Posts tagged with: economics

"Help me help you."

“Help me help you.”

Yesterday in conjunction with this week’s Acton Commentary I looked at Tim Riggins’ gift of freedom to his brother and the corresponding sense of responsibility that resulted. When Tim takes the rap for Billy, Billy has a responsibility to make something of his life. As Tim puts it, that’s the “deal.”

When Tim feels that Billy hasn’t lived up to his end, it causes conflict. Tim’s gift has created an obligation for the recipient. This reality is on clearest display in this exchange between the two brothers:

Billy: “How long are you going to hold it over my head, man?”

Tim: “The rest of my life if I feel it needs to be.”

This hints at the shadow-side of much of our gift-giving as human beings, as this good thing can be turned into a way of manipulating, controlling, or holding “it over” someone.

Consider these words about Augustine and their implications for the kinds of gift-giving that we ought to pursue:

A person who sorrows for someone who is miserable earns approval for the charity he shows, but if he is genuinely merciful he would far rather there were nothing to sorrow about. If such a thing as spiteful benevolence existed (which is impossible, of course, but supposing it did), a genuinely and sincerely merciful person would wish others to be miserable so that he could show them mercy!

The “spiteful benevolence” that drives much gift giving is actually intended to keep the recipient in a state of dependence, in a relationship that gives power to the giver which can be lorded over others. This, I think, is actually one of the key dynamics of much of the modern international aid movement. Aid can become a tool of a kind of neo-colonial policy.

It is this debased and corrupted form of gift-giving that has led so many to the extreme position which argues that true gifts require no response and inspire no responsibility. But as I argue this week, this abuse of the reality of gift is no argument against its proper use: “The connection between gift and gratitude invigorates a life of stewardship and responsibility.”

If  you’re a young American adult (the 25-to-34 age range), and you have a good job, count yourself blessed. Most of your peers aren’t so lucky. The New York Times reports that “[o]ver the last 12 years, the United States has gone from having the highest share of employed 25- to 34-year-olds among large, wealthy economies to having among the lowest.”

Of course, young Europeans have been dealing with this for years. Greece, Spain and Portugal have unemployment rates between 17-27% (Greece being the highest), and the outlook is grim for most of the European Union (EU). Even taking into account that many young people may be studying or raising families and therefore not looking for full-time work, the deterioration of the EU’s economies is obvious. But it’s not just lack of jobs. As Samuel Gregg, Acton’s Director of Research, points out in his book Becoming Europe, “Europe’s social systems are under consider­able internal strain from the remorseless deterioration associated with unaffordable welfare states, population decline, low produc­tivity levels, and the preferential treatment of politically connected insiders.” (more…)

Rev. Robert Sirico was recently featured in El Salvador’s newspaper El Diaro de Hoy. Consuelo Interiano interviewed him about the free market, and social mortgage.

Sirico begins by saying that private property isn’t just important for businesses to thrive, it’s absolutely necessary for their existence. He goes on to say that businesses and private companies are the best way to help individuals escape poverty. Companies, large or small, create opportunities for work and offer individuals a means to elevate themselves out of poverty.

John Paul II said the Church “has consistently taught that there is a ‘social mortgage’ on all private property.” For those not familiar with the term ‘social mortgage,’ it refers to the conditions under which people may use God’s creation.  In other words, if you have private poverty you have a duty to be productive with it. Sirico responds to this by saying that the free market is a means to productivity and therefore social mortgage. He explains that one should not assume that the Catholic Church promotes socialism or communism.The duty of social mortgage falls on the shoulder of private property (which does not exist in these economic systems). He  goes on:

My defense of the free market is not a defense of crony capitalism, not a defense of mercantilism, not a defense of banks or entrepreneurs who buy the courts, who buy the states, because these people act exactly against the free market.

Rev. Sirico bases his explanations of the free market and the role of businesses on the book of Genesis. It says that human beings were created in order to exercise creativity and rule over all of creation.

To read the full article in Spanish, please visit ElSalvador.com.

 

Over at the National Catholic Reporter, Michael Sean Winters makes some comments about my book Becoming Europe based on a review he had read by Fr. C.J. McCloskey. Here are the most pertinent of his observations:

I know that American exceptionalism lives on both the left and the right, but when did the right become so Europhobic? And why? National Catholic Register has a review of a new book by the Acton Institute’s Samuel Gregg entitled Becoming Europe: Economic Decline, Culture, & How America Can Avoid a European Future. I confess, come August, when Europeans sensibly take the month off and head to the beach or the mountains for time with their families, I am envious of them, not scornful. When I look at Europe’s lower rates of income inequality, I am envious, not scornful. When I look at the creative ways Germany minimized unemployment during the recent economic downturn, I was deeply envious.

