Letter From the UK (About European Ossification)

Economic Europe is paying the price for political Europe

By Douglas Carswell 
August 14th, 2014
The Telegraph

Remember what European Monetary Union was supposed to do? It was going to add zillions to Europe’s GDP, they said.  According to the Lisbon development plan, by 2010, the EU was going to be “the most competitive and dynamic knowledge-based economy in the world capable”.

The truth is that Europe is failing badly. At a time when the rest of the world is growing, data out today shows France stagnating. Shockingly, Italy’s output is lower today than it was fourteen years ago. Even Germany is going into reverse.

Economic Europe is paying the price of ever more political Europe. Introducing layer upon layer of rules, regulations and directive is starting to ossify. Europe’s economy has consistently performed worse than expected as a result of decades of dirigisme. 

Here in Britain we have nothing to be complacent about. To be sure, cheap credit is stimulating output. Combined with welfare reforms, this is driving a spectacular jobs boom. But beware.  We might be outside the euro – and therefore free to engage in our own monetary stimulus. We are not outside the single market regulatory sclerosis. The deadweight of all those directives presses down on us every bit as much as on the Eurozone. Strip away the easy money stimulus, and we’re not that much better off.

For years, politicos have told us we need to be inside the European single market to prosper. So why is wealth now being created almost everywhere but inside the highly regulated single market? Those parts of the world that are flourishing somehow don’t seem to struggle to sell either inside or outside Europe.

It is not only European monetary union we ought to steer clear from.

 

Letter From America (About Essential Truths)

10 Essential Economic Truths Liberals Need to Learn

Jeffrey Dorfman

Forbes

5th June 2014

Jeffrey Dorfman teaches economics at the University of Georgia.  In this article he presents ten economic principles or verities, which, he says, “liberals” need to learn.  Synonyms for “liberal” would be “left wing”, “progressive”, or, in the case of New Zealand, an apt synonym would be “general population”, such is our adulation of bad economic principles.

1) Government cannot create wealth, jobs, or income. Because government has to take money from somebody before it can spend it, there is no economic gain from anything the government does. Money collected in taxes or borrowed would have been either spent or invested in the private sector. Any jobs government claims to have created are only in place of other jobs the same money would have produced if people had been allowed to spend it themselves.

It is possible for government to own businesses which trade like any other company in the private sector.  These may make profits, can, therefore, grow in size and capital base and add jobs as a result.  These are truly exceptions to the general maxim that governments cannot create wealth, jobs or income.  And Dorfman’s general point remains true: government enterprise comes into existence by expropriating property from citizens in the first place.  Governments are unable to create wealth from nothing; in the first instance governments must appropriate property from tax payers.  

2) Income inequality does not affect the economy. Poor people do spend more (or all) of their income while people with higher earnings save some of their income. However, saving is as good for the economy as consumer spending (or better). The basic identity is that national income equals consumer spending plus investment plus government spending on goods and services plus net exports. To make investments, money first must be saved; so savings contribute to national income, too. In fact, savings that lead to increased capital (a company borrows it to build a factory, for example) will lead to higher national income in the long run because the capital can produce income year after year.

3) Low wages are not corporate exploitation. In a free country, people voluntarily accept employment, so all workers believe their current job to be the best choice from among their opportunity set. If a business paid its workers much less than they were worth, a competitor would offer more and hire them away. As consumers, when we go shopping, we are happy to find low prices. We certainly do not go out of our way to pay more than we need to for things. Businesses are the same when they are buying labor; they do not pay more than they need to pay. Businesses exist to make profit, so a business will not, and should not, pay its workers more just because it has the profits available to do so. Workers get paid more only when they become more productive or when the price of what they make goes up. 

Whilst this is generally true, it must be qualified.  Where labour is in plentiful supply a different dynamic may operate.  In such a case, a worker may become more productive, but if he can be easily replaced by  many more equally productive workers, he is unlikely to get paid more. In fact he may lose his job to those who are prepared to produce the same or more for even lower wages.  

Such an outcome would be very hard upon the sacked worker.  But this cannot be regarded as exploitation, provided the same principle applies throughout the company.  If the CEO, for example, could be replaced by someone equal or better for a lower salary, the owners must act to fire the CEO.  Recently the successful CEO of a large New Zealand company publicly stated that he considered himself overpaid.  If that is true, there should be equally competent people who would be prepared to do the job for less, in which case the present incumbent should receive a paycut or  he should be replaced.  The efficiency of the company requires it.

The reality, however, is often very different.  A productive employee may be replaced by an equally productive employer for less, but there are always risks, transition costs, and intangible realities to consider.  The existing worker, for example, may be punctual, loyal, and harmonious in his or her relationships with colleagues and other staff. Such realities, whilst not easily calibrated in dollars and cents can be extremely valuable and contribute greatly to the productivity and success of the firm. 

4) Environmental over-regulation is a regressive tax that falls hardest on the poor. When we reduce pollution more than we should, worry about climate change more than we should, or over-restrict access to natural resources, prices go up. Because the poor spend a higher percentage of their income, forcing up prices is a bigger penalty on the poor. Blocking the Keystone XL pipeline is a perfect example of how environmental extremists are causing energy prices to be higher.

