Sunday, March 29, 2009

Misunderstanding Ha-Joon Chang #2

I've got into another argument about protectionism, this time it's with Phillipe Legrain over a Prospect article by Ha-Joon Chang (who I happen to think is awesome). I've copied it here because I thought it was quite good.

Phillipe, I believe you are misunderstanding exactly what Chang proposes in his article. The debate over protectionism and free trade always seems to have one side creating a straw man of the other which is a shame.

You make the assumption that he suggest that all governments agree to raise their import taxes, he does not suggest any such thing. Protectionist measures come in various forms, tariffs being just one of a large number of different policies. Tariffs would indeed be largely counterproductive in most developed countries since many of their jobs depend heavily on imported goods. National governments are aware of this and would realise the folly of such a move.

The real argument, one that Chang doesn't make especially clear in this article is about a pragmatic application of protectionist measures by national governments in order to:A) Promote sustainable future economic developmentB) Preserve viable sectors of the economy going through tough timesC) Actively promote the restructuring of the economyD) Minimise the social cost of economic restructuring

Protectionist measures can assist in meeting these goals, for developing countries tariffs are often a very effective way of raising revenue and can be a useful tool for raising funds in order to encourage development. For developed countries such measures are not pragmatic, but subsidies and low interest loans can be used to promote sectors seen as essential for future growth while causing a minimum of distortion to international trade.

Where I feel the true difference between yourself and those of us who call ourselves "protectionist" lie is in the role of the state. The solutions you propose are broad measures and I personally do not believe these will be sufficient, I believe (and suspect Chang would agree) that any economic stimulus should be far more targeted with a view to promoting specific sectors of the economy.

The Supposed Benefits of Globalization

One thing that seriously annoys me in politics is the way that orthodoxies take hold over certain subjects and anyone challenging that orthodoxy is often sidelined and ignored. It's a very dangerous situation because it can allow certain special interest groups to dominate the debate and sieze control of power.

It's my view that globalization in the form that we've had it in the last 30 years has been exactly this kind of situation. We've had a world where financial interests have seized control of political power and dominated the political debate. This is not just my view, but also the view of Simon Johnson former chief economist of the IMF in an article entitled The Quiet Coup he explains the rise of the financial interest in terms of both it's importance and it's influence over national governments.

Whats worse than the raw political influence has been the way that the financial interest managed to worm it's way into political thinking. To this day many Labour politicians speeches have been filled with talk of the benefits of globalisation, the need for competetiveness and the need not to restrict "aspiration". I'm sure that most are not complete converts on this score they've simply come to believe that these financial interests are impartial technocrats presenting a solution that is clearly the only right one to follow.

I do wonder if our politicans have ever looked at the figures, the table below shows per capita GDP growth in various regions of the world from 1960 to 1980.

Region1960-19701970-19801960-1980
Low Income Countries1.81.71.8
-Sub Sahran Africa1.70.21.0
-Asia1.70.21.0
Middle Income Countries3.53.13.3
-East Asia & Pacific 4.95.75.3
-Latin America & the Carribean 2.93.23.1
-Middle East &North Africa1.13.82.5
-Sub-Saharan Africa2.31.62.0
-Southern Europe5.63.24.4
All Developing Countries3.12.83.0
All Industrialised Countries3.92.43.2

The second shows the figures for the period 1980 - 2000 (with slightly different groupings).

Region1980-19891990-19991980-1999
Developing Countries1.41.71.5
-East Asia & Pacific6.46.16.3
-Europe & Central Asia1.5-2.9-0.6
-Latin America & The Carribean-0.31.70.6
-Middle East & North Africa-1.10.8-0.2
-South Asia3.53.83.6
-Sub Saharan Africa-1.2-0.2-0.7
Developed Countries2.51.82.2

Looking at it we can draw several trends, we can note the massive growth of South East Asia, we can also see the negative growth of sub-Saharan Africa in 1980-2000 period, the terrible collapse of Eastern Europe and Central Asia in the 1990's as well as the very poor growth of Latin America in the 1980-2000 period. The more general trend is that the earlier period of more regulated capitalism delivered a far better rise in the standard of living.

