The Death Of The "welfare State"

[idealisttotheend]

Socialist policies caused the depression

Uh huh. And every idiot and his brother speculating on the margin on the stock market that was going to grow "forever" had nothing to do with it? The little cabals that worked the stock prices for their own gain were good examples of market forces at work (stock prices must have been reflecting the real value of the company after all), n'est pas? That's why they had to put all those reforms in the stock market afterwards? I’ve never seen anyone argue that it wasn’t the market crash that triggered the depression and if they’re out there, they’re probably on the same level as holocaust deniers.

These were socialist ideas such as agricultural price fixing (leading to agricultural underproduction and food shortages),

Yes well, during the depression there was a drought. There was not enough rain and therefore food shortages. Socialist policies cannot, easily, be blamed for the fact that it didn't rain.

As to FDRs policy you may be right. My understanding was that his policies did have a small benefit (usually only to the people who were actually employed in the make work schemes) but that many were disappointed that they didn't end the depression. I have trouble understanding how the market solution worked better though, we had work camps in Canada (designed to prevent communist revolution) and a significant lack of any 'socialist' policies, but we still had a depression.

Indeed whatever you or I may think, without the Great Depression there would have been no CCF or NDP, nor any welfare state. The 'common man' accepted socialist practices (differing from communist practices) as a possible solution to some problems making the CCF/NDP into a quasi mainstream party. The 'common man' saw that when everyone worked together for the war effort suddenly there were jobs for all and everyone ate. Once the 'common man' fought and died in the trenches it got harder to call him lazy or a n'ear do well if he was unemployed and there weren‘t any jobs for him to do. The market showed it's weakness and policies were put in place to correct for those weakness.

minimum wage which increased unemployment massively

Unemployment is not caused by minimum wages. There are people who argue that it does but I've never seen a valid argument that considers all the facts. Look what mass production did for Ford, he increased wages, decreased the price of his cars and therefore sold many more cars, increasing his return. If I manage a 7-11, I know exactly how many workers I need based on how many customers I have and how much work needs to be done. I will not hire more workers if the wages of the ones I have are lower because I don't need more workers, (unless I am particularly benevolent or inefficient manager). Higher labour costs may increase my prices but will also increase my demand since my employees now have more money with which to buy products (from me and others). If a business can’t survive under such laws than it was marginal to start with. Minimum wage laws are the best way to ensure the race is to the top and not to the bottom.

Just looking at modern examples, since China moved away from socialism and joined the world market the average income of the Chinese has nearly quadrupled. Could you explain that in a way that justifies your wrongheaded ideas?

Sure. China has becoming the "factory floor" of the world, to use the cliché. We are sending all our manufacturing jobs there and quadrupling their incomes with our money. Surely you did not think that those incomes appeared magically out of nowhere due to the benevolence of the world market? That the large US trade deficit with them is not a transfer of wealth from the US to China?

socialism has become a tool for tyranny, murder and human rights abuse because of the grotesque concentration of power that accompanies it.

Didn't you just use China as an example of everything you see as right with the world? Either they're 'socialist' or they're not.

In any case many people have done many things in the name of 'socialism.' Like all very broad and poorly defined ideas it means so many different things to so many people. People commit violence in the name of religion even though all world's major religions are inherently peaceful.

Socialism, properly defined, brought us universal health care, welfare, employment insurance etc. I find these policies to be liberating and in the best tradition of enabling human rights and safeguarding human dignity.

Please note that there are elections every four years in Saskatchewan even though the NDP has been in power more often than not since 1944, to my knowledge there are no mass graves from government killings to be found.

Mixed economies do not work as well. Sweden, Norway and Canada have all encountered economic problems.

These three countries are often at or near the top of the UN's quality of life index. Canada's economic position is considerably better than the American's (sacrilege I know) except for the fact that no one ever did bother to diversify our trade so we will go down right along with them.

Even if I agreed that this was true, are we to assume that the state sponsored health care, decently funded education systems, larger public sectors, and more generous welfare policies are the only variables involved in which country has more poor? Could resources have anything to do with it? What about immigration or geographical position or relative size. How about foreign policy or land per capita ratios? Surely other factors must be taken into account.

compared to the American poor, which is shrinking.

Says who?

Only if you actually studied economics

I've read a couple of books here or there. I get quite tired of the self fulfilling prophecies that everything seems to be dependant on, (if enough people believe that A lead to B then A leads to . I get tired of people who state assumptions as fact. I get tired of just spinning the numbers one way or the other. Or the people who have stopped doing research by coming up with a hypothesis and checking if it is true but rather by starting with the answer they want and working backwards to come up with the theory that fits (and ignoring the twenty or thirty other possibilities).

