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Saturday, October 20, 2018

The Powerlessness of the Most Powerful [feedly]

The Powerlessness of the Most Powerful
https://www.project-syndicate.org/commentary/powerlessness-of-most-powerful-by-javier-solana-2018-10

Oct 20, 2018 JAVIER SOLANA

The president of the leading global power has made it clear that he has no interest in getting involved in resolving any of the world's shared problems, dressing up his foreign policy as one of "principled realism." But there is nothing principled or realistic about it.

MADRID – The annual General Debate of the United Nations General Assembly is one of the most notable events on the international diplomatic calendar. As usual, this year's meeting, during the last week of September, brought together a long list of world leaders, although perhaps the term "world leader" should no longer be used so lightly. The president of the leading global power has made it clear that he has no interest in getting involved in resolving any of the world's shared problems. Unfortunately, he is not alone.



For those of us who put our faith in international cooperation as a necessary complement to economic globalization, the General Assembly debate revealed a bleak panorama. Certain leaders' short-term interests, often presented as "national interests," are one of the factors roiling international relations more than any time since the end of the Cold War. But the rise of nationalist populism is less the cause than the result of rifts that have been forming for some time.

As with any economic process, globalization has a distributive dimension, which means that it is bound to generate frustration for some groups of people. The center of the Western political spectrum has tended to underestimate the impact of rising inequality within countries, focusing instead on the benefits of market opening and integration, such as the unprecedentedly rapid reduction in global poverty. Understandably, however, not everyone is consoled by such outcomes.

It is not only goods, services, and capital that circulate through the global economy. Ideas circulate, too. So globalization, like democracy, is vulnerable to itself, because it puts at its opponents' disposal a set of tools that they can use to sabotage it. Aware of this, the "nationalist international" driven by US President Donald Trump and his ideological fellow travelers has mobilized anxiety and alienation to launch a (somewhat paradoxical) crusade to globalize their particular anti-globalization discourse.

Addressing the UN General Assembly, Trump stated openly that, "We reject the ideology of globalism, and we embrace the doctrine of patriotism." He lavished praise on other states, such as Poland, that follow his example. Should Brazilians elect the far-right presidential candidate Jair Bolsonaro, they will join the wave of national populism threatening to raze the world's multilateral institutions.

Yet globalism and patriotism are not incompatible concepts. Trump's invocation of patriotism has no aim other than to whitewash his nationalist and nativist tendencies. Rhetorical traps of this type can catch us with our guard down, above all when the person who resorts to them is a leader who is known for serving his ideas raw. But it is evident that the Trump administration, too, worries about keeping up appearances.

There are many other examples. At the UN, Trump sought to give his foreign policy a patina of coherence by calling it "principled realism." In international relations, realism is a theory that regards states as the central actors and units of analysis, relegating international institutions and law to an ancillary status. Principles such as human rights are usually set aside, though countries may deploy them selectively to advance their interests.

This is precisely what Trump does when he criticizes the repression of the Iranian regime, while failing to denounce similar practices in other countries. But no self-respecting realist would exaggerate the threat posed by Iran, or allow a flurry of compliments from Kim Jong-un to cloud their vision regarding North Korea.

"America will always choose independence and cooperation over global governance, control, and domination," Trump told the UN. In theory, cooperation is not incompatible with the realist paradigm. For example, realists could conceive of the US trying to offset China's geopolitical rise by bolstering its alliances in the Asia-Pacific region, especially with Japan and South Korea.

But the Trump administration has called into question the security umbrella that it provides for these countries, not even exempting them from its protectionist trade measures (although the recent update of the bilateral agreement with South Korea seems to have calmed the waters). This disconcerting behavior has extended to other traditional US allies, such as the European Union, revealing that Trump is extraordinarily reluctant to cooperate. When he does, he seldom favors the alliances that most fit his country's strategic interests.

Regarding China, US diplomacy openly uses the term "competition," despite the friendly relations that Trump claims to maintain with Xi Jinping. The ongoing trade (and technology) war between the two countries, along with the bouts of friction in the South China Sea, seem to presage an uncontrollable spiral of confrontation.

Nonetheless, this scenario (which the realist school might foresee) can be avoided, especially if we shore up the existing structures of multilateral governance, which can help us to manage shifts in the balance of power. It is clear that China does not always adhere to international norms, but the right response is to uphold these norms, not to bulldoze them. Unfortunately, the US is opting for the latter course in many areas, such as commercial relations.

In his General Assembly speech, China's foreign minister, Wang Yi, did not stress the realpolitik that his country often promotes; instead, he mentioned the concept of "win-win" no less than five times. If Trump – together with the rest of the nationalist international – continues to reject this notion of mutual benefits, he will likely manage to slow down not only China's growth, but also that of the US.

Even more alarming, spurning multilateral cooperation means dooming the world to resignation in the face of existential issues such as climate change, a negligent stance that the Trump administration has adopted with relish. America's abdication of leadership under Trump raises an obvious question: What good is it to be the world's dominant power if, in the face of the greatest global challenges, its government chooses to condemn itself to powerlessness?


