Donald Trump’s incessant tweeting

December 10th, 2016

Why does the President-elect tweet so often?

British journalist Gillian Tett has an explanation. “This is”, she writes, “the political equivalent of a dog peeing on lampposts in order to mark territory.” Read the rest of this entry »

Michael Lewis on Donald Trump

December 9th, 2016

Financial journalist Michael Lewis (born 1960) is author of numerous bestselling books, including Liar’s Poker (1989) and The Big Short (2010).

Just before Donald Trump’s electoral victory, Lewis was adding finishing touches to his latest book, The Undoing Project: A Friendship that Changed Our Minds (Norton, 2016). The 368-page volume is an homage to contributions to behavioural economics of two Isreli psychologists: Danny Kahneman (born 1934) and the late Amos Tversky (1937-1996).

Gary Silverman, the FT’s US national editor, recently caught up with Lewis.

“Every which way, Trump is exploiting the faulty mechanisms in people’s minds,” Lewis says over lunch at César, a restaurant in his adopted home town of Berkeley, California. “It feels like we are in a world where, to me, some meaningful part of the electorate is beyond reasoning with — beyond fact, anti-science. All the mental faculties that lead to human progress, they are opposed to.” ….

“I think of this as echoing of the 2008 financial crisis,” he says. “The marketplace for politicians just did something as weird as the marketplace for securities did ….”

Given their histories, Lewis makes a natural critic of the president-elect. Apart from having two ex-wives apiece, as Lewis jokes, he and Trump have little in common. Lewis made his name as a writer with an account of 1980s capitalist excess — Liar’s Poker, a memoir of his stint as a young bond salesman at investment bank Salomon Brothers. Trump, meanwhile, was an unapologetic poster child for the era — a property developer and casino owner who put his name on a book that described his deals as art. ….

One of the reasons that Lewis finds Trump so worrisome is that he appears so resistant to criticism. “He seems to think his own impulses are ingenious, even when they are fraudulent, idiotic or stupid. He tells himself a story that ‘I won, I am a success,’?” says Lewis. “He really is as fallible as the stupidest American citizen.”

Trump, in other words, is one of us — and that’s a problem.

“We are hard-wired to stereotype,” Lewis says. “When you are fighting racism or bigotry of any sort, or stereotyping of any sort, you are in combat with the way the mind works. You are, in a weird way, in the world where you are trying to overwhelm impulses. It’s so hard to get rid of it. This is how people think.”

Gary Silverman, “American psyche: Michael Lewis on the triumph of irrational thinking“, Financial Times, 9 December 2016 (metered paywall).

There is much more in Mr Silverman’s full column, which TdJ highly recommends.

Hillary Clinton and Dilma Rousseff

December 8th, 2016

This week’s special issue of FT Weekend Magazine contains interviews and profiles of 19 “women of the year“, from Theresa May (Britain’s prime minister) to Simone Biles (“arguably the greatest female gymnast of all time”). Those I found most interesting were two 68-year old politicians for whom 2016 was a year of failure rather than triumph: Hillary Clinton, who failed in an attempt to become the first female president of the United States, and Dilma Rousseff, who lost her job as the first female president of Brazil at the end of a long impeachment trial.

Here are portions of the FT columns written for each woman.

Edward Luce, the FT’s chief US columnist, writes “Historians will look back on 2016 as a textbook case of how not to run a campaign”.

In place of her own vision, [Hillary] Clinton focused on the nightmarish prospects of Trump’s. Almost three-quarters of her television ads warned of Trump’s character flaws — his attacks on minorities, the disabled and, most of all, on women. While Trump was holding mass rallies in the middle of the country, often drowned in cries of “Lock her up”, Clinton was raising money on the east and west coasts. At one event in Manhattan, she described half of Trump’s supporters as “deplorables”. It was not even a gaffe. The epithet appeared in her text.

Hillary Clinton: a fate worse than mere defeat“, Financial Times, 10 December 2016 (metered paywall).

Joe Leahy, the FT’s Brazil bureau chief, interviewed Dilma Rousseff, noting

More a nerdy technocrat than a natural politician, she is never happier than when discussing the intimate details of the federal budget, backed by PowerPoint.

It strikes me that this description would apply equally to Hillary Clinton! The two women have quite a lot in common.

Mr Leahy continues:

Another defining quality is her dogmatism, which showed at an early age. Born in 1947 in the mining town of Belo Horizonte in Brazil’s south-east to a Brazilian teacher and a Bulgarian communist lawyer, she began fighting the country’s former military dictatorship aged just 16. She met lawyer Carlos Franklin Paixão de Araújo, her now ex-husband and father of her only child, before she was imprisoned for three years by the military in 1970. She was tortured, an experience that led her to remind her opponents during the impeachment that she knew how to tough anything out. ….

