March 25, 2004

Get Happy. "I think it's time for a reality check. What's everyone really complaining about? That India and China are joining the global trading system? That Russia and Taiwan just had democratic elections, however imperfect, for their Presidents? That the American productivity growth rate jumped to a 3% average annual rate from 1995 to 2003, about double the anemic pace of 1973 to 1995? .. ". more CHRISTOPHER FARRELL.

Quotable: "Let's not lose sight of the bigger picture here. Even with the threat of terrorism, freer trade is invigorating global growth by providing entrepreneurs from all the world's major economies access to bigger markets. The Austrian economist Friedrich Hayek emphasized the role the markets play in creating and disseminating knowledge. In the Information Age, the cost of gathering and sharing information and knowledge has plummeted even as the size of the market has expanded exponentially. "Capitalism, as Hayek conceived it, was fundamentally dynamic, and that dynamism was due to the discovery of new needs and new ways of fulfilling them by entrepreneurs possessed with 'resourcefulness,'" writes historian Jerry Muller in The Mind and the Market. These are the tantalizing glimmers of a payoff from globalization. WHAT IF? Productivity growth isn't the magic mantra it was a few years ago because, as the U.S. loses manufacturing jobs, an increasingly efficient Corporate America is under little pressure to add to its payrolls. Nevertheless, "productivity growth is what determines our living standards, the competitive advantage of companies, and the wealth of nations," says Erik Brynolfssohn, an economist at MIT. Take the recent report on Social Security issued by the system's trustees. It assumes under its intermediate projection (essentially the baseline forecast) that productivity will grow at an average annual rate of 1.6%, and that the Social Security system runs into financial trouble come 2042. Yet, consider this: The Social Security problem largely disappears if the productivity growth rate hits an underlying trend growth rate of 2.5% a year .. ". Posted by Greg Ransom | TrackBack