Many economists, including those at the I.M.F., have concluded that the austerity policies imposed on the euro zone by Germany cost millions of jobs and trillions of dollars of output over the last decade. But the NYT dismisses this assessment and tells readers that policies moving away from austerity, “could undo economic boom.”
The piece tells readers that reducing restrictions on firing across the eurozone was a major factor in lowering unemployment:
“He also pushed those countries to emulate Germany’s reforms, in particular relaxing restrictions on hiring and firing. Many countries complied, at least to a degree, helping joblessness in the eurozone fall to 8.6 percent in February, down from more than 12 percent in 2013.”
This contradicts much research which finds that restriction on firings have no effect on employment and unemployment. The more likely explanation is that the euro zone eventually did recover from the 2008–2009 recession, in part because the European Central Bank did its best to work around the austerity being imposed by Germany through fiscal policy.
The one cited source for the piece’s conclusion on labor market dynamics is Holger Schmieding, chief economist of Berenberg, a German bank, although the piece does tell us:
“Surveys of business optimism have slipped in recent months after four years of nearly uninterrupted gains. Such pessimism can become self-fulfilling, discouraging businesses from expanding and hiring.”
So, the NYT is unhappy that German workers may have more job security and get back some of their share of economic output. That’s fine, but maybe they should confine these views to the opinion pages.
Many economists, including those at the I.M.F., have concluded that the austerity policies imposed on the euro zone by Germany cost millions of jobs and trillions of dollars of output over the last decade. But the NYT dismisses this assessment and tells readers that policies moving away from austerity, “could undo economic boom.”
The piece tells readers that reducing restrictions on firing across the eurozone was a major factor in lowering unemployment:
“He also pushed those countries to emulate Germany’s reforms, in particular relaxing restrictions on hiring and firing. Many countries complied, at least to a degree, helping joblessness in the eurozone fall to 8.6 percent in February, down from more than 12 percent in 2013.”
This contradicts much research which finds that restriction on firings have no effect on employment and unemployment. The more likely explanation is that the euro zone eventually did recover from the 2008–2009 recession, in part because the European Central Bank did its best to work around the austerity being imposed by Germany through fiscal policy.
The one cited source for the piece’s conclusion on labor market dynamics is Holger Schmieding, chief economist of Berenberg, a German bank, although the piece does tell us:
“Surveys of business optimism have slipped in recent months after four years of nearly uninterrupted gains. Such pessimism can become self-fulfilling, discouraging businesses from expanding and hiring.”
So, the NYT is unhappy that German workers may have more job security and get back some of their share of economic output. That’s fine, but maybe they should confine these views to the opinion pages.
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Thomas Friedman used his column today to trash Trump for protecting old-line industries like steel and aluminum and argued instead that US trade policy should be, “[…]focused on protecting what we do best — high-value-added manufacturing and intellectual property.” In this vein, he argued for rejoining the Trans-Pacific Partnership and very high tariffs on China unless it respects our protectionist policies in these areas. Oh yeah, Friedman also wants to toss a few bones to the less-educated workers who might lose jobs but will pay higher prices for prescription drugs, software, and a wide range of other items with Friedman’s agenda.
Just to get our eyes on the ball, if anyone were approaching these issues seriously, they would be asking how much additional innovation we get for how much additional patent and copyright protection. (Anyone seen any analysis on this one?) The question would then be both, is the additional inequality from stronger and longer protections justified by the additional innovation and is there an alternative mechanism (e.g. direct public funding) that could be comparable efficient and yield less inequality. (This is discussed in my [free] book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer, chapter 5.)
For some reason, it seems no one likes to talk about the link between patent and copyright protection and inequality. Remember, Bill Gates would probably still be working for a living without these government-granted monopolies.
Thomas Friedman used his column today to trash Trump for protecting old-line industries like steel and aluminum and argued instead that US trade policy should be, “[…]focused on protecting what we do best — high-value-added manufacturing and intellectual property.” In this vein, he argued for rejoining the Trans-Pacific Partnership and very high tariffs on China unless it respects our protectionist policies in these areas. Oh yeah, Friedman also wants to toss a few bones to the less-educated workers who might lose jobs but will pay higher prices for prescription drugs, software, and a wide range of other items with Friedman’s agenda.
