Although over-population tends to be more pronounced in poor countries, there are serious imbalances in reproduction rates between the rich and poor in developed countries. In the same way that global overpopulation is no longer taken seriously, reproduction imbalances within developed states are also down played. This neglect is likely to worsen inequality and contribute to social problems such as crime and racial tension.
In the 1970s family planning was widely promoted by welfare agencies in many developed countries. Developed nations at that time where well aware that working class people with limited income and education tend to have larger families than Middle class people , which is a major factor in economic inequality. Today, levels of inequality in developed countries have increased considerably yet family planning is given little priority. The connection between family size and economic status is also rarely discussed in the media.
Most developed countries have acknowledged that raising children has become much more expensive in recent decades and have increased welfare assistance for low-income families. There is also a concern that their populations are aging too quickly and that those who wish to have children should be encouraged to do so. Although global overpopulation is a serious concern, reproduction rates in some developed countries are indeed falling fast and their governments are right to encourage people to have more children.
However, Western governments are wrong to target assistance exclusively at low income families since reproduction rates are lowest among middle and high income earners. Higher income groups should also receive some incentives for having children. Providing tax concessions for having children might be a sensible starting point.
On family planning and the poor in New Zealand check out Michael Bassett's website.
Tuesday, April 25, 2006
Friday, April 21, 2006
In Support of Limited Immigration
Throughout the Western world limited immigration policies are seen as backward and reactionary by many educated people. Despite this, there are sound environmental and ethical reasons why large-scale immigration is no longer desirable. The rise of popular support for limited immigration should not be discouraged. It is the association of limited immigration with unrealistic policies of extreme anti-immigration, and indifference to Third World countries, that needs to be countered.
In Europe there is a clear need for immigration to be limited. Most European countries are densely populated and are struggling with high unemployment in the wake of deindustrialisation. Continental Europeans are environmentally conscious and increasingly aware of the superior quality of life enjoyed by those in less densely populated countries like Canada and Australia. Unfortunately, many of the European parties that support limited immigration don't appear to be interested in assisting poor counties. The neo-liberal policies of the IMF and World Bank have helped to weaken many states in the developing world resulting in increased anarchy and inequality. This is turn has increased the number of refugees and economic migrants pressing on the borders of developed countries. Developing countries should be given more leeway in managing there own economies and the West should should do more to reduce their indebtedness. We can't turn away refugees without doing something to address the causes of their displacement.
Many parts of the developing world are grossly overpopulated, yet industrialised countries are hardly underpopulated. Gareth Hardin rightly argues that states shoud be made responsible for their own population problems. Mexico, for example, shouldn't be permitted to deal with its populaton problems through immigration to the U.S - does the world need more people living an extravagant U.S lifestyle? However, a total ban on immigration from developing countries would be too austere to be accepted by most people and is probably unrealistic. Where possible, immigration from developing countries should be restricted to a small number of carefully screened refugees and workers.
In terms of population, the developed world is dwarfed by the developing world. Hence, rich countries could easliy be overwhelmed if immigration is not tightly restricted. Liberal economists argue that Third World immigrants in developed countries help their home countries through the money they sent back home. However, living costs in developed countries are much higher than in poor countries, Hence, it would be more cost effective to help the Third World directly through debt relief or aid.
Limited immigration shoud not be be based on perceived ethical shortcomings in the immigrants themselves- a point now acknowledged by the European 'New Right' intellectual movement. Refugees and economic migrants are often victoms of forces beyond their control which developed countries are partly responsible for. Affluent countries should provide aid to developing countries but on the condition that developing countries accept poulation control measures and limitations on military programmes.
Another important consideration in immigration is the fear among many people of European, Jewish and Japanese descend that they belong to dying races whose cultures are in decline. This is not a trivial concern- much of the tension in Palestine is because of the unequal reproduction rates between Arabs and Jews. Many Jews believe that the more numerous Palestinians will soon overwhelm them. In the coming decades such ethnic fears are only going to intensify if Western governments promote utopian ideas of large-scale immigration.
In Europe there is a clear need for immigration to be limited. Most European countries are densely populated and are struggling with high unemployment in the wake of deindustrialisation. Continental Europeans are environmentally conscious and increasingly aware of the superior quality of life enjoyed by those in less densely populated countries like Canada and Australia. Unfortunately, many of the European parties that support limited immigration don't appear to be interested in assisting poor counties. The neo-liberal policies of the IMF and World Bank have helped to weaken many states in the developing world resulting in increased anarchy and inequality. This is turn has increased the number of refugees and economic migrants pressing on the borders of developed countries. Developing countries should be given more leeway in managing there own economies and the West should should do more to reduce their indebtedness. We can't turn away refugees without doing something to address the causes of their displacement.
Many parts of the developing world are grossly overpopulated, yet industrialised countries are hardly underpopulated. Gareth Hardin rightly argues that states shoud be made responsible for their own population problems. Mexico, for example, shouldn't be permitted to deal with its populaton problems through immigration to the U.S - does the world need more people living an extravagant U.S lifestyle? However, a total ban on immigration from developing countries would be too austere to be accepted by most people and is probably unrealistic. Where possible, immigration from developing countries should be restricted to a small number of carefully screened refugees and workers.
In terms of population, the developed world is dwarfed by the developing world. Hence, rich countries could easliy be overwhelmed if immigration is not tightly restricted. Liberal economists argue that Third World immigrants in developed countries help their home countries through the money they sent back home. However, living costs in developed countries are much higher than in poor countries, Hence, it would be more cost effective to help the Third World directly through debt relief or aid.
Limited immigration shoud not be be based on perceived ethical shortcomings in the immigrants themselves- a point now acknowledged by the European 'New Right' intellectual movement. Refugees and economic migrants are often victoms of forces beyond their control which developed countries are partly responsible for. Affluent countries should provide aid to developing countries but on the condition that developing countries accept poulation control measures and limitations on military programmes.
Another important consideration in immigration is the fear among many people of European, Jewish and Japanese descend that they belong to dying races whose cultures are in decline. This is not a trivial concern- much of the tension in Palestine is because of the unequal reproduction rates between Arabs and Jews. Many Jews believe that the more numerous Palestinians will soon overwhelm them. In the coming decades such ethnic fears are only going to intensify if Western governments promote utopian ideas of large-scale immigration.
Saturday, April 15, 2006
The Consequences of Ignoring Conservative Populism
Since the 1970s many working and lower middle class whites have become alienated from mainstream politics. Where previously they tended to support centrist or centre left parties, that supported their economic interests , they now tend to either avoid voting or give their support to neo-conservative parties. Educated liberals and libertarians argue that supporters of such parties are ignorant of, or unable to deal with, the realities of the modern world with its service economy and 'information society'. However, in the 21st century educated liberals and libertarians also appear to be increasingly out of touch with reality.
Conservative populism in the developed world appears to be strongest in the United States. In the U.S nearly half the population doesn't vote. Among working class voters that vote, most vote for the Republicans whose tax policies favour the wealthy. Liberals argue that working class Whites don't know their own interests because they are poorly educated or intolerant of minorities, who tend to vote for the Democrats.
No doubt there is intolerance towards minorities in the United States but the U.S also has very high levels of immigration and a low minimum wage. Over a million migrants enter the U.S each year. This level is economically and environmentally unstable and is highly likely to reduce wages and increase rents for low income Whites and Afro-Americans. However, the Democrats appear to have no intention of reducing immigration or seriously improving working conditions for low income workers. Hence, it is not suprising that working class whites have abandoned the Democrats. Many prefer to support the Republicans who at least promise to keep taxes low.
In the rhetoric of economic libertarians working and lower-middle class people who lack a university education are economically redundant. They argue that manual work can be done by machines or workers from the developing world. Knowledge workers or 'symbolic analysts' are today's heroes who richly deserve their much larger pay packets. The working class should either get educated or gratefully accept a low-income service job. However, low income Americans sense that much of this talk is hubris and that many traditional blue collar jobs are still important to society- its a pretty safe beat that a strike among refuse collectors would have more serious consequences than a strike among fast food workers.
The media has also added to the sense of betrayal felt by many of the Democrats' traditional voters. Although the media is largely driven by commercial considerations, rather than a liberal agenda as such, neo-conservative critics believe that it highlights the hypocricy of many prominent liberals. The media has responded by offering neo-conservatives critics a voice through talk radio and print media, thus opening up another lucrative media market. However, the big institutions of the media, such as Hollywood, still appear to have a liberal bias. As far as much of the public is concerned, neo-conservative commentators are embattled outsiders standing up for ordinary Americans agianst the liberal power elite.
