Planning Dependability (Planungssicherheit)

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This question has been put to me recently:

Can we plan the fate of an economy and ensure the plan will be dependable?

My answer: no, we cannot.

But there are judicious choices that are likely to facilitate the desired broad success. I offer examples of this in these posts on 

• the superiority of managed trade over free trade — see Free Trade (9) — Shortcomings (II) — Long-Term Development Prospects — and, 

• the wisdom to balance the economy rather than the budget — EU (2) — Balance the Economy, Not the Budget.

To the extent that dependable planning (Planungssicherheit) may be approximated by policies that facilitate the success of an economy within broad corridors,  Planungssicherheit is severely counteracted by policy bundles like the Energiewende and the Euro-based monetary union in Europe, the former messing up the reliability and efficiency of energy production by unwisely giving precedence to intermittent energy sources (wind and solar), the latter aggravating economic downturns by imposing procyclical behaviour upon member state governments (more on this here).

I hope this helps.

Folklorisation of the Public Discourse

 

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German summary below / deutsche Zusammenfassung unten.


The EU ban on plastic items (see also (1) Waste) is a good example of the problems created by folklorising the public debabte (more on this below).

Plastic item in the oceans - not good. Hence, ban plastic items. World improved. Defeated: Bad humans killing nature. Feel good about it. Folkloristic reasoning helps ignore important steps in analysing and practically tackling the issue sensibly. How large is the problem? Where does it occur to a problematic extent? Europeans are inconvenienced, restricted in their consumption options and made to pay for redundant efforts when in fact they have already solved the problem, making negligible contributions to oceanic plastics pollution. But the folkloristic narrative in which the issue is couched ensures that ecological problems are perceived as far larger and more dangerous than they really are.

Given the amount of evidence clearly calling into question the theory of anthropogenic global warming, it is astounding that governments lend credence solely to this apocalyptic narrative. 

This implies a bias toward insufficient, shady or even fraudulent evidence. This in itself is alarming, for it suggests that governments use their exceptional powers not to protect the population from deceit but instead take an active role in replacing scientific correctness with political correctness.

Usually, pluralism needs to be considerably damaged for such one-sided action to be feasible; if political competition does no longer work properly, then scientific competition (the be-and-end-all of the scientific method) will be hampered by political pressures; and if this is possible economic competition will also increasingly be restricted, with highly invasive political control of company management and economic policies beholden to the dominant ideology.

One of the most dangerous outcomes of such a distortion of pluralism is that fraudulent evidence is increasingly used to "prove" the urgency of desired policies, which "evidence" is then relied upon by the courts and parliament to ratify and make legally binding measures that are not based on rational corroboration but on ideological preferences, often of a dangerously unrealistic sort.

There are many factors that contribute to such maldevelopments. In Germany, but certainly not only here, highly deficient rational vetting does not encounter noticeable resistance, among other things, due to what I call  folklorisation (of facts and science).
  

Folkorisation of the public discourse

Certain ideas, phrasings, and terms become part of the public mindscape, most notably the conceit that man destroys nature, especially through the processes that have made our species unprecedentedly healthy and wealthy as well as empowering the individual as never before. Oil is filthy, unhealthy and evil. The emissions from chimney stacks are lethal. Industrialisation and urbanisation bring forth extreme levels of extinctions in fauna and flora. And so forth. 

Each subject, meme or notion is perfectly intelligible in its meaning but factually wrong. Folklore transforms the factually wrong however into an indubitable truth in the public mind. It does this by reinforcing traditional pre- and misconceptions, mesmerising repetition, counterfactual oversimplification, use of stereotypes in rites of social reassurance etc.

If you plant a large enough number of such folkloristically "true" untruths in the minds of the population, intellectual vigilance tends to get trumped by powerful ideological preferences; in this way flimsy or false evidence is easily accepted if only it appeals strongly to those preferences, even though it would not pass the test of unprejudiced analysis.

A people, it would seem, can become unable to defend its rational interests in the face of such folklorisation, acting as a major agent of the self destructive developments to which it is forced by virtue of its demotic convictions.

Where this happens, I would predict democracy and, therefore, political competition (including the competition of thoughts and opinions, not only as represented in the mass-reaching media) to be in a bad state as well as the other two pillars of a free society: scientific competition and economic competition. In short, the freedom to take diverging views and action is restricted.

For a case in point see these posts on the demonisation of diesel in Germany here, here, here, here and here.

It is the government's duty to support and safeguard agencies (universities, research(ers), government departments etc.) designed to identify and debunk superstition, error and misinformation and thereby provide intellectual protection to the population, enhancing at the same time the powers for critical thinking in the populace.

See also Abuse of Governmental Duties in Germany — The New Normal

Deutsche Zusammenfassung: 

Ein Beispiel für die hier beklagte Folklorisierung des politischen Diskurses liefert das Plastik-Verbot der EU.  Das Thema wird übervereinfacht, sodass es in ein grelles Problemmuster passt. Die Ozeane sterben, weil wir Plastiklöffel verwenden. Plastiklöffel verbieten. Natur gerettet, böse umweltfeindliche Menschen besiegt. Klopf Dir auf die Schulter. Doch diese Folklorisierung sorgt dafür, dass Zwischenschritte ausgelassen werden, die unverzichtbar für eine profunde Analyse und vernünftige praktische Behandlung des Themas sind. Welche Auswirkungen hat das Plastik genau? Wie groß ist infolgedessen das Problem überhaupt? Wo tritt es auf? Doch ohne, dass diese und andere Gesichtspunkte beleuchtet werden, verfügt die Politik Maßnahmen, die die Bevölkerung Europas kurzum um Verbrauchsoptionen beraubt und Kosten für unnötige Maßnahmen aufbürdet, hat Europa das Problem doch längst gelöst, weswegen unser Betrag zu Einspeisung von Plastikartikeln in die Meere nicht der Rede wert ist. Doch das folklorisierende Format, in dem das Thema vor der Öffentlichkeit inszeniert wird, verstärkt das falsche Bewusstsein, die vorgegaukelten Probleme seien schwerwiegender als sie es wirklich sind. Auf diese Weise wird eine allgegenwärtige katastrophale Gefahr fingiert, die sich leicht mobilisieren lässt, um die Gesellschaft nach und nach dahin zu steuern, wo man sie haben will (z. B. Abschaffung des Individualverkehrs wie wir ihn kennen, siehe die folkloristische Mär vom tödlichen Diesel).

