Moving to the Heart of Europe

Migration tends to be greater where there is a wider gulf between employment and economic opportunities

by Wendell Cox

Europe's demographic dilemma is well known. Like East Asia and to a lesser degree most of the Western Hemisphere, Europe's birth rates have fallen so far that the population is becoming unable to replenish itself. At the same time, longer  life spans have undermined the poulation’s ability to withstand a growing  old age dependency ratio, challenging the financial ability (and perhaps even willingness) of a smaller relative workforce in the decades to come. The EU-27 (excluding Croatia) over 65 population is projected by Eurostatto increase 75 percent relative to its working age population (15-64) between 2015 and 2050, more than either the 60 percent increase the UN projects in the United States and Japan (though Japan’s current ratio is much higher than the EU or the US).

This problem could be partially addressed by international migration, which could increase the size of labor force required to support expensive social welfare commitments. Our analysis of available Eurostat data (European Commission) data indicates that international migration to the European Union (EU) is strong. Further, migration has been shifting with the changing economic fortunes of EU nations, led by strong growth in the “heart of Europe” but slowing growth along much of the periphery of the former EU-15.This suggests that strong economic growth may be the key to solving, or at least ameliorating,  Europe’s looming demographic crisis.

All EU-15 Nations have Attracted Migrants

Since the 2004 enlargement of the European Union, now at 28, with the recent addition of Croatia, the former EU-15 has attracted millions of international migrants, including many from the newer entrants to the original fifteen memnbers. Eurostat data indicates that nearly 11 million people more people moved to these nations between 2005 and 2012 than moved away.

The Conservative Mistake

Stasis is not an option

by david friedman
Critics of free immigration worry that immigrants might change the country, make it more socialist, more crime ridden, more like the places they are coming from, but offer no strong reason to expect those particular effects. Leaving the place where you grew up to move somewhere very different is, after all, evidence that you prefer the latter. As I pointed out in one exchange, the Volokh brothers, associated with the popular libertarian/conservative legal blog the Volokh Conspiracy, are immigrants from the ex-Soviet Union. While Eugene and Sasha Volokh may be slightly more socialist than I am, they are much less socialist than most of their fellow academics, not entirely surprising given that they have experienced socialism at first hand.

The critics’ argument takes it for granted that change is presumptively bad.

The same assumption appears implicitly in arguments over global warming. It seems likely that the average temperature of the globe will go up by several degrees C over the next hundred years due to increased Carbon dioxide in the atmosphere, a change that will have both good and bad effects. If I had to guess, my guess would be that the net effect will be positive, for at least two reasons. The first is that human habitability is limited mostly by cold not heat—the equator is populated, the poles are not. The second is that, for well understood reasons, global warming can be expected to increase temperatures more in cold places and at cold times than in warm. Combine those two and one might guess that a somewhat warmer world would be, on the whole, more suited to humans, not less. Here again, the explanation of the opposite view seems to me to be the conservative mistake, the assumption that change is presumptively bad. The same is true, I think, of concerns about a variety of other issues, from fracking to cloning to GMO foods.

I call it a mistake, but perhaps that is unfair. We know that the present is at least tolerable, since we are at present tolerating it. A change might make things better, might make them worse, so why chance it? That sounds like a plausible argument, but it contains a hidden assumption—that stasis is an option, that if we do not have more immigration our cultural and political circumstances will remain the same, that without anthropogenic CO2, climate will stay what it currently is.

Both are demonstrably false. Over my lifetime the cultural and political institutions of the U.S. have changed substantially for reasons that had little to do with immigration. Over the past million years, the climate of the earth has changed radically, time after time, for reasons that had nothing to do with anthropogenic CO2. A rise in sea level of a foot or two would create problems in some parts of the world, but not problems comparable to the effect of half a mile of ice over the present locations of Chicago and London. 

Puerto Rico the Next Detroit?

So how is Puerto Rico's debt going to be paid back? The answer is it won't.

By Mike "Mish" Shedlock

Puerto Rico has been in recession for 8 years. The unemployment rate is 15% and debt has piled up to the tune of $70 billion. For Comparison purposes, California public debt is $96 billion and Detroit debt was $18 billion. Wall Street rates Puerto Bonds at one step above junk.

How did Puerto Rico get into trouble? The short answer is the same way as Detroit: loss of industry coupled with lavish pensions.

The Washington Post reports Puerto Rico confronts a rising economic misery.

 Boxes and wooden crates filled with household items bound for the U.S. mainland are stacked high in the Rosa del Monte moving company’s cavernous warehouse, evidence of the historic rush of people abandoning this beautiful island.

The economy here has been in recession for nearly eight years, crimping tax revenue and pushing the jobless rate to nearly 15 percent. Meanwhile, the government is burdened by staggering debt, spawning comparisons to bankrupt Detroit and forcing lawmakers to severely slash pensions, cut government jobs and raise taxes in a furious effort to avert default.

