Self Help

Edge of Chaos Why Democracy Is Failing to Deliver Economic Growth---and How to Fix It - Dambisa Moyo

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Matheus Puppe

· 56 min read

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  • The UK referendum to leave the EU and Trump’s election in the US were signs that people want change and policies that improve lives with better education, healthcare and jobs.

  • Economic growth is slowing globally and not meeting the needs of populations. Key drivers of growth like capital, labor and productivity face challenges from demographic shifts, inequality and technological change.

  • Liberal democratic capitalism is struggling as alternative models like authoritarianism and state capitalism rise. Policymakers focus on short-term gains rather than long-term costs.

  • The book argues liberal democracies must reform to address economic headwinds obstructing growth. It proposes 10 constitutional reforms like longer political terms to improve long-term decision making.

  • Stagnant growth, poverty and high unemployment have become normal. While some non-democratic nations achieved growth, corruption remains a problem. Reform can make liberal democracy deliver growth rather than abandon it for alternatives. Protectionism will not remedy global economic challenges and isolationism is not a solution in an interconnected world.

  • Economic growth is critical for improving living standards, reducing poverty and inequality, and providing opportunities and stability. Stagnating or declining growth leads to worsening conditions.

  • Major developed and developing economies are experiencing slow growth rates of 2-3% or less per year, insufficient to meaningfully raise living standards. This threatens to make lower standards permanent.

  • Growth benefits individuals by enabling higher incomes which can be used to access better goods, services, and opportunities. It also allows individuals to invest and support others’ livelihoods.

  • Lack of growth has the opposite effect, reducing opportunities and standards of living while potentially fostering unrest. Developed economies now face lasting problems like unequal access to opportunities that dampen their long-term growth prospects.

  • Promoting sustainable, inclusive economic growth that reaches more individuals is imperative to maintaining stability and progress globally in the 21st century. New approaches may be needed to repair flaws in current economic systems.

  • Gary, Indiana has a high poverty rate of 38%, high crime, and poor education outcomes. Its lack of economic growth has negatively impacted individual quality of life.

  • Economic growth improves living standards through the multiplier effect. Additional income spent in the economy generates further economic activity and income.

  • Growth also preserves stable political structures by enabling accountability. Economic stress can undermine democracy and liberal institutions, as seen in Germany in the 1920s-30s.

  • Without growth, societies contract and standards of living decline. Growth funds public services like education, health care and infrastructure. Private investment and innovation also drive improvement.

  • While growth can’t solve all problems like pandemics or inequality, it enables progress on human needs. Lack of growth undermines wages, jobs, and social mobility.

  • Growth is driven by capital investment, labor forces, and productivity factors like technology and regulations. Debt and demographics can limit growth. Growth statistics alone don’t capture impacts on different groups in society.

  • The Domesday Book from 1085 was one of the earliest attempts to measure a country’s economic wealth, by calculating the total value of land in England.

  • In the 1660s, William Petty estimated England’s total wealth including land, ships, housing, etc. But there was no standardized way to compare countries’ wealth internationally.

  • It took the Great Depression for economists to realize the need for standardized economic data across countries. Simon Kuznets produced the first national income accounts in the 1930s to compare economic growth across countries.

  • Kuznets’ work established GDP as the dominant measure of a country’s economic performance and living standards. GDP measures the total value of goods and services produced within a country.

  • However, GDP is criticized for failing to capture changes in economic structure, quality of life factors, and informal economies. Alternative indices have been developed to measure happiness, well-being, social progress, health, education, and other non-economic factors.

  • While GDP generally correlates with success in other indices, economic growth underpins improvements in other areas like health and quality of life. GDP provides a snapshot but other data is needed to assess economic health over time.

  • GDP has become the main measure for comparing economic progress across countries, but it has limitations in capturing non-monetary factors like quality of life.

  • The Big Mac Index provides a lighthearted way to estimate purchasing power parity and capture changes quickly, like how UK minimum wage hikes reduced time needed to afford a Big Mac.

  • GDP fails to show inequality - who benefits from growth and suffers from declines. Individual perceptions of well-being are also important.

  • Trying to understand differences in economic growth across countries and over history provides insights into growth factors. Geography, culture, institutions, and policies all play a role.

  • Natural resources are not always an economic boost - they can fuel ‘Dutch Disease’ by harming other industries and job growth. Managing resource wealth well is challenging.

  • Histories of developing countries, advanced economies, and cases like Argentina and Japan show the complex combination of factors behind economic success or failure over time. Looking at shifts in shares of global GDP over centuries also reveals dramatic changes in economic powers.

  • In the early 20th century, China accounted for about 5% of global GDP but then fell further to around 3.4% by 1978 as Western nations industrialized more rapidly. The US alone accounted for close to 30% of world GDP at this time.

  • Since launching economic reforms in 1978 under Deng Xiaoping, China has seen tremendous growth, becoming the world’s second largest economy today and contributing about a third of global growth. It has transformed from an investment/export-led economy to one focused more on domestic consumption.

  • In contrast, Japan rapidly industrialized in the late 19th century during the Meiji Restoration, becoming a global economic powerhouse. However, it has struggled with nearly zero growth for the past 25 years despite various stimulus policies, held back by demographic decline.

  • Argentina was among the richest countries per capita in the early 20th century but then saw severe economic decline due to political instability, populism, protectionism, debt defaults and hyperinflation. Despite natural resources, inconsistent policies have prevented sustainable growth.

  • Political stability, wise long-term planning and credible institutions have been important for China and historical Japan’s economic success, while Argentina suffers from short-term thinking and an inconsistent agenda.

  • In the 1940s, Argentina failed to align with the rising US and instead chose declining Britain. Its elites also neglected industrialization and education in favor of cheap agricultural labor. This hampered innovation and competitiveness.

  • Between 1975-1990, Argentina’s per capita income declined over 20% due to high spending, wages, and inefficient production fueling high inflation over 1,000%.

  • From 1998-2002, Argentina’s economy contracted 20% and lost over 15% of output. Unemployment rose to over 25% and poverty increased from 35-54.3%.

  • Western countries like the US and Europe saw steady economic growth and rising incomes over 50+ years due to liberal democracy, strong institutions, private property rights, and shifting to market capitalism.

  • Lessons from multiple countries show strong, trustworthy institutions that protect laws and rights underpin development and growth. Absence of these institutions can impede progress.

  • Other factors like colonialism, war, and cultural norms also influence economic performance. War in particular can be hugely destructive.

  • Recent slowdowns in advanced economies reveal there is no one-size-fits-all recipe for economic growth. Policymakers must be both vigilant and open-minded in designing tailored strategies.

  • While political and social stability as well as free markets have proven vital for long-term success over 250+ years, freedom alone is insufficient for growth given challenges today and China’s success while lacking full political freedoms.

  • Winners were led by long-term thinking and risk-taking, while losers focused too much on short-termism and assumed current conditions would persist. This short-sightedness proved unwise in the past and risks economic futures given today’s challenges.

  • The global economy now faces severe “hurricane headwinds” against the traditional drivers of growth: high debt levels, natural resource constraints, misallocated capital, aging/declining workforces, inequality-reduced quality of labor, paradoxical impacts of tech on productivity, and reduced efficiency in converting inputs to output.

  • Understanding these fundamental challenges is crucial because past solutions like monetary/fiscal policy or protectionism are inadequate responses given the different nature of today’s crisis compared to past recessions.

  • The relationship between debt and economic growth is complex and nonlinear. While debt can help growth to a point, excess debt accumulation risks constraining long-term prosperity.

  • Once a country’s debt reaches 60% of GDP, annual growth declines by about 2% according to some studies. High debt burdens also make economies more volatile and vulnerable to crises.