For all the images of financial globalisation as a powerful driver in eliminating world povery the actual results, ignoring all social consequences and sticking to the primitive measure of GDP growth have been surprisingly lacklustre, which makes me wonder why our Labour politicians so openly embraced it.

Wednesday, March 25, 2009

The Financial Crisis and Peak Oil

A blog I've starting reading recently that I'm really liking the look of is The Oil Drum, it's got some pretty good coverage of various bit's of the energy industry.

This very long post on the subject of peak oil and the financial crisis is well worth a read.

WTF!?

I generally think that MP's should follow the party line, accepting the need that sometimes they'll need to grit their teeth and vote in favour of legislation that they're not 100% happy with. I do however accept that occasionally there are matters that evoke such strong feelings, matters that breach such dearly held principles that than an MP might be driven to stand defiant in rebellion against their party.

I would have to ask though: Is minor amendment relating to homophobic hate speech really the place to lose your rebellion virginity in such a principled stand?

Tuesday, March 24, 2009

Mervyn King is not Omnipotent

I suspect there's a lot of buzz surrounding what Mervyn King saidtoday, it's very much unlike him to make an announcement quite so political. It appears to be music to the ears of Davey C and his crew, but I think it's worth bearing a couple of things in mind.

Firstly, it's worth pointing out what King actually said:
Given how big those deficits are, I think it would be sensible to be cautious about going further in using discretionary measures to expand the size of those deficits.

This does appear to be far more noncommittal than "Britain cannot afford any further fiscal stimulus" which appears to be the headline of choice.

The second point is quite simply that Mervyn King is no super being, he could be wrong. After all in his six years at the bank he presided over monetary policy that led to the current situation. The bank was also considered to have been to slow in cutting interest rates under King's stewardship when the first waves of the financial crisis hit. King has been wrong before and he could be wrong now.

For my two cent's (for my opinion is worth little more) I believe that King is wrong in this case, I think we need to be forging ahead with another larger fiscal stimulus with the aim of investing in infrastructure and restructuring of the economy. I don't think now is the time to be losing our nerve.

Crossposted on Common Endeavour

Sunday, March 22, 2009

When the Mail on Sunday says "Jump"..

...as in this example here, you don't say "How High?"

Whatever the rights and wrongs of the rules on MP's expenses, they should not be decided by a tabloid newspaper.

Friday, March 20, 2009

Top Talent

I'm really amazed at how much stock people put in the idea of "Top Talent". For example this chap seems to think that Obama's 90% bonus tax (basically any bonuses paid to an exec at a company receiving a bailout will be taxed at 90%) will have the top talent leaving for firms not taxed in this way.

Personally, far from being rare individuals posessed of greatness I reckon most of these guys (plus the occasional gal) are dime a dozen. Far from seeing vast differences in performance between those companies that recruit the "top talent" and those who lose them, I reckon that performance differences will be pretty modest.

I'd like to hope that that this breaks the spell that's hung over society for many years that these people are worth their rewards and to object is nothing more than politics of envy. Can't say I'm hugely hopeful though.

Tuesday, March 17, 2009

Time to Hug a Banker? Definitely Not

I really not happy with Robert Peston today, first it's the rather ambiguous comment that the Tories were first to warn of excess in the city. There may be a grain of truth in this, but I wonder exactly where and when they did this and exactly how much of a fuss they made about it.

Second is this blog post elaborating on his earlier Today programme appearance, where he briefly talked about he talked about Britain's comparative advantage in banking. Problem is that it's really hard to see how you can have an advantage in an industry that creates something that exists on no more than a whim. I suppose I could look to religon for answers.

Monday, March 16, 2009

On Free Trade..

Over on the Times website is a piece on free trade by Peter Mandelson. Now, I suppose I could make a straw man argument out of it and knock it down, instead I'll say this:

Trade between nations is undoubedly important and worthwhile, I have no doubt that much of the world's prosperity is due to it's expansion. Where I take issue is with the word "free" which could in a sense be translated as "unrestricted". If you pursue a policy of unrestricted trade then the production of every good and every service in this country will be dictated by commercial, not political priorities.

