Will Washington Risk WW3 to Block an Emerging Russia-EU Superstate? by Mike Whitney for Counterpunch.
Archive for the ‘Economy’ Category
This chart shows how the cost of different necessities and amenities of life have changed over the past 75 years.
The high and rising costs of housing stands out, but the cost of health care and education also are going steadily up.
I’d guess the falling cost of food is due to technology and the falling cost of clothing is due to globalization.
But why hasn’t technology brought down the cost of housing and transportation?
Unprecedented Spending Trends in America, in One Chart, by howmuch. Remember that the figures are adjusted for inflation.
Considerations on Cost Disease by Scott Alexander for Slate Star Codex.
This map shows national output (GDP) per person in different nations. The leaders seem to be financial centers (Luxembourg, Switzerland, Singapore) and oil and gas producers (Qatar, Brunei, United Arab Emirates and maybe Norway).
The USA is both a financial and energy-producing center, ranking eighth behind those seven nations, but way ahead of Russia and China.
While China’s overall economy is thought to be larger than the American economy, that doesn’t mean that the average Chinese person is rich.
Of course GDP per person is not the whole story, either. How the average person does depends on how wealth is distributed. What the GDP figure shows is how potentially well off the individual person is.
Scott Alexander, a physician in the Midwest, points out on his blog that during the past 50 years—
- U.S. housing costs have increased about 50 percent.
- U.S. education costs have increased 100 percent
- U.S. college costs have increased 400 percent.
- U.S. subway fares have increased 400 percent or more.
All of this is adjusted for inflation.
- Health care in the United States costs about four times as much as equivalent health care in other First World countries
- U.S. subways costs about eight times as much as equivalent subways on other First World countries.
The wages and salaries of public school teachers, college professors, nurses and physicians has meanwhile remained relatively flat.
As Alexander points out, this is strange.
President Donald Trump made specific promises in his inaugural address. He should be judged on whether or not he keeps these promises. Here are the promises:
We will bring back our jobs.
We will bring back our borders.
We will bring back our wealth, and we will bring back our dreams.
We will build new roads and highways and bridges and airports and tunnels and railways all across our wonderful nation.
We will get our people off of welfare and back to work, rebuilding our country with American hands and American labor.
We will follow two simple rules: Buy American and hire American.
We will seek friendship and goodwill with the nations of the world, but we do so with the understanding that it is the right of all nations to put their own interests first.
We do not seek to impose our way of life on anyone, but rather to let it shine as an example.
We will shine for everyone to follow.
We will re-enforce old alliances and form new ones and unite the civilized world against radical Islamic terrorism, which we will eradicate completely from the face of the earth.
At the bedrock of our politics will be a total allegiance to the United States of America, and through our loyalty to our country we will rediscover our loyalty to each other.
Source: Ian Welsh
If Donald Trump could accomplish these goals, he would go down in history as one of the great Presidents.
I will store this away and re-post it in 2020 if he runs again, and if this blog still exists. I don’t think he will keep these promises and I don’t think he can keep them, but I would be pleased to be proved wrong.
Donald Trump in his campaign promised to reverse the decline of American manufacturing.
Can he do it? I’m willing to be pleasantly surprised, but I don’t think so.
President-elect Trump’s proposed economic policies are the same as what most Republicans and many Democrats have been advocating for 30 years or more—lower taxes, less regulation, fewer public services.
None of these things has stopped the increase in U.S. trade deficits or the increase in economic insecurity of American workers.
Trump did speak against the Trans-Pacific Partnership agreement, promised to renegotiate other trade agreements and threatened to impose punishing tariffs on China and Mexico in retaliation for their unfair trade policies.
I myself am in favor of rejecting the TPP and renegotiating trade treaties. This would be a step forward. But it would take more than this to rebuild the hollowed-out U.S. manufacturing economy.
China, Japan, South Korea and most nations with flourishing industrial economies use trade policy as a means of strengthening their economies.
Their leaders, like Alexander Hamilton in the early days of the United States, seek to build up their nations’ “infant industries” under those industries are strong enough to stand on their own feet.
When foreign companies seek to sell these nations their products, their governments demand that the foreign companies not only set up factories in their countries, but that they employ native workers and transfer their industrial know-how to the host countries. The USA does nothing like this.
I think there is a strong possibility that Donald Trump will be a one-term President—provided there are still free and fair elections in 2020.
