Why Is This Bad?

Monday, October 4, AD 2010

Rookie hazing is common to all American professional sports.  Normally it amounts to rookies carrying veterans’ bags, being dressed up in women’s clothing for “fashion shoots,” or simply having to buy dinner for the veterans.  Well last week Dez Bryant of the Dallas Cowboys was subjected to the latter.  Unlike most rookie hazing incidents this caused headline news.  Why?  Because the bill came out to just under $55,000.  That’s a lot of steak.

This has led to all sorts of outrage.  I think this nugget from Peter King’s (never-ending) column fairly represents the typical media reaction to the story.

This doesn’t deserve a monumental amount of coverage, but one thing should be said to the Cowboy veterans who delighted in spending about $2,500 per man (one estimate I heard for the 22 to 25 men who attended this dinner) as most of America struggles to pay for weekly groceries: Stop being pigs. It’s disgusting.

This comes from the same column in which Peter King discusses his three-hour meal with Texans running back Arian Foster.  People are struggling with the grocery bills and Peter King is out carousing with football players?  What a pig.

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24 Responses to Why Is This Bad?

  • It is bad because, as the Catholic Church has consistently taught, gluttony is one of the seven deadly sins. When one indulges in it, one is doing evil. It is still evil even if one of the side effects (unintended from the looks of it) is to create jobs.

  • I’m probably going to regret the title of the post because it doesn’t really convey the real subject matter. My beef is with the idea that the amount spent is an affront to people who are struggling economically.

  • Almost totally correct Mr. Z.

    Except the a priori is somewhat “off target.” Some of the people criticizing rich people’s spending habits are not concerned with poor people’s financial problems. Some demagogues gain power by generating envy and antipathy toward evil rich people.

    Wrath is one of the seven deadly sins, too.

  • The type of rookie hazing you described seems harmless enough so I have no problem with that. But, when the hazing turns dangerous and deadly then I do have a problem with that type of hazing.

    Rich people spending money is a good thing. When we are taxed excessively it creates a domino effect and hurts the taxpayer, which in turn impedes their ability to patronage a certain place and then that place loses profits and might be forced to layoff some employees. Excessive taxation hurts people. Money makes the world go round. The best thing that could happen to boost our economy today is for the rich to be encouraged to spend money instead of them presently being discouraged, which is causing a sluggish economy.

  • Hopefully they all gained 20 lbs of flab in one sitting so the Cowboys can continue to stink this season, right under that ridiculous jumbotron in their fancy new clown stadium. Did the columnist mention anything about the team owners/coaches/league officials/et al? Because I can assure you that plenty of them go to sleep every night on large piles of cash surrounded by many beautiful women, thanks to the revenue happily forked over by fans.

  • Also, is it truly gluttonous behavior? The bill was high not because they consumed a lot of stuff, but because the individual price of the food and drinks was ridiculously high. But Bryant is set to make $2,000,000+ this year, so it’s the equivalent to me spending $100 on a nice meal with my wife. Are we being gluttonous just because we spent a lot, but did not necessarily over-consume?

  • So now King is the champion of the little guy? I remember a few years ago King writing in his column how disgusted he was seeing people waiting overnight outside stores to get special sale prices prior to Christmas.

  • Frankly, the one time I went to Smith & Wollensky, it rather sucked (and I didn’t spend nearly that much). It doesn’t take much to run up a bill if alcoholic beverages are involved.

    If they want to blow big bucks on barely average food, that’s their business.

  • I don’t think gluttony is necessarily restricted to quantity. It can also include exhorbitantly expensive.

  • Agree with c matt. An additional problem with these gents is that I heard on NPR recently that 60% of professional football players are bankrupt 5 years after leaving the game. This in part explains why. Not wise stewards of their multi-millions.

  • So, why is it OK for football players to stimulate the economy by spending $55,000 on one meal but it’s not OK for the Clintons to spend $2 million (or $3 million or $5 million, depending on whose estimates you believe) on Chelsea’s wedding? Didn’t we have a post on TAC decrying the excess involved there? Not that I’m a big fan of the Clintons or of over the top weddings — I did agree that seemed a bit excessive — but let’s show some consistency here.

    I suppose the argument could be made that the Clinton’s “wasted taxpayer’s money” on Chelsea’s wedding because of Bill and Hillary’s current and past employment; but by that logic, all past and current government employees should take strict vows of poverty and never splurge on anything, right?

  • @Elaine

    I must have missed that post but in any case, I believe that the Clintons had the right to spend as much money as they wanted on Chelsea’s wedding. It probably helped to stimulate the economy.

  • @ Elaine

    Thank you for the link.

    While I do think that Chelsea’s wedding was extravagant I also believe that the Clintons had every right to spend their own money as they wish.

  • Was Paul the author of that Clinton wedding post? If not, I don’t quite get the consistency argument.

  • Unless, that is, writing for TAC means that you must march in lockstep with Tito (and we know just from his outlandish college football picks, alone, that that’s not the case).

    😉

  • What’s football?

  • Well, now that I looked back I see that the two posts have different authors so they do not have to be “consistent.” Still, I thought it might be interesting to notice the contrast in approaches.

  • I have actually ate at the Restaurant. The food prices are not that out of line for a quality Steak House. What people are missing is that it was not the food bill that really got him but the bottles of WINE that all the players ordered to take home that upped the bill so much LOL

  • “Unless, that is, writing for TAC means that you must march in lockstep with Tito”

    Nah, Jay, we have to march in lockstep with Elaine. 🙂

  • “We have to march in lockstep with Elaine.”

    Well, if that’s the case you all aren’t doing a very good job of it 🙂

  • Oh, I thought it was the thousand dollar shots of cognac that put the bill over the top. I stand corrected.

    To address Elaine’s point, no I didn’t write that post nor was I overly bothered by the extravagance of the wedding, though perhaps it was over the top. And again, I don’t exactly wholeheartedly approve of the lavish dinner. My question about whether or not this was a true example of gluttony was not rhetorical. I was genuinely curious, and I think I agree with most of the responses.

    I think Philip raises an interesting point. Not only are many pro football players broke shortly after retirement, but this problem plagues pro basketball players and other athletes. In fact I believe that NBA players make NFL players look like wise financial stewards. Dinners like this are just a drop in the bucket of the types of ridiculous purchases made by American professional athletes, and in fact this particular case is slightly less bothersome only because it is an exercise in hazing, not a regularly occurring incident. When Bryant buys his $30 million mansion in north Dallas, then it’s time to start flagging down a good financial advisor.

    And to repeat, the main thrust of my post is to chide Peter King for his reasons for objecting to the dinner. As someone on a tight budget, I don’t begrudge the Cowboys for having the means to go a little nuts at dinnertime. As for the prudence of such a dinner, that’s another matter.

  • This seems to rest on the idea that the choices are between spending money and not spending money. But that’s not the case.

    While I’d like to see these players utilizing their money, I’d rather see it spent in far more productive investments. The $55,000 they spent won’t lead to a lot of other growth.

    That said, when I heard this I thought it was funny rookie hazing rather than a horrible thing.

    Unless, that is, writing for TAC means that you must march in lockstep with Tito (and we know just from his outlandish college football picks, alone, that that’s not the case).

    I think at the end of the season, I’m doing a special recap of Tito’s picks.

  • In fact I believe that NBA players make NFL players look like wise financial stewards.

    The guaranteed NBA contracts make this a lot easier. If an NBA player gets hurt and can’t play at a high level, the team still has to pay his contract for the duration (see Grant Hill, Allan Houston) unless he generously decides to release the team from the obligation. In the NFL, the team only has to pay the player their salary through the end of the season, then whatever guaranteed money he is owed (much of the money in the contracts is not guaranteed). The income of an NFL player is much less stable, which makes financial planning particularly difficult for players who are injured or who play positions in which the average career is around three years (e.g. running back).

California Nightmaring

Thursday, August 12, AD 2010

In a remarkably good article here at newgeography, Joel Kotkin details how California has been transformed from the Golden State to the state most likely to go bankrupt.  He sums up his argument as follows:

What went so wrong? The answer lies in a change in the nature of progressive politics in California. During the second half of the twentieth century, the state shifted from an older progressivism, which emphasized infrastructure investment and business growth, to a newer version, which views the private sector much the way the Huns viewed a city—as something to be sacked and plundered. The result is two separate California realities: a lucrative one for the wealthy and for government workers, who are largely insulated from economic decline; and a grim one for the private-sector middle and working classes, who are fleeing the state.

Kotkin notes that government spending was completely out of control prior to the present Great Recession:

Between 2003 and 2007, California state and local government spending grew 31 percent, even as the state’s population grew just 5 percent. The overall tax burden as a percentage of state income, once middling among the states, has risen to the sixth-highest in the nation, says the Tax Foundation. Since 1990, according to an analysis by California Lutheran University, the state’s share of overall U.S. employment has dropped a remarkable 10 percent. When the state economy has done well, it has usually been the result of asset inflation—first during the dot-com bubble of the late 1990s, and then during the housing boom, which was responsible for nearly half of all jobs created earlier in this decade.

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2 Responses to California Nightmaring

  • Truth.

    Sadly, the DNC propaganda apparatchnik/MSM will not cover the truth.

    It seems the geniuses and college professors that rule us are out to destroy the racist, unjust private economy, or they are really clueless.

  • All you have to do is look at the Bell Ca public officials or the state employees who work like crazy on thier last year in order to pad their lifetime retirement benefits. There are plenty of areas to point at when it comes to waste and fraud.

    I just wish the common sense would come back … It’s gone!

Economics and Moral Hazard

Sunday, August 8, AD 2010

Another first rate video from the Econ 101 series of the Center for Freedom and Prosperity.  This video exlores the concept of moral hazard in economics.  A moral hazard occurs in economics when one of the parties to a transaction is  insulated from bad effects if the transaction goes south.  This will cause that party to behave more recklessly than if the full impact of the failure of the transaction were felt.  Government bailouts of course establish a precedent that if a big business suffers a loss, that the government might bail it out.  No doubt many of our major financial institutions have learned the lesson that if a financial fiasco is large enough, Uncle Sucker will come to the rescue, and put the taxpayers on the hook for another few trillion that they can’t repay.  Moral hazard indeed!

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6 Responses to Economics and Moral Hazard

  • Excellent! FNM/FRE provided huge volumes of (explosive) hydrogen (liquidity – relatively unlimited dollars chasing after limited houses) that over-filled the housing bubble, which is bursting (gov loan modifications and tax credits – just lapsed – will spread out the pain over years) so violently.

    N.B. FNM/FRE already cost “we the people” almost $300 billion. They are in conservatorship. They owe outright $1.6 trillion (publically held debentures – needs to be addded to the national debt) and also indirectly owe on implied guaranties possibly up to $10 trillion of mortgage backed paper.

    The 2,300 page financial reform legislation does not mention FNM/FRE. These are two dem sacred cows which ‘they’ apparently want to keep available to do more of the same damage going forward.

    Slight clarification: FNM/FRE lowered standards for loans they would buy to re-package/securitize into mortgage-backed securities. They also unsoundly increased the max loan balances they would buy. The banks would not have lowered credit underwriting standards if FNM/FRE had maintained their standards because banks would have retained the loans and the risks.

    Thank Dodd and Frank.

    A qualifier: Many (except ever-present frauds) involved parties believed that real estate prices always rise, never decline. So, they blindly accepted paper collateralized by any piece of God’s green Earth, regardless of the owner’s creditworthiness. The problem is that collateral values often disappear when they are most needed to cover loan losses. Appraised values (comparable sales prices not stabilized for unsustainable price run-ups) were used to the exclusion of sound credit underwriting and realistc financial analysis. Sadly, pension fund managers who have almost no real estate expertise but needed to “chase” yields and believed they were secured by good real estate collateral.

    President George W. Bush (Lord, I miss him!) didn’t do his duty here, either.

    In 1999, HUD Honcho A. Cuomo dictated that the two cash sacred cows underwrite 50% of their business in “low to moderate income” loans. The rate of home ownership rose from say (depending on the study) 63% to 69%, above historical equilibrium. Last I read, 15% of single family mortagge loans are past due.

    You just gored two lib/dem “sacred cows.”

    Anticipate lib ad hominems, insults and lies aimed at you.

  • T. Shaw I agree with most of what you posted – but I have found that the picture becomes MUCH clearer when the “liberal – conservative – Democrat – Republican” filters are removed. The bottom line is Wall Street runs our government – the politicians play the “two-party” false dichotomy when in reality that are two sides of the same coin, they just have different pet issues.

  • Great video! I like hearing someone say what I couldn’t express due to my lack of knowledge on the subject. But it seems all too simple now – follow the money trail…

  • Jim,

    Thanks. Most of that post was factual.

    The non-facts were meant to answer dem/liberals’ denials of sacred cows’ -FNM/FRE/HUD/US government social engineering – complicity in the recent economical “pomp and circumstances.”

    If the US had limited government and limited moral hazard, the depth of the debacle may have been limited.

    Also, recently, I believe Wall Street ceded its monopoly control of the US government to the UAW (GM/Chrysler bondholders were robbed), public employee/teachers unions, public pension funds, etc.

  • Question for Don: What is money?

  • Pingback: Government Monopolies v. Competition « The American Catholic

A Story in Graphs

Wednesday, July 28, AD 2010

Once upon a time there was a country — it had its problems as any nation does, but it did well enough. Its people prided themselves on working hard, and they were comparatively well off: less so than the UK, more so than Spain and Italy.

They’d had the good fortune to have none of their infrastructure destroyed during World War II, and after the war they experienced a boom as an exporter. Things slowed, however, in the late 60s and early 70s. Some said this was because the rest of the world got better at growing their own food and manufacturing their own goods. Others said it was because they allowed too much immigration. Some said it was because the welfare programs they created in the 60s ate away at the motivation to work hard.  Others said it was because unions became weak. Whatever the reason, their average income in inflation adjusted terms grew much more slowly than it had, and there was a good deal of discontentment and disagreement as to what to do about it all and who was at fault. Here’s a graph of their average family income in inflation-adjusted US Dollars.

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11 Responses to A Story in Graphs

  • You might want to add something else to your little graph there. In the 1950s, the highest nominal tax rate (the tax rate that would have affected the 80th percentile, but not the 20th) was 90%. It has fallen significantly as supply side economics and other such silliness were applied, and today, that same tax rate is a little less than 40%. Apparently, allowing the rich to keep their money and stash it in the Cayman Islands isn’t as good for the US GDP as conservatives might think.

  • PF,

    Actually, the top marginal income tax rates didn’t affect the 80th percentile either. For instance, in 1950, income over 200k was taxed at 90%. This data, however, is inflation adjusted to 2008. If you inflation adjust 200k in 1950 to 2008, it’s $1.7 million. However, the 80th percentile of income was only $41k (in 2008 dollars). If you adjust that back to 1950 dollars this is $4,600 which would put you in the 26% tax bracket for 1950.

    Interesting question though.

    Historical tax tables:
    http://www.taxfoundation.org/publications/show/151.html
    Inflation calculator:
    http://www.coinnews.net/tools/cpi-inflation-calculator/

  • Exactly right, Darwin. Leaving aside the rather obvious noxiousness of a 90% income tax rate, that rate actually hit very few families. Inflation adjusted, income tax rates are higher today for virtually all high income earners, which is not to say that this somehow provides a contrary explanation for the phenomenon you describe — that is doubtful. But facts will never dissuade class warriors. Their personal failures are always the fault of someone more successful — you can count on it.

    Another partial explanation for the phenomenon described in the graphs is the sexual revolution, which increased both ends of the income spectrum. High income households include many two-income professionals (something pretty rare until the late 1970s) — doctors don’t marrry plumbers. And low income households are disproportionately composed of a single female with children, a very costly and very modern phenomenon.

    Another related observation: inflation adjusted income statistics do a very imperfect job of actually describing changes in standard of living, which changes are actually quite pronounced for households at every level. Even households at the 20% level live in much better conditions than the modest inflation adjusted income increase would suggest. More own homes; both apartments and homes are larger and usually have air conditioning; computers, televisions, microwaves, mobile phones, etc. are plentiful; and a much greater percentage of low-income families own cars. Even food is much cheaper (inflation adjusted) with unbelievably greater variety. Moreover, the percentage of meals the average member of a 20% household eats outside his own home would be unimaginable to that person’s counterpart in 1950.

  • You need to be careful with this sort of information to verify what is being measured and what is being excluded. Some data series fail to take into account fringe benefits, or measure only wages and not salaries, or exclude the value of government benefits like Medicaid. Variation over time in the size of households is often not accounted for either. I have heard also criticisms of the Census Bureau as a producer of economic statistics (not its core mission). The Bureau of Economic Analysis or the Bureau of Labor Statistics might be a better bet.

  • allowing the rich to keep their money and stash it in the Cayman Islands isn’t as good for the US GDP as conservatives might think.

    1. How many people are doing that?

    2. Of what do the loan portfolios of banks domiciled in the Caymen Islands consist?

  • AD,
    I predict you will not receive a helpful answer. The facts, I’m afraid, are not compatible with the class warfare narrative. More self-affirming to ignore them and continue on in smug moral superiority, however delusional.

  • “There are plenty of theories as to why this could be: immigration, technology, less unionization, welfare, low taxes, businesses being eeeeeeevilllllll, etc.”

    Because labor and capital are disunited. That is the fundamental reason. Nearly 40% of the stocks in this country are owned by the top 1% of income earners. The next 40% is owned by the next 9%. The bottom 90% owns about 20%. And there is a similar story with respect to business equity, financial securities, trusts, non-home real-estate – everything related to investment.

