BC’s weekend reads

  1. Power, Islam, and Pragmatism in Turkish Strategy
  2. Anthropology, Empire and Modernity
  3. Would New Borders Mean Less Conflict in the Middle East?
  4. Cairo: A Museum of Ghosts
  5. Obama in London
  6. Rand back to being Rand
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Percentages that Fairly Scream and, “Catastrophe” is a Greek Word

The WSJ of 7/9/15 shows a comparative table for some European Union countries of spending on pensions as a share of GDP. This comparison denotes roughly the drag effect that payments to retirees has on the whole national economy. To no one’s surprise, Greece tops the list with 14.4%. Germany is at 9.1%. This may seem like a small difference but when it’s turned into actual, absolute figures, the difference becomes downright striking. They scream!

The 5.3 percentage points difference can be applied to both countries’ GDPs (or GDPs per capita, same thing in this case). The International Monetary Fund gives Germany’s GDP per capita for 2014 at about $46,000 and Greece’s at about $26,000*. Pensions cost Germany $4,150 annually for each man, woman and child. Pensions cost Greece $3,400 annually for each Greek. It does not look like the Greeks should be able to afford this kind of disproportionate burden.

Suppose Greece’s pensions took the same bite out of its GDP as Germany ‘s does out of its GDP, 9.1% . In this scenario, today, the Greek economy would have about $1,400 each year unspoken for for each man, woman and child. This money would still be available for spending, as it is through pensions. It would also, however, be available for both public and private investment.  That’s $1,400 each year; that’s a lot by any standard. That’s money needed to rejuvenate the Greek aging economic plant.

How realistic would such a change be, involving raising the legal age of retirement, I mean? The Germans’ and the Greeks’ life expectancies are virtually identical ( 80.44 vs 80.30, in CIA Handbook). There seems to be a little wiggle room to move there. Note that raising the age at which people can claim a pension is doubly beneficial: It reduces the number of pensioners while raising the number of workers who support the pensioners. Some will argue that raising the age of retirement is a pipe-dream in a country such as Greece where there is chronically high unemployment. I think this reasoning is wrong. Many Greeks don’t find a job because investment in Greece is insufficient. People need tools to work. What is certain is that the current dishonest Greek government policies, soundly supported by the exercise of a majority of Greeks’ votes cast, are not going to draw foreign investment. The money to improve both Greeks’ chances of employment and their productivity will have to come from within. One significant source is described above: Close the pension option for one or more years to healthy Greeks. It will provide both ready investment money and confidence abroad.

Note that raising the legal age of retirement is a purely political decision. The Greeks can do it any time they want. They can do it overnight. Perhaps, there will soon arise a political party in Greece that will proclaim the truth: It’s not the mean lenders, it’s us!

This is a fairly simplistic reasoning, I know. The general age of the population places constraints on the practicality of raising the age of legal retirement (but an older population also makes it more desirable; think it through). I have heard leftist demagogues on National Public Radio argue that the big bite that pensions take out of the Greek economy is not the Greeks’ fault, that it results more or less directly from the fact that Greece has an old population. Sounds good but the fact is that the Germans are, on the average, quite a bit older than the Greeks (Median age of 46.5 vs 43.5 according to Wikipedia.) Don’t believe experts on NPR, not even on simple facts!

Alternatively, the Greeks could begin collecting their moderate taxes like the Germans instead of like the Italians. They might also remember that “catastrophe” is a Greek word.

* The figures are “PPP” meaning that they take differences in buying power in the two countries into account.

Senator Rand Paul on Taxes: Chip off the Old Block

Sen. Rand Paul, the nominally Republican presidential candidate, has inherited an uncommon trait from his father. He manages to inspire distrust in his credibility even as he conveys a message I want to hear and believe. On Thursday June 18th 2015, he had an op-ed in the Wall Street Journal about his proposed tax reform. Any national tax reform involves fiendishly difficult calculations about complex matters. Sen. Paul wants to junk the whole repulsive, disgusting, oppressive income tax and the IRS in favor of a flat tax. Music to my ears but difficult to believe his assertion that this replacement would be revenue neutral.

