BLOG: What's wrong with the economy?

Tom Jackson
Nov 23, 2011

Why is the economy so bad?

I'm not referring just to the Great Recession, which has supposedly ended, but to a longer term trend. Why isn't the economy working well for people who aren't rich?

The usual answer from political discourse is that it's the fault of liberals, or the fault of conservatives. Politicians tend to stick to political talking points in giving the answer: It's the fault of free trade treaties, or it's the fault of too much taxation.

Two new books, written by economists for general audiences, attempt to go a little deeper and discuss structural reasons for the bad economy.

Tyler Cowen, who writes at the Marginal Revolution blog, is the author of The Great Stagnation: How America Ate All of the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better.

Cowen argues that from 1880 to 1940, there were a series of dramatic technological breakthroughs, including electricity, cars, electric lights, radio, airplanes, the telephone, the record player, and indoor plumbing. These inventions helped create many new industries. There hasn't been comparable innovation in recent years, Cowen says, although excitement over the Internet has tended to obscure that.

Cowen also argues that America no longer has free land to generate economic growth and that improvement in the public school system apparently ended in the 1960s.

Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy, by Erik Brynjolfsson and Andrew McFee, says that many workers have been thrown out of work because machines can do their jobs more cheaply. (A familiar example would be the way machines have replaced many bank tellers and people who run cash registers.)

This trend is accelerating as computers become exponentially more powerful and are able to take on many new tasks, the authors say.

Both books are $4 as electronic editions from Amazon.

Cowen discusses the two books here. A debate between the authors of the two books may be viewed here (about 35 minutes long).

 

Comments

Phil Packer

Who cares? The world is going to end in about 13 months anyway.

Free Speaker

Just one word "Democrats"

goofus

Actually both books make valid believable excuses. However I also believe businessmen are apprehensive about expansion with the future unknown liabilities they might incur from the agenda of Obozo!!

Captain Gutz

" Why isn't the economy working well for people who aren't rich?" 

It never does.

The New World Czar

Government doesn't create wealth, this current administration has done its best to create poverty.

What's wrong with the economy? A fiscal basket-case federal government and a president that is in way over his head (heck if the tingle isn't there for Chris Matthews). 

gene44870

Well I guess we dont have the brightest bulbs running this country , If you can see right through all the bull the Feds are tring to tell us , then we will never recover . PEOPLE WE ARE IN A DEPRESSION .NOT A RECESSION . Look all around you can look at the great depression of 1929 and you will see that not much is different .

If you want to get out of it , borrowing money you cant pay back and have the richest few keep there money safe in bank accounts , and in other saving ways and not put the money they have to reate full and long term work in the country we will never be able to get free of debt , and therefore will not end this DEPRESSION THAT WE ARE IN ..

Higher taxes is not going to be the answer to our problems , The more people that are born into this country that can not afford to go to collage and get degrees is only going to add to the problem . Cause lets face it money for collage has to come from somewhere not to mention the cost to live while you are in collage and when you get down with collage and the loans have to be payed back who is going to pay them back if you cant ? the feds , and the feds are you and me which just adds to the debt that is all ready out of this world .

We need tax payers who are going to pay taxes every year and till we get that , we will never get back to the way we were in years gone by .

coasterfan

Uh, Gene44870? It's spelled "college". All of you are ignoring a huge piece of history, assuming you actually care about the truth of why our country is mired in a recession. Luckily, you won't have to dig through your history books too far. Please rewind just a few short years to the previous presidency. You know, that Bush guy who deregulated the banks, which led to a huge economic crisis on a worldwide level including our own current recession? You guys must not keep up on current events; it was in all the papers. Anyway, from where I'm sitting, it's the GOP who are turning America into a Banana Republic...

The reality is, of course, that taxes are at the LOWEST level they have been in decades, yet the conservatives think the answer is to starve funding for our government when it's obvious that just the opposite is needed. Ask the people who were on the bridge that collapsed in Minneapolis if they think it's a good idea to not fund improvements to infrastructure. NO one likes to pay taxes. It's just that some of us realize that it's something we need to do, assuming we want to maintain some semblance of civilization and quality of life.

