Welcome Daniel Altman and Host Dan Rosenheck.

[As a courtesy to our guests, please keep comments to the book.  Please take other conversations to a previous thread. - bev]

Outrageous Fortunes: The Twelve Surprising Trends That Will Reshape the Global Economy

Dan Rosenheck, Host:

Economic forecasting is a tough business: most stock analysts have trouble predicting the earnings of the companies they cover over the next three months. That doesn’t seem to intimidate Daniel Altman, the author of “Outrageous Fortunes: The Twelve Surprising Trends That Will Reshape the Global Economy.” The book’s dozen prognostications cover every corner of the planet and extend many decades into the future. Altman argues that he is able to take the long view by distinguishing day-to-day fluctuations from the “deep factors that really move the global economy,” such as cultural norms that go back millennia or the inevitable conflicts caused by colonialism. The boldest predictions in “Outrageous Fortunes” include the disintegration of the European Union and World Trade Organization, a premature slowdown in China’s economic growth, and climate change actually helping richer countries.

The first, most fundamental question posed by Altman’s book is whether it is possible to make forecasts on such a long time scale at all. For example, he contends that since Chinese culture is ill-suited to business innovation, the country will not be able to grow as fast as rivals with a more entrepreneurial spirit after it attains a certain level of development. But won’t the Chinese make more of an effort to promote innovation once it becomes necessary for them to continue their trajectory?

A follow-up question is how useful forecasts looking ahead this far in the future can be in practice. Altman writes that he hopes writing the book will affect the decisions its readers take. How do you think a politician or businessman or investor might act differently after looking into the author’s crystal ball?

Finally, the book is structured as 12 separate, stand-alone predictions in 12 different chapters. Is there any common thread tying them together? What can each forecast teach us about the others?

___________

Dan Rosenheck edits The Economist’s website for coverage of the Americas, and regularly contributes articles to its foreign section. In 2009 and 2010, he served as the magazine’s bureau chief for Mexico, Central America and the Caribbean, and from 2004 through 2009 he worked as the publication’s correspondent in Argentina and Uruguay. Rosenheck also writes regularly on baseball statistics and economics for The New York Times, and has contributed to Slate, Boston Magazine, The New Statesman, The New York Observer, and the Spanish-language edition of Vanity Fair, among other publications.

134 Responses to “FDL Book Salon Welcomes Daniel Altman, Outrageous Fortunes: The Twelve Surprising Trends That Will Reshape the Global Economy”

BevW March 6th, 2011 at 1:58 pm

Daniel, Welcome back to the Lake.

Dan, Welcome to the Lake and for Hosting today’s Book Salon.

Daniel Altman March 6th, 2011 at 1:59 pm

Hi all, thanks for having me! And thanks, Dan for a great introduction. I’ll respond to one of your points right away. I don’t necessarily want all of my predictions to come true – I’m actually hoping that people will heed some of the book’s warnings and change the future that awaits us, especially when it comes to things like addressing the effects of climate change, financial regulation, and the shortcomings of our political institutions. But more on that later….

Elliott March 6th, 2011 at 2:00 pm

Welcome to the Lake!

Can you tell us a few of the trends?

newtonusr March 6th, 2011 at 2:06 pm

Thank you Mr. Altman, for appearing today. Appreciate the hosting, Dan.
Bev, as always…

Mr. Altman, how do your predictions take into account peculiarities in governance?
For instance, had you predicted the crash of the Bush 43 years in, say, 1975, you would not have had the benefit of knowing the deregulatory fever that swept the country for 8 years, and even during the Clinton years.

Was it always, in your opinion, destined to happen this way?

Daniel Altman March 6th, 2011 at 2:06 pm
In response to Elliott @ 3

Sure, here they are:

1. China will get richer, and then it will get poorer again.
2. The European Union will disintegrate as an economic entity.
3. The new colonialism will leave the colonizers and the colonized worse off in the long term.
4. Changing immigration policies in rich countries will worsen the brain drain from poor countries, even as they get richer.
5. The backlash against capitalism won’t last, but it won’t be replaced by political stability, either.
6. Americans will become the world’s sales force.
7. As the global economy integrates, the middleman will win.
8. The collapse of the World Trade Organization will unlock new gains from trade.
9. A new set of lifestyle hubs will replace today’s business hubs.
10. An enormous fi nancial black market will arise outside of traditional centers.
11. Global warming will make rich countries cleaner and richer and poor countries dirtier and poorer.
12. The structure of political institutions will stop the world from solving its biggest problems.

ThingsComeUndone March 6th, 2011 at 2:08 pm

and climate change actually helping richer countries.

America at least is a major agricultural producer rural america/farm america is Red State turf they don’t believe in global warming and won’t change crops or prepare for the weather. As bugs that only live in warm weather move north crops will suffer.
As the weather gets more extreme between hot and cold and storms get worse well a freak late or early frost a heat wave/ drought or just more storm damage will all hurt crops.
I admit winter heating bills will lessen a longer growing season helps but peak power demand and peak electric costs are in summer when demand is highest for air conditioning.
If we were going solar power in a big way then yes global warming could help us.

Dan Rosenheck March 6th, 2011 at 2:09 pm

Sure. The book is broken up into four sections: limits, obstacles, opportunities, and risks. The predictions I found most surprising in each section were the disintegration of the European Union as an economic entity (limits); that the “new colonialism” (countries buying control of resources abroad) would be as bad for the colonizers as for the colonized (obstacles); that the economic future of the United States rests on using its comparative advantage in sales to better market other countries’ products to themselves (opportunities); and that global warming will actually benefit the rich world (risks).

ThingsComeUndone March 6th, 2011 at 2:10 pm

The boldest predictions in “Outrageous Fortunes” include the disintegration of the European Union

Why financial matters or some other factor? If its finance I would say we are much shakier than Europe but we don’t want to admit it.

ThingsComeUndone March 6th, 2011 at 2:11 pm

a premature slowdown in China’s economic growth,

When and what causes it?

Daniel Altman March 6th, 2011 at 2:11 pm
In response to newtonusr @ 4

Hi newtonusr,

As you’ll see from my response to Elliott above, one of my predictions is specifically about governance. I don’t think that our political institutions, as they currently stand, will be able to solve problems that require either 1) upfront sacrifices for long-term gains or 2) international coalitions. Hopefully a recognition of this fact will lead to changes, and we can discuss what kind of changes if you like. But most of my predictions are based on an analysis of the deep factors that drive economic growth over the course of centuries, not decades; they tend to be the kinds of institutions and cultural factors that are rooted in the bedrock of a society. The others are mostly the predictions of game-theoretical analyses of situations involving known actors, such as negotiations between members of the World Trade Organization.

All of this is a verbose way to say that I’m not forecasting specific economic cycles (which tend to take 8-10 years) but rather the very long-term “fortunes” of entire economies, based on the risks and opportunities inherent in their economic conditions.

