Month: March 2018

The Great Trump Korean Trade Deal

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As usual we need to put two and two together for these announcements.

  1. The biggest, highest profile provision of the deal is the raised limit on the number of cars each American manufacturer can sell in Korea. However, no American manufacturer has come close to the current limit.
  2. American auto manufacturers have recently made clear how interested they are in foreign markets. The industry’s lobbying group—the  Alliance of Automobile Manufacturers—recently released a report full of fabricated challenges to the idea of climate change in support of a regulatory request for relief from new auto emissions and fuel economy standards.

In other words they’d rather come up with the next SUV—a product niche initially unique to the US—than fight it out in the more competitive international market where such standards hold sway.  (Even the Korean deal actually had to include an exemption from such rules, or we couldn’t sell anything!)

So we have theater instead of economic policy.  Too bad we can’t just export media events.

Political Correctness, False News, and the Attack on Education

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This is a tough time for colleges and universities.  Many of them—particularly the public ones—are being squeezed for money, and they’ve all got to deal with conflicting standards for sexual harassment, trigger warnings, and political polarization of the student body.

And then there’s “political correctness”.  It’s a difficult issue, with arguments on multiple sides, and with something quite sinister lurking in the background.

On one hand there is the classic liberal argument for universal openness.  Constraints on the intellectual environment are bad, because truth can be unpopular.   Furthermore, once you allow constraints you never know who is going to do the deciding.

It’s hard to argue with that position in an ideal world, but the real world makes the situation less clear.

First there is the question of safety or feelings of safety for the student body.   You can’t allow some people to attack others they don’t like, and the only question is how far that prohibition goes.  In the real world, the university must guarantee that every student is safe and valued.  That has to apply to all groups, religious beliefs, and sexual attitudes (liberal, Christian, or anything else).  That’s not a simple criterion to enforce, but universities cannot be faulted for setting such rules.

A second problem is harder.  Today we’re dealing with an environment where not all ideas have an equal chance, as more and more intellectual discourse is bought.  The prime example is the Koch organization, that has plowed hundreds of millions of dollars into institutes that promote their ideas.  Everyday examples are the American Enterprise Institute, the Cato Institute, and the Mercatus Center at George Mason.  People working for these institutes (e.g. Charles Murray) can do legitimate research, but they are paid for reaching correct conclusions, and their ideas are heavily promoted to serve their masters.  This isn’t exactly false news, but any implication of unbiased research is certainly false.

In such cases it is understandable that some students feel that their ideas are being squashed by the power of money—a feeling that is particularly acute in a time of Citizens United and Trump.  But it’s also true that the student intellectual environments are prey to their own fads, with self-righteous acts directed at others. (I personally remember unbridled enthusiasm for Chinese communism and Mao’s little red book.  I also remember reading Simon Leys’ Chinese Shadows, with the comment that Western fascination with Mao was proof of how little anyone really cared about China!)

So there is some justice in decrying political correctness, but that doesn’t mean that student concerns about speakers are wrong.   Any opinions can be expressed (subject to valuing all students), but it also seems that sponsors of a speaker should be required to enforce standards for on-campus speech and also to make clear the nature of the institutions represented.  And it should be part of everyone’s education to understand how intellectual discourse is bought.  With the profusion of institutes and representatives, it’s not simple to keep track of all the Koch tentacles!  Even when the subject is government, people aren’t reminded frequently enough that Pence, Pruitt, and Pompeo are all Koch creations.

However, we have not yet reached the crux of the issue.  Thus far we have treated political correctness as a real issue where there can be legitimate areas of disagreement.   That’s true for some of the discussion, but certainly not all.  You have to go back to the core Koch motivations:  shrink government, shrink controls, and above all shrink taxes.  Colleges are expensive and turn out liberals.  The Koch’s attack on political correctness is actually just a pretext for a full-bore attack on college education overall.  The whole system has to go.

A recent best-seller on Amazon could not be more explicit—“The Case against Education: Why the Education System Is a Waste of Time and Money”.  College education teaches nothing useful, it’s just a game to certify the capabilities of students to potential employers.  It teaches people things they don’t want to learn and will just forget anyway.  In particular nobody needs to know history, because no one is going to get a job as a historian.  Scrap the whole thing, save a fortune, and give people some useful vocational education to get a job!

