GAI - We have enough to share

[BHS]

Anyway given that all western industrial democracies are socialist in large degrees, arguing that socialism doesn't work is to ignore its role in the success of our own societies.

<{POST_SNAPBACK}>

Agreed. It occurred to me recently that all government activity is essentially socialist in nature. How much you wish to attribute the success of the first world on government intervention is entirely up to you. My personal opinion is that our success is based on the relatively small amount of influence our governments have on individual choice, which in turn is the key to freedom and prosperity. My problem with a single tier health care system (for example) is that it reduces individual choice in country (that is, ignoring the choice to seek treatment elsewhere).

[Yaro]

In a rather definitive sense socialism is the only system that has ever worked. The debate is rather to what extent a nation and by what method a society should decide between private and public control. I personally usually let it fall to the efficiency standard.

[cybercoma]

No, I am not joking. Show me a single. Cite one comparative study of international systems that supports the hypothesis that it is a disincentive to work. Cite one that shows tax policies are any deterrent to groth.

There is none. There is only the unsupported bunk of the "Right Wingers." There are studies of the opposite wrt tax policies. Ayrton Sen's is the most notable.

<{POST_SNAPBACK}>

I wasn't addressing the disincentive to work, I was talking about YOU taking my money that I earned and giving it to other people. Instead of showing up at my door and doing it, you advocate the government coming and getting it with their police and guns. That pisses me off.

[cybercoma]

Shady, step out in the open and let the sun shine in on your deprived sense(s). It is true that one cannot get blood out of a turnip. You can, however, get nutrition. There is no nutrition in your silliness: none for the mind, body, or soul.

<{POST_SNAPBACK}>

and there's no substance to your argument....

[Toro]

What economics! There is no evidence anywhere in the world to back up their assumptions.

Well, here's the evidence in the world. Its below.

That, August, proves nothing. It is merely a statement.

No its not. Its a publication from the Minneapolis Federal Reserve Bank by a Nobel Prize winner in economics. Here is his biography.

http://wpcarey.asu.edu/directory/stafffacu...47709&from=dept

Here is the Fed link

http://minneapolisfed.org/research/prescot...LaborSupply.pdf

And here's the link to the paper he if you want to read it

http://minneapolisfed.org/research/QR/QR2811.pdf

I related them to growth The findings are that they do not affect growth. Growth rates in various European countries are significantly different even where taxes are not dissimilar. There are other factors at play.

Of course there are other factors to growth, because, obviously, there are. But the question can also be posed that if taxes were lower, what would the rate of growth be?

There are in quite recent history, examples of countries where hours were longer and tax rates higher. Productivity and growth in those countries moved significantly higher after the 40 hour work week became the legal norm. I give you Britain as one where the top marginal tax rate was at one time, shortly after the war, 95%. It did not stop people working hard.

Well, that's a specious example because Britain had been bombed to smithereens, and people will react differently during war, or in the aftermath of war. A better example is what happened to the UK in the 1970s when the country was bailed out by the IMF and what happened to Britain under Thatcher. Now, of course, the structure of the British economy was different during the time of "The British Disease" and post-1980 as Thatcher reformed the country in other areas besides the tax system. But certainly, the tax system played a role.

Of course, some here will take that to mean tax at any absurd level. That is not worth discussing. What level would cause disincentive is unknowable since it has not been reached anywhere. It might even prove to be an incentive if it were necessary to sustain a desired standard of living.

I don't agree. De facto confiscatory tax regimes existed under communism, and we know how that turned out.

But Americans are more productive than Europeans, at least since the early 1980s. You can find the productivity numbers here.

http://www.oecd.org/topicstatsportal/0,264...0.html#30453948

(I'd quote the exact numbers but I'm getting a new computer up and don't have excel running yet.)