I don’t especially want federal revenue neutrality. I want the federal government’s share of GDP to decline. Yet, I understand that Mr Paul wishes to avoid conducting two discussions in one. (Junk the personal income tax; decrease the power of the federal government.) So, he has not done anything wrong there.

My problem is that in the course of a longish piece, he misuses grossly two sets of simple, basic economic terms. In this second paragraph, he refers to “duties and tariffs…” Toward the last third, he states something about “small businesses” and “corporations.” Both statements would be unacceptable in a sophomore basic economics class, even in a introduction to economics in a reasonably good high school.

Here is the first mistake: duties and tariffs are the same object. A “duty” is a tax on imports (or, very rarely, on exports). A tariff is the mechanism used to levy such taxes. It could be 10% of the value of the import or it could be $1 per bottle, for example. (Both methods are common.) That’s it. Referring to “duties and tariffs” proves beyond any doubt that you don’t understand the ordinary and oldest form of taxation. It looks bad in an essay devoted to …taxation.

Contrasting, or building any sort of parallel construction between “small business” and “corporations” is a common mistake but it does not belong under the pen of an elected politician who wants, as his main contribution, to overturn the way we have been financing most government for fifty years. “Small” businesses are in fact small. “Corporations” can be of any size, including two people, such a dentist and his wife. Most American corporations are small. The word corporation refers to a legal arrangement. It has nothing to do with the size of the business.

It’s as if Sen Paul did not know simple stuff when he talks about complex stuff. It’s as if, even more seriously from the standpoint of his credibility, he had no one to proofread his writing for blatant errors. It’s as if he were so convinced of knowing everything that he did not need -ever – anyone looking over his shoulder. If these two mistakes are the product of carelessness, they also imply hubris. That’s worse than simple ignorance because it has no cure in a grown man.

How can I trust someone to unravel the complex relationship between taxes, government revenue, economic growth, and personal liberty when he sounds like one of my indifferent former students?

The GOP as a Homosexual Cabal

Reading the capital letters between the stately lines of today’s Wall Street Journal, I conclude that Speaker of the House Dennis Hastert paid 3.5 million dollars in hush money to a blackmailer with whom he had homosexual relations before he joined Congress. (They may also have been pedophilic relations.) As the WSJ relates, Hastert’s elevation to the Speakership was followed by a period when he was reproached for his limp handling of  the case of Mark Foley, a Florida Republican (GOP) who admitted to sending sexually charged messages to a House page (un page, en Francais). The page was a handsome young man.

All this leads me to wonder whether the GOP – for which I normally vote –  was not for a while simply a homosexual conspiracy. I might not mind but I would have liked to know. And I don’t like this closet business (I don’t mind simple discretion.)

All this wondering leads me to wonder whether gay activists will claim Hastert as one of their own. Of course, it’s disturbing that the politically active element of the gay movement did not claim Foley, as they have failed largely to claim thousands of pedophile priests. Yes, of course, gays are not necessarily pedophile but male pedophiles who specialize entirely in boys are homosexuals, it seems to me. I think a male homosexual is a man or boy who is sexually stimulated by other men or boys. Shoot me!

The Most Embarrassing Factions of the US-Cuba detente

I can only list, in order of magnitude, three: 1) Republican hawks, 2) condescending Leftists, and 3) anti-Americans abroad.

In some ways none of this is surprising. All three of these factions hate each other, mostly because they are the least libertarian factions in the world (familiarity breeds contempt, it is often said).

Republican hawks are first on my list because they are the most dangerous. This is a deeply reactionary faction that does not care one iota about the national interest. It is a vulgar mob that has no need for nuance or depth. One of the state of Florida’s Senators, Marco Rubio, exemplifies this isolationist faction. This is demagoguery at its finest. It also goes a long way toward explaining why I will never, ever be a Republican, despite the honest efforts of courageous statesmen like Ron and Rand Paul.

