Tag Archives: economics

No Nation is an Island

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That’s the concern of The Wall Street Journal in one of its Thursday editorials.

President Trump’s biggest achievement has been the revival of faster US economic growth, but past performance is no guarantee of future results. The White House should be worried about growing economic strains in the rest of the world, and policy makers need to prepare. The US is not an island.

The WSJ went on to note that the Germany economy shrank 0.2% in the last quarter, the Japanese economy shrank by 0.3% in the same quarter, and the PRC’s economy “only” grew by 6.5% year-on-year in the same quarter.  The WSJ particularly worried about the German auto industry.

However.

It’s true enough that the US is not an economic island, but there are many, and serious, factors that are beyond our control and that the WSJ chose to be silent about.

Take Germany, for instance. Its labor laws are almost as draconian as the French and, together with German regulations, leave that economy much less nimble in changing conditions than it needs to be.  And even though the German auto industry wants a zero-tariff trading regime, at least with its products, the German government has shown its disinterest with its lack of action at the EU level.

The Japanese economy also is heavily regulated and inflexible, for all that it’s not a centrally planned one.  There’s no economic flexibility there.

That’s especially true with the especially heavily regulated and overtly, deliberately centrally planned economy of the PRC.

Our other trading partners? The EU as a whole has rejected any concept of a tariff-free environment with the US, it routinely attacks our companies’ competitive success across Europe, it constantly seeks to raise taxes on our companies rather than lowering their own to competitive levels, and on and on.

There’s only so much we can do with trading partners whose government denizens are more interested in their personal political and fiscal powers than they are in the welfare of their citizens.

A Thought on Amazon’s Choices

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Amazon.com has made its selection (-s, plural as it turns out) for its alternate corporate headquarters: Arlington County, VA’s Crystal City and New York’s Long Island City, with a booby consolation prize—or a scrap bone—tossed to Nashville, TN.

I have a couple of thoughts about this.

San Antonio, in Texas, had misgivings and declined to play Amazon’s game.

“Blindly giving away the farm isn’t our style,” wrote San Antonio officials in an open letter to Mr Bezos.

Others openly groveled and kissed the ground on which Amazon officials walked when those worthies deigned visit.

In Los Angeles, Amazon executives notified officials on a Tuesday they would be visiting the following Monday. Local officials had to juggle a major clean-technology conference scheduled for that day because Amazon executives insisted they couldn’t change their plans. The message was clear: Amazon had to take priority.

That should have been a crystalline hint, and Los Angeles’ pseudo-leadership should have told Amazon to take a hike.  Instead, they bent over their desks and….

Crystal City and Long Island City—and Virginia and New York at large—will pay a heavy price for their kowtowing.  Nashville may get off more lightly, but I’m not holding my breath.

San Antonio made out like a bandit (so did Dallas, TX, one of the non-selected finalists; although they will take a while to realize it).

A Bit of Perspective

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The 1%-ers, the Evil Rich.  How much does it take, really, to become of member of the world-wide crowd of really rich folks, or how much would have to be given up to leave that group?  Jade Scipioni, of FOXBusiness, offered some information from Credit Suisse Research Institute’s 2018 Global Wealth Report last week.

  • the global top 1% requires a net worth of US$871,320
  • the global top 10% requires a net worth of US$93,170
  • the global top 50% requires a net worth of US$4,210

On the other hand, the Federal Poverty Guideline income for a family of four for the US in 2018 is US$25,100, and the median household income in the US is US$62,175 as of last June (income is just one component of net worth, which also includes the value of possessions).  The median net worth in the US is in the neighborhood of US$84,500 for a middle-aged, 50-ish person.  (An aside: that middle-age for an American compares to a life expectancy—total lifetime—of an Angolan of 52 years, 51 years for a Chadian, 50 years in the Democratic Republic of Congo, 53 years in Mali….)

There does seem to be something to this capitalism business.  A free market is both a first and an absolutely necessary step in seeing to our least.

None of this means we shouldn’t care about our own poor, rich though they are in the world.  They live in our neck of the woods, not the world at large.  The responsibility for seeing to the least among us is ours, first—they are our neighbors—and our government’s only last.  It’s useful to keep in mind, though, that we’re not as bad or as bad off as we’re often made out to be.

The full report can be read here.

Quick Thought on Tax Reform

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The Progressive-Democrats won a majority in the House, and the Republicans look like they’re going to expand their majority in the Senate.  That looks like legislative paralysis in the next Congress.

However.

The next Congress won’t be sworn in until 3 January 2019.  That gives two months for the present Congress, with Republican majorities in both houses, to get some remaining stuff done.

Top on that list in my august view is tax reform.  This Congress needs to move to make permanent the individual income tax cuts that otherwise will expire in 2025.  Get it done now, before the Progressive-Democrats, with their gridlock, take sufficient office to block the reform.

A Government Personnel Shakeup

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This one in the Republic of Korea.  RoK President Moon Jae-in has removed many of his economic cabinet members because the RoK’s economy has continued to stagnate.

So far, the government’s prescribed medicine—big increases in public-sector hiring and the minimum wage—hasn’t proved an elixir.

What a surprise—government crowding out the private sector, competing with the private sector for labor, demanding that workers be paid more than their work is worth isn’t economically stimulative.

Unfortunately, Moon is only changing personnel; he’s not correcting policy. Here’s Lee Sang-jae, Eugene Investment & Securities macroeconomy analyst:

Mr Moon’s policy will stay on course and hardly change, just with a second line of its original architects at the helm[.]