Paul Krugman: Idea that Climate Change Requires Austere Back-to-Nature Lifestyle

60:42
thank you what is the most persistent
60:45
zombie idea on the left and is there one
60:47
is there an idea to what you have
60:50
subscribed in the past which you now
60:51
kind of put into that category oh boy I
60:55
mean the trend the left is not nearly as
60:58
good at maintaining zombie ideas partly
61:03
because there there are in fact not that
61:07
many leftist billionaires and and
61:09
billionaires there are some but not very
61:12
leftist and so I mean well let me put
61:20
this way we were talking about climate
61:22
and environment and and climate change
61:25
and economic growth I’m running to a lot
61:27
of people still who are now this is
61:30
telling you that there I don’t think
61:31
there are a large part of the electorate
61:33
but there are
61:34
but the circles I move in I run into
61:36
people who are sure that to fight
61:39
climate change we have to stop living
61:41
the way we’re living and a much more
61:43
austere back-to-nature lifestyle is the
61:47
only way to deal with climate and that’s
61:49
an idea that it’s just clearly wrong if
61:53
we actually asked by we know enough
61:55
about the technological and economic
61:57
solution to climate change that ASUS a
62:00
green society that does not burden the
62:02
planet would almost certainly be a
62:04
society that looks a whole lot like what
62:06
we have now in people with the driving
62:08
cars they’d be using electricity but the
62:10
cars with the electric and the
62:12
electricity would be generated by solar
62:13
and wind and it but the actual rhythm of
62:16
daily life could look very much like
62:18
what we we have we don’t have to go back
62:20
to to an agrarian pastoral Eden to to to
62:25
deal with the issue but it’s it’s
62:26
something that sounds again it sounds
62:29
serious from a different point of view
62:30
it sounds like if you’re serious about
62:31
climate change you must be serious and
62:34
believing that we have to give up on
62:35
this consumer oriented society and and
62:38
all of these these comforts that we take
62:40
for granted but in fact it’s not true so
62:43
that would here that would be an example
62:44
of a kind of a left-wing zombie in other
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countries in the belief that you can
62:49
just dictate all prices and you know you
62:53
can put price controls on everything and
62:54
not and never face shortages that’s not
62:58
something we see in the US but they
62:59
Venezuela clearly there’s some refusal
63:02
to face reality going on but that would
63:05
be these house but again zombies mostly
63:08
flourished because their big money
63:10
behind them not all of them but mostly
63:12
and and and the no.4 for every George
63:17
Soros there are 50 quiet billionaires
63:21
supporting extremely reactionary causes
63:23
and what about the question the question
63:25
of an idea you’ve changed your mind oh
63:27
so most of my changes have been in the
63:33
in the other direction look at minimum
63:36
wages no no a piece of economic research
63:41
has has shaken my views as much
63:46
actually I’m gonna give you two and and
63:50
me at this this is a great risk of
63:52
turning into a Monty Python routine
63:54
amongst the issues three okay so
64:00
actually so I’ll give you two one
64:01
minimum wages up until sometime in the
64:05
mid 1990s I believe that clearly
64:09
increases in minimum wages would cost
64:11
jobs they might be desirable otherwise
64:13
but econ 101 said that that’s what
64:15
happened and then we got this amazing
64:17
body of empirical research because we
64:19
get in the United States we get a lot of
64:21
natural experiments when one state
64:22
raises its minimum wage and the
64:24
neighboring state does not and the
64:26
overwhelming evidence says that minimum
64:28
wage increases at least within the range
64:30
we see in the US do not cost jobs and
64:33
that changed my view has said labor
64:34
markets are very different from where I
64:35
thought it actually moved me towards
64:38
emphasizing the role of power and in
64:40
labor relations and so on another one I
64:43
used to think that it was always
64:44
possible just by printing money to get
64:47
full employment and and the experience
64:50
of Japan in the late 1990s when despite
64:54
a very easy monetary policy they slid
64:56
into deflation changed my views totally
65:00
I there was a there was a group of us
65:03
actually of when I when I arrived at
65:05
Princeton in 2000 was a bunch of Japan
65:07
warriors who were really very shaken by
65:10
the Japanese experience because we we
65:12
looked at it said you know this could
65:13
happen to us so with me people you
65:16
wouldn’t have heard of but very
65:17
influential in the professional arts
65:18
Vince and Mike Woodford and the fourth
65:21
was Bernanke Ben Bernanke don’t know
65:24
what happened to him he disappeared I
65:26
think yeah so we so that but no the the
65:31
Japanese Japan’s Lost Decade
65:33
changed my view and basically made me
65:36
much more Keynesian much more believer
65:38
that there are times when you really
65:40
need to have the government do the
65:41
spending yes how do you successfully
65:45
regulate the financial markets while not
65:50
scaring the business community in sort
65:53
of trying to
65:55
in the middle of a class that any form
65:58
of common sense reform or tax is not
66:01
Marxist Leninist and it’s not going to
66:03
take away all their assets and money
66:05
okay you know we’ve done this before
66:10
right we imposed extensive bank
66:14
regulation in the 30s which didn’t
66:17
obviously cripple the economy we the
66:19
post-war generation was was the best
66:22
generation in in in certainly in US
66:24
economic history the the the only I
66:29
would say the problem is not scaring
66:31
people not looking Marxist the problem
66:33
with regulating financial markets is
66:35
first of all they’re the financiers have
66:39
a lot of clout but but beyond that it is
66:45