Mnay 'conservative' politicians and media personalities in the U.S are actually more libertarian than conservative. Libertarian thought has had a big impact on North American society over the last twenty years. The works of Ayn Rand, for example, have been among the biggest selling books in America. Unfortunately, centrist critics of libertarian thinking have played into neo-conservative and libertarian hands by highlighting the economic aspects of libertarian thinking rather than its social ideas. Laissez-faire economics has always had a relatively strong following in the United States. As post-war Keynesian economics has become increasingly unworkable the U.S has returned to its historical preference for limited government. Neo-liberalism may not be the best solution to de-industrialisation and inflation but it has at least cured stagflation and tamed some aspects of government spending.
While America has a liberal economic history (albiet with periods of protectionism) its social history is relatively conservative. The U.S, for example, is more religious than most Western countries. Libertarian writers like Ayn Rand may support lower taxes but they also advocate atheism, abortion, unlimitted immigration( except to criminals) and legalised drugs and prostitution- social policies that would horrify most Republican voting Americans. Indeed, if U.S libertarians had their way the current war in Iraq would not have occured, as military interventionism contradicts libertarian philosophy. If the Democrats were as politically savvy as the Republicans they would play on public fears of social libertarianism and use the media to expose the libertarian backgrounds of prominent establishment figures like Alan Greenspan.
It is a huge irony that the key supporters of George Bush's neo-conservative government are working class populists, who suffer neo-liberalism and military expansionism to promote social conservatism- and intellectual libertarians, who sacrifice their social beliefs so as to promote neo-liberalism. The Democrats need to acknowledge that they have lost control of the economy because they have not moderated their social and immigration policies to attract more social conservatives with centrist economic views.
Conservative populism in the developed world appears to be strongest in the United States. In the U.S nearly half the population doesn't vote. Among working class voters that vote, most vote for the Republicans whose tax policies favour the wealthy. Liberals argue that working class Whites don't know their own interests because they are poorly educated or intolerant of minorities, who tend to vote for the Democrats.
No doubt there is intolerance towards minorities in the United States but the U.S also has very high levels of immigration and a low minimum wage. Over a million migrants enter the U.S each year. This level is economically and environmentally unstable and is highly likely to reduce wages and increase rents for low income Whites and Afro-Americans. However, the Democrats appear to have no intention of reducing immigration or seriously improving working conditions for low income workers. Hence, it is not suprising that working class whites have abandoned the Democrats. Many prefer to support the Republicans who at least promise to keep taxes low.
In the rhetoric of economic libertarians working and lower-middle class people who lack a university education are economically redundant. They argue that manual work can be done by machines or workers from the developing world. Knowledge workers or 'symbolic analysts' are today's heroes who richly deserve their much larger pay packets. The working class should either get educated or gratefully accept a low-income service job. However, low income Americans sense that much of this talk is hubris and that many traditional blue collar jobs are still important to society- its a pretty safe beat that a strike among refuse collectors would have more serious consequences than a strike among fast food workers.
The media has also added to the sense of betrayal felt by many of the Democrats' traditional voters. Although the media is largely driven by commercial considerations, rather than a liberal agenda as such, neo-conservative critics believe that it highlights the hypocricy of many prominent liberals. The media has responded by offering neo-conservatives critics a voice through talk radio and print media, thus opening up another lucrative media market. However, the big institutions of the media, such as Hollywood, still appear to have a liberal bias. As far as much of the public is concerned, neo-conservative commentators are embattled outsiders standing up for ordinary Americans agianst the liberal power elite.
Mnay 'conservative' politicians and media personalities in the U.S are actually more libertarian than conservative. Libertarian thought has had a big impact on North American society over the last twenty years. The works of Ayn Rand, for example, have been among the biggest selling books in America. Unfortunately, centrist critics of libertarian thinking have played into neo-conservative and libertarian hands by highlighting the economic aspects of libertarian thinking rather than its social ideas. Laissez-faire economics has always had a relatively strong following in the United States. As post-war Keynesian economics has become increasingly unworkable the U.S has returned to its historical preference for limited government. Neo-liberalism may not be the best solution to de-industrialisation and inflation but it has at least cured stagflation and tamed some aspects of government spending.
While America has a liberal economic history (albiet with periods of protectionism) its social history is relatively conservative. The U.S, for example, is more religious than most Western countries. Libertarian writers like Ayn Rand may support lower taxes but they also advocate atheism, abortion, unlimitted immigration( except to criminals) and legalised drugs and prostitution- social policies that would horrify most Republican voting Americans. Indeed, if U.S libertarians had their way the current war in Iraq would not have occured, as military interventionism contradicts libertarian philosophy. If the Democrats were as politically savvy as the Republicans they would play on public fears of social libertarianism and use the media to expose the libertarian backgrounds of prominent establishment figures like Alan Greenspan.
It is a huge irony that the key supporters of George Bush's neo-conservative government are working class populists, who suffer neo-liberalism and military expansionism to promote social conservatism- and intellectual libertarians, who sacrifice their social beliefs so as to promote neo-liberalism. The Democrats need to acknowledge that they have lost control of the economy because they have not moderated their social and immigration policies to attract more social conservatives with centrist economic views.
Monday, April 10, 2006
The Cult of Managment
Although the cornucopian idea, that technology can solve all the world's problems, seems to be on the wane, a related belief, that management can solve all our problems seems to go largely unquestioned. There are many books and internets sites discussing the down side of technology but few devoted to criticising the excessive claims of modern management (John Ralston Saul's 1992 book 'Voltaires Bastards' being a notable exception) . American economist Thorstein Veblen was one of the first to point out the coming problem with modern management. Veblen argued that as productivity in industrial increases too many people become engaged in unproductive activity- the old problem of too many chiefs and not enough indians.
In the area of environmental conservation fundamentals such as the rate of economic growth, human nature and population levels are treated as secondary to good management. In New Zealand our elites seem to believe that with sufficient managers, lawyers and legislation like the Resource Management Act, problems like supplying enough energy to a rapidly expanding population can be painlessly resolved. Tough choices like forgoing current consumption for future development, spending tax dollars on energy conservation or cutting immigration aren't necessary if we have sufficiently enlightened bureaucracy.
As organisations become more and more management focused they start to erode the 'espirit de corps' that helped make them successful organisations in the first place. Over the past decade the wages of upper management in English speaking countries have increased considerably more than those of workers. Although managers say this is the logical result of a limited supply of good managers in a global market place, they fail to appreciate the effect it is having on worker morale. Productivity levels in most English speaking countries have shown little increase in recent decades and union militancy is beginning to resurface. In contrast wage differentials are much lower in Continental Europe and Japan where productivity levels in corporations are generally quite a lot higher.
The Obssesion with management in English speaking countries is having a bad influence on the developing world. Developing countries need to get the basics right before striving for sophisticated systems of management. This means concentrating on developing law and order, basic education for both sexes, passable roads, reasonable agricultural practices and lower rates of population growth. The fact that many poor countries have very high levels of graduate unemployment yet provide little support for their peasant farmers indicates that the West is still providing the wrong kind of advice and funding through organisations like the World Bank.
According to John Ralston Saul the word 'manager' comes from a French term for someone that does domestic housework. Although management is certainly more demanding than getting out a vacuum cleaner he does have a point- managers maintain existing systems they don't produce or develop anything per se. Actual development requires not so much managers, as 'entreprenuerial technocrats' (for want of a better term) that can generate plans and ideas and get different parties together to produce something new. In New Zealand, such people are conspiciously absent from our current crop of politicans and civil servants. Probably the only conspicious example is Jim Anderton , founder of kiwibank. Not suprisingly, the think tank, The New Zealand Institute describes the frustrating state of the New Zealand economy as the 'tidy management of the status quo'.
The cult of management is in many respects a new version of the old socialist idea, now descredited, of trying to develop a perfect world through politics.
In the area of environmental conservation fundamentals such as the rate of economic growth, human nature and population levels are treated as secondary to good management. In New Zealand our elites seem to believe that with sufficient managers, lawyers and legislation like the Resource Management Act, problems like supplying enough energy to a rapidly expanding population can be painlessly resolved. Tough choices like forgoing current consumption for future development, spending tax dollars on energy conservation or cutting immigration aren't necessary if we have sufficiently enlightened bureaucracy.
