Just gimme some choice

The Irish Times this morning describes the increased vote for independents as an expression of anti-politics sentiment.

Anti-establishment-politician sentiment, certainly, but anti-politics? That depends on how you define politics.

My definition of “politics” is all about choice over policies: citizens in a democracy can choose to fundamentally change their country’s economic and social policies, if that is what they want to do. In 2011 Irish voters voted for change, and got none: the new government faithfully implemented the Troika programme, just as the previous government had done, and presumably would have continued to do had they been re-elected. (And now that they have been let off the leash they are coming up with bubble-era proposals to increase mortgage lending. Not much change there either. And consequently not much real choice.)

Democracy without choice is not democracy. Politics without choice is not politics.

A lot of people in this country, and right across Europe, want real change. Some in Ireland voted for Sinn Féin, the big winner in the election. Some voted Independent. This isn’t anti-politics. It’s anti-anti-politics.

Long-run perspectives on crime and conflict

More news from Queens – their Centre for Economic History (QUCEH) is hosting an interdisciplinary workshop on the economics and history of crime and conflict. The workshop will take place in Belfast on Friday 12 September 2014 and they are currently inviting submissions (with a deadline of Friday 18 July 2014). A key motivation of the workshop is to encourage economists and social science historians of crime and conflict to network and collaborate on future research.

Full details here.

The 75% of the world’s population not covered by Piketty

In between grading exam papers I have been wading through the Piketty book.  Its a bit like walking through a muddy field.  The going is sometimes a bit stodgy, but you eventually get there.  There have been many reviews and commentaries on the book – one of the best I think is by Debraj Ray (http://debrajray.blogspot.co.uk/2014/05/nit-piketty.html ), who also wrote what I believe to be the best textbook on Development Economics in 1998, which, alas, I don’t think was ever updated.

Ray is sceptical about Piketty’s “Fundamental Laws of Capitalism”, but believes that the book makes a major contribution in highlighting the concentration of top incomes, arising from both an increasing share of income accruing to capital and also the phenomenon of very high returns to human capital at the top of the wage distribution.

All of this I am sure is very familiar to readers of this blog – Piketty’s must be one of the most reviewed economics books of the last 30 years.  But what seems to get less coverage is what has been happening to the approximately 75% of the world population not covered by the Piketty book.  A recent World Bank study by Lakner and Milanovic (covered here in Vox http://www.voxeu.org/article/global-income-distribution-1988 ) shows that over the 1988-2008 period, growth for the bottom 75% of the world (with the exception of the very bottom 7% or so) has been well above average, thus contributing to an overall compression of the world income distribution.  There have basically been three broad changes in world income distribution over the last 30 years.  Yes, the top 1% have seen high growth, while those between about the 75th and 99th percentiles have done relatively poorly – these are the phenomena covered in Piketty.  But the vast majority of the bottom 75% have also done relatively well, particularly those just above the median – effectively the Chinese and Indian middle classes are catching up with lower income groups in the OECD countries.  The net effect of these three changes is a fall in overall world income inequality.  The data stops at 2008 but my guess is that developments since then have probably only accentuated these trends.  And further globalisation is likely to have the same effect.

The piece finishes off with some speculation about the political implications of all this, which I am not quite so convinced by.  But overall, given that inequality seems to be flavour of the moth these days, it is interesting to get a more global view.

The FT is on a roll

In an otherwise unremarkable editorial about the upshot of the elections, the FT comes up with this quite remarkable statement:

The only viable path for France is to press ahead with tax cuts and spending reductions that can sustain growth.

Is the FT really saying that in a Keynesian short run, such as we find ourselves in just now, the balanced budget multiplier is negative? Really? Or that the spending multiplier is negative? Or is it perhaps denying that the Eurozone currently finds itself in such a Keynesian short run, in which a lack of demand is the key constraint on growth? (Let’s not even get into the debate about the long run relationship between growth and the size of the state in Europe, although I can’t help writing down one word: Scandinavia.)

And is the FT really claiming that continuing with this programme would make all those FN voters switch to the socialists and UMP?

Really?

Canaries in the coal mine

The European election results are coming in, and in France they are catastrophic.

There are two obvious points to be made which work in opposite directions.

First, the vote for the FN and similar parties is an under-estimate of eurosceptic opinion, since these parties come with so much baggage that many voters who hate what Europe has become would never, ever dream of voting for them. And quite right too.

Second, it may well be that these parties would have done less well if there had been national elections last weekend: voting for the EP is one thing, voting for national governments another. (But who really knows.)

Expect many mainstream commentators to point out that the centre has held, that the EPP have won, that Juncker is the people’s choice for EC President, and all the rest of it. This strikes me as exactly the wrong response.

My big worry this Monday morning is that Hollande and others (but I am mainly thinking of Hollande) will continue with their current economic strategy, which as far as I can see consists of crossing their fingers and hoping that something will turn up. Yes, some day this recession will end, since all recessions do, but the timing of this will depend (probabilistically, since life is uncertain) on policies: monetary and fiscal policies, obviously, but also policies to fix the European banking sector. Right now, given Europe’s policy choices, there is no good reason for the French government, or any other government, to expect that the real Eurozone economic crisis (which has to do with growth and unemployment, not yields on government paper) is going to end any time soon. And certainly not by 2017.

M. Hollande and his like may believe that sticking to the programme is their only option, and that any other course of action would be far too risky. They should ask themselves what the political landscape will look like if the Eurozone crisis continues for another 3, 5 or 10 years. It’s not impossible. Perhaps something will turn up, and perhaps the status quo merchants will get away with it. But perhaps it won’t, and perhaps they won’t.

People who argue that there is no alternative presumably see themselves as prudent and responsible. But you could just as easily regard them as drunken gamblers on a losing streak, forever doubling up.