Sunday, August 22, 2010

Tom Friedman’s “Really Unusually Uncertain”

Tom Friedman in his article, “Really Unusually Uncertain,” writes we have “to deal with three huge structural problems that built up over several decades and have reached a point of criticality at the same time,” and “That ‘Structural problems need structural solutions.’ There are no quick fixes.”

“The first big structural problem is America’s. America will probably need some added stimulus to kick start employment, but any stimulus right now must be in growth-enabling investments that will yield more than their costs, or they just increase debt. That means investments in skill building and infrastructure plus tax incentives for starting new businesses and export promotion. To get a stimulus through Congress it must be paired with spending cuts and/or tax increases timed for when the economy improves.

“Second, America’s solvency inflection point is coinciding with a technological one.

“Thanks to Internet diffusion, the rise of cloud computing, social networking and the shift from laptops and desktops to hand-held iPads and iPhones, technology is destroying older, less skilled jobs that paid a decent wage at a faster pace than ever while spinning off more new skilled jobs that pay a decent wage but require more education.”

This is something I addressed in a post “There will be no choice; our money-based economic system must change” in which I linked a Fortune Magazine article, “What if there’s no fix for high unemployment?” The article puts forth the well-founded proposition that unemployment may remain high into the unforeseeable future. He forecast it might never rebound to acceptable levels. Unemployment is a structural problem

“Third, a decade ago Germany was the ‘sick man of Europe.’ Labor gave up wage hikes and allowed businesses to improve competitiveness and worker flexibility, while the government subsidized firms to keep skilled workers on the job in the downturn. Germany is now on the rise, but also not free of structural challenges. Its growth depends on exports to China and it is the biggest financier of Greece. Still, ‘Germany is no longer the country with the oldest students and youngest retirees.‘”

Today’s circumstances are not a product of the Obama Administration nor essentially the Bush’s Administration, although the latter did make things worse, leaving the Obama Administration with a bad situation made even worse. Once we understand that a large portion of our economic quagmire is not governmental, political or a result of mandated free market controls but structural, we can address solutions to the problem.

Read Tom Friedman’s article here