Some people may believe that commercial priorities will ultimately deliver better results, I do not. I believe that commercial priorities ignore the many social concerns external to the crude calculations they make and untamed by politics deliver neither the growth or the better society they promise.


That is all.

Taking on Tom Harris

Originally wrote this over on Common Endeavour, but thought I'd add it here too.

Tom Harris' follow up to his "Return of Morality" piece is definitely an improvement, he has obviously taken on board criticisms about the sexist nature of the original piece and makes sure at least that the boys are in for an equal dose of criticism. He is also making an effort to distance himself from those on the right who like to view benefits claimants as scroungers.

All, no doubt an improvement on the original article but there are still what I'd call a few causes for concern with his article. A culture of benefit dependency is no doubt a problem and I have no doubt that Tom's diagnosis that much of it began with Thatcher in the 80's. I'm less convinced on two other aspects of his argument.

Firstly, there's the Tom Harris vs The Labour Party mentality that persists with stuff like this:
AS FOR the accusation of giving comfort to the ‘Right-wing’, when did it become ‘Left-wing’ to tolerate such a colossal waste of lives? Why is it ‘Left-wing’ to allow millions of people to remain on benefits instead of working? When did ‘Labour’ stop meaning ‘work’ and start to mean ‘benefits’?

With this he is pandering to a set of predjudices that the Daily Mail and it's ilk like to put out that we in the Labour party are driven by some kind of sinister drive to further welfare dependency and that we prefer to bury our heads in the sand over the issue. This is quite simply not the case.

Then we move on to this bit:
No single party, I’m convinced, has all the answers. James Purnell, the Work and Pensions Secretary, has proposed some of the most radical changes yet to the welfare state. But just because Labour is in government does not give us a monopoly on solutions. Former Tory leader Iain Duncan Smith and Theresa May, the Shadow Work and Pensions Secretary, have much to add to this debate, as has Frank Field, the Labour MP who was asked by Tony Blair to ‘think the unthinkable’ back in 1997, who did – and was sacked for his efforts

In looking for answers to the problems of welfare dependency, looking to Frank Field, Iain Duncan-Smith, Theresa May and James Purnell seems like limiting yourself to a very narrow set of viewpoints. I know this is simplifying their viewpoints somewhat, but all of them seem to rely very heavily on what you might call "stick" policies (withdrawal of benefits and such).

The problem with "stick" policies is that for many, getting a job means getting a menial minimum wage job with no prospects for promotion or advancement. The prospect of a lifetime in such unrewarding work will not lift people out of the benefit trap.

What we need, in my view, is a serious attempt by the government create new jobs, the market has 30 years to try and I think it's fair to say that it's failed in that aim. The government needs to step in with a fiscal stimulus that has the clear aim of creating good, rewarding work. That and not handing out judgement from on high is what we need.

Wednesday, March 11, 2009

Blogroll Additions

Some chap called Duncan who often writes long and very detailed economics comments over on Hopi Sen's blog and ocassionally does guest posts over at Don Paskini's place has started a blog of his own, and it's looking like it's off to a good start. Also being added is the new Labour Women blog.

And, on another note Liberal Conspiracy seem to be picking a fight with James Purnell, I'm planning to stand back and watch.

Tuesday, March 10, 2009

Premptive Economics #2

A few months ago I wrote a piece called "Considering Japan", suggesting that looking at it, when you take into consideration all the factors that Japan's lost decade was not nearly as bad as you might think.

Yesderday it appears, that Paul Krugman wrote a piece called "Japan Reconsidered" on his New York Times blog. It seems to be saying something very similar.

Coincidence? Probably, but I've been doing quite well on economics related coincidences recently. So I think I can give myself a pat on the back.

Monday, March 09, 2009

International Womens Day

Today is International Womens Day, and despite the occasional person thinking that I'm a girl called Andrea, that is, I'm afraid, not the case. I am a red blooded male as my previous testosterone fuelled clarksonist post may have indicated. Nevertheless I'd like to post in support for my sister comrades.