Javier Solana

Writing for PS since 2004 
97 Commentaries

Javier Solana was EU High Representative for Foreign and Security Policy, Secretary-General of NATO, and Foreign Minister of Spain. He is currently President of the ESADE Center for Global Economy and Geopolitics, Distinguished Fellow at the Brookings Institution, and a member of the World Economic Forum's Global Agenda Council on Europe.


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Notes on Global Convergence (Wonkish and Off-Point) [feedly]

Notes on Global Convergence (Wonkish and Off-Point)
https://www.nytimes.com/2018/10/20/opinion/notes-on-global-convergence-wonkish-and-off-point.html


Figure 1CreditCreditConference Board, Total Economy Database

For readers obsessed with the Trumpification of America and the looming election, I'm with you – I try not to check FiveThirtyEight more than five times a day, but it's hard. If you can't bear to think about anything else, don't read this; rest assured that this blog post isn't coming at the expense of writing about the core issue of the moment, it's a rest break, a bit of vacation in the head.

OK, that said, I read two things in the past few days that had me thinking about the biggest economic story there is: the dramatic rise of some formerly very poor nations, and the concomitant shift of the world's economic center of gravity away from the West.

One was a new paper by Patel, Sandefur, and Subramanianpointing out that overall global convergence in per capita GDP, which used to be largely absent in the data, has become very pronounced since 1990, with really fast growth in middle-income economies. The other was a tweet by my CUNY Stone Center colleague Branko Milanovic, pointing out that convergence among Western economies seems to have stalled.

I'd argue that these observations are really part of the same story. Let me start with Branko's observation.  

The way I'd make sense of this observation is to argue that the West has already converged, in terms of technology and productivity. The remaining differences in GDP per capita mainly reflect different social choices over things like vacation time and retirement age, and there's no reason to expect those differences to go away.

I won't do a full statistical analysis, but let me give the example of France versus the US. Figure 1 shows French productivity – real GDP per hour worked – relative to the US, and relative real GDP per capita. What you see is that French productivity has matched that of the US for many years (it was actually higher for a while, although that was probably a composition effect reflecting an older work force.) French real GDP per capita has, however, slid relative to US levels. Why?

Image
Figure 1CreditConference Board, Total Economy Database

Partly it's fewer people working – not prime-age adults, who are more likely to be employed in France, but mainly pre-seniors, 55-65, encouraged to retire by more generous pension policies. Even more important, the French take vacations; we don't (and often aren't allowed to.) 

So these are just different choices. And while France does need more pension reform (it has done some already), it's far from clear that overall French choices are worse. On many quality of life indicators, like life expectancy (Figure 2), America has fallen behind.

Image
Figure 2CreditOECD

The end of Western convergence, then, isn't an indicator of some kind of failure. Meanwhile, the coming of rapid convergence by emerging markets is a huge success story.

When I was in grad school in the 1970s, I thought I should do development economics – because it was clearly the most important subject – but didn't, because it was too depressing. At that point it was mostly non-development economics, the study of why Third World countries seemed to fall ever further behind the West. True, we were already seeing a growth takeoff in smaller East Asian economies, but few saw this as a trend that would spread to China and India.

Then something happened; we still don't know exactly what. It's a good guess that it has something to do with hyperglobalization, the unprecedented surge in world trade made possible by breaking up value chains and moving pieces of production to lower-wage countries. But we don't really know even that.

One thing is clear: at any given time, not all countries have that mysterious "it" that lets them make effective use of the backlog of advanced technology developed since the Industrial Revolution. Over time, however, the set of countries that have It seems to be widening.

Once a country acquires It, growth can be rapid, precisely because best practice is so far ahead of where the country starts. And because the frontier keeps moving out, countries that get It keep growing faster. Japan's postwar growth was vastly faster than that of the countries catching up to Britain in the late 19th century; Korea's growth from the mid-60s even faster than Japan's had been; China's growth faster still.

The It theory also, I'd argue, explains the U-shaped relationship Subramanian et al find between GDP per capita and growth, in which middle-income countries grow faster than either poor or rich countries. Countries that are still very poor are countries that haven't got It; countries that are already rich are already at the technological frontier, limiting the space for rapid growth. In between are countries that acquired It not too long ago, which has vaulted them into middle-income status, but are able to grow very fast by moving toward the frontier.   

The result is a world in which inequality among countries is declining if you look from the middle upward, but rising if you look from the middle down. Fundamentally, however, it's a story of diminishing Western exceptionalism, as the club of countries that can take full advantage of modern technology expands.

Oh, and rising inequality within Western countries means that if you look at the global distribution of household incomes, you get Branko's elephant chart.

It's not entirely a happy story. That concentration of income and wealth at the top is worrisome, not just economically, but for its political and social implications; it's one reason US democracy is teetering on the edge. And there are still hundreds of millions of people left out. But there's also a lot of good news in the picture.

I now return you to our regular political anxiety.


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Friday, October 19, 2018

Krugman: The Trump Tax Scam, Phase II [feedly]

The Trump Tax Scam, Phase II
https://www.nytimes.com/2018/10/18/opinion/taxes-medicare-social-security-midterms.html

When the Trump tax cut was on the verge of being enacted, I called it "the biggest tax scam in history," and made a prediction: deficits would soar, and when they did, Republicans would once again pretend to care about debt and demand cuts in Medicare, Medicaid and Social Security.

