With Tom Keene. To talk about trade...
Live from Bloomberg News: "Tom Keene... featured your excellent Vox essay as his Morning Must Read...
...on Bloomberg Surveillance.... He would be honored to speak with you tomorrow about the essay. Are you available at 9:30am ET/6:30am PT [Thursday] on the phone on Bloomberg Radio?
Yes I am available. It should be fun...
Want the elevator pitch version of: NAFTA and other trade deals have not gutted American manufacturing—period?
Here it is: Technology has driven our manufacturing share of non-farm employment down from 30% to 12%. Lousy macroeconomic policies--Reagan and Bush 43's generation of large wrong-time government deficits, an inappropriate overly strong dollar policy kept long past its sell-by date, etc--further pushed it down from 12% to 9%. Our assisting in the extraordinarily rapid industrialization of China from 9% to 8.7%. NAFTA from 8.7% to 8.6%. And given all the benefits we have gotten from NAFTA--and the much bigger ones Mexico has gotten--NAFTA was a good (albeit small) deal for the U.S.
Live at Vox.com: NAFTA and Other Trade Deals Have Not Gutted American Manufacturing—Period: Politically speaking, there was no debate on United States international trade agreements in 2016: All politicians seeking to win a national election, or even to create a party-spanning political coalition, agree that our trade agreements are bad things.... From the left... Bernie Sanders.... From the right—I do not think it’s wrong but it’s not quite correct to call it “right,” at least not as Americans have hitherto understood what “right” is—but from somewhere... now-President Donald Trump....
From the center establishment... popular vote–winning (but Electoral College–losing)... Hillary Rodham Clinton.... “I will stop any trade deal that kills jobs or holds down wages, including the Trans-Pacific Partnership. I oppose it now, I’ll oppose it after the election, and I’ll oppose it as president.…” The rhetoric of all three candidates resonates with the criticism of trade agreements that we heard way back when NAFTA was on the table as a proposal—not, as today, something to blame all our current economic woes on... Read MOAR at http://vox.com
January 24, 2017 at 06:35 AM in Economics: Growth, Economics: History, Economics: Inequality, History, Long Form, Philosophy: Moral, Political Economy, Politics, Streams: (BiWeekly) Honest Broker, Streams: Cycle, Streams: Economics, Streams: Equitable Growth, Streams: Highlighted | Permalink | Comments (68)
| | |
Robert Allen (2011): Global Economic History: A Very Short Introduction (New York: Oxford), chapter 4 http://amzn.to/2iloEx6
As you read, focus on:
The "standard package" of economic policies that, if successfully implemented, allows a 19th century economy to catch up to the world's then industrial leaders.
The absence of large gaps in technological competence across the North Atlantic--how by 1870 or so the more advanced parts of western Europe and North America were very close to being one single engineering technical community. Note also that nobody outside was able to join.
Up until 1870 or so technological progress was focused on the "old industries"--steam, iron, and textiles--of the Industrial Revolution. Starting in 1870 we get "new industries": automobiles, petroleum, electricity, chemicals. Does Allen provide us with a way to understand why there was this sudden spreading-out of the front of invention and innovation from narrow to broad?
Allen's has a tidy explanation of why Zimbabwe, Malawi, and India are poor today--that it is unprofitable to invest in machines because labor is cheap and labor is cheap because nobody has invested in machines. Thus even though the technological knowledge is in the air, and even though finance for profitable projects is easily raised throughout the world, the poor stay poor. Is this an adequate theory? Isn't it close to being a tautology--or, alternatively, to being a simple declaration that anything can happen? How could we make more intellectual progress on this issue?
Robert Allen (2011): Global Economic History: A Very Short Introduction (New York: Oxford), chapters 2 and 3 http://amzn.to/2iloEx6
Bob Allen has his own theory of what laid the foundations of the Industrial Revolution of 1750-1870. It is a smart theory. It is a good theory. It is a well-argued theory. It is an evidence-based theory. But it is a contested theory. Others, as smart as Allen, think it is wrong.
In this chapter Allen presents his theory.
He takes occasional swipes at other theories. Treat them more seriously than he does.
Allen's theory is, basically, that technological developments in ocean sailing and cannon produce maritime empires that encourage and dominate trade; that trade produces high wages in the imperial center; and thus it becomes, for probably the only time in history, profitable to develop the steam engine--if you also have a culture of mechanical engineers, really cheap coal, and excellent water transport. Thereafter what your engineers have learned from building the first generation of steam engines allows them to improve it and build other machines. And the Industrial Revolution is off and running. Try to grasp the whole theory as you read.
