Quotulatiousness

February 10, 2014

The difference between money and wealth

Filed under: Economics — Tags: , , , , — Nicholas @ 11:37

At Ace of Spades HQ, Monty gives an introduction to Say’s Law:

Jean-Baptiste Say, an 18th-century economist and follower of Adam Smith, recognized one of the most fundamental laws in all economics: the entirely common-sense observation that consumption requires production. This axiom is called Say’s Law of Markets.

However, this axiom is often mis-stated as “production creates its own demand”. This is incorrect — production is necessary for consumption to take place, but production anticipates demand, it does not cause it. Production is speculative in this sense. The simple act of producing some good or service does not, in and of itself, create demand for that good or service. (This is true even for basic commodities.)

What Say’s Law really says is that production is the source of wealth. Market-driven production creates value and provides choice to consumers. Inventors and innovators bring new products to market, and as consumers are exposed to these new products, demand rises with the utility or desirability of these new products. New markets are opened by innovators who are able to tap into needs and wants that consumers didn’t even know they had until a new product or service is offered.

And he explains why money is not wealth:

So what is “wealth”, really? (I could write a whole book on the difference between “wealth” and “money”, but I’ll try to boil it down.) Wealth is options. Wealth is choice. Wealth is variety. Wealth is agency — being able to do what you want to do when you want to do it. Wealth is surfeit — having more than the essentials of life. It is comfort, leisure, ease — or at least the agency and option (those words again) to avail oneself of leisure. Simply put, wealth is stored value that can be drawn down in various ways, only some of which involve the exchange of money for goods and services. And how is wealth created? Through production, because production must necessarily precede consumption.

Money correlates with wealth because money is a medium of exchange and a store of value. Rich people have a lot of money because they are wealthy, not the other way around. Wealth allows us to buy a bigger house or better car or nicer furniture. It pays for a nice dinner for two at an upscale restaurant. Note well: wealth buys these things, not money per se. Consumption is the draw-down of wealth, not the simple expenditure of money.

Money is the oil in the machine of an economy, but money is not in and of itself wealth. If I am stranded on a desert island with a thousand gold coins, I am just as poor as if I were a homeless vagrant living in an alleyway somewhere, because I cannot exchange my gold for things I want or need. It does not give me options or variety or comfort. My gold facilitates neither production nor consumption absent a market mechanism that makes use of it.

February 8, 2014

The utopian bubble of elite university students

Filed under: Politics, USA — Tags: , , , , — Nicholas @ 10:34

Jonah Goldberg on the “ideal” lifestyle of students at elite universities:

There’s a certain kind of elite student who takes himself very, very seriously. Raised on a suite of educational TV shows and books that insist he is the most special person in the world — studies confirm that Generation Y is the most egocentric and self-regarding generation in our history — he is away from home for the first time, enjoying his first experience of freedom from his parents. Those same parents are paying for his education, which he considers his birthright. Shelter is provided for him. Janitors and maids clean up after him. Security guards protect him. Cooks shop for him and prepare his food. The health center provides him medical care and condoms aplenty. Administrators slave away at finding new ways for him to have fun in his free time. He drinks with abandon when he wants to, and the consequences of his bacchanalia are usually somewhere between mild and nonexistent. Sex is as abundant as it is varied. If he does not espouse any noticeably conservative or Christian attitudes, his every utterance in the classroom is celebrated as a “valuable perspective.” All that is demanded of him is that he pursue his interests and, perhaps, “find himself” along the way. His ethical training amounts to a prohibition on bruising the overripe self-esteem of another person, particularly a person in good standing with the Coalition of the Oppressed (blacks, Latinos, Muslims, women, gays, lesbians, transsexuals, et al.). Such offenses are dubbed hate crimes and are punished in a style perfected in Lenin’s utopia: through the politicized psychiatry known as “sensitivity training.”

