Category: Current Affairs

Trade deficit fact of the day

The reality is that, well before Trump became president, global trade imbalances were shrinking. Figures from the International Monetary Fund (IMF) show that, as a share of the economy (gross domestic product), the U.S. current account deficit hit a recent peak of 5.8 percent in 2006 and dropped to 2.4 percent by 2017 . The comparable figures for China were 9.9 percent of GDP in 2007 and 1.4 percent in 2017.

That is from Bob Samuelson.  Arguably China is already running a trade deficit, especially if you account for the fact that some of their major exports, such as iPhons, are built using an international supply chain, and most of the actual value-added does not come from China (though it solely counts as a Chinese export in the numbers).

Kiev notes

The city has some of the best Soviet war memorials, noting that the text at the main Babi Yar monument does not in fact refer to “Jews.”  The museums are much better than expected, with at least five worthy of a visit, including the National Museum, the folk art museum, Scythian gold museum, and Russian art museum, and the Khanenko museum.

I am underwhelmed by the economy here, and Kiev is one of the least bustling national capitals I have seen, especially for a country of its size.  The distribution of stores and commercial ventures is so thin as to remind me of some parts of San Francisco.  Yes, this is August but still the streets feel empty, even in the center of town.  Maybe especially in the center of town.  The earlier Soviet infrastructure has not been built over, and the basic outline of the city does not yet feel “post-reform.”

Poland and Ukraine had about the same per capita gdp in 1992, but now Poland’s is three times higher.  Even Russian wages are twice as high.  The Ukrainian economy has shrunk 17.8% since 2008, and that is not even counting the loss of territory, which still counts statistically as part of Ukrainian gdp.

Markers of the new, post-2014 Ukrainian nationalism are seen frequently, and the use of the Russian language is actively discouraged.

There is a brand or chain of Karaoke parlors called “MAFIA Karaoke.”

Unlike some parts of Moscow, there are few signs of a rip-off culture here with respect to tourists. The citizenry is unfailingly helpful when possible, though short answers are hard to come by.  People in random encounters seem quite willing to give all sorts of (wordy) advice as to what you should be doing and why.

Japanese restaurants are more common than Chinese.  After Italian, there is not much culinary diversity to be seen, but the Georgian restaurants are among the best in the city.  As for a single recommendation, Kanapa [Kanape] for “nouvelle Ukraine” would be my clear first pick, and it is on a picturesque street with many folk art stalls.

If two people each order bottles of mineral water, they will not open one bottle for each person.  Instead, they induce you to first share the first bottle, and then the second, in sequence.  Thus the water is not efficiently conserved.

It is remarkable how many different restaurants serve their chocolate ice cream with a basil leaf on top.

The decline of private ownership in America

That is the topic of my latest Bloomberg column,.  After a discussion of Spotify, Netflix, Kindle, and Uber, I move to the more general point:

Each of these changes is beneficial, yet I worry that Americans are, slowly but surely, losing their connection to the idea of private ownership. The nation was based on the notion that property ownership gives individuals a stake in the system. It set Americans apart from feudal peasants, taught us how property rights and incentives operate, and was a kind of training for future entrepreneurship. Do we not, as parents, often give our children pets or other valuable possessions to teach them basic lessons of life and stewardship?

We’re hardly at a point where American property has been abolished, but I am still nervous that we are finding ownership to be so inconvenient. The notion of “possessive individualism” is sometimes mocked, but in fact it is a significant source of autonomy and initiative.

And as software continues to “eat the world,” we often have fewer ownership rights when it comes to revisions, upgrades, and repairs.  The piece closes with this:

Does that sound like something our largely agrarian Founding Fathers might have been happy about? The libertarian political theorist might tell you that arrangement is simply freedom of contract in action. But the more commonsensical, broad libertarian intuitions of the American public encapsulate a more brutish and direct sense that some things we simply own and hold the rights to.

Those are intuitions which are growing increasingly disconnected from reality, and no one knows what lies on the other side of this social experiment.

Do read the whole thing.

Why sleep in a McDonald’s?

The number of people sleeping in McDonald’s outlets has increased six-fold over the past five years, a trend partly driven by rising rents and substandard housing that makes life especially unbearable in the city’s baking weather, a study has found.

The survey, organised by Junior Chamber International and conducted in June by volunteers, found 334 people had slept in a McDonald’s outlet nightly over at least the past three months. Of the 110 branches that operate 24 hours in the city, 84 had seen overnight sleepers.

