POMP AND CIRCUMSTANCES: Five decades after college

Cauliflower is nothing but cabbage with a college education. ~ Mark Twain

How could have it been this long, 50 years since I graduated from college? My how time really flies.

Now that I’ve reached my Baccalaureate’s golden anniversary I decided to explore how our economy and its college graduates can be compared during the 50 years since June 1967 when I received my B.A. degree in economics. I assess the current economic circumstances that the graduating Class of 2017 is about to inhabit with that of my graduation. I also have examined the economic landscape in June 1971, when I (finally) entered the full-time work force having completed my Ph.D. course work and much of my dissertation.

Here’s a minor insight I gained from this inquiry. In looking back at my college transcript – no, it wasn’t on papyrus – I re-discovered that my college senior thesis and five years later my doctoral dissertation both examined aspects of the economics of technological innovation, a topic that’s still of personal interest.
Can there be a golden reunion of sorts between my Class of 1967 and the Class of 2017? Let’s see…

First, here is some basic information regarding the impressive accomplishment of increasing our educational attainment. Chart 1 below shows the ever-growing percentage of adults who have received a B.A. or more during the past century. In 2015, the latest year available, 32.5% of adults had a 4-year college degree or more and 88.4% had a high-school diploma. In 1967, 10.5% of us had received a B.A. or higher degree. In 50 years we’ve tripled the share of adults who have college degrees.  

Chart 1: Percent of US adults who have a B.A. or higher degree

Source: NCES.ed.gov. Adults are defined as people between 25 and 64 years.

 An interesting perspective on the current level of degree-attainment is the percentage equivalence between the high-school graduation share in 1950 and college graduation in 2015. The percent of adults who have at least a B.A. in 2015 (32.5%) is in a way comparable (and up an educational notch) to 1950, when 34.3% of adults had a high-school diploma. In 1950, the bulge of American GIs who benefited from the federal government paying for much of their post-high school education had started completing college. People with a B.A. or more in 1950 represented 6.2% of adults. In 1971, about 11% of adults had a B.A. or more.

Table 1 shows the breakdown of college graduates by gender for the three years I have focused on.

 Table 1: Adults who have completed four years of college or more, by gender

Year	Men / Women with a B.A. or more(% of US population)
1967	12.8% / 7.6%
1971	14.6% / 8.5%
2015	32.3% /32.7%

Source: https://www.statista.com 

As shown, in 1967 almost twice as many men received degrees as women. Between 1967 and 2015 the percentage of adults with a B.A. or post-graduate degree more than doubled for men and more than quadrupled for women, a notable feat for improving the nation’s human capital and enormously benefiting America. Each year, women now account for more college degree-holders than men.

Table 2 summarizes macroeconomic conditions in the US for these three graduation years. 

Table 2: US Economy in three graduation years

Year	Real GDP (billions 2009$)	Real GDP Growth	Employment* (millions)	Unemployment Rate**	Inflation Rate (CPI)+	US Average Annual Earnings++
1967	$4,355.2	0.3%	65.89	4.0% ↑	2.8%	$5,907 ($43,246)
1971	$4,877.6	2.3%	71.25	5.6% ↓	4.3%	$7,530 ($44,780)
2017	$16,842.4	0.7%	146.06	4.4% ↓ (2.4%)	1.8%	($45,677)

*All employees: total nonfarm payrolls.  ** ↑ indicates increase in rate from previous month; ↓ indicates decrease from previous month; in parentheses, unemployment for people with a B.A. or higher.  + 2017 inflation based on CPI change from 2015Q4 to 2016Q4.  ++ Average annual real earnings in parentheses (2017$).

Source: BEA, BLS. If available, I used June data for each year. 
You can see that real GDP almost quadrupled from 1967 to 2017 and that that real GDP growth was lowest in 1967, an unimpressive 0.3%. The June 1967 unemployment rate also was the lowest. Even though the 4.0% unemployment rate had increased marginally from the month before, 790,000 more people were added in June 1967 to the employed, nonfarm labor force. Using today’s economic thinking a 4.0% unemployment rate would signal robust full employment with a solid likelihood of inflation around the GDP corner. Yet the annual inflation rate in 1967 was a relatively mild 2.8%. Real GDP growth was far stronger when I entered the full-time labor force in 1971, 2.3%, although the 5.6% unemployment rate was the highest of any of the three years. The 4.3% inflation rate also was the highest of these three years. What wasn’t high during the four year period between 1967 and 1971 was the increase in average annual real earnings that grew less than 1% per year. It increased even less during the 1971-2017 time period. Despite this miniscule income growth, the US was not in a recession during any of these three years.