But even as this sensitivity is being cultivated, the student is stuffed to the gills with cant about the corruption of “the system,” i.e., the real world just outside the gates of his educational Shangri-La. He is taught that it is brave to be “subversive” and cowardly to be “conformist.” Administrators encourage kitschy reenactments of 1960s radicalism by celebrating protest as part of a well-rounded education — so long as the students are protesting approved targets, those being the iniquities of “the system.” There is much Orwellian muchness to it all, since these play-acting protests and purportedly rebellious denunciations of the status quo are in fact the height of conformity.

But it is a comfortable conformity, and this student — who in all likelihood will go into a profession at the pinnacle of the commanding heights of our culture — looks at this Potemkin world and thinks it is the way things are supposed to be. He feels freer than he ever has or ever will again, but that freedom is illusory. He is, in fact, a dependent: All his fundamental needs are met and paid for by others. This is what the political theorists call positive liberty — when someone else gives you a whole pile of stuff so you can be “free” to do whatever you want.

January 18, 2014

The view from the “loser” demographic and the rise of “anti-success” sentiments

Filed under: Economics, Media, USA — Tags: , , — Nicholas @ 11:50

Scott Adams thinks he’s identified a trend, and it’s a troubling one if he’s right:

I have been seeing a pattern in the past several years that makes me wonder if a sizeable portion of the public has become anti-success. The media has pitted the general public against the one-percenters for several years, so that might be a factor. And the bottom-feeders on the Internet (Gawker, Jezebel, etc.) have business models that involve taking celebrity quotes out of context to demonize them. So it would be no surprise if the public disliked successful people more than ever.

But I have also lately observed people who seem to reject their own best paths to success in favor of paths that are clearly bad. Let’s call those choices “loser choices” because any rational and objective observer would see it that way. I wondered if I was seeing an emerging pattern or an illusion.

And in a follow-up post:

The other day I asked aloud in this blog if there might be some sort of anti-success trend emerging in society. I think I found it.

Some folks emailed me directly to say they believe it is a waste of time to pursue success because it is a zero-sum game. In other words, they believe they can only be successful by making someone else less successful, on the theory that there isn’t enough success in the universe for everyone to get a meaningful slice. They tell me it would be “wrong” on some level to pick the pockets of strangers for self-enrichment.

And there it is.

I doubt that sort of thinking would have existed before the massive media campaign against the “top 1%.” The power of the top 1% story is in the false impression that rich people stole the money from the poor and middle class, and therefore it would only be fair to give most of it back.

Clearly some of the financial titans are doing little more than picking pockets. But those are the exceptions. Most one-percenters are growing the economy and creating jobs. That’s obvious to people who were born in the “rising tide lifts all boats” era. And it’s obvious to anyone with a bit of economics education.

But if you are in your twenties, with no deep understanding of economics, wouldn’t you believe success is evil? That’s the dominant story of their generation.

January 8, 2014

Inequality and the American elite

Filed under: Politics, USA — Tags: , , , , , — Nicholas @ 08:25

Victor Davis Hanson diagnoses what he calls the “Modern Psychological Disorder of Elite Liberalism”:

The result of cosmic disappointment in the ability of progressive politics to correct human disparities has given birth to the modern psychological disorder of elite liberalism, which is mostly about squaring the circle of maintaining privilege while deploring inequality. Say America is unfair ten times a day, and the BMW in the garage and the new putter are no longer sins.

Barack Obama cannot finish a sentence without lamenting unfairness; but he proves to be no Jimmy Carter in scouting out the most exclusive of golf courses, and the richest of fat cats to putt with. Elizabeth Warren talks of oppressed minorities, but then invents a pseudo-Native-American identity to get a leg up on the elite competition in order to land at Harvard. The fact is that the elite who champion the poor and the poor themselves are not the players of the 1930s; the former usually make about the same amount of money and enjoy the same privileges as those they damn, while the latter have access to appurtenances and privileges denied the royalty of old.

The wealthier and more secluded an Oprah, the most desperately she searches for evidence of bias and inequality, finally reduced to the caricature of whining about racially driven poor service over a $38,000 crocodile handbag. If most in California don’t care what people do in their bedrooms, or if gays have on average higher incomes than non-gays, or if gay marriage is now de rigeur, the search for cosmic equality continues at an even brisker pace, resulting in transgendered bathrooms in the public schools (crede mihi: the ten-year-old daughters of the Yahoo elite will not encounter transgendered fifteen-year-old boys in the female Menlo School restrooms).

