Archive for the ‘Economics’ Category

China certainly is lucky to have us around to tell them what to do

November 20, 2006 1 comment

Commerce secretary Don Evans says China isn’t reforming it’s economy fast enough, a call echoed by President Bush this week.

Riiiight… this from the country that has a budget deficit of over two billion bucks a day.  That’s like marriage advice from Henry VIII.  It’s like John Ashcroft doing a rap album.

“You know, if you let me write $200 billion worth of hot checks every year, I could give you an illusion of prosperity, too.”
- Lloyd Bentsen, 1988

Take your time, China.  Take all the time you need.  Change slowly and carefully – you don’t want to turn a nation of a billion people on its head overnight.

Seriously, the national debt will sink us long before Al Queda ever gets the chance.  And we have plenty of misguided subsidies and other economic policies of our own.  Blaming China for our troubles is more sidestepping than stepping up.

Bush’s tax cuts are FAKE

October 30, 2006 11 comments

“You know, if you let me write $200 billion worth of hot checks every year, I could give you an illusion of prosperity, too.”
- Lloyd Bentsen, 1988

The universal diss against Democrats is that they “Tax and spend”.  Thank goodness for the Republicans who cut taxes!  And if any Democrat opposes them, they can plant their feet resolutely and demand; “Are you willing to make Bush’s tax cuts permanent, or NOT?”

Only trouble is, Bush’s tax cuts are fake.  As long as we keep spending vastly more than we are taking in, we’re heading for disaster.  So says America’s ‘Accountant In Chief’, the head of the GAO, David M. Walker. 

We. Are. Headed. For. Disaster.  Deficit spending will destroy our economy.  Thanks for the big favor, mister president.

At least with “Tax and spend” the transaction is done.  You taxed, you spent, that’s it.  Well, not really ‘it’.  The money didn’t disappear from existence; it went back into the economy.  Some government programs actually do some good, too.  OK not many, but some.

Not so with “Borrow and spend”.  When you borrow money, you have to pay it back someday under conditions of compound interest.  This is just as true for governments as it is for individuals.  Bush’s tax cuts just push off the taxes to our children.  By then, interest will be the bulk of the federal budget.

It’s no use whining about Democrats – it’s been a Republican shop for six years now.  House, Senate, President – it’s all yours.  Our president never vetoes any spending.  But “borrow and spend” is a bigger threat to our country than Al Queda could ever think of being.  So when i talk about Bush being a threat to our country, I mean it; absolutely, literally, in the most direct sense.  He and his band of borrow-and-spend so-called “conservatives” are on-track to destroy our country. 

Only thing I can’t figure out is how the Democrats were too dumb to come up with the phrase “borrow and spend” a long time ago.  It’s been obvious to me for years.  And now it’s official.

Tony Blair knows a good deal when he sees one

July 30, 2006 Comments off

In the wake of George Bush’s veto of federal stem cell research funding, England’s Tony Blair…

…is on a four-day visit to California to try to boost co-operation between the state and the UK.  The UK may benefit from an influx of cash as US stem-cell firms face vocal and politically powerful opposition.
- BBC News: Blair to lure US stem cell firms

Crippled children and alzheimer’s patients aside, biotech is huge business, with correspondingly strong support from Singapore, Korea, China, and now England.  Thanks a lot, religious fundiecrats.  Just another area where other countries can gain an insurmountable lead.

Open thread 1 on poverty: Socialism vs Capitalism

July 27, 2006 5 comments

Much of the slugfest centered on the contest between socialism and capitalism, with GUYK and WEBS05 arguing about the definition and relative merits of each.  Although I am capitalist I think the distilled version of either ignores some important realities…

It is possible to screw up ANY kind of economy: capitalist, socialist, or communist.  But I think it would be fair to say that the odds of successful communism are rather poor.  You can get people to work by threatening them, but if you want extraordinary effort or innovation, they need to feel a stake in the outcome.  Communism offers no such stake.

I wish it was January instead of July, because a great deal of heat was generated by the conflation of socialism and communism.  While both are easy to screw up, and both are heavy on the social programs, there is one extremely important difference: under communism you cannot get rich.  Even if by some miracle you found a way to motivate people to work hard, produce a superior product, and get it to market, under communism it’s all the government’s from the very beginning.  Your top pay is set by a government pay-scale.  You are level 7, so your pay is this much.  Since there is no ‘private’ industry, high-performers are stopped at the limit of bureaucratic imagination.

