Category Archives: Economics

Death by Peonage

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The greatest threat to the people in charge has always been the property holder. Before human settlement, the strongest or oldest were the tribal leaders. Once humans began to settle into an agricultural life, it got a lot harder to boss people around. In the tribal days, exile was the way to keep people in line. If the tribe got too big, then they just split into two tribes so the malcontents could go off on their own, thus preserving the authority of the chief.

Once people started to settle into agricultural life, exile was not so easy. The chief could be angry, but as long as you could feed yourself and your family, you had no reason to leave, and he had only one way to make you leave. That was to take your property. The trouble with that is he had to have hired men willing to kill and that meant the boss had to have a surplus of property to hire them.

It’s not an accident that for most of our time as settled creatures controlling the land was of paramount importance to the rulers. The Romans, upon the defeat of Carthage and Corinth, used the proceeds to throw the small farmers off their land, by use of slave labor. In short order Rome went from a Republic of free men to an empire run by powerful land holders.

In medieval times, feudalism put control of land in the hands of the crown and by extension, the nobles, who held these lands in exchange for service to the crown. In turn, vassals and peasants worked the land for the nobles. It was not until the rise of global trade that one could challenge the power of the king without taking his lands.

Trade created capital that was mobile and therefore hard to steal. Stealing a man’s land is just a matter of killing his soldiers and forcing him off the land. When a man’s wealth is distributed all over and is highly portable, stealing his capital is not so easy. This required more complex schemes and more complex defenses.

The other day in my Greek post I pointed out that sovereign debt is mostly a way to rob the property holders of countries. No one really thinks about it like that as the people in charge prefer, we think of it in other ways. They like to talk about government investment in the safety net, as if it were a real physical net underneath all of us, magically held up by fairies and magic dust.

That’s the sales pitch. Most sensible people like the folks reading this blog see past it and understand that it is just a way to pay for an ever expanding government. As we’re fond of saying on the Dissident Right, no tree grows to the sky. Eventually the government can borrow no more because no one will lend. That’s not just a Greek problem. The public debt of the West is at level unimaginable just a generation ago.

That’s where the credit currency comes into the mix. By artificially lowering the cost of borrowing, governments are allowed to shift more debt onto their taxpayers. Eventually, the debts must be paid thus creating the transfer of property through the state to friends of the state. Public debt is just organized looting of the middle-class.

This is a little more obvious when we look at it in small scale. That is the assault on small business by the financial sector. When talking about the banksters and their cronies in politics, everyone just assumes they spend their time on complex deals involving leverage, derivatives, and special favors in the tax code.

Much of that is true, but unlimited cheap credit has had another terrible consequence that is a microcosm of what we are seeing with Greece. That is, insiders using zero cost debt to undermine the middle-class business owners. While Warren Buffet uses the tax code to raid mid-sized business, venture capital often uses cheap money to sack small business.

Let me use an example. I have known a local businessman for twenty years. I’m not sure how much of the details of his dealings I am free to reveal so I will be deliberately vague on some points. His business was a family business started by his father and another man in the 50’s. They distributed niche products in the Mid-Atlantic.

My acquaintance was never going to get rich running the business, but it afforded him a nice middle-class life. He was also able to hire a few a key people and pay them well, along with a staff of entry level people. Some of his employees had been in the business since he could walk. In other words, it was a typical middle-class small business.

About ten years ago his suppliers began to consolidate. One after another was bought up by some global player. He went from have a dozen suppliers vying for his business to just three. At the time, he thought it may be better for him as it was much simpler to do business with three suppliers.

Then one supplier bought one of his competitors and made them the exclusive distributor. All of a sudden, a sizable chunk of the market was walled off to him because he could not carry the products certain customers preferred. At this point he knew he was in trouble, but the options were limited. Profits started to get trimmed and he prepared for a reduced lifestyle in order to keep the business running.

Keep in mind that all of the consolidation was made possible by abnormally low interest rates. When money cost ten points, buying a competitor meant having a big chunk of cash in the deal. When money is three points most M&A deals can be done with no cash whatsoever.

A few years ago, some VC boys bought his biggest competitor. They brought in new technology, and they made a deal with one of the big suppliers. Because it was all debt driven, they could drop prices putting even more pressure on the remaining independents. Quickly they went about offering buyouts to the little guys. My acquaintance sold out for what he could get.

This is a common theme in wholesale distribution around the country. The little guys are hoovered up by big players using borrowed money. Is it better for consumers? Maybe, but prices are not dropping so it is not a good deal from that regard. It’s not better for employees as small business hiring has never been lower.

