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August 7, 2012

Latest Posts from Economist's View


Latest Posts from Economist's View


Posted: 26 Jun 2012 03:33 AM PDT
Robert Reich on the unpatriotic attitude of self-labeled "patriots":
Excluding Outsiders or Coming Together for the Common Good: What's the True Meaning of Patriotism?, by Robert Reich: Recently I publicly debated a regressive Republican who said Arizona and every other state should use whatever means necessary to keep out illegal immigrants. He also wants English to be spoken in every classroom in the nation, and the pledge of allegiance recited every morning. "We have to preserve and protect America," he said. "That's the meaning of patriotism."
To my debating partner and other regressives, patriotism is about securing the nation from outsiders eager to overrun us. ... Yet many of these same regressives have no interest in preserving or protecting our system of government. ... In fact, regressives in Congress have substituted partisanship for patriotism, placing party loyalty above loyalty to America.
The GOP's highest-ranking member of Congress has said his "number one aim" is to unseat President Obama. For more than three years congressional Republicans have marched in lockstep, determined to do just that. They have brooked no compromise. They couldn't care less if they mangle our government in pursuit of their partisan aims...
True patriots don't hate the government of the United States. They're proud of it. Generations of Americans have risked their lives to preserve it. They may not like everything it does, and they justifiably worry when special interests gain too much power... But true patriots work to improve the U.S. government, not destroy it.
But regressive Republicans loathe the government – and are doing everything they can to paralyze it, starve it, and make the public so cynical about it that it's no longer capable of doing much of anything. Tea Partiers are out to gut it entirely. ...
When arguing against paying their fair share of taxes, wealthy regressives claim "it's my money." But it's their nation, too. And unless they pay their share America can't meet the basic needs of our people. True patriotism means paying for America.
So when regressives talk about "preserving and protecting" the nation, be warned: They mean securing our borders, not securing our society. Within those borders, each of us is on our own. They don't want a government that actively works for all our citizens.
Their patriotism is not about coming together for the common good. It is about excluding outsiders who they see as our common adversaries.
Posted: 26 Jun 2012 02:43 AM PDT
Tim Duy:
Running Silent, by Tim Duy: I will soon be boarding a flight on my way to a real vacation. "Real" is defined as the absence of an internet connection, which will be the case for the first part of the trip. Or so I am told by my wife who planned the trip, I suspect, by looking for locations without internet access. More evidence that she is smarter than me.
This week the Federal Reserve will likely be overshadowed by the European summit and the expected Supreme Court ruling on health care, both of which I will miss in real time. Of course, if markets tank on European news and there is a sudden dollar shortage, we would expect the Fed to assist via expanded swap lines. For their part, the Europeans are reaching a critical moment in history. They still have time to walk back from the abyss, but they need to move quickly. Paul Krugman outlines three sensible proposals that offer the most near term hope - shared backing of the banking system, enable the ECB to act as lender of last resort to governments, and a higher inflation target. A real fiscal union is too much to hope for anytime soon.
That said, while the Europeans have the capacity to move forward, the odds are all too high that they will choose to move backwards. At this point, I can't see the latter two proposals seeing the light of day. On the first point, today's comments by German Chancellor Angela Merkel seem pretty clear. Via Bloomberg:
Merkel, speaking to a conference in Berlin today as Spain announced it would formally seek aid for its banks, dismissed "euro bonds, euro bills and European deposit insurance with joint liability and much more" as "economically wrong and counterproductive," saying that they ran against the German constitution.
The ball is in Germany's court, and they are dropping in it.
In other news, Greece is losing its finance minister:
Incoming Greek Finance Minister Vasilios Rapanos is going to resign after less than a week in office, according to the prime minister's office.
The cause wasn't immediately known, although Rapanos was rushed to the hospital on Friday after suffering from abdominal pain. At the time, the hospital released a statement saying he was admitted "because of intense abdominal pains, dizziness, nausea, sweating and weakness."
