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Archive for 17. August 2018

Greece: Long-Run GDP Growth Prospects Are Poor

Posted by hkarner - 17. August 2018

Friday, August 17, 2018, Observing Greece

Last month, the IMF pubslished its 2018 Article IV Report on Greece and it was widely commented in the media. I have now read the full 80+ pages and can only recommend others to read the full report. It can be found under this link (under the caption Electronic Access, click on Free Full Text).

I focus here on Annex VI about Greece’s Long-Term Growth Potential and I reproduce it below. A summery statement would be: „Ceteris paribus, aging would imply an average yearly decline of 1.1 percentage points in Greece’s labor force during the next four decades. Labor productivity (output per worker) would grow only at about 0.4 percent in the steady state (the rate of TFP growth adjusted for the labor share in output). Long-run GDP growth prospects are thus poor, absent a major change in policies. Structural reforms to raise TFP growth and employment are therefore the only option to achieve higher long-term output growth.“

Below is the Annex VI about Greece’s Long-Term Growth Potential.

1. Greece is set to experience dramatic population aging over the next several decades. In its 2018 Aging Report, the EC projects Greece’s working age population to fall by about 35 percent between 2020 and 2060 due to a shrinking and rapidly aging population. This is among the largest such declines in the Euro Area, and three times the average fall for the Euro Area. Ceteris paribus, aging would imply an average yearly decline of 1.1 percentage points in Greece’s labor force during the next four decades.

2. Greece’s productivity growth has historically been poor. Greece’s underperformance relative to peers is often associated with relatively low openness of the economy and a high share of labor allocated to non-tradable sectors. Total factor productivity (TFP) growth over the last 47 years averaged just ¼ percent annually, by far the lowest in the Euro Area. Assuming this historical average TFP growth rate going forward, labor productivity (output per worker) would grow only at about 0.4 percent in the steady state (the rate of TFP growth adjusted for the labor share in output).

3. A pickup in investment could provide a short-run boost to growth, but productivity and demographics will dominate in the longer run. Investment is bound to recover from its highly depressed level once Greece emerges from the crisis, but the growth effect of this will wane once the capital stock returns to its long-run level. Staff’s medium-term projections already assume a temporary boost to GDP growth from higher investment (with real GDP growth rates averaging close to 2 percent during the investment recovery). Once the transition to the new, higher capital ratio is completed, however, the impact of increased investment will fade and growth dynamics will be determined by the evolution of output per worker and of the number of workers. Den Rest des Beitrags lesen »

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A Better World Is Here

Posted by hkarner - 17. August 2018

Bjørn Lomborg, a visiting professor at the Copenhagen Business School, is Director of the Copenhagen Consensus Center, which seeks to study environmental problems and solutions using the best available analytical methods. He is the author of The Skeptical Environmentalist, Cool It, How to Spend $75 Billion to Make the World a Better Place and The Nobel Laureates‘ Guide to the Smartest Targets for the World, and was named one of Time magazine’s 100 most influential people in 2004.

The belief that everything is getting worse paints a distorted picture of what we can do, and makes us more fearful. But while getting the facts wrong – or willfully misrepresenting them – often results in misguided policies, fact-based recognition of what humanity has achieved encourages policies that can achieve the most good.

SKANDERBORG, DENMARK – It’s very easy to form the view that the modern world is coming apart. We are constantly confronted with an onslaught of negativity: frightening headlines, alarming research findings, and miserable statistics.

There are indeed many things on the planet that we should be greatly concerned about. But fixating on horror stories means that we miss the bigger picture.

The United Nations focuses on three categories of development: social, economic, and environmental. In each category, looking back over the last quarter-century, we have far more reason for cheer than fear. Indeed, this period has been one of extraordinary progress. Den Rest des Beitrags lesen »

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Erdoğan’s Authoritarian Quackery

Posted by hkarner - 17. August 2018

Nina L. Khrushcheva, the author of Imagining Nabokov: Russia Between Art and Politics and The Lost Khrushchev: A Journey into the Gulag of the Russian Mind, is Professor of International Affairs at The New School and a senior fellow at the World Policy Institute.

Turkey’s currency is plunging, yet the central bank has been all but prohibited from raising interest rates, because Turkish President Recep Tayyip Erdoğan believes that raising interest rates actually causes inflation. What is it about dictators that leads them so consistently down the rabbit hole of charlatanism and conspiracy theory?

TBILISI – Why do conspiracy theories and general charlatanism so often receive their strongest support from the world’s dictators? Sure, dictators are almost always oddballs themselves, but that cannot be all there is to it. In fact, it is worth asking whether quackery is a necessary feature of authoritarian rule.