I think that for the same reasons I thought Hillary Clinton might be a one-term President. I believe there will be another recession, as serious as the last, during the next four years, and I think Trump will be even less able to cope with it than Clinton.
He campaigned as a populist champion of the common people against the elite. But he spent his life among the elite, and his business history shows that he is only tough with those with less wealth and power than he has.
Trump kicks downward. He doesn’t punch upward.
His transition team is drawn from K street lobbyists. His preference is to appoint from the private sector, not from government or academia.
His likely choice for Secretary of the Treasury is Steven Mnuchin, his campaign finance chairman. Mnuchin is CEO of an investment firm called Dune Capital Management, but, according to POLITICO, he worked 17 years for Goldman Sachs, whose subprime mortgage manipulations were a big contributor to the last recession.
The problem is that, in a recession, what makes sense for a business owner doesn’t make sense for a President. A business owner’s instinct in tough times is to cut back. That is rational behavior for the individual, but cutting back means less money in circulation, less economic activity and a worse recession.
A lot of Hillary Clinton supporters say that Donald Trump’s supporters are not white working people who are worried about their jobs and their economic future. No, Trump’s supporters are all racists and bigots.
In the primary election, he talked a lot about unfair trade treaties, industrial decline, immigration and unwise military interventions. He still talks about immigration, but his emphasis now is on law and order, the threat of unauthorized voters and Hillary Clinton’s e-mails.
But all kinds of people support Trump for all kinds of reasons. Some no doubt vote for him because they fear Muslim terrorists, unauthorized Mexican immigrants and illegal African-American voters. Others see him as the last hope of making American industry great again. And many others see him as the lesser of two evils.
If you say that all Trump supporters are racists and bigots and nothing more, then there is no reason for Democrats to try to appeal to them on economic grounds.
And there is no political reason for Democrats to appeal to black and Hispanic working people in grounds of economic self-interest either, because Donald Trump’s candidacy provides sufficient reason for voting Democratic.
In 1960, a quarter of world output was for export. Now it is well over half.
There is a benefit in being able to buy things that are produced in distant lands. There also is a risk in depending on long and vulnerable supply chains for what you need. We the people and our governments need to think about what balance to strike.
Harvard historian Niall Ferguson uses this chart to explain why Americans are unhappy with their nation’s economy.
Last week Clinton’s supporters seized on new economic data showing that median household income rose by more than 5 percent in real terms last year. Poverty is down. So is the number of Americans without health insurance. So is unemployment. Yes, Hillary Clinton has had a few bad weeks. But don’t worry.
All this seems like grist to the mill of a campaign that essentially promises continuity. Yet there is a problem. Take another look at those figures for inflation-adjusted median household income. Yes, it was $56,500 last year, up from $53,700 the year before. But back in 1999 it was $57,909. In other words, it’s been a round trip — and a very bumpy one indeed — since Clinton’s husband was in the White House.
Telling Americans that they are nearly back to where they were 17 years ago and then expecting them to be grateful looks like a losing strategy. When two thirds of Americans — and even higher percentage of older white voters — say the country is on the wrong track, they are not (as Democrats claim) in denial about the Obama administration’s achievements.
They are saying that the country is on a circular track, and has been since this century began.
Hat tip to occasional links & commentary.
If factory automation, artificial intelligence and data tracking are doing all that much to improve productivity, why don’t we see it in the productivity statistics?
It’s true that productivity is growing, and the continual growth in productivity should not be taken for granted. Maybe productivity would be less or even fall if not for the computer revolution.
Maybe the computer revolution hasn’t gone far enough as yet. Maybe, as the linked articles suggest, it is confined to just a few industries—electronics, communications and finance. Maybe it is offset by disinvestment in American industry, as CEOs spend profits on stock buybacks rather than productivity improvements.
The fact remains that productivity was increasing at a faster rate in the United States before the 1980s, which is when Wired magazine proclaimed a new economy.
Technology Isn’t Working by The Economist.
Robots, Growth and Inequality by Andrew Berg, Edward F. Buffie and Luis-Felipe Zanna for the International Monetary Fund.
The Russian Federation is in economic crisis.
The economy is shrinking. Although unemployment is low, poverty is increasing, Inflation is at double-digit rates. The exchange rate for the ruble is falling. Russia’s trade deficit is widening. The Russian government is cutting spending on public services.
While Russia has serious internal economic problems, the immediate cause of the crisis is the economic war being waged by its foes.
- The United States and European Union boycott many Russian individuals and institutions, including cutting off credit to Russian banks and cutting off sales of equipment to Russian oil companies.