Sure enough, the deficit is soaring. And this week Mitch McConnell, the Senate majority leader, after declaring the surge in red ink "very disturbing," called for, you guessed it, cuts in "Medicare, Social Security and Medicaid." He also suggested that Republicans might repeal the Affordable Care Act — taking away health care from tens of millions — if they do well in the midterm elections.

Any political analyst who didn't see this coming should find a different profession. After all, "starve the beast" — cut taxes on the rich, then use the resulting deficits as an excuse to hack away at the safety net — has been G.O.P. strategy for decades.

Oh, and anyone asking why Republicans believed claims that the tax cut would pay for itself is being naïve. Whatever they may have said, they never actually believed that the tax cut would be deficit-neutral; they pushed for a tax cut because it was what wealthy donors wanted, and because their posturing as deficit hawks was always fraudulent. They didn't really buy into economic nonsense; it would be more accurate to say that economic nonsense bought them.



That said, even I have been surprised by a couple of things about the G.O.P.'s budget bait-and-switch. One is the timing: I would have expected McConnell to hold his tongue until after the midterms. The other is the lying: I knew Donald Trump and his allies would be dishonest, but I didn't expect the lies to be as baldfaced as they are.

What are they lying about? For starters, about the causes of a sharply higher deficit, which they claim is the result of higher spending, not lost revenue. Mick Mulvaney, Trump's budget director, even tried to claim that the deficit is up because of the costs of hurricane relief.

The flimsy justification for such claims is that in dollar terms, federal revenue over the past year is slightly up from the previous year, while spending is about 3 percent higher.

But that's a junk argument, and everyone knows it. Both revenue and spending normally grow every year thanks to inflation, population growth and other factors. Revenue during Barack Obama's second term grew more than 7 percent a year. The sources of the deficit surge are measured by how much we've deviated from that normal growth, and the answer is that it's all about the tax cut.

Dishonesty about the sources of the deficit is, however, more or less a standard Republican tactic. What's new is the double talk that pervades G.O.P. positioning on the budget and, to be fair, just about every major policy issue.      

 

What do I mean by double talk? Well, consider the fact that even as McConnell blames "entitlements" (that is, Medicare and Social Security) for deficits, and declares (falsely) that Medicare in particular is "unsustainable," Paul Ryan's super PAC has been running ads accusing Democrats of wanting to cut Medicare. The cynicism is breathtaking.

But then, it's no more cynical than the behavior of Republicans like Dean Heller, Josh Hawley and even Ted Cruz who voted to repeal the Affordable Care Act, which protects Americans with pre-existing medical conditions, or supported a lawsuit trying to strip that protection out of the act, and are now running on the claim that they want to … protect people with pre-existing conditions.

The point is that we're now in a political campaign where one side's claimed position on every major policy issue is the opposite of its true position. Republicans have concluded that they can't win an argument on the issues, but rather than changing their policies, they're squirting out clouds of ink and hoping voters won't figure out where they really stand.

Why do they think they can get away with this? The main answer is obviously contempt for their own supporters, many of whom get their news from Fox and other propaganda outlets that slavishly follow the party line. And even in appeals to those supporters who rely on other sources, Republicans believe that they can neutralize the deep unpopularity of their actual policies by misrepresenting their positions, and win by playing to racism and fear.

But let's be clear: G.O.P. cynicism also involves a lot of contempt for the mainstream news media. Historically, media organizations have been remarkably unwilling to call out lies; the urge to play it safe with he-said-she-said reporting has very much worked to Republicans' advantage, given the reality that the modern G.O.P. lies a lot more than Democrats do. Even the most blatant falsehood tends to be reported with headlines about how "Democrats say" it's false, not that it's actually false.

Anyway, at this point Republicans are proclaiming that war is peace, freedom is slavery, ignorance is strength and the party that keeps trying to kill Medicare is actually the program's greatest defender.

Can a campaign this dishonest actually win? We'll find out in less than three weeks.

Follow The New York Times Opinion section on Facebook and Twitter (@NYTopinion), and sign up for the Opinion Today newsletter.

Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @PaulKrugman -- via my feedly newsfeed

Brad DeLong: Why Is Donald Trump Waging a Trade War? DeLong FAQ [feedly]


Brad DeLong, former asst secy of the Treasury under Larry Summers and Clinton, asks a very important question.


Why Is Donald Trump Waging a Trade War? DeLong FAQ
https://www.bradford-delong.com/2018/10/why-is-donald-trump-waging-a-trade-war-delong-faq.html

DeLong FAQ: Why Is Donald Trump Waging a Trade War? You ask: who are the people who would want to see this U.S.-China trade war happen? We have been unable to find any. Usually pressure to wage a trade war bubbles up from powerful economic groups that are or that believe they are being gravely injured by imports. Usually there are large advertisements in the New York Times and the Washington Post saying that it is time for the country to get behind the president, who is trying to keep other countries from taking unfair advantage of Americans.

We have not had any of that this time. There has been no mobilization of economic interests that favor a trade war.

