History

In 2015 our iron ore exports alone were four times the value of all of our combined services exports to China. And in services the only things that really count are tourism and education. That’s not going to change for a long, long time.

The alas now gated article, by Greg Sheridan, is of interest more generally and concerns some myths about China and Australia.

Addendum: To read the piece, try here.

From Scott Sumner:

…what’s happened since 2009 involves not just one, but at least five new types of voodoo:

1. The claim that artificial attempts to force wages higher will boost employment, by boosting AD.

2. The claim that extended unemployment benefits—paying people not to work—will lead to more employment, by boosting AD.

3. The claim that more government spending can actually reduce the budget deficit, by boosting AD and growth. Note that in the simple Keynesian model, even with no crowding out, monetary offset, etc., this is impossible.

4. More aggregate demand will lead to higher productivity. In the old Keynesian model, more AD boosted growth by increasing employment, not productivity.

5. Fiscal stimulus can boost AD when not at the zero bound, because . . . ?

In all five cases there is almost no theoretical or empirical support for the new voodoo claims, and lots of evidence against. There were 5 attempts to push wages higher in the 1930s, and all 5 failed to spur recovery. Job creation sped up when the extended UI benefits ended at the beginning of 2014, contrary to the prediction of Keynesians. The austerity of 2013 failed to slow growth, contrary to the predictions of Keynesians. Britain had perhaps the biggest budget deficits of any major economy during the Great Recession, job growth has been robust, and yet productivity is now actually lower than in the 4th quarter of 2007.

There is more at the link. And here is Scott from the comments:

As I recall, productivity did well during the 1930s. Why? If falling AD hurts productivity, then shouldn’t productivity have done very poorly during the 1930s?

See also my earlier post “Not all complaints can be true at the same time.

My current pet peeve is advocacy of fiscal stimulus without even bothering to consider whether the economy might be at or very close to full employment, much less considering whether the stimulus will target unemployed resources.

We do in fact need a good aggregate demand-based macroeconomics; the topic is far too important to allow it to become so politicized.

The author is Nancy Tomes and the subtitle is How Madison Avenue and Modern Medicine Turned Patients into Consumers.  Here is one excerpt:

While unwilling to pass any kind of national insurance program, the U.S. Congress strove to advance the cause of “medical democracy” by other means.  Instead of guaranteeing a right to medical care, legislators voted to spend public funds on hospital construction and basic medical research as a means to yield more and better treatment.  To make that treatment affordable, the federal government looked to the private sector for help, using tax policy to encourage the growth of employee insurance plans.  In this fashion, postwar political and business leaders hoped to create a free enterprise alternative to “socialized” medicine.

The first step toward expansion came in 1946 when Congress passed the Hill-Burton Act, which funneled federal funds into hospital construction and expansion.  Over the next two decades, Hill-Burton funds would be used on almost 5,000 projects, many of them in rural areas that previously had had no hospitals.  The program proved very popular, giving local communities a new institution to be proud of while creating more “doctors’ workshops” for medical education and private practice.  At the same time, Congress vastly increased funding for medical research, from about $4 million in 1947 to $100 million by 1957.  Postwar political leaders found appealing the idea of tackling cancer, mental illness, and other dread diseases through “a medical research program equal to the Manhattan Project,” as the National Health Education Research Committee urged in 1958.  Taxpayer dollars helped to build up the National Institutes of Health (NIH) in Bethesda, Maryland, as the hub of what a later generation would christen the “medical-industrial complex”: a network of researchers located in American universities and scientific institutes whose careers depended on the generation of medical innovations.

I found this book extremely useful for understanding the evolution of American health care policy and institutions before 1965.

Should you go?  I give the place high marks for food and scenery, but the total population of about 48,700 limits  other benefits.  It is like visiting a smaller, more unspoilt Iceland.  There is a shop in the main city selling Faroese music and many shops selling sweaters.  They will not tell you where the sweaters were knitted.

The natives seem to think Denmark is an excessively competitive, violent, harsh and hurried place.  The norm here is to leave your door unlocked.  It is a “self-governing archipelago,” but part of the Kingdom of Denmark.  In other words, they get a lot of subsidies.

But they are not part of the EU, so they still sell a lot of salmon — their number one export — to Russia.

You see plenty of pregnant women walking around, and (finally) population is growing, the country has begun to attract notice, and the real estate market is beginning to heat up.  But prices remain pretty low, and it would be a great place to buy an additional home, if you do that sort of thing.

In the early 1990s, their central bank did go bankrupt and had to be bailed out by Denmark.  It is a currency board arrangement, and insofar as the eurozone moves in that direction, as it seems to be doing by placing Target2 liabilities on the national central banks, a eurozone central bank could become insolvent too, despite all ECB protestations to the contrary.

