Relevant and even prescient commentary on news, politics and the economy.

Islamic Extremist Violence v. Right Wing Extremist Violence, and Our Government

Earlier this month, the Government Accounting Office released a report entitled Countering Violent Extremism”. Its a great example of how to outright lie using data. (I note that the, um, “analysis” was performed between October 2015 and April 2017, and bears the previous administration’s imprint. The current administration’s inanities lie in an orthogonal direction.)

The upshot of the report is:

GAO recommends that DHS and DOJ direct the CVE Task Force to (1) develop a cohesive strategy with measurable outcomes and (2) establish a process to assess the overall progress of CVE efforts. DHS and DOJ concurred with both recommendations and DHS described the CVE Task Force’s planned actions for implementation.

All well and good, once you get through the acronymese. But you cannot tackle something you don’t understand, or pretend not to understand. (Sun Tzu’s dictum about the need to know the enemy and know oneself comes to mind.) And this is how the authors of the piece understand violent extremists:

Of the 85 violent extremist incidents that resulted in death since September 12, 2001, far right wing violent extremist groups were responsible for 62 (73 percent) while radical Islamist violent extremists were responsible for 23 (27 percent). The total number of fatalities is about the same for far right wing violent extremists and radical Islamist violent extremists over the approximately 15-year period (106 and 119, respectively). However, 41 percent of the deaths attributable to radical Islamist violent extremists occurred in a single event—an attack at an Orlando, Florida night club in 2016 (see fig. 2). Details on the locations and dates of the attacks can be found in appendix II.

The usual narrative we’ve seen in the past decade and change in this country is that right wing extremists are more dangerous than Islamic extremists. But bad as the right wing crazies are, the narrative is getting a bit hard to sustain, what with the internet being so easily accessible. So the rear-guard action now seems to be to say that radical extremists at least aren’t any worst than the people we actually are allowed to think of as villains, and maybe better if you ignore that Mateen fellow.

But going to appendix II, where the data, such as it is, sits, is eye opening. Appendix II is basically a collection of sordid acts, described in short blurbs. Some are well-known, such as the aforementioned Mateen case: “Orlando Night Club shooting. Omar Mateen killed 49.” Some are oddly described. The John Allen Muhammad – Lee Boyd Malvo sniper attacks are broken up into 15 separate incidents, each with one dead victim. (This seems shy of the 17 deaths attributed to them in other sources, but that’s a quibble.)

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Is Authoritarian Nationalism Mostly A Rural Phenomenon?

by  Barkley Rosser

Is Authoritarian Nationalism Mostly A Rural Phenomenon?

Offhand it looks like maybe it is.  In the US Trump won overwhelmingly in rural areas while losing all of the largest cities.  Yes, he took some mid-size declining industrial ones like Youngstown, OH and Erie, Pa, while losing some rural areas in places like Vermont as well as areas with minority groups the majority of the population.  But in general it holds, he won the countryside and lost the big cities.

In France, Marine Le Pen is also leading in some declining industrial cities of the Northeast for the upcoming presidential second round, but she loses in the larger growing cities such as Paris and Toulouse.   Recently The Economist reported a study showing that as one goes from downtown Paris outward there is a linear and substantial increase in support for her.  Again, the countryside is her base.

The Brexit vote was more for nationalism than authoritarianism, but in England it was the same pattern, countryside and declining industrial cities for Exit while London was strongly for Remain.  Of course in Scotland, every county was pro-Remain, but that is a special case.

In Russia, where Putin apparently remains very popular, his base is also  the countryside.  The main location where one finds open opposition to him?  Moscow, the largest, richest, and capital city.

So it looks like there is a pattern here, but there are some exceptions.

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Two hits and a miss on GDP and wages

by New Deal democrat

Two hits and a miss on GDP and wages

We got two pieces of good news from the GDP report this morning, and one piece of bad news for workers.

First, from the important long leading housing sector, real private fixed residential investment rose again to a new post-recession high:

This adds to the generally positive data coming out of that sector.

Second, proprietors income increased:

This is a good proxy for corporate profits, which won’t be reported until next month.  It isn’t quite as reliable an indicator, but the two generally move in the same direction so the two long leading aspects of the GDP report were hits.

This miss was in the Employment Cost Index. 

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Ad blockers…?

I use an ad blocker in general, and add exceptions if ads are not onerous and I want to subscribe to help fund sources. The impact on AB is not large but helps keep AB on a non-profit level instead of using personal funds. Contributors are volunteers. But I would like to hear from readers on notions on their own experience…AB is glad to share links to content almost anywhere.

