cnn--2019-01-23--White House adviser says there could be zero economic growth if shutdown lingers

White House Council of Economic Advisers Chairman Kevin Hassett said in an interview with CNN's Poppy Harlow that he was not overly worried about the long-term effects of a government shutdown. But after Harlow asked him if the United States could wind up with zero GDP growth this quarter, he conceded that it was possible. "We could, yes," he said.  But Hassett noted that the economy is typically weak in the first quarter because it follows a boom during the holidays. He argued that the economy would bounce back once the government reopens and any hit to GDP would eventually be recovered.  The second quarter could be "humongous" if the government shutdown ends before then, Hassett said.  He told CNN Wednesday that he and his staff were not being paid during the shutdown, and he noted that some government workers are having to take on other work to compensate for the loss in wages. He said one of his staffers was now driving for Uber. The lack of a paycheck for federal employees is one reason why corporate executives are nervous about the shutdown. The Business Roundtable, an organization representing many top CEOs, said Wednesday that "the shutdown is harming the U.S. economy and American workers, both federal employees and those in the private sector supporting government functions." "The shutdown is also preventing policymakers from focusing on solutions to create strong, sustained economic growth in America," the Business Roundtable added in its statement. Hassett is more optimistic though. He told CNN he did not believe that credit rating agencies would downgrade US government debt -- as Standard & Poor's did in 2011 following a debate over raising the debt ceiling. He conceded that "brinkmanship" was making investors nervous but he added that the US economy still looks strong. To that end, Hassett said chances of the United States entering a recession in 2020 are "close to zero," even though many economists are predicting a downturn by next year. He pointed to continued strong jobs gains as a healthy sign for the economy. He also stuck to his forecast of about 3% growth for the US economy this year, despite concerns about the shutdown, China trade talks and a slowing global economy. Hassett, who told CNN's Harlow in an interview earlier this month that "a heck of a lot" of US companies will face challenges in China after Apple ( AAPL ) warned of slowing iPhone sales there, added Wednesday that the recent economic weakness in China could help lead to a long-lasting trade deal with the United States. "I think the Chinese recognize that they've got a big potential gain because their growth has fallen off the cliff," he said.


cnn--2019-12-10--How uneven economic growth feeds political turmoil

(CNN) When it comes to economic innovation, the rich are getting richer -- and that's generating increasing social frustration and political turmoil for the winners and losers alike as the digital revolution rolls through the American economy.  Over the past 15 years, employment in the computer- and science-based industries at the forward edge of economic change has further concentrated into a handful of superstar cities, according to a sweeping new study released Monday by the Brookings Institution's Metropolitan Policy Program and the Information Technology & Innovation Foundation. Just 20 large metropolitan areas now account for a clear majority of the nation's jobs in the 13 high-productivity industries that the authors identify as the nation's most innovative.  This narrowing distribution of America's most cutting edge, research-intensive industries -- including pharmaceuticals, software, aerospace, data processing, and computer and communications manufacturing -- has contributed to the concern in many smaller communities about being left behind in the changing economy. That anxiety has widened the audience for President Donald Trump's racially-infused message of economic nationalism.  But simultaneously, the lopsided distribution of these new jobs has ignited a backlash over affordability, displacement of low-income families and traffic congestion even in many of the communities, like San Francisco and Seattle, on the winning side of the equation. Despite the enormous creation of wealth and jobs in the Bay Area over the past three decades, it is common to hear mayors and community leaders in emerging technology hubs declare that their greatest fear is becoming "another San Francisco."  "Nobody feels that they are winning," says study co-author Mark Muro, policy director of the Metropolitan Policy Program. "Everyone seems to feel there is either too much or too little (development). Our story is fairly sobering about the ways every category of community is being hurt by this economic order that is bigger than all of them."  But the winners in the digital economy are collected overwhelmingly in large metropolitan areas that are moving steadily toward the Democrats, largely around cultural and social issues from race relations and immigration to guns, gay rights and the role of women in society. Republicans have consolidated a dominant position in the places that feel most excluded and threatened not only by those cultural and social shifts, but also by the economic changes driving the transformation to an information-based economy.  Correlating the study's findings with the results of the 2016 presidential election captures the enormity of that shift. In the 5% of metropolitan areas that have attracted the largest number of these cutting edge jobs -- a list of 20 communities that includes New York, Boston, Washington, Atlanta, Dallas, Phoenix, San Francisco, Los Angeles, San Diego and Seattle -- Hillary Clinton won 59% of the vote and routed Trump by 11.5 million ballots, according to calculations provided by Brookings. Just those 20 thriving metropolitan areas provided her over 28 million votes -- more than two-fifths of her total.  In the next 5% of metro areas that have attracted the most of these high-innovation jobs -- a group that includes Pittsburgh, Orlando, Charlotte, Nashville, Austin and Portland -- Clinton beat Trump by about eight percentage points, or roughly 1.2 million votes. In all, these two groups of thriving urban areas -- the 40 communities that comprise the 10 percent of American metros that have generated the most of these highly-innovative jobs -- provided Clinton over 36 million votes, fully 55% of her total.  In the metros that ranked between the 10th and 25th percentile for the number of these high-innovation jobs, Trump squeezed out a narrower advantage of about 200,000 votes, or half a percentage point. He beat Clinton soundly by 3.4 million votes in the remaining 75% of metro areas with the smallest numbers of these coveted jobs. Trump also won comfortably in the smaller communities that are not included in the nation's roughly 400 metropolitan areas.  The 13 industries Monday's report labels as high-innovation provide just 3% of the nation's jobs. But they account for 6% of the nation's total economic output, a quarter of its exports and a striking two-thirds of its business research spending. Their high wages and extensive supply chains generate big "multiplier" effects that catalyze other economic activity in their area, which is why they are such a focus of municipal economic development efforts.  As the Brookings/ITIF report notes, the separation of the superstar cities from the rest of the economy defies economic theory, which assumes that, like water finding its level, lower labor and housing costs will encourage more jobs to shift out of the most expensive urban centers toward less expensive places.  The differences in output and wages between high- and low-income US regions did in fact generally narrow from the 1940s to the 1980s, the authors note. But since the 1980s, the richest metropolitan areas have pulled further away from the rest, with the gap significantly widening over the past 15 years, exactly as the digital economy has accelerated.  Just five metropolitan areas -- San Francisco, San Jose, Seattle, San Diego and Boston -- accounted for 90% of all the net new job growth in these dynamic industries since 2005, the study found. The 20 largest metros now command a much bigger share of jobs in these advanced industries than they do in employment overall.  The hope of many urban affairs experts has been that oppressive housing costs will encourage talented workers -- and the companies pursuing them -- to relocate to mid-sized and smaller cities where the cost of living is much lower. There's some evidence of that occurring, but overall the convergence of more college graduates into fewer places is one of the study's most striking findings. Nearly 40% of working-age adults in the 5% of metros with the most high-innovation jobs have at least a four-year college degree, the researchers found. That number steadily declines to 35% in the next 5% of metros, 32% in the 15% beyond that and just 26% in the remaining 75%.  The trend toward the concentration of the most highly-trained talent now appears self-reinforcing. College educated migrants, both from other places in the US and internationally, tend to locate in the places that already have the most college graduates, the researchers found.  This divergence is ominous, Muro says, because of the evidence that the presence of large numbers of highly skilled workers Is the critical variable in where these innovative industries grow. That means, as smaller places lose more of their college graduates to the superstar cities thriving in the new economy, they become even less attractive to innovative companies, even if their cost of living is lower. This cycle fuels the modern political divide, too, as Democrats improve their standing in prospering metro areas with large numbers of college graduates and the Trump-era GOP grows stronger in non-metro areas dominated by white voters without a college degree.  The paradox is that the migration of college-graduates into fewer places is generating frustration on the receiving end, too. The willingness of well-educated, well-paid young people to live in central cities has helped to revive cities from Pittsburgh to Chicago to Los Angeles. But the influx has also ignited concerns about affordability, displacement and gentrification. Virtually without exception, every city booming in the new economy faces frustration over the fact that while they are importing large numbers of college graduates, they have not proven capable of providing their own largely minority kids from low-income communities with the skills to compete for the jobs they are creating.  Development is creating so many pressures in the superstar cities that the authors expect most of the future growth in employment in these industries will shift to tech hubs overseas. "More and more the incremental growth will go offshore," says Robert Atkinson, president of the ITIF and also a co-author of the study. "Just simply for the fact that these (domestic) places are packed to the gills."  Given that prospect -- and the strains this concentration is imposing on both the domestic winners and losers -- Brookings and the ITIF are calling for a significant federal effort to encourage greater dispersal of these dynamic industries across mid-sized US cities. They propose that the federal government should pick 10 mid-sized communities and then invest a whopping $10 billion in each of them over a 10-year period -- mostly through a huge increase in federal research grants for local universities -- to create new "regional growth centers" across the heartland. "You just needed a big push to get places over the hump," Atkinson says.  But, as Muro notes, that hostility to cities among Trump's core supporters is counterproductive because their economic fate is bound to the urban centers. "It's all about the regional spillovers of these big metro areas," he said. "They become anchors of regional mobility and regional prosperity. There is all kind of research that the economy of adjacent...rural places are hugely tied to the vibrancy of the urban center."  That's a vision of shared interest across the red-blue divide almost completely absent from today's political debate. A regional economic policy that created a model for building bridges across that widening partisan trench might be the greatest innovation of all.