Every mode of transport is subsidized in the Faroes, including helicopter rides across the islands.  Often the bus is free, and there is an extensive network of ferries.  I wonder how many population centers there would be otherwise.  There is now the notion that all of the communities on the various islands are one single, large “networked city.”

The Faroes are a “food desert” of sorts, with few decent or affordable fruits or vegetables.  And not many supermarkets of any kind.  Yet the rate of obesity does not seem to be high.  And they have a very high rate of literacy with little in the way of bookstores or public libraries.

The seabirds including puffins are a main attraction, but I enjoyed seeing the mammals too, with pride of place going to the pony:

The domestic animals of the Faroe Islands are a result of 1,200 years of isolated breeding. As a result, many of the islands’ domestic animals are found nowhere else in the world. Faroese domestic breed include Faroe pony, Faroe cow, Faroese sheep, Faroese Goose and Faroese duck.

puffins-mykines-faroe-islands

The country receives a great deal of negative publicity for killing whales, but overall they seem to treat animals better than the United States does.  Fish consumption is very high and there are no factory farms.

If the Faroes had open borders, but no subsidies for migrants, how many people would settle there?

In 1946 they did their own version of Faerexit, from Denmark of course:

The result of the vote was a narrow majority in favour of secession, but the coalition in parliament could not reach agreement on how this outcome should be interpreted and implemented; and because of these irresoluble differences, the coalition fell apart. A parliamentary election was held a few months later, in which the political parties that favoured staying in the Danish kingdom increased their share of the vote and formed a coalition.

Overall I expect this place to change radically in the next twenty years.  It is hard to protect 48,700 people forever.  In part, they are killing those whales to keep you away.

I can think of a few reasons:

1. Many of the structures in places are perceived as failing, even though in absolute terms they are not obviously doing worse than previous times.

2. There is a rise in nationalist sentiment and a semi-cosmopolitan ethic is starting to lose influence.

3. The chance of violent conflict is rising.

4. Dialogue is becoming more polarized and bigoted, and at some margins stupider.

5. Tales of gruesome torture are being spread by new publishing and communications media.

6. The world may nonetheless end up much better off, but the ride to get there will be rocky iindeed.

I have been reading Carlos M.N. Eire, Reformations: The Early Modern World, 1450-1650.  Yes I know it is 893 pp., but it is actually one of the most readable books I have had in my hands all year.

That is one question I consider in my latest Bloomberg column, here is one excerpt:

Nima Sanandaji, a Swedish policy analyst and president of European Centre for Entrepreneurship and Policy Reform, has recently published a book called “Debunking Utopia: Exposing the Myth of Nordic Socialism.” And while the title may be overstated, his best facts and figures are persuasive.

For instance, Danish-Americans have a measured living standard about 55 percent higher than the Danes in Denmark. Swedish-Americans have a living standard 53 percent higher than the Swedes, and Finnish-Americans have a living standard 59 percent higher than those back in Finland. Only for Norway is the gap a small one, because of the extreme oil wealth of Norway, but even there the living standard of American Norwegians measures as 3 percent higher than in Norway. And that comparison is based on numbers from 2013, when the price of oil was higher, so probably that gap has widened.

Of the Nordic groups, Danish-Americans have the highest per capita income, clocking in at $70,925. That compares to an U.S. per capita income of $52,592, again the numbers being from 2013. Sanandaji also notes that Nordic-Americans have lower poverty rates and about half the unemployment rate of their relatives across the Atlantic.

It is difficult, after seeing those figures, to conclude that the U.S. ought to be copying the policies of the Nordic nations wholesale.

There is more to the piece, and I will note that I see a Land of Twitter where many Danes have read only that part of the piece.   I close with this:

How’s this for a simple rule: Open borders for the residents of any democratic country with more generous transfer payments than Uncle Sam’s.

Do read the whole thing.  You can buy the Sanandaji book here.

Faroe Islands fact of the day

by on August 16, 2016 at 2:57 am in Books, Education, History, Law | Permalink

…the first monolingual Faroese-Faroese dictionary was only published in 1998, the first Bible in Faroese didn’t appear until 1961, and the language only won official status in the islands in 1948 with the introduction of the Home Rule Act.

That is from James Proctor, Faroe Islands.  Here is some Faroese on YouTube.  Here is a short (2:32) Faorese drama, with profanity in Faroese, subtitles too.

