Again with the Schacht-bashing by mattsteinglass
March 31, 2009, 8:23 pm
Filed under: Economics

Megan McArdle notes that up is up and down is down, and, relatedly, that observing that Obama has an industrial policy and Hitler did too! is pretty weak stuff:

And the problem with Hitler was not his industrial policy–I mean, okay, fine, Hitler’s industrial policy bad, right, but I could forgive him for that, you know?  The thing that really bothers me about Hitler was the genocide.

Yeah. But, okay, I’ll bite: what was wrong with Hitler’s industrial policy? If I understand correctly, Hjalmar Schacht brought Germany back to full employment faster than the rest of the industrialized world got there. A lot of their recovery was driven by spending on arms, but, um, so was (and is) ours. Indeed, it might be worth observing that Hitler had an industrial policy and Adenauer did too! and that Tojo had an industrial policy and Ikeda did too! and that Mussolini had an industrial policy and De Gasperi did too! and so forth.

Smoot-Hawley third world style by mattsteinglass
March 31, 2009, 6:48 pm
Filed under: Economics, Vietnam

Last week, India imposed anti-dumping tariffs of 16% on Vietnamese textile imports. The Indians have at least some evidence that Vietnamese firms are dumping textiles below cost, but it seems highly likely that this is basically a protectionist measure to protect domestic textile producers in a situation of shrinking markets, where East Asian producers probably are in fact dropping prices to get rid of overproduction as their first-world clients disappear.

At least the Indians have some evidence of dumping, which is more than can be said of the Egyptians. Last week Egypt banned imports of Vietnamese catfish, also known as basa or pangassia, based on nothing more than vague accusations in the the newspaper Al-Ahram that Vietnamese catfish are raised in the polluted waters of the Mekong Delta. A country that farms its own fish in the Nile Delta, obviously, should really not be running around making accusations about polluted water. In fact the Mekong Delta water in basa-farming areas is reasonably clean, and the European Union and World Wildlife Foundation have been setting up stringent certification regimes to ensure that Vietnamese catfish exports are safe and hygienic. The Egyptian ban is clearly just an effort to protect local Nile carp producers.

The global economic slowdown is driving countries towards protectionism. We’ll have to see whether there’s anything anyone can do about it.

Matthew Yglesias wants blogging production caps by mattsteinglass
March 31, 2009, 6:39 pm
Filed under: Uncategorized

He thinks bloggers are forcing each other to produce more content to stay competitive, and everyone is losing:

I would prefer to write somewhat less—this pace is stressful and doesn’t leave me as much time to pursue other projects and interests. But though I would prefer to write somewhat less, I have a stronger second-order preference to produce a blog that’s competitive with other major offerings on the internet. And over the years competition between bloggers has led to escalating word-counts. The resulting situation isn’t terrible, there are lots of people you should cry for before you get to me, but basically we bloggers are engaged in a red queen’s race where we all need to keep trying harder and harder just to maintain our positions.

In Amsterdam, the streets are quiet after 6 pm, and by 10 pm the city is as silent as a country town. Why? Because to sell retail goods after 8 pm, you need a special “night store” license, and they only issue one of those per neighborhood, at most. That makes the city considerably less convenient, and in a sense it reduces choice: if you want to buy a beer or a carton of milk at night, you have to walk half a mile. But say there were no restrictions on store hours. What then would happen to the freedom of choice of those who wanted their city to be quiet at night? That would be one good you would be unable to purchase, one choice that would be unavailable. Yglesias wants the freedom to work less. Without a common rule setting performance maximums, that’s the one choice that is not available to him.