  • While debt financing can boost growth in the short-run, unsustainable debt accumulation limits policy options and forces more tax revenue to go towards debt repayment rather than investment.

  • constraints on key resources like arable land, fresh water, energy and minerals threaten to limit long-term global economic growth as demand outpaces supply. Rapid population growth is a key driver of rising resource demand.

  • Shortages of natural resources risk inflation, social instability, conflict and pose “a dire threat to global economic growth” if demand continues to outpace the limited and dwindling supply of important commodities.

  • Rising global population will put pressure on limited natural resources, increasing commodity prices and potentially hindering long-term economic growth and living standards.

  • Population growth and increasing wealth in emerging markets have rapidly increased demand for resources like food, phones, plumbing, and cars. Urbanization will further drive up demand as cities require more resources than rural areas.

  • Concerns about resource scarcity outpacing population growth date back centuries, but new sources like shale oil have mitigate risks to some extent. However, conflicts over scarce resources like water are still possible threats.

  • There is tension between environmentalists warning of growth’s impact on the planet and economists worried strict environmental policies will damage growth. Resolving this is key to managing resource constraints and sustainable growth.

  • Populations in developed countries are aging rapidly as lifespans increase, raising dependency ratios and costs for healthcare and pensions. This will reduce the workforce and burden economic growth over the coming decades globally. Addressing aging populations is a major challenge.

  • The global population is aging rapidly. The share of people over 60 is projected to rise significantly in most world regions by 2050, including Europe, Asia, Latin America, and others.

  • In addition to declining in quantity, the global workforce is also declining in quality due to decades of underinvestment in education. Many young people lack the skills needed for modern economies. The number of unemployed youth is over 71 million globally.

  • Educational achievement gaps persist in countries like the US, costing the economy hundreds of billions in lost GDP potential. Future US generations may be less educated than the last.

  • In developing economies, large young populations are growing more educated but economic growth is too slow to provide jobs, making them a burden.

  • Technological advances are disrupting labor markets on a massive scale by automating both blue-collar and white-collar jobs. This could produce a large unemployed underclass and severely impact sectors like trucking. Rapid automation is occurring in places like China, Japan, and the US healthcare industry.

  • While technology enhances productivity and growth in some ways, the downside risks of widespread unemployment and inequality are bigger concerns for the future global economy.

  • In 2014, companies in Silicon Valley employed 137,000 workers and had a combined market capitalization of $1.09 trillion, while Detroit’s top 3 companies in 1990 employed 1.2 million workers with a $36 billion market cap. Silicon Valley is generating much more value with far fewer employees.

  • The financial sector faces significant disruption from automation through robo-advisors and other technologies. A study found 40-50% of bank jobs in the US and Europe could be lost to automation in the next 10 years.

  • Globally, labor’s contribution to the economy has declined by around 5 percentage points since the early 1980s, with most countries seeing a fall in labor’s share of GDP. Technology is substituting capital for labor.

  • Technological change also threatens technology jobs as tasks are automated. Nokia lost market share and was acquired as technology changed rapidly.

  • While technology has historically increased living standards, current advances may be eliminating jobs faster than creating them, posing economic growth problems. New opportunities are not tangible for many displaced workers.

  • Income inequality is rising worldwide and undermining economic growth as the wealth of the richest increases while incomes of the poor decline, according to OECD and other reports. Growing inequality has cost major economies up to 9% of GDP growth.

  • Income inequality has worsened significantly in many countries in recent decades. In the US, the top 1% earns 14 times more than the average income, up from 10 times more in 1978.

  • High inequality has negative societal effects like loss of social cohesion, mistrust in the system, and potential political instability. It also contributes to worse health and education outcomes for those at the bottom.

  • Both capitalist and non-capitalist economies struggle with inequality, showing it is a complex issue not easily addressed. Both left-leaning redistribution policies and right-leaning low-tax policies have failed to curb rising inequality in many nations.

  • Absolute living standards and social mobility are perhaps more important than relative inequality. As wages have declined and social mobility decreased, focus on a minimum living standard and mobility is needed.

  • Productivity growth globally has declined in recent decades from an average of 2.6% before the financial crisis to 2.1% in 2014. Many developed nations have seen marked drops while gains came mostly from China, though even Chinese productivity is now slowing. Low and declining productivity is a hindrance to economic growth.

  • Productivity growth in developed economies has stagnated or declined in recent decades, hampering overall economic growth.

  • There are debates around whether the productivity decline is real or apparent due to measurement issues. However, most analysts agree productivity has meaningfully declined.

  • One key reason cited is the shift from manufacturing to services employment. Manufacturing is more automated and productive, while services employ more workers per unit of output. This “mix-shift” drags down overall productivity.

  • Demographic changes also impact productivity as aging workforces have higher skills while younger generations are often less educated. More workers are needed to maintain output levels.

  • Reversing the productivity decline is important for resolving economic malaise, but challenges remain around disagreement on measuring productivity and finding policy solutions. Improving workforce skills and facilitating further automation could help boost productivity.

  • Slow productivity growth will significantly hamper overall economic expansion potential in the coming decades according to analyses, underscoring the importance of addressing this problem.

  • Globalization and open international trade have historically been major drivers of economic growth since WWII. However, challenges to globalization, like Brexit and the election of Trump, reflect longstanding criticisms that it mostly benefits elites while leaving many behind.

  • While political leaders advocated for open global trade policies, in practice trade and immigration policies have often been more protectionist. This diluted form of globalization failed to create widespread benefits, allowed stagnation, and left voters vulnerable to anti-globalization messages.

  • In response, leaders are now pivoting toward greater isolationism through protectionist trade policies and increased immigration controls. But a path of protectionism risks unraveling globalization further and slowing long-term growth, as evidenced by the impacts of Smoot-Hawley tariffs in the 1930s.

  • Globalization exists on a spectrum from total isolationism to complete openness. In reality, most countries operate somewhere in between with a mix of globalized and protectionist policies driven by short-term thinking rather than long-term benefits of global cooperation.

  • The failures of globalization to deliver prosperity for all have fueled the political challenges we now see, but a retreat into protectionism is also unlikely to solve economic problems and may make things worse overall.

  • In the 1990s, Mexico was able to increase its borrowing in US dollars due to access to capital investment. However, political instability led to a devaluation of the Mexican peso in 1994, causing capital flight and high inflation. This event, known as the “Tequila Crisis,” served as an early warning of risks from globalization and free trade.

  • It prompted the IMF to reexamine open capital markets and integration. Other countries questioned the benefits of free trade amid the crisis.

  • Recent data shows aspects of globalization like trade connectivity are declining or reversing, representing one of the largest drops since WWII. This has led to concerns that globalization hurts living standards and wages.

  • In response, politicians are pursuing protectionist policies like tariffs to try to help their economies in the short-term, threatening longer-term growth. Bad policies misallocate resources and discourage investment, exacerbating economic problems.

  • While concerns about globalization’s effects are valid, the problems stem more from its “incompleteness” - large groups have been left behind as it has benefited some more than others. Alternative policies risk lower growth rather than addressing globalization’s shortcomings.

  • Global trade growth has declined significantly since the late 2000s financial crisis, driven partly by rising protectionism among countries. The WTO lowered its forecast for 2013 trade growth and global trade volumes declined in 2015.

  • Loose monetary policies like quantitative easing weaken currencies, making countries more competitive but hurting trade partners in a “beggar thy neighbor” way. Retaliatory policies end up damaging the global economy.

  • Protectionism is not new and follows past economic difficulties. An example is the 1930 Smoot-Hawley Tariff in the US which further damaged the economy during the Great Depression. Modern trade barriers like steel tariffs also hurt growth.