And if anyone wants to check out levels of GDP, and extrapolate growth rates, they are here. And once again, America is ahead.

http://www.oecd.org/topicstatsportal/0,264...1_1_1_1,00.html

[Yaro]

The problem with the those numbers is they don't take into account a 30 million person slave labour pool that count towards productivity results but not towards population count.

[BHS]

The problem with the those numbers is they don't take into account a 30 million person slave labour pool that count towards productivity results but not towards population count.

<{POST_SNAPBACK}>

Um, how do you know it's 30 million? Your own statement suggests the number is unknown.

[Guest eureka]

I have posted on a few occasions that the groth rates from 1960 to 1980 were higher throughout the woeld (with a few exceptions) than between 1980 and 2000. I have given link to the figures.

That is, that growth rates were significantly higher in the period of "high" tax than in the period of globalizration and Tax "cutting." Nobody has ever taken that up. Is it too uncomfortable for the neo-cons. That should answer the question of what would happen if taxes wre lower. The answer is that everyine suffered when taxes were lowered. Growth was lost and productivity lowered. The incomes of the large majority of the citizens of almost every country also suffered. In the advanced nations, incomes stagnated and in the 3rd. world, particularly, they declined signifcantly.

Thatcher did not cure the "British Disease." She destroyed industry and ushered in that period of low growth and stagnating incomes in Britain. There is nothing specious about my statement. There was massive reconstruction in Britain and a shift in economic relations in the country that brought it out of the stultifying past. Much of the problem that Britain had, financially, a little later was entirely the consequence of shifting world trade; of the inability to replace the wealth used in financing the war -Britain had the greatest asset base in the world before; and in repaying borrowing for that financing. Britain was the only nation to repay American loans as the losers benefited from the American aim of destroying Britain as a competitor.

What existed under Communism is not really a useful base of comparison with Capitalist regimes. There were many, many factors other than taxes at play.

Good luck with your new computer. I hope it helps you to find better information. BTW, Sen was also a Nobel Prize winner and not beholden to American Banking system.

[Yaro]

Um, how do you know it's 30 million? Your own statement suggests the number is unknown.

It’s not unknown, although I have seen estimates as high as 45 million, I have never seen an estimate lower then 25, so I used 30. There are by most estimates 20 million illegal Latinos, and a very significant number of Chinese and Koreans. The US government has continuously underestimated the illegal population for domestic political reasons (its just about the hottest topic in the US for politicians, but that source of extremely cheap labour helps to keep the labour market so liquid-and helps in there ongoing deception concerning there completely false unemployment rate). This adds a great deal to the US productivity numbers.

The fact is that productivity numbers are severely skewed by a number of issues, and like most statistics released by governments they is heavily manipulated.

[BHS]

Um, how do you know it's 30 million? Your own statement suggests the number is unknown.

It’s not unknown, although I have seen estimates as high as 45 million, I have never seen an estimate lower then 25, so I used 30. There are by most estimates 20 million illegal Latinos, and a very significant number of Chinese and Koreans. The US government has continuously underestimated the illegal population for domestic political reasons (its just about the hottest topic in the US for politicians, but that source of extremely cheap labour helps to keep the labour market so liquid-and helps in there ongoing deception concerning there completely false unemployment rate). This adds a great deal to the US productivity numbers.

The fact is that productivity numbers are severely skewed by a number of issues, and like most statistics released by governments they is heavily manipulated.

<{POST_SNAPBACK}>

So you admit that your numbers are more or less pulled out of your arse, and then you accuse the US government of fudging unemployment statistics. If I can't believe your first statement, what makes you think I'm going to believe whatever comes after it?

[Toro]

I have posted on a few occasions that the groth rates from 1960 to 1980 were higher throughout the woeld (with a few exceptions) than between 1980 and 2000. I have given link to the figures.

