For reasons many of us find puzzling, the Economist Magazine believes that the
U. S. economy is doing pretty well,
and may continue to do even better.
The cause for celebration in the Economist is
booming export sector.
from a consumer-focused economy to a more outward-looking one, what businesses
sell, and how and where, will change too. And all sectors will be affected:
services, manufacturing and commodities. This is most obvious in the
geographical pattern of American exports. Sales to traditional markets in the
OECD, a rich-world club, have risen 20% since the end of 2007. But they have
risen 51% to Latin America and 53% to America China,
which is now America’s
third-largest market after Canada
and . Mexico
But this is the seeds of disaster. First of all consumer spending, which is needed to drive the
economy is and has been in serious trouble.
Consumers are now engaged in a long, hard process of shedding debt and learning to live within their means. This is essential, but it has a price: an uncommonly feeble recovery. In the three years since the recession ended, GDP has grown by an average of 2.4%. This year it may not reach even that. On July 6th the government reported that jobs figures, excluding jobs on farms, rose by just 80,000 (less than 0.1%) in June, the third straight month of meagre growth, and unemployment remained at 8.2%.
And as these charts show, only exports have kept the
from plunging to zero growth, or worse.
So what’s the problem, economists like exports and they do indicate a positive sector of the
economy. The problem is two fold. First the U. S. economy is so large compared
to others that it will never be able to export enough goods and services to
sustain the economic growth goals when consumer spending is weak. Exports just cannot take up the slack.
Secondly, and more important, as the economic conditions in the rest of the world slow, so will the
export sector. If your customers are in
trouble, you are in trouble. This is
something Germany is going
to have to learn the hard way, as German European policy drives German
customers in Spain, Greece, Portugal and the rest to cut back
their spending, and a lot of that spending is on German products and
services. So as Europe slows, as South
America slows and as Asia slows the U. S. economy will slow.
Normally this can be offset by consumer spending. But consumer spending is driven by consumer income and consumer debt. The tax policies of the Republicans are not going to give American consumers more income, and the spending policies of Conservatives will drive down family incomes.
So what might the
look like with total
Republican control? It will look like
Europe, much to the horror of Conservatives who hate looking like U. S. Europe. Ah yes, a
whiff of irony in the midst of a 2013-14 Republican created recession.