J. Bradford DeLong's Blog, page 44

U.S. & China: Economy Size

Note to Self: How does the U.S. economy really compare in size to China's right now?: Statistics Times: Comparing United States and China: "The United States and China are the two largest economies of the world in both Nominal and PPP method. US is at top in nominal whereas China is at top in PPP since 2013 after overtaking US. Both country together share 40.75% and 34.27% of total world's GDP in nominal and PPP terms, respectively in 2019. GDP of both country is higher than 3rd ranked country Japan (nominal) and India (PPP) by a huge margin. Therefore, only these two are in competition to become first. As per projections by IMF for 2019, United States is leading by $7,128 bn or 1.50 times on exchange rate basis. Economy of China is Int. $5,987 billion or 1.28 times more than US on purchasing power parity basis. Acc to estimates by World Bank, China gdp was approx 11% of US in 1960 but in 2017 it is 63%. Due to vast population of China, more than 4 times of US's population, difference between these two country is very high in terms of per capita income. Per capita income of United States is 6.38 and 3.32 times greater than of China in nominal and PPP terms, respectively. US is the 8th richest country of the world whereas China comes at 72th rank. On PPP basis, United states is at 12th position and China is at 75th... #noted #2020-06-04

"Your Young Men Shall See Visions, & Your Old Men Shall Dream Dreams..."

Luke: Acts 2 KJV https://biblehub.com/kjv/acts/2.htm: 'They were all amazed, and were in doubt, saying one to another, "What meaneth this?" Others mocking said, "These men are full of new wine." But Peter, standing up with the eleven, lifted up his voice, and said unto them...

...Ye men of Judaea, and all ye that dwell at Jerusalem, be this known unto you, and hearken to my words: For these are not drunken, as ye suppose, seeing it is but the third hour of the day. But this is that which was spoken by the prophet Joel:

And it shall come to pass in the last days, saith God, I will pour out of my Spirit upon all flesh: and your sons and your daughters shall prophesy, and your young men shall see visions, and your old men shall dream dreams: And on my servants and on my handmaidens I will pour out in those days of my Spirit; and they shall prophesy: And I will shew wonders in heaven above, and signs in the earth beneath... #noted #2020-06-04

Hoisted from the Archives: Moral Fault Attaches to Anybody Who Pays Money to or Boosts the Influence of the _New York Times

There are many, many reasons why moral fault attaches to anybody who pays money to or boosts the influence of the New York Times. This is one: Thomas L. Friedman (2003): Because We Could: "The failure of the Bush team to produce any weapons of mass destruction (W.M.D.'s) in Iraq is becoming a big, big story. But is it the real story we should be concerned with? No. It was the wrong issue before the war, and it's the wrong issue now. Why? Because there were actually four reasons for this war: the real reason, the right reason, the moral reason and the stated reason...

...The ''real reason'' for this war, which was never stated, was that after 9/11 America needed to hit someone in the Arab-Muslim world. Afghanistan wasn't enough. Because a terrorism bubble had built up over there���a bubble that posed a real threat to the open societies of the West and needed to be punctured. This terrorism bubble said that plowing airplanes into the World Trade Center was O.K., having Muslim preachers say it was O.K. was O.K., having state-run newspapers call people who did such things ''martyrs'' was O.K. and allowing Muslim charities to raise money for such ''martyrs'' was O.K. Not only was all this seen as O.K., there was a feeling among radical Muslims that suicide bombing would level the balance of power between the Arab world and the West, because we had gone soft and their activists were ready to die.

The only way to puncture that bubble was for American soldiers, men and women, to go into the heart of the Arab-Muslim world, house to house, and make clear that we are ready to kill, and to die, to prevent our open society from being undermined by this terrorism bubble. Smashing Saudi Arabia or Syria would have been fine. But we hit Saddam for one simple reason: because we could, and because he deserved it and because he was right in the heart of that world. And don't believe the nonsense that this had no effect. Every neighboring government -- and 98 percent of terrorism is about what governments let happen -- got the message. If you talk to U.S. soldiers in Iraq they will tell you this is what the war was about...

