TED and inequality: The real story(tedchris.posterous.com) |
TED and inequality: The real story(tedchris.posterous.com) |
How about creating Soft-Tax system, where Rich people are taxed Soft-Tax in addition to regular Tax. Soft-Tax would be a separate bank account where Rich must transfer their capital for Entrepreneurial work. If they don't use that money for funding new businesses Soft-Tax would turn into regular Tax after some deadline.
If I gave a TED talk that just was a fisher-price version of Bastiat's broken window, should it be aired? Should I call it censorship if it wasn't?
Heh, I suppose the devil's "quality" control argument slides right in.
303 views
2,115 likes, 837 dislikes
Yes his presentation is not up to snuff as the typical TED speaker. So a quiet YouTube release and shitstorm of trumped up controversy work out great for getting the message out:
"In a consumption driven economy, the middle class is more important than the elite class."
That's almost right; just change "less" to "full".
When a problem has overwhelmingly been created by one party, then yeah, of course you're going to have to be "partisan" to address it.
This idea is an article of faith for republicans and seldom challenged by democrats and has shaped much of today's economic landscape.
What's so f*cking partisan about it?
Maybe i'll have to go back and actually watch the speech now. Funny, though, how this fellow, if he did feel slighted by TED and sought to get his speech publicized, is now getting all this attention ... Seems he's the beneficiary of a lot of interest at TED's expense.
Come on, use real words that mean something.
But I think the real point is this quote from the NJ article: "But even if the talk was rated a home run, we couldn't release it, because it would be unquestionably regarded as out and out political. We're in the middle of an election year in the US. Your argument comes down firmly on the side of one party." (attributed to Chris Anderson)
Is this quote accurate, and does Ted have an official stance of avoiding controversial issues? The fear is not that Ted is in the pocket of any particular party, rather that the bounds of public debate are being set by parties (plural) who benefit from the absence of debate. If Ted isn't independent enough to start this discussion, who is?
TED is about sharing knowledge. Raw, unbiased, unignorable knowledge. Talks that are based entirely on anecdote and talking points have no place in the discussion.
After reading the transcript, I firmly believe they made the right choice. And it could simply be that the ambiguous nature of the study of economics prevents it from being an approached topic on TED, which is unfortunate, but I don't believe for one second they blacklist anything based on controversy alone.
I'm not arguing that Ted should be pressured into publicizing this talk. But with great admiration for Ted, I think their approach to politicized topics bears further discussion. I'm stunned to think that an international organization should find it less desirable to broach certain topics due to the timing of a US election.
This is also why I'm of the opinion that Internet forums which are not explicitly about politics should explicitly ban most political discussion. Otherwise the loud partisans will eventually drown out everything else. (Remember a few years ago when it came out that there was a huge conservative voting bloc on Digg downvoting anything posted by members they suspected of being liberals, even if it was non-political? You don't want those people around.)
This isn't to say that topics one party or another might happen to like better should be off-limits, but that you should be very careful when approaching those topics not to play to the political aspects of the topic. It sounds to me like this is what TED suggests as well.
That myth is what TED is selling. Not truth, not even a better world, just a world where we can believe ourselves to be better people.
Because that is how the world should be like and they have a mission to make it real. It's not a myth. It's a goal.
Welcome to the world of science.
We don't want to "call out political parties", so we will ignore the truth that one of the political parties has deviated so far off course, in its anti-science, anti-intellectual, anti-equality pursuit.
But let us not speak of it.
If you talk to most people involved in a particular issue (eg. not politicians) they tend to have views that diverge from the party line, when a talk lines up perfectly with a particular party it comes off more like talking points than an engaging topic.
Imagine a talk on states rights that comes out against abortion and for the war on drugs. Sounds to me like Republican crap rather than an intelligent debate on the separation of powers in government. I think this is what TED is trying to avoid, they're all for an intelligent debate on separation of powers, but against spewing republican or democratic talking points.
I can understand their reluctance to give Fox News ammunition to smear the TED brand. But it was the parties who chose to politicize ideas and issues which should belong to all humanity. Whatever happened to respectfully listening to people you disagree with?
Getting locked up for speaking your mind is only one way for free speech to be stifled; another is to convince people to self-censor for the sake of their reputation, and whether he admits it to himself or not, this is exactly what Chris Anderson is doing. And alas, in today's media-political landscape, one is hard-pressed to find organizations and individuals for whom this is not the norm.
The Republican party should find this insight to be valuable, since their stated goal is job creation, right? Why might they not want to learn something about the process they are working so hard to enable?
And to people who make this out to be a US political issue, income equality is a global issue, and always have been. It's not the issue being brushed off but the quality of the argument judged by TED.
But that said it's a really good talk.
This would imply that climate change would also be off limits at TED, which it isn't.
When money and power is involved, you don't get to be independent in the US (or a lot of other places for that matter).
You have the right to free speech as long as you talk for inconsequential issues, if you talk for anything else you are labeled a "partisan" (that goes for both republicans and democrats, and even every other stance).
You are of course free to raise very important issues for society as a whole, but not in a way that implies that the way the power/financial system works is bad in toto -- the best you can get away with is "inefficient".
That is, you have free speech as long as you don't use it for real political causes. Any other partial view is allowed (gay or anti-gay, abortion or pro-life, etc...).
Of course, it's one thing to talk about everything being screwed up and quite another - having any practical recipe of how to fix it and being able to convince enough people to follow you. Words are wind, you know. Allowed is one thing, effectual is another. But not because there's an evil 1% conspiracy - but because mainstream is mainstream for a reason, changing people's opinions is very hard.
He had hired a PR firm to promote the talk to MoveOn and
others, and the PR firm warned us . . .
Aren't you now committing the same mistake of guessing the speaker's motivations as everyone who criticized TED?
They seem to be doing a great job at stirring up artificial controversy and laying the groundwork for a great political talk show "victim" career.
I wonder if that's what the PR push is about.
[1] http://www.amazon.com/The-Gardens-Democracy-Citizenship-Gove...
I do wholeheartedly agree with the central thesis, but if I were to put together a (nonpolitical) TED talk on the subject I would've been a lot lighter on the rhetoric and heavier on the case studies.
While I find it interesting that the author does not dispute the accuracy of the emails describing the talk as too controversial, what I find troubling is that the author insinuates that hiring a PR firm calls a person's character into question.
In 2010, the Sapling Foundation which owns TED spend more than $100,000 on PR:
http://dynamodata.fdncenter.org/990pf_pdf_archive/943/943235... [page 7].
See also "Who Owns TED?" http://www.ted.com/pages/42
Saying TED shy away from controversy, or even defining this talk as huge controversy is tragic.
Take this talk for example: http://www.ted.com/talks/bryan_stevenson_we_need_to_talk_abo... -- stop reading this comment -- AND GO WATCH IT. It touches on many very critical issues in our society and the USA in particular that are marginalised and forgotten. If this talk was "censored" due to the fact it deals with "minority issues" I would understand a "censorship" claim.
The "tax the mega rich" talk was not powerful enough and did not properly deal with all the surrounding issues. As a person who watched many TED talks I also feel it was not at the right level. I also find it very disingenuous that the speaker did not tell anything about his story, what is he doing to change the state of affairs (besides talking at TED).
