April 10, 2012

Brooks, Cowan, tag-team economic stupidity

David Brooks, riffing on Tyler Cowan, claims that a new American economic boom is around the corner. Not necessarily immediately, but in a decade or two.
Are they right?
Even if not all wrong, they're not as right as they think they are. With Brooks, of course, that's no surprise. And, on a more intellectual level, it's really not a surprise of Cowan. I'm realizing just how much of a libertarian he is, and how he's willing to let his thinking be driven by this.
Let's go to Cowan as the source of what needs to be refuted, starting with this:
To put it simply, the closer other nations come to our economic level, the more they will want to buy our stuff. Indeed most of those nations are growing rapidly, so we can expect their attentions to shift toward American exporters. The leading categories of American exports today—civilian aircraft, semiconductors, cars, pharmaceuticals, machinery and equipment, automobile accessories, and entertainment—are going to be in the sweet spot of growing demand in what we now call the developing world. 
On traditional manufacturing, China's already shown plenty of penchant for stealing know-how, design blueprints and many other things. Add that to its growth in military aircraft, there's nothing to stop China from building civilian planes that it at least deems worthy for its interior market, and sooner rather than later.
Semiconductors? Cowan must be dreaming here.
Pharmaceuticals? In the last decade, they've been more and more outsourced to India, at least generics. Name brands likely will be soon enough.
Entertainment? Bollyworld will continue to grow, not shrink. Ditto for Chinese-made entertainment. And Bollywood at least will probably find a growing market outside of India, due to the English-language factor.
Cars? China is continuing to expand its domestic manufacture, like Cherry Motors. And Cowan acts like he's never even heard of India's Tata. Then, he adds the part about Japan losing its creative edge here. Excuse me? Never heard of Prius? Which is going to become a whole line of Toyota's?
Meanwhile, it's nice, or "nice," to see that Cowan is not only a libertarian of sorts, he's a libertarian hawk:
As a major exporter (among other strengths), the United States can be expected to maintain and even extend its investments in its Navy and Air Force. The current defense budget austerity won’t last very long, meaning, among other things, that it won’t be a fun time to be a pirate.
Austerity? In the middle of fighting one land war in the "war on terror" and giving open ends to the actual military departments, and private mercenaries, to fight more? Austerity?
And, it's even more "nice" to see that, in terms of hard-heartedness, Cowan is a libertarian indeed on the home front. He talks about what all the above (whether he's right about it or not) will mean for American jobs:
The class of elite labor will grow, and protest against the “one percent” will seem anachronistic. ... (S)ignificant segments of the American workforce are likely to continue suffering falling real wages, even in a time of rising export prowess. ... We will continue to cut a proverbial “deal with the devil”, in which ever more jobs will be created in the relatively protected service sectors, while much of the economic dynamism and income gains will accrue to the capitalists, CEOs and managers who dare to export.
And here's the kicker. This is all happening because we're not libertarian enough:
A lot of people complain about this deal from both sides of the political spectrum, but few observers are willing to countenance a truly open, competitive set of educational, governmental and health care institutions as a remedy. Libertarian-leaning recommendations for open competition everywhere may or may not be acceptable to us, but they have a bracing way of pushing the truth before our eyes.
Of course, for Cowan, this too is OK, because he's a (mildish) sort of Internet utopian. He's nowhere near Ray Kurzweil, but he does believe that the Internet is going to transform, for the economically better, the net income bottom line for many.
I hadn't read Cowan in much depth very often before now. And, I likely shan't in the future. In fact, I think I have a mild loathing for the man

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