Brexit and the UK economy

September 29th, 2016

FT columnist Martin Wolf writes that, contrary to a claim of Brexit supporters, there is no reason to expect scrapping EU regulations to change the relatively poor performance of the UK economy.

The UK … has low unemployment. But it also has high inequality, mediocre real incomes, at least by the standards of its European peers, and poor external competitiveness. Above all, recent productivity growth has been truly awful.

Moreover, such failings, relative to the UK’s EU-15 peers, cannot plausibly be due to the burden of regulation since, as the OECD rightly stated in its pre-referendum report on Brexit, “regulations are low relative to those in other EU member states”. If that made the difference, the UK would be more productive and dynamic than its peers, not less so. Given this, scrapping remaining regulations would not be transformative.

What, then, might account for the poor performance of the UK economy? According to Mr Wolf,

the list includes: low investment, particularly in infrastructure; inadequate basic education of much of the population and the innumeracy of much of its elite; a grossly distorted housing market; over-centralisation of government; and a corporate sector whose leaders are motivated more by the share price than by the long-term health of the business.

Martin Wolf “Make no mistake, Britain is not a world-beating economy“, Financial Times, 30 September 2016 (metered paywall).

For details, read the full column at the link above.


imagining President Donald Trump

September 27th, 2016

Martin Wolf’s column this week is a must-read.

Sometimes history jumps. Think of the first world war, the Bolshevik revolution, the Great Depression, the election of Adolf Hitler, the second world war, the beginning of the cold war, the collapse of the European empires, Deng Xiaoping’s “reform and opening up” of China, the demise of the Soviet Union, and the financial crisis of 2007-09 and subsequent “great recession”.

We may be on the brink of an event as transformative as many of these: the election of Donald Trump as US president. This would mark the end of a US-led west as the central force in global affairs. The result would not be a new order. It would be perilous disorder. ….

[E]lection of a man as unqualified as Mr Trump would call into question … belief in the capacity of the US to choose reasonably well-informed and competent leaders. Under a President Trump, the democratic system would lose much of its credibility as a model for the organisation of a civilised political life. ….

If Mr Trump were to win, it would be a regime change for the world. It would, for example, end efforts to manage the threat of climate change, possibly forever. But even his candidacy suggests that the US role in the global order risks undergoing a transformation. That role depended not only on American economic and military prowess, but also on the values it represented. For all its mistakes, the ideal of a law-governed democratic republic remained visible. Hillary Clinton is an imperfect candidate. Mr Trump is something else altogether. Far from making America great, his presidency might unravel the world.

Martin Wolf, “How the west might soon be lost“, Financial Times, 28 September 2016 (metered paywall).

Columns like this are why I subscribe to, and continue to support, this newspaper.

the US presidential debate viewed from the UK

September 27th, 2016

The editors of the Financial Times watched last night’s presidential debate and, predictably, are disturbed. Here is a brief excerpt from an editorial that will appear in tomorrow’s newspaper.

Anyone watching the first presidential debate would be forgiven for thinking the US was on the brink of collapse. The Republican candidate, Donald Trump, insisted the US was a third-world country suffering an almost biblical flight of jobs to China and beyond. Violence was out of control and parts of the country were now in open warfare.

Hillary Clinton’s language may have been rather less melodramatic. But she shared Mr Trump’s premise about the threat posed to the US by an open global economy. ….  Contrary to Mr Trump’s depiction of a jobless America, the US unemployment rate is just 4.9 per cent, which is less than half that of parts of Europe. ….

Both Mr Trump and Mrs Clinton pander to the idea that comfortable mid-20th century factory-floor jobs can simply be willed back into existence. It is a myth. The blame for America’s labour force woes and the increasingly skewed distribution of the fruits of growth are to be found at home. It is Washington, not Beijing, which sets US tax rates. The answer to most of America’s challenges are to be found in the booming cities and technological hubs of 21st century America. Blaming it on foreigners may be good tactics. But it could result in terrible policies that will only deepen the malaise.

“America’s dystopian presidential debate”, Financial Times editorial, 28 September 2016 (metered paywall).

Canada’s unique refugee programme

September 23rd, 2016

Canada’s private sponsorship programme is the oldest and best known in the world. Its implementation coincided with another conflict four decades ago.

The new policy came into force in 1978 under former Prime Minister Pierre Trudeau’s government, just as people were growing increasingly alarmed at the plight of hundreds of thousands of Vietnamese, Cambodians and Laotians fleeing communist regimes by sea in leaking, unsafe boats.

The programme, overseen by the federal government, allows groups of private citizens – often with ties to faith-based organisations, cultural groups or humanitarian organisations – to directly sponsor refugees. ….

