Tag Archives: economic growth

not so fast, says Paul Krugman

Not so fast with the backslapping on the U.S. economy, says Paul Krugman:

On Dec. 16, 2008, the Fed set its interest target between 0 and 0.25 percent, where it remains to this day.

The fact that we’ve spent six years at the so-called zero lower bound is amazing and depressing…

It’s true that with the U.S. unemployment rate dropping, most analysts expect the Fed to raise interest rates sometime next year. But inflation is low, wages are weak, and the Fed seems to realize that raising rates too soon would be disastrous. Meanwhile, Europe looks further than ever from economic liftoff, while Japan is still struggling to escape from deflation. Oh, and China, which is starting to remind some of us of Japan in the late 1980s, could join the rock-bottom club sooner than you think.

In other inflation news, the price of Thanksgiving was up slightly this year:

– The American Farm Bureau Federation’s annual price survey found the average cost of this year’s Thanksgiving meal for 10 is $49.41, a 37-cent increase from last year.

– Don’t blame the turkey for the slight uptick. The AFBF says the typical 16-pound turkey will cost $21.65. That’s an 11-cent decrease from last year.

– In fact, cranberries, stuffing and pie shells are down in price. The slight rise in total meal cost can be blamed on higher prices for sweet potatoes, milk and whipping cream.

China is now the world’s biggest economy

From Jeffrey Sachs:

According to the IMF, China’s GDP will be $17.6 trillion in 2014, outstripping US output of $17.4 trillion. Of course, because China’s population is more than four times larger, its per capita GDP, at $12,900, is still less than a quarter of the $54,700 recorded in the US, which highlights America’s much higher living standards.
In other U.S. – China news, the NSA is worried that China has the ability to crash the U.S. electrical grid with a cyber attack:
China and “one or two others” can shut down the U.S. electric grids and other critical infrastructure and is performing electronic reconnaissance on a regular basis, said NSA director Admiral Michael Rogers, testifying Thursday (Nov. 20) at a House Select Intelligence Committee hearing on U.S. efforts to combat cybersecurity.

habitat loss and animal welfare

Brian Czech makes the point that habitat loss causes a lot of animal suffering. I think this is almost certainly true, and sad. He mostly blames urbanization. I want to argue with that, because a compact, well-designed city should have a relatively small ecological footprint per person living in it, compared to people spread out over a more rural landscape. For example, the Amish way of farming actually is a big contributor to the water pollution destroying the Chesapeake Bay. If there are going to be 7 billion of us, or 10 billion, we can’t all live like the Amish or it would be an ecological disaster. Of course, it is true that the relatively low-impact lifestyle in the city is supported by an enormous rural base of agriculture, forestry, fishing, resource extraction, mining, and manufacturing that has a huge and growing ecological footprint. It’s possible to envision a world where we eventually turn the corner and manage to grow in quality without growing our physical footprint. But we are far from that, and natural ecosystems are certainly the big losers whether or not we are actually on the verge of destroying ourselves.

Japan

According to the Economist, Japan’s economy is officially back in recession. I don’t fully understand these things, but I do find them interesting, so here’s my attempt at an explanation. They’re in a deflationary spiral, which means prices are falling, and people aren’t spending money because they expect prices to keep falling. It makes sense – if you want to buy something, and you expect it to be cheaper next week than it is this week, you will wait. It’s hard for an economy to grow under these circumstances. The government combats this by printing massive amounts of money and loaning it to itself, which it can then spend. Normally that would create massive inflation, but it doesn’t because no matter how much they print, everybody just sits on it and won’t spend it. If you think about it too much, you can’t help wondering whether money actually has any value or meaning under these conditions. It’s best if people don’t sit around wondering about that too much.

World Economies

According to NPR, the U.S. economy has picked up, which is nice.

In the most recent quarter, this country grew at 3.5 percent — a very robust pace for a mature economy.

In the United States, the stock market is booming, budget deficits are melting away, corporate profits are breaking records and the unemployment rate is falling, down to nearly half the level set five years ago.

U.S. success shows “the resilience and determination of the American people,” Lew said. “It also reflects the ease of starting businesses, our highly competitive product markets, and the ability to reap rewards from entrepreneurship.”

In fact, the U.S. is doing so well that we have resumed wagging our fingers at other countries.

Meanwhile, Japan’s economy is stuck, with its inflation-adjusted growth rate running at less than 1 percent over the past decade. Europe may be on the brink of its third recession in six years.

