Posts tagged with: economy

Paul Krugman made the mistake of over-sharing this past weekend when he told CNN’s Fareed Zakaria he thinks that the United States economy would benefit from a military build-up to fight made-up space aliens. He’s been defended as being fed up with Republican obstructionism, being desperate to make a point, or even being wholly and completely correct. He’s entirely wrong though, and his thinking (what there is of it) is an example of the kind of depersonalized economics that has cost this country so much.

You’ve probably seen the video by now. If not, your sides will ache through the rest of this post:

Economics is more than just the manipulation of balance sheets, which is how the hyperinflation trillions-in-stimulus crowd see it. Professor Krugman does not accept that essentially, economic activity is the production of something valuable, and he does not believe that human labor has intrinsic worth, besides its taxability. Therefore what people do does not matter; in fact, if lying to them makes the economy function more smoothly, that’s fine.

This is a vision in which Man has no dignity—in which Man is not made in the image of God or anything else. The study of human interaction, then, is nothing more than moving numbers around on a page, and people are no different than plastic cars to be shifted across a traffic jam board game. (It’s telling that Krugman turns to space aliens to save our economy.) Contrast this view with what the Pope said this morning at World Youth Day.

What does have value? The state, which for progressives like Krugman is the engine of historical progress. Enter Keynsian economics, and this weekend’s gibberish.

Blog author: jballor
posted by on Monday, February 1, 2010

Business Weekly, a production of BBC World Service, had an informative feature on Toby Sheta, a Zimbabwean mobile phone trader, who provided insights into the courage and tenacity required of entrepreneurs under Mugabe’s brutal dictatorship (you can download the original Business Daily story in MP3 format here).

During the worst times of the Mugabe regime, Sheta would illegally buy and sell fuel coupons, a profitable enterprise because of the chaos of governmental interference in international trade and domestic fuel markets. Sheta says in the context of survival the “black market actually became the formal market,” the place where products were available. “For us the black market was the real market.”

Sheta says that what he gained as an entrepreneur in the emergency economy translate into more normalized economic conditions: “The skills that were learned and some of the principles that we’re using apply in any situation.” Sheta says, “Zimbabweans overall have gone through a school, a very informal school that was first upon us, in some ways in a positive way for us, to actually think and work for ourselves, work with our hands and see where we can see opportunity.”

Risk is a constant feature of enterprise, and Sheta testifies to the survival of the human spirit of innovation: “What I’ve learned is, even as I think of Haiti right now, as long as you’re human, and you’ve got your two feet, your two hands and your brain is still functioning, you’ll survive.”

“As you go into the problems you also go in terms of our creativity and learn how to survive,” he says.

As put by dairy farmer Brad Morgan, featured in Acton’s The Call of the Entrepreneur, “You put your butt in the corner, you’d be surprised what you can achieve.”

In terms of Zimbabwe’s future, Sheta points to stabilization in 2010 and beyond, in part because of the dollarization of the economy, and he concludes that Zimbabweans have “graduated to another level” from the emergency school of economics under Mugabe, looking forward to “see opportunities where in the past we wouldn’t have seen those opportunities.”

There has been much discussion, commentary, and debate on Pope Benedict’s much anticipated encyclical on the economy Caritas in Veritate (remarkable for a statement that has not yet been released).  At the PowerBlog, we will keep you informed on what is being said about the encyclical and, when it is released, we look forward to providing great coverage.

Two of the most recent commentaries came from John Allen Jr. in the National Catholic Reporter and Michael Novak in First Things.  In Allen’s preview of the new encyclical he states:

In effect, what Benedict laid out last night likely amounts to the theological and spiritual substructure of the encyclical, minus the specific economic prescriptions.

The core of what Benedict said, during an ecumenical vespers service at the grand basilica of St. Paul Outside the Walls, is that building a better world requires forming better people.  Structural reform thus presuppose personal moral and spiritual renewal, including a life devoted to prayer and the sacraments.

Allen further hints at the theme of the encyclical with his statement:

The idea that a better world must be built on better people is likely to be a core theme in Caritas in Veritale, and the pope dealt with it at length yesterday.

“Paul tells us [that] the world cannot be renewed without new human beings,” Benedict said. “Only if there are new human beings will there be a new world, a renewed and better world.”

