You might not be familiar with it, but “Very Serious People” is a popular slur on the internet to describe a certain brand of politician, economist, and pundit who talk about the need for bold steps and sweeping structural reforms to deal with problems like the deficit, America’s lack of competitiveness, and the need to build a retooled, highly educated workforce prepared for the high-tech challenges of the 21st century.
In the eyes of the “Very Serious People,” If you propose something so crude as just spending a lot of money to put people to work, but don’t also propose some long-term deficit “solution,” then, well, you’re just not being serious.
The Simpson-Bowles Commission and its supporters. They were serious. Paul Ryan? Serious.
Anyway, one of the fundamental beliefs of this set of folks is that unemployment is the result of some fundamental (mostly technological) change to the economy. Gone are the old days of working in a store or in a factory or hammering nails to build a house. All that collapsed, and the industries of the future (like building apps for phones or sifting through piles of Big Data) aren’t open to the workers of the pre-2008 world. And so therefore, they say, it’s crude and silly to think that mere fiscal stimulus can do anything but put a temporary “band aid” on the problem.
But there’s a problem with this view, which is that it doesn’t accurately describe the economy at all.
Karl Smith at modelled behaviour posted this brilliant chart the other day.
The blue line is the shipment of technological manufactured goods. The red line is the shipment of metals for the durable goods industry.
One of the lines has been surging since the recovery, and it isn’t the tech one. It’s the major old economy one.
If we listened to the Very Serious People, we’d be trying hard to train people to work in tech, rather than in burgeoning heavy industry, that are having major booms.
In fact, rapid growth in car sales is said to have accounted for over half of Q1 GDP GDP growth.
Now think about that: Even the Obama administration, when it was bailing out the auto industry in 2009, would probably never have guessed in public that car sales would be the primary driver of GDP growth. If you had said that, you’d have been totally laughed at by the people talking about the economy of tomorrow.
Meanwhile, certain measures of the housing industry (like permits and starts) are starting to achieve liftoff as well.
And by this point, probably nobody needs to be told what a boom there’s been in employment in domestic resource extraction.
There’s definitely no question that there are areas of the US economy that are growing incredibly rapidly, and which face a major talent shortage, since not many people can code iPhone apps or whatnot. But labour shortages have always been a big thing at the high end of the economy.
The fact of the matter is, though, that the US labour market is well suited for a lot of what needs to get done: Building stuff, manufacturing big things, and of course taking care of old people. Spending money to put people to work in these areas is certainly one plausible strategy that needn’t be scoffed at.
Stepping back for a moment, it’s worth thinking about what it is that makes people insist on the need for big, bold ideas, rather than simple stuff like stimulus, to help the economy. It’s probably a bias of intellectuals that simplistic stuff just isn’t interesting, and that only grand prescriptions could work. Furthermore, it just doesn’t sound good. Saying “structural problems” makes you sound interesting. Talking about a high-tech workforce makes you sound like someone with vision. Saying “spend more” is boring.