Selbst in freien Gesellschaften ist es offenbar möglich,  zumindest bestimmte Kernthemen durch politische Steuerung zu vereinseitigen und dahin zu arbeiten, dass folkloristische Vorstellungen die rationale und kritische Wahrnehmung verdrängen. Dies scheint einherzugehen mit Phasen, in denen Pluralismus, Demokratie und politischer Meinungswettbewerb und infolgedessen auch der für echte Wissenschaft konstitutive Wettbewerb ebenso wie der ökonomische Wettbewerb starke Einschränkungen erleiden. Umgekehrt lassen politisch durchgesetzte Manien den Rückschluss zu, dass die drei Säulen der Freiheit erheblich unterminiert worden sind: politischer Wettbewerb, wissenschaftlicher Wettbewerb und wirtschaftlicher Wettbewerb (z.  B. durch Verpflichtung der Unternehmen auf politische Vorgaben wie Energiewende und E-Mobilität).

Euro (8) — Preferential Treatment of Germany, Repression for Italy

 

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See German version below / siehe deutsche Version unten

Merkel has achieved what Hitler had unsuccessfully endeavoured: Europe's total submission to German interests.

The below comment describes the EU's preferential treatment of Germany and its simultaneous repression of economic growth in other member states. While strictly insisting on Italy meeting the (economically detrimental) Maastricht criteria, the EU is ignoring the fact that — since 2011 — Germany has been violating the EU ruling whereby a current account surplus of more than 6 % of GDP is inadmissible.  

The large current account surplus indicates that German savings are much larger than domestic investments. However recommendations to encourage domestic investments and use fiscal policy to improve demand in Germany so as to reduce economic disparities among EU countries are being ignored.

Germany has supported its export-model by domestic wage repression, deliberately keeping wage growth lower than productivity growth.

It is an open secret that German growth is being supported by debt — incurred by other nations (and, of course, EU's member states). For in Germany three of four sectors, namely households, firms and government are running surpluses, implying that the fourth sector (the export/import sector, i. e. foreign countries) must be running deficits.

At the same time, insisting on the Maastricht convergence criteria (public debt ≤ 60 % of GDP; government deficit ≤ 3 % of GDP), Italy is barred by the EU from boosting her own economy via increased spending.

Little wonder the Italians are outraged.

Merkel hat geschafft, was Hitler erfolglos versucht hatte: die völlige Unterwerfung Europas unter deutsche Interessen.

Dass Deutschland seit 2011 einen Leistungsbilanzüberschuss von mehr als 6% (den erlaubten Wert) des BIP verbucht, und damit gegen die EU-Regeln verstösst, gilt aber allem Anschein nach als Bagatelle.

Der immense Überschuss in der deutschen Leistungsbilanz deutet darauf hin, dass die einheimischen Ersparnisse deutlich höher sind als die Investitionen im Inland.

Kein Wunder, dass der IWF Berlin nahelegt, mit Investitionen und dem Einsatz der Fiskalpolitik dazu beizutragen, die Ungleichgewichte in der Eurozone abzubauen.

Tatsache ist, dass Deutschland das eigene Export-Modell jahrelang mit Lohn-Moderation gestützt hat. Der Lohnzuwachs wurde ständig absichtlich unter das Produktivitätswachstum gedrückt. 

Und es ist ein offenes Geheimnis, dass das deutsche Wirtschaftswachstum von Schulden getragen wird, und zwar von den Schulden des Auslandes.

Denn Deutschlands Wirtschaftssektoren sparen allesamt: private Haushalte, Unternehmen und die öffentliche Hand weisen jeweils einen Finanzierungsüberschuss auf. Und es ist buchhalterisch unumstritten, dass die Rechnung nicht aufgehen würde, wenn sich der vierte Sektor, nämlich das Ausland nicht verschulden würde. 

Italien wird aber untersagt, die eigene Wirtschaft durch erhöhte Ausgaben anzukurbeln. Da stehen die restriktiven Regeln der EU (Maastrichter Konvergenzkriterien) im Wege: 

Die Staatsverschuldung darf nicht 60% des BIP überschreiten. Und das gesamtstaatliche Haushaltsdefizit darf maximal 3% des BIP erreichen.

Es ist vor diesem Hintergrund nicht schwer, die Empörung der italienischen Wähler zu verstehen.

 

Source / Quelle

Euro (7) — The Mac Dougall Report (1977) Warns Against EU Monetary Union

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5. As well as redistributing income regionally on a continuing basis, public finance in existing economic unions plays a major role in cushioning short-term and cyclical fluctuations. For example, one-half to two-thirds of a short-term loss of primary income in a region due to a fall in its external sales may be automatically off-set through lower payments of taxes and insurance contributions to the centre, and higher receipts of unemployment and other benefits. If only because the Community budget is so relatively very small there is no such mechanism in operation on any significant scale as between member countries, and this is an important reason why in present circumstances monetary union is impracticable.

Source. The MacDougall Report. 

This was written in April 1977. So, there had been enough time to devise alternative approaches to intra-European cooperation. But no, the Euro was ratified in 1993 and implemented in 2000 without any consideration of this fatal flaw.

The Eurozone is lacking an effectual mechanism to ensure the sharing of burdens from economic downturns, crises and regressive developments amongst the member states. Also, there seems to be insufficient cultural cohesion and sense of identity among Europeans for them to extend their feelings of solidarity to other parts of Europe. A European living in Munich considers it a matter-of-course to share the burden of a European in Hamburg, but a European in Munich is not happy at all to share the burden of a European in Athens.

