Archive for the ‘Political Economy’ Category

Bernie and Hillary debate Wall Street

Saturday, February 6th, 2016

Throughout the Democratic primary, Mr Sanders has managed to keep much of the focus on Wall Street, a contrast from the Republican side where Wall Street regulation has rarely figured in debates. ….

On Thursday [4 February] she [Hillary Clinton] attempted to portray Mr Sanders’ focus on Wall Street as narrow minded.

“If all we are going to talk about is one part of our economy, and indeed one street in our economy, we’re missing the big oil companies, we’re missing the other big energy companies. We’re missing the big picture,” she said.

But Mr Sanders was ready with a retort. “Madam Secretary, it is not one street. Wall Street is an entity of unbelievable economic and political power,” he replied.[Emphasis added.]

When Mrs Clinton went after Mr Sanders and accused him of suggesting that her speeches had made her corruptible to Wall Street’s influence — something she called “an artful smear” — the studio audience at the debate booed.

Courtney Weaver, “Bernie Sanders brandishes his Wall Street weapon“, Financial Times, 6 February 2016 (metered paywall).

Bernie’s weak socialist credentials

Saturday, February 6th, 2016

Socialists complain that Bernie Sanders is not a real socialist, that he is “Socialist In Name Only”. They have a point. Bernie likes to call himself a socialist (perhaps to shock voters!), but he is actually a social democrat.

Socialism is government ownership of the means of production. A US example is Veterans Affairs, a government agency that owns and operates hospitals. Medicare is an example of social democracy, as the government pays the bill for services provided to older persons mainly by private doctors and hospitals. Bernie’s promise of “Medicare for all” is a call for expansion of social democracy, not socialism.

Incidentally, Bernie has received a surprising amount of money from small donors, without a dollar of cash from Wall Street or large corporations. This alone is an incredible achievement. (See the chart below.)

Clinton and Sanders debate

Source: Financial Times.

Jimmy Carter prefers Trump over Cruz

Saturday, February 6th, 2016

Jimmy Carter, the former Democratic president, weighed in on the Republican race, telling the House of Lords in London that faced with a choice between Donald Trump and Ted Cruz, he would prefer to see the New York property mogul as president because he is “malleable”. The Texas senator lost almost no time converting the back-handed endorsement into an attack ad against the tycoon who leads in New Hampshire.

Demetri Sevastopulo, “White House countdown: Jimmy Carter prefers Trump“, The World,, 5 February 2016 (un-metered link).

Mr Sevastopulo is Chief of the Financial Times Washington Bureau. The FT graciously allows unmetered access to all its blogs (free registration required). There is much more at the link above, for example this curious “Soundbite”:

“Well, I don’t know. That’s what they offered” – Hillary Clinton, when asked about accepting $675,000 in speaking fees from Goldman Sachs (Washington Post)


revolt of the masses

Thursday, February 4th, 2016

FT columnist Martin Wolf writes that, in the west, a rebellion against economic and technocratic elites is in progress. The increasing gap between the income of the elites and that of the masses “hollows out realistic notions of democracy”.

We are not Chinese. Maybe even the Chinese will not remain content to hand responsibility for public affairs to a self-selecting elite. ….

As a recent OECD note points out, inequality has risen substantially in most of its members in recent decades. The top 1 per cent have enjoyed particularly large increases in shares of total pre-tax in­come. This divergence between the success of the economic elite and the relative lack of success of the rest has been particularly striking in the US. Thus, notes the OECD: “Between 1975 and 2012 around 47 per cent of total growth in [US] pre-tax incomes went to the top 1 per cent.” As the US has developed a Latin American-style income distribution, its politics have grown infested with Latin American-style populists, of both the left and the right.

How should those in the centre respond? Successful politicians understand that the people need to feel their concerns will be taken into account, that they and their children enjoy the prospect of a better life and that they will continue to have a measure of economic security. Above all, they need once again to trust the competence and decency of economic and political elites.

Martin Wolf, “Bring our elites closer to the people“, Financial Times, 3 February 2016 (metered paywall).

martin wolf

the struggle for single-payer health care

Monday, January 18th, 2016

The US has nearly universal, single-payer health insurance for everyone from age 65. The programme is known as Medicare. It is not quite universal because there is a requirement that the beneficiary (or spouse) have a minimum of forty quarters (ten years) of contributions to Social Security.

