Stories to watch for in 2013

by on December 31, 2012 at 7:22 am in Current Affairs, Uncategorized | Permalink

Here is a list from The Guardian.  Here is an FT list.  My list looks more like this:

1. Economic turnarounds in the Philippines, Sri Lanka, Indonesia, and possibly Pakistan and Myanmar.

2. Pressures for secession in Catalonia, and a potential crisis of the Spanish state.

3. East Asian belligerence, with more hawkish leaders in the three major countries.

4. There is actually a non-trivial chance we totally blow it on the debt ceiling.

5. The continuing rise of machine intelligence and the general recognition of such as the next major technological breakthrough.

6. Significant positive reforms in Mexico on education, foreign investment, and other matters too.

7. Political collapse in South Africa.

8. Continuation of America’s “Medicaid Wars,” over state-level coverage, combined with the actual implementation of much more of ACA.  Continuing attempts in Rwanda, Mexico, and China to significantly extend health care coverage to much poorer populations.

9. The return of dysfunctional Italian politics, combined with the arrival of recession in most of the eurozone economies, including France and Germany.

10. The ongoing barbarization of North Africa, including Mali, Syria, and possibly Egypt.  And whether any of these trends will spread to the Gulf states.

11. Whether China manages a speedy recovery and turnaround.

12. Watching India try to overcome its power supply problems, its educational bottlenecks, and its low agricultural productivity.

13. Seeing whether Ghana makes it to “middle income” status and how well broader parts of Africa move beyond resource-based growth.

14. Whether U.S. and also European political institutions can handle the intensely distributional nature of current fiscal questions.

Those are some of the main stories I will have my eye on, but of course I expect to be surprised.  I suppose Israel and Iran should be on that list somehow, North Korea too, but I don’t find that thinking and reading about it yields much in the way of return, compared to a simple “wait and see.”

Addendum: Here is Matt’s list.

dearieme December 31, 2012 at 7:26 am

“10. The ongoing barbarization of North Africa, including Mali, Syria, and possibly Egypt. “: I understand that geography is little studied in the USA.

Orange14 December 31, 2012 at 7:41 am

I don’t think it is a requirement to get a degree in economics (but then sometimes common sense isn’t a requirement either).

Tyler Cowen December 31, 2012 at 7:42 am

Not worth mentioning and explaining “MENA,” people know what I mean.

Millian December 31, 2012 at 9:14 am

And you’re surprised that Krugman never admits that he’s wrong?

beamish December 31, 2012 at 9:30 am

I assume you mean ‘berberization’ and were mistreated by a spell checker.

Rahul December 31, 2012 at 9:49 am

Fortuitously semantically invariant?

libert December 31, 2012 at 4:02 pm

Half-right. I think he meant “barberization”.

Givco December 31, 2012 at 2:03 pm

Yes, but why not just say what you mean instead of saying other than what you mean?

(I mean this as mild teasing.)

Happy New Year.

dearieme December 31, 2012 at 7:27 am

“we totally blow it on the debt ceiling”: woz mean?

Andrew' December 31, 2012 at 7:45 am

It means if we aren’t allowed to be in the hole more than we aren’t allowed to be in the hole then it’s a disaster.

Tom West December 31, 2012 at 8:50 am

Andrew”s explanation is an illustration of why there’s a non-trivial chance…

Andrew' December 31, 2012 at 11:42 am

No it’s just funny. Every political issue right now that isn’t an opportunistic distraction for vote pandering is about how we are broke. And then there is this thing where it is the end of the world every single solitary time they don’t get to borrow more than the last time they said they wouldn’t borrow more.

libert December 31, 2012 at 4:07 pm

The reason they kept the debt ceiling isn’t that they wanted to cap the debt. It’s because they wanted to keep a hostage to threaten later in defense of their special interests.

If politicians really were worried about the debt, they wouldn’t have cut a deal today to cut taxes to the tune of trillions of dollars.

liberalarts December 31, 2012 at 8:55 am

The previous battles have been terrible for consumer and business confidence, causing a slowing of economic activity at each point. I get that since the GOP has the house, they should have a hand in the outcome, but their position largely seems to be move largely to our position or we won’t consider it and even then we won’t include a debt ceiling deal with this fiscal cliff deal. That means that within 2 months we have another showdown over the debt limit. If I were the Dems, I would not consider any deal now that did not increase the debt ceiling through the next election.