  • Globalization’s benefits were not distributed properly, with leaders failing to invest in infrastructure, jobs retraining, etc. Subsidies also protected farming interests instead of facilitating trade. Debt programs inflated asset prices and led to crisis.

  • National interests still override global cooperation, limiting institutions like the WTO. Politicians resist ceding power, so addressing globalization’s costs is difficult without fueling protectionism.

  • Capital flows are also declining due to tighter monetary policies, weak emerging market growth, and new controls. Policy protectionism on both trade and capital undermine long-term global growth prospects.

The chapter discusses how capital flows, globalization and migration policies have contributed to slowing global economic growth. Protectionist measures on capital flows imposed after the 2008 crisis inadvertently reduced investment and growth. Countries have also imposed additional capital controls in response to other nations’ policies, further restricting cross-border investment.

While globalization succeeded in integrating trade and capital flows, it has done less to integrate migration policies. Labor policy remains determined by individual nations rather than a global framework. The lack of coordinated immigration policy represents a form of protectionism that hurts growth, as the global labor supply is not optimally deployed.

However, open-door migration also faces challenges due to concerns about impacts on income inequality, job prospects and welfare systems. Greece’s economic crisis demonstrated a rejection of imposed globalization and austerity. Protectionist measures today may provide quick fixes but ultimately inhibit long-term growth by reducing cross-border investment and adoption of more local business models. A more fragmented world will see slower overall growth.

  • Businesses fund themselves through various sources like equity financing (issuing stocks), debt financing (loans, bonds), and retained earnings. They structure costs between fixed costs (rent, utilities, salaries) and variable costs (materials, shipping). They view long-term growth as a key proposition to attract investors and funding.

  • Rising protectionism could initially lead to short-term deflation as trade declines, but eventually cause long-term inflation. Factors like higher import prices, rising wages in closed economies, and supply constraints could all be inflationary over time, though traditional economic models may not accurately predict the timing.

  • Growing protectionism may prompt governments to favor “national champions” - domestic companies receiving regulatory advantages over foreign competitors. This undermines competition and leads to consumer-harming monopolies. Many countries already protect key industries from foreign investment or acquisitions.

  • The shift toward more authoritarian, state-centric economic models in developing countries poses dangers. While offering short-term growth, state capitalism suppresses individual rights, innovation, and private sector development - hurting long-term growth. It also encourages protectionism. Despite short-term appeal, liberal democracy and free markets remain a superior development model.

In summary, the article discusses business funding structures and long-term growth focus, outlines how rising protectionism may cause both short-term deflation and long-term inflation, highlights the trend toward favoring national champions, and argues authoritarian state capitalism poses risks compared to liberal democracy and free markets.

Here is a summary of the key question posed by British Prime Minister Harold Macmillan in his 1960 “Wind of Change” speech:

Macmillan asked whether the newly independent and “uncommitted” nations of Asia and Africa would align with the communist eastern bloc or the western liberal democratic capitalist countries. Specifically, he questioned whether these nations would “be drawn into the Communist camp” or whether “the great experiments in self-government that are now being made in Asia and Africa, especially in the Commonwealth, prove so successful and by their example so compelling, that the balance will come down in favor of freedom and order and justice.”

In other words, Macmillan posed the central geopolitical issue of the time as whether the emerging nations would choose communism or the free market democracy exemplified by countries like Britain and its former colonies. Free market capitalism and liberal democracy were seen as the key choice and path toward prosperity.

  • China has experienced tremendous economic growth and development over the last several decades, improving living standards. This has led many in emerging economies to doubt the importance of prioritizing democracy in seeking growth.

  • Countries like Hungary, Chile, Singapore, and Taiwan have shown that economic growth is not dependent on democracy. In fact, studies show democracy is more fragile in poorer countries and needs the foundation of a stable middle class.

  • Doubts about liberal democracy and capitalism have grown as the West faces issues like Brexit, inequality, and the 2008 crisis. Authoritarian leaders are seen as more trustworthy by some. Freedoms have declined globally according to surveys.

  • Persistent problems in emerging economies like unemployment, poverty, and stagnant wages have increased skepticism about free market solutions alone. Countries are turning to alternates like China’s state-led model for quicker results. This has weakened support for democratic reforms.

  • Even developed states have expanded economic interventionism to boost growth, showing more ambiguous views on limiting state involvement in markets. Overall, priorities seem to have shifted toward deliverable improvements over political ideals alone.

  • Government spending accounts for a large and growing share of the global economy. Together, the US and Europe account for 90% of global welfare/social spending. Government budgets have expanded beyond core roles like defense, infrastructure, and crisis response.

  • The world’s largest employers are now governments, not private companies. Expansive government roles raise concerns about effectiveness and impact on economic growth.

  • Effective governments drive growth by attracting investment, providing quality services, and advancing technology/productivity. But overreach beyond core areas like security, infrastructure, law/regulation hinders growth.

  • Governments play crucial stabilization roles in crises like financial crashes or natural disasters. But policies like the US push for widespread homeownership through Fannie/Freddie contributed directly to the 2008 crisis.

  • While models vary, expanding government intervention worldwide poses risks if it undermines effectiveness or crowds out the private sector as the primary engine of growth. The Chinese model also has limitations that make it difficult for other countries to replicate.

  • The passage argues that short-termism in both business and democratic politics is a major drag on long-term economic growth. Politicians focus too much on short-term gains to get re-elected rather than taking actions that may provide long-term benefits.

  • Trust in government is at historic lows globally according to surveys. Citizens are skeptical of democratic governments’ ability to act effectively, including as good custodians of the economy.

  • By design, Western politicians have relatively short terms in office (usually less than 5 years) which encourages a short-term focus on getting re-elected rather than long-term policy challenges. They focus on policies that quickly boost metrics like GDP and employment.

  • This short-termism is at the heart of liberal democracy both in its design, which incentivizes frequent elections, and in practice, as politicians prioritize short-term popularity over long-term solutions.

  • Correcting this short-term bias in both business and politics would do much to address challenges to long-term economic growth, according to the author. Overcoming political myopia is seen as vital.

  • The chapter argues that political and business leaders prioritize short-term gains over long-term economic prosperity due to electoral pressures in democratic systems.

  • Voters tend to prefer policies that benefit them immediately with little regard for future generations. Politicians respond by enacting policies that win votes rather than addressing structural economic issues.

  • Studies show voters are often short-sighted in their thinking, contrary to economic theories of forward-looking behavior. This rewards politicians for short-term decision making.

  • Frequent elections, government turnover, and partisan gridlock discourage long-term policymaking. Politicians focus on immediate electoral needs rather than complex, long-term challenges facing the economy.

  • Examples are given of politicians promising increased welfare spending to garner votes. Debts also rise as politicians avoid unpopular cuts or reforms needed for sustainability.

  • Overall, the chapter argues political short-termism exacerbates economic headwinds and prevents addressing issues critical for long-term growth like demographics, technology, productivity and debt. Reform is needed to reduce this bias toward short-term thinking.

The decision has been deferred because there are various stakeholders and interest groups who vote in elections. Short-termism has spread beyond government to business and finance, where CEO tenures are getting shorter and companies are being held for less time by investors. Shareholders and managers are increasingly focused on short-term results like quarterly earnings, rather than long-term growth. As a result, companies are spending less on R&D and infrastructure and more on stock buybacks and dividends. Pension funds and other large investors are also shifting toward shorter-term investments. This misallocation of capital away from equity markets and toward safer bonds is reducing funding for small businesses and innovation, which hurts productivity and economic growth. An aging population also favors stable income over riskier equity investments. So short-term thinking in both the public and private sectors is limiting support for long-term initiatives like infrastructure that enable growth.

