America in the Post Meltdown, Upside Down World: Globalizing, Rebalancing and Innovating

Transcription

1 America in the Post Meltdown, Upside Down World: Globalizing, Rebalancing and Innovating Professor Peter Brews Kenan-Flagler Business School, University of North Carolina at Chapel Hill World View 15 th Annual K-12 Symposium 25 October 2012

2 Outline for today Globalization/Post Industrialization America in post meltdown/upside down world What must we all do? Questions 2

3 Globalization/Post Industrialization 3

4 The Human Struggle for Productivity Global Output Growth Pre 1800 and for all of human history 1800 and until

5 The Human Struggle for Productivity: Eras, Population, Economics, Bases of Growth, and Status Global Output Growth Industrial Era: % of world population Manufacturing Input-led growth Followers Post Industrial Era: 1950 onwards 10% of world population Services Innovation-led growth Leaders 2012 Pre Industrial Era: Pre % of world population Subsistence agriculture No growth Failures Time 5

6 The Human Struggle for Productivity: Regional/National Positions United States Japan USSR/Russia Sub-Saharan Africa Pre to Post Industrial Eras Post Industrial Era Industrial Era Pre Industrial Era

7 America in Post Meltdown/Upside Down World 7

8 Why Upside Down? Country Public Debt* (% GDP) World Rank** National Taxes/Govt. Revenues (% GDP)*** Budget (% GDP)*** Japan (72) (191) Greece ) (194) Italy (28) (125) Singapore (192) 1.30 (32) Ireland (67) (199) Portugal (29) (131) Belgium (23) -4.20(136) France (21) -5.40(165) Canada (56) -5.00(161) Germany (33) -1.00(61) Great Britain (46) (187) Austria (24) (104) United States (193) (190) Spain (61) (189) Brazil (49) 3.10 (22) India (206) (180) China (140) (62) South Africa (126) (120) World average (96) (134) *Only public debt denominated in home currencies is reported. Private sector debt (regardless of currency of denomination) and government debt denominated in foreign currency are not included. **Drawn from ranking based on 135 countries. ***Figures in parentheses indicate ranking based on 210 countries. Source: The World Factbook 2009, Washington, DC: Central Intelligence Agency, accessed 30 July Most estimates based on 2011 data. 8

9 U.S. in worst shape it has been in for generations: 25 years living beyond means finally caught up; out of balance economically, publically and privately Politically divided/facing legislative gridlock with little center convergence Many core industries in recent trouble (banking, automobiles, construction, retail) and important support industries face serious funding issues (healthcare, education, military ) and Americans have also executed series of hospital passes: healthcare, retirement, environment 9

10 U.S. Political Economy: Public Sector Imbalances

11 U.S. Gross Federal Debt (% of GDP): Source: zfacts.com 11

12 U.S. Gross Federal Debt now > 100% of U.S. GDP Source: 12

13 U.S. GDP Growth, Federal outlays/receipts (% of GDP): Year Growth Rate (%) Fed. Receipts (% GDP) Fed. Outlays (% GDP) Surplus/Deficit (% GDP) * * * * * * Years of significant Federal tax cuts Source: GDP Growth - U.S. Bureau of Economic Analysis 2012 QI and II real GDP growth rates estimated at 2.0 and 1.5 percent respectively. See: accessed 22 August Source: Federal Receipts/Outlays: accessed 18 October

14 U.S. Federal outlays/receipts (% GDP): % of U.S. GDP Outlays - Receipts Source: Table 1.3, accessed 18 October

15 Federal, State, Local Government Receipts/Expenditures (% of GDP): Total Government Receipts % of U.S. GDP Federal Government Receipts State and Local Government Non- Interest Receipts (NIPA Basis) Total Government Expenditures Linear (Federal Government Receipts) Linear (State and Local Government Non-Interest Receipts (NIPA Basis)) Source: Table 15.1, accessed 18 October

16 Gross U.S. Government Savings: (as at 1 January 2012) Source: Economic Research, Federal Reserve Bank of St. Louis, see accessed 31 July

17 U.S. Political Economy: Private Sector Imbalances

18 Index or Interest Rate Population in Millions U.S. Macroeconomic data: Home prices, building costs, interest rates, population until mid Home Prices Building Costs Population Interest Rates Year Source:

19 U.S. Macroeconomic data: Consumption and Mortgage Equity Withdrawals (MEWs) Graph constructed by Professor Christian Lundblad, Kenan-Flagler Business School, University of North Carolina at Chapel Hill. Consumption and GDP data from the Bureau of Economic Analysis (BEA). Mortgage equity withdrawals are measured as the year-over-year change in mortgage debt (from the Federal Reserve Flow of Funds) minus 70 percent of residential investment spending (from the BEA). (Source: L. Josh Bivens, Economic Policy Institute) 19

20 U.S. Personal Savings Rates: (as at 1 June 2012) Source: Economic Research, Federal Reserve Bank of St. Louis, see accessed 31 July

21 Adjustments needed: < 5 % in U.S. Consumption as % of GDP > 5 % in taxes as % of GDP (medium term) < 5% in govt. expenditure as % of GDP and < 20% in average U.S. body weight This is my plan for America Would you vote for me? 21

22 Reality check U.S. cannot borrow, grow, vote imbalances away; painful adjustment required Rebalancing not yet begun; past four years economic triage to get patient out of ER; Republican president would have followed similar policy, except healthcare Financial crises of type faced in 2007 take 7-10 years to resolve; no quick fix Future entitlements/ living standards will have to be curtailed to some degree Cuts in govt. expenditure and tax increases will probably be required 22

23 What must we all do? 23

24 Why is Economic Globalization important to State/Citizens of North Carolina? 20 th Century economic globalization was supply seeking enterprise for Americans 21 st Century economic globalization will be more a market seeking enterprise for Americans Can producers in America offer products/services/solutions others in world want? But most important short term issue is getting America back to work: by Americans, of Americans, for Americans 24

25 Political, community, education leaders must ensure North Carolinians ready to compete in Post Industrial, globalizing, fast moving world And that NC is attractive location to live in, work in, invest in, holiday in, retire in 25

26 What must educators do? Prepare students for knowledge intensive, creative work, so they can innovate at rates faster than others replicate; high level math/science skills table stakes Instill discipline/deferred gratification into students so they learn how to THINK, problem solve, research, imagine, create, connect dots etc. Develop curricula that prepare workers for 21 st Century, high value creative work, or for working with smart machines and systems delivering smart goods, services, solutions to smart consumers NC K-12 schools must give world class grounding in basic subjects across spectrum, instill strong work ethic/sensitize students to global issues and cross cultural differences All in climate of fiscal austerity 26

27 What should we do individually? Live within means/demand leaders do too Be realistic/honest about situation, realize those who have may need to contribute little more; those who want expect little less Keep perspective - though America out of balance, adjustment not that significant compared to others Good news: most in U.S. could < consumption by 20% and would probably not notice Show some character/be part of the solution... 27