Home > The Economy > The USA’s broken business model

The USA’s broken business model

from John Schmitt

The Wall Street Journal’s David Wessel recently had a good column arguing that the US business model is broken.

According to Wessel:

Two big sectors of the U.S. economy have been on steroids: finance and health care. If anything is crowding out more productive activities, it’s them, as Mr. Romer argued in a recent National Academy of Sciences lecture.

The bloated financial sector—all those brains lured by big bucks who might otherwise have been employed in science, software, engineering or other fields—has harmed the U.S. economy more than any of our post-World War II communist adversaries did.

The American health system costs more per person than any other, but isn’t delivering the world’s healthiest people. The U.S. isn’t getting its money’s worth from either sector.

The piece also includes this nice graph of some key trends in the US economy since the end of World War II:

Trends in US economy since end of World War IISource: David Wessel, Wall Street Journal

As a share of the economy, manufacturing is way down and government purchases of goods and services are basically flat (and down from their levels in the 1970s). Finance and health care, however, have been rising steeply.

  1. Ken Zimmerman
    August 22, 2011 at 6:10 pm

    Perhaps someone should send the article, along with a book on the basics of pragmatic reasoning to Eric Cantor. His op-ed yesterday also claims the model is wrong. But he suggests a “lower taxes, reduce regulation” model as the altnernative. They both can’t be correct, but I’d go with Wessel.

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