Blog Posts Driving the Debate

January 27, 2012

NCF curates a weekly list of blog posts that touch on emerging issues affecting the American business community.

The Capital Spectator posted a chart tracking long-term interest rates dating back to 1790.  Wonky?  Very.  What it shows though is that we’re at near all-time lows in interest rates.

There was a lot of discussion this week about the rise of China vis-à-vis the United States, but Kindred Winecoff thinks that the whole conversation is misguided.  Rather than looking at China’s growth on its own or solely in relation to the United States, we should all take a step back to look systemically at our current geopolitical structure.  From that vantage point we see that America retains unparalleled structural power.  Put another way, others may build lofty sand castles, but they do so in our sandbox.

Mark Perry responded to this week’s State of the Union address by President Obama, specifically to the president’s assertions about the state of manufacturing in America.  He deploys six points to argue that, in the end, “American manufacturing is doing quite well and experiencing record profits.”

The Ares blog gave the low-down on the Pentagon’s budget cuts.  There’s a lot to digest, but it’s important to begin to grasp this emerging issue.  The cuts will undoubtedly affect the private sector in numerous ways, from the service sector around bases to contracting firms here and abroad.

Reihan Salam responded to Matt Yglesias’s post on how six of the ten most productive cities on earth are found in America.  Yglesias pointed out though that the success of these cities, especially those harboring the tech industry, isn’t seeping into too many parts of America (and resulting in greater job creation than at present).  The reason is simply that the sector’s firms aren’t based in highly populated areas.  For as prosperous as Silicon Valley is, it really isn’t that populous.  Here’s where Salam injected his own commentary that perhaps the lack of people has to do with the high cost of living, which itself is a product of undue zoning and other such regulations.  Often with the best of intentions, the most prosperous cities throw up barriers to new entrants by limiting the supply of housing.  Silicon Valley’s average pay is in the six figures now, but few are flocking to an area boasting double-digit rent increases last year.  A lack of investment in infrastructure compounds the problem and discourages the lower-skilled workers from taking advantage of the opportunities for advancement to be found in more prosperous, populated areas.  Cities may then remain productive, but far from its potential.

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Posted by National Chamber Foundation

Robert Shiller and the Winds of Austerity

January 24, 2012

By Michael Hendrix, Research Manager

An austere wind is blowing, whipped up by budget cuts and regulatory and economic uncertainty.  What of the job creator in this climate?  Will our economy simply dry up or will the weight of recession be blown away?  Robert Shiller of Yale took to a poem recently —  ”The building Trade is quite destroy’d, Artificers are not employ’d” — in wondering whether history or academia had any answers to this stiff gale.  He found some tempered hope, but not much more.  The truth is though, Shiller didn’t look in the right places.

The real question Shiller should have been asking is whether austerity increases confidence, not whether it produces economic growth.  Rather than focus on the purely measurable, Shiller should have taken a cue from his past writings and looked closer at the slippery “animal spirits” that drive our modern economy.

In the simplest sense, austerity means less money in the economy.  Governments reduce their expenditures on the proverbial guns and butter and the result is what Bernard Mandeville’s poem Fable of the Bees shows: “The Price of Land and Houses falls; Mirac’lous Palaces, whose Walls, Like those of Thebes, were rais’d by Play, Are to be let.”  Austerity cuts directly into demand and ripples across an economy, even touching the “mirac’lous palaces” of our American suburbs.

Is it that simple though?  Shiller doesn’t seem to think so, and neither do I.  Our economy is immensely complex, partly because we’re complex and often irrational consumers and spenders.  One recent study by Harvard economist Alberto Alesina on public sector austerity found that parsimony needn’t result in economic pain.  Rather, the record shows that fiscal tightening can lead to the sort of confidence to invest and create that we so desperately need today.  ”Sometimes, even often, economies prosper nicely after the government’s deficit is sharply reduced. Sometimes, just maybe, the austerity program boosts confidence in such a way as to ignite a recovery.”

