Tag Archives: Capital

Can Asia reach high-income?

By Donghyun Park, Abdul Abiad, Gemma Estrada, Xuehui Han, and Shu Tian – In a single generation, Asia has transformed itself from a low-income continent to a middle-income one.

In 1991 more than 90 percent of the region’s population still lived in low-income countries. By 2015, more than 95 percent lived in middle-income countries.

Is the continent now on its way to reaching high income in the next generation?

The experiences of the newly industrialized economies might give some cause for optimism about the region’s prospects. After all, the Republic of Korea made the transition from middle to high income in only 23 years. Yet global experience is far less reassuring. Historically it has taken the typical middle-income country more than half a century to graduate to high-income status, leading some economists to label this the “middle-income trap.”

As countries develop their economies, traditional sources of productivity growth—such as shifting labor from agriculture to manufacturing or the imitation of foreign technologies—decline in importance. Innovation assumes a more central role, especially for upper middle-income countries. Middle-income economies that successfully graduated to high income had 2.5 times more research and development stock per worker as those that did not, for example. more> https://goo.gl/CfPW4u

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GE’s Immelt bets big on digital factories, shareholders are wary

By Alwyn Scott – The $4 billion GE has spent on developing digital products – ranging from tiny sensors in jet engines to augmented reality and software that can crunch large volumes of data – is on the scale of investments Google and Facebook Inc (FB.N) made to build their businesses, Bill Ruh, CEO of GE’s digital division, told Reuters.

Now that GE has shed non-essential operations, including most of its large financial unit, its fortunes will rise or fall depending on whether that investment delivers.

GE’s technology – and similar systems by IBM, Siemens AG (SIEGn.DE) and others – is a hot new battleground in manufacturing.

The companies promise they can spot problems before machines break down, yield cost savings of 30 percent or more, and raise labor productivity that has slowed sharply in recent years.

The company has spent $5 billion setting up new U.S. factories in the last five years. As it now adds digital technology to its plants, it needs fewer, and higher skilled, workers than in the past.

“We’re going to have a smarter worker,” Jeff Immelt said in an interview. “We’re not going to have as many workers.” more> https://goo.gl/MDXuzw

The Robot Economy: Ready or Not, Here It Comes

By JP Sottile – This is the “next economy,” and, ready or not, it is coming at the double-time speed of Moore’s Law. This rapid acceleration of the Fourth Industrial Revolution is transforming “The Future of Employment’s” apocalyptic premonition — that 47 percent of all jobs in the United States may be lost to automation over the next two decades — into a solemn epitaph for the rapidly fading era of manufacturing-based, consumption-driven economics.

Even low-paying farming jobs could be completely upended by robotic fruit pickers with the deft touch needed to harvest food in American and European fields. Robots are already replacing cheap migrant workers shut out by anti-immigrant policies. And new robot-staffed factories are producing modular houses, while robotic bricklayers promise to do to the construction trades what automation did to coal mining.

An often overlooked element, though, is the way automation helped maintain continued growth in productivity, even as wages lagged. As the Guardian recently noted, “As of 2015, a typical production worker in the US earned about 9% less than a comparable worker in 1973. Over the same 42 years, the American economy grew by more than 200%, or a staggering $11tn.” This divergence between wages and productivity drove wealth inequality. more> https://goo.gl/a7rHdR

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What is human capital?

BOOK REVIEW

The Death of Homo Economicus, Author: Peter Fleming.
The Road to Serfdom, Author: F A Hayek.

By Peter Fleming – Back in the 1960s, Friedman envisaged a society in which we’d all be wealthy, thriving entrepreneurs. What we got in reality was a pay cut, reduced holiday or sick leave, a chronic skills deficit, credit-card debt and endless hours of pointless work. If anything, the story of human capital theory in Western economies has been about divesting in people, not the opposite.

That’s because it was born within an extreme period in 20th-century history, when many believed that the fate of humanity was hanging in the balance. It should therefore be approached as such, a rather eccentric and largely unrealistic relic of the Cold War.

Only in that highly unusual milieu could mavericks such as Hayek and Friedman ever be taken seriously and listened to. In the face of communist collectivism, the Chicago school developed a diametrically opposed account of society, one populated by capsule-like individuals who automatically shun all forms of social cohesion that isn’t transactional.

These loners are driven only by the ethos of self-serving competitiveness. Blindly attached to money. Insecure and paranoid. No wonder we’re so unwell today. more> https://goo.gl/hLM2ey

Why the Phrase ‘Late Capitalism’ Is Suddenly Everywhere

By Annie Lowrey – Now, it is everywhere, in thousands of social-media posts and listicles aimed at Millennials and news stories about modern malaise.

Over time, the semantics of the phrase shifted a bit. “Late capitalism” became a catchall for incidents that capture the tragicomic inanity and inequity of contemporary capitalism.

This usage captures the resurgent left’s anger over the recovery and the inequality that long preceded it—as well as the rage of millions of less politically engaged Americans who nevertheless feel left out and left behind.

“I think it’s popular again now because the financial crisis and subsequent decade has really stripped away a veneer on what’s going on in the economy,” Mike Konczal, a fellow at the Roosevelt Institute, told me. “Austerity, runaway top incomes, globalization, populations permanently out of the job market, competition pushed further into our everyday lives. These aren’t new, but they have an extra cruelty that is boiling over everywhere.”

The current usage also captures the perceived froth and foolishness of Silicon Valley. The gig economy in particular provides plenty of late-capitalist fodder, with investors showering cash on platforms to create cheap services for the rich and lazy and no-benefit jobs for the eager and poor. At the same time, traditional jobs seem to be providing less in the way of security, stability, and support, too. more> https://goo.gl/bwRjd5

Our world outsmarts us

BOOK REVIEW

A Skeptic’s Guide to the Mind: What Neuroscience Can and Cannot Tell Us About Ourselves, Author: Robert Burton.

