*Sigh* More Bad Macroeconomic News

From Ralph Atkins of the FT:

FT.com / World - Confidence dives in Europe's economy: "Gloom about Europe's economic outlook intensified markedly on Thursday after a plunge in economic confidence across the continent and further rises in French and German unemployment.

Economic sentiment in the 12-country eurozone and the UK fell to the lowest levels since December 2003, according to the European Commission. Economists fear that eurozone economic growth will slow in months ahead, despite a bounce back at the beginning of 2005after a weak second half of 2004.

The eurozone ‘is experiencing a faltering recovery . . . after almost a half-decade of achievement,’ the Euro-frame group of leading research institutes said yesterday. In forecasts in line with those to be published by the Commission next week, Euroframe expected eurozone growth of just 1.5 per cent this year, after 1.8 per cent in 2004. However, 2006 would see 2 per cent growth.

The latest data, which reflect the impact of higher oil prices and a stronger euro, may force the European Central Bank to revise its view that last year's soft patch was ‘transitory’. However, Lucas Papademos, ECB vice-president, told an Italian newspaper that he expected ‘the economic recovery in the eurozone will pick up momentum over the course of 2005’.

The French and German governments, meanwhile, face increasing political pressures caused by high unemployment. Patrick Devedjian, French industry minister, described as ‘very bad’ figures showing the country's jobless rate at a five-year high of 10.1 per cent in February.

‘France is struggling with the cost of reforms that went in the wrong direction the 35-hour week, for instance,’ said Klaus Eklund, economist at SEB Bank in Stockholm and adviser to José Manuel Barroso, the European Commission president. ‘Germany seems to have gone through that stage, the crisis-consciousness is higher.’

German unemployment, nevertheless, rose in March by a seasonally adjusted 92,000 to almost 5m, or 12 per cent of the workforce although the Federal Labour Agency said 20,000 jobless were due to statistical changes while unusually cold weather was responsible for another 50,000.

‘The accuracy of these estimates is not necessarily high,’ said Dirk Schumacher, economist at Goldman Sachs. ‘What is true, though, is that information from business surveys is consistent with a stagnation or mild deterioration of the labour market.’

Earlier this week, Gerhard Schröder, chancellor, highlighted Berlin's nervousness by demanding a stop to the ‘endless talk’ about German companies shifting jobs overseas.

The Commission's survey showed confidence declining in industrial, services and retailing sectors. EU consumers were more worried about unemployment than at any time since last June.

The overall ‘economic sentiment’ indices for the eurozone, and the entire EU peaked last October, with the latest results showing particularly steep declines in the UK and Poland, as well as in Germany, France, and to a lesser extent Italy.

Comments

[jm]

Since the hypermercantilists in Japan and China refuse to let exchange rates adjust and bring their trade into balance, all the currency adjustment pressure has gone onto the Euro. Not having a central bank like the Fed willing to flood the world with liquidity and debase their currency, the Europeans naturally are suffering.

[Andrew Boucher]

You can look at in the other direction, however. For many years the Europeans had a cheap (debased) currency and so were able to export. But they didn't take the opportunity presented to correct their structural problems; instead some took the opportunity to just make them worse.

They are now complaining, in the same breath and with a straight face, about the cheap U.S. dollar and high oil prices - even though the cheap dollar is softening the spike in oil. Also, a lot of the money generated by more expensive oil is being recycled back to Europe, via the consumption by the oil states of luxury goods and European vacations and/or primary and secondary residences. (Look at the number of Russians who now own homes on the Cote d'Azur or in Courchevel.)

The Europeans complained that the U.S. wasn't helping them when the euro was weak, and they complain that the U.S. isn't helping them when the euro is strong. It's one thing they sure do well - complain.

[A. Zarkov]

Could high unemployment and the sluggish economy in the EU have something to do with high taxes and a bloated public sector?

[Julian Elson]

Structurally, yes. Cyclically, I don't see why.