There is in fact an International Men's Day although some might argue that getting to spend our time running the worlds governments and corporations does render such an occasion redundant.

Labourlist is full of posts from some lovely leftwing ladies and Comrade Smith has stolen ehe Twitter feed from Derek Draper, it's rather entertaining and has pointed me in the direction of the quite interesting Labour Women blog.

Finally, I'd like to suggest that the person on this thread going by the name of Stewart Cowan is a sexist pig, I'll have to dig out the quote later, as for now ReasonablyNiceCorp's swear filter won't allow it.

Update: The quotes
Feminists try and depict the indispensable role of patriarch as being misogynistic.

and
By contravening the natural order of things, of course you will wreak havoc. And the natural order is for a man and a woman to marry, children are added to the family and the process continues.

Sunday, March 08, 2009

Thoughts of a Left Wing Petrolhead

I may be a Labour supporter, ready to argue in favour of the many policies put forward by our comrades in Westminster, but I also happen to be someone who rather likes driving. so, comrades I'm afraid that this little story has released my inner Clarkson.

I'm afraid I think that reducing the speed limit on single lane A roads from 60 to 50 is a stupid idea. I wouldn't want to comment on the safety of the idea, I don't know how effective such a policy can be, I would say however that it will irritate a hell of a lot of people for no good reason.

I can understand why there might be a call for such a thing on certain roads, but the whole plan seems like overkill to me.

Friday, March 06, 2009

Torynomics = Fail

The latest news is that the Bank of England has begun quantitative easing and right on time Iain Dale has chipped in with his viewpoint and the favourite Tory comparison to Robert Mugabe's Zimbabwe and of course 1920's Germany. He says:

No one has ever shown, to my knowledge, any instance where printing money has led to anything but a worsening economic situation.

So allow me to provide Iain with an instance where it has worked, Japan. From my copy of "Japan's Great Stagnation":

In March 2001, the BOJ (Bank of Japan - Andreas) introduced it's policy of
"quantitative easing" at the same time the Bank lowered it's interst rateto zero
(consisting of bank reserves and current account balances of exempted institutions). At the time the BOJ began targeting the outstanding balance of bank's current accounts (consisting of required and excess reserves ofcommercial banks). The BOJ initially announced a target of around ¥5 trillion with the objective of pushing the overnight call rate to zero. The BOJ also announced that this procedure would continue "until the consumer price index (excluding perishables, on nationwide statistics) registers stably a zeropercent or an increase year on year." The target current account balance (held at the BOJ) was raised three times in 2001, twice in 2002, three times in 2003 ad again in January 2004.
Despite the use of this policy, Japan did not suffer hyperinflation, inflation has remained fairly mild. Recovery properly occured in 2003 and growth when taking into account Japan's shrinking population looked reasonably good. Of course, Japan has it's own problems now, but this is an entirely different story. He then goes on to say:

The way to get confidence back into our economy is not to print money, but to encourage the return of sound money.
To this I'd like to point out Stephanie Flander's post about protectionism and gold, the gold standard, which in a lot of ways can be considered the ultimate "sound money", but is believed to be a major factor in causing the great depression, as Stephanie points out the first countries to recover were those that came off the gold standard, "sound money" has it's own set of problems.

Night all.

Wednesday, March 04, 2009

Liberty, Security & All That

Being the kind of Labour supporter who occasionally suggests that maybe the database state is not all that bad and CCTV can actually be quite a helpful thing, I'm often on the recieving end comments from people who think they are being incredibly original and insightful when they throw this quote in my face:
They who would give up an essential liberty for temporary security, deserve neither liberty or security. - Benjamin Franklin

Now, I'm not going to start having a go at Ben Franklin because there is the really large "essential liberty" caveat as well the good chance that it was intended as rhetoric rather than logical argument. I'd also prefer to dipense with arguments over whether he said "security" or "safety". What I would like to do though is put forward an argument in favour of security.