Entries Tagged 'Economics' ↓

Gary MacDougal, who works with poor people to help them climb out of poverty, writes about just how harmful Rev. Jeremiah Wright’s message is, and not just because he hurts Barack Obama or even because he preaches racism. He and preachers like him proclaim the pervasive message that the poor people in their congregations have no hope, that they are doomed to be perpetual victims, and that their problems are always white people’s fault. This worldview, he says from experience, paralyzes people who need, instead, encouragement and prevents them from improving their lives.

Imagine getting up each morning to go to work in a society that doesn’t want you, doesn’t respect you and seeks to hold you back. Your spiritual leader has told you this, after all. With powerful rhetoric, Wright has asserted, for instance, that white America sees black women as useful only for their bodies. If this is the message you got from your mentor, would you expect that you could succeed? Would you try very hard, if at all?

Through my work with the Illinois governor’s task force on human services reform and its efforts to reduce welfare dependency, I have encountered misguided community “leaders” like Wright who tell their followers, for example, that the job market is stacked against them and that the jobs that are available aren’t good enough — that they are entitled to more. The underlying message: You can’t win because of who you are, regardless of what you do.

Fed to Pursue Aggressive Checks on Credit Cards - washingtonpost.com:

The Federal Reserve and two other banking regulators are set to unveil today one of the most aggressive efforts in decades to crack down on the credit card industry, prohibiting practices such as arbitrarily raising interest rates on outstanding balances.

The proposed regulations, which could be finalized by year’s end, would label as “unfair or deceptive” practices that consumers have long complained about. That includes charging interest on debt that has been repaid and assessing late fees when consumers are not given a reasonable amount of time to make a payment. When different interest rates apply to different balances on one card, companies would be prohibited from applying a payment first to the balance with the lowest rate.

Before, all the Fed made the credit card companies do was to inform the consumer of such practices. Now, the Fed will forbid them.

Even if you bemoan government interference into businesses and the economy, isn’t this a good idea? Isn’t there a moral issue here that the state does have a Romans 13 right to restrict, namely that all-but-forgotten sin of usury?

We’ve been talking about the price of wheat. Here is what is going on with corn and how the ethanol-fueled prices are affecting nearly every other kind of food:

People who use corn to feed cattle, hogs and chickens are being squeezed by high corn prices. On Monday, Tyson Foods reported its first loss in six quarters and said that its corn and soybean costs would increase by $600 million this year. Those who are able, such as egg producers, are passing those high corn costs along to consumers. The wholesale price of eggs in the first quarter soared 40 percent from a year earlier, according to the Agriculture Department. Meanwhile, retail prices of countless food items, from cereal to sodas to salad dressing, are being nudged upward by more expensive ingredients such as corn syrup and cornstarch.

Rising food prices have given Congress and the White House a sudden case of legislative indigestion. In 2005, the Republican-led Congress and President Bush backed a bill that required widespread ethanol use in motor fuels. Just four months ago, the Democratic-led Congress passed and Bush signed energy legislation that boosted the mandate for minimum corn-based ethanol use to 15 billion gallons, about 10 percent of motor fuel, by 2015. It was one of the most popular parts of the bill, appealing to farm-state lawmakers and to those worried about energy security and eager to substitute a home-grown energy source for a portion of U.S. petroleum imports. To help things along, motor-fuel blenders receive a 51 cent subsidy for every gallon of corn-based ethanol used through the end of 2010; this year, production could reach 8 billion gallons. . . .

Although ethanol was once promoted as a way to slow climate change [so says the Post, tODD!], a study published in Science magazine Feb. 29 concluded that greenhouse-gas emissions from corn and even cellulosic ethanol “exceed or match those from fossil fuels and therefore produce no greenhouse benefits.”