The Class of 2017 faces an economy that’s expanding, at an all too modest rate (0.7%), with a declining unemployment rate and very modest inflation, 1.8%. The unemployment rate for all people with at least a B.A. is much lower than the overall rate, just 2.4%; although the unemployment rate for young adults (21-24 years) with a college degree was 5.6%. The income of young college graduates has recovered to about $40,000. These economic descriptors sound quite encouraging for the Class of 2017; certainly when compared to seniors who graduated in 2007 and soon thereafter during the lingering Great Recession. This year 21% of the class of 2017 accepted a job before graduation, up from 12% last year and 11% two years ago according to Accenture.

Nevertheless, there are qualifications to this year’s good news based on two factors. First, there are now more young adults with B.A.s seeking jobs than ever before. This steady increase in B.A.-holders first began in earnest in the 1980s, as shown in Chart 1. In 2017, 1.9 million college students are expected to graduate. Having a college degree has become much less exceptional than it was in the 1960s, 1970s or 1980s. Now, it’s increasingly seen as necessary, not optional, for securing a brighter economic future. This surge in college-educated labor in part has allowed employers to “up-credential” certain entry-level jobs, meaning employers have been able to specify that job applicants require a college degree, where before the job didn’t require a B.A. credential. Of the more than 11 million jobs were created since the last recession, almost 75% of those positions have been filled by people with at least a B.A. degree.

A second factor is persistent, historically-low economic (GDP) growth, shown in Table 2. As I’ve mentioned before, US macroeconomic growth remains rutted well below 3% since 2006. Lower growth produces fewer new jobs for everyone looking to be employed, lower labor-force participation and slackened wage increases.

Beyond up-credentialing, underemployment of recent college graduates has risen and includes 43.5% of college graduates ages 22 to 27 who are working at jobs that don’t even require a college degree. Employment of non-white college graduates remains even more problematic.

With the sizeable number of college grads working in “non-college” jobs, the employment prospects for recent high school graduates have become doubly-difficult. High school graduates’ unemployment climbed to 16.9%, one percent higher than in 2007; their average income is $22,600.

The properly-vaunted college wage premium has been one often-cited motivating factor for increased college attendance during the past decade. According to a recent NBER paper the college wage premium has levelled-off. The wage premium between the average annual income of B.A. holders and of high-school degree holders, remains large (about $27,000 per year), but its growth has dropped significantly since 2010. Between 2010 and 2015 the increase in this premium only grew 0.4%; between 2000 and 2010 it was a much larger 25.2% gain. I expect this wage premium will continue to decay as college attendance rises and low growth persists.

If this trend persists, it will be very challenging for new college graduates because these grads have taken on ever-larger student loans in order to cover their ever-increasing college costs. The most recent information states that 71% of students graduating from four-year colleges have student loan debt. College attendees and graduates now owe $1.4 trillion on their student loans. The average monthly student loan payment is $351 for 20 to 30 year old borrowers. Student loan debt has increased the most rapidly of any debt type (e.g., mortgages, car loans, credit cards) during the past decade. It doubled both as a share of total consumer debt and in dollar amount since 2007. Student loan debt now accounts for 10.6% of all consumer debt. To add fiscal salt to these debt wounds, students’ ability to pay has withered. The average income of B.A.-holders increased a meager $915 from 2010 to 2015, a paltry 0.3% per year.

The president’s more-detailed budget for the next fiscal year was submitted to Congress on May 23. In it he proposes to cut student loan funding and subsidies by $143 billion. That may save some cents, but it does not make sense.

Until more robust economic growth re-appears, the Class of 2017’s economic prospects will be far less buoyant than those of our Class of 1967 were. Despite the president’s pledges for higher growth, it’s unlikely to occur any time soon. His policies don’t support it. Many economists rightly believe his visions of sustained 3+% growth is a fantasy. Greater macroeconomic growth depends on two principal sources, higher productivity and higher work-force participation, neither of which has risen much if at all lately. None of the president’s hazily-stated policies will positively affect productivity or work-force participation.

In many economic respects it was relatively better for us 50 years ago as newly-minted graduates in the Class of 1967. QED, the Summer of Love, complete with embroidered bell-bottoms, and beyond. But it is worth remembering from a broader, life perspective that recent college grads very fortunately haven’t had to worry, as we did, about General Hershey and local Selective Service Boards (which, to this day, still require men to register at age 18) drafting us as young graduates, then donning a uniform and heading into the jungles of Viet Nam. As they fling their mortarboards in the air, the challenges facing the Class of 2017 thankfully have nothing to do with tropical war zones. Here’s to more pomp and less circumstances.

CONSUMER ILLUSION: Why we don’t get any respect.