And its interesting to understand why that happened. The period from 1945 to around 1965-1970 was a recoiling from the depression and the world war. After 16 years of depression and war, there was enormous pent-up consumer demand. This is not unusual. The same thing happened from 1920 to 1929, when, after WWI and a recession in 1919, the economy boomed. Then, in the 1970s, growth was fueled by government spending, which lead to indebtedness. Of course, as everyone knows, you can live like a king if you have enough credit until the bills come due. (And I would include the last five years as living beyond our means.) This lead to high inflation and high interest rates, which stopped growth in its tracks and lead to a the worst recession since the depression. But breaking the back of inflation eventually lead to the prosperity of the 1990s, of which, BTW, Slick Willie deserves as much credit as Reagan/Bush.

What you really should be comparing, however, isn't so much time periods but similar national economies while understanding the differences between the structures of the economies. Looking at previous time periods is, of course, instructive, but economies work through long cycles. Its valid to compare time periods, but we must understand underlying global trends during different time periods. The example of pent-up consumer demand is one example. Another is that the economy currently is being partially driven by an asset boom - i.e. housing - which is due in part to excess liquidity in the global financial system, which is a lot different than looking at 1980-1984 when the fed funds rate hit 16%. If you want to compare political economies, its more appropriate to look at how similar economies during the same time period. How did France, Japan, Germany, Canada, the US, Italy, etc. all do from 1980-2005 for example.

Thatcher did not cure the "British Disease." She destroyed industry and ushered in that period of low growth and stagnating incomes in Britain. There is nothing specious about my statement. There was massive reconstruction in Britain and a shift in economic relations in the country that brought it out of the stultifying past. Much of the problem that Britain had, financially, a little later was entirely the consequence of shifting world trade; of the inability to replace the wealth used in financing the war -Britain had the greatest asset base in the world before; and in repaying borrowing for that financing. Britain was the only nation to repay American loans as the losers benefited from the American aim of destroying Britain as a competitor.

I once owned a book published in 1981 or 1982 with many articles written by British economists entitled "The British Disease." It explored the reasons why Britain grew slower than the US and continental Europe. It would come in handy now if I still had it. But I will address this at another time as I have promised to play with my son before bedtime.

Good luck with your new computer. I hope it helps you to find better information. BTW, Sen was also a Nobel Prize winner and not beholden to American Banking system.

Thank you. Yes, I am aware of Sen.

[Guest eureka]

I cited long time periods and the fact that it was a world phenomenon. All those advanced nations are amongst the losers. There are no answers of inflation or interest rates or pent-up demand. The periods in question were long enough for all those to work through.

They do. however, coincide with the shift of the advaced nations to the neocon view of the world. They coincide exactly with Globalization and lowering of taxes.

[Toro]

I cited long time periods and the fact that it was a world phenomenon. All those advanced nations are amongst the losers. There are no answers of inflation or interest rates or pent-up demand. The periods in question were long enough for all those to work through.

They do. however, coincide with the shift of the advaced nations to the neocon view of the world. They coincide exactly with Globalization and lowering of taxes.

<{POST_SNAPBACK}>

If you live on a credit card, you can live well, which is what happened in the 1970s. The card was being paid off in the 1980s and 1990s. (The US has begun ramping up the card the past few years.) Since you are insisting in drawing political boundaries here, it is the Left that failed to realize the effects of spending like a drunken sailor in the 1970s, and it is why either those countries that are still reliant on big government spending, i.e. France, Japan have sclerotic economies, while those that have not, i.e. the US, the UK, and to a lesser extent, Canada and Australia, have done better. If government spending was the driving force of the economy, then Germany, France and Japan would have done better the past 25 years than the UK or the US. They have not. Full-stop.

To somehow demark 1980 as the time of "globalization" and lowering of taxes as the reason for slower growth is false. The world had been "globalizing economically for the past 300 years. The difference in globalizations over decades is merely the rate.

Not only that, but there was enormous globalization during the post-war period to 1980s. Tariffs averaged around 40% after WWII. Through the GATT, they had fallen to around 10% by 1980 and now are around 5%. Not only that, but you had enormous technological advancements in commercial aerospace and telecommunications that shrunk the world.

