The PIIGS still fly

[dcarrigg]

Re: The PIIGS still fly

You're the one who put forth the theory that China's incredible growth is made easier because they started further behind, not me. So shouldn't all of Mississippi's setbacks have been an advantage? Shouldn't it grow faster the more behind it gets? Isn't it easier to "catch up?" That is, after all, what you said about China.

And don't give me the Civil War excuse. That was 150 years ago. Japan occupied and China just 70-some-odd years ago. Remember the rape of Nanking? Look at the city today...it's not a port either, just a town on a major river, just like most of Mississippi. Why can China do it but Mississippi can't? Is there maybe something at work other than "it's easier to catch up when you start from behind?"



As for the California, Massachusetts bit, the easy answer is California never surpassed Massachusetts. At least not on a per-capita basis. It is a much bigger place, that's for sure. But I'm not talking about population flows. I don't care if China's economy is bigger than Bangladesh's because it's a bigger area with 10 times the people. I'm interested in levels of economic development--more GDP per capita than just comparing size.

Anyways, I'm not too interested in getting distracted by all the examples.

My point was simply that the idea that being backward makes economic growth easier--that it's easier to "catch up"--doesn't really make a lot of sense. Or at least it only applies to very select situations and not to all, which means it's not some ironclad rule and requires other variables and conditions to be set right in order to mean anything.

[vt]

Re: The PIIGS still fly

India will still lag China for a number of years, but China's one child policy along with an aging population will slow growth even more in the next decade while India's growth accelerates and passes China. China's inherent weaknesses will become more evident. You are already seeing more rapid on shoring to American manufacturing and rapid growth of new technologies will keep the U.S. as a major economic power.

http://fortune.com/2016/05/19/china-india/

Mississippi vs. Massachusetts? Come on DC that is a lousy comparison.

Boston developed as a major Atlantic seaport starting in the 1600's. Mississippi didn't see any population until the early 1800's and was agricultural in nature. Then the civil war further destroyed their economy. The population of Mississippi was a bit over 10,000 in 1800; Massachusetts was 422,000.

The real question is why did California economic surpass and far exceed that of Massachusetts despite the superior educational infrastructure of Massachusetts for two centuries before California growth exploded?

[dcarrigg]

Re: The PIIGS still fly

One man's nitpicking is another man's genocide...I suppose... I still insist it's odd to lump the whole together like that. It's as if WWII were just about one people beating on themselves or something. It really makes no sense.

As for the Turks...maybe things would have gone the other way if men other than Churchill, Roosevelt, and Stalin were at the helm...who knows?

But I still think words matter. I think they have meaning. And I think when we get all fuzzy with them, we lose track of clear thinking.

See, you're lumping capitalism in with "free markets" and "Protestant ethics." Maybe there's some relation. But they can't all be the same concept. To me they are three different things.

1. Capitalism is a specific thing in my mind. It refers to the post-feudal development of the idea of land, labor and money as commodities that began in the Netherlands (hence the namesake of this website), and spread to England. The process began roughly in the 15th century in the former and the 16th century in the latter. It grows in about a hundred-year process. It begins with closing off the commons and ending serfdom. Then land is capitalized. Then serfs end up landless and congregate in urban areas. From there you get wage labor. And at this point you begin to get the seeds of land and large labor-employing concerns as the bedrock of capital. The first stock exchanges usually pop up around this point. And legal protections for private property expand. Meanwhile taxpayer-funded social welfare and dedicated police forces arrive on the scene around the same time to mitigate the fallout from the process. A society in which this transformation has occurred--in which land, labor, and money are treated as legally-enforced commodities--is a capitalist society. You might have some other definition. But this one at least is rooted in the history of capitalism.