This may still be too simple.  Alesina’s study was overly abstract for Shiller and without enough historical evidence.  For a look to the past he turned to Jaime Guajardo, Daniel Leigh, and Andrea Pescatori of the International Monetary Fund.  Their study “found a clear tendency for austerity programs to reduce consumption expenditure and weaken the economy.”

The authors culled the historical record to find only the austerity programs that were meant to better an economy over the longer term.  More often than not, austerity didn’t work out as they planned and indeed led to tougher times.

There’s still something being lost in the analysis.  Job creators run off of confidence nearly as much as they do capital.  It’s confidence that’s at the heart of economic growth.  Confidence is slippery though and hard to measure.  So for the dismal scientist looking to quantify the effects of austerity, it’s hard to tell whether austerity kills confidence and thus growth or is the result of declining confidence itself.

Perhaps in the end austerity is what we make of it.  Shiller is doubtful that austerity expands an economy and he’s likely right.  Sometimes a country has no choice but to cinch its belt and lean into the dry austere gusts.  The real challenge is to have a growth agenda that’s intent on building confidence and clearing away obstacles.  Why even wait for red tape to wither?  A confident private sector is far more willing to step into the breach opened by a shrinking public sector, deploying its capital both physical and financial.  Our loss-averse nature means that we’re often more inclined to take risks in the face of austerity.  That too is a good thing, since risk-taking is one of the essential elements of entrepreneurship.

In a time of austerity, confidence is key.  Private capital must be free and open to take advantage of whatever animal spirits there may be, though tempered by these tough times.  Austerity, if it comes, should simply be a re-prioritization of where our money goes — ideally, toward growth and innovation — to be matched with structural reform in government.

We must be prepared and confident in the face of this austere gale.

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Posted by Michael Hendrix

The Latest Business Horizon Quarterly

January 23, 2012

NCF is proud to be releasing the latest issue of the Business Horizon Quarterly, our publication on the emerging issues affecting the American business community.  To answer the question of “What is innovation?”, we’ve brought together a slate of thought leaders from a diversity of backgrounds, including:

  • John Raidt, Senior Fellow, Atlantic Council
  • Nick Schulz, DeWitt Wallace Fellow, American Enterprise Institute
  • Bill Raisch, Director, International Center for Enterprise Preparedness, New York University
  • Ted Fishman, Author

We invite you to check out the latest issue, give us a shout with your thoughts on our Facebook page, and stay tuned for more from NCF, the think tank of the U.S. Chamber of Commerce.

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Posted by National Chamber Foundation

Infrastructure Resilience

January 23, 2012

By Eric Boyer, Consultant, National Chamber Foundation

Infrastructure resilience is one of the greatest challenges facing our country today.  In the post-disaster world of events like Hurricane Katrina and the near meltdown of the Fukishima Nuclear Power Plant in Japan following last year’s catastrophic earthquake and tsunami, public and private sector leaders have learned the  potential for a single event to disable the foundations of a functioning society.

The traditional approach to addressing resilience involves integrating the efforts of federal, local and state governments; as well as private sector owners of much of the nation’s infrastructure.  The US Department of Homeland Security’s (DHS) Office of Infrastructure Protection (IP) and the Federal Emergency Management Agency (FEMA) lead the charge, coordinating efforts to improve the design standards, disaster planning, and overall coordination of infrastructure facilities.  Much of their work involves engaging state and local governments where facilities are based, and the owners and operators of those facilities – often from the private sector – to arrange joint efforts for preparing roadways, water systems, and energy facilities for the worst that Mother Nature and others can bear.  With more than 20,000 local and municipal governments within the U.S. federal system, aligning federal, state, local, and private interests is anything but easy.

