Mike Roberts: ASSA 2021 – part one: the mainstream dilemma

ASSA 2021 – part one: the mainstream dilemma

-- The annual conference of the American Economic Association (ASSA 2021) was unusual this year, for obvious reasons.  Instead of 13,000 academic and professional economists descending on an American city to present and discuss hundreds of submitted papers over a few days, because of the COVID-19 pandemic, ASSA 2021 was virtual.  Despite that, there were a host of papers presented, along with plenaries of the great and good in mainstream economics and economic policy.

Every year, there is an issue that tends to dominate among the mainstream presentations.  In previous years that has been the economics of rising inequality and last year it was the economics of climate change.  Not surprisingly, this year it was the economic impact of COVID-19 and what policies to deal with the pandemic slump.

There were two large panel presentations on the economic impact.  The first was on what was happening to the US economy and where it was going.  Former central bank governor of India, Raghuram Rajan, now back at his neoclassical base at the University of Chicago, raised the risk of rising corporate debt turning into 'corporate distress'.  He reckoned that the current monetary and fiscal support offered to small and large corporations "will have to end eventually" and "at that point, the true extent of the distress will emerge".   Rajan reckoned it was time for 'targeted support' to reduce debt accumulation and so avoid future bad debts on the banking system – a banker's policy as recently advocated by the so-called Group of Thirty bankers.

Carmen Reinhart, recently appointed as chief economist of the World Bank andjoint author with Kenneth Rogoff of the huge (and controversial) book on the history of public debt, also echoed Rajan's worry about rising debt, not only among corporates in the US but particularly in the so-called emerging economies.  In the Great Recession, the US dollar appreciated sharply against other currencies as it was seen as a 'safe haven' for cash and assets.  But in this COVID-19 pandemic slump, the dollar has depreciated significantly because it seems investors fear that US fiscal spending is too large while dollar interest rates have plunged.  But what happens to the ability of emerging economies to service their dollar debt, if the dollar should start to rise again?

Lawrence Summers, the guru of secular stagnation, reckoned that the pandemic slump has only increased the length of stagnation in advanced economies.  Interest rates had dropped into negative territory and fiscal stimulus had been raised to new heights.  But that would not end stagnation unless "there are structural policies adopted".  He did not spell out what these were, but instead argued against untargeted fiscal spending like the proposed $2000 per person check to all Americans, which he saw as just adding to the incomes of those who had actually increased their incomes during the COVID.  Summers has been attacked for his rejection of the $2000 payment from the left.  But what it shows is that the mainstream is increasingly worried that fiscal and monetary stimulus is creating uncontrolled debt levels (despite low interest costs) that will have to be reined it at some point – and also that Federal Reserve largesse has mostly ended up in boosting the stock market and the better-off.

Liberal left economist and 'Nobel' laureate, Joseph Stiglitz called for a resetting of the US economy when the pandemic ends. He wanted to reverse the tax cuts to the corporations and better off implemented by Trump; increase environmental regulations; break the power of the tech monopolies and make productive public investments.  What is the likelihood of any of this under the Biden administration over the next four years?

In contrast, right-wing orthodox John Taylor of Stanford University wanted the Fed to stop its emergency COVID bond purchases and other credit facilities as soon as possible, and for the new Biden administration to be cautious on more public spending.  You see, for Taylor, the market system was innovative and works.  During COVID, internet businesses and purchases had rocketed and this was the way forward, replacing the old ways with the new.  But that needs not more regulation, but less regulation of businesses like Uber or Amazon.

Perhaps the most interesting paper in this session was that by Janice Eberly of NorthWestern University who showed that during the COVID slump, companies had saved huge amounts of capital spending on offices, travel and other physical equipment as staff worked from home (at their own expense).  This provided an opportunity for business to boost the productivity of the workforce without extra capital spending and less labour – a way out for capitalism after the pandemic?

The second big session was on the world economy.  By any measure, the panellists agreed that the COVID-19 slump was the worst in the history of capitalism.  But even worse, it could take some time for economies to return to their pre-pandemic levels, if ever at all.  On current projections, the OECD reckons that won't happen until 2022 and even then, world GDP will behind the pre-pandemic trajectory.

The impact on world trade has been even more damaging. According to the World Trade Organisation, world trade growth will never return to its previous trajectory.

And as it was argued in the US economic session, global debt levels are at record levels.

Dale Jorgenson of Harvard University is an expert on global productivity growthand its constituents.  In his presentation, he reckoned that the differentials of growth in output and output per worker between the G7 economies and the 'emerging economies' of China and India would be resumed.  "Growth in the advanced economies will recover from the financial and economic crisis of the past decade, but a longer-term trend toward slower economic growth will be re-established."  Interestingly, he argued that the consensus view that China's economic growth will slow because its working-age population is falling may not be right, if China can raise the quality of its labour force through education and extend the working age.  That could deliver an annual growth rate closer to 6% than the 4-5% forecast by many.

