End of Economic Growth?

Robert Gordon’s new book on economic growth and its future has been received tons of press and it looks like a pathbreaking read not the least for what Gordon is arguing – that the world will see less and less economic growth going forward. Though eminently contestable, the thesis is by no means new. Several other thinkers have argued as such in the last few years namely Tyler Cowen and Peter Thiel, both of whom lament the state of innovation in the world today. Couple of interesting links on Gordon’s book below here

A insightful podcast and conversation of Gordon and Jeff Sachs (who commends the book but disagrees with the thesis) and a good review by Ed Luce in this weekend’s FT Magazine. Paul Krugman in his review in NY Times praised the book; here’s a snippet from his review.

Is he right? My answer is a definite maybe. But whether or not you end up agreeing with Gordon’s thesis, this is a book well worth reading — a magisterial combination of deep technological history, vivid portraits of daily life over the past six generations and careful economic analysis. Non-economists may find some of the charts and tables heavy going, but Gordon never loses sight of the real people and real lives behind those charts. This book will challenge your views about the future; it will definitely transform how you see the past.

What to do with the Rupee?

Rajiv Kumar has a blistering column in the Indian Express of India’s Exchange Rate taking issue with Raghuram Rajan’s recent comments that he prefers a stable, not undervalued, exchange rate for the Indian economy. Ostensibly, his comments were driven by a need to have a stable rate that advances price stability in the economy allowing individuals to makes investments as they see fit. No doubt, this also favours those vested interests, Banks, Financial institutions and other companies that have heavy foreign debt obligations. Kumar begs an answer to Rajan’s comments which he sees as counterproductive given that India’s exports have declined over the past few years. Kumar has a point, a certain decline in the Rupee will favour those SME’s that are already operating in a difficult global economy.

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But the problem is this: once you start to devalue how much control will you have over the process? And even if you devalue, will Indian industry and SME’s use that to propel their exports? Answers to this question are not clear. The exchange rate, right now, is not high enough to prevent export-led growth yet Indian industry has not really responded so there is no certainty that it could happen in the near term should the Rupee slide. In this context, Rajan perhaps prefers stability over uncertainty in an international economic environment that is far from stable. But the politics of this is also interesting – Rajan’s independence and penchant for openness has already irked the government, especially Modi and Jaitley, which begs the question – Will his term be extended come 2017?

Conversations with Tyler

Tyler Cowen has become probably the most respected and followed scholar-blogger. Marginal Revolution is one of the frontline places to visit for accessible and policy-relevant posts and comments on contemporary economic and political issues. Now Cowen has begun a podcast series that is equally stellar – Conversations with Tyler. Several episodes have been broadcast with genuinely interesting people, not just scholars. The most recent one with Kareem Abdul Jabbar, the public intellectual, is a must watch/hear.

Response to Governance Commentary on Global Governance

As posted on Governance Journal’s Blog, a response to Coen and Pegram’s commentary on Global Governance Research.

In a recent commentary for Governance, David Coen and Tom Pegram argue that the best way to improve global governance research is by synthesizing advances from three disciplines – International Relations, International Law and European Public Policy to enable scholars map, grapple with and overcome hindrances to global public policy-making. Though instructive, their agenda will not explain why ‘global governance is not working’ since their focus does not extend to the politics around the gridlock in global governance today.

The gridlock, I argue, is linked to two developments which undoubtedly deserve more scholarly attention: West’s opportunistic multilateral impulses and the intent of rising powers to establish other multilateral frameworks like the Shanghai Cooperation Organization (SCO), BASIC Climate Change Group, India-Brazil-South Africa Forum (IBSA), BRICS and other recent initiatives like Asian Infrastructure and Investment Bank (AIIB) and New Development Bank (NDB). Going ahead, we need not focus entirely on the ‘global’ per se but on the ‘domestic’ in key countries to probe and elucidate their fluid attitudes and preferences toward the multilateral order and its rules.

As Coen and Pegram rightly identify, we are confronted by a spate of global problems in areas like finance, energy, climate change and health. Problems that many claim cannot be adequately addressed by existing governance mechanisms. And there is a general understanding that this gap has generated an institutional gridlock.[i] But this gridlock is not by any means new. A cursory peek into the negotiations of any major multilateral treaty over the past two decades reveal a polarized political climate where countries in the ‘North’ and ‘South’ clash over the rules of international rule. To be sure, the number of issues on the multilateral agenda have risen; issues also appear to be more complex. What has perhaps changed now is that countries are less willing to address trans-boundary problems in the formal multilateral order. This has presented political options for industrialized countries and emerging powers that both have exercised.

