Seeing Complexity in National Economies

Here's a very nice post by Paul Krugman on his NY Times blog pointing out that the world isn't black or white. It is complex and drawn in shades of gray, with good and bad bits at the same time. Things improving while other bits are regressing. Real life is complex, but the ideologues want to dress everything as "all good" or "all bad":

One thing I tend to see in comments — especially from our resident troll, but from others as well — is an insistence that economies must be either all good or all bad. They seem to think that you can’t say good things about European employment performance and technology, on one side, and talk about the monetary and fiscal mess, on the other.

But as I often find myself saying, economics is not a morality play. America in the early 1930s was a nation of great dynamism, by far at the forefront of technology; that didn’t prevent it from having a worse Great Depression than most other advanced countries. America from 1973 to 1995 was a nation with remarkably poor productivity performance and stagnant median income; but it was also quite successful at job creation (as was Britain from 1950 to 1970, even as it was in relative economic decline.) And so on. Just as an individual can be good at some things and bad at others, economies can have strong and weak points.

So, about Europe: the continent has made great strides in overcoming Eurosclerosis, the persistent failure of job creation that afflicted Europe from the early 70s into the mid 90s. Here’s prime-age employment — the percentage of adults aged 25-54 with jobs — for the 15 “old” members of the EU versus the United States, this time brought up to 2010 3rd quarter:

I focus on prime-age employment because the generosity of retirement programs is a separate issue from the functioning of the job market. But if you want to look at the population 15-64, Eurostat has a table; same trend, but Europe still slightly below US.

There’s no contradiction between noting these good signs and pointing out that the euro is functioning badly.

And my gripe about American attitudes is that many people have an outmoded view of Europe’s condition — they still think that Eurosclerosis is in full force — and assume that the monetary woes of the present must be connected to the old ailment. Not so.

In the above Krugman tries to give you a taste of the complexity. It is not all "US great, Europe is a mess" nor is it "US is hopeless, Europe is going to outperform". It is more complex. Some things are good in Europe and some others are good in the US. Meanwhile some things are bad in Europe while yet other things are bad in the US.

Sitting and watching this from Canada, it is easy to understand this complexity. A big chunk of Canada's economy is beyond its control. We are driven remote-control by the US. But there is still a sizeable chunk that our governments here can run to try to keep us from crashing when the US topples. There is lots that we do to make sure everybody get a fair shake that the rabid "government is bad" US doesn't do. We pay a price for "socializing" our economy and making sure the underdog isn't thrown to the wolves. This built-in complexity of Canada's situation means it is easy to live here and understand that the world is complex.

But Americans aren't curious about the outside world and their media doesn't talk much about the rest of the world, so American tend to see a simplified version of the world: "noble America" versus the "digusting, incompetent, corrupt rest of the world". That's a cartoon caricature, but sadly that is the simplistic version carried around in most Americans' heads. It was fine for the most of the 20th Century when the US was dominant. But the dominance of the US is coming to an end, and Americans need to "sharpen up" and look around and appreciate the complexity of the world around them.