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Posts Tagged ‘Economist’

The inversion of Classical Economics

Posted by hkarner - 26. März 2016

By  Hudson,  Hudson

Days of Revolt: How We Got to Junk Economics

In this episode of teleSUR’s Days of Revolt, Chris Hedges interviews economist Michael Hudson on the history of classical economics and explores Marx’s interpretation of capitalism as exploitation –   March 22, 2016

CHRIS HEDGES: Hi, I’m Chris Hedges. Welcome to Days of Revolt. Today in a two-part series we’re going to be discussing a great Ponzi scheme that not only defines not only the U.S. but the global economy, how we got there, in the first segment, and secondly, where we’re going. And with me to discuss this issue is the economist Michael Hudson, author of Killing the Host: How Financial Parasites and Debt Destroy the Global Economy. A professor of economics who worked for many years on Wall Street, where you don’t succeed if you don’t grasp Marx’s dictum that capitalism is about exploitation. And he is also, I should mention, the godson of Leon Trotsky. Welcome Michael.

MICHAEL HUDSON: Thank you. Good to be here.

HEDGES: I want to open this discussion by reading a passage from your book, which I admire very much, which I think gets to the core of what you discuss. You write, “Adam Smith long ago remarked that profits often are highest in nations going fastest to ruin. There are many ways to create economic suicide on a national level. The major way through history has been through indebting the economy. Debt always expands to reach a point where it cannot be paid by a large swathe of the economy. This is the point where austerity is imposed and ownership of wealth polarizes between the One Percent and the 99 Percent. Today is not the first time this has occurred in history. But it is the first time that running into debt has occurred deliberately.” Applauded. “As if most debtors can get rich by borrowing, not reduced to a condition of debt peonage.” Den Rest des Beitrags lesen »

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Oil and the Gulf states: After the party

Posted by hkarner - 25. März 2016

Date: 24-03-2016
Source: The Economist

The low oil price is manageable in the short term; but the Gulf states must make big changes to face the future

Dubai ccFAST cars whizz around, malls are full of expensive luxuries and cranes dominate the skyline. But scratch the shimmering surface of the Gulf and you soon find countries hurting from the low oil price, currently around $40 a barrel. Growth is slowing and unemployment is rising. Policymakers even dare utter a three-letter “t” word until recently taboo: tax.

Oil is central to the six Gulf Co-operation Council (GCC) states, which have used the windfall of the past few years to spend lavishly. Unlike many oil exporters, such as Nigeria and Venezuela, they have high foreign-exchange reserves and low debts to cover short-term gaps. But public spending is generous and the private sector is heavily reliant on oil to boot. To be sustainable in an era of lower prices, the rulers must change the structure of their economies.

The IMF reckons the lower oil price knocked $340 billion off Arab oil-exporting states’ government revenues in 2015. This year is looking worse. Moody’s, a ratings agency, this month downgraded Bahrain and Oman and put on watch the other four GCC states: Saudi Arabia, Kuwait, the United Arab Emirates (UAE) and Qatar. “It’s the end of an era for the Gulf,” says Razan Nasser of HSBC in Dubai. “And we’re only just starting to see the effects.” Den Rest des Beitrags lesen »

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Living with technology: The data republic

Posted by hkarner - 25. März 2016

Date: 24-03-2016
Source: The Economist

To safeguard democracy, the use of data should be made as transparent as possible

“TECHNOLOGY IS NEITHER good nor bad; nor is it neutral,” said the late Melvin Kranzberg, one of the most influential historians of machinery. The same is true for the internet and the use of data in politics: it is neither a blessing, nor is it evil, yet it has an effect. But which effect? And what, if anything, needs to be done about it?

HabermasJürgen Habermas, the German philosopher who thought up the concept of the “public sphere”, has always been in two minds about the internet. Digital communication, he wrote a few years ago, has unequivocal democratic merits only in authoritarian countries, where it undermines the government’s information monopoly. Yet in liberal regimes, online media, with their millions of forums for debate on a vast range of topics, could lead to a “fragmentation of the public” and a “liquefaction of politics”, which would be harmful to democracy.

