The Deep Roots of Social Conservatives' Disdain for the French

The roots of conservatives' disdain for the French date back to the 1800 election between Jefferson and Adams.

That election took place in the wake of the French Revolution, which was inspired by the American Revolution but was considerably more violent and intent on overthrowing traditions. The American Revolutionaries just severed the ties to their monarchy; the French actually severed the heads of monarchs. Americans gave themselves freedom of religion whereas the French actually outlawed religion for a time, turning the gorgeous Notre Dame into a temple to the cult of reason. What the American Revolution seemed to be to Britain, the French Revolution seemed to be to the United States.

Jefferson, the Republican candidate, had been in France. He also pushed to create not only freedom of religion but freedom from religion in the US. Jefferson was a Deist who did not trust clergy anymore than he trusted aristocracy, and as a man of science he didn't believe in miracles or God's intervention in daily affairs. The Federalists claimed that a vote for Jefferson was a vote against God and religion, a vote for chaos rather than order, a vote to let the rabble have a dangerous amount of influence. Jefferson was a Jacobin, they said, and a vote for him was a vote to head in the direction of godless France.

Federalists - whose candidate for president was President Adams - had passed an Alien and Sedition Act that let them arrest anyone who spoke against the government. They had argued for laws that would let them - essentially the wealthy elite - vote to determine "the people's" representatives. And, of course, they were horrified that a Deist might hold office. The Republicans argued that a vote for Federalists would be a vote to essentially return to British rule. Not only did the Federalists have ties to Britain but some had actually proposed making the presidency and even the Senate lifetime positions, even allow them to be inherited.

It was not true that Jefferson was so intent on individual liberty at the expense of order and so opposed to religious influence that he wanted the US to be like France, but he certainly leaned that direction more than Adams.

It was not true that Adams was so intent on imitating Britain that he would take away the people's rights and move towards solidifying the hold on power of a new, American aristocracy. (Although curiously his son, John Quincy, did become the sixth US president.) But he certainly leaned more in that direction than Jefferson.

It is interesting how many parallels there are between the politics of 1800 and today. But the one shocking thing that has persisted is that conservatives still don't trust the French. (Remember after the French refused to join us in the invasion of Iraq when members of congress proposed renaming french fries "freedom fries?") These conservatives are still the ones who think that God isn't given His proper due in this country and that the rabble who shouldn't be allowed to vote too easily can and see threats to their traditions all around them. 

It's worth pointing out a few things about the hopelessness of the cause of the social conservative, though. Jefferson wrote the Declaration of Independence and is more revered than Adams. Jefferson won the election of 1800, taking the presidency from Adams. Not only did he win but the Federalists proved so irrelevant that their party eventually disappeared. Jefferson had  a disdain for tradition but he was only the first in a string of presidents who decided not to wear a sword or powdered wig for his inauguration. And Hamilton - who was head of the Federalist Party and more extreme than Adams - was shot and killed by the Republican, Jefferson's former Vice President, Aaron Burr. Hamilton and the Federalist Party were killed off by Republicans. Social conservatives, however were not. Now they protect the very values and traditions that shocked Federalists and take offense instead at the next wave of social change. Oh, and seemingly still hate the French.

Jesus is Bored

As I commute to and from my current client, I drive under an overpass where a truck and trailer is parked with the message,
"Jesus is Lord."

I'd like to plant a truck at the next overpass with the message,
"Jesus is Bored. 
Just once you might do something wildly out of character, speak truth to power, commit an act of inexcusable generosity, or do something that terrifies you. Reward him for paying attention: be interesting."

Of course the fine print might be too much to absorb for someone already driving 65 mph while texting.

The Less You Have, the More Alluring is Gold's Glitter

The lower your income, the more likely you are to think of gold as a good investment.

From http://www.gallup.com/poll/168554/americans-sold-real-estate-best-long-term-investment.aspx?ref=image

What Government Does Well: Basic, Market Changing Research

There is a fascinating book review by Jeff Madrick that undermines so many of the casually inaccurate claims made by libertarians in the course of exploring The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato and Doing Capitalism in the Innovation Economy: Markets, Speculation and the State by William H. Janeway.

These titles buttress my suspicion that to be a libertarian requires a special blend of intelligence and naivete. Specifically, a naivete about the history of government's role in economic progress to date. These authors argue that economies move forward on a dance between government innovation (usually for basic research) and private innovation (usually for products that apply these innovations).

"Government can't do anything well," libertarians say. They've said it so much that it begins to sound like truth, in the same way that the Greeks' repetition of Homer's myths made Athena seem real. But what are the facts?

Despite protestations that government should not pick winners or losers, even including Solyndra it's only about 2% of the projects partly financed by government that go bankrupt. Symantec and Qualcomm were among the new companies funded by The Small Business Innovation Research program - a program started by Ronald Reagan. Google's basic algorithm was funded with a National Science Foundation grant. The iPod - and essentially every computing device - depends on technology that came out of US and European government-funded research labs.

It seems silly to say that the government should not choose research projects or companies or industries to invest in. The government - in the form of universities - regularly chooses which kids to invest in for undergraduate and graduate studies. The government chooses who goes to prison and who goes free. The government chooses who pays taxes and who gets subsidies. Governments inescapably make big decisions.

