Democracy and liberalterians

Unwilling to admit that the center-left has been largely captured by the managerial elite, many pundits and academics on the left insist that mindless bigotry, rather than class interests, explains the attraction of many working-class voters to populist parties that promise to restrict trade and immigration. But it is just as rational for workers to prefer a seller’s market in labor as it is for employers to prefer a buyer’s market in labor. Blue-collar workers who have abandoned center-left parties for populist movements bring with them the historic suspicion of large-scale immigration that was typical of organized labor for generations.

A few decades ago, corporate managers, politicians and university professors had distinct subcultures. No longer. What we might call “woke capitalism” represents a fusion of the three elites at the commanding heights of the economy, the culture and politics; they increasingly constitute a single conformist caste.

This newly consolidated ruling class is best described as “liberaltarian,” combining moderately libertarian views in economics with cultural progressivism in values. From its citadels in a few big cities, this oligarchy periodically notifies the working-class majority what values and
opinions about sex, immigration and other topics it must immediately adopt without debate, on pain of being blacklisted by the private sector, prosecuted by the government or censored or erased by the media….

…… The managerial overclasses of the West understand that the policies they prefer on trade, immigration, entitlements and other issues are unpopular and can be threatened by voter rebellions. That is why for the last few generations they have sought to remove decisionmaking
authority from legislatures, which are somewhat accountable to working-class majorities, and deliver it to administrative agencies, courts and transnational institutions such as the European Union. [Linkht Gulzar Natarajan]

Paul Tucker makes this last point too in his work, ‘Unelected power’.

Quest for jobs

The project that started in 2018 finally attained its logical conclusion two days ago. On Wednesday, Carnegie India published the joint paper that Gulzar and I began writing last year on how to view entrepreneurship as an answer to India’s job creation.

We dispel some myths along the way that India’s MSMEs are its strength. We see them more as a reality to live with – especially the micro-ones. They are subsistence enterprises.

The small and medium enterprises have to be allowed to grow. We outline some policy measures. The more often that I read it, the more I am pleased with the practical and pragmatic suggestions we have made. They are not dramatic and headline grabbing stuff but they are likely more effective.

A colleague asked me if we had used a Research Assistant to collect and compile so much of information. I proudly answered her that it was all our effort! No external assistance.

The full paper is available here. It is an easy read. has published excerpts [Link]

Tim Taylor, Managing Editor of the Journal of Economic Perspectives has written a detailed blog post on it. He had also commended our ‘Can India grow?’ book, when it was published in November 2016.


In this regard, it is encouraging to note that employment in India’s factory sector had grown at nearly 5% in 2017-18. This is based on provisional tables from the Annual Survey of Industries 2017-18. You can see the provisional tables here and the important Table 7 here.

How to place this near-5% growth in jobs in the factory sector? Pramit Bhattacharya’s article in Mint helps us place this growth estimate in context:

The latest numbers on annual growth of workers (4.8%) and managers (4.5%) do not qualify as a boom. The last factory jobs boom India witnessed was in the 2004-08 period, when the blue collar workforce grew at an average annual pace of 8%. In the four years leading to fiscal 2018, the average growth rate was much more modest at 4%.

However, the boom phase was preceded by a sharp contraction in the factory workforce in the years leading up to the boom. In four of the five years between fiscal 1999 and fiscal 2004, the factory workforce actually shrank in size. As a result, a part of the boom that followed merely replenished the diminished stock of workers across India’s factories.

It is an encouraging sign that we do have the capacity to generate manufacturing jobs. It shows that if we do really take a sledgehammer and a scissors to all the ‘Unease of Doing Business’, India can dispel the myth of ‘premature industrialisation’.

The policy proposals we had identified are our important contribution to India’s quest for jobs.

Jobs boom in OECD

‘The Economist’ magazine has recently received some flak for listing shrinking imports as one of the reasons for good economic growth in Japan. See here.

But, ‘The Economist’ is almost breaking out into a dance on the jobs boom in OECD nations. Fair enough. It is an important story.

Wondering if it has anything to do with declining global trade? I am being cheeky here, of course, in phrasing it that way. More seriously, the question is whether it is due to the re-shoring of production and decline in export volumes from emerging economies. To be fair, the latter is a hypothesis and I need to check some data. I am just merely writing based on memory from the shrinking trade surplus of China and also shrinking export growth from India.

Of course, China’s export growth might still be good but its second derivative might be negative.

