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Article Artículo

Robert Samuelson Hypes the Views of Always Wrong Economists to Tell Us to Get Used to Being Poor

Economics is a great profession for people who are not very good at their work. Messing up all the time does not affect at all your ability to maintain a high-paying job and get people to take your views seriously. 

Hence we have Robert Samuelson warning us that we might have to just accept that we will be faced with continuing slow growth and high unemployment. First off, it is important to sort out two different issues which Samuelson mushes together.

The first one is the extent to which we should expect the unemployment rate to fall as the economy returns to full employment or something like it. The second issue is the rate of productivity growth that the economy can sustain going forward. These are very different issues that are at most tangentially related.

The first one is about a level of output and employment. We saw a plunge in demand when the housing bubble burst. Those of us familiar with intro economics were not surprised by the downturn nor the weak recovery, since there is no source of private sector demand to replace the demand that had been generated by the bubble. We saw more than a trillion dollars of annual demand disappear when the construction driven by the bubble disappeared along with the consumption driven by $8 trillion in housing bubble generated equity that vanished with the crash.

The public sector could replace the demand, but people like Robert Samuelson and his buddies in the Washington elite like low budget deficits more than they care about seeing people have jobs. In short, there is no mystery about the economy not returning back to potential GDP and continuing high unemployment. It is exactly what the textbook economics would predict.

Dean Baker / March 31, 2014

Article Artículo

Economic Growth

Workers

Raising the Minimum Wage Does not ‘Kill Jobs’ – Preliminary Evidence from 2014

[Note: this blog post has been updated with the BLS data from March, updated post here]

At the beginning of 2014, thirteen states increased their minimum wage. Of these thirteen states, four passed legislation raising the minimum wage (Connecticut, New Jersey, New York, and Rhode Island). In the other nine, the minimum wage automatically increased in line with inflation at the beginning of the year (Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Vermont, and Washington State).

Earlier this week, Goldman Sachs conducted a simple evaluation of the impact of these minimum-wage increases on state employment levels. Goldman Sachs compared the employment change between December and January in the 13 states where the minimum wage increased with the employment change in the remainder of the states, where the minimum wage remained constant. They concluded that “January's state-level payrolls data failed to show a negative impact of state-level hikes (in the minimum wage). Relative to recent averages, the group of states that had hikes at the start of 2014 in fact performed better than states without hikes. While this is only one month's data, it suggests that the negative impact of a higher federal minimum wage--if any--would likely be small relative to normal volatility.”

CEPR, Jeffrey Gianattasio and Nicole Woo / March 28, 2014

Article Artículo

Wall Street

Elaine Chao: Director Watch Director of the Day
Chao Elaine

Directorships, 2008-2012: 3 (Note: This does not include Chao’s service to Twenty-First Century Fox/News Corporation, which she joined in October 2012.)

Total director compensation, 2008-2012: $1,128,466

Total director compensation, 2012: $ 545,275

Average compensation per full year of service as director: $159,257

Dean Baker / March 28, 2014

Article Artículo

Bolivia

Latin America and the Caribbean

World

The Bolivian Transportation Sector, Regional Integration and the Environment

Bolivia will most likely join Brazil and Argentina (Bolivia’s largest trading partners) by becoming the sixth member of the MERCOSUR group. Since 2006, Bolivian trade with MERCOSUR has grown by 17 percent. A recent study published by Desarrollo de Negocios Internacionales found that over the last 10 years Bolivia has experienced the second highest export growth rate in South America. This is remarkable considering that on average landlocked developing countries (LLDC) trade 30 percent less [PDF] than coastal countries [1]. As a result, for most landlocked countries transportation infrastructure plays a crucial part in facilitating intraregional trade. Since 2005, industrialization has become a key aspect of Bolivian President Evo Morales’ economic policy, particularly in the area of transportation, which in 2013, accounted for 30 percent of total [PDF] public investment [2]. The chart below shows levels of public investment in transportation as a percentage of total GDP since 2005:

nate-bolivia-blog-figure

Source: International Monetary Fund and Ministerio de Economía y Finanzas Pública Estado Plurinacional de Bolivia

