Economics

Ash over Europe, Wilting Flowers and Produce in Kenya


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. Continue reading

Service Economy

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?

From Sweat-shop Workers to Business Owners

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

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. Continue reading

Sweatshop Economics Must Not Continue

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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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On Certification Instead of Regulation

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: Continue reading

Difference and Equality

Individualism is one of those terms which a great many people use in a great many different ways, so it has been with interest that I’ve been reading Individualism and Economic Order by F. A. Hayek. The book is a collection of essays dealing the individualism, its definition and its place in the economic order.

From the first essay, “Individualism: True and False” comes an interesting thought:

Here I may perhaps mention that only because men are in fact unequal can we treat them equally. If all men were completely equal in their gifts and inclinations, we should have to treat them differently in order to achieve any sort of social organization. Fortunately, they are not equal; and it is only owing to this that the differentiation of functions needs not be determined by the arbitrary decision of some organizing will but that, after creating formal equality of the rules applying in the same manner to all, we can leave each individual to find his own level.

There is all the difference in the world between treating people equally and attempting to make them equal. While the first is the condition of a free society, the second means, as De Tocqueville described it, “a new form of servitude.”
(Individualism and the Economic Order p. 14-15)

This strikes me as touching on the sense in which classical liberals in the tradition of Burke and Smith can still be considered “conservative” in the old sense of the term. Although Burke is commonly accepted by those who argue that classical liberalism is not “truly conservative” as being conservative in his outlook because of his reaction to the French Revolution, he was (like Smith) Whig, though they were Old Whigs, not True Whigs or Country Whigs. Prior to the French Revolution, Burke had been generally supportive of the cause of the colonists in the American Revolution.

Taking Hayek’s point, classical liberals in the tradition of Burke and Smith do not reject the necessary hierarchy of society. Nor do they embrace sudden, transformative social change. As such, they can certainly be seen as conservative. However, they do seek sufficient freedom within society to allow people to “find their own level”, believing that there is a natural hierarchy of ability which will thus result in an ordered society, and a more desirable one than one in which hierarchy comes strictly from birth and rank.

In this sense, the freedom of a classical liberal society creates social order, and a more stable one than the sort that an ancien regime conservatism maintains. Indeed, arguably, at this point in history, it is only this Whig-ish conservatism which is commonly found within society. Ancien regime conservatism has virtually died out.

Entirely different are notions of politics or the human person in which it is held which all people are truly and fully equal — in ability and inclination as well as in human dignity. Such systems would indeed seem to lead quickly to a most undesirable oppression.

An Interesting Thought on State Universities

Some interestingly counter-intuitive thoughts on the UC student protests against rising tuition from David Henderson of EconLog:

Taxpayer funding of higher education is a forced transfer to the relatively wealthy

Socialist author Robert Kuttner once called Proposition 13, California’s 1978 property-tax-cut initiative, the revolt of the haves. The latest opposition by UC students to a 32% increase in tuition is a revolt of the “will-haves.”

Milton Friedman used to remark that the California government, with its state funding of higher education, taxed the residents of Watts to pay for the residents of Beverly Hills. I think Friedman exaggerated substantially. Even though the California’s tax system relies heavily on sales taxes, which probably makes the state tax system on net somewhat regressive, it’s still the case that a given Beverly Hills family pays much more in taxes than a given family in Watts. But Friedman also focused on family income of the student, and that’s misleading.
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The Road to Serfdom

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I do not endorse some of the overheated added commentary, but I believe Friedrich von Hayek’s warnings of the long terms dangers of a planned economy are just as prescient today as when the book The Road to Serfdom was published in 1944.  It is a short book and well worth the time it takes to read it. Some memorable quotes of von Hayek: Continue reading

Beatrix Potter, Capitalist Swine

[This is neither American nor Catholic, but it is, I like to imagine, mildly amusing in a bored-parent-on-a-Friday kind of way.]

As you can perhaps imagine, there is much reading in the Darwin family, as we consider it necessary to corrupt the dear little tabula rasas of our children with a mixture of facts and fairy stories from the very youngest possible age. And how better may one corrupt the youth then by wrapping up the harsh teachings of the dismal science in the charming trappings of a bevy of dear little fuzzy animals? Do not allow these subtle deceptions, gentle reader! As I shall demonstrate, under the cover of a whimsical, Edwardian children’s authoress, lurks a deadly capitalist in sheep’s clothing.

Attend, to The Tale of Ginger and Pickles (ebook available here)

THE TALE OF
GINGER & PICKLES

BY
BEATRIX POTTER


Once upon a time there was a village shop. The name over the window was “Ginger and Pickles.”
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They Only Donate Money

Every so often, when dealing with Church projects and non-profit work in general, one hears someone who does a lot of volunteer work toss off a disparaging remark alone the lines of, “Oh, those people. They only give money. You’d never see them down here working.”

Sometimes this is used to support a claim as to “who really cares” about an issue, along the lines of:

“Sure, you’ll find lots of [members of group X] a pro-life fundraising banquets, but you’ll never see them working at a crisis pregnancy center.”

or

“[Members of group X] may give money to ‘charity’, but you’ll never find them filling boxes down at the foodbank or working with at-risk kids.”

This has always struck me as a somewhat unfair criticism, for reasons I will get into in a minute, but I was particularly reminded of this last week when I had to go down to the diocesan offices to be trained to count and report the collections for the diocesan Catholic Services Appeal. The annual appeal provides a about the third of the operating expenses for the diocese — and since I deal with financial-ish stuff at work and I’m going to be rotating off the pastoral council in a couple months, I half volunteered, half was dragooned, into helping out with the processing of the collection this year at the parish. At the training session, I was particularly struck by the numbers of where the money in the appeal comes from:
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