Letter to a Friend about Free Trade, Unions, and the “Rise of the Rest”

A friend asked me what I thought about an email from MoveOn featuring Robert Reich. He shares his views on “the worst trade deal you’ve never heard of—the Trans-Pacific Partnership (TPP).” Here are the first two paragraphs:

Dear fellow MoveOn member,

Recently, award-winning director Jake Kornbluth and I worked with MoveOn to put together a video about the worst trade deal you’ve never heard of—the Trans-Pacific Partnership (TPP), often called “NAFTA on steroids.”

If the TPP doesn’t sound familiar, that’s no accident: This giant story has been almost totally ignored by mainstream TV networks. (Interestingly, most TV networks are owned by corporations that would rake in profits if the deal goes through.)

Here’s what I thought, and I’d like to hear your thoughts. I expect I’ll get some blowback as I’ve made some sweeping generalizations, but it should be fun to discuss these issues and defend my beliefs about these important issues:

Hi,

Interesting you should ask. I like a lot of what Robert Reich says and thinks, but I am for free trade. I’m definitely a non-professional economist, but I do believe that most of the “rise of the rest”–the rise of more than a billion of people out of poverty as well as the expansion of the middle class in BRIC (Brazil, Russia, India, China) and other countries–is because people in developing countries can participate in the global economy more easily.

NAFTA was mostly good but bad for people with high-paying industrial jobs who were out-competed by lower wage folks in the developing world. …I don’t put American jobs ahead of Mexican or Chinese jobs; I’m a utilitarian in this regard: “most good for the most people.” Nearly all forms of protectionism are bad, IMO. Even though I’m married to a highly paid union worker, I think unions are mostly bad nowadays except in low-paying industries where workers need protection. Nowadays “Old Labor” protects the already entrenched (not the neediest). The rights that unions fought for in the 20th century have mostly been granted by law.

There’s undoubtedly a squeeze on the middle and working class right now in the US. I’m all for tax increases on wealthier folks (like me, frankly, though I’d like to believe I’m middle middle class) and public health insurance, and a decrease in all the gov’t welfare the RICH get in this country. (I have no qualms with helping the poor with gov’t money, but not the rich!) That said, much of the squeeze on the middle and working classes is because the world is more fair. We in the US had huge advantages, and globalization is taking those away…which is fair! All the more reason to invest in infrastructure and education right now!

Thanks for asking and I hope you have a good week (despite much snow).

Best,

Henry

As I said, I made some sweeping statements (as did Robert Reich), but I’m happy to dig into them. Do you agree or disagree about unions, free trade, “The Rise of the Rest,” etc.?

Gender Equality: Highest Priority!

Today there are many engines for positive change around the world, including powerful and inexpensive technologies, near-ubiquitous vaccines, and improving NGO-private sector collaboration in developing countries. But if I had to choose the one most important driver for good, it would be the empowerment of women.

While it’s dangerous to generalize about men and women, science does point to some important differences. “Research tells us that women invest more of their earnings than men do in their family’s well-being—as much as ten times more. They prioritize things like healthcare, nutritious food, and education. When a mother controls her family’s budget, her children are 20 percent more likely to survive—and much more likely to thrive.”*

Imagine if men and women were equal. Trillions of dollars would go toward health, education, food and childcare. While technology gains, civil society and anti-corruption programs are important, the change in priorities that would flow in the wake of gender equality would transform the world for good.

And many trends bode well. All over the world walls are coming down that have kept women out of male-dominated professions. Girls’ participation in education has grown a great deal in recent decades (see chart below), but atrocities against girls in Pakistan and Nigeria remind us that there are misanthropic (and misogynistic) forces that violently oppose female empowerment.

12_fig_girls_secondary_sml

Chart: Female Secondary Education Participation, 1975 and 1997**

The Charlie Hebdo tragedy reminds us that we must stand for our values, even if our opponents are gun-toting nihilists. Like free speech, gender equality must be a highest priority.