It is not perverse, but logical that Obamacare architects don’t want Obamacare coverage. It is understandable that Washington young-gun liberals know exactly where DuPont Circle or Georgetown gets iffy. Modern liberalism provides the necessary mental mechanisms to ensure the enjoyment of privilege. Al Gore was the classical liberal of the age, crafting an entire green empire predicated on opposing the very values that he later embraced to become, and preserve staying, very rich.

[…]

It is past time to forge a new populist approach without the theatrics of shutting down the government or playing on the same keyboards as Pajama Boy Obamacare spivs. The liberal elite runs the culture, from universities and entertainment to government bureaucracies and the media, but it nonetheless is predicated on loudly condemning in the abstract the very creed that they embrace in the concrete.

November 16, 2013

QotD: Petronius was right

Filed under: Education, History, Media, Quotations, USA — Tags: , , , , — Nicholas @ 09:57

Sometime in the mid-first century a.d., an otherwise little known consular official, Gaius Petronius, wrote a brilliant satirical novel about the gross and pretentious new Roman-imperial elite. The Satyricon is an often-cruel parody about how the Roman agrarian republic of old had degenerated into a wealth-obsessed, empty society of wannabe new elites, flush with money, and both obsessed with and bored with sex. Most of the Satyricon is lost. But in its longest surviving chapter — “Dinner with Trimalchio” — Petronius might as well have been describing our own 21st-century nomenklatura.

[…]

Another farce in the Satyricon involves the nonchalant ignorance of Trimalchio and his guests. The wannabes equate influence and money with status and learning and so pontificate about current events, with made-up mythologies and half-educated references to history. When Trimalchio and his banqueters begin to sermonize on literature, almost everything that follows turns out to be wrong — as Petronius reminds us how high learning has become as inane a commodity as food or sex, and only sort of half consumed, rather like the 2008 campaign of faux Greek columns and Vero possumus, which were supposed to convey gravitas.

Likewise, in our version, what does a $200,000 Ivy League education or a graduate degree really get you any more? In the sophisticated world of our political and highly credentialed elites, there are 57 states. Atlantic Coast cities are said to lie along the Gulf of Mexico; after all, they are down there somewhere in the South. The Malvinas become the Maldives — Ma- with an s at the end seems close enough. Corps-men serve in the military (as zombies?). Medgar Evans was a civil-rights icon, but you know whom we mean. President Roosevelt addressed the nation on television after the stock-market crash in 1929 — well, he would have, had he been president then and if only Americans had had televisions in their homes. And how are we to know that what we read from celebrity authors is not just made up or plagiarized, whether a Maureen Dowd column or a Doris Kearns Goodwin book?

The famously nouveau-riche Trimalchio’s guests drop the names of the rich and powerful, mostly to remind one another that they are now among the plutocracy that is replacing the old bankrupt aristocracy. We too are seeing something like that metamorphosis. It is hard to guess on any given summer weekend which populist progressive family — the Obamas, the Clintons, the Kerrys, the Gores — will be ensconced on what particular Hamptons, Nantucket, or Martha’s Vineyard beach, rubbing shoulders with just the sort of Silicon Valley or Wall Street new zillionaires who during work hours are supposed to be the evil “1 percent” and “fat cats” who need to be forced to pay their “fair share.”

Victor Davis Hanson, “An American Satyricon”, National Review Online, 2013-08-27

October 20, 2013

QotD: The “Paleo” diet

Filed under: Food, Health, History, Quotations — Tags: — Nicholas @ 13:53

Look, I can see that there is a lot of common sense behind some of these modern dietary ideas and yes, I have personally adjusted my lifestyle a bit, such as cutting down on grains and bread and so on. But there is something about the almost religious fervor behind this “paleo” stuff that bothers me. The fact is that without what we call modern agriculture, the vast majority of the today’s population would not be alive. And that is a rather big plus for agriculture. Sure, there is obesity and associated issues to deal with, many of which have complex causes. But I am damn glad we did have agriculture. It is precisely the wealth that such developments made possible that enable people today to worry about this stuff, and even make whole careers and businesses out of it.

