Mark Weisbrot’s blog on economic and political trends in a multipolar world.
- Written by Mark Weisbrot
In a recent article aptly titled, “The Global Growth Funk,” Nouriel Roubini does what he does best: makes the case that the global economy is going to hell in a handbasket, and there is little that can be done about it. This is how he earned the nickname “Dr. Doom.” There is much to agree and disagree with in his analysis. But I think there is some overreach here, and some overdeterminism.
One of these is a technical point, but it’s important. Roubini writes:
Moreover, a protracted cyclical slump can lead to lower trend growth. Economists call this “hysteresis”: Long-term unemployment erodes workers’ skills and human capital; and, because innovation is embedded in new capital goods, low investment leads to permanently lower productivity growth.
This is true, and it is one of the most tragic results of the European authorities’ forced austerity and unnecessary prolongation of financial crisis (from 2010 through most of 2012). This is what gave Spain the 20 percent unemployment and 45 percent youth unemployment that it still has today, and even worse unemployment for Greece. Because of very bad policy choices, driven in large part by a political agenda, Europe has an unemployment rate today that is twice the level of the United States.
But as for “permanently lower productivity growth,” there is still a question of how much lower and how permanent? The IMF forecasts that Spain will have unemployment of 16.4 percent in 2019; at the same time, the Fund estimates that Spain will be above its potential GDP in 2019. This means that Spain will have reached “full employment” with more than 16 percent of its labor force unemployed. Similarly, the IMF projects Greece to have unemployment of 18.9 percent in 2020; but the economy will be running at just 1.2 percent below its potential GDP.
- Written by Mark Weisbrot
One of the great accomplishments of Bernie Sanders’ campaign has been getting his opponent, Hillary Clinton, to adopt his positions on so many important issues. Hillary Clinton recently had this to say:
Because whether you support Senator Sanders or you support me, there is much more that unites us than divides us. We all agree that wages are too low and inequality is too high, that Wall Street can never again be allowed to threaten Main Street, and we should expand Social Security, not cut or privatize it. We Democrats agree that college should be affordable to all, and student debt shouldn’t hold anyone back. We Democrats agree that every single American should and must have quality, affordable healthcare. We agree that our next president must keep our country safe, keep our troops out of another costly ground war in the Middle East.
I was waiting for her to say something about when "I was a young boy growing up in Brooklyn," as in the Saturday Night Live skit where she morphs into Bernie.
The parts about expanding Social Security and keeping our troops out of another costly ground war in the Middle East are particularly noteworthy; it seems unlikely that she would have made these statements without Bernie in the race. That is probably why even the New York Times editorial board, who endorsed Hillary, wrote immediately after the New York primary that Bernie should stay in the race until the end. It is more than just a candidate that will come out of this race, especially in a contest that has mobilized a mass movement of millions of people. And so it is far from over.
Of course candidates’ promises often prove ephemeral. But we can already see how the race is boxing Hillary in: on Friday, the Oregon Fair Trade Campaign released a written response from her saying that she opposed Congress voting to approve the TPP in the lame duck session following the November election. This would be the TPP proponents’ best shot, and so this is a pretty important development. So, too, would a Democratic Party vote at the convention against the TPP, which is now possible due to Bernie’s large number of delegates and Hillary’s increasingly acting like her opposition is serious this time, despite her track record.
The defeat of the TPP would be a historic achievement for the United States and the world (more on that later). So this, too, is how history is made, from campaigns powered by small donors and grassroots activism — not only, as so many pundits are telling us, by political leaders funded by the country’s richest people; leaders who are so often ready to compromise before they even put up a fight.