As organisations become more and more management focused they start to erode the 'espirit de corps' that helped make them successful organisations in the first place. Over the past decade the wages of upper management in English speaking countries have increased considerably more than those of workers. Although managers say this is the logical result of a limited supply of good managers in a global market place, they fail to appreciate the effect it is having on worker morale. Productivity levels in most English speaking countries have shown little increase in recent decades and union militancy is beginning to resurface. In contrast wage differentials are much lower in Continental Europe and Japan where productivity levels in corporations are generally quite a lot higher.
The Obssesion with management in English speaking countries is having a bad influence on the developing world. Developing countries need to get the basics right before striving for sophisticated systems of management. This means concentrating on developing law and order, basic education for both sexes, passable roads, reasonable agricultural practices and lower rates of population growth. The fact that many poor countries have very high levels of graduate unemployment yet provide little support for their peasant farmers indicates that the West is still providing the wrong kind of advice and funding through organisations like the World Bank.
According to John Ralston Saul the word 'manager' comes from a French term for someone that does domestic housework. Although management is certainly more demanding than getting out a vacuum cleaner he does have a point- managers maintain existing systems they don't produce or develop anything per se. Actual development requires not so much managers, as 'entreprenuerial technocrats' (for want of a better term) that can generate plans and ideas and get different parties together to produce something new. In New Zealand, such people are conspiciously absent from our current crop of politicans and civil servants. Probably the only conspicious example is Jim Anderton , founder of kiwibank. Not suprisingly, the think tank, The New Zealand Institute describes the frustrating state of the New Zealand economy as the 'tidy management of the status quo'.
The cult of management is in many respects a new version of the old socialist idea, now descredited, of trying to develop a perfect world through politics.
Sunday, April 09, 2006
Technology, Resources and Reality
In the 1990s it was argued that globalisation and information technology would create a 'weightless economy' in the West in which manufacturing and farming would be largely obselete and commodities from the developing wolrd would be cheap and abundant. In this brave new world computer literate workers would prosper while manual workers would be largely redundant. The state would also be redundant as flows of information and finance across national borders would be impossible to tax and regulate.
However, the 'weightless, stateless' world theory overlooks four crucial factors- resources, geography, demography and previously accumulated wealth.
In 2006 the weightless economy looks like an increasingly unlikely prospect. The economic boom of the 1990s was initiated by U.S military intervention in Kuwait, and the political collapse in Russia, that lead to a drop in oil prices. In the 21st Century increasing industrialisation in China, India and Vietnam is pushing up oil prices along with prices for many other commodities such as rice, beef, copper, gold, steel and gas. The United States, which is increasingly dependent on foreign energy sources, is also becoming increasingly indebted to overseas creditors.
Although farming and manufacturing employ a relatively small proportion of workers they are still very important to the economies of the West. Revenues from farming in the U.S, Argentina, and Australia have increased significantly in recent years in response to rising demand from China and the Middle East. Although the U.S and Britain have been promoting a shift to a service economy they have also maintained large defence industries to offset the impact of industrial decline in the non-military sector. Meanwhile mining and metal refining is becoming an increasingly important part of the economies of Canada and Australia.
The weightless economy theory also overlooks the wealth the West has accumulated through manufacturing in previous decades. Many people are currently spending inheritances and retirement savings that were built up during the 1950s and 1960s when manufacturing was much stronger. However, rates of personal savings in Western countries are now at historically low levels and today's generation will have little to pass onto their offspring.
Even though capital may be highly mobile, people are not. In a world of 6 billion inhabitants migration is inevitably highly restricted by national governments. Subsequently workers in 'geographically fixed' professions such as construction are protected from overseas competition. Over the last 10 years wages in the buiding trades have increased while many white-collar professionals have struggled to find work with an increasing number of office jobs are being outsourced to India. Only the highest paid managers and technocrats are fully internationally mobile, and even then only between developed countries.
Rather than dying off, governments have actually grown over the last 5 years and this trend looks likely to continue. Security threats from terrorism, contagious diseases and biological pests have recently increased and highlighted areas where state involvement is essential. Organised crime has also grown in tandem with globalisation and prompted the state to increase border and intelligence networks. As the population ages the state is also becoming increasingly important as a provider of health services and pensions in most developed countries.
The state is also providing a vital role in developing the infrastructure for oil and gas extraction. Increasingly long pipelines are now needed to get shrinking oil and gas supplies from isolated regions to where they are needed and this requires considerable inter-state cooperation. The shift to alternative fuels such as hydrogen will require even more state involvement due to the massive long term investment required. Indeed, the development of alternative energy sources may become the largest single government expense of the 21st Century.
However, the 'weightless, stateless' world theory overlooks four crucial factors- resources, geography, demography and previously accumulated wealth.
In 2006 the weightless economy looks like an increasingly unlikely prospect. The economic boom of the 1990s was initiated by U.S military intervention in Kuwait, and the political collapse in Russia, that lead to a drop in oil prices. In the 21st Century increasing industrialisation in China, India and Vietnam is pushing up oil prices along with prices for many other commodities such as rice, beef, copper, gold, steel and gas. The United States, which is increasingly dependent on foreign energy sources, is also becoming increasingly indebted to overseas creditors.
Although farming and manufacturing employ a relatively small proportion of workers they are still very important to the economies of the West. Revenues from farming in the U.S, Argentina, and Australia have increased significantly in recent years in response to rising demand from China and the Middle East. Although the U.S and Britain have been promoting a shift to a service economy they have also maintained large defence industries to offset the impact of industrial decline in the non-military sector. Meanwhile mining and metal refining is becoming an increasingly important part of the economies of Canada and Australia.
The weightless economy theory also overlooks the wealth the West has accumulated through manufacturing in previous decades. Many people are currently spending inheritances and retirement savings that were built up during the 1950s and 1960s when manufacturing was much stronger. However, rates of personal savings in Western countries are now at historically low levels and today's generation will have little to pass onto their offspring.
Even though capital may be highly mobile, people are not. In a world of 6 billion inhabitants migration is inevitably highly restricted by national governments. Subsequently workers in 'geographically fixed' professions such as construction are protected from overseas competition. Over the last 10 years wages in the buiding trades have increased while many white-collar professionals have struggled to find work with an increasing number of office jobs are being outsourced to India. Only the highest paid managers and technocrats are fully internationally mobile, and even then only between developed countries.
Rather than dying off, governments have actually grown over the last 5 years and this trend looks likely to continue. Security threats from terrorism, contagious diseases and biological pests have recently increased and highlighted areas where state involvement is essential. Organised crime has also grown in tandem with globalisation and prompted the state to increase border and intelligence networks. As the population ages the state is also becoming increasingly important as a provider of health services and pensions in most developed countries.
The state is also providing a vital role in developing the infrastructure for oil and gas extraction. Increasingly long pipelines are now needed to get shrinking oil and gas supplies from isolated regions to where they are needed and this requires considerable inter-state cooperation. The shift to alternative fuels such as hydrogen will require even more state involvement due to the massive long term investment required. Indeed, the development of alternative energy sources may become the largest single government expense of the 21st Century.
The Aging Society
What are the likely effects of an aging populaton in New Zealand?
Many economists, such as Gareth Morgan, are painting a pretty gloomy picture of New Zealand's economy as the population ages with the retirement of the baby boomer generation. However, the reality could be very mixed, some possible positive effects could be-
Low unemployment- an aging population will reduce competition for jobs and create new jobs in healthcare and domestic services
Higher productivity- a shortage of workers will provide greater incentives for businesses to increase productivity, without increasing unemployment
Decreased pollution- elderly people tend to be more frugal, eat less and drive smaller cars
More equality- labour shortages will drive up wages for manual workers
A happier population- increased equality will reduce feelings of relative deprivation
Lower crime- the elderly commit less crime and have lower rates of drug abuse.
Offsetting these positive changes could be-
Lower Growth- the elderly will spend less and companies won't have enough labour for expansion
Higher Taxes- to pay for pensions and health care
Reduced spending on government services- governments may have to spend less on transport, education and some social services to pay for pensions and elderly healthcare
Inflation- wages may increase excessively as workers perceive their strong bargaining position and unions get greedy. Also, certain products and services may be in short supply.
Economic instability- massive amounts of pension savings chasing after high returns in emerging markets may destabilise the global economy.