5) Education is not a public good. We provide publicly funded K-12 education to all (even to non-citizens), but the education provided produces human capital that is privately owned by each person. This human capital means more work skills, more developed talent, and more potential productivity. People with more human capital generally get paid more, collecting the returns from their education in the form of higher earnings. One common defense of education as a public good is worth refuting here. Yes, education helps people invent things that benefit society. However, they will expect to be paid for those inventions, not give them away for free in return for their education.

6) High CEO pay is no worse than high pay to athletes or movie stars. Yes, CEOs are paid a lot, maybe too much. The top professional athletes, television and movie stars, singers, lawyers, and hedge fund managers also all make lots of money. High CEO pay does not reduce the pay average workers get any more than high athlete pay means that the equipment manager gets paid less or the roadies on a Rolling Stones tour make less when the Rolling Stones make more. The high pay of CEOs, movie stars, and athletes all come out of the pockets of the owners of the business, movie studio, and team, respectively. Such pay reduces profits, but not the pay of other workers who are paid what they are worth in the marketplace. Shareholders have a right to complain about CEO pay, but other employees and labor activists do not.

7) Consumer spending is not what drives the economy. An extra dollar of investment, government spending, or net exports adds just as much to GDP as does a dollar of consumer spending. In fact, until recently, consumer spending was 65 percent of GDP (find an old economics textbook and look it up for yourself). Then, as savings fell beginning in the 1980s and consumer credit became more widely available and less expensive, consumer spending rose to 70 percent of the economy. This is actually a bad thing. Robert Solow, who won a Nobel Prize in Economics, showed that nations are the wealthiest in the long run if they save a share of their income known as the Golden Rule Savings Rate. This is tricky to estimate, but all economists are sure that the U.S. is well below it. So if we save more and spend less of our income, our children and grandchildren will be better off.

8) When government provides things for free, they will end up being low quality, cost more than they should, and may disappear when most needed. Public education, free health care, welfare programs; does anybody think these programs are high quality, reliable, and have no waste in their budgets? Most states fund the majority of their technical and community college programs. Thus, in the recent recession, right when lots of people wanted to get some new job skills, technical and community colleges had to cut their budgets and offer fewer classes. The freebie disappeared at just the wrong time. The sad reality is: when the customer does not pay, the product is rarely any good.

The economic reality is that government owned and operated enterprises, whether schools, hospitals, or electricity generators, do not have customers to win, satisfy and retain, and usually face very little, if any, competition.  They thus lack the two key disciplines to force efficiency and excellence into the operation. 

9) Government cannot correct cosmic injustice. Esteemed economist Thomas Sowell wrote a fabulous book on this topic. Nobody likes to see cosmic injustice: kids with serious health problems through no fault of their own, families whose homes are destroyed in natural disasters, etc. However, when government steps in to correct a cosmic injustice, the price must be paid by someone else—a someone else who had nothing to do with causing the injustice being addressed. Thus, every time government fixes or eases a cosmic injustice, it creates a new one by sticking somebody with the bill—either a financial one or one measured in some other sort of cost. For example, each affirmative action college admission by definition mean some other applicant must be turned down. We may be willing, as a society, to bear an injustice in order to fix some cosmic injustices (e.g., many will willingly chip in to pay for a child’s medical care), but we cannot create a world free from all cosmic injustice.

10) There is no such thing as a free lunch. In America today the number of free lunches being served is at an all-time record high. People on food stamps, households receiving a government check of some kind, the number of people collecting disability, need-based financial aid for college expenses; all either hit highs recently or are at all time highs right now. Yet, somebody is paying that bill; no free lunch is really free. This is true more broadly about all regulations that promise to provide us with something good; the costs are lurking somewhere in the background. Raising the minimum wage does not just take money out of employers’ pockets, but also raises prices for all customers and will cost some low-wage workers their jobs. If we protect voting rights, we get more voter fraud. If we help underwater homeowners, it will be harder for future borrowers to get a mortgage. Sooner or later, those free lunches get paid for and often the bill lands in an unexpected or unintended place.

Liberals love to talk about their compassion. Compassion is great, but no amount of caring can repeal the simple facts of economics. It is fine to support raising the minimum wage, but understand that jobs will be lost and prices will rise. Protecting the environment is a wonderful thing, but it is also expensive and hurts the poor in particular. Politicians love to claim the government spending which they direct creates jobs, but it only moves jobs from one place to another. Greedy businesses cannot exploit workers because another greedy business would be happy to exploit them a little less until greed removed all the exploitation.

Letter From Argentina (About The Fate of Another Socialist Economy)

Analysis: Argentina policies adrift as inflation spiral looms

Brad Haynes
Yahoo News 

BUENOS AIRES (Reuters) – In the midst of Argentina’s biggest currency devaluation in a decade, with the peso’s plunge rattling financial markets worldwide, President Cristina Fernandez’s first public address in weeks was silent on the matter.  She didn’t say a word about the currency, but instead took to national television last week to announce the latest government measure – a new form of high school scholarship.

While the president has avoided mention of currency policy, the increasingly unpredictable messages from her ministers have amplified the risks weighing on the peso.  An announcement last week suggesting long-awaited relief from currency controls for ordinary Argentines in practice meant a trickle of U.S. dollars for an affluent minority.  Officials also promised to cut the tax rate on spending dollars overseas, but revoked the measure just two days later.