[Yaro]

So you admit that your numbers are more or less pulled out of your arse, and then you accuse the US government of fudging unemployment statistics. If I can't believe your first statement, what makes you think I'm going to believe whatever comes after it?

I never said I pulled the number out of my ass, but there have been dozens of estimates all over the map. But feel free to use the official US government number of 15 million. Those results in a 5% margin of productivity, easily enough to overcome any US "advantage in productivity". Oops I see I put 25 million as the lowest estimate I have seen, I meant 15 (2004 figures, which is why I came up with 30).

As for the unemployment numbers, there have been dozens of very good papers written on the changes in the way which the US has changed the way they calculate the unemployment %.

Real Unemployment

Like I said, the US has made a couple of dozen changes over the last 25 years to make the US unemployment figure look much lower then it is. If calculated using the same system that Canada uses, it’s around 9 %(U-5 close approximate) and if calculated the way most of Europe does it, its closer to 10.5 %(U-6).

1995 changes PDF

But if you want to hear it directly from the mouth of one of the best statisticians the US has ever produced and the former head of the BLS herself:

Janet Norwood Interview

If you live on a credit card, you can live well, which is what happened in the 1970s. The card was being paid off in the 1980s and 1990s. (The US has begun ramping up the card the past few years.)

Actually, ironically, the largest debts in US history were under Reagan in the 80s. It’s ironic because nobody spent more time pushing a balanced budget amendment and nobody had bigger deficits. But you are right that the current administration in all practical ways has larger deficits.

Since you are insisting in drawing political boundaries here, it is the Left that failed to realize the effects of spending like a drunken sailor in the 1970s, and it is why either those countries that are still reliant on big government spending, i.e. France, Japan have sclerotic economies, while those that have not, i.e. the US, the UK, and to a lesser extent, Canada and Australia, have done better.

Not that I want to turn this into a political thing, but it was the very hard right that spent like a drunken sailor in every one of these countries, it was Regan in the US and Mulroney in Canada that virtually destroyed those respective economies. Japans problems have allot more to do with there resource-population issues and there corrupt banking system, neither of which could reasonably be attributed to there government as the geography is out of everyone’s hands and there banking system was set up by the US.

And it’s interesting to understand why that happened. The period from 1945 to around 1965-1970 was a recoiling from the depression and the world war. After 16 years of depression and war, there was enormous pent-up consumer demand.

No it wasn't pent up consumer demand, if you remember correctly there was a rather severe depression in the early 60's. JFK cut taxes rather dramatically, this helped to spur the economy until the baby boomers started entering the workforce which created quite possibly the largest bulge in employment age individuals in history, and this of course ballooned the economy and is largely the origins of the asinine supply side ideology. But it should be noted that unlike the current US administration JFK raised the taxes 4 years after he lowered them in 62 (I think it was) in order to start paying off the card as you say.

Another is that the economy currently is being partially driven by an asset boom - i.e. housing - which is due in part to excess liquidity in the global financial system, which is a lot different than looking at 1980-1984 when the fed funds rate hit 16%.

This is actually one of the most important points in understanding the current booms stability (for now). Most of the governments of the west, the US primarily, have been doing everything in there power to drive social value through the roof. Extending patents well beyond there natural lifespan, borrowing against there status as the worlds reserve bankers and the oil standard by printing money at an insane pace, using interest rates to fuel consumer debt... All these things create the artificial appearance of value; they give people faith in the value of what they own. This creates of course a use/desire for all that wealth they have created, they have essentially created the demand that they are filling only with paper and dreams. When this one pops its going to be a dozy.

I also think there’s many who have the misconception that cost effectiveness = efficiency, it doesn't.

