secular stagnation

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The Wealth of Humans: Work, Power, and Status in the Twenty-First Century by Ryan Avent

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This condition, which economists label ‘secular stagnation’, is associated with limp and vulnerable economic expansions, which often conclude in the deflation of big asset-price bubbles, and with protracted and disappointing recoveries. Secular stagnation in part of the world can function as a sort of economic black hole, sucking other economies into the weak-demand trap. It is caused by and exacerbates the inequities generated by the digital revolution. Secular stagnation slowly undermines support for the existing economic order, and while it is possible that governments will eventually settle on benign solutions to the problem, it is more likely that prolonged secular stagnation will lead to a broad backlash against global economic integration, and a costly turn inward. THE HOARDERS The idea of secular stagnation dates to the 1930s, when Alvin Hansen, an American economist of Keynesian intellectual disposition, wrote a book called Full Recovery or Stagnation.1 The book mused on the nature of the Depression and asked whether some of the factors behind it might lead to permanent, structural economic malaise.

In deflationary environments, on the other hand, such burdens loom ever larger, contributing to a cycle of cutbacks, defaults and further price declines. A WIDENING GYRE While the underlying conditions leading to chronically weak demand remain in place, the struggle to escape will grow harder, not easier, over time. Secular stagnation has a way of drawing additional countries into the trap, increasing the share of the global economy facing stagnant conditions and raising the gravitational pull towards the secular-stagnation black hole. The world is stuck. Too many big economies are struggling to generate enough demand to use up all their available economic capacity. Economies stuck in such a position can achieve fast growth, however, by capturing demand from abroad: by boosting their net exports (exports less imports) to other countries.

These actions, if successful, place a demand drag on the rest of the world; some of the purchasing power in a country like America, say, is diverted to goods and services produced elsewhere – in Germany, for instance. In ordinary times, this would not matter much: America’s central bank could respond to the diversion of spending to foreign economies by reducing interest rates to boost domestic demand. But in secular-stagnation economies, and especially those in which interest rates have fallen to near zero, the central bank cannot easily offset that drag. The more of the world’s economies that find themselves in low-rate, secular-stagnation conditions, the more pressure is placed on those economies not yet stuck in the trap, since they are the remaining, reliable sources of demand. But as ever more of the spending power in those reliable sources of demand is sucked in by those stuck in the trap, the closer healthy economies are brought to the trap themselves.

 

pages: 318 words: 77,223

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse by Mohamed A. El-Erian

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“In Search of a New Compass,” Bank for International Settlements, June 29, 2014, http://www.bis.org/publ/arpdf/ar2014e1.htm. 4. E. S. Browning, “The ‘Investor’s Dilemma’: Everything Is Expensive,” Wall Street Journal, August 24, 2014, http://blogs.wsj.com/moneybeat/2014/08/24/the-investors-dilemma-everything-is-expensive/. 5. Lawrence H. Summers, “Reflection on the ‘New Secular Stagnation Hypotheses,’ ” in Coen Tuelings and Richard Baldwin, eds., Secular Stagnation: Facts, Causes, and Cures (London: CEPR Press, 2014), http://www.voxeu.org/sites/default/files/Vox_secular_stagnation.pdf. CHAPTER 9: THE QUEST OF A GENERATION 1. Mohamed A. El-Erian, “The Global Growth Quest,” Project Syndicate, April 9, 2013, http://www.project-syndicate.org/commentary/the-worldwide-search-for-new-growth-models-by-mohamed-a--el-erian. 2. Matt O’Brien, “Greece’s Poor Are Back to Where They Were in 1980,” Washington Post, April 10, 2015, http://www.washingtonpost.com/blogs/wonk blog/wp/2015/04/10/greeces-poor-are-back-to-where-they-were-in-1980/. 3.

,” Reuters, October 31, 2011, http://blogs.reuters.com/mohamed-el-erian/2011/10/31/could-america-turn-out-worse-than-japan-2/. 9. Lawrence H. Summers, “U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound,” Business Economics 49, no. 2 (2014), http://larrysummers.com/wp-content/uploads/2014/06/NABE-speech-Lawrence-H.-Summers1.pdf. 10. Christine Lagarde, “The Challenge Facing the Global Economy: New Momentum to Overcome a New Mediocre,” speech to Georgetown University School of Foreign Service, October 2, 2014, http://www.imf.org/external/np/speeches/2014/100214.htm. 11. Gauti Eggertsson and Neil Mehrota, “A Model of Secular Stagnation,” NBER Working Paper No. 20574, National Bureau of Economic Research, April 2014, http://www.nber.org/papers/w20574.pdf. 12. Mohamed A. El-Erian, “Confronting Persistent U.S.

But I do worry, a lot, about future financial instability and what that does to economic and social well-being—agreeing with Fed chair Yellen’s remark that “a smoothly operating financial system promotes the efficient allocation of saving and investment, facilitating economic growth and employment.”12) This is an unprecedented policy configuration, and the outcome so far is mixed. CHAPTER 4 HOW AND WHY THIS BOOK IS ORGANIZED “Today, the growth picture is foggier. We have fear about secular stagnation at the same time as cheer about secular innovation. The technological tailwinds to growth are strong, but so too are the sociological headwinds. Buffeted by these cross-winds, future growth risks becoming suspended between the mundane and the miraculous.”1 —ANDY HALDANE “I am describing the outlook that I see as most likely, but based on many years of making economic projections, I can assure you that any specific projection I write down will turn out to be wrong, perhaps markedly so.”

 

pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

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Faltering Innovation Confronts the Six Headwinds, Centre for Economic Policy Research, Policy Insight No. 63, September 2012, http://www.cepr.org/sites/default/files/policy_insights/PolicyInsight63.pdf (accessed 12 April 2016). 18 See for example L. H. Summers, ‘U.S. economic prospects: secular stagnation, hysteresis, and the zero lower bound’, Business Economics, vol. 49, no. 2, 2014, pp. 65–73, http://larrysummers.com/wp-content/uploads/2014/06/NABE-speech-Lawrence-H.-Summers1.pdf (accessed 12 April 2016); C. Teulings and R. Baldwin (eds), Secular Stagnation: Facts, Causes and Cures, London, CEPR Press, 2014, http://voxeu.org/sites/default/files/Vox_secular_stagnation.pdf (accessed 12 April 2016). 19 Real median US household income in 2014 was $53,657 compared with $52,623 in 1990 (using 2014 CPI-U-RS Adjusted Dollars). Source: US Bureau of the Census, made available by the Federal Bank of St Louis, https://research.stlouisfed.org/fred2/series/MEHOINUSA672N (accessed 12 April 2016). 20 E.

The rate of productivity-enhancing innovation appears to have slowed down markedly over the last decade,2 a trend likely to be exacerbated in the future by declining rates of investment in research and development by both public and private sectors. This is one factor generating concerns that the developed world has entered a period, not of sustained growth, but of ‘secular stagnation’.3 Some economists see the risk of secular stagnation as a quasi-inevitable consequence of demographic change and savings behaviour in high-income countries. This chapter will instead highlight its endogenous character: the result of problematic choices that are being made by both businesses and governments. It will focus on how a different understanding of the origins of innovation—and, in particular, the role of public investment in the process of wealth creation—creates a different set of policy imperatives for countries seeking ‘smart’ growth.

Notes 1 See Innovation Union Flagship Initiative in the Europe 2020 strategy, http://ec.europa.eu/research/innovation-union/index_en.cfm (accessed 7 September 2015). 2 R. J. Gordon, ‘Is US economic growth over? Faltering innovation confronts the six headwinds’, Centre for Economic Policy Research, Policy Insight No 63, September 2012. Available at: http://www.cepr.org/sites/default/files/policy_insights/PolicyInsight63.pdf (accessed 13 June 2015). 3 See for example C. Teulings and R. Baldwin, eds, Secular Stagnation: Facts, Causes and Cures, London, CEPR Press, 2014. Available at http://www.voxeu.org/content/secular-stagnation-facts-causes-and-cures (accessed 20 May 2015). 4 A public good is a good that is both non-excludable and non-rivalrous so the use by one individual does not exclude the use by another. This means it is hard to appropriate privately the return from public goods, and hence they are characterised by too little private investment. Public goods might include clean air, national defence, basic research, all of which create benefits, positive externalities, for the wider community besides the agent investing in it. 5 R.

 

pages: 424 words: 115,035

How Will Capitalism End? by Wolfgang Streeck

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accounting loophole / creative accounting, Airbnb, Ben Bernanke: helicopter money, Bretton Woods, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, Clayton Christensen, collective bargaining, conceptual framework, corporate governance, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, market bubble, means of production, moral hazard, North Sea oil, offshore financial centre, open borders, pension reform, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, post-industrial society, private sector deleveraging, profit maximization, profit motive, quantitative easing, reserve currency, rising living standards, Robert Gordon, savings glut, secular stagnation, shareholder value, sharing economy, sovereign wealth fund, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, winner-take-all economy, Wolfgang Streeck

I called them stagnation, oligarchic redistribution, the plundering of the public domain, corruption and global anarchy. Re-reading what I said then, I see no reason to make modifications; in fact, in the short time of two years that has since passed, all five conditions became even more palpable. In the present section I will limit myself to just a few elaborations on oligarchy and corruption – the two, of course, being closely connected. Like secular stagnation, the private appropriation of public infrastructures, and global anarchy, they have in common that they critically weaken the systemic integration and stability of neoliberal capitalist societies.40 Beginning with oligarchic inequality – one could also speak of neo-feudalism – what matters here for the future of capitalism, or the lack of one, is not primarily that a tiny minority in today’s capitalist societies is becoming unimaginably rich.

In any case, in what looks like an afterthought, Gordon supports his prediction of low or no growth by listing six non-technological factors – he calls them ‘headwinds’ – which would make for long-term stagnation ‘even if innovation were to continue … at the rate of the two decades before 2007’.30 Among these factors he includes two that I argue have for some time been intertwined with low growth: inequality and ‘the overhang of consumer and government debt’.31 What is astonishing is how close current stagnation theories come to the Marxist underconsumption theories of the 1970s and 1980s.32 Recently, none other than Lawrence ‘Larry’ Summers – friend of Wall Street, chief architect of financial deregulation under Clinton, and Obama’s first choice for president of the Federal Reserve, until he had to give way in face of congressional opposition33 – has joined the stagnation theorists. At the IMF Economic Forum on 8 November last year, Summers confessed to having given up hope that close-to-zero interest rates would produce significant economic growth in the foreseeable future, in a world he felt was suffering from an excess of capital.34 Summers’ prediction of ‘secular stagnation’ as the ‘new normal’ met with surprisingly broad approval among his fellow economists, including Paul Krugman.35 What Summers mentioned only in passing was that the conspicuous failure of even negative real interest rates to revive investment coincided with a long-term increase in inequality, in the United States and elsewhere. As Keynes would have known, concentration of income at the top must detract from effective demand and make capital owners look for speculative profit opportunities outside the ‘real economy’.

They include the use of highly secretive ‘special forces’ to seek out potential enemies for individualized destruction; unmanned aircraft capable of killing anybody at almost any place on the globe; confinement and torture of unknown numbers of people in a worldwide system of secret prison camps; and comprehensive surveillance of potential opposition everywhere with the help of ‘big data’ technology. Whether this will be enough to restore global order, especially in light of China’s rise as an effective economic and, to a lesser extent, military rival to the United States may, however, be doubted. In summary, capitalism, as a social order held together by a promise of boundless collective progress, is in critical condition. Growth is giving way to secular stagnation; what economic progress remains is less and less shared; and confidence in the capitalist money economy is leveraged on a rising mountain of promises that are ever less likely to be kept. Since the 1970s, the capitalist centre has undergone three successive crises, of inflation, public finances and private debt. Today, in an uneasy phase of transition, its survival depends on central banks providing it with unlimited synthetic liquidity.

 

pages: 378 words: 110,518

Postcapitalism: A Guide to Our Future by Paul Mason

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Alfred Russel Wallace, bank run, banking crisis, banks create money, Basel III, Bernie Madoff, Bill Gates: Altair 8800, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business process, butterfly effect, call centre, capital controls, Claude Shannon: information theory, collaborative economy, collective bargaining, Corn Laws, corporate social responsibility, credit crunch, currency manipulation / currency intervention, currency peg, David Graeber, deglobalization, deindustrialization, deskilling, discovery of the americas, Downton Abbey, en.wikipedia.org, energy security, eurozone crisis, factory automation, financial repression, Firefox, Fractional reserve banking, Frederick Winslow Taylor, full employment, future of work, game design, income inequality, inflation targeting, informal economy, Internet of things, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kevin Kelly, knowledge economy, knowledge worker, late capitalism, low skilled workers, market clearing, means of production, Metcalfe's law, money: store of value / unit of account / medium of exchange, mortgage debt, Network effects, new economy, Norbert Wiener, Occupy movement, oil shale / tar sands, oil shock, payday loans, post-industrial society, precariat, price mechanism, profit motive, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, RFID, Richard Stallman, Robert Gordon, secular stagnation, sharing economy, Stewart Brand, structural adjustment programs, supply-chain management, the scientific method, The Wealth of Nations by Adam Smith, Transnistria, union organizing, universal basic income, urban decay, urban planning, wages for housework, women in the workforce

Keynes, The General Theory of Employment, Interest and Money (Cambridge, 1936), p. 293: http://www.marxists.org/reference/subject/economics/keynes/general-theory/ch21.htm 12. http://www.ftense.com/2014/10/total-global-debt-crosses-100-trillion.html 13. http://www.internetworldstats.com/emarketing.htm 14. http://cleantechnica.com/2014/04/13/world-solar-power-capacity-increased-35-2013-charts/ 15. L. Summers, ‘Reflections on the New Secular Stagnation Hypothesis’, in C. Teulings and R. Baldwin (eds.), Secular Stagnation: Facts, Causes, and Cures, VoxEU.org (August 2014) 16. R. Gordon, ‘The Turtle’s Progress: Secular Stagnation Meets the Headwinds’ in Teulings and Baldwin (eds.), Secular Stagnation 17. http://www.constitution.org/mon/greenspan_gold.htm 18. http://www.treasury.gov/ticdata/Publish/mfh.txt 19. R. Duncan, The New Depression: The Breakdown of the Paper Money Economy (Singapore, 2012) 20. http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/18/breaking-inside-the-feds-2007-crisis-response/?

