American Politics and Economics

February 14, 2003

From Michael Jabbra: SOME CHALLENGING QUESTIONS FOR LEFTIES

Michael Jabbra, who graduated from UCSB in 2001, is looking into a variety of possible careers in public service. When he was in political science 121 (IR theory) and 129 (The US, Europe, and Asia), he proved to be an ideal student: constantly peppering me during lectures with hard, right-to-the-point queries and comments, while doing the same, it seems, in the discussion sections led by his teaching assistants. Whatever the career Michael eventually chooses, our public service will be the better.

Needless to say, Michael would welcome any replies to these comments of his --- as many of us would.



Dr. Gordon,

Here are some considered thoughts of mine about all ther recent North Korean bluster and nuclear brinksmanship, and the Japanese threat discussed in a BBC article yesterday that Tokyo would pre-emptively attack that country if it believed that the Pyongyang Communists were moving to attack it. The Japanese are right to take seriously that threat and treat it that way. North Korea's several hundred mid-range missiles, after all --- as you have discussed in earlier commentaries sent to your list-server subscribers --- have the range to target all of the Japanese islands. And in 1998 the North Koreans did test fly a missile over one of those islands, much to Japan's dismay.




Posted by Michael Gordon @ 4:44 PM CST [continue] [ Comments? ]

March 11, 2003

US Angry with Blix. Is He Easily Duped and Misled? Yes, Says a Former Friend and Former Deputy Prime Minister in Sweden: the Wrong Man for the Wrong Job

American officials are openly voicing anger with Hans Blix's performance. In particular, what they regard as significant evidence of Iraqi non-compliance with Security Council Resolution 1441 --- which calls for "immediate," "complete", and "unconditional" cooperation with the inspectors to show that it has or will disarm (three adjectives with different meanings, apparently, in French and Russian than in English) --- never showed up in Hans Blix's public statement to the Security Council last Friday. Blix Report Blix's public excuse since then? He couldn't confirm the existence of the big drone plane, nor 100 special cluster bombs that can be used for spraying chemical or biological weapons, but was going to look into it.

Seems a strange claim, no? He could have said on Friday, clearly, explicitly, that the inspectors had found such weapons, but hadn't yet determined what violations they constituted.

Posted by Michael Gordon @ 2:5 PM CST [continue] [ Comments? ]

July 18, 2003

LOTS OF BUGGED-OUT POLITICAL-ECONOMY ARTICLES TO COME

In May and June --- before the hacker-attack and the buggy shutdown --- several articles, close to ten or so, were published here that dealt with the economy and economics as a discipline: among them, whether economics is or can be a science, and then several on the prospects of the US economy . . . short- and long-term. These articles, alas, aren't available yet. Their reappearance here depends on WebXpertz, the buggy prof's web management firm, getting permission from biggie.com (its ISP) to use biggie's server and fetch the buggy archives missing after April 16th. These articles on the economy formed a logical sequence that, over the weeks, unfolded a lengthy analysis of a coherent sort --- in principle anyway, subject to buggy brain-lame aberrations --- so that you needed to read the earlier articles to make sense of the latest.

Toward the end of June, the articles were narrowing in focus to concentrate on the US economy's immediate prospects ---- most of them bright enough (not all) --- and on four theoretical obstacles, it's said, that might impede a much better growth record the remainder of this year and into the next couple of years . . . roughly the short-term. Two of the obstacles --- [1] deflation and [2] a liquidity trap --- were dealt with at length just before the July 1st attack; and both, to say the least, turned out to be noticeably hyped-up dangers. Japan, it's true, might be suffering from deflation, a general fall of the price level; by contrast, there's almost zero probability that it will materialize here. As for a liquidity trap --- first identified theoretically by Keynes in the 1930s Great Depression, in which key nominal interest rates are at or near zero, yet are unable to stop deflation and kick-start economic growth --- it's not clear it ever existed even in those depressing days, let alone hovering as a real threat to the immediate future of the US economy.

 

Posted by Michael Gordon @ 9:0 PM CST [continue] [ Comments? ]

July 20, 2003

Part I THE PROSPECTS OF THE US ECONOMY CONTINUED: WHY THE ODD JOBLESS RECOVERY SO FAR? (Final Version)

With a few updated comments and new data, this article --- a re-run of one originally printed on June 6, 2003, but still missing thanks to the incomplete buggy archives --- is the latest in a series, started in May, that deal with the US economy's prospects. Thanks to the earlier theoretical work, we can now take up a host of more practical matters --- particularly the problems and opportunities now facing the economy.

 

Economic Performance the Last Year and a Half. A Strange Jobless Recovery



Officially, the recession of 2001 came to a halt in the fall of that year, with economic growth picking up rapidly in the fourth quarter after the 9/11 attacks, and then surging off and on throughout 2002. In the end, overall GDP growth --- real, after adjusted for inflation --- was a disappointing 2.4% last year: not enough to reverse the job losses that the recession caused, and in fact, not enough to stop unemployment from rising throughout 2002 and through the winter and spring of 2003. In more concrete terms, since March 2001, the US economy has experienced a loss of 2.1 million jobs: that leaves the official unemployment rate at around 6.0%, compared to the low-point of 3.9% at the end of the 1990s --- the least unemployment we've had since the mid-1960s. That 6.0% in April was actually slightly worse than the 5.8% recorded for March of this year. (In May, the level of unemployment climbed, it turns out, to 6.2%).

A longer-term perspective might be helpful here.


Posted by Michael Gordon @ 9:20 PM CST [continue] [ Comments? ]

July 21, 2003

Part II THE PROSPECTS OF THE US ECONOMY CONTINUED: WHY THE ODD JOBLESS RECOVERY SO FAR? Final Version

Originally published June 5, 2003, this is a revised, updated article on the prospects of the US economy. It replaces that earlier version, which is still missing and will continue to elude us until the buggy prof's web-manager is able to retrieve and then install the archives between April 19th and July 2nd.

Like its first six or seven predecessors, this article is an ongoing installment in a series on the economics profession and the US economy's prospects, this year and in the future, that began in May 2003. More to the point, consider the article as part II of a mini-series on those short-term prospects. Part I was published yesterday, July 20th . . . an updated version, essentially, of the original article and mini-series that started in early June. Part III will materialize tomorrow. All in all, there'll be about 5 or 6 parts here.

Remember, the short-term's our current preoccupation. Later on, in a new series of articles, we'll deal with the long-term future of the US economy --- say, the next two or three decades. Hard to foresee with any reliability any farther into the future. And when we finally get around to that new series in a couple of weeks or so, our perspective, it's worth stressing now, will be increasingly comparative. The primary aim? To tease out the ways in which economic growth and technological dynamism across countries, especially potential great powers that could rival the US --- China, maybe a unified EU, possibly a revived Japan --- will likely affect the global distribution of power.



THE MAIN PROBLEM: SLOW RECOVERY AND A DETERIORATING JOB MARKET

As the previous article noted, Part I of this two-part mini-series, the US economy's recovery from the recession of 2001 has been OK in terms of GDP growth --- which is why most analysts think the recession itself ended by the start of 2002 --- but has been disappointi

Posted by Michael Gordon @ 7:9 PM CST [continue] [ Comments? ]

July 23, 2003

PART III THE SHORT-TERM PROSPECTS OF THE US ECONOMY: CONCRETE REASONS FOR OPTIMISM. Final Version

First published June 9th as part of a mini-series on the short-term prospects of the US economy --- that original, along with the missing buggy-prof archive, still drifting aimlessly in cyberspace like the unplugged psychopathic computer Hal in Kubrick's 2001: Space Odyssey --- the current article that unfolds here has been revised and thoroughly updated and now links more tightly to the first two parts in this series. Another three or four are destined to follow soon, the whole series of articles adding up to a coherent argument . . . at any rate in principle, subject as always to bugged-out quirks and aberrations.

Note the sub-title here: "Reasons for Optimism." In reality, to imitate Alan Greenspan's comments in early June, "cautious" optimism would be more appropriate . . . the Fed Chairman warning us that the US economy might be facing the danger of deflation, a persistent, self-reinforcing decline in the general price level. Is this danger at all probable? Hard to know. Coy as ever in his oracular way, Greenspan was hinting, it seems, that the Federal Reserve was ready to do what it had to in order to keep deflation at bay: if need be, presumably, by flooding the economy with dollars. A few days later, in another speech that he gave, the "cautious" qualifier was absent: what now struck the Fed chief was the remarkable resiliency of the US economy, considering how it had quickly absorbed several sequential shocks to GDP growth in the three year period from early 2000 to early 2003 . . . above all, the ballooning stock-market collapse, then the auditing scandals that have scared off investors ever since, then the jarring destruction of the 9/11 attacks, then the surge in oil prices, and more recently the Iraq war and the other geopolitical uncertainties that cut short, for several months, the stock market rally of last fall. Just two decades ago, these shocks would have been more than enough, the Fed chief no

Posted by Michael Gordon @ 4:14 PM CST [continue] [ Comments? ]

July 26, 2003

Part IV The Prospects of the US Economy: Why The Dangers of Deflation and a Liquidity Trap Are Way Overblown

Initially published on June 18th as part of a mini-series on the short-term prospects of the US economy --- the original itself, along with the missing buggy-prof archives, still languishing restlessly somewhere in interstellar cyberspace --- the current article has been revised and thoroughly updated and now links more tightly to the first 3 parts in this series. Another two or three articles will follow soon, with the whole series of articles adding up to a coherent argument . . . at any rate in principle, subject as always to any outbursts of screw-loose buggy stuff.

