Larry Elliott writes: Blue Planet 2 demonstrated the terrifyingly fragile state of nature’s ecosystem. One of the key messages from the BBC series was that a delicate balance exists in the oceans between predators and prey. If there are too many predators, the stocks of prey fall. The predators go hungry and their numbers dwindle, allowing the prey to recover. Balance is restored.
Humans have their equivalent of this predator-prey model. It is best demonstrated by the workings of the labour market, where there is a constant struggle between employers and employees over the proceeds of growth. Unlike the world of nature, though, there is no self-righting mechanism. One side can carry on devouring its prey until the system breaks down. Over the past 40 years, employers have been the predators, workers the prey.
Consider the facts. By almost any measure, the past decade has been a disaster for living standards. Unemployment has fallen from its post financial-crisis peaks across the developed world but workers have found it hard to make ends meet. Earnings growth has halved in the UK even though the latest set of unemployment figures show that the jobless rate is the lowest since 1975.
The reason is not hard to find. Unions are far less powerful; collective bargaining in most of the private sector is a thing of the past; part-time working has boomed; and people who were once employed by a company are now part of the gig economy. [Continue reading…]
Jeff Nesbit writes: Climate change is now a credit issue for city and state governments vulnerable to extreme weather events and natural disasters made worse by global warming. And that will make a complicated problem a lot easier for people to understand, because it could hit them where they feel it: in their wallets.
In a welcome but long overdue development, one of the world’s leading credit-rating agencies, Moody’s Investors Service, announced recently that it would give more weight to climate change risks in evaluating the creditworthiness of state and local governments.
Coming in the aftermath of hurricanes that severely damaged parts of Houston and much of the United States Virgin Islands and Puerto Rico this year, the message from Moody’s was clear. Governments must prepare for heat waves, droughts, flooding and coastal storm surges or face credit downgrades that will make it more expensive for them to borrow money for public services and for improvements in roads, bridges and other infrastructure.
That could mean higher taxes for the people who live in those communities. Even for governments that act to reduce their exposure to climate risks, the costs of doing so “could also become an ongoing credit challenge,” Michael Wertz, a Moody’s vice president, said.
And there are many communities in harm’s way: Just in terms of coastal flooding, for instance, Moody’s reports that 43 percent of coastal homes in Georgia lie in floodplains vulnerable to inundation; in Florida and Mississippi, the number is 38 percent; in Louisiana, 34 percent and in Texas, 26 percent. [Continue reading…]
Robert S. McElvaine writes: “There are two ideas of government,” William Jennings Bryan declared in his 1896 “Cross of Gold” speech. “There are those who believe that if you will only legislate to make the well-to-do prosperous their prosperity will leak through on those below. The Democratic idea, however, has been that if you legislate to make the masses prosperous their prosperity will find its way up through every class which rests upon them.”
That was more than three decades before the collapse of the economy in 1929. The crash followed a decade of Republican control of the federal government during which trickle-down policies, including massive tax cuts for the rich, produced the greatest concentration of income in the accounts of the richest 0.01 percent at any time between World War I and 2007 (when trickle-down economics, tax cuts for the hyper-rich, and deregulation again resulted in another economic collapse).
Yet the plain fact that the trickle-down approach has never worked leaves Republicans unfazed. The GOP has been singing from the Market-is-God hymnal for well over a century, telling us that deregulation, tax cuts for the rich, and the concentration of ever more wealth in the bloated accounts of the richest people will result in prosperity for the rest of us. The party is now trying to pass a scam that throws a few crumbs to the middle class (temporarily — millions of middle-class Americans will soon see a tax hike if the bill is enacted) while heaping benefits on the super-rich, multiplying the national debt and endangering the American economy. [Continue reading…]
Aditya Chakrabortty writes: In a speck of a village deep in the Finnish countryside, a man gets money for free. Each month, almost €560 (£500) is dropped into his bank account, with no strings attached. The cash is his to use as he wants. Who is his benefactor? The Helsinki government. The prelude to a thriller, perhaps, or some reality TV. But Juha Järvinen’s story is ultimately more exciting. He is a human lab rat in an experiment that could help to shape the future of the west.
