Walmart avoids $1 billion a year in taxes through federal loopholes. The losers are the working-class consumers who think they’re getting a good deal by elbowing through the mob surrounding the Xbox floor display. An even more convenient source of “savings” for Walmart operates on the retail level, through the pockets of consumers and workers who rely on taxpayer-funded federal welfare programs.
Many believe that the American economy has some inherent advantages over its major competitors — a more flexible structure, stronger entrepreneurial traditions and a more demographically vibrant society. Along comes a fascinating new book that says you ain’t seen nothing yet. Peter Zeihan’s “The Accidental Superpower” begins with geography, pointing out that the United States is the world’s largest consumer market for a reason: its rivers.
A study published in The Lancet sheds light on a little-discussed issue affecting U.S. military veterans – a lack of health insurance coverage. Using numbers from the Census Bureau’s American Community Survey, the authors determined that more than 1.2 million veterans lacked health insurance in 2012, in line with previous studies that came to similar conclusions.
When people think of the world’s “population problem,” they often focus on rapid demographic growth in parts of the developing world. But, globally, the population-growth rate is actually falling, and population is expected to plateau later this century. Though we cannot afford to ignore the fact that, according to United Nations estimates, there will be 2.4 billion more mouths to feed worldwide by mid-century, another population problem also merits serious attention: large pockets of demographic decline.
Bill Clinton’s economic worldview spells trouble, both for a party that’s still reeling from defeat and for a nation where millions of people struggle just to make ends meet. Hillary Clinton, the heavily-favored contender for the Democratic nomination, has made Bill’s presidency and her role in it an essential part of her resume. But “Clintonism,” the Wall Street-friendly economic ideology of a bygone era, has passed its sell-by date. The former president’s latest remarks confirm that. If Hillary Clinton disagrees with the former president’s views, she hasn’t said so. When Bill Clinton speaks on economic issues, he reveals a deep wellspring of neoliberal belief and a profound detachment from the lived experience of most Americans. It’s true that, for the extremely wealthy, the “trend lines” are positive indeed. For the rest of the nation, not so much.
A big-money war is brewing over the meaning of America’s best-selling condiment: mayonnaise. Food giant Unilever has sued the San Francisco start-up behind Just Mayo, an egg-less, mayonnaise-like sandwich spread. Brand disputes typically quibble over words, not the definition of the product itself. But the very modern legal battle will be fought on regulatory territory that is decades old. The FDA’s definition of mayo was set in 1957.
Fleischmann is the central witness in one of the biggest cases of white-collar crime in American history, possessing secrets that JPMorgan Chase CEO Jamie Dimon late last year paid $9 billion (not $13 billion as regularly reported) to keep the public from hearing. Back in 2006, as a deal manager at the gigantic bank, Fleischmann first witnessed, then tried to stop, what she describes as “massive criminal securities fraud” in the bank’s mortgage operations. This past year she watched as Holder’s Justice Department struck a series of historic settlement deals with Chase, Citigroup and Bank of America. The root bargain in these deals was cash for secrecy. “I could be sued into bankruptcy,” she says. “I could lose my license to practice law. I could lose everything. But if we don’t start speaking up, then this really is all we’re going to get: the biggest financial cover-up in history.”
We are witnessing profound changes in the way that the world economy works. As a result of the growing pace and intensity of globalization and digitization, more and more economic processes have an international dimension. As a consequence, an increasing number of businesses are adapting their structures to domestic and foreign legal systems and taxation laws. Tax legislation has not kept pace with these developments. The resulting tensions between national fiscal sovereignty and the borderless scope of today’s business activities can be resolved only through international dialogue and uniform global standards.
Federal regulators and members of Congress have been pressing private lenders to adopt flexible payment plans like those available through the federal loan system to no avail, according to an alarming report released last month by the student loan ombudsman at the Consumer Financial Protection Bureau. Congress may have to step in and require them to do so.
To prevent dangerous deflation, the ECB is discussing a massive program to purchase government bonds. Monetary watchdogs are divided over the measure, with some alleging that central bankers are being held hostage by politicians. Is it important that the ECB adhere to tried-and-true principles in the crisis, as Weidmann argues? Or can it resort to unusual measures in an emergency situation, as Draghi is demanding?
The phrase “Silk Road” evokes a romantic image – half history, half myth – of tented camel caravans winding their way across the trackless deserts and mountains of Central Asia. But the Silk Road is not just part of a fabled past; it is an important feature of China’s current foreign policy.