This is the fourth installment in a mini-series on the likely fate of the US economy over the next year or so. In the previous three installments, recall, a trio of big things stood out:

[1] Since the end of the shallow, short-lived recession of 2001, GDP growth has been disappointing . . . not enough to prevent unemployment from rising in the 18 months since then, up from 4.2% or so to over 6.3% this spring.

[2] Of the various reasons for this jump in joblessness, the pivotal one seems to be a big output gap between the economy's Aggregate Demand --- private consumption, private investment, and government consumption and investment, plus exports-imports --- and the economy's new, higher Potential Output . Aggregate Demand, in effect, explains the actual performance of real GDP from year to year as it tracks Potential Output, the economy's sustainable long-term growth rate . . . itself equivalent to a fully employed labor force without any inflationary pressures present. Sometimes actual GDP is exactly at Potential Ouput. Other times it falls short, and hence recessions; other times still, it exceeds Potential Output --- and hence booms and inflationary pressures.

Another name for these ups and downs of actual GDP year by year? The business-cycle . .

Posted by Michael Gordon @ 2:8 PM CST [continue] [ Comments? ]

July 27, 2003

FOREIGN COMPETITION AND US INDUSTRIAL COMPETITIVENESS: IS IT UNFAIR OR HARMFUL FOR THE US?

Along with the rest of the archives in the weeks between April 18th and July 2nd, the current article has disappeared into some dismal Black Hole of Cyberspace-Purgatory, its final fate not yet known. Originally published on June 7th, it now appears here as a re-run, revised and updated . . . part of the mini-series on the US economy that began in May and June here.

John Allen, a visitor to the buggy site, has kindly sent us the following observations and queries:

In thinking about the slow response of the US economy to its recession, what role has the loss of industrial competitiveness had to do with this? I read that Boeing will have the wings on its new jet design made in Japan. This is one of the critical technologies in the aerospace industry that another US company is strengthening overseas. Do you have any particular insight on why Fingleton is either right or wrong?

I am referring to this article in Insight Magazine ; Samizdata; unsustainable ; and again unsustainable

It seems despite all the billions that were put in R&D investment during the bubble in the 90s, our economy did not reach a new plateau in terms of technologically driven economic activity that competitively revitalized strength of the economy.


Posted by Michael Gordon @ 9:19 PM CST [continue] [ Comments? ]

August 2, 2003

CHINA'S GROWING ECONOMY: A THREAT TO THE US OR AN OPPORTUNITY? Version Three

Like the previous article on the EU and the US, this one --- on China's economy and its impact on the US, including its growing trade surplus with us (over $100 billion, much bigger than Japan's bilateral surplus) --- is essentially a series of observations, with extensive revisions, that the buggy prof left yesterday at another web site devoted to economics and political economy, Arnold Kling's Econ Log. Go to the topic for August 1 entitled "China Menace?" After linking to three very different articles on the Chinese economy and how it affects the US, Kling asked why it is that journalists tend in his view to see the growth of foreign economies as a threat to US prosperity, whereas economists --- he's a Chicago Ph.D in the discipline --- see it differently, thinking of the mutual benefits that free trade bring to economies that practice it. The three articles that Arnold linked can be found there, and to make it easier in the future to get hold of them --- one in the Washington Post, another in the Wall Street Journal, the third in Foreign Policy --- here's the permanent link for "China Menace".

What the Argument Here Seeks to Show

Good question, this one about China. Any effective answer needs to distinguish between the short- and long-run impact of China's rising trade surplus with the US. In the short-run, the surge in Chinese imports --- along with their concentration in certain industries --- is causing more trouble for those affected industries and with US GDP growth and manufacturing jobs than is desirable. Fortunately, as we'll see, there are ways to handle this surge and bring some relief to the affected industries without resorting to permanent protection; even the WTO rules allow for import-relief in such

Posted by Michael Gordon @ 8:11 PM CST [continue] [ Comments? ]

August 19, 2003

WHAT CAUSES THE LARGE AND PERSISTENT US TRADE DEFICIT, AND SHOULD WE WORRY ABOUT IT. And US Crime and Crime Elsewhere: Some Misconceptions

An economics professor at UC Berkeley who runs a good web site, Brad DeLong expresses some stimulating thoughts about the size and duration of the US trade deficit . . . presumably in manufacturing and agricultural goods plus fuels and raw materials, as well as in services. See the chart on the page linked to here. (The Trade Account refers to exports and imports in the goods just mentioned. Add in Trade in Services and Unilateral Transfers, in which the US consistently runs a surplus, and you get the Current Account . . . itself highly negative for a couple of decades, save for 1991, but not nearly so large as the trade in goods itself.)


DeLong's puzzled about the size of the trade deficit (presumably, the current account) and its persistence at high levels with some ups-and-downs for more than two decades now. Why, presumably, doesn't it adjust in textbook fashion towards more balance in exports and imports on the trade side? The buggy prof left a trio of lengthy rejoinders at DeLong's site; revised and amplified, they will be found here in a few moments. First, though, we need to summarize DeLong's thought-provoking reflections that prompted the buggy replies.


Note that by the time you've worked your way through DeLong's argument and the three sets of buggy replies, you should be able to understand much better, let's hope, what the balance of payments is, the causes of the US trade deficit, how that deficit relates to the rest of GDP, and whether it's a big problem or not. And, to top it off --- because of some bugged-out comments in reply to someone else at the DeLong site --- whether or not the US is a particularly

Posted by Michael Gordon @ 8:56 PM CST [continue] [ Comments? ]

August 21, 2003

WHAT CAUSES THE LARGE AND PERSISTENT US TRADE DEFICIT, AND SHOULD WE WORRY ABOUT IT. PART TWO

This is part two of a three-part mini-series on the US Trade Deficit --- its causes, and whether it's really a problem worth worrying about. Part one was published two days ago, and needless to add, it will help if you've read it before plunging into part two. It starts off with some thoughtful comments left by a visitor, Tom Dechaene in Belgium, and some lengthy replies by the buggy prof that help clarify and illustrate many of the main points that the argument in part one unfurled.

Note that part one dealt mainly with the causes of the large and persistent US current account deficit over the last two decades or so, with some ups and downs. Part two continues the analysis of these matters. Part three, which will be forthcoming soon --- probably tomorrow --- will dealt much more directly with the question whether these current account deficits of ours are something worth worrying seriously about . . . or at all.


Comments on the US Trade Deficit by Tom Dechaene

I agree with your refutations of the 3 "exorbitant" privileges. Furthermore, central banks are small players in the international currency markets.

I believe the reason the US has been able to sustain a trade deficit for so long without depreciation is that Japan and the EU have much higher savings rates and their financial institutions channel a large proportion of these to the US because (i) they want to geographically diversify, (ii) they believe(d) in better prospects for US companies than for their counterparts in Japan or Europe.

It was interesting to see how these capital inflows fell as soon as the US markets fell. I guess these inflows have picked up again somewhat lately, given the positive earnings forecasts from US companies, hence the $ has done better lately than in quite some time.

All it means is that more and more of the US is owned by Japanese and Europeans (although they tend to be investors

Posted by Michael Gordon @ 7:58 PM CST [continue] [ Comments? ]

August 22, 2003

WHAT CAUSES THE LARGE AND PERSISTENT US TRADE DEFICIT, AND SHOULD WE WORRY ABOUT IT. PART 3

Before reading this article, it will have helped --- no, been indispensable really --- to have read the two previous articles . . . which are parts one and two that, together with part three here, form a coherent mini-series on the US balance of payments. The two previous parts looked at the various causes of the large and persistent US trade deficit. This one deals with some technical aspects and is much more concerned with the question whether or not we should worry about the annual deficits here.

Some Technical Observations about the US Balance of Payments

There are essentially three ways to understand the balance of payments, and in particular for a country like the US, how it persistently runs large current account deficits --- the sum total of exports and imports in goods, services, and gifts or unilateral transfers like foreign aid or Mexican workers in the US sending US dollars back home. Each has their uses. Understanding them will help us answer our main concern here: should we be worrying about these trade and current account deficits? The answer, as you'll see, might be surprising to those of you who aren't economists or specializing in that discipline in university studies.


Posted by Michael Gordon @ 12:54 AM CST [continue] [ Comments? ]

August 24, 2003

THE BUSH-ERA DEFICITS: SHOULD WE WORRY ABOUT THEM?

The following discussion was prompted by a selection from The Center on Budget and Policy Priorities, a Washington Think Tank, that Professor Brad DeLong --- an economist at UC Berkeley, with an unusual grounding in economic history that he draws on for his views on contemporary economic problems and trends --- posted on his web site on August 22, 2003. The buggy prof then replied at length in the comments-forum on the posted selection, plus Professor DeLong's own brief supporting commentary at the end.