Let’s take an example of a TV produced in China, now if it takes a total of 25 man hours a resource value index of 100 to create this TV then that is the production value of that TV. This production value is the same whether produced in China or the US or Canada, productivity numbers vary to a minimal degree next to logistical costs.

So now you have a TV in China which has to reach its marketplace in North America to realize its economic value. This means that you now have the logistical cost and efficiency issues. If a TV is produced in China and has to be shipped across the ocean, then we would have to assign a value to the labour and resource value required to get it to north America, lets say that the labour value is 1 hour per TV, and lets assign the resource cost (oil mainly) at 25, we now have a circumstance where the cost can and will be lower then a TV produced in the US but before it is delivered to you in your home it has seen a significant hit in its efficiency to get it to you. This is to a large extent the cause of productivity issues and why there is any advantage at all in the US productivity numbers (despite a significant slave labour population) because the fact of the matter is that at the end of the day producing closer to your consumer with equal efficiency is more efficient even if its not cheaper.

Some day when it’s no longer cost effective to produce goods in china and ship them over here we are going to be left with a devastated manufacturing industry and little to no base from which to build one. The saddest thing is that we have every advantage considering we are the most heavily resource valued population on earth and we further reduce our efficiency numbers by actually shipping those resources out of the country.

Although I am a little tired so I don't know if that was clear.

[August1991]

If you live on a credit card, you can live well, which is what happened in the 1970s. The card was being paid off in the 1980s and 1990s.

That is misleading and even wrong.

The lesson of the 1960s and 1970s is that government deficits cannot be financed by printing new money. Starting in 1979, central banks began to refuse to accommodate governments. Initially, this drove up interest rates causing numerous other problems in the 1980s. But the long run payoff has been ongoing economic growth since the 1990s. General inflation no longer creates noise confusing changes in relative prices, as was the case in the 1970s.

it is the Left that failed to realize the effects of spending like a drunken sailor in the 1970s, and it is why either those countries that are still reliant on big government spending, i.e. France, Japan have sclerotic economies, while those that have not, i.e. the US, the UK, and to a lesser extent, Canada and Australia, have done better.

Here, I agree with you because you note "government spending". As long as new money is not involved, it matters little how a government pays for its purchases - but the size of those purchases, and what they are, certainly do matter for the economic well-being of society.

The world had been "globalizing economically for the past 300 years. The difference in globalizations over decades is merely the rate.

Not only that, but there was enormous globalization during the post-war period to 1980s. Tariffs averaged around 40% after WWII.

You don't mention that world trade was greater (as % of world GDP) in 1912 than in 1990. Post-WWII, we were undoing the barriers erected in the "War Years". (Globalization is not new. Think of the Titanic, transoceanic cables and visa-free travel.)

----

Government does not only purchase but it also regulates. Clinton, Blair and Bob Rae understand this. Jack Layton and Canada's Left apparently do not. Layton et al call themselves "progressive" but in fact they are stuck in a 1960s time warp, perhaps because they want to remain young. They ironically garner support now by being "social liberals" - but that's about all.

The NDP appears to be pushing GAI now but the idea will go nowhere. People know that no government can truly guarantee anything, and money given to Peter must be taken from Paul.

At the same time, Canada must really reform its social welfare net, including UIC. With the switch from CAP to CHST in 1996, there might be more chance for provincial experiments but we are far from the US reforms under Clinton. In my view, we should have some form of negative income tax so that people on welfare do not have strong disincentives (as they do now) to avoid work. People on welfare trying to go back to work are among the most highly taxed. That's wrong.

[mirror]

The NDP appears to be pushing GAI now but the idea will go nowhere. People know that no government can truly guarantee anything, and money given to Peter must be taken from Paul.

Actually Chretien was pushing for it.

Of couse governments can guarantee whatever they want. Look at how Bush has guaranteed the US cattle and lumber interests that the US is going to screw over Canada. And look they are doing it!

