Category Archives: Book review

China, America, and the International Order after the Pandemic

By Mira Rapp-Hooper – As people around the world fall ill, global markets convulse, and supply chains collapse, COVID-19 may also reorder international politics as we know it. No analyst can know when this crisis will end, much less divine the world we will meet at its conclusion. But as scholars have begun to note, it is plausible that China will emerge from the wreckage as more of a global leader than it began.

Following World War II, the United States was a chief architect of the so-called liberal international order and became its uncontested leader with the Cold War’s end. China, with its breathtaking economic growth and vast increases in military spending, has been on the ascent for decades, but long remained focused on domestic stability and the security of the Chinese Communist Party. It clambered to center stage after 2008, when the global financial crisis appeared to signal a weakening of American primacy.

China and others took the American financial stumble as a blunder of democratic capitalism, and a moment of opportunity to advance their own agendas. Under Xi Jinping, Beijing has seen the last decade as a period of “strategic opportunity” — one it did not necessarily expect to last, as it faces its own expected economic and demographic slowdowns. It built military bases in the South China Sea in contravention of international law, launched the vast and opaque Belt and Road Initiative to spread economic and political influence, doubled down on the state’s role in the economy and prejudicial policies, and coopted international human rights bodies. Along the way, it began to develop its own global governance aspirations and visions.

With the election of Donald Trump, the United States widened Beijing’s window of opportunity with its self-inflicted political convulsion. To China’s great fortune, American foreign policy was now expressly hostile to multilateral institutions, bellicose on trade, and defined national security in terms of narrow, homeland defense. To experts in the United States and abroad this looked like a willing abdication of the system the United States had constructed and led. But alongside these fears, and in another significant shift, foreign policy thinkers from both major parties increasingly agreed that the United States and China had entered a period of a great-power competition, in part, over the future of the international order and which power would set its terms.

Alone, the United States could not hope to match China’s economic and military heft in Asia. With allies by its side, America could remain peerless and manage peaceful change. Narrow unilateralism stoked renewed perceptions of further American decline and attenuated an otherwise favorable balance of power.

Enter the novel coronavirus.

It should be stunning that a virus that originated in China and spread in part due to Chinese government mismanagement may reorder the world to Beijing’s advantage, as Kurt Campbell and Rush Doshi have argued. more>

Technology and the future of growth: Challenges of change

By Zia Qureshi – Economic growth has been lackluster for more than a decade now. This has occurred at a time when economies have faced much unfolding change. What are the forces of change, how are they affecting the growth dynamics, and what are the implications for policy? A recently published book, “Growth in a Time of Change,” addresses these questions.

Three basic ingredients drive economic growth—productivity, capital, and labor. All three are facing new challenges in a changing context. Foremost among the drivers of change has been technology, spearheaded by digital transformation.

Productivity is the main long-term propeller of economic growth. Technology-enabled innovation is the major spur to productivity growth. Yet, paradoxically, productivity growth has slowed as digital technologies have boomed. Among advanced economies over the past 15 years or so, it has averaged less than half of the pace of the previous 15 years. Firms at the technological frontier have reaped major productivity gains, but the impact on productivity more widely across firms has been weak. The new technologies have tended to produce winners-take-most outcomes. Dominant firms have acquired more market power, market structures have become less competitive, and business dynamism has declined.

Investment also has been weak in most major economies. The persistent weakness of investment despite historically low interest rates has prompted concerns about the risk of “secular stagnation.” Weak productivity growth and investment have reinforced each other and are linked by similar shifts in market structures and dynamics.

Technology is having profound effects on labor markets. Automation and digital advances are shifting labor demand away from routine low- to middle-level skills to higher-level and more sophisticated analytical, technical, and managerial skills. On the supply side, however, equipping workers with skills that complement the new technologies has lagged, hindering the broader diffusion of innovation within economies. Education and training have been losing the race with technology. more>

The future will be shaped by what global productivity growth does next

By Warwick J. McKibbin and Adam Triggs – Productivity growth is a shadow of its former self. It’s one-tenth of what it was 40 years ago in advanced economies, and even emerging economies are struggling to replicate the growth of the past. As the fundamental driver of long-run living standards, weak productivity growth is a serious problem. Lower living standards, bigger budget deficits, fewer jobs, lower wages, and higher inequality await if things don’t improve.