You're entitled to your own greed/selfishness, of course, As a Democrat, I see things differently. I hope to gawd our country doesn't give the GOP another shot in 2012, because they're still pushing the same harmful strategies that quite obviously didn't work in 2000-2008. As if voters don't have memories, the GOP is actually trying to sell the American people on the idea that somehow (magically) their ideas would work this time, if we just let them try again. You guys are hilarious...

gilamonster
Hey coaster, only a dem thinks Bush deregulated the banks. Your beloved Clinton administration deregulated the banks.   Your beloved dems supported Freddie and Fannie, they had $388 billion in high-risk mortgages. They directly enabled Wall Street to destroy our economy. Greenspan warned in 2005 that high-risk mortgages put the whole financial system at risk. Liberal dems thought it was a great idea for people to purchase homes that previously would not been able to.   Liberal democraps used social issues such as home ownership for all, at the same time privatized for profit; hell even Clinton almost admitted it. Who protected Fan and Fred, lets see Obama, Dodd, Clinton, Franks; they also received funds from them. When the crap hit the fan, they did what liberal dems do; blame someone else.
Phil Packer

Maybe he meant that people should make collages. It's fun to make collages from old magazines...

KnuckleDragger

I'm not rich, but God Bless his economy hasn't been bad at all for me.  Not only did I find a job with little problem but I also received a promotion that increased my salary significantly.  Instead of writing only about people who are down on their luck, why not write about people who are middle class that are doing well despite the economy.  Honestly, I think the constant reporting of bad news is why many people have given up hope.  These people need positive examples and not a constant beat down.

goofus

Here's one of the founders of Home Depot ruminating on my opinion that the only way out of this recession is to get rid of Obama and the libs.

http://nation.foxnews.com/ken-langone/2011/11/22/home-depot-co-founder-rebukes-obama-if-we-change-faces-white-house-we-are-road-recovery

OMG.LOL.WT_

 Who says the government doesn't create wealth?  I say it has created plenty of wealth for the wealthy with low taxes, subsidies, earmarks, etc., etc., ad nauseum!

ohioengineer

Why are people so upset with the rich?  We should both celebrate and thank our Founding Fathers that ordinary people can still make a lot of money in this country, despite the best efforts of our government to prevent it.  When people get rich they create jobs and opportunity for the rest of us.  I, for one, would not want to live in a nation where there were no rich people; they tried this a few decades ago and called it the Soviet Union.  (Oh, I am sorry, there were indeed rich people in the old USSR - they were called government officials.)  The European countries have also done away with rich people and we can see today where that has got them. 

The Big Dog's back

 Name 1 European country that doesn't have rich people.

Captain Gutz

 "Name 1 European country that doesn't have rich people."

 

Moldova

The Big Dog's back

 Wrong again putz.

"The Moldova economy's growth is around 7 per-cent, and has the third fastest growing economy of Europe."

Captain Gutz

My good friend Brutus,

You asked for the name of a european country that doesn't have rich people. I provided you with what you asked for.  As was pointed out to you, with a 7% growth rate and an inflation rate of 15%, along with the average monthly salary at only $243.00, you cannot find a rich person in Moldova. Wrong again.

Or maybe you're not wrong. Please provide me with the phone number of a rich Moldovan and I'll call them.

By the way, your keyboard is still broken. Your G key and your P key are still switched.

The Big Dog's back

 A student from Moldova has become one of the richest men in his homeland after inheriting almost a billion euros from a relative he barely knew. Sergey Sudev had not seen his uncle, who lived in Germany, for 10 years – so was shocked to find th

It was during their meeting a decade ago that the young Moldovan unwittingly sealed his 950 million euro windfall. Sergey made such an impression on his uncle that he decided to write him into the will. 

The student had no idea he was to become so wealthy and only found out when his uncle’s agents came to Moldova to tell him the good news.

He has rocketed up Moldova’s rich-list. He’s now not far behind Vladimir Balaeskul, who currently lives in Russia and is worth around $US 2.2 BLN.

Give him a call ppppppgutz.

pntbutterandjelly

"What's wrong with the economy?";

The simplest of all answers is, "A capitalistic system without ample and enforecable checks and balances."

Even simple games of entertainment have enforecable rules and regulations to keep both/all teams playing fairly and equally. The same, in therory, was also attempted to be established by our founding fathers with and for our free enterprise (capitalistic) democracy. However....the "deck" was and is stacked by those who control the creation of those rules and regulations. The most basic of human instincts (survival at all costs) has a greater tendency to surface than our desire to share with each other for the survival of the whole. This also happens even when those survival needs have been met and exceeded which then becomes a matter called greed.

That unsavory and even life threatning human instinct (greed of all types, degrees and forms) requires humanity to generate laws, rules and regulations to attempt to keep it in check. Those "rules", of course, include money and with money comes money distribution. Therefore (like it or not) even our democratic system has a large element of socialistic overtures within it's very foundations.

Now we Americans find those most elementary and negative survival instincts have thoroughly infested our governing bodies. In essence...the wealthiest, most powerful, most influential humans have, since Cain and Able, prostitued the "game". For them....there isn't anything "wrong" with the economy. It is how they intend it to be.

"A capitalistic system without ample or enforceable checks and balances."