Within the workplace the effects of an aging population are alos likely to be very variable. In jobs requiring new technology older workers tend to make more mistakes and are reluctant to work overtime. Younger workers are generally more enthusiastic and hard working in most other professions. However, in white-collar professions older workers are often superior, they tend to have more common sense and have an aversion to hubris and political correctness (valuable qualities in the present era!).
Given that the impact of an aging population is so hard to determine it seems unwise to resort to the radical step of large scale immigration to try and 'solve' the problem. Immigraton can only postpone the inevitablity of an aging population. We should accept that the population is aging and start preparing for it rather than trying to avoid it.
Many economists, such as Gareth Morgan, are painting a pretty gloomy picture of New Zealand's economy as the population ages with the retirement of the baby boomer generation. However, the reality could be very mixed, some possible positive effects could be-
Low unemployment- an aging population will reduce competition for jobs and create new jobs in healthcare and domestic services
Higher productivity- a shortage of workers will provide greater incentives for businesses to increase productivity, without increasing unemployment
Decreased pollution- elderly people tend to be more frugal, eat less and drive smaller cars
More equality- labour shortages will drive up wages for manual workers
A happier population- increased equality will reduce feelings of relative deprivation
Lower crime- the elderly commit less crime and have lower rates of drug abuse.
Offsetting these positive changes could be-
Lower Growth- the elderly will spend less and companies won't have enough labour for expansion
Higher Taxes- to pay for pensions and health care
Reduced spending on government services- governments may have to spend less on transport, education and some social services to pay for pensions and elderly healthcare
Inflation- wages may increase excessively as workers perceive their strong bargaining position and unions get greedy. Also, certain products and services may be in short supply.
Economic instability- massive amounts of pension savings chasing after high returns in emerging markets may destabilise the global economy.
Within the workplace the effects of an aging population are alos likely to be very variable. In jobs requiring new technology older workers tend to make more mistakes and are reluctant to work overtime. Younger workers are generally more enthusiastic and hard working in most other professions. However, in white-collar professions older workers are often superior, they tend to have more common sense and have an aversion to hubris and political correctness (valuable qualities in the present era!).
Given that the impact of an aging population is so hard to determine it seems unwise to resort to the radical step of large scale immigration to try and 'solve' the problem. Immigraton can only postpone the inevitablity of an aging population. We should accept that the population is aging and start preparing for it rather than trying to avoid it.
Now is the Time
With both Labour and New Zealand First now talking about increasing the minimum wage to 12 dollars per hour it is an excellent time to reopen the debate about introducing a compulsory savings scheme.
The argument in favour of increasing the minimum wage is based on the idea that higher wages will force companies to invest in more labour saving technology that will increase productivty. New Zealand wages over the last few years have increased slightly but this rise has been cancelled out by rising fuel and property prices. The reason why the debate has currently been gaining ground is because of high levels of migration to Australia, which is managing to maintain a strong economy despite high minimum wage levels.
While a higher minimum wage increases productivity it could also lead to significant problems with inflation and trade imbalances. Giving workers more money in the hand won't do much for the national economy if the money is spend on imports and property. After all, wages have increased significantly over the last few years but this has only resulted in a further widening of the gap between wages and property prices.
If the government increases the minimum wage to 12 dollars per hour it should make workers pay some of this increase into a compulsory savings scheme. This would help keep inflation down and allow the government to lower interest rates and thus help local businesses expand. Furthermore, New Zealand would increase its levels of overseas investment and subsequetly benefit from higher growth in Asian markets.
New Zealanders are notoriously poor savers and this is made worse by easy access to consumer credit. Also, lower income workers simpy won't save anything unless the minimum wage is increased and they are forced to contribute to a compulsory savings scheme. In our increasingly decadent consumer society a national commitment to saving may also have a positive impact on our social values and attitudes.
Critics of compulsory savings schemes quibble over minor problems with such schemes overseas. Certainly there is no such thing as a perfect scheme but there are many proven shcemes from countries such as Singapre and Australia. The key point is that the benefits of compulsory saving outweigh the disadvantages, especially for low and middle income earners. High income earners with substantial investments are a relatively small proportion of the population and schemes can be modified to allow them to opt out.
Pragmatic countries like Singapore simply wouldn't introduce compulsory savings schemes if they didn't make sense.
The argument in favour of increasing the minimum wage is based on the idea that higher wages will force companies to invest in more labour saving technology that will increase productivty. New Zealand wages over the last few years have increased slightly but this rise has been cancelled out by rising fuel and property prices. The reason why the debate has currently been gaining ground is because of high levels of migration to Australia, which is managing to maintain a strong economy despite high minimum wage levels.
While a higher minimum wage increases productivity it could also lead to significant problems with inflation and trade imbalances. Giving workers more money in the hand won't do much for the national economy if the money is spend on imports and property. After all, wages have increased significantly over the last few years but this has only resulted in a further widening of the gap between wages and property prices.
If the government increases the minimum wage to 12 dollars per hour it should make workers pay some of this increase into a compulsory savings scheme. This would help keep inflation down and allow the government to lower interest rates and thus help local businesses expand. Furthermore, New Zealand would increase its levels of overseas investment and subsequetly benefit from higher growth in Asian markets.
New Zealanders are notoriously poor savers and this is made worse by easy access to consumer credit. Also, lower income workers simpy won't save anything unless the minimum wage is increased and they are forced to contribute to a compulsory savings scheme. In our increasingly decadent consumer society a national commitment to saving may also have a positive impact on our social values and attitudes.
Critics of compulsory savings schemes quibble over minor problems with such schemes overseas. Certainly there is no such thing as a perfect scheme but there are many proven shcemes from countries such as Singapre and Australia. The key point is that the benefits of compulsory saving outweigh the disadvantages, especially for low and middle income earners. High income earners with substantial investments are a relatively small proportion of the population and schemes can be modified to allow them to opt out.
Pragmatic countries like Singapore simply wouldn't introduce compulsory savings schemes if they didn't make sense.
Saturday, April 08, 2006
Conservative Populism in the U.S and N.Z
Over the last 30 years many working and lower-middle class Amercians that previously supported the Democrat Party have now switched allegiance to the Republicans. According to Thomas Frank in Whats the Matter with America these 'populist' voters are largely oblivious to economic issues and vote with the Republicans on social issues like abortion to spite the nation's liberal elites. In so doing they have allowed economic policy to shift further to the right. According to Frank, the primary reason for this change in voting behaviour has been a misguided policy by the Democrats to appeal to white-collar liberals over traditional blue-collar voters.
Since 1984 the New Zealand Labour Party has shifted to the right on economic policy whilst trying to appeal to white-collar liberals through its 'Nuclear Free' policy as well various social reforms in areas like gay rights. During this time voter turnout has declined as increasing numbers of voters have become disillusioned with the two main parties. However, it is only in the last few years that a conservative populist backlash along U.S lines had started to occur. The emergence of Destiny Church and the urban/rural split in the 2005 election are a direct reaction to the social policy initatives of Labour's second term. Perhaps even more significantly, the new urban/rural devide looks very similar to the coastal/hinterland divide in the U.S.
At the start of 2005 Labour was in a strong position with little support for National's economic proposals. However, Labour stuck its neck out with some controversial policy initatives such a proposal to legalise prostitution. Come election time and Labour received a sound thrashing in the provinces, including some previously safe seats like Palmerston North. Although Labour recovered to win the election by a narrow margin it duly took notice of the conservative backlash by turning to the centre parties, New Zealand First and United Future, at the expense of the more fancied centre-left Greens.
Since New Zealand has followed so many U.S fashions in recent years, from credit cards to personalised number plates and cheerleaders, it seems likely it will develop some backlash fashions from the U.S as well. Hopefully the Labour Party, unlike the U.S Democrats, will start to pay some attention to working and lower-middle class voters who are suspicious of progressive social policies.
Since 1984 the New Zealand Labour Party has shifted to the right on economic policy whilst trying to appeal to white-collar liberals through its 'Nuclear Free' policy as well various social reforms in areas like gay rights. During this time voter turnout has declined as increasing numbers of voters have become disillusioned with the two main parties. However, it is only in the last few years that a conservative populist backlash along U.S lines had started to occur. The emergence of Destiny Church and the urban/rural split in the 2005 election are a direct reaction to the social policy initatives of Labour's second term. Perhaps even more significantly, the new urban/rural devide looks very similar to the coastal/hinterland divide in the U.S.
