Jamie Dimon identifies a promising route to his 3% growth goal before turning to foreign economic policy: removing domestic regulatory obstacles (“A Plan for the Western World’s Revival,” op-ed, Sept. 29). That opportunity deserves more than a passing mention.
In research published in the Review of Economic Dynamics, Bentley Coffey, Pietro Peretto and I showed that federal regulatory accumulation reduced U.S. economic growth by approximately 0.8 percentage point per year between 1980 and 2012. The buildup of regulatory requirements distorts investment decisions, which ultimately weakens the business-led innovation that makes workers more productive.
There is also evidence that reversing the accumulation can help. For example, the Canadian province of British Columbia reduced its regulatory requirements by roughly 36% after launching reforms in 2001. Research I conducted with Mr. Coffey estimated that those reductions increased annual economic growth by about one percentage point.
While those estimates don’t guarantee an identical result if the U.S. cuts regulations by 36%, they do make a strong case for the regulatory budgeting approach that British Columbia pioneered.
The approach involves three initial steps and then a feedback loop. First, inventory existing requirements, set reduction targets and require agencies to identify rules whose costs exceed their benefits. Then continually measure success against economic performance and the health, safety and environmental outcomes regulation is supposed to improve.
Mr. Dimon is right to seek faster growth. A serious effort to clear away obsolete and counterproductive rules should be central to that agenda.
In May, Kyrgyzstan imposed price controls on fuel. Gas stations reported shortages. The government repealed the price cap on gasoline in July.
In Bangladesh earlier this year, some drivers waited in line up to 14 hours for price-controlled fuel. As soon as the government allowed prices to rise, the lines in Dhaka, the crowded capital, shortened by two-thirds. Lines elsewhere disappeared entirely.
TotalEnergies, the French oil giant, announced it would voluntarily cap fuel prices at its gas stations in March. In early April, the great majority of gas stations in France had no shortages. Of the 900 that did, 700 belonged to TotalEnergies.
Also in France, universities in April capped meal prices at one euro for all students. The actual cost averages eight euros. The surge in students using cafeterias now means there is often nowhere to sit, and unions threatened to strike over the big increase in work. Some students have said that the long lines make it impossible to eat between classes.
Catalonia, in northeastern Spain, imposed sweeping rent controls in 2024. What followed was a decline in rental agreements. As of March, the supply of rental housing had declined by 23 percent.
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Price controls are still doing what they always do: destroy investment, encourage lawbreaking and cause shortages. Politicians would be wise to remember that voters’ opinions might change, but the laws of economics don’t.
A 2024 WTO study suggests that reductions in trade costs between 1995 and 2020 increased global real GDP by about 6.8 percent. For low-income economies, the increase was much larger, about 33 percent. As for the U.S. in particular, one estimate concludes that international trade alone led to “an increase of $7,014 in [inflation-adjusted] GDP per capita and $18,131 in GDP per household” in the United States between 1950 and 2016. A census report concludes that lower import prices under globalization held inflation down for all American groups between 1995 and 2018, relative to autarky. (The benefits were most pronounced for rural Americans, which will be relevant when you get to the paragraph after next.)
None of these studies capture the full warp and weft of globalization. They’re mostly focused on trade barriers, with some comparative advantage and diffusion of technology and ideas thrown in. But left out are the beneficial effects of foreign direct investment, labor and capital mobility, factor price convergence, multinational production chains, financial integration, and so forth, which are also well-recognized drivers of growth.
David Sergent tweets: (HT Scott Lincicome)
Defining a reduction in trade barriers and the development of technologies (containerization, global aviation) that made international trading easier as “central economic planning” is a bait and switch. No one thinks “central planning” = “globalization.” Nor should they.
Harold Black reflects wisely on Trump’s new steel mill in Iowa. A slice:
Ohio State is playing Iowa today, and the president is busy patting himself on the back – a sport in which he remains undefeated. The occasion: a new $15 billion steel mill, the first in 50 years, coming to Iowa. Naturally, he credited his 50% tariffs. The project is expected to create 1,750 permanent jobs and support up to 6,000 construction jobs. Trump added that it would also create 2,000 new manufacturing and mining jobs. Over the next decade, it is projected to generate $95 billion for the U.S. economy. He took credit, saying his “powerful 50%” tariffs on steel imports last year meant that “our steel industry is roaring back to life. Everyone’s building their plant here because they don’t want to pay tariffs. It’s really not that complicated.”
Actually, it is a bit more complicated than that. The president is a short-timer. If the next president lowers or scraps the tariffs, will the math on a $15 billion plant still work, or does Iowa end up with one of the world’s most expensive machine sheds? Although not as apparent as beef or energy, Trump’s tariffs have made Americans to pay more for steel than any other country in the world. And while the president bragged that the steel will be “mined, melted, and made completely in the U.S.,” calling it “something very unusual,” he skipped a small detail: the mine’s owner is Mesabi Metallics, a Minnesota-based company owned by India’s Essar Group. Made in America, owned by India – which, to be fair, is “something very unusual.” The plant will be fed by a newly developed $2.5 billion iron ore mine that Mesabi opened on September 17 on Minnesota’s Mesabi Iron Range. And the Export-Import Bank of the United States (EXIM) will provide up to $10 billion in financing for the new Iowa steel mill. Hold that thought. Also keep in mind (mine?) that the US steel industry is being dominated by foreigners – US Steel is a wholly owned subsidiary of Nippon Steel. I thought Trump’s policy was America First?
But what is the Export-Import Bank and why is it providing financing for an Indian company? This is from its website: “The EXIM Bank is the official export credit agency of the United States. Our mission is to support American job creation, prosperity and security through exporting. We accomplish this by unlocking financing solutions for U.S. companies competing around the globe. We help level the playing field and fill gaps in private sector financing.” https://www.exim.gov
So let me get this straight: a U.S. government bank is putting up $10 billion of the $15 billion so an Indian corporation can set up shop in Iowa. And once this foreign-owned mill is running, Trump’s 50 percent tariffs will protect it from… foreign competition. Sounds like a sweet deal to me – sweet as Iowa corn. And timing, of course, is everything. The announcement comes just before the midterms. Between the tariffs and the price of fertilizer and diesel, Iowa is suddenly in play. The governorship, a U.S. Senate seat, two of the four congressional districts, and the attorney general’s office are all suddenly competitive in races where the republicans should have been favored. Surely that had nothing to do with the announcement. Right?