Condescending Leftists are second because of their reactions to the beginnings of the end of a vicious, self-defeating embargo: Decrying the fact that Starbucks and McDonald’s will soon be forcing poor, naive Cubans into becoming customers with actual choices in an actual marketplace. According to the worldview of these Leftists: the lives of Cubans have been better than those of Westerners because of its simplicity (this simplicity was brought about, of course, by the heavy-handed tactics of the Castro dictatorship, but somehow this always fails to make the final cut of the condescending Leftist’s narrative). Capitalism will put an end to the simple lives of the Cuban people, and this is a bad thing for both the world and the Cubans themselves.

Embarrassing and disgusting.

The last faction on my list, anti-Americans abroad, have taken the Obama administration’s decision to reach out to Cuba as an excuse to lie to domestic factions everywhere. They have seized upon the fact that the US sometimes pursues bad policies, and have turned it into a soapbox preaching session for all of the gullible schoolboys and girls in the world who instinctively hate the world’s liberal hegemon. What is lost (or, more likely, ignored) in these preachers’ message is the fact that the US is changing its bad policy. The same cannot be said for the tired tropes wielded by aging anti-Americans in the name of some variant of socialist (whether national or international) revolution.

Some notes in the margins:

  • Cuba will not become free or (or) democratic overnight.
  • It will not become wealthy overnight, either. In fact, there is bound to be a whole lot of cronyism in the near future, as Castro’s butchers and henchmen gobble up much of the wealth that will inevitably flood Cuba’s markets. Remittances will likely increase as well, which means that the cronysim of Castro’s henchmen will be offset by the influx of cash from the US. This, in turn, means that the Castro dictatorship is likely to be around for a lot longer than anticipated.

Peggy Noonan’s piece in the Wall Street Journal is well-worth reading. Observe:

A closing note: I always thought, life often being unfair, that Fidel Castro would die the death of a happy monster, old, in bed, a cigar jutting out from the pillows, a brandy on the bedside table. My dream the past few years was that this tranquil end would be disturbed by this scene: American tourists jumping up and down outside his window, snapping pictures on their smartphones. American tourists flooding the island, befriending his people, doing business with them, showing in their attitude and through a million conversations which system is, actually, preferable. Castro sees them through the window. He grits his teeth so hard the cigar snaps off. Money and sentiment defeat his life’s work. He leaves the world knowing that in history’s great game, he lost.

Open the doors, let America flood the zone and snap those pictures. “Fidel! Look this way!” Snap. Flash. Gone.

Ed Lazear’s WSJ op-ed on California’s water problems

Ed Lazear had an outstanding op-ed, “Government Dries Up California’s Water Supply,” in the June 26 Wall Street Journal

It brings me back to 1982, when I first moved to California from Texas. Less Antman had the California Libertarian Party hire me as research director, and one of the biggest political issues at the time was water. The fight was over a ballot initiative authorizing construction of a Peripheral Canal around the San Joaquin-Sacramento River delta to divert more water to Central Valley farmers and southern California. It would have been an enormous, expensive boondoggle that united environmentalist and libertarians in opposition. I ended up not only writing but speaking before all sorts of audiences about the issue. My studies made me quite familiar with the socialist bureaucracy, much of unelected with taxing power, which manages California’s feudalistic water system, severely mispricing and misallocating water.

Fortunately, the Peripheral Canal went down to defeat. But little was done to reform California’s water system, and Lazear provides an excellent survey of the myriad drawbacks still plaguing it today. His solution: “Rather than praying for rain, we should get government out of the water-allocation business.” One noteworthy detail he doesn’t mention is that even in non-drought years, because the system encourages overuse of water, the Central Valley’s ground water continues to get depleted. This ensures that each subsequent drought will generate ever more serious problems. Worst of all, one solution being pushed during the current drought is a jazzed up version of the Peripheral Canal.

HT: Corrie Foos

Around the Web

  1. Reading Tocqueville in Qatar and at Georgetown
  2. Colonialism and Anti-Colonialism: Blame Nationalism for Both
  3. The Issue of Selective Prosecution
  4. Eric Prince: Out of Blackwater and into China; The WSJ‘s weekend interview with the founder of Blackwater is particularly good. If you hit a paywall, just copy and paste the title and enter it into your Google search bar. Click on the first link and voila.
  5. A short history of economic anthropology (grab a cup of coffee first)
  6. The market may be colorblind, but politics isn’t: Race, class and economic opportunity