Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts

Saturday, June 3, 2017

Thoughts On Russia

I am a bit puzzled by how anxious Donald Trump and the people around him are to make nice with Russia.

Let's put Russia in perspective.

The per capita GDP (Gross Domestic Product) of Russia is about the same as Mexico. So why isn't Trump and Co. making nice with Mexico?

Russia doesn't make anything the rest of the world wants to buy. What they sell is oil and gas.

There isn't much of an international market for matryoshka dolls.

Russia's GDP is declining.

We will not become prosperous by deals with Russia.

Today's Russia is a kleptocracy. Vladimir Putin is the chief kleptocrat.

Russia is a closed society.

Her most talented young people seek futures elsewhere.

Reminds me of Mississippi.

Friday, June 24, 2016

Axel Oxenstierna (Sweden) 1634 On Wisdom

"Do you not know, my son, with how little wisdom the world is governed?" Letter to his son, 1634.

The Brexit vote last night verified Oxenstiern's observation. More succinctly: The world is governed by fools.

Monday, July 13, 2015

The German Question

It is becoming pretty clear that the most urgent question facing today's Europe is the German question.

Paul Krugman sees Germany as killing the European project:  I agree, and have been commenting on the looming disaster for about three years now. The biggest surprise to me is how patient the long-suffering public has been. I hope Greece uses whatever time they have gained by this weekend's deal to print bales of new drachma and prepare to exit the Euro. Spain and Italy should do so as well.

Roger Cohen of the New York Times  claims we thought we had solved the problem of Germany in 1945. I take issue with that, though I think we did believe we had solved it by embracing Germany within the stifling arms of NATO and the Western European Union. As NATO's first Secretary General explained, the purpose of NATO was to keep the Germans down, the Russians out, and the Americans here. To Europe, NATO was at least as much about Germany as it was about the Soviet Union. From 1945 for more than four decades, NATO publicly blamed the Soviet Union for a divided Germany and privately hoped the division would continue. It was Germany under Willy Brandt whose "Ostpolitik" began chipping away at the barriers between East and West for the purpose of making German reunification possible. In the United States, we studied what might happen after Tito died, but never examined the implications of a reunited Germany. Everyone knew that could never happen. Everyone was wrong.

The late George Kennan had some thoughts on Germany, which we should have considered, but of course no one did:

More recently, the economic historian Brad Delong had some interesting thoughts in response to Simon Wren-Lewis' ruminations on the Euro: "And we are seriously considering, after reading him, whether the Euro project needs to be blown up--indeed, whether the fundamental flaw was in U.S. occupation authorities allowing the formation of the Bundesrepublik, because a European Union that now had five members named "Brandenburg", "Saxony", "Bavaria", "Rhineland", and "Hanover" would be likely to have a much healthier politics and economics than our current one, with one member named "Germany":"

That's a thought worth retrospective consideration. It is a much more creative idea than the quickly-abandoned "Morgenthau plan."

It's very hard to get toothpaste back in the tube.

Did we waste a whole war?

Tuesday, November 11, 2014

Armistice Day, 2014

The calendar says today is Veterans' Day. History says today is Armistice Day - the 11th hour of the 11th day of the 11th month, when the guns that had roared in August, 1914 fell silent. The war that decimated Europe had come to an end not with victory, but with an Armistice. A truce.

There was still hope that this had been a "war to end wars."

But the Armistice had been a fiction. Germany was defeated, and the country was falling apart.

The failure of the Allies to insist on a German surrender was to create problems in the years ahead.

The peace was still being negotiated at Versaille. It was to be a draconian peace imposing harsh terms on Germany that, if fully implemented, would destroy the economy of Europe.

None of the belligerents was satisfied with the outcome. England and France wanted greater reparations payments, notwithstanding the damage this would do to their own economies. (John Maynard Keynes described what would happen in his book The Economic Consequences of The Peace.)

The only belligerent that achieved its war aims was Serbia (in the form of Yugoslavia) who started the whole thing in the first place.

Europe was in discord. Hungary didn't like the settlement and attacked Czechoslovakia. Poland didn't like the settlement and attacked the Soviet Union.

Russia (the Soviet Union) lost Poland, Latvia, Lithuania, Estonia and Finland, and for a time lost Ukraine. Central Asia did its best to avoid incorporation into the Soviet Union.