As you read, note:
Q: Has protectionism ever worked? Are there examples of countries throughout history that have embraced protectionist policies, and did that yield positive results? And what do these examples, if there are any, tell us about the economic plans of Mr. Trump?
A: If I were you, I would go grab Robert Allen's Global Economic History: A Very Short Introduction <http://amzn.to/2kgt8pj>, and immediately read chapters 8 and 9.
Growth: Exponential, Convergent, Logistic: How much of this will my students this semester know? How much of this will I have to remind them? And how much of this will I have to teach them for the first time?
These days a lot of energy and effort goes into user interface and user experience design.
And then we have the typewriter keyboard from 150 years ago.
It shows up in remarkably many places.
Is there any reason to think that it is in any sense the best way to lay out an alphabetical interface entry form?
From left and right alike we hear something called "globalization" condemned. The forces driving the world economy toward increased economic integration are sinister. On the left politicians like Democratic congressman David Bonior begin speeches by noting three things that come to the U.S. from Mexico--dirty trucks, drugs, and hepatitis. On the right politicians like ex-Republican Pat Buchanan blame a century-old conspiracy to deliver America into the hands of the international bankers--and somehow to Buchanan the bankers are always named Goldman, Sachs, or Rubin; never Morgan or Baker.
January 10, 2017 at 07:23 AM in Economics: Growth, Economics: History, Economics: Macro, History, Philosophy: Moral, Political Economy, Politics, Streams: (Tuesday) Hoisted from Archives, Streams: Cycle, Streams: Economics, Streams: Equitable Growth, Streams: Highlighted | Permalink | Comments (2)
| | |
In many businesses, the explicit or implicit human-resources policy is LHFF--last hired, first fired. That means that workers who jump from a job in one firm to a job in another purchase a greater beta with respect to the business cycle along with the higher wages, better working conditions, and more interesting responsibilities that would lead them to jump. This seems the most likely explanation for the fact that more than one-fifth of the hiring we would expect to get at the current aggregate level of unemployment relative to job openings is not there. After the catastrophic downturn of 2008-9 and the subsequent half a decade noncovery, workers' assessments of the risks taken on in jumping firms and thus going to the back of the tenure-in-job queue are likely to be greatly elevated. Everybody knows people who lost their jobs in 2008-9 and then had the devil's own time finding another one.
Hoisted from the Archives from 2000: The Neoliberal Bet: January 15, 2000 ; Our panelists--Robert Kaplan, Saskia Sassen, and Manuel Castells--are all seeing not a crowded, thirsty world, but a crisis of urban governance. We are becoming an urban world. Cities require a lot of public services to function well. And our panelists seem to have no confidence in the ability of city governments in what we call emerging market economies to deliver services--police, electricity, roads, schools.
Missing the Economic Big Picture: As former WTO Director-General Pascal Lamy said earlier this month in my hearing, quoting from a conversation between Wu Jincang and Chinese Sixth Buddhist Patriarch Huineng:
"When the philosopher points at the moon, the fool looks at the finger". Market capitalism is the moon. Globalization is the finger.
Between the Little Englanders' BREXIT vote and those currently installing Donald Trump in the American presidency in the belief that he will make America great again by negotiating very different "trade deals", there has been a lot of finger-watching this year.
Pascal Lamy: "When the wise man points at the moon, the fool looks at the finger..."
Perhaps in the end the problem is that people want to pretend that they are filling a valuable role in the societal division of labor, and are receiving no more than they earn--than they contribute.
But that is not the case. The value--the societal dividend--is in the accumulated knowledge of humanity and in the painfully constructed networks that make up our value chains.
Germany does not have the rise of the overclass. And Germany does have the wage stagnation--even though it is done everything right to preserve manufacturing employment and nurture communities of engineering practicing excellence.
Can I take the Germany-U.S. comparison as strong evidence against the "globalization has driven wage stagnation" hypothesis?
How much to make of the post-1400 pre-1650 divergence between London and Amsterdam on the one hand and Valencia and Florence on the other? We want to grab for the explanation that the Black Death (and associated fourteenth-century demographic disasters) was a huge deal--and then things returned to Malthusian normal in southern Europe. But not so in northern Europe. And Delhi laborers are hanging up there, as well-off as Londoners (as best as Bob Allen and company can tell) in 1625 and 1650...
The worst possible "structural reform" program is one that moves a worker from a low productivity job into unemployment, where they then lose their weak tie social network that allows them to get new jobs.
