Yglesias » Evolution of Eurozone Trade Balance

Yglesias » Evolution of Eurozone Trade Balance:

The OECD has a new survey out of the Euro area economy, including some slides (slides) from Pier-Carlo Padoan:

Among other things, you see here another illustration of the point that there’s something very simplistic about the “Germany has high net exports because we make good cars” theory of global trade flows. BMW made good cars in the 1990s, too, but Germany ran modest trade deficits at that point. And if Germans (and Dutch, Austrian, Swedish, etc.) households started buying more consumer goods (or, equivalently, taking more vacations) the growth outlook for neighboring countries would be better. But this wouldn’t just be a favor to the people of Spain, Germans would actually have more stuff. The Schröder government undertook a lot of politically difficult reforms in order to boost German productive capacity. But presumably the point of this was to actually reap more rapid increases in living standards and not just to try to win some kind of global exports championship.

China’s Army of Graduates Faces Struggle - NYTimes.com

China’s Army of Graduates Faces Struggle - NYTimes.com:

In a kind of cruel reversal, China’s old migrant class — uneducated villagers who flocked to factory towns to make goods for export — are now in high demand, with spot labor shortages and tighter government oversight driving up blue-collar wages.

But the supply of those trained in accounting, finance and computer programming now seems limitless, and their value has plunged. Between 2003 and 2009, the average starting salary for migrant laborers grew by nearly 80 percent; during the same period, starting pay for college graduates stayed the same, although their wages actually decreased if inflation is taken into account.

Who Exports

Yglesias :

talking about the balance of trade with Germans. One thing you often hear from Germans on this issue is a kind of patronizing line about “oh, are you saying we should make our products worse? If America has a trade balance problem, you guys should make better stuff!

...This whole line of thought seems to me to be largely based around confusing exports with net exports. If you just look at aggregate exports then Germany and the United States are very closely packed. There’s only slightly more German-made stuff being purchased by non-Germans than there is American-made stuff being purchased by non-Americans. And if you look at adjacent countries, the combined GDP of Poland + Czech Republic + Austria + Switzerland + France + Belgium + Netherlands + Luxembourg + Denmark is wildly higher than Mexico + Canada. Indeed, France alone has a bigger economy than Canada and Mexico combined. Or to look at it in the most clear-cut way, the per capita output of the American economy is higher than the per capita output of Germany, whether measured at market exchange rates or with PPP adjustments.
Long story short, the issue here really and truly is one of German households engaging in a very high rate of savings and not one of Germany firms being somehow extra awesome at making desirable products. German firms are great, the German people make a lot of stuff, and on a per hour basis the German workforce is incredibly productive. And good for them! But they’re not actually not outproducing the United States of America, they’re buying less stuff. Which would be fine if when the world turned around to look at what’s happening with these savings we saw the world’s finest banking system financing highly productive investments all ’round the world. But is that actually what we see? I see German banks financing bum real estate developments in Ireland, Nevada, Spain, Florida, etc. ...The issue of the questionable prudence of the savers is a real one here. If I heard more people saying with a straight face “Matt, the reason our households save so much is our banks are uniquely skilled at channeling savings into profitable investments” I’d feel much happier about the whole thing.

Trade Does Not Equal Jobs - NYTimes.com

Trade Does Not Equal Jobs - NYTimes.com:
One thing I’m hearing, now that all hope of useful fiscal policy is gone, is the idea that trade can be a driver of recovery — that stuff like the South Korea trade agreement can serve as a form of macro policy.

Um, no.

Our macro problem is insufficient spending on U.S.-produced goods and services; this spending is defined by

Y = C + I + G + X – M

where C is consumer spending, I investment spending, G government purchases of goods and services, X is exports, and M is imports. Trade agreements raise X — but they also lead to higher M. On average, they’re a wash.

This, by the way, is why claims that the Smoot-Hawley tariff caused the Great Depression are nonsense. Yes, protectionism reduced world exports; it also reduced world imports, by the same amount.

There is a case for freer trade — it may make the world economy more efficient. But it does nothing to increase demand.

And there’s even an argument to the effect that increased trade reduces US employment in the current context; if the jobs we gain are higher value-added per worker, while those we lose are lower value-added, and spending stays the same, that means the same GDP but fewer jobs.

Robotic Warriors and Industrial Policy

Yglesias reviewing Peter Singer’s excellent book on military robots,

Perhaps the most disturbing truth is that a book about military applications of robotics is largely coextensive with a book about robotics in the United States. Singer alludes to the fact that the world leader in robotics is Japan, where technological prowess is used to do productive work on behalf of a skilled but aging population. There robots are “used for everything from farming and construction to nursing and elder care” in a country that contains “about a third of all the world’s industrial robots.” In the U.S., by contrast, civilian applications of robots remain relatively primitive. The field is dominated by defense-oriented research funding and competition for large defense-related government contracts. Perhaps the most notable American civilian robot is the Roomba, a sort of semi-intelligent vacuum cleaner. But even this is made by a firm, iRobot, that has extensive defense contracts for its PackBot and other military robots.

Yglesias » Robotic Warriors:

Shunting such a large proportion of our talented engineers into dreaming up more clever ways to engage in misguided military adventures seems to me to be a policy that’s going to end up leaving a lot of useful ideas on the table. If you took the funds currently appropriated for specialized high-tech defense procurement and put some of them into basic research funding and gave some of them back to the private sector, we’d be on the road to higher productivity.

Chinese 'Button Town' Struggles with Success : NPR

Chinese 'Button Town' Struggles with Success : NPR:

Look down at the shirt you're wearing. Chances are the buttons came from Qiaotou. The small Chinese town, with about 200 factories and 20,000 migrant workers, produces 60 percent of the world's supply.