#journamalism #noted #2020-06-04

I Do Not Trust This Supreme Court...

I am not nearly as confident as Ben Thompson is here. Right now we have 5 Supreme Court justices who are partisans first, Republicans second, Americans not at all, and judges to a negative degree. I have no idea what they will do should Trump���s ���executive order ���wind up in front of them. The Supreme Court might rule 9-0 against Trump. It might write a 5-4 ���non-precedental��� upholding on whatever very narrow ground it can find for the particular case brought. It might go all in for Trump, 5-4:

Ben Thompson: Trump���s Executive Order, Section 230 In Court, Public Forums https://stratechery.com/2020/trumps-executive-order-section-230-in-court-public-forums: ���The problem is with the summary of subsection 230(c)(2)(A).... The part that the executive order is missing: "obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected". That���s a pretty important clause!.... Congress clearly enacted �� 230 to forbid the imposition of publisher liability on a service provider for the exercise of its editorial and self-regulatory functions.... The imposition of tort liability on service providers for the communications of others represented, for Congress, simply another form of intrusive government regulation of speech. Section 230 was enacted, in part, to maintain the robust nature of Internet communication and, accordingly, to keep government interference in the medium to a minimum...

...The... applicable... case... is Manhattan Community Access Corp. v. Halleck... explicit that, except for extremely limited cases, private corporations were not state actors, and thus not beholden to the First Amendment, even in cases where they were fulfilling government functions like running public access television channels.... To be honest, there is a part of me that hopes Trump signs this order. The arguments I have gone through, particularly Section 230, are increasingly widespread, and it would be gratifying to see them soundly refuted in court, as I am confident they would be���

#noted #2020-06-04

On Human Emancipation from Imaginary Financial Constraints...

A vision of public opulence, and of human emancipation from imaginary financial constraints. If there are three things that are at the heart of Keynesian economics, they are (1) the private sector cannot run the economy without assistance, (2) a great deal of evil is done by analogizing the government���s and society���s balance sheet to an individual���s, and (3) this one here: what we can do, we can afford���that if we could do it, it makes no coherent sense to say that we cannot afford it, for the market and finance economy was made for man, not man for the finance and market economy:

John Maynard Keynes: How Much Does Finance Matter? https://github.com/braddelong/public-files/blob/master/readings/article-keynes-finance-matter.pdf: ���Where we are using up resources, do not let us submit to the vile doctrine of the nineteenth century that every enterprise must justify itself in pounds, shillings and pence of cash income, with no other denominator of values but this...

...I should like to see that war memorials of this tragic struggle take the shape of an enrichment of the civic life of every great centre of population. Why should we not set aside, let us say, ��50 millions a year for the next twenty years to add in every substantial city of the realm the dignity of an ancient university or a European capital to our local schools and their surroundings, to our local government and its offices, and above all perhaps, to provide a local centre of refreshment and entertainment with an ample theatre, a concert hall, a dance hall, a gallery, a British restaurant, canteens, cafes and so forth.

Assuredly we can afford this and much more. Anything we can actually do we can afford. Once done, it is there. Nothing can take it from us.

We are immeasurably richer than our predecessors. Is it not evident that some sophistry, some fallacy, governs our collective action if we are forced to be so much meaner than they in the embellishments of life?���

#noted #2020-06-04

Deng Xiaoping���s Victory...