Note the title above, which ends in a question mark.

The short answer: there may be some reasons to worry about the Bush Jr. deficits, particularly if they were to initiate an era of high government deficits that lasted, say, a decade or more. For all that, it seems unlikely they will. Before national debt as a percentage of GDP rose above the high point of the Reagan-Bush Sr. era, around 60% of GDP, corrective measures would probably kick in: either GDP growth would rise fast enough to generate new revenue to offset some or most of the deficits; or taxes would be raised to collect more tax revenue, something that happened in 1990 under President Bush Sr. and then at the start of President Clinton's administration in 1993; or government spending would be cut back in some areas to reduce the overall burden; or some combination of these first three alternatives would follow.

For the time being, however, they aren't worth worrying about and should be welcomed. Why? For two reasons essentially:

[1] As at the start of the 1980s, so today the US economy faces a major problem of high unemployment --- 6.3% now, almost 10% then (plus 10% annual inflation!) --- and large unused industrial capacity, now operating only at about 75% of full capacity. As the buggy prof argued in a mini-series of 4 articles published on this site between July 20th and J

Posted by Michael Gordon @ 7:21 PM CST [continue] [ Comments? ]

August 26, 2003

THE SHORT-TERM IMPACT OF CHINA'S SOARING TRADE SURPLUS WITH THE USA: Updated Final Version

On August 2nd, the buggy prof had a long article --- with one more installment to come --- on the impact of the Chinese economy on the US: China's Growing Economy, A Threat to the US or An Opportunity. It tried to distinguish between the current impact on the US economy --- more and more dislocating to many US industries (mainly low-tech ones), thanks to a huge export drive --- and its long-term promise as a huge, rapidly growing market for which the exports of US high-tech industries will be able to find more and more customers. The short-term problem, recall, has four facets.

* The size and rate of Chinese imports into the US economy. In 1997, those imports totaled $62 billion; last year they had more than doubled to $125 billion; this year, the influx has been even faster so far. In the same interval since 1997, $US exports rose from only $13 billion to $17 billion (2002). This year, the US deficit with China will almost certainly top $100 billion.

* The huge import surge is concentrated in certain industries: textiles, wood furniture, steel, plastics, and a few others, almost all low- or mid-tech in nature. That is causing big problems for employment in those industries at a time when the US job market has markedly worsened over the last two years, ever since the 2001 recession officially ended. It's one thing to encourage an economy's less technologically advanced industries to adapt to international competition through free trade, particularly if the declining competitiveness of these industries is underscored by a steady but predictable and limited growth rate of import competition, and at a time when the rest of the US economy is growing rapidly and creating lots of new jobs. It's another thing to let industries be overwhelmed by a flood of imports, and especially when the job market has been gloomy. (Note that integrated steel mills in this country are finally getting relief, in pa

Posted by Michael Gordon @ 9:58 PM CST [continue] [ Comments? ]

September 18, 2003

Should We Worry About the US Trade Deficit?

The follow buggy commentary was prompted by some observations made by Professor Brad DeLong, a UC Berkeley economist whose writings on contemporary economic trends and problems are always illuminating, even when you don't agree with them --- and not least, thanks to an unusual grounding in economic history that helps inform his insights into contemporary matters. Specifically, on his web-site, Brad DeLong, he commented at length on the growing size of the US trade deficit in goods and services --- the current account in the US balance of payments (offset by a similar size surplus yearly on capital account, as foreigners invest more and more in US financial assets, both long- and short-term) --- then argued the trend is unsustainable: that at some point, foreign investors will grow nervous about the ability of the US economy to handle such a large and rapidly growing level of debt owed to foreigners, and that consequently at some point their nervousness will translate into a large sell-off of their US investments. The result? A rapid fall in the exchange rate of the dollar in terms of other currencies, especially the euro, the yen, and the Chinese yuan.

The further results for the health of the US economy?

Here there are two contrasting scenarios that DeLong sets out: one gloomy doomster stuff, the other a softer-landing for the US economy. Both, even the softer one DeLong hews to, predict that the value of the US$ will fall by about 25- 50% in currency markets. Both, note, have to do explictly or implicitly with the level of current US savings, private and public --- the latter, the federal deficit, now running on the order of about 4 - 5% of US GDP this year and probably next. (Not, by the way, the higher % reached by federal deficits. That honor goes to the Bush-Sr. one of 1992, something close to 6.0% of GDP that year.)

As you'll see,

Posted by Michael Gordon @ 4:24 PM CST [continue] [ Comments? ]

September 19, 2003

Worries About the US Trade Deficit and a Falling Dollar: A Reply to A Visitor's Comment

A visitor, Steve Shea, left a thoughtful comment at the end of the previous article that looked at the worries being expressed about the growing size of the US current account deficit . . . and the likelihood, consequently, that there will soon be a rapid sell-off of US financial assets by foreigners, fearful that the US couldn't sustain such high levels of debt to them. In the upshot, it's argued, the exchange rate of the dollar would fall sharply, and all sorts of harm would ensue to the health of the US economy and the manufacturing sectors of foreign countries dependent on exports to the US. That's one scenario, the doomsday one. The other, a soft-landing for the US economy, still seemed to the buggy prof to exaggerate harm: either to us or to others. The evidence? The buggy prof looked at a comparable period in recent US economic history --- 1985 - 1995 --- when, like now, there were record US federal deficits, alleged low-levels of savings a dependence therefore on imported foreign capital to invest in our financial assets, and then a sharp fall in the value of the dollar against major currencies at the time, especially the Yen and the German Mark.

A brief sidebar clarification about "alleged low savings" in the US. There's frequently confusion here. By definition, savings and investment have to equal one another over the year. By definition, too, the current account deficit each year is equal to the gap between net savings and net investment by Americans ---including, observe, American investments abroad --- generated out of US savings, with the gap then closed by importing the capital from abroad. (The imported capital from abroad --- foreigners investing in American financial assets like bonds and equity --- then raises the exchange rate of the dollar and leads to an equivalent size deficit in current account: the trade in goods and services.) But wait! To note a gap between net American savings a

Posted by Michael Gordon @ 5:5 PM CST [continue] [ Comments? ]

September 21, 2003

Some Technical Points in the Last Couple of Articles Clarified: Doubts about 1) Crowding Out Theories, 2) Alleged Low US Savings, and 3) Alleged Panic Sell-off by Foreigners of Their US Financial Assets

Those who've read the previous two articles on US trade deficits and whether they're something to worry and fret about might have encountered some theoretical materials that are worth clarifying here. In particular, what follows tries to throw light on two theoretical claims: 1) Government fiscal deficits crowd out either private investment or US exports (or both), resulting in rising interest rates in the first case or rising US current account deficits in the second. 2) The US economy reflects a problem of low national savings compared to other industrial countries.




NATIONAL SAVINGS: A COMMON CONFUSION

At the outset of the last article, it was noted that there's a frequent confusion made --- you'll find it repeatedly, for instance, in the forum discussions at Brad DeLong's site --- between two different things: the level of US national savings on a net basis (hence minus the cost of replacement capital deducted from gross investment), on one side, and on the other the fact that our national savings aren't sufficient to cover our national investment each year. The latter is true. By definition, the gap is equivalent to the amount of net foreign investment that flows yearly into the US economy on capital account in the balance of payments; in turn, by definition, the net inflow of foreign investment here is equivalent to the size of the current account deficit in the trade of goods and services (plus unilateral transfers, such things as foreign aid or Mexican workers in the US sending money back home to Mexico).

Posted by Michael Gordon @ 1:14 PM CST [continue] [ Comments? ]

November 13, 2003

Final: An Exchange on US Exceptionalism. 2nd of 5 Articles In The Mini-Series On That Topic.

From Michael Jabbra, who graduated from UCSB in 2002, the following comments arrived that deal with the buggy analysis in the first of several articles on American exceptionalism. The lengthy buggy reply comes afterwards.


Dr. Gordon:

Ideological bias and shallow reporting are hardly confined to the EU. Just watch the 24-hour news services such as Fox or CNN, which use lots of dazzling graphics, triumphant music, but say little of note.

Failing in business might slow you down here too. I work at a bank these days, and I think we would take a long, hard look at a loan applicant with a bankruptcy (personal or business) on his/her record.

As to national pride, is it possible that people might have it but refuse to admit it to pollsters? Here in the U.S., one might (for example) be racist but not admit it to a pollster...because it looks bad. Feelings of cultural superiority aren't gone entirely in Europe; Sweden voted against the Euro again, and the UK still doesn't want it. I don't think any human will get over the feeling that their own culture or homeland is superior to any other.

Differences? Not a lot. But then, the U.S. derives many of its political and cultural traditions from Europe.



