The French Start to Quit France

Forget Paris: Stymied by Socialist Policies, the French Start to Quit France

By Vivienne Walt

Ernest Hemingway once described Paris in spring as a time when “there were no problems except where to be happiest.” Clearly Hemingway did not foresee the springtime of 2013. For many of Paris’ residents right now — in fact, for many French in general — the answer to the question of where to be happiest is: pretty much anywhere but France.

The French, to be sure, are famous for their grumbling, regularly ranking near the bottom of global happiness indexes. Malaise, after all, is French for ill at ease. Yet even given the usual predilection to gloom, this year has been a standout. For months now, there has been a steady rumbling of people packing up and moving out. There are few reliable figures of the numbers of people leaving, in part because many are moving within the E.U., where there are no immigration requirements for Europeans. Yet for those of us living in France, the exodus has been notable. Around New Year, a moving truck rolled up to our building and loaded the worldly possessions of the couple and four children living below us as they headed off to Singapore where better prospects awaited the father of the family. Earlier last week, a woman flopped on to a bench next to me in the schoolyard of the school our children both attend, fatigued from apartment-hunting in London, where she is moving with her family next month — driven out by what she describes as the aggravation of running a small business with 35-hour work weeks and by tax hikes introduced by President François Hollande, who was elected last May. “I resisted the move, but it’s become impossible,” she says.

Centralization And Sociopathology

Concentrated power and wealth are intrinsically sociopathological by their very nature

by Charles Hugh-Smith

I have long spoken of the dangers inherent to centralization of power and the extreme concentrations of wealth centralization inevitably creates.

The Master Narrative Nobody Dares Admit: Centralization Has Failed (June 21, 2012)

The Solution to Concentrated Power: Decentralize, Diffuse and Devolve Power (June 22, 2012)

To Fix Healthcare, Let 100 Solutions Bloom (February 26, 2013)

Longtime contributor C.D. recently highlighted another danger of centralization: sociopaths/psychopaths excel in organizations that centralize power, and their ability to flatter, browbeat and manipulate others greases their climb to the top.

In effect, centralization is tailor-made for sociopaths gaining power. Sociopaths seek power over others, and centralization gives them the perfect avenue to control over millions or even entire nations.

Even worse (from the view of non-sociopaths), their perverse abilities are tailor-made for excelling in office and national politics via ruthless elimination of rivals and enemies and grandiose appeals to national greatness, ideological purity, etc.

As C.D. points out, the ultimate protection against sociopathology is to minimize the power held in any one agency, organization or institution:

After you watch these films on psychopaths, I think you'll have an even greater understanding of why your premise of centralization is a key problem of our society. The first film points out that psychopaths generally thrive in the corporate/government top-down organization (I have seen it happen in my agency, unfortunately) and that when they come to power, their values (or lack thereof) tend to pervade the organization to varying degrees. In some cases, they end up creating secondary psychopaths which is kind of like a spiritual/moral disease that infects people. 

If we are to believe the premise in the film that there are always psychopaths among us in small numbers, it follows then that we must limit the power of any one institution, whether it's private or public, so that the damage created by psychopaths is limited. 

Oil! Price Discovery and Regulation

There is a growing disconnect between the price of oil and the price and supply of retail fuels 

by JACOB BORDEN

Market signals about the relative value of available materials are paramount for widely dispersed people to make rational decisions. Such was the solution to the “knowledge problem” elaborated by F. A. Hayek. A topical example of Hayek’s theory in practice is the decade-long adjustment in the prices of oil and products refined from petroleum. Oil is generally considered to be a fungible global commodity, and one frequently hears reference to global oil prices as reflecting global supply and demand. But a combination of factors over the past decade has substantively reduced the fungibility of this once-standard product. 

Increasingly, oil is a design-specific product and the price you pay at the pump for a gallon of fuel more often reflects local design characteristics than the underlying price of a global commodity. These local design characteristics are exacerbated by regulations that disrupt the market’s price-discovery process. 