At the start of 2005 Labour was in a strong position with little support for National's economic proposals. However, Labour stuck its neck out with some controversial policy initatives such a proposal to legalise prostitution. Come election time and Labour received a sound thrashing in the provinces, including some previously safe seats like Palmerston North. Although Labour recovered to win the election by a narrow margin it duly took notice of the conservative backlash by turning to the centre parties, New Zealand First and United Future, at the expense of the more fancied centre-left Greens.
Since New Zealand has followed so many U.S fashions in recent years, from credit cards to personalised number plates and cheerleaders, it seems likely it will develop some backlash fashions from the U.S as well. Hopefully the Labour Party, unlike the U.S Democrats, will start to pay some attention to working and lower-middle class voters who are suspicious of progressive social policies.
The Irrationality of New Zealand's Green Party
If the Green Party is anything to go by, environmetalism in New Zealand is in a sorry state. Perhaps the most glaring weakness in the Green's proposals is a total lack of any population policy. Surely if the Greens are really concerned with New Zeland's environment they should adopt a policy of limited immigration. Instead, they seem to be more concerned with the political rights of immigrants from dubious backgrounds such as Ahkmed Zouei. If New Zealand expects to survive as a first world country in an over-populated world it is going to have to turn away a lot of refugees. The Greens must abandon their outdated, marxist attitude to immigration.
The Greens also display a muddled attitude to transport issues. If it is so logical to spend less on roads, as the Greens argue, then why are the environmentally conscious Scandinavian countries spending more on roads? The fact is that even if petrol price scarcity reduces the number of petrol powered cars on the road we will still rely on roads as our primary surface for travel, whether for cars or scooters, bicycles and buses. Good quality roads reduce travel times and also save petrol, vehicle wear and tear, aid cyclists and reduce road fatalities. Why not upgrade our roads now before tarmac also becomes too expensive for large scale projects - it may be the last chance we get. The Greens would be better promoting bio-fuels that could reduce our CO2 emissions, create jobs and save on costly petroleum imports. Another ill-conceived proposal advocated by the Greens is increasing the tax on diesel. Clearly the Greens do not realise that diesel is a much better fuel than petrol, hence its popularity in Europe where fuel is more expensive.
In their claims for wind power the Greens are guilty of the sort of technological utopianism usually associatedwith the Act Party. Wind power is a useful adjunct to other forms of energy production but can only supply a small proportion of the nation's total energy requirements- wind can't power the Camalco Smelter for example. Only in the lower North Island (which is particularly windy!) can wind make a serious contribution to energy needs.
Job creation strategies are also absent from the Greens policies. Under the Greens, income tax would be raised while businesses would receive no R and D assistance to compensate them for a raft of new environmental regulations. However, most leading environmental economists believe that income taxes should be lowered at the same time that environmental taxes are increased. This would increase employment and give the Greens a better image among voters. Why should people vote for the Greens if their policies are going to put them out of work?
The Greens also display a muddled attitude to transport issues. If it is so logical to spend less on roads, as the Greens argue, then why are the environmentally conscious Scandinavian countries spending more on roads? The fact is that even if petrol price scarcity reduces the number of petrol powered cars on the road we will still rely on roads as our primary surface for travel, whether for cars or scooters, bicycles and buses. Good quality roads reduce travel times and also save petrol, vehicle wear and tear, aid cyclists and reduce road fatalities. Why not upgrade our roads now before tarmac also becomes too expensive for large scale projects - it may be the last chance we get. The Greens would be better promoting bio-fuels that could reduce our CO2 emissions, create jobs and save on costly petroleum imports. Another ill-conceived proposal advocated by the Greens is increasing the tax on diesel. Clearly the Greens do not realise that diesel is a much better fuel than petrol, hence its popularity in Europe where fuel is more expensive.
In their claims for wind power the Greens are guilty of the sort of technological utopianism usually associatedwith the Act Party. Wind power is a useful adjunct to other forms of energy production but can only supply a small proportion of the nation's total energy requirements- wind can't power the Camalco Smelter for example. Only in the lower North Island (which is particularly windy!) can wind make a serious contribution to energy needs.
Job creation strategies are also absent from the Greens policies. Under the Greens, income tax would be raised while businesses would receive no R and D assistance to compensate them for a raft of new environmental regulations. However, most leading environmental economists believe that income taxes should be lowered at the same time that environmental taxes are increased. This would increase employment and give the Greens a better image among voters. Why should people vote for the Greens if their policies are going to put them out of work?
Immigration in New Zealand
In the early 1990s the National government embarked on a policy of wealth-based immigration without a popular mandate. This policy was continued by the subsequent Labour adminstration. During this time the population of the country rose from 3.3 million to 4 milion. Although this led to increased growth for a time it has also worsened labour shortages and has done little to reduce inequality or solve the nation's balance of payment problems.
Further rapid immigration is likely to present new problems. The country's neglected transport infrastructure is struggling to cope with increased levels of traffic while the energy infrastructure will have to be expanded - this means more dams and coal fired power stations, since wind power alone will not provide enough electricity. The larger New Zealand's population becomes, the bigger the environmental impact will be. Bio-security measures are already beginning to fall apart with environmental agencies failing to contain imported pests like sea squirts.
The New Zealand economy relies on five key sources of income; farming, fishing, tourism, education and metal refining. None of these sectors are particularly labour intensive and several are likely to be adversely affected by a substantial population increase. Tourists won't come to see suburban sprawl instead of scenery while aluminium refining (a vital foreign exchange earner) could get the chop if population growth leads to a big increase in power consumption. Valuable arable land is also disappearing under new housing subdivisions at a time when agricultural commodity prices are set to increase, perhaps drammatically. New Zealand's wild fisheries are already fully exploited with most species in decline. A bigger population will only see more commercial and recreational fishermen fighting over a rapidly shrinking resource.
To the extent that New Zealand does need economic immigration it should be limited to skill-based immigration. The country does need more technically savvy workers to make it more energy efficient, revitalise its depleted transport infrastructure, and increase the level of value-added exports. Wealth-based immigration has led to a drammatic rise in house prices without a corresponding increase in wages. This has forced many people under 40 out of the housing market altogether- this will lead to serious intergenerational inequalities in the future.
In the coming age of resoure scarcity and global over population New Zealand should try to preserve its status as a resource rich country by firmly limiting immigration. At the very least it should abandon the 19th Century policy of using immigration as the primary means to stimulate economic development.
Further rapid immigration is likely to present new problems. The country's neglected transport infrastructure is struggling to cope with increased levels of traffic while the energy infrastructure will have to be expanded - this means more dams and coal fired power stations, since wind power alone will not provide enough electricity. The larger New Zealand's population becomes, the bigger the environmental impact will be. Bio-security measures are already beginning to fall apart with environmental agencies failing to contain imported pests like sea squirts.
The New Zealand economy relies on five key sources of income; farming, fishing, tourism, education and metal refining. None of these sectors are particularly labour intensive and several are likely to be adversely affected by a substantial population increase. Tourists won't come to see suburban sprawl instead of scenery while aluminium refining (a vital foreign exchange earner) could get the chop if population growth leads to a big increase in power consumption. Valuable arable land is also disappearing under new housing subdivisions at a time when agricultural commodity prices are set to increase, perhaps drammatically. New Zealand's wild fisheries are already fully exploited with most species in decline. A bigger population will only see more commercial and recreational fishermen fighting over a rapidly shrinking resource.
To the extent that New Zealand does need economic immigration it should be limited to skill-based immigration. The country does need more technically savvy workers to make it more energy efficient, revitalise its depleted transport infrastructure, and increase the level of value-added exports. Wealth-based immigration has led to a drammatic rise in house prices without a corresponding increase in wages. This has forced many people under 40 out of the housing market altogether- this will lead to serious intergenerational inequalities in the future.
In the coming age of resoure scarcity and global over population New Zealand should try to preserve its status as a resource rich country by firmly limiting immigration. At the very least it should abandon the 19th Century policy of using immigration as the primary means to stimulate economic development.
Friday, April 07, 2006
The Hubris of the Education Sector
For some reason English-speaking countries excel at generating hubris in regards to the education sector. The central governments of Australia, New Zealand and Great Britian are constantly engaged in questionable reforms to fulfil the needs of the 'knowledge economy' (whatever that means). In many respects these countries would be better served by down playing the commercial value of education and instead providing students with honest advice about the benefits and limitations of education.
