Economic Collapse - Glass Half-Full?

Monty Pelerin / Economic Noise

The following reaction came from a reader in response to Economic Disaster Coming Our Way.

Monty, all these fact and figures certainly are frightening but there are some positives such as

• rapidly diminishing reliance on foreign energy supplies,
• a still reasonably educated and industrious work force (try setting up a sophisticated manufacturing plant in Mexico, Brazil, or even France and getting comparable productivity),
• demographics that aren’t death spiral yet such as Russia, Japan, and most of western Europe,
• and massive public infrastructure malinvestment such as the ghost cities and little patronized high speed rail of China. Compared to the Chinese we throw just pennies away on Amtrak.

Also on a hopeful note, even when the vicious Soviet dictatorship finally collapsed, the streets didn’t run red with blood.

The response was reasonable, although I thought a bit too optimistic regarding our actual condition. Thus, I responded as follows:

At the risk of sounding overly pessimistic, I shall reply to your points:

 

1. Foreign Energy — In a pure economic sense, there is no difference between foreign and domestic supplies of any good. Only in a world at war or threatening actions that might lead to war (embargo, etc.) does this consideration matter. Given the state of this world your point is very valid, although hardly a sign of any economic strength. Some of the reduction in dependence occurs partly from diminished demand that characterizes our weak and probably contracting economy.

 

2. I am not sure I would say that our workforce is either educated or industrious any more. On International tests, where comparisons are possible, the US ranks close to the bottom against many first and second-world countries. Who would you rather hire sight unseen, an Asian immigrant with an eighth grade education or a shiny new high school graduate from the good old US of A? Perhaps that is an unfair comparison, but American youth do not value education the way their parents did. The self-absorption, self-esteem, lack of motivation, terrible schools or whatever other factors might be cited for our educational failure does not seem to have similarly affected education in other countries.

 

3. The issue of setting up sophisticated manufacturing plants in other countries is an empirical matter. Captains of Industry in the US seem to have no trouble doing so and that is one of the reasons why our economy is beginning to look like Detroit. One needs comparable productivity only if the costs of operating there are comparable. Lower productivity is not an economic advantage if costs are low enough to offset the productivity differential. A lawyer may be more productive than his secretary in typing,, but that does not mean that it is economically wise for him to do his own typing.

continue article at Economic Noise:

http://www.economicnoise.com/2014/01/22/economic-collapse-glass-half-full/