Howard Dean Report

So I just had lunch with Howard Dean. Ok, maybe it’s not that exciting for most people, even people reading this blog. In fact, I wouldn’t be surprised if Carson, in his glorious Vermont heritage, was Dean’s godson or something like that. Anyways, it was quite an event, especially in a town where nothing much really happens of this magnitude.

There wasn’t too much of a formal Q&A, but I was able to ask the ex-Governor a question along the lines of “What are your thoughts on how Obama has handled the economy, specifically the auto bailouts and the appointments of Timothy Geithner and Larry Summers?” His response was somewhat predictable but also much less politician-y than I’ve heard figures in similar positions answer with. He said that he believed the auto bailouts were a necessary evil. Fine. Whatever. The auto bailouts to me are one of the ore reprehensible acts economically the American government has taken part in in the last few decades. He said the bank bailouts were also a necessary evil, and that unemployment would be three times higher today if they had not occurred. Fine. Probably true. Maybe the bank bailouts weren’t that bad (from only a consequentialist perspective).

Where I felt he was straightforward and honest was his analysis of Obama’s general choices for his economic team. Obama, Dean observed, campaigned hard on having fresh outsiders in his cabinet and change (remember that word?) -ing the political landscape for the better. Well, Larry Summers was a lot more of the same. His credentials aren’t to be questioned, in terms of political track record or as an academic economist. But he spent years on the inside of Washington and is a relative moderate compared to economists like Krugman or Stiglitz.

Other observations:

• Just like when I met Dave Gilmour, I was shocked by how short famous people can be.
• I regret not asking him his favorite Ben & Jerry’s flavor.
• He joins the ranks of Democrats who believe Obamacare was too tame.
• He thinks the Tea Party is not the “beginning” of a new movement but the last spark of a branch of the right wing that prides itself on motivating a base that cares almost entirely about knee-jerk issues and idiocy populism.
• Similar to that point, he said that my generation is actually more fiscally conservative than his and that Republicans actually have a great chance (that they probably won’t take) to embrace socially moderate views with fiscal conservatism. Pretty much a statement of optimism for libertarians.
• His niece goes to University of St Andrews (probably the only reason he considered coming).
• Grilled chicken breast wrapped in bacon is surprisingly good but a little heavy in retrospect.
• I admire his expression of discontent with Obama in regards to social issues; Dean was a leader on the national stage for gay rights, getting civil unions in Vermont when he was Governor.
• He is good friends with Nick Clegg, apparently.
• He supports net neutrality.
• My name tag said “Will Compernelle.”
• He sees his generation as one of conflict but ours as one of people trying to compromise and work together. This was interesting, as I had never thought about it before. Still, I’m not sure what to make of it.

 

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Obama’s Trade Hypocrisy

Joseph Stiglitz, in Globalization and Its Discontents, was definitely on to something when he criticized developed countries for preaching liberalization of trade and then hypocritically sheltering themselves behinds walls of protectionism. Developed countries subsidize certain goods – think of agricultural subsidies in America – to crowd out foreign competition, or they can enact tariffs that make foreign goods more expensive and have the foreign goods effectively lose their comparative advantage.

President Obama recently practiced such hypocrisy by enacting a 35% tariff on low-grade Chinese car tires. As The Economist points out,

The number of jobs affected is barely a rounding error in measurements of the mighty American workforce…But in geopolitical terms, it is a whopper.

I shant go into much obvious detail about the actual net job gains from free trade, so I’ll elaborate on the second point of The Economist’s point: the political consequences.

The infamous Smoot-Hawley Tariff Act was passed in the midst of the Great Depression in an attempt to revive the American workforce. Accepted economic wisdom regarding Smoot is that it not only didn’t solve unemployment, it made it worse. The same situation could occur with this tariff on tires. China could start a trade war and impose tariffs on American goods. Suddenly, one retaliation leads to another and the walls of inefficient protectionism begin to grow larger.

The possible trade war is also accompanied by the increasingly hypocritical reputation of America in terms of trade liberalization. Why would anyone listen to American recommendations for free trade when they don’t practice it themselves? Whatever happened to Obama’s cry of restoring America’s credibility around the world?

Several news sources have pointed to political pressure from the United Steelworkers Union in order to get support for healthcare reform, but I haven’t seen any concrete evidence for that so I won’t believe it just yet.

Obama should be calling on all countries to lower trade barriers. But he’s got to practice what he preaches.

