Saturday, February 29, 2020

Brad DeLong: As of the end of February the stock market is forecasting a very sharp, sudden recession in the probability of a recess... [feedly]

from Brad DeLong's blog (former depy Sec of Treasury)

As of the end of February the stock market is forecasting a very sharp, sudden recession in the probability of a recess...

As of the end of February the stock market is forecasting a very sharp, sudden recession in the probability of a recession from near zero a week ago to better-than-even today: that is the only way to make sense of the S&P 500 over the past week. Thus it is not too late to plan. It is, rather, time to act to offset the likely spending contraction we now see much closer than the horizon. Here are the plans we should have made: Alyssa FisherPlanning for the Next Recession by Reforming U.S. Automatic Stabilizers 'Equitable Growth has joined forces with The Hamilton Project to advance a set of specific, evidence-based policy ideas for shortening and easing the impacts of the next recession... _Recession Ready: Fiscal Policies to Stabilize the American Economy.... Six concrete ideas... expand eligibility for Unemployment Insurance and encourage take-up of its regular benefits... reduce state budget shortfalls during recessions by... increasing the federal matching rate for Medicaid and the Children's Health Insurance Program... eliminate work requirements for supplemental nutrition assistance during recessions... expand federal support for basic assistance during recessions... an automatic infrastructure investment program... boost consumer spending during recessions by creating a system of direct stimulus payments to individuals that would be automatically triggered when rising unemployment signaled a coming recession.... Congress should consider them now, because when the next recession appears on the horizon, it may be too late...  

 -- via my feedly newsfeed

Lack of paid sick days and large numbers of uninsured increase risks of spreading the coronavirus [feedly]

Lack of paid sick days and large numbers of uninsured increase risks of spreading the coronavirus

COVID-19—commonly known as the coronavirus—is now a potential threat for the United States and we all "need to be preparing for significant disruption of our lives," warned the Centers for Disease Control and Prevention (CDC) this week.

Unfortunately, preparing for the "significant disruption" will be economically unimaginable for one group of Americans—the millions of people in the United States who do not have access to paid sick days or have health insurance with a regular health care provider.

The CDC released very clear instructions to help prevent the spread of respiratory diseases, including staying home when you are sick. Not everyone has that option.

Overall, just under three-quarters (73%) of private sector workers in the United States have the ability to earn paid sick time at work. And, as shown in the figure below, access to paid sick days is vastly unequal. The highest wage workers are more than three times as likely to have access to paid sick leave as the lowest paid workers. Whereas 93% of the highest wage workers had access to paid sick days, only 30% of the lowest paid workers were able to earn sick days. In this way, access to paid sick days increases with wages among workers, disproportionately denying workers at the bottom this important security. And, low-wage workers are more likely to be found in occupations where they have contact with the public—think early care and education workers, home health aides, restaurant workers and food processors. When workers or their family members are sick, they shouldn't have to decide between staying home from work to care for themselves or their dependents and paying rent or putting food on the table. But, that is the situation our policymakers have put workers in.

Figure A

Meaningful paid sick leave legislation is incredibly important for low-wage workers and their families and important to reduce the spread of illness.

The ability for workers to earn paid sick days varies greatly across the country. In lieu of federal action, many states have passed legislation to guarantee paid sick days, but many workers have been left behind. The figure below shows vast differences across Census divisions in the ability for workers to use paid sick time to take care of themselves or their family members. The share with access to paid sick days ranges from only 62% in East South Central United States (composed of Alabama, Mississippi, Kentucky, and Tennessee) up to 91% in the Pacific (California, Oregon, and Washington). Notably, many local municipalities in the East South Central region have been preempted by their state governments from passing paid leave and sick day policies.

Figure B

The second recommendation from the CDC is to contact your healthcare provider.

We know in that the United States, millions of people delay getting medical treatment because of the costs. The latest Census numbers tell us that over 27 million people in this country are uninsured, up nearly two million over the previous year. These trends are moving in the wrong direction, notably because of losses in Medicaid coverage. Without health insurance, many do not have a regular source of careand simply won't go to the doctor to get the attention and information they need to not only get better but reduce the spreading of disease.

The CDC recommendations all seem well and good but how does someone with no paid sick days or insurance cope?

Luckily, policymakers can choose to act. Federal legislators can require employers to provide paid leave for workers to stay home when they are sick, as many states have done. And, policymakers can finally pass legislation that gives everyone the right to affordable health care when they need it.

 -- via my feedly newsfeed

Krugman: When a Pandemic Meets a Personality Cult [feedly]

PK nails it. Watch out for Trump  "states of emergency" once he abandons "its a democratic hoax" position.

When a Pandemic Meets a Personality Cult
text only:

So, here's the response of the Trump team and its allies to the coronavirus, at least so far: It's actually good for America. Also, it's a hoax perpetrated by the news media and the Democrats. Besides, it's no big deal, and people should buy stocks. Anyway, we'll get it all under control under the leadership of a man who doesn't believe in science.