Ian Buruma: Deng Xiaoping���s Victory https://www.project-syndicate.org/commentary/tiananmen-square-massacre-pioneered-illiberal-democracy-by-ian-buruma-2019-06: 'China never looked back (literally as well as figuratively, because the events of June 3-4 are unmentionable). The economy soon steamed ahead. And the educated urban classes, from which most of the student protesters in 1989 sprang, benefited enormously.... Stay out of politics, don���t question the authority of the one-party state, and we���ll create the conditions for you to get rich.... Even educated young Chinese now have little or no knowledge of what happened 30 years ago.... In 2001, a year after Vladimir Putin came to power in Russia, I traveled from Beijing to Moscow and wrote an article comparing Russia favorably to China. I assumed that Russia was well on its way to becoming an open democracy. I was wrong. In fact, Russia became more like Deng Xiaoping���s China, albeit a less successful version.... Something similar has happened in Central European countries. Hungary���s prime minister, Viktor Orb��n, has been most the most vociferous ideologue of ���illiberal democracy,��� a system of oppressive one-party rule in which capitalism can still thrive. It looks as if the right-wing populist demagogues of Western Europe, and even the US, would like to follow this example. Like Donald Trump, they are all more or less unreserved admirers of Putin. Of course, this was not the way it was supposed to happen.... China was not an outlier in 1989 at all. Illiberal capitalism has since emerged as an attractive model to autocrats all over the world, including in countries that succeeded in throwing off communist rule 30 years ago. The Chinese just got there first... #noted #2020-06-04

Coronavirus, Wealth, & Social Power...

In a market economy, wealth is social power. In fact, in a market economy, wealth is the only form of social power. If you do not have wealth, your preferences and needs are of no account relative to those of somebody who does have wealth. Moreover, the requirement that people earn the cash with which they buy their daily bread means that no command, no control, and little exertion of force are needed in order to produce the application of social power to make the poor ignore their preferences and needs to satisfy those of the rich. Amartya Sen wrote about how we see this process at work at its sharpest edge: the so-called ���entitlement families���, like that of Bengal during World War II. In the age of coronavirus, the edge is not quite as sharp. But it is plenty sharp even so:

Ellora Derenoncourt: ���This piece captures everything you need to know about the US coronavirus labor market https://twitter.com/EDerenoncourt/status/1263604734348402689. We did not have a freely competitive labor market before the crisis. What we have now is starting to look like forced labor���. ���Making employers compete with a generous unemployment insurance system... could reset bargaining power in the low-wage end of the labor market... At the least, it would be a first step toward exiting this pandemic a fairer society than the one that entered it���. By Suresh Naidu https://t.co/6y5WzGUg7k��� #coronavirus #equitablegrowth #inequality #noted #2020-06-04

The Development of 'Theory-of-Mind'...

Scott Alexander: Book Review: Origin of Consciousness in the Breakdown of the Bicameral Mind https://slatestarcodex.com/: ���Julian Jaynes��� The Origin of Consciousness in the Breakdown of the Bicameral Mind is a brilliant book, with only two minor flaws. First, that it purports to explains the origin of consciousness. And second, that it posits a breakdown of the bicameral mind. I think it���s possible to route around these flaws while keeping the thesis otherwise intact. So I���m going to start by reviewing a slightly different book, the one Jaynes should have written. Then I���ll talk about the more dubious one he actually wrote. My hypothetical Jaynes 2.0 is a book about theory-of-mind.... When in human history did theory-of-mind first arise? It couldn���t have been a single invention���more like a gradual process of refinement. ���The unconscious��� only really entered our theory-of-mind with Freud. Statements like ���my abuse gave me a lot of baggage that I���m still working through��� involves a theory-of-mind that would have been incomprehensible a few centuries ago. It���s like ���I���m clicking on an icon with my mouse������every individual word would have made sense, but the gestalt would be nonsensical. Still, everyone always assumes that the absolute basics���mind as a metaphorical space containing beliefs and emotions, people having thoughts and making decisions ��� must go back so far that their origins are lost in the mists of time, attributable only to nameless ape-men. Julian Jaynes doesn���t think that. He thinks it comes from the Bronze Age Near East, c. 1500���750 BC��� #books #cognition #noted #2020-06-03

What To Watch For in the Employment Report

Equitable Growth alumnus Nick Bunker is closely watching the labor market in advance of this week���s employment report. The employment report will be one of our first significant clues as to the extent to which the coronavirus supply shock is turning into a demand shock as well:

Nick Bunker: May 2020 Jobs Day Preview: Tracking the Spread of the Coronavirus Shock https://www.hiringlab.org/2020/06/02/may-2020-jobs-day-preview/: ���The coronavirus has devastated the US economy, leading to the destruction of over 21 million payroll jobs since February.... The concentration of job losses so far is unsurprising, with the leisure and hospitality sector seeing total employment drop by almost 50%. Employment in the utilities sector has barely fallen, losing less than 1% of jobs.

