Author Archives: rdmyers75@hotmail.com

free trade

I just thought I would counter yesterday’s discussion of “blowback economics” with a typical pro-trade argument from a mainstream economist, in this case Kenneth Rogoff at Harvard:

The rise of anti-trade populism in the 2016 US election campaign portends a dangerous retreat from the United States’ role in world affairs. In the name of reducing US inequality, presidential candidates in both parties would stymie the aspirations of hundreds of millions of desperately poor people in the developing world to join the middle class. If the political appeal of anti-trade policies proves durable, it will mark a historic turning point in global economic affairs, one that bodes ill for the future of American leadership…

The right remedy to reduce inequality within the US is not to walk away from free trade, but to introduce a better tax system, one that is simpler and more progressive. Ideally, there would be a shift from income taxation to a progressive consumption tax (the simplest example being a flat tax with a very high exemption). The US also desperately needs deep structural reform of its education system, clearing obstacles to introducing technology and competition.

Indeed, new technologies offer the prospect of making it far easier to retrain and retool workers of all ages. Those who advocate redistribution by running larger government budget deficits are being short sighted. Given adverse demographics in the advanced world, slowing productivity, and rising pension obligations, it is very hard to know what the endgame of soaring debt would be.

Like I said, I am still thinking these things through. I find the mainstream economic arguments very elegant and appealing, but clearly they haven’t led to the promised gains for everyone in either the developed or developing countries. I am suspicious of the trickle down claims, although I have spent time in so-called “middle income” countries in Asia and I can’t deny that even the relatively poor have made huge gains in areas in health, nutrition, and life span, even if monetary incomes are lagging. The fact that things are better than they used to be doesn’t mean they are as good as they could be. I would like to hear more details about these training technologies and education reforms that are going to make everyone competitive in the global economy – when are they going to be rolled out, how and by whom? Or if there is not a plan yet, who exactly is working on one?

Blowback Economics

I’m nearing the end of Blowback: The Costs and Consequences of American Empire by Chalmers Johnson. Towards the end he makes some novel economic arguments that I will have to think about. Basically, he argues that the rhetoric of free trade and globalization that arose after World War II was at first political in nature, acting as an ideological counterweight to communism. It supported a geopolitical strategy which was to get industry off to a fast start in Japan and later Korea, open the U.S. market to their exports and allow their economies to grow quickly, creating strong Cold War allies in Asia. The U.S. itself was highly industrialized, growing fast, and its markets were by far the largest in the world, so at first it could absorb these exports and drive growth abroad just fine. But over time, Japan and Korea grew large relative to the U.S., and other economies like Singapore, Taiwan, and Hong Kong began to copy the model, and later the nations of Southeast Asia and of course China. Johnson argues that the U.S. kept its own markets open without insisting that these countries do the same. The result was the slowing of growth in the U.S., loss of the industrial base, loss of well paying blue collar jobs, and inner-city and small-town poverty. Meanwhile, he argues that because labor costs stayed low in Asia, which by now western multinational corporations were insisting on, the middle class in Asia was not growing fast enough to be able to afford the things they were making. With the U.S. stagnating at the same time, the U.S. couldn’t afford to buy all the things being made either. All this led to manufacturing over-capacity in Asia and under-demand globally, which he sees as leading directly to the Asian financial crisis of 1997. So in his view, the free market, free trade ideology we somewhat take as a given now began as a cynical propaganda campaign, which outlived its usefulness with the end of the Cold War. He blames the financial industry for pushing the system over the edge, but does not see financial speculation or risk taking as a root cause. Publishing in 2000, he suggests that 1997 may end up being seen by history as the high water mark of the American empire, after which it went into decline.