From January 1979 to December 1980, Canada resettled 60,049 so-called “boat people.” More than 50%, were privately sponsored, often by complete strangers. ….

Since last November, Canada has welcomed over 30,000 Syrian refugees. Almost 11,300 were brought in through private sponsorship.

Jessica Murphy, “The unique programme that brings refugees to Canada“, BBC News, 20 September 2016.

There is much more – including video – at the link. It is worth noting that the USA, with ten times the population of Canada, has accepted fewer than 10,000 Syrian refugees.

Obama as anthropologist

September 22nd, 2016

FT columnist Simon Kuper has written the best profile of President Barack Obama that I have ever seen. Here are extracts from his outstanding column.

Obama … has identified the “dominant figure in my formative years” as his mother, Ann Dunham. She was an anthropologist — a scholar who studies foreign cultures. Being an anthropologist’s son myself (though, unlike Obama, I actually was born in east Africa), I’ve always sensed that the family business explains a lot about his presidency. ….

When he was six, his mother took him to Indonesia, where she had married a local man. There she began what became her magnum opus: a study of peasant blacksmiths on Java. ….

Aged 10, he returned to Hawaii, where he was born, to live with his grandparents but he continued visiting his mother in Indonesia. ….

Even in Hawaii, Obama remained an outsider. The state was nearly five hours’ flight from the continental US, and hardly any black people lived there. …. It’s wrong to understand Obama chiefly as a product of his ethnic identity, or as a mainstream American liberal like his mother. Rather, he wasn’t raised in any group.

The “birther” jibes, therefore, aren’t simple racism against a black president. After all, although black Americans suffer horrible discrimination, hardly anyone questions their Americanness. Instead, birthers are pointing up Obama’s perceived foreignness.

Viewing the US from the outside, President Obama never seems to have bought the notion that it is an exceptional country with a superior culture and God-given duty to save the world. Asked on his first trip overseas as president whether he believed in American exceptionalism, he replied: “I believe in American exceptionalism. Just as I suspect that the Brits believe in British exceptionalism, and the Greeks believe in Greek exceptionalism.”

That upset some voters. Obama can seem apart from his own country, haughty, almost a foreigner in the White House.

Simon Kuper, “Barack Obama: anthropologist-in-chief“, Financial Times, 22 September 2016 (metered paywall).

There is much more in the full column. If you are not a subscriber to FT, I encourage you to register at the link above for a free download of Mr Kuper’s essay.

British journalist Simon Kuper was born in Uganda of South African parents in 1969. His father was an anthropologist. Mr Kuper studied History and German at Oxford University and now lives in Paris with his family.

Martin Wolf on Brexit

September 21st, 2016

The always sensible Martin Wolf writes, in his FT column today, that exit from the EU means exit from the customs union and single market along with exit from EU regulation and intra-bloc migration. The only feasible alternative is to ignore the Brexit referendum results. This is not likely.

“Brexit means Brexit.” As circular as it is concise, this three-word sentence tells us much about the style of Theresa May, the UK prime minister. I take this to mean that the UK will, in her view, formally leave the EU, without the option of a second referendum or a parliamentary override. If so, it seems overwhelmingly likely that the outcome will be “hard Brexit”.

By “hard Brexit” I mean a departure not only from the EU but also from the customs union and the single market. ….

Why then is a hard Brexit the most likely outcome? My belief rests on the view that this UK government will not seek to reverse the result of the vote and that it will feel obliged to impose controls on immigration from the EU and to free itself from the bloc’s regulations overseen by its judicial processes. ….

The only reasonable alternative to hard Brexit would be to stay inside the EU. Parliament is constitutionally entitled to ignore the vote result. The people could also be asked if they wanted to change their minds. But the Conservatives would surely follow Labour into ruin if they tried to reverse the outcome. Their Brexiters would go berserk. ….

The UK has chosen a largely illusory autonomy over EU membership. That has consequences. It will have to accept this grim reality and move as quickly as it can to whatever the future holds.

Martin Wolf, “Theresa May limbers up for a hard Brexit“, Financial Times, 21 September 2016 (metered paywall).

Fox News

September 20th, 2016

Here is an excerpt and link to another op-ed from yesterday’s New York Times. It is a call to reform Fox News, written by a Reagan Republican.

When it began in 1996, Fox News did not advertise itself as conservative, but rather as being in the center. I, like many conservatives, thought the mainstream media was liberal, so being in the center meant Fox was relatively to the right of most media.

But after the terrorist attacks on Sept. 11, 2001, Fox began shifting to the right of center ….