The other half of the Rogoff-Reinhart history of debt team, Kenneth Rogoff again presented his current view that the level of global debt is near a tipping point.  Yes, interest rates are very low making debt servicing sustainable.  But economic growth is also low and if interest costs (r) start to exceed growth (g), then a debt crisis could ensue.  So the problem of fiscal sustainability has not gone away, as many argue.  Of course, Rogoff only talks about public sector debt (graph), when the problem of record high corporate debt is much more worrying for the sustainability of future economic growth in capitalist economies.

Joseph Stiglitz's answer to a post-pandemic global debt crisis was to cancel the debts of the poorest countries.  This should be done by "creating an international framework facilitating this in an orderly way".  What chance of this being agreed and implemented by the IMF and World Bank, let alone all the private creditors like the banks and hedge funds?

My overall impression from these panels is that the mainstream is fairly pessimistic about a sufficient economic recovery from the pandemic, both in the US and globally.  But the great and good are torn between the obvious requirement to maintain monetary and fiscal stimulus to avoid a meltdown in the world economy and financial assets; and the impending need to end that stimulus to avoid unsustainable debt levels and a new financial crisis.  It's a dilemma for capitalist economics.

That dilemma also led to some papers by mainstream economists looking for ways to forecast future financial crashes.  One paper reminded us that during the depth of Great Recession, the Queen of England visited the London School of Economics. As she was shown graphs emphasising the scale of imbalances in the financial system, she asked a simple question: "Why didn't anybody notice?"  It took several months before she got an official reply from the economists.  They blamed the lack of foresight of the crisis on the "psychology of denial". There was a "failure to foresee the timing, extent and severity of the crisis and to head it off." The causes of the Great Recession Now in this paper, the authors attempt to deal with this lack of foresight with machine learning.  Using these modern techniques, they reckon that they can now predict systemic financial crises 12 quarters ahead. AnsweringTheQueen_MachineLearningAn_preview They go further in suggesting that the empirical work can offer 'precious hints' on why there are regular and recurring financial crises in modern economies – although I could not see what they were.

In another paper, the authors looked at five large financial crises over the last 200 years of capitalism to see what policies were most effective in recovering from crises.TwoHundredYearsOfRareDisasters_Fin_powerpoint  They found that crises had "persistent effects both on financial markets and on economic activity".  Surprise!  However, they also found that since the end of the dollar-gold standard "downturns in economic activity following a crisis in the financial center continue to be quite protracted, the effects on financial markets are far less persistent."  In other words, monetary injections by central banks under floating fiat currencies can preserve the value of financial assets but not help productive assets. Just as we have seen during the COVID slump.

The other worry about the impact of COVID for the mainstream was the possible collapse of trade and 'global value chains'.  One paper found clearly that international trade wars and reducing the optimum distribution of international suppliers for political reasons was damaging. CuttingGlobalValueChainsToSafeguard_preview (1) It would reduce US GDP by 1.6% "but barely change U.S. exposure to a foreign shock".

The impact of COVID-19 was not the only issue that concentrated the minds of the mainstream.  The economics of climate change was not ignored.  Yet another paper showed that mainstream economics market solutions to global warming were failing.  Carbon pricing was not working. Perhaps it is time to phase out mainstream economics itself.  One paper raised the possibility that artificial intelligence could replace economists soon and do all the calculations that humans do now. WillArtificialIntelligenceReplaceCom_powerpoint

The next post will review the presentations by the radical wing of economics at ASSA 2021.

John Case
Harpers Ferry, WV

Enlighten Radio

Socialist Economics

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Mike Roberts: ASSA 2021: part two – the radical answers

Mike Roberts: ASSA 2021: part two – the radical answers

Mike Roberts summary of the ASSA URPE (Union of Radical Political Economists( sessions, part 2. Interesting to compare Roberts summaries with those of Equitable Growth published earlier. Different topics, but good example of distinctions between Marxist and social-democratic approaches to similar challenges.

At the annual conference of the American Economics Association (ASSA), there are sessions hosted by the Union for Radical Political Economics (URPE) for Marxist and other heterodox economists to present papers.

At this year's ASSA 2021, many of the URPE sessions were concerned with the economic impact of COVID-19 and climate change, as did the mainstream sessions, but, of course, from a different perspective. But before I look at those sessions, let me start with the annual David Gordon lecture presented by a different radical economist each year.

This year it was Michael Hudson who gave the lecture. Hudson is a longstanding radical economist with a wide reputation.  He considers himself a classical' economist. His theme for the lecture was Has Finance Capitalism Destroyed Industrial Capitalism?  Hudson argued that capitalism started as a progressive force in developing the productive forces because it was industrial capitalism.  But since the 1980s, 'financial capitalism' had superseded industrial capitalism.  And this was really a return to feudalism where the surplus in an economy was extracted by landlords (rent) and financiers (interest and capital gains), not by exploitation of labour power (profits).

Feudalism had originally been critiqued by the great classical economists like Adam Smith and David Ricardo who reckoned that the landlords and financiers held back the productivity of labour by reducing the surplus going to the industrial capitalists.  Hudson argued that Marx also supported industrial capitalism as progressive, being he was "the last of the great classical economists."