conservativehome--2019-01-21--Kevin Hollinrake High environmental standards boost economic growth

Kevin Hollinrake: High environmental standards boost economic growth

Kevin Hollinrake is MP for Thirsk and Malton, and is co-Chair of the APPG for Fair Business Banking.  British voters overwhelming support high environmental standards – 80 per cent, for example, want the UK to maintain after we leave the European Union.  This is unsurprising – high environmental standards in agriculture keep our livestock healthy and our food safe to eat, and in product design they cut our energy bills by improving the efficiency of our ovens and toasters.  A sensible, long term framework of environmental rules spurs investment and innovation from business.  Many businesses of course face examples of vexatious red tape – and Brexit does provide us with the opportunity to cut some of the bureaucracy that has impeded business and made our lives more difficult. From the baffling small print on radio adverts, to compelling pharmacists to scan every medicine in front of their customers, there are plenty of nonsensical EU regulations that add unnecessary costs to businesses and should be scrapped.  Yet the desire to trim unnecessary red tape can sit comfortably alongside support for a long term, sensible framework of high environmental standards that, if properly enforced by an independent watchdog, will restore our countryside, clean up our air, and boost British business.  BuroHappold Engineering  between environmental regulations and competitiveness  in particular the impact of the implementation of the London Plan in the construction sector, the Landfill Tax in the waste sector, and the passenger car emission regulations in the car industry.  In all three cases their analysis found that the upfront costs of complying with regulations were outweighed by the economic benefits they triggered through increased business investment in innovation and skills, better-quality products and infrastructure, greater business competitiveness, and job creation.  For example, there was an overwhelming consensus that despite flaws in the testing methodology, passenger car CO2 emission regulations have been a success story for the UK and EU car industry. The regulations have provided certainty, scale, and a clear framework to meet targets, without any negative impacts on competitiveness. The relatively stable and consistent regulatory framework has allowed for a long-term and broader view of managing the costs of compliance.  This commitment to a stable and consistent framework underpins the UK’s Climate Change Act – which, through its long-term approach to tackling global warming, has delivered certainty to businesses and deep reductions in CO2 emissions. Since 1990, we have cut emissions by 42 per cent , while our economy has grown by two-thirds. This means that we have reduced emissions faster than any other G7 nation, while leading the G7 in growth in national income over this period.  The same principle – that businesses benefit from a clear and consistent regulatory framework – underpins the Government’s Environment Bill. The Bill will set out clear goals and targets to reverse the damage done to the British countryside over previous decades and clean up our toxic air.  Businesses welcome the clarity provided by these targets. Anglian Water, for example, “when targets are too vague, it’s almost impossible to assess whether government is on track to hit them. In order for real progress to be made on the environment, goals within the Environment Bill must be carefully established with robust timetables.”  Businesses will then only invest if they have the confidence that these targets will be properly enforced: hence why the independence of the statutory body – the “watchdog” – is so crucial. Firms need to know that whoever is in government, their investments in things such as new technology to improve air quality will pay off.  The UK is a world leader in clean growth, with over 400,000 jobs in the low carbon economy: one in five electric vehicles sold in Europe in are made in Britain; our offshore wind sector is second to none; and the City of London is the home of green finance. This is in large part down to investment decisions that have been driven by our Climate Change Act – and the certainly provided to business by the existence of an independent Committee on Climate Change that will make sure standards are upheld.  We now have the opportunity to set the gold standard with a world-leading Environment Bill, and achieve similar results for British nature, while providing the certainty British businesses need about the direction of travel to a cleaner, more prosperous future.


crikey--2019-07-03--The government can still end Australias lost years of economic growth

The government can still end Australia’s lost years of economic growth

Australia's new normal is low growth, low interest rates, low inflation and low productivity. The government needs to act before low employment joins the list.  While politicians in Canberra yesterday indulged in some silly theatrics to mark the opening of parliament -- people in funny costumes, a speech by the representative of a northern hemisphere monarch, popguns on the front lawn, a church service -- the Reserve Bank continued to play the adult in the room, deciding a second interest rate cut to 1% was needed to make inroads on spare capacity in the economy.  When the politicians finally did get around to anything of substance in Canberra, it was about the sole item on the government's agenda, tax cuts, which in the immediate future will provide some modest stimulus to the economy but are otherwise irrelevant (though the press gallery, which is obsessed with reporting every trivial detail of Labor's position on the tax cuts, thinks otherwise).


dailyheraldchicago--2019-10-11--Pritzker introduces five-year economic plan, touts 'strong job growth'

SPRINGFIELD -- Gov. J.B. Pritzker's Department of Commerce and Economic Opportunity has introduced a five-year economic plan, focusing on six industries that can boost the state's economy and a variety of programs to build its workforce and encourage population growth.  It's the first such plan since former Democratic Gov. Pat Quinn released his in July 2014, when he declared, "Illinois is in the midst of a resurgence."  "Over the past five years, the state has battled back from the worst financial crisis in seven decades to put the economy on a positive trajectory," Quinn said in his 2014 plan.  Pritzker had similar sentiments in this year's plan. He touted his first seven months in office and emphasized the passage of a $45 billion capital infrastructure plan, legalized recreational marijuana and sports gambling, and the passage of several pro-business reforms.  "For the first time in nearly two decades, we've seen simultaneous strong job growth in every region of the state," Pritzker wrote in the plan's executive summary. "Underlying my vision is the fundamental principle of equity. No matter their zip code, every Illinoisan deserves economic opportunity. Where in the past sustainable and inclusive economic development has been elusive, instead I am committed to reinvigorating the most important foundational element of Illinois' economy: our diverse and talented workforce."  The report, which serves as a loose guiding document rather than binding public policy, also listed challenges to overcome, including outmigration.  "Illinois has experienced a mild outbound migration of approximately 0.3 percent on average for the past five years," according to the report. "This trend is driven particularly by migration among young people, minorities, and rural populations."  The Illinois Board of Higher Education reported this year that 48.4 percent of Illinois public high school graduates who enrolled in a four-year institution in 2017 chose an out-of-state institution.  Pritzker's plan calls for a 50 percent funding increase for Monetary Award Program grants from 2019 levels by fiscal year 2023. Those grants go to college students that have a financial need and help them attend college in Illinois.  The report added: "New business creation in communities of color and a downstate revitalization effort undertaken since the beginning of 2019 are intended to reverse outmigration in communities that have historically suffered disinvestment."  Other challenges noted in the plan include income inequality along the lines of race and sex, unresponsive bureaucracy, lagging commercialization of research and development, and indistinct industry strength.  It also mentions a "history of fiscal imbalances," calling attention to a 736-day budget impasse under former Republican Gov. Bruce Rauner and claiming the budget passed this year was the first such effort that was "bipartisan and balanced" in years.  "The fiscal condition of the state has affected the ability of government to operate efficiently and the ability of businesses to invest confidently. It has also driven many costs down to the local government level, where property taxes are now high relative to other states," according to the document.  The plan also focuses on "winning in key industries," including agribusiness and ag tech, energy, information technology, life sciences and health care, manufacturing, transportation and logistics, and small businesses.  Pritzker emphasized reforming government to "provide world-class customer service," and "aggressively marketing" the state to its young people and those thinking of moving here.  The governor's plan looks at government as an entity that can facilitate business growth through "regional economic hubs," in which "all the key economic actors in regions across Illinois, including state and local governments, industry, unions, universities, and nonprofits are communicating well and working together to accomplish the same economic vision."  The plan calls for creation of an online platform "that allows Illinois-based small businesses and startups to easily access resources, content, and connections to build and grow their businesses from anywhere at any time."  It also calls for "updating and broadening" incentive programs for businesses and collaboration between industry and community colleges to develop apprenticeships and training programs, and the development of a "Governor's Champions" program to acknowledge employers making workforce commitments.  It will also be necessary to revitalize downstate communities and increase investment in communities of color, according to the plan.  "Our state has a legacy of redlining and decades of commercial and industrial disinvestment in communities of color. We will focus efforts and invest resources in transportation, broadband, small business development, and a range of programs that meet those communities' needs. We will bring down barriers that affect startup businesses and low-income workers, and set targets for diversity in government procurement, oversight, and programming," the plan stated.  The downstate revitalization effort would include local communities, according to the plan.  "We would work closely with towns and cities throughout downstate Illinois to develop comprehensive plans that could include downtown redevelopment; new housing, parks, or shopping centers; transportation and public transit improvements; new or rehabilitated schools or career and technical education centers; and more," the report stated.  There is no timeline for the implementation of any of the proposals in the plan, all of which would require further action from either the governor, the General Assembly or both before taking effect.