    Large incomes are derived from ownership of property. Small incomes are derived from wages. Every CEO has a salary, but it is a minuscule fraction of his income when set against dividends. Thomas Montag, the “global banking and markets” executive at Bank of America, had an income in 2009 of over 29 million dollars.

    Only 600,000 of that, or a little less than 3% was in salary. 97% of that 29 million was derived entirely from stock awards. Now this is an extreme case, but on average the compensation of CEOs, as I’ve seen, breaks down in similar ways – most of their income is derived from stocks, and comparatively little from salaries.

    These are simple facts, not cries of envy or to redistribute the wealth. Narrowing the income gap means narrowing the property gap.

  • Joe, the income and property gap distinction is not that elegant. The stock grants to CEO’s for instance is all wage income as a practical matter. It is true that the truly super rich earn most of their income from investments, but most high income earners do not. The pattern is disarmingly common. People work for compensation for many years in order to build wealth that will eventually allow them to generate most of their income from invested assets. CEOs are no exception. Warren Buffett counter-examples are pretty rare. Somewhat more common are those who inherit wealth, though they normally do a pretty good job of diluting and dissapating it over a few generations.
    I can see the attraction in trying to unite labor and capital via ESOPS etc, but there are potentially serious pitfalls. It is normally imprudent to place most or all eggs in one investment basket, which is what entrepreneurs and small businessmen are willing to do — and they make up most of the wealthy in this country (which does not remotely mean most of them achieve wealth). The willingness to take risk and the ability to successfully manage it through entrepreneurial skill is not equally shared among all workers. Most people are better off accumulating wealth through long-term diversified investments substantially disassociated with their workplace.

  • on average the compensation of CEOs, as I’ve seen, breaks down in similar ways – most of their income is derived from stocks, and comparatively little from salaries.

    I believe this is largely a function of the minutia of the tax code, which taxes compensation at a higher rate if it comes from stock than if it comes as salary.

    If someone is employed at a publicly traded company, nothing prevents him from immediately converting as much of his wages as he wishes into company stock. If he converts it all to stock, this is functionally equivalent to what he would have gotten in compensation if he had been paid in stock in the first place. That so few people do this suggests that they prefer being paid in wages (you might say that this is just inertia, but suppose for a moment that Bank of America decided to start paying its employees with stock; if this happened, my guess is that a) the employees would not be happy about it, and b) upon receiving their stock they would immediately convert all or most of it to cash).

  • BA,
    Yes, the reason CEO comp is stock heavy is simply because boards want CEO comp tied to company fortunes and there are some tax advantages in doing so. There is an intuitive appeal to ensuring that CEOs pay is tied to investor fortunes, but it does have some perverse consequences including an emphasis on short-term thinking as well as the potential for huge comp packages beyond what may be intended or anticipated. Many public company boards struggle with this.

  • A good analysis, but I think that the reason for our relative decline starting in the early 70’s comes from the fact that our tax and regulatory system became increasingly hostile to wealth creation. And it was the big corporations, big government and big unions who wanted it this way – it protected established wealth and power.

    A genuinely free market means a continual and rapid over turn of the socio-economic elite. This sort of thing is not desired by those at the top – and, so, they’ve made it harder and harder for anyone to do anything which might create sufficient new wealth to allow entry in to the upper reaches of society. The only people who have been able to continue rising are those in entertainment and sports (you might want to consider that while baseball stars and movie idols were popular 70 years ago, they didn’t for the most part hob nob with the elite…that is something which only happened when such persons started raking in the many millions of dollars necessary to purchase entry).

    Getting back on track really involves no more (and no less) than breaking the chains on the economy. Just allow people to work as they will, and things will go back to the old, American norm.

Progressives Are Not Cynical Enough About Business

Friday, July 16, AD 2010

One thing my study of economics has taught me is that businesses will tend to act in whatever way they think will bring them the most profit. There may be rare exceptions, and of course businessmen often have mixed motives. But the overall tendency in this direction is very strong.

My guess is that if you surveyed people, many more self-described progressives would say that they agreed with the statement than self-described conservatives. Indeed, progressives often criticize conservatives and libertarians for being insufficiently attuned to the rapacious self-interest motivating businessmen.

Yet oddly enough, it seems to me that one of the main problems with progressive thought is that they don’t take the idea that businesses act to maximize profit seriously enough. For a group that claims to have a low opinion of businessmen, progressives have a strange habit of advocating policies that will only work on the supposition that businesses won’t act to maximize profit, and then react with shock when they proceed to do so.

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0 Responses to Progressives Are Not Cynical Enough About Business

  • ” If progressives would only be more consistent in their cynicism, their policy prescriptions might improve.”

    Progressives who become more consistent in their cynicism become Marxists.

  • It is not a question of progressive’s being cynical enough, more like being clueless enough of how economic life actually works. Government always trumps private, Federal vs. local. They are extremely ideologically consistent in this. The law of unintended consequences is automatically ignored in staying true to this worldview.

  • Progressives who become more consistent in their cynicism become Marxists.

    A more consistent cynicism might lead progressives to become Marxists, or it might make them into libertarians.

  • Whether it leads to marxism or libertarianism is unimportant. The Progressive movement is utopian, denies original sin, and Jesus Christ. It was condemned prior to Vatican II and Catholics can not be Progressives. Thought you’d like to know.

  • @Tim McCarthy
    What you’re saying isn’t completely right. The Vatican always argues for a “balance” between pure capitalism and socialistic capitalism. I think, for instance, that they would’ve agreed with the raise of the minimum wage; even though some companies are now apperently cutting working hours, a large share of companies simply can’t so their poorest employees are earning more.
    Sure, the idea that we can create a utopia with socialism is obviously not realistic and not in line with Catholic teachings, but I certaintly believe that a Catholic or christian government or business must protect their poorest employees or citizens. We can obviously not stop sin but caring for our brothers and sister is most definitely effective. Again I’m not saying people should adopt socialism, just that there should be some social elements in capitalism.
    See for instance Rerum Novarum and the social teachings of the church.
    Maybe you know all this and I just understood you wrong, I don’t mean to be patronizing (or socialist BTW), but at least others should know this.

  • Richard, you’re right on track. And we can all thank you for reminding us here of what the Church actually has to say about the matter as opposed to letting people like Glenn Beck define our terms for us. Actually, I don’t feel any strong desire to rehabilitate the term Progressive. I do want to point out, though, that when liberals or progressives or Democrats or whatever you want to call them decry the abuses of big business, it is actually an opportunity for conservative enablers of big business (through irresponsible deregulation) to wake up from THEIR doey eyed naivete.

  • Mark,

    Here’s a list of the irresponsible (bank) deregulation since 1864.

    1. National Bank Act of 1864 (Chapter 106, 13 STAT. 99). Established a national banking system and the chartering of national banks.
    2. Federal Reserve Act of 1913 (P.L. 63-43, 38 STAT. 251, 12 USC 221). Established the Federal Reserve System as the central banking system of the U.S.
    3. To Amend the National Banking Laws and the Federal Reserve Act (P.L. 69-639, 44 STAT. 1224). The McFadden Act of 1927. Prohibited interstate banking.
    4. Banking Act of 1933 (P.L. 73-66, 48 STAT. 162).
    Glass-Steagall Act. Established the FDIC as a temporary agency. Separated commercial banking from investment banking.
    5. Banking Act of 1935 (P.L. 74-305, 49 STAT. 684).
    Established the FDIC as a permanent agency of the government.
    6. Federal Deposit Insurance Act of 1950 (P.L. 81-797, 64 STAT. 873). Revised and consolidated earlier FDIC legislation into one Act.
    7. Bank Holding Company Act of 1956 (P.L. 84-511, 70 STAT. 133). Required Federal Reserve Board approval for the establishment of a bank holding company.
    8. International Banking Act of 1978 (P.L. 95-369, 92 STAT. 607). Foreign banks in the federal regulatory framework. Deposit insurance for branches of foreign banks engaged in retail deposit taking in the U.S.
    9. Financial Institutions Regulatory and Interest Rate Control Act of 1978 (P.L. 95-630, 92 STAT. 3641). FIRIRCA. Created the Federal Financial Institutions Examination Council. Established limits and reporting requirements for bank insider transactions. Electronic fund transfers.
    10. Depository Institutions Deregulation and Monetary Control Act of 1980 (P.L. 96-221, 94 STAT. 132). Established “NOW Accounts.” Began the phase-out of interest rate ceilings on deposits. Granted new powers to thrift institutions. Raised the deposit insurance ceiling to $100,000.
    11. Depository Institutions Act of 1982 (P.L. 97-320, 96 STAT. 1469). Garn-St Germain. Expanded FDIC powers to assist troubled banks. Net Worth Certificate program. Expanded the powers of thrift institutions.
    12. Competitive Equality Banking Act of 1987 (P.L. 100-86, 101 STAT. 552). CEBA. Expedited funds availability. Recapitalized the Federal Savings & Loan Insurance Company (FSLIC). Expanded FDIC authority for open bank assistance transactions, including bridge banks.
    13. Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (P.L. 101-73, 103 STAT. 183). FIRREA – restore public confidence in the savings and loan industry. Abolished the Federal Savings & Loan Insurance Corporation (FSLIC), and the FDIC was given the responsibility of insuring the deposits of thrift institutions in its place. FDIC insurance fund created to cover thrifts was named the Savings Association Insurance Fund (SAIF), while the fund covering banks was called the Bank Insurance Fund (BIF). Abolished the Federal Home Loan Bank Board. Two new agencies, the Federal Housing Finance Board (FHFB) and the Office of Thrift Supervision (OTS), were created to replace it. FIRREA created RTC as a temporary agency of the government. The RTC was given the responsibility of managing and disposing of the assets of failed institutions.
    14. Crime Control Act of 1990 (P.L. 101-647, 104 STAT. 4789). Title XXV of the Crime Control Act, known as the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of 1990, greatly expanded the authority of Federal regulators to combat financial fraud.
    15. Federal Deposit Insurance Corporation Improvement Act of 1991 (P.L. 102-242, 105 STAT. 2236). FDICIA greatly increased the powers and authority of the FDIC. Major provisions recapitalized the Bank Insurance Fund and allowed the FDIC to strengthen the fund by borrowing from the Treasury. The act mandated a least-cost resolution method and prompt resolution approach to problem and failing banks and ordered the creation of a risk-based deposit insurance assessment scheme. Brokered deposits were restricted, as were the non-bank activities of insured state banks. FDICIA created new supervisory and regulatory examination standards and put forth new capital requirements for banks.
    16. Housing and Community Development Act of 1992 (P.L. 102-550, 106 STAT. 3672). Established regulatory structure for government-sponsored enterprises (GSEs), combated money laundering, and provided regulatory relief to financial institutions.
    17. RTC Completion Act (P.L. 103-204, 107 STAT. 2369.
    18. Riegle Community Development and Regulatory Improvement Act of 1994 (P.L. 103-325, 108 STAT. 2160). Established a Community Development Financial Institutions Fund, a wholly owned government corporation that would provide financial and technical assistance to CDFIs.
    19. Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (P.L. 103-328, 108 STAT. 2338). Permits adequately capitalized and managed bank holding companies to acquire banks in any.
    20. Economic Growth and Regulatory Paperwork Reduction Act of 1996 (P.L. 104-208, 110 STAT. 3009
    21. Gramm-Leach-Bliley Act of 1999 (P.L. 106-102, 113 STAT 1338) Repeals the Glass Steagall Act of 1933. Allows national banks to underwrite municipal bonds. .
    22. International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001* (P.L. 107-56) The law requires financial institutions to establish anti-money laundering programs and imposes various standards on money-transmitting businesses.
    23. Sarbanes-Oxley Act of 2002 (P.L. 107-204) Sarbanes-Oxley establishes the Public Company Oversight Board to regulate public accounting firms that audit publicly traded companies. It prohibits such firms from providing other services to such companies along with the audit. It requires that CEOs and CFOs certify the annual and quarterly reports of publicly traded companies. The Act authorizes, and in some cases requires, that the Securities and Exchange Commission (SEC) issue rules governing audits.
    24. Fair and Accurate Credit Transactions Act of 2003* (P.L. 108-159)
    25. Dodd/Frank – In 2,300 pages the culmination of all that preceeded.

  • My opinion of liberals/progressives tells they think businesses and Republicans will to act in whatever manner necessary to make Obama look bad.

    For example, today the racists are selling off the NYSE just to cause people to think that Obama’s socialist agenda is not salutary. The villains!

  • I think you ought to read the documents. It still stands that Progressivism is utopian and as such denies original sin and by extension Jesus Christ. Their was never any teaching allowing socialistic capitalism. What is that ? Socialism and Communism and Progressivism are condemned. Subsidiarity is what is approved. The means of production owned by working men is approved. Re-distribution of wealth is condemned. Moreover what is socialistic capitalism ? Do you mean Distributism written about by Chesterton and Belloc ? Glenn Beck has nothing to do with me, I was taught by the Church prior to Vatican II in the 1950’s. The Church can not change it is until the end of this age, and no lib modernist influence has any place in the Church.

  • Humanistic ideal: “Man is the measure of all things and that our job is to make life worth living.”

    “But it is not necessary here to argue whether the other-worldly or the humanistic ideal is ‘higher.’ The point is that they are incompatible. One must choose between God and Man, and all ‘radicals’ and ‘progressives’ from the mildest liberal . . . have in effect chosen Man.”

    Orwell: “Reflections on Gandhi”

  • @Tim McCarthy Doesn’t subsidiarity imply a kind of involvement of the government in for instance health care? Helping society organise systems like that?

  • The most important goal of business is survival. If a business does not survive it can do no good or anything. The main goal of a progressive politician is to get elected; just like his or her conservative counterpart. Ergo, he or she will do or say whatever it takes to stay in office. Why state the obvious. Everybody knows that business people or politicians or bureaucrats driven by fear or lust for power or greed make poor choices that harm themselves and many others and then try to cover their tracks. On the other hand great leaders driven by Faith, Hope and Love make inspired choices that enrich themselves and the world at large. Let’s quit bemoaning human weakness and spread the One True Faith that will once again make a positive difference.

  • @ Richard. No it doesn’t. It means the decision should be taken as close to the action as possible. No Federal nothing unless it can not be resolved at the lowest level. For example parents decide what their children are taught not the Federal Government. But to the contrary the Federal Government should maintain interstate roads. They should regulate interstate trade, getting rid of obstacles for the free flow of commerce. There is no reason not that by applying subsidiarity and free market principles we couldn’t have better cheaper health insurance than what is currently going on. I’m not for turning back the clock, but if we took a look at how the laws were back then and adapted them to now we would be better off. On the one hand we have the party of death, and on the other the zionist neo-cons, and to paraphrase Fr. Malachi Martin when asked who he’d vote for Kerry or Bush he said he intended to be in St. Pats in NYC praying God would deliver us from both of those evils. Progressives are the enemies of the Church.
    tim

  • Without the assistance of government, business is shackled by the consumer. If the consumer is vicious, the business will be vicious. If the consumer is virtuous, the business will be virtuous.

    Government has a role; however, a vicious electorate will elect a vicious government and business will secure its authority through the power of the gun. Then there is no check on evil.

    Progressives, especially well-intentioned progressives are dangerous and destructive.

    Capitalists, as capitalism has come to be practiced are corporatists. They secure profits and eliminate competition with the power of the guns of government.

    To think that modern capitalists and progressives are different is simply foolish – they are exactly the same. Big Business and State Socialism are very much alike, especially Big Business – Chesterton.

    A government of virtuous men will curtail our disordered appetites and leave the natural free market to serve. No one goes into business, in a genuinely free market, unless they think they have a way to serve others and their profit is the measure of the degree of success they achieve in serving others.

    In a progressive corporatist capitalist construct only those with the lust for power will go into business and should anyone else manage to get in, they will be crushed by the corporate government.

    Debating capitalism, socialism, progressivism, etc. in the current paradigm is a fools errand. The terms we are using are incorrect, the intentions are masked and the idea of Christian justice doesn’t enter into the equation.

    Progressive aren’t cynical about business. Progressives are very much in favor of business provided they control consumer choices – no happy meals with toys, plenty of prescription drugs with deadly side effect, no guns in the hands of the common man, the right to murder a human being simply because of their current location – inside the womb or in the nursing home. They also want to control the businesses – no free market in insurance, managed pools of mandatory insurance instead, no parochial schools, plenty of government indoctrination centers.

    This is the stuff of a ‘scientific dictatorship’, one in which the slaves enjoy their servitude. It is a technological feudal system – we are the serfs and the progressives are the lords. The first thing our lords must do is eliminate the only Lord we should have – His Name is Jesus Christ.

    No King but Jesus Christ for me.

  • Psalm 146:3, “Put not your faith in princes . . . “

  • Someone help me out here – is there a reason the author of the article is not posted with the article – I have never seen a blog that doesn’t list the author. It is EXTREMELY annoying an unprofessional.

  • Jim, the author shows at the bottom of each post on the main page. The individual pages don’t for some reason (and I agree it’s unfortunate, but it’s not that big of a deal once you know where to look). Blackadder was the author of this post.

  • “It is EXTREMELY annoying an unprofessional.”

    Professional? Jim, we are just a rag-tag bunch of unpaid volunteers! 🙂

    As RL said you can see the authors on the main page for each post before clicking on the post. Alternatively, on the main page clicking on a contributor’s name will bring up all the posts of the contributor clicked on.

  • That businesses optimize is a useful assumption in constructing ideal types. I think you will find in practice that businesses satisfice rather than optimize.

    In the case of wage and hour laws, rules on the terms on consumer credit, and the regime in health care finance, public policy imposed costs. Parties to economic transactions make adjustments which distribute the costs between workers, proprietors, and customers. Some of the politicos who imposed those costs did so with the assumption that proprietors would eat all the new costs.