From the day Donald Trump was elected, some of us worried how his administration would deal with a crisis not of its own making. Remarkably, we've gone three years without finding out: Until now, every serious problem facing the Trump administration, from trade wars to confrontation with Iran, has been self-created. But the coronavirus is looking as if it might be the test we've been fearing.

And the results aren't looking good.

The story of the Trump pandemic response actually began several years ago. Almost as soon as he took office, Trump began cutting funding for the Centers for Disease Control and Prevention, leading in turn to an 80 percent cut in the resources the agency devotes to global disease outbreaks. Trump also shut down the entire global-health-security unit of the National Security Council.

Experts warned that these moves were exposing America to severe risks. "We'll leave the field open to microbes," declared Tom Frieden, a much-admired former head of the C.D.C., more than two years ago. But the Trump administration has a preconceived notion about where national security threats come from — basically, scary brown people — and is hostile to science in general. So we entered the current crisis in an already weakened condition.

And the microbes came.

The first reaction of the Trumpers was to see the coronavirus as a Chinese problem — and to see whatever is bad for China as being good for us. Wilbur Ross, the commerce secretary, cheered it on as a development that would "accelerate the return of jobs to North America."

The story changed once it became clear that the virus was spreading well beyond China. At that point it became a hoax perpetrated by the news media. Rush Limbaugh weighed in: "It looks like the coronavirus is being weaponized as yet another element to bring down Donald Trump. Now, I want to tell you the truth about the coronavirus. … The coronavirus is the common cold, folks."

Limbaugh was, you may not be surprised to hear, projecting. Back in 2014 right-wing politicians and media did indeed try to politically weaponize a disease outbreak, the Ebola virus, with Trump himself responsible for more than 100 tweets denouncing the Obama administration's response (which was actually competent and effective).

And in case you're wondering, no, the coronavirus isn't like the common cold. In fact, early indications are that the virus may be as lethal as the 1918 Spanish Flu, which killed as many as 50 million people.

Financial markets evidently don't agree that the virus is a hoax; by Thursday afternoon the Dow was off more than 3,000 points since last week. Falling markets appear to worry the administration more than the prospect of, you know, people dying. So Larry Kudlow, the administration's top economist, made a point of declaring that the virus was "contained" — contradicting the C.D.C. — and suggested that Americans buy stocks. The market continued to drop.

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At that point the administration appears to have finally realized that it might need to do something beyond insisting that things were great. But according to The Washington Post's Greg Sargent and Paul Waldman, it initially proposed paying for a virus response by cutting aid to the poor — specifically, low-income heating subsidies. Cruelty in all things.

On Wednesday Trump held a news conference on the virus, much of it devoted to incoherent jabs at Democrats and the media. He did, however, announce the leader of the government response to the threat. Instead of putting a health care professional in charge, however, he handed the job to Vice President Mike Pence, who has an interesting relationship with both health policy and science.

Early in his political career, Pence staked out a distinctive position on public health, declaring that smoking doesn't kill people. He has also repeatedly insisted that evolution is just a theory. As governor of Indiana, he blocked a needle exchange program that could have prevented a significant H.I.V. outbreak, calling for prayer instead.

And now, according to The Times, government scientists will need to get Pence's approval before making public statements about the coronavirus.

So the Trumpian response to crisis is completely self-centered, entirely focused on making Trump look good rather than protecting America. If the facts don't make Trump look good, he and his allies attack the messengers, blaming the news media and the Democrats — while trying to prevent scientists from keeping us informed. And in choosing people to deal with a real crisis, Trump prizes loyalty rather than competence.

Maybe Trump — and America — will be lucky, and this won't be as bad as it might be. But anyone feeling confident right now isn't paying attention.

 -- via my feedly newsfeed

Friday, February 28, 2020

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Thursday, February 27, 2020

Historical Wealth: How to Compare Croesus and Bezos [feedly]

More from Branko Milanovic on the history and character of wealth.