"This idea is an oracle of faith for republicans and seldom challenged by democrats." Clearly against bi-partisan and not pro-democrat.
Very bad move by TED. Also, the quality of many TED presentations is a joke so they can't pull that card.
Four years after replacing the Beast with the Smiler, and what have you learned?
"Don't blame me, I voted for Kodos"
2. Calling an idea an 'article of faith' is insulting as it implies a lack of reasoning.
Mr. Rosling made a seminal talk that is one of the 3 or 4 that I think of when I think of TED. It was data-driven and multi-dimensional. At the same time, you're learning about the content -- global poverty through the eyes of a top UN advisor -- you're watching world-class data visualization.
Since their inception, TED has done a tremendous job staying on message. Most talks are given by people who are up to their elbows in the subject matter that they're talking about. This entrepreneur works in the business community, so there's relevance there, but that's pretty abstract. I would much rather this point be made by a union organizer.
The core message of the non-TED talk is a good one. That is the problem. The entrepreneur and the internet grassroots that have followed him are over the moon for it and are happy with the implementation that have here. If they were a bit less resistant to the criticism they've received, they could probably find a better way to get their message out.
For instance, how much more credible would it be if there were an enterprising union leader who could talk about his or her chapter's strategies, and who has measured the boost that their union members' employment has brought to their local community? In this age when many employers can't afford to invest in training employees who will leave their firms in 5 years, a union that provided job security to its members through training partnerships with local community colleges, and provided quality assurance to employers through licenses, and certifications in order to close the skills gap would be an inspiring organization. If they were providing each other with unemployment insurance and allowing the federal government to spend less money, that's a bi-partisan win!
An approach like that works at TED. One that can't be cobbled together in a weekend. These talks are almost always personal, representing years of on-the-ground activity. If they aren't given by the leader in the field they're given by someone with a unique perspective, like Jill Bolte Taylor, the stroke victim/neuroscientist who talked about the stroke she had.
This entrepreneur has a compelling message, one that I agree with, but his standpoint isn't special and his content hasn't progressed further than a well fleshed-out idea.
1. http://www.ted.com/talks/hans_rosling_reveals_new_insights_o...
The video is at http://www.youtube.com/watch?v=bBx2Y5HhplI
Since it's short, I'll go over it point-by-point.
1. "It is astounding how significantly one idea can
shape a society and its policies. Consider this one:
if taxes on the rich go up, job creation will go
down. This idea is an article of faith for
Republicans, and seldom challenged by Democrats, and
has indeed shaped much of the economic landscape."
2. "But sometimes the ideas that we are certain are
true, are dead wrong. Consider that for thousands of
years, humans believed that the Earth was the center
of the universe. It's not, and an astronomer who
still believed that it was, would do some pretty
terrible astronomy. Likewise, a policymaker who
believes that the rich are job creators and therefore
should not be taxed, will do equally terrible
policy."
3. "I have started or helped start dozens of companies,
and initially hired lots of people, but if there was
no one around who could afford to buy what we had to
sell, all those companies, and all those jobs, would
have evaporated."
4. "That's why I can say with confidence that rich
people don't create jobs, nor do businesses large or
small. Jobs are a consequence of a circle-of-life-
like feedback loop between customers and businesses.
And only consumers can set in motion this virtuous
cycle of increasing demand and hiring. In this sense,
an ordinary consumer is more of a job creator than a
capitalist like me. That's why when business people
take credit for creating jobs, it's a little bit like
squirrels taking credit for evolution. (audience
chuckles) It's actually the other way around. Anyone
who's ever run a business knows that hiring more
people is a course of last resort for capitalists.
It's what we do if and only if rising consumer demand
requires it. And in this sense, calling ourselves job
creators isn't just inaccurate, it's disingenuous."
Would you, for example, deploy 100 times more servers than you thought you actually needed to meet demand for your SAAS or PAAS? No? Then why would somebody running a large corporation hire more people than they thought would be needed to meet consumer demand?
5. "That's why our existing policies are so upside-down.
When the biggest tax exemptions, and lowest tax
rates, benefit the richest, all in the name of job
creation, all that happens is that the rich get
richer. Since 1980, the share of income for the top
1% of Americans has more than tripled while our
effective tax rates have gone down by 50%. If it was
true that lower taxes for the rich and more wealth
for the wealthy led to job creation, today we would
be drowning in jobs. (audience laughter and applause)
and yet unemployment and underemployment is at record
highs."
6. "Another reason that this idea is so wrong-headed is
that there can never be enough super-rich people to
power a great economy. Somebody like me makes
hundreds or thousands of times as much as the median
American, but I don't buy hundreds or thousands of
times as much stuff. My family owns 3 cars, not
3,000. I buy a few pairs of pants and shirts a year
like most American men, occasionally we go out to eat
with friends. I can't buy enough of anything to make
up for the fact that millions of unemployed and
underemployed Americans can't buy any new cars, any
clothes, or enjoy any meals out. Nor can I make up
for the falling consumption of the vast majority of
middle-class families that are barely squeaking by,
buried by spiraling costs, and trapped by stagnant or
declining wages."
7. "Here's an incredible fact: that if the typical
American family still retained the same share of
income that they did in 1970, they'd earn like
$45,000 more a year. Imagine what our economy would
be like if that were the case."
8. "Significant privileges have come to people like me,
capitalists, for being perceived as job creators at
the center of the economic universe, and the language
and metaphors we use to defend the current economic
and social arrangements is telling. It's a small jump
from 'job creator' to 'The Creator'. (audience
laughter) This language wasn't chosen by accident,
and it's only honest to admit that when somebody like
me calls themselves a job creator, we're not just
describing how the economy works, but more
particularly we're making a claim on status and
privileges that we deserve."
9. "Speaking of special privileges, the extraordinary
differential between the 15% tax rate that
capitalists pay on carried interest, dividends, and
capital gains, and the 35% top marginal rate on work
that ordinary Americans pay, is kind of hard to
justify without a touch of deification."
10. "We've had it backwards for the last 30 years. Rich
people like me don't create jobs. Jobs are a
consequence of an eco-systemic feedback loop between
customers and businesses. And, when the middle-class
thrives, businesses grow and hire, and owners
profit. That's why taxing the rich to pay for
investments that benefit all is such a fantastic
deal for the middle class and the rich. So, ladies
and gentlemen, here's an idea worth spreading: in a
capitalist economy, the true job creators are
middle-class consumers, and taxing the rich to make
investments to make the middle class grow and thrive
is the single shrewdest thing we can do for the
middle class, for the poor, and for the rich. Thank
you."
As for TED's response, they justified their decision not to post the video with several points: that it was unnecessarily partisan, that it was unconvincing, and that it was mediocre.
I do not see that it was unnecessarily partisan at all. He mentions political parties exactly once, at the beginning of his talk, and I don't think he said anything there that wasn't true.
But, I could agree that his talk was unconvincing to anyone who steadfastly believes in supply-side economics. He didn't present facts well enough, and his talk was salted and peppered with too much opinion, hyperbole, and fluff.
And, I agree wholeheartedly that it was mediocre. Compared to the talks featured on TED's home page, it just doesn't have the substance, the impact, the original research, or the delivery that those talks have. It's just not good enough of a talk. He's got good points. He clearly has something to say, and I would love nothing more than to hear more discussion like this in our national politics, instead of continuing to take a cargo-cult approach towards heaping benefits on the wealthiest class. However, he's a terrible speaker, and his talk in general needs a lot of work.