They then get used to sitting in their sisters' basement splaying video games and surfing the internet all day.
John Maynard Keynes (1919): The Economic Consequences of the Peace: "After 1870 there was developed on a large scale an unprecedented situation, and the economic condition of Europe became during the next fifty years unstable and peculiar...
Live from Nineteenth-Century London: John Stuart Mill (1848, 1871): Principles of Political Economy: "Hitherto it is questionable if all the mechanical inventions yet made have lightened the day's toil of any human being...
Q: Have BREXIT and Trump increased the probability of a breakup of the eurozone?
That Britain voted for BREXIT, even under the false pretense of an extra 350 million pounds a week for the health service, is a strong indication that the tide of globalization and integration is not irresistible. That Americans... well, Americans did not vote for Trump--they voted for Clinton. That the quirks of the electoral college have made Trump president-elect is a strong indication that the tide of globalization and integration is not irresistible.
Live from Lancashire: Pseudoerasmus: Random Thoughts on Critiques of Allen’s Theory of the Industrial Revolution: "I love the work of Robert Allen...
I must take exception to something said earlier today by the very sharp Neville Morley:
Neville Morley: When It Changed: "Unless you do assume that one strand of historical development...
...changes in productivity, or technology, or ideology--is determinative of all the others, then there’s no particular reason to assume that everything will change according to the same chronological pattern...
I think he has gone wrong here. In the past--even in the first half of the nineteenth century--the assumption that there was one principal engine driving the belts and powering the orreries of history was just that: an assumption, and a simplifying and probably badly chosen assumption.
But for the past hundred and fifty years things have been different.
In the "long" twentieth century the pace of economic transformation has been so great as to force nearly every other aspect of history to respond according to the same chronological pattern.
Ah. I see that you have found the first draft of my opening lecture for Econ 115 next semester... https://twitter.com/BrankoMilan/status/804205835543019520 https://t.co/lK82RVQudb
I think whether it is more useful to do the tell of 20th century economic history as the "short" 1914-1989 (as Hobsbswm does) or the "long" 1870-2012 (as I want to) rests on two analytical judgments:
Good Riddance to Fidel Castro!: Fidel Castro has retired. Good riddance!!
That the Lenin-Trotsky-Stalin Authoritarian Project of which Fidel Castro was the next-to-last exemplar was not an advance toward but a retreat from a better world was obvious long, long ago. Quite early--Kronstadt?--it was clear to all save the dead-enders that the project was a mistake.
As Rosa Luxemburg wrote in "The Russian Revolution":
November 26, 2016 at 06:32 AM in Economics: Growth, Economics: History, Economics: Inequality, History, Moral Responsibility, Philosophy: Moral, Political Economy, Politics, Streams: (Tuesday) Hoisted from Archives, Streams: Cycle, Streams: Economics, Streams: Equitable Growth | Permalink | Comments (5)
| | |
Ana Navarro: @ananavarro: "Why Miami celebrating? Ppl like my friend, Claudia Puig. Her dad killed by a Castro firing squad. Her uncle was a political prisoner 25 yrs."
Sean Carroll: @seanmcarroll: “'Universal health care' and 'other countries were worse' don’t make Castro worth celebrating. Repressive dictatorships are bad."
Adrian Monck: @amonck: "Channelling Public Enemy on Elvis:"
Stefan Leifert: @StefanLeifert: "Jean-Claude Juncker: 'With the death of Fidel Castro, the world has lost a man who was a hero for many'."
For all of our stooges searching for a Stalin, half-wits hailing a Hitler, morons marching for a Mussolini, and clowns craving a Castro this morning. A suitable epitaph for Fidel Castro, from Gabriel Garcia Marquez:
A vast bureaucratic incompetence affecting almost every realm of daily life, especially domestic happiness... has forced Fidel Castro himself, almost thirty years after victory, to involve himself personally in such extraordinary matters as how bread is made and the distribution of beer...
Jacobo Timmerman (1990): A Summer in the Revolution: 1987: "When I read one of Gabriel Carcia Marquez's essays on the Commandante [Fidel Castro], I was remind of paeans to Stalin...
November 26, 2016 at 06:02 AM in Economics: Growth, Economics: History, Economics: Inequality, Funny, Moral Responsibility, Philosophy: Moral, Political Economy, Politics, Streams: (Tuesday) Hoisted from Archives, Streams: Cycle, Streams: Economics, Streams: Equitable Growth | Permalink | Comments (1)
| | |
For all of our stooges searching for a Stalin, half-wits hailing a Hitler, morons marching for a Mussolini, and clowns craving a Castro this morning:
Jaybird: Vladimir, Joseph, and Zedong:
Has anybody here seen my old friend Vladimir?
