Life expectancy in rich countries

In the latest issue of the British Medical Journal, Jessica Ho and Arun Hendi chart recent trends in life expectancy in 18 rich countries. The authors rightly note that ‘life expectancy is a key summary measure of the health and wellbeing of a population’. Not surprisingly, the UNDP’s iconic ‘human development index’ (HDI) incorporates life expectancy as one of its core components alongside per capita income and education.

While ‘monumental improvements in life expectancy have been the predominant trend for high income, developed countries over the course of the 20th and 21st centuries’, recent changes have been mixed and in some cases, most notably the United States, the evidence on the evolution of life expectancy has been quite disturbing. Ho and Hendi show that in 12 out of 18 countries, life expectancy declined moderately in 2014-2015, although this has been offset by robust gains. The exceptions have been the United Kingdom and the United States which appear to be ‘experiencing stagnating or continuing declines in life expectancy, raising questions about future trends in these countries.’  As far as the US is concerned, these trends reinforce its poor position in an international ranking of life expectancy among high-income countries (see table 1 below).

Table 1

Country Life expectancy in years (average for men and women)/2015
1.       Japan 84
2.      Switzerland 83
3.      Spain 82.7
4.      Australia 82.7
5.      Italy 82.3
6.      Norway 82.3
7.      Sweden 82.2
8.      France 82.2
9.      Canada 82.0
10.   Netherlands 81.5
11.    Finland 81.4
12.   Austria 81.2
13.   Portugal 81.1
14.   United Kingdom 80.9
15.   Belgium 80.9
16.   Denmark 80.7
17  Germany 80.7
18.   United States 78.9

Source: Ho and Hendi (op.cit)

The recent mixed trends in life expectancy can be linked to deaths due to diseases associated with old age, such as respiratory and cardiovascular disease. In the US, a much-noted study by Nobel laureate Angus Deaton and his co-author Anne Case draws attention to the hitherto unknown case of white non-Hispanic Americans with limited education (no more than a high school degree) experiencing significant ‘increases in mortality and morbidity in mid-life since the turn of the century’. Proximate causes that could explain these negative trends include drug overdoses (often known as the ‘opioid crisis’), suicides and alcohol-related liver mortality – the so-called ‘deaths of despair’. Deeper structural factors include various types of social and economic dysfunction, such as the decline of marriage, social isolation and limited labour market opportunities. Case and Deaton lament that the story that they unearth is a tragic one ‘about the collapse of the white, high school educated, working class, after its heyday in the early 1970s…’ which continues unabated.



Living the American dream….from pay check to pay check

Is the US economy poised to enter a new era of shared prosperity? Is the American dream becoming a real prospect again for the average worker? And that too at a time when the US administration is conspicuously dysfunctional under a Trump Presidency?

Some indicators suggest considerable grounds for optimism about future economic prospects in the United States. The unemployment rate (at 4 per cent) is at its lowest level in decades. Growth has surged to more than 4 per cent in the most recent quarter.

Critics are not convinced. Nobel Laureate Paul Krugman dismissed the growth data as a temporary blip. He argues that one would need at least a decade of 4 per cent plus growth before an era of sustainable economic boom can be proclaimed.

Robert Reich, former Labour Secretary under the Clinton Administration and a distinguished Professor at Berkeley, draws on a survey reported in CNBC to highlight the fact that almost 80 per cent of Americans live from paycheck to paycheck. The same survey shows that the majority of Americans battle with the unsustainable burden of personal debt. These grim statistics can be combined with protracted wage stagnation, especially for low skilled workers, and what some leading analysts have called US-style ‘extreme inequality’. Reich makes the point that while jobs are plentiful, ‘good jobs’ entailing decent wages and secure working conditions, are scarce.

How can one explain these stylized facts that seem to be stubbornly persistent even as the labour market tightens in the context of an incipient boom? Reich highlights two aspects of the American labour market that are germane to our understanding of what is happening to the living standards of the average American worker. To start with, there has been a substantial erosion of the bargaining power of workers. In 1954, unionization rates were 35 per cent of the work-force. In 2015, it stood at a paltry 11 per cent. Reinforcing this loss of bargaining power is the rise of oligopolistic market power across a broad spectrum of American industries.

Reich is not the only one concerned about these stark structural realities of the American labour market. Other scholars have enunciated a similar narrative. Such scholarship suggests that reviving the American dream will require much more than a temporary surge in growth and low unemployment rates.