What is most striking about this period of low productivity is that it coincides with enormous advances in technology. An extra 3.5 billion people have gained access to the internet. The processing power of computers has increased exponentially while their cost and size have plummeted. Smartphones have multiplied, and online businesses have flourished. Email, GPS and advanced software have become widespread. The sharing economy is unlocking the full potential of idle cars and empty rooms and houses. Information and communication technologies (ICT) and artificial intelligence (AI) have reshaped many industries. The accumulated history of human knowledge is now at our fingertips.

Robert Solow famously remarked that “you can see the computer age everywhere but in the productivity statistics.” Economists have put forward a variety of explanations for the so-called “Solow paradox,” each of which implies a radically different path for productivity growth in the future. Our chapter in the just-published book “Growth in a Time of Change” models each of these possible scenarios to explore what the world might look like depending on who turns out to be correct.

Let’s start with the optimists. Some economists, like the 2018 Nobel Laureate William Nordhaus and Iraj Saniee and his co-authors at Nokia Bell Labs, point to historical data showing long lag times between technological advances and increases in productivity. For these economists, a big surge in productivity is just around the corner.

If the optimists are correct and global productivity growth takes off rapidly, many of the world’s problems go away. Investment, wages, and employment rise sharply. GDP increases and inequality declines. While all sectors experience an investment boom, the durable goods sector experiences the largest increase. The sharp increase in investment sees an increased demand for investment goods, particularly durable manufactured goods and the energy and mining resources required to produce them. Countries that export durable manufactured goods (such as Germany) and energy and mining resources (such as Australia) benefit significantly. Secular stagnation becomes a thing of the past.

But new challenges emerge. The global economy is a closed system, so the resources to finance this boom in investment and production must come from somewhere: either from increased government savings or from reductions in current consumption. If governments don’t act, or if financial market rigidities prevent access to global capital markets, consumption can fall. The shock also triggers transitions that require the redeployment of labor and capital from declining sectors to booming ones. Rigid labor markets and oligopolistic product markets hamper this adjustment. Thus, the full benefits of the boom can be squandered, and its benefits may be short-lived and distributed more unequally between capital and labor.

Now consider the pessimists. Some economists, notably Northwestern University’s Robert Gordon, argue that the technological advances in recent decades won’t deliver the sort of productivity increases that we saw from the inventions of the last century. Facebook and Netflix are great, but they are no match for electricity and indoor plumbing. more>

Why hiring the ‘best’ people produces the least creative results

By Scott E Page – The complexity of modern problems often precludes any one person from fully understanding them. Factors contributing to rising obesity levels, for example, include transportation systems and infrastructure, media, convenience foods, changing social norms, human biology and psychological factors.

Designing an aircraft carrier, to take another example, requires knowledge of nuclear engineering, naval architecture, metallurgy, hydrodynamics, information systems, military protocols, the exercise of modern warfare and, given the long building time, the ability to predict trends in weapon systems.

The multidimensional or layered character of complex problems also undermines the principle of meritocracy: the idea that the ‘best person’ should be hired. There is no best person. When putting together an oncological research team, a biotech company such as Gilead or Genentech would not construct a multiple-choice test and hire the top scorers, or hire people whose resumes score highest according to some performance criteria. Instead, they would seek diversity. They would build a team of people who bring diverse knowledge bases, tools and analytic skills. That team would more likely than not include mathematicians (though not logicians such as Griffeath). And the mathematicians would likely study dynamical systems and differential equations.

Believers in a meritocracy might grant that teams ought to be diverse but then argue that meritocratic principles should apply within each category. Thus the team should consist of the ‘best’ mathematicians, the ‘best’ oncologists, and the ‘best’ biostatisticians from within the pool.

That position suffers from a similar flaw. Even with a knowledge domain, no test or criteria applied to individuals will produce the best team. Each of these domains possesses such depth and breadth, that no test can exist.