If the cumulative employment drop starts to pile up in utilities or other indirectly affected sectors, that could mean that more of the aggregate job loss is due to a systematic, economy-wide shock rather than a sector-specific one. Cumulative job loss will also put the eventual jobs recovery in a fuller context....

Hopes for a V-shaped recovery were already fleeting, but if more and more employers are shedding jobs, they might be gone for good.��Elsewhere in the report, I���ll be looking for the answers to these questions:

Will unemployment due to reasons other than temporary layoff start to rise, as job loss becomes permanent?

Will employers continue to reduce work hours and shift more workers to involuntary part-time work?

How much further will the drop in the labor force participation rate hold down the rise in the unemployment rate?���

coronavirus #equitablegrowth #labormarket #macro #noted #2020-06-02

What the Democrats Must Do: Project Syndicate

What the Democrats Must Do https://www.project-syndicate.org/commentary/democrats-must-embrace-full-employment-by-j-bradford-delong-2020-06: Although the United States has entered a period of deepening social strife and economic depression, the Republicans who are in charge have neither the ideas nor the competence to do anything about it. The Democrats must start planning to lead, starting with a commitment to full employment���. A federal commitment to full employment is not a new idea. The US Employment Act of 1946 embraced the principle.... The best response to... objections has always been John Maynard Keynes.... ���Anything we can do, we can afford.���...

Far from acting as an independent binding constraint on economic activities, the financial system exists precisely to support such activities. Finding useful jobs for willing jobseekers is surely something we are capable of doing.

Adjusting the prevailing payments and financial structure to support full employment would of course have consequences.... Supporting full employment... may... require higher and more progressive taxes... sky-high debt... that we divert demand from elite consumption to labor-intensive sectors like public health. It also may require a large-scale labor-intensive public-works program. So be it. It���s time to make full employment our highest priority. Once we have done that, everything else will fall into place...

Full Column: Although the United States has entered a period of deepening social strife and economic depression, the Republicans who are in charge have neither the ideas nor the competence to do anything about it. The Democrats must start planning to lead, starting with a commitment to full employment.

BERKELEY ��� Like almost all other countries, the United States has become poorer since the COVID-19 pandemic began, because Americans can no longer engage in valuable activities that require close human contact. Millions of workers now need to find other productive things to do, and many of these new tasks will not be as valuable as the ones they replaced.

But there is no economic reason why the depression triggered by the COVID-19 crisis should be particularly deep or prolonged. The US leads the world in technological and organizational competence and is home to a highly skilled workforce. The problem is that recovery won���t happen by itself.

The fact that it took a decade for the US to recover fully from the 2008 financial crisis should inform today���s thinking. Back then, the US housing-construction sector had already shrunk back to its normal size before the subprime-mortgage crisis erupted, which meant that no sectoral structural adjustment was required. The challenge, rather, was to identify and reallocate resources to previously unproduced goods that would become more valuable in the future.

Moreover, the 2008 financial crisis and ensuing recession did not make American workers less skilled or reduce the effectiveness of existing technologies. In the short term, it destroyed many professional networks and reduced the social trust that underpins the economy���s division of labor. The only long-term effect was a loss of investor confidence in private-sector financial institutions��� ability to create safe, properly-rated financial assets.

But that is why it took a decade for US employment to recover from the subprime crisis. The world was short of safe assets, and governments failed to address that problem in the right way. The US, for its part, should have done more to mobilize extra private-sector risk-bearing capacity, create safe public assets, and support workers, including by printing money and buying stuff to drive effective demand and employment growth.
Although there is no reason why it should take a decade for employment to return to its pre-pandemic level, that is probably what will happen. The same forces that led policymakers to declare victory over the crisis and shift to ���austerity��� in 2010 are already at work again today. It is clear that the US federal government over the next month will offer no new policy initiatives to mitigate the depression or to improve upon America���s failed public-health response.

