Simon Wren-Lewis (Mainly Macro): Why are the UK and US more vulnerable to right wing populism?

Why are the UK and US more vulnerable to right wing populism?

https://mainlymacro.blogspot.com/2017/05/why-are-uk-and-us-more-vulnerable-to_9.html

Cartoon by @ThomasHTaylor

A week or so ago, anticipating Macron's victory and following defeats of the far right in Holland and Austria, I asked on twitter why the US and UK seem to be more susceptible to right wing populism than elsewhere. It is a question that requires much more than a post to answer, but I thought the replies to my question were interesting.

Quite rightly, a large number of people questioned the premise. We have populist far right leaders in parts of Eastern Europe, for example. Maybe timing is also important, with the US and UK acting as warnings to other countries.

Nor should differences be exaggerated. Macron is quite unique in his achievements, and a runoff between Le Pen and the conventional right or left might have been closer. Trump lost the popular vote, and the Brexit vote was very close. What exactly is populism anyway: as someone said to me recently, elites use the label populist much as populists use the label elites.

On the other hand, one of the features of the Macron campaign is that he championed all the things that Brexit and Trump led us to believe were now politically unpopular and therefore to some extent compromised, especially globalisation and the EU. A number of people suggested specific features of European economies that might have cushioned the impact of globalisation more effectively: a stronger welfare state, for example, or stronger union power. One way of describing this is to say that neoliberalism has been less successful in Western Europe. Real wage growth has been poor in the UK and US, which may have a wider impact in electoral terms than higher unemployment in Europe.

Another set of suggested explanations focused on the rise of the very rich in the US and UK. Those who had recently achieved much higher incomes and wealth would be naturally keen to keep it, and would therefore do what they could to ensure democracy allowed them to keep (or increase) it. The obvious way to do this is through the media, although recent attempts at voter persuasion discovered by Carole Cadwalladr suggest it is not the only way. The UK press is perceived to be the most biased to the right among this sample of European countries apart from Finland. The US has talk radio and Fox news. These may persuade the non-partisan media to give undue coverage to far right individuals, which then increases their support. To the extent that the very rich are able to influence elections, we get what could be described as a managed democracy.

That in turn may be related to a remark by Matthew Yglesias: "You see in Trump vs Le Pen once again that authoritarian nationalist movements only win with the support of the establishment right." (The centre-right candidate in the French elections, Fillon, recommended his supporters vote for Macron.) Brexit was enabled by a Conservative leader offering a referendum, and more importantly Brexit was encouraged by his party attempting to shift the blame for austerity on to immigrants. Trump has been embraced by the Republican party. This narrative fits with this past post of mine.

It seems to me that these various explanations are quite compatible with each other. Where what we might call neoliberal policies had been strong - weak unions, declining welfare state, stagnant wages - these policies created a very large group in society that were looking for someone to blame. In a managed economy that allowed the parties of the right either to use nationalism and anti-immigration rhetoric to deflect blame from themselves, or for the far right to capture those parties. As that rhetoric also hit out at globalisation it potentially was a direct threat to global business interests, but those interests could either do nothing about this or felt they could manage that threat.

One final set of answers to my original question focused on history. Europe still has enough memory of living under authoritarian nationalist governments to want to avoid going down that route again. (Macron's vote was highest amongst the 70+ age group.) The UK and US do not have that experience, and perhaps nostalgia for empire (or WWII) in the case of the UK or watching an empire decline in the case of the US created unique tensions.

While these are dark times to be living through (and I suspect many others besides myself certainly think they are), for anyone interested in political economy they are also fascinating times.   

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John Case
Harpers Ferry, WV

The Winners and Losers Radio Show

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African American women stand out as working moms play a larger economic role in families [feedly]

African American women stand out as working moms play a larger economic role in families
http://www.epi.org/blog/african-american-women-stand-out-as-working-moms-play-a-larger-economic-role-in-families/

In a previous post, we noted that annual work hours for all workers, especially low-wage African American workers and women, increased between 1979 and 2015. Working moms are significant contributors to this trend—half of all African American female workers are moms, as are 55.3 percent of Hispanic working women and 44.5 percent of white female workers. While all moms are working more hours per year and contributing more to their households financially, African American working moms are uniquely central to the economic well-being of their families.