Last Christmas, Järvinen was selected by the state as one of 2,000 unemployed people for a trial of universal basic income. You may have heard of UBI, or the policy of literally giving people money for nothing. It’s an idea that lights up the brains of both radical leftists – John McDonnell and Bernie Sanders – and Silicon Valley plutocrats such as Mark Zuckerberg and Elon Musk. And in the long slump that has followed the banking crash, it is one of the few alternatives put forward that doesn’t taste like a reheat.
Yet hardly anyone knows what it might actually look like. For all the fuss, Finland is the first European country to launch a major dry run. It is not the purists’ UBI – which would give everyone, even billionaires, a monthly sum. Nor will Finland publish any results until the two-year pilot is over at the end of 2018. In the meantime, we rely on the testimony of participants such as Järvinen. Which is why I have to fly to Helsinki, then drive the five hours to meet him. [Continue reading…]
Tim Fernholz reports: There is an enormous, invisible clock that keeps ultra-precise time, can be checked from anywhere on earth, and is free for everyone to use. This technological gift to mankind was built by the US government. It is called the Global Positioning System (GPS), it lives in space, and you use it every time you check the map on your phone.
What you may not know is that you rely on it far more often than that. Cell towers use it to route your phone calls, ATMs and cash registers use it for your transactions, electrical grids use it to send power to your house, and stock exchanges use it to regulate the trades that go into your stock portfolio or investment fund. And it is far more vulnerable to attack and disruption than most people know or are willing to admit.
“When we talk about economic infrastructure, I don’t think the general public realizes the extent to which the Global Positioning System’s timing signal is critical for these ATM transactions and every other point-of-sale transaction conducted in the United States and throughout most of the world,” Michael Griffin, a former NASA administrator, told US space policymakers in early October. “To what extent do we believe that we have defended ourselves if an adversary can bring our economic system near collapse?”
Time, as it turns out, is money, in a very literal sense. Since digital money moves faster than humans can think, banks and regulators alike rely on time stamps to monitor transactions, catch fraud, and make sure the right people get paid. When you pull cash from an ATM or swipe your card at the coffee shop, the machine needs to determine the precise time that the transaction occurs to, for example, prevent it from being over-drawn.
Putting a little clock in the credit-card machines wouldn’t work, because over time, even the most precise clocks start to differ from one another. That doesn’t matter when you’re meeting me for lunch at noon, but if you’re timing transactions down to the microsecond standard now used in many electronic networks, tiny differences can screw up your whole operation.
What makes the Global Positioning System so crucial, then, isn’t in fact the “positioning” part; it’s the ability to make machines all over the planet agree on exactly what time it is. [Continue reading…]
Dani Rodrik writes: For many, the nation-state evokes nationalism, the extremes of which have meant war and death to millions. But a corrective is in order, to remember not just the ideological excesses of the ‘nation’ part, but also the transformative, historic role of the state component. As scholars of nationalism like to say, the state usually precedes and produces the nation, not the other way around. The best definition of the nation remains that of Abbé Sieyès, one of the theorists of the French Revolution: ‘What is a nation? A body of associates living under one common law, and represented by the same legislature.’ Ethno-nationalists, with their emphasis on race, ethnicity or religion as the basis of nation, have it backward. As the historian Mark Lilla at Columbia University put it recently: ‘A citizen, simply by virtue of being a citizen, is one of us.’
Robust nation-states are actually beneficial to the world economy. The multiplicity of nation-states adds rather than subtracts value.
A principled defence of the nation-state would start from the proposition that markets require rules. Markets are not self-creating, self-regulating, self-stabilising or self-legitimising, so they depend on non-market institutions. Anything beyond a simple exchange between neighbours requires investments in transportation, communications and logistics; enforcement of contracts, provision of information, and prevention of cheating; a stable and reliable medium of exchange; arrangements to bring distributional outcomes into conformity with social norms; and so on. Behind every functioning, sustainable market stands a wide range of institutions providing critical functions of regulation, redistribution, monetary and fiscal stability, and conflict management. These institutional functions have so far been provided largely by the nation-state. [Continue reading…]
Pacific Standard reports: It’s the most ambitious project in the history of humankind. If successful, it would solve many of civilization’s most pressing challenges. But due to a single, fatal defect, it’s poised to fail—catastrophically.