The author is an academic from a reputable institution, nominally talking about what he as a teacher really thinks needs to be done.   Almost all reviews on Amazon take that at face value.  You have to know that he comes from the Mercatus Institute at George Mason, where Charles Koch sits on the board!

The argument is of course self-serving.  There’s no question about the value of education—both financial and personal—to those who complete it, and also no question about what kind of education people with money will chose for their own children.   The “just a game” story ignores the value of intellectual activity—the real goal of education—and focuses on memorized facts.  In the end the proposal comes down to a two-tiered educational model, where the world is wide open to children whose parents can afford the real thing, but not to the rest.   The Kochs are willing to pay for the basics needed to produce employees and nothing more.  Just like the good old days.

Nonetheless the argument has a scary amount of currency.  Mainstream Republicans are hostile to education in general and college education in particular (but richer ones send their kids to college anyway).  Identity politics and vilification of liberals have convinced some people against their interests to keep their kids from being corrupted by education.   Some state governments (Wisconsin, North Carolina) have deliberately attacked their state universities.  Trump’s State of the Union speech pointedly talked about “vocational education” only.  (A more recent NY Times college education overview is perhaps scariest of all in the amount of Republican rhetoric it swallows whole in its effort to be even-handed.)

We can’t claim all colleges have always paid enough attention to getting their students jobs, but the value of education has been undeniable and increasing.  Further, broad-based college education has always been one of the major strengths of this country, and the rest of the world has learned its value as well.  College at its best prepares students for a world where they will have to adapt continually to changes and opportunities, whatever those might be.  A two-tiered system would be a nightmarish step backward both for students and for the country.

Education is one of the most important battlegrounds where our collective future will be won or lost.

Guns

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Despite all that has been written about guns and their consequences, there are still important topics that haven’t received much press.  This note is about two interrelated subjects:

  1. Why the NRA and the gun lobby are as powerful as they are.
  2. Why the pro-gun campaigns are as damaging as the guns themselves.

Both are important in thinking about what needs to happen with public policy.

 

  1. Why the NRA and the gun lobby are as powerful as they are.

The point here is that the usual stories explain influence but nothing like the absolute veto power wielded by the NRA.   Most articles describe NRA contributions to candidates and gun manufacturer contributions to the NRA.  The stories are compelling, but the money just isn’t there for absolute power.

A recent article clarifies the situation.  As with much of today’s politics, the real story is in the dark.   The vast majority of the money spent by the NRA actually doesn’t go directly to candidates but to political action committees.   And the source of that money is also dark and from far deeper pockets.  Specifically the NRA’s Institute for Legislative Action, and Political Victory Fund are supported by conservative Super PACs and the Koch brothers’ organization.

Nothing says that guns are necessarily close to the hearts of the Koch brothers, but the rhetoric around guns is.   The central argument of the Koch agenda is that governments can do nothing, so we need to shrink government, shrink controls, and above all shrink taxes.  We’ve talked about this before:

Government is corrupt and inept.   Sometimes, as with the EPA, it is actively malicious.  It makes laws that impinge on our freedoms.  It wastes money with social welfare programs for ungrateful non-white cheats.  Education is useless indoctrination.  Even the police cannot be trusted to do their job—we need more good people with guns.

In that context the Kochs have every reason to support the gun lobby, and the pro-gun movement has to viewed as just one more aspect of the Koch organization that has already delivered unimaginable tax cuts for the ultra-rich.

That leads to the next topic.

  1. Why the pro-gun campaigns are as damaging as the guns themselves.

The first point here is obvious but needs to be emphasized.   The whole notion of “good people with guns” is an attack on the rule of law. The Kochs may not have to care about it—they certainly have their own law enforcement—but for the rest of us this is terrible.   No one should be cheering for laws that say it is okay for people to go execute each other with only the vaguest notion of self-defense.

That gets us to the main point:  the pro-gun movement is not just supporting guns—it is supporting vigilante action.  This is important, because it undermines the “guns don’t kill people, people kill people” argument.  We’re actually glorifying citizen executions.

And if there is anything that stands out in virtually all cases of mass shootings it’s that.

 

So now the question is what we can do about it.  Anything in this piece is of course pure speculation, but here goes.

