Category: Current Affairs

That is the title of my new 4000 or so word essay for The American Interest.  Excerpt:

At least three forces are likely to combine to make the United States an [increasing] export powerhouse.

First, artificial intelligence and computing power are the future, or even the present, for much of manufacturing. It’s not just the robots; look at the hundreds of computers and software-driven devices embedded in a new car. Factory floors these days are nearly empty of people because software-driven machines are doing most of the work. The factory has been reinvented as a quiet place. There is now a joke that “a modern textile mill employs only a man and a dog—the man to feed the dog, and the dog to keep the man away from the machines.”

The next steps in the artificial intelligence revolution, as manifested most publicly through systems like Deep Blue, Watson and Siri, will revolutionize production in one sector after another. Computing power solves more problems each year, including manufacturing problems.

It’s not just that Silicon Valley and the Pentagon and our universities give the United States a big edge with smart machines. The subtler point is this: The more the world relies on smart machines, the more domestic wage rates become irrelevant for export prowess.

…The second force behind export growth will be the recent discoveries of very large shale oil and natural gas deposits in the United States…

That brings us to the third reason why America is likely to return as a dominant export power: demand from the rapidly developing countries, and not just or even mainly demand for fossil fuel. As the developing world becomes wealthier, demand for American exports will grow. (Mexico, which is already geared to a U.S.-dominated global economy, is likely to be another big winner, but that is a story for another day.)

In the early stages of growth in developing nations, importers buy timber, copper, nickel and resources linked to construction and infrastructure development. Those have not been U.S. export specialties, and so a lot of the gains from these countries’ growth so far have gone to Canada, Australia and Chile. Usually American outputs are geared toward wealthier consumers and higher-quality outputs, which is what you would expect from the world’s wealthiest and most technologically advanced home market. To put it simply, the closer other nations come to our economic level, the more they will want to buy our stuff.

That’s just the introduction.  The rest of the essay considers: “how will this shape American foreign policy, jobs, education, politics and poverty?”  For instance:

Some of the new technological and export-related breakthroughs will consist of making education and health care more affordable, often through software and smart machines that bypass the current credentialized control of those fields. Imagine getting an online medical diagnosis from a smart machine like IBM’s Watson, or learning mathematics from an online MITx program or one of its successors. The American poor and lower middle class will have considerably greater opportunities, at least if they are savvy with information technology and disciplined enough to take advantage of these new free or cheaper goods. Of course, this will not come close to helping everybody. These internet tools reward the self-motivated, who will be disproportionately well educated, even if their parents lack higher education, wealth and connections. Many of the rest will still fall by the wayside.

Do read the whole thing.  You can think of it as some current thoughts on what it would look like to climb out of The Great Stagnation.

Addendum: Reihan adds excellent comments.

Hat tip: Carpe Diem. Do note the date.

Ryan Avent has an excellent post, channeling an Adam Posen report (pdf).  Here is one summary bit:

Financial issues, euro crisis, austerity and oil can account for a lot. It seems possible that structural factors are more of an issue in Britain than in America.

It’s worth noting that the main “austerity” culprit here seems to be the increase in the VAT, not the spending cuts (proposed or real) per se.

Do not heed those who paint with a limited palette and speak only of fiscal austerity.  Via Scott Sumner, Britmouse has one report:

The Office for National Statistics’ current data on quarterly UK nominal GDP growth in 2008 is as follows, at Seasonally Adjusted Annual Rates:

• Quarter 1: 4.3%
• Quarter 2: -1.7%
• Quarter 3: -5.2%
• Quarter 4: -3.4%

That collapse in nominal spending has no precedent in the data, and is certainly worse than anything since the 1930s. . . .

There was by the way no liquidity trap, as rates were often at five percent and in general not close to zero.  Britmouse now has his (her?  its?) own blog.

Going back in time a bit further:

The stark generational rift emerging in Britain is highlighted by a Financial Times analysis showing that the real disposable household incomes of people in their 20s have stagnated over the past 10 years just as older households are capturing a much greater share of the nation’s income and wealth.

…The FT analysis of 50 years of official data also shows that the living standards of Britons in their 20s have been overtaken by those of their 60-something grandparents for the first time, with the household incomes of pensioners in their 70s and even 80s also catching up rapidly.

The data, which underpins government publications on living standards, takes no account of housing costs or wealth. Had it done so the results would have been even more dramatic, showing median living standards of people in their 20s have now slipped below those of people in their 70s and 80s.

The problems over there are deeply rooted.

Nonetheless, via David Harbottle, we learn that during the Olympics there is a home in London for rent for about $412,646 per month.  So far there appear to be no takers.  The price is listed as negotiable.