The key things about Detroit’s bankruptcy are that it didn’t happen overnight – and it didn’t have to happen at all.
Detroit’s long, sad slide started in 1950, when the Motor City’s population peaked at nearly 2 million people. Now it’s around 700,000.
The hollowing out of the city was on gut-wrenching display in two recent exhibits at the National Building Museum, featuring photographs by Camilo Jose Vergara and Andrew Moore.
In fat times and lean, the city’s pols and power-brokers chose to focus their energy, and the residents’ tax dollars on gigantic, big-ticket development scams while ignoring the basics that let cities thrive — or at least survive.
Detroit’s leaders poured money into a never-ending assembly line of sad-sack projects such as the Renaissance Center, the Fox Theater, Comerica Park, Poletown, the People Mover, and Ford Field.
But unlike Pompei and other cities crushed by Nature’s wrath or God’s wrath, Detroit’s destruction is completely man-made and thus can be reversed. The city that midwifed the Model T and the Cadillac, Bob Seger and Eminem, Ted Nugent and the Insane Clown Posse, still has tremendous assets in terms of infrastructure, location, and people.
Like Buffalo, Cleveland, St. Louis, and other dead cities scattered across the map of the industrial Midwest like so many cigarette burns, Detroit can stage its own comeback by reducing crime and picking up garbage; by freeing kids, parents, and property values from an abysmal school system; and getting the government out of everything that isn’t essential.
In other words, Detroit’s leaders only need to do what they should have been doing for the past 50 years. And the city’s dwindling supply of residents needs to keep them honest this time.
Because Detroit is finally out of next times.
Produced by Jim Epstein. Written and narrated by Nick Gillespie. Additional camera by Meredith Bragg.
July 21, 2013
Reason.tv – Detroit’s Tragedy and How to Fix It
Lessons in “Rockonomics”
Tim Harford has a few interesting economic examples to look at from the world of music:
Lesson two is about globalisation. A new article in The Economic Journal from Fernando Ferreira and Joel Waldfogel asks whether in a world of MTV and YouTube, national musical cultures are being crushed by American imports. Ferreira and Waldfogel have assembled more than a million data points covering chart hits in 22 countries, in some cases going back to 1960. In practice this covers pretty much the entire global music market, and the data are used to estimate the value of music sales.
At first glance, worries about the cultural dominance of the US seem justified: US artists are responsible for 60 per cent of world music sales. But US artists were responsible for 80 per cent of world music sales in the early 1960s before dramatically losing market share to the British. (We are now, alas, in sharp decline.)
In the early 1980s, less than 50 per cent of music sales were by domestic artists — that is, French artists selling in France, or Brazilian artists selling in Brazil. By 2007 that figure was around two-thirds. Domestically produced music is having a renaissance — proof that globalisation has more complex effects than we tend to assume.
July 19, 2013
Bitter reality scheduled to return on September 22nd
Here’s an unpleasant idea to disturb your narrative of economic recovery:
You may have noticed the small blurb recently that the ECB had eased the rules for asset backed securitizations. You may have read this snippet and thinking nothing of it you moved on. This would have been a mistake because just here you would have noticed the cracks of a crumbling empire.
The French banks, the Spanish banks, the Portuguese banks are all engaged in an ongoing charade so they do not need to ask the EU for help. They all are taking their Real Estate loans, the properties that they have confiscated, the commercial loans that are no longer paying and they have put them into massive securitizations that are pledged at the ECB as they are given cash for the collateral. The collateral, as you may suppose, has all of the value of cents on the Dollar but they are given money at par while the ECB carries them on their books at par. It is a fraudulent scheme jam packed with money created out of nothing but it is judged to be a better plan that to have to admit to accurate financials and have the banks of Europe default all across the Continent.
[. . .]
There will be nothing but lying until September 22, 2013 which is the date of the German elections. This is the drop dead date that I have been asked about for so long. Then, as soon as the celebration is over that Ms. Merkel is to remain in power, the world will turn on its axis. The status quo will disappear and there will be a “shock and horror” campaign as the Southern nations of Europe demand more help and Germany squirms and then refuses to provide it because it does not have the assets to do so.
Spain, France, Portugal, Greece, Cyprus, and even Italy are all going to line up at the trough only to discover that the promise of water was just that, a promise, and does not exist. A Biblical drought will be upon the Continent and from the political battles will emerge new alliances and new screams calling the traitors by name. The twin towers upon which the markets rest, money from nothing and fairy tale financials, will decompose in the light of this new sun and our old friend, Fear, will return to haunt us.