Amidst the existing challenges of engaging public and private stakeholders in infrastructure resilience, many state and local governments are re-shaping the boundaries between public and private sectors by developing innovative public-private partnerships (PPP) to develop, finance and operate critical infrastructure systems.  These innovative, infrastructure-delivery partnerships merge public and private interests and responsibilities for operating major roadways, bridges and other vital transportation arteries.  The integrated responsibilities in PPPs for infrastructure re-define public and private roles in major systems by integrating public managers into private sector approaches to building and financing infrastructure.  The Federal Highway Administration (FHWA) also reports more innovative PPPs for infrastructure delivery since 2005 than any other time in our nation’s history.

The future is not all bleak, however.  A recent report on “Public-Private Partnerships and Infrastructure Resilience” by the National Chamber Foundation, the think tank of the U.S. Chamber of Commerce, suggests that as more governments turn to private financing and related partnerships for developing facilities, many of the planning processes required of co-developing infrastructure with a private entity challenge governments to address a number of issues related to resilience.  Specifically, PPPs for infrastructure force public managers to consider risk assessments, design standards in respect to long-term operating needs, and coordination across public and private sectors in ways they had not done before.  The very involvement of market mechanisms in the infrastructure delivery process introduced through infrastructure PPPs, challenges the public sector to consider long-term planning, including resilience, in new ways.

Coordinating the many public and private sector interests involved in infrastructure resilience will always remain a challenge in the U.S.  As more and more states find themselves strapped for cash and begin to look at innovative approaches for engaging the private sector in what they deliver, it’s long past time that we find out how infrastructure PPPs affect our approaches to building durable and sustainable facilities that we all depend upon.

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Posted by Eric Boyer

Blog Posts Driving the Debate

January 20, 2012

NCF curates a weekly list of blog posts that touch on emerging issues affecting the American business community.

James Pethokoukis at The American outlined a Harvard Business School survey of 10,000 alumni on the state of American competitiveness.  Here’s what they found: “The big problems are macroeconomic policy (soundness of government budgetary, interest rate, and monetary policies), political system (ability of the government to pass effective laws),  legal framework (modest legal costs; swift adjudication), regulation (effective and predictable regulations without unnecessary burden on firms), K-12 education system(universal access to high-quality education; curricula that prepare students for productive work), and complexity of the national tax code.“

In the view of Jordan Weissmann at The Atlantic, American innovation is “not dead yet.”

Wired’s Threat Level blog revealed that major cybersecurity flaws have been found in six industrial control systems across the nation.  This doesn’t sound too frightening until you realize what these systems do: they “control functions in critical infrastructure such as water, power and chemical plants; gas pipelines and nuclear facilities; as well as in manufacturing facilities such as food processing plants and automobile and aircraft assembly lines.”  Rightfully so, there’s a real debate now as to whether these flaws should have been revealed before systems manufacturers had a chance to address them.

The Geo-graphics blog at the Council on Foreign Relations released a chart on how how housing has “defriended” the Facebook generation.  ”Household balance sheets among the Facebook generation were the hardest hit: between 2007 and 2009, half of those under the age of 35 lost over 25% of their wealth.”

Is the American middle class shrinking?  Scott Winship found that most of the narrowing in this income class has had more to do with households moving to the upper middle income levels.  Economic hardship is a reality for many in America, but Winship showed economic mobility may not be quite as bad as many feared.

The Eurocrisis has quieted down in recent weeks, but that doesn’t mean it’s gone away.  Felix Salmon at Reuters showed how “Greece’s endgame looms.”

“Greece will officially default on March 20. The only question is whether the EU will continue to fund the country after that date. For the sake of the euro zone, we had better all hope the answer is yes.”

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Posted by National Chamber Foundation

High-Skilled Immigration and Job Creation in America

January 19, 2012

By Michael Hendrix, Research Manager

Vivek Wadhwa, a noted immigration expert at Duke University, came out with an article in BloombergBusinessweek recently that highlighted some of the latest research on the benefits of highly-skilled migrants to the American economy.  Together with Nick Schulz’s recent NCF white paper on this very same topic, we’re beginning to see a compelling case form for what both authors call the biggest “free lunch” of them all: high-skilled immigration reform.