The United States intervened in the Russian Civil War in the Murmansk area and in Eastern Siberia. Japan tried to carve out a part of Siberia.

The Czechoslovak Legion fought its way west to Vladivistok and on by sea to the newly independent state of Czechoslovakia.

Great Britain, France, Belgium, Luxemburg, Italy, Germany and the remains of Austria licked their wounds and sulked.

It was a long way from a peaceful world (I won't mention the Far East), but still the Armistice brought hope.

Maybe I'm just old-fashioned, but I wish we still called it Armistice Day.

In memory of the hope the day brought.

Thursday, September 18, 2014

The Best Laid Plans Gang Aft Agley

Scotland votes today on the referendum to leave the United Kingdom. Yes or No?

The polls don't reveal how the vote will go. Earlier this week opinion seemed to run slightly in favor of staying in the UK.

I sympathize with the Scots who want independence. Staying in a union run by Tories isn't a great prospect. On the other hand, leaving the union while keeping the British Pound (as the proposal would do) is madness. The fate of an independent country with no currency of its own is in the hands of others. Every experiment along those lines in the past has turned out badly, including the present European experiment with the Euro.

Staying in the union is a more rational choice.

Then work to rid the UK of Cameron.

Wednesday, August 13, 2014

On Knowledge And Wisdom

"Supposing is good, but finding out is better." - Mark Twain

For some reason, newspapers and blogs today are full of discussions about knowledge, facts, wisdom, stupidity, and how to tell the difference.

Nicholas Kristoff: Don't dismiss the humanities:

Noah Smith: I'm with stupid - and Paul Krugman:

Simon Wren-Lewis: Policy-Based Evidence Making, a play on the opposite side of evidence-based policy;

Joshua Smith: EPI And AEI Agree: Cutting Jobless Benefits Did Not Boost Employment; [the case of North Carolina figures in this discussion].

Thursday, April 10, 2014

Living Within Our Means?

The budget just passed by the Republican House of Representatives sheds new light on the phrase "living within our means."

"Mean" is a word with many meanings. But when referring to Republicans, one set of meanings stands out:

mean 2  (mēn)
adj. mean·er, mean·est
a. Selfish in a petty way; unkind.
b. Cruel, spiteful, or malicious.
2. Ignoble; base: a mean motive.
3. Miserly; stingy.
a. Low in quality or grade; inferior.
b. Low in value or amount; paltry: paid no mean amount for the new shoes.
5. Common or poor in appearance; shabby: "The rowhouses had been darkened by the rain and looked meaner and grimmer than ever" (Anne Tyler).
6. Low in social status; of humble origins.
7. Humiliated or ashamed.
8. In poor physical condition; sick or debilitated.
9. Extremely unpleasant or disagreeable: The meanest storm in years.
10. Informal Ill-tempered.
11. Slang
a. Hard to cope with; difficult or troublesome: He throws a mean fast ball.
b. Excellent; skillful: She plays a mean game of bridge.

[Middle English, from Old English gemǣne, common; see mei-1 in Indo-European roots.]
Synonyms: mean2, low1, base2, abject, ignoble, sordid
These adjectives mean lacking in dignity or falling short of the standards befitting humans. Mean suggests pettiness, spite, or niggardliness: "Never ascribe to an opponent motives meaner than your own" (J.M. Barrie).
Something low violates standards of morality, ethics, or propriety: low cunning; a low trick.
Base suggests a contemptible, mean-spirited, or selfish lack of human decency: "that liberal obedience, without which your army would be a base rabble" (Edmund Burke).
Abject means brought low in condition: abject submission; abject poverty.
Ignoble means lacking noble qualities, such as elevated moral character: "For my part I think it a less evil that some criminals should escape than that the government should play an ignoble part" (Oliver Wendell Holmes, Jr.)
Sordid suggests foul, repulsive degradation: "It is through art . . . that we can shield ourselves from the sordid perils of actual existence" (Oscar Wilde).
A check of the Republican budget reveals that it (the budget) is mean in most of those senses.
It is such a mean and destructive budget that Americans should be enraged. NYT  columnist Charles M. Blow tells us today why we should be enraged. Republican insistence on measures like this is the main reason why wages for sixty percent of Americans are lower now (in real terms) than they were 40 years ago, despite vast improvements in economic productivity. 

