Falling Apart, Falling Behind

Previous posts and our report have discussed how America is falling apart. Collapsing bridges, high unemployment, and so forth. In this post I discuss how we are falling behind.

China recently announced an economic stimulus package worth $586 billion, roughly 7% of its gross domestic product and the largest in its history. The Washington Post describes the plan as response to “increasing social unrest due to factory closings and rising unemployment.”

The plan is being compared to the New Deal. It will “ease credit restrictions, expand social welfare services and launch an infrastructure spending program that would include the construction of new railways, roads and airports.”

This is on top of China’s already aggressive plans to expand high-speed and freight rail nationwide. China has opened at least one new subway system every year for the past six years.

Meanwhile Europe announced a stimulus plan worth $256 billion, or 1.5% of the European Union’s gross domestic product. Every member state will define its own part, but they are generally heavy on public works.

“The goal of the fund is to mobilize workers, jobs and resources,” said Spain’s Prime Minister, Jose Luis Rodriguez Zapatero. The lion’s share of Spain’s $14 billion plan is for new construction and upgrades of existing public buildings, infrastructure, parks, schools and sports facilities

Denmark is ahead with an economy built around “flexicurity,” a generous system of carefully monitored unemployment benefits and training for displaced workers, designed to smooth transitions caused by international trade. The system costs fully 5% of Danish GDP, but former Prime Minister of Denmark, Poul Nyrup Rasmussen, thinks it’s worth it. “Active labour market policies help the unemployed to find work and increase their skills through training in periods between jobs. The idea is to make the journey from the old job to the new job as short, as easy and as productive as possible.”

With new leadership, the U.S. might well snap out of its doldrums. Our leaders no longer think the economy is fundamentally sound, nor do free market ideologues reject government intervention out of hand. The recovery packages are still under construction. But we are closing in on the change we need.

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