The title of Vivek’s article is pretty self-explanatory: “Fix U.S. Immigration Policy, Create Jobs.”  The “why” and “how” are answered by two large studies authored by Stuart Anderson and Madeleine Zavodny, respectively.  As Vivek highlights, they each provide support for building America’s human capital by drawing on the best and the brightest from around the world.

“Increasing bodies of evidence show that skilled immigrants are fueling technological innovation and job growth in America. A study released last week by Stuart Anderson of the National Foundation for American Policy found that immigrants were on the founding leadership teams of 24 of the top 50 privately held, venture-backed companies in the U.S. The highest percentage of these immigrant founders came from India. What’s more, Anderson found that in 76 percent of these companies, immigrants held key positions in engineering, technology, or management.”

“In another study released in December 2011, Madeleine Zavodny, an economics professor at Agnes Scott College, found that foreign-born adults with advanced science, technology, engineering, and math (STEM) degrees were strong net generators of jobs for native-born American workers. Zavodny found that 100 foreign-born workers with advanced STEM degrees generated 262 jobs for native-born workers, on average. The study, sponsored by the American Enterprise Institute and the Partnership for a New American Economy, echoes earlier research  by Professor AnnaLee Saxenian of the University of California, Berkeley, that showed that Chinese and Indian engineers managed 24 percent of the technology businesses started in Silicon Valley from 1980 to 1998. My own research found that in a quarter of the U.S. engineering and technology companies founded from 1995 to 2005, the chief executive or lead technologist was foreign-born. In Silicon Valley, the percentage of immigrant-founded startups was much higher—52 percent.”

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Posted by Michael Hendrix

Paper Finds importance of Keeping Foreign-Born STEM Students in U.S.

January 18, 2012

By Randy Johnson, Senior Vice President, U.S. Chamber of Commerce

A white paper authored by Nick Schulz, who serves as a National Chamber Foundation (NCF) Scholar and the DeWitt Wallace Fellow at the American Enterprise Institute, and unveiled today by NCF is part of a growing body of research that demonstrates the importance of high-skilled immigration to our nation’s economy.

Mr. Schulz asserts that in a knowledge-based economy there is a clear link between productivity growth and the contributions of highly-skilled immigrants.  In particular, the report notes that highly-skilled foreign-born nationals are being hired by prominent scientific, technology, and engineering firms – such as Microsoft, Coca-Cola, Intel, Caterpillar, 3M, and Ingersoll-Rand – to supplement the skill sets of native-born Americans.  These immigrants contribute to business operations not just through their skills but also their understanding of foreign markets, and in so doing play an active role in international commerce.

The paper argues that due to their willingness to take risks, high-skilled immigrants are also entrepreneurial. To back this assertion, Mr. Schulz cites a study from Duke University that examines the new science, technology, engineering, and mathematics-related (STEM) companies founded in the decade between 1995 and 2005.  The study’s authors found that fully one-quarter of those firms had at least one immigrant founder.  In addition, the paper also cites a study from the National Bureau of Economic Research which shows that immigrants with advanced degrees are also more likely to file patents for new inventions than native-born Americans.

Mr. Schulz’s main concern is that although immigrants still come to the United States in order to study at some of the finest universities in the world, the United States is still rapidly losing its competitive edge.  There is a growing recognition echoed by other groups, such as the Council of Foreign Relations, that existing immigration laws hinder the ability of foreign-born nationals to work following the completion of their studies.  Perhaps most alarming is the fact that Indian and Chinese nationals currently studying in the U.S. have indicated that they are intending to leave this country and start businesses elsewhere, directly competing against our nation’s economic interests.