(Full disclosure, I am a Suffolk farmer’s son, and probably the only person on this blog who has driven a combine harvester for its intended purpose.)

Johnathan Pearce, “Let’s talk about paleo”, Samizdata, 2013-08-30

September 21, 2013

Big government – “smart guys rob taxpayers because that’s where the big money is”

Filed under: Bureaucracy, Government, USA — Tags: , , , , — Nicholas @ 11:18

Mark Steyn on the quick route to banana republic status:

As the old saying goes, bank robbers rob banks because that’s where the money is. But the smart guys rob taxpayers because that’s where the big money is. According to the Census Bureau’s latest “American Community Survey,” from 2000-12, the nation’s median household income dropped 6.6 percent. Yet, in the District of Columbia median household income rose 23.3 percent. According to a 2010 survey, seven of the nation’s 10 wealthiest counties are in the Washington commuter belt. Many capital cities have prosperous suburbs — London, Paris, Rome — because those cities are also the capitals of enterprise, finance, and showbiz. But Washington does nothing but government, and it gets richer even as Americans get poorer. That’s very banana republic, too: Proximity to state power is now the best way to make money. Once upon a time, Americans found fast-running brooks and there built mills to access the water that kept the wheels turning. But today the ambitious man finds a big money-no-object bureaucracy that likes to splash the cash around and there builds his lobbying group or consultancy or social media optimization strategy group.

The CEO of Panera Bread, as some kind of do-gooder awareness-raising shtick, is currently attempting to live on food stamps, and not finding it easy. But being dependent on government handouts isn’t supposed to be easy. Instead of trying life at the bottom, why doesn’t he try life in the middle? In 2012, the top 10 percent were taking home 50.4 percent of the nation’s income. That’s an all-time record, beating out the 49 percent they were taking just before the 1929 market crash. With government redistributing more money than ever before, we’ve mysteriously wound up with greater income inequality than ever before. Across the country, “middle-class” Americans have accumulated a trillion dollars in college debt in order to live a less-comfortable life than their high school-educated parents and grandparents did in the Fifties and Sixties. That’s banana republic, too: no middle class, but only a government elite and its cronies, and a big dysfunctional mass underneath, with very little social mobility between the two.

Like to change that? Maybe advocate for less government spending? Hey, Lois Lerner’s IRS has got an audit with your name on it. The tax collectors of the United States treat you differently according to your political beliefs. That’s pure banana republic, but no one seems to mind very much. This week it emerged that senior Treasury officials, up to and including Turbotax Timmy Geithner, knew what was going on at least as early as spring 2012. But no one seems to mind very much. In the words of an insouciant headline writer at Government Executive, “the magazine for senior federal bureaucrats” (seriously), back in May:

“The Vast Majority of IRS Employees Aren’t Corrupt”

So, if the vast majority aren’t, what proportion is corrupt? Thirty-eight percent? Thirty-three? Twenty-seven? And that’s the good news? The IRS is not only institutionally corrupt; it’s corrupt in the service of one political party. That’s Banana Republic 101.

September 4, 2013

Corporations are (legally) people

Filed under: Business, History, Law, USA — Tags: , — Nicholas @ 16:26

At Not Quite Noahpinion, Josiah Neeley explains why the legal notion of corporate personhood was actually intended as consumer protection:

Contrary to popular impression, corporate personhood did not start with Citizens United. In fact, corporate personhood dates back to the old English common law, where it was originally conceived as a consumer protection measure.

Suppose I buy meat from a butcher and it makes me sick. I might wish to sue the butcher for damages. But suppose that I bought the meat not from an individual butcher but from Acme Meat, Inc. It was a central doctrine of the common law that only persons could sue or be sued, own property, or make legally binding contracts. So if a corporation is not a person, I am out of luck. The response to this was to treat corporations as legal persons, who could sue or be sued, make and enforce contracts, buy, sell, and hold property, and so on.

