Archive for the ‘Economy’ Category

Jordan Peterson and the dominant lobster

April 17, 2018

I forgot to mention the most striking metaphor in Jordan Peterson’s 12 Rules for Life—the struggle for dominance among lobsters.

Hierarchy is a law of nature, Peterson wrote; it is hard-wired in our brains by the evolutionary process.  It manifests itself not only as top dogs and pecking orders, but the struggle for dominance of our distant ancestor, the humble lobster.

Lobsters, it seems, compete for the best nesting places where they can be safe when they are shedding their shells.  The winners are lobsters with the biggest claws and a level of confidence produced by a substance called serotonin.   Sub-dominant lobsters not only fail to get good nesting places, but their level of serotonin drops so they can adjust to their lowly status.  Not only that, lobsters respond to Prozac.

So don’t be a loser lobster, Peterson says; stand up for yourself.

Illustration from 12 Rules for Life

It’s true, as he says, that human beings compete for dominance in subtle and not-so-subtle ways.  Everybody can see this.  I’ll never again observe a certain type of (usually) male behavior without forming a picture in my mind of a giant humanoid cartoon lobster, waving its claws.

And it’s also true that the human body produces serotonin.  But current thinking is that serotonin has little to do with mental states.  In human beings, its main function is to aid digestion.   Also, even though lobsters respond to Prozac, there is no evidence that it makes them happier.  Also, the lobster species is not the ancestor of the human species.

Peterson, to his credit, does not advocate being at the top of a dominance hierarcy as a life goal.   That way lies fascism by way of social Darwinism.  What he says is that life is tough and you need to be able to stand up for yourself.

What he goes wrong is to claim dominance and hierarchy in the animal kingdom have any relevance to current arguments about economic inequality.

It is true that, within any group, there will be one or more persons who are more competent and confident than the others, and they will emerge as leaders.

But that has nothing to do with questions of the power of money in politics, the abuse of power by government or the growth of income inequality.  The current distribution of wealth and power in the USA and other countries does not reflect constants of human nature; it is the result of governmental and corporate policies during the past 35 years.

12 Rules for Life is inspirational, and Peterson mostly speaks good sense when he is dealing with matters of which he has personal experience or has studied deeply.   But on issues of economics and politics, he seems not to know what he doesn’t know.

LINKS

Psychologist Jordan Peterson says lobsters help to explain human hierarchies – do they? by Leonor Gonçalves for The Conversation.

Three More Reasons for Wealth-Deprived Americans to Take to the Streets by Paul Buchheit for AlterNet.  The real issues in the inequality debate.

 

Trade war tactics and strategy

March 5, 2018

Reuters reported that the European Union is considering applying 25 percent tariffs on American motorcycles, bourbon and blue jeans, if President Trump imposes new tariffs on steel and aluminum imports.

Motorcycles, bourbon and blue jeans?  Kevin Drum of Mother Jones explained the significance.

Hmmm.  Harley-Davidsons are made in—what?  Wisconsin, right?  In Menomonee Falls, actually, about 50 miles from Janesville, where Paul Ryan lives.  The Jim Beam bourbon distillery is in Clermont, Kentucky, about 20 miles from Mitch McConnell’s house in Louisville.  Levi’s is headquartered in San Francisco, about two miles from Nancy Pelosi’s house.

I think that’s a pretty funny example of trade war tactics.

Deaths of despair in America

March 1, 2018

Economists Angus Deaton and his wife, Anne Case, are authors of a study showing the increase in the rate suicide, and also of other “deaths of despair,” among middle-aged white Americans.

The mystery is why there’s no such trend among black and Hispanic Americans, or among Europeans, even though many of them are struggling economically as much or more than white Anglo Americans.

Deaton and Case, in an interview shown in the video above, saw the rising suicide rate as a failure of social and spiritual bonds, and not just a failure of public policy.

They speculated that some white Americans are failed by their religion.  He said many evangelical churches downplay social support because they believe salvation is an individual relationship with God.

I think this is a stretch, and they don’t provide any evidence for this.   My impression—admittedly based on limited experience—is that strict conservative churches provide at least as strong social support as mainstream churches.