As recently as December 2001, oil was still trading at the 20-year average of $20 per barrel, even despite the September 11 attacks and the ongoing recession. Over the next seven years, a series of disruptions drove the price up. It became more expensive to do business with the countries that held most of the world’s proven reserves, which two oil-intensive wars did nothing to help. Moreover, oil politics in Venezuela and surging demand from China and other developing nations helped push prices to record highs—over $130 per barrel—by 2008.

Politically Correct Lending

When loans are made for political considerations as opposed to financial ones, capital is wasted and we are all made poorer

by DOUGLAS FRENCH

There seems to be only one kind of loan that bankers want to make—SBA loans. SBA stands for Small Business Administration, a federal agency that guarantees certain loans made by banks that operate within its guidelines.

Lawmakers portray SBA lending as a boost for small businesses. The program is actually a form of corporate welfare for some of America’s largest banks. While banks reap profits, taxpayers cover the losses.

SBA lending is especially lucrative because, with a government guarantee, there are plenty of buyers for these loans in the secondary market. Borrowers are paying interest rates of 6 percent or more and the government is standing behind the majority of the loan balance. Buyers will pay large premiums for that kind of risk-free yield.

As hard as it has been to pry funds from lenders since the financial crash, the SBA had record years in 2011 and 2012, writing over $30 billion in loans each year. Making a profit and collecting interest and principal are not included in the SBA’s goals. Instead, the agency’s three strategic initiatives for 2012 were as follows:

1. Growing businesses and creating jobs.

2. Building an SBA that meets the needs of today’s and tomorrow’s small businesses.

3. Serving as a voice for small businesses.

The agency’s flagship loan product is the 7(a) program that funds business loans. More than $15 billion in SBA 7(a) loans was disbursed in 2010. The two years following were brisk as well, nearly matching the boom years of ‘04 through ‘07. These loans were used, per SBA guidelines, “to establish a new business or to assist in the operation, acquisition, or expansion of an existing business.” 

Why, in particular, was there a surge in 7(a) loans?  The Congressional Research Service reports,

Congressional interest in the 7(a) program has increased in recent years because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to assist in the economic recovery. Some, including President Obama, argue that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations with the expectation that in so doing small businesses will create jobs.

Somehow, people like those cited above have come to believe that small businesses are at a disadvantage in obtaining credit. It’s a “market failure,” if you will. So the Small Business Act of 1953 created the 7(a) loan guarantee wherein 85 percent of a loan’s principal up to $150,000 is guaranteed by the government; the guarantee drops to 75 percent for loans more than $150,000. During 2010 and 2011, the guarantee was bumped to 90 percent.

When A Money-Printing Butterfly Flaps Its Wings In Japan, This Is What Happens In Greece

This is beyond Parody

Since the BoJ enunciated its actions on April 4th, the world has decided that consuming risk assets (the riskier the better) is the path to salvation.

While it makes perfect sense that some level of inspiration for a global recovery makes sense (though hardly) given Japan's actions, it beggars belief that the most broke of broke peripheral European nations would see equity moves of such magnitude.

On the 50th anniversary of Chaos Theory, it is perhaps worth remembering its central lesson – that complex interrelated systems create unexpected outcomes from seemingly benign inputs.

It appears the complex inter-related world in which we live is becoming more and more chaotically unstable at the margin and this current euphoria does not approximately determine the future.  There are more than enough variables out there – the butterflies flapping away – which can change outcomes in an instant.

Europe's Hollow Efforts to Save a Lost Generation

Jobless Youth

Europe is failing in the fight against youth unemployment. While the German government's efforts remain largely symbolic, Southern European leaders pander to older voters by defending the status quo

BY SVEN BÖLL, MARKUS DETTMER, FIONA EHLERS, MANFRED ERTEL, CORNELIA SCHMERGAL AND HELENE ZUBER

Stylia Kampani did everything right, and she still doesn't know what the future holds for her. The 23-year-old studied international relations in her native Greece and spent a year at the University of Bremen in northern Germany. She completed an internship at the foreign ministry in Athens and worked for the Greek Embassy in Berlin. Now she is doing an unpaid internship with the prestigious Athens daily newspaper Kathimerini. And what happens after that? "Good question," says Kampani. "I don't know."