CEPR and Nate Singham / March 27, 2014

Article Artículo

Latin America and the Caribbean

Venezuela

World

The “Cubanization” of U.S. Policy Towards Venezuela

Venezuelan opposition politicians and their allies in the U.S. frequently decry Cuba’s alleged influence on the Venezuelan government. Ironically however, there seems to be an important and growing nexus between the Venezuelan opposition and the anti-Cuba lobby in the U.S. Cuban-American lawmakers recently introduced sanctions legislation targeting Venezuelan officials that appears to be designed to push U.S. policy toward Venezuela in the same direction as policy toward Cuba.

Meanwhile, the New York Times reports on the Venezuelan opposition’s ire for Cuba and the role it has played in the ongoing protests in Venezuela:

Enraged as they are by their nation’s leaders, many of the protesters who have spilled onto Venezuela’s streets have their eyes fixed on another government altogether, one they resent perhaps just as bitterly as their own: Cuba’s.

…

Their rancor is echoed by the Cuban opposition, which has thrown itself behind the Venezuelan protesters’ cause with gusto, sharing photos and videos of protests and police abuse on Twitter, urging Venezuelans to resist and even rapping an apology for what they call Cuba’s meddling.

The Venezuela protests have “energized” members of Cuba’s opposition, reports the Times. Orlando Luis Pardo Lazo, an anti-Castro blogger in the U.S., told the Times, “The fate of Castro-ism may be at play in Venezuela…What we were not able to topple in Cuba, we may be able to topple there.”

Yet despite near constant claims from the Venezuelan opposition that Cuba is in control of their country (for instance, when it was announced that Venezuelan congresswoman Maria Corina Machado would be investigated and possibly stripped of her position, she responded that “It’s clear to me that it was the Castro brothers who gave the order”), the Times notes that:

Such convictions are held by critics in both countries, although they offer little hard evidence to back their suspicions. And while some former Venezuelan military officers say that Cubans are involved in decision-making in the armed forces, some protesters go further, professing to see what they call “the hairy hand” of Cuba everywhere: saying they have detected Cuban “infiltrators” at street protests; seeing a Cuban hallmark in the tactics of Venezuela’s armed forces; and circulating unsubstantiated Internet reports that Cuban special forces, or Black Wasps, are operating in Venezuela.

The Times report follows a number of pieces from the Tampa Bay Tribune, which discuss the relations between anti-Castro exiles, specifically in South Florida, and the opposition in Venezuela. In early March, Paul Guzzo wrote:

From Tampa to the Senate floor in Washington, and throughout the United States, Cuban Americans who defend continued isolation of the Communist island nation are throwing their support behind Venezuelan Americans in their efforts to bring order to the South American country.

CEPR / March 26, 2014

Article Artículo

Economic Growth

Inequality

Discussing 'Capital' in the Nation’s Capital – Piketty to Visit DC in April

Thomas Piketty’s provocative new book, Capital in the Twenty-First Century, has struck a chord among prominent economists and political scientists in these trying times. Piketty’s sweeping account of economic theory and history highlights the special character of capital accumulation as the driver of economic inequality, and he challenges us to place distributional questions at the center of the economic debate. Positing that broad-based economic growth is largely a relic of the short 20th century, he contends that the returns on capital will continue to outpace the economic gains accessible to the majority of society, ultimately threatening the foundation of our liberal-democratic states.

Piketty will be visiting Washington DC this April to discuss Capital, with stops in New York in Boston to follow. Be sure to attend one of the discussions of what is already shaping up to be a seminal work of political economy. You can find a list of these speaking events at the bottom of this post.

In case you have not gotten your hands on a copy of the book, or are as of yet unconvinced that you should read it, I have included below a sampling of reviews of Capital in the Twenty-First Century.

CEPR and Jeffrey Gianattasio / March 25, 2014