It’s unrealistic to expect individuals to inquire, broker by broker, about their files. Instead, we need to require brokers to make targeted disclosures to consumers. Uncovering problems in Big Data (or decision models based on that data) should not be a burden we expect individuals to solve on their own.
The creditor-debtor relationship embodies no iron law of morality; rather, it is a social relationship that always must be negotiated. When quantitative precision and an unyielding approach to debt obligations are the rule, conflict and penury soon follow. We need to limit the supply of and demand for credit to what the economy is capable of producing.
The International Monetary Fund has once again downgraded its assessment of the world economy through 2015. This year, the IMF expects global growth to clock in at 3.3 percent — 0.4 percentage points lower than the organization predicted just six months ago. It’s been six years since the darkest days of the global financial crisis, but economies across the world have yet to escape its shadow. Here are five of the most important charts in the IMF’s forecast that help explain why this recovery continues to disappoint.
In August 2007, then–presidential candidate Barack Obama vowed that, if elected, he would “immediately” amend NAFTA. Six years later, with NAFTA still untouched, Obama faced the decision to appoint the chief U.S. negotiators for the two largest trade agreements in history. And he picked Wall Street bankers for the job. While labor organizations worry about losing leverage, the financial industry seems poised to entrench its influence.
Governments worldwide increasingly share the sentiment: perhaps, like the pinched middle classes, they feel that corporations are taking too much of the profits for themselves. And so, at a June 2012 summit, G-20 leaders resolved to get multinational corporations to pay more taxes. They asked another international organization, the Organization for Economic Cooperation and Development, to investigate and suggest what might be done.
The Energiewende will go on despite its obvious setbacks. There are countries in Europe that already generate more than half of their electricity from renewable sources, such as Sweden, and others that are getting there, such as Austria, and the continent’s biggest economy is trying hard to catch up. The German government’s determination to experiment, and citizens’ continued willingness to pay for these experiments if they lead to a cleaner future, carry important lessons for the U.S. and other countries where politicians are afraid of the kind of upheavals that Germany has faced.
Saving the planet would be cheap; it might even be free. But will anyone believe the good news? Where is the new optimism about climate change and growth coming from? It has long been clear that a well-thought-out strategy of emissions control, in particular one that puts a price on carbon via either an emissions tax or a cap-and-trade scheme, would cost much less than the usual suspects want you to think. But the economics of climate protection look even better now than they did a few years ago.
It looked like East Asia might be the place where the crumbling global order of the past quarter-century, centered on U.S. power and values, would face a decisive crisis. Instead, it was Vladimir Putin who launched a frontal military assault to stop the spread of Western influence and institutions to Ukraine, and the Islamic State that forced the U.S. retreat from foreign military commitments.
President Barack Obama’s push to raise the minimum wage, which has largely found success in liberal-leaning coastal states to date, could make headway in the conservative heartland in the November elections. Voters in several Republican-controlled states will consider ballot initiatives to raise the minimum wage above the national rate of $7.25 per hour.
It is well known that globalization has put strong downward pressure on wages and benefits of workers in wealthy countries, as companies have offshored and outsourced labor to lower-wage locations and justified wage cuts to try to stay competitive. But politicians and economists have yet to come to terms with the fact that in the rich world the income distribution system itself has broken down irretrievably.
Economic predictions depend on figuring out what generates economic activity. Since the turn of the 20th century, economists have struggled to grasp what drives various parts of the economy, from consumer goods to commodities to housing. Recent research suggests financial markets and economic growth are supported mainly by animal spirits, not rational calculation
Until now the story of human prosperity has been all about cheap, abundant energy. However, something big has been happening. For the first time in history, we are growing richer while using less energy. That is unalloyed good news for budgets, incomes and the planet. We have reached a technological tipping point. Energy-saving is working. Green growth makes sense, and is happening. There is a future that preserves the gains of industrialisation without its polluting losses.
Every piece of garbage can be turned into raw material that can be used in future products. With his influential Cradle to Cradle movement, Germany’s Michael Braungart espouses a form of eco-hedonism that puts smart production before conservation. In Braungart’s universe, every product is basically designed to either decompose without causing any harm or to be recycled without loss of quality. His vision is of a planet on which no garbage accumulates, because all waste becomes food.