Could be symptoms of extreme stress, which would hardly be surprising. Note that Prime Minister Antonis Samaras will also be missing this week's summit for health reasons. It is hard not to suspect that the new Greek government is trying to avoid their European counterparts after getting their hands on the books and realizing that they had no good news for the Troika. It is very possible that the Greek electoral drama over the past two months piled more almost-permanent damage on the Greek economy. Very discouraging; I still have trouble seeing how Greece stays in the Euro, except that there is no mechanism for exit.
Bottom Line: I wish everyone the best managing in this difficult environment. Posting will now be intermittent, depending on internet connection.
Posted: 26 Jun 2012 02:34 AM PDT
A recent column:
The Political Empowerment of the Working Class is the Key to Better Employment Policy, by Mark Thoma: The high unemployment rate ought to be a national emergency. There are millions of people in need of jobs, the lost income as a result of the recession totals hundreds of billions of dollars annually, and the longer the problem persists, the more permanent the damage becomes.
Why doesn't the unemployment problem get more attention? Why have other worries such as inflation and debt reduction dominated the conversation instead? As I noted at the end of my last column, the increased concentration of political power at the top of the income distribution provides much of the explanation.
Consider the Federal Reserve. Again and again we hear Federal Reserve officials say that an outbreak of inflation could undermine the Fed's hard-earned credibility and threaten its independence from Congress. But why is the Fed only worried about inflation? Why aren't officials at the Fed just as worried about Congress reducing the Fed's independence because of high and persistent unemployment?
Similar questions can be asked about fiscal policy. Why is most of the discussion in Congress focused on the national debt rather than the unemployed? Is it because the wealthy fear that they will be the ones asked to pay for monetary and fiscal policies that mostly benefit others, and since they have the most political power their interests – keeping inflation low, cutting spending, and lowering tax burdens – dominate policy discussions? There was, of course, a stimulus program at the beginning of Obama's presidency, but it was much too small and relied far more on tax cuts than most people realize. The need to shape the package in a way that satisfied the politically powerful, especially the interests that have captured the Republican Party, made it far less effective than it might have been. In the end, it had no chance of fully meeting the challenge posed by such a severe recession, and when it became clear that additional help was needed, those same interests stood in the way of doing more.
Republican policymakers give us all sorts of excuses for blocking further action to help the unemployed. We are told the problem is structural – there is a geographical or talent mismatch between labor availability and labor needs – and nothing can be done to help. But something can be done. We can help workers move to where the jobs are, encourage firms to locate in areas where workers are readily available, and help with job retraining. If mismatches are really the problem, why aren't Republicans leading the charge on these policies? If they care about the unemployed rather than the tax burden of the wealthy, then why are they allowing community colleges – one of the best ways we have of providing job training for new and displaced workers – to be gutted with budget cuts?
We are also told that the deficit is too large already, but there's still plenty of room to do more for the unemployed so long as we have a plan to address the long-run debt problem. But even if the deficit is a problem, why won't Republicans support one of the many balanced budget approaches to stimulating the economy? Could it be that these policies invariably require higher income households to give something up so that we can help the less fortunate? Tax cuts for the wealthy are always welcome among Republicans no matter how it impacts the debt, but creating job opportunities through, say, investing in infrastructure? Forget it. Even though the costs of many highly beneficial infrastructure projects are as low as they get, and even though investing in infrastructure now would save us from much larger costs down the road – it's a budget saver not a budget buster – Republicans leaders in the House are balking at even modest attempts to provide needed job opportunities for the unemployed.
The imbalance in political power, obstructionism from Republicans designed to improve their election chances, and attempts by Republicans to implement a small government ideology are a large part of the explanation for why the unemployed aren't getting the help they deserve. But Democrats aren't completely off the hook either. Centrist Democrats beholden to big money interests are definitely a problem, and Democrats in general have utterly failed to bring enough attention to the unemployment problem. Would these things happen if workers had more political power?
