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America’s economy is once again reinventing itself (economist.com)
84 points by shill on July 14, 2012 | hide | past | favorite | 74 comments

This is disappointing.

I enjoy some of the articles in the Economist, but this is advocacy writing at its worst. It strings together a few examples as claims, each presented uncritically, then generalizes from this bullet list to make sweeping claims with emotional characterizations.

It never shows you if each of these examples is actually net positive for our society and economy. It never shows you the scale or impact they're having.

It's like saying "Kevin Durant's shooting percentage was up this year, so the Thunder are going to win the next 10 NBA Championships!"

It's cheerleading.

No surprise there's no author's name on it.

I enjoy some of the articles in the Economist, but this is advocacy writing at its worst.

Your clue that this submitted article here comes from the "leader" section of editorials by the Economist editors comes from the "(see article)" link in the submission here. You're reading an editorial, and it is written like an editorial, with a point of view. The actual underlying article


to be found by following that link is longer, more detailed, more in the style of objective journalistic reporting, and full of food for thought.

Thanks. I didn't know that "Leader" meant "Editorial."

The linked article is much more what I would expect.

It appears to be a British term[1], which makes sense for The Economist as it's based in London.


Also, The Economist doesn't provide credit for individual writers since, in their estimation, there aren't any.

Individuals prepare the pieces, of course, but the publication's editorial approach marks up the results quite heavily in a process specifically designed to reflect both a house style and a set of long-held positions that maintain a single and fairly coherent perspective.

For instance, they've provided long-standing opposition to the War on Drugs, and rarely miss the opportunity to reiterate this position whenever the subject comes up. Likewise, they had a massive problem with Silvio Berlusconi. As a human being, they held him in the deepest possible contempt. They were entirely open about this, and dedicated much effort to detailing the causes of their overtly intense dislike.

Some disregard what they have to say as "mere opinion" to which they'd say "No, this is informed opinion." In any case, if you're writing for The Economist, you're producing raw material that will get edited and rewritten until it reflects the very distinct views and voice that the publication has painstakingly developed for itself over the course of 17 decades.

Suggestion: future HN submissions linking to editorials in magazines, newspapers, or journals should be prefixed with OpEd:

The Economist typically omits bylines for all its writing:


I wasn't so bothered by the fact that it was opinionated but that it's examples had such obvious and in some cases faulty assumptions. The idea that America will become an exporter of oil due to natural gas is, pardon the pun, a pipe dream. Natural gas has absolutely affected our dependence, but no one knows how long of a supply (or rather given the oil industries continued lack of accuracy on life-of-well numbers, none that I trust) or how regulation will affect this in the long run. Fracking has been targeted by many environmental groups as a huge enemy and I expect to see that continue.

Nothing says "buff and reinvented" like red, white and blue nipple tassels.

Thanks for reminding me why I stopped subscribing to The Economist. In addition to the usual simpleminded analysis that serves only to flatter its readers, we get an endorsement of fracking! Good lord!

It's hard to argue with hundreds of billions of dollars and oil-addict America becoming a net exporter.

Here’s what’s happening with natural gas vs coal, I assume at least partly attributable to fracking: http://www.theatlantic.com/technology/archive/2012/07/the-hu...

At least they're upfront about their biases. More than you can say for much other "journalism".

A facile prejudice against fracking has proven an excellent litmus test to identify dilletante pseudo-environmentalists. It's an indication they have no clue what they are talking about and also don't consider carbon emissions a serious problem.

Many studies have been done on fracking, and there is every indication that with sound regulation and proper practices it is a perfectly safe technique for extracting natural gas. More so, using natural gas for energy instead of oil or especially coal is an enormous carbon emissions win. Far greater than any hybrid or even all electric vehicle technology can achieve. To write it off as an evil because you heard some anecdotal evidence somewhere just proves you don't take the fundamental problems of energy production and the environment seriously.

I'm not sure what your qualifications are to reply as you did, but I doubt it's on par with Arthur Berman, a petroleum geologist and editorial board member of The Oil Drum. His views are quite different than yours.