Here is my Bloomberg column on the passing of the economic miracle, here is one excerpt:

Most of the world’s wealthiest and best-governed countries got there without super-rapid bursts of growth. Denmark, which has a per capita income of about $52,000 and is frequently ranked as one of the happiest countries in the world, never experienced what anyone would call an economic miracle. If you Google that phrase, the main entry will be a research piece detailing how, in the 1990s, the country lowered its unemployment rate without having to dismantle its welfare state.

Denmark’s overall economic record is gloriously boring. From 1890 to 1916, per capita growth averaged about 1.9 percent per year, and if in 1916 you had forecast that this pace would continue for another 100 years, you would have been off by only about $200. Denmark had positive growth about 84 percent of the time and no deep recessions, according to a recent study by Lant Pritchett and Lawrence Summers.

And this:

…the experience of Denmark and other “no drama” growth stories provides some clues to the future of developing economies. The East Asian growth model, for all its wonders, belongs to history. Slow and steady may be the only option left. For whatever reasons, few countries have been able to scale up their educational successes as rapidly as the East Asian tigers. Trade growth, which exceeded overall output growth in the late 20th century, now seems stagnant. Many export industries are automated and hence don’t create as many middle-class jobs as they used to.

In other words, today’s world may resemble the 19th century more than the last few decades.

Do read the whole thing.

From the comments

by on August 15, 2016 at 2:50 pm in Economics, History, Philosophy | Permalink

The authors of an article entitled “Mysticism in Literature” (by H.C. Gardiner and E. Larkin) were surprisingly dismissive of Blake, an “I-It” enthusiast (like Wordsworth and fantasy novel world-builders); apparently the real success in the “Mysticism in Literature” world is in the “I-Thou” (Carmelite poets, very generous people, that sort of thing) area. I have long thought that JM Keynes – whose General Theory is in places as well written as Finnegans Wake, as I once read somewhere on this blog – was to his brother Geoffrey (the Blake specialist) what the fictional Sherlock was to Mycroft; a very bright sibling but clearly the exponentially less capable of the two. Economics, though, is often just common sense reiterated and refined with the mistakes thrown out; it seems almost comical to associate something that takes such a long time with young students. I read my first economics book, with a banana-yellow cover, in high school (bought at a Waldenbooks at a Bay Area shopping mall, long vanished; at the same mall, I was in line behind a young woman, now in her 70s, who bought a cassette recording of Rachmaninoff’s 24 variations on a theme of some long-forgotten fiddler. I still remember the shy happy smile on her face – the money she spent must have meant something to her – and how well she was dressed, as if she believed one had to dress elegantly to buy a Rachmaninoff cassette. Writing a comment on this almost (or completely) male-only comment thread, all I can say is she was as likely to be right about the necessity of elegance as me, if not more so. If she is reading this, I don’t remember the town, but it was somewhere just north of Pleasanton).

It doesn’t matter what the post was, that is from another vote another time zone, if only E. Harding were so eloquent…

That is my latest Bloomberg column, and here is just one bit from it:

Third, Brazil’s political history has been an odd mix of dictatorship and extreme decentralization. Until the late 1980s, a series of autocratic leaders took power but failed to govern outlying regions successfully. Governance remained based on a colonial model with an authoritarian leader at the center and autonomous power blocs throughout the regions — a system that, for all of its periodic dynamism, proved ill-suited for modern times.

That colonial legacy is being dismantled, in fits and starts.  Brazil now has a real democracy and some degree of political accountability, though it falls short of a well-functioning federalism, as illustrated by the fiscal troubles of Rio de Janeiro and many other parts of the country. Income inequality has been falling (contrary to the trend in most countries), extreme poverty has virtually been eliminated and Brazil has moved up the rankings in terms of education.

I love to visit Brazil. I have been chased by aggressive pre-teens wielding sharpened sticks and even shot at, yet I remain an unreconstructed optimist. It’s actually a major achievement to remain “the country of the future” for so long. Can you say the same about Argentina or Venezuela? If there’s one thing we know from Olympic competition, it’s that if you remain in the game through successive rounds, your chances of winning only go up.

Do read the whole thing, there is much more detail at the link.

Observations on seeing Paul McCartney

by on August 11, 2016 at 12:07 am in History, Music | Permalink

1. Many of the best songs were from his solo or Wings period, especially those designed to be played live, and designed to work without the backing voices of the other Beatles.

2. The first two-thirds of the concert pulled out an impressive number of obscure songs, most of which worked, including a bluesy “Letting Go” (can anyone other than Kelly Jane Torrance place that one without using Google?).  Paul flat out told the crowd he doesn’t care if they like these other songs less.

3. Often the best Beatle song vocals were Paul doing either John or George parts, because you didn’t know exactly what to expect and thus you were let down less by his 74-year-old vocal cords.

