Comments on: What Good Is It, Anyway?

By: Chris Rogers

Chris Rogers — Fri, 29 May 2009 05:37:41 +0000

Tertius Oculus,
One’s intent is to raise the issue that over-population is having an adverse effect on our planet – global warming being just one example of this significant issue.
There is a huge difference in managing population growth and what you are misrepresenting from my words.
I think the key issue now is actually managing a net decline, something that is already occurring in much of the developed world – look at Japan for instance.
Further, why invest money in trying to reduce infant mortality rates, hence increasing mouths to feed, and then not correspondingly increasing aid or opportunities for those very same individuals – you condemn them to a life of abject poverty.
many persons speak of socialism as an answer, i think the word should be a more ‘equitable’ distribution of wealth.
Until you address the fact that 1% of the global population owns the majority of the wealth, nothing will change.
I note, the USA is incapable of providing comprehensive health care for its citizen, and yet its one of the richest countries globally.
Could you please answer why this is the case?
By ignoring the elephant in the room, we do ourselves a grave injustice.
The present financial crisis has opened the door of debate on our presently flawed capitalistic economy and our duty, that is those that actually care, is to engage in this debate.
Reforming the US financial services system is a start, sooner or later though, the fundamental issues I and many other serious minded individuals raise though will need addressing at a global level if we wish for our children and their offspring to inherit a planet worth living in.
As I’ve stated previously, just look at Haiti, take this as a warning of what the world may look like in 50-100 years if our population exceeds its present levels and capitalism is left unchecked.

By: Tertius Oculus

Tertius Oculus — Thu, 28 May 2009 19:35:11 +0000

** “In tangent with many others, it seems essential that we sooner or later aim for a population of no more than 5 billion and that our global wealth needs to be redistributed fairly among all inhabitants of our planet.” **

In other words, let’s kill everyone and split the cash.

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By: Jon

Jon — Thu, 28 May 2009 09:50:48 +0000

I didn’t mean to infer that volume alone is the cause. Rather, I think that globalization, in general, had a lot to do with the growth of the WFCs. The growth in Asia has to financed somehow, and their regional financial centres lacked the capacity and expertise to handle the such an expansion. Just think about how many US and Euro banks set up offices in Asia over the past two decades. Then think about how large the Asian business is in most Western banks. I think I read recently that Asia makes up 30% of Citi’s business. That’s substantial.

My argument is simple: Western Financial Centres serve more than just Western clients. Rather, they service the entire globe. Thus, as global commerce grew over the past 20 year at rates far exceeding western GDP, surly the size of the WFCs would be expected to increase as a percent of Western GDP.

By: c smith

c smith — Wed, 27 May 2009 13:17:00 +0000

The volume of capital recycling is not limited to U.S. Federal financing alone, but all forms of corporate, sovereign-wealth and municipal funding as well, both domestic and foreign. How many people in the U.S. have the financial skill set, social and business connections, and access to communications and technology tools to facilitate these transactions? I would guess it is not more than 10K or so. Layer the unfettered growth of leverage via the securitization markets (shadow banking system) on top of this, and you have a formula for very large income and disparities.

By: James Kwak

James Kwak — Wed, 27 May 2009 12:38:53 +0000

How exactly does that argument work? China, for example, mainly buys Treasuries and agency bonds. I know that they are buying them via U.S. investment banks, not directly from Treasury and the agencies. But still, this is as low-margin a business as exists.

I don’t buy this idea that volume alone should create large financial-sector profits, and especially not large per-banker compensation.

By: q

Wed, 27 May 2009 10:05:50 +0000

> couldn’t the growth of the Western financial centres as a percent of Western GDP be attributed to massive amounts of capital (savings) flowing in from non-Western geographies?

this is absolutely the case. a lot of the size of the financial sector, in the US and UK especially, is due to mediating the flow of asian savings toward investment in the US.

By: Jon

Jon — Wed, 27 May 2009 08:22:38 +0000

Good write up James.

Perhaps this is simplifying the problem too much, but couldn’t the growth of the Western financial centres as a percent of Western GDP be attributed to massive amounts of capital (savings) flowing in from non-Western geographies? The Western financial system more or less manages the entire world’s capital. Thus as Asia began to invest its excess capital, sure this would push up the size of the WFS in proportion to Western GDP.

But like I said, perhaps this is too simple. The scientist in me tries to find the simple solution before resorting to the political and way-over-dramatized theories that clog up most of these comment boards.

By: Boris

Boris — Wed, 27 May 2009 01:27:12 +0000

I like this idea! I fully agree that one of the greatest problems we face as a society is the “assumption of capitalism”. As you point out, most of the country doesn’t even know what that means, beyond being a nice slogan to lecture our friends and enemies with. Because it is so poorly defined, we have few common terms for our conversations on this vital topic. My capitalism may look completely different than my neighbor’s. Defining our terms would go a long way to move the conversations of our economy and by extension our politics forward.

By: Eric W

Eric W — Wed, 27 May 2009 00:20:38 +0000

Roger: “Somehow I don’t think blogging or twittering will have the same effect.”

I’ve recommended this blog posting to two others, in two other states.

I think that blogging and twittering have a huge potential to “create enough disorder that govts would be forced to take action.”

Reading articles like this, and the (mostly) interesting and thoughtful comments, certainly helps to shape my thoughts and understanding.

By: Rex

Rex — Tue, 26 May 2009 20:59:43 +0000

Tapeworms work 24/7, dude.
And they “deserve” everything they can suck out of an organism.
The only difference between you and them is they don’t invent a story to tell themselves that they aren’t tapeworms.
Oh yeah .. they don’t log on to the Internet at 6:13am to justify their existence.