Critics say the government’s erratic decision-making is the biggest risk looming over the volatile peso, as the policies that triggered the currency crunch have only become more contradictory as the crisis unfolds.  The stakes aren’t what they were in 2002, when a record sovereign default shook the global economy, as Argentina has since been ostracized from global credit markets. Still, the sense of a government without its bearings is familiar to some.

“Every day it’s a different argument,” said former central bank president Aldo Pignanelli in a radio interview, pointing the finger at brash 42-year-old Economy Minister Axel Kicillof.  “In 2002 we got things right and wrong, but we faced the storm. I see what this kid is doing and it gets me furious, because we’re losing precious time to take coherent measures.”  Even the dynamics of the peso’s 15 percent drop last week are shrouded in uncertainty. At the start of the historic slide, on Wednesday, there was no government intervention, but by Thursday the central bank was intervening heavily to hold the line, as it has this week. Officials blamed a “speculative attack” in the tightly controlled interbank market.

With the right mix of policies, the devaluation could have helped boost exports and brought relief for Argentina’s dwindling foreign reserves. But the chaotic approach has meant the central bank is burning more quickly through reserves and there is even more pressure on perilously high inflation. 

As veterans of previous crises, Argentines have assumed a familiar defensive crouch, hoarding any dollars they have and spending pesos like they are going out of style.  “Right now all you can do is buy. Today. Not tomorrow,” said Walter Yofre, 41, an accountant on a bustling retail boulevard in Buenos Aires. “I just got a memory chip for 268 pesos. This morning the store was charging 245!”

Trade on a major grains exchange has dried up as farmers stockpile their soybeans rather than taking pesos.   Goods are backing up at the border as officials try to slow the impact of more expensive imports.
And ordinary supply chains are frozen with uncertainty in a country where the dollar is a reference for everything from real estate to raw materials.  “You pick up the phone and 90 percent of your suppliers will tell you they’re out of stock,” said Gaston Luccisano, who runs a kitchen goods store in the middle-class neighborhood of Caballito. “The guy could be staring at a stack of plates but he won’t sell until he knows what it will cost to restock.”

Many economists say officials are obsessing over symptoms while aggravating the illness with an improvised approach.  Economy Minister Kicillof, a former professor of Marxist, spent this week chasing down what he calls speculative price gouging by major corporations.  In daily meetings with business leaders, he and top officials have warned cement makers to avoid “unpatriotic” pricing and forced retailers to roll back new price tags.

Devaluations can help exporters and eventually slow the drain on Argentina’s foreign reserves, which fell over 30 percent in the past year to below $29 billion. But shock and uncertainty over the measure has also fuelled the rush for dollars.  Reserves have fallen more than $2.3 billion so far this month as the central bank fights to defend the new exchange rate – more than ten times what was lost in all of December.  “There is no doubt: this crisis has been entirely self-inflicted by confused policies,” said Eric Ritondale, senior economist for Econviews in Buenos Aires.

Making matters worse, the spike in import costs and a stampede of shoppers trying to lock in prices for durable goods is now feeding Argentina’s inflationary demons.  Consumer prices have risen about 4 percent in four weeks, according to economic consultancy Elypsis, who put the annual inflation rate near 30 percent. Private economists reported inflation of about 25 percent last year – more than double the price increases recognized in the government’s official index.

To interrupt the inflationary feedback loop, the government would need a coordinated program to cut back deficit spending, stop the money presses at the central bank and keep wage hikes under control, economists say.  The central bank has taken some tentative first steps since the devaluation, hiking a key interest rate this week and signalling tighter monetary policy.

The best case scenario, according to Ritondale of Econviews, would be interest rate hikes triggering a sharp economic slowdown. The economy could shrink 3 or 4 percent this year, he said, cooling inflation and restoring enough of a trade surplus to replenish foreign reserves.  That would be an orderly adjustment compared to the crisis set off in 2001, when a string of presidents resigned amid riots and looting as the unemployment rate climbed to more than 20 percent.

There is little or no risk a similar financial collapse, as Argentina’s exclusion from international credit markets since then has left the country with few foreign debts.  Most Argentines are also numbed by years of an overheating economy, discussing the latest prices like the weather. “So, have you bought anything?” is a common conversation starter.  But the potential for social conflict is real.

The test may come in March, when labor talks will have powerful unions out in force, threatening strikes and protests to keep wages rising with consumer prices. Labor disruptions are as regular as the seasons in Argentina, but broader economic frustration this year could make things volatile.  The pressure would be difficult for an avid inflation hawk – and the president is anything but. At a political rally after a stinging primary defeat in last year’s midterm elections, Fernandez showed her colors.  “Do you know what it means when they say we should govern according to inflation targets?” she shouted to flag-waving supporters. “I will translate it for you. It means they want to cap your wages.”

If the government’s fight against inflation has been inconsistent, currency measures have been downright contradictory.  Two years ago, officials attacked the “dollarization” of the economy, discouraging the listing of apartments and cars in anything but pesos. Last year they reversed course, printing central bank paper indexed to the dollar and facilitating dollar-denominated commerce despite the scarcity of greenbacks.  In May, Fernandez dismissed critics suggesting the possibility of a devaluation: “They are going to have to wait for another government.”  Yet last week her government oversaw the peso’s biggest daily drop since 2002.

The recent loosening of currency controls was equally unexpected.  Last week, officials announced access to dollars for private savings for the first time in two years, creating even more demand for scarce foreign reserves. Until then Argentines could only turn to far more expensive dollars on the black market.  But by Monday it became clear the new currency market would be tightly controlled, with just one in four Argentines meeting salary requirements and only a fifth of their wages eligible.

