: Mork at September 3, 2003 at 04:37 PM

mork, you should take your own advice on economics.Consumers don't prop up capital, even by going in to debt over it. A simple one to answer, who pays the consumer ... and it aint bloody guvmnts.

What danger in real economic growth, as opposed to the snake oil of government spending.Sure, there are those who promote government as necessary grease, those who profit from it - and those profits are not long running and all who don't from it pay hell to prop up guvmnt and their armies of mendicants inlding those who are employed by guvnmts in the pursuit of their silly little careerahs.

When, Mork,guvnmnts muscle in, that is the time when others hunker down and not because investors in capital contract debt to finance assets.It is a bloody great distinction , Mork. Which is why Wood's is also wrong per generalisation as also the ABC and NYT. Put it this way Mork, follow ABC, NYT and Aust. rags and you will end up a tramp on the streets( just elect communistos like the spivs in Spring St. to make a thorough job of it all). Guess what, Mork,businesses in even boom land Oz are hunkering down, cleaning out scrub, tightening payrolls, writing off loss making assets, taking on new low cost capital.Oh, just to reinforce the point, it is why pricing of mining stocks look so good right now.

Posted by: d at September 3, 2003 at 05:58 PM

I'd love to follow my own advice on economics, d, but I'm not sure that I've given any.

What are you talking about?

Posted by: Mork at September 3, 2003 at 06:05 PM

What if d and Big Hawk had a child?

Posted by: Ferg at September 3, 2003 at 06:51 PM

Surely, Mork, you jest.Your'e comment 3.10 tells all.
Unless you mean `growth' is all due to guvment consumption.
Put it like this, Mork one does believe Austrlians could be very propserous indeed but: as things stand the punter of capital is genuinely heroic but then, unlike communardo governments and their armies of mendicant peasants, as in the U.S. also in Oz, there are still some left whose grip on the hard of facts of life persuade them, even mere surival doesn't come by adding to the tax and spend spree of communisotos. Why is there growth in Oz, then, becuase things are not so bad as in, say,France or Germany.
The communistos in each tier of government and their opponents in each tier, however, are doing their level best we remain a feudal economy and someday soon shall once again enjoy the thralls of depression.

All that I have said in posts above stand, Mork.You wish to rectify Mr. Blair, take a course of acid, followed by epsom salts and do some work your-self.

Posted by: d at September 3, 2003 at 06:55 PM


What is your cite for the productivity statistics?

As for production technology, while Volkswagen has improved, and may well be ahead of American production, one has to wonder where the broader EUropean car industry is, at the moment. It would certainly appear, based on cross-ownership and the like, that many of Europe's oldest marks are, in fact, subsidiaries of American companies (e.g., Saab and Volvo), or facing ever more intense competition from the likes of the US and Japan.

As for your complaints about M&As, that is quite cyclical. It is part of the ebb and flow between specialization and generalization---is a corporation better off it makes a range of things, or only one or two. Hardly the basis of a gloom-and-doom prospect, thankyouverymuch. After all, in the 1950s and 1960s, it was the conclusion of many of those same experts that companies that focused on only one area were missing out.

And as the Japanese have shown, INattention to the bottom line, share prices, etc. is not exactly a recipe for success, either. Indeed, many of your critiques sound remarkably similar to those made in the late 1980s and early 1990s about why the American model of capitalism was doomed to fall before the mighty titans of Nippon.

Posted by: Dean at September 4, 2003 at 02:28 AM

Behind what Elitism describes stand several things all due to goveerment.

The fed. has relied on inflation, via cutting interest rates, to fuel recovery, to the extent Greenspan has zippo left to cut.It is compounded problems of capital allocation andonly serves to fuel increasingly shorter run bursts of high stock prices.

Not only direct but also indirect regulation further distorts the entrepeneurial drive, reflected in , for example , inferior cars. It is staggering to realise the highly innovative and successful Asian auto makers adopted U.S. technology and design and production line and managment innovations: Honda is, it might be said,the textbook case study.Current tarriff protection of the U.S. steel industry has already generated nasty complications for buyers of steel products.

US court decisions which have made some companies and also small operations internal liable for other's mishaps.The Scam which is the Sherman ant-trust act which has nothing to do with breaking up government coercion of markets but can be used only to reak havoc on successful entrepunerial companies, Microsoft being an example.
Unreliable judiciary add to growing sovereign risk, EPA corruption of markets being a very good example.

In other words, the underlying problems are not because Americans have given up their entrepenurial drive, it is demmned governments placing tons of led weights upon it which is causing the damage.

France, Germany, Sweden, they are very large warning signs as to where confiscatory governments lead, misery.

Posted by: d at September 4, 2003 at 09:49 AM

I believe Skoda turns out a reasonable motor these days.

Posted by: pooh at September 4, 2003 at 10:31 AM

Hey, Analogue Voter -- any clues on how to link up with those thousands of Australian illegal immigrants here in France? I'm thinkiing of having my apartment cleaned.

Posted by: John Nowak at September 4, 2003 at 02:53 PM