I'm reading DSquared's book on fraud at the moment. Interesting stuff.
1 Can't wait to get my hands on it. The excerpt in the Grauniad was very good.
It is very good. I grabbed one of the copies lying around the office and read it in a couple of evenings.
Thanks to NickS, good links all. I think you really bury the lede on the LRB piece though.
[The bailouts] were necessary, I thought at the time and still think, because this really was a moment of existential crisis for the financial system, and we don't know what the consequences would have been for our societies if everything had imploded. But they turned into a disaster we are still living through.So we have this emotionally impossible situation where the crisis created by high finance can be solved only by more high finance, and the poverty created* by globalization can be solved only by more globalization.
[...]
At the time of the crash, 19 per cent of the world's population were living in what the UN defines as absolute poverty, meaning on less than $1.90 a day. Today, that number is below 9 per cent. In other words, the number of people living in absolute poverty has more than halved, while rich-world living standards have flatlined or declined.
If you want a long listen with your long reads, there is a new "Hardcore History" podcast out. This one is on Japan in WW II.
I'm about an hour into it. Japanese history is fascinating, as is Dan Carlin.
One could say something similar about climate change. How to solve it? PV, EVs, desert solar, nuclear plants, heat tolerant crops, seawalls, orbital mirrors. The problems created by science and technology can be solved only with more science an technology; the only way out is through. Who ever wanted to hear that?
The flaws in the system that produced 2008 are still there. Without a fix, we're inevitably eventually due for another existential crisis. When it happens, we need to be ready with our demands. They won't fool us twice. Last time, they got their bailout in exchange for essentially nothing. Next time, we must make some demands -- IRV? a parliamentary system? Election Day as a holiday? -- you tell me. But we need to be ready now, because when the crisis comes, they will try to say we don't have time for anything but their bailout.
Here's the thing, though. We can't prevent recessions from starting, but we really have fixed the problem of ending recessions. The Tories in the UK stagnated the economy as a deliberate policy choice. Incomes in the UK are stagnant because the Tories have made them so. It didn't just happen.
The financial system is the asshole of the economy. You can't do without your asshole, but you need to stop it from spewing shit everywhere.
"Financial system" isn't synonymous with "banks", though. We should try to move as much of the financial system out of banks as we can. Next time there is a financial crisis, we should nationalize the important banks that get in trouble, and figure out how to take them apart so that they aren't so important anymore. (The first has happened a bit, and the second has been partially planned for, but probably not enough in either case.)
THANKS FOR 'SPLAINING THAT BRO.
"Financial system" isn't synonymous with "banks", though. We should try to move as much of the financial system out of banks as we can.
I am not sure at all about this bit, because you need something to do banking-type activities (credit intermediation, deposits, payment processing) and either you have a bank doing it, or something that is effectively a bank but doesn't have to follow banking regulations. We call these "shadow banks". And it's not clear to me that they would be an improvement on real banks. I quite like things like "capital adequacy" and "deposit insurance".
the poverty created* by globalization
If you think globalisation goes along with an increase in world poverty, you are wrong.
12. Overall, globalisation obviously doesn't increase world poverty. But MC significantly didn't say that; he said the poverty created by globalization. If you don't think it creates local poverty, I suggest you look around you.
How do you explain the recent upsurge in right wing populism otherwise?
If you don't think it creates local poverty, I suggest you look around you.
*Looks round himself
*Sees poverty rates falling for the last 60 years in the UK, albeit much more slowly recently
*counts number of local jobs that are with foreign employers
*looks at scale of UK export-supported jobs
*is puzzled
12: The asterisk is there for a reason, and I well understand the benefits of globalization, as made clear by 12 quote 2.
The point is, as chrisy says, globalization undeniably creates plenty of *relative* poverty, national and global (and relative is more important than absolute, once above subsistence) and sometimes creates local poverty.
I would have done better to talk simply about inequality, which is more what I was thinking of anyway. Inequality everywhere has very deep and complex causes, but has everywhere been spectacularly exacerbated by globalization (I'm thinking here long term, the past 500 years or more). So, to be more precise:
We have this emotionally impossible situation where the inequality exacerbated by globalization can be eliminated only with wealth created through more globalization.
(And the clunkiness of that sentence is the reason 4 came out the way it did the first time.)
