Saturday, September 17, 2011

Obama's Speech & Inter/National Political Economies

While mostly trying to avoid the day-after reactions to the President's "jobs speech," I did enjoy reading what was actually a pre-speech Q&A with a Mike Spence of the Council on Foreign Relations.  Spence makes a good introductory point about the structural nature of America's employment crisis.  The reason I'm bringing it up in this forum is Spence's focus on the distinction between what he calls the "tradable" and the "non-tradable" sectors of the employment picture.  The non-tradable sector is "the sector that doesn't compete directly in the global economy," and most significantly comprises 98% of the jobs generated over the past few decades, according to Spence.  I would posit that this is correlated with the shift in the United States away from heavy manufacturing to a services-based economy, but that's just a guess at this point.  The point here is that with the vast majority of jobs heavily dependent on domestic demand, slowdowns in domestic demand brought on by the combination of cyclical forces and the burst of the construction-reliant real estate bubble have inordinate effects on the depth and length of the unemployment crisis more broadly. Put another way, given the relative successes in the "tradable" sector of the jobs economy -- that which is plugged in globally -- we may want to think about what greater globalization offers the unemployed.  As Spence points out, there are opportunities especially in the emerging markets.  Here is where the President's push for trade agreements can help, but not before some time has passed, unfortunately for the job seekers.

More generally, it seems ironic that America's past of mass and heavy manufacturing that contributed a great deal to creating the middle class, did so to a great degree because the world was America's market for these manufactured wares.  Around the time WW II ended, the U.S. debt was exceeding GDP and the domestic jobs market was in a state of great transition, as women entered the workforce, millions of armed forces returned to the market, and the populace became highly mobile, for example the mass migration of African Americans northward.  However, the U.S. alone was responsible for half the world's economic output, and the world bought its needs from America with American dollars.

The out-migration of manufacturing jobs and the increased international economic competition occurred over a long period as the nation's economy became increasingly service-oriented, servicing a domestic market, mostly.  Thus, both supply and demand sides need reinvigorating but in a country with 300+ million people and with expensive counter-insurgency and counter-terrorism policies globally, there are stringent limits to government acting alone.  Add in, of course, the words "election year" and the potential for effective strategies to cope with or alter the structural barriers that Spence speaks of is even more diminished.

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