Under socialism you will pay higher taxes as your income goes up, but there’s a maximum tax rate.  This, too, is hard to set correctly; the Beatles’ Tax Man wasn’t exaggerating when it said “That’s one for you, nineteen for me”.  But even under that system, the Beatles still got fabulously wealthy.  Nevertheless, Thatcher’s reforms brought much-needed cleansing to a runaway pattern of government subsidy.

Socialism is about counting people as part of the country’s infrastructure.  A good rule of thumb is to subsidize people, not industries or corporations. (Note in the next section I don’t think that subsidy should take the form of cash payments.  Rather, I prefer a strong supporting infrastructure for people to grow in, along with the opportunity to fail without utter disaster.) Socialism has a lot to learn from ruthless capitalism as to the most intelligent way to go about doing this.  But capitalism has a lot to learn from socialism about keeping the engine running.  A capitalist economy runs best on the strength of healthy, educated people.

Notes: see also

  1. Capitalism vs Socialism

  2. Education
  3. Health care
  4. Social programs

Open thread 4 on poverty: Social Programs

July 27, 2006 9 comments

First, I agree with the critics of welfare that it is bone-headed to give money to the poor.  If they had good money-management skills, they wouldn’t BE poor so that money will basically be wasted.  Those programs should end now, in favor of attacking root causes…

It is a Christian tradition to idealize the poor as virtuous.  Anyone inclined to do this should read what a police reporter of over a decade’s experience has to say and what a burned-out social worker knows about it.  The choices made by our poverty systems will have to be a bit more intelligent.

One little-considered reason for ending cash subsidies to the poor is that every social program has a ceiling that can be quite difficult to penetrate.  Suppose you are working and your income is slowly increasing.  As you approach the ceiling, your aid is scaled back and you find yourself less well-off.  In electronics, this would describe a ‘negative feedback system’ that reaches and holds a stable condition.  But when that condition is poverty, we need to change the system; introduce enough “slop” in the feedback range to allow system tipping points into higher states.

Many other social programs contain the seeds of poverty as well.  Housing assistance depresses rents and leads to housing shortages, which in turn drives up prices; this is basic economics. 

Jobs programs can be very effective by building work history and also by addressing problems right in the poor person’s neighborhood.  You work, you get paid; this is a good pattern to learn.  The cost is similar to cash assistance programs except stuff gets done and people become accustomed to working.

Food assistance is controversial for two reasons: fraud and luxury.  Both can be addressed with restricted-spending debit cards, coupled with strong penalties for illegal possession of an issued card.  In general I have no problem with food assistance, especially if luxury items are excluded and nutrition education is given as in the WIC program.  No one, and especially no child, should ever have to go hungry in this country.

Family-planning assistance is extremely cost-effective.  Politicians need to get over their squeamishness about sex education.  Abstinence-based education sounds good but doesn’t work.  The countries with the lowest rates of teen pregnancy are the ones with sex education that would scare the pants off a fundamentalist. 

There was once an orphanage in our community and the general consensus among alumni seems to be that it was a good thing.  Of course, not all orphanages were well-run; some were houses of horrors.  I have heard many opinions on the value or iniquities of orphanages, and suspect that with modern oversights it may be possible to raise children in such institutions and have them grow up to be productive citizens. 

In a nutshell, I prefer indirect assistance to the poor, along with the opportunity to fail and the resources to continue when failure happens.  Direct assistance, when it is offered, should be coupled with some strings such as education, work, or even public service.  But almost any model can work if it is well-administered, and hardly any model (including private charity) can guarantee good results if it is run by incompetent or evil men.  Probably the only assurance of good administration is transparency, a relatively modern invention that allows citizens to see past the outer institutional walls.

Notes: see also

  1. Capitalism vs Socialism

  2. Education
  3. Health care
  4. Social programs

Stuff adds up

March 9, 2006 3 comments

Two unrelated quantities that caught my eye in a couple of news articles:

  • Tobacco consumption in S. Korea increased from 68,000 tons in 1980 to 101,000 tons in 1999, most of it imported from the US

  • Steel mills recycling shredded automobiles in Illinois release about 400 lbs of mercury a year into the air, roughly the same as a large coal-fired power plant.

I enjoy quantities like this because of the scale of activity they suggest around them.  They help us understand why certain human activities have influence.

How many acres of land would it take to grow 101 thousand tons of tobacco?  How many families does it take to tend those acres?  What is the collective political clout of those (mostly American) families?  And – that’s just South Korea.  What’s the tobacco clout worldwide?

