Posted on 04/09/2004 1:28:17 AM PDT by sarcasm
Measuring America's economy
Grossly Distorted ProductApr 7th 2004
From The Economist print edition
Are official statistics exaggerating America's growth?
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DESPITE the welcome leap in American employment in March (see article), America's job market has been surprisingly weak in the past couple of years—surprising, at least, to economists. Some have explained this by pointing to rapidly rising productivity figures. Perhaps firms have not needed more workers. But there is another explanation: America's GDP figures, which have been strong, may be inaccurate, and may be exaggerating the extent of economic growth.
In the two years to the fourth quarter of 2003 America's real GDP grew at an annual rate of 3.6%. Going by past recoveries, this should have meant a rise in employment of 2% a year. Instead, non-farm payrolls have fallen. Most economists say that this reflects a sharp increase in productivity growth. Jan Hatzius, an economist at Goldman Sachs, is not so sure. Other economies that have enjoyed rapid productivity gains in recent years, such as Canada and Australia, have also seen strong increases in employment.
Nor does Mr Hatzius accept the argument that the employment figures have been understating job creation. It is too soon to tell whether March's data (which were published after his study) mark the start of a delayed catching-up. This leads Mr Hatzius to suggest that GDP is being overstated. The standard measure of GDP is calculated by totting up aggregate expenditure; but another estimate, found by summing incomes—which in theory should be the same—says that GDP has grown at an annual rate of only 2.8% since the end of 2001, 0.8 percentage points less than the expenditure measure.
Another piece of evidence is the unusual divergence of the growth rates of GDP in the goods sector and of industrial production. The two series used to track each other closely; but in the past two years a wide gap has opened up (see chart). In the year to the fourth quarter, industrial production rose by only 1.4%, while goods-sector GDP surged by 8.0%.
Industrial-production figures are likely to be the more reliable of the two, because they come directly from industry reports. In contrast, goods-sector GDP is estimated indirectly by adding together final sales of goods, changes in inventories and net exports. If goods-sector GDP is replaced with the industrial-production series in estimating GDP, then the economy grew by only 2.2% in the year to the fourth quarter, not the reported 4.3%.
Why might official statisticians be overstating America's GDP—and productivity with it? Mr Hatzius suggests that they may be undercounting imports of intermediate inputs of goods and services produced abroad by American firms that have outsourced jobs to cheaper countries. Since GDP is calculated as domestic spending plus exports less imports (including imports of intermediate inputs), this would lead to an overstatement of GDP.
For example, when American firms outsource call-centre and information-technology-support jobs to India and other Asian countries, the result should be higher imports of services, yet official statistics do not show such an increase. America's recorded imports of software services from India are also much smaller than India's reported exports of such services to America.
If Mr Hatzius is right, then jobs have been slow to pick up largely because this has been, at least until now, an exceptionally weak economic recovery. That is exactly what you might have expected after the bursting of the biggest financial bubble in history.
THE towers of Zenith aspired above the morning mist; austere towers of steel and cement and limestone, sturdy as cliffs and delicate as silver rods. They were neither citadels nor churches, but frankly and beautifully office-buildings.-- Sinclair LewisThe mist took pity on the fretted structures of earlier generations: the Post Office with its shingle-tortured mansard, the red brick minarets of hulking old houses, factories with stingy and sooted windows, wooden tenements colored like mud. The city was full of such grotesqueries, but the clean towers were thrusting them from the business center, and on the farther hills were shining new houses, homes--they seemed--for laughter and tranquillity.
Over a concrete bridge fled a limousine of long sleek hood and noiseless engine. These people in evening clothes were returning from an all-night rehearsal of a Little Theater play, an artistic adventure considerably illuminated by champagne. Below the bridge curved a railroad, a maze of green and crimson lights. The New York Flyer boomed past, and twenty lines of polished steel leaped into the glare.
