Bob Higgs in his characteristic clarity offers insights into how policy choices undermine security over private property rights, leading to less private investments & hence slower economic growth.
“We believe in the rule of law and not of persons or groups of persons, be they a minority or a majority.”
Manuel Ayau (1972) inauguration of Francisco Marroquín University (UFM).
Based on official estimates of China’s economic growth, it supposedly has overtaken Japan in the 2nd quarter of this year, becoming the 2nd-largest economy in the world after the US. Some “experts” suggest that China might overtake the US & become the biggest economy as early as 2030.
In the first instance, I am skeptical that China has overtaken Japan, in a meaningful sense. After all, GDP is a bogus measure of economic activity & China is in the midst of a massive bubble afflicting its entire economy, driven by loose monetary policy by most central banks in the world! In all events, the numbers are provided by an authoritarian government whose data collection & calculation is far from transparent.
Secondly, it will be virtually impossible for China’s per capita GDP to match that of the US within 20 years. This will not happen even though US economic policy is diverted from supporting economic growth toward greater redistribution under the Obama administration.
Thirdly, Chinese authorities insist that “real” economic growth has been close to double-digits for nearly 2 decades. During that period, measured price inflation has often been close to double digits. Does anyone really believe that any economy can have a 20% nominal growth rate for such a long period.
Hey guys, a reality check is in order.
And just think about the boastful claims of China’s $2.45 trillion foreign exchange reserve balances. Having a dollar fetish is like the gold bullion fetish of European absolute monarchies that followed the same sort of export-led growth policies as does Beijing.
These reserves are driven in large part with an obsession with under-valuing the reminbi. In turn, China is selling exports at artificially-low prices & paying artificially-high prices for imports!
And then, they are mostly used to buy US Treasuries that pay risibly-low interest rates.
BTW. look for a big & bad surprise when China’s property bubble blows up in Beijing’s face. It will not be pretty!!!
“Rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others.”
“The reforms we seek would bring greater competition, choice, savings and inefficiencies to our health care system.”
~Barack Hussein Obama~
“Government is not reason, it is not eloquence, it is force; like fire, a troublesome servant & a fearful master. Never for a moment should it be left to irresponsible action.”
“It’s not surprising, then, they get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.”
~Barack Hussein Obama~ April 11, 2008
“You cannot help the poor by destroying the rich.
You cannot strengthen the weak by weakening the strong.
You cannot bring about prosperity by discouraging thrift.
You cannot lift the wage earner up by pulling the wage payer down.
You cannot further the brotherhood of man by inciting class hatred.
You cannot build character & courage by taking away people’s initiative & independence.
You cannot help people permanently by doing for them, what they could & should do for themselves.”
“I think when you spread the wealth around, it’s good for everybody.”
~Barack Hussein Obama~ Toledo, Ohio, Oct. 12, 2008
The primary gains to society from privatization come from getting government-owned properties into private hands. To this end, the least important aspect is for the state property to be sold.
As it is, bureaucrats & politicians tend to dither or delay to find the “right” timing or to find a way to transfer such assets into the hands of supporters or sycophants.
Instead, state-owned properties should be given away in a lottery format so that they are immediately transferred into private ownership. This would also lead to the emergence to a whole new set of brokers to assist the new owners in handling future rentals or sales.
While the best lottery would involve a random selection of citizens, perhaps it would satisfy populistic concerns by choosing from a pool made up of those below the median income level.
In the end, the government would gain since they property would no longer be a drain on the public purse. Instead, it would become a revenue source in being used to generate income for individuals or businesses. And of course, the brokers would be paying taxes on large earning from the turnover of the properties.
“When we save a schoolteacher’s job, that unambiguously aids employment; when we give millionaires more money instead, there’s a good chance that most of that money will just sit idle.”
~Paul Krugman~ “America Goes Dark.” New York Times, 8 August 2010.
Comments such as this surely bring into question how anyone could win a Nobel Prize in economic sciences yet be so ignorant of how or why markets work.
Let’s start with the latter claim. Given the diverse & vibrant capital market in the US, it is bizarre to claim that allowing millionaires to keep more of what they earn increases “idle” balances, whatever those might be.
Next, saving jobs of schoolteachers requires higher taxes, increased government borrowing or in the case of the federal government with the connivance of the Fed, more money to be printed.
None of these actions “aids” employment. In the first instance, higher taxes reduce spending by households & businesses that will almost certainly lead to less job creation by the private sector.
And increased public-sector borrowing to create or save public-sector jobs with massive deficits tends to suck the oxygen out of the economy with fewer resources left to the private sector. As it is, the Congressional Budget Office (CBO) estimates that America’s public-sector debt is projected to hit 62% of GDP, up from 40% in 2008 & almost twice its historical average. And the CBO projected that this ratio will rise to 146% of by 2030.
In all events, adding or protecting jobs in the public sector are the worst possible solution to reducing the unemployment rate.
As it is, unions represent around 37% of public sector workers, compared to 7% of private sector workers. Since their governments paymasters do not consider profits & losses, public-sector workers can demand & receive settlements that bear no connection with productivity or value for money.
As such, public-sector employees receive more generous benefits & pensions than those that make net contributions to the pool of tax revenues. Since public-sector employees earn from this pool, tax payments by them do nothing to enlarge it.
The US is experiencing a growing numbers of citizens in households that pay no income taxes. This along with a growing public-sector labor force means that the proportion of workers that actually pay into the tax pool is shrinking.
It seems that the US is moving towards a “tipping point” that will stifle long-term economic growth prospects just as happened in Japan after its bubble economy collapsed in the late 1980s.
Note the similarities in the policy responses. Japan’s leaders refused to allow over-inflated assets to deflate completely while embarking on endless rounds of “stimulus” spending. Now the ratio of Japan’s public-sector debt to GDP is moving towards 200% with no sign yet of full economic recovery for 2 decades.
It seems that professor Krugman is as ignorant of history as he is of market processes.
Thomas Jefferson identified individual rights as being natural, inherent & inalienable & that exist independently of the acquiescence of governments or limits set by legislation. Law in the hands of tyrants as well as those set by democratic government will inevitably & eventually violate individual rights & freedom, most often through limits on property rights.
For him, “…rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others.”