    It may be that these pols are insufficiently cynical. It may also be that they are ignorant or have not come to the realization that other people have their own agendas and their own fish to fry and are not merely characters in Henry Waxman’s doll house. I come from Upstate New York. We have twelve members of Congress. Perhaps four have some familiarity with business or economics from the occupations they have followed or from academic study. Ignorant would seem likely. The extent of narcissism would be harder to determine.

  • After reading this discussion I’m baffled by the republican party. They seem to get the vote of most serious christians (and rightly so, as they are against abortion), but they often seem very unchristian. Seen from Europe I get the impression that they are often a little xenophobic and very warlike. Also the ties politicians in the United States often have with the business world seems very unhealthy for a democracy.
    Are these impressions just wrong? BTW the presidential candidates are obviously the most visible in Europe, so that’s most of all where I’m basing these conclusions on.

  • “Are these impressions just wrong?”

    Yes.

  • ““Are these impressions just wrong?”

    Yes.”

    OK

  • American Knight’s analysis is spot on. The question is how do we affect real Catholic change. The right are corporatists or zionist trotskyites ( Krystal and Strauss founders of neo con were trotskyites first)
    The Dems are the party of death and it matters little which modifier you use; liberal, socialist, or progressive. My latest suggestion is to keep throwing the incumbents out until they listen to us.
    We are to bring forth the Social Kingship of Christ, not play patty cake with evangelicals that think they are bringing the latter day rain.

  • I find it difficult to understand what this blog post has to do with Catholicism. Following the author’s logic, we should abolish minimum wage, indeed, all regulation of business, because it will affect prices. And it is of course not true that “progressives” are surprised by the reactions of (certain) businesses. If I may quote from your own comments’ policy:
    “I will not exaggerate others’ beliefs nor make unfounded prejudicial assumptions based on labels, categories, or stereotypes. I will always extend the benefit of the doubt. (Ephesians 4:29)”

  • Perhaps a better title for this post would have been “Progressives Are Not Skeptical Enough Of Business.” You see, there’s a big difference between being skeptical and being cynical.

    It’s OK to have a healthy skepticism of business, government, or even (up to a point) the Church. Ronald Reagan’s “trust, but verify” rule encapsulates that quite well. Blind and unquestioning faith in the fallen human beings who comprise any institution usually leads to trouble. Being prepared for the POSSIBILITY that one might be decieved, or that the other party has ulterior motives, doesn’t hurt.

    However, that is not the same as cynicism — the attitude that automatically ASSUMES people or institutions to be stupid, evil, or corrupt until (or even if) proven otherwise, and never expects any better from them. Cynicism, like flippancy (an attitude that automatically treats everything as a joke) dulls the intellect instead of sharpening it, and if unchecked turns into a cancerous contempt for others that is extremely toxic to one’s spirtual life.

  • “Seen from Europe I get the impression that (the Republican party) are often xenophobic and very warlike… Are these impressions just wrong?”

    What you are seeing, Richard, is a focus on the most extreme elements of the conservative movement/Republican Party. Every movement or political faction has its “fringe” elements, which don’t represent the majority of people involved, but which unfortunately tend to attract most of the media attention. I’m sure the same thing happens in your country.

    In fact, we in America probably get an equally simplistic, stereotyped or distorted view from OUR media of what’s happening in Europe and elsewhere in the world. It’s just the nature of the news media to do that. I hope that answers your question.

  • America is large and not Europe, though our politicos wish it were and work to change it into it. Look at the stats when this country was strong and wealthy after the last war we did not export but 5% of GDP. We made all kinds of things and now we do not. This is key to prosperity we make things to create wealth we do not take in other’s laundry that’s called service. It is parasitic. This is part of the reason for this crisis we have more parasites than are healthy for a political organism. We must rid the
    body of these parasitic diseases and promote healthy activities like small businesses, while getting rid of the terminal diseases like the Federal Reserve and fractional banking, the IRS, reduce the Federal Government to about 10% of it’s current size. Well you get the idea. We need to stop supporting Europe and pull all of our Nato troops and war machines out. Let the Russians take over. The EU has put obstacles in the way of American free trade in Europe so have a nice day, we are out of there. We can do it alone just like we did in the past and be the wealthiest country on the globe. The US is fighting a proxy war for the EU, or the Mohammedans would have taken over the Continent due to their physical superiority to the fighting forces in the EU. Remember France it was on TV and the French police looked like little skinny girls and could not control the Mohammedans. Fortress America with Catholic Ghettos are what we need again.

  • Tim,

    I agree on many of your points especially the Fed and fractional-reserve banking (usury); however, I would not call service oriented businesses parasitic. All businesses serve, some provide and intangible benefit, some provide manufactured goods, some facilitate (service). All are legitimate; however, we do need to get back to having a manufacturing base, not because there is something wrong with service, but because wealth is created by mixing man’s labor (with the intent on sanctification) with God’s creation for His glory.

    In truth the USA barely needs to import anything and we should be exporting our massive surplus to help the world and enculturate the world to freedom.

    As for letting the Russians take over – I am not cool with that at all. I do think we need to stop our imperial military and have the biggest baddest military around, but not send them anywhere without a firm purpose for defeating an enemy – utterly defeating an enemy. Our military should not be the policeman of the EU, we should not be nation-building and we should most certainly not be using our soldiers within the borders of the USA (on the borders – I am all for that). That being said, we cannot create a vacuum because the Russians, the Muslims and the Chinese will fill it – we can’t have that.

  • We have no surplus to export. We don’t make anything any more. Agri-business has killed vegetable farming we export corn syrup, soy oil, corn oil, etc. We need to import everything, we need food, we need clothes, we need tv’s nothing is made here any more.
    The service industries like accounting are now counted as part of the GNP thanks to Billy Clinton. Accountants do not make anything they count what has been done. This is perverse. It adds no wealth. Service business are a cost of manufacturing which produces wealth. They do not create wealth they suck it out of the economy, but they are clean jobs for college educated clerks.
    The most important thing is this the Chastisement which Our Lady explained at Fatima has not been fulfilled and Russia has not been consecrated. This chastisement which is coming will be worse than the Deluge.

    We have protected Europe it is time they grew up. If they can protect themselves Russia will not take over but I’m betting on Russia, because EU is effeminate

  • @tim mccarthy Russian is Orthodox now, and the EU atheist, so, it’d be an improvement.

  • Tim,

    Most accountants are progressives because they earn their livelihood as a result of burdensome government regulation and graduated income tax scheme. However, their are some services that are useful. Retail is one of those. Most people purchase the goods we used to manufacture through service retailers. Financial services professionals are usually progressives too because they tend to favor the evil Fed and corporatism. Some actually help people make smart decision about the stewardship of their wealth, sadly those are few and far between.

    Not having a manufacturing base is part of the globalization plan to erode the sovereignty of the United States of America. The intent is to kill the shining city on the mountain and it eventually will happen, but it does not have to be now.

    The kings of the earth who had intercourse with her in their wantonness will weep and mourn over her when they see the smoke of her pyre.
    They will keep their distance for fear of the torment inflicted on her, and they will say: “Alas, alas, great city, Babylon, mighty city. In one hour your judgment has come.”
    The merchants of the earth will weep and mourn for her, because there will be no more markets 5 for their cargo:
    their cargo of gold, silver, precious stones, and pearls; fine linen, purple silk, and scarlet cloth; fragrant wood of every kind, all articles of ivory and all articles of the most expensive wood, bronze, iron, and marble;
    cinnamon, spice, 6 incense, myrrh, and frankincense; wine, olive oil, fine flour, and wheat; cattle and sheep, horses and chariots, and slaves, that is, human beings.
    “The fruit you craved has left you. All your luxury and splendor are gone, never again will one find them.”
    The merchants who deal in these goods, who grew rich from her, will keep their distance for fear of the torment inflicted on her. Weeping and mourning,
    they cry out: “Alas, alas, great city, wearing fine linen, purple and scarlet, adorned (in) gold, precious stones, and pearls.
    In one hour this great wealth has been ruined.” Every captain of a ship, every traveler at sea, sailors, and seafaring merchants stood at a distance
    and cried out when they saw the smoke of her pyre, “What city could compare with the great city?”
    They threw dust on their heads and cried out, weeping and mourning: “Alas, alas, great city, in which all who had ships at sea grew rich from her wealth. In one hour she has been ruined.
    Rejoice over her, heaven, you holy ones, apostles, and prophets. For God has judged your case against her.” – Apoc 18:10-20

  • The lunacy on this blog is beyond belief. Certainly beyond catholic belief.

  • Why thank you for your kind remark Professor Simons. I am sure you are used to an ideological spectrum at Dartmouth that goes from far left to lunatic left, so I can understand your distress at being exposed to uncongenial currents of thought.

  • I understand the importance of having a strong manufacturing, and for that matter an agricultural, base to the economy — i.e. making, selling, and buying stuff — but since when are service jobs now classified as being bad and unnecessary? Doesn’t this imply that the ONLY “real” economic wealth or value lies in material goods? Aren’t knowledge, independence, skill, and just plain enjoyment of life economic goods as well?

    Service jobs are simply doing for others what they do not have the time, ability, or inclination to do for themselves — thereby freeing them to devote their time to do the things they CAN do, or want to do. When this comes about as a result of genuine demand — and isn’t artificially forced on people through excessive government regulation or other causes — how is that bad? And finally, isn’t the notion that real wealth only lies in “things” and not in serving others basically un-Christian?

  • Spot on Elaine. Although material wealth is measured only by the things produced, so in that sense service isn’t wealth; however, some services enhance wealth. Education and apprenticeship for example, without those how will most people have any idea how to create material wealth?

    As for the true wealth – we know that can’t be measured.

    Look where your treasure is, for there your heart will be also.

  • Simons,

    Care to elaborate? Levying an attack like that without any substance, hmm? When did that stop being beyond Catholic belief?

    You may have a little something in your eye.

  • We have no surplus to export. We don’t make anything any more.

    This is a myth, albeit a widespread one. America’s manufacturing output is actually much much higher now than in previous decades.

    What trips people up is that while the U.S. is making more stuff than ever before, we’ve gotten so efficient at doing it that it takes fewer people than before, so manufacturing employment has declined even as output has risen (the same is true, btw, for agriculture).

  • Bravo BA! That is a simple fact, but one that seems to elude most people.

  • I was a Manufacturing Engineer for thirty five years. I worked start-ups and turnarounds I am the wrong guy to try to bamboozle. This idea that we make as much now as then is another Progressive piece of bent truth. The dollars as a number have remained the same but our share of the industry as a percentage has diminished. I saw it, I fought against it. A single aside in the Chicago Metro Area when I started we had 1200 job shops there. We now have less than 100. These companies were forced out of business by the progressive force of ISO conformance to the EU. The regs were intended to put America out of business. Nafta sent the rest of the jobs to China and India. It is all about how little they pay them, it has nothing to do with anything but that.
    What you really need to do is stop getting you info from the liberal news, watch fox news, but not the talking heads like Hannity etc, they are apostate Catholics which endorse contraception.

  • This idea that we make as much now as then is another Progressive piece of bent truth. The dollars as a number have remained the same but our share of the industry as a percentage has diminished. I saw it, I fought against it. A single aside in the Chicago Metro Area when I started we had 1200 job shops there. We now have less than 100.

    I’m not saying that the U.S. makes as much now as in the past. It makes more. That’s just a fact, as the chart I linked to illustrates.

    It’s true that as a percentage of the world total, U.S. manufacturing output has declined in recent decades. But it doesn’t follow from this that U.S. manufacturing output has declined. Suppose, for example, that total manufacturing output worldwide doubles while America’s share of output falls from 20% to 15%. Our share of industry as a percentage would diminish, but we would still be making more stuff and before. This is basically what has happened (though the numbers are just for purposes of the example).

    Likewise, as I noted previously, a decline in manufacturing employment doesn’t imply a decline in manufacturing output. Indeed, one of the reasons manufacturing employment has fallen is that the manufacturing sector has become so productive that they can produce lots more stuff with fewer people.

  • Today’s Sunday I’m taking a day of rest.

  • A single aside in the Chicago Metro Area when I started we had 1200 job shops there. We now have less than 100. These companies were forced out of business by the progressive force of ISO conformance to the EU.

    In addition to Blackadder’s point, which is undeniable, it’s worth noting that the upper midwest does not the entire US make (although in regards to manufacturing they’re used to thinking so.) The amount of manufacturing employment in the South and in Texas has increased over the last couple decades, even as the Great Lakes states have seen decreases in manufacturing employment (though not necessarily output.)

Quick Econ Thoughts on Licensing

Wednesday, June 16, AD 2010

This was going to be a comment on Blackadder’s post which has turned into a discussion on licensing and whether it raises prices, but since I only have time to write out one thought process today I thought I’d turn it into a post.

Most folks outside economics see licensing as a way of legally certifying duties and providing a means of redress when incompetence occurs. Not only does a plumber who consistently allows sewer gases to enter a home get sanctioned civilly, he can be sanctioned by license loss and prevented from harming other households.

Let’s try two examples on our theoretical plumber here:

1) Say that we have a local economy in which licensing is not mandatory. If I want some plumbing done, I have several options: I could open up the phone book, call around, and hire the absolute cheapest guy who says he’s willing to give plumbing a job. He may do a terrible job, and set sewage to run through my ice maker.

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3 Responses to Quick Econ Thoughts on Licensing

  • I think your statement is excessively binary – licensing requirements can do both.

    You have also neglected one of the benefits of licensure is the distribution of recognition to those licensed. Their sense of ‘professional identity’ may be highly or even solely dependent on their passage through the certification hoops. I think you tend to find these types in public and philanthropic agencies (librarians and social workers being the most blatant examples).

    The licensing requirement adds information to the transactions between supplier and consumer. The questions at hand is how beneficial is the information to the consumer, or, if not the consumer, to potential employers or other stakeholders; what kind of injuries might befall the consumer or other stakeholders in the absence of this information, and what resources the stakeholder in question has to acquire the information from alternative means.

    Italy used to have a system for licensing aspirant retail merchants. It is difficult to imagine how that might be of use to consumers. Banks might find such a certification useful, but they hardly need it to be given the force of law for banks to require them ‘ere approving a loan.

    One might also consider that other actors in the marketplace may replicate and replicate well the functions intended to be undertaken by state licensing boards and occupational guilds. Insurers come to mind.

  • One point is that a “license” may or may not mean something. For a janitorial business all it means is I went down to the city and purchased a “permit” to do business. The fee for the license was my qualification. For a brain surgeon it means I have completed the requisite education and training before being allowed to open your skull.

    With people like physicians you also have two other factors affecting supply; the AMA (their equivalent of a union) and the medical schools which have a Darwinian “pyramiding out” scheme. It’s a game of musical chairs, you learn you lessons and kiss enough butts and you get one of the last chairs. It’s as much political as academic.

    There are many things that are restricted to “licensed physicians” that can easily be accomplished by people with much less formal training. You are starting to see some of these people, like nurse practitioners and physician assistants make some headway into this “turf”, but not without stiff opposition by the medical (and political) establishment. I just read a post yesterday where homeopathy is being squeezed out of the medical establishment as they aren’t “real doctors”.

    Lastly, I think you are limiting the conversation by looking at it through the “progressive – conservative” lens. It’s not that black and white, it’s a false dichotomy that doesn’t hold up, especially when you look at it through the eyes of Church teaching (moral and social).

  • My sister’s trained to be a non-therapeutic massage therapist. After getting through a three year course of study, she paid several hundred dollars to be allowed to…um… do basic, non-medical massage for one year. It was expensive enough that she’s now working at Target because the overhead was killing her.
    (And that was with just filling a spot at a gym– no rent, just licensing fees.)

    Their justification is that it is theoretically possible for someone to be hurt by a massage.

What the Left Cannot Supply, the Right Will Not Demand

Tuesday, June 15, AD 2010

Recently I’ve been toying with the idea of doing a series of posts looking at the recent survey purporting to know a lack of economic knowledge on the Left, with one post for each of the eight questions on the survey. As I look at the list of questions, however, a clear theme emerges, namely that liberals tend to think that the price of a good or service isn’t much affected by the supply of that good or service or visa versa. According to the survey, liberals tend to think that restricting the supply of housing doesn’t increase the price of housing (question 1), that restricting the supply of doctors (through licensing) doesn’t increase the price of doctors (question 2), and that price floors won’t decrease the supply of either rental space (question 4) or jobs (question 8).

Coincidentally, I’m currently reading a (surprisingly good) book by Paul Krugman, in which he argues that conservatives tend to minimize or dismiss the part changes in demand have on getting us into or out of recessions. Naturally this got me thinking whether one of the things separating left from right in this country is a difference in the importance of supply and demand in economic phenomenon. For the above issues, at least, liberals seem to be ready to discount the importance of supply, whereas conservatives underestimate the importance of demand.

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0 Responses to What the Left Cannot Supply, the Right Will Not Demand

  • I realize there is a standard argument that licensing restricts supply. Does it though? I think it is akin to arguing the ACT artificially restricts the supply of college students. (Admittedly, most colleges don’t require the ACT, but work with me here.) In both cases, there is a nominal fee and a background requirement, either explicit or implicit. While it is certainly true that there are people capable of going to college that don’t don’t take the ACT, there are also people capable of becoming doctors that don’t complete the formal requirements to do so. But is it truly the case that the ACT or licensing is restricting supply?

    In the case of supply, I think an example would be airline regulation. By essentially setting a price floor, money was able to be spent on R&D resulting in better aircraft over time. I think a lot of the interurban rail arguments are similar as well, where you have to have a sufficient base of supply before demand will truly kick in.