"None of my friends believes that we have a future or will be able to live a normal life," says Kampani. "That wasn't quite the case four years ago."

Four years ago -- that was before the euro crisis began. Since then, the Greek government has approved a series of austerity programs, which have been especially hard on young people. The unemployment rate among Greeks under 25 has been above 50 percent for months. The situation is similarly dramatic in Spain, Portugal and Italy. According to Eurostat, the European Union's statistics office, the rate of unemployment among young adults in the EU has climbed to 23.5 percent. A lost generation is taking shape in Europe. And European governments seem clueless when they hear the things people like Athenian university graduate Alexandros are saying: "We don't want to leave Greece, but the constant uncertainty makes us tired and depressed."

Instead of launching effective education and training programs to prepare Southern European youth for a professional life after the crisis, the Continent's political elites preferred to wage old ideological battles. There were growing calls for traditional economic stimulus programs at the European Commission in Brussels. The governments of debt-ridden countries paid more attention to the status quo of their primarily older voters. Meanwhile, the creditor nations in the north were opposed to anything that could cost money.

In this way, Europe wasted valuable time, at least until governments were shaken early this month by news of a very worrisome record: Unemployment among 15- to 24-year-olds has climbed above 60 percent in Greece.

Wimps Versus Barbarians

If the battle comes down to the wimps versus the barbarians, the barbarians are bound to win

By Thomas Sowell

An all too familiar scene was enacted on the campus of Swarthmore College during a meeting on May 4th to discuss demands by student activists for the college to divest itself of its investments in companies that dealt in fossil fuels.

As a speaker was beginning a presentation to show how many millions of dollars such a disinvestment would cost the college, student activists invaded the meeting, seized the microphone and shouted down a student who rose in the audience to object.

Although there were professors and administrators in the room -- including the college president -- apparently nobody had the guts to put a stop to these storm trooper tactics. Nor is it likely that there will be any punishment of those who put their own desires above the rights of others.

On the contrary, these students went on to demand mandatory campus "teach-ins," and the administration caved on that demand. Among their other demands are that courses on ethnic studies, and on gender and sexuality, be made a requirement for graduation.

Just what is it that academics have to fear if they stand up for common decency, instead of letting campus barbarians run amok? At a prestigious college like Swarthmore, every student who trampled on other people's rights could be expelled and there would be plenty of replacement students available to take their places.

Although colleges and universities across the country have been giving in to storm trooper tactics ever since the nationwide campus disruptions of the 1960s, not all have. Back in the 1960s, the University of Chicago was a rare exception.

As Professor George J. Stigler, a Nobel Prize winning economist, put it in his memoirs, "our faculty united behind the expulsion of a large number of young barbarians."

The Arab collapse

Middle East a vulture’s feast

By RALPH PETERS

The Arab Spring has unleashed the Arab Collapse. Everybody still standing in the region is picking the flesh of the helpless. The Islamist cancer proved more virulent than Arabs themselves expected, while dying regimes behave with unrestrained ruthlessness.

And our diplomats still think everyone can be cajoled into harmony.

We’re witnessing a titanic event, the crack-up of a long-tottering civilization. Arab societies grew so corrupt and stagnant that violent upheaval became inevitable. That’s what we’re seeing in Syria and Iraq — two names, one struggle — and will find elsewhere tomorrow.

We can’t stop it, we can’t fix it, and we don’t understand it. But we can stay out of it.

When the US is in the Middle East, the Arabs want us out. When we’re out, they want us in. But our purported Arab (and Turkish) allies consistently agree that Uncle Sam should pay the party bill, while they take home all the presents.