Hudson argued that Marx had a vision that capitalism will eventually create the objective conditions for a transition to socialism. Instead, in the last 50 years finance capital has blocked that vision with a form of 'neo-feudalism' represented by monopolies extracting 'rents' and bankers extracting interest and capital gains.  And now the main enemy of workers was not the capitalist owners of industrial companies, but rentier capitalists who exploit us through mortgages, loan rates, housing rents etc. And now it was rising debt that was the cause of capitalist crises and not the falling rate of profit of productive capital.  This was where David Harvey  and Hyman Minsky had taken us forward from Marx.

I disagree.  This classic financialisation' thesis by Hudson has many holes, in my opinion.  First, modern capitalism can hardly be described as 'neo-feudalism' because feudalism was never a mode of production based on monopoly rents or usury.  Under feudalism, the surplus created by the serfs and peasants was appropriated by landed aristocracy directly from the produce of the land.  Commercial and financial activity was an adjunct, not the dominant activity of feudalism.

Yes, the classical economists opposed the landlords and monopolies and supported industrial capitalism, but the whole point of the Marxist critique was to reveal the new form of exploitation under the capitalist mode of production, namely the exploitation of labour power for profit by capitalists (industrial capitalists).  Indeed, Marx's Capital has a subtitle: A critique of political economy; and back in 1842, Engels wrote a piece entitled An outline of a critique of political economy.  Both attacked the position of classical political economy because it backed markets and the exploitation of workers for profit in industry.

At no time did Marx or Engels suggest that 'industrial capitalism' could move smoothly to socialism without first ending the contradiction between labour and capital through class struggle. The idea of a seamless progression to socialism was that of the later revisionists like Eduard Bernstein. Yet Hudson seemed to suggest that the gains that workers made in public services, wages and welfare in the 'golden age' after WW2 were made possible because it was in the interests of the 'progressive' industrial capitalists. Tell that to the workers who had to fight hard for these gains!  These gains were only possible because the industrial capitalists were forced to concede them by labour action; and they were able to do so only because profitability of capital was relatively high. But when profitability started to fall in the 1970s, ushering in the era of 'neo-liberalism', that was when there was a reversal of those gains and the relative rise of financial capital.

Indeed, the idea that we can divide capitalism into progressive industrial capitalism and reactionary monopoly financial capitalism is not only not the Marxist view, it is also empirically invalid. There is a very high integration between financial and industrial functions in modern capitalist companies – they are not separate.  And most important, the industrial surplus value-creating function is still the largest section of capital by any measure. 

Josh Mason from John Jay College was the discussant on the Hudson's lecture and he made some telling points. He queried Hudson's claim that industrial capitalists supported better public services because it raised the quality of the labour force.  Mason argued that industrial capitalists' main aim is always to lower wage costs and, for them, public services are a cost not a saving.  In the neo-liberal period, industry supported austerity, crushed trade unions and demanded public spending cuts just as much as bankers. And monopolies are found in industrial sectors just as much as in finance. Moreover, is Jeff Bezos just a rent extractor?  Surely Amazon exploits workers for profit in its distribution and web services like an industrial capitalist, not like a 'neo-feudal' financier?

For me, the Hudson 'financialisation' thesis not only weakens and distorts Marx's critique of capitalism by ditching his law of value for post-Keynesian monopoly rent extraction theory.  It is also empirically incorrect.  And it leaves the door open for a reformist policy: that if we regulate or control the finance sector and monopolies and return to 'competitive industrial capitalism' (something that never really existed), then we can gradually move onto socialism.

But let's move on here too. There were some important papers on China in the URPE sessions.  Minqi Li of the University of Utah made a compelling empirical case that China was not an imperialist country in Marxist terms. Li argued that, although China had developed an exploitative relationship with South Asia, Africa, and other raw material exporters, China continued to transfer a greater amount of surplus value to the core countries in the capitalist world system than it receives from the periphery. Just handful of countries are rentier imperialist economies getting super profits from working people in global south and China is not one of them.

China has a net stock of financial investment of around $2trn, but this is mainly FX reserves held in US T-bonds ($3.5trn).  Gross FDI stock is $1.7trn, but only a tiny share is invested in Africa or Lat Am. It's mostly in tax havens!  So 90% has not been invested for imperial super-profits. Indeed, the profitability of China's FDI is lower than profitability for foreigners on inward investment into China ie China's net investment income from abroad is negative.

Zhonglin Li and David Kotz reach a similar conclusion in their paper. IsChinaImperialist_EconomyStateAnd_preview (1) China is ruled by a Communist Party that came to power through a socialist revolution. China still has a significant sector of large state-owned enterprises and the party and state exercise considerable control over the economy. China's role in other parts of the world does not fit the Marxist concept of imperialism. China does not operate a free market economy, as the CP is still directing investment and employment to a great degree.

Li and Kotz argued that the pro-market faction has not triumphed in China.  Indeed, this is also the conclusion of another paper by Isabelle Weber of UMA.  HowChinaEscapedShockTherapy_TheMar_preview (2) She reckoned the direction of 'more market' was dominant among Chinese reformers very early in the reform process in the 1980s, but the question of how to introduce market mechanisms into China's command economy remained highly contested and is still unresolved.