  • It’s true liberals tend to be Keynesian demand-siders and conservatives tend to be Say’s supply-siders. But you can be a Keynesian like Krugman and still get those questions right. Our political divide on economic issues seems to be primarily driven not by Keynesians and supply-siders but illiterate Keynesians and supply-siders. I bet if you get Krugman and Gary Becker in a room, they’d come out with pretty sensible economic policy roadmap.

  • The best lecture on supply and demand is

  • But is it truly the case that the ACT or licensing is restricting supply?

    Does it render the supply of providers smaller than it would otherwise be? If so (and there would not be much point to licensure if it did not) then it restricts supply and affects price.

    A more telling example than that of physicians would be certification requirements for school teachers and librarians, which are often a parody of vocational training.

  • I would imagine that the degree to which licensing restricts supply is directly proportional to how much of an obstacle the licensing is.

    If a license was as easy to procure as the ACT, it seems unlikely that it would restrict supply much — though it would do so slightly at the margins. (Arguably, the sort of college student who fails to go to college because he doesn’t get around to taking the ACT isn’t that much of a loss, academically.)

    However, when licensing requirements become steep, they restrict supply more. Librarian work is probably a decent example. My mom works as a library aide. The work she does is essentially the same as that which the librarians do (a bit more shelving and less answering questions), but the city she lives in only hires people with masters degrees in library science. Since a lot of the sort of people who want to work part time at a library are not going to go sink $30k+ and two years into getting a masters degree for it, the librarians are in comparatively short supply and highly paid (while there are lots of aides, and they’re low paid.)

    I find it hard to imagine that the masters requirement is not inflating the salary (by decreasing the supply) of librarians relative to the actual skills required.

  • The President’s speech tonight was a classic example of the utter economic ignorance that dominates the left.

    “Lets all stand in a circle, hold hands, and embrace a new “green economy”, because the time is now. Here it is, I think its coming. There, we did it, a brand new green economy.”

    Mr President, stop the BS, our country has been ripped off by false promises and promoters of junk science for years now. FOSSIL FUELS ARE BY FAR THE CHEAPEST SOURCE OF THE ENERGY AVAILABLE. If you have to subsidize something to get it to compete with fossil fuels, then its less economic. The money to subsidize it has to come from somewhere, and that means a net loss of productivity and jobs.

    A green economy is a less productive economy because our economy is more productive when energy is cheaper. He’s gonna make some green jobs, but what he isn’t telling everyone is that for each green job we’ll lose many regular jobs as even more manufacturers and businesses go somewhere else where the energy is cheaper.

  • Yes We Can!! Gulf D-Day 58, or is it 59?

    It’s tragic. Quis Ut Deus could have declared war on the Gulf. That could be very good for the Gulf.

    Kumbaya, my Lord! Kumbaya!!!!

    This is what happens when liberals, clueless college profs, people with multiple PhD’s in theology, economists of the income-redistribution-is-everything school, community agitators, ex-weather underground terrorists, etc. take over everything. Some dad-gummed fact that adults have lived with since God created us jumps out and bites them in the @$$.

    And, he fired that other gen’l. and put in snake-eater McKrystal as OIC of Afghanistan ‘war.’ Go long on the Taliban. Short US health care and the Gulf.

    It’s okay! They can always blame Bush.

  • I imagine the argument would be that while you may not see librarians and library assistants as distinct goods, those hiring them do see them as such. I’m not sure of the extent economics has seen every man as a potential supplier of goods. I’m well familiar with licensing being a bugaboo for a while.

    Does it render the supply of providers smaller than it would otherwise be? If so (and there would not be much point to licensure if it did not) then it restricts supply and affects price.

    This is of course dependent on what you want to consider supply. For example, I can supply oil changes to your car, but I haven’t increased the supply of car mechanics. Most folks outside economics see licensing as a way of legally certifying duties and providing a means of redress when incompetence occurs. Not only does a plumber who consistently allows sewer gases to enter a home get sanctioned civilly, he can be sanctioned by license loss and prevented from harming other households.

  • I’m not sure of the extent economics has seen every man as a potential supplier of goods.

    I take that back. In Econ 101, there are assumed to be no frictional costs to transitioning.

  • I’m not sure I see the analogy to the ACT. Aside from the fact that you don’t have to take the ACT to get into college, simply taking the ACT doesn’t mean you’ll get into college, whereas getting a license does mean you can work in the given field.

  • perhaps its not the licensing per se, but the entrance costs to the chosen field that does the limiting. The licensing portion, after all, is the least costly of it, unless you include the capital requirements (college and grad school) that go into getting that license. Dropping the licensing requirement for doctors would not likely reduce costs much, since it would still be prohibitively expensive for most to become.

    I suppose you may have several tiers of “doctors”, those that deal with more complicated ailments and conditions, and those treating run of the mill stuff (maybe for $30 you’d be willing to go to someone with a bachelor’s in biology if you had a headache, but willing to pay $8,000 to an M.D. for a C-section).

  • Pingback: Quick Econ Thoughts on Licensing « The American Catholic

Left=Economic Illiteracy?

Friday, June 11, AD 2010

Great minds think alike.  I had prepared a post on this subject and I see that Darwin already has posted on the same topic.  Normally I would simply trash my post, but this time I think our readers might find it amusing to see our different takes on this topic.

Everyone loves a pop quiz right, especially on economics!   Here are eight questions.   Possible answers are :   1) strongly agree; 2) somewhat agree; 3) somewhat disagree; 4) strongly disagree; 5) are not sure.

Here are the questions:

 1) Mandatory licensing of professional services increases the prices of those services.

 2) Overall, the standard of living is higher today than it was 30 years ago.

 3) Rent control leads to housing shortages. 

 4) A company with the largest market share is a monopoly.

 5) Third World workers working for American companies overseas are being exploited.

 6) Free trade leads to unemployment.

7) Minimum wage laws raise unemployment.

8)  Restrictions on housing development make housing less affordable.

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8 Responses to Left=Economic Illiteracy?

  • The first link didn’t work. It yielded the message “Sorry, but you are looking for something that isn’t here”, which sounds like something out of Camus.

    I read the report on the second link. Amazing.

  • Camus: “ . . . all attempts to create heaven on earth lead to hell on earth.”

  • For the record Capitalism and Socialism are two sides of the same coin. Both require huge governments to sustain themselves. Uncle Milty was a flawed in economic theory as Marx.

    To answer his question of “what does reward virtue?” I submit the following:

    Economics, Cooperation, and Employee Ownership: The Emilia Romagna model – in more detail

    http://www.community-wealth.org/_pdfs/articles-publications/outside-us/article-logue.pdf

  • It is a bit of an unsurprising result, but I’m afraid I’m going to have to dissent from the concept that foreign workers of American companies overseas aren’t being exploited. Of course they are – its not just the fact of lower wages, which is the least of the issues (cost of living is generally very much less in Third World nations than the USA), but the fact that there are few safety, health and environmental protections…people at my employer who have gone to visit our Indian sites come back with reports of representatives crammed in to space which would make an American revolt…things like that which do indicate that the company is using foreign labor as a means of squeezing an extra half percent out of the balance sheet to make profits look higher when they’re really not.

  • The link is fixed Pinky. Thank you for bringing it to my attention. Begone Camus! 🙂

  • The exploitation question is rather seriously debatable, and thus it is unfortunate that it was included. In fact, most of the key terms in that question have no commonly agreed definition.

    The free trade question is also problematic. Free trade may lead to less total unemployment in the entire system, but it can certainly lead to unemployment in a particular nation-state, and especially in the weaker sectors of economies. Free trade should be job positive when you look at all sectors of all nations, but there is no guarantee for any particular nation or sector.

  • What happened to the plethora of comments criticizing Klein’s serious methological errors?

  • You are probably thinking about Darwin’s post on the same subject Tony. This is my post and none of the comments have been deleted, and I assume the same applies to Darwin’s thread.

Ideology and Economic Knowledge

Friday, June 11, AD 2010

Prof Daniel Klein of had a brief piece in the WSJ this week talking about how people’s economic knowledge or ignorance breaks down by ideological lines.

Zogby researcher Zeljka Buturovic and I considered the 4,835 respondents’ (all American adults) answers to eight survey questions about basic economics. We also asked the respondents about their political leanings: progressive/very liberal; liberal; moderate; conservative; very conservative; and libertarian.

Rather than focusing on whether respondents answered a question correctly, we instead looked at whether they answered incorrectly. A response was counted as incorrect only if it was flatly unenlightened.

Consider one of the economic propositions in the December 2008 poll: “Restrictions on housing development make housing less affordable.” People were asked if they: 1) strongly agree; 2) somewhat agree; 3) somewhat disagree; 4) strongly disagree; 5) are not sure.

Basic economics acknowledges that whatever redeeming features a restriction may have, it increases the cost of production and exchange, making goods and services less affordable. There may be exceptions to the general case, but they would be atypical.

Therefore, we counted as incorrect responses of “somewhat disagree” and “strongly disagree.” This treatment gives leeway for those who think the question is ambiguous or half right and half wrong. They would likely answer “not sure,” which we do not count as incorrect.

In this case, percentage of conservatives answering incorrectly was 22.3%, very conservatives 17.6% and libertarians 15.7%. But the percentage of progressive/very liberals answering incorrectly was 67.6% and liberals 60.1%. The pattern was not an anomaly.

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26 Responses to Ideology and Economic Knowledge

  • The best data on question #7 says the unenlightened answer is the correct answer. Our best data on #6 suggests that free trade between a highly developed country and less developed country leads to labor transfer from the former to the latter. #1 has all sorts of assumptions. Generally licensing is non-determinative, like the cost of postage in deciding to open a law office. Certainly scenarios can be envisioned where both are determinative, but in practice, it isn’t the case. #2 is dependent upon your measurements and largely amount to saying that having a color television means you have a better lifestyle. I think #5 is purely ideological.

  • Yes, well, obviously “best data” is a term which can be used to mean “data that I like”. Looking at what actual economists have to say on the topic, I’d say the only one of these where Klein is perhaps reaching a bit in regards to consensus is on the minimum wage, where opinion is split fairly evenly among economists as to whether it increases unemployment. From the papers I’ve seen on the topic, the breakdown on that is basically that if you raise the minimum wage a small amount, you don’t measurably increase unemployment of adults looking for work — though marginal workers such as teenagers often end up working less, though they don’t report as “unemployed”. Clearly, if a massive minimum wage increase was put through, it would result in measurable unemployment increases, but people are generally smart enough not to do that.

    The general trend here is pretty accurate:

    Progressives : Economic Consensus :: Conservatives : Climate Science Consensus

  • Personally I prefer to evaluate intelligence on people understanding the parts that are under debate. Needless to say, that question is hard to poll. To pick another topic, I’m not convinced that people that accept evolution have a better understanding of it than those those that reject it, although it is fashionable to portray the latter as ignorant rubes. A lot of these things just accept conditioned response.

    I could just mean “best data” in the sense of our best research.

  • Well, 5 and 6 (at least) are blatantly ideological, offhand.

    “Free Trade” does lead to unemployment for some people, and new jobs for others; where “some” is most often natives of wealthy countries at the low end of the income scale and “others” are usually natives of poorer countries. There are whole categories of native citizens for whom free trade has been and is a personal disaster, and economic libertarians do themselves no favors with their ridiculous “see no evil” pretense otherwise.

    Work conditions at third-world manufacturing facilities are much worse than in domestic facilities, and those poor conditions are part of what makes the third world ones cheaper to operate. It isn’t unreasonable to conclude that third-worlders are being exploited in order to avoid paying the higher cost of native labor. Someone might disagree that that is “exploitation”, but now we enter into semantics, and someone who thinks it is “exploitation” could quite legitimately give the supposed “unenlightened” answer.

    This might be an interesting survey if it in fact was not a piece of ideological propaganda. I fully expect that as a very gross generalization more conservative people as a group tend to do a better job accepting the world as it is, and more liberal people as a group tend to live in utopian fantasy worlds.

    This particular survey though appears, right on its face, to reside in an economic-libertarian fantasy world.

  • I know why liberals are not greatly function in economics and math.

    Economics and math are based on realisms, i.e., there are right and wrong answers. Economics less so than math because there are tens of millions of players, actions, decisions, etc. constantly evolving and interacting (and many ‘mistakes’ are made in decisions – all players are not economically rational, e.g., idiot politicians – I repeat myself – who hold sway over expanding regulatory matters). That is why central planning/collectivism was a disaster everywhere it was tried. The sad peoples of Venezuela and Zimbabwe are learning that the hard way at this moment.

    Liberals aren’t good at math or economic because math/economics are not susceptible to mythical worldviews or weeping and gnashing of teeth.

  • I’d say the only one of these where Klein is perhaps reaching a bit in regards to consensus is on the minimum wage, where opinion is split fairly evenly among economists as to whether it increases unemployment.

    Economists are about evenly split on the question of whether there should be a minimum wage. On the question of whether it increases unemployment it’s about three to one in the affirmative.

    For the “best data” I would suggest Neumark and Wascher’s recent survey.

  • Probably the greatest problem in economics is its inability to understand dominating phenomenon. The minimum wage is a prime example. Economics 101 goes to marginal utility and claims that rising minimum wage equals fewer jobs. This neglects that the people who earn minimum wage aren’t the dynamic components of companies. A companies decision on placement will be more greatly dictated by the availability of professionals at the top end rather than the demands of lower end workers. This is pretty true about a lot of things. NYC will have greater housing demand than Pigeon Creek, Montana, even though NYC has a greater regulatory burden than Pigeon Creek. The Econ 101 student will argue that NYC could have more if they repealed its regulations and Pigeon Creek would have less demand if it increased its regulations, which is all well and fine and could possibly even be stipulated, but they aren’t the driving factor for housing demand.

  • That doesn’t change the fact that, all other things held constant, rent control will decrease housing availability, or raising the minimum wage will increase unemployment.

    Nor do I think you’d find many economists were unclear on the fact that rent control is not the only difference in regards to housing demand and availability in NY vs. Montana.

  • Economists are about evenly split on the question of whether there should be a minimum wage. On the question of whether it increases unemployment it’s about three to one in the affirmative.

    Thanks for the correction, BA. I’d been going off a the Whamples’ survey link, but that only said that 37% think the minimum wage should be increased while 48% think it should be elminated. Looks like you’ve got more comprehensive info there.

  • All things are never held constant.

    If the minimum wage is not the driving factor in employment, the raising of it will not increase unemployment. High tech firms move into expensive cities where they have to pay clerical and janitorial help much higher than the minimum wage. In many, if not most circumstances, the effect on employment by raising the minimum wage will be trivial.

  • I personally would like the minimum wage to be $50,000/year with benefits.

  • Whether things are held constant depends on your frame of reference and what question you’re are trying to answer. The question of whether California having a higher minimum wage than Wisconsin will result in California having higher unemployment is not a question which can be answered by a “all other things being held constant” kind of question. However, if Wisconsin was attempting to decide whether to increase their minimum wage to $15/hr next year, you may be assured that things would be constant enough for an effect to be felt.

    However, I will certainly grant you that if the minimum wage is increased by amounts which do little more than equal local price trends (which is what is generally done) there will be trivial effects. (And trivial benefits.)

  • The answers to statements 5-7 are wrong if the questions are taken literally. Are not some foreign workers not paid just wages? The Autoworkers Union doesn’t oppose free trade for no reason. And a $1 min wage would have absolutely no effect on unemployment.

    If I were conducting the poll, I’d ask a few more questions.
    1. An income tax cut would increase tax revenue (unenlightened answer: agree).
    2. The federal budget can be balanced without raising taxes or cutting defense spending (unenlightened answer: agree).
    3. Fortune 500 executives pay a higher effective tax rate than their secretaries (unenlightened answer: agree).
    4. Over 1% of the federal budget goes to foreign aid (unenlightened answer: agree).
    5. Income inequality has been increasing over the past 30 years (unenlightened answer: disagree).
    6. Americans have more economic mobility than those in most other developed countries (unenlightened answer: agree).

  • And a $1 min wage would have absolutely no effect on unemployment.

    Can the same be said for a $30 min wage? I think that goes to Darwin’s observation regarding trivial effects from trivial amounts.

    Are not some foreign workers not paid just wages?

    No doubt. Same with many Americans. However, I wouldn’t base any assessment on that regarding the UAW’s support or lack thereof. Frankly, the UAW is really only concerned about their own being. They would just as much object to a manufacturer moving an operation to a foreign country regardless of how well paid the new employees are. Nor would I consider a lesser wage in a foreign country to be unjust. It must be measured by the effects and what it does for a person. If it raises someone out of poverty, provides a better standard of living, and perhaps better health and education for themselves and their offspring, I’d say it was a good thing for the worker and certainly not exploitation. I’m not saying there aren’t true sweatshops and exploitation, I just think that the calculus of paying less wages to someone else” = exploitation is incorrect. I think that is why some people see that question as an ideological one rather than an attempt for an objective (even if qualified) answer.

  • RL, my previous post was unclear. I didn’t mean to suggest that the UAW opposes free trade because of unjust wages. It was meant as a separate point to statement #6 which says that free trade doesn’t cause unemployment. The UAW opposes free trade because it would cause unemployment within its ranks.

  • Though at the same time, I would take it that #6 was talking about unemployment aggregate in the economy as a whole — not that some particular group of jobs might disappear and be replaced by others.

    For instance, tragic economic upheavals have put wheel wrights and buggy builders out of business almost entirely — and yet it’s unclear that we are suffering unemployment as a result at this point.

    Those people really did lose their jobs, and it might have helped them short term if they had managed to get alternate methods of transportation banned, but the changes there did not in fact result in long term unemployment.

  • Gotcha RR, sorry for the misunderstanding.

  • For instance, tragic economic upheavals have put wheel wrights and buggy builders out of business almost entirely — and yet it’s unclear that we are suffering unemployment as a result at this point.