To begin with, more than two-thirds of all African American working mothers are single moms, making them the primary, if not sole, economic providers for their families. By comparison, 29.6 percent of white working mothers and 47.9 percent of Hispanic working mothers are single.

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Policy Watch: House Republicans vote to strip health care from millions [feedly]

Policy Watch: House Republicans vote to strip health care from millions
http://www.epi.org/blog/policy-watch-house-republicans-vote-to-strip-health-care-from-millions/

Yesterday, on President Trump's 105th day in office, House Republicans approved a bill repealing the Affordable Care Act. President Trump celebrated the House passage of the American Health Care Act (AHCA) and stated that he is confident that the measure will pass the Senate. Under the AHCA, 24 million Americans would lose their health insurance coverage. The majority (14 million) would lose coverage as the result of staggering cuts (almost $900 billion over the next decade) to the Medicaid program, which provides health care coverage to low-income Americans. An additional 7 million Americans would lose the coverage they get through their employer. In addition to taking coverage away from millions of Americans, the AHCA would have a significant impact on our nation's overall economy. Large cuts to Medicaid and the subsidies for those buying health insurance on the ACA exchanges, combined with the AHCA's tax cuts benefitting the top 1 percent of households, would be a drag on the economy and hurt job growth. Nationally, the job losses would reach 460,000 by 2020 and 1.8 million by 2022.

Earlier in the week, House Republicans voted in favor of legislation that would give employers the right to delay paying any wages for overtime work for as long as 13 months. The deceptively named "Working Families Flexibility Act" (H.R. 1180) would allow private-sector employers to "compensate" hourly workers with compensatory time off in lieu of overtime pay. Contrary to proponents' claims, the bill does not give employees the right to comp time, it takes away their right to overtime. The legislation forces workers to compromise their paychecks for the possibility—but not the guarantee—that they will get time off from work when they need it.

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Links for 05-04-17 [feedly]

Links for 05-04-17
http://economistsview.typepad.com/economistsview/2017/05/links-for-05-04-17.html

• Milton Friedman and data adjustment - VoxEU
• "Capital in the Twenty-First Century," Three Years Later - Equitable Growth
• Carl F. Christ, 1923-2017 - Tim Taylor
• This stage managed, policy free election - mainly macro
• How Ultralow Interest Rates Could Backfire - Greg Ip
• Stuck in That Same Old Dead-End Job - Justin Fox
• Spring 2017 Journal of Economic Perspectives Available On-line - Tim Taylor
• Health Care Fantasyland - The New York Times
• Populist Attacks on Elites Are a Dead End - Noah Smith
• Assessing the tax dependence of US households - VoxEU
• Adam Smith on Beggar Thy Neighbor - Tim Taylor
• Partisans or Peacocks? - The Regulatory Review
• Where US Manufacturing Jobs Really Went - J. Bradford DeLong
• Against the Subjective Theory of Knowledge - EconoSpeak
• Measuring Sustainability - Jayson Lusk
• Tax Reforms - IGM Forum
• Sigh....No, tax cuts won't boost growth - Dietrich Vollrath
• The sunspot agenda meets the MIT machine - Roger E. A. Farmer
• Do Socially Responsible Investors Have It All Wrong? - Carola Binder

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Where US Manufacturing Jobs Really Went: Fresh at Project Syndicate [feedly]

Where US Manufacturing Jobs Really Went

http://www.bradford-delong.com/2017/05/where-us-manufacturing-jobs-really-went-fresh-at-project-syndicate.html

BERKELEY – In the two decades from 1979 to 1999, the number of manufacturing jobs in the United States drifted downward, from 19 million to 17 million. But over the next decade, between 1999 and 2009, the number plummeted to 12 million. That more dramatic decline has given rise to the idea that the US economy suddenly stopped working – at least for blue-collar males – at the turn of the century.