hard to keep up with financial
66:49
innovation which very often is not
66:53
innovating in the sense of you know
66:55
doing things better but as is innovating
66:58
a way of finding ways to set things up
67:01
that evade the regulations so you
67:04
regulate banks and then people create
67:06
something that is functionally a bank
67:07
but doesn’t technically meet the
67:09
definition of a bank and evades the
67:11
regulations it’s hard to keep up with
67:13
that and and if it’s not a well solved
67:16
problem in the we had a significant
67:21
financial reform in the US under Obama
67:24
not everything you I would have wanted
67:26
but it was significant but on many of
67:29
the issues it depends upon this
67:31
Financial Stability Council which has to
67:34
define systemic lis important
67:37
institutions that they’re mean and
67:40
there’s no clear definition it’s kind of
67:43
like pornography you know when you see
67:44
it which is not a stupid way to do it
67:47
but it depends upon having honest people
67:51
of goodwill in charge and now we have
67:55
the Trump administration so so the
67:58
dodd-frank is not a very effective tool
68:00
and it always depended upon upon good
68:04
leadership and
68:06
we have not found I haven’t come up with
68:08
a way to the thing about doing a regular
68:10
old-fashioned commercial banks is that
68:15
that system works the regulations work
68:18
the the guarantees work without
68:21
requiring that there be smart leadership
68:23
or good judgment calls at the top and
68:25
unfortunately everything we try to do to
68:27
deal with more modern financial
68:29
institutions is requires both goodwill
68:34
and sophistication which are both the
68:36
now and very short supply question from
68:39
the balcony please thanks very much so
68:41
we’ve mostly discussed zombi ideas in
68:43
the kind of domestic policy context i
68:45
wanted to ask about zombie ideas in the
68:47
international context in the sense of
68:50
the Washington Consensus and trade
68:51
liberalization and specifically I want
68:54
to ask what your thoughts are on the
68:56
extent to which countries can still
68:58
develop by exporting I has the impact of
69:02
technology and the scale of China made
69:06
it essentially impossible for a trade
69:07
liberalization to facilitate development
69:10
okay that’s a good question
69:13
I think empirically it’s just the
69:16
premise is wrong so we all know about
69:19
China and we know that China occupies
69:21
this huge space and China is a unique
69:25
success story nobody else has matched
69:27
their rates of growth but it’s not the
69:31
only success story so when I took I like
69:34
to talk about the the unfamiliar cases
69:39
Bangladesh Bangladesh is a desperately
69:43
poor country and and compared with
69:46
working conditions and in in the first
69:49
world it’s it’s is horrible and they
69:51
have factories that collapse and kill
69:53
hundreds of workers and all of that but
69:56
Bangladesh is actually they’ve they’ve
69:59
tripled their per capita income and
70:03
there there are very poor country but
70:06
they were a country that was right on
70:07
the edge of Malthusian starvation and
70:11
it’s all because of the ability to
70:13
export if the the ability basically
70:17
clothing labor-intensive
70:19
that they’ve been steadily gaining
70:21
market share at China’s expense because
70:23
China has been moving upscale and that’s
70:26
that’s showing that you can get yeah
70:28
that’s that’s major development that’s a
70:29
major change it’s it’s not it’s a long
70:32
way from from turning into into Western
70:35
Europe but it’s it’s it’s a very big
70:37
deal and it’s showing that the
70:39
globalization can still work for for
70:41
poor countries so I that’s that’s what
70:45
the line Bangladesh is not a it’s not a
70:48
banana republic it’s a pajama republic
70:51
but but that you know they can make fun
70:54
of it but in fact their use that’s a
70:56
very large number of people who are
70:57
lifted at least some ways above
71:00
starvation level by globalization and
71:03
another question from the balcony please
71:06
looking at it as a economist with a
71:08
mathematical mind what impact do you
71:11
think a shift a proportional
71:12
representation would have over time as
71:15
you compared to the electoral colleges
71:18
and first-past-the-post which we have in
71:19
the UK other British Commonwealth
71:22
countries which tend to over time have
71:24
led to two party states so what if we
71:26
shifted the proportional representation
71:28
okay I mean firstly the u.s. the the
71:33
u.s. electoral college system is
71:35
monstrosity that’s a that’s not about
71:38
first-past-the-post it’s about a system
71:40
that at the presidential level gives
71:42
disproportionate representation to to
71:45
some states with small populations and
71:48
at even more important we have the
71:50
Senate which where half the Senators are
71:53
elected by 16 percent of the population
71:55
so this is a that that’s crazy
71:58
that’s a deeply basically we’ve we’ve
72:00
evolved into a rotten borough system for
72:03
half of the US government and that’s
72:05
that’s a clear monstrosity as for the
72:08
rest I mean I don’t know I mean this is
72:13
not I’m not a political scientist I talk
72:16
to political scientists which by the way
72:18
is rare for economists we actually talk
72:20
I actually talk to these goods to other
72:21
social sciences and take them seriously
72:24
and but what I would say is that the the
72:29
there are places with proportional
72:31
representation
72:32
that also managed to be very
72:34
dysfunctional so you know Israel I
72:38
believe has proportional representation
72:39
and I would not say that Israeli
72:44
politics these past 15 years have been a
72:47
model of good ideas and wisdom
72:50
prevailing in fact they I mean every
72:52
system has its problems and one of the
72:54
problems with proportional
72:55
representation is it sometimes causes
72:57
small factional parties with with very
73:01
antisocial goals to to be kingmakers so
73:06