The isolated ones would be the ones who think they don’t need a church community because they have an individual relationship with God.   This was true of J.D. Vance’s troubled family, which he described in Hillbilly Elegy.  When trouble comes, his family didn’t have any support system beyond each other.

Of course, all other things being equal, unbelievers suffer just as much or more from lack of a church community.

I think we white Anglo Americans are brought up to think that society is basically fair and that anything that happens to us is our own fault.   We’re taught to keep trying despite setbacks, and not to give up.  This is good—up to a point.

My guess is that black and Hispanic people on average are more aware that life is unfair and that they don’t invest so much of their self-esteem in being breadwinners.

My other guess is that life is more meaningful to those who join in solidarity with others to fight for change.

In an interview linked below, Deaton said the problem is not economic inequality as such.   It is fairness, he said.  It is not unjust for someone to get rich by creating something of value.   What matters is how you get rich.

He said the problem is that so many of the economic elite get rich through what he called “rent seeking”—extracting money from people without contributing anything of value.  The health insurance industry is an example of this.

Monopoly or “oligopoly” (control by a small number of firms) are a big part of the problem, he said.  Lack of competition results in lower inflation-adjusted wages, higher prices, fewer jobs and slower productivity growth.   Self-described progressives and conservatives ought be able to in fighting monopoly.

LINK

Angus Deaton on the Under-Discussed Driver of Inequality in America: “It’s Easier for Rent-Seekers to Affect Policy Here Than in Much of Europe”, an interview for Pro-Market, the blog of the Stigler Center of the University of Chicago Booth School of Business.

Mortality and morbidity in the 21st century by Anne Case and Angus Deaton for the Brookings Institution (2017).   This is their most recent study of “deaths of despair.”

‘Remind me why socialism is so great again’

February 22, 2018

Economist Mark J. Perry, who posted this chart on the American Enterprise Institute’s Ideas blog, argued that prices are highest in the economic sectors that are most heavily regulated.

Said he:  “Remind me of why socialism is so great again.”

One possible explanation is Baumol’s Cost Disease, the tendency of the cost of human services to rise relative to the cost of manufactured goods.  That’s not the whole story.

The fact is that European countries that most Americans would consider socialist have free or affordable medical care and free or affordable higher education.   And it is not a case of costs being shifted from patients and students onto taxpayers.

Overall costs of health care and higher education are less in so-called socialist European countries (I write “so-called” because most of them have self-described conservative governments).

The reasons why health care costs less in those European countries than in the USA is that there are no for-profit insurance companies standing between the patient and the physician, that European countries control prescription drug prices and that the incomes of physicians and other health care providers are less.

My guess is that European universities provide a no-frills education without spending huge sums on sports stadiums and student amenities.  My other guess is that their hospitals and univerities are not so top-heavy with highly-paid administrators.

In and of itself, government regulation is neither good nor bad.  It depends on what is being regulated, how it is being regulated and in whose interest it is being regulated.

LINKS

Chart of the day (century?): Price changes 1997 to 2017 by Mark J. Perry for AEI Ideas.

Mark Perry Has Never Heard of William Baumol by ProGrowth Liberal for Angry Bear.

Chris Arnade on how the other half lives

January 13, 2018

This includes two updates

Half the world doesn’t know how the other half lives.   (old saying)

Chris Arnade spent 20 years as a Wall Street investment banker, then quit in 2011 to start a new career as a photojournalist, first interviewing and photographing drug addicts and prostitutes in the Bronx, then traveling across the country to talk to working people and poor people who’ve been left behind in the new economy.

Arnade said that what he concluded was that addiction is the result of isolation, isolation is the result of rejection and the chief source of rejection is the U.S. educational system.

The U.S. educational system, he said, teaches that the way to achieve success is to go to a good college, leave home and devote yourself to achievement in your professional life.

Those who do this successfully are the elite in American life.   The problem is that not everybody is able to succeed this way, and not everybody wants to do this.

Some people put family, community and religion first.  In this respect, he said, there is little difference between black people and white people, or between Anglos and Hispanics.

Arnade calls the first group the Front Row and the second group the Back Row. The Back Row are not only disrespected, Arnade said.  The economic system is rigged against them.

Every important decision on national policy, since at least the North American Free Trade Agreement  (NAFTA) in 1994, has put the interests of the Front Row ahead of the Back Row.