Put the banks right, manage the debts down, rebalance the world and things will be all right. That is the assumption that has guided policy since 2008. Yet the persistence of low growth has now driven even mainstream economists beyond such complacency. Larry Summers, Treasury Secretary under Bill Clinton and an architect of bank deregulation, shook the economics world in 2013 by warning that the West faced ‘secular stagnation’ – that is, low growth for the foreseeable future. ‘Unfortunately,’ he admitted, low growth ‘has been present for a long time, but has been masked by unsustainable finances’.15 Veteran US economist Robert Gordon went further, predicting persistent low growth in the USA for the next twenty-five years, as a result of lower productivity, an ageing population, high debts and growing inequality.16 Remorselessly, capitalism’s failure to revive has moved concerns away from the scenario of a ten-year stagnation caused by overhanging debts, towards one where the system never regains its dynamism.

They also relentlessly pay down debt, and in the good times buy back shares as a kind of windfall profit distribution to their financial owners. They are minimizing their exposure to being financially exploited, and maximizing their own ability to play in the financial markets. So while Husson and Shaikh successfully demonstrate a ‘falling profit rate’ prior to 2008, the crisis is a result of something bigger and more structural. Its cause (as Larry Summers suggested in his work on secular stagnation) is the sudden disappearance of factors that had compensated for inefficiency and low productivity for decades.29 The determination to trace crises in general to one abstract cause, ignoring the structural mutation that was actually going on, was the original source of confusion in Marxist theory. This time around we have to avoid it. The account must be concrete: it must include the real structures of capitalism: states, corporations, welfare systems, financial markets.

 

pages: 357 words: 95,986

Inventing the Future: Postcapitalism and a World Without Work by Nick Srnicek, Alex Williams

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World Economic Outlook 2015: Uneven Growth: Short- and Long-Term Factors (Washington, DC: International Monetary Fund, 2015), pp. 69–71, pdf available at imf.org. 133.We do not pretend to adjudicate between the competing explanations here, but merely point to the growing consensus about a new era of lower growth: Andrew Kliman, ‘What Lies Ahead: Accelerating Growth or Secular Stagnation?’ E-International Relations, 24 January 2014, at e-ir.info; Robert Gordon, Is US Economic Growth Over? Faltering Innovation Confronts the Six Headwinds, Working Paper, National Bureau of Economic Research, August 2012, at nber.org; Lawrence Summers, ‘US Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound’, Business Economics 49: 2 (2014); Tyler Cowen, The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better (New York: Dutton, 2011); Coen Teulings and Richard Baldwin, eds, Secular Stagnation: Facts, Causes and Cures (London: CEPR, 2014). 134.Cowen, Great Stagnation, pp. 47–8. 135.Thor Berger and Carl Benedikt Frey, Industrial Renewal in the 21st Century: Evidence from US Cities?

The dearth of economic analysis on the left could be seen in the wake of the 2008 crisis, when the most prominent critical response was a makeshift Keynesianism. The left was largely without a meaningful and desirable economic programme, having focused primarily on the critique of capitalism rather than the elaboration of alternatives. This is a crisis of utopian imagination, but also of cognitive limits. A series of emerging contemporary phenomena must be thought through carefully: for instance, the causes and effects of secular stagnation; the transformations invoked by the shift to an informational, post-scarcity economy; the changes wrought by the introduction of full automation and a universal basic income; the possible approaches to collectivising automated manufacturing and services; the progressive potentials of alternative approaches to quantitative easing; the most effective ways to decarbonise the means of production; the implications of dark pools for financial instability – and so on.

Rousseau, General Purpose Technologies, Working Paper, National Bureau of Economic Research, January 2005, at nber.org; George Terbough, The Automation Hysteria: An Appraisal of the Alarmist View of the Technological Revolution (New York: W. W. Norton, 1966), pp. 54–5; Aaron Benanav and Endnotes, ‘Misery and Debt’, in Endnotes 2: Misery and the Value Form (London: Endnotes, 2010), p. 31. 25.Barry Eichengreen, Secular Stagnation: The Long View (Working Paper, National Bureau of Economic Research, January 2015), p. 5, pdf available at nber.org. 26.Kalyan Sanyal, Rethinking Capitalist Development: Primitive Accumulation, Governmentality and Post-Colonial Capitalism (New Delhi: Routledge India, 2013), p. 55. Notably, this means that this economic sector is eminently contemporary, rather than being a residue of some pre-capitalist mode of production. 27.Gabriel Wildau, ‘China Migration: At the Turning Point’, Financial Times, 4 May 2015, at ft.com; ‘Global Labor Glut Sinking Wages Means U.S.

 

pages: 524 words: 143,993

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis by Martin Wolf

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air freight, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, Bretton Woods, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, debt deflation, deglobalization, Deng Xiaoping, diversification, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, floating exchange rates, forward guidance, Fractional reserve banking, full employment, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, price stability, private sector deleveraging, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, The Chicago School, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tyler Cowen: Great Stagnation, very high income, winner-take-all economy

This view fits with the analysis in Chapter Five of longer-term reasons why demand in the high-income countries had to be supported by aggressive monetary policy and an ultimately unsustainable credit boom, particularly after the Asian financial crisis and the collapse of the stock-market bubble of the late-1990s. The argument for secular stagnation made by Lawrence Summers is that demand has become structurally weaker over the past decade.37 Daniel Alpert’s The Age of Oversupply is about much the same thing.38 The principal piece of evidence of secular stagnation is, as Mr Summers also notes, the combination of rapidly growing credit and high asset prices with weak economies, even before the crisis hit. The first explanation for structurally deficient private-sector demand in the absence of credit bubbles is rising inequality. A number of authors, from different sides of the policy spectrum, have made a direct link between inequality, structurally deficient demand and credit booms.39 The Nobel laureate economist Joseph Stiglitz of Columbia University has argued, for example, ‘Unemployment can be blamed on a deficiency in aggregate demand (the total demand for goods and services in the economy, from consumers, from firms, by government and by exporters); in some sense, the entire shortfall in aggregate demand – and hence in the U.

This weakness in domestic private demand was then offset either by prolonged fiscal deficits (as in Japan) or by large current-account surpluses (as in Germany, the Netherlands and other northern European countries). These three underlying drivers – liberalization, technology and ageing – proceeded to shift the world economy into a new shape, one that created huge gross and net capital flows across borders, growing inequality within countries, radical shifts in the location of investment and the rise of liberalized credit. These shifts led high-income economies into ‘secular stagnation’ – a world of structurally deficient aggregate demand, identified by Lawrence Summers, the former US treasury secretary, following the Keynesian Alvin Hansen, who invented this term in the 1930s.54 These forces in turn help explain the low real rates of interest before 2007 and the still lower real rates after the crisis, which was caused in large part by the policy responses to pre-crisis recessionary forces.

So the question is whether one can do simple things that would make the system more or less on its present lines more robust, and if not what the alternatives might be. That is the subject of Chapter Seven. Third, this leads the discussion to the big macroeconomic challenges. How should we manage a world of savings glut – or, which comes to the same thing, excess supply? Is there a real chance of secular stagnation and, if so, what might be done about it? These are in fact plausible worries. In particular, our big problem is the addiction to ever-rising debt, and the most worrying debt is not the public debt with which policymakers are obsessed but private debt, whose collapse, as we have seen, creates huge public-sector debt problems. It is extremely disturbing, however, that the policies being pursued in the big high-income economies amount to an attempt to get the credit machine going again.

 

pages: 126 words: 37,081

Men Without Work by Nicholas Eberstadt

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Carmen Reinhart, centre right, deindustrialization, financial innovation, full employment, illegal immigration, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labor-force participation, low skilled workers, moral hazard, Ronald Reagan, secular stagnation, Simon Kuznets, War on Poverty, women in the workforce, working-age population

Why is this recovery so much more fitful than other postwar recoveries?3 Some economists suggest the reason has to do with the unusual nature of the Great Recession. Downturns born of major financial crises intrinsically require longer correction periods than business cycle downturns.4 Others theorize that the scale of recent technological innovation is unrepeatable or that we have entered into an age of “secular stagnation” with low “natural real interest rates” consistent with significantly reduced investment demand.5 What is incontestable is that the ten-year moving average for U.S. per capita economic growth is lower today than at any time since the Korean War and that this slowdown commenced in the decade before the 2008 crash. As a result, a consensus among economists has developed in recent years redefining the growth potential of the U.S. economy downward.

Rogoff, “Recovery from Financial Crises: Evidence from 100 Episodes,” American Economic Review: Papers and Proceedings 104, no. 5: 50–55. http://scholar.harvard.edu/files/rogoff/files/aer_104-5_50-55.pdf. 5.Cf. Robert J. Gordon, The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War (Princeton, NJ: Princeton University Press, 2016); see for example, Lawrence H. Summers, “U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound,” Business Economics 49, no. 2: 65–73. 6.August 2016 projections for 2016–2026 by Congressional Budget Office anticipates full potential growth for U.S. GDP. See Congressional Budget Office, “Budget And Economic Data: Potential GDP and Underlying Inputs,” https://www.cbo.gov/about/products/budget_economic_data#6. 7.Simple calculations based on Bureau of Labor Statistics numbers make the point.

 

pages: 437 words: 115,594

The Great Surge: The Ascent of the Developing World by Steven Radelet

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Admiral Zheng, agricultural Revolution, Asian financial crisis, bank run, Berlin Wall, Branko Milanovic, business climate, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, clean water, colonial rule, demographic dividend, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, Erik Brynjolfsson, European colonialism, F. W. de Klerk, failed state, Francis Fukuyama: the end of history, Gini coefficient, global supply chain, income inequality, income per capita, invention of the steam engine, James Watt: steam engine, John Snow's cholera map, Joseph Schumpeter, land reform, low skilled workers, M-Pesa, megacity, Mikhail Gorbachev, oil shock, out of africa, purchasing power parity, race to the bottom, randomized controlled trial, Robert Gordon, Second Machine Age, secular stagnation, Simon Kuznets, South China Sea, special economic zone, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, women in the workforce, working poor

Former secretary of the Treasury and Harvard professor Lawrence Summers worries that the United States and other leading economies may be entering a period of “secular stagnation,” with structural changes in the global economy such that a return to past growth rates might not be feasible. Economic growth has rebounded much less quickly than many expected, and output remains far below its potential. Japan is in its second decade of slow growth, with a GDP today far lower than anyone would have predicted twenty years ago. Global investment and aggregate demand have remained tepid despite low interest rates. Summers does not argue that secular stagnation in the advanced economies is inevitable but that it could become the reality if policy makers do not take steps to heighten demand such as increasing public investment in infrastructure and changing regulations to spur private investment in alternative energy sources.2 Northwestern University economist Robert Gordon sees other forces working to slow long-term growth in the United States.

Joshua Kurlantzick gives an excellent account of political changes in Thailand in Democracy in Retreat: The Revolt of the Middle Class and the Worldwide Decline of Representative Government (New Haven, CT: Yale University Press, 2013), and my narrative follows his. The quote from James Kelly comes from his speech “U.S.-Thai Relations After September 11, 2001,” to the Asia Foundation in Bangkok on March 13, 2002, http://avalon.law.yale.edu/sept11/kelly_002.asp. 2. For a series of articles in which Summers lays out his views on secular stagnation, see his webpage: http://larrysummers.com/secular-stagnation. 3. See also Robert Gordon, “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds,” working paper 18315, National Bureau of Economic Research, Cambridge, MA, August 2012, www.nber.org/papers/w18315.pdf. 4. Press Information Bureau, Government of India, Prime Minister’s Office, “Sixth BRICS Summit—Fortaleza Declaration,” July 16, 2014, paragraphs 5 and 18, http://pib.nic.in/newsite/PrintRelease.aspx?

