Saturday, September 25, 2010

Poverty does not make you happy

Dr Oliver Marc Hartwich

‘Money can’t buy me love,’ the Beatles once told us. Now economists like Jeffrey D. Sachs argue that money can’t buy you happiness, either.

In an opinion piece in Wednesday’s The Australian, the Columbia University professor recommended a closer look at the Himalayan kingdom of Bhutan. The Bhutanese attitude towards development and their government’s focus on happiness should inspire the West, he wrote.

Indeed, Bhutan is always held up by as the shining example in the quest to make the world a happier place. In the 1970s, the Bhutanese king decided that his subjects should strive to increase Gross National Happiness, not GDP. Ever since, this has been the country’s guiding principle. It is this principle that Sachs now recommends to more developed nations.

There is nothing wrong with happiness, of course. In fact, it was the Americans and not the Bhutanese who first declared the pursuit of happiness a national goal. But it’s nevertheless a bit odd to present Bhutan as the role model for global happiness and well-being.

Have the Bhutanese really reached a special stage of enlightenment the rest of the world should follow? There is reason for doubt if you believe reports in the country’s press. Not long ago, the Bhutan Times came to this harsh assessment:

"To the world beyond its borders, Bhutan is a sort of a fabled country. Happiness is the mantra of development here that has tickled the imagination of economists and social engineers near and far. Closer home, a microscopic view of things reveals that all is not so well. In the recent years, an overriding numbers of drug and substance abuse and an alarming suicide rate have been reported in the country, an indication that the pursuit of happiness is still a delusional journey for some."

Perhaps the Bhutanese are not so happy after all because they are poor. According to the country’s National Statistics Office, 23.2% of the total population are living below the poverty line of Nu 1,096 (approximately $25) a month.

Or maybe they are unhappy about their press freedom, which was ranked as one of the worst in the world in the 2009 ‘Freedom of the Press’ survey. That is, of course, only relevant insofar as they can read because Bhutanese literacy is below the South and West Asian average.

None of these figures featured in Professor Sachs’ rose-tinted survey of Bhutan. Such ignorance is a bliss that only Western tourists can afford. Maybe money can’t buy you happiness, but at least it can buy you a return ticket to Bhutan.

The above is a press release from the Centre for Independent Studies, dated Sept. 24. Enquiries to Snail mail: PO Box 92, St Leonards, NSW, Australia 1590.


A Nation of Peasants?

Victor Davis Hanson

Traditional peasant societies believe in only a limited good. The more your neighbor earns, the less someone else gets. Profits are seen as a sort of theft. They must be either hidden or redistributed. Envy rather than admiration of success reigns.

In contrast, Western civilization began with a very different ancient Greek idea of an autonomous citizen, not an indentured serf or subsistence peasant. The small, independent landowner -- if left to his own talents and if his success was protected by, and from, government -- would create new sources of wealth for everyone. The resulting greater bounty for the poor soon trumped their old jealousy of the better off.

Citizens of ancient Greece and Italy soon proved more prosperous and free than either the tribal folk to the north and west, or the imperial subjects to the south and east. The success of later Western civilization in general, and America in particular, is testament to this legacy of the freedom of the individual in the widest political and economic sense

We seem to be forgetting that lately -- though Mao Zedong's redistributive failures in China, or present-day bankrupt Greece, should warn us about what happens when government tries to enforce an equality of result rather than of opportunity.

Even after the failure of statism at the end of the Cold War, the disasters of socialism in Venezuela and Cuba, and the recent financial meltdowns in the European Union, for some reason America is returning to a peasant mentality of a limited good that redistributes wealth rather than creates it. Candidate Obama's "spread the wealth" slip to Joe the Plumber simply was upgraded to President Obama's "I do think at a certain point you've made enough money."

The more his administration castigates insurers, businesses and doctors; raises taxes on the upper income brackets; and creates more regulations, the more those who create wealth are sitting out, neither hiring nor lending. The result is that traditional self-interested profit-makers are locking up trillions of dollars in unspent cash rather than using it to take risks and either lose money due to new red tape or see much of their profit largely confiscated through higher taxes.

No wonder that in such a climate of fear and suspicion, unemployment remains near 10 percent. Deficits chronically exceed $1 trillion per annum. And now the poverty rate has hit a historic high. We are all getting poorer in hopes that a few don't get richer.

The public is seldom told that 1 percent of taxpayers already pay 40 percent of the income taxes collected, while 40 percent of income earners are exempt from federal income tax -- or that present entitlements like Medicare and Social Security are financially unsustainable. Instead, they hear more often that those who managed to scheme to make above $250,000 per year have obligations to the rest of us to give back about 60 percent of what they earn in higher health care and income taxes -- together with payroll and rising state income taxes, and along with increased capital gains and inheritance taxes.

That limited-good mind-set expects that businesses will agree that they now make enough money and so have no need to pursue any more profits at the expense of others. Therefore, they will gladly still hire the unemployed and buy new equipment -- as they pay higher health care or income taxes to a government that knows far better how to redistribute their income to the more needy or deserving.