Alexei Sadeski December 31, 2012 at 11:47 am

Legislatively speaking, the House is the most powerful single arm. By design…

Andrew' December 31, 2012 at 1:02 pm

So does anyone have any ideas why this is happening? I know the part about Republicans are evil. Any other ideas?

msgkings December 31, 2012 at 3:30 pm

Andrew’: Isn’t that sufficient?

Actually, snark aside, Nate Silver did a piece on how yes Virginia Congress is way more polarized now than it used to be, and it’s not just the Reps. There aren’t any moderate Dems left either. Gerrymandering means moderates get primaried all the time by the extremes on either side.

http://fivethirtyeight.blogs.nytimes.com/2012/12/27/as-swing-districts-dwindle-can-a-divided-house-stand/

Michael December 31, 2012 at 10:07 am

The US has agreed to pay certain people. We don’t have the money to pay them what we’ve already promised to pay. Some other people say, “Hey, you can borrow the money from us.” They may even offer to do so at a negative real interest rate. Instead, the US may very well say, “Our promises to pay people back don’t mean anything and in the future no one should trust us to pay them back, even when we have access to extremely cheap, even free, forms of financing.”

I think that’s what he means by “totally blow it.”

Brian Donohue December 31, 2012 at 10:53 am

Yes. We’ve put $16 trillion on the card, but we keep getting these amazing offers with higher limits and attractive terms in the mail. Totally blowing it means not throwing these out.

I’m a fiscal conservative, and I think it’s time Uncle Sam stopped digging, and I think the fiscal cliff may, by default, be the solution we’ve been looking for, but it is insane how many people want to keep lending to the US government at current rates.

Dont they even want to look at the books first? It seems like all the “high quality dumb money” in the world wants US debt, just like so many of them loved AAA CDOs several years ago. Read the prospectus first!

derek December 31, 2012 at 11:01 am

It may very well be that everyone has read the books. Japan? God help us. China? What is this crap, and does it relate to reality? Europe. Heh, they do know how to descend into the abyss in style. Leaves the US, which has the most functional political system of them all. Yes Dorothy, this is what a functional political system looks like.

Steven Kopits December 31, 2012 at 11:42 am

Michael -

You are correct. When people offer to lend you money for free, despite the fact that your credit limit is all used up, then those people–like me, whom you will ask to pay the bills later–become deeply concerned. You’ll no doubt recall the enthusiasm to lend to Greece because the EU would never allow it to default. That was a great game while it lasted. Now banks won’t lend to it at any price, and the country is in a true depression. Of course, you’ll counter with the notion that we can simply debase the currency, and pay back in devalued dollars. Well, we’re not going to be on the same page for this topic.

I have deep reservations about borrowing a trillion dollars a year to pay for Social Security and Medicare, which are essentially consumption programs. If the debt ceiling is held, then government spending will by definition be constrained. But of course, we’ll continue to pay our debt obligations–indeed, we can roll them over. We just can’t increase them.

I so often read about people decrying the reckless lending and borrowing of monies for property purchases. Mind you, these are real properties which have a continuing collateral value. This over-borrowing was perhaps $1 trillion in total.

Now, we are borrowing $1 trillion per year essentially for consumption and the Fed has injected perhaps $5 trillion of liquidity into the banking system, which has mercifully not made its way into circulation–yet. And this is kind of profligacy is held up as virtue.

Back in 2008 I slammed Bernanke for not having engineered a recession sooner. Had he done so in 2005 or 2006, the country might be in much better shape today. But no one wanted to take away the punch bowl, so the housing bubble kept right on growing. You are calling for the punch bowl to remain full, even though the country is coked sky high. How many years could you borrow 46% of your spending to support consumption? One, two, maybe? We’re now going into Year 6 at the Federal level.

There are those who believe in a free lunch, and those who don’t. Personally, I don’t.

Andrew' December 31, 2012 at 12:21 pm

Ability to debase, ability to tax, the need to continue rolling over debt in the future- many of these reasons why people like lending to us are not reassuring to me.

dead serious December 31, 2012 at 1:01 pm

Like climate change, it’s not a problem until it’s a problem.

