Link: What Trump’s Fight with Amazon Signals for American Business

“All nations, of course, suffer some degree of corruption. Mathurin told me a simple test to determine if a country’s corruption level is at risk of reaching a point of state capture: just see if there is a class of entrepreneurs and small-business people with enough confidence in the government and the infrastructure to invest in businesses that can only succeed in a market that allows for the unconnected to thrive, based on their merit. In another chat a few years ago, this time in a crowded deli in New York City, Mathurin pointed out the window at the many shops nearby as proof that this country, for its many flaws, has not been captured. Without even thinking about it, those store owners trusted that their venders and bankers and electricity provider would honor their contracts, that the roads and the phone service would be reliable enough to allow businesses to function, and that, every few years, the turnover of leadership, in either the city or the nation, would not have any dramatic impact on their ability to conduct business.”
Original source: What Trump’s Fight with Amazon Signals for American Business

Link: Trump’s Tariff Plan Leaves Blue-Collar Winners and Losers

“The mills and smelters that supply the raw material, and that would directly benefit from the tariffs, have been shrinking for years. Today, those industries employ fewer than 200,000 people. The companies that buy steel and aluminum, to make everything from trucks to chicken coops, employ more than 6.5 million workers, according to a Heritage Foundation analysis of Commerce Department data.”

Trade is hard.
Original source: Trump’s Tariff Plan Leaves Blue-Collar Winners and Losers

Link: Federal Reserve chair says ‘Amazon effect’ could be responsible for low inflation

‘The “Amazon effect” refers to the decline in traditional retail employment despite expansion in the overall retail sector. That paradox is occurring because of the explosion of online retail, driven in part by Amazon. As online shopping becomes more efficient and widely-used, fewer traditional retail workers are needed. The Amazon theory purports that lower demand for retail labor keeps wages low and holds down the price of consumer goods. But economists are split on the extent to which this phenomenon actually impacts inflation.’
Original source: Federal Reserve chair says ‘Amazon effect’ could be responsible for low inflation

People get upset when others make more money, and they don’t

Between 1990 and 2010 the rate of economic convergence across American states slowed to less than half what it had been between 1880 and 1980. It has since fallen close to zero. Rich cities started pulling away from less well-off counterparts (see chart 1). According to the Brookings Institution, a think-tank, in the decade to 2015 productivity growth in American metropolitan areas was highest in the top 10% and the bottom 20% (where, by definition, the baseline was low). Struggling middle-income cities like Scranton fell further behind. A recent report by the OECD found that, in its mostly-rich members, the average productivity gap between the most productive 10% of regions and the bottom 75% widened by nearly 60% over the past 20 years.

Source: Left in the lurchGlobalisation has marginalised many regions in the rich world

Trumponomics: focusing on weird things with a small staff

From The Economist a few weeks back:

The real difference is that Trumponomics (unlike, say, Reaganomics) is not an economic doctrine at all. It is best seen as a set of proposals put together by businessmen courtiers for their king. Mr Trump has listened to scores of executives, but there are barely any economists in the White House. His approach to the economy is born of a mindset where deals have winners and losers and where canny negotiators confound abstract principles. Call it boardroom capitalism.

And, on trade, where history points towards a more open approach being successful:

Contrary to the Trump team’s assertions, there is little evidence that either the global trading system or individual trade deals have been systematically biased against America. Instead, America’s trade deficit—Mr Trump’s main gauge of the unfairness of trade deals—is better understood as the gap between how much Americans save and how much they invest. The fine print of trade deals is all but irrelevant. Textbooks predict that Mr Trump’s plans to boost domestic investment will probably lead to larger trade deficits, as it did in the Reagan boom of the 1980s. If so, Mr Trump will either need to abandon his measure of fair trade or, more damagingly, try to curb deficits by using protectionist tariffs that will hurt growth and sow mistrust around the world.

Meanwhile, by the numbers, the focus is obviously on the wrong sectors for juicing:

A deeper problem is that Trumponomics draws on a blinkered view of America’s economy. Mr Trump and his advisers are obsessed with the effect of trade on manufacturing jobs, even though manufacturing employs only 8.5% of America’s workers and accounts for only 12% of GDP. Service industries barely seem to register. This blinds Trumponomics to today’s biggest economic worry: the turbulence being created by new technologies. Yet technology, not trade, is ravaging American retailing, an industry that employs more people than manufacturing. And economic nationalism will speed automation: firms unable to outsource jobs to Mexico will stay competitive by investing in machines at home. Productivity and profits may rise, but this may not help the less-skilled factory workers who Mr Trump claims are his priority.

Check out the rest: “Courting trouble”.

“[E]verybody likes growth in someone else’s backyard”

So, long run growth comes from one thing, and one thing only: Productivity. New and better ways of doing things. New and better products, new and better companies. It doesn’t come from 90% of the things that we talk about. So, the Federal Reserve, stimulus programs, even anti-inequality programs–over 10-20 years, it’s about productivity. Our ancestors may have, you know, you might have had a grandparent who dug coal with a pickaxe; and how did you get so much richer? Not by your union getting him higher wages and he still digs coal with a pickaxe at 20 cents an hour, not 10 cents. It’s because one guy left and he uses a bulldozer. Right? Growth comes from productivity. And productivity–everybody likes growth in someone else’s backyard. Productivity comes from new companies, doing things new ways, and making life very uncomfortable for everybody else. Uber is the great example. Uber is–that’s a great productivity enhancement. It’s putting a lot of people to work who otherwise couldn’t go to work. And the taxi companies hate it. And most of economic regulation is designed to stop growth. It’s designed to protect the old ways of doing things. So, what we need for growth-oriented policies is exactly that kind of innovation, that kind of new companies coming in an upending the status quo, that make everybody uncomfortable and run to their politician to say, ‘You’ve got to stop this.’

I don’t know the politics of economics enough to figure out if that’s a dick thing to say or not, but it sure makes grim-sense. The rest of the interview has some fun mental gymnastics and suave “turns out”’ing.

(And check out the show notes! That’s some intimidating work.)

Source: “EconTalk: John Cochrane on Economic Growth and Changing the Policy Debate”