Category Archives: Economy

It’s Exploitation, Stupid!

A consensus has now emerged as to why Donald Trump is president, why Britain voted to leave the EU, and why Marine Le Pen is ascendant in France.  Some thoughtful analyses have come from the left.  If you are a Democratic Party strategist and you attribute the “Trump disaster” to racism and xenophobia, you are hopelessly behind the curve.  This is not a strategy that will prevail in 2018.

Indeed, if you have been reading anything at all on the topic, you know that the relevant new divide in politics is between rural and urban voters.  In America this might have something to do with racial politics, but the phenomenon is global.  Points for originality go to David Wong, who spotted the shift a month before the election – writing in, yes, Cracked and strongly recommend for youth readers.

The rural folk with the Trump signs in their yards say their way of life is dying, and you smirk and say what they really mean is that blacks and gays are finally getting equal rights and they hate it. But I’m telling you, they say their way of life is dying because their way of life is dying. It’s not their imagination.

With the benefit of hindsight and some classical history, Wong might have written this analysis in City Journal or this one in The Guardian.  Read one or the other if you identify as right or left, respectively.  They say the same thing.

And what I am here to say is that the Midwest is not an exotic place. It isn’t a benighted region of unknowable people and mysterious urges. It isn’t backward or hopelessly superstitious or hostile to learning. It is solid, familiar, ordinary America, and Democrats can have no excuse for not seeing the wave of heartland rage that swamped them last November.

The really interesting part, though, is the intersection of liberal values with urban life and the global economy.  Humanity has now produced a strain of pure liberalism, combining classical liberal laissez faire economics with “social liberal” values in the American sense.  If Trump supporters are the losers from global trade, these urbanites are the winners.  You may have seen this map depicting the archipelago of Clinton voters.

You could draw the same map of Europe, and someone has – a geographer by the name of Christophe Guilluy.  The mayors of London and Paris have more in common with each other than with ordinary British or French workers.

Charles Murray would have you believe these people are the “cognitive elite,” blessed with superior intellectual gifts.  Jeremiah is not so sure.  Maybe some are internet entrepreneurs, but it seems more likely they are simply attached like leeches to lucrative sectors like banking and government – what you might call the “ruling class.”  Here is Victor Hansen again, from City Journal:

The elite in Washington and Menlo Park appreciate the fresh grapes and arugula that they purchase at Whole Foods. Someone mined the granite used in their expensive kitchen counters and cut the timber for their hardwood floors. The fuel in their hybrid cars continues to come from refined oil.

For people who think about public policy, this is a conundrum – how to enjoy the benefits of global trade without producing a society that looks like The Hunger Games.  On the other hand, the beneficiaries of this new economy are not losing sleep over it.

French elites have convinced themselves that their social supremacy rests not on their economic might but on their common decency. Doing so allows them to “present the losers of globalization as embittered people who have problems with diversity,” says Guilluy. It’s not our privilege that the French deplorables resent, the elites claim; it’s the color of some of our employees’ skin.

Thus it transpires that social liberalism is congruent with economic liberalism, i.e., exploitation.  Sure, we love to give immigrants a chance.  Whether they’re migrant farm workers or H-1B engineers, immigration drives down labor costs.  The same goes for offshore jobs.  Everyone must have a fair shot at driving down labor costs, while the urban elite reaps the profits.


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Filed under Economy, Trade

The Chinese Worker Protection Act

comradeJeremiah, as you know, takes a nuanced view of protectionism.  We favor free trade, but we recognize the role of negotiation.  Since our new president has promised to get tough on China, here is a suggestion: use trade barriers to promote environmental and worker protection standards around the world.

For example, if a Chinese (or any) exporter enjoys a labor cost advantage because it exposes its workers to hazardous conditions, slap punitive tariffs on them until they reform.  Good luck challenging that at the WTO.  If they are polluting Shenzhen, we don’t need to buy their products.

American manufacturers complain that our trading partners can offer cheap goods because they abuse their workers, and it’s true.  Just look factory fires in Bangladesh.  These people labor like slaves in conditions we outlawed a hundred years ago.  Labor advocates worry about a race to the bottom.  We can halt this race using … protectionism!

Now, here is a trade policy that should draw bipartisan support.  We can protect our manufacturers by holding foreign companies to American standards.  This will create jobs in America, and at the same time make life better for exploited workers around the world.

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Filed under Business, Economy, Foreign Policy

Doubts about Climate Change

Old timers like Jeremiah recall that winters used to be longer and colder.  Old photos in ski lodges invariably show more snowpack and a bigger glacier.  There can be little doubt about climate change.  One can, however, doubt the policy response.

Do you agree with President Obama, that climate change is the greatest threat facing humanity?  Jeremiah can find, without exerting himself, at least a billion people who feel more imminently threatened by hunger.


Among resource crises, the shortage of fresh water is easily more urgent.  With oil at $40 a barrel, the world’s desalination plants should be running flat out.  Alas, water is universally mispriced and so squandered.

A global outreach to discourage meat would go a long way.  Raising animals for food is an egregious waste of resources, especially fresh water.  Plus, livestock produce methane, a much worse greenhouse gas than carbon dioxide.

The root cause of our resource problems is overpopulation.  So, why not a global program to promote birth control?  Better yet, a global program (backed by sanctions and incentives) to mandate equal rights for women.  You can’t go wrong emancipating half the world, plus – fertility drops off sharply once women stop being chattel.

 “Population policy has been abandoned in recent decades. It is barely mentioned in discussions on sustainability or development” – Simon Ross

Why are the world’s policy makers focused on climate change, a distant and secondary effect, instead of root causes and immediate returns?  There is no logic to it, unless we apply our imagination and think like a criminal.