Der Mac Dougall Bericht von 1977 warnt ausdrücklich vor einer Währungsunion wie sie 1993 beschlossen und im Jahr 2000 verwirklicht worden ist. Es fehle an einem wirksamen Lastenausgleich, der von wirtschaftlichen Abschwüngen, Krisen und rückläufiger Entwicklung ungleich betroffene Mitgliedsländer zu einer Solidargemeinschaft zusammenschließt, innerhalb derer eklatanter Ungleichheit entgegengewirkt wird. Auf diese Weise wird dafür gesorgt, dass die Unterschiede im Lebensstandard zwischen wirtschaftlich stärkeren und schwächeren Bundesländern kaum auffällig sind. Dies setzt allerdings auch voraus, dass das Territorium kulturell und vom nationalen Selbstverständnis so geschlossen ist, dass der Lastenausgleich als Selbstverständlichkeit wahrgenommen und bereitwillig unterstützt wird. 

Im heutigen Deutschland ist der in Rheinland-Pfalz lebende Europäer gerne bereit, den in Sachsen lebenden Europäer per Lastenausgleich zu unterstützen (kulturelle Geschlossenheit). Doch es scheint nicht so viele in Rheinland-Pfalz lebende Europäer zu geben, die bereit sind, sich in dieser Weise mit in Griechenland lebenden Europäern zu solidarisieren.

(2) Waste

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Continued from here.

My comment here:

tom0mason, Thank you for these excellent observations. You write:

"Sure plastic should not be there but we need better information in order to judge the damage done (if any), and to formulate the correct action plan. Merely banning something because as waste it is often dumped in the sea but perhaps doesn’t do much harm, is foolish at best."

You are putting your finger on it. This is what I mean, when I speak of the dumbing down of the population by green mythology ("Ökoverblödung"), a process by which genuine interest in nature is crowded out by the habit of turning the prayer wheels of political correctness, a more convenient but less sincere activity.

(1) Waste

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I just realised this is almost the same post as the one published under the title: Green Cultural Dominance and Manipulative Signalling.

In his recent post on EU-bans of plastic items like straws, cotton buds, cutlery, balloon sticks and drink stirrers, Pierre Gosselin concludes :

Like climate change, the latest announcement of banning straws and drink stirrers is nothing but pure inconsequential, environmental grandstanding. It isn’t going to accomplish a damn thing accept make green morons irrationally feel better about themselves.

By contrast, I feel the ban is in a certain way highly effective:

Pierre, Thanks for yet another excellent post and a great analysis. I would add that the ban is extremely important and very effective in terms of manipulative signalling.

Sensible or not, it signals man is evil, man is hell-bent to destroy nature.

This is the core faith and subliminal trigger of popular compliance with green totalitarianism.

Only if this post-hypnotic suggestion is removed from the minds of the people will they wake up from green inebriation and return to a mentally normal state of appropriate skepticism and vigilance.

If ideologues succeed in implanting this core faith in your mind (and they have been successful at it in Germany in a big way), your mind will inevitably be looking for indications that support the creed’s presumption. This is the psychological mechanism by which the greens keep the Germans in a religious trap, from which they find no escape.

It is this false faith in man’s natural enmity and destructiveness vis-à-vis “nature” that explains why Germans irrespective of their level of education and pertinent expertise are ready to buy into almost any rubbish about purported Umweltzerstörung (destruction of the environment). Any verbiage and any acts (like dramatising prohibitions) that reinforce this misanthropic conceit are a gain for the greens and a loss for reason, humanism and mankind.

Underlying this is a false juxtaposition of man and nature and the accompanying eco-religious conception of nature as a subject, a person confronting us — an article of faith heavily promoted by dignitaries like Bundespräsident von Weizsäcker who demanded at the height of the acid rain mania (another green deception) that “we need to protect nature for its own sake”). Here: sinful man, there: godlike nature, man’s arbiter and moral superior. The cultural dominance of green nonsense depends entirely on people internalising this faith built on the deification of nature and the debasement of one’s own species.

See also Death of the Forests — Das Waldsterben — On the History of a Politically Useful Myth

Continued here. 

Exploitation

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Submitting the below considerations, I have joined the discussion in the comment section of this blog post: Marx’s labour theory of value and exploitation under capitalism

It appears that the meaning of “exploitation” most prominent in Marx’s thinking amounts to “the inadequate remuneration of a producer”, or “an insufficient share of the producer in the value of his output”.

However, the meaning of this concept of “exploitation”, and most alternative denotations of it, are open to contestation under innumerable circumstances. In fact, in a free society (which communism promises to be) people will have and — as we will see below — amply exercise the right of debating whether or not they are affected by “exploitation”.

Even if it were possible to unequivocally distinguish capital from labour and prove that value is only created by labour, the issue of exploitation would remain indeterminate/open to contestation

This is because no production is possible without engaging in social relationships characterised by differential power among the participants. Whenever differential power prevails amongst a group of humans there is the possibility of divergent assessments of processes and outcomes brought about by activities involving dominance, subordination, and dependency. Exploitation in Marx’s sense is a variant, an element, one hypothesis among others in a large set of possible evaluations of power-based production. People, not Marx, will decide if his conception is useful. When free to follow their own assessment they tend to dismiss Marx.

For Marx’s elementary error is to assume that power is a historically specific attribute of capitalist social relations (and earlier historical stages) but will no longer play a role in the future — under communism. 

Even if labour ensures for itself sole possession and the exclusive right of disposition of the means of production, at once power relationships will emerge among the labourers. There will be competition for power accompanied by all phenomena associated with such a clash of interests (from contented obedience to mobbing and revolt). This is clearly borne out by experiments with worker cooperatives and grand scale attempts at communism.

Marx was hopelessly naïve concerning this unsuspected cornerstone (the ineradicable role of power in production) of his shaky theoretical cathedral. His oversight has cost millions of people their lives.

Marx was unable to follow the concept of power to a sufficiently high level of abstraction.

Insinuating a benign power vacuum under communism, he paved the way for ruthless power-seekers who imposed their repressive and self-serving agenda on the people under the pretence of abolishing “exploitation”.

The functional division of labour in modern complex production processes justifies differentiation of categories like capital(ist), management, labour (and still further distinctions), while the production of value requires cooperation within and among these groups, giving inevitably rise to conflicts that may be couched in terms of “exploitation” (“my share in managerial decision power/pecuniary remuneration/protection from work hazards etc. is inadequate relative to the value I produce.” “No, it isn’t.” “Yes, it is!”). Admission and expression of such conflicts may be suppressed (as under communism) but their ongoing occurrence cannot be conjured away, except in theory, which is the path that Marx chose.

