Has Donald Trump already changed US trade?

from C.P. Chandrasekhar and Jayati Ghosh

There is no doubt that President Trump is upending global trade. He has unleashed a trade war with China as well as with some of the US’ s purported allies, using grounds of “threats to national security” to impose tariffs on many US imports. The likely retaliation will obviously affect some US exports in turn. The trajectory of world trade suddenly looks quite uncertain – and this will also depress investment across the trading world.

So the Trump effect on world trade is clearly just beginning. But the naked self-interest of Trump’s moves, the “America first” orientation declared by the US President should not be interpreted only in the doom saying tones of much of the mainstream media. The truth is that this orientation is not new: US trade policy always put the US first – or at the very least, privileged the interests of US capital vis-à-vis all other players. The US strongly influenced the Uruguay Round of the GATT that introduced many new elements into trade negotiations (such as services, intellectual property provisions and trade-related investment measures) to benefit US multinationals.  

RWER no. 84 – special issue

Special issue on the public economy and a new public economics

download whole issue

edited by Michael Bernstein and June Sekera

Reconstructing a public economics: markets, states and societies          2
Michael A. Bernstein          download pdf

There is more than one economy          16
Neva Goodwin         download pdf

The public economy: understanding government as a producer.          36
A reformation of public economics
June Sekera         download pdf

Economic benefits of public services          100
David Hall and Tue Anh Nguyen          download pdf

Bureaucracy shouldn’t be a dirty word:
the role of people-responsive bureaucracy in a robust public economy          154
Janine R. Wedel          download pdf

The need for a new public administration          170
James K. Galbraith          download pdf

Industrial policy, then and now          178
Victoria Chick         download pdf

Putting the nation-state back in: public economics and the global economy          189
Michael Lind          download pdf

The entrepreneurial state: socializing both risks and rewards          201
Mariana Mazzucato          download pdf

Board of Editors, past contributors, submissions, etc.          218

Long-term trends in U.S. income distribution – 2 graphs

 

“Health expenditure”

Source: https://en.wikipedia.org/wiki/List_of_countries_by_total_health_expenditure_per_capita#/media/File:OECD_health_expenditure_per_capita_by_country.svg

Walmart’s gamble and what it means for India

from C. P. Chandrasekhar

Much of the writing on Walmart’s purchase of a dominant 77 per cent stake in Flipkart, touted for long as India’s answer to Amazon, is focused on its size. At $16 billion, of which $14 billion goes to buy up the stakes of investors such as SoftBank from Japan and Naspers from South Africa, it is reportedly the biggest acquisition in the global e-commerce area, and way larger than $3.3 billion that Walmart paid for US web retailer Jet.com in a deal considered the largest purchase of a US e-commerce startup. With some existing shareholders exiting, Walmart now shares ownership with co-founder Binny Bansal, Tencent, Tiger Global and Microsoft. The size of the acquisition, and Walmart’s keenness to acquire Flipkart it reflected, is seen as indicative of India’s importance to the world economy, and not just to international capital. What is missed in this perspective is the impact that this kind of transition has for Indian-owned business, which is the instrument through which India can be seen as participating meaningfully in the global capitalist economy.

The reason why Walmart is interested in the acquisition of Flipkart, at a price which most observers feel implies an unwarranted premium and valuation, is clear. The company that had dominated the brick-and-mortar retailing business in the United States for long has, as in the case of many other players from the ‘old economy’, not been able to keep pace with the disruption that technology has caused. As the share of aggregate sales through online retail creeps up in the US, the company has lost market share to Amazon since its foray into the e-commerce realm has not been too successful. 

Is CORE a pluralist economics curriculum?

from Ioana Negru

Core (the acronym for Curriculum Open Access Resources in Economics) is a project led by professor Wendy Carlin from UCL, UK, that aims to improve the content and delivery of the economics curriculum around the world. Other remarkable economists have been and are part of this project such as Diane Coyle and Samuel Bowles.

