Austerians have had their worst week since the last time GDP numbers came out for a country that's tried austerity.
But this time is, well, different. It's not "just" that southern Europe is stuck in a depression and Britain is stuck in a no-growth trap. It's that the very intellectual foundations of austerity are unraveling. In other words, economists are finding out that austerity doesn't work in practice or in theory.
What a difference an Excel coding error makes.
Austerity has been a policy in search of a justification ever since it began in 2010. Back then, policymakers decided it was time for policy to go back to "normal" even though the economy hadn't, because deficits just felt too big. The only thing they needed was a theory telling them why what they were doing made sense. Of course, this wasn't easy when unemployment was still high, and interest rates couldn't go any lower. Alberto Alesina and Silvia Ardagna took the first stab at it, arguing that reducing deficits would increase confidence and growth in the short-run. But this had the defect of being demonstrably untrue (in addition to being based off a naïve reading of the data). Countries that tried to aggressively cut their deficits amidst their slumps didn't recover; they fell into even deeper slumps.
Enter Carmen Reinhart and Ken Rogoff. They gave austerity a new raison d'être by shifting the debate from the short-to-the-long-run. Reinhart and Rogoff acknowledged austerity would hurt today, but said it would help tomorrow -- if it keeps governments from racking up debt of 90 percent of GDP, at which point growth supposedly slows dramatically. Now, this result was never more than just a correlation -- slow growth more likely causes high debt than the reverse -- but that didn't stop policymakers from imputing totemic significance to it. That is, it became a "fact" that everybody who mattered knew was true.
Except it wasn't. Reinhart and Rogoff goofed. They accidentally excluded some data in one case, and used some wrong data in another; the former because of an Excel snafu. If you correct for these very basic errors, their correlation gets even weaker, and the growth tipping point at 90 percent of GDP disappears. In other words, there's no there there anymore.
Austerity is back to being a policy without a justification. Not only that, but, as Paul Krugman points out, Reinhart and Rogoff's spreadsheet misadventure has been a kind of the-austerians-have-no-clothes moment. It's been enough that even some rather unusual suspects have turned against cutting deficits now. For one, Stanford professor John Taylor claims L'affaire Excel is why the G20, the birthplace of the global austerity movement in 2010, was more muted on fiscal targets recently.
The discovery of errors in the Reinhart-Rogoff paper on the growth-debt nexus is already impacting policy. A participant in last Friday's G20 meetings told me that the error was a factor in the decision to omit specific deficit or debt-to-GDP targets in the G20 communique.
The UK and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not. You've got to spend money.Bond investors want growth much like equity investors, and to the extent that too much austerity leads to recession or stagnation then credit spreads widen out -- even if a country can print its own currency and write its own checks. In the long term it is important to be fiscal and austere. It is important to have a relatively average or low rate of debt to GDP. The question in terms of the long term and the short term is how quickly to do it.
Growth vigilantes are the new bond vigilantes. Gross thinks the boom, not the slump, is the time for austerity -- which sounds an awful lot like you-know-who.
The austerity fever has even broken in Europe. At least a bit. Now, eurocrats can't say that austerity has been anything other than the best of all economic policies, but they can loosen the fiscal noose. And that's what they might be doing, by giving countries more time and latitude to hit their deficit targets. Here's how European Commission president José Manuel Barroso framed the issue on Monday:
While [austerity] is fundamentally right, I think it has reached its limits in many aspects. A policy to be successful not only has to be properly designed. It has to have the minimum of political and social support.
That's not much, but it's still much better than the growth-through-austerity plan Eurogroup president Jeroen Dijsselbloem was peddling on ... Saturday.
Now, Reinhart and Rogoff's Excel imbroglio hasn't exactly set off a new Keynesian moment. Governments aren't going to suddenly take advantage of zero interest rates to start spending more to put people back to work. Stimulus is still a four-letter word. Indeed, the euro zone, Britain, and, to a lesser extent, the United States, are still focussed on reducing deficits above all else. But there's a greater recognition that trying to cut deficits isn't enough to cut debt burdens. You need growth too. In other words, people are remembering that there's a denominator in the debt-to-GDP ratio.
But austerity doesn't just have a math problem. It has an image problem too. Just a week ago, Reinhart and Rogoff's work was the one commandment of austerity: Thou shall not run up debt in excess of 90 percent of GDP. Wisdom didn't get more conventional. What did this matter? Well, as Keynes famously observed, it's better for reputation to fail conventionally than to succeed unconventionally. In other words, elites were happy to pursue obviously failed policies as long as they were the right failed policies.
But now austerity doesn't look so conventional. It looks like the punchline of a bad joke about Excel destroying the global economy. Maybe, just maybe, that will be enough to free us from some defunct economics.
