Tuesday, June 14, 2005

Poor Europe. The Chief Wiggum of the Modern World

In one episode of The Simpsons, the town police chief Clancy Wiggum is out of a job and tries to rob Homer with a piece of a gun (having sold the rest) Homer shows no fear and much pity when he exclaims "Poor Wiggum." Wiggum is unoffended by this pity because he himself realizes his fall and shares Homer's pity by himself exclaiming "Poor Wiggum." in the third person.

Unfortunately Europe has not come to the point where it realizes that it has gone down several very wrong turns (except for this guy). While the electorate of France and the Netherlands rejected the European constitution out of a sensible distrust of the political elite which has kept their economies flat for years. The real reasons they have (zis competition and free-markite bizinis eez too Anglais, mon Deu.) betray the thinking that will keep Europe stuck to the floor of the movie theatre while everyone else has gone for drinks. France not only has multiple left-wing parties but a communist party that does pretty good by western terms. Yes, there are significant numbers of people in Western Europe (all over the planet actually but in Europe they don't get laughed at) who believe that communism might just work if it were given one last shot (or two).

Many of those who are not communists or in some cases fascists, are still to some degree enamored with the concepts of nationalism and central planning. Maybe the new members will be able to snap them out of it but then they will probably react to the growing economies of the east, not by realizing that they are doing something right and copying (privatization, reduction of regulation, not choosing which companies are, or should be the winners in the economy and corrupting them with pointless support), but instead by claiming that the east is growing too fast and calling for protectionist measures. Humans are as predictable as the tides.

Wiggum gets his life back in the end. Europe will too but the question is whether it will be soon or another century or two.


At Sat Jun 18, 01:50:00 AM 2005, Blogger alice said...

I know it's nice to be on top, as my country is, and since your country is on top of my country, then you must really be on top.
But I can't help thinking that a lot of this "big dog" ideology is a lot of nonsense that is costing the big dogs a whole hell of a lot of money.

I know all about global politics. I've played Risk.

When I turn on the television and look at all of those Europeans, they seem to be doing just fine in their "underdog" state. So what if they think communism could work. They have the time to play with the idea and if it doesn't work out, they'll try something else. At least they get some kind of affordable healthcare and education while we really smart capitalists are paying through the nose for a lousy visit to the doctor. But we do have cell phones that can take pictures (but so do the Euros, probably) so what's the advantage? Oh wait, I know, we're right and they're wrong.

And they are not having to fork over lots of $$$ to keep the world safe for democracy and to fight global terrorism. They're letting us do it. Maybe they're not so dumb after all.

At Mon Jun 20, 03:30:00 PM 2005, Blogger Apesnake said...

Perhaps, but then France has had double digit unemployment for about a decade now and many of their young people are moving to London because they feel that Paris is like some kind of museum where the opportunities are limited to being a bureaucrat or living off 'old money'. Germany and France were once the economic anchors of Europe (Germany was once seen as an economic superpower) and now they are dead weight. High unemployment among young people leads to political instability and with loses of immigrants there to take the blame, you have the makings for lots of blood on the evening news. At least the sponsors will make a buck.

The big debate in Europe these days is that a huge fraction of it's budget is provided by the UK because they have managed their economy well and is absorbed by France because so much of the E.U. budget goes to subsidizing the small fraction of the population and economy who are farmers so that they do not need to diversify or respond in any way to market conditions. The debate is not whether it is fair that a nation which is doing everything right should be punished by supporting a small group in a countries which are doing everything wrong but whether the punishment on the UK should be greater! It is kind of unfair to the new eastern countries who thought they were joining a dynamic modern economic power house only to find that they were getting free room and board in an insane asylum.

What is the advantage between these two systems? Jobs. When I was a lad, Canada was pursuing the European "middle way" between Communism and a free-enterprise system. One in five people worked for the government in some capacity. Our debt was out of control and the idea that we would ever have single digit unemployment was a pipe dream. There were many people, mainly those who worked for the state and belonged to huge public sector unions, who felt this was great. There were a few big businesses who loved the arrangement too because it kept the crop of small business competition (weeds in their eyes) from being any serious threat and it was easy to live off government contracts.

As for the rest of the country who scraped by in the legitimate economy or clung to dead-end seasonal work so that we could depend on federal assistance the rest of the year with no hope for the future, the highly lauded "third way" was no workers' paradise I can assure you.

While Canada has by no means fully reformed and there are many parts of the country for which the "third way" is the only game in town, we have made some improvements. We are actually paying down our debt which means that in addition to having a better credit rating, we are not paying more and more interest every year but less and less. Our unemployment rate has fallen to (at some times) below 7% and businesses are actually starting up here instead of fleeing. Many Canadians who moved to Europe are moving back and fewer of our nations youth are leaving for the States.

