Just today we have the following: US employment costs post smallest increase on record
U.S. labor costs in the second quarter recorded their smallest increase in 33 years amid tepid gains in the private sector... Labor market slack has diminished significantly over the last few years, which is expected to start putting upward pressure on wages...Yesterday brought this news: GDP disappoints; revisions show recovery from recession was even weaker than we thought
instead of growing at an average annual rate of 2.3 percent from 2011 to 2014, the economy grew by only 2 percent. So not only was the economic recovery from the recession tepid, it was even weaker than we thought.And the latest employment report was weak: Mixed U.S. jobs report
U.S. job growth slowed in June and Americans left the labor force in droves... The Labor Department said on Thursday nonfarm payrolls rose 223,000 last month after a downwardly revised 254,000 increase in May, with construction and government employment unchanged, and the mining sector purging more jobs.
April payrolls were also lowered, meaning 60,000 fewer jobs were created during the two months than previously reported. The unemployment rate fell two-tenths of a percentage point to 5.3 percent, the lowest since April 2008, but that was a sign of weakness as 432,000 people dropped out of the labor force...Admittedly, I'm cherry picking the bad news, and most professional commentators still seem to think that the economy will improve, although the trend is clearly more pessimistic:
The labor force participation rate fell to 62.6 percent, the lowest since October 1977
The post-recession economy is worse than we thought
Even the Federal Reserve, which has consistently overestimated growth trends, only sees the economy growing between 1.8% and 2% for the full year this year, with long-run potential between 2% and 2.3% growth.As with the U.S. in Vietnam, we see the Fed declaring victory and moving on. I will proceed under the assumption that the converntional wisdom as to how the economy works has been proven wrong, and that new conventional wisdom is slowly emerging.
Economic conventional wisdom is politically relevant. Both the Republicans and the Democrats are being forced to adapt their economic principles to the reality of the failed monetary practices of the Reaganomics era. Beginning around 1982, "the era of big government ended" (Bill Clinton's words in the 1996 State of the Union Address.) A less intrusive method of managing the economy, as opposed to the previous Keynesianism, was advocated by both Republicans and Democrats during this period. Monetary policy under the technocratic (apolitical) direction of "the Fed" reigned supreme. As we enter the 2016 presidential election campaign, the two parties are testing the waters with alternative economic platforms.
Interestingly, Donald Trump has moved to an early lead on the Republican side. He has been the Republican with the most intriguingly different perspective on the economy. Trump opposed the Trans Pacific Partnership, for example, unlike most of the other Republicans who follow the big corporate donors. He is stridently against illegal immigration and other aspects of globalization which have harmed labor in the U.S.
The more intellectual spokesmen for the Republicans favor continued globalization. To the Republican intellectuals, big government continues to be the problem. Globalization keeps governments in check by subjecting societies to marketplace discipline. In spite of populist rhetoric, almost all the Republican presidential candidates are pro-globalization and pro-big business.
The Republicans face a serious divide between the corporatists and the populists. The Trump supporters stand to gain strength as the economy slumps, but big business will continue to wield more economic power. While populism versus corporatism presents a wedge issue for each party, the Republicans are more vulnerable given the strength of the Tea Party populists in the Republican media machine. Republicans may face decades of internecine conflict.
In the Democratic presidential primaries for 2016, a somewhat similar battle is shaping up between populists and corporatists. Hillary's position is somewhat similar to the Republican mainstream -- i.e. globalization in general is good (and nationalism/populism is bad although worthy of political recognition). Bernie Sanders, on the other hand, is a class warrior.
3 comments:
I'm not sure why globalization is in the "populist liberal" corner?
In any event, if Nixon were alive today he'd be at the extreme "populist liberal" corner, about equal to Bernie Sanders. It hard to think of any major issue where they disagree.
Thanks for pointing out the issue with globalization being in the populist-liberal quadrant, Dan L. I meant to point out that the populist-liberal position on globalization is one of limiting business -- i.e. anti-globalization. So that was indeed poorly respresented on my part.
Interesting comments on Nixon vis a vis Sanders. They would disagree on social issues such as police abuse of power and marriage equality. they would also perhaps disagree perhaps on projection of military power in foreign countries. Economically, I imagine that Sanders take on inequality would be opposed by Nixon, although it's not clear how this would show up in specific policies.
I'm reading a book now, Railroading Economics, which divides the 1900 economic landscape into four economic schools, similar to the four quadrants illustrated in this post:
1. Laissez-faire (populist / corporatist)
2. Socialist (liberal / populist)
3. Corporatist (conservative / corporatist)
4. Populist (liberal / socialist)
Based upon this analysis, I might change the x axis to "social <=> capitalist".
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