Forget the Common Core, Finland’s youngsters are in charge of determining what happens in the classroom.
“The changes to kindergarten make me sick,” a veteran teacher in Arkansas recently admitted to me. “Think about what you did in first grade—that’s what my 5-year-old babies are expected to do.”
The difference between first grade and kindergarten may not seem like much, but what I remember about my first-grade experience in the mid-90s doesn’t match the kindergarten she described in her email: three and a half hours of daily literacy instruction, an hour and a half of daily math instruction, 20 minutes of daily “physical activity time” (officially banned from being called “recess”) and two 56-question standardized tests in literacy and math—on the fourth week of school.
That American friend—who teaches 20 students without an aide—has fought to integrate 30 minutes of “station time” into the literacy block, which includes “blocks, science, magnetic letters, play dough with letter stamps to practice words, books, and storytelling.” But the most controversial area of her classroom isn’t the blocks nor the stamps: Rather, it’s the “house station with dolls and toy food”—items her district tried to remove last year. The implication was clear: There’s no time for play in kindergarten anymore.
The country has seen periods of turmoil before. But this time may be different.
I am usually an optimist when it comes to Turkey’s future. Indeed, I wrote a whole book about The Rise of Turkey. But these days, I’m worried. The country faces a toxic combination of political polarization, government instability, economic slowdown, and threats of violence—from both inside and outside Turkey—that could soon add up to a catastrophe. The likelihood of that outcomeis increasing amid Russia’s bombing raids in Syria in support of its ally, Syrian President Bashar al-Assad, which threaten to debilitate the moderate rebels and boost the extremists in Syria’s civil war, while leaving Turkey to deal with two unruly neighbors: Assad and ISIS.
Of course, Turkey has gone through periods of political and economic crisis before. During the 1970s, the country’s economy collapsed, and the instability led to fighting among right- and left-wing militant groups and security forces that killed thousands of people. Then, in the 1990s, Turkey was pummeled by triple-digit inflation and a full-blown Kurdish insurgency that killed tens of thousands. Turkey survived both those decades. The historian in me says that Turkey will be able to withstand the coming shock this time as well.
Many high-school graduates must choose between two bad options: a four-year program for which they’re not academically or emotionally prepared, or job-specific training that might put a ceiling on their careers.
Two years ago, my nephew was set to graduate from Maryland’s Towson University with a degree in political science. After six long years, both he and his parents were ready to breathe a sigh of relief—he had made it to the finish line. He had never been excited about school, and his parents had worried about his lack of enthusiasm, wishing he could be engaged in something that ignited his curiosity and provided him more of a motivation to focus, something more hands-on and practical. But they also knew that without a bachelor’s degree, my nephew’s ability to move into a rewarding career, earn a middle-class salary, and enjoy some economic security would be very limited. And they worried that if he didn’t complete that degree before he turned 25, he likely never would (a reasonable concern, given national statistics on college completion). Determined to launch him into adulthood with the strongest possible foundation they could, they persuaded him to go to college and crossed their fingers.
A profile of the presidential candidate written in the 1980s, as he got his start in politics
In 1985, when Bernie Sanders was in his second term as mayor of Burlington, Vermont, a writer named Russell Banks published his breakthrough novel, Continental Drift. It would earn Banks the John Dos Passos Prize, and make him a finalist for the Pulitzer for fiction. Sometime after the book came out, Banks accepted an assignment to profile the self-described socialist mayor. He followed Sanders around the city, watched him interact with constituents, and recorded his candid views. He produced a remarkable and compelling portrait of a distinctive politician, but it never found its way into print. Instead, it was filed away for three decades. With Sanders leading in the polls in New Hampshire, though, we now offer it to our readers, as a look at the senator before he became a national figure.
Rescuers have been searching for the container ship, which was in the path of Hurricane Joaquin, since the crew last made contact Thursday morning, saying El Faro was listing but the situation was manageable. The vessel was carrying 33 people—28 Americans and five Poles—and while searchers have found debris they believe came from the ship, they haven’t found the vessel itself or any survivors. One body has been found.
While nautical disasters remain a fact of life—everything from missing sailboats to deadly catastrophes like the Costa Concordia’s sinking or recent ferry disasters in Asia—it is exceptionally rare for a large ship like El Faro to disappear.
Even in big cities like Tokyo, small children take the subway and run errands by themselves. The reason has a lot to do with group dynamics.
It’s a common sight on Japanese mass transit: Children troop through train cars, singly or in small groups, looking for seats.
