WORÞY READS: from 2021-04-23
A preview of my weekly read-around for the Washington Center for Equitable Growth...
Worthy Reads from Equitable Growth:
1) Greatly looking forward to listening in two weeks to the most thoughtful and incisive analyst of US supply chains and worker productivity and compensation patterns: Sue Helper, now working for the Biden-Harris administration:
Equitable Growth: Webinar: Transforming U.S. Supply Chains to Create Good Jobs: ‘When: May 3, 2021 1:30PM - 2:30PM. Where: This event is virtual and not held in person, The Washington Center for Equitable Growth, 15th Street Northwest, Washington, DC, USA. One reason U.S. workers’ wages are stagnating is that large firms shifted… to buying goods and services from a complex web…. Firms outsource so they can offload production onto firms with weak bargaining power and thus little ability to compete except by aggressively holding down wages. This “low-road” model… the erosion of U.S. workers’ standard of living. A different kind… possible…. High-road outsourcing… requires overcoming both market and network failures…. Susan Helper… building high-road supply networks… greater collaboration between management and workers… policy proposals that directly address… reasons that outsourcing increases wage inequality…
LINK: <https://equitablegrowth.org/event/webinar-transforming-u-s-supply-chains-to-create-good-jobs/>
2) The amount of potential talent we are—still—failing to make use of is horrifyingly large:
Lisa Cook: Addressing Gender & Racial Disparities in the U.S. Labor Market to Boost Wages & Power Innovation: ‘Women and African Americans continue to participate at each stage of the innovation process at lower rates than their counterparts. I… propose four policies to close these race and gender innovation divides…. (1) Improve mentoring…. (2) Facilitate early education exposure to invention opportunities. (3) Engage in blind patent reviews…. (4) Address the climate in high-tech workplaces… where invention and innovation happen…
3) Here we have a very useful and very informative deep dive into how racial discrimination spreads its effects into places in the economy that I had thought were relatively immune to it:
Shaun Harrison: How Inequities in U.S. Taxation Can Perpetuate Systemic Racism: ‘In his in 1901 study, “The Negro Landholder of Georgia,” scholar W.E.B. Du Bois noted that “in most cases there are no tax assessors, but a county tax receiver, who receives the sworn statements of property holders as to their estates. This gives rise to wholesale undervaluation, especially in the case of the rich….” Property tax systems still place a heavier burden on Black and Latinx property owners…. Carlos Fernando Avenancio-León… and Troup Howard… homeowners of color end up paying a 10 percent to 13 percent higher tax rate…. High degrees of residential racial segregation in the United States…. White residents… live in neighborhoods where amenities push market prices up…. These amenities are not properly taken into account for property tax assessments…
LINK: <https://equitablegrowth.org/how-inequities-in-u-s-taxation-can-perpetuate-systemic-racism/>
4) From last August: Equitable Growth’s talking points on wealth taxation, and related issues:
Equitable Growth: Taxing Wealth & Investment Income in the United States: ‘The federal income tax does a poor job of taxing income derived from wealth…. A two-tier tax system… middle-class families pay full freight on their wages…. Lawmakers… should… reform… adopt either a wealth tax or… accrual taxation that would tax all investment gains on an annual basis regardless of whether assets are sold… detail[s]…
LINK: <https://equitablegrowth.org/taxing-wealth-and-investment-income-in-the-united-states/>
Worthy Reads from Elsewhere:
1) It now looks like the long-run effect of the coronavirus plague year will be to move 10% of the American workforce—10%that would otherwise have spent their days in the office—into telecommuting. The gains in terms of reduced commute-time waste and Increased life flexibility will be substantial. They will remain largely uncaptured in our standard statistics. I cannot yet figure out what the further ramified consequences of this rapid rough doubling in the number of telecommuters will be. But they will be very substantial:
Adam Ozimek: Future Workforce: ‘Companies continue to be remote… 41.8 percent of the American workforce…. Companies say remote work is getting easier, not harder…. Managers believe that 26.7 percent of the workforce will be fully remote in one year…. The number of remote workers in the next five years is expected to be nearly double what it was before COVID–19: By 2025, 36.2 million Americans…. Increased productivity and flexibility continue to be key benefits… reduction of non-essential meetings, increased schedule flexibility, and no commute… have worked better than expected…
LINK: <https://www.upwork.com/press/releases/economist-report-future-workforce>