The first development is the West’s growing opportunistic engagement with the existing multilateral order. In the last ten years, the US Senate has either rejected or stalled a raft of relevant international treaties on labor, cultural rights, armed conflict, nuclear weapons, law of the sea, disability rights and discrimination against women. Funding is often withheld for multilateral institutions and purposes. Intermittently, Washington supports institutional restructuring in the IMF and the World Bank but seldom backs it up by action. In international health, western donors have begun to earmark their financial contributions for particular initiatives and tasks – multilateralism à la carte, siphoning funds away from the WHO’s institutional prerogatives.[ii] Rules around international trade are now wittingly entangled with intellectual property concerns, environmental protection checks and labor rights. This selective multilateral disposition appears to have domestic sources that revolve around diminishing public opinion toward international organizations, internal financial constraints and efficiency concerns vis-à-vis multilateral processes. No doubt, political economy also factors with rules being negotiated to advance particular interests within industrialized countries. To better understand this dynamic, more detailed empirical work is needed.

And the second trend, ostensibly linked to the first development, is the resolve of rising powers to establish alternate mechanisms to further mutual cooperation on issues like climate change, maritime security, health, trade and infrastructure. There is a political logic to these arrangements. Pooling collective and growing economic power boosts their political clout when negotiating international rules. Bargaining power also gives these countries more space to protect their flank when proposed rules conflict with their development or security interests. This collective bargaining is not a recent phenomenon as entities like the G-77 have long been a staple of the multilateral landscape. But there is a general acceptance that, this time around, the stakes are much higher since the economic clout of emerging powers have considerably grown distinguishing them from the bottom rung of developing countries. This leaves them less than tolerant of institutions and rules that do not reflect their interests. However, even as structural factors may explain the rise of these arrangements they cannot account for their gradual deepening. As newer initiatives like the AIIB and NDB emerge and evolve, we need to better understand and explain why emerging powers are opting to develop and deepen new arrangements while retaining one foot in the main multilateral camp.

As Coen and Pegram assert, a great deal of insight has been given to map and understand how governance works at the global level. The time has come to understand why governance is ‘not working’ at the global level.

[i] Hale, T., Held, D., & Young, K. (2013). Gridlock: Why Global Cooperation is Failing When We Need It Most. Polity.

[ii] Sridhar, D., & Woods, N. (2013). Trojan Multilateralism: Global Cooperation in Health. Global Policy4(4), 325-335.

Is the Creative Class really struggling?

NYT Magazine has published an interesting essay questioning the pronounced decline of the creative class – writers, musicians, authors, etc over the past two decades with the rise of the internet and other platforms that have flattened the way people consume art and media. Differing from what we hear that this labour group is fighting for its livelihood, Johnson finds evidence to suggest otherwise. Instead these occupations are actually experiencing a growth spurt, some more than others. This comes down to a few reasons – more avenues to produce your content to which creates more opportunities as people continue to consume the same level of content as they did in 1999. But returns, he points out, are rising disproportionately to those that produce excellent work and less so for the others but they do get a piece of the pie.

An interesting essay throughout, here is one nugget worth highlighting:

Of the big four creative industries (music, television, movies and books), music turns out to be the business that has seen the most conspicuous turmoil: None of the other three has seen anywhere near the cratering of recorded-­music revenues. The O.E.S. numbers show that writers and actors each saw their income increase by about 50 percent, well above the national average.

History of Nuclear Inhibition

Frank Gavin has a useful article in War on the Rocks that cuts through the fog around the Iran-US Nuclear Agreement. Leaving aside any concerns that Israel or other regional states might have, the deal is remarkable in that Iran voluntarily or with some voluntary involvement has agreed to limit its nuclear ambitions despite being in a deplorable security environment surrounded by foes alike. Gavin identifies this clearly:

‘Getting any sovereign state to limit its ability to develop a weapon that would provide it with the ultimate security is beyond difficult. We should not forget how impressive any deal limiting Iran’s nuclear capabilities is. Iran’s neighborhood is one of the toughest in the world, marked by chaos and discord and populated by bitter enemies, ideological and geopolitical rivals, and nuclear-armed states. It faces adversaries with superior conventional capabilities and has limited abilities to project power, making it the ideal candidate to acquire nuclear weapons. It is no friend to the United States, nor will it be anytime soon. Iran possesses both ample capabilities and powerful incentives to go nuclear. This makes the nuclear agreement, despite its imperfections, all the more remarkable.’