Sleep well.
Blaming the bankers and absolving the politicians
Daniel Ben-Ami points out that current campaigns to vilify bankers (“banksters”) over their role in the economic crisis that began in 2007-2008 conveniently ignores the politicians’ dirty hands:
There is at least one area where mainstream politicians can legitimately claim considerable success: they have offloaded much of the blame for the economic crisis from themselves and on to banks and other financial institutions.
Much of the public has accepted the premise that greedy bankers were largely responsible for the economic turmoil that emerged in 2007-8. There is little discussion of the government’s role in creating the conditions for the financial crash, let alone any examination of the economy’s underlying weaknesses.
Criticism of the government’s economic policy is usually confined to it being heartless or ill thought out. Often the two are combined, in the accusation that the government is obeying the diktat of its banker friends by imposing cuts. Campaigners also often allege that a shady global financial network is the real power in the world. In this conspiratorial worldview, a labyrinth of offshore tax havens helps the rootless rich evade the power of national authorities.
[. . .]
But in truth, politicians on both sides of the Atlantic bear a large share of the blame for the crisis. To understand their culpability, it is necessary to go back at least to the early 1980s rather than just to 2007. For decades it was clear that investment and innovation were insufficient. Yet rather than tackle these underlying problems, the authorities pursued policies that ended up creating a credit bubble.
Public spending was kept high and interest rates artificially low. Often, governments also used additional measures to ease the supply of credit, such as reforming the financial markets. The hope was that such moves would keep the market ticking over in the short term and the economy would somehow correct itself in the longer term.
This was the backdrop to the financial crisis that emerged in 2007-8. Bankers certainly played a role, but governments created the conditions for the credit bubble to emerge. Underlying this development was the failure of politicians to tackle or even recognise structural economic weaknesses.
[. . .]
Underlying anti-banking campaigns is the common assumption that financial institutions are part of a giant global conspiracy to undermine nation states.
This view was most vividly put forward by Matt Taibbi, a campaigning American journalist, in a 2009 article in Rolling Stone magazine and in a subsequent book. He famously condemned Goldman Sachs, a top Wall Street investment bank, as ‘a giant vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money’. In the UK, the New Economics Foundation, a think tank, adopted the image with a short video entitled Taming the Vampire Squid: Take Back Our Banks.
There are several reasons to object to such imagery and the conspiratorial worldview that underlies it. For one thing it is strongly reminiscent of Nazi imagery of Jews as central to an international financial conspiracy. For example, in Mein Kampf, Adolf Hitler talked of Jews as being ‘like leeches… they were slowly sucking the blood from the pores of the national body’.
Protectionist law from 1920 strangling economies of Hawaii and Puerto Rico
Keli’i Akina wants the US government to amend or (better) repeal the 1920 Jones Act:
What’s the best way to destroy the economy of an island or largely coastal region? From the Peloponnesian War to the 1960s confrontation between Cuba and the United States, the answer has been to impose an embargo. In effect, that’s what the United States has been doing for decades to its non-contiguous regions such as Hawaii and Puerto Rico as well as Alaska and much of the East and West Coasts. The culprit in this economically self-defeating practice is a little-understood federal statute called the Jones Act. The 1920 maritime cabotage law specifies that ships carrying cargo between two American ports must: 1) be built in the United States, 2) be 75% owned by U.S. citizens, 3) be largely manned by a United States citizen crew, and 4) fly the United States’ flag.
In 2012, the Federal Reserve Board of New York issued a warning to the federal government that, unless Puerto Rico is granted an exemption from these Jones Act rules, its economy would likely tank. Following suit, the World Bank released a statement announcing that it will cut back its financing of projects in Puerto Rico and begin encouraging investors to look to Jamaica as a new international shipping hub. Puerto Rico’s legislature, governor, and resident commissioner in Congress have voiced loud objections. They join a growing chorus of outrage which includes Alaska, whose legislature has passed a law (Sec. 44.19.035) requiring the governor lobby Congress for reprieve from the Jones Act.
The Jones Act creates an artificial scarcity of ships due to the inefficiency and the extraordinary cost of U.S. ship construction, driving up cargo costs and limiting domestic commerce. Through World War II the United States was a leading producer of merchant ships. Today we build less than one percent of the world’s deep draft tonnage, and the ships produced domestically for the commercial market come at a hefty price.