 

Assorted Links

In an ode to Marginal Revolution, check out these links:

• Tyler Cowen in the NYT on how government-inspired perverse incentives made the financial crisis much worse.
• Obama provokes a possible trade war with China by imposing huge tariffs on Chinese tires.
• Reason comments on Norman Borlaug’s death. The father of the Green Revolution is probably the most understated humanitarian in history.
• Joseph Stiglitz, among others, thinks banking problems have gotten worse since Lehman’s collapse.
• A UK ban on public smoking has been concurrent with a dramatic reduction in heart attacks. See more on smoking bans here.
• Venezuela is going to develop Nuclear power – with Russian help.
• The economy is recovering, says a Google economist analyzing people’s searches.

 

Globalization and Its Discontents

I finished Joseph Stiglitz‘s Globalization and Its Discontents. In Stiglitz’s words, it argued that:

The Problem is not with globalization, but with how it has been managed.

Here are the thoughts I jotted down while reading it (yes, there are a lot of them):

• Stiglitz acknowledges the benefits of privitization and how, when necessary criteria are met regarding property rights and good government, private firms operate better than government.
• The IMF ruins capital by controlling the money supply.
• Rich countries practice hypocritical protectionism by using things like the IMF to make developing countries lower trade barriers while not doing so themselves. I couldn’t agree more.
• His claims supporting the “infant industry argument” aren’t too compelling.
• “The reason that Wal-Mart is successful is that it provides goods to consumers at lower prices.”
• Believes the invisble hand doesn’t exist because the critera implied by it – perfect information, perfect competition – aren’t there. But he fails to explain why market economies are better at dispersing resources than centrally planned ones. In other words, he doesn’t disprove Hayek’s theory of spontaneous order.
• He blames a lot of the East Asian Crisis of the 90’s on currency speculators. I am very suspicious of this.
• Stiglitz met with Chinese government officials to discuss their transition to a market economy. No one (rightly) ever accuses Stiglitz of being an aid to the Tianeman Square Massacre. But for some reason Naomi Klein accused Milton Friedman of being complacent to Pinochet’s human rights violations because Friedman had a 40 minute meeting with Pinochet’s advisors. Naomi Klein is such an idiot.
• Stiglitz thought that Alan Greenspan cared too much about inflation. This book was written in 2001, before the current economic crisis. Most people now accuse Greenspan of letting a huge bubble be created by extremely loose monetary policy. I just thought that was interesting.
• His recommendation for a “gradual” approach to the market-oriented reforms in poor countries: “Development encompasses not just resources and capital but a transformation of society.” I think this can be applied to Iraq –  we can’t force our values on countries.
• People getting richer helps the environment.
• Makes a case in the “Way Ahead” chapter for preserving local cultures. I disagree tremendously. I think that as long as cultural change is caused by voluntary actions, whatever happens shouldn’t be altered. (If Japan suddenly only had American food because that’s what the consumer demand was, why is that bad?)

Stiglitz’s book was pretty good in convincing me that the IMF and World Bank are counter-productive. But I’m excited to hear some rebuttals to his other ideas about globalization from Jagdish Bhagwati’s In Defense of Globalization, which I’ll read next.

Anyone who has read Globalization and Its Discontents is encouraged to criticize the points I made or add their two cents in the comment section below.

 

Reading Globalization and Its Discontents

I am a firm believer that everyone should expose themselves to the ideas/works of opposing viewpoints, no matter how ridiculous one might think such views are. I feel a lot of people read blogs, books, and articles only by people with similar views. This acts as a re-enforcement of opinions rather than an enhancement of knowledge. As such, I like to think that I break out of this mold by reading people like Paul Krugman, Ezra Klein, or even Naomi Klein.

One of the issues that seems most obvious to me is globalization and its net benefits for people around the world. The chief critic of globalization is Joseph Stiglitz, a nobel laureate in “information economics.” I picked up his magnum opus, Globalization and Its Discontents, today and just finished reading the first fifty pages. Interestingly, I find myself agreeing with him much more than I thought I would. First off, he is not nearly as anti-“globalization” as he is in opposition to distinctly non-market institutions like the IMF and the World Bank (where he was chief economist for a few years). The IMF and World Bank, in my admittedly limited knowledge, are organizations that are indeed detrimental to growth in developing countries and more often make things worse than make them better.

From the start, he acknowledges the undeniable benefits to people around the world and even seems to offer some support for sweatshops:

People in the West may regard low-paying Nike jobs at Nike as exploitation, but for many people in the developing world, working in factory is a far better option than staying down on the farm and growing rice.

So far, it seems clear to me that Siglitz isn’t opposed to globalization as much as he is against how it is being carried out. In the back of my mind I also remember that his expertise is in asymmetric information and not international trade (though his time at the World Bank does give him expertise on how it carries out its business).

I have only read a fifth of Stiglitz’s book, so he might go onto issues where his opinions part from mine later. Meanwhile, I look forward to seeing what he has to say against all the good things of globalization I hear so much about.