Officials in San Juan and Washington are adamant that a federal bailout is not on the table, but the situation is being closely monitored by the White House, which recently named an advisory team to help Puerto Rican officials navigate the crisis.

The island’s problems have ignited an exodus not seen here since the 1950s, when 500,000 people left for jobs on the mainland. Now Puerto Ricans, who are U.S. citizens, are again leaving in droves.

Puerto Rico lost 54,000 residents — 1.5 percent of its population — between 2010 and 2012 alone. Since recession struck in 2006, the population has shrunk by more than 138,000 to 3.7 million, with the vast majority of the outflow headed to the mainland.

The brutal combination of a long recession, a shrinking population and overwhelming debt has left Puerto Rico’s political leaders struggling to manage a conundrum: How do they tame at least $70 billion in debt while marshaling the resources to grow a shrinking economy and battle corrosive social problems, including a homicide rate that is nearly six times the U.S. average?

Nobody knows how to make a pencil, or a health-care system

I Pencil

By Kevin D. Williamson

Everybody knows the first words spoken on a telephone call — Alexander Graham Bell’s simple demand “Mr. Watson, come here. I want to see you.” April marked the 40th anniversary of the first cell-phone call, which was quite different in tone. Two research teams had been competing to bring the first real consumer cell phone to market, and the first mobile call was placed by Motorola engineer Marty Cooper to his chief rival, Joel Engel of Bell Labs. “Joel, this is Marty,” he said. “I’m calling you from a cell phone.” In other words: “You lose, suckers.”

It took nearly a century to get from Alexander Graham Bell’s conversation to Marty Cooper’s, even though the basic technologies of mobile phones — telephony and radio — date from the 19th century. Conversely, it took only 66 years for mankind to go from the Wright brothers’ flight at Kitty Hawk to Neil Armstrong’s stroll on the moon. Technology does not move in predictable ways.

But it does move.

We treat technological progress as though it were a natural process, and we speak of Moore’s law — computers’ processing power doubles every two years — as though it were one of the laws of thermodynamics. But it is not an inevitable, natural process. It is the outcome of a particular social order.

When I am speaking to students, I like to show them a still from the Oliver Stone movie Wall Street in which the masterful financier Gordon Gekko is talking on his cell phone, a Motorola DynaTac 8000X. The students always — always — laugh: The ridiculous thing is more than a foot long and weighs a couple of pounds. But the revelatory fact that takes a while to sink in is this: You had to be a millionaire to have one. The phone cost the equivalent of nearly $10,000, it cost about $1,000 a month to operate, and you couldn’t text or play Angry Birds on it. When the first DynaTac showed up in a movie — it was Sixteen Candles, a few years before Wall Street— it was located in the front seat of a Rolls-Royce, which is where such things were found 25 or 30 years ago. By comparison, an iPhone 5 is a wonder, a commonplace miracle. My question for the students is: How is it that the cell phones in your pockets get better and cheaper every year, but your schools get more expensive and less effective? (Or, if you live in one of the better school districts, get much more expensive and stagnate?) How is it that Gordon Gekko’s ultimate status symbol looks to our eyes as ridiculous as Molly Ringwald’s Reagan-era wardrobe and asymmetrical hairdos? That didn’t just happen.

In his classic short story “I, Pencil,” economist Leonard Read considers the incomprehensible complexity involved in the production of a simple No. 2 pencil: the expertise in design, forestry, mining, metallurgy, engineering, transportation, support services, logistics, architecture, chemistry, machining, and other fields of knowledge necessary to create a product so common, so humble, and so cheap as to have become both ubiquitous and disposable. Read’s conclusion, which is one of those fascinating truths so obvious that nobody appreciates them, is that nobody knows how to make a pencil.Nobody is in charge of the operation, and nobody understands it end to end. From the assembly-line worker to the president of the pencil company, thousands or millions of people have tiny, discrete pieces of knowledge about the process, but no coordinating authority organizes their efforts.

Puerto Rico might be a little too big to fail

Puerto Rico, with at least $70 billion in debt, confronts a rising economic misery

By Michael A. Fletcher

Boxes and wooden crates filled with household items bound for the U.S. mainland are stacked high in the Rosa del Monte moving company’s cavernous warehouse, evidence of the historic rush of people abandoning this beautiful island.

The economy here has been in recession for nearly eight years, crimping tax revenue and pushing the jobless rate to nearly 15 percent. Meanwhile, the government is burdened by staggering debt, spawning comparisons to bankrupt Detroit and forcing lawmakers to severely slash pensions, cut government jobs and raise taxes in a furious effort to avert default.