    That strikes me as something of misdirection, since what is usually at issue as far as globalization and “free trade” is concerned is not new products displacing old products, but making the same products for less cost, and therefore higher profits, by exploiting cheaper (for a whole variety of reasons) third world labor.

  • Klein is, of course, stacking the deck. Some of his answers are vague. In 4, it may or may not be a monopoly. In 5, they may or be not be exploited. In 6, free trade most certainly leads to unemployment in certain sectors.

    I have the greatest problem with 2. Are living standards higher than 30 years ago? Well if you look at GDP capita, most certainly, and I assume that this is what Klein has in mind. But this definition really ignores the stark rise in inequality. What happened over the past 30 years (except for a small interlude in the 1990s) was that the gains from growth went to the rich. Median real wages have been pretty stagnant since the early 1970s (for men, they did not rise at all, and for prime-age men, they actually fell).

    Overall, Mankiw’s list is more honest, and more reflect of reality.

    I could have some fun and design some of my own questions!

    (1) Cutting income taxes raises revenue (unenlightened answer: agree).

    (2) There is no need for regulation as market discipline works fine (unenlightened answer: agree).

    (3) Fiscal stimulus made the recession worse (unenlightened answer: agree).

    (4) Collective wage bargaining is harmful for unemployment (unenlightened answer: agree).

    (5) Government intervention in the healthcare market through the combination of community rating and an individual mandate makes healh care more expensive (unenlightened answer: agree).

  • MM, I took “standard of living” to mean “standard of living,” not GDP per capita. People, even the poor, are materially better off today than they were 30 years ago. I agree with the rest of your post, though #2 and #4 are true in many cases and #5 is true for many people.

  • If the minimum wage is not the driving factor in employment, the raising of it will not increase unemployment.

    Doesn’t follow.

  • If the minimum wage is not the driving factor in employment, the raising of it will not increase unemployment.

    Doesn’t follow.

  • “free trade” is concerned [not with] new products displacing old products, but making the same products for less cost, and therefore higher profits

    Doesn’t follow.

  • MM’s 1-3 I think are legit, though I prefer my wording of 1) since there are some situations in which cutting taxes would increase revenues, while others when it would decrease them. (Right now, my bet would be that cutting taxes would not increase revenues.)

    4) I’d agree so long as you’re not automatically assuming closed shop.

    5) strikes me as rather dubious right now — though it’s certainly true that the pair of community rating and individual mandate makes health care less expensive than either one of those without the other. If the claim that it is less expensive than any other common arrangement, that strikes me as something we’re in no position to defend right now.

  • On Klein’s original #2 — I really don’t see how one can credibly disagree, unless one is speaking from a particular position of privilege which has since been overturned.

  • My experience in grad school was that the most vocally leftist students were the most ill-informed about economics. It was sometimes painful (and occasionally humorous) to watch their mental contortions as their orthodoxies were shattered. Of course, this is not to dismiss all leftist arguments: it’s just that those students could no longer base their arguments on their flawed version of armchair economics.

    If by “economics” we mean merely the academic discipline alone, it’s hard to argue against Klein. However, if we mean the larger, normative application of economics as part political economy, part moral philosophy, part public policy and sociology, then there is room to disagree with his findings.

    To make a bold generalization:
    No economics education = progressive
    Some economics education (undergrad econ 101) = libertarian
    Way too much economics education (and you know who you are, myself included) = politically all over the map; can argue yourself into almost any position

Pope Speaks About Economics Again, "It's the Natural Law, Stupid"

Monday, May 3, AD 2010

After calling for Catholics to be liberated from their pet ideologies, Pope Benedict is helping flesh out a moral economic vision that puts the standard Left- socialism/Right- Free Markets debate into the dust bin for faithful Catholics.  The bottom-line seems obvious to me- you can’t demonize government and you can’t demonize business- both bring difficulties into play- over-regulation can harm economic development, but lack of regulation can lead to corporate dominance which is a problem when one considers that corporations typically are upfront about being in existence to pad their investor’s bank accounts, not being much concerned with the universal common good. Our Pope clarifies the inherent morality(read Natural Law) in the economy in this article from one of my favorite web sites Zenit.org:

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8 Responses to Pope Speaks About Economics Again, "It's the Natural Law, Stupid"

  • I love the Holy Father.

  • The Austrian and Chicago school economists heads will explode.

  • I’m glad you posted this, Eric! Er… Tim. 🙂

    Sorry, this morning I saw Eric’s comment, and mistakenly typed his name, Tim. 🙂

  • I don’t think so, Jim. Both Austrian and Chicago school economists understand the limits of markets self-regulating. In particular they admit that the capacity for perfect self-regulation is inevitably inhibited by (i) imperfect information and (ii) imperfect rational behavior. As such the risk of errors and even so-called “bubbles” caused by deceit and simple mistakes is very real and in requires some government regulation. How much is a prudential question given that government regulation is also inherently very imperfect and one must recognize the reality that such regulation often makes things worse either by exacerbating a problem or creating new ones.
    The heads that would explode would be the Ayn Randians who view market theory as a dogma for how to live one’s life rather than simply a useful explanation of how resources are efficiently allocated. To be sure Randians are often greatly influenced by classical economic theories, but overall they represent a small subset of economists and thinkers who generally regard themselves as so-called Chicagoans or Austrians.

  • Here is Shaw’s ‘theology’ of the money: “You can’t take it with you. It will burn.”

    As St. Augistine wrote in The City of God: ” . . . the possession of those temporal goods which virtuous and blameless men may lawfully enjoy; still, there is more self-seeking here than becomes men who are mere sojourners in this world and who profess hope of a home in heaven.”

  • Tim posted this Chris. I’d be wrong to take credit.

  • I’m not sure why someone edited the title from It’s the Natural Law, – Stupid- to -Gomer- I was playing off the famous expression It’s the Economy, Stupid- I wasn’t calling folks out as being stupid if they didn’t agree with the Pope’s commentary- anyone know about this editing?

  • Should there be negative consequences for stupid decisions? Or should the market be regulated to make sure no one can make a stupid decision?

    I can’t tell from this teaching. What is the governments legitimate power, specifically? Isn’t that detail kind of important?

Set Me Free (From Ideologies) Part 2

Wednesday, April 28, AD 2010

 

To follow up on my first installment of “Set Me Free (From Ideologies), I am going to draw again from the rich well of Pope Benedict’s powerful encyclical Caritas In Veritate.  In this case it would seem that in paragraph #25 the Pope is sounding kinda liberal if we would attempt to fit the views expressed into one or another of our American political ideologies.

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7 Responses to Set Me Free (From Ideologies) Part 2

  • It seems a greater threat to social security are underfunded public pensions including Social Security itself which all seem at risk of collapsing. Perhaps someone can comment on this.

  • We’d all do well to remember that we’re Catholic first & American second. We’re in the mess we’re in because we’ve reversed the order for the last 50 yrs.

  • “The repeated calls issued within the Church’s social doctrine, beginning with Rerum Novarum[60], for the promotion of workers’ associations that can defend their rights must therefore be honoured today even more than in the past, as a prompt and far-sighted response to the urgent need for new forms of cooperation at the international level, as well as the local level.”

    For me the key phrase is NEW forms.

    I believe the old social welfare state is a failure.

    I believe the old union model is a corrupt failure.

    And I think John Paul II made this point pretty clearly in Centesimus Annus.

    The new forms are worker ownership, or possibly even community/worker ownership of businesses. Most of them are jointly owned by workers and investors.

    The way forward, I believe, is localism and distributism. And in some places it is taking place already with good material results – but it is being guided by secular liberals who have no use for the moral teachings of the Church, by radical campus intellectuals and hippies who believe in the materialist community but reject the spiritual community in favor of atheism or spiritual anarchy.

    It is simply an empirical fact that welfare-statism doesn’t bring an end to poverty. Instead it creates the conditions and the precedents for a secular bureaucracy to further meddle in Christian families, in the education of children, even growing food on one’s own property.

    The dichotomy in politics and morality is not individualism vs. collectivism. Or rather, that is A dichotomy but not the decisive one. It is materialism vs. spirituality. The materialist community has an idea of “justice” that is based on economics and cares nothing for the corruption and pollution of souls. The spiritual community sometimes neglects the details of the material – but with the guidance of the Papal encyclicals there is no excuse for that negligence.

    The vital question is whether or not we ought to accept a full implementation of “material” or economic justice, brought to us by secular liberal hedonists who let the soul rot, who poison it with filth and perversion, or,

    whether we ought to reject it and continue to show those who understand a spiritual reality, who believe in God and especially Christ, that they also have to focus their attention on the material community.

    I opt for the latter. I want nothing from the secular liberal hedonists, from the communist revolutionaries, from the sexual perverts who staff Western governments and the United Nations. They’ve rejected God and they’ll never accept him.

    It’s easier to get good Christians to see the areas they’ve been neglecting than it is to get materialists to see the truth and reality of God and all that follows from him.

    And if you think I’ve gone off topic, you’re wrong, because its secular, atheistic, materialists who manage and administer the welfare bureaucracies of the West, whether they call themselves Democrats, Socialists, or Christian Democrats, or Labour, or whatever.

  • THERE IS NO SUCH ORGANIZATION AS THE AMERICAN CATHOLIC. YOU ARE A ROMAN CATHOLIC WHO JUST HAPPENS TO LIVE IN AMERICA. I REMEMBER ON MY FIRST COMMUNION DAY AND THE NUNS SAYING REMEMBER, YOU ARE A ROMAN CATHOLIC, A ROMAN CATHOLIC.

  • to gb- what I would say is what my favorite professor once said- “the best gift we can give America is our Catholic faith”- I don’t see my citizenship in the U.S. to be a detriment to my faith- America is my homeland, and America needs Catholicism to fulfill her potential as a truly great and lasting nation. We have religious liberty here in our country- that’s all we need- that means the onus is literally “on us”- I have seen first-hand as a candidate that the Catholic community is for the most part so divided up and rendered passive in the political arena- when I see how effective the pro-Israel Jewish community has been in getting organized and mobilizing and lobbying all sectors of our American society in getting their vision and agenda into play- all of this with such a small percentage of the population! And Catholics act as if there is no unifying social doctrine, and fall headlong into the same ideological traps that catch everyone else- and it makes me sick.

    It doesn’t have to be this way- we are our own worst enemy I’m convinced of that- my primary targets are politically-active Catholics who publicly identify themselves as die-hard liberals or conservatives- these folks are the ones who do the most damage- they make it impossible for the whole body of believers to unite under the direction of the entire social doctrine- they want to make every Catholic a narrow liberal or conservative- a Kennedy or a Hannity- and that is something I disagree with vehemently. I will continue to post my complaints- soon I will detail my fallout experience from my participation in an elite Catholic Democrats listserve- that is quite a story to be told another day- I am bent on taking on all loud and proud liberal and conservative Catholic political animals- for I am convinced that the way forward is one that must release the hold that ideologies have over our collective Catholic and American heads.

  • Joe H.- as always so intense and direct in your views- I don’t find your passion for disconnecting from States and Government in the Church’s actual documents such as the above Encyclical. I do think that we should go in every good direction all at once- translation- create more fair trade producer-consumer networks- drawing upon the Catholic Relief Services model, and also the worker-owned business models, and such as you describe above. But I don’t think that abandoning the Government, Trade Unions, and Multinational Corporations to the current corrupt slate of big-wigs is the best solution. I really don’t think our system is rotten, I do think we have really rotten apples floating to the top- which is why I can’t relate to anyone who celebrates a Reagan or an Obama presidency.

    I do believe that Catholics have not yet begun to fight- from my own little campaign experience I saw how wide-open the door is for solid Catholic candidates if only the Catholic community was even a little bit organized to be of some service to her own. As it is we have two types of Catholic activists- the typical political liberal and the typical political conservative- they both seem to have one overriding passion- they hate like satan the Republican or Democratic party- and all that party stands for- pretty much across the board. This reality is something that is causing me to seriously consider dropping my formal affiliation as a Democrat to become an Indy with “Common Good” as my tag- there is just too much baggage associated with the two major parties- it is like a pavlov dog response for most political animals- Catholic or otherwise. What I know is that I am going to stay close to the Church’s actual teaching documents, and Hierarchical speeches/letters and commentary- I have found that the prudential judgments on socio-economic matters coming from the Catholic Hierarchy is truly awesome- it would figure that those who are charged with coming up with the principles that underpin the social doctrine would do well in helping to apply those principles to real life circumstances. I don’t think this is clericalism because I am open to other prudential points-of-view- I just don’t find many ideologically-transcendent points-of-view around town- so I’m sticking close to Mama Church- in my family when mama talks and gives counsel to the kids they better listen up because my wife and I are on the same page- I imagine that it works that way with Christ and His Church as well.

  • “I don’t think that abandoning the Government, Trade Unions, and Multinational Corporations to the current corrupt slate of big-wigs is the best solution”

    They aren’t ours to abandon. But they are ours to reject. We need to get our resources together, make our own proposals to banks and private investors, and build our own local economies. Some have tried, many have failed, few have succeeded – more will succeed if more people rally to the cause.

    Like you, I’m an independent. I don’t care about the Republicans. I don’t care about the Democrats. I’ll vote for the pro-life candidate. Otherwise change comes from us, not from Obama, not from a bureaucracy, not from a social worker.

    “I really don’t think our system is rotten”

    I suppose we’ll have to disagree on that.

Ash over Europe, Wilting Flowers and Produce in Kenya

Wednesday, April 21, AD 2010


Economics may be the “dismal science”, but I find this kind of story about the interconnectedness of the world endlessly fascinating. With flights restricted throughout the UK and Northern Europe because of the volcanic eruption, vegetable and flower growers in Kenya find themselves with mountains of produce with no market.

If farmers in Africa’s Great Rift Valley ever doubted that they were intricately tied into the global economy, they know now that they are. Because of a volcanic eruption more than 5,000 miles away, Kenyan horticulture, which as the top foreign exchange earner is a critical piece of the national economy, is losing $3 million a day and shedding jobs.

The pickers are not picking. The washers are not washing. Temporary workers have been told to go home because refrigerated warehouses at the airport are stuffed with ripening fruit, vegetables and flowers, and there is no room for more until planes can take away the produce. Already, millions of roses, lilies and carnations have wilted.

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Service Economy

Tuesday, March 30, AD 2010

One often hears polemics against the fact that our country is now dominated by the “service economy”. It is one of those phrases that gives a strong impression, yet is oddly difficult to pin down.

If I may be indulged in an open-ended post:

1) How would you define the “service economy”? (with examples)

2) Is the service economy new, or merely expanded/changed, versus what you would consider a more traditional time? (Whether that is 100 years ago or 500 years ago.)

3) Is it a problem that the service economy is so large, and if so why?

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14 Responses to Service Economy

  • To me, “Service Economy”, or “Service Industry” is as opposed to manufacturing””. 60 Years ago, when manufacturing was a large part of the over all U.S. economy. Before the world economy became so powerful, driving American manufacturing to foreign countries, where wages were lower, in order to meet the price competition, the highest wages were in the manufacturing sector. In search of profits, the American economy turned to other industries. One of the industries that offered increasing personal and corporate income is the financial industries. In my mind,this was a tragedy. The finance industry produces profit through the use of the savings of other people. This can go on only so long, until all the available savings have been totally consumed by the financial industry. I liken it to the Biblical “Money Changers”, and lawyers. Neither of these actually “create” anything but wealth for the bankers, investment advisers, sales staff, stock brokers, and government administrators (bureaucrats). Other than that, there are many true “service”industries; such as janitorial, yard maintenance and repair work. These service industries include those tasks that the everyday worker once performed for himself, and have always been traditionally low-paying. While 60 or more years ago, there were true “custodial”workers, whose jobs were not so much to create goods, but to conserve what we had already created.

  • “This can go on only so long, until all the available savings have been totally consumed by the financial industry.”

    Because there’s a finite amount of savings? Well, then manufacturing can go on only until all the money available for consumption is used up.

    “Neither of these actually “create” anything but wealth for the bankers, investment advisers, sales staff, stock brokers, and government administrators (bureaucrats).”

    And investors like anyone saving for retirement. It also provides capital for companies like Ford. Commodity futures allow farmers to manage risk. The benefits are countless. But who cares? It’s much easier and fun to demonize the bankers.

  • My understanding is that “service jobs” is just a kind of catch all category for employment that doesn’t fall into the manufacturing or agricultural sectors. Doctors, plumbers, teachers, accountants, actors, waiters, salesmen, etc. Lumping all these types of jobs together made sense when most jobs were in manufacturing and/or agriculture, but I think it makes less sense today. I suspect that a lot of hostility to the idea of a “service economy” comes from the fact that when you say service jobs most people think of the guy who mans the drive-through at McDonald’s, and obviously a country where most everyone does that isn’t going to work out very well. There is also, I think, a sort of atavistic temptation to think that a lot of service jobs are somehow unreal or valueless because there isn’t some tangible material object that is produced in the process.

    As the above comments suggest, I don’t see having a large service sector as being a problem.

  • 1) Service economy is the delivery of intangible benefits or tangible goods. This would be in contrast to the manufacture of goods or agricultural work. These are different facets of man cooperating with that which God has given us and all are designed to benefit mankind and primarily for the sanctification of those involved in the labor, whether it be service, manufacturing or farming/ranching.

    2)Service has always been around, but it used to be more closely associated with agriculture and then manufacture. Now it has grown, primarily due to the fact that information has become one of the primary commodities of a modern economies.