“It” is the United Nations Sustainable Development Goals, and as U.N. Secretary-General António Guterres recently reported, the efforts to meet the goals are lagging and must pick up the pace to hit the 2030 target. Fortunately, there’s still time to save the project, and it can be done by applying a straightforward fix.
But first, it’s worth slowing down and adding a bit of context to this endeavor. The goals—known as the SDGs—were adopted just two years ago by 193 nations, with the aim to guide global, regional, and national efforts to reduce poverty, address climate change, and build inclusive societies. They are, in a sense, the sequel to the blockbuster Millennium Development Goals, which was arguably the most successful anti-poverty initiative in history.
Why are the SDGs stalling? For one, it’s because, in their very conceit, they’re defective. While this list of 17 goals and 169 targets is longer than the Constitution, it’s not the goals’ breadth, depth, or even ambition slowing us down; it’s the absence of internal logic. The SDGs are a postmodern, deconstructed, Jackson Pollock-version of a to-do list.
The reason for this is simple. The U.N. reacted to legitimate critiques of the original Millennium Development Goals—that the goals were conceived by a too-small group with “relative casualness,” with insufficient input from the public, and from developing countries. Thus, the successor SDGs were informed, in contrast, by years of meetings, consultations, stakeholder forums, online input, and door-to-door surveys.
That was undoubtedly wise. But the U.N. stopped there, with an indiscriminate list of objectives. Virtually every perspective is reflected and no perspective is subordinated. The pithiest analysis came from an executive at the Bill & Melinda Gates Foundation: “No targets left behind.” [Continue reading…]
Jonathan Taplin writes: I would date the rise of the digital monopolies to August 2004, when Google raised $1.9 billion in its initial public offering. By the end of that year, Google’s share of the search-engine market was just 35%; Yahoo ’s was 32%, and MSN’s was 16%. Today, under Alphabet, Google’s market share is 87% in the U.S. and 91% in Europe. In 2004, Amazon had net sales revenue of $6.9 billion. In 2016, its net sales revenue was nearly $136 billion, and it now controls 65% of all online new book sales, whether print or digital. In mobile social networks, Facebook and its subsidiaries (Instagram, WhatsApp and Messenger) control 75% of the American market.
This shift has brought about a massive reallocation of revenue, with economic value moving from the creators of content to the owners of monopoly platforms. Since 2000, revenues for recorded music in the U.S. have fallen from almost $20 billion a year to less than $8 billion, according to the Recording Industry Association of America. U.S. newspaper ad revenue fell from $65.8 billion in 2000 to $23.6 billion in 2013 (the last year for which data are available). Though book publishing revenues have remained flat, this is mostly because increased children’s book sales have made up for the declining return on adult titles.
From 2003 to 2016, Google’s revenue grew from about $1.5 billion to some $90 billion as Alphabet. Today, it is the largest media company in the world, collecting $79.4 billion in ad revenue in 2016, according to Zenith. Facebook is a distant second, with $26.9 billion.
The precipitous decline in revenue for content creators has nothing to do with changing consumer preferences for their content. People are not reading less news, listening to less music, reading fewer books or watching fewer movies and TV shows. The massive growth in revenue for the digital monopolies has resulted in the massive loss of revenue for the creators of content. The two are inextricably linked. [Continue reading…]
Christopher Ketchum writes: The idea that economic growth can continue forever on a finite planet is the unifying faith of industrial civilization. That it is nonsensical in the extreme, a deluded fantasy, doesn’t appear to bother us. We hear the holy truth in the decrees of elected officials, in the laments of economists about flagging GDP, in the authoritative pages of opinion, in the whirligig of advertising, at the World Bank and on Wall Street, in the prospectuses of globe-spanning corporations and in the halls of the smallest small-town chambers of commerce. Growth is sacrosanct. Growth will bring jobs and income, which allow us entry into the state of grace known as affluence, which permits us to consume more, providing more jobs for more people producing more goods and services so that the all-mighty economy can continue to grow. “Growth is our idol, our golden calf,” Herman Daly, an economist known for his anti-growth heresies, told me recently.