July 15, 2013
Expensive military gear to become piles of scrap
Strategy Page explains why billions of dollars in military equipment will be scrapped in Afghanistan:
It’s going to cost some $14 billion to deal with $26 billion worth of American equipment in Afghanistan. Half that cost will be for shipping gear out, but the other $7 billion will be the cost of equipment not worth shipping home and either destroyed or donated to the Afghans. About 78,000 tons of gear will be destroyed, including over 2,000 armored vehicles. Some has to be moved, given to the Afghan security forces, sold locally or destroyed. About 9,000 MRAPs will be sent back to the United States.
Unlike Iraq, where heavy stuff, like armored vehicles and trucks, could simply drive to a nearby port and put on a ship, Afghanistan has no ports. The nearest ones are in Pakistan and the road trip is expensive and dangerous because of the theft and the threat of attacks (by terrorists or gangsters seeking “protection” fees). So a lot more gear will be flown out of Afghanistan, which is quite expensive. The current plan calls for 28,000 vehicles and 20,000 shipping containers of gear are to be moved by the end of 2014.
The U.S. and NATO supplies coming in (or going out) via railroad from Western Europe, go through Ukraine, Belarus, Russia, Kazakhstan and Uzbekistan, to Afghanistan. This approach costs $400 a ton to move material to or from Afghanistan, versus three times that to truck it in from Pakistani ports, or $14,000 a ton to fly stuff in, or $10,000 a ton if you just fly material in from a friendly (Persian Gulf) port. For example, $600,000 MRAPs (Mine Resistant Ambush Protected) cost $140,000 to fly in from the Gulf. Some 2,000 of these MRAPs in Afghanistan are no longer needed by the United States or the Afghan forces so are being cut up for scrap in Afghanistan.
July 14, 2013
Signs of an economic Sharknado
Feeling positive about the economy? Michael Snyder has ten reasons to change your mind:
Have you ever seen a disaster movie that is so bad that it is actually good? Well, that is exactly what Syfy’s new television movie entitled Sharknado is. In the movie, wild weather patterns actually cause man-eating sharks to come flying out of the sky. It sounds absolutely ridiculous, and it is. You can view the trailer for the movie right here. Unfortunately, we are witnessing something just as ridiculous in the real world right now. In the United States, the mainstream media is breathlessly proclaiming that the U.S. economy is in great shape because job growth is “accelerating” (even though we actually lost 240,000 full-time jobs last month) and because the U.S. stock market set new all-time highs this week. The mainstream media seems to be absolutely oblivious to all of the financial storm clouds that are gathering on the horizon. The conditions for a “perfect storm” are rapidly developing, and by the time this is all over we may be wishing that flying sharks were all that we had to deal with. The following are 10 reasons why the global economy is about to experience its own version of Sharknado…
#1 The financial situation in Portugal continues to deteriorate thanks to an emerging political crisis. […]
#2 The economic depression in Greece continues to deepen, and it is being reported that Greece will not even come close to hitting the austerity targets that it was supposed to hit this year […]
#3 The economic crisis in the third largest country in the eurozone, Italy, has taken another turn for the worse. […]
#4 There are rumors that some of the biggest banks in the world are in very serious trouble. […]
#5 Just before the financial crisis of 2008, the price of oil spiked dramatically. […]
#6 Mortgage rates are absolutely skyrocketing right now […]
#7 This upcoming corporate earnings season is shaping up to be an extremely disappointing one. […]
#8 U.S. stocks are massively overextended right now. […]
#9 Rapidly rising interest rates are causing the bond market to begin to come apart at the seams. […]
#10 Rapidly rising interest rates could cause an implosion of the derivatives market at any moment. […]
Most Americans don’t realize that Wall Street has been transformed into the largest casino in the history of the world. Most Americans don’t realize that the major banks are literally walking a financial tightrope each and every day.
All it is going to take is one false step and we will be looking at a financial crisis even worse than what happened back in 2008.
So enjoy this little bubble of false prosperity while you can.
It is not going to last for too much longer.
July 13, 2013
What is the real inflation rate?