By: john c. halasz

john c. halasz — Tue, 26 May 2009 19:45:32 +0000

I fail to see the mystery here. The financial sector has been drawing huge rents off of the real productive economy, in effect, looting it. And much “financial innovation” has been directed at providing the means of obfuscation to effect that rent-extraction. (As a definition, economic rents would be profits displaced and detached from underlying costs-of-production, rather than profits in excess of those accruing to “perfect” competition, since the latter is a counter-factual largely not in evidence. In fact, competition largely aims at securing asymmetric advantages, i.e. blocking off the competitive diminishment of returns). But then the whole notion of “financial efficiency” is itself largely an obfuscation, based on a fallacious analogy between goods markets, based on underlying costs-of-production, (wherein rents may be partly “justified” as subsidizing high long-run fixed capital costs necessary to the technical productivity gained through large-scale production), and the packaging of credit “costs” into financial assets, whose “value” is determined by the apparent flow/extraction of corporate profits. But in fact, the overwhelmingly primary source of economic growth, increases in the real distributable surplus product, lies in technical improvements in the sphere of production, which raise productivity and lower output prices, which markets of various sorts might variously stimulate and promulgate, but do not of themselves produce, and financial intermediation only plays a limited role in determining and efficiently allocating between such prospects. The over-financialization of the real productive economy, generating bubbles in essentially fictive financial asset “values”, is effectively a symptom of blockages in real investment prospects and a damaging distortion on allocations of productive investment, not least because it distorts the distribution of income upwardly and undermines the level of real effective aggregate demand, which crucially influences the level of profits from real productive investment. Volcker was on the right track when he said the most significant financial innovation in the last generation was the ATM. Much of the other “innovations” amount to little more than pouring old wine into new bottles, a sophistication of goods, in the older sense of the word. But then if one sticks with standard academic neo-classical economics, with it’s fallacious account of price formation through the equation of marginal costs and marginal revenues, and equally fallacious account of distribution through largely fictitious marginal returns to factors, under “perfect” competition,- (and note that if firms are at all profit-seeking, their own-demand output curves will equate marginal costs with marginal profits, not revenues, and, insofar as fixed capital costs are a prevailing factor, most of that own-demand output curve will exhibit increasing rather than diminishing returns),- and its failure to adequately distinguish production from market-exchange,- (in fact, attempting to collapse the former into the latter through mathematic fudging devices),- and to distinguish between goods and financial asset markets, as if it were all reducible to undifferentiated flows of money, then none of the above will be at all apparent. If one wants to understand the sources of the current crisis/debacle, then what would be needed is a good theory of organizational and institutionalized rent-seeking/-extraction,- and on a global scale,- rather than one based on a “competitive” justification of profits.

By: Chris Rogers

Chris Rogers — Tue, 26 May 2009 19:20:29 +0000

Roger Sir,
Thank you for reminding me about some of the work of Malthus again, I only wish I had both a copy of the “Wealth of Nations” and “Essays on the Principle of Population” at hand. Alas, all my political-economy books are languishing in the UK – this includes copies of Das Kapital and Mein Kampf
However, as with many Brit’s one is very much a pessimist and prone to dystopian interludes.
Personally, I do not believe we should evoke great names, and then give examples of how their thought has been utilised out of all context, indeed, the same can be said of Adam Smith’s views as expressed in his great work.
Like you, one is of a left persuasion, however, I do not treat the work of Malthus lightly. Indeed, I fervently believe we are at an unsustainable level of population, and that this mixed with the utter greed exhibited under a capitalist framework, is a dangerous chemical mix and one prone to have horrendous consequences.
In tangent with many others, it seems essential that we sooner or later aim for a population of no more than 5 billion and that our global wealth needs to be redistributed fairly among all inhabitants of our planet.
Anti Malthusians have always pointed to the fact that agricultural production has been able to keep pace with population growth – unfortunately most of these gains have been via the use of petrochemicals and mechanisation reliant on the black stuff, which by all estimates will run out before the end of the century.
One hates also to mention global warming and a crisis in drinking water that is again just around the corner.
Hence I believe you can be both a green, Malthusian and good left winger all at the same time.
Whilst i understand that it was science that actually gave birth to the ‘Holocaust’, I still believe it will be our salvation, certainly not under the current socio-economic arrangement though.
one is also a little averse to both Huxley’s ‘Brave New World” and HG Well’s “The Shape of Things to Come.”
Given an internationalist outlook, one tempered with contempt for many aspects of globalisation, I certainly hope one is not considered a fascist on these boards, niether, must it be said, am I a Communist, although much useful work can be gleaned from most of Marx’s economic tracts, and this means much, much more than just an acquaintance with Das Kapital.

By: IT Corner » Blog Archive » What Good Is It, Anyway? « The Baseline Scenario

Tue, 26 May 2009 19:07:20 +0000

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By: JQW

JQW — Tue, 26 May 2009 19:06:00 +0000

Financial markets have not been strong for 4,000 years; there have been periodic resets. As I said, it has required recessions, depressions, world wars (forgot that one), and dark ages to tame compound growth over the last 4,000 years. The question is whether we’re willing to tolerate that antidote in return for the good times in between. Suggesting a periodic die-off is just another way of saying the same thing as dark ages and world wars. Sorry, I don’t find that very appealing.

I think the situation is probably worse than it was 2,000 years ago; there was more room for growth then than there is now.