But, ‘tongue-in-cheek’ remarks apart, it is important to see if manufacuring jobs have gone back to the West and if that is part of the jobs boom that ‘The Economist’ is talking about. In that case, this SOS from Michael Bloomberg to stop Trump on trade might be a bit unnecessary.

Manufacturing employment was declining in the US in absolute terms and as % of overall employment. The low was in February 2010 at around 11.45 million jobs and in April 2019, it stood at 12.838 million manufacturing jobs. Since January 2017 – when Trump took office – manufacturing has added some 470,000 jobs.

In contrast, the second Obama Presidency (not the first one – that might be harsh, because of the 2008 crisis) saw 372,000 manufacturing jobs added.

[Postscript: Related and Unrelated news is that self-employment improves mental health both for those switching out of regular jobs and for those who were earlier unemployed. See here.]

‘Has Asian dominance arrived’ and other links

This Bloomberg story tells us that global debt rose ‘only’ USD3.3trn in 2018 to around USD243trn, about three times the global GDP. If you want to know the background to this news, the link is there in the Bloomberg news-story. It is a research note by the Institute of International Finance.

Despite that, President Trump is not happy with Fed Chairman Jerome Powell. He says he is ‘stuck’ with Powell. This is quite wrong and dangerous. I am surprised at US dollar’s resilience in the face of such gibberish.

According to ‘What we are seeing’ (Edition: 22.03.2019), for the first time, globally, the number of 65-year olds has exceeded the number of 5-year olds.

One has to do more detailed work on the claim that Asia has become the world’s largest economic bloc and that its GDP now exceeds the combined GDP of the rest of the world, in PPP $. My simple response is ‘So, what?’. Of course, I could be very wrong here but the obituatry of Western dominance is being written too prematurely. Asia is at very high risk of internecine warfare and the West has a good track record of ‘divide and rule’. I would like to recall my MINT column from nearly four years ago that the 21st century would belong to the West or to nobody.

This blog post from ‘Bank Underground’ (Bank of England blog) says that rising interest rates increase labour share of GDP because productivity might fall faster than wages do. Or, we can add that capital’s share declines faster in an environment of rising rates due to correction in asset prices. Very interesting and important empirical evidence in this. It shows that a reflexive opposition to higher interest rates by the likes of, say, the Economic Policy Institute is wrong.

The return of robber-barons?

I receive the NBER digest every month and the papers that the Digest features are almost always very interesting. In the October 2018 Digest, I came across this paper:

Are EU Markets More Competitive than Those in the U.S.? 

Since 2000, gross profit rates in the United States have risen and industry concentration has soared, but these trends are not found in the European Union.
Until the late 1990s, most U.S. markets were viewed as highly competitive relative to their international counterparts. Many European countries implemented U.S.-style free market regulatory models during this time period. 

In How EU Markets Became More Competitive Than U.S. Markets: A Study of Institutional Drift (NBER Working Paper No. 24700), Germán Gutiérrez and Thomas Philippon argue that over the last two decades, U.S. markets have gradually become less competitive, and that, because this trend was not echoed in Europe, European markets today are actually more competitive than those in the United States. In many cases, the EU markets exhibit lower levels of industry concentration and excess profitability, as well as fewer regulatory barriers to entry.

The researchers find that starting around 2000, gross profit rates in the United States began to increase while the labor share declined. These developments are much more muted in the EU. A similar trend is observed in measures of industry concentration.

The researchers explore whether industry composition drove the divergence in concentration. They consider whether the emergence of high-tech industries drove the broad increase in concentration observed in the United States. They discount that explanation, noting that “the rise in U.S. concentration since 2000 is pervasive across most sectors, just as the stability/decline in EU concentration is.” Industries that experienced significant increases in concentration in the United States, such as telecom and airlines, did not experience parallel changes in the EU.

In the airline industry, the researchers find, the “rise in U.S. concentration and profits closely aligns with a controversial merger wave that includes Delta-Northwest (2008), United-Continental (2010), Southwest-AirTran (2011) and American-US Airways (2014).”

They suggest that the divergence in market competitiveness between the U.S. and Europe is related to the powers granted to EU regulatory institutions at their inception. They note that both the European Central Bank and the Directorate-General for Competition were given more political independence than parallel institutions in the United States and thus have been able to pursue more aggressive antitrust enforcement in recent years. In the U.S. between 1996 and 2008, they write, the Federal Trade Commission “…essentially stopped enforcing mergers when the number of remaining competitors is 5 or more.” 

