Friday, August 5, 2016

Reimagining the United Nations: A 2020 Vision [feedly]

Reimagining the United Nations: A 2020 Vision
http://www.globalpolicyjournal.com/blog/04/08/2016/reimagining-united-nations-2020-vision

"Does the United Nations Still Matter?" It often seems so irrelevant to the problems of the modern age that those words appeared last year on the front page of The New Republic magazine. More than seven decades after the UN's invention in 1945, our multiple planetary crises seem dramatically different from those confronting the generation that emerged from the rubble of the Second World War. Isn't it time to devise architectures of global governance intended not to avoid the mistakes of the 1930s, but focused instead on the intertwined predicaments of our own 21st Century?

A New Global Governance Commission

If so, we have a new guide to start the journey. It's the report from the "Commission on Global Security, Justice, and Governance," co-chaired by former U.S. Secretary of State Madeleine Albright and former UN Under-Secretary-General Ibrahim Gambari. The name they chose reflects the inescapable links the Commission sees among those three variables. Their report elaborately makes the case that we can't have security anywhere without justice, or justice anywhere without security. And it asserts that nothing could do more to provide both security and justice to much of humanity than smart 21st Century innovations in global governance.

Commission ReportThe Commission employs this paradigm to tackle three broad issue areas – the impact of climate change on the poor and vulnerable, the intersection between "cross-border economic shocks" and various cyber nightmares, and intrastate violence "in fragile states." Climate? The report proposes an "International Carbon Monitoring Entity" and a "Climate Engineering Advisory Board," as well as atmospheric modification and climate adaptation efforts – a welcome move beyond the usual focus on emissions reduction. "A hyperconnected global economy?" Vastly increasing Internet access and cybersecurity in the Global South will both help prevent cybercrime and promote a renewed focus on the UN's Sustainable Development Goals. Eruptions of intrastate bloodshed? The report calls for "peacebuilding audits" focused on atrocity prevention, investments in early-warning capabilities and rapid-response UN mediation teams, national military units designated and trained in advance for UN peacekeeping deployments, and "particular attention to inclusion of women in peace processes."

The Commission does not just offer "policy proposals" about tackling these transnational issues, but asserts instead that reimagining key elements of international institutions can provide new tools to surmount them. The Commission subtly threads the needle of contemporary political reality, advancing new ideas which one might say stand somewhere in between today's status quo and a more ideal array of global governance structures adequate to the magnitude of contemporary transnational challenges. So voices beyond the Commission can begin to think about the logical conclusions of some of its carefully parsed recommendations – and to define the eventual historical goals.

Expanding Our Global Governance Imagination

  • Regarding the UN Security Council, the Commission calls for adding new members beyond the present 15, creating a new kind of "dissenting vote … (that would) not block passage of a resolution," and "restraint in the use of the veto." Under Article 27 of the 1945 UN Charter, the representatives of Britain, France, America, Russia, and China -- the winners of a war that took place during the first half of the last century -- can "veto" Security Council action. This means that on any issue before the Council, one single country can prevent every other country in the world from any kind of collective action at all. Even when the heavy hand of the veto is not actually cast, it still dominates Council decision-making. The only initiatives that ever get advanced are ones which might actually fly with all five permanent members. It's the most extreme case of what the American political scientist Walter Dean Burnham calls "the politics of excluded alternatives." If the UN is ever to become both democratic and effective, the veto doesn't need to be "restrained." The veto needs to be eliminated.
  • The Commission recommends the creation of a "UN Parliamentary Network … to raise greater awareness and participation in UN governance." Today's UN represents only national executive branches. An analogy might be if every single member of the US Congress was appointed by state governors. This innovative new concept proposes that individuals already elected to national legislatures could be selected to sit in this new international body. That very idea has been promoted for years by the international "Campaign for a UN Parliamentary Assembly" based in Berlin. But the hope of this international campaign is that eventually the representatives in such a body would be not selected from national parliaments, but directly elected to a new transnational chamber. That's not such a far-fetched notion. An American woman living in Los Angeles elects particular individuals to represent her in the LA City Council, the California state legislature, and the U.S. Congress. Why shouldn't she be able to elect particular individuals to represent her at the global level as well? Whether a Parliamentary Network now or a newly invented Citizens Assembly later, we might just see the emergence of transnational political parties, which could dramatically increase the direct participation of ordinary citizens in global affairs.
  • Besides providing a forum for national government executive branches alone, the structure of the UN General Assembly put forth in the United Nations Charter contains two other fundamental flaws – which unfortunately the Commission's "UN Parliamentary Network" would do nothing to ameliorate. First, the principle of one nation one vote, for states large and small, India and Vanuatu alike, could hardly be more undemocratic or absurd.  Second, once votes are cast in the UN General Assembly, its decisions serve only as polite requests to the world. It has no power to make anything like universal laws. The obvious solution to those twin defects is to establish some kind of weighted voting system in the General Assembly (perhaps accounting for both population and monetary contributions to global public initiatives), and then to give the results of its balloting the force of international law (like Security Council decisions already possess). "One nation one vote" (and no power) is surely not the one and only concept we can ever envisage to legislate for and govern our one world.
  • "Tents, Water Run Short for Iraqis Fleeing Fallujah." "Nigerians at Refugee Camp Face Starvation." "Dire Funding Shortfalls Will Hit Aid to Yemen, UN Says." These recentWashington Post headlines from one single day demonstrate that the single greatest hindrance to the UN carrying out its multiple and often overwhelming missions is the absence of any kind of funding source beyond voluntary ad hoc contributions from member states. Many proposals have been put forth to remedy this structural deficiency. Probably the most well-known is the "Tobin Tax," devised by the late Nobel economics laureate James Tobin, which, by placing a microscopic fee on international currency speculation, could provide vast and reliable new resources for the entire UN system.
  • Finally, the Commission does not to put forth the most promising idea for preventing genocide and crimes against humanity – a permanent, directly-recruited, all-volunteer UN Rapid Deployment Force (UNRDF). Many don't realize that "UN Peacekeepers," in their distinctive blue helmets, are in every case national soldiers, dispatched and ultimately controlled by national governments on a case by case basis. A proposal for such a "UN Legion" was first put forward in 1948 by the first UN Secretary-General, Trygve Lie. A half century later, his successor Kofi Annan observed with some exasperation that the UN is the only fire department that cannot obtain fire engines until after the flames have broken out. A UNRDF would be poised to act not to serve the national interests of any individual state, but the common human interest we all share in relegating genocide to the dustbin of history. It could free the American president in particular from the excruciating dilemma of dispatching "the most powerful military in the world" to stop crimes that have little to do with us, or doing nothing while the nightmares continue to unfold. It might well deter the perpetrators of crimes against humanity from making their fateful choices in the first place. And it would give individual citizens of the world the opportunity not just "to serve their country," but to put their lives on the line to serve humanity. To bring both security and justice to countless violent conflicts -- where national governments are unwilling to deploy their own national forces because the fight in question does not engage their own national interests -- the world needs a UN army.

