David Brooks teams up with Tyler Cowen, who is the Director of the Mercatur Center funded by the Koch family, to describe the new political economy in America. This is a perfect match of conservative opinion makers. Tyler Cowen provides a version of two sectors in the US economy, and then Brooks plays Mr. Center and describes the interplay between the two sectors as republican and democratic sectors. He takes no position on which sector will win the political battle, but as usual his last paragraph telegraphs his real position. He works in the democratic sector that is facing a transition to what must be the superior republican sector.
Tyler Cowen correctly indicates that some sectors of the economy do not face global competition and that other sectors do compete in global markets. Competition in global markets has made the tradable sector brutally efficient. It will become even more efficient over time as it substitutes capital for labor. It will become an export leader in the global market selling high value added products to the expanding middle classes in the emerging markets. The US will even become an exporter of energy by exploiting fracking technologies to extract natural gas. The efficient global sector will be highly profitable, but it will not create a lot of jobs.
The sectors of the economy that do not face international competition are less efficient, but that is where most of the jobs are being created. This sector is favored by democrats and the more efficient global sector is favored by republicans. The democrats protect the less efficient sector from privatization which would make it more efficient and they want to redistribute income from the more efficient global sector to subsidize it.
According the this analysis we have an efficient sector and an inefficient sector in our economy. Competition is what is making the global sector more efficient and that is what is needed to make the other sector more efficient. Republicans naturally favor competition and efficiency, while democrats natural favor less competition and inefficiency, which must be subsidized by the republican sector. That, of course is what politics in the US is all about. One party favors capitalism with its brutal efficiency and the other party wants the strong to protect the weak. Over time the strong must prevail over the weak. This is another version of Social Darwinism.
There are a lot of problems with this analysis. In the first place, it has always been easier to introduce productivity enhancing capital into manufacturing. We were doing that well before manufacturing was subject to the brutal forces of global competition. The efficiency gains in manufacturing today have come primarily from replacing expensive US labor with less expensive foreign labor. This is the brutal efficiency that concerns many Americans. Moreover, the consumers of these products have often been Americans. A large share of US imports are from US corporations that produce them offshore and import them into the US. Consumers get lower prices and corporations get higher profits at the expense of higher paying US jobs.
The non-tradeable services sector has always been less efficient than the manufacturing sector because it is more difficult to make many services more efficient with the use of capital. This has little to do with lack of competition in many of the service sectors. There is little evidence that privatization and competition has made the services sector more efficient as Brooks implies.
In summary, the political economy described by Brooks, with a little help from his friend, is largely a fiction. The difference between democrats and republicans is not a dispute over efficiency. Democrats like efficiency and exports as much as republicans. They also like manufacturing as much as they like the services sector. David Brooks is just doing his job when he produces his works of fiction. His job is to justify the current trends in the economy which have primarily benefited a small fraction of the population.
No comments:
Post a Comment