Incidentally, anarcho-capitalists fall prey to a similar error. Thinking that unfettered freedom will give rise to processes free of power and the need to conquer and defend incumbent power — in a word: politics. Thus, they dream of a society without politics, when in fact freedom presupposes politics as a means to establish a power structure capable of supporting a society where liberty thrives to the most feasible extent. For individual freedom to prevail a lot of individual freedom has to be restricted and much space must be gained for collective rights and decisions. In fact, freedom encourages dissent and therefore the management of conflict (a central task of politics), including forms of conflict-suppression, is essential for liberty.

Green Cultural Dominance and Manipulative Signalling

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I have offered this comment on Latest Euro Delusion: EU Wants Us To Believe It Can Rescue Oceans By Removing Less Than 0,01 % Of The Plastic:

Pierre, Thanks for yet another excellent post and a great analysis. I would add that the ban is extremely important and very effective in terms of manipulative signalling.

Sensible or not, it signals man is evil, man is hell-bent to destroy nature.

This is the core faith and subliminal trigger of popular compliance with green totalitarianism.

Only if this post-hypnotic suggestion is removed from the minds of the people will they wake up from green inebriation and return to a mentally normal state of appropriate skepticism and vigilance.

If ideologues succeed in implanting this core faith in your mind (and they have been successful at it in Germany in a big way), your mind will inevitably be looking for indications that support the creed's presumption. This is the psychological mechanism by which the greens keep the Germans in a religious trap, from which they find no escape.

It is this false faith in man's natural enmity and destructiveness vis-à-vis "nature" that explains why Germans irrespective of their level of education and pertinent expertise are ready to buy into almost any rubbish about purported Umweltzerstörung (destruction of the environment). Any verbiage and any acts (like dramatising prohibitions) that reinforce this misanthropic conceit are a gain for the greens and a loss for reason, humanism and mankind.

Underlying this is a false juxtaposition of man and nature and the accompanying eco-religious conception of nature as a subject, a person confronting us — an article of faith heavily promoted by dignitaries like Bundespräsident von Weizsäcker who demanded at the height of the acid rain mania (another green deception) that "we need to protect nature for its own sake"). Here: sinful man, there: godlike nature, man's arbiter and moral superior. The cultural dominance of green nonsense depends entirely on people internalising this faith built on the deification of nature and the debasement of one's own species.

Euro (6) — € Based on Humbug Models

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Find here a remarkable, very clearly written article by Bill Mitchell about an even more remarkable research paper published under the aegis of the ECB, of all institutions! 

What the findings suggest is that the generally accepted type of models used to analyse economies is humbug. Thus, the paper implies that the whole Eurozone construct is based on economically nonsensical and practically false and highly damaging reasoning.

The overall conclusions:

1. They [the authors of the paper] find “great regularities in business cycle co-movements of key macroeconomic variables across multiple economies”.

They find “one dominant source of real co-movements … business cycle dynamics of key macroeconomic data can be largely, .. explained by a single source of variation”.

Which is?

2. The one dominance source of co-movement is a “demand factor” – that is, variations in aggregate demand (spending).

3. “any structural economic or econometric model of business cycles must be able to generate the principal component structure that we present” – that is the dominance of aggregate demand.

“We argue that the recent vintage of structural economic models fails this test—these models cannot explain business cycle dynamics.”

The authors find that:

… most prominent DSGE models today are not compatible with our empirical findings on the number of factors and the nature of co-movement in the macroeconomic data.

Little wonder, considering Willem Buiter's description of the underlying models in the Financial Times (now deleted but now available here:

Most mainstream macroeconomic theoretical innovations since the 1970s (the New Classical rational expectations revolution … and the New Keynesian theorizing) … have turned out to be self-referential, inward-looking distractions at best. Research tended to be motivated by the internal logic, intellectual sunk capital and esthetic puzzles of established research programmes rather than by a powerful desire to understand how the economy works – let alone how the economy works during times of stress and financial instability. So the economics profession was caught unprepared when the crisis struck … the Dynamic Stochastic General Equilibrium approach which for a while was the staple of central banks’ internal modelling … excludes everything relevant to the pursuit of financial stability.

And the amazing thing is that the (transformed, regressive) Left (that the average German feels cool to be part of and which is spearheaded by a once Christian conservative party (CDU), now run by a GDR-propagandist strongly attached to "green" ideology) has bought into this lock, stock and barrel — a complete about-face from the convictions that the Left held until the 1980s.

In November 2017, I remarked in a public discussion about the supposedly catastrophic Brexit that the Eurozone as we knew it then might actually disintegrate before Britain's exit from the anti-democratic and economically regressive EU would be fully accomplished. I also argued that the EU was the main problem, and certainly not Britain's sensible return to sovereignty. I was laughed at.

I was shocked at the racism-like contempt of the British that my fellow Germans would betray at the time — a very European attitude, indeed, revealed time and again when Germans deign to pontificate about the sundry EU crises being due to the despicable inferiority (compared to the German race) of the Portuguese, the Spaniards, the Italians or the Greeks.

It was as politically correct to hate the Brexiters at the time as it is to publicly loath President Trump in Germany today; no one complained about luminaries like Manuel Neuer, Germany's No. 1 goal keeper, deploring the prospect of the UK leaving the EU during a football-related press conference. To the contrary.

The Euro has reawoken a remarkable propensity in Germans to look down on their fellow Europeans as sluggards, dunces, and freeloaders.

Zero Libertarian Countries on Earth. Why?

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Here are some thoughts on why the libertarian state will never happen.

One development that people both on the Left and the Right are unaware of is almost an inexorable force that leads affluent societies to devote increasing amounts of their wealth to social spending, to redistribution to children, to education, to healthcare, to supporting the poor, to supporting the aged." Until the 20th century, most societies devoted about 1.5% of their GDP to social spending, and generally much less than that. In the last 100 years, that's changed: today the current global median of social spending is 22% of GDP. One group will groan most audibly at that data: Libertarians. However, Pinker says it's no coincidence that there are zero libertarian countries on Earth; social spending is a shared value, even if the truest libertarians protest it, as the free market has no way to provide for poor children, the elderly, and other members of society who cannot contribute to the marketplace. As countries develop, they naturally initiate social spending programs. That's why libertarianism is a marginal idea, rather than a universal value—and it's likely to stay that way. 