We believe we are the consumers, but we really are the consumed. ~ Bryant H. McGill 

What group has the most at stake in virtually all of the laws and regulations now being either considered or changed by the president and his Republican-controlled Congress? This assemblage of Americans is the most numerous and broadest of any group, but probably doesn’t immediately come to mind as an answer to the question. It is consumers; the millions of individuals and households who every day buy goods and services in every market in the US. Consumers run our economy. But we don’t get any respect.

Last week Congress managed save some face by rescuing itself – and spared consumers from inevitable harm – from yet another government shutdown and passed a Continuing Resolution (CR) for funding through September 30, the end of the federal government’s fiscal year. It’s a very low bar to surmount – to keep the federal government actually operating – but somehow this do-nothing Congress succeeded. Thank goodness for small favors. The largest single loser from the CR was the president, who didn’t get a dime for building his wall nor get reductions in funding of agencies like the National Institutes of Health. Astonishingly, the CR also prevented Attorney General Jeff Sessions from interfering with marijuana policy provisions of the 44 states that have already passed medical marijuana laws. Who would have guessed?

Yet the media stories about the CR never mentioned American consumers as winners for having the government stay in business. Instead, despite the vast importance of consumers in this country, stories like this one mentioned distinct, individual groups like coal miners and Planned Parenthood as winners who were spared the fiscal axe that the president and many Republicans wanted to sway their way, not consumers.

As we already know from personal experience, we are a nation of consumers. Personal consumption expenditures (PCE) drive our GDP and make up the single largest component, 68.6%, of our top-ranked GDP. PCE has grown gradually over the past 30 years, as shown in the figure below from the St. Louis Federal Reserve Bank. Most recently, the BEA reported that during the last quarter (2017Q2) PCE had increased a dismal 0.23%. Consumer purchases of durable goods – those lasting 3 years or longer (like appliances, furnishings and cars) – decreased 0.19%. This softness in consumer spending is in large part why the latest, annualized real (inflation-adjusted) GDP growth was a dreary 0.7%. Given his usual denials of economic reality, I expect the president labelled this fact as “fake news.” 

Personal Consumption Expenditures as a percent of GDP, 1984-2013

 The chart below shows the US share of GDP from PCE tops the list when compared to other large nations. Notice that as a share of China’s GDP, the world’s second-largest, Chinese consumer expenditures just account for about one-half of the US share. Yes, we certainly know how to shop.

Source: CIA World Factbook

How many consumers are there in the US? Surprisingly, it’s not a straightforward question to answer despite the importance of consumption in our economy. Using several sources, I determined there are about 249 million adult consumers in the US, including you and me. Our per capita average annual consumption is now $40,326. Per capita consumption has increased only 1.7% in real terms since the end of the Great Recession.

How are we consumers doing? The Federal Reserve’s apt actions to hold inflation in check have clearly benefited consumers. In some ways consuming in the US has never been better. There are more goods and services being marketed to us than ever before. When I was last at the grocery store, I counted an amazing 167 different types of pasta sauce on the shelves! 5/5/17 at the Park & Pay/Safeway

The following table illustrates how we consumers have been doing during the decades from 1950 until 2015, relative to average salary-based purchasing power for 3 staples of modern consumption; a gallon of gasoline, a new car and a loaf of bread. The national average annual salary is taken from the Social Security Administration’s national average wage index. I’ve examined how much work time, based on average salary, it has taken to buy these items over this period.

Consumer Welfare during the Past 6 Decades

Year	Average Annual Salary*	Price of Gasoline (1 gal.)	Minutes to Purchase Gasoline	Price of New Car	Hours to Purchase Car	Price of Bread (Loaf)	Minutes to Purchase Bread
1950	$2,643	$0.18	8.5 min.	$1,510	1,189 hrs.	$0.12	5.7 min.
1980	$12,513	$1.19	11.9	$7,210	1,198	$0.50	5.0
2010	$41,674	$2.96	8.9	$27,950	1,395	$1.41	4.2
2015	$48,099	$2.40	6.2	$33,543	1,445	$1.44	3.7

Sources: Social Security Administration, AAA, KBB, thepeoplehistory.com, infoplease.com, BLS

*Calculated from the national average wage index (AWI).

As shown, consumers in 2015 can buy a gallon of gas for 23% less time than in 1950, and about 50% less time than in 1980 (when OPEC was not exporting petroleum to the US for the second time), due principally to the rise in average salary during these decades. Unlike gasoline and bread, the time needed to buy a new car has risen. Through the 1950 to 2015 time frame consumers have needed to spend 21.5% more hours to buy a new car. It’s worth remembering the quality and capabilities of the “average” new car have vastly improved since 1950, much more than either gasoline or bread. And speaking of dough, recent consumers have definitely benefited when buying a loaf of bread. In 2015 we had to work 65% fewer minutes to buy the bread than in 1950. 