This is a six-fold increase from a similar study in 2013, which found only 57 such people, popularly dubbed McRefugees or McSleepers.

A branch in Tsuen Wan hosted more than 30 sleepers, the highest among all branches, according to the latest study.

Researchers were able to interview 53 McRefugees aged between 19 and 79 in depth, and found 57 per cent of them had a job and 71 per cent of them had flats that they rented or owned, contrary to the common belief that these people tended to be jobless and homeless.

Saving on air conditioning costs, as well as comfort and security, topped a list of reasons given by these interviewees, followed by high rents, conflict with family members, the ability to develop social relations at the chain and substandard housing.

Here is the full story, via the excellent Kevin Lewis.

Why does tech have so many political problems?

These are originally derived from written notes, a basis for comments by somebody else, from a closed session on tech.  I have added my own edits:

  1. Most tech leaders aren’t especially personable. Instead, they’re quirky introverts. Or worse.
  2. Most tech leaders don’t care much about the usual policy issues. They care about AI, self-driving cars, and space travel, none of which translate into positive political influence.
  3. Tech leaders are idealistic and don’t intuitively understand the grubby workings of WDC.
  4. People who could be “managers” in tech policy areas (for instance, they understand tech, are good at coalition building, etc.) will probably be pulled into a more lucrative area of tech. Therefore ther is an acute talent shortage in tech policy areas.
  5. The Robespierrean social justice terror blowing through Silicon Valley occupies most of tech leaders’ “political” mental energy. It is hard to find time to focus on more concrete policy issues.
  6. Of the policy issues that people in tech do care about—climate, gay/trans rights, abortion, Trump—they’re misaligned with Republican Party, to say the least. This same Republican party currently rules.
  7. While accusations of deliberate bias against Republicans are overstated, the tech rank-and-file is quite anti-Republican, and increasingly so. This limits the political degrees of freedom of tech leaders. (See the responses to Elon Musk’s Republican donation.)
  8. Several of the big tech companies are de facto monopolies or semi-monopolies. They must spend a lot of their political capital denying this or otherwise minimizing its import.
  9. The media increasingly hates tech. (In part because tech is such a threat, in part because of a deeper C.P. Snow-style cultural mismatch.)
  10. Not only does tech hate Trump… but Trump hates tech.
  11. By nature, tech leaders are disagreeable iconoclasts (with individualistic and believe it or not sometimes megalomaniacal tendencies). That makes them bad at uniting as a coalition.
  12. Major tech companies have meaningful presences in just a few states, which undermines their political influence. Of states where they have a presence — CA, WA, MA, NY — Democrats usually take them for granted, Republicans write them off.  Might Austin, TX someday help here?
  13. US tech companies are increasingly unpopular among governments around the world. For instance, Facebook/WhatsApp struggles in India. Or Google and the EU. Or Visa and Russia. This distracts the companies from focusing on US and that makes them more isolated.
  14. The issues that are challenging for tech companies aren’t arcane questions directly in and of the tech industry (such as copyright mechanics for the music industry or procurement rules for defense). They’re broader and they also encounter very large coalitions coming from other directions: immigration laws, free speech issues on platforms, data privacy questions, and worker classification on marketplaces.
  15. Blockchain may well make the world “crazier” in the next five years. So tech will be seen as driving even more disruption.
  16. The industry is so successful that it’s not very popular among the rest of U.S. companies and it lacks allies. (90%+ of S&P 500 market cap appreciation this year has been driven by tech.) Many other parts of corporate America see tech as a major threat.
  17. Maybe it is hard to find prominent examples of the great good that big tech is doing. Instagram TV. iPhone X. Amazon Echo Dot. Microsoft Surface Pro. Are you impressed? Are these companies golden geese or have they simply appropriated all the gold?

Are there more spies than you think?

That is the topic of my latest Bloomberg column, here is one excerpt:

We tend to focus on the cloak and dagger side of the KGB and successor institutions, but they’re also just government agencies trying to boost their budgets and achieve higher status in their home country. In other words, spy agencies play the typical bureaucratic games.

To maintain their status and privileged perch, spy agencies may try to take credit for as many activities as possible. This emphasis of quantity over quality is a typical bureaucratic response to a political system based on imperfect information. It is hard for national leaders to judge how effective their spy agencies are, so the spy agencies want to pass along good numbers, much as a corporation might try to slant its quarterly earnings report.

