The problem is that, of late, manufacturing’s powers seem to have vanished. Figures published on October 26th show that America’s gdp jumped by 4.9% at an annualised rate in the third quarter of the year. Nearly 80% of output is now made up of services
labour productivity in manufacturing fell by 0.2% at an annualised rate, meaning that the boost to growth was driven by services.
What has prompted the reversal? Mr Cass’s favourite explanation, trade policy, can be dismissed. American manufacturing employment fell sharply in the early 2000s, in part owing to the integration of China into global trade. Some think that this “China shock”, which led to a wave of outsourcing, also caused productivity to decline by reducing the incentive for American firms to invest. Yet productivity grew until 2011. Moreover, it also subsequently declined in sub-sectors that are mostly domestic and immune to trade, including cement and concrete production.
A better clue is provided by what went well in earlier decades. During the 1990s and 2000s manufacturing productivity soared, with the production of computers and electronics, especially semiconductor chips, leading the way. Gains seem to have topped out at around the time things went wrong more broadly, in the early 2010s. All told, more than a third of the overall slowdown in manufacturing since 2011 is accounted for by computers and electronics.
Perhaps all those computers have been put to poor use. America may be a technology superpower, but when it comes to using tech in the physical world it lags behind others. It ranks seventh out of 15 countries in the adoption of robots per worker, according to the Information Technology and Innovation Foundation, a think-tank. South Korea, the world leader, uses over three times more robots per worker. And after adjusting for average wages—richer countries tend to be more advanced—America ranks 11th. But it is not clear whether there was a big change in American manufacturers’ adoption of tech, compared with other sectors, in the early 2010s. Indeed, the evidence points in the opposite direction. As Chad Syverson of the University of Chicago notes, the ratio of capital to labour has actually grown slightly faster in manufacturing than in the private sector as a whole.
If investment has not plummeted, it must then be paying fewer dividends. Low-hanging fruit might have been plucked more eagerly in manufacturing. This idea is supported by the fact that industrial productivity growth has slowed across the rich world, even if not by as much as in America (see chart 2). The extra bit of American underperformance is trickier to explain. Economists throw out a boatload of hypotheses. America is known to have laxer antitrust enforcement than its peers; perhaps scrutiny was especially needed in the manufacturing sector. Maybe American manufacturing was more advanced when robots arrived on the scene, so had less to gain. Some have even argued that because America’s software and internet sectors have been so lucrative, talent has been diverted away from older industries.
In properly weighted opinion polls, support for the Palestinians is much less marked
keyboards. “At first I was angry at Hamas and Palestine for the attacks” wrote one user, “but now after seeing more of what’s going on I cannot support such a regime in Israel. #FreePalestine”.
Do such views reflect overall opinion? At our request dmr, an ai-technology firm, collected 1m posts from Instagram, Twitter and YouTube from October 7th to 23rd. All contained hashtags from a list with similar numbers of pro-Israeli and pro-Palestinian terms in English, or replied to such posts. dmr then built a machine-learning model to classify posts as backing one side, the other or neither. It was trained on content in English, but also processed posts in any language that included English hashtags.
One cause of this gap is age. Social-media users skew young, and such people are unusually pro-Palestinian in their views. Moreover, dmr’s sample did not include Facebook, which may be the most pro-Israel platform owing to its older users. In polls of people in Denmark, France, Spain and Sweden, Israel drew more total sympathy, but young participants’ opinions matched social-media ratios. Yet in America and Britain, social-media views are even more pro-Palestinian than those of young poll respondents. Israel’s backers show rather less zeal for online combat.
The conviction that rates will remain “higher for longer” is spreading around the world.
Can the world economy cope with corporate deleveraging, falling house prices, turmoil at banks and fiscal frugality? Surprisingly, the answer is, perhaps—if rates have risen for the right reason.
For rates to have shifted permanently, that outlook must have changed. One possible reason it might have is the anticipation of faster economic growth, driven, perhaps, by recent advances in artificial intelligence (ai). In the long term, growth and interest rates are intimately linked.