There's a revolution happening (no not that kind, the computer kind) and I think it is time for some new economic theory to deal with it. Or else we'll have another Depression and then we'll see if more or less "common men" think socialism is in their interests or not.

[August1991]

Uh huh. And every idiot and his brother speculating on the margin on the stock market that was going to grow "forever" had nothing to do with it?

The stock market crashed in 1987 also. But it didn't lead to a depression. Have you ever wondered why?

The Dow-Jones went from 375 to 200 in fall 1929.

1929 Chart

The Dow-Jones went from 2700 to 1800 in fall 1987.

1987 Chart

Why did one lead to a depression and the other not? There is no doubt whatsoever now that the US Federal Reserve really, really screwed up in 1929. Having learned the hard way, they didn't screw up in 1987. Greenspan still has his job because of this. Of course, he has good advisors.

I’ve never seen anyone argue that it wasn’t the market crash that triggered the depression and if they’re out there, they’re probably on the same level as holocaust deniers.

Indeed they're out there; in fact, they're advising Greenspan. None, to my knowedge, deny the holocaust.

China has becoming the "factory floor" of the world, to use the cliché. We are sending all our manufacturing jobs there and quadrupling their incomes with our money. Surely you did not think that those incomes appeared magically out of nowhere due to the benevolence of the world market?

The wealth came precisely out of trade, and the world market. Higher Chinese incomes do not mean lower incomes for us. Life is NOT a zero sum game, IdealEnd.

There's a revolution happening (no not that kind, the computer kind) and I think it is time for some new economic theory to deal with it.

IMV, economics is about trade. The internet means it is easier to trade. So, it's the same old same old.

I think the real revolution was the telegraph. Since then, it's a variation on a theme. People born in 1850 (and living to 1920) saw far more revolutionary things in their lifetime than people born in, say, 1930 and living to 2000.

[idealisttotheend]

The stock market crashed in 1987 also. But it didn't lead to a depression. Have you ever wondered why?

I have never wondered why, better social supports, better financial controls (I think only one small bank failed) and we were producing so much more of everything due to technology that the sort of starvation and using flour bags for clothing was not necessary. Plus there was not a food crisis.

The wealth came precisely out of trade, and the world market. Higher Chinese incomes do not mean lower incomes for us. Life is NOT a zero sum game, IdealEnd.

If that were so then there were be no scarcity and the basic premise of economics would fail. Economics tries to be a non-zero sum game but it works only as long as it can string it out (the bank may lend/invest 10 dollars on my 1 dollar deposit but it has to be paid bank eventually). I have yet to see the free lunch that perpetual growth fanatics are trying to produce for me. Physics tells us that everything has a cost, you can break down one sort of atom to form another but you still have the same number of particles. The only thing that creates 'more' is the multiplying effect of technology which had it's own cost to develop and deploy and such. Chinese workers are not on the same level as new technology as you have argued previously but an end around labour and environmental standards and a transfer of jobs to where they are 'demanded' most. Without jobs the wage economy fails and we do lose, people have no way to earn a living. Chinese workers do not produce more they only produce the same with less.

Indeed they're out there; in fact, they're advising Greenspan.

I would love to know then how they explain that with a loss of no material, no productive capacity and no labour everyone got so much poorer all of the sudden. I will try to find such a theory and read it so that I can understand how this is possible.

[August1991]

I will try to find such a theory and read it so that I can understand how this is possible.

Try this:

Slate Krugman piece

[idealisttotheend]

All right, that is a good site. Would inflationary policies have helped in 1929, maybe so but then they are usually considered 'socialist policies' even now. Furthermore they don't account for the fact that company shares were ridiculously overvalued and were expected to keep rising with no underlying 'real' value What is real value, beats me but surely a company's share price should represent something 'hard' some product or benefit to society. Yes we need to speculate but how much and at what cost, (own Nortel? what was the difference between when their share price was really high and when it was really low?). Surely share prices could not rise forever but everyone (including apparently the experts) thought this was possible. People who argued were seen as party poopers and discounted out of hand (Chinese incomes can go up 4 times but ours won't go down).

Plus the reforms instituted after included a provision that closes the market when things start to go bad to let things cool down. This is less than "free" but is necessary. A regulation.

Only with some form of order can freedom exist.

[August1991]

Would inflationary policies have helped in 1929, maybe so but then they are usually considered 'socialist policies' even now.

