How (Real) Capitalism Works


English: (Photo credit: Wikipedia)

A couple of interesting things here, relating to capitalism, and just how very far we’ve come in the last few hundred years.

First off Deidre McClosky is in the process of explaining how we got so rich. From the Spectator, UK.

Deirdre McCloskey has been at work for many years on a huge project: to explain why the world has become so much richer in the past two centuries, and at an accelerating rate since 1945. This is the third and final volume in the series. In it she argues that ‘our riches were not made by piling brick on brick, bank balance on bank balance, but by piling idea on idea’. The Great Enrichment, which she dates from 1800 to the present, depends on the spread of ideas of liberty, seeded in a series of ‘egalitarian accidents’ in European politics between 1517 and 1789.

The liberalism she describes operates in a very narrow free zone, hemmed in by what she calls the ‘clerisy’ — critics on left and right alike who do not accept a full version of liberalism — and roughly a third of the text sees McCloskey, vorpal sword in hand, slaying the dragons of the state. But she’s fighting enemies from the past: her side has won the battle. Globalisation, neo-liberalism, the expansion of monetary assets and instant internet communication have spawned a new world order without any state powerful enough to contain it.

A couple of notes here, unless I’m mistaken, she’s referring here to classical liberalism, not the socialistic nonsense we hear now on both sides of the Atlantic. And she has much right, although I find the adjective European, misleading at best because it has little to do with Europe, it is the classical form of the British and American ‘rule of law’ that has made it so. There’s a reason why the industrial revolution happened first in that ‘nation of shopkeepers’ and then why they financed it here. More later on that.

[…] The world today produces 70 times more goods and services worldwide than in 1800. McCloskey gives imaginative examples of the improved standard of living by looking at the products in one’s room, starting with ‘the 20 ballpoint pens stuffed into a mass-produced coffee cup, pens and cups greatly cheapened after the second world war’. I have just that on my desk. Citizens of the most prosperous half of the world are hundreds of times better off than they were even in 1900 or 1945, and that standard of living is spreading quickly to the poorer places on the planet. A small refrigerator at Home Depot today costs 15 hours of work: at Sears in 1956 it cost 116 hours.

The history of western capitalism does owe a great deal to the onward march of ideas of liberty. But it’s not the whole story. The greatest expansion of capitalism, the Chinese economic miracle, has taken place under a very restrictive communist regime.

Except the Chinese form of capitalism bears about as much resemblance to real capitalism as does that of Mussolini. I wonder what the Chinese could do if the government got out of their way. And finally:

Unbridled liberalism on a global scale today has little in common with its portrait in this book. It has exploded its limiting conditions to make the whole world economy a giant speculative game. It looks, to this member of the clerisy, to be a threat to the society that spawned it.

All from: How capitalism really works

And that’s one problem with the British, and increasingly, with us as well. We’ve forgotten how we got rich, and now we’re getting poorer because we aren’t doing those things anymore. Instead, we’re copying the Chinese, God help us!

You’ve likely heard that Beyoncé’s clothing line is produced in Sri Lankan sweatshops. Well, that’s a shame, It’s also what happens in every single industrializing country, not excluding the UK and the US. When labor is plentiful and jobs are few labor gets paid less, always. And by the way, if Trump gets his tariffs, those jobs won’t be coming back, but the prices will be going up probably far more than the tariff rate, and a good many of those sweated seamstresses (who in actuality make far more than most of their neighbors) will revert to the real minimum wage, which is $0. And there is this.

In 2001, Nobel Prize winning economist Milton Friedman Paul Krugman, whose written some of the most effective defenses of so-called sweatshops — “bad jobs at bad wages are better than no jobs at all” — explained why these efforts were insanity:

In 1993, child workers in Bangladesh were found to be producing clothing for Wal-Mart, and Senator Tom Harkin proposed legislation banning imports from countries employing underage workers. The direct result was that Bangladeshi textile factories stopped employing children. But did the children go back to school? Did they return to happy homes? Not according to Oxfam, which found that the displaced child workers ended up in even worse jobs, or on the streets — and that a significant number were forced into prostitution.

