Peter Thiel's pivot
By Scott Sumner
Tyler Cowen linked to some discussion of a recent speech by Peter Thiel, a highly successful Silicon Valley entrepreneur. Thiel is known for holding somewhat libertarian views, but recently seems to be pivoting towards national conservatism. The talk ranged over a wide variety of issues. An attendee named Bonnie Kavoussi took notes:
I took notes on my phone, so any mistakes are mine. These notes should be treated as paraphrases and not as direct quotes, since I was not able to write everything down, and I have added context:
Since I don’t have the actual speech, I need to add a disclaimer that these notes may not always accurately reflect Thiel’s views, so take my comments as reflecting my general views on these issues, not necessarily criticism or praise of Thiel.
This caught my eye:
Silicon Valley now has a story that is off, that we are going to automate all the jobs, and people will now get UBI (universal basic income) or play video games in their basement. But this does not show up in the unemployment rate or the productivity numbers.
In fact, most of the jobs that could be automated were automated a long time ago. Most of the jobs that are left can’t be automated — like yoga teachers and waiters. In fact, we should be more concerned that we will be stuck with low productivity for the foreseeable future.
This is basically right, except “low productivity” is too pessimistic. I’d say, “modest increases in productivity from an already high level, rather than the fast productivity growth promised by starry-eyed Silicon Valley inventors.”
But whenever the subject matter turns to trade, things seems to go off course:
Think of a thought experiment where there are robots just like you, or 100 clones like you. That would presumably be bad for your wages, but that is nowhere about to happen. Instead, what we are having are human beings being treated like robots and being paid little. This is happening in China and India. This talk about automation and technology is actually about globalization.
The opposite is more nearly true. The Rust Belt job losses occurring all over the world (even in China’s rustbelt!) are due to automation, not globalization. Chinese wages have been soaring, and yet they remain the world’s largest exporter. Other high wage economies such as Germany and Switzerland are exporting powerhouses. If wages were the key factor, India and Africa would be outcompeting China and Germany.
We are incredibly far from a functioning free trade regime. We should expect growth and money to be flowing to where the return is the highest. We shouldn’t be having Chinese peasants saving money to invest in low-yielding U.S. Treasury bonds.
When intellectuals abandon libertarianism, they often suddenly discover a “flaw” in classical free trade theory. Paul Krugman does a masterful job of exposing the emptiness of these refutations of Ricardian trade theory in Pop Internationalism. I’d strongly encourage trade skeptics to read that book, if you have not already done so. BTW, it’s not at all apparent that Chinese peasants are buying Treasury bonds (China’s a big country), and even if they were it would have no bearing on the classical argument for free trade. In standard trade theory, current account deficits reflect saving/investment imbalances. It may be a surprise that moderate income China invests savings in high income America, but it doesn’t have any bearing on the advantages of free trade.
You don’t want people negotiating free trade treaties who are dogmatic about free trade. The worse job they do, the better job they think they are doing. You need people who are skeptical to be negotiating trade treaties, in order to get a better deal for the U.S. You don’t want them to be playing John Lennon’s “Imagine” in the background.
This is a political economy question. A General Motors executive once said, “What’s good for GM is good for America.” This wasn’t exactly true, but now money-centered banks are negatively correlated with the U.S. when it comes to trade. When money flowed from abroad into the U.S., these banks invested in subprime real estate, and this caused the 2008 financial crisis. Every time the current account deficit goes down, we have a banking crisis. Like when Michael Milken went to jail.
The current account deficit should go from 3% to 0%. We should have a controlled crash landing for the banks for when we fix our trade deficit and current account deficit. Anyone on Wall Street will fight tooth and nail against sensible trade, and we need to keep them away from the negotiating table.
The current account deficit should not go to zero, indeed we don’t even know how to properly measure the current account deficit.