I have long thought that the easiest way to achieve universal health insurance coverage in the United States is to give Medicare benefits to everyone: remove the contribution requirement and lower the age of eligibility to zero. A social scientist at the University of Chicago points out that achieving this, though technically simple, is not easy to do. Why? Because policy changes create losers and winners. The losers will oppose the reform. If they have sufficient power and wealth, they may successfully block the change.

But doesn’t the “winners and losers” argument apply equally to the Patient Protection and Affordable Care Act, known as Obamacare? And Medicare does have the advantage that it is easier to explain to voters.

For whatever reason, only two US candidates for president endorse Medicare for all: one Democrat (Bernie Sanders) and one Republican (Donald Trump).

Harold Pollack, in an online column, provides insights into why legislating single-payer health insurance is difficult in the United States.

The Hillary Clinton campaign is taking some hard knocks from liberals over its maladroit attacks on Bernie Sanders’ single-payer proposal. In one sense, the knocks are well-deserved. Even if single-payer markedly lowers medical expenditures, … a tax increase of at least 8 percent of GDP would likely be required to finance it.

Yet as proponents rightly observe, these taxes would replace many visible and invisible ways we now provide to support a health sector that consume more than 17 percent of our economy. ….

The pitch for single-payer is admirably simple: We cover every (legal) resident. We mail a Medicare card to everyone. Everyone is covered. That’s a lot easier to explain and market than it is to explain the convoluted structures of Medicaid and state marketplace plans. ….

[There is a problem, though.] A huge reform that creates millions of winners creates millions of losers, too.

As with ACA [Obamacare], the biggest winners would be relatively disorganized low-income people in greatest need of help. The potential losers would include some of the most powerful and organized constituencies in America: workers who now receive generous tax expenditures for good private coverage, and affluent people who would face large tax increases to finance a single-payer system.

Harold Pollack, “Here’s why creating single-payer health care in America is so hard“, Vox, 16 January 2016.

Harold Pollack is a professor at the University of Chicago School of Social Service Administration.

Surprisingly, Professor Pollack fails to mention that Republican candidate Donald Trump supports a single-payer system, and has words of praise for the health-care systems of Canada and Scotland. Unsurprisingly, though, Trump is often rather vague when answering questions on this topic.

the FT at lunch with Charles Koch

Saturday, January 9th, 2016

Charles Koch (born 1935) and his younger brother David (born 1940) are billionaires who contribute generously to conservative causes and Republican candidates. Leftist Americans view the Koch brothers as villains, as a danger to democracy. I was thus surprised to learn today that the elder Koch is unhappy with Donald Trump, a billionaire who leads the Republican race for nomination as candidate for president. Policies proposed by Ted Cruz, another Republican front-runner, are also anathema to him. Indeed, many of Koch’s views are close to those of Bernie Sanders, a self-styled socialist who seeks nomination as Democratic candidate for president.

All became clear once I understood that Charles Koch is not a conservative. He is a libertarian.

I ask [Charles Koch] … about [Donald] Trump’s assertion that the US could require all Muslims in the country to register with the government.

“Well, then you destroy our free society,” Koch says of the idea. “Who is it that said, ‘If you want to defend your liberty, the first thing you’ve got to do is defend the liberty of people you like the least’?” ….

It’s a view that also contrasts with that of another Republican frontrunner; Ted Cruz’s plan to carpet-bomb Isis strongholds is anathema to Koch. “I’ve studied revolutionaries a lot,” he says. “Mao said that the people are the sea in which the revolutionary swims. Not that we don’t need to defend ourselves and have better intelligence and all that, but how do we create an unfriendly sea for the terrorists in the Muslim communities? We haven’t done a good job of that.” With about 1.6bn Muslims worldwide “in country after country. What,” he asks, “are we going to do: go bomb each one of them?”

These particular views could almost have come from the mouth of Bernie Sanders, the socialist challenger to Hillary Clinton for the Democratic nomination and a regular basher of the Kochs. ….

Through our conversation, there seems to be no issue to which smaller government, freer markets and unfettered competition is not the solution. “Our worst example in this country is the way we’ve treated Native Americans,” he says at one point. “A great portion of the property of the American Indians is held in trust by the Bureau of Indian Affairs. They are not allowed to control their own.” Citing the high rate of unemployment among Native Americans, he says, “This is what this whole philosophy of control and dependency does. How do you have a life of meaning? It’s hopeless. So, you’re, oh well, they’re a bunch of alcoholics. Well, no kidding.”