Our near-term prospects as consumers, however, are quite mixed due to the Trump administration’s strong anti-consumer bent. Politicians and policy-makers invariably pledge allegiance to consumers and our interests, but it’s fleeting and illusory. Rarely do they offer any improvement in consumer wellbeing.  In effect, we’re so numerous we’re taken for granted.

Consumers represent a very broad and diverse group of citizens. In contrast, “special interests” are exceedingly narrow and much deeper. Politicians spend far more time and effort satisfying these better-defined special interests than inclusive consumers.

Citizens do not march on Washington, or elsewhere, as identified consumers. Whenever we march it’s as worried scientists, as people concerned about environmental or other specific policies. Such marches and public assemblies carry considerable weight and should continue, but consumerist sentiments are never at the forefront of these actions, except when we’re pushing a grocery cart down the actual or electronic aisles.

This is a large part of the illusion connected with consumers. As consumers we’re essential for the health and growth of our economy, but rarely important when policies that affect us (and virtually all of them do in some way) are considered by the federal, state or local governments. Usually we are seen just as a source of tax revenue. In a grand irony, consumers are too numerous to be politically acknowledged. Not one of the $11,645,680,000,000 dollar “votes” that we consumers spent in March 2017 gets counted when this administration formulates economic, health and social policies that affect us all. We are illusory ciphers.

The House of Representative’s passage of the Republicans’ new health care legislation this week will impose higher costs and more restrictions for virtually all US health care consumers. For Republicans, this legislation isn't ultimately about health care at all, it's about reducing taxes for the rich. President Trump’s and Republicans’ pledge to weaken and eliminate the Consumer Finance Protection Bureau, begun in 2011 via the Dodd-Frank Act, typifies their anti-consumer views.  

The president’s policy pronouncements regarding international trade will directly and indirectly increase the price of a vast array of consumer goods sold in America. First, let’s look at his proposed tariffs on Mexican imports into the US; then his annunciated 45% tariff on Chinese imports to the US.

The president has said he wants either a 20% or a 35% tariff (depending on what else is going on in his jumbled, “untrained” mind) on imports from Mexico to pay for his Wall. In 2015, Mexico exported $295 billion (B) worth of goods into the US, including vegetables and fruit (avocados, tomatoes, peppers, lemons, watermelons and mangoes), beer (Corona, Dos Equis, Pacifico, Modelo), electronic equipment and machinery, and cars and trucks (Toyota, Ford, Chevrolet, Honda, VW, Nissan and Ram trucks). One US Congressman said consumer prices of Mexican goods subject to such tariffs could increase by 20%. How’s them (more expensive) avocados, Coronas and Fords for you John and Jane America.

Illustrating the president’s inability to connect the economic dots, such a tariff would be paid in varying degrees by US consumers of Mexican imports, not Mexican producers. It is worth noting that Mexican-made automobiles and trucks, its most valuable import to the US ($75.2B in 2016), are 40% comprised of US-made parts. If such tariffs are imposed it could threaten some of the 6 million US jobs that depend on trade with Mexico according to the US Chamber of Commerce. Mexico has already stated such tariffs will provoke it to purchase corn and other agricultural products ($18B US exports in 2016) and US electrical and other manufactured machinery ($83B) from other nations and/or impose retaliatory tariffs on US exports. Shades of the Smoot-Hawley Tariff Act that induced international trade wars in the 1930s and intensified the Great Depression. Maybe the president is thinking Andrew Jackson should have considered it to avoid the Depression. 

If the president’s suggested 45% tariff on Chinese imports is actually enacted, similar though larger negative consequences would ensue for US consumers because the tariff is higher and the imports are greater. In 2015, China’s imports into the US totaled $483.2B, almost twice as large as Mexico’s. China’s imports, ordered in descending value, include electronic equipment (cellphones, computers, printers), machinery, furniture, toys/games, footwear and clothing. By value, China is the source of 75% of cellphones and 93% of tablets or laptops shipped into the US.

A 45% tariff on Chinese-made goods could drive up US retail prices on those goods by an average of about 10%, according to Capital Economics. Consumers would find it hard to escape these price increases. "There are few alternative sources for the main products the US buys from China," says Mark Williams, Capital Economics' chief Asia economist. China would also retaliate with their own tariffs on US products, as they did in 2009 when the Obama administration imposed levies on automobile tires imported from China. China imposed a tariff on US chicken (including chicken feet) exports. The US tire tariffs didn’t bring back domestic tire industry employment, but did allow manufacturers to raise their prices when US consumers bought them.