Dan Rosenheck March 6th, 2011 at 2:12 pm

Ah, Daniel beat me to it. To pick one in particular, I’d note the similarity between the US-salesmanship chapter and the China chapter, in which Daniel argues that China’s Confucian legacy will eventually slow its growth. Daniel, would it be wrong to extrapolate that you think that countries’ cultures are relatively fixed, or at least that they evolve much more slowly than their economies? If so, why?

Elliott March 6th, 2011 at 2:12 pm
In response to Daniel Altman @ 5

oo thank you!

a lot to work with here

SanderO March 6th, 2011 at 2:12 pm

Is there anything that mitigates a complete abandonment of the current international monetary system? Is it part of a capitalist notion of capital flows themselves or is it separate and not related to capitalism?

ThingsComeUndone March 6th, 2011 at 2:14 pm

3. The new colonialism will leave the colonizers and the colonized worse off in the long term.

Every company in the Dow making money seems to be making money in foreign markets not in investing in jobs or selling products in America this prediction and the China one must make you very unpopular on the Cable TV business shows.:)

Scarecrow March 6th, 2011 at 2:16 pm
In response to Daniel Altman @ 2

Ok, I’ll bite. What’s the most important prediction you hope won’t come true, and why? More importantly, what needs to happen to prevent it?

Daniel Altman March 6th, 2011 at 2:16 pm
In response to Dan Rosenheck @ 11

I think cultures are relatively fixed. When the trends that propelled Japan’s growth – rural-to-urban migration and copying products to manufacture cheaply for export – ran out of steam, the country needed to change its culture in order to stop stifling innovation, embrace competition, and liberalize its markets… that is, if it wanted to compete head-to-head with the United States, Germany, and other cutting-edge economies. Junichiro Koizumi made some attempts at this as prime minister, but generally speaking Japan is still a much harder place for entrepreneurs to do business, and a less economically meritocratic place, relative to the United States. China will eventually have to make the same changes, but I think they will be just as difficult as in Japan. China’s business culture has been formed over thousands of years. Why would it suddenly change ten or twenty years from now? Some countries can re-choose their institutions – like the post-Soviet states did – but changing culture is tough.

TheLurkingMod March 6th, 2011 at 2:16 pm
In response to Dan Rosenheck @ 11

Dan, in the comment you are replying to, there’s a ‘Reply’ button. Click that and insert your reply, and it will be correctly formatted.
/~~~

ThingsComeUndone March 6th, 2011 at 2:16 pm

With about 35 cars per 1,000 people in China’s 1.3 billion-person population, roughly 80 percent of car sales in the country are currently made to first-time buyers. As Josie wrote for GigaOM Pro (subscription required), this potentially lowers the barrier to adoption of alternative vehicles. Nearly half of the more than 5 million electric vehicle charge point installations anticipated worldwide by 2015 will happen in China, according to Pike Research. In addition, the government-owned utility State Grid Corp. plans to invest $586 million in a smart grid buildout over the next five years.

China has been investing in a green economy across the board, including clean power, energy efficiency and plug-in cars.

http://gigaom.com/cleantech/the-key-to-chinas-electric-car-market-partnerships/

To reach 15 percent of total electricity-generating capacity nationwide by 2020 would require ramping up the industry to build in the neighborhood of 210,000 additional megawatts of wind capacity. It would mean building at twice the pace of the best year wind installations have ever been built in the United States – which was 10,000 megawatts in 2009. Too big a reach? Depends on how can-do we’re really willing to be. The Chinese installed more than 15,000 megawatts in 2010, a 62 percent increase over the previous year. They’re planning to do it again this year.

http://www.dailykos.com/story/2011/1/27/939201/-Sputnik-moment:-Reenergize-America15-20-by-2020

China very well might need all its rare earth minerals if they keep planning on increasing wind production and electric cars.

http://my.firedoglake.com/thingscomeundone/2011/02/06/rare-earth-minerals-chinas-undeclared-trade-war/

China seems the country best prepared to make a buck off of green energy and global warming.

Scarecrow March 6th, 2011 at 2:19 pm

re #7, it seems the reality now is not that middlemen win but that the financial sector wins and almost all incremental wealth/income, and with it political power, gets siphoned to the top 1% or less. Why would we expect further globalization to be any different?

SanderO March 6th, 2011 at 2:19 pm
In response to Daniel Altman @ 16

Why do economies or countries have to compete? Is competition rule #1… thou must compete or else!

Daniel Altman March 6th, 2011 at 2:19 pm
In response to Scarecrow @ 15

I’m going to try and reply to as many people as I can here, but please bear in mind that there are limits to thinking and typing speeds!

The trend I’d least like to come true is the last one. We need to reform our political institutions – or at least give our politicians different incentives – in order to ensure a better future for ourselves and our children. In the US, we need to make the costly, long-term investments in infrastructure, education, and research that we’ve been putting off for decades. Abroad, we need to invest in mitigating the effects of climate change, such as the disappearance (already) of tens of thousands of square miles of arable land in countries that are already very poor and sometimes volatile. We also need to form coalitions to deal with challenges like financial regulation; otherwise we’ll still see bad behavior leading to crises somewhere in the world, and the linkage of international markets will mean that these crises affect all of us.

Dan Rosenheck March 6th, 2011 at 2:20 pm
In response to Daniel Altman @ 16

Two years ago, I would have pointed to the peripheral European economies as a counterexample–they seemed to have not just gotten wealthy but also adopted many socioeconomic values from their European peers that promote development. Now, given their sovereign-debt woes, I’m not so sure…maybe you’re right that cultures only evolve very slowly.

But it’s still hard for me to accept that a country’s economic development would have little-to-no impact on its culture. How people interact and what they care about changes as they get richer, no??

eCAHNomics March 6th, 2011 at 2:20 pm

I was a short-term (year to year & a half) U.S. economy forecaster on Wall ST.

I started with current conditions and what they implied about the future. Worked in evidence on policy and a lot of study about how things worked in the past, mostly post-WWII.

Did you have the same starting point for your thought process? If not, what was your starting point?

If current conditions were your starting point, how did you select them among the many possibilities & how did you proceed from there?

Kurt Sperry March 6th, 2011 at 2:21 pm

China is fragile- much more than commonly believed. They have yet to reckon with their first major down economic cycle and they will have to deal with the political fallout of rising economic expectations going unmet. In a single party state with a corrupt control economy there is only one place to point the finger of blame and lacking any democratic institutions to act as a pressure valve, things could get ugly very, very quickly. The CCP’s iron fisted control of the media and concern over seemingly innocuous institutions not under government control such as the Falun Gong is strong tacit acknowledgment of their concern.