Michael:

Thanks for the stimulating set of comments. Here are some replies, more numerous and detailed than you might have expected . . . more so than I myself had expected when I began them. All worth while, though, let us hope, if only because the replies as they uncoil should help throw into a rounder perspective what the next three buggy articles will say about key US differences with the EU. Again, for good or bad. Remember, no one pretends the US is a perfect country. A good deal of our popular culture these days, not all of it by any means --- to take just once such instance --- strikes me and others as poisonous: cheap, foul-mouthed, and extravagant

Posted by Michael Gordon @ 1:30 AM CST [continue] [ Comments? ]

November 11, 2003

American Exceptionalism: How We Differ From Other Industrial Democracies. 1st of 5 Articles

PART I: WHAT WE'RE UP TO HERE IN THIS NEW MINI-SERIES

Prompted by an unusually intelligent and astute survey on American exceptionalism that appeared this last week in the estimable British weekly, The Economist ---- which all visitors here are urged to download and read in its entirety: about 20-25 pages in all --- the current buggy article starts where The Economist leaves off. Like that weekly, only far more quickly, it sets out the major differences that underscore American exceptionalism --- such as greater suspicion of government than in other democracies, or more individualism, or greater religiosity --- and then, pushing hard in a probing, energized manner, it seeks to delve more deeply and identify and explain the historical and cultural influences that account for these differences: for good or bad. And it's a mixture, American exceptionalism. Not everything different here in the US is for the better. No surprise. We hardly live in a perfect country.

But then, neither is any other country. And what most Americans like about our country is justified . . . especially viewed in comparative perspective: especially too, if like the buggy professor, you've lived, studied, and taught in several of the EU countries. Most of us --- not all, but overwhelmingly most--- would chafe under the greater social restrictions and rigid, locked-in regulatory apparatus, one detailed regulation after another, mountains of them, that pervade, say, the European Union's member-countries . . . assuming that we had to live for decades there, not just visit those countries for a few months or a year or two, and pursue or change careers or start and run businesses there. (Being a professor at Oxford or Cambridge or in London is the only main exception I can think of; and if it's London, you'd better have an independent income of hefty means.)

You

Posted by Michael Gordon @ 10:21 PM CST [continue] [ Comments? ]

November 17, 2003

Final Version: US EXCEPTIONALISM, Another Exchange: 3rd in a 5-7 Article Series

 Last week, the buggy prof started a new mini-series on some systematic differences between the US and EU democracies: political, economic, and cultural --- for good or bad. The initial article in this series set out a series of preliminary remarks, nothing else --- though with the ranging comments backed up by different sorts of evidence, some including diverse surveys of public opinion in Europe and the US. We were about to launch a sustained detailed list of the differences across the Atlantic in the second article --- based in part on the Economist's recent admirable survey of US exceptionalism --- and then push hard in the subsequent articles in our mini-series to account for these American divergences with West European countries, only to have some comments left by one visitor, Michael Jabbra, that the buggy prof responded too. When it turned out that the response was actually much longer than the initial article in our mini-series, it was published here as the 2nd in the series.

And now?

Well, guess what. I was just about ready to start the 3rd article in the series --- which would set out systematically the precise differences that can be pinned down as shaping American exceptionalism (again, for better or worse) --- when a new commentary arrived from Joey Tartakovsky, a senior political science major in the buggy course this term on International Relations theory who also does journalism on the side for a variety of publications, on and off campus. Like Michael Jabbra's commentary, Joey's seemed sufficiently important --- and sufficiently in line with what earlier buggy articles this term have said about the EU media's general deficiencies, especially compared to the US's --- that it warranted, it seems, a full-tilt reply as well. Hence this 3rd article in the mini-series on American Exceptionalism . . . which, remember, is only a brief way-station on the thoroughfare to a far more probing, comparative analysis of what that US uni

Posted by Michael Gordon @ 8:1 PM CST [continue] [ Comments? ]

November 28, 2003

American Exceptionalism: Several Differences Set Out In This, The 5th Article In The Series FINAL

Belatedly, nearly a good three weeks after we started this mini-series on US Exceptionalism --- no help for it, what with all the buzz in the interval of competing claimants on buggy time: the busy Thanksgiving holiday, some strung-out research matters, and as a clincher some ho-hum donkey-work tasks for a class -- the series, resuming right now, is ready to push briskly ahead again in a ranging, comparative manner. When it's finished, the series now looks like having 8 or 9 articles in all. The current one happens to be the 5th installment. It sets out the various stand-out ways that, taken together, and for good or bad, add up to American contrasts with other democratic countries.

What We're Up To Here


A few things to remember here, all dealt with earlier in the series:


(i.) The comparisons being unveiled in this article are with the current EU countries, 15 in number, all democratic like the US and most of them rich too: if you want exact figures, American per capita income is about $39,000 toward the end of 2003, the EU average is around 64% or about $25,000 . . . with Germany just about that level, France and Italy too, and Britain slightly higher. Note briefly a couple of points. All these figures for per capita income convert the dollar/euro exchange rate into purchasing power parity, and hence abstract away from the big fluctuations in that rate since the euro's introduction in 1999. More generally, in the next article, you'll find a table that sets out the relevant stats here: population, GDP, per capita income, and government spending --- itself broken down into a percentage of GDP, as well as the percentage of this spent on social programs, education, and defense.

(ii.) The value of comparisons --- economic, cultural, or political --- all hinge on the choice of countries. If we were comparing the US or the EU with, say, China or the Ara

Posted by Michael Gordon @ 7:32 PM CST [continue] [ Comments? ]

December 5, 2003

American Exceptionalism: 6th in a Series, Suspicion of Big Government and A Truncated Ideological Spectrum

In the last article --- the 5th in this lengthy mini-series on US exceptionalism among industrial democracies --- a catalogue of specific American traits, political, economic, and cultural, was quickly set out in a fairly schematic, top-skimming way, along with a promise to do three things later on: flesh out the list, document each of the traits, and provide a convincing explanation as to why they exist and make the US differ, for good or bad, from other democratic countries. Time now to honor that promise. As things now stand, another four or five articles look like being needed before the series reaches the home-stretch and can gallop past the finish-line.

Our mental tasks in the series, remember, are strictly comparative; the American idiosyncrasies highlighted here make sense only when the standard of comparison is with other rich industrial democracies. Shift the standard --- compare, say, Communist-ruled China or the despotic Arab tyrannies with the US --- and this country and all other democratic industrial ones would turn out to share far more in common as a group than they diverge. That's true of the US and the EU and the other English-speaking democracies outside Europe; for that matter, it applies to Israel and Japan as well, both countries where a rule of law prevails --- in the former more than the latter probably --- as does an advanced high-tech industrial base.



And this article's current task?

Easy enough to say. As buggy connoisseurs might recall, the catalogue of distinctive American traits boasted some six in all . . . not counting a seventh item, a set of misconceptions widespread in the EU and elsewhere about the US. Forget those misconceptions for the moment; dealing with them is a future chore. Come to that, elbow two-thirds of these specific US traits to the sidelines for a while too --- until tomorrow or the day after --- and focus your attention on the first two traits only: a rooted mistrust

Posted by Michael Gordon @ 6:28 PM CST [continue] [ Comments? ]

December 10, 2003

American Exceptionalism: A Follow-Up Exchange on Article 6

The following comment, left by John --- a prominent legal specialist who prefers to keep his name abridged this way --- was appended to the previous article on American exceptionalism, itself not yet in its final version [no, not indolence at work in the delay; rather, because the buggy prof took off three days and went to Los Angeles . . . a very nice trip, thank you very much L.A]. John, who has lived, studied, and worked in the EU --- including a stint in one of its member-countries' legislatures --- sets out some important differences between American and EU Continental legal traditions, including the role of state authority and powers and some contrasting philosophical views as to the origins of citizens' rights: whether toward one another or vis-a-vis the state itself. John has some stimulating remarks, too, to underscore about judicial activism in this country, a topic treated in the previous buggy article . . . and for that matter, one of the most controversial, high-coiled constitutional questions of the last few decades.

What follows first is John's commentary, then the lengthy buggy reply.

In that reply, as you'll see, some explicit comparisons are laid out and clarified between the Anglo-American legal traditions of the common law, on one side, and on the other those on the Continent in West Europe that are inspired by Roman (and Roman-Dutch) laws. The common law grew up in medieval and early modern England as a set of property laws, reinforced by the sustained efforts of the barons and free towns and parliaments over the centuries to limit arbitrary state power over them. In shorthand terms, consider it a bottom-up law. It is what the English colonists brought to this country, which was then reinforced and extended by our Constitution and the greater institutionalized suspicion of state power that followed here. With some variations across Continental countries, Roman law is different; generally, it stresses state security and law

Posted by Michael Gordon @ 7:37 PM CST [continue] [ Comments? ]

December 14, 2003

US EXCEPTIONALISM, The 6th Article On Mistrust of Big Government Continued: Congress vs. Parliamentary Legislatures

Still unfolding, a few articles left to publish, the current mini-series on US exceptionalism among the democratic countries --- for good or bad --- started the 6th article in that series last Sunday, December 7, 2003. It wasn't concluded, and then a buggy prof trip to Los Angeles followed and delayed its finish. When I got back, I found a stimulating commentary left by a legal specialist, John, on the differences between American and EU Continental legal systems. Replying to John took part of Thursday. Then, on Friday and Saturday as it happened, prof bug's mind was diverted by the need to learn some new computer programs --- specifically, Dreamwever MX for web design, Acrobat 6 for .pdf files, and Photocopy . . . the latter for futzing around with charts and other images: a crop here, a new splash of red or blue there, a fine-tuned enlargement opposite, on and on. Plus, come to think of it, some donkey-work reviewing HTML and XHTML coding. Even tried my hand at XML coding: ouch, who has time for it all?