.), 32, 33–34 Port of Cotonou, 216 Portugal, 105, 123, 136 poverty, 94, 294 definitions and terminology of, 26–27 democracy and, 121 as exacerbated by conflicts, 119, 119 as man-made, 180 poverty, extreme, 5, 8, 25, 26, 27–30, 30, 31–35, 36, 41, 42, 118, 231, 232, 240, 241–45, 244, 256, 271 in China, 35, 36, 242 in Indonesia, 136 in South Africa, 183 poverty, reduction of, 3, 4, 5, 8, 17, 21, 27–31, 28, 30, 34–35 in Africa, 12 in China, 201 after global food crisis (2007), 12 ignorance of, 10 lack of attention to, 10 poverty traps, 14–16 pregnancy, 178 press, freedom of, 198–99 Preston, Samuel, 92 Preston curves, 92 Pritchett, Lant, 89, 235, 262 Programa Bolsa Família, 38, 67 progress in developing countries, x, 3–5, 45–53, 46, 49, 229, 237–39, 238 democratization and, see democracy factors for, 16–19 future of, 21–23 as good for West, 19–21 income growth in, 240–41, 240 investment in, 238 and long historical perspective, 13 and microlevel studies, 13–14 middle class emergence in, 240–41 pessimism about, 9–12 possible stalling of, 255–56 possible tripling of incomes in, 277–78 and poverty traps, 14–16 reduction of poverty in, see poverty, reduction of threats to, 291–92 transforming production in, 262–63 property rights, 142, 303 protein, 280 Protestant work ethic, 120–21 Publish What You Pay, 305 Punjab, 178–79 Putin, Vladimir, 224, 255 Radelet, John, 60 Rahman, Ziaur, 271 Rajan, Raghuram, 225, 237 Rajasthan, 33 Ramos, Fidel, 103 Ramos-Horta, José, 184 Ravallion, Martin, 27, 29, 64, 227, 243 Rawlings, Jerry, 188–89 Rebirth of Education, The (Pritchett), 89 recession (1980s), 10, 191 Reebok, 164 religion, freedom of, 198–99 religious bodies, 110 Reserve Bank, Zimbabwe, 181 resource curse, 54, 163, 206 resource demand, 21, 233, 272, 281 resource extraction, 162–63 resources, 275 in Africa, 261 resource wars, 284–86 retail trade, 37, 45 Return of History and the End of Dreams, The (Kagan), 253 Reuveny, Rafael, 272 Rhodes, Cecil, 180 Rhodesia, 43 rice, 139, 215–16 rickshaw drivers, 32–33 Ridley, Matt, 11 rights, 131, 161, 198–99 rinderpest, 215 Rio de Janeiro, 46, 58, 159, 201 river blindness, 214 roads, 169, 233, 235 aid for, 216 in South Africa, 202 Robinson, James, 13, 140, 249 robotics, 261, 301 Rockefeller Foundation, 170 Rodrik, Dani, 261, 263 Roll Back Malaria Partnership, 212 Romania, 36, 50, 134, 143 Romero, Óscar, 100 Roosevelt, Franklin, 100 Roosevelt, Theodore, 169 Ross, Ronald, 211 Royal Economic Society, 226 Russia, 47, 146, 222, 256 democracy in, 113, 263, 264 infrastructure financing in, 259–60 slowing of progress in, 250, 264 Ukraine invaded by, 192, 233 US aid banned by, 224 Rutagumirwa, Laban, 176–77 Rwanda, 144, 159 aid to, 214, 216, 224 China’s example followed by, 266 growth in, 6, 7, 45, 50, 125, 128, 261 individual leadership in, 187 as landlocked, 207 Sachs, Jeffrey, 14–15, 175, 205, 210, 213, 219 Safaricom, 47 salinity, 171, 215 Sall, Macky, 114 Samoa, 202 sanitation, 73, 77, 216, 303 Sargsyan, Vazgen, 113 Saudi Arabia, 115 savings rate, 201 schistosomiasis, 205 Schlesinger, Arthur, Jr., 121 Schumpeter, Joseph, 249 Second Machine Age, The (Brynjolfsson and McAfee), 166, 300 secular stagnation, 257 seed drill, 25 seeds, 171 semiconductors, 20 Sen, Amartya, 19, 123, 127, 128 Sendero Luminoso, 287 Senegal, 7, 37 aid to, 223, 224 corruption in, 114 democracy in, 123, 124, 263 demonstrations in, 281 growth in, 261 inequality in, 67 Senkaku islands, 288 Seoul, 201 September 11, 2001, terrorist attacks of, 269 services, 67, 260, 261–62 severe acute respiratory syndrome (SARS), 82, 267 Seychelles, 284 Shanghai, 201 Shenzhen, 91 Sherpas, 203 Shikha, 33–34 Shinawatra, Thaksin, 254–55, 264 Shinawatra, Yingluck, 255 Shining Path, 287 shipping, 202 shipping containers, 167–68 shock therapy, 219 shoes, 56, 139, 162, 262 Sierra Leone, 220, 285 democracy in, 104, 107 Ebola in, 82 growth in, 50 health system in, 266 violence in, 146, 206 Silk Road, 206 silks, 152 silver, 152 Simon, Julian, 294 Sin, Jaime, 18, 103 Singapore, 7, 16, 184 benign dictatorship in, 126 and democracy, 122, 248, 250 and globalization, 155 growth in, 125, 139, 147 universities in, 247 Singh, Manmohan, 192 Six-Day War, 285 skills and capabilities, 16, 190–92 slavery, 142, 156, 180, 206 smallpox, 214, 215 Smith, Adam, 151, 156, 200–201 Smith, David, 43 Smith, Marshall, 178–79 SMS text messages, 47, 178 Snow, John, 77 social safety net, 38, 39, 68, 164, 307 Sogolo, Nicéphore, 144 soil, 171, 215 Solow, Robert, 165 Somalia, 8, 9, 99, 119, 213, 243 aid to, 224 power vacuum in, 184 Zheng He’s trip to, 152 Somoza García, Anastasio, 100, 127 Song-Taaba Yalgré women’s cooperative, 178 South Africa, 7, 17, 18, 20, 22, 37, 43, 46, 127, 143, 145, 155, 182–83, 207 aid to, 223 apartheid in, 44, 57, 68, 100, 103, 135, 141, 180, 182 banks in, 56 corruption in, 264 economic growth in, 183, 235, 262 future of, 234 HIV in, 174 inequality in, 68 infrastructure financing in, 259–60 life expectancy in, 266 political turmoil in, 57 roads in, 202 universities in, 247 South Asia, 37, 50 Southeast Asia, 5, 12, 167 colonialism in, 140 growth in, 141 Southern Rhodesia, 180 South Jakarta, 286 South Korea, 36, 127, 159, 184, 201, 288, 290 aid to, 214, 216 benign dictatorship in, 126 democracy in, 104, 122, 126, 250 as dictatorship, 99, 122 and globalization, 155 growth in, 7, 16, 29, 71, 125, 139, 147, 236, 262 individual leadership in, 187 inequality in, 68 lack of resources in, 205 land redistribution in, 68 Soviet Union, x, 50, 126, 133–34, 145, 148, 298, 309 Afghanistan invaded by, 134, 146 collapse of, 16, 81, 103, 131, 135, 142, 156, 250, 251 countries controlled by, 141 dictatorships supported by, 100 malaria in, 210 Spain, 105, 123, 140 speech, freedom of, 198–99 Spence, Michael, 86, 165 Spratly Islands, 289 Sputnik, 147, 250 Sri Lanka, 11, 37 economic problems in, 255 engineers from, 56 malaria in, 211 Zheng He’s trip to, 152 Stalin, Joseph, 127 state-owned farms, 195 Stavins, Robert, 297 steam engine, 25, 300 Steinberg, James, 299 Stern, Nicholas, 213, 292 Stiglitz, Joseph, 213, 227 stock exchanges, 241 Strait of Malacca, 201 student associations, 110 Subic Bay Naval Station, 201 Subramanian, Arvind, 225 Sudan, 114, 115, 185, 206, 208, 285 aid to, 224 China’s example followed by, 266 violence in, 285 Suharto, 99, 112, 122, 126, 138–39, 144 Sumatra, 152 Summers, Lawrence, 88, 227, 235, 246, 257 Sustainable Development Goals, 217 Swaziland, life expectancy in, 266 sweatshops, 58 Sweden, 159 Switzerland, 27, 202 Sydney, 201 Syria, 8, 285 aid to, 224 conflict in, 118, 119, 146, 233, 255 in Six-Day War, 285 Taiwan, 29, 153, 201, 289, 290 aid to, 216 benign dictatorship in, 126 democracy in, 122, 126, 250 and globalization, 155 growth in, 125, 139, 147, 236, 262 individual leadership in, 187 lack of resources in, 205 Tajikstan, 205, 208 Tanzania: aid to, 214, 216 and democracy, 248 fruit markets in, 58 growth in, 45, 50, 238, 240, 261 purchasing power in, 27 reforms in, 192 Zheng He’s trip to, 152 tariffs, 44, 102, 155, 167, 193, 263, 305 Tarp, Finn, 226 tax revenues, 241, 247 Taylor, Charles, 99, 145 technology, x, 17, 19, 22, 94–96, 135, 150, 151–79, 183, 200, 206–7, 234, 245, 258, 294, 301 for agriculture, 170–71 for banking, 175, 179 in China, 154–55, 236 for education, 178–79 globalization and, 156, 166 for health, 173–75, 179, 293 terrorism and, 287–88 telecommunications, 158 Terai, 211 terms-of-trade ratio, 54 terrorism, 19, 20, 21, 146, 286–88 tetanus, 94, 161 textiles, 25, 56, 139, 152 Thailand, 9, 22, 36, 253–55, 265 benign dictatorship in, 126 child mortality in, 84 corruption in, 254, 264 and democracy, 248, 253–54, 255, 263 growth in, 139, 147, 262 protests in, 255, 263 Zheng He’s trip to, 152 Theroux, Paul, 12 Things Fall Apart (Achebe), 72 think tanks, 110 Third Wave, The (Huntington), 121 Thomas, Brendon, 90–91 Tiananmen Square, 148 Tibet, 203 Tigris, 285 timber, 61, 139, 206, 223, 285 Timbuktu, 206 Timor-Leste, 36, 139, 144, 184, 220 aid to, 223 democracy in, 106, 122 infrastructure investment in, 216 poverty in, 122 tin, 139 Tokyo, 201, 277 totalitarianism, 10–11, 16 tourism, 45 toys, 56, 139 trade, x, 6, 17, 20, 22, 52, 156, 157, 162–63, 193, 203, 204–5, 234, 257, 303 in agriculture, 273 Asian economic miracle and, 170, 201 growth of, 157, 158–59, 160 sea-based, 200–201 shipping containers and, 167–68 trade unions, 110 transportation, 166, 261 Truth and Reconciliation Commission, 182 T-shirts, 159, 164 Tuareg, 265 tuberculosis, 75, 94, 161, 205, 214 Tull, Jethro, 25 Tunisia: democracy in, 7, 106, 124, 255, 263 growth in, 50, 238 Turkey, 36, 127, 285 aid to, 223 authoritarian rule in, 255 demand in, 53 democracy in, 106, 123, 124, 263 future of, 234 growth in, 6, 7, 22, 235, 238 protests in, 263 trade encouraged by, 155 universities in, 247 Turkmenistan, 114, 266, 285 Tutu, Desmond, 18, 103, 185 Uganda, 106, 112, 144, 159, 287 aid to, 216 and democracy, 263, 264 growth in, 50 horticulture producers in, 169 individual leadership in, 187 inequality in, 67 infrastructure investment in, 216 mobile phones in, 176–77 Ukraine, 143, 192, 233 Ultimate Resource, The (Simon), 294 unemployment benefits, 38, 164 United Fruit Company, 223 United Nations, 79, 212, 217, 258, 275, 298, 309 United Nations’ International Labour Organization, 57 United States, 19, 47, 68, 148, 231, 292, 300 China’s relationship with, 298–99 countries controlled by, 141 coups supported by, 100 democracy criticized in, 126 democracy in, 112, 296 and dictatorships, 139, 222 Iraq invasion by, 8, 118, 124, 146 leadership needed by, 234 natural capital in, 63 Panama invaded by, 144 post–World War II boom in, 262 protection provided by, 289–90 in World War II, 137 universities, 247 urbanization, 4, 22, 233, 268, 276–77, 279 US Agency for International Development (USAID), 95, 170, 171, 216, 308 Uyuni Sal Flat, 205 Uzbekistan, 8, 145, 185, 281, 285 vaccines, 77, 94, 161, 214, 233, 302 Velvet Revolution, 103 Venezuela, 22, 47, 106, 115 and democracy, 248, 263, 264 economic problems in, 255 natural capital in, 63 Vereenigde Oostindische Compagnie (VOC), 136–37 Vietnam, 36, 106, 144, 289 aid to, 214, 224 China’s example followed by, 266 growth in, 7, 45, 50, 125, 128, 147, 262 individual leadership in, 187 inequality in, 67 life expectancy in, 78 rice yields in, 215–16 textiles from, 56 Zheng He’s trip to, 152 Vietnam War, 100, 138, 141, 145, 289 Vincent, Jeffrey, 61 violence, 6, 20, 290 decline in, 4, 115–20, 116, 117, 119, 145–46 poverty deepened by, 119, 119 and poverty traps, 15 over resources, 284–86 Vitamin A deficiency, 173–74 Viviano, Frank, 152 Wade, Abdoulaye, 114, 224 Wałesa, Lech, 18, 103, 143, 149, 184, 186 Walls, Peter, 181 Walmart, 46 Wang Huan, 90–91 war, 5 attention to, 10 and poverty traps, 15 reduction of, 3, 4, 6 watchdog groups, 110 water, 77, 80, 161, 216, 275, 277–80, 307 water conservation, 233 water pollution, 8 water shortages, 22, 73 Watt, James, 25 Wealth and Poverty of Nations, The (Landes), 13 Wealth of Nations, The (Smith), 200–201 Weber, Max, 120 West Africa, 8, 10, 22, 205 colonialism in, 140 West Bengal, 31 Western Samoa, 75, 202 What We Know (AAAS report), 281–82 “When Fast Growing Economies Slow Down” (Eichengreen et al.), 236 White, Howard, 226 white supremacy, 124 “Why Isn’t the Whole World Developed?”

 

pages: 275 words: 77,955

Capitalism and Freedom by Milton Friedman

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affirmative action, Berlin Wall, central bank independence, Corn Laws, Deng Xiaoping, floating exchange rates, Fractional reserve banking, full employment, invisible hand, Joseph Schumpeter, liquidity trap, market friction, minimum wage unemployment, price discrimination, rent control, road to serfdom, Ronald Reagan, secular stagnation, Simon Kuznets, the market place, The Wealth of Nations by Adam Smith, union organizing

Chapter V Fiscal Policy EVER SINCE THE NEW DEAL, a primary excuse for the expansion of governmental activity at the federal level has been the supposed necessity for government spending to eliminate unemployment. The excuse has gone through several stages. At first, government spending was needed to “prime the pump.” Temporary expenditures would set the economy going and the government could then step out of the picture. When the initial expenditures failed to eliminate unemployment and were followed by a sharp economic contraction in 1937–38, the theory of “secular stagnation” developed to justify a permanently high level of government spending. The economy had become mature, it was argued. Opportunities for investment had been largely exploited and no substantial new opportunities were likely to arise. Yet individuals would still want to save. Hence, it was essential for government to spend and run a perpetual deficit. The securities issued to finance the deficit would provide individuals with a way to accumulate savings while the government expenditures provided employment.