Historical Wealth: How to Compare Croesus and Bezos

Following on from his previous post, Branko Milanovic further explores the difficulty of comparing wealth over the ages and across societies. 
A few days ago I wrote a post on wealth comparisons overtime. I have done such a comparison myself in "The haves and the have-nots" and have used Adam Smith's argument that person's wealth ought to be measured in the amount of labor he commands. In other words, wealth needs to be measured in its historical context. I gave two examples of misleading wealth comparisons: over time, when we try to use the same bundle of commodities to compare Croesus and Bezos, and when we conflate wealth and power.
Here I would like to explain a bit more the problems with historical comparisons of wealth (or income) because they have direct bearing on our understanding of the past, and raise also some essentially philosophical points.
The difficulty of measurement of wealth between different periods derives not only because of our lack of data for most of the past but from the inability to meaningfully compare wealth or consumption patterns in the past with those of today. Some economists believe that if people in the past did not have certain amenities that we have today they must have been infinitely poorer. This is what one finds in Nordhaus and DeLong's view of historical progress as unfolfding through reduced cost of artificial lighting, the approach that Angus Maddison (in  "Contours of the World Economy: 1-2030") termed a "hallucigenic history".
The logic of such authors is as follows. Take the example of artificial lighting or voice recording. For Julius Caesar to read a book overnight, easily move at night around his palace, or listen to the songs he liked would have required perhaps hundreds of workers (slaves) to hold the torches or sing his favorite arias all night. Even Caesar, if he were to do that night after night, might, after some time, have run out of resources (or might have provoked a rebellion among the singers). But for us the expense for a similar pleasure is very small, even trivial, say $2 per night. Consequently, some people come to the conclusion that Caesar must have had tiny wealth measured in today's bundle of goods since a repeated small nightly expense of $2 (in today's prices) would have eventually ruined him. Other people at Caesar's time had obviously much less: ergo, the world today is incomparably richer than before, and people then must have felt horribly poor and deprived of all pleasurable things. (Even if you cannot feel deprived of the things you do not know exist.)
The logic seems at first reasonable even if somewhat extreme. But it is not reasonable. Let's extend this logic, now in a different direction, from us today to the next 500 years. Suppose that in 500 years people are able to choose for their vacation between Mars, Venus, Pluto or perhaps even to go further than that. Suppose they can fly around our solar system, go to the bottom of the ocean, zip from one end of the Earth to another in a few minutes, or do lots of fun things that we cannot imagine today, no more than Caesar could have imagined that his singers' voices could be recorded on a tiny chip and reproduced ad infinitum at almost no cost. And when we then look at Jeff Bezos' wealth today using the consumption opportunities of the future, that wealth is likely to look to us –from the vantage point of 500 years hence- insignificant. Bezos might be rich in our own terms, but he cannot fly to Mars this weekend, no matter how much he tries.  
So should we then absurdly turn around and claim that Jeff Bezos, Bill Gates et al. are poor? Clearly not. But thus, equally clearly, rich Romans were not poor either. In other words, we cannot compare wealth of vastly different epochs by using one yardstick, whether it be the yardstick of the past (which is on balance more reasonable) or the yardstick of the present. This is a well-known problem for empirical economic historians. If time-periods are not vastly apart, or rather if technologies and consumption baskets are not vastly different, we can perhaps use some equal weighting of the baskets (½ of the past and ½ of the present). But that clearly will not do for the very remote periods.
This is why wealth has to be measured with a yardstick belonging to the same time when that wealth exists.* And this is why Adam Smith's approach seems the only one that makes sense. No other commodity but labor power (an hour of unskilled work) is both as unchanged over time in terms of effort exerted, and yet paid the equivalent of different amounts of real goods and services reflecting the general level of productivity of a society. It is both covariant with wealth and an unvarying numeraire.     
Angus Maddison who created the original series comparing incomes of countries over a very long-run was perfectly aware of the problem. He directed his scorn towards those who believed that looking at the past through our today's lenses made them treat everybody who lived then as "cavemen": "[Such authors as] Nordhaus and DeLong have constructed fairytale scenarios that greatly exaggerate progress since 1800, before which they seem to believe that people lived like cavemen. These views are fundamentally wrong."


* The same problem technically applies to cross-country comparisons at a given point in time. However with globalization which brings similarity in technologies and consumption patterns across the world the comparisons are much more meaningful.

 -- via my feedly newsfeed

Wednesday, February 26, 2020

Epidemics and the real Thucydides Trap [feedly]

A powerful piece on the consequences of the Thuchdides Trap in the context of an epidemic: "Thus, the Thucydides' Trap is about the unavoidable nature of military confrontation between a rising power and a declining hegemon. In this scenario, Beijing is the challenger to American global supremacy and sooner or later Washington, as Sparta did many millennia ago, will find itself in a position where it will have to defend its global standing position by attacking China."

Epidemics and the real Thucydides Trap

Emilian Kavalski and Nicholas Ross Smith, from the University of Nottingham Ningbo China, explore the coronavirus outbreak through an international relations lens.

To "imagine" is a powerful human exercise, as many successful inventors around the world can attest. It is also a crucial, but perhaps sometimes underutilized, exercise for security analysis and forecasting.

So, let us imagine a scenario where a superpower launches an attack on the second-largest economic power in the world. The attack is pre-emptive, so it takes everyone by surprise. The conflict would immediately cause ripples that would be global in scope. It would lead to rapid militarization and the onset of military clashes, the internment and lockdown of enemy citizens and the persecution of sympathetic locals, and the bipolarization of the globe into "blocs".

But, unlike previous conflicts between large powers, this conflict would occur at a time of unprecedented (technology-infused) interconnectedness and interdependence. Therefore, the impact would not just be in the realm of security and defence or international trade and capital flows, but the very foundations of modern global society would be affected. The most crucial area of this conflict perhaps, given our increasingly cyber age and the enveloping "internet of things", would be the massive cyberspace battles over infrastructure and information that would ensue.