President Trump purports to be interested in increasing blue-collar jobs, but his tariffs will increase the prices of goods that far more blue-collared workers and other consumers regularly buy, all in the name of his Wall and “fairness.” Tariffs may possibly be good politics, but they are poor economics for the majority of customers because they raise consumer prices and potentially reduce jobs dependent on US exports.

Customers will be consumed by higher costs to buy health care, food, cars and trucks, clothing, electronics and other key items of modern life, courtesy of the Trump administration. The president has yet to support consumers with his scattershot, inconsistent policies. He’s firmly on the side of private, moneyed interests. His policies are all about consumer illusion and falling discretionary incomes. President Trump’s anti-consumerist policies won’t make America any greater again for our 249 million adult consumers, just more expensive and less healthy.

TRADING PLACES

Free trade is not based on utility, but on justice. ~ Edmund Burke

This weekend China’s President Xi Jinping is meeting with our president at his Mar-a-Lago resort. A key discussion topic will be trade between the 2 nations. This face-to-face meeting represents a substantial test for  Mr. Trump for several reasons. First, the US and China are the world’s 2 largest economies. Second, each man has very different perspectives on how to conduct international trade with each other, let alone the broader features of their economic and political firmaments and mutual interests. These challenges lead The Economist to cleverly christen this inaugural meeting Spar-a-Lago.

Our golfer-in-chief unfortunately will not be carting with Mr. Xi along his fairways, clubs at the ready. Officially, the Chinese government takes a sub-par view of golf, considering it a game for rich capitalists. Perhaps the 2 men can relax and create personal connection during a game of bocce ball instead?

They have plenty of trade issues to discuss. In 2016 the US exported $169.8 billion (B) of goods and services to China. We imported almost 3 times as much; $497.6B of imported goods and services from China. The US trade deficit with China isn’t recent. It has been negative for 31 years ever since Reagan was president, as shown in the figure below.

US-China Balance of Trade, 1985-2016 (10⁹ $)

Source: Economist.com, DOC/BEA

Overall, the current US balance of trade (BoT; exports minus imports) deficit with China is $309.8B. Mitigating the US-China trade deficit would be useful for us, depending on how it’s done. The president and Congress have power to change policies that can influence some but not all aspects of our BoT. During the past 3 years the appreciation of the US dollar relative to other key currencies like the Yuan and Euro – that neither the president nor Congress can effect – has not helped US exports.

Beyond the US and the Middle Kingdom, international trade anxieties are affecting other trading nations. The largest concern is that trade growth has slowed; the high-output growth engine of globalization-related trade has braked. As we already know, the political winds are shifting, causing international trade’s sails to luff in the doldrums of no supportive breezes. The World Trade Organization (WTO) expects that trade will remain “sluggish” and grew just 2.8% in 2016, like it did in 2015. Over the last decade, world trade growth has lagged world GDP growth. The world’s real GDP grew 3.0% in 2016. Average annual world real GDP growth between 2000 and 2016 was 3.0%; between 2000 and 2010 it was higher, 3.9%.

The post-WWII orthodoxy of increasing trade to improve nations’ growth and development is crumbling. Talk of tariffs and other protectionist policies is cresting these days, as individual nation’s economic growth has faltered and domestic-centered populism rises.

In addition to the general reduction in GDP growth mentioned above,  there are more specific reasons for this decrease in trade. First, growth of the BRICS (Brazil, Russia, India, China and South Africa) has slowed. These nations are the world’s largest emerging markets. Their collective economic growth has slowed from 9% in 2010 to about 4% in 2015. By 2015, 3 of the BRICS (China, Russia, and South Africa) had slower growth for at least 3 consecutive years and Brazil remains in a significant recession. Brazil’s GDP dropped 3.2% in 2016, it contracted 3.8% in 2015. Long-term growth expectations in these 5 key economies have been repeatedly downgraded since 2010. This lack of growth affects both our exports and imports. Second, imports into developing nations stagnated, growing only 0.2% in 2016, according to the WTO.

Mr. Trump has spewed several ill-considered actions for dealing with the threatening, hostile world he sees beyond our boundaries, including abolishing “unfair” trade agreements like the North American Free Trade Agreement (NAFTA), placing punitive tariffs on imports and restricting our borders.  

The pre-election Trumpian “action plan” included withdrawing from NAFTA that the candidate called “The worst trade deal maybe ever signed anywhere, but certainly ever signed in this country.” After becoming president, his extreme language has become less bellicose. Now he’s apparently willing to renegotiate, but hasn’t specified what that means; imagine our surprise. Time may tell.

