Must- and Should-Reads:
Must-Read: : Path to Grexit Tragedy Paved by Political Incompetence: “The country is seemingly on the slippery slope to exiting the euro….
…Nearly a decade ago, I analyzed scenarios for a country leaving the eurozone. I concluded that this was exceedingly unlikely to happen…. So where did this prediction go wrong?… The costs, I concluded, would be severe and heavily front-loaded… a bank run… shutter[ing] the financial system… losing access to not just their savings but also imported petrol, medicines and foodstuffs…. Not only would any subsequent benefits, by comparison, be delayed, but they would be disappointingly small…. Any improvement in export competitiveness due to depreciation of the newly reintroduced national currency would prove ephemeral…. Greece’s… leading export, refined petroleum, is priced in dollars and relies on imported oil…. Agricultural exports… will take several harvests to ramp up. And attracting more tourists won’t be easy against a drumbeat of political unrest….
I stand by the economic argument. Where I need to mark my views to market, however, is for underestimating the role of politics…. Syriza had run on a platform of no more spending cuts or tax increases but also of keeping the euro. It should have anticipated that some compromise would be needed to square this circle…. Prime Minister Alexis Tsipras and his government…. If it was unwilling to accept the creditors’ final offer, then it should have stated its refusal…. The decision to call a referendum in midstream only heightened uncertainty…. Still, this incompetence pales in comparison with that of the European Commission, the ECB and the IMF… [that] opposed debt restructuring in 2010 when the crisis still could have been resolved at low cost… continued to resist it in 2015… calculated the… primary budget surpluses that Greece would have to run… to hypothetically repay its debt… required the government to raise taxes and cut spending… ignored the fact that… they consigned the country to an even deeper depression. By privileging their own balance sheets, they got the Greek government and the outcome they deserved. The implication is clear. Never underestimate the ability of politicians to do the wrong thing. I will try to remember next time.
Must-Read: : “There is no correlation between austerity and debt reduction. If anything, slightly positive: http://t.co/mW3qGtpnC1 https://twitter.com/COdendahl/status/614161821356937216/photo/1
: Jeb Bush’s 4% Growth Promise Is 104% Nonsense: “Asked by Reuters to describe his thought process…
…Jeb said:
It’s a nice round number. It’s double the growth that we are growing at. It’s not just an aspiration. It’s doable….
According to James Glassman, Bush originally selected this goal at random, backed by zero substantive analysis of any kind…. In that conference call, “we were looking for a niche and Jeb in that very laconic way said, ‘four percent growth.’ It was obvious to everybody that this was a very good idea.” Wait, there’s a George W. Bush Institute? Yes. Having presided over the only presidency since Herbert Hoover in which the country lost jobs, the worst terrorist attack in American history, and a costly invasion of Iraq whose purpose was to destroy a nuclear weapons program that didn’t exist, George W. Bush decided he could not deprive the world of his policy insights upon retirement. Among other programs, the institute runs a 4% Growth Project, which is led by Amity Shlaes, a former Wall Street Journal editorial writer. Shlaes is a believer in the absurd inflation conspiracy theories of John Williams’s website, Shadowstats, according to which, among other things, the American economy has been consistently shrinking since 2004….
Has anyone actually read the Bush Institute’s book The 4% Solution? There is no clear and convincing evidence that anyone has read this book. But the introduction can be read for free on Amazon, and it contains the surprising admission that the goal is bullshit:
The United States is much more likely to achieve the average growth rate it maintained from the end of World War II to the most recent economic downturn — a rate of about 3% — than it is to accelerate to a new long-term economic growth rate of 4%…. The Bush Institute has set an intentionally provocative target in part because one way to find out what is actually attainable is to stretch for a goal that is seemingly just beyond one’s reach….
Why would Jeb propose it?… One, if you help yourself to an unrealistic presumption that the economy will grow at 4 percent per year…. Budget problems… melt away…. Suddenly gigantic tax cuts are affordable…. The other is that if you’re up on a debate stage, you’d much rather be the guy offering upbeat assessments of America’s potential to grow than the guy droning on about shifting demographics and Total Factor Productivity trends…
Must-Read: : It’s the Politics, Stupid!: “Contrary to what is heard in European circles…
…most of the concessions came from the Greek government. On retirement age, on the size of budget surplus… on VAT, on privatizations, we are today much closer to the Troika initial positions than to the initial Greek position…. The point that the Greek government made repeatedly is that some reforms, like improving the tax collection capacity, actually demanded an increase of resources, and hence of public spending. Reforms need to be disconnected from austerity…. Syriza, precisely like the Papandreou government in 2010 asked for time and possibly money. It got neither….