In short, foreign-born nationals supplement the skill sets of those individuals born in the United States.  It is an economic imperative that highly-skilled, foreign-born individuals, especially those studying in the critical STEM fields, remain in this country so that they may expand economic growth and create new job opportunities for all Americans.

Re-Posted from FreeEnterprise.com: Paper Finds importance of Keeping Foreign-Born STEM Students in U.S.

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Posted by National Chamber Foundation

Nick Schulz on the Human Capital Imperative

January 18, 2012

By Michael Hendrix, Research Manager

The National Chamber Foundation (NCF) is unveiling a white paper today authored by Nick Schulz, NCF Scholar and DeWitt Wallace Fellow at the American Enterprise Institute, on the benefits of high-skilled immigrants to the American economy. In The Human Capital Imperative, Schulz argues that America’s immigration policy needs to adopt a welcoming stance toward the skilled human capital found overseas if the country wishes to remain competitive in the 21st century.

Schulz examines “what scholars and the public have learned over the years about the economic effects of adding new skilled immigrants to the work force.” He concludes that “the United States will need to take steps to make sure it can compete,” including increasing the number of visas available to skilled immigrants.

The paper follows up on the conclusions reached at a recent event at the U.S. Chamber called“Immigration & American Competitiveness: The Challenge Ahead.” The remarks of New York City Mayor Michael R. Bloomberg and U.S. Citizenship and Immigration Services Director Alejandro Mayorkas focused on how high-skilled immigration is important to our nation’s economic recovery.

Schulz finds that skilled immigrants make inordinate contributions to American prosperity. They “start businesses at higher rates than the native-born,” “work or start businesses in some of America’s key growth sectors,” “help create new intellectual property,” and add to broader productivity growth and innovation throughout the economy.

“When any economy faces challenges, the first thing it should do is determine if it has any self-inflicted wounds, as those are the easiest to correct. The evidence is clear that the benefits of skilled immigration are high. The costs of bad immigration are also high. It is past time for the nation to stop shooting itself in the foot.”

You can read the rest of the paper below on our blog or on its own page here.

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Posted by Michael Hendrix

The Rise of Big Data

January 17, 2012

By Michael Hendrix, Research Manager

On the eve of 2011, humanity was creating enough data each day to match all of the content in the Library of Congress — 11,461 times over.  With more digital devices than there are humans in existence and internet users being added by the tens of millions with each passing month, data is streaming from all corners of the globe.

The world is floating in a vast river of digital information that is getting faster, deeper, and wider every day.  Data pours forth from handheld phones, social media, credit card purchases, and Wal-Mart warehouses in quantities and rates never seen before in history.  The possibilities found in this river of information are equally endless.  It can open up new markets, help unlock the secrets of science, defy corruption, and much more.  These aims are lofty.  Yet they are feasible through the rise of what’s being called “big data” and all of the analysis, storage, and human capital that goes into managing it.

We must ask what the rising tide of big data means to businesses and individuals alike. While companies can find opportunities, trends, and new approaches in the mass of data, the human element remains critical to understanding, interpreting, and using this information.

Data, Data Everywhere, Nor Any Drop to Sync

Global data flows are so vast that they overwhelm the imagination.  2010 saw the production of over 1,200 exabytes of information.  To put that number into perspective, 1,200 exabytes is roughly equivalent to the storage space of 300 billion DVDs.  Moreover, this number represents a ten-fold increase in data creation over just five years.  It’s projected that in 2015 we will be produce a staggering 7,910 exabytes of data.

In 2011, the world had 2 billion internet users or a little over a quarter of the global population.  What isn’t reflected in that number is the total of mobile-phone subscribers, people who are fast becoming connected to this same data flow.  Bearing in mind that some individuals have multiple subscriptions while others are bundled together, the world now has 4.6 billion mobile phone subscribers.