I doubt the NDP would make it part of their iteniary now as they are probably too worried about the number the MSM might do on them if they don't toe the corporate line. They could do do what all political parties do, not talk about it before the election, and implement whenever they get elected.

[August1991]

I never said I pulled the number out of my ass, but there have been dozens of estimates all over the map. But feel free to use the official US government number of 15 million. Those results in a 5% margin of productivity, easily enough to overcome any US "advantage in productivity". Oops I see I put 25 million as the lowest estimate I have seen, I meant 15 (2004 figures, which is why I came up with 30).

For this argument to make sense, first, it would require that the US government accurately calculates GDP (including black market production) but for some reason the US government miscalculates numbers of workers (excluding black market workers).

Second, and more critically, productivity is all about changes. If the hidden slave labour force you refer to has remained proportionally teh same for the past few years, then who cares? It would have no effect on estimates of productivity.

Lastly, in a similar vein, does Europe not also have a "hidden slave labour force"? Why aren't Europe's productivity stats similarly distorted? (Maybe they are, and true European productivity is in fact declining!)

Some day when it’s no longer cost effective to produce goods in china and ship them over here we are going to be left with a devastated manufacturing industry and little to no base from which to build one. The saddest thing is that we have every advantage considering we are the most heavily resource valued population on earth and we further reduce our efficiency numbers by actually shipping those resources out of the country.

By your logic, you should personally start sewing your own clothes because one day in the future, you will need those skills. Tell me, what resources do you actually ship out of your own household?

Trade does not occur between countries, it occurs between individuals. Do you make your own ice cream, or do you import it?

[Guest eureka]

August is right in his"history" of Globalization. You are both wrong in that Globalization as we now know it has been going on for such a long time. The current round is (in trade) more the import of finished goods rather than resources. Manufacturing is disappearing from the West in a way that it has nevr done in the past. There was a time in the first half of the 19th. century when 3rd. world "slave labour" was devastating our "slave labour" in some products but we quickly took care of that.

The reason I use the demarcation of 1980 is that then is when the decline in productivity and GDP growth began in earnest. Incomes began to suffer a few years earlier in the lead up to the recession.

For the rest, I think Yaro answered better than I could. I know something of the history of economics but I am no expert on theory or what passes for theory in, as Yaro pointed out, the new fetish of Supply Side.

Yaro is also emphatically correct in stating that the huge deficits belong to the neo-cons. Clinton wiped out the monstrous deficit he inherited and put the US in recovery mode. Dubbya is trying to outspend his father and Reagan and dooming the US to financial instability for a generation to come. And Trudeau's deficit was a penny ante matter compared to Mulroney.

[Toro]

As for the unemployment numbers, there have been dozens of very good papers written on the changes in the way which the US has changed the way they calculate the unemployment %.

As have all governments.

Like I said, the US has made a couple of dozen changes over the last 25 years to make the US unemployment figure look much lower then it is. If calculated using the same system that Canada uses, it’s around 9 %(U-5 close approximate) and if calculated the way most of Europe does it, its closer to 10.5 %(U-6).

1995 changes PDF

But if you want to hear it directly from the mouth of one of the best statisticians the US has ever produced and the former head of the BLS herself:

Janet Norwood Interview

I am not sure where you get this information from. I read the article and didn't see anything other than a personal interview with Norwood. There was a study by an economist at one of the Ohio Universities - I think it was Ohio State, but I'm not sure - a decade or so ago who looked at the differences in statistical methodologies between Canada and the US and came to the conclusion that the difference was about 0.8%.

Anecdotally, as someone who works and has hired people in the US, as well as having worked in both Canada and England, I will tell you that the unemployment rate being similar is simply not true. My agency has had problems in the past finding qualified people, and I mean people right out of school. That's changed a bit the past few years, but in the late 1990s, we had jobs for college graduates going vacant. I never saw that in Canada.

If you live on a credit card, you can live well, which is what happened in the 1970s. The card was being paid off in the 1980s and 1990s. (The US has begun ramping up the card the past few years.)