The one institution in society that welcomes the back row is the churches, he wrote.  He himself is an atheist, but he said that churches welcome you, no matter what your credentials or lack of them.  I’m not sure that is true of all churches, but his point is correct.

Another place the Back Row is welcome, he said, is McDonald’s restaurants.  McDonald’s original business model was a place where you can get in and get out quickly, but McDonald’s and other fast-food restaurants have become places where you can get a nourishing meal at a low price, charge your cell phone and hang out with friends.  Most of them have an old man’s table that retirees have staked out for their own.

If you’re a Front Row person and want to break out of your bubble, stop having coffee at Starbuck’s (or the equivalent) and stop start spending time in McDonald’s (or the equivalent), Arnade advised,

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Robots will not (necessarily) replace us

November 15, 2017

You Will Lose Your Job to a Robot—And Sooner Than You Think, argues Kevin Drum in Mother Jones.

His argument is simple.  Historically, computing power doubles every couple of years.   There is no reason to think this will stop anytime soon.   So at some point the capability of artificial intelligence will exceed the capability of human intelligence.  Machines will be able to do any kind of job, including physician, artist or chief executive officer, better than a human being can.

This will happen gradually, then, as AI doubles the last few times, suddenly.

When that happens, humanity will be divided into a vast majority who serve no economic function, and a tiny group of capitalists who own the means of production.   Rejection of automation is not an option, according to Drum.   It only means that your nation will be unable to compete with nations that embrace it.

The only question, according to Drum, is whether the wealthy capitalists will have enough vision to give the rest of us enough of an income to survive and to create a market for the products of automation.

I have long believed that automation is driven as much by administrators’ desire for command and control as it is by the drive for economic efficiency.   An automated customer service hotline does not provide better service, but it eliminates the need to deal with pesky and contentious human beings.

I also believe that, in the short run, the danger is not that computer algorithms will surpass human intelligence, but that people in authority will treat them as if they do.

Drum presents interesting information, new to me, about the amazing progress of machine intelligence in just the past few years.   But that’s not necessary to his argument.

His argument is based on continuation of exponential growth and (unstated) continuation of the current economic system, which works for the benefit of high-level executives and administrators and of holders of financial assets at the expense of the rest of us.

There’s no law of physics that says development of technology has to result in higher unemployment.  Under a different system of incentives and ownership, technology could be used to expand the capability of workers and to make work more pleasant and fulfilling.

To the extent that automation eliminated boring and routine jobs, it could free up people to work in human services—in schools, hospitals, nursing homes—and in the arts and sciences.

Technology does not make this impossible.   Our current economic structure does.   Our current economic structure was created by human decisions, and can be changed by human decisions.  Technological determinism blinds us to this reality.

Tax havens are big business

November 7, 2017

Research by the economist Gabriel Zucman shows that tax havens are big business.   He concludes that they substantially increase the after-tax income of the top 0.01 percent of the world’s population and that they enable U.S. and other corporations to evade taxes on nearly half their income from foreign operations.

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Offshore wealth as % of GDP.  Source: Gabriel Zucman. Click to enlarge.

Zucman is a respected economist  I’m not able to evaluate his estimates based on my own knowledge, or to meaningfully compare his figures with those of the Tax Justice Network and other sources.   But there’s no doubt that ultra-rich individuals and powerful corporations are able to keep a lot of their wealth hidden from view.

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The top 1 percent in Russia

October 6, 2017

I’ve posted many charts about the growing concentration of income and wealth in the United States in the hands of a tiny elite.   Here is a chart illustrating inequality in Russia.

You should take note about what this chart shows and doesn’t show.  The ruling elite in the old Soviet Union didn’t have large incomes, and they didn’t live like American millionaires and billionaires, but they did have special privileges, much like military officers compared to the rank and file or like American corporate executives with huge expense accounts.    They had special stories, special medical care, special schools for their children, etc.

Also, the chart indicates that relative equality isn’t everything.   I don’t think many Americans would have wanted to trade places with the average person in the old Soviet Union.

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Neoliberalism is about more than free markets

August 22, 2017

The common mistake about neoliberal ideology is to think that it is about nothing more than unrestricted free markets.