The real criticism of government is that they're likely to invest in projects, technologies and even companies that the market would not finance. I think this is accurate. I also think that such an accusation is actually an argument for such investment. Taking the lead on research can give a country an advantage for decades (look, for instance, at what the spending on computer chip and Internet research did for the US). Better to spend on 10 technologies, only a couple of which change the economy, than to spend on no technologies and watch another country take the lead on an important new industry or technology.

Yet because of recent cuts, funding for government research programs is at its lowest rate - as a percentage of GDP - in 40 years. Back to the level it was at before the personal computer, the Internet, bio-tech, and nanotech. (All, by the way, products of basic research initially funded by government programs.)

We're about to enter a period of even more rapid technological and economic change, not less. We can listen to the historically naive and continue to cut our funding on basic research. Or we can assume that even with all the change we're living through,the one thing that hasn't changed is that investment now determines income later, and in no area does that investment have more potential than basic research or even subsidies to startups.

Taxes Don't Determine Rates of Entrepreneurship, So Let's Determine What Does

The Kauffman Foundation just released a report on Entrepreneurship that, among other things, gives the rate at which people in each state have started businesses. I was tickled to see that Montana topped the list of states; not only that, but even among the metropolitan regions, only the Bay Area (San Francisco, et al) had a higher rate of entrepreneurship than Montana. (It's a good year for Montana. This year they bumped Colorado from number one on the list of fittest states, as measured by average body fat percentage.)

The top 5 states for entrepreneurship are:
1. Montana
2. Alaska
3. South Dakota
4. California
5. Colorado

The bottom 5 are:
51. Iowa
50. Rhode Island
49. Indiana
48. Minnesota
47. Washington

Of course the sum of Republicans' argument is that the less that government interferes with business, the lower governments keep tax rates, the more business formation and job creation there will be. And it's true that Alaska and South Dakota - number 2 and 3 on the list - have no state income tax, which would seem to buttress the Republican argument. Further, the worst state - Iowa - has a pretty hefty tax rate of nearly 9%. So points go the GOP for that.

But then the simplicity of this argument wanes in the face of facts as we look at the rest of the list. California has the highest tax rate of any state and is ranked 4th. Additionally, Washington state  has a zero rate and is still 5th from the bottom.

So what does the relationship between state income tax rates and rates of entrepreneurship look like? If Republicans' are right, we see should at least a rough correlation between a state's tax rate and its rate of business formation. Here's a graph that shows the relationship between the two variables:

The line that Exel fits to this data does slop downwards - suggesting that as tax rates go up, the rate of business formation falls. The Republicans are right. If everything else were equal, entrepreneurs would choose to start a business in a state with lower taxes.

But it also turns out that this relationship seems to explain only 1% of the difference in rates of entrepreneurship. Polls have suggested - as does this data - that taxes aren't very important in the list of consideration for aspiring entrepreneurs.They're more interested in finding a place where they themselves want to live and where they can find good employees. It's true that low taxes that leave more money in their pocket are likely to attract them. It's also true that low taxes that leave a community unable to provide a great education or high quality of life are likely to repel entrepreneurs. On their own, taxes simply aren't much of a determinant of where businesses get started.

Arguing for lower taxes is akin to saying, "We don't have a clue why entrepreneurs choose, or emerge out of, some communities but not others." Or more precisely, "We can explain about 1% of why states differ."

Communities serious about increasing the rate of entrepreneurship - and that should include any community serious about job and wealth creation - should first admit that the problem is more complicated than the simple matter of tax rates and then dive into discovering what does. The longer they waste time debating a dead issue, the longer they'll defer a genuinely profitable discussion.

Two Reasons Why This Recovery Feels So Anemic (And Why Even Normal Could Create a Boom)

The economy is recovering but we've yet to feel a wave of optimism sweep across the country. The two biggest reasons are that the 2000s gave us a huge hole to dig out from and we're creating jobs at about half the rate we should be given our population.

At first blush, the first few years of this decade have been pretty good in terms of job creation. Assuming that the rate of job creation continues at the average of the first 4.25 years (2010 through March of this year), a graph showing job creation by decade looks like this.

At the rate it is going, the economy would create 19.4 million jobs - exactly what it created in the 1970s and not that much better than the 1980s or worse than the 1990s. That seems really good but I'll explain in bit why it isn't.

REASON ONE: MAKING UP FOR AN AWFUL DECADE
In this graph we see the first reason why our recovery seems so anemic. During the 2000s the economy actually destroyed 1.1 million jobs. Such a decade is unprecedented in the post WWII period. A disaster. And think about what it means for a running total. During the 1990s it wasn't just that the economy created nearly 22 million jobs: added to the 1980s, it created a total of 40 million jobs. For an equivalent job market coming off a decade in which no jobs were created, the economy would have to create 40 million jobs during the 2010s, an average of 4 million per year. During the entire period shown in this graph (1940 to 2014), the economy created 4 million jobs only one year (1978).