[Colin Danby]

Has anyone done a careful study and decomposition of these unemployment rates in Germany and France? I can see the theory of why taxes and so forth might have an effect, part of the German difficulty is presumably still the East, and I thought the French 35-hour week was idiotic when it was introduced. But 12% and 10% still means an awful lot of talented people sitting on the sidelines, especially given "almost a half-decade of achievement" in Euroland and the added benefits of easier worker mobility within the EU.

[b]

Germany is still paying a HUGE amount for consolidating east Germany. Without the high unemployment there, the numbers would tolerable.

Also the unemployment statistics in Germany include everyone who could possibly work. If the US statistics would use the same standard they would probably point more to a double digit number than a single digit number.

If the US would somehow "aquire" Mexico as a 51st state, how would the numbers look there?

[anne]

http://www.nytimes.com/2005/04/03/business/yourmoney/03view.html

Do Taxes Thwart Growth? Prove It
By ANNA BERNASEK

TAX reform, like a second marriage, is the triumph of hope over experience. The United States has just gone through the most sweeping tax cuts since the 1980's, but hardly anybody is satisfied. President Bush contends that we need still-lower taxes in order to prosper. Alan Greenspan, the Federal Reserve chairman, is suggesting a radical shift to a consumption tax. And the Republican Party has taken aim at the entire tax system.

At the heart of such antitax sentiment is this belief: Taxes are bad for the economy. And who would disagree, especially as April 15 nears?

There's just one problem, though. Despite the widespread notion that taxes harm the economy, no one has actually been able to back that up. It's not that taxes have no effect; they are a major part of the American economic system and affect planning and behavior in many ways. Taxes influence who wins and who loses in a competitive society. But over all, there is surprisingly little evidence that tax rates are an important factor in determining the nation's economic prosperity.

In theory, the issue seems simple enough. According to basic economic principles, a tax can have a negative effect on behavior by reducing the incentive to do whatever is taxed. Impose a tax on wages, and people may decide to work less.

That's the theory, anyway. In practice, how many Americans will work less if their taxes rise? ...

[Jennifer]

There is no reason ever to be rude and mean on this wonderful Blog.

[anne]

Employment level differences between Germany and France and Sweden and England, and several other European economies, need to be considered more fully. There are seemingly puzzles here that defy a simple generalization. Still, I have wondered for some time why the Euro countries have not left a mandate for the central bank that asks a balancing of price stability and economic growth. I wonder whether monetary policy should have been more stimulative for some time for the Euro countries.

[anne]

http://www.nytimes.com/2005/04/03/international/asia/03china.html?pagewanted=all&position=

Help Wanted: China Finds Itself With a Labor Shortage
By JIM YARDLEY and DAVID BARBOZA

NINGXIANG, China - The pipeline that pours young, eager workers into China's manufacturing juggernaut begins in the country's interior at vocational schools like Hunan Top Software.

So it is here in Ningxiang, a 10-hour drive from the factories on the southern coast, that clues can be found to a problem once thought inconceivable: The world's most populous nation, which has powered its stunning economic rise with a cheap and supposedly bottomless pool of migrant labor, is experiencing shortages of about two million workers in Guangdong and Fujian, the two provinces at the heart of China's export-driven economy.

For Wu Dongshan, the job placement coordinator at Hunan Top, the most obvious sign of change is that factory recruiters now come to him, a reversal from three years ago, when he would make the long drive to Guangdong with busloads of students desperate for work.

'We were begging the factories to hire our students,' Mr. Wu said. 'We had too many students and not enough jobs.'

No one thinks China is running out of workers. But young migrant workers coveted by factories are gaining bargaining power and many are choosing to leave the low pay and often miserable conditions in Guangdong. In a nondemocratic China, it is the equivalent of 'voting with their feet.' ...

[johnnyds]

How much "more bad" news do we need to get markets here roiled? Perhaps it's all factored in into the latest military budget increase (http://www.warresisters.org/piechart.htm).

On Europe, see Peter Hall's Varieties of Capitalism.

[Tom Marney]

Probably for the same reason we're ruled by our own idiots: the power of mythology.