For women, she had wanted to leave a legacy of a successful presidency, not an impeachment. “In any case, I will leave as a legacy to women my trajectory. I say that we [women] are not people who give up, who bend under adversity.”

Women always face some level of discrimination, even in “the most civilised societies”, she says. Rousseff was frequently charged with being an iron lady, reportedly so “tough” that she made ministers in her cabinet cry when they did not do their homework.

“When you are a woman in authority, they say you are hard, dry and insensitive, while a man in the same position is strong, firm and charming,” she says.

Joe Leahy, “Dilma Rousseff: ‘A woman in authority is called hard, while a man is called strong’”, Financial Times, 10 December 2016 (metered paywall).

fiscal austerity in the eurozone

December 7th, 2016

The eurozone’s pursuit of austerity, when fiscal stimulus is needed, continues to worry Martin Wolf. Here are the concluding two paragraphs of his exceptionally informative Wednesday column.

What the eurozone needs most is a shift away from the politics of austerity. In its most recent Economic Outlook, the OECD, a club of mostly rich nations, makes a cogent (albeit belated) plea for a combination of growth-supporting fiscal expansion with relevant structural reforms. This is most relevant to the eurozone because that is where demand has been weakest and the fetish over fiscal deficits most exaggerated. In the big eurozone economies, net public investment is near zero. This is folly.

Alas, little chance of change exists. Those who matter — the German government, above all — view public borrowing as a sin, regardless of its cost. The political and economic impact of breaking up the eurozone is so great that the single currency may well soldier on forever. But it has by now become identified with prolonged stagnation. Those member countries with the power to change this approach should ask themselves whether it really makes sense. It is time for the eurozone to stop living dangerously and start living sensibly, instead.

Martin Wolf, “More perils lie in wait for the eurozone“, Financial Times, 7 December 2016 (metered paywall).

Trump’s style of industrial policy

December 7th, 2016

Donald Trump last week set a precedent with Carrier for direct deals with business firms, one that continues with Boeing and SoftBank. This style of governance, common in third-world countries, is new to the United States. The feedback from Trump’s political base has been positive, but many are not impressed.

Mr Trump’s intervention to stop Carrier, the air conditioner maker, moving more than 2,000 jobs to Mexico are politically popular even if the eventual deal means only 730 remain in Indiana. ….

“This was more of a mugging than a bribe,” Larry Summers, the former Treasury secretary, wrote of the deal Mr Trump negotiated with Carrier, whose parent company, United Technologies, has hinted that it felt under pressure to work with Mr Trump because of its vast defence contracts.

James Pethokoukis of the conservative American Enterprise Institute said it was still too early to establish “how much of this was just one-off behaviour and how much of this is going to become the modus operandi of the new administration”.

However, if it does become how a Trump administration works with business it would mark a fundamental shift for a US economy that has long thrived on the credo that the market decides and where businesses have been free of the sort of political pressure they might face in places such as China. “This is a novel political experiment and maybe it’s worth running,” Mr Pethokoukis said. “But I’d rather not run it with the largest economy in the world.”

Shawn Donnan, “Business wary of Twitter blasts from Trump’s bully pulpit“, Financial Times, 8 December 2016 (metered paywall).

resolving the Dakota Access pipeline controversy

December 6th, 2016

Opponents of the oil pipeline that threatens the water supply of a Sioux Indian reservation in North Dakota are perhaps celebrating too soon their apparent victory. Ed Crooks, US industry and energy editor for the Financial Times, reports “Donald Trump’s team has said he supports the pipeline, and his administration is expected to grant the approvals that have so far been denied.” Read the rest of this entry »

science under siege

December 6th, 2016

The conflict between scientists and political leaders (secular and religious) in some countries is moving toward levels that were common centuries ago, writes British-Indian science journalist Anjana Ahuja. The coming change of government in the USA is but one example, though a surprising one.

Four centuries ago, Galileo caught the unwelcome attention of the Roman Catholic Church. In 1616, his conviction that the Earth went round the Sun, contrary to the geocentric view of the universe, simply irritated theologians; by 1633, the astronomer was under house arrest and forbidden from propagating his beliefs, a situation that prevailed until his death in 1642. It might have been worse for a heretic: he could have been burnt at the stake.

Scientists may well feel the heat from those in power once again. Donald Trump, US president-elect, established his anti-science credentials by declaring climate change a Chinese hoax. In Mike Pence, he chose a running mate who seems not to believe in evolution. One science blogger said Mr Trump’s cabinet looked as if his team had “made a list of all 300m Americans, ordered them by competency … and then skipped straight down to the bottom”.