The official US inflation rate is around 1% annually. That doesn’t seem quite right to a lot of people who seem to be spending more money for the same goods:
… what Bernanke will never admit is that the official inflation rate is a total sham. The way that inflation is calculated has changed more than 20 times since 1978, and each time it has been changed the goal has been to make it appear to be lower than it actually is.
If the rate of inflation was still calculated the way that it was back in 1980, it would be about 8 percent right now and everyone would be screaming about the fact that inflation is way too high.
But instead, Bernanke can get away with claiming that inflation is “too low” because the official government numbers back him up.
Of course many of us already know that inflation is out of control without even looking at any numbers. We are spending a lot more on the things that we buy on a regular basis than we used to.
For example, when Barack Obama first entered the White House, the average price of a gallon of gasoline was $1.84. Today, the average price of a gallon of gasoline has nearly doubled. It is currently sitting at $3.49, but when I filled up my vehicle yesterday I paid nearly $4.00 a gallon.
And of course the price of gasoline influences the price of almost every product in the entire country, since almost everything that we buy has to be transported in some manner.
But that is just one example.
Our monthly bills also seem to keep growing at a very brisk pace.
Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row, and according to USA Today water bills have actually tripled over the past 12 years in some areas of the country.
No inflation there, eh?
July 11, 2013
Inane new “measurement” claims 1978 was the “best year ever”
An editorial in New Scientist (which I can’t quote from due to copyright concerns) claims that using a new “measurement” called the Genuine Progress Indicator (GPI), human progress peaked in 1978 and it’s all been downhill since then. Anyone who actually lived through 1978 might struggle to recall just what — if anything — was better about 1978 than following years, but the NS editors do point out that the GDP measurement generally used to compare national economies doesn’t capture all the relevant details, while GPI includes what they refer to as social factors and economic costs, making it a better measuring tool for certain comparisons.
I can only assume that most of the economists who believe that 1978 was a peak year for the environment hadn’t been born at that time: pollution was a much more visible issue in North America and western Europe than at almost any time afterwards (and eastern Europe was far worse). Industry and government were taking steps to cut back some of the worst pollutants, but that process was really only just in its early stages: it took several years for the effects to start to show.
In the late 1970s, the world was a much dirtier, poorer, less egalitarian place than even a decade later: China and India were both much more authoritarian and had still not mastered the art of ensuring that there was enough food to feed everyone. Behind the Iron Curtain, Soviets and citizens of their client states in Europe were falling further and further behind the material well-being of westerners (and becoming much more aware of the deficit).
No matter how much emphasis you put on nebulous “social factors”, the fact that the world poverty rate — regardless of how you measure it — has been cut in half over the last twenty years, lifting literally billions of people out of near-starvation makes an incredibly strong case that the world is doing better now than at any time since 1978. You can prattle on all you like about “rising inequality”, but for my money it’s a better world where the risk of people literally starving to death is that much closer to being eliminated. Give me an “unequal” world where even the poorest have enough food and clean water over an egalitarian world where billions starve, thanks very much.
July 10, 2013
Next up on our agenda of things to panic about is “peak water”
sp!ked editor Rob Lyons explains that “peak water” just isn’t something to worry too much about:
Disappointed by the failure of the peak-oil disaster to come to fruition, our doom-mongering, Malthusian friends have alighted on other scary narratives to confirm their suspicions of humanity as a rapacious blight on the planet. Their latest is ‘peak water’.
On the face of it, peak water is a boneheaded concept on a planet where two thirds of the surface is covered in, er, water. According to the US Geological Survey, there are 332 million cubic miles of water on Earth. What we tend to need, however, is not sea water but fresh water, of which there is much less: nearer 2.5 million cubic miles. And much of that is too deep underground to be accessed. Surface water in rivers and lakes is a small fraction of overall fresh water: 22,339 cubic miles. Handily, though, natural processes cause sea water to evaporate and form clouds, which then dump their contents on to land — so in most populated parts of the world there is currently sufficient water to supply our needs in an endlessly renewable way. As for the future, it is clear there is no shortage of H2O on the planet. What we really have is a shortage of cheap energy and the necessary technology to take advantage of the salinated stuff.
The ‘peak water’ theorists focus on groundwater supplies that are either being used faster than they are replenished, or supplies that are not replenished at all: so-called ‘fossil water’. According to leading environmentalist Lester Brown, writing in the Guardian last weekend, the rapid exhaustion of these supplies in some parts of the world is leading to the decline of food production. And at a time of fast-growing populations, this apparently promises disaster for these countries.
