Tag Archives: The Economist

The Power Of A Word

From The Economist - True Progressivism

I was going through my edition of The Economist the other day.  It was a treat really, in the “old days” I used have lunch across from the Barnes and Noble, buy the print edition and read it over Thai food.  I’ve long given that ritual up in favor of a subscription and electronic reading but hey….

So, anyway, there I was with my Phad Thai and the print version of the Economist.  I flipped to the “Leaders” section and just shook my head when I say this title:

True Progressivism

I’ve come to see The Economist as a more moderate magazine than I used to, but every now and then I hit an article that makes me wonder.  I nearly just turned the page and walked away.

But I read on.  And boy am I glad that I did!

To be sure they came out of the gate pretty slowly:

BY THE end of the 19th century, the first age of globalisation and a spate of new inventions had transformed the world economy. But the “Gilded Age” was also a famously unequal one, with America’s robber barons and Europe’s “Downton Abbey” classes amassing huge wealth: the concept of “conspicuous consumption” dates back to 1899. The rising gap between rich and poor (and the fear of socialist revolution) spawned a wave of reforms, from Theodore Roosevelt’s trust-busting to Lloyd George’s People’s Budget. Governments promoted competition, introduced progressive taxation and wove the first threads of a social safety net. The aim of this new “Progressive era”, as it was known in America, was to make society fairer without reducing its entrepreneurial vim.


But the plot improves quickly:

Thus, on America’s campaign trail, the left attacks Mitt Romney as a robber baron and the right derides Barack Obama as a class warrior. In some European countries politicians have simply given in to the mob: witness François Hollande’s proposed 75% income-tax rate.

I’m willing to trade a whole bunch of ideology to someone who’s willing to admit that the left is nothing more than class warriors.  So anyway, the article moves along and then comes some true gems:

In the rich world the cronyism is better-hidden. One reason why Wall Street accounts for a disproportionate share of the wealthy is the implicit subsidy given to too-big-to-fail banks. From doctors to lawyers, many high-paying professions are full of unnecessary restrictive practices. And then there is the most unfair transfer of all—misdirected welfare spending. Social spending is often less about helping the poor than giving goodies to the relatively wealthy. In America the housing subsidy to the richest fifth (through mortgage-interest relief) is four times the amount spent on public housing for the poorest fifth.


The Economist is calling out the label, “Too Big To Fail.”  And then the truly Libertarian line of logic that begins to pin back the lawyers and the docs.  Who WOULDN’T love the racket that allows barristers and snake oil salesmen to restrict competition?  And how about that fact regarding the mortgage-interest?

So, ideas?

Compete, target and reform

The priority should be a Rooseveltian attack on monopolies and vested interests, be they state-owned enterprises in China or big banks on Wall Street. The emerging world, in particular, needs to introduce greater transparency in government contracts and effective anti-trust law. It is no coincidence that the world’s richest man, Carlos Slim, made his money in Mexican telecoms, an industry where competitive pressures were low and prices were sky-high. In the rich world there is also plenty of opening up to do. Only a fraction of the European Union’s economy is a genuine single market. School reform and introducing choice is crucial: no Wall Street financier has done as much damage to American social mobility as the teachers’ unions have. Getting rid of distortions, such as labour laws in Europe or the remnants of China’s hukou system of household registration, would also make a huge difference.

Next, target government spending on the poor and the young. In the emerging world too much cash goes to universal fuel subsidies that disproportionately favour the wealthy (in Asia) and unaffordable pensions that favour the relatively affluent (in Latin America). But the biggest target for reform is the welfare states of the rich world. Given their ageing societies, governments cannot hope to spend less on the elderly, but they can reduce the pace of increase—for instance, by raising retirement ages more dramatically and means-testing the goodies on offer. Some of the cash could go into education. The first Progressive era led to the introduction of publicly financed secondary schools; this time round the target should be pre-school education, as well as more retraining for the jobless.