Two other Chinese scholars provided further empirical support for the view that China is not imperialist.  UnderstandingChina'sNew"DualCirc_preview Using the world input-output database, Su from Nanking University and Liang from UMA reckon China transfers up to 10% of its value added through trade to the US and other imperialist economies.  Indeed, there is an asymmetrical trade relationship with the US, so that if the US and China were to completely halt and transfer their bilateral merchandise trade to elsewhere, the Chinese economy would lose 2.5 percentage points in its growth rate and over ten million jobs, while the United States would gain 1.3 percentage points in growth and some 700 thousand jobs. That is why President Xi is looking to adopt a 'dual circulation' strategy of switching more to the domestic market.

All these studies confirm the empirical work that G Carchedi and I first presented to the Historical Materialism conference in 2019.  China is not an imperialist country in the Marxist definition. But two questions on China were still unanswered for me. All the contributors reckoned that China was a capitalist state in some form, if not imperialist. In which case 1) how did this capitalist economy perform so unprecedently well during the neo-liberal period when the imperialist economies and other peripheral capitalist economies did so poorly?; and 2) if China is capitalist and yet so huge, will it eventually become imperialist? But that's for another day.

There were also several good papers on the impact of COVID and the economics of climate change.  Ron Baiman of Benedictine University highlighted the huge loss in Arctic ice in the recent period that had now become a tipping point in its impact on global warming. InSupportOfARenewableEnergyAndMat_powerpoint (1) Stopping emissions rising was not enough. We need to reduce the existing carbon stock. If we could reduce the stock already in Arctic, we could give the planet an extra 17 years to turn things round.  It was utopian to solve the crises by looking to achieve zero emissions alone. He reckoned that there were technical solutions that could lower stock levels including Arctic Sea-Ice climate triage and carbon cycle climate restoration "that would rapidly move us toward avoiding increasingly catastrophic climate impacts."  Strangely, he did not mention to need to phase out fossil fuel production as well.

Robert Williams of Guilford College gave us chapter and version on how the COVID pandemic would increase the already high levels of inequality of wealth and income in the major capitalist economies.  Even before the COVID, Federal Reserve policies "have lavished hundreds of billions of dollars annually on the rich. Despite an unemployment rate trumpeted by many for its 50-year low, these structural forces and policies have left the vast majority of US households were wholly unprepared for sudden onslaught of the coronavirus."

Chyrs Esseau, Tomar Galaragga and Sherif Khalifa in their papers showed how previous epidemics have affected income inequality. They found that an epidemic/pandemic shock increased income inequality by 4.6 points (gini coefficient). "We conclude that the epidemics and pandemics of the early 21st century contributed to the stagnation, and even worsening, of the otherwise slightly decreasing trends in global income inequality."

Sergio Camara from the Autonomous Metropolitan University of Mexico provided an overall Marxian framework for the COVID pandemic, breaking the crisis down into its cyclical, structural and systemic parts.  Cyclically, the world economy was already "on the verge of falling into a new cyclical crisis because of the imbalances accumulated after the 2007-2009 cyclical crisis." Structurally, the major capitalist economies were not equipped to handle the pandemic because they had run down the health, medical and public services needed to cope. And systemically, the pandemic had shown that capitalism's drive for profit over need leads to recurring crises in humanity, the climate and nature.

Finally, there was a session on 'post-capitalist futures' which, I think, exposed how market economies cannot cope with pandemics and reinforced the need for democratic socialist planning of economies.  Robin Hahnel and Mitchell Szczepanczyk presented the results of their innovative attempt to model democratic annual planning in a post-capitalist economy.  ComputerSimulationExperimentsOfParti_powerpoint Through iterative computer simulations of the planning process from local to central level and back, using a new computer coding technique, they found that it would not take a long at all to reach a feasible and practical annual plan to meet social needs with available resources which involved the participation and democratic decisions of people.

This was another compelling refutation of the critique made by neoclassical pro-market theorists like Von Mises and Hayek; and Keynesian pro-market social democrats like Alec Nove who argued that socialist planning was infeasible because there were just too many calculations to make.  Only the invisible hand of the market and market pricing could do this.  This paper showed that this was not true, especially now with the advances in computer programming.  Democratic socialist planning can work and can replace market chaos.

--

John Case
Harpers Ferry, WV

Enlighten Radio

Socialist Economics

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EPI: Heidi Shierholz: The economy President-elect Biden is inheriting: 26.8 million workers—15.8% of the workforce—are being directly hurt by the coronavirus crisis

The economy President-elect Biden is inheriting: 26.8 million workers—15.8% of the workforce—are being directly hurt by the coronavirus crisis

39Blog | Economic Policy Instituteby Heidi Shierholz

We now have a full year of jobs data for 2020. This is an important moment to take stock of where things stand in the labor market.