that’s not an easy solution either I
73:08
don’t really know what the answer is
73:10
except to say that that you know people
73:13
people are both generally clever and
73:19
often nasty and they can find a way to
73:21
screw up any system question trip down
73:24
here hi
73:25
you said earlier that the American
73:26
economy is in a pretty strong position
73:28
so I was wondering how much he thought
73:30
Trump could legitimately claim
73:32
responsibility for that and then
73:33
alongside that what are the strong II
73:35
cannot strongest economic arguments to
73:37
voters for voting against him okay the
73:41
reason that we’re in a relatively strong
73:43
economic position is that it’s basically
73:47
deficit spending after years and years
73:49
of saying no debt this is an existential
73:52
threat then we must have austerity which
73:54
really hobbled the US recovery under
73:58
Obama as soon as Trump was in office for
74:00
Republicans said oh we don’t care about
74:02
that I mean the last two State of the
74:04
Union speeches have not so much as
74:06
mentioned the deficit and that even
74:09
though it’s badly done it does give a
74:13
boost to demand so I guess you could say
74:16
the Trump has gets some credit in the
74:19
sense that by getting elected he caused
74:22
congressional Republicans to stop
74:24
sabotaging the economy that’s not a you
74:27
know vote Republican and and and and the
74:29
and the economy won’t be undermined by
74:31
by our sabotage efforts so that’s not a
74:34
great electoral slogan but it might win
74:36
in the election I have to say and I lost
74:40
the room what the rest of that was but
74:42
the
74:44
was one of the strong strongest economic
74:46
arguments to voters to vote against him
74:48
oh the thing about Trump is that he’s
74:50
managed to preside over a economy that
74:55
by sort of aggregate measures
74:58
unemployment rate is low GDP growth has
75:02
been pretty good not spectacular but
75:04
pretty good but which is is showing
75:08
increased hardship for many people
75:11
despite that I mean we were making huge
75:13
progress in reducing the number of
75:15
people without health insurance that has
75:17
now gone into reverse the number of
75:19
people who say that their that they are
75:23
that they are postponing or not
75:27
undertaking necessary medical treatment
75:29
because of expense has skyrocketed
75:32
and the America like the UK there’s
75:38
tremendous regional divergence we have a
75:43
large part of the large parts of the the
75:47
heartland which are in severe economic
75:50
decline as social collapse and that has
75:53
just accelerated you know despite the
75:55
low overall unemployment rate the state
75:58
of affairs in Eastern Kentucky is
76:01
terrible and life expectancy I guess it
76:06
rose slightly this past year but you
76:07
know mortality rates are rising and it’s
76:11
as in case an Angus Deaton say deaths of
76:14
despair people dying from from opioids
76:19
alcohol and suicide have been rising
76:22
despite the strong economy so this is
76:25
actually that earlier question about GDP
76:27
you know the GDP growth not saying that
76:31
the that it’s false but under under the
76:34
surface of that good GDP growth is
76:36
actually a substantial increase in
76:38
misery just a one final question from
76:43
thanks bull great to see you here my
76:48
question is about the u.s. minimum wage
76:50
obviously it’s very very low compared
76:53
it should be you know from visiting the
76:55
US for last 25 years it seems P and
76:57
getting no three jobs to make ends meet
77:00
what do you think the minimum wage
77:02
should be and one of the reasons other
77:05
than you know losing jobs that perhaps
77:07
people have been keeping it down the
77:09
minimum wage suppressed oh so I asked
77:12
that in Reverse I mean the reason the
77:14
minimum wage has been held down is
77:15
because employers want chief labor and
77:20
they have a lot of clout the question of
77:24
how high to go is an interesting one
77:26
and it’s the so even the the big move in
77:34
the u.s. is for $15 and that’s a I’d say
77:39
even $15 an hour even Alan Krueger who
77:43
was one of the key researchers on that
77:45
revelatory work was a little nervous
77:48
about 15 and that the problem is
77:52
regional the the state of New York the
77:55
state of California no problem you have
77:58
a $15 minimum wage and and there’s
78:00
absolutely no reason to think that
78:02
that’s economic difficulty we’re talking
78:05
about Mississippi or Alabama places with
78:08
much lower productivity you might start
78:10
to have some job loss at that level I
78:12
think that the preponderance of the
78:14
evidence says that $15 is okay that
78:18
there might be some minor job loss in
78:21
some of the least productive parts of
78:22
the US but but overall not a big deal I
78:26
think 20 I would start to make me really
78:28
nervous
78:29
that then you start to really be a
78:30
problem in in potentially problematic
78:33
territory but it’s it’s why they see
78:36
actually in this case I think a federal
78:38
minimum wage of 15 and then higher wages
78:40
and in in in appropriate States it makes
78:44
sense this is one of these cases where
78:45
federalism works to our advantage and
78:47
and it’s interesting by the way Alan
78:49
Krueger did do at one point he he went
78:52
to to Puerto Rico which part of the u.s.
78:55
is subject to the u.s. minimum wage and
78:57
much lower productivity and said there
78:59
we should be able to see clear evidence
79:01
that the minimum wage cost jobs and he
79:03
couldn’t find it he said I don’t really
79:05
believe this by
79:06
I can’t find the evidence so so for the
79:09
moment I say let’s let’s go for 15 and
79:11
see what happens and then maybe maybe
79:15
look for the high productivity states to
79:20
to go beyond that great I’m so sorry to
79:24
have to draw it to a conclusion but you
79:27
will have the opportunity to meet ball
79:29
and and get the book signed for now
79:32
please join me in thanking him for
79:34
really fascinating today all right