Turning to the organizational level, a recent McKinsey report found that overall data volume is growing by some 40% per year.  While 75% of all data created in the world stems from individual users, companies have liability for around 80% of it at some point.   In 15 of the U.S. economy’s 17 sectors, companies with more than 1,000 employees store on average over 235 terabytes of data.  At the more extreme end are companies like IBM, which boasts a storage capacity that comes to over 120 petabytes, and tech titan Microsoft, which in just one data storage center can hold up to 6.75 trillion photos.

A Rising Tide of Data

As the tide of data rises, a number of key trends are starting to surface.  The first is the sheer ubiquity and complexity of data.  As noted earlier, raw data is being created at a faster rate and in greater quantities than ever before.  One reason for this is the increase in users and devices.  By 2015, Cisco Systems expects that 40% of the world’s population will have internet access and that the number of network connected devices will quadruple to some 15 billion connections.  These users and devices will also be able to access and create data at greater speeds thanks to the spread of broadband connectivity, which itself is expected to become four times as fast in less than five years.

This deluge of data is also becoming more complex.  Digital information comes in either structured or unstructured form and, according to SAS, upwards of 85% of data is this latter, unsorted type.  While structured data is categorized and sorted within easy reach, unstructured information is often a scattered morass of text-heavy data with few identifying marks.  The reality of data today is more like a bad episode of TLC’s Hoarders than something out of the streamlined, glowing structures seen in Disney’s Tron. As such, there is tremendous potential value in leveraging cluttered data.  To quote The Economist, “Given enough raw data, today’s algorithms and powerful computers can reveal new insights that would previously have remained hidden.”

The second key trend is that this data is far more mobile today than ever before.  It’s not just being stored but shared.  One manifestation is in the realm of social networking.  Up to 65% of Americans use social networking sites such as Facebook and LinkedIn.  Now more than ever, these sites are yet another way to share information and structure e-mail data within a defined network of users.  Another is the ascent of what’s called the “cloud.”  Ubiquitous internet access is allowing for data to be stored in centralized servers — rather than be siloed and scattered — that can be accessed on-demand and readily scaled up.  With the cloud, computing becomes less about the hardware and more of a service to a network of global consumers.  By 2015, upwards of 20% of all data will course through the servers of cloud computing providers.

The private sector was the first realm in which big data arose and so it’s apt that private firms are among the first to be utterly transformed.  As McKinsey put it, data “underpins processes that manage employees; it helps to track purchases and sales; and it offers clues about how customers will behave.”  Not only are industries forming around sorting, analyzing, and applying this data, but it’s forming new data-driven business models.  In short, data is central to how business is done in the 21st century.

So What?

The rise of big data is proving to be profitable, for one thing.  Data analytics, as an example, offers a way to improve productivity by some 0.5 to 1 percent annually in sectors like health care and retailing.  Moreover, a recent study found that data-driven decision-making increases firm performance by 5-6%.  It is quite normal now for an organization to employ “business intelligence” systems to make sense of the data coming from their customers, employees, stores, and warehouses.  As one article in The Wall Street Journal said, “It means fewer hunches and more facts.”

We’re also seeing more organizations be shaped internally by information flows: that is, becoming more collaborative and less hierarchical.  Networked enterprises thrive off of collaborative software that encourages more of a team-based approach centered on open communication flows.  Think of a Silicon Valley firm that eschews cubicles and communicates through instant message.  A survey by McKinsey found a distinct correlation between networked enterprises and increased market share.  Only 3% of the companies they surveyed were “fully networked,” but that cohort is growing fast.

Big data is also impacting external engagement.  Companies are using social media platforms to interact with customers, web-based portals to communicate with suppliers, and overarching systems to coordinate the resulting data flows.  The result is incredibly precise segmentation of customers and the products and services they need.  In this we see that big data need not be for the tech titans alone.  Wal-Mart thrives off of real-time inventory data from across the world in order to properly allocate its products.  For instance, “Wal-Mart discovered in 2004, that along with flashlights, batteries, and other emergency supplies, Pop-Tart sales increased before a predicted hurricane.”  ”Thanks to those insights, trucks filled with toaster pastries and six-packs were soon speeding down Interstate 95 toward Wal-Marts in the path of [Hurricane] Frances. Most of the products that were stocked for the storm sold quickly, the company said.”