Officials also promised last Friday that the tax rate on Argentines’ overseas credit cards bills would fall in line with the new market for dollar savings.  That is, until Kicillof scrapped the idea two days later.

While some have read the waffling as signs of moderation, others see a government without a plan.  “They have been reacting more than anticipating,” said Daniel Marx, Argentina’s finance secretary from 1999 to 2001 and the head of consultancy Quantum Finanzas. “Their strategies haven’t worked as planned, so they’ve had to correct course. The question is whether they are clear on their goal.”

(Reporting by Brad Haynes; Editing by Kieran Murray and Meredith Mazzilli)

It’s Not Fair

Economic Ignorance and Moral Turpitude

In his book, Fairness and Freedom, David Fischer makes some observations which represent a touchstone for truth and error in economics.  Fischer has written a historical comparison of New Zealand and the United States.  The latter nation has focused over time upon political and social freedom (from government rules, regulations, and controls) whilst New Zealand has been shaped by notions of fairness (which implies egalitarian distribution at least of opportunity, if not actual goods). 

We will endeavour to critique Fischer’s book in a future post, but for the moment consider this partly insightful, yet misguided quotation:

Where [economic] growth is positive, and material limits are less constraining, it seems reasonable to believe that one person can become rich and prosperous without impoverishing another.  On that assumption, American ideas of liberty and freedom, especially freedom of opportunity, became plausible ways of achieving fairness and natural justice.  Not all Americans share that way of thinking, but many do so–especially those who have been successful in their own lives. 

The great majority of Americans strongly oppose policies of wealth distribution.  When the Democratic Party nominated Senator George McGovern for president in 1972, he campaigned in part for the redistribution of wealth in the United States.  Most Americans–white collar and blue collar, rich and poor–rejected the idea out of hand.  Even people of very modest means condemned it as unjust to hard workers. . . . Americans don’t dream of equality.  They dream of wealth.  They don’t want to get even; they want to get ahead.  And they deeply believe that in this dynamic society one person can become a millionaire without beggaring another. 

In New Zealand, attitudes are very different.  The land was taken long ago.  Within two generations of settlement, a growing nation began to run up against its physical limits.  In such a setting, most ideals of social justice could not be realised simply by freedom of opportunity.  They required intervention, planning, and even the redistribution of limited resources and material possession such as land.  New Zealanders began to act on this assumption as early as 1890.  [David Fischer, Fairness and Freedom: A History of Two Open Societies, New Zealand and the United States (New York: Oxford University Press, 2012), p. 149f.]

Fischer’s description of New Zealand physical limitations is laughable.  What on earth does he mean when he says, “the land was taken long ago” and that “within two generations of settlement, a growing nation began to run up against its physical limits”?  New Zealand is a small geographical landmass to be sure.  Yet its population is only four and a half million people today.  Agricultural pasture comprises just 40 percent of the land area; urban areas comprise less than 1 percent!  If New Zealand were to have the population density of Java, it would support over eighty million people.   [Ministry for the Environment Report]  What Fischer ought to have said is that by 1860 New Zealand reached its physical limits, given the economic paradigm of the time–a very different, but more accurate and meaningful proposition.Yet we also suspect that Fischer is right on the nose insofar as people in New Zealand thought back then they had reached the physical limits of resources, as they do to this day.  Malthus was alive and well back then, as he is today.  But this is a very different proposition to what Fischer is espousing.

In New Zealand it is actually widely believed that one can only get ahead economically by beggaring one’s neighbour.  In the United States it is still believed (though not now by the majority of the population, one ventures to suggest) that one can get wealthy and benefit one’s neighbour at the same time.   Further, the even more insightful have pointed out that in a free society one most likely becomes wealthy because of the benefit provided to one’s neighbour.  Why would people purchase or desire what we manufacture or provide?  Only if we put their interests above our own and serve them by offering them what they consider to be appropriate, desirable, and needed goods and services at affordable prices. 

Secondly, a suppressed premise of the physical limits theory of economic development is actually false.  We now know that all created material existence is actually nothing more than tiny swirling balls of energy in empty space. (Recall that an atom–and thus, all material reality–consists of 99.999 percent empty space).  All of it.  Energy, not matter, is the staff of material existence and to all practical matters without limit.  It is in practice infinite, although not in absolute reality.  Thus, the economic future and growth of New Zealand is not limited because we are a small country at the bottom of the world.  The economic future is wide open, as the potentialities of limitless energy are discovered and harnessed and exploited.  There are no final limits to economic growth and development. 

New Zealand’s penchant for socialism without doctrines, for restrictions upon economic growth, for government intervention and planning, and the systemic forced redistribution of  property is built on a fallacy–a mistake.  But, worse, it is built upon ethical evils and immoral foundations.  Covetousness and theft–the twin motivations of “fairness” when seen as economic and material equalisation–are as evil as murder and rape.  That’s why they both appear in the Ten Commandments. 

But why is it that New Zealand rightly perceives murder and child abuse as grossly evil, whilst shrugging shoulders at institutionalised, legally sanctioned, covetousness and theft?  Because of the prevailing Malthusian falsehoods that the economic pie is fixed, finite, and limited and that when one eats at the pie, others go hungry.  That’s why most New Zealanders think that forced redistribution of property is justifiable.  It is a small evil to combat a bigger evil.  That’s why the country is besotted with who is eating what from the pie, rather than upon the ethical ways to make the pie bigger. 