And it is not true that “Every time the current account deficit goes down, we have a banking crisis.” We have had three banking crises
since over the past 100 years, and the first two (which began in the early 1930s and the early 1980s) probably had almost no relationship to the US current account. Even the third one (2008) is more plausibly linked to slowing NGDP, while the shrinking current account deficit seems more an effect than a cause. More importantly, this passage suggests that our current account deficit is due to bad trade agreements, whereas it actually reflects our low saving rates. Northwestern European countries (from Switzerland to Sweden) also have very high wages and relatively free trade, and yet run up large current account surpluses. Again, it’s about saving rates, not relative wages or free trade agreements.
China has been stealing our intellectual property and conducting cyber-warfare, and China is an unusually dirty country dirtying up the planet. Trump’s 25% tariffs on China should be reframed as a carbon tax.
It is disturbing to see the rise in hostility toward China all across the political spectrum. To be sure, there is plenty to criticize, including a poor human rights record and statist economic policies. But it’s also important to keep things in proportion. Compared to other middle-income countries, China does not stand out in terms of protectionism, intellectual property theft, per capita carbon use, etc. It draws attention because it is so large. Ironically, many American nationalists are silent on China’s treatment of its Muslim citizens, and human rights is one area where China does noticeably worse than many other countries with similar income levels.
Barack Obama said that just because it’s not a name-brand, fancy school, it doesn’t mean you’re not going to get a great education, but this was actually a double-lie. An education at a low-ranked school is a dunce hat in disguise, and you are not necessarily going to get a great education at a high-ranked school.
This is way too strong. Bentley College did not have a famous name when I taught there, but I believe that undergraduates at Bentley receive a better education than students at many top research universities. (This is based on conversations with a number of undergraduate students at various types of schools.) At elite schools the professors tend to focus on research and the quality of instruction is often quite poor. Bentley has excellent instructors.
There is the fraud of university education. Student loan debt is not dischargable in bankruptcy. The government can garnish your Social Security payments when you’re 65 to pay off your student loans. I’m very optimistic that this fraud is finally coming to an end.
We spend far too much on education, and to some extent this shows up in the bloated student loans. But the solution is not to have 100% of Americans pay off the student loans of that fraction of Americans who are fortunate enough to go to college.
Then there is the tournament model at Stanford and Harvard. It’s good for their students’ prestige and bad for their morals. It’s like the Studio 54 nightclub where it’s desirable to get in because there is a long line of people wanting to go there. The Studio 54 model is not deserving of nonprofit tax-exempt status.
Yes, much of college life is consumption. That portion of expenditures should be taxed, just as business lunches should be taxed.
The single thing I would see in distracting the right is the idea of American exceptionalism. If God is radically singular or radically different, can you know Him? Similarly, if the U.S. is so exceptional, you can never talk about it. We’ve had this doctrine of American exceptionalism, but instead we are now exceptional in bad ways: We are exceptionally overweight, we are exceptionally addicted to opioids, it is exceptionally expensive to build infrastructure here, we are exceptionally un-self-aware, and we are exceptionally un-self-critical.
Nationalism is not my country, right or wrong. It is: How does my country compare to other countries? Nationalism is going to be extremely critical, not unreflective.
These views are debatable, but I’m dubious regarding the definition of nationalism. Nationalism has a long history, and that history is important. The actual ideology of nationalism was almost universally rejected in western countries after 1945, for good reason. This passage describes how ‘nationalism’ might be defined, not the actual meaning of the term in the real world.
In America, nationalism most certainly does involve American exceptionalism. All around the world, nationalism is based on a denial of actual history, and a substitution of a fake history that covers up the atrocities of one’s own country. You can say that’s not “true nationalism”, just as some communists say that the Soviet Union wasn’t true communism, but that’s what nationalism has been in the real world. Anyone interested in advocating a different ideology from what I’ve described, an ideology that doesn’t demonize unpopular minorities and foreigners, an ideology that doesn’t whitewash history, might consider creating a different term for their ideology. (I’d suggest Bernie Sanders do the same, unless he wants to be associated with actual, existing regimes that call themselves “socialist”.)
PS. I recommend Alberto Mingardi’s very thoughtful post on nationalism, which looks at this issue in much greater depth.
PPS. Unlike Peter Thiel, I wish trade negotiators would play John Lennon’s classic song in the background.