  • Infrastructure in the US is woefully inadequate, receiving a grade of D+ from the ASCE. Over $1 trillion is needed in upgrades over the next 25 years.

  • Underinvestment in infrastructure hampers pension funds’ ability to find long-duration assets to match long-term liabilities. Infrastructure projects could help address this asset-liability gap.

  • Increased infrastructure spending could substantially improve prospects for low-skilled labor given ongoing unemployment and underemployment issues.

  • Political short-termism contributes to the problem as politicians focus on short-term metrics rather than long-term issues like infrastructure. Programs like FDR’s WPA showed infrastructure could be addressed when political interests aligned.

  • Three key shifts since the mid-20th century have exacerbated short-termism: a movement from Keynesian economics to laissez-faire capitalism, the 24-hour news cycle and social media, and a power shift to corporations/philanthropists weakening the state.

  • Missing opportunities to invest gains from globalization into infrastructure and jobs frustrated many and fueled populism, as noted by Alibaba founder Jack Ma. The US chose wars over infrastructure investment.

  • The author argues that the US federal government should create a bipartisan infrastructure commission to develop long-term infrastructure plans and bypass current political gridlock. This commission would function similarly to past commissions on fiscal issues.

  • However, commissions alone will not solve the problems of short-term thinking and inability to address long-term challenges like infrastructure. The democratic process needs reform to encourage higher quality, long-term decision making and jumpstart sustainable growth.

  • While democratic capitalism has achieved great prosperity and growth, it also faces issues like misallocating assets, lobbying interference, political short-termism due to election cycles, potential for corruption, inability to counter rising inequality, and tendency toward two-party systems and gridlock.

  • Reforms are needed to democratic systems and processes to address weaknesses like myopic decision-making, influence of money in politics widening inequality, and entrenched political duopolies that stalemate progress. Overall the author argues democracy in its current form is inadequate for tackling major long-term challenges.

The passage argues that while political reforms can enable certain non-democratic systems to generate economic growth in the short-term, the long-term solution is to reform democracy itself so it is better equipped to address long-term economic challenges.

It claims democracy’s greatest weakness is its inability to reform itself. To achieve sustainable growth, political systems must match their time horizons to the long-term nature of economic issues, rather than focusing on short-term political cycles.

Current democracies contain incentives for short-term thinking in policymaking that undermine long-term success. However, politicians are rational actors responding to pressures, not malicious.

Preserving democracy’s strengths like freedom and markets while reforming weaknesses is important. Myopic time horizons must be addressed by correcting the mismatch between political cycles and economic challenges. Gridlock and political pressures on the economy must also be reduced.

Overall, the passage argues political reforms within democracies, not abandoning democracy, is the solution to fostering long-term economic growth and prosperity. The political system needs reforming before the economic system.

The passage argues that democratic decision-making today prioritizes short-term political goals over long-term economic growth. It proposes several radical reforms aimed at addressing this issue.

Some proposals target politicians and political institutions. These include making it harder to repeal existing legislation, reducing the frequency of elections, imposing term limits, and requiring officeholders to have non-political experience. This is intended to bind governments to longer-term policies and discourage political opportunism.

Other proposals target voters, such as mandating voter participation and instituting minimum qualifications for voters. This is aimed at increasing civic responsibility and engagement.

The proposals may be seen as restricting liberty, but the author argues this is necessary to counteract the short-sighted behavior of politicians and voters that is hindering economic prospects. The recommendations are focused on mature democracies and aim to demonstrate that democracy can adapt while still promoting economic success and progress. Overall the passage makes the case for reforms to combat political myopia and encourage long-term decision making.

International agreements bind national governments in areas like trade, economics and security. This requires governments to balance international obligations with domestic policies. It makes governments accountable to international bodies in addition to domestic voters.

The European Union has come under increased scrutiny due to economic issues. Issues like Brexit and rising nationalism threaten the EU’s long-term agenda driven by consensus. There is always tension between national interests and broader cross-border priorities in agreements between groups of nations.

Binding future governments and policies can help address issues like short-term political pressures skewing decisions. This could involve making some legislation difficult to repeal for a set period. However, binding the government is not always positive, and mature democracies still need checks on government overreach.

While desirable in some ways, completely binding governments may not be legally possible in countries where legislatures have sovereignty to repeal past laws. The goal should instead be setting very high barriers to policy changes to reduce fickle policies.

Reforming campaign finance is also important to reduce the disproportionate influence of wealthy interests on elections and policies. Most democracies have some contribution limits but more restrictions are likely needed, such as very low contribution caps or public financing of elections. This could enhance integrity in the political process.

Here is a summary of the key points about ions:

  • Ions are atoms or molecules that have gained or lost one or more electrons, giving them a positive or negative electrical charge.

  • Ions are formed through ionization, which is the loss or gain of electrons during a chemical reaction or physical interaction. Common ways for ions to form include electron loss during oxidation and electron gain during reduction.

  • Cations are positively charged ions that form when an atom loses electrons. Common examples include sodium (Na+), calcium (Ca2+), and iron (Fe3+).

  • Anions are negatively charged ions that form when an atom gains electrons. Common examples include chloride (Cl-), sulfate (SO42-), and bicarbonate (HCO3-).

  • Ions play an important role in many chemical and biological processes due to their electric charge. This allows them to interact strongly with other ions and polar molecules through electrostatic attraction.

  • The formation and interaction of ions is important for processes like chemical bonding, nerve impulses, osmosis, and acid-base reactions. Ions are also important in biology to help regulate processes in the body.

  • Identifying the charges of ions in compounds allows us to determine chemical formulas and write balanced chemical equations. Understanding ions is thus fundamental to chemistry.

  • Mexico has achieved notable economic success relative to other Latin American countries, despite not being viewed as highly successful from a US perspective. Its income inequality and credit rating are comparable to developed nations.

  • Democracies could benefit from longer terms of office (over 5 years) with fewer opportunities for re-election to reduce constant campaigning and allow focus on long-term challenges. However, this risks reducing accountability and allowing poor decisions without consequence.

  • Requiring politicians to have real-world work experience outside of politics could help address these issues by bringing diverse perspectives and a better understanding of the economy. Career politicians with only political experience may be more politically-focused over long-term outcomes.

  • Reforms could include setting minimum experience requirements or political parties recruiting candidates with relevant experience. This could improve the quality of politicians and decision-making. Concerns include potential discrimination and restricting younger candidates.

  • Increasing competitive elections and reducing “safe seats” could also help by incentivizing politicians to effectively represent voters and provide public goods, not just appeal to immediate demands, in order to stay in office. This maintains accountability even with longer terms.

Uncompetitive elections, where outcomes are predetermined, can lead to complacent policymakers who have little incentive to deliver long-term positive policies. This is a particular problem in the US due to gerrymandering, where district boundaries are often drawn to favor incumbents over competition. More competitive elections that are not predetermined would hold politicians more accountable and incentivize higher-quality policymaking.

Reforming district boundaries could improve competition and outcomes. The Iowa model, where a nonpartisan body draws districts without partisan influence, is one approach. The goal should be maximizing competition both within and between political parties.

However, the link between gerrymandering and economic outcomes is difficult to prove empirically. Still, efforts to counter gerrymandering through redistricting reforms move in the right direction. Beyond politicians, voters also shape outcomes, so declining voter turnout is a concern. Mandatory voting laws could address this by creating the broadest possible voter base and enhancing democracy, as seen in countries where turnout is near 100% due to such laws.

The passage indicates that weighting votes based on voters’ qualifications, such as through a civics test, could be beneficial by incentivizing better long-term policymaking and economic decision-making. However, it is also noted that weighted voting systems have historically been used for prejudicial reasons. Overall, the argument presented is that while controversial, weighting votes based on meritocratic criteria like knowledge or education could improve voter quality and counter short-term thinking, but would require careful implementation to avoid discrimination.