It is the complete absence of these kinds of smart institutional innovations, 70 years on, which lead so many to consider the UN so ineffectual and irrelevant. The problem with the UN is neither "Council deadlock" nor "bureaucratic timidity." The problem with the UN is the design of the UN. 

In 2020: A World Summit on Global Governance

Fortunately, however, the Commission atones for any of its hesitancies with one overarching recommendation. It calls for convening in 2020 -- the 75th anniversary of the birth of the United Nations – a formal global summit, of both governments and non-governmental actors, called a "World Summit on Global Security, Justice, and Governance."

The Commission report emphasizes that most of what it proposes could be accomplished in 2020 without revising the 1945 UN Charter. But it does acknowledge that to advance the broad overall agenda, "consideration could be given … to Articles 108 or 109." That first is the provision in the Charter for making individual Charter amendments, while the second provides for summoning "A General Conference of the Members of the United Nations for the purpose of reviewing the present Charter." Indeed, Article 109(3) indicates that the framers intended for such a conference to be held no later than "the 10th annual session" -- 1955! Today the UN is into its 71st annual session.  But no such formal Charter review process has ever been launched.

A world summit on global governance during the UN's 75th anniversary year could provide a once-in-our-lifetime opportunity to reinvent humanity's architectures of world order. It would allow many to suggest that a redesigned United Nations might tackle not just the bloody upheavals inside "fragile states" that the Commission identifies, but the ancient and omnipresent danger of military confrontations between nations -- and actually find a way to save succeeding generations from the scourge of war. Civil society activists on a vast variety of other issues – climate, human rights, the education of girls, migration, poverty and inequality and ever-increasing economic globalization – all could pursue global institutional reforms to advance their issues through the vehicle of such a 2020 world summit. NGOs could engage their constituencies on a large menu of imaginative global governance proposals focused upon their own agendas. (The Commission to its credit urges nongovernmental participation and civil society agitation on nearly every page.) Indeed, the American NGO Citizens for Global Solutions(founded in 1947 as the "United World Federalists for World Government with Limited Powers Adequate to Prevent War") is already laying plans to mobilize a broad coalition -- of multiple actors who might possess a great many different issue priorities and world order visions -- behind the singular call for governments to commit now to convening in the year 2020 a world summit on global governance.

Humanity's "Ultimate Aims"

On November 12, 1946, the Prime Minister of the United Kingdom, Clement Attlee, announced to the House of Commons that nothing less than a world government could serve as "the ultimate aim of Great Britain's foreign policy." (Attlee succeeded one Winston Churchill in that post – who repeatedly suggested much the same thing.) What strikes one about this utterly forgotten vision is not just how few world leaders would say anything like it today, but how rarely they speak about any sort of "ultimate aims" in the realm of world order at all.

As we approach the year 2020, our agenda should not be limited solely to what we might practically try to achieve in the year 2020. We also ought to begin to talk about the kinds of structures of global governance we might hope to enact by, oh, the UN's 100th anniversary year, in 2045. And, perhaps too, about the world political structure and the nature of the human condition that we might hope for at the very end of the present century, in 2099. That last might seem inconceivably remote and distant -- far too much so to utter any kind of meaningful predictions or prescriptions. And yet a child 6 years old today will be 89 years old in 2099. Surely, we ought not hesitate to express our hopes regarding how future history might unfold during the space of a single human lifetime.

That leads to some Very Big Questions.

What kind of United Nations would we create if we were designing it from scratch today? If the League of Nations was the first and the United Nations the second, can we begin to envision a "Third Generation World Organization" – Version 3.0? Might the modest "UN Parliamentary Network" proposed by the Commission evolve someday into a true world legislature – what Alfred Lord Tennyson called in 1835 "The Parliament of Man?" Can we dream that some distant day the human race might eliminate both permanent national military establishments and endless international arms races, through the establishment of what the University of Chicago's Committee to Frame a World Constitution in 1948 called a "Federal Republic of the World?"

That idea, of something like a world state, has been repeatedly advanced over the course of many centuries, by geniuses like Albert Einstein, H.G. Wells, Victor Hugo, Immanuel Kant, Jean Jacques Rousseau, William Penn … dating as far back as Dante! But is a world state in fact a desirable destination, or might its costs and risks exceed its benefits? If desirable, could it ever be achievable? If not desirable or not achievable, what are the likely costs, benefits, and risks of the contemporary state sovereignty system enduring indefinitely, on and on into the dim mists of perpetuity? Can we envision any hypothetical models of world order beyond tribes with clubs, Thomas Hobbes's "bellum omnium contra omnes," the war of all against all? If we are going to put a message in a bottle and dispatch it to the Earthlings of the 22nd Century – containing our hopes and dreams for them -- what do we want it to say?