The implications are serious for Americans outside Puerto Rico both because a taxpayer bailout would be expensive and a default would be far more disruptive than Detroit’s record bankruptcy filing in July. Officials in San Juan and Washington are adamant that a federal bailout is not on the table, but the situation is being closely monitored by the White House, which recently named an advisory team to help Puerto Rican officials navigate the crisis.

The island’s problems have ignited an exodus not seen here since the 1950s, when 500,000 people left for jobs on the mainland. Now Puerto Ricans, who are U.S. citizens, are again leaving in droves.

They are choosing the uncertainty of the job market in Orlando or New York City or Philadelphia over what they view as the certainty that their dreams would be crushed by the U.S. territory’s grinding economic problems.

“We used to move a lot of machinery into Puerto Rico, and executives who worked in the pharmaceutical industry here,” said Neftaly Rodriguez, whose father founded Rosa del Monte. “Now we are packing people up to go out. Everybody is looking for a better opportunity.”

Puerto Rico lost 54,000 residents — 1.5 percent of its population — between 2010 and 2012 alone. Since recession struck in 2006, the population has shrunk by more than 138,000 to 3.7 million, with the vast majority of the outflow headed to the mainland.

The brutal combination of a long recession, a shrinking population and overwhelming debt has left Puerto Rico’s political leaders struggling to manage a conundrum: How do they tame at least $70 billion in debt while marshaling the resources to grow a shrinking economy and battle corrosive social problems, including a homicide rate that is nearly six times the U.S. average?

The crisis has left Puerto Rican Gov. Alejandro Javier Garcia Padilla juggling competing demands for budget cuts and other types of austerity demanded by Wall Street rating agencies, and the incentives and other spending needed to ignite growth.

“Sometimes, you are between the wall and sword,” Padilla said in an interview.

Arsonists Running the Fire Brigade

Promoting Failure

By John Mauldin

The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake.

– Alan Greenspan

If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.

– John Maynard Keynes

And He spoke a parable to them: "Can the blind lead the blind? Will they not both fall into the ditch?"

– Luke 6:39-40

Six years ago I hosted my first Thanksgiving in a Dallas high-rise, and my then-90-year-old mother came to celebrate, along with about 25 other family members and friends. We were ensconced in the 21^st floor penthouse, carousing merrily, when the fire alarms went off and fire trucks began to descend on the building. There was indeed a fire, and we had to carry my poor mother down 21 flights of stairs through smoke and chaos as the firemen rushed to put out the fire. So much for the advanced fire-sprinkler system, which failed to work correctly.

I wrote one of my better letters that week, called "The Financial Fire Trucks Are Gathering." You can read all about it here, if you like. I led off by forming an analogy to my Thanksgiving Day experience:

I rather think the stock market is acting like we did at dinner. When the alarms go off, we note that we have heard them several times over the past few months, and there has never been a real fire. Sure, we had a credit crisis in August, but the Fed came to the rescue. Yes, the subprime market is nonexistent. And the housing market is in free-fall. But the economy is weathering the various crises quite well. Wasn't GDP at an almost inexplicably high 4.9% last quarter, when we were in the middle of the credit crisis? And Abu Dhabi injects $7.5 billion in capital into Citigroup, setting the market's mind at ease. All is well. So party on like it's 1999.

However, I think when we look out the window from the lofty market heights, we see a few fire trucks starting to gather, and those sirens are telling us that more are on the way. There is smoke coming from the building. Attention must be paid.

I was wrong when I took the (decidedly contrarian) position that we were in for a mild recession. It turned out to be much worse than even I thought it would be, though I had the direction right. Sadly, it usually turns out that I have been overly optimistic.

This year we again brought my now-96-year-old mother to my new, not-quite-finished high-rise apartment to share Thanksgiving with 60 people; only this time we had to contract with a private ambulance, as she is, sadly, bedridden, although mentally still with us. And I couldn't help pondering, do we now have an economy and a market that must be totally taken care of by an ever-watchful central bank, which can no longer move on its own?

I am becoming increasingly exercised that the new direction of the US Federal Reserve, which is shaping up as "extended forward rate guidance" of a zero-interest-rate policy (ZIRP) through 2017, is going to have significant unintended consequences. My London partner, Niels Jensen, reminded me in his November client letter that,

In his masterpiece The General Theory of Employment, Interest and Money, John Maynard Keynes referred to what he called the "euthanasia of the rentier". Keynes argued that interest rates should be lowered to the point where it secures full employment (through an increase in investments). At the same time he recognized that such a policy would probably destroy the livelihoods of those who lived off of their investment income, hence the expression. Published in 1936, little did he know that his book referred to the implications of a policy which, three quarters of a century later, would be on everybody's lips. Welcome to QE.