[standa]

Help Wanted: China Finds Itself With a Labor Shortage

http://www.nytimes.com/2005/04/03/international/asia/03china.html

Perhaps a parallel to what America was in the 1950's and 1960's. India is analogous. Then you have Eastern Europe and so on.

The greatest decades for middle class America were the 50's, 60's 70's. Reagan in the 80's ( although prosperous for many ) was the beginning of the end.

Middle Class America is in decline but most Americans don't know it yet.

Stay tuned...

America's economy is heading towards 90% services and with our $600B/yr trade deficit and $500B/yr budget deficit how much longer can the Bush admin idiots mask this ruse.

Inflation heading North
Credit Cards Rates heading North
Real Estate heading South
Stock market - caveat emptor where Bush wants to sell Americans a SS package for investing for your retirement ???

It's just a matter of time ( IMO within 2 yrs ) before the standard of living for many middle class Americans is negatively impacted.

And you can thank George W. Bush and his fiscal irresponsibility with perpetural war and tax cuts for the rich and corporate America.

[matt]

"In practice, how many Americans will work less if their taxes rise?"

anne, we just might get an answer to this as the AMT kicks in and starts to affect greater numbers of people. Given the fact that many households are now two-earner units who are struggling under huge levels of debt and who have now had the bankruptcy relief option removed from any equation of relief, there will be large numbers of people in this country who will have no choice but to work, no matter at what level they are taxed.

This, of course, is the plan. Remove any relief from workers, make health care unaffordable unless bought as part of a group, make Medicaid and Medicare increasingly expensive, gut social Security at some point, and continue with the ridiculous system of vesting in private pensions, thereby prohibiting workers from carrying their pensions when they change jobs, and we have the GOP old age retirement plan. Let them work until they die at meaningless, low wage jobs while all taxes are removed from dividend income, the estate tax repeal becomes permanent, and the capital gains tax becomes almost non-existent.

Then implement a wonderfully regressive consumption tax.

Sounds like a plan to me.

Barney Frank was right, these are Addams Family values.

[anne]

The Alternative Minimum Tax will increasingly and rapidly effect middle income households. The tax has to be set aside, but the guess is that it will be set aside year to year and late in the budget process. As long as the tax is only set aside a year at a time, it is added to projected revenue and makes the budget deficit seem less than it will be.

[anne]

Brad Setser has remarked several times these last months that this year investment income coming to America from abroad will be less than we are paying abroad. The cumulative borrowing of America will effectively finally leave us an investment income debt. So, from here, we can look forward to increasingly negative income flows abroad as we continue to save little and borrow much. We do have a serious saving problem.

[wkwillis]

America is a democracy. Eventually you piss enough people off and they change the rules back. We've been diverting income from income percentiles 5 to 20 in favor of percentiles 80 to 100, and are now diverting income from percentiles 20 to 80 as well in favor of 95 to 100. Popular support is dropping.
We can always change the rules back. Plan for that in your investments.

[MrM]

I wonder if there is a silver lining in economic problems in Europe as they might increase probability of the soft readjustment of the US CA deficit:

- Foreign CB will have less incetives to shift their currency reserves from USD to Euro
- Asian CB will be even more worried about the well-being of the US economy as the main engine for their economic growth and therefore will continue aggresively buying US debt

Both of these trends will be pushing US interest rates down and the USD exchange rate up, thus providing support for soft landing for the US CA deficit.

So maybe, from the selfish US perspective, it is a welcome news?

[anne]

http://www.nytimes.com/2005/04/03/magazine/03DOMINANCE.html?pagewanted=all&position=

It's a Flat World, After All
By THOMAS L. FRIEDMAN

In 1492 Christopher Columbus set sail for India, going west. He had the Nina, the Pinta and the Santa Maria. He never did find India, but he called the people he met ''Indians'' and came home and reported to his king and queen: ''The world is round.'' I set off for India 512 years later. I knew just which direction I was going. I went east. I had Lufthansa business class, and I came home and reported only to my wife and only in a whisper: ''The world is flat.''