2. Free Markets are another thing entirely. This is a much newer and much more complicated concept. The phrase itself comes to life in the 1920s as propaganda for business concerns. But soon Markets take on a life of their own and a very different conceptual meaning. By the 1940s, this idea is rooted in the ideas of physical equilibria and inspired by classical thermodynamics. Roughly the idea is that supply and demand of goods (and eventually services) will reach an optimum price equilibria if left alone, assuming all agents are rational maximizers and economic systems tend to a 'natural' equilibrium. So, it rests on the assumptions that individuals and businesses are utility maximizers and that supply would exactly meet demand for any given good or service with free trade if there was no interference. "Markets" generally refer to this abstract economic system which has a natural equilibrium (but cannot be seen or measured by any human means in physical reality), and "Free Markets" generally refers to situations in which outside agents (most likely governments) are prevented from interfering with that abstract economic system. This means you can have capitalism without free markets, and you can have free markets without capitalism. This was not a controversial idea until very recently. Market Socialism is an old idea, for example. In fact, there might be times (and I firmly believe there are) that free markets are bad for capitalism...

3. The Protestant Work Ethic is an idea conjured up by Max Weber in the 1900s in The Protestant Work Ethic and the Spirit of Capitalism. So it's a bit newer than Free Markets. But actually, it lays some of the framework, and maybe is where some of the confusion comes from. Weber basically says that the spirit of capitalism (see how we're getting religious and spooky already) favors the rational pursuit of material accumulation (this is almost, but not quite, the rational utility-maximizing agents in the free market model). Unlike the free market model, which assumes all individuals are maximizing utility all the time, Weber doesn't think everyone has this spirit. In fact, he thinks it's a very individual thing, and that it's not even confined to the West. BUT, where he does find it in large groups of men is within Protestant cultures. Especially Calvinists because of predestination wherein it's assumed God gives poverty to the sinners and riches to the pious here on Earth, because your fate is sealed and it is already known whether you are going to heaven or hell. Therefore, even if only to signal religious virtue, Calvinists would seek to accumulate material wealth more than other groups of people. That's literally the Protestant Work Ethic. That's what it means. Catholics meanwhile insist that people have free will and their choices on earth determine whether they go to heaven or hell, which means the poor and kind have better odds than the rich and mean. So Weber figures the Catholic Ethic leaves less incentive for individuals to maximize wealth. And so that's how Max Weber rationalizes why England is wealthier than Ireland and The Netherlands are wealthier than Spain, etc.

So see what I mean? These are 3 different, if related, concepts. And by just blanket-labeling them the same thing, we're losing any sort of meaning here.

So I don't understand--I mean I truly and honestly don't understand--what you mean when you say:

The best way to understand the Protestant ethic, free markets, capitalism, or whatever you want to call it

I think maybe you mean American culture or Anglo business culture or something like that? I really don't know.

When you say:

is to move abroad to an entirely different culture and speak the native language and make a living there.

I am certain I have less experience than you. But I have done it, if only for a few months. I'm not monolingual. And while I believe that Greece is more corrupt than the US, I'm pretty sure the US is more corrupt than, say, Germany.

And I'm not trying to rail against the US either. I'm really not. None of this was a screed against capitalism nor was it against America. In fact, if you've followed my posts over the years, you'd see I'm a pretty big America-booster.

I'm trying to rail against magical and sloppy thinking. We cannot afford to just lay back comfortably numb, joint in hand, waving the smoke away saying, "Capitalism, free markets, whatever man, it's all the same thing, dude..."

Because then people who worship free markets and blindly believe that this magical equilibrium exists always and everywhere even in cases where it is obviously failing to materialize and under conditions where it was never meant to work in the first place (monopoly, oligopoly, cartels, monopsony, etc) and with items and services that were never meant for material gain or to be private property in the first place (people, air, space, water, etc), end up really messing capitalism up badly while thinking they're rooting for it and doing it good.

[gnk]

Re: The PIIGS still fly

I still stand by what I wrote above. Broadly speaking, there's more truth to it than the nitpicking details/exceptions you wrote above. My people, the Greeks, have had their share of ruling and being ruled. In the 1600-1700s North African pirates and Ottoman Turks constantly raided Greek villages, enslaving people and doing other horrible acts to Greeks. Why did the Ottomans ultimately fail?

But I think something else is going on. In the history of the US, there have been periods of excessive market and government corruption followed by good government movements and regulations. Guilded Age, Roaring Twenties... We happen to be going through a corrupt era, but that doesn't mean the broad theories that guide us are faulty. I think it's a generational thing, and it too will pass.