Can you tell me where he’s gone?
He freed a lot of people,
But it seems the good they die young.
You know, I just looked around and he’s gone.
AP: Fidel Castro Dead at 90: "HAVANA (AP) — Cuban President Raul Castro has announced the death of his brother Fidel Castro on Cuban state media. Fidel Castro was 90 years old..."
Some teabaggers like Augusto Pinochet. Some herbal teabagger liked Fidel Castro. Peas in a pod:
Let us suppose that we had been transported to some other branch of the multiverse, along which the Federal Reserve had not held interest rates at zero but had steadily and gradually raised them for the past six years them so that the Federal Funds rate now stood at 400 basis points. What does the economy look like along our branch and along that branch?
Q: How hard will it be for Trump to produce jobs for the people he promised he would?
A: Fiscal expansion might rescue Trump by creating a high-pressure economy, if we are still far from full employment. Otherwise...
Bad trade deals are not the reason for the decline in American manufacturing employment and the stagnation of earnings outside the 10%.
Filling: 2 cups pumpkin, 1 cup sugar, 2 cups heavy cream, 4 large eggs (2 oz. each: 1 cup total), 2 teaspoons cinnamon, 1 teaspoon ginger, 1/2 teaspoon nutmeg, 1 pinch clove...
Crust: 1 3/4 cups flour, 5 oz. butter, 2 oz. shortening, 1 egg yolk, 3 tablespoons sugar, 2 teaspoons orange zest, 2 teaspoons lemon zest...
Whipped Cream: to taste...
Hoisted from the Archives: 470 years ago, in 1543, King Henry VIII Tudor of England married his sixth and last wife, Katherine Parr. He also:
A busy king, for one so sick and mad.
In the United States 24% of nonfarm workers were manufacturing workers in 1971.
It's 8.6% today.
Maybe it would be 9% if NAFTA has not been negotiated and if China had not joined the WTO, but maybe it would still be 8.6%--analysts disagree on trade expansion vs. trade diversion here.
A cleaned-up transcript of my part of this Bank-Fund Meeting cycle's panel on "Fiscal Policy in the New Normal":
Moderator: Vitor Gaspar. Panelists: Mitsuhiro Furusawa, Brad DeLong, Bill Morneau, Ludger Schuknecht, Arvind Subramanian
Diane Coyle: The Trade-Investment-Service-Intellectual Property Nexus: "I’ve managed to resist reviewing Richard Baldwin’s new book The Great Convergence: information technology, trade and the new globalization until now...
J. Bradford DeLong :: U.C. Berkeley, NBER, and WCEG :: November 17, 2016 :: PIIE
We are highly unlikely to have any—not for the next two years, and probably not for the next four years. Thus the talk I had prepared and the powerpoint I had drawn up two weeks ago are now totally irrelevant.
I think the big part of the story is that the investment accelerator is a big thing, even though our models say it should not. Businesses do wait to invest until they are running flat out to invest. It's a puzzle why they do this--they ought to act like the foresighted agents in our models, shouldn't they?
Let me distinguish between:
Supervulgar Trumpism: Donald Trump will return manufacturing employment to 24% of the nonfarm labor force.
Vulgar Trumpism: Donald Trump will renegotiate NAFTA and China's accession to the WTO. We will not get all or even most of the manufacturing jobs back, but the industries and the communities will be healthy.
Semi-intelligent Trumpism: The U.S. ought to be a high savings capital and manufactures exporting country, like Germany and Japan. Bad macro and trade policies--the Reagan and Bush 43 deficits, keeping the strong dollar policy long past its sell-by date, prioritizing finance over manufacturing--accelerated the decline of manufacturing employment well beyond its proper technology driven pace and eroded our valuable communities of engineering practice.
Should we expect 2017 to be different than 2016 as far as global economic growth is concerned?
As Gian-Maria Milesi-Ferreti said yesterday, it surely ought to be better because it will be unlikely to be as bad as 2016 was for Russia, Nigeria, South Africa, and Brazil. The anti-productivity shock of BREXIT will not have hit the world economy yet, and Mark Carney and company have managed to drop the pound enough that Britain looks likely to see expenditure-switching rather than expenditure-dropping as people readjust their plans as they wonder what the end of the BREXIT imbroglio will be.