*from “Why Development Begins with Women” by Melinda Gates

**http://www.unesco.org/education/tlsf/mods/theme_c/mod12.html?panel=1#top

2014: Bad Headlines, Good News

Ebola, ISIS, school shootings. Michael Brown and Eric Garner, Ukraine and Russia, Israel and Hamas. It’s been a bad year for many.

Nonetheless, life slowly gets better for most of us.

I’ll just make a passing remark about the US economy. Even in times of recession Americans have a quality of life that is better than that of kings 100 years ago, so the improving US economy and record highs for the Dow are just blips in the big picture.

The Ebola outbreak was tragic. Nonetheless, there were positive glimmers, especially Nigeria’s coordinated response. And overblown fears of a pandemic proved ludicrous.

People bemoan the state of Palestine-Israel relations, but few see recent times in the larger historical context. Before Camp David there were major wars in ’48, ’56, ’67 and ’73. Since then there have been missiles and terrorists, incursions and intifadas, but no all-out wars. The conflict seems intractable, but its scope continues to shrink.

Russia, such a nuisance through much of 2014, now seems a paper bear with gas prices and the Rouble tumbling.

The opening of Cuba bodes well. Communism, like mold, thrives in closed spaces. The feeble Castros can only hold on for so long.

ISIS’s luck is running out, especial as air strikes continue to weaken its infrastructure and the Iraq government shows some modicum of competence post-Maliki.

Tragedy will continue in Syria, and Venezuela looks ripe for some kind of change.

Alas, I’m starting to predict. “Mortals predict and the gods laugh.”

Obama has been criticized (often rightly) for his leadership, but his assessment of 2014 is spot on (if a bit awkwardly phrased): “We solved problems. Ebola is a real crisis. You get a mistake in the first case because it’s not something that’s been seen before. We fix it. You have some unaccompanied children who spike at a border. And it may not get fixed in the time frame of the news cycle, but it gets fixed. And…as we reflect on the new year — this should generate . . . some confidence. America knows how to solve problems.” (quoted from The Washington Post)

Despite cops and black men being unjustly shot, America and the world are actually getting safer. And richer, freer, more equal, more democratic, more literate, longer lived, better educated and healthier.

Here’s to an even better 2015.

Millions of Children’s Lives, Simple Solutions

“In the category of stunning, heartening, woefully underreported good news: In 2000, an estimated 9.9 million children around the world died before age 5. In 2013, the figure was 6.3 million. That is 3.6 million fewer deaths, even as the world’s population increased by about 1 billion.”

This stat, from Michael Gerson’s article in the Washington Post, reflects the continuing avalanche of positive health trends of the last few decades. Gerson gives a shout out to Gavi, the Vaccine Alliance, an organization that supports vaccinations for some 60% of the world’s children. Gavi does what government programs try but usually fail to deliver–a successful program with low overhead that shuts down when the job is done. Gavi tapers off its subsidization of vaccines over time as local vaccination infrastructure scales up.

We all know how deep and detailed the reporting of the Ebola crisis was. (Now that it’s getting under control we hear much less.) But this much more important story–think of the thousands of children saved from death for every Ebola death–yet stories about vaccinations saving millions never make it to the front page.

http://www.washingtonpost.com/opinions/michael-gerson-a-global-conspiracy-of-health/2014/12/18/dc79da7c-86f9-11e4-9534-f79a23c40e6c_story.html#b12g22t20w14

Inequality: What’s Goin’ On?

Income inequality, especially in the United States, has been a hot topic. It seemed to peak with the publication this year of Thomas Pinkatty’s Capital in the Twenty-First Century. The upshot? Income inequality has gotten worse.

But it’s not that simple. If you look at the big picture, inequality has decreased.