  • The current democratic system tends to promote short-term thinking and policies over long-term solutions, leading to issues like economic stagnation.

  • Reforms are proposed to address political myopia, including making voting mandatory, weighting votes based on civic knowledge, implementing qualification tests, and linking voter participation to civic duties.

  • An impartial national media organization could help combat partisan media and create a more informed electorate.

  • Younger people are skeptical of current democracy but still want to actively participate in political and social issues, suggesting they would support reformed democracy.

  • These reforms aim to encourage long-term perspectives from politicians and policies that maximize economic growth, not just react to recent issues like Brexit or Trump. Reform is still needed even if those issues were avoided.

  • The risks of inaction are too great; democratic reform has the potential to facilitate long-term economic policies and reset the trajectory of the global economy onto a path of sustainable growth.

  • While changes will be difficult, implementing the proposed reforms could allow countries to make the policy choices needed to avoid worse economic outcomes in the future. The ultimate goal is a system that produces well-informed leaders driving long-term prosperity.

  • Over the past 50 years, freedom and prosperity have increased globally. The percentage of truly free countries rose from 29% to 45% and over a billion people have been lifted out of extreme poverty. Violence has generally decreased as well.

  • However, past progress does not guarantee future progress. Many challenges remain, including growing political instability, natural resource conflicts, terrorism, and economic stagnation. Total global debt is very high and emerging markets have seen negative capital flows.

  • The global economy faces unprecedented headwinds like slowing growth, income inequality, unemployment, debt, and declining productivity. Classical economic models have failed to address these challenges adequately.

  • In response, many nations are pivoting to more protectionist, statist policies that misallocate resources and exacerbate conflicts over scarce resources. This forms a downward vicious cycle where weak democratic decision-making leads to poor economic outcomes, further weakening democracy.

  • Reforming democracy to reduce short-termism and partisanship could break this cycle by allowing longer-term, more effective policy focused on sustained economic growth, which would in turn strengthen democracy. However, future progress is not guaranteed given the major geopolitical and economic risks the world still faces.

The economic policies under a reformed democratic system would prioritize long-term challenges over short-term gains to win votes. Politicians would invest more in infrastructure, education, and other areas that strengthen future economic growth.

In education specifically, politicians would be judged on outcomes like student performance rather than just spending levels. This could improve education quality in countries like the US that spend a lot but don’t always see results.

Japan’s experience shows that unsustainable debt and piecemeal policies don’t work long-term. Comprehensive reform is needed to address underlying issues like political short-termism.

The proposed reforms aim to reduce myopia and improve policy quality. Restricting donations, extending terms, raising pay, and minimum standards for voters and politicians could align interests with long-term goals.

Advocates for reform may come from outside the existing political system, such as retired politicians, think tanks, wealthy individuals, and corporations who want stability for future investment. Wide-scale changes would face opposition from those invested in the current system, but improving democracy benefits all in the long run.

  • The passage discusses reforms that need to be implemented in democracies to address issues like short-term thinking (“myopia”) and ensure economic and political stability. Some democracies have aspects of the proposed reforms but more is needed.

  • Major democracies currently do not fully embrace the recommendations. The US only has some versions of 3/10 reforms while the UK has 2/10.

  • Warning signs of future crises were ignored in the past. An FBI agent warned of al-Qaeda in the 1990s. An economist warned of the 2008 crisis in 2005 but was dismissed.

  • Protectionist policies in the 1920s-1930s weakened the US economy and paved the way for WW2. Rising isolationism now also threatens stability by creating power vacuums that adversaries can exploit.

  • Continuing on the current path risks greater volatility, challenges to the international order, extremism in places like Europe, and threats from actors like Russia, Iran and China. It could spill over into political chaos and warfare as in the lead up to WW2.

  • Reforming democracy is essential to sustain economic growth, equality, poverty reduction and prevent worsening conflicts. But it will be difficult. Warning signs regarding future crises must not be ignored again.

  • Dambisa Moyo is an economist who has written several bestselling books on global economics and development. In this book, she seeks to motivate a debate on how to upgrade and improve the democratic system.

  • She draws on her experiences growing up in a non-democratic state and living/working in established democracies to analyze the benefits and weaknesses of different political systems. Her goal is to start a discussion, not prescribe definitive solutions.

  • Writing the book has taken on different roles for her - initially an amusement, then a mistress (absorbing focus), then a master (dictating her activities), and finally a tyrant just before completion.

  • She acknowledges the book has flaws but hopes it provokes thoughtful debate. Many people supported the project, including her research team, agent, and publisher.

  • The book is dedicated to her younger sister who passed away during the writing, devastating her family. Her goal is to discuss how democracies can evolve to better serve citizens in the future.

  • Most countries do not allow lawmakers or executives to commit to long-term agreements that extend beyond their terms.

  • Many countries have some form of campaign finance restrictions like monetary donation caps or expenditure limits.

  • Restrictions on taking high-paying jobs after holding public office vary, with some countries having cooling-off periods or permanent bans.

  • Electoral cycles are typically no more than 5 years, except in times of war or crisis when terms may be extended.

  • Term limits for lawmakers are rare, but many countries have term limits for executives like a president.

  • Minimum qualifications for office are generally not required beyond citizenship and age requirements.

  • Most countries do not design electoral districts specifically to incentivize competition or reform districts frequently.

  • Mandatory voting and minimum voting requirements are rare. No countries reported using weighted voting systems.

  • The number of political reforms implemented out of 10 possible reforms ranged from 1 to 5, with most countries having implemented 1-3 reforms.

Here is a summary of the sources provided:

  • Collins and Hoxie (2015) examine income inequality between billionaires and average Americans using data from Forbes 400 lists.

  • The Economist (2014) and Frey and Osborne (2013, 2015) discuss the rise of automation and its impact on jobs.

  • International IDEA and other sources examine compulsory voting policies around the world.

  • New York Times (2015) reports on super PAC donors in the 2016 US presidential election.

  • One Earth Future Foundation (2013) looks at the increasing role of non-state actors in global governance.

  • Freedom House reports track levels of freedom and democracy internationally from 1972-2016 and in individual country reports.

  • Gallup, Well-Being Index, and other polls measure topics like happiness, trust, and living conditions globally.

  • IMF, McKinsey, OECD, World Bank, and other sources analyze economic trends like growth, trade, productivity, inequality, and demographics.

  • Pew Research studies public issues in the US and other nations, like wages, elections, technology use, and student achievement.

  • Additional sources examine issues like financial inclusion, infrastructure, conflict, health, education and more from institutional perspectives.

Here is a summary of the key points from the sources provided:

  • Global GDP is growing steadily, led by emerging economies like China. World GDP reached $80 trillion in 2016.

  • Global infrastructure investment needs are massive, estimated at $57 trillion through 2030 to support economic growth.

  • Global patent filings rose to 2.9 million in 2015, driven largely by growth in applications from China. Innovation is increasing globally.

  • The Global Peace Index finds world is becoming less peaceful, with increased terrorism and conflicts disrupting nations.

  • Global pension assets totaled $32 trillion in 2015 but funding gaps remain an issue in many countries.

  • Forced displacement of refugees and internally displaced people hit record levels, with 59.5 million displaced in 2014.

  • Voter turnout has declined globally as trust in political systems has fallen in many nations. Inequality is a challenge for democracies.

  • US economic growth faces headwinds like slowing productivity and an aging population putting pressure on growth rates.

  • Wages have stagnated in US and globally for decades for most workers despite overall GDP growth. Income inequality is rising.

  • Economic freedom and strong, effective institutions are linked to prosperity while corruption and weak rules undermine development.

