Playing Games with GDP Numbers: China’s Growth Has Not Slowed to a Crawl

 Playing Games with GDP Numbers: China’s Growth Has Not Slowed to a Crawl

Dean Baker, via Patreon

GDP growth in the United States is always reported as an  annual rate. This means that if the economy grew 0.5 percent from the  first quarter to the second quarter, it would be universally reported as  2.0 percent growth, with reporters always giving the annual rate. This  is basically four times the quarterly rate. (It’s actually the first  quarter’s growth rate taken to the fourth power, but this will be the  same for small numbers.)

This is a simple and obvious point. It is not something that is  debated among reporters or economists, it is just a standard that has  become universally accepted.

Many other countries do not report their growth numbers as annual  rates. They report a quarter’s growth number at a quarterly rate. That  is fine, there is nothing that makes the use of an annual rate better,  the point is that everyone should know that the number is being reported  as a quarterly rate, if that is the case.

I have often railed at news stories that have reported another  country’s growth number, without telling readers that it is a quarterly  rate. That obviously gives a very distorted picture.

Fareed Zakaria committed this sin today in a Washington Post column that told people that China’s economy is stuck in a rut. Zakaria told readers:

“China’s economy is in bad shape. Economic growth last quarter came in at 0.8 percent, putting China at risk of missing the government’s target for the year.”

Since Zakaria did give a link for his growth figure it was easy to  click through and see that the 0.8 percent figure was in fact a  quarterly growth rate. This translates into a 3.2 percent annual rate.  Zakaria is right that this growth rate is a disappointment for China,  but a 3.2 percent rate is very different from a 0.8 percent rate.

I’m sure Zakaria is well aware of the distinction between a quarterly  growth rate and an annual rate. I’m also sure he would not have made  this sort of mistake on purpose. He could have made his point just fine  using the actual number.

But it does reflect extraordinary sloppiness on Zakaria’s part, as  well as the Post’s proofreading system, that this mistake was not caught  before it found its way into print. I would hope that the Post would  correct it, but I know that the Post’s opinion editors do not care about correcting mistakes.

Dean Baker: The Chinese Need to Stay Poor because the United States Has Done So Much to Destroy the Planet

 Dean Baker -- via Patreon

That line is effectively the conventional wisdom among people in  policy circles. If that seems absurd, then you need to think more about  how many politicians and intellectual types are approaching climate  change.

Just this week,  John Kerry, President Biden’s climate envoy, was in China. He was  asking the Chinese government to move more quickly in reducing its  greenhouse gas emissions. President Xi told Kerry that China was not  going to move forward its current target, which is to start reducing  emissions by 2030.

I know from Twitter that many people think that Kerry’s request was  reasonable and that Xi is jeopardizing the planet with his refusal to  move forward China’s schedule for emission reductions. This is in spite  of the fact that China is by far the world leader in wind energy, solar  energy, and electric cars and that all three are growing at double-digit  annual rates.

The basic complaint is that China must start reducing its emissions  now because of the crisis facing the planet. To my Twitter friends, the  problem is that China is the world’s biggest emitter of greenhouse gas.  It doesn’t matter that it has four times the population of the U.S. and  emits less than half as much on a per person basis. Nor does it matter that its economy is growing  rapidly as it tries to catch up to the living standards enjoyed in the  United States and other wealthy countries.

This complaint against China hinges on two sorts of arguments that  would be dismissed as nonsense if they were used against the United  States.

• Population size doesn’t matter. We care about how much China is emitting on the whole, not per person.
• Levels don’t matter, we only care about rates of change.

Taking these in turn, a line I heard endlessly (maybe it came from  Chatgpt) is that the climate doesn’t care about per capita emissions, it  only cares about total emissions. I have no idea what people were  thinking when they wrote this.

Would it be okay if Djibouti, with a population of just over 1  million had fifty times the emissions it has now, because the climate  only cares about total emissions, not per capita? After all, even with  fifty times its current emissions, Djibouti would only be admitting a  small fraction of what the U.S. emits.

If we said this about every country with a relatively small  population, we would have enormously more emissions than is now the  case. I assume anyone who actually cares about the future of the planet  would not say that it’s okay for small countries to have per capita  emissions that are many times larger than the U.S.

Measured in per capita terms, the United States is among the worst  emitters on the planet. We only have a prayer of preventing a horrible  climate disaster because just about every other country emits far less  per capita.

The second argument raises the question of whether historic emissions  somehow entitle a country to future emissions. Just writing that  sentence seems close to crazy, but that is in fact what many of my  Twitter friends seem to believe.

If we only care about changes and not levels, we are effectively  saying that high levels of past emissions allow us to have high levels  of future emissions. This line becomes even more absurd when we consider  that, in general, higher GDP has been associated with higher levels of  emissions. In other words, at least historically, as countries have  gotten richer, they have emitted more greenhouse gases.

In the context of China, which is no longer poor, but still a rapidly  growing developing country, limiting its future emissions growth would  effectively be saying that the country doesn’t have the right to reach  U.S. standards of living. This sort of restriction applied to poorer  countries would be even more onerous. It would mean that poor countries  in Sub-Saharan Africa, Latin America, and South Asia should be denied  the opportunity to improve the living standards of their populations  because they had not had high emissions in prior years.

The story gets even worse when we consider that the only reason that  the planet now faces a climate crisis is that the United States and  other wealthy countries have spewing vast amounts of greenhouse gases  into the atmosphere for decades. If we all still had 19th or 18th century living standards, global warming would not pose an imminent crisis.

Our China critics are effectively saying that China, and implicitly  other developing countries, must be denied the opportunity to improve  the living standards of their people because we messed up the planet so  badly. That might make sense in intellectual circles here, but that is  not an argument that is likely to impress people in China or anywhere  outside those circles.

Fortunately for the planet, China actually is moving ahead rapidly in promoting clean energy and electric cars. It is now projected to have its emissions peak in 2025, after which they will be headed  downward. This is the result of aggressive policies that it has  undertaken to control its emissions, policies that are far more  aggressive than anything we have put in place here.

The Chinese government apparently has far more concern for the future  of the planet than its critics in the United States. If we did want an  opportunity to put our money where our mouth is, the United States could  adopt a policy of making all the technology that it develops fully  open-source, so that everyone in the world could take advantage of it,  without concerns about patent monopolies or other protections.