The source.

 

Welfare Has Always Been Part of Human Society and Always Will Be

Both the motives and the actual administration of social spending are of a multi-layered nature, containing much that is questionable and bad. However, welfare has always been part of human society. Offering social services is part of the human condition. If anything, this feature becomes more prominent and effective as societies advance. A rich state — and the state has been growing richer and richer since man has learned to overcome the Malthusian trap (population outgrowing productivity of land) —, has ample means to afford good things to the population (or activist and powerful sections of it). This being so, it is natural that there will be a tendency to enhance all kinds of forms of  social support by the state (which can also crucially contribute to making the state stronger and more stable), but there is also a tendency to curtail (rightly or wrongly) or misapply it. Working simultaneously in opposite directions, these trends are always present.

Social welfare (part of the state's enormous wealth) will always be fought over because of its formidable effects — to help people, to cater to helping instincts, to make life safer and more comfortable, to make a political force popular, to assuage popular discontent, to make people dependent, to enrich bureaucrats, to strengthen the state (in legitimate and illegitimate ways) and so on.
 

A community will always be a political event, as there are no automatic mechanisms to settle disagreements or make negotiations and cooperation based on human discretion superfluous. The larger the part of a community's wealth that is available for welfare/discretionary/politically determined spending the larger the incentives to take part in the decisions that regulate the appropriation of so much wealth and power.
 

In short, there being too many (good as well as bad) reasons to argue in favour of the welfare state in this or another way, we are unlikely to ever come to a stage where people no longer call for it.

Wishing the welfare state away is a bit like prohibiting drawing and painting. People can not help doing it.

A Paradox of Libertarianism
 

Incidentally, this represents one of the paradoxes of libertarianism. For freedom requires that individuals are entitled to express their will politically (as they are seen to be equal and free to associate as they see fit), but in doing so they inevitably create social structures that are rooted in collective determinations and communal (government or state) rather than individual power. If political competition is part of a free society — and it is hard to imagine how a society where political participation of the individual is prohibited could be called free — then it is inevitable and often legitimate that the personal freedom of certain (in some regards even of all) participants of society will be curtailed by laws and regulations that have been collectively arrived at. A free society does not eliminate the juxtaposition of the individual and the collective. It opens the processes by which this juxtaposition is determined to all individuals.

Libertarians keep a vigilant eye on the dodgy side of the welfare state. Which is good. But they do it standing on a questionable base. By insinuating that the state is somehow naturally evil they become crypto-anarchists, taking an anarchist stance in this regard without calling themselves anarchists.
 

In truth, the state is not a fundamental evil and an immutable problem. It is actually capable of tremendous benignity that we would be fools to discard. However, nothing is perfect. We must live with inadequate solutions and always make strong efforts to filter out the bad and maintain the good. Like the quality of our political system and democracy, there is no guarantee that the benignity of government will remain at a high level without fluctuations and setbacks. In short, inadequate institutions to control the state are the problem. Add to this ideological fads, like the neoliberal belief that an impersonal mechanism is available that brings about optimal outcomes automatically. So, in assessing the welfare state, its growth and contraction, we ought to monitor what services are actually provided, including their likely effects, and evaluate them in the wider context of their institutional framework in a free society. 
 

Conclusion

Freedom allows a community and its governing bodies to become wealthier and more powerful, thereby creating a new collective challenge: to dispense this historically unprecedented abundance. So, really, the demands and conflicts that give rise to and keep alive the welfare state are just a special case of the need in a free society to allow and organise competition for collective resolutions.

There is nothing anti-freedom about the welfare state viewed from this perspective (of course, with provisos in order, depending on the concrete case). Only a despot (in a country of rudimentary development) can afford to ignore the potential for widespread collective (as opposed to elite) betterment. Libertarians will never achieve anything remotely close to total success, because they decline to take advantage of the power of the modern state, while free people will inexorably make use of this source of personal and collective advancement.

Average Global Temperature Not Driven by CO2

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A reminder:

Refutation of significant influence from CO₂

There is multiple evidence (most identified earlier [2] ) that CO₂ has no significant effect on climate:

1. In the late Ordovician Period, the planet plunged into and warmed up from the Andean/Saharan ice age, all at about 10 times the current CO₂level [3].
2. Over the Phanerozoic eon (last 542 million years) there is no correlation between CO₂level and A[verage]G[lobal]T[emperature] [3, 4].
3. During the last and previous glaciations AGT trend changed directions before CO₂trend [2].
4. Since AGT has been directly and accurately measured world wide (about 1895), AGT has exhibited up and down trends while CO₂trend has been only up. [2]
5. Since about 2001, the measured atmospheric CO₂trend has continued to rise while the AGT trend has been essentially flat. [21, 13]

Anyone wishing to follow up the footnotes go to this most interesting paper which explains why CO2's effect on AGT is negligible at best, while arguing that the relevant greenhouse gas is water vapour: Climate Change Drivers.

Dosis, Attitude, and the Killing of Theories

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I have written this comment here: 

Often skeptics revert to the false argument that because CO2 is such a minute part of the atmosphere it could not possibly have a fatal effect on climate. In principle, it could (like an exceptionally strong poison). However, it is the argument that you advance, Pierre, that is correct. Unless the corresponding mechanism is sufficiently established, which it is not in the least, the thesis of "CO2's homoeopathic violence" lacks authority. Plus, of course, leaving many other significant factors out of consideration further disavows the unproven thesis of CO2's super-leverage.

By the way, what has made me highly skeptical of alarmists a long time ago is this: if you are really scared about something, you make sure you understand what goes on (say, someone tells you your house is burning, or a party turns up with the surprise claim that your house does not actually belong to you); you go out of your way to discern sense from nonsense, AND you jump at any evidence that indicates the problem is smaller than you thought or does not exist at all. If people are so scared about global warming, where are the hurrahs in the face of mitigating evidence? If anything, you would expect them to err on the side of optimism. What I observe instead is a growing propensity to accept flimsy "evidence", if only it is useful in upholding the prospect of Armageddon.

