Politico gets into the act telling readers how tragic the demise of the Trans-Pacific Partnership (TPP) is for the rural economy in a special report. Here’s the punch line:
“But for the already struggling agricultural sector, the sprawling 12-nation TPP, covering 40 percent of the world’s economy, was a lifeline. It was a chance to erase punishing tariffs that restricted the United States—the onetime ‘breadbasket of the world’—from selling its meats, grains and dairy products to massive importers of foodstuffs such as Japan and Vietnam.
“The decision to pull out of the trade deal has become a double hit on places like Eagle Grove. The promised bump of $10 billion in agricultural output over 15 years, based on estimates by the U.S. International Trade Commission, won’t materialize. But Trump’s decision to withdraw from the pact also cleared the way for rival exporters such as Australia, New Zealand and the European Union to negotiate even lower tariffs with importing nations, creating potentially greater competitive advantages over U.S. exports.”
Wow, we could have had another $10 billion in agricultural output after 15 years, if only Donald Trump had not pulled the plug. Hmm, $10 billion in additional agricultural output in 2032, is that a big deal?
Well, if we turn to the International Trade Commission (ITC) report cited in the piece, we see that it amounts to 0.5 percent of projected agricultural output in 2032. That’s about equal to six months of normal growth of the agricultural economy. This means that, according to the ITC report, with the TPP in effect, the agricultural economy would be producing roughly as much on January 1, 2032 as it would otherwise be producing on July 1, 2032 without the TPP.
Is this a “lifeline” for the agricultural economy?
There is also reason to be wary of the ITC report, since these models have been incredibly bad at predicting the outcome of past trade deals.
It’s also worth commenting on the apparent horror with which Politico views the possibility, “rival exporters such as Australia, New Zealand and the European Union to negotiate even lower tariffs with importing nations.” In the good old days, economists used to believe that the United States was helped by stronger trading partners. This was one reason the U.S. generally supported the process of economic integration that led to the European Union.
If other countries remove barriers between them, this could make some of their goods better positioned relative to U.S. exports, but it can also lead to more rapid growth in these countries, which will increase demand for U.S. exports. While both effects are likely to be small relative to the size of U.S. production, it is entirely possible that the growth effect will exceed the substitution effect. Long and short, there is no need for reasonable people to be terrified by the prospect of other countries crafting trade deals.
Politico gets into the act telling readers how tragic the demise of the Trans-Pacific Partnership (TPP) is for the rural economy in a special report. Here’s the punch line:
“But for the already struggling agricultural sector, the sprawling 12-nation TPP, covering 40 percent of the world’s economy, was a lifeline. It was a chance to erase punishing tariffs that restricted the United States—the onetime ‘breadbasket of the world’—from selling its meats, grains and dairy products to massive importers of foodstuffs such as Japan and Vietnam.
“The decision to pull out of the trade deal has become a double hit on places like Eagle Grove. The promised bump of $10 billion in agricultural output over 15 years, based on estimates by the U.S. International Trade Commission, won’t materialize. But Trump’s decision to withdraw from the pact also cleared the way for rival exporters such as Australia, New Zealand and the European Union to negotiate even lower tariffs with importing nations, creating potentially greater competitive advantages over U.S. exports.”
Wow, we could have had another $10 billion in agricultural output after 15 years, if only Donald Trump had not pulled the plug. Hmm, $10 billion in additional agricultural output in 2032, is that a big deal?
Well, if we turn to the International Trade Commission (ITC) report cited in the piece, we see that it amounts to 0.5 percent of projected agricultural output in 2032. That’s about equal to six months of normal growth of the agricultural economy. This means that, according to the ITC report, with the TPP in effect, the agricultural economy would be producing roughly as much on January 1, 2032 as it would otherwise be producing on July 1, 2032 without the TPP.
Is this a “lifeline” for the agricultural economy?
There is also reason to be wary of the ITC report, since these models have been incredibly bad at predicting the outcome of past trade deals.
It’s also worth commenting on the apparent horror with which Politico views the possibility, “rival exporters such as Australia, New Zealand and the European Union to negotiate even lower tariffs with importing nations.” In the good old days, economists used to believe that the United States was helped by stronger trading partners. This was one reason the U.S. generally supported the process of economic integration that led to the European Union.
If other countries remove barriers between them, this could make some of their goods better positioned relative to U.S. exports, but it can also lead to more rapid growth in these countries, which will increase demand for U.S. exports. While both effects are likely to be small relative to the size of U.S. production, it is entirely possible that the growth effect will exceed the substitution effect. Long and short, there is no need for reasonable people to be terrified by the prospect of other countries crafting trade deals.