This view has been thoroughly discredited by theoretical analysis and even more by actual experience, including the emergence of wholly new lines for private investment not dreamed of by the secular stagnationists. Yet it has left its heritage. The idea may be accepted by none, but the government programs undertaken in its name, like some of those intended to prime the pump, are still with us and indeed account for ever-growing government expenditures. More recently, the emphasis has been on government expenditures neither to prime the pump nor to hold in check the specter of secular stagnation but as a balance wheel. When private expenditures decline for any reason, it is said, governmental expenditures should rise to keep total expenditures stable; conversely, when private expenditures rise, governmental expenditures should decline. Unfortunately, the balance wheel is unbalanced. Each recession, however minor, sends a shudder through politically sensitive legislators and administrators with their ever present fear that perhaps it is the harbinger of another 1929–33.

railroads, 29, 35, 123, 126, 156, 197 recession, 76, 78 registration, 144, 145–46, 149 regulation, industry, 35, 38 rent control, 35 “right-to-work” laws, 115–17 riparian rights, 27 Road to Serfdom, The (Hayek), 11 roadways, 30–31, 36, 125, 199 Rome, 10 Roosevelt, Franklin Delano, 59 royalties, 27 Russia, 7–8, 20, 59, 164, 169, 196, 197, 101–2 salaries, teacher, 93–94, 95–96 Schacht, Hjalmar, 57 schooling, 85–98; and citizenship, 86, 88, 90, 96, 98, 199; conformity as result of, 94, 95, 97; denationalization of, 91; effect of competition on, 93; effect of teacher salaries on, 93–94; for-profit institutions of, 89; governmental administration of, 85, 87, 89, 90, 94, 95, 97, 98, 117; government funding of, 85, 86–88, 90, 93–94, 95; nonprofit funding of, 85, 89; and segregation, 117–18; subsidies for, 87 88–89, voucher system of, 89, 90, 91–98 Schumpeter, Joseph, 5 n. Schwartz, Anna J., 45 n. Second Bank of America, 44 secular stagnation, 75, 76 segregation, 117–18 Sherman antitrust laws, 125, 155, 199 Simons, Henry, 22, 32 Smith, Adam; 131, 133, 100, 102 socialism, 167–68, 171; vs. freedom, 7–8, 16–19, 20, 34, 74 social responsibility, 120, 133–36; and support of charities and universities, 135 social security, 35, 177, 182–89, 191, 199; administrative machinery to handle, 97; compulsory nature of annuities of, 8–9, 183, 187, 188–89; nationalization of, 183, 185–87; tax, 182–89 Social Security Administration, 186 South Africa, 59 South (U.S.), 109, 123, 181 Spain, 10 specialization of function, 22, 23, 14 stability, money.

 

pages: 179 words: 43,441

The Fourth Industrial Revolution by Klaus Schwab

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3D printing, additive manufacturing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, augmented reality, autonomous vehicles, barriers to entry, Baxter: Rethink Robotics, bitcoin, blockchain, Buckminster Fuller, call centre, clean water, collaborative consumption, conceptual framework, continuous integration, crowdsourcing, disintermediation, distributed ledger, Edward Snowden, Elon Musk, epigenetics, Erik Brynjolfsson, future of work, global value chain, Google Glasses, income inequality, Internet Archive, Internet of things, invention of the steam engine, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, life extension, Lyft, megacity, meta analysis, meta-analysis, more computing power than Apollo, mutually assured destruction, Narrative Science, Network effects, Nicholas Carr, personalized medicine, precariat, precision agriculture, Productivity paradox, race to the bottom, randomized controlled trial, reshoring, RFID, rising living standards, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, smart cities, smart contracts, software as a service, Stephen Hawking, Steve Jobs, Steven Levy, Stuxnet, The Spirit Level, total factor productivity, transaction costs, Uber and Lyft, Watson beat the top human players on Jeopardy!, WikiLeaks, winner-take-all economy, women in the workforce, working-age population, Y Combinator, Zipcar

In the immediate aftermath of the Great Recession, the expectation that the global economy would return to its previous high-growth pattern was widespread. But this has not happened. The global economy seems to be stuck at a growth rate lower than the post-war average – about 3-3.5% a year. Some economists have raised the possibility of a “centennial slump” and talk about “secular stagnation”, a term coined during the Great Depression by Alvin Hansen, and recently brought back in vogue by economists Larry Summers and Paul Krugman. “Secular stagnation” describes a situation of persistent shortfalls of demand, which cannot be overcome even with near-zero interest rates. Although this idea is disputed among academics, it has momentous implications. If true, it suggests that global GDP growth could decline even further. We can imagine an extreme scenario in which annual global GDP growth falls to 2%, which would mean that it would take 36 years for global GDP to double.

 

pages: 330 words: 77,729

Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes by Mark Skousen

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Albert Einstein, banking crisis, Berlin Wall, Bretton Woods, business climate, David Ricardo: comparative advantage, delayed gratification, experimental economics, financial independence, Financial Instability Hypothesis, full employment, Hernando de Soto, housing crisis, Hyman Minsky, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, laissez-faire capitalism, liquidity trap, means of production, microcredit, minimum wage unemployment, open economy, paradox of thrift, price stability, pushing on a string, rent control, Richard Thaler, rising living standards, road to serfdom, Robert Shiller, Robert Shiller, rolodex, Ronald Coase, Ronald Reagan, school choice, secular stagnation, Simon Kuznets, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, unorthodox policies

The Austrian Model Ultimately Loses Popularity Mises, Hayek, and Wicksell helped fill the gaps in neoclassical monetary economics, and helped complete the structure that Adam Smith had begun. But if their monetary theories of the business cycle had all the answers, why didn't they catch on? Primarily, their model was not appreciated until after the Great Depression took hold. And when the Great Depression didn't end quickly, as the Austrians predicted, economists started searching for a new model that could explain secular stagnation in a capitalist economy. Hayek and Mises advocated standard neoclassical solutions such as cutting wages and prices, lowering taxes, and reducing government interference in commerce and trade, but they adamantly counseled against reinflation and deficit spending. "It would only mean that the seed would already be sown for new disturbances and new crises," Hayek warned. The only solution to the Great Depression was "to leave it time to effect a permanent cure"—in other words, wait it out and let the market take its natural course (Hayek, 1935, 98-99).

Keynes had to be translated into plain English and easy-to-understand graphs and math, and Hansen was the principal interpreter, from Fiscal Policy and Business Cycles (1941) to A Guide to Keynes (1953). Hansen also campaigned for the Employment Act of 1946. According to Mark Blaug, "Alvin Hansen did more than any other economist to bring the Keynesian Revolution to America" (Blaug 1985, 79). "Stagnation Thesis" Discredits Hansen and Almost Destroys Samuelson's Reputation However, Hansen fell into a trap. He logically extended Keynes's unemployment equilibrium theory into a "secular stagnation thesis." (Keynes himself believed that conditions of the 1930s could persist indefinitely.) In his presidential address before the AEA in 1937, Hansen boldly announced that the United States was stuck in a "mature economy" rut from which it could not escape, due to its lack of technological innovations, the American frontier, and the population growth rate. His stagnation thesis was vigorously attacked by George Terborgh in his book The Bogey of Economic Maturity (1945) and then soundly disproved by a vibrant recovery after World Warn.

 

pages: 484 words: 104,873

Rise of the Robots: Technology and the Threat of a Jobless Future by Martin Ford

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3D printing, additive manufacturing, Affordable Care Act / Obamacare, AI winter, algorithmic trading, Amazon Mechanical Turk, artificial general intelligence, autonomous vehicles, banking crisis, Baxter: Rethink Robotics, Bernie Madoff, Bill Joy: nanobots, call centre, Capital in the Twenty-First Century by Thomas Piketty, Chris Urmson, Clayton Christensen, clean water, cloud computing, collateralized debt obligation, computer age, debt deflation, deskilling, diversified portfolio, Erik Brynjolfsson, factory automation, financial innovation, Flash crash, Fractional reserve banking, Freestyle chess, full employment, Goldman Sachs: Vampire Squid, High speed trading, income inequality, indoor plumbing, industrial robot, informal economy, iterative process, Jaron Lanier, job automation, John Maynard Keynes: technological unemployment, John von Neumann, Khan Academy, knowledge worker, labor-force participation, labour mobility, liquidity trap, low skilled workers, low-wage service sector, Lyft, manufacturing employment, McJob, moral hazard, Narrative Science, Network effects, new economy, Nicholas Carr, Norbert Wiener, obamacare, optical character recognition, passive income, performance metric, Peter Thiel, Plutocrats, plutocrats, post scarcity, precision agriculture, price mechanism, Ray Kurzweil, rent control, rent-seeking, reshoring, RFID, Richard Feynman, Richard Feynman, Rodney Brooks, secular stagnation, self-driving car, Silicon Valley, Silicon Valley startup, single-payer health, software is eating the world, sovereign wealth fund, speech recognition, Spread Networks laid a new fibre optics cable between New York and Chicago, stealth mode startup, stem cell, Stephen Hawking, Steve Jobs, Steven Levy, Steven Pinker, strong AI, Stuxnet, technological singularity, telepresence, telepresence robot, The Bell Curve by Richard Herrnstein and Charles Murray, The Coming Technological Singularity, Thomas L Friedman, too big to fail, Tyler Cowen: Great Stagnation, union organizing, Vernor Vinge, very high income, Watson beat the top human players on Jeopardy!, women in the workforce

* Obviously, I’m leaving aside those people who might choose to drop out of the workforce (at least temporarily) for reasons we would likely consider more legitimate, such as caring for children or other family members. For some families, for example, a basic income might turn out to be a partial solution to the looming elder-care problem. * Some economists, most notably former US Treasury secretary Larry Summers, have suggested that the economy is currently trapped in “secular stagnation”—a situation where interest rates are near zero, the economy is operating below its potential, and there is too little investment in more productive opportunities. I think a future where everyone is dependent almost entirely on his or her mutual fund balance for economic survival might well result in a similar outcome. CONCLUSION In the same month that the total number of jobs in the United States finally returned to pre-crisis levels, the US government released two reports that offer some perspective on the magnitude and complexity of the challenges we are likely to face in the coming decades.

., 150n risk, Peltzman effect and, 267–268 RoboBusiness conference/tradeshow, 7 Robot & Frank (film), 155 robotics, 6–8 cloud, 20–23 See also automation; robots robotic walkers, 157 robots in agriculture, 23–26 box-moving, 1–2, 5–6 consumer, 197n educational, 7 elder-care, 155–158 hospital and pharmacy, 153–155 industrial, 1–5, 10–11 personal, 7 telepresence, 119–120, 157 Rolling Stone (magazine), 56 Romney, Mitt, 272 Roosevelt, Franklin, 279 Rosenthal, Elisabeth, 160, 163 Rosenwald, Michael, 107 ROS (Robot Operating System), 6, 7 Russell, Stuart, 229 Rutter, Brad, 101 Sachs, Jeffrey, 60 Saez, Emmanuel, 46 safety, autonomous cars and, 184–185, 187 Salesforce.com, 134 Samsung Electronics, 70n Samuelson, Paul, x Sand, Benjamin M., 127 San Jose State University, 134 Sankai, Yoshiyuki, 156–157 Santelli, Rick, 170 savings, China’s high rate of, 224–225 SBTC. See skill biased technological change (SBTC) Schlosser, Eric, 210 Schmidt, Michael, 108, 109 Schwarzenegger, Arnold, 22 S-curves, 66–67, 68, 69, 70–71, 250 secular stagnation, 274n self-driving cars, See autonomous cars Selingo, Jeffrey J., 140, 141 Semiconductor Industry Association, 80 service sector, 12–20 The Shallows (Carr), 254 Shang-Jin Wei, 225 Silvercar, 20 Simonyi, Charles, 71 single-payer health care system, 165–167, 169 The Singularity, 233–238, 248 The Singularity Is Near (Kurzweil), 234 Singularity University, 234 Siu, Henry E., 49, 50 skill biased technological change (SBTC), 48 skills, acquisition of by computers, xv–xvi Skipper, John, 201 “Skynet,” 22 Slate (magazine), 153 Smalley, Richard, 244–245 Smith, Adam, 73 Smith, Noah, 219–220, 273 Smith, Will, 111 social media response program, 93–94 social safety net, 278.

 

pages: 361 words: 97,787

The Curse of Cash by Kenneth S Rogoff

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Andrei Shleifer, Asian financial crisis, bank run, Ben Bernanke: helicopter money, Berlin Wall, bitcoin, blockchain, Bretton Woods, capital controls, Carmen Reinhart, cashless society, central bank independence, cryptocurrency, debt deflation, distributed ledger, Edward Snowden, ethereum blockchain, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial intermediation, financial repression, forward guidance, frictionless, full employment, George Akerlof, German hyperinflation, illegal immigration, inflation targeting, informal economy, interest rate swap, Isaac Newton, Johann Wolfgang von Goethe, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, money: store of value / unit of account / medium of exchange, moral hazard, moveable type in China, New Economic Geography, offshore financial centre, oil shock, open economy, payday loans, price stability, purchasing power parity, quantitative easing, RAND corporation, RFID, savings glut, secular stagnation, seigniorage, The Great Moderation, the payments system, transaction costs, unbanked and underbanked, unconventional monetary instruments, underbanked, unorthodox policies, Y2K, yield curve

Thus the usual view that loose monetary policy is a driver of speculative bubbles might not be properly accounting for underlying factors that are simultaneously shifting both interest rates and risky borrowing. 4. See the interview of Bernanke in Rolnick (2004). 5. Reinhart and Rogoff (2009). 6. Philippon (2015) emphasizes the difficulty of measuring the contribution of the financial industry to GDP. 7. Yes, if secular stagnation turns out to imply that equilibrium real policy interest rates must remain below –2.0% for years on end (implying nominal rates below zero), then great adaptation will be necessary, but for the moment, this is certainly not the central long-term scenario. 8. See Chris Kimball and Miles Kimball, “However Low Interest Rates Might Go, the IRS Will Never Act Like a Bank,” Quartz blog, April 15, 2015, available at http://qz.com/383737/however-low-interest-rates-might-go-the-irs-will-never-act-like-a-bank/.