And therein lies a tale of technology and geoeconomics that is fundamentally reshaping our lives -- much, much more quickly than many people realize. It all happened while we were sleeping, or rather while we were focused on 9/11, the dot-com bust and Enron -- which even prompted some to wonder whether globalization was over. Actually, just the opposite was true, which is why it's time to wake up and prepare ourselves for this flat world, because others already are, and there is no time to waste.

I wish I could say I saw it all coming. Alas, I encountered the flattening of the world quite by accident. It was in late February of last year, and I was visiting the Indian high-tech capital, Bangalore, working on a documentary for the Discovery Times channel about outsourcing. In short order, I interviewed Indian entrepreneurs who wanted to prepare my taxes from Bangalore, read my X-rays from Bangalore, trace my lost luggage from Bangalore and write my new software from Bangalore....

[anne]

http://www.nytimes.com/2005/04/03/international/asia/03china.html?pagewanted=all&position=

The article on a labor shortage in China strikes me as especially interesting. There is a sense in the midst of limited job creation that work is intrinsically limited, but it is economic policy of short and long term consequences that should allow for an ever expanding job market. Then, are we stimulating job creation properly and preparing a well educated imaginative work force with policy?

[Tom Marney]

So, does a prospective labor shortage in China make it more likely or less that the yuan-dollar peg will hold?

[Julian Elson]

I would THINK that it would make it less likely to hold.

A labor shortage, if it leads to inflation, means that the Chinese Central Bank would want to raise interest rates, which would make the Yuan rise, or at least rise without even more massive intervention.

[anne]

Interesting question. If China's leaders are comfortable that consumer demand will easily build, I would guess the peg will be more readily adjusted. But, China is using credit controls rather than interest rates changes to limit inflation. There has been a single interest rate rise, really as a signal of intent not policy as such. China is not likely to use monetary policy as we know it for some time. Interesting.

[anne]

An interesting passage:

http://www.nytimes.com/2005/04/03/magazine/03EAT.html?pagewanted=all&position=

Eat, Memory: Our Lady of Lawson
By PICO IYER

...

The Japanese are so good at keeping up appearances that few signs are ever evident of the series of recent recessions. But over the years, I have seen poor Mrs. Hirata's husband (the store's manager) open his doors around the clock and take the graveyard shift himself. The place started to stock tequila-sunrise cocktails in a can, and little bottles of wine. Soon even the Hiratas' two high-school-age sons were being pressed into service (unpaid, I'm sure).

[anne]

What has happened to Japan? How has economic growth been so poor for so long given the education and technical proficiency and innovation that is Japan? What has happened?

[Tom Marney]

Too much capital, not enough immigrants?

[wkwillis]

Too much transfer of wealth by zoning. If you own a farm and try to turn it into housing they tax you at very high rates. You weren't allowed to build housing without political connections, and so the savings of the country were used to pay for a consumption boom by politically connected elites and to retain people in the countryside in agricultural idleness to justify the gerrymandered voting system. It worked as you would expect.
They ate their children and turned their countryside into concrete. Like we did, but much worse because their country is so small.

[Tom Marney]

Are you sure? Consumption boom or no, Japan still has plenty of capital and all the symptoms of endemic deflation.

My response was just a guess...

[jm]

About seven years ago, playing golf with a Japanese salaryman friend living near me in the Chicago suburbs, I mentioned that some years before I had taken a 7-day vacation and driven with my family from Phoenix to San Francisco visiting the major western scenic spots in between. The envy in his voice was palpable as he said, "Ahhh. If I did that I'd be fired."

As Richard Koo notes in "Balance Sheet Recession", Japan can't support the kind of resort industry you would expect to find in a nation of its size and wealth because so few Japanese salarymen can take any time off except on weekends and those traditional holiday periods such as Golden Week, Obon, and New Years (when everyone else is off, too).

Why?

Various Japanese commentators have observed that the bureaucrat-dominated system of central control and total mobilization set up during WWII has continued with no interruption into the present. My own impressions from over 30 years of close association with the country are consistent with this. My overriding impression of Japan is of an economic garrison state. At lunch one day in Tokyo some years ago with some American colleagues and a salaryman from a major trading company, I happened to remark that a Japanese company is essentially a military organization, and my colleagues (less experienced in Japan) were amazed at the vehemence with which the normally very reserved salaryman blurted out, "That's right!" I had struck a nerve.