- Saudi Arabia has stepped up production of oil, driving down oil prices worldwide and hurting Russia’s oil exports.
- The United States has begun a new arms race with Russia, forcing the Russian government to either divert resources from the civilian economy or admit inferiority.
In waging economic war against Russia, the United States and its allies hurt themselves as a price of hurting Russia more.
- Europe and Russia are natural trading partners, with Europeans buying Russian gas and oil and Russia buying Europe’s, especially Germany’s industrial products. Cutting off this trade hurts both.
- Saudi Arabia is using up a large but limited resource at a fast rate without getting the best price for it.
- The United States, too, is diverting resources from our civilian economy and domestic needs.
In many ways, this is a replay of the economic war waged against the Soviet Union in the 1980s.
Donald Trump Doesn’t Understand White People by Jason Johnson for The Root.
Progressives Are Targets of Hillary’s ‘Basket of Deplorables’ Speech by John V. Wash for Counterpunch.
Donald Trump tries to reassure supporters they’re not really racist. Hillary Clinton tries to reassure supporters it’s okay to be elitist.
The Coming European Debt Wars by Michael Hudson for Defend Democracy Press.
The European Union is in crisis because it insists on repayment of debts that are too great to ever be repaid.
An Anniversary of Shame by Michael Hirsch for POLITICO.
Some in the CIA say the “war on terror” could have been won in six months if the U.S. government had not given “regime change” priority over capturing or killing Osama bin Laden.
Maximillian Alvarez, a graduate student at the University of Michigan, wrote in the current issue of The Baffler that the real driver behind “political correctness” on American university campuses is the neoliberal idea that students are customers, and that the job of the university is to give the customers what they want.
The traditional idea of the university was that the professors were the custodians of knowledge, that their job was to impart knowledge and wisdom to students and that their work should be judged by their peers.
The neoliberal idea of the university is that professors are vendors and students are customers, and that the measure of a university’s success is the ability to maximize enrollment and tuition.
Alvarez wrote that the conflict over “political correctness” is a conflict over which of the university’s customers are more important—the students and parents, or the wealthy donors. (In the case of public colleges and universities, there is a third customer—the businesses that depend on public institutions to provide vocational training.}
Here’s what Alvarez had to say:
When professors today say they fear their students, they’re really saying that they’re afraid their students’ reviews and complaints will get them fired.
What professors fear are the changing administrative policies that have pinned the fate of their job security to the same unstable consumer logic behind Yelp reviews and the reputation economy.
The image of the wise, hard-nosed professor who upends her students’ assumptions about the world, who provokes and guides heated debates in class about subjects that may offend as much as they enlighten, rests on a whole host of factors that no longer enter into the crabbed, anxiety-driven working life of the casually employed academic.
Nor do such factors typically emerge in our debates about political correctness at universities.
Three in particular are worth highlighting.
First, tenure for faculty is disappearing—and along with it the sort of job security that once made university teaching an attractive long-term career.
Now the lion’s share of college teaching jobs goes to part-time (adjunct) instructors and non-tenure-track faculty.
Many Americans are suffering because of the loss of good jobs during the last 20 years.
This is largely due to bi-partisan government policies that began in the late 1990s. The 1994 North American Free Trade Agreement and later trade agreements, in the name of free trade, limited the power of national governments to regulate banks in the public interest.
Repeal of the Glass-Steagall Act in 1999 allowed banks to engage in risky investments, but retained the U.S. government’s guarantee of individual deposits. This was part of an overall economic policy, which continued under the George W. Bush and Barack Obama administrations, of deregulating financial institutions, bailing them out when they failed, refusing to enforce the anti-trust laws and refusing to prosecute financial fraud.
Concentration of wealth destroys the mass consumer market, which was the source of American prosperity during most of the 20th century. It means that what economic activity there is goes to serve the needs and wishes of the upper 10 percent or upper 1 percent of the population, which can be done without high wages or full employment.
These were the conditions that led to the 2008 financial crash and probably will lead to a worse financial crash to come.
Eventually someone — either a great statesman or a great demagogue — will emerge to change all this. Neither Hillary Clinton nor Donald Trump is that leader.
Hillary Clinton, whose personal income and campaign contributions depend on these powerful institutions, cannot be expected to fix the problem. Neither can Donald Trump. While Trump has criticized corporate trade agreements, the rest of his economic program is lower taxes on the rich, deregulation of business and economic austerity, which will make conditions even worse.
