The latest OECD report of composite leading indicators (CLIs) show that the global recovery shows signs of stalling. Note that CLIs do not reflect current business activities. They are aggregates of leading indicators that attempt to indicate turning points in economic activity approximately six months in advance.
Recent high-frequency indicators point to a slowdown in the pace of recovery of the world economy that is somewhat more pronounced than previously anticipated. Against this background and according to the OECD short-term forecasting models, growth could slow in the G7 economies to an annualised rate of about 1½ per cent in the second half of the year
So here's how I see it: what we're really seeing here is a sort of intellectual Wile E. Coyote moment. Back in May, the OECD was responding to social pressure, not economic logic. All the right people wanted austerity now now now, because, well, because, and the OECD went along. Now a bit of bad economic news has led the organization to look down, and realize that there's nothing supporting its position. But there never was.
From the press press release:
OECD composite leading indicators show signs of possible peak in expansion OECD composite leading indicators (CLIs) for July 2010 point to clearer signs of a moderation in the pace of expansion compared to last month's assessment. The CLI for the OECD area decreased by 0.1 point in July 2010.
In Canada, France, Italy, the United Kingdom, China and India there are stronger signals of a slower pace of economic growth in coming months than was anticipated in last month's release. Stronger signals that the expansion may lose momentum have emerged in Japan, the United States and Brazil. Tentative signals have also emerged that the expansion phases of Germany and Russia may soon peak.
The OECD Development Centre's Asian Business Cycle Indicators (ABCIs) show that the recovery of ASEAN economies keeps on track with some signs of moderation.
Here are some charts, showing coming peaks in major sections of the world economy, and even a downturn in China:
A couple of weeks ago, in "The REAL causes of the long-term federal debt crisis", I argued that "The long-term federal debt is basically due to two things: Republican fiscal irresponsibility and the extreme costliness of the American health care system as a whole." And I presented several charts showing (a) how much Medicare & Medicaid costs increases had paralleled general medical costs increases, (b) how much MORE their projected costs increaeses were due to costs themselves, rather than demographics, (c) how much less our debt burden would be in 2050, if we could slow the growth of medical costs and (d) how much higher our costs than other countries many of which have much older populations than we do.
On the flip, I'll republish those charts, just to refresh people's memories. But the purpose of this post is to provide another perspective on what's gone wrong with American health care--a historical perspective showing just how it is that US costs have grown so far out of whack with everyone else in the industrial world. It's this vast departure from the cost structures everywhere else in the world that are at the root of virtually all our long-term public debt problems circa 2050. That's not to say there aren't other important issues--such as the need to repair and rebuild infrastructure--particularly in a much more energy-efficient way. We also need to stop squandering vast sums on the military, and invest heavily in a post-carbon economy. But the overwhelming problem of debt that politicians blame on "entitlements" is actually predominantly a result of our deeply dysfunctional health-care system, which will barely be touched by reforms that have been discussed this past year.
All the figures are from the most recent OECD database of health-related statistics, and are denominated as percentages of GDP. The first chart compares the US to other Anglophone countries--those whose welfare state systems are most similar to ours, as they all derive historically from British culture, and tend to reflect a common attitude that tilts more heavily to reliance on markets and away from government programs. Nonetheless, all the other Anglophone countries eventually accepted that health care was different, and that government needed to play a much more active role in making sure the workforce--as well as the citizenry as a whole--was healthy. This is how their costs changed over time:
As you can see, the US costs began pulling away from the cots levels of the other Anglophone countries around 1970, as our costs continued growing at about the same rate they had been from 1966 onward, while other countries' costs grew at a slower pace.
Charts for other groups of countries compared to the US on the flip, along with a reprise of the charts mentioned above.
I've been extremely skeptical of what I regard as unduly optimistic economic forecasts, simply because this recession is so much worse than others over the past half-century, not to mention the fact that it's causes caught almost everyone by surprise. I've warned that there were false signs of hope during the Great Depression as well. At the same time, I'm well aware that this has not been anywhere near as a bad as the Great Depression, but then, we're not out of the woods just yet.
Now, however, the 30-nation OECD (Organization for Economic Cooperation and Development) has just issued a press release on the June composite leading indicators (CLI), which shows widespread signs that economies are about to turn around. The CLI gernerally forecasts economic conditions 6 months in advance. Signs have been positive for several months now, but temporary upticks happened during the Great Depression, so if this event is any way comparable, it seemed prudent to remain cautious. It still does. Now, however, the last major economy that had had its CLI headed down--Japan--has seen it turn up. That means that all the countries included in this press release show signs of having hit bottom, and having begun to turn up. Since most countries began trending up in March, actual economies could show signs of improvement in September across most of the OECD. I'd be quite relieved to have been wrong in being so pessimistic, both because so many people are hurting, and because of what it will mean for the mid-term elections. It takes months of improvement before it impacts the mode of the electorate. And even then, the job prospects are much bleaker than general recovery. So we're still not out of the woods yet. But we've finally seen broad enough signs of improvement that I'm shifting my focus of concern away from recovery in general, and squarely onto the issue of jobs.