Capitalism is expanding like a tumor in the body of American society, spreading further into vital areas of human need like health and education. Not coincidentally, as inequality has surged since the 1980s, the number of administrators at private universities has doubled. Administrators now outnumber faculty on every campus across the country. As with education, the extremes forced upon us by free-market health care are nearly beyond belief.
Important information relating to economics, health and other things can be extracted from big data given the right tools. But exactly how this should be done accurately and reliably is still the subject of significant debate. Government agencies, companies and almost anyone willing to play with the numbers will be able to extract significant value from search query data in future. But considerable care is needed. Many an economic hangover has been caused by over-indulgence in unreliable data.
Bryan Jeffries, the chief of Arizona’s firefighters’ association, has been arguing to anyone who will listen that his members — and the state’s police officers, too — should volunteer to cut their own pension benefits. Cutting pensions for firefighters and police officers would help save their woefully underfunded retirement plan and bail out towns and cities that are struggling to keep up with their mandated contributions, he says.
Financial crises may seem a familiar part of the economic cycle, but they rarely repeat themselves exactly. Now, some worry that the next crisis could occur in the asset-management industry. The industry manages $87 trillion, making it three-quarters the size of banks. In January the Financial Stability Board (FSB) published a consultation paper which asked whether fund managers might need to be designated “systemically important financial institutions” or SIFIs, a step that would involve heavier regulation.
Recent advances in technology have created an increasingly unified global marketplace for labor and capital. Some have argued that the current era of rapid technological progress serves labor, and some have argued that it serves capital. The real winners of the future will not be the providers of cheap labor or the owners of ordinary capital, both of whom will be increasingly squeezed by automation. Fortune will instead favor a third group: those who can innovate and create new products, services, and business models.
Hoping in part to expand U.S. business presence in African markets, the Obama administration is hosting a three-day summit this week attended by nearly 50 African heads of state, the first gathering of its kind. Fueled by the consumption demands of a growing young middle-class, the African private sector is, unevenly yet surely, on the rise. But although the United States is still the leader in foreign direct investment in African economies, China surpassed the United States as Africa’s biggest trading partner in 2009.
A few months ago, the international food manufacturing giant General Mills was branded a “clear laggard” by climate activists for not doing enough to cut its carbon footprint. Today, Oxfam International is claiming big victory: General Mills has released a new set of climate policies that Oxfam says makes it “the first major food and beverage company to promise to implement long-term science-based targets to cut emissions.”
Welcome to the Everything Boom and, quite possibly, the Everything Bubble. Around the world, nearly every asset class is expensive by historical standards. The big question for the global economy is what happens next. In the most pleasant outcome, global economic growth would pick up, causing today’s expensive assets to begin looking more reasonably priced. But other outcomes are also possible, including busts in one or more markets that could create a new wave of economic ripples in a world economy still not fully recovered from the last crisis.
There are two leading views about the world’s financial system. The first, heard mostly from executives at leading global banks and their allies, is that the system is safer than it has ever been. According to this view, the events that led up to the global financial crisis that erupted in 2008 cannot happen again; the reform process has succeeded. By contrast, a growing group of current and former officials continues to express concern about current and potential future risks in the United States, Europe, and globally.
The OECD has a clear message for the world: for the rich countries, the best of capitalism is over. For the poor ones – now experiencing the glitter and haze of industrialisation – it will be over by 2060. If you want higher growth, says the OECD, you must accept higher inequality. And vice versa.
The Obamians seem bewildered that the country is not more thankful to its government for having prevented another Great Depression. They saved the banks, and in doing so, they saved the economy from a once-in-a-hundred-year storm. And they proudly point out that all the money given to the financial sector has been more than repaid. But in making such claims, they ignore some critical realities.
The United States passed a major milestone last month, having now regained all 8.7 million of the jobs lost during the Great Recession. But many American families, businesses, and communities are still living with the legacy of the most severe contraction in decades. Wages have stagnated, poverty has increased, social mobility has decreased, and too much human potential is being left untapped.
We may be witnessing the beginning of the end of the neoliberal capitalist consensus that has prevailed throughout the West since the 1980s – and that many claim led to the economic disaster of 2008-2009. There is growing discontent among economics students with the university curriculum, which they claim has become merely a branch of mathematics, disconnected from reality.