The ups and downs of the presidential campaign in America and the political turbulences elsewhere seem to support Mr Habermas’s view. Indeed, it is tempting to ask whether all this online activism is not wasted political energy that could be put to better use in other ways. Indeed, the meteoric rise of many online movements appears to explain their equally rapid demise: many never had time to build robust organisations. Den Rest des Beitrags lesen »

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Economics in a Time of Political Instability

Posted by hkarner - 24. März 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.

Photo of David Brady

David Brady

David Brady is Deputy Director and Senior Fellow at the Hoover Institution and Professor of Political Science at Stanford University.

MAR 23, 2016, Project Syndicate

MILAN/STANFORD – Over the last 35 years, Western democracies have seen a rapid rise in political instability, characterized by frequent shifts in governing parties and their programs and philosophies, driven at least partly by economic transformation and hardship. The question now is how to improve economic performance at a time when political instability is impeding effective policymaking.

In a recent article, one of us (David Brady) shows the correlation between rising political instability and declining economic performance, pointing out that countries with below-average economic performance have experienced the most electoral volatility. More specifically, such instability corresponds with a decline in the share of industrial or manufacturing employment in advanced countries. Though the extent of the decline varies somewhat across countries – it has been less sharp in Germany than in the United States, for example – the pattern is fairly ubiquitous. Den Rest des Beitrags lesen »

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The problem with profits

Posted by hkarner - 23. März 2016

Date: 23-03-2016
Source: The Economist

Big firms in the United States have never had it so good. Time for more competition

AMERICA used to be the land of opportunity and optimism. Now opportunity is seen as the preserve of the elite: two-thirds of Americans believe the economy is rigged in favour of vested interests. And optimism has turned to anger.

Voters’ fury fuels the insurgencies of Donald Trump and Bernie Sanders and weakens insiders like Hillary Clinton.

The campaigns have found plenty of things to blame, from free-trade deals to the recklessness of Wall Street. But one problem with American capitalism has been overlooked: a corrosive lack of competition. The naughty secret of American firms is that life at home is much easier: their returns on equity are 40% higher in the United States than they are abroad. Aggregate domestic profits are at near-record levels relative to GDP. America is meant to be a temple of free enterprise. It isn’t.

High profits might be a sign of brilliant innovations or wise long-term investments, were it not for the fact that they are also suspiciously persistent. A very profitable American firm has an 80% chance of being that way ten years later. In the 1990s the odds were only about 50%. Some companies are capable of sustained excellence, but most would expect to see their profits competed away. Today, incumbents find it easier to make hay for longer. Den Rest des Beitrags lesen »

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The strange amnesia of modern macroeconomics

Posted by hkarner - 21. März 2016

Adair Turner interviewed by Romesh Vaitilingam, 19 March 2016, voxeu

Chairman, Institute for New Economic Thinking

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The blockchain in finance: Hype springs eternal

Posted by hkarner - 19. März 2016

Date: 18-03-2016
Source: The Economist

Distributed ledgers are the future, but their advent will be slow

NORMALLY, it is Simon Taylor’s job to persuade sceptical colleagues at Barclays that rapid technological change will disrupt the bank’s business. So it comes as something of a surprise to have to dampen the excitement about the blockchain. “It’s quite silly. I get ten invitations to speak at a conference every day,” he says. “The technology will have real impact, but it will take time.”

The blockchain is the technology underpinning bitcoin, a digital currency with a chequered history. It is an example of a “distributed ledger”: in essence, a database that is maintained not by a single actor, such as a bank, but collaboratively by a number of participants. Their respective computers regularly agree on how to update the database using a “consensus mechanism”, after which the modifications they have settled on are rendered unchangeable with the help of complex cryptography. Once information has been immortalised in this way, it can be used as proof of ownership. The blockchain can also serve as the underpinning for “smart contracts”—programs that automatically execute the promises embedded in a bond, for instance. Den Rest des Beitrags lesen »

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Low wages are both a cause and a consequence of low productivity

Posted by hkarner - 19. März 2016

Date: 18-03-2016
Source: The Economist: Free exchange
Subject: Doing less with more

Labor Productivity GrowthCOUNTRIES grow richer when they learn how to produce more valuable stuff per person. Sadly, many advanced economies seem to have lost the knack. Except for a brief spurt around the turn of the millennium, productivity has grown painfully slowly in rich countries over the last four decades (see chart)—a factor, economists reckon, that has contributed to stagnant pay. Labour productivity in America fell at a startling 2.2% annual pace in the fourth quarter of 2015; growth of 0.6% for the year as a whole was better, but hardly impressive.

