Monday, August 20, 2007

Debtor Nation

Big, juicy, thinky piece at Harvard Magazine about America's indebted state and its possible consequences.

*The difference between what Americans consume and what we produce (in income) each year is nearly equal to the entire annual output of Brazil.

*We've been this in the red before, but to build infrastructure and capacity, which we're manifestly not doing now. "The United States, for example, was “the world’s biggest debtor for a hundred years,” [Harvard economist Jeffrey] Frieden notes, “but the money was used to build the railroads and the canals and the factories and to improve the ports and to build our cities. It was used productively, and it worked. The question to ask now is not, ‘Is the country living beyond its means?’ The question is, ‘Is the money going to increase the productive capacity of the economy?’ Because if it just goes to getting everybody another iPod,” he warns, “then unless iPods make people more productive, there is going to be trouble down the road when the debt has to be serviced.”"

*Are we headed the way of Argentina? It looks more likely now than just a couple of weeks ago.

*“Part of the reason people are spending beyond their means,” says Rawi Abdelal, an associate professor of business administration at HBS, “is because they are—in a way—witnessing the end of the American dream.” Between 2000 and 2005, even as the U.S. economy grew 14 percent in real terms, and worker productivity increased a remarkable 16.6 percent, workers’ average hourly wages were stagnant. The median family income fell 2.9 percent.

1 comment:

sj_mullins said...

Right, what you used to get with 1 person working in a family, now takes 2 people working full time jobs + taking on credit card debt. It's a sense of entitlement combined with a lack of money making it into the pocketbooks of consumers.