(39 comments on this thread when I started writing this, and none actually discussing the content of the video -- tsk.)
(edit: formatting.)
edit it's been fixed, but for reference the original title had something in it about "astroturfing in action"
None of that happened here. Instead what happend was someone posted and article to the internet, the internet got outraged, and someone else issued an apology. Same cycle that happens every day.
Without disputing the 'ratings' (whatever these may be), its pretty obvious from the youtube video that the actual audience response is very positive rather than mediocre (the majority of the audience seem to give a standing ovation and there is pretty emphatic applause all around).
This was too easy of a decision to not run this, because it was really terrible. Instead of bitching and moaning about censorship, get a better speaker to talk about income equality. Get a more dynamic speaker to present a better-researched and better written speech, and then see what happens. But THIS particular speech is not something that people should be rallying behind, because it's really bad.
Their current position is like an agnostic who says, "well, we can never know..." when what they mean is "of course the idea of a divine being is a human invention, but if I say that some people might not like me as much." They are cowards, and I have little respect for cowards.
You try explaining to a group of children on Christmas morning that Santa isn't real and there aren't going to be any presents this year.
If instead you tell the children you will put in a good word for them with Santa Claus and then Santa Claus brings them the stuff they wanted then they'll be amazed by your pull with Santa.
Think of it this way, every week 2 billion people give up 10% of their wages just so Santa's intercessors can give them a little wine and some rice paper.
And we try to steer clear of talks that are bound to
descend into the same dismal partisan head-butting
people can find every day elsewhere in the media.
Whereas TED is the only place I can find a talk about taking criminals bicycling, the importance of the washing machine and why we should eat insects (that one does have a few doses of liberal morality though).
I really doubt that. Given that a Google for "study of effects of inequality" returns 13 million results, a citation of the absence of relevant citations is needed.
Disagree. If the result of certain economic practices result in social inequality, is that entirely political? Economics is a social science, so why should some results be only political? It's not as black and white as you make it sound.
The power of PR can be pretty amazing sometimes. Especially scary given the susceptibility of the masses (ie, the Reddit firestorm).
Why don't these individuals, e.g. Buffett, this TED speaker, and others, just lead by example. Overpay their taxes to amount to whatever they think is fair.
Why do they have to wait for the government to tell them they must pay?
Or they say they will pay more only if other wealthy individuals do the same.
Either they believe in paying a bigger share or they don't.
This "I'm not going to do it unless he does too" attitude is child-like behaviour.
First, They believe in rules to enforce everyone paying a bigger share, and are lobbying to bring that about. There's nothing inconsistent in doing that whilst not individually making a bigger voluntary contribution. One might think that one's efforts are far better spent lobbying for a general rule then individually donating.
Second, people like Buffett have commitments to philantropy that I think would easily count as making a bigger contribution.
"Also, for the record, we have never sought advice from any of our advertisers on what we carry editorially. To anyone who knows how TED operates, or who has observed the noncommercial look and feel of the website, the notion that we would is laughable."
For anybody that knows how to read press releases, this speaks volumes. It is indignant and righteous and yet at the same time it clearly leaves a loophole one can use to back out of the statement at a later date. Hint: one does not always have to seek advise to receive it. Sometimes the "advice" just comes to you.
* The attendee for hiring a PR firm to create commotion
* TED for not being transparent
TED's decision, based on the elections or quality is superfluous. The fact is they weren't up front about it. If TED took its reputation seriously it would be transparent in all aspects of video selection. If it isn't censorship, they wouldn't be in this situation. Personally the slides I read were thought provoking, which is what TED was about (despite some graphs not labeling their Y access correctly).
Hiring a PR firm for a smear campaign on a non profit is simply a dick move. I shouldn't have to elaborate on that.
One ticket went for $33k http://www.businessweek.com/innovate/next/archives/2008/01/a...
— n a PR tactic used in politics and advertising in which actors are paid to display overt and apparently spontaneous grassroots support for a particular product, policy, or event
That would be like me pitching a show to Fox News about how white christian males are scum and should be burned for fuel. It's the wrong message, for the wrong audience.
This has shown TED doesn't want to spread the word about controversial issues that actually impact the vast majority of people's lives. I stand by the accusations of them being cowardly.
But of course, a society by the rich, for the rich is nothing new.
People are downvoting him for making assumptions about the motivations of actual, specific people, based on little more than their presumptive membership in arbitrary and subjective categories. And, for what it's worth, you're doing the same thing.
What drives the economy is people creating value. When people have created value, they can exchange that value for things they want from other people who have created value.
Simply handing people money to spend is not stimulative because it does not create value. Put another way, taking money from A and giving it to B so B can buy things from A does not (and cannot) make A wealthier.
The route to greater wealth for A and B is that both A and B specialize in creating things that the other wants. Then, they trade, and each winds up with a higher standard of living than if each tried to do both. Economies are built on the greater efficiency that comes from specialization, and the resulting trade.
Either way, the process of creating 'real value' on both sides cannot get started in some cases because neither A nor B has any confidence (or capital to support their confidence) that the other side will have the currency to buy the real value they intend to create.
Sure, the currency itself just goes around in circles, and only acts as a catalyst to creation of the 'real value' we are after. But by injecting actual currency to one side or the other (through tax cuts or other means) we increase the aggregate demand and thus amount of flow of this currency in the economy as a whole. This could then (hopefully) increase the confidence of A and B that the other will buy their real value and thus is a way to restart the circular flows of productivity that ultimately creates jobs (and real value).
His talk sort of just assumes you are aware of all the above. His actual point is that by giving tax cuts to the wealthy instead of workers a greater percentage of the stimulus / tax cut stays in bank accounts and thus the effect on aggregate demand is less.
Sure they can, according to some models.
Here's the argument: Say A and B produce goods for each other, and so A might buy something from B for $5, and B might come back and buy something from A with the same $5. They are happily creating value, trading back and forth. Now, say something scares A so that he wants to save some of his money instead of spend. Then B is getting less income from A, and so she also becomes worried about her future income and spends less. Then A gets even less money, and is even less willing to spend. As you can see there is a feedback cycle where A and B produce (and spend) less and less. This is a recession.
Now give B some money, possibly even taken from A. Now B is getting a more reliable income, an is more willing to spend on A, who thus earns more and becomes more willing to spend on B, and so on in positive feedback.
This is basically Krugman's "Babysitting Co-op" scenario.
John makes software for law firms. His software has lots of bugs. John justifies this because he can make more money by adding features and isn't at risk of losing his cash flow because there are no competitors in his space. IMHO, John has an obligation to write better software simply because his constituents deserve it. I also think it could be warranted that he charge even more for it at this point. While I'm not sure bug-free software is a universal good, there are definitely products that ought to be better or not exist (pornography and cigarettes come to mind). The government should not have to regulate these.
Yes, there has to be a customer; but identifying that customer, discovering his desires, and satisfying them in a way that creates net value for all parties is the role of the entrepreneur. Doing that successfully is not a trivial task, and entails substantial risk. Saying that this isn't a value-added activity is like saying that scientific research doesn't create value because the physical world already is what it is, or that explorers and cartographers are useless because the land that they're mapping already exists.