It might seem farfetched to say that optimism about ai is pushing up bond yields. Yet it would explain why the prospect of higher-for-longer has not caused stockmarkets to fall much.
In fact, as optimism about ai has spread, the value of big tech firms such as Microsoft and Nvidia has soared.
To the extent that productivity growth explains higher rates, the new era could be a happy one. Alongside the rise in debt-service costs, households will have higher real incomes, firms will have higher revenues, financial institutions will enjoy low default rates and governments will collect more tax. Healthy competition for capital might even bring benefits of its own.
To the extent government debt is to blame for “higher-for-longer”, then the world economy will have to deal with higher rates without any accompanying fillip to growth. That would be painful.
Something’s got to give, whether it’s a more restrictive fiscal policy or some sort of debt crisis.
Other than a fiscal crisis, how could the tension be resolved? One possibility is that persistently high inflation could erode the real value of government debts.
Another possibility is that high rates push the world economy into a recession, which in turn causes central banks to cut them.
Jim Farley, Ford’s chief executive, has argued that the 36% pay rise over four years demanded by the striking workers would cripple his business. The uaw has countered that the average pay of the big three’s ceos is 40% higher than it was in 2019, compared with 6% for the union’s members, which is well below inflation. Last year Mr Farley raked in $21m in pay, Carlos Tavares, his counterpart at Stellantis, $25m(대략 300억 원)and Mary Barra of gm, $29m. The average full-time uaw member made less than $60,000.
America’s bosses are certainly well compensated. After languishing in the 2000s, median pay for ceos of big companies in the s&p 500 index has climbed by 18% over the past decade, adjusting for inflation, twice the rise in the median full-time wage in America. The typical s&p 500 boss earned more than $14m last year, according to figures from MyLogiq, a data provider. That is around 250 times as much as the average worker. It is also more than bosses earn in Britain (where chiefs of ftse 100 firms took home just shy of $5m), let alone in France and Germany (where ceos are paid still less). Some American corporate chieftains rake in many times that. In 2022 Sundar Pichai of Alphabet, a tech titan, received a $218m stock award, following a similar-sized bounty in 2019. In 2021 David Zaslav of Warner Bros Discovery, a media giant, received stock options worth an estimated $203m.(대략 2200억 원).
Investors, for their part, do not seem overly bothered. As Lucian Bebchuk of Harvard Law School explains, America’s big institutional investors pay little attention to the market-wide level of compensation, focusing instead on what share of a ceo’s pay is tied to the firm’s performance, and on how much they earn relative to other bosses.
Ordinary Americans, though, are furious. A survey in 2019 by David Larcker and Brian Tayan of Stanford University found that 86% of them thought bosses were overpaid. Is it time, then, to rein in ceo pay?
Judging by the European experience, paying bosses less is not obviously a good idea. The earnings gap between American and European bosses is partly the result of less competition for executives in Europe, which has fewer big firms. It also reflects a more egalitarian attitude to pay that has not translated into better performance. Europe’s firms exhibit lower sales growth, profitability and shareholder returns, and its workers are less productive. All that contributes to the continent’s sluggish economic growth.
In practice, though, shareholders should watch for two things. For one, the American market for ceos is far from perfectly efficient. Many bosses loom large over their boardrooms, and may cow notionally independent remuneration committees. Two in five s&p 500 ceos also chair their boards. A recent survey of American company directors by pwc, a consultancy, showed that one in two thought executives were overpaid.
A more immediate concern is that paying vast sums to bosses when times are tough for common folk can have unwanted consequences, if it emboldens employees to make demands that their companies cannot afford. This risks happening in Detroit, which must compete globally with lower-cost carmakers. The free market for ceos, in other words, is also subject to political economy.