REASON TWO: A BIGGER POPULATION NEEDS MORE JOBS
It gets worse. These numbers of jobs created make no allowance for whether the population is 132 million (as it was in 1940) or 309 million (as it was in 2010). Obviously, though, a larger population needs more jobs. This graph shows the number of jobs created as a percentage of the population.

As a raw number, a rate of job creation that would give us 19 million jobs by decade's end is not bad in comparison to the previous seven decades. But creating new jobs for only 6% of the population is bad. The average for the decades up to 2000 was 9%. To create the equivalent number of jobs would mean creating about 30 million jobs in this decade instead of 20 million.

What would it take to party like it's 1999? To feel as flush with jobs, cash, and wealth? At least a few years of job creation at the rate of 3 to 4 million per year. If we come even close to this, it'll create a boom as impressive as any since WWII even though it will - in some sense - simply get us back to normal.

Forecasting Job Numbers for Tomorrow and the Unemployment Rate for 2014 (and Beyond)

Tomorrow the Bureau of Labor Statistics unveils their job numbers for March, reporting job creation and the unemployment rate. My prediction is job creation numbers closer to 300,000 than 200,00 and an unemployment rate dip from 6.7% to 6.5%. Gallup's job creation index has risen sharply in the last couple of months and everyone is hiring - from stores and construction companies to manufacturing and governments.
[P.S. from 4 Apr 2014. Well, I blew this forecast. ADP was spot on, forecasting 191,000 when the number came in at 192,000. At this point the closest I can come is in the revisions that will come out over the next two months. The numbers for January and February were revised upwards, making the new jobs reported for this month about 220,000. There is a chance that the March numbers will be revised upwards eventually but probably not enough to get us north of 250,000. Mine is an optimistic bias. But my forecasts are also a reminder of how tepid is this recovery. In 1999, in 7 of 12 months the economy created more than 250,000 jobs.]

It gets even more interesting if you interpret the stock market as a leading indicator of the economic recovery. That perspective suggests 2014 will be a really good year.

From January 2008 to the worst of the recession, the S&P 500 fell by half and the unemployment rate doubled. The two markets moved in tandem.

The S&P 500 has since fully recovered. In fact, it's now 34% above what it was in January of 2008. Lest you get too excited about that, up 34% in 6 years equates to an annual return of 5%. That's not exactly amazing. In fact, given the (obvious) risk in the stock market, a 5% annual return would roughly equate to "back to normal."

So what about the labor market? Shouldn't unemployment be about normal by now?

Well, the markets don't move at the same speed. There is a time lag since capital moves faster than labor. During the Great Recession, the stock market hit bottom seven months before the unemployment rate peaked. You can sell stock much more quickly than you can layoff employees. And of course it takes even longer to hire than it does to fire, so if the labor market is lagging the stock market by seven months on the way down, it seems safe to assume that it would take about two to three times as long - 12 to 24 months, say, - to catch up during the recovery.

So if that's right, it means that the unemployment rate could hit "normal" in another 6 to 18 months.

That raises the question, What is normal for the unemployment rate? The obvious answer would be 5%, where it was before the Great Recession began. My prediction? The unemployment rate will dip below 6% by Fall and by this time next year will be somewhere between 5.5% and 6.0%. Whether it returns to 5% or even goes below 5% or 4% will depend on the extent to which governments and corporations get serious about popularizing entrepreneurship. Once we learn how to popularize entrepreneurship, unemployment could join starvation as something that people regularly worried about in the past.

Within hours, we will find out whether I'm right about the March job numbers. It will take years to find out if I'm right about the popularization of entrepreneurship.

My Invisible Friend Bernard Uses the Expansion of Space to Illustrate Social Change

Bernard was excited, which delighted me. I knew that his eyes lit up like that only when he'd been seized by a new idea he wanted to share.

"It's been a long time Bernard," I said as I sat down.

"How is this for a long time," he said leaning forward. "13.8 billion years!"

I had to shake my head. "That's a really long time."

"Yep. I heard scientists talking about new experiments that shed light on dark matter," he said. "And the big bang. Did you know that in the first trillionth of a trillionth of a trillionth of a second the entire universe expanded from something smaller than an atom to something the size of a grapefruit?"

"That actually sounds kind of good," I said.

"What does?"

"Grapefruit. Do you think they have any grapefruit juice," I asked.

"Out of what I said you heard, 'I think I'll have grapefruit?'" Bernard slumped. "You've got to be kidding."

"Bernard," I leaned forward. "I was! I was only kidding." Some days he was more sensitive than others. "Go ahead. It really sounds interesting."

"That's not even the interesting part," Bernard began anew. "That's just the set up for the interesting part. Get this," he leaned in. "The particles in the universe have to obey the speed limit, can travel no faster than the speed of light. But, the expansion of the universe itself can take place at any speed."

"Hmm," I said in what I hoped sounded like an intelligent tone.

"Hmmm," he shook his head. "You had better find that waiter and order your grapefruit juice," Bernard scoffed. "I think your blood sugar might be low."

I nodded. He shook his head.

"So this is pretty phenomenal to think that while the stuff in the universe - stars and planets and comets and even the light they emit can only travel so fast, the container in which all of this is moving can expand out at some multiple of the speed of light."