Those in this country who used to have great power - the political parties who appealed to public service unions and bought our support with our own tax dollars through poorly conceived pork barrel projects, the crown corporations who ran so many of our industries, the large businesses who depended on being chosen as "winners" by the state so they would be blessed with government support and subsidies - are still complaining about our neo-conservative, overly-American, uncompassionate agenda. They may eventually turn back the clock again but there is one thing that they have proven, to me at least: What the Europeans are doing - murdering their own economy; sacrificing the future of their young people, forcing them to choose between their homeland and their wellbeing is wrong. Fundamentally and absolutely wrong. Every single nation which has tried socialism has regressed to poverty, unemployment and corruption. Every single one. Every nation which has gone towards a free market, free-enterprise, free trade system has prospered. Even small moves in one of these directions has shown some results. I think there comes a point, certainly for me at least when we need to say, yes there are right and wrong actions in regards to economies and all the belief in our ideology and good intentions will not make a punch in the face feel like a kiss on the cheek.

As for healthcare and education: trade protectionism, an inflexible labour market where a business can not afford to hire anyone because they can never fire anyone, and laws, regulations and taxes which only big businesses with expert staff can navigate have nothing to do with them. Universal service does not need to mean service provided by a large over-staffed under-invested government bureaucracy. Canada has a fully public healthcare system which is supposed to be so much better than the "two tier" American system. Yet the Canadian system is two tier. Those who can afford Blue Cross and to go to America are the first tier and everyone else risks dying in a waiting line. This is in spite of healthcare having huge levels of funding. All funding - no investment or development. Education is a repeat of the same story.

This is not some tendency that government has which could be avoided if we would just elect a party that could manage these departments responsibly. Political interference by the elected officials who have no experience running anything and bowing to pressure from the public with even less experience running anything is never going to result in an efficient, productive or fair program, no matter how good our intentions. I don't know what the best way is to ensure universal access to education and healthcare is but throwing truck loads of money into a system which results in poor service and a massive loss of human resourses (nurses, doctors, teachers) to other countries because of horible working conditions can not be the way. (Third way, middle way or otherwise.)

That is how I see it anyway.

At Mon Jun 20, 04:02:00 PM 2005, Blogger alice said...

If I have to come down on any side, I will come down on the side of free markets. My point is that in today's world it is difficult for me to explain why free markets are better, because really those without free markets aren't doing that much worse.

I watched a program last night about the collapse of Enron. Now there was a paragon of free-market enterprise, unfettered capitalism and the sleeziest bunch of assholes who even lifted a spoon. Many people suffered because of their actions and not all of them will be punished.

I understand the theoretical reason why it is better for privately owned companies to supply goods and services. But the theory is flawed because the actors are human. Big companies are often way too obsessed with their stock price as in the case of Enron. They lie and manipulate to stay on top. Free markets can't operate efficiently that way, just as free markets can't operate with government bureacrats sticking their noses in.

We're doomed!!!!

At Mon Jun 20, 11:07:00 PM 2005, Blogger alice said...

...and I need to add that I am talking about western nations here. I'm not talking about third world economies. It's obvious who's doing better than they are.

At Tue Jun 21, 02:18:00 PM 2005, Blogger Apesnake said...

There is a problem with treating Enron as an example of free-market excesses. It was not actually competing with anyone, and so no one bothered to hold it accountable for anything.

They sold a barely real product/service. (Protection against energy fluctuations caused by weather? That's a joke, right?) And they sold it to huge brainless gas companies and electrical companies - two of the stupidest, least competitive groups on the planet. They did not face any real competition because there were so few companies doing this which were treated as legitimate. There is a reason for this. It is not.

Making a legitimate profit on selling insurance (which is seems to be what they were trying to do in a convoluted way) is based on the probability that you will not need to pay out too often to too many people. They were loosing money to electricity companies when weather was cold, gaining it from gas producers when weather was warm, and vise a versa. The only way you could possibly make money under this model is to lie about profits and live off money coming in as new investment.

So you have a group of investors dumping cash into a company with a dubious product and where the shareholder representatives never did their homework (accounting lies are not magical; either the financial statements make sense or they don't and if they don't you have a problem). The market eventually did what it was supposed to do and crapped Enron out on the floor of the stock exchange where the authorities could have a go at them. The people who lost pension value because of Enron were wronged not by the market but by the managers of their pension funds who put too much money into an investment without being diligent (in other words, doing their job).

In health care and education there is a real service with a real demand from an interested and concerned market of real people. It is large enough for competition yet the scale required for start-ups is not so large that new companies can not move in at anytime and set up shop, or school or clinic. The proof is that there are plenty of quality private schools which operate profitably and while the tuition is high, so is the unseen tuition that taxpayers pay for public schools, most of which gets wasted.