Almost certainly, the kinds of next steps in the social evolution of the human species suggested in these questions will not be accomplished in the year 2020. Politics, after all, as every freshman learns, is "the art of the possible." But we profoundly constrain our ability to imagine a brighter human future if we insist that every single proposal be weighed down by the ball and chain of "PPP" – present political possibility. Nothing will ever become a realistic goal unless someone first declares it a desirable goal – and proclaims it, however distantly, as humanity's eventual historical aspiration.

So civil society needs to begin working right now to persuade national governments to convene the world summit on global governance proposed by the Albright/Gambari Commission in 2020. Then it needs to endeavor to move those governments to push the edges of the envelope as far outward as possible during the UN's 75th anniversary year. But perhaps more than anything else, campaigns for human progress ought to set out to shatter the limitations – the ones that so many so often so completely take for granted – on humanity's collective political imagination, the future potential of our single global civilization, and the infinite historical possibility of One World. 

 

 

Tad Daley, JD, PhD, is a former policy advisor and speechwriter for three Democratic members of the United States Congress. One of these, U.S. Senator Alan Cranston (D-Cal, 1969-1993), served before he ran for public office as president of the United World Federalists (known as Citizens for Global Solutions today). Tad is author of the book from Rutgers University Press called APOCALYPSE NEVER: FORGING THE PATH TO A NUCLEAR-WEAPON FREE WORLD. He now directs the Project on Abolishing War at the Center for War/Peace Studies in New York. Please follow him on Twitter @TheTadDaleyThis post first appeared on Citizens for Global Solutions blog.

Photo credit: Sharon Mollerus via Foter.com / CC BY


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Dani Rodrik: Fairness and Free Trade

Fairness and Free Trade

Dani Rodrik - 5th August 2016


Dani Rodrik explores what China's role may mean for the global trade system.

The global trade system faces an important turning point at the end of this year, one that was postponed when China joined the World Trade Organization almost 15 years ago. The United States and the European Union must decide whether they will begin to treat China as a "market economy" in their trade policies. Unfortunately, even as the battle escalates over the course of this year, the terms of the choice ensure that nothing will be done to address the global trade regime's deeper flaws.

China's WTO accession agreement, signed in December 2001, permitted the country's trade partners to deal with China as a "non-market economy" (NME) for a period of up to 15 years. NME status made it a lot easier for importing countries to impose special tariffs on Chinese exports, in the form of antidumping duties. In particular, they could use production costs in more expensive countries as a proxy for true Chinese costs, increasing both the likelihood of a dumping finding and the estimated margin of dumping.

Today, though many countries, such as Argentina, Brazil, Chile, and South Korea, have already rewarded China with market-economy status, the world's two biggest economies, the US and the EU, have not. But, regardless of whether they do, antidumping measures are ill-suited to the task of addressing concerns about unfair trade – not because such concerns are ungrounded, but because they go well beyond dumping. Antidumping facilitates protectionism of the worst kind, while doing nothing for countries that need legitimate policy space.

Economists have never been fond of the WTO's antidumping rules. From a strictly economic standpoint, pricing below costs is not a problem for the importing economy as long as the firms that engage in the strategy have little prospect of monopolizing the market. That is why domestic competition policies typically require evidence of anti-competitive practices or the likelihood of successful predation. Under WTO rules, however, pricing below costs on the part of exporters is sufficient for imposing import duties, even when it is standard competitive practice – such as during economic downturns.

This and other procedural considerations make antidumping the preferred route for firms to obtain protection from their foreign rivals when times are tough. The WTO does have a specific "safeguard" mechanism that enables countries to raise tariffs temporarily when imports cause "serious injury" to domestic firms. But the procedural hurdles are higher for safeguards, and countries that use them have to compensate adversely affected exporters.

The numbers speak for themselves. Since the WTO was established in 1995, more than 3,000antidumping duties have been put in place (with India, the US, and the EU being the heaviest users). The corresponding number for safeguard measures is a mere 155 (with developing countries being the heaviest users). Clearly, antidumping is the trade remedy of choice.

But the global trade regime has to address issues of fairness, in addition to economic efficiency. When domestic firms must compete with, say, Chinese firms that are financially supportedby a government with deep pockets, the playing field becomes tilted in ways that most people would consider unacceptable. Certain types of competitive advantage undermine the legitimacy of international trade, even when (as with this example) they may imply aggregate economic benefits for the importing country. So the antidumping regime has a political logic.

Trade policymakers are deeply familiar with this logic, which is why the antidumping regime exists in its current form, enabling relatively easy protection. What trade officials have never taken on board is that the fairness argument extends beyond the dumping arena.

If it is unfair for domestic firms to compete with foreign entities that are subsidized or propped up by their governments, is it not similarly unfair for domestic workers to compete with foreign workers who lack fundamental rights such as collective bargaining or protections against workplace abuse? Aren't firms that despoil the environment, use child labor, or provide hazardous employment conditions also a source of unfair competition?

Such concerns about unfair trade lie at the heart of the anti-globalization backlash. Yet legal trade remedies permit little room for them beyond the narrow commercial realm of below-cost pricing. Labor unions, human rights NGOs, consumer groups, or environmental organizations do not have direct access to protection in the way that firms do.