This is not driven by economics. It is driven by the greed of a narrow sliver of American society who make nothing but deals. And prosper out of all proportion to any contribution they make to society. Many of them got their wealth the old fashioned way - they inherited it. And for the past half century they have used that wealth to acquire great political power. Which the George W. Bush Supreme Court has just increased.

The only weapon we have to fight back with is the vote. We can see how much this threatens the wealthy and powerful by what a concerted effort Republican state governments across the land have exerted to suppress the votes of the poor, people who work for a living, people of color, women and the elderly. 

We see it right here in North Carolina.

Get out and vote!

Sunday, April 6, 2014

What Is A Robber Baron?

A little etymology is in order.  Fortunately, Timothy Taylor in his blog "The Conversable Economist" saves us the trouble of poring over the archives.

He explains the origin of the term in the Middle Ages here and provides some helpful examples from Nineteenth Century oratory using the term in very descriptive ways.

Where are the orators of our day?

W.C Flagg, president of the Illinois State Farmer's Association, was such an orator in his day. He explains the results of the Robber Barons' in the field of transportation: "There-by you, the citizens of a democratic-republican country, are enabled to know how cruel, relentless, and unscrupulous a thing is arbitrary power in the hands of a few. Regulation by combination means that the railroad managers are feudal lords, and that you are their serfs."

An 1870 article in Atlantic Monthly draws a picture that seems all too familiar today:

"They make money so rapidly, so easily, and in such a splendid sensational way, that they corrupt more persons by their example than they ruin by their knaveries. As compared with common rogues, they appear like Alexander or Caesar as compared with common thieves and cutthroats. As their wealth increases, our moral indignation at their method of acquiring it diminishes, and at last they steal so much that we come to look on their fortunes as conquests rather than burglaries."

The article might have been referring to the practice of high frequency trading, where margins of time in microseconds result in vast stock trading fortunes as described this week in the New York Times. In times past, such people were also described as parasites. 

Friday, March 14, 2014

Why Is Ukraine's Economy So Fouled Up?

Justin Fox in Harvard Business Review has an interesting article on Ukraine's economy. Why is it so bad? In a nutshell - rampant corruption.

Monday, February 24, 2014

American CEO's Are Forty Times As Productive As German CEO's

American CEO's Are Forty Times As Productive As Germans

At least that is what one might assume from the above graphic. That is, if you believe that capitalism dispenses rewards in a rational and proportional manner.

Then there's this:

Who was Tesla? He invented and designed the entire infrastructure to distribute electricity by alternating current, generate it more efficiently using the Tesla turbine, and invented radio. He had to fight all those "job creators" like Thomas Edison and Guglielmo Marconi to get his ideas adopted.

Wednesday, February 12, 2014

Are There Sensible Republicans After All?

Early this evening, the Republican-dominated US House of Representatives passed a "clean" bill to raise the debt ceiling without tying it to any other legislation. The bill passed with only 28 Republican votes. The big news is that Speaker of the House John Boehner allowed the vote to be taken.

This lets the Treasury borrow money as necessary to pay bills we have already incurred. While that is good news, there shouldn't be the slightest controversy.

It would be better news if we did away with the "debt ceiling" altogether. Our need to borrow is governed by revenue and expenditures that already comply with the dictates of Congress.

Here is economist Jared Bernstein's take on what has happened.

Tuesday, February 11, 2014

The Big Game That Matters

From early childhood, we Americans are conditioned to believe the most important human events are the big game. Athletic contests define us. What are our loyalties? Red Sox or Yankees? Giants or Dodgers? Redskins or Cowboys? UNC or Duke?

A little over a week ago the Big Game was a Super Bowl that wasn't very (super, that is). This week and next the Big Game is the Winter Olympics at Sochi in Russia.

Much as we enjoy the spectacle of these events, hang on every slip of a ski or skate, wince at every stumble or fall, once the spectacle is over, we should remember that nothing in the real world has changed. People still die in Syria and Afghanistan and Darfur, there is no peace in the Middle East. And nothing has made lives better for human beings anywhere, including here in America.

Six hundred forty-two miles North West of Sochi, in Kiev, the capital of Ukraine, a drama is playing out that could change the lives of people living there and the fates of nations. The drama gets little press here, but at stake is the future of Ukraine as a European country. Will Ukraine join Europe or be captured in the orbit of a resurgent Russia?