It is this neo-Keynesian fetish that low interest rates can somehow spur consumer spending and increase employment and should thus be promoted even at the expense of savers and retirees that is at the heart of today's central banking policies. The counterproductive fact that savers and retirees have less to spend and therefore less propensity to consume seems to be lost in the equation. It is financial repression of the most serious variety, done in the name of the greater good; and it is hurting those who played by the rules, working and saving all their lives, only to see the goal posts moved as the game nears its end.

Central banks around the world have engineered multiple bubbles over the last few decades, only to protest innocence and ask for further regulatory authority and more freedom to perform untested operations on our economic body without benefit of anesthesia. Their justifications are theoretical in nature, derived from limited-variable models that are supposed to somehow predict the behavior of a massively variable economy. The fact that their models have been stunningly wrong for decades seems to not diminish the vigor with which central bankers attempt to micromanage the economy.

Seattle en route to Venezuela

A Socialist Wins in Seattle

By John Nichols

When Machinists union members rallied in Seattle in mid-November to protest Boeing’s demand for wage and pension cuts, the newest municipal official roused the crowd. “We salute the Machinists for having the courage to reject this blatant highway robbery from the executives of Boeing in pursuit of their endless, endless thirst for private profit.” Kshama Sawant, an economics professor and Occupy Seattle activist who had just won a citywide City Council seat, said threats to shift production out of state could be met with an eminent domain move allowing workers to “take over the factories.”

Condemning private profit and talking up worker control of factories? That sounds kinda socialist. And socialists don’t win elections in the United States, right? Wrong. Sawant is the most recent in a long line of “out” socialists elected to city councils, mayoralties and even seats in Congress over the past century. Yet her win drew headlines as far away as her native India.

What made Sawant’s victory historic was the context. Since 2008, Republican politicians and their media echo chambers have built a cottage industry around the comic claim that Barack Obama is a socialist. The man who took single-payer healthcare off the table and refused to break up “too big to fail” banks wouldn’t qualify as a mild social democrat, let alone the raging “Marxist” of Rush Limbaugh’s hallucinations.

Still, the charge persists. In October, Sarah Palin was peddling the fantasy that problems with the Affordable Care Act website were part of an elaborate scheme to steer America toward “full socialized medicine.” The rhetorical strategy imagines that the mere suggestion of a socialist or socialized tendency is a deal killer. It’s not just Republicans who buy into the notion; Democrats, with rare exceptions like Representative John Conyers and Senator Bernie Sanders, are almost as quick as conservatives to distance themselves from the s-word.

But the American people are less concerned. Thirty-nine percent of Americans surveyed for a November 2012 Gallup poll said they had a positive image of socialism. In a 2011 Pew survey, 49 percent of Americans under 30 said they felt positive about socialism, while just 46 percent felt positive about capitalism. Among African-Americans, 55 percent had a positive reaction to socialism, versus 41 percent to capitalism. Among Latinos, it was 44 percent for socialism, 32 percent for capitalism.

Even socialists have a hard time agreeing on definitions of socialism, so there may not be a consensus on what all those Americans feel positive about. But in an era of lingering unemployment, cuts to public education and public services, and ever-widening incomeinequality, it should not be surprising that millions of Americans are ill at ease with capitalism—at least as it’s defined by Ted Cruz and Paul Ryan—and that many of them are open to alternatives. Nor should it be surprising that, after all the silly ranting about Obama’s “socialism,” voters are increasingly immune to redbaiting. In New York City this fall, Bill de Blasio’s Republican opponent seized on a New York Times story that said the Democratic mayoral candidate had once expressed an interest in “democratic socialism”; he attacked de Blasio for running a campaign “directly out of the Marxist playbook.” The New York Post featured an image of the Democrat next to a hammer and sickle. De Blasio laughed the attacks off, continued to describe himself as a progressive and won 73 percent of the vote.

Frustration with America’s constrained political discourse, and the dysfunctional governance that extends from it, is palpable, and people are looking for fresh policies and approaches. Virginia Libertarian gubernatorial candidate Robert Sarvis just won 15 percent of the under-30 vote, securing almost 150,000 votes statewide. Political and media elites acknowledge that libertarian ideas can attract votes, but they still wrestle with the notion that socialist ideas might also have appeal. Sawant put the prospect to the test in Seattle, a city with a population larger than the District of Columbia, Vermont and Wyoming. Identifying herself as a “Socialist Alternative” candidate who would fight for a $15 minimum wage, taxation of millionaires and expanded public services, she beat a sixteen-year incumbent who had broad support from mainstream Democrats and environmental groups. It’s fair to suggest that much of her backing came from Seattle voters who wanted to shake things up: on the same Election Day, the city turned out a mayor and changed its system of electing Council members. But it is also fair to suggest, as Sawant does, that her win has “shown the strongest skeptics that the socialist label is not a bad one for a grassroots campaign to succeed.”