Of course, courts could have granted corporations all the same rights, abilities and duties without calling them persons. But this would have been merely a semantic difference. Once a society decides to have corporations, it has to grant them something along the lines of legal personhood if for no other reason than to protect those who deal with it.

Likewise, once a society decides to grant corporations the right to own property, it is absurd to deny them constitutional protections. The New York Times, the AFL-CIO, and the Sierra Club are all corporations. But it would be ridiculous if the government tried to use those organizations’ corporate status as a justification for regulating the editorial position of the New York Times, or controlling the advocacy position of the Sierra Club or the AFL-CIO.

[…]

More than 150 years ago Alexis de Tocqueville noted in his Democracy in America that the genius of the American political tradition lay in what he called associations but what in today’s terminology we would call corporations. In Europe, to advance some political, social, or economic cause required some wealthy patron. In America, by contrary, groups of people who individually might not have had deep pockets could come together and pool their resources by founding an organization to advance the cause.

Far from being a tool of repression, corporations advanced the interests of democracy and equality by allowing the little guy to organize to accomplish what otherwise could only be achieved by the very rich. Ending corporate personhood would not stop billionaire individuals like the Koch brothers or George Soros from using their wealth to affect the political process, but it would hamper small grass roots organizations which choose to use the corporate form. Ultimately, the long tradition of corporate personhood represents not a threat to democracy, but a support of it.

August 4, 2013

Who speaks for those neither rich nor poor?

Filed under: Economics, Government, USA — Tags: , , , — Nicholas @ 09:37

Victor Davis Hanson on the forgotten people in the middle:

There are more than 48 million Americans on food stamps, an increase of about 12 million since the beginning of the Obama presidency.

At a time of record-high crop prices, the U.S. government still helps well-off farmers with some $20 billion in annual crop payouts and indirect subsidies.

The Left mythicizes food-stamp recipients almost as if they all must be the Cratchits of Dickensian England.

The Right romanticizes corporate agriculture as if the growers all were hardscrabble family farmers in need of a little boost to get through another tough harvest.

Those in between, who pay federal income taxes and are not on food stamps, lack the empathy of the poor and the clout of the rich. Can’t a politician say that?

Illegal immigration is likewise not a Left vs. Right or Republican vs. Democrat issue, but instead mostly one of class.

The influx of millions of illegal immigrants has ensured corporate America access to cheap labor while offering a growing constituency for political and academic elites.

Yet the earning power of poorer American workers — especially African Americans and Hispanic Americans — has stagnated.

The common bond between the agendas of La Raza activists and the corporate world is apparently a relative lack of concern for the welfare of entry-level laborers, many of them in American inner cities, who are competing against millions of illegal workers.

Given the slow-growth, high-unemployment economy, and the policies of the Federal Reserve, interest on simple passbook accounts has all but vanished.

The poor are not so affected. They are more often borrowers than lenders, and they are sometime beneficiaries of federally subsidized debt relief.

The rich have the capital and connections to find more profitable investments in real estate or the stock market that make them immune from pedestrian, underperforming savings accounts.

In other words, this administration’s loose money policy has been good for the indebted and even better for the stock-invested rich. But it is absolutely lousy for the middle class and for strapped retirees with a few dollars in conservative passbook accounts.

July 3, 2013

Kathy Shaidle’s “Dispatch from Canada”

Filed under: Cancon, Economics, USA — Tags: , , , , , — Nicholas @ 09:21

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.

The most blatant display of “one law for the rich, one law for the poor”

Filed under: Law, Liberty, USA — Tags: , , , , — Nicholas @ 07:54

Reason‘s Mike Riggs points out the most amazing part of the Aaron Hernandez case:

Let me paint the scene for you: It’s broad daylight out. A group of six Massachusetts State Police officers in suits and ties approach Hernandez’s North Attleborough mansion from the front. Three of them walk up the steps of his porch, and — with their guns holstered — knock on the door. After roughly 50 seconds of knocking and doorbell-ringing, a shirtless Hernandez opens the door and lets six suited staties, plus a cop in uniform, come inside. As one officer starts to cuff Hernandez right there in the foyer, another officer closes the door, presumably to provide Hernandez with some privacy. A few seconds later, Hernandez — now with a tee-shirt pulled over his handcuffed arms and torso — is led outside to a cop car, where officers gently lower him into the back seat and put on his seatbelt.

