The Macro Economic Environment: The New Normal

Times are tough. It’s not just business as usual. iStock_000017859436Small

Economic Developers ought to be aware of the complicated “goings on” in the macro/global economy. All that blather about debt, finance systems, derivatives, deficits, Europe, Greece, China, exchange rates, inflation and the like wreak havoc on your local and state economies. Ignore them at your peril!

The United States and the global economy are working their way back from the most crippling finance collapse since the Great Depression. This is not a normal business cycle recession. Our finance system collapsed, crushed by debt, irrational exuberance, poorly understood and mis-priced financial innovations, and a cattle stampede of downright stupid, selfish decisions by bankers and consumers alike. Equally important, there may be significant structural shifts in the economic power between heretofore undeveloped emerging economies and the developed economies. In an “Age of De-leveraging”, time and healing pass slowly.

The articles and reviews included under this theme relate macro economic and global issues to local economic development. Some of them will more explain what is going on out there so an economic developer can make sense of how to act locally. In other instances, the articles and reviews will directly offer insights into how these larger economic forces directly affect the strategies and tools used by economic developers.

Welcome to The Macro Economic Environment: The New Normal.

Articles in 'The Macro Economic Environment: New Normal'

SLOW GROWTH AND POPULIST PUSHBACK: The Times They are a ‘Changing

“The times they are a-changing”.The article outlines the link between populism and slow economic growth. Free trade is the accepted paradigm of global finance and trade. Free trade is characterized by a “lag and shift” dynamic that has made life for our “Forgotten People, the working and lower classes. hell, hence the rise of a hostile populism. Look for no real help to those who are hurt by free trade from these ideologies and paradigmatic economic development strategies. Class and culture distinctions create a serious gap between conventional economic development strategies. Economic development can close that gap by offering jobs, training, and place-based redevelopment to improve the lot of the Forgotten People.

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Quo Vadis–Whither Goest the "Margins of our Labor Force"???

Economic and workforce developers typically confront unemployment by providing basic or enhanced skills and repositioning the unemployed into “hot” occupations or growing industry sectors. Alan B. Krueger, Judd Cramer and David Cho, “Are the Long-Term Unemployed on the Margins of the Labor Market”, Brookings Papers, however, challenge this paradigm and wonder if the unemployed may be on the margins of the labor market–on the road to dropping out completely. Who is Alan Krueger–from 2011 to August 2013 he was President Obama’s White House Chair of the Council of Economic Advisors. So what does Krueger have to say?

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The New Normal II: Economic Developers, Export, and the Global Finance System

The New Normal II: Economic Developers, Export, and the Global Finance and Trade System
Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram Rajan
Now the Curmudgeon trespasses into the world of export, global finance, and trade. Boundaries obviously mean little to him–should they mean much more to you our community economic developer? Is export more risky than often portrayed? Plus an added feature–how the Fault Lines of Global Finance brought the United States into the New Normal. How did forty years of stagnant wage and income levels lead to the accumulation of massive amount of debt that made financial collapse unavoidable?

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Is This Time Any Different?

Our discussion on the New Normal and the Post-Financial Crisis centers chiefly around two important publications. The New Normal label was developed by Mohamed El-Erian, CEO of America’s largest asset manager, PIMCO. The second conceptual position is drawn from Reinhart & Rogoff’s, This Time is Different. El-Erian put his concept together in 2008-2009 period and Reinhart and Rogoff in early 2010. They have been mostly right thus far into 2012.

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