  • Happiness levels have declined in recent years in US despite growth, with increasing unhappiness linked to loss of economic security.

  • Sustainable, inclusive development is the goal of the UN’s 2030 agenda to balance economic, social and environmental progress globally.

Here are summaries of the provided articles:

  • Polity IV Project: Provides data on regime characteristics and transitions for all independent states with greater than 500,000 total population for the years 1800-2013. Codes countries on a scale from fully authoritarian to fully democratic.

  • Life Expectancy for White Americans Declines: Reports that life expectancy for white Americans has declined slightly while rising for other ethnic groups, marking a reversal from decades of increasing life expectancy across groups. Cites rising death rates from drug overdoses, suicides, and alcoholic liver diseases.

  • Limits to Growth: 1972 report issued by the Club of Rome that used computer models to simulate economic and population growth under different scenarios. Warned that continued growth in population, pollution, food production, and resource depletion could result in economic and environmental collapse.

  • Deepening the United States–Africa Trade and Investment Relationship: Calls for strengthening trade and investment ties between the US and Africa to promote economic growth and create jobs. Notes opportunities in infrastructure, agriculture, finance and energy.

  • Millennial Disruption Index: 2013 study from Viacom that examines how millennials are changing business through their preferences, behaviors and values as the largest living generation. Found they value experience, convenience, self-expression and social impact of brands.

  • U.S. Imposes 266% Duty on Some Chinese Steel Imports: Reports on the US imposing heavy anti-dumping tariffs on certain Chinese steel products, citing unfair foreign competition harming American industry. China vowed to challenge the tariffs at the WTO.

  • Earth Has Lost a Third of Arable Land in Past 40 Years, Scientists Say: Cites research finding that about a third of the world’s previously cultivated land has become severely degraded due to erosion, pollution, urban sprawl and climate change over recent decades.

  • The Wedges Between Productivity and Median Compensation Growth: Analysis showing that while productivity grew strongly from 1948-1979 in the US, median compensation growth tracked productivity closely. Since then productivity growth has far exceeded wage growth, contributing to increasing inequality.

  • Mandatory Voting: Want to Make Me?: Discusses arguments for and against compulsory voting being imposed, especially in countries lacking high voluntary turnout like the US. Finds little evidence it results in more informed voting.

  • Human Capital Investment, Inequality and Economic Growth: Analysis finding that the rise in inequality seen in many countries since 1980 is partly explained by underinvestment in human capital for those from lower socioeconomic backgrounds. This has contributed to slower aggregate economic growth.

  • Trump’s America: Opinion piece reflecting on political and economic implications and uncertainties of Donald Trump’s election as US president in 2016.

  • National New-Type Urbanization Plan (2014–2020): Overview of China’s government plan to shift the population from rural to urban areas and promote sustainable urbanization over the period. Aims to build millions of affordable housing units and improve infrastructure.

  • Natural Resources in 2020, 2030, and 2040: International intelligence report examining future global supply, demand and geopolitical risks around food, water, energy, minerals and other key commodities. Warns of declining resource quality, water scarcity and political instability.

  • The Global Decline of the Labor Share: Academic study finding the labor share of national income (compensation of employees as a percentage of GDP) has fallen markedly in most advanced and emerging economies since the 1980s, while the capital share has risen. Indicates increasing economic inequality.

  • Transformation in Emerging Markets: From Growth to Competitiveness: Business report on how emerging markets are facing new challenges to move their development to higher value activities, amid rising costs, less favorable demographics, urbanization and a need to become more innovative and skilled.

  • No, ‘Truck Driver’ Isn’t the Most Common Job in Your State: Critiques popular articles claiming truck driver is the most common job nationally, finding that retail sales and food service are more common based on Bureau of Labor Statistics data. Truck driving did not make the top five for most states.

  • UK Productivity Falls by Most Since Financial Crisis: Reports that UK productivity, measured by output per hour, fell sharply in the last quarter of 2015, contributing to slug: gish wage growth and concerns over long-term economic health.

  • Stress from Within: EM Capital Flows Chartbook: Statistical compilation from the Institute of International Finance examining trends in capital flows to and from emerging market countries, finding resilient yet uneven flows. Flags risks from weakness in commodity exports and economic rebalancing in China.

  • ODNI Releases Global Water Security ICA: Summarizes an unclassified 2012 intelligence report assessing global water resource challenges through 2040 from population growth, climate change, pollution and poor management. Finds overuse and scarcity in many regions risk instability and state failure.

  • OECD Better Life Index/Income Inequality in Figures: Reports describe the OECD’s indexes and data tools for comparing well-being and inequality factors across countries based on metrics like health, education, income, jobs, housing, work-life balance and more.

  • Global Inequality: Beyond the Bottom Billion: UNICEF research finds that inequality between countries has narrowed since 1980 while inequality within countries has risen markedly, especially between urban and rural populations.

  • Rise in Consumer Borrowing Is Fastest Since Pre-crisis: Article notes that UK consumer borrowing increased the most in over 7 years in late 2015 per Bank of England data, with auto loans seeing double-digit gains and concerns over risks if economic growth weakens.

  • The Calculus of Voting in Compulsory Voting Systems: Academic study examining how mandatory voting laws can influence how citizens make informed decisions at the ballot box with rational calculation of expected outcomes versus affective assessments.

  • Japan Is Rapidly Losing Population: Overview of demographic challenges facing Japan and other developed nations from falling birth rates and aging societies, with population projected to decline by over 30 million by 2050 absent increased immigration.

  • Why Does America Have So Many Hungry Kids?: TV news special report on the paradox of rising food insecurity and access challenges facing American children despite economic recovery, exploring contributing factors like poverty, healthcare costs and weaker social safety nets.

  • Debt and Growth: Is There a Magic Threshold?: IMF paper finds public debt levels above about 77% of GDP tend to negatively impact economic growth, though many country-specific factors also matter and growth effects depend on debt composition and use.

  • U.S. Steel Starts Layoffs of Up to 323 Workers at Gary Works: Reports on latest job cuts affecting the struggling American steel industry from global overcapacity and cheaper imports.

  • Developing a Time-Based Economic Formalism: Think tank paper proposing a new framework to incorporate concepts of genuine progress, sustainability and well-being over time into economic models and policy making beyond a narrow focus on GDP and consumption growth.

  • PISA 2009/2012 Results: Summarizes key findings from the OECD’s Program for International Student Assessments, which test 15-year-olds globally. Finds countries with highly skilled populations and equality of opportunity tend to have stronger economies and social cohesion.

  • Population Projections for Japan: Outlines government projections showing Japan’s population declining from around 128 million currently to around 88 million by 2065, with over one-third of residents aged 65 and over posing economic and social challenges.

  • Social Progress Index 2017: Report from the Social Progress Imperative benchmarking achievements in basic human needs, foundations of wellbeing, and opportunity for 151 countries based on metrics like nutrition, healthcare access, shelter, personal safety, education rates, and other social factors.

  • The Privileged Few: To Those That Have Shall Be Given: Economist report finding that the wealthiest 10% globally own approximately 85% of total household wealth,while half the world’s population together owns less than 1% of total wealth. Inequality has increased markedly.

  • Productivity Brief 2015: Business analysis finds productivity growth declined significantly in many advanced nations after the 2008 crisis yet remains vital for long-term growth and competitiveness. Notes challenges ahead from demographics and changing industries.

  • Has Financial Development Made the World Riskier?: Academic research examines relationship between financial development and financial crises over past two centuries. Finds more advanced financial systems may paradoxically cause developing economies to experience more severe crises.

  • Rate of Increase in Indian Population: Provides real-time population clock and statistics on India’s rapid demographic growth, projected to surpass China’s population around 2024.