The geographic smallness of the country provides an illusory corroboration to the myth of a small, limited pie.  Fundamental ignorance of the nature of material existence is another.  But the root cause lies in the rejection of God and His holy law.  If we were a nation that predominantly lived in the fear of God, covetousness and institutionalised theft would be as odious to us as the grossest crimes.   Instead, we view it as a crowning glory.  We give it euphemistic names, like fairness. 

Sunset Industries

Commercial Reality

Back in the day, New Zealand used to make cars.  We kid you not.  In fact, when Milton Friedman visited New Zealand around 40 years ago he was aghast that we had an automobile manufacturing industry.  It existed and was nurtured by government subsidies and grants–all in the name of creating employment.  Of course NZ Autos Incorporated has long since gone the way of the dodo.  Now punters import swanky second-hand (near new) cars from Japan at a fraction of the price.

The thing about government subsidies to start and maintain industries is that they are proof positive from the outset that the industry in question is not economic from the get-go.  In order to continue, it will need perpetual injections of government money.  Before you can say “Mitsubishi”, pouring more money down the crankcase becomes a political necessity because, well, all those jobs are at stake.

We have seen a modern version of the same parable recently with the NZ film industry–stimulated by government interventions over the last twenty years.
  The idea was that taxpayers would pony up some grants and initial capital, then “incentives” would be given to movie making such as tax write offs and tax breaks and hey presto, out of the primordial slime a self-supporting, globally competitive industry would emerge.

Actually, what emerged out of the slime was actually a nasty looking orc that barrelled off overseas as soon as government money dried up.  We are pleasantly surprised that the party ended so soon.  Usually these things drag on for decades, even generations, to the creeping impoverishment of tax payers. 

And so it has proved in Australia which has had its own domestic automobile industry for decades and decades, sucking millions upon millions of tax money down the sinkhole.  But in the end governments run out of money and global competitive realities finally have to be acknowledged.  Ford and Holden (General Motors) have announced they are shutting up shop in Australia.  But, hey, lots of opportunities remain.  Why not start an aeronautical industry and manufacture jet liners?  They can be called Kangajets, hopping through the skies like nobody’s business.  A few billion in government start up money, a few more in ongoing subsidies and Australia will be up there competing with Boeing and the rest. 

Wise heads used to say, “You can’t fight City Hall.”  Neither can you fight local and global commercial reality.  A thousand government hand outs notwithstanding, in the end you have to grow up and face the real world, not the childish one where parents hand out dosh to cocoon you from reality.  Australia is facing this reality now–long past time.  Talking heads are now saying that its national airline, Qantas, long protected and soft-subsidised by the Australian government is next. 

Bloated, sclerotic, inefficient Western economies–usually the outcome of decades of soft-despotic government subsidies and interventions–cannot compete with less subsidised, more efficient, less costly emerging economies.  In the long run it will be better for us all. 

The moral of the story remains true: when secular government overreaches its God-ordained duties and responsibilities there is always a price to pay.  We, the people, end up paying it. 

Simplistic Nostrums Don’t Cut It

More Full Than a Craft Beer Bar

Consider the following testimonies.

Citation One:

Feeding the masses will be a problem if the population continues to soar.  The news on the population front sounds bad: birth rates are not dropping as fast as expected, and we are likely to end up with an even bigger world population by the end of the century. The last revision of the United Nations’ World Population Prospects, two years ago, predicted just over 10 billion people by 2100. The latest revision, just out, predicts almost 11 billion.

 

That’s a truly alarming number, because it’s hard to see how the world can sustain another 4 billion people. The current global population is 7 billion. But the headline number is deceptive, and conceals another, grimmer reality. Three-quarters of that growth will come in just one continent: Africa.  The African continent has 1.1 billion people. By the year 2100, it will have 4.1 billion – more than a third of the world’s total population. Or rather, that is what it will have if there has not already been a huge population dieback in the region. At some point, however, systems will break down under the strain of trying to feed such rapidly growing populations, and people will start to die in large numbers. 

Citation Two:

Everything has been visited, everything known, everything exploited.  Now pleasant estates obliterate the famous wilderness areas of the past.  Plowed fields have replaced forests, domesticated animals have dispersed wild life.  Beaches are plowed, mountains smoothed and swamps drained.  There are as many cities as, in former years, there were dwellings.  Everywhere there are buildings, everywhere people, everywhere communities, everywhere life . . . . We weigh upon the world; its resources hardly suffice to support us.  As our needs grow larger, so do our protests, that already nature does not sustain us.  In truth, plague, famine, wars and earthquakes must be regarded as a blessing to civilization, since they prune away the luxuriant growth of the human race.  

Spot anything wrong here?  The first citation comes from international correspondent, Gwynne Dyer in a recent edition of the NZ Herald.   The second comes from Tertullian, writing about 200AD, quoted by Andrew S. Kulikovsky, Creation, Fall, Restoration: A Biblical Theology of Creation (Fearn, Ross-shire: Mentor/Christian Focus Publications Ltd, 2009), p.246f.]

