WASHINGTON – The American economy is closing 2014 on a high note. US GDP grew 5% in the third quarter. This is good. Jobs creation is better. Unemployment is down a bit, and disposable income has been boosted by slightly higher wages and substantially lower gasoline prices due to the global oil glut.
Good numbers, but not exceptional
Still, while all this is definitely good news, let’s not get carried away. Even with this rather exceptional 5% third quarter GDP growth, for the whole year the US economy is up 2.5%.
This is respectable; but not astonishing. If compared with a post-war 3% average yearly growth, this is barely OK. The fact is that what started in 2009 has been the worst post-recession recovery in recent history. There has been a slow upward movement, but no vigorous bounce.
Much better than Europe
The US economic performance looks positively great only if compared with dismal Europe or Japan. A 2.5% rate of growth looks amazing, in fact miraculous in countries that are either in constant recession or growing at 1%. But the sad story is that both Europe and Japan are declining economic regions of the world.
In Japan, even with interest rates near zero, debt service absorbs 40% of the entire state revenue. And this is because Japan’s debt is now a colossal 240% of GDP. Doing better than Japan, Greece, Italy or Spain is no great achievement.
Too many part-time jobs
Besides, can America sustain this 5% growth rate in the coming months? Probably not. The problem is low productivity and stagnant incomes. While lower unemployment is certainly good news, the fact is that far too many Americans seeking full-time positions can only find part-time jobs. This means only low income and no security. Again, far better to have some work than no work at all. But the reality is that millions of American are on really shaky economic ground, with very few prospects of any real improvement.
The best way out of this relative stagnation is more innovation, more enterprises, and more high paying jobs created. There is no doubt that a good portion of the American economy is on solid ground. High technology, information and communications firms, biotechnology, robotics, electronics are doing well.
Bad public education
But much of the rest is doing only so so. In part this is due to the fact that for decades we have not done much to improve overall public education standards. Far too many young Americans, most of them minorities, get only a mediocre or really bad education. They have few marketable skills; and therefore their chances to get ahead in life are small.
Develop all human capital
America needs to do all it can to develop its human capital. In a very competitive global economy, the future belongs to societies in which there are many highly educated, talented, creative individuals capable of starting innovative enterprises.
This used to be America. But now it is no longer so. We have fallen behind. Millions of functionally illiterate teenagers cannot do much to take care of themselves, let alone help grow the economy.
We can do better
By all means, let’s rejoice looking at improved growth numbers. But let us not forget that the secret of sustained high growth is innovation. Let’s do our very best to develop to the fullest extent the intellectual potential of our large society. High quality human capital is what we need. Now and tomorrow.
Let’s pledge to educate all Americans. We do need all hands on deck.