That would help to speed the process of diffusion so that clean  technologies could be adopted more quickly around the world. But doing  this could actually mean money out of the pocket of intellectual-types  here. For that reason, don’t expect to see any discussion of  open-sourcing clean technologies in any reputable publication here.  Hurting poor people in the developing world might be a fair topic for  debate, not taking away money from relatively affluent people here.

Enlighten Radio Podcasts: Labor Beat Radio: Is it Time for Single Payer?

Enlighten Radio Podcasts: Labor Beat Radio: Is it Time for Single Payer?: Enlighten Radio Presents:   The Labor Beat Radio Podcast Broadcast LIVE, Tuesday, 9:00 AM Eastern, July 18, 2023 Hosts: John Case, JB ...

notes on the Working Class 1913 - 2002

note: statistics were sparse before WWI, and the call up for WW

Size of wc and prop of society 1913 and now

before WWI labor data is very sparse and not considered accurate. The data below includes all occupations AND farming, both tenant and family farm operations

There were 300,00 workers in the Horse and Buggy industry in 1900.  Virtually none 30 years later.

• 1910 total workforce -- 51 million in 1900 census

38,000,000 men

13 million women

51 million workers

1913 total population  97,225,000

• 2020 population  331,4 million

        2020 workforce 149.8 million

1910 -- 2015 workforce division of labor graph comparison

Notes on 1910 - 1915 data

Comprehensive data by industry do not exist for 1915, but we have information for 1910 from the decennial census. Data from the 1910 Census show that 32 percent of nonfarm jobs were in manufacturing; in 2015, manufacturing accounted for less than 9 percent of total nonfarm employment. The number of people employed in manufacturing was 8 million in 1910 and 12 million in 2015. While employment in manufacturing grew over the past 100 years, employment in other industries grew more.

Transportation and public utilities also declined in percentage terms over the last century, from 13 percent in 1910 to 4 percent in 2015. The number of people employed in transportation and public utilities was 3 million in 1910 and 6 million in 2015.

From 1910 to 2015, employment in mining and the percentage of total employment in mining both decreased. In 1910 there were 1 million people employed in mining, accounting for 4 percent of nonfarm employment; in 2015, the number employed was 25 percent lower than in 1910 and less than 1 percent of total 2015 employment.

Domestic service, such as maids and cooks in private households, accounted for about 9 percent of nonfarm employment in 1915; comparable data for recent years are not available.

Employment in wholesale and retail trade, including eating and drinking places, increased from 3 million (or 13 percent of nonfarm employment) in 1910 to 33 million (23 percent) in 2015.

Far fewer people worked in professional services in 1910. Today’s economy includes professional services related to computers and electronics that didn’t exist a century ago. Fewer than 1 million workers were employed in professional services, accounting for 3 percent of nonfarm employment in 1910. In 2015, 41 million people were employed in professional services, 29 percent of the nonfarm total.

• Over the course of the 20th century, the composition of the labor force shifted from industries dominated by primaryproduction occupations, such as farmers and foresters, to those dominated by professional, technical, and service workers.
• At the turn of the century, about 38 percent of the labor force worked on farms. By the end of the century, that figure was less than 3 percent. 
• Likewise, the percent who worked in goods-producing industries, such as mining, manufacturing, andconstruction, decreased from 31 to 19 percent of the workforce. 
• Service industries were the growth sector during the 20thcentury, jumping from 31 percent3 of all workers in 1900 to 78 percent4 in 1999.

Include sharecroppers

Sharecropping continued to be a significant institution in many states for decades following the Civil War. By the early 1930s, there were 5.5 million white tenant farmers, sharecroppers, and mixed cropping/laborers in the United States; and 3 million Blacks.

Gdp 1913 to now

1913 -- 571 billion

2020 -- 20.1 Trilliion

    

Labor movement size relative to wealth distribution over century

 






Voting rights for labor no data found, except rise in immigrant and informal work, and incarceration has had negative impact.


Bea lumpkin -- shorter work week

1914  -- 50.8 hrs

2020 --  34.6 hrs

Dean Baker: Mixed Progress in the Fight Against Inequality and for Democracy

 

Mixed Progress in the Fight Against Inequality and for Democracy
Dean Baker

I have a birthday coming up, so it seems a good time to assess progress, or lack thereof, on the various issues that I have worked on over the decades. There is some big progress in at least a couple of areas, but not much to boast about in the others.

I’ll start with the success stories.

The Benefits of a Tight Labor Market

The big one, where I feel we really have made huge progress, is the battle for full employment. It might seem like ancient history, but a quarter century ago the absolute standard wisdom in the economics profession was that we could not get unemployment rates below 6.0 percent without ever accelerating inflation. To argue otherwise was to invite ridicule.

The reality repeatedly contradicted the theory. We sustained an unemployment rate of 4.0 percent in 2000, with only a very modest increase in the inflation rate. The recession caused by the collapse of the stock bubble drove the unemployment rate back up in 2001 and 2002, but we eventually did start to see it fall again, eventually reaching levels around 4.5 percent in 2007.

Unfortunately, this drop in unemployment was driven by a housing bubble, the collapse of which gave us the worst downturn since the Great Depression. The timid response to the recession by the Obama administration and the Republican Congress gave us a weak recovery. However, by the end of 2017, the unemployment rate was again approaching 4.0 percent.

The Federal Reserve Board had already begun raising interest rates, following the theory that an unemployment rate this low would trigger inflation. But inflation remained tame. In the summer of 2019, the Fed made the remarkable decision to lower rates, even though the unemployment rate was below 4.0 percent.

Fed Chair Jerome Powell said it was time to give the full employment side of the Fed’s mandate equal weight with the price stability side. He noted the huge benefits accruing to Blacks, Hispanics, people with less education, and people with criminal records from low unemployment. He said, given the huge benefits of low unemployment, he wanted to press the unemployment rate as low as possible, until there was clear evidence of inflation.

This was exactly the script that those of us on the left had been pushing for decades. It was great to hear it from the mouth of a Fed chair.

