Why U.S. Business Is Winning

[Pangloss]

Fascinating editorial today by Washington Post columnist Sebastian Mallaby. Mallaby is not a conservative -- he spent 13 years writing for The Economist, a British paper that follows economic news and which has been a frequent critic of the Bush and Blair administrations (as Mallaby has been). This is a guy who writes books about apartheid and the World Bank, folks, not Rush Limbaugh and Christian evangelism. He knows his stuff. His editorials make frequent appearances on liberal as well as conservative blogs. And he has written editorials that are extremely critical of the Bush administration, such as this one, criticizing his economic policies. He's seen by most as an objective, fair-minded observer.

 

And yet here he is, saying that American business is at the top of its game. Gosh. Guess he can toss his invite to the next Nobel Peace Prize awards ceremony. And forget about that Pulitzer!

 

This page may be subscription-based, so I'll post a few good quotes along with my comments:

http://www.washingtonpost.com/wp-dyn/content/article/2006/03/26/AR2006032600878.html

 

The dawn of this heyday came in 1995. In the two preceding decades, the productivity of American workers had grown more slowly than that of Japanese and European competitors. But in the decade since 1995, U.S. labor productivity growth has outstripped foreign rivals'. Meanwhile U.S. firms' return on equity -- that is, the efficiency with which they manage the capital entrusted to them -- has pulled away from that of Japan, France and Germany, according to data provided by Standard & Poor's Compustat.

 

Other measures tell a similar story. Up until the 1990s, management books were crammed with Japanese buzzwords, and the early Clinton administration was in awe of Germany's apprenticeship system. But today the United States provides most of the business role models, from Starbucks to Procter & Gamble, from Apple to Cisco. The (British) Financial Times publishes an annual list of the world's most respected companies. In 2004 and again in 2005, no fewer than 12 of the top 15 slots were occupied by American firms.

 

Fascinating. The nightly news certainly seems to tell a different story, doesn't it? All I hear about is layoffs and losses and GM and Ford. As if the "Fortune 500" were actually the "Misfortunate 2"!

 

Mallaby goes on to talk about the reasons for this success:

 

Whence this American superiority? The first answer is that competition is fiercer. The United States has relatively few trade and regulatory barriers for firms to hide behind, so bad companies either shape up quickly or go bust. In retailing, for example, firms such as Wal-Mart and Target have been able to spread their super-efficient logistics systems all across the country -- at least until lately, when a perverse anti-Wal-Mart campaign has sprung up. In Europe and Japan, by contrast, a web of zoning laws entangles efficient retailers, sheltering unproductive companies that overcharge consumers.

 

Imagine that. We're actually doing something right. Go figure. And here I thought we were on the brink of decay and collapse!

 

A final thought:

 

All these forces come together to create an American moment. But you could be forgiven for missing this, because other forces spoil what ought to be a celebration. In the midst of this American moment, hatred of President Bush has simultaneously created an anti-American moment. And in the midst of American prosperity, rising inequality has prevented American workers from sharing in the success of American firms.

 

Darn tootin'. And see what I mean about balance? He's right on both of those counts, as far as I'm concerned, although I realize he doesn't make a case here for the last point (it's the last sentence in the piece).

[-Demosthenes-]

I think the US economy as a whole is in good shape because of the mind frame of the people. Just the right mix of ignorance and blind faith in just the right amount of people can do wonders for an economy. They say the economy is "all in your mind," a large part of it is, and it seems that the American people just always assume that we're doing okay overall and continue to buy, really, no matter what.

 

It sounds odd, but compared to other cultures, and ours in different time periods, it seems to fit. We still challenge authority, but oddly, ultimately we trust that the economy is doing fine and we will buy despite what "experts" might say in their crazy techno-babble.

[padren]

If we dropped the fat cat big government regulations even more, we could probably get all 15 top slots, if we just legalized crack, heroine and the like.

 

I am glad to see Clinton get some long overdue respect for his work in economics, especially coming out of the Reagan era, but can you argue that Walmart is an example of what is right with this country? Or that we measure our national health by whether we obsess over productivity more than every other nation, instead of our time with our families?

 

If the US moved from say, a 40 hour work week average to a 35, would be a bad sign or a good sign? Would it improve the average American's life, and that of their kids, or be a sign of a suffering GNP?