Of course, given the fact that Gregg works for the libertarian Acton Institute, where the false god of the market is worshipped day in and day out, it should not surprise that he misses the Catholic and Christian roots of the modern social welfare state as it exists in Europe.  And the fact that Rev. C. John McCloskey misunderstands the Christian roots of the modern social welfare state shows the degree to which some members of the Catholic clergy have bought into what can best be described as the Glenn Beck narrative of the relationship of faith and culture.

Alas, Mr. Winters apparently hasn’t actually read the book. Because if he had, he would know that Becoming Europe (1) notes several good economic things happening in Europe (such as in Germany and Sweden) and (2) addresses at considerable length the various Catholic and Christian contributions to the development of European welfare states and the European social model more generally. In the case of the latter, I’d direct his attention to Chapters 2 and 3 of Becoming Europe where these matters are discussed extensively. The point is that it is always prudent to perhaps read a book before venturing criticisms of its arguments.

Then there is the label of “libertarian.” Again, if Mr. Winters took a moment to read a few of my writings, he’d know that, in books such as On Ordered Liberty, I‘ve articulated critiques of libertarian thought, especially with regard to the way that libertarian thinkers approach, for instance, moral questions. Figures such as Friedrich Hayek, Ludwig von Mises, and Milton Friedman have many interesting economic insights. But I have always viewed their philosophical positions (which include, among others, commitments to nominalism, epicurism, utilitarianism, social-evolutionism, and social contractarianism) to be less-than-adequate. In many ways, their conceptions of the human person are virtually indistinguishable from modern liberals such as John Rawls. (more…)

Joe has done us all a real service in putting together his three part (1, 2, 3) primer on Bitcoin (full PDF here).

I am curious, though, what the justification is for referring to Bitcoin as a “commodity” currency. Consider this from Izabella Kaminska at the FT Alphaville blog:

For those who insist that the term “fiat” refers exclusively to government-issued fiat currency, it’s perhaps better to interpret our use in the evolutionary sense.

Meaning that Bitcoin (and other virtual currencies) represent not commodity money, not managed money, nor even old fashioned government-issued fiat money, but a whole new type of super fiat that is rendered valuable by the issuing crowd (made up of independent entities) rather than the state.

The idea is that Bitcoin isn’t “declared” to be valuable by the state, but that it is “declared” to be valuable by common consent of the community of Bitcoin users. Consider this a kind of communal rather than governmental fiat.

This is why I wondered earlier about Bitcoin as “merely fiat money without the pretensions.”

But then again, isn’t this kind of communal agreement or declaration of value what money has always really been? Isn’t that, as Joe relates, what we learn from the example of the rai of Yap? (Their real innovation seems to be that they anticipated something like the “virtualization” of money exchange.)

Here again I’ll invoke the insight of Richard Whately: “It is not that pearls fetch a high price because men have dived for them; but on the contrary, men dive for them because they fetch a high price.” People are mining Bitcoins because they fetch a high price…at least for now.

[Note: This is the third entry in a three part series. You can read the introductory post here and part two here.]

The Disadvantages of Bitcoin

For people who are not obsessed with anonymity and are not waiting for the U.S. to return to the gold standard, the reasons for avoiding entering the Bitcoin market are numerous:

1. Convertibility – Whereas other currencies are convertible into other financial instruments (dollars to checks to certificates of deposit, etc.) and through numerous third-party services (e.g., Visa, PayPal, Citibank), commodity currencies like Bitcoin can only be exchanged for fiat currencies—and then only through an online exchange. Indeed, unless your computer is working overtime on Bitcoin mining, the only way to acquire the currency is to buy it from one of the 30 online exchanges.

These exchanges are completely unregulated and are subject to problems that do not affect other financial markets. For instance, in 2011 the largest Bitcoin exchange, MTGox, had a security breach that resulted in the theft of nearly $9 million worth of Bitcoins. The theft caused the value of Bitcoins to crash from $17.50 to one cent before the market was able to recover.

2. Instability – The MTGox breach—and the subsequent market crash—taught Bitcoin owners a harsh lesson about commodity currencies: they can be wildly unstable. Over the 8 month span from October 1 2010 to June 9 2011, the market value of Bitcoins skyrocketed 9667-fold from a value of $0.06 to $29.