    3)The service economy’s growth is testimony to the advancement of man’s economic activity. This has a very practical function; however, the economy has to be ordered toward benefiting God’s children for His glory. Clearly we are lacking in this area as we have progressed toward utilitarianism with little to no regard for God’s primary role in our economic activity. Homo Economicus is a myth – we are integrated creatures (body/soul) and our end is supernatural – our economic activity must be ordered toward our supernatural end (Heaven with God); rather than merely our comfort here and now.

    The chief tool, other than man’s labor mixed with God’s creation for economic development is the invention of money. Money can be a commodity, yet it is the utility of money in service of economic exchange that gives it value. So service has been part of our economic development from the moment we got beyond bartering. As for financial services being nothing more than a parasite on the economy, I disagree with Paul. Authentic financial services are essential. I do agree that the financial services, in their present form, are severely twisted, but that is symptomatic of perversion by the cartelization of that aspect of the economy under the banking authorities. The chief culprit being the private banking cartel whose arm in the USA is the Orwellian Federal Reserve System.

    All banking is subject to this monopoly. All firms on Wall Street are bank holding companies under the same umbrella. The next and final target are the insurance companies. The first salvo in that hostile takeover is the so-called health care reform (law) – the next will be the so-called financial re-regulation that we can expect to pass concurrently with amnesty for illegal aliens (the Demoncrats buying 17-25 million votes to secure their oligarchy).

    Insurance companies, when mutually owned or when they are fraternal organizations like the Knights of Columbus, are an invaluable benefit for the economic development of mankind. They are proficient at risk management, which helps create stability and reduce uncertainty allowing entrepreneurs to take risks and innovate and develop. Life insurance companies are especially helpful for creating financial stability for all actors in an economy, most notably the bedrock of civilization and economy – the traditional family.

    So, while most of the financial services are perversions of what the true purpose is, it is erroneous to paint this important aspect of economic development as parasitic. We just need to allow the authentic financial services to operate for the benefit of all without coercive interference from cartels, cabals, monopolies and duopolies of the elite, transnational financiers and banking interests. It is well beyond time to end the Fed and return nearly all regulation to the state level – where it is most efficient, most consumer friendly, conducive to business activity and beneficial to society at large.

    As for the Money Changers reference, that applies to usurers and that is exactly what the Fed is. Jesus was angry with them because they defiled His Father’s House, the Temple. They continue to defile His Father’s House. Profit is a necessary feedback to measure the effectiveness of entrepreneurs out-competing each other to best serve their customers. What we have to do is return our culture to good morality and re-Christianize our country. By ordering our economic activity toward God, we will help with inviting God to sanctify us through our work. Interest charged to compensate for the opportunity cost for allowing others access to capital reserves is legitimate in order to direct capital to where it can provide the most good. The proper function of regulation, with respect for subsidiarity, is to curtail man’s disordered appetites. This is a delicate endeavor as libido domonandi will tempt those with the power to use it to advance their own interests. For example, when bureaucrats award non-compete, no-bid contracts to their buddies instead of the most efficient and effective producers. Conversely, a local community preventing the manufacture and distribution of pornography or narcotics is the legitimate use of regulatory authority.

    A danger in the growth of our service economy is that we are too reliant on unskilled, low-skilled and poorly educated laborers. One may think that this is what crowded out the manufacturing economy; however, that is incorrect. What has crowded out the manufacturing economy is a poorly run, intentionally bad, dumbed down government monopoly known as ‘public education’. In conjunction with managed trade agreements with the Orwellian name of ‘free trade’ and excessive taxation and regulation, which stifles innovation – we are left vulnerable to all sorts of dangers, not the least of which is national defense. If we cannot make our own war materiel than we will be overrun by foreign competitors in a hostile takeover known as conquest. The barbarians will not be able to resist the temptation to cross the Tiber and sack Rome.

    Economic prosperity is a byproduct of the pursuit of sanctity through work – that work can be agrarian, industrial, service, religious, child rearing, home keeping or any number of activities – yet, they become a complex tapestry when naturally woven together by the Invisible Hand of Divine Providence. When God is the director of the economy it will best serve man in a spirit of Charity. When the economy is directed by men, with no reference to God, it will eventually and always lead to ruin.

    The distorted growth of our service economy is a result of men and their lust for power, worshiping the total return of idols with no reference to God.

    An authentic service economy will allow each and every actor in the economy to serve all the others in a spirit of Love. For even the Son of God came to serve and not be served.

    Sorry for running so long, it is past midnight, I can’t sleep, Mass is in six hours and my brain is squirming in my skull. I take no credit for any of the above that make sense and I apologize for all of it that seems like nonsense.

    Enjoy.

  • is just a kind of catch all category for employment that doesn’t fall into the manufacturing or agricultural sectors.

    Agriculture, manufacturing, construction, or mining.

    I doubt the change in the country’s productive mix is much of a problem bar that there are transition costs for localities and regions (as Mr. Price will attest). The alacrity of adjustment is a function in part of public policy. I think you might also argue that reasons of state mandate physical access to certain raw materials and productive capacity.

  • Economists sometimes talk about primary, secondary, and tertiary industries. Primary industries deal directly with raw materials: agriculture, forestry, fishing, hunting, mining, utilities. Secondary industries use those materials. Generally that means manufacturing and construction. Tertiary industries are services: trade, transportation, finance, education, health care, et cetera.

    When people complain about the US becoming a service economy, they need to remember that half of that is education and health care. We’re the world leaders in those fields. In fact, I don’t think it’s possible to overestimate how dominant we are in higher education. We’re huge in software, entertainment, and finance.

    I have no concern about our becoming a service economy. We’re the fourth largest producer of food, and we’ve got a lot of natural resources to fall back on if we ever need to.

  • Much much late….

    “Service” to differentiate from “goods” industry.
    If it makes something, it’s a “goods” industry; if it involves doing something (even if that is “moving goods” or “teaching a skill”) then it’s a service industry.

    Expanded or changed, definitely. Unlikely to be new, since I can’t think of any business that is really new– internet is information, teaching isn’t new, moving stuff isn’t new….

    Yes, it is a problem. Service requires demand for the service, and while it can be fudged for a little while, it doesn’t respond very well on a human level to changes in demand. I’m not sure WHY, it’s just what I’ve observed– for example, every shop I was in when I was in the Navy was undermanned, because demand for our service wasn’t steady. This was a Navy-wide problem for our job, when the opposite wasn’t true. (I believe it caused at least one helo-crash that killed some two dozen folks because someone incorrectly checked some gear.)

  • Service Economy:
    From all the other comments I have read, it sure seems to me that; 1) In the beginning of any economy, there must be industrial production. Without industrial production from raw materials, all the “Service Industry” can “service” is itself. 2) some people think servicing non-productive assets, like shares of stock or other ways of manipulating money someone in an industrial capacity has earned (and saved or invested) has become too much the “service Industry” of the U.S. If nobody is willing to get their hands dirty as a laborer, we will shrivel up. Even engineers who automate manufacturing are merely supporting industry. Even in industries where most every stage is automated, there is still the production of something tangible. “Money Changing” and lawyering are about the same in regard to the creation of real wealth as far as I am concerned. They both work in the same “temple”, taking their “cut” off the labor of honest workers.
    Credit default swaps are one of the most highly paid trading ventures I can think of. Million dollar bonuses go to those who shuffle other people’s money.

  • World leaders in higher education and healthcare? You need to check some rankings, because we are neither. We might spend the most on healthcare, but our coverage is no better than countries that spend much less.

  • but our coverage is no better than countries that spend much less.

    How ya figure?

  • Simple. We operate the health industry as for-profit. There are many, many other reasons, but the simplest reason for why we pay more is that for-profit companies will want profits.

    (As opposed to non-profit corporations & state run service)

  • Plus, those pesky old, sick or disabled folks just insist on BUYING health care, rather than being “allowed to die” (if they wish it or not) by the Liverpool Pathway.

    Then theirs our insane insistence on legally defining a “live birth” as any baby that breaths or shows other signs of life after delivery, rather than calling premies that don’t make it “miscarriages.”

From Sweat-shop Workers to Business Owners

Friday, March 12, AD 2010

The Oregonian features an article on how Chinese workers who spent years working in factories for American brands like Nike and Columbia Sportswear have become a major source of business startups and wealth in China’s rural interior.

WUHU, China — Years after activists accused Nike and other Western brands of running Third World sweatshops, the issue has taken a surprising turn.

The path of discovery winds from coastal factory floors far into China’s interior, past women knee-deep in streams pounding laundry. It continues down a dusty village lane to a startling sight: arrays of gleaming three-story houses with balconies, balustrades and even Greek columns rising from rice paddies.

It turns out that factory workers — not the activists labeled “preachy” by one expert, and not the Nike executives so wounded by criticism — get the last laugh. Villagers who “went out,” as Chinese say, for what critics described as dead-end manufacturing jobs are sending money back and returning with savings, building houses and starting businesses.

Workers who stitched shoes for Nike Inc. and apparel for Columbia Sportswear Co., both based near Beaverton, are fueling a wave of prosperity in rural China. The boom has a solid feel, with villagers paying cash for houses.

“No one would take out a mortgage to build a house,” said Wang Jianguo, 37, who returned after a factory injury in a distant province to the area near Wuhu, west of Shanghai. “You wouldn’t feel secure living in a house you didn’t own.”

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It's Not Subversion, It's The System

Monday, February 22, AD 2010

I ran across this Boston Globe article about a Boston College professor who believes she has successfully identified a new form of civil disobedience, or as she terms it “economic disobedience.”

The interview changed the way Dodson talked with other supervisors and managers of low-income workers, and she began to find that many of them felt the same discomfort as the grocery store manager. And many went a step further, finding ways to undermine the system and slip their workers extra money, food, or time needed to care for sick children. She was surprised how widespread these acts were. In her new book, “The Moral Underground: How Ordinary Americans Subvert an Unfair Economy,” she called such behavior “economic disobedience.”

I’m perplexed as to why Prof. Dodson is so surprised by this.

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4 Responses to It's Not Subversion, It's The System

  • The only system I can think that it subverts is the legal system type hoops put in the way– I know I’ve heard of a lot of places getting attacked for giving away beyond-sell-date food, and there can be taxes on any recompense that an employer offers an employee…. Ditto with the flipside of workers willing doing an extra ten minutes after they’ve clocked out so the work is done right.

    (My sister did that once– and was informed that she’d be fired if she did it again, because the risk of legal action against her workplace was way, way too high. Not out of fear of risk, but because she was willingly doing something extra without being paid.)

    It doesn’t seem the lady drew the same sort of conclusion I would’ve, but the phenomena seems to be in the same vein as the various Catholic services that have had to shut their doors because the law says X can’t happen, and there’s no way for them to sneak.

  • Dodson’s perspective is so screwed up. Her implicit starting point is that the system is evil and soul-crushing, and anyone who acts humanely is undermining it. And the fact that she’s surprised by human charity! Is she stunned when someone holds a door open for her? Does she see that few-second pause as an undermining of efficiency? or maybe an attempt to overthrow “the man”?

    Foxfier is right that in an absolutely legalistic society, there’s always the possibility of complaint. What we forget is that such obsessive interpretation of the law is a relatively new thing. There’ve always been decent people doing a little extra.

  • This type of understanding is often produced by academics, for whom work can only be understood as an abstraction. When you trade in ideas, it’s easy to forget that the idea you have in your mind may not have any correspondence to reality, especially when it’s an abstraction like “the capitalist system,” which is almost meaningless. Philosophers, political “scientists”, psychologists and social scientists are most susceptible to this. It seems this professor has been “mugged by reality”.

    I actually like the understanding of charity as subversive, but not subversive of “the system”. Charity is subversive of evil!

  • Oooh, Charity as subversion of the fallen nature of man, maybe? I like it….

Sweatshop Economics Must Not Continue

Thursday, February 4, AD 2010

I don’t believe any good Catholic would say they are happy with the situation of so many sweatshops operating in China et al.  The problem is what to do (or not do) about it.  I am giving my students a research project premised on a single sentence- “How can I avoid buying sweatshop products?”.  We are simultaneously studying the good Pope Benedict XVI’s “Caritas In Veritate”- specifically paragraphs #21, 22, 25, 27, 35, 36, 37, 38, 40, 41, 44, 48, 49, 51, 60, 63, 64, 65, 75, and 76. You can follow along at home!

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49 Responses to Sweatshop Economics Must Not Continue

  • No doubt the conditions in so-called sweatshops are often horrible. You won’t improve the lot of anyone in the developing world, however, buy declining to buy products produced in sweatshops, or by trying to get them shut down. Jobs with low pay and poor conditions exist because the people who work there don’t have any better options, and you generally don’t help a person by taking away his best option, however awful in an absolute sense.

    In my post yesterday, I noted that global poverty and inequality has declined significantly over recent decades. It’s not clear that that would have happened absent sweatshops, a fact that should be borne in mind.

  • Assuming free choice is involved, Blackladder is correct. In other words, there is an important difference between sweatshop labor resulting from laborers selecting the best of unattractive options versus laborers who have no other legal option because they are slaves, and slave labor does exist in some parts of the world. Historical economists who have studied the sweatshops of newly industrialized Great Britain now pretty much all agree that as bad as those environments were they actually provided the workers with a superior standard of living than their other options, which were often simple starvation. Widespread starvation has been a normal condition throughout world history until very recently. Hobbes was wrong in many things, but his description of life as nasty, brutish, and short was spot on correct for most people throughout the world well into the 20th century. Many things have contributed to economic progress, but probably the most important are free markets protected by the rule of law. I certainly agree that there can be necessary and appropriate regulation of markets, but many well-intended regulations advanced by social reformers have produced adverse unintended consequences that dwarf the social affliction they were designed to remedy.
    The botton line is that not buying goods from companies that employ workers in sweatshop conditions may help wealthier workers in developed nations and may even make one feel good, but it probably hurts those who are already the most vulnerable.

  • Your overall aim here is clearly good, and I think people are certainly right to want to see conditions in third world factories get better. Two things that might be worth keeping in mind:

    1) Often in an effort to “keep from buying from sweatshops” people simply avoid all products made in third world countries. They assume that if a shirt was made in Indonesia, it must have been made under inhuman conditions. In most cases, however, they have no way of knowing, so what they end of doing is simply punishing Indonesians in general, rather punishing bad factories and buying from good ones. (On the flip side, such movements are seldom wide-spread enough to have any real effect, so I suppose one could argue that their attempt to boycott the third world isn’t hurting anyone that much.)

    2) The video if factually incorrect that globalization has lowered wages in poor countries overall. It may be correct that wages have fallen in Mexico since NAFTA, but Mexico was manufacturing products for the US long before then. Since the early ’90s, Mexico has in turn seen low end manufacturing jobs move farther south to Nicaragua, Hunduras, Colombia, etc. and across the Pacific to China, Indonesia and Vietnam. (Further, Mexico is actually a market for goods made in Asia and elsewhere; it’s not just in the US that cheap shirts made in China are being sold, but in Mexico too.) Overall wages have increased, not decreased in globalization. The problem is just that they are often increasing from very, very low levels.

  • I can only accept the “sweatshop” concept if there was a clear line of progress leading from a peoples acceptance of harsh, low paying work into middle-class opportunities for themselves and most definitely their children. This seems to be the way it worked here in the U.S. as workers used their political and other freedoms to advance collectively- drawing upon unions and other political tools including muckraking journalism. Of course, success brings a new set of challenges/temptations, and we didn’t find the right calibration of corporate and labor powers in our own system.

    But without these type of freedoms in repressive nations, and with corporations using their power advantage to say – hey if you unionize, if you start collective bargaining power plays- we just leave you an empty factory and move to where the workers can just suck on it coutesy of the police state apparatus. If this is the current situation- and the proof of this for me is how everyone ended up in China- the land of one-child limits and no religious freedom- not so easy for muckraking journalists to just poke around either to provide a true narrative of the average Chinese life. I have many reasons to be suspicious of an American economy so warmly connected to the biggest and meanest psuedo-Communist dictatorship around. Can’t be good

  • I can only accept the “sweatshop” concept if there was a clear line of progress leading from a peoples acceptance of harsh, low paying work into middle-class opportunities for themselves and most definitely their children.

    I think this is precisely what we have been seeing over the last few decades. Here, for example, is a description of the effect of a Nike factory in Vietnam:

    Ten years ago, when Nike was established in Vietnam, the workers had to walk to the factories, often for many miles. After three years on Nike wages, they could afford bicycles. Another three years later, they could afford scooters, so they all take the scooters to work (and if you go there, beware; they haven´t really decided on which side of the road to drive). Today, the first workers can afford to buy a car.

    Since 1990, when the Vietnamese communists began to liberalise the economy, exports of coffee, rice, clothes and footwear have surged, the economy has doubled, and poverty has been halved. Nike and Coca-Cola triumphed where American bombs failed. They have made Vietnam capitalist.

    I asked the young Nike worker Tsi-Chi what her hopes were for her son´s future. A generation ago, she would have had to put him to work on the farm from an early age. But Tsi-Chi told me she wants to give him a good education, so that he can become a doctor. That´s one of the most impressive developments since Vietnam´s economy was opened up. In ten years 2.2 million children have gone from child labour to education. It would be extremely interesting to hear an antiglobalist explain to Tsi-Chi why it is important for Westerners to boycott Nike, so that she loses her job, and has to go back into farming, and has to send her son to work.

