Monthly Archives: September 2012

Is the Eurozone crisis a Euro crisis?

Too many voices are pointing at the imperfections of the Euro as a monetary union, and blaming the Euro for the lingering recession across the continet, but it seems that the currency is not the root cause of problems. The real crisis is fiscal imbalance: Greek pensions, Spanish welfare, Italian debt/GDP ratio.  Contrast those nations’ fiscal policies with Germany, the Netherlands, and others.

So the question isn’t what transmission mechanism might bring the interest rate spike to U.S. bonds, it is whether the Senate can pass a budget. If America has another 5 years of trillion dollar annual budget deficits, our debt/GDP ratio surpasses Spain’s.  In fact, as AEI President Arthur Brooks recently noted in the Wall Street Journal, America is already more European than many European nations: “[O]ur debt-to-GDP ratio is 103%; Spain’s is 68%.” To be sure, if we don’t count debt America owes America, the ratio is only 73%, but CBO predicts it will rise to 200% in 25 years.

Academic presentations on Institutions

Stockholm University had a Nobel Symposia on growth and development a few days ago.  All of the presentations are publicly available here.  Daron Acemoglu’s presentation on Institutions and the comment by Andrei Shliefer are very good.

The Q3 Econ Blog Survey

For years, I conducted a survey of top economics bloggers for the Kauffman Foundation, and I have been continuing the tradition since joining Hudson. A few weeks ago, just as Glenn and I were launching the BALANCE blog, I got results in for the Q3 survey.  They are truly fascinating, as always, because the collective opinion never conforms to an ideological tilt that we see in many media stories. The 50 or so respondents include some very famous bloggers, but they tend to not identify with either political party. Roughly half of the respondents have an economics PhD, and roughly half are professors of some kind.  With that, here are the results in chart form of the Q3 survey …





Imageand finally the word cloud (each participating blogger is asked to list five adjectives that describe the U.S. economy right now), which speaks for itself:

The most disturbing jobs metric

The number that deserves more attention in the U.S. employment situation
 report (out this morning from the BLS like every first Friday), is the employment to population ratio.  It got worse last month, dropping to 58.3, which is unchanged for the last 30 months (!) and far, far below the pre-recession normal band of 62 to 64. Here is one of the charts I put put together to see it in context, and why I call this the ‘Zero Recovery’ —


Polarization, Obama, and the Ottomans

Bill Clinton gave a fascinating speech last night about the rich tradition of leadership in the White House that reached across party lines rather embracing extremism. Polarization is something we identify as a central cause of macroeconomic dysfunction, and it can be found at the turning point of decline in historical great powers, so Clinton’s message is worth repeating:

After all, President Eisenhower sent federal troops to my home state to integrate Little Rock Central High and built the interstate highway system. And as governor, I worked with President Reagan on welfare reform and with President George H.W. Bush on national education goals. I am grateful to President George W. Bush for PEPFAR, which is saving the lives of millions of people in poor countries and to both Presidents Bush for the work we’ve done together … I work with Democrats, Republicans and Independents who are focused on solving problems and seizing opportunities, not fighting each other.

Unfortunately, as the former President surely was hinting, that kind of bipartisan leadership has been missing from DC during the last four years. See the Politico story today here, for example. Or see the excerpts from Bob Woodward’s Price of Politics here about Obama’s partisan style: “It was increasingly clear that no one was running Washington. That was trouble for everyone, but especially for Obama,” Woodward  writes. Partisan polarization is a huge danger if it is allowed to continue because it means our nation will simply not be able to address the fiscal imbalance of trillion dollar baseline deficits.

A few weeks ago, I looked into the polarizing nature of President Obama’s legislative achievements, my own effort to step back from the trees to see the forest. The media often cast President Bush as “extreme” but the legislative record shows Obama to be off the charts by comparison. Here’s an excerpt & chart from my op-ed  in the Washington Examiner:

The total number of opposition votes Obama attracted for all five signature laws was just 14 in the Senate and 21 in the House. The comparable numbers for Bush are 145 votes in the Senate and 468 in the House. …The Obama White House never sought centrist policy or votes in its signature legislation, not even from centrist Democrats. Consider the 34 Republican representatives who voted against Bush’s NCLB because they thought it too liberal, in contrast with the 33 House Democrats who voted against Obama’s Patient Protection and Affordable Care Act because they found it too liberal.

Knee-deep in reading about how other Great Powers have declined, it is clear the extent of polarization could get a lot worse.  In the Ottoman empire, the Janissaries morphed from the Sultan’s fearsome elite infantry unit into a self-serving special interest that resisted new technology. They deposed Sultan Selim III in 1807 for trying to modernize the military. The next Sultan, Mahmud II, was careful to slowly consolidate his power and then initiated a fight with his own Janissary Corps, burning 4000 of them to death in their  barracks. In Ming China, for example, the eunuchs struggled bitterly against the Confucian Mandarinate for centuries, but the Mandarins ultimately won and not only docked Zheng He’s great treasure fleet after 1436, but also burned records of his travels, and made sure the emperor banned ocean travel. Short-sighted politics to say the least.

What the Romans Did Not Know

Charles Van Doren’s History Of Knowledge has always struck me as one of the most profound and least appreciated grand histories.  I first read it in 1993 or 1994. With its emphasis on the state of knowledge, Van Doren’s book offers a useful paradigm for the level of development of each Great Power. Here are a few lines about Rome that stuck with me over the years:

The Romans always possessed a fierce respect for and love of law.  …Everywhere that Rome conquered they took their law with them and gave it to the peoples they ruled. (p. 67)

Rome in the latter days of empire… An emperor would be chosen by a gang and would rule only so long as he pleased the assassins. (85)

The ancient empire … was thus crippled at its heart by a political disease which no one knew how to cure. (85)