Read More Leer más Join the discussion Participa en la discusión
It is strange how the media often respond to the prospects of tariffs on imports by pointing to foreign-owned factories in the United States, implying that these are somehow at risk if tariffs are imposed. The NYT gives us an example of this reporting today in a front page article.
The piece highlights a number of foreign-owned factories in the United States and includes data on foreign direct investment by country and also employment levels. It also includes the warning:
“But political and business leaders here in Hamilton County, a conservative stronghold where Donald J. Trump won a majority of the votes, worry that the president’s attacks on trading partners and exhortations to ‘Buy American’ could set off a protectionist spiral of tariffs and import restrictions, hurting consumers and workers.”
This seems to be a non-sequitur. Tariffs on imports increase the incentive for foreign companies to invest in the United States. They allow them to produce for the U.S. market and get around any tariffs. The first Japanese auto factories in the United States were a direct response to the “voluntary export restraints” on the major Japanese manufacturers agreed to in the Reagan years. The cars that Toyota and other companies produced in the United States did not count against these limits.
There are good arguments to be made against putting up import tariffs, but the idea that it would somehow hurt foreign direct investment in the United States is not one of them. If new tariffs are put in place, it would more likely increase foreign investment than reduce it.
It is strange how the media often respond to the prospects of tariffs on imports by pointing to foreign-owned factories in the United States, implying that these are somehow at risk if tariffs are imposed. The NYT gives us an example of this reporting today in a front page article.
The piece highlights a number of foreign-owned factories in the United States and includes data on foreign direct investment by country and also employment levels. It also includes the warning:
“But political and business leaders here in Hamilton County, a conservative stronghold where Donald J. Trump won a majority of the votes, worry that the president’s attacks on trading partners and exhortations to ‘Buy American’ could set off a protectionist spiral of tariffs and import restrictions, hurting consumers and workers.”
This seems to be a non-sequitur. Tariffs on imports increase the incentive for foreign companies to invest in the United States. They allow them to produce for the U.S. market and get around any tariffs. The first Japanese auto factories in the United States were a direct response to the “voluntary export restraints” on the major Japanese manufacturers agreed to in the Reagan years. The cars that Toyota and other companies produced in the United States did not count against these limits.
There are good arguments to be made against putting up import tariffs, but the idea that it would somehow hurt foreign direct investment in the United States is not one of them. If new tariffs are put in place, it would more likely increase foreign investment than reduce it.
Read More Leer más Join the discussion Participa en la discusión
In his NYT column on whether the turmoil of Trump’s presidency is slowing economic growth, Neil Gross refers to concerns about “secular stagnation” raised by former Treasury Secretary Larry Summers. Secular stagnation just means insufficient demand in the U.S. economy. While the column sees the major cause as weak investment demand, the more obvious cause of secular stagnation is the U.S. trade deficit.
The trade deficit is running at annual rate of more than $540 billion a year, close to 2.8 percent of GDP. This is money that is creating demand in other countries, not the United States. If the trade deficit were suddenly brought to zero it would have the same effect on demand as an increase in annual investment of $540 billion. That is far larger than any shortfall that could be explained by factors Summers cited.
It is bizarre that the trade deficit never features in discussions of secular stagnation since it is obviously a major drain on demand in the U.S. economy. It also runs contrary to textbook economics which holds that rich countries like the United States should be capital exporters to the developing world, which means that we should be running large trade surpluses, not deficits.
But, as the saying goes, economists are not very good at economics.
In his NYT column on whether the turmoil of Trump’s presidency is slowing economic growth, Neil Gross refers to concerns about “secular stagnation” raised by former Treasury Secretary Larry Summers. Secular stagnation just means insufficient demand in the U.S. economy. While the column sees the major cause as weak investment demand, the more obvious cause of secular stagnation is the U.S. trade deficit.
The trade deficit is running at annual rate of more than $540 billion a year, close to 2.8 percent of GDP. This is money that is creating demand in other countries, not the United States. If the trade deficit were suddenly brought to zero it would have the same effect on demand as an increase in annual investment of $540 billion. That is far larger than any shortfall that could be explained by factors Summers cited.
It is bizarre that the trade deficit never features in discussions of secular stagnation since it is obviously a major drain on demand in the U.S. economy. It also runs contrary to textbook economics which holds that rich countries like the United States should be capital exporters to the developing world, which means that we should be running large trade surpluses, not deficits.