Two decades ago, not long after the Soviet Union broke up, I met a dozen or so Ukrainian judges at a bar in Georgetown, District of Columbia. They were in this country to study our legal system, including some pretty esoteric issues of corporate law. They were interested to learn that I was vice president of a limited liability corporation. They had just learned about that legal structure.

After a few beers, they made it clear that their aspiration was for Ukraine to become a "normal European country." I found the same sentiment when I visited Kiev a few years later. It was as though the disaster at Chernobyl had broken a dam, releasing a vast reservoir of disdain and resentment at not only the former Soviet Union but also at Russia.

The story may seem complicated. The characters have funny-sounding names like a Dostoevsky novel.  Here is one account of what is going on and why it is happening.

This is an actual Big Game - and the outcome does matter.

Monday, February 10, 2014

Austrians? - What's That About?

"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”
 John Maynard Keynes quote

“The businessman is only tolerable so long as his gains can be held to bear some relation to what, roughly and in some sense, his activities have contributed to society.”

― John Maynard Keynes
"Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.”
― John Maynard Keynes
John Maynard Keynes (Lord Keynes) was a man with a sharp tongue and an even sharper pen.  He was a savvy investor who became wealthy through his investments. He famously foretold economic disaster from Britain's postwar policies. His essays, "The Economic Consequences Of The Peace" and "The Economic Consequences of Mr. Churchill" outlined years in advance what was to happen during the interwar period.

He did not endear himself to the wealthy and powerful men of his day.

Yet his ideas were greatly influential in shaping the postwar (post-WWII) world for the better.

His ideas were based on facts and reality.

His opponents among economists based their ideas on what they viewed as revealed truth. They never changed their ideas when more information became available. His most famous opponents were Friedrich Hayek (sometimes von Hayek) and Ludwig von Mises. Austrian aristocrats didn't like Keynes.

The ophthalmologist and former congressman Ron Paul is among the most visible and doctrinaire supporters of the Austrians and opponents of Keynes in the present day.

In today's Washington Post, columnist E.J. Dionne explains some of the historical background of Paul's devotion to the thoughts of  von Hayek and von Mises. Neither of the two Austrians wielded any significant influence in shaping the modern postwar world. At the time, they were marginal figures at best.

As a practical matter, Keynes was as influential on Republican policies during the Eisenhower and Nixon administrations as he was on Democratic policies. As recently as 1980, then presidential aspirant George Herbert Walker Bush disparaged the policies espoused by Reagan as "voodoo economics."

But the economic thought of Hayek and Mises became useful in supporting the self-interests of super wealthy plutocrats bent on undoing the works of the New Deal in every particular.

Never mind that these very policies, even in the attenuated form that survived Reagan, are what kept the global economy after 2007 from descending into worse chaos than existed after the crash of 1929.

Republican plutocrats have never forgiven President Roosevelt for rescuing capitalism from the consequences of their own excesses.

Nor have they ever forgiven the measures to protect the poor and middle classes from the destructive consequences of the excesses of plutocrats.

Saturday, January 18, 2014

Who Are The Rebels - Who Are The Anarchists?

“The poor have been rebels, but they have never been anarchists; they have more interest than anyone else in there being some decent government. The poor man really has a stake in the country. The rich man hasn’t; he can go away to New Guinea in a yacht. The poor have sometimes objected to being governed badly; the rich have always objected to being governed at all. Aristocrats were always anarchists.” (G. K. Chesterton, The Man Who Was Thursday)

G. K. Chesterton may have a point here.  At least, the part about the rich objecting to being governed at all. As for the aristocrats being anarchists, they are one-way anarchists at best. Before letting anarchism loose, they do their very best to load the dice in their own favor. Both tendencies are at work among Tea-Party activists and Libertarians. Old-fashioned Conservatives, not so much, but there don't seem to be many of those around any more.

Today, not many of the rich would go away to New Guinea in a yacht. The natives are too restless and their own country (which many rich do in fact despise) lacks the power to rescue them if (when) things go awry. Instead, they are happy to fly away to Switzerland or some tax haven in the Caribbean.

Monday, January 6, 2014

The Invisible Hand And Kinky Indifference Maps

Someone long ago decided that economics is "the dismal science."

It therefore may come as a shock to learn that economists (at least the salt water variety) sometimes exhibit a keen sense of humor.