On a personal level, we are depositing data in our wake as we move through this river of information. While the privacy concerns are real, this data has also enabled the rise of niche markets and services that become highly personalized in real-time.  Companies using data to more accurately interact with their customers or earn new ones makes their advertising, offers, and service more relevant and specific to the needs of customers.  As Erik Brynjolfsson and Andrew McAfee put it in a recent article in The Atlantic, “Customers are acting as unwitting business consultants for these companies. Our purchases, searches, and online activities are being tracked to improve everything from websites to delivery routes and drug manufacturing.” Ultimately, this enables you and me to capture the gains brought on by lower prices, lifestyle improvements, and niche products.

Staying Afloat in the River of Data

While we can have instant data ready to answer the “what” and the “how” of our world, the “why” and the “so what?” is still up to us to determine and understand.  Analytical talent is not replaced by streams of data or number-crunching machines.  In fact, it makes the insight and intuition of skilled workers that much more valuable.  As McKinsey concludes, “The demand for people with the deep analytical skills in big data (including machine learning and advanced statistical analysis) could outstrip current projections of supply by 50 to 60 percent.”

Companies should work diligently to not drown in this river of data.  There’s much to be said for thinking proactively about the opportunities afforded by an ever greater supply of data and the need for its effective storage, analysis, and integration.  Big data allows companies to more dynamically compete in the marketplace and to capitalize on greater informational awareness.  Just as countries should think holistically about their technology agenda, companies must understand how big data fits into their overall strategy and not separate it from decision makers.  The rise of big data offers a way toward a more prosperous future for economies and businesses.

Big data is more than information.  It is an assembly of our collective experience.  We see ourselves in the stream of data, more aware and complex than ever before.  Our institutions – political, economic, social — are rising on tides of inter-connectivity.   The future of business will in many ways emerge from this river of data and it will be all the more human because of it.

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Posted by Michael Hendrix

Blog Posts Driving the Debate

January 13, 2012

NCF curates a weekly list of blog posts that touch on emerging issues affecting the American business community.

Ezra Klein notes the “confused argument against immigration.”

Richard Florida at The Atlantic Cities laid out “the geography of women’s economic opportunity” in the world.

It’s a little bit wonky, granted, but there’s been a debate on the blogosphere this week about the length and severity of Japan’s 1990s recession.  Noah Smith argues that Japan’s economy was actually relatively strong during the 2000s, contrary to the popular notion that the country has suffered a stretch of two nearly unbroken decades of stagnation.  Many of the free market reforms and previously unseen initiatives (at least in Japan) that the country’s former prime minister Junichiro Koizumi brought about deserve much of the credit.

Arnaud de Borchgrave at The Atlantic Council outlined the key “threats to watch in 2012,” including those challenges both military and financial.  Speaking of risks, it looks like North Korea has far more advanced nuclear program that the public previously knew.

Gavyn Davies wrote on “America’s incredible shrinking labor force.”  After 2008, what had been a steady upward rise in the labor force came to a sudden stop and has been stagnating ever since.  The fundamental reason is short-term but worrying, having to do with a drop in the participation rate.  In other words, a large number of people have quit working or looking for work in America, which in turn puts our traditional economic dynamism at risk.

The Mafia may be the largest banking institution in Italy.  According to a recent report, “The mafia affects up to 50 businesses every hour, causing the loss of ‘tens of thousands of jobs’ and the closure of more than 1,800 businesses throughout the country each year.”  A shadow banking system acts like a cancer to a country’s economic body, much like Greece’s endemic tax avoidance.

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Posted by National Chamber Foundation

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