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

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

Why Was Trumponomics a Flop?

Neither tax cuts nor tariffs are working.

Donald Trump has pursued two main economic policies. On taxes, he has been an orthodox Republican, pushing through big tax cuts for corporations and the wealthy, which his administration promised would lead to a huge surge in business investment. On trade, he has broken with his party’s free(ish) trade policies, imposing large tariffs that he promised would lead to a revival of U.S. manufacturing.

On Wednesday, the Federal Reserve cut interest rates, even though the unemployment rate is low and overall economic growth remains decent, though not great. According to Jay Powell, the Fed’s chairman, the goal was to take out some insurance against worrying hints of a future slowdown — in particular, weakness in business investment, which fell in the most recent quarter, and manufacturing, which has been declining since the beginning of the year.

Obviously Powell couldn’t say in so many words that Trumponomics has been a big flop, but that was the subtext of his remarks. And Trump’s frantic efforts to bully the Fed into bigger cuts are an implicit admission of the same thing.

To be fair, the economy remains pretty strong, which isn’t really a surprise given the G.O.P.’s willingness to run huge budget deficits as long as Democrats don’t hold the White House. As I wrote three days after the 2016 election — after the shock had worn off — “It’s at least possible that bigger budget deficits will, if anything, strengthen the economy briefly.” And that’s pretty much what happened: There was a bit of a bump in 2018, but at this point we’ve basically returned to pre-Trump rates of growth.

Republican faith in the magic of tax cuts — and, correspondingly, belief that tax increases will doom the economy — is the ultimate policy zombie, a view that should have been killed by evidence decades ago but keeps shambling along, eating G.O.P. brains.

The record is actually awesomely consistent.

  • Bill Clinton’s tax hike didn’t cause a depression,
  • George W. Bush’s tax cuts didn’t deliver a boom,
  • Jerry Brown’s California tax increase wasn’t “economic suicide,”
  • Sam Brownback’s Kansas tax-cut “experiment” (his term) was a failure.

Nevertheless, Republicans persist. This time around, the centerpiece of the tax cut was a huge break for corporations, which was supposed to induce companies to bring back the money they’ve invested overseas and put the money to work here. Instead, they basically used the tax savings to buy back their own stock.

What went wrong? Business investment depends on many factors, with tax rates way down the list. While a casual look at the facts might suggest that corporations invest a lot in countries with low taxes, like Ireland, this is mainly an illusion: Companies use accounting tricks to report huge profits and hence big investments in tax havens, but these don’t correspond to anything real.

What about the trade war? The evidence is overwhelming: Tariffs don’t have much effect on the overall trade balance. At most they just shift the deficit around: We’re importing less from China, but we’re importing more from other places, like Vietnam.

And there’s a good case to be made that Trump’s tariffs have actually hurt U.S. manufacturing. For one thing, many of them have hit “intermediate goods,” that is, stuff American companies use in their production processes, so the tariffs have raised costs.

Beyond that, the uncertainty created by Trump’s policy by whim — nobody knows what he’ll hit next — has surely deterred investment. Why build a manufacturing plant when, for all you know, next week a tweet will destroy your market, your supply chain, or both?

Now, none of this has led to economic catastrophe. As Adam Smith once wrote, “There is a great deal of ruin in a nation.” Except in times of crisis, presidents matter much less for the economy than most people think, and while Trumponomics has utterly failed to deliver on its promises, it’s not bad enough to do enormous damage.

On the other hand, think of the missed opportunities. Imagine how much better shape we’d be in if the hundreds of billions squandered on tax cuts for corporations had been used to rebuild our crumbling infrastructure. Imagine what we could have done with policies promoting jobs of the future in things like renewable energy, instead of trade wars that vainly attempt to recreate the manufacturing economy of the past.

And since everything is political these days, let me say that pundits who think that Trump will be able to win by touting a strong economy are almost surely wrong. He most likely won’t face a recession (although who knows?), but he definitely hasn’t made the economy great again.

So he’s probably going to have to do what he’s already doing, and clearly wants to do: run on racism instead.

The ‘Rotten Equilibrium’ of Republican Politics

the 20 most prosperous districts are now held by Democrats, while Republicans represent 16 of the 20 least prosperous, measured by share of G.D.P. The accompanying chart illustrates their analysis.

.. The authors’ calculation of the contribution to the G.D.P. of every congressional district showed that Democratic districts produce $10.2 trillion of the nation’s goods and services and Republican districts $6.2 trillion.

This trend creates a significant dilemma for Trump and the Republican Party. Candidates on the right do best during hard times and in recent elections, they have gained the most politically in regions experiencing the sharpest downturn. Electorally speaking, in other words, Republicans profit from economic stagnation and decline.