By Robert Burton – Whether contemplating the pros and cons of climate change; the role of evolution; the risks versus benefits of vaccines, cancer screening, proper nutrition, genetic engineering; trickle-down versus bottom-up economic policies; or how to improve local traffic, we must be comfortable with a variety of statistical and scientific methodologies, complex risk-reward and probability calculations – not to mention an intuitive grasp of the difference between fact, theory and opinion.

Even moral decisions, such as whether or not to sacrifice one life to save five (as in the classic trolley-car experiment), boil down to often opaque calculations of the relative value of the individual versus the group.

If we are not up to the cognitive task, how might we be expected to respond? Will we graciously acknowledge our individual limits and readily admit that others might have more knowledge and better ideas?

Will those uneasy with numbers and calculations appreciate and admire those who are?

Or is it more likely that a painful-to-acknowledge sense of inadequacy will promote an intellectual defensiveness and resistance to ideas not intuitively obvious? more> https://goo.gl/Bjkogb

America is Regressing into a Developing Nation for Most People

BOOK REVIEW

The Vanishing Middle Class: Prejudice and Power in a Dual Economy, Author: Peter Temin.

By Lynn Parramore – America is not one country anymore. It is becoming two, each with vastly different resources, expectations, and fates.

In one of these countries live members of what Temin calls the “FTE sector” (named for finance, technology, and electronics, the industries which largely support its growth). These are the 20 percent of Americans who enjoy college educations, have good jobs, and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success. They grow up with parents who read books to them, tutors to help with homework, and plenty of stimulating things to do and places to go. They travel in planes and drive new cars. The citizens of this country see economic growth all around them and exciting possibilities for the future.

They make plans, influence policies, and count themselves as lucky to be Americans.

The FTE citizens rarely visit the country where the other 80 percent of Americans live: the low-wage sector. Here, the world of possibility is shrinking, often dramatically. People are burdened with debt and anxious about their insecure jobs if they have a job at all. Many of them are getting sicker and dying younger than they used to. They get around by crumbling public transport and cars they have trouble paying for. Family life is uncertain here; people often don’t partner for the long-term even when they have children. If they go to college, they finance it by going heavily into debt.

They are not thinking about the future; they are focused on surviving the present. The world in which they reside is very different from the one they were taught to believe in. more> https://goo.gl/LKhYy6

How Norway Proves Laissez-faire Economics Is Not Just Wrong, It’s Toxic.

By David S. Wilson, Dag O. Hessen – For most of human existence, until a scant 10 or 15 thousand years ago, the human ladder was truncated. All groups were small groups whose members knew each other as individuals. These groups were loosely organized into tribes of a few thousand people, but cities, provinces, and nations were unknown.

Today, over half the earth’s population resides in cities and the most populous nations teem with billions of people, but groups the size of villages still deserve a special status. They are the social units that we are genetically adapted to live within and they can provide a blueprint for larger social units, including the largest of them all – the global village of nations.

Modern nations differ greatly in how well they function at the national scale. Some manage their affairs efficiently for the benefit of all their citizens. They qualify at least as crude superorganisms.

Other nations are as dysfunctional as a cancer-ridden patient or an ecosystem ravaged by a single species. Whatever teamwork exists is at a smaller scale, such as a group of elites exploiting the nation for its own benefit.

The nations that work have safeguards that prevent exploitation from within, like scaled-up villages.

The nations that don’t work will probably never work unless similar safeguards are implemented. more> https://goo.gl/r9OigY

Almost everything Republicans get wrong about the economy started with a cocktail napkin in 1974

BOOK REVIEW

Return to Prosperity, Author: Art Laffer.

By Gwynn Guilford – The sealing of America’s fiscal fate began in 1974, over cocktails.

As afternoon faded to evening on December 4, Dick Cheney and a young economist named Art Laffer shuffled into a booth at the Two Continents restaurant in the iconic Hotel Washington—two blocks from the US Treasury department.

Cheney was US president Gerald Ford’s deputy chief of staff. He and his boss, Donald Rumsfeld, were looking for alternatives to Ford’s plan to raise taxes 5%. Raising taxes was a bad idea, said Laffer.

Growth, argued Laffer, depends on how much people work and how much businesses invest. He believed both those things hinge on tax rates: the more income the government takes away in taxes, the less motivated people are to work and save (leaving businesses less money to invest).

The government that thinks that raising taxes is necessary to pay for social programs and other public services is short-changing itself, argued Laffer. more> https://goo.gl/3Tfhgj

From Netflix to rented homes, why are we less interested in ownership?

By Ian Leslie – Instead of owning things, we are renting experiences. The proliferation of mobile apps enables us to source or supply whatever we want, for short periods, more easily than ever before.

The “sharing economy” is not about sharing, however. I encourage my three-year-old daughter to share her toys with her little brother; I don’t suggest that she charge him an hourly fee for doing so. A better name for it is the Paygo (pay-as-you-go) economy.

The Paygo economy combines two intertwined phenomena: the rise of renting and the decline of stuff.

A world in which we own less and rent more is not necessarily one in which consumers are empowered. You never really own the electronic versions of a book or a film – you can’t lend them to a friend or sell them on – because the publisher retains its rights over them. Even our photos aren’t ours any longer: they are owned by corporations that scrape them for data that can be sold.

The Paygo economy is changing our relationships with each other and with ourselves. more> https://goo.gl/AL6Ms1