But it is wrong to suggest that all was well in manufacturing before 1999. Manufacturing jobs were being destroyed in those earlier decades, too. But the lost jobs in one region and sector were generally being replaced – in absolute terms, if not as a share of the labor force – by new jobs in another region or sector.

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Consider the career of my grandfather, William Walcott Lord, who was born in New England early in the twentieth century. In 1933, his Lord Brothers Shoe Company in Brockton, Massachusetts, was facing imminent bankruptcy. So he relocated his operations to South Paris, Maine, where wages were lower.

The Brockton workers were devastated by this move, and by the widespread destruction of relatively high-paying blue-collar factory jobs across Southern New England. But in the aggregate statistics, their loss was offset by a bonanza for the rural workers of South Paris, who went from slaving away in near-subsistence agriculture to holding a seemingly steady job in a shoe factory.

The South Paris workers' good fortune lasted for just 14 years. After World War II, the Lord brothers feared that depression could return, so they liquidated their enterprise and split up. One of the three brothers moved to York, Maine; another moved to Boston. My grandfather went to Lakeland, Florida – halfway between Tampa Bay and Orlando – where he speculated in real estate and pursued non-residential construction.

Again, the aggregate statistics didn't change much. There were fewer workers making boots and shoes, but more workers manufacturing chemicals, constructing buildings, and operating the turnkey at the Wellman-Lord Construction Company's Florida-based phosphate-processing plants and other factories. In terms of domestic employment, the Wellman-Lord Construction Company had the same net factor impact as Lord Brothers in Brockton. The workers were different people in different places, but their level of education and training was the same.

So, during the supposedly stable post-war period, manufacturing (and construction) jobs actually moved en masse from the Northeast and Midwest to the Sun Belt. Those job losses were as painful for New Englanders and Midwesterners then as the more recent job losses are for workers today.

During the 2000s, American blue-collar jobs were churned more than they were destroyed. Until 2006, the number of manufacturing jobs decreased while construction jobs increased. And in 2006 and 2007, losses of residential construction jobs were offset by an increase in blue-collar jobs supporting business investment and exports. It was not until the post-2008 Great Recession that blue-collar jobs began to be lost more than churned.

Because there is always some degree of churn, a more accurate perspective on what has happened is gained by looking at blue-collar jobs as a share of total employment, rather than at the absolute number of manufacturing workers at any given time. In fact, there was an extremely large and powerful long-run decline in the share of manufacturing jobs between World War II and now. This gives the lie to the meme that manufacturing was stable for a long time, and then suddenly collapsed when China started making gains.

In 1943, 38% of America's nonfarm labor force was in manufacturing, owing to high demand for bombs and tanks at the time. After the war, the normal share of nonfarm workers in manufacturing was around 30%.

Had the US been a normal post-war industrial powerhouse like Germany or Japan, technological innovation would have brought that share down from 30% to around 12%. Instead, it has declined to 8.6%. Much of the decline, to 9.2%, is attributable to dysfunctional macroeconomic policies, which, since Ronald Reagan's presidency, have turned the US into a savings-deficit country, rather than a savings-surplus country.

As a rich country, the US should be financing industrialization and development around the world, so that emerging countries can purchase US manufacturing exports. Instead, the US has assumed various unproductive roles, becoming the world's money launderer, political-risk insurer, and money-holder of last resort. For developing countries, large dollar assets mean never having to call for a lifeline from the International Monetary Fund.

The rest of the decline in the share of manufacturing jobs, from 9.2% to 8.6%, stems from changing trade patterns, primarily owing to the rise of China. The North American Free Trade Agreement, contrary to what US President Donald Trump has claimed, contributed almost nothing to manufacturing's decline. In fact, all of those "bad trade deals" have helped other sectors of the American economy make substantial gains; and as those sectors have grown, the share of jobs in manufacturing has fallen by only 0.1%.