Trade experts have long been wary of opening up the WTO regime to questions about labor and environmental standards or human rights, fearing the slippery slope of protectionism. But it is becoming increasingly clear that excluding these issues does greater damage. Trade with countries that have very different economic, social, and political models raises genuine concerns about legitimacy. Refusal to acknowledge such concerns not only undermines these trade relationships; it also jeopardizes the legitimacy of the entire global trade regime.

None of this implies that democracies should not trade with non-democracies. The point is that commercial logic is not the only consideration that should govern their economic relationships. We cannot escape – and therefore must confront – the dilemma that gains from trade sometimes come at the expense of strains on domestic social arrangements.

Public discussion and deliberation are the only way that democracies can sort out the contending values and tradeoffs at stake. Trade disputes with China and other countries are an opportunity for airing – rather than repressing – these issues, and thus taking an important step toward democratizing the world's trade regime.

 

Dani Rodrik is Professor of International Political Economy at Harvard University's John F. Kennedy School of Government. He is the author of The Globalization Paradox: Democracy and the Future of the World Economy and, most recently, Economics Rules: The Rights and Wrongs of the Dismal Science.

Article Copyright: Project Syndicate 2016

Photo credit: hans-johnson via Foter.com / CC BY-ND

John Case
Harpers Ferry, WV

The Winners and Losers Radio Show
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Mike Konczal: The Right wants Glass Steagal for wrong reasons

The Right Wants Glass-Steagall for the Wrong Reasons

By Mike Konczal | 

It's impossible to look at any single financial regulation without understanding the problem it is trying to solve and how it would hang together with the rest of the financial regulatory regime. This is why cost-benefit analysis of financial rules isn't very useful, as any rule depends on all the other rules. It also means that two people who agree on one idea for regulation could still bring about two very different worlds, one significantly worse than the other.

This has happened with Glass-Steagall, the Depression-era separation of commercial and investment banking. Both the Republicans and Democrats endorsed its return in their party platforms. But there are two ways to talk about the reform, a Left and a Right way to imagine what problem Glass-Steagall would solve and what kind of financial regulatory regime you would have after it was reinstated. I think the Right's way is wrong, dangerously so, and would leave us with a split regulatory regime and a world very similar to 2007.

The Left's Approach to Glass-Steagall

The Left story would argue that the risks of investment banking are so great that they put FDIC insurance at risk. The wave of losses hitting investment banks like Lehman Brothers and Bear Stearns in 2008 were bad enough, but when that wave of losses was about to hit a bank like Citigroup it became far riskier. As Barry Ritholtz described,Glass-Steagall's repeal was "not a cause, but a multiplier" of the crisis. Imposing Glass-Steagall would reduce this spillover risk; it would also make it easier to resolve said firms in a crisis, while reducing their political power. The extent to which this is important and a priority has been debated extensively in the primary, but it is a clear story.

It follows from this story that you would extend important stability regulations to all the new, standalone investment banks created by reinstating Glass-Steagall. You'd use the designation powers of Dodd-Frank to require them to be funded with more capital and equity and prepare for how they'd handle a crisis. They'd be subject to the Consumer Financial Protection Bureau, the same consumer regulator as commercial banks. In short, you'd standardize the regulatory regime.

The Right's Approach to Glass-Steagall

Here's another story about Glass-Steagall: The protections around commercial banking caused the financial crisis. Federal backstops for consumer deposits mingled with normally boring investment banking to make both far riskier than they would have been otherwise. Commercial banking obligations, such as the Community Reinvestment Act, made it worse. As Thomas Hoenig argues, "A safety net was extended beyond commercial banks to bank holding companies and broker-dealers […] The Federal Deposit Insurance Corporation (FDIC) fund and the taxpayer are the underwriters of this private risk-taking [leading up to the crisis]."

I personally think the idea that FDIC insurance was responsible for the crisis is difficult to justify on any number of grounds, but the important thing about this story is that it absolve investment banking of any systemic risk. The Left's story is about the risks investment banks pose to commercial banks; the Right's story is about the risks commercial banks pose to investment banks. If commercial banking regulation lead to the crisis, you wouldn't want to extend it to investment banks.

As a result, the Right's story calls for splitting the regulatory regime and rolling back reform, which is exactly what the Republican platform does. The RNC platform makes a point of ending Dodd-Frank, including its ability to regulate investment banks, while also attacking the CFPB at length. It says the cause of the crisis was "the government's own housing policies," not mentioning Wall Street. Interestingly, it includes a demand "that FDIC-regulated banks are properly capitalized." Note that this purposeful phrasing means the new investment banks would be exempt from the requirement for more capital.

The Serious Consequences

So the Right's plan would involve creating many new investment banks while taking away Dodd-Frank's new abilities to subject them to higher capital requirements and crisis preparation. There'd be no FSOC or SIFI designation, so no way to heighten their regulations. No CFPB to standardize consumer protection, and no tools to wind them down. In other words, it would be the world of 2007 all over again.

But there's a deeper issue here. The crisis showed that it is difficult to draw a clear line between the risks of commercial banking and investment banking, and as such, it's crucial to standardize the regulatory regime between the two, no matter what activities you allow any one firm to do.

I'm going to quote at length from a fascinating discussion I had with Columbia law professor Jeffrey Gordon over his new book Principles of Financial Regulations. Gordon notes that "Glass-Steagall divided the world intellectually into two distinct financial arenas, securities markets and banking. Securities markets were subject to the regulatory authority of the SEC, whose major tools were disclosure and enforcement; the banking agencies oversaw banks using a strategy of prudential oversight. Legal specialization aligned this way; so did academic work."

However, he says, "in the ensuing decades, an increasing share of financial activity took place in the large space of functional overlap between banks and securities markets." Since those activities were securities markets, "the principal regulatory tool was disclosure, even though the core activity was maturity and liquidity transformation, the sort of activity that we have learned from banking requires prudential oversight for stability." He concludes that "[t]he consequence of this regulatory mismatch was a massive increase in systemic risk."

