Would Reaganomics Work Today?

The key drivers that propelled the Reagan economy are now tapped out or out of favor.

The name of Ronald Reagan is frequently evoked by the current contenders to the GOP nomination. Donald Trump speaks admiringly of the 40th President of the United States and uses a truncated version of his 1980 campaign slogan “Let’s Make America Great Again”. Ted Cruz promises to implement Reagan’s solution of lower taxes, lower regulation and a stronger military. Before he bowed out recently, Marco Rubio was equal in his praise. And John Kasich stakes an even more tangible claim by reminding us that he is the only candidate who actually worked with Reagan. Read more

China’s Demographics at a Turning Point

For decades, the decline in China’s birth rate was a big boost for the economy. What now?

This week, schadenfreude could have been a word invented for China experts if you judge by some of the commentary surrounding the country’s lifting of its one-child policy. Most got it right that the legacy of the one-child policy is now a problem for the Chinese economy because of a rapidly rising old-age dependency ratio (green line in the first chart below). This was tacitly acknowledged by the lifting of the policy. Read more

Now a Trade Partnership with Africa?

A few days ago, the United States reached agreement on the Trans-Pacific Partnership (TPP) with eleven other nations (see list in tables below). Here is how the Office of the US Trade Representative (USTR) describes the TPP on its web page:

President Obama’s trade agenda is dedicated to expanding economic opportunity for American workers, farmers, ranchers, and businesses. That’s why we are negotiating the Trans-Pacific Partnership, a 21st century trade agreement that will boost U.S. economic growth, support American jobs, and grow Made-in-America exports to some of the most dynamic and fastest growing countries in the world.

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The Candidates’ Other Demographic Challenge

It is massively larger than 11 million illegals.

Hans Rosling, co-founder of Gapminder, calls it “the biggest change of our time”. It is Africa’s population growth from 1 billion people today to 2.5 billion by 2050 and 4 billion by 2100.

You could say that a close “second biggest change of our time” is the aging and stagnation of the population in rich countries. The combined population of North America, Europe, Japan and Australia/New Zealand is now at 1.3 billion and it will remain at 1.3 billion by 2050 and 2100 with small gains in North America and Oceania offset by declines in Europe and Japan. Read more

Demography, the Global Emergency

It is not an exaggeration to say that world demographics are entering uncharted territory. For the first time in a very long time, perhaps the first time ever, the dependency ratios (loosely, the ratio of dependents to workers) of all rich nations and of several emerging markets have started rising and will continue to rise for several decades.

This alone would be enough of a challenge for the world economy. But making things more complicated, it is taking place at the same time as the other big demographic transition of our age, the great population boom in some of the poorest nations of the world. Read more

US GDP: Is 4% Growth Achievable?

The Wall Street Journal and The Financial Times say no.

While announcing his presidential campaign Monday, Jeb Bush said:

There is not a reason in the world why we cannot grow at a rate of 4% a year. And that will be my goal as president—4% growth, and the 19 million new jobs that come with it.

As a cruising speed, 4%+ GDP growth is achievable but only under very favorable conditions. Read more

The Lottery of Birth Place and Time

“When I attempt to find a simple formula for the period in which I grew up, prior to the First World War, I hope that I convey its fullness by calling it the Golden Age of Security.”

Thus begins the autobiography The World of Yesterday in which the Austrian author Stefan Zweig, born in 1881, recounts his early life in Vienna at the height of the Belle Époque. It was a time of high culture, of prosperity, and of people who believed that war was forever relegated to the past. Then came the shock of WW1, the breakup of Austria-Hungary, the difficult inter-war period, Zweig’s own forced exile, the horrors of WW2, and finally death. Zweig and his wife committed suicide in Brazil, far from Vienna and very far from the Belle Époque, in early 1942 at a time when the Nazis still looked unbeatable. Read more