Ken Rogoff: "In nine years, nobody will be talking about 'secular stagnation'. I've been debating Larry on this for a year, and I started saying 'in ten years..., and so for consistency I now say 'in nine years...".
This is a wager that the full-employment long-run in which money and its associates are a veil that does not affect or disturb the Say's Law operation of the economy will come not more than 18 years after the shock of 2017--or at least that whatever remnants of the effects of that shock on the business cycle come 2025 will be dwarfed the effects of other business cycle shocks subsequent to now.
I do know from experience that one disagrees with Ken Rogoff at one's grave intellectual peril. But is he correct here? I really cannot follow him to the conclusion he wants me to reach...
Things to reread and chew over:
Whether Thomas Jefferson's vision of the future of America was coherent was unclear then and remains unclear now.
Jefferson, like most of his founding-father contemporaries, was steeped in one version of classical history: Roman history as a morality play. Jefferson and many, many of his revolutionary peers assumed that yeoman farmers--Cincinnati--were the only possible social class that could maintain a free republic. They all believed that Rome was a great, free Republic because of its fiercely-independent farmers who nevertheless loved their city and would--like Cincinnatus--drop their ploughs and instantly take up their swords to defend (and conquer), and then return to their ploughs after the war was over.
November 14, 2016 at 11:34 PM in Economics: Growth, Economics: History, History, Moral Responsibility, Philosophy: Moral, Political Economy, Politics, Streams: (Wednesday) Economic History, Streams: Cycle, Streams: Economics, Streams: Equitable Growth, Streams: Highlighted | Permalink | Comments (31)
| | |
Fiscal expansion now is really a no-brainer:
What's the downside?
Must-Read: I would add Mongkut and Chulalongkorn in Thailand, and Mohammed Ali in Egypt, to Pseudoerasmus's list here...
In a good world, this would be not a blogpost but a symposium. This would be a conference. Admittedly, since Pseudoerasmus is and probably must remain anonymous, he/she would have to teleconference in her/his disguised-voice avatar:
Pseudoerasmus: State Capacity & the Sino-Japanese Divergence: "Why China did not industrialise before Western Europe may be a tantalising and irresistible subject, but frankly it’s a parlour game...
...What remains underexplored, however, is the more tractable issue of why Japan managed, but China failed, to initiate an early transition to modern growth and convergence with the West. A recent paper argues that the gap in state capacity between Qing China and Tokugawa Japan was responsible for the divergence.
Please note, this blogpost disputes that argument:
Stephen Cohen and J. Bradford DeLong (2016): Concrete Economics: The Hamilton Approach to Economic Policy (Cambridge: Harvard University Press) http://amzn.to/2fJnSEe | Keynote
Well, that was a very interesting election night...
Our failure in 2000 to introduce into the running code (as opposed to the specification document) of our constitution that electors switch votes so that the national popular vote winner wins the electoral college cost us dear in 2000, and may cost us even more today...
You may ask: How is one to judge what to do in such times? The answer is clear: As one has ever judged. Good and evil have not changed since yesteryear, nor are they one thing among Elves and another among Men. It is a human's part to discern them, as much in the Golden Wood as in his own house. What would have been good policy yesterday would still be good policy today. What would have been bad policy yesterday would still be bad policy today. So we play our position.
I therefore set forth seven principles that should govern good technocratic fiscal policies that promise to enhance America's societal well-being :
Must-Read: Why I reacted badly to journalists who asked me to analyze Trump's economic plans. The first, last, and only correct thing to say was that there never was any coherent plan. To say anything else was to try to normalize the unnormalizable. Everyone who wrote as if there was a plan should be deeply ashamed of themselves.
Here Alan Cole gets it... less wrong than most. He is still trying to normalize the unnormalizable. But he is honest about how difficult it was for him to attempt the task:
Alan Cole: _On Twitter: "This is my 407th (and, I expect, final) day covering Donald Trump's tax proposals for @taxfoundation...
...Here's what we've learned:
Must-Read: Branko Milanovic: The Long Shadow of 1989: "The [Eastern European] generation born around the early 1990s, which has now reached its maturity...
Looking Forward to Four Years During Which Most if Not All of America's Potential for Human Progress Is Likely to Be Wasted
With each passing day Donald Trump looks more and more like Silvio Berlusconi: bunga-bunga governance, with a number of unlikely and unforeseen disasters and a major drag on the country--except in states where his policies are neutralized.
Nevertheless, remember: WE ARE WITH HER!
"I now know it is a rising, not a setting, sun" --Benjamin Franklin, 1787