The best way to understand the Protestant ethic, free markets, capitalism, or whatever you want to call it - is to move abroad to an entirely different culture and speak the native language and make a living there.

Then you'll understand my view. I worked in the US, and I have worked abroad. I now see the US in a different light. It's not just its abundant resources or imperialism that gave it wealth. It's much, much greater than that. And that, I believe holds true for many other Western countries. And the fact that they are the most culturally progressive societies on the planet? Not a coincidence. Many moving parts/reasons, as I said before.

And guess what. There's no comparison when it comes to corruption. The US, however corrupt you see it, and it is, is still better off than 90% of the rest of the world.

[dcarrigg]

Re: The PIIGS still fly

"Right, as the world goes, is only in question between equals in power, while the strong do what they can and the weak suffer what they must."

-Thucydides

That state of affairs has existed for millenia and still does. Let's set aside the sanctimonious judging. Historically speaking, every region of the world has had it's share of blood on its hands. Every region. They all had their turns.

Yet the truly historical explosion in technological advances, food productivity, medical miracles, etc... and the "democratization" of wealth occurred in the system you despise.

No other system has come even close at such productivity. Not by a longshot.

And furthermore, as of today, in our times, LGBTQ rights, female advancement, the constant fight for racial equality, and free thought and free press and freedom to criticize past government actions are usually found in countries with what type of system?

Let's put things in perspective.

The self-flagellation in the West is getting old.

The Melian Dialogue gets too much schrift. The real point of The History of the Peloponnesian War was that if debased and greedy enough, the people would elect a an idiot demagogue businessman like Kleon who sounds good and takes them to a disastrous war that ends democracy for 2,000 years...

The mistake you make is assuming the West is one unified bloc with a totally shared identity and values, even as you assert that the Protestant half is harder working and more virtuous than the other.

So, I think it's hardly self-flagellation if I point out the Brits committed crimes against my ancestors. It wasn't we that were doing those crimes. It was them. And who gets to be "The West," then? Who hails from the east of whom? (PS: The Hun always come from the East...hence the Atilla reference if it went over your head).

BTW--there's a dark side to rapid growth the Chinese must face too, and I'm certain the Tibetans and Uyghurs are quite aware of it.

But I find it laughable that people in this day in age still think the Protestants found their wealth by working harder than the Catholics. Had a couple of wars gone the other way, I bet Catholics might tell the same tale about lazy Protestants. It's a convenient story for the inheritors of wealth gained from ancestors' war victories to tell themselves...that it's their own philosophy/religion/hard work and respect for property that made them wealthy, not the property their ancestors stole and the people their ancestors subjugated for their personal profit.

And that's the story you're telling yourselves now. That commitment to free markets created personal liberty and food surpluses and technological breakthroughs. It's just the new religion. From Calvin to Samuelson...actually, the two have a hell of a lot in common, so it's fitting one becomes the successor to the other. You think free trade is free? That 2 trillion of crap can just sail back and forth on the oceans without a multi-trillion dollar navy to keep the game going?

Anyways, you tell me of the glorious technology only the Free Market can make, as you type on a computer probably with an LED screen displaying sampled images (but if not, then maybe on a CRT monitor showing interlaced images, or an LED smartphone with heterotransistors), sending information through microchips fashioned by excimer lasers, through a global information system enabled by satellites and masers...but all the building blocks that came from a fallen nation with no Intellectual Property protection or lawsuits for patent infringement are quickly forgotten.

It's funny, because you keep referring to a "system I hate." And to be honest, I'm not sure what system that is. I am no proponent of socialism or communism. I'm a republican after all. I just think Markets can ruin capitalism. I've seen it happen.

And I don't like answers to problems that involve spooky action at a distance--invisible hands, Magic Markets, some vague Protestant work ethic--none if it is very tangible. I can point to tangible reductions in private property "rights" and tangible investments in people that produce tangible results. I don't need to lean on the unseen and ethereal as explanations for growth in material goods.