In the 1980s students were advised that manual work was becoming a thing of the past and that students with high education levels were invariably more likely to obtain higher paying jobs. This was in line with government policy that discouraged teenagers from taking up practical apprenticeships. The result has been a labour shortage in manual trades and a surplus of tertiary graduates. By falling for the hype of corporate managers and academics, that have talked up the 'knowledge economy', the governments of English-speaking countries have helped create major structural problems with their economies which will be difficult to reverse.
University graduates have also had a very difficult time finding work because of the competition between the sexes that has arisen in recent decades. In the social sciences humanities and biology, for example, females now outnumber males by a sizeable margin. Subsequently, competition for suitable jobs is intense and many, if not most, lose out. In the 1960s for example, many males arts graduates from working class backgrounds moved up into good white collar jobs. Today, many male graduates from working and lower middles backgrounds are moving back down into manual work. Similarly, although there has been some occupational mobility among women, this has been offset by big problems in paying off student debt. All this should have been highly predicatable to policy advisers but students going through the education system have been given little warning.
Despite all the reforms initiated by central government basic education standards have fell. More students are finishing school with poor writing skills and weaknesses in basic mathematics. Knowledge of history, geography and hands on science is also declining. Teachers repeatedly deny falling standards but students who look at their parents old school books know better. Modern educators believe teaching facts is unimportant but students can't move onto theory until they have an established body of facts and skills to work with. By all means give a rationale for teaching facts and skills but don't dismiss them as unimportant. Spending on manual skills training is also declining (I certainly remember the metal workshop at my school in the 1980s sitting idol for long periods of time). In countries like Australia and New Zealand a lot of money tends to be put into sports facilities yet only the gifted athletes seem to getting any physical exercise.
If the government's real aim is to increase education standards they could easily follow proven methods from North European countries where basic education standards are higher. Instead they have followed a muddled combination of political correctness and commercialisation. Teaching to children under 16 is often made impossible by discipline restrictions in which teachers are not even allowed to raise their voice in a forceful manner. Market populism reigns in the universities where subjects like American studies receive significant funding despite being neither intellectually or commercially useful. Although left-wing critics are right to point out that struggling students need more support than successful students, they overlook the fact that most students are strong in some areas and weak in others, yet as far as I know, subject based streaming is almost never used in public schools in English speaking countries.
Perhaps the worst aspect of modern education is commercially driven dishonesty. As tertiary institutions have become semi-commercial enterprises, in competition with one another, the needs of the institution have taken precedence over those of the student. Faculties market their subjects in a flattering light and give misleading information about how any graduates find work through their programmes. Similarly, many vocational courses are paded out with unnecessary theory that is not needed for entry-level positions. If governments persist in commercialising education they should at least set up well funded independent agencies to give students real advice about career choices and courses.
At the heart of the hubris surronding education is the outdated belief that education is the key to a nation's economic and social problems. Education can't kick start an industrial revolution, reduce inequality or get a country out of a prolonged recession. If education could do these things Japan and Germany wouldn't be in recession and Russia would be economically equal to the West. Education is only one in a number of factors in economic success and social stability. By over-stating the power of education today's elites make it harder for teachers to actually teach. Teachers are often harassed by neurotic parents and over-bearing civil servants that clamour for incessant reforms. This discourages many of the best teachers from staying in the profession and encourages schools too over assess students and cram too many subjects into the curriculum.
Education should be focused on getting the basics right at the secondary level, promoting high academic standards and discussion in universities, and praciticality in vocational colleges. The drive towards commericalisation and premature specialisation has left many students ill-equiped for the workforce and perhaps more importantly, without the skills or direction to address the mistakes made by today's elites.
Note to any American readers: American studies, as taught in New Zealand and the U.K is a post-modern pop culture course rather than a traditional history course.
In the 1980s students were advised that manual work was becoming a thing of the past and that students with high education levels were invariably more likely to obtain higher paying jobs. This was in line with government policy that discouraged teenagers from taking up practical apprenticeships. The result has been a labour shortage in manual trades and a surplus of tertiary graduates. By falling for the hype of corporate managers and academics, that have talked up the 'knowledge economy', the governments of English-speaking countries have helped create major structural problems with their economies which will be difficult to reverse.
University graduates have also had a very difficult time finding work because of the competition between the sexes that has arisen in recent decades. In the social sciences humanities and biology, for example, females now outnumber males by a sizeable margin. Subsequently, competition for suitable jobs is intense and many, if not most, lose out. In the 1960s for example, many males arts graduates from working class backgrounds moved up into good white collar jobs. Today, many male graduates from working and lower middles backgrounds are moving back down into manual work. Similarly, although there has been some occupational mobility among women, this has been offset by big problems in paying off student debt. All this should have been highly predicatable to policy advisers but students going through the education system have been given little warning.
Despite all the reforms initiated by central government basic education standards have fell. More students are finishing school with poor writing skills and weaknesses in basic mathematics. Knowledge of history, geography and hands on science is also declining. Teachers repeatedly deny falling standards but students who look at their parents old school books know better. Modern educators believe teaching facts is unimportant but students can't move onto theory until they have an established body of facts and skills to work with. By all means give a rationale for teaching facts and skills but don't dismiss them as unimportant. Spending on manual skills training is also declining (I certainly remember the metal workshop at my school in the 1980s sitting idol for long periods of time). In countries like Australia and New Zealand a lot of money tends to be put into sports facilities yet only the gifted athletes seem to getting any physical exercise.
If the government's real aim is to increase education standards they could easily follow proven methods from North European countries where basic education standards are higher. Instead they have followed a muddled combination of political correctness and commercialisation. Teaching to children under 16 is often made impossible by discipline restrictions in which teachers are not even allowed to raise their voice in a forceful manner. Market populism reigns in the universities where subjects like American studies receive significant funding despite being neither intellectually or commercially useful. Although left-wing critics are right to point out that struggling students need more support than successful students, they overlook the fact that most students are strong in some areas and weak in others, yet as far as I know, subject based streaming is almost never used in public schools in English speaking countries.
Perhaps the worst aspect of modern education is commercially driven dishonesty. As tertiary institutions have become semi-commercial enterprises, in competition with one another, the needs of the institution have taken precedence over those of the student. Faculties market their subjects in a flattering light and give misleading information about how any graduates find work through their programmes. Similarly, many vocational courses are paded out with unnecessary theory that is not needed for entry-level positions. If governments persist in commercialising education they should at least set up well funded independent agencies to give students real advice about career choices and courses.
At the heart of the hubris surronding education is the outdated belief that education is the key to a nation's economic and social problems. Education can't kick start an industrial revolution, reduce inequality or get a country out of a prolonged recession. If education could do these things Japan and Germany wouldn't be in recession and Russia would be economically equal to the West. Education is only one in a number of factors in economic success and social stability. By over-stating the power of education today's elites make it harder for teachers to actually teach. Teachers are often harassed by neurotic parents and over-bearing civil servants that clamour for incessant reforms. This discourages many of the best teachers from staying in the profession and encourages schools too over assess students and cram too many subjects into the curriculum.
Education should be focused on getting the basics right at the secondary level, promoting high academic standards and discussion in universities, and praciticality in vocational colleges. The drive towards commericalisation and premature specialisation has left many students ill-equiped for the workforce and perhaps more importantly, without the skills or direction to address the mistakes made by today's elites.
Note to any American readers: American studies, as taught in New Zealand and the U.K is a post-modern pop culture course rather than a traditional history course.
Thursday, April 06, 2006
The End of The Free Lunch
Over the last twenty years the people of Britain, New Zealand and the United States have been living beyond their means and have been persistently lied to by their political leaders and economic journalists. The essential lie is that there is, contrary to common sense, such a thing as a free lunch - you can live off the industry of others without saving or producing. However this free lunch is soon likely to end.
The U.S and Britain have had a crutch that allowed them to survive de-indutrialisation in the 1980s - cheap oil and gas. However, both countries domestic supplies are now declining rapidly. The Bush administration's bold attempt to grab Iraq's oil has succeeded but only at a huge political and economic cost. Furthermore, the ongoing cost of maintaining steady oil flows means that cheap oil from Iraq is now a thing of the past in any case.
The negative economic impact of industrial decline in the U.S has been temporarily countered by massive borrowing, running down savings and inheritances, and slashing the wages of unskilled and semi-skilled workers. Subsequently, the middle classes have found plenty of money to splash out on cheap Asian imports and European luxuries. However, trade deficits and personal debt have continued to rise.