And:

John Negroponte, former director of national intelligence, admitted in 2006 that the U.S. was deploying about 100,000 spies around the world. Given that the U.S. is the world’s technology and military leader, and yet has a relatively small share of global population, is it so crazy to think the number of people spying on us is larger than that?

Do read the whole thing.

What does the pessimistic scenario look like?

That is the topic of my latest Bloomberg column.  No, these are not forecasts, but which of them are so far from the current reality?:

In recent years, the underlying rate of productivity growth often has been about 1 percent, and rates of economic growth are not even half of what they used to be. Meanwhile, America will have to increase taxes or reduce spending by about $2,200 per taxpayer per year to keep the national debt-to-GDP ratio from rising ever higher, and that figure predates the Trump tax cuts. To fund that shortfall, the U.S. will cut back on infrastructure maintenance. At least one-third of this country will end up looking like — forgive the colloquial phrase — “a dump.” The racial wealth gap will not be narrowed.

And:

Other technologies will indeed provide a bounty, but not all of it will be positive. Artificial intelligence and facial and gait surveillance will lead to unprecedented invasions of privacy, causing another 1 or 2 percent of Americans to decide to “live off the grid.” The impact of assassin drones will be curbed — by filling the skies with police drones. Public crimes will plummet, but public spaces in major cities will have a depressing sameness, due to the near-total absence of spontaneous behavior. Advances in recording technologies will make most conversations in public, and many in private, remarkably bland.

Do read the whole thing, which includes a discussion of “my own petty gripes.”  Consider it your pick-me-up for this morning.

Is Ben Carson underrated?

For his part, Mr. Carson publicly acknowledges the [housing affordability] crisis in most of his speeches. “Alarmingly high numbers of Americans continue to pay more than half of their incomes toward rent,” he told a House panel in October. “Many millions remain mired in poverty, rather than being guided on a path out of it.”

But he is focused less on federal solutions than on prodding local governments to ease barriers to construction. He has ordered his policy staff to come up with proposals to push local governments to reduce zoning restrictions on new projects, especially low-cost manufactured housing. HUD will also begin working with landlords around the country to come up with ways to make housing vouchers more attractive and more inclusive, aides said.

“Subsidies are a piece of the puzzle,” said Raffi Williams, a spokesman for Mr. Carson, “but we must also address the regulatory barriers relative to zoning and land use in higher-cost markets that are preventing the construction of new affordable housing. This is not just a federal problem — it’s everybody’s problem.”

Here is the full NYT story by Glenn Thrush.

Cross-Mediterranean migration to Europe is falling

Fewer successes, more deaths:

Between 2015 and 2017, according to United Nations data analyzed by The Washington Post, about 95 percent of migrants taking the so-called central Mediterranean route ended up on this continent’s shores.

Last month, however, the success rate was 45 percent — the lowest of any month in at least four years. A large proportion of migrants were intercepted and returned to North Africa. But deaths have spiked. According to the International Organization for Migration, 564 people died in June — or more than 7 percent of those who attempted the crossing. That is the highest percentage in any month since at least 2015. For the year, 3.4 percent have died attempting the journey, compared with 2.1 percent last year.

“Outsourcing” seems to be a major reason for this change:

Many migrants don’t make it to Europe because they don’t make it past the fleet of Libyan patrol vessels. The coast guard, rebuilt with E.U. and Italian funding, has become the most important player in the Mediterranean. Though the unit has been patrolling its coastal waters for more than a year and a half, data suggests it is becoming far more proficient at its job: intercepting migrants, placing them in detention on Libyan shores and keeping them from Europe.

In 2017, the Libyan coast guard managed to catch about 1 in 9 migrants attempting the journey. This year, it is intercepting almost 2 in 5. In June, it intercepted 47 percent.

Here is the full WaPo story by Chico Harlan.

Noah Smith and I debate the future of immigration into America

Over at Bloomberg:

Noah Smith: …Your conclusion was that although most Americans might have warm feelings toward immigrants in the abstract, the minority who are intensely anti-immigrant will prevail.