Consider the field of neuroscience. Upwards of 50,000 papers were published last year covering various techniques, domains of inquiry and levels of analysis, ranging from molecules and synapses up through networks of neurons. Given that complexity, any attempt to rank a collection of neuroscientists from best to worst, as if they were competitors in the 50-metre butterfly, must fail.

What could be true is that given a specific task and the composition of a particular team, one scientist would be more likely to contribute than another. Optimal hiring depends on context. Optimal teams will be diverse.

Yet the fallacy of meritocracy persists. Corporations, non-profits, governments, universities and even preschools test, score and hire the ‘best’. This all but guarantees not creating the best team.

Ranking people by common criteria produces homogeneity. And when biases creep in, it results in people who look like those making the decisions. That’s not likely to lead to breakthroughs. more>

Collaborators in creation

Our world is a system, in which physical and social technologies co-evolve. How can we shape a process we don’t control?
By Doyne Farmer, Fotini Markopoulou, Eric Beinhocker and Steen Rasmussen – This is a disorienting time. Disagreements are deep, factions stubborn, the common reality crumbling. Technology is changing who we are and the society we live in at a blinding pace. How can we make sense out of these changes? How can we forge new tools to guide our future? What is our new identity in this changing world?

Social upheavals caused by new technologies have occurred throughout history.

Cultural institutions are also a kind of technology – a social technology. Just as physical technologies – agriculture, the wheel or computers – are tools for transforming matter, energy or information in pursuit of our goals, social technologies are tools for organizing people in pursuit of our goals. Laws, moral values and money are social technologies, as are ways of organizing an army, a religion, a government or a retail business.

While we are fascinated and sometimes frightened by the pace of evolution of physical technologies, we experience the evolution of social technologies differently. Our values, laws and political organizations define and shape our identities. We often regard those who use different social technologies – people from different cultures, regions, nations, religions or those with different values and beliefs – as ‘others’.

When social technologies change too quickly, we experience a loss of identity, a collective confusion about who we are and how we distinguish ourselves from others. But when social technologies change too slowly, this can create tensions too – for example, when political institutions fail to keep pace with wider changes in society.

Physical and social technologies co-evolve all the time, pushing and pulling on each other. The influence is in both directions. Physical and social technologies are so entangled that it can be hard to separate them.

What drives technological change? In many popular narratives, invention is an act performed by heroes such as Thomas Edison and Tim Berners-Lee. In reality, technological change comes about through an incremental process that involves a great deal of trial and error, and networks of people working in ecosystems of innovation. Technological change is an evolutionary process, very much like biological change is an evolutionary process. more>

What if Competition Isn’t As “Natural” As We Think?

By John Favini – “The struggle for life,” Darwin deduced, would naturally select those beings whose hereditary mutations made them most fit to a specific environment. Over successive generations, scientists came to see the driving force behind evolution as perpetual competition between discrete individuals, a biological arms race to eat and reproduce in a world of scarcity.

Fast forward a century and a half, and “survival of the fittest”—the expression social theorist Herbert Spencer coined to sum up Darwin’s thinking—is as much a cultural cliché as it is a scientific theory. Hell, your worst colleague at the office might even offer it as a justification for his one-upmanship. More than just a cliché, though, the supposed naturalness of competition has played a central role in substantiating the laissez-faire variety of capitalism the majority of the American political spectrum has championed for the past four or so decades.

Indeed, any non-market-based solution to social issues usually falls prey to claims of utopianism, of ignoring the fundamental selfishness of the human species. Advocates for welfare programs, for instance, often run up against criticism that their policy proposals fail to understand to importance of “losing,” that they lessen the stakes of the competition innate to human social life.

Similarly, collectively owned spaces or institutions (like communal land trusts or co-ops) are often presumed short-lived or inefficient, doomed to suffer the “tragedy of the commons” as the innate self-interest of each member leads to an overuse of collective resources—a thesis that has been debunked again and again since its first articulation by Garrett Hardin in 1968.

To put it simply, we have let Darwinism set the horizon of possibility for human behavior. Competition has become a supposed basic feature of all life, something immutable, universal, natural.

