Economics & Finance

Politicians As Business Managers

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Reason puts the business  management  skills of politicians into  perspective:

Keep in mind that the “annihilating cuts” proposed thus far include  trimming 5,000 employees out of a 235,000-strong state workforce  (after a  historic run-up  in the state’s employee-per-resident ratio). So: Only after hiking spending by 40 percent in five years, raising taxes across the board,  matching even Gray Davis’ deficits, and then getting spanked in a multi-tax suite of propositions, is California’s debased political class even beginning to  contemplate  a 2 percent reduction in its bloated, tax-sucking workforce. Maybe voter petulance isn’t such a bad thing after all.

Even successful and sound businesses all across the country this year are going to lose more than 2% of their workforce by attrition following hiring freezes. Californian’s dysfunctional political system can’t even trim that many jobs in the face of near total financial collapse.  

They’re boned and the rest of us are going to pay for it.  

You Can’t Have it Both Ways

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A left-wing guest on “Hannity” tonight said we should stop enriching OPEC. He also said oil drilling off of the US coast is unacceptable because drilling platforms spoil the view. So which is it? Either energy production is most important or the esthetic values of people like him are most important. He can’t have it both ways. (The Left’s third alternative — forcing automobile companies to sell more small cars, hybrids and plug-in electric vehicles — is a false one, because Americans prefer larger vehicles and because increased vehicle efficiency leads to more driving.)

So much of leftist thought comes down to a childish unwillingness to acknowledge real-world tradeoffs.

People in the Northeast are Economically Insane

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In a stunning display of economic  illiteracy  Connecticut is mulling a bill to force all gasoline  wholesalers  to sell gas at the same price to all retailers in the state. [More here] This is a form of price fixing that will drive down prices for rich people, drive up prices for poor people, cause shortages for everyone and not alter the wholesale price structure in the long run. Why do the people of Connecticut think such an idea can possibly work?  

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Quote of the Day

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This financial and political system is the operating system on which the world runs; the Dutch introduced version 1.0 in about 1620; the British introduced 2.0 in about 1700; the Americans upgraded to version 3.0 in 1945, and as an operating system, it works pretty well—most of the time. The 300 years of liberal, global capitalism have seen an extraordinary explosion in knowledge and human affluence. Not everybody shares in these benefits, and there are environmental and social costs to the rapid progress. Still, not many of us would like to turn the clock back to 1610.
 
But the system has bugs—among them, a tendency to crash. Ever since the great Dutch tulip bubble of 1637, the economic system has been prey to roller-coaster-style booms and busts. From the South Sea bubble of 1720 to the subprime loan bubble of our own time, the financial system leads people into irrational behavior and fever dreams of wealth and of eternally rising prices for stocks, houses—and tulips. These episodes never end well, and as time passes and the financial system grows more complex, more global and more interdependent, the cost of these periodic crashes gets worse.

Walter Russell Mead

RTWT.

Killing Cities: Indiana versus Texas

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As I mentioned in my last post, my son and I watch “Life After People” on The History Channel. In the last episode, “Outbreak,” the show used the  abandoned buildings  of the downtown of a major American city as real-world examples of how quickly abandoned buildings fall into decay.  

No, the abandoned buildings were not in Detroit, they were in downtown Gary, Indiana.  

How many of these abandoned areas are there in the Great Lakes region? Most people point the finger at the auto industry to explain the fall of  Detroit,  but what explains the fall of Gary?  

Steel. Gary was founded in 1907 by U.S. Steel as a company town. U.S. Steel built Gary because it was a great place to make steel in 1907. Gary grew because for the next 60 years it was a great place to make steel. Then suddenly Gary stopped being a  competitive  place to make steel. Why?

More importantly, why don’t all regions that lose a major industry suffer the same decay?

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