Europe’s Struggling Political Parties Promise a Return to the Pre-Thatcherite Era

BERLIN—To win voters lost to an anti-globalization backlash, Europe’s mainstream parties are going back to the 1970s.

In Germany, the U.K, Denmark, France and Spain, these parties are aiming to reverse decades of pro-market policy and promising greater state control of business and the economy, more welfare benefits, bigger pensions and higher taxes for corporations and the wealthy. Some have discussed nationalizations and expropriations.

It could add up to the biggest shift in economic policy on the continent in decades.

In Germany, Europe’s biggest economy, the government has increased social spending in a bid to stop the exodus of voters to antiestablishment, populist and special-interest parties. Reacting to pressure on both ends of the political spectrum, it passed the largest-ever budget last year.

“The zeitgeist of globalization and liberalization is over,” said Ralf Stegner, vice chairman of the 130-year-old Social Democratic Party, the junior partner in Chancellor Angela Merkel’s government coalition. “The state needs to become much more involved in key areas such as work, pensions and health care.”

The policies mark the end of an era in Europe that started four decades ago, with the ascent of former British Prime Minister Margaret Thatcher and her U.S. ally, President Ronald Reagan.

Margaret Thatcher and Ronald Reagan in Paris, 1982. PHOTO: ASSOCIATED PRESS

After Thatcher abolished capital controls in 1979 and began selling off state companies in the 1980s, other European governments followed suit, embracing supply-side policies, deregulation, market liberalization and tax cuts. Revenues from privatization among European Union member states rose from $13 billion in 1990 to $87 billion in 2005, according to Privatization Barometer, a database run by consultancy KPMG Advisory S.p.A.

Today, concerns about growing inequality, stagnating wages, immigration, the debt crisis and China’s rising power have fueled the recent political shift. European businesses and governments also worry about potential changes in U.S. policy, amid looming threats of trade sanctions.

Smaller State Governments across Europe retreated from many economic sectors and sold state companies starting inthe 1980s.Privatization proceeds in EU countriesSource: Privatization Barometer reports
00.billion1980’85’90’952000’05’10’150102030405060708090$100

This erosion of the old technocratic consensus about how to run an economy, even in countries where populists aren’t getting any closer to power, could be one the most lasting consequences of the recent antiestablishment surge.

Even in countries where populist parties are already in government, such as Poland, those parties have shifted their focus from nationalist and anti-immigration rhetoric to championing generous welfare policies and state aid.

Bigger BenefitsGermany’s government has increased socialspending in a bid to win over voters. Germany’s government spendingSource: Germany’s Federal Ministry of FinanceNotes: Data through 2017 are actual; 2018 and 2019are targets. €1=$1.14
.billionSocial and welfare benefitsOther spending2012’13’14’15’16’17’18’19050100150200250300350€400

Germany’s SPD has embraced additional welfare spending, paid for by tax revenues, to combat a retreat of voters so rapid it threatens to turn the once-dominant force in German politics into a niche player. The party is now pushing for policies such as unconditional pension for people who have worked for a certain period but didn’t make sufficient contributions into the pension pot.

In the U.K., Jeremy Corbyn, leader of the opposition Labor Party, has proposed renationalizing railways, public utilities, the postal service and the Royal Bank of Scotland ,the country’s second-biggest lender. It’s effectively a reversal of the privatization spree initiated by Ms. Thatcher. The party is also toying with policies such as universal basic income for all and a four-day working week for public-sector employees.

Labor has been polling ahead of the ruling Conservatives in opinion surveys for most of the past two years.

The re-nationalization plan would cost around $210 billion, according to an estimate by New York-based consulting firm S&P Global. Labor has said it would issue treasury bonds to finance nationalizations. Thames Water, the U.K.’s largest water company, added a clause to its bond to make sure holders are repaid immediately should it be nationalized.

U.K. Labor leader Jeremy Corbyn in May. PHOTO: BEN BIRCHALL/PA IMAGES/GETTY IMAGES

In France, President Emmanuel Macron reacted to weeks of violent street protests by abolishing plans to increase fuel prices and announcing measures to boost the incomes of low earners. The estimated cost of the spending is more than €10 billion ($11 billion). In a symbolic concession to the antiestablishment yellow-vest movement, Mr. Macron declared he would shut down the university École Nationale d’Administration, his own alma mater, because it instigated elitism.

Mr. Macron reversed a decision to eliminate 200,000 civil-service jobs and announced a tax increase for companies that overly rely on short-term contracts, which his government blames for creating an underclass of workers. In addition, monthly pensions of less than €2,000 have been pegged to the rate of inflation.

He also embraced the idea of holding referendums on certain policy issues, a key demand of populist leaders. The first major referendum will decide whether the sale of the state’s majority stake in the company that runs Paris’s airports should go ahead as planned.

French President Emmanuel Macron in May. PHOTO: PIROSCHKA VAN DE WOUW/REUTERS

Denmark’s Social Democrats, who had been out of government since 2015, won a general election on June 5 following a policy makeover that included going further left on economic policy, while sharply turning right on immigration. They pledged to increase public spending and taxes for companies and the wealthy, and to enable early retirement by rolling back some recent pension changes. Their far-right rivals the People’s Party suffered a major loss in the election.