GlobalPost pieces on COIN in Vietnam and Afghanistan by mattsteinglass
March 30, 2009, 1:51 pm
Filed under: Afghanistan, Vietnam

As I said in my GlobalPost series on counterinsurgency strategy in Vietnam and Afghanistan, the similarities between the two situations are really discomfiting. And now that President Obama has released the details of the new Af-Pak strategy, I can’t say I’m reassured. In particular, the assertions that American economic aid and efforts to effect political reforms in Afghanistan will have any dramatic effect on sapping the Taliban insurgency seem redolent of Vietnam. People just don’t seem to have any recall of how much aid the US gave to South Vietnam — as I’ve written elsewhere, it dwarfed US efforts in Afghanistan. And US aid efforts in South Vietnam evolved and became increasingly sophisticated over time, and were increasingly integrated with US military efforts. It’s possible that the US is better now at this social element of counterinsurgency than it was back then. But I don’t see a lot of evidence that this is the case, and it seems naive to me to believe that US aid efforts will have a dramatic impact on Afghanistan’s society and economy when aid efforts in similar countries during peacetime are extremely hit-or-miss and only make marginal contributions to societal stability and well-being. Anyway, read the articles.

Taibbi: skimming off the great rivers of capital by mattsteinglass
March 30, 2009, 1:22 pm
Filed under: Economics

Taibbi’s takedown of DeSantis is exactly right. One of the rightest things about it is this:

Here’s the real problem with people like Jake DeSantis. Throughout this whole period, they never were able to connect the dots — to grasp the fact that when they skimmed a million here or a million there off the great rivers of capital that flowed through their offices, that that money came from somewhere, from someone. To them, it wasn’t someone else’s money, it was just money, and why shouldn’t they have it?

Marxists used to refer to middlemen and capitalists as skimmers and parasites. (You can see the mirror image of this idea in Ayn Rand’s “looters and moochers”; she remained fundamentally Marxist in her way of thinking, though only she was capable of the amazingly unique insight that it was the ordinary working people who actually produce everything in the world who were actually “mooching” off of the capitalists.) For Marxists, a merchant who buys a piece of fruit and resells it for more money is a parasite; Marxists didn’t recognize the work of finding or creating markets as valuable work, and that’s why the stores in the USSR were empty and the goods they did have were things nobody wanted. The reaction against Marxism’s multifarious economic wrongnesses has left us allergic to any accusations that people with paying jobs in the private sector are parasites. If they’re being paid money by a private employer, the free-market ideology has axiomatically assumed, then what they’re doing must by definition be producing value.

Except it isn’t. A lot of the things people do in free-market economies are actually worthless. They just consist of getting access to money, taking it, and conning people into believing they deserve to have it or that there’s nothing that can be done to keep it away from them. The highest risk of this kind of things happens in situations where people are standing right next to the flow of vast sums of money and are able to siphon it off. I.e. the financial industry. There should be no presumption that the money earned by financial institutions has been “earned”. It’s entirely possible that any given financial institution is parasitical. That doesn’t mean we can eliminate that institution immediately; it can be dangerous to suddenly kill a parasite. Think of extracting a tick. But you wouldn’t say the tick is playing a vital role in your body’s health or that it’s entitled to the blood it’s sucking out of you.

Exports vs. GDP: use value-added, not headline! (wonky) by mattsteinglass
March 30, 2009, 11:15 am
Filed under: Economics, Vietnam

I’m always getting on the case of Vietnamese economics reporters for using statistics inappropriately, so I was embarrassed to read an article in this morning’s Vietnam Investment Review, by Nguyen Thanh Ha and Hoang Viet Phuong of Saigon Securities (article not on website), that revealed I’ve been using some wrong statistics myself. I’ve been using the frequently cited figure that exports account for about 70% of Vietnam’s GDP. It turns out this is misleading because it compares gross domestic product to the total value of exports including all the elements of those exports which were made outside of Vietnam and just assembled in Vietnam. The proper comparison to make is to compare the value-added component of Vietnamese exports to the total GDP, which gives you a more reasonable figure of about 15-20% for the percentage of GDP accounted for by exports.

It’s easy to see why this is true. Imagine, for example, that you had a country of 10 farmers with per capita GDP of $1000 each. Then say you hired 3 of those farmers at $1200 a year to assemble Toyotas, shipping in all the prefab auto parts from abroad, and exported those cars back to Japan. If you booked the entire value of the cars as export value and compared that to GDP, you’d quickly show exports accounting for five or ten times the country’s total GDP, which doesn’t make any sense. The rational thing to do is to compare GDP to the export value added in Vietnam, which would be roughly the same as the farmers’ salaries of $3600 a year and would thus show that exports accounted for something like a third of GDP, which seems about right.