This has been since the beginning about politics. Creditors cannot afford that an alternative to policies followed since 2010 in Greece and in the rest of the Eurozone materializes. Austerity and structural reforms need to be the only way to go. Otherwise people could start asking questions; a risk you don’t want to run a few months before Spanish elections. Syriza needed to be made an example. You cannot survive in Europe, if you don’t embrace the Brussels-Berlin Consensus…. Those of us who were discussing pros and cons of the different options on the table, well, we were wasting our time. And if Greece needs to go down to prove it, so be it. If we transform the euro in a club in which countries come and go, so be it. The darkest moment for the EU.
Must- and Should-Reads:
Might Like to Be Aware of:
Must-Read: : Linkages and Economic Development: “Linkages across firms and industries….
Countries with stronger linkages have indeed higher productivity. A single Honda automobile is made of 20,000 to 30,000 parts produced by hundreds of different plants and firms… relie[s] on an extensive division of labour across plants which trade specialised inputs with one another in convoluted networks…. Hirschman (1958) reasoned these industry linkages were essential for economic development, and focused on how to promote the formation of robust input markets in poor countries and target investment to the industries with the strongest linkages…. Recent work by Ciccone (2002), Acemoglu et al. (2007), Jones (2011) and others has shown that distortions in input markets can in principle explain a large fraction of productivity differences between countries, but this literature has remained largely theoretical…. We show that the strength of linkages – measured as the average output multiplier (AOM) from an input-output table – is strongly and positive related to measured output per worker and total factor productivity…. A one standard deviation increase in the average output multiplier is associated with a 15-35% increase in output per worker…
Must-Read: : A Glimpse Into the Black, Shriveled Hearts of the Class Warriors: “When you think that maybe the hearts… aren’t actually that closed to compassion…
…you are always proven wrong:
[John] Kasich’s temper has made it harder to endear himself to the GOP’s wealthy benefactors. Last year, he traveled to Southern California to appear on a panel… sponsored by… Charles and David Koch…. Randy Kendrick, a major contributor and the wife of Ken Kendrick, the owner of the Arizona Diamondbacks, rose to say she disagreed with Kasich’s decision to expand Medicaid coverage, and questioned why he’d expressed the view it was what God wanted.
The governor’s response was fiery. ‘I don’t know about you, lady,’ he said as he pointed at Kendrick, his voice rising. ‘But when I get to the pearly gates, I’m going to have an answer for what I’ve done for the poor.’
The exchange left many stunned. About 20 audience members walked out of the room, and two governors also on the panel, Nikki Haley of South Carolina and Bobby Jindal of Louisiana, told Kasich they disagreed with him. The Ohio governor has not been invited back to a Koch seminar…
A Kasich spokesman, Chris Schrimpf, declined to comment on the episode.
Like in the first Gilded Age, the poor are seen with total contempt and hostility, as is even the mildest suggestion that we should do something for them. This is the open position of the Republican Party, a position they are able to take with a combination with appeals to racism and a well-funded propaganda machine about the values of the free market and self-reliance.
However, do remember, in office in Washington, as a legislator and as a technocrat John Kasich was no prize…
Must-Read: : The Future of Economic Transformation in Developing Countries: “Economic transformation in low-income countries is changing…
…For years, developing countries have tended to transition from agriculture to manufacturing to services. Yet recent evidence suggests that countries are running out of industrialisation options much sooner than expected. Is this a cause for concern? Or are there opportunities in agriculture and services that are just as effective at generating growth and ending poverty?
This is a weekly post we publish on Fridays with links to articles we think anyone interested in equitable growth should be reading. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Links
Derek Thompson imagines a world without work. [the atlantic]
David Leonhardt reports on new research on the intersection of race and neighborhoods. [the upshot]
The homeownership rate is declining and seems like it will keep going that way, according to Emily Badger. [wonkblog]
Adam Ozimek crunches the data on the changing sources of immigration to the United States. [moody’s]
Matthew C. Klein looks at household debt since the Great Recession and finds evidence for its “socialization.” [ft alphaville]
Friday figure
Figure from “What Do Americans Think Should Be Done About Inequality?” by Ilyana Kuziemko, Michael Norton, Emmanuel Saez, and Stefanie Stantcheva.