That’s not a new notion. The acceptance of socialist candidates and ideas has waxed and waned in American history. With the rapid evolution of our politics in an age of instant communication and growing anger at income inequality, fear of the s-word is diminishing. And voters—especially younger ones—are beginning to demand a politics that, instead of rejecting solutions or candidates based on a label, considers their merits.

Venezuela’s Price Police

Sooner or later, price inflation will cause Maduro's demise

By Alvaro Vargas Llosa

The Venezuelan government’s war on price inflation is not a metaphorical one—last weekend President Maduro, who owes his title to April’s rigged election, ordered the military takeover of Daka, a chain of electronic stores, and the arrest of several managers from that and other retail companies. The rhetoric employed by Maduro was inevitably interpreted by the masses as an encouragement to loot—which is what they did in the city of Valencia.

Besides the images sent out by citizen-reporters in Valencia, the picture that best captures the essence of what is happening is the one tweeted by a government minister who tried to justify the measures. The photo shows a washer/dryer that, in the words of the minister, “cost 39,000 VEF on November 1 and today costs 59,000 VEF, a nearly 100 percent rise in a week...”

Yes, minister, that is precisely what happens when you are on the verge of hyperinflation! The inflation rate is now nearing 60 percent and, as anyone who has lived under those conditions (including yours truly) knows, going from 60 percent to 1,000 percent is a lot easier than going from 3 percent to 40 or 50 percent.

For many years Venezuela has produced nothing but oil (in decreasing quantities) and has therefore had to import pretty much everything the population consumes. The artificial level at which the government has kept the bolivar in spite of the massive outflow of hard currency required to meet those import needs has, of course, caused a severe drop in foreign-exchange reserves. Government controls and the militarization of the economy have not prevented the black market from taking the real exchange rate to a level ten times higher than the official one. No wonder people who have to obtain US dollars to import even the most basic stuff sell it at much higher prices than the government Wonderland economy dictates.

But that is not all. Since 2002 the money supply (M1) has grown at an annual rate of 54 percent while real GDP per capita has risen at an annual rate of just under 4 percent. The socioeconomic model based on producing nothing and consuming everything at subsidized prices, printing colossal amounts of money to paper over the government’s yawning fiscal gap, and waging literally a war on private businesses has led to a stagflation—minimal growth and skyrocketing prices that have turned ministers into photographers. A few weeks from the local elections that will be the first test of Maduro’s support since the rigged presidential election, the political consequences are already serious—he faces the possibility of such a big defeat that the numbers will simply overwhelm the government´s ability to commit yet another electoral fraud.

This explains Maduro’s desperate move over the weekend. The man who openly encouraged people to loot and ordered the military to takeover several stores around the country in an attempt to lower consumer prices understands all too well that he is in danger. He lacks Hugo Chavez’s charisma, he is presiding over a regime that exhibits growing cracks, and he is fast losing support according to the few polls one can trust in that environment.

We don’t know if he will be able to rig the next election at this point. But we do know this: He cannot win the war on inflation (soon hyperinflation) no matter how many stores he takes over, how many managers he throws in jail, and how many businesses he allows the masses to loot. Sooner or later, price inflation will cause his demise.

Government is dangerous. Handle with care.

Government is dangerous. Handle with care.

The corruption of the federal government was a key element in the career of Whitey Bulger (seen here in a 1955 mug shot taken in Miami Beach). Officials charged with defending the public from gangsters like Bulger used their considerable influence to defend the gangster instead.

by Jeff Jacoby

THERE IS NO connection, of course, between the prosecution of notorious gangster James "Whitey" Bulger and the recent spate of scandals and revelations roiling the Obama administration. Or is there?

Law enforcement and criminal justice are essential functions of government. No civilized society could survive for long if it lacked tools to combat lawlessness or make dangerous villains answer for their crimes. And Bulger was certainly dangerous — "one of the most vicious, violent criminals ever to walk the streets of Boston," as Assistant US Attorney Fred Wyshak called him in summing up for the prosecution last week.

But Bulger wasn't the only one on trial in Boston's federal courthouse. So was the government trying him. Bulger and his henchmen may have been the degenerates who physically committed the gruesome murders and other crimes that jurors learned about during 35 days of sometimes stomach-churning testimony. But it was other degenerates, in the FBI and the Justice Department, who for so long enabled Bulger's bloody mayhem. They enlisted Bulger as an informant, protected him from police investigations, and warned him to flee when an indictment was imminent. "If the FBI had not made Whitey its favorite mobster, broken the rules, and rigged the game to his benefit," reporter David Boeri has concluded, "Bulger would never have reached as high as he did."