There is much speculation that the new encyclical will be in favor of free markets and Novak responds to the criticism from those on the left:

For moralists, it is essential to see how often (not always) government itself sins grievously against the common good, out of a lust for power and domination over others.  Furthermore, government often (not always) generates foolish and destructive regulations, and often dispenses justice that winks rather than justice that is blind.  Government is more frequently the agent of injuring the common good than the ordinary lawful actions of free citizens.  During the twentieth century, governments too often destroyed the common good of their citizens for years to come.

Blog author: jballor
posted by on Friday, June 12, 2009

A great deal of focus in the midst of the economic downturn has been on “green” jobs, that sector of industry that focuses on renewable sources of energy and that, according to some pundits and politicians, heralds the future of American economic resurgence. Here in Michigan, the long-suffering canary in the country’s economic mineshaft, the state government has particularly focused on these “green” jobs as an alternative both to fossil fuels and to fossil fuel industries, including most notably the Big Three automakers.

Apart from the dangers, moral and otherwise, endemic to government officials picking winners, there’s a need to rethink this entire framework. Even if such predictions about the future of alternative and renewable energy sources are realistic, it’s highly doubtful that the businesses that produce these kinds of technologies will ever employ enough people to begin to replace the losses to the labor force following the various bankruptcies, selloffs, buyouts, and layoffs.

The lesson state officials ought to learn is one about fostering an economic environment that promotes diversification and sustainability through creative liberty, rather than being tied to any one (however hopeful) sector of the economy.

This lesson also has something to teach us about how to truly promote sustainable business. The jobs that are most usually called “green,” like the places that manufacture wind turbines or solar cells, are a tiny part of the economic picture. Instead of “green” jobs, we ought to focus on “greening” jobs, changing the way we do jobs that already exist.

Anyone who works in business will tell you that at a certain point of production it is far more lucrative to eliminate $1 of waste than to gain $1 in sales. The eliminated waste goes straight to the bottom line, while the increased sales brings along all kinds of overhead that cuts into profits. As part of a recent feature titled “Work Reinvented,” Forbes reporter David Whelan described how many employees are taking the challenge of the economic downturn as an opportunity to “reinvent” their jobs. As Whelan writes,

Technology–computers and teleconferencing equipment, that is–makes fixed employment in a fixed place less necessary. Economics makes it less available. With chronic instability comes a shift in loyalty from the company to one’s own calling, skills and personal life.

Technological advancement, economic conditions, and environmental concerns might combine to create the perfect storm for the reformation of many kinds of jobs. For some, including a few profiled in Whelan’s report, this might mean an increase in telecommuting (although then again, perhaps not). For others it might mean job sharing, opening up their own business, or negotiating different compensation packages. An added benefit of this kind of innovative flexibility might be curbing of the transitory nature of today’s employment scene. There’s no way real way to enjoy human community when young and middle-aged professionals are moving every 2 to 3 years.

But in terms of political economy, our policies ought to be focused on the broader picture of “greening” a diverse landscape of jobs rather than subsidizing a narrow strip of “green” jobs.

Blog author: jwitt
posted by on Monday, February 16, 2009

In response to the question, “What are the moral lessons of the American Recovery and Reinvestment Act (ARRA)?”

Perhaps the most effective historical trope in pushing through the massive stimulus package on Capitol Hill has been the notion that if only the New Deal of the 1930s hadn’t had to wait more than three years for the election of FDR, the Great Depression might have been avoided.

But have you ever wondered why the Great Depression persisted for so long? Why didn’t we bounce out of it after two, three, or four years as we did from previous economic downturns? Hillsdale’s Burt Folsom suggests an answer. Whether it was paying farmers not to farm until we had to import millions of bushels of grain, or throttling job-creating enterprise by raising the highest marginal tax rate to 90 percent, the many tentacles of the New Deal stimulus package choked rather than stimulated the American economy.

The common theme of all of the New Deal’s misguided policies was to remove decision-making power and cash from the free market and move it to Washington. As Folsom goes on to note, such policies not only extended the economic downturn, they set interest groups against each other, stimulating rather than alleviating human envy: “The New Deal divided and politicized the country in tragic ways. Those who lobbied most effectively won subsidies and bailouts even if their cause was weak. Others, who had greater needs, received nothing.”

There is a cure for human envy, of course, but it lies with a civil rather than a government institution, and with a power higher than Capitol Hill.