Kansas City Federal Reserve Bank. ———. 2008. “Inflation Is Now the Lesser Evil.” Project Syndicate, December. Available at http://www.project-syndicate.org/commentary/inflation-is-now-the-lesser-evil. ———. 2014. “Costs and Benefits to Phasing Out Paper Currency.” In NBER Macroeconomics Annual, ed. Jonathan Parker and Michael Woodford. Chicago: University of Chicago Press. ———. 2016. “Debt Supercycle, Not Secular Stagnation.” In Progress and Confusion: The State of Macroeconomic Policy, edited by Olivier Blanchard, Raghuram Rajan, Kenneth Rogoff, and Lawrence H. Summers. Cambridge: MIT Press, pp. 19–28. Rolnick, Arthur J. 2004. “Interview with Ben S. Bernanke.” Minneapolis Federal Reserve, Region Magazine (June). Rolnick, Arthur J., François R. Velde, and Warren E. Weber. 1996. “The Debasement Puzzle: An Essay on Medieval Monetary History.”

 

pages: 515 words: 142,354

The Euro: How a Common Currency Threatens the Future of Europe by Joseph E. Stiglitz, Alex Hyde-White

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bank run, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bretton Woods, capital controls, Carmen Reinhart, cashless society, central bank independence, centre right, cognitive dissonance, collapse of Lehman Brothers, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, currency peg, dark matter, David Ricardo: comparative advantage, disintermediation, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial innovation, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, housing crisis, income inequality, incomplete markets, inflation targeting, investor state dispute settlement, invisible hand, Kenneth Rogoff, knowledge economy, labour market flexibility, labour mobility, manufacturing employment, market bubble, market friction, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, neoliberal agenda, new economy, open economy, paradox of thrift, pension reform, pensions crisis, price stability, profit maximization, purchasing power parity, quantitative easing, race to the bottom, risk-adjusted returns, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, sovereign wealth fund, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population

If individuals insist, say, on saving a higher fraction of their income, the only way that the level of savings can be changed is if the level of income is reduced. Today the world is in this precise situation, with a deficiency of aggregate demand leading to slow growth and some 200 million unemployed around the world. This deficiency of aggregate demand is the cause of what many have referred to as global secular stagnation. (The term secular just means that it is long-term as opposed to cyclical, temporary slow growth that is part of recurrent business cycles.) The jobs “gap” has increased enormously since the onset of the Great Recession, with some 60 million fewer jobs in existence than what would have been expected if there had been no crisis.45 There is another reason that surpluses are particularly problematic.

