The Boom Is Nigh

By Easterbrook, Gregg | Newsweek, February 22, 2010 | Go to article overview

The Boom Is Nigh


Easterbrook, Gregg, Newsweek


Byline: Gregg Easterbrook

Why the coming recovery will hurt like hell.

Home prices keep falling, but productivity is rising fast. GDP grew 5.6apercent in the fourth quarter, yet unemployment remains stubbornly high. Inflation is nonexistent, while the consumer confidence index just rose to 55.9 from 53.6--whatever that means. Can't make sense of these economic indicators? Don't worry, because nobody else can, either.

Here is what you really need to know: a Sonic Boom is coming. It will be caused by globalization. And while globalization may be driving you crazy, it's just getting started. Thirty years ago, Shenzhen, China, did not exist; today, it has nearly 9 million residents, roughly the same as New York City. In a single generation, it has grown from a village of tar-paper shacks into an important urban center. It has become the world's fourth-busiest port, busier than Los Angeles and Long Beach combined. Never before has a great city been built so fast, nor a productive economy established from so little.

The international recession that began in 2008 has made the Sonic Boom quieter, but history shows that when a crisis ends, the larger trends in place before the crisis usually resume. Shenzhen represents the larger trend of growth, change, and transformation at unprecedented velocity. Thanks to vast increases in productivity, worldwide economic growth soon will pick up, creating rising prosperity and higher living standards for most people in most nations. The world will be far more interconnected, leading to better and more affordable products, as well as ever better communication among nations.

But there's a big catch: just as favorable economic and social trends are likely to resume, many problems that have characterized recent decades are likely to get worse, too. Job instability, economic insecurity, a sense of turmoil, the fear that even when things seem good a hammer is about to fall--these are also part of the larger trend. As world economies become ever more linked by computers, job stress will become a 24/7 affair. Frequent shakeups in industries will cause increasing uncertainty. The horizon has never been brighter, but we may not feel particularly happy about it. Here are five things to keep in mind during these dizzying times:

CLIMATE CHANGE WILL CHANGE EVERYTHING

Dramatic economic change will happen at the same time as climate change. Either one would be a challenge in itself. Now, they're going to occur simultaneously, which will cause economic convulsions unparalleled by any event other than World War II. Winners are likely to be those in high-latitude regions. Yakutsk, Russia, located in Siberia just below the Arctic Circle, is currently home to the world's leading museum of woolly-mammoth fossils. But what if Siberia were to become a temperate expanse? The minerals and oil thought to lie beneath the permafrost could boost the global supply of commodities, not to mention Russia's national wealth.

MANUFACTURING WILL BE OBSOLETE

The factory-based economy is nearly over, because of technological improvements. Fifteen years ago, Boeing took 22 days to build a 737 airliner; today, it takes 12 days. Such changes mean fewer factory jobs, even as production rises. China is losing factory jobs much faster than the United States, as efficiency improves. Soon there won't be any nation with a factory-based economy, and that would have happened regardless of whether there was trade liberalization. Higher productivity, in turn, generates the social wealth that creates more jobs for teachers, health-care providers, and other essential needs. The world is actually better off with declining factory employment, which is no consolation if you lost a job.

COLLEGE IS OUR SECRET WEAPON

College is more valuable to the future economy than petroleum. America leads the world in many areas--economics, military power, loud music--but nowhere is the lead more important than higher education.

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