No battering ram. No flashbangs. No paramilitary gear. I was shocked.

Compare and contrast this arrest — for homicide — with this arrest first reported by Radley Balko:

In 2011, a SWAT team conducted a midnight raid on Stamps’ home in Framingham looking for a couple of small-time crack dealers. In the chaos and cloud of adrenaline that results from knocking down someone’s door and flooding his home with men dressed like soldiers, an officer shot Stamps in the neck, killing him. The city’s chief of police would later say that Stamps was “tragically and fatally struck by a bullet which was discharged from a SWAT officer’s rifle”; as if guns fire themselves.

When police eventually found who they were looking for — not Stamps, but his stepson and the stepson’s cousin — neither of them was armed. Nor did police find any firearms in the house.

It almost sounds backwards, doesn’t it? Killing an unarmed senior citizen in the process of arresting two unarmed kids holding a couple hundred bucks and some crack, while sending guys in their Sunday best to bring in a man allegedly involved in not just one violent, gang-related murder, but three?

[. . .]

This trend isn’t limited to Massachusetts. Across the country, poor people experience an entirely different criminal justice system — from arrest to prosecution — than the wealthy. Oftentimes, this means blacks are treated more harshly than whites and that the people who sell illegal drugs for money are treated differently than bankers who launder that money.

While football fans are free to care about whatever they want, the most shocking aspect of the Hernandez case isn’t that an incredible athlete killed anywhere from one to three people, it’s that the location of his home and the name of his employer bought him courtesies that poor, nonviolent offenders committing consensual crimes seldom experience.

Update: The Hernandez case gets even more weird:

Investigators in the Aaron Hernandez murder case were prepared to interview a Bristol man who was killed early Sunday when he crashed a car registered to his father-in-law, the former New England Patriot tight end’s uncle.

Multiple law enforcement sources said Massachusetts investigators were interested in speaking with Thaddeus Singleton III, 33, because he was associated with Hernandez. Singleton, who records show has served time in state prisons on various drug-related convictions dating to the mid-1990s, was killed when the car he was driving shot 100 feet through the air and hit the Farmington Country Club 6 feet off the ground.

Maybe this is something new in Nissan automotive technology, but it’s a rare vehicle that can shoot 100 feet through the air and impact a building six feet up? Impressive.

July 1, 2013

The rise and fall of economic powers

Filed under: China, Economics, History, Japan — Tags: , , , , , — Nicholas @ 10:30

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.

June 3, 2013

“Checking your privilege”

Filed under: Britain, Humour, Media, Politics — Tags: , , , — Nicholas @ 09:14

Sean Thomas outlines the notion of “checking your privilege” before discovering that he is the most underprivileged person in Britain:

The idea of Checking Your Privilege is that the opinions of “underprivileged” people, in any political debate, are deemed to be intrinsically more important and valuable than the beliefs of those who are luckier in life.

This is especially true if the debate relates to an area in which The Underprivileged Person is adjudged to be deprived. Extreme versions of Privilege Theory assert that, in especially sensitive arguments, the more privileged person should say nothing at all. e.g. white people are not allowed to express an opinion on racism.

[. . .]

It’s an impressive list of deprivations. Sometimes, when I look at my life, I wonder if I am [a] talented black saxophone player in the 1950s, or at least a meth dealer in central Baltimore – rather than a writer in north London. Certainly, I am THE most underprivileged person in the UK. And this means that my opinion is the most worthy and important of all, and everyone else must shut up, while I opine.

And my opinion is this: Privilege Checking is stupid. It is vacuous and diseased. It is a duet of moral vanity and bourgeois guilt which symptomizes the decadence and redundancy of what passes, today, for lefty “thinking”. Karl Marx (middle-class, well-travelled, disapproved of Engels’s plebby girlfriend) must be spinning on his Highgate pedestal when he sees what his great discourse has turned into.