dailymail--2019-04-30--Enriching the rich Most Americans havent personally benefited from US economic growth under Trump

Enriching the rich: Most Americans haven't personally benefited from US economic growth under Trump

A majority (54 percent) of Americans feel they have not personally benefited much or at all from U.S. economic growth since Donald Trump took office – but the wealthiest Americans are the most likely say they've been enriched over the past two years, according to a new survey.  Overall, 12 percent of Americans say they've benefited a 'great deal,' while 31 percent say they've seen 'some' personal improvement from the economic upturn, according to the survey of 801 adults by Monmouth University Poll.  However, results broke dramatically along socioeconomic lines, with just 34 percent of those making less than $50,000 a year and 41 percent of those earning $50,000-$100,000 saying they have benefited at least somewhat from the economy's upswing.  By comparison, 58 percent of those earning more than $100,000 a year say they have benefited.  Overall, 18 percent of Americans believe that middle-class families have benefited 'a lot' from Trump's policies so far, while 37 percent say they've benefited 'a little' and another 36 percent say they haven't seen any improvement in their situation.  'There just isn't a sense that Donald Trump has come to the rescue of the middle class. He has his staunch defenders, but there hasn't been any clear success in winning over the public on bread-and-butter issues,' said Patrick Murray, director of the independent Monmouth University Polling Institute.  Among all Americans, 58 percent said that wealthy families have benefited a great deal from Trump's policies, while 22 percent say they've benefited a little and 9 percent said not at all.  More than half (51 percent) of Americans say the poor have not benefited at all under Trump, compared to 26 percent who think they've seen small improvements and 14 percent who say poor people have benefited a lot under the president.  Notably, more people expected the poor would fare better when Trump first took office, with 21 percent saying in January 2017 that low-income families would see a lot of benefit from the president's new policies.  Workers have benefited in almost no way from the Trump administration's corporate tax cut, an investigation has found. This is despite lawmakers promising the billions saved by big companies would trickle down to staff in the form of wage increases and bring the average American household 'around a $4,000 pay raise.' The 2017 Tax and Jobs Act - President Donald Trump's one major piece of enacted legislation - slashed the corporate tax rate from 35 to 21 percent, the biggest such cut in U.S. history. Yet, only 6 percent of the $150billion saved by corporations in 2018 was spent on workers, according to not-for-profit Just Capital. In the first three months after the bill was passed by Trump in December 2017, the average yearly salary increased by just $233 a year, or $6.21 a week. The bulk of the cut went into shareholder dividends and stock buy-backs, helping only the 10 percent of Americans who own 84 percent of the stocks.  Despite seeing a disparity in who has benefited under Trump, 54 percent of all Americans say their current financial situation is stable, while 20 percent say they are struggling and 25 percent saying that things are improving.  The number who say they are struggling has declined from 29 percent in January 2017, when Trump first took office.  Those earning less than $50,000 a year are the most likely (32 percent) to say they are struggling – down from 41 percent a year ago. By comparison, 13 percent of those earning $50,000-$100,000 and 7 percent of those earning more than $100,000 say they are struggling.  'One bit of good news in this poll is the decrease in the number of low income families who feel like they are struggling to stay afloat. However, this does not erase the general sense that administration policies really haven't been of much help to working Americans,' said Murray.  The poll also asked Americans about their biggest worries right now, with the cost of health care topping the list at 19 percent, followed by taxes (9 percent), every day bills (8 percent) and job security (7 percent).  Just 14 percent of Americans said the federal government's actions have helped their family with the issue they are most concerned about over the past year.  Some 42 percent said the government's actions have actually hurt their family on the issue they were most concerned about.


drudgereport--2019-01-21--China economic growth sinks to 3-decade low

China economic growth sinks to 3-decade low...

China on Monday announced that its official economic growth came in at 6.6 percent in 2018 — the slowest pace since 1990.  That announcement was highly anticipated by many around the world amid Beijing's ongoing trade dispute with the U.S., its largest trading partner.  Economists polled by Reuters had predicted full-year GDP to come in at that pace, which was down from a revised 6.8 percent in 2017.  Fourth quarter GDP growth was 6.4 percent, matching expectations. That was a decline from the 6.5 percent year-over-year growth in the third quarter of 2018.  There were a few bright spots in Monday's batch of official Chinese economic data.  Industrial output grew 5.7 percent in December from a year earlier — beating economists' expectations of 5.3 percent growth — outpacing November's 5.4 percent growth.  Retail sales data rose 8.2 percent in December on-year, in line with a forecast and up from November's 8.1 percent gain.  "What we're seeing in the fourth quarter is that, while the economy is decelerating, we actually still have some support from most of the quarters from the export front-loading," said Helen Zhu, head of China equities at BlackRock, referring to exporters rushing to ship their goods out of China before new U.S. tariffs hit.  Zhu told CNBC that even though she expected some support from Chinese consumption and tax cuts, growth in 2019 will decelerate this year compared with 2018.  Although Beijing's official GDP figures are tracked as an indicator of the health of the world's second-largest economy, many outside experts have long expressed skepticism about the veracity of China's reports.  "The official GDP figures have been too stable in recent years to be a good guide to China's economic performance," said Julian Evans-Pritchard, senior China economist at Capital Economics, a research house.  "But for what it's worth, the headline breakdown suggests that service sector activity strengthened slightly last quarter," he added.


eveningstandard--2019-01-11--Economic growth halves as confidence ebbs away amid Brexit uncertainty

Britain’s economic growth has halved since the summer against a backdrop of Brexit chaos and the threat of global trade wars, official figures have shown.  GDP moved ahead 0.2 per cent in November, bringing the quarterly rolling average growth rate down from 0.4 per cent to 0.3 per cent.  It had been as high as 0.7 per cent in the three months to August when output was boosted by the royal wedding, the World Cup and hot summer weather. However, data from the Office for National Statistics showed that confidence ebbed away during the autumn as Theresa May struggled to win support from her Cabinet for her plan to quit the European Union. City experts said there was unlikely to be any pick-up for the economy while there was still so much uncertainty.  Mike Jakeman, senior economist at consultancy PwC said: “The clear loss of momentum in the economy since the summer is as expected, given the ongoing lack of clarity on Brexit. For as long as this remains unclear, businesses will continue to defer major investment plans and households will reconsider making big-ticket purchases.”  Pablo Shah, economist at forecasters CEBR said: “The economy has now entered what is likely to be a prolonged spell of weak growth. CEBR forecasts that the UK economy will expand by 1.1 per cent in 2019, which would make it the weakest year since the 2009 recession, as economic uncertainty continues to cripple sentiment among firms and households alike.”  During November the economy was supported by the dominant services sector, which gained 0.3 per cent. But industrial production slipped 0.4 per cent, dragged down by a 0.3 per cent fall in factory output.  Manufacturing has fallen for five consecutive months for the first time since the banking crisis a decade ago, with the car and pharmaceuticals sectors both performing poorly. Industrial output fell 0.8 per cent in the latest three months.  The figures came after the British Retail Consortium declared Christmas the worst for the high street in a decade and a number of well-known retail names revealed falls in sales or only meagre growth.  However, there was more encouraging news today from two retailers in contrasting sectors of the market.  Piccadilly store and grocer to the Queen Fortnum & Mason reported record Christmas trading, with sales up 12 per cent in the five-week period before December 31.  Chief executive Ewan Venters said: “We have always believed that quality products, exceptional service and an extraordinary retail environment is what makes us stand out. In this day and age, it is more important than ever to be unique, and our exceptional Christmas results demonstrate that.”  Meanwhile discount supermarket chain Lidl said it had seen a 33 per cent increase in sales of its premium product range over Christmas and an eight per cent increase in sales across all its branches in the six weeks to December 30.


eveningstandard--2019-02-14--Brexit has wiped 40 billion from Britainaposs annual economic growth since referendum top Bank o

Brexit has wiped £40 billion from Britain's annual economic growth since referendum, top Bank of England official reveals