I think there are reasons to doubt this conclusion. The first reason is that illegal immigration and low-skilled immigration — the types that people tend to feel most negatively about — are both way down from a decade ago. Because these unpopular inflows are simply less of an issue, the pressure for restriction might abate quickly. Meanwhile, with U.S. fertility rates low, the U.S. needs skilled immigrants to come in and pay taxes to support the comfortable retirements of the elderly native-born. We might be seeing a situation similar to the mid-1800s, in which the needs of the U.S. economy override a brief bout of nativism.

Tyler Cowen: I still don’t see a renewed dose of immigration increases in America’s immediate or even midterm future. Immigration has become a major issue all around Europe, and pretty uniformly it is helping right-wing parties, not the left. Democrats fear this scenario for the U.S., even if immigration is polling pretty well at the moment. And so Democrats will keep some distance from the issue, more than one might have thought a few years ago.

Democrats also have begun to rethink the demographic-dividend strategy, based on the premise that immigrants will continue to vote for the Democrats in disproportionate numbers. According to one estimate, in 2016 perhaps as many as 28 percent of Latinos voted Republican, more than many observers had been expecting. The very successes of assimilation mean that many immigrants will end up voting Republican. Furthermore, a lot of recent legal arrivals are among the strongest opponents of illegal immigration into this country. I increasingly doubt that Democrats will be willing to bet the farm on a political strategy to boost immigration.

There is much more at the link.

Chinese sentences of the day another view of Trump

I have just spent a week in Beijing talking to officials and intellectuals, many of whom are awed by his skill as a strategist and tactician…He [Yafei] worries that strategic competition has become the new normal and says that “trade wars are just the tip of the iceberg”.

…In Chinese eyes, Mr Trump’s response is a form of “creative destruction”. He is systematically destroying the existing institutions — from the World Trade Organization and the North American Free Trade Agreement to Nato and the Iran nuclear deal — as a first step towards renegotiating the world order on terms more favourable to Washington. Once the order is destroyed, the Chinese elite believes, Mr Trump will move to stage two: renegotiating America’s relationship with other powers. Because the US is still the most powerful country in the world, it will be able to negotiate with other countries from a position of strength if it deals with them one at a time rather than through multilateral institutions that empower the weak at the expense of the strong…

My interlocutors say that Mr Trump is the US first president for more than 40 years to bash China on three fronts simultaneously: trade, military and ideology. They describe him as a master tactician, focusing on one issue at a time, and extracting as many concessions as he can. They speak of the skillful way Mr Trump has treated President Xi Jinping. “Look at how he handled North Korea,” one says. “He got Xi Jinping to agree to UN sanctions [half a dozen] times, creating an economic stranglehold on the country. China almost turned North Korea into a sworn enemy of the country.” But they also see him as a strategist, willing to declare a truce in each area when there are no more concessions to be had, and then start again with a new front.

That is highly speculative, to say the least.  And perhaps you should not be happy if China sees your strategy as strong, since China itself generally does a poor job cultivating allies and also undervalues them.  In any case, that is from Mark Leonard at the FT.

Is Portugal an anti-austerity story?

A recent NYT story by Liz Alderman says yes, but I find the argument hard to swallow.  Here’s from the OECD:

The cyclically adjusted deficit has decreased considerably, moving from 8.7% of potential GDP to 1.9% in 2013 and to 0.9% in 2014. This is better (lower) than the OECD average in 2014 (3.1%), reflecting some improvement in the underlying fiscal position of Portugal.

Or see p.20 here (pdf), which shows a rapidly diminishing Portuguese cyclically adjusted deficit since 2010.  Now I am myself skeptical of cyclically adjusted deficit measures, because they beg the question as to which changes are cyclical vs. structural.  You might instead try the EC:

…the lower-than-expected headline deficit in 2016 was mainly due to containment of current expenditure (0.8 % of GDP), particularly for intermediate consumption, and underexecution of capital expenditure (0.4% of GDP) which more than compensated a revenue shortfall of 1.0% of GDP (0.3% of GDP in tax revenue and 0.7% of GDP in non-tax revenue)

Does that sound like spending your way out of a recession?  Too right wing a source for you?  Catarina Principle in Jacobin wrote:

…while Portugal is known for having a left-wing government, it is not meaningfully an “anti-austerity” administration. A rhetoric of limiting poverty has come to replace any call to resist the austerity policies being imposed at the European level. Portugal is thus less a test case for a new left politics than a demonstration of the limits of government action in breaking through the austerity consensus.