When we talk about leveling the playing field, it is generally in terms of economic opportunity. However, leveling the political playing field is just as important, and in the past unions provided workers with a powerful voice in the political arena. But unions have largely faded from the scene leaving workers with very little organized power. Correcting the political imbalance this has created through the renewed political empowerment of the working class must be part of any attempt to improve our response to serious recessions.
Posted: 26 Jun 2012 01:17 AM PDT
Daniel Little wonders why poverty isn't a more prominent concern:
Where is poverty in the national agenda?, by Daniel Little: Our elected officials are charged to do their best to create legislation and policies that work best to secure the important life interests of all citizens. Can we take that as a shared assumption? This is how we want it to work, and we feel morally offended when legislators substitute their own wants and opinions for those of the public.
If this is a fair description of the role obligations connected to elected office, then there are some important discrepancies that arise when we look at the actual work that legislators do, both nationally and at the state level. For example, a striking number of legislators bring their own personal and religious convictions into their work. Legislators all too often attempt to draft legislation that furthers their moral opinions on issues like stem cell research, gay marriage, abortion, and even birth control. But given that reasonable and morally grounded people disagree about these issues, how could they possibly be the legitimate object of legislation? Legislation needs to be designed to treat all citizens equally and fairly, so how can the personal moral or religious opinions of the legislator ever be a legitimate foundation for legislation? How is it any different from a legislator who tries to steer a highway project over a particular piece of land in order to favor his own business interests? In each case the legislator is substituting a personal interest for the public interest as a foundation for legislation.
Or how about this puzzle: every state in the country has serious problems of poverty and discrimination. That means that every state has a percentage of its citizens who live under demeaning and impoverishing circumstances. And in many cases this current fact derives from a past history of segregation, discrimination, and unfair treatment. These problems are urgent and pressing. If the responsibility of legislators is to identify and address urgent, pressing problems, they ought to be intensely interested in poverty, discrimination, and racial disparities. So why is it that virtually all governors and state legislators continue to ignore these facts -- even when their own departments of human services are fully able to document the human results of these facts about poverty? Why is it virtually impossible for elected officials to address the facts of racial inequality in American cities? Can we imagine a legislature in Illinois, New York, Florida, or Michigan undertaking a serious debate to decide how best to address racial disparities in the state? And yet -- doesn't the fact that legislators are responsible for preserving and enhancing the quality of life of all citizens simply require honesty and action about these facts?
There seem to be a couple of reasons why that kind of honest debate does not occur. One is the position of relative privilege from which elected officials are usually drawn. It is possible to lose sight of unpleasant truths about your own society when they don't really impinge on your own daily life. And it is possible to tell a story of "progress and problem solving" that succeeds in papering over the unpleasant truths.
Another possible interpretation is a regrettable hard-heartedness that many people have in the face of poverty. "There is nothing to be done; the poor bring their deprivation upon themselves; the poor are different from the rest of us." These attitudes are all too common in our politics, and they often get intertwined with a long history of racialized thinking as well.
I think there is another possibility as well that has more to do with "problem cognition". An honest politician may accurately perceive the human cost of persistent poverty, and he/she might also have a sincerely empathetic response to these perceptions. But this politician may be wedded to a particular theory of social change that leads him or her to discount the systemic features of the poverty he sees. For example, the "jobs, jobs, jobs" mantra may push out other more nuanced theories about how poverty and the inequalities of race can be addressed. If you think that the cause of poverty is simply the unemployment rate, then you may feel justified in ignoring race and paying attention to business growth. but this is a mistake. Racial disparities and inter-generational poverty are created by specific, durable institutions, and they can only be attacked on the basis of intelligent and specific strategies. Trickle-down economics doesn't work for specific segments of America's population.