  • Without some big regulatory change- which seems to be the Magisterium’s intent behind calling repeatedly for a global economy that has a just juridical framework- I still think we can make strides by doing business through the global Catholic Church via CRS and diocesan/parish contacts operating fair trade cooperative relationships bypassing the big box network on as many individual products as possible. Just like I would prefer a Catholic non-profit health insurance option to a completely Government-only one. There is a Catholic difference to every field- from education, to medicine and pharmaceuticals (think birth control, embryonic stem cell research, euthanasia), to economics/business – this Pope is very clear about warning us away from any single ideological view or overeliance on technical solutions that ignore the humanity involved at every turn of every economic transaction. Check out the Pope’s call for a new synthesis of Christian humanism applied to the development of economies that include holistic considerations that interrelate- he would also include ecological and promotion of healthy families at the core. Working in sweatshops for 12 hour shifts over 6 or 7 days certainly isn’t suitable for someone in a Catholic family- we can’t leave people with this option or nothing at all- it ain’t right folks- gotta come up with something better than apologetics for shopping Walmart- reminds me of the old argument against ending slavery- the slaves would be worse off and the economy would be destroyed- well no one says we can create a perfect world, but we are charged with creating civilizations of love- I don’t see a sweatshop standing in that kind of civilization so I’m not going to accept rationalizations- doesn’t fit into my understanding of our Catholic social doctrine

  • Working in sweatshops for 12 hour shifts over 6 or 7 days certainly isn’t suitable for someone in a Catholic family- we can’t leave people with this option or nothing at al

    I’m all for giving people better options (and if people did have better options than working at sweatshops there would be no sweatshops – you wouldn’t need a law for that). Trying to shut down sweatshops, though, isn’t giving people a better option. It’s taking an option away, and in particular it’s taking away an option that people judge to be better than the available alternatives.

    reminds me of the old argument against ending slavery- the slaves would be worse off and the economy would be destroyed

    It seems to me that the main problem with this argument was that it was false. Abolishing slavery didn’t destroy the economy and ex-slaves were better off than they were before. That’s not the case for sweatshops.

  • I would recommend a book titled “The Vocation of Business: Social Justice in the Marketplace” by John Medialle, a professor at Univ of Dallas.

    I have read it four times and I’m still unpacking it.

    http://tinyurl.com/yeljrdz

    He writes that until you have equity, you will never have equilibrium. Labor must come before capital and that is one of the main tenets of Catholic Social Teaching. The bottom line to ending sweatshops is worker ownership of the means of production, which is the main tenant of Distributism as advanced by GK Chesterton and Hellaire Belloc.

  • I’m interested in the NIke factory in Vietnam example- I wonder how it worked that the workers went from destitution to being able to afford cars- did that happen while no positive changes took place at work- like a healthy increase in wages, better working conditions and so forth which would actually take the factory out of the sweatshop category? Is this typical? Does the Vietnamese government do a better job of protecting their people who work for foreign companies than the Chinese? I had thought that the whole reason for going to these kind of countries was the fact that the government would be on the side of the companies to help keep the workers in line so they wouldn’t press for higher wages and more investment in safe working environments? I wouldn’t submit that every factory in every poor country is necessarily a sweatshop, but it would seem that the purpose of locating half a world away from a pure business profit motive is the cheap labor- and the promise that that cheap labor would remain so- otherwise why not stay in the U.S. and save on a lot headaches and travel expenses?

    The trick for me would be to follow the American way and see a shift to domestic markets in every nation so that you don’t have a system where most production in the world is geared for sale in relatively few countries- like American consumers should not be the main source of income for the third world workers to fight over for perpetuity. Has the open trade system had enough time to bring about a better system- fitting in with the CAtholic social teaching theme of the universal destination of goods/resources?

    I think that having international bodies like the WTO representing the interests of multinational corporations needs a strong element of human rights protectors- so that workers are competing with their basic rights as humans and workers respected by all participating trading partners- this would seem fair and necessary given our fallen nature and the fact that the love of money is the root of many evils- or so says the Bible.

  • I had thought that the whole reason for going to these kind of countries was the fact that the government would be on the side of the companies to help keep the workers in line so they wouldn’t press for higher wages and more investment in safe working environments?

    The point of going to developing countries is that labor is cheaper. Labor is cheaper, however, not because the government will come in and bust heads if people demand higher wages, but because the average wages in the countries are so low. Wages in multinational owned factories may be low by American standards, but they can be several times the prevailing wage for other sources of employment.

  • The modern term is “developing country,” not “third world.”

    reminds me of the old argument against ending slavery- the slaves would be worse off and the economy would be destroyed

    If the slaves would be worse off, there would’ve been no problem with giving them the choice to be free. If they thought they’d be worse off, they’d volunteer to be enslaved. I’m all for ensuring that factory workers overseas have choices. Closing sweatshops restrict the freedom to choice though.

    American consumers should not be the main source of income for the third world workers to fight over for perpetuity.

    Why not? If Latin American farmers were limited to domestic markets and not of the millions of Starbucks customers in the US, those farmers would not be able to afford to send their kids to school.

  • I had thought that the whole reason for going to these kind of countries was the fact that the government would be on the side of the companies to help keep the workers in line so they wouldn’t press for higher wages and more investment in safe working environments? I wouldn’t submit that every factory in every poor country is necessarily a sweatshop, but it would seem that the purpose of locating half a world away from a pure business profit motive is the cheap labor- and the promise that that cheap labor would remain so- otherwise why not stay in the U.S. and save on a lot headaches and travel expenses?

    I work fairly directly with the operations group which deals with our Chinese manufacturers are work, so I can explain some of the details here. (This is dealing with consumer electronics, so we’re talking pretty advanced factories, not sweatshops, but the logistics are similar.)

    One thing many people don’t realize is how incredibly cheap it is to ship things to the US from China, so long as you have the six weeks to send it across in bulk via cargo ship. For instance, when we bring in a container load (about 2,500) of laptop computers by sea, all packed up in their retail packaging ready to go onto a store shelf, the shipping cost from Shanghai to the distribution center in the US is about $5/laptop.

    With shipping so cheap, even a very small difference in the cost of manufacturing becomes worth while — especially because the profits made by each company along the supply chain are often very small.

    Most of the factories that make product for US companies in China are not actually owned by the US company — they’re owned by a local company which makes products to order, which the US company then buys. The US companies do this because it saves them start-up costs, and the difficulties of dealing with local government. (In many developing nations, local government basically runs of bribes and shakedown schemes — such as claiming the deed to your factory is forged and threatening to confiscate if you don’t buy a new one — and US companies typically don’t want to deal with it for legal reasons.)

    These locally owned factories will compete for business with each other, and manufacture for multiple US brands. So the HP, Sony, Dell and Toshiba laptops you see in Best Buy may actually have been made in the same factory. The different factories also compete with each other for labor. Building a high quality factory takes a lot of capital, but turning the capital into a good return requires a high output with few mistakes. More experienced workers tend to make product faster and with fewer mistakes — so if a new factory wants to get up to speed quickly their best approach is to poach workers from another factory with an offer of higher wages. All of the factories end up hiring and training new workers as well, but it helps to have a certain critical mass of experienced workers to provide on-the-line training and such. So wages do tend to rise over time through competition between the manufacturers.

    Expansion out into new areas can provide a way to keep wages from rising too high, but this again runs into the problem of inexperienced workers being less productive. And once you have a lot of experienced workers, it becomes tempting for a competitor to build a factory and poach some of that expertise. If you’re the first factory into a new are, you get lower wages for a while, but then others move in and they creep up.

    The more established areas move into more high value types of factories — and there’s also a value to being near to rail lines and ports, so businesses can’t chase endlessly into the wilderness in search of lower labor costs, because they start to incur other costs that make up for it.

    Why do businesses bother sourcing in the developing world when wages are rising? Well, businesses are very willing to be temporary — and there’s not necessarily a huge investment for them when most of the factories are locally owned. Also, as those developing markets see their wages rise, they become customers as well as sources of labor. For instance: most cell phones are currently manufactured in China. But it’s not just a source of cheap labor. There are more than twice as many cell phone users in China as in the US.

  • The modern term is “developing country,” not “third world.”

    Exactly right. That term is quite Modern. It should be done away with.

  • While I can appreciate the intent of this post, Blackadder and others have done a great job explaining how among a continuum of choices sweatshops may not represent the least desirable choice given the circumstances.

    I would like to add that from our perspective, as Americans living in 2010 with possibly the most posh existence the world has ever known, this appears downright inhumane and barbaric. And on many levels it is. But poverty and prosperity are relative, in large measure.

    The sad reality is, from a perspective of solidarity, the most Catholic thing you can do is to continue to patronize goods from such third-world nations and simultaneously pray for the transformation of the culture from within.

    For further reading on wealth and poverty:

    http://www.independent.org/publications/tir/article.asp?a=726

  • I laud the effort to ensure that workers, all over the world, are allowed to work in safe, clean, and humane conditions. IT will certainly not increase the cost of my XXL/X-Tall sweatshirt to reduce a shift in a factory to 8 hours, or to make the minimum work age 18 instead of 13.

    But we risk much, I think, when applying US standards of living as a measure of the humanity/inhumanity of a particular living/working condition, and the justice of any particular wage.

    Start in the US. I can live very well in Jonesboro, AR on a salary of $45,000/year; I can at least rent a house, pay my bills, and basically take care of my needs and the needs of a young family. Take that same $45,000 to New York City, and I am at or below subsistence level; I cannot drive, I cannot buy a lot, and I am much poorer than when I left home in AR.

    Same applies in Memphis, TN vs. Jonesboro; rents are lower in Jonesboro, and I can live better there than I can in Memphis.

    Now stretch it across the Pacific. In many countries, $45,000 would make me a rich man, or at least move me well into the upper middle class. This is why, I would think, remittances are so helpful to families in developing countries; the available capital moves the family into a different economic stratum.

    SO, while the work of organizations such as these is important in correcting the abuses that inevitably occur when people are involved (cuz we’re a greedy bunch when left to ourselves, sometimes), it doesn’t make sense to decry every instance of people being paid $0.47/hr as an egregious offense against humanity. How does making that $0.47/hr materially affect the living standard of that family? If that $0.47/hr were not available to that worker in Swaziland, what would their alternative be, and how would their standard of living change?

    It also doesn’t pass the smell test that standards of living would be forced *downward* by the arrival of a manufacturer supplying, say, Wal-Mart. Were people conscripted by force into the factory, and removed from better-paying positions in much nicer factories in order to slave for the Waltons? Doubtful. SO what’s the real story?

    As well-intentioned as I think folks like this start, I wonder if their agenda isn’t much more driven by a hatred of anything “corporate”. The factories they depict shuttered and empty didn’t get that way because an evil corporation decided to screw over a town and its citizens; they got that way because the manufacturer was forced, by competition, to decide between competition and extinction. Some of those companies *died*; they didn’t move to China. Once they died, though, Chinese manufacturers were able to make the case that they could offer similar quality for much less. Once China’s standard of living (and wages) started to rise, manufacturers looked for even lower-cost areas to move into; thus, Swaziland, Haiti and Bangladesh start to benefit from the rise in the standard of living in China (which, I would bet, imports a lot more Bangladeshi clothing than we do).

    I agree with P.Diddy’s closing comment, with one caveat: We *should* continue to purchase goods from developing countries, but in addition to *praying* for the transformation of the culture from within, we have to be willing to *work* for that same transformation, by holding businesses accountable for knowing the conditions under which their inventories are produced.

  • Thinking about this, I’d make two additional points:

    1) One of the major differences here, I think, is between different views of history. In a more progressive view of history, the primary reason that we no longer see the worst conditions of the Industrial Revolution in the US is the work of unions and the work of journalists exposing repressive corporate practices to public outrage. Now, I think those were in fact very minor factors, and that the primary reason we no longer see those conditions and those levels of pay is because companies simply can’t get workers to work that way any more as a result of economic development and competition for labor. These different views will lead to different conclusions as to what we should do now.

    2) The solution from a more economistic point of view is not necessarily just “do nothing”. US Companies choose which contract firms in developing countries to work with based on a number of factors, and if they do refuse to deal with firms which behave in inhuman ways (forcing female workers to take birth control; unsafe working conditions; etc.) they will drive local firms to improve conditions overall. There will probably continue to be much worse firms doing work for the local market, but if US firms use their purchasing power to drive incremental improvements (not the kind of “have US working conditions and pay or give the jobs back to US union workers” that domestic interests have in mind, but insisting on working with the better factories in the region) that will help drive conditions upwards faster. It will also tend to benefit not just the workers, but the products and the companies that make them in the long term.

  • The modern term is “developing country,” not “third world.”

    Exactly right. That term is quite Modern. It should be done away with.

    While we’re at it, let’s revive “negro,” “oriental,” and “groovy.”

  • You have forgotten “white trash” and “Honky” as long as you want to visit the old labels/terms.

    Dynamite article! Makes a person think about the choices that we make each day and the affect it has on the rest of the world and our local economy.

    I never shop at Walmart and haven’t for years. I would rather purchase meat from our local meat market and drugs from our small town Drug Store, etc. and Fresh produce from the farmer’s market or visit the growers themselves.

    “The Jungle” was largely responsible for changes in the meat industry. However, recently the changes in that industry are for the negative with most labor from Mexico or Latn America– and conditions (and pay) regressing –as well as safety for workers and eaters of said meat.

  • While we’re at it, let’s revive “negro,” “oriental,” and “groovy.”

    Far out.

  • I agree that having a global minimum wage would be a tough sell given all the factors that go into determining local living standards- but having all corporations participating in global trade being charged with legal responsibilities for basic human rights and decency which allow traditional families to take root and potentially flourish – for economic security is only one factor in determining that. That should be the goal- just like the video showed with dog and cat fur items being banned, so too, could member nations in trade pacts make certain contractual obligations legally binding without going overboard with insensible regulations and running into the reverse problem of giving too much power over to union bosses for example.

    The fact remains that Pope Benedict is directly calling for a “new humanistic synthesis” in the wake of the current global economic crisis. “The current crisis obliges us to re-plan our journey, to set ourselves new rules and to discover new forms of commitment, to build on positive experiences and to reject negative ones. The crisis thus becomes an opportunity for discernment, in which to shape a new vision for the future.” #21 Caritas..

    This is what I am trying to do- scrap what hasn’t worked and try to retain some of the positives, but recognizing that there isn’t a pure ideological solution out there- which is why I’m attracted to more solidarity/subsidiarity economic relationships spring up between Catholics who happen to live in the developed/developing sectors of the global society. There is also an ecological concern which the Pope brings up that must be brought into the discussion at some point as well- I was thinking of that when it was brought up at how cheap it is to ship goods around the world- and I have read that the cargo ships use pretty poor quality fuel and are big polluters of the oceans- one doesn’t have to embrace the all-encompassing theory of man-created Climate Change to be aware of our stewardship duties in the “Care for God’s Creation” and how that affects humanity as well.

  • Re third world: Well, admittedly third world is an imperfect descriptor in that it really refers to unaligned nations during the Cold War. Back in the day economists used to refer to undeveloped countries or UDCs, but PC precursers soon claimed that the term was too harsh and demanded that it term be abandoned in favor of lesser developed countries (or LCDs), which proved to be understood as demeaning, which is why we now have developing countries — a term that makes no sense at all since all countries are developing in different ways and at different paces. But these days “feelings” trumps truth all the time. It is kind of funny in a pathetic sort of way.

  • “Wal-Mart has such a strong command over the retail market that it alone affects the wages of many workers and the fate of many factories around the world. In a recent series the LA Times described how Wal-Mart’s demands dictate lower wages, harder work, and longer hours, while eliminating jobs in factories from Honduras to China. No longer is this humongous corporation putting only America’s factories out of business, it has now turned to pitting factories in countries around the world against each other in an impossible race to the bottom.

    Wal-Mart was removed from KLD & Co.’s Domini 400 Social Index because of what it called ‘sweatshop conditions’ at its overseas vendors’ factories. KLD, which provides social research for institutional investors, said Wal-Mart hasn’t done enough to ensure that its vendors meet ‘adequate labor and human rights standards,’ according to a statement distributed by PR Newswire. KLD also cited charges that the company hasn’t been forthright about its involvement with a Chinese handbag manufacturer alleged to have subjected workers to 90-hour weeks, exceptionally low wages, and prison-like conditions. The Domini 400 is a benchmark index for measuring the effect of social screening on financial performance. (1/03)

    Some of the abuses in foreign factories that produce goods for Wal-Mart include:

    * Forced overtime

    * Locked bathrooms

    * Starvation wages

    * Pregnancy tests

    * Denial of access to health care

    * Workers fired and blacklisted if they try to defend their rights

    The National Labor Committee reported in September 1999 that the Kathie Lee clothing label (made for Wal-Mart by Caribbean Apparel, Santa Ana, El Salvador) conducted sweatshop conditions of forced overtime. Workers hours were Monday to Friday from 6:50 a.m. to 6:10 p.m., and Saturday from 6:50 a.m. to 5:40 p.m. There are occasional shifts to 9:40 p.m. It is common for the cutting and packing departments to work 20-hour shifts from 6:50 a.m. to 3:00 a.m. Anyone unable or refusing to work the overtime hours will be suspended and fined, and upon repeat “offenses” they will be fired. This factory is in an American Free Trade Zone. (http://www.nlcnet.org/KATHLEE/elsalvinfo.html)”

    From Voice of American Workers trade article.

  • The modern term is “developing country,” not “third world.”

    Exactly right. That term is quite Modern. It should be done away with.

    While we’re at it, let’s revive “negro,” “oriental,” and “groovy.”

    The term “third world” has been used over the years by peoples from these countries, sometimes prefaced by the word “so-called.” Other terms used today among global social movements are “Two-Thirds World” and “Global South.”

    But the term “developing world” was rejected long, long ago.

  • Other terms used today among global social movements are “Two-Thirds World” and “Global South.”

    But the term “developing world” was rejected long, long ago.

    Rejected by whom, exactly?

    There is a certain silliness to trying to use a single term to cover countries as distant from each other and diverse as India, Honduras, Vietnam and Kenya. I’ve heard some writers differentiate between the “developing world” and the countries in the “bottom billion” where development seems to have “stuck”.

