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

Why I’m Not Going to Properly Review “The People’s Republic of Wal-Mart”

Why I’m Not Going to Properly Review “The People’s Republic of Wal-Mart”

I’ve been thinking about alternatives to capitalism for a long time now.  I’ve taught several courses on the topic and plan eventually to write up what I think I’ve learned, so naturally I was intrigued by the new book, The People’s Republic of Wal-Mart: How the World’s Biggest Corporations Are Laying the Foundation for Socialism (PRW) by Leigh Phillips and Michal Rozworski.  I picked up a copy and started reading it, intending to write a review for this blog.

Well, I stopped about a quarter of the way through.  It’s not worth my time or yours, and I briefly want to tell you why.

For over a hundred years, socialists have looked to the organization of capitalist businesses for a vision of what a post-capitalist society might look like.  The conception of socialism as a single, all-encompassing public enterprise was widely recognized by advocates and opponents alike.  Marxists in particular looked to each new management strategy as a building block for the socialist future, since Marx’s idea was that the new society will be the product of the old, when the forces of production are liberated from the old, confining relations of production.  Remember Lenin’s encomium to the “scientific management” of F. W. Taylor?

And so there has been much left wing debate over the years about what is progressive and valuable about management, and what needs to be discarded.  You would think someone writing a book on this topic today would review that literature to see what might be learned from it.  Not this one.

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Gas prices fail to ignite overall inflation in April, but real wages flat so far for 2019

Gas prices fail to ignite overall inflation in April, but real wages flat so far for 2019

The consumer price index rose +0.3% in April, just as in March mainly as a result of a big monthly increase in gas prices. This is actually a surprisingly small increase because, as I pointed out last month, almost every time gas prices have increased by as much as they did — up 9% in March and 11% for April — consumer prices as a whole have gone up at least +0.4%. I’m showing just the last 10 years in the graph below (wages in blue, gas prices in red):

Figure one

Ex-gas, consumer inflation ex-energy has been remarkably stable between 1.5% and 2.5% YoY ever since gas prices made their long term bottom in early 1999. The only big exceptions were in the year before each of the last two recessions:

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The Psilocybin Referendum In Denver

The Psilocybin Referendum In Denver

This is one of the last things I was expecting to see happen; that a referendum in Denver would effectively decriminalize magic mushrooms or more specifically the main constituent component of them, the psychedelic drug, psilocybin.  But this has happened in the Mile High City, if by a narrow margin.  I largely welcome this.  After all, it has always been sort of ridiculous to arrest someone for owning a naturally growing mushroom, especially one known to grow especially in cowpies.

This gets personal.  I had my first psychedelic experience 55 years ago from ingesting a completely  legal, and still legal, substance, morning glory seeds, certain brands  of which (Heavenly Blue and Pearly Gates) containing LSD-6, a weaker form of LSD-25, the usual form of “acid” that people take, which is a Schedule 1 drug  along with marijuana, illegal for half a century here in the US, asi is psilocybin also.  As it is, psilocybin has long been known to be much milder than other psychedelics, especially LSD.  That long-ago experience massively changed me and my view of the world, I think mostly for the  better.

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Top 100 economic blogs

 

Econospeak (Barkley Rosser, pgl, Peter Dorman, Tom Walker) is in the financial section along with  Bonddad blog (New Deal democrat) and  Capital Ebbs and Flows (Joseph Joyce), and I am proud to say have a direct connection to Angry Bear (under general blogs…).

Dear Dan,

I wanted to let you know that your blog, Angry Bear Blog has been featured in the Top 100 Economics Blogs of 2019

One of the significant changes this year has been the removal of newspaper blogs such as Bloomberg View and Real Time Exchange to focus on more niche blogs. The lack of female economist (and bloggers) has been a common criticism of this list. I’ve made an effort to include more female bloggers, but if you have any suggestions, I can consider them for the 2020 list.Economics Blogs 2019

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U.S. Consumers Have Borne the Brunt of the Current Trade War

The National Bureau of Economic Research has highlighted two studies. (hat tip Spencer England)

U.S. Consumers Have Borne the Brunt of the Current Trade War

Recent tariff increases are unprecedented in the post-World War II era in terms of breadth, magnitude, and the sizes of the countries involved.


In 2018, the United States imposed tariffs on a variety of imported goods, and other countries responded with tariffs on imports from America. Two new NBER working papers analyze how this “trade war” has affected U.S. households and firms.

The recent tariffs, which represent the most comprehensive protectionist U.S. trade policy since the 1930 Smoot-Hawley Act and 1971 tariff actions, ranged from 10 to 50 percent on about $300 billion of U.S. imports — about 13 percent of the total. Other countries responded with similar tariffs on about $100 billion worth of U.S. exports.

In The Impact of the 2018 Trade War on U.S. Prices and Welfare (NBER Working Paper No. 25672), Mary AmitiStephen J. Redding, and David Weinstein find that the costs of the new tariff structure were largely passed through as increases in U.S. prices, affecting domestic consumers and producers who buy imported goods rather than foreign exporters.