When VICE reached out to a Sri Lanka labor expert, no doubt expecting him to describe some soul-crushing hellhole, it got a pretty tepid response. “MAS [the factory] are essentially top of the range in terms of labour conditions in Sri Lanka,” Dr. Kanchana Ruwanpura of the University of Edinburgh told VICE. “They’re brilliant factories in terms of the build space and the attention they usually pay to the codes they work with. However, I would say that when it comes to wages and freedom of association, MAS don’t do a very good job.”

So, after having to grapple with two inconvenient facts — 1) that salaries at MAS are better than prevailing wages in Sri Lanka, and 2) that the factory is probably a relatively modern and safe place to work[…]

Lots more on this at: Beyonce’s ‘Sweatshops’ Do More For The Poor Than You Ever Will

And that is the pure and unvarnished truth. It’s not optimum but it’s better for these people than it ever has been. So why would we not want to help them? As Daniel Harsanyi says in the article:

In fact, if you want to help the world’s impoverished, you should probably buy her products. The more demand there is for tight-fitting, overpriced celebrity clothing lines, the more factories Sri Lankans will have to work in. As those workers have more choices, salaries will rise and so will the quality of life. This competition will impel employers to increase productivity and, if Sri Lanka doesn’t revert to its old ways, the economy will grow. The children of these workers will turn to white-collar professions. And before you know it, factories will be taken over by automatons and the Sri Lankan middle class will grumble about how the Indonesians are stealing their jobs.

This process might not sit will with the empathetic American liberal, and it might not happen as quickly as we’d like, but it’s how the world works.


How The New E-Cig Rules Hurt Americans

Some Kills

Some Kills (Photo credit: Wikipedia)

You may have noticed that the FDA recently decided that E-cig should be regulated (by themselves, natch) as tobacco products. Frankly, it doesn’t make much sense to me, maybe because I expect tobacco products to contain, well, I don’t know, tobacco, maybe.

Jared Meyer wrote about this the other day in The Federalist, here’s some of it.

Most people agree minors should not have access to products that contain substantial levels of nicotine (and “substantial” is used because many foods contain trace amounts of nicotine). But, in focusing on this move, commentators are missing how the FDA’s new regulations will destroy 99 percent of an industry that offers an option the Royal College of Physicians finds is 95 percent safer than cigarettes.

We Don’t Care About Your Health

The FDA’s regulations will force all e-cigarette products to go through the costly and time-consuming premarket tobacco product application process, a step that all but the big tobacco companies will not be able to comply with. (For more on how the FDA’s approval process will harm innovation and consumers, see my previous E21 article).

The fundamental reason FDA placed the public at greater risk of the health problems that come with smoking traditional cigarette was that it cannot pass up on a chance to expand its power. As the tortured language of the regulation shows, the FDA recognizes that e-cigarettes are safer than cigarettes, but refuses to admit their potential positive consequences. Instead, the agency twists congressional intent in its deadly power grab.

The FDA recognizes that e-cigarettes are safer than cigarettes, but refuses to admit their potential positive consequences.

Last week Nicopure Labs, an e-cigarette company, filed a lawsuit against the FDA that argued the agency’s dictates violate free speech by prohibiting e-cigarette makers from advertising that their products are smoke-free or safer than cigarettes. When addressing public comments on page 248 of the regulation, the FDA preemptively brought up this legal challenge by writing, “A few comments expressed concern that imposition of section 911 of the [Federal Food, Drug, and Cosmetic (FD&C) Act] will force e-cigarette manufacturers to implicitly lie by not permitting them to tell consumers that their products are safer alternatives to conventional cigarettes, to advertise that they do not contain tobacco, and to state that they are ‘smoke free.’”