In fact, neoliberalism is about unrestricted accumulation of capital.

Concentration of wealth at the top is an intended, not an unintended, consequence.

The idea is that of classical economics’ three sources of wealth – land, labor and capital – it is capital that is the force multiplier.

Capital investment, as Karl Marx recognized in the Communist Manifesto, is what has increased the total amount of wealth available to humanity in the modern capitalist era.   What neoliberals say is that this process can and should continue, with capital remaining in private hands.

That is why neoliberals advocate upper-bracket tax cuts and government austerity, and oppose minimum wage laws and labor unions.   Working people only waste their wages on their personal needs, neoliberals think; capitalists invest and increase the wealth of society.

That is neoliberals they advocate bailing out banks in the USA and Europe, while insisting that home mortgages, student loans and the debt of nations such as Greece by repaid to the last penny.

There is logic to this, once you accept the underlying assumptions.  The wrongness of this idea is shown, not by economic theory, but by the history of the last 40 years.

We have had increasing austerity and increased concentration of wealth in the upper brackets, but the investment needs of the USA and other advanced countries are unmet.

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Book note: The Making of Global Capitalism

May 30, 2017

International financial organizations such as the International Monetary Fund and the World Trade Organization have come to be a kind of world government, dictating policy to supposedly sovereign governments.

I recently read a book, The Making of Global Capitalism (2012) by two Canadian leftists named Leo Panitch and Sam Gindin, on how this came about.   I thank my friend Tim Mullins for recommending it.

It’s quite a story.  It is not well understood.

The first part of the story is the U.S. New Deal.   President Franklin Roosevelt and the Democratic Congress gave the U.S. Treasury Department and the Federal Reserve System the authority they needed to stabilize the crumbling U.S. financial and banking system.

The second part is the 30 years following World War Two.   Under the leadership of the U.S. Treasury and Federal Reserve, international financial institutions were created that duplicated the U.S. system.  They presided over the era of greatest peace and prosperity that North Americans and Europeans had ever since.

The third part is what happened after that.  The world’s financial system endures a series of ever-greater financial crises.   To deal with them, international financial  institutions demand the surrender of gains made by American and European workers and the middle class in the earlier era.

The irony is that a financial governing structure created by American power is now stronger than ever, while the actual American economy is rotting away beneath it.

Panitch and Gindin described in great detail how this happened, step-by-step,.

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Neoliberalism and Its Discontents (1)

April 13, 2017

What follows is notes for the first part of a talk for the Rochester Russell Forum scheduled at Writers & Books Literary Center, 740 University Ave., Rochester, NY, at 7 p.m. Thursday, April 13, 2017

Neoliberalism is the philosophy that economic freedom is the primary freedom, economic growth is the primary goal of society and the for-profit corporation is the ideal form of organization.

It is the justification for privatization, deregulation and the economic austerity currently being imposed on governments by lenders.

Neoliberalism has its roots in classical liberalism, which arose in the 18th and 19th centuries.  Classic liberals said that the purpose of government is to protect human rights, including religious, intellectual, political and economic freedom.   They fought the absolute power of kings and the privileges of aristocrats and demanded the right of individuals to determine their own fates.

Classical liberalism came to be supplanted in the early 20th century by a belief that government regulation and welfare could, if well thought out, enhance human freedom by giving individuals more choices.   A graduate of a public school or university, for example, has more options than a person unable to afford an education, so taxing the public to pay for public schools and universities would be a form of liberation.

Neoliberalism is a backlash against social liberalism.  Neoliberalism affirms that freedom of enterprise is the only important freedom.   Its well-known adherents include Friedrich Hayek, Ludwig von Mises and Milton Friedman.

It came into widespread acceptance in the 1980s, as a reaction against the manifest failures of central economic planning and as a way to break the political gridlock of the welfare state.  Ronald Reagan and Margaret Thatcher were both strongly influenced by the neoliberals.

Neoliberalism’s strongest adherents are to be found among economists, journalists, financiers, Silicon Valley executives and right-of-center parties in the English-speaking world and western Europe, and in international institutions such as the International Monetary Fund, World Bank and European Central Bank, which enforce neoliberal policies on debtor countries.