An unlikely Asian success story? Revisiting the Bangladesh paradox of bad governance and good development outcomes

Once derided as an ‘international basket case’ following its emergence as an
independent nation in 1971 after a bitter war of liberation with Pakistan,
Bangladesh is now lauded as a development success story. How can one explain this unanticipated transformation?

Read more at Griffith Asia Insights…

Guarding against growth fetishism: The case of India

India is justifiably proud of acquiring the mantle of the ‘fastest growing economy in the world’. There is the risk, however, of succumbing to ‘growth fetishism’. ‘Official India’ seems to subscribe to the view that the country can – and must – continue to grow at 7 to 8 percent per annum for decades and even aspire to double-digit growth. This uncritical acceptance of a growth target belies the dissident views of formidable critics who argue the case for a secular growth slow-down as extrapolated from well-known empirical regularities. There are sound reasons to temper the case of endless and rapid growth.

Read more at Griffith Asia Insights….

Foreign investors, not Australians, are likely to benefit from corporate tax cuts

The following insightful piece is authored by Anis Chowdhury, a former Director at one of the UN agencies and currently Adjunct Professor, University of Western Sydney and Australian Defence Force Academy. 


The Coalition Government has based its argument on the proposed corporate tax cuts on the recent cuts in America. In my previous Australia Institute blog (January 20, 2018), I have debunked Treasurer Scott Morrison’s scare tactics that if we do not follow the US move, investors will abandon Australia. Drawing from research findings on past US experiences of tax cuts, I have also debunked the argument that tax cuts generate more jobs and higher income.

In a recent paper, the prestigious US research organization, Brookings Institution, has demonstrated that the latest corporate tax cuts of the Trump administration will benefit mostly the foreign investors; not the ordinary Americans or businesses. It cites recent estimates from the Congressional Budget Office (CBO) to support its conclusion. The CBO analysis shows that the Tax Cut and Jobs Act (TCJA) effectively will have no impact on US incomes after 10 years. While foreign investors will end up receiving much of the gains, the net income available to Americans will rise barely, if at all.

According to the Brookings paper, this outcome results from different estimated impacts of corporate tax cuts on Gross Domestic Product (GDP), Gross National Product (GNP) and Net National Product (NNP). GDP is the estimate of output produced within a country (e.g. Australia) regardless of who produces it – domestic or foreign companies/workers. GNP is the estimate of output by domestic workers and domestically-owned capital. It is derived by subtracting incomes (profit, interest, wages, etc.) paid to the foreign nationals/entities and adding income received by nationals/entities from overseas. NNP is GNP minus depreciation of capital goods—the wear and tear of machines and other facilities. NNP comes closest of the three measures to incomes of the people and businesses of a country.

The CBO estimates that TCJA will increase US GDP by 0.5% in 2028. This happens as lower tax rates on capital income—such as the 21% rate on corporate profits—increases the after-tax rate of return which in turn should boost investment and hence the stock of productive capital such as computers or factories. But the CBO finds that most of that additional capital will be financed by foreigners. As a result, net payments of profits, dividends, and interest to foreigners also will also rise. The CBO projects that after subtracting those net payments to foreigners from GDP, the tax cuts will boost GNP by just 0.1% in 2028.

However, since the increase in output results mostly from additional investment in capital goods, the nation’s capital stock will be higher relative to output. That is good as it can raise worker productivity and wages, on average. But to maintain that larger capital stock a larger share of output must be devoted to offsetting depreciation, i.e. for wear and tear of those additional machines and factory buildings.

The CBO estimates that the rise in depreciation will be about 0.1% of output in 2028—enough to erase the already paltry boost to GNP. This means long-run incomes for Americans as measured by NNP will be more or less unchanged by the TCJA.

Thus, one can safely conclude that the Coalition Government’s proposed corporate tax cuts, modeled after the US, is unlikely to create much prosperity and jobs for Australians as is argued. Contrary to the claim, the direct benefits from tax cuts on incomes of Australian workers and businesses will be almost non-existent in the long-run.

Then consider the negative effects of tax cuts at the high end: Worsening income inequality, less revenue to finance government services and benefits, and higher Commonwealth debt, it is hard to make a case for Mr. Morrison’s proposed tax cuts for corporations and high-income earners.