All posts filed under: Economics

An Optimistic Outlook on 2021

The outlook, scientist Peter Turchin tells the Atlantic’s Graeme Wood, is bleak. Turchin thinks we are looking at another five years—or more likely a decade—of misery. And as 2020 draws to a close, modern civilization does appear to resemble a metaphorical dumpster fire. It really has been a terrible year, possibly the worst most people can remember. Every morning seemed to bring a new global damage report—an endlessly spreading pandemic, mounting death tolls, economies cratered by lockdowns, rising unemployment, racial inequality and civil unrest, spiraling political polarization, election turmoil in the United States, and bushfires in Australia. Countless people are ending the year feeling much further behind than they were on New Year’s Eve 2019. “Surely 2021 can’t be worse than 2020?” feels like wishful thinking. 2020 has felt particularly punishing, at least in part because the decade that preceded it was astonishingly hopeful and productive according to almost every metric of human progress. Extreme poverty was dramatically reduced, from 18 percent of the global population to just 8.6 percent. More than 158,000 people climbed …

Corruption: Greasing the Wheels of the World

One December evening in the late ’90s, I met a friend in a Moscow restaurant. I drank two zero-alcohol beers that night—an eccentric posture, in a Russian-Georgian restaurant—and then drove back to my borrowed flat in a car lent to me by my successor as the FT’s Moscow Correspondent. In Russia, no alcohol is permitted at all when driving—a law fashioned, it would seem, to allow the city’s GAI (Gosurdarstvennaya Aftomobilnaya Inspektsiya, or state traffic police) to supplement their low pay. As I was passing one of the new luxury hotels, a thick bundle of clothes propelled on boots and topped with a badged fur shapka waved his stick before my windscreen and motioned me to pull over. He told me to wind down my window, and stuck his head in. “Dikhnite!” (“Breathe!”) he instructed. Then he smiled, stepped back, saluted, and told me to get out of the car. He asked for my passport, and as he looked at it he told me I had been drinking. Yes, I admitted, but only zero-alcohol beer. …

The Search for a Politics of Community

After COVID-19—when that moment finally arrives—will be a bleak time for most. Debts must be reckoned with; cuts must be made; seasons of possibly violent political struggle will not be avoided. But COVID-19 monopolises so much news media time and content, that it has frozen or put out of most minds large social and political issues with which democracies will have to contend in due course. They may have to deal with them to remain democracies. One of these, which still intrudes into the news, is the migrant issue. Last week, a Kurdish-Iranian family drowned in the English Channel, reportedly forced onto a frail boat for a desperate voyage to the UK. The pity of this tragic incident, which claimed the lives of two adults and three children, kept it in the news for a couple of days. Then the migrant issue receded again. Still, it waits. “The West,” Israeli political scientist Martin Van Creveld has observed, “is rather like a besieged castle, the waves battering against the walls. They [the 80 percent of the …

The Failing Business Model of American Universities

Put yourself in the shoes of the average college graduate today. It took you longer than expected to complete your “four-year degree” and you are almost $30,000 in debt. You are desperately searching for a job in your field before your student loan payments run you into the ground, assuming your rent and car payments don’t get you there first. The generations before you had student loan debt too, but not nearly to the same degree of an ever-present threat. How did you end up here, and what do you do now with the worldwide COVID-19 pandemic? The business model adopted by our academic institutions is increasingly at odds with those seeking higher education and with the broader society as well. It is undesirable to have entire generations unable to participate in the economy, and as of June 2020, contribute a staggering $1.67 trillion to the national debt according to the National Reserve. This is more than auto loan debt and almost twice the amount of credit card debt in the US. It is crucial …

Against an Unequivocally Bad Idea

I first heard the phrase “Universal Basic Income” when I was sitting in a Wesleyan sociology class. My classmates and I were discussing the American safety net, and one student proposed eliminating the whole system. “The safety net has so many programs, and to be honest, I don’t really understand them,” he said. “I’d rather just replace them with a UBI.” A few students concurred, and a short debate ensued. Universal Basic Income, or “UBI,” is a proposal to give every American a periodic check from the government. Everyone would receive the same amount, no strings attached. Although my classmate’s proposal had a certain cool-kid hipness to it, I was appalled. The current safety net does a tremendous amount of good, lifting millions of low-income people out of poverty every year. The fact that it isn’t easily understood by undergraduate sociology majors was pretty low on my list of concerns. After class ended, I largely forgot about our discussion. No mainstream politician was openly supporting UBI, and the impending rollout of something called “Obamacare” was …