Now, imagine that this was not about a military confrontation, but about the spread of a virus.

Rather than a fictional scenario, ever since reports of a coronavirus outbreak in Wuhan first surfaced in December 2019, the, now termed, COVID-19 virus has managed to virtually isolate China from the rest of the world.

Millions of Chinese live under near 24-hour lockdown, in which they have to stay confined to their apartments and only a single member from a family is allowed to leave the home to get supplies every second day. Most public transport – planes, trains, taxis and car-sharing services – have been either halted or operate under very strict and limited terms. Travel in and out of China is difficult with most international airlines cancelling their services to the mainland for the foreseeable future. Those that are still able to leave are quarantined as soon as they reach their destinations; many of them in military facilities and detention centres.

Further to this, a putative information war has erupted over the virus, with the Chinese government saying one thing, while outside powers and authorities either questioning this narrative or suggesting alternative ones. China's reporting of the virus, especially its statistical transparency, is a cause of significant criticism (or at least suspicion) in the West. China has also been accused of bullying smaller partners to keep their borders open and of corrupting international organizations, such as the WHO. But, at the same time, in some quarters, China has been praised for its swift handling of the outbreak and its use of cutting-edge technology has been looked upon with awe.

In a matter of weeks, the COVID-19 virus has managed to achieve much more than President Trump's trade war managed in over a year: the practical "decoupling" of China from the rest of the world.

And, all of this happened without a single shot being fired.

Such developments suggest the futility of the traditional frameworks of analysts to explain the nature of events such as the COVID-19 virus. In times like this, it often takes a work of fiction to provide illumination and dispel the dominant paradigms of the time. The poetic ruminations of the 1980 Nobel Laureate for Literature, Czeslaw Milosz, offer just such a corrective:

People always live within a certain order and are unable to visualize a time when that order might cease to exist. The sudden crumbling of all current notions and criteria is a rare occurrence and is only characteristic of the most stormy periods in history. In general… the only possible analogy [for such] rapid and violent changes… may be the time of the Peloponnesian War, as we know it from Thucydides.

The irony today is that in this passage Milosz seemingly outlines (at least in a proto sense) perhaps one of the most clichéd analytical frameworks for understanding contemporary international politics,  one which is increasingly popular with policymakers in Washington: the Thucydides Trap. For Graham Allison, the author that coined the term, the conflict between the ancient Athens and Sparta offers a useful parallel for the likely trajectory of Sino-American relations.

The gist of the Thucydides' Trap is the argument that the Peloponnesian war was an inevitable product of 'the growth of Athenian power and the fear which this caused in Sparta'. Thus, the Thucydides' Trap is about the unavoidable nature of military confrontation between a rising power and a declining hegemon. In this scenario, Beijing is the challenger to American global supremacy and sooner or later Washington, as Sparta did many millennia ago, will find itself in a position where it will have to defend its global standing position by attacking China.

Milosz's putative Thucydides' Trap, however, did not use the Peloponnesian War as a framework for a contemporaneous international political issue but rather as an example of the failure to imagine a profound disruption to the routines and rhythms of daily life.

For Milosz and Thucydides alike, the real threat to a society and, by extension the place in the international political environment it inhabits, was not connected to war, regime type, or international grandstanding. Instead, it reflected the inability to imagine and hence prepare for a complete breakdown of the well-oiled whir and hum of everyday life.

For Thucydides, this disruption also came in the form of a virus, which entered Athens via the port of Piraeus in the summer of 430 BCE. The epidemic that it spawned devastated the Athenian population. Thucydides describes the complete breakdown of the social and political order in Athens as a result of a disease which wiped out young and old, rich and poor without any discrimination. Pericles, the leading citizen of Athens, was among those who succumbed to the plague. According to Thucydides: "the catastrophe was so overwhelming that men, not knowing what would happen next to them, became indifferent to every rule of religion or law".

The impact of the epidemic was so devastating that Athens failed to recover and ultimately lost the Peloponnesian war (although, if Sparta won is another debate). The key point is that in this version of the Thucydides' Trap, trust – an essential building block of political life – disappeared in the dust left behind the loss of what used to be the normal patterns of life. In its stead, lawlessness and chaos reigned in a period of great uncertainty, anxiety, and fear with devastating economic and political effects.

Yet, despite the overwhelming historical evidence of the profound impact of newly emergent diseases on human society – from Thucydides' time to the present day – it seems that politicians and security experts still tend to imagine conventional warfare as the means of societal demise. Some might challenge here that climate change has become a recognized "unconventional" threat to human society, but the lack of political will and action by those that matter is arguably a product of this entrenched myopia. As the situation with the COVID-19 virus indicates, many still prefer to deal with remote threats – such as the potential for WWIII between China and the United States – than with real ones affecting us now.

And this is what the real Thucydides' Trap is all about: the inability to imagine beyond our entrenched analytical confines.