I think "the market" had very little to do with rights being extended. I think the blood of John Brown and Inez Hilholland and Medgar Evers and Harvey Milk did a hell of a lot more to extend rights than some vague invisible hand. And these are real people who took real action I can name and identify on real dates. Not just "well markets were working so things worked out!"

See, you think I hate capitalism...but that's not really what I'm hating on. What I'm hating on is magical thinking...

[gnk]

Re: The PIIGS still fly

"Right, as the world goes, is only in question between equals in power, while the strong do what they can and the weak suffer what they must."

-Thucydides

That state of affairs has existed for millenia and still does. Let's set aside the sanctimonious judging. Historically speaking, every region of the world has had it's share of blood on its hands. Every region. They all had their turns.

Yet the truly historical explosion in technological advances, food productivity, medical miracles, etc... and the "democratization" of wealth occurred in the system you despise.

No other system has come even close at such productivity. Not by a longshot.

And furthermore, as of today, in our times, LGBTQ rights, female advancement, the constant fight for racial equality, and free thought and free press and freedom to criticize past government actions are usually found in countries with what type of system?

Let's put things in perspective.

The self-flagellation in the West is getting old.

[dcarrigg]

Re: The PIIGS still fly

You're trying to sell the protestant work ethic to an Irish Catholic, gnk...you'd have better luck selling menorahs in Medina in August...

We know our history well enough to know that it wasn't Calvin or Luther or hard work or "respect for property rights" that made Attila wealthy...

And we also know what they do with all that extra food their "system" creates...found that one out the hard way in '47.

[gnk]

Re: The PIIGS still fly

Economics aside, Culture plays a huge role. It's been said that Capitalism arose from the Protestant Reformation, thus the requisite culture existed prior to the economic theory.

This discussion could go on forever. Too many moving parts.

But ask yourself this - in what type of economic environment have most advances in science, medicine, technology etc... have been made? Did the human motivation specific to that type of economic environment play a role? Respect for property rights? What economic environment has cured the most people and fed the most people and produced the most food?

And what about climate? Geology? Again, too many moving parts.

What works here may not work there...and vice versa.

[dcarrigg]

Re: The PIIGS still fly

dcarrig you are a marvel at fast research. iTulip's Metalman used to be able to do that too.

I don't dispute you basic premise, that blind faith in magical market forces is misguided.
But that may not adequately explain the India China differences.

India was aligned with the USSR during the cold war, and was hardly a zealot for free market, Laissez-faire policies.

The education differences in India and China are real, but don't seem big enough to me to be causative.
The vast rural populations of China were not highly educated overall, and modern factory jobs in low wage regions plan for an illiterate workforce.
I have personally created pictorial assembly instructions that avoid any need to read any language to assemble video cameras.

The internal policies and economic strategies of these two huge countries are way beyond my knowledge to explain.
But it seems plausible that the difference might be, at least in part, consistent government authority pursuing a workable and detailed plan for development.
An authoritarian government driving a population, often harshly, seems important to what we observe in China, and seems largely absent in India.

I would point to South Korea as a supporting example. President Park Chung-hee is widely considered a tyrant, but he brought that nation up the development curve.

All this supports your claim that the magical Market (bless His holy name) just does not work as advertised.
Neither China nor South Korea had free markets working internally during their boom times -they were barely markets at all.

But see, I think that basic literacy and arithmetic--even if not sufficient for factory wage labor--is hugely important for an economy. In India, if one out of three people can't do it, and in China they can, these are people who might be able to understand all sorts of things in life--even purchases--basic, simple contracts--pass on instructions--keep more vaguely up to date with broad ideas and news. Hell, even to read the job ads to discover a factory is coming in a few towns away might be a basic advantage that has huge economic effects.

It's more than what you do at the job.

Ditto with life expectancy. How do you get someone a 30 year mortgage when half of everyone is dead before 50. How do you even begin to invest in kids when they drop like flies before 15? After all, take away the commodities and the capital, and what's left but people? Before we went Market-crazy and renamed people "human capital" and relationships "social capital" and democracy "political capital," I think the simple fact that investment in people pays off was far more obvious.