But frankly I do not see the future as being private school centered or school centered at all. Schools of the future will be mainly for evaluation, tutoring and guidance with the real learning being done by the kids themselves. Research shows that poor kids in India, if given the right resources in the right format, can teach themselves just about any subject.

In Canada you need to wait for ages to get an MRI scan but the government threatens legal action if anyone sets up a for profit MRI clinic. The logic is that if rich people are allowed to buy the service, which is not available in anything like a timely manner, and by doing so shorten the wait list and save the public system money, they are some how committing a crime. As a result they head to the states instead of creating good paying jobs at a private clinic here.

I consider this kind of madness to be at least as bad as corporate corruption. At least they are hurting people for money. The public only system is hurting people in the name of sanctimonious ideology. Six to one, half-dozen to the other I guess.

At Tue Jun 21, 08:53:00 PM 2005, Blogger alice said...

I'm reading "Basic Economics" by Sowell. He talks about how in the 1930's the Morton Salt Company was prosecuted for unfair trade practices because they sold railroad cars full of salt for less per pound than smaller amounts. Morton Salt lost the case.

Of course Sowell has a bias,
but he is really good writer and makes one think.

So this is what I want to know....how do we know free markets will really work, because they have never really been tried? And could they realistically ever be tried?

I know libertarians think free-markets are the answer to all matter of ills, but isn't it just really theoretical whether that is true?

At Wed Jun 22, 12:02:00 AM 2005, Blogger Apesnake said...

"So this is what I want to know....how do we know free markets will really work, because they have never really been tried? And could they realistically ever be tried?"

A good point. While totally free markets, which for me would include not just large businesses that get represented in trade talks but Ma and Pa operations and even Ma and Pa themselves if they cross the border to shop, has never been tried we has seen most of the spectrum covered by nations over the years. Everything from full command economies to economies where most of the trade is restricted to ones where there is a high level of liberalized trade.

More importantly from an evaluation point of view, we have economic and historical data from nations which have made transitions from one state of liberalization to another. Both directions have been covered, as some nations have (often during a time of uncertainty) bowed to populist pressures for protectionist measures (either left-wing or right wing socialism or trade isolation) while others have implemented what economists have come to refer to as reforms.

It can be difficult to tease apart the effects of trade liberalization with the effects of free-enterprise reforms because they are often accepted and opposed together but then they are at their core one issue: Who can best make decisions about where a business or individual can get their supplies, what to do with the things they own and make - who gets economic freedom, the people or the state?

The results tend to be fairly conclusive. Even North Korea has had some small ease in it's poverty since it started allowing private restaurants and some shops and the tiny scale agricultural land reforms they have made may not have weened them off UN food aid but there has not been a famine there since.

In China, India and many Asian countries the simple equation of more economic liberalization = less poverty has held sway. In my lifetime nearly one billion people in Asia have gone from abject poverty to middle class status by economic liberalization. No nation on earth has gotten it perfect yet but it seems clear to me that there is a right direction if you want to reduce poverty rather than simply reducing the "gap between the rich and the poor" as many call for. That is only possible if everyone, including the Amish, the mentally ill, hermits and the forest dwelling natives become fantastically rich or if everyone is made equally poor.

Eastern Europe, after the fall of the wall, shows a lot of pretty clear evidence. Many on the west end of the former Soviet block have adopted better economic policies then most Western European countries and are having remarkable growth while those close to the heart of Russia, having adopted a centrally planned model are experiencing predictable results.

So while there has never been totally free trade or a completely free market nation and many of the richest and most powerful corporations have often undercut these concepts of liberal economics through support for preferential state intervention in the name of capitalism, I still think there is sufficient proof of the concept. I would liken the situation to finding a sickly dehydrated stray cat. If you give her some water and feed her a bit and she improves, even if she is still not the picture of health you can be reasonably sure that you are on the right track. If several vets tell you you are doing the right thing you might feel a little reassured. If someone comes by and tells you the cat is only mentally ill and needs to be cut off of food and water for compassionate reasons and claims to have a bunch of philosophers to back them up you would be kind of suspicious.

So far the vets (economists) agree with trade liberalization and free-markets [I know that they once supported Communism but doctors once supported blood letting - fields of inquiry advance from guess work with time]. Those against it offer philosophers, religious leaders and appeals to "compassion" while the best available evidence is on the side of those who actually study the subject for a living - the economists. Or was that the vets?

In short, I support feline trade and catapalism - I mean free trade and capitalism.

At Mon Jan 09, 10:52:00 AM 2006, Anonymous Anonymous said...

are you continue doin' bullshit as the most of the french teenager ?

Yes, I'm french and the things I've just read there really shock me :
I really wonder how(but, I know how because of journalist(~periodist, ?)make a really good job and, i can know) with all the internet ways you can still so "rétrograde" !

Bonne route ! L'évolution n'est-ce pas un gage d'humanité ?


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