America Turns Inward. NewsWire

NEWSWIRE: 3/4/19

• Only 18% of Americans believe that the United States can best achieve and sustain peace by promoting and defending democracy around the world. The rise of isolationism at the expense of American exceptionalism bears a striking resemblance to the 1930s, a period during which nations around the world turned inward. (Eurasia Group Foundation)
• NH: Six years ago we issued a report (see: "Globalism in Retreat") on the rise of isolationist sentiment in America since the peaking of "globalist" optimism in the late Clinton years. The decline of globalism accelerated after the GFC. Ian Bremmer's Eurasia Group survey is an eye-opening look at just how much public opinion has shifted.
• American exceptionalism is not dead, but among all age groups today it manifests itself overwhelmingly in the desire that America clean up its own house and lead by example rather than promote global economic growth, keep our military number one, or intervene anywhere militarily except as a last resort. President Trump would be happy to learn that Millennials are the least likely to want the U.S. to go to war over human rights abuses abroad.
• Twenty years ago, to use the four-fold terminology of Walter Russell Mead, the two dominant worldviews were the Wilsonian (promoting democracy around the world) and the Jacksonian (benign neglect, but retaining overwhelming strength to intervene if necessary). These views are still popular among experts. But the American public now favors the two less interventionist credos: the Hamiltonian (try to boost global prosperity and maximize trade) and the Jeffersonian (forget the world entirely and promote democracy at home).
• But here's the fascinating twist. It's Republicans who are veering fastest toward isolationism. Increasingly, they are the Jeffersonians (like Senator Rand Paul) or the Jacksonians (like Senator Lindsey Graham). As a group, they believe America's biggest threats are immigration and lack of democracy at home. Meanwhile, the Democrats are beginning to take over the ranks of the Wilsonians and the Hamiltonians. They believe America's biggest threats are authoritarian leaders abroad and global economic catastrophe (brought on, for example, by trade wars). When asked whether America should go to war with Russia if Russia invaded Estonia (after being reminded that the U.S. is bound to Estonia by a NATO treaty), a slight majority of Americans said yes (54%). What's amazing is that Democrats are now twice as likely to say yes as Republicans. (See chart below.)
• The last time America entered an extended isolationist funk was in the 1970s. But back then, it was liberal Democrats who led the turn away from global involvement and it was conservative Republicans who resisted. Today, we're seeing the reverse. The proper parallel for today's mood is not the 1970s, but the 1930s--when it was the political left that (ultimately) pushed for national mobilization and re-engagement with the world. Ray Dalio likes to say that America today is reliving the late 1930s. Here's one more way that he's right.

• Israeli women average 3.1 children over their lifetime, which is by far the highest total fertility rate in the OECD. The religious makeup of Israel’s population is one major driver (fertility has fallen for the country's Arab population while rising for the country's Jewish population), but pronatalist policies have also played a part—which gives hope to low-fertility countries searching for a policy fix. (Taub Center)
• NH: Demographically, Israel breaks all the rules. As societies become more affluent, educated, and urbanized, their total fertility rates (TFRs) are supposed to decline. But Israel's TFR (at 3.1) remains vastly higher than that of any comparably developed economy. Indeed, it is now substantially higher than the TFR of many of its Arab neighbors--including Lebanon, Libya, Tunisia, and Saudi Arabia and the gulf states. And it's not far behind Egypt (3.3) and Jordan (3.4). What's more, unlike all of the above, Israel's TFR is not declining over time. It has hardly changed since the late 1970s.
• What's Israel's secret? Yes, Israel's ultra-orthodox sects (like the Haredi, with a TFR of roughly 7) do make a difference. But they are a small minority. The TFR of Israel's secular majority is also high and steady. It can't have much to do with Judaism in general, since the fertility of Jews elsewhere in the developed world is unexceptional, indeed probably lower than average. One explanation is policy: Israel has generous childcare and family-leave laws, which enable women to keep working while having children. Eastern European countries trying to implement pronatalist policies (see: "Nations Labor to Raise Their Birthrates") should probably study Israel's success. Another explanation is national culture: High fertility is the expected norm in a society that understands its regional vulnerability and fervently believes in its collective future. That sort of national solidarity will be a lot harder for other countries to emulate.