Typically when I challenge a fellow to back up his alarmism with evidence, people act in a way that shows the issue is not important enough to them personally; they simply claim that the media can't be lying, since a person claiming this — say the media — is culpable of subscribing to some sort of conspiracy theory. 

This is an argument as silly as claiming that evidence against CO2-alarmism cannot be true if the research had been financed by Big Oil. Government financing of alarmism is far larger than any private financing. 

Nobody should be prohibited from financing research, and the emphasis should be on the quality of the resultant findings and on their thorough criticism. When prejudices of the above kind become culturally and/or legally dominant, truth is in danger.

Truth is not found by prejudging who is or is not entitled to advancing an argument, but by assessing the quality of an argument, testing, corroborating or refuting it. In science one dismisses arguments, not people. Or as Sir Karl Popper used to say, in developing modern science mankind found a way to kill theories instead of people.

Euro (5) — Beginning of End of Democracy and Economic Reason

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Die Politik hat seit Anfang der 1990er Jahre den Euro an den Bevölkerungen vorbei Wirklichkeit werden lassen. Das war der Beginn des Endes von Demokratie und ökonomischer Vernunft in Europa.

Es ist schwer zu verstehen wie die Mitgliedsländer zulassen konnten, was Hitler nicht gelungen ist: die völlige Unterwerfung Europas unter deutsche Interessen.

Es ist unglaublich, dass die Verlierer des Euros solange gebraucht haben, bis sie endlich – in Spanien und Italien – Anzeichen machen, ihre Benachteiligung durch den Euro zu begreifen, und es wagen, sich dagegen zu wehren.

Der Euro verschreibt sich dem Dogma einer willkürlich definierten vermeintlichen fiskalpolitischen Haushaltsdisziplin, die in Wirklichkeit zerstörerisch ist, weil sie den Mitgliedsstaaten, die Möglichkeit nimmt, Krisen durch währungs- und konjunkturpolitische Maßnahmen zu vermeiden oder abzuwenden. Und so kommen die Schwachen unter den Mitgliedsstaaten – und die bilden die Mehrheit – spätestens seit 2007 nicht mehr aus  dem Trudel von Krise, Stagnation und wirtschaftlichem Abstieg heraus.

Völlig unklar ist, warum sich (außerhalb vom auch in dieser Frage gleichgeschalteten Deutschland) nicht schon längst Widerstand gegen den Euro geregt hat. Allerdings spielt die regressive Linke hier eine unrühmlich Rolle, die mit ihrer entschiedenen Unterstützung des Euros im Lager des Neoliberalismus heimisch geworden ist. Ich habe nur die vage Vermutung, dass linke Wendehälse wie Mitterand, das Problem hatten, sich zwischen einer unvernünftigen Linken (übertriebene gewerkschaftliche Forderungen, Verlust von Identität und Renommee durch Zusammenbruch des Kommunismus etc.) und neoliberalen Kräften entscheiden zu müssen, da sie nicht in der Lage waren, eine intelligente und selbstbewusste sozialdemokratische Alternative aufzuweisen.

Die Begründungen für den Euro zeichnen sich durch eine atemberaubende Naivität und Unausgewogenheit aus: schon der Werner-Report und der McDougall-Report haben deutlich gezeigt, dass der Euro nicht funktionieren kann, gleichzeitig hat man die Bevölkerung für dumm verkauft mit der Behauptung, dass in Europa Kriege ausbrechen würden (die sind eher für den Zusammenbruch des Europäer gegen Europäer positionierenden Euros zu erwarten), wenn man den Euro nicht einführen würde und hat die Menschen mit dem Argument der Abschaffung der Wechselkurse zu locken versucht – ein lächerlich kleines Plus gemessen an dem unermesslichen Schaden, den die Fehlkonstruktion Euro dem Kontinent eingetragen hat.

Lesen Sie den folgenden Artikel, der die Geschehnisse in Spanien und Italien in den Zusammenhang mit den Defekten des Euros stellt:

Lesen Sie auch: (1) EU — The Left's Treason, and (2) EU — Balance the Economy, Not the Budget and my recent series on Wynne Godley's pronouncements on the Euro.

Writes Raúl Ilargi Meijer,

The Spanish government is about to fall after the Ciudadanos party decided to join PSOE (socialist) and Podemos in a non-confidence vote against PM Rajoy. Hmm, what would that mean for the Catalan politicians Rajoy is persecuting? The Spanish political crisis is inextricably linked to the Italian one, not even because they are so much alike, but because both combine to create huge financial uncertainty in the eurozone.

Sometimes it takes a little uproar to reveal the reality behind the curtain.

Both countries, Italy perhaps some more than Spain, would long since have seen collapse if not for the ECB. In essence, Mario Draghi is buying up trillions in sovereign bonds to disguise the fact that the present construction of the euro makes it inevitable that the poorer south of Europe will lose against the north.

Club Med needs a mechanism to devalue their currencies from time to time to keep up. Signing up for the euro meant they lost that mechanism, and the currency itself doesn’t provide an alternative. The euro has become a cage, a prison for the poorer brethren, but if you look a bit further, it’s also a prison for Germany, which will be forced to either bail out Italy or crush it the way Greece was crushed.

Italy and Spain are much larger economies than Greece is, and therefore much larger problems. Problems that are about to become infinitely more painful then they would have been had the countries been able to devalue their currencies.

If you want to define the main fault of the euro, it is that: it creates problems that would not have existed if the common currency itself didn’t. This was inevitable from the get-go. The fatal flaw was baked into the cake.

And if you think about it, today the need for a common currency has largely vanished anyway already. Anno 2018, people wouldn’t have to go to banks to exchange their deutschmarks or guilders or francs, they would either pay in plastic or get some local currency out of an ATM. All this could be done at automatically adjusting exchange rates without the use of all sorts of middlemen that existed when the euro was introduced.

Americans and British visiting Europe already use this exact same system. Governments can make strong deals that make it impossible for banks and credit card companies to charge more than, say, 1% or 0.5%, on exchange rate transactions. This would be good for all cross-border trade as well, it could be seamless.

Technology has eradicated the reason why the euro was introduced in the first place, and made it completely unnecessary. But the euro is here, and it is going to cause a lot more pain and mayhem. Any country that even thinks about leaving the system will be punished hard, even if that’s the by far more logical thing to do.