Clearly someone is wrong–or both are.  When Tertullian was working, the estimated global population (note estimate only) was between 190 to 256 million people at the time.  Yet to Tertullian and his contemporaries the earth was full, too full, of people.  So full that plagues were a blessing in disguise. 

What is wrong with his  assessment?  It was wrong because it was one-dimensional, and therefore simplistic and trite.  Subsequent centuries have demonstrated that with technological development and economic growth the earth can support a vast increase in human population.  And still it has only scratched the surface.  Today’s global population is 6.8 billion people, a 2.5 thousand percent increase from Tertullian’s day.  Yet the larger proportion of the earth’s surface remains wilderness and uninhabited. 

Tertullian might be excused the error, since he was ignorant of the historical explosion in knowledge, technology, and economic growth that in our day brings emphatic testimony to us moderns.  Dyer’s assessment, therefore, represents the greater error.  It is even more simplistic, trite, and ignorant because he has two millennia of human history to prove just how wrong Tertullian and others were.  Yet he recites the same simplistic nostrums as if they were proved beyond reasonable doubt. 

In other days, Dyer has written about the wonder of the green revolution in the latter decades of the twentieth century when genetic engineering produced a significant increase in agricultural output of such staples as wheat, corn, barley, rice  and other grains vital to support human life.  Where once doomsters such as Paul Ehrlich was announcing the population bomb and warning that mass starvation was just around the corner, in fact grain production increased so rapidly that his proclaimed doom never transpired.  Dyer knows this–but has apparently concluded that such technological and economic advances will not re-occur.  

The biggest impediments faced today to growing vast new supplies of food and sustenance are governmental and political ones.  Beneath it all runs a strong luddite stream.  Here is just one example.  Grass carp have been found not to reproduce naturally in the NZ wild.  They do not despoil waterways, but actually keep them clear of invasive grasses.  They are beautiful to eat–a wonderful food.  New Zealand could produce a limitless amount using judicious farming technologies.  But the resistance to this wonderful opportunity is strong: it comes from those who view change with fear, who have the view that the world is about to end in some great catastrophe.  It is better to do nothing than risk calamity. 

In the long run it is only Christians (better taught than Tertullian on this matter) who relish the divine command and responsibility to multiply  fill the earth and make it bring forth and bud. (Genesis 2:15,16; 9:1-4)  But when a culture or civilisation turns away from God deathly patterns begin to form and emerge.  Those who love God, love His creation; they love life.  They look forward to a world more joyous, merry, bounteous and full than a craft beer bar on a Friday night. 

Malthusian Cassandras

Purblind Arrogance and Invincible Ignorance

Malthusian despair grips the Western world in a vicious vice.  It is a puzzling phenomenon if one considers that the economic theories of Thomas Malthus were discredited centuries ago.  But the puzzlement exists only if one also believes in a false, objective rationalism, ignoring the blind foolishness attenuating the human heart.  Did not the prophet say, “the heart is deceitful above all things and is desperately sick; who can know it?” (Jeremiah 17:9)

We are sonorously told by modern sages that over-population threatens the continued existence of the planet.  Assuming that the world is one vast fixed, zero-sum game, our oh-so-wise cassandras insist that more mouths to feed means less food for everyone.  If one eats more, everyone else is condemned to eat less.  If a country expends more energy, there is less energy for every other nation. 

The latest voice is the respected and revered Royal Society.  Its purblind stupidity belies its reputation.
  But its “official”, don’t you know.  And we are sure that The Guardian gets thrills from contemplating the terrible plight in which we poor humans find ourselves.  Horror fascinates, after all.  Besides warning the world of impending doom like a brazen klaxon does give one a sense of moral self-righteousness and elitist raison d’etre. Someone has to be smart enough to sound the siren, after all.

As we review the Royal Society’s latest stupidity, let’s be mindful that from the time of Malthus onward, such ignorant speculations of the coming destruction of the planet and of humankind as we know it have always been a pre-occupation of elites and the relatively wealthy.  Scratch the scrofula and underneath you will discover a paternalistic disdain of others–particularly those peoples who are living in relative poverty.  The rumoured extinction of the British snob is greatly exaggerated, it would seem.

World population needs to be stabilised quickly and high consumption in rich countries rapidly reduced to avoid “a downward spiral of economic and environmental ills”, warns a major report from the Royal Society.

Contraception must be offered to all women who want it and consumption cut to reduce inequality, says the study published on Thursday, which was chaired by Nobel prize-winning biologist Sir John Sulston.  The assessment of humanity’s prospects in the next 100 years, which has taken 21 months to complete, argues strongly that to achieve long and healthy lives for all 9 billion people expected to be living in 2050, the twin issues of population and consumption must be pushed to the top of political and economic agendas. Both issues have been largely ignored by politicians and played down by environment and development groups for 20 years, the report says.

Before we turn to the needs of poorer, developing nations, let’s pause to inquire how reducing consumption in the developed countries could possibly help poorer countries?  After all, if the West stops consuming all those goods and services, the markets for export in poorer countries collapse, consigning them to continuing poverty and degradation.  Only if you have swallowed discredited Malthusian theories could you seriously make such an argument.  It represents a modern equivalent of the Flat Earth Society. 

But the sheer number of people on earth is not as important as their inequality and how much they consume, said Jules Pretty, one of the working group of 22 who produced the report. “In material terms it will be necessary for most developed countries to abstain from certain sorts of consumption, such as CO2. You do not need to be consuming so much to have a long and healthy life. We cannot conceive of a world that is going to be as unequal as it is now. We must bring the 1.3 billion people living on less than a $1.25 a day out of absolute poverty. It’s critical to slow population growth in those countries which cannot keep up with services.”