The FDA replied to the objection by stating, “Section 911 is one of the provisions of the statute that applies automatically to deemed products. It was included in the FD&C Act to protect consumers from manufacturers making invalid or unsubstantiated claims, as many had done with respect to their designation of cigarettes as ‘light,’ ‘low,’ or ‘mild.’”

via How The New E-Cig Rules Hurt Americans

One of the things I’ve noticed over the years is that while government talks a good game about wanting us to quit smoking, they don’t really, smokers pay for a good bit of the FDA, and they provide a lot of money to both the local and federal government. Do you really think the cost of a pack of Marlboros is all that much greater now when they cost at least $5.00 than when the cost about 35¢? Nope, almost all of that difference goes to the government(s). If everybody quit smoking today, they’d be broke beyond fixing next month.

In full disclosure, I’ve been a smoker since the 60s, when all the cool kids smoked, probably averaging about 2-2½ packs a day, a good part of the time on non-filtered Pall-Malls. I always enjoyed it, and in fact, still do occasionally, although now I’m more likely to indulge in a fairly decent cigar. How did I get to that point? Easy answer, E-cigarettes. It’s very true, they allowed me to very easily quit smoking, and yes, my health has improved a lot. My stamina isn’t what it was when I was 20, but it’s a reasonable comparison to what it was at 45. I rarely cough anymore, where it was constant before, and in general, I just feel much better. And you know what else? When I was smoking, I spent around $20 a day on the habit, now I spend roughly $50 a month on its replacement. To me, that’s quite a product, that can do so much for me. And yes, I tried all the (very expensive) replacement programs too, I likely spent something like $1000 on trying (unsuccessfully) to quit smoking.

Not a good thing for either the FDA or ‘Big Tobacco’. So in true crony-capitalist fashion, it looks to me like they decided to destroy something, by taxing it out of existence, that has the usefulness to destroy one, and damage the other. And the Health of the Public, be damned, our money is much more important.

About those health benefits, the Royal College of Physicians had some things to say, these are just the ones that caught my eye, the paper is linked below.

  • Smoking is the biggest avoidable cause of death and disability, and social inequality in health, in the UK.
  • Quitting smoking is very difficult and most adults who smoke today will continue to smoke for many years.
  • NRT is most effective in helping people to stop smoking when used together with health professional input and support, but much less so when used on its own.
  • E-cigarettes appear to be effective when used by smokers as an aid to quitting smoking.
  • However, the hazard to health arising from long-term vapour inhalation from the e-cigarettes available today is unlikely to exceed 5% of the harm from smoking tobacco.
  • Rather, the available evidence to date indicates that e-cigarettes are being used almost exclusively as safer alternatives to smoked tobacco, by confirmed smokers who are trying to reduce harm to themselves or others from smoking, or to quit smoking completely.
  • A regulatory strategy should, therefore, take a balanced approach in seeking to ensure product safety, enable and encourage smokers to use the product instead of tobacco, and detect and prevent effects that counter the overall goals of tobacco control policy.
  • The tobacco industry has become involved in the e-cigarette market and can be expected to try to exploit these products to market tobacco cigarettes, and to undermine wider tobacco control work.
  • However, in the interests of public health it is important to promote the use of e-cigarettes, NRT and other non-tobacco nicotine products as widely as possible as a substitute for smoking in the UK.

From Nicotine without smoke: Tobacco harm reduction

The FDA’s approach is very suspect because it goes against the best available evidence, which I think is brought out by the RCP paper. The FDA’s approach in collusion with the tobacco companies is, in fact, against the best interests of the taxpayers, and will cause more smokers to die of tobacco-related diseases.