We saw this story further reinforced following the pandemic. Many leading lights of the economic profession denounced the Biden stimulus package and warned that it would take a prolonged period of high unemployment to bring inflation back down to acceptable levels.

Well, at this point we can say that the package, along with subsequent policies like the infrastructure bill and the Inflation Reduction Act, quickly boosted the economy back to full employment. While inflation did jump in 2021 and the first half of 2022, we are most of the way back down to the Fed’s 2.0 percent target, even as unemployment remains near its half century low. We are not necessarily out of the woods yet, as the Fed will likely have further rate hikes and we have not yet seen the full impact of past hikes, but thus far, things look pretty damn good.

Furthermore, the benefits of a tight labor market for those at the bottom are clearer than ever. Workby Arin Dube, David Autor, and Annie Mcgrew shows that as much as a quarter of the wage inequality that built up over the prior four decades has been reversed with the tight labor markets in the recovery from the pandemic recession. That is a really big deal.

We also have moved away from the idea that we need to weaken unions and reduce labor market supports, like minimum wages and unemployment benefits, to have a strong labor market. These were literally the policies being pushed on countries by the OECD in the 1990s and the start of the century. They reflected the consensus view in the economics profession.

This is no longer the case. Countries with very high unionization rates, like Denmark and Sweden, have managed to maintain high levels of employment and strong growth. It is also now generally recognized that reasonable levels of minimum wages are not impediments to employment. This is huge progress.

Saving Social Security

In the 1990s there was widespread agreement across party lines that Social Security was broken and needed to be “fixed.” Only the ramshackle left and most of the public wanted to protect the current benefit structure. Incredibly, in spite of efforts supported by presidents of both parties, there were no cuts to the program.

This was a period in which the program faced serious vulnerability because of its structure and the demographics of the populations. In the 1990s, and the first decade of this century, Social Security had a large annual surplus. This was due to the fact that the huge baby boom cohort was in its prime working years. The program was structured so that its trust fund would build up a large surplus in these decades, which could then be used to partially cover the cost of the baby boomers’ retirement.

This surplus also created a door for privatization. Instead of putting the money into the trust fund, the privatizers dreamed of turning it over to Wall Street, who could make tens of billions of dollars in fees managing individual accounts.

We managed to get through these decades without privatizing or cutting the program. Now a large portion of the baby boom generation is retired and receiving benefits, eliminating the annual surplus. Also, with this huge cohort either currently dependent on Social Security, or likely to be in the very near future, cuts to benefits will face more opposition than ever. This doesn’t mean that there can never be any cuts to the program, but the probability of cuts that hit a substantial segment of the poor or middle class seems very low.

Failed Efforts

Well, that’s my good news, the story with other issues that I worked on is much less bright.

Patent and Copyright Monopolies

In the effort to promote alternative mechanisms to patent and copyright monopolies for financing innovation and creative work, I would say that we have gotten pretty much nowhere. There is virtually no understanding of how these monopolies work and that there can in fact be alternative mechanisms. There is also almost no understanding of how much money is at stake.

On the first point, it is really hard to get people, including economist-type people, to understand that we don’t need to attach patents to innovation and copyrights to creative work. I don’t know how many times I have laid out a scheme to have the government pay for all the research and testing involved with developing a drug and then have someone ask “how long would the patent be?” [1]

Somehow people just can’t grasp that if the government pays for the research, there is no patent, there would be no point to a patent, and there would be no one to have a claim to one. Patent monopolies are a mechanism for providing incentive. If the government paid the money (as we did with the Moderna Covid vaccine), it already provided the incentive. If the money wasn’t adequate, then people didn’t have do the work.

I recall when I read Marx back when I was an undergrad. In Capital he talks about how people see it as natural that money gets interest, failing to recognize that lending money at interest is a social relationship. There seems to be a similar story with innovation and creative work and patents and copyrights. People seem to think that these government-granted monopolies are inherent to these processes, rather than an explicit policy choice.

There are obviously arguments for these mechanisms as policy tools, but it is impossible to have a serious discussion if people don’t even recognize that they are policy tools and not facts of nature. I don’t know how to advance this point, I just know that, to date, I and others have made very little progress.

I’m sure that part of the issue is that this hits very directly at people’s view of the economy and its fairness. It is absolutely conventional wisdom that the upward redistribution of the last four decades is explained in large part by the development of technology.

However, pointing out that who benefits from this technology and how much is a political decision, destroys that view. As a practical matter, we can make patent and copyright monopolies longer and stronger, or shorter and weaker. We don’t even need to have them at all.

In a world where these monopolies do not exist, there is zero reason to think that all the educated STEM-types would get rich at the expense of everyone else. That may not be a good way to structure the economy, but the point is that it is a possible way. The fact that people like Bill Gates can get hugely rewarded for his talent and work is the result of how we chose to structure the market. It was not “technology.”

The other part of the story is getting people to understand how much money is at stake. Here also the ignorance of well-educated people is astounding. If we had a world without patent and copyright monopolies, we would likely free up more than $1 trillion a year, close to half of all after-tax corporate profits.

In the case of prescription drugs alone we are likely talking about more than $450 billion a year. That comes to $3,000 per family or more than four times the annual food stamp budget. The money at stake with these monopolies swamps the amount at stake in almost all the political battles that take place in Washington.

Apart from the money involved, expecting someone with a serious illness to effectively pay for research that was done long ago should strike anyone as an act of irrational cruelty. Economists all go nuts if you talk about a tariff of 10-20 percent. Drug patents are effectively tariffs of several thousand percent. Furthermore, since we generally have third party payers (insurers or the government) this is not even a question of consumer choice. How can this policy possibly make any sense?

I have been around Washington long enough to know that you don’t just reshape the whole financing mechanism for prescription drugs, medical equipment, or anything else important in one big move. But it should be possible to get a foot, or ideally feet, in the door, pointing the way to alternatives. In recent months I have been hoping that it would be possible to secure funding for a trial of the open-source Covid vaccine developed by Drs. Peter Hotez and Maria Elena Bottari at Baylor College of Medicine and Texas Children’s Hospital.

This vaccine has already been used by over 100 million people in India and Indonesia, so they should not be too much question about its safety and effectiveness. It just needs a domestic trial to get FDA approval so that it can be used here.