Yes, Syria’s humanitarian crisis is appalling. And no, I don’t like to see innocents dying or suffering. But the calls from the region for American action are nakedly cynical.

Turkey has the largest military in NATO after our own, but cries “helpless” crocodile tears over Syrian refugees — while dreaming of rebuilding the Ottoman Empire upon their ruined lives. Our Saudi “friends” spent decades building the most-sophisticated military arsenal in the Middle East, apart from Israel. Now the Saudis wring their hands over Syria’s misery — but won’t intervene directly to stop the killing.

The Poisonous Printing Press

Unproductive asset classes of every shape and form are surging in price everywhere

By Bruno de Landevoisin 

It’s painfully clear for all to see that the majestic United States is now firmly caught in the rapacious stranglehold of financial elites which have completely captured it in a grotesque gamed monetary process.  Our country’s once idealistic and industrious free market economy has been hijacked and is undeniably being fraudulently and overtly financialized by the craven clutches and maniacal machinations of a contemptible self-seeking banking class. They have become nothing more than avaricious parasites disgustingly feeding from the grand trough of our treasured human ingenuity and self-respecting industry.

Unproductive asset classes of every shape and form are surging in price everywhere as the pumped up folly of the perpetually spewing free money fire hose incessantly flows.  Both privileged institutional and private favored recipients of the free flowing Fed funds are climbing all over themselves snatching up existing assets of all kinds, in a vulgar and narcissistic ferocious feeding frenzy. The gluttonous menu includes: Housing, Commercial Property, Farm Land, Fine Art, Vintage Collectibles, Classic Automobiles, Equity Indexes, ETFs, REITs, Options, Currencies, Futures, Precious Metals and Commodities………………………etc.

Just last week the NY auction house Christies, founded in 1766, posted its best week ever in its over 250 year old illustrious history. This is simply non productive wealth formation my twisted malfunctioning friends.  It is profoundly unhealthy and decidedly unearned prosperity, as it provides little to no substantial growth value nor functional benefit for the actual working economy on the ground which so many depend upon.  True prosperity comes from real authentic wealth creation through genuine tangible production with honest determined human endeavor, not speculative and discreditable self enrichment based primarily on asset inflation deliberately engineered by gross and dishonorable monetary largess.

The brilliance and magnificence of the United States was always characterized by its thriving, hard working and tremendously productive middle class. Today’s disgraceful paper printing artifice that we are currently witnessing is slowly but surely destroying that once proud, noble and unparalleled historic human achievement which was distinctively made in the USA. The diseased America has now set upon the degrading and ignoble course of abusing its hard earned reserve currency status via cheap and decadent monetary debasement in order to save its own deplorable hide, and much of the world is compelled to follow our disgraceful lead as the global financial system continues to circle the descending drain’s virulent vortex.

EU On Collision Course With Germany Over Tariffs

Yet Another Reason for UK to Exit EU

By Mike "Mish" Shedlock

The threat by the EU to impose huge tariffs on solar panels from China has run into staunch opposition. The Financial Times reports Germany warns EU solar tariffs would be ‘grave mistake’ 

 Germany’s vice-chancellor and economy minister put Berlin on a collision course with Brussels by warning that imposing anti-dumping duties on solar panels from China would be a “grave mistake”.

Philipp Rösler’s statement came as Germany’s leading manufacturing industry organisation also called for urgent negotiations with China to head off the threatened import duties, which are expected to be announced formally by the European Commission in early June.

The comments risk undermining Karel De Gucht, the trade commissioner, as he faces off against Beijing in the EU’s largest ever trade case, based on the €21bn of solar products China exported to Europe in 2011.

Mr De Gucht has recommended that such products face duties averaging 47 per cent after concluding that Chinese manufacturers illegally dumped their products, or sold them below cost, in Europe.

