1. Anders Åslund of the Peterson Institute has written a terrific piece on the state of the Russian economy, and it’s alarming if unsurprising. And so, as Åslund writes, the BRIC countries become the BIC countries. (How often do you get to type that particular variation on the letter A?)
Russia’s problem is larger than day-to-day constraints. Its public finances are in good shape; its current account is sound. But during Putin’s second term as president, from 2004 through 2008, a substantial renationalization of business took place, spearheaded by his confiscation of the Yukos oil company. Much of Russia’s economy is now dominated by monopolistic state corporations such as Gazprom, Russian Railways, Russian Technologies, Transneft, Rosneft and a handful of banks. They are run by Putin confidants who are close friends from his days in the KGB.
When the other shoe drops — that is, when China slams into a wall under the weight of its own form of crony capitalism — the case for the Beijing Consensus, for industrial policy, and for other alternatives to economic regimes built on a firm foundation of grassroots indigenous entrepreneurship — will collapse. But I’m obviously biased, so go read Carl Schramm.
2. Nicole Gelinas demonstrates yet again that she is one of the most insightful of the younger political thinkers. She’s written a fantastic indictment of eminent domain abuse in New York city that could unite critics on the left and right.
Ratner didn’t want to do the piecemeal work of cajoling private owners into selling their properties, however. Instead, he appealed to the central-planning instincts of New York’s political class. Use the state’s power to seize the private property around the railyards, he told Governor George Pataki, Mayor Michael Bloomberg, and Brooklyn borough president Marty Markowitz. Transfer me the property, and let me buy the railyards themselves below the market price. I’ll build my development, Atlantic Yards, around a world-class basketball arena.
New York, in short, would give Ratner an unfair advantage, and he would return some of the profits reaped from that advantage by creating the “economic benefits” favored by the planning classes.
3. Not surprisingly, I really liked Yuval’s take on the health summit.
4. Check out Kristen Soltis’s essay on how Millennials might shift to the political right.
Well first of all, there’s an ideological issue: the Pew average for 2009 showed 29% of young voters identifying as liberal while only 28% identify as conservative. This is in sharp contrast with the rest of the electorate that is far less liberal and more conservative.
But there are also the underlying reasons for that ideological split: young voters are more likely to be accepting of things that create serious hot-button divides in the GOP, like immigration and same-sex marriage. Young voters are also more likely than their older counterparts to say, “government should do more to solve problems (53 percent)” rather than “government is doing too many things better left to businesses and individuals (42 percent).”
The most critical thing that the Republican Party can do is make a compelling, positive case for its values—limited government as a means to personal freedom, low taxes as a means to individual economic opportunity—and present innovative solutions to earn back the trust of a generation that completely abandoned the party in 2008.
I had the pleasure of taking part in a really smart panel on this subject on Wednesday. My sense is that Millennials consider social issues to be less salient in their voting decisions, but that could change. And I think that the right’s increasing identification with older Americans is more of a potential long-term problem than it’s limited success with non-white voters. We’ll see.
5. Tyler Cowen asks a good question.
6. Andrew Samwick makes a good point.
If the Federal government could administer a problem this intricate, I doubt we would be in the shape we are in. We are over two years into these discussions of stimulus and bailouts, and it is disappointing to continue to see these gimmicks being discussed. …
So what do we need that we typically entrust the government to provide? Infrastructure — repair of the old and expansion of the new. We need trillions of dollars of it, more than enough spending to replace the reduction in private sector demand that has occurred during this downturn. Two years, over a trillion dollars of wasted spending, and counting.
This also accords with a framework in which we think of a recession as an opportunity to stock up on valuable public goods at a steep discount. That said, I still think that Alice Rivlin is right to argue that infrastructure spending should be funded on a sustainable basis. Plan a phase-in of a gas tax increase, for example.
7. Derek Thompson interviews with Rudolph Penner, and Penner makes the case against runaway tax expenditures.
8. I actually think that Okun’s Law is more broken than Louis Uchitelle suggests. But Northwestern University economist Robert Gordon is always worth reading.
“Seeing their compensation collapse with profits and the stock market,” Mr. Gordon wrote, managers “cut costs relentlessly.” In doing so, they rely on rising productivity to sustain production even as they usher workers out the door, now that employers are relatively less constrained by the union power that helped both to protect workers in Mr. Okun’s day, and to make employers’ behavior more predictable.
Okun’s Law plainly needs a rewrite, and Mr. Gordon offers a rough draft. He argues, in effect, that if Okun were living today, the job loss factor in his famous formula would be almost twice as great as it was in the 1960s.
“Labor has always been the prime victim of recessions,” Mr. Gordon said, “but now business firms have succeeded in pushing more of the pain onto workers than ever before.”
Another spin on this could be that these productivity gains place us on a trajectory for more robust long-term growth, which will help improve the employment picture in sustainable fashion. And I have to say, would we want managers to not cut costs relentlessly in this environment? The broader consequences of the required cultural shift wouldn’t be pretty, I’m guessing.
9. Ruffini has a smart take on Ron Paul’s CPAC victory. My strong suspicion is that a softer version of Ron Paul’s politics will continue to gain influence on the right, as evidenced by the extraordinary rise of Glenn Beck and the libertarian populism reflected in the Tea Party movement. Whether this worldview will have much purchase in the broader electorate remains to be seen. This could happen if, as Ralph Benko suggests, there were more of an effort to unite populists on the right and left, and if what some see (fairly or unfairly) as the cultural narrowness of the Tea Party movement started to break down.
10. Josh Levin on Korea’s biggest celebrity.