Caroline Baum's View on Money
Good morning, dear readers. Here are some stories and commentary I'm perusing to start the week.
Hilsenrath speaks, doesn't say much.
Journalists have examined ad nauseam the views of Janet Yellen and Larry Summers on monetary policy, and today is the turn of the Wall Street Journal's veteran Fed-watcher Jon Hilsenrath. The media has dissected the two candidates' ideas on regulation and today's topic is their leadership styles: Guess who is expected to be the better consensus builder? What comes next? What Janet and Larry eat for breakfast? Hopefully President Barack Obama will announce his pick for Federal Reserve chairman before things get too gastronomical.
On the importance of an entrepreneurial culture.
Back in the 1980s, Japan was the envy of the world. U.S. companies sent senior level employees abroad to study Japanese management techniques. When Japan's real estate and stock market bubbles burst in 1989, the nation virtually disappeared from the world stage. I've often wondered if it wasn't Japan's corporatist policies that created the illusion of success in the short run, only to be revealed as a failure. Nobel Prize winning economist Edmund Phelps comes to the same conclusion in his new book. As discussed by Yale's Robert Shiller: "An economy with a corporatist culture can copy and even outgrow others for a while," Phelps says, "but, in the end, it will always be left behind. Only an entrepreneurial culture can lead."
How much does it actually cost?
Preferred provider organizations negotiate with health-care providers for discounts on medical services. Discounts from what? From some "fantasy price" set by the hospital. Providers know what they charge, but patients have no idea what they pay. Until the actual price of health care is made transparent to everyone, U.S. medical care costs are destined to remain high.
Outsourcing, a case of less than meets the eye.
"Made in America" has become more of a political rallying cry to subsidize domestic manufacturers than an accurate reflection of where goods are produced. Today, an increasingly large share of international trade is in goods assembled with parts from many different countries. Most iPhones are assembled in China, for example, but the value added from China accounts for only 4 percent of the total production cost. It's about time politicians got up to speed on the data, or at least understood some basic principles such as comparative advantage.
Did someone say "reshoring?"
Sure enough, U.S. manufacturers look to be regaining their competitive edge. The Boston Consulting Group has long argued that manufacturing jobs will come flooding back to the U.S. as rising wages in China reduce that country's competitive advantage. A combination of cheaper natural gas and electricity prices (a result of the fracking boom) and stagnating wages are making the U.S. "one of the lowest-cost countries for manufacturing in the developed world," according to a new Boston Consulting Group report.
(Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.)