    But I’m not clear that there’s some sort of clearing house of “approved terminology for people who care” in charge of sorting out whether “developing world” is an acceptable term or not.

  • Well, admittedly third world is an imperfect descriptor in that it really refers to unaligned nations during the Cold War. Back in the day economists used to refer to undeveloped countries or UDCs, but PC precursers soon claimed that the term was too harsh and demanded that it term be abandoned in favor of lesser developed countries (or LCDs), which proved to be understood as demeaning, which is why we now have developing countries — a term that makes no sense at all since all countries are developing in different ways and at different paces. But these days “feelings” trumps truth all the time.

    Hard to call China “undeveloped.” “Lesser developed” sounds awkward. Pre-Tsvangirai Zimbabwe wasn’t “developing.” At any rate, I’ll use whatever the most commonly accepted term at the moment happens to be. I use “pro-life” and “pro-choice” instead of “anti-abortion” and “pro-abortion.” I use “illegal immigrants” instead of “undocumented immigrants.” “African-American” or “black” instead of “negro.” And “developing” instead of “third world.”

    I’ve noticed that “OECD” and “non-OECD” is getting popular. They don’t roll off the tongue well but they are more precise terms so that’s good.

  • Rejected by whom, exactly?

    By global social justice movements, as I said.

    “Developing world,” “bottom billion,” etc. are terms that assume the values and commitments of capitalist modernity. Continue to use them if those are your values and commitments.

  • There is a certain silliness to trying to use a single term to cover countries as distant from each other and diverse as India, Honduras, Vietnam and Kenya.

    Use of terms like “Global South” and “Two-Thirds World” are precisely NOT meant to “cover” the diversities of these countries, but as an expression of solidarity of the oppressed peoples of these countries. The terms do not unite the countries, but unite particular classes among the countries.

  • From THE CATHOLIC NEWS;

    VATICAN CITY (CNS) — Conversion to Christ gives people the strength to break the bonds of selfishness and work for justice in the world, Pope Benedict XVI said in his message for Lent 2010.

    “The Christian is moved to contribute to creating just societies where all receive what is necessary to live according to the dignity proper to the human person and where justice is enlivened by love,” the pope said in the message released Feb. 4 at the Vatican.”

  • I believe the discussion of terminology is a rabbit trail. I’m just sayin’.

    To return, I hope, to the main point of the article and prior discussion, though, it seems to me that there exists a basic divide in ways of looking at corporations vs. small businesses. And not-coincidentally, there seems to exist a certain almost snobbery about not doing business with the Wal-marts of the world. Having, as I do, four children (and now regretting that I don’t have more, as I stand on the threshold of my 50’s) gives me a slightly different perspective on the place of Wal-Mart in my local economy.

    I would *love* to be able to buy meat at my local butcher shop, and to patronize local farmers all the time. I would love to be able to buy only clothes manufactured in the United States. Unfortunately, I cannot raise a family of six and do that; it costs too much! And since my diet is varied, and I like lettuce in January, I have to buy it from somewhere warm enough to *produce* lettuce in January. And since I don’t want a slaughterhouse in my neighborhood, I have to have meat trucked in from Arkansas and Mississippi, where the animal farms are. As much as I would like to be able to feed and clothe my family from the local economy, I cannot!

    Simplistically, I blame the union movement for these developments; the reason I can’t buy a pair of shoes made in the US is that I cannot afford to pay the added costs loaded onto the shoes by the provision of generous union benefits, and shortened shifts. I have had to wait an extra month for a suit I ordered (at 6’9″, I have to have them made (in the US)), because the factory was negotiating a contract dispute with their **union**.

    See, long ago, unions stopped being about making working conditions humane and pay dignified, and started to be about how much they could negotiate being paid for how little work. Unions, IMHO, have become the proletariat mirror of the “evil corporations”, in that they jockey to see how *little* work can be done for the dollars spent. And so the manufacturers of my clothes and other goods move overseas in order to escape the burden, and millions of jobs disappear.

    So as nice as it would be to localize everything, it isn’t practical. And as nice as it would be to impose US wages and working conditions on every country around the world, it wouldn’t be fair to guys like me, who are trying to feed and clothe the next generation, to impose those costs in a feel-good attempt at one man’s view of “social justice”. We should, as Catholics, be about *improving everyone’s lot*, not about making everyone equally miserable. And we should be about raising everyone’s standard of living by providing opportunities for people, not by redistributing wealth and just handing it over to folks. We create far more problems in that way than we solve (see the welfare system in the US from the mid-sixties till the mid nineties for an example; nothing did more to destroy the Black community than that!)

    We *can* help our brtothers and sisters in need! But it would be wrong to take from others by force of law in order to do it!

  • The complete story is found at the link below:

    http://www.catholicnews.com/data/stories/cns/1000486.htm

  • There are many Catholics who have not intellectually reconciled themselves with the fact that we live in a fallen world. This manifests itself in a worldview which effectively seeks to make everyone equally miserable, ala, socialism.

    Among a number of excellent points Chip discusses is the fact that the Wal-marts of the world actually do more to help the poor of the world than the snobs who won’t shop there.

  • Chip,

    In this small town of 4000, our merchants do very well at competing with Walmart. We intentionally support them and the quality and care they provide. I do not think that makes us snobs, do you really?

    We are lucky to still have small town meat markets in the upper Midwest. The owner is more selective and responsible for the meats he chooses. Ground meats especially!

    It is far superior to the products processed through the meat-packing facilities. Also, the workers do not join unions as much in the meat-packing facilities for obvious reason. (Being many illegals, etc.) The wages are half of the wage paid for the same job in 1970. The conditions much worse. Speed-ups and injuries with knives, etc., See the Postville, Iowa story recently in the news. (And that was a Kosher plant.)

    The book, THE JUNGLE, helped change working conditions for the (largely immigrants) meat-packing workers NOT because Americans gave a whit about the conditions of the workers but because Americans did not want to eat sausage that might have a worker or rat ground up in it. (As brought out by the book.)

    I basically feel the same is true with products today; dog food kills my beloved Fluffy and I don’t want those Chinese products….most people don’t care about those workers but let Fluffy get sick and I care. That is my sense of Americans and myself included. I am trying to change. It isn’t easy!!!

    I do not live in California and need to purchase veggies too, but go to other grocery stores. (Just not Walmart.)

  • Snobbery might be a bit harsh, but it is a choice you consciously exercise. And you and others in town obviously hav ethe means to exercise that choice; if you did not, all the good intentions in the world would not keep you out of Wal-mart if you had to feed your family.

    It’s akin to neighborhood choice, I suppose. If I can afford a $450,000 house in Collierville, TN, why would I choose to move to my neighborhood in Bartlett, with average home prices in the low $200’s? And if I can afford to live *there*, why would I move to Raleigh, where the same house costs only $130,000? I make any of these choices because I have the means to make them. If I could afford to drive an Escalade instead of this 10-year-old Expedition, you bet I would be driving one; can’t right now, though, since I have tuition to pay and groceries to buy for all these little girls who still live at my house.

    If your townsfolk did not have the means to buy higher-quality, higher-priced meat from your local butcher, he would have two choices: Either lower his quality, thereby enabling a lower price, or to accept less profit on the items he sells. If the margin is low enough, he then goes out of business. If it works well for y’all, great!

    But who shops at Wal-mart in your town? I would guess it’s NOT the insensitive rich folks who just don’t care about the social justice implications of enabling a behemoth bad corporate actor like Walmart; I am betting it’s the folks who can’t afford to shop at your local butcher shop and other small retailers, but who would like a consistent quality of meats, vegetable, and other staples of life. We could kill off Walmart tomorrow; where would that leave the thousands employed by Wal-mart, and where would it leave the poorer folks to shop? I don’t know, but I bet they wouldn’t be buying the same quality meats you’re able to procure from your guy. (BTW, how much does a pound of ground chuck cost from your guy?)

    So…I apologize for the snobbery accusation. But it still sounds a bit “Let-them-eat-cake”-ish…

  • Chip,
    The small retailers, meat market, lumber yard, etc…were here long before Walmart. We hope to keep them in business. The prices are competetive. The people are friendly. No snobbery here as no one here is rich. Our Van is 1998 and just had a new engine in it. We do have some nice bike trails and not much traffic so that is an alternative in good weather. (Not now…we live 2 states north of you in Jonesboro.)
    The rich folks live in new sub-divisions far away from
    this old town along the Mississippi. And it costs to drive across the river to Walmart–30 minutes away. They surely do not miss our patronage as the parking lot is always full.

    We have worked for Walmart- in our family -in the past and used the 10% discount the employees are given.

    Is it snobbery to want to keep an old small town way of life and support our business’? We all struggle to find the best way to survive, small town America too.

  • “Labor is cheaper, however, not because the government will come in and bust heads if people demand higher wages”

    Well, sometimes that does happen. It’s not the least of the reasons why places like China are popular to do business.

  • And todays price for quality ground beef is 2.69. I am sure box stores have 80% ground much cheaper. Some of us need low-fat…me in particular. Not enough bike riding lately. Have a good day!

  • Well, sometimes that does happen. It’s not the least of the reasons why places like China are popular to do business.

    I have heard nasty stories about such things. I’m not sure it done by or the behest of the government though. Sounds to me like that at some foreign companies there is a general lack of regard for the workers’ dignity that is aggravated by the fact that they are managed by petty tyrants.

    That said, I’m not so sure that sort of a work environment is something Western corporations are looking for or appreciating. The draw to China for example is, as stated above, being able to reduce labor costs to stay competitive PLUS by providing jobs there that will produce expendable income for the workers, there will be a huge market of new consumers that can afford to buy the products they are making. Maybe that thinking it reeks of “anything for a buck”, but the reality is the existence of a great many lives are benefited or at least have the opportunity to be benefited.

  • If the quality is up to par, I’d rather buy from poorer foreigners than relatively richer locals. I think Catholic Social Teaching demands it.

  • We “poorer folks” shop at our local $ollar Store-8 blocks away. I did not know The Waltons needed our money so badly. I guess we should take pity on them? Who doesn’t sell imported products these days? And jobs are supported at by shopping at other stores too.

    Seriously, how do you resolve the conflict of a government like China (still Communist last I checked) that has a one-child policy and supports abortion? Did they change that?

    I understand that people need jobs everywhere and buying from China supports people there and supports an emerging middle class. That would be true in other developing countries that are not so repressive wouldn’t it?

    http://en.wikipedia.org/wiki/One-child_policy

  • I guess I would ask, first, Duke…how will NOT buying from companies that manufacture in China help to change China’s one-child policy? What will change oppressive regimes like that faster than anything is giving more people in those countries the economic means to decide that the government should not be making those kinds of decisions for them!

    The people working in factories in China making…well, some of everything are not the Chinese government. And they don’t *make* policy, they *live under* it. China’s changes over the last 30 years have come, not because people decried the status quo from outside China, but because exposure to Western democracy and economic prosperity stirred a desire in the hearts of Chinese folks to have something *different*.

    And to address your earlier question, Duke, of *course* it’s OK to preserve your town;s way of life, and to support the merchants who enable it. I wouldn’t drive 30 minutes through the country to Wal-mart either, if I had the option of using the gas money instead to pay just a little more, and shopping 5 minutes away. Again, though, your town’s economy allows for that (and is actually a strong counter-argument to the “evil Wal-mart kills small businesses” mantra). $2.69 ain’t bad for a pound of chuck; I think we are paying just a little less than that, but then, Memphis is the transportation hub of the known universe or something.

    And again, apologies for the “snobbery” comment; that was too strong. Parochialism might describe it better; it’s just that the conditions under which you live (rare, by percentage of population, I bet) are not the conditions under which most people live. And if I wanted to patronize meat boutiques in Memphis similar to your small-town merchants, I would get hammered. Those types of stores here cater to the hormone-free, organic, grass-fed crowd who feel they must buy products like that, and who make the economic decision to do so. I can’t afford to eat like that, unfortunately, at least, not until the 9-year-old is out of college…

  • Have any of you read the book “A Year Without Made in China” by Sara Bongiorni? I have been meaning to because the premise sounds interesting. Bongiorni, her husband and their two young kids attempted to go an entire year without buying ANYTHING made in China… and it proved to be a lot more difficult than they thought. From what I gather, they were pretty solidly middle-class financially, definitely not poor, yet even they found it next to impossible to avoid ‘made in China.’ For lower income people, I imagine it is impossible.

    Again, it’s another reflection of the fact that we live in a fallen world, and though we do the best we can to promote good and avoid evil, we will never achieve absolute, total non-cooperation with evil in this life.

  • Boycott American products! The US slaughters innocent Iraqis and Afghans, aids Israel in the slaughter of Palestinians, tortures and kills prisoners, isn’t democratic (see 2000 presidential election), pollutes like it owns the world, doesn’t provide its people with basic health care, and gives handouts to its wealthy bankers while its ethnic minorities are placed in slums where they don’t even receive a proper education. And remember, when you buy American, you’re paying for some American women’s abortion or a float at one of America’s many gay pride parades.

  • Chip,
    I understand the conditions in China. It makes me feel very conflicted, frankly.

    I’ll have to tell my family I’m going down to the meat “boutique” ..classier than what we call it. Meat markets -as we call them here- cater to deer hunters and farmers. No one cares about the organic, hormone free etc stuff around here too much. Organic chickens here are called free range and only means raised the way grandma used to. (Free to peck and scratch the way God intended.)

    Who knows what it will be like in another decade? Maybe the $ollar Store will again be a 5 & 10 cent Store like in the 1960’s. Cheaper products and competition going the way it is.

    Elaine,
    It would be a challenge to buy products from everywhere but China. I would rather WATCH someone else do that on a Reality Show and learn from them. Sounds like an interesting book to read. Maybe the library will have it. Thanks for the suggestion.

  • I think your students (and anyone else interested in the sweatshop issue) might enjoy checking out http://www.teamsweat.org. Team Sweat is an international coalition that I founded to fight against Nike’s sweatshop abuses.

    I am a Catholic activist and former professional athlete and I have been fighting for 12 years on the front lines in solidarity (a key theme in Catholic Social Teaching) with the factory workers that produce for Nike.

    How did I get involved in this work? It all started as a research paper for a grad class I was taking while pursuing my masters degree in theology. The paper was titled:

    “Nike and Catholic Social Teaching: A Challenge to the Christian Mission at St. John’s University.”

    If you’re interested in reading it, drop me a line at [email protected].

    Peace, Jim Keady

  • Wow. The famous Jim Keady chimes in, albeit with a sales pitch.

  • I just checked out Jim Keady’s stuff- he’s the real deal folks- he has walked the walk, made real-life sacrifices, put in the time and mileage to find out the truth- and he’s Catholic- I’m going to pick this guy’s brain and heart to find out more- to take more responsibility for this issue of sweatshop labor- I want to take this thing far and beyond the normative ideological pissing contest- that means finding sources that have ground level information that is trustworthy. People who give up lucrative careers because something smells rotten in Greece- these type of guys grab my attention. I would recommend that the defenders of sweatshop economics take a look at Jim Keady’s stuff as well because this debate ain’t goin’ away just yet!

  • Blackladder claimed that “global poverty and inequality has declined significantly over recent decades,” a misleading statement based on using GDP to measure standard of living.

    More money flowing into an economy does not always translate to better living— in many “developping” countries, there are growing gaps between the rich and poor, and an unhealthy dependency on bigger economies (and corporations) for jobs and products (such as the US.) Self-sustainability, more options and consumer choice ease away poverty— not more money. The increase in money is often artificial, as any sweatshop laborer in LA will tell you (most of the money goes on increasing rent and product-prices, which remain high in developping areas due to lack of competition.)

    In short, boycotting sweatshops directly might not work, but reducing our reliance on them does. Otherwise, we are feeding into a global dependency.

On Certification Instead of Regulation

Thursday, January 7, AD 2010

What started as a “Ha, do you libertarians endorse this?” dare by Mike of Rortybomb has turned into a somewhat interesting discussion between him and Megan McArdle about to what extent it’s possible to protect people who are not good at understanding complex financial products (the elderly, or people who just aren’t good at understanding complicated service agreements) from being victimized by banks without in the process hurting the people you’re trying to help. This as the new credit card legislation is going into effect, trying to crack down on banks which raise interest rates quickly if you’re late paying, have hidden fees, or move due dates around (theoretically in an attempt to keep people from paying on time.)

Mike suggests that banks should be required to offer a “plain vanilla option” of products such as credit cards or checking accounts.

And that solution would be mandating financial services to provide Vanilla Option financial products. Boring, low-reward trap-fee products you’d probably have to pay a yearly fee for.

So much of our financial services are predicated on tricks and traps but also have a lot of benefits. You get free checking, but if you overdraft you lose more than you gained. Now with a vanilla option, you could pay more upfront to not take the risk of losing later. This is banking how it used to be, boring. And this is exactly the kind of product that people with weak cognition would want to have available. Someone approaching older age, but before getting there, could opt for the “extra boring” financial services package. People buy renter’s insurance; some might view a yearly-fee on their checking account or credit card as a “trap insurance.”

Megan doesn’t think the idea would be very successful:

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One Response to On Certification Instead of Regulation

  • The Thaler and Sunstein book Nudge made some similar recommendations regarding what you might call “plain vanilla” options for things like credit cards, mortgages, etc. In general they think that you could get around the problems noted by Ms. McArdle by making the plain vanilla the “default option” rather than just one option among many. The idea is that most people tend to stick with a default option whatever it is, and the few who don’t tend to be the ones who are more knowledgeable and capable of comparing the pros and cons of other options. I’m not sure how that would translate into things like health care, but it’s an interesting idea.