In large part, there has been no mobilization because the costs of trade war are high relative to benefits. The economies are deeply intertwined at the industrial and sub-industrial level because it has become so cheap and so profitable to send plans and goods across the Pacific, and huge numbers of people have taken advantage of it.

There are people who will cheer a trade war. With them, however, they are cheering not because they see it as making America or their part of America richer happens. It is, instead, much more cheering the local sports team of your municipality when it wins a victory—they have won something, and so you cheer for them. However, what it would mean or what it would take for Trump to "win" this trade war is unclear.

Viewed as an economic policy I think, as I have said before, that the only people who seem to believe in this trade war are Donald Trump, Peter Navarro, and Trade Representative Robert Lighthizer—and I have a hard time believing that Lighthizer believes what he finds himself saying.

Certainly the Republicans in Congress have major, major disagreements with the policy. They have been quiet. I believe they have been quiet because they accept the principal that to make the president of your party look weak or stupid is to put your side's majority and possibly your seat at risk. That is not how it is is supposed to work. Political scientists have a lot to think about in terms of the foundations of their understanding of the American government.

I hope that after this November Republicans in Congress will decide that their electoral future requires that they be much more representatives of the people than cheerleaders for Trump, and that we will see a 25th Amendment remedy. I do not expect this hope to be realized. I think the chances are pretty good that we will have an informal, silent coup—like when Howard Baker became effective acting president during the second Reagan administration. But I will probably be wrong.

This is not a situation I ever expected the United States to be in.

It is now more than two years since then-IMF Deputy Managing Director Min Zhu asked me what we people in the United States are going to do to fix our broken political system. I had no good answer to him then. I have no good answer for him now.

#globalization  #orangehairedbaboons  #delongfaq

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Law and Economics [feedly]

Nice when science confirms the class aspects of the US legal system


Law and Economics
http://crookedtimber.org/2018/10/18/law-and-economics/

I've been waiting for this paper to drop, ever since Suresh told me about it last year. It's groundbreaking. What it does is to take Steve Teles' qualitative work on the conservative legal movement, and then ask a simple question: if we start with the qualitative evidence about the program's intentions, then FOIA the hell out of George Mason University to find out which judges attended the Manne seminars, and then apply cutting edge econometrics and natural language processing to their decisions, what are we going to find out?

Some selected quotes (as well as one quote that isn't in the current version, but will likely be in the next) under the fold, for those who are interested in the headline findings.

we find that, post Manne attendance, judges render conservative verdicts in economics-relevant cases. Further, using the 100% sample of machine-coded circuit cases, we find that Manne attendees subsequently are more likely to rule against regulatory agencies, for example the EPA and NLRB. Next we look at criminal sentencing in the district courts. We find that Manne attendance is associated with harsher prison sentences imposed. We show that the difference in sentencing harshness between Manne and non-Manne judges is highest after the 2005 Booker decision gave more discretion to judges in sentencing.

We find that Manne attendance is associated with disparate sentencing. The results are consistent with judges learning a theories of simple deterrence and the use of stereotypes as being economically efficient … –that discrimination in prices and in punishment can be analyzed in terms of economic efficiency (documented in the Manne program archives). … Exploiting random panel composition, we document extensive spillovers consistent with both peer and learning effects. Having an economics trained judge on the authoring judge's previous panel impacts the decision. There is no effect in a set of placebo cases … There are spillovers on rulings against regulatory agencies.


Law and economics' key criticism of regulatory policies is that they have perverse, unintended economic consequences. In the domain of labor regulation, law and economics scholars (and judges) wrote extensively against New Deal labor law and union protections …. In EPA regulation, almost all environmental regulations can be construed as a form of government expropriation that limits how property owners can develop their property. Reliance on economic analysis in antitrust has attained nearly complete consensus.

By the 1960s, the Supreme Court had read into previous statutes a variety of anti-competitive social and political goals, such as protecting small traders from their larger and more efficient rivals as well as curbing inequality in the distribution of income and undue influence of large business. The law-and-economics movement advanced the initially controversial view that the antitrust laws should promote economic efficiency and consumer welfare, rather than shield individuals from competitive market forces or redistribute income across groups of consumers. In the recent time period, judges who attended law-and-economics training were less likely to have their antitrust decisions appealed (Baye and Wright 2011).

A more controversial branch of law and economics is the use of incentives reasoning in criminal law. In Becker's (1968) analysis of crime and punishment, the notion of "rational criminals" works against the then-prevailing wisdom of crime as a product of mental illness. This change in perspective motivates deterrence (more police, more punishment) rather than rehabilitation (more social services and mental health treatment) as the preferred focus of crime policy.



The influence of economics on legal thought is, in part, due to a controversial economics training program for sitting judges, the Economics Institute for Federal Judges. … The course was founded and organized by Henry Manne, an influential conservative in the early law and economics movement. The institute was the the flagship program of the Law and Economics Center, the first academic research center devoted to law and economics. It was funded mainly by donations from conservative foundations and business interests. …By 1990, forty percent of federal judges had attended this program. … at least in principle, the program was billed as a non-partisan tool to help judges understand their decisions

In terms of the main lessons, the program strove for ideological balance. Both conservative and liberal economic thinkers were invited. Empirical panels could include both Orley Ashenfelter and John Lott, for example. … The instruction may have been more emphatically delivered by the conservative instructors. Manne himself (who taught part of the course) articulated the view that insider trading was economically efficient. Another instructor, Professor Goetz, defended "'Unequal' Punishment for 'Equal' Crime," arguing that discrimination in punishment can be economically efficient.