Brexit has already wiped £40 billion off Britain’s annual economic growth since the 2016 referendum, a top Bank of England official revealed today.  Gertjan Vlieghe said it amounted to £800 million per week of “lost income for the country” -- more than twice as much as the £350 million a week that the Vote Leave campaign claimed could be “saved” by quitting the European Union.  Mark Rutte, the Dutch premier and one of Britain’s closest EU allies, said the UK would be “weaker” after Brexit and “too small to appear on the world stage on its own”.  International Trade Secretary Liam Fox rounded on Tory Right wingers threatening to defeat Theresa May in the Commons tonight, accusing them of behaving like an “internal debating society” and risking the “wrong signals” that would undermine her backstop negotiations.  Germany avoided a technical recession by a whisker — and the country’s economy ministry blamed Brexit “uncertainty” for holding back the EU’s biggest economy.  One of Jeremy Corbyn’s closest allies moved against a second in-out referendum. Unite union boss Len McCluskey told ITV’s Peston show that a re-run of the 2016 vote “threatens the whole democratic fabric on which we operate” and was “not the best option for our nation”.  Speaking in London, Mr Vlieghe said Britain would be growing two per cent faster if the referendum had voted for Remain. “Based on what happened in the rest of the world we would have expected UK growth to accelerate, but actually it slowed,” he told the Resolution Foundation.  Crashing out of the European Union without a deal would force emergency measures to prevent the economy stalling, such as a cut in interest rates, he warned. The comments by Dutch  premier Mr Rutte to a Spanish newspaper were particularly worrying because he has supported Britain on the European stage. “It is the UK that will be weakened,” he said. “It is already weakening; it is on the wane compared to two or three years ago.  “It is going to become a middling economy stuck in the Atlantic Ocean. It is neither the US nor the EU. It is too small to appear on the world stage on its own.” On Mrs May’s attempts to change the Irish backstop and save her deal, he said: “I do not know how this will end and whether we can avoid a hard Brexit. It would be devastating for the UK.”  Mr Fox delivered a warning to Tory Right-wingers to call off a Brexit revolt.  “I think that there’s a danger that we send the wrong signals,” he told BBC Radio 4’s Today programme. “What we say is looked at and listened to by those that we are negotiating with.” He said EU leaders would be “watching our debate” and if Mrs May was defeated they would conclude it was pointless to make concessions as she could not deliver in Parliament.  Former Brexit minister Steve Baker responded by calling it a “storm in a tea cup” but said members of the European Research Group would only decide at the last minute whether to back down. “Is the EU really hanging on a non-binding motion at 5pm on a Thursday afternoon?” he asked.  Rebuking the whips for bringing forward a badly drawn motion, he added: “This unnecessary carry-on is wanted by no one.”  The revolt is over a motion that ERG members say would effectively support removing a no-deal Brexit from the table, something they say would weaken the UK position.  Ex-Cabinet minister Nicky Morgan, a leading former Remain campaigner, backed the ERG’s criticism of the Government, saying it should have “taken time to discuss the wording of the motion with MPs on all sides... they would have achieved a clear and united signal”.


eveningstandard--2019-11-11--Britain heading into election with slowest annual economic growth in nearly 10 years, official figur

Britain heading into election with slowest annual economic growth in nearly 10 years, official figures show

Britain is heading into a winter election with the slowest annual economic growth for nearly a decade, according to official figures.  The sluggish performance, which came as the UK was hit by Brexit and the slowdown in global economic growth, immediately raised fresh doubts over the affordability of multi-billion-pound spending sprees promised by both the Conservatives and Labour.  Former Cabinet minister David Gauke warned Boris Johnson that his Brexit and spending plans risked leaving thousands of traditional Conservative voters feeling “politically homeless”.  The UK avoided slipping into a recession after the economy expanded by 0.3 per cent in the third quarter of this year, according to data from the Office for National Statistics.  However, the figure was below City and Bank of England expectations and shows the economy has grown by just one per cent compared with a year ago — the slowest rate since the start of 2010.  “With the election just under five weeks away, clearly this isn’t the good news the Government might have hoped for,” said Ruth Gregory, senior UK economist at Capital Economics.  However, Chancellor Sajid Javid tweeted: “Great to see solid Q3 growth — another welcome sign fundamentals of UK economy are strong. Biggest risk to our economy is Corbyn’s Labour — its plans for *two* referendums in 2020 and out of control debt.”  Shadow chancellor John McDonnell said: “The fact that the Government will be celebrating 0.1 per cent growth in the last six months is a sign of how low their hopes and expectations for our economy are.  “Labour will build a high-wage, high-skill economy by investing for growth in every region and nation of the UK.”  Liberal Democrat Treasury spokesman Sir Ed Davey added: “The economy under the Tories is anaemic.”  The economy had been under threat of entering a recession, which is defined by two consecutive quarters of economic decline, after it contracted by 0.2 per cent in the three months to June.  This scenario was avoided with 0.3 per cent growth in the third quarter, powered by 0.4 per cent growth in July that was driven by strong manufacturing figures thanks to a robust pharmaceutical sector.  The services and construction sectors delivered growth throughout the quarter, boosted by seasonal trends.  There were now signs of economic growth “slowing”, the ONS added.  Former justice secretary Mr Gauke stressed on the ConservativeHome website that a large number of Tory seats may be “put at risk” because the party’s reputation for economic competence is being undermined.  Mr Javid is “putting up a fight to limit the fiscal incontinence”, he added.  But potentially significant numbers of Conservative-inclined voters are now worried about their party “engaging in a bidding war with a Marxist”.  Mr Gauke, a former chief secretary to the Treasury, told the Evening Standard: “Large numbers of Conservative voters have traditionally supported the party because of its reputation for economic competence.  “Too many unfunded spending commitments and being boxed into a hard Brexit will undermine this reputation.  “The Conservative leadership should not take these votes for granted. Many of these voters feel politically homeless and, but for the fear of Corbyn, would almost certainly abandon the Tories.”  However, a Conservative source said: “People have had enough of delay and indecision.  "It’s time to get the country back on the road to a brighter future and the way to do that is to get Brexit done, leaving the EU with the great new deal we’ve secured, so that we can focus all our energy on people’s priorities.  “The Conservative Party’s driving mission is to level up the country, and we will not shy away from investing in our NHS and schools, tackling violent crime and helping people to make ends meet.”  Mr Javid ditched his predecessor Philip Hammond’s fiscal rules last week for a proposed £100 billion spending bonanza on roads, rail, broadband and buildings over the next five years.  He still maintained tougher spending constraints than Labour, which is ready to splurge £400 billion on “investment on a scale never seen before in this country”.  Both sprees, which will mean borrowing more, have raised concerns that future generations will be laden with having to tackle an even bigger debt mountain — which stood at £1.8 trillion in March.  Doubts were cast today over a Tory claim that Labour’s spending plans will cost £1.2 trillion.  Paul Johnson, director of the Institute for Fiscal Studies, told LBC radio: “We won’t know that until their manifesto comes out.  "But the bigger picture of course is... Labour are saying we are going to spend a very, very large amount more than is being spent at the moment and that has been spent any time in the last 40 years.”


fortruss--2019-10-18--China records lowest quarterly economic growth in 27 years

BEIJING – In the midst of a trade war with the United States and falling domestic demand, China registered a 6% GDP increase in the third quarter of the year compared to the same period of 2018.  That is the smallest number since Beijing began compiling the data in 1993, the Associated Press reports.  Quarterly economic growth was announced by the National Bureau of Statistics (NBS) on Friday. According to the Beijing agency, the number was lower than expected by analysts (6.1%) and the annual economic growth of 2019, compared to 2018, is at 6.2%.  The slowdown has global repercussions and is expected to dampen Chinese demand for industrial components from its Asian neighbors as well as soy and other foods from Brazil, Australia and other commodity suppliers.  Trade suffered from US tariff increases, but the biggest impact on Chinese growth appears to come from a slowdown in domestic activity, including consumer spending and investment.  Retail sales growth fell to 8.2% from a year earlier in the first three quarters of 2019, down from 8.4% in the first half. Industrial production growth slowed to 5.6% from January to September, compared to 6% in the first six months of the year.  The prediction Beijing is to have a GDP growth between 6% and 6.5% in 2019.  After the last round of talks, China and the US were able to reach a substantial consensus on the first part of the trade agreement, Chinese Foreign Ministry spokesman Geng Shuang told a news conference on Tuesday.  The latest round of trade talks between the US and China took place on last Thursday and Friday. The most important decision of the US Administration was to postpone the introduction of tariffs on Chinese imports to the US scheduled for October 15.  US President Donald Trump stated that the first part of the US agreement with China could be signed at the APEC Chile Summit.  US Treasury Secretary Steven Mnuchin said the deals cover intellectual property, financial services and the purchase of $40-50 billion.


fortune--2019-03-19--US Economic Growth Expected to Slow Sharply in 2019

U.S. Economic Growth Expected to Slow Sharply in 2019

Chief financial officers and even average U.S. citizens have been bracing themselves for a recession, either this year or next.  American executives and investment experts have been more sanguine in surveys, typically discounting the possibility of a significant downturn. And, technically, as a recession means sustained negative economic growth, they still are, according to a new CNBC poll of economists and people in the equities and fixed income industries.  But the 43 respondents offered an average expected real GDP gown of 2.3%, factoring in inflation, which is down from the actual 3.1% year-over-year growth seen at the end of 2018’s last quarter. The projection is also down from a January poll that put growth at 2.44%. The poll also suggests that growth will drop below 2% by 2020.  The biggest two drivers for the lowered expectations are slower global growth and tariffs put into place by Donald Trump.  If Trump wants to be a two-term president, he needs to make a China trade deal and start lowering tariffs across the board,” Hank Smith, co-chief investment officer at Haverford Trust Company, said to CNBC. “This will cause business confidence to rise and capital spending to increase, stimulating the economy.”  When that might happen is a question. Trump has floated the idea of walking away from a deal with China if it isn’t to his liking.  A potential economic slowdown could convince the Federal Reserve to put off another interest rate hike, according to the poll. In January, 78% of respondents expected a rate hike sometime this year. That is down to 60% now.