The rate had dropped in 2012 and at the end of last year a Bitcoin was worth only $13.51. Last week, though, Bitcoins were trading as high as $266 before plummeting to less than $100. Anyone who had bought $1,000 worth of currency in October 2010 would theoretically have $4.4 million worth of Bitcoins. However, the convertibility problem would make it nearly impossible to extract that money without crashing the market and devaluing the entire currency. A gradual sell-off over an extended period of time would be necessary to take advantage of increase in valuation.

Still, being the seller of the overvalued currency is preferable to being the buyer. The Winklevoss twins, millionaires famous for their legal battle with Facebook, claim to own around one percent of all Bitcoins currently in existence (around 108,000). They began buying the currency in 2012, making some early Bitcoin holders very rich.
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Blog author: jcarter
Wednesday, April 10, 2013
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“Crime has been in decline,” says Acton Research Fellow Jonathan Witt, in an article for The American Spectator, “but current government policies are bound to reverse this trend.”

Against the backdrop of sluggish growth and high unemployment, one bright spot has been declining crime rates, with levels in the United States now about half what they were 20 years ago. This gradual decline holds true even in the perennially high-risk demographic of young men, suggesting it isn’t merely a knock-on effect of an aging population. That’s the good news.

The bad news is that current government policies may reverse this downward trend.

Witt’s article will also be featured in today’s Acton Commentary.  Subscribe to the free, weekly Acton News & Commentary and other publications here.

Connecting CommunitiesA recent report by the United Nations states that out of the world’s seven billion people, six billion have a mobile phone, but only 4.5 billion have a modern toilet. In India, there are almost 900 million cell phone users, but nearly 70 percent of the population doesn’t have access to “proper sanitation.” Jan Eliasson, the UN Deputy Secretary General has called this a “‘silent disaster’ that reflects the extreme poverty and huge inequalities in world today.”

Despite the lack of sanitation, most people are able to afford a mobile phone with a wide range available for [$15] or less and the price of calls reducing from [15c] a minute to [3c] a minute in the last decade.

This report focuses on the negative: the lack of sanitation for those in abject poverty, but it fails to note the extraordinary fact that people living in poverty have access to a device that was, until recently, a luxury item for wealthy Americans. Tim Worstall, a contributor on Forbes.com, addresses this report in a recent article:

It’s possible to be a little cynical about this phones versus thrones number though. Actual flush toilets aren’t in fact the problem. What is the provision of water to flush them and a sewage system to flush them into. Both of which are largely government provided. While mobile phone systems are largely private company provided. Whether you want to call it the lust for profit or the greater efficiency of the private sector, it won’t surprise the more right leaning of us that phones do have a greater market reach than toilets.

Andreas Widmer, president of The Carpenter’s Fund in Switzerland, has spoken a great deal about small businesses, aid, and investing in Africa. In an interview with PovertyCure, he explains causes of poverty: (more…)

Blog author: jcarter
Wednesday, April 3, 2013
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“There has always been a generous spirit in America towards the downtrodden, but it’s time to realize that we are no longer being generous: the government is leading us merrily along the path of fiscal fugue,” writes Elise Hilton. So why are federal officials advising benefit applicants that they shouldn’t be “discouraged by funding issues”? The full text of her essay follows. Subscribe to the free, weekly Acton News & Commentary and other publications here.
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There is much talk about raising minimum wage, even to the absurd rate of $22 per hour. President Obama has promised an increase to $9 per hour. Some small business owners, feeling the pinch of these raising wages, are turning to technology to solve their economic issues.

Carla Hesseltine, who runs a small bakery, is considering eliminating employees and replacing them with tablets that will take orders:

In order for her Just Cupcakes LLC to remain profitable in the face of higher expected labor costs, Ms. Hesseltine believes the customer-ordering process “would have to be more automated” at the Virginia Beach, Va., chain, which has two strip-mall locations as well as a food van. Thus, she could eliminate the 10 workers who currently ask customers what they would like to eat.

Small business owners can only raise prices so much without damaging sales, in order to cope with increased labor costs. Of course, there are costs involved with the set-up, upkeep and repair of technology, and the intangible cost of the loss of human contact.

Many studies about the effects of higher wages on overall employment tend to be politicized, clashing over whether the benefits of higher paid workers outweigh the costs of having fewer low-wage jobs. To support President Obama’s case for an increase in the minimum wage, the White House cites a 2009 academic study that says any adverse employment effect from such would be of a small and possibly irrelevant magnitude.

The raise in minimum wage to $9 does in fact seem to be minor. However, it is clear from Ms. Hesseltine’s story alone that tinkering with the minimum wage system will have ramifications. One could argue that the loss of minimum wage jobs will be balanced out by sales of technology and the jobs created there. It remains to be seen.