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

The US Economy in a Christmas Carol style

Real Gross Domestic Product, Quarterly % Change (Source BEA) We just had the worst recession in 50 years

America is about 10% poorer (around $7,000 per household per year) Source: John Taylor

Unemployment rate, seasonally adjusted (Source BLS) Unemployment is still 3% above “normal” levels Unemployment has stopped rising (the recession is over) but the recovery is very slow

December 2007 May 2009 Although the recession could have been worse Industrial production, normalized to 100 at the recession start (Source FRB)

The US Economy in a Christmas Carol style

S&P 500 Stock Market Index The stock market seems to have mostly recovered

Note: IMF Global Database: all countries with at least 10 million people and $20,000 or greater GDP per capita PPP$ in ,00020,00030,00040,00050,000 United States Netherlands Australia Canada Belgium Germany United Kingdom France Japan Korea Spain Italy Greece Czech Republic Portugal Saudi Arabia Gross Domestic Product per person, 2010 (PPP dollars) Out of countries with 10+ million people America is still the richest country in the world

The US Economy in a Christmas Carol style

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 I think America will continue to be the worlds richest and successful economy

EDUCATION

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

INEQUALITY

The top 1% are getting increasingly rich Source: March 2012 Update to Piketty and Saez (2003)

Real income growth, The bottom 99% have seen real income growth of just 0.3% a year since 1993

Generating widespread protest Including the Occupy Wall Street protest at the American Economics Association Meetings (Chicago, January 2012)

Source: Atkinson (2003) The pattern in Britain is similar

Source: Atkinson (2003) The French as always have to be different d

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 This raises economic risks

EUROPE

Europe’s debt crisis comes from anti-growth policies: regulation Source: World Bank 2012 doing business index

Europe’s debt crisis comes from anti-growth policies: regulation

Europe’s debt crisis comes from anti-growth policies: taxes Source: “Restoring Europe’s Lustre”, World Bank 2012

1) Without slashing regulations and spending Southern Europe will stagnate and be forced to default 2) In fact I think it’s frankly too late for Greece So I would be worried about Europe

And having recently enjoyed St. Patrick’s Day it’s good to see Ireland is recovering too

FINALLY SOME GOOD NEWS (WHY I BELIEVE IN AMERICA)

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

Management US Japan Germany Sweden Canada Australia Great Britain Italy France New Zealand Mexico Poland Republic of Ireland Portugal Chile Argentina Greece Brazil China India Source and full data: We find American firms are the best managed

[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….” The traditional British Chat-Up MY FAVORITE QUOTES

Interviewer: “How many production sites do you have abroad? Manager in Indiana, US: “Well…we have one in Texas…” Americans on geography 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” ?” The difficulties of defining ownership in Europe MY FAVORITE QUOTES

3232 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 get sick in Britian 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” 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…] MY FAVORITE QUOTES

You’ll find more on the management research on

And work on measuring policy uncertainty on

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

Policy Uncertainty Index 1 st Gulf War 9/11 Clinton Election 2 nd Gulf War Bush Election Balanced Budget Act Lehman and TARP Large interest rate cuts Debt Ceiling Dispute Source: “Measuring Economic Policy Uncertainty” by Scott Baker, Nicholas Bloom and Steven J. Davis, November 2011, all data at Russian Crisis & LTCM Black Monday Euro crisis The slow recovery is in large part due to massive policy uncertainty