Last, reform taxes: not to punish the rich but to raise money more efficiently and progressively. In poorer economies, where tax avoidance is rife, the focus should be on lower rates and better enforcement. In rich ones the main gains should come from eliminating deductions that particularly benefit the wealthy (such as America’s mortgage-interest deduction); narrowing the gap between tax rates on wages and capital income; and relying more on efficient taxes that are paid disproportionately by the rich, such as some property taxes.

Thoughts on paragraphs 1, 2 and 3:

1- A gigantic FU to the teacher’s unions and labor laws!  What I wouldn’t do to compromise if the deal included teacher’s union destruction and the loosening of labor laws.  I mean, holy shit – “No Wall Street financier has done as much damage to American social mobility as the teacher’s unions!”

2- Welfare reform.  We can only hope to slow the increase, but we should!   Though they do slip on early education; there isn’t any data that suggests the gains last beyond 3rd grade.

3-  This sounds exactly like Romney’s tax plan.

And to think, I almost passed this by because of the word Progressivism.

Wherein The Economist Channels Pino

If I’ve said it once I’ve said it a thousand times, if you wanna sell more beer, lower the price.  The same concept exists for labor.  If you want people to buy more labor, lower the price of labor.

But even as we face unprecedented levels of unemployment, there are people in the world that wanna make it harder for people to hire people.  They suggest that the real value of the current minimum wage is low and that we should consider raising it match past level.

I don’t understand how pricing low margin workers out of the job market right now makes sense.  And the Economist agrees with me.

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Measuring History And Economic Productivity

Over the holiday break, the Economist ran a bunch of really cool little snippets of articles.  One of them caught my eye:

The chart below shows a population-weighted history of the past two millennia. By this reckoning, over 28% of all the history made since the birth of Christ was made in the 20th century. Measured in years lived, the present century, which is only ten years old, is already “longer” than the whole of the 17th century. This century has made an even bigger contribution to economic history. Over 23% of all the goods and services made since 1AD were produced from 2001 to 2010, according to an updated version of Angus Maddison’s figures.

What this is saying is that of all the economic history since the birth of Christ, 23% of it has been made in this decade alone.

And the chart.

Fascinating.  Considering that 55% of all economic history was made in the last full century, we are almost half way there and we’re only 11 years in.

We Are Socialist: And So Can You

I’m pretty free market.  I’m also of the mind that the best incentives are the ones that you remember your dad teaching you or that you teach your kids.  Hard work, eat your vegetables, save your money, do your homework….stuff like that.

I like to think that most America teaches these things to their kids.  And to the extent that some of us are better or worse, I guess that’s okay.  But the idea is the same.  This is a place where, if you work hard enough, you can have anything you want.  Which, I’ve always thought the inverse were then true as well.  This is a place where if you DON’T work hard enough, you can’t have anything you want.

So, I don’t like socialism.  Either as a way to teach our kids how to live or as an economic system where we organize our society.

But we are.

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Trade, the exchange of goods and services, makes all people wealthier.  It always has.  And as long as personal liberties are enforced, it always will.

Consider how we normally trade; money for goods.

This weekend my young nephew was in town and the kids wanted to play Wii.  We only had one controller so I needed another.  Out to the store I went.

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The Economist Weighs In

Look, I’m just a guy with a college degree.  I’m not an economist but I am handy with numbers.  And, mostly, I am capable of free thinking.  Which is why I find this article from The Economist laughable.

We start off well, in fact I had high hopes after just the first sentence.

DIAGNOSING what is wrong with America’s health-care system is the easy part.

I happen to agree with the author’s take.  I DO think that it’s easy to diagnose what’s wrong with America’s health-care system.  Which is why I was disappointed when The Economist got it wrong.  Not even 30 seconds later we are stunned to learn that nearly 50 million Americans don’t have coverage.  This is gross and simply unacceptable for a major news source to make a statement this absurd.  50 million.  Americans.  Uninsured.  Really?  Let’s take a look.