• Columnist Jeff Edelstein writes that Gen Xers are going to make either Amy Klobuchar or Sherrod Brown the next U.S. president. His reasoning? Self-interested Boomers and progressive Millennials will essentially cancel each other out at the voting booths, leaving Gen X—whose pragmatism favors centrist Democratic candidates—as the difference-maker. (The Trentonian)
• NH: In his unplugged Xer fashion, Edelstein makes a persuasive if blunt case. First, "Trump sucks" and will be gone for sure. And second, "Millennials suck" because they're stupidly progressive and because Boomers will never allow their own entitlements to be cut in favor of Millennial entitlements. So that leaves moderate (Boomer) Democrats like Klobuchar and Brown--and Gen Xers will vote them in: "I promise you: We are going for pragmatism in 2020. And Klobuchar and Brown are the most pragmatic of the bunch. Honestly, I wouldn’t even be shocked if they ended up as the ticket."
• Just four years ago, I would have been astonished to hear Brown referred to as a moderate. But today? Sure. He's pretty far left on the economy--but with his rumpled working-class authenticity, he doesn't partake much in his party's wrangled identity politics. Of Klobuchar or Brown, who would be at the top of this ticket? IMO, if there's no recession by the fall of 2020, it's Klobuchar. If there's a bad recession, it's Brown.
• Fully 43% of Millennial online traders trust cryptocurrency exchanges more than stock exchanges, the highest share of any generation. Even among Millennials who don’t currently trade crypto, one-third would trust crypto over stocks, a reflection of this generation's widespread distrust of traditional financial investments. (eToro)
• NH: eToro is a youth-oriented and gamified global trading platform that likes to think of itself as on the cutting edge of cool. But the first question you have to ask is, how many Millennials actually trade online? And how representative are they of their entire generation? Interestingly, they share enough with all Millennials to cite risk and insecurity as the reason they don't like traditional investments. That sounds right. (See: "Stock Market Volatility Scares Millennials.") But in that case, you have to question their sanity. I can't think of an investment class with higher volatility, deeper bear markets, more fraud and self-dealing, larger legal risk, and less obvious economic utility than a cryptocurrency. So you're going to invest in IOTA because you can't trust the SPY ETF or your target-date fund? You may need to seek counseling.
• The relationship contract, a feminist symbol last popular in the 1960s and ‘70s, is making a comeback among Millennials. While outlining rules about money, sex, and chores might seem like the antithesis of romance, it feels only natural for a generation of planners to want to talk through their relationship to avoid potential issues. (The Lily)
• NH: There's a big difference between then and now. Back in the 1960s and '70s, virtually all couples living together were married and divorce was both less frequent and legally more difficult. So back then, substituting a (non-legally binding) "relationship contract" was a daring and extraordinary move. It was a genuine protest against convention. Today, nearly a third of all young-adult couples are unmarried to begin with and divorce is both common and easy. So when Millennials today engage in intentional contracts, it has more the feel of trying to create a new convention than of trying to break an old one. Hey, we're pooling time and property and creating a family: Don't we need some rules about what our expectations are and what to do in case of failure? In time, you can expect Millennials to favor legally enforceable contracts. (Imagine a broader and broader pre-nup.) And then, eventually, we'll arrive at something new, something that resembles... marriage.
• CBRE is launching its own co-working arm, “Hana,” which will operate under a profit-sharing agreement with landlords. Established real estate firms like CBRE are going all-in on the lucrative co-working market, hoping that their property management expertise will help set themselves apart from startups like WeWork. (The Wall Street Journal)
• NH: The Millennial togetherness trend has affected work life as well as family life. (See: "So Happy (Living and Working) Together.") Co-working startups have attracted lots of investor interest by cashing in on this trend. But now that the major office realtors are waking up and starting to compete in the same space, we'll be able to find out: How much of WeWork's success is due to its trendy, Millennial-friendly brand? And how much is due to a genuine efficiency edge in providing flexible office space to small companies, contract employees, and permatemps?
• To understand more about Millennials’ political behavior, read this profile of 37-year-old Democratic presidential candidate Pete Buttigieg. Without being a firebrand radical, he brings prototypical Millennial strengths to the table: a mix of idealism and pragmatism, strong ambition, and a belief in the possibility of sweeping change. (The New Yorker)
• NH: We first described Buttigieg last month (see: "Op-Ed Writer Says Millennials Have Been Fleeced"). In an outsized way, he's a very Millennial sort of prodigy. He's obviously a well-rounded achiever (Harvard grad, Rhodes Scholar, veteran with a tour in Afghanistan, two-term mayor). He's conventional, impressing voters with his self-deprecating, polite, and slightly formal sociability. And he bills himself as a "radical pragmatist," a practical and optimistic problem solver who wants to take on the nation's biggest problems. He's someone to keep an eye on--if not for 2020 than for some future election.
• A new analysis of Census data finds that the share of children living in three-generation households has nearly doubled since 1996. Factors at play include lingering financial insecurity following the Great Recession; declining marriage rates and rising rates of single parenthood; and the rising proportion of minority families who are more likely to live with multiple generations under one roof. (MercatorNet)