(Please do not misundertstand...I AM for capitalism. In it's purest form it can be a wonderful, beautiful, self-gratifying and even life sustaining system. However...when the average non-weathly, non-powerful, non-influential individual has too much of their hard-earned incomes and futures literally stolen by those in control....we have a problem. The ONLY solution is to remove as much money and influence from the all-governing process as humanly possible. "That" begins with (a) publically funded campaigns with limits pre-established, (b) total elimination of all forms of lobbying and (c) extremely severe penalties for both of the above. Then, and ONLY then, can we, the average American, begin to feel the full and positive ramifications of a true democracy and well working capitalistic system.

I am thankful for many , many things this Thanksgiving.  However...I am not thankful for being cheated out of what I have worked so hard, so honestly and so long for by the few dishonest and greedy among us . "We" can, we must all do better for ourselves and for the good of the whole.

Happy Thanksgiving all

Captain Gutz

Dear large canine,

I attempted to contact Mr. Sudev but was unable to find him. I did have contact with the local government of his hometown of Komrat. I was informed that Mr. Sudev has left the country, leaving behind only poor people.

He is rumored to be in Miami Beach.



опять не маленький песик, кора кора !

OMG.LOL.WT_

 I have nothing against RICH people, IF they get it honestly without the aid of government subsidies, earmarks, Tax loopholes, and don't forget, insider trading like 60 Minutes exposed.  Not only USSR gov't officials but right here in USA.

gene44870

why people insist on calling this a recission and not a depression is beyond me . WE ARE IN A DEPRESSION , its not rocket science . Open your eyes people .This ccountry hasnt seen a good year sense President Clinton was in office and lets not forget all the good things he did while he was in for eight years .

He did something to boost this country and make a profit and it Bushes fault that we are in trouble . I am not going to debate this with you people cause most of you have your minds set to lay the blame on the other guy instead of looking around you with open eyes .

goofus

Clinton? Oh please, but yet he did coin the phrase regime change before bush.

In Clinton's 1998 State of the Union Address, he warned Congress of Iraqi dictator Saddam Hussein's possible pursuit of nuclear weapons:

Together we must also confront the new hazards of chemical and biological weapons, and the outlaw states, terrorists and organized criminals seeking to acquire them. Saddam Hussein has spent the better part of this decade, and much of his nation's wealth, not on providing for the Iraqi people, but on developing nuclear, chemical and biological weapons and the missiles to deliver them. The United Nations weapons inspectors have done a truly remarkable job, finding and destroying more of Iraq's arsenal than was destroyed during the entire gulf war. Now, Saddam Hussein wants to stop them from completing their mission. I know I speak for everyone in this chamber, Republicans and Democrats, when I say to Saddam Hussein, "You cannot defy the will of the world", and when I say to him, "You have used weapons of mass destruction before; we are determined to deny you the capacity to use them again.[107]  

To weaken Saddam Hussein's grip of power, Clinton signed H.R. 4655 into law on October 31, 1998, which instituted a policy of "regime change" against Iraq, though it explicitly stated it did not speak to the use of American military forces.[108] The administration then launched a four-day bombing campaign named Operation Desert Fox, lasting from December 16 to December 19, 1998. For the last two years of Clinton's presidency, U.S. aircraft routinely attacked hostile Iraqi anti-air installations inside the Iraqi no-fly zones.

goofus

Nice try Brutus but the growth rate was 5% in 2007 and PROJECTED to be 7%. Salon,Slate or Fire Dog Lake coaching you still!!!

goofus

Gee Brutus, a 7%growth rate with a 15% inflation rate really helps that 2,000 dollar a year median income!!!!

mikel

to many freeloaders??

eriemom

 goofus: Try to think about your country and not your politics when posting links like this. Do you honestly believe that holding the country hostage will benefit you? Look around. There is more at stake than your portflolio.

WilliamJackson

I am not agree with you Phil. This is absolutely incorrect news you got. May be Democracy is the one reason but I feel most of us are not paying the taxes on regular basis as gene44870 said. This can lead to the bad economy. And the when it becomes worst then it affects employment, health and education which are the necessity things today.


6079 Smith W

@ pntbutterandjelly:

Free market capitalism does contain its own checks and balances; it's called "failure."

Did TARP work; did the govt. takeover of GM, Chrysler, GMAC, Fannie Mae, Freddie Mac, et al work? Yes.

By using taxpayer funds to prop up business failure and gross bureaucratic incompetency, the political ruling class has made profit private and failure public.

The rule of law allows for an orderly dissolution of business - bankruptcy.

The failure of MF Global demonstrates that perhaps bankruptcy is back in vogue. (I hope to see Jon Corzine in a perp walk.)

As has been said: Capitalism without bankruptcy is like Christianity without Hell.

 

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