The reaction from European economists is decidedly mixed.

Some have greeted the shift as a welcome correction to years of pro-business and free-trade policies they think have dug deep rifts in Western societies.

“The lesson from Germany is: Strong growth and a generous social welfare system alone are insufficient to satisfy voters. Globalization and technological change are putting pressure on many people,” said Marcel Fratzscher, head of the German Institute for Economic Research, a Berlin-based think tank. “Europe’s social welfare state needs a fundamental overhaul as it has to focus on empowering people and on stopping the market abuse of firms and lobby groups.”

Others are concerned Europe is deviating from proven economic recipes just as growth is wobbling, or that the policies are outdated.

“We are indeed seeing a kind of return to the pre-Thatcherite approach, but it is doubtful that policies from the era of closed markets and capital controls could work in a globalized world. A vision of the past can’t be implemented in the present,” said Branko Milanovic, a New York-based Serbian-American economist who studies income distribution and inequality.

In Germany, despite a decade of robust economic growth and near full employment, almost four million working people receive welfare benefits to supplement their income. Around one-quarter of all employees work in the low-wage sector, according to government statistics and research by Mr. Fratzscher’s group.

Low Wages Increased competition put downward pressure on wages, while shrinking unemployment benefits increased incentives for Germans to take lower paying jobs. Share of German workers who are low paid*Source: German Institute for Economic Research*Those who make less than two-thirds of the country’s median earnings
%1996’982000’02’04’06’08’10’12’14’1614161820222426

Subsidies to Germany’s mandatory pay-as-you-go pension scheme almost reached the €100 billion mark for the first time in 2018. Earlier this year, Ms. Merkel’s government adopted a new industrial strategy that centers on protecting German companies from foreign competition, including by enabling the government to buy stakes in businesses to shield them from foreign acquisition.

Peter Altmaier, economics minister and author of the industry strategy, said it was designed in part to address the anxieties of Germans who have been drawn to far-left and far-right parties in recent years.

Germany’s SPD, the junior partner in Germany’s government coalition, is now debating whether large real-estate investors should be expropriated as a way to stabilize rents. In Berlin, where they preside over the local government, the SPD announced a freeze on rent prices. The head of its youth wing recently called for car maker BMW to be nationalized, earning grass-roots plaudits and some support from SPD ministers and mayors.

The SPD scored its worst result ever at last month’s European Union election. Polling around 12% to 14%, it is a shadow of its 1998 self, when it gathered 41% of the vote.

German Chancellor Angela Merkel on June 17. PHOTO: TOBIAS SCHWARZ/AGENCE FRANCE-PRESSE/GETTY IMAGES

The environment-focused, center-left Greens more than doubled their votes between the country’s last general election in September 2017 and the EU election. It is now polling at around 26%. At least two polls since early June showed the Greens had become Germany’s most popular party for the first time since its creation in the 1980s—ahead of Ms. Merkel’s Christian Democratic Union.

Twenty years ago, the German Greens co-wrote with the SPD the country’s last big tax cuts and a deeply unpopular overhaul of labor-market legislation. Today, the party is toying with an unconditional universal income and seizing real estate from commercial landlords as a way to stop rent increases.

The far-right Alternative for Germany, known as AfD, lost ground in last month’s EU election, and is now polling around 13%.

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The AfD has campaigned on immigration in recent elections. Party leaders recently consulted with Steven K. Bannon, President Trump’s former chief strategist and now an adviser to nationalist and populist parties in Europe. In a meeting in Berlin on May 13, he advised the leaders to tone down their anti-Islam fervor, purge radical members, and refocus their message from identity politics to economics.

“The real message is the economy,” Mr. Bannon said in an interview. “Populists need to talk to the workers.”

Jörg Meuthen, the AfD co-chair who met Mr. Bannon, said he agreed, but questioned the timing of the message. He said Germany’s economy—with record low unemployment and slowing but still positive growth—remained too healthy for an immediate policy shift.

When the recession kicks in and people start worrying about their jobs, then we can roll out economic campaigns and show our competence. Populists must look at what is affecting people emotionally, and at the moment that is migration and the climate,” Mr. Meuthen said.

Globalization BacklashProtest parties focused on denouncing the economic, cultural and security impact of globalization have drawn more attention across Europe.Populist party poll performance in selected countries Source: NomuraNote: Weighted averages of national polls.
%GermanyFranceSpainU.K.2015’16’17’18’19051015202530

In Spain, Pedro Sanchez, acting premier and leader of the Socialist Party, won the national and the EU elections this year after sharply raising the minimum wage and announcing a boost in social benefits and corporate taxes.

Mr. Sanchez’s bet on wooing working-class voters lost to protest parties paid off, said Daniel Diaz Fuentes, professor of economics at the Spanish university of Cantabria. Mr. Fuentes said that the rise of populism could trigger a re-nationalization wave.

“I think that the state will become a much more active entrepreneurial actor via venture capital and involvement in investment via the banking system,” Mr. Fuentes said.