I hope that clears things up. Now we can move on; IMHO, of course.

April 25, 2013

Populist talk on taxes may please the voters (sometimes), but it won’t help the economy

Filed under: Cancon, Economics, Government, Politics — Tags: , , — Nicholas @ 00:01

In Maclean’s, Stephen Gordon explains why the only kind of tax hikes that seem in any way “popular” are particularly bad if implemented:

Magical thinking might be smart politics, but it’s not very good economics. Here are the two most popular themes:

  1. Higher corporate income taxes. From a political marketing point of view, the appeal of increasing corporate income tax (CIT) rates is obvious: “Hey, I’m not a corporation, so it’s no skin off my nose.” But the economics of CIT rates are very dodgy indeed: higher CIT rates are the most costly way of generating revenue and are most harmful to economic growth. It also turns out that workers and consumers are the ones who ultimately bear the burden of higher CIT rates. (If you start taxing corporate profits, shareholders will eventually move their money to jurisdictions with more competitive rates, reducing the availability of investment capital. In the long-run, that results in lower output and weaker labour demand. More on that here.) But even if you were willing to pay these costs, higher CIT rates don’t generate much in the way of new revenues.
  2. Increased taxes on high earners. While there may be good reasons for wanting to use the personal income tax system to counter recent trends in the concentration of income, policymakers should be under no illusions about how much new revenue taxing the rich will bring in. There simply aren’t that many high earners to tax, and they have access to expert tax planning advice: there is overwhelming evidence showing that those with high incomes can and will respond to higher tax rates by reporting lower taxable income.

April 2, 2013

Revisiting the revisionist view of the “Satanic mills” of the British industrial revolution

Filed under: Britain, Economics, History — Tags: , , , , — Nicholas @ 08:55

Rather in keeping with the sentiments expressed in today’s Quote of the Day post, Emma Griffin explains why the workers generally thought of the industrial revolution as a very good thing indeed:

Writers and academics often show an interesting ambivalence about industrialization. Today, they regard it as a blessing, the single-most-effective way to lift people out of poverty. But in thinking about Britain’s Industrial Revolution, they have tended to reach the opposite conclusion: The rise of the factory, they argue, caused the end of more “natural” working hours, introduced more exploitative employment patterns and dehumanized the experience of labor. It robbed workers of their autonomy and dignity.

Yet if we turn to the writing of laborers themselves, we find that they didn’t share the historians’ gloomy assessment. Starting in the early 19th century, working people in Britain began to write autobiographies and memoirs in ever greater numbers. Men (and occasionally women) who worked in factories and mines, as shoemakers and carpenters, and on the land, penned their stories, and inevitably touched on the large part of their life devoted to labor. In the process, they produced a remarkable account of the Industrial Revolution from the perspective of those who felt its effects firsthand — one that looks very different from the standard historical narrative.

[. . .]

Higher levels of employment also helped change the balance of power between master and laborer. So long as jobs remained scarce, workers, by necessity, obeyed their employers. The price of dissent or disobedience was unemployment. With more jobs, such subservience became less and less necessary. In the booming new industrial towns, workers could, and did, walk out on employers over relatively minor matters, confident that finding more work wouldn’t be difficult. One autobiographer left his position simply because he “grew sick” of the work; another because he didn’t want to “beg pardon” after a falling out with his master; another objected to wasting his precious Sunday mornings at his master’s religious services; and another quit when his master refused to let him take his tea breaks off the premises. All working relationships are defined by a disparity in power between master and servant. But that inequality is rendered more palatable if we’re well remunerated for our services and can leave at will.

The way in which working people described the upheavals of this period provides us with a powerful reminder of the transformative effect of industrialization and of its capacity to improve living standards, even for the poor. Generations of historians have dwelled on the loss of old working patterns and presumed that the introduction of more intensive ones was detrimental to workers’ welfare. But these developments weren’t viewed in such a sinister light at the time. Industrialization promised full employment, and for those used to scraping together a living from the land, this was very good news indeed.

« Newer Posts — Older Posts »

Powered by WordPress