Worse, Gordon believes that this separation helped with the development of shadow banking. "The development of market-based credit intermediation was not by chance. Glass-Steagall created a set of institutions – investment banks – that came to see that their living depended on inventive ways to use securities market for debt finance. Hence the rapid financial innovations in debt markets in the run-up to the financial crisis." Gordon contrasts that system with the universal banks of Europe, which were slower to develop market-based debt finance.

It's difficult to determine if Glass-Steagall is a serious policy priority for Donald Trump or not, and whether it will be in the next Republican platform. But regardless of which activities you believe the largest financial institutions should be allowed to carry out, it's essential to ensure a unified regulatory regime. To cleave it in two, as the GOP platform would do, is to invite another disaster.

Mike Konczal is a Fellow with the Roosevelt Institute, where he works on financial reform, unemployment, inequality, and a progressive vision of the economy. His blog, Rortybomb, was named one of the 25 Best Financial Blogs by Time magazine. Follow him on Twitter @rortybomb.

John Case
Harpers Ferry, WV

The Winners and Losers Radio Show
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Employment Again Rises Sharply in July [feedly]

Employment Again Rises Sharply in July
http://economistsview.typepad.com/economistsview/2016/08/employment-again-rises-sharply-in-july.html


Dean Baker:

Employment Again Rises Sharply in July: The Labor Department reported the economy added 255,000 jobs in July. With the June number revised up to 292,000, the average for the last three months now stands at 190,000. The household survey also showed a positive picture, with employment rising by 420,000. With new people entering the labor force, the employment-to-population ratio (EPOP) edged up by 0.1 percentage point to 59.7 percent, while the unemployment rate remained unchanged at 4.9 percent.
The job gains in the establishment survey were broadly based. ...
Other news in the establishment survey was also positive. The length of the average workweek edged up by 0.1 hours leading to an increase in the index of aggregate weekly hours of 0.5 percent. There also is some evidence of more rapid wage growth. The year-over-year increase in the average hourly wage was 2.6 percent. The annual rate comparing the average for the last three months with the prior three months was 2.8 percent. If this continues, workers will be able to get back some of the share lost to profits in the downturn.
While the household survey is mostly positive, there are some aspects that continue to suggest labor market weakness. The duration measures of unemployment all increased in July, with the average duration of unemployment spells rising from 27.7 weeks to 28.1 weeks and the median from 10.3 weeks to 11.6 weeks. These durations are more consistent with a recession than a strong labor market.
Similarly, the number of people involuntarily working part-time rose slightly to 5.94 million. This followed a sharp drop in June, but it is nonetheless quite high for a labor market with an unemployment rate of 4.9 percent. Also, the percentage of unemployment due to voluntary job leavers remained at 10.7 percent. This compares with peaks of more than 12.0 percent before the recession and over 15.0 percent back in 2000.
One interesting note is that the least educated workers appear to be the biggest beneficiaries of recent job growth. The EPOP ratio for workers without high school degrees rose by 2.1 percentage points for the month and is 1.6 percentage points above its year ago level. The unemployment rate for this group is 1.9 percentage points below the year ago level. By contrast, the EPOP ratio for college grads is down by 0.5 percentage points from its year ago level while the unemployment rate is unchanged. The unemployment rate for workers with just a high school degree fell by 0.5 percentage points over the last year.
One positive item in this report is a sharp drop in black teen unemployment from 31.2 percent to 25.7 percent. These data are highly erratic, but the June level was a sharp reported rise from a low of 23.3 percent in February.
This is mostly a very positive report. In addition to the strong growth in jobs in the establishment survey, the household survey also showed a large jump in employment. The increase in hours, coupled with some evidence of more rapid wage growth, add to the positive picture. The labor market still has some way to go to fully recover, but it is making progress.

See  also Calculated RiskJared Bernstein.


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Re: [socialist-econ] Triple crisis: The Economics of Political Change in Developed Countries [feedly]

This is a very important article that should be shared widely.  It is an excellent argument for government intervention in labor markets and the economy more broadly to raise wages.  


Sent from my iPad

On Aug 5, 2016, at 6:36 AM, John Case <jcase4218@gmail.com> wrote:

The Economics of Political Change in Developed Countries
http://triplecrisis.com/the-economics-of-political-change-in-developed-countries/

Jayati Ghosh

Across the world, people have been watching recent political changes in developed countries with a mixture of bemusement and shock. From the recent anointment of Donald Trump as the Republican candidate for US President, to the rise and spread of blatantly racist anti-immigration political parties and movements in Europe, it is clear that there are tectonic shifts under way in the political discourse and practice in these countries. As these changes have gone from the unthinkable to the depressingly predictable, there are increasingly desperate attempts to understand what is driving them. This is especially the case because – despite all the talk of a shift in global power to some large "emerging nations" – what happens in the developed countries still matters hugely in international relations and to all of us in the rest of the world.

It is now obvious that increasing inequality, stagnant real incomes of working people and the increasing material fragility of daily life have all played roles in creating a strong sense of dissatisfaction among ordinary people in the rich countries. While even the poor amongst them still continue to be hugely better off than the vast majority of people in the developing world, their own perceptions are quite different, and they increasingly see themselves as the victims of globalisation.

But while this is increasingly recognised, the full extent of recent economic trends is probably less well known. A new report from the McKinsey Global Institute ("Poorer Than Their Parents? Flat or falling incomes in advanced economies", July 2016) brings out in detail how the past decade in particular has been significantly worse for many people in the developed world.

The report is based on a study of income distribution data from 25 developed countries; a detailed dataset with more information on 350,000 people from France, Italy and the United States and the UK; and a survey of 6,000 people from France, the United Kingdom and the United States that also checked for perceptions about the evolution of their incomes.