Lew says that to grow, countries need a “comprehensive policy approach” that involves not only better fiscal and monetary decisions, but “structural” changes. When he talks about “structure,” he’s referring to the policy frameworks that hold back growth.

This sounds pretty good. We should also remind ourselves to have a comprehensive policy approach to not crash the world financial system again.

American Made: The New Manufacturing Landscape

NPR has this series called American Made. It has a variety of interesting articles/interviews but there is a common theme. We are making and selling a lot of stuff, and it has a lot of economic value to be captured. But manufacturing is now a tech industry. It is more capital- and technology-intensive all the time, and less labor-intensive. So favoring manufacturing over other industries is not going to be a path to full employment and sharing the wealth with low- and medium-skilled workers like in the U.S. of the 50s and 60s, or the Asia of the 80s and 90s and 00s. By default the value is going to be captured by a small elite who own the capital or have the skills to create and operate the technology, unless we think of something better.

Also related to this topic, be sure to check out this Dilbert.

 

October 2014 in Review

At the end of September, my Hope for the Future Index stood at +1.  As I did last month, I’ll sort selected posts that talk about positive trends and ideas vs. negative trends, predictions, and risks. Just for fun, I’ll keep a score card and pretend my posts are some kind of indicator of whether things are getting better or worse. I’ll give posts a score from -3 to +3 based on how negative or positive they are.

Negative trends and predictions (-11):

  • The Wall Street Journal prints an op-ed by a climate change skeptic. Wait, I thought there was a pure consensus among serious scientists about climate change. Or is it just serious climatologists, with a few lone dissenting physicists like this guy? Either way, there is an overwhelming near-consensus and by printing this the WSJ gives the idea that there is still a significant debate, thereby reducing the chances of action being taken. Meanwhile, the New York Times tells us where in the U.S. to move as the heat creeps up on us – Alaska, Seattle, and Detroit. Tidal flooding may also become a bigger problem in coastal cities. (-1)
  • Economists and economic journalists are buzzing about a worldwide slowdown and an even more severe financial crisis that may be on the horizon. Europe, and France in particular, seem to be getting into dangerous territory right now. (-2)
  • The new Living Planet Report says our ecological footprint has not ticked up from 1.5 planets since the last Living Planet Report. That is, no change given the rounding error of 0.1 planets. Before we get too happy, remember that a number over 1 is meant to measure the rate of decline. So these would be mean not that our situation has stabilized, but that the rate of decline has not accelerated. (-1)
  • Slavery is a good example of how amoral profit-seeking private enterprise can lead to evil consequences. (-3)
  • The drought in California and the U.S. desert southwest continues to get worse. Ours is not the first civilization to be impacted by drought in the U.S. desert southwest, and hopefully we will deal with it better than last time. (-1)
  • The U.S. medical system may not be prepared for Ebola, and if not it would be even less well prepared for something even more serious. (-1)
  • The American entrepreneurial spirit may have slowed down over the last generation. If this is true, it would be yet one more drag on the innovation pickup the world needs. (-1)
  • Energy prices are down. I’m not smart enough to tell you definitively if this is good or bad. If it reflected a breakthrough in renewable energy technology and cost-effectiveness, or low energy, sustainable food production, it would be great news. I hope renewable energy is starting to have an effect. But the bulk of the effect, most likely, reflects upward pressure on supply from hydraulic fracturing, and downward pressure on demand from economic slowing in Asia and Europe. High energy and food prices over the past decade quite likely have a hand in the economic slowing. Economic slowing can lower the world’s ecological footprint a bit, but it can also slow down innovation and, of course, lead to unemployment, hunger, unrest and conflict. (-0)
  • Echoes of the Cold War are rearing their ugly head, with Sweden out searching for Russian submarines in its territorial waters. (-1)

Positive trends and predictions (+8):

  • Maybe green consumer behavior can be scaled up through clever advertising. (+1)
  • Mosquitoes are being purposely infected with a naturally occurring bacteria, then released to control Dengue fever. (+1)
  • Automation (i.e. increasing computer control of nearly everything) is really taking hold of our economy and society, with potentially positive consequences for overall productivity and wealth, but potentially negative consequences for employment and distribution of wealth, depending on how it is handled. (+0)
  • There really are a lot of good examples and a lot of knowledge out there on how to have a lot of healthy trees in cities. This is known technology. Now cities in North America and the developing world just need to catch up and adopt the technology. (+1)
  • The old economy, for example dirty old fossil fueled electric utilities and sleazy taxi companies, are fighting the new, such as solar road materials and ride sharing. As they realize the technological and economic tide is turning against them, they are fighting in legislatures and courts for special laws that are unfair in their favor. They might win some battles and retard progress for a while, but I don’t see how they can win the long-term war. (+1)
  • LED light bulbs are now the overwhelming best household lighting choice, even in terms of purchase price. (+1)
  • Developing countries today are achieving much better health outcomes than developing countries of the past did at similar income levels. (+1)
  • People are waking up to fact that computer-controlled cars may free up large amounts of space in cities for new uses. (+2)
  • New technology for freezing human eggs may give women more flexibility on how and when to start a family, but muddle the historical meaning of biological relationships and generations. (+0)

