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The Myth that Economic Success Requires Personal Freedom
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October 11, 2011
5:30 am
Scotlyn
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I suppose I should clarify - you initially spoke of economic "success" but then the concept of economic "growth" crept in, as if it was interchangeable.  "Growth" is an artifact of the readily available supply of something that initially seems endless - in the past few centuries, this has included new lands (forget about the people already living there), oceans, and petroleum-based easy energy (which feeds easy cereal feeding of the world).  All of these things will quickly prove (I expect within my lifetime and that of my children) NOT to be endless. 

I understand your point about population, freedom and sustainability, but we can't really even have this conversation properly until we give up the delusion of growth, and start focussing on quality of life, quality of planet, and issues of that nature.

Human overpopulation is also an artifact of this recent (in planetary terms) of "growth" - especially as it has made possible the over-feeding with petroleum-pumped cereals - all animal populations increase their numbers in the face of surplus food.  Severe reductions in our population may lie ahead in any case, through war, starvation, illness, storm, drought, etc...  Planned reductions would be nicer and less violent, of course, but again, we have to give up the delusion of economic "growth"  to even have that conversation sensibly.  And one other thing we need to give up in order to have that conversation sensibly is the implication that "you're hurting me by having all those babies" to which the reply might (just as correctly) be "you're hurting me by stealing my food, water and self-sufficiency, to support your lifestyle and if I can rear two children to adulthood out of all the children I give birth to, I'll be lucky."  None of this recrimination helps the conversation at all.

What helps is paying attention to the detail of what's wrong, and doing what we can to help it go better.

Then there is the originally stated concept of economic "success."  On an individual basis, of course, this definition is very subjective. For example, actual money is a thing that rarely shows itself in my house, and when it does, we usually manage to send it on its way again fairly quickly.  Nevertheless, since we measure our life satisfaction in terms of good food, good company, creative opportunities for making or bartering for what we need, leisure time to sit and think, a few good books to read, a productive garden in the summer and fat pigs in the winter, coupled with very little "wanting" of things in shops, we are personally much more than "successful."

As to the economic success of a country, I measure economic success by the condition of the poorest.  If its economy cannot lift all boats to some degree, it is not a success.  The super-wealthy have always been with us (well, at least since
agriculture was invented).  Nothing new, innovative or successful about
that. The super-wealth of a few can happily co-exist with slavery or serfdom.  It is the democratisation of wealth, land-owning, production, etc,
that is new, and when allowed to develop properly, successful.  By this measure, the US was much more "successful" post-depression and up to the 70's or so, as FDR's measures kicked in and took hold.  This success began to erode once Reagan began overturning as many of these measures as he could - uncoupling the fortunes of the wealthy from those of the poorest, in the face of which no "common good" is possible.  And to a reversion to a type of debt-serfdom of the majority. In the present day, countries such as Sweden and Norway are among the most "successful" in my view. Their economy is run at the service of the citizens, not the citizens at the service of the economy.

 

October 11, 2011
5:36 am
Scotlyn
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PS - The "Mars Trilogy" by Kim Stanley Robinson (particularly book two) is excellent for thinking about economies in really innovative new ways, especially on how to run an economy in the context of resources that are scarce by definition.

October 16, 2011
1:26 pm
mm
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Stanton, I don't know if this was intentional or not but your joke of inducing cancer to increase GDP growth from cancer treatment sounds quite Keynesian and a huge malinvestment of funds... they might as well pay people to break windows and pay others to build and fix them to boost the economy.

That got me thinking: if you don't know who Keynes is and what I mean by that, you should stop making economics-related blog posts until you transcend the dunning-kruger effect affecting most people's conventional views on economics.

I don't mean that as an insult or to show how smarter I am for knowing about some random dead guy; I really think you should read up on John Maynard Keynes, and so should anyone else reading this comment. I'm guessing you might know Keynes' general theories already but for those who don't, I suggest Hunter Lewis' book, Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts

Also watch this youtube video:

Funny video that highlights many of Keynes' bad ideas. If you understand most of what they're saying in it, you probably know more about economics than 99% of laymen and probably a decent chunk of "experts" too, especially those in governments - governments like to use Keynesian economics, for obvious reasons.