In the United States, the religion is expressed most avidly in the cult of the American Dream. The gatekeepers of the faith happen to not only be American: The Dream is now, and has long been, a pandemic disorder. Growth is a moral imperative in the developing world, we are told, because it will free the global poor from deprivation and disease. It will enrich and educate the women of the world, reducing birth rates. It will provide us the means to pay for environmental remediation—to clean up what so-called economic progress has despoiled. It will lift all boats, making us all rich, healthy, happy. East and West, Asia and Europe, communist and capitalist, big business and big labor, Nazi and neoliberal, the governments of just about every modern nation on Earth: All have espoused the mad growthist creed.
In 1970, a team of researchers at the Massachusetts Institute of Technology began working on what would become the most important document of the 20th century to question this orthodoxy. The scientists spent two years holed up in the company of a gigantic mainframe computer, plugging data into a system dynamics model called World3, in the first large-scale effort to grasp the implications of growthism for mankind. They emerged with a book called The Limits to Growth, issued as a slim paperback by a little-known publisher in March of 1972. It exploded onto the scene, becoming the best-selling environmental title in history. In the Netherlands half a million copies sold within the year. More than three million copies have been sold to date in at least 30 languages.
Its message was commonsensical: If humans propagate, spread, build, consume, and pollute beyond the limits of our tiny spinning orb, we will have problems. This was not what Americans indoctrinated in growthism had been accustomed to hearing—and never had they heard it from Ph.D.’s marshaling data at one of the world’s citadels of learning. [Continue reading…]
Yanis Varoufakis writes: The recent elections in France and Britain have confirmed the political establishment’s simultaneous vulnerability and vigor in the face of a nationalist insurgency. This contradiction is the motif of the moment — personified by the new French president, Emmanuel Macron, whose résumé made him a darling of the elites but who rode a wave of anti-establishment enthusiasm to power.
A similar paradox is visible in Britain in the surprising electoral success of the Labour Party leader, Jeremy Corbyn, in depriving Theresa May’s Conservatives of an outright governing majority — not least because the resulting hung Parliament seemingly gives the establishment some hope of a change in approach from Mrs. May’s initial recalcitrant stance toward the European Union on the Brexit negotiations that have just begun.
Outsiders are having a field day almost everywhere in the West — not necessarily in a manner that weakens the insiders, but neither also in a way that helps consolidate the insiders’ position. The result is a situation in which the political establishment’s once unassailable authority has died, but before any credible replacement has been born. The cloud of uncertainty and volatility that envelops us today is the product of this gap. [Continue reading…]
The New York Times reports: As the United States confronts global warming in the decades ahead, not all states will suffer equally. Maine may benefit from milder winters. Florida, by contrast, could face major losses, as deadly heat waves flare up in the summer and rising sea levels eat away at valuable coastal properties.
In a new study in the journal Science, researchers analyzed the economic harm that climate change could inflict on the United States in the coming century. They found that the impacts could prove highly unequal: states in the Northeast and West would fare relatively well, while parts of the Midwest and Southeast would be especially hard hit.
In all, the researchers estimate that the nation could face damages worth 0.7 percent of gross domestic product per year by the 2080s for every 1 degree Fahrenheit rise in global temperature. But that overall number obscures wide variations: The worst-hit counties — mainly in states that already have warm climates, like Arizona or Texas — could see losses worth 10 to 20 percent of G.D.P. or more if emissions continue to rise unchecked. [Continue reading…]
Politico reports: When President Donald Trump issued his executive order on immigration last week, it was the travel ban on seven Muslim-majority countries that dominated headlines — leaving hundreds of people in limbo, provoking airport protests, and raising questions about whether the U.S. was targeting religion in the guise of a new security rule.
But immigration lawyers who have read the order carefully are now increasingly concerned that one of its provisions could have much wider repercussions, affecting literally every foreign visitor to America, from tourists to diplomats.
