1 Low interest rates and the global recovery (Barry Eichengreen in The Guardian) Two of the world’s most prominent economic institutions, the International Monetary Fund and Former US Treasury Secretary Larry Summers, recently warned that the global economy may be facing an extended period of low interest rates. Why is that a bad thing, and what can be done about it?
Adjusted for inflation, interest rates have been falling for three decades, and their current low level encourages investors, searching for yield, to take on additional risk. Low rates also leave central banks little room for loosening monetary policy in a slowdown, because nominal interest cannot fall below zero. And they are symptomatic of an economy that is out of sorts.
Identifying the problem, much less prescribing solutions, requires diagnosing underlying causes. And here, unfortunately, economists do not agree. Some point to an increase in global saving, attributable mainly to high-saving emerging markets. There is only one problem: the data show little evidence of a savings glut. A second explanation for low interest rates is a dearth of attractive investment projects. But this does not appear to be the diagnosis of stock markets, notably in the US, where equities are trading at record-high prices.
Still others, like the Fed’s current leader, Janet Yellen, suggest that investment and interest rates are depressed as a result of the damage done to the economy and the labour force during the Great Recession. Specifically, the skills and morale of the long-term unemployed have been eroded. Detached from the labor market, they lack incomes to spend; and, stigmatised by long-term unemployment, they are not regarded as attractive employees.
As a result, firms see inadequate demand for their products, and a shortage of qualified workers to staff their assembly lines. The result is low capital spending, one of the striking anomalies of the current recovery, which in turn can explain other troubling aspects of the recovery, from slow growth to low interest rates.
If the disorder has multiple causes, then there should be multiple treatments. There should be tax incentives for firms to hire the long-term unemployed; more public spending on infrastructure, education, and research to compensate for the shortfall in private capital spending; and still higher capital requirements for banks and strengthened regulation of nonbank financial institutions to prevent them from excessive risk-taking.
2 Tech leaps, job losses and rising inequality (Eduardo Porter in The New York Times) A few years ago, technological development would be treated like unadulterated good news. But a growing pessimism has crept into our understanding of the impact of such innovations. It’s an old fear, widely held since the time of Ned Ludd, who destroyed two mechanical knitting machines in 19th-century England and introduced the Luddite movement, humankind’s first organized protest against technological change.
In its current incarnation, though, the fear is actually very new. It strikes against bedrock propositions developed over more than half a century of economic scholarship. It can be articulated succinctly: What if technology has become a substitute for labor, rather than its complement? No law of nature ensures this will always be the case. Some jobs — nannies, say, or waiting tables — may always require lots of people. But as information technology creeps into occupations that have historically relied mostly on brainpower, it threatens to leave many fewer good jobs for people to do.
Robert Solow, who won the Nobel in economic science for his work on how labour, capital and technological progress contribute to economic growth, proposed more than 50 years ago that the share of an economy’s rewards accruing to labour and capital would be roughly stable over the long term. But evidence is emerging that this long-held tenet is no longer valid. In the US, the share of national income that goes to workers — in wages and benefits — has been falling for almost half a century.
In a recent interview, Professor Solow stressed that his proposition of relatively stable labor and capital shares assumed “an economy in a steady state with no systematic structural changes occurring.” Technology clearly plays a role. “We will know better in 10 or 15 years,” Professor Solow said. “But if I had to interpret the data now, I would guess that as the economy becomes more capital intensive, capital’s share of income will rise.” The implication is potentially dire: The vast disparities in the distribution of income that have been widening inexorably since the 1980s will widen further.
3 Selfie obsession and mental illness (Khaleej Times) Taking lots of selfies is not an addiction but a symptom of Body Dysmorphic Disorder (BDD), psychologists warn. ‘Two out of three of all the patients who come to see me with Body Dysmorphic Disorder (BDD) since the rise of camera phones have a compulsion to repeatedly take and post selfies on social media sites,” explained David Veale, a consultant psychiatrist in London.
In a first such study, experts have linked selfies with mental illness and have suggested that people regularly searching for the perfect angle from which to portray themselves could in some cases be ill. Selfie fans with BDD can spend hours trying to take pictures that do not show any defects or flaws in their appearance, which they are very aware of but which might be unnoticeable to others. Often, people who take selfies take several photographs until they find their best angle or pose, but picking out small details can make people very self-conscious about the tiniest of ‘flaws’, the report added.
4 India recognises third gender (Nikita Lalwani in The Wall Street Journal) India’s Supreme Court has officially recognized a third gender category in a landmark verdict that for the first time affords transgender Indians legal status and protection under the law. Transgender people will now have the option to identify as a third gender in official documents, including passports and identification cards, the court said.
India’s top court directed the federal and state governments to count transgender people as part of the country’s “ backward classes,” a designation, based usually on caste, which entitles socially and economically disadvantaged groups to affirmative action in university admissions and state employment. The judgment emphasized the country’s history of discrimination against transgender people. India’s roughly three million transgender people are particularly vulnerable to public harassment, violence and sexual assault, sometimes at the hands of police, the court said.
Among India’s transgender communities, the hijra community is perhaps most prominent. The presence of a hijra at a wedding or birthday party is considered auspicious, but they remain deeply marginalized by mainstream society.