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Great Expectations or Hard Times ? Can America Restore its Economic Leadership Nick Bloom (Economics & GSB)

Great Expectations or Hard Times ? Can America Restore its Economic Leadership Nick Bloom (Economics & GSB). The US Economy in a Christmas Carol style. We just had the worst recession in 50 years. Real Gross Domestic Product, Quarterly % Change (Source BEA).

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Great Expectations or Hard Times ? Can America Restore its Economic Leadership Nick Bloom (Economics & GSB)

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  1. Great Expectations or Hard Times? Can America Restore its Economic Leadership Nick Bloom(Economics & GSB)
  2. The US Economy in a Christmas Carol style
  3. We just had the worst recession in 50 years Real Gross Domestic Product, Quarterly % Change (Source BEA)
  4. America is about 10% poorer(around $7,000 per household per year) Source: John Taylor
  5. Unemployment has stopped rising (the recession is over) but the recovery is very slow Unemployment rate, seasonally adjusted (Source BLS) Unemployment is still 3% above “normal” levels
  6. Although the recession could have been worse Industrial production, normalized to 100 at the recession start (Source FRB) 100 December 2007 90 May 2009 80 70 60 Great Recession (2007-2009) Great Depression (1929-1933) 50 0 10 20 30 40 Months since the start of the recession
  7. The US Economy in a Christmas Carol style
  8. The stock market seems to have mostly recovered S&P 500 Stock Market Index
  9. America is still the richest country in the world Out of countries with 10+ million people United States Netherlands Australia Canada Belgium Germany United Kingdom France Japan Korea Note: IMF Global Database: all countries with at least 10 million people and $20,000 or greater GDP per capita PPP$ in 2010 Spain Italy Greece Czech Republic Portugal Saudi Arabia 0 10,000 20,000 30,000 40,000 50,000 Gross Domestic Product per person, 2010 (PPP dollars)
  10. The US Economy in a Christmas Carol style
  11. I think America will continue to be the worlds richest and successful economy It has incredible strengths in terms of free markets, entrepreneurial spirit and hard working people Because of this I moved to America with my family But I see three major risks EDUCATION schools are falling behind internationally INEQUALITY generating risks of major social reform EUROPE their failure would damage America
  12. EDUCATION
  13. 50 Years ago the US had the best education system in the world. Now it is mid-table according to the OECD 2009 PISA rankings
  14. INEQUALITY
  15. The top 1% are getting increasingly rich Source: March 2012 Update to Piketty and Saez (2003)
  16. The bottom 99% have seen real income growth of just 0.3% a year since 1993 Real income growth, 1993-2010 Source: March 2012 Update to Piketty and Saez (2003)
  17. Generating widespread protest Including the Occupy Wall Street protest at the American Economics Association Meetings (Chicago, January 2012)
  18. The pattern in Britain is similar Source: Atkinson (2003)
  19. The French as always have to be different d Source: Atkinson (2003)
  20. This raises economic risks Obama highlighted inequality as “the defining issue of our time” in his January 2012 State of the Union Address I see political and taxation risks – if inequality keeps rising politicians are increasingly likely to do something radical
  21. EUROPE
  22. Europe’s debt crisis comes from anti-growth policies: regulation Source: World Bank 2012 doing business index
  23. Europe’s debt crisis comes from anti-growth policies: regulation
  24. Europe’s debt crisis comes from anti-growth policies: taxes Source: “Restoring Europe’s Lustre”, World Bank 2012
  25. So I would be worried about Europe 1) Without slashing regulations and spendingSouthern Europe will stagnate and be forced to default 2) In fact I think it’s frankly too late for Greece
  26. And having recently enjoyed St. Patrick’s Day it’s good to see Ireland is recovering too
  27. FINALLY SOME GOOD NEWS (WHY I BELIEVE IN AMERICA)
  28. For the last decade, I have been working with a team at Athens, Cambridge, Harvard, LSE and McKinsey to measure management Use a McKinsey tool to measure management practices for monitoring, targets and incentives Target random firms from the population of all medium and large firms, measuring 10,000 firms over 20 countries since 2001
  29. We find American firms are the best managed US Japan Germany Sweden Canada Australia Great Britain Italy France New Zealand Mexico Poland Republic of Ireland Portugal Chile Argentina Greece Brazil China India 2.6 2.8 3 3.2 3.4 Management Source and full data: www.worldmanagementsurvey.com
  30. MY FAVORITE QUOTES The traditional British Chat-Up [Male manager speaking to an Australian female interviewer] Production Manager: “Your accent is really cute and I love the way you talk. Do you fancy meeting up near the factory?” Interviewer “Sorry, but I’m washing my hair every night for the next month….”
  31. MY FAVORITE QUOTES The difficulties of defining ownership in Europe Production Manager: “We’re owned by the Mafia” Interviewer: “I think that’s the “Other” category……..although I guess I could put you down as an “Italian multinational” ?” Americans on geography Interviewer: “How many production sites do you have abroad? Manager in Indiana, US: “Well…we have one in Texas…”
  32. MY FAVORITE QUOTES Don’t get sick in Britian Interviewer : “Do staff sometimes end up doing the wrong sort of work for their skills? NHS Manager: “You mean like doctors doing nurses jobs, and nurses doing porter jobs? Yeah, all the time. Last week, we had to get the healthier patients to push around the beds for the sicker patients” Don’t do Business in Indian hospitals Interviewer: “Is this hospital for profit or not for profit” Hospital Manager: “Oh no, this hospital is only for loss making”
  33. MY FAVORITE QUOTES The bizarre Interviewer: “[long silence]……hello, hello….are you still there….hello” Production Manager: “…….I’m sorry, I just got distracted by a submarine surfacing in front of my window” The unbelievable [Male manager speaking to a female interviewer] Production Manager: “I would like you to call me “Daddy” when we talk” [End of interview…]
  34. You’ll find more on the management research on www.worldmanagementsurvey.com
  35. And work on measuring policy uncertainty on www.policyuncertainty.com
  36. Great Expectations or Hard Times? Can America Restore its Economic Leadership Nick Bloom(Economics & GSB)
  37. The slow recovery is in large part due to massive policy uncertainty Debt Ceiling Dispute Lehman and TARP 250 2nd Gulf War 9/11 200 Euro crisis Large interest rate cuts Bush Election 1st Gulf War Balanced Budget Act Clinton Election Black Monday Policy Uncertainty Index Russian Crisis & LTCM 150 100 50 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2012 Source: “Measuring Economic Policy Uncertainty” by Scott Baker, Nicholas Bloom and Steven J. Davis, November 2011, all data at www.policyuncertainty.com
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