In more recent years, the annual reports include instructors with known conservative stances on immigration (George Borjas), crime (James Q. Wilson), and family law (Jennifer Roback Morse, founder of the anti-LGBT Ruth Institute). … In a Fortune magazine article (May 21, 1979), instructors quotes indicate how normative the economics instructors intended to be. Alchian said, "I'm trying to change your view of the world, to show you that what you thought was bad really may not be." On damages and deterrence, Demsetz said motivated increase in sanctions as, "[an agent is] not likely to be caught, [so] the threat of simple damages may not be a tough enough deterrent" and the moral hazard associated with damages: "The plaintiffs may wait a long time before they complain, because they want damages to pile up."

On environmental law, Alchian stated, "Give me a capsule that will magically clean all the air in Los Angeles … Beg me to crush it. … I won't crush the capsule. Because, if I do, poor blacks will have to pay $20 a month more for land rental. … the black in Watts, already used to living with bad air, loses his discount for doing that." On equal opportunity and discrimination, Feldstein said, "you should be asking questions like, `Is it more likely to be this than that ?' ", but no empirical skepticism towards antitrust theory was articulated.



The program has a recognized conservative bias, yet the attending judges are effusive in their praise regardless of ideological standpoint. What is the impact on observed judge decisions? …We focus on two agencies the Law and Economics movement specifically criticized: the National Labor Relations Board and the Environmental Protection Agency. .. Manne judges exhibit a sharp and sudden increase in propensity to vote against federal labor and environmental regulatory agencies. … The differences-in-differences analysis … renders a consistent picture that Manne judges become more conservative after the training relative to their colleagues. …

this indicates the Manne program accounts for 28-42% of the rise in judicial conservatism. If peers and precedent also impact the non-Manne judges, then the true Manne impact may … explain an even larger portion of the historical shift. … Judges increase sentence lengths by 7 percent and any sentence by 2 percentage points after Manne attendance. …United States v. Booker loosened the formerly mandatory U.S. Sentencing Guidelines and offers a policy experiment to analyze the effects of judicial discretion. … economics trained judges render more severe sentences in the fiscal years after Booker. …the racial disparity in sentencing between black and white defendants is larger for Manne-trained judges than their colleagues. In addition, the gender disparity in sentencing between make and female defendants is larger for Manne-trained judges than their colleagues. …

Manne attendance increases use of economics language for Manne judges across both economics and non-economics cases. … Judges who sit with economics-trained judges start to use more economics
language, consistent with a learning effect.

And not in the article – but highly relevant – is this quote from a reminiscence of Henry Manne's influence:

Finally, Manne paid very careful attention to the content of the conference and to the approaches and positions of the attendees. None of the many Manne conferences that I attended were ideological directly. There was no clear or, to my mind, subterranean agenda. Nevertheless, while Manne, both in terms of content and attendees, provided for balance, he did not provide for too much balance. As befits a clever market-maker, Manne's balance was ingenious. Commonly, extremely prominent liberal economists would attend—such as Paul Samuelson or Ken Arrow. Though both are irrepressible, their positions were often cabined by topics far from familiar to them. Similarly, Manne would typically invite liberal economists to teach at his Judges' programs. His faculties uniformly showed political and ideological balance. But again, Manne was in charge of the curriculum. A liberal economist teaching supply and demand is hardly dangerous. A liberal economist becomes dangerous when addressing how to improve the world with unlimited spending of other citizens' tax monies. That, Henry Manne would never allow.

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Top 1.0 percent reaches highest wages ever—up 157 percent since 1979 [feedly]

Top 1.0 percent reaches highest wages ever—up 157 percent since 1979
https://www.epi.org/blog/top-1-0-percent-reaches-highest-wages-ever-up-157-percent-since-1979/

Newly available wage data for 2017 show that annual wages grew far faster for the top 1.0 percent (3.7 percent) than for the bottom 90 percent (up only 1.0 percent). The top 0.1 percent saw the fastest growth, up 8.0 percent—far faster than any other wage group. This fast wage growth for the top 0.1 percent reflects the sharp 17.6 percent spike upwards in the compensation of the CEOs of large firms: executives comprise the largest group in both the top 1.0 and top 0.1 percent of earners. The fast wage growth of the top 1.0 percent in 2017 brought their wages to the highest level ever, $719,000, topping the wage levels reached before the Great Recession of $716,000 in 2007. The wages of the top 0.1 percent reached $2,757,000 in 2017, the second highest level ever, roughly only 4 percent below their wages in 2007.

These are the results of EPI's updated series on wages by earning group, which is developed from published Social Security Administration data. These data, unlike the usual source of our wage analyses (the Current Population Survey) allow us to estimate wage trends for the top 1.0 and top 0.1 percent of earners, as well as those for the bottom 90 percent and other categories among the top 10 percent of earners. These data are not topcoded, meaning the underlying earnings reported are actual earnings and not "capped" for confidentiality.