And entrepreneurs and investors do create jobs: if a venture fails because it turns out that the demand wasn't there to begin with, the employees of the venture still get paid - not by the customer, but by the investors, out of the capital that they've risked and lost.
The necessity of demand is the 'elephant in the room' because so much of the political argument so far has revolved around increasing benefits for the suppliers, rather than increasing demand. The argument has been, "we're supposed to make the wealthy wealthier, and then -- magically -- they will create more jobs."
If the necessity of demand isn't the elephant in the room, then why isn't there broad political support for higher tax rates on the wealthy? Why isn't there broad political support for economic stimulus packages? Why isn't there broad political support for universal health care, a significant expense for poor and middle-class Americans? Why isn't there broad political support for lowering taxes on the poor? Why, instead, do I keep hearing such balderdash as, "The poor pay no taxes at all"?
Nobody's saying that business people don't add value to the economy. What people like this guy -- and me -- are saying is that they don't add value all by themselves. And, if that's a point that people can agree on, then the very next question is naturally, "Why do the bulk of our economic strategies focus only on benefiting them then?"
If a venture fails due to low demand, yes, some investor and some capitalist assumed risk and have presumably lost something. But, worse still, are all those other people -- those employees -- who didn't have anything to risk in the first place, and are now back to looking for work again. In your scenario, there wasn't any net job creation, there were just some positions temporarily filled.
And, anyway, if the business people do the market research they're supposed to do first, and the demand isn't there, they won't bother starting anyway.
Let's stop making up fairytale scenarios. Let's start getting specific. Let's look at things like leveling-off or falling consumer demand for gasoline [1], and then let's look at the tax breaks afforded to oil companies [2], and let's ask ourselves: if we're doing everything right, if we're granting these companies record profits [3], then why haven't they lowered gas prices to increase demand like the magic formula says they will?
[1]: http://soberlook.com/2012/03/us-consumer-is-saying-no-to-hig...
[2]: http://www.washingtonpost.com/business/economy/how-much-do-o...
[3]: http://thinkprogress.org/climate/2012/02/08/421061/big-oil-h...
It can be summed up by the famous if possibly apocryphal line by Ford: "I pay my employees enough to afford to buy my cars."
When a consumer chooses not to buy something, i.e. commerce does not take place, saving occurs. Savings means there will be money available in the future. Money available for a small business loan. Money available to buy shares in a company, freeing up capital from the person you bought the shares from. That capital could actually end up in a new venture that makes it cheaper to produce X, or make X last twice as long, producing more savings in the economy.
That decision by the consume NOT to purchase something tells the producer that they better figure out some way to reduce the price, or go under. Capital, including human capital, frees up for more productive uses. Occasionally imbalances (e.g. too much capital tied up in housing) cause a massive recession, but most of the time this process is relatively benign. Victims of this cheap-credit fueled bubble and recession don't have money to save and invest right now, but innovation will provide jobs again one day. It happens every recession, sometimes longer than others.
Creative Destruction: it's the primary reason why we're all not planting seeds or hunting right now.
i.e., consumers aren't "choosing" not to buy because they're saving the money instead, they're "choosing" not to buy because they don't have any money.
This is exactly why it is so, so important to foster a healthy middle class: they love to spend money. Give them $10,000, and they'll spend $9,000 of it.
We do not right now have a healthy middle class, and I'm super interested in whether or not our economy will recover without addressing that.
While your statement is not entirely false, it paints a misleading picture of how the economy at large works. Outside of venture capitalism, credit for running businesses tends to be provided by banks, and banks just create the necessary money out of thin air whenever they find a creditworthy borrower, i.e. a business with a solid business plan and with a reasonable expectation of sufficient demand for its product.
When the overall savings rate rises, it becomes less reasonable to expect sufficient demand for products, which means less creditworthy borrowers, which means less loans given out by banks.
Occasionally imbalances (e.g. too much capital tied up in housing) cause a massive recession
Not quite. The recession isn't caused by capital being tied up in housing. "Putting capital into housing" is just economics-jargon for spending money on houses. And that tends to create jobs in the construction sector.
The recession comes about when private households can no longer use their houses as collateral for loans to fuel demand because the value of those houses is reassessed.
Creative Destruction: it's the primary reason why we're all not planting seeds or hunting right now.
I think you'll find that the primary reason why most of us are not doing these things is actually creative construction. The destruction part is only really beneficial when one gets stuck in a local optimum.
Now, in some way he, being as lame as he is in this presentation, has proven his own argument.
A lot of wisdom is imparted on the wealthy to be leaders of the economy. But not everyone who is wealthy is actually very wise. They have succeeded in making money. But that in itself does not elevate them to God status. Don't believe me? Let us look at Exhibit A:
Rich guy from Seattle who has "started _dozens_ of companies."
Roll presentation.
And what's with use of the term "capitalist"? Are there lots of socialists in America now? Are American workers not capitalists?
Workers (as in people who work for a wage) aren't Capitalists (as in the Noun).
You don't have to be a Socialist if you are not a Capitalist. There are not 'a lot' of Capitalists anywhere (proportional to the overall population).
His entire argument flows from this assumption.
Likewise "more consumption" is not a goal in itself. Wellbeing of people is a goal, consumption might be a way to achieve it. But because you should be careful what you measure, trying to increase consumption is probably bound for disaster.
The problem is not creating more jobs, it is distribution of wellbeing.
Here's the thing, you can't force people to be productive enough to be able to consume at the optimal level. All you can do is provide an environment where being productive is easier.
I think that guys like Ford are job creators, but most capitalists don't have the foresight to enact such bold policies.
Anderson has said they will avoid overtly partisan talks during an election year.
You can talk about the topic, Anderson just won't promote if if you do it in a partisan manner.
And there are other parties.
But the whole point is they only put the talks they want you to hear on YouTube. Rich people hearing about income inequality is nothing new, but it's downright scary when they limit the non-rich hearing about it.
Value does not exists per se.
You are so simplicistic here, guys, when you talk about rich and poor.
I know you are not so young, but sometimes it seems you are a group of small kids talking about life.
It's true you don't have to be a socialist if you are not a capitalist. But in terms of `ist's, what else would an American likely be? A communist?
The speaker's argument revolves around inequality, by leading to lower consumption by the lower classes, making an economy unsustainable. This assumes domestic lower class consumption is the driving force behind GDP, which further assumes a diminishing consumption function (consumption as a function of household income). The consumption function is, in fact, quite linear [2]. The speaker also ignores investment, public sector spending, industrial investment (firms buying from other firms), and export industries.
Thus, the notion of consumers being the only pillar of economic activity and by proxy job creation is faulty.
A better argument would be wealth concentration compromises meritocracy and the social trust that binds society together. This isn't a new argument. So the speaker elevates novelty over accuracy in pursuit of a perception of profundity, fallacy be damned.
[1] http://data.worldbank.org/indicator/NE.CON.PETC.ZS?order=wba... (2010 countries ranked by consumption/GDP)
[2] http://wps.aw.com/aw_miller_econtoday_12/0,7965,904285-,00.h...
To put the shoe on the other foot: let's say someone had data which demonstrated that welfare and affirmative action are bad for the people they purport to help (just an example, I'm not making a case for or against either). How could one make that argument in a neutral, non-partisan way, when those issues have been politicized to death for decades?