Actually, ironically, the largest debts in US history were under Reagan in the 80s. It’s ironic because nobody spent more time pushing a balanced budget amendment and nobody had bigger deficits. But you are right that the current administration in all practical ways has larger deficits.

Right. I meant to say "government spending." Reagan's tax cuts were the main reason for the deficits, and I wouldn't disagree with you.

Not that I want to turn this into a political thing, but it was the very hard right that spent like a drunken sailor in every one of these countries, it was Regan in the US and Mulroney in Canada that virtually destroyed those respective economies. Japans problems have allot more to do with there resource-population issues and there corrupt banking system, neither of which could reasonably be attributed to there government as the geography is out of everyone’s hands and there banking system was set up by the US.

I have a hard time believing that Reagan and Mulroney "destroyed" the economies when I look at how the anglo-american world is doing compared to the franco-german model. Real growth under Reagan and Mulroney was in the 3% range.

No it wasn't pent up consumer demand, if you remember correctly there was a rather severe depression in the early 60's. JFK cut taxes rather dramatically, this helped to spur the economy until the baby boomers started entering the workforce which created quite possibly the largest bulge in employment age individuals in history, and this of course ballooned the economy and is largely the origins of the asinine supply side ideology. But it should be noted that unlike the current US administration JFK raised the taxes 4 years after he lowered them in 62 (I think it was) in order to start paying off the card as you say.

I didn't say there were no recessions between 1945 and 1970 because there were. There was one in 1954-1955, at least one more in the late 1960s and one I believe in 1950 or 1951. My point though is that pent-up aggregate demand from the intra-war years drove the economy over the next few decades.

[Toro]

If you live on a credit card, you can live well, which is what happened in the 1970s. The card was being paid off in the 1980s and 1990s.

That is misleading and even wrong.

The lesson of the 1960s and 1970s is that government deficits cannot be financed by printing new money. Starting in 1979, central banks began to refuse to accommodate governments. Initially, this drove up interest rates causing numerous other problems in the 1980s. But the long run payoff has been ongoing economic growth since the 1990s. General inflation no longer creates noise confusing changes in relative prices, as was the case in the 1970s.

That's what I was trying to convey.

Its interesting to note, however, that the monetary aggregates were accelerating at a 21% pace in 2001-2002, which I believe is the highest we've ever seen, and we haven't seen inflation, or at least price inflation in the CPI or PPI. Some argue that is because of heurisitic adjustments within the indicator, and I would argue you are seeing asset inflation.

[Toro]

I have insomnia.

August is right in his"history" of Globalization. You are both wrong in that Globalization as we now know it has been going on for such a long time. The current round is (in trade) more the import of finished goods rather than resources. Manufacturing is disappearing from the West in a way that it has nevr done in the past. There was a time in the first half of the 19th. century when 3rd. world "slave labour" was devastating our "slave labour" in some products but we quickly took care of that.

The reason I use the demarcation of 1980 is that then is when the decline in productivity and GDP growth began in earnest. Incomes began to suffer a few years earlier in the lead up to the recession.

For the rest, I think Yaro answered better than I could. I know something of the history of economics but I am no expert on theory or what passes for theory in, as Yaro pointed out, the new fetish of Supply Side.

Yaro is also emphatically correct in stating that the huge deficits belong to the neo-cons. Clinton wiped out the monstrous deficit he inherited and put the US in recovery mode. Dubbya is trying to outspend his father and Reagan and dooming the US to financial instability for a generation to come. And Trudeau's deficit was a penny ante matter compared to Mulroney.

