Rob Shapiro in Superb Business Week Overview of Fast-Changing Economic Debate

Democracy, sometimes, is amazing to watch. The election has clearly changed the tenor of the economic debate. It is clear to me that the disucssion we were having in the weeks prior to the election has shifted sharply. Jim Webb is taking a leading role, both with his rambunctious WSJ article, and his robust performance on Sunday's the Meet the Press in which he said the economy and globalization were his first priorities for action. There have been important articles in the Times, including this excellent overview of the debate by Eduardo Porter, where he leans heavily on influential Saez and Pitteky study of rising income disparity. This week's American Prospect goes all out for one side, arguing the case for "Why Populism Wins" and making Sherrod Brown perhaps the first cover star to wear a sheep skin jacket for some considerable time. And even in today's papers you see the divide. The Wall St Journal has a big piece saying that "Divide Between Rich and Poor
Continues to Widen; Spurs 'Robin Hood' Plans", while the Boston Globe notes the "Pelosi team tries to steer Democrats to the center." What is going on? The lid has come off the debate on globalization. It's exciting to watch.

But the single best introduction to the contours of this debate comes in the main story in this week's Business Week: "Can Anyone Control This Economy?" And, I promise, i'm not just saying this because our own Rob Shapiro is quoted prominently. The piece is by Michael Mandell, something of a prince among economics commentators. This is a least in part because he predicted the internet bubble bursting, while others were prattling on about Dow 36000 and the rest. Mandell's blog - Economics Unbound - is excellent also. But i digress. His piece is an extremely insightful take on the dillmmas facing economic policy makers at present. I'll quote it at length. This is the set-up.

No matter which party you belong to, or which Big Idea or school of economic policy you subscribe to, one thing is clear: Globalization has overwhelmed Washington's ability to control the economy. Whether you're a Republican supply-side tax-cutter, a Wall Street deficit hawk of either party, or a Silicon Valley techie type, your preferred levers of economic policy just don't work as well as they once did.

He then moves on to discuss some of the difficulties of the current administration, and quotes Rob:

President Bush encountered a similar problem. His huge tax cuts poured hundreds of billions into the economy and kept output rising at a decent clip. Nevertheless, the fiscal stimulus generated far fewer jobs than anyone expected, as more and more production headed overseas. "Traditional macro policies are less effective than they used to be," says Robert S. Shapiro, a top economic adviser to President Bill Clinton who now runs a Washington economic consulting firm. "We don't know how to ensure strong job creation and strong wage growth anymore."

He then moves on to discuss the limitations of current approaches.

Even the Big Idea of devoting more tax dollars to research and development to make the U.S. more competitive--an idea repeatedly advocated by such tech leaders as John T. Chambers of Cisco Systems Inc.CSCO and John Doerr of venture capital giant Kleiner Perkins Caufield & Byers--is beginning to look economically and politically troublesome.... But in the brave new world of the global economy, where companies move factories and facilities around the world like game pieces, it's no longer a given that U.S. workers benefit directly from U.S.-funded research.

And get this: We don't even know how to measure whether we as a country are succeeding or failing. The traditional metrics for economic security and prosperity are capturing impressive signs of life. Washington has responded to these concerns, in large part, with a series of small fixes, like tinkering with the pension system. But what's needed is a new Big Idea for economic policy--or two or three competing Big Ideas--that accounts for the verities of the global economy.

It really is an excellent overview of the debate. Kudos to Mr. Mandell both for writing it, and for mentioning Rob's views.

In other news, NDN's Globalization Initiative will shortly be announcing a major event to discuss the way forward on economy, on November 30th, at lunchtime in downtown DC. Put it in your diaries, and check back on the blog later for details.