The official unemployment rate was 6.7% in December, and the official number of unemployed workers was 10.7 million, according to the Bureau of Labor Statistics (BLS). These official numbers are a vast undercount of the number of workers being harmed by the weak labor market, however. In fact, 26.8 million workers—15.8% of the workforce—are either unemployed, otherwise out of work due to the pandemic, or employed but experiencing a drop in hours and pay. Here are the missing factors:

• Some workers are being misclassified as "employed, not at work" instead of unemployed. BLS has discussed at length that there have been many workers who have been misclassified as "employed, not at work" during this pandemic who should be classified as "temporarily unemployed." In December, there were 1.0 million such workers, a substantial increase from November. (Wonky aside: Some of these workers may not have had the option of being classified as "temporarily unemployed," meaning they weren't technically misclassified, but all of them were out of work because of the virus.) Accounting for these workers, the unemployment rate would be 7.3%.
• The number of officially unemployed is undercounted, even in normal times (and is probably worse now). Rigorous research that addresses issues like the fact that survey nonresponse is nonrandom—and that missing individuals are more likely than the general population to be unemployed—find that the official unemployment rate was understating the unemployment rate by 1.5 percentage points at the start of 2020. Accounting for that undercount yields 2.7 million unemployed workers who are misclassified as not in the labor force. This is conservative, given that there is good evidencethat this problem is likely substantially worse in the coronavirus era. (Another wonky aside: this research also finds that the official labor force participation rate was understating labor force participation by 1.9 percentage points at the start of 2020, or by 4.8 million workers.)
• Some workers who are out of work as a result of the virus are being counted as having dropped out of the labor force instead of as unemployed. In order for a person without a job to be counted as unemployed, they must be available to work and actively seeking work. However, during the COVID-19 crisis, many people who are out of work as a result of the crisis do not meet those criteria. For example, many workers are out of work because of care responsibilities as a result of COVID-19 (e.g., a young child's school being remote, or an elderly parent's day care closing). These workers would not be counted as officially unemployed but are nevertheless out of work because of the coronavirus shock. To calculate how many there are, I estimate what the labor force level would be if the labor force participation rate had not dropped since February—the month before the pandemic hit the U.S. labor market—by multiplying the February labor force participation rate by the December population level. I then subtract this "counterfactual" labor force from the actual labor force. This yields an additional 4.9 million people out of the labor force as a result of the crisis.
• Millions of employed workers have seen a drop in hours and pay because of the pandemic. BLS reports that 7.5 million people who were working in December had been unable to work at some point in the last four weeks because their employer closed or lost business due to the coronavirus pandemic, and they did not receive pay for the hours they didn't work. This is a substantial increase from November. These workers have clearly been directly harmed by the coronavirus downturn.

Adding up all but the last quantity above, that is 10.7 million + 1.0 million + 2.7 million + 4.9 million = 19.3 million workers who are either unemployed or otherwise out of the labor force as a result of the virus. Accounting for these workers, the unemployment rate would be 11.3%. Also adding in the 7.5 million who are employed but have seen a drop in hours and pay because of the pandemic brings the number of workers directly harmed in December by the coronavirus downturn to 26.8 million. That is 15.8% of the workforce.

Finally, even the 26.8 million is an undercount. For one, it doesn't count those who lost a job or hours earlier in the pandemic but are back to work now. The cumulative impact would be much higher. But perhaps more importantly, the 26.8 million is a drastic undercount because it ignores the fact that even workers who have remained employed and have not seen a cut in hours and pay are being hurt by the weak labor market. How? Essentially the only source of power nonunionized workers have vis-à-vis their employers is the implicit threat that they could quit their job and take another job elsewhere. Case in point: One of the most common ways nonunionized workers get a wage increase is by getting another job offer for higher pay—they either accept the new job, or their current employer gives them a raise in response to their outside offer. When job openings are scarce, as they are now, workers' leverage dissolves. Employers simply don't have to pay as well when they know workers don't have as many outside options.

All this means that stimulating the economy to create jobs is crucial—both to the 26.8 million workers who are being directly harmed by the downturn because they are either out of work or have had their hours and pay cut, and to the millions more who saw their bargaining power disappear as the recession took hold. It is even more urgent considering the country is now facing a resurgent virus and renewed job losses.

A further reason more relief is so important is that this crisis is greatly exacerbating racial inequality. Due to the impact of historic and current systemic racism, Blackand Latinx workers have seen more job loss in this pandemic and have less wealth to fall back on. To get the economy back on track in a reasonable timeframe, policymakers should pass an additional $2.1 trillion in fiscal support (the $2.1 trillion is calculated by subtracting the $900 billion December COVID-19 relief bill from the total $3 trillion in fiscal support that is actually needed). In particular, it is crucial that Congress provide substantial aid to state and local governments. Without this aid, austerity by state and local governments will result in cuts to essential public services and the loss of millions of jobs in both the public and private sector.

Senate Republicans forced the December bill to be far too small. Fortunately, with their new majority in the Senate given the results of the Georgia runoffs, Democrats will now be able to get more relief measures through reconciliation. Top priorities must be aid to state and local governments and further extensions of unemployment insurance. There is no time to lose.

--

John Case
Harpers Ferry, WV

Enlighten Radio

Socialist Economics

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First UI claims of 2021 are still higher than the worst of the Great Recession [feedly]

First UI claims of 2021 are still higher than the worst of the Great Recession
https://www.epi.org/blog/first-ui-claims-of-2021-are-still-higher-than-the-worst-of-the-great-recession/

There was an armed insurrection at the U.S. Capitol yesterday in which the police were complicit in a way that has everything to do with structural racism. Structural racism has also meant that Black and Latinx working people are experiencing a disproportionate health and economic impact of the COVID-19 pandemic. The UI data released this morning show a labor market in turmoil as COVID-19 surges.