2) I understand, kinda sorta, why China is such an export powerhouse even though it is still so poor. I understand that because one important reason that China is an export powerhouse is precisely that it is still a relatively poor and thus low-wage country. Productivity outrunning wages is the way to become the kind of global manufacturing powerhouse that Britain was in the mid-1800s and that the United States was in the mid-1900s. In Britain’s case it was that wages lagged behind productivity, in large part because of the inflow of workers from unproductive Irish and north British Agriculture. In America’s case it was because productivity ran ahead of wages, In part because of the great commitment to investment during World War II and consequent learning-by-doing. China appears more British than American here. But what I do not understand is the rapid growth of China’s tech sector. Something must be wrong with my vision of what the requirements for having a booming global-leader tech sector are:
Barry Naughton: The Rise of China’s Industrial Policy: ‘China has rapidly emerged… a large economy… a technological power… a middle-income country… [with] the world’s second most important high-tech sector, as well as the world’s largest manufacturing and internet sectors…. To what extent can China’s undeniable economic and technological success be reasonably attributed to specific policies, and more generally to a Chinese “path,” or program of industrial policy?… This volume makes a contribution… by disentangling specific threads…. The objective is not to try to evaluate the effectiveness of specific policies, but simply to reliably track what policy was in effect during different periods, and where we might expect to see large and important impacts…
LINK: <https://dusselpeters.com/CECHIMEX/Naughton2021_Industrial_Policy_in_China_CECHIMEX.pdf>
3) The United States has demonstrated that it can turn Chinese high-tech companies into near-cripples through the sanctions that it can impose and get the rest of the world to conform to. The US has thus weaponized the economic interdependence between America and China. Could China do the same by applying the squeeze to the onshore China-producing subsidiaries of US companies? Or would the US government simply not care? Here economics turns into geopolitics, and I am out of my comfort zone:
Dan Wang: China, the U.S., & Technology: ‘The economic relationship between China and the US is massive. Over the last few years, US direct exports of goods and services to China clocks in at around $200 billion every single year, but that’s really dwarfed by the amount of sales that US companies make in China, which the last figure we have from the Bureau of Economic Analysis in the US is $600 billion…
LINK: <https://stratechery.com/2021/an-interview-with-dan-wang-about-china-the-u-s-and-technology/>
4) This is an old but an absolute classic think through of how economies can and should be managed. It is essential reading as we try to think through how we are going to try to control global warming, given that we seem to be in a world in which it looks as though we are not going to pursue the economic-technocratic first-best regulatory strategy of carbon taxes:
Martin Weitzman: Prices vs. Quantities: ‘If tastes happen to be kinked at certain critical points… it doesn’t pay to “fool around” with prices in such situations…. There is, it seems to me, a rather fundamental reason to believe that quantities are better signals for situations demanding a high degree of coordination…. [For] General Motors Corporation or the Soviet industrial sector as a whole, the need for balancing the output of any intermediate commodity whose production is relatively specialized to this organization and which cannot be effortlessly and instantaneously imported from or exported to a perfectly competitive outside world puts a kink in the benefit function. If it turns out that production of ball bearings of a certain specialized kind (plus reserves) falls short of anticipated internal consumption, far more than the value of the unproduced bearings can be lost…
LINK: <https://scholar.harvard.edu/files/weitzman/files/prices_vs_quantities.pdf>
5) This is turning into semiconductor week. Perhaps the most striking thing to happen over the past decade is how TSMC and Samsung have managed to move ahead three generations in terms of shrinking the size and power consumption of the microprocessors they can manufacture, while Intel has been unable to fully advance even one. A decade ago there were great worries about whether TMSC could produce microprocessors as sophisticated as those that Apple was hoping to design and use at an acceptable quality. Now Apple has made it very clear that it is Intel cannot meet acceptable quality standards by the yardstick of TSMC (and Samsung):