It is also clear that the Republican Party has no valid ideas for how to achieve a ���V-shaped��� recovery. Additional tax cuts for the rich would do as much to boost demand and employment as they did when the GOP rammed through the Tax Cuts and Jobs Act in late 2017: absolutely nothing. Similarly, slashing social programs might make workers even more desperate to find jobs; but despair won���t translate into additional employment if the spending isn���t there. Nobody with any authority in President Donald Trump���s White House knows what to do, and no one would be competent enough to implement the right policy if they stumbled on it accidentally.

With the GOP controlling three of the US government���s four veto points (the presidency, the Senate, and the Supreme Court), America will remain without a coherent response to its multiplying crises at least until January 2021. Republicans are already doing everything they can to suppress voter turnout ahead of the election this November. But assuming that those efforts fail and Democrats reclaim the White House and potentially even the Senate, what should they do to rescue America from another lost decade?

First and foremost, the Democratic Party must commit unconditionally to the principle that every American who wants a job should be able to find one. And while that job need not be great, it must pay enough to keep the worker���s family above the poverty line. Every policy under consideration should be judged by whether it accords with this principle.

A federal commitment to full employment is not a new idea. The US Employment Act of 1946 embraced the principle, but has since been watered down, owing to complaints that government support of full employment is unaffordable. The best response to such objections has always been John Maynard Keynes���s quip during a 1942 BBC radio address that, ���Anything we can do, we can afford.��� What he meant is that, far from acting as an independent binding constraint on economic activities, the financial system exists precisely to support such activities.

Finding useful jobs for willing jobseekers is surely something we are capable of doing. But adjusting the prevailing payments and financial structure to support full employment would of course have consequences. For example, we might discover that, under conditions of full employment, the rich would need to bear substantial risk in order to achieve sustained compound growth on their wealth. As Keynes argued, full employment would ���lead to a much lower rate of interest��� and thereby function as the ���euthanasia of the rentier.��� So be it. To maintain their glitzy lifestyles, the rich would either have to draw down their capital or wager it on risky enterprises.

Supporting full employment also may turn out to require higher and more progressive taxes, and it may lead to public-debt levels that would seem unfathomable to those who lived through the 1970s. So be it. If sky-high debt is required to achieve full employment in the medium term, it is justified. The only way that it could become dangerous is if the economy were to shift out of its current secular stagnation, at which point sky-high debt would no longer be necessary.

Finally, restoring and maintaining full employment may require that we divert demand from elite consumption to labor-intensive sectors like public health. It also may require a large-scale labor-intensive public-works program. So be it. It���s time to make full employment our highest priority. Once we have done that, everything else will fall into place.

First Draft: There is no rational reason why the coronavirus depression has to be both deep and long. We have immense social power in terms of our technological and organizational competence and immense reserves of skill and energy in our workforce. We are poor or as a result of coronavirus: a lot of valuable activities that involve sustained close human contact, especially in places at all reminiscent of the batcaves in which the ���rona evolved, now have costs greater than benefits. That means that many of us need to find different productive things to do, many of us temporarily and some of us permanently, and those different things will be somewhat less valuable to us than the sustained-close-human-contact jobs used to be.

But all of that does not provide a single rational reason why it should take, say, a decade before the share of Americans with jobs gets back to its pre-���rona sustainable full employment level.

The problem is that there was no rational reason, a decade ago, why it should have taken a decade after the subprime financial crisis before the share of Americans with jobs ggotets back to its sustainable full employment level. Yet it did. The housing construction sector had already shrunk back to its normal size before the subprime crisis hit. There was no sectoral structural adjustment required. There was on need to grope for what previously unproduced commodities it was now to society���s benefit to make. The crisis itself did not make our workers less skilled or our technology less effective and powerful. In the short run, the subprime financial crisis destroyed a great deal of the network of social trust that supports our extremely powerful and fine societal division of labor. But in the long run the only durable effect of the crisis was to destroy investor confidence that private-sector financial institutions could create truly-safe properly AAA-rated financial assets.