Another 948,000 people applied for Unemployment Insurance (UI) benefits last week, including 787,000 people who applied for regular state UI and 161,000 who applied for Pandemic Unemployment Assistance (PUA). The 948,000 who applied for UI last week was a decrease of 152,000 from the prior week. That drop was driven almost entirely by a drop in PUA claims, undoubtedly due to uncertainty over whether PUA would be extended, as Trump delayed signing the relief bill during that week. Now that the program has been extended (more on that below), I expect PUA claims to rise again in coming weeks.

Last week was the 42nd straight week total initial claims were greater than the worst week of the Great Recession. (If that comparison is restricted to regular state claims—because we didn't have PUA in the Great Recession—initial claims last week were greater than the second-worst week of the Great Recession.)

Most states provide 26 weeks (six months) of regular benefits. Given the length of this crisis, many workers have exhausted their regular state UI benefits. In the most recent data, continuing claims for regular state UI dropped by 126,000. After an individual exhausts regular state benefits, they can move onto Pandemic Emergency Unemployment Compensation (PEUC), which is an additional 24 weeks of regular state UI (the December COVID-19 relief bill increased the number of weeks of PEUC eligibility by 11, from 13 to 24).

However, in the most recent data available for PEUC, the week ending Dec 19, PEUC claims dropped by 293,000. That was undoubtedly due to exhaustions. Well over 2 million people had exhausted the original 13 weeks of PEUC before Congress passed the extensions (see column C43 in form ETA 5159 for PEUC here). These workers are eligible for the additional 11 weeks, but they will need to recertify. We can expect PEUC numbers to swell dramatically as this occurs.

Continuing claims for PUA also dropped, by 71,000, in the latest data. The latest data for this series is also for the week ending December 19—so before the relief bill, meaning some of that drop would have been exhaustions, i.e. temporary. The COVID-19 relief bill also extended the total weeks of eligibility for PUA by 11, from 39 to 50 weeks. As with PEUC, those who had exhausted the original 39 weeks of PUA before Congress passed the extensions are eligible for the additional 11 weeks, but they will need to recertify. Workers who were still on PUA (or PEUC) when Congress passed the bill will not need to recertify.

The 11-week extensions of PEUC and PUA just kick the can down the road—they are not long enough. Without additional action by Congress, millions will exhaust benefits in mid-March, when the virus is still surging and job opportunities are still scarce.

Figure A shows continuing claims in all programs over time (the latest data are for December 19). Continuing claims are still more than 17 million above where they were a year ago, even with the exhaustions occurring during the time period covered by this chart.

Figure A

 -- via my feedly newsfeed

Will Population Fall for Many Countries--and the World? [feedly]

Tim Taylor: Will Population Fall for Many Countries--and the World?
https://conversableeconomist.blogspot.com/2021/01/will-population-fall-for-many-countries.html

During my adult life, the main arguments about global population typically revolved around the topic of whether growth in population would overwhelm natural resources and lead to mass starvation and environmental collapse, or whether growth in population would be accompanied by technological progress in a way that would lead to a generally rising standard of living. Although the dire predictions of overpopulation from the 1960s and 1970s have not materialized on schedule, those concerned about overpopulation could always argue that even if the doomsday predictions were premature or delayed, they were nonetheless on their way. 

However, both sides of this controversy started from an assumption that population levels would continue to rise. In the 21st century, this assumption may be proven false. 

US birthrates have been in decline for some years. William Frey recently reported some historical figures on US population growth from the Census Bureau. Here's population growth by decade. Notice that the rate of population growth in the 2010s is the lowest of any decade in US history.

Here's US population growth annually since 1900. It looks as if 2020 will be the lowest population growth in that time. 

The US pattern is reasonably representative of the world as a whole: that is, population growths is faster in some countries and slower in others. In Japan, Russia, and Spain, for example, total population has already peaked in the last few years and how has started to decline. For an look at projected global population growth, a group of 24 demographers published a "Fertility, mortality, migration, and population scenarios for 195 countries and territories from 2017 to 2100: a forecasting analysis for the Global Burden of Disease Study (The Lancet, October 17, 2020, pp. 1285-1306).  Here's a flavor of their results (for readability, I've deleted footnotes and parenthetical references to statistical confidence intervals):

Our reference scenario, based on robust statistical models of fertility, mortality, and migration, suggested that global population will peak in 2064 at 9·73 billion and then decline to 8·79 billion (6·in 2100 ... 

Responding to sustained low fertility is likely to become an overriding policy concern in many nations given the economic, social, environmental, and geopolitical consequences of low birth rates. A decline in total world population in the latter half of the century is potentially good news for the global environment. Fewer people on the planet in every year between now and 2100 than the number forecasted by the UNPD would mean less carbon emission, less stress on global food systems, and less likelihood of transgressing planetary boundaries. ...