Hans Rosling, a prominent Swedish statistician and TED Talk regular, paints a different picture in this Tweet*:

Hans Rosling Inequality

In the past 4o years world income distribution has transitioned from a bimodal distribution (two humps) to a normal distribution (a “bell curve”). In the 1973 histogram the high peak to the left represents the disproportionately high rates of world poverty.  The peak to the right means that a disproportionately large amount of wealth was held by the wealthiest. Note the gap–the trough–between rich and poor. That’s a statistical representation of inequality.

In the past 40 years the distribution has migrated toward the center, which represents the meteoric “rise of the rest,” especially China and India, and the unprecedented expansion of the world middle class.

Income inequality in the United States is a problem. I’m for unpopular measures, like taxing inheritance much more because, with some exceptions such as family businesses, inheritance is a massive transition of unearned wealth from the privileged to the privileged. Let’s spend that money on education. Our government’s priorities are dominated by untouchables like Medicare and Social Security–investment in those who no longer earn money–instead of education and poverty reduction, which are real investments that pay off in years to come. I’m an optimist about most things, but I’m not optimistic that there will be a “future focus” shift where we choose invest in tomorrow’s workers and the poor instead of the retired.

*This link takes you to the study from which Rosling bases his ideas: https://ideas.repec.org/p/ucg/wpaper/0001.html

More and More Little Wins

Since I read Nudge by Richard Thaler a few years back, I’ve been happily surprised how quickly the idea of “nudges” is spreading around the world. In a recent New York Times piece, David Brooks catalogues many successful nudges, notably in places like Kenya and Zambia. David Cameron is a noted supporter of using the gleanings of behavior economics to get citizens in the UK to “do good by default.”

The way nudges work is that governments and organizations set up “decision architecture” such that the default option–or an easy option–has a socially beneficial outcome. A well known nudge is making the default option in organ donation “yes.” (In the past the default option was nearly always “no organ donation.”) A more whimsical one is to put some kind of target–say a picture of a fly or seashell–inside men’s urinals to induce them to aim better.

The most important findings of behavioral economics are that humans often do not make rational decisions…but they’re predictably irrational (in the words of scholar Daniel Ariely).  Scientists like Amos Tversky and Daniel Kahnemann pioneered studies that showed subtle biases and decision-making “errors” that humans make in some situations. That said, just as we are sometimes led astray, we can use behavioral economics to unconsciously guide people to make prosocial decisions while allowing individuals freedom and control to make decisions.

Brooks’ examples from Africa were most intriguing to me:

“Too many people die in auto accidents. When governments try to reduce highway deaths, they generally increase safety regulations. But, also in Kenya, stickers were placed inside buses and vans urging passengers to scream at automobile drivers they saw driving dangerously.”

“In Zambia, hairdressers were asked to sell female condoms to their clients. Some were offered financial incentives to do so, but these produced no results. In other salons, top condom sellers had a gold star placed next to their names on a poster that all could see. More than twice as many condoms were sold. This simple change was based on an understanding of the human desire for status and admiration.”

Now these behavioral economics inspired nudges are not going to end malaria or cure cancer, but this kind of clever policy making can have an impact. Nudges like these can get well-meaning programs–like the female condom scheme in Zambia–to perform better. And while I don’t think that a sticker encouraging Americans to yell at drivers would work in our culture, I do like how the Kenya government encouraged its citizens not to stand for dangerous behavior. At their best, nudges get people to make small, prosocial decisions at the grassroots level. Like the improvements in life that this blog chronicles, nudges bubble up from the bottom and make the world a better place.

So Much to Be Grateful For!

Significant decreases in extreme poverty, hunger, child labor, child mortality, death in childbirth, teen births (US), smoking, war, homicide, violent crime, nuclear weapons, and share of income spent on food.

Significant increases in life expectancy, leisure time, literacy, IQ scores, democracy and internet access.

People are getting taller and staying in school longer. Guinea worm is almost eradicated–and Guinea Worm is a really bad parasite–Homelessness in the US is down.

Check out 26 Charts and Maps to Be Grateful for on Vox.com

Happy Thanksgiving!

http://www.vox.com/2014/11/24/7272929/charts-thankful