All posts filed under: Economics

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 …

Will Workers’ Wages Ever Go Up Again?

Self-employment, temporary employment, on-call work, home-based work, and telecommuting are becoming more common. In some countries, such as Australia, nearly half of the workforce falls into one of these categories. The growth in these types of employment opportunities is often attributed to the rise in app-based gig employers like Uber or Lyft. The employment contract signed by those working in the gig economy is very different from what workers in goods-producing industries had come to expect during most of the postwar era. Back then, for example, you knew when you were working. There were regularly defined work hours (normally 40 hours a week, assigned at a fixed time). These days, your gig employer practises just-in-time labour, putting you on perpetual standby. The company will call you when they need you, thanks. And they might need you for only 10 to 15 hours in a week. And don’t count on receiving much in the way of the non-wage benefits unions negotiated for most industrial workers in America. Get sick or need dental work as a part-time …

The Rule of the Masses

As cities burn across a divided United States of America, it is worth considering some of the conditions that foment the country’s increasingly radical politics. During the past few years, the United States has experienced a series of cultural shifts in which the public’s perception of numerous—primarily social—issues has been abruptly and dramatically altered. In a matter of months, the minority views of political activists become normalised while views which were previously tolerated in mainstream discussions are suddenly impossible to hold in public life. Though one would expect such shifts to occur gradually over many years and feature prominently in fierce public debate, the change always arises suddenly, at once a surprise to many who pride themselves on being informed about—and having a stake in—public life, and yet succeeding overwhelmingly against virtually no formal organised opposition. Moreover, these shifts are supported by private and public institutions which become, without warning, part of the vortex of mass opinion. I Writing between the two world wars that would shape the rest of his century and the beginning …

The Failure of Fusionism

Conservative parties throughout the West are in crisis. This may not be fully understood by simply looking at recent election results, as conservative parties have continued to win elections. But these parties are currently in a state of ideological flux, and their commitment to existing liberal democratic principles and institutions are in noticeable decay. The conventional perception of conservative parties as steady and secure governing hands has made way for a more volatile and agitated form of politics. Parties that have routinely positioned themselves as defenders of the established order have instead become actively hostile to it. Conservative parties, the Economist noted last year, are now “on fire and dangerous.” This phenomenon is most evident in the United States, where the Republican Party has become a wholly owned subsidiary of Donald Trump; a political actor guided solely by parochial instincts and personal narcissism, untethered to any intellectual understanding of his party’s traditions. The party’s convictions are now driven solely by fealty to the president, regardless of his actions. While Trump may be a singular figure, …

The Closing of the High Street Theatres

In his book, Think Like Amazon, John Rossman, the former director of Merchant Integration at the everything store, invokes Captain Ahab, “the monomaniacal character at the heart of Herman Melville’s Moby Dick.” Ahab, writes Rossman, is a man obsessed with the capture of a great white whale, and each of Amazon’s 560,000 employees worldwide—not to mention those eager to emulate Amazon’s success—should likewise be obsessed, but with perfection, customer satisfaction, and “becoming inspired to develop and expand beyond your current products, services and business model.” This isn’t, he reassures, the kind of obsession that takes Ahab and his ship to the bottom of the sea, “but it’s not bad to have people on board with a little Ahab in them… being ‘nice’ all the time can be a liability for your team.” The Amazon philosophy—more to the point, the Amazon practice—is to dominate every market into which it moves. The hyper-competitiveness cultivated by its executives, the voracious acquisition of every kind of product, and the refusal to be “nice” to staff all take their cue …

On Race and Inequality—A Reply to Nathan J. Robinson

The resurgence of the Black Lives Matter movement following the death of George Floyd has plunged us into a new era of institutional anti-racism. The prevailing narrative is that the country remains a fundamentally racist and white supremacist society that has yet to come to terms with its original sin and must be held accountable by eliminating all racial disparities of outcome. To this ongoing discussion, Nathan J. Robinson has contributed a long essay in his magazine Current Affairs restating the case for reparations on behalf of black Americans. What was once a fringe perspective has become increasingly mainstream in the wake of Ta-Nehisi Coates’s widely debated 2014 essay on the topic for the Atlantic. The reparations issue has become emblematic of the broader debate around race, encapsulating all of the moral and political dimensions that make it so complex and heavy. To what extent does racism continue to hold blacks back? Can an entire racial group, whites, be held responsible for the sins of the past? What does racial justice really look like, basic …

The Coming of Neo-Feudalism—A Review

Review of The Coming of Neo-Feudalism: A Warning to the Global Middle Class by Joel Kotkin, Encounter Books (May 2020) 288 pages. Writing books which make bold predictions about the future of the Western world can be risky, so I naturally approached Joel Kotkin’s The Coming of Neo-Feudalism: A Warning to the Global Middle Class with caution. Could feudalism really be making a comeback in the West, as Kotkin argues? The answer might not be a straight “yes,” but Kotkin’s overall argument that deep currents of history and economics are pulling us towards a more stratified and ideologically orthodox society is persuasive. Particularly in light of recent events, as we shall see. Feudal societies were hierarchical, with clearly-defined roles and responsibilities for everyone. The knights fought for all, the priests prayed for all, and the peasants worked for all. Times of upheaval could force open the door to social mobility, but otherwise, people kept their station. These barriers were broken down by the Enlightenment, the Industrial Revolution, and the rise of the modern democratic state. …

Is State Protection a Threat to Liberal Democracy?

The world is awash with predictions about the impact of COVID-19 on life in the liberal democracies—from more online shopping to less globalisation, from higher taxing governments to more working from home. But most analyses compare 2020 with 2019 and examine the immediate changes wrought by the pandemic alone. Long-term, COVID-19’s impact may turn out to be considerably greater. To fully appreciate the potential consequences of this pandemic we need to examine it in the wider context of the last two decades. It must be seen as part of a series of developments over that period that, collectively, could transform liberal democracy more dramatically than is currently predicted. Those developments have driven the physical and economic insecurity of citizens to levels never previously experienced in the modern liberal democratic state. COVID-19 may be a tipping point for insecurity. Self-preservation may be the new priority that triggers a radical transformation of what the citizens of liberal democracies demand from the state and what the state delivers. Taken too far, that transformation of the citizen/state relationship could …