If it were approved, the shots would likely cost less than $5 each (they cost $2 in India), compared to more than $100 a shot for the Moderna or Pfizer boosters. This contrast should help drive home the benefits of open-source funding of research, but it is an uphill battle.

For the most part, people, including progressives, can’t even conceive of a world where drugs are cheap. Their hope is largely that the U.S. government will limit drug prices in the same way that governments in Europe, Canada, and elsewhere limit them. But the idea that we would get the government to stop making drugs expensive by giving out patent monopolies, is not even within their realm of thinking. That’s a problem.

The Financial Industry Money Pit

Any economics textbook tells students that the purpose of the financial industry is to facilitate transactions and to allocate capital. That should be fairly straightforward, sort of like the purpose of the trucking industry is to move goods from one place to another.

Unfortunately, while most people grasp the purpose of the trucking industry pretty well, they seem to have forgotten the textbook story on finance the moment they leave the class. The point here is simple, but important. An efficient financial industry is a small financial industry.

We want to be able to conduct transactions quickly and safely. That means I should be able to buy my groceries, pay my rent or mortgage, or do other transactions in the least amount of time and with minimal risk of fraud or theft.

We also want capital allocated efficiently. That means when someone has a useful innovation, they should be able to get the money to market it on a large scale. People also need capital to buy homes, cars, and to pay for education.

The textbook tells us we want these tasks done with as few resources as possible, meaning a minimal number of workers and capital being used. If we applied this standard in thinking about the financial industry, many issues become simple.

Take Bitcoin and other crypto currencies. These currencies serve no purpose for the real economy, they are just a form of gambling. And, how do we deal with gambling? We tax it.

Suppose we had a 1.0 percent tax on all crypto trades. That should radically downsize the industry, while raising a nice chunk of revenue for the government, with no negative effects on the real economy at all.

I know that crypto proponents insist it will eliminate racial discrimination in the financial industry and in other ways create heaven on earth. It’s hard to take these folks seriously, but let’s put it this way. In Utah, I paid 8.0 percent sales tax when I bought a pair of shoes. Surely if crypto is the way to heaven on earth, a 1.0 percent tax won’t stand in the way.

It’s the same story with the financial industry more generally. We will have roughly $40 trillion in stock trades this year, or $160 billion a day. Does anyone think capital would be less efficiently allocated if we cut this in half to $20 trillion a year? A financial transaction tax that cut the volume in trading in half would free up roughly $120 billion a year (0.5 percent of GDP) that is now spent carrying through these trades.

The same goes for other parts of the financial industry. We may not outlaw private equity, but we need not structure our tax laws to give the industry special tax advantages like the carried interest tax break. We could also look to have the Fed offer everyone digital bank accounts so that we could save tens of billions annually in bank fees. And, we could have the federal government offer low cost IRAs, like the federal employees’ Thrift Savings Plan, which would save people tens of billions annually on needless management fees charged by brokerage houses and insurance companies.

On this issue, there is some progress to report. Several states now let private sector employees buy into their state employees retirement system, effectively giving them a low-cost IRA/401(k) option.

But progress in this and other areas would be so much easier if we could just get everyone to remember their intro econ treatment of finance. We want it simple and we want it cheap: full stop.

In this vein, I should probably also mention the ideaof converting the basis of the corporate income tax from profits to the returns companies provide to shareholders (dividends and capital gains). The logic of this is straightforward, corporate accountants tell us how much profit the company made. We can get returns to shareholders from any financial website.

This would effectively be a tax that would be impossible to avoid. The I.R.S. could calculate every company’s tax liability on a single spreadsheet. (That is, all companies tax liability could be calculated on the same spreadsheet.)

Not only does this mean that we could be sure to get the tax rate we targeted, it would also destroy the tax gaming industry. The tens of billions of dollars that companies currently spend on gaming the tax code could instead go to productive uses.

We actually have made serious progress on this sort of switch. As part of the Inflation Reduction Act, we now have a 1.0 percent tax on share buybacks. I’m sure that this tax was not put in place as a step towards shifting the basis for the corporate income tax to returns to shareholders, it could end up being a big step in this direction.

Since buybacks are 100 percent transparent (companies can’t very well keep them a secret), this will be the easiest tax ever from the standpoint of enforcement. When people recognize how simple and easy it is to collect a tax that is based on returns to shareholders, there could be momentum to increase the portion of the income tax that is based on buybacks, dividends, and capital gains. It’s always best to tax things we can see directly, as opposed to a number manufactured by corporate accountants.

Reining in CEO Pay

It is common to see people on Twitter and elsewhere complain about the tens of millions pulled down each year by the CEOs of major corporations. While the complaints are certainly justified, they rarely go beyond moral indignation. Few make the point that CEOs are not worth their paychecks, at least in the very narrow sense that they do not produce for their companies an amount of value equal to their $20 million or $30 million paycheck.

This point is important, since it means CEOs are ripping off the companies they work for. That implies that the shareholders of these companies should be allies in the effort to rein in CEO pay.

While that point would seem obvious, there is almost no recognition of this logical inference from most progressives. Even people who complain about CEOs using stock buybacks to manipulate stock prices and increase the value of their options, rarely take the next step and say shareholders should be upset about CEOs taking money from them.

In my view, the key to bringing down CEO pay is to give shareholders more ability to rein it in. As it stands, the corporate board of directors are supposed to be the ones who act on shareholders’ behalf to limit CEO pay. But a recent survey found that these boards don’t even see it as their responsibility to rein in CEO pay. Rather they see their job as helping top management.

We should be focused on making it easy for shareholders to pressure boards to take CEO pay seriously. I have suggested that the “Say on Pay” votes on CEO pay, which were part of the Dodd-Frank financial reform act, have a bit more teeth.

As it stands, there is no consequence for a no vote on a CEO compensation package, except for a bit of embarrassment. Suppose that directors lost their pay if a vote went down. My guess is that if two or three packages went down, and boards felt some real consequence from overpaying their CEOs, they would start to ask questions like “can we get someone just as good for less money?” That could end the upward spiral of CEO pay and start to bring it back down to earth.