More on the price explosion in food, which I think is much more serious than the high price of oil. See Emptying the Breadbasket. Here are some sample facts:

Last year, wheat cost $6 per bushel; this year, it’s $20. Farmers still don’t want to grow it, though, because it is riskier, subject to disease. Research to develop disease-resistance wheat has all but halted, since the public is irrationally scared of genetic alterations. And farmers can make even more money from soybeans (from the Chinese) and corn (from government-subsidized ethanol plants). Besides, the way the farm bill works, farmers can still get wheat subsidies even when they switch their acreages to corn! In the 1980s, half of the nation’s fields grew wheat. Now, only 10% do. Because of the low dollar and desperate foreign governments, our reserves are getting bought out. We now have the lowest amount of grain in storage since World War II, enough to last the world for 4 days.

This article, The New Economics of Hunger, is both fascinating and sobering, showing just how interconnected the world’s economy has become and how good environmentalist intentions and arcane investments are translating into actual human beings starving to death. Killer quote: “food was becoming the new gold.”

Here is how the current food crisis happened: The wheat harvest worldwide was mediocre, making for tight though sufficient supplies. But Argentina and Russia decided to ban exports so they could keep their crops for themselves. That meant less wheat on the world market, sending prices up.

Meanwhile, in the U.S., our farmers–who account for half of the world’s grain exports!–had shifted a significant amount of their production from wheat to corn to take advantage of the federally-subsidized ethanol market , which consumes nearly 25% of the current corn supply. So less American wheat meant still higher prices. Foreign buyers, facing the prospect of hunger at home, bid it still higher. Because of the falling value of the dollar, foreigners bought more and more, stockpiling supplies. In the meantime, the collapse of the mortgage markets sent investors into grain markets! Bidding prices even higher!

Now, food shortages and high prices are destabilizing governments in Haiti, Bangladesh, and a dozen other countries. And, after years of progress in fighting hunger in these countries, starvation is back.

George F. Will gives useful background on the worldview that looms behind Barack Obama’s contention that Americans are religious, love guns, and want border control because they are economically oppressed. A sample:

The emblematic book of the new liberalism was “The Affluent Society” by Harvard economist John Kenneth Galbraith. He argued that the power of advertising to manipulate the bovine public is so powerful that the law of supply and demand has been vitiated. Manufacturers can manufacture in the American herd whatever demand the manufacturers want to supply. Because the manipulable masses are easily given a “false consciousness” (another category, like religion as the “opiate” of the suffering masses, that liberalism appropriated from Marxism), four things follow:

First, the consent of the governed, when their behavior is governed by their false consciousnesses, is unimportant. Second, the public requires the supervision of a progressive elite which, somehow emancipated from false consciousness, can engineer true consciousness. Third, because consciousness is a reflection of social conditions, true consciousness is engineered by progressive social reforms. Fourth, because people in the grip of false consciousness cannot be expected to demand or even consent to such reforms, those reforms usually must be imposed, for example, by judicial fiats.

According to Marxism and its neo-Marxist descendents (who apply what Marx said about ecoonomics to other kinds of oppression, such as by race, gender, and sexual orientation), “false consciousness” has to do with the oppressed being manipulated by those in power to co-operate in their own oppression. For example, in neo-Marxist literary criticism (still a big deal on non-Patrick Henry university campuses), Jane Austen is said to show “false consciousness” by having her female characters get married rather than empowering them to be feminists.

Hey, remember when we were so traumatized when gasoline hit $2 per gallon? (I can remember being traumatized when it hit $1. I still am! When I was in college, a gallon of gasoline cost 21.9 pennies.) There wasn’t much outcry when it passed the $3 mark. But what about $4?

Economists are rather mystified as to why it costs so much. See Oil Price Defies Easy Calculation. The supply is plentiful, and there seems to be no artificial interruptions in the marketplace. One culprit seems to be that big investors, such as pension funds, are moving out of those shaky financial credit funds into commodities, bidding the price up. Also, the price has to be whatever the market can get, and few people seem to be inhibited by these high prices to reduce the demand.

