I used to be a member of the World Future Society. One of the things I learned was that peering past tomorrow is not only difficult but was meant to be difficult. The greatest obstacle is our many unknown biases or prejudices, which keep us from being purely analytical. The most common bias is that of recency, i.e., whatever has been trending lately will continue to trend that way in the future.
Two new books reflect that bias. They are Niall Ferguson's The Great Degeneration and David Stockman's The Great Deformation. You can tell by their titles that they are grim prophecies. They are also both from the Austrian school of economics, often described as the Tough Love school as they insist on balanced budgets every year and minimal national debt. I believe in the Austrian economic philosophy as a starting point, until they become as strident as the Tea Party.
Certainly, history is littered with failed civilizations, and the "great American experiment" may yet fail. That's why it is essential to balance our reading with the latest study by the Boston Consulting Group. They recall how the U.S. became uncompetitive due to high labor costs. While those high labor costs created the great American middle class over the last century, the "hollowing-out" of that middle class over the last business cycle has made our labor costs competitive once again. Adjusted for productivity, our labor costs are now 18% cheaper than in Japan and 34% cheaper than in Germany. Instead of out-sourcing jobs, the U.S. is now re-sourcing jobs or bringing them back to America, because it makes business sense.
In addition to our improved labor costs, the U.S. is now a very low-cost provider of energy, thanks largely to the explosion in natural gas reserves. Natural gas has dropped in price by 50% in the U.S. Natural gas costs 2.6 times as much in Europe and 3.8 times as much in Japan. In other words, two of the primary cost drivers of business, i.e., the cost of labor and the cost of energy, have come down dramatically in the United States. Position those new advantages alongside our traditional advantages in technology, labor mobility and democratic institutions, it is not surprising that our exports of manufactured goods are rising rapidly.
Lastly, the growth in entitlements has been slowed, albeit not nearly enough. And, revenues have been increased, albeit not nearly enough. Still, there has been a change in degree or direction.
The recency bias in the books of Ferguson and Stockman blinded the authors to the benefits from hurting the middle class, from unbridled energy exploration, and from dumping fewer IOUs on our grandchildren. America is changing, and I think it is changing for the better, albeit slowly.
The 1913 class Pollyanna by Eleanor Parker told the story of a young girl named Pollyanna, who always maintained an optimistic viewpoint. It entered our lexicon that being a Pollyanna meant ignorance of bad news. Maybe, the Boston Consulting Group is being Pollyanna-ish. I think not. By the way, that book had a happy ending. So will the "great American experiment!"
Two new books reflect that bias. They are Niall Ferguson's The Great Degeneration and David Stockman's The Great Deformation. You can tell by their titles that they are grim prophecies. They are also both from the Austrian school of economics, often described as the Tough Love school as they insist on balanced budgets every year and minimal national debt. I believe in the Austrian economic philosophy as a starting point, until they become as strident as the Tea Party.
Certainly, history is littered with failed civilizations, and the "great American experiment" may yet fail. That's why it is essential to balance our reading with the latest study by the Boston Consulting Group. They recall how the U.S. became uncompetitive due to high labor costs. While those high labor costs created the great American middle class over the last century, the "hollowing-out" of that middle class over the last business cycle has made our labor costs competitive once again. Adjusted for productivity, our labor costs are now 18% cheaper than in Japan and 34% cheaper than in Germany. Instead of out-sourcing jobs, the U.S. is now re-sourcing jobs or bringing them back to America, because it makes business sense.
In addition to our improved labor costs, the U.S. is now a very low-cost provider of energy, thanks largely to the explosion in natural gas reserves. Natural gas has dropped in price by 50% in the U.S. Natural gas costs 2.6 times as much in Europe and 3.8 times as much in Japan. In other words, two of the primary cost drivers of business, i.e., the cost of labor and the cost of energy, have come down dramatically in the United States. Position those new advantages alongside our traditional advantages in technology, labor mobility and democratic institutions, it is not surprising that our exports of manufactured goods are rising rapidly.
Lastly, the growth in entitlements has been slowed, albeit not nearly enough. And, revenues have been increased, albeit not nearly enough. Still, there has been a change in degree or direction.
The recency bias in the books of Ferguson and Stockman blinded the authors to the benefits from hurting the middle class, from unbridled energy exploration, and from dumping fewer IOUs on our grandchildren. America is changing, and I think it is changing for the better, albeit slowly.
The 1913 class Pollyanna by Eleanor Parker told the story of a young girl named Pollyanna, who always maintained an optimistic viewpoint. It entered our lexicon that being a Pollyanna meant ignorance of bad news. Maybe, the Boston Consulting Group is being Pollyanna-ish. I think not. By the way, that book had a happy ending. So will the "great American experiment!"