"Wow," I responded. "So you're saying that the space in which space happens can expand faster than the speed of light even though things in space can't?"

"Exactly," Bernard grinned. "Exactly." He looked like a seven year old who'd just played a Coltrane solo on a waxed papered comb. He actually rocked as he smiled.

"So this explains cultural evolution," he said. "It explains how it is that we get progress even though we're social creatures."

"The expansion of space explains cultural evolution?"

"Yes! See, we are products of our culture. So much of who we are is defined by that. If you're born in Indonesia there is a 99% chance that you're Muslim. It's hard to move faster than the speed of light if you're a particle or faster than your culture if you're an individual."

"Okay," I took the bait. "So what about a culture?"

"Aha!" Bernard jabbed the air dangerously close to my nose. "That can move rapidly. See Ron," he said. "Context is everything! Culture moves so rapidly that people can barely keep up. One century everybody is Catholic and the next they're Calvinists and Lutherans and Anglicans and Puritans and Deists. One year everyone is trying to be like Bobby Darin and the next it's Mick Jagger and then the next year rock gives way to disco. One decade everyone is embodied  and hang out in clubs and the next they're virtual and hang out on social media."

"So what's the container that can move so much faster than individuals?"

"The container is the code, the DNA, the meme, the new normal. As individuals we can't travel much faster than that but that - that normal - it can change so rapidly. And given we're social creatures, we keep up."

"So who changes the code?"

"Social inventors. You succeed at that experiment and you've just changed the container - maybe even more rapidly than people could ever think to move."

The waiter showed. "What can I get you," he asked.

I looked up. "For like the last ten minutes I have not been able to think about anything but grapefruit," I told him. "Do you have that?"

Before the waiter could say, "Sure," Bernard let out with a groan.

"Something wrong," the waiter inquired, worried.

"Yeah," Bernard said. "I guess that just because the container expands rapidly doesn't mean the people in it move at all."

The waiter looked at me with raised eyebrows. I shrugged. "Excuse me," the waiter asked.

"I said I'll take the lox and bagel," Bernard said. "With sesame seeds."

"any fool can get into an ocean ..." a poem by Jack Spicer

It's Sunday night. That seems reason enough to post a poem.

“Any fool can get into an ocean . . .”

BY JACK SPICER 1925–1965

Any fool can get into an ocean   

But it takes a Goddess   

To get out of one.

What’s true of oceans is true, of course,

Of labyrinths and poems. When you start swimming   

Through riptide of rhythms and the metaphor’s seaweed

You need to be a good swimmer or a born Goddess

To get back out of them

Look at the sea otters bobbing wildly

Out in the middle of the poem

They look so eager and peaceful playing out there where the

    water hardly moves

You might get out through all the waves and rocks

Into the middle of the poem to touch them

But when you’ve tried the blessed water long

Enough to want to start backward

That’s when the fun starts

Unless you’re a poet or an otter or something supernatural

You’ll drown, dear. You’ll drown

Any Greek can get you into a labyrinth

But it takes a hero to get out of one

What’s true of labyrinths is true of course

Of love and memory. When you start remembering.

The Most Important Government Policy for Determining Unemployment Rate

In most EU countries, the majority of people report that their government makes it hard to start a business.  Sadly for them, this matter of ease in starting a business seems to be a simple determinant for unemployment. And it makes sense. The harder it is to start a business, the harder it will be for successful entrepreneurs to hire people.

Here you can see the relationship between how hard it is to start a business and the unemployment rate. Do you want a high unemployment rate in your country? Make it hard to start a business.

Obviously unemployment rates depend on a variety of factors, but governments sincere about lowering their unemployment rates would great a great return from making entrepreneurship easier. (I argue incessantly that the task for policy makers in this new economy is to popularize entrepreneurship just as successful policy makers popularized knowledge work in the Information Economy.)

If you want to stymie economic growth in an Industrial Economy, make it difficult to attract or create capital. If you want to stall growth in an Information Economy, make education expensive and unattainable for large swaths of people. And if you want to frustrate growth in an Entrepreneurial Economy, make it hard to aspiring entrepreneurs to start a business. It certainly seems to work for countries like Italy, Greece, and Spain.

Data for the above graph.

	Hard to Start Biz	Unemployment
Italy	96%	20%
Greece	93%	24%
Spain	82%	25%
Portugal	80%	16%
Lithuania	72%	13%
Latvia	71%	15%
Slovenia	69%	9%
Ireland	69%	15%
Romania	68%	7%
Slovakia	68%	14%
Cyprus	67%	12%
Bulgaria	66%	12%
France	66%	10%
Czech Republic	61%	7%
United Kingdom	59%	8%
Belgium	58%	8%
Croatia	57%	16%
Denmark	54%	8%
Poland	52%	10%
Netherlands	49%	5%
Hungary	48%	11%
Finland	46%	8%
Germany	46%	5%
Estonia	44%	10%
Austria	43%	4%
Luxembourg	33%	5%
Sweden	25%	8%
Malta	21%	6%

Once Upon Time (1998), Republicans and Democrats Had Nearly Identical Views on Climate Change. Then it Became Political

Up until 1998, Republicans and Democrats were equally likely to believe that climate change resulted from human activity and was already having an impact.