In all areas of antitrust the researchers find decreasing enforcement in the United States and increasing enforcement in the EU. The Directorate-General for Competition is more likely to pursue “abuse of dominance” cases than is the U.S. authority, and financial penalties in cartel cases tripled as a share of EU GDP between 2000 and 2016.

The decline in U.S. market competitiveness has had meaningful consequences for U.S. consumers, the researchers point out. Broadband internet prices in the U.S., for example, are significantly higher than in the EU, where the telecom industry is less concentrated. 

They buttress their case for the comparative lack of political independence of U.S. regulatory bodies by noting the higher levels of both lobbying and campaign contributions in the U.S. than in the EU. Political campaign contributions are 50 times higher in the U.S. than in the EU.

Source:The NBER Digest, October 2018

It is often assumed that a capitalist economy is a competitive economy. But, it need not be. Is Capitalism synonymous with competition? In theory, it is. In practice, it is not. The guy with the most market capitalisation wins? Is that capitalism?

Sarah O’ Connor’s piece in FT on how big companies are pushing governments around confirms why market concentration rises. Governments are doing the bidding of companies and not that of real markets. Pro-business is not pro-market. Pro-business is anti-competition and ani-consumer. Even anti-society.

‘The Economist’ now suggests or describes how labour unions are regrouping using technology to re-establish themselves or how technology is allowing workers to regroup themselves. Technological developments might have led to the erosion in their power base. Funny that ‘The Economist’ does not include globalisation and the offshoring of jobs as one of the things that led to the erosion of the powers of labour unions. In any case, it is good for capitalism too that labour unions are coming back.

May be, this is what is needed for the rising tide of market concentration in America to be reversed.

On ‘Bullshit’ jobs

Why are bullshit jobs created? The author of the book with the above title – David Graeber – offers this explanation:

The answer clearly isn’t economic: it’s moral and political. The ruling class has figured out that a happy and productive population with free time on their hands is a mortal danger (think of what started to happen when this even began to be approximated in the ‘60s). And, on the other hand, the feeling that work is a moral value in itself, and that anyone not willing to submit themselves to some kind of intense work discipline for most of their waking hours deserves nothing, is extraordinarily convenient for them. [Link]

Somewhere here, he has a point:

If someone had designed a work regime perfectly suited to maintaining the power of finance capital, it’s hard to see how they could have done a better job. Real, productive workers are relentlessly squeezed and exploited….

….This is one of the secret strengths of right-wing populism. You can see it when tabloids whip up resentment against tube workers for paralysing London during contract disputes: the very fact that tube workers can paralyse London shows that their work is actually necessary, but this seems to be precisely what annoys people.

He had written the above article in 2016 – little under two years ago. This is the cover of his new book.

His recent interviews are here and here. I get the impression that he has not figured out why bullshit jobs are created, even granting his pro-worker, ‘class revolution’ framework.

Clearly, he is focused on the possibilities of a working class revolution against capitalism of the day exept that he has not yet gone to the root cause.

This article in ‘The Economist’ in 2013 does better. The article talks about complexity of tasks being one of the factors for them to be broken up into ‘bullshit’ tasks. That is one step closer. But, how does complexity arise, in the first place? Is it only technology or is it something else? Rapacity has to be a factor.

The article goes on to predict a happy ending but the author is silent on how we would get there:

The issue is that too little of the recent gains from technological advance and economic growth have gone toward giving people the time and resources to enjoy their lives outside work. Early in the industrial era real wages soared and hours worked declined. In the past generation, by contrast, real wages have grown slowly and workweeks haven’t grown shorter.

The development of large-scale technological unemployment or underemployment, however, would force rich societies to revisit a system that primarily allocates purchasing power via earned wages. And that, in turn, could allow households to get by or even thrive while working many fewer hours than is now typically the case—albeit through a pretty hefty level of income redistribution.

This is how I see it:

Capitalist societies seem to want to pay only as little as possible to those who are not directly contributing to its bottomline. They are employed by the public sector who are paid out of the taxes that the well-heeled pay. Hence, the lower their pay, the better. Their tax dollars travel the most, in  that case.

If they are not in the public sector, they are then employed by contractors who pay even worse.

But, those who are employed by the capitalists (solely) for the purpose of catering to and furthering their greed are paid better. David Graber gives some examples of such professions:  private equity CEOs, lobbyists, PR researchers, actuaries, telemarketers, bailiffs or legal consultants.

It is mostly about greed and how modern capitalism is not satisfied. It is about ‘more is preferable to less’ and non-satiation being the building blocks of modern capitalism. That, to me, is the root cause of ‘bullshit’ jobs and that is what I had mentioned in my column last week.