There is, for example, the economics professor/writer known to the world as Adam Smith. No, not the Adam Smith of 1776 who wrote Wealth of Nations. Rather the Adam Smith (pen name) who in 1976 received the "Invisible Hand" award.

Rather than attempt to describe the scene myself, I'll let Adam Smith himself (The late Jerry Goodman) tell the tale here.

And we can all join in a rousing chorus of "Wealth of Nations- Writ for me!"

Sunday, January 5, 2014

Why I Am A Democrat

I have heard people ask, in apparent confusion: "Just what does the Democratic Party stand for?"

There should be no confusion. Here is what President Franklin Delano Roosevelt said about it in 1932:

"There are two ways of viewing the Government's duty in matters affecting economic and social life. The first sees to it that a favored few are helped and hopes that some of their prosperity will leak through, sift through, to labor, to the farmer, to the small business man. That theory belongs to the party of Toryism, and I had hoped that most of the Tories left this country in 1776
But it is not and never will be the theory of the Democratic Party."

Here is what presidential candidate William Jennings Bryan said about it in 1896:

"There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it."

From Thomas Jefferson to the present day, the central idea of the Democratic Party has been to achieve "the greatest good to the greatest number of our citizens."

Wednesday, December 18, 2013

Today's News and Observer prints an editorial concerning the income gap between ordinary working Americans and the super wealthy, explaining why the gap is holding back our economy.

It isn't about fairness - it is about what works best:

"To boost economy, reduce the income gap
December 17, 2013 Updated 6 hours ago
"The rich are enjoying a surge in wealth from robust stock market gains, but it’s only when low- and middle-income people have more to spend that the economy rises, the economists said.
“What you want is a broader spending base,” said Scott Brown, chief economist at Raymond James, a financial advisory firm. “You want more people spending money.”
What’s wanted – broad gains in income – is not what the great majority of Americans will be getting this Christmas. Pay for low- and middle-income earners is barely rising, and the gap between the rich and the rest shows no sign of slowing its expansion. The result of flat incomes for most is flat consumption overall.
The most recent census figures reveal, the AP reported, “that the average income for the wealthiest 5 percent of U.S. households, adjusted for inflation, has surged 17 percent in the past 20 years. By contrast, average income for the middle 20 percent of households has risen less than 5 percent.”
What may be changing is that growing income inequality is moving from a moral debate about fairness to a practical discussion about its economic effect. That’s a good change. President Obama has moved the discussion that way. With luck, the mid-term election will take it further."

To find out more, read the AP story here:

The truth is that New Deal programs and the so-called safety net have always been about making the economy work better for everyone. Businessmen in our poorest states are the biggest beneficiaries from putting more money in the pockets of workers, whether currently employed or not.

Thursday, November 21, 2013

Mark Thoma Reminds Us Of The State Of The Labor Market


We have a lot of headline activity every time the "unemployment rate" goes up or down. But what matters much more is the overall percentage of working age population that is employed. Here is that picture, and the ratio is going down.

Then there is the issue of wages and salaries. As Jim Hightower observes, "It isn't about jobs. Slaves had jobs!"

Wednesday, October 9, 2013

Bruce Bartlett Predicts: Shutdown Will Defeat Republicans In 2014

Writing for the Fiscal Times,  Republican pundit Bruce Bartlett sees a possible Republican defeat in 2014 because of the government shutdown. His analysis is here.

Tuesday, October 8, 2013

Tea Party Radicalism: Just A Bit More Extreme?

Much current commentary tends to describe the Tea Party phenomenon as just a bit more extreme than mainstream Republicanism, but within the American tradition. Francis Fukuyama recently tied the Tea Party efforts to the parts of the US Constitution that make it hard for anything to get done.

Michael Lind thinks it is more than that. It may have roots going back to Jefferson and Jackson (and to the Anti-Federalists, but Lind doesn't bring that up), but it represents a fundamentally anti-democratic undertaking. Think Downton Abbey.

Here is Lind's article. It is the best analysis I have read lately, putting it in the context of the American Civil War, the failure of reconstruction, and the reaction to the Voting Rights Act and Civil Rights Act.

There are a lot of different ways to look at current American politics. The different angles overlap, and they all seem to involve race to some degree.

I strongly recommend reading Lind's article.