In numerous public pronouncements the president has said he’s considering large tariffs on imports from countries like China and Mexico. Sometimes he’s mentioned a 45% tariff, other times a 10% tariff. Like all too many of his impulse-driven communications, they’re literally spread all over the map without substance. These specious ideas characterize his disjointed, no-dots-connected approach to creating policies that will hardly enhance our nation’s greatness. They’ll probably have the opposite effect. He seems oblivious to the likelihood that if he imposes tariffs on Chinese, Mexican and other nation’s imports these countries will retaliate with their own tariffs on our exports. In his fantasy world, US tariffs will only bring back low- and medium-skilled manufacturing employment; not higher prices on imported consumer goods and services, not curtailed exports from the ensuing trade war.

American companies that have used China and Mexico as a production base would struggle to revamp their supply chains. If US firms brought production back home to escape the tariffs, prices would increase dramatically and take considerable time to set up. As a consequence of much higher tariffs, Goldman Sachs estimates that the cost of producing clothing domestically would increase by over 40% and smartphones by over 35%. None of these consequences seems to concern Mr. Trump.

His muddled, myopic mind doesn’t see any connection between exports and imports. They are completely separate from each other, not mutually bound by trade agreements and economic reality.

The president seems equally unaware that the ultimate objective of bilateral and multilateral trade agreements is to benefit every signatory and that the negotiations to reach agreement will always involve trade-offs that need to be recognized and made. Trade agreements are founded on the world being a positive-sum game, where each party can gain. Should trade agreements be reviewed and modified over time? Surely, but Mr. Trump’s world view is at best zero-sum.

That zero-sum concept is not supported by historical facts. For example, under NAFTA US farmers – who most likely voted for Trump in large numbers – have exported significant amounts of corn and other ag commodities. In 2016 these farmers sold 13.8 million metric tons of corn to Mexico. Corn exports to Mexico have increased 5.5% every year since NAFTA was implemented in 1994. Mexico has said if the US walks away from NAFTA or imposes tariffs on Mexican goods, it will buy corn from other exporters including Argentina, not the US. How are you going to explain that in Dubuque or Omaha Mr. President?

Then there’s Trump’s Wall. Building the Wall along the US-Mexican border was a prominent specter in Trump’s candidacy. When mentioned in his campaign speeches, it wasn’t a question of if, but how tall and how long it would be – and, of course, that Mexico would pay for it. The Wall was only one piece of Mr. Trump’s actions to close our borders.

Other pieces include his disastrous 2-part orders to stop people from 8 (then 7) principally Muslim nations as well as other visa-holders from entering the US. To date, federal courts have fortunately taught Mr. Trump that his actions are subject to court interpretation; despite his protests (which themselves were cause for public astonishment and distain).

But back to The Wall. The total length of the US-Mexico border is 1,989 miles. It’s been difficult for anyone outside the White House to get specific information about Mr. Trump’s plan for the Wall. Until Jan. 20, Mr. Trump's border wall existed only as campaign rhetoric not supported by a real plan for building or paying for it. Its length and height depended on to whom and where he was talking. Now that he’s president, a plan appears to be arising. In mid-March the Department of Homeland Security (DHS) issued a request that stipulated the wall must be 30ft high, look good from the US side and be hard to climb or cut through. It must take at least 1 hour to cut through. The request apparently didn’t state how long the wall should be. Irony abounds beyond walls because some of the firms that may submit bids are minority-owned, Hispanic companies.  

Others have speculated that the Wall could be up to one-half of the border’s length, with natural barriers such as the Rio Grande River taking up the rest of the length. Guestimated costs range from $12 to $21 billion. The President’s draft budget, which was sent to Congress last month and generated scathing reviews, indicates only about $2.9 billion is now earmarked for the Wall — most of which will come from sizeable cuts to key agencies within the DHS, like the Coast Guard. Oh, will the bill eventually be sent to Mexican President Enrique Peña Nieto, as Mr. Trump proclaimed dozens of times? Nope, he was just kidding in trolling for votes. US taxpayers appear to be on the hook, which is no laughing matter at all.

The president’s international trade policies are quixotic at best; they are misdirected and inconsistent. It’s hard to see such policies as the product of reasoned, competent, coordinated analysis. This goes beyond just trade. Such concern was reflected in a recent column by David Brooks where he stated, “Trump’s greatest achievements are in the field of ignorance. … It’s not so much that he isn’t well informed; it’s that he is prodigiously learned in the sort of knowledge that doesn’t accord with the facts of our current dimension.” Trading places with Mr. Trump would involve more than relocating to 1600 Pennsylvania Avenue. Fasten your seat belts and resist.

DEVELOPMENTAL BLUES

Development is an endurance exercise with incremental improvements. ~ Sri M. Indrawati  

The self-inflicted tumult created by the 45th president has whelmed our policy-making and politics during the 74 days since he was inaugurated is completely evident to all but Micro-Man himself. His and his acolytes’ myopia limits their vituperative policy considerations only to domestic affairs and not the 195 nations beyond the US. After all, it’s “make [only] America great again” isn’t it? An exception to this domestic bias includes the impending social and economic disaster connected with the Mexican border wall.