And then it became political. A decade later, Democrats were almost twice as likely to believe that climate change was real.

As it turns out, Democrats aren't smarter or better educated than Republicans. Nor are Republicans more scientifically inclined than Democrats. Randomly select a member from either party and you're about as likely to get someone who couldn't explain their way out of a rain storm. Or for that matter, about as likely to give you a cogent argument based on science. (Note that actual scientific experts, however, are not divided on climate change. I'm making a point about the average layman, the voter who can swing an election.)

Once climate change became political, though, it became a matter of identity, of being in the club. If you have lots of Republican friends, it becomes increasingly awkward to argue for climate change. By contrast, if you hang out with Democrats, it is hard to argue that climate change is not such a big deal.

I think its true that - outside of scientists, philosophers, and prophets - very people seek truth at the expense of alienating friends and family. Most folks would rather hang out with actual people than be alone with ideas or facts. It's peer pressure that seems as likely to shape our beliefs as an objective look at the facts. And now the argument is not scientific: it's an attack on you and your group. To change your belief might mean alienating you from your peer group. That's tough to ask of anyone, unless your peer group is fellow scientists, philosophers, and prophets.

[Last note: the Gallup numbers since 2008 haven't changed much. It's now 79% probable that a Democrat will belief in climate change. Republicans are unchanged at 41%.]

The Trip to the Therapist Took an Unexpected Turn Today

Gallup Job Creation Index Back to Pre-Recession Levels

Gallup tracks job creation in the US, posting a three-day running average. Its posted values go back six years. Here is a graph that plots only the value on March 16, from 2008 to 2014.

The index is back to where it was just before the recession. It's worth remembering that six years ago, unemployment was 5.1 percent.

This is good news for the obvious reason that a job creation index this high will continue to bring down unemployment. Almost as importantly, as unemployment continues to lower wages will start going up. That is terribly overdue.

I think that this graph showing how household income has stagnated is probably the single most important graph from the president's recent economic report. It explains a host of political and economic issues, showing that household income last year was about where it was in the late 90s.

As household income has stagnated, it has simultaneously put pressure on two political fronts. Liberals, aware of how hard this economy has been on people, have pushed for a better safety net. Conservatives, aware of how hard this economy has been on government debt load, have pushed for less spending. Because of this reality of diminished household income, both sides are hugely disappointed: debt has soared even as government programs have been scaled back. 

Back when household income rose, it was possible to simultaneously increase government revenues and take-home pay; that makes for easy politics. When household income drops, so does take-home pay and money for government programs; that makes for hard politics.

If the rate of job creation rises, it won't just make things easier in households across the country. It will make politics a little easier in capitol buildings in DC and every state.

The Best Irish Music You'll Hear All St. Patrick's Day

Years ago I briefly hosted a "Celtic Folk for Celtic Folk and Other Folk" Show. On the basis of that and an enduring fondness for the emotionally expressive music of Ireland, I'm going to offer you a few wonderful Irish songs.

First this classic from the Bothy Band, sort of a late 70s super group of Celtic musicians.



Two members of that band, Kevin Burke and Mícheál Ó Domhnaill, perform a song in English, a sad ballad about an expedition lost at the pole.



For a couple of newer bands, here's one of Toronto that reminds us that anything rock guitarists did with tone and rhythm had already been done centuries earlier by guys playing bag pipes.



And then just a ridiculously beautiful song by a modern super group is this number from The Gloaming.



Then the Pogues, who remind us that these Celtic folk musicians grew up down the street from the Sex Pistols and other punk rockers.




This, a heart breaking love song from a contemporary singer / songwriter who may still perform music better than this instant classic.



Finally, Van Morrison. And in this song he reminds us of the romantic poets who first defined the lifestyle and occupation of those modern troubadours we call musicians and the rich literary tradition from which these Irish musicians can draw.



If you know of better Celtic music, I'd love to hear it. Happy St. Patrick's Day.

Measuring the Future as Well as the Past - Adding Entrepreneurial Activity to Measures of GDP and Unemployment

In the wake of the Great Depression, the US began to measure GDP. Simon Kuznets, in 1937, presented his formulation of gross domestic product to the U.S. Congress for the first time. As obvious and as simple as it sounds, if economic growth mattered and was going to be a goal of economic policy, it had to be measured.

In the 50 years after GDP was defined, GDP grew about 50% faster than it had in the 50 years before. Management 101 is "measure what matters."

Which brings us to entrepreneurship, for which no simple equivalent to GDP exists. Making the rash assumption that it matters, it seems worthy of a Simon Kuznets for the 21st century, someone to create a measure that would - in a single value - capture the rise and fall in entrepreneurial initiatives.

The Global Entrepreneurship Monitor (GEM) offers a candidate for this measure. The good and the bad of their data set is that it is rich. You can compare Total Early Stage Entrepreneurial Activity across countries, investment rates, growth expectations, etc. This is a delightful database for serious students. It is less helpful for a simple report akin to "GDP rose from 2.3% to 3.3% this year." 