The 70% figure always seemed a little crazy to me — even in an export-oriented economy the vast majority of people in Vietnam are obviously working for and making things for other Vietnamese, not for foreigners. The more accurate figure is a relief both because it’s not crazy, and because it indicates that the current very rapid slowdown in exports isn’t quite the dire threat to Vietnam’s economy that it might have seemed.

Annals of difficult relations by marriage by mattsteinglass
March 30, 2009, 9:01 am
Filed under: Uncategorized

John Yoo and father-in-law Peter Arnett. Glad I don’t have to sit at that Thanksgiving dinner table.

Insurance policies by mattsteinglass
March 29, 2009, 10:11 pm
Filed under: Economics, Vietnam

Back in 2004, while working on an article about whether the Vietnamese government was compensating farmers adequately for land it seized to turn into industrial parks, I had to try and figure out what farmland in northern Vietnam was worth. Trying to estimate its value based on how much rice the typical farmer could grow on an average plot produced a figure of just a few hundred dollars a year, which seemed absurdly low. The logical thing would be to check the market price, obviously, but there I came up against the odd fact that nobody knows what the market price is, because there isn’t really a market for farmland in northern Vietnam. Farmers in Vietnam mostly have private title to their land, but in most rural areas, they sell it to other farmers so rarely that one can’t really speak of an agricultural real estate market. The reason farmers so rarely sell land is in part because other farmers can’t access credit to buy land, but it’s mainly because rural farming families in Vietnam that own land are extremely reluctant to sell it: they view their land as an insurance policy for their children. If all else fails, they say, as long as they have the land, their children will always be able to eat rice.

At the time, I viewed this as a ridiculous premodern economic attitude.

There’s no such thing as a free lunch, but there is such a thing as a ripoff by mattsteinglass
March 26, 2009, 1:37 am
Filed under: Economics

Megan McArdle is startled to find that contrary to claims by others that AIG’s retention bonuses were a travesty, people who work at AIG don’t think so. She believes critics (presumably referring to Ezra Klein) who say the AIG traders’ behavior offends their love of country; she does “not, however, believe that this love would actually keep them working long hours for little-to-no pay at a company that was failing because people in another department, people long since given the sack, had screwed up royally.”

A fair point. Therefore, I think the people working to wrap up the affairs of the AIG FP division should be paid a decent American salary — $100,000 a year, say — rather than being enslaved and forced to toil for free. Well, okay, for those who did really stellar work, $250,000 might even be in order. Mr. DeSantis says his bonus amounted to $746,000 after taxes. So how about we tone that congressional surtax down from 90% to 66% on the amount left after other taxes are assessed, leaving Mr. DeSantis with his hard-earned 250 grand for the year, and we’ll call it a deal. Shall we?

P.S.: The statement “I plan to donate the entire amount to charity” has a disreputable whiff to it; I would have advised DeSantis to actually donate $150,000 or so before writing the article, provide a verifiable list of donations, and then say he plans to donate the rest as well, having established his credibility. But surely someone who worked at AIG’s Financial Products division is above any suspicion of being creative in what he means by the words “donate”, or “100 percent of the effective after-tax proceeds of my retention payment”, or “organizations that are helping people who are suffering from the global downturn”. And his argument that he, rather than taxpayers, is exclusively entitled to decide what to do with the money that taxpayers gave him after the company he worked for became insolvent certainly seems airtight.

The living-room financial war by mattsteinglass
March 24, 2009, 1:38 pm
Filed under: Economics

One of the common analyses of public opinion during the Vietnam War is that Nixon’s ultimate withdrawal from Vietnam was determined by public exhaustion. It wasn’t so much that the public had changed its mind on the merits of the question of whether it was important to stop Communist expansion in SE Asia and so forth. They were just sick of it. They didn’t want to hear about it anymore. They weren’t interested in reading about it; they wanted it over.

This week I found myself unable to get up the energy to read the summary of the Geithner plan or even to read much commentary on it, and realized that I’m now in basically that same place with regard to the global financial crisis and bank nationalization and so on. I don’t have a position on it. I don’t want to read about it. I just want it to be over.


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