Cost, convenience and conspiracy-mongering undercut support for greenery
We need to be good stewards of our planet. But that doesn’t mean I need to do away with my gas vehicle and drive an electric vehicle with a battery from China,” said Kristina Karamo, the chair of the Republican Party in Michigan, on September 22nd. America’s Democrats, she warned, are trying to “convince us that if we don’t centralise power in the government, the planet is gonna die. That seems like one of the biggest scams [since] Darwinian evolution.”
On September 27th Donald Trump said: “You can be loyal to American labour or you can be loyal to the environmental lunatics but you can’t really be loyal to both…Crooked Joe [Biden] is siding with the left-wing crazies who will destroy automobile manufacturing and will destroy our country itself.”
On September 20th Rishi Sunak, Britain’s prime minister, announced a weakening of net-zero targets, including a five-year delay of a ban on the sale of new petrol cars. Two weeks earlier, Germany kicked a proposal for stringent green home-heating rules years into the future. France has seen huge protests against high fuel prices, and could one day elect as president Marine Le Pen, who deplores wind farms and thinks the energy transition should be “much slower”.
Awareness of the dangers of climate change seems to have risen over the past wildfire-charred decade.
In all of the 14 rich countries surveyed by Pew in 2022, people on the political right were less likely to see climate change as a major threat than those on the left.
In rich democracies, especially, divisions over climate are aggravated by populist politicians, who take real problems (such as cost and disruption) and exaggerate them, while claiming that the elite who impose green policies don’t care about ordinary motorists because they cycle to work.
Populism tends to undermine effective climate policy in several ways. First, populists are often sceptical of experts. When people say “trust the experts”, suggests Ms Karamo, they really mean: “You are too stupid to make decisions about your life.”
Second, populists are suspicious of global institutions and foreigners. “Every subsidy we award to an electric-vehicle manufacturer is really a subsidy to the [Chinese Communist Party], because we depend on them
Third, populists encourage people to believe that the elite are plotting against them, thus adding paranoia to public life and making compromise harder. Mr Trump frames policies to promote electric cars as a threat to the American way of life
If Mr Trump is re-elected in 2024, he would once again pull out of the Paris Agreement on climate change. At a minimum, America would cease to offer leadership on climate change at a crucial moment
Similar arguments against greenery have taken root in Europe, too. Sweden German Britain
A quarter of global emissions are now covered, and the share is rising fast
Economists have long favoured putting a price on carbon, a mechanism Europe introduced in 2005.
Take Indonesia
On September 26th, at the launch of its first carbon market, Joko Widodo, the president, talked up its prospects as a hub for the carbon trade, and local banks duly snapped up credits from a geothermal-energy firm. The country also introduced an emissions-trading scheme in February, which requires large coal-fired plants to buy permits for emissions above a threshold.
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If global warming is to be limited, the world must forget fossil fuels as fast as possible—that much almost everyone agrees upon. How to do so is the complicated part. Economists have long favoured putting a price on carbon, a mechanism Europe introduced in 2005. Doing so allows the market to identify the cheapest unit of greenhouse gas to cut, and thus society to fight climate change at the lowest cost. Others, including many American politicians, worry that such schemes will provoke a backlash by raising consumer costs. Under President Joe Biden, America is instead doling out hundreds of billions of dollars to turn supply chains green. Yet, remarkably, the rest of the world is beginning to look more European—with carbon prices spreading in countries both rich and poor. Take Indonesia, the world’s ninth-biggest polluter. Although it releases 620m tonnes of carbon-dioxide equivalent a year, with almost half its soaring energy consumption coming from coal, the country has green ambitions. On September 26th, at the launch of its first carbon market, Joko Widodo, the president, talked up its prospects as a hub for the carbon trade, and local banks duly snapped up credits from a geothermal-energy firm. The country also introduced an emissions-trading scheme in February, which requires large coal-fired plants to buy permits for emissions above a threshold.
image: the economist In short, even in countries better known as polluters than green leaders, things are shifting. By the beginning of 2023, 23% of global emissions were covered by a carbon price, up from just 5% in 2010. According to the imf, 49 countries have carbon-pricing schemes, and another 23 are considering them.
