Economics

Who has got an upside from Brexit?

Published by Anonymous (not verified) on Wed, 13/09/2017 - 4:15pm in

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This comment was posted on the blog yesterday:

Dear Richard,

I have read a certain amount of your articles and you seem to speak with a certain amount of knowledge and authority, and therefore I wish to pose a direct question to you. Who does benefit from Brexit?, it seems clear who the losers will be but who are the likely winners?

I thought that a fascinating question, so I am offering a blog post response.

First, let’s be clear that most elites very clearly did not want Brexit. Don’t be confused by those business people who backed it. Wetherspoons, Timpsons and others owned by those supporting Brexit are not multinationals and nor are they at the centre of the economy. Nor are their owners part of the normal business elites. So right now it cannot be said that the elite (however they are defined) planned a Brexit win.

Nor did most unions.

Or a majority in most political parties, whatever is happening now.

And let’s be quite clear that just about no one in the EU, whoever they might be, wanted it.

So who did, and why? I think it safe to say three groups wanted it. The first were dogmatic nationalists. These have always been found in the Conservarive Party, but did of course provide the foundations for UKIP. Nationalism is not rational. It is not dogmatic. The gain they secure will not be economic. Whether in that case the national pride they think has been wounded by EU membership will be healed is open to doubt.

Second there are those quite obviously left behind by society in the last thirty or so years. These are people whose skills, and the whole sectors they worked in, have been made redundant in that time. In many cases their whole communities have suffered with them. Tending to be older and more male than female on average, many have not adapted well to their loss of the status they once had. This has fuelled resentment, not least of those in any employment. They think, or at least hope, that Brexit might restore their fortunes or that of their communities. It is not clear how this might happen.

And then, thirdly there were those who more generally felt that this was an opprtunity to reject what most establishment politicians wanted on the grounds that neoliberal politicians have chosen to represent themselves and the whole political process as incompetent in the face of market forces. Many sent a rejection message as a result. I find this group, if anything, the most baffling. What gain they thought they would make from Brexit I do not know, but feel sure they will be disappointed.

So who will gain? Only the ideologues as far as I can see.

Plus those who are mobile, who always tend to be those with wealth, because they can quit and move elsewhere.

For everyone else the only tally will be of the losses. Try as I might I can’t yet see an upside.

The UK has a duty to reform its Caribbean Overseas Territories

Published by Anonymous (not verified) on Wed, 13/09/2017 - 4:10pm in

Rupert Jones, the former attorney general of Anguilla, wrote an article for the Guardian yesterday in which he suggested that the UK’s lethargic response to the Hurricane Irma induced crisis that has hit that island and others in the Caribbean is due to the UK’s uncertain attitude towards its Overseas Territories due to their tax haven status.

He graciously referred to my comments on this issue on this blog, as did the Guardian when quoting me at length in a related artcile on their web site. I have to say, he and I seem to be of not dissimilar mind. His central argument is that the UK is deeply embarrassed by tax haven activity and the refusal of these places to comply with requests for improved transparency but as he notes:

The UK may hold the local governments of these territories responsible for these failures. What it does not say is that the UK could legislate to require reform tomorrow if there was the political will. There is not, perhaps because of the fear that it would highlight the UK’s ultimate responsibility.

This ability on the part of the UK to impose its will on these places is something I have long argued exists, but is strenuously denied in Whitehall. It is good to see it confirmed by someone with very good reason to know the facts.

I also welcome this statement, with which I concur:

Both UK and local politicians also recognise that the islands’ economies, heavily reliant on offshore financial services, might flounder with the major loss of jobs. Then the UK may have to provide alternative investment.

I have long argued this is our duty.

In essence what we agree upon is what Rupert Jones says at the end of how own artcile:

I hope he [Boris Johnson] will maximise the UK’s response to the devastation wreaked by Irma, as well as using it as an opportunity to discuss our relationship with the overseas territories. It’s a conversation long overdue.

I can hope.

But I do not expect it will happen.

Good old Collingwood forever

Published by Anonymous (not verified) on Wed, 13/09/2017 - 5:23am in

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All of which serves to underline the point that the hierarchies that dictate policy are not just hierarchies of people, but also of knowledge.

Brexit has delivered on its promise to make the people of the UK worse off

Published by Anonymous (not verified) on Tue, 12/09/2017 - 11:33pm in

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From the Guardian based on today’s inflation data:

Wages are back behind inflation. As was near enough inevitable after Brexit.

And now some of the loonies members on the Bank of England Monetary Policy Committee are more likely to vote for interest rate rises as a result, tipping millions in the UK into an even bigger household economic crisis and inexorably paving the way for the next banking crisis.

Philip Hammond has said no one voted for Brexit to make themselves worse off but I beg to differ: that’s exactly what they did. They just may not have realised it, that’s all.