In this era of fake news, astroturf social movements, and misleading anecdotes, it is imperative for anyone who cares about our collective future to get the numbers right, and to get the right numbers into the public sphere. As the Republican Party's first president, Abraham Lincoln, put it in his "House Divided" speech, "If we could first know where we are, and whither we are tending, we could then better judge what to do and how to do it."
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"Capital in the Twenty-First Century," Three Years Later

By Brad DeLong, Heather Boushey, Marshall Steinbaum May 4, 2017

The following is an excerpt from After Piketty: The Agenda for Economics and Inequality, edited by J. Bradford DeLong, Heather Boushey, and Marshall Steinbaum and published by Harvard University Press:

Thomas Piketty's Capital in the Twenty-First Century, which we will abbreviate to C21, is a surprise best seller of astonishing dimensions.

Its enormous mass audience speaks to the urgency with which so many wish to hear about and participate in the political-economic conversation regarding this Second Gilded Age in which we in the Global North now find ourselves enmeshed.1 C21's English-language translator, Art Goldhammer, reports in Chapter 1 that there are now 2.2 million copies of the book scattered around the globe in thirty different languages. Those 2.2 million copies will surely have an impact. They ought to shift the spirit of the age into another, different channel: post-Piketty, the public-intellectual debate over inequality, economic policy, and equitable growth ought to focus differently.

Yet there are counterbalancing sociopolitical forces at work. One way to look at Piketty's project is to note that, for him, the typical low-inequality industrialized economy looks, in many respects, like post–World War II Gaullist France during its Thirty Glorious Years of economic growth, while the typical high-inequality industrialized economy looks, in many respects, like the 1870–1914 Belle Époque version of France's Third Republic. The dominant current in the Third Republic was radically egalitarian (among the male native born) in its politics, radically opposed to ascribed authority—especially religious authority—in its ideology, and yet also radically tolerant of and extremely eager to protect and reinforce wealth. All those who had or who sought to acquire property—whether a shop to own, a vineyard, rentes, a factory, or broad estates—were brothers whose wealth needed to be protected from the envious and the alien of the socialist-leaning laboring classes.

Underlying Piketty's book is a belief that this same cultural-ideological-economic-political complex—that all those with any property at all—need to band together to protect any threats to the possession or the profitability of such property—will come to dominate the twenty-first century political economy, in the North Atlantic at least. It will thus set in motion forces to keep the rate of profit high enough to drive the rise of the plutocracy Piketty sees in our future.

Two years ago we editors would have said, "Maybe, but also maybe not." In the wake of the 2016 presidential election in the United States, however, Piketty's underlying belief looks stronger. While we will not repeat the cultural dominance of property of the 1870–1914 Belle Époque French Third Republic, we do look to be engaged in the process of echoing many of its main characteristics.

It is important to note that Donald Trump won the 2016 presidential election thanks to the electoral college and not because he got more votes. But he got a lot of votes, and he got them in some places that have historically voted Democratic but faced extreme economic dislocation in the recent past. Moreover, Hillary Clinton failed to achieve the margins among young voters and racial minorities that Barack Obama did, plagued as they are with historically low employment rates, despite the record-high student debt they were promised would lead to security in the labor market. And so Piketty's analytical political-economic case looks to us to have been greatly strengthened by Trump's presidential election victory.

Thus we believe our book is even more important now. And so we have assembled our authors and edited their papers to highlight what we, at least, believe economists should study After Piketty as they use the book to trigger a focus on what is relevant and important.

Extracted from After Piketty edited by Heather Boushey, J. Bradford DeLong & Marshall Steinbaum published by Harvard University Press, $35. Copyright @ 2017 by the President and Fellows of Harvard College. All rights reserved.

1. Thomas Piketty, Capital in the Twenty-First Century,  trans. Arthur Goldhammer (Cambridge, MA: Belknap Press of Harvard University Press, 2014). ↩

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John Case
Harpers Ferry, WV

The Winners and Losers Radio Show

7-9 AM Weekdays, The EPIC Radio Player Stream, 

Sign UP HERE to get the Weekly Program Notes.

Check out Socialist Economics, the EPIC Radio website, and 

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Enlighten Radio:Paris on the Potomac and Labor Beat --- 100 Days -- Has God Left us In DISGUST

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