The corruption of the federal government was a key element in Bulger's trial, as it was in so much of his sadistic career. Officials charged with defending the public from gangsters like Bulger used their considerable influence to defend the gangster instead.

It would be comforting to believe that this was a one-off, that law enforcement agencies never abuse their authority, that the immense powers of the federal government are always deployed with scrupulous integrity. But no one believes that.

As Bulger's racketeering prosecution was playing out in Boston, other stories of federal overreach, secrecy, and obstruction were making headlines: The scandal at the Internal Revenue Service, which for more than two years had targeted conservative grassroots groups for intimidation and harassment. The Justice Department'sunprecedented designation of national-security reporter James Rosen as a "co-conspirator" in order to trawl through his personal email, and its surreptitious seizure of telephone records from up to 20 Associated Press reporters and editors. The disclosure that the National Security Agency's collection of domestic communications data is far more intrusive than was previously known, with the NSA reportedly collecting billions of pieces of intelligence from US internet giants such as Google, Facebook, and Skype.

President Obama insists that none of this should undermine confidence in the federal government. "You've grown up hearing voices that incessantly warn of government as nothing more than some separate, sinister entity," he told Ohio State's graduating class in May. "You should reject these voices."

At a press conference in June, he likewise assured Americans that they needn't worry about the NSA's vast data-mining operation being abused. "We've got congressional oversight and judicial oversight," he said. "And if people can't trust not only the executive branch, but also don't trust Congress and don't trust federal judges to make sure that we're abiding by the Constitution and due process and the rule of law, then we're going to have some problems here."

According to Gallup, nearly half of Americans believe that the federal government "poses an immediate threat to the rights and freedoms of ordinary citizens." A Rasmussen Poll asks whether the NSA's metadata is likely to be used by the government to persecute political opponents; 57 percent say yes. Maybe we do have some problems here.

(Un)Paving Our Way To The Future

Cutting Our Losses and Moving On

by James H. Kunstler

You can’t overstate the baleful effects for Americans of living in the tortured landscapes and townscapes we created for ourselves in the past century. This fiasco of cartoon suburbia, overgrown metroplexes, trashed small cities and abandoned small towns, and the gruesome connective tissue of roadways, commercial smarm, and free parking is the toxic medium of everyday life in this country. Its corrosive omnipresence induces a general failure of conscious awareness that it works implacably at every moment to diminish our lives. It is both the expression of our collapsed values and a self-reinforcing malady collapsing our values further. The worse it gets, the worse we become.

The citizens who do recognize their own discomfort in this geography of nowhere generally articulate it as a response to “ugliness.” This is only part of the story. The effects actually run much deeper. The aggressive and immersive ugliness of the built landscape is entropy made visible. It is composed of elements that move us in the direction of death, and the apprehension of this dynamic is what really makes people uncomfortable. It spreads a vacuum of lost meaning and purpose wherever it reaches. It is worse than nothing, worse than if it had never existed. As such, it qualifies under St. Augustine’s conception of “evil” in the sense that it represents antagonism to the forces of life.

We find ourselves now in a strange slough of history. Circumstances gathering in the home economics of mankind ought to inform us that we can’t keep living this way and need to make plans for living differently. But our sunk costs in this infrastructure for daily life with no future prevent us from making better choices. At least for the moment. In large part this is because the “development” of all this ghastly crap — the vinyl-and-strandboard housing subdivisions, the highway strips, malls, and “lifestyle centers,” the “Darth Vader” office parks, the infinity of asphalt pavements — became, for a while, our replacement for an economy of ecological sanity. The housing bubble was all about building more stuff with no future, and that is why the attempt to re-start it is evil.

Sooner rather than later we’ll have to make better choices. We’ll have to redesign the human habitat in America because our current environs will become uninhabitable. The means and modes for doing this are already understood. They do not require heroic “innovation” or great leaps of “new technology.” Mostly they require a decent respect for easily referenced history and a readjustment of our values in the general direction of promoting life over death. This means for accomplishing this will be the subject of Part II of this essay, but it is necessary to review a pathology report of the damage done.

Launching Nirvana

I have a new theory of history: things happen in human affairs because they seem like a good idea at the time. This helps explain events that otherwise defy understanding, for example the causes of the First World War. England, France, Russia, Germany, and Italy joined that war because it seemed like a good idea at the time, namely August of 1914. There hadn’t been a real good dust-up on the continent since Waterloo in 1814. Old grievances were stewing. Empires were both rising and falling, contracting and reaching out. The “players” seemed to go into the war thinking it would be a short,  redemptive, and rather glorious adventure, complete with cavalry charges and evenings in ballrooms. The “deciders” failed to take into account the effects of newly mechanized warfare. The result was the staggering industrial slaughter of the trenches. Poison gas attacks did not inspire picturesque heroism. And what started the whole thing? Ostensibly the assassination of an unpopular Hapsburg prince in Serbia. Was Franz Ferdinand an important figure? Not really. Was Austria a threat to France and England? It was in steep decline, a sclerotic empire held together with whipped cream and waltz music. Did Russia really care about little Serbia? Was Germany insane to attack on two fronts? Starting the fight seemed like a good idea at the time — and then, of course, the unintended consequences bit back like a mad dog from hell.

