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Archive for 29. Oktober 2016

How Inequality Found a Political Voice

Posted by hkarner - 29. Oktober 2016

Photo of Michael Spence

Michael Spence

Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU’s Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, Senior Fellow at the Hoover Institution at Stanford University, Academic Board Chairman of the Asia Global Institute in Hong Kong, and Chair of the World Economic Forum Global Agenda Council on New Growth Models. He was the chairman of the independent Commission on Growth and Development, an international body that from 2006-2010 analyzed opportunities for global economic growth, and is the author of The Next Convergence – The Future of Economic Growth in a Multispeed World.

OCT 28, 2016 Project Syndicate

MILAN – It took a long time for widening inequality to have an impact on politics, as it suddenly has done in recent years. Now that it is a central issue, national economic priorities will need to shift substantially to create more equitable, inclusive economies and societies. If they do not, people could embrace explosive alternatives to their current governments, such as the populist movements now sweeping many countries.

Political leaders often speak of growth patterns that unfairly distribute the benefits of growth; but then they do relatively little about it when they are in power. When countries go down the path of non-inclusive growth patterns, it usually results in disrespect for expertise, disillusionment with the political system and shared cultural values, and even greater social fragmentation and polarization. Den Rest des Beitrags lesen »

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Four Fallacies About Trade and Globalization

Posted by hkarner - 29. Oktober 2016

Date: 28-10-2016
Source: YaleGlobal

Trade – along with the accompanying fears over foreign competition, job loss and reduced wages – is a hot issue for the US presidential campaign and elections elsewhere. Ajai Gaur and Ram Mudambi, professors of international business strategy at Rutgers University and Temple University, analyze four fallacies associated with trade, globalization and manufacturing in advanced economies. Manufacturing jobs are no longer the basis of US prosperity. “Most advanced economies have become primarily service economies,” they explain. “Rich countries are service economies, focused on finance, engineering, design and health care, and this is dictated by their comparative advantage.” Also, imports do not make a country poor, and the most competitive companies both import and export to attract foreign investment and capital. Foreign firms can provide immense benefits for the economies of other nations, and the global supply chain allows domestic firms to become exporters by proxy without the risks of international activity. Gaur and Mudambi urge politicians to reject the fallacies and citizens to make informed decisions before voting. – YaleGlobal

Fear of trade overlooks that most value creation in advanced economies is based on services, not manufacturing

mfg-emplomentNEWARK, PHILADELPHIA: Trade typically figures prominently in US presidential election, and 2016 is no exception. While campaigning, politicians tend to adopt anti-international business positions that are theoretically unsound and lack empirical evidence.

Four fallacies underline these common political arguments.

Fallacy 1: Manufacturing jobs are the basis of American prosperity.

Fallacy 2: Imports make us poorer.

Fallacy 3: Success of foreign firms always helps foreign countries, success of US firms always helps the US economy.

Fallacy 4: To export, firms must sell to buyers in foreign countries.
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Inequality in the euro zone

Posted by hkarner - 29. Oktober 2016

Date: 27-10-2016
Source: The Economist

The gap between poor and rich regions in Europe is widening

Austerity is partly to blame

inequality-euTHE beautiful but rubbish-strewn streets of Catania, Sicily’s second-biggest city, are a world away from swanky Trento, in the country’s richer north. About a quarter of Sicilians are “severely materially deprived”—meaning that they cannot afford things like a car, or to heat their home sufficiently—compared with just 5% in Trento. Italy is not unique. In many places, the divide within countries appears to be getting worse.

According to an analysis by The Economist, the gap between richer and poorer regions of euro-zone countries has increased since the financial crisis. Our measure of regional inequality looks at the average income per head of a country’s poorest region, expressed as a percentage of the income of that country’s richest part. The weighted average for 12 countries shows that regional inequality was declining in the years leading up to the financial crisis of 2007-08, but has increased since then (see chart).

The poorest area in Slovakia, the euro zone’s most geographically unequal economy, now has an income per person of just 28% of the richest, a slight fall from before the crisis. In Calabria, Italy’s poorest region, income per person as a share of the country’s best-off part, the province of Bolzano, was 45% in 2007 but is only 40% now. Elsewhere poor regions of the euro zone have seen income falling in both relative and absolute terms.

An exception is Germany: in its once-communist east, excluding Berlin, GDP per person reached 67% of that in former West Germany last year. (Most of the catch-up took place in the early 1990s, but continues more slowly.) Den Rest des Beitrags lesen »

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Europe’s single currency: France v Germany

Posted by hkarner - 29. Oktober 2016

Date: 27-10-2016
Source: The Economist

The founders of the euro have fundamentally different ideas about how the single currency should be managed

euro-bookThe Euro and the Battle of Ideas. By Markus Brunnermeier, Harold James and Jean-Pierre Landau. Princeton University Press; 440 pages; $35 and £24.95.

THE euro crisis that first blew up in late 2009 has revealed deep flaws in the single currency’s design. Yet in part because it began with the bail-out of Greece, many politicians, especially German ones, think the main culprits were not these design flaws but fiscal profligacy and excessive public debt. That meant the only cure was fiscal austerity. In fact, that has often needlessly prolonged the pain. Later bail-outs of countries like Ireland and Spain showed that excessive private debt, property bubbles and over-exuberant banks can cause even bigger problems for financial stability.

That is one early conclusion of “The Euro and the Battle of Ideas”, by three academics from Germany, Britain and France. They describe thoroughly the watershed moments of the crisis, how power shifted to national governments (especially in Berlin) and the roles played by the IMF and the European Central Bank (ECB). They blame euro-zone governments for failing to sort out troubled banks more quickly, for not realising that current-account deficits matter when public debts are in effect denominated in a foreign currency, for not making the ECB into a lender of last resort and for not pushing through structural reforms in good times. Den Rest des Beitrags lesen »

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