fortune--2019-11-07--Caught Between Trade Wars and Brexit, EU Cuts Economic Outlook as It Sees Dismal Growth Into 2022

How to Keep Your Skype Interview From Going Viral


foxnews--2019-12-22--Buttigieg unveils immigration plan he says will reduce deportations, spur economic growth

Democratic presidential candidate Pete Buttigieg on Sunday unveiled an immigration plan that he says will reprioritize the nation’s deportation efforts with the goal of cracking down on criminals and protecting otherwise law-abiding illegal immigrants.  “Our immigration enforcement system is not working,” Buttigieg wrote. “Current enforcement practices not only terrorize communities but also make all of us less safe by pulling resources away from genuine public safety concerns. The net result is harmful to communities and corrodes what should be the mission and focus of enforcement officers.”  Buttigieg plans to implement an executive order to prioritize enforcement on undocumented immigrants who are a “genuine public safety threat.” A Buttigieg administration also would pursue deportations for those who have just entered the country and have no claim of asylum.  MAYOR PETE BECOMES MAIN TARGET FOR DEMS, MODERATES AND LEFTISTS ALIKE  The South Bend, Ind., mayor wrote that this “targeted and effective” approach will “assure law-abiding people who pose no public safety risk that they have nothing to fear from our government.”  Immigration enforcement has been a linchpin of Donald Trump's presidency, with his administraion ordering mass deportation roundups across the country earlier this year.  The same week he launched his 2020 reelection campaign in June, Trump announced a weekend of Immigration and Customs Enforcement (ICE) raids by tweeting that the agency “will begin the process of removing the millions of illegal aliens who have illicitly found their way into the United States.”  Trump has deported 282,242 people in the fiscal year 2019, according to the Department of Homeland Security. Deportations, however, were higher under his predecessor, Barack Obama, who was labeled the “deporter-in-chief” by critics. According to DHS data, Obama removed more than 2 million illegal immigrants during his tenure.  Buttigieg also proposed updating the list of offenses that can prompt deportation, calling the current list “extensive, outdated, overly harsh, and inconsistent with criminal justice reforms.” Under his presidency, drug offenses and misdemeanors would not result in deportation. He plans to apply this rule retroactively to free the fear of deportation from those who have committed the low-level offenses.  Buttigieg vowed to end the 287 (g) agreement, which allowed local and state police departments to perform the functions of federal immigration officers. The move would “help establish trust between police and their communities,” he wrote.  He also plans to “reinstate and reinforce prohibitions against immigration enforcement near sensitive locations such as schools, health facilities, places of worship, and courts.”  In order to protect the nation’s southern border and decrease the number of illegal crossings, Buttigieg said he would invest in “smart border technology” that is estimated to cost between $1 billion and $2 billion. He slammed Trump’s proposed border wall as “astronomically expensive and ineffective.”  Buttigieg also wants to make immigration court-independent, stripping control from the attorney general, which he said has led to “greater politicization, to the detriment of immigrants’ rights and lives.”  “This system will guarantee immigration judges full procedural power and ensure that all immigrants receive due process and timely resolution in their cases,” Buttigieg wrote.  A campaign spokesperson told Fox News that Buttigieg understands that “immigration is not exclusively a border issue,” adding that immigrants “power our nation's economy and contribute to the success of cities across our country, cities like South Bend.”  Buttigieg plans to unlock the economic potential of immigrants. He vowed to “modernize our employment-based visa system” by reviewing it every two years to change the number of visas allotted to immigrants if the economy requires more workers.  “This process will make our immigration system more adaptable, evidence-based, and competitive. It will be informed by labor market needs, engagement with immigrant and other stakeholders, and analysis of domestic and global trends,” Buttigieg wrote.  Buttigieg said this will fix the backlogged system that prevents many from gaining access to the United States.  Temporary work visas won’t be tied to a single employer under a Buttigieg presidency, giving immigrants the freedom to move to a different employer within the same industry.  His Community Renewal Visa program would place immigrants in rural communities to supplement population loss and spur economic growth. If the immigrant remains in that community, they would be eligible for an expedited green card.  Buttigieg’s visa proposal would also prioritize health care workers in order to address the shortage in rural areas.  CLICK HERE TO GET THE FOX NEWS APP  He also plans to address the nation’s 11 million illegal immigrants.  “Undocumented people are our neighbors who raise families and pay taxes; share our workplaces and schools; pray in churches, synagogues, and mosques; and are Americans in every way except one — they are not citizens and have no pathway to citizenship,” he wrote.  Within the first 100 days of his presidency, Buttigieg promises he would push legislation to create that pathway to citizenship.  The immigration plan also calls for eliminating the Trump travel ban and raising the cap on refugees.


freebeacon--2019-11-14--Economists’ Analysis Finds Warren Wealth Tax Would Slow Economic Growth

A new projection from the Penn Wharton Budget Model finds that the wealth tax supported by Democratic presidential candidate Sen. Elizabeth Warren (D., Mass.) would hinder the nation's economic growth.  The nonpartisan, research-based initiative calculated in an analysis due to be released Thursday afternoon that under the Massachusetts senator's plan, "annual economic growth would slow from an average of 1.5 percent to an average of just over 1.3 percent over a decade," equivalent to a roughly 13 percent reduction.  The analysis comes as economists and conservative analysts have criticized Warren's economic plans as based on unrealistic assumptions. Warren's Medicare for All proposal, for example, estimates a price tag of only $20.5 trillion across 10 years, despite the liberal Urban Institute placing the cost at around $34 trillion.  Penn Wharton director of policy analysis Richard Prisinzano told the New York Times that the reduction in growth would stem from wealthy Americans consuming more and investing less.  "The wealth tax shrinks the economy because saving is more expensive," he said. "The results also suggest that the negative effect of the tax increases as the tax rate increases."  Penn Wharton's model takes at face value the Warren campaign's claim—disputed by some economists—that the wealth tax would rise $3 trillion in revenue. It also assumes that the $3 trillion would be used to pay off the national debt, which in the model would encourage growth by stimulating investment. In Warren's actual plan, the money would be spent on projects such as free childcare and student loan forgiveness, with uncertain effects on GDP growth.


