Monday, March 13, 2017

Trump Is Wrong: Protectionism Leads to Misery, Not Prosperity

By Ryan Bourne

Donald Trump tore up the broad consensus on international free trade with a miserable, protectionist inaugural speech on Friday. So explicit was his outlook that those of us who had become complacent about his economic impact — the “how bad can he be?” crowd — have had to sit up and reassess.
In a pugnacious passage, he claimed: “Every decision on trade… will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength.”


The US and UK Are Failing to Confront the Long-Term Drivers of Explosive Debt Growth

By Ryan Bourne

The chancellor Philip Hammond will take to the despatch box tomorrow to deliver his Budget.
The media will pore over the plethora of announcements made — fiddly tax changes here, growth forecast revisions there. But this short-term focus misses the real policy story of the post-crisis period. The political class is failing to address our long-term fiscal challenges, with its spending choices arbitrarily reshaping the British state while entrenching growing welfare expenditure on politically powerful groups.
This dawned on me last week when watching President Donald Trump outline the broad contours of his budget plan to the US Congress. “The Donald” wants to boost military spending by $50bn, paid for by discretionary spending cuts in a range of departments.


The Spectacular Economic Ignorance of Peter Navarro

By Ryan Bourne

Those who believed President Donald Trump’s trade policy couldn’t be as bad as suggested might want to reassess. For his adviser Peter Navarro has written a spectacularly economically ignorant article on the subject for the Wall Street Journal, fulfilling all of Robert Colvile’s fears.
His premise is simple: trade deficits are a drain on economic growth, and the capital surpluses necessary to finance them are also harmful to American interests.
Where to start?


US Trade Laws and the Sovereignty Canard

By Daniel J. Ikenson

John Bolton took to the pages of the Wall Street Journal yesterday to assert America’s interest in abandoning international institutions that threaten U.S. sovereignty. In identifying the World Trade Organization’s Dispute Settlement Body as such an institution, Bolton was reinforcing a central theme of the Trump administration’s recently-minted 2017 Trade Policy Agenda. That document is short on specifics, but makes one thing clear: Under threat of going rogue, the United States will leverage its indispensability to compel changes at the WTO that accommodate a more expansive, less surgical application of domestic trade laws.


Why Is Trump Abandoning the Foreign Policy That Brought Him Victory?


By Doug Bandow

Candidate Donald Trump offered a sharp break from his predecessors. He was particularly critical of neoconservatives, who seemed to back war at every turn.
Indeed, he promised not to include in his administration “those who have perfect resumes but very little to brag about except responsibility for a long history of failed policies and continued losses at war.” And he’s generally kept that commitment, for instance rejecting as deputy secretary of state Elliot Abrams, who said Trump was unfit to be president.


Ten Classic Films with a Libertarian Twist

1. Star Wars: The Empire Strikes Back (1980)

A tyrannical Empire threatens the freedom of its people and uses mind control, torture, propaganda, and force (including The Force) to destroy their way of life and even an entire religion. There’s no way this could happen on our planet, only in a faraway galaxy… right? 
Empire won Best Sound Mixing and a Special Achievement Academy Award; other films that have received this award include Superman, Raiders of the Lost Ark, and Toy Story.

2. All Quiet on the Western Front (1930)

For countless generations, young people have been taught that fighting and dying for their country is the most glorious thing a citizen can do. Two millennia ago, the Roman poet Horace opined, “Dulce et decorum est pro Patria Mori” — how sweet and honorable to die for the fatherland!
In All Quiet on the Western Front, a soldier repudiates the professor who planted this idea in his head, recounting the horrors of the Great War to a new class of young students. “We used to think you knew; the first bombardment taught us better. It’s dirty and painful to die for your country. When it comes to dying for your country, it’s better not to die at all! There are millions out there dying for their countries, and what good is it?”
All Quiet won Academy Awards for Best Director and Outstanding Production in 1930.


How Communism Became the Disease It Tried to Cure

From Radical Revolutionaries to Privileged Bureaucrats
The great German sociologist, Max Weber (1864-1920) offered an understanding of the evolution of socialist regimes in the twentieth century from revolutionary radicalism to a stagnant system of power, privilege and plunder, manned by self-interested Soviet socialist office holders.
Max Weber, in his posthumously published monumental treatise, Economy and Society (1925), defined a charismatic leader as one who stands out from the ordinary mass of men because of an element in his personality viewed as containing exceptional powers and qualities. He is on a mission because he has been endowed with a particular intellectual spark that enables him to see what other men do not, to understand what the mass of his fellow men fail to comprehend.