Yet new research from across various fields of study is throwing the putative scientific basis of this consensus into doubt. Mind you, there have always been people, scientists and otherwise, who conceived of life outside a Darwinian paradigm—the idea of evolutionary biology is and has been a conversation among a mostly white and male global elite. Yet, even within centers of institutional power, like universities in North America, competition’s position as the central force driving evolution has been seriously challenged recently. In fact, criticisms have been mounting at least since biologist Lynn Margulis began publishing in the late ’60s

Put simply, life is beginning to look ever more complex and ever more collaborative. All this has fractured Western biology’s consensus on Darwin. In response to all these new insights, some biologists instinctively defend Darwin, an ingrained impulse from years of championing his work against creationists. Others, like Margulis herself, feel Darwin had something to offer, at least in understanding the animal world, but argue his theories were simplified and elevated to a doctrine in the generations after his passing.

Others are chartering research projects that depart from established Darwinian thinking in fundamental ways—like ornithologist Richard Prum, who recently authored a book on the ways beauty, rather than any utilitarian measure of fitness, shapes evolution. Indeed, alongside the research I have explored here, works by scientists like Carl Woese on horizontal gene transfer and new insights from epigenetics have pushed some to advocate for an as-yet-unseen “Third Way,” a theory for life that is neither creationism nor Neo-Darwinian evolution. more>

Saving Capitalism from Inequality

Robust middle incomes deliver the demand that businesses need to produce.
By Robert Manduca – After decades of praise heaped on “job creators,” viewers today may find it disorienting to see the consumer—and a middle-income one at that—cast as the hero of the economy, instead of the investor or the entrepreneur.

Yet Fortune, which produced the video in 1956, was hardly an outlier. In the mid-twentieth century, advertising, popular press, and television bombarded Americans with the message that national prosperity depended on their personal spending. As LIFE proclaimed in 1947, “Family Status Must Improve: It Should Buy More For Itself to Better the Living of Others.”

This messaging was not simply an invention of clever marketers; it had behind it the full force of the best-regarded economic theory of the time, the one elaborated in John Maynard Keynes’s The General Theory of Employment, Interest and Money (1936). The key to full employment and economic growth, many at the time believed, was high levels of aggregate demand.

But high demand required mass consumption, which in turn required an equitable distribution of purchasing power. By ensuring sufficient income for less well-off consumers, the government could continually expand the markets for businesses and boost profits as well as wages.

Conversely, Keynes’s theory implied, growing income inequality would lead to lower demand and slower economic growth.

The basic Keynesian logic of demand-driven growth came to be accepted across U.S. society in large part due to significant postwar efforts to explain, communicate, and popularize it. Proponents of Keynesian thinking worked hard to educate the public about the new economic theory and the possibilities of abundance that it foretold. A particularly compelling example is the book Tomorrow Without Fear (1946). more>

The Battle for India’s Founding Ideals

By Madhav Khosla – These events come after much of India has been engulfed in protests over a new citizenship law that treats Muslims differently to those from other religions. These protests, which have seen tens of thousands march across the nation, began in universities. The government’s reaction was swift and brutal. It encompassed both prohibitory measures, such as Internet shutdowns and the prevention of public assembly, as well as reactive measures, which included detention and violence. In Uttar Pradesh, a state which is home to more Indians than any other, the tales of police brutality would send a shiver down any spine.

Sunday’s attack underscores two crucial changes taking place in the world’s largest democracy. The first is to the country’s formal legal architecture. India’s founders, as I have suggested in a new book, India’s Founding Moment, imagined citizenship to be unmediated by community affiliation. For them, to belong to the modern world was to belong to representative framework where each person was treated on free and equal terms.

Measures like the new citizenship law challenge and undermine this founding vision. The law enables “any person belonging to Hindu, Sikh, Buddhist, Jain, Parsi or Christian community from Afghanistan, Bangladesh or Pakistan” to become an Indian citizen, thereby explicitly excluding Muslims.

India’s Constitution guarantees the right to equal treatment. This right applies to all persons and not only to citizens. To pass muster, a law has to make an intelligible distinction between those that it includes and those that it excludes. Moreover, this distinction has to bear a rational connection to the law’s objective.