One billion people watched the opening match of the FIFA World Cup in São Paulo, Brazil, and hundreds of millions more will tune in at some point during the month-long tournament. For FIFA’s six major partners and the event’s eight official sponsors, this audience is nothing short of a gold mine. Indeed, they pay tens of millions of dollars in the hope that some of the magic of the “beautiful game” will rub off on their brands. For viewers, that is probably not a good thing. Sponsorship by companies like Budweiser, McDonald’s, Coca-Cola, and the food giant Moy Park brings millions of dollars to the game. But what message does it send to the global audience? Promoting alcohol, sugary drinks, and fast food may mean massive profits for corporations, but it also means worse health for individuals and a costly burden on countries’ health-care systems.
Noncompete clauses are now appearing in far-ranging fields beyond the worlds of technology, sales and corporations with tightly held secrets. From event planners to chefs to investment fund managers to yoga instructors, employees are increasingly required to sign agreements that prohibit them from working for a company’s rivals.
Homeowners can refinance a mortgage at under 4 percent. Car loans are available for under 3 percent. Yet college graduates are paying interest of 7 percent or higher on undergraduate loans, and are unable to refinance. Elizabeth Warren’s goal is passage of a bill that will allow students to refinance their loans at lower rates.
Europe’s financial and macroeconomic woes have overshadowed its remarkable, unheralded longer-term success in an area in which it used to lag: job creation. The truth is that European-style welfare states have proved more resilient, more successful at job creation, than is allowed for in America’s prevailing economic philosophy.
Artificial intelligence is guided by the far-off goal of having software match humans at important tasks. After seeing results from a new field called deep learning, which involves processing large quantities of data using simulated networks of millions of interconnected neurons, some experts have come to believe that this goal isn’t so distant after all.
The underground economy is a shadowy zone where businesses, both legitimate and less so, transact in the currency of opportunity, away from traditional institutions and their watchful eyes. A recent University of Wisconsin report estimates the value of the underground economy in the United States at about $2 trillion, about 15% of the total U.S. GDP.
“Every now and then, the field of economics produces an important book; this is one of them,” writes Tyler Cowen in his Foreign Affairs review of Thomas Piketty’s Capital in the Twenty-first Century. Justin Vogt, deputy managing editor of Foreign Affairs, recently sat down with Piketty to discuss inequality and his controversial policy proposals.
The U.S. Department of Agriculture proposed to increase the speed of kill lines for poultry in slaughterhouses. But with testing from Consumer Reports last year revealing that 97 percent of raw chicken breasts purchased at retailers are contaminated with harmful bacteria, and with poultry workers already suffering from numerous job-related injuries, advocacy groups are vigorously opposed to the idea.
Four major tech companies including Apple and Google have agreed to pay a total of $324 million to settle a lawsuit accusing them of conspiring to hold down salaries in Silicon Valley. The case was based largely on emails in which Silicon Valley rivals hatched plans to avoid poaching each other’s prized engineers.
The American middle class, long the most affluent in the world, has lost that distinction. While the wealthiest Americans are outpacing many of their global peers, a New York Times analysis shows that across the lower- and middle-income tiers, citizens of other advanced countries have received considerably larger raises over the last three decades.
The anti-oligarchy argument claim is that the rich have too much money, which they use to elect politicians who will enact laws that favor their interests. But it seems better to argue about the best policies to improve income distribution efficiently, and to point out which politicians support them. “Yes” to the EITC and pre-school education; “no” to subsidies for oil, agriculture, and mortgage debt.
When researchers at the McKinsey Global Institute recently dug into the details of Mexico’s lagging economic performance, they made a remarkable discovery: an unexpectedly large gap in productivity growth between large and small firms. In view of the huge gulf separating the “two Mexicos” it is no wonder that the economy performed so poorly overall. This is in fact an increasingly common occurrence around the developing world, a bewildering fissure is opening up between economies’ leading and lagging sectors.
Since the financial crisis, central banks have slashed interest rates, purchased vast quantities of sovereign bonds and bailed out banks. Now, though, their influence appears to be on the wane with measures producing paltry results. Do they still have control? Governments must exert tighter control over banks and financial institutions, but monetary policy experts also have a role to play. They shouldn’t just focus on the economy, but also pay attention to the financial cycle.
Slavery, in its various forms of physical and mental torment, has been a part of U.S. history from the beginnings of our country to the present day. There are numerous modern-day corporations who profited immensely from slave labor. The 13th Amendment bans slavery “except as punishment for crime.” The 14th Amendment bans debt servitude. But each inmate in a modern-day private prison, according to Chris Hedges, “can generate corporate revenues of $30,000 to $40,000 a year.”
