In an Oct 17th article, Morgan Stanley's Global contributor: Stephen Roach, makes a compelling case for understanding our current jobless recovery as "Imported Productivity". One of his key points is about sustainability of the current outsourcing model:
"Wage and salary disbursements -- by far the dominant component of personal income -- are basically unchanged in real terms fully 21 months into this recovery. By contrast, at this juncture in the past six upturns, real wage income has been up, on average, by about 9%. The gap between the current cycle and the norm of earlier cycles works out to a shortfall of about $320 billion in real terms, or 4.4% of the current level of real disposable personal income...
The flip side of this saga is, of course, quite beneficial to Corporate America. Sourcing demand through low-cost, offshore labor input has become an increasingly important tactic to enhance the operating efficiency of US businesses... While this has resulted in a significant improvement in corporate earnings, the American workforce is not sharing the benefits. The resulting clash between the owners of capital and the providers of labor has resulted in profound tensions in the US body politic. Imported productivity, together with the jobless recovery and income leakage it implies, is the stuff of heightened trade frictions, mounting protectionist risks, and a populist assault on Corporate America.
Which takes us to the bottom line: In my view, the income leakages of imported productivity raise serious questions about the sustainability of this recovery from an economic point of view. At the same time, the political reaction to the resulting jobless recovery raises equally profound questions about sustainability from a political standpoint."
posted by Richard at
Thursday, October 23, 2003
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