On October 1st the eu launched a groundbreaking policy under a dreary name. The “carbon border adjustment mechanism” (cbam) will, by 2026, start to levy a carbon price on all the bloc’s imports, meaning that European companies will have a strong incentive to push suppliers around the world to go green.
The spread of carbon prices is happening in three ways. First, governments are creating new markets and levies. Indonesia
Second, countries that already have established markets are beefing up their policies. In September China’s National Climate Strategy Centre announced its emissions-trading scheme, the largest in the world
The final way that carbon markets are spreading is via cross-border schemes. The eu’s programme is by far the most advanced. CBAM.
Many of these schemes will take time to have an impact. Lots in Asia are flimsy, with prices set too low to lead to substantive change—well below the eu’s current price of around €90 ($95), which is itself only approaching climate economists’ estimate of the social cost of carbon.
Industrial firms around the world now face a still greater incentive to accurately track their carbon footprints: cbam. The eu’s ultimate goal is to tackle “carbon leakage”. Before cbam’s introduction, Europe’s carbon price meant that domestic industries faced an extra cost compared with those in countries with less ambitious decarbonisation plans. This gave importers an incentive to source material from abroad, even if such inputs were dirtier. To compensate for this, the eu handed out permits to industrial producers. These will now be phased out as cbam is phased in.
Carbon border tariffs may themselves start to multiply.
There is a domino effect to carbon pricing. Once an industry is subject to a carbon price, affected businesses will naturally want their competitors to face the same rules. Therefore owners of coal power plants will lobby to ensure that gas power plants operate on a level playing field. Governments in exporting countries also have an incentive to ensure that their domestic firms pay a carbon price at home rather than a tariff abroad. If Asia’s factories are pressed to reduce their emissions anyway by schemes such as cbam, then its governments are leaving money on the table by not levying a carbon price of their own.
The question is whether the dominoes will fall sufficiently quickly.
Her work has overturned assumptions about gender equality
her research provides a comprehensive history of gender labour-market inequality over the past 200 years. In telling this history, she has overturned a number of assumptions about both historical gender relations and what is required to achieve greater equality in the present day.
Before Ms Goldin’s work, economists had thought that economic growth led to a more level playing field. The relationship between the size of Western economies and female-labour-force participation is U-shaped—a classic Goldin result.
Ms Goldin’s research has busted other myths, too. By employing time-use surveys and industrial data she has painstakingly filled in gaps in the historical record about women’s wages and employment.
Her calculations also showed that the gender wage gap narrowed in bursts. First, a drop from 1820 to 1850, then another from 1890 to 1930 and finally a collapse, from 40% in 1980 to 20% in 2005. What drove these bursts? The initial two came well before the equal-pay movement and were caused by changes in the labour market: first, during the Industrial Revolution; second, during a surge in white-collar employment for occupations like clerical work.
For the third and most substantial drop, in the late 20th century, Ms Goldin emphasised the role of expectations. If a young woman has more control over when and whether she will have a child, and more certainty about what types of jobs will be available, she can make more informed choices about the future and change her behaviour detailed the example of the contraceptive pill,
Expectations also matter for employers. Although the pay gap narrowed in the early 20th century, the portion of the gap that was driven by discrimination, rather than occupation
Wages used to be based on contracts tied to tangible output—how many clothes were knitted, for instance. But after industrialisation, they were increasingly paid on a periodic basis, in part because measuring an individual’s output became trickier. As a result, other more ambiguous factors grew in importance, such as expectations of how long a worker would stay on the job. This penalised women, who were expected to quit when they had children.
Ms Goldin blames “greedy” jobs, such as being a lawyer or consultant, which offer increasing returns to long (and uncertain) hours.
She explains how such work interacts with the so-called parenthood penalty.
Before Ms Goldin, many academics considered questions about historical gender pay gaps unanswerable owing to a paucity of data. She has demonstrated—again and again—that digging through historical archives allows researchers to credibly answer big questions previously thought beyond their reach.
