We used to joke on Wall Street that you should marry a trader at another firm, trade with only each other, and by end of the year one would have made a lot of money and the other lost the exact same amount. The winner would be paid a big bonus, and the loser only a six-figure salary, or at worst, dismissed with severance. Then you split the pot and both walk away rich.
It is just a joke, but it wasn’t far from reality. You can make a lot of money doing nothing on Wall Street if you are clever enough. Large parts of the financial industry is people playing an intellectual grift, coming up with complex schemes to evade and exploit the tangle of laws and regulations that the rest of society have to abide by. Read More
German philosopher Hegel postulated that history progresses through thesis, antithesis and then synthesis. Today we are seeing the first two dynamics with trade policy and attitudes towards globalization; we desperately need the third.
For over 40 years synthesis meant unbridled support for free trade and globalization. But after failing to deal with the contradictions that came with it, America is shifting to antithesis: protectionism and nationalism, whose consequences, if fully followed through, will be dire. Read More
In a recent post, Rachel Bovard rightly defended the notion that in certain instances national security considerations should supersede free trade considerations. She specifically cited the ban on Huawei in the context of a discussion of a recent Real Clear Markets column by economist John Tamny, who makes a traditional free market case against the ban on Huawei in the US market
I’d like to discuss aspect of this debate that goes beyond the national security considerations outlined by Bovard. Regarding free trade, the theory is that the savings generated by purchasing the lowest cost import will be offset by sufficient demand elsewhere to offset the collateral damage of displaced workers. The implicit assumption is that this “good” outweighs all other considerations, even though the relative consumption problem that occurs as one person buys the lower-cost good creates a consumption equivalent to Keynes’s “paradox of thrift” – insofar as consumers fail to realize that if they all do it, then many more of them ultimately end up unemployed or underemployed. Read More
My American Compass co-blogger, Michael Lind, likes to portray America’s development as a tug of war between the ideals of Alexander Hamilton and Thomas Jefferson — nation builders and industrialists on the one hand, and laissez-faire localists on the other.
It’s an eye-opening way to interpret the turning points throughout U.S. history, and yet the dichotomy is not nearly as strong as it first seems. The Hamiltonian-Jeffersonian divide suggests, for example, that a strong federal government is at odds with a strong local government, or that a national civic culture must come at the expense of regional particularly. While these tradeoffs may seem intuitive, in reality the vitality of our local communities often depends on the strength of higher-level institutions.
In a recent Real Clear Markets column, economist John Tamny made the case that Oren Cass’s policy advice is backwards and will result in political doom for, in Tamny’s words, “the hyper emotional Marco Rubio.”
The personal invectives against Cass and Rubio (of which there are several) aside, this sentence in Tamny’s piece caught me off guard:
“Indeed, if Huawei can help Americans reach a 5G future sooner than American companies can, why should we care?”
This seems like a strange headline given that the economy has recently shed almost 40 million jobs. But at some point with the development of a vaccine or an effective treatment, the economy will come back to normal.
And when it does, so too will opposition to automation, at a time when we will need productivity more than ever to shrink the now massive debt-to-GDP ratio. We can be sure the conversation will be reminiscent of an early 1960s Twilight Zone episode in which a manager replaces all his firm’s workers with robots, only to find himself replaced by a robot. Read More
Try as we might, those of us who dare to challenge economic orthodoxy within the GOP are unlikely to prevail on policy and moral grounds alone. But the politics of today offer us another course that is just as powerful: offering a prescription to protect from impending electoral doom of the party if the course isn’t corrected. Rejecting economic orthodoxy within the GOP and embracing the largest jobs program in American history may be the only antidote to saving the Senate majority and the Trump presidency. Read More
In his recent post Matt Stoller observes that a common theme at The Commons thus far is “the reemergence of the state as the key locus of legitimacy for the exercise of power” and urges conservatives to think about corruption and statecraft. What’s needed, he says, “is a vision of how to structure such a state without succumbing to corruption.”
Corruption is, of course, a serious threat to our liberties, and Stoller’s piece is deeply thought-provoking. (Particularly striking is his treatment of the American Revolution as a response not only to a corrupt government but to the corrupt economic power of the East India Company; also, his framing of large corporations as “private governments in control of public infrastructure.”)
The post made me reflect on the spillover effects of corruption, the way that corruption in the government or market initiates trickle-down distrust. Though its origins may be specific (a particular instance of corruption), the effects are more akin to general anesthesia: an IV in one vein that spreads its effects to the whole body, corruption in one person or institution that leads to a more general social distrust of people and institutions of all kinds, the disorienting sense that nothing is as it seems and no one can be trusted. Read More
Some time after I first met Oren, we had a good back and forth about neoliberalism, a term that has already appeared several times on this website and is at the forefront of American Compass’s mind. While Oren thought the word useful to describe the reigning economic orthodoxy we both found dissatisfying, I was more reticent to use it.
For one, none of today’s neoliberals, and very few of yesteryear’s neoliberals, identify as such. In fact, I can’t think of any prominent intellectual, politician or economist today who calls himself a neoliberal. In 1951, Milton Friedman did publish an essay entitled “Neo-Liberalism and its Prospects,” but he later abandoned the label.
Neoliberalism also seems too elastic a concept to be meaningful. An article by two political scientists surveying its various uses concludes that it is a “conceptual trash heap capable of accommodating multiple distasteful phenomena.” Indeed, one may question the value of a label that gets applied to every single President since Nixon, as well as to Hayek, Tony Blair and Deng Xiaoping.
Professor Dan Drezner has been crudely criticizing Senator Josh Hawley’s New York Times op-ed on U.S. withdrawal from the WTO—treating it “the way one would treat an undergrad paper in global political economy,” awarding a C-minus, and offering the feedback that, “You can do better work than this, Josh. Put in the effort, do more research and make sharper arguments next time.” He exposes the fundamental weakness of his critique though, with the claim that “Hawley prefers exiting the WTO and rejecting the estimated $2.1 trillion in benefits from trade,” in the process demonstrating exactly what simplistic economic analyses of trade policy get wrong. Read More