Just to get our eyes on the ball, if anyone were approaching these issues seriously, they would be asking how much additional innovation we get for how much additional patent and copyright protection. (Anyone seen any analysis on this one?) The question would then be both, is the additional inequality from stronger and longer protections justified by the additional innovation and is there an alternative mechanism (e.g. direct public funding) that could be comparable efficient and yield less inequality. (This is discussed in my [free] book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer, chapter 5.)
For some reason, it seems no one likes to talk about the link between patent and copyright protection and inequality. Remember, Bill Gates would probably still be working for a living without these government-granted monopolies.
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It seems Germany is suffering from a skills gap also, at least according to Reuters. It told readers:
“Labour shortages in Germany are threatening the whole economy as companies struggle to fill around 1.6 million job vacancies, the DIHK Chambers of Industry and Commerce said on Tuesday.”
According to the OECD, labor compensation rose by just 2.6 percent last year, down from a 2.9 percent rate in 2016. When an item is in short supply, we expect the price to rise. If there is a housing shortage, buyers or renters bid up the price of housing. If employers can’t get workers, then the normal route is to offer higher pay, which will attract workers from competitors.
Apparently, German employers don’t understand basic economics. Their ignorance is apparently jeopardizing the whole economy, according to the DIHK Chambers of Industry and Commerce.
It seems Germany is suffering from a skills gap also, at least according to Reuters. It told readers:
“Labour shortages in Germany are threatening the whole economy as companies struggle to fill around 1.6 million job vacancies, the DIHK Chambers of Industry and Commerce said on Tuesday.”
According to the OECD, labor compensation rose by just 2.6 percent last year, down from a 2.9 percent rate in 2016. When an item is in short supply, we expect the price to rise. If there is a housing shortage, buyers or renters bid up the price of housing. If employers can’t get workers, then the normal route is to offer higher pay, which will attract workers from competitors.
Apparently, German employers don’t understand basic economics. Their ignorance is apparently jeopardizing the whole economy, according to the DIHK Chambers of Industry and Commerce.
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Apparently, America’s small business owners are too dumb to realize how great the tax cuts were. The Trump administration told us that the corporate tax cuts would lead to a massive boom in investment which would increase the capital stock by one third above the baseline projection. But for some reason, the nation’s businesses haven’t gotten the message.
The National Federation of Independent Businesses released its February survey of its members this morning. The survey showed (page 29) that 29 percent of businesses expect to make a capital expenditure in the next 3 to 6 months, the same percentage as in January. This is somewhat higher than the 26 percent reported for February of 2017, but below the 32 percent reported for August of last year. It’s also the same as the 29 percent reading reported back in August of 2014 when a Kenyan socialist was in the White House.
In other words, there is no evidence here of any uptick in investment whatsoever and certainly not of the explosive increase promised by the Trump administration. Maybe if Trump did some more tweeting on the issue it would help.
Apparently, America’s small business owners are too dumb to realize how great the tax cuts were. The Trump administration told us that the corporate tax cuts would lead to a massive boom in investment which would increase the capital stock by one third above the baseline projection. But for some reason, the nation’s businesses haven’t gotten the message.
The National Federation of Independent Businesses released its February survey of its members this morning. The survey showed (page 29) that 29 percent of businesses expect to make a capital expenditure in the next 3 to 6 months, the same percentage as in January. This is somewhat higher than the 26 percent reported for February of 2017, but below the 32 percent reported for August of last year. It’s also the same as the 29 percent reading reported back in August of 2014 when a Kenyan socialist was in the White House.
In other words, there is no evidence here of any uptick in investment whatsoever and certainly not of the explosive increase promised by the Trump administration. Maybe if Trump did some more tweeting on the issue it would help.
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Okay, Brownstein didn’t use the word “fake,” but that is the position he described in his CNN column. Brownstein argues that the Democrats predominately live in tech centers like Seattle and the Bay area which export large amounts of high tech products and services. He argues these tech areas won’t be helped by Trump’s steel tariffs and could be hurt by retaliation from foreign countries.