4. His stamina was remarkable.  The show was almost three hours long, with little in the way of breaks for him, and he is playing two nights in a row.

5. At the time of its release, “Hi Hi Hi” seemed like a commercial piece of crud, but it has become iconic and satellite radio treats it with respect as well.

6. Paul has been with his current touring band for fifteen years, far longer than he ever was with either Wings or the Beatles.

7. There is a fellow who collects “album covers that are parodies of Beatle album covers,” and he has over 2,000 of them.  How is that for markets in everything?

There are two new and interesting books with that same title.  The first is by William I. Brustein and Louisa Roberts, and it has the subtitle Leftist Origins of Modern Anti-Semitism.  Think of it as a short overview of what the subtitle promises, with chapters on the Enlightenment, France, Germany, and Great Britain.  The second, by Michele Battini, has the subtitle Capitalism and Modern Anti-Semitism, and is longer and perhaps more exotic.  Here is one summary sentence: “My hypothesis is that this anti-Semitic anticapitalist literature arose in the context of the intransigent Catholic reaction against the revolution in political rights, the free market, and secularization.  Both are of interest.  Both main titles of course come from the classic quotation by August Bebel: “Antisemitism is the socialism of fools.”

I asked that question of Michael Orthofer, and his answer was this:

Underrated, I would absolutely think the regional language and literature of India. I think surprisingly, even though, perhaps, English is the main literary language of India and a great deal is locally translated, even there much of the vernacular literature still isn’t available in English.

What one can see of it and also in part hear about it — we’re missing an awful lot. There is a literary culture there, especially, for example, in Bengali, but we’ve had that since Tagore. One of the remarkable things is Tagore won his Nobel prize over a hundred years ago, and there are still novels by him which haven’t been translated into English. He is really a very good novelist.

It’s truly worthwhile, and this goes for many regions. The southern region of Kerala where they write in Malayalam — there’s remarkable literary production there, and we just see so little of it.

My inclination was to suggest Chile.  Here’s why this country of below 18 million people is nonetheless a fierce literary contender:

1. Pablo Neruda was one of the two or three best poets of the latter part of the twentieth century.   His Canto general is not his best poetic work but as a general statement of the history and underlying unity of the New World it is unparalleled.  Gabriela Mistral is noteworthy too.

2. José Donoso’s The Obscene Bird of the Night is one of the very best Latin novels, yet it is hardly read these days, I am not sure why.  I think it is clearly better than say One Hundred Years of Solitude.

3. Roberto Bolaño is probably the most important Latin author post-García Márquez, and he is from Chile, though he wrote much more about Mexico.

4. Antonio Skármeta isn’t even a top figure in this lineage yet he is still quite good, the same holds for Ariel Dorfman (born in Argentina, moved to Chile shortly afterwards), Alejandro Zambra, and yes Isabel Allende, who is the Chilean author most in the public eye in the United States.  She is usually too sentimental for my taste but some of it I enjoy nonetheless.

And why is Chile underrated?  Well, when you are there it feels fairly provincial — just ask a Porteño.  Bolaño didn’t stick around and more generally exile from Pinochet prevented the creation of any well-defined group or movement.  The Pinochet years also gave Chile a…shall we say…non-artistic reputation, and finally both Neruda and Doñoso don’t translate so well out of the Spanish.

Do you have an alternative choice?

…there were at least two instances in which top officials tried to slow, or undermine, the president’s nuclear authority.

The first came in October 1969, when the president ordered Melvin R. Laird, his secretary of defense, to put American nuclear forces on high alert to scare Moscow into thinking the United States might use nuclear arms against the North Vietnamese.

Scott D. Sagan, a nuclear expert at Stanford University and the author of “The Limits of Safety,” a study of nuclear accidents, said Mr. Laird tried to ignore the order by giving excuses about exercises and readiness, hoping that the president who sometimes embraced the “madman theory” — let the world think that you are willing to use a weapon — would forget about his order.

But Nixon persisted. Dr. Sagan reports that during the operation, code-named Giant Lance, one of the B-52 bombers carrying thermonuclear arms came dangerously close to having an accident.

Then, in 1974, in the last days of the Watergate scandal, Mr. Nixon was drinking heavily and his aides saw what they feared was a growing emotional instability. His new secretary of defense, James R. Schlesinger, himself a hawkish Cold Warrior, instructed the military to divert any emergency orders — especially one involving nuclear weapons — to him or the secretary of state, Henry A. Kissinger.

It was a completely extralegal order, perhaps mutinous. But no one questioned it.

That is from William Broad and David Sanger at the NYT.

Addendum: Here is a 2008 Alex post on the same.