• NH: We just released a report that covers a related topic: the rising share of all Americans who live with adult relatives other than their own parents or children. (See: "How Togetherness Is Killing the U.S. Housing Market.") Census calls these "shared households." The authors of this paper, published in Demography, show that the rising share of children living in shared households is due almost entirely to the presence of more grandparents--not aunts or uncles or other relatives.
• Why? Typically because the grandparent has a home but the (increasingly single) parent does not. Yes, there are other contributing drivers: e.g., improving generational relationships between parents and grandparents; and the relative growth of minority households, which have always favored shared living. But the biggest driver pushing three-generation households (a trend now appearing throughout the developed world, especially in southern Europe) is the growing economic security of older households and the declining economic security of younger households. (See: "The Graying of Wealth.")
• Author and scholar Shoshana Zuboff writes that we’re in the age of “surveillance capitalism.” Society is gradually waking up to the fact that, to firms like Google and Facebook, people are the product rather than the customer—a realization that has put these firms squarely in the crosshairs of regulators. (The Guardian)
• NH: Sure, the author undermines her own credibility with her breathless and apocalyptic phrasing. And some of her solutions (such as just banning certain types of data from being acquired at all) veer toward Ludditism. Still, her basic point is sound--and one that we have made in several contexts. (See: "Danger Ahead for Google and Facebook?" and "The Rise of Total Tech.") Throughout history, every society sooner or later demands some sort of regulation of the possession, ownership, use, and circulation of information. That won't change in the digital era.
• New research shows an association between strict parenting and a high level of economic inequality. Here's a new argument to be wielded by those in favor of greater economic equality: A high gini coefficient turns us into parents who raise kids to be dog-eat-dog achievers, which (per this story) further reinforces the gap between rich and poor. (The Washington Post)
• NH: You gotta love two economists who find a way to put Russia, China, Turkey, and the United States into the same basket. What do they have in common? Well, they all have relatively high economic inequality and they all score high in the pressure they put on children to succeed. Such pressure is measured by Value Survey responses to two questions: how much parents emphasize "hard work" to their children; and how little they emphasize "imagination" to their children.
• Part of me is sympathetic to their argument. Personally, I dislike "Tiger moms." Parents who incessantly push and bully their kids to succeed should, from time to time, be compelled to shut up and watch their kids try to discover their own talents. The data show that, on a society-wide basis, the best efforts of parents have surprisingly little measurable impact on children's outcome other than the genetic material they hand to them. For chapter and verse on this research, please read The Nurture Assumption (10th ed., 2009) by Judith Harris or, even better, Blueprint (2018) by Robert Plomin.
• On the other hand, can it be true that unequal, achievement-oriented societies are actually toxic? Look again at the fearsome foursome of the U.S., China, Russia, and Turkey. Now look at those at the other end of the scale: Scandinavia and a handful of mainly (northern) European social democracies like France and Germany. Now ask yourself: Which of these country groups has done more to change the world in recent decades--culturally, economically, technologically, and geopolitically? And which is likely to do so in coming decades? Which (to paraphrase Lenin) are the locomotives of history? And which are the free-rider passenger cars? I think these questions answer themselves.
• In a similar vein, Pamela Druckerman wrote a recent NYT best seller, Bringing Up Bébé (2014), in which she extolled the "wisdom" of French parents who worry much less than Americans about how their kids will turn out. French parents, she claimed, encourage their kids to "fit in" and don't stress individual achievement. Good or bad? Listen to the combative Forbes rebuttal by Erika Brown Ekiel, an American mom, entitled "Bringing Up Bebe? No Thanks. I'd Rather Raise a Billionaire." Somehow, I don't think these two economists will change the thinking of many American (or Chinese) parents.

DID YOU KNOW?

Job Training? You're on Your Own. It wasn’t long ago that employers helped workers develop the skills they needed to climb the corporate ladder. But increasingly, according to The Wall Street Journal, that’s changing. Consider Yonnas Getahun, a Zillow employee who has spent roughly 800 hours of his personal time (and thousands of dollars) over the past 18 months on professional courses, webinars, and workshops. Jeremy Maffei, eyeing a career in digital marketing, recently completed a $1,000 Udacity.com certificate program on his own dime. Of course, despite the heavy time and cost investment, self-directed learning doesn’t always pay off: Even with his newly minted certification, Maffei has yet to land a new job. Quite simply, workers may be ill-equipped to anticipate the in-demand skills of tomorrow. But employers have little incentive to bring back the old model. According to Tim Munden, Chief Learning Officer at Unilever, “There’s no way on earth we can send people to enough training courses to make the shift we need to adapt to the world around us. People need to take that on themselves.”