The upshot?

The concluding section of the 6th article didn't materialize until . . . well, about a minute ago, give or take a few seconds. Actually, that's wrong --- the reference to "concluding" anyway. The key topic of the 6th installment --- American mistrust of big government and bureaucratic rule --- will require at least another article-installment. So what follows here?

Well, it's the concluding section of the argument that was left hanging fire since last Sunday's start of the 6th article --- and that, scout's honor, prof bug did just finish. Long enough in its own right, and sufficiently crammed with comparative analysis to boot, that section, it seems, deserves to be republished here as a stand-alone article. Will visitors share this bugged-out view? Let us hope so. And remember, the buggy comments that follow are all intended to underscore one of the key exceptions that define American political life compared to

Posted by Michael Gordon @ 8:45 PM CST [continue] [ Comments? ]

December 15, 2003

A Follow-Up Exchange on Article 6 on US Exceptionalism (Continued), With A British Visitor

Francis, a British visitor , has left us a set of stimulating comments --- some supportive, others critical --- that deal with the argument set out in the previous buggy article published here . . . the 6th in the mini-series on US exceptionalism. Francis' comments are all the more thought-provoking because he has been a long-time resident of Italy, where he has held a number of jobs as he continues his writing career, and so he enjoys a built-in comparative perspective on both politics and general life in Britain and Italy. His comments uncoil here first, followed by a lengthy buggy set of replies. Both should help round out your perspective on the question of institutionalized mistrust of big government, only one of a wider series of limits on it and bureaucratic rule that exist in the American system ---- always, remember, for good or bad.


Francis' Comments

Prof Bug:

(i.) I think you are confusing "Anglo-saxon" exceptionalism with US exceptionalism in this article. In all Anglo-Saxon democracies the parliament is intended to monitor the executive. In the UK that is precisely what the Hutton enquiry into the recent WMD/Suicide claims has been doing. Likewise politicians in the UK are repeatedly hauled over the coals for failing to declare "interests" in individuals, companies, industries and foreign countries. Some have had their careers blighted temporarily or permanently as a result.

(ii.) Federal countries such as Australia or Canada also show similar tensions between the different levels of government, which helps keep the federal executive reasonably honest, however even in the highly centralized UK distrust of the government for one reason or another is extremely widespread. You may recall Mrs Thatcher's Poll Tax problems and indeed Tony Blair's problems with the various countryside groups and there is pers

Posted by Michael Gordon @ 9:0 PM CST [continue] [ Comments? ]

January 22, 2004

A Former Student Asks For Buggy Views of the Democratic Contenders

Matthew Mishory, a very good student with a flair for web-site development --- he's already a professional without having finished his undergrad studies --- has asked for some buggy views of the contenders vying for the Democratic Party nomination. The buggy prof himself, remember --- despite his support of President Bush's foreign policy revolution --- is a Democrat who didn't vote for Bush in 2000. Though leaning that way this time, his final choice when it comes to the ballot-box will hinge on three things:

  • the state of our economy then, especially whether it's creating lots of employment and looks like being able to sustain high-level growth for years;

  • the transforming revolution in Iraq, and US fortunes in the wider war on terrorism;

  • and the Democratic nominee and his own concrete plans for dealing with the first two challenges just mentioned.



THE BUGGY REPLY

Matthew:

Many thanks for the query. A confession: a big problem of illuminating the Democratic primary contest now unfolding is getting hard, down-to-earth information to generalize about. As things stand, almost all the candidates have dealt in slashing negativism or hey don't-ask-for-more generalities . . . Howard Dean, in some ways an admirable man who rose above his plutocratic background and ski-bum days, then became an MD, then a good moderate governor, probably self-imploding because of his attack-dog style and endless torrents of criticism aimed at President Bush. Democratic anger, it turns out, has its limits . . . all to the good.

As a general thing, I'd say that no candidate --- Democrat or Republican --- who doesn't tell us which programs he will expand or create and which ones he will cut back or end, and how much they will cost or save, is doing anything but waffling. Bush is no exception.

 

<

Posted by Michael Gordon @ 7:48 PM CST [continue] [ Comments? ]

January 24, 2004

EXCHANGE ON THE US ECONOMY, A FOLLOW-UP TO THE PREVIOUS ARTICLE

From Michael Jabbra, a former and unusually talented undergrad at UCSB, the following brief set of queries arrived. They are reproduced here, along with the buggy replies


Prof Bug

I was wondering if you could comment on the similarities between the U.S. and the E.U. with regard to economic problems. What will the national debt ($7 trillion, according to the Bureau of the Public Debt website) and the devaluation of the dollar do to US economic strength? Isn't the refusal of both parties to address the growing debt and dollar devaluation a sign of bureaucratic or legislative inertia?

THE BUGGY REPLY

Good questions, Michael --- which I will try to deal with in greater detail later on. Note that they were delved into at length last summer in several articles, about 8 or 9, on the US economy; even so, I'm happy to take them up again, both now and later.

THE FEDERAL GOVERNMENT DEFICIT: TO WORRY OR NOT?

1) Briefly, we went through a very similar period of worry back in the 1980s about rising federal government deficits, a swelling trade deficit, and a falling dollar (after 1985). The federal deficit reached 6.0% of GDP at one point (this year, it will be about 4.2%). What happened? Any noticeable harm?

2) Not, far from it. In the end, faster economic growth and to an extent the Clinton tax-rises of 1993 not only ended the rising government deficit, but reversed it by the late 1990s. It took a decade or so for the new economic dynamism to kick in, based on clear rises in productivity (by two- to three-fold). Thanks to those rises, the US enjoyed the longest boom in its history --- 10 years in all. There was another benefit. As unemployment fell to near-historic lows in the last four years of the boom, 1996-20

Posted by Michael Gordon @ 4:18 PM CST [continue] [ Comments? ]

February 5, 2004

THE DEMOCRATIC PRESIDENTIAL PRIMARIES: Take #2

 A few people, students and others, have asked the buggy prof for an updated view on the Democratic primary races now that the field is being shaken out: Lieberman no longer a candidate, Dean saying he will withdraw if he loses Wisconsin, Kearney ahead, Edwards still in contention, Clark too. The first article on this topic appeared on January 22nd. What follows is a more updated view.

Lessons for Democrats Who Want To Win

Democrats who hope to win this and other presidential elections --- not to mention Congressional ones --- have to show that they're learned from their mistakes of the past, especially in the 1970s and 1980s when the public mood shifted noticeably and Democrats continued to choose candidates like McGovern, Mondale, and Dukakis who were way out of step with it . . . somewhere out in left field. Jimmy Carter, note, was only a partial exception. A Southern governor, he came to the White House after public revulsion with the Watergate scandal and the machinations of the Nixon presidency: not only did Carter sweep in against a weak candidate, Jerry Ford, but the Republicans were slaughtered in the 1974 and 1976 Congressional elections. In office, Carter --- good man, wrong job (he should have been the head of the UN or Amnesty International) --- proved a thumping disappointment, both in domestic and foreign policy. His administration only reinforced the problems the Democrats had in finding an electable candidate until Bill Clinton, maybe the best campaigner in American politics since FDR in the 1930s, and of course another Southerner, was elected.

Had Al Gore used Clinton to campaign for him in 2000, he would have probably won at least one southern state and been president. The moral? No Democrat will be elected unless he can carry some or much of the South.


The Shift in Pu

Posted by Michael Gordon @ 1:9 PM CST [continue] [ Comments? ]

June 12, 2004

ECONOMIC DEVELOPMENT: WHY THE US LEADS THE WORLD. 4th of a 8-Article Series

This is the 4th of a 8-article mini-series on economic development, the mini-series itself part of longer series --- which seems to stretch back in time all the way to the Battle of Gettysburg, but more likely to the end of April this year --- on the democratic prospects of the Arab Middle East. It takes up where the 3rd article left off: at the point where it explained that convergence theory predicts how the gap between the US as the lead country and rich follower countries like Japan or Germany or even smaller ones like Sweden or Taiwan should, in principle, be closed sometime in the future.

As the article concluded, the prediction has not been borne out.

The US has been the richest country in the world in per capita income since the 1880s, roughly half the time that has expired since the industrial revolution of the late 18th century erupted. Far from the gap in per capita income and productivity being closed, the EU average is now back to where it was in the early 1960s --- about 63% of the US level. Germany and Japan, two countries that had closed the gap to around 90% by the end of the 1980s --- widely touted as late as 1993 to match the US level by the end of the decade, then to go on and surpass it in the next decade --- are themselves not doing much better, comparatively speaking.

Why has convergence theory not worked out, at any rate for the US lead? The previous article didn't delve much into the reasons for catch-up growth not to work in its case. The current article seeks to repair the omission. There are two possible explanations: either convergence theory is wrong, or the US enjoys a superior form of capitalism --- a system of national innovation, plus an unusually mobile and flexible population, that surpasses that of the EU or Pacific Asian countries.