The OECD has developed International Metrics for Entrepreneurship (with financial aid - and presumably advice - from the Kauffman Foundation) that allow comparisons across countries and also guide in policy formulation. (Note how much better the UK's recovery has been than the US recovery in this regards.)

Stock market investors look for leading indicators, measures that predict what will happen to stock prices. (Weather prediction that would then influence crop yields was one of the original leading indicators.) That matters. But what matters more to a community are measures of activities that will create - rather than just predict - future prosperity. In this regards, it is hard to think of a more important measure than entrepreneurial activity.

Curiously, in Obama's annual report, entrepreneur ( or entrepreneurs or entrepreneurship) is mentioned only 6 times in 410 pages. By contrast, the UK has done more than merely make mention of entrepreneurship. In November of last year, the UK announced its 10,000th startup loan. It doesn't seem like an accident that the UK's rate of new enterprises is up 40% since before the recession while the US's rate has yet to fully recover. The UK is laying policies for future economic growth that are already showing up in increased rates of business formation. Look for the UK's future GDP growth to outpace that of the US for this reason alone. 

Every good manager and policy maker knows that intentionality precedes results. Managers who want high performance don't just shrug and tell their teams, "Whatever." On a similar note, policy makers intent on creating economic growth are intentional about everything from infrastructure investments to tax policies to education and permits. Entrepreneurship is as likely to respond to government initiatives as is education. And one of the simplest way to communicate what matters is to begin talking about what desired results look like. For this, a measure can be a good thing.

As it is, the awareness of the rate of new business formation is paltry in comparison to awareness to the unemployment rate; and yet it is the first that will do the most to change the second. Unemployment rate is not a cause. It is an effect.

If you want to measure past economic performance, measure GDP and unemployment. If you want to measure future economic performance, measure entrepreneurship. That's reasons enough to standardize and publish easy metrics to explain our entrepreneurial performance.

Everything You Needed To Know About the President's Economic Report in 6 Simple Graphs

President Obama and his economic advisers have just released their annual report. It offers good news for this year and sobering news about the reality of household income at the start of this century. Also, there are a couple of curious facts that might surprise you.

Obama is predicting GDP growth of 3.3% for 2014, a big gain on 2013's 2.3%. Here are the reasons for his optimism.

Household debt

Household debt service is the lowest it has been since they began collecting data in 1980. As you can see in this graph, there has been a sharp downturn in both debt owed and current loan payments on debt. As consumers become more confident, this trend will likely reverse, driving up consumer spending (which makes up nearly 70% of GDP).



Household wealth
Household wealth rose sharply in 2013. Stocks were up 31% and house prices up 11%. This suggests that the ratio of net worth to income rose about 50%. Add that to a drop in debt and it suggests that households will spend more this year.

Government Job Creation
After shedding 700,000 jobs in the wake of the recession, state and local governments actually added 32,000 jobs during 2013. (This austerity has been a major drag on the recovery compared to past recoveries.) State and local governments will likely increase jobs again this year, adding to private sector gains.

Additionally, the federal government has stabilized. Congress has already agreed to budgets for this year that will stabilize spending rather than  cut it as last year's sequester did. (The CBO estimates that last year's budget deals slowed GDP growth by 0.6 percentage points and cost the equivalent of 750,000 full-time jobs.)


The deficit has contracted sharply during this recovery. In no four year period since WWII has the deficit shrunk so rapidly. In 2013 alone, the deficit shrunk by 2.7% of GDP. That won't happen in 2014, which will make it easier for the economy to grow.

All this means that the public sector will no longer be putting its foot on the brake even as the private sector tries to accelerate.



Europe and Japan are Recovering
At the close of 2013, the 28-country European Union experienced its first 3 consecutive quarters of GDP growth since 2011.

Japan's GDP grew 2.7% in 2013 after a 0.4% decline in 2012.

As our trading and investment partners' economies improve, it will help ours. Japan's prolonged recession and Europe's continuing woes have been a huge drag on our recovery.


Household Income Is Stagnating

A recovery is much better than a recession, and that is what 2014 promises to enhance. But while a recovery will define how many people are working, it is long-term issues that define their standard of living.  The president's report also highlights some bad news about the gains so far this century.

Median family income is lower than it was at the start of the century.






Finally, there are a couple of curious facts that seemed worth reporting.

One, health spending per capita is growing at its lowest rate since the 1960s. That's good news for businesses, entrepreneurs and households but of course it is bad news for the healthcare sector.










Two, for all the talk of solar, it is wind energy that has grown most rapidly this century. Couple that with increases in oil and gas production and domestic energy production is finally greater than the value of our imports.

A Very Bad, No Good Recession is Followed by a Very Slow, Fairly Anemic Recovery

The average downturn since World War II
Jobs Lost: 2 million
Months to regain lost jobs: 10
Length of Recovery: 59 months
Ratio of Jobs Gained During Recovery to Lost in Recession: 6X
Ratio of Months Recovering to Months in Recession: 3X

Put simply, on average it took the economy less than a year to regain the jobs lost in a recession. On top of that, the average recovery kept going about 4 more years after recovering the lost jobs, creating about 6 times as many jobs as was lost. On average we gained about 11 million jobs in a recovery after losing about 2 million during a downturn.