Last time we checked the elements of carbon and oxygen were pretty plentiful.  And CO2 is the life-gas, the greenest gas of all.  The more CO2 in the atmosphere, the better the growth of all plants and trees.  But beside that, note the attendant sub-theme: population growth must be controlled in poor countries.  The more people you have, the less everyone gets.  Economics is the art of distributing a fixed, finite pie.  Therefore, the less mouths, the better for all.  And it’s your mouths, over there, that must be shut down.  (We in the West are a dying civilization.  We appear to be in terminal population decline.  Demographically, it is impossible now to reverse the declining population growth unless there is a rapid change of mind towards childbearing and raising large families.  We want the rest of the world to follow our ignoble example.)
    

Most of the global population growth in the next century will come from the 48 least developed countries, of which 32 are in Africa, said Ekliya Zulu, one of the authors and president of the Union for African Population studies. “Taking Africa alone, the population will increase by 2 billion this century. If we fail and fertility levels do not go down to 2.1, (from 4.7 now) the population [there] may reach 5.3 billion. When we slow down population growth we empower women and provide more money for least developed countries to invest in education. The majority of women want fewer children. The demand to reduce fertility is there”, he said.

Get this, slower population growth means more money for less developed countries.  How on earth does that causality work?  We have no idea, unless . . . unless the economic theory which is a step-child of Malthus’s ideas is coming into play.  And the step child is socialism. You guessed it.  Limited resources.  Need to be fairly distributed (“from each, according to his ability, to each according to his need”). The State must so regulate and thus re-distribute. 

The authors declined to put a figure on sustainable population, saying it depended on lifestyle choices and consumption. But they warned that without urgent action humanity would be in deep trouble. “The pressure on a finite planet will make us radically change human activity”, said Pretty.

“The planet has sufficient resources to sustain 9 billion, but we can only ensure a sustainable future for all if we address grossly unequal levels of consumption. Fairly redistributing the lion’s share of the earth’s resources consumed by the richest 10% would bring development so that infant mortality rates are reduced, many more people are educated and women are empowered to determine their family size – all of which will bring down birth rates”, said an Oxfam spokeswoman.

There we have it.

Malthusianism is discredited.  Socialism is discredited.  But the purblind foolishness of Unbelief keeps clinging to these exploded nostrums because it has nothing else.  These “experts” insist on playing god.  Their own arrogance demands it.  Their foolish speculations stroke their arrogant egos, as they tell themselves they are making  a real contribution towards being the Saviour of the human race.  Yet what they have advocated will bring unimaginable suffering and degradation to millions.  But that’s ok.  They, themselves, at least will be protected.  Their moral superiority knows no bounds. 

The heart is deceitful above all things and is desperately sick; who can know it? 

Bad Weather Coming

Idiotic Utopians and Mountains of Vainglorious Pride

The Soviet Union believed in Five Year Plans–central, government plans–to develop the economy of the Soviet Union to reach a prosperous nirvana whilst creating a new order in the world.  Government planners would focus the resources of the economy on what was vital and important; resources would be delivered; production targets would be set; and the entire army of Soviet New Socialist Citizens would go to work to transform the USSR from poverty to a socialist paradise.

None can gainsay that every attempt was made, every resource was committed.  Yet for nearly one hundred years the Soviet Union was so poor and backward that it did not have enough food for its own people.  Millions upon millions died through starvation and its attendant diseases.  Ah, but the propaganda machine had a ready series of excuses and explanations.
  The most consistent was bad weather.  Literally.  For just on a hundred years, every year there was bad weather in the Soviet Union which prevented agricultural production targets being met.  Can you believe it?  What bad luck.  The weather gods did not like Koba the Dread.

All centrally planned, command and control economies fail.  They devolve into waste, destruction, and ultimately, the degradation of poverty.  But every generation breeds its own special brand of idiots who want to try it all over again.  The latest crop is currently running the government of the United States.  The results are completely as expected. Today, another stellar part of the Central Committees Five Year Plan fell to bits.  Another “green energy” company went into bankruptcy.

The company, Ener1, received a $118 million grant from DOE in 2010 as part of the president’s stimulus package. The money, which went to Ener1 subsidiary EnerDel, aimed to promote renewable energy storage battery technology for electrical grid use.

But despite generous federal support for the company, Ener1 was racked by problems last year. In October, NASDAQ delisted the company due to non-compliance with Securities and Exchange Commission filing requirements. A month later, the company’s president, chief executive, and top financial officer were fired. . . .

Ener1 is not the first energy storage technology company to file for Chapter 11 after receiving significant stimulus support. Beacon Power, which manufactures flywheel energy storage technology, received a $43 million loan guarantee from the same stimulus program that funded Solyndra. Despite having used $3 million marked for loan repayment to continue funding its daily operations, Beacon filed for Chapter 11 in November.