The latest evidence that it is can be found at the heart of Turkey’s current economic crisis. Turkey is saddled with debt and its currency, the lira, is plunging, yet the central bank has been all but prohibited from defending the currency by raising interest rates, because Turkish President Recep Tayyip Erdoğan believes that raising interest rates actually causes inflation.

The economics profession would beg to differ. But Erdoğan, as with much else, is not inclined to listen. On the contrary, to force the central bank to pursue his bizarre monetary policy, Erdoğan has installed his utterly unqualified son-in-law, Berat Albayrak, as the country’s Minister of Finance and Treasury. Den Rest des Beitrags lesen »

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Can Turkey Rewrite the Crisis-Management Rules?

Posted by hkarner - 17. August 2018

Mohamed A. El-Erian, Chief Economic Adviser at Allianz, the corporate parent of PIMCO where he served as CEO and co-Chief Investment Officer, was Chairman of US President Barack Obama’s Global Development Council. He previously served as CEO of the Harvard Management Company and Deputy Director at the International Monetary Fund. He was named one of Foreign Policy’s Top 100 Global Thinkers in 2009, 2010, 2011, and 2012. He is the author, most recently, of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

Rather than sticking with the approach taken by numerous other countries – including Argentina earlier this year – by raising interest rates and seeking some form of IMF support, Turkey has shunned both in a very public manner. Unless it changes course, the government risks much wider damage – and not just in Turkey.

LAGUNA BEACH – Whether by accident or design, Turkey is trying to rewrite the chapter on crisis management in the emerging-market playbook. Rather than opting for interest-rate hikes and an external funding anchor to support domestic policy adjustments, the government has adopted a mix of less direct and more partial measures – and this at a time when Turkey is in the midst of an escalating tariff tit-for-tat with the United States, as well as operating in a more fluid global economy. How all this plays out is important not only for Turkey, but also for other emerging economies that already have had to cope with waves of financial contagion.

The initial phases of Turkey’s crisis were a replay of past emerging-market currency crises. A mix of domestic and external events – an over-stretched credit-led growth strategy; concerns about the central bank’s policy autonomy and effectiveness; and a less hospitable global liquidity environment, owing in part to rising US interest rates – destabilized the foreign-exchange market. Den Rest des Beitrags lesen »

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The “neuropolitics” consultants who hack voters’ brains

Posted by hkarner - 17. August 2018

Date: 16-08-2018
Source: Technology Review by Elizabeth Svoboda

These experts say they can divine political preferences you can’t express from signals you don’t know you’re producing.

Maria Pocovi slides her laptop over to me with the webcam switched on. My face stares back at me, overlaid with a grid of white lines that map the contours of my expression. Next to it is a shaded window that tracks six “core emotions”: happiness, surprise, disgust, fear, anger, and sadness. Each time my expression shifts, a measurement bar next to each emotion fluctuates, as if my feelings were an audio signal. After a few seconds, a bold green word flashes in the window: ANXIETY. When I look back at Pocovi, I get the sense she knows exactly what I’m thinking with one glance.

Petite with a welcoming smile, Pocovi, the founder of Emotion Research Lab in Valencia, Spain, is a global entrepreneur par excellence. When she comes to Silicon Valley, she doesn’t even rent an office—she just grabs a table here at the Plug and Play coworking space in Sunnyvale, California. But the technology she’s showing me is at the forefront of a quiet political revolution. Campaigns around the world are employing Emotion Research Lab and other marketers versed in neuroscience to penetrate voters’ unspoken feelings. Den Rest des Beitrags lesen »

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The Zero-Sum Economy

Posted by hkarner - 17. August 2018

Adair Turner, a former chairman of the United Kingdom’s Financial Services Authority and former member of the UK’s Financial Policy Committee, is Chairman of the Institute for New Economic Thinking. His latest book is Between Debt and the Devil.

The anthropologist David Graeber has argued that as much as 30% of all work is performed in “bullshit jobs,” which are unnecessary to produce truly valuable goods and services but arise from competition for income and status. But the deeper problem is that more and more economic activity performs a merely distributive function.

LONDON – Across the global economy, the potential for automation seems huge. Adidas’ “Speedfactory” in Bavaria will employ 160 workers to produce 500,000 pairs of shoes each year, a productivity rate over five times higher than in typical factories today. The British Retail Consortium estimates that retail jobs could fall from three million to 2.1 million within ten years, with only a small fraction replaced by new jobs in online retailing. Many financial-services companies see the potential to cut information-processing jobs to a small fraction of current levels.

And yet, despite all this, measured productivity growth across the developed economies has slowed. One possible explanation, recently considered by Andrew Haldane, chief economist of the Bank of England, is that while some companies rapidly grasp the new opportunities, others do so only slowly, producing a wide productivity dispersion even within the same sector. But dispersion alone cannot explain slowing productivity growth: that would require an increase in the degree of dispersion. Den Rest des Beitrags lesen »

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