Dan Rosenheck March 6th, 2011 at 2:23 pm

Daniel isn’t arguing that buying up land in Africa is going to hurt China or Saudi Arabia in the next three months. He’s saying that whenever there is an eventual resource squeeze–which is why they are acquiring the assets in the first place–there will inevitably be conflict between colonizer and colonized, whose government will not be able to retain popular support if they respect the foreigners’ property rights. That’s still many years down the line.

Daniel Altman March 6th, 2011 at 2:24 pm

I’m going to start a new thread here to deal with the various comments on finance. I think there are two threats to worry about right now. One is a high probability of another crisis created by herd behavior and/or too-big-to-fail institutions. So far, financial regulations haven’t solved this one. The second is lower-probability but more important: the possibility that the United States will overstay its welcome in the credit markets. The moment a major creditor loses confidence in Treasury IOUs, the whole house of cards will collapse. We’re not too close to this happening now, but we’re closer than we’ve been in decades. We need a bipartisan plan to reduce our debt. Everyone in Washington knows this, but too few leaders are willing to do something about it.

ubetchaiam March 6th, 2011 at 2:25 pm

Mr. Altman ,welcome. In the research you did for your book did you consider what has been called the bio-info-nano singularity which posits that “technological progress is reaching such an extremely high, near infinite, value at a point in the near future that it will be impossible to predict what happens next based on extrapolations of past experience.”?

And it’s corollary, “What is globalised human society going to do with the mass of unemployed human beings that are rendered obsolete by the approaching super-intelligence of the Bio-Info-Nano Singularity?”

Daniel Altman March 6th, 2011 at 2:27 pm
In response to eCAHNomics @ 23

I used current conditions relatively little in making my forecasts. I spent much more time analyzing systems and institutions. For example, the European Union countries have different economic futures because of factors that were determined decades ago. Yes, their recent spending has affected their long-term debt levels, and that will play a part. But I also looked at things like long-term population trends and the way legal systems (which are usually hundreds of years old) affect the environment for entrepreneurship.

ThingsComeUndone March 6th, 2011 at 2:27 pm
In response to Daniel Altman @ 16

I think cultures are relatively fixed. When the trends that propelled Japan’s growth – rural-to-urban migration and copying products to manufacture cheaply for export – ran out of steam, the country needed to change its culture in order to stop stifling innovation, embrace competition, and liberalize its markets

Japan was doing great until they agreed with Bush 1 to move production of American cars to America then jobs in Japan went down. As far as innovation goes look at the Prius then look at GM having to go bankrupt before it could make the Volt.
Competition in the Airline business has lead to how many bailouts of airplane makers via military contracts that were not sent to the lowest bidder and an airline bailout and how many airlines going under since deregulation of the airlines?
Whats that joke about making how to make a small fortune investing in the airline business start with a large fortune:)
We broke up the phone companies and now we have crappy cell phone service while Europe has faster and cheaper cellphone, cable, internet than us.
We invent stuff because we had great public schools how many inventors come from private schools? We invent stuff because inventors had enough wages and time to afford to experiment on their own.
In unregulated workplaces the workers are squeezed of cash and time America is a two job kind of place now and we will invent less in the future because of that.

TheLurkingMod March 6th, 2011 at 2:28 pm

Let’s keep the topic centered on the book. Thanks.

/~~~

Scarecrow March 6th, 2011 at 2:28 pm
In response to Daniel Altman @ 26

Sorry, but I think almost everyone in Washington is confused about the debt. It is not possible for the US to default, unless it does something intentionally stupid — that may happen. But a nation with it’s own fiat currency can’t default — smart economists know that — unless it chooses to. The forecast, therefore, might be that the US via herd instinct may easily do something stupid and tank it’s own economy, not because it can’t borrow or create money, but because it doesn’t understand what money is and how it’s created.

Kurt Sperry March 6th, 2011 at 2:29 pm

The US enjoys a number of unique fixed advantages that no other large country in the world has- primarily an ideal geographical location with a huge agricultural area not reliant on irrigation, enormous fresh water resources, a lack of militarily threatening neighbors, the finest post secondary education system on Earth, our language and pervasive cultural patrimony, a potential for substantial resource independence including energy. And not least, a huge defense budget that can be, assuming energy independence, repurposed without harming American security. That’s roughly a trillion dollars a year nobody else has.

Dan Rosenheck March 6th, 2011 at 2:29 pm
In response to Daniel Altman @ 26

As long as the US is borrowing in its own currency, the only risk from over-borrowing is higher inflation down the road, no? The Fed is already buying 70% of new Treasury issuance. Clearly the weakening of the dollar and the potential loss of its role as the global reserve currency would be a major problem for the US, but there’s no way the country could have a Greece/Argentina style sovereign debt crisis, is there?

Daniel Altman March 6th, 2011 at 2:29 pm
In response to ubetchaiam @ 27

Wow, that sounds like something out of science fiction! Appropriate given that my book is dedicated to Hari Seldon…

I make a big point about *not* extrapolating to make my predictions. I am trying to understand the underlying dynamics of systems and make logical predictions based on those dynamics. I’m not just looking at a stream of numbers and trying to predict the next number.

It’s true, I think, that the huge flowering of the global economy and the massive daily exchange of ideas makes prediction more difficult; the range of things that *could* happen is exploding. But I still think it’s worth making forecasts based on what we do know. It’s like weather-forecasting: not perfect, but better than nothing.

Daniel Altman March 6th, 2011 at 2:31 pm
In response to Scarecrow @ 31

Your point is theoretically correct. In practice, however, nations with fiat currency can certainly be forced to default. At some point, the consequences of hyperinflation created by issuing new currency are worse than those of defaulting.

ThingsComeUndone March 6th, 2011 at 2:32 pm
In response to Dan Rosenheck @ 25

Daniel isn’t arguing that buying up land in Africa is going to hurt China or Saudi Arabia in the next three months

I wasn’t saying that either America is the defacto Economic Colonizer of the world Coke Cola, McDonalds, our movies, music, food, our food processing companies that import food, we use more of the world’s raw materials and energy than any other country why we buy stuff from the rest of the world.

Dan Rosenheck March 6th, 2011 at 2:34 pm
In response to Daniel Altman @ 35

I suppose the question is whether you can get away with a gradual monetization of deficits over time, or whether it inevitably gets out of hand if you keep borrowing “too much.” Do you have any thoughts on how much is too much?

ThingsComeUndone March 6th, 2011 at 2:34 pm
In response to TheLurkingMod @ 30

Just disagreeing with some of the ideas in the book not all of them How and when China will slow down for example.

Dan Rosenheck March 6th, 2011 at 2:37 pm

Well, Daniel’s chapter focuses on non-American foreigners–and particularly foreign governments–directly buying land or exploration/mining rights abroad. The question of the rest of the world buying American products–or, as Daniel foresees, the rest of the world hiring Americans to sell their own products–is dealt with in the “Americans will become the world’s sales force” chapter.

glacierpeak March 6th, 2011 at 2:37 pm

I recently read (and highly recommend) Dani Rodrik’s The Globalization Paradox. Any comments on this book specifically, and Rodrik’s impact on the policy community in general, by our two authors today?