The little-noticed section, appearing immediately after the travel ban, calls for the government to develop a “uniform screening standard and procedure” for all individuals seeking to enter the United States. As written, it appears to require all visitors to go through the same vetting measures, regardless of where they come from or how long they intend to stay.
If interpreted as broadly as it’s written, “It would basically shut down tourism,” said Stephen Legomsky, the former chief counsel for U.S. Citizenship and Immigration Services during the Obama administration. [Continue reading…]
Nicholas Kristof writes: There’s a broad consensus that the world is falling apart, with every headline reminding us that life is getting worse.
Except that it isn’t. In fact, by some important metrics, 2016 was the best year in the history of humanity. And 2017 will probably be better still.
How can this be? I’m as appalled as anyone by the election of Donald Trump, the bloodshed in Syria, and so on. But while I fear what Trump will do to America and the world, and I applaud those standing up to him, the Trump administration isn’t the most important thing going on. Here, take my quiz:
On any given day, the number of people worldwide living in extreme poverty:
A.) Rises by 5,000, because of climate change, food shortages and endemic corruption.
B.) Stays about the same.
C.) Drops by 250,000.
Polls show that about 9 out of 10 Americans believe that global poverty has worsened or stayed the same. But in fact, the correct answer is C. Every day, an average of about a quarter-million people worldwide graduate from extreme poverty, according to World Bank figures. [Continue reading…]
The Daily Beast reports: A young entrepreneur named Vladimir Khrykov listened attentively to every word President Vladimir Putin said last week in his address to Russia’s Federal Assembly. And the 30-year-old was hugely disappointed by what he heard.
For Khrykov, who runs a diaper company on Sakhalin Island in Russia’s Far East, foreign investors are key to his business. And his clients are eager to know just one thing before they invest: Will Russia see more profits in the next few years? And so Khrykov tuned in to hear Putin’s economic plan, so he could divine the future for his firm.
“Putin has no strategy,” Khrykov told The Daily Beast on Wednesday, as he despaired over the contents of the president’s speech, which seemed fragmented at best. “It is impossible for us to convince our foreign investors to spend money on technologies here, as nobody can be sure that the population will be able to afford the product in the future.”
Recently, Khrykov’s Japanese partners asked him whether Russia’s economy would improve in the next 50 years. He didn’t know what to tell them. [Continue reading…]
The Economist reports: In December 2010 Egypt’s cabinet discussed the findings of their National Youth Survey. Only 16% of 18-29-year-olds voted in elections, it showed; just 2% registered for volunteer work. An apathetic generation, concluded the ministers, who returned to twiddling their thumbs. Weeks later, Egypt’s youth spilled onto the streets and toppled President Hosni Mubarak.
The UN’s latest Arab Development Report, published on November 29th, shows that few lessons have been learnt. Five years on from the revolts that toppled four Arab leaders, regimes are ruthlessly tough on dissent, but much less attentive to its causes.
As states fail, youth identify more with their religion, sect or tribe than their country. In 2002, five Arab states were mired in conflict. Today 11 are. By 2020, predicts the report, almost three out of four Arabs could be “living in countries vulnerable to conflict”.
Horrifyingly, although home to only 5% of the world’s population, in 2014 the Arab world accounted for 45% of the world’s terrorism, 68% of its battle-related deaths, 47% of its internally displaced and 58% of its refugees. War not only kills and maims, but destroys vital infrastructure accelerating the disintegration.
The Arab youth population (aged 15-29) numbers 105m and is growing fast, but unemployment, poverty and marginalisation are all growing faster. The youth unemployment rate, at 30%, stands at more than twice the world’s average of 14%. Almost half of young Arab women looking for jobs fail to find them (against a global average of 16%).