But maybe that's just the New Englander in me always trying to promote our City on a Hill--the Hub of the Universe since the 17th century--a 400-year-long utopian experiment in democracy and education that hasn't run its course yet...

But ask even a vulgar, undereducated, drunken Bostonian why Mass does better than Mississippi, and he's liable to know the answer...

It ain't just the infrastructure and capital investment...and it's certainly not free markets, a lack of regulations, and less government interference...

[thriftyandboringinohio]

Re: The PIIGS still fly

You think maybe it has something to do with the fact that China invested much more in education and healthcare than India, and made access to basic levels of each universal while India let the "free market" rip? And if so, does that mean that non-market forces might have more influence on economic growth than market forces..

dcarrig you are a marvel at fast research. iTulip's Metalman used to be able to do that too.

I don't dispute you basic premise, that blind faith in magical market forces is misguided.
But that may not adequately explain the India China differences.

India was aligned with the USSR during the cold war, and was hardly a zealot for free market, Laissez-faire policies.

The education differences in India and China are real, but don't seem big enough to me to be causative.
The vast rural populations of China were not highly educated overall, and modern factory jobs in low wage regions plan for an illiterate workforce.
I have personally created pictorial assembly instructions that avoid any need to read any language to assemble video cameras.

The internal policies and economic strategies of these two huge countries are way beyond my knowledge to explain.
But it seems plausible that the difference might be, at least in part, consistent government authority pursuing a workable and detailed plan for development.
An authoritarian government driving a population, often harshly, seems important to what we observe in China, and seems largely absent in India.

I would point to South Korea as a supporting example. President Park Chung-hee is widely considered a tyrant, but he brought that nation up the development curve.

All this supports your claim that the magical Market (bless His holy name) just does not work as advertised.
Neither China nor South Korea had free markets working internally during their boom times -they were barely markets at all.

[dcarrigg]

Re: The PIIGS still fly

dcarrigg, you seem to have answered your own question.
Back in math class we said "necessary but not sufficient", or the associated phrase "if and only if"

One necessary factor for a nation to show the sorts of explosive growth we are discussing is it must be underdeveloped.
But that alone is not sufficient.
Some economies will lie fallow for generations because they lack other necessary conditions.
Chad has never had a consistent and intelligent set of leaders and policies or even the basic rule of law.

India versus China is a more interesting pair to compare and contrast.
Which means I can't explain why India is running 20 or 30 years behind China in development.
They are pretty similar in important ways. Both huge nations with large populations, both obtained their current political systems in the late 1940s.

So you are correct that beta convergence alone does not explain it all.

You think maybe it has something to do with the fact that China invested much more in education and healthcare than India, and made access to basic levels of each universal while India let the "free market" rip? And if so, does that mean that non-market forces might have more influence on economic growth than market forces? And if that were the case, then what does that say about The Market being a panacea?

Is beta convergence really at work here? Does the fact Deng liberalized the small manufacturing and retail sectors really account for the majority of this discrepancy? Or might the massive investments made a generation earlier in education and basic health actually be something that comes with a payoff later?

[thriftyandboringinohio]

Re: The PIIGS still fly

You're not the only True Believer to assert that without a shred of evidence to back it up. Economists call it "beta convergence theory."

The thing is, if it were true, then why hasn't Mississippi exploded in growth to catch up to Massachusetts? Why hasn't West Virginia overtaken New Jersey? Why hasn't Wales ever burst on the seen to surpass London? Why hasn't Haiti exploded past the DR? Why hasn't Bangladesh started smaller with less of a base than India and leapfrogged it? Why is Romania still so much poorer than France? Why is it Afghanistan is STILL so much poorer than all of its neighbors? Chad might be the poorest, least developed, smallest country on earth by that measure. Its GDP growth was NEGATIVE 7% last year. Why isn't it growing gangbusters at 50% per annum?...

dcarrigg, you seem to have answered your own question.
Back in math class we said "necessary but not sufficient", or the associated phrase "if and only if"

One necessary factor for a nation to show the sorts of explosive growth we are discussing is it must be underdeveloped.
But that alone is not sufficient.
Some economies will lie fallow for generations because they lack other necessary conditions.
Chad has never had a consistent and intelligent set of leaders and policies or even the basic rule of law.