Let us return to another work of fiction to summarise, this time the words of Milan Kundera who observed:

All of us have become prisoners of a rigid conception of what is important and what is not, and so we fasten our anxious gaze on the important while from a hiding place behind our backs, the unimportant wages its guerrilla war, which will end in surreptitiously changing the world and pouncing on us by surprise.

A silver lining from the unfolding tragedy of the COVID-19 virus might be the opportunity that it creates to reconsider whether what we think as important threats are indeed such and refocus attention and energy on addressing the real ones – such as global health, climate change, and, perhaps rising inequality. But given that we still seem to be looking to Thucydides and his fifth-century BC worldview and ideas for guidance, perhaps that is too much to ask.



Emilian Kavalski & Nicholas Ross Smith, University of Nottingham Ningbo China.

Image: 葉 正道 Ben(busy) Public Domain.

 -- via my feedly newsfeed

Tuesday, February 25, 2020

Krugman: this is the way the world ends.....maybe

This is the way the world ends. This is the way the world ends. This is the way the world ends. Not with a bang, but with a virus.

OK, it's not that bad — or at least I don't think it is. The coronavirus isn't the Black Death; so far there's no reason to believe that it will be remotely as deadly as the influenza epidemic that swept the world in 1918-19, killing as many as 50 million people.

But that said, we've clearly missed whatever chance we had of containing the disease's spread. And it's going to be seriously disruptive.

For some reason markets, which had been weirdly complacent for weeks, decided to panic yesterday. I don't know why it took so long, but there are three good reasons to be very worried about the economic impact of what isn't yet officially a pandemic, but is obviously headed for that status.

First, we have a deeply interdependent world economy, and China — still the epicenter of the pandemic, although this thing is going global fast — plays a very big role in world manufacturing. The last time we saw a comparable event — the SARS outbreak of 2002-3 — China accounted for around 7 percent of world manufacturing. Now it's more than a quarter, and a lot of production around the world depends on Chinese components.


And I'm not just talking about iPhones and all that. China, it turns out, supplies some of the crucial raw materials used in modern pharmaceuticals. This virus won't just disrupt world trade, it will disrupt the medical response.

Second, the world economy is poorly prepared to handle an adverse shock of any kind. Unemployment may be low — it's especially low in the United States, but even in Europe it's low by historical standards. But we've only been able to get close to full employment thanks to extremely low interest rates, which means that there's very little room to cut rates further if something goes wrong. And the coronavirus looks like something.

True, we could respond with fiscal stimulus — public spending and other measures to prop up demand. In fact, that's what the Chinese are doing. But the West seems paralyzed by ideology. In America, Republicans seem incapable of coming up with any proposal that doesn't involve tax cuts for the rich. In Europe, the Germans still treat economics as a branch of moral philosophy; saving is virtuous, and nobody can convince them that sometimes you need to spend.

Finally, the Trump administration seems both woefully and willfully unprepared to deal with a public health crisis. President Obama created a global disease "czar" to deal with Ebola; Trump eliminated the position, and substantially cut funding for the Centers for Disease Control, because his administration didn't consider pandemics a significant national security threat. So who's going to take charge if things get really scary? Jared Kushner?


Two indicators of the seriousness with which our current leadership is confronting the risks: Rush Limbaugh, recent recipient of the Presidential Medal of Freedom, dismisses the coronavirus as just the common cold, being "weaponized" against Donald Trump. And Larry Kudlow, the administration's top economist, responded to the market's fears by … urging Americans to buy stocks.

We still don't know how big a deal this virus will turn out to be. But there are good reasons to be seriously scared.


Tim Taylor Untangling India's Distinctive Economic Story [feedly]

From Tim Taylor, and in the interest of advancing economic literacy, an excellent review of literature on the Indian economy and history.

Untangling India's Distinctive Economic Story

It's easy enough to explain why China's economic development has gotten more attention than that of India. China's growth rate has been faster. China's effect on international trade has created more a shock for the rest of the global economy. In geopolitical terms, China looks more like a rival. Also, China's basic story-line of trying to liberalize a centrally-planned economy while keeping a communist government is fairly easy to tell.

But whatever the plausible reasons why China's economy has gotten more attention than India, it seems clear to me that India's economic developments have gotten far too little attention. A symposium in the Winter 2020 issue of the Journal of Economic Perspectives offers some insights:
I'll also mention an article on "Caste and the Indian Economy," by Kaivan Munshi, which appears in the December 2019 issue of the Journal of Economic Literaturea sibling journal of the JEP (that, is both are published by the American Economic Association).

Lamba and Subramanian point out that over the 38 years from 1980 (when India started making some pro-business reforms), India is one of only nine countries in world to have averaged an annual growth rate of 4.5%, with no decadal average falling below 2.9% annual growth. (The nine, listed in order of annual growth rates during this time with highest first, are Botswana, Singapore, Korea, Taiwan, Malta, Hong Kong, Thailand, India, and Malaysia.) Of course, one can tweak these cutoffs in various ways, but no matter how you slice it, India's growth rate over the last four decades has been remarkable. Moreover, India's population is likely to exceed China's in the near future.