How do you like them facts?

Published by Anonymous (not verified) on Tue, 12/09/2017 - 11:00pm in

wage-inequality

Apologists for mainstream economics (such as Noah Smith) like to claim that things are OK because good empirical research is crowding out bad theory.

I have no doubt about the fact that the theory of mainstream economics has been bad. But is the empirical research any better?

Not, as I see it, in the academy, in the departments that are dominated by mainstream economics. But there is interesting empirical work going on elsewhere, including of all places in the International Monetary Fund (as I have noted before, e.g., here and here).

The latest, from Mai Dao, Mitali Das, Zsoka Koczan, and Weicheng Lian, documents two important facts: the decline in labor’s share of income—in both developed and developing economies—and the relationship between the fall in the labor share and the rise in inequality.

I demonstrate both facts for the United States in the chart above: the labor share (the red line, measured on the left) has been falling since 1970, while the share of income captured by those in the top 1 percent (the blue line, measured on the right) has been rising.

labor shares

Dao et al. make the same argument, both across countries and within countries over time: declining labor shares are associated with rising inequality.

And they’re clearly concerned about these facts, because inequality can fuel social tension and harm economic growth. It can also lead to a backlash against economic integration and outward-looking policies, which the IMF has a clear stake in defending:

the benefits of trade and financial integration to emerging market and developing economies—where they have fostered convergence, raised incomes, expanded access to goods and services, and lifted millions from poverty—are well documented.

But, of course, there are no facts without theories. What is missing from the IMF facts is a theory of how a falling labor share fuels inequality—and, in turn, has created such a reaction against capitalist globalization.

Let me see if I can help them. When the labor share of national income falls—the result of the forces Dao et al. document, such as outsourcing and new labor-saving technologies—the surplus appropriated from those workers rises. Then, when a share of that growing surplus is distributed to those at the top—for example, to those in the top 1 percent, via high salaries and returns on capital ownership—income inequality rises. Moreover, the ability of those at the top to capture the surplus means they are able to shape economic and political decisions that serve to keep workers’ share of national income on its downward slide.

The problem is mainstream economists are not particularly interested in those facts. Or, for that matter, the theory that can make sense of those facts.

Tagged: 1 percent, economics, economists, exploitation, facts, inequality, mainstream, outsourcing, surplus, technology, theory, wages, workers

What makes economics a science?

Published by Anonymous (not verified) on Tue, 12/09/2017 - 9:04pm in

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Economics

Well, if we are to believe most mainstream economists, models are what make economics a science. In a recent Journal of Economic Literature (1/2017) review of Dani Rodrik’s Economics Rules, renowned game theorist Ariel Rubinstein discusses Rodrik’s justifications for the view that “models make economics a science.” Although Rubinstein has some doubts about those justifications […]

Theresa May’s Britain: Three Million Children Go Hungry in the Holidays

I’m sure Mike and the other left-wing bloggers and vloggers have posted up this statistic before, but I came across it again last night. It shocked and outraged me. Inside Out West, the local documentary programme on BBC 1 for the Bristol area, did a piece on child poverty. They interviewed one woman, a single mother, one of whose children was disabled. She was starving herself so she could feed her children. There were a few words from her non-handicapped son, who said it upset him that his mother was denying herself food, and he tried to persuade her to eat something. Sebet Chaudhary, the presenter of that part of the programme, then said that national statistics showed that 3 million children were going hungry in the holidays. When they go back to school, they are months behind their classmates. The programme then moved on to interview a man, who had a scheme to change all this.

I wasn’t really following the programme, so I can’t give you a complete description of what it said. Only that I was deeply annoyed by the stats.

Three million children in Britain do not have enough to eat.

In Britain, one of the richest nations in the world.

This is absolutely disgraceful, though I’m sure there are other, less delicate terms to describe it.

No wonder many people were reading a piece I put up a few years ago about a food line of starving children in early 20th century Britain, before the introduction of the welfare state.

It’s recurring, and due to the same stupid, laissez-faire, free trade, corporatist, neoliberal policies.

And the people behind this are the Tories, with some help from their Lib Dem enablers. This is what Maggie set out to do when she ranted about rolling back the frontiers of the state. She wanted to privatize everything, including the NHS, and dismantle the welfare state. And part of her wretched ‘Victorian Values’ was less eligibility, the policy of making life on benefit so hard, that people would be deterred from relying on state aid.

And so we had Iain Duncan Smith and David Cameron presiding over a vicious sanctions regime, in which claimants were denied benefits for the flimsiest of reasons, humiliated at their interviews, and the desperately and incurably ill were told that they were well enough to work. Even those terminally ill in comas.

The benefits system was drastically curtailed, so that more people are being forced to rely on food banks.