Inflation, Shortages, and Social Democracy in Venezuela

Venezuela’s economic policy is proving that economic intervention, leads to complete socialism and economic destruction

by Matt McCaffrey and Carmen Dorobat

The economic turmoil in Venezuela has received increasing international media attention over the past few months. In September, the toilet paper shortage (which followed food shortages and electricity blackouts) resulted in the “temporary occupation” of the Paper Manufacturing Company, as armed troops were sent to ensure the “fair distribution” of available stocks. Similar action occurred a few days ago against electronics stores: President Nicolás Maduro accused electronics vendors of price-gouging, and jailed them with the warning that “this is just the start of what I’m going to do to protect the Venezuelan people.”

Earlier this month, in another attempt to ensure “happiness for all people,” Maduro began to hand out Christmas bonuses, in preparation for the coming elections in December. But political campaigning is not the only reason for the government’s open-handedness. The annual inflation rate in Venezuela has been rapidly rising in recent months, and has now reached a staggering 54 percent (not accounting for possible under-estimations). Although not yet officially in hyperinflation, monetary expansion is pushing Venezuela toward the brink.

In such an environment, paychecks need to be distributed quickly, before prices have time to rise; hence, early bonuses. This kind of policy is nothing new in economic history: Venezuela’s hyperinflationary episode is unfolding in much the same way Germany’s did nearly a century ago.

Consequently, Venezuela’s economic policy is proving to be another example of Ludwig von Mises’s argument that economic intervention, if left unchecked, leads to complete socialism. The ever-expanding price controls testify to the fact that governments always search for new scapegoats in the market instead of admitting the failure of their own policies, and that it is always easier to increase government control than reduce it.

Maduro clearly knows the ropes when it comes to anti-market propaganda; like his predecessor, Hugo Chávez, he has placed blame for soaring prices on speculators and the “parasitic bourgeoisie.” But no witch-hunt for “price-gougers” will stop the eventual collapse of the economy that will result from further monetary expansion combined with crippling price controls. Inevitably, as Mises argued, “once public opinion is convinced that the increase in the quantity of money will continue and never come to an end, and that consequently the prices of all commodities and services will not cease to rise, everybody becomes eager to buy as much as possible and to restrict his cash holding to a minimum.”

Is France the New Italy?

With or without new monetary stimulus, though, France needs reform

By Bloomberg

If U.S. President Barack Obama thinks he’s having a difficult autumn, then maybe he should consider the season French President Francois Hollande is experiencing. Paris in springtime may have been lovely as usual, but fall has been horrible.

The French unemployment rate stands at 11 percent. After growing tepidly in the second quarter, the economy shrank again in the third. Standard and Poor’s just downgraded the government’s debt -- for the second time in less than two years. Hollande’s Socialist administration faces protests over taxes and burdensome regulation not just from business leaders, as you might expect, but also from farmers, shopkeepers, teachers, truck drivers and soccer players.

The European Commission recently called on the government to speed up economic reform. Speaking from its conveniently located Paris headquarters, the Organization for Economic Cooperation and Development restated the message in a detailed report issued last week: “In recent years, a significant adjustment has been under way in several European countries that have accelerated the introduction of essential reforms. This adjustment hasn’t yet happened in France.”

The White House is concerned that some recent polls have shown Obama’s approval rating dropping below 40 percent. For Hollande, who was elected only last year, it stands at 15 percent.

Even discounting for the French flair for umbrage, the backlash against Hollande is extraordinary. The economy -- the second-biggest in the euro area after Germany -- is in deep trouble, and the government looks helpless. Seemingly intractable problems and a lack of effective leadership threaten to turn France into Europe’s new Italy.

The New York Times versus the New York Times

Sometimes, the New York Times is not that bad

by David Henderson

I have known Hoover colleague, economist Paul Gregory, for about 5 years, and gotten to know him better in the last 3. An expert on Russia's economy and increasingly on China's economy, he has written two articles on those topics for Econlib. I had no idea, until reading this New York Times article, "Lee Harvey Oswald Was My Friend," earlier this month, that he had known Lee Harvey Oswald, the Communist ex-Marine who murdered John F. Kennedy. The whole piece is fascinating. Here are three paragraphs that make the case for Oswald's motivation and why Gregory finds it implausible that someone would conspire with Oswald:

On the Saturday morning after Kennedy was killed, I was sitting in my small apartment in Norman when a Secret Service agent and the local chief of police arrived and took me some 20 miles down I-35 to Oklahoma City for questioning. As we drove, I began telling them about how I met Oswald, the evenings driving around Fort Worth, the Dallas Russians and how a college kid got caught up with an accused assassin. After they escorted me into a nondescript conference room in a downtown building, the agents homed in on the question of the day, which, of course, has lingered over the past 50 years: Did I think Oswald worked alone or was part of a larger conspiracy? I told them simply that, if I were organizing a conspiracy, he would have been the last person I would recruit. He was too difficult and unreliable.

