Today’s New York Times has an interesting Op Ed column by Daniel Alpert, a partner at the investment bank, Westwood Capital, LLC, “The Rut We Can’t Get Out Of” . It is based on Mr. Alpert’s new book, “The Age of Oversupply: Overcoming the Greatest Challenge to the Global Economy”.
“Hundreds of millions of people who once lived in sleepy or sclerotic statist and socialist economies now compete directly or indirectly with workers in the United States, Europe and Japan, in a world bound by lightning-fast communications and transportation,” says Mr. Alpert.
During the “Great Moderation,” beginning in the early 1980’s, with the tech bubble of the 1990’s and the housing bubble of the 2000’s, we could ignore this threat from the developing world. But now, after the financial crisis and the Great Recession which followed, this huge new source of global competition for jobs and cheap goods is a drag on our recovery.
Mr. Alpert’s main prescription for recovery is to put the unemployed back to work “by any means, including big public sector investments to improve infrastructure and competitiveness.” He would do this with massive new deficit spending, arguing that U.S. debt is not a serious problem in the short term.
I agree with his argument that the global oversupply of workers, money and goods is a huge threat to future prosperity. Where I disagree is when he says that faster economic growth is more important than controlling deficit spending.
In my opinion, “America’s existential threat is fiscal” (Glenn Hubbard and Tim Kane). In other words, as important as it is to boost the economy and create more jobs, and this is very important indeed, it is more urgent to get deficit spending under control and to do this quickly. We can actually accomplish both of these critical tasks simultaneously, as I discussed in my post of September 20, 2013.