Like I said, I have to think about all this. For one thing, while the U.S. might have directly subsidized the rise of Cold War allies like Japan, Korea and Taiwan to some extent, you certainly can’t make that same case for China, which followed almost exactly the same trajectory a bit later. And the economic theory behind free trade is pretty elegant and appealing. You can’t base a national economy on subsidized, inefficient domestic industries forever and expect to remain competitive. You need to adapt to change rather than resist change. On the other hand, you need strategies to slow the rate of change so you have time to adapt, retrain as many workers as possible, educate the next generation of workers, build public infrastructure that allows the private sector to operate efficiently, and provide a safety net for those who are still left behind. The U.S. clearly failed to do these things, at least in the city centers and small factory towns that used to depend on heavy industry. To some extent I think Chalmers is right that we believed our own Cold War propaganda and let ideology prevent us from taking the measures that would have allowed us to adapt better.

Obama vs. Drought

Obama is worried enough about drought that he stopped whatever else he was doing and issued a presidential memorandum called Building National Capabilities for Long-Term Drought Resilience. It’s pretty vague but basically orders federal agencies to work together on resilience and support for new technologies.

Also, according the Wikipedia, the difference between an executive order and a presidential memorandum is…there is no difference. There are different kinds though. I like that there is one called a “memorandum of disapproval”. I can think of a few people I may send those to tomorrow.

Donald Trump and Blowback

I still won’t dignify Trump’s (or any politician’s) appeals to bigotry or science denial for a second, but I found myself pausing to consider some of the foreign policy ideas he mentioned in his recent New York Times article. No, not his support for nuclear proliferation in Japan or South Korea, of course. That is insanity. If the world has to have nuclear weapons (which I don’t accept, other than in the very short term), it makes much more sense for a very small number of responsible (?) parties to keep them under lock and key and agree to protect others. In fact, one of the diabolical things about nuclear weapons is that relative to their destructive and strategic power they are incredibly cheap compared to conventional weapons and boots on the ground. It is the enormous number of boots on the ground in places like Japan and South Korea that it may be time to reconsider, and mainstream politicians are generally not willing to stand up to the military-industrial establishment and bring that up for discussion.

I have recently been reading Blowback: The Costs and Consequences of American Empire by Chalmers Johnson. A key point he makes is that the United States propped up dictators and conservative governments around the world during the Cold War, often subverting popular democratic movements, and this led to a lot of resentment. Japan and South Korea are two of his examples. He says that the United States controls a huge area of the island of Okinawa, entirely rent free (and contrary to Trump’s claim that other countries don’t pay anything, another example of his not bothering to check his facts assuming that his supporters won’t bother either), and that this leads to a lot of resentment among the Japanese population to this day. In Korea, he claims that the CIA actively subverted democratic movements in favor of military dictators that proved to reliable Cold War allies. An even more surprising claim I had never heard before was that the South Korean military regime was actively pursuing nuclear weapons early on, and that the North Korean nuclear program was initially a response to this. Later South Korea agreed to give up its program, while North Korea obviously has not. Anyway, the focus of Johnson’s book is actually the 1990s, the period between the end of the Cold War and the book’s publication in 2000, when the U.S. had a chance to dial back its military footprint around the world, tone down the resentment, and chose not to.

So the U.S. probably could pull back its boots-on-the-ground military commitments in Japan and South Korea, stay engaged with these countries through trade and diplomatic channels (another area I was surprised to find myself nodding my head slightly while reading Trump’s interview). These countries are rich and powerful enough to take care of themselves to a large extent. The U.S. Navy, Air Force, and nuclear umbrella could still get there pretty quick to support them if needed.

