I only just got around to reading Rattner's opinion piece in Sunday's NYT. I haven't seen anything else here about it. And since I'm newbie, I'm referencing my broadsheet version instead of linking to the website.
I don't know what passes for a lay understanding of economics. Possibly so low that bushlit like this doesn't get the critical attention it deserves. Or maybe my own bulb is too dim. Feel free to let me know.
I was a skeptical undergraduate when Economics professor Saul Hyman explained the benefits of global free trade. But at least he provided a compelling example. In the 1980's it made sense to divest from the struggling textile industry into something more valuable like building computers.
Rattner makes the same argument: The local and temporary economic disruptions are offset by the greater value to larger economy. As an example, he points out that benefits of outsourcing computer chip production so we can concentrate on more valuable enterprises, such as shining shoes and washing dishes.
...Our greatest strength, and a source of high-paying jobs, lies in service industries with high intellectual content, like education, entertainment, digital media, and yes, even financial services.
Of course, I'm exaggerating, and probably being insensitive. My personal experience is digital media where wages have been in a free-fall. Given the trend towards private, charter, and right-to-work schools, education careers are heading in the same direction. Not exactly trajectories to prosperity. Furthermore, shoe-shining and dish-washing do not require a $100000+ outlay for a post-secondary education. (At least Rattner deserves credit for identifying our next speculative bubble.)
So let's start by acknowledging that [err, sic] just as occurred decades ago with agriculture, the declining role in our economy of manufacturing, which over the last half-century is down from 32 percent of the workforce to 9 percent.
I don't know whether those numbers are accurate, what happened decades ago with agriculture, or even whether the English language just got butchered. But I do know a circular argument when I see one: Employment is down because these sectors are shrinking, based on, err, employment. We're not talking buggy whips and typewriters here. In terms of consumption, I expect the agricultural and manufacturing sectors have grown and increased in value. In this light, Mr. Rattner has merely demonstrated yet another illustration of wealth concentration.
One other fallacy I would like to address is the contention that our financial industry has some particular quality that makes it particularly valuable. That somehow, our investment prowess and ingenious financial instruments are envied around the world. Nonsense. The fact is our financial sector has an effective monopoly because the Bretton Woods accord established the dollar as international currency.
This is as far as I go on my limited understanding of economics. Intuitively, I understand how this arrangement would lead to large trade deficits, loss of productive capacity and ultimately, deflation... in other words, exactly the situation America finds itself in. But how is this scenario modeled economically? Seems like a more satisfactory explanation than this blather from Steven Rattner.