<{POST_SNAPBACK}>

No, globalization has been occurring for centuries. The fact that it involves different factors of production is not really relevant. In fact, the time period 1850-1910 may have been even "more globalizing" than today. Currently, there are tremendous restrictions on the movement of labour. There were none a century ago. Pretty much anyone could come to Canada or America (while at various times, America did halt immigration altogether, only to rescind such restrictions later.) Tariffs may have been low in 1912 - and August is correct on tariffs being erected during the intra-war years - but that's not necessarily true throughout most of the latter half of the 1800s (which lead to agreements such as the Reciprocity Treaty between Canada and the US). Tariffs were once a primary source of government revenue.

As for this idea that manufacturing is disappearing being bad, manufacturing "wiped out", or a better word is "replaced", agriculture as the primary source of economic growth in the 18th through 20th centuries. Manufacturing also replaced hand-drawn industries, which lead to riots in England and elsewhere - this is where the term "Luddites" comes from. That economy is now transitioning to a service/knowledge based economy. There is absolutely nothing inherantly good or bad about manufacturing. It just is. And its now being replaced by the service economy, which has been occurring for several decades.

Finally, Mulroney had balanced the operational budget of the federal government in his second term, i.e. before interest payments. Its awfully hard to argue that the structural fiscal problems of the 1980s weren't caused by what occurred in the 1970s.

[Argus]

I have insomnia.

Toro, read an economics text. When I was in college that usually did it for me!

[Toro]

Toro, read an economics text. When I was in college that usually did it for me! 

I konked right out after I posted those.

[Guest eureka]

But the factirs are entirely relevant. The Globalization of the past was characterized by the exploitation of resources in colonies and undeveloped areas: not just labour and capital movement.

Manufacturing cannot be replaced by "service" industries Service industries other than retail are not labour intensive. It is the transformation to a service economy that is largely responsible for Rifkin's belief that we will, in the vary near future, not be able to provide work for the majority of the populations of the advanced nations.

Globalization, to use your understanding of that, has been going on at least since the Phoenicians. What we have today is sometging new. It is not about tariffs: it is a deliberate manipulating of the world economy to provide fodder for the Bulls in the form of the cheapest labour to be found and the pressure on every nation to reduce its labour force in sustenance as well as dignity to the levels that inspired protest in such as Thoreau.

Britain in the nineteenth century was forced to act against the ichoate attempts to do what we do today in order to avoid revolution. Manufacturing is, and was, the base of any successful economy. Even in an agricultural age, manufacturing was important.

You and August are both right in that tariffs were erected in the early 20th. century. They were used as a misplaced attempt to prevent the Capitalist excesses that we see today. I would think it entirely possible that we may see the same again with the same disastrous consequences rather than put the brakes through government regulation to Capitalism gone mad.

[August1991]

Its interesting to note, however, that the monetary aggregates were accelerating at a 21% pace in 2001-2002, which I believe is the highest we've ever seen, and we haven't seen inflation, or at least price inflation in the CPI or PPI. Some argue that is because of heurisitic adjustments within the indicator, and I would argue you are seeing asset inflation.

It is a tenuous connection between "high-powered money", what the Fed can directly control, and other monetary aggregates, private forms of money. How Fed policies affect inflation, and ultimately the real interest rate, are hardly immediate.

The striking feature of banking in the past two decades is technological innovation. This has had made the Fed's job very difficult. When you say the value of monetary aggregates grew by 20%, I would expect those to be widely defined financial instruments.

The basic lesson of the 1950s-1970s still applies - and it's basically a monetarist lesson: central banks must be independent of governments and monetary policy should be conducted to keep inflation low.

Manufacturing cannot be replaced by "service" industries Service industries other than retail are not labour intensive. It is the transformation to a service economy that is largely responsible for Rifkin's belief that we will, in the vary near future, not be able to provide work for the majority of the populations of the advanced nations.

Not be able to provide work? You mean, cause unemployment? Technological innovation frequently seeks ways to improve productivity and reduce the need for labour. IOW, new technology causes unemployment.

[bTW, if everyone in Canada is unemployed, what will we have to offer to trade with all those people working in Third World countries?]