Daniel Altman March 6th, 2011 at 2:37 pm
In response to Dan Rosenheck @ 37

Well, we saw the first warnings on US debt from a couple of credit-rating agencies a few weeks ago. Given how quickly they usually react to deteriorations in credit quality, the warnings should have gone out six months to a year ago. (Just look how long it took them to downgrade GM and Ford to junk.) Maybe we’re $500 billion away, maybe $1 trillion. But we want to stay far away from the blurry line….

BevW March 6th, 2011 at 2:38 pm

Daniel, How big a factor is the “oil economy” in your predictions? With the US and China competing for the same oil reserves.

ubetchaiam March 6th, 2011 at 2:39 pm
In response to Daniel Altman @ 34

Thanks for the reply; it’s mot science fiction though:
http://www.mi2g.com/cgi/mi2g/frameset.php?pageid=http%3A//www.mi2g.com/cgi/mi2g/press/100110.php

Let me also suggest that a nation whose currency is sovereign and fiat based can only be faced with a ‘forced default’ by the so called bond markets and that the intertwining of global finance precludes such a bogeyman from appearing. See “Chimerica:
http://en.wikipedia.org/wiki/Chimerica

The ‘real bogeyman’ is when neither private nor public investment is being made (the austerity model), therefore ‘drying up’ the means by which inflation is addressed.

papau March 6th, 2011 at 2:39 pm
In response to Daniel Altman @ 35

The end of the WTO is logical – as current rules make protecting your current “competitive advantage” nearly impossible without internal barriers – and even then China is demanding trade secrets as the price of access to its cheap labor. The result is that trade is no longer win-win but rather win-lose for the USA.

But the corporations like the current system – and around the world we are seeing that what the corporations want, they get.

So what do you see that will take down the WTO?

Daniel Altman March 6th, 2011 at 2:41 pm
In response to BevW @ 42

I didn’t write too much about oil, mainly because I think others are much better qualified to do so. But I do have some thoughts.

About 47% of crude oil is used to make gasoline. If we could cut that amount in half, we’d probably have enough oil to last long after you and I are dead. Could we do this if we had to? I think so – we’d just pay a little more for transportation. It would be like a small tax on the global economy until we developed still-more-efficient alternative fuel vehicles (which seems to be happening anyway). So I guess I’m not worried about an economic cataclysm because of oil, even with China’s demand growing.

Daniel Altman March 6th, 2011 at 2:44 pm
In response to papau @ 44

I don’t think corporations (I take it you mean multinationals based in the West) are loving the WTO as much as they used to. First of all, the WTO hasn’t had a major agreement to lower trade barriers since China became a member a decade ago. Second, the dispute-settlement arm of the WTO, which used to be a playground where the big countries were the bullies, is now more of a level playing field. Smaller, poorer countries are taking bigger, richer countries to task there – and winning. As I wrote in Newsweek and Big Think (links below), I think the rich guys will eventually pack up their toys and go home.

http://www.newsweek.com/2011/02/20/goodbye-and-good-riddance.html

http://bigthink.com/ideas/30861

Scarecrow March 6th, 2011 at 2:46 pm
In response to Daniel Altman @ 41

Are you predicting a debt crisis in the US within one year? The annual deficits now are over $1 trillion/year, so adding another $500 billion to $1 trillion to the debt takes less than a year.

And why should anyone pay any attention to the credit raters, who got everything wrong for the last ten years, can’t tell the difference between the US and Greece/Ireland, which don’t have their own currencies, and who are telling regulators they should NOT be be held accountable for their ratings? Seems to me the rest of the world is concluding these guys are not trustworthy.

newtonusr March 6th, 2011 at 2:47 pm
In response to Daniel Altman @ 46

wrt the WTO:

…I think the rich guys will eventually pack up their toys and go home.

OK, that is some big-think.
Are we talking about a decade from now? Shorter?

ubetchaiam March 6th, 2011 at 2:47 pm
In response to Daniel Altman @ 46

From the bigthink link:”Pretty soon, we should see a few large regional blocs dominating global trade.”; why does this remind me so strongly of 1984 by Orwell?

Kurt Sperry March 6th, 2011 at 2:48 pm

The technology pretty much already exists to make the US independent on imported oil, it’s just a matter of summoning the will to make the necessary infrastructure investments. Burning petroleum distillates for heat makes no technological sense in any case, they are best used as base stock for chemical engineering of manufactured goods which can then be recycled.

papau March 6th, 2011 at 2:48 pm
In response to Daniel Altman @ 41

credit-rating agencies have near zero credibility post the derivative magic of making C assets into AAA rated securities. That is reflected in the fact that rating changes over the last two years do not correlate with changes in relative value of money.

Actual debt to GDP in the US is a small fraction of what it is in Japan (although Japan does its calculations of GDP in a way to minimize the apparent growth while the US does the opposite). But even allowing for that nonsense, our debt level appears a long way from the tipping point – 10 trillion rather than one, IMHO – assuming we do end the Bush tax cuts – indeed if we end the Reagan tax cuts we are reducing debt very fast.

Why do you see us only a trillion away from a tipping point – less than a year – or are you just warning us about our fate if the Bush tax cuts are made permanent?

ubetchaiam March 6th, 2011 at 2:48 pm
In response to Scarecrow @ 47

Yeah, but they don’t know what to replace them with. And the PTB sure don’t seem to want to rein them in.

Daniel Altman March 6th, 2011 at 2:49 pm

Earlier we had a question about the gains in the global economy going to people working in finance. I think there’s a bigger theme here about what globalization is doing to our income distribution. We’re looking at a situation where the wealthiest, best educated, most connected people are getting a lot of the big opportunities to work and invest. In rich countries, this isn’t being accompanied by an expansion of opportunities for people at the bottom of the totem pole (as it is in many poor countries). So we’re seeing income inequality increase in countries that don’t take action to stop the trend. In the long term, this will hurt our economy. It’ll be less meritocratic, and we’ll give more opportunities to people who are rich but not so bright and fewer to those who are poor but talented. So yes, I worry about this problem… and finance isn’t the only place where it’s happening.

Dan Rosenheck March 6th, 2011 at 2:49 pm

Daniel, here’s another one from me. Your historical analysis of why Americans became the world’s best salesmen and marketers is extremely interesting. But I don’t understand why that’s a defensible competitive advantage or what the barrier to entry is. Why can’t other countries simply copy American sales techniques without paying American firms?