Not surprisingly, the latter explanation is what will be stressed here. In particular, we will try to show that the US has an unusually effective system of national

Posted by Michael Gordon @ 7:54 PM CST [continue] [ Comments? ]

June 21, 2004

ECONOMIC DEVELOPMENT: WHAT EXPLAINS THE ONGOING US LEAD IN INNOVATION? 5th in a Series

This, the 5th article in the mini-series on economic development, resumes the argument where it was left dangling at the end of previous article. Its theme: why convergence theory --- which postulates that follower countries with good human skills, good institutions, and good economic policies should eventually close the gap in per capita income and productivity with the lead countries --- is generally sound except in one instance: where the gap relates to the US. This is a big problem that has to be explained. The various convergence mechanisms entail, after all, a prediction of such catch-up growth; and yet the US has remained the lead country for over 120 years now . . . something that shouldn't occur if convergence theory is sound.

As things now are shaping up, please note, there will probably be a need for 3 or 4 more articles in this series on development. In the meantime, shift your attention now to the current argument. Its first two parts will unfold here in this 5th article; the next two parts will figure in the 6th article of the series. Why two articles. Dividing the argument this way seems to be a good simplifying device, a way to keep your attention jogging along at a comfortable pace; nothing more profound anyway.



PART ONE:
INTRODUCTORY COMMENTS: THE US FORGES AHEAD AGAIN


In more concrete terms, the need for an explanation of the ongoing US lead, now 120 years old, is all the greater because Germany and Japan --- the two other major capitalist countries in the world --- had closed the gap with the US in per capita income to around 90% by the end of the 1980s . . . exactly as convergence catch-up growth had predicted. The closer they came to that 90% level, the more droves of observers --- European, Japanese, even American --- talked about US decline, relative or even in some instances absolute. Absolute decline: was that possible? Yes, to jud

Posted by Michael Gordon @ 9:14 PM CST [continue] [ Comments? ]

June 24, 2004

AN EXCHANGE WITH A VISITOR ON THE US ECONOMY'S ALLEGED DANGERS: 1st of 2 Articles

The following brief comment was left by John, a lawyer who has spent long stints working in West Europe, including a year's internship with the German government. He returns to Europe frequently for professional reasons as well as for vacations, and so he has followed our series on development --- just about ready to be extended to a 6th article --- and especially how Anglo-American capitalism differs from the EU welfare-state sort, with particular interest.

Note that the buggy reply to John unfolds with lots of twists and turns; and though they shouldn't be hard to follow, they added up to a fairly hefty commentary . . . so much so that the reply has been divided into two articles. What follows is the 1st of the two. The second will immediately ensue, a direct continuation of the overall argument.



From John

Prof Bug:

In this wonderful ongoing series of yours on the performance of the US economy --- especially compared to its rivals abroad in the last decade or so --- would you be willing to discuss what many of us worry about more and more: whether, to put it bluntly, the US economy isn't heading into troubled waters as the Federal government's deficits rise and rise and the US current account, our trade in goods and services with the rest of the world, does the same? Aren't these big problems lying ahead for us?

I have to come clean here. What particularly worries me is that these problems would be compounded by one political party coming to dominate the Federal government after the elections this year. If that happened, might not the President and Congress --- unable to agree on the need to cut back on federal spending --- panic and sooner or later institute big jumps in federal taxes to offset the federal deficits?

If that should happen, note the irony, buggy prof.

The American economy would be stuck with both growing levels of

Posted by Michael Gordon @ 5:28 PM CST [continue] [ Comments? ]

June 29, 2004

AN EXCHANGE WITH A VISITOR ON THE US ECONOMY'S ALLEGED DANGERS: 2nd of 2 Articles

This is the second of a two-article mini-series on the alleged dangers that hover over the US economy in the rest of this decade, and two in particular: the rising Federal deficit and the rising US current account . . . trade in goods and services (plus some unilateral transfers). The mini-series was prompted by some worried concerns that were voiced by a visitor, John, set out in the previous article. That article tried to show that the two biggest worries associated with these two deficits in the US economy, the Federal budget and the US current account, reflect fears of "crowding out": 1) either of US private investment as the US Treasury sells more and more securities to finance the growing US Federal deficit --- this year alone, around 4.0% of GDP --- 2) or of US exports, making the trade deficit even worse.


PART ONE:
SUMMARY OF THE PREVIOUS ARGUMENT


(i.) Crowding-Out Version One: Federal Deficits Harm Private Investment

The first crowding-out fear --- that private investment in the US economy will be cumulatively hurt --- turns on the concern that there is a given pool of national savings . . . at any rate from domestic sources: thus, as the US Treasury competes with private investors seeking to borrow those savings for their own purposes --- particularly US firms wanting to buy new or more machines or offices or plants --- interest rates will have to rise and choke off much of the private investment. Over time, the outcome will be a lower level of investment and hence GDP growth. Some of those who espouse this theory see crowding out of private investment as 100% effective --- a total wash-out: each dollar the US Treasury accumulates from selling new securities to finance the US Federal deficit will, it's argued, be one dollar less that's available for private investment.

In that case, even in a recession, deficit spending won't h

Posted by Michael Gordon @ 4:50 PM CST [continue] [ Comments? ]

July 9, 2004

WHY THE US HAS BEEN THE RICHEST COUNTRY SINCE THE 1880's: 5th in a Series

This is the 5th article on the innovative capabilities of the US economy, comparatively viewed. Starting in mid-June 2004, the 1st and 2nd articles dealt with convergence theory: according to it, those follower countries with good institutions and enough human skills to import, adapt, and diffuse modern technologies will grow faster than the lead country, the main innovator on the technological frontier. A variety of complex convergence processes, each of them set out systematically, remember, in the first article in this mini-series, explain that faster catch-up growth. (Click here for that article.) How long will catch-up growth go on then? Until --- barring disruptions like wars or a great depression --- the follower countries end up converging on the leader in its levels of labor productivity and per capita income.

As we saw, the theory is generally sound . . . especially in a qualified version of what's called conditional convergence that needn't bother us in this series. The evidence here is clear.

In the EU 15, for instance, catch-up growth is very much alive today. Spain, Portugal, and Greece continue to narrow the gap with the rest of the EU in per capita income; come to that, Ireland --- once the poorest country in the region --- upped its rate of per capita income since the mid-1980s to the point that it is now the richest in the EU. . . roughly $32,000 (in purchasing power parity terms) compared to the EU average of around $26,000. Denmark, by the way, comes in second at $29,000.

In Pacific Asia, convergence is still going on at a fast pace as well. South Korea and Taiwan are still closing the gap with Japan; Singapore and Hong Kong have already surpassed its per capita income; and China --- at a much poorer level of per capita income (and hence growing especially rapidly) --- has been growing at about four or five times the Japanese GDP rate since

Posted by gordongordomr @ 5:5 PM CST [continue] [ Comments? ]

July 20, 2004

WHY HAS THE US BEEN THE RICHEST COUNTRY WORLD SINCE THE 1880s? 6th In A Series

This, the 6th article in a series on the performance of the US economy --- viewed comparatively, especially against its major rivals in West Europe and East Asia --- takes up the argument that was left hanging fire in the 5th article, published a week or so ago. The argument there wound its way back and forth through three parts, worth briefly summarizing here . . . not least for some new survey data to reinforce the key point made in part three.


PART ONE:
SUMMARY OF THE ARGUMENT IN ARTICLE 5




(i.) Declinism and Alice-in-Wonderland's Looking Glass

In part one, the analysis set out and probed the once chic declinist polemics of the late 1980s and early 1990s. Their overall thrust? The US economy, it was claimed, was performing poorly compared to Japan and Germany, two large countries whose economic systems were far more heavily regulated and subject to cartel-like arrangements in industrial manufacturing . . . with far different arrangements for mobilizing capital and allocating it for investment purposes.

As it happened, those polemics got everything topsy-turvy. Since the start of the 1990s, the US performance has far outclassed those of other industrial countries (save tiny Ireland) in per capita income growth. Meanwhile, their economies buried under small mountains of market inefficiencies, all adding up to rigidities and vested interests around the status-quo, Germany and Japan have racked up the worst growth performance of any industrial economy since the Great Depression of the 1930s. The average EU per capita income is now slightly less than 65% of the US's --- where it was more than three decades ago. Japan's is slightly higher; Germany's slightly lower.

 

What went wrong with the declinist predictions?

For one thing, its advocated ignored the major reasons for the gradual n

Posted by gordongordomr @ 4:42 PM CST [continue] [ Comments? ]

July 22, 2004

WHY THE US HAS BEEN THE RICHEST COUNTRY SINCE THE 1880s: 7th in a Series

This, the 7th article in the series on the US's economic performance --- especially its remarkable innovative prowess, technologically and otherwise --- is a direct continuation of the previous article. Originally, when that 6th article was written two days ago, the argument that's about to unfold right here would be tacked onto the end there, starting with Part Four. Why the change? Well, as it turned out, the summary of the main points in the first five articles took longer than the buggy prof had initially thought. No surprise really. In the flitting vagaries of a bugged-out professor's mind, the surprise really is that a sustained line of analysis can be snatched out of the tumbling ideas and their twists-and-turns and set down in hard print as frequently as they appear to do so on this site.