It is important to understand that the Japanese government differs very fundamentally from ours.

In the US, high-level decision-making positions in the executive branch are held by political appointees most of whom have had substantial careers prior to their appointment, and will return to those careers after their time in office. The lower and middle levels of the bureaucracy are not necessarily staffed by brilliant, hyper-ambitious people expecting to climb up the ladders to the top (though some may pass through early in their careers).

In Japan, all ministry posts up through vice-minister are held by career bureaucrats who entered those ministries at the bottom, straight from one of a few top universities, distilled out from the mass of their contemporaries by the world's most brutally competitive academic system. I am sure most of you know something of that system; consider for a moment what an extraordinarily disciplined, intelligent and ambitious person one must be to make it through into the entry-level career-track positions of the bureaucracy -- the most sought-after jobs in the nation. Consider also the nature of a bureaucracy in which _every_ decision-making post (except the semi-honorary post of minister at the top) is held by people of such character and ability who have spent their entire working lives in the same elite organization, continuing their competition in the climb up from those entry-level career-track positions. Finally, consider that in Japan the judiciary and legislative branches are much inferior to the bureaucracy in power, and the most legislation is drafted by the ministries in such a way as to give themselves maximum freedom in regulatory rule-making.

The system thus selects into positions of great power a set of men who are not only highly intelligent and ambitious, but also extraordinarily self-disciplined to start, and then subjected for years to tight discipline and intense competition within an organization run by others just like themselves.

Most of the large corporations are similar in organization and staffing -- the men who get into their entry-level career-track positions are the fellows who weren't quite up to the bureaucratic standard in intelligence, discipline and ambition.

The result is a nation dominated by fellows who really don't place a very high priority on relaxing and enjoying life -- and don't think anyone else should, either. Thus Japan has never been able to evolve into a modern nation in which people work to live, rather than living to work -- to make the nation (and the bureaucrats) stronger.

[lise]

The question about the problem of generating a sustained period of healthy economic growth in Japan is important for Japan and every other developed country. But, I have trouble thinking the problem lies in the work ethic of the Japanese. Americans work as hard and long as the Japanese, and far more hours than Europeans. Why should Japan be different than Australia or Canada or Sweden or France? Is the problem slow population growth? Is the problem rigid local economic structures? Is the problem as I suspect application of monetary and fiscal policy?

[kharris]

Thanks, Anne, for posting the tax piece from Sunday's NYT. Saved me having to go find it and link to it. The point of that article should be repeated often.

Assertions about the impact of taxes on economic activity often lack sophistication - a fault that may be intentional. Prices matter, and taxes change prices. That much is clear. What is often left out is the structure in which those price changes take place. In the labor market, more than any other I can think of, we do not buy and sell tiny, discrete units. We buy and sell big blocks. Most of us commit to selling our services in thousands-of-hour blocks.

We also know, from international studies, that a wide variety of marginal and average tax rates are associated with good growth and high living standards. From looking at the performance of our own economy since WWII, we know that periods of high taxation are often associated with better economic performance. If we look at the expiration of more favorable tax treatment for capital put in place at the end of 2004, we'd expect a sharp drop in capital orders before the end of last year. Capital goods orders were particularly strong in January.

Those Europeans who can't get their economic arrangements right? They continue to rival US productivity, to enjoy very high material standards of living and to work shorter hours than their US counterparts. And don't they report themselve happier than their US counterparts, in general?

[Jennifer]

Another fine comment K Harris. This was an important post, and I much agree.

[anne]

KHarris

"Assertions about the impact of taxes on economic activity often lack sophistication - a fault that may be intentional. Prices matter, and taxes change prices. That much is clear. What is often left out is the structure in which those price changes take place. In the labor market, more than any other I can think of, we do not buy and sell tiny, discrete units. We buy and sell big blocks. Most of us commit to selling our services in thousands-of-hour blocks."