The Great Recession and current recovery
Jobs Lost: 8.7 million
Months to regain lost jobs: 48 (and counting)
Length of recovery: 48 (and counting)
Ratio of Jobs Gained During Recovery to Lost in Recession: 0.9X
Ratio of Months Recovering to Months in Recession: 1.9X

That is, 4 years into the recovery, the economy has not yet created as many jobs as was destroyed during the Great Recession. During the 2 years of the Great Recession, we lost jobs 3X faster than average for a recession. Since then, we are growing jobs more slowly than average. That's a terrible combination and it explains why 4 years is still not enough to fully recover.

At our current rate of job creation, it will take 4 more months to completely recover the jobs lost between Feb 2008 and Feb 2010.

At some point policy makers have to realize that the policies that yielded us such spectacular job creation rates in the last half of the 20th century are in need of revision. This century seems different.  We've never had a better educated workforce or more capital available for credit or investment. Still, the economy is creating jobs more slowly than it used to.

In 1873, Walter Bagehot wrote Lombard Street, explaining the role of central bankers to provide credit and liquidity during a crisis. An economy limited by capital was not able to create jobs or wealth; good policy during the Industrial Economy meant abundant capital. By early in the 20th century, the leading economies of the day were increasingly reliant on an educated workforce; economic development had to include public education, from kindergarten to universities and good policy during the Information Economy meant an abundance of knowledge workers.

And policy makers still focus on just those two things: capital and knowledge workers. They don't demonstrate an awareness that anything has changed in this century.  For them, if only we put money into education and capital markets, the economy will respond with more jobs, more wealth, more growth. That linkage seems a little less obvious in this new century.

Until policy makers in this century find similarly creative ways to stimulate the supply of entrepreneurs, our economy will continue to fall far short of its potential. We have unprecedented access to finance, information, and education. Our technologies are as promising as ever. Consumer markets are emerging in China, India and around the world; billions more are now connected to the global economy as consumers and workers. We have an abundance of everything except entrepreneurs.

Few people in 1900 would have believed that simply being upper middle class would mean staying in school into one's mid-20s. Few people in 1800 would have believed that it would take trillions in easy credit to keep an economy running at full employment. Today, few people can comprehend how much we need to popularize entrepreneurship to hit a new rate of job creation.

Entrepreneurship creates jobs, not capital or education. Today we can automate manual labor with machines and knowledge work with software. It takes fewer people to create value which means we need more entrepreneurs to create jobs at a rate that will lead to full employment. To create jobs more quickly than we automate them is going to require unprecedented levels of entrepreneurship. For this reason alone entrepreneurship - and not capital or knowledge workers - now limits our economic development and growth.

Someone is going to begin working towards policy that encourages entrepreneurship in the same way that in past centuries leading communities began implementing policy that created more capital or knowledge workers. Until that happens, we will just need to lower our expectations.

Millennials as Social Inventors in the Fourth Economy

From marriage to religion to politics, millennials are less likely to identify with institutions of any kind than are previous generations. My prediction is that they'll become a generation of social inventors.

Pew reports that Millennials (18 to 33 years old) are about one third again more likely to identify themselves as political independents (at 50%) than are Gen X (34 - 49, at 39%), Boomers (50 - 68, at 37%) or the Silent Generation (69 - 86, at 32%). 

They are twice as likely as boomers and three times as likely as the Silent generation to have no religious affiliation. 

They've had a steep decline in marriage from previous generations, a continuation of a trend.

And yet these are not disconnected people. Measured by number of Facebook friends (admittedly a number biased by the inclination of young people to use social media and to socialize) they have a large network of friends.

My interpretation? This generation is not subordinating their definition of self or their relationships to existing institutions: instead, they are likely to reinvent institutions to better fit who they are. This is not revolution by the barrel of a gun that would seize control of existing institutions. Instead, it is a revolution that simply walks away from those institutions to create something new and different. They aren't fighting over the ball; they are creating new sports.

In the Fourth Economy I tell the story of economic progress as invention. And indeed, technological inventions like steam engines and computers rightfully get a lot credit for making our lives enormously better. But social invention - acts like the creation of the modern corporation and bank - have been just as important to the transformation of our world and sense of self as any technological inventions. 

Last century, technological invention became the new normal. Today, anyone who buys a car fully expects a better model to emerge within a few years. Anyone who buys a smart phone fully expects a better model to emerge within a few months. We expect constant evolution and occasional shifts in technology. 

This century, social invention will become the new normal. It is gradually dawning on average Americans that our definition of marriage is going through an historic change. What's curious about same-sex marriage is, of course, that gays are showing such an interest in marriage even when millenials are showing less and less. But the reinvention of this social invention we call marriage is hardly the only reinvention that millenials will experience and pioneer. This is the generation that grew up playing video games as much as they watched TV or listened to music; they are used to having participation in, some control over, their experiences. You may not be able to change the outcome of a song or movie but you can change the outcome of a video game. This generation is not going to simply accept the social inventions they've inherited: they are going to expect to be able to change them to adapt to who they are and to reality as they see it.