  • Real Wages in Germany: Numerous Years of Decline: Study finds real wages in Germany fell around 2-3% from 2000-2009 during a period of solid economic growth, highlighting disjunction between overall productivity and median compensation.

  • Economic Suicides in the Great Recession in Europe and North America: Academic paper links rise in suicides during and after financial crisis to unemployment levels, foreclosures and economic uncertainty from downturn.

  • Public Debt Overhangs: Advanced Economy Episodes Since 1800: Research analyzing debt overhang episodes in developed nations finds high debt levels are rarely reduced quickly and often associated with subpar growth unless resolved through purposely default, inflation or high growth.

  • Growth in a Time of Debt: Controversial academic research paper found levels of government debt to GDP ratios above 90% associated with lower real growth, with stronger negative effects at very high levels of debt. Findings were later partially walked back.

  • Reinvention in the Rust Belt: Report on diversification efforts underway in former manufacturing regions of the Midwest like Ohio and Pennsylvania to reposition their economies for new industries and employment through medical research, renewable energy, advanced manufacturing and other areas.

  • Report Card on International Cooperation: Independent Council report assesses performance of G7/G20 nations and other major powers on international cooperation issues, finding collaboration increasingly hampered by other priorities, less US leadership and strains within alliances.

  • Report on the Economic Well-being of US Households: Federal Reserve research overview finding most American families experienced modest improvements in finances from 2010-2013 but many remain financially fragile and unprepared for emergencies or retirement. Income inequality remains high.

  • Report on the Municipal Securities Market: Securities regulator analysis of $3.7 trillion municipal bond market that provides financing for schools, roads and hospitals. Finds market vital yet some issuers faced fiscal stress from recession requiring disclosure reforms passed the next year.

  • Reports, Trends & Statistics: American Trucking Association provides data showing trucking industry circulation over $660 billion annually and employs over 7 million people when associated industries are included, remaining an economic pillar.

  • Results of the 2014 European Elections: Overview of election results showing growing strength of populist and Euroskeptic parties plus historically low voter turnout as indications of public dissatisfaction and disaffection with the EU.

  • Ripe for Rebellion?: Economist report discusses causes and risks of social unrest in emerging and developing nations, citing factors like rising inequality, corruption, poor governance, high youth unemployment and pressures from globalization as fueling popular anger and instability in many countries.

  • Where Have All the Public Companies Gone?: Analysis finding the number of publicly listed companies in the US has fallen by almost half since 1996, contributing to reduced competition, less transparency, higher market concentration and less opportunities for savers partially due to increased regulatory burdens and costs of being public.

  • China Wants Its People in the Cities: Outlines longstanding government aim to shift over half its population into urban centers by 2020 to power economic growth through more efficient land and resource use, closing income gaps versus farm incomes, and enabling easier provision of public services to a concentrated population.

  • The Past, Present, and Future of Economic Growth: Research examines history of technological innovation driving productivity increases and hence real income gains over time, while also raising living standards. Looks at slowing productivity growth since 1970s yet still sees potential for future revolutions in fields like materials, energy, life sciences to reinvent economies once more.

  • How Technology Is Destroying Jobs: Controversial argument that while new jobs are created, digital advances in fields like robotics, machine learning and artificial intelligence are poised to eliminate far more jobs than they generate across many professions from transportation and warehouses to finance and manufacturing in coming decades, potentially requiring universal basic income policies.

  • Lions on the Move: The Progress and Potential of African Economies: McKinsey research finding Africa has experienced economic growth exceeding global averages this millennium yet most African countries still face significant challenges transitioning to high-productivity export-oriented economies with formal sector jobs spurring continued development and poverty reduction.

  • Robots Can’t Replace IT Workers, Doctors, Dentists, Haldane Says: Reports the central bank chief’s argument that jobs requiring high levels of interactive social skills and creative or conceptual thinking will remain hard for machines to perform at human level due to difficulties with general artificial intelligence, reducing risks of mass technological unemployment.

  • Have Millennials Given Up on Democracy?: Analysis exploring survey findings that many younger people have weaker attachment and trust in political institutions than older groups, yet still value participation. Debates whether this signals democratic disillusionment or a shift in priorities and methods of engaging such as through social activism versus traditional party politics.

  • The Disturbing ‘Rise’ of Global Income Inequality: Research paper challenges assumptions of globalization naturally reducing inequality, finding instead it has grown substantially both between and within nations. Limited opportunities facing the bottom billion are highlighted as a major problem needing policy remedies.

  • Free Lunch: Where Has All the Productivity Gone?: Journalist piece investigating fall and mysteries behind slowing productivity growth afflicting many advanced economies for decades despite expansion of digital technologies, as this remains key driver of higher living standards over the long run through higher output per worker.

  • Global Competitiveness Report 2016–2017: annual World Economic Forum study benchmarking the competitiveness of 138 economies based on 12 policy pillars encompassing areas such as macroeconomic stability, infrastructure quality, access to healthcare, skills, labor market efficiency, financial system soundness, technology usage and innovation capabilities seen as determinants of long-term productivity and prosperity.

Here is a summary of some of the key points from the sources provided:

  • The Global Competitiveness Report 2016-2017 examines the factors driving productivity and long-term economic growth. It finds competitiveness is determined by institutions, infrastructure, macroeconomic stability, health and primary education, higher education, goods market efficiency, labor market efficiency, financial market sophistication, technological readiness, market size, business sophistication, and innovation.

  • Manufacturing jobs are important for the US economy even if manufacturing makes up a smaller share of GDP and employment. Manufacturing impacts innovation, exports, wages, and entire supply chains of related industries. Declining manufacturing jobs has negative effects.

  • Constitutional Environments and Economic Growth argues incentives embedded in a nation’s founding documents influence productive activities and the scope and stability of property rights and political power. This impacts long-run economic growth.

  • The sources cover topics like the impacts of the Greek economic crisis, commodity price movements, SMEs and their role in developing economies, debates around compulsory voting, globalization’s effects on inequality, urbanization trends, global trusts in institutions, definitions of poverty and human rights, Chinese and Indian economic growth, impacts of mobile technology, debates around accounting standards, youth unemployment, rising global debt levels, effects of Dutch Disease, importance of services industries, trends in welfare spending, projections for future global and economic powers, impacts of advancing women’s equality, surveys of global public opinion, evaluations of capitalism after the financial crisis and more.

  • Key themes discussed are globalization, inequality, impacts of technology, institutional quality, economic growth strategies, jobs and unemployment, poverty, trade, manufacturing, institutions, urbanization, demographics and more. A wide range of economic and social issues are covered across the sources.

Here is a summary of the key points from the article “The ‘Lion’s Share’ for NATO,” by the Washington Post Fact Checker:

  • Trump has claimed that the US pays the “lion’s share” of costs for NATO. However, the funding commitments for NATO operate on different levels - much of the alliance’s work is funded through separate national budgets, not a central fund.

  • NATO members agreed in 2006 that each would aim to spend 2% of their GDP on defense by 2024. Only 5 of 28 members currently meet the 2% threshold.

  • The US spends more on defense than any other NATO member in absolute terms, but as a share of GDP its spending is lower than that of several other allies.

  • When it comes to directly funding the civilian and military costs of NATO headquarters, command structures, and joint projects, the US contributes 22.1% of the total budget. Other major contributors include Germany (14.8%) and France (10.5%).

  • While the US spends more on defense than other members, analysts say no single member foots the “lion’s share” of NATO costs. Claims that the US is unfairly burdened are an oversimplification. NATO defense is meant to benefit all members collectively.

In summary, the article disputes Trump’s claim that the US pays the “lion’s share” for NATO, noting funding is more complex with different levels and no single centralized fund, and that while the US spends heavily it still benefits from the alliance.