In an interview with the Welt am Sonntag newspa per, Mr Rösler said that “punitive duties are the wrong instrument” to deal with the dispute. “German industry is quite rightly very concerned” about the threatened action, he said, and its potential for retaliatory action by China affecting German exports.

Hollande: Europe Needs More Bureaucracy, More Spending and Higher Taxes

The ‘Growth President’ Has an Epiphany

Hi guys! You won't believe what great idea I had…

You can't keep a good énarque down. Faced with an economy that is no longer merely circling the drain but gurgling down it at great speed, Francois Hollande has discovered what Europe needs to fix its ailments.

Perhaps not surprisingly, his epiphany, revealed to the press after his first 150 days in office, consisted of the recognition that what the EU urgently needs is yet another layer of centralized bureaucracy, complete with its own taxing power and 'harmonized' taxes (this is the codeword for 'everybody's taxes should be as high as those in France, i.e., the highest possible') across the continent.

That will fix things. For sure.

According to a Reuters report: 

“French President Francois Hollande called on Thursday for an economic government for the euro zone with its own budget, the right to borrow, a harmonized tax system and a full-time president.

At a 150-minute news conference marking his first year in office, a day after economic data showed France had slipped into recession, the Socialist leader defended his record on economic reform and budget discipline and told the French people they would have to work "a bit longer" for a full pension in future. Rebutting criticism that France has lost its leadership role in Europe because of its dwindling economic competitiveness, Hollande said he wanted to create a fully-fledged political European Union within two years.

"It is my responsibility as the leader of a founder member of the European Union… to pull Europe out of this torpor that has gripped it, and to reduce people's disenchantment with it," Hollande said. "If Europe stays in the state it is now, it could be the end of the project."

He acknowledged he could face resistance from Germany, Europe's dominant power, which opposes mutualising debt among member states. Berlin is also reluctant to give the euro zone its own secretariat for fear of deepening division in the EU, between the 17 members of the single currency and the 10 others. Non-euro Britain's government already faces growing domestic pressure to hold a referendum on leaving the bloc.

Hollande said he wanted Britain to stay in the EU but added: "I can understand that others don't want to join (the single currency). But they cannot stop the euro zone from advancing."

Speaking in Berlin before the French leader announced his initiative, German Chancellor Angela Merkel said her relations with Hollande were good, and she was "very optimistic" France would strike a balance between growth and budgetary rigor.

Hollande said a future euro zone economic government would debate the main political and economic decisions to be taken by member states, harmonize national fiscal and welfare policies, and launch a battle against tax fraud.

He proposed bringing forward planned EU spending to combat record youth unemployment, pushing for an EU-wide transition to renewable energy sources, and envisaged "a budget capacity that would be granted to the euro zone along with the gradual possibility of raising debt".

The Rise of the Megacity

If megacities are such shitholes, why are so many people running toward rather than away from them?

By DOUGLAS RAE

The stupid ones have gathered in a field in the center of the town. Every now and then a truck comes by, and all the men in the field rush to it with their hands outstretched, shouting “Take me! Take me!”

Everyone pushed me; I pushed back, but the truck scooped up only six or seven men and left the rest of us behind. They were off on some construction or digging job—the lucky bastards. Another half hour of waiting. Another truck came. Another scramble, another fight. After the fifth or sixth fight of the day, I finally found myself at the head of the crowd, face-to-face with the truck driver. He was a Sikh, a man with a big blue turban. In one hand he held a wooden stick, and he swung the stick to drive back the crowd. 

“Everyone!” he shouted. “Take off your shirts! I’ve got to see a man’s nipples before I give him a job!”

He looked at my chest; he squeezed the nipples—slapped my butt—glared into my eyes—and then poked the stick against my thigh: “Too thin! Fuck off!”

Aravind Adiga’s wonderful novel of India, White Tiger, won the 2008 Man Booker Prize for passages like the one you’ve just read. Adiga’s protagonist, Balram Halwai, is an urban newcomer, recently arrived from the “Darkness” of village India. He counts himself among the “stupid ones” because he hasn’t yet given up (and won’t, even after he finds an abusive employer and ultimately murders him). The “smart ones”, recognizing their powerlessness, have given up already. 