The big story in Silicon Valley these days is a class-action lawsuit alleging that several major tech companies, including Google and Apple, agreed not to try to hire away one another’s employees – thereby hindering workers from seeking out better-paying jobs. But do-not-hire agreements are not the only way that corporations are taking control of their employees’ intellectual capital. With more corporations demanding that employees pre-assign their intellectual property, there has been a steady decrease in inventor-owned patents. The effects of giving up future control over one’s own skills and products of the mind are significant. In a world in which economic growth depends on innovation, we cannot afford such limitations on creativity.
Hundreds of millions of pounds may have been wasted on a drug for flu that works no better than paracetamol, a landmark analysis has said. The Cochrane Collaboration claimed the drug did not prevent the spread of flu or reduce dangerous complications, and only slightly helped symptoms. The report is the result of a colossal fight for the previously hidden data into the effectiveness and side-effects of Tamiflu.
Food manufacturers are routinely exploiting a “legal loophole” that allows them to use new chemicals in their products, based on their own safety studies, without ever notifying the Food and Drug Administration, according to a new report by an environmental and consumer advocacy group.
Former oil geologist and government adviser on renewable energy, Dr. Jeremy Leggett, identifies five global systemic risks directly connected to energy which together threaten capital markets and hence the global economy in a way that could trigger a global crash sometime between 2015 and 2020.
In the golden, post-war years of Western economic growth, the comfortable living standard of the working class and the economy’s overall stability made the best case for the value of capitalism and the fraudulence of Marx’s critical view of it. But in more recent years many of the forces that Marx said would lead to capitalism’s demise have become real, and troubling, once again.
By 2020 there could be over 30 billion devices connected to the Internet. Once dumb, they will have smartened up thanks to sensors and other technologies embedded in them and, thanks to your machines, your life will quite literally have gone online. Techno-evangelists have a nice catchphrase for this future utopia of machines and the never-ending stream of information, known as Big Data, it produces: the Internet of Things. With the rise of the networked device, what people do in their homes, in their cars, in stores, and within their communities will be monitored and analyzed in ever more intrusive ways by corporations. Yes, imagine it. Welcome to a world where everything you do is collected, stored, analyzed, and, more often than not, packaged and sold to strangers — including government agencies.
Climate change and its regulation pose significant risks and opportunities to investors and corporations. The key regulator that leads federal efforts to provide investors with information about corporate risks and opportunities is the SEC. This report examines the state of such corporate reporting and associated SEC comment letters.
The Snowden leaks have painted a U.S.-centric Internet infrastructure, and now people are looking for alternatives. Digital espionage is hastening the trend to secure networks, to isolate them, or even to disconnect. If the Internet and its components cannot be trusted, how will that affect business?
Factory farming has devastating consequences to animals, human health, and the socio-economic wellbeing of rural America. It’s easy to criticize the current model of industrial agriculture, far harder to outline a viable alternative. A starting point is to recognize bluntly that our industrial food system is unhealthy.
When customers speak, businesses listen. It’s an old adage in business that Oxfam and its supporters tested to see if this would be true on issues of sustainability and human rights. First we asked the 3 biggest chocolate companies, Mars, Mondelez and Nestle to address the inequality and injustices that women cocoa farmers and workers faced in their cocoa supply chains.
To have an 80 percent chance of maintaining this 2 °C limit, the IEA estimates an additional $36 trillion in clean energy investment is needed through 2050—or an average of $1 trillion more per year compared to a “business as usual” scenario over the next 36 years.This Ceres report provides 10 recommendations for investors, companies and policymakers.
REmap 2030 is a roadmap to double the share of renewable energy by 2030. It is the first global study to provide renewable energy options based on a bottom-up analysis of official national sources. The study not only focuses on technologies, but also on the availability of financing, political will, skills, and the role of planning.
The brilliance of “The Lego Movie” lies in providing every piece to the modern branding puzzle, including the surface-level subversion. In this way, “The Lego Movie” graduates to a new skill level in the game of branding, an approach that’s at once more grandiose and more pernicious than ever. It should probably be a red flag that the most memorable line from “The Lego Movie” is pretty much the central message of any great marketing campaign: This product will deliver you from averageness. But somehow it still works. In the movie’s final moments, big tears stream down my face. I am weeping over a 90-minute infomercial. With enough cleverness and induced vertigo, the mad geniuses of branding never have to be the bad guys again. All they have to say is: You are special.