In one of the skyscrapers the wires of the Associated Press were closing down. The telegraph operators wearily raised their celluloid eye-shades after a night of talking with Paris and Peking. Through the building crawled the scrubwomen, yawning, their old shoes slapping. The dawn mist spun away. Cues of men with lunch-boxes clumped toward the immensity of new factories, sheets of glass and hollow tile, glittering shops where five thousand men worked beneath one roof, pouring out the honest wares that would be sold up the Euphrates and across the veldt. The whistles rolled out in greeting a chorus cheerful as the April dawn; the song of labor in a city built--it seemed--for giants.
II
There was nothing of the giant in the aspect of the man who was beginning to awaken on the sleeping-porch of a Dutch Colonial house in that residential district of Zenith known as Floral Heights.
His name was George F. Babbitt. He was forty-six years old now, in April, 1920, and he made nothing in particular, neither butter nor shoes nor poetry, but he was nimble in the calling of selling houses for more than people could afford to pay.
His large head was pink, his brown hair thin and dry. His face was babyish in slumber, despite his wrinkles and the red spectacle-dents on the slopes of his nose. He was not fat but he was exceedingly well fed; his cheeks were pads, and the unroughened hand which lay helpless upon the khaki-colored blanket was slightly puffy. He seemed prosperous, extremely married and unromantic; and altogether unromantic appeared this sleeping-porch, which looked on one sizable elm, two respectable grass-plots, a cement driveway, and a corrugated iron garage. Yet Babbitt was again dreaming of the fairy child, a dream more romantic than scarlet pagodas by a silver sea.
Some reccommended reading ...
Well, what's your source for that?
That's not a fact, it's a belief system's idol.
Interesting. That gets to the return of slavery, or near-slavery that the mighty currents of "free trade" and fiat money seem to be driving us toward.
How do you propose to do this? Pass a law that stops it?
Writing a book was previously the domain of authors from Western Nations. Unfortunately, worldwide literacy has taken away our writing jobs and now cheap writers in India compete with American authors for jobs.
I'm sorry to say, but IT and programming is not as skilled as some would like to think. If someone else can learn how to do it (Indians) then you will have to compete with them. Like it or not.
You can choose to compete with them today or you can compete with them 20 years from now after you have protected your industry and stifled innovation.
Of course it is skilled. One of our "structural" problems, or "gesalt", in the language Condi Rice may have picked up that concept, is that in the US for many years IT did require high skills, and adept persons at those skills. Then came the rise of the Computer Science Departments.
They teach grammar and proclaim it creative writing. It ain't.
At the same time many people entered the programming market and the market resonanted to the tune of the lowest common demoninator of skills and mastery -- and that is a 2-year associates degree in minimal computer skills and basic programming grammar.
Mark that to 1980 and since. The pool of entering programmers trained in the US -- idiot savants of grammar being made to work as creative writers.
In the same time frame in India, they were ramping up their technical schools, and they are great rote learners, great grammarians. As idiots of programming they are more naturally savant at grammar.
Creative people are a mix of weird, flakey, unique, rough-edged, abrupt, socially radical, edgy. America is the place for those charateristics -- not as a majority to be sure, but as a fondly tolerated and many times celebrated minority.
But our Carnegie-mellonized, community-college-level modern grammarians of programming can't compete with the India's natural grammarians -- who are in fact, trained more than 2-years at grammar.
We can and will compete and win every time on the creativity front -- but the market right now, since 1980 or so, isn;t looking for that, isn't buying that.
How about stopping offshoring to communist China only?
It won't be easy. Some in this generation of conservatives are conditioned to salivate on command. How I was conditioned to stop criticizing Communism and learned to love it: cheap labor!
They can be just as tricky as any defending their addictions.
Look at Mr. Bartlett's writings, referenced in #4. He argues that "outsourcing offshore" are today's "racial code words" such as yesterday's "states rights" and "law and order." That is how the evil "protectionists" get support from today's "racists" (xenophobes).