How Government Spending Kills Economic Growth

Now that Donald Trump has been elected, one of my main goals will be to convince him and his team that it would be wrong to leave government spending on autopilot (and it would be even worse to spend more money and increase the burden of government!).
Since Trump semi-endorsed the Penny Plan, I don’t think this is a hopeless quest. But it will be an uphill battle since populists have a “public choice” incentive to appease interest groups.
But we have a very powerful weapon in this battle. It’s called evidence.
And now there’s even more data on our side. The Institute for Economic Affairs in London has just published an excellent new book on fiscal policy. Edited by Philip Booth, Taxation, Government Spending, & Economic Growth is must reading for those who want to understand the deleterious impact of the modern welfare state.
The IEA’s Director General, Mark Littlewood, explains the goal in the book’s foreword.


Lifestyles of the Rich and Bureaucratic

Yesterday I shared some very good news about Brazil adopting a spending cap.
Today, I also want to share some good news, though it’s not nearly as momentous.
Indeed, it’s not even good news. Instead, it’s just that some bad news isn’t as bad as it used to be.
I’m referring to the fact that the nation’s capital region used to be home to 10 of the nation’s 15-richest counties.
That was back in 2012, and I viewed it as a terrible sign that the DC area was packed with overpaid bureaucrats, oleaginous rent seekers, and government cronies, all of whom were enjoying undeserved wealth financed by hard-working taxpayers from the rest of America.
Well, now for the “good news.”
Terry Jeffrey has a column for CNS News about the current concentration of wealth in the national capital area.


When Equal Access Means Zero Access for All

There is irrational comfort taken in the belief that man-made laws somehow ensure equality for all. More often than not, the exact opposite is true.
Within the next week, UC Berkeley will be forced to remove over 20,000 lectures, videos, and other digital documents from its free online library. While the prestigious school has been generous in making its electronic resources available to the public, a violation of the Americans with Disability Act has left the University with no other choice but to remove the online archive in its entirety.
We are currently living in a golden age of information, where the internet has provided the world with limitless sources of learning without ever having to leave the comfort of home. Like many institutions of higher education, including many other Ivy League schools, UC Berkeley has contributed to open source learning by sharing its curricula and other materials to online platforms like YouTube and iTunes, as well as its own site.


Can Having More Babies Save the Welfare State?

The tax-and-transfer welfare state is in deep trouble. I explained last year that the United States faces a very serious long-run challenge.
Many of our entitlement programs were created based on the assumption that we would always have an expanding population, as represented by a population pyramid. …however, we’ve seen major changes in demographic trends, including longer lifespans and falling birthrates. The combination of these two factors means that our population pyramid is slowly, but surely, turning into a population cylinder. …this looming shift in America’s population profile means massive amounts of red ink as the baby boom generation moves into full retirement.

Foreign Aid Is Out of Control

While President Trump apparently intends to waste taxpayer money for more childcare subsidies and presumably is going to duck the critical issue of entitlement reform, there is some good news for advocates of limited government and fiscal responsibility.
What’s Going On?
According to a recent news report, he’s not a big fan of outlays for foreign aid.
The White House budget director confirmed Saturday that the Trump administration will propose “fairly dramatic reductions” in the U.S. foreign aid budget later this month.
…news outlets reported earlier this week that the administration plans to propose to Congress cuts in the budgets for the U.S. State Department and Agency for International Development by about one third.


Move over Greece, Italy's Crisis Will Be Worse

Early last month, in a column on my hopes and fears for 2017, I fretted about fiscal chaos in Italy leading to default and bailouts.
Simply stated, I fear that Italy, along with certain other “Club Med” nations, has passed the point of no return in terms of big government, demographic decline, and societal dependency.
And this means that, sooner or later, the proverbial wheels are going to fall off the bus. And it might be sooner.
On Shaky Ground
I don’t always agree with his policy recommendations, but I regularly read Desmond Lachman of the American Enterprise Institute because he is one of the best-informed people in Washington on the fiscal and economic mess in Europe.
And Italy, to be blunt, is in a mess.
Here’s what Desmond just wrote about the country’s economy.


Chile Is Thriving – So Why Is Socialism Rising?

Back in May, I wrote about the heart-breaking descent of Venezuela from relative prosperity into socialist destitution. The humanitarian catastrophe unfolding in the Latin American nation should serve as a warning to everyone – don’t try this at home!
It should be possible to separate Pinochet's murders from the economic reforms he undertook.
Yet socialism is very much alive in the least likely place – Chile. Chile, the poster child for the benefits of economic liberalization, is experiencing a resurgence of the Left. Why? To answer that question, let us look at the state of affairs in both countries.
Chile was one of the poorer Latin American countries until relatively recently. In 1950, for example, its average annual income per capita (PPP) was a mere 38 per cent of that of Venezuela – Latin America’s richest nation. That’s where things stood, when a Castro-inspired socialist, Salvador Allende, was elected as Chile’s 30th president in November 1970.