'Socialist Policies'? Where did you get that idea? (People confused by math believe that a piece of paper is the root of all evil. A piece of paper... )

Furthermore they don't account for the fact that company shares were ridiculously overvalued

Yeah, well, you know. Bubbles happen in markets - particularly in "paper" markets.

Much worse are panics. (Thank God, we don't have those in the Western World anymore. BTW, the State helped to solve the problem - sort of.)

Yes we need to speculate but how much and at what cost

Speculation. Another thread, please. Unless you wanna write a book.

What is real value, beats me but surely a company's share price should represent something 'hard' some product or benefit to society.

"Real value". Hmm. In another thread, I think you (or someone else) said something about politicians and corporate managers being "short term thinkers". Polticians maybe. Corporate managers never. Here's why (and it's connected to the "value" of share prices.)

A decent house in Montreal can be had for about $200,000. Would anyone pay $200,000 for house if they knew that the house would burn down next year? IOW, the resale value of the house determines in part today's price. Think of a car. Why is a Mercedes expensive but a Hyundai cheap? True, not the same quality - but think of the resale price. Today's high price also contains the belief that a future price will be high.

Shares. Why buy Nortel at $100 now? Because you believe that next year the resale price will be good. IOW, you believe that someone will want to pay a good price for Nortel next year.

Going back to the "real" house example, why will someone want to buy a house next year? That someone will benefit from living in it for the subsequent year (assuming there's no fire.)

Back to shares. What benefit will the next person get from holding shares? Hmmm.

Only with some form of order can freedom exist.

Brilliant. I agree completely.

John Locke said "life, liberty and property".

Americans say "life, liberty and the pursuit of happiness."

Canadians say "peace, order and good government." (Not only are we wimps, but we're boring, imitative wimps.)

So, to have freedom, what form of order are we talking about here? ('Freedom'? How about 'to enjoy life the most possible'?)

Wordy ain't the word.

[August1991]

I read these, but missed a reply:

I have yet to see the free lunch that perpetual growth fanatics are trying to produce for me. Physics tells us that everything has a cost, you can break down one sort of atom to form another but you still have the same number of particles.

Interesting comparison. I don't want to go "new age" but what is gravity except the connection between two objects. To use your chemical example, bonds not elements make character. (And a thought for fun: Quantum mechanics and probability are the universe "learning".)

The only thing that creates 'more' is the multiplying effect of technology which had it's own cost to develop and deploy and such.

True. But the cost is often small. Think of the "cost" of Mozart and the benefit of his music. Using trade is also a "soft" technology. All mean we get "more". (I don't mean only more Walmart junk. I mean more... well, what?)

Chinese workers are not on the same level as new technology as you have argued previously but an end around labour and environmental standards and a transfer of jobs to where they are 'demanded' most.

Good point. Really good point.

First, labour. How about child labour. IME, Asians and Latin Americans have a greater respect for family, and love of children, than anything I've ever seen in Europe or North America. North Americans claim Asians mistreat children? WTF? I know parents in Montreal that haven't spoken to their kids in years. (Ask someone from Asia about this.) I suspect that guilty/frustrated Westerners are transferring their personal problems on to foreigners.

Labour? People in China, Vietnam, India, Ecuador are poor. They have low wages. They accept dangerous jobs because they need the money. All true. What did your great-grandparents do?

Environmental standards. Got me there. You're right. Do you know what happens when a person drops one AA battery on the ground? Do you know what it takes to produce one AA battery in China, or anywhere else? I don't know exactly, but I suspect it ain't good.

[idealisttotheend]

'Socialist Policies'? Where did you get that idea? (People confused by math believe that a piece of paper is the root of all evil. A piece of paper... )

Yes well math has never confused me and I don't think money is the root of all evil. However the debate is that high interest policies benefit the rich (i.e. ones with savings especially bonds) and low interest rates help labour because they create employment. Think 1980 and whatever the heck that BOC governer's name was (can't remember it now). I have no strong feeling one way or the other.

First, labour. How about child labour.

UNICEF stats re: Child labour third world

I agree though that extended families seem much stronger and that the Chinese with their one child policy tend to be especially nice to their children. I wonder if Western civilization hasn't made having children economically unwise and what that says about this particular society.

Canadians say "peace, order and good government." (Not only are we wimps, but we're boring, imitative wimps.

Peace order and (sort of) good government have gotten us a relatively peaceful, stable and prosperous place to live. I'd argue they've served us very very well and allowed us to survive as such a diverse country. You commented on Progressive Conservatives (Tall shorts) somewhere else. It always seemed silly to me too but now I wonder if it isn't the one political truth in this country.

(And a thought for fun: Quantum mechanics and probability are the universe "learning".)