 

 

Also, can we really say there is an honest measure of business success in the US, when so many corporations get government money that comes from national debt loans out of Asia? If I get a massive debilitating loan I can probably pay my employees more than any other company in my industry.

 

I am glad it points out that much of US productivity is due to management processes, not just working more hours. I liked this section too:

 

The next explanation for American superiority is a healthy indifference to first sons. Bloom and Van Reenen report that the practice of handing a family firm down from father to oldest son is five times more common in France and Britain than in the United States. Not surprisingly, this anti-meritocratic practice does not always produce good managers. So even though the best European companies are managed roughly as well as the best American ones, there's a fat tail of second-rate firms in Europe that's absent in the United States.

 

...

The best guess about the "X factor" is that America's business culture is peculiarly well-suited to contemporary challenges. American business is not especially good at coaxing productivity out of factory workers: The era when this was all-important was the heyday of Germany and Japan. But American business excels at managing service workers and knowledge workers: at equipping these people with technology, empowering them with the right level of independence and paying for performance. So the era of decentralized "network" businesses is the American era.

 

All in all, I am glad to see articles that point out the pro end of US business, when there are enough bad ones too, so I am glad you pointed it out. It still deserves to be picked at and critizied as much as any anti-business article of course.

[Pangloss]

Oh yeah, for sure. (grin) Good points.

[ecoli]

Why are american business doing so well?? Probably because they're leaving America. Outsourcing to places with cheap labor and no taxes, businesses are pulling in more profits... I don't see how that's helping our economy.

[Pangloss]

Well for one thing it helps our economy by keeping those pension funds liquid so the government doesn't have to send me a massive bill to pay those retirees at a fraction of what they're actually owed. That alone makes outsourcing worth it in a virtually-fully-employed economy.

 

Another factor is something ABC News the other day called "insourcing", which is that a growing sector of the American labor force is now employed by foreign companies who are localizing their businesses in the US, either to hit our markets or to take advantage of our tax situation. These aren't cheap jobs, either -- beats workin' at WalMart.

 

Frankly the whole outsourcing deal is a red herring and a meaningless buzzword for the far left. Historians are going to write about the whole "outsourcing scare" from the perspective of how we ran around and tore out our hair about it, but in the end it made little difference except to keep American businesses competitive.

[Jim]

Another factor is something ABC News the other day called "insourcing"' date=' which is that a growing sector of the American labor force is now employed by foreign companies who are localizing their businesses in the US, either to hit our markets or to take advantage of our tax situation. These aren't cheap jobs, either -- beats workin' at WalMart. [/quote']

 

Kind of what the ports deal was going to bringl...

 

Another hugely positive bit of economic news is labor productivity:

 

The U.S. economy has undergone a remarkable resurgence since the mid-1990s with accelerating growth in output, labour productivity, and total factor productivity. Jorgenson (2002) has shown that information technology has been an important driving force in the revival of the American economy.

 

Economists don't often agree but they are virtually unanimous that rising productivity is a win/win situation which lowers inflation to allow for the creation of more jobs. They also agree that restricting trade is destructive.

 

Frankly the whole outsourcing deal is a red herring and a meaningless buzzword for the far left. Historians are going to write about the whole "outsourcing scare" from the perspective of how we ran around and tore out our hair about it, but in the end it made little difference except to keep American businesses competitive.

 

Meaningless and destructive.

[Skye]

As far as I know outsourcing is a term used by business, or simply the hipper sourcing.

[pink_trike]

Glad to hear U.S. business is doing so well. I guess this means that it won't be so resistent to minimum wage increase, comprehensive health care benefits and enforced worker safety standards? Do you suppose that maybe they'll open the tap a little more on the trickle-down faucet? I only ask because I noticed that the poverty rate keeps increasing, and the number of people that can afford to purchase a home keeps declining.

[Severian]

Imagine that. We're actually doing something right. Go figure. And here I thought we were on the brink of decay and collapse!

 

Who is this 'we' you keep talking about?

[gcol]

Who is this 'we' you keep talking about?

 

Is he not voicing the opinions of the South Floridians, whoever and wherever they are? It is just their point of view.