His limited view of our world is reflected by his proposed 32% reduction in funding for the State Department and other development programs. The media’s reaction to the president’s punishing budget reductions didn’t adequately acknowledge the fiscal fact that it is not the president but Congress that ultimately determines appropriations and expenditures for the federal government. The president proposes; the Congress acts. Given how badly he mishandled his push for the contaminated replacement to Obamacare, I have no doubt his proposed budget will drastically change. As one prominent Republican Senator concluded about the president’s proposed budget reductions, “They’re dead on arrival.” We’ll see about his conclusion during the coming months of budget negotiations.

The president’s overly inward focus has given me a case of the developmental blues. The rest of the world continues to exist, remains vital to our interests, and should not be summarily dismissed as it has been by Micro-Man.

Like other interesting economics topics, opinions about the efficiency and effectiveness of economic development vary considerably. Economic development is multi-dimensional and refers to improving the welfare and status of a nation’s people, including their health, well-being, education and livelihood.

Some analysts despair about the state of development of many countries, especially because so much economic, political and personal effort has been expended in attempting to improve the lives of people in "lesser-developed countries" (LDCs). Other analysts are more optimistic, saying that some developing nations have realized important gains in crucial facets of their social and human advancement.

At the risk of considerably simplifying alternative strategies for economic development, a more liberal prescriptive approach can be characterized as “interventionist,” another more conservative approach focusses on “market-led” policies. Liberal discussions about how to aid LDCs often express a preference for collectively-focused policy approaches that enhance public sector intervention in markets in order to encourage growth and development. More conservative approaches emphasize strengthening market forces in a nation’s economy, including adopting low-tax rate policies, trade liberalization, deregulation and privatization of state enterprises.

Interventionist policy adherents frequently mention that free-market strategies can often harm the poor and do nothing to mitigate the potentially damaging influences of having multi-national (or transnational) corporations assume too large a role in development, via market-led strategies perhaps based on the disdained Washington Consensus.

Unfortunately, neither centrally-dispatched, interventionist policies, nor market-based strategies are wearing developmental white hats. That's why you could also color me developmentally blue from a prescriptive policy perspective. Left unsaid is the unsettling notion that despite more than 65 years of effort, economists and policy-makers still sadly lack a definitive idea about how to answer the central question, "What works in development?" These herculean efforts include the formation of international organizations devoted to promoting and facilitating economic development and growth like the World Bank (WB), the International Monetary Fund (IMF), and the United Nations Development Programme (UNDP) and spending billions and billions of dollars in this quest.

In 2000 the UN created 8 Millennial Development Goals (MDGs) – such as decreasing extreme poverty, reducing child mortality and achieving universal primary education – to be achieved by 2015 via 21 targets. The MDGs guided the UNDP and many nations’ development efforts. Not every MDG objective was achieved, but many were fruitful. The efforts of the Chinese and Indian governments to reduce extreme poverty (people living on less than $1.25/day) in their nations were singularly successful. 

After 2015 the UN moved on and now has another, much more numerous and more ambitious series of goals, entitled Sustainable Development Goals (SDGs), which are built on the MDG foundation.

The 8 MDGs have been superseded by 17 much more expansive SDGs. The SDGs are described here.

It should be no surprise that the UN more than doubled its list of development goals – that’s the nature of setting public objectives over time and the nature of bureaucracy. Regrettably, more than doubling the number of goals will involve some degree of diminishing returns, given that the UN’s and WB’s development budgets haven’t doubled, nor have the sources of aid grown to support the SDGs’ achievement beyond these international agencies. Talk about scarce resources being spread ever more thinly.

Given their larger number, it’s hard to imagine the world’s efforts –especially LDCs and donor nations –can possibly be focused and intense enough to succeed in achieving each and every SDG. These SDGs have a total of 169 targets, 8 times as many as the MDGs. Take for example, the first SDG, “End poverty in all its forms everywhere” [Emphasis added.] that has 6 individual targets. The corresponding MDG was, “Eradicate extreme poverty and hunger.” The new poverty goal is essentially unconditional; to eradicate every form of poverty everywhere on Earth by 2030. It’s a worthy, but realistically unattainable objective.

Unfortunately, and despite our huge collective efforts to date, the answer to the fundamental question “What works for development” largely remains; we don't really know what works. In this sense, the development glass is half-empty.