Ten years ago I stopped watching Fox because I found that it distorted my worldview ….

Could Fox News be that outlet that a broader coalition of conservatives wants? The recent ouster of Mr. Ailes and the inevitable takeover of the company by the sons of 85-year-old Rupert Murdoch mean that some change will come. Opening Fox to broader political views could be a plus for both it and the conservative movement. If Fox News remains an entrenched part of the conservative extreme, the result will be more Republican candidates like Mr. Trump and more defeats at the polls.

Bruce Bartlett, “It’s Not Too Late to Fix Fox News“, New York Times, 19 September 2016.

HT Mark Thoma.

Bruce Bartlett (born 1951) studied American diplomatic history (BA Rutgers; MA Georgetown). He then worked as a staff economist for members of Congress and occupied senior policy positions in the governments of Ronald Reagan and George H.W. Bush. He is author of numerous books and articles, including the book Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy (Doubleday, 2006), and the article “How Fox News Changed American Media and Political Dynamics” (3 June 2015).

Krugman to young Americans: Your vote matters!

September 20th, 2016

Further to yesterday’s post, Paul Krugman pleas for young voters to vote for Hillary Clinton, rather than waste their vote on a third party candidate, as so many did 16 years ago.

Does it make sense to vote for Gary Johnson, the Libertarian candidate for president? Sure, as long as you believe two things. First, you have to believe that it makes no difference at all whether Hillary Clinton or Donald Trump moves into the White House — because one of them will. Second, you have to believe that America will be better off in the long run if we eliminate environmental regulation, abolish the income tax, do away with public schools, and dismantle Social Security and Medicare — which is what the Libertarian platform calls for.

But do 29 percent of Americans between 18 and 34 believe these things? I doubt it. Yet that, according to a recent Quinnipiac poll, is the share of millennial voters who say that they would vote for Mr. Johnson if the election took place now. …

So I’d like to make a plea to young Americans: your vote matters, so please take it seriously. ….

Remember, George W. Bush lost the popular vote in 2000, but somehow ended up in the White House anyway in part thanks to the Nader vote — and nonetheless proceeded to govern as if he had won a landslide. Can you really imagine a triumphant Mr. Trump showing restraint out of respect for all those libertarian votes?

Paul Krugman, “Vote as if It Matters“, New York Times, 19 September 2016 (metered paywall).

Thanks to Mark Thoma’s ungated extract for the pointer.

Clinton vs Trump

September 19th, 2016

FT columnist Edward Luce writes that Hillary Clinton is perfectly capable of losing the November election to Donald Trump. If this is a prediction, we will soon find out.

It is often said that the Republican Party, by accepting Donald Trump as its nominee, made the election of Hillary Clinton possible. I now realise that it is equally true that the Democratic Party, by accepting Hillary Clinton as its nominee, has made a Trump victory possible. Each candidate is disliked, not without reason, by a majority of voters.

In 50 days we will know whether Donald Trump has pulled off the biggest upset in American history. …. Hillary Clinton is all that stands between the world and the Trumpian abyss. ….

Voters will have to make do with her campaign themes of building bridges rather than walls, and being stronger together. Laudable though such sentiments are, they are dangerously anodyne. They tell voters what Mrs Clinton is not — Donald Trump. They tell us next to nothing about what she would do. ….

If this is a contest over who is least unpopular, Mrs Clinton is capable of losing it. All Mr Trump has to do is control his nastiness for seven weeks. For most people this would pose few difficulties. But he is capable of falling off the wagon. …..

Make no mistake: the US could be about to elect a proudly ignorant xenophobe as president. [Emphasis added.]

Edward Luce, “Fifty Trumpian days that will shake the world“, Financial Times, 19 September 2016 (metered paywall).

the CEO of Wells Fargo

September 17th, 2016

FT columnist Gary Silverman has written a surprisingly positive profile of John Stumpf, CEO of Wells Fargo, a huge bank that is embroiled in a huge scandal. Mr Stumpf, writes Mr Silverman, “still has friends on Wall Street”.

Mr Stumpf was … a country boy who grew up as one of 11 children on a Minnesota farm where he shared a bed with two of his brothers.

“I never got to sleep alone until I got married,” he likes to say. ….

[H]e was the rare big banker who emerged from the turmoil of the past decade with his public image relatively intact.

Last week, however, Mr Stumpf’s long run of good fortune came to an end. ….

Mr Stumpf, who is due to retire when he turns 65 in two years, said this week he has no plans to step down because of the scandal. But the pressure on him to go could very well increase.

Gary Silverman, “John Stumpf, the labrador of Main Street“, Financial Times, 16 September 2016 (metered paywall).