Economy

It’s Too Late to Compensate Free Trade’s Losers

Dani Rodrik: “Today’s consensus concerning the need to compensate globalization’s losers presumes that the winners are motivated by enlightened self-interest – that they believe buy-in from the losers is essential to maintain economic openness. Trump’s presidency has revealed an alternative perspective: globalization, at least as currently construed, tilts the balance of political power toward those with the skills and assets to benefit from openness, undermining whatever organized influence the losers might have had in the first place. Inchoate discontent about globalization, Trump has shown, can easily be channeled to serve an altogether different agenda, more in line with elites’ interests.”

“The time for compensation has come and gone. Even if compensation was a viable approach two decades ago, it no longer serves as a practical response to globalization’s adverse effects. To bring the losers along, we will need to consider changing the rules of globalization itself.”

AI and the Robot Uprising: With So Many Jobs at Risk, Why Isn’t the World More Prepared?

Steve LeVine: “…the world has looked at the potential for a robot onslaught, and decided not to resist. In interviews, American technologists and a long list of historians, ethicists, and philosophers focused on science and technology told me in a seemingly unified voice that they had yet to come across a serious proposal for an outright ban on job-stealing robots, and that if they had, they would have thought it a bad idea, undoable, or outright absurd. A prohibition on robots ‘will impoverish everyone,’ said MIT’s Andrew McAfee, co-author of The Second Industrial Revolution.”

“But wait. In much of the world, we negotiate climate and nuclear arms deals; we regulate the spread of disease and firearms; we take diplomatic or even military action against dictators; and build defenses against cyber attacks by rogue nations. In all these cases, we are seeking a rational de-escalation of a perceived existential threat. Do the robots and their makers—in Silicon Valley, Japan, and China—place our way of life in less jeopardy? And if they are as dangerous, are they truly unstoppable, akin to a force of nature? Given the political havoc already wreaked in part by working-class discontent, can we do nothing to stop or even slow what seems a mechanized approximation of an army of marching Huns?”

3 Big Ways Trump Is Starting to Sound Like Obama on the Economy

On the Export-Import Bank, China policy, and attitude toward Federal Reserve Chair Janet Yellen, “President Trump’s economic policy appears to be moving closer to former president Barack Obama’s,” Max Ehrenfreund writes for The Washington Post.

“In an interview Wednesday with the Wall Street Journal, Trump reversed his stance on three economic issues, moving closer to the policies of his predecessor.”

“Trump has continually changed his policies since launching his presidential campaign in 2015, and whether his latest statements represent a shift or a one-off set of comments remains to be seen. But if Trump follows through on his latest promises, he’ll have adopted a large segment of Obama’s economic platform.”

Are Living Standards Truly Stagnant?

“It may turn out that the widespread belief that most Americans’ incomes have stagnated for years is, well, false or at least overstated,” Robert Samuelson argues for The Washington Post.

“In a provocative new study, economist Bruce Sacerdote of Dartmouth College reviewed the material well-being of the poorest 50 percent and 25 percent of Americans. What he concluded was that even these families had achieved a ‘meaningful growth in consumption . . . [despite] a prolonged period of increasing income inequality . . . and a decreasing share of national income accruing to labor.'”

“If true, the result is not a pervasive stagnation of living standards — or even declines — but what Sacerdote calls a ‘slow and steady’ advance that, to varying degrees, has permeated the income spectrum. Of course, that conclusion is likely to be challenged, because it rests heavily on controversial technical issues in estimating inflation. In addition, many political leaders and economic commentators, of both parties, have a vested interest in criticizing government economic policy.”

Trump Finds His Niche: Fixing Problems That No Longer Exist

Matt O’Brien: “President Trump has finally found an economic issue that’s not too complicated for him to do something about. That’s stopping China from manipulating its currency that it hasn’t been manipulating for the past two years.”

“It’s not that Chinese companies have stopped earning so many dollars. They haven’t. It’s that now they don’t want to turn those dollars into yuan, and would rather keep them offshore. China’s recent slowdown — that’s what 6.6 percent growth is for them — has scared people into moving as much money as they can out of the country in case things get worse. It’s a vicious circle where all this money leaving puts pressure on the yuan to weaken, which makes even more people rush to pull their money out before it loses any more value, and so on, and so on.”

“Beijing, for its part, has tried to put an end to this by manipulating its currency in reverse.”

“China isn’t manipulating its currency, and all Trump had to do was nothing. Success!”

Consumer Confidence Is Soaring Among Americans—Especially Richer Americans

Quartz: “US consumer confidence is at at a 16-year high, surpassing the levels reached before the 2008 financial crisis and rivaling the heady days of the dot-com boom. But not everybody is feeling equally buoyant.”

