Sunday, June 23, 2019

China And Market Socialism [feedly]

China And Market Socialism


Monday, June 17, 2019

Rémy Herrera
The "Chinese Model" and us Tony Andréani L'Harmattan, 208 pages, 21.50 euros.
In a book that goes off the beaten track, Tony Andréani analyses the current situation.

To those who claim that China has converted to capitalism, Tony Andréani replies in this book that Chinese successes are due to "a draft of market socialism". According to precise criteria defining such socialism (prevalence of collective choices, planning, etc.), he shows that China meets them. The term "draft" means that, for some of these criteria (e.g. social security or labour law), however, it has a long way to go. It would only be at a "primary phase of socialism", as the Chinese themselves call it - which is already much more than "left-wing Keynesianism". The author thus rejects the traditional expression of "state capitalism", in particular because state enterprises are not there to pay dividends to the state owner or to value its securities, are otherwise managed through meaningful management participation of their employees and occupy all key sectors of the economy by "serving as the armed arm of the state" for the achievement of its objectives.

He argues that in China the state controls capitalist oligopolies in many ways (control of capital, credit by large public banks, joint ventures, presence in the capital and board of directors of large private companies) and that it stimulates effective demand through public investment, which is the driving force behind each stimulus. Tony Andréani insists that state-owned enterprises are not focused on capitalist profitability. According to him, it is the low prices of the various inputs they provide to other companies in the domestic economy that make Chinese exports more successful commercially than low wages. Moreover, a significant part of the Chinese economy is not strictly speaking capitalist (number of small businesses, crafts, so-called "collective" economy) and cannot therefore practice capitalist prices. In addition, the Chinese government is trying to control the capital markets, particularly the financial markets, by continuing to favour (and regulate) the credit market and banking intermediation. Exciting and original developments are devoted to the political and social system in this courageous, relevant, informed and useful book.

Rémy Herrera Economist

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Tim Taylor: Is Hydrogen the Storage and Carrying Technology for Carbon-Free Energy? [feedly]

Is Hydrogen the Storage and Carrying Technology for Carbon-Free Energy?

Fossil fuels store energy until they are burned. Solar and wind power generate electricity, but don't store it. As a result, they are intermittent sources of electricity, requiring back-up generation capacity that is typically still supplied by fossil fuel. Could hydrogen become a way of storing energy from renewable power sources? The International Energy Agency, in a report on The Future of Hydrogen, describes what would be needed to make this happen (June 14, 2019, accessing report requires free registration). 

At present, hydrogen is mostly produced from fossil fuels, and used only in fairly narrow applications. The report notes: 
Hydrogen is almost entirely supplied from natural gas and coal today. Hydrogen is
already with us at industrial scale all around the world, but its production is responsible
for annual CO2 emissions equivalent to those of Indonesia and the United Kingdom
combined. Harnessing this existing scale on the way to a clean energy future requires
both the capture of CO2 from hydrogen production from fossil fuels and greater supplies
of hydrogen from clean electricity. ... Today, hydrogen is used mostly in oil refining and
for the production of fertilisers. For it to make a significant contribution to clean energy
transitions, it also needs to be adopted in sectors where it is almost completely absent at the moment, such as transport, buildings and power generation.
So making the shift to a more use of hydrogen will require a lot of change. The overall vision would be that some of the sources of renewable energy like solar, wind, and hydro could become hydrogen farms, separating hydrogen from water. Instead of building electrical power lines from these facilities, there would need to be a system for storing and transporting the hydrogen they produce, similar to all the ways that natural gas (and liquified natural gas) are transported today. There would need to be early adopters of hydrogen fuel cell vehicles, perhaps focusing first on organizations with fleets of vehicles like trucks or buses. Building would need to be designed or retrofitted to use hydrogen as a source for heating, cooling, and electricity.