., 51–57 single currency and, 45–46 economic rents, 226, 280 economics, politics and, 308–18 economic security, 68 economies of scale, 12, 39, 55, 138 economists, poor forecasting by, 307 education, 20, 76, 344 investment in, 40, 69, 137, 186, 211, 217, 251, 255, 300 electricity, 217 electronic currency, 298–99, 389 electronics payment mechanism, 274–76, 283–84 emigration, 4, 68–69 see also migration employment: central banks and, 8, 94, 97 structural reforms and, 257–60 see also unemployment Employment Act (1946), 148 energy subsidies, 197 Enlightenment, 3, 318–19 environment, 41, 257, 260, 323 equality, 225–26 equilibrium, xviii–xix Erasmus program, 45 Estonia, 90, 331, 346 euro, xiv, 325 adjustments impeded by, 13–14 case for, 35–39 creation of, xii, 5–6, 7, 10, 333 creation of institutions required by, 10–11 divergence and, see divergence divorce of, 272–95, 307 economic integration and, 46–47, 268 as entailing fixed exchange rate, 8, 42–43, 46–47, 86–87, 92, 93, 94, 102, 105, 143, 193, 215–16, 240, 244, 249, 252, 254, 286, 297 as entailing single interest rate, 8, 85–88, 92, 93, 94, 105, 129, 152, 240, 244, 249 and European identification, 38–39 financial instability caused by, 131–32 growth promised by, 235 growth slowed by, 73 hopes for, 34 inequality increased by, xviii interest rates lowered by, 235 internal devaluation of, see internal devaluation literature on, 327–28 as means to end, xix peace and, 38 proponents of, 13 referenda on, 58, 339–40 reforms needed for, xii–xiii, 28–31 risk of, 49–50 weakness of, 224 see also flexible euro Eurobond, 356 euro crisis, xiii, 3, 4, 9 catastrophic consequences of, 11–12 euro-euphoria, 116–17 Europe, 151 free trade area in, 44–45 growth rates in, 63–64, 69, 73–74, 74, 75, 163 military conflicts in, 196 social models of, 21 European Central Bank (ECB), 7, 17, 80, 112–13, 117, 144, 145–73, 274, 313, 362, 368, 380 capture of, 158–59 confidence in, 200–201 corporate bonds bought by, 141 creation of, 8, 85 democratic deficit and, 26, 27 excessive expansion controlled by, 250 flexibility of, 269 funds to Greece cut off by, 59 German challenges to, 117, 164 governance and, 157–63 inequality created by, 154–55 inflation controlled by, 8, 25, 97, 106, 115, 145, 146–50, 151, 163, 165, 169–70, 172, 250, 256, 266 interest rates set by, 85–86, 152, 249, 302, 348 Ireland forced to socialize losses by, 134, 156, 165 new mandate needed by, 256 as political institution, 160–62 political nature of, 153–56 quantitative easing opposed by, 151 quantitative easing undertaken by, 164, 165–66, 170, 171 regulations by, 249, 250 unemployment and, 163 as unrepresentative, 163 European Commission, 17, 58, 161, 313, 332 European Court of Human Rights, 45 European Economic Community (EEC), 6 European Exchange Rate Mechanism (ERM), 30, 335 European Exchange Rate Mechanism II (ERM II), 336 European Free Trade Association, 44 European Free Trade Association Court, 44 European Investment Bank (EIB), 137, 247, 255, 301 European Regional Development Fund, 243 European Stability Mechanism, 23, 246, 357 European Union: budget of, 8, 45, 91 creation of, 4 debt and deficit limits in, 87–88 democratic deficit in, 26–27 economic growth in, 215 GDP of, xiii and lower rates of war, 196 migration in, 90 proposed exit of UK from, 4 stereotypes in, 12 subsidiarity in, 8, 41–42, 263 taxes in, 8, 261 Euro Summit Statement, 373 eurozone: austerity in, see austerity banking union in, see banking union counterfactual in, 235–36 double-dip recessions in, 234–35 Draghi’s speech and, 145 economic integration and, xiv–xx, 23, 39–50, 51–57 as flawed at birth, 7–9 framework for stability of, 244–52 German departure from, 32, 292–93 Greece’s possible exit from, 124 hours worked in, 71–72 lack of fiscal policy in, 152 and move to political integration, xvi, 34, 35, 51–57 Mundell’s work on dangers of, 87 policies of, 15–17 possible breakup of, 29–30 privatization avoided in, 194 saving, 323–26 stagnant GDP in, 12, 65–68, 66, 67 structure of, 8–9 surpluses in, 120–22 theory of, 95–97 unemployment in, 71, 135, 163, 177–78, 181, 331 working-age population of, 70 eurozone, proposed structural reforms for, 239–71 common financial system, see banking union excessive fiscal responsibility, 163 exchange-rate risks, 13, 47, 48, 49–50, 125, 235 exchange rates, 80, 85, 288, 300, 338, 382, 389 of China, 251, 254, 350–51 and competitive devaluation, 105–6 after departure of northern countries, 292–93 of euro, 8, 42–43, 46–47, 86–87, 92, 93, 94, 102, 105, 215–16, 240, 244, 249, 252, 254, 286, 297 flexible, 50, 248, 349 and full employment, 94 of Germany, 254–55, 351 gold and, 344–45 imports and, 86 interest rates and, 86 quantitative easing’s lowering of, 151 real, 105–6 and single currencies, 8, 42–43, 46–47, 86–87, 92, 93, 94, 97–98 stabilizing, 299–301 and trade deficits, 107, 118 expansionary contractions, 95–96, 208–9 exports, 86, 88, 97–99, 98 disappointing performance of, 103–5 external imbalances, 97–98, 101, 109 externalities, 42–43, 121, 153, 301–2 surpluses as, 253 extremism, xx, 4 Fannie Mae, 91 farmers, US, in deflation, xii Federal Deposit Insurance Corporation (FDIC), 91 Federal Reserve, US, 349 alleged independence of, 157 interest rates lowered by, 150 mandate of, 8, 147, 172 money pumped into economy by, 278 quantitative easing used by, 151, 170 reform of, 146 fiat currency, 148, 275 and taxes, 284 financial markets: lobbyists from, 132 reform of, 214, 228–29 short-sighted, 112–13 financial systems: necessity of, xix real economy of, 149 reform of, 257–58 regulations needed by, xix financial transaction system, 275–76 Finland, 16, 81, 122, 126, 292, 296, 331, 343 growth in, 296–97 growth rate of, 75, 76, 234–35 fire departments, 41 firms, 138, 186–87, 245, 248 fiscal balance: and cutting spending, 196–98 tax revenue and, 190–96 Fiscal Compact, 141, 357 fiscal consolidation, 310 fiscal deficits, see deficits, fiscal fiscal policy, 148, 245, 264 in center of macro-stabilization, 251 countercyclical, 244 in EU, 8 expansionary, 254–55 stabilization of, 250–52 fiscal prudence, 15 fiscal responsibility, 163 flexibility, 262–63, 269 flexible euro, 30–31, 272, 296–305, 307 cooperation needed for, 304–5 food prices, 169 forbearance, 130–31 forecasts, 307 foreclosure proposal, 180 foreign ownership, privatization and, 195 forestry, 81 France, 6, 14, 16, 114, 120, 141, 181–82, 331, 339–40, 343 banks of, 202, 203, 231, 373 corporate income tax in, 189–90 euro creation regretted in, 340 European Constitution referendum of, 58 extreme right in, xi growth in, 247 Freddie Mac, 91 Freefall (Stiglitz), 264, 335 free mobility of labor, xiv, 26, 40, 125, 134–36, 142–44, 242 Friedman, Milton, 151, 152–53, 167, 339 full employment, 94–97, 379 G-20, 121 gas: import of, 230 from Russia, 37, 81, 93 Gates Foundation, 276 GDP-indexed bonds, 267 German bonds, 114, 323 German Council of Economic Experts, 179, 365 Germany, xxi, 14, 30, 65, 108, 114, 141, 181–82, 207, 220, 286, 307, 331, 343, 346, 374 austerity pushed by, 186, 232 banks of, 202, 203, 231–32, 373 costs to taxpayers of, 184 as creditor, 140, 187, 267 debt collection by, 117 debt in, 105 and debt restructuring, 205, 311 in departure from eurozone, 32, 292–93 as dependent on Russian gas, 37 desire to leave eurozone, 314 ECB criticized by, 164 EU economic practices controlled by, 17 euro creation regretted in, 340 exchange rate of, 254–55, 351 failure of, 13, 78–79 flexible exchange of, 304 GDP of, xviii, 92 in Great Depression, 187 growing poverty in, 79 growth of, 78, 106, 247 hours worked per worker in, 72 inequality in, 79, 333 inflation in, 42, 338, 358 internal solidarity of, 334 lack of alternative to euro seen by, 11 migrants to, 320–21, 334–35, 393 minimum wage in, 42, 120, 254 neoliberalism in, 10 and place-based debt, 136 productivity in, 71 programs designed by, 53, 60, 61, 202, 336, 338 reparations paid by, 187 reunification of, 6 rules as important to, 57, 241–42, 262 share of global employment in, 224 shrinking working-age population of, 70, 78–79 and Stability and Growth Pact, 245 and structural reforms, 19–20 “there is no alternative” and, 306, 311–12 trade surplus of, 117, 118–19, 120, 139, 253, 293, 299, 350–52, 381–82, 391 “transfer union” rejected by, 22 US loans to, 187 victims blamed by, 9, 15–17, 177–78, 309 wages constrained by, 41, 42–43 wages lowered in, 105, 333 global financial crisis, xi, xiii–xiv, 3, 12, 17, 24, 67, 73, 75, 114, 124, 146, 148, 274, 364, 387 and central bank independence, 157–58 and confidence, 280 and cost of failure of financial institutions, 131 lessons of, 249 monetary policy in, 151 and need for structural reform, 214 originating in US, 65, 68, 79–80, 112, 128, 296, 302 globalization, 51, 321–23 and diminishing share of employment in advanced countries, 224 economic vs. political, xvii failures of, xvii Globalization and Its Discontents (Stig-litz), 234, 335, 369 global savings glut, 257 global secular stagnation, 120 global warming, 229–30, 251, 282, 319 gold, 257, 275, 277, 345 Goldman Sachs, 158, 366 gold standard, 148, 291, 347, 358 in Great Depression, xii, 100 goods: free movement of, 40, 143, 260–61 nontraded, 102, 103, 169, 213, 217, 359 traded, 102, 103, 216 Gordon, Robert, 251 governance, 157–63, 258–59 government spending, trade deficits and, 107–8 gravity principle, 124, 127–28 Great Depression, 42, 67, 105, 148, 149, 168, 313 Friedman on causes of, 151 gold standard in, xii, 100 Great Malaise, 264 Greece, 14, 30, 41, 64, 81, 100, 117, 123, 142, 160, 177, 265–66, 278, 307, 331, 343, 366, 367–68, 374–75, 386 austerity opposed by, 59, 60–62, 69–70, 207–8, 392 balance of payments, 219 banks in, 200–201, 228–29, 231, 270, 276, 367, 368 blaming of, 16, 17 bread in, 218, 230 capital controls in, 390 consumption tax and, 193–94 counterfactual scenario of, 80 current account surplus of, 287–88 and debt restructuring, 205–7 debt-to-GDP ratio of, 231 debt write-offs in, 291 decline in labor costs in, 56, 103 ECB’s cutting of funds to, 59 economic growth in, 215, 247 emigration from, 68–69 fiscal deficits in, 16, 186, 215, 233, 285–86, 289 GDP of, xviii, 183, 309 hours worked per worker in, 72 inequality in, 72 inherited debt in, 134 lack of faith in democracy in, 312–13 living standards in, 216 loans in, 127 loans to, 310 migrants and, 320–21 milk in, 218, 223, 230 new currency in, 291, 300 oligarchs in, 16, 227 output per working-age person in, 70–71 past downturns in, 235–36 pensions in, 16, 78, 188, 197–98, 226 pharmacies in, 218–20 population decline in, 69, 89 possible exit from eurozone of, 124, 197, 273, 274, 275 poverty in, 226, 261, 376 primary surplus of, 187–88, 312 privatization in, 55, 195–96 productivity in, 71, 342 programs imposed on, xv, 21, 27, 60–62, 140, 155–56, 179–80, 181, 182–83, 184–85, 187–88, 190–93, 195–96, 197–98, 202–3, 205, 206, 214–16, 218–23, 225–28, 229, 230, 231, 233–34, 273, 278, 308, 309–11, 312, 315–16, 336, 338 renewable energy in, 193, 229 social capital destroyed in, 78 sovereign spread of, 200 spread in, 332 and structural reforms, 20, 70, 188, 191 tax revenue in, 16, 142, 192, 227, 367–368 tools lacking for recovery of, 246 tourism in, 192, 286 trade deficits in, 81, 194, 216–17, 222, 285–86 unemployment in, xi, 71, 236, 267, 332, 338, 342 urgency in, 214–15 victim-blaming of, 309–11 wages in, 216–17 youth unemployment in, xi, 332 Greek bonds, 116, 126 interest rates on, 4, 114, 181–82, 201–2, 323 restructuring of, 206–7 green investments, 260 Greenspan, Alan, 251, 359, 363 Grexit, see Greece, possible exit from eurozone of grocery stores, 219 gross domestic product (GDP), xvii decline in, 3 measurement of, 341 Growth and Stability Pact, 87 hedge funds, 282, 363 highways, 41 Hitler, Adolf, 338, 358 Hochtief, 367–68 Hoover, Herbert, 18, 95 human capital, 78, 137 human rights, 44–45, 319 Hungary, 46, 331, 338 hysteresis, 270 Iceland, 44, 111, 307, 354–55 banks in, 91 capital controls in, 390 ideology, 308–9, 315–18 imports, 86, 88, 97–99, 98, 107 incentives, 158–59 inclusive capitalism, 317 income, unemployment and, 77 income tax, 45 Independent Commission for the Reform of International Corporate Taxation, 376–377 Indonesia, 113, 230–31, 314, 350, 364, 378 industrial policies, 138–39, 301 and restructuring, 217, 221, 223–25 Industrial Revolution, 3, 224 industry, 89 inequality, 45, 72–73, 333 aggregate demand lowered by, 212 created by central banks, 154 ECB’s creation of, 154–55 economic performance affected by, xvii euro’s increasing of, xviii growth’s lowering of, 212 hurt by collective action, 338 increased by neoliberalism, xviii increase in, 64, 154–55 inequality in, 72, 212 as moral issue, xviii in Spain, 72, 212, 225–26 and tax harmonization, 260–61 and tax system, 191 inflation, 277, 290, 314, 388 in aftermath of tech bubble, 251 bonds and, 161 central banks and, 153, 166–67 consequences of fixation on, 149–50, 151 costs of, 270 and debt monetization, 42 ECB and, 8, 25, 97, 106, 115, 145, 146–50, 151, 163, 165, 169–70, 172, 255, 256, 266 and food prices, 169 in Germany, 42, 338, 358 interest rates and, 43–44 in late 1970s, 168 and natural rate hypothesis, 172–73 political decisions and, 146 inflation targeting, 157, 168–70, 364 information, 335 informational capital, 77 infrastructure, xvi–xvii, 47, 137, 186, 211, 255, 258, 265, 268, 300 inheritance tax, 368 inherited debt, 134 innovation, 138 innovation economy, 317–18 inputs, 217 instability, xix institutions, 93, 247 poorly designed, 163–64 insurance, 355–356 deposit, see deposit insurance mutual, 247 unemployment, 91, 186, 246, 247–48 integration, 322 interest rates, 43–44, 86, 282, 345, 354 in aftermath of tech bubble, 251 ECB’s determination of, 85–86, 152, 249, 302, 348 and employment, 94 euro’s lowering of, 235 Fed’s lowering of, 150 on German bonds, 114 on Greek bonds, 4, 114, 181–82 on Italian bonds, 114 in late 1970s, 168 long-term, 151, 200 negative, 316, 348–49 quantitative easing and, 151, 170 short-term, 249 single, eurozone’s entailing of, 8, 85–88, 92, 93, 94, 105, 129, 152, 240, 244, 249 on Spanish bonds, 114, 199 spread in, 332 stock prices increased by, 264 at zero lower bound, 106 intermediation, 258 internal devaluation, 98–109, 122, 126, 220, 255, 388 supply-side effects of, 99, 103–4 International Commission on the Measurement of Economic Performance and Social Progress, 79, 341 International Labor Organization, 56 International Monetary Fund (IMF), xv, xvii, 10, 17, 18, 55, 61, 65–66, 96, 111, 112–13, 115–16, 119, 154, 234, 289, 309, 316, 337, 349, 350, 370, 371, 381 and Argentine debt, 206 conditions of, 201 creation of, 105 danger of high taxation warnings of, 190 debt reduction pushed by, 95 and debt restructuring, 205, 311 and failure to restore credit, 201 global imbalances discussed by, 252 and Greek debts, 205, 206, 310–11 on Greek surplus, 188 and Indonesian crisis, 230–31, 364 on inequality’s lowering of growth, 212–13 Ireland’s socialization of losses opposed by, 156–57 mistakes admitted by, 262, 312 on New Mediocre, 264 Portuguese bailout of, 178–79 tax measures of, 185 investment, 76–77, 111, 189, 217, 251, 264, 278, 367 confidence and, 94 divergence in, 136–38 in education, 137, 186, 211, 217, 251, 255, 300 infrastructure in, xvi–xvii, 47, 137, 186, 211, 255, 258, 265, 268, 300 lowered by disintermediation, 258 public, 99 real estate, 199 in renewable energy, 229–30 return on, 186, 245 stimulation of, 94 in technology, 137, 138–39, 186, 211, 217, 251, 258, 265, 300 investor state dispute settlement (ISDS), 393–94 invisible hand, xviii Iraq, refugees from, 320 Iraq War, 36, 37 Ireland, 14, 16, 44, 113, 114–15, 122, 178, 234, 296, 312, 331, 339–40, 343, 362 austerity opposed in, 207 debt of, 196 emigrants from, 68–69 GDP of, 18, 231 growth in, 64, 231, 247, 340 inherited debt in, 134 losses socialized in, 134, 156–57, 165 low debt in, 88 real estate bubble in, 108, 114–15, 126 surplus in, 17, 88 taxes in, 142–43, 376 trade deficits in, 119 unemployment in, 178 irrational exuberance, 14, 114, 116–17, 149, 334, 359 ISIS, 319 Italian bonds, 114, 165, 323 Italy, 6, 14, 16, 120, 125, 331, 343 austerity opposed in, 59 GDP per capita in, 352 growth in, 247 sovereign spread of, 200 Japan, 151, 333, 342 bubble in, 359 debt of, 202 growth in, 78 quantitative easing used by, 151, 359 shrinking working-age population of, 70 Java, unemployment on, 230 jobs gap, 120 Juncker, Jean-Claude, 228 Keynes, John Maynard, 118, 120, 172, 187, 351 convergence policy suggested by, 254 Keynesian economics, 64, 95, 108, 153, 253 King, Mervyn, 390 knowledge, 137, 138–39, 337–38 Kohl, Helmut, 6–7, 337 krona, 287 labor, marginal product of, 356 labor laws, 75 labor markets, 9, 74 