  • The real number being used is 47 million
  • Of those 47 million it’s been reported that 9 million are enrolled in Medicaid and failed to report it
  • 8 million are kids.  These kids are now covered by SCHIP

We’re down to 30 million now.  Fully 40% off the 50 million number quoted by the Economist.  But there’s more–way more.

  • 1.7 million are parents making more than 300% of FPL [federal poverty level]
  • 5.9 million are non-parent adults making more than 300% of FPL
  • 3.1 million are adult parents eligible for assistance today
  • 2 million are non-parent adults who are eligible for assistance today

Now we’re at 17.3 million.  17.3 million people who are not covered.  Now for the best part.  Wait for it—wait…waaiit……9 million aren’t even US citizens.  How AWESOME is that?!?

So, after getting the number down to 17.3 million, we’re able to shave off another cool 9 mill  bringing us to the grand total of 6.3 million.  And we get 50 million from The Economist.  Gross.

Next the author compares the benefits of American health services with OECD and their averages.  As far as I can tell, the comparison used three metrics:

  1. Infant mortality rate
  2. Life Expectancy
  3. Survival Rates for Heart Attacks

Again, the depth, or lack thereof, in reporting is surprising.  It has been documented that the infant mortality rate in the US is much higher than other countries because of the methods used in reporting.  According to WHO the definition of birth is:

Live birth refers to the complete expulsion or extraction from its mother of a product of conception, irrespective of the duration of the pregnancy, which, after such separation, breathes or shows any other evidence of life – e.g. beating of the heart, pulsation of the umbilical cord or definite movement of voluntary muscles – whether or not the umbilical cord has been cut or the placenta is attached. Each product of such a birth is considered live born.

However, in many cases, countries fail to report all births due to their own definitions; for example:

  • In Switzerland and other parts of Europe, a baby born who is less than 30 centimeters long is not counted as a live birth. Therefore, unlike in the U.S., such high-risk infants cannot affect Swiss infant mortality rates.
  • In Belgium and France — in fact, in most European Union countries — any baby born before 26 weeks gestation is not considered alive and therefore does not “count” against reported infant mortality rates.
  • Some of the countries reporting infant mortality rates lower than the U.S. classify babies as “stillborn” if they survive less than 24 hours whether or not such babies breathe, move, or have a beating heart at birth.
  • In Canada, Germany, and Austria, a premature baby weighing <500g is not considered a living child.

When these and other reporting anomalies are factored in, Norway, which has the lowest infant mortality rate in the world, ranks no better than the United States.  Further, since 2000, 42 of the world’s 52 surviving babies weighing less than 400g (0.9 lbs.) were born in the United States.  Hardly an indicator that the United States if failing in the area of infant health.

The CIA has the United States ranked 50th in life expectancy.  And, as noted above, the article uses this metric in it’s assessment of the United State’s system.  However, it has been reported that Life Expectancy is not a valid measure of a country’s health care system:

…robust statistical analysis confirms that health care spending is not related to life expectancy.  Studies of multiple countries using regression analysis found no significant relationship between life expectancy and the number of physicians and hospital beds per 100,000 population or health care expenditures as a percentage of GDP.  Rather, life expectancy was associated with factors such as sanitation, clean water, income, and literacy rate.8 A recent study examined cross-national data from 1980 to 1998.  Although the regression model used initially found an association between health care expenditure and life expectancy, that association was no longer significant when gross domestic product (GDP) per capita was added to the model. Indeed, GDP per capita is one of the more consistent predictors of life expectancy.

Yet the United States has the highest GDP per capita in the world, so why does it have a life expectancy lower than most of the industrialized world?  The primary reason is that the U.S. is ethnically a far more diverse nation than most other industrialized nations.  Factors associated with different ethnic backgrounds – culture, diet, etc. – can have a substantial impact on life expectancy.  Comparisons of distinct ethnic populations in the U.S. with their country of origin find similar rates of life expectancy.  For example, Japanese-Americans have an average life expectancy similar to that of Japanese.

And this is just the first paragraph.  Keeping up with the Liberal press is simply exhausting.