Even though most people in English speaking countries have been comparatively unproductive many still work very long hours. This fuels the illusion that their economies are healthy. Surely if people are working hard they must be paying their way. However, workers haven't been rewarded according to how much they produce. CEOs have been often been awarded huge pay packets for their ability to accumulate wealth, not for producing it.
At present the U.S economy is propped up by massive Asian investment which helps keep interst rates low and consumer demand high. However, a fall in foreign investment will put big pressure on interest rates. The rapid aging of Japan, and in another 15 years China, will mean that investors from these countries will be cashing in their savings to pay for retirement. Hence, the U.S will not be able to rely on Asian investment for much longer.
In contrast high interest rates have been a prominent feature of economic stagnation in New Zealand. U.S style financial deregulation has contributed to poor savings rates and high public and private debt, which in turn has led to chronically high interest rates. This has enriched parts of the financial sector while speeding the decline of manufacturing. Meanwhile foreign investors have been busy buying up real estate or investing in the dollar rather than investing in productive businesses.
Besides rising oil and gas prices the English speaking countries will soon be hit by the cost of a rapidly aging population. Although all the developed countries are aging rapidly, the English speaking countries (apart from Australia) have fewer savings, higher debt levels, and are more de-industrialised than countires like Japan and Germany. With most people employed in services it will be difficult to raise productivity levels and generate sufficient income to pay for rising health and pension costs.
The superior performance of the English speaking economies over the last 15 years has largely been an illusion. Low real growth is a fact of life in most of the develped world, not just in Continental Europe and Japan. Australia, which has maintained relatively high levels of savings and investment, is one of the few countries in a reasonably strong position.
Suggested Reading: William Bonner, Empire of Debt: The rise of a financial crisis. 2005. Also check out some of the economic articles in American Conservative Online.
The U.S and Britain have had a crutch that allowed them to survive de-indutrialisation in the 1980s - cheap oil and gas. However, both countries domestic supplies are now declining rapidly. The Bush administration's bold attempt to grab Iraq's oil has succeeded but only at a huge political and economic cost. Furthermore, the ongoing cost of maintaining steady oil flows means that cheap oil from Iraq is now a thing of the past in any case.
The negative economic impact of industrial decline in the U.S has been temporarily countered by massive borrowing, running down savings and inheritances, and slashing the wages of unskilled and semi-skilled workers. Subsequently, the middle classes have found plenty of money to splash out on cheap Asian imports and European luxuries. However, trade deficits and personal debt have continued to rise.
Even though most people in English speaking countries have been comparatively unproductive many still work very long hours. This fuels the illusion that their economies are healthy. Surely if people are working hard they must be paying their way. However, workers haven't been rewarded according to how much they produce. CEOs have been often been awarded huge pay packets for their ability to accumulate wealth, not for producing it.
At present the U.S economy is propped up by massive Asian investment which helps keep interst rates low and consumer demand high. However, a fall in foreign investment will put big pressure on interest rates. The rapid aging of Japan, and in another 15 years China, will mean that investors from these countries will be cashing in their savings to pay for retirement. Hence, the U.S will not be able to rely on Asian investment for much longer.
In contrast high interest rates have been a prominent feature of economic stagnation in New Zealand. U.S style financial deregulation has contributed to poor savings rates and high public and private debt, which in turn has led to chronically high interest rates. This has enriched parts of the financial sector while speeding the decline of manufacturing. Meanwhile foreign investors have been busy buying up real estate or investing in the dollar rather than investing in productive businesses.
Besides rising oil and gas prices the English speaking countries will soon be hit by the cost of a rapidly aging population. Although all the developed countries are aging rapidly, the English speaking countries (apart from Australia) have fewer savings, higher debt levels, and are more de-industrialised than countires like Japan and Germany. With most people employed in services it will be difficult to raise productivity levels and generate sufficient income to pay for rising health and pension costs.
The superior performance of the English speaking economies over the last 15 years has largely been an illusion. Low real growth is a fact of life in most of the develped world, not just in Continental Europe and Japan. Australia, which has maintained relatively high levels of savings and investment, is one of the few countries in a reasonably strong position.
Suggested Reading: William Bonner, Empire of Debt: The rise of a financial crisis. 2005. Also check out some of the economic articles in American Conservative Online.
Wednesday, April 05, 2006
The Iraq War - Incompetence not Cunning
Left-wing critics of the war in Iraq, such as Noam Chomsky, have criticised the Bush administration for being ruthless and Machiavellian in its decision to go to war. They argue that Bush's goal was to drive down global oil prices by capturing Iraq's oil fields and forcing the country to increase its oil exports. Eventually, this would allow the U.S to control most of the world's accessible oil and give it an unassailable economic advantage over competitors like China for many decades.
While I agree that securing Iraqi oil and increasing the U.S presence in the Middle-East were the primary reasons for American involvement, I think the Bush administration was far from ruthlessly calculating in its decision to go to war and in its conduct of the campaign. In going to war without U.N support, Bush has shown himself to be naively optimistic. Since his advisers had no plan for the reconstruction of Iraq they thought it would be relatively easy to create a favourable democratic regime and get oil steadily flowing again.
However, after three years oil prices have increased significantly while oil flows are still below pre-war levels. Clearly the Bush administration has underestimated the difficulty of reconstructing the Iraqi State and protecting oil installations from sabotage.
In the First Gulf War there was a clearly thought out rationale for intervention- stopping Iraq from capturing foreign oil supplies and then using increased oil prices to fund military expansionism. Since the U.S, and U.S culture is widely hated in the Middle East, it is only sensible for America to intervene militarily when its Allies are actually attacked, or if global oil supplies are disrupted on a massive scale due to military unrest. Since the costs of military intervention are so large, intervention can only be justified from a self-interest pespective when there is a truly serious threat to U.S interests.
The neoconservative philosophy of pre-emptive attack and regime change is wishful fantasy, not realipolitik. The world is too complex and too disfunctional to be remodelled in America's image.
Bush made a serious mistake in deciding to give U.K and U.S companies public preference for reconstruction contracts. This has only served to further alienate the Europeans and increase anti-American feeling in the Middle-East. If Bush were a cold, calculating pragmatist he wouldn't make such an obvious blunder as this.
The United States has only limited experience policing fractured states and its military is mainly designed for blitzreig type operations. American army equipment tends to lack durability and U.S tanks and planes are ludicrously expensive to run. Countries like France are probably superior to the U.S in occupation operations. Hence, the Americans would have been wise to try and get countries like France involved in the reconstruction process.
With the U.S occupation of Iraq now causing increasing problems with Iran, the original 'Machiavellian' goal of cheap, secure oil, now looks even more utopian.
-For some spectical, conservative opinions on the war in Iraq check out the American Conservative website.
While I agree that securing Iraqi oil and increasing the U.S presence in the Middle-East were the primary reasons for American involvement, I think the Bush administration was far from ruthlessly calculating in its decision to go to war and in its conduct of the campaign. In going to war without U.N support, Bush has shown himself to be naively optimistic. Since his advisers had no plan for the reconstruction of Iraq they thought it would be relatively easy to create a favourable democratic regime and get oil steadily flowing again.
However, after three years oil prices have increased significantly while oil flows are still below pre-war levels. Clearly the Bush administration has underestimated the difficulty of reconstructing the Iraqi State and protecting oil installations from sabotage.
In the First Gulf War there was a clearly thought out rationale for intervention- stopping Iraq from capturing foreign oil supplies and then using increased oil prices to fund military expansionism. Since the U.S, and U.S culture is widely hated in the Middle East, it is only sensible for America to intervene militarily when its Allies are actually attacked, or if global oil supplies are disrupted on a massive scale due to military unrest. Since the costs of military intervention are so large, intervention can only be justified from a self-interest pespective when there is a truly serious threat to U.S interests.
The neoconservative philosophy of pre-emptive attack and regime change is wishful fantasy, not realipolitik. The world is too complex and too disfunctional to be remodelled in America's image.
Bush made a serious mistake in deciding to give U.K and U.S companies public preference for reconstruction contracts. This has only served to further alienate the Europeans and increase anti-American feeling in the Middle-East. If Bush were a cold, calculating pragmatist he wouldn't make such an obvious blunder as this.
The United States has only limited experience policing fractured states and its military is mainly designed for blitzreig type operations. American army equipment tends to lack durability and U.S tanks and planes are ludicrously expensive to run. Countries like France are probably superior to the U.S in occupation operations. Hence, the Americans would have been wise to try and get countries like France involved in the reconstruction process.