Figure A

As Figure A shows, the top 1.0 percent of earners now earn by 157.3 percent more than they did in 1979. Even more impressive is that those in the top 0.1 percent had more than double that wage growth, up 343.2 percent since 1979 (Table 1). In contrast, wages for the bottom 90 percent only grew 22.2 percent in that time. Since the Great Recession, the bottom 90 percent enjoyed very modest wage growth, with annual wages (i.e., reflecting growing annual hours as well as higher hourly wages) up just 5.4 percent over the eight years from 2009 to 2017. In contrast, the wages of the top 0.1 percent grew 29.8 percent from 2009 to 2017 (Table 1).

Wages fell furthest among the top 0.1 and 1.0 percent of earners during the financial crisis and, as noted above, the top 0.1 percent have not yet recovered their prior earnings (though they now have just had their second best year ever).

Table 1

These disparities in wage growth reflect a major change in the distribution of wages since 1979. The bottom 90 percent earned 69.8 percent of all earnings in 1979 but just 60.9 percent in 2017. In contrast the top 1.0 percent increased its share of earnings from 7.3 percent in 1979 to 13.4 percent in 2017, a near doubling. The growth of wages for the top 0.1 percent is the major dynamic driving the top 1.0 percent earnings as the top 0.1 percent more than tripled its earnings share from 1.6 percent in 1979 to 5.2 percent in 2017.

Table 2
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Thursday, October 18, 2018

Enlighten Radio:The "No Name Yet" Labor Beat Radio Show Returns

John Case has sent you a link to a blog:



Blog: Enlighten Radio
Post: The "No Name Yet" Labor Beat Radio Show Returns
Link: http://www.enlightenradio.org/2018/10/the-no-name-yet-labor-beat-radio-show.html

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While China fuels Asian integration, Japan longs for US role [feedly]

More signs that Asian strategic realignments are moving rapidly -- although the endgames are difficult to discern.



While China fuels Asian integration, Japan longs for US role
http://www.atimes.com/article/while-china-fuels-asian-integration-japan-longs-for-us-role/

ast week, it was reported that China is once again exploring the possibility of joining an Asia-Pacific trade pact once lead by the United States.

But experts see no realistic path for China to join what is now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – often referred to as TPP-11 following the US withdrawal – several core principles of which are at odds with key Chinese policies.

Meanwhile, some still have a cautious expectation that the US will eventually rejoin the trade regime, which is now spearheaded by Tokyo in Washington's absence. One option is that a future US administration could sign on after Trump has left office, but Japan is also exploring possibilities for the near-term.

"The Trump administration cannot jump into the TPP," Yasu Ota, who has covered trade for Japan's Nikkei Shimbun for more than 30 years, told Asia Times. But, he added, "something different but with the same function [as the TPP] could be possible."

Japanese officials, Ota said, have been discussing the possibility of creating a framework similar to the TPP, but more palatable from a domestic US political perspective.

When China first announced the Belt and Road Initiative in 2013, several months after Japan joined US-led negotiations for the TPP, it was widely seen as a response to the Obama administration's "pivot to Asia."

At the time, the TPP was the lynchpin of the US policy shift but has since been cast aside by the Trump administration, while the BRI continues in fits and starts in a quest to transform trade routes with infrastructure investment, expanding China's economic influence in the process.

The news that officials in Beijing are currently looking into the possibility of joining the TPP-11 is not earth-shattering considering they have expressed interest in the past. But it does suggest that the Trump administration's trade war, and the recently renegotiated North American Free Trade Agreement, have prompted a renewed sense of urgency in Beijing to avoid being left out of new trade deals.

"Yes, broadly the trade war is part of the story," Wang Yong, a professor at Peking University's School of International Studies told Asia Times. "It gives more incentive for China to think once again about the [TPP-11]," he added, in the context of the Trump administration's successful conclusion of a deal with Canada and Mexico.

The new Nafta, which has been dubbed the US-Mexico-Canada Agreement, was in some ways a step in the direction of the TPP for the Trump administration. It not only includes rules similar to many of the TPP-11's key provisions but also included an article directed at China, which grants the US freedom to renege on the deal if any party to the USMCA enters into a trade agreement with a "non-market economy."

Both the USMCA and the TPP-11 include articles dealing with the digital economy that require freedom of cross-border transfer of information and prohibit member countries from requiring the localization of data or the handing over of source code. All three of those rules are directly contradicted by China's domestic internet security laws.

But Wang of Peking University disagrees with the insistence among many in Washington that the BRI and TPP-11 are competing platforms for expanding influence. "I think we can work together. The two are complementary," he suggested.

Wang's comments echoed the official line from Beijing that downplays the role of competition in these trade-related initiatives, stressing that they are mutually beneficial. He also added that trade pacts like the TPP-11, and even the Trump administration's tariffs, help encourage China to reform.

At an event hosted by Washington DC-based think tank Center for Strategic and International Studies this week, attended by both Wang and Ota, there was a disagreement among panelists as to which initiative – the TPP-11 or the BRI – had more wind in its sails.

