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Article Artículo

Globalization and Trade

Does Raising Drug Prices in TPP Countries Scare China?

Roger Cohen tells us it does. In a column drafted in Vietnam, he tells us that the Trans-Pacific Partnership (TPP) is all about shoring up East Asian countries in their resistance to China. 

That's an interesting thought. After all, the hardest battles at the end were about getting longer and stronger patent-related protections for the pharmaceutical industry. It's not obvious how that helps us gain solidarity among the people of the region against China.

There is much else in the deal that doesn't obviously help us vis-a-vis China. For example, the Investor State Dispute Settlement mechanism, which institutionalizes the far-right wing legal doctrine of regulatory takings (we have to compensate foreign investors for any law or regulation that reduces their expected profits), doesn't seem like the sort of thing that advances an anti-China coalition.

Nor is it obvious why we would not have had stronger rules of origin requirements. As the TPP is written, China will be able to hugely increase the amount of goods it can export to the United States tariffs free by having them assembled into products in one of the TPP countries. This is not to argue that we should be looking to construct a trade deal to marginalize China, but if that were the point, the TPP would probably not be that deal.

CEPR / June 02, 2016

Article Artículo

Robert Samuelson Is Right Again: Robot Are Not Taking Our Jobs

No, I'm not about to become a charter member of the Robert Samuelson fan club, but he does get the basic story right in his column this morning. The robots are not taking our jobs, or at least not at an especially rapid pace. As Samuelson correctly points out, robots are just a form of productivity growth and productivity growth has been very slow in recent years. This is 180 degrees at odds with the robots taking our jobs story.

In fact, we should want more robots taking our jobs. That would allow more rapid wage growth and/or longer vacations and more leisure, assuming of course that the Federal Reserve Board did not deliberately slow the economy to create more unemployment.

There are a couple of other points worth mentioning on this piece. Samuelson is dismissive of the potential impact of self-driving cars. He tells readers:

"Consider. An opinion survey by Brandon Schoettle and Michael Sivak at the University of Michigan found that only 16 percent of respondents wanted self-driving vehicles; 39 percent preferred “partially self-driving” and 46 percent wanted no “self-driving” features. Safety is one anxiety. Cost may be another. Presumably, car prices would be higher, reflecting the costs of software, sensors and electronics. Will drivers pay the premium, especially when today’s cars last longer than ever? (The average age of today’s vehicles is 11 years, up from five years in 1969, reports the Transportation Department)."

This one completely misses the potential of self-driving cars. If cars are remotely driven, there is no need to own your own car. You can summon a car to meet your specific needs at the time you need it. In other words, if it's just a short trip by yourself, you would presumably summon a small car that uses very little gas (or electricity). If you're going on a longer trip with friends or family, you would summon a bigger car that would allow everyone to be comfortable. Not owning a car could lead to enormous savings, in addition to not needing parking spaces or garage space to house your car.

It's not surprising that people grabbed for a quick survey would not have a clear idea of the potential of this technology. It's unlikely any of us can fully grasp the potential of major innovations. I remember Paul Krugman dismissing the value of the iPad when it first came out. I say this not to trash Krugman, but to point out that even a very insightful economist, who had time to reflect on the topic, had no clue as to use of this new product. Anyhow, put me down as a big optimist on self-driving vehicles.

CEPR / June 02, 2016

Article Artículo

Economic Growth

Health and Social Programs

Workers

Older Americans Are Working Longer

The 2008 recession caused job losses across the board, but it was especially hard for young Americans. The annual employment rate for 20–24 year-olds declined 8.1 percentage points between 2007 and 2010; for 25–29 year-olds, employment fell 6.0 percentage points through 2011. As of 2015, employment was still down 4.6 percentage points for the former group and 3.1 percentage points for the latter.

By contrast, employment among seniors did not fall during the recession — it actually increased. Between 2006 and 2015, there was not a single year in which employment fell for Americans age 65 and over. Employment in this age group is up 2.7 percentage points since 2007 and is up 3.2 percentage points since 2006.

CEPR and Nicolas Buffie / May 31, 2016

Article Artículo

More Nonsense on China's Demography

It is amazing how often we hear that China is experiencing some sort of crisis because of its aging population. This is supposed to lead to a situation in which it won't have enough workers to support an aging population.

If folks have been following events in China recently its big problem is too few jobs and unemployment. It has closed a number of coal mines in recent years, leading to the loss of tens or even hundreds of thousands of jobs in the coal mining industry. Currently, it is hugely subsidizing its steel exports to keep its steel factories running. Without these subsidies, hundreds of thousands of workers could lose their jobs. There are comparable stories in many other industries.

So China's big problem for the foreseeable future is going to be too many workers, that is 180 degrees at odds with the too few workers story that the demographic crisis people keep pitching, as in this Reuters article that appeared in the NYT today. This piece includes the ominous warning:

"For the first time in decades China's working age population fell in 2012 and the world's most populous nation could be the first country in the world to get old before it gets rich."

Actually, China is pretty close to getting rich. If the I.M.F.'s projections prove correct, then it will be as wealthy as countries like Portugal and Greece by the end of the next decade. (This assumes that the per capita growth rate over the rest of the decade is the same as is projected from 2019–2021.) In an international context, that would count as "rich," and in any case many countries with lower per capita incomes already have high ratios of retirees to workers. Given its extraordinarily rapid growth over the last three and half decades China is far better positioned to care for its population of retirees than almost any other country in the developing world. 

Addendum: Numbers for Arithmetic Fans

In response to requests from Twitterland, I will show the simple arithmetic of why China need not be worried about its declining ratio of workers to retirees. This is highly stylized, but it should make the basic point.

CEPR / May 28, 2016