Pablo D. FajgelbaumPinelopi K. Goldberg,Patrick J. Kennedy, and Amit K. Khandelwaladopt a different methodological approach to address the welfare effect of recent tariffs. They also find complete pass-through of U.S. tariffs to import prices. In The Return to Protectionism (NBER Working Paper No. 25638), they estimate that the new tariff regime reduced U.S. imports by 32 percent, and that retaliatory tariffs from other countries resulted in an 11 percent decline of U.S. exports.

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Scenes from the April jobs report

Scenes from the April jobs report

The headline news in Friday’s employment report was excellent. But underneath those headlines, all is not well.

Let’s celebrate the excellent headlines first. Adding 263,000 jobs in April was one of the dozen best reports of this entire expansion:

Next, here is the YoY% change in nonfarm payrolls, showing an uptick after the deceleration in the prior two months:

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Fiscal Policy and GDP 2019 update

I think it might be time for an update on the crudest of tiny sample reduced form analysis of fiscal policy and the current recovery.

One reason for my continued interest is that there was a rather large tax cut enacted in 2017. Trump critics tend to argue that it failed to encourage investment, but did affect aggregate demand. I wonder if the noticeable increase in GDP growth is due to the tax cut or the spending increase from the 2017 omnibus spending bill.

So I look at GDP and G (government consumption plus investment) again. Both are annual changes in billions of 2012 dollars (Not logs). I subtracted 400 billion from the change in quarterly GDP (multiplied by 4 to give an annual rate). Also I multiplied G by 1.5 which is a common estimate of the multiplier (say by Blanchard and Leigh or Nakamura and Steinsson). Here an effect of the tax cut would appear as an anomaly — an increase in GDP not fit by the change in G times the multiplier (or the $ 400 Billion and year trend).

I do not see an anomaly either when the tax bill passed in 2017 or in 2018 when tax witholding changed. As I mentioned back in 2014 I don’t see an anomaly in either growth or government consumption plus investment when sequestration started in 2013 q1. The anomalies are high growth from 2014 q 1 to 2015 q 1 then low growth from 2015 q1 and q2 to 2016 q1 and q2, that is a level anomaly at a time when there weren’t policy shifts.

I notice again that theory and data both suggest that changes in G are more important than changes in taxes. Nonetheless the practice is to measure the fiscal stance with the full employment budget deficit, that is, to assume that the balanced budget multiplier is zero.

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Median wage and salary growth stalls in Q1, while overall positive trend remains intact UPDATE: real household income declined

Median wage and salary growth stalls in Q1, while overall positive trend remains intact UPDATE: real household income declined

The Employment Cost Index is a median measure of wages, and also total compensation, for the 50th percentile worker. Thus it escapes the “Bill Gates walks into a bar” issue with average measures. Sunday I wrote that “It has been improving for several years now, and I am expecting it to continue.”

Not quite. While both the wage and total compensation indexes, measured nominally,  improved by +0.7% In the first quarter, on a YoY basis they declined slightly from +3.1% to +2.9%, and from +2.9% to +2.8%, respectively.  Here’s the YoY graph:

A quarterly look shows that the reason for the YoY deceleration is the outsized gains in Q1 last year, which were the best in over ten years:

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New home sales suggest housing bottom is in

New home sales suggest housing bottom is in

New home sales are extremely volatile, and extremely revised, but they do have the advantage of probably being the single most leading housing statistic, ahead of permits and starts.

So it is noteworthy that new home sales for March rose to 692,000, below only one month in late 2017 when they hit their expansion high of 712,000:

I have been looking for the bottom in housing, as mortgage interest rates have fallen in the past 5 months, and purchase mortgage applications have risen to new expansion highs:

 

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Commercial and industrial loans: another sign of a slowdown?

Commercial and industrial loans: another sign of a slowdown?

There are lots of cross-currents in the economy right now. At the absolute tip of the spear is the decline in interest rates since November, which has led to an improvement in some of the housing market metrics. In the shorter-term outlook, a simple quick-and-dirty metric of initial jobless claims (new 49 year lows) and the stock market (just made new all-time highs) suggests all clear. But there are contrary signs as well. For example, the weekly measure of temporary jobs by the American Staffing Association just fell to -1.8%, its worst YoY comparison since the 2015-16 shallow industrial recession.

Here’s one other little tidbit. Yesterday I read an article elsewhere about how a near-term recession isn’t in the cards, citing among other things a declining delinquency rate for commercial and industrial loans. Here’s their accompanying graph:

True enough, although if you look carefully, in the lead up to both the 1990 and 2008 recessions there were only two quarters of significant increases off the bottom before the recessions began. Since the latest data in the graph is for Q4 2018, a similar pattern wouldn’t rule out a recession beginning as soon as Q3 of this year, i.e., July.

 

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