This is not just a question of a small number of top execs getting too much money. The bloated pay for CEOs affects pay structures throughout the economy. If the CEO gets $20 million, the rest of C-suite might get close to $10 million, and third tier execs can get $2 million or $3 million. This also affects pay outside the corporate sector. It is now common for presidents of universities or major charities to get several million dollars a year for their work.

The world would look very different if we had not seen the explosion of CEO pay relative to ordinary workers. If we still had the ratios of 20 or 30 to 1, that we had in the 1960s and 1970s, CEOs would be getting $2 million to $3 million a year. The lower pay for the top end of the income distribution would free up lots of money for everyone else. Unfortunately, we cannot even get a serious discussion of this issue.

Free Trade for Doctors and High-End Professionals

It has become gospel that the United States has pursued a policy of free trade for the last four decades. This is a lie.

Our trade policy has been focused on removing barriers to trade in manufactured goods. This has the effect of putting U.S. manufacturing workers in direct competition with low-paid workers in the developing world. This has the predicted and actual effect of reducing the number of manufacturing jobs in the United States and reducing the pay for the jobs that remain.

While this policy can be justified by pointing to the benefits for consumers in the form of lower prices, we could have gone the same route of “free trade” when it came to doctors and other highly paid professionals. The models showing the gains from trade work the same way when we talk about physicians’ or dentists’ services as when we talk about cars and clothes.

However, our trade negotiators never had free trade in physicians’ services on their agenda. That is understandable, since they probably all have friends and relatives who work as doctors, dentists, or as other highly paid professionals.

But, even if we have to recognize the power relations that are behind trade deals that have the effect of redistributing income upward, there is no excuse for covering up the true story by calling it “free trade.” Trade rules were constructed to redistribute income upward. No one involved in the process had any interest in real free trade.

Anyhow, we continue to get these absurd battles over “free trade.” It’s sort of like debating Catholic or Jewish theology where you first have to accept the tenets of the faith before you can be admitted into the discussion. For now, the participants in trade debates all must pretend that we have a free trade policy, instead of a policy of selective protectionism designed to screw ordinary workers.

Saving Journalism

I raise this one because there is not even a debate on the topic, simply a steady drumbeat of stories about how local newspapers are closing around the country and how national news outlets, both print and broadcast, are laying off reporters because they can’t make money in the current system. While there apparently is a big market for pieces bemoaning the current situation, there is very little interest in discussing policies that could alter the picture and revitalize reporting.

This is unfortunate, because these ideasdo exist. The basic story is finding some way to get public funds to people doing journalism. For whatever reason, we can’t get a serious discussion in major news outlets about how to repair the news system.

I should also mention another aspect to this issue. Many people rightly complain about the outsize power that the rich have in politics. Under the current system, billionaires can basically contribute as much as they want to support their favored candidates or causes.

Here also, there is a lot of ink spilled decrying the situation, but almost no discussion of serious remedies. Not only would it be almost impossible to limit political contributions given the current makeup of the Supreme Court, it’s not clear it would make much difference even if we could.

Suppose no one was allowed to give more than $1,000 to a candidate and/or a PAC or PAC-equivalent. Is anyone proposing measures that would prevent right-wing billionaires from creating another Fox News, or two or three Fox News networks? Alternatively, are there proposals to prevent right-wing billionaires from buying up CBS, NBC, CNN and every other major news outlets?

If right-wing billionaires controlled all the major news outlets, they could effectively run ads for their favored candidates as “news.” They would have no reason to make campaign contributions to get their candidates elected. Their news shows would be far more effective in pushing the case.

If progressives want to be serious about countering the political power of billionaires, there is no alternative to finding mechanisms that give more voice to ordinary people. No one has even conceived of an effective way to restrict billionaires’ political power, much less put forward a proposal that would have prayer in hell of becoming law in anyone’s lifetime.

While we are on the topic of the political power of the rich, it would also be a good idea to have a serious discussion of restructuring Section 230 protection for Internet platforms. There is no obvious reason that Internet platforms should be protected from liability for defamation suits based on third party content, when print and broadcast media don’t enjoy this protection.

Although it is not feasible for these platforms to preemptively screen content for defamatory material, they could be subject to take-down rules in the same way that is now the case for allegations of copyright infringement. We can also write the rules in ways that are likely to disadvantage giants like Facebook and Twitter and benefit smaller sites.

Anyhow, there are an infinite number of ways to slice and dice a Section 230 repeal, but the key thing is to get it on the agenda. As of now, it isn’t. All we get are complaints about the way billionaire jerks run their platforms, as though the rest of us are powerless in the story.

Changing the Narrative Is not Easy

It is not easy to move policy debates, as most people recognize. As the old saying goes, “intellectuals have a hard time dealing with new ideas.” And, as we know, intellectuals control the outlets where these issues get debated, which means it’s hard to find an entry point to even try to move the debate. Anyhow, I will keep trying and maybe the picture will look better on my next birthday.

[1]See Rigged chapter 5 for an outline of my alternative mechanisms. (It’s free.)

Jerry Brown: Washington's Crackpot Realism -- text only

via the New York Review of Books







The twenty years of war since the September 11, 2001, attacks have killed more than 900,000 people, displaced at least 38 million, and cost the United States an estimated $8 trillion.


During these two decades of intense fighting and killing, the US has been responsible for a quantity of suffering that would have been unthinkable when President George W. Bush, with the near-unanimous backing of Congress, launched his assault on Afghanistan. It is clear now that America’s leaders deluded themselves and failed to ask basic questions about the ultimate goal of the war before invading: its human and financial costs, its benefits, or how it would end.



One might assume that such disastrous results, and the ignominious end of the war in Afghanistan last year, would lead to a period of reflection and soul-searching. Yet no such inquiry has occurred—at least not one that fully grapples with the shocking self-deception, pervasive misreading of events, and powerful groupthink that drove the longest war in American history.

Instead, without missing a beat, Washington power brokers and pundits, in and out of government, have fixed their gaze on a new foe: China. Think tank specialists and defense insiders are churning out books and articles on how to contain China and engage in what they have called a “great power conflict,” a vague description encompassing all manner of hostile interactions—ideological, economic, political, and military. Last year, Admiral Philip Davidson, head of the US Indo-Pacific Command, told a Senate Armed Services Committee hearing that China is accelerating its ambitions to supplant America’s leadership in the world, and that it could invade Taiwan within “the next six years.”