Gross Domestic Freebie

The gap between what’s actually happening in the economy and what the statistics are measuring is getting wider than ever before

BY JAMES SUROWIECKI

Titter’s recent I.P.O. bonanza gave us all some striking numbers to consider. There’s the company’s valuation: an astounding twenty-four billion dollars. And its revenue: just five hundred and thirty-five million. It has more than two hundred and thirty million active users, and a hundred million of them use the service daily. They collectively send roughly half a billion tweets every day. And then there’s the starkest number of all: zero. That’s the price that Twitter charges people to use its technology. Since the company was founded, ordinary users have sent more than three hundred billion tweets. In exchange, they have paid Twitter no dollars and no cents.

Ever since Netscape made the decision to give away its browser, free has been more the rule online than the exception. And even though traditional media companies have been erecting paywalls to guard revenue, a huge chunk of the time we spend online is spent consuming stuff that we don’t pay for. Economically, this makes for an odd situation: digital goods and services are everywhere you look, but their impact is hard to see in economic statistics.

Our main yardstick for the health of the economy is G.D.P. growth, a concept devised in the nineteen-thirties by the economist Simon Kuznets. If it’s rising briskly, we know that the economy is doing well. If not, we know it’s time to worry. The basic assumption is simple: the more stuff we’re producing for sale, the better off we are. In the industrial age, this was a reasonable assumption, but in the digital economy that picture gets a lot fuzzier, since so much of what’s being produced is available free. You may think that Wikipedia, Twitter, Snapchat, Google Maps, and so on are valuable. But, as far as G.D.P. is concerned, they barely exist. The M.I.T. economist Erik Brynjolfsson points out that, according to government statistics, the “information sector” of the economy—which includes publishing, software, data services, and telecom—has barely grown since the late eighties, even though we’ve seen an explosion in the amount of information and data that individuals and businesses consume. “That just feels totally wrong,” he told me.

Brynjolfsson is the co-author, with Andrew McAfee, of the forthcoming book “The Second Machine Age,” which examines how digitization is remaking the economy. “We’re underestimating the value of the part of the economy that’s free,” he said. “As digital goods make up a bigger share of economic activity, that means we’re likely getting a distorted picture of the economy as a whole.” The issue is that, as Kuznets himself acknowledged, “the welfare of a nation . . . can scarcely be inferred from a measure of national income.” For instance, most Web sites are built with free, open-source applications. This makes running a site cheap, which has all sorts of benefits in terms of welfare, but G.D.P. ends up lower than it would be if everyone had to pay for Microsoft’s server software. Digital innovation can even shrink G.D.P.: Skype has reduced the amount of money that people spend on international calls, and free smartphone apps are replacing stand-alone devices that once generated billions in sales. The G.P.S. company Garmin was once one of the fastest-growing companies in the U.S. Thanks to Google and Apple Maps, Garmin’s sales have taken a severe hit, but consumers, who now have access to good directions at no cost, are certainly better off.

New technologies have always driven out old ones, but it used to be that they would enter the market economy, and thus boost G.D.P.—as when the internal-combustion engine replaced the horse. Digitization is distinctive because much of the value it creates for consumers never becomes part of the economy that G.D.P. measures. That makes the gap between what’s actually happening in the economy and what the statistics are measuring wider than ever before.

Figuring out the invisible value created by the Internet is no easy task. One strategy that economists have used is to measure how much time we spend online (on the assumption that time is money). A recent study by Brynjolfsson and Joo Hee Oh concluded that in 2011 the value of free goods on the Internet was hundreds of billions of dollars, and that it was increasing at a rate of more than forty billion dollars annually. Another study, by the economist Michael Mandel, contended that the government had underestimated the value of data services (mobile apps and the like) by some three hundred billion dollars a year. These are rough estimates, but they give a sense of how much better off the digital economy has made us. 

A Great Society Grounded in Private Property Rights and Bourgeois Dignity

And somewhat less of a Commonwealth

  

In this delightful, humorous, and spot-on correct short video from Reason, we learn of the true source of America’s bounty: private property rights (to which I would add also – influenced as I am by Deirdre McCloskey – Americans’ cultural embrace, by and large, of bourgeois dignity).