Great Expectations or Hard Times? Can America Restore its
Economic Leadership Nick Bloom (Economics & GSB)
Slide 3
The US Economy in a Christmas Carol style
Slide 4
Real Gross Domestic Product, Quarterly % Change (Source BEA) We
just had the worst recession in 50 years
Slide 5
America is about 10% poorer (around $7,000 per household per
year) Source: John Taylor
Slide 6
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
Slide 7
December 2007 May 2009 Although the recession could have been
worse Industrial production, normalized to 100 at the recession
start (Source FRB)
Slide 8
The US Economy in a Christmas Carol style
Slide 9
S&P 500 Stock Market Index The stock market seems to have
mostly recovered
Slide 10
Note: IMF Global Database: all countries with at least 10
million people and $20,000 or greater GDP per capita PPP$ in 2010
010,00020,00030,00040,00050,000 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
Slide 11
The US Economy in a Christmas Carol style
Slide 12
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
Slide 13
EDUCATION
Slide 14
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
Slide 15
INEQUALITY
Slide 16
The top 1% are getting increasingly rich Source: March 2012
Update to Piketty and Saez (2003)
Slide 17
Real income growth, 1993-2010 The bottom 99% have seen real
income growth of just 0.3% a year since 1993
Slide 18
Generating widespread protest Including the Occupy Wall Street
protest at the American Economics Association Meetings (Chicago,
January 2012)
Slide 19
Source: Atkinson (2003) The pattern in Britain is similar
Slide 20
Source: Atkinson (2003) The French as always have to be
different d
Slide 21
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
Slide 22
EUROPE
Slide 23
Europes debt crisis comes from anti-growth policies: regulation
Source: World Bank 2012 doing business index
Slide 24
Europes debt crisis comes from anti-growth policies:
regulation
Slide 25
Europes debt crisis comes from anti-growth policies: taxes
Source: Restoring Europes Lustre, World Bank 2012
Slide 26
1) Without slashing regulations and spending Southern Europe
will stagnate and be forced to default 2) In fact I think its
frankly too late for Greece So I would be worried about Europe
Slide 27
And having recently enjoyed St. Patricks Day its good to see
Ireland is recovering too
Slide 28
FINALLY SOME GOOD NEWS (WHY I BELIEVE IN AMERICA)
Slide 29
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
Slide 30
2.62.833.23.4 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: www.worldmanagementsurvey.com We find
American firms are the best managed
Slide 31
[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 Im washing my hair every night for the next month. The
traditional British Chat-Up MY FAVORITE QUOTES
Slide 32
Interviewer: How many production sites do you have abroad?
Manager in Indiana, US: Wellwe have one in Texas Americans on
geography Production Manager: Were owned by the Mafia Interviewer:
I think thats 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
Slide 33
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 Dont get sick in Britian
Dont 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
Slide 34
The bizarre Interviewer: [long silence]hello, hello.are you
still there.hello Production Manager: .Im 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
Slide 35
Youll find more on the management research on
www.worldmanagementsurvey.com www.worldmanagementsurvey.com
Slide 36
And work on measuring policy uncertainty on
www.policyuncertainty.com www.policyuncertainty.com
Slide 37
Great Expectations or Hard Times? Can America Restore its
Economic Leadership Nick Bloom (Economics & GSB)
Slide 38
50 100 150 200 250
1985198719891991199319951997199920012003200520072009 2011 2012
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
www.policyuncertainty.comwww.policyuncertainty.com Russian Crisis
& LTCM Black Monday Euro crisis The slow recovery is in large
part due to massive policy uncertainty