You couldn't. You'd have to either state your case bluntly and take the heat, or shut up and go away. Though the talk could definitely have been better (more data, please), I'm glad the speaker chose the former, and I think he made the best attempt possible at being neutral.
"It is important to help [group] overcome [disadvantage]. We have new data showing that [policy], while stemming from admirable goals, is ultimately counterproductive, leading to worse outcomes than would be expected without such a policy in place." Then discuss the data, without specifically naming any politician or political party or questioning anyone's motives. Make recommendations based on the idea of doing right by those you're trying to help, rather than making accusations based on the idea of the other side being evil or stupid.
It's certainly true that some people would interpret your statement in a partisan way. Some people would assume you were secretly funded by the Association of Partisan Conspirators. But by focusing on data rather than partisan cheap shots, you would give them little to go on, and you would be more engaging to those who are honestly interested in doing the right thing.
I've never attended Ted, but I've been to a few TedX events in San Jose as a small sponsor. For Global Warming and some other business issues, I was happily surprised that it had a lot of diverse viewpoints, and that the after event discussions indicated that people were considering these thoughtfully.
But I still fear that there is a political correctness at play, independent of the 'partisan' aspects. Al Gore is welcome as a speaker, and clearly is a partisan giving a partisan speech. That's good. But I don't know that Steve McIntyre, who has strong non-politically correct views on Global Warming but is extremely non-partisan, would be welcome.
I'm not painting Ted as being left-wing or right-wing, or unfair to either party. But I worry that if they start playing the game of avoiding topics because they are "partisan", the give up too much room to both of the major US political parties to declare topics untouchable. I'd rather they ignore the political implications, and help the search for truth.
1. Hired a PR firm in an attempt to threaten TED into publishing his talk. 2. When that failed, he misrepresented TED (by selectively quoting private correspondence) to the media in order to create the subsequent firestorm.
I will accept that the speaker may be passionate about his views. However, he is not interested in open discussion, at least not if you mean honest by open. The ends does not justify the means.
How do you conclude that? The only possible dishonesty I've seen is about how the talk was handled, not the content of the talk. He seems all for open discussion of the content of the talk.
I know it goes against the conventional wisdom, but in subjects such as politics I haven't been wrong about it yet.
Based on the transcript alone my argument can be pretty weak but anyone with at least one perceptive bone in their body can see what I saw if you watch the video. I agree that no one can know a person's motivations for sure and I feel like a hypocrite for doing it myself but in some cases it's just obvious. There's more to this than just what he says, watch his body language and listen to his delivery.
I actually have experience with people like this. I often give talks to different community groups and schools and such on the topic of teen drug abuse along with a father who lost his son to an overdose. This man agrees to speak whenever asked and claims to do it for the good of the youth in our community but once he starts speaking you can easily tell his intentions have shifted and his cause has now become about him instead of educating the audience. The content of his talks are definitely educational but he always gets off the subject and pats himself on the back for some great thing he did which was related to the topic but unnecessary to say along with some heavy name dropping. This TED speaker reminded me of the guy I often talk with. (Now, does ending my commend with a personal anecdote make my comment all about me now? Haha)
(As eloquently put by Jimmy Stewart in "It's a Wonderful Life".)
Therefore, placing currency in the hands of the masses can and will drive value creation, because it will assign economic value to what brings value to the masses.
When the masses have no currency, in effect, that's signaling to the economy that their needs are of no value. Therefore, businesses that solve the masses' problems gain no economic value from it, and will not generate real value.
So currency has no intrinsic value, but it does signal to the economy which needs are more valuable. And currently, one of the claims is that the middle class and poor's needs are valued so low, that it is creating economic stagnation, and there's little incentive to solve their problems.
It also assumes that A stuffs the money into the mattress rather than lending it to C, who uses the money to create something that B wants to buy.
It's a very simplistic two-part scenario and has a lot of problems, not in the least what the 'something scares A' part of it. It also assumes that nobody else wants to buy products from B.
In fact the more I read it, the less I am convinced it has any merit at all.
Which? The model ealloc describes or the Babysitting Co-op scenario? They aren't actually the same.
The concept of social inequality is inherently political. You can formulate methods of quantifying anything, but if what you're quantifying is inherently political in the first place, it doesn't make it any more objective or empirical.
> Economics is a social science
Exactly. Most social sciences are based upon subjective value systems and not objective empirical data; they're not really sciences in the same sense as physics, chemistry, or biology.
TED conferences are discussions of ideas, and ideas are often engender controversy; some of them might influence people toward one political position or another, but that doesn't mean that the ideas don't have some relevance or value outside of politics.
In this case, though, I can't blame the TED organizers for eschewing the discussion of ideas that are entirely political, and which are ultimately only about engaging the controversy itself.
This activity is ultimately underwritten by deposits.
It should also be noted that paying down debt is counted as saving from a statistical perspective. It just means value is being transported back in time versus forwards.
Yes and no. First of all, deposits are created whenever a bank gives out a loan. So it is not the deposit that makes loan creation possible, but rather the reverse: creation of loans is where money in deposits comes from in the first place. Without loans there would be no deposits.
Now the outstanding loans given by the bank are on the asset side of its balance sheet and there must be something corresponding on the liabilities side. For most banks, deposits are indeed a large part of liabilities.
However, the liability may just be a loan from the central bank or from other banks instead. It's not strictly necessary for banks to have deposits at all (and there are banks which specialize in such a way).
The only reason why it makes sense for banks to attract deposits is that they typically pay less interest on those deposits than they would have to pay for other refinancing options.
And again, all this doesn't say anything about the dynamics of the system, i.e. it doesn't say anything about loan creation. It's not like there is some process where the banks say "Look, we have X more deposits than loans, so let's give out some more loans". Some banks operate with more deposits than loans, others operate with less. In the end, they give loans whenever they find a creditworthy borrower.
In the overall system, i.e. when summing over all banks, the sum of loans is roughly the same as the sum of deposits, because loans are where deposits come from in the first place. (I say roughly because owners of deposits can transform them into other types of assets such as bonds.)
What determines sufficient demand? It's the chicken and the egg. Or is it: Profits lead to innovation. Innovation leads to cheaper goods. What's left over is new demand? Or demand dries up for product X, and demand is available for product Y?
Yes, tribalism can induce such ills as well as invoke cognitive dissonance, but it is not a default setting.
There's a big difference between saying Republicans are anti-intellectual and saying anti-intellectualism is bad for the following reasons. TED is all for the latter and completely against the former.
i.e., consumers aren't "choosing" not to buy because they're saving the money instead, they're "choosing" not to buy because they don't have any money.
I don't see how your argument is necessarily justified by article. It seems entirely possible that families are trying to put food on the table, whenever possible, rather than save for the future.
This is exactly why it is so, so important to foster a healthy middle class: they love to spend money. Give them $10,000, and they'll spend $9,000 of it.
We do not right now have a healthy middle class, and I'm super interested in whether or not our economy will recover without addressing that.
How do you know if the middle class is healthy? Can you define middle class?
That's actually what I was trying to say, I probably just wasn't clear. I was responding to webXL's opening sentence, "When a consumer chooses not to buy something, i.e. commerce does not take place, saving occurs." I don't think that saving is occurring, I think that people are trying to put food on the table right now, as you say.
