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One of the most influential public policy books for me is 1988′s Third Century, co-written by Joel Kotkin and Yoriko Kishimoto. It was a timely and thorough — and correct — response to a spate of books theorizing that America/free enterprise was in permanent decline versus Japan/industrial policy. Rather, argued Kotkin and Kishimoto, America’s flexible, entrepreneurial economy gave it a “reserve power,” or sokojikara, that would enable it to out innovate its Asian competitors.
Good call. As this following chart shows, Third Century came out right around the time Japanese per capita GDP peaked as a share of America’s and then began declining as the Land of the Rising Sun entered its long stagnation:
All of which leads me to this upbeat Bloomberg story: “America Resilient Five Years After Great Recession” by Kasia Klimasinska and Shobhana Chandra. The piece outlines the US economic rebound since the Great Depression:
The U.S. is weathering federal budget cuts and higher payroll taxes, growth is picking up and some economists predict the expansion, now in its fifth year, may last longer than most. The signs of resilience are everywhere: Households continue to spend. Businesses are investing and hiring. Home sales are rebounding, and the automobile industry is surging. Banks have healthier balance sheets, and credit is easing. All this coincides with the economy shedding the excesses of the past, such as unmanageable levels of consumer and corporate debt.
In other words, we are in an economic recovery. Which is great. But there is more to the story, as WaPo reporter Jim Tankersley notes:
And let me add a few other things via the miracle of pictures:
1. The slowdown in productivity growth starting in 2006:
2. The continuing output gap:
3. The dead-in-the-water labor market:
Perhaps most of all, I am worried about America’s sokojikara. As the FT’s Ed Luce noted recently: “The rate of small business creation in the US is in long-term decline. Last year, just 513,000 businesses were created, down from 543,000 in 2011. Overall, businesses under five years old account for just 8 per cent of US businesses, against 13 per cent in the 1980s, according to the Kauffman Foundation.” And there are even more troubling numbers here and here about our entrepreneurial economy.
Yes, America is recovering. And things might even pick up a bit over the next year or two. But are we really laying a foundation that will avoid a New Normal future? We need to move from signs of resilience to signs of above-trend growth. No wonder more than half the country still thinks America is in recession.