In this case, the stated objective is addressing the religious persecution of the enumerated classes. But the law does not capture this objective as it is both over- and under-inclusive. It does not provide protection to groups such as the Ahmadiyya Muslims from Pakistan and it assumes that all those who enter India from the specified classes are persecuted. This presumption is revealed by the fact that the law has no provisions relating to religious persecution at all, thus eliminating any link between the distinctions drawn and the declared aim.

As India is thrown deeper and deeper into a cycle of extra-constitutional violence, we should fear that the state and citizens will struggle to manage the situation. In such scenarios, the disorder and horror often follows a logic of its own.

If India continues to unravel in this fashion, there will be unspeakable acts on either side, untold truths that are hidden in every quarter. Even the most terrifying moves will be justified, even the clearest forms of evidence will be challenged.

In a world where public institutions and social harmony have given way, we will live under a state that claims monopoly over the exercise of force but no longer quite enjoys it. The state will deploy and exploit its power in every possible way, but, as in the case of colonial rule, the idea of legitimate authority will cease to have meaning. more>

Capitalism’s Case for Abolishing Billionaires

Adam Smith wanted to keep the power of the rich in check.
By Linsey McGoey – Adam Smith is remembered as the patron saint of unregulated commerce, as the world’s greatest prophet of profit. His idea of the “invisible hand” has been used by countless economists and politicians to argue that capitalism works, despite its excesses and inequalities.

But this fairytale version is wrong. The actual Smith wrote of his dream for a more equal society, and condemned the rich for serving their own narrow interests at the expense of the wider public.

“The establishment of perfect justice, of perfect liberty, and of perfect equality,” he writes in Wealth of Nations, “is the very simple secret which most effectively secures the highest degree of prosperity to all the three classes.”

Today Smith’s call for “perfect equality” is either ignored or deliberately misrepresented.

But with 1% of the world’s population now owning half its wealth, that belief is being forcefully called into question. There are growing calls to abolish billionaires and their privileges, including preferential tax treatment, handouts to corporations, and grossly inflated executive salaries that are often subsidized by taxpayers.

Smith was scathingly critical of the wealthy’s disproportionate power over government policymaking. He complained about the tendency of the rich to shirk tax obligations, unfairly passing tax burdens on to poor workers. He heaped scorn on government bailouts of the East India Company. He thought dirty money in politics was akin to bribery, and that it undermined the duty to govern impartiality. He wasn’t alone.

The reality is that the historical case for abolishing billionaire privileges has a long heritage, stretching to enlightenment thinkers and the revolutionaries they inspired, including countless enslaved and working-class people in forgotten graves. more>

Why the idea that the world is in terminal decline is so dangerous

By Jeremy Adelman – From all sides, the message is coming in: the world as we know it is on the verge of something really bad. From the Right, we hear that ‘West’ and ‘Judeo-Christian Civilization’ are in the pincers of foreign infidels and native, hooded extremists. Left-wing declinism buzzes about coups, surveillance regimes, and the inevitable – if elusive – collapse of capitalism.

In fact, the idea of decline is one thing the extremes of Left and Right agree upon. Rome’s decline looms large as the precedent. So, world historians have played their part as doomsayers.

It is almost part of the modern condition to expect the party to be over sooner rather than later. What varies is how the end will come. Will it be a Biblical cataclysm, a great leveler? Or will it be more gradual, like Malthusian hunger or a moralist slump?

Our declinist age is noteworthy in one important way. It’s not just the Westerns who are in trouble; thanks to globalization, it’s the Resterners too. In fact, we are all, as a species, in this mess; our world supply chains and climate change have ensured that we are poised before a sixth mass extinction together. We should worry less about our lifestyle and more about life itself.

One dissenting voice in the 1970s was Albert O Hirschman’s. He worried about the lure of doomsaying. Dire predictions, he warned, can blind big-picture observers to countervailing forces, positive stories and glimmers of solutions. There is a reason why: declinists confuse the growing pains of change with signs of the end of entire systems. Declinism misses the possibility that behind the downsizing old ways there might be new ones poking through. more>