The results are probably not surprising in terms of the basic trends identified, but the sheer extent of the change and the deterioration in incomes still comes as a surprise. In 25 advanced economies, between 65 and 70 percent of households (amounting to around 540- 580 million people) were in segments of the income that experienced flat or falling incomes between 2005 and 2014. By contrast, in the previous period between 1993 and 2005, less than 2 percent (fewer than ten million people) faced flat or falling incomes.

The situation was much worse in particular countries. In Italy, a whopping 97 per cent of the population had stagnant or declining real incomes between 2005 and 2014, while the ratios were 81 per cent for the United States and 70 per cent in the United Kingdom. This refers to market incomes, and it is true that government tax and transfer policies can change the final disposable income of households, in some cases improving it. Indeed, for the 25 countries taken together, only 20-25 per cent experienced flat or falling disposable incomes. In the US, government taxes and transfers turned a decline in market incomes for 81 percent of households into an increase in disposable income for nearly all of them.

Similarly, government policies to intervene in labour markets also made a difference. In Sweden, the government intervened with measures designed to preserve jobs, so market incomes fell or were flat for only 20 percent, while tax and transfer policies ensured that disposable income advanced for almost everyone. But in most of the countries examined in the study, government policies were not sufficient to prevent stagnant or declining incomes 2 for a significant proportion of the population, and labour market trends contributed to feelings of insecurity among workers everywhere.

While these changes were evident across the board, the worst affected were less educated workers, and particularly the younger ones among them, as well as women, especially single mothers. The report notes that today's younger generation in the advanced countries is at real risk of ending up poorer than their parents, and in any case already faces much more insecure working conditions.

This material reality is actually quite accurately reflected in popular perceptions. A survey conducted in 2015 of British, French and US citizens confirmed this, as approximately 40 per cent of those surveyed felt that their economic positions had deteriorated. Interestingly it was also such people, as well as those who did not expect the situation to improve for the next generation, who felt most negatively about both trade and migration. More than half of this group agreed with the statement, "The influx of foreign goods and services is leading to domestic job losses," compared with 29 per cent of those who were advancing or neutral. They were also twice as likely to agree with the statement, "Legal immigrants are ruining the culture and cohesiveness in our society," compared to those advancing or neutral. The survey also found that those whose incomes were not improving and who were not hopeful about the future were more likely in France to support political parties such as Front National and in Britain to support Brexit.

One major driver of stagnant worker incomes has been the combination of labour market developments and public policies that have resulted in declining wage shares of national income. The report notes that from 1970 to 2014 – with the brief exception of a spike during the 1973–74 oil crisis – the average wage share across the 6 countries studied in depth (United States, United Kingdom, France, Italy, the Netherlands and Sweden) fell by 5 percentage points. In the most extreme case of the United Kingdom, it declined by 13 percentage points. These declines in wage shares occurred despite increases in labour productivity, as the productivity gains were either grabbed by employers or passed on in the form of lower prices to maintain external competitiveness.

Such declining wage shares are commonly seen to be the result of globalisation and technological changes that have led to changing patterns of demand for low-skill and medium-skill workers. But even here, it is evident that state policies and institutional relations in the labour market matter. In Sweden, where 68 percent of workers are union members and the government has in place policies that enforce contracts that protect both wage rates and hours worked, the median household received a greater share of output that went to wages, and even got more of the gains from aggregate income growth than households in the top and bottom income deciles over the 2005–14 period.

By contrast, countries that have encouraged the growth of part-time and temporary contracts experienced bigger declines in wage shares. Once again, this is especially adverse for the young. According to European Union official data, more than 40 per cent of workers aged between 15 and 25 years in the 28 countries of the EU have such insecure and low- paying contracts, while the proportion is more than half for the 18 countries in the Eurozone, 58 per cent in France and 65 per cent in Spain. This is obviously a concern for the young people who have to experience this, but it is as much a source of unhappiness and anger for their parents who worry for the future of their children.

In the meantime, they can all observe the counterpart in terms of rising profit shares in many of these rich countries. Economic processes and government policies increasingly appear to favour plutocratic tendencies. In the United States, for example, post-tax profits of firms in the period 2010-14 reached more than 10.1 per cent of GDP, a level last reached in 1929 just before the Great Depression. Ironically, in the US this is apparently favouring the political rise of one of the biggest beneficiaries of this process, Donald Trump who is himself emblematic of such plutocracy.

If economic policies do not change dramatically to favour more good quality employment and better labour market outcomes through co-ordinated fiscal expansions, to lift growth in more inclusive ways, things are likely to get even worse. The report projects that even if the previous high-growth trajectory is resumed (an unlikely prospect) at least 30-40 per cent of households would not get income gains over the next decade, especially if technological changes like more automation accelerate. And if the slow growth conditions of 2005–12 persist, the proportion of households experiencing flat or falling incomes could go to as much as 70-80 per cent by 2025.

The unpleasant and even terrifying political fallout of such outcomes is now only too evident. How much more will it take for political leaders to recognise the need for a move away from business as usual to radical change in economic policies?

Triple Crisis welcomes your comments. Please share your thoughts below.

Triple Crisis is published by


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Triple crisis: The Economics of Political Change in Developed Countries [feedly]

The Economics of Political Change in Developed Countries
http://triplecrisis.com/the-economics-of-political-change-in-developed-countries/

Jayati Ghosh

Across the world, people have been watching recent political changes in developed countries with a mixture of bemusement and shock. From the recent anointment of Donald Trump as the Republican candidate for US President, to the rise and spread of blatantly racist anti-immigration political parties and movements in Europe, it is clear that there are tectonic shifts under way in the political discourse and practice in these countries. As these changes have gone from the unthinkable to the depressingly predictable, there are increasingly desperate attempts to understand what is driving them. This is especially the case because – despite all the talk of a shift in global power to some large "emerging nations" – what happens in the developed countries still matters hugely in international relations and to all of us in the rest of the world.