According to the website of the project, www.core-econ.org CORE is:

“a) a global community of learners, teachers and researchers;

1. b) a problem- motivated and interactive way to learn economics;
2. c) bringing recent developments into the classroom;
3. d) giving everyone the tools to understand the economics of the world around   them”.

As Mearman et al (2016: 5) explain: “CORE is a large undergraduate year one course called ‘The Economy’, which itself comprises nineteen modules on a range of topics. CORE is neither a Massive Online Course (MOOC) nor a course in the traditional sense, but an online resource, a frame to be elaborated”. According to the same authors, CORE represents both an ‘improvement’ and a ‘missed opportunity’. On the one hand, CORE employs historical and experimental data and draws on the history of economics or new branches of economics such as theory of games, covering thus a variety of topics. On the other hand, the course is rife with concepts and elements unsupported by evidence, such as utility maximization that constitute fundamental components of CORE (Mearman et al 2016).

The reactions to CORE, both from the media and the academic world, have been mixed.  Read more

US student loan debt explosion

Once again, the Oil Price Scare

from C. P. Chandrasekhar and Jayati Ghosh

The news last week that prices of Brent Crude oil (which is used as a global benchmark) had crossed $80 a barrel in some markets must have created shock waves in policy circles of many countries, especially India. Many oil-importing countries had grown comfortable with – and even complacent about – the relatively low oil prices that persisted after their precipitous drop in the middle of 2014.

As Chart 1 shows, average oil prices feel very sharply after June 2014, falling by 56 per cent just in the months until January 2015, and by more than 70 per cent from their earlier peak in 2012. Thereafter, they mostly remained at relatively low levels until January this year. This reflected the general deflationary atmosphere prevailing in the global economy, as well as subdued demand in the face of significantly increased supply because of the shale boom in the US as well as more production in countries like Iran as sanctions were lifted.

Decline of working hours over long-run

The return of a Housing Bubble – (4 graphs)

from C. P. Chandrasekhar and Jayati Ghosh

Even while optimistic assessments of growth trends in the global economy proliferate, concerns that the unwinding of inflated asset price markets could abort the recovery are being expressed. Interestingly, there appears to be a substantial degree of agreement on the cause for such uncertainty, which is an excessive dependence on monetary measures in the form of quantitative easing and the associated extremely low interest rate environment to address the post-crisis recession. That lever was not the most effective from the point of view of lifting growth. While the early resort to fiscal stimuli delivered a sharp recovery, the retreat from fiscal triggers and reliance on monetary measures led to a reversal and a new normal of low growth that has lasted almost a decade.

On the other hand, the large-scale infusion of cheap liquidity that this form of intervention triggered saw increased activity in asset markets of different kinds, especially equity, bond and property markets. Two factors played a role here. First, punters of various kinds accessed cheap money to invest in assets that were expected to deliver returns significantly higher than the cost of capital. This affected bond, equity and property markets, where the sheer influx of liquidity resulted in the realization of the punters’ expectations. Second, excess liquidity triggered credit expansion, resulting in a revival of credit access even for those households which had not deleveraged fully to reduce the burden of debt accumulated prior to the crisis, which too was triggered by the last lending and borrowing spree. 

Income inequality 1970 – 2015: USA and France compared

The return of the oil threat

from C. P. Chandrasekhar

On the morning of April 24, the price of Brent crude, the global benchmark for oil prices, rose above $75 a barrel, touching its highest level since 2014 and signalling the return of an era of high oil prices. That is a $30 per barrel or 66 per cent rise from the previous low of around 10 months ago. As expected, this has made oil importers nervous. But, despite the benefits it would bring US shale producers, even President Donald Trump is rattled. In one more of his infamous early morning tweets he declared: “Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!”

The sharp rise in the price of oil does raise a host of questions. What explains the reversal of the late-2014 price collapse? Would the price recovery be sustained and where would it taper off? What would be the implications for economic performance of a global economy still burdened with the effect of the recession. And, why, if there is need for a sensible reason, is President Trump rattled? 