While it is true that these areas will not be helped by steel tariffs it is dishonest to say that these industries support free trade. The tech sector is hugely dependent on protectionism in the form of patent and copyright protection. These government-granted monopolies raise the price of protected items by factors or ten or even a hundred over the free market price, making them the equivalent of tariffs of several thousand percent or even tens of thousands percent.
There is a rationale for this protectionism, as there is for all protectionism. This is the government’s way to provide incentives for innovation and creative work. But there are other, more efficient, mechanisms for financing innovation and creative work that would not put so much money in the pockets of high tech sectors. The people who insist on longer and stronger patent and copyright protections, and use trade deals to lock them in domestically and impose them on other countries are protectionists, not free traders. (This is discussed in my [free] book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer, chapter 5.)
It is also worth noting that most of Brownstein’s “free traders” are just fine with the protectionist barriers that insulate doctors and other highly paid professionals from foreign competition. In the case of doctors these barriers have created a situation in which the average pay of our doctors is roughly twice as high as it is in other wealthy countries (see Rigged, chapter 7).
Protectionism for doctors costs us roughly $100 billion a year in higher health care costs. This is ten times as much as the amount of money at stake with the steel tariffs. All the people who apparently are fine with the barriers that prevent foreign doctors from competing with U.S. doctors are protectionists, not free traders.
Okay, Brownstein didn’t use the word “fake,” but that is the position he described in his CNN column. Brownstein argues that the Democrats predominately live in tech centers like Seattle and the Bay area which export large amounts of high tech products and services. He argues these tech areas won’t be helped by Trump’s steel tariffs and could be hurt by retaliation from foreign countries.
While it is true that these areas will not be helped by steel tariffs it is dishonest to say that these industries support free trade. The tech sector is hugely dependent on protectionism in the form of patent and copyright protection. These government-granted monopolies raise the price of protected items by factors or ten or even a hundred over the free market price, making them the equivalent of tariffs of several thousand percent or even tens of thousands percent.
There is a rationale for this protectionism, as there is for all protectionism. This is the government’s way to provide incentives for innovation and creative work. But there are other, more efficient, mechanisms for financing innovation and creative work that would not put so much money in the pockets of high tech sectors. The people who insist on longer and stronger patent and copyright protections, and use trade deals to lock them in domestically and impose them on other countries are protectionists, not free traders. (This is discussed in my [free] book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer, chapter 5.)
It is also worth noting that most of Brownstein’s “free traders” are just fine with the protectionist barriers that insulate doctors and other highly paid professionals from foreign competition. In the case of doctors these barriers have created a situation in which the average pay of our doctors is roughly twice as high as it is in other wealthy countries (see Rigged, chapter 7).
Protectionism for doctors costs us roughly $100 billion a year in higher health care costs. This is ten times as much as the amount of money at stake with the steel tariffs. All the people who apparently are fine with the barriers that prevent foreign doctors from competing with U.S. doctors are protectionists, not free traders.
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The Washington Post has long used both its opinion pages and news section to advance its agenda on trade. It is famous for inventing a GDP boom in Mexico to push the case for NAFTA. More than a decade ago it ran an editorial claiming that Mexico’s GDP quadrupled between 1987 and 2007, which it attributed to NAFTA.
The actual number was 84.2 percent, according to the I.M.F. In spite of this gross error, the paper has never run a correction.
Given the Post’s history on trade, it was not surprising to see a piece (“The obsolete number that drives Trump’s China obsession and how to fix it”) telling readers that China’s trade surplus with the United States is actually much smaller Donald Trump thinks it is. The gist of the piece is that China’s trade surplus with the U.S. is actually considerably smaller than the standard data reported by the Commerce Department. The reason is that much of what China exports includes inputs from other countries, including the United States.
The piece offers up the example of the iPhone, which is assembled in China. In the trade data the full value of the iPhone is counted as a Chinese export and a U.S. import, but most of the value actually comes from inputs produced in other countries. By counting the full value of the finished product as an export from China we are seriously overstating the value of exports from China.