The coming debt bust

20160507_LDD010_1You will, I hope, forgive me a personal note before we get down to business today. Yesterday was the fourth anniversary of my co-blogger, Jessica’s blog ‘All along the Watchtower‘ and we each had a piece or two there to celebrate. In truth of the blogs that we read when she started, or when I did ten months earlier, not all that many are left. She graciously said this, this morning:

As Neo reminds us, there have been ups and downs, and what with attempted censorship, my illness and people popping in and out, the wonder is we’re still here. I looked back at some of the earlier posts, and felt quite nostalgic at some of the bloggers who have come and gone since then, including some of our contributors. No one will, I hope, mind if I pay an especial tribute to Geoffrey Sales, who at times kept the blog going all by himself. I hope, too, no one will feel slighted if I pay a heartfelt tribute to Chalcedon451 who has kept the ship afloat despite his own heavy workload.

She’s right, If you dig back through the archive, you’ll find much that is interesting. You’ll even find a multipart story where many of us tried our hands at fiction. It could have been worse, and I’m surprised it wasn’t. Geoffrey and Chalcedon, have between them kept us going for many weeks when I was totally useless and Jess was very ill indeed. And I wanted to mention it here as well, because many of you are fond of Jess, and they are two of the best friends I, and this blog have. So do drop over and like her article, and maybe look around, it’s a lively fun place, for all that we are all serious about our Christianity.

Today we’re talking about the looming financial crisis, no not ours for once, at least not first. China has a pretty big problem staring them in the face. This is from the print edition of The Economist, and well worth taking note of.

CHINA was right to turn on the credit taps to prop up growth after the global financial crisis. It was wrong not to turn them off again. The country’s debt has increased just as quickly over the past two years as in the two years after the 2008 crunch. Its debt-to-GDP ratio has soared from 150% to nearly 260% over a decade, the kind of surge that is usually followed by a financial bust or an abrupt slowdown.

China will not be an exception to that rule. Problem loans have doubled in two years and, officially, are already 5.5% of banks’ total lending. The reality is grimmer. Roughly two-fifths of new debt is swallowed by interest on existing loans; in 2014, 16% of the 1,000 biggest Chinese firms owed more in interest than they earned before tax. China requires more and more credit to generate less and less growth: it now takes nearly four yuan of new borrowing to generate one yuan of additional GDP, up from just over one yuan of credit before the financial crisis. With the government’s connivance, debt levels can probably keep climbing for a while, perhaps even for a few more years. But not for ever.

When the debt cycle turns, both asset prices and the real economy will be in for a shock. That won’t be fun for anyone. It is true that China has been fastidious in capping its external liabilities (it is a net creditor). Its dangers are home-made. But the damage from a big Chinese credit blow-up would still be immense. China is the world’s second-biggest economy; its banking sector is the biggest, with assets equivalent to 40% of global GDP. Its stockmarkets, even after last year’s crash, are together worth $6 trillion, second only to America’s. And its bond market, at $7.5 trillion, is the world’s third-biggest and growing fast. A mere 2% devaluation of the yuan last summer sent global stockmarkets crashing; a bigger bust would do far worse. A mild economic slowdown caused trouble for commodity exporters around the world; a hard landing would be painful for all those who benefit from Chinese demand.

Brace, brace

Continue reading at The coming debt bust | The Economist

This is not my field, obviously, but I know from a whole lot of experience, if you don’t get out in front of problems, they can really ruin your day, and it doesn’t look like China is anywhere near to solving this. If it blows up, it will have major repercussions for us all.

Going Out of Business!

Well, perhaps a reminder of why businesses settle where they do. From Bill Whittle

Lies, Damned Lies, and Statistics

42-76175484There’s an excellent article over at First Things this month. Nothing at all unusual about that, of course, but this one speaks to a fair number of our problems.