I love that thought. I wonder though if it doesn't necessarily follow then that the farther you get from the quantum level the less you are able to 'learn.' Is this why societies/economies are so slow to change? I wonder.

Wordy ain't the word.

Ah yes, what was the subject again. Oh can we afford the Welfare State. Yes well of course we can, in fact we can't not afford it unless we are willing to write off 15-20% of the population, (who won't like being written off). Gonna have to make some ethical choices about health care (when is it wrong to keep people alive through expensive medical treatments). Gonna have to reinvigorate the civil service too, maybe PC has gone too far. Serious consideration to a minumum income for all. Otherwise sure.

Finally on topic. First time in my life.

Sorry, one more wordy post and then I'll retire, gotta get back to more economically 'productive' pursuits anyway I guess.

[Hugo]

Furthermore they don't account for the fact that company shares were ridiculously overvalued and were expected to keep rising with no underlying 'real' value What is real value, beats me

A company's value is not always tangible, and cannot be measured purely in terms of assets, personnel etc. For instance, Amazon.com has never made a profit. Why is it still in business? Easy: it has market share. It's easily the biggest e-tailer today and that makes it very valuable.

The reason the stock market does not seem to represent "real value" as you put it is because it measures intangible ideas such as market share, growth prospects and even the future of the industry in question. That's why events such as war are able to impact the stock market.

If that were so then there were be no scarcity and the basic premise of economics would fail.

The study of economics is the study of best allocating scarce resources. The free market is the best system for doing that because it is the most equitable and the most flexible. Yes, I said equitable. I don't see any problem with rewarding a person proportionately to the value of the work that they do.

[Hjalmar]

. Think 1980 and whatever the heck that BOC governer's name was (can't remember it now).

I think that was John Crow if memory serves me correctly.

[Hjalmar]

An Incentive to be Poor

A flat tax of perhaps 18% with a $12,000 basic exemption would be very fair in my view. A person earning an annual income of say $15,000 would pay $540 in income taxes while a person earning $500,000 would pay $87,840. Can anyone see that as being unfair?

But Canada has a system in place that taxes the higher wage earner much more. This system has been in place as far back as I can remember.

Along comes Jack Layton of the NDP and proposes tilting the scales further in favor of the poor.

The "welfare state" is dying throughout the world. Governments today know that for the first time in history they will have to compete from a tax standpoint. Failing that, they will lose their hardest working, best educated and most productive citizens to more tax friendly jurisdictions..

The NDP have always reached out for their votes from the poorest in our society. We are fortunate here in Canada that they will never pose a threat of forming government, nor even official opposition. With them in power we would become a "Third World" country within 5 years. Jack Layton knows that if the "go getters" in this country were to flee he would be assured of power forever. This will leave no one left to fund the welfare state but the poor themselves.

Do we really want to become another Cuba?

[idealisttotheend]

Can anyone see that as being unfair?

No -- the 15,000 person has to spend a far greater amount of the income on necessities of life.

But Canada has a system in place that taxes the higher wage earner much more.

It's called a progressive system, very popular in the developed world.

. Failing that, they will lose their hardest working, best educated and most productive citizens to more tax friendly jurisdictions..

Hmmm. Their hardest working, best educated and most productive citizens depend on education and health systems that are often integral parts of the welfare state. They prefer having them I'm told.

The NDP have always reached out for their votes from the poorest in our society

Like Autoworker's or other "overpaid" (your assertion) union members. Or people in urban areas (like downtown Toronto), or maybe immigrants? All very poor.

With them in power we would become a "Third World" country within 5 years.

Prove it.

Jack Layton knows that if the "go getters" in this country were to flee he would be assured of power forever.

Prove it.

This will leave no one left to fund the welfare state but the poor themselves.

Prove it.

Do we really want to become another Cuba?

Prove this is the intention of the NDP

Thanks kindly.

[idealisttotheend]

The study of economics is the study of best allocating scarce resources. The free market is the best system for doing that because it is the most equitable and the most flexible. Yes, I said equitable. I don't see any problem with rewarding a person proportionately to the value of the work that they do.

The free market allocates more resources to people who already have resources, it's all 'supply side'. Unless, of course it is properly regulated so that people can be rewarded proportionately to the work they do but all people have a reasonable chance, (like poets or laundry workers even if they're not as 'valued' as currency traders).

It is the most flexable but certainly not the most equitable. Is Britany Spears really 1000 times better than the PM of Canada for example.

[Hjalmar]

Prove this is the intention of the NDP

Perhaps we could wait and let Jack Layton prove it for you!!!