Daniel Altman March 6th, 2011 at 2:50 pm
In response to newtonusr @ 48

I don’t think that the Doha Round will go on for another decade, if that’s what you mean! I think that by 2025, we’ll have big regional trading blocs stealing the spotlight from the WTO. They’ll probably include the US and a large number of Latin American, Middle Eastern and, African countries; the European Union and its former African, Caribbean, and Pacific colonies; and the Association of Southeast Asian Nations with Australia… and perhaps China.

newtonusr March 6th, 2011 at 2:51 pm
In response to Daniel Altman @ 55

I did, thank you.

Daniel Altman March 6th, 2011 at 2:53 pm
In response to papau @ 51

Taxes will have to go up sooner or later. The question is only whether we have to have a credit crisis before they do. The American taxpayer certainly could, in principle, shoulder the burden of another $10 trillion in debt (it’s about $30,000 per person stretched over many years). But the ongoing changes in our political system are making a George H. W. Bush kind of readjustment look harder and harder. I’m a little bit worried, at any rate.

Dan Rosenheck March 6th, 2011 at 2:53 pm
In response to Daniel Altman @ 53

Isn’t the US education system supposed to be a vehicle for upward mobility? Certainly the majority of students at the most selective schools receive financial aid. It’s certainly true that globalization decreases within-country equality of outcome, but does it have the same effect on equality of opportunity? If so, why?

Daniel Altman March 6th, 2011 at 2:54 pm
In response to Dan Rosenheck @ 54

Hmm, why can’t Americans make cars that feel like German cars? I’d like to see a double-blind study if you think we can. The best people to purvey American commercial culture to the world are the ones who experience it from birth. It’s not a bulletproof advantage, but I think it’s real.

Dan Rosenheck March 6th, 2011 at 2:54 pm
In response to Daniel Altman @ 57

Why taxes up as opposed to spending down, or a combination of the two?

eCAHNomics March 6th, 2011 at 2:54 pm
In response to Daniel Altman @ 53

A couple of months ago (link lost to history), I read that the ONLY income group experiencing a rise in income in the U.S. in 2010 were those earning in excess of $52 million/year.

So the U.S. economy is screwing all but a small fraction of 1%. They just don’t know it yet.

Daniel Altman March 6th, 2011 at 2:57 pm
In response to Dan Rosenheck @ 58

Our system is still far from meritocratic. Kids with wealthy parents (and legacies) have a big advantage when applying to college. Money plays more of a role in politics than ever before. Corporate boardrooms are staffed by musical chairs. And social mobility has decreased dramatically since the baby boom generation; you can see it in the figures.

Daniel Altman March 6th, 2011 at 3:00 pm
In response to Dan Rosenheck @ 60

If you gave me the federal budget and a pair of scissors, I could probably get spending down without harming economic growth. I’m not sure our politicians can. They seem make cuts with zero correlation to the effects on the economy’s long-term potential to grow. A valuable (if slow to pay off) investment in scientific research is just as likely to get the axe as a pork-barrel bridge to nowhere.

eCAHNomics March 6th, 2011 at 3:00 pm
In response to Daniel Altman @ 62

Upward mobility in U.S. is, last I remember seeing it reported, something like 17th in the world. Most western European countries rank higher, just like they do in every other measure of well being.

ubetchaiam March 6th, 2011 at 3:02 pm
In response to Daniel Altman @ 63

In Elliott’s intro at myfdl to this book salon, it was written “And his forecasts for the future raise a pressing question for today: With so many challenges awaiting us, are our political and economic institutions up to the task?” ; my answer is no. Do you have a different answer?

Daniel Altman March 6th, 2011 at 3:02 pm
In response to eCAHNomics @ 61

According to the Census Bureau, most of the gains in household income (adjusted for inflation) since 1968 have gone to the top 5%. Some has gone to the rest of the top 20%. The lower 80% has lost out pretty steadily, though the second 20% flattened out in the past decade or so.

Dan Rosenheck March 6th, 2011 at 3:04 pm
In response to Daniel Altman @ 63

So what’s stopping said politicians from implementing the Altman Plan? ;) Is there something intrinsic in the US political system that is preventing sound economic decisionmaking? If so, what is it and how should it be changed?

eCAHNomics March 6th, 2011 at 3:05 pm
In response to Daniel Altman @ 66

I’m familiar with those stats. The point of my comment was that the skewed income distribution is getting worse at a vastly accelerated pace.

Not to mention that the industries in charge of the U.S. economy & U.S. pols are the dysfunctional ones: MIC, energy, med insurance, PhRMA, etc.

Daniel Altman March 6th, 2011 at 3:05 pm
In response to ubetchaiam @ 65

My answer is also no. In the book, however, I do make some suggestions for changing that answer to yes. And we don’t have to change our institutions to make it happen (though that might help). We simply need to take the long view ourself, and then set incentives for our political leaders based on that view. For example, “You think my vote depends on my income in the coming election year. But I take the long view, so I won’t vote for you unless you promise to vote for investments in infrastructure over the next twenty years, even long after you leave office.”

Dan Rosenheck March 6th, 2011 at 3:07 pm
In response to Daniel Altman @ 69

Has any electorate ever actually acted like that?? Democracy is the worst form of government except for all the others…the flip side is China where you get tons of infrastructure but, as you note, less innovation.

Kurt Sperry March 6th, 2011 at 3:07 pm
In response to Dan Rosenheck @ 67

Why would those in the decision making e.g. upper income demographic want to change course? Their personal economic trendlines all look good.

Daniel Altman March 6th, 2011 at 3:08 pm
In response to Dan Rosenheck @ 67

I see two threads coming together here….

Our politicians are on a two-year electoral cycle, and when there’s a presidential election coming up the campaign season can last for twenty-two months. How can we get them to focus on the long term? We could if we made our votes contingent on their long-term economic policies. But we’ve been trained to focus on the short term. I think the media is partly at fault here. If the media didn’t write a story about every data point that came out of our economy, a lot of business reporters would be out of work. Yet the long-term fortunes of our economy are much more important, and they change much more slowly. We need an educated electorate with a long time horizon, and the media isn’t always helping.

What do you say to that (said the former journalist to the journalist)?

ubetchaiam March 6th, 2011 at 3:08 pm
In response to Daniel Altman @ 69

“But I take the long view”; ah, the antithesis of U.S. culture *G*

eCAHNomics March 6th, 2011 at 3:10 pm
In response to Daniel Altman @ 69

Voting makes no diff in the U.S. Candidates are selected by the PTB long before voting ever begins. Leaving no choice for voters anymore.

Not to mention the structural flaws in the U.S. voting system, like winner-take-all and black box ballot machines.

Kurt Sperry March 6th, 2011 at 3:11 pm

Long term planning has to be the province of public institutions, private business is generally loathe to look further ahead than the quarterlies.