The problem with ­science is that so much of it simply isn’t. Last summer, the Open Science Collaboration announced that it had tried to replicate one hundred published psychology experiments sampled from three of the most prestigious journals in the field. Scientific claims rest on the idea that experiments repeated under nearly identical conditions ought to yield approximately the same results, but until very recently, very few had bothered to check in a systematic way whether this was actually the case. The OSC was the biggest attempt yet to check a field’s results, and the most shocking. In many cases, they had used original experimental materials, and sometimes even performed the experiments under the guidance of the original researchers. Of the studies that had originally reported positive results, an astonishing 65 percent failed to show statistical significance on replication, and many of the remainder showed greatly reduced effect sizes.

Their findings made the news, and quickly became a club with which to bash the social sciences. But the problem isn’t just with psychology. There’s an ­unspoken rule in the pharmaceutical industry that half of all academic biomedical research will ultimately prove false, and in 2011 a group of researchers at Bayer decided to test it. Looking at sixty-seven recent drug discovery projects based on preclinical cancer biology research, they found that in more than 75 percent of cases the published data did not match up with their in-house attempts to replicate. These were not studies published in fly-by-night oncology journals, but blockbuster research featured in Science, Nature, Cell, and the like. The Bayer researchers were drowning in bad studies, and it was to this, in part, that they attributed the mysteriously declining yields of drug pipelines. Perhaps so many of these new drugs fail to have an effect because the basic research on which their development was based isn’t valid.

When a study fails to replicate, there are two possible interpretations. The first is that, unbeknownst to the investigators, there was a real difference in experimental setup between the original investigation and the failed replication. These are colloquially referred to as “wallpaper effects,” the joke being that the experiment was affected by the color of the wallpaper in the room. This is the happiest possible explanation for failure to reproduce: It means that both experiments have revealed facts about the universe, and we now have the opportunity to learn what the difference was between them and to incorporate a new and subtler distinction into our theories.

The other interpretation is that the original finding was false. Unfortunately, an ingenious statistical argument shows that this second interpretation is far more likely. First articulated by John Ioannidis, a professor at Stanford University’s School of Medicine, this argument proceeds by a simple application of Bayesian statistics. Suppose that there are a hundred and one stones in a certain field. One of them has a diamond inside it, and, luckily, you have a diamond-detecting device that advertises 99 percent accuracy. After an hour or so of moving the device around, examining each stone in turn, suddenly alarms flash and sirens wail while the device is pointed at a promising-looking stone. What is the probability that the stone contains a diamond?[…]

[Speaking of the scientific method] If peer review is good at anything, it appears to be keeping unpopular ideas from being published. Consider the finding of another (yes, another) of these replicability studies, this time from a group of cancer researchers. In addition to reaching the now unsurprising conclusion that only a dismal 11 percent of the preclinical cancer research they examined could be validated after the fact, the authors identified another horrifying pattern: The “bad” papers that failed to replicate were, on average, cited far more often than the papers that did! As the authors put it, “some non-reproducible preclinical papers had spawned an entire field, with hundreds of secondary publications that expanded on elements of the original observation, but did not actually seek to confirm or falsify its fundamental basis.”

What they do not mention is that once an entire field has been created—with careers, funding, appointments, and prestige all premised upon an experimental result which was utterly false due either to fraud or to plain bad luck—pointing this fact out is not likely to be very popular. Peer review switches from merely useless to actively harmful. It may be ineffective at keeping papers with analytic or methodological flaws from being published, but it can be deadly effective at suppressing criticism of a dominant research paradigm. Even if a critic is able to get his work published, pointing out that the house you’ve built together is situated over a chasm will not endear him to his colleagues or, more importantly, to his mentors and patrons.

via Scientific Regress by William A. Wilson | Articles | First Things

We see this all the time, don’t we? From climate science, to sugar in our diets, to low fat diets, to almost everything else, we have far more information available than any generation before us. That’s likely a good thing, except it all means this. We have far more false information available than any generation before us.

Maybe it wouldn’t matter but, as George Canning once observed:

I can prove anything by statistics except the truth.