Here's an interview he did on the Kunstlercast: http://kunstlercast.com/shows/kunstlercast-192-arthur-e-berm...

Ah yes, argument from authority. Were you on a debate team in school perchance? Should we compare the height of our piles of note cards and references to see who wins?

Your argument would be stronger if it were framed as an actual argument backed by evidence instead of in the form "well mr. So-and-so is an expert and he says..."

There are many ways in which you can argue against fracking on an environmental basis.

But one is really abouve all: natural gas is a fossil fuel and burning of fossil fuels leads to climate change. The costly investment on this harmful energy source is much more needed in renewables.

Unfortunately climate change science has been distorted in the media.

> natural gas is a fossil fuel and burning of fossil fuels leads to climate change.

We are going to burn something. Better it be natural gas than oil or coal.

I guess at some point in the future we'll have lots of nuclear power and won't need to burn anything, but right now we do.

Natural gas is the cleanest energy source we have, in some ways even cleaner than nuclear.

We're not going to get to 100% carbon-free energy sources overnight. Continued use of fossil fuels in the near-term is a fact of life. Natural gas technology is well developed, highly capable, and already economically competitive with coal and oil. If carbon emissions are an existential threat to humanity, to any degree, we would be stupid not to take advantage of natural gas in the here and now. Switching from gas/diesel/kerosene to natural gas is a >20% reduction in carbon emissions per unit of energy. Switching from coal is a 60% reduction.

And natural gas is also better for human health and overall environmental quality since the emissions are almost pure CO2 and H2O without a risk of acid rain, particulates, or radioactive fly ash. Being able to make such huge environmental gains in the short-term at very minimal economic cost is as much of a no brainer as these things get.

You are blowhard and moron.

I was a bit shocked by that. Not sure I would want Fracking to be the engine driving my economic growth — you're trading a financial crisis for a potentially massive environmental catastrophe.

Don't judge them too harshly. Fracking isn't clearly bad or good. As the article pointed out: coal is worse.

Natural gas is also much easier to store than coal and gas turbines have much shorter startup times. Thus Natural gas provides an excellent base power to complement renewable energy.

So while I am sure many would prefer a direct to renewable energy situation, natural gas is fine too.

In what way is natural gas easier to store than coal? Coal can just sit in huge piles on the ground.

True, but what happens once the coal is a pile? Unless said pile is being turned into a giant bonfire it will need further transportation.

This means big machines and their operators. It means trucks, trains, barges, and yet more drivers.

Gas needs storage tanks and pipelines. Ignoring maintenance the entire chain from well head to plant can be automated. A trans-continental coal conveyor belt would look nice on a popular mechanic's cover page but would never compare to what already exists for natural gas.

Granted natural gas' infrastructure is capital intensive. Yet in exchange for this capital you get a transportation network that functions like a classic graph flow problem.

After watching the film Gaslands, fracking should leave you scared. It paints fracking as a greed driven, accident waiting to happen.


It's a movie filled with lies and shouldn't be taken as a serious documentary.

For instance when the guy sets fire to gas coming out of his tap it is assumed that it is caused by fracking, but the movie doesn't tell you that these things happen naturally also in areas without any gas drilling.

Take a look at this video: http://www.fightgaslandcensorship.com/

There are lots of independent sources that back up the details presented in the film:


Also if the fracking process is so safe why did they have ask for and get special exemption from the Safe Drinking Water Act?

Isn't that the tradeoff? You either join the circle of people selling each other insurance, or you get a real job.

How can https://en.wikipedia.org/wiki/American_middle_class cope with https://en.wikipedia.org/wiki/Renminbi#Value economic/export/currency tricks, if every country follows them.

"Because the companies leading the process are so productive, they pay high wages but do not employ many people. They may thus do little to reduce unemployment, while aggravating inequality."

That can't really carry on long term can it? Not much chance of infrastructure improvements without a tax base?