But, as the saying goes, economists are not very good at economics.
Read More Leer más Join the discussion Participa en la discusión
According to the Bureau of Labor Statistics, productivity growth, especially in manufacturing, has slowed to a record slow pace. In light of this fact, the Washington Post naturally decided to run a major front page article, jumping to two full inside pages, on automation.
It would be good if we were seeing more rapid productivity growth. It would mean that we could enjoy higher wages and/or shorter hours. The Fed could also stop raising interest rates since it wouldn’t have to worry so much about having too many jobs. But that is not the world we are seeing — or at least not the world that we are seeing outside of the pages of the Washington Post.
According to the Bureau of Labor Statistics, productivity growth, especially in manufacturing, has slowed to a record slow pace. In light of this fact, the Washington Post naturally decided to run a major front page article, jumping to two full inside pages, on automation.
It would be good if we were seeing more rapid productivity growth. It would mean that we could enjoy higher wages and/or shorter hours. The Fed could also stop raising interest rates since it wouldn’t have to worry so much about having too many jobs. But that is not the world we are seeing — or at least not the world that we are seeing outside of the pages of the Washington Post.
Read More Leer más Join the discussion Participa en la discusión
The big difference between outsourcing and robots is that the former is happening and the latter isn’t. Productivity growth (a.k.a. robots) has been very slow in recent years. It has averaged less than 1.0 percent over the last seven years and has sometimes been negative.
By contrast, many firms are looking to outsource jobs, both domestically and internationally, on an ongoing basis. For this reason, when the NYT told readers in a story on the jobs report and the economy:
“Perhaps even more than outsourcing, the real threat to job growth for Mr. Trump’s blue-collar base comes from automation and other efforts to improve productivity on the factory floor.”
It had the picture backward. At least for the immediate future, it does not seem rapid productivity growth will be a major source of job loss.
The big difference between outsourcing and robots is that the former is happening and the latter isn’t. Productivity growth (a.k.a. robots) has been very slow in recent years. It has averaged less than 1.0 percent over the last seven years and has sometimes been negative.
By contrast, many firms are looking to outsource jobs, both domestically and internationally, on an ongoing basis. For this reason, when the NYT told readers in a story on the jobs report and the economy:
“Perhaps even more than outsourcing, the real threat to job growth for Mr. Trump’s blue-collar base comes from automation and other efforts to improve productivity on the factory floor.”
It had the picture backward. At least for the immediate future, it does not seem rapid productivity growth will be a major source of job loss.
Read More Leer más Join the discussion Participa en la discusión
Okay, this is getting beyond ridiculous. Productivity growth, especially in manufacturing, is at a record slow (as in not fast) pace. This is not secret information. The data are published every quarter by the Bureau of Labor Statistics. You can even find a nice graph in my previous post. Yet, in spite of the fact that all the evidence shows that workers are not losing jobs due to automation, or at least at a much slower pace than in prior decades, the Washington Post still tells us:
“Yet manufacturing hit a new low in July as a share of all U.S. jobs, said Kolko. While manufacturing has been a focus of the Trump administration, the sector continues to shed jobs, due largely to automation.”
Apart from the fact that manufacturing has actually been adding jobs for last eight months, how does the Post get off blaming non-existent job loss on automation? This seems like a knee jerk response.
No, job loss can’t be due to a trade deficit. The idea that importing things rather than producing them here, couldn’t possibly mean that we hire fewer people to produce things here. The papers can’t have people believe this. So we get outright lies. (Sorry, it is a lie — it is reasonable to expect reporters/editors at a major news outlet to be able to look up data that is readily accessible from a government agency. At the least, there is a deliberate decision to remain ignorant at work here.)
Let me also point out another aspect to this issue. Even if automation was the factor costing jobs, it would not be technology that was responsible for any increase in inequality. The ownership of technology is determined by government policy on patent and copyrights. The government can (and has) made these forms of protection longer and stronger. It could make them shorter and weaker.
Without patent and copyright protection, Bill Gates, the richest person in the world, probably would not have much more money than your average successful doctor or lawyer. It is possible to argue that these are good policies and that we have all benefited from making them stronger and longer, but to deny that the resulting upward redistribution was just technology is just flat-out dishonest.
Incredibly, I have never seen any discussion of this simple and obvious point in any major outlet. I haven’t seen in the NYT, WaPo, WSJ, heard it on NPR or PBS Newshour. I haven’t even seen it mentioned in ostensibly liberal and progressive magazines like the New Republic and the Nation.