Stephen Foley, “Lunch with the FT: Charles Koch“, Financial Times, 9 January 2016 (metered paywall).

There is much more in the full column.

end the war on drugs to win the war on terror

Sunday, January 3rd, 2016

There are many reasons to legalise drugs. British journalist Misha Glenny writes about one that is often overlooked: ending the war on drugs can help governments pursue the war on terror by depriving criminals of a major source of revenue. Legalising recreational drugs also produces fiscal benefits: governments can tax legal drugs and avoid the cost of arresting and incarcerating users of illegal drugs.

The terms may no longer be politically correct but western governments continue to wage both a war on terror and a war on drugs. They now need to recognise what is staring them in the face : that the prosecution of the latter makes it impossible to win the former. ….

The billions spent by America and its allies on war in Afghanistan since 2001 have not destroyed the Taliban. On the contrary, funds from heroin sales have made the group stronger than ever. ….

The movement of cocaine and marijuana through west Africa and the Maghreb has provided various organisations linked to al-Qaeda and Isis with a cash boost. Western governments cannot stop drugs reaching their cities, and their passage benefits some of the worst people in the world.

But the problems do not end there. Homegrown terrorists in Britain and France are often radicalised in prison, after first being jailed for drugs offences or other petty crime. ….

Canada’s new government is set to legalise marijuana for recreational use and Britain should do the same. The crises we face today are so serious that it is not only bad politics to resist drug law reform — it is downright immoral.

Misha Glenny, “To win the war on terror, forget the war on drugs“, Financial Times, 4 January 2016 (metered paywall).


free FT interviews

Sunday, December 13th, 2015

This week’s Alphachat, a Financial Times podcast, is now available. The half-hour podcast contains interviews and discussions that cover three topics: increasing interest rates, the shrinking middle class and gender equality for pay.

[1] What happens after rates rise?

Many economists are all but certain the FOMC [Federal Open Market Committee of the US Federal Reserve] will announce an interest rate rise next week. US capital markets correspondent Eric Platt joins Shannon Bond to talk about what kind of long term monetary policy these economists expect to see in 2016. ….

[2] The shrinking middle class

Once considered the majority class in the US, the middle class has shrunk to less than half of the country’s population for the first time since the start of the 1970s. …. US economics editor Sam Fleming and world trade editor Shawn Donnan have travelled across the country meeting Americans considered middle class. They called in to speak with Shannon about who and what they found. ….

[2] The last chapter for pay equity

I… Harvard economics professor Claudia Goldin argues that the final aspect of gender equality in the work place, the one which will close the pay gap, will require time and flexibility for workers. ….

What happens after rates rise, the shrinking middle class and pay equity“, FT Alphachat, 11 December 2015 (unrestricted access; free registration required).

Alphachat is also available on Acast, iTunes, and Stitcher. At these links, you can download archived podcasts, and subscribe to future podcasts.

chart of the day

Friday, December 11th, 2015

America’s shrinking middle class

Chart: US middle class data

America’s middle class has shrunk to just half the population for the first time in at least four decades as the forces of technological change and globalisation drive a wedge between the winners and losers in a splintering US society.

Sam Fleming and Shawn Donnan, “America’s Middle-class Meltdown: Core shrinks to half of US homes“, Financial Times, 10 December 2015 (metered paywall).

To download a long FT “Big Read” column, which contains this and other charts, click on the link above. (FT subscription or free registration is required.)

For more detail, download the full, 73-page ungated report from Pew Research Center as a printable pdf, or view it in html with interactive charts.

Simon Kuper interviews Nobel laureate Jean Tirole

Sunday, December 6th, 2015

FT journalist Simon Kuper has published a wide-ranging interview of French economist Jean Tirole.

Tirole, explains Mr Kuper, “has long sat on the Council for Economic Analysis (CAE), advising prime ministers of right and left”, but has had little influence on government policy.

In part, that’s because economists aren’t heard or understood much in France. Tirole explains: “In France, in most universities you specialise very early but you don’t learn any economics. France came to a market economy pretty late, too. If you think about France, a lot of the decisions were administrative.”