But India's path to rapid growth has been notably different than many other countries. India is ethnically fractionalized, especially when the caste system is taken into account.In addition, India path to development has been "precocious," as Lamba and Subramanian put it, in two ways.

One involves the "modernization hypothesis" that economic development and democracy evolve together over time.  In India, universal suffrage arrived all at once when India became independent in 1948. For a sense of how dramatic this difference is, the graph below shows per capita GDP on the horizontal axis and degree of democracy on the vertical axis. The lines show the path of countries over time. Clearly, India defies the modernization hypothesis by having full democracy before development. China defies the modernization hypothesis in the other direction, by having develoment without democracy.
The other precocious factor for India is that economic development in most countries involves a movement from agriculture to manufacturing to services. However, India has largely skipped the stage of low-wage manufacturing, and moved directly toward a services-based economy. One underlying factor is India's "license raj"--the interlocking combinations of rules about starting a business, labor laws, and land use that have made it hard for manufacturing firms to become established. A related factor is that in global markets, India's attempts at low-wage manufacturing over the decades were outcompeted by Korea, Thailand, China--and now by the rise of robots.

The good side of this "precocious servicification" is that that high-income economies are primarily services and services are a rising part of international trade. The bad side is that this services economy works much better for the relatively well-educated in urban areas, and offers less opportunity for others--thus leading to greater inequality.

India faces a range of other issues as well. Environmental problems in India are severe: when it comes to air pollution for example, "22 of the top 30 most polluted cities in the world are in India." The role of women in India's economy and society is in some ways moving backward: "Female labor force participation in India has been declining from about 35 percent in 1990 to about 28 percent in 2015. For perspective, the female labor force participation rate in Indonesia in 2015 was almost 50 percent; in China, it was above 60 percent. In addition, the gap between India's labor force participation rate and the rate of countries with similar per capita GDP is widening, not narrowing. ... India's sex ratio at birth increased from 1,060 boys born for every 1,000 girls in 1970 to 1,106 in 2014, widening its gap from the biological norm of 1,050."

The capabilities of India's government are shaped by these underlying background factors. Devesh Kapur writes in JEP:
India's state performs poorly in basic public services such as providing primary education, public health, water, sanitation, and environmental quality. While it is politically effective in managing one of the world's largest armed forces, it is less effective in managing public service bureaucracies. The research literature on India has many discussions of programs that fail to deliver meaningful outcomes, or that are victims of weak implementation and rent-seeking behavior of politicians and bureaucrats, or that are vitiated by discrimination against certain social groups ...

But on the other side, the Indian state has a strong record in successfully managing complex tasks and on a massive scale. It has repeatedly conducted elections for hundreds of millions of voters—nearly 900 million in the 2019 general elections—without national disputes. In this decade, it has scaled up large programs such as Aadhaar, the world's largest biometric ID program (which crossed one billion people enrolled within seven years of its launch). Most recently, it has implemented the integrated Goods and Services Tax (GST), one of the most ambitious tax reforms anywhere in recent times. India ranks low on its ability to enforce contracts, but its homicide rate has dropped markedly from 5.1 in 1990 to 3.2 (per 100,000) in 2016 ... 
[T[he Indian state has delivered better in certain situations and settings: specifically, on macroeconomic rather than microeconomic outcomes; where delivery is episodic with inbuilt exit, rather than where delivery and accountability are quotidian and more reliant on state capacity at local levels; and on those goods and services where societal norms and values concerning hierarchy and status matter less, rather than in settings where these norms and values—such as caste and patriarchy—are resilient.

Kapur traces these issues back to the ethnic fractionalization, social cleavages and caste system in India, combined with India's early adoption of democracy. Moroever, India is a country with a low tax/GDP ratio and a relatively small number of taxpayers. He also points out that most government positions in India require a difficult civil-service examination, and by international standards India's government does not appear overstaffed. A pattern has evolved that India's government is relatively effective on big picture projects like electrification, but much less effective on local issues that are related to social expectations about caste and gender: for example, reforms related to education, or the welfare of children and women.  In countries as different as the United States and China, about 60% of all government employees are at the local level; in India, it's less than 20%.