> That can't really carry on long term can it? Not much chance of infrastructure improvements without a tax base?

This is a problem for large political units going back to at least the Roman Empire.

The government should be doing everything it can to empower small businesses. It isn't because of two-party adversarial politics, however.

"Empower" how? Subsidies? If you enact subsidies, then you create an environment in which somebody has the incentive to aggregate the subsidy - in a large business. That's agricultural policy in the US for the last hundred years in a nutshell.

Please, let's not have one of those debates.

I agree directly subsidizing businesses is foolish, in part for the reason you cite. I think there are lots of infrastructure-like things that could be provided, including healthcare. There is clearly something broken in US healthcare. It doesn't function as useful market for individuals and small businesses. There's clearly something screwy with the economics of it.

You can have the last word. I have to go sell my car.

When did healthcare become "broken" in the US? It hasn't always been so, back to 1776, right? I think the answer is pretty obvious.

It became broken as a side effect of wage control regulations during WW2 that encouraged healthcare to be tied to employers. The second world war is long over but this particular unintended consequence is still with us.

cutting taxes =/= subsidy.

Not so much two-party adversarial politics so much as big business and the 0.01% funding and controlling the two viable parties. The center-right party and the right party used to compromise. The system wasn't always this dysfunctional but one party has been hijacked by fringe groups who refuse to compromise.

Ultimately there are going to have to be shifts in what skills people learn. There will be high unemployment during the adjustment period, but as long as demand for low-skill jobs shrinks, people will adjust and learn new skills. You don't have to go back to school to learn how to be a programmer :)

Two faulty assumptions:

1) That for every low-skill job lost, a high-skill job replaces it. That's not the case. When robotic arms replace 100k factory workers, the robotic arm companies do not need 100k new programmers, nor are the factory owners going to use the reduced labor costs to turn into software shops. It's not like the industrial revolution all over again; computers and robotics are producing such enormous productivty gains that eventually there will be fewer people required by the labor force than the working-age population.

2) That people whose skills are no longer in-demand will somehow acquire other skills. Some will, but large swaths of the unemployed won't, especially among people 50+. That's why so many millions, especially 50+ women, have now been unemployed for years. It's not such an easy transition as you make it out to be -- people won't simply adjust, no, a large portion will essentially drop from middle-class to poverty and stay that way until they die. It's not they who will take the new jobs, it's the younger next generation that never had the obsolete skills.

A 55 year old with only a HS diploma for whom a computer has never been more than a magical toaster that delivers e-mail, only existing in the past few years of his/her life, is simply not going to become a professional programmer even if he/she wanted to.

> " When robotic arms replace 100k factory workers, the robotic arm companies do not need 100k new programmers"

This is entirely true, but was also true in the industrial revolution. With the increasing efficiency of manufacturing we've seen a tremendous growth in service industries that are absorbing a large portion of the displaced workforce.

Whether or not that ratio is 1:1 is hard to guess, though I suspect not quite.

The real problem here is not so much lack of jobs, but like you mentioned, it's nigh-impossible to actually transition people from one field to another. We've outright eliminated most manual and unskilled labor, and what remains is disappearing quickly. The jobs that people had, vs. the jobs that they must now pursue are incredibly different, and most people aren't going to make that jump successfully.

We are dealing with an entire lost generation, if not more.

The productivity improvements of particular individuals needn't be so drastic as going from assembly line worker to computer programmer.

(Bear in mind that not all "assembly lines" or "programmers" are the same -- there are very likely line workers at Boeing who are multiples more productive than programmers at [big Fortune 500 company of your choice].)

Workers can improve productivity by taking jobs that are otherwise less desirable. Maybe they have to commute further, or work shifts they don't prefer. There is a small segment of the workforce that can improve its productivity just by showing up on time. Some folks will have to make more drastic changes, such as moving. Many people moved to Florida to build houses that, as it turns out, no one wants. Those people won't find construction work in Florida but might well find it in North Dakota, which is currently going bonkers.