The Day After Election Day by Rob Urie for Counterpunch.
My e-mail pen pal Bill Harvey sent me a link to an article in YES! magazine about the Emilia Romagna region in northern Italy, where two-thirds of its 4.5 million people participate in co-operative businesses.
There are worker-owned cooperatives, consumer-owned co-operatives, and social service co-operatives, in which people band together to provide day care, care for senior citizens and other services that the Italian government can’t do satisfactorily.
Vera Zarnagni, professor of economic history at the University of Bologna, said co-operative enterprise is part of an economic tradition going back to the 1850s. It’s an illustration of a contention by the American thinker Murray Bookchin, that there are other ways the world’s economy could have developed besides the way it did.
Even though a majority of the region’s people are co-op members, many of them also work for profit-seeking corporations. Co-operative business activity accounts for about 30 percent of the economic output of the region.
Most of the co-ops in the region are small enterprises, linked together in a ecological network of relationships. What I’ve read about Italy indicates that this is true of Italian business as well. Italy has an unusually high proportion of small family-owned businesses, linked by personal relationships, and engaged in high-value work involving high standards of craftsmanship.
I can’t judge all the consequences to Britain of the vote to exit the European Union, but there are a few things I am sure of.
- The United Kingdom had many serious economic problems before Brexit—financialization, the hollowing out of manufacturing, the decline of the British pound, unnecessary government austerity.
- Politicians and journalists will use Brexit as the scapegoat and explanation of these problems, and an excuse for not doing anything about them.
- If the UK joins the Transatlantic Trade and Investment Partnership, the Trade In Services Agreement or other corporate-sponsored trade agreements, it will lose whatever national sovereignty it gained by exiting the European Union.
Why They Left by Costos Lapavitsas for Jacobin magazine.
‘I want to stop something exploitative, divisive and dishonest’—conversation with a Leaver by Oliver Humpage for Medium.
Britain is not a rainy, fascist island — here’s my plan for ProgExit by Paul Mason for The Guardian.
I thought this chart was interesting.
Interest rates on 10-year U.S. Treasury bonds fell to 1.34 percent on Tuesday, the lowest in 225 years. They bounced back on Wednesday to only 1.37 percent.
Bond yields of other governments also are low, with the UK, Germany and Japan at record lows. Ten-year rates in Japan, Germany, the Netherlands and Switzerland are negative—that is, you get back less than you paid for the bond! France offers 0.13 of a percent on 10-year bonds, Britain 0.91 of a percent.
What this means is that investors are fearful of future, and prefer the safety of government bonds, even at low, non-existent or even negative interest rates, than the risk of investing in the stock market. Not a good omen!
Why the 10-Year Treasury Yield Is at Record Lows by Steve Schaefer for Forbes.
Another Fed Fiasco: U.S. Bonds Fall to Record Lows by Mike Whitney [added 7/14/2016]
Why Interest Rates Are Lower Than Ever, and Why That’s Scary by Paul J. Lim for Money magazine.
10-Year Treasury yield hits record low by Adam Shell for USA Today.
Strong demand for UK gilts at record low yield by Elaine Moore for Financial Times.
The common people in Europe, the USA and other countries are starting to revolt against international institutions—the European Union, the World Trade Organization, the International Monetary Fund—that represent the interests of an international financial elite.
The financial elite is striking back by promoting international trade agreements—the Trans-Pacific Partnership (TPP) agreement, the Transatlantic Trade and Investment Partnership (TTIP) agreement, the Trade in Services Agreement (TISA) and the lesser-known Comprehensive Economic and Trade Agreement (CETA) involving Canada and the European Union.
All these agreements would enact pro-business policies into international law, and would create tribunals with the power to fine governments for unjustly depriving businesses of expected profits.
Nationalists oppose these agreements because they undermine national sovereignty. Progressives and liberals oppose these agreements because they are un-democratic. On this issue, progressives and nationalists are on the same side because, at these moment in history, national governments are the highest level in which democracy exists.
President Obama hopes to get the Republican majority in the lame duck Congress following the November election to enact the TTP Agreement. The Conservative Party in Britain favors the TTIP, which would subject the UK to a new pr0-business international authority. CETA would accomplish the same goal for the remaining EU members.
If any of these agreements passes, they can be used to block legislation to protect workers, consumers or public health, or to bring banks and financial institutions under control.
