Commentary

Greece’s Perpetual Crisis

ATHENS – Since the summer of 2015, Greece has (mostly) dropped out of the news, but not because its economic condition has stabilized. A prison is not newsworthy as long as the inmates suffer quietly. It is only when they stage a rebellion, and the authorities crack down, that the satellite trucks appear.

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The Promise of Digital Finance

BERKELEY – An economic development revolution lies literally in the palm of a single hand. As mobile phones and digital technologies rapidly spread around the world, their implications for economic development, and particularly finance, have yet to be fully realized. The sooner that changes, the better for people worldwide.

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How Climate Action Can Make America Great

SINGAPORE – Climate change is the single biggest challenge facing humankind. Yet the next president of the United States – the world’s second-largest greenhouse-gas emitter and a critical actor in climate policy – does not believe it is happening, or at least that humans have a role in driving it. If Donald Trump actually wants to “Make America Great Again,” as his campaign slogan declared, he will need to change his attitude and embrace the climate agenda.

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Confronting the Next Global Health Challenge

ZURICH – Thanks to unprecedented international cooperation, the world is making impressive progress in the fight against malaria. According to the World Health Organization’s just-released 2016 World Malaria Report, malaria mortality rates among children under age five have fallen by 69% since 2000.

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Missing the Economic Big Picture

BERKELEY – I recently heard former World Trade Organization Director-General Pascal Lamy paraphrasing a classic Buddhist proverb, wherein China’s Sixth Buddhist Patriarch Huineng tells the nun Wu Jincang: “When the philosopher points at the moon, the fool looks at the finger.” Lamy added that, “Market capitalism is the moon. Globalization is the finger.”

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Toward a Rust Belt Powerhouse

LONDON – A few days ago, US President-elect Donald Trump took to Twitter – his medium of choice – to declare that he did not need China’s permission to contact Taiwan, because China didn’t ask for permission to devalue its currency. At that moment, my hope that the Trump shake-up would be economically beneficial for the United States diminished.

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The Trump Boom?

CAMBRIDGE – After years of hibernation, will the US economy rouse itself for a big comeback over the next couple of years? With an incoming Republican administration hell-bent on reflating an economy already near full employment, and with promised trade restrictions driving up the price of import-competing goods, and with central-bank independence likely to come under attack, higher inflation – likely exceeding 3% at times – is a near-certainty. And output growth could surprise as well, possibly reaching 4%, at least temporarily.

Impossible you say? Not at all. The economy already seems to be growing at a 3% annual clip. And even steadfast opponents of President-elect Trump’s economic policies would have to admit they are staunchly pro-business (with the notable exception of trade).

Consider regulation. Under President Barack Obama, labor regulation expanded significantly, not to mention the dramatic increase in environmental legislation. And that is not even counting the huge shadow Obamacare casts on the health-care system, which alone accounts for 17% of the economy. I am certainly not saying that repealing Obama-era regulation will improve the average American’s wellbeing. Far from it. But businesses will be ecstatic, maybe enough to start really investing again. The boost to confidence is already palpable.

Then there is the prospect of a massive stimulus, featuring a huge expansion of badly needed infrastructure spending. (Trump will presumably bulldoze Congressional opposition to higher deficits.) Ever since the 2008 financial crisis, economists across the political spectrum have argued for taking advantage of ultra-low interest rates to finance productive infrastructure investment, even at the cost of higher debt. High-return projects pay for themselves.

Far more controversial is Trump’s plan for a massive across-the-board income-tax cut that disproportionately benefits the rich. True, putting cash in the pockets of rich savers hardly seems as effective as giving cash to poor people who live hand to mouth. Trump’s opponent, Hillary Clinton, memorably spoke of “Trumped-up trickle-down economics.” But, Trumped-up or not, tax cuts can be very good for business confidence.

It is hard to know just how much extra debt Trump’s stimulus program will add, but estimates of $5 trillion over ten years – a 25% increase – seem sober. Many left-wing economics commentators, having insisted for eight years under Obama that there is never any risk to US borrowing, now warn that greater borrowing by the Trump administration will pave the road to financial Armageddon. Their hypocrisy is breathtaking, even if they are now closer to being right.

Exactly how much Trump’s policies will raise output and inflation is hard to know. The closer the US economy is to full capacity, the more inflation there will be. If US productivity really has collapsed as much as many scholars believe, additional stimulus is likely to raise prices a lot more than output; demand will not induce new supply.

On the other hand, if the US economy really does have massive quantities of underutilized and unemployed resources, the effect of Trump’s policies on growth could be considerable. In Keynesian jargon, there is still a large multiplier on fiscal policy. It is easy to forget the biggest missing piece of the global recovery is business investment, and if it starts kicking in finally, both output and productivity could begin to rise very sharply.

Those who are deeply wedded to the idea of “secular stagnation” would say high growth under Trump is well-nigh impossible. But if one believes, as I do, that the slow growth of the last eight years was mainly due to the overhang of debt and fear from the 2008 crisis, then it is not so hard to believe that normalization could be much closer than we realize. After all, so far virtually every financial crisis has eventually come to an end.

Of course, all of this is an optimistic spin on a Trump economy. If the new administration proves erratic and incompetent (a real possibility), dejection will quickly overwhelm confidence. But beware of pundits who are certain that Trump will bring economic catastrophe. On election eve, New York Times columnist Paul Krugman unequivocally insisted that a Trump victory would lead to a stock-market collapse, with no recovery in sight. Investors who relied on his insights lost a lot of money.

At the risk of hyperbole, it’s wise to remember that you don’t have to be a nice guy to get the economy going. In many ways, Germany was as successful as America at using stimulus to lift the economy out of the Great Depression.

Yes, it still could all end very badly. The world is a risky place. If global growth collapses, US growth could suffer severely. Still, it is far more likely that after years of slow recovery, the US economy might at last be ready to move significantly faster, at least for a while.

Kenneth Rogoff, a former chief economist of the IMF, is Professor of Economics and Public Policy at Harvard University.

Stalking a Killer Fungus

SINGAPORE – Warnings of the rise of so-called superbugs – disease-causing microbes that are resistant to many (or all) antibiotics – have been coming thick and fast in recent years. What many people seem not to realize is that superbugs are already here –and they are already killing people.A prime example is Candida auris, a multidrug-resistant fungal infection that is emerging as a serious global health threat.

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Why is Saudi Arabia at War in Yemen?

RIYADH – Saudi Arabia has drawn a lot of criticism lately for its leading role in the war against Houthi rebels in Yemen. Some deride the Kingdom, the richest Arab state, for taking action against the poorest. Others have claimed that the fight against the Houthis – a Zaidi Shia-led religious-political movement – is just one element in a broader war on the Shia that Saudi Arabia has supposedly been waging. These are simplistic claims, reflecting a fundamental misunderstanding about the Kingdom’s role in Yemen – and, indeed, in the entire Arab world.

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A Scientific Outlook for a Post-Factual World

VIENNA – We have entered a disturbing new era. The sheer volume of false utterances and outright lies spewed during the United States’ presidential election campaign implies a growing disdain for factual knowledge, as does the proliferation of fake news disseminated without journalistic filters on social-media platforms such as Facebook and Twitter.

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