Although good for the environment, population decline and associated shifts in age structure in many nations might have other profound and often negative consequences. In 23 countries, including Japan, Thailand, Spain, and Ukraine, populations are expected to decline by 50% or more. Another 34 countries will probably decline by 25–50%, including China, with a forecasted 48·0% decline.

For the United States, their baseline scenario suggests that population will rise from 324 million in 2017 to a peak of 363 million by 2064, before declining to 335 million in 2100. 

When confronted with predictions that are decades in the future, it's of course important to note that they rely on underlying estimates about fertility and longevity, which in turn rely on estimates about factors like education levels and use of contraception. Perhaps there will be a new global baby boom that will surprise the demographers. But it's also important to note that much of the future population has already been born. For example, those who will be 40 or older by the year 2061 are already born right now. A sizeable share of those born in the last few years will live to see 2100. Thus, it's worth some thought as to where we seem to be headed. 

One obvious shift is that countries around the world will be much more focused on the elderly, because the elderly will be a much large share of the population. The demographers writing in the Lancet note: 

In 2100, if labour force participation by age and sex does not change, the ratio of the non-working adult population to the working population might reach 1·16 globally, up from 0·80 in 2017. This ratio implies that, at the global level, each person working would have to support, through taxation and intra-family income transfers, 1·16 non-working individuals aged 15 years or older (the working age population is defined by the International Labour Organization as those aged 15 years or older).41 Moreover, the number of countries with a dependency ratio higher than 1 is expected to increase from 59 in 2017 to 145 in 2100. Taxation rates required to sustain national health insurance and social security programmes might be so large as to further reduce economic growth and investment. Insecurity from the risk that these programmes could fail might generate considerable political stress in societies with this demographic contraction ...

When thinking of these challenges, one's mind immediately turns to financing of government programs that support the elderly, like Social Security and Medicare in the United States, but that's only the beginning. For example, the US and other countries are going to face an enormous challenge in financing and providing long-term care options for the elderly. There are also likely to be hard-to-predict effects on the rate of economic growth: 

Having fewer individuals between the ages of 15 and 64 years might, however, have larger effects on GDP growth than what we have captured here. For example, having fewer individuals in these age groups might reduce innovation in economies, and fewer workers in general might reduce domestic markets for consumer goods, because many retirees are less likely to purchase consumer durables than middle aged and young adults. Developments such as advancements in robotics could substantially change the trajectory of GDP per working-age adult, reducing the effect of the age structure on GDP growth. However, these effects are very difficult to model at this stage. Furthermore, the impact of robotics might have complex effects on countries for which the trajectory for economic growth might be through low-cost labour supply.

These population shifts will alter perspectives on the magnitude of of countries around the world, too. For example, China is the now the most populous country in the world with a population of 1,412 billion in 2017. However, China took dramatic steps to reduce fertility back in the early 1970s, later culminating in the "one-child" policy. Thus, the forecast is for China's population to peak in 2024 at 1,431 billion, and then fall by nearly half to 731 billion in 2100. 

The decline in fertility for India started later. India's population is 1,380 billion in 2017, but it will overtake China in the next few years, before peaking in these projections at 1,605 billion in 2048--and then falling back to 1093 billion by 2100. 

Meanwhile, the fertility decline has barely started in Nigeria. Thus, Nigeria's current population of 206 billion is forecast to rise continually through the rest of this century, and by 2100 the 790 million Nigerians would outnumber the population of China. 

I do not know if the problems of flat and falling population will ultimately be bigger or smaller than the problems of continually rising population, but the problems will be different ones, and it's none too early to start thinking about them. 

 -- via my feedly newsfeed

AEP consideration of retiring Marshall County coal plant continues trend, rouses both sides of debate over coal's future in WV

There have been 10 conventional steam coal plants retired in West Virginia since 2005, and there are only nine left in the state, according to U.S. Energy Information Administration data.

At least one of the remaining nine could be retired before the decade is done, continuing a trend of dwindling coal plants across West Virginia as the coal industry fights to preserve itself amid a shift toward renewable energy that is taking shape more quickly outside the Mountain State's borders than inside them.

Appalachian Power and Wheeling Power said in a recent filing with the Public Service Commission of West Virginia that the Mitchell coal-fired generating facility in Marshall County would cease operation in 2028 if the companies choose to retire the plant rather than make an additional investment to ensure that the plant complies with federal guidelines limiting wastewater to continue operating beyond that year.

The companies say they could make modifications to comply with the wastewater rule and a federal rule regulating coal combustion residuals at the Mitchell plant, the John Amos plant in Putnam County and the Mountaineer plant in Mason County that would allow each of those plants to operate until 2040, and the filing argues that it would benefit customers to ensure compliance at the John Amos and Mountaineer plants and keep them operating until the end of their projected useful lives in 2040.

But the companies report that performing only the coal combustion residual compliance work at Mitchell and retiring the plant in 2028 has "comparable costs and benefits" to making the additional wastewater compliance investment to allow the plant to operate beyond 2028. Replacing a portion of the retired Mitchell capacity with a portion of Appalachian Power's excess capacity in 2028 would result in savings to West Virginia customers of approximately $27 million annually from 2029 to 2040, the companies said in the Dec. 23 filing.