The skillful use of debt has always been the hallmark of shrewd businessmen. That’s not what’s going on here anymore than the use of slaves by wealthy Roman landowners was a skillful use of labor. My acquaintance could not go to his bank and get the same deals as the VC boys raiding his industry. They had special access to cheap money and informational asymmetry let them exploit the tax law in ways the little guy could never match.

I pointed out the other day that it is easy to blame the Greek people and write them off as dead beats. It’s easy to blame the small businessman who goes bust. That way we can pretend it is still an even playing field and everyone is playing by the rules. That’s not what’s happening in America, Greece or anywhere else in the West.

Artificially low borrowing rates are warping reality and blocking the normal signals within society citizens use to make decisions. It’s also rearranging the social order in ways that are incompatible with liberal democracy. My acquaintance who lost his business is no different than the farmer thrown off his land. He loses his stake in the current order and goes from being a citizen to being a subject.

I need to wrap this up as it is already too long, but in another age, men on horseback flying the flag of their lord would raid towns and villages, hauling off what they could. The only recourse of the village was to submit to a lord promising protection. They got to choose their master.

Today, global finance is the tool to break the spine of the middle, making them dependent on the ruling elite. The systematic looting of Western economies through central banks is sucking the life out of the citizens. The Greeks are finally fighting back, but until they start hanging the people responsible, the tide will never turn.

The Greek Revolution

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The Greeks vote on something this weekend, but no one really knows whether it matters. The news indicates that the deal offered Greece is no longer on the table so the plebiscite on it would be moot. There’s also the fact that Greece appears to be in full blown financial collapse. The scenes on television remind me of the Argentine financial collapse of ’98. In fact, the comparisons are so close that the Argentinians of that era are advising the Greeks now.

Here’s an interesting documentary on the Argentine crisis.

The fascinating thing about this last phase of the now seven year crisis is that the enormity of Greek debt is finally being revealed. The IMF has released their analysis of Greek debt and there’s simply no way anyone can think the Greeks will ever pay their debts. It is a mathematical impossibility. Further, they will never be able to make their interest payments.

Greece has a €50 billion cash deficit through 2018, which means even under the bailout plan that was offered, Greece would be accumulating debt faster than it would be retiring debt. In theory, something magical could happen so that the economy would boom, but the debt burden makes that unlikely.

That means the people in charge of Europe have been lying to their public all this time. Default was an inevitability. That will then be followed by a restructuring of debt and debt forgiveness. Lying is no surprise as it was always assumed that the EU was buying time to transfer these debts from the private holders to the taxpayers.

The deliberate and seemingly pointless immiserating of Greece is what one would expect from a loan shark. It’s not the money, it’s the principle. The EU was supposed to make one big happy family of former countries. The trouble is one of the family members is a bit of a screw-up so the paterfamilias is teaching a lesson. It’s not so much for the one taking the beating, but for the rest. “Don’t be like Greece or we’ll break you like we broke them.”

That sounds good, but it remains to be seen if they will actually break Greece. The first hit is the worst hit and Greece is taking the first hit right now. By the time they vote, a fair number of Greeks will be ready to see it through. The next hit lands to the body of the EU financial system. No one knows what happens when the fallout from Greece starts washing up in the rest of Europe.

It’s easy to dismiss Greece as a dead beat country full of oily grifters. In theory, the Greek people have only themselves to blame for electing crooks and liars. That’s an argument against democracy, but the people never voted for bankruptcy. They were misled by their leaders, who got hooked on the heroin of global finance. They supported joining the Euro because they were told it would avoid these problems.

The problem at the core of global finance is that there’s no market mechanism to restrain public debt. The whole point of a floating currency regime is to disguise public debt in order to avoid making tough choices about the welfare state. It’s not an accident that since the Louvre Accords the size and scope of government has skyrocketed throughout the West.

In other words, a currency system based on credit has worked at hiding the cost of government. In fact, it has been so good at it no one noticed that Greece was running up debt at an alarming rate. In the old system, Greece would have been facing double digit borrowing rates long before they reached this point.

Sovereign debt is mostly a way to rob the property holders of countries. When the state borrows, there has to be someone on the other side of the transaction. If they borrow from their people then they are taking property with a promise to pay at a latter date. If they borrow from abroad, then they are promising their tax payers will pay at a later date.

The only people with the ability to pay sovereign debt are the tax payers.

In the old currency arrangements, this was understood. Lenders knew this. If you lent gold to the neighboring king, you did so knowing you may have to invade his lands to get it back. That made lenders more prudent, which made the crown more prudent. Credit currency makes it appear that default is impossible so no one considers the cost of collection.