Or so it seems to my not entirely bias-free quirky view.



PART ONE:

THE SUPERIORITY OF THE US ECONOMY'S INNOVATIVE SYSTEM



Why This Superiority Is A Puzzle For Mainstream Economics

Our jump-off point here is why the US --- the richest economy in the world in per capita income for 125 years or so, roughly half the time since the industrial revolution of the late 18th century --- has been able to achieve a superior growth rate in its people's material standard-of-living for so long. It defies the theory of convergence catch-up growth, however interpreted. It also is a big problem for maintstream economics --- AKA, neo-classical theory, a term that will be clarified in a moment or two.

In standard neo-classical economic theory, to be blunt, the US's superior success shouldn't persist: if its economy does things better in certain key respects than other economies --- especially revolutionary innovative technologies, and the speed with which they are brought to the market-place by start-up firms --- then thos

Posted by gordongordomr @ 8:21 PM CST [continue] [ Comments? ]

August 1, 2004

WHY THE US HAS BEEN THE RICHEST COUNTRY SINCE THE 1880s: 9th in a Series

This is the latest article in a series about a month old now --- which deals with the various reasons why the US has been the richest country in the world now for 125 years, roughly half the total time since the industrial revolution of mid-18th century. This new installment extends the lengthy, stretched-out argument by probing a host of Schumpeterian concepts about capitalism, technological innovation, and long-term economic growth. Schumpeterian? The term refers to the work of Joseph Schumpeter, a Harvard economist in the early and mid-20th century, plus his recent followers . . . all of whom will be identified and explained later. Fairly marginalized in economics until the 1990s, the work of the Schumpeterians --- more and more numerous these days --- has moved toward the center stage of growth economics, and for reasons set out in parts two and three in this article.

...........................................................



(i.) America's Lead Is A Problem For Mainstream Economics

Of these Schumpeterian concepts, the most useful for our purposes postulates that there are different systems of national innovation across the countries of the world.

As previous articles in this series have hinted at, it's our chief explanatory variable to account for what stands out as a puzzle for mainstream economics: why the US continues to be the richest country in the world, and by far . . . these days, a good 35% richer than the Japanese or EU average in per capita income. In particular, superior American success here defies the predictions of both convergence catch-up theory and standard neo-classical market theories,

(i.) The former prediction argues that dynamic follower countries --- assuming they have good institutions and sufficient human skills to work with modern t

Posted by gordongordomr @ 2:15 PM CST [continue] [ Comments? ]

July 26, 2004

WHY HAS THE US RICHEST COUNTRY SINCE 1880? 8th in a Series

Not to worry, your eyes aren't playing a trick on you. The graphic illustrations that figure in this article also appeared in full-dress form in the previous article. Why their rebirth here?

Well, for one thing, if you've read the previous article in this series on the innovative performance of the US economy --- a sustained effort to explain why the US has been the richest country in the world since 1880, a good half the time since the industrial revolution of the late 18th century --- it might not hurt to focus your attention anew on the US's superior ability to innovate in ICT, information and communication technologies, compared to Japan or the EU, its main rivals. For another thing, the buggy prof wanted to stick the diagrams on the home buggy page; nothing more, nothing less.

As you'll see, the gaps in innovation and --- no less important --- the pay-off in rising labor productivity between the US on one side and the EU and Japan on the other aren't due to differences in the percentage rates of investment in either ICT or overall R&D. Those differences are generally negligible across the three regions. What then accounts for the big differences? The answer to that, sketched in already in earlier articles in this series --- and spelled out briefly once more at the end here --- lies in what we can call different systems of national innovation, the main subject of this series (now in its 8th article) and the focused theme of the next three articles.



BRIEF INTRODUCTORY REMARKS

The main twist in the previous article's argument can be crisply summarized: US superiority in technological innovation is a puzzle for standard neo-classical (mainstream economics).

In perfectly competitive markets, if other firms are doing something better than your firm, either you quickly emulate those best practices --- whether they're more advanced

Posted by gordongordomr @ 5:0 PM CST [continue] [ Comments? ]

October 11, 2004

THE CAUSES OF THE AMERICAN ECONOMIC LEAD: 11th Article In An Ongoing Series


The buggy series on the US economy, comparatively viewed --- in particular, an ongoing effort to pin down the reasons why it has been the richest and the most innovative national economy for over 125 years --- resumes its lengthy, strung-out argument here. The series, you might recall, began in early July and then broke off in early August after its 10th installment . . . the buggy prof deciding to take a mental rest for a while; very much welcome. The current article, the 11th in the series, has a double aim. Mostly, it rehearses the main themes that the earlier articles dealt with. For some of you, this review might not be necessary. Others, whether old or new visitors, will likely profit from it.

And the second aim?

Well, it's far more ambitious, even if the current article does little more than do some scene-setting for what will follow next in the series: the role of political ideologies in influencing how a national economy like the US's --- or Japan's or West Europe's or any other country's --- operates, particularly in shaping the interaction between the public and private spheres. That interaction, in turn, will heavily influence the flexibility and innovative prowess of a capitalist economy.

As you'll see, the two aims in this article hook together. With a sort of English spin on the analysis, let's begin with the second of them.


Part One:

THE SECOND AIM CLARIFIED: POLITICAL IDEOLOGIES AND DIVERSE ECONOMIC MODELS


State-Market Linkages

Consider the following diagram.

Oversimplified as it is, it's a good jump-off point to resume this series on the US economy. What it does is situate various real-world economies on an institutional spectrum running between two poles: total free market economies and total statist dominance. In turn, as we'll see in a moment or t

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December 6, 2004

AMERICAN IDEOLOGICAL EXCEPTIONALISM: WHY NO SOCIALIST TRADITIONS? 1st in a Mini-Series

This, the 12th installment in a lengthy series on the innovative prowess of the U.S. economy --- always viewed comparatively with Japan and the EU countries --- takes up a key topic that has only been briefly touched on so far: the absence in American politics, historically and at present, of a strong left-wing ideological tradition . . . socialist, Marxist, or what have you.. Its absence, historically and at present, is unique among industrial countries, including Canada ---which has had both stronger left-wing and statist-conservative traditions; even more important, it has helped to make the United States the richest country in the world . . . with a per capita income 55% higher than the EU-15 average and 50% higher than Japan's.

What This Gap Entails

To drive home just how great this gulf in living standards happens to be, consider the four largest EU countries: Britain, plus Germany, France, and Italy . . . the latter three advanced welfare-and-regulatory states of the sort extolled by the left-wing radicals in US universities and among Democratic Party activists at the grass-roots as a model for this country: a saner, more equitable way to organize an economy, it's claimed. The reality? As a recent study by two Swedish economists showed, if any of these four big EU countries were suddenly to join the U.S. federation, it would be the fifth poorest of the existing 50 states, ranking just ahead of Mississipi, West Virginia, Arkansas, and Montana, and tied with Oklahoma . . . all five of these, please note, overwhelmingly rural states and far below average American per capita income. Sweden itself would be the 7th poorest state. The second richest EU country --- tiny Denmark --- would be the 10th poorest, and Ireland with the highest EU living standard would rank 14th among the poorest U.S. states.

For that matter, according to the same Swedish study, 40% of all of Swedish households "w

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December 11, 2004

WHY NO SOCIALISM OR MARXISM IN AMERICAN POLITICAL LIFE: 1st of 2 Articles

A few days ago, a buggy article appeared that analyzed the nature and range of political ideologies around the world. Its main point? To show that the US is unique among industrial countries, lacking either an influential left-wing socialist tradition, Marxist or otherwise, or anything equivalent to the statist-conservatism that flourishes in Japan and everywhere on the Continent of West Europe these days. In particular, on the American right . . .

. . . The Republican Party Is Unique

With few exceptions, American conservatism has always been generally opposed to paternalistic big government, on any grounds --- not that Republican politicians, hypocritically to be sure, won't dish out benefits on a grand scale to their constituencies or provide subsidies or protection to certain manufacturing or agricultural firms . . . usually big corporations, generous with their campaign contributions for their patrons. companies. All politicians, everywhere --- whether on the left or right --- do this. It's a professional hazard. What alone differs is the PR-fluff used as rationalizations.

Still, the Republican party remains unique in the industrial democratic world with its suspicions of big government and partisan preferences for free markets.

These days, the only other major conservative party that has strong leanings toward smaller government and freer markets similar to the Republican Party is the British Conservative Party; and even then --- until Margaret Thatcher routed it with her powerful anti-welfare measures in the 1980s --- it had a strong Tory paternalistic wing, with roots in pre-industrial, pre-democratic British life extending back to the 17th century, that had no trouble managing the advanced welfare-state that the Labour Party established in Britain after 1945. And come to think of it, not only managing that rapidly growing welfare-and-regulatory state, but extending it during the 1950s, 1960s, and most of the 197

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December 16, 2004

Final Version WHY NO SOCIALISM OR MARXISM IN AMERICAN POLITICAL LIFE: 2nd of 3 Articles On The US Left

This is the 3rd article in a mini-series that started earlier this month on the exceptional nature of American political ideologies --- in particular, the almost total absence of a socialist or Marxist heritage on the left and, on the right, an unique conservatism that is committed to free-markets and hence differs from statist-conservatism found in Japan and everywhere on the West European continent.