Note: politically, Keynes is a "liberal" economist. I'm not saying everyone who believes in Keynesian or liberal economics is suffering from the dunning-kruger effect, just anyone who doesn't know his principle theories and criticisms since outdated Keynesian theories are lurking everywhere. (I do however think anyone who knows Keynes' theories and counter-arguments but still believes in his more outdated theories is probably not a very good economist, but at least they're informed)

Keynes, in addition to inventing a made-up economic formula about spending and GDP growth, brought us stupid ideas like "consumers need to buy junk to boost our economy" "deficit spending on inefficient make-work programs and stimulus packages helps fight recessions" "Wars are good for the economy. WW2 got America out of the depression" (ha! Keynes got America into a protracted depression - ever heard of the ?)

October 16, 2011
7:58 pm
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Scotlyn:

The problem I'm talking about is that a government which values growth above all will outcompete a country that values sustainability, because it's more productive (in the short and medium term).

If you mine out your resources to overproduce corn and weapons — or, even better, mine out someone else's — you can economically and militarily dominate a country that exists sustainably.  This is basically the history of every empire ever: they expand as long as they can conquer new resources more quickly than they deplete existing ones. 

This was most obvious with, say, the Romans.  In the modern era, the conquering tends to be softer.  Witness the US practice of agricultural dumping (which I know you've mentioned before) to destabilize local sustainable agriculture, and the historical propping up of banana republics to keep the bananas coming.  We outsource the dirty work of politics to local dictators while keeping the economic spoils.  And China is even more hands-off…they can simply wave around all the trillions of US dollars they've got from keeping the exchange rate artificially low.

And this is the conundrum I'm bringing to our attention: any sustainable country is competing with a handicap.  If we decide that there are things we value more than economic growth, the countries that value economic growth over all have a huge advantage.

"By this measure, the US was much more "successful" post-depression and up to the 70's or so, as FDR's measures kicked in and took hold."

The US was successful post-WWII because we were the only industrialized world power whose infrastructure didn't consist primarily of smoking craters.  I don't think FDR or his policies had much to do with it, with the probable exception of the GI Bill.

However, it is true that corporate dominance really got moving in the 1970s and kicked in through the 1980s, as evidenced by the fact that real wages peaked in 1974 and have stagnated or declined ever since.  Corporate welfare is far more pervasive and damaging than individual welfare.

Also, I don't measure economic success by the condition of the poorest: I measure it by opportunity.  It is very important to note that what currently passes for a "free market" is simple corporate thuggery: any truly free market would immediately abolish the concept of a corporation, which is just a special exemption to the rules for profit-seeking groups.  It's a complex issue.

JS

October 23, 2011
10:38 pm
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mm:

I'm absolutely familiar with Keynes' theories, and with why they're wrong -- which is why I use the cancer example.  And yes, the "depression of 1920" was quickly fixed by allowing deflation to take its course, allowing those who had been prudent and saved money (instead of participating in the bubble) to buy overleveraged assets and start them producing again.  What we're doing now is stealing money from the prudent (who would otherwise invest it to restart the economy) and giving it to the stupid and reckless.  Result: less prudence, more stupidity and recklessness.

JS

 

 

 

April 22, 2012
9:48 pm
BPT
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This is partly why the earth is going to hell in a hand basket, the idea that growth is the answer to all ills. Bhutan has a wellness measure that is showing alternatives are available. What we value though is getting the bigger TV or the faster car, or now even the electric car.

Solutions to the topsoil issue, food chain compromise, health and wellbeing are individual concerns and Govt, or Corporate interests will only be mobilised when actual disfunction or an economic need can be identified...so until it is all broken, the current diabolical misallocation of wealth will prevail.

We are now experiencing what the "Indians" said would be ours to enjoy...not all the trees are felled but we are heading that way.

April 23, 2012
3:57 pm
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BPT:

The need for endless growth is an inbuilt 'feature' of our current monetary system, which must expand or crash...but that's another topic for another time.