While this point is entirely accurate, there is a flip side to this issue which the piece amazingly ignores. While much of the value-added in products imported from China originates in other countries, much of the value-added in our imports from other countries originates in China. China is a huge exporter not only to the United States, but to Japan, Korea, Europe, and elsewhere.
If we want to do a serious value-added analysis of our trade balance with China we would not only subtract out the foreign value-added in Chinese exports, we would also add in the Chinese value-added in our imports from other countries. It would take some serious work to calculate the total figure (see Rob Scott’s analysis), but the deficit would clearly be larger than the one the piece calculates by just pulling out the foreign value-added in Chinese exports.
The Washington Post has long used both its opinion pages and news section to advance its agenda on trade. It is famous for inventing a GDP boom in Mexico to push the case for NAFTA. More than a decade ago it ran an editorial claiming that Mexico’s GDP quadrupled between 1987 and 2007, which it attributed to NAFTA.
The actual number was 84.2 percent, according to the I.M.F. In spite of this gross error, the paper has never run a correction.
Given the Post’s history on trade, it was not surprising to see a piece (“The obsolete number that drives Trump’s China obsession and how to fix it”) telling readers that China’s trade surplus with the United States is actually much smaller Donald Trump thinks it is. The gist of the piece is that China’s trade surplus with the U.S. is actually considerably smaller than the standard data reported by the Commerce Department. The reason is that much of what China exports includes inputs from other countries, including the United States.
The piece offers up the example of the iPhone, which is assembled in China. In the trade data the full value of the iPhone is counted as a Chinese export and a U.S. import, but most of the value actually comes from inputs produced in other countries. By counting the full value of the finished product as an export from China we are seriously overstating the value of exports from China.
While this point is entirely accurate, there is a flip side to this issue which the piece amazingly ignores. While much of the value-added in products imported from China originates in other countries, much of the value-added in our imports from other countries originates in China. China is a huge exporter not only to the United States, but to Japan, Korea, Europe, and elsewhere.
If we want to do a serious value-added analysis of our trade balance with China we would not only subtract out the foreign value-added in Chinese exports, we would also add in the Chinese value-added in our imports from other countries. It would take some serious work to calculate the total figure (see Rob Scott’s analysis), but the deficit would clearly be larger than the one the piece calculates by just pulling out the foreign value-added in Chinese exports.
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The NYT had an article profiling Christopher Liddell, who is currently the Trump administration’s director of strategic initiatives and is apparently a top candidate to replace Gary Cohn as head of the National Economic Council. In recounting his career, the piece notes that Liddell had been the chief financial officer at Microsoft.
The piece later presents a comment on trade from Liddell:
“I think the days of unbridled free trade and unbridled free markets are over.”
“I worked in the private sector all my life, so I’m a believer in free markets, but not unbridled free markets […]And we’ve had 30 years since the mid-’80s, both in New Zealand and here in the U.S. and globally, of basically free markets being driving the whole thinking, the whole rhetoric around governing. I think those days are over, personally. I think we’re going to go through a circular trend of a much more restrained free market.”
Of course, we have not had free markets, as the government has actively structured markets in a variety of ways. In particular, Microsoft, the company at which Mr. Liddell served as Chief Financial Officer, benefited enormously from government-granted patent and copyright monopolies. These forms of protection are equivalent to tariffs of many thousand percent, raising the price of protected items by a factors of ten or even a hundred or more.
It is ironic that someone who had benefited so much from government intervention would somehow claim that this is a free market.
The NYT had an article profiling Christopher Liddell, who is currently the Trump administration’s director of strategic initiatives and is apparently a top candidate to replace Gary Cohn as head of the National Economic Council. In recounting his career, the piece notes that Liddell had been the chief financial officer at Microsoft.
The piece later presents a comment on trade from Liddell:
“I think the days of unbridled free trade and unbridled free markets are over.”
“I worked in the private sector all my life, so I’m a believer in free markets, but not unbridled free markets […]And we’ve had 30 years since the mid-’80s, both in New Zealand and here in the U.S. and globally, of basically free markets being driving the whole thinking, the whole rhetoric around governing. I think those days are over, personally. I think we’re going to go through a circular trend of a much more restrained free market.”
