Good Economics for Hard Times summary

There is perhaps no issue more controversial today than immigration. Politicians like Donald Trump have painted a picture of their countries being under siege from hordes of hungry immigrants who will decimate resources and threaten the very identity of the locals.

Politicians use the simple economic model of supply and demand to explain why immigration is such a problem. The argument goes that immigrants will be attracted by the financial riches of a first-world country like the US, and so will be motivated to move there in uncontainable droves. When they arrive there will be an over-supply of cheap labor, meaning that salaries will decrease and native workers will lose their jobs.

Imagine for a moment that you’re a waiter, and your town has become heavily populated with immigrants, as certain politicians direly warned would happen. You’re momentarily alarmed that your new neighbors might compete for your job. But then you notice how much busier your restaurant is since they arrived.

Immigrants don’t only bring with them a supply of labor. They also bring a demand for services. They plow money into businesses like cafes and shops which are staffed by low-skilled workers.

Advocates of international trade agreements paint a rosy picture: each country will export what it’s best at producing and import things that are more affordable when sourced from elsewhere.

So, Egypt can export labor-intensive items like handwoven carpets, capitalizing on a cheap domestic workforce. China can use its formidable technological resources and efficient factories to export mass-produced computer parts. Those parts can then be bought cheaply by Indian companies, bolstering the local tech industry.

You’ve probably seen footage of Trump surrounded by steelworkers in 2018, proclaiming that the US will impose a heavy tax on aluminum and steel imported from China to protect local jobs.

Might this tactic work? Well, the steelworkers’ jobs will likely be protected by the measure. More people will buy local steel, meaning that there will be more demand and fewer layoffs in those factories. So far so good, but it’s not that simple.

At the end of 2018, crowds of “yellow vest” protesters thronged the streets of Paris, bitterly protesting a proposed tax on gasoline. They argued that this was a move designed to hurt the poor while protecting the elite. Wealthy Parisians could afford to take the metro to work; but poorer people living in the suburbs or countryside whose livelihoods depend on being able to drive to work couldn’t. 

The argument that fighting climate change is a luxury that the poor cannot afford is very common. The thinking is that either we can save the planet for the future or we can protect the economy in the present.

You’ve seen the scenario in sci-fi movies: humans have been replaced by gleaming robots, who took over our jobs before taking over the world.

It might sound a little far-fetched, but is it really? Today, robots can flip burgers, vacuum floors, and even take care of complex logistics.

It might be tempting to blame economic inequality on robots. They are the ultimate intrusive aliens in our society, and therefore a very convenient scapegoat.

But inequality was rising long before self-scanning supermarket tills were invented. In fact, we can’t understand the effects of AI without looking at the bigger picture of the labor market and how income is distributed in society as a whole.

There’s one way to level the playing field between exorbitant top earners and other workers: taxes. Studies have shown that when the tax rate for the top 1 percent is 70 percent or higher, salaries become more equal. That’s because corporations stop paying such crazy salaries, as it isn’t worth losing 70 percent to the tax office.

Countries like Germany, Spain, and Denmark, which have maintained such high taxes, have less of a gulf between the salaries of top and average earners compared to countries like the US, Canada, and the UK, which have all slashed taxes for top salaries from the 1970s onwards.

Imagine your job as a bookkeeper has just been taken over by a robot. Or your regular work on an organic farm has disappeared because of the impact of the trade war with China. Or your work in an Indian garment factory disappears as Korean textile imports become more affordable to the West.

These job losses will have profound economic consequences for you and your family. But money won’t be the only thing lost. You’ll also lose your work community, your identity in the workplace, and perhaps even your sense of dignity.

According to the FBI, the number of hate crimes in the United States rose by 17 percent in 2017. This was the third consecutive year that the number had increased. Over a long period before 2015, the number of hate crimes was flat or declining.

How can we understand these soaring figures? What makes someone hate black people, or immigrants, or people from a different social class? Is it that some people are born prejudiced and grow up like that? Or is it the effect of the media, and the rhetoric of an anti-immigrant president like Donald Trump?