Trying to talk to (many, not all) liberals about a future financial comeuppance is like talking to (many, not all) right wingers about a future climatic comeuppance.

In both cases, the winning solution involves fingers and ears but no brains.

Andrew' December 31, 2012 at 1:08 pm

The equivalence is most obvious in that the only solutions that are entertained are the ones that stick it hardest to the opposition.

dead serious December 31, 2012 at 2:11 pm

Yes, the stonewalling of any attempt to change deleterious behavior.

JonF January 1, 2013 at 4:56 pm

Re: I have deep reservations about borrowing a trillion dollars a year to pay for Social Security and Medicare

Well then, it’s a good thing we are not borrowing a trillion a year to pay for those programs. The form is (still) totally self-funding, and the latter has been tapping into the general fund (but is still mainly self-funded), but not to anywhere near a trillion a year.

Careless January 1, 2013 at 6:46 pm

Social Security went into the red years ago.

dearieme December 31, 2012 at 7:28 am

Seeing whether Ghana makes it to “middle income” status: I have the impression that Ghana might have had that status, or been close to it, at independence. Does anyone here know?

Orange14 December 31, 2012 at 7:40 am

My daughter spent a summer in Ghana after her junior year in college studying African ethno-musicology and lived with a family during that time. Her reports back were pretty encouraging about the quality of life in Ghana. Maybe it isn’t middle class by our definition here in the US but it definitely wasn’t the type of third world society that one reads about. I didn’t tell her ahead of time that she probably would be living without air conditioning during that time but in the end it didn’t phase her all that much and she returned much richer for the experience.

So Much for Subtlety December 31, 2012 at 3:18 pm

Well it was richer than South Korea at independence. Those bastard colonialists!

But it makes you wonder what exactly a middle income country is. From Wikipedia:

Ghana is a Middle Income Economy and is ranked as a Lower–Middle Income Economy by the World Bank.[47][48][49] In 2011, 27% of Ghana’s population were living on less than $1.25 per day (excluding Ghanaian citizens),[47][50] and in 2011 there was a rate of 25% youth unemployment (excluding Ghanaian citizens).[51]

Let’s ignore precisely why you would want to exclude Ghanaian citizens. A quarter of them are living on less than $1.25 a day and yet they are a middle income country?

At the end of December 2011, Ghana’s total external debt had risen to an all-time high of $18 billion (GH¢ 23.4 billion), up from $8 billion (GH¢ 8.8 billion) at the end of December 2008. In 1966, Ghana’s debt totaled US$1 billion and the country was among the wealthiest and most socially advanced areas in Africa; Ghana’s per-capita income was comparable to that of South Korea.[57] …. Ghana’s labour force in 2008 totalled 11.5 million people”

So they owe about half their GDP to external creditors? They are so screwed.

Therapsid January 1, 2013 at 2:55 am

The notion that Ghana was richer at independence is absurd. Korea was comprised of literate civilizations with developed agriculture and urban centers prior to independence. Ghana was in one of the more advanced parts of Sub-Saharan Africa, in proximity to the more developed West African cultures like the Ashanti, but was illiterate and barbaric in comparison.

Moreover, Japanese colonialism in Korea favored much more heavy industry and infrastructure than British colonialism did in modern day Ghana.

dearieme January 1, 2013 at 5:52 am

The request was for facts not for vapouring.

Orange14 December 31, 2012 at 7:43 am

#4 – as long as entitlement reform/devastation is the mantra of the Republican party this will not turn out well at all.

8 December 31, 2012 at 10:26 am

It’s not the mantra of the Republican party, it’s reality. The GOP is stupid enough to try to stop it.

Rahul December 31, 2012 at 7:46 am

(15) At least one flu-like pandemic?

(16) Gold / Corn / Beef prices touching a new high?

Orange14 December 31, 2012 at 10:17 am

If the corn to ethanol subsidy goes away, corn prices drop like a lead balloon.

Artimus December 31, 2012 at 8:10 am

17) Washington Nationals win the World Series

Rahul December 31, 2012 at 8:49 am

In the interest of an even broader readership why won’t your comment elaborate on what GMU is? Was that not worth your time? Maybe a link too? All acronyms need to be expanded lest you come across someone who does not get it.

anon December 31, 2012 at 9:37 am

(18) signs whether the accolades on central bankers (and their intellectual cheerleaders) in 2012 were deserved and further lessons on how to (or how not to) manage market expectations.