In The Real Population Bomb, P.H. Liotta, a member of the 2007 Nobel Prize-winning panel on climate change, and James Miskel, a former director of defense policy and arms control for the National Security Council, draw us into places filled to overflowing with people like Balram. They gather in the millions, facing one another in places controlled neither by themselves nor by the authorities nominally in charge. Those authorities are very often poorly paid, avidly corrupt and accountable to nobody. 

Ireland has spared the old but robbed the young

The ‘jilted generation’

By Eamonn Moran

The Irish are thought to be a compassionate people who care about human rights, but we are also capable of appalling selfishness towards our own citizens. A report this week from the Economic and Social Research Institute suggests that few developed nations have committed the level of intergenerational theft we have witnessed in Ireland since the financial crisis began.

The headline finding of the report, by Petra Gerlach-Kristen, is stark. “The younger age group on average spent 20 per cent less per week in 2009/2010 compared with five years earlier. Over the same period, those aged over 45 managed to keep most of their bubble-era gains, spending 31 per cent more each week than they did in 2004/2005.”

In a very short period, two groups in society have experienced a huge disparity in spending power. These groups are separated not by class or occupation or education but by the timing of their births.

In James Joyce’s Portrait of the Artist as a Young Man Stephen Dedalus declares, “Ireland is the old sow that eats her farrow.” That was written in 1914, but it seems we continue to fail in our efforts to form a republic in any meaningful sense because of clientelism and self-interest at the very highest levels.

The total number of job losses in the Irish economy since the economic crisis started is more than 300,000. Yet the number of people over 35 who are employed is now back above the level it was before the crisis. The unemployment burden has fallen squarely and almost exclusively on those aged 35 and under.

A recent report on food poverty in Ireland by Caroline Carney and Bernard Maître showed that young people between 18 and 30 are three times more likely to be at high risk of food poverty than people over 61. Between 2007 and 2011 some young people had their jobseekers’ benefit cut by 46 per cent while some pensioners saw their pensions increase by 10 per cent. Ireland’s youth unemployment, among 15- to 24-year-olds, has gone from one of the best rates in Europe, at 5 per cent, to about 30 per cent, and might be worse than that of Greece or Spain were it not for emigration.

The Jobs Question

Work Is A Human Right

BY WALTER RUSSELL MEAD

Pretty much everybody understands at some level that the question of jobs is at the heart of America’s politics today. An old world of stable, reasonably well paid jobs in manufacturing (stuff processing) and in corporate or government bureaucracies (information processing) is passing away. What comes next is up in the air, but as things stand we see growing insecurity, inequality and a darker outlook for youth.

The argument about how to address the jobs question is the single political issue that has the most to do with how the country will develop for the next twenty years. Political disputes over hot button social policy issues like gay marriage or affirmative action often get more attention, but underneath the noise it is the question of jobs that will shape the way our institutions and policies develop. After all, creating the best possible conditions for large numbers of Americans to make good livings and achieve their personal goals engages the electorate’s attention year in and year out. Scandals and controversies come and go, even long wars come to an end sometime, but in times like ours when people aren’t sure that the economy will allow them to make a good living, the job question never really goes away.

But if the debate over jobs is central, it is also confused. As a nation, we haven’t thought very deeply about what an information economy will look like, much less thought about what kinds of government policies can help or hinder the growth of an information-based middle class.

There seem to be two main kinds of confusion at work: the widget fallacy and a skewed idea about what work is and how it relates to human life overall.

The widget fallacy is the idea that only the production of concrete objects really matters. It leads many people to deny that mass prosperity under an information economy is even possible. For this crowd, if you aren’t bashing metal in a noisy place, you aren’t really working. If America isn’t “making things,” these people say, the economy will wither and die.