But often, the problem is a political rather than a practical one. [. . .]
In reality, all of the fixes that apply to peak oil also apply to peak water. New technology may make water desalination far cheaper than it is now, a claim being made for new water filtration methods based on nanotechnology. Better use of water in irrigation, through careful management of when and how water is applied to crops, could cut usage dramatically — something that is already happening in dry countries such as Israel and Australia and in parts of the US. Current uses of water, like flush toilets, may be superseded in places where water is in high demand. Through civil engineering projects, water can be shifted from places where it is plentiful to places where it is needed most, something societies have been doing for thousands of years.
July 7, 2013
Trying to prevent another “flash crash”
Tim Harford discusses high speed trading and its potential problems:
“High-frequency trading” is a rich environment of algorithms, of predators and prey, all trying to make money by trading financial products at tremendous speed. But the basic proposition is simple to state. When the price of a share rises in New York, the price of related contracts will rise in Chicago just as soon as the news arrives. But if everyone else gets the news on the regular cable, and you’re renting space on the faster cable, you can see into everyone else’s future by (say) 0.7 milliseconds, plenty of time to buy soon-to-rise assets and then, less than a thousandth of a second later, to sell them again.
You don’t have to be a socialist to find this kind of thing discomfiting. There are three concerns. The first is that scarce resources are being spent on high-speed connections that have no social value in what is at best a zero-sum game. The second is that high-frequency traders may be making money at the expense of fundamental investors. The third problem is that such trading appears to introduce systemic risks. The “flash crash” of May 2010 is still poorly understood, which should ring alarm bells — especially since the need for speed means most high-frequency algorithms are simple and therefore stupid.
What, then, should be done? Rather than trying to slow down the algorithms, why not slow down the market? Most financial exchange markets run continuously, effectively assuming that traders can react instantaneously, withdrawing out-of-date offers and replacing them with up-to-the-picosecond prices. It’s this flawed premise — that all trades could be instantaneous — that means that no matter how fast the computers get, there will always be an incentive to go faster still.
A simple way for an exchange to improve matters would be to run an auction once a second, batching together all the offers to buy and sell that have been submitted during that second. Unsuccessful bids and asks would be published and would remain on the books for the next auction, unless withdrawn. One auction a second ought to be enough for anyone; it would deliver a stream of well-behaved data to regulators — currently unable to figure out what is going on — and it is plenty of time for a computer to weigh its options.
July 4, 2013
“Buenos Aires […] is the headquarters for the central planning bad idea bus”
At the Sovereign Man blog, Simon Black discusses Argentina’s sad history of central planning failures:
The more interesting part about Buenos Aires, though, is that this place is the headquarters for the central planning bad idea bus.
Argentina’s President, Cristina Fernandez, continues to tighten her stranglehold over the nation’s economy and society.
This country is so abundant with natural resources, it should be immensely wealthy. And it was. At the turn of the 20th century, Argentina was one of the richest countries in the world.
Yet rather than adopting the market-oriented approaches taken by, say, Colombia and Chile, Argentina is following the model of Venezuela.
Cristina rules by decree here; there is very little legislative power. She may as well start wearing a crown.
Just in the last few years, she’s imposed capital controls. Media controls. Price controls. Export controls.
She’s seized pension funds. She fired a central banker who didn’t bend to her ‘print more money’ directives. She even filed criminal charges against economists who publish credible inflation figures, as opposed to the lies that her government releases.
Inflation here is completely out of control. The government figures say 10%, but the street level is several times that.
[. . .]
Being here in this laboratory of central planning makes a few things abundantly clear:
1) Printing money does not create wealth. If it did, Argentina would be one of the richest places in the world again.
2) All of these policies that are ‘for the benefit of the people’ almost universally and up screwing the people they claim to help.
Printing money creates nasty inflation. If you’re wealthy, it leads to asset bubbles, which can make you even wealthier. If you’re poor, you just get crushed by rising prices. Or worse – shortages (remember the recent Venezuelan toilet paper crisis?)
3) Desperation leads to even more desperation. The worse things get, the tighter government controls become… which makes things even worse. It’s a classic negative feedback loop.
Both the United States and pan-European governments are varying degrees of this model, with only a flimsy layer of international credibility separating them from the regime of Cristina.
So Argentina is really a perfect case study in things to come.