Margarine Revolution December 31, 2012 at 10:58 am

What are the three major countries of East Asia?

Jordan B December 31, 2012 at 11:14 am

China, Japan, and Taiwan

Jordan B December 31, 2012 at 11:16 am

Scratch that.. make it China, Japan, and South Korea.

Margarine Revolution December 31, 2012 at 11:00 am

If you expect to be surprised, then be surprised if you’re not!

Philo December 31, 2012 at 11:53 am

“12. Watching India try to overcome its power supply problems, its educational bottlenecks, and its low agricultural productivity.”

It is more misleading than helpful to describe such situations as if *the nation* (in this case India) were an agent, acting purposefully. The real agents are the individuals, mostly but not exclusively Indians, whose actions affect the production of power, education, and foodstuffs in India. And most of these agents most of the time have much narrower and more localized purposes than *solving India’s “problems”*.

It would have been better to write: “12. Watching to see whether the performances of the power, educational, and agricultural industries in India, so far comparatively dismal, show improvement,” or something of the sort.

derek December 31, 2012 at 8:13 pm

How much of said industries are structured the way they are currently due to state regulation?

Bill December 31, 2012 at 1:09 pm

According to my traveling ag economist neighbor, Ghana is one of the few shining stars in developing Africa. He’s quite optimistic, if they stay on the same path.

Chris December 31, 2012 at 4:06 pm

Not sure what led you to #7. That scenario appears exceptionally unlikely to me as someone living in South Africa.

libert December 31, 2012 at 4:11 pm

+1

farmer December 31, 2012 at 4:15 pm

see: District 9.

Zimbos over-run ZA, nothing works anymore, people just kind of “give up” supporting the State.

vanderleun December 31, 2012 at 8:00 pm

Some say they will and some say they won’t
Some say they do and some say they don’t
Some say they shall and some say they shan’t
and some say they can and some say they can’t

All in all it’s all the same
but call me if there’s any change

Some say there’s nothing and some say there’s lots
Some say they’ve started while some say they’ve stopped
Some say they’re going and some say they’ve been
Yes, some say they’re looking and some say they’ve seen

All in all it’s all the same
but call me if there’s any change

Wake me when the targeted assassinations start.

Lars Christensen January 1, 2013 at 3:19 am

Tyler, #7 on your list – Political collapse in South Africa – unfortunately seems more and more likely. South Africa has been a great success story, but in recent years thinks have certainly moved in the wrong direction. While we see progress on most front across Africa these years South Africa is increasingly decaying politically, economically and socially.

In somewhat the development in South Africa can be compared to the transition in Central and Eastern Europe. I guess in some sense we can say that South Africa used to be like Poland – a highly successful transition story, but today increasingly looks like Ukraine – a transition failure due to terrible politics.

What the South Africa story shows in my view is that ideas matter. The South African transition has never fundamentally been based on an idea, but on the “reform performance” of individuals like president Mandela and especially finance minister Trevor Manuel. Both as we know are now far from having any real influence on things in South Africa.

Rahul January 1, 2013 at 7:59 am

In hindsight, what could they have done differently (in the transition; not during apartheid)? It seems like a fundamentally difficult problem to me.

Lars Christensen January 1, 2013 at 3:19 pm

Rahul,

I am not sure what could have been done differently – at least not given the extremely challenging political situation at the time, but what I am saying is that we are now seeing the real costs of the failure to build stronger institutions in South Africa and particularly the failure of limit the power of government over the economy.

Duncan January 3, 2013 at 6:24 am

Really? Do you live in South Africa? As a South African (residing in South Africa) I am bemused by the view that we’re on the brink of political collapse. I chuckled heartily at Tyler putting us at #7 because it reflects how wrong well-read, critical individuals can be when basing their opinions on second-hand sources. To be sure, the country has more than its fair share of economic, social and political problems. But to say that we are on the brink of political collapse is, with all due respect, absurd.

Deane January 1, 2013 at 12:37 pm

Hi Tyler,is there a particular reason why you are looking towards an economic turnaround in Sri Lanka? Beyond the fact of the end of the war of course.

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