At just a couple drops of mercury (in electrical switches) per car, how many cars does it take to equal 400 lbs (about three gallons) of mercury?  What other pollutants are in those cars?  How much lead?  What happens to the gasoline in the tanks?  (It can’t be reused in other cars unless it is carefully filtered) How about the motor oil?  How many of the tires are reused?  How many people make their livings handling those cars? 

What is the composition of the scrap metal?  Cars have a lot more aluminum and various alloys in them nowadays – the quality of the steel would be degraded unless that is separated out before smelting. 

And that’s just Illinois: nationwide, there are still 35 million mercury switches in cars, though manufacturers switched in 2002 to nontoxic alternatives.  Just about all those cars will be off the road in ten years – hence the need for removing the switches.  But that mercury had to come from somewhere. How much cinnabar is mined each year?  Cinnabar is mercury sulfide; what are the sulpher emissions of mercury smelting plants, to say nothing of the mercury?  Where are the plants located?  How are the mine tailings handled?

Hold almost any commercial product in your hand; the connections associated with it dazzle the mind.  Economies closely resemble ecologies and are interrelated to them.  It’s just fun to think about that stuff…  (sources New Scientist magazine and Chicago Tribune)

No wonder NeoCons hate the social sciences

December 18, 2005 2 comments

Selected quotes from December ‘05 Scientific American article, “Sick of poverty” (Robert Sapolsky), a review of studies that correlate SES, or Socio-Economic status, with ill health, control for epidemiological factors such as lifestyle, and develop a useful analysis:

“Of the Western nations, the U.S. has the steepest gradient; for example, one study showed that the poorest white males in America die about a decade earlier than the richest…

Our body’s response, though adaptive for an acute physical stressor, is pathogenic for prolonged psychosocial stress…

It is not a subtle statistical phenomenon.  When you compare the highest versus lowest rungs of the socioeconomic ladder, the risk of some diseases varies 10-fold.

An extensive biomedical literature has established that individuals are more likely to activate a stress response and are more at risk for a stress-sensitive disease if they (a) feel as if they have minimal control over stressors, (b) feel as if they have no predictive information about the duration and intensity of the stressor, (c) have few outlets for the frustration caused by the stressor, (d) interpret the stressor as evidence of circumstances worsening, and (e) lack social support for the duress caused by the stressors…

…low control in the workplace accounts for about half of the SES gradient in cardiovascular disease…

…Adler’s work suggests that the objective state of being poor adversely affects health, at the core of that result is the subjective state of feeling poor

…Wilkenson has shown… that decreased income inequality predicts better health for both the poor and the wealthy…

…the more unequal the income is in a community, the more incentive the wealthy will have to oppose public expenditures benefiting the health of the community…

…Social capital refers to the broad levels of trust and efficacy in a community.  Do people generally trust one another and help one another out?  Do people feel an incentive to take care of commonly held resources (for example, to clean up graffiti in public parks)?  And do people feel that their organizations – such as unions or tenant associations – actually have an impact?  Most studies of social capital employ two simple measures, namely, ow many organizations people belong to and how people answer a question such as, “Do you think most people would try to take advantage of you if they got a chance?”

…the strongest route from income inequality to poor health is through the social capital measures

…As a culture, America has neglected its social safety nets while making it easier for the most successful to sit atop the phyramids of inequality.  Moreover, we have chosen to forgo the social capital that comes from small, stable communities in exchange for unprecedented opportunities for mobility and anonymity.  As a result, all measures of social epidemiology are worsening in the U.S.  Of Westernized nations, America has the greatest income inequality (40 percent of the wealth is controlled by 1 percent of the population) and the greatest discrepancy between expenditures on health care (number one in the world) and life expectancy (as of 2003, number 29).”

It’s a fascinating read, but not comfortable padding for the conservative couch.  No wonder the current crop hate science – it keeps leading to conclusions that their ideology doesn’t like.  The December issue of Scientific American should still be on the newsstands – or you could swing by the library – if you want to tackle it.

Categories: Economics, Geeky

Seoul Machine

May 1, 2005 5 comments

About 20 years ago I bought a Samsung radio, and it was a piece of junk.  It was inexpensive and it worked, but the sound was bad, one speaker rattled, reception was marginal, and the volume control was scratchy right out of the box.  Today, Samsung makes the very best consumer electronics, beautifully designed and perfectly built.  I actually look for the Samsung name in stores. What happened?