> How do you know if the middle class is healthy? Can you define middle class?
To be fair, I'm not aware of a strict definition of "middle class" -- it's one of those amorphous abstractions that everyone refers to without ever bothering to see if they're talking about the same thing.
However, if we define some basic properties of "middle class" -- owns a home (probably with mortgage), has some savings, has reasonable credit, owns two vehicles (for a family) of recent vintage and in decent condition, college educated, etc. -- I think it's pretty easy to see from the news of the last several years that they aren't doing too well these days. Their mortgage is likely upside-down if they bought their home in the last decade; their car is probably requiring more frequent repair; their credit probably isn't as good as it used to be; their savings are diminished; and tuition is expensive.
If you can find any recent good news for U.S. middle class families, I would honestly love to read it. :-)
I.e. if there are no mortgages, people buy what they can afford and housing prices remain low. If there are mortgages, suddenly house prices skyrocket since buyers can afford vastly higher prices, making mortgages a requirement for owning a home.
A good position to be in if you're a bank; now you get a big slice of all action.
If you weren't trying to provide an example of how explicitly partisan debates can just shut down all conversation, you still did a good job.
Edit: here it is, "I know there are some polls out there saying this man has a 32% approval rating. But guys like us, we don't pay attention to the polls. We know that polls are just a collection of statistics that reflect what people are thinking in "reality." And reality has a well-known liberal bias."
If you read the same article I did, that's not the reason they claimed, so I don't know where you're getting that from. Here's the relevant portion:
> And we try to steer clear of talks that are bound to descend into the same dismal partisan head-butting people can find every day elsewhere in the media.
It says nothing about the talk being only about engaging controversy, nor about the idea being entirely political. The reason was that it had potential to rile people up. You are confusing an idea that will unavoidably rile people up with an idea that is intended to rile people up. They are not the same.
The reason there is so much political emphasis on job creation is that the unemployed are a small but vocal minority, who's political decisions may rest almost entirely on job growth. Whereas value benefits a lot of people in a small way, but value alone probably will not be enough to sway someone's voting decision.
Economy has no rules outside the square we create. So, there's no such thing as Economy per se.
You have to remember that the reason a group of people doesn't go out and take what they want is that there is a State, there are laws, there is a monopoly of legitimate force (the police): all of this can survive only if there is a contract between state and the people. All the people, not just the rich or who has a job or <put a category here>
The community of people is far, far more than the State. Cultural/religious norms shape the State and the rules. If corruption is tolerated, for example, it doesn't matter what the official State rules are.
Furthermore, economics are baked in to human nature. Indeed, gender differences are a kind of specialization of labor. Economic activity and surplus allows the creation of the State, not the other way around. In fact, while certain State activities like protecting property rights advances the Economy, most activity by the State is parasitic on the Economy.
> If the necessity of demand isn't the elephant in the room, then why isn't there broad political support for higher tax rates on the wealthy?
Because the two concepts have nothing to do with each other, and support for higher taxes on the wealthy - or anyone else - has antecedents in much more basic underlying principles that many do not share, and often strongly oppose in their own right.
> Why isn't there broad political support for economic stimulus packages? Why isn't there broad political support for universal health care, a significant expense for poor and middle-class Americans?
It's because people oppose these ideas in their own right, and see them as being unjustifiable means even if they could achieve their stated ends.
Many people do not want macro-level attempts to manipulate their economic situation at all. Many people do not want to outsource responsibility for their health to external institutions at all. Many people resent that these intimate and personal aspects of their lives are being politicized and turned into public questions in the first place.
> Why isn't there broad political support for lowering taxes on the poor? Why, instead, do I keep hearing such balderdash as, "The poor pay no taxes at all"?
I'm not sure where you've heard that, but I assume that you and whomever you were discussing the matter with had two very different definitions of the term 'poor'.
> What people like this guy -- and me -- are saying is that they don't add value all by themselves.
Nothing ever does. The very concept of value implies that there exists at least two distinct entities: the thing being valued and the being doing the valuing. In commerce, there are at least two valuers and two 'valuees' in every transaction.
This is basic and obvious, and I don't see how it generates any new or significant perspective on any question.
> But, worse still, are all those other people -- those employees -- who didn't have anything to risk in the first place, and are now back to looking for work again.
Since you're intent on analyzing everything from a macro-level perspective, consider that if a certain proportion of all startup ventures are doomed to failure from the outset, and that these ventures provide a certain aggregate number of jobs, then those jobs represent an ongoing pool of jobs that is not supported by market demand.
In other words, some proportion of total jobs is always being subsidized by capital losses, rather than by aggregate demand.
But to your point of this being 'worse', I'd ask "worse than what?" If you choose to support yourself by taking a job working for a third party rather than applying your labor to the direct satisfaction of your needs and desires, then the risk of losing your job is always present, regardless of whether or not the business you work for is sustainable in its own right by market demand. The only way to eliminate this risk is to avoid being dependent on a single external source of income in the first place (which, in my opinion, everyone ought to do to whatever extent they can).
> And, anyway, if the business people do the market research they're supposed to do first, and the demand isn't there, they won't bother starting anyway.
Market research is hardly an exact science. Accurately gauging market demand is extremely difficult, and ventures fail all the time. The core problem of economics is one of epistemology.
> then why haven't they lowered gas prices to increase demand like the magic formula says they will?
What magic formula are you talking about? What problem, exactly, is the profitability of oil companies an indicator of in the first place?
You assume here that demand is possible, it just needs to be created through marketing. I get that that's what marketing does -- I really do. I read a great article recently about the rise of marketing in the U.S. as a way to get people to buy things that they didn't know they needed, as a consequence of the industrial revolution creating a surplus of products.
But that's not what we're talking about here.
We're talking about an economic environment in which people don't have enough money to spend. And the solution to that -- and, it seems, your solution as well -- seems to be to give more incentives to the people who do have money to spend.
So that's what I'm trying to point out to you. I don't think it should be a revelation; I'm surprised it's even a point of debate. I've done a couple of quick searches online for citations for some of my arguments elsethread -- there are a ton of other citations which I could bring which could be altogether summed up as, "companies have more money than ever before, and consumer demand is still low and consumers still don't have money to spend."
So, at what point should we step back and say, "OK, this strategy isn't working"?
You object to my macro-level perspective on economics. I object to the idea of managing a system as complex as economics at anything other than the macro level. I honestly do not understand why any economic strategy should not involve the entire economic ecosystem.
> Because the two concepts have nothing to do with each other...
Granted, but I was leading into that with the next couple of questions. Taken out of context, no, they're not related. In context, yes, they are.
> It's because people oppose these ideas in their own right, and see them as being unjustifiable means even if they could achieve their stated ends.
But, seriously, achieving their stated ends would justify their means. You seem to be saying here, "Sure, those are solutions to the problems, but people don't support them even if they do solve the problems." ...OK, so, why? Seriously, why are economic stimulus packages unjustifiable, but austerity is not? There are quite a few Greeks asking this same question right now...
> Many people do not want ... Many people do not want ... Many people resent ...
I hate to do this, but "many people" is not a good counter-point. I'm trying to stick either to specifics, or to things that I could produce citations for, or to things which (I hope) are clearly opinion. Would you mind doing the same? Otherwise, we're just making things up.