I’m ambivalent about the value of term limits, but one thing that can certainly be counted in their favor is that they (at some point at least), force lawmakers to go out and try to make a living in the economic environment which they helped to shape. In Michigan, nearly half of the 110-member House of Representatives will consist of new members. Of the 46 new members, 44 are coming from seats that were open because of term limits.

And now we have reports that ex-legislators are having a tough time finding private sector jobs in the state. As the AP reports, “The task of finding new gigs will be tougher than usual for this year’s crop of term-limited lawmakers because of Michigan’s highest-in-the-nation unemployment rate, which in November reached 9.6 percent — the highest monthly rate since March 1992.”

It’s been said that those who can’t do, teach. But sometimes those who can’t do, legislate. That’s in part an argument in favor term-limits, part-time legislatures, and something other than a system that encourages the formation of career politicians.

I recognize that serving in government is an important and even a divine calling. Still, I have a hard time finding a great deal of sympathy for those who after a break from the private sector have to face up to the real-world employment situation. You reap what you sow.

Blog author: jballor
posted by on Tuesday, July 15, 2008

Last week presidential candidate John McCain distanced himself from economic adviser Phil Gramm, after Gramm’s comments that America had become a “nation of whiners” and that the current concerns over a lagging economy amounted to a “mental recession” rather than any real phenomena.

The press and political reaction was swift and quizzical. What could Phil Gramm possibly mean? Why would an adviser to a presidential candidate publicly broadside the American electorate? As one editorial page wondered, “we can’t fathom the target of his ‘nation of whiners’ zinger.”

Sen. Obama himself seemed a bit (mockingly) incredulous. “Then he deemed the United States, and I quote, ‘A nation of whiners.’ Whoa,” Mr. Obama said. “A nation of whiners?” After his remarks were published, Gramm would later clarify that he was talking about “American leaders who whine instead of lead.”

But Obama’s reading of Gramm’s original remarks seem to be the most natural. “It isn’t whining to ask government to step in and give families some relief,” said Obama.

Well, maybe it is whining, but that’s precisely the sort of family-friendly rhetoric that makes Gramm’s remarks seem unduly harsh by comparison. But does it matter if there is truth to the substance of Gramm’s assertions? A day after Gramm’s statements appeared in the Washington Times, the Washington Post published an article highlighting the findings of a study that characterized the baby boomers as a generation of…”whiners.”

The study by the Pew Research Center found that

More than older or younger generations, boomers — born from 1946 to 1964 — worry that their income won’t keep up with rising costs of living. They say it’s harder to get ahead today than it was 10 years ago. They are more likely to say that their standard of living is lower than their folks’ but that things don’t look too good for their kids either (67 percent of younger generations, meanwhile, feel they have it better than their parents).

This despite the fact that boomers, dubbed here the “gloomiest” generation, have had it objectively better for a longer period of time than any other generation before or since. Anecdotally I had a “boomer” relative tell me the other day that the movie Cinderella Man resonated with her because it happened during a time of economic duress, the Great Depression, that so closely resembles the problems of today. Talk about a lack of correspondence between perception and historical reality!

The real problem with Gramm’s remarks was that they displayed a lack of connection to the perceptions of many Americans, even if his comments corresponded better with reality than many popular perceptions. Part of what makes a successful politician is the ability to understand and sympathize with his or her constituency, beyond the clarity of vision simply to see what the objective truth is. Gramm’s comments were more than just “bootstraps” rhetoric. Perhaps they were meant to be prophetic, in a way that gives people a kick in the rear and forces them to readjust their frame of reference.

And, again, the substance of the remarks didn’t differ much from what the “straight talking” McCain campaign has been saying all along. Last April McCain marched into Ohio, a part of the country hardest hit by globalization of industry, and said, “a person learns along the way that if you hold on — if you don’t quit no matter what the odds — sometimes life will surprise you. Sometimes you get a second chance, and opportunity turns back your way. And when it does, we are stronger and readier because of all that we had to overcome.” This sort of approach takes seriously the realities of both global trade and the plight of displaced workers.

So McCain’s dismissal of Gramm should be understood as having as more to do with rejecting the tone and style of Gramm’s message than the substance. McCain may have learned something from the resonance of Mike Huckabee’s message to blue collar evangelicals that trade needs to be “free and fair.” But for many economic conservatives, reactions to that message were as negative as reactions were to Gramm’s message. Free and fair? Free is fair, right? Maybe it is, but it doesn’t always seem to be so. And simply repeating “free is fair” isn’t going to work rhetorically.