Tae Kim: Intel’s Plan to Take On TSMC & Win Big in Chips Has Big Risks: ‘Intel’s strategic pivot to chip making comes at an ideal moment, but that won’t make its task any easier…. $20 billion to build two new factories in Arizona… internal use… customers of… “Intel Foundry Services"…. Can it win a large chunk of business away from market leader Taiwan Semiconductor Manufacturing Co.?... With Intel compelled to use TSMC for some of its leading products, it’s going to be difficult at least in the near term for the company to argue that its services are significantly better than its Asian rival…. There are some tailwinds for Intel… security concerns… future subsidies… from the Biden administration…. It is easy for Intel to talk a big game… it will be much harder to create a viable and profitable one…
6) The rise of financiers and entrepreneurs among our superrich, and the decline of dealmakers and inheritors make up one of the most striking aspects of our Second Gilded Age. However, going forward expect the number of inheritors in our superrich to increase very rapidly:
Paul Graham: How People Get Rich Now: ‘In 1982… of the 100 richest people, 60 inherited…. By 2020 the number of heirs had been cut in half, accounting for only 27 of the biggest 100 fortunes…. How are people making these new fortunes?… 3/4 by starting companies and 1/4 by… managing investment funds. There were no fund managers among the 100… in 1982…. In 1982… dominant source… [were] oil and real estate. Of the 40 new fortunes… 24 were due primarily to oil or real estate…. Of the 73… in 2020, 4 were due to real estate and only 2 to oil…. The oil and real estate magnates… won by being really driven and good at making deals…. In 1892, the New York Herald Tribune… millionaires… 4047…. How many had inherited?… 20%…
LINK: <http://paulgraham.com/richnow.html>
7) Building communities of engineering practice is a sound goal for industrial-trade policy. Protecting rust-belt blue-collar jobs is not:
Adam Posen: America’s Self-Defeating Economic Retreat: ‘Populist anger is the result not of economic anxiety but of perceived declines in relative status. The U.S. government has not been pursuing openness and integration over the last two decades. To the contrary, it has increasingly insulated the economy from foreign competition, while the rest of the world has continued to open up and integrate. Protecting manufacturing jobs benefits only a small percentage of the workforce, while imposing substantial costs on the rest. Nor will there be any political payoff from trying to do so: after all, even as the United States has stepped back from global commerce, anger and extremism have mounted…
LINK: <https://www.foreignaffairs.com/articles/united-states/2021-04-20/america-price-nostalgia>
8) History does not repeat, but it does rhyme. And in this particular case, I cannot escape thinking that “Tucker Carlson” rhymes with “Benito Mussolini”:
Ed Luce: The Rise & Rise Of Tucker Carlson Conservatism: ‘His reaction to Wednesday’s verdict on Derek Chauvin for killing George Floyd crossed even his own thinly drawn lines. The jury’s triple guilty verdict…. amounted to “an attack on civilisation”, said Carlson…. The true cause of Floyd’s death, Carlson has repeatedly said, was a drug overdose—not the nine-minute asphyxiation that jurors saw…. Carlson’s outburst is notable for two reasons. First, he is the most popular conservative TV anchor… a nightly audience of 3m…. Second, Carlson’s outburst illustrated that US racial injustice is not close to having turned the corner…. During the trial, police shot and killed an average of three Americans a day, the majority non-white, including a 13-year-old unarmed black boy. Unlike Floyd’s death, these were not recorded on the mobile phones of passers-by. That footage meant Chauvin’s case was almost unique. Even then, Carlson wants viewers to believe that Chauvin was the real victim…. For some people believing is seeing, rather than the other way round…
LINK: <https://www.ft.com/content/cc2a46cf-4392-44db-b911-f883e2f46539>
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Re: Beckwith, I am not in a position to question the results he cites in order to rebut "myths" 2 & 3. However, I doubt that this research can tell us what the chilling effect of the new laws will have, by inducing a climate of fear around voting. Think of the woman actually recently sentenced to prison for casting a provisional ballot; how many others will say "I'm not sure of my voting status, I'm not going to take a chance by trying to vote"?
I am doubting the degree to which true telecommuting, by which I mean workers having the choice to live well beyond commute distance is going to expand after the pandemic year. Most of the folks I know who have been working from home, have received notices, that the post-pandemic workplace will be a hybrid workplace, with two or three days still required in the office. So much of the new telecommuting will be part-time, and the freedom to take advantage of cheap housing available at a great distance won't significantly expand. This will maintain the large cost of living premium associated with working in any of the major tech-hubs.