friction in, 336 reforms of, 214, 221 labor movement, 26, 40, 125, 134–36, 320 austerity and, 140 capital flows and, 135 see also migration labor rights, 56 Lamers, Karl, 314 Lancaster, Kelvin, 27 land tax, 191 Latin America, 10, 55, 95, 112, 202 lost decade in, 168 Latvia, 331, 346 GDP of, 92 law of diminishing returns, 40 learning by doing, 77 Lehman Brothers, 182 lender of last resort, 85, 362, 368 lending, 280, 380 discriminatory, 283 predatory, 274, 310 lending rates, 278 leverage, 102 Lichtenstein, 44 Lipsey, Richard, 27 liquidity, 201, 264, 278, 354 ECB’s expansion of, 256 lira, 14 Lithuania, 331 living standards, 68–70 loans: contraction of, 126–27, 246 nonperforming, 241 for small and medium-size businesses, 246–47 lobbyists, from financial sector, 132 location, 76 London interbank lending rate (LIBOR), 131, 355 Long-Term Refinancing Operation, 360–361 Lucas, Robert, xi Luxembourg, 6, 94, 142–43, 331, 343 as tax avoidance center, 228, 261 luxury cars, 265 Maastricht Treaty, xiii, 6, 87, 115, 146, 244, 298, 339, 340 macro-prudential regulations, 249 Malta, 331, 340 manufacturing, 89, 223–24 market failures, 48–49, 86, 148, 149, 335 rigidities, 101 tax policy’s correction of, 193 market fundamentalism, see neoliberalism market irrationality, 110, 125–26, 149 markets, limitations of, 10 Meade, James, 27 Medicaid, 91 medical care, 196 Medicare, 90, 91 Mellon, Andrew, 95 Memorandum of Agreement, 233–34 Merkel, Angela, 186 Mexico, 202, 369 bailout of, 113 in NAFTA, xiv Middle East, 321 migrant crisis, 44 migration, 26, 40, 68–69, 90, 125, 320–21, 334–35, 342, 356, 393 unemployment and, 69, 90, 135, 140 see also labor movement military power, 36–37 milk, 218, 223, 230 minimum wage, 42, 120, 254, 255, 351 mining, 257 Mississippi, GDP of, 92 Mitsotakis, Constantine, 377–78 Mitsotakis, Kyriakos, 377–78 Mitterrand, François, 6–7 monetarism, 167–68, 169, 364 monetary policy, 24, 85–86, 148, 264, 325, 345, 364 as allegedly technocratic, 146, 161–62 conservative theory of, 151, 153 in early 1980s US, 168, 210 flexibility of, 244 in global financial crisis, 151 political nature of, 146, 153–54 recent developments in theory of, 166–73 see also interest rates monetary union, see single currencies money laundering, 354 monopolists, privatization and, 194 moral hazard, 202, 203 mortgage rates, 170 mortgages, 302 multinational chains, 219 multinational development banks, 137 multinationals, 127, 223, 376 multipliers, 211–12, 248 balanced-budget, 188–90, 265 Mundell, Robert, 87 mutual insurance, 247 mutualization of debt, 242–43, 263 national development banks, 137–38 natural monopolies, 55 natural rate hypothesis, 172 negative shocks, 248 neoliberalism, xvi, 24–26, 33, 34, 98–99, 109, 257, 265, 332–33, 335, 354 on bubbles, 381 and capital flows, 28 and central bank independence, 162–63 in Germany, 10 inequality increased by, xviii low inflation desired by, 147 recent scholarship against, 24 Netherlands, 6, 44, 292, 331, 339–40, 343 European Constitution referendum of, 58 New Democracy Party, Greek, 61, 185, 377–78 New Mediocre, 264 New World, 148 New Zealand, 364 Nokia, 81, 234, 297 nonaccelerating inflation rate of unemployment (NAIRU), 379–80 nonaccelerating wage rate of unemployment (NAWRU), 379–80 nongovernmental organizations (NGOs), 276 nonperforming loans, 241 nontraded goods sector, 102, 103, 169, 213, 217, 359 North American Free Trade Agreement (NAFTA), xiv North Atlantic Treaty Organization (NATO), 196 Norway, 12, 44, 307 referendum on joining EU, 58 nuclear deterrence, 38 Obama, Barack, 319 oil, import of, 230 oil firms, 36 oil prices, 89, 168, 259, 359 oligarchs: in Greece, 16, 227 in Russia, 280 optimal currency area, 345 output, 70–71, 111 after recessions, 76 Outright Monetary Transactions program, 361 overregulate, 132 Oxfam, 72 panic of 1907, 147 Papandreou, Andreas, 366 Papandreou, George, xiv, 60–61, 184, 185, 220, 221, 226–27, 309, 312, 366, 373 reform of banks suggested by, 229 paradox of thrift, 120 peace, 34 pensions, 9, 16, 78, 177, 188, 197–98, 226, 276, 370 People’s Party, Portugal, 392 periphery, 14, 32, 171, 200, 296, 301, 318 see also specific countries peseta, 14 pharmacies, 218–20 Phishing for Phools (Akerlof and Shiller), 132 physical capital, 77–78 Pinochet, Augusto, 152–53 place-based debt, 134, 242 Pleios, George, 377 Poland, 46, 333, 339 assistance to, 243 in Iraq War, 37 police, 41 political integration, xvi, 34, 35 economic integration vs., 51–57 politics, economics and, 308–18 pollution, 260 populism, xx Portugal, 14, 16, 64, 177, 178, 331, 343, 346 austerity opposed by, 59, 207–8, 315, 332, 392 GDP of, 92 IMF bailout of, 178–79 loans in, 127 poverty in, 261 sovereign spread of, 200 Portuguese bonds, 179 POSCO, 55 pound, 287, 335, 346 poverty, 72 in Greece, 226, 261 in Portugal, 261 in Spain, 261 predatory lending, 274, 310 present discount value, 343 Price of Inequality, The (Stiglitz), 154 prices, 19, 24 adjustment of, 48, 338, 361 price stability, 161 primary deficit, 188, 389 primary surpluses, 187–88 private austerity, 126–27, 241–42 private sector involvement, 113 privatization, 55, 194–96, 369 production costs, 39, 43, 50 production function, 343 productivity, 71, 332, 348 in manufacturing, 223–24 after recessions, 76–77 programs, 17–18 Germany’s design of, 53, 60, 61, 187–88, 205, 336, 338 imposed on Greece, xv, 21, 27, 60–62, 140, 155–56, 179–80, 181, 182–83, 184–85, 187–88, 190–93, 195–96, 197–98, 202–3, 205, 206, 214–16, 218–23, 225–28, 229, 230, 231, 233–34, 273, 278, 308, 309–11, 312, 315–16, 336, 338 of Troika, 17–18, 21, 155–57, 179–80, 181, 182–83, 184–85, 187–93, 196, 202, 205, 207, 208, 214–16, 217, 218–23, 225–28, 229, 231, 233–34, 273, 278, 308, 309–11, 312, 313, 314, 315–16, 323–24, 346, 366, 379, 392 progressive automatic stabilizers, 244 progressive taxes, 248 property rights, 24 property taxes, 192–93, 227 public entities, 195 public goods, 40, 337–38 quantitative easing (QE), 151, 164, 165–66, 170–72, 264, 359, 361, 386 railroads, 55 Reagan, Ronald, 168, 209 real estate bubble, 25, 108, 109, 111, 114–15, 126, 148, 172, 250, 301, 302 cause of, 198 real estate investment, 199 real exchange rate, 105–6, 215–16 recessions, recovery from, 94–95 recovery, 76 reform, 75 theories of, 27–28 regulations, 24, 149, 152, 162, 250, 354, 355–356, 378 and Bush administration, 250–51 common, 241 corporate opposition to, xvi difficulties in, 132–33 of finance, xix forbearance on, 130–31 importance of, 152–53 macro-prudential, 249 in race to bottom, 131–34 Reinhardt, Carmen, 210 renewable energy, 193, 229–30 Republican Party, US, 319 research and development (R&D), 77, 138, 217, 251, 317–18 Ricardo, David, 40, 41 risk, 104, 153, 285 excessive, 250 risk markets, 27 Rogoff, Kenneth, 210 Romania, 46, 331, 338 Royal Bank of Scotland, 355 rules, 57, 241–42, 262, 296 Russia, 36, 264, 296 containment of, 318 economic rents in, 280 gas from, 37, 81, 93, 378 safety nets, 99, 141, 223 Samaras, Antonis, 61, 309, 377 savings, 120 global, 257 savings and loan crisis, 360 Schäuble, Wolfgang, 57, 220, 314, 317 Schengen area, 44 schools, 41, 196 Schröeder, Gerhard, 254 self-regulation, 131, 159 service sector, 224 shadow banking system, 133 shareholder capitalism, 21 Shiller, Rob, 132, 359 shipping taxes, 227, 228 short-termism, 77, 258–59 Silicon Valley, 224 silver, 275, 277 single currencies: conflicts and, 38 as entailing fixed exchange rates, 8, 42–43, 46–47, 86–87, 92, 93, 94, 97–98 external imbalances and, 97–98 and financial crises, 110–18 integration and, 45–46, 50 interest rates and, 8, 86, 87–88, 92, 93, 94 Mundell’s work on, 87 requirements for, 5, 52–53, 88–89, 92–94, 97–98 and similarities among countries, 15 trade integration vs., 393 in US, 35, 36, 88, 89–92 see also euro single-market principle, 125–26, 231 skilled workers, 134–35 skills, 77 Slovakia, 331 Slovenia, 331 small and medium-sized enterprises (SMEs), 127, 138, 171, 229 small and medium-size lending facility, 246–47, 300, 301, 382 Small Business Administration, 246 small businesses, 153 Smith, Adam, xviii, 24, 39–40, 41 social cohesion, 22 Social Democratic Party, Portugal, 392 social program, 196 Social Security, 90, 91 social solidarity, xix societal capital, 77–78 solar energy, 193, 229 solidarity fund, 373 solidarity fund for stabilization, 244, 254, 264, 301 Soros, George, 390 South Dakota, 90, 346 South Korea, 55 bailout of, 113 sovereign risk, 14, 353 sovereign spreads, 200 sovereign wealth funds, 258 Soviet Union, 10 Spain, 14, 16, 114, 177, 178, 278, 331, 335, 343 austerity opposed by, 59, 207–8, 315 bank bailout of, 179, 199–200, 206 banks in, 23, 186, 199, 200, 242, 270, 354 debt of, 196 debt-to-GDP ratio of, 231 deficits of, 109 economic growth in, 215, 231, 247 gold supply in, 277 independence movement in, xi inequality in, 72, 212, 225–26 inherited debt in, 134 labor reforms proposed for, 155 loans in, 127 low debt in, 87 poverty in, 261 real estate bubble in, 25, 108, 109, 114–15, 126, 198, 301, 302 regional independence demanded in, 307 renewable energy in, 229 sovereign spread of, 200 spread in, 332 structural reform in, 70 surplus in, 17, 88 threat of breakup of, 270 trade deficits in, 81, 119 unemployment in, 63, 161, 231, 235, 332, 338 Spanish bonds, 114, 199, 200 spending, cutting, 196–98 spread, 332 stability, 147, 172, 261, 301, 364 automatic, 244 bubble and, 264 central banks and, 8 as collective action problem, 246 solidarity fund for, 54, 244, 264 Stability and Growth Pact, 245 standard models, 211–13 state development banks, 138 steel companies, 55 stock market, 151 stock market bubble, 200–201 stock market crash (1929), 18, 95 stock options, 259, 359 structural deficit, 245 Structural Funds, 243 structural impediments, 215 structural realignment, 252–56 structural reforms, 9, 18, 19–20, 26–27, 214–36, 239–71, 307 from austerity to growth, 263–65 banking union, 241–44 and climate change, 229–30 common framework for stability, 244–52 counterproductive, 222–23 debt restructuring and, 265–67 of finance, 228–29 full employment and growth, 256–57 in Greece, 20, 70, 188, 191, 214–36 growth and, 232–35 shared prosperity and, 260–61 and structural realignment, 252–56 of trade deficits, 216–17 trauma of, 224 as trivial, 214–15, 217–20, 233 subsidiarity, 8, 41–42, 263 subsidies: agricultural, 45, 197 energy, 197 sudden stops, 111 Suharto, 314 suicide, 82, 344 Supplemental Nutrition Assistance Program (SNAP), 91 supply-side effects: in Greece, 191, 215–16 of investments, 367 surpluses, fiscal, 17, 96, 312, 379 primary, 187–88 surpluses, trade, see trade surpluses “Swabian housewife,” 186, 245 Sweden, 12, 46, 307, 313, 331, 335, 339 euro referendum of, 58 refugees into, 320 Switzerland, 44, 307 Syria, 321, 342 Syriza party, 309, 311, 312–13, 315, 377 Taiwan, 55 tariffs, 40 tax avoiders, 74, 142–43, 227–28, 261 taxes, 142, 290, 315 in Canada, 191 on capital, 356 on carbon, 230, 260, 265, 368 consumption, 193–94 corporate, 189–90, 227, 251 cross-border, 319, 384 and distortions, 191 in EU, 8, 261 and fiat currency, 284 and free mobility of goods and capital, 260–61 in Greece, 16, 142, 192, 193–94, 227, 367–68 ideal system for, 191 IMF’s warning about high, 190 income, 45 increase in, 190–94 inequality and, 191 inheritance, 368 land, 191 on luxury cars, 265 progressive, 248 property, 192–93, 227 Reagan cuts to, 168, 210 shipping, 227, 228 as stimulative, 368 on trade surpluses, 254 value-added, 190, 192 tax evasion, in Greece, 190–91 tax laws, 75 tax revenue, 190–96 Taylor, John, 169 Taylor rule, 169 tech bubble, 250 technology, 137, 138–39, 186, 211, 217, 251, 258, 265, 300 and new financial system, 274–76, 283–84 telecoms, 55 Telmex, 369 terrorism, 319 Thailand, 113 theory of the second best, 27–28, 48 “there is no alternative” (TINA), 306, 311–12 Tocqueville, Alexis de, xiii too-big-to-fail banks, 360 tourism, 192, 286 trade: and contractionary expansion, 209 US push for, 323 trade agreements, xiv–xvi, 357 trade balance, 81, 93, 100, 109 as allegedly self-correcting, 98–99, 101–3 and wage flexibility, 104–5 trade barriers, 40 trade deficits, 89, 139 aggregate demand weakened by, 111 chit solution to, 287–88, 290, 299–300, 387, 388–89 control of, 109–10, 122 with currency pegs, 110 and fixed exchange rates, 107–8, 118 and government spending, 107–8, 108 of Greece, 81, 194, 215–16, 222, 285–86 structural reform of, 216–17 traded goods, 102, 103, 216 trade integration, 393 trade surpluses, 88, 118–21, 139–40, 350–52 discouragement of, 282–84, 299–300 of Germany, 118–19, 120, 139, 253, 293, 299, 350–52, 381–82, 391 tax on, 254, 351, 381–82 Transatlantic Trade and Investment Partnership, xv, 323 transfer price system, 376 Trans-Pacific Partnership, xv, 323 Treasury bills, US, 204 Trichet, Jean-Claude, 100–101, 155, 156, 164–65, 251 trickle-down economics, 362 Troika, 19, 20, 26, 55, 56, 58, 60, 69, 99, 101–3, 117, 119, 135, 140–42, 178, 179, 184, 195, 274, 294, 317, 362, 370–71, 373, 376, 377, 386 banks weakened by, 229 conditions of, 201 discretion of, 262 failure to learn, 312 Greek incomes lowered by, 80 Greek loan set up by, 202 inequality created by, 225–26 poor forecasting of, 307 predictions by, 249 primary surpluses and, 187–88 privatization avoided by, 194 programs of, 17–18, 21, 155–57, 179–80, 181, 182–83, 184–85, 187–93, 196, 197–98, 202, 204, 205, 207, 208, 214–16, 217, 218–23, 225–28, 229, 231, 233–34, 273, 278, 308, 309–11, 312, 313, 314, 315–16, 323–24, 348, 366, 379, 392 social contract torn up by, 78 structural reforms imposed by, 214–16, 217, 218–23, 225–38 tax demand of, 192 and tax evasion, 367 see also European Central Bank (ECB); European Commission; International Monetary Fund (IMF) trust, xix, 280 Tsipras, Alexis, 61–62, 221, 273, 314 Turkey, 321 UBS, 355 Ukraine, 36 unemployment, 3, 64, 68, 71–72, 110, 111, 122, 323, 336, 342 as allegedly self-correcting, 98–101 in Argentina, 267 austerity and, 209 central banks and, 8, 94, 97, 106, 147 ECB and, 163 in eurozone, 71, 135, 163, 177–78, 181, 331 and financing investments, 186 in Finland, 296 and future income, 77 in Greece, xi, 71, 236, 267, 331, 338, 342 increased by capital, 264 interest rates and, 43–44 and internal devaluation, 98–101, 104–6 migration and, 69, 90, 135, 140 natural rate of, 172–73 present-day, in Europe, 210 and rise of Hitler, 338, 358 and single currency, 88 in Spain, 63, 161, 231, 235, 332, 338 and structural reforms, 19 and trade deficits, 108 in US, 3 youth, 3, 64, 71 unemployment insurance, 91, 186, 246, 247–48 UNICEF, 72–73 unions, 101, 254, 335 United Kingdom, 14, 44, 46, 131, 307, 331, 332, 340 colonies of, 36 debt of, 202 inflation target set in, 157 in Iraq War, 37 light regulations in, 131 proposed exit from EU by, 4, 270 United Nations, 337, 350, 384–85 creation of, 38 and lower rates of war, 196 United States: banking system in, 91 budget of, 8, 45 and Canada’s 1990 expansion, 209 Canada’s free trade with, 45–46, 47 central bank governance in, 161 debt-to-GDP of, 202, 210–11 financial crisis originating in, 65, 68, 79–80, 128, 296, 302 financial system in, 228 founding of, 319 GDP of, xiii Germany’s borrowing from, 187 growing working-age population of, 70 growth in, 68 housing bubble in, 108 immigration into, 320 migration in, 90, 136, 346 monetary policy in financial crisis of, 151 in NAFTA, xiv 1980–1981 recessions in, 76 predatory lending in, 310 productivity in, 71 recovery of, xiii, 12 rising inequality in, xvii, 333 shareholder capitalism of, 21 Small Business Administration in, 246 structural reforms needed in, 20 surpluses in, 96, 187 trade agenda of, 323 unemployment in, 3, 178 united currency in, 35, 36, 88, 89–92 United States bonds, 350 unskilled workers, 134–35 value-added tax, 190, 192 values, 57–58 Varoufakis, Yanis, 61, 221, 309 velocity of circulation, 167 Venezuela, 371 Versaille, Treaty of, 187 victim blaming, 9, 15–17, 177–78, 309–11 volatility: and capital market integration, 28 in exchange rates, 48–49 Volcker, Paul, 157, 168 wage adjustments, 100–101, 103, 104–5, 155, 216–17, 220–22, 338, 361 wages, 19, 348 expansionary policies on, 284–85 Germany’s constraining of, 41, 42–43 lowered in Germany, 105, 333 wage stagnation, in Germany, 13 war, change in attitude to, 38, 196 Washington Consensus, xvi Washington Mutual, 91 wealth, divergence in, 139–40 Weil, Jonathan, 360 welfare, 196 West Germany, 6 Whitney, Meredith, 360 wind energy, 193, 229 Wolf, Martin, 385 worker protection, 56 workers’ bargaining rights, 19, 221, 255 World Bank, xv, xvii, 10, 61, 337, 357, 371 World Trade Organization, xiv youth: future of, xx–xxi unemployment of, 3, 64, 71 Zapatero, José Luis Rodríguez, xiv, 155, 362 zero lower bound, 106 ALSO BY JOSEPH E.