And they can seek retrainings that might seem marginal. Maybe they learn to weld, or operate a crane. A semi-literate adult who buckles down achieve actual literacy probably opens very large possiblities for productivity gains.

So moving up the productivity curve doesn't mean learning 55 year olds learning Python. It can mean finding a way to do 5%, 10% 20% better.

That said, I have to agree that improving productivity is a lot easier for people with sound education and training to begin with. One of our great problems is the failure of our schooling culture to properly prepare people to understand and learn new things.

EDITED TO ADD: Also, I don't want to sound ignorant of all the difficulties of this. Some gains are easily achieved, some are hard won but worthwhile for non-economic reasons. And some of the sacrifices required are pretty hard. It is one thing for economists to talk about "labor mobility" as a factor driving productivity, and another for those who find they have to move half-way across the country.

The theory says that workers with low marginal productivity can move up the productivity scale. And largely, that's what's seen, but it's far from perfect.

A 55 year old with only a HS diploma for whom a computer has never been more than a magical toaster that delivers e-mail, only existing in the past few years of his/her life, is simply not going to become a professional programmer even if he/she wanted to.

I disagree, if he really wanted to, he could. I do agree that most don't/won't. At that age, most people have low motivation to start over.

I disagree, though I used to believe the same.

What you're discounting is that people are born with vastly different mental capabilities - I'm quite certain everyone on HN is at least in the top 20% of the country, and it's easy for us to assume that, just because we've encountered few hard caps on our mental abilities, that others are the same.

What changed my mind was working in a factory - where I had months to hang out with line workers, machinists, technicians, and just shoot the shit with them. My takeaway from it is: a lot of them simply do not have the intelligence to operate in many highly technical jobs. This isn't a slight on them - they're amazing, worthwhile human beings, but it's unreasonable to expect them to be able to write code, even given an arbitrarily large amount of training. For every IQ 120, there is an IQ 80. Remember that.

The other side of it is that our school system performs appallingly poorly, and fails a lot of the population. Even if someone had the natural intelligence and aptitude, for a lot of them their educational background is so poor that there is no meaningful way for them to catch up, ever. A person of solid intellect who, for whatever reasons, barely made his way out of high school math, is not going to be able to pick up a CS curriculum. The foundation we're working from is not very solid.

The third component is of course the system - if someone wanted to retrain as a professional programmer from a factory job, and let's assume magically that he/she has the intelligence to do it, and unexpectedly did really well in school a long time ago. They're about as ideally positioned as one can be... except who's going to pay for the retraining? Who's going to hire the 40 year-old who just got into programming? Even when you have created the ideal state, the person's odds are still horrible.

You're probably right on a lot of this. But being a programmer doesn't require exceptional intelligence. Normal intelligence, yes. And a fair amount of patience. An ability to not get frustrated, to understand that things NOT working right away is normal. But it's not that hard. And you don't need to go through a formal CS curriculum to be a productive programmer. I don't think it's a cakewalk; I certainly know 50-somthings who I don't think could do it. Not a chance in fact. But I do think it's possible for some.

I wonder what we're all going to do when humans doing app development by writing code becomes obsolete. Yes, it will happen.

There are a lot of people of below-normal intelligence out there. Keep in mind that by definition 50% of the world has an IQ below 100 - that's a very, very large chunk of our work force that simply cannot pull off, say, programming, data science, or the myriad of technical jobs that are now in-demand.

> "But it's not that hard."

It wasn't for you, evidently, and it wasn't really for me either, but for a lot of people it strains at the edge of their ability to comprehend and mentally model, even with practice. That's the point I'm making: we've been born into the portion of the population that can, with some elbow grease, grok it. Not everyone is as fortunate. Even some of the ones who are, lack the educational background - in math, in logic, in whatever - to make that leap.

It took working a wildly different job, with a wildly different demographic, to really comprehend just how wide that gap is.