Glenn March 6th, 2011 at 3:13 pm
In response to Daniel Altman @ 5

This is the sort of desperate wishful thinking I’d expect from someone who writes for The Economist. You are predicting that the two greatest threats to continued American dominance, China and the EU, will both fail badly. Global warming will actually help insure American dominance. Americans will have lots of great jobs as the “world’s sales force”, which presumably means that they will be able to skim off a lot of the profits from the world’s manufacturing industries. Brainy people around the world will abandon their own countries and come to America.
If you’re an American, this must all sound very nice indeed. But doesn’t most of the population of the rest of the world have good reason to hope most of your predictions don’t come true?

Kurt Sperry March 6th, 2011 at 3:13 pm

Oh. You guys all know each other. Nevermind.

Daniel Altman March 6th, 2011 at 3:14 pm
In response to Kurt Sperry @ 75

Hi Kurt – why shouldn’t private companies look further ahead? Surely they need to know the risks and opportunities that await years down the road, just as governments do. I agree that governments can take a longer time horizon; their main source of revenue (taxpayers) will most likely be the same fifty years from now. But companies that focus on quarterly earnings may be going through a lot of wasteful financial gymnastics – time, effort, and money that could be better directed to investing in the long term.

Dan Rosenheck March 6th, 2011 at 3:15 pm
In response to Daniel Altman @ 72

Well, as long as we have for-profit media, this is going to be a problem. Journalists have to make a living, which means they need to sell people the news they want to hear, which most of the time is probably not the news they need to hear. Unfortunately, this trend has been accelerating–as the Internet has disrupted the mainstream media’s traditional business models, we’re seeing more and more pandering journalism intended to grab eyeballs at any cost, and less and less considered professional analysis. The alternative would be something like the BBC, or a nationwide version of PBS. But at a time of public belt-tightening–even the Daniel Altmans of the world are chirping about the deficit :)–it’s hard to see how we get support for a new government expenditure that would surely be tarred as a liberal East Coast mainstream media conspiracy…

oldgold March 6th, 2011 at 3:15 pm

Daniel: Are you familiar with Nasim Taleb’s book The Black Swan?

The book is concerned with the troubling question of: How do you live in a world where accurate prediction is rarely possible, where history is not a reliable guide to the future and where the most important events cannot be anticiated?

papau March 6th, 2011 at 3:16 pm
In response to Daniel Altman @ 55

I am lost on how WTO rules are avoided by regional agreements.

And if the current GATT/WTO rules continue our corporations move all jobs to low labor cost countries while at the same time giving up “our” “competitive advantage” current manufacturing and research data to the low labor cost country (read China as having this as a formal rule currently) – all the while surrendering our national sovereignty in such areas as the financial reform law just passed. Granted the EU ignores the WTO’s “national sovereignty” override in the sense they change nothing and just pay the penalty, but getting rid of the WTO may take more than the development of trading blocks -

Or is there a “WTO” ending that is not simply countries formally dropping out?

earlofhuntingdon March 6th, 2011 at 3:17 pm
In response to Daniel Altman @ 62

Very much so. And the most elite institutions are the staunchest defenders of legacy admissions, which further limit access and upward mobility. The odds of equally talented students gaining admission to Harvard, where one is from a single-parent family in white Appalachia and the other is a double legacy whose parents live in Sudbury, MA, are quite different.

Dan Rosenheck March 6th, 2011 at 3:17 pm
In response to Daniel Altman @ 78

Isn’t this just an argument for private equity? If you’re right, you could make money off of removing those financial gymnastics—as the Blackstones and KKRs of the world do.

Daniel Altman March 6th, 2011 at 3:17 pm
In response to Glenn @ 76

Hi Glenn, I certainly don’t want several of my predictions to come true! It would be great if China could keep growing, the European Union could stay together and grow in synch, and climate change made no difference to anyone at all. I work every day at Dalberg (www.dalberg.com) to raise living standards around the world, and my main concern is fighting poverty. The global economy is so interconnected now, and it’s by no means a zero-sum game. More wealth abroad means more people who can buy our products. More wealth here means more purchasing power for exports from developing countries. These are good things for the whole world.

Kurt Sperry March 6th, 2011 at 3:17 pm
In response to Daniel Altman @ 78

The business culture is such that long term investment will necessarily be detrimental to short term profit goals and by the time the dividends from those investments pay off, the upper echelon executives will in most cases have moved on our pulled the ripcords on their golden parachutes.

ubetchaiam March 6th, 2011 at 3:18 pm
In response to Daniel Altman @ 62

RE “Corporate boardrooms are staffed by musical chairs.” ; 118 people make up the board of directors for the top 10 media stations and of all the stations on the air there are only 6 corporations that own all of the media outlets. The 118 are made up of people from the criminal banking cabal, Pharma giants, and the oil industry to name a few.

Daniel Altman March 6th, 2011 at 3:19 pm
In response to oldgold @ 80

I am familiar with the book. I can’t predict the things Donald Rumsfeld called the “unknown unknowns”, like an alien invasion or perhaps the whole universe folding up into a Chinese takeout container. No one can. So I do the best I can within the parameters of the world we know so far. Hopefully it’s better than nothing….

earlofhuntingdon March 6th, 2011 at 3:20 pm
In response to Dan Rosenheck @ 79

The application of competition rules would help. But they never seem to trouble the media acquisitions of the likes of Rupert Murdoch.

Daniel Altman March 6th, 2011 at 3:20 pm
In response to Kurt Sperry @ 85

That’s exactly right. Investors need to reward corporate executives for doing things that will help companies in the future, not just today. If I were chairman of a corporate board, I would make a large part of the CEO’s compensation come due in ten or twenty years, based on long-term performance, whether or not he/she was still with the company then.

frmrirprsn March 6th, 2011 at 3:22 pm
In response to Daniel Altman @ 78

Private, publicly held corporations should take the view that the objective is to maximize long-term earnings. Unfortunately, it seems to me that the objective is to maximize short term compensation for the top 5 officials in the corporation. As far as I’m concerned an equity share is now simply the most subordinate debt issued by a corporation.

earlofhuntingdon March 6th, 2011 at 3:22 pm
In response to Daniel Altman @ 84

It seems more accurate to ask which China will keep on growing or suffer decline: the roughly 300 million living in urban China or the billion who live elsewhere. Their paths, like the haves and have nots here, are diverging.

ubetchaiam March 6th, 2011 at 3:23 pm
In response to Kurt Sperry @ 75

Which is why States have to start their own “Bank of N.Dakota’ facilities. The rating agencies keep them locked into the private business logistical nightmare.

gigi3 March 6th, 2011 at 3:23 pm
In response to glacierpeak @ 40

I’ll second your recommendation of Rodrik’s, The Globalization Paradox. I read it a couple of weeks ago.

earlofhuntingdon March 6th, 2011 at 3:23 pm
In response to Daniel Altman @ 89

Views like that assure that you’ll never be on a corporate board, let alone chair one.