Europe is not ready to call for the end of the experiment. Because so much reputation and ego has been invested in it, and because the richer nations and their banks still benefit -hugely- from the problems the poorer face. The one country that got it right was Britain, when it decided to stay out of the eurozone.

But then they screwed up the next decision. And found themselves with the most incompetent ever group of ‘chosen few’ to handle the outcome. Still, anyone want to take out a bet on who’s going to be worse off when the euro whip comes down, Britain or for instance Italy or France? Not me. Close call is the best I can come up with.

The euro was devised and introduced, ostensibly, to solve problems. Problems with cross border trade between European nations, with exchange rates. But instead it has created a whole new set of problems that turn out to be much worse than the ones it was supposed to solve. That’s how and why M5S and the League got to form Italy’s government.

In Spain, if an election is called, and it looks that way, you will either get a left wing coalition or more of the Rajoy-style same. Left wing means problems with the EU, more of the same means domestic problems; the non-confidence vote comes on the heels of yet another corruption scandal for Rajoy’s party.

And let’s not forget that all economic numbers are being greatly embellished all over the continent. If you can claim with a straight face that the Greek economy is growing, anything goes. Same with Italy. It’s only been getting worse. And yeah, there’s a lot of corruption left in these countries, and yeah, Europe could have helped them solve that. Only, it hasn’t, that is not what Brussels focuses on.

Italy for now is the big Kahuna. The EU can’t save it if the new coalition is serious about its government program. But it also can’t NOT save it, because that would mean Italy leaving the euro. And perhaps the EU.

If Italian bonds are sufficiently downgraded by the markets, Mario Draghi’s ECB will no longer be permitted to purchase them.

And access to other support programs would depend on doing the very opposite of what the M5S/League program spells out, which is to stimulate the domestic economy. Is that a bad idea? Hell no, it’s just that the eurozone rules forbid it.

The euro has entirely outlived its purpose, and then some. But it exists, and it will be incredibly painful to unravel. The new game for the north will be to unload as much of that pain as possible on the south.

Europe would have been much better off of it had never had the euro. But it does. The politicians and bankers will make sure they’re fine. But the people won’t be.

The euro will disappear because the reasons for it not to exist are much more pressing than for it to do. At least that bit is simple. The unwind will not be.

(2) A Puzzle: Exports = Cost, Imports = Benefit ?

 

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Continued from here.

I received this reply to my comment.

Dear Lector (at 2018/05/25 at 5:31 am)

Thanks for the kind comments.

Joan Robinson was talking about a world economy under the Bretton Woods agreement (fixed exchange rates). The constraints that system imposed on governments and nations no longer apply – where nations adopted fiat currencies with floating exchange rates.

A world of difference.

best wishes

My response is here:

 

Bill,

Thank you for your reply.

I fail to see how a regime of floating exchange rates invalidates what these gentlemen have to say about the benefits of engaging in exporting:

    Between whatever places foreign trade is carried on, they all of them derive two distinct benefits from it. It carries the surplus part of the produce of their land and labour for which there is no demand among them, and brings back in return something else for which there is a demand. It gives value to their superfluities, by exchanging them for something else, which may satisfy part of their wants and increase their enjoyments. By means of it, the narrowness of the home market does not hinder the division of labour in any particular branch of art or manufacture from being carried to the highest perfection. By opening a more extensive market for whatever part of the produce of their labour may exceed the home consumption, it encourages them to improve its productive powers and to augment its annual produce to the utmost, and thereby to increase the real revenue of wealth and society.

Adam Smith, The Wealth of Nations, Chap I, Commercial System, p. 181

While Adam Smith emphasises trade and thus exporting as "a vent for surplus production and as a means of widening the market thereby improving the division of labour and the level of productivity" (Thirlwall), the latter author continues to write in his "Growth and Development" (1990, p. 430),

    ... export growth plays a major part in the overall growth process by stimulating demand and encouraging saving and investment, including foreign direct investment from abroad, and by increasing the supply potential of the economy by raising the capacity to import.

And he adds on p. 431 with respect to the most successful among the developing and (not only recently) industrialised countries

    ... there is no way in which these countries could have grown as rapidly as they did without the rapid growth of exports. Apart from all the externalities associated with trade and encouragement of domestic and foreign investment, they simply would not have had the foreign exchange to pay for all the imports.

If this is true, and I have no doubt it is, how can one claim that exporting is an impoverishing activity and nothing but an impoverishing activity (Neil Wilson above), a cost and nothing but a cost, not eligible to be ascribed any benefit(s) ?

Are you saying all of these benefits do not exist? Alternatively, are you saying that if these benefits exist their effects are fully annihilated, made to disappear, leaving no traces of their positive side by the fact that an exporter is "giving up some real things" of domestic origin? Are you arguing in favour of total autarky? No, you are not, because you posit that imports are a benefit (and nothing but a benefit). But as you acknowledge yourself, exports have the benefit of making imports possible. How does that benefit disappear, when it is claimed that exports are nothing but disadvantageous, void of benefits, a cost and nothing but a cost?

You write:

    But being able to export is clearly particularly important for a nation that cannot feed itself or run electricity systems with the resources it has at its disposal [sic] with trade.

You are avoiding the term "benefit", but still a benefit it is. Then you write: 

    Which means that the cost [that export is] is best considered as an investment in generating benefits, which in this case, might be an increased capacity to purchase imports.

The ability to afford the cost of importing "some real things" is a benefit derived from export. If export would not bring forth this benefit, I would not be able to benefit from import. Restricting export to its cost side is as inadmissible as claiming that a salary is a cost for its receiver, say, for all of it is spent. Well I could not spend anything unless my salalry had the benefit of being worth enough to afford the cost that sellers erect like a wall between my desires and the things I would like to acquire. This cost (of purchasing imports) is not generated by export, but by the importers legitimate inclination not to give away things for free, and that cost is met by the exporter's ability (i. e. the great benefit of export) to offer something sufficiently valuable to entice the importer to make a purchase. So export can be looked at from the point of view of benefits (e. g. it gives me purchasing power) as well as costs (I have to give up certain things to enjoy the benefits of export).

