To keep its goods cheap, it has allowed its currency to rise only about 6 percent against the dollar since June 2010, even as the dollar has plunged against other currencies. Last month, the I.M.F. called on China to help global growth by letting the currency appreciate more rapidly, which would make Chinese goods more expensive around the world and give a break to competing manufacturers.
China has so far resisted that advice. It lashed out at economic mismanagement in Washington after the Standard & Poor’s downgrade, which could potentially reduce the value of its $1.1 trillion stash of American Treasury bonds. Rather than berate Washington, it should abandon its currency manipulation. China’s leaders have said they want to put more money in the hands of consumers through social programs and higher wages, and to rely less on exports. They can do this without stoking inflation by allowing the renminbi to rise significantly.
In addition a WSJ piece by two Democrats states:
According to the Bureau of Labor Statistics, the U.S. currently has approximately three million job openings, all waiting to be filled. With so many Americans out of work, what is the delay? Workers want to work, and so many businesses want to hire—but there is a widening "skills gap" that prevents many Americans from filling the jobs of the 21st century economy. If we want to get our economy back on track and get workers back on the job, we will have to address this issue in a better way.
The problem is that growth is driven by entrepreneurs building the better mousetrap. Namely making something that someone wants. And in addition if that something actually increases productivity all the better. Thus the PC is an example of something that created tremendous growth and led to an exploding market. One questions whether the iPad will do the same or is it just a form of Soma. Yet it does create growth.
Can Government create growth. We have argued that it cannot. At best it inefficiently transfers wealth. At worst it take capital from real creation and distributes to value destruction spenders.
As for the skill's gap, I am always amazed that somehow Government will solve the problem. We need more engineers, not fewer. The ones we develop go back home for a better opportunity. During the Space Race period the Government did provide funding and to some degree motivation. Yet even that had a double edge. The graduates went to work for NASA or DoD and did not go into private industry. It opened a window for Japan to enter and it did with gusto, letting Japan dominate the 1980s.
Thus Government can help, but it often comes with strings attached, strings that can all too often pull us down again.
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