Dan Rosenheck March 6th, 2011 at 3:23 pm

I might argue the contrary! Maybe media firms need consolidation and a measure of market power in order to remain profitable and keep impoverished journalists like myself in jobs. Of course, that gives their owners a tremendous amount of political sway.

wattsyourproblem March 6th, 2011 at 3:23 pm

Professor Altman,

I’ve recently read some posts in regards to the revolutions in the Middle East in which it has been postulated that the societies that replace the autocratic regimes could bring about new economic/social experiments including a high degree of wealth redistribution. How do you see a potential rise of new economies that disregard neoliberalism (if they should actually materialize) affecting your long term views?

Thanks,

Drew

Kurt Sperry March 6th, 2011 at 3:25 pm
In response to Daniel Altman @ 89

I’d like to see that taught as theory at HBS. Heh.

earlofhuntingdon March 6th, 2011 at 3:25 pm
In response to frmrirprsn @ 90

I think that view more accurately states the predominant perspective among top managers and their corporate boards; regulatory or supervisory capture no longer applies only to public officials.

earlofhuntingdon March 6th, 2011 at 3:27 pm
In response to Dan Rosenheck @ 95

So you’d rather remain with BSkyB rather than Sky News, I take it. Excuse me if that view seems a tad conflicted.

ubetchaiam March 6th, 2011 at 3:28 pm
In response to Dan Rosenheck @ 95

And I -and others- would argue that the consolidation restricts your capability to have such media compete for your skills.

Daniel Altman March 6th, 2011 at 3:29 pm

Hi Drew,

The new governments in Egypt, Tunisia and perhaps other countries have a great opportunity to re-choose their institutions like the post-Soviet states did. Since people power gave them their positions, they’ll be under pressure to make their societies more meritocratic. This can only be a good thing for global growth; think of the thousands of talented people who were denied opportunities under the old regimes – activating their economic potential will make a big difference. Of course, I’m assuming that the armies and other elites won’t derail the process.

mzchief March 6th, 2011 at 3:30 pm
In response to ubetchaiam @ 92

A point for reference regarding that:

As states struggle to meet their budgets, public pensions are on the chopping block, but they needn’t be. States can keep their pension funds intact while leveraging them into many times their worth in loans, just as Wall Street banks do. They can do this by forming their own public banks, following the lead of North Dakota—a state that currently has a budget surplus.

(excerpt from “How Wisconsin Could Turn Austerity into Prosperity: Own a Bank” by Ellen Brown, Mar. 05, 2011)

Shorter: Break up the TBTF banksters via the ND state bank form going viral.

Dan Rosenheck March 6th, 2011 at 3:31 pm

Another one from me, Daniel:

You predict that the brain-drain phenomenon will only increase with globalization. Is that a problem for the world as a whole, or just for the poor countries losing their top talent? And either way, what strategies would you recommend for poor countries to address it?

earlofhuntingdon March 6th, 2011 at 3:33 pm
In response to ubetchaiam @ 100

Further consolidation, the financialization of media sellers, and worse, the Murdoch-like politicization of what passes for news, narrows the public’s access to views that conflict with the views of media’s dominant owners and top managers.

Kurt Sperry March 6th, 2011 at 3:34 pm

journalists need to find a more decentralized means of monetizing their work. In the internet age with publishing costs being relatively trivial, there are huge opportunities for journalists outside the orthodoxy built on media requiring huge capital investments and attendant overheads.

ubetchaiam March 6th, 2011 at 3:34 pm
In response to mzchief @ 102

Thanks I know; I’m working with someone on an initiative here in CA to do that very thing.

mzchief March 6th, 2011 at 3:36 pm
In response to ubetchaiam @ 106

You are welcome. I provided the documentation in this forum merely as a courtesy to all readers.

earlofhuntingdon March 6th, 2011 at 3:37 pm
In response to Dan Rosenheck @ 103

Brains drain from many places, not just from Haiti to Paris or from Nigeria or Egypt to the UK or the US. Britain complained of brains draining to the US for decades. Draining brains was a frequent whinge coming from Oxford, competing with Cambridge and Harvard/MIT for top science students. US schools complain about it now, in the context of GWOT policies making it harder to compete for or to keep top Asian students, which are now, oddly, being successfully sought by UK schools.

Daniel Altman March 6th, 2011 at 3:37 pm
In response to Dan Rosenheck @ 103

I think it is a problem for the world as a whole.

Yes, the exodus of doctors, engineers, scientists, and other professionals from poor countries will initially help economic growth in the countries to which they migrate. And, as my colleague Yaw Nyarko at NYU points out, in some cases these professionals will send a lot of money home – perhaps more than they could have earned if they had stayed. But overall, I think this trend is a long-term problem for poor countries; they’ll lose the professional middle class they need as an anchor for stable growth.

If the poor countries fall further behind rich countries, then we face a much harder battle against poverty, with its attendant global risks in the form of disease, conflict, etc. We can also expect to see fewer and smaller markets for our exports. Both of these trends will hurt us in the long term, perhaps canceling out the benefits of the brain drain.

ubetchaiam March 6th, 2011 at 3:40 pm

Appreciated mzchief.

Dan Rosenheck March 6th, 2011 at 3:41 pm
In response to Daniel Altman @ 109

…and strategies for poor countries to address it?

ubetchaiam March 6th, 2011 at 3:41 pm

Comment 110 was meant for you.

Daniel Altman March 6th, 2011 at 3:41 pm

I would add that the UK makes it much easier for high-skilled, highly educated, high-earning people to migrate permanently than the US does. Compare our puny H1-B visa program to the UK’s Tier 1 visa program. You can get a Tier 1 permit in a couple of weeks regardless of whether there’s a job waiting for you in the UK. Not so on either count with H1-B.

Glenn March 6th, 2011 at 3:41 pm
In response to Daniel Altman @ 84

So why do you think the people of China and Europe will fail so badly to do what’s in their society’s best interests? The idea that Confucian ideals are somehow going to prevent China from being successful sounds like warmed over Max Webster. If you look at the last two thousand years of Chinese history, you’ll note that for much of that time, China had the most advanced technology and economy on Earth. Then it had a bad two or three centuries, followed by the very recent upturn in the last few decades. So why does Confucius prevent China from (for example) developing quantum computers or nanotechnology?

Kurt Sperry March 6th, 2011 at 3:41 pm
In response to Daniel Altman @ 109

A country experiencing brain drain doesn’t just lose the short term earning power, but the cultural foundations for furtherance of development through upward mobility and education. You can’t send that home in a bank draft.

ubetchaiam March 6th, 2011 at 3:42 pm
In response to Dan Rosenheck @ 111

Would you believe incentives for ex-pats?