State control over energy is the mother lode of political rent seeking.  Politicians wielding this power can make or break any company they choose.  Those who donate generously can be rewarded with “green energy” grants.  Those who don’t can be sanctioned, without much evidence.

You can’t do that with birth control.

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Filed under Economy

Dependency Ratio

Jeremiah sees red whenever he reads about the dependency ratio. China must engineer a baby boom, so that they will have enough young workers to support a billion retirees. Europe must admit hordes of migrants, in hopes they will pay into the retirement fund. Economists talk about the dependency ratio as if it were an iron law of demographics, and it’s not. It is merely the artifact of a badly designed retirement program.

Despite the term “trust,” the Social Security system contains nothing that remotely resembles the common law trust. It is merely a system of taxation and appropriation sprinkled with trust terms – John Attarian

The dependency ratio only matters because Social Security, and other systems around the world, are passthru systems. Workers paying into it today are paying directly to those who have already retired. These retirees, in turn, have spent their working lives supporting someone else. The system needs at least two workers for every retiree, which means an ever-expanding workforce.

This is an absolutely insane proposition on which to base a retirement system. If the workforce actually doubled every generation, the population boom would overwhelm the planet. More likely, some generation soon will decide to stuff it. That will leave Jeremiah, having paid into the system all his life, holding the bag. It is literally a Ponzi scheme.

The correct design, of course, is to accumulate the contributions over time, so that the cohort drawing benefits in any given year is roughly the same cohort that paid in. This decouples the system from the vagaries of demographics. Whatever boom or bust in the workforce today, will be matched to the later demands of their retirement.


This design would also allow the fund to invest in high yielding projects over long timeframes. A national retirement program should be a big winner, not the bankrupt loser we have. For comparison, look at Singapore’s Temasek, the Ontario Teachers’ Pension Plan, or Berkshire Hathaway.

Far from being “worthless IOUs,” the investments held by the trust funds are backed by the full faith and credit of the U. S. Government – Social Security Administration

The solution for China, just starting down the slope with a 1:3 ratio, is to implement an accumulating system instead of a passthru one, and not plan on a workforce of 3 billion. For our Western welfare states, the old system must be phased out – so as not to strand Jeremiah – and replaced with a new one.

This means America will need political leaders who can handle a trillion dollar fund, and resist the temptation to pillage it for “emergencies.” Our track record is not promising.

See also: For the Last Time, the Social Security Trust Fund is Real

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Filed under Economy

Demonize Sloppy Accounting

The Economist describes Bernie Sanders’ candidacy as the biggest-ever student prank. It was certainly amusing watching his interview with Bill Maher, wherein both tried heroically to “undemonize” socialism. Regular readers know that Jeremiah takes a nuanced view of socialism, allowing for redistribution but debunking the statist agenda.

Mr. Maher made the point that Social Security, Medicare, et alia are “socialist” programs – and we like them, so socialism is groovy, right? Well, no. These programs have epic problems, which could be fixed using free market methods. See How to Control Health Costs, for example.


The important thing is to talk about specific policies, regardless of the demonic label, and this is where Sen. Sanders went badly wrong. He repeatedly used the charlatan’s formula, “we can pay for X by taxing Y,” where X is a free pony and Y is something we don’t understand. Like, we can pay for free college by taxing speculation on Wall Street. Yes, he actually said that. Cue cheers from the college kids (except the finance majors).

The right way to analyze this proposal is by splitting it, just as you would split a transaction in double entry accounting. If free college is a good idea, then the funding side can be considered separately. If taxing “speculation” is feasible, then we should do it anyway and reduce the deficit.

Free college might not be a good idea, if costs continue to rise and quality continues to fall, as they have been doing under the current subsidized (but not free) system. The likeliest outcome is that employers will respect a state college degree even less than they do today, if such a thing is possible. This is not to pick on free college, but merely to show that universal free stuff is not always a good idea.

Turning to the funding side, we should definitely tax those bad speculators on Wall Street. They’re the folks who make the price of heating oil go up in the winter. We should put a big fat Tobin Tax on them. What could go wrong?


Filed under Economy

Eating the Golden Goose

SwedenThe Mises Institute has a rundown on Swedish socialism. It’s a good example of why policy should be informed by the whole picture, and not tabloid stereotypes. The article shows that the Swedish economy had historically been very successful, and was harmed by its socialist policies.

It is a mistake to draw conclusions from any nation’s experience at a point in time, without considering the trend. Sweden’s past success carried it for many years after the fatal policies were implemented. The comments to the article are good, too, from many people with firsthand experience.

Nordic Socialism has frozen a once entrepreneurial and prosperous people in time.

This line about freezing the economy at a point in time is reminiscent of Jeremiah’s Freeze-Frame Economics. Socialists implicitly believe that the nation’s productive capacity will run on unchanged, and unimpeded by their redistribution program.

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Filed under Economy


popeRejoice! The pope is coming to America! Let’s all applaud an institution that has been on the wrong side of gay rights, women’s rights, abortion, evolution, heliocentricity, and pedophilia.

The left has long been an enemy of the church, and rightly so, but – let a Marxist be installed, and all is forgiven.  The pope grew up in Argentina, land of the perpetual peso crisis, and he knows as much about economics as he does about raising a family. He has never even been to America, until now.

The pope’s sophomore socialism is sheer demagoguery, and we can expect all the wannabee demagogues to trail him in force.  You may have what you feel are good arguments against capitalism, but the pope’s “divine authority” isn’t one of them.

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Filed under Economy