It is worth noting that the technology view does have the implication that upward redistribution is something that happened, as opposed to upward redistribution being something that was done through deliberate policy. The implication that the rich getting richer is just the natural state of things is convenient for the winners in this story.
Okay, this is getting beyond ridiculous. Productivity growth, especially in manufacturing, is at a record slow (as in not fast) pace. This is not secret information. The data are published every quarter by the Bureau of Labor Statistics. You can even find a nice graph in my previous post. Yet, in spite of the fact that all the evidence shows that workers are not losing jobs due to automation, or at least at a much slower pace than in prior decades, the Washington Post still tells us:
“Yet manufacturing hit a new low in July as a share of all U.S. jobs, said Kolko. While manufacturing has been a focus of the Trump administration, the sector continues to shed jobs, due largely to automation.”
Apart from the fact that manufacturing has actually been adding jobs for last eight months, how does the Post get off blaming non-existent job loss on automation? This seems like a knee jerk response.
No, job loss can’t be due to a trade deficit. The idea that importing things rather than producing them here, couldn’t possibly mean that we hire fewer people to produce things here. The papers can’t have people believe this. So we get outright lies. (Sorry, it is a lie — it is reasonable to expect reporters/editors at a major news outlet to be able to look up data that is readily accessible from a government agency. At the least, there is a deliberate decision to remain ignorant at work here.)
Let me also point out another aspect to this issue. Even if automation was the factor costing jobs, it would not be technology that was responsible for any increase in inequality. The ownership of technology is determined by government policy on patent and copyrights. The government can (and has) made these forms of protection longer and stronger. It could make them shorter and weaker.
Without patent and copyright protection, Bill Gates, the richest person in the world, probably would not have much more money than your average successful doctor or lawyer. It is possible to argue that these are good policies and that we have all benefited from making them stronger and longer, but to deny that the resulting upward redistribution was just technology is just flat-out dishonest.
Incredibly, I have never seen any discussion of this simple and obvious point in any major outlet. I haven’t seen in the NYT, WaPo, WSJ, heard it on NPR or PBS Newshour. I haven’t even seen it mentioned in ostensibly liberal and progressive magazines like the New Republic and the Nation.
It is worth noting that the technology view does have the implication that upward redistribution is something that happened, as opposed to upward redistribution being something that was done through deliberate policy. The implication that the rich getting richer is just the natural state of things is convenient for the winners in this story.
Read More Leer más Join the discussion Participa en la discusión
It’s standard practice in news stories to refer to France’s economy as a basket case. The NYT went this route in an article on President Emmanuel Macron’s efforts to rewrite the country’s labor laws.
The article refers to Macron’s efforts to “revitalize” the French economy and then tells readers:
“The code is regarded by many as the wellspring of the country’s malaise and the chief obstacle to generating jobs, leaving the country with an unemployment rate that hovers persistently around 10 percent.”
Of course, many economists regard the German government’s insistence on austerity in spite of low interest rates and low inflation as “the wellspring of the country’s malaise,” but apparently there was no room to mention this fact. Anyhow, it is worth noting that while France has a considerably higher unemployment rate than the United States a larger portion of its prime-age population (ages 25 to 54) have jobs than in the United States.
According to the OECD, the employment-to-population ratio for this age group is 79.6 percent in France, compared to 78.2 percent in the United States. For this age group, the French economy is doing better producing jobs than the U.S. economy, in spite of its malaise.
It does have lower employment rates for younger and older workers, but this is largely the result of deliberate policy. A college education is largely free in France, and as a result, few students work. France also has a more generous social security system than the United States, which discourages older workers from staying in the labor force. It’s arguable whether these are good policies but it is these policies, rather than the state of the economy, that explain differences in employment rates between the U.S. and France for these age groups.
The piece also includes this interesting paragraph:
“The Macron changes would help employers set the rules on hiring and firing, ignore the crippling restraints in the code that discourage taking on new workers, and limit unions’ ability to get in the way. Instead, individual agreements would be negotiated at the company or industry level between bosses and workers.”
It is interesting that NYT thinks that unions “get in the way” between workers and employers. This is, of course, true just as when we allow defendants to have lawyers, the lawyer “gets in the way” of discussions between police and prosecutors and the accused.
It’s standard practice in news stories to refer to France’s economy as a basket case. The NYT went this route in an article on President Emmanuel Macron’s efforts to rewrite the country’s labor laws.
