The Koreas: totalitarian socialism vs industrial policy

A link below to Michael Roberts’ blog post on the Koreas. It focuses mainly on some analysis of the post-Korean War economic history of the North, but also some comparison with the capitalist South and his desire to see the two of them reunified under centrally-planned socialism, something that I cannot see being a success.

The diverging fortunes of North and the South in terms of economic (and political) development illustrate the potential dynamism of capitalism versus largely autarkic socialism. But it does not lend support to an idealised and unfettered free-market capitalism either. Continue reading

America is regressing into a developing nation for most people

“The US is no longer one country, but dividing into two separate economic and political worlds.”

Via the Evonomics website, Lynn Parramore provides a useful review of The Vanishing Middle Class: Prejudice and Power in a Dual Economy

Brexiters’ fantasy island

Some UK politicians happy to walk away from the Brexit negotiations without a deal have brokered the idea of turning their country into a minimal tax, minimal regulation economy, and have cited Singapore as a model to follow. They should look more closely.

As James Crabtree wrote in yesterday’s FT:

“Many things the Brexiters think they admire about Singapore also turn out to be only half-true. Singapore is indeed a competitive market economy with relatively low tax and a threadbare social safety net. But rather than a model of laissez-faire capitalism, its state is actually highly interventionist, from its famous chewing-gum ban to wide-ranging public ownership of everything from banks to airlines.

Its success as a financial hub, meanwhile, is based not only on openness to capital and goods, but also people. Extraordinarily high immigration has seen the island’s population double in 30 years. Today, not far off a third of its 5.8m people are foreigners, from Filipino nannies and Bangladeshi builders to Japanese bankers. The government has tightened migration rules recently, but still expects to add 1m to its population by 2030 – hardly a policy migration-averse Brexit backers would want to copy.”

State intervention in the market, widespread public ownership, mass immigration. These are not the sort of policies supported by Brexiters, at least those on the right of the political spectrum. Continue reading

On immigration – The Economist’s surprising structuralist turn

immigration airportHere is a useful extract from a recent piece in The Economist magazine on the economics of immigration. Surprisingly for this free market-oriented publication, which often emphasizes individual freedom in its analysis, they highlight the importance of structural factors in boosting the earning power of immigrants:

“Workers who migrate from poor countries to rich ones typically earn vastly more than they could have in their country of origin. In a paper published in 2009, economists estimated the “place premium” a foreign worker could earn in America relative to the income of an identical worker in his native country. The figures are eye-popping. A Mexican worker can expect to earn more than 2.5 times her Mexican wage, in PPP-adjusted dollars, in America. The multiple for Haitian workers is over 10; for Yemenis it is 15.

No matter how hard a Haitian worker labours, he cannot create around him the institutions, infrastructure and skilled population within which American workers do their jobs. By moving, he gains access to all that at a stroke, which massively boosts the value of his work, whether he is a software engineer or a plumber. ”

‘The best policy’, The Economist, March 18th 2017, p.74

Continue reading

Neo-liberalism and the productivity problem


Margaret Thatcher is irrevocably associated with neo-liberal politics

What has neo-liberalism got to do with productivity? Since the financial crisis many countries in both the rich and emerging world have experienced slowing productivity growth. Productivity growth is what makes rising living standards possible. It enables workers to earn more while working the same hours. Alternatively, it can enable them to earn the same wage while working fewer hours and taking more leisure. Government policy, trade unions and corporate governance can have a strong influence on such outcomes.

The UK economy has seen a particularly dramatic productivity slowdown since the crisis, from annual growth in output per hour of 2.2% between 1996 and 2006, to an average of 0.2% between 2006 and 2016. This is an astonishing turnaround. Continue reading

Prophetic words on today’s economic and political trends

599px-The_Blue_MarbleThese words were written twenty years ago by distinguished Cambridge economist, the late Ajit Singh, and are somewhat prophetic on the evolution of the world economy and the causes of today’s political trends.

He compares the situation in the 1990s with the ‘Golden Age’ of capitalism during the 1950s and 60s, which saw rapid growth, low unemployment, and rising wages for the majority in many countries. He puts this down to broadly Keynesian interventionism by the state in cooperation with employers and trade unions. This was more effective in some countries than others. Nevertheless, he predicts that unless such conditions are restored, and the benefits of globalization are spread more widely through deliberate policy, the liberal international order will lose its legitimacy and prove unsustainable. I could argue with some of this, as I am not a fully convinced Keynesian, but the broad theme is telling. And so it goes…   Continue reading

The difficulty of industrial policy in developing countries

My former tutor, SOAS Professor Mushtaq Khan, on the difficulty of industrial policies in developing countries. Political, economic and technological conditions are specific to each country and to different stages of development, and this should be borne in mind when designing and implementing such policies, if they are to have a good chance of success. Such an outcome is badly needed to help the poorest on our planet improve their situation.