Two TrajectoriesThe income of low earners has decreased since 1980, while that of top earners has grown.Income shares of the top 10% in European regions*
%NorthernWesternSouthernEastern1980’902000’102022242628303234
Income shares of the bottom 50% in European regions*Source: Thomas Blanchet, Lucas Chancel and Amory Gethin, World Inequality Database*Population-weighted country averages
%NorthernWesternSouthernEastern1980’902000’102022242628303234

Wolfgang Schmidt, deputy German finance minister and one of the strategists behind the SPD’s new approach, said the success of socialists in Spain, Britain and Denmark, in elections and opinion polls, shows that voters have turned against economic orthodoxy.

“As a society, we need to stop looking down on people. Anxiety about the future of work is driving voters to populists. People read about automation and self-driving cars and they ask themselves what will happen to their jobs in the near future,” he said.

Many European politicians and economists say the swing away from markets and back to the state misses the point of many voters’ anxiety, which is rooted in politics or culture. An annual poll about the fears of Germans conducted by the R+V Versicherung AG insurance group found that nine of respondents’ top 10 fears focused on politics, security and health. Economic concerns dominated between 2004 and 2015.

Paul Ziemiak, the second most senior official in Ms. Merkel’s conservative party, opposes what he says is an SPD-driven spending spree. “These policies have never made any country successful. Countries that have [tried them] have ultimately failed—politically, but also economically,” he said.

Protectionism would destroy a German economy built on exports and cross-border supply chains, said Clemens Fuest, an economist and adviser to the German government. Ambitious redistribution programs such as pension increases, early retirement or a universal income would collapse as soon as tax revenues fall in the slowdown. Companies were privatized 30 years ago because the state is generally bad at managing businesses, he said.

“Established parties are taking over the populists’ agenda to show voters that they have heard their message,” Mr. Fuest said. “But they are making big promises that cannot be kept.”

Where in the world is it easiest to get rich? | Harald Eia | TEDxOslo

In which society is it easiest to get rich? Contrary to common belief, it is not countries like the US or the UK that create the highest number of rich people per capita, but Nordic social democracies like Norway and Sweden. Counter intuitive as it may sound, high taxes, generous welfare states and strong unions makes a better environment for the people who wants to earn huge amounts of money, than free markets, low taxes, and minimal government intervention.

Harald Eia is a trained sociologist who works in television with comedy and documentaries.

Yes, Venezuela Is a Socialist Catastrophe

In the age of A.O.C., the lesson must be learned again.

Conspicuous by its absence in much of the mainstream news coverage of Venezuela’s political crisis is the word “socialism.” Yes, every sensible observer agrees that Latin America’s once-richest country, sitting atop the world’s largest proven oil reserves, is an economic basket case, a humanitarian disaster, and a dictatorship whose demise cannot come soon enough.

But … socialist? Perish the thought.

Or so goes a line of argument that insists socialism’s good name shouldn’t be tarred by the results of experience. On Venezuela, what you’re likelier to read is that the crisis is the product of corruption, cronyism, populism, authoritarianism, resource-dependency, U.S. sanctions and trickery, even the residues of capitalism itself. Just don’t mention the S-word because, you know, it’s working really well in Denmark.

Curiously, that’s not how the Venezuelan regime’s admirers used to speak of “21st century socialism,” as it was dubbed by Hugo Chávez. The late Venezuelan president, said Britain’s Jeremy Corbyn, “showed us there is a different and a better way of doing things. It’s called socialism, it’s called social justice, and it’s something that Venezuela has made a big step toward.” Noam Chomsky was similarly enthusiastic when he praised Chávez in 2009. “What’s so exciting about at last visiting Venezuela,” the linguist said, is that “I can see how a better world is being created and can speak to the person who’s inspired it.”

,” as it was dubbed by Hugo Chávez. The late Venezuelan president, said Britain’s Jeremy Corbyn, “showed us there is a different and a better way of doing things. It’s called socialism, it’s called social justice, and it’s something that Venezuela has made a big step toward.” Noam Chomsky was similarly enthusiastic when he praised Chávez in 2009. “What’s so exciting about at last visiting Venezuela,” the linguist said, is that “I can see how a better world is being created and can speak to the person who’s inspired it.”

.. Chomsky walked back some of his praise as Venezuela became more overtly dictatorial, but others on the left weren’t as squeamish. In a lengthy obituary in The Nation, New York University professor Greg Grandin opined, “the biggest problem Venezuela faced during his rule was not that Chávez was authoritarian but that he wasn’t authoritarian enough.”

At least Grandin could implicitly concede that socialism ultimately requires coercion to achieve its political aims; otherwise, it’s human nature for people to find loopholes and workarounds to keep as much of their property as they can.

That’s more than can be said for some of Chávez’s erstwhile defenders, who would prefer to forget just how closely Venezuela followed the orthodox socialist script.

  • Government spending on social programs? Check: From 2000 to 2013, spending rose to 40 percent of G.D.P., from 28 percent.
  • Raising the minimum wage? Check. Nicolás Maduro, the current president, raised it no fewer than six times last year (though it makes no difference in the face of hyperinflation).
  • An economy based on co-ops, not corporations? Check again. As Naomi Klein wrote in her fawning 2007 book, “The Shock Doctrine,” “Chávez has made the co-ops a top political priority … By 2006, there were roughly 100,000 cooperatives in the country, employing more than 700,000 workers.”

And, lest we forget, all of this was done as Chávez won one election after another during the oil-boom years. Indeed, one of the chief selling points of Chavismo to its Western fans wasn’t just that it was an example of socialism, but of democratic socialism, too.