 

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The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War (The Princeton Economic History of the Western World) by Robert J. Gordon

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3D printing, Affordable Care Act / Obamacare, airline deregulation, airport security, Apple II, barriers to entry, big-box store, blue-collar work, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, deindustrialization, Detroit bankruptcy, discovery of penicillin, Donner party, Downton Abbey, Edward Glaeser, en.wikipedia.org, Erik Brynjolfsson, everywhere but in the productivity statistics, feminist movement, financial innovation, full employment, George Akerlof, germ theory of disease, glass ceiling, high net worth, housing crisis, immigration reform, impulse control, income inequality, income per capita, indoor plumbing, industrial robot, inflight wifi, interchangeable parts, invention of agriculture, invention of air conditioning, invention of the telegraph, invention of the telephone, inventory management, James Watt: steam engine, Jeff Bezos, jitney, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, labor-force participation, Loma Prieta earthquake, Louis Daguerre, Louis Pasteur, low skilled workers, manufacturing employment, Mark Zuckerberg, market fragmentation, Mason jar, McMansion, Menlo Park, minimum wage unemployment, mortgage debt, mortgage tax deduction, new economy, Norbert Wiener, obamacare, occupational segregation, oil shale / tar sands, oil shock, payday loans, Peter Thiel, pink-collar, Productivity paradox, Ralph Nader, Ralph Waldo Emerson, refrigerator car, rent control, Robert X Cringely, Ronald Coase, school choice, Second Machine Age, secular stagnation, Skype, stem cell, Steve Jobs, Steve Wozniak, Steven Pinker, The Market for Lemons, Thomas Malthus, total factor productivity, transaction costs, transcontinental railway, traveling salesman, Triangle Shirtwaist Factory, Unsafe at Any Speed, Upton Sinclair, upwardly mobile, urban decay, urban planning, urban sprawl, washing machines reduced drudgery, Washington Consensus, Watson beat the top human players on Jeopardy!, We wanted flying cars, instead we got 140 characters, working poor, working-age population, Works Progress Administration, yield management

The war created household saving that after 1945 was spent on consumer goods that had been unavailable during the war, the classic case of “pent-up demand.” A strong case can be made that World War II, however devastating in terms of deaths and casualties among the American military (albeit much less than the greater toll of deaths and wounded among other combatants), nevertheless represented an economic miracle that rescued the American economy from the secular stagnation of the late 1930s. In fact, this chapter will argue that the case is overwhelming for the “economic rescue” interpretation of World War II along every conceivable dimension, from education and the GI Bill to the deficit-financed mountain of household saving that gave a new middle class the ability to purchase the consumer durables made possible by the Second Industrial Revolution. The supply effects are more subtle and interesting and include a vast expansion of the nation’s capital stock as the government paid for new factories and equipment that were then operated by private firms to create aircraft, ships, and weapons.

All the food, clothing, and housing for the 12 million in the military (whether it be in barracks, camps, or on ships) was provided by the government and counted in wartime government spending rather than personal consumption expenditures. A broader and more important point is that the wartime prosperity, despite its inconveniences, marked a sea change in the outlook and expectations of the entire nation after a decade of grinding depression and unemployment that appeared without end, a world of “secular stagnation” in the famous phrase of Harvard’s Alvin Hansen. The Great Depression had a searingly negative effect on the nation’s sense of well-being. Through most of the 1930s, a sizable portion of the population was badly fed, clothed, and housed. This extreme poverty was eliminated by the war economy. The reduction in the economic distance between the least well-off and the rest of the population significantly lifted everyone’s sense of well-being.

The use of plastics in every kind of producer and consumer durable was on the cusp of reality in 1941 before production was diverted to wartime uses. A favorite photograph of the hardships of the World War II home front shows women painting stripes on their legs to replace the rayon and nylon stockings that were no longer available. Two overriding conclusions emerge from this study of one of the great puzzles of economic growth. First, World War II saved the U.S. economy from secular stagnation, and a hypothetical scenario of economic growth after 1939 that does not include the war looks dismal at best. Second, much more than in traditional economic history, the Great Inventions of the late nineteenth century, especially electricity and the internal combustion engine, continued to alter production methods beyond recognition not just in the 1920s but in the 1930s and 1940s as well.

 

pages: 326 words: 103,170

The Seventh Sense: Power, Fortune, and Survival in the Age of Networks by Joshua Cooper Ramo

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Airbnb, Albert Einstein, algorithmic trading, barriers to entry, Berlin Wall, bitcoin, British Empire, cloud computing, crowdsourcing, Danny Hillis, defense in depth, Deng Xiaoping, Edward Snowden, Fall of the Berlin Wall, Firefox, Google Chrome, income inequality, Isaac Newton, Jeff Bezos, job automation, market bubble, Menlo Park, natural language processing, Network effects, Norbert Wiener, Oculus Rift, packet switching, Paul Graham, price stability, quantitative easing, RAND corporation, recommendation engine, Republic of Letters, Richard Feynman, Richard Feynman, road to serfdom, Sand Hill Road, secular stagnation, self-driving car, Silicon Valley, Skype, Snapchat, social web, sovereign wealth fund, Steve Jobs, Steve Wozniak, Stewart Brand, Stuxnet, superintelligent machines, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, too big to fail, Vernor Vinge, zero day

“Deflation,” Bernanke concluded: Ben Bernanke and Harold James, “The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison,” in Financial Markets and Financial Crises, ed. R. Glenn Hubbard (Chicago: University of Chicago Press, 1991), 34. “Inflation is always and everywhere a monetary phenomenon”: Milton Friedman, “The Counter-Revolution in Monetary Theory,” IEA Occasional Paper 33 (London: Institute of Economic Affairs, 1970), 11. “I think it is fair to say that six years ago”: Lawrence H. Summers, “U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound” (Keynote address at NABE Policy Conference, February 24, 2014), Business Economics 49, no. 2 (2014): 65. “A commander-in-chief”: Carl von Clausewitz, On War, ed. and trans. Michael Howard and Peter Paret (Princeton, NJ: Princeton University Press, 1984), 110. “We got to know the nature of calculating”: Ludwig Wittgenstein, On Certainty, ed. G. E. M.

 

pages: 298 words: 95,668

Milton Friedman: A Biography by Lanny Ebenstein

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affirmative action, banking crisis, Berlin Wall, Bretton Woods, Deng Xiaoping, Fall of the Berlin Wall, fiat currency, floating exchange rates, Francis Fukuyama: the end of history, full employment, Hernando de Soto, hiring and firing, inflation targeting, invisible hand, Joseph Schumpeter, labour market flexibility, Lao Tzu, liquidity trap, means of production, Mont Pelerin Society, Ponzi scheme, price stability, rent control, road to serfdom, Ronald Coase, Ronald Reagan, school choice, school vouchers, secular stagnation, Simon Kuznets, stem cell, The Chicago School, The Wealth of Nations by Adam Smith, Thorstein Veblen

Essentially everyone accepts the permanent income hypothesis with some variations and modifications. The language has made its way into the conventional language of economics; ‘permanent’ and ‘transitory’ are part of the lexicon.” With respect to the question of the accuracy of Keynes’s underlying proposition that there are fewer investment opportunities as economies mature, so that, particularly with oversaving, there would be long-term, secular stagnation, Friedman says that, in this case, there would not be unemployment but a lower rate of interest: The “end result would simply be a different interest rate, not unemployment.”14 This page intentionally left blank 12 KEYNES he ideas of John Maynard Keynes were triumphant in Tthe economics profession in the 1950s and 1960s. Though Keynes was prominent, generally and in economics, around the world from the time of his The Economic Consequences of the Peace (1919) in which he attacked the Versailles Peace Treaty and its makers, he was not the all-dominant figure that he became in academic economics in the United States and elsewhere after World War II.

 

pages: 1,042 words: 266,547

Security Analysis by Benjamin Graham, David Dodd

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asset-backed security, backtesting, barriers to entry, capital asset pricing model, carried interest, collateralized debt obligation, collective bargaining, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, diversified portfolio, fear of failure, financial innovation, fixed income, full employment, index fund, invisible hand, Joseph Schumpeter, locking in a profit, Long Term Capital Management, low cost carrier, moral hazard, mortgage debt, p-value, risk-adjusted returns, risk/return, secular stagnation, shareholder value, The Chicago School, the market place, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, zero-coupon bond

It did not amuse the Exchange that a New York City magistrate, sarcastically addressing in his court a collection of defendants hauled in by the police for shooting craps on the sidewalk, had derided the financial profession. “The first thing you know,” the judge had upbraided the suspects, “you’ll wind up as stock brokers in Wall Street with yachts and country homes on Long Island.”3 In ways now difficult to imagine, Murphy’s Law was the order of the day; what could go wrong, did. “Depression” was more than a long-lingering state of economic affairs. It had become a worldview. The academic exponents of “secular stagnation,” notably Alvin Hansen and Joseph Schumpeter, each a Harvard economics professor, predicted a long decline in American population growth. This deceleration, Hansen contended in his 1939 essay, “together with the failure of any really important innovations of a magnitude to absorb large capital outlays, weighs very heavily as an explanation for the failure of the recent recovery to reach full employment.”4 Neither Hansen nor his readers had any way of knowing that a baby boom was around the corner.

., 227 Salvador, 175 Samberg, Arthur, 267 San Antonio and Aransas Pass Railway Company, 220, 221 San Francisco Toll-Bridge Company, 309 San Joaquin Light and Power Corporation, 320n Sao Paulo, 173n Savings Bank Trust Company of New York, 172 Savold Tire, 15 Savoy Plaza Corporation, 208n Schackno Act, 233n Schletter and Zander, Inc., 365 Schloss, Edwin, 57–58 Schloss, Walter, 57–58 Schulte Retail Stores Corporation, 221 Schumpeter, Joseph, 3 Schwartz, Carl H., 213n Schwed, Fred, Jr., 6 Seaboard Air Line, 182 Seaboard-All Florida Railway, 145 Seager, Henry R., 680n Sears Roebuck, 53, 383n Seasoned issues, price inertia of, 688–689 Secular stagnation, 3–4 Securities Act of 1933, 414n Securities analysis, general procedure for, 669–670 Securities and Exchange Commission, 115n, 223, 232 Securities as element in security analysis, 7 Securities Exchange Act of 1934, 255n, 414n, 582 Securities prices: comparative, discrepancies in, 691–692 of convertible and warrant-bearing issues, 306–307 of definitely related issues, comparison of, 693–695 as element in security analysis, 77 intrinsic value vs., 64–65 of seasoned issues, inertia of, 688–689 sensitivity of, 256–257 of speculative preferred stocks, 330–334 supply and demand factors and, 695–696 (See also Bond prices; Stock prices) Security analysis: Ayres mechanical forecasting method and, 702–703 at Chieftain Capital Management, 397–400 critical function of, 73–74 cyclical nature of, 11–12 descriptive function of, 62 disadvantages of market analysis as compared with, 703–704 market analysis as substitute or adjunct to, 697–702 prestige of, 61 prophesies based on near-term prospects and, 704–706, 707 selective function of, 62–71 speculation and, 71–73 usefulness of, 62 Security Analysis, shortcomings of, 620–622 Security Analysis, first edition: acceptance of, 16–19, 39–40 analytical approach of, 41–44 endurance of, 40–41, 42–43, 137–140 focus on bonds, 44 historical background, 1–19 Rich’s review of, 2 Security Analysis, second edition: on corporate finance, 8–12 historical background, 1, 6 Segregations, market exaggerations due to, 680 Selective function of security analysis, 62–71 examples of analytical judgments and, 63–64 intrinsic value and, 64–68, 70–71 obstacles to, 68–70 tardy adjustment of price value and, 70 Semiannual reports as information source, 91 Senior securities, 229–241 indenture or charter provisions designed to protect holders of, 229–230 Seton Leather, 674 Shabacker, R.

 

pages: 566 words: 163,322

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World by Ruchir Sharma

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3D printing, Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, colonial rule, Commodity Super-Cycle, corporate governance, crony capitalism, currency peg, dark matter, debt deflation, deglobalization, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, hiring and firing, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labor-force participation, Malacca Straits, Mark Zuckerberg, market bubble, megacity, Mexican peso crisis / tequila crisis, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, pattern recognition, Peter Thiel, pets.com, Plutocrats, plutocrats, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Simon Kuznets, smart cities, Snapchat, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Steve Jobs, The Wisdom of Crowds, Thomas Malthus, total factor productivity, trade liberalization, trade route, tulip mania, Tyler Cowen: Great Stagnation, unorthodox policies, Washington Consensus, WikiLeaks, women in the workforce, working-age population

Sharma, Ruchir. “India’s Cycle of Recklessness and Reform.” Wall Street Journal, February 28, 2013. Smith, Tony. “In Brazil, Chafing at Economic Restraints.” New York Times, March 17, 2004. “A Strongman Cometh.” JP Morgan Research, November 2012. Summers, Lawrence. “Second-Term Presidents Cost America 40 Lost Years” Financial Times, August 10, 2014. ——. “Bold Reform Is the Only Answer to Secular Stagnation.” Financial Times, September 7, 2014. “Technocrats—Minds Like Machines.” Economist, November 19, 2011. “Turkey: Business Climate Will Gradually Erode with Erdogan Presidency.” Eurasia Group, July 2014. “Turkey’s Delight: A Growing Economy.” Bloomberg News, August 31, 2003. “Turkish PM’s Top Aide Says Erdoan One of Only Two World Leaders.” Today’s Zaman, August 29, 2013. Wang, Zhengxu.