[Pangloss]

I only ask because I noticed that the poverty rate keeps increasing, and the number of people that can afford to purchase a home keeps declining.

 

And yet new home starts are UP over the last few years -- more people buying homes than ever before. As for the so-called "poverty-rate", you're talking about a group of people that typically owns two cars, owns their home, has a DVD player and a TV, has a computer, has a job and has access to health care. That's not what I call "poverty", but that's what the US Census Bureau and the mainstream media calls poverty.

 

Since the 1960s we've spent $6.6 trillion on the "war on poverty". Ignore them? We've done anything but.

[Pangloss]

Is he not voicing the opinions of the South Floridians, whoever and wherever they are? It is just their point of view.

 

I don't understand. When have I ever claimed to speak for South Floridians?

[gcol]

Just a leg-pull, in the same vein as Severian's question.

[Pangloss]

Ow. =P

[Jim]

Glad to hear U.S. business is doing so well. I guess this means that it won't be so resistent to minimum wage increase, comprehensive health care benefits and enforced worker safety standards? Do you suppose that maybe they'll open the tap a little more on the trickle-down faucet? I only ask because I noticed that the poverty rate keeps increasing, and the number of people that can afford to purchase a home keeps declining.

 

 

Hmmm... how about $20/hour? That will help our outsourcing problem for sure.

[cosine]

And yet new home starts are UP over the last few years -- more people buying homes than ever before. As for the so-called "poverty-rate"' date=' you're talking about a group of people that typically owns two cars, owns their home, has a DVD player and a TV, has a computer, has a job and has access to health care. That's not what I call "poverty", but that's what the US Census Bureau and the mainstream media calls poverty.

 

Since the 1960s we've spent $6.6 [i']trillion[/i] on the "war on poverty". Ignore them? We've done anything but.

Where does 6.6 trillion USD number come from?

 

Here is what we say people need to live:

5.15 an hour

40 hours a week

52 weeks a year

5.15 x 40 x 52 = 10712/yr

 

Please explain how 2 cars + house + DVD player + TV + computer = 10712/yr

[Pangloss]

Where does 6.6 trillion USD number come from?

 

If you find out let me know. Near as I could tell, George Will got a calculator and a list of budgets and added it up himself.

 

http://www.google.com/search?hl=en&q=%22%246.6+trillion%22+poverty

 

Here is what we say people need to live:

5.15 an hour

40 hours a week

52 weeks a year

5.15 x 40 x 52 = 10712/yr

 

Please explain how 2 cars + house + DVD player + TV + computer = 10712/yr

 

Well things accumulate over time -- you don't have to buy each of those items each year, and nobody said they were NEW cars, DVD players or computers -- but really you're asking the wrong question. The Census Bureau actually asked these people what they own, and that's what they were told. So we already know that they have these things.

 

So the right question is, assuming they weren't lying (and presumably a percentage were verified, because that's standard CB procedure), or do they in fact have other sources of income, plus, perhaps, significant credit card debt?

 

Put another way, do we actually have a poverty problem in this country at all? Or is it more accurate to say we have a lot of people who aren't keeping up with the Joneses, and we CALL it a "poverty problem"?

 

I don't know the answer to that question, but here's my real point, which is the same point I made when we discussed this before: You don't know either. We know exactly how many people own 2 cars, a home, a computer, a DVD player, have a job and health care. We have NO idea how many people own none of those things and are absolutely destitute. We don't collect that information!

 

So really what it all boils down to is that we're losing a lot of sleep over something we really have no idea if even exists.

[pink_trike]

Put another way, do we actually have a poverty problem in this country at all? .

 

Wow. You and I live in parallel universes. I'd love to take you on a tour of the United States I live in.

[JohnB]

We have NO idea how many people own none of those things and are absolutely destitute. We don't collect that information!

 

So really what it all boils down to is that we're losing a lot of sleep over something we really have no idea if even exists.

Unless you think that the US is somehow different from the rest of the planet, then you do have a problem.

 

Is it possible that you don't collect the data because you don't want to know exactly how bad the problem is?

[Phi for All]

Wow. You and I live in parallel universes. I'd love to take you on a tour of the United States I live in.

Pangloss is not saying we don't have a poverty problem, he's questioning whether it's what the CB and the media say it is.