It is now obvious that increasing inequality, stagnant real incomes of working people and the increasing material fragility of daily life have all played roles in creating a strong sense of dissatisfaction among ordinary people in the rich countries. While even the poor amongst them still continue to be hugely better off than the vast majority of people in the developing world, their own perceptions are quite different, and they increasingly see themselves as the victims of globalisation.

But while this is increasingly recognised, the full extent of recent economic trends is probably less well known. A new report from the McKinsey Global Institute ("Poorer Than Their Parents? Flat or falling incomes in advanced economies", July 2016) brings out in detail how the past decade in particular has been significantly worse for many people in the developed world.

The report is based on a study of income distribution data from 25 developed countries; a detailed dataset with more information on 350,000 people from France, Italy and the United States and the UK; and a survey of 6,000 people from France, the United Kingdom and the United States that also checked for perceptions about the evolution of their incomes.

The results are probably not surprising in terms of the basic trends identified, but the sheer extent of the change and the deterioration in incomes still comes as a surprise. In 25 advanced economies, between 65 and 70 percent of households (amounting to around 540- 580 million people) were in segments of the income that experienced flat or falling incomes between 2005 and 2014. By contrast, in the previous period between 1993 and 2005, less than 2 percent (fewer than ten million people) faced flat or falling incomes.

The situation was much worse in particular countries. In Italy, a whopping 97 per cent of the population had stagnant or declining real incomes between 2005 and 2014, while the ratios were 81 per cent for the United States and 70 per cent in the United Kingdom. This refers to market incomes, and it is true that government tax and transfer policies can change the final disposable income of households, in some cases improving it. Indeed, for the 25 countries taken together, only 20-25 per cent experienced flat or falling disposable incomes. In the US, government taxes and transfers turned a decline in market incomes for 81 percent of households into an increase in disposable income for nearly all of them.

Similarly, government policies to intervene in labour markets also made a difference. In Sweden, the government intervened with measures designed to preserve jobs, so market incomes fell or were flat for only 20 percent, while tax and transfer policies ensured that disposable income advanced for almost everyone. But in most of the countries examined in the study, government policies were not sufficient to prevent stagnant or declining incomes 2 for a significant proportion of the population, and labour market trends contributed to feelings of insecurity among workers everywhere.

While these changes were evident across the board, the worst affected were less educated workers, and particularly the younger ones among them, as well as women, especially single mothers. The report notes that today's younger generation in the advanced countries is at real risk of ending up poorer than their parents, and in any case already faces much more insecure working conditions.

This material reality is actually quite accurately reflected in popular perceptions. A survey conducted in 2015 of British, French and US citizens confirmed this, as approximately 40 per cent of those surveyed felt that their economic positions had deteriorated. Interestingly it was also such people, as well as those who did not expect the situation to improve for the next generation, who felt most negatively about both trade and migration. More than half of this group agreed with the statement, "The influx of foreign goods and services is leading to domestic job losses," compared with 29 per cent of those who were advancing or neutral. They were also twice as likely to agree with the statement, "Legal immigrants are ruining the culture and cohesiveness in our society," compared to those advancing or neutral. The survey also found that those whose incomes were not improving and who were not hopeful about the future were more likely in France to support political parties such as Front National and in Britain to support Brexit.

One major driver of stagnant worker incomes has been the combination of labour market developments and public policies that have resulted in declining wage shares of national income. The report notes that from 1970 to 2014 – with the brief exception of a spike during the 1973–74 oil crisis – the average wage share across the 6 countries studied in depth (United States, United Kingdom, France, Italy, the Netherlands and Sweden) fell by 5 percentage points. In the most extreme case of the United Kingdom, it declined by 13 percentage points. These declines in wage shares occurred despite increases in labour productivity, as the productivity gains were either grabbed by employers or passed on in the form of lower prices to maintain external competitiveness.

Such declining wage shares are commonly seen to be the result of globalisation and technological changes that have led to changing patterns of demand for low-skill and medium-skill workers. But even here, it is evident that state policies and institutional relations in the labour market matter. In Sweden, where 68 percent of workers are union members and the government has in place policies that enforce contracts that protect both wage rates and hours worked, the median household received a greater share of output that went to wages, and even got more of the gains from aggregate income growth than households in the top and bottom income deciles over the 2005–14 period.

By contrast, countries that have encouraged the growth of part-time and temporary contracts experienced bigger declines in wage shares. Once again, this is especially adverse for the young. According to European Union official data, more than 40 per cent of workers aged between 15 and 25 years in the 28 countries of the EU have such insecure and low- paying contracts, while the proportion is more than half for the 18 countries in the Eurozone, 58 per cent in France and 65 per cent in Spain. This is obviously a concern for the young people who have to experience this, but it is as much a source of unhappiness and anger for their parents who worry for the future of their children.

In the meantime, they can all observe the counterpart in terms of rising profit shares in many of these rich countries. Economic processes and government policies increasingly appear to favour plutocratic tendencies. In the United States, for example, post-tax profits of firms in the period 2010-14 reached more than 10.1 per cent of GDP, a level last reached in 1929 just before the Great Depression. Ironically, in the US this is apparently favouring the political rise of one of the biggest beneficiaries of this process, Donald Trump who is himself emblematic of such plutocracy.