The Initial Article

The 1st article in the mini-series, as you might recall, set out a spectrum of ideologies --- on both the left and right --- that runs between two poles of total state dominance of the economy and society: totalitarian Communism on the far left and Nazism (and fascist variants) on the far right. It distinguished between eight kinds of ideologies, all of which emerged in the modern era of industrialization, nationalism and nation-states, democracy, and the counter-reactions to them that materialized with eruptive force by the late 18th century in West Europe and North America and then spread gradually around the world. Then, in that same article, a buggy analysis of the eight different ideologies was unpacked. It tried to clarify the meaning of each, along with some concrete examples: among other things, as it turns out, liberalism and conservatism mean different things in Europe and Japan, or for that matter in the rest of the world, than in the USA.

Liberalism in the rest of the world, just to remind you, means free-market enthusiasm --- what we would call libertarianism in the US --- and hence the pejorative term, neo-liberalism, to depict the anti-statist policies of Ronald Reagan and Margaret Thatcher. In European circles, never mind Latin America or among leftists everywhere, neo-liberalism is a big boo-word; just mentioning it is likely to send shivers racing up and down the spines of left-wing intellectuals, most of them totally ignorant about economics. Conservatism, too, means something different in

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December 21, 2004

The American Left's Unique Political Traditions: An Exchange With A Visitor

Our thanks to James Ruhland, a buggy visitor, for his stimulating comments: in particular, about the impact of economic influences in helping to account for the unique non-socialist nature of the American left in politics, whether past or present.

 

Prof Bug:

 

Is the emphasis on wage levels corresponding to presence or absence of a strong Marxist/Socialist tradition really warranted, given that Marxist and Socialist movements have more often than not originated not from the bottom, but instead from fairly well-off, well-educated segments of a population?

It's an observation made by Joshua Muravchik in his book Heaven on Earth. Those who clamor most for Socialism, those most likely to adhere to Marxist views, are rarely the poorest. They're most often a educated - if politically disempowered - class. The members of the Bolshevik movement weren't from poor backgrounds. Neither were the founders of the British Labour movement.

 

Muravchik believes that what made America distinctive was the nature of our own Labour movement, and its leaders, from Gompers to Meany, who rejected Socialistic/Class-warfare solutions. The focus on America's PCI relative to that of other nations as an explanation for the lack of a strong Marxist movement seems - well, almost Marxist in its Materialism.


James:

Thank you for the comments, all stimulating and in effect reducible to two different sets: one about the leaders and mass-following in the Marxist movements, and the other about economic influences in shaping the American left's history. What follows are the buggy replies to each set.

 

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February 22, 2005

WHY NO SOCIALISM OR MARXISM IN AMERICAN POLITICAL LIFE: 6th in a Mini-Series of Articles

This, the 6th article in a lengthy mini-series on the American ideological spectrum --- its unique nature on both the left and right, and how, in turn, that uniqueness has helped shaped the US economy's institutional structures and government policies --- is a direct follow-up of the previous article. That article looked at economic equality and inequality. So too does the current article.

Up to now, the mini-series has dealt with the left-side of the American spectrum: in particular the reasons why it alone, in all the industrial countries, has never been attracted to Marxism or any other socialist variants. So far, come to that, we've looked only at economic explanations --- such as the extraordinarily high wages of American labor in the 19th and 20th centuries (always comparative viewed), our unusually high standard of living, and the uncommonly wide diffusion of property ownership. The previous article moved on to probe the distribution of income in American life since the early 19th century. It showed that right down to 1970, Americans also enjoyed the most equitable distribution among industrial countries. It also showed, in a fast, top-skimming way, nothing more, how this has markedly changed since then.

The Big Change

Specifically, the US now ranks at the bottom in income equality among industrial countries. Interestingly, too, Britain --- which was 2nd to the US in limiting income inequality in 1970 --- now ranks 2nd from the bottom, slightly ahead of the US. Is this just a coincidence? No, not really. As you'll eventually see, Britain is the most dynamic of the big countries in the EU, just as the US is by far among all industrial countries.

Hence, in brief, the need for this follow-up argument, which will strive to deepen the analysis of the previous article and make more sense of the big turnabout in the US's income-distribution over the last three decades.


More Specifically, A Trio of Aims Here

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January 20, 2005

WHY NO SOCIALISM OR MARXISM IN AMERICAN POLITICAL LIFE: 5TH Article in a Series

This is the 5th article in a long mini-series --- now about 6 weeks old, with roots back to early December 2004 --- on the unique nature of the American ideological spectrum, both on the left and right, and how in turn that spectrum has helped to encourage the innovative prowess of the US compared to other countries, making it the richest country in the world in per capita income for well over a century.

Right now, that lead is greater than at any time since the late 1950s. We're roughly 55% richer than either Japan or the European Union average, and since the 4 big EU countries' per capita income is either at that average (Germany) or slightly above it --- Britain, Italy, and France --- that huge lead applies to them as well.

A Problem for Economics

Mainstream growth theory in economics can't explain this persistent US lead, far from it. Essentially, despite some qualifications, it postulates a variety of convergence catch-up variants, all of which predict that rich follower countries able to sustain long-term GDP growth should, at some point in the future, catch up to the leader's levels of productivity and per capita income. That future point is called the steady-state, a hypothetical end condition. In it, all advanced industrial countries with good human capital and institutions should be equally rich, and they should all be on or very near the technological frontier. The large gap with the US --- now 10-12 decades old --- defies all these variants.

Not so our buggy analysis.

In particular, the much more ambitious series on the US economy that the current mini-series is part of --- the wider series stretching back over the months to July 2004 --- seeks to make sense of that huge American lead, past and present. That long-lived lead --- greater now than at any time for the last half century or so --- isn't an accident, even if mainstream economic growth theories can't account for it. On the buggy view, it's t

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January 5, 2005

WHY NO SOCIALISM OR MARXISM IN AMERICAN POLITICAL LIFE: 4th Article in a Series

This is the 4th article in a mini-series on the unique nature of the US ideological spectrum, all part of a larger, far more ambitious series --- stretching back now, it seems, through 14 articles to the battle of Gettysburg --- on the innovative prowess of the US economy, always comparatively viewed. Thanks to that prowess, the US has been the richest country in per capita income for well over a century now . . . a lead that defies standard economic growth theory, in all its variants. Right now, at the end of 2004, the US is 55% or so richer than the EU average for West Europe; and since the British, French, Germans, and Italians have a per capita income roughly the same as that average --- Britain slightly richer than the others --- the US lead is especially vivid and startling, no other words for it. Japan's per capita income, come to that, is about that of the British, and hence the US lead over it is no less startling,

The articles on ideology are doubly relevant here to explaining this huge, surprisingly long-lasting US lead: in particular, they're part and parcel of an institutional and cultural approach that underpins the overall argument of the series on the US economy's innovative powers. Note: doubly relevant. How so?



  • The US lacks a statist-conservatism of the sort that is rife on the Continent of West Europe and in Japan . . . the dominant political parties there, for generations now, suspicious of free markets and capitalist competition of the sort Americans take for granted.


True, the British Conservative Party is an exception to this rule in Europe, but only in part: the Tory patrician wing, which extends back to the pre-democratic, pre-industrial period of the 17th century --- and was dominated by land-owning aristocrats right down to the start of the 20th century, decades after the vote was extended to the middle classes and the working classes --- had

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July 4, 2005

IDEOLOGIES AND ECONOMIC PERFORMANCE: 6th Article in a Series

This, the 6th article in a series on the economic performance of the two kinds of economic systems in industrial countries these days --- those that adhere to variants of state-capitalism in Japan and on the EU-15 Continent, and those like the US and the other English-speaking countries that are market-oriented --- is a direct follow-up of the previous article's argument. To be exact, it sets out parts III and IV of that argument . . . the original draft cleaved in two because of its length; that's all, no other reason. Two other parts precede these.

The Four Parts of the Argument Clarified



In part one, some introductory comments unfold that link today's argument to the analysis in the previous article and --- no less important --- place it within the wider ambit of the entire series' thrust and main points. The series began in early May 2005, a good six weeks ago. Even if you've followed its substantive twists and turns in the five earlier installments, these introductory comments should help jog your memory and widen your perspective on what follows here.

In part two, the explanatory thrust in this lengthy buggy series --- now several weeks old --- is set out and clarified in greater depth than in earlier prof bug articles. There are two sides to that thrust. The first side, treated exclusively in this part, is an institutional analysis of the state-capitalist and market-oriented countries: in particular --- with the help of both some Schumpeterian insights into long-term economic growth and what's called public choice theory in economics --- the institutional stress explains why the economic status quo is so tenaciously defended and hard to change in Japan and the EU Continental countries, especially compared to the English-speaking countries.


Part three brings us to the second explanatory thrust in this s

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