And here’s another part that we must never forget, from Josiah Stamp:

The government are very keen on amassing statistics. They collect them, add them, raise them to the nth power, take the cube root and prepare wonderful diagrams. But you must never forget that every one of these figures comes in the first instance from the village watchman, who just puts down what he damn pleases.

See also: The Week: Big Science is Broken

Nebraska Repeals Strict Licensing Laws for Hair Braiders

160318_NebraskaHairBraiding_Johnson-1250x650Better late than never, I suppose.

A cosmetology license, required for hair braiding? Really?

Here: from the Daily Signal.

Just two weeks ago, Nebraskans who wanted to make money braiding hair had to undergo 2,100 hours of training to obtain a cosmetology license, which state officials say dedicates little time to natural hair braiding techniques.

But now Nebraska Gov. Pete Ricketts, a Republican, has signed legislation into law that will lift arduous occupational licensing requirements on the state’s hair braiders. […]

She said the government is often “too intrusive” and enacts restrictions that prevent people from earning an honest living. She hopes her bill, which Ricketts signed into law March 9, will empower female professionals to take risks, which she said will help build self-esteem.

“It’s the pursuing of the American Dream,” Fox said. “I think when you start taking risks and accomplishing things, it kind of makes you, the entrepreneur, set the bar higher and try to accomplish more.”

Yes, yes it does. That’s exactly what it does. The opportunity to accomplish something on your own. If you don’t know this 2100 hours is about 52 weeks at 40 hours per week, what we call full time, by the way, all that for hair braiding.

Furth said Nebraska’s legislature should continue to deregulate work in the state, where there is “no serious, proven risk” to public safety.

“One easy way to deregulate is to accept other states’ licenses: If you’re good enough to be a dentist in Iowa, you’re good enough to be a dentist in Nebraska,” he said. “That’s an easy way for a state to attract more skilled workers without being accused of risking public safety.”

via Nebraska Repeals Strict Licensing Laws for Hair Braiders

That I don’t completely agree with. While she’s right, as far as she goes, but she doesn’t go nearly far enough. As most of you know, I’m an electrician, and yes, I’m a pretty good one. And yes, bad electrical work can kill you, and do it quick, by electrocution, by fire, and by other things. But you know what, Nebraska’s licensing system, isn’t really about safety, maybe it was at one time, but now it functions as simply a medieval guild. It exists to prevent other equally good electricians from competing with the ones that have a license. If memory serves, neither Pennsylvania or Indiana have state licenses, although they likely have some sort of inspection regimen. By the way, here you need a state permit to change an outlet, which costs about $50 additional. Yeah, I know!

I’ve written about this before, here, and here, and this too is relevant. Yes, a lot of that has to do with codes, and inspections and such, but it’s still very relevant to the discussion.

Short form is this, having a bloody piece of paper, and having pushed a broom for four years, and having passed a test I could have passed when I was 14 just does not make you a competent electrician, neither does mandated continuing education, which requires that half of the courses you take each biennial period duplicate over and over again. Electrical theory hasn’t changed much in the last fifty years, but what has changed is the material we work with. I spent most of my time in the last few years with single board computers, programmable logic controllers, variable frequency drives, computer networks and sensors, and other things that didn’t exist in 1980. I did not learn that in bogus seminars for licensing requirements, I learned that mostly in the field, by reading, and by taking real seminars that allowed me to do the job.

The code has changed, it’s purpose now is, as near as I can tell to keep an unattended two year child, or a stupid drug addict safe, and like I said in one of the linked articles, it forces us to refuse to work on really hazardous installations, unless the client can afford the tariff.

Are there solutions? Sure, but we’re not looking for them, because the manufacturers want to sell higher priced material, and the authority having jurisdiction, who by the way, is not your local inspector, have a need to, at all costs, protect their jobs, for which, frankly, I don’t blame them at all.

And yes, all of this has much to do with why I retired or was that got too tired to deal with it.

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