This peasant approach to commerce also assumes that businesses either cannot understand administration signals or can do nothing about them. So who cares that in the Chrysler bankruptcy settlement, quite arbitrarily the government put the unions in front of the legally entitled lenders?

Health insurers should not mind that Health and Human Services Secretary Kathleen Sebelius just warned them to keep their profits down and their mouths shut -- or face exclusion from health care markets.

I suppose that no corporation should worry that the government arbitrarily announced -- without benefit a law or court ruling -- that it wanted BP to put up $20 billion in cleanup costs for the Gulf spill.

What optimistic Americans used to call a rising tide that lifts all boats is now once again derided as trickle-down economics. In other words, a newly peasant-minded America is willing to become collectively poorer so that some will not become wealthier.

The present economy suggests that it is surely getting its wish.



Democrat jobs cost the taxpayer a heap

They're making a bundle inside the Beltway, while across the country it takes $2 million to create a pothole-filling job. Never has Washington spent so much to get so little real work.

When the Democrats are in charge, the rich just get richer. Wait — isn't that what we're supposed to say about Republicans? Not so when federal stimulus funds are being spent.

Washington has taken trickle-down economics to a whole new level of inefficiency. Those closest — literally — to the seat of federal power get the most. By the time the funds make their long journey to paychecks for people doing productive work, there's not a whole lot left.

Take the example, revealed this past week, of how $111 million in stimulus money has so far funded a paltry 55 public-works jobs in Los Angeles. City Controller Wendy Gruel says two municipal departments, Public Works and Transportation, plan eventually to create or retain 264 jobs with that money, but the contracting process is so slow that most of the money is still waiting to be spent.

So the price tag per job is $2 million at this point. Even if the city departments meet their target of 264, it will drop to only $420,000. This is still several times what workers will actually get paid.

So where does all the money go in cases such as this? In part it goes to the capital costs and profit of the contractors. But much of it also gets absorbed into the normal process of government contracting, in which public employees are paid to ensure (ideally) that the taxpayers are getting the most for their money and aren't being cheated by favoritism.

Of course, bureaucrats typically feel no need to rush things along. They don't get paid any less if a street gets repaved a few months late.

L.A. may be worse than most at getting people to work, but its low return on stimulus spending is certainly not unique. Even projects touted by the Obama administration have this problem.

Vice President Joe Biden on Friday cited one in which the New York City Department of Transportation is spending $175 million to renovate bridges and a parking lot, putting all of 120 people to work. That's $1.46 million per job. Another job on Biden's list, a highway project in Ohio, has created 300 jobs and costs $138 million — $460,000 per worker.



Regime Uncertainty: Reports Keep Coming In

Each summer, Wall Street strategist Byron Wien convenes a meeting of high rollers to discuss the outlook for investment. This year’s meeting brought together fifty individuals, including more than ten billionaires. Their expectations, as reported by CNBC, are gloomy:
“They saw the United States in a long-term slow growth environment with the near-term risk of recession quite real,” said Wien, in a commentary to Blackstone clients. “The Obama administration was viewed as hostile to business and that discouraged both hiring and investment. Companies and entrepreneurs were reluctant to add workers because they didn’t know what their healthcare costs or taxes were going to be.”

Add this report to the many similar ones to which my colleagues and I have called attention over the past two years.

Of course, for mainstream macroeconomists, such evidence means nothing. In fact, they hold it in complete contempt because (1) their formal mathematical models do not have a variable called “regime uncertainty,” and (2) even if they could be persuaded to take this factor into account, the canned data on which they rely—the product of the Commerce Department’s Bureau of Economic Analysis, for the most part—do not supply them with an “official” data set for their analysis. What you can’t measure, according to their “scientific” credo, does not exist. Their de facto motto (of which I have more than once been on the receiving end) is: you’ve got no formal model; you’ve got nothing.

In my study of regime uncertainty over the past fifteen years, I have given weight to three independent forms of evidence: (

1) specific legislative, executive, judicial, and regulatory actions the government is taking, the ideology embraced by major government actors and advisors, and, in light of basic economic logic, what investors might reasonably infer about the future security of their private property rights from the government’s actions and the ideology of its leading figures;

(2) direct testimony by investors themselves, as well as relevant opinion surveys of businessmen, when available; and

(3) changes in risk premiums demanded by investors in the corporate bond markets, as shown by changes in the slope of yield curves. During the past two years, my scrutiny of these types of evidence has persuaded me that regime uncertainty has arisen and that this uncertainty probably accounts, at least in part, for the very low level at which long-term private investment has settled, with only relatively small recovery since it hit its most recent trough.

Again, however, full disclosure obliges me to warn the reader that the acknowledged experts in macroeconomics—those who work in this area at MIT, Stanford, Harvard, Chicago, Yale, Princeton, and the other esteemed universities—are to my knowledge unanimous in their disregard of the idea that regime uncertainty might be contributing to the prolongation of the present recession (or might have contributed to the prolongation of the Great Depression, as I argued in my 1997 paper).

So, if you prefer to go with the experts, you should disregard my argument and my evidence and make your bets on the basis of what the experts say. You might wish to consider, however, that these are the same experts who, virtually to a man, failed to predict the present recession (and most of the preceding ones, as well)



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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)


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