These changes are substantial!  As the report notes, there have been a few previous moments when hydrogen was widely discussed as a method of storing and carrying energy: the 1970s, the 1990s, and the early 2000s. When oil prices declined after about 2011, government R&D spending on hydrogen also declined.
However, if technological progress can continue to drive down the costs of hydrogen, the potential benefits are also substantial, because hydrogen technology offers a way in which renewable power that now generates electricity could instead be used to address sectors of the economy where electricity has proven to have practical drawbacks. The report notes:
The increased focus on reducing [greenhouse gas] emissions to near zero by mid-century has brought into sharp relief the challenge of tackling hard-to-abate emissions sources. These emissions are in sectors and applications for which electricity is not currently the form of energy at the point of end use, and for which direct electricity-based solutions come with high costs or technical drawbacks. Four-fifths of total final energy demand by end users today is for carbon-containing fuels, not electricity. In addition, much of the raw material for chemicals and other products contains carbon today and generate CO2 emissions during their processing. Hard-to-abate emissions sources include aviation, shipping, iron and steel production, chemicals manufacture, high-temperature industrial heat, long-distance and long-haul road transport and, especially in dense urban environments or off-grid, heat for buildings. Rapid technological transformations in these sectors have made limited progress in the face of the costs of low-carbon options, their infrastructure needs, the challenges they pose to established supply chains, and ingrained habits. ... As a low-carbon chemical energy carrier, hydrogen is a leading option for reducing these hard-to-abate emissions because it can be stored, combusted and combined in chemical reactions in ways that  are similar to natural gas, oil and coal.

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The Economic Value of Household Production: 1965-2017 [feedly]

The Economic Value of Household Production: 1965-2017

Gross domestic product is not the total amount of output produced; instead, it is a a measure of what is bought and sold in markets. Pretty much every intro class in economics will point out to students that when I clean my own house, cook my own meals, look after my children, or or mow my lawn, that "household production" doesn't show up in GDP. But if I hire someone to do household production tasks, then that output gets counted as part of GDP.

For a number of situations where the limitations of GDP are obvious, the US Bureau of Economic Analysis publishes "satellite" accounts, where it calculates what a different and broader measure of economic output would look like. In this spirit, Danit Kanal and Joseph Ted Kornegay have written "Accounting for Household Production in the National Accounts: An Update, 1965–2017," in the June 2019 Survey of Current Business.

The overall approach is to look at data on time use in household production, estimate the cost of hiring that time in the market, and then add this output to the standard conventional measure of GDP. They write:
The largest impact when including household production in GDP stems from the inclusion of nonmarket services. Nonmarket services measure the value of time spent on home production tasks. ... To compute household production, we first aggregated household production hours across seven categories: housework, cooking, odd jobs, gardening, shopping, child care, and domestic travel. The value of nonmarket services is the product of the wage rate of general-purpose domestic workers and the number of hours worked. This method assumes a market-cost approach to valuing nonmarket household services. ... BEA's current GDP measure treats consumer purchases of durable goods as consumption. In contrast, this satellite account treats such purchases as investment and adds the services of consumer durables to personal consumption expenditures. 
Some interesting fact patterns emerge from thinking about economic output in this way:

When this calculation is carried out for 1965, the revised GDP with household production included is 37% higher than the conventional measure. For 2017, the revised GDP with household production included is 23% higher.

Thus, if you are someone who sometimes uses per capita GDP as a quick-and-dirty measure for social well-being (a sin of which I've been guilty now and again), taking household production into account shows that the US standard of living is higher than the conventional measurement.

Why does adding a value for household production have a smaller effect now than a half-century ago? "Household production has declined in significance over time as more women engage in market work." In particular, the number of hours spent in household production by nonemployed women has declined substantially.

The growth rate for total economic output is slower. Measured in nominal dollars, the growth rate of traditional GDP is 6.5% per year from 1965 to 2017, while the annual nominal growth rate of output falls to 6.3% per year with household production in included. In effect, the declining hours spent on household production mean that the relative size for this part of the economy is shrinking.

As usual with economic statistics, any one number is going to have serious limitations, and so looking at a variety of interrelated measures will provide a more in-depth picture. Here, the authors are just presenting fact patterns, not hypothesizing about underlying causes. But presumably there are a variety of changes behind these patterns, like fewer children in the average household, the spread of household technologies like the dishwasher and the microwave, and household which choose to purchase some services (meals eaten out, house-cleaning, yard work) rather than producing it themselves. 

For my blog posts on a couple of previous reports from the Survey of Current Business on this topic, see: 

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Wednesday, June 12, 2019

Crooked Timber (J. Quiggen): Can globalization be reversed?: Part II (migration) [feedly]

Can globalization be reversed?: Part II (migration)

In my previous post about globalization, I concluded that plausible policy shifts (essentially, the continuation and widespread adoption of Trump's current policies) could bring about a substantial reversal of one element of globalization – the complex global supply chains that now characterize the production of goods. In this post, I'm going to look at migration, which is now the most politically salient aspect of globalization, and argue that even draconian policies are unlikely to do more than slow the most important consequences of migration.