For example, you say, "Many people resent that these intimate and personal aspects of their lives are being politicized and turned into public questions in the first place." OK, I'm one of those people. Let me explain: I've worked hard, for years, to claw my way from poverty -- actual homelessness, not enough money for food, all that good stuff -- up to lower-middle-class, and I'm working hard to at least stay there. I'm also the owner of a small business.
So, I should be one of the darlings of the Republican constituency, right? I wish it were so.
I resent that our country is still arguing about health care and tax breaks for huge corporations and tax breaks for wealthy people, while making it sound like these are all things which benefit me, when they don't. I am living this. It's not politics to me, it's life.
My company builds long-term relationships with its customers. A year ago, my biggest client had their research funding canceled. There is a ton of work they would love to pay my company to do, but they can't. Not because they're choosing to save it instead, but because they don't have the money.
My company recently enjoyed its highest-ever billing cycle, just last month. Great news, especially when my overall trend has been pretty good. But, right now, I have $30 in my accounts, because my company is also right now suffering through its slowest recent month in actually receiving our invoices, since so many of our clients are running a little short on money right now.
I have, for better or for worse, a middle class mentality. I don't care as much about accumulating money as I do about doing things with it. I have lots of projects and hobbies. I have a truck that I'd like to finish the R&R on. Better yet, I'd love to pay someone to finish a huge chunk of it for me, to get it done faster. But, I can't afford it. I would have liked to go climbing last Saturday, like I do every Saturday, but, I couldn't afford it.
I would like to hire a sysadmin/junior developer, to ease my workload and free me up to work on some of the other long-term projects we have instead. But, I can't afford it.
Now, this is the part where I'm supposed to say -- if I were wealthy or if my business were bigger -- that it's all the fault of those mean old taxes.
But it's not.
The biggest problem facing my business right now is that my customers don't have any money.
So why are we still debating the supply side of economics when it's the demand side that is suffering so badly?
> I'm not sure where you've heard that
http://www.dailykos.com/story/2011/05/31/980891/-The-poor-pa... http://progressive-charlestown.blogspot.com/2012/02/is-it-tr... etc.
If you would like to pay my hourly rate, I would be happy to do more Google searches for you. :-) (Meant just in good humor, no offense intended.)
If they don't have enough money to spend, what's with all of the money that's circulating every day? What's with the (admittedly contrived) metric of GDP indicating that there's about of $13 trillion of value being generated via economic transactions in the United States each year.
You're also neglecting the fact that money isn't actually worth anything intrinsically; it's entirely a token of exchange that merely represents the actual utility value of the goods and services that are available for trade in the market. If the money supply remains constant but the real economy expands, then each dollar is worth more; i.e. if what you were saying is true, we'd see deflation. The fact that prices of goods seem to gradually increase suggests that, if anything, there's more money in the economy than is proportionate to the real demand that exists in the market.
The bottom line is that if there's real value to be obtained via trade, then trade will take place, and the value of the unit of exchange will simply fluctuate in response to the real value that exists in the market.
What you're really complaining about here is that people aren't spending money in the way that you expect/desire them to. You're treating the results of actual people's manifest choices as though they're a problem that needs to be corrected, as though people pursuing their own goals in life are obligated to conform to your expectations in doing so.
> So, at what point should we step back and say, "OK, this strategy isn't working"?
Why don't we take it a step further back, and consider whether and when it's appropriate and efficacious to design and implement any top-down strategies for what fundamentally amount to other people's lives. That's what economies are, after all, no matter how many layers of abstraction and aggregation you pile on top of your understanding.
> You object to my macro-level perspective on economics. I object to the idea of managing a system as complex as economics at anything other than the macro level.
Right, that's the fundamental disagreement. You've got it in your head that economies are somehow predictable systems that conform to well-understood models, and which can be managed via carefully-calculated planning.
The reality, of course, is that economies are vastly complex emergent phenomena whose patterns form from the individual decisions of billions of human beings in real time, and which follow no consistent and predictable rules at the macro level, and indeed may adhere to no fixed set of rules whatsoever, and for which, in any case, no theoretical model can even be tested in a controlled and scientific way.
I don't intend to be dismissive or condescending here, but I unfortunately can't think of a more descriptive summarization here: you're just wrong.
> I hate to do this, but "many people" is not a good counter-point. I'm trying to stick either to specifics, or to things that I could produce citations for, or to things which (I hope) are clearly opinion. Would you mind doing the same? Otherwise, we're just making things up.
I'm not making a counterpoint; I'm answering your question. You inquired as to why so many people seem to oppose your list of policy positions. This is why. You're seeing the dispute as one over which means best pursue uncontroversial ends. In reality, most of the opposition is the result of people opposing the intended ends of those policies.
> So, I should be one of the darlings of the Republican constituency, right? I wish it were so.
Either them or the Democrats. Both parties seem to have a philosophy similar to what you're advocating here.
> It's not politics to me, it's life.
I'm not sure I understand what you mean here. Why do you resent that other people have opposing positions to yours? I don't mean to sound condescending, but I really don't understand how the description of your personal circumstances relates to the discussion. What was it intended to be an example of?
> I have, for better or for worse, a middle class mentality.
What does this mean? What does it mean to have any kind of a class mentality?
> Now, this is the part where I'm supposed to say -- if I were wealthy or if my business were bigger -- that it's all the fault of those mean old taxes.
Of course it's not. Not for large-scale business anyway; capital-intensive ventures with external investors calculate their tax burden as a cost of doing business, and we can't quantify how many businesses never launched because the tax burden would have pushed them into unprofitability. And although it's possible that cost and complexity of taxes actually do prevent many very small businesses - e.g. those run by families or individuals - from being sustainable, even this isn't the crux of the objection.
The problem is that taxes provide revenue to the government, and what those taxes are spent on is almost invariably destructive. Tax 'the wealthy' so we can have more foreign wars, TSA strip-searches, email surveillance and drug wars? No thanks. Tax 'the wealthy' so we can implement more policies that treat people's lives as instantiations of presumptive socioeconomic categories and shoehorn them into patterns of behavior irrespective of their own goals and intentions? No thanks. Tax 'the wealthy' so we further politicize deeply personal value judgement relating to matters such as health care and education, simply to make the macro-level picture look pretty? No thanks. Tax 'the wealthy' so we can artificially create more customers for your business? No thanks - tweak your business model, not the world around you.
I'd love to live in a world without taxes. In this world, I prefer for my taxes to go into pork-barrel projects, the pockets of corrupt lobbyists, and general waste, anything really, that prevents taxes from funding the grandiose ambitions of people who want to remake society and people's lives from the top down, and especially those who prefer for everyone to outsource their happiness and security to outside institutions and abstract 'systems'.
Wow, seriously?
As an extreme example, and something no one is proposing: give all unemployed people a $1 million cash payment. They'll spend at least some of that money, which will create demand.
More seriously as an actual example that happened, in December 2008 (during the worst of the GFC) the Australian government made cash stimulus payments to most Australian families. This is credited with stimulating spending (ie, demand) during the Christmas period[1], which of course keeps retail employment high, which in turn puts money in employed peoples pockets etc etc. A second cash payment was made in April 2009.
The Australian government also spent large amounts of money on infrastructure projects. Being government, this took longer to spend, so most of that spending occurred right as the effects of the cash stimulus was wearing off. Construction is a big employer, so that helped support employment too.
