link here to article
This is a link to a video interview of William Rees who is one of the pioneers in ecological economics. He points out that there are around 4 acres per capita of land to serve the needs of the world's population. Rich nation's consumption, like that of the US, requires around 20 acres per capita. If China reached the level of US consumption, together they would require 125% of the earth's capacity to provide the necessary resources.
Expanding global income creates a big problem. Higher income is correlated with higher consumption. Every nation is committed to growth in GDP and growth in national income. The expansion of the means to consume is greater than the capacity of the planet to provide the resources, and sink functions to support growth. Money grows faster than the things that money can purchase.
There is little incentive to adapt new technologies. Those who benefit from things as they are have the resources to influence public opinion and the means to purchase the support of elected officials. He believes that some nation must take the lead and show the rest of the world what can be done to deal with the problems of a finite planet and an infinite desire to consume.
Thursday, July 7, 2011
Debt Reduction Has Popular Support Even If It Slows Short Term Growth
link here to article
I guess Obama's political people read the polls. The majority of American's want to reduce the national debt even at the expense of short term growth in the economy. Over 70% of Republicans and 61% of independents want to focus on debt reduction. One wonders where they were when Bush was in office and Cheney told Bush that deficits don't matter. Part of the problem is that a majority prefers government spending cuts to tax increases. Apparently, the majority of the public does not value the contribution of government spending to its well being. Conservatives have won the battle for public opinion. It helps to have the media and conservative funded "think tanks" on one's side.
I guess Obama's political people read the polls. The majority of American's want to reduce the national debt even at the expense of short term growth in the economy. Over 70% of Republicans and 61% of independents want to focus on debt reduction. One wonders where they were when Bush was in office and Cheney told Bush that deficits don't matter. Part of the problem is that a majority prefers government spending cuts to tax increases. Apparently, the majority of the public does not value the contribution of government spending to its well being. Conservatives have won the battle for public opinion. It helps to have the media and conservative funded "think tanks" on one's side.
A Conservative View on Income Inequality
link here to article
Kenneth Rogoff states that income inequality is the single greatest threat to stability in almost every country in the world. He argues in this article that market forces will correct the problem.
His first point is that the distribution of skills is at the root of income inequality. Highly skilled labor earns higher wages than lower skilled labor. One consequence is that the cost of skilled labor provides an incentive for capital substitution. Many skill intensive occupations will be affected by the use of new technologies. This will even affect professions like law and medicine.
His next point is that education will be more evenly distributed because low cost technology will be provide the skills needed for higher paying jobs. That will level the playing field so that more people will compete for the high paying jobs. That will also cause the wage premium for skills to fall.
He acknowledges that progressive taxation and other non-market interventions have been useful in reducing inequality but that the past should not be used as a prologue to the future. The market will eventually reduce income inequality.
Rogoff raises some interesting points but I don't like the idea of waiting for a future in which technology and market forces will reduce inequality. Especially, if as he indicates, it is the greatest source of instability. I also have a problem with his assumption that income inequality is a function of the distribution of skills. For example, one of the leading sources of inequality is the rapid increase in the compensation of corporate executives. They earn many times more than executives in similar jobs 30 years ago. I do not believe that this is because they are more skillful than their historical peers. Moreover, US executives earn many times more than their counterparts in Europe and elsewhere in the world. Is this another example of American Exceptionalism? The highest paid executives in the world are in the financial services industry. Does the financial crisis that they produced suggest that their compensation is skill based?
Kenneth Rogoff states that income inequality is the single greatest threat to stability in almost every country in the world. He argues in this article that market forces will correct the problem.
His first point is that the distribution of skills is at the root of income inequality. Highly skilled labor earns higher wages than lower skilled labor. One consequence is that the cost of skilled labor provides an incentive for capital substitution. Many skill intensive occupations will be affected by the use of new technologies. This will even affect professions like law and medicine.
His next point is that education will be more evenly distributed because low cost technology will be provide the skills needed for higher paying jobs. That will level the playing field so that more people will compete for the high paying jobs. That will also cause the wage premium for skills to fall.
He acknowledges that progressive taxation and other non-market interventions have been useful in reducing inequality but that the past should not be used as a prologue to the future. The market will eventually reduce income inequality.
Rogoff raises some interesting points but I don't like the idea of waiting for a future in which technology and market forces will reduce inequality. Especially, if as he indicates, it is the greatest source of instability. I also have a problem with his assumption that income inequality is a function of the distribution of skills. For example, one of the leading sources of inequality is the rapid increase in the compensation of corporate executives. They earn many times more than executives in similar jobs 30 years ago. I do not believe that this is because they are more skillful than their historical peers. Moreover, US executives earn many times more than their counterparts in Europe and elsewhere in the world. Is this another example of American Exceptionalism? The highest paid executives in the world are in the financial services industry. Does the financial crisis that they produced suggest that their compensation is skill based?