Orthodox explanations for the problem tend to fall into one of three categories. The first, championed by Robert Gordon, an economist at Northwestern University, suggests humanity has run out of big ideas.* Recent technological advances, the argument goes, lack the transformative power of the inventions of the 19th and early 20th centuries. Electricity and indoor plumbing, in Mr Gordon’s view, altered lives in a far more fundamental way than the digital revolution has managed. We were promised flying cars, to paraphrase Peter Thiel, a venture capitalist, but wound up instead with social networks.

There are several inconsistencies in this story, however. Recent developments in artificial intelligence and robotics look at least as transformative as the gains in software and computing that powered the productivity boom of the late 1990s. The breadth of the productivity slowdown also poses a problem for Mr Gordon’s thesis. Productivity growth has slumped not just in the rich world, but also in developing countries such as Mexico and Turkey, which should be able to boost efficiency easily by adopting the productivity-boosting technology that is already in use in wealthier places.

Some optimists argue instead that the problem is one of measurement. Technological progress often raises productivity in ways that statistical agencies struggle to detect. The tumbling cost of digital media (vast amounts of which are in effect free) subtracts from measured GDP, for example. Meanwhile, huge improvements in the quality of goods like smartphones can be difficult for statistical agencies to capture.

Yet mismeasurement probably plays only a small role in the slowdown. Chad Syverson of the University of Chicago estimates that the productivity slump has cost America about $2.7 trillion in lost output since 2004, or about $8,400 for every American. That is far more than most estimates of the unmeasured gains from information technology. New research presented at the Brookings Institution, a think-tank, by David Byrne and John Fernald of the Federal Reserve and Marshall Reinsdorf of the IMF suggests there is little reason to think that the official data are worse now than in the late 1990s, when measured productivity growth was much higher. Indeed, the data ought to have improved, since the smartphones and computers that give statisticians such headaches are no longer made in the rich world.

A third, more worrying possibility is that ossifying rich economies are getting worse at shifting people from obsolete firms and stagnant towns to more productive ones. In America, for instance, the rate of startup formation has fallen steadily since the late 1980s, according to work by Jorge Guzman and Scott Stern of MIT. That is not as disconcerting as it sounds: the authors find that the American economy is still producing plenty of the right sort of firms, with lots of growth potential. Worryingly, however, fewer of those firms seem to grow big.

A few, high-growth startups account for most new jobs created in the private sector. But over the past 15 years America’s high-growth companies have not expanded much faster than their plodding peers. Flagging competitive pressures could be to blame. Profitable firms are increasingly likely to bank their earnings than to plough them back into the business. Regulation may also be a problem. Messrs Guzman and Stern find that entrepreneurial potential in some places, such as San Francisco and its hinterland, is far larger than in others, such as Detroit. Yet restrictions on construction constrain the movement of people from stagnant places to dynamic ones. A paper published in 2015 by Chang-Tai Hsieh of the University of Chicago and Enrico Moretti of the University of California, Berkeley, suggested that if it were easier to build in and around San Francisco, and thus cheaper to live there, employment in the area would rise by more than 500%, while many cities in the Rust Belt would all but vanish.

Waste not, want not
Orthodox economics suggests plenty of ways to nurture productivity growth—and, with luck, wages—such as boosting support for research and cutting red tape. But some in the profession are also beginning to ask whether the link between low productivity and low wages may run in both directions. Low pay allows firms to employ workers profitably in marginal jobs and to continue to use workers even though robots or software could replace them. Investments in automated checkout machines, for example, are less attractive when there are lots of cheap humans around.