 

If the media is guilty of being liberal, it's due to keying on those who are down and out, the so called "bleeding heart" response. Claiming people are living in poverty makes for great news. People have always been drawn to negative stories, partly because it helps reaffirm that, as bad as it is at least we aren't doing as bad as THOSE people.

 

There are people living in poverty in this country, no doubt about it. The media and the politicians highlight the ones that give them the most coverage without turning too many people off. They point to New Orleans, which was only flooded, as the result of hurricane Katrina but forget about Biloxi, Mississippi, which was hit by a forty-foot wall of water, absolutely destroying 5000 homes. What the media and the politicians address is usually convenient for them, not necessarily what needs to be addressed.

 

I think minimum wage needs to be increased to keep pace with the economy, but not so dramatically that it forces employers to look for alternatives. It's unfortunate, but raising wages doesn't insure that the money will be well spent. I'd much rather see employers being required to offer health insurance or learning benefits. Daycare funds would help the poverty problem more than cash handouts.

Is it possible that you don't collect the data because you don't want to know exactly how bad the problem is?

What good are statistics if you can't use them to cover up your worst secrets?

[Pangloss]

Exactly. We may indeed have a poverty problem, and if we do I want it solved -- I'm not hard-line right-winger, telling people to fix it on their own. I'm a moderate conservative who wants public money spent on strong safety nets and public outreach programs to help people help themselves.

 

What I'm not okay with are politically-correct assumptions and guesswork guiding the spending of trillions of my hard-earned dollars.

 

(Yeah I'm a trillionaire. Or maybe just a poor gramatician.) (grin)

[Pangloss]

There are people living in poverty in this country' date=' no doubt about it. The media and the politicians highlight the ones that give them the most coverage without turning too many people off. They point to New Orleans, which was only flooded, as the result of hurricane Katrina but forget about Biloxi, Mississippi, which was hit by a forty-foot wall of water, absolutely destroying 5000 homes. What the media and the politicians address is usually convenient for them, not necessarily what needs to be addressed.

[/quote']

 

Well... I might go along with the first sentence, just not your example. The MSM's use of the Straw Man has certainly shown us individual cases of poverty. I'm just not sure any of the Katrina coverage is an example of that. I saw a lot of people displace from their homes, but the key word there would be homes. Homes they owned. They weren't living in squalorous poverty. They may (or may not) be NOW, but they weren't then.

 

The only example of true destitution in America that I've seen reported in the MSM is the situation with "the homeless". Statistics on this are questionable, but some do exist and some seem almost scientific. I don't have a problem with some amount of money being spent based on some of the less-questionable statistics in that area.

 

One point here that I forgot to make above is that our notion of poverty is actually pretty darn hypocritical. Aside from the homeless, what we call "poverty" is something that millions, perhaps billions of people would call "unimaginable wealth". If there are large numbers of Americans living in the kind of conditions typical Haitians live in, for example, I've not seen any evidence of it.

 

What I have seen is plenty of evidence of millions of Americans who are upset because they can't buy a BMW or live in the "right" neighborhood. And those people basically overshadow the thousands of Americans (who may or may not exist) who really DO live in abject destitution (i.e. the homeless).

 

Why, I don't know, but that's how it seems to me. We're really good at beating ourselves up. Figuring out real problems? Not so much.

[pcs]

Exactly. We may indeed have a poverty problem, and if we do I want it solved -- I'm not hard-line right-winger, telling people to fix it on their own. I'm a moderate conservative who wants public money spent on strong safety nets and public outreach programs to help people help themselves.

 

Then surely you must be able to point to a body of knowledge supporting this general principle of social safety net success. Otherwise, I don't know what about your point of view warrants the label "conservative."

[Jim]

Wow. You and I live in parallel universes. I'd love to take you on a tour of the United States I live in.

 

Here are the poverty thresholds used by the Census Bureau for 2004: http://www.census.gov/hhes/www/poverty/threshld/thresh04.html .

 

It's not to hard to see how anyone with kids earning no more than minimum wage would be in "poverty." This seems to circle back to the minimum wage issue. The concern, of course, is that on a global scale unskilled American labor is overpaid currently, hence the outsourcing.