JOHN CHUCKMAN COMMENT: MORE ON OBAMA’S SAD WORDS – CLIVE CROOK RIGHTLY SAYS THE ECONOMY ISN’T A MOON RACE – THOUGHTS ON PRODUCTIVITY AND COMPETITION   Leave a comment


 

JOHN CHUCKMAN

POSTED RESPONSES TO A COLUMN BY CLIVE CROOK IN THE FINANCIAL TIMES

Well said, Mr. Crook.

And I think this points to an underlying truth about the government of America.

If a man as intelligent, optimistic, and hard-working as Obama can get things so wrong, who possibly can get them right?

He is being torn apart in the world’s mightiest, most unforgiving force-field,a set of demands from scores of directions, many or most irrational and unforgiving.

America’s national politics have many similarities to being caught in the gravitational pull of a black hole.

The force cannot be resisted, and there is only one possible end to the event: the object caught will be reduced to its constituent atomic particles.
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From another reader:

‘Another question: Is not “productivity” even more of an empty mantra than “competitiveness”?’

Empty mantra?

Productivity is a real and measurable quantity.

Unfortunately, in the popular mind, higher productivity means just something like just working harder, but that is not at all the case.

Take the example of two small farmers, one still using a hoe and spade and the other using a new small tractor.

No matter how hard the farmer with the hoe works, he can barely compete with the farmer who has a tractor. Indeed, the tractor makes such increases in productivity that its owner will be ready to buy more land since his tractor enables him to work more without a huge increase in time and other inputs. Or he may choose to do still other work with his tractor in his time freed up.

Productivity is the ratio of the amount of output (the product) to the amount of an input – often called a factor of production, as capital or labor, but most often measured in terms of labor. The ratio may be in terms of hours or dollars or still other measures.

It is possible to substitute up to a point more labor for capital goods like tractors if you have an economy with huge surpluses of underemployed labor, as has been the case of China or India, since hiring from this pool of labor does not raise costs.

Competitiveness is a nation’s (or a company’s, within a nation) ability to produce goods and services at lower cost, so long as that cost has adequate returns to the factors used in producing it.

The adequacy of the returns to factors of course varies from country to country and industry to industry: we know interest rates, the price of capital, and wages, the price of labor, vary.

The United States remains competitive in areas of high-technology and advanced services, but in all traditional industries it is pretty well uncompetitive.

Its car industry, for example, is just holding on through various artificial barriers and helps. Within a few years, China is going to come crashing into North America with quality products at lower cost.

We have already seen the results in recent decades: American real wages have dropped for decades.

But even in areas of high-technology and advanced services, countries like China and India are catching up. They invest in education and technology, and they appear to have natural intellectual gifts making them very comfortable with computers and engineering.

China today produces the world’s fastest super-computer and is entering areas like high-speed trains or advanced aeronautical products. India, with its language gift from the British Empire, is busy in areas like finance and banking and on-line computer services.

The world does not sit still. The rate of change in technology, which over the long term, drives economic growth, is on a steep rising curve, which means the rates of change we see will only continue to come faster and with greater impacts. America in no way possesses a unique grasp of technology or of the ability to adapt to its changes.

Indeed, it could well be argued that the ancient adaptations Asian people have made to group cooperation and civility are superior qualities for a rapidly changing world. Just so, their clear superior average endowment in mathematical ability – measured on many international tests – gives them a powerful underlying advantage.

America’s postwar period of easy superiority, a time when all serious competitors were prostrate, is now over – that is, the so-called American Dream, that glib, largely meaningless political slogan, is dead.

On top of those realities, America has so over-extended itself with debt and waste on war in every direction, there is a huge price to be paid before an equilibrium can be reached to even start new competitive efforts. Obama and other American leaders are not willing to say any of this.

It’s just more of the same-old, same-old blubbering and slogans, whether from Obama or the Tea Party.

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