Entries Tagged as 'Economic Growth'

Why the Rich Get Richer

October 27th, 2011 at 12:24 am 82 Comments

It is no secret to practitioners that in systems of capital finance, opportunity and the wealth that comes with it have a natural propensity over time to clump, sometimes without regard to extraordinary human talent or ability. In what is otherwise probably the world’s most efficient system of resource allocation, this propensity of capital finance is an historically acknowledged systemic flaw.

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Romney’s Plan: One Step Forward, Two Steps Back

David Frum September 7th, 2011 at 9:30 am 83 Comments

To read Mitt Romney’s economic plan is to join a more elevated conversation. This is a document written by people who value expertise, and it shows.

It avoids overstatements and misstatements. It credits Presidents Bush and Obama for pulling the financial system back from the brink in 2008-2009. While acknowledging the role of government policy in abetting the housing bubble, the report lays the blame for the excesses of the 00s on the bankers who committed them. The report does take some partisan jabs, but they meet the truth test.

The National Bureau of Economic Research (NBER), the non-partisan research organization that determines when business cycles begin and end, tells us that the Great Recession came to a conclusion in June 2009, when the economy technically returned to the path of growth. However, if the downdraft officially ended at that juncture, that assessment is almost an artifact of NBER’s definitions and nomenclature. For the Obama Recovery is different from its predecessors. As one team of economists has put it in the colorless language of their profession, “the path of adjustment [has] exhibited important departures from that seen during and after prior deep recessions.” In plain words, we are now more than two years into an economic recovery that has been one of the most lackluster in our nation’s history.

The document has one great excellence and two major failings.

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Summer Reads: Silber on The Great Stagnation

August 17th, 2011 at 12:45 am 12 Comments

FrumForum correspondents and readers are encouraged to blog about the books they are reading this August.  Please send any entries to editor[at]frumforum.com with the subject line, treatment “Summer Reads.”

Being home under the weather for a couple of days gave me ample time to read The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, buy viagra Got Sick, sick and Will (Eventually) Feel Better, by economist Tyler Cowen. Published early this year as an ebook, it proved highly popular and was reissued as a hardcover (the form in which I read it).

It’s perhaps a third to a half the length of your standard non-ebook, and contains much thought-provoking material to richly reward the short read.

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Winners From a Cheaper Dollar

David Frum July 20th, 2011 at 11:31 pm 6 Comments

My Marketplace commentary broadcast today celebrates the US export boom.

An economy as big as the U.S. cannot export its way out of recession. But the export surge does contain promising signals of the U.S. economy of tomorrow.

The U.S. is increasing its exports to China faster than to any other country — despite China’s manipulated currency. Computer technology and foodstuffs head the list of sales.

U.S. grain exports have surged to their second best year since 1982, as the droughts in Russia and Ukraine impelled those governments to halt international sales.

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If Not a Balanced Budget Amendment, Then What?

David Frum July 19th, 2011 at 10:13 am 27 Comments

As Fred Bauer and the WSJ edit page (!!) argue today, the Balanced Budget Amendment is not a good idea, especially not the version circulating in the House of Representatives.

Yet it’s also true that the aspiration contained in the BBA – to constrain the future growth of the federal government – is one broadly shared by all Republicans.

That aspiration will only become more difficult to achieve in the years ahead, as baby boomers retire, health costs rise, and the borrowing of the Obama years must be repaid. The task will be doubly challenging if we wish (as I do) to maintain a robust American military capability and generous veterans benefits.

If the BBA is not the way to go – what is?

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Fiscal Stimulus Didn’t Work, Now What?

July 5th, 2011 at 12:00 am 29 Comments

A report from the White House Council of Economic Advisers has indicated that the stimulus added 2.3 to 3.2 percent to gross domestic product in the first quarter relative to what it otherwise would have been. The same report indicated that the stimulus was responsible for 2.4 to 3.2 million jobs. This is being reported as good news.

What should we have expected from the stimulus? Actually, what we should have expected was stimulus. For $800 billion, of course gross domestic product had to go up in the first quarter and at least someone should have been employed. But and it is a big but, the stimulus should have reduced overall unemployment and brought private investment dollars into the economy that would have sustained any short term economic gains from the stimulus. The real benefit of stimulus, not simply increased spending, should be appearing in current economic news. It is not.

And what should a new job cost? If 2.4 to 3.2 million jobs cost $800 million, that is a cost of $250,000 to $350,000 per job. It makes one ask for a more precise accounting of the spending. Shouldn’t we have expected more jobs?  Weren’t we promised an unemployment rate of less than 8%? And there appears to be little or no sign that these jobs were not, in part, a continuation of state and city government jobs which are going to be lost in 2011 and 2012 due to state finances.

What is the solution now? Did we sell the seed corn by using up our borrowing opportunity and maxing out the nation’s debt? Perhaps.

How Reliable Are China’s Statistics?

July 2nd, 2011 at 12:36 pm 44 Comments

Ajay Ravichandran wrote a piece at FrumForum earlier this week in which he asks whether the claims about China’s ability to serve as a model for how to weather the recent global economic crisis match reality.  Ravichandran’s piece cites an article by Minxin Pei which suggests that China is in an asset bubble and that the economic policies of the Chinese government are basically window dressing to hide inflationary problems and other more systemic ills.  These points are well-taken, especially considering the hype one reads about China as a model.  But there may be another issue that should be considered.  As Sean Corrigan, an investment strategist quoted at CNBC states:

“So much of the news flow is controlled, so much of the data is suspect, but if you read the Chinese press that we do get translated into English, there’s an increasing litany of stories of distress, of distortions, of those problems that this top down approach is inflicting on the country, particularly on those outside the state owned enterprise sector,” he said.  Corrigan also questioned the perception that China managed its economy well compared to the West, saying centralized approaches were viewed with suspicion in developed economies.  “I think we have to ask ourselves how well managed is any economy? Can it be managed is the first question.

The second point is one raised in both Pei’s and Ravichandran’s article and is a broad one about the relationship between the state and the economy.  The first one is another point altogether, namely, how can we really know whether the Chinese system is working well if the publicized data itself is suspect?  While Western governments have certainly been known to manipulate data, checks and balances exist in the West (like a free press, freedom of information laws and opposition parties that won’t blindly accept the government’s data) that don’t exist in China, so there’s no real way of knowing whether much of the data we read about China is accurate.  There have been recent revelations (via Wikileaks) about China’s provincial GDP data being described as “man made” and “for reference only” by Li Keqiang, who is now China’s Vice Premier.  Also, there have been reports about inaccurate data from China’s agriculture and real estate sectors, and there is evidence that China’s provinces report GDP growth rates that exceed the national average.

I’m not suggesting that China isn’t a manufacturing and economic powerhouse.  A simple trip to Wal-Mart will prove that.  The point is, policymakers and ordinary citizens inevitably make judgments based on limited information, including with regard to comparisons between our economy and that of China and other countries.  Those judgments should ideally be made with accurate data at hand, and one shouldn’t assume such accuracy when it comes to data produced by the Chinese government or institutions that work under its aegis.  After all, many of the people (including those ostensibly in private business) who are providing the data have their own interests to protect.  This is something to keep in mind while discussing whether China should serve as a model for economic policy or as a good place for investment.