Since it was referenced in the Lanchester article, I read The Hidden Wealth of Nations over the weekend. It's a breezy read--less than 200 pages, so it might be a hard buy at $10--that fits well into Piketty's worldview. I didn't really appreciate how tax havens work or exactly how bad they are.
Inequality everywhere has very deep and complex causes, but has everywhere been spectacularly exacerbated by globalization (I'm thinking here long term, the past 500 years or more).
It's not intuitively obvious at all that Europe is more unequal now than it was 500 years ago; that the gap between Henry VIII and a Warwickshire peasant was smaller than the gap between a Birmingham office cleaner and Lakshmi Mittal.
I though the point was it has gotten much worse over the lifetimes of us that are now reading this and such.
20: Yes.
19: That may be true in Europe, but I doubt seriously it's true at the global level; within countries, probably, between them, certainly.
I don't know if this goes here or in the Musk thread, but I'm going to put it here because my thoughts apply better to Trump than to Musk. Henry VIII wasn't content that he could do whatever he wanted. He had to have everybody tell him he was doing the right thing when he did whatever he wanted. The powerful today appear to have moved on to a similar standard. The powerful have probably always preferred that standard but had enough awareness of potential checks from the bottom up that they didn't try.
For starters, between regions:
great divergence had already existed in the early modern period, for the welfare ratios calculated for East Asia were substantially lower than those for northwestern Europe, that is, England and the Netherlands. At the same time, they have found that a similar divergence had also emerged within Europe--southern Europe lagged behind the northwestern countries. To put it differently, while England and the Netherlands were well ahead of the rest of the world, East Asia was on a par with southern Europe.You British people can tell me about the Baltic trade.
According to Maddison's historical national accounts table for countries in the world, GDP per capita in the United Kingdom grew more than threefold from 1600 to 1870. On the other hand, India's per capita GDP is estimated to have declined by 3 percent, while Japan achieved modest growth of 42 percent over the same period.
I read a history of the English east India Company years ago. A running theme in their early period was their frustration by the fact that the further south and east they went, the less anyone was remotely interested in buying English wool.
And the more likely they were to hear jokes about "sharing the sheep."
In England, a high-growth country, the growth of real wages for labouring men lagged far behind that of income experienced by men in the middle position of the entire population.An accompanying graph shows English GDP per capita rising 250% from 1500-1800, while real wages fluctuated between 50 and 100% of their 1500 level. 28: The Portuguese had the same experience. (Don't know if the wool was English.)
Now, the pattern is much clearer for Great Britain. There is evidence that the Gini coefficient for the nation peaked at a level of 0.54-0.55 in 1867. The decline since then was gradual, but accelerated after World War I, reaching 0.42 in 1938/9Graph shows it at ~0.47 in 1688; wiki presently at 0.456.
Gini index in Japan:
was 0.42 in 1890-94 and 0.57 in 1937. If back projected, this implies that the coefficient level must have been a little over 0.3 soon after the opening of the country in 1859. It is worth emphasising while the level of 0.3 does not compare unfavourably with any present-day welfare state, the estimated coefficient of 0.57 for the late 1930s is higher compared not only with the corresponding British figure, but also with Britain's peak index in 1867. Thus, in less than a century, Japan changed from a reasonably egalitarian to a very unequal society.
You can add to these two articles Michael Pettis' excellent explanation of what's really behind trade imbalances. Short version: countries like China and Germany get trade surpluses by lowering wages, thus transferring money from people who would likely spend it to people/organizations that would likely save it.
IOW, the way to get a trade surplus is to increase your level of inequality
India:
1875 and 1950. The estimates of the Gini coefficients put forward by Tirthankar Roy for the two benchmark years point to a 'mild decline from a level above 0.35 to nearer 0.3'; and the reason for the high 1875 estimate seems to be found in the 'feature that the British rulers of India had emulated from the Mughals--the presence of a tiny governmental elite that received fantastically large incomes'India is a big chunk of the world, so I'll walk back "everywhere"; but OTOH this paper (PDF) only covers three countries, and Indian globalization started long before 1875: the Portuguese couldn't sell their cloth east of the Cape because everyone had better Indian cloth already.
[...]
Roy argues based on various pieces of evidence that much of the problem of increased poverty and, hence, increased income inequality in rural India between 1870 and 1940 cannot be accounted for by the impact of globalisation
I read a history of the English east India Company years ago. A running theme in their early period was their frustration by the fact that the further south and east they went, the less anyone was remotely interested in buying English wool.