India continues to have issues with caste differences, as explored in the article by Kaivan Munshi. he writes: 
Caste continues to play an important role in the Indian economy. Networks organized at the level of the caste or jatiprovide insurance, jobs, and credit for their members in an economy where market institutions are inefficient. Affirmative action for large groups of historically disadvantaged castes in higher education and India's representative democracy has, if anything, made caste more salient in society and in the public discourse. Newly available evidence with nationally representative data indicates that there has been convergence in education, income, occupations, and consumption across caste groups over time. ... The available evidence indicates that caste discrimination, at least in urban labor markets, is statistical, that is, based on differences in socioeconomic characteristics between upper and lower castes. ... Given the strong intergenerational persistence in human capital, the key variable driving convergence, it will be many generations before income and consumption are equalized across caste groups.
The caste-based economic networks that currently serve many functions will also disappear once markets begin to function efficiently. These networks continue to be active in the globalizing Indian economy because information and commitment problems are exacerbated during a period of economic change. In the long run, however, the markets will settle into place and the caste networks will lose their purpose. This has certainly been the experience in many developed countries. In the United States, for example, ethnic networks based on a European country (region) of origin supported their members through the nineteenth century into the middle of the twentieth century. Ultimately, however, these networks no longer served a useful role and today, outside of a few pockets, European ethnic identity in the United States is largely symbolic. We might expect caste to similarly lose its salience as India develops into a modern market economy, and there is some evidence that this process may have already begun.
 Amartya Lahiri takes up yet another issue: "On November 8, 2016, India demonetized 86 percent of its currency in circulation." Specifically, India declared that people needed to turn in their large-denomination bills at banks, and that the existing bills would be worthless moving forward. They would then be replaced with new currency. The policy had several goals, like making it impossible for organized crime to hide its accumulated gains in the form of cash, and bringing people into the banking system and the digital economy. But Lahiri argues that these larger goals were not much affected by the change. Instead, the main effect of the demonetization was causing short-term hardship and higher unemployment in the areas where the demonetization led to temporary cash shortages. I had not known that India had carried out similar demonetizations of large-denomination currency in 1946 and 1978--with, Lahiri argues, much the same minimal-to-negative effects.

India's record of sustained and strong economic growth appears to be in some danger from the "twin balance sheet challenge."  As Lamba and Subramanian put it:
The sustainability of growth—which in late 2019 has cratered to a near standstill— will be determined by structural factors salient amongst which is the "twin balance sheet challenge" initiated by the toxic legacy of the credit boom of the 2000s. Recently, the rot of stressed loans has spread from the public sector banks to the nonbank financial sector, and on the real side, from infrastructure companies to most notably the real estate sector with the latter threatening middle class savings. This contagion owes both to overall weak economic growth and slow progress in cleaning up bank and corporate balance sheets. A failure to resolve this challenge could mean a reprisal of the Japanese experience of nearly two decades of lost growth, but at a much lower level of per capita income. India's development experience could end up being a transition from socialism without entry to capitalism without exit because weak regulatory capacity and lack of social buy-in will have impeded the necessary creative destruction.
Thus, India's economy finds itself at a pivotal moment, facing both the short-run challenges of the twin balance sheet problem, the longer run economic problems of appropriate reforms to create an environment in which India's businesses can function and grow, the challenges of building transportation, energy, and communications infrastructure., and the social policy challenges of improving education and health care. Challenges never come singly.

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Monday, February 24, 2020

Enlighten Radio:End of the Road -- the Feb 20, 2020 Show -- "The Off-white Wedding Dress"

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Post: End of the Road -- the Feb 20, 2020 Show -- "The Off-white Wedding Dress"

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Workingclass Perspectives: Precarity Goes to the Movies [feedly]

Sherry Linkon and her cooperative do fascinating research into working class culture

Precarity Goes to the Movies

Two recent events, vastly different in scale and importance, nonetheless point to the importance of the concept of the precariat, a relatively new coinage for the class of exploited, underemployed and temp workers of the world. The Oscars' celebration of the South Korean film Parasiteforegrounded what even mainstream critics in the New York Times and the Washington Post called a "class war" between the comfortable rich in glossy mansions and the precariat, a miserable underclass who live in Seoul's gross banjiha or semi-basements.

The other event, the pandemic of the latest coronavirus COVID-19 that, among other horrors, curtailed the yearly—and only–vacation of hundreds of millions of Chinese migratory workers, who would normally travel home to the countryside from the industrial mega-cities in which they are similarly stuffed in overcrowded living conditions in dormitories and squalid apartments.

All over the world these workers of the precariat face remarkably similar working conditions, although they labor under many different titles: zero-hour contracts (United Kingdom), casual employment (Australia), low-hour contracts (Ireland), mini-jobs (Germany), subcontracted labor (India), non-hukuo migration (China), and McJobs or the gig economy (United States). We can hardly pretend that these workers are invisible: they are "illegal immigrants," fast-food workers, Uber and Lyft drivers, retail clerks, day laborers, landscape workers, migrant workers, child laborers, farm laborers, seasonal workers, house cleaners, nannies, domestic workers, hotel and motel workers, carwasheros, tech workers, adjunct professors, convict labor, recycling scavengers, and so-called "guest workers."

The precariat are everywhere, a vast global workforce defined by their transitory and tenuous relationship with employers emboldened by declining union membership numbers and the cost-saving outsourcing of labor by corporations and government entities alike. Guy Standing, former director of the Socio-Economic Program of the United Nations International Labour Organization and the leading chronicler of the precariat, examines how their lives are marked by the lack of health and safety regulations, job training, and stable income. As he argues in his 2011 book, The Precariat: The New Dangerous Class, the precariat has replaced the traditional proletariat with "a new mass class … characterized by chronic uncertainly and insecurity." They "consist of millions of people relegated to bits and pieces living, in and out of casual flexible jobs, unable to build an occupational identity." They are "wanted by the global market system" but are not simply a lumpenproletriat or underclass. They are even more vulnerable because they have no collective voice in their workplace and no short- or long-term job protection.