The Strategy of Denial by Elbridge Colby well exemplifies this new confrontational and Manichean zeal. Colby’s book clearly, but perhaps unwittingly, exposes the extreme peril we face, as he and others like him lay the intellectual foundations for yet another war thousands of miles from our shores, and one that is more treacherous than those we fought in the Middle East.

Colby worked under Defense Secretary Jim Mattis and helped write the 2018 US National Defense Strategy, which proclaimed that “inter-state strategic competition, not terrorism, is now the primary concern.” His book reflects a growing perception throughout the country that China poses a mortal threat to America and its Asian allies. A Gallup poll in March 2021 found that the share of Americans who see China as our greatest enemy doubled in just one year, from 22 percent to 45 percent.



Colby’s focus is not on human rights or democratic values, ours or anyone else’s, but rather on how to deter China and “wage war” against it to prevent it from dominating Asia—and ultimately the entire world. He emphasizes relentless military competition among states, while omitting any discussion of how we might compete economically with China or what part international institutions could play. He considers Asia the most important region in the world because it produces 40 percent of global GDP. There are, in his view, stable balances of power in Europe and the Persian Gulf, leaving the Pacific as the primary theater of conflict between America and China.

Colby believes that if China were ever to achieve what he calls “hegemony” in Asia, it would have substantial incentives to use such power to exclude the US from the region and “compromise Americans’ freedom, prosperity, and even physical security.” To contain China, he proposes a “binding strategy” that would enmesh the military of the US with those of our Pacific allies, such as Japan, Australia, South Korea, the Philippines, and Taiwan. This, he believes, would force China, if it invaded Taiwan, to attack these countries as well—resulting in a much wider war. The US position would thus be stronger because more countries would be fighting alongside us in an “anti-hegemonic coalition” against China.

He also looks to what he calls “thumotic impulses”—spiritedness or passion—to spur on the coalition to fight with greater resolve. Colby takes the concept from Homer’s Iliad, in which Achilles, driven mad by his anger (θυμός, thumos) at the killing of his friend Patroclus, slays Hector. In recent years this theme has been articulated by a number of conservative scholars, such as Harvey Mansfield in his book Manliness (2006); Michael Anton, who served on President Trump’s National Security Council, in his essay “The Flight 93 Election” (2016); Robert Kagan in The Return of History and the End of Dreams (2008); and the political science professor Carson Holloway, who published an essay on thumos in which he described Trump as “a preeminently thumotic being.”

Colby acknowledges that war with China over Taiwan could lead to the “limited” use of nuclear weapons and that as a last resort, “selective nuclear proliferation”—which is to say, providing nuclear weapons to allies—might be necessary. He adds:


Selective nuclear proliferation to such states as Japan, South Korea, Australia, and even Taiwan might help bridge the gap between regional conventional defeat and US willingness to employ its nuclear forces, especially at scale.

Colby tries to assure us that China would be deterred from escalating to a broader nuclear exchange because of America’s retaliatory power.


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Confident about his strategy and markedly unconcerned about its catastrophic implications, Colby seems cavalier about the fog of war and the possibility of errant intelligence. He blithely ignores how much can go wrong. For evidence, consider the recently declassified video footage of a US drone strike during the final days of our withdrawal from Afghanistan that mistakenly killed ten innocent civilians, including seven children. In its subsequent review of more than 1,300 documents from a hidden Pentagon archive, The New York Times found that this wayward bombing was no aberration, but rather part of a pattern of airstrikes in Iraq, Syria, and Afghanistan over the past eight years that were “plagued by deeply flawed intelligence, rushed and imprecise targeting and the deaths of thousands of civilians, many of them children.”

These are just the latest examples of shocking intelligence failures stretching back to the Korean War, Vietnam, and the Cuban Missile Crisis, when the US totally missed the fact that Russian missiles in Cuba were already loaded with nuclear weapons and would have been launched before any disabling US strike.

The danger here is not this specific book, but that Colby is not an outlier in Washington. In The Long Game: China’s Grand Strategy to Displace American Order, Rush Doshi, currently Biden’s director for China at the National Security Council, writes from a similar zero-sum perspective but focuses more broadly on what he sees as China’s decades-long determination to become the world’s new hegemon. Citing voluminous Communist Party documents, he carefully traces the emergence of what he believes is China’s grand strategy to drive America out of Asia and displace its paramount influence in the world.

Writing in scholarly, sometimes jargon-laden prose, Doshi presents the US–China contest as “a competition over regional and global order, as well as the various ‘forms of control’ that sustain it.” According to him, the US cannot maintain its preeminent position unless it blunts China’s worldwide military, economic, and political “order-building” and simultaneously reinvests in “the foundations of American order.”

With respect to military engagement, this will entail deploying and sharing with allies a number of advanced weapons systems throughout the Indo-Pacific and conducting joint training and war exercises. On the political and economic front, Doshi calls for expansive industrial policies and innovative initiatives to keep America at the forefront of the vital technologies of the future. Though he recognizes the country’s polarized political environment, he believes that there is enough bipartisan consensus on the threat from China that America can rise to the challenge.

Despite this unrelenting competition, Doshi envisions cooperation with China on what he calls “transnational challenges,” such as nuclear proliferation and climate change. Unfortunately, he does not explain how cooperation on these threats would ever be possible in view of the mutual hostility and deep mistrust inherent in his grand strategy.

It’s worth noting that “political realism,” the school of thought that Colby and Doshi in their different ways represent, has genuine value. Such an approach can sharpen our understanding of the way nation-states have historically acted as they jockey for advantage over competitors. The doctrine explains why the competition between China and the US is so dangerous, and how diplomacy and human judgment can be overwhelmed by the powerful forces of nationalism—even more so when exacerbated by historical grievances and rapid weapons innovation.

World War I is the classic example of how nations move from competition to miscalculation to war, even though it results in mutual catastrophe. In his 2012 book The Sleepwalkers: How Europe Went to War in 1914, the historian Christopher Clark diagnoses self-reinforcing “processes of interaction” that led to the unforeseen and unwanted war, inducing each state to repeatedly react to the other in an attempt to gain an advantage.