Henry James held that in the clarity of the writing resides the truth of the thought, and your writing is wonderfully clear. We can not be another country, but we can surely analyze strengths and weaknesses of others clearly enough to learn of ourselves. We are now a most low tax country, especially so for the wealthiest. We have as a result a structural government deficit that can not be set aside by spending cuts and will in time call for tax increases. Hopefully we can come to look to our history and about us to find such a prospect benign.

[anne]

http://web.mit.edu/krugman/www/jpage.html

A SPECIAL PAGE ON JAPAN
By Paul Krugman

The state of Japan is a scandal, an outrage, a reproach. It is not, at least so far, a human disaster like Indonesia or Brazil. But Japan's economic malaise is uniquely gratuitous. Sixty years after Keynes, a great nation - a country with a stable and effective government, a massive net creditor, subject to none of the constraints that lesser economies face - is operating far below its productive capacity, simply because its consumers and investors do not spend enough. That should not happen; in allowing it to happen, and to continue year after year, Japan's economic officials have subtracted value from their nation and the world as a whole on a truly heroic scale.

The fault does not, however, lie merely with those officials. Japan has also been badly served by the economics profession, both in Japan and outside. The great majority of economists - including those who specialize in issues of economic stabilization and growth - seem oddly uninterested in Japan's plight, as if the failure of conventional macroeconomic policy in the world's second largest economy were a subject of merely parochial interest, with no lessons for the rest of us. Of those who do make pronouncements on Japan, many if not most have taken the easy way out: blaming the victim, absolving themselves of responsibility for proposing solutions by asserting that Japan's problems are deep, structural, beyond the reach of technical fixes. Well, maybe; but maybe not. Sometimes big problems have small causes; sometimes a simple technical fix can work miracles.

Last spring I decided to sit down and think seriously about Japan's ills, putting aside conventional wisdom and my own prejudices, following the logic of economic analysis wherever it led. And it led to a surprising conclusion: that there is indeed a simple fix for Japan's slump - and that the structural obstacles to a quick recovery lie not in the economy itself but in the minds of policymakers.

What is particularly remarkable about the debate over Japan is that it is a case where straightforward economic analysis and policy orthodoxy are in direct conflict. If you apply the most conventional of macroeconomic models to Japan's unusual plight, you come up with recommendations that are anathema to central bankers and finance ministers. And in this case, I am firmly convinced that the models are right and the officials are wrong.

[anne]

http://www.nytimes.com/2005/04/04/business/worldbusiness/04textiles.html

Stream of Chinese Textile Imports Is Becoming a Flood
By DAVID BARBOZA

SHANGHAI - Imports of Chinese textile and apparel products into the United States soared in the first quarter, offering fresh evidence that the world's clothing trade is being drastically reshaped by the abolition of global quotas in January.

The United States Commerce Department said Friday that in the first three months of the year, preliminary data showed that United States imports of textile and apparel products from China rose more than 63 percent from a year ago.

In some crucial categories previously governed by the old system of country-by-country quotas, like underwear, cotton trousers and cotton knit shirts, the increases were even more stark - jumps of as much as 2,000 percent.

The figures are certain to heighten trade tensions between the countries and also to renew calls for the United States government to place restrictions on some Chinese imports to protect American manufacturing jobs....

[anne]

http://www.nytimes.com/2005/04/04/technology/04map.html

U.S. Blocks Use of Mapping System in China
By WAYNE ARNOLD

The Australian mining company BHP Billiton said Friday that the United States Defense Department was blocking it from using an advanced mapping technology to search for mineral deposits in China.

BHP Billiton has a license to use the so-called Falcon system, which was originally intended for use on United States nuclear submarines. BHP Billiton has been using the system around the world since 1999 to help find underground deposits of minerals from aluminum to zinc.

But in a meeting this week with analysts in Australia, the head of BHP Billiton's business in China, Clinton Dines, said plans to use Falcon technology in China had been rejected by the United States Navy, according to a report published in The Australian, which was confirmed Friday by BHP Billiton in Melbourne.

Under the terms of BHP Billiton's license to use Falcon, a spokeswoman for the company said, "They can dictate where we can and can't use it."

