dagblog - Comments for "Falling Behind the "Socialists""

Ah, I remember my childhood

Doctor Cleveland — Tue, 15 Sep 2009 15:58:53 +0000

Ah, I remember my childhood along the New England coast, and all the free salt.

Thanks, DF. I aspire to a world where everything I have to say about economics is tedious and banal.

Fair enough. I'm a big

Doctor Cleveland — Tue, 15 Sep 2009 15:57:20 +0000

Fair enough. I'm a big cherry-picker in this post. The Daimler thing and the exchange rate are also delicious Bings I've picked from an orchard I don't know well.

And let me be starightforward about my economic knowledge: I have almost none. I'm a layperson groping to understand the economics of the current crisis, and the problems with the conventional wisdom that failed to predict it. I'm always grateful for anything that adds to my udnerstanding of how the world, including the economic world actually works. My blogging contributions to economic debates will mostly be gadfly contributions: I don't have a good model, but I have developed an allergy to certain widely-respected ideological positions that don't seem to describe the world. (And my contempt for the chatterers on Meet the Press expresses my sense that they know even less than I, once you subtract the misinformation. You are better off asking someone at random than listening to Chuck Todd.)

As for trends, let me simply voice my layman's suspcions. I'm not entirely sure the data for the last several years is entirely accurate (as it is my understanding that a bubble, distorting asset valuation, can create illusory "growth"). More importantly, I am not 100% convinced that previous trends can be projected accurately on the far side of our current mess. There are moments when trends change. I have no idea whether this is one of those moments, but I can't be confident that it isn't.

And that said, sure. And if Germany (and France, and the rest of the EU) don't overtake us economically, that's fine with me.

Welcome to Dag, Dr.

DF — Mon, 14 Sep 2009 23:32:32 +0000

In reply to Falling Behind the "Socialists"

Welcome to Dag, Dr. C.

Economics is all about scarcity and, therefore, about choices. It's about weighing advantage versus disadvantage, opportunity against the cost of taking that opportunity. Anyone who thinks that any system, no matter its composition, is composed of nothing but advantage is simply not acquainted with the most basic economic thinking. Were people more versed in this sort of understanding, your thesis would be tediously banal.

Yet we don't live in that world, or at least not that society. For instance, I recently had someone tell me that producing salt had "zero cost" if one lives near an ocean.

As such, what you say bears being stated, loudly and often. Unfortunately, it's difficult to hear what you offer over the cries of "SOCIALISM!!" that have become so prominent, even as the picture of social mobility begins to change both in the US and in Europe.

Yeah, I don't dispute the

Michael Wolraich — Mon, 14 Sep 2009 23:09:00 +0000

In reply to Thanks, Genghis. Good points,

Yeah, I don't dispute the heart of your argument, but I reserve my constitutional right to quibble about the details. German unemployment has dropped below ours, but you're comparing unusually high U.S. unemployment to unusually low German unemployment--which constitutes cherry-picking. It's possible that this change represents a new trend, especially since German's unemployment level has been artificially high because of reunification, but I wouldn't bet on it at this point.

It's the trends that make people more anxious about China. If the Chinese can maintain their incredible growth rate, they will eventually surge past us regardless of how the U.S. economy performs. Europe, on the other hand, would have to reverse decades of comparatively lethargic growth in order to overtake us. That's not to say that current growth trends can't change, but we just don't have evidence that Europe is moving strongly in that direction, not yet anyway.

(Of course, there's also a question about the value of economic growth in the first place, but that's for another blog post.)

Thanks, Genghis. Good points,

Doctor Cleveland — Mon, 14 Sep 2009 22:53:43 +0000

In reply to Thanks for joining us, Dr. C.

Thanks, Genghis. Good points, and well taken. I don't mean to idealize the German system, either, and I'm not calling for its wholesale adoption.

The point about it being harder to start a business in Germany is excellent, and I'll confess that I was projecting my American assumptions there. I would quibble a bit with your quibble about higher European unemployment. That has been historically true, but at the moment we are hitting European unemployment levels. Whether those levels will fall again to something like the postwar norm or remain consistently higher has yet to be resolved.

I think the heart of my argument is that most American opinion-makers haven't thought lucidly about the European model at all. But I'm grateful for your thoughts.

Thanks for joining us, Dr. C.

Michael Wolraich — Mon, 14 Sep 2009 22:42:22 +0000

In reply to Falling Behind the "Socialists"

Thanks for joining us, Dr. C. I agree with my Canadian friend (much as that pains me), excellent blog. Your point about unquestioned assumptions regarding both Europe and China is very sharp, and I agree that we could learn much from European economic models.

But if I may quibble, I think that little is gained by regarding competition with either Europe or China as a horse race where one must choose between three monolithic economic models. Europe in particular is very complex, with various models employed by its members. We should certainly emulate German auto industry successes, and for various reasons, we need a stronger safety net, but it doesn't follow that we should seek to become like Germany.

For instance, it's nice to think that factory workers in Germany can easily start a cafe, but in general, the U.S. offers a much more hospitable environment for entrepreneurs. It's difficult to get high risk loans or investments in Germany, which has a conservative and insular financial community. Moreover, though an unemployed factory worker in Germany would have much better benefits than one in the U.S., it would be harder on average for her to rejoin the workforce because of chronically higher unemployment. When it comes to entrepreneurship, we'd do much better to emulate Israel, which has a more dynamic entrepreneurial environment AND a better safety net.

As for Canada, we should emulate their wide open spaces.

Thanks very much,

Doctor Cleveland — Mon, 14 Sep 2009 22:15:20 +0000

In reply to Excellent post. The same

Thanks very much, acanuck.

Absolutely, the same applies to Canada, whose success is also inconvenient for American supply-side ideology. I wrote about Europe because it seemed so obvious to everyone on Meet the Press that Europe was lagging behind us.

Lots of Americans use China for rhetorical purposes, to build their case for making America an unregulated capitalist libertarian wonderland. But the case isn't sound. And the sad part is, a lot of the people making the case actually seem to believe it.

Excellent post. The same

acanuck — Mon, 14 Sep 2009 21:53:06 +0000

In reply to Falling Behind the "Socialists"

Excellent post. The same "socialist" smear is applied to Canada -- though less often these days, since proximity means more Americans have seen first-hand that our system works. If evidence were needed, our current government (which labels itself "Conservative") has made no move to dismantle any part of what right-wingers define as a welfare state. In fact, it might sweeten employment insurance in a bid to retain power.

Fact is, our single-payer health care and robust EI program encourage country-wide labor mobility and lower employer costs, making for a freer job market than in the United States. Stringent rules on mortgages and banking practices generally helped us avoid any sub-prime or lending crash (though rates did follow the U.S. lead). Jobs were lost (many in auto-making) but housing prices barely dipped. Bottom line: our recession is officially over.

Your point is an important one: knee-jerk ideological revulsion to anything that smacks of socialism has cost (and will cost) the United States dearly. The gutted health-care reforms that remain on the table are a manifestation of that tunnel vision. Even the largely uninformed public senses that the insurance industry is dragging down the economy, but for too many legislators, it's a sacred cow that can't be touched. Too bad. If the States can't solve that straightforward, no-brainer problem, it's fucked.