Hard to believe that a "conservative" would give credence to such 20th century leftist crap that "code words" existed; that he accepts the leftist lies that honorable men and Americans like Barry Goldwater meant the "N" word when he spoke of our Constitution and -- well.. law and order. Liberal pigs mocked it by shorting it to "lawn order."
Rather than stopping outsourcing offshore how about just letting it "wither away" vis-a-vis the Chi-coms?
India is another story. It is one of the world's more corrupt countries even more corrupt than the criminal, corrupt government of Mexico. I first became aware of the problem from Indian H1Bs years ago and have done some googling lately that confirms the problem.
Keep offshoring to the Philippines, Taiwan, Eastern Europe, etc. under free trade?
As of my last post (#49) no one had posted calling you a racist.
I would ask that those who scream Racist!! take the time to read an Indian's own words about the state of higher educaiton in India.
"Competitive exam mania. It’s the quality of education that suffers," by Pratap Bhanu Mehta. Mr. Mehta even includes Indis'a best in his criticism -- you know, those are the schools that some idiots say make MIT look like a high school.
www.tribuneindia.com/2003/20031201/edit.htm#5
and on a related aspect of higher education
"The tuition issue: Perception and the whole truth," by Bhim S. Dahiya
www.tribuneindia.com/2001/20010708/edit.htm#1
On your observation that Indians are "great grammarians" I must say that I have been impressed by Indian journalism. There is where we need to outsource offshore more and more.
BTW, those who say programming is unskilled should consider what a poorly structured and written chapter in a book does to understanding. Then consider a book with hundreds (thosands in many legacy systems) of chapters (programs) each critical to making the computer do what the end users expect it to do. Then there's binding that holds the book together (jobs including on-line), the library of books (systems, what good is just one book?) and the minor matter of data bases that hold the billions of bits and pieces of data that the users depend upon.
We're not talking making up a personal web page using an ISP template.
Doesn't mean cooks have no skill.
True. And if you try to fight the market with artificial gov't involvement, you will only make matters worse.
The wafer, the microprocessor, is a refined product.
Years back I worked with (then) high-end graphic systems. Boards were prototyped, wire wrapped, hand solder patched, etc. etc. We shipped two or three of those rat's-nests to our alpha's. Not a great thing to do. What a mess. The prototype boards were prototypes they required considerable additional resdeign to clean up, to make into multi-layer PC boards, to handle heat-sinking and mechanical clearance issues, etc. To make pretty and neat. To make shippable as actual product.
That pretty work can take as much time as the original design, or at least as a major re-do of some orginial demonstration of concept design, The production engineering phase.
That phase is almost never found in software. The dang Carnegie Mellonized front-end loaded methodolgies preclude it -- by the time you get close to where it should be applied -- everyone is rushing to ship the whole pile of crap you have because "it works", "it works already, just ship it!"
Let's just call it "government involvement" -- if you want to come back and explain how you distinquish between "artificial" government and whole-food, natural, enivironmentally friendly "natural" government, fine.
The field is already flashing and screaming the "TILT" light as regards government intrervention in the market. In our competitors, in us. Not only do "independent" companies compete in the global market, but nations do to. That is utter folly to ignore. India, for example, tilts the market against us with tariffs and by paying for the total college education costs of their people. That's theirs to do! They, as a nation, are FREE to do that! All power to them!
China -- why China do that too, and does that true! China sets higher tariffs and restrictions, encourages grand-scale IP theft, and moreover provide slaver labor to "entrepreneurs". China's table is so tilted against us, it's insane. But as a nation -- why they are FREE to do that. That IS what *nations* are about.
We, however, have adopted a BOHICA trade policy. We only ask if we have presented ourselves bent over far enough for the pleasures of our internationalists.
It's just odd to me that the article would make this statement when unemployment is at it's lowest level in 25 years. Especially when the low unemployment is not even mentioned. It looks like spin.
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