If economic policies do not change dramatically to favour more good quality employment and better labour market outcomes through co-ordinated fiscal expansions, to lift growth in more inclusive ways, things are likely to get even worse. The report projects that even if the previous high-growth trajectory is resumed (an unlikely prospect) at least 30-40 per cent of households would not get income gains over the next decade, especially if technological changes like more automation accelerate. And if the slow growth conditions of 2005–12 persist, the proportion of households experiencing flat or falling incomes could go to as much as 70-80 per cent by 2025.

The unpleasant and even terrifying political fallout of such outcomes is now only too evident. How much more will it take for political leaders to recognise the need for a move away from business as usual to radical change in economic policies?

Triple Crisis welcomes your comments. Please share your thoughts below.

Triple Crisis is published by


 -- via my feedly newsfeed

Thursday, August 4, 2016

Carlotta Perez Remarks on TECHNOLOGICAL REVOLUTIONS AND POLITICAL CHOICES

Carlota Perez is a most interesting Venezuelan Schumpeterian, on the left wing of his economic descendants, and a long waver. She researches the concept of Techno-Economic paradigm shifts and the theory of great surges, a further development of Schumpeter's work on Kondratieff waves. In 2012 she was awarded the Silver Kondratieff Medal by the International N. D. Kondratieff Foundation.  For you left wing historical reference hunters, Kondratieff was Lenin's favorite economist, and most influential in the drafting and argumentation for the New Economic Program -- later renounced and exterminated, along with Kondratiev, by Stalin, of course, but resurrected by Deng Chou Peng.

The following remarks were contracted by Shell Oil Corp as an honorarium for a presentation she did to their leadership.


A VIEW FROM PROFESSOR CARLOTA PEREZ

Since the industrial revolution, each subsequent technological revolution has gone through two different periods.

The first is installation, when unfettered markets in a financial frenzy set up a huge market experiment to define the products and the companies that will be the winners for the future; when the new infrastructures (canals, railways and telegraph, ports and steamships, highways and electricity or internet) are installed; and when the new paradigm is learned and adopted by companies and people. It is a time of 'creative destruction' as the Austrian economist Joseph Schumpeter rightly defined it. But the process often leads to a major bubble or two and can end in a huge financial crash. The recessions that follow reveal how much 'destruction' had gone on under the shine of the boom, including how much inequality resulted from the success of the relatively few involved in the bubble prosperity. It is by coming out of those recessions that past periods of golden age prosperities have been unleashed – bringing the second period of each technological revolution. They require government involvement to tilt the playing field in a direction that will reduce the risk for all and increase profitability through generating synergies in common suppliers, skills, knowledge, and consumer requirements. This is possible because each of the installed revolutions provides an enormous potential for transforming the whole economy and changing lifestyles in many possible directions. 


For example, the mass production revolution of the 20th century was shaped very differently by Nazi Germany, the Soviet Union, and the Western democracies. The latter provided clear directions for innovation to serve suburbanisation, European reconstruction, and the Cold War. What became the all-electric home with multiple appliances for cooking, freezing, and entertainment, with innumerable plastic objects, often meant for disposability, and a car at the door gave a clear direction for innovation and a well-defined shape to demand. 

Yet this was not achieved by markets alone but by a favorable context for markets to act. In the US and Europe, for example, that context included the welfare state, the consumer society, unemployment insurance (for uninterrupted payment of consumer credit), pensions (to safely spend monthly incomes without worrying about old age), and a progressive tax system able to fund the welfare state, the Cold War, massive state employment, education and health services, roads, and so on. And, while the income of public servants went into increasing demand, the publicly provided services freed income for consumption. 

The world is now in a similar historical moment requiring equally bold and systemic institutional and policy changes to harness the true potential offered by the digital and IT revolution of the last two decades and to give a direction to innovation. It is not to be any direction but one that has roots in the nature of the new technologies and in the problems inherited from the old ones. That direction is "green growth," widely understood as increasing the proportion of services and intangibles in GDP, world trade, and in lifestyles. Green growth involves reducing the amount of materials and energy in tangible products, decreasing or eliminating waste through reuse and recycling in the circular economy, making products really durable while moving to rental and maintenance, including 3D printing of parts for upgrading, and changing the ideal of a good life to one that involves fewer material goods, with an emphasis on exercise, creativity, preventive health care, unprocessed food (preferably grown nearby), community, communications activities, computer or smart phone-based music, films, books, education through a combination of online courses and face-toface interactions, experiential entertainment, and so forth. All this requires a massive shift to policies of indirect energy conservation, contributing to reduce carbon emissions. 

Most importantly, it makes it possible for the people of the whole world to aspire to a good life that is viable on our single planet. In addition to this change in consumer behavior, many profound changes also have to take place in manufacturing, power generation, land use, and other aspects of production in order to make the best of the IT revolution. In the current playing field, such a transformation cannot be achieved by markets alone. The field has to be tilted by state action, and this time also at the global level. 

Fortunately the transition to green growth has already begun to happen. The upper and educated layers of the population – together with many of the young –are adopting the ICT-intensive mode of living, together with health, exercise, adventure and concerts rather than purchasing commodities as entertainment. Imitation will follow as has happened historically – but it may not happen quickly or at an equal rate everywhere. 

Each technological revolution provides a new space of the possible that is then shaped by socio-political choice in the deployment period. That is the choice the world has ahead now. We can continue to a "gilded age" with financial markets and the military shaping the playing field, and with growing inequality and environmental degradation for the new millions who will inhabit our planet. Or we can create policies that encourage green growth, bringing social and environmental sustainability across the world with a rising standard of living even for the poorest. It is a task equivalent to what the welfare state and the new international institutions (World Bank, IMF, etc.) did for the post-war boom in the advanced countries of the West. It will require an equivalent amount of imagination and a huge dose of bold, collaborative political and business leadership


John Case
Harpers Ferry, WV

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