Via VOX:

The impact of ad blockers on the Internet

In the short run – before sites have a chance to change their investment – ad blocking should just increase traffic.  Sites haven’t had a chance, or the need, to adjust their quality, so users employing ad blockers can access the same quality content without the nuisance of ads.  Users of ad blockers, some of whom had been unwilling to visit the sites without an ad blocker, would now find the site more attractive and might now visit.  In the short run, we would therefore expect sites with a greater share of potential users employing ad blockers to experience increased traffic. In the longer run, by contrast, sites deprived of revenue would decrease their investment along the lines outlined above.  While we find a worsening in traffic for sites with more ad blocking users over the three-year period, we find no such worsening during 2013.  Rather, sites with higher shares of eventual ad blocking users experience increases in traffic during 2013, a pattern that reverses in the longer-run period of 2013-2016.  This provides some assurance that the site degradation that we document is caused by ad blocking.

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Impact of free trade agreements

Via Vox:

One size does not fit all: On the heterogeneous impact of free trade agreements

Can empirical research on past FTAs shed light on this uncertainty? To date, most studies that quantify the effects of trade agreements have either focused on obtaining a common average effect across all agreements (e.g. Baier and Bergstrand 2007, Anderson and Yotov 2016) or have assumed that the effects are common across similar types of agreements (e.g. Baier et al. 2014). A small literature, including works by Carrère (2006) and Kohl (2014), has documented that different individual FTAs – even ostensibly similar ones – can have very different effects on trade. However, while the principle that the effects of FTAs may be heterogeneous is generally well-understood, an intuitive understanding of the sources of this heterogeneity remains elusive. Aside from variation in tariffs, few theoretically grounded arguments exist for why one agreement should have a larger impact on trade than another, let alone why the same agreement might affect different members in different ways.

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Financial Times Messes Up On Italy

by Barkley Rosser

Financial Times Messes Up On Italy

I have for a long time thought the Financial Times to be the best newspaper in the world, but now I am going to play Dean Baker beating the press on it.  I think they are slipping, and the sign is a story that appeared in today’s issue about Matteo Renzi in Italy, about whom I have posted here previously.

The story reported that he is likely to finally nail down the leadership of the Democratic Party in Italy this Saturday over two rivals.  It then praised him and compared him to Canada’s Trudeau and France’s Macron as a bright young guy all new and blah blah, even as it recognized that he stepped down in December as PM after losing a referendum he pushed.  It said he has learned his lesson.

Now it did briefly recognize that he might have a problem in the general election next year as the opposition Five Star movement now has 50% support in the polls, although so what.  The one thing that they mentioned as possibly causing problems for him would be the problems of Alitalia.

There was zero mention of the corruption problem of his father, zero.  I note that over the last several weeks basically every day on the front pages of all the newspapers in Italy have been stories about this matter, and it has badly damaged Renzi in the polls.  The Alitalia story is back pages. Heck, that airline is always in trouble, in “crisis.”  Big nothing.  But his old man being corrupt completely upends this story of him being the reformed young Trudeau-Macron.  He has a serious problem, and it could be a serious problem for the EU next year, if Renzi cannot get this under control.

But the Fin Times somehow completely missed this story.  I guess their reporter listened to some PR guy out of the Renzi camp and never bothered to check on the Italian press.  I am sorry to learn that the FT has joined so many other newspapers in just going down the toilet of bad reporting.

Ciao you all.

Barkley Rosser

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European Union ends relocation subsidies

by Kenneth Thomas

European Union ends relocation subsidies

This isn’t actually news, but it’s news to me, and it’s something you need to know. Greg LeRoy sent me an article by James Meek in London Review of Books (20 April 2017) that he’d been sent by a friend, documenting more EU-permitted job piracy by Poland that preceded the case I discuss at length in my book, Investment Incentives and the Global Competition for Capital. There, I criticized the European Commission’s Directorate-General for Competition for approving a 54.5 million euro subsidy for Dell to move from Ireland to Poland in 2009. During my January 2011 book tour, I took a lot of flak from DG Competition when I presented there, with several staff pushing back on my criticism of this decision.