July 3, 2013
Kathy Shaidle’s “Dispatch from Canada”
Kathy will be writing a weekly column for our American friends, updating them with whatever’s up here in the Great White North. Given how little actually ever happens in Canada, it might be just a weather report or the latest style change for Justin Trudeau’s hair. However, to start it off, yesterday’s column attempted to correct a few common notions about Canada:
Because a lot of what you think you know about Canada is probably decades out of date.
As investment bigwig and journalist Theo Caldwell recently noted:
But Canada is far from American stereotypes of socialism, centralization and obeisance, at least in relative terms. By almost any measure, Canada is a freer country than the U.S.A.
Economically, the contrast is stark, for those who care to see. While folks reflexively state that Canadian taxes are higher than those of the United States, corporate and personal rates are lower up north.
How much lower are those corporate taxes? Canada ranks 6th lowest out of 185 nations. America came in at a shocking 69th place.
Believe it or not, Canada’s average household net worth is higher than America’s.
We also have lower unemployment, and our economy is holding steady, thanks in part to our ingenious refusal to give mortgages to welfare bums.
We have fewer divorces, fewer traffic fatalities, and way fewer tornadoes.
We’re skinnier, too. (Seriously: your restaurant portions are freakishly huge.)
But what about “the American Dream”?
According to one (Canadian) economist, “a son born to a poor father in the U.S. is twice as likely to remain poor throughout his life than if he had been born in Canada.”
[. . .]
We’ve got our flaws too, of course.
We literally have no abortion law, which means it’s easier to get one than a gun, even at the nine-month mark.
There’s no death penalty. And try getting an MRI, unless you’re a cat.
Our cops are increasingly corrupt, if not downright fascist. (Don’t be fooled by the propaganda about the noble, virtuous Mountie…)
We have this unelected Senate thing (long story) and a dorky constitution, especially compared to yours.
And don’t get me started on Quebec.
July 1, 2013
The rise and fall of economic powers
Charles Hugh Smith has a guest post at Zero Hedge, talking about the theme of economic decline of great powers:
Our collective interest in the rise and fall of empires is not academic. The meteoric rise of China and the financialization rotting out global capitalism are just two developments that suggest we are entering an era where some great powers will collapse, others will remake themselves and others will gain ascendancy.
[. . .]
In 1987, pundits were predicting that Japan’s “5th generation” computing would soon dominate what was left of America’s technological edge. They were spectacularly wrong, as the 5th generation fizzled and Japan became an also-ran in web technology, a position it still holds despite its many global electronic corporations and vast university research system.
Japan’s modern economy was set up in the late 1940s and early 1950s to exploit the world of that time. Sixty years later, Japan is still a wealthy nation, but its relative wealth and power have declined for 20 years, as its political-financial power structure clings to a model that worked splendidly for 40 years but has not worked effectively for 20 years.
The decline is not just the result of debt and political sclerosis; Japan’s vaunted electronics industry has been superseded by rivals in the U.S. and Korea. It is astonishing that there are virtually no Japanese brand smart phones with global sales, and only marginal Japanese-brand sales in the PC/notebook/tablet markets.
The key dynamic here is once the low-hanging fruit have all been plucked, it becomes much more difficult to achieve high growth rates. That cycle is speeding up, it seems; western nations took 100 years to rapidly industrialize and then slip into failed models of stagnation; Japan took only 40 years to cycle through to stagnation, and now China has picked the low-hanging fruit and reverted to financialization, diminishing returns and rapidly rising debt after a mere 30 years of rapid growth.
There is certainly evidence that China’s leadership knows deep reform is necessary but the incentives to take that risk are low. Perhaps that is a key dynamic in this cycle of rapid growth leading to stagnation: the leadership, like everyone else, cannot quite believe the model no longer works. There are huge risks to reform, while staying the course seems to offer the hope of a renewal of past growth rates. But alas, the low hanging fruit have all been picked long ago, and as a result the leadership pursues the apparently lower-risk strategy that I call “doing more of what has failed spectacularly.”
Though none of the historians listed above mention it, there is another dangerous dynamic in any systemic reform: the very attempt to reform an unstable, diminishing-return system often precipitates its collapse. The leadership recognizes the need for systemic reform, but changing anything causes the house of cards to collapse in a heap. This seems to describe the endgame in the USSR, where Gorbachev’s relatively modest reforms unraveled the entire empire.