Same-sex marriage will seem like a paltry change within a few decades. Millenials will popularize entrepreneurship twice: once in the traditional way by starting more businesses than any previous generation and a second time by extending entrepreneurship as social invention into the re-creation of education, government, and the corporation. Their leadership style will be less about ascending to the position of CEO than about creating a successful startup; and this will be true not just in the business world but across the various kinds of relationships they have, from personal to financial to religious to political. 

Economic progress has been the product of technological and social invention. We've already made technological invention a constant. It's the millenials who will make social invention a constant. 

It's little wonder that Pew reports that millenials are also optimistic about their economic future.

Will Corporations Lead Governments in Addressing Climate Change?

Today, Sir Richard Branson wrote an interesting piece in which he sided with Apple CEO Tim Cook. Conservative stockholders have recently criticized Cook for pursuing sustainability programs and his response was to advise them to get out of Apple stock. Branson seconds this sentiment, adding that it is not just profit that drives corporations but purpose.

In Galileo's time, the laity put more trust in priests than scientists; in our time, voters put more trust in politicians than scientists. People distrust scientists because they don't understand them; priests and politicians are easier to believe because they speak in a language that doesn't require us to think hard. By contrast, businesses are used to thinking rigorously about issues, which gives them a real advantage over Congress in dealing with reality.

I've written before about how the popularization of entrepreneurship is something that will transform the corporation. As employees become more entrepreneurial, control over the corporation and the definition of policies will be dispersed more broadly within the corporation. (The corporation will be democratized in ways that parallel the transformation of the church and state centuries earlier in the West.) Senior managers in one country might feel blase about policies that negatively impact employees or residents across the globe. As employees throughout the corporation have more power to define policies, they are likely to put as much value on their own air, water, and climate as they are profits. Management here may not be concerned about habitats there but employees everywhere will be concerned about habitat everywhere. (And, of course, given the dynamics of climate change, everything going on over "there" are just as likely to impact us 'here.")

Corporations may not be people but they are comprised of people. People within a corporation are as likely to care about the earth as people within a school, park, shopping mall or city hall. As more people get to shape corporate policy, it should benefit more people. Churches became better when power was dispersed from the popes to the people. Nation-states became better when power was dispersed from monarchs to voters. Corporations will become better, too, when their power is dispersed from CEOs to employees. And that's already happening as decisions become too complex for any leader to keep pace with.

Sir Branson has called our attention to this before: he thinks that corporations will take the lead on addressing climate change. I think he's right. The issues around climate change revolve around business practices and business is - of course - the domain of the corporation.

Predicting a Record Number of Civil Wars

This decade could be really messy. Already countries like Iraq, Syria, and the Ukraine are making headlines as forces within the country struggle for independence or control.  Given the stage of development so many countries are at right now, we will likely see quite a number of civil wars in the next 20 years or so.

Iraq became a country because some British administrator drew a line around the region. Iraq now includes two or three very distinct groups that don't think of themselves as one nation but instead as three. It seems obvious to say but it's tough to create a nation-state when more than one nation - more than one people - wants to be represented. The Kurds in the north of Iraq have very different values and interests - perhaps irreconciliable differences - from the Sunnis and Shiites in the south.

Before the English and French invented the modern nation-state, the West was mostly defined by city-states, empires, and tribes. A state refers to a form of government. A nation refers to a people who define themselves through some blend of common language, beliefs, culture, history, potential, etc. One nation might include many states. (Think of Italy before 1861, made up of city-states like Milan, Florence, and Venice.) One state might include many nations. (Think of the Holy Roman that at one time or another included Germans, Dutch, Italians, French and Poles.)  A nation-state by definition aligns a nation and a state.

As it now stands, it seems difficult to create a modern democracy without first creating a nation-state.

The Ukraine seems to be comprised of two nations right now. The west faces Western Europe, is liberal, better educated and intent on economic and social freedoms. The east faces Russia, is conservative, less educated and speaks Russian. While it is possible to align these two groups, it is very difficult. And the more that the people define their own policies -as happens in a representative government - the more glaring will be these differences, the harder it will be to reconcile. A strong-man leader makes these differences less important simply because these differences have little chance to be expressed; but as information technology, media, and economic power shifts from the center of a country to its people, such differences become more obvious. It seems as though one of the first things revealed in the transition towards a democracy is that these countries are rarely nation-states; instead, they are petty empires of multiple nations that have been ruled over by a strong central government.

Because of this, civil war almost seems like an inevitable step towards the creation of a nation-state. (It happened in the US when the economy and politics developed to the point that states became less defining of the continent than the country, when united States gave way to The United States.)  Because of this, it's hard to imagine that the number of civil wars will drop any time soon. This is going to be painful.

P.S. Here's a piece that not only adds a different perspective on the Ukrainian crisis from what you might get in most Western media but seems to buttress the notion that a fundamental problem is that there is no organic whole that encompasses the Ukraine, a country that was pieced together by outsiders after WWII.
Jack Matlock, Ukraine: the Price of Internal Division