Government overspending created catastrophic deficits when oil prices plummeted. Worker co-ops wound up in the hands of incompetent and corrupt political cronies. The government responded to its budgetary problems by printing money, leading to inflation. Inflation led to price controls, leading to shortages. Shortages led to protests, leading to repression and the destruction of democracy. Thence to widespread starvationcritical medical shortages, an explosion in crime, and a refugee crisis to rival Syria’s.

.. All of this used to be obvious enough, but in the age of Alexandria Ocasio-Cortez it has to be explained all over again. Why does socialism never work? Because, as Margaret Thatcher explained, “eventually you run out of other people’s money.

.. Surely there’s a compound in Havana where that gang can live out their days without tyrannizing a nation.

The Case for the Wage Subsidy

Americans across the political spectrum should focus on how best to spend government money already slated to go out the door.

.. The controversial subsidies that New York and Washington offered Amazon to attract its “HQ2” are not some novel approach to economic development. Last year, Wisconsin offered a larger package of incentives to entice electronics supplier Foxconn, assembler of iPhones, to build a $10 billion manufacturing facility in Wisconsin. Annual payroll for 13,000 workers would exceed $700 million, and Wisconsin expected the plant to generate annual state and local tax revenue of $181 million and lead to the creation of 20,000 additional jobs. Critics panned the deal as corporate welfare, to which Governor Scott Walker fired back, “That’s fine, but I think they can go suck lemons.”

.. The value of the subsidy would be set relative to a “target wage” of, say, $15 per hour and would close half the gap between the market wage and the target. A worker would initially receive a subsidy of $3 per hour in this case, equal to approximately $6,000 per year if he worked full-time.
.. This differs from most programs that transfer resources to lower-income households, including the EITC, which phase out as the household’s total income rises; for every additional dollar earned by the household, the worker loses some of the benefits he was receiving. With the direct wage subsidy, the worker receives the same subsidy for every hour worked at a given wage, no matter how much total income he earns. He can take a second job and earn the subsidy for each of those hours. His wife can take a job and earn her own subsidy, too. The value of the subsidy declines only as workers become more productive, earning promotions and raises.
.. First, the wage subsidy is the appropriate mechanism for redistributing gains from the economy’s “winners” to its “losers.” It comes closest to doing this directly, by taking tax revenue drawn from higher earners and inserting it directly into the paychecks of lower earners.
.. Second, the wage subsidy offsets subsidies given to foreign producers and moves the cost to employers for domestic workers closer to parity with what firms pay foreign workers living in sharply different social and economic contexts. The benefit is largest for industries where the work is most labor-intensive and relies on the lowest-cost labor — in other words, the industries under greatest pressure from globalization. But it does this through a neutral structure
..  A community lacking the ability to export (even to the rest of the nation) must rely on government transfer payments to fund the resources it requires from the outside world — the community is literally exporting need. The existing American safety net conditions those transfers on very low incomes — often, no work at all — and channels them primarily toward consumption of health-care services. With a wage subsidy, work, rather than unemployment, draws government support, and that support can flow to a fuller range of productive activities in the community. In this model, a services economy can still thrive disconnected from a tradeable sector — not an ideal arrangement but one far better than today’s.

This invites the question, Isn’t the wage subsidy just another form of redistribution, like all the safety-net programs we already have? Yes and no. Yes, it is redistribution. And yes, high-income taxpayers will finance it. But unlike with government assistance disconnected from work, the value of a productive job through which someone supports her family and contributes to her community is not diluted if it yields a paycheck into which the government has put in more than it takes out. Certainly a society of thriving and perfectly self-sufficient families would be preferable. But America is nowhere near such a reality today, and for some people, it may never happen. If we can at least make redistribution a tool for creating jobs and promoting work, we will be moving the labor market in the right direction and delivering better outcomes for those who need support.

.. They might accept a subsidy as a replacement for existing safety-net programs, but if cutting safety-net spending is on the table, many would prefer to spend that savings on a growth-generating tax cut.
.. What really infuriates Democrats, meanwhile, is the possibility that employers might benefit. Factually speaking, they have a point. If the government offers a $3 subsidy atop a $9-per-hour job, the result will not necessarily be a $12-per-hour job. The employer might instead cut the market wage to $8, to which the government would add $3.50 — half the $7 gap to the target wage of $15 — leaving the worker with $11.50. Both worker and employer are better off than without the subsidy, but the entire benefit is not the worker’s.
.. roughly 75 percent of the financial benefit accrued to workers. In general, employers have to benefit at least somewhat. A central premise of the wage subsidy is to pull more prospective workers into the labor force. Other things held equal, if the supply of workers increases, then employers will be able to offer lower wages — even as, thanks to the subsidy, workers take home more... Remember, the wage subsidy’s goal is not only, or even primarily, to transfer resources into the pockets of low-income households. It is also to connect more workers with employers in permanent jobs. The task requires employers to do the hard work of hiring and training certain employees whom they otherwise would not, and this benefits society greatly.

A central premise of the wage subsidy is to reward employers sufficiently so that they choose to do more. By contrast, just wishing that firms would create more and better jobs when they have no economic incentive to do so is futile; it has zero bearing on what will happen in the actual labor market.

.. Note that this need to create incentives for the employer is no different from what happens in any other effort at assisting low-income households in a market economy. When people use food stamps at the supermarket, the supermarket benefits. When they use housing vouchers to pay the rent, the landlord benefits. Unless the government wishes to produce everything itself, or order market participants to take actions against their own interests, efforts to deliver results that the market will not deliver for low-income households always benefit the businesses that choose to participate in the transactions. Otherwise, they wouldn’t participate!