Successive Greek governments have promised the property of Greek tax payers as collateral. The Greeks on the dole are demanding their checks and making a fuss about it on TV. The real revolt is the from the people with money. The Greek taxpayers are refusing to pay up. Unless the EU is ready to roll in the tanks, the debts will have to be forgiven.

Techno-Feudalism

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Since the dawn of human settlement, being rich has been a process, not an end point. In order to accumulate capital, you need to figure out a way to organize people in such a way that their extra becomes your extra. Ideally, you leave a little for them so they think helping you grow rich is to their benefit. But, 1,000 years of feudalism proves it is not a requirement. With the right system, you can grow rich and powerful at the expense of others.

That’s the other part of the process though. To keep the peasants, slaves, servants, workers and associates from revolting, you either invest some of your extra back into them or you invest it in men with weapons who will keep the order. Recently the former has been the preferred method, but the only proven way to keep order is the latter. That’s why gun laws are enforced by men with guns.

This is not how most Americans look at economics. I’m sure a few reading this are thinking I have been reading too much Marx. But, that’s the thing. Marx was not wrong about everything. He made some excellent observations. His recommended solutions were insane, but many of his observations were spot on and hold up well even today.

Marx observed that capitalism, as he defined it, destroys and reconfigures previous economic orders, but also that it must ceaselessly devalue existing wealth. We see this today with Uber. The old order of state run cab companies is under assault from the new order of distributed contractors linked by a public information network paid for by people who don’t use it.

Joseph Schumpeter argued that this process was not pure destruction as Marxist claimed, but a reordering that eventually added value to the old stock of capital. The automobile did not entirely obliterate the horse and buggy industry. The carriage makers moved to the car business. The property employed in keeping and raising horses did not go away. It was re-purposed for car maintenance. While some value was lost from the end of horse travel, much of it was retained and a whole new layer of value was added onto it.

Both men were working from the perspective of rapid material progress. Events seem like they favor Schumpeter as opposed to Marx as we have seen whole industries grow up in one generation, displacing an old industry from our parents’ generation. The example I love using is the fax machine. In my lifetime, I saw it created, dominate and then replaced with something different. My parents could not imagine it and the kids today have never heard of it.

When I see stories like this one, I wonder if rapid material progress has reached an end or at least a lull. This looks like techno-feudalism to me. Amazon is trying to arrange things such that they can get writers to work for the benefit of Amazon, rather than their own benefit. Amazon gets the benefit of being the world’s largest bookstore, without incurring any risk. Get halfway through some book and decide you don’t like it? No problem. The author will refund you the difference! Amazon looks like a hero and the writer is looking for food in neighborhood dumpsters.

Amazon is not the only billionaire operation running these scams. Apple is trying to screw performers out of royalties. They backed off this time, but you can see where they are headed with this. These new “rental” services are about locking up the pipeline between the creator and the customer. Once they gain that edge, they will stop paying royalties. The next step will be that small acts get nothing but the benefit of “advertising” themselves on Apple or Amazon. It’s classic rentier behavior.

These are two recent examples, but the entire financial system is nothing but feudalism these days. Banks charge people for savings accounts. That forces everyone to put their savings into equities where smart people charge fees on investment funds. This arrangement means that when the economy is strong, everyone gets richer, but the rich get very rich. When the economy falls, everyone gets poorer, except for the rich, they keep getting richer. It is heads they win tails you lose.

The reason for wondering if these are symptoms of systemic stagnation is that when the pie is expanding, the rich guys are rushing to get the lion’s share of the new pie. When the pie is not growing, they look to expand their share of the pie at the expense of the weak. The new business from expansion is always the most profitable. Cannibalizing the existing market is low margin. When big players like Apple and Amazon are slumming this way, it suggests they have nowhere else to turn for profit.

It’s what appears to be at the heart of the massive new trade bill that just passed. The point of it is not to expand the US market, letting a rising tide lift all boats. No one believes that anymore. This bill is about making it easier for global players to loot the American middle class. William the Conqueror imposed feudalism in the English speaking world after the Battle of Hastings. Silicon Valley and Wall Street are imposing it on America a millennium later.

Uber Screwed

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At various times here I have ranted and raved about Uber and other “sharing economy” companies. My contention is that they are just clever ways to dodge existing laws and regulations in order to undercut exiting providers. It’s not a new technology or a new way to provide a service. It’s technology used to evade the law. It looks like the law is slowly coming around to that position.

It would appear that the California Labor Commission has ruled that at least one Uber driver is an employee.

As it stands now, Uber employs its drivers as third-party contractors, operating as a logistics company that provides access to customer demand and directions, transactions, etc. for the drivers. Uber has argued repeatedly in various courts that it is not a transportation or taxi company, but rather a software platform that matches customer demand with supply.