newswars--2019-01-28--Government Spending Doesnt Create Economic Growth

Government Spending Doesn’t Create Economic Growth

According to many commentators, outlays by government play an important role in the economic growth.  In particular, when an economy falls into a slower economic growth phase the increase in government outlays could provide the necessary boost to revive the economy so it is held.  The proponents for strong government outlays when an economy displays weakness hold that the stronger outlays by the government will strengthen the spending flow and this in turn will strengthen the economy.  In this way of thinking, spending by one individual becomes part of the earnings of another individual, and spending by another individual becomes part of the first individual’s earnings.  So if for some reason people have become less confident about the future and have decided to reduce their spending this is going to weaken the flow of spending. Once an individual spends less, this worsens the situation of some other individual, who in turn also cuts his spending.  Following this logic, in order to prevent an emerging slowdown in the economy’s growth rate from getting out of hand, the government should step in and lift its outlays thereby filling the shortfall in the private sector spending.  Once the flow of spending is re-established, things are back to normal, so it is held, and sound economic growth is re-established.  The view that an increase in government outlays can contribute to economic growth gives the impression that the government has at its disposal a stock of real savings that employed in emergency.  Once a recessionary threat alleviated, the government may reduce its support by cutting the supply of real savings to the economy. All this implies that the government somehow can generate real wealth and employ it when it sees necessary.  Given that, the government is not a wealth generator, whenever it raises the pace of its outlays it has to lift the pace of the wealth diversion from the wealth-generating private sector.  Hence, the more the government plans to spend, the more wealth it is going to take from wealth generators. By diverting real wealth towards various non-productive activities, the increase in government outlays in fact undermines the process of wealth generation and weakens the economy’s growth over time.  This way of thinking follows the ideas of John Maynard Keynes. Briefly, Keynes held that one could not have complete trust in a market economy, which is inherently unstable. If left free the market economy could lead to self-destruction. Hence, there is the need for governments and central banks to manage the economy.  In the Keynesian framework of thinking an output that an economy could generate with a given pool of resources i.e. labor tools and machinery and a given technology without causing inflation, labeled as potential output. Hence the greater the pool of resources, all other things being equal, the more output can be generated.  If for whatever reasons the demand for the produced goods is not strong enough this leads to an economic slump. (Inadequate demand for goods leads to only a partial use of existent labor and capital goods).  In this framework of thinking then, it makes a lot of sense to boost government spending in order to strengthen demand and eliminate the economic slump.  What is missing in this story is the subject matter of real savings. For instance, a baker out of the production of ten loaves of bread consumes two loaves, saves eight loaves, and exchanges them for a pair of shoes with a shoemaker. In this example, the baker funds the purchase of shoes through the saved eight loaves of bread.  Note that the bread maintains shoemaker’s life and wellbeing. Likewise, the shoemaker has funded the purchase of bread by means of shoes that maintains bakers’ wellbeing.  Now, the baker has decided to build another oven in order to increase the production of bread. In order to implement his plan the baker hires the services of the oven maker.  He pays the oven maker with some of the bread he is producing. Again, what we have here is a set-up where the building of the oven is funded by the production of final consumer good – bread. If for whatever reasons the flow of bread production is disrupted the baker would not be able to pay the oven maker. As a result, the making of the oven would have to be aborted.  Now, even if we were to accept the Keynesian framework that the potential output is above the actual output, it does not follow that the increase in government outlays will lead to an increase in the economy’s actual output.  It is not possible to lift overall production without the necessary support from final saved consumer goods or from the flow of real savings.  We have seen that by means of a final consumer good — the bread — the baker was able to fund the expansion of his production structure.  Similarly other producers must have final saved real consumer goods – real savings – to fund the purchase of goods and services they require. Note that the introduction of money does not alter the essence of what saving is. (Money is just a medium of exchange. It is only used to facilitate the flow of goods it however cannot replace the final consumer goods).  The government as such does not create any real wealth, so how can an increase in government outlays revive the economy?  Various individuals who employed by the government expect compensation for their work. The only way it can pay these individuals is by taxing others who are still generating real wealth. By doing this, the government weakens the wealth-generating process and undermines prospects for economic recovery.  The fiscal stimulus could “work” if the flow of real savings is large enough to support i.e. fund, government activities while still permitting a positive growth rate in the activities of the private sector. (Note that the overall increase in real economic activity is in this case erroneously attributed to the government’s loose fiscal policy).  If, however, the flow of real savings is not large enough then regardless of any increase in government outlays overall real economic activity cannot be revived.  In this case the more government spends i.e. the more it takes from wealth generators, the more it weakens prospects for a recovery.  Thus when government by means of taxes diverts bread to its own activities the baker will have less bread at his disposal. Consequently, the baker will not be able to secure the services of the oven maker. As a result, it will not be possible to boost the production of bread, all other things being equal.  As the pace of government, spending increases a situation could emerge that the baker will not have enough bread to even maintain the workability of the existing oven. (The baker will not have enough bread to pay for the services of a technician to maintain the existing oven in a good shape). Consequently, his production of bread will actually decline.  Similarly, other wealth generators because of the increase in government outlays will have less real savings at their disposal. This in turn will hamper the production of their goods and services. This in turn will retard and not promote overall real economic growth.  As one can see the increase in government outlays leads to the weakening in the process of wealth generation in general. According to Ludwig von Mises,  There is need to emphasize the truism that a government can spend or invest only what it takes away from its citizens and that its additional spending and investment curtails the citizens’ spending and investment to the full extent of it quantity.


newswars--2019-02-11--The Division of Labor Is at the Very Core of Economic Growth