How the Black Market Is Saving Two Countries from Their Governments

Ever since governments began banning and licensing different parts of the economy, the black market has made sure people still have access to the things they need. Unstable governments always turn on their own citizens using price controls, heavy taxes, and even the threat of imprisonment to prop up their failing systems. As conditions inevitably deteriorate, as they have in Venezuela and Greece, the underground economy becomes invaluable to those living through the crisis.
Markets Survive in Venezuela
The shadow economy refers to more than just the trade of illegal goods. A grey market, for example, provides legal products distributed through illegal channels. Since basic things like toilet paper, medicine, and even food have disappeared from store shelves in Venezuela, the peer-to-peer network has become the only reliable way to secure life’s necessities. In desperate situations like this, the existence of independent merchants can mean the difference between life and death.


Sunday, March 12, 2017

Europe or Anti-Europe?

Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU’s Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, Senior Fellow at the Hoover Institution at Stanford University, Academic Board Chairman of the Asia Global Institute in Hong … read more
 
MILAN – A knowledgeable friend in Milan recently asked me the following question: “If an outside investor, say, from the United States, wanted to invest a substantial sum in the Italian economy, what would you advise?” I replied that, although there are many opportunities to invest in companies and sectors, the overall investment environment is complicated. I would recommend investing alongside a knowledgeable domestic partner, who can navigate the system, and spot partly hidden risks.
Of course, the same advice applies to many other countries as well, such as China, India, and Brazil. But the eurozone is increasingly turning into a two-speed economic bloc, and the potential political ramifications of this trend are amplifying investors’ concerns.

Four Certainties About Populist Economics

Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU’s Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, Senior Fellow at the Hoover Institution at Stanford University, Academic Board Chairman of the Asia Global Institute in Hong … read more
MILAN – Successful economic globalization requires reasonably successful growth patterns in individual countries. That dynamic characterized the 30 years or so after World War II: growth rates were relatively high across a wide range of countries; their benefits were broadly shared within countries; and the rise of developing countries reduced global inequality. This period was arguably the heyday of globalization.
Of course, globalization continued through the 1970s and beyond. But the underlying growth patterns changed. Driven by the labor arbitrage embedded in economic globalization and the rise of disruptive digital technologies, advanced economies’ middle-class manufacturing jobs disappeared, their median incomes stagnated, and job and income polarization grew, even as GDP growth remained strong. This new pattern – which persisted through the 1980s and 1990s, and accelerated after 2000 – caused inequality to rise sharply, weakening the foundations of globalization.

Escaping the New Normal of Weak Growth

Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU’s Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, Senior Fellow at the Hoover Institution at Stanford University, Academic Board Chairman of the Asia Global Institute in Hong … read more
 
MILAN – There is no question that the recovery from the global recession triggered by the 2008 financial crisis has been unusually lengthy and anemic. Some still expect an upswing in growth. But, eight years after the crisis erupted, what the global economy is experiencing is starting to look less like a slow recovery than like a new low-growth equilibrium. Why is this happening, and is there anything we can do about it?
One potential explanation for this “new normal” that has gotten a lot of attention is declining productivity growth. But, despite considerable data and analysis, productivity’s role in the current malaise has been difficult to pin down – and, in fact, seems not to be as pivotal as many think.

Civilizing the Marketplace of Ideas

Niall Ferguson is Laurence A. Tisch Professor of History at Harvard University and a senior fellow at the Hoover Institution, Stanford.
 
CAMBRIDGE – “When men have realized that time has upset many fighting faiths,” US Supreme Court Justice Oliver Wendell Holmes wrote in a famous dissenting opinion in 1919, “they may come to believe…that the ultimate good desired is better reached by free trade in ideas – that the best test of truth is the power of the thought to get itself accepted in the competition of the market, and that truth is the only ground upon which their wishes safely can be carried out.”
Like any market, however, the marketplace of ideas needs regulation: in particular, its participants should be bound by norms of honesty, humility, and civility. Moreover, every idea-trader should adhere to these principles.

More Keynesian than Keynes

Niall Ferguson is Laurence A. Tisch Professor of History at Harvard University and a senior fellow at the Hoover Institution, Stanford.
 
CAMBRIDGE – Like most people who create an “ism,” John Maynard Keynes quickly found his followers running ahead of him. “You are more Keynesian than I am,” he once told a young American economist. Now it is the turn of his biographer, Robert Skidelsky, to become distinctly more Keynesian than Keynes.
Keynes was not averse to changing his mind. But, as far I am aware, he did not change his predictions after the fact. This does not seem to be the case for Skidelsky.
In November 2010, Skidelsky described British Chancellor of the Exchequer George Osborne as a “menace to the future of the economy,” whose policies “doomed” the United Kingdom to “years of interminable recession.” In July 2011, he declared that Osborne was making a “wasteland.” 
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