European decline — a further note

January 9, 2010, 4:19 pm. Paul Krugman Blog.

<!– — Updated: 4:19 pm –>There’s been a big to-do in the econoblogsphere over an essay by James Manzi in National Affairs; unfortunately for Manzi, it hasn’t been the kind of debate you want. Manzi asserts that having a European-style social democracy is terrible for growth:

From 1980 through today, America’s share of global output has been constant at about 21%. Europe’s share, meanwhile, has been collapsing in the face of global competition — going from a little less than 40% of global production in the 1970s to about 25% today. Opting for social democracy instead of innovative capitalism, Europe has ceded this share to China (predominantly), India, and the rest of the developing world.

Manzi’s numbers were picked up widely, including by the Times’s own Ross Douthat.

The Bad Job Numbers and the Secret Second Stimulus

Friday, January 8, 2010, Robert Reich’s Blog:

The Labor Department reports that 85,000 jobs were lost in December. The official rate of unemployment (which measures how many people are looking for jobs) held steady at 10 percent nonetheless. That’s because so many more people have stopped looking. Reportedly, 661,000 Americans dropped out of the labor force last month, deciding there was no hope of finding a job. Had they continued to look, the official unemployment rate would have been 10.4 percent.

These statistics mask an even more troubling reality. Since the start of the recession in December 2007, around 8 million jobs have been lost. But this doesn’t include all the people who, in a growing national population, would have entered the labor market had there been jobs for them. These “never entereds” amount to an estimated 2.5 million. So, in truth, the national economy is down by 10.6 million jobs overall. There’s no way to make this up for years.

The most painful political truth for Democrats is the nation won’t possibly be out of this jobs hole by the presidential election of 2012, even if the recovery is vigorous.