Modern economic theory tends to treat production, the process of generating valued consumption in a market, as a function carried out within firms and so out of reach for the general market (Coase 1937).  Firms are seen as “black box” generators of output from inputs in accordance with a calculable and formalized “production function,” and both inputs and outputs are exchanged at competitive money prices in market transactions. The market, consequently, is seen as simply a means for efficiently allocating resources through the price mechanism. The development and production of the specific goods and services that are directly valued by consumers is considered of much lesser import.  In contrast, Austrians emphasize the causal processes in the economy and therefore pay much attention to production — the way value is created through consumer wants satisfaction — and capital theory — how factors are utilized to support production. Austrians recognize that the specialized market process consists of and is dependent on an intricate structure of productive resources. This structure supports roundabout production processes that exploit productivity-enhancing uses of non-permanent intermediate (produced) goods. Such an advanced production apparatus is dependent on the specific uses of capital goods that facilitate taking factors of production through stages aimed at eventually satisfying consumer wants.  This distinctly Austrian perspective on the market as a process of production is the subject for this chapter, with specific emphasis on how changes to the economy’s production apparatus or capital structure are brought about. The aim is to elaborate on the implications of the market’s capital and production structure and thereby illustrate a specific theoretical problem that is conspicuously missing in the Austrian analysis. I draft a solution to this problem by addressing potential remedies made available by market actors exercising productive entrepreneurship. In this sense, the essay elucidates a realm for entrepreneurship within production and capital theory.  Capital goods can be defined as “the produced goods that must be combined still further with other factors in order to provide the consumers’ good” (Rothbard 2004 [1962], p. 299). These intermediate or “produced” goods that can only indirectly satisfy consumer wants are “a necessary way station to increased consumption” (Rothbard 2004 [1962], p. 966; emphasis in original). Seen as a whole, they compose “an intricate, delicate, interweaving structure of capital goods” (Rothbard 2004 [1962], p. 967; Lachmann 1978 [1956]), a production structure that in its current length and form is configured to satisfy wants already anticipated by entrepreneurs.  A production structure is composed of specific capital goods, themselves a combination of other capital goods and original factors. It is assembled and configured in a specific way for a specific purpose (Lachmann 1978 [1956]) and operated by specialized labor. Production is temporally dependent since it must be carried out in time. Carrying out a production process with already existing, supporting capital goods takes time, as does the production of the capital goods used in the process. The existent production structure was brought together and configured in the past, and is used and operated in the present to produce consumers’ goods available in the future.  Time, therefore, is both a limitation and a factor of production: due to its irreversibility, it “puts the future services of certain resources beyond our reach in the present and so makes it impossible to anticipate their use” (Hayek 1941, p. 52). In other words, we cannot conceive of specialized production without capital. Even acknowledging that there is a capital structure supporting production in multiple stages ultimately appears insufficient for us to fully understand the production process. For this reason, a theory of production is of limited use without a capital theory that also includes action and so explains the structure’s dynamic: how and why the production structure has taken a certain shape and how and why the structure changes over time. As we will see, the Austrian conception of production subject to the heterogeneous structure of productive capital indicates a problem related to the structure of tasks in an economy’s production apparatus. This problem does not exist for Robinson Crusoe but is potentially crippling in a specialized market, and it requires entrepreneurship and integration to be solved.  Imagine that a person P, in a world without existent capital, decides to manufacture a product A with the intention of making it available for consumers in the open market. To the extent the production process requires (or is more productive with) capital, these capital goods must first be produced. Regardless of the complexity of the specific production process, the only possible way of realizing production of A is to first produce the necessary intermediate goods such as tools and machinery, and then, at a later time and using the intermediate goods, produce A. To make this happen, P therefore accumulates the resources necessary, gets busy creating the means to carry out the production process, and then produces the end product.  Due to P’s productive endeavor to establish the necessary structure for their envisioned production process, the world now has capital. This capital gives P a competitive advantage in the market by creating a unique production capability (Barney 1995; 1991), which increases in the overall valuable output in the economy. The direct effect of the “advancing capital structure increases the marginal productivity of labor” without requiring an increase in “the labor energy expended” (Rothbard 2004 [1962], p. 578). The capital created is essentially an extension of and therefore facilitates more productive uses of labor. In this sense, the investment creating “non-permanent resources enables us [the market] to maintain production permanently at a higher level than would be possible without them” (Hayek 1941, p. 54, emphasis in original). Overall, P’s endeavor has brought about a situation where the original factors — land and labor — are used more efficiently toward satisfying consumer wants than was the case before. Production has become more roundabout.  The value of this better use of original factors is measured by the subjective valuations of consumers who benefit from this production. As Austrians have known since Menger (2007 [1871]), the market value of the capital produced is derived from consumer benefits. This means the value cannot be established until consumer valuation of the end product has been revealed through market action (purchases of the product). The market value of the produced capital — the indirect means to satisfy consumer wants — is equal to their contribution to the value consumers ultimately place in the consumption good produced (Mises 1951 [1936]; Rothbard 1987).  The temporal sequence of actions within the production process is then exactly the opposite of how its value is derived. Production begins with the extraction of the highest-order goods from their natural state and the production of intermediate or capital goods, and continues through the stages to eventually produce the lowest-order good offered to consumers. Upon consumers’ decision to purchase the lowest-order good at a certain price, the market value of capital goods is established by imputation “upstream” through the higher orders to the highest order and original factors (Menger 2007 [1871]). There can be no capital that is not preceded by production, and there can be no specialized, roundabout production without the existence of capital.  Let us now turn to analyzing a specialized market economy with existing advanced production structures, as does e.g. Rothbard (2004 [1962]) and Coase (1937). We assume a market with highly specialized production with a capital structure that is well configured to satisfy consumer wants. As capital is heterogeneous, by which is meant that it “is not an amorphous mass but possesses a definite structure [and] is organised in a definite way” (Hayek 1941, p. 6), the capital structure entails both productivity gains and high costs of adjustment. As the market data change, the existing capital structure will be misaligned to real consumer wants. In this sense, the specialized market place is very fragile to (unanticipated) changes.  This problem is partly recognized in the Austrian business cycle theory, but it is scarcely elaborated. Rather, it is acknowledged that the realignment process of the market’s capital structure, from the anticipated and prepared-for market situation to the new and revealed situation, takes time. This is undoubtedly true, and this process is carried out by entrepreneurs (broadly defined), who are “eager to earn profits, appear as bidders at an auction, as it were, in which the owners of the factors of production put up for sale land, capital goods, and labor” (Mises 1998 [1949], p. 335). Time-consuming and costly realignment follows (cf. Williamson 1985, pp. 21–22).  Yet this problem does not arise only when the market process is affected by abrupt and/or unanticipated exogenous change such as the expansion of credit by banks and the subsequent distortion of market prices. In fact, any reconfiguration, elaboration, or expansion of the capital structure, whether as a reaction to changing consumer preferences or as a means toward increased productivity and economic growth, is subject to what we can describe as a “specialization deadlock”: production structure based inertia to which both market actions and actors are subject.  A specialized market consists of production processes that encompass many stages and where the stages are carried out separately by specialized labor operating specialized capital structures configured to facilitate this particular (and perhaps similar) stage. While there may be several uses for specialized capital, each of the uses tends to be highly specific and the capital goods are therefore very limitedly substitutable in the market. To the degree capital traded in the market has undergone a particular transformation by being irreversibly combined into a non-decomposable unique (or uniquely aligned) capital good, there is no existent market for the produced means of production. New capital goods exist in a non-salable state to the degree their uses have no or very limited substitutability and lack obvious substitute uses. Whether or not a market for specialized capital goods emerges depends on the competitive discovery process (Hayek 1978) as entrepreneurs imitate and attempt to surpass the original entrepreneur’s successful production achievement (Bylund forthcoming; 2011).  While the uniqueness of particular capital goods in specialized production may severely limit their markets (both in terms of demand and supply), this may not constitute more than a temporary problem. The problem emerges as specialized capital is utilized in roundabout production processes under intensive division of labor. Assuming a market with entrepreneurs alert to and ready to adjust errors and misalignment through arbitrage (Kirzner 1973), and therefore an equilibrating market process, the market should soon approach stasis.  Entrepreneurs, eager for profit, will bid for capital and labor factors that they perceive to be undervalued or in otherwise suboptimal use. Provided entrepreneurs do not commit more errors than successful adjustments, and provided consumer preferences do not frequently, radically, and unexpectedly change, a market without innovation has limited opportunity for growth and productivity increase. In fact, even allowing for innovation of capital goods, which can be usefully thought of as finding new productive combinations of land factors and existing capital (Schumpeter 1934 [1911]), will not facilitate economic growth through productivity increases unless there is also a corresponding intensification in the division of labor. As Mises (1998[1949], p. 164) notes,  The division of labor splits the various processes of production into minute tasks, many of which can be performed by mechanical devices. It is this fact that made the use of machinery possible and brought about the amazing improvements in technical methods of production. Mechanization is the fruit of the division of labor, its most beneficial achievement, not its motive and fountain spring.  The truthfulness of the temporally dependent order in Mises’s claim can easily be shown, as we shall see in the next section.  Consider the specialized market in the previous section. Assuming the market is minimally regulated and therefore without artificial barriers of entry, we can assume with Rothbard (2004 [1962], p. 369, fig. 41) that the rate of interest income for capitalist investments in each production stage will be approximately the same. Entrepreneurial arbitrage will see to it that this holds true within one production process as well as across parallel, competing processes. Alert entrepreneurs will discover and correct through arbitrage any “errors” revealed by above-normal returns in any process or stage. Profitable (successful) undertakings tend to be imitated and loss-generating (unsuccessful) are abandoned by entrepreneurs eager to earn profits, which suggests an equilibrating process consisting of continuous adjustment through correction (Shane 2003). This, in turn, suggests that markets are effectively created for specific capital goods utilized in production processes as entrepreneurs set out to imitate and emulate processes that earn profits (Stigler 1951; Bylund 2015). The economy in this sense functions as a continuous “discovery process” where competition for profit is the driving force toward better alignment between the totality of the production structure and consumer wants (Hayek 1978).  Along the lines of this reasoning one can develop a theory of strategic management based on the resources used within the firm, as has been done by Barney (1986; 1991) and others. The incentive of any firm (or rather, its owners and management) is here to strive for including and utilizing as rare and unsubstitutable resources as possible that are still valuable in production. The rarer and less substitutable (and imitable) the resources, the longer a firm can stay ahead of its competition and earn above-normal profits — competitors are simply unable to emulate the capital recipe of success. But it should be noted that while this competitive advantage may last for some time due to the unavailability of necessary resources for competitors, it will eventually be undermined by the discovery of better processes or alternative implementations of the same process.  The reason for this is that capital goods are produced and non-permanent. Even in situations where a certain capital good cannot be imitated or emulated (however unlikely this scenario is), it must be reproduced when it is used up or expired. The serviceability of capital can be extended through investments in maintenance, upkeep, and repairs. Still, capital is ultimately consumed during the production process, which means the owner of a unique capital good used in profitable production must at some point invest to extend its productive life. In a specialized market economy, any such reproduction must to some degree depend on the availability of market for materials, parts, etc., — the higher-order goods used in production of the capital good. It is therefore an impossibility that a certain resource combination — a particular capital good — is non-reproducible over time.  But even so, as Mises shows in the quote above, capital is ultimately dependent on division of labor preceding its development and use. Only through the splitting of tasks can capital goods be (1) innovated and (2) utilized in new processes. The former holds true simply because new specializations (that is, a more intensive division of labor) are necessary in order to produce a new type of capital good, at the very least in the tasks of combining factors or configuring an existing capital good. The latter is illustrated by Mises’s example of mechanization of the minute tasks that are made into separate tasks only through the splitting of existing, more broadly defined, tasks.  