The ideological inability of many economic conservatives to frame their message in a way that resonates with mainstream Americans is what is reflected in Phil Gramm’s comments and the corresponding rejection and derision of Mike Huckabee by many in the GOP (the positive reception of Gramm’s remarks among many economic conservatives underscores this). In politics, communicating the truth effectively is just as important as perceiving it. McCain might be on a steeper learning curve on that score than many of his fellow Republicans.

Blog author: jballor
posted by on Tuesday, April 1, 2008

Last week the Providence Journal ran a piece by me on the forthcoming “rebate” checks from the government intended to be an economic stimulus, “The mandate is to ‘spend all you can’.” I take issue with the idea that the government gives us money that is our own in the first place, and then tells us how we ought to spend it: on consumables and retail goods to spur growth in the economy.

Instead, I propose that people “should use this rebate money as they see fit, since they are the ones most familiar with their own situations and their own needs. Consider giving part of the money to charity or saving, paying off debt or investing. And if it makes sense for you and your situation, you should feel free to buy that hi-def TV if you so desire.”

“But you certainly should not feel obligated to do so as if mere consumption is a civic responsibility,” I add.

The real problem with the package is that it perpetuates a view of the government’s role in the economy as the final arbiter of how markets ought to work and what people should be doing with their money. No doubt this is in part a response to the idea that the federal government in general, and the president in particular, has a primary formative influence on the shape and health of the nation’s economy.

Alasdair MacIntyre puts it this way,

Government insists more and more that its civil servants themselves have the kind of education that will qualify them as experts. It more and more recruits those who claim to be experts into its civil service…. Government itself becomes a hierarchy of bureaucratic managers, and the major justification advanced for the intervention of government in society is the contention that government has resources of competence which most citizens do not possess.

Thus comes the idea that the president is a kind of “economist in chief,” who directs the nation’s and the world’s markets by executive decree (compare that idea with the presidential job description given by the Concerned Women for America here).

Update: It’s 3 am…and this time the crisis is economic…


Of course, if we’re really concerned about someone answering a phone in a crisis, maybe we should elect a Wonder Pet:

Hostility towards globalization is not the exclusive territory of the left in Italy. Giulio Tremonti, a former minister of the economy in Silvio Berlusconi’s centre-right government, has written a book called Fear and Hope (La Paura e la Speranza), largely arguing against free trade and the opening of international markets.

Tremonti blames the recent rise in the prices of consumer goods on globalization and says that this is only the beginning. The global financial crisis, environmental destruction, and geopolitical tensions in the struggle for natural resources are also fruits of globalization, according to Tremonti. He identifies the main problem as a lack of international governance of the process of globalization and calls for a new Bretton Woods-like system to confront the multiple crises caused by what he calls “marketism”.

The “dark side of globalization” can only be countered by a return to European values: tradition, the family, and the nation, adds Tremonti. Europe “needs a philosophy which makes politics and not economics the primary mover [of globalization]. This can only work if we go back to the roots of Europe, these are the roots of Judeo-Christianity”.

This “cure” to the ills of globalization remains vague (as one would imagine in a book of only 112 pages). Still more puzzling is his insistence on a contrast between market principles and traditional European values. The idea that a return to values must be coupled with a stronger politicization of the world economy clashes with experience. More regulation and state interference not only tend to reduce growth and living standards but also create new opportunities for rent-seeking and corruption, and thereby undermine the traditional virtues that Tremonti supports.

He misses the opportunity to discuss how certain values are enhanced by the market and how international competition has in fact strengthened Europe by highlighting its best qualities, both technologically and culturally, while repressing its worst.

Tremonti’s vision is inward-looking and profoundly pessimistic. Some market-oriented Italian commentators have pointed out that his ideas seem dangerously close to old-style protectionism. It is clear if Europe followed his analysis, it would be led on a path of future irrelevance both as an economic and a cultural model.

This article at the WSJ reviews a book that purports to be about progressive environmentalism. Doomsday is out. Nobody cares. People need material well-being before they are interested in environmentalism at all.

Messrs. Nordhaus and Shellenberger want "an explicitly pro-growth agenda," on the theory that investment, innovation and imagination may ultimately do more to improve the environment than punitive regulation and finger-wagging rhetoric. To stabilize atmospheric carbon levels will take more–much more–than regulation; it will require "unleashing human power, creating a new economy."

Not perfect, but alot better than what passes for environmentalism most of the time.