That may be true, but the jobs question isn’t about whether “America” is making things, but about whether people or machines are making the things “America” or any other country makes. You can have, indeed we have now, a healthy industrial economy that doesn’t create many jobs because factories increasingly use robots and computers rather than human beings. There are going to be fewer and fewer people in the widget works even as widget production hits all time highs. The world’s factories are going to be spewing out widgets like nobody’s business in the next generation, but there won’t be many people involved.

Bernanke Says Pessimists Wrong as Innovation Spurs Growth

Don't Sell Innovation Short

By Steve Matthews & Jeanna Smialek

Federal Reserve Chairman Ben S. Bernanke said technological change will remake fields like health care and belie predictions that innovation will fade and economic growth will wane.

“Pessimists may be paying too little attention to the strength of the underlying economic and social forces that generate innovation in the modern world,” Bernanke said today in a speech at Great Barrington, Massachusetts. “Both humanity’s capacity to innovate and the incentives to innovate are greater today than at any other time in history.”

The Fed chairman, who didn’t comment on policy or the U.S. economic outlook, rebutted the view of academics such as Northwestern University professor Robert Gordon, who predicted U.S. growth may stall over the next century in a paper published by the National Bureau of Economic Research last August. Innovation’s contribution to higher standards of living will slow, and headwinds such as an aging population and increased inequality will reduce growth, he said.

The pessimists’ view is “sort of depressing,” Bernanke said in a commencement address at Bard College at Simon’s Rock.

“As trade and globalization increase the size of the potential market for new products, the possible economic rewards for being first with an innovative product or process are growing rapidly,” he said.

Commercial applications of personal computers and biotechnology have “arguably thus far only scratched the surface,” and they could contribute to a surge in productivity in health care, Bernanke said.

“A strong case can be made that the modernization of health-care IT systems would lead to better-coordinated, more effective, and less costly patient care than we have today,” he said. “Such advances could lead to another jump in life expectancy and improved health at older ages.”

Bernanke is the father of a Simon’s Rock alumnus, father-in-law of an alumna, and his wife, Anna, is a member of the school’s board of overseers. 

Give Them Our Huddled Masses

Why America should swap its retirees, patients, and students for skilled immigrant labor

BY AADITYA MATTOO, ARVIND SUBRAMANIAN

Immigration reform is back on the policy agenda. Can it help get the United States out of the economic pickle in which it finds itself these days? The global financial crises reinforced the long-term trend of stagnating incomes, shrinking wealth, and diminishing opportunities for the U.S. middle class. Both ends of the age spectrum have been hit: Today, only 45 percent of those between the ages of 16 and 24 are employed, while an increasing number of baby boomers are retiring with reduced savings and pensions. Meanwhile automatic budget cuts and future fiscal tightening will overwhelmingly affect the infirm, retirees, and students. High long-term growth, obviously, is one solution. But that's easier said than done. There's a more straightforward way to revive the U.S. economy and put money in people's pockets. To borrow from the 19th century U.S. politician Horace Greeley: Go South, Americans!

Already, Americans are spending more time in the economically dynamic developing world. Patients are traveling to Thailand for treatment. Retirees are enjoying the low costs of living in Latin America, while students are enrolling in medical schools in the Caribbean.

These trends should be embraced and enhanced. This new form of globalization will boost the purchasing power of U.S. consumers by providing greater and cheaper access to key services -- such as health and education -- whose costs will likely grow in the future. 

Additionally, if U.S. emigrants and medical or education tourists seek opportunities overseas, other countries could help convince the United States to relax its barriers to foreign entrepreneurs, scientists, doctors, and engineers. Greater skilled immigration would boost domestic innovation and growth.

To start, consider retirees. The Congressional Budget Office estimates that the unfunded pension liability of the state and local governments in the United States ranges between $0.7 trillion and $3 trillion (depending on how assets and liabilities are valued.) Since the net worth of the median household has also declined by 35 percent over the last decade, the prospects of current and future retirees who stay in the United States are dim: They have fewer savings, and their pension incomes will become less reliable.