In the last twenty years, I have studied how the precariat are presented in both feature and documentary films. Using a broad definition of cinema, I have explored not only the traditional genres of labor documentaries and working-class feature films, but also other genres especially relevant to precarious work, such as epidemic cinema and films of catastrophe, as well as other forms of artistic expression, such as video games and films made for art installations and political protests by non-traditional filmmakers. I analyze 300 of these texts in my new book, The Cinema of the Precariat: The Exploited, Underemployed, and Temp Workers of the World (Bloomsbury).

When we consider the visual exploration of filmmakers of radically different backgrounds and intentions, we realize that the precariat has not been so invisible after all. Many of us know, for example, the classic television documentary, Harvest of Shame, Edward R. Murrow's pioneering televised exposé of the migrant workers' plight in 1960. That program launched an extended series of television documentaries, from 1960 through the 1990s, that I see as the first series of films about the precariat, though the term had not yet been coined. These films included white, African-American, and Latino migrant workers and farm laborers. At least six major programs, from What Harvest for the Reaper?(1968) through Children of the Harvest (1998), used Murrow's model of investigative journalism to expose the scandalous conditions of this substantial arm of the precariat and their devastating effect on their families.

The closing years of the twentieth century engendered another kind of massive migration in China and other developing countries, as workers both from within and without urban centers tried to survive austerity programs that eliminated economic safety nets. Between 1970 to 2009, as many as 340 million rural workers were crowded into edge cities and satellite factory towns, working upwards of sixteen hours a day for low pay to generate the Chinese economic miracle of economic growth. Numerous films have chronicled these exploited migratory workers. Lixin Fan's Last Train Home (2009), for example, follows a single family on a visit home after working for fifteen years in a garment factory in Guangdong Province only to return to find their factory shuttered because of the 2008 world financial crisis.

Other films document how desperate workers in South American countries had no choice but to move into shanty towns among massive garbage dumps to recycle plastics dumped in ever-increasing mounds of trash. For example, Recycled Life (2006) reveals a forty-acre ravine called the Guatemala City Dump, possibly the largest in the world, where hundreds of scavengers, the guajeros (from guaje or "a thing of little value") recycle millions of pounds of paper, plastic, and metal. In White Train (1993), we see hundreds of cartoneras (the recyclers, literally "the cardboard people") gleaning the trash of Buenos Aires and transporting their finds on unmarked special trains to the recycling centers.

Films about the recycling of discarded plastics and metals from electronic equipment in China and Southeast Asia and ship-breaking in India, Pakistan, and Bangladesh reveal the dangerous and life-threatening tasks the precariat engage in a desperate race to the bottom. Plastic China (2017) focuses on one of five thousand small home factories in the province of Shandong where plastic garbage is transformed into recyclable pellets. On a different and massive scale, workers swarm over discarded ships in select "shipbreaking" ports in the Indian subcontinent, as in Graveyard for Giants (2014). We see Bangladeshi workers suspended hundreds of feet in the air, blowtorching pieces of an old freighter: "Is this a way to live?" one asks the filmmaker.

Looking beyond films that explicitly consider precarious labor, I think we also gain insight on the precariat through film genres and video games that are not so obviously focused on working-class topics. Epidemic cinema has located the spread of diseases among the precariat at least since the 1950s when Elia Kazan's Panic in the Streets (1950) dramatized an outbreak of plague among the precariat and the lumpenproletariat in New Orleans. Much more recently politically-conscious video game makers have been influenced by traditional filmmakers to offer games in which players have to identify with the precariat to survive or "win." In the videogame Fort McMoney (2013), modeled on the fracking boom-town Ft. McMurray, Canada, players "walk" around the town, interview workers, and participate in decisions about the city's future.

The title—and subject matter–of Parasite suggests, like epidemic cinema, that the precariat is a threat to the oligarchy of the 1%, epitomizing the class divide that leaves the 99% struggling for decent pay, health benefits, and job security. The Cinema of the Precariat also devotes separate chapters to the films that demonstrate the 1%'s capitalist drive for profits and economic dominance and that chronicle the rise of alt-labor and the drive to organize the unorganized of the 99%.

While films about the precariat are not new, filmmakers have begun to show the need for new films that will, like Murrow's Harvest of Shame, make the precariat visible in the 21st century. It seems fitting that the documentary Food Chains (2014) returns to Immokalee, Florida, where Murrow began sixty years ago, to document new organizing drives among migrant labor and to take up the fight for workers' rights again.

Tom Zaniello

Tom Zaniello is a film and media scholar who has written several books on films about work and class, including Working Stiffs, Union Maids, Reds, and RiffraffThe Cinema of Globalizationand The Cinema of the Precariat

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