Here is a summary of the article “‘s Robot Army Set to Surge,” Financial Times, April 8, 2016:

  • The article discusses how China’s robotics industry is set for rapid growth in the coming years. China aims to become the world’s largest market for industrial robots by 2020.

  • Chinese firms are developing low-cost robots for factories to replace human workers and boost productivity. Some Chinese firms are also developing more advanced robots for applications like surgical operations.

  • Government policies are supporting the growth of robotics through funding for R&D and tax incentives for companies that use industrial robots. The Made in China 2025 initiative aims to upgrade Chinese manufacturing through new technologies like robotics.

  • However, the expansion of industrial robots also risks significantly affecting employment in China. Many common manufacturing jobs are susceptible to robot automation. While some jobs will be created to develop, install and maintain robots, overall job losses are expected without worker retraining programs.

  • If China meets its targets, its annual demand for industrial robots could triple to over 100,000 units by 2020. This would surpass the European market and make China the world’s largest single country market for factory robots.

In summary, the article discusses China’s plans and policies to rapidly grow its robotics industry, with the goal of making China the world’s top market for industrial robots by 2020. However, this robotics surge also risks major job losses without efforts to retrain workers.

Here is a summary of the key points from the summarized passages:

  • Labor force participation rates have been declining in many advanced economies due to aging populations and other factors like automation. This poses economic and fiscal challenges.

  • Income inequality has increased significantly in many countries. Campaign finance regulations aim to reduce the influence of wealthy special interests on politics. Restricting political advertising and limiting undisclosed donations could help address inequality issues.

  • Turnout in national elections has generally been declining worldwide. Compulsory voting laws aim to address this by requiring citizens to vote or face penalties. Australia has had compulsory voting for decades with positives like increased civic engagement reported. However, others argue compulsory voting violates personal freedom.

  • Gerrymandering undermines democracy by allowing politicians to choose their voters rather than the other way around. Non-partisan commissions could help address this issue by making redistricting less partisan and self-serving for incumbents.

  • Infrastructure investment has lagged behind needs in many countries. More spending on infrastructure could help address issues like congestion and support long-term growth. But funding challenges remain due to budget constraints in many governments. Public-private partnerships may help attract more private funding for infrastructure.

  • Career politicians have become more common as the profession of politics has become more desirable and lucrative. Term limits could help diversify political leadership and reduce careerism. However, term limits also remove experienced lawmakers. Overall balance is needed.

Here is a summary of the key points about the topics provided:

  • Colonialism declined gradually from the mid-20th century but still had impacts on societies and economies in former colonies.

  • CFIUS reviews foreign investments for national security impacts in the US. It aims to balance economic interests with security concerns.

  • Commodity markets and prices influence commodity-based economies that rely on exports of agricultural and raw materials. Scarcity can increase prices and volatility.

  • Common law systems like in the UK emphasize legal precedent while civil law codes were influenced by Roman law as seen in Europe.

  • Predictions of communism’s demise proved correct with the fall of the Soviet Union, though China adopted a model blending elements of capitalism and communism.

  • Comparative advantage theory suggests countries specialize in industries where they have lower opportunity costs than trade partners. Globalization increases competitiveness pressures.

  • Economic growth, competitiveness, and prosperity face challenges from debt burdens, demographics like aging societies, and economic uncertainty if not well managed. Educational attainment also influences competitiveness.

  • Financial crises like in 2008 can have long-lasting economic and social impacts and result from risks building up in areas like housing markets if not addressed preemptively. Stronger regulatory oversight aims to prevent future crises.

Here is a summary of the text from 0-71:

  • Food is a high priority in daily life for many around the world. Natural resources are important for food production.

  • Forbes magazine publishes an annual list of the richest Americans (the Forbes 400).

  • Preventing foreign acquisitions is a concern for some governments and citizens.

  • Reports on global issues come from sources like Foreign Affairs magazine.

  • Issues around foreign aid and foreign currency exchange policies arise. Booms in foreign currency revenues can also create issues.

  • Foreign direct investment, cross-border capital flows, and foreign exchange reserves are important globally.

  • Foundations of Wellbeing is one dimension used to assess countries and progress.

  • Countries mentioned include France, which has a long history and progressive policies on some issues.

  • Organizations like the Fraser Institute publish rankings of countries based on metrics like economic freedom.

  • There is a debate around whether increased free time in modern societies is a benefit or raises other questions.

  • Democratic capitalism and state capitalism differ in how they view and implement concepts like freedom, the role of the state, and economic policies.

  • Global trends in freedom, both positive and negative, affect countries and societies.

  • Groups like Freedom House monitor and report on levels of freedom worldwide.

  • Income inequality is a concern both between and within countries, though there are debates around measuring and addressing it.

  • Global GDP, globalization, and other economic indicators are important for understanding progress and challenges facing the world community.

Here is a summary of the key points from 143–148:

  • Risk aversion has increased, as people are less willing to take career risks or start new businesses. This misallocation of talent and capital holds back productivity and growth.

  • Demographic changes like increasing lifespans and an aging population are shifting risk preferences. People want more secure, stable lives and are less willing to take risks.

  • Pressure to meet short-term earnings targets encourages businesses to play it safe rather than make long-term investments or risky innovations. This contributes to declining productivity growth.

  • Risk aversion may be rational at the individual level but is harmful at the societal level. It contributes to misallocation of resources and less dynamic economies. More needs to be done to encourage risk-taking and long-term thinking.

  • Productivity growth depends on the willingness to reallocate resources like capital and labor away from declining sectors and into new, more innovative ones. More risk-taking would support this reallocation process.

So in summary, it says increased risk aversion on the individual and corporate level is holding back productivity and economic dynamism by discouraging innovation, new business creation, and reallocation of resources to more efficient uses.

Here is a summary of key points about actionism:

  • Actionism refers to the belief that constant government activity and intervention in the economy is necessary and beneficial. It promotes anactive, hands-on role for the state in economic and social matters.

  • Critics argue that excessive state intervention can be problematic and hinder market forces. It can lead to inefficiency, misallocation of resources, distort market signals, and reduce economic freedom.

  • However, proponents of actionism believe some level of government and policy involvement is needed to boost growth, address issues like inequality, and guide development in a way that benefits society.

  • There are different views on the appropriate level and scope of state intervention. Some argue for more limited actions to fix market failures, while others support a stronger guiding hand.

  • In practice, most modern economies have shifted away from pure laissez-faire policies towards more pragmatic approaches that incorporate some degree of actionism through regulatory oversight and targeted social programs/investments.

So in summary, actionism refers to an ideology that advocates an active role for the government in economic and social matters through continuous intervention, as opposed to a purely hands-off laissez-faire approach, though criticisms of excessive intervention also exist.

Here is a summary of lobbying:

  • Lobbying refers to attempts to influence legislators and officials on behalf of various interest groups. It usually involves communicating groups’ policy preferences and positions to lawmakers.

  • Lobbying is a common political activity in many countries. In the US, diverse groups represent industries, non-profits, unions, and other interests. They try to shape public policy outcomes through advocacy and outreach to government.

  • Effective lobbyists provide expertise and information to legislators on issues. However, lobbying is also controversially because large corporations and special interests can spend vast sums to sway policymaking. This has raised concerns about money’s disproportionate influence in politics.

  • Research shows lobbying does affect some policy decisions and priorities. However, its overall impact is debated as political realities are complex. Lobbying is also centered in democratic systems as representation of diverse constituencies is important even if imperfect.

  • Reforms have been proposed to increase transparency of lobbying and limit money’s role. However, outright banning of lobbying would limit participation and advocacy in the political process. Managing its influence remains an ongoing challenge.

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About Matheus Puppe