A British newspaper has a frontpage story proclaiming, with some glee, that the United States has entered a new Great Depression.

This is a silly exaggeration, it seems to me. (The paper bases its conclusion on a small uptick of the number of Americans on foodstamps, which was primarily caused, the paper itself admits, by an advertising effort to get eligible people to sign up for them!) But certainly many Americans are going through hard times. I read somewhere that, though by most measures the economy has been booming, the soaring prices of food and fuel have hit average families really hard, impacting them in concrete ways and making them feel the pain despite what the abstract overall numbers say. Now the big financiers are also feeling the hurt.

I worry about the economy, but I also worry about what seem like draconian plans for the government to regulate it all. (If you really want to get scared, read this, about how the Fed is studying how the Nordic states nationalized their banks.) It is as if free markets are fine as long as everybody is making money, but once the free market creates its losers, as it has to, politicians become Keynsians again. Imagine, with this going on in a Republican administration, what a Democratic victory will do. Statist liberalism will be back. With a vengeance. And might socialism come back into vogue?

Or do I overstate the case? Are we depressed over a Depression, or do we just have the blues?

The Washington Post, in a useful exercise, asked spokesmen for each of the three presidential candidates about what each of them would do to address our current economic problems. Go here, then click each candidate in turn.

The notion that Obama and Clinton have virtually the same policies does not hold, at least for this issue. And it is certainly not true that McClain is just like the Democrats. He stands for conservative free-market economic policies, addressing our problems through tax cuts, letting those who made bad investments fail, and refusing to bail out the financial industry. Obama offers a series of ingenious “incentives and guarantees” that would protect the little guys caught up in all of this, policies that would increase government’s impact in the economy, but which sound like they respect a free market and a free society. Clinton’s proposals, though, are full of government fiats: She would impose a 90 day moratorium on home foreclosures. The rhetoric is about what the government should permit and not permit. (E.g., “Complex lending vehicles for sophisticated financiers must ultimately be shown to benefit America’s working families”–shown to whom? who is going to have the power to approve or disallow such investments?) The point is, Clinton sounds far more hard-core statist than Obama does.

is collapsing. So the government is working to bail out the big investment firms that have made easy credit possible. It seems that everyone is a free market capitalist during good times, but once a downturn happens, everybody wants to state to intervene into the economy after all.

See E. J. Dionne Jr. - The Street on Welfare - washingtonpost.com

Perhaps these interventions are necessary. (We need our resident economist, EconJeff, to advise us.) But I worry that this is just the beginning of a turn back to a state run economy.

I sense that liberalism is rising from the dead, that a Democratic president and a Democratic Congress will re-regulate the whole economy and utterly undo the Reagan revolution.

Inflation in the South African nation of Zimbabwe has reached Weimar-republic-like proportions. Michael Gerson writes how that nation’s dictator President Mugabe–who famously confiscated the land of all white farmers, who had supplied much of the food supply for generations–is funding his predatory government by simply printing money.   Back in 1980, a Zimbabwe dollar was worth about as much as ours.  Today, a newspaper costs $3 million, and a two pounds of chicken costs $15 million.  People have to carry around boxes of money.  If someone doesn’t collect a bill within 48 hours, it isn’t worth collecting anymore, since by then the hourly inflation will have rendered the original amount into chump change. 

Japan used to be the world’s economic success story. Now, after a decades-long slide, its own government officials are saying that Japan no longer has a “first-class economy.” According to this article, its woes include too much government regulation, declining productivity, stagnant innovation, and. . .

the petering out of the population. Japan has the world’s highest proportion of elderly people and the lowest proportion of children.By 2050, population decline will have reduced economic growth to zero, according to the Japan Center for Economic Research. Seventy percent of the country’s labor force will have disappeared.

You know something else? Some business educators, using their old notes and research from twenty years ago–are STILL hailing Japanese management techniques and saying that we need to emulate them.