The article refers to Macron’s efforts to “revitalize” the French economy and then tells readers:
“The code is regarded by many as the wellspring of the country’s malaise and the chief obstacle to generating jobs, leaving the country with an unemployment rate that hovers persistently around 10 percent.”
Of course, many economists regard the German government’s insistence on austerity in spite of low interest rates and low inflation as “the wellspring of the country’s malaise,” but apparently there was no room to mention this fact. Anyhow, it is worth noting that while France has a considerably higher unemployment rate than the United States a larger portion of its prime-age population (ages 25 to 54) have jobs than in the United States.
According to the OECD, the employment-to-population ratio for this age group is 79.6 percent in France, compared to 78.2 percent in the United States. For this age group, the French economy is doing better producing jobs than the U.S. economy, in spite of its malaise.
It does have lower employment rates for younger and older workers, but this is largely the result of deliberate policy. A college education is largely free in France, and as a result, few students work. France also has a more generous social security system than the United States, which discourages older workers from staying in the labor force. It’s arguable whether these are good policies but it is these policies, rather than the state of the economy, that explain differences in employment rates between the U.S. and France for these age groups.
The piece also includes this interesting paragraph:
“The Macron changes would help employers set the rules on hiring and firing, ignore the crippling restraints in the code that discourage taking on new workers, and limit unions’ ability to get in the way. Instead, individual agreements would be negotiated at the company or industry level between bosses and workers.”
It is interesting that NYT thinks that unions “get in the way” between workers and employers. This is, of course, true just as when we allow defendants to have lawyers, the lawyer “gets in the way” of discussions between police and prosecutors and the accused.
Read More Leer más Join the discussion Participa en la discusión
Read More Leer más Join the discussion Participa en la discusión
The NYT had an article on Amazon’s job fairs which were set up to recruit workers for 50,000 new jobs nationwide. At the end of the piece, the article discusses concerns that robots may soon replace the jobs that Amazon is now hiring for in its warehouses:
“Amazon is more aggressively using robots to help make the operations inside its warehouses more efficient. For now, the company said machines are not replacing people. Instead, they mostly move large shelves of merchandise to stations where orders are manually picked.
“Many academic researchers and start-ups are working on robots that have the dexterity to pick orders automatically. Amazon sponsors a competition to encourage engineers to build more advanced warehouse robots.
“When those technologies are perfected, the employment picture inside Amazon’s warehouses could look very different. That day could be a decade or more away, though.”
It is important to remember that productivity growth has been at record low levels in the last five years, meaning that we are seeing very few workers displaced by robots. Furthermore, the Federal Reserve Board has been raising interest rates over the last year and a half because it is concerned the economy is creating too many jobs. The concern about budget deficits is also a concern about inadequate productivity growth (too much demand and not enough supply).
In other words, in almost every other economic debate our concern is the opposite of having robots replacing workers. The concern is that we won’t have enough goods and services to go around.
If robots create a distributional issue, that is because of policies like patent monopolies that give all the money to owners of robots. These policies can be changed, but not if the media has a policy of never talking about them.
The NYT had an article on Amazon’s job fairs which were set up to recruit workers for 50,000 new jobs nationwide. At the end of the piece, the article discusses concerns that robots may soon replace the jobs that Amazon is now hiring for in its warehouses:
“Amazon is more aggressively using robots to help make the operations inside its warehouses more efficient. For now, the company said machines are not replacing people. Instead, they mostly move large shelves of merchandise to stations where orders are manually picked.
“Many academic researchers and start-ups are working on robots that have the dexterity to pick orders automatically. Amazon sponsors a competition to encourage engineers to build more advanced warehouse robots.
“When those technologies are perfected, the employment picture inside Amazon’s warehouses could look very different. That day could be a decade or more away, though.”
It is important to remember that productivity growth has been at record low levels in the last five years, meaning that we are seeing very few workers displaced by robots. Furthermore, the Federal Reserve Board has been raising interest rates over the last year and a half because it is concerned the economy is creating too many jobs. The concern about budget deficits is also a concern about inadequate productivity growth (too much demand and not enough supply).
In other words, in almost every other economic debate our concern is the opposite of having robots replacing workers. The concern is that we won’t have enough goods and services to go around.
If robots create a distributional issue, that is because of policies like patent monopolies that give all the money to owners of robots. These policies can be changed, but not if the media has a policy of never talking about them.
Read More Leer más Join the discussion Participa en la discusión
Read More Leer más Join the discussion Participa en la discusión