One dollar will buy twice as much in Costa Rica, and three times as much in Thailand as it does in the United States, as well as the opportunity to hike in Monteverde and sunbathe in Phuket. According to the Social Security Administration, about 350,000 U.S. retirees (about 1 percent of the total) already live abroad, a quarter in developing countries. Between 2008 and 2010, 35 percent of U.S. retirees who moved abroad headed for the developing world, double the rate of the preceding seven years. If the fraction of those choosing to live overseas were to increase to 2 percent by 2020, and 3 percent by 2030, nearly 3 million U.S. retirees could be living abroad within two decades. Retirees relocating to developing countries would not only continue to draw Social Security benefits, but they would maintain their current standard of living.

Taxes on some wealthy French top 100 pct of income

News From The Class Struggle in France

by Leigh Thomas

More than 8,000 French households' tax bills topped 100 percent of their income last year, the business newspaper Les Echos reported on Saturday, citing Finance Ministry data.

The newspaper said that the exceptionally high level of taxation was due to a one-off levy last year on 2011 incomes for households with assets of more than 1.3 million euros ($1.67 million).

President Francois Hollande's Socialist government imposed the tax surcharge last year, shortly after taking office, to offset the impact of a rebate scheme created by its conservative predecessor to cap an individual's overall taxation at 50 percent of income.

The government has been forced to redraft a proposed bill to levy a temporary 75 percent tax on earnings over 1 million euros, which had been one of Hollande's campaign pledges.

The Constitutional Council has judged such a high rate of taxation to be unfair, leaving the government to rehash it to hit companies rather than individuals.

Since then, a top administrative court has determined that a marginal tax rate higher than 66.66 percent on a single household risked being considered as confiscatory by the council.

Les Echos reported that nearly 12,000 households paid taxes last year worth more than 75 percent of their 2011 revenues due to the exceptional levy

The ‘New’ Confusion About Planning

T. Boone Pickens and Energy Public Policy

by Robert Bradley Jr.

“[A]s my father liked to tell me, ‘Son, a fool with a plan can beat a genius with no plan any day.’ Right now, when it comes to America and our effort to achieve greater energy security, we’re a foolish nation without a plan.

If it were up to me, America’s energy plan would have ….”

            - T. Boone Pickens, “Leadership Absent on Energy Plan,” Omaha World-Herald, May 1, 2013.

“The curious task of economics is to demonstrate to men how little they really know about what they imagine the can design.”

            - F. A. Hayek, The Fatal Conceit: The Errors of Socialism (1988), p. 76.

T. Boone Pickens, the author and marketer of three national energy plans (see yesterday’s post), is a “man of system,” to use Adam Smith’s phrase from the mid-18th century.

Pickens’s grandiose scheme to use the powers of government to implement wind-for-natural-gas in  electrical generation and natural-gas-for-oil in transportation (Pickens I) inspired Carl Pope, then head of the Sierra Club, to state back in 2008: “To put it plainly, T. Boone Pickens is out to save America.” [1] Plans II and III dropped wind (when business Boone did) to just push natural gas in the transportation market.

To plan or not plan–that is the wrong question in the realm of human action. Purposeful human action is planning. A central plan enforced by government (which by definition has a legal monopoly on the initiation of force) precludes planning on the individual and group level done by voluntary means.

Thus T. Boone Pickens has fundamentally misconstrued the question of planning which is who will plan: the market through private property, voluntary exchange, and the rule of law or government through its “experts” and legal monopoly on coercion.

Early Warming: Adam Smith

One of the oldest fallacies of economics is that the only plan is the central plan, devised by experts and implemented by common-good government.

Adam Smith warned against the “man of system” in The Theory of Moral Sentiments (1759) presciently recognizing that the quest to correct alleged market failure was prone to two other types of error: analytic failure (expert error) and government failure. In his words:

The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamored with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it.