MtnBiker
Senior Member
January 26, 2004 05:03 PM EST
WASHINGTON - Federal Reserve Chairman Alan Greenspan said Monday that jobs lost in the last recession can be replaced but that unemployed workers may need retraining to qualify for new work.
In a speech prepared for an economic conference in London, Greenspan sought to address fears that many of the 2.8 million manufacturing jobs lost in the past 3 1/2 years could be gone forever to lower wage countries.
He said competition from low-wage countries was not a new development. He said that in the 1950s and 1960s, the concern was that U.S. jobs were migrating to Japan with fears about competition from Mexico rising in the 1990s. He said more recently the concern has been that we are losing jobs to China.
Greenspan said what people needed to keep in mind is that the U.S. economy has always been able to generate enough jobs in cutting-edge industries to replace jobs lost in industries facing the highest competition from low-wage labor.
This has given the country an average of 94 percent employment of its work force, he said, predicting that this process will continue.
"We can thus be confident that new jobs will replace old ones as they always have, but not without a high degree of pain for those caught in the job-losing segment of America's massive job-turnover process," Greenspan said.
He warned U.S. policy-makers worried about the loss of jobs not to heed calls for an increase in protectionist trade barriers, saying such a move could be "unexpectedly destabilizing" to the global economy.
"I remain optimistic that we and our global trading partners will shun that path," he said. "The evidence is simply too compelling that our mutual interests are best served by promoting the free flow of goods and services among our increasingly flexible and dynamic market economies."
Greenspan, in his remarks, did not discuss the outlook for the U.S. economy. Federal Reserve policy-makers will begin a two-day meeting on Tuesday in which they are widely expected to keep pledging to keep interest rates low for a "considerable period" to generate stronger job growth.
In his speech, delivered by satellite to London, Greenspan said the U.S. economy has become more flexible because of government moves over the past three decades to deregulate a number of industries from banking to trucking.
He said this new flexibility has helped to make the past two recessions in the United States, the 1991 downturn and the 2001 slump, the mildest of the post World War II period.
"The more flexible an economy, the greater its ability to self-correct in response to inevitable, often unanticipated disturbances," Greenspan said. "Enhanced flexibility has the advantage of being able to adjust automatically and not having to rest on policy-makers' initiatives, which often come too late or are misguided."
As he has in the past, Greenspan praised the increased use of complex financial instruments known as derivatives for boosting flexibility by allowing banks and other financial institutions to spread their risks.
He said derivatives had enabled financial institutions to weather the deep slump in the telecommunications industry after the bursting of the stock market bubble in 2000 - even though globally telecommunications companies had taken out $1 trillion in loans from 1998 to 2001.
"Prices of telecommunications stocks collapsed and many firms went bankrupt," Greenspan said. "But unlike in previous periods of large financial distress, no major financial institution defaulted and the world economy was not threatened."
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WASHINGTON - Federal Reserve Chairman Alan Greenspan said Monday that jobs lost in the last recession can be replaced but that unemployed workers may need retraining to qualify for new work.
In a speech prepared for an economic conference in London, Greenspan sought to address fears that many of the 2.8 million manufacturing jobs lost in the past 3 1/2 years could be gone forever to lower wage countries.
He said competition from low-wage countries was not a new development. He said that in the 1950s and 1960s, the concern was that U.S. jobs were migrating to Japan with fears about competition from Mexico rising in the 1990s. He said more recently the concern has been that we are losing jobs to China.
Greenspan said what people needed to keep in mind is that the U.S. economy has always been able to generate enough jobs in cutting-edge industries to replace jobs lost in industries facing the highest competition from low-wage labor.
This has given the country an average of 94 percent employment of its work force, he said, predicting that this process will continue.
"We can thus be confident that new jobs will replace old ones as they always have, but not without a high degree of pain for those caught in the job-losing segment of America's massive job-turnover process," Greenspan said.
He warned U.S. policy-makers worried about the loss of jobs not to heed calls for an increase in protectionist trade barriers, saying such a move could be "unexpectedly destabilizing" to the global economy.
"I remain optimistic that we and our global trading partners will shun that path," he said. "The evidence is simply too compelling that our mutual interests are best served by promoting the free flow of goods and services among our increasingly flexible and dynamic market economies."
Greenspan, in his remarks, did not discuss the outlook for the U.S. economy. Federal Reserve policy-makers will begin a two-day meeting on Tuesday in which they are widely expected to keep pledging to keep interest rates low for a "considerable period" to generate stronger job growth.
In his speech, delivered by satellite to London, Greenspan said the U.S. economy has become more flexible because of government moves over the past three decades to deregulate a number of industries from banking to trucking.
He said this new flexibility has helped to make the past two recessions in the United States, the 1991 downturn and the 2001 slump, the mildest of the post World War II period.
"The more flexible an economy, the greater its ability to self-correct in response to inevitable, often unanticipated disturbances," Greenspan said. "Enhanced flexibility has the advantage of being able to adjust automatically and not having to rest on policy-makers' initiatives, which often come too late or are misguided."
As he has in the past, Greenspan praised the increased use of complex financial instruments known as derivatives for boosting flexibility by allowing banks and other financial institutions to spread their risks.
He said derivatives had enabled financial institutions to weather the deep slump in the telecommunications industry after the bursting of the stock market bubble in 2000 - even though globally telecommunications companies had taken out $1 trillion in loans from 1998 to 2001.
"Prices of telecommunications stocks collapsed and many firms went bankrupt," Greenspan said. "But unlike in previous periods of large financial distress, no major financial institution defaulted and the world economy was not threatened."
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