If we did that, what are the odds of a country like Japan taking a militaristic expansionist turn again? That doesn’t seem too likely in Japan’s case. But the rest of the world could monitor and stay engaged through trade, diplomacy, and organizations like the United Nations Security Council. At the end of the Cold War, the Security Council seemed to be the body that was going to defend national borders. Rather than complicated, entangled groups of allies that could become ensnared in world wars, the simple story was that if one powerful country took aggressive action against a neighbor, all the other powerful countries in the world would suddenly become an alliance against it. Aggressive war would be futile. This would justify each country having a capable military, but no country has to devote an enormous chunk of its economic and social energy to weapons and the capability to commit violence as the United States has over the past 70 years or so. It’s a simple and naive story I’m sure, but not as naive as a purely pacifist approach, and an ideal to work towards.

how aliens could be hiding in plain site

There’s always that puzzle – if conditions were such that life could arise on this planet, and the universe is so vast that there must be similar conditions out there, and given the unfathomable amounts of time for that to happen, is it really likely or even possible that this is the only place it ever happened? And if life is actually common, how could it be that we have never detected it? One answer to the puzzle would be if sophisticated life is out there, even relatively nearby, and doesn’t want to be detected by us for some reason.

Serious people at serious universities like Columbia study this, the technology side at least if not the existential questions. If aliens are hiding from us right now, here’s one way they might be doing it. Or if we thought there was somebody bad out there (one of those infinitesimal probability, infinite consequence risks that are hard to wrap your head around) and wanted to hide, here is how we could try to do it.

A Cloaking Device for Transiting Planets

The transit method is presently the most successful planet discovery and characterization tool at our disposal. Other advanced civilizations would surely be aware of this technique and appreciate that their home planet’s existence and habitability is essentially broadcast to all stars lying along their ecliptic plane. We suggest that advanced civilizations could cloak their presence, or deliberately broadcast it, through controlled laser emission. Such emission could distort the apparent shape of their transit light curves with relatively little energy, due to the collimated beam and relatively infrequent nature of transits. We estimate that humanity could cloak the Earth from Kepler-like broadband surveys using an optical monochromatic laser array emitting a peak power of ∼30 MW for ∼10 hours per year. A chromatic cloak, effective at all wavelengths, is more challenging requiring a large array of tunable lasers with a total power of ∼250 MW. Alternatively, a civilization could cloak only the atmospheric signatures associated with biological activity on their world, such as oxygen, which is achievable with a peak laser power of just ∼160 kW per transit. Finally, we suggest that the time of transit for optical SETI is analogous to the water-hole in radio SETI, providing a clear window in which observers may expect to communicate. Accordingly, we propose that a civilization may deliberately broadcast their technological capabilities by distorting their transit to an artificial shape, which serves as both a SETI beacon and a medium for data transmission. Such signatures could be readily searched in the archival data of transit surveys.

the path to water innovation

Brookings has a new paper called The Path to Water Innovation. Here’s an excerpt:

The primary barriers to innovation are related to the way that the many layers of governmental agencies and water entities manage the nation’s water sector. Among the main management and policy barriers are (1) unrealistically low water pricing rates; (2) unnecessary regulatory restrictions; (3) the absence of regulatory incentives; (4) lack of access to capital and funding; (5) concerns about public health and possible risks associated with adopting new technologies with limited records; (6) the geographical and functional fragmentation of the industry; and (7) the long life expectancy, size, and complexity of most water systems. Although the last three factors are inherent to the water sector and hard to change, substantial policy reforms are feasible that could alter pricing, regulation, and finance in the water sector—all in ways that would encourage innovation.

We focus on several recommendations: (1) pricing policies that would both better align with the full economic cost of supplying water and decouple revenues from the volume of water supplied; (2) regulatory frameworks to create an open and flexible governance environment that is innovation friendly and encourages valuable new technologies; and (3) financing and funding mechanisms, such as a public benefit charge on water, that can help raise sufficient funds to implement innovative solutions. As has been demonstrated in the clean energy sector, implementation of these policy reforms would facilitate greater innovation in the water sector. In addition, we recommend the creation of a state-level water innovation vision that would identify state-specific innovation opportunities and policies, along with state innovation offices to help implement the vision across the many varied agencies and firms relevant to the sector. While we expect these state water innovation offices would become common, a small group of states with the greatest water challenges—such as California, Florida, and Texas, or a consortium of like-challenged states in a region such as the West—would begin the process. Based on the lessons learned, other states could follow.

