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Global Economics & Pricing

March 15, 2011
In the last 20 years, 27.3 million new jobs have been created in the United States. But underlying that apparently impressive statistic is the fact that 98% of them have been created in non-tradable areas such as government, healthcare, retail, hospitality and real estate.  And that is a key reason why the US unemployment rate is proving stubborn.
In order to achieve growth, raise employment levels and reduce trade deficits, the US must create more sustainable jobs based on exportable goods or services. And that is why innovation is so important, to raise the value-added skills or components that the US can offer to overseas trading partners.
Of course, the US is not alone in facing this challenge and even the high-growth developing countries cannot assume continued success. In an excellent article on the structure of global growth, Nobel laureate in Economics Michael Spence explains that there are no certainties in how conditions evolve. In particular, many of the high-growth emerging countries of recent times reached a sticking point. They achieved middle-income status, but only about one third have moved forward to high-level incomes ($20,000 per capita or above). They lacked the technologies, investment in human capital and governance infrastructure that are necessary to advance to this next stage.
The points made by Mr. Spence are important for any supply chain or marketing professional to understand. They illustrate the challenges of forecasting where to invest, where to seek long-term supply and the factors to watch out for in making those selections. They also show the dangers of believing that advanced economies can survive simply based on continuous price reductions achieved through outsourcing. To prosper, we must be creative and, as many articles in this blog have pointed out, unrelenting price pressure for its own sake is often the enemy of creativity and can lull the most advanced societies into a false sense of security.
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