Fighting the whole Koch agenda is impractical, so we have to separate this part out.   It seems that a first step is to go after the “good people with guns” notion explicitly and with support from law-enforcement and anyone else willing to stand up for rule of law.  Guns are for defense, not vigilantes.  Basic gun control (background checks and no assault weapons) is intrinsically part of the package.  Ideally that could be an acceptable compromise and could also make gun issue less productive for the Kochs.

It’s worth noting that nothing in the second amendment supports vigilante action, and no one can possibly believe that the eminently respectable founding fathers wanted to encourage it!

For the Economy—Stop the Tantrums and Look

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To forestall expectations—this article is not about Trump’s daily antics.  It starts with a basic fact from Dani Rodrick (no cheerleader for globalization).  He talks about asking students a simple question: Would you rather be rich in a poor country or poor in a rich country?

…think of a rich person as someone in the top 10 percent of a country’s income distribution while a poor person is in the bottom 10 percent.   Similarly, a rich country is in the top decile of all countries ranked by average income per person while a poor country is in the bottom decile of that list.

The correct answer is “Poor in a rich country”—and it’s not even close.  The average poor person in a rich country, according to my parameters, earns three times more than the average rich person in the poor country ($9,400 versus $3,000 adjusted for differences in purchasing power across countries).  Disparities in other aspects of well-being, such as infant mortality, go the same way too.  The poor in a rich country have it much, much better than the rich in the poor country.

Students get it wrong because they don’t realize what a minute share of society those BMW-driving superrich represent—no larger perhaps than one hundredth of 1 percent of the total population.  When we expand the numbers to cover the full top 10 percent of a typical poor country, we have come down to income levels that are a fraction of what most poor people in rich countries make.

There’s a lot here that’s relevant, but the most basic message is that when you make the pot bigger, things ought to get better for everyone—even in the most extreme cases.

We live in time period where the pot is getting bigger all over the world, and especially in the hugely populated countries of China and India.  So the right question to ask is NOT “how can we stop those people from stealing from us?” but “why are we not making things better for everyone?”  As we’ll see it is a useful question to ask.

The major changes going on in the world are technological.  Technology has made production of many goods both cheaper and ever easier to locate anywhere.  There are good (and increasingly many) jobs in that world, but they are not the same jobs.   Some jobs get replaced by technology, some jobs get moved to places where labor is cheap enough to compete with the next level of automation.  In both cases they cease to be good jobs.   As with other such cases in the past, the social dislocations are enormous—but they are only as bad as we make them.  And the best way to make matters worse is to pretend the changes don’t exist!

In this country we have both the rhetoric and the policy of such delusion.  We’ve gotten out of the business of helping people who lose jobs in the blind belief that a happy private sector will take care of it.  In fact, people are going to lose jobs and find their skills devalued through no fault of their own.  Further, with the changing economy, education is for most people the necessary path to a good job and a viable financial future.  However we have become alarmingly hostile to it, underfunding it and looking for reasons to limit it to the targeted “vocational ed” that seems to be in the air.  And internationally our response to problems of dislocation has been a tantrum:  everyone is out to get us, so we’ll take our marbles and go home.

The rhetoric says that Mexico and China and …  have caused an epidemic of depression, joblessness, and despair.  That’s self-destructive blindness.  (The worst thing about globalization is all that can be blamed on it!)  We did it.  We refused to recognize the technological dislocation we’re living through, so we provided no help, blithely punting to the private sector.  However, private sector expansion and even tariffs are false hopes for jobs that aren’t economically viable.  We have to support people, and as much as possible get them on a new track.  And we particularly need to make sure that the next generation doesn’t suffer for it.

That takes money, but it’s not as if we don’t have any.   We’ve just devoted $1.4T to a corporate tax cut that is nothing more than a misguided subsidy to have the private sector solve this very same problem!  (We know now that the money is going instead to investors, primarily via stock buybacks.  Real tax reform is another subject and can be close to revenue-neutral.)  We have to spend it on the people who need it and on education and infrastructure.

And for the rest of the economy, things aren’t so bad out there in the real world.

First of all, even before the tax cuts, our corporations and our upper tier of incomes have been doing just fine.  There are problems for people, middle class and below.   But there’s no indication that the technology-driven side of American business is going anywhere but up.