Kun-hee Lee happened.  In 1995 the CEO sent Samsung wireless phones to his friends for Christmas, and none of them worked.  This must have really ticked him off, as Wired magazine describes what happened next…

That March he paid a visit to Samsung’s main factory at Gumi.  At Lee’s command, the factory’s 2,000 employees donned headbands labled QUALITY FIRST and assembled in a courtyard.  There they found their entire inventory piled in a heap – cell phones, fax machines, nearly $50m worth of equipment.  A banner before them read QUALITY IS MY PRIDE.  Beneath it were Lee and his board of directors.  Ten workers took the products one by one, smashed them with hammers, and threw them into a bonfire.  Before it was over, employees were weeping…

Ritual purification at the command of a heroic leader is an ancient and powerful tradition in this part of the world… Certainly it had the desired effect: after Lee’s visit to Gumi, shoddiness was not an option.  Ki-tae Lee, then the Gumi factory manager and now head of Samsung’s mobile telecon division, personally tests new models by hurling them against a wall or dropping them from a second-story window.  Once he even ran over a handset with his car.  It still worked.
Wired, May 2005

Several things strike me about that story.  First, the Gumi factory manager Ki-tae Lee not only still has a job, he’s head of Samsung’s telecom division.  Second, the employees themselves were profoundly changed by the event.  And third, can you imagine an American manufacturer’s CEO destroying $50m worth of inventory?  The stockholders would have his head.  But Kun-hee Lee was right, because Samsung’s market value today exceeds that of Sony.

I remember back in the late ‘70’s and ‘80’s when the American auto industry was tanking.  Plants were closing, GM was outsourcing (sound familiar?), and auto workers who showed up for work driving a Japanese car were pointedly told never to do that again. 

Back in ‘76 through ‘78 I had a summer job at an auto dealership.  We sold both American and Japanese cars, and I got to prep them for sale.  The American cars were shoddy; it was common for a dashboard designed to be held in place by 7 screws to be held by 2, and those weren’t fully tightened.  Door panels didn’t fit, trunk lids didn’t line up, and the cars just looked crudely made.  I often had to finish the factory’s job, lining things up, correcting missing fasteners, and so forth.

With the Japanese cars, it was a different story.  I’d peel off the shipping plastic, and they were ready to sell.  Not once did I ever have to fix a single thing.  Would I have been anti-American to have said the Japanese were making better cars than the Americans?  Or just honest – or even patriotic, because you can’t solve a problem that is not identified?

Today, it’s hard to find American consumer electronics at all.  (I recently bought a blender that was made in Utah.)  American cars have gotten a lot better but – let’s be honest – they’re still not up to the standards of the best Japanese-made cars.  You can prove this by checking eBay Motors, a completely market-driven auto lot where your $2,000 will buy an American car with 100,000 miles on it, or a Japanese car with over 160,000 miles on it. 

In the 1950’s, cars from every nation were pretty unreliable, requiring maintenance at least every 3,000 miles (and British cars needed their own British mechanic.)  It was rare for any car to last over 100,000 miles without an overhaul.  But in the early 80’s, a different standard of reliability began to emerge.  American carmakers at the time, comfortable in their market-share, did nothing to adapt and even allowed quality to slide.

It isn’t that American workers can’t build good cars – Honda and Toyota (and now Hyundai, a Korean company rising fast on the strength of good quality and design) have plants here.  And American cars have (of necessity) improved tremendously.  Obviously we can do it given the chance.

Of course, the auto workers can’t build a better car than the auto company designs – another whole subject in itself.  Auto-company executives should take a really good look at Honda’s new pickup truck, for example, or the Nissan Maxima or even the Hyundai Sonota.  Or practically any Toyota.

I wish the American-company auto executives and workers would all drive foreign cars to work, so they could understand the strong and weak points of the rest of the world’s autos.  But bumper stickers saying; “100 thousand laid-off UAW workers don’t like your Toyota.  Please park it in Tokyo” make that impossible.

Today the US exports enormous value in services and software, as we lead the world in these categories.  It is fortunate that these economies emerged when they did because our manufacturing base was tanking at the time.

There are no Chinese or Indian counterparts to Microsoft or IBM – or FedEx – but there soon will be. 

Solutions?  I could at least identify a couple problem areas: education and attitude.  While every other industry grows through innovation, our public schools dig in their heels.  And TV ratings are hardly encouraging either – those huge Samsung plasma TV’s (which pretty much only Americans buy) aren’t being used to watch Scientific American Frontiers or Commanding Heights.

Categories: Economics, Politics