The UN DESA International Migration Report 2017 shows that

3.4% of the world's inhabitants today are international migrants. This reflects a modest increase from a value of 2.8% in 2000. By contrast, the number of migrants as a fraction of the population residing in high-income countries rose from 9.6% in 2000 to 14% in 2017.

The focus on migrant stocks illustrates one of the crucial distinctions between migration and trade. Trade is a matter of flows, but the primary issues in migration relate to stocks, that is, cumulative flows. So, even if migration flows are slowed, the stock of migrants will continue to grow. That growth is limited by mortality, but that in turn is offset by the fact that the children of migrants will resemble their parents in many (not all) of the characteristics that have created political tension.

A second point, that needs to be treated with care is that immigration is primarily an issue for high-income countries. That's partly because net migration flows from poor to rich countries, as would be expected. But it's also because there's a lot of migration between high-income countries. The US, UK and Germany are all among the Twenty countries or areas of origin with the largest diaspora populations. If the numbers were expressed as a percentage of population rather than an aggregate, some other European countries might make the list.

The final factor that needs to be taken into account is that permanent migration represents only a tiny proportion of international travel. It's estimated that there are over a billion international arrivals a year, compared to annual migration flows in the tens of millions. That's a reversal of the 19th century pattern when migration to the "New World" was commonly a one-way trip, and when tourism barely existed. The underlying cause is that the cost of travel has declined rapidly, far more so than the cost of shipping goods.

Everyone who travels overseas is potentially a migrant. They may see new places they might prefer to their home, meet people with whom they might form relationships, take on temporary work that opens up permanent opportunities and so forth. These effects are enhanced by the ITC revolution which has effectively eliminated costs of communication between people in different countries. I'm typing this in Toulouse, but it would make no difference if I were in Toowoomba, or even somewhere proverbially remote like Timbuktu (Mali currently has 63 per cent Internet penetration). All of this creates a demand for migration that goes beyond the traditional motivators: moving to an unknown country in the hope of a better life and fleeing your hope country to escape war and persecution.

Can this flow be halted or reversed? Anti-immigrant sentiment has already led to the adoption of measures sufficiently draconian to impose substantial costs on current citizens, both native-born and naturalized, without achieving more than a modest reduction in flows.

These costs of restrictionist policies arise most sharply for anyone who forms a relationship with someone from another country. In Australia, your spouse can generally get a visa, but at the potential cost of being unable to reunite with immediate family members. In Britain, as I understand it, even spouses aren't allowed in unless their income is high enough. These are huge restrictions on freedom for those affected.

Exclusion of foreign workers, is in large measure, the rationale of restrictionist policy. But, even on extreme estimates, the benefits to native-born workers are small enough to be offset by a single round of regressive tax cuts. And these estimates look only at net flows from poor to rich countries. The EU puts a lot of effort into restricting work opportunities for Australians and vice versa. There's almost no aggregate effect on labour markets, but it puts plenty of burdens on individual workers and raises costs for employers, with no net benefit.

A policy to push net immigration to zero, or even close to zero, would almost certainly impose personal and economic costs on the country concerned so high as to be politically untenable. And anything less implies a continuation of the gradual mixing of the world's population that is the most immediately visible consequence of globalization.

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Tuesday, June 11, 2019

Jack Metzgar : Talking Class and Race at the Same Time [feedly]

Jack has a point.

Talking Class and Race at the Same Time

Most progressive policies have the potential of unifying people around class interests, but a convention in talking about these things often seems to purposely lean against pointing that out. Cory Booker's baby bonds, all versions of Medicare for All, and the $15 minimum wage, for example, would all disproportionately benefit blacks and Latinxs, a point often highlighted by politicians and in the press, especially the advocacy press.  What they usually don't say, however, is that though lower percentages of whites will benefit from these policies, very large numbers of them will. What would be wrong with uniformly mentioning that while people of color are disproportionately affected, the largest groups of pooruninsured, and negative-wealth Americans are white folks?