As the LRB article pointed out, there was another case involving Poland, where Cadbury received state aid of about $5 million (14.18 million zloty when the zloty was worth about 0.35 USD) in November 2008 to move from the Somerdale, United Kingdom, to Skarbimierz (the LRB gives a much bigger number, but from unspecified “Polish government figures,” so I cannot find a way to compare it with the EU’s case report). This case is only listed in the EU’s Official Journal, where it is reported as having been notified under the General Block Exemption Regulation. As this regulation is intended for uncontroversial cases, that makes it evidence, though hardly proof, for a relatively smaller rather than larger aid amount. For my purposes, the amount is less important than the fact that we have another documented relocation subsidy.

What’s the big “news”? In Meek’s article we read, “In 2014, too late for Somerdale, the EU recognised its error and banned the use of national subsidies to entice multinationals to move production from one EU country to another.” Just like that.*

Okay, I’m abstracting from the political process. But it’s pretty clear what happened. As I reported in Investment Incentives and the Global Competition for Capital, when Dell moved to Poland, all of Ireland was up in arms, including government officials and Members of the European Parliament. The European Parliament made its displeasure known. What the Somerdale case shows us is that there was at least one other country on the wrong end of a relocation subsidy, strengthening further the political pressure for state aid reform.
As I said, Commission staff believed they made the correct decision in the subsequent Dell case, and the rationale would have been exactly the same for Cadbury. The move sent economic activity from somewhere with high per capita income to a place with a far lower per capita income. They saw this as an overall increase of efficiency within the European Union. As I argued, though, even if that were the case, the decision wasn’t good for intra-EU solidarity, and it undermined support for policies promoting the growth of the EU’s poorer regions (“cohesion” policy in EU-speak). In light of the 2014 policy change, we know that arguments aligned to mine were the ones that carried the day politically.

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The new Robert’s Supreme Court

Linda Greenhouse of the NYT comments:

A Supreme Court quiz: Who offered this paean to judicial restraint: “If it is not necessary to decide more to a case, then in my view it is necessary not to decide more to a case”?

That was nearly 11 years ago, only eight months into his tenure. It was before Citizens United erased limits on corporate spending in politics, before Shelby County v. Holder eviscerated the Voting Rights Act, before Chief Justice Roberts swung for the fences in the Parents Involved case to bar formerly segregated school districts from trying to preserve integration through the use of racially conscious student assignment plans. (Only Justice Anthony M. Kennedy’s separate concurring opinion in that 5-to-4 decision retained some leeway for school districts looking for strategies to prevent resegregation.)

And now we have Trinity Lutheran Church v. Comer, a case argued last week that presents the question whether a state that provides grants to schools for upgrading their playground surfaces can constitutionally disqualify a church-run nursery school from eligibility because of its religious character.

“Having eight was unusual and awkward,” Justice Alito said, according to The Journal article. “That probably required having a lot more discussion of some things and more compromise and maybe narrower opinions than we would have issued otherwise, but as of this Monday, we were back to an odd number.”

That’s a bold statement that hardly needs translation, but here’s mine anyway: We’ve got our mojo back. Consensus? That was so 2016. And the Roberts court in 2017? Now it begins.

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Poland: “What Are These People Complaining About?”

by Barkley Rosser

Poland: “What Are These People Complaining About?”

Thus spake Jeffrey Sachs in January 1994 at the ASSA/AEA meetings shortly after the Solidarity government of Lech Walesa was defeated in an election over plans to cut old age pensions, which Sachs thought were too high. He has since recanted some of his views from that time, but indeed Poland had been the poster boy for the Washington Consensus on transition, with its “shock therapy” approach of sudden change that looked like it was doing well.  Poland had sharply reduced inflation from triple to single digits and after a 7% GDP decline in 1990 had turned to positive growth before any other transition economy and was growing impressively with sharply falling unemployment.  What were these people complaining about?

This parallels more recent developments.  Poland was the only European nation not to fall into recession in 2009, able to devalue its zloty as not in the Eurozone and able to continue exporting to strong neighbor Germany.  Its unemployment rate has remained fairly low and its poverty rate falling and below that of the US.  Yet in 2015 the Civic Platform party was ousted by the Law and Justice Party, which has since taken to shutting down free press and judiciary and otherwise engaging in general demagogic and populist authoritarianism along with hyper-nationalism.  Well, thank the Civic Platform raising the retirement age for those large pensions back in 2012, which the Law and Justice Party hammered them on hard.  Part of why Poland has done well has been that indeed it has not undone its social safety net inherited from the communist period, even as so many outsiders and insiders have said they should do, including at some points the mastermind of shock therapy and the finance minister who put it in place, Leszek Balcerowicz.

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