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Article Artículo

Hickel Response on Degrowth

(This is the last piece in an exchange with Jason Hickel on growth. My last piece is here.)

Baker says “I am at a loss to understand why we would have a war on growth.” I don’t know why he is at a loss. I explained the reasons for this in my previous post. There are two I focus on. 

  1. Because growing the GDP means growing energy demand, and this makes the task of switching to renewable energy significantly more difficult (nearly three times more difficult between now and 2050, which virtually rules out success). 
  2. Because our preoccupation with growth makes it extremely difficult to get the regulations we need to avert ecological breakdown. Politicians resist such measures precisely because of the risks they pose to growth

Baker has, unfortunately, not engaged with these arguments.

Next, Baker says that “if we spend enough in other areas, it is possible to offset sharp reductions in the sectors of the economy that are heavy users of fossil fuels.” This argument is central to the standard vision of the Green New Deal (i.e., massive public investment in clean energy, which will generate millions of well-paid jobs and increase GDP growth). Again, there are two problems with this. 

  1. Even if we do manage to switch the entire energy system over to renewables, that might help us with emissions but it doesn’t help us with resource use. If we keep growing GDP, resource use will keep going up — even if the economy is powered by clean energy. And let’s not kid ourselves: to the extent that resource use is driving mass species extinction, this is an existential threat that we have to take seriously.
  2. Why does the Green New Deal have to be focused on aggregate GDP growth? Why not just stick with the bits about public investment and jobs and leave it at that? The last New Deal was growth-oriented, sure. But that doesn’t mean that this one has to be. Again — and this is a crucial point — Baker has not made a positive argument for growth. He just for some reason assumes that we must have it, but he never says why. This is odd, because as he himself points out, the problem is not that we don’t have enough income; the problem is that it’s all locked up at the top. 

CEPR / December 13, 2018

Article Artículo

Robert Samuelson Says That He Is Very Closed-Minded and Won't Accept Wage Stagnation

Sorry, I misread that one. This is what he quoted my friend Steve Rose saying about the people who disagree with him on income stagnation. Yes, it's Monday and Robert Samuelson is once again trying to insist that everyone's income is rising just fine.

The bizarre part of the story is that no one is really disagreeing on the facts, just how we talk about them. Before-tax income has been largely stagnant over the last four decades. For families at the middle and bottom, there has been some rise, but this has largely been because there are more earners per family, not rising hourly wages.

This is primarily the story of women entering the labor force. That was mostly a 1979–2000 story, since women's employment rates have actually slipped somewhat in the last two decades. It's great that barriers to women working are lower today than four decades ago (although discrimination is still huge), but saying that a two-earner family typically has higher income than a one-earner family doesn't really contradict the stagnation story.

The way Samuelson shows larger gains for families at the middle and bottom is by including government transfers, most importantly health care programs like Medicaid and SCHIP, in the story. As I pointed out in the past, the value of these transfers increases every time the pay of a heart surgeon or the cost of drugs increase, so people can be excused for not seeing this as a rise in their income.

CEPR / December 10, 2018

Article Artículo

Trump and China: Going with Patent Holders Against Workers

This piece was originally posted on my Patreon page.

While most of us don’t have access to the inner workings of the Trump administration to know exactly what is going on with its negotiations with China, given the public accounts and statements, it seems workers have clearly lost. Trump seems to have made the concerns of companies like Boeing, who want more help maintaining their control over technology, his top priority. The impact of an undervalued Chinese currency, which has led to a large US trade deficit, seems to have been dropped from discussion.

The disappearance of currency “manipulation” from the discussion is more than a bit ironic since Trump made this a centerpiece of his presidential campaign. He ran around the country complaining that China was a world-class currency manipulator. He pledged that he would declare China a currency manipulator on day one of his administration and apply corresponding trade sanctions.

We’re getting close to day 700 and there is still no declaration on China’s currency practices. Furthermore, the topic has been virtually dropped from public discussions.

What is highlighted is that Trump is pressing China to end practices that require US companies to transfer technology to Chinese partners and also to stop corporate espionage (where Chinese companies infiltrate US companies to obtain their latest technology).[1] Most of the media cover this as though Trump is pursuing a genuine national interest in pressing this issue, as opposed to the interest of a small number of large corporations.

This is seriously wrong. In fact, if Trump is successful in pushing his “anti-intellectual property theft” agenda with China, it will actually be bad for most of the nation’s workers.

CEPR / December 08, 2018

Article Artículo

Will Degrowthing Save the Planet?

This is the third piece in an exchange with Jason Hickel on growth. Hickel's response will be the last piece in the series.

Jason Hickel responded to my earlier piece on degrowth arguing that in fact, economic growth is inconsistent with a sustainable environment and that we have to get people to reject growth as an economic goal if we are going to limit the damage from climate change and excessive resource use more generally.

First, let me point out where we do agree. It is necessary to take drastic measures to reduce greenhouse gas emissions quickly. The world is falling far behind a path of emissions reductions (they are still rising) that will prevent excessive damage to the planet. Going beyond the issue of greenhouse gas emissions, we also have to take steps to reduce resource use more generally. The planet is rapidly losing habitat and species in ways that are irreversible.

I’m sure Hickel knows the data in these areas better than me, but I would not argue on the basic point. The question is whether degrowth needs to somehow fit into the picture. I will raise two points, one a question of logic and one a practical political issue.

On the logical point, I am at loss to understand why we would have a war on growth. Granted, we need to massively reduce our consumption of fossil fuels and over time other material inputs, but I am afraid I don’t see how that this precludes growth.

I am certainly willing to believe that a period of rapid increases in carbon taxes may lead to a recession, although I would not even take this as a foregone conclusion. If we spend enough in other areas, it is possible to offset sharp reductions in the sectors of the economy that are heavy users of fossil fuels. (Yes, I know people have modeled this scenario, but I’m afraid that I don’t view such modeling as sacrosanct. Almost no economic models projected the collapse of the housing bubble and the Great Recession. I don’t think economists who can’t tell us what will happen next year in ordinary times suddenly have perfect foresight when we talk about an unprecedented transition in energy use.)

But let’s say that the transition brings about a recession. How does that preclude further subsequent growth? The Federal Reserve Board has brought on nine recessions since World War II. Would anyone say the Fed precludes growth?

Concretely, when we get to our sustainable level of resource use, I assume we will still have clothes, shelter, computers, etc. These items all wear out. When we replace them, is there some reason the new items would not be better (e.g. longer lasting, clothes that are warmer or cooler etc.) than the ones they replaced? If so, that sure sounds like growth to me.

CEPR / December 07, 2018