Of course, we have not had free markets, as the government has actively structured markets in a variety of ways. In particular, Microsoft, the company at which Mr. Liddell served as Chief Financial Officer, benefited enormously from government-granted patent and copyright monopolies. These forms of protection are equivalent to tariffs of many thousand percent, raising the price of protected items by a factors of ten or even a hundred or more.
It is ironic that someone who had benefited so much from government intervention would somehow claim that this is a free market.
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As Robert Samuelson tells us in his weekly column in the Washington Post, there is a big market for people saying that things are great. Samuelson cites a number of authors and statistics telling readers that things are getting better.
He then speculates about why we have so much pessimism. He suggests that the media is at fault for using the word “crisis” too frequently and tells us:
“But some of today’s pessimism is simply a political fad. It ‘became fashionable, starting in academia and expanding to the public square, brought there by politicians [and] social media,’ Easterbrook [economist Gregg Easterbrook] writes. ‘Today the conventional wisdom is that any informed person should feel the world is falling apart.'”
Of course, the other plausible explanation is that most of the workforce in the United States has seen stagnating wages over the last four decades even as those at the top have become incredibly rich. And, the incredibly rich don’t like to highlight this fact, so there is a big market for people saying that everything is great.
As Robert Samuelson tells us in his weekly column in the Washington Post, there is a big market for people saying that things are great. Samuelson cites a number of authors and statistics telling readers that things are getting better.
He then speculates about why we have so much pessimism. He suggests that the media is at fault for using the word “crisis” too frequently and tells us:
“But some of today’s pessimism is simply a political fad. It ‘became fashionable, starting in academia and expanding to the public square, brought there by politicians [and] social media,’ Easterbrook [economist Gregg Easterbrook] writes. ‘Today the conventional wisdom is that any informed person should feel the world is falling apart.'”
Of course, the other plausible explanation is that most of the workforce in the United States has seen stagnating wages over the last four decades even as those at the top have become incredibly rich. And, the incredibly rich don’t like to highlight this fact, so there is a big market for people saying that everything is great.
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Most data indicate relatively little acceleration in wage growth overall, but as I have noted the Current Population Survey shows more rapid wage growth at middle and especially the bottom end of the wage distribution over the last three years. The “Workforce Vitality Index” produced by ADP, shows a similar picture.
Its most recent survey shows hourly wage growth of more than 6.0 percent for workers earning less than $20,000 a year and 5.6 percent for workers earning $20,000 to $50,000 a year. This compares to increases of 5.4 percent and 5.0 percent in the 3rd quarter of 2014, the first period in the sample. By comparison, wages increased 3.4 percent on the most recent quarter for workers earning more than $75,000 a year, virtually the same as the 3.3 percent increase in the 3rd quarter of 2014. (These are figures for job holders — found on page 5.)
This supports the view that the tightening of the labor market has disproportionately benefited those at the bottom end of the wage distribution. It also should be a warning of bad effects if the Fed moves too aggressively in raising interest rates and causes the unemployment rate to rise.
Most data indicate relatively little acceleration in wage growth overall, but as I have noted the Current Population Survey shows more rapid wage growth at middle and especially the bottom end of the wage distribution over the last three years. The “Workforce Vitality Index” produced by ADP, shows a similar picture.
Its most recent survey shows hourly wage growth of more than 6.0 percent for workers earning less than $20,000 a year and 5.6 percent for workers earning $20,000 to $50,000 a year. This compares to increases of 5.4 percent and 5.0 percent in the 3rd quarter of 2014, the first period in the sample. By comparison, wages increased 3.4 percent on the most recent quarter for workers earning more than $75,000 a year, virtually the same as the 3.3 percent increase in the 3rd quarter of 2014. (These are figures for job holders — found on page 5.)
This supports the view that the tightening of the labor market has disproportionately benefited those at the bottom end of the wage distribution. It also should be a warning of bad effects if the Fed moves too aggressively in raising interest rates and causes the unemployment rate to rise.
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