Wednesday, July 6, 2011
History Repeats Itself and We Can Suffer the Consequences Again
link here to article
Those who refuse to learn from history are doomed to repeat its mistakes. Joe Siglitz summarizes our current economic and political mess quite nicely. The lessons from the financial crisis have been forgotten. The zombie economic ideas that provided the cover for the financial crisis refuse to die. They are kept alive by those who benefit from them and they have the megaphones that enable them to keep neo-liberal ideology alive and well at the expense of everyone else. Unfortunately, governments in the US and in Europe would rather accept the faith than to turn against it.
Those who refuse to learn from history are doomed to repeat its mistakes. Joe Siglitz summarizes our current economic and political mess quite nicely. The lessons from the financial crisis have been forgotten. The zombie economic ideas that provided the cover for the financial crisis refuse to die. They are kept alive by those who benefit from them and they have the megaphones that enable them to keep neo-liberal ideology alive and well at the expense of everyone else. Unfortunately, governments in the US and in Europe would rather accept the faith than to turn against it.
Obama Versus Obama on the Economy
"There are some structural issues with our economy where a lot of businesses have learned to be much more efficient with fewer workers. You see it when you go to a bank and you use an ATM, you don’t go to a bank teller. Or you see it when you go to the airport and you use a kiosk instead of checking at the gate. What we have to do now, and this is what the jobs council is all about, is identifying where the jobs for the future are going to be, how do we make sure that there’s a match between what people are getting trained for and the jobs that exist, how do we make sure that capital is flowing in those places with the greatest opportunity".
Obama helping the GOP again. His first point is true but it has little to do with the current rate of unemployment. New technologies have a long history of increasing productivity and reducing the number of workers needed to do things that capital can do more cost effectively. Does he really believe that the rate of technological change has increased enough on his watch to cause a mismatch between the skills demanded by business and the skills available in the labor force? That would mean that we have structural unemployment that cannot be fixed by monetary or fiscal policy. That is what his buddies in the GOP have been saying for a long time.
Another problem with his analysis is that trying to discover the jobs of the future, and educating the labor force to fill those jobs, is a long term solution to the unemployment problem. It does nothing to deal with the current unemployment problem, and it implies that government will do little to fix the problem. Rather than dealing directly with the lack of jobs, the administration can play around with the education system. This fits nicely into his comfort zone. He has always promoted education as the answer to our economic and social problems.
In any case Obama is his own worse enemy. He continues to take positions on the economy, and the government response to high unemployment and budget deficits, that mimic those of the GOP. He either needs new economic advisers or new political advisers that will pay any attention to his economic staff.
Obama helping the GOP again. His first point is true but it has little to do with the current rate of unemployment. New technologies have a long history of increasing productivity and reducing the number of workers needed to do things that capital can do more cost effectively. Does he really believe that the rate of technological change has increased enough on his watch to cause a mismatch between the skills demanded by business and the skills available in the labor force? That would mean that we have structural unemployment that cannot be fixed by monetary or fiscal policy. That is what his buddies in the GOP have been saying for a long time.
Another problem with his analysis is that trying to discover the jobs of the future, and educating the labor force to fill those jobs, is a long term solution to the unemployment problem. It does nothing to deal with the current unemployment problem, and it implies that government will do little to fix the problem. Rather than dealing directly with the lack of jobs, the administration can play around with the education system. This fits nicely into his comfort zone. He has always promoted education as the answer to our economic and social problems.
In any case Obama is his own worse enemy. He continues to take positions on the economy, and the government response to high unemployment and budget deficits, that mimic those of the GOP. He either needs new economic advisers or new political advisers that will pay any attention to his economic staff.
Putting the GOP Obsession on Tax Policy in Perspective
link here to article
Harold Meyerson of the Washington Post joins the chorus of those who believe that an over zealous GOP is harming the economy and its own political chances in future elections. He compares their zeal with that of Communists in the past who put principle over tactics at great cost to their cause. They have given the Democrats a good chance to portray them as radicals in the next election. They can't win an election with the tea party vote. They may lose the independent voters who reject radicalism.
Harold Meyerson of the Washington Post joins the chorus of those who believe that an over zealous GOP is harming the economy and its own political chances in future elections. He compares their zeal with that of Communists in the past who put principle over tactics at great cost to their cause. They have given the Democrats a good chance to portray them as radicals in the next election. They can't win an election with the tea party vote. They may lose the independent voters who reject radicalism.
OECD Spending On Healthcare Versus US Spending
This graph shows healthcare spending as a percent of GDP and spending per capita in OECD countries including the US. US spending as a percent of GDP was 17.4% versus the OECD average of 9.5%. US spending per capita was 2.5 times the OECD average of $3223.
The graph shows spending by government and by private healthcare providers. The US hybrid system is unique. Government spending on healthcare as a percent of GDP is about equal to the OECD average, but private spending is well above the OECD average. Government spending seems to have little impact on private spending relative to the OECD average.
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