One of the favorite new rightwing memes on health care is that one out five Canadian patients dies because of their evil Stalinist system. The reality, of course, is quite the opposite. The broadest international health measure one can use to reflect this sort of claim is "potential years of life lost", which is one of a large number of indicators tracked by the 30-nation Organization for Economic Cooperation and Development (OECD). As can be seen, the US started out about average in 1960, but quickly fell behind, both for men and women. While we've improved significantly over the years, others have improved significantly more--so much so that for women the years of life lost approaches the maximum of OECD coutries, excluding Turkey and Mexico.
The OECD just did a major release of new data back on July 1. What should interest us, however, is not the new data, but the historical trends like those shown above, which go back to 1960. At the time, the US looked relatively good in some international comparisons--such as infant mortality rate, the other single most significant indicator of national health--and our costs, though as high as anyone else's, had yet to diverge as wildly as they would after 1980. On the flip, I provide some more charts dealing with potential years of life lost, as well as infant mortality rates, percent of GDP spent on health care, and number of hospital beds--all broad indicators for comparing health care and health outcomes.
Amidst a recent upsurge of happy talk about economic "green shoots," the Organization for Economic Cooperation and Development (OECD) released a sober reminder this week in the form of its Quarterly National Accounts figures (pdf) showing that the global recession deepened in the first quarter, while the New York Review of Books published a forum, "The Crisis and How to Deal with It" with Bill Bradley, Niall Ferguson, Paul Krugman, Nouriel Roubini, George Soros, and Robin Wells. It was from an April 30 panel discussion, but things have not improved so much as to render it outdated. Indeed, Huffington Post just published a followup report on the "American families" featured in his 30-minute campaign ad. They've yet to see any real help from his presidency. And while they are still patient and trusting towards him, the collective picture is not encouraging.
OECD first:
Gross domestic product (GDP) in the OECD area fell by 2.1% in the first quarter of 2009, the largest fall since OECD records began in 1960, according to preliminary estimates, and followed a fall of 2.0% of GDP in the previous quarter.
In the United States GDP fell by 1.6% in the first quarter of 2009, the same rate as in the previous quarter. Japan's GDP declined by 4.0%, following a 3.8% decrease in the previous quarter. GDP in the euro area was down 2.5%, following a 1.6% fall in the previous quarter.
Of the Major Seven* countries, only in France, where GDP fell 1.2%, did the rate of contraction ease in the first quarter.
Compared with the same quarter a year earlier, all the Major Seven* economies recorded a fall in GDP, and a marked deterioration on the previous quarter's year-on-year figures.
The United States contributed 0.9% to the total OECD fall of 4.2% between the first quarter of 2008 and the first quarter of 2009. Japan contributed 1.0%, the euro area (13 countries) 1.3%, and the remaining countries 1.0%.
* "Major Seven" and other groups of countries defined at end of diary.
Issues? Remember them? Well, this has to do with a big one: Health Care, and the government role therein.
You probably know that the Social Security "crisis" is a myth. You probably also know that the Boston Red Sox finally broke the curse of The Bambino. But what about the "fact" that Baby Boomers are going to break the bank on Medicare?
Turns out, not so much. The real problem is not aging Boomers. It's a crazy incentive system that drives "innovation" and costs much faster and higher than it drives health results. So resports Maggie Mahar, who blogs at Health Beat, a Century Foundation project, in an Alternet article, "The Mythology of Boomers Bankrupting Our Healthcare System".
In the 1 picture=1k words department, dig this:
Mahar's article is based on a presentation at the recent three-day "World Health Care Congress Europe" (WHCCE), by Princeton economist Uwe Reinhardt:
The only American to speak at WHCCE, Reinhardt focused on what he called "the folklore that people bring to the healthcare policy table." By nature an iconoclast, Reinhardt spent the next 20 minutes shattering some of the myths that have become part of the received wisdom among policymakers.
STATE BLOGS
I've been extremely skeptical of what I regard as unduly optimistic economic forecasts, simply because this recession is so much worse than others over the past half-century, not to mention the fact that it's causes caught almost everyone by surprise. I've warned that there were false signs of hope during the Great Depression as well. At the same time, I'm well aware that this has not been anywhere near as a bad as the Great Depression, but then, we're not out of the woods just yet.