David Brooks summarized development economics' lack of insight in a New York Times column dealing with the development enigma surrounding Haiti, "The Underlying Tragedy." We don't really know how developing nations can create sustainable development – and be aided by already-developed nations in this mission to enhance the lives of all their citizens. This is true for both macro- and micro-aid strategies, as well as indigenous and external plans. We don't yet unmistakably know how to target, structure and spend financial aid so that it will reduce poverty and create longer-term economic and social improvement for all citizens.

Needless to say, this is a regrettable situation because it implies we don't really understand with any specificity how well-meaning decision-makers can provide broadly-applicable ways for needful nations to augment their development status. Brooks' article mentions that perhaps a nation's culture is a more telling indicator for why some countries are more successful than others in their quest for development. Yet changing cultural norms in the name of economic development is a much more disputed prospect, and fraught with far more unease and uncertainty than merely improving ineffective or inefficient institutions, infrastructure and even markets (that in and of themselves embody huge challenges). Unsurprisingly, few publicly-funded projects directly mention changing cultural norms as a mechanism for achieving economic development goals, even though such indigenous norms may not outwardly be consistent with enhanced development. So, if the development glass is indeed half-empty, how should we proceed; what's the alternative?

We, the already-developed world of G-7 or G-20 nations, must continue promoting (and funding) effective economic development, but unambiguously consistent solutions for development still await discovery. Hopefully, we will gain more insight about what works for economic development as a new generation of clever economists as well as political and social scientists tackles these abundant challenges.

A more positive rejoinder to the above "half-empty" argument can be made using a different perspective. This alternative is discussed in David Leonhardt's column in the New York Times, "For the Poor, A Message of Hope." Leonhardt talks some about Liberia and its significant economic development struggles. Liberia's per capita income has decreased by an astonishing 80% to as little as $210 [that’s $0.58/day] since 1980, one of the world's very lowest. However, development economist Charles Kenny argues that contrary to the popularly-held general belief, nations in Africa like Liberia have actually attained some success and improvement in recent decades, even if their economic growth hasn't distinguished itself. Kenny argues in his book, Getting Better, "the biggest success of development has not been making people richer but, rather, has been making the things that really matter – things like health and education – cheaper and more widely available." Furthermore, the UN's 1st Millennium Development Goal (to halve the portion of world population living in dire poverty by 2015) was impressively achieved 5 years early largely through efforts in India and China. It can be done.

So instead of focusing on the dismal state of Liberia's (and other nations') per capita income, we should change our perspective and acknowledge that other, non-economic factors have progressed from development aid. For example, average life expectancy has improved significantly in many developing nations. In 1990 Ethiopia’s life expectancy at birth was 47.9 years; by 2008 it increased substantially to 64 years. Also, Ethiopia’s infant mortality, although still elevated, has been reduced by 50% to 67 deaths/1000 births in 2009. Ethiopia increased its primary school enrollment ratio from 21.7 in 1990 to 89.3 in 2007. These improvements are significant and impressive.

In concentrating on economic numbers (like per-capita income) we've ended up overlooking crucial gains by developing countries' human development, particularly in health and education. Sure, these gains are all relative to a very low historic base, but they represent noteworthy, meaningful improvements in many people's lives. The gains in life expectancy since 1980 have been highest in the Middle East and North Africa (12.2 years), South Asia had the second largest gain (9.6 years) and Latin America is third (8.1 years). Still, 12 nations have life expectancy less than 55 years; and Sub-Saharan Africa's gain since 1980 is a disappointing 4.0 yrs. [As a point of reference, Leonhardt mentions that estimated life expectancy during the Stone Age (approximately 200,000 years ago) was 34 years.[1]] These advances are also in spite of the modern-day scourges in Africa and other locales of HIV/AIDS and Ebola that many people, including Mr. Kenny, believe are akin to the 14th century Plague that killed 30-60% of Europe's population.

Thus, we should look more closely at which development programs actually do work, rather than asking whether any work or not. Fortunately, some do work. It appears that development of the "basics" – health, education, communications and transport (HECT) – have provided a growing number of counties with demonstrable improvement. Indeed, programs that concentrate on HECT broadening and deepening can also eventually even impart economic progress; since healthier, more educated, more connected people will be more productive and economically vital.

Needless to say, there is still too much room for improvement in how development can be successfully created to be complacent, but we should remember that the development glass is indeed half-full. We should focus on human, HECT-based development through our efforts, rather than more narrowly-focused economic development. And most important for myopic, disjointed folks like Mr. Trump, our history is replete with evidence that when we help improve the economic status and welfare of other nations’ peoples, American citizens – including corn farmers in Iowa – benefit as well.

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[1] It's a mystery to me how archaeologists can determine Stone Age life expectancy, but then they probably wonder how we economists calculate cross-price elasticity of demand and purchasing power parity.