The Corn Mafia

Fifteen years ago, corn farmers, agricultural businesses, commodity traders, lobbyists and politicians all got together and decided on a new path for corn. Their goal? To use their money, power, muscle and influence to turn corn into a staple of the American economy. Call them the Corn Mafia. And I do not use the word “mafia” lightly.

The Corn Mafia bribed politicians, poisoned people and wildlife and caused cancer in thousands of people. It rewrote legislative districting, created and encouraged the mythical “gluten-free diet,” and eliminated rivals like sugar, rice and wheat. It also overturned U.S. trade policies to promote the spread of corn products in other countries, and financed and developed the use of ethanol. Then, the Corn Mafia took advantage of the Russian invasion of Ukraine and supply chain disruptions to manipulate the price of corn.

It was a well-orchestrated, calculated, vicious campaign, the likes of which America hasn’t seen since similar industries like oil, rubber and the banana robber barons beforehand successfully elevated their products to America’s forefront.

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Will Latin America Form an OPEC-like Cartel for Lithium?

Chile, the world’s second-largest producer of lithium, announced plans to bring the industry under state control. Bolivia, Argentina and Chile have already hinted at creating a cartel that would oversee the production and prices of lithium, much like the Organization of the Petroleum Exporting Countries. Brazil, Peru and Mexico may join, too.

But there’s one thing holding back from making those dreams a reality — demand.

Unlike oil, lithium is not a transactional commodity. You can’t pump your gas tank full of lithium.

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Why Value Stocks Will Beat Growth Stocks

Trendline Economics conducted its own research, and we concluded that value stocks have indeed regained the lead on a long-term basis, possibly for years to come. We see the outperformance of value stocks continuing to lead growth over the next five years, with intermittent spurts of outperformance by growth stocks. However, we do believe the outperformance of value will be slight.

Our estimate is for value to post at least 30% total returns over the next five years, and for growth to post returns in the neighborhood of 20%. The definition of “value stocks,” however, has changed, such that the old “growth vs. value” debate needs a revamp.

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The Future of Fashion Tech

AI Models, Pret-A-Porte 3.0, Demand Forecasting

StyleScan is one of several new startup companies in the fashion technology industry that are bursting onto the scenes as they are bought up by larger fashion companies or, in some cases, preparing to go public.

While some of these technologies are not limited to the fashion industry, there are two fashion-specific technologies that this white paper will focus on: artificial intelligence modeling, and demand forecasting through traceability software. We believe these are two areas that will make or break the future of fashion technology.

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How Trump’s Efforts to Reduce the Trade Deficit and Favor U.S. Companies Threaten the Way Foreign Companies do Business in the U.S.

By Michael Molinski and Sandra Rodriguez

Abstract

President Trump has made no secret of his intention to renegotiate virtually every trade agreement that comes before him which violates what he considers in the best interests of America. He has labeled trade agreements with Asia and NAFTA (the North American Free Trade Agreement) as probably the worst trade agreements that the United States has ever made.

Chinese steel, Canadian airplanes, Brazilian orange juice and South Korean electronic components are just a few of the products on the schedule of trade renegotiations still to come.

Foreign companies doing business in the United States have a long and arduous road ahead of them over the next three years, or seven years if Trump is reelected to a second term. The question is what should foreign companies do about it?

Should they fight trade agreements or anti-dumping sanctions against them in U.S. courts? Or should they put pressure on their own governments to renegotiate favorable trade deals? Or should they give up and turn to other countries to purchase their exports? Our recommendation is to pursue all three avenues. Our reasoning for doing so is discussed below.

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The Fate of Friendship: Renegotiating NAFTA in the Time of Trump

Presented and defended by: Blake Schierman

Abstract

In following through with his electoral promises, President Donald Trump is attempting to do what many trade observers never thought possible — renegotiate NAFTA. The monumental achievement of NAFTA stands nearly 25 years old, a proud testament to the advancement of free trade and international cooperation. This summer, however, preliminary talks are now underway to begin renegotiations, and the once-solid treaty is now in question.

Amidst fears of outsourcing and trade deficits, particularly with notable partners he has strongly criticized, Trump has vowed harsh measures to stem these perceived threats. In addition to Mexico being one of his prime targets, he has also accused certain Canadian industries of unfair trade practices supposedly detrimental to their US counterparts. Though Canada does not appear to be the primary cause for renegotiating NAFTA, it is nonetheless vulnerable to the harsh consequences that may ensue.

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Corruption and the Lack of Confidence in Public Institutions

Trendline Economics, in cooperation with Université Paris 1 – Pantheon Sorbonne

Presented and defended by:  José Victor Cremonesi Giarola

Supervised by: Prof. Lisa Chauvet

Abstract

There is a consensus in the literature on the effects of public institutions in improving the economic, political and social well-being of society. However, for this impact to be effective and efficient, public institutions must inspire confidence among those they serve. Corruption, on the other hand, is seen as one factor that could lead to lack of confidence in public institutions. Therefore, using a large database from African countries (Afrobarometer) and relying on microanalysis, this paper analyzes the presence of corruption among public institutions. We find that, in general, public institutions have failed to inspire confidence among those they serve. Furthermore, to disentangle how different levels of income within a country yield different patterns of response of trust, our analysis also finds that when individuals are exposed to corruption experiences, wealthier individuals tend to lose trust in public institutions even more than those from lower-income levels, by roughly 2%. The results are economically robust and have been run through a set of controls and different specifications. This paper has also introduced a new methodology to deal with endogeneity due to a reverse causality problem between corruption and trust in institutions.

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Labor Productivity and Trade Liberalization: Evidence from China

Presented and defended by: Wang Bin

Published by Trendline Economics, in conjunction with Université Paris 1 – Panthéon Sorbonne

Advising Professor Sandra Poncet, Paris School of Economics & Université Paris 1 - Panthéon Sorbonne

Abstract

International trade is a very important part of China’s economy. And one of the most important issues is the trade liberalization on labor productivity. This paper is based on the theory of Melitz and Ottaviano (2008). We revise the empirical model developed by Chen et al. (2009) so that it will be more consistent with the theoretical model. We separate labor productivity into two dimensions: extensive margin labor productivity and intensive margin labor productivity. For the theoretical model, which takes intensive labor productivity more heavily into consideration, we take value added per unit per worker as the input labor productivity in the empirical analysis. The model is in the sector level. All the sector level databases are from CEPII and GDP data is from World Bank. We take China as the domestic country and 180 countries are included in the sample from 1996 to 2006. We make pairwise of China – foreign country – sector to estimate the short run effect by using OLS, fixed effect model and first order difference model, and to estimate the long run effect by using error correction model.

The results show that domestic trade liberalization has a positive effect on labor productivity, while foreign trade liberalization has a negative effect on labor productivity.

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Aging Workers And Pension Systems, And Their Effect On A Nation’s Productivity And Inequality

Presented and defended by: Michael Molinski and Xinyue Wei

Published by Trendline Economics, in conjunction with Université Paris 1 – Panthéon-Sorbonne

Advising Professor Maria del Carmen Camacho

Abstract

There are three major themes that this paper will attempt to show. First, it will show how the effects of the age of a workforce can have an impact on a nation’s productivity and growth. Then, by analyzing the effect of life expectancy on productivity, and forecasts of the age of countries, it will show how the age of a workforce is changing and how some countries are aging faster than some others and will continue to do so over the next 35 years. Lastly, it will show how a nation’s pension system can have an effect on workers and their productivity, and demonstrate how the design of a pension system can differ by country.

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