They wear knee socks, polished patent-leather shoes, and plaid jumpers, with wide-brimmed hats fastened under the chin and train passes pinned to their backpacks. The kids are as young as 6 or 7, on their way to and from school, and there is nary a guardian in sight.
A popular television show called Hajimete no Otsukai, or My First Errand, features children as young as two or three being sent out to do a task for their family. As they tentatively make their way to the greengrocer or bakery, their progress is secretly filmed by a camera crew. The show has been running for more than 25 years.
The elite university still honors the South Carolina senator best known for praising the morality of slavery.
Yale’s Calhoun College, one of 12 residential colleges where undergraduates live, is named for John C. Calhoun, the South Carolina politician and an 1804 graduate. It’s not the only memorial to Calhoun. In Charleston, an 80-foot-tall statue of him overlooks Calhoun Street. In the wake of the church murders in that city last June, students at Yale petitioned the university to change the college’s name.
The students’ petition recognizes that Calhoun “was respected during his time as an extraordinary American statesman,” but stresses that he was “one of the most prolific defenders of slavery and white supremacy” in the history of the United States. It declares, “The monumental task of eliminating the vestiges of racism must include all monuments and symbols dedicated to people and institutions that fought to preserve slavery and white supremacy.”
Any attempt to address mass incarceration has to begin with an effort to tackle crime—and the social conditions linked to its rise.
With the publication of “The Black Family in the Age of Mass Incarceration” Ta-Nehisi Coates has added an elegant and forceful voice to the growing frustration with the inefficacy and injustice of America’s criminal-justice system. Mandatory-sentencing laws, the War on Drugs, juvenile-justice sentences that seem to do more to create than deter criminals, racial arrest and sentencing disparities: All are ready for a tough national cross-examination.
But even in the unlikely event that Washington and state legislatures successfully adapt the nation’s crime policies to a safer, more racially sensitive era, the nation will still look around to find more black men in prison than it might expect or want. There’s a simple reason for that, one that Coates himself notes: Relative to other groups, blacks commit more crimes. To understand why is to tackle some very hard-to-talk-about realities of black family life. And on that issue—and despite his announced interest in the topic—Coates has been the opposite of lucid.
In the name of emotional well-being, college students are increasingly demanding protection from words and ideas they don’t like. Here’s why that’s disastrous for education—and mental health.
Something strange is happening at America’s colleges and universities. A movement is arising, undirected and driven largely by students, to scrub campuses clean of words, ideas, and subjects that might cause discomfort or give offense. Last December, Jeannie Suk wrote in an online article for The New Yorker about law students asking her fellow professors at Harvard not to teach rape law—or, in one case, even use the word violate (as in “that violates the law”) lest it cause students distress. In February, Laura Kipnis, a professor at Northwestern University, wrote an essay in The Chronicle of Higher Education describing a new campus politics of sexual paranoia—and was then subjected to a long investigation after students who were offended by the article and by a tweet she’d sent filed Title IX complaints against her. In June, a professor protecting himself with a pseudonym wrote an essay for Vox describing how gingerly he now has to teach. “I’m a Liberal Professor, and My Liberal Students Terrify Me,” the headline said. A number of popular comedians, including Chris Rock, have stopped performing on college campuses (see Caitlin Flanagan’s article in this month’s issue). Jerry Seinfeld and Bill Maher have publicly condemned the oversensitivity of college students, saying too many of them can’t take a joke.
Some businesspeople are working half of the week in far-off countries or catching 3 a.m. trains just so that they don’t have to uproot their lives at home.
A few years back, David Neeleman, the founder of JetBlue Airways, left his company and launched a new airline in Brazil. The airline, Azul, flies 22 million people a year, employs 12,000 people, and is the fastest-growing carrier in the region.
You’d think running such a large, complex operation would require a move to South America. But Neeleman commutes to Azul’s Sao Paulo headquarters every week from his home in Connecticut, taking the 10-hour redeye on Sunday nights and returning on Thursdays. This way, he says, he doesn’t have to uproot his family of 10 kids.
“My wife wasn’t so interested in moving,” said Neeleman, who recently bought TAP, Portugal’s national airline and is now commuting there as well. “We had all these kids playing [American] football and lacrosse. They don’t have those sports in Brazil.”
In the movie Up in the Air, George Clooney successfully captures the road-warrior ethos that has long been associated with, say, business consultants from firms like McKinsey & Company who work on projects outside their hometowns and spend most of their week in hotels. But now, more and more executives around the world are choosing to take on lengthy commutes on a permanent basis, even if their jobs don’t demand it. Increasing globalization and tech-enabled workplace flexibility are certainly part of the reason why. But a more child-centered approach to parenting also seems to be a factor, as these executives make other major sacrifices in order to balance their professional and home lives.