Even if we could successfully retrain, say, 20% of the industrial work force into knowledge-based jobs, that's still a lot of people out in the cold, and even then - who would pay for the retraining, which for a lot of people would take years? Who will bankroll their education, or even their living costs, while this transition occurs?

There are so many systemic problems with this it's mind-boggling. Suffice it to say, the notion that displaced workers from now-collapsed industries can retrain and reapply elsewhere is dramatically oversimplified. The reality is that the vast majority will never make the leap anywhere else.

Brynjolfsson and McAfee deal with the stresses on societies to keep up with technology:


Unfortunately, the rate of technological acceleration is increasing, and society is not able to keep up with even the current rate, viz. the huge numbers of unemployed workers with outdated skills. They suggest that the disruptions we have experienced over the last ten years are just a hint of the disruptions coming over the next ten years, with increasing rates of change. It is the elephant in the room for the presidential campaign, but is pretty much being ignored by both sides. They even suggest that in ten years or so, all that manufacturing in China could move back to US soil as factories become completely robotic.

Wouldn't there be a fairly simple solution in lowering the working schedules of Americans as a whole? (Simple in idea, not in execution)

With all the productivity improvements couldn't workweek hours decrease causing a rise in the number of people employed (maybe at a cost of less take home pay for workers overall)?


America doesn't have a tax base problem, it has a spending priority problem. The total government system in the US collects more in taxes than the entire German economy is worth. You'd think we could have nice roads given that. The problem is what that money is being spent on.

Our tax system is also extraordinarily complex, with thousands of taxes, and a tax code that the IRS doesn't even fully understand. Individual Americans spend $300+ billion (last I recall reading) just preparing their taxes each year.


If a number seems hard to believe, it probably is. Think it through--how many hours do you spend doing your taxes each year? A few hours? How many hours do you spend showering and brushing your teeth each year?

Maybe it's businesses--but the entire US legal sector is only about $150 billion.

eh. most people don't correctly fill out their taxes.

Did you pay your use taxes? (actually, I believe that has been simplified, in california, allowing you to pay a flat fee now.)

If you ordered anything from amazon tax free, well, you should have filed your use taxes. I know one person, besides me, that does, and I pay someone else to do it.

There are all sorts of other little gotchas, even if you are an employee on a 1040EZ.

Also, this complexity leads to incredible risk; I mean, I generally don't mind paying taxes. (I mean, I'd like to pay less, but eh, I've shopped around, and the rates here are pretty okay for what I need and what I get.) but I fear nothing like I fear the tax man. With almost any other tax mistake? the worst that can happen is corporate and personal bankruptcy.

Now, screw up your taxes? yeah, you aren't particularly likely to go to jail, I mean, assuming you weren't trying to commit fraud, but it is pretty easy to end up with a whole lot of debt that you can't run out on.

Because of this, I outsource nearly all my accounting and bookkeeping. and yeah, it costs money, but as far as I can tell? it's the only insurance I can buy against one of the very few (likely) events that can put me in debt for life.

(Now, obviously, this is only scary because I have a low-margin business with revenue that is substantial compared to my personal earning power; if the IRS reclassified some of my revenue as income? it wouldn't take very much to put me in the red. If you are on a 1040ez and you miss your use tax and get audited? eh, it's not a bankruptcy event.)


>With almost any other tax mistake?

Should be

With almost any other business mistake?

I mean, if I sign a 5 year lease on the small house I'm spending every year on datacenter space, then the company crashes? eh, bankruptcy.

I don't hire someone to brush my teeth for me at $65 / hour or $250 / hour etc.

The US Government disagrees with you.

"The cost of preparing and filing all business and personal tax returns is estimated to be $250 to $300 billion each year. According to a 2005 report from the U.S. Government Accountability Office, the efficiency cost of the tax system—the output that is lost over and above the tax itself—is between $240 billion and $600 billion per year."

"The Government Accountability Office (GAO) is the audit, evaluation, and investigative arm of the United States Congress. It is part of the legislative branch of the United States government."