.. It is a strange consequence of our commitment to individuals as consumers that we unthinkingly pay hundreds of billions of dollars each year to hospitals and universities to provide treatment and education to customers whom they otherwise would turn away but that we shrink from the idea that society might pay anything to an employer to hire someone he otherwise would not.

.. Just as the Republican party’s relative disinterest in the labor market is made apparent by its preference for a tax cut over a wage subsidy, a good distillation of the Democrats’ core attitude toward the labor market emerges from comparing a wage subsidy to their preferred approach: the minimum wage. Raising the minimum wage is the quintessential left-of-center labor-market policy. Unsatisfied with the market outcome, Democrats suggest decreeing a different one. The outcome it professes to deliver is widely desired. It seems “free.” And then it damages, rather than strengthens, the labor market.

.. The minimum wage and the wage subsidy both aim to raise the earnings of low-wage workers, but whereas the wage subsidy asks taxpayers to make up the difference, the minimum wage asks employers to

.. The wage subsidy injects funds from outside the labor market to boost the formation of employment relationships and encourage greater investment in labor-intensive businesses. The minimum wage does the opposite, operating as a tax on low-wage employment that employers have to pay for every low-wage hour they use.

.. The roughly $200 billion price tag for a wage subsidy might require some new tax revenue, but its funding could come largely from the existing safety net, which already dedicates more than $1 trillion annually to low-income households

 

Another year of American hilarity

Washington’s subway banned a civil liberties group’s ad consisting entirely of the text of the First Amendment, which ostensibly violated the rule against ads “intended to influence members of the public regarding an issue on which there are varying opinions.”

.. United Airlines said: Assault? Don’t be misled by your eyes. That passenger dragged off the plane was just being “re-accommodated.”

.. The councilwoman who made the motion for protecting illegal immigrants said: “Our city depends on a Hispanic population to support our comfortable lifestyle.”

.. In more-progressive-than-thou Oregon, where you can get state-subsidized gender reassignment surgery at age 15 without parental permission, the legislature made 21 the age at which adults can buy cigarettes.

.. Although San Francisco’s hourly minimum wage has not yet reached its destination of $15, the city is surprised that so many small businesses have closed. McDonald’s probably was not surprised when its shares surged after it announced plans to replace cashiers with digital ordering kiosks in 2,500 restaurants.

Study: Blacks’ Median Wealth Will Be Zero in 2053

That racial stereotyping hides the real cause and scale of economic damage to blue-collar and white-collar Americans families amid the rising wealth of the technocratic globalized elite which dominates the Democratic Party and at least half of the GOP.

.. That government failure is exemplified by the housing bubble, which destroyed a huge percentage of wealth held by black Americans.

2011 report by the Pew Research Center showed that the median wealth of black American households dropped by 53 percent because of the property bubble. The mid-point median of black American wealth crashed from $12,124 in 2005 to just $5,677 in 2009, according to the Pew report.

.. White Americans suffered far less from the bubble because many had already paid off their mortgages, because their debts were a small percentage of their income, and because whites had more assets in the stock market and other sectors outside the housing market. Still, the median wealth of white households also dropped by a huge 16 percent, from $134,992 in 2005 to $113,149 in 2009.

.. Meanwhile, wages for all men have remained flat for the past 44 years since 1973, according to the Census Bureau.

.. when Obama settled into the White House during the housing implosion, his economic policies helped very clever people invest their way back up to more wealth. The New York Post described the process:

The years 2008 through 2015 should be known as the Great Fleecing.

During that time, the greatest transfer of wealth in the history of the world occurred. Some $4.5 trillion was given to Wall Street banks through its Quantitative Easing program, with the American people picking up the IOU … Who did this help? The 1%, and pretty much only the 1%.

.. The report does not discuss how technology is concentrating wealth among higher-skilled people, and it omits any talk of globalized outsourcing. It also avoids family stability and it ignores the topic of immigration, which has flooded the nation’s marketplace with cheap labor that effectively imposes a 5 percent tax on labor — and then transfers $500 billion a year to company owners and investors.

.. the report then lists a series of unrealistic demands, including a massive tax increase on the wealthy, a massive financial grant to children that could be spent when they become adults, more house-buying aid for poor people, a higher minimum wage, and “a federal jobs guarantee [that] would function similarly to the Works Progress Administration of the 1930s.”

.. But many people of all colors who cannot get through college are falling behind because technology, work, and business are becoming more complex. This increasing complexity ensures that an increasing share of income and wealth goes to people who are smart enough to arbitrage the increasing social and technological diversity, regardless of color.

 .. the Democratic elite prefers to import foreign voters rather than accept the equal social status of all blue-collar Americans.
.. four million Americans turn 18 each year and begin looking for good jobs. However, the government imports roughly 1 million legal immigrants to compete against Americans for jobs.
.. That Washington-imposed policy of mass-immigration floods the market with foreign laborspikes profits and Wall Street values by cutting salaries for manual and skilled labor offered by blue-collar and white-collar employees. It also drives up real estate priceswidens wealth-gaps, reduces high-tech investment, increases state and local tax burdens, hurts kids’ schools and college education, pushes Americans away from high-tech careers, and sidelines at least 5 million marginalized Americans and their families, including many who are now struggling with opioid addictions.