It is more of an implicit philosophy than a credo, a series of assumptions that has come to permeate our society.

What follows is my attempt to understand the logic behind these assumptions.

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The case against the Internet

March 29, 2017

Double click to enlarge. Source: Visual Capitalist.

Andrew Keen’s book, The Internet Is Not The Answer (2015), which I recently finished reading, is a good antidote to cyber-utopians such as Kevin Kelly.

Keen says the Internet is shaping society in ways we the people don’t understand.  Some of them are good, some of them are bad, but all are out of control.

Like Kelly, he writes about technology as if it were an autonomous force, shaped by its own internal dynamic rather than by human decisions.  Unlike Kelly, he thinks this is a bad thing, not a good thing.

He does not, of course, deny that the Internet has made life easier in many ways, especially for writers.   But that is not the whole story.  He claims that—

  • The Internet is a job-destroyer.
  • The Internet enables business monopoly
  • The Internet enables surveillance and invasion of privacy.
  • The Internet enables anonymous harassment and bullying.
  • The Internet enables intellectual property theft

Keen quotes Marshall McLuhan’s maxim, “We shape our tools, then our tools shape us.”

What he doesn’t quite understand is that the “we” who shape the tools is not the same as the “us” who are shaped by them.

Or to use Marxist lingo, what matters is who owns the means of production.

Technology serves the needs and desires of those who own it.  Technological advances generally serve the needs and desires of those who fund it.

Advances in technology that benefit the elite often serve the general good as well, but there is no economic or social law that guarantees this.   This is as true of the Internet as it is of everything else.

Let me look at his claims one by one—

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Mike Whitney on U.S. anti-Russian policy

March 24, 2017

Will Washington Risk WW3 to Block an Emerging Russia-EU Superstate? by Mike Whitney for Counterpunch.

Map via Wikimedia

The rent is too damn high

March 7, 2017
Double click to enlarge

Double click to enlarge

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?

LINKS

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.

Rich people’s countries, poor people’s countries

February 28, 2017
government-and-gdp-capita-ad92

Double click to enlarge.

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.

LINK

Which Government System is the Best for People’s Wealth? on howmuch.

Why do things cost so much?

February 17, 2017

cost_putoff

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.

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What Donald Trump promised in his inaugural

January 21, 2017

trump inauguration politico 1

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.

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The guaranteed incomes of the top 0.1 percent

January 14, 2017

notwork11

Hat tip to occasional links and commentary.

Radicals propose a universal guaranteed income for all, regardless of whether you are gainfully employed or not.   But as Matt Breunig pointed out, it already exists in the top 1 percent and 0.1 percent income bracket.   They receive income from their financial assets regardless of whether they work or not.

There is a strong argument for a guaranteed.  It is that the reason that the national wealth today is greater than in the past is largely due to the inventiveness and effort of our ancestors, not to anyone living today, and that therefore all of us are equally entitled to the fruits of their effort.

This was the philosophy of the social credit reform movement, which provided the background for Robert A. Heinlein’s great utopian science fiction novel, Beyond This Horizon.

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Can Trump make U.S. industry great again?

December 1, 2016

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.

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Trump as a possible one-term President

November 9, 2016

trumpwins

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.

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Economic anxiety and Donald Trump voters

November 1, 2016

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.

Trump in NH in 2015. Source: Reuters

Trump in NH in 2015. Source: Reuters

It’s true that Trump has sought to appeal to white nationalists, gun-toting private militias and paranoid conspiracy theorists.

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 if you say that, 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.

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The march of globalization

October 7, 2016

trade-goldmansachchart-barry-rithholtz

This chart, produced by Goldman Sachs and reproduced by FT Alphaville and Barry Ritholtz, shows how world trade has grown in the past half-century.

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.

Average Americans are getting nowhere fast

October 5, 2016

medianhouseholdincome6a00d83452403c69e201b8d21cc5c1970c

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.

Source: Niall Ferguson | The Boston Globe

Hat tip to occasional links & commentary.

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The computer era and productivity statistics

September 28, 2016

us_total_factor_business_productivity

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chart-2-us-labour-productivity

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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.

LINKS

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.

Russia is losing an economic war

September 26, 2016

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.

03-bust-boom-bustIn 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.

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