"Once [TPP-11] launches there will be a lot of countries on the outside looking at the investment that's going to be flowing into countries like Vietnam and Malaysia, if Malaysia ratifies," said Amy Searight, CSIS's resident Southeast Asia expert, contending that there was more momentum behind the Japan-led trade pact than there was behind the BRI.

Searight, who expects the TPP-11 to be officially launched next year, added that "countries in Southeast Asia are going to be looking jealously at their neighbors, which is why [Indonesian] President Jokowi keeps telling his cabinet that he wants them to look seriously at joining."

But other panelists saw the situation in a dramatically different light.

"The great momentum [for] business at the moment is [behind] the BRI because of the infrastructure projects," said former Thai commerce minister Apiradi Tantraporn.

"We have the third international airport underway, we have the high-speed train, and a web of highways to support this project," she said, stressing that "this Belt and Road Initiative is something that will support the economic integration in Asean"

"[The BRI] will have the short-term impact on the economies of the region," according to Tantraporn.

For the long-term, whether the United States wants to be involved in writing trade rules remains in question. What is not in question is that, while China injects investment into trade-related projects, Japan is hoping the US will come back into the fold.


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Wednesday, October 17, 2018

Will Trump’s Policies Wreak Havoc on the US and Global Economies? An Interview with Gerald Epstein [feedly]


Will Trump's Policies Wreak Havoc on the US and Global Economies? An Interview with Gerald Epstein
https://www.globalpolicyjournal.com/blog/17/10/2018/will-trumps-policies-wreak-havoc-us-and-global-economies-interview-gerald-epstein

With the midterm elections rapidly approaching, many Americans will start thinking more and more about the economy before they decide how to cast their votes. In this context, Trump's claim that the US economy under his administration is the "greatest in history" needs to be thoroughly and critically examined in order to separate facts from myths. How much of the ongoing "recovery" is being felt by average American workers? And what about Trump's escalating trade war with China, which is already beginning to impact American consumers and various US manufacturers, while making European firms nervous? In this exclusive interview, Gerald Epstein, professor of economics and co-director of the Political Economy Research Institute at the University of Massachusetts at Amherst, clears the air on several myths and misconceptions about the developments that Trump has tried to frame as an "economic miracle."

C.J. Polychroniou: Trump likes to boast about an economic revival of historic proportions under his administration, which includes a strong labor market, a robust stock market, and a 4 percent GDP rate. What are the facts and myths about Trump's alleged economic miracle? Give us the full story.

Gerald Epstein: Trump is a gross exaggerator who loves to construct stories. When it comes to his claims about an economic miracle under way during his administration, I think my friend and colleague John Miller in the economics department at Wheaton College put it best in a September 30 presentation at the University of Massachusetts Amherst: "Compared to the standard of U.S. economic performance since 1948, we have been living through an economic expansion that has been historically long, historically slow, and that has done historically little to improve the lot of most people."

It is safe to say, as Miller and many other economists show, slashing corporate taxes has not generated an investment boom or a stock market boom. Data show that during the second quarter of 2018, housing investment continued to go down, and spending on new equipment, the largest component of investment, grew only half as quickly as it had at the end of 2017, prior to the tax cut. As the data discussed by Josh Bivens of the Economic Policy Institute show, business investment in structures such as office buildings and factories did increase far more quickly than before the tax cut, but most of that went into oil and gas drilling which resulted from higher world energy prices.

As Bill Lazonick, an economist at the University of Massachusetts Lowell has pointed out, slashing corporate taxes has created a torrent of stock buybacks that is on track to reach $800 billion by year's end.

What's the explanation for S&P 500 and Dow setting all-time records under Trump, and what impact do stock market trends have on the life and well-being of average Americans?

It is true that the stock market has increased since Trump was elected, but it has been on an upswing since the recession bottomed out in 2009. In fact, stock prices (the S&P 500 adjusted for inflation) increased just 2.1 percent from Jan. 1 to Sept. 1, 2018 — far slower than earlier in the expansion, and the near double-digit increase during the 1990s expansion.

Only in the third week of September did the S&P 500 Stock Index and the Dow Jones Index finally top their January 2018 highs.

Still, it is clear that since Trump was elected, financial investors have been quite happy and optimistic. The Republican agenda of tax cuts and deregulation have significantly increased corporate profits and the expectations of further corporate profits, and these drive up stock prices.

But most stocks are owned by the very wealthy. According to Edward Wolff, the richest 10 percent of the population own close to 90 percent of all stocks. So when the stock market goes up in value, it is the already very rich that mostly benefit.

Now some of this could trickle down as investment and jobs but this appears to be rather limited. As I mentioned earlier, we are not seeing much of an increase in investment in factories and equipment as a result of the tax cuts and corresponding increase in the value of the stock market. It is true that when the stock market goes up substantially it can increase the consumption of those that own stocks and some of that can trickle down when increases in consumer demand boost the economy. But here the question is the size of the impact — which is modest at best — and the impact on wages.

Up until now, this increase in consumption and decline in unemployment has not led to much in the way of increased wages, when the uptick in inflation is taken into account. People's paychecks might be a bit bigger but so is the cost of living. So, the economy seems to still be largely stuck in a period of stagnant inflation-adjusted wages, which has been plaguing us for more than 40 years. The Trump economy has yet to break free of that swamp.