Or consider the NYT article itself:

The government raised public sector salaries, the minimum wage and pensions and even restored the amount of vacation days to prebailout levels over objections from creditors like Germany and the International Monetary Fund. Incentives to stimulate business included development subsidies, tax credits and funding for small and midsize companies. Mr. Costa made up for the givebacks with cuts in infrastructure and other spending, whittling the annual budget deficit to less than 1 percent of its gross domestic product, compared with 4.4 percent when he took office. The government is on track to achieve a surplus by 2020, a year ahead of schedule, ending a quarter-century of deficits.

This passage also did not completely sway me:

“The actual stimulus spending was very small,” said João Borges de Assunção, a professor at the Católica Lisbon School of Business and Economics. “But the country’s mind-set became completely different, and from an economic perspective, that’s more impactful than the actual change in policy.”

Does that merit the headline “Portugal Dared to Cast Aside Austerity”?  Or the tweets I have been seeing in my feed, none of which by the way are calling for better numbers in this article?

I would say that further argumentation needs to be made.  Do note that much of the article is very good, claiming that positive real shocks help bring recessions to an end.  For instance, Portuguese exports and tourism have boomed, as noted, and they use drones to spray their crops, boosting yields.  That said, it is not just the headline that is at fault, as the article a few times picks up on the anti-austerity framing.

I’m going to call “mood affiliation” on this one, at least as much from the headline and commentary surrounding the article as the author herself.

Steve Teles on the Federalist Society and the Left

Here is one bit from what is an excellent story with good material in every paragraph:

Mr. Teles makes sure to emphasize that his sympathy with the conservative legal movement here grows out of not his policy preferences, which lean left, but his belief in the importance of a “powerfully structured” constitutional system. “I don’t think the purpose of the Constitution is to get a government so small you can drown in a bathtub,” he says. Rather, it is to ensure the government “is democratically responsible.”

Mr. Teles believes that one of the most salient projects for the newly conservative Roberts Court will be to roll back administrative-state prerogatives. That could revitalize Congress and restore the constitutional structure, vindicating two longtime goals of the conservative legal movement. But he thinks this could also end up serving certain policy ends of progressives.

For the past several decades, Mr. Teles says, many progressive victories in the economic realm have been achieved through “administrative jujitsu”—difficult-to-understand maneuvers involving taxes, fees, mandates, regulations, and administrative directives. If courts start to block technocratic liberal plans for social reform because they violate the separation of powers, the left may find it easier to mobilize for pure redistribution as an alternative. Think of postal banking instead of CFPB regulation, or a carbon tax instead of the Obama administration’s Clean Power Plan, or a reduction in the Medicare eligibility age instead of ObamaCare subsidies and exchanges.

That might be good for democratic discourse, Mr. Teles suggests. “In some ways liberalism has been deformed” by relying on administrative agencies, “as opposed to making big arguments for big, encompassing social programs.” In the short term, though, conservative courts will probably prove “radicalizing for the left.” Democrats may fully jettison Clintonism and say: “We’re going straight for socialism.” Steeply redistributive programs enacted by legislatures would be “easier to defend in court,” even a conservative court, than unaccountable bureaucratic diktats.

That is from Jason Willick at the WSJ.  I am a big fan of Steve Teles, and in fact here is my Conversation with him (and Brink Lindsey).

Surveillance sentences to ponder

One of the surveillance industry’s recent — and much publicised — success stories took place at a pop concert in eastern China. While Jacky Cheung, a Hong Kong pop star (rebranded a “fugitive trapper” by the Chinese media) crooned, cameras were automatically sweeping the audience.  Facial-recognition technology picked out four men accused of crimes — including a ticket scalper and a greengrocer accused of a Rmb110,000 potato scam in 2015. “Smiling as he approached his idol, he did not realise he had already been spotted,” Jiaxing police gloated in a social-media post.

And:

Some of China’s leading facial-recognition players, for example, are now moving into gait recognition. Hanwang Technology was an early entrant in the field: it was forced to rethink its fingerprint-recognition technology when the Sars epidemic of 2005 left people in China terrified of physical contact.  “We can see the human figure and his gait, so if his cap is pulled down [we] can still recognise him,” explains Liu Changping, president of the Beijing-based company. The Chinese authorities already have a decent video database to build on, he adds: “If [someone] was put in prison before, there’s video of him walking around.”

That is from Louis Lucas and Emily Feng from the FT, interesting throughout.