With the U.S occupation of Iraq now causing increasing problems with Iran, the original 'Machiavellian' goal of cheap, secure oil, now looks even more utopian.
-For some spectical, conservative opinions on the war in Iraq check out the American Conservative website.
The Rise of the Resource Rich Periphery
There is currently a lot of talk about about a looming global recession due to U.S indebtedness and rising oil prices. However, economic growth in China and India is also causing a rise in commodity prices that is boosting the economies of resource rich counties such as Russia, Argentina, Chile, Brazil, Australia and Saudi Arabia. In the 1980s and 1990s many resource rich countries including Russia, Argentian, New Zealand and Canada suffered serious economic decline as commodity prices plummeted due to overproduction and insufficient demand. However, the process of industrialisation and population growth has now taken up much of the slack in world commodity markets.
With most industrial production now shifting to China, India and South-East Asia, heavily populated industrial countries like Germany and Japan are stuck in ongoing recessions. Great Britain defied the odds in the 1990s by managing to run its economy primarily on financial services. However, now that North Sea oil and gas are running out the U.K also appears to be sliding into a prolonged recession- as Karl Mark once pointed out, all wealth ultimately comes from production. In contrast, countries like Canada, Argentina and Australia, with smaller populations and greater reserves of natural resources, are less affected by industrial decline.
In the 1990s Canada and New Zealand maintained economic growth through wealth based immigration- bringing in wealthy immigrants to encourage a spending boom in property. However, in the 21st Century such a short-term solution is likely to back-fire. Large numbers of immigrants will consume resources that the world needs to survive on and which resource rich countries need to trade for essential manufactured goods. Consumption patterns in developed resource rich countries like Canada and Australia are also more extravagant than in densely populated developed countries like Japan and Holland. Hence, large scale-immigration into Australia and Canada will have an adverse effect on such things as global co2 emissions.
From a military perspective the resource rich countries will become tempting targets for invasion and piracy. Australia and New Zealand are dangeroulsy isolated in the South Pacific and vulnerable to attack from resource hungry Asian neighbours- especially with the U.S unable to maintain current levels of defence spending. As a result it is likely that Australia, Canada and parts of South America will increase their defence spending and become more assertive in global politics in the coming decades. With German technology the Russian Federation will also become a much stronger military power as it tries to deter Chinese intervention in Central Asia.
The current dominance of the United States and Britain is now being challanged by an industrially powerful China and a countervailing assortment of resource-rich nations that are feeding off Asian economic growth.
With most industrial production now shifting to China, India and South-East Asia, heavily populated industrial countries like Germany and Japan are stuck in ongoing recessions. Great Britain defied the odds in the 1990s by managing to run its economy primarily on financial services. However, now that North Sea oil and gas are running out the U.K also appears to be sliding into a prolonged recession- as Karl Mark once pointed out, all wealth ultimately comes from production. In contrast, countries like Canada, Argentina and Australia, with smaller populations and greater reserves of natural resources, are less affected by industrial decline.
In the 1990s Canada and New Zealand maintained economic growth through wealth based immigration- bringing in wealthy immigrants to encourage a spending boom in property. However, in the 21st Century such a short-term solution is likely to back-fire. Large numbers of immigrants will consume resources that the world needs to survive on and which resource rich countries need to trade for essential manufactured goods. Consumption patterns in developed resource rich countries like Canada and Australia are also more extravagant than in densely populated developed countries like Japan and Holland. Hence, large scale-immigration into Australia and Canada will have an adverse effect on such things as global co2 emissions.
From a military perspective the resource rich countries will become tempting targets for invasion and piracy. Australia and New Zealand are dangeroulsy isolated in the South Pacific and vulnerable to attack from resource hungry Asian neighbours- especially with the U.S unable to maintain current levels of defence spending. As a result it is likely that Australia, Canada and parts of South America will increase their defence spending and become more assertive in global politics in the coming decades. With German technology the Russian Federation will also become a much stronger military power as it tries to deter Chinese intervention in Central Asia.
The current dominance of the United States and Britain is now being challanged by an industrially powerful China and a countervailing assortment of resource-rich nations that are feeding off Asian economic growth.
Monday, April 03, 2006
The Carrot and The Stick
A conspicious feature of NZ governments in recent decades has been an emphasis on punitive measures over incentives, which can be clearly seen in environmental policy. However, the use of both methods together could greatly increase the effectiveness of legislation.
The Government is currently considering policies to reduce fuel consumption among the nation's motorists. So far all the proposals centre on taxing vehicles perceived to be fuel inefficient. The idea of taxing older cars will fall disporportionately on low- income drivers who have no choice but to drive older vehicles. Another proposal is to tax cars according to engine size. This proposal may seem fair, but cars aren't neccessarily less fuel efficient just becase they have larger engines. These policies don't take into account driver behaviour, how often people use their cars, whether they are petrol or diesel, or how well they maintain them. All these factors have a major impact on fuel consumption. If the fixed cost of motoring is increased for example, drivers may actually use their cars more often, to get better value for money, or get them tuned less frequently to save money.
If recent trends are any thing to go by, the easiest group to influence are drivers of new vehicles. In response to rising fuel prices sales of smaller cars have recently increased, as have hybrid cars that are still new to the market. Hybrid and diesel cars are much more fuel efficient than standard petrol powered vehicles- hence the Government should reduce or eliminate taxes on these cars and maintain the present diesel subsidy.
Low income drivers are much more restricted in the choices they can make in response to fuel price increases. Although many low-income drivers do have fuel inefficient cars they cannot afford to upgrade them. The best that low-income drivers can do is drive their cars less frequently and get them tuned and serviced more often. This means that fixed costs for low income drivers should be kept to a minimum. Low income drivers should also get subsidies or tax relief for getting their vehicles tuned, perhaps with community service cards as entitlement ID.
Admittedly incentives have a major down side- they cost money. In contrast, punitive taxes make money for the Government. An ironic effect of neo-liberal ideology in policy making has been an increase in some taxes because other forms of government intervention have been discredited. In neo-liberal thinking nothing is worse than intervening in the market to make some goods cheaper than others. Although government incentives are often effective , they do need to be balanced by disincentives. Taxes on certain vehicles may be necessary but they must be balanced by incentives to change driver behaviour and vehicle choice.
The cost of increasing fuel efficiency is a responsibility for all vehicle owners, not just low income people.
The Government is currently considering policies to reduce fuel consumption among the nation's motorists. So far all the proposals centre on taxing vehicles perceived to be fuel inefficient. The idea of taxing older cars will fall disporportionately on low- income drivers who have no choice but to drive older vehicles. Another proposal is to tax cars according to engine size. This proposal may seem fair, but cars aren't neccessarily less fuel efficient just becase they have larger engines. These policies don't take into account driver behaviour, how often people use their cars, whether they are petrol or diesel, or how well they maintain them. All these factors have a major impact on fuel consumption. If the fixed cost of motoring is increased for example, drivers may actually use their cars more often, to get better value for money, or get them tuned less frequently to save money.
If recent trends are any thing to go by, the easiest group to influence are drivers of new vehicles. In response to rising fuel prices sales of smaller cars have recently increased, as have hybrid cars that are still new to the market. Hybrid and diesel cars are much more fuel efficient than standard petrol powered vehicles- hence the Government should reduce or eliminate taxes on these cars and maintain the present diesel subsidy.
Low income drivers are much more restricted in the choices they can make in response to fuel price increases. Although many low-income drivers do have fuel inefficient cars they cannot afford to upgrade them. The best that low-income drivers can do is drive their cars less frequently and get them tuned and serviced more often. This means that fixed costs for low income drivers should be kept to a minimum. Low income drivers should also get subsidies or tax relief for getting their vehicles tuned, perhaps with community service cards as entitlement ID.
Admittedly incentives have a major down side- they cost money. In contrast, punitive taxes make money for the Government. An ironic effect of neo-liberal ideology in policy making has been an increase in some taxes because other forms of government intervention have been discredited. In neo-liberal thinking nothing is worse than intervening in the market to make some goods cheaper than others. Although government incentives are often effective , they do need to be balanced by disincentives. Taxes on certain vehicles may be necessary but they must be balanced by incentives to change driver behaviour and vehicle choice.
The cost of increasing fuel efficiency is a responsibility for all vehicle owners, not just low income people.
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