India versus China is a more interesting pair to compare and contrast.
Which means I can't explain why India is running 20 or 30 years behind China in development.
They are pretty similar in important ways. Both huge nations with large populations, both obtained their current political systems in the late 1940s.

So you are correct that beta convergence alone does not explain it all.

[dcarrigg]

Re: The PIIGS still fly

But our grandfathers didn't worship The Market.

True believers now call anti-trust enforcement "overregulation," or "socialist government-interference."

https://www.cato.org/publications/co...inst-antitrust

[dcarrigg]

Re: The PIIGS still fly

A nation and a company starting from a small base can grow much faster than a mature, older demographic nation.

You're not the only True Believer to assert that without a shred of evidence to back it up. Economists call it "beta convergence theory."

The thing is, if it were true, then why hasn't Mississippi exploded in growth to catch up to Massachusetts? Why hasn't West Virginia overtaken New Jersey? Why hasn't Wales ever burst on the seen to surpass London? Why hasn't Haiti exploded past the DR? Why hasn't Bangladesh started smaller with less of a base than India and leapfrogged it? Why is Romania still so much poorer than France? Why is it Afghanistan is STILL so much poorer than all of its neighbors? Chad might be the poorest, least developed, smallest country on earth by that measure. Its GDP growth was NEGATIVE 7% last year. Why isn't it growing gangbusters at 50% per annum?

If all you have to do to achieve high economic growth is begin more backwards with less development than your competitors, then why are so many places in the world perpetually poor compared to their neighbors?

I mean if beta convergence works---if we're all trapped in this teleological tale where The Market (bless His holy name) uses spooky action at a distance to magically make poor countries grow faster than rich ones, then how exactly was it the rich ones got rich in the first place?

Was it just Markets' Holy Will and Fate that forced China to grow quickly through beta convergence? Or did China actually figure out how to do something right for growth that most other countries that were as poor and backwater did not?

And if it figured something out, is it worth asking what that is? Or shall we sit back and hand-wave it away and say, "It's easier to catch up when you start small," as if that allows us to learn anything?

India's a good example. It definitely had more freedom than China. 50 years ago, it had the larger economy. It has a working democracy. It has more "free markets," that's for sure. The state owns less of the economy than in China. Populations are pretty damn near equal. Both have large landmasses. So why is it China grew so much faster and more consistently than India over these last 30 years? More free markets should mean more growth, right? They both were about as behind at the beginning, so you can't hand-wave that one away with beta-convergence. And it's just about as easy to offshore things to India. Hell, the population there even knows English, which saves you a lot of energy and time.

So what caused this in your mind? Because I have some concrete, replicable reasons I can (and will) give. But I'm curious how you square this data as a market worshiper. Was it just China's "turn" before India? And if so, why would Market (bless His holy name) rain His grace upon a country run by the Communist Party with less free markets over its neighbor with more free Markets? That doesn't compute, does it? Or does Market simply work in mysterious ways?

[thriftyandboringinohio]

Re: The PIIGS still fly

A nation and a company starting from a small base can grow much faster than a mature, older demographic nation. The U.S. had higher growth rates early in it's industrialization. While the U.S. did not grow as fast as China is today, it did not have the
advantage of modern technology that speeds China's growth.

http://ushistory.councilforeconed.or...26_visuals.pdf

China's growth is slowing, and will slow even more as there population ages and places them at a demographic disadvantage. India will dominate growth on Asia between 2020 and 2040.

Very true, vt. Those situations come only once to a nation. The US from the civil war to WWII was unique, filling a giant resource-rich continent and literally giving away tracts of valuable land. From WWII to the 1970's the US enjoyed being the only industrial nation not bombed to rubble. The US no longer enjoys either of those advantages over its trading partners.

I see China in a similar situation, a vast land with a huge population that was far behind in industrial development.

After India completes it's cycle of development, that only seems to leave Africa.
.
.
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