U.S. manufacturing—and the jobs that go with it—have been steadily increasing since 2010. Whether the resurgence of U.S. manufacturing jobs continues depends on a range of factors—including environmental initiatives. While the future of U.S. manufacturing jobs is uncertain, energy-efficiency and clean-energy investment can help ensure that this sector continues to thrive.
One of the great hopes of health care reform is that it will reduce the number of Americans who file for bankruptcy because of medical debt. A new study in Massachusetts is providing evidence that the reform law passed in that state in 2006, and which served as the model for the Affordable Care Act, is indeed making a significant dent in bankruptcy filings.
As fellow tech giants have reached billion-dollar deals in recent years to add significant new arms to their businesses, Apple has ventured down a different path. The company has avoided jaw-dropping takeovers in favor of a series of smaller deals, using the companies to buttress or fill a gap in products that already exist or are in development.
The economics of international banking are straightforward enough: raise funds in countries where they are cheap, lend where they are dear. Done right, this is both lucrative for bankers and good for the world, by channelling savings to their most productive use. Those economics have begun to come apart over the past five years.
World War I may have ended in 1918, but the violence it triggered in the Middle East still hasn’t come to an end. Arbitrary borders drawn by self-interested imperial powers have left a legacy that the region has not been able to overcome. No group of countries, particularly given their small sizes, has seen so many wars, civil wars, overthrows and terrorist attacks in recent decades. To understand how this historical anomaly came to pass, several factors must be considered: the region’s depressing history prior to World War I, the failure of the Arab elite and the continual intervention by the superpowers thereafter, the role of political Islam, the discovery of oil, the founding of Israel and the Cold War.
You don’t really read the endless pages of terms and conditions connected to every website you visit or phone call that you make, but every day billion-dollar corporations are learning more about your interests, friends, family, finances and secrets precisely because of this, are selling the information to the highest bidder, and you agreed to all of it.
As research continues and other nations increasingly invest in R&D, nanotechnology is moving from the laboratory to commercial markets, mass manufacturing, and the global marketplace–a trend with potential future import that some compare to history’s introduction of technologies with major economic and societal impact, such as plastics and even electricity.
As politicians and pundits in Washington continue to spar over whether economic inequality is in fact deepening, in corporate America there really is no debate at all. The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away.
MIT Technology Review explores a big question: how are data and the analytical tools to manipulate it changing decision making today? The number of variables and the speed and volume of transactions are just too much for human decision makers. Todays smart systems, and their impact, are prosaic next to what’s planned.
At the dawn of a new year, the world is in the midst of several epic transitions. Economic growth patterns, the geopolitical landscape, the social contract that binds people together, and our planet’s ecosystem are all undergoing radical, simultaneous transformations, generating anxiety and, in many places, turmoil.
The world’s wealthiest people aren’t known for travelling by bus, but if they fancied a change of scene then the richest 85 people on the globe – who between them control as much wealth as the poorest half of the global population put together – could squeeze onto a single double-decker.
Irrational exuberance is back on Wall Street, encouraged by cheap credit lavished on heavily leveraged speculators, lax accounting rules and the unfortunate tendency to confuse the true value of stocks. Sky-high valuations get little skeptical coverage in the financial press, which has acted more as lapdog than watchdog in the past decade.
The primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.
The greatest danger is one that will not be faced for decades but that is lurking out there. If we move to a system where half of the country is either stagnant or losing ground while the other half is surging, the social fabric of the United States is at risk, and with it the massive global power the United States has accumulated.
Unless something goes unexpectedly wrong in 2014, the level of real per capita GDP in the United States will match and exceed its 2007 level. That is not good news. US output is now seven years – 14% – below the level that was reasonably expected back in 2007. If we combine the costs of idle workers and capital during the downturn and the harm done to the US economy’s future growth path, the losses reach 3.5-10 years of total output. That is a higher share of America’s productive capabilities than the Great Depression subtracted.
Private sector companies like Google run hi-tech spying operations that vacuum up private information and use it to compile detailed dossiers on hundreds of millions of people around the world — and that’s on top of their work colluding and contracting with government intelligence agencies. Silicon Valley runs on for-profit surveillance that dwarfs anything being run by the NSA.
Today’s techniques of finance are designed to make the rich richer. None are designed to make the poor richer. That’s why the poor are poor. The reason they are poor is because they do not have viable capital ownership. Thus, we need to focus on revising today’s techniques of finance to broaden capital ownership.