In early 20th-century America, firms barred married women from obtaining or retaining employment. A policy response came with the Civil Rights Act of 1964, which banned such behaviour. Today, wage gaps persist because of greedy jobs and parental norms, rather than because of employer discrimination.
In the past, Ms Goldin has suggested more flexibility in the workplace could be a solution.
The eu economy is now 65% the size of America’s in dollar terms, down from 90% just ten years ago. gdp per person is higher, and has grown far faster, in the United States than in Europe.
Goods and services cost more in some countries than in others, and working more does not always make people better off.
각국 소득 비교시 환율을 선정하는 문제: PPP(물가를 고려한 환율)
Measuring living standards requires converting gdp figures to “purchasing-power parity” (ppp).
Today, the gap is 46%, largely thanks to a strong dollar. Adjusting for ppp, the eu’s gdp is roughly 95% of America’s, the same as it was ten years ago.
Still, ppp-adjusted gdp per person has grown faster in America than in most of western Europe.
But focus instead on productivity, by dividing these figures by a tally of hours worked, and the gap closes further.
because of differences in holiday allowances, pensions and unemployment benefits, Europeans work less than Americans do. On an hourly basis, countries like Austria, Belgium and Denmark leap ahead. In France, Germany and Sweden productivity has also grown faster in the past ten years than it has in America.
America’s university graduates live much longer than non-graduates
Oct 2nd 2023
America’s economic record over the past 20 years has been impressive, outperforming other rich countries. Less impressive is its measure of wellness, or how long people live. A study by Anne Case and Angus Deaton, two economists at Princeton University, is a case in point. Their latest research shows that in America there is a huge and growing gap between the life expectancy of people with degrees and those without. In 2021, at age 25, Americans who do not have a four-year college degree (about two-thirds of the adult population) were expected to live on average about ten years less than those who do. In 1992 the gap was a third of that.
The authors, who previously made waves with their book on “Deaths of Despair and the Future of Capitalism”, speculate that the cause of this divergence is different status. “Jobs are allocated, not by matching necessary or useful skills, but by the use of the BA as [a] screen,” they say. That is persuasive, but not a complete answer. Greater despair might explain drug overdoses rising among the poor. It hardly explains why Americans are four times more likely to die in a car crash than people in Germany. As we recently reported, America does not do a very good job of keeping its people safe.
60만 명. 15만 8,000명. 앞의 숫자는 1999년부터 2017년 사이에 사망한 사람의 수고, 뒤의 숫자는 그중 2017년 한 해에 해당하는 사망자 수다. 미국 중년 백인층의 사망률에 돌연 반전이 일어나지 않았다면, 즉 20세기 들어 멈춤 없이 낮아지던 사망률의 흐름이 계속 유지되었다면 죽지 않았을 사람의 수.
노벨경제학상을 받은 경제학자 앵거스 디턴과 보건경제학의 귄위자 앤 케이스는 이처럼 일어나지 말았어야 하는 죽음에 ‘절망사’라는 이름을 붙인다. 이는 저소득·저학력 백인층에서 나타나는 현상으로 자살, 약물 중독, 알코올 중독으로 인한 죽음이다.
나아가 두 저자는 절망사라는 단서에서 출발해 미국의 경제 시스템과 사회 전반을 해부하고 문제의 근본 원인을 파고들어, 우리가 보다 더 공정한 세계로 가기 위해 필요한 해법을 제시한다. 불평등과 불공정, 능력주의와 교육 양극화, 경기침체와 실업, 독과점과 정경유착, 공동체 붕괴와 가족 해체까지 한국의 상황이라고 해도 어색하지 않은 문제와 그에 대한 면밀한 분석이 담겨 있다.
At last, a convincing explanation for America’s drug-death crisis
The synthetic opioid and its close chemical relatives were involved in about 70% of the country’s 110,000 overdose deaths in 2022. They are now almost certainly the biggest killer of Americans between the ages of 18 and 49. Every 14 months or so America loses more people to fentanyl than it has lost in all of its wars combined since the second world war, from Korea to Afghanistan.
