The Zero-Sum Economy

Suppose, for example, that you cared passionately about the objectives of a particular charity, had a flair for fundraising, and successfully increased that charity’s share of available donations. You would probably feel both motivated and good, even if all you had done was divert money from another charity about which another equally motivated fundraiser was equally passionate.

The crucial economic question, therefore, is not whether individual jobs are “bullshit,” but whether they increasingly perform a zero-sum distributive function, whereby the dedication of ever more skill, effort, and technology cannot increase human welfare, given the skill, effort, and technology applied on the other side of the competitive game.

Numerous jobs fall into that category: cyber criminals and the cyber experts employed by companies to repel their attacks; lawyers (both personal and corporate); much of financial trading and asset management; tax accountants and revenue officials; advertising and marketing to build brand X at the expense of brand Y; rival policy campaigners and think tanks; even teachers seeking to ensure that their students achieve the higher relative grades that underpin future success.

.. But available figures suggest that zero-sum activities have grown significantly.

.. some 17.6% of all US jobs, receiving 30% of all compensation, are in “management and administrative” functions likely to involve significant zero-sum activity.

.. Eventually, almost all human work might be devoted to zero-sum activities.

.. Whether or not robots will ever achieve human-level intelligence, it is illuminating to consider what an economy would look like if we could automate almost all the work required to produce the goods and services human welfare requires. There are two possibilities: one is a dramatic increase in leisure; the other is that ever more work would be devoted to zero-sum competition.

.. As I argued in a recent lecture, such an economy would probably be a very unequal one, with a small number of IT experts, fashion designers, brand creators, lawyers, and financial traders earning enormous incomes.

.. Paradoxically, the most physical thing of all – locationally desirable land – would dominate asset values, and rules on inheritance would be a key determinant of relative wealth.

.. we would have solved “the economic problem” of how to produce as many goods and services as we want , but would face the more difficult and essentially political questions of

  • how to achieve meaning in a world where work is no longer needed,
  • and how to govern fairly the inherent human tendency toward status competition

 

Merkel’s Comeuppance is Europe’s – and the World’s – Misfortune

No one who was paying attention to Greece’s predicament three years ago should be surprised by the position that German Chancellor Angela Merkel and Europe find themselves in today. But only a dangerous fool would celebrate.

.. today’s defenders of the European status quomust fight on two fronts: against Trump’s encroachments and, within Europe, against the likes of Matteo Salvini and Luigi di Maio, the rising stars of Italian politics who, despite their parliamentary majority, were denied the right to form a government by the country’s besieged pro-establishment president.

.. Just as it is Trump’s aim to overturn the global system from which Germany has benefited for decades, Salvini and di Maio see the disintegration of the euro as a welcome development and a boon to their anti-immigration campaign.
.. If you insist on policies that condemn whole populations to a combination of permanent stagnation and humiliation, you will soon have to deal not with Europeanist leftists like us but, instead, with anti-Europeanist xenophobes who see it as their vocation to disintegrate the European Union.”
.. Germany’s establishment media are now referring to the Italian economist whose appointment as finance minister was vetoed by the president as “Italy’s Varoufakis.” That moniker obscures a fundamental difference: I wanted to keep Greece in the eurozone sustainably and was clashing with Germany’s leaders in favor of the debt restructuring that would make this possible. By crushing our Europeanist government in the summer of 2015, Germany sowed the seeds of today’s bitter harvest: a majority in Italy’s parliament that dreams of exiting the euro.
.. Trump understands one thing well: Germany and the eurozone are at his mercy, owing to their increasing dependence on large net exports to the US and the rest of the world. And this dependence has grown inexorably as a result of the austerity policies that were first tried out in Greece and then implemented in Italy and elsewhere.