So it could be, too, with respect to the current “great power competition” between the US and China. Few want war, but highly competitive actions are fostering increasingly hostile perceptions based on profoundly different histories and social systems.



Compounding the danger is a long history of self-assured but mistaken—even delusional—thinking in Washington. More than sixty years ago, the sociologist C. Wright Mills coined the phrase “crackpot realism,” referring to leaders who he believed were making incredibly reckless decisions with little understanding of the consequences, while believing themselves to be exceptionally rational.


In The Hell of Good Intentions (2018), Stephen Walt describes countless blunders made by the foreign policy elites in the Clinton, Bush, Obama, and Trump administrations. He convincingly demonstrates that very bright people with the best of intentions, no matter their party or ideology, get caught up in “rational” processes that lead to disastrous outcomes.



This is what makes current groupthink on China, based almost exclusively on zero-sum assumptions, so alarming. General Mark A. Milley, the chairman of the Joint Chiefs of Staff, described China’s recent testing of a hypersonic missile as “very close” to a “Sputnik moment,” referencing the technological advantage that US planners perceived the Soviet Union to have achieved with its satellite launch in 1957. Such statements reinforce the notion that China or America must subordinate the other and engage in a new cold war, rivaling the contest between the US and the USSR. But this one would be, in many ways, far different.

First, China, unlike the USSR, has an enormous and growing economy. Second, it is a major trading partner with neighboring countries and is tightly integrated with the rest of the world, including the US. Third, it is making huge investments in research and development and driving technological innovations of all kinds. Finally, China is intensifying its nationalistic fervor with repeated invocations of its victimhood during a “century of national humiliation.”

This nationalistic fervor is on display in China’s efforts to threaten and pressure even ordinary people if they dare to criticize Chinese policies. In China Unbound: A New World Disorder, Joanna Chiu, a reporter for the Toronto Star, provides a powerful, heartfelt account of Chinese immigrants and their fraught encounters with Beijing’s United Front Work Department, a lavishly funded government agency that works with the Ministry of State Security. Chiu tells gripping stories of influence operations in such disparate places as Australia, Canada, the US, Italy, Greece, Turkey, and Russia. Chinese agents are sent throughout the world to intimidate international students and others of the far-flung Chinese diaspora. Chiu’s stories demonstrate in human terms just how formidable a task it will be to put the US and China on any kind of cooperative path.

The most telling example of China’s nationalism is its deep and pervasive conviction that Taiwan is a part of China. This is an area where compromise seems inconceivable. I can’t imagine China accepting defeat, ever, in a conflict with the US over Taiwan.

Kevin Rudd, a former prime minister of Australia and a Mandarin speaker, recognizes this stark reality in The Avoidable War: The Dangers of a Catastrophic Conflict Between the US and Xi Jinping’s China. Rudd directly confronts the growing possibility of war and offers well-thought-out proposals to prevent that catastrophic outcome and the “global carnage” it would cause.

Rudd is undaunted by the fact that, in his view, for both Washington and Beijing, “the question is no longer whether such confrontation can be avoided, but when it will occur and under what circumstances,” and he rejects “decoupling, containment, confrontation, and perhaps ultimately the unthinkable itself.” Instead, he sketches out “a joint strategic framework” that would allow China and America to (1) agree on procedures for navigating each other’s strategic red lines, which if inadvertently crossed would lead to military escalation; (2) identify acceptable areas of “nonlethal” but “full-blown strategic competition”; and (3) define those areas where cooperation would be recognized and encouraged, such as on climate change. All of this would be anchored in negotiation, verification, deterrence, and mutual respect. Rudd calls this “managed strategic competition.” He sees a military conflict between China and the US as a catastrophe “beyond imagining” and therefore makes the case for “all necessary precautionary measures” to reduce the risk of war.

Like Rudd, several leading scholars envision a future where both China and the US, despite their radically different systems, learn to coexist and even cooperate without waging a new cold war. In Limit, Leverage, and Compete: A New Strategy on China, a 2019 report from the Center for American Progress, Melanie Hart and Kelly Magsamen (who now hold senior positions at the US Departments of State and Defense, respectively) detail a “new strategic framework” for the US–China competition, which they call the “central contest of this century.” Hart and Magsamen grant that China is “actively undermining US interests around the world,” but they diverge from the more hawkish China hands in their strong emphasis on policies that would rejuvenate and strengthen America, “regardless of how China acts.”

In plain language, the writers explain what America must do to reassert global leadership and rectify a “pattern of serious missteps” and “decades of strategic inertia.” Hart and Magsamen emphasize the dramatic investments needed to transform American education, specifically calling for debt-free undergraduate education for all students; tuition assistance for postgraduate science, technology, engineering, and math degrees; federal funding for state and local colleges; a redesigned workforce development system; and a substantial commitment to research and development, and public infrastructure. It all sounds plausible, but the politics of getting it done seem remote. The unrecoverable trillions spent on fighting terrorism could have paid the bill; alas, this is not how official Washington sees America’s challenges.

Looking outward, Hart and Magsamen are concerned about China’s efforts to obtain sensitive US technology. They recommend a variety of preventive measures aimed at curbing “operations that threaten US prosperity or national security,” though the consequences of these measures remain unclear. They also suggest finding ways to “leverage” Chinese investments in development projects, such as those in its Belt and Road Initiative. The idea here is for America to invest, along with others, to make development projects more transparent and sustainable. This will require the US to work with countries in the Belt and Road target areas and provide competitive financing so that recipient countries are not solely dependent on China. Additionally, they call for partnering with China on such public goods as disaster relief, ocean protection, climate initiatives, and combating pandemics.

Focusing on global economic and financial structures, The United States vs. China: The Quest for Global Economic Leadership by C. Fred Bergsten makes an even more urgent case for US–China cooperation: work together to stabilize the world economy or risk a disaster on par with the Great Depression of the 1930s. Bergsten doesn’t ignore the deep differences between our political systems, but he says that the world economy will encounter dangerous disruptions unless the US and China ensure orderly functioning of trade, currencies, lending, and investment. He categorically rejects decoupling the two economies and asserts that if America follows this path, China will just continue to rise and America will falter. He notes that the tariffs imposed by Trump failed to slow China’s growth and adds that most other countries will not follow America if it goes its own way.