Finally, the (huge) Chinese stimulus[2] kept the Chinese economy growing, which in turn increased demand for Australian exports.
The outcome was mostly positive: Australia was one of the few developed nations to avoid recession in 2008-2010. Unemployment is at historically low levels and inflation is also low.
Note that NONE of this was supplier initiated. Businesses were worried and were laying people off, and it was increases in demand via economic stimulus that reversed that trend.
[1] http://www.canstar.com.au/global-financial-crisis/
[2] http://en.wikipedia.org/wiki/Chinese_economic_stimulus_progr...
(1) The data (when compared to the recession forecast) doesn't support the idea that household spending is what boosted the economy. Instead, business investment and exports appeared to prop up the Australian economy.
(2) The Rudd government didn't try anything (broad stimulus, cash payments, home rebates, auto stimulus) that wasn't tried in the United States. If you believe these things succeeded in AUS, you'd have to have a convincing argument as to why they didn't in the US.
Obviously this is a tough nut to crack and there are really too many sourced to cite. Here is an article that talks a little bit about the data:
http://www.theaustralian.com.au/business/opinion/how-mining-...
Government-funded spending does spur economic activity--true. However it is merely temporary and is essentially borrowing money from the future to buy fake economic growth today--which is why governments reserve it for truly crisis situations like the ones you list above.
Marketing only increases the amount of pie you get when compared to no marketing at all, it doesn't increase the amount of pie available to get however. The problem is not in grabbing more pie than everyone else, the problem is a shortage of pie being made available because certain people collect pies as a hobby and they are doing rather well these days and have fantastic new methods to collect and store pies, so leaving less pie around for everybody else.
If that's so I can tell you quite a number of very successful companies that should never have been started. ;)
But there are also the unintended consequences: people buy things they can't actually afford, like you said, and people begin to qualify for buying homes as investment vehicles, which really screws with things.
So I'm not smart enough to figure that one out.
But does it actually have that effect? Once everyone is using mortgages, everyone is back in the same place as before mortgages.
To put it more concretely: before mortgages, houses might average around $100K because the average person simply cannot afford any higher. Once mortgages arrive, houses might spike to $300K, because your average person can afford that mortgage. So while the example family might not have been able to afford the $100K house because they had $80K, a mortgage won't help because now houses are around $300K.
So I don't quite grasp how this would affect rents. That seems to be an orthogonal issue.
NO doubt the Rudd government's big budget stimulus helped keep Australia out of recession last year. But mining was at least as important in producing the unexpectedly good performance.
I agree 100% with that conclusion.
Also, at odds to your point (1) above the same article says:
So the stimulus cash handouts and capital works look to have done most of the work by pumping up consumer and government spending. Treasury suggests budget stimulus added 2 percentage points to GDP growth last year.
It goes on to point out that this was insufficient in itself to explain the growth in the economy.
Clearly, demand stimulus by government hand-outs isn't a sustainable, long term model to grow an economy. BUT contra-cycle government spending can be an important tool to stimulate growth, especially through periods of uncertainty. (To make it clear this isn't a political point: Australia was able to do this because of large surplus budgets run in the period up to 2008/09 by the previous government. That was good policy during that period, and the stimulus was good policy during the crisis).
Note that in the US the stimulus package was radically smaller (compared to the size of the US economy) vs the Australian package. Additionally, it actually did reduce unemployment[1]. It is unfortunate that the US didn't follow that up, and instead made things worse via austerity measures.
My point is that money-in-pockets stimulated demand, not marketing...
Well, if you think fishing and hunting are economy, go with that.
States can certainly make trade easier and safer (though it doesn't always do so), but to say trade cannot exist without the state is simply wrong.
> If they don't have enough money to spend, what's with all of the money that's circulating every day?
The amount of money in circulation has very little to do with how it's distributed or where it's circulating.
> Why don't we take it a step further back, and consider whether and when it's appropriate and efficacious to design and implement any top-down strategies for what fundamentally amount to other people's lives. That's what economies are, after all, no matter how many layers of abstraction and aggregation you pile on top of your understanding.
This is particularly ironic given that not much further down in my previous comment, I said exactly the same thing -- that economies amount to people's lives -- and I gave my own life as an example, and you didn't understand my point. You are very much lecturing to the choir here.
> You've got it in your head that economies are somehow predictable systems that conform to well-understood models, and which can be managed via carefully-calculated planning.
1. Please point out where I said that.
2. "Managing" -- really, influencing -- economies is in fact one of the roles of government, by definition.
3. Only a couple of short paragraphs above, you said: "If the money supply remains constant but the real economy expands, then each dollar is worth more; i.e. if what you were saying is true, we'd see deflation." This is a rule. If it is true, then we have a system of rules, and, while it may not be absolutely predictable, it is still a system which is subject to predictable behavior. You can't have it both ways. You can't say in one breath that you can use a constant money supply and an expanding economy to predict deflation, and then in the next breath say that the system isn't predictable. So, if someone like me comes along and says, "I don't think that continuing supply-side policies are leading to a healthy economy" -- which, again, was the only point of all of this -- then perhaps instead of saying, "you're wrong because it's unpredictable", you might point out which rules are being broken.
> The problem is that taxes provide revenue to the government, and what those taxes are spent on is almost invariably destructive. Tax 'the wealthy' so we can have more foreign wars...
Why are you bringing this into the discussion? I never once even brushed past the Federal budget, or how taxes are being spent. If you could set aside your own prejudices for just a moment, I think you'd find that you and I would agree on a lot of points here. But, that's not what we were talking about.
The most charitable reading I can give your comment here is that you're suggesting we throw the baby out with the bathwater. That, because taxes are sometimes, even often, used for evil things, that they are inherently evil. I think it is sufficient to say that I disagree with that.
> ...anything really, that prevents taxes from funding the grandiose ambitions of people who want to remake society and people's lives from the top down, and especially those who prefer for everyone to outsource their happiness and security to outside institutions and abstract 'systems'.
And this is when I knew we couldn't continue to have a discussion.
This all started from a video and some brief commentary on it. To summarize the points: tax policy in the U.S. has in recent years favored large corporations and wealthy individuals; those favors have been justified by an ideological belief that those businesses and individuals will use their advantages to create more wealth; and that empirically does not seem to be happening as we are seeing falling savings, widening income gaps, continued unemployment and underemployment, continued stagnant consumer spending, weak investment markets, and an overall sluggish and stubborn economy.
How did we get from those points to "funding the grandiose ambitions of people who want to remake society and people's lives from the top down"??
For anyone who really has no idea what Gormo is expressing opposition to here but is truly open to at least understanding "the other side" -- might I suggest borrowing a copy of Ameritopia[1] by Mark Levin from the library? Mr. Levin attempts to go through some of the philosophical history of the debate between those advocating top-down "Utopian" solutions vs those advocating bottom-up "Individualistic" solutions.
[1] http://www.amazon.com/Ameritopia-Unmaking-Mark-R-Levin/dp/14...
It can be a little dry and the author never apologizes or backs away from which side of the debate he believes is right; but he does make a solid attempt to get at the root of this whole contention.
All this talk of taxing the rich and the various wars on women, college loan recipients, etc... is really just a distraction or at best a side-effect of the real issue of the Individual vs the State.