So how can disadvantaged Americans get the sustained attention of their legislators? How can poverty, segregation, and discrimination get the place on the public agenda they deserve to have? The classic answer offered by American politics is simple: mobilize, elect some legislators if your own, and find ways of challenging those legislators who continue to ignore your issues. There's just one problem with this: there isn't much history of success in the US for poor people's movements. I suppose specialists could offer some reasons for why that would be true -- poor people don't vote, poor people are distributed in small numbers over numerous districts, poor people can be misled by political rhetoric too -- but it's hard too think of parties or majorities who have paid serious attention to poor people's issues. (How much political influence does the homeless guy selling the homeless people's newspaper on Main Street really have?)
So getting government and elected officials to place poverty on the action agenda is hard work, and the officials themselves are unlikely to lead the way. This implies -- to me anyway -- that anti-poverty, anti-racism organizations will need to take the lead. There are such organizations in every city. Are there ways for them to gain more influence?
Posted: 26 Jun 2012 12:24 AM PDT
 "Maybe Africa needs a different theory of political centralization":
Roots of Political Centralization in Africa, by Daron Acemoglu and James Robinson: Seen from a wider perspective, the development of the strong central state we described in our previous post in Rwanda is anomalous in African history. Though states did form in pre-colonial Africa, for example around the Niger bend in the late middle ages, and in many parts of West, Central and East Central Africa after the 17th century, it is clear that these processes lagged those which took place in Eurasia. One can get some quantitative picture of this via the data coded by Louis Putterman and his collaborators (see this paper).
The lagged development of political centralization in Africa is an important part of the puzzle about why Africa developed less slowly than the rest of the world (see also this paper and this paper).
What can explain this retarded political centralization? Scholars of European political development, notably Charles Tilly in Coercion, Capital and the European State, have advanced several hypotheses which, they claim, can explain the development of European states. Tilly's boldest claim was "states made war and war made states". He argued that it was the intense inter-state warfare of Europe which led to political centralization. Other scholars have instead emphasized high population density and trade and commerce.
A natural approach to explaining why political centralization lagged in Africa is therefore to argue that the factors that led to such centralization in Europe were absent in the African continent. Jeffrey Herbst in his book States and Power in Africa did exactly this, arguing that African had not developed powerful centralized states because it had low population density and inter-state warfare was absent.
Is this the right answer to the puzzle? ...[continue reading]...
They don't believe that it is (see the evidence in the graphs they present in the post).
Posted: 26 Jun 2012 12:06 AM PDT
Posted: 25 Jun 2012 02:47 PM PDT
The inequality problem won't solve itself:
America is no longer a land of opportunity, by By Joseph Stiglitz, Commentary, FT: US inequality is at its highest point for nearly a century. ... One might feel better about inequality if there were a grain of truth in trickle-down economics. But the median income of Americans today is lower than it was a decade and a half ago... Meanwhile, those at the top have never had it so good. ...
Markets are shaped by the rules of the game. Our political system has written rules that benefit the rich at the expense of others. ... There is good news in this: by reducing rent-seeking ... and the distortions that give rise to so much of America's inequality we can achieve a fairer society and a better-performing economy. ...
America used to be thought of as the land of opportunity. Today, a child's life chances are more dependent on the income of his or her parents than in Europe, or any other of the advanced industrial countries for which there are data. ...
We can once again become a land of opportunity but it will not happen on its own... The country will have to make a choice: if it continues as it has in recent decades, the lack of opportunity will mean a more divided society, marked by lower growth and higher social, political and economic instability. Or it can recognize that the economy has lost its balance. The gilded age led to the progressive era, the excesses of the Roaring Twenties led to the Depression, which in turn led to the New Deal. Each time, the country saw the extremes to which it was going and pulled back. The question is, will it do so once again?
Posted: 25 Jun 2012 08:37 AM PDT
Could have fooled me:
German Finance Minister Wolfgang Schäuble says "We Certainly Don't Want to Divide Europe."

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