A Pentagon spokeswoman in Washington, Lt. Col. Tracy O'Grady-Walsh, said Friday that the Falcon system was on a list of American munitions banned from export to China without a presidential waiver. The ban results from sanctions imposed after the Tiananmen Square massacre in 1989....

[Frank]

Warning long blogwhore follows:

Tom Friedman: Bush Apologist

Last night I was reading a couple of posts by Jeanie de Arc on Tom Friedman here and here

I thought she was too harsh on him having an econ degree myself.
"You need only read Tom Friedman's paean not to creating economic relationships that meet human needs, but to creating men and women who fit neatly into the economic machine, to see a perfect, and repulsive, example of what John Paul was talking about." Is just part of her critique.

Then I was going threw some old Globblog (General Glut)archive here about 60% down the page
I like his thinking though I often don't entirely agree.

"but is anyone naive enough to believe that no jobless recovery would have occurred on Al Gore’s watch?" Globblog asks.

And it occured to me that the whole point of Friedman's column "It's a Flat World, After All"... Flat World here
...is that its not Bush's fault that we are in a jobless recovery. Its because Americans are lazy and stupid. Which is of course BS of the rankest ordure. Americans work more hours than anyone in the industrial world. Americans have amoung the highest productivity and proportion of advanced degrees as well. Further and more importantly; The conditions he is describing in terms of access to productivity mediating software and connection to the internet Were already available to those in India and China well connected enough to have a good education

America isnt failing to maintain its technological/creative edge because of its workers. Bush is letting go of our strengths because he neither understands nor values them.

I agree with Elaine Supkis here Its not a coincidence that this administration is very good for Texas Oil Men. Nor that its bad for American IT workers. Thanks guys I now have a much lower opinion of Tom Friedman, not that it was high before, and a better understanding of why we are so screwed.

thanks for anyone who read all that.

[kharris]

Today, the EU cut its growth forecast for 2005 to 1.6% from 2.0%, cut its 2006 forecast to 2.1% from 2.2% and said risks are to the downside. Also today, an economic advisor to Chancellor Schroeder said it's a bad idea to call on the US to reduce its current account balance right now, because that risks letting "the roof cave in." How are we going to fix a problem that our trading partners can't afford to let us fix?

[anne]

KHarris

The decline of the dollar with regard to the Euro may have come to an end. The German warning that America must maintain healthy growth, which we would much prefer in any event, is surely a call to the European central bank to limit any further decline in the value of the dollar.

[anne]

Similarly with Japan faltering, it is hard to imagine the Bank of Japan allowing much of an appreciation of the Yen against the dollar. Though the Bank of Japan has not been buying much American debt as our trade deficit with Japan grows, the dollar has held value against the Yen. The guess is that foreign currency traders are not willing to go against what they consider the intent for a stable dollar by the Bank of Japan.

[jm]

lise:

Americans do not work as long and hard as the Japanese. The official published figures for working hours in Japan are complete baloney. There is a venerable tradition in Japan of what they call "sabisu zangyou", "sabisu" meaning "free" (as in, "It's a service"), and "zangyou being overtime. It means the employee punches out and then goes back to work for a couple hours more, or shaves a couple hours a day off his or her timesheet. And of course there are also "exempt employees" who don't even qualify for overtime -- in the first company I worked for in Japan, half the work force had "manager" titles.

I first learned of this about 30 years ago when a fellow said to me, "In our department we're working 12 or 14 hours a day and only getting one or two days off a month -- and they're limiting overtime." I thought I must have misheard him, or I had learned one of the Japanese words wrong, but then he explained about "sabisu zangyou."

There was a good article on this topic in NYT or WSJ about a year ago. An employee of IBM Japan was suing for what he hadn't been paid in forced free overtime. It was nearly universal in Japanese companies even when times were good. I'm sure it's far worse now.

[obscure]

anne-

What's your deal? Grad student? Professional? Just curious.

[Ari]

Obscure, be polite.

[obscure]

Sorry. Didn't know that was a breach of etiquette.

[anne]

No eitquette breached :)