Monday, January 31, 2011

Turning Point?

I get chills hearing of the bravery of Egyptians facing down Mubarak, the US backed thug. This could be a historic moment. Democracy could emerge here after all these years. It's very encouraging.

Tunisia is regarded as the first Wikileaks revolution, and the Egyptian outbreak is believed to have been fueled by it as well. People are figuring out what I've known for a long time regarding Al Jazeera. It's pretty darn good and doing some amazing work here. In many ways they actually act like journalists, criticizing powerful regimes. The right wing is spinning, trying to pretend that support for Mubarak's brutal dictatorship isn't something they supported. Sure, we've given him tens of billions in military aid and protesters are being gassed and abused with US made products, but that's not indicative of anything. Here's Victor Davis Hansen's effort. No credit for Wikileaks of course. It's the internet, which apparently only recently came to Egypt and they realized they were poor finally. None of that yearning to be free stuff. He blames the people themselves for their condition, with beliefs incompatible with successful "capitalist democracy." And he looks on at this courageous display of democracy with extreme pessimism, "expecting the worst". What a joke he is. I used to read him regularly. Incidentally inequality is worse in the US than in Egypt, but I'll leave that aside for now.

The state has cut off the internet, but the people are defiant. The military says they will not fire on protesters. So the demonstrations continue and I very much hope that this results in positive things.


HispanicPundit said...

It's definitely a good sign, but I'd be happier if they were making for capitalist reforms - atleast then, you'd expect a standard of living increase, see here.

Oh and, its not surprise that they have lower income inequality than we do. That's the general trend: the poorer the country, the less the income inequality, the higher the standard of living, the higher the income inequality.

Jon said...

Do you ever bother to get out of your theoretical world and consult reality? Poorer countries, less inequality. Richer countries, more inequality. Maybe that sounds plausible to you. Have you actually checked?

Here's a color map of countries as measured by the inequality index and here's a color map of countries by GDP per capita. So who is unequal (and hence rich).

There's Colombia, Bolivia. Look at southern Africa. Nambia and Botswana must be really rich. Also the Central African Republic. Guatemala looking very good. Haiti is orange. Then look to the hell holes. Canada, Spain, France, Italy, Australia. Then the beyond bad places. Germany, Denmark, Norway. Worst of all, Sweden. All of Europe is really bad. It's probably not necessary to check my second color map but if you need to feel free. No, Sweden is not amongst the poorest countries.

I think your economic freedom measurements are misguided. The key is not to look at present economic freedom. The key is to look at what the measures were as a country was becoming prosperous. So for instance today the US is happy to accept Japanese cars. But when the Japanese had a major technological advantage we blocked them so that we could recover and develop our technology. Prosperous countries are happy to allow for free trade. But only when they recognize they are not at a major competitive disadvantage.

My understanding is that those countries which did develop did so by managing their economies. Blocking superior Indian steel. Look at the US today, manipulating the price of oil by military force. It was the same for the British. There's nothing free trade about kidnapping Africans and bringing them to America to work. There's nothing free trade about slaughtering the indigenous population of Native Americans to clear the land for colonial exploitation. How did the US develop? How did it become the economic superpower that it is? High tech industry. Computers, the internet, telecommunications, lasers, commercial aviation. All funded by the public in massive violation of free market principles. The third world didn't have the power to prevent free trade from being forced down their throats, destroying their various industries. Perhaps today their policies are different in some cases. What were the policies when their economies were wrecked? That was the period of US military intervention or US backed trade agreements.

Like I mentioned earlier, Russia endured market reforms through the 90's. It was like going through Stalin's purges. It was around 2007 when they finally reached GDP levels equaling that of 1990, though inequality was way higher. So it's not just about their present freedom metrics. It's about what their metrics were while they went through the ups and downs.

Though I do quite agree that in many cases economic freedom is really important and should be increased. But it should be managed. History shows that management is necessary, sometimes blocking the generally preferred neo-liberal policies and sometimes encouraging them. Japan would have benefited greatly from more neo-liberalism in the 80's. They could have wiped out US auto. But the US would have suffered.

HispanicPundit said...

I wonder how that graph would look if you removed countries that had vast natural resources (most of Scandinavia, for example, would be removed, so would several poor countries in Africa).

At the very least, you would have to say that inequality is unrelated to standard of living or poverty reduction.

Regarding your wealth view: again, you ignore what inconveniences you. Namely, countries that had completely open trade grew even faster. Like Hong Kong. And countries that had more government involvement (communism!) grew the least of all. It's a trend.

But let me ask you point blank: do you disagree with neoliberal economic policies? I want you to say it plainly Jon: You disagree with the majority of economists, both left and right.

Jon said...

You know my thoughts on the correlation between regulation and economic growth, your assertion below notwithstanding.

I would hope you know my position on neoliberalism by now. I think some elements of neoliberalism, like unregulated financials, are bad. This undermines democracy and produces a plutocracy. I regard trade restrictions as sometimes good, sometimes bad. But I think a government should have the power to control if it decides that unrestricted trade in a given sector is harmful to the public interest. For instance Mexico should have the authority to block subsidized corn imports because it will destroy an entire economic sector, leaving not only millions out of work but the country more vulnerable to foreign control.

I understand that Africa contains countries that are among the most resource rich in the world. Also Haiti. So no, resources don't necessarily help the country as a whole. They can help the few capitalist owners, but not always the country at large.

You say neoliberalism is the preferred position of both left and right economists. What's your source on that?