And yet it took a decade after the subprime crisis before the share of Americans with jobs gets back to its pre-���rona sustainable full employment level.

Why? Because the world was short of safe assets in the aftermath of the destruction of the confidence that private-sector financial institutions could create such. And governments failed to properly step in, either to create institutions to mobilize extra private-sector societal risk-bearing capacity to reduce the demand for safe assets, to create public safe assets in sufficient quantity themselves, or to stand up and print money and buy stuff and employ workers themselves to rapidly return the North Atlantic economy to sustainable full employment.

There is not a single rational reason why it should take, say, a decade before the share of Americans with jobs gets back to its pre-���rona sustainable full employment level. But right now the odds are that it will. For the same forces in the factors that led the great and good of the north Atlantic to declare victory over the economic emergency of unemployment in 2010 and turn it toward ���austerity��� are at work today. These forces and factors can be beaten: but they could have been beaten over 2010 to 2014, and they were not.

Over the next month the United States will in all probability do nothing on the policy level��� nothing either to prevent the coronavirus depression from being deep and long nor to keep America���s public health response to coronavirus from being among the worst if not the worst in the global north.

America���s Republican Party has no valid ideas for how to create a V-shaped path for the economy. More text cuts for the rich would do exactly as much to boost demand and employment as the McConnell-Ryan-Trump TCJA did to boost demand and employment 2.5 years ago: zero. Cutting social insurance benefits relative to what they ought to be Will make more workers desperate to find jobs, but if the spending is not there workers��� desperation to find jobs has no more effect than does commuters��� desperate wish to go faster in a bumper to bumper traffic jam.

Nobody in the Trump White House with enough authority to make policy has any idea how to figure out what good policy might be, or even how to implement a good policy if they by accident uncovered one.

And with strongly partisan Republicans in charge of three of the four federal veto points���Presidency, Senate, and Supreme Court���in the U.S.���s antiquated orrery of a system, the Democratic Party can do nothing effective until January, and can operate then only if Republican voter suppression efforts are unsuccessful and if the voters trust the Democrats enough.

So what should the Democratic Party do, should there be a chance in January 2021 to rescue America from another lost decade like the one that followed 2007?

I believe that they should grasp onto one principle, and hold on to it for dear life. Every American who wants a job and is willing to work should be easily able to find one. It may not be a great job. But it will be a job. And it should keep their family above the poverty line. Every policy should be judged first by: is it part of that commitment?

Some will say that such a full-employment commitment���a commitment that Harry S Truman and his wing of the Democratic Party wanted to make back in 1946, when they proposed the ���Full Employment Act������is not something that we can afford. Here I remember what John Maynard Keynes said on the radio in 1942: ���What we can do, we can afford���. The financial and payments structure exists to support our activities. It is not an independent binding constraint on them.

And surely finding useful jobs for people willing to work is not something we cannot do?

Now arranging the payments and finance structure to support full employment will have consequences. It may well not be possible for the rich to see their wealth compound without doing their job as substantial risk-bearers. Keynes certainly thought that was the case���that successful attaining full employment meant the euthanization of the rentier, and that the rich who wished to live in high style would be able to do so only by drawing down their capital, or making massive bets on risky enterprise. If so, so be it. Full employment may well turn out to require higher and more progressive taxes as part of its financing. So be it. Full employment may turn out to require levels of national debt the curl the hair of those who live through the 1970s. So be it: if sky-high debt is required for full employment, it is not dangerous; and if it were to be dangerous it would be because the economy will have shifted out of its current secular stagnation into a configuration in which sky-high debt is not necessary. Full employment may require that we divert demand from elite consumption to labor-intensive sectors like public health. So be it. Full employment may require a large-scale labor-intensive public-works program. So be it.

Prioritize full employment. And then all other policies will fall into their natural places around it.

#coronavirus #highighted #macro #orangehairedbaboons #2020-06-02




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