Appalachian Power and Wheeling Power are seeking permission to perform all of the work at all of the plants, which they estimate would cost $317 million, and listed potential project-related residential, commercial and industrial rate increases of 1.59%, 1.52% and 1.72%, respectively. The proposed increased project-related rates and charges would produce $23.5 million annually in additional revenue, according to the companies.

The Mitchell plant began operating in 1971 and was West Virginia's sixth-largest plant in generation and fourth-largest in capacity, according to EIA data.

Wheeling Power and Kentucky Power Company each own 50% interest in the plant, according to the Dec. 23 filing. Those two companies and Appalachian Power are regional electric utilities of Columbus-based American Electric Power.

AEP has retired or sold nearly 13,500 megawatts of coal-fired generating capacity in the past decade, according to Nick Akins, AEP's chairman, president and CEO.

"As we look at the future of our power plant fleet, we've balanced the remaining life and economic viability of each of our coal-fueled generating units with other options for delivering power to our customers," Akins said in a November statement in which AEP said it planned to continue operating the Amos, Mountaineer and Mitchell plants while retiring two Texas plants in 2023 and 2028 as it prepared to make environmental upgrades. "We continue to add lower cost, cleaner resources, like renewables and natural gas, as we diversify our generating fleet to benefit our customers and the environment."

West Virginia's number of coal plants has steeply declined as the U.S. shifts away from coal toward renewable energy. The EIA last year reported that the nation's annual energy consumption from renewable sources in 2019 exceeded coal consumption for the first time in more than 130 years, largely reflecting the continued decline in coal used for electricity generation over the past decade, as coal consumption in the U.S. decreased nearly 15% from 2018 to 2019 as renewable energy consumption rose 1%. Electricity generation from coal in 2019 fell to its lowest level in 42 years, according to the EIA.

But in West Virginia, coal-fired power plants still account for almost all of West Virginia's electricity generation. In 2019, coal comprised the smallest share of state generation in more than 20 years, and it exceeded 90% anyway.

Less than 3% of the more than 23,000 operating generators across the U.S. are conventional steam coal facilities, but that clip remains above 20% in West Virginia, according to a Gazette-Mail analysis of EIA's operating generators as of October. Still, West Virginia's percentage of operating generators that use conventional steam coal technology has declined nearly 8% in the last five years as the national clip fell by 2.3%.

The Mitchell plant emitted just over 5 million tons of carbon dioxide, just under 1,900 tons of sulfur dioxide and just over 2,000 tons of nitrogen oxides in 2019, per EIA data.

All those numbers have pushed environmentalists in West Virginia toward embracing renewable energy as an alternative to coal-fired generation.

"The dictates of the market, along with the need to address the health and climate costs of burning coal, mean that much of the nation is taking part in the renewable energy revolution," Vivian Stockman, executive director of the Ohio Valley Environmental Coalition, said. "West Virginia would do well to embrace this change now and make every effort to shift our economy to one that can provide just transitions for former coal workers and sustainable livelihoods for all West Virginians."

The state Public Service Commission last month approved a settlement between FirstEnergy subsidiaries Mon Power and Potomac Edison and energy efficiency advocates including Solar United Neighbors that requires the utilities to justify continuing coal plant operations and provide an economic analysis of plants for which they plan major improvements.

"Renewable energy generation and energy efficiency measures are increasingly more cost-effective options for utilities and ratepayers than continuing to rely on an aging, expensive fleet of coal-fired power plants," Autumn Long, regional field director for Solar United Neighbors, said Monday.

The EIA does predict that coal-fired generation will stabilize after declining through the mid-2020s as more economically viable plants stay operational, and Chris Hamilton, president of the West Virginia Coal Association, said he sees the coal industry "stabilizing about where they are at the present time," noting the prominent role coal still plays in the Mountain State's economy.

Hamilton says the Coal Association was surprised to learn of AEP's plan to potentially close the Mitchell plant, adding that the organization plans to get involved in the PSC proceedings to lobby to keep the plant from retirement.

"We're not sure that [American Electric Power] is looking at the totality of the economics surrounding that plant," Hamilton said, noting that the Coal Association is considering an independent economic evaluation of the plant.

Hamilton estimated that the plant generates "a couple hundred million dollars" of economic support for the Ohio River valley.

"Those range from the hundreds of mining jobs that provide the base fuel, all the vendor supply jobs that support the mining industry in that area, and … the plant workers, all the maintenance workers that service that plant," Hamilton said.

American Electric Power officially retired the Kanawha River coal plant in Kanawha County in 2017 and the Philip Sporn coal plant in Mason County in 2015, while AEP Generation Resources, Inc. retired the Kammer coal plant in Marshall County in 2015.

FirstEnergy pledged in November to transition away from coal-fired power by 2050 in an effort to achieve carbon neutrality in an effort to combat climate change, and Akins noted an "aspirational" goal of zero emissions by 2050 in 2019.

Hamilton alluded to those goals with a call to action in an open letter to "Friends of Coal" last week.

"We are deeply concerned with what the future holds, and you should be as well," Hamilton wrote. " … [W]e must be prepared to stand up for coal."

--

John Case
Harpers Ferry, WV

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