Bergsten calls for “conditional competitive cooperation,” with both strenuous competition and substantive cooperation on global economic issues that are vitally important to both countries—and to the world. He acknowledges that China has engaged in currency manipulation, theft of intellectual property, and forced transfer of technologies, but he argues that these problems are best confronted through global institutions and skillful diplomacy. Like Hart and Magsamen, Bergsten sees the absolute need for America to straighten out its own economy; make serious investments in research and development, and infrastructure of all kinds; and enact policies that reduce its gross inequalities and wage stagnation.

Framing the China threat as irredeemably antagonistic, as many “political realists” are currently doing, misses the reality that both countries—to prosper and even to survive—must cooperate as well as compete. While competition is inevitable, the US and China do share common interests, which could help form the basis of what I would call “planetary realism.” This is an informed realism that faces up to the unprecedented global dangers caused by carbon emissions, nuclear weapons, viruses, and new disruptive technologies, all of which cannot be addressed by one country alone. Both America and China recognized such planetary realism when they pledged, albeit loosely, at the Glasgow climate summit in late 2021 to work together to cut greenhouse gas emissions. The stakes for the world have never been higher, and there has never been a greater need to see the world as profoundly interdependent.

It would be foolish to minimize the military dangers that China poses, but it would be even more foolish to act in ways that actually exacerbate them. The better path—in fact, the only path that avoids the horror of war—is to accept that China’s system is different from ours, get our own house in order, and seek a decent modus vivendi. Given America’s recent history of ill-conceived and disastrous wars, we should be skeptical of any other course—especially of loud calls for potentially catastrophic confrontations. Rather than thumos and grand strategies, America desperately needs clarity about the perilous predicament in which it now finds itself, and the courage to think and act anew.

It is difficult to overstate the hostility of the Roberts court to organized labor and the rights of American workers.

By Jamelle Bouie

Opinion Columnist, NYT

It is difficult to overstate the hostility of the Roberts court to organized labor and the rights of American workers.

Under John Roberts, who became chief justice in 2005, the court has made it harder for workers to bring suit against employers collectively, limited the power of workers to hold employers responsible for discrimination on the job, ended the ability of public sector unions to require dues from nonmembers who benefit from collective bargaining and struck down a California law that allowed unions to recruit workers on the property of agricultural employers.
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In pretty much any given conflict between an employer and a group of workers, you can count on Roberts and his Republican allies on the court to side with the employer.



We saw this dynamic at work last week when the court issued its decision in Glacier Northwest v. International Brotherhood of Teamsters Local Union No. 174. The case involves a struggle in Washington State between workers represented by the Teamsters and their employer, a concrete manufacturer.

In its lawsuit, Glacier alleged that its workers timed a 2017 strike so that it would begin after some of the company’s mixing trucks were already filled with wet concrete, a perishable material. Glacier’s non-unionized workers were able to remove the concrete before the trucks were significantly damaged, but the company sued the Teamsters in state court anyway for damages relating to lost revenue from the wrecked concrete.


The union countered, citing the right to strike. It also noted that the damaged concrete was essentially spoilage of a product, for which unions have not generally been held liable. The Washington State Supreme Court dismissed the suit on the grounds that the dispute was “pre-empted by the National Labor Relations Act.”

The Supreme Court took Glacier’s appeal. And in an opinion joined by Roberts and Justices Sonia Sotomayor, Elena Kagan and Brett Kavanaugh, Justice Amy Coney Barrett held that unions are liable for damages during strikes under federal labor law when they take “affirmative steps to endanger” the employer’s property rather than “reasonable precautions to mitigate that risk.” She also sent the case back to the Washington State court for further litigation.

In a separate concurrence joined by Neil Gorsuch, Clarence Thomas said the Supreme Court should reconsider its 1959 decision in San Diego Building Trades Council v. Garmon, which held that state courts are barred from handling claims concerning conduct that is “arguably” covered by the National Labor Relations Act. Under Garmon, employers must first receive a favorable ruling from the National Labor Relations Board if they want to sue a union for striking in state court. Tossing Garmon would bring labor law much closer to its pre-N.L.R.A. status quo, when conservative judges treated union actions as little more than criminal conspiracies to harm employers. Justice Samuel Alito also filed a concurrence in support of the majority.




The divide among the liberal justices was especially striking. The sole dissent came from Justice Ketanji Brown Jackson, who argued that the ruling would “erode the right to strike” and undermine the oversight of workplace law by the N.L.R.B. “Workers are not indentured servants, bound to continue laboring until any planned work stoppage would be as painless as possible for their master,” she wrote. “They are employees whose collective and peaceful decision to withhold their labor is protected by the N.L.R.A. even if economic injury results.”

It is possible that Justices Kagan and Sotomayor joined Barrett’s opinion in a strategic move meant to foreclose a more expansive decision from Thomas, Gorsuch and Alito. If so, it may ultimately prove a short reprieve in the face of a conservative majority that is eager to undermine a set of interests (labor’s interests) and a set of rights (workers’ rights) that it does not respect.

One point that must be emphasized is how, with its war on workers, the Roberts court is only acting in the Supreme Court’s historical capacity as an agent of capital. At times, the court has taken an expansive view of the civil and political rights of the American people. But it has rarely been a friend to the right of workers to organize and act in their own interests.

In the decade before the passage of the National Labor Relations Act, for example, the Supreme Court under William Howard Taft issued rulings constraining the ability of unions to act and organize, subjecting union actions to antitrust law and upholding restrictions on speech that targeted unions and other pro-labor organizations.

In other words, the Supreme Court is first and foremost the leading defender of property within our political order. And how could it be otherwise? The Constitution itself was written, in part, to protect the rights of property in the face of democracy and the spirit of egalitarianism. Even a more liberal Supreme Court than the one we have now would eventually find itself acting against labor, for the simple reason that the American political system was not built with the interests of workers in mind.





This means, as our actual court has again made clear, that the struggle for the emancipation of labor does not, as Samuel Gompers once wrote, take place in an “ideal world.” Instead, “we are in the bitter struggles of an unjust society.” If labor is ever going to get what it needs, it probably won’t be with the helping hand of a judge or a justice.