Australia’s Population Ponzi Scheme

The current economic system in Australia is a Ponzi scheme based on maintaining positive GDP through migration. Populations of native species are plummeting and people are faced with increased job insecurity and housing costs, all of which are side effects of the Australian government’s ongoing drive for an ever increasing population. In the 35 years prior to 2005, Australia’s net overseas migration averaged around 70,000 per annum. But from 2005 this number was trebled, and ever since then Australia’s population has been increasing at the rate of an extra million people every three years. As a result, Australia has been a part of the on-average 68 percent fall in global wildlife populations between 1970 and 2016. Some Australian species’ numbers have plummeted by up to 97 percent, primarily due to habitat loss. The environmental havoc is justified as needed for the economy, but the evidence does not support this claim. In the 1950s and 1960s Australia had strong industry protection policies and a strong manufacturing industry, and therefore both migrant and non-migrant workers had good …

From “Who Gets What?” to “Who Are We?”

American politics can be conceptualized through two questions. The first is “Who gets what?” and the second is “Who are we?” Before and during the Cold War, the specter of fascism and then communism kept Americans aligned on fundamental questions of who we are. From the New Deal to the peak of the Cold War in the 1970s, questions of who we are were far less prominent than questions of who gets what. As Lee Drutman shows, the dividing line of politics was principally over economic issues. An unsteady class peace that took shape as “democratic pluralism”—the representation of workers throughout many realms of society—reigned. During this period unions were widely subscribed (35 percent in 1954) and served as a civic and associational pillar in American life. However, once the Cold War peaked, the dividing line in contemporary America became increasingly cultural, and the primary question in America shifted to “Who are we?” As the fear of foreign and existential threats retreated, so too did a sense of common identity and purpose. Without something to …

What Divides Us Is Class, Not Race

Black lives matter. It’s become a rallying cry for those seeking social and racial justice. These three words express the idea, symbolized by the death of George Floyd, that race defines the fault line fracturing our society. Racism doesn’t exist in a vacuum. It always has an economic context. When Brownshirts attacked Jewish shop owners in Nazi Germany, an opening act in one of history’s greatest genocides, they were acting on anti-Semitic propaganda that cast Jews as leeches sucking Germany’s lifeblood. This was an ugly and murderous lie. But it became attractive to those suffering amidst the reparations that had been imposed on Germany after World War I, and whose effects impoverished the country’s workers. The villains in today’s racism narrative tend to be cast as privileged, white middle-aged men—beneficiaries of a system that everyone can see is unfair. But the idea that the injustice baked into our economic systems can be reduced to race is false. For years, I was chief economist at one of Canada’s biggest banks. Since I stepped down from that …

The Coming Post-COVID Global Order

The COVID-19 pandemic has devastated economics in the West, but the harshest impacts may yet be felt in the developing world. After decades of improvement in poorer countries, a regression threatens that could usher in, both economically and politically, a neo-feudal future, leaving billions stranded permanently in poverty. If this threat is not addressed, these conditions could threaten not just the world economy, but prospects for democracy worldwide. In its most recent analysis, the World Bank predicted that the global economy will shrink by 5.2 percent in 2020, with developing countries overall seeing their incomes fall for the first time in 60 years. The United Nations predicts that the pandemic recession could plunge as many as 420 million people into extreme poverty, defined as earning less than $2 a day. The disruption will be particularly notable in the poorest countries. The UN has forecast that Africa could have 30 million more people in poverty. A study by the International Growth Centre spoke of “staggering” implications with 9.1 percent of the population descending into extreme poverty as …

Revisiting the Simon-Ehrlich Wager 40 Years On

It is 1980, and you are getting married. Your parents decide to celebrate your nuptials by inviting 100 guests to a wedding reception. The reception cost them $100 per person or $10,000 in total. Fast forward to 2018. Now it is you who is throwing a wedding reception for your child. The guest list has increased by 72 percent (some of the old folk are no longer around, but the cousins have exploded in number). That means that you are now catering to 172 people. The price per guest remained the same (suspend your disbelief and ignore inflation for now), and you expect to get a bill for $17,200. Instead, the bill comes to $4,816, which is less than half of what your parents paid for you. How is that possible, you ask the caterer? The caterer responds that for every one percent increase in attendance, the bill fell by one percent. And so, while the number of guests rose by 72 percent, your bill declined by 72 percent. Surely, things like that don’t happen …