It is thus regrettable that the economics has had little to say about fentanyl. A review of 150 economic studies in 2022 included just two that were focused on the drug.
The best-known explanation is the “deaths of despair” hypothesis, advanced by Anne Case and Angus Deaton of Princeton University.
This suffering, they argued, was related to economic insecurity. Yet their analysis had major defects, such as a failure to adjust for ageing populations. The arrival of fentanyl has highlighted a more fundamental flaw: it now kills black people at a higher rate than white people, the group supposedly gripped by anguish. An ill-defined notion of “despair” that leaps between different segments of the population does not carry much explanatory heft.
Some economists have homed in on the financial roots of the crisis. Justin Pierce of the Federal Reserve and Peter Schott of Yale University documented how areas most exposed to trade liberalisation suffered most. They found that counties exposed to import competition from China after 2000 had higher unemployment rates and more overdose deaths. Their analysis, however, ended in 2013, when the effects of this trade-related affliction were wearing off—and just before the fentanyl storm erupted.
Others have traced America’s addiction to the original sin of pharmaceutical firms pushing painkillers. In a paper published in 2019 Abby Alpert of the University of Pennsylvania and colleagues showed that states with looser prescription rules were targeted by Purdue Pharma in the late 1990s when it started selling OxyContin, its notorious opioid, and that they had nearly twice as many deaths from opioid overdoses as states with stricter rules over the following two decades. But recent years have been horrific everywhere: in California, a state with stricter rules, the opioid-overdose death rate roughly tripled between 2017 and 2021.
At last, economists are catching up with the awful turn in the opioid crisis. A new working paper by Timothy Moore of Purdue University, William Olney of Williams College and Benjamin Hansen of the University of Oregon offers a novel way of examining the spread of fentanyl. Rather than trying to account for demand for opioids, the focus of most research, they look squarely at the supply side of the equation, finding a strong correlation between aggregate import levels and opioid use. In states that import more than the national median, overdose deaths are roughly 40% higher. Put another way, 10% more imports per resident are associated with an 8.1% increase in fentanyl deaths from 2017 to 2020.
This is not because of some kind of trade-induced economic malaise. Many big importing states are wealthy, such as New Jersey and Maryland. Rather, the essential point is that these states bring in more stuff from abroad, and fentanyl is often part of the mix. It may ultimately travel around America, but much of it remains, and kills, in the states where it first arrived. None of the previous hypotheses—deaths of despair, competition from China or opioid marketing—have an impact on the relationship between trade flows and fentanyl deaths.
Policy responses often centre on the roles of China as a producer of fentanyl-related chemicals and Mexican drug gangs as distributors. America’s drug enforcers are especially active on its southern border; its diplomats want China to crack down on makers of synthetic opioid feedstocks. But Mr Moore and his colleagues conclude that more trade with pretty much anywhere is associated with fentanyl deaths. The probable explanation is that gangs are nimble and shift their smuggling routes.
This makes intuitive sense. Fentanyl’s danger stems from its potency: it is up to 50 times stronger than heroin. Criminals can sneak in tiny volumes, with devastating effects. And drug users can get one hell of a high for next to nothing: a single $5 pill contains a lethal dose. In business terms the overall picture is that of a classic positive supply shock—of a most negative product. The forensic accounting of fentanyl’s spread by Mr Moore and his colleagues is important. It suggests that targeting China and Mexico risks a game of whack-a-mole. Any country at any given moment may be the trouble spot, so it is better to spread out enforcement resources more evenly. It also shows that legal trade is probably the main conduit for fentanyl smuggling, meaning that more sophisticated screening operations at all ports of entry would be wise. Last, it reveals that despite all the attention paid to the disadvantaged and the despairing, the core problem is at once simpler and more depressing: fentanyl is just too easy to get. ■