BlackRock’s Aladdin keeps its eyes on almost 7% of the world’s $225 trillion of financial assets. This is unprecedented—and it means flaws in the system could matter to more than just BlackRock, its investors and its customers. If that much money is being managed by people who all think with the same tools, it may be managed by people all predisposed to the same mistakes. If models are always wrong, as BlackRock posits, it should perhaps be a little worried that so many people are using the ones it offers.
Central banks around the world are pumping trillions into the economy. The goal is to stimulate growth, but their actions are also driving up prices in the real estate and equities markets. The question is no longer whether there will be a crash, but when. Some economists seek to allay fears, by noting that the real estate market still has a long way to go, but who says that you have to reach the most inflated point in the last crisis before a dramatic downturn sets in?
U.S. commercial banks and their affiliates have always faced limitations on the business they are allowed to undertake, in order to reduce the risk of business disasters that would endanger their ability to fulfill their critical role at the heart of the economic system, but we do not favor any of the major proposals for further structural divisions between commercial banking and securities and derivatives activities.
The sophisticated banks that dominate the financial system will directly incorporate the effects of capital regimes into their internal pricing models. This will result in the incentive effects flowing directly through to almost all decisions about business mix and pricing. Thus, incentive effects will be much more than academic constructs, they will play through into actual business decisions via banks’ internal markets.
Population growth, urbanisation and climate change are presenting significant challenges for cities now and into the future. Resilient cities can pick themselves up after a disaster and rebuild sustainably where necessary. Resilience to climate change will become even more important in the future. Compounding the natural hazard risk is the fact that cities are getting bigger, with denser populations and more assets at risk.
Since the 2008 financial crash, our country has been reeling without getting its economic policy right. What we needed then, and need now, is a new kind of macroeconomics; one that aims for investment-led growth, not consumption-led growth. But investment-led growth can’t be achieved by a temporary stimulus. It requires a very different kind of strategy and policy.
It might seem like a marriage made in heaven. Infrastructure projects take a long time to build but then deliver cashflows over an extended period. Pension funds have liabilities that stretch over several decades. Why not get the latter to finance the former? But the couple have barely survived the first date, let alone made it to the altar. A new report from the OECD estimates that global pension funds have just 0.9% of their portfolios in pure infrastructure plays.
A new solar cell material has properties that might lead to cells more than twice as efficient as the best on the market today. The researchers haven’t yet demonstrated a high-efficiency solar cell based on the material. But their work adds to a growing body of evidence suggesting that perovskite materials could change the face of solar power.
Unconditional Cash Transfers work better than almost anyone would have expected. They dent the stereotype of poor people as inherently feckless and ignorant. But Conditional Cash Transfers are usually better still, especially when dealing with the root causes of poverty and, rather than just alleviating it, helping families escape it altogether.
One of the main things keeping the economy weak is the depressing effect of cutbacks in public spending justified in the name of protecting the future from the wildly exaggerated threat of excessive debt. By tolerating high unemployment we have inflicted huge damage on our long-run prospects. America will probably spend decades paying for the mistaken priorities of the past few years.
One problem with economics is that it is necessarily focused on policy, rather than discovery of fundamentals. Nobody really cares much about economic data except as a guide to policy: economic phenomena do not have the same intrinsic fascination for us as the internal resonances of the atom or the functioning of the vesicles and other organelles of a living cell. Critics of “economic sciences” sometimes refer to the development of a “pseudoscience” of economics, arguing that it uses the trappings of science, like dense mathematics, but only for show. As economics develops, it will broaden its repertory of methods and sources of evidence, the science will become stronger, and the charlatans will be exposed.
If they are to work, economic models of climate change will require sweeping changes to incorporate the idea that global warming can damage capital stock, productivity and growth. They will also need low or even negative discount rates, to reflect the possibility that future generations will be worse off than the current one.
The rise of cat bonds and other “insurance-linked securities” is starting to affect the price of insurance, particularly on the reinsurance side. Some weathered insurance executives are warning that naive investors are distorting prices, creating a frothy “shadow insurance” sector with systemic implications.
Dozens of psychological studies have shown that people primed to think about money before an experiment are more likely to lie, cheat and steal during the course of that experiment. Thinking about time, by contrast, makes people more honest than normal rather than less so and the more reflective they are the more honest they become.