A tax is a burden imposed upon me by an external force. In the case of taxes it's generally completely involuntary. I voluntarily brush my teeth. There's a very, very, very large difference between having a time and financial cost imposed upon you, and choosing to spend a few dollars and x hours per month on brushing my teeth.

If someone is imposing a tax upon you, it's properly their responsibility to make sure it's as efficient and as non-painful as possible (in terms of time to file, added costs, etc). The US Government has completely failed in that regard. It's almost universally agreed (aka bi-partisan) that we have a disaster of a tax code complication wise.

1.75 million accountants in the US. That's about 60% more than there are lawyers.

> I don't hire someone to brush my teeth for me at $65 / hour or $250 / hour etc.

But that's not how the numbers you're pointing to were generated. They put a $39/hour figure on the time people spent to do their own taxes. My point is that if you put a $39/hour figure on say brushing and showering, you get something like $15,000 per year spent on personal hygiene, about 1/2 of the individual income.

You brush your teeth so your mouth doesn't taste like shit and your teeth don't fall out. You hire an accountant to do your taxes because the tax code cannot be understood by anyone who hasn't devoted his life to deciphering it.

The difference is that there's not a damn thing you can do about your teeth getting dirty (but brush them), but the tax code could be a hell of a lot simpler if only they'd stop making it more complicated.

1.75 million accountants in the US.

A good number of whom are vested in keeping things complicated.

A bit cynical. Taxes for the majority of Americans are simple enough to be done without accountants, and even without any kind of tax filing software. Meanwhile, no matter how simple or complicated the tax codes get, businesses will always need accountants.

The first paragraph shows we're not talking real world here: Obama a "left-wing president"?

That quote is presented as Mitt Romney's supposed view on "what would make things worse", not the Economist's.

He's not?

He really isn't. Some aspects of his administration are centrist-liberal (see: healthcare reform), and maybe to the largely-very-right-wing mainstream political sphere of the USA he's a leftist, but on the global stage Obama is pretty firmly in the center.

Obama's healthcare reform is almost exactly the same plan the Republicans advanced as the conservative alternative to Hillarycare in the 1990's.

On the other hand, he did nationalize two car companies....

He's campaigned for more extensive reforms than what actually took place - I'd place his position further left than the current state of health care.

That said, mainstream politics in the US has shifted dramatically to the right since the 90s. The conservatism of the 90s is the "liberalism" of today.

This, basically. America as a whole is pretty far right. When you're left of that, it's not very left at all.

On a global scale, these "left" / "right" labels lose a lot of their meaning and are more a sign of a poorly framed discussion than a useful shorthand.

Reconcile to "right" and "left" say, at-will employment, or a right to bear arms, or mandatory health insurance, or laws prohibiting Nazi sympathism, or vigorous loser-pays libel laws, or tax-free churches, or the right to keep and bear arms... the list goes on and on. The US is statist is some ways that Europe isn't, and libertarian in others.

At the end of the day, these things all boil down to differing priorities and to different levels of policy sophistication.

Household debt 114% of income is nothing to brag about. Apalling.

It's a substantial improvement, and if you graph it over time, it's heading down after decades of going up:


That downward trend is the opposite of appalling.

1. Could that be because disposable income is going down?


2. Mass paying down of debt may not be the best thing to generate demand during a demand crisis.

> "2. Mass paying down of debt may not be the best thing to generate demand during a demand crisis. "

Yeah, but is it worse than continuing to build up household debt in order to alleviate the pains of a demand crisis?

1. Could that be because disposable income is going down?

If disposable income goes down, then (all other things being equal) the ratio of household debt to disposable income would go up.

You're right. Brainfart.

It would be very helpful if the article would mention, 114% of what exactly is the household debt. 114% of annual income, perhaps? Anyway, it looks like we are looking at few more years of decreasing consumption, to get to the year 2000 level of household debt. And even that level is probably too high. So, mostly troubles ahead for US economy, no matter who the next president is going to be.

I painfully disagree with this article.

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