Followers of Bernie Sanders in the USA and Jeremy Corbyn in the UK, and progressives in other subject countries, would be stymied until they could figure out a way to roll back the agreements.
None of these agreements is needed in order to have international trade. Rather their goal is to remove controls on the operations of international corporations.
Sharp increases in rents along with stagnant incomes over the past five years have helped create a dire situation for many of the country’s renters. A new report shows how those trends have actually been playing out for more than five decades.
Inflation-adjusted rents have risen by 64% since 1960, but real household incomes only increased by 18% during that same time period, according to an analysis of U.S. Census data released by Apartment List, a rental listing website.
Renters fared the worst during the decade between 2000 and 2010, when inflation-adjusted household incomes fell by 9%, while rents rose by 18%, according to Apartment List. That is likely because there were two recessions during that time and a housing bust in 2008 that drove millions of homeowners into renting.
The takeaway: The United States has grown much less affordable for renters for half a century and, barring a major change, is likely to continue doing so.
Source: Wall Street Journal.
These figures are national averages. I shudder to think what it would be like to try to rent in places like San Francisco.
The trouble with the U.S. economy is monopoly power.
Concentrated business power means less consumer choice, less opportunity for entrepreneurs and greater concentration of wealth.
Senator Elizabeth Warren described the problem very well in a speech on Wednesday. If you care about this issue, I strongly recommend that you click on the first link below.
She noted that five banks have been designated as “too big to fail” by the Federal Reserve Board and the Federal Deposit Insurance Corp.
But that situation is not limited to the banking industry. Four airlines (down from nine in the past 10 years) control 80 percent of all airline seats. If American, Delta, United or Southwest were to be in danger of ceasing operations, could there be any doubt that the government would want to keep them flying at all costs?
There’s another problem with concentration in the transportation industry, and that is the incentive to abandon small and remote communities and concentrate services in a few hubs. The second article linked below describes how concentration in the airline, railroad and trucking industries has harmed small cities in the Heartland. “Flyover country” wasn’t always flyover country.
Concentration means less consumer choice. Warren pointed out that more than half of Americans who with Internet or cable television service use Comcast. Yet, she said, a third of U.S. citizens who theoretically have access to high-speed Internet service can’t afford it. Americans pay more than Europeans for Internet service and get worse service.
The French economist Thomas Piketty has a strong and obvious argument as to why the rich usually get richer and the rest of us not.
He points out that so long as the return on assets—of whatever kind—is at a higher rate than the rate of economic growth, wealth and income will flow to owners of capital, not to wage-earners.
If you see gross inequality as a problem, there are two possible solutions:
- Raise the top tax brackets to reduce the share of the capitalists.
- Increase the rate of economic growth to increase the share of the workers.
An economist named Gerald Friedman concluded that Bernie Sanders’ economic policy would produce 5.3 percent annual economic growth. Other economists say that is over-optimistic to the point of being crazy. But even if Friedman is right, it would still be less than the historic rate of return on capital.
If Piketty is right, it means economic growth alone will not stem the growth of economic inequality. It will be necessary to reduce return on capital, not to zero, but to a rate less than the rate of economic growth.
One way to do this is to raise upper-bracket taxes to 1950s levels. Regulation of interest rates and subprime lending would help. Prosecution of financial fraud and enforcement of antitrust laws might have an effect.
Historically, as Piketty noted in Capital in the 21st Century, there have been other ways in which concentrations of wealth have been destroyed. They have been destroyed by means of wars, revolutions and devastating economic depressions.
One of the Russian Federation’s big problems is that its millionaires and billionaires are sending their money abroad, adding to Russia’s serious economic problems.
The fact that the Panama Papers reveal that one of Vladimir Putin’s oldest friends, a cellist named Sergei Roldugin, is the nominal head of offshore companies controlling billions of dollars in assets, is a big deal – especially since Roldugin does not live the life of a millionaire or billionaire.
Putin said back in 2011 that rich Russians who keep their money offshore are unpatriotic.
The Panama Papers are a trove of documents about shell companies registered in tax havens in the files of a Panamanian law firm called Mossack Fonseca. The documents were leaked about a year ago by an unknown person to a German newspaper, Seuddeutsche Zeitung, which shared them with other publications around the world and with the International Consortium of Investigative Journalists. They spent a year picking through the material, and published their findings starting last Sunday.
A tax haven is a jurisdiction with low or zero taxes which provides anonymity and protects financial secrecy. Drew Schwartz of VICE news explained how a tax haven can be used to hide a money trail.