Hope for the Future Index (September 2014): +1

October 2014 change: -11 + 8 = -3

Hope for the Future Index (October 2014): +1 – 3 = -2

houses and cars

This article from Atlantic Monthly saying Millennials are not interested in houses and cars has been talked about a lot. The car companies think they just haven’t hit on the right propaganda yet:

Don’t blame Ford. The company is trying to solve a puzzle that’s bewildering every automaker in America: How do you sell cars to Millennials (a k a Generation Y)? The fact is, today’s young people simply don’t drive like their predecessors did. In 2010, adults between the ages of 21 and 34 bought just 27 percent of all new vehicles sold in America, down from the peak of 38 percent in 1985. Miles driven are down, too. Even the proportion of teenagers with a license fell, by 28 percent, between 1998 and 2008.

In a bid to reverse these trends, General Motors has enlisted the youth-brand consultants at MTV Scratch—a corporate cousin of the TV network responsible for Jersey Shore—to give its vehicles some 20-something edge. “I don’t believe that young buyers don’t care about owning a car,” says John McFarland, GM’s 31-year-old manager of global strategic marketing. “We just think nobody truly understands them yet.” Subaru, meanwhile, is betting that it can appeal to the quirky eco-­conscious individualism that supposedly characterizes this generation. “We’re trying to get the emotional connection correct,” says Doug O’Reilly, a publicist for Subaru. Ford, for its part, continues to push heavily into social media, hoping to more closely match its marketing efforts to the channels that Millennials use and trust the most.

I think Millennials have encountered a tough economy. If economic conditions improve and they have more money, they will find ways to spend it. But not necessarily on cars. I think cars are just fundamentally different from all the other things we can buy with our money. No other good just completely saturates the physical environment, and drives the entire way our physical world is set up, the way cars do. Cars have physically saturated our world to the point that there is no room to squeeze any more of them in. Getting around our car-oriented world is just not convenient any more, and people are smart enough to realize that no matter how much advertising is thrown at them. Advertising messages that cars represent “freedom” are just not going to resonate with most people any more. And as far as status and sex appeal, I don’t believe for a second that our species has fundamentally changed – those things still matter to our species of large hairless ape but they are moving on to new forms.

Cars kill, pollute, waste our space and waste our time – good riddance.

driverless vehicles and displacement of drivers

Here is a continuation of the Economist‘s musings about automation:

The possibility of a world in which a rather large share of the population works as drivers, simply because human labour has gotten too cheap to automate out of the job, should focus minds on the nature of the policy challenge economies are beginning to face. Is work—and the link between work and the earning of an income sufficient to live on—so important to society that we should want millions of people to function as meatware: doing jobs sensors and computers could and would do if only there were not an excess supply of humans needing to work in order to afford food and shelter?

That’s not a rhetorical question. It’s a genuine puzzle that societies will find themselves confronting in coming decades. It will be obvious to many people that the answer is no and just as obvious to many others that the answer is yes. I cannot begin to say which side will win the argument.

The idea is that as automated vehicle technology becomes more effective and inexpensive, it will start to put more drivers out of work. But having more drivers available will reduce wages for drivers, possibly below what the automated technology costs and reducing the incentive for further development of the technology. It’s logical, but this sort of thing must have happened throughout history, and technology tends to win even if it takes a while. Take agricultural technology like diesel-powered tractors – when they got cheaper and more effective, they put enormous numbers of agricultural workers out of work. For the most part, those people didn’t accept lower wages and continue as agricultural workers, they migrated and tried to find better jobs in manufacturing, jobs that were also unfortunately drying up due to globalization and automation. The result, in the U.S. at least, was formation of a (seemingly, so far) permanent new underclass. So not only are these issues about technology vs. jobs, they are about how (whether) the wealth created by the new technology is going to be shared throughout society. In theory, we could retrain people and better educate their children, while also working less and sharing income more broadly. But that doesn’t sound like the American way, does it?