Some economists, such as João Paulo Pessoa and John Van Reenen of the London School of Economics, reckon low British wages, which tumbled during the Great Recession, help account for weak productivity growth during the subsequent recovery, since firms felt less pressure to economise. Similarly, abundant, cheap labour may help explain how the American economy has managed to produce the unusual combination of soaring employment and weak wage growth in recent years.

By allowing economies to operate with lots of labour-market slack and by relying on falling pay to boost competitiveness, governments have enabled firms to make careless use of low-wage labour. By prioritising a return to full employment, politicians could give a much-needed kick to both wages and productivity.

Sources:

“The Rise and Fall of American Growth: The US Standard of Living Since the Civil War”, Robert Gordon, 2016.

“Challenges to mismeasurement explanations for the US productivity slowdown”, Chad Syverson, NBER Working Paper 21974, January 2016.

“Does the United States have a productivity slowdown or a measurement problem?”, David Byrne, John Fernald and Marshall Reinsdorf, Brookings Papers on Economic Activity, Spring 2016.

“The state of American entrepreneurship? New estimates of the quantity and quality of entrepreneurship for 15 US states, 1988-2014”, Jorge Guzman and Scott Stern, 2016.

„Where has all the skewness gone? The decline in high-growth (young) firms in the US“, Ryan Decker, John Haltiwanger, Ron Jarmin and Javier Miranda, NBER Working Paper 21776, December 2015.

“Why do cities matter? Local growth and aggregate growth”, Chang-Tai Hsieh and Enrico Moratti, NBER Working Paper 21154, May 2015.

“The UK productivity and jobs puzzle: Does the answer lie in labour market flexibility?”, Joao Paulo Pessoa and John Van Reenen, Centre for Economic Performance Special Paper, June 2013.

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Russian foreign policy: A hollow superpower

Posted by hkarner - 18. März 2016

Date: 17-03-2016
Source: The Economist

Putin ccDon’t be fooled by Syria. Vladimir Putin’s foreign policy is born of weakness and made for television

JUBILANT crowds waved Russian flags; homecoming pilots were given fresh-baked bread by women in traditional dress. Judging by the pictures on television, Vladimir Putin won a famous victory in Syria this week. After his unexpected declaration that the campaign is over, Mr Putin is claiming credit for a ceasefire and the start of peace talks. He has shown off his forces and, heedless of civilian lives, saved the regime of his ally, Bashar al-Assad (though Mr Assad himself may yet prove dispensable). He has “weaponised” refugees by scattering Syrians among his foes in the European Union. And he has outmanoeuvred Barack Obama, who has consistently failed to grasp the enormity of the Syrian civil war and the threat it poses to America’s allies in the Middle East and Europe.

Look closer, however, and Russia’s victory rings hollow. Islamic State (IS) remains. The peace is brittle. Even optimists doubt that diplomacy in Geneva will prosper. Most important, Mr Putin has exhausted an important tool of propaganda. As our briefing explains, Russia’s president has generated stirring images of war to persuade his anxious citizens that their ailing country is once again a great power, first in Ukraine and recently over the skies of Aleppo. The big question for the West is where he will stage his next drama. Den Rest des Beitrags lesen »

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Shocking irony: reading Germany’s vote

Posted by hkarner - 16. März 2016

Date: 15-03-2016
Source: The Economist

In three regional elections on Sunday most voters supported the refugee policy of Angela Merkel. But they cast their ballots for the Greens and the Social Democrats, who had campaigned for the chancellor’s “welcome culture”, instead of Mrs Merkel’s own Christian Democrats, who had confusingly distanced themselves from her stance.

The shock was that the Alternative for Germany, an anti-refugee and right-wing party, scored beyond all expectations, coming in second in Saxony-Anhalt, in the east, with 24% and third in two western states. But that only attests to growing polarisation, which has been obvious for months.

Mrs Merkel has concluded that Germans overall still agree that people fleeing war deserve protection, but want her to restore order. Even though lonely in Europe and her party, she will thus continue to push in Brussels and Ankara for a humane and “European” solution to the crisis.
Regionalwahlen D 2016

 

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