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Labor, Trade & Federal Budget Balances Aggregated by Country

In Economy on November 22, 2011 at 4:53 AM

Courtesy of Jeffrey Sachs of Columbia University, we may now consider a new analytical measure to compare America’s progress on jobs, trade exports and federal budget balances against the rest of the World, namely a revised ad-hoc Misery Index. The Index directs us to add: (1) the unemployment rate; (2) the current account deficit/GDP percentage; and (3) the federal budget deficit/GDP percentage.

Here is the available source data, provided by the OECD. As Sachs has pointed out recently, the United States in 2010 “had a Misery Index equal to 23.4, the sum of a 9.6 percent unemployment rate, a budget deficit equal to 10.6 percent of GDP, and a foreign (current account) deficit of 3.2 percent of GDP.” Only Ireland, Spain, Greece, Portugal and the Slovak Republic reflect higher numbers in that year.

Regarding learning lessons, Germany’s mastery of labor policy provides homework worth the studying moving forward. Sweden’s effective actions during the 1992 Banking Crisis response provide worthwhile guidance for handling a failed housing market. And the United States’ Savings & Loans Crisis response provides closer to home guidance for solving public/private corruption very much in the tradition of Sweden.

Benjamin Franklin reminded us, “No nation was ever ruined by trade.” Adam Smith reminded us, a “well-governed society” is necessary for setting beneficial “division of labour” in motion, buttressed by a modestly sized banking system. Even Friedrich Von Hayek reminded us, a publicly financed healthcare program is the way forward. It is time for us to recall knowledge and do justice to the legacy of the printer, the button factory observer and the guardian of “the road to serfdom.”

Lords of Finance, Nouriel Roubini and Jeffrey Sachs, inform us that the way forward is advocating long-run high ROE private investment and public investment. Talking principal modifications instead of interest modifications alone, offers the second key reinforcing pillar according to John Geanakoplos. Rounding out the trilogy, the third pillar entails a clean politics overhaul by: (1) Ending Gerrymandering; (2) Repealing the Citizens United Supreme Court decision; and (3) Ending the Commission on Presidential Debates, for start. This Time is Different; instead of employing the Wrecking Crew, we need Doctor Economy and al. in charge for a change.

For all the “fact-starved” conversation ablaze in the 24/7 news cycle, here is the long-run historical data, as compiled by the author. The average revenue/GDP percentage of 34.9 from 1997-2000 paralleled an average Misery Index percentage of 6.9 over those same years. In the long-run of the past, we were all alive (or at least much better off judging from the data), e.g., today the United States is at 31.6 and 23.4 levels, respectively (see paragraph 2 above).

As Bacon reminds us, “Knowledge is power.” As Jonah’s crew reminds us, “O’ Sleeper, Wake.” The “Dream Deferred,” now exploded, justifying Hughes. “Injustice anywhere is a threat to justice everywhere,” realizing King. Let’s seize the right lessons of the past for the right purposes of the present with a right mind toward improving the future. All boats, too, will then proceed to rise in the process.

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