Yet governance remains firmly the domain of an often hereditary elite. “Young people are gripped by an inherent sense of discrimination and exclusion,” says the report, highlighting a “weakening [of] their commitment to preserving government institutions.” Many of those in charge do little more than pay lip-service, lumping youth issues in with toothless ministries for sports. “We’re in a much worse shape than before the Arab Spring,” says Ahmed al-Hendawi, a 32-year-old Jordanian and the UN’s envoy for youth. [Continue reading…]
James Livingston writes: Work means everything to us Americans. For centuries – since, say, 1650 – we’ve believed that it builds character (punctuality, initiative, honesty, self-discipline, and so forth). We’ve also believed that the market in labour, where we go to find work, has been relatively efficient in allocating opportunities and incomes. And we’ve believed that, even if it sucks, a job gives meaning, purpose and structure to our everyday lives – at any rate, we’re pretty sure that it gets us out of bed, pays the bills, makes us feel responsible, and keeps us away from daytime TV.
These beliefs are no longer plausible. In fact, they’ve become ridiculous, because there’s not enough work to go around, and what there is of it won’t pay the bills – unless of course you’ve landed a job as a drug dealer or a Wall Street banker, becoming a gangster either way.
These days, everybody from Left to Right – from the economist Dean Baker to the social scientist Arthur C Brooks, from Bernie Sanders to Donald Trump – addresses this breakdown of the labour market by advocating ‘full employment’, as if having a job is self-evidently a good thing, no matter how dangerous, demanding or demeaning it is. But ‘full employment’ is not the way to restore our faith in hard work, or in playing by the rules, or in whatever else sounds good. The official unemployment rate in the United States is already below 6 per cent, which is pretty close to what economists used to call ‘full employment’, but income inequality hasn’t changed a bit. Shitty jobs for everyone won’t solve any social problems we now face. [Continue reading…]
George Monbiot writes: Wave the magic wand and the problem goes away. Those pesky pollution laws, carbon caps and clean-power plans: swish them away and the golden age of blue-collar employment will return. This is Donald Trump’s promise, in his video message on Monday, in which the US president-elect claimed that unleashing coal and fracking would create “many millions of high-paid jobs”. He will tear down everything to make it come true.
But it won’t come true. Even if we ripped the world to pieces in the search for full employment, leaving no mountain unturned, we would not find it. Instead, we would merely jeopardise the prosperity – and the lives – of people everywhere. However slavishly governments grovel to corporate Luddism, they will not bring the smog economy back.
No one can deny the problem Trump claims to be addressing. The old mining and industrial areas are in crisis throughout the rich world. And we have seen nothing yet. I have just reread the study published by the Oxford Martin School in 2013 on the impacts of computerisation. What jumps out, to put it crudely, is that jobs in the rust belts and rural towns that voted for Trump are at high risk of automation, while the professions of many Hillary Clinton supporters are at low risk.
The jobs most likely to be destroyed are in mining, raw materials, manufacturing, transport and logistics, cargo handling, warehousing and retailing, construction (prefabricated buildings will be assembled by robots in factories), office support, administration and telemarketing. So what, in the areas that voted for Trump, will be left?
Farm jobs have mostly gone already. Service and care work, where hope for some appeared to lie, will be threatened by a further wave of automation, as service robots – commercial and domestic – take over.
Yes, there will be jobs in the green economy: more and better than any that could be revived in the fossil economy. But they won’t be enough to fill the gaps, and many will be in the wrong places for those losing their professions. [Continue reading…]
Quartz reports: Maybe Uber isn’t that innovative after all.
A new study from the McKinsey Global Institute (MGI), finds that the “gig” economy model popularized by Uber has a lot in common with the economies of poor countries today, as well as the US and Europe before the Industrial Revolution.
Uber and other “gig” companies like Lyft and TaskRabbit hire their workers as independent contractors rather than full employees. These jobs comes with a lot of flexibility — workers can set their own schedules — but they lack the protections afforded full-time employees of larger corporate enterprises, such as health care and a guaranteed minimum wage. Uber and its digital peers are a small if well-known part of the larger independent workforce, which McKinsey estimates at 20% to 30% of the working-age population in the US and the EU-15, or some 160 million people.
While companies like Uber have been hailed as modern conveniences for consumers, they are proving to be just the opposite for workers. App-based services rely on income inequality and may well be perpetuating the divide between capital and labor. They are also reverting economies to pre-industrial ideas about work. [Continue reading…]