Anjana Ahuja, “Echoes of Galileo in the populist retreat from reason“, Financial Times, 7 December 2016 (metered paywall).

Anjana Ahuja has a PhD in space physics from Imperial College London, and is now a contributing writer at the Financial Times. She is also a visiting lecturer in science journalism at City University in London.

investment incentives

December 5th, 2016

FT columnist John Thornhill has an interesting, simple idea for corporate tax reform. (Scroll down to the last sentence below, which is also the last sentence of his column.)

One of the startling features of Anglo-American capitalism is that corporate investment remains so low when profits are so high.

This lack of investment seems all the more puzzling given that money is cheap, infrastructure needs are glaring, fast-growing consumer markets are opening up all over the developing world, and smart technologies are making it possible to imagine and create new business models. ….

Carlota Perez, a professor at the London School of Economics, argues that an effective way of spurring more investment would be to rewrite our “completely wacky” tax regimes, which penalise “goods” rather than “bads”.

Why do we tax salaries so heavily when we consider employment to be a good thing? Why not shift the burden to energy, materials and transport to stimulate the greening of the economy? Why not tilt the playing field towards longer-term investment by taxing short-term capital gains at punitive rates while cutting them for those made over five years?

Few governments are likely to be so bold, given how beholden they are to corporate lobbying. ….

Maybe it is time to turn recent logic on its head. If the private sector remains so reluctant to invest then governments should consider taxing companies more heavily and invest directly themselves. [Emphasis added.]

John Thornhill, “Rewrite tax regimes to spur greater investment“, Financial Times, 6 December 2016 (metered paywall).

Mr Thornhill links to the following 22 minute podcast:

Tech utopia or tech dystopia? Carlota Perez of the London School of Economics talks to John Thornhill about the radical changes she believes are needed if we are to harness the benefits of the current technological revolution.

John Thornhill, “Harnessing the technological revolution“, FT Tech Tonic Podcast, 1 November 2016.

FT podcasts are not metered, but free registration is required.

Trump’s tax plans favour the rich

December 5th, 2016

Harvard economist Larry Summers explains that Trump’s proposed tax cuts will benefit high-income taxpayers, at the expense of those with lower incomes. He predicts that this is likely to retard rather than stimulate economic growth, in part because after-tax income is shifted “towards those most likely to save it”.

Just as Ronald Reagan’s landmark 1986 bipartisan tax reform increased simplicity, fairness and economic efficiency by broadening the tax base and reducing rates, today reform of the system has the potential to help American families and the economy. ….

A core principle agreed to by all in 1986 was that reform would not reduce the tax burden on high-income taxpayers. Reagan achieved this objective while reducing top marginal rates because he raised capital gains rates, scaled back investment incentives, increased corporate tax collection, curtailed shelters and left estate and gift taxes alone. Unfortunately, neither the Trump plan, nor the one put forward by Paul Ryan, speaker of the House of Representatives, provides for nearly enough base-broadening to finance all the high-end tax cutting they include.

Steven Mnuchin, Treasury secretary-designate, asserts there will be no absolute tax cut for the upper class because deductions would be scaled back. The rub is that totally eliminating all deductions for those with incomes over $1m would not even raise enough revenue to cover reducing their marginal tax rates from 39 to 33 per cent, let alone offset their benefit from huge rate reductions on business and corporate income, and the elimination of estate and gift taxes.

Lawrence Summers, “Trump’s tax plans favour the rich and will hamper economic growth“, Financial Times, 5 December 2016 (metered paywall).

See also this post from February 2014 on Professor Summers’ concern with increasing inequality in the distribution of after-tax income.

Keynes vs Hayek podcast

December 4th, 2016

I enjoy very much listening to weekly podcasts from FT Alphachat. The host is Cardiff Garcia, and the hour-long talk is almost always entertaining. This week’s podcast is particularly good. You can download it at the link below, or at iTunes. Notes and links for this episode will be posted at ftalphaville within a few days.

All FT blogs and podcasts can be downloaded without charge. (Free registration may be required.)

Cardiff Garcia sits down with Nicholas Wapshott, author of Keynes Hayek: The Clash that Defined Modern Economics [Norton, 2011], to discuss which economist’s ideas are ascendant in the post-crisis cycle, and why both will matter during the Trump administration.

Cardiff Garcia, “Keynes vs Hayek: NOW who is winning?“, FT Alphchat, 2 December 2016.

Nicholas Wapshott (born 1952) is a British journalist and author of numerous books, including Ronald Reagan and Margaret Thatcher: A Political Marriage (Sentinel, 2007). His latest publication is The Sphinx: Franklin Roosevelt, The Isolationists, and the Road to World War II (Norton, 2014).

I have added “Keynes Hayek” to my reading list.