Topic: International Economics and Development

Capitalism Defused the Population Bomb

Journalists know that alarmism attracts readers. Just yesterday, an article in the British newspaper The Independent titled, “Have we reached ‘peak food’? Shortages loom as global production rates slow” claimed humanity will soon face mass starvation. Just as Paul Ehrlich’s 1968 bestseller The Population Bomb  predicted that millions would die due to food shortages in the 1970s and 1980s, the article from yesterday tried to capture readers’ interest through unfounded fear. Let’s take a look at the actual state of global food production.

The alarmists cite statistics showing that while we continue to produce more and more food every year, the rate of acceleration is slowing down slightly. The article then presumes that if the rate of food production growth slows, then widespread starvation is inevitable. This is misleading. Let us take a look at the global trend in net food production, per person, measured in 2004-2006 international dollars. Here you can see that even taking population growth into account, food production per person is actually increasing:

Putting Agriculture Subsidies Back on the Table

Yesterday, my colleague Bill Watson made the following point on this blog: “Perhaps China’s growing use of subsidies can change the dynamic, making it finally possible for international negotiations to take on U.S. agriculture subsidies.”  I’ve been thinking the same thing.  When it was just a few rich countries subsidizing, the political dynamic of subsidy reduction was challenging.  But if we are all subsidizing now, can’t we all just agree to stop?  Unfortunately, I fear the reality is going to be less promising than we might hope.

I confess that I did get a little excited and optimistic when I read a recent piece from U.S. Trade Representative Michael Froman, in which he said:

Take the example of agriculture, the subsidies for which have proven one of the toughest issues to tackle. In 2008, the proposed solution was that developed countries would cut their agricultural subsidies while developing countries would not.

But much has changed since that time. Just last year, a group representing agriculture-exporting countries, developed and developing alike, published a report listing the top four users of trade-distorting agricultural subsidies in today’s world, with India first, followed by China, the European Union, and the United States.

In a global commodities market, this double-standard makes no economic sense. In reality, trade-distorting subsidies from emerging economies have the same impact on global commodity prices as trade-distorting subsidies from developed countries. The United States is willing to wade back into the complex thicket of agricultural trade negotiations, but only if the discussion reflects today’s reality.

Parsing his words, he says the United States is “willing to wade back” in to these issues.  That’s slightly positive, suggesting the possibility of action.  But it’s going to take a bit more than this.  At some point, someone has to make an actual concrete proposal to eliminate or reduce agriculture subsidies.  That is, someone has to lay out specific details of a proposal for everyone to rein in subsidies.  It would be great if it were the United States, but it could be any of the big subsdizers.  However, it’s not going to happen unless and until someone takes this initiative.

Banks Are ‘Under Assault’

J.P. Morgan Chase’s CEO Jamie Dimon has it right when he asserts that banks are “under assault.

This has put a damper on the source of 80 percent of the U.S. money supply, broadly measured. The CFS Divisia M4 is growing at an anemic 2.2 percent on a year-over-year basis.

Since the course of nominal national income is determined by the money supply, it’s not surprising that U.S. growth is also anemic. Final Sales to Domestic Purchasers, the best proxy for U.S. aggregate demand, has still not reached its trend rate of growth. In the face of these facts,

I don’t anticipate that the Fed will (or should), “tighten” at its Federal Open Market Committee meetings on January 27–28. Nor do I think the Fed will tighten as soon as most people think. 

The World Misery Index: 108 Countries

Every country aims to lower inflation, unemployment, and lending rates, while increasing gross domestic product (GDP) per capita. Through a simple sum of the former three rates, minus year-on-year per capita GDP growth, I constructed a misery index that comprehensively ranks 108 countries based on “misery.”

Below the jump are the index scores for 2014. Countries not included in the table did not report satisfactory data for 2014.

The five most miserable countries in the world at the end of 2014 are, in order: Venezuela, Argentina, Syria, Ukraine, and Iran. In 2014, Argentina and Ukraine moved into the top five, displacing Sudan and Sao Tome and Principe.

The five least miserable are Brunei, Switzerland, China, Taiwan, and Japan. The United States ranks 95th, which makes it the 14th least miserable nation of the 108 countries on the table.

Trade Agreements Can Be Net Liberalizing

Some libertarians have been expressing concern about particular aspects of trade negotiations, often focusing on provisions relating to intellectual property. Here’s Jesse Walker of Reason:

“Free trade” agreements frequently include details that don’t have anything to do with freeing trade. When intellectual property enters the picture, the rules typically make trade more rather than less restrictive. That certainly seems to be the case with the TPP: Provisions in the leaked drafts would extend copyright terms, impose DMCA-style restrictions on circumventing copy protection, and otherwise take a maximalist approach to intellectual property. There are efforts to add tighter IP regulations to the Transatlantic Trade and Investment Partnership too.