WEA Commentaries – new issue

Download the issue as a PDF

In this issue
Game Theory—A Severe Case of ‘as-if’ Model Platonism
     Lars Syll
Utopia and Macroeconomics
     David Ruccio
A Better Way for Development Theory and Practice
     Habtamu Girma Demiessie
On Kurien’s new book, Economics of Real-Life
     Stuart Birks
Economics Education and Pedagogy
     Malgorzata Dereniowska interviews Peter Söderbaum

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Ratio between CEOs and average workers in world by country

Trump’s Trade War

from C. P. Chandrasekhar

After a year of huffing and puffing, President Donald Trump has launched, since January this year, what some are terming a trade war—fought in scattered industrial and selected locations. It started with quotas and tariffs on solar panel and washing machine imports, but then moved menacingly to steel and aluminium. Tariffs on these two products have been imposed under a WTO clause relating to imports that threaten national security, even while Trump’s rhetoric refers to competition from “cheap metal that is subsidized by foreign countries”, which amounts to a completely different ‘dumping’ charge.

With the tariff hike on steel at 25 per cent and that on aluminium 10 per cent the imposts are not trivial, though there are exemptions promised, subject to conditions, for Canada, Mexico, South Korea and some others. All this put together did not mean too much though. Reuters quotes Morgan Stanley as placing steel, aluminium, washing machines and solar panels together at a little more than 4 per cent of US imports. But then on 22 March, Trump announced trade sanctions on China, on the grounds that China was using unfair tactics such as hacking commercial secrets and demanding disclosure of “trade secrets” by US companies in return for access to the Chinese market. Those measures included investment restrictions and tariffs on Chinese exports valued at $60 billion. 

European Appeal – companies and employees – blazing a new European trail

from Olivier Favereau 

Something has gone wrong in the European Union. Four examples bear witness to this dysfunction. How can it be justified that hundreds of thousands of letter-box companies have been allowed to develop, when the aim of these ghost companies is to evade taxes, labour laws and regulations? How can it be explained that European Court of Justice decisions authorized the restriction of employees’ fundamental rights in order to support business schemes whose very objective was to circumvent the protection of employees? How could recurring revelations such as those made by the Panama Papers and the Paradise Papers fail to have consequences, showing the EU’s inability to prevent tax circumvention by wealthy individuals and large companies? Finally, how could we accept that, despite scandals such as the Rana Plaza factory collapse in Bangladesh, many companies have continued to turn a blind eye to suppliers that ignore the most basic social, environmental and human rights?

The “shareholder primacy” theory has been promoted by the European Commission while the real economy and employees have been forgotten in the process. As a result, profits have grown at the expense of wages since the 1990s. This does not make sense. Employees are a core constituency of companies: while shareholders contribute capital, employees contribute their time, skills and life. That is why it is time to revisit the situation of the more than 140 million EU employees working in companies. The elections for the European Parliament are in one year’s time, and we wish to set the upcoming debate on the right footing.

We deeply believe that it is vital that the following five reforms be undertaken. 

The Big Five: Australia, USA, Canada, Luxembourg and Saudi Arabia

source: http://www.oecd.org/sti/ind/carbondioxideemissionsembodiedininternationaltrade.htm

Oxfam report on the rich-poor divide

Trends of bottom 50% income share: USA and China versus France

new issue of Economic Thought

Economic Thought, vol. 7, no. 1 download issue in full Spiethoff’s Economic Styles: a Pluralistic Approach? Sebastian Thieme The Backward Induction Controversy as a Metaphorical Problem Ramzi Mabsout Reassessing Marshall’s Producers’ Surplus: a Case for Protectionism Daniel Linotte The Decline of the ‘Original Institutional Economics’ in the Post-World War II Period and the Perspectives of Today Arturo Hermann Comments on Arturo Hermann’s paper, ‘The Decline of the “Original Institutional Economics”’ Anne Mayhew