“why we lost” Iraq and Afghanistan

Daniel Bolger is a retired U.S. general who has written a book about why he thinks the U.S. lost these two wars.

Why exactly did American military leaders get so much so wrong? Bolger floats several answers to that question but settles on this one: With American forces designed for short, decisive campaigns, the challenges posed by protracted irregular warfare caught senior officers completely by surprise.

Since there aren’t enough soldiers — having “outsourced defense to the willing,” the American people stay on the sidelines — the generals asked for more time and more money. This meant sending the same troops back again and again, perhaps a bit better equipped than the last time. With stubbornness supplanting purpose, the military persisted, “in the vain hope that something might somehow improve.”

Toward what end? Bolger reduces the problem to knowing whom to kill. “Defining the enemy defined the war,” he writes. But who is the enemy? Again and again, he poses that question, eventually concluding, whether in frustration or despair, that the enemy is “everyone.”

Well, if you can’t figure out who you are fighting or why, it is not likely that you will ever be able to say you accomplished your objective. These were really wars fought for no obvious reason, and blowback may only be starting. Hopefully lessons were learned.

Antarctica, it was nice knowing you

Thank you, Eric Holthaus, for your entertaining, mildly sensational climate change coverage at Slate.

In a study released Wednesday, a new estimate of how much Antarctic ice would melt in a warmer world nearly doubles previous projections of sea level rise by the end of the century. And it might be even worse than that: The study did not explore the true worst-case scenario, and its lead author said the work is still incomplete. Taken together with recent results from other research teams—most notably James Hansen’s, just last week—it’s increasingly clear that consensus projections of near-term sea level rise, about three feet in the next 85 years, are likely an underestimate.

The latest information comes via a breakthrough in simulating the behavior of Antarctica’s vast and complex network of glaciers and ice shelves. That’s brought a more complete understanding of how warmer air temperatures—projected to surpass those regularly experienced on Earth at any point during at least the last few million years—are affecting the sea level. At the same time, the study provides new certainty that—should the world act immediately to curb carbon emissions at a scale far beyond current efforts—virtually all Antarctic ice melt could be avoided.

Runaway Inequality

Les Leopold is a guy who wrote a book called Runaway Inequality: An Activist’s Guide to Economic Justice. Here’s an excerpt from an interview about the book:

In the late ’70s, roughly, a new economic philosophy really caught hold in both political parties. It originally came from the right, from Milton Friedman and the free marketeers. Academics call it neoliberalism; in the book, we call it the “Better Business Climate.”

It basically was kind of a simple model. Cut taxes, cut regulations, cut back social spending so people will be more eager to find work and be less dependent on the government, and basically undermine the power of labor unions so the economy would run more on market principles and have less inefficiencies in it. There would be more investment and profits, and therefore, all boats would rise. It would lead to kind of a boom economy. That was the theory. I was in graduate school when that was going on, and it was pretty strong, even more liberal economists were sort of giving up on Keynesianism and going in this direction.

What they didn’t teach us and what they never discussed is that it’s one thing to deregulate trucking or airlines or telecommunications, but it’s quite another thing to deregulate the financial sector… In 1980, about two percent of a company’s profits were used for stock buybacks. By 2007, 75 percent of all corporate profits were used to buy back their own shares. Forget about R&D, forget about workers’ wages, forget about all that kind of stuff. All that matters to a CEO today is raising the prices of the shares through stock buybacks.

The mantra makes some logical sense – capitalism is about competition to create better products at better prices and operate efficiently in the short term, and a necessity to innovate if you want to compete in the long term. Consumers are supposed to win. Profit and stock price are supposed to be the score card that determines which companies are winning, and the possibility of winning is the incentive to play the game. This all makes some sense, unless and until people are gaming the system to such an extent it is not really competition any more.