To claim that within the conceptual framework of costs and benefits, only the concept of cost applies to export is not true. It (export as cost) applies in the form of special cases.

It is not clear to me what one hopes to gain by claiming that a proposition is more general than it actually is.

Also, the advantages and disadvantages (costs and benefits) of exporting and importing can not be exhaustively accounted for by concentrating exclusively on the question whether the domestic availability and the domestic use of domestic resources are increased (supposedly categorically good) or reduced (supposedly categorically bad). Why should one use domestic resources domestically, when they are more productively and profitably applied by producing and selling export goods?

To the extent that trade involves international imbalances as well as winners and losers, this still does not justify the conceptual truncation whereby exports are said to be a cost and only a cost, and not amenable to being (perceived as) anything else, and imports are said to be a benefit and only a benefit, and not amenable to being (perceived as) anything else.

I think, this is the core reason why many people do not go along with "export = cost, import = benefit."

A claim is made that the proposition is virtually self-evident, easy to state and understand, when it is not, for it purports to express a generally applicable statement, when in fact it can be challenged by valid counter examples.

The claim is confidently introduced as simple and clear and of the most general nature, but further discussion quickly reveals that sophisticated complementary arguments are required to support it.

It seems to me that a rephrasing is required that avoids the above shortcomings.

I write this as someone who is willing to try very hard to understand MMT, because I have amply experienced how exceptionally valuable this way of looking at the economy is.

Free Trade (17) — Joan Robinson on Free Trade As a Form of Mercantilism

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 German version below / deutsche Version unten

Continued from here / fortgesetzt von hier.


Quoting The Case for Concerted Action:

As Joan Robinson pointed out in a 1977 article (and even before), What Are The Questions?

From a long-run point of view, export-led growth is the basis of success. A country that has a competitive advantage in industrial production can maintain a high level of home investment, without fear of being checked by a balance-of-payments crisis. Capital accumulation and technical improvements then progressively enhance its competitive advantage. Employment is high and real-wage rates rising so that “labour trouble” is kept at bay. Its financial position is strong. If it prefers an extra rise of home consumption to acquiring foreign assets, it can allow its exchange rate to appreciate and turn the terms of trade in its own favor. In all these respects, a country in a weak competitive position suffers the corresponding disadvantages.

When Ricardo set out the case against protection, he was supporting British economic interests. Free trade ruined Portuguese industry. Free trade for others is in the interests of the strongest competitor in world markets, and a sufficiently strong competitor has no need for protection at home. Free trade doctrine, in practice, is a more subtle form of Mercantilism. When Britain was the workshop of the world, universal free trade suited her interests. When (with the aid of protection) rival industries developed in Germany and the United States, she was still able to preserve free trade for her own exports in the Empire. The historical tradition of attachment to free trade doctrine is so strong in England that even now, in her weakness, the idea of protectionism is considered shocking.
[italics: mine]

The last sentence is also important when discussing Krugman. The United States’ balance of payments has deteriorated and needs some protectionism. But economists are attached to the idea of free trade like it’s some dogma.

Deutsche Version (meine Übersetzung)

Joan Robinson hat in einem Artikel aus dem Jahre 1977 –What Are The Questions? – (und schon davor) folgendes dargelegt.

Auf lange Sicht ist das sich dem Export verdankende Wirtschaftswachstum der Schlüssel zum Erfolg. Ein Land mit einem Wettbewerbsvorteil in der industriellen Produktion ist imstande, ein hohes Niveau an Investitionen in der eigenen Binnenwirtschaft aufrechtzuerhalten, ohne Gefahr zu laufen, durch eine Zahlungsbilanzkrise auf ihrem Erfolgskurs gestoppt zu werden. Kapitalakkumulation und technologische Verbesserungen bauen den Wettbewerbsvorteil sukzessive aus. Das Beschäftigungsniveau ist hoch und die Reallöhne steigen, sodass sich Probleme mit der Arbeiterschaft in Grenzen halten. Das Land befindet sich in einer finanzwirtschaftlich starken Lage. Wenn man dort einen Anstieg des inländischen Verbrauchs gegenüber dem Erwerb ausländischer Vermögenswerte bevorzugt, besteht die Möglichkeit, eine Aufwertung der Währung zuzulassen und somit das Tauschverhältnis von Export- und Importgütern (terms of trade) zu eigenen Gunsten zu beeinflussen. Ein Land, das eine schwache Wettbewerbsposition einnimmt, verzeichnet in all den Punkten, die wir gerade durchgegangen sind, entsprechende Nachteile.

Als Ricardo sein Plädoyer für den Freihandel darlegte, trat er als der Vertreter der wirtschaftlichen Interessen Großbritanniens auf. Der Freihandel ruinierte die Industrien Portugals. Freihandel für die anderen kommt der Interessenslage des stärksten auf den Weltmärkten agierenden Wettbewerbers entgegen. Ein ausreichend starker Wettbewerber ist nicht darauf angewiesen, seinen Binnenmarkt protektionistisch abzusichern. Die Freihandelsdoktrin ist in praxi eine subtilere Form des Merkantilismus. Als Großbritannien gewissermaßen die Betriebswerkstatt der Welt war, entsprach der Freihandel seinen Interessen. Als rivalisierende Industrien in Deutschland und den Vereinigten Staaten (mithilfe protektionistischer Maßnahmen) entstanden, war das Vereinigte Königreich noch immer in der Lage, den Freihandel für seine eigenen Exporte durchzusetzen. [Ich glaube, damit ist gemeint, dass Großbritannien, die im Vergleich zu ihm schwächeren Handelswettbewerber des britischen Imperiums dazu verpflichtete, ein Freihandelsregime zu praktizieren, das für Großbritannien vorteilhaft(er) war (als für seine Handelspartner)]. Die historisch gewachsene Treue zur Freihandelsdoktrin ist in England so stark, dass selbst jetzt, wo das Land schwach ist, die Idee des Protektionismus als schockierend empfunden wird.

... Die Zahlungsbilanz der Vereinigten Staaten hat sich verschlechtert und [deren Heilung] verlangt nun ein gewissen Maß an Protektionismus. Aber die [eher: allzu viele] Ökonomen haben sich der Idee des Freihandels wie einem Dogma verschrieben.