I already tend to be skeptical about trade agreements as a path to freer trade, but I recognize and respect the argument that they do more good than harm. That argument is much harder to maintain, though, when the deals are loaded down with provisions like these. If fast-track authority makes such rules easier to pass, then fast-track authority is something I’m happy to do without.

I get what he is saying about intellectual property, and I have criticized this aspect of trade talks myself. But as my colleague Dan Ikenson says, we should consider whether these deals are “net liberalizing.”  In this regard, I think trade deals have the potential to do a lot of good, in ways that people may not be aware of.  Here’s an example from the negotiations between the U.S. and EU.  The EU has proposed new disciplines on government subsidies, in which it states:

subsidies given to support insolvent or ailing companies without a credible restructuring plan belong to some of the most harmful types of subsidies and have the potential to have an adverse effect on trade and investment relations.

Now, translating such sentiments into concrete rules can be difficult, but I like the idea of pushing for limits on subsidies. I can’t guarantee that anything will come out of the EU proposal, but I’m glad they are pursuing it.  To me, a trade agreement that offers additional disciplines on subsidies is something of great value.

(Some of you might be thinking, wait, how come the EU is proposing constraints on subsidies?  Aren’t they the worst abusers, with their farm subsidies, Airbus subsidies, etc.?  Here’s my sense of what is going on:  In addition to the concerns about bailout-type subsidies mentioned in the quoted text, the EU has some pretty strict internal rules governing when its member states can provide subsidies.  As a result, the Europeans get annoyed at subsidies offered by U.S. states, and are looking for ways to impose constraints on these and other U.S. subsidies).

The Potential Long-Term Consequences of the Paris Shooting

The horrific killing of 12 people who ran the French satirical magazine Charlie Hebdo, which published the controversial Mohammed cartoons in 2011, by suspected Muslim extremists is likely to have serious consequences. In the short run, it will result in shock, grief, and possibly counterattacks on some innocent Muslims living in France. The long-term consequences of the shooting could be monumental.

First, the French could get their first female head of state since Queen Anne’s regency during the minority of Louis XIV. Queen Anne faced a massive revolt of the nobles known as the Fronde and a subsequent civil war. Ms. Marine Le Pen’s presidency could be similarly eventful.

While, as libertarians, we despise much of what Ms. Le Pen stands for, the two mainstream political parties in France, Mr. Sarkozy’s socialist center-right UPM and Mr. Hollande’s Socialist Party, have totally failed to address the legitimate concerns of the French citizens, chief among them the failure of multiculturalism and high unemployment. The country is ready to hand the reins of power to someone else.

Second, the euro will end its role as a global currency and remain a legal tender in something akin to Großdeutschland greater Germany, composed of Germany and her satellites, like the hapless Slovakia. Ms. Le Pen is mistaken in thinking that the French withdrawal from the euro will revive the French economy. French economic difficulties are primarily structural (i.e., high taxes and over-regulation), not monetary.

Be that as it may, Ms. Le Pen has set her sights on exiting the euro and, at least as far as this author is concerned, the sooner she puts the euro out of its misery, the better. They might even build her a statue in Athens. (Perhaps 2,000 years from now, it will be admired with as much reverence as Venus de Milo is revered today, but I digress…).

Third, on day two of a Le Pen presidency, border guards will return to the French frontiers. Of course, the end of the freedom of movement will be in full breach of all sorts of European treaties and conventions. (The British, by the way, would love to do the same, but cannot, because the British, being British, follow the rules. In contrast, the French, being French, will do what they have always done: follow their national interest.)

France will not be stopped. Because as it is big and powerful, it is not subject to the same rules that govern the rest of the EU. That is why the French have been allowed to make mincemeat out of the Maastricht Treaty without any consequences.

That will cause a major crisis in the EU and lead to a clarification of what the EU is–a cooperative arrangement between sovereign states–and what the EU is not–the United States of Europe.

Happy New Year: A Time to Celebrate Human Progress

The media are full of headlines about war, sexual assault, inequality, obesity, cancer risk, environmental destruction, economic crisis, and other disasters. It’s enough to make people think that the world of their children and grandchildren will be worse than today’s world.

But the real story, which rarely makes headlines, is that, to paraphrase Indur Goklany’s book title, we are living longer, healthier, more comfortable lives on a cleaner and more peaceful planet. (Allister Heath summed up his argument in a cover story for the Spectator of London, without all the charts and tables.) Fortunately, beyond the headlines, more people do seem to be recognizing this.

The Cato Institute, for instance, has created an ever-expanding website on human progress, known simply as

Here’s Steven Pinker expanding on the information in his book The Better Angels of Our Nature: Why Violence Has Declined in Slate:

The world is not falling apart. The kinds of violence to which most people are vulnerable—homicide, rape, battering, child abuse—have been in steady decline in most of the world. Autocracy is giving way to democracy. Wars between states—by far the most destructive of all conflicts—are all but obsolete. 

He has charts of the data in each of those areas. And here’s Pinker at the Cato Institute discussing why people are so pessimistic when the real trends are so good: