The General Economics Thread

Manufacturing wages defy UK-wide earnings collapse

The problem with this statement is that "libertarian economics in its pure form" is, as you stated in a weaker form, inherently self-destroying, because the government (the central authority with the guns) is still composed of people and thus vulnerable to corruption by the people with the money (and economic power can be concentrated without limit under libertarian systems). And if there is no government (or the people are strong enough to resist the government by acting as militias, which is a common ideology among American libertarians), then the people with the money can buy guns and hire people to shoot them.

So if libertarianism is inherently subject to being hijacked by assholes, then it's not unfair to say that the problems of asshole hijack are part of the problem with libertarianism.

edited 25th Aug '14 2:46:27 AM by Ramidel

Yay! We're industrializing at last.

Again.

It's more of a general problem with all things political, and with human nature in general.

It's never really gone away^note  Unfortunately not always in the best of ways, considering what we lost along the way , just changed.

To summarize from the above

The inherent problem with Libertarianism, like Marxism/Communism, is while both are both great ideas in and of themselves on paper, Humanity itself is why they don't work. Only takes one egg to ruin the bunch, etc.

Why Burger King may be abandoning the US for Canada: Now Burger King plans to perform a Tax Inversion into Canada.

Yes, but in a lot of systems (a functional democracy), we can mitigate the problem of having humans in power by diffusing power among a mass of educated people with very little tolerance for bullshit.

Libertarianism has too weak of a government to control its people. Authoritarianism (of any stripe) has too much government to be controlled by its people. Liberal democracy is the best balance we've managed to figure out so far, and it requires constant vigilance and self-correcting to stay that way.

Draghi is showing he doesn't believe in an obsession with balanced budgets that much of the EU is worried about, and France has realized that much of their country's issue is a demand side problems. However, the Eurozone is still likely to suffer from Stagnation.

Really need to stop this tax inversion bullshit, that's for damn sure.

Well, the article states the Treasury and White House are planning more paywalls to make inversion more difficult. It seems like the main idea is to make it far less possible to load the "American subsidiary" with huge amounts of debts for massive deductions.

However, this seems like ultimately a Congressional problem. And Republicans lawmakers seem to think Inversion is a swell, legal nifty idea.

edited 25th Aug '14 8:45:35 AM by PotatoesRock

Well, their idea is that these companies are leaving because taxes are too high and that the best way to stop corporate inversion is to cut taxes.

It has nothing to do with the absolute amount of taxes, it has to do with taxes being lower in some countries than in others, so companies feel like they can "shop around" for the best deal.

Honestly, I think corporations should have to pay taxes in relation to how much business they do in other countries. Not where they're based.

Right. A VAT in lieu of corporate income tax would put an end to this nonsense right off the top, because then no matter where countries ran, if they wanted to do business in America, they'd have to pay for the privilege

@ Burger King Tax Inversion: Probably not the best idea. The taxes are really low because of the current Federal Government here, but there's no guarantee they'll stay that low. Also, Tim Hortons has basically achieved market saturation.

There was some discussion on the previous page regarding libertarianism and economic reform. It's clear that our economy needs reform, it's also clear that our current administration lacks the will to reform it. Only the government can govern- no set of private interests can replace the essential functions of law, public safety and security, promoting basic scientific research, maintaining our physical infrastructure, and so forth. Only private interests can maintain the production cycle and grow the economy- people wish to compete with each other to produce and consume desirable resources, products and services, and they should be allowed to do so. The only economy that works is a mixed economy- more or less what we already have. The problems we face aren't of the nature of a fundamental economic mis-alignment, requiring a revolution to fix. They are more in the nature of an incremental problem: wealth, and power have gradually become more and more concentrated in a governing class consisting of a small set of elite corporate investors and their elected allies in office. We dont need to eliminate government, or private property, we need to take steps to restore a balance of wealth and power between the socio-economic classes. Ideally, we would want elected officials to weight policies toward the classes with the most people in them, which is to say the so-called "Middle" class (at least in the US and the EU, a different weighting might be appropriate for other regions of the world).

There are several sets of reforms which would help accomplish this: 1) Campaign Finance Reform 2) Tax Reform and 3)Corporate Governance Reform.

Campaign Finance Reform is already underway in the US; see here, here, and here. Progress on this front is currently very slow due to corporate resistance, and a lack of engagement by the general population. Very likely this issue will have to wait until the next serious recession occurs, at which point we can expect political support for these kinds of reforms to gain in popularity. It is important that we lay the groundwork now, however, so I encourage everyone to go to the linked sites and demonstrate your support.

Tax Reform basically means restoring and strengthening the progressive nature of the tax code. The US, while still progressive compared to most of the rest of the world, has a less progressive tax policy than the most productive countries in the EU, and has become significantly less progressive over time (see here). Reversing this trend is critical for correcting the ever widening levels of wealth disparity we see now.

Corporate Governance really isnt on the radar at all in the US, which is very unfortunate, because I think it's vital. The problem with campaign finance and tax reform is that the established interests can be expected to use their concentration of wealth and influence to block any reform which will undermine their interests. Thus, it's necessary to attack this problem from another angle. I happen to support a version of the German "Stakeholder" model (as distinct from the US and UK "Shareholder" model) of corporate decision making. In a nutshell, in stakeholder systems power over corporate policy is shared between shareholders, employees, the community, suppliers and customers. Formal articles here and here.

I'm interested in views and opinions regarding these points, but esp. corporate governance reform, esp. the German vs. US systems. Does the stakeholder model make sense? Would it help restore a degree of social equity?

edited 25th Aug '14 8:39:53 PM by Demarquis

I think part of the problem with corporate governance is most of the Shares of companies ended up in these huge fund managers or fickle shareholders who demand short term profits over long term stability and profits for the CEO and Board. Though I think a lot of the evolution of that has to do with the post Enron world where we made it much harder for the Tom, Dick and Harry to get into meaningful stock control, and thus only fancy richy riches end up with big stock shares and thus control of companies and running those companies into the ground.

Also Governance via Government Regulation is generally frowned upon by the public because from what I've observed, it seems to lean towards while people like less oil spills, they associate government regulation with banning future minded inventors and developers from making the cool stuff of tomorrow.

If anyone wants some interesting reading, try reading about Banknotes of the pound sterling.

Well, part of the problem is that middle class households rarely buy their own stock anymore. They tend to invest their money in stock portfolios (esp retirement plans) managed by third parties who aren't concerned with corporate behavior except for profitability.

Governance reform...I agree with Potatoes, it's not going to work over here because our economy is so extremely investment-driven nowadays. Workers' reps on the board would just get ignored by the shareholders' reps.

It does make sense. Germany has changed this system for its own reasons, but over here it's expected that a company will hire someone because hiring that person benefits them, and (unless a union has collective-bargained otherwise) fire him the moment the cost/benefit analysis tips the other way. Loyalty isn't really a valuable commodity when the money has no particular long-term interest in a company.

I've seen so many companies decay away from their values. Network Decay is one of the most visible signs of this (my mom has made comments on A&E losing its "A", and I pointed out the reason why).

This shareholder shit really disgusts me. I think this obsession with short-term profits and ignoring long-term stability in invested companies is killing a lot of innovation and creativity in itself. I fear for what will happen to Google in the future. Right now, they're building things like self-driving cars and the balloon project to bring internet to poor countries. They actually do have financial incentive to do so - self-driving cars means more internet use in the car, and in turn, more Google products and ads. Likewise with the internet being available in poor countries.

But all it takes is enough idiots to say "I want my money NOW!!!!" to stop good long-term ideas like that.

I play the stock market myself, but the more I learn about it, the more disgusted I am.

Brad DeLong seems to think Mario Draghi is very very aware if he can't get Europe to start boosting Demand and get people Spending, the continent is about to triple dip, and likely slide the world economy into an outright Depression.

@ Inversions: It's interesting to note that the US has got the highest rate of Corporation Tax of all the G7 at ~39% — the UK has the lowest at 21%.

edited 26th Aug '14 7:36:43 AM by Greenmantle

But that's also because America no other real tax regimen for corporations (aside from anything state/local might take out). UK has the VAT on top of that, does it not?

From a quick glance, it appears not...

edited 26th Aug '14 10:32:35 AM by Greenmantle

Deflation Fears: A worldwide deflation fear is expanding and may actually be rampant. BCA Daily Insights (August 25, 2014) notes that, “out of 32 OEC countries, more than two-thirds have domestic inflation rates that fall short of 1%.” BCA analysts go on to argue that the worldwide inflation rate may converge to zero over the next couple of years.