Consider a production process in our previously assumed specialized market that is dedicated to the production of bread. It consists of the following division of labor: a farmer produces wheat, a miller produces flour, and a baker produces and sells the bread. Each stage uses capital: the farmer uses a plow in the spring and sickle in the late summer, the miller uses milling stones, and the baker uses an oven. One can imagine making this process more roundabout through the innovation of new capital goods to support either of the stages, e.g. a tractor for the farmer or a blender for the baker (Böhm-Bawerk 1959 [1889]). But no such capital can be made available for the farmer or baker without an innovative entrepreneur figuring out the full production process for that specific capital good. This amounts to a much greater undertaking than the error-correction type of arbitrage provided by Kirznerian entrepreneurs (Kirzner 1973; 2009).  An alternative is to make the bread-producing process itself more roundabout through the insertion of more narrowly specialized labor: splitting a task into several (Smith 1976 [1776]; Bylund forthcoming). The splitting of a task is different from simply “adding” labor power. The farmer can “hire” labor workers to carry out the same tasks as he is already carrying out, which increases output through increasing the volume of labor being used in the process. As these workers need to be paid — and likely monitored (Alchian and Demsetz 1972; Williamson 1993) — it is not obvious that this is a profitable investment for the farmer. Where an increase in the number of workers leads to diminishing returns, the farmer is likely to make a loss on invested funds.  The alternative is to engage in intensifying the division of labor, which, as suggested in the Mises quote above, entails taking an existing task and dividing it into a number of more narrowly defined tasks. In the case of the bread production process, this amounts to replacing one of the existing stages with several new and separate tasks in the same way a hypothetical original production process was split from self-sufficiency toward specializations in farming, milling, and baking.  Where a market stage already consists of easily separable tasks, such as the plowing, sowing, watering, and harvesting of farming, specialization may not be more than a minor change. For instance, a farmer having hired labor workers may assign specific tasks to different workers and thereby simplify specialization. This must be preceded by increased density of labor factors (Durkheim 1933 [1892]) and can be facilitated by coordination through centralized ownership (Stigler 1951). As this type of “marginal” or incremental specialization can be rather easily brought about, it may not constitute an economic problem of production. In fact, such productivity-increasing measures should be easily discernible for the actors themselves: we know that “work performed under the division of labor is more productive than isolated work and that man’s reason is capable of recognizing this truth” (Mises 1998 [1949], p. 144; emphasis added). This is not a division of labor as much as it is a rational (re)allocation of labor input across already existing chores. But this means it also cannot constitute a problem for competing farmers, who as (or even more) easily can institute this type of division of labor by imitation or emulation. So we may, for the sake of simplicity, assume that such comparatively simple opportunities have already been exploited. Indeed, we can think of the inefficient use of laborers on the farm as an “error” to be corrected by the alert farmer.  This leaves the type of disruptive specializing that suggests a new production sub-process to replace a commonplace and standardized task carried out by market actors. We can now begin to discern the problem, since all the “low-hanging fruits” in terms of productivity-increasing allocative measures are easily exploitable and so should tend to already be exploited. What remains is the unintuitive or highly coordinative task-splitting that requires foresight, investment, and perhaps development of new types of capital goods to be realized. Add to this situation how within-stage (horizontal) competition should tend to standardize the procedures used and therefore effectively produce market standards around best practices. This is the process through which markets are created, which was explained by Stigler (1951). While the market may not reach a general equilibrium, it can easily be seen how its competitive process brings about standardizing at the production possibilities frontier. At this point, further specializing should seem unattainable if at all advantageous — much like splitting the task of “driving a taxi” into the more specialized tasks of driving straight, driving around corners, and going in reverse.  Further advances in productivity requires the adoption of a more intensive division of labor — the further splitting of existent tasks — and the use of (new) capital to replace labor with automatic execution of newly identified and separated “minute tasks.” The market, in other words, finds a state of rest in the sense of a highly restricting inertia — if not impossibility — of adopting further productivity-increasing measures. Specialization cannot go further through incremental adoption of better utilizations of labor. Whether or not market actors have exhausted all opportunities for further incremental improvements to production processes, the market is in a specialization deadlock.  So far we have considered production in the market: while not all actions necessarily take place independently and under the price mechanism, we noted how markets are generated as new production structures are imitated by competitors (Stigler 1951; Bylund 2011; forthcoming). For all tasks carried out in an economy’s production apparatus, therefore, there is semi-standardization within the limits of substitutability where the price mechanism is applicable. In other words, there is a tendency toward standardization of best practices through competition as improvements are all but universally implemented through profit-induced imitation in the open market.  So far we have not made any assumptions about who brings about or profits from the adjustments made in the market. The reason for this is that opportunities for incremental changes to the production structure are neither difficult to discover nor to implement or observe /imitate. This suggests the function of adjustment can be carried out by most or all market actors and without much foresight, coordination or investment. Indeed, the farmer who hires labor workers and assigns different responsibilities to them is engaging in (a weak form of) specialization and division of labor, but in such a mundane fashion that it is of little analytical importance. These tasks were already carried out — they may even have been identified as separate such — and the increased density due to increased volume of available labor facilitated an “obvious” opportunity for “specializing.” Rather than each labor worker switching between the same or similar tasks, each worker could save time and energy by streamlining their work and so focusing on a single or only a few tasks serially divided among them (Smith 1976 [1776]). This type of improvement in productivity is, indeed, within the limits of man’s capability of reason. In fact, we might expect the common worker, knowledgeable of the production process as well as the “particular circumstances of time and place” (Hayek 1945, p. 521), to identify and act to implement such productivity-increasing measures.  But this only augments our perception that the specialization deadlock is an economic problem. It should furthermore be an increasing problem as a market becomes more intensely specialized, since specializing increases heterogeneity and therefore lowers the overall density of workers carrying out similar tasks in the market place. As opportunities for specializing are exploited, taking specialization even further may necessitate much less obvious changes — and coordination. So far in our discussion, we have not included more than minimal coordination in the market place, primarily through the price mechanism and simple agreements.  Consider the case of the tractor noted above. In order to provide a tractor in this market, actors need to break free from the specialization deadlock. This is a problem of innovation, coordination, and capital investment, since it includes the insertion of a new productive sub-process to produce a higher-order good (the tractor) to be used in farming. This sub-process requires its own division of labor to carry out tasks specific to tractor production. In this case, this is a novel process the tasks of which may not have been more than limitedly known. But this need not be the case: we can easily imagine splitting the existing tasks into several independent subtasks. The solution is however found to be the same: innovation, coordination, and capital investment are necessary for the implementation and thus realization of the new tasks and thereby the more roundabout production structure.  It is not within the scope of this chapter’s discussion to specify the exact nature of implementing such improvements to the production structure. This has been done elsewhere (Bylund 2011; 2015; forthcoming), so it should therefore be sufficient to point out that this is the role of the innovative and imaginative entrepreneur. But it should also be noted that there can be no blueprint for the implementation (realization) of such novel production processes that introduce a radically intensified division of labor since their functioning is strictly unknowable — detailed information about the intricate workings of a previously unseen sub-process is revealed only through its implementation process. For this reason, the entrepreneur can only guide the project and must rely on the decentralized problem-solving or proxy-entrepreneurship of employed workers (Foss, Foss and Klein 2007). This appears to require an integrated production structure, which is commonly referred to as a firm.  What has been drafted above suggests that production theory is incomplete without both capital theory and entrepreneurship. This may appear obvious to Austrians, but the entrepreneurship aspect appears often missing or lacking in discussions on capital theory. Rothbard’s discussion on production theory in Man, Economy and State can serve as an illustrative example.  Rothbard here provides a groundbreaking discussion on production theory, but his discussion on the effect of saving on the economy’s production stages is severely lacking. Increased saving, states Rothbard, shifts “investment further up the ladder to the higher-order production stages.” And further: “Simple investigation will reveal that the only way that so much investment can be shifted from the lower to the higher stages … is to increase the number of productive stages in the economy, i.e. to lengthen the structure of production” (Rothbard 2004 [1962], p. 519, emphasis in original). Perhaps this is a necessary conclusion, but as we have seen in this chapter, increasing the number of production stages implies the splitting of tasks and, essentially, breaking free from the specialization deadlock of the existent capital structure. We can hardly assume that this process is automatic or immediate (and it is of course unlikely that Rothbard would rely on such an assumption).  But even if we allow this process to be time-consuming, any production process must already encompass a full-length process with stages covering the production distance from virgin land to consumer. A more roundabout production process does not add stages to the “top,” but must split a stage into several or insert a new sub-process in-between or to assist existing stages. This has implications for the income accruing to factors and capitalists involved in each stage, since a “local” intensification of the division of labor by splitting one stage into many necessarily disrupts production.  Rothbard seems to assume a preexisting market for each production stage, which suggests standardization and substitutability throughout the market and thus somewhat accurately determined market prices. From the perspective of Rothbard’s discussion, it may not be limiting but useful to rely on analytical aggregates and talk of “readjustment.” But “readjusting” the production structure to new levels of saving is a much messier process than the type of arbitrage-like allocative adjustment we discuss above — and much messier than is shown in Rothbard’s analysis. Changes to the length of the production structure means the structure is disrupted by an imaginative entrepreneur, which has implications throughout the “intricate, delicate, interweaving structure of capital goods” (Rothbard 2004 [1962], p. 967). It is insufficient and potentially misleading to assume changes in the savings rate reallocates “capital” within the production process (and therefore across the production apparatus’ existing stages). More realistically, productive investments can fundamentally change production processes by splitting or inserting stages, and this can bring about important changes to the economy’s capital structure.  It is furthermore insufficient to treat the entrepreneur as simply the discoverer of price discrepancies who then acts to shift factors from one production process to another to better account for their “real” value (Rothbard 2004 [1962], p. 511; cf. Kirzner 1973; Sautet 2000). As Rothbard (2004 [1962], pp. 858–59) puts it:  But as we saw above, while adjustment takes place “all the time” it can and does take place within the limits of the existing division of labor intensity; “adjustment” is unable to deal with the specialization deadlock and therefore excludes disruptive innovation. In other words, it does not include “breaking free” from the deadlock through revolutionizing the production structure, which necessitates realizing an innovative splitting of tasks — which in turn requires integration (a firm) (Bylund 2015). Entrepreneurial adjustment ensues upon and as a consequence of disruption, but it is limited to corrections given the existing production or capital structure and incremental improvements to it.  In this sense, we have drafted a scope for entrepreneurship with the help of capital and production theory that both confirms and challenges Rothbard’s analysis. It confirms Rothbard’s focus on adjustments, which are carried out “all the time” through the market’s competitive discovery process and “is not exhausted in any single act of investment.” This can potentially be seen as a “Kirznerian” type of entrepreneurship (Kirzner 1973; 1979; 1999; 2009). Yet Rothbard, by not including the type of disruptive entrepreneurship that can be found in e.g. Schumpeter (1934 [1911]), sees no significance in organization or its function in the market. He therefore does not recognize the causal relationship between the division of labor and the creation of capital that Mises notes and that we here found to suggest a solution to the interlocking compatibilities of the production structure that we refer to as the “specialization deadlock.”  In fact, it appears Rothbard in Man, Economy and State fails to recognize the great importance of the division of labor for production and capital theory as well as for the evolution of society. This chapter attempts to show, in line with Mises’s view (Mises 1998 [1949]; Salerno 1990) as well as Rothbard’s later and more astute understanding (Rothbard 1991), how the importance of the division of labor hardly can be exaggerated, but that it in fact can be used to explain the process of capital creation.     Democrats attempted to provoke AG Matt Whitaker during a committee hearing, but they only succeeded at making themselves look bad.