Weekly Economic Report
Following up on last week’s missive which examined where the next round of cheaper labor might come from (the answer was China, then India, with a little ASEAN in between), we ask a related question of what will happen to the US economy if it does not have access. For us, the history of US growth is much like the development of the City of Boston where we grew up. Back in the early post war period, Boston, like the US, was a manufacturing led economy – mostly footwear and chemicals. Over time, its universities were first regional, then national and ultimately international powerhouses that generated leaders in business, finance, medical care, technology and education. Manufacturing jobs moved south, then overseas. For the US in the early post war period, the economic cycle was a short boom bust pattern, with peaks near 8% and bottoms around -2%. The one longer cycle was in the 1960s as the Government funded the Space Race to fend off the threat to world leadership from the Soviet Union. This led to a cold war, with a proxy fight in Vietnam, and a domestic war on poverty rather than a Thucydides trap (where the rising power physically fights with the current leader).