Why did this much lionized battery company fail?  Did the boss run off with the money?  Nothing so prosaic. Just boring economics.  There was no demand for the products.  The government had built yet another bridge to nowhere or as we say in New Zealand, A Bridge to Erewhon.  This from the CEO:

In a statement announcing the company’s bankruptcy, CEO Alex Sorokin said that the company’s business plan was crippled by insufficient consumer demand.  “We moved aggressively to reduce costs and shift focus when the marketplace did not evolve as quickly as anticipated.  Our business plan was impacted when demand for lithium-ion batteries slowed due to lower-than-expected adoption for electric passenger vehicles,” Sorokin wrote.

No-one wanted the things.  Oops.  That was a slight oversight.  But far, far more to the point: every human economy is so complex, so interrelated and interdependent, so dependent upon local motivations and aspirations and knowledge and actions that no central planning agency can ever cope.  There is no computer big enough, nor will there ever be.  And if there ever were, human beings would strive and conspire to beat it and avoid it and get around it, trying to make money by outsmarting it.

The only economic structure that both persists and works to produce efficiently to the best possible outcomes at the time is one where economic decision making is devolved, not centralised in the hands of bureaucratic experts.   But fools, such as now run the US Government, never learn.  A hundred blows on the back of a fool makes no impression!

Let’s go back a few months.  Watch this “promo” video below, where President Obama’s Five Year Plan was unveiled to the nation.  Note all the nationalistic central planning adages and slogans.  Observe the implicit utopianism.  Then watch Biden’s grease-balling at the company (warning: you may face an involuntary urge to disembogue from your gut.)

The irony is this: if the US does not utterly reject a government planned, command and control economy it will indeed set up the future for the United States.  But not as they hoped.  There will be a ton of excuses along the way to explain the failures like those of Ener 1–we will name them now: Congress, Republicans, millionaires, the “Top One Percent”, racism, gun owners, ignorance.  All these excuses will wear thin, eventually.  Finally, the ultimate excuse will be trotted out as rising economic despite grips the land like a perpetual winter storm.  Americans will be told the real cause of despite will be bad weather, every year, all the time. Social justice, central planning style.

It is always the last refuge of the intellectually and morally bankrupt Central Planner. 

More Lanchashire Cotton Wool

Troglodyte Reactionary Syndrome, Part II

Economic ignorance amongst the left never ceases to surprise it seems.  Hidebound in ideology, leftists would appear unable to see what is right before their face.  

The latest example: the self-styled humble blogger, Danyl at Dim Post.
 

Labour Party candidate Josie Pagani (relation) has a column in the Herald about Labour’s identity problem. Some of it’s interesting, but this jumped out at me:

There’s a reason we’re called “Labour”: We have always represented people who work. If you work hard you should earn enough to pay the bills, save a bit and enjoy the holidays with your family. If you have a great idea to build a business and work really hard, a Labour government will back you to be world class. It’s not just about dividing the economic pie fairly, it’s about increasing the size of the pie so everyone can get their piece.

Growing the pie. David Shearer used the same cliche in his first speech to Parliament. Here’s my question: why are Labour still using ACT Party rhetoric about the panacea of economic growth, when all our economic statistics, social indicators and lived experience over the past thirty years tell us that the benefits of ‘growing the pie’ now aggregate to a  small number of high-net worth individuals? The rest of us stay where we are, or go backwards.

For a few years during the mid 2000s it felt like we were going forwards – but that was just a bubble fueled (sic) by overseas debt. During this time Helen Clark constantly resorted to the tired old Kennedy/Sorenson trope that ‘a rising tide lifts all boats’. But this just isn’t an accurate way to think about economic growth. It may, eventually lift general living standards over a long period of time, but it always involves an element of ‘creative destruction’. Businesses go bankrupt and people lose their jobs, and their occupations become obsolete.

Two things  stand out.  Firstly, Danyl seems to have little idea of what economic growth actually is.  Ironically, Danyl is making his point via a blog on the Internet; he presumably is using a PC; no doubt he has a cell-phone–maybe even one of those latest funky smart phones.  He probably owns a car with performance characteristics undreamed of thirty years ago.  He presumably has travelled overseas via a Boeing or Airbus aircraft, and the food on his table is likely much more interesting, varied, and more healthy than what was on his grandfather’s table thirty years ago.  Moreover, the cost of the shirt on his back is a fraction of what it cost his grandfather at the time, and we are pretty sure Danyl has far more shirts overall in his wardrobe at present than his grandfather ever owned in his entire life.  We don’t know Danyl, and are speculating.  But we think our speculations will not be far from the truth.

But for some unfathomable reason, Danyl does not regard these phenomena as economic growth.  He does not think the pie has got bigger.  Spare us.  It represents a classic example of leftist ideology blinding its adherents.

Secondly, Danyl appears offended by the idea that economic growth can only come via creative destruction.  Some things, firms, jobs have to go the way of the dodo as economic growth happens.  This, to Danyl represents human suffering.  It is why economic growth is costly and bad.  Puleeeeze! 

To Danyl its somehow evil and sad that our thoroughfares are not longer filled with horses perambulating up and down, filling the roads with fly infested dung.  So many hostlers and stable hands out of work.  And think of all those doctors whose livelihoods have been threatened because they no longer get to work on attempting to cure tuberculosis.  And all those nurses made redundant once the TB sanatoriums had to close down, because economic progress killed them off.  Terrible.  What a cost.

He can’t be serious.  No, he just can’t think straight.  Why?  His hide-bound ideology has made him myopic, if not blind.  One more troglodyte reactionary living in nineteenth century Lancashire cotton wool.

Hat Tip: Kiwiblog