The Economic Consequences of War - EconVue Spotlight November 22 2019
In 1919 John Maynard Keynes wrote the first best-seller in economics, The Economic Consequences of the Peace. The title is a bit misleading, since it is really about the cost of war. He railed against the Treaty of Versailles, correctly predicting that inequitable conditions of peace made another world war inevitable.
With recent protests in Chile, Bolivia, Venezuela, Hong Kong, Iran, France, Lebanon, and numerous other places erupting like the many-headed Hydra of Lerna, the economic costs of violence are a subject of concern. Keynesian economics predicts that wars between major powers have a perversely positive effect on GDP as military spending booms and rebuilding begins.
Civil wars are different. Continued low-grade violence and domestic unrest such as Iraq has experienced destroys stability and saps growth. Saddled with ongoing violence and debt from the Iran-Iraq war, it took Iraq more than sixteen years to regain 1990 GDP levels. Citizen uprisings are difficult to put down with advanced and costly heavy military equipment, as the photo of Tank Man so eloquently illustrates. Hong Kong is a more current example, where a localized recession is a likely outcome of current troubles.
Overall global GDP should not change as a result of these local conflicts, but a concatenation of events occurring simultaneously might change expectations of peace and dampen growth overall. Multinational businesses operate in multiple locations and can shift operations and investments. However if geopolitics begins to look like a game of whack-a-mole, the world will be looking for a new Hercules.
War and Peace
The Economic Value of Peace
Institute for Economics & Peace 2018
This is what violence does to a nation's GDP
John McKenna 6/25/2018 World Economic Forum
The Better Angels of Our Nature: Why Violence Has Declined
Steven Pinker, 2011 Viking
Pinker documents that violence has declined dramatically since WW2, although communications technology has influenced our perceptions to the contrary. This influential work also admits that the current balance might not last forever.
The Lack of Major Wars May Be Hurting Economic Growth
Tyler Cowen 6/13/2014 New York Times
Living in a largely peaceful world with 2% G.D.P. growth has some big advantages that you don’t get with 4% growth and many more war deaths. Economic stasis may not feel very impressive, but it’s something our ancestors never quite managed to pull off.
Three Big Things: The Most Important Forces Shaping the World
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The three great forces that matter: demographics, wealth inequality, and IT, and how everything has its roots in WWII.
Global Fertility Crashes
Andre Tartar, Hannah Recht, and Yue Qiu 10/30/2019 Bloomberg
Demographics is destiny.
The End of Babies
Anna Louie Sussman 11/16/2019 New York Times
Around the world, economic, social and environmental conditions function as a diffuse, barely perceptible contraceptive.
Experimental economists win Nobel Prize (and deserved to win)
Gary Burtless 10/23/2019 Brookings Institute
Clear explanation of RCT’s (Randomized Control Trials) that were first used in medicine (think placebos). The 2019 Nobel was awarded for using RCT's in economic experiments meant to alleviate poverty instead of disease.
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David Kelley 11/2019 The Federal Reserve Bank of Chicago
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Eleanor Shiori Hughes 11/14/2019 EconVue Conference Report
Japan to exempt asset managers from stricter investment rules
Nikkei Asian Reviews 10/17/2019
This is very good news for investors in Japan.
As America Leaves Syria, Iran Isn’t as Happy as You Think
Ray Takeyh 10/20/2019 Wall Street Journal
In Syria, Turkey is bound to be more powerful, Bashar Assad more reckless, the Kurds substantially weakened, and ISIS reconstituted. None of this is good news for Iran, writes Ray Takeyh.
Sajid Javid accused of 'flying blind' as he refuses to publish economic assessment of Brexit deal
Matt Honeycombe-Foster 10/22/2019 Politics Home
When you do something for the first time in history you will by definition be flying blind. So maybe the Chancellor of the Exchequer is simply being honest about the economic impact of Brexit.
Farm Finances Continue to Weaken Amid Ongoing Uncertainty
Nathan Kauffman 11/14/2019 Federal Reserve Bank of Kansas City
Despite slightly higher crop prices and support from trade relief payments, farm income decreased compared with a year ago
Oakland's Sugar-Sweetened Beverage Tax: Impacts on Prices, Purchases and Consumption by Adults and Children
John Cawley, David E. Frisvold, Anna Hill, David Jones 11/8/2019 the National Bureau of Economic Research
The unsurprising result: no change in consumption.
Taxing unrealized capital gains is an idea so bone-headed I'm at a loss for words
Patrick Chovanec 11/2/2019 Twitter
Taxing unrealized capital gains by marking retirement accounts to market, as well as real estate not on the market, would be hands down the worst US economic policy of all times.
Repo auctions highlight failure of post-crisis policymaking
Karen Petrou 11/6/2019 Financial Times
Repo markets are no longer just financial plumbing. In a low interest rate world, borrowers in speculative markets use repo financing to enhance profits. By January, says Karen Petrou, the Fed's repo support will top $11.5T, more than half of US GDP. What could go wrong?
Where 75% of workers are on the autistic spectrum
Robbie Wojciechowski 10/20/2019 BBC
Thomas Edison and Steve Jobs would not be hired by their own companies today.
Warren's ill-timed insult to Chicago's new mayor
Greg Hinz 10/22/2019 Crain's Chicago's
Hot doggin it in Chicago. Scathing on Warren; no surprise that Mayor Pete is surging ahead in Iowa.
Beware a Faltering China
Michael Beckley 10-28-2019 Foreign Affairs
A weakened China, not a strong China, poses a threat to the world economy.
Francis Fukuyama, 30 years on: Is the world turning Chinese?
Mikio Sugeno 11/9/2019 Nikkei Asian Review
I think the likelihood that there will actually be overt conflict in Asia is much higher than a lot of people imagine it. ... The biggest risk is actually Taiwan right now.
Aftermath: the fall of the Berlin Wall — and its lesson for China 30 years on
Niall Ferguson11/3/2019 The Times
How China Rode the Foreign Technology Wave
R. Stephen Brent 11/10/2019 The American Interest
The best way for the US to combat the technology issue is probably not with tariffs on tradable goods but rather with taxes on capital inflows.
Why quantum computing could be a geopolitical time bomb
Kevin Allison 11/6/2019
Non-binary computing could end encryption says the author, but I disagree and so do others. Quantum-resistant computing is already here: Why Encryption Has Nothing to Worry About
Trump Administration Popped 2017 Bitcoin Bubble, Ex-CFTC Chair Says
Brady Dale 10/22/2019 Coin Desk
Bitcoin futures were allowed in order to short bitcoin and pop the price bubble. ETF’s were not. It worked.
Digital Money Tests Central Banks (video)
Digital currencies under central bank control are not cryptocurrencies.
Five Trends Appear on the Gartner Emerging Hype Cycle for Emerging Technologies
Kasey Panetta Gartner 8/29/2019
Sensing and mobility, augmented human postclassical computing and communications, digital ecosystems, advanced AI, and analytics.
Speaking of known unknowns, our next Hale podcast is with fellow Chicagoan Michele Wucker, author of "The Gray Rhino". You can download and listen to previous podcasts on Itunes, Stitchers, Google Play,Spotify, and of course on our website.