Let’s return to John Austin of the Michigan Economic Center. In an email he describes this unusual situation succinctly: “A rising economic tide tends to sink the Trump tugboat,” adding

“Certainly more people and communities that are feeling abandoned, not part of a vibrant economy means more fertile ground for the resentment politics and ‘blaming others’ for people’s woes (like immigrants and people of color) that fuel Trump’s supporters.”

The small- and medium-sized factory towns that dot the highways and byways of Michigan, Indiana, Ohio and Wisconsin have lost their anchor employers and are struggling to fill the void. Many of these communities, including once solidly Democratic-voting, union-heavy, blue collar strongholds, flipped to Trump in 2016.

This pattern is not limited to the United States. There are numerous studies demonstrating that European and British voters who are falling behind in the global economy, and who were hurt by the 2008 recession and the subsequent cuts to the welfare state, drove Brexit as well as the rise of right-wing populist parties.

..In a July 2018 paper, “Did Austerity Cause Brexit?” Thiemo Fetzer, an economist at the University of Warwick in Coventry, England, argues that austerity policies adopted in the wake of the 2008 financial collapse were crucial both to voter support for the right-wing populist party UKIP in Britain and to voter approval of Brexit.

the EU referendum (Brexit) could have resulted in a Remain victory had it not been for a range of austerity-induced welfare reforms. These reforms activated existing economic grievances. Further, auxiliary results suggest that the underlying economic grievances have broader origins than what the current literature on Brexit suggests. Up until 2010, the UK’s welfare state evened out growing income differences across the skill divide through transfer payments. This pattern markedly stops from 2010 onward as austerity started to bite

.. The results here and in England reinforce the conclusion that the worse things get, the better the right does.

As a rule, as economic conditions improve and voters begin to feel more secure, they become more generous and more liberal. In the United States, this means that voters move to the left; in Britain, it means voters are stronger in their support for staying in the European Union.

Was the Rise of Neoliberalism the Root Cause of Extreme Inequality?

So pervasive has neoliberalism become that we seldom even recognise it as an ideology. We appear to accept the proposition that this utopian, millenarian faith describes a neutral force; a kind of biological law, like Darwin’s theory of evolution. But the philosophy arose as a conscious attempt to reshape human life and shift the locus of power.

 .. Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning.
.. The term neoliberalism was coined at a meeting in Paris in 1938. Among the delegates were two men who came to define the ideology, Ludwig von Mises and Friedrich Hayek.
..  The movement’s rich backers funded a series of think tanks which would refine and promote the ideology. Among them were the American Enterprise Institute,the Heritage Foundation, the Cato Institute, the Institute of Economic Affairs,the Centre for Policy Studies and the Adam Smith Institute. They also financed academic positions and departments, particularly at the universities of Chicago and Virginia.
.. But in the 1970s, when Keynesian policies began to fall apart and economic crises struck on both sides of the Atlantic, neoliberal ideas began to enter the mainstream.
.. But in the 1970s, when Keynesian policies began to fall apart and economic crises struck on both sides of the Atlantic, neoliberal ideas began to enter the mainstream.
.. But, as Hayek remarked on a visit to Pinochet’s Chile – one of the first nations in which the programme was comprehensively applied – “my personal preference leans toward a liberal dictatorship rather than toward a democratic government devoid of liberalism”.
.. The doctrine that Von Mises proposed would free us from the bureaucratic nightmare of central planning has instead created one.
Neoliberalism was not conceived as a self-serving racket, but it rapidly became one.
.. The totalitarianism Hayek feared is more likely to emerge when governments, having lost the moral authority that arises from the delivery of public services, are reduced to “cajoling, threatening and ultimately coercing people to obey them”.
..  We find that the Institute of Economic Affairs, which has argued forcefully in the media against the further regulation of the tobacco industry, has been secretly funded by British American Tobacco since 1963.
.. tend to reject the term, maintaining – with some justice – that it is used today only pejoratively. But they offer us no substitute.
.. Some describe themselves as classical liberals or libertarians, but these descriptions are both misleading and curiously self-effacing, as they suggest that there is nothing novel about The Road to Serfdom, Bureaucracyor Friedman’s classic work, Capitalism and Freedom.
.. When Keynesian demand management hit the buffers in the 70s, there was an alternative ready. But when neoliberalism fell apart in 2008 there was … nothing. This is why the zombie walks.  The left and centre have produced no new general framework of economic thought for 80 years.
.. most importantly, they have nothing to say about our gravest predicament: the environmental crisis. Keynesianism works by stimulating consumer demand to promote economic growth. Consumer demand and economic growth are the motors of environmental destruction.

Zombies of 2016

Start with Mr. Christie, who thought he was being smart and brave by proposing that we raise the age of eligibility for both Social Security and Medicare to 69. Doesn’t this make sense now that Americans are living longer?