Daniel Altman March 6th, 2011 at 3:43 pm
In response to Dan Rosenheck @ 111

Poor countries can hold onto their top-achieving people by giving them real opportunities to capitalize on their talents, ideas, and hard work. That means making it easier to start businesses, opening up financial markets, and ending government franchises and other monopolies. Many migrants would stay in their home countries if they could earn a decent living – perhaps not as much as they could earn abroad, but enough to live comfortably – without fear of expropriation or persecution. It looks like there are more countries that can offer them this deal today then there were a few weeks ago… but the number is still far too few.

Daniel Altman March 6th, 2011 at 3:44 pm
In response to Kurt Sperry @ 115

Good point, Kurt. I usually say that to Yaw, too. Sending money home doesn’t improve the competitiveness of local industries much. If you can’t improve the productive capacity of an economy, then that extra money will either be spent on imports or just create inflation. Not such a great boost.

earlofhuntingdon March 6th, 2011 at 3:45 pm
In response to Daniel Altman @ 109

“Canceling out effects” seems an arithmetic and insufficient description of the economic, social and political impoverishment of poorer countries and the narrower decline in the competitiveness of institutions, industries or regions in richer ones.

Dan Rosenheck March 6th, 2011 at 3:47 pm
In response to Daniel Altman @ 113

You know, I’ve never really understood the consensus that rich countries should compete for the highest-skilled immigrants and keep the unskilled out. Don’t rich countries have *huge* needs for unskilled labor? Who would pick American fruits or build the country’s buildings if the US really managed to keep illegal immigrants out? And bringing in cheap unskilled foreign labor in service industries decreases the cost of what locals consume, leaving them more disposable income to make productive investments…no?

earlofhuntingdon March 6th, 2011 at 3:48 pm
In response to Daniel Altman @ 113

Agreed, which is what I meant by the shorthand reference to the immigration policies, profiling and other forms of discrimination coming out of the US’s policies in its global war on “terror”. I would add that the current UK government seems intent on reversing the UK’s once welcoming attitude toward talented immigrants.

Daniel Altman March 6th, 2011 at 3:49 pm

Your Lordship, I couldn’t agree more. My eloquence and time for typing are somewhat limited, however!

Daniel Altman March 6th, 2011 at 3:51 pm
In response to Dan Rosenheck @ 120

I never said rich countries should keep the unskilled out. I’d say the US immigration policy is devoid of economic content from top to bottom, whether it’s six-figure-earning PhDs or undocumented construction workers. We need a complete overhaul to rationalize it. I don’t think the US has ever suffered from allowing hardworking people who want to make a better life for their children to put down roots here… but we don’t test for that in our visa interviews.

earlofhuntingdon March 6th, 2011 at 3:53 pm
In response to Dan Rosenheck @ 120

True. But many Ag laborers in the US are undocumented. That’s officially ignored when their labor is wanted. But despite that such workers are often phenomenally productive and law abiding, public officials deem it politic to disdain them and prohibit them from acquiring a permanent right of abode, let alone citizenship.

The German history with Turkish immigrants also illustrates the social problems involved with attempts to hire unskilled workers while denying them the right to stay permanently or become citizens.

Dan Rosenheck March 6th, 2011 at 3:54 pm
In response to Daniel Altman @ 123

No, you didn’t, but lots of people do, and you do write about a heated competition for the most-skilled immigrants in “Outrageous Fortunes.” Why do you think that the economic contributions of unskilled immigrants–particularly the illegal ones in the US, who pay into Social Security and will never get a cent back–go unrecognized?

earlofhuntingdon March 6th, 2011 at 3:56 pm
In response to Daniel Altman @ 122

I appreciate the comment, your willingness to submit to our critical questions, and the hope that numerate analysis need not prohibit assessing the social impacts of economic policies, basing policy judgments on both.

BevW March 6th, 2011 at 3:56 pm

As we come to the end of this Book Salon,

Daniel, Thank you for returning and spending the afternoon with us discussing your new book and the global economy.

Dan, Thank you very much for Hosting this Book Salon. Have a safe trip back to London.

Everyone, if you would like more information:
Daniel’s website, and book.

Dan’s website

Thanks all,
Have a great week!!

Daniel Altman March 6th, 2011 at 3:58 pm

I think there’s a perception that undocumented immigrants are somehow a burden on the economy, and that they take jobs for which Americans would have received higher wages. The former doesn’t seem to be true at all, if you look at the fiscal calculation. The latter may be true in some cases; hiring illegally is frequently – but not always – a way around the minimum wage. But go back a few years. Our economy had unemployment below 5% even with all the undocumented workers. Surely we could afford to incorporate many of them into the legal economy if we did a better job managing our other economic policies.

Daniel Altman March 6th, 2011 at 4:00 pm
In response to BevW @ 127

Thanks to all of you for such a stimulating discussion! If you want to keep interacting with me, please visit my Facebook page:

https://www.facebook.com/pages/Daniel-Altman/235015537593

Or look me up on Twitter:

http://www.twitter.com/altmandaniel

All the best, and I hope you enjoy my book!

earlofhuntingdon March 6th, 2011 at 4:02 pm
In response to Daniel Altman @ 117

The Chinese seem to have reversed their brain drain. Fewer students seem to think it necessary to study abroad to get an adequate or superlative education. Fewer business and other potential leaders seem to think it necessary to have such foreign qualifications or experience either to get ahead personally or to get ahead in China.

newtonusr March 6th, 2011 at 4:04 pm
In response to Daniel Altman @ 129

Thanks Daniel. A very interesting conversation.

TheLurkingMod March 6th, 2011 at 4:05 pm
papau March 6th, 2011 at 4:31 pm

China is forcing our tech companies to set up research facilities – indeed to give them an education in their manufacturing and technology secrets – if our tech companies want access to their cheap labor.

Given that – and the support to start your own company or have a relative to the middle class great living – why would the brain drain not be reversed?

earlofhuntingdon March 6th, 2011 at 5:39 pm
In response to papau @ 133

I agree. How could the brain drain not reverse in China’s favor. China has far more attractions than relatively cheap labor. It’s has large consumer and industrial markets. Urban industrialized China, ignoring the billion living elsewhere, is numerically as large as the United States. General Motors, for example, makes and sells more cars in China than it does in the US; it earns far more profit there, too. Its tech center in Shanghai competes directly with the tech centers in Detroit and Frankfurt and in some ways has surpassed them.

Foreign investment in China is an important part of China’s growth, but it’s not the whole story. Looming at least as large is that domestic and foreign companies in China alike sell their products globally. It has a lock on toys and cut ‘n sew commodities, and huge piece of the global production of appliances like refrigerators. There’s no Maytag or Whirlpool anymore, except as trademarks and IP owned by foreigners, which is what happened to once vibrant US radio and television makers. It has significant market share in the design and production of everything from microprocessors and microcameras to apples to cars.

China is growing at more than twice the rate in the US. Chinese students see opportunities to stay at home and attend world class or competitive schools and then to start their own companies or work for industries now owned by, headquartered or whose global focus is China. Why carry coals to Newcastle?

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