.. a condition of agreeing to bailout loans for distressed governments and banks. Then note that this pan-European austerity drive took place against the backdrop of massive excess savings over investment.
.. large excess savings and balanced government budgets necessarily mean large trade surpluses – and thus the increasing reliance of Germany, and Europe, on massive net exports to the United States and Asia.
.. In other words, the same incompetent policies that gave rise to the xenophobic, anti-Europeanist Italian government also bolstered Trump’s power over Merkel.
.. the US will aim to force China to deregulate its financial and tech sectors. If it succeeds, at least 15% of China’s national income will gush out of the country, adding to the deflationary forces that are breeding political monsters in Europe and in the US.

Britain Considers Life Without Its Russian Oligarchs

Roman Abramovich, Britain’s best known Russian oligarch

.. Since he bought Chelsea—a purchase that made him a household name—Abramovich, more than any other Russian billionaire, has personified to the British public what oligarchs do and are. They buy soccer teams. They buy art. They get divorced. They are absentee governors of remote parts of Siberia. Their fortunes rise and fall according to their relationships with Vladimir Putin.

..  If the U.K. has decided it is no longer willing to take Abramovich’s money or—at the very least—to help him transform it from one asset class into another, this is quite a departure.

.. passengers on the flight were subjected to the kind of bureaucratic oddities that I have sometimes come across when reporting in Eastern Europe.

.. According to anti-money-laundering campaigners, in the last two decades around a hundred billion pounds of Russian money have come through London and been reinvested in property, commodities, and financial instruments

.. Between 2008 and 2015, the British government granted so-called investor visas to some seven hundred Russian citizens, who were each willing to spend two million pounds in the country.

.. During the same period, Russian oligarchs and Kremlin-connected businesses hired some of London’s finest bankers and lawyers to protect them from the closing circles of international sanctions and financial regulations.

.. On March 16th, two days after May expelled the diplomats, Russia raised four billion dollars from sovereign-debt sales on London’s bond markets.

.. The previous day, the Russian oil giant Gazprom had raised seven hundred and fifty million euros in bond sales in the city. “Business as usual?” the Russian Embassy tweeted.

.. On June 14th, the soccer World Cup kicks off in Moscow.

.. An estimated thirty thousand England fans will travel to the country to watch the national team play

 

Exiting the Iran deal is a blow to financial transparency and US control

the West’s dominance of global finance has meant that the US effectively controls conduits which are the lifeblood of non-Western powers like Russia and China as well. Russia, itself bitterly subject to American sanctions, hopes to escape the noose by deploying a blockchain-based parallel infrastructure for international transactions. Whether such an enterprise will prove laughable and quixotic, or whether it might pierce meaningful holes in the US-dominated conventional system, depends a great deal on how policymakers, bankers, and entrepreneurs around the world react to it.

.. However, now, specifically with respect to its enforcement of financial sanctions on an apparently compliant Iran, it is the United States that seems, even among its Western partners, to be the rogue state in need of policing. However begrudging European acquiescence to extraterritorial US sanctions may have been two days ago, it is more begrudging today.

.. More than that, the remaining counterparties of the Iran nuclear deal — China, France, Russia, the UK, and the EU — all want the deal to continue. They will be at pains to persuade Iran that it continues to enjoy significant sanctions relief relative to what it would face if it abandoned the deal. Which puts those countries between a rock and the hard-place of extraterritorial enforcement by the US of reimposed prohibitions. At a policy level, the remaining signatories now have an active interest in enabling, even encouraging, evasion of US financial controls, an interest that is morally and politically defensible. All of a sudden La Resistance among sullen French bankers isn’t just about the juicy fees foregone, but a heroic struggle to #resist Donald Trump, to prevent the renuclearization of Iran. And policymakers might agree.

.. That might mean taking some of the pressure off of European and vacation isle tax havens, reversing the recent, American-enforced trend towards transparency. It might mean partnering with China and Russia to participate in the parallel, alternative financial arrangements that those countries seek to develop. It plainly puts at risk the hard won, absolutely extraordinary, hegemony that American regulators have over global finance.

.. And for those among the US #resistance who see Vladimir Putin beneath every strand of orange hair, what Donald Trump has just done makes the possibility of a new Russian SWIFT considerably less laughable.