The reasons for this seem myriad: a major one is the reduced bargaining power of workers due to a 40-year political assault on unions and workers' bargaining rights. A second is related to appearance of other global trade powers like China on the scene and the response of American capitalists and politicians to that crucial structural shift.

Trump has made the reduction of the trade deficit one of his central goals, which partly explains his gambles with trade wars, tariffs and protectionism and his so-called "America First" policies. Yet, the US trade deficit, ironically enough, has widened considerably (especially with China) under the Trump administration. Is the increase in the trade deficit a direct result of the trade war?

No. The increase in the trade deficit is mostly due to the fact the US economy has been continuing to grow and recently picked up speed. Any growing economy will increase imports; if exports are not leading the growth — which they are not in the US and haven't been for several decades — then the trade deficit is almost certain to grow. But what it does show is that Trump's trade policy has not reversed the secular dependence of the US on trade deficits, which has been increasing in the last 40 years or so.

Just recently, numerous US manufacturing companies testified how Trump's trade wars and tariff policies will increase both the cost of production and the cost of imports, cause layoffs and devastate lives, while failing to improve competition or spur additional growth. Given all this, what's the real purpose behind the trade war with China, and will tariffs boomerang on workers in the US and the global economy?

Trump believes that he can win political support from his base by bashing foreigners and "others" — be they Mexican and South American citizens, Muslims, African Americans and women, even if his policies hurt his base in economic terms. He is specializing in a type of [white nationalist] "identity politics" and is very good at manipulating people. For the rich, he delivers the goods…. He believes he can get away with this even if he hurts his base economically. He believes he can put lipstick on trade deal pigs and his base will buy it. Perhaps he is right. We will see.

So, yes: the trade war he has started might sound good to his base, but is likely to hurt many of them, as Canada, Europe and China are smart when they retaliate, knowing fully well that they will harm his base.

So part of his goal is to fire up his base by being tough on the foreigners. But the fight with China is much more than that. Trump has decided that the US is in a power struggle with China for global dominance. He is not the first US capitalist politician to believe that. US strategists have talked about making a pivot to China for more than a decade now. Trump has decided to lurch toward China.

His trade deals, such as the new NAFTA, contain sections which require that Canada and Mexico notify the US if they are going to make any trade deals with China; and there are various elements in them that attempt to discourage such deals with China. So this is all part of the attempt to create a new cold war with China.

Cold Wars are useful for capitalists. They can justify massive military expenditure; they can justify patriotism and squashing dissent; they can justify loyalty to the strong leader.

Another reason why Trump is pursuing these policies is that they can split the labor movement and the Democrats. When Steve Bannon was on his way out of the Trump administration, he contacted Robert Kuttner of the American Prospect and said he wanted to form a left/right coalition over trade. He and Trump have been partly successful in this. The United Steelworkers Union has supported his tariffs on steel. Much — but not all — of organized labor has offered tentative support for Trump's new NAFTA, even though there are very few positive features for labor in the agreement.

The new NAFTA also has a lot of very negative features, including the undermining of environmental regulations, the increase of patent protections, limitations on the ability to restrict pharmaceutical prices and other consumer-gouging provisions.

As a result, even labor unions and groups like Public Citizen have been reluctant to endorse it fully yet.

Do you have any predictions about how the story of Trump's trade war against China and his overall economic policies will end?

Overall, Trump's policies will prove to be extremely disruptive. The trading system will develop many cracks, the supply chains of trade will get mucked up, and the expansionary wave coming from the tax cuts will fade out with nothing left but deficits and bloated capitalists to show for it. But this will not necessarily mean political trouble for Trump and the Republicans. For that to happen, the Democrats and the left have to not only make clear what are all the problems in Trump's and the Republicans' economic charades, but have to promote their alternatives relentlessly, and in a unified fashion. The left has developed a strong set of policies that can address the ills facing the majority of US residents — single payer health care, raising the minimum wage, a Green New Deal, breaking up Wall Street banks and promoting financial alternatives, tax increases on the wealthy, real infrastructure investment, affordable and improved education, and a peace-oriented foreign policy. This is a winning agenda. If economists, policy makers and activists can continue to develop this program and promote it relentlessly, then when the Trump economy falls apart, it is the left that can win with a viable program that can truly work for the many.

 

 

C.J. Polychroniou is a political economist/political scientist who has taught and worked in universities and research centers in Europe and the United States. His main research interests are in European economic integration, globalization, the political economy of the United States and the deconstruction of neoliberalism's politico-economic project. He is a regular contributor to Truthout as well as a member of Truthout's Public Intellectual Project. He has published several books and his articles have appeared in a variety of journals, magazines, newspapers and popular news websites. Many of his publications have been translated into several foreign languages, including Croatian, French, Greek, Italian, Portuguese, Spanish and Turkish. He is the author of Optimism Over Despair: Noam Chomsky On Capitalism, Empire, and Social Change, an anthology of interviews with Chomsky originally published at Truthout and collected by Haymarket Books.

This wa reposted from TruthOut with permission.

Image credit: Matt Johnson via Flickr (CC BY 2.0)


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