Maybe candidates and reporters assume that everybody knows this, but I'm pretty sure they do not.  Though I have only anecdotal evidence, I suspect large numbers of white people don't realize how substantially they would benefit from these policies.  Every time a politician or advocate says proudly that their policy would "especially benefit people of color," to white folks it can sound like the policy is geared mostly toward people unlike them.  Because whites are still a large majority of the population (67%) and an even larger proportion of voters (72%), this should be seen as political malpractice.  But beyond political pragmatism, there's a moral and truth deficit to mentioning one but not the other.

Almost any policy, existing or proposed, that aims to improve the economic circumstances of the bottom half of the population by income will end up benefiting larger percentages of people of color (what is meant by "disproportionately"), while the largest group of beneficiaries will be white people.  While whites are under-represented among the bottom half, they are still the largest group as we define our races and ethnicities.  A $15 minimum wage, for example, would benefit the majorities of blacks and Hispanics and only a little more than a third of whites, but of the 60 million people who would benefit, 33 million would be white.

To take a more complicated example, consider this headline from Vox, "Study: Cory Booker's baby bonds nearly closes the racial wealth gap for young adults."  The black-white racial wealth gap is huge, and it is clearly tied to a centuries-long history of structural racism that continues today in many forms, including education, housing, and lending practices.  The mean average wealth of white households is nearly 9 times higher that of black households.  What's more, about 20% of black households have zero or negative net wealth versus only 10% of white households.  But while it may seem paradoxical, more than twice the numberof white households have zero or negative net wealth than black households – 7.7 million white households compared to 3.3 million black households. This is simple arithmetic – lower percentages of much larger groups mean more actual people, but most of us can't and don't do this arithmetic in our heads.  And, unless it is pointed out, we don't often infer it as a background fact.

So if Cory Booker says his baby bonds would "especially benefit people of color" in building wealth, is that actually true?  If we look at just those with negative net wealth who would benefit the most from Booker's means-tested proposal, more than 7 million white households would benefit while only about 3 million black households would.  What is "especially" about that?  Booker assumes that people only go by percentages, and his proposal would indeed substantially reduce the black-white wealth gap in median incomes, but the largest group of beneficiaries will still be white. Booker's baby bonds scheme reduces not only the racial wealth gap but also the class wealth gap.  Families of color will benefit disproportionately, but white ones will "especially" benefit too.  Wouldn't being explicit about that make the proposal more attractive, not less, to a big chunk of the two-thirds of the electorate that is white?

Would that be appealing to "white" self-interest?  Yes, in part it would, but it would not appeal uniformly across white income classes, 20% of whom would likely see their benefit from baby bonds as insignificant.  But this is also true of people of color.  By mentioning that a policy "disproportionately benefits people of color," we might think we're appealing to the interests of all people of color, but we're undoubtedly appealing most to those for whom baby bonds could be a generational game changer – a group defined by class, not by race.  Baby bonds benefit almost everybody (up to $126,000 in annual income), but they make the most difference for people of little or negative wealth regardless of race or ethnicity.  Calling out not just how a policy benefits almost everybody, but specifically how it benefits larger numbers of white people at the same time as it benefits larger percentages of people of color is to talk about race and class at the same time – and we need to do more of that.

It feels awkward, because calling white people white can seem provocative.   But if we're going to divide ourselves into racial groups as we do – white, black, Hispanic, Asian, and other – then we need to stop talking as if all poor people are people of color and all white people have the full array of privileges that come with whiteness.  Though nearly everybody would get it right on a true-false test, well-educated journalists and politicians routinely use "poor" as if it were a racial category and "working class" as if it were wall-to-wall white (and often just blue-collar white men).  This implicit usage not only makes building class unity more difficult, it makes it nearly impossible even to envision.

It also encourages politicians and pundits to pose false dilemmas pitting Trump's working-class white base against the Democrats' rainbow coalition, as in suggesting that the Party must choose to "Win Back Trump Voters or Rally the Base?"  It makes it impossible to see that 33 percent of the rainbow are whites without bachelor degrees – the reigning definition of the white working class and the largest single group in the Democratic base.  Dems need class-based policies that appeal across our racial categories, and candidates running for the Democratic nomination have a potpourri of such policies on offer.  But they need to learn how to talk about class and race at the same time.

Jack Metzgar

Jack Metzgar is a professor emeritus of Humanities at Roosevelt University in Chicago.  A former president of the Working-Class Studies Association, he is the author of Striking Steel: Solidarity Remembered (Temple 2000).


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