JS

September 8, 2012
5:42 am
WalterB
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But economic opportunity depends on the rule of law. Without personal freedom the rule of law will be suborned by rich parents obtaining special privileges for their children, if not by an oligarchy of rich people in chahoots

Once the courts and government are suborned there is no lawful way of retuning to economic freedom.

November 8, 2012
1:49 am
eddie watts
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so must be awkward with the american elections:
on the one hand most libertarians seem to vote republican, who get "6,000 year old earth" voters too.(along with stopping equal rights and a whole lot of other craziness, rape victims own bodies prevent pregnancy etc etc)

or the socialism side of liberals, who seem to mess up the economy by some peoples views.

November 9, 2012
3:31 am
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WalterB:

The "rule of law" always ends up giving special privileges to someone.  In previous years, it was primogeniture: currently it's banks (given the right to create money out of thin air) and corporations (given the right to avoid responsibility for their actions, so long as they're organized as a profit-making enterprise).

eddie:

Don't forget the Obama administration deliberately letting semiautomatic weapons get smuggled to Mexican drug cartels so that they can blame Mexico's crime on lax American gun laws, whereupon they were used to kill American border patrol agents (google "Fast and the Furious"), renewing the Patriot Act, signing the NDAA (authorizing indefinite detention without being charged with any crime for all Americans), not closing Guantanamo, etc.  

The difference is more of rhetoric than actual policy.

JS

March 14, 2014
11:29 pm
Wanderer
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Just a few observations,

Firstly growth....

I think growth comes down to 2 factors, urbanisation and population (generational) growth.

Urbanization serves to change self sufficient persons living off the land to persons relying on others to service most of their needs. Urbanization reaches a tipping point where further urbanization doesn't serve to increase economic growth of countries (most western countries are at this point). China has seen massive growth from urbanisation.
Generational growth depends on the simple fact that there are more consumers to buy products in the future than there are now.

I think once your country sees negatives in both, growth stops and collapse will ensue. I just don't think societies are truly collectively smart enough to continue growth through innovation in the face of falling demand.

On free markets....

Free markets should work but they don't because they truly aren't free, the problem I see is that the money you need to participate in free markets aren't subject to supply and demand forces. Interest Rates set by governments whom need to be re-elected are the scuttler of free markets. If people whom demanded money could negotiate a fair price with the people who could supply it, the whole system would work. Banks would become arbitrageurs again, between savers and spenders and also between the people and their governers.

On the American empire....

The American empire is probably the most laughable in modern human history. Empires work by a home state improving its standard of life by extracting tribute from satellite states either through fear or through protection. The USA's large funny mistake is that the tribute it receives off satellite states it one day has to pay back in the future.

March 15, 2014
3:30 pm
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dilberry:

I suspect that a substantial fraction of the "growth" that results from urbanization is fake. 

In a primarily rural society, people feed themselves via subsistence agriculture, which isn't part of the economic system: they're eating the food they grow themselves.  In a primarily urban society, people must work, earn money, and buy the food from someone else -- transactions which can be tracked and considered part of GDP.

And yes, you're correct: in the absence of productivity improvements, the only way to produce growth is to produce more people.  However, this also assumes the presence of sufficient natural resources to feed them and sufficient demand for whatever they can produce -- the problem with the latter being that people have to be educated and capable enough to produce something others want, and paid enough that they can afford to buy it.

Meanwhile, the drive towards corporate profit involves reducing labor costs by reducing them to interchangeable unskilled labor or automating everything.

Result: a growth-based economy is an unstable equilibrium on all sides.

"the problem I see is that the money you need to participate in free markets aren't subject to supply and demand forces."

That's a big part of it: when your medium of exchange represents government debt, i.e. a claim on your future earnings, all the incentives go haywire.  It'll be interesting to see how cryptocurrencies shake out, and whether they can represent another usable alternative medium of exchange. 

As far as the American empire, we get a free pass on that as long as US government debt is the least laughable of all government debt.  Where else are you going to park your trade surplus?  The only countries that are anywhere approaching solvent are also too small to absorb any usable fraction of world wealth...

It's like the old joke:

"What are you doing?  You can't outrun a bear!"

"I don't have to.  All I have to do is outrun you."

JS

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