While people in all income groups have grown more optimistic since 2009, only higher-income consumers have surpassed the confidence levels registered before the financial crisis. Last month, confidence among Americans with a household income above $50,000 surged ahead of pre-financial crisis highs. Households that make less than that have yet to recover all that lost ground.”

Behind Trump’s Trade Deficit Obsession: Deficient Analysis

Peter Goodman: “In the world according to President Trump, trade deficits are among the clearest indication that Americans have become habitual chumps in the global marketplace. The United States sells fewer goods and services than it buys from the rest of the planet, and this is supposedly evidence that Americans are getting rolled.”

“But Mr. Trump’s portrayal of trade deficits entails crucial departures from economic reality.”

“Trade is not zero-sum. Expanded trade has historically tended to support economic growth, which generates more spoils to be divvied up for all.”

U.S. to Lose $1.6B as Mexican Vacationers Choose Canada

Forbes: “After decades of sitting pretty as a bucket list destination, the stars and stripes might be on their way out. Experts warn that anti-immigration rhetoric as well as confusing travel and electronic bans have dampened foreign interest in U.S. vacations, especially from Mexico.”

“At the same time, Canada has made it easier than ever to visit.”

“Mexico is America’s second-largest inbound tourism market, accounting for some 18.4 million visits in 2015. Just this year, experts predict 7% less visits from Mexico, totaling a $1.6 billion loss in direct economic spending by 2018, according to Tourism Economics, a research firm.”

Here’s the Real Rust Belt Jobs Problem — and It’s Not Offshoring or Automation

Josh Pacewicz and Stephanie Lee Mudge: “Many struggling U.S. cities and states compete fiercely with one another to attract and keep firms that offer jobs. Unfortunately, these are not the ‘good’ jobs that Americans are looking for, jobs with middle-class pay, benefits and security. This race to the bottom drains public coffers, preoccupies local leaders and fuels voter cynicism. ‘America First’ sidesteps the problem.”

“The Rust Belt’s real problem isn’t jobs fleeing the country; it’s jobs that do not pay well or offer the benefits they once did, and a lack of urban policies to prevent corporations from pitting cities against one another. Only national policy solutions to these problems will help.”

“Failing that, cities and towns will keep racing to the bottom, spending nonexistent funds to bring in uncertain, low-paying jobs that do not result in a healthy tax base.”

The Entire Coal Industry Employs Fewer People Than Arby’s

Washington Post: “Another largely overlooked point about coal jobs is that there just aren’t that many of them relative to other industries. There are various estimates of coal-sector employment, but according to the Census Bureau’s County Business Patterns program, which allows for detailed comparisons with many other industries, the coal industry employed 76,572 people in 2014, the latest year for which data is available.”

“Although 76,000 might seem like a large number, consider that similar numbers of people are employed by, say, the bowling (69,088) and skiing (75,036) industries… Looking at the level of individual businesses, the coal industry in 2014 (76,572) employed about as many as Whole Foods (72,650), and fewer workers than Arby’s (close to 80,000), Dollar General (105,000) or J.C. Penney (114,000). The country’s largest private employer, Walmart (2.2 million employees) provides roughly 28 times as many jobs as coal.”

“The point isn’t that coal jobs don’t matter — they matter to the people who have them and to the communities they support, especially as they typically pay far more than do jobs in the retail and service industries, But if you’re looking to make a meaningful increase in the number of jobs available to U.S. workers, bringing back coal jobs isn’t going to do it.”

America Is Getting Richer and Sicker

Justin Fox: “Per capita gross domestic product is much higher in the U.S. than in the other major developed economies, and no one really seems to be catching up.”

Life expectancy, on the other hand, is lower in the U.S. than in those same peer countries — and the gap has been growing.”

“In the past, one could argue that the diversity of the U.S., and its huge income disparities, helped explain the poor performance: Economically disadvantaged minority groups were dragging the average down. Recent research by Princeton University economists Anne Case and Angus Deaton, however, shows that since 1999 longevity gains have slowed most dramatically, and in some cases reversed, among white Americans.”

Compelling New Evidence That Robots Are Taking Jobs and Cutting Wages

Quartz: “In a recent study (pdf), economists Daren Acemoglu of MIT and Pascual Restrepo of Boston University try to quantify how worried we should be about robots. They examine the impact of industrial automation on the US labor market from 1990 to 2007. They conclude that each additional robot reduced employment in a given commuting area by 3-6 workers, and lowered overall wages by 0.25-0.5%.”

In order to isolate the effect of robots, Acemoglu and Restrepo used a clever statistical trick. They collected data on adoption rates of industrial robots in Europe, and then analyzed what happened to American labor markets by comparing industry trends with their equivalents in Europe. This isolated the changes likely caused by the spread of robots, and not some other factor peculiar to the US.”