Once unsustainable economic structures begin to fail, it takes a significant improvement to make them viable again. Yet because of the difficulty of making major changes under our current political alignment, most new government policies today are no more than changes at the margin. Perhaps the most basic problem is that it is difficult to be sure when a reset is underway, and it is harder yet to raise public alarm about changes that seem to be gradual and slow.
If you have not done so already, read the whole thing.
On China, he writes,
Today’s China is sui generis. The country has grown so quickly that every decade or so there is a very new China. And so we cannot easily look to the past as a guide. In economic terms, China seven years ago is equally removed from China today as the United States about thirty-five years ago is removed from the United States today
I do not know China, but I imagine that this is an understatement.
Normal is over, and it has been over for a long time, particularly if you think of “normal” as workers being temporarily laid off and then getting re-hired to those same jobs when things are back to “normal.” It’s been at least 35 years since we have seen workers recalled from layoffs in any significant numbers.
Going further, I would suggest that the whole idea of “normal growth” is probably an attempt to impose an orderly pattern on processes that are not truly orderly. Economists do this all the time. They “seasonally adjust” data. They “de-trend” data. They draw lines connecting peaks in GDP and thus conjure “potential GDP” and “trend productivity growth” and make up stories about these artificial constructs.
Some of the elements of what Tyler calls an economic “reset” have been playing out for decades. The decline of manufacturing employment as a share of total employment began over 50 years ago. I continue to suggest keeping an eye on four forces, all of which were in place long before the financial crisis of 2008: the New Commanding Heights; bifurcated marriage patterns; factor-price equalization; and Moore’s Law.
One of my memories is as an United Airlines employee in the late ’90s in the “financial analysis” group listening to the United vs Southwest comparisons. If only United had a Southwest cost profile it would rule the airline world. Normalization is frequently fools’ gold.