All the while we have Theresa May lying about how she’s ‘strong and stable’ and will give Britain a good deal with Brexit. She hasn’t so far. All she’s done is lie.

And to add insult to injury, we have Jacob Rees-Mogg being touted as the next leader of the Tory party, while the inbred, single-helix upper class morons and closet Nazis of ‘Activate’ make jokes about gassing chavs and shooting peasants.

Rees-Mogg is the spawn of privilege. He’s an upper-class, seriously entitled Tory, who started his political career telling the guid fisherfolk of Fife that they should vote for him to maintain an aristocratic House of Lords. His voting record shows that he is massively opposed to the welfare state, and in favour of increased taxation on the poor. When it comes to people earning over £100,000, he’s dead against it.

And to cap it all, he was in the Mirror the other week, which reported that his private investment firm had earned him a cool £4 million.

Well, he’s not the only one. 77 per cent of MPs are company directors, often holding multiple directorships. He, and the other Tories like him, neither know nor care anything about the real, grinding poverty they and their vile policies have inflicted on this country. They are only interested in filling their own pockets at the expense of the rest.

The sooner they’re voted out, the better.

Paul Krugman: Conspiracies, Corruption and Climate

Published by Anonymous (not verified) on Tue, 12/09/2017 - 2:46am in

"Why are U.S. conservatives so willing to disbelieve science and buy into tinfoil-hat conspiracy theories":

Conspiracies, Corruption and Climate, by Paul Krugman, NY Times: After the devastation wreaked by Harvey on Houston — devastation that was right in line with meteorologists’ predictions — you might have expected everyone to take heed when the same experts warned about the danger posed by Hurricane Irma. But you would have been wrong.

On Tuesday, Rush Limbaugh accused weather scientists of inventing Irma’s threat for political and financial reasons: “There is a desire to advance this climate change agenda, and hurricanes are one of the fastest and best ways to do it,” he declared, adding that “fear and panic” help sell batteries, bottled water, and TV advertising.

He evacuated his Palm Beach mansion soon afterward.

In a way, we should be grateful to Limbaugh for at least raising the subject of climate change and its relationship to hurricanes..., it’s a topic the Trump administration is trying desperately to avoid. ...

So what should we learn from Limbaugh’s outburst? ... The important point is that he’s not an outlier..., denying science while attacking scientists as politically motivated and venal is standard operating procedure on the American right. ...

And thanks to Trump’s electoral victory, know-nothing, anti-science conservatives are now running the U.S. government. ... Almost every senior figure in the Trump administration dealing with the environment or energy is both an establishment Republican and a denier of climate change and of scientific evidence in general. ...

All of these scientists, they insist, motivated by peer pressure and financial rewards, are falsifying data and suppressing contrary views.

This is crazy talk. But it’s utterly mainstream on the modern right, among pundits ... and politicians alike.

Why are U.S. conservatives so willing to disbelieve science and buy into tinfoil-hat conspiracy theories about scientists? Part of the answer is that they’re engaged in projection: That’s the way things work in their world. ... Today’s right-wing intellectual universe, such as it is, is dominated by hired guns who are essentially propagandists rather than researchers.

And right-wing politicians harass and persecute actual researchers whose conclusions they don’t like — an effort that has been vastly empowered now that Trump is in power. ...

The bottom line is that we are now ruled by people who are completely alienated not just from the scientific community, but from the scientific idea — the notion that objective assessment of evidence is the way to understand the world. And this willful ignorance is deeply frightening. Indeed, it may end up destroying civilization.

Behavioural New-Keynesian Macroeconomics

Published by Anonymous (not verified) on Tue, 12/09/2017 - 2:45am in

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Roger Farmer:

Behavioural New-Keynesian Macroeconomics: This is my penultimate post featuring research presented at the conference on Applications of Behavioural Economics and Multiple Equilibrium Models to Macroeconomics Policy Conference held at the Bank of England on July 3rd and 4th 2017.

Today’s post features two single authored papers: one by Xavier Gabaix and one by Michael Woodford. ...

Xavier has an exciting research agenda that combines ideas from psychology and economics. He is a prolific author who has worked on topics in finance, macroeconomics and behavioural economics.

In Xavier’s own words, “economists usually assume that people know how the economy works. This is a bit strange since economists don’t even know how the economy works”. ...

At the conference Xavier presented a paper related to this research agenda, “A Behavioral New Keynesian Model”...

Michael Woodford was one of our two keynote speakers...  Michael is one of the founders, and a long-time proponent, of New-Keynesian economics. ...

Michael addresses the question of forward guidance and specifically how central bank announcements will affect the economy when people are forward-looking but not infinitely forward looking. His goal, like Xavier’s, is to fix New Keynesian economics. ...

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