America’s economic secret

I was privileged to take the Washington-Trenton train, round trip, over the last two days. As you may know, this route takes you past some of America’s most spectacular industrial decay. (I recommend bringing Philip Glass music on CD with headphones; it makes your trip feel like the Koyaanisqatsi movie, experienced live.)

Some Europeans might regard the decay as reflecting our economic weakness. But they have it backwards: our willingness to let industries decline is a significant source of our economic strength. A country with no declining industries is a country that doesn’t have many better new ideas.

Here is a New York Times article about how the French are having a hard time accepting deindustrialization.

“[The French are] fighting against windmills – the process of disindustrialization is inevitable,” said Daniel Gros, director of the Brussels-based Center for European Policy Studies. “Those countries who slow that process pay. The problem is not that there is disindustrialization in France, but that it isn’t happening fast enough.”

Not suprisingly, the French are looking toward subsidies to slow down these changes. Here is an excellent article on just how much of American productivity growth comes from allowing losing sectors to decline.

Outsourcing anyone?