Or any wool at all, probably. They should have brought some English linen.
Calicut sees your English linen and raises you Indian cotton.
I think I've lost track of the point you're arguing, but the most recent round of globalization has meant that inequality *between* countries is much less yhan it was in 1950 and getting close to less than at any point we can tell since about 1700. Of course esrlier rounds were linked to the great divergence that led to the astronomical differences between countries -- but also the first time that some countries weren't trapped in what is (to us) almost unimaginable poverty.
I think I'm trying to argue that the rich need put back into their place.
First sentence of 38 should make clear that we're getting closeR to the differences in 1700 if current trends continue. The differences between the rich west and the rest are still astronomical, but muchnnarrower than a few decades ago.
I could probably get used to the growing disparity of wealth and power if it wasn't very clear that I was expected to switch my facts 1984-style to maintain the egos of those with wealth and power. I'd rather call some fuck "Your highness" because who his parents were than pretend everybody who was standing in the right place for tech boom is a visionary.
38: The point is (1) that globalization increases local inequality*; and (2) that as it unfolds it produces, as you say, massive inequalities between countries. Those differences may even out, and fairly soon, but it's a long road to get there, many centuries in most places. Tying back to the OP and my point in 4, (3) the various autarchies** that have felt and are feeling the need to hunker down and self-strengthen in the face of globalization are (a) emotionally sometimes understandable but (b) wrong, self-defeating, and doomed.
*Though of course this can and should be counteracted by policy; witness the falling UK Gini in the mid-20C.
**Weltpolitik, USSR, imperial Japan, Maoism, Nehruism***, Chavismo***, MAGAism, Brexiteers.
***I think?
I think every part of 43 is so oversimplified as to be not very useful for thinking. At a minimum the relationship between "globalization" (whatever exactly this means) and domestic inequality both in the 19th Century and in the 20th-21st is complicated -- some people (Milancovic) posit more of a connection, some (Piketty) less, some have no general laws about the connection (Lindert and Williamson). And when it does matter it matters only in connection with some other transformations and with politics (most recently, the rich-country move to diffuse services as opposed to more centralized politics). And the great divergence *between countries* was not *caused* by globalization (almost certainly); it was as far as we can tell (unless you're an idiot like Sven Beckert) the product of domestic transformations in the rich countries that then had a massive global effect.
Anyhow, if you're mad about inequality in rich countries, there are some not that hard to figure out solutions. More redistribution, but equally a smaller financial sector and more education. If possible, more unionization. No need to have many grand elaborate theories beyond that, but you have to solve the politics.
It seems to me that earlier rounds of globalization led to increased between-country inequality because they were based on imperialism, and later rounds are decreasing it, though this is mainly concentrated in China. In 1980 advanced economies had GDP per capita of roughly 7 times developing countries. That gap is now down to 4x.
I didn't read that much of the link in 33, but this sentence struck me as fucking stupid: "The idea that all countries lose in a trade war is unintelligible.".
There are countries that have deliberately run trade surpluses as a matter of policy, and have become rich while doing so, such as Germany and Japan There's another country that has run giant trade deficits, bigger than ever before seen in human history, and yet has become richer still. That country? The United States.
Pettis points out that it is nearly impossible for the US to avoid running trade deficits no matter what they do because of the dollar's status as the world's reserve currency. No coincidence that the US was running budget surpluses up until the Bretton Woods system dissolved in the mid-70s.
It was deliberate policy and completely necessary after the war.
A trade deficit is when other countries send us stuff and in return we send them stuff back plus also pieces of paper with pictures of our dead presidents on them. I don't understand why trade deficits aren't more popular.
They turn you steel mill with $40/hour jobs into a Target with $10/hour jobs selling those extra goods.
I call shenanigans. It's tempting to ascribe everything to impersonal forces, and economic forces sure seem impersonal, but it neglects the role of politics. Inequality has increased, in the US at least, because we voted for it. One of the two major parties has openly called for increasing inequality since 1980, and they have delivered on this promise.
50 is pretty much word for word the Spanish view circa 1700 or so.
Oh, no doubt. The role of the government is to mitigate these impersonal economic trends. Germany and the US have the same level of income inequality before taxes and transfers, but Germany's overall inequality is much less because of higher taxes and more generous social services.