Second this is a period of unprecedented geopolitical opportunity.   China has finally reached the point where it is a viable market for the West and with an incentive to act that way.   There has been so much rhetoric about China that even the basics get lost.  China has been a statistically poor country for a very long time.  Its economic development has been export-directed and they do have some shady practices, but China’s ability to absorb imports has been limited at best.  That is no longer true, and China recognizes that its economic interdependence with the West requires a new relationship.  Given China’s size, the opportunities are real—which is to say that if we play our cards right the pie should get bigger for everyone .  (A more recent NY Times piece also makes that point.)  And given the speed and magnitude of technological change, the pie should continue getting bigger for a long time.

In some ways you can compare our situation to the world in the 1950’s.  European countries had lost their colonies and their predominance, and they had to recover from the damage in the war.  It was a rough transition, but they ended up far better off than they had been before.

We are living through a time of major transition.  We are well-positioned, but we have to help some people through it.   And with more players we may not always be so overwhelmingly predominant as we are today.   But this is an extraordinary future for us and everyone else.  We just have to be willing to open our eyes and get it.

Another Gift to China

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Trump’s latest tariffs on steel and aluminum were announced to combat unfair trade practices from China.  The first problem with that explanation is that China is no better than 11th on the latest list of steel exporters to the US!

The craziness of the action, however, just goes on from there.   According to the steel industry itself, the major problem with steel today is overproduction in China leading to overcapacity worldwide.  That’s a problem for every country that produces steel.  As the NY Times pointed out, if we were really serious about Chinese behavior, there are plenty of other countries in the same boat, so collective—and effective—action is straightforward.  (The US actually has a good record of success with the WTO.)  Instead we’re going after those potential allies.   And as a matter of fact China has already pledged to reduce its steel production in response to such international pressure.   The new tariffs take the pressure off China by making the tariff wars, not the overproduction, the main issue.

The tariff proposal itself is particularly suspect, because it applies to all countries across the board.  We are by definition not responding to particular protectionist behavior in targeted countries.  Since we’re not punishing actual perpetrators, the proposed tariff is essentially a cheap way of financing subsidies to the steel and aluminum industries.  It’s perfectly rational for the steel industry to want a subsidy by whatever means.   But the President of the United States has an obligation to recognize that a shakedown of potential allies is not a good way to deal with an offender!

It’s worth saying a few words about fair trade.   First of all, it’s worth recognizing that making something better and cheaper is not of its nature unfair.  It is the task of trade agreements to define the rules of the game.  Dumping below cost is unfair.  Subsidies of all kinds are unfair (but can be hidden in many different ways!)    Sales restrictions are unfair.   Below standard wage arrangements or environmental rules are unfair.

China’s case is not unusual in its evolution, but it has reached historically unique proportions.   For many years China was basically an underdeveloped country, with a limited ability to purchase imports to match its export-directed production—regardless of whether its markets were open or closed.  As the Chinese economy has grown, however, the state has maintained that mindset despite the growth.  And the Chinese population—after Mao—sees the improvement as more than acceptable, and any serious labor agitation is a good way to get shot.

China still has the mindset—and per-capita production—of a poor country.  But the country is so big that its prosperous part is a huge market that should be opened to the rest of the world.   The upshot is that there is plenty to discuss about fair trade with China, and now is a good time (from the point of view of international leverage) to do it.  But instead we’re stuck with a trade war that will be damaging to everyone—including us—and real progress with China may get lost in the noise.

Even if we just want to focus on the steel industry, this didn’t have to happen.  The best way to help the American steel industry is to buy American steel.   Everyone agrees we have an infrastructure problem—in any reasonable world we would be using American steel to rebuild the country.  Instead that got sacrificed to private-sector fantasy in the budget.

The final and perhaps most serious subject is the way this is being done.  Trump has been able to set tariffs by fiat by claiming national security as motivation.  Normally, without this seldom-used national security ploy, tariffs are a matter for Congress.  That we’ve started this way is a scary first step.  And Trump has already announced how he is going to respond to possible European Union tariff retaliation—by large tariffs on imported cars.  You can hardly claim that is a national security matter—but it sure doesn’t seem like this government by fiat is going to stop!

So we no longer need to argue about whether Trump will or won’t try to make himself a dictator.  Unless something happens, he is already in position to wreck our economy all by himself.