This ruling changes all that, turning Uber into a transportation startup instead of a logistics software company. That puts the company in a position to face a number of legal obstacles, as well as rising costs of employing those drivers directly and offering them benefits, etc.

As BI points out, one of Uber’s main costs is its full-time employees that work out of Uber corporate offices. If Uber drivers are deemed employees, the business model shifts drastically.

Uber is not the first company to try this trick. Most states have laws to address the use of “part-time” and “contract” employees. That’s because companies tried to shift their employment costs onto their employees by classifying full-time employees as contractors or temporary. In most states, an employee counts as an employee as soon as they reach a certain number of hours.

Years ago I was involved with a union campaign in Massachusetts. The company used part-time drivers and got into trouble when they let the part-time drivers work full-time hours. They were working 40-50 hours per week, but classed as seasonal temps. Sensing an opening, the Teamsters tried to organize them promising better wages and benefits.

Anyway, there’s no mystery to any of this. Operating a car service has well known costs. The car, its maintenance, gas and taxes are not costs that can be mitigated with a phone app. Similarly, licensing and regulatory fees are set by the state. There’s never been a lot of room to cut costs or increase efficiency. It is a basic business made more expensive by government.

The only way Uber and Lyft can be offering a better cheaper service is to avoid the government imposed costs or transferring some of their costs onto others. It turns out they are doing both of those things. On the one hand they dump their fleet costs on their drivers. On the other hand they dodge local regulations and licensing. Add back all of those costs and Uber is just another taxi company.

The interesting thing about this line of attack on Uber is the potential liabilities. Once the states start calling those Uber drivers employees, they can go to the local labor boards and get back wages, benefits and possibly damages. At the very minimum, Uber will be hiring a big shot law firm charging big shot law firm rates. Those costs will show up in the price of the product.

As I’ve said in the past, I’m not against Uber or Lyft. I’m against the idiots claiming they are creating “disruptive technology.” That offends me. Uber and Lyft are not building a better mousetrap so much as they are just exempting themselves from the laws the rest of us must follow. We have a lot of stupid laws governing banks, but I’m still against bank robbery. Most taxi laws are probably stupid too, but that does not mean Uber is a great way to mitigate those laws.

 

What’s a Conservative?

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The other day, James asked about this line from one of my posts:

“On the other hand, people like me no longer describe ourselves as conservative because we are at odds with everything the modern conservative supports.”

His questions was:

“Two questions: 1. what specifically are the things the modern conservative supports? 2. In what respect are you at odds with each of these things?”

Large books have been written on the subject and I could easily write a small book on what I find objectionable with what we currently define as “conservative.” Since I don’t have the time to write a book at the moment, I’ll nibble away at it here. This post by one of Tyler Cowen’s grad students is a good place to start.

The latest from Louisiana is that taxes are going up, but in a strange way that won’t be called a tax increase:

One of the most critical parts of the budget plan, and the part that attracted most of the debate, would raise no revenue and lighten no one’s tax burdens. But because of a complicated arrangement of tax credits, this plan could, by some interpretations, allow Mr. Jindal, a Republican, to say that despite millions coming in from cigarette tax hikes and tax break rollbacks, the state had technically not raised net new tax revenue.

Read the whole article, it is even weirder than that sounds.  Combine that with the recent fiasco in Kansas, where the strongly Republican state government will be reversing earlier tax cuts.

It seems to me that, whether we like it or not, fiscal conservatism has been stymied at the state level.  No, that’s not true for Illinois, New York, or California, but it does seem to be true for many other states, especially those governed by Republicans.  (And yes, state pension obligations still do need to be reigned in and made subject to proper accounting.)  More concretely, trying to cut taxes at the state level doesn’t seem like a useful or productive way forward.

I’m old enough to remember when the people saying they were “fiscal conservatives” were almost always in the Democrat party. That phrase was a lot like “path to citizenship” or “secure the border” is today. It meant something different than the literal meaning. The Congressman I worked for was a fiscally conservative Democrat and that meant he was a deficit hawk.

My congressman was no one’s idea of a conservative back then. He was fine with New Deal style government programs, as long as they were paid for through taxes. Like all other fiscal conservatives in both parties, he preferred broad based taxes to pay for government. Today, exactly no one in politics is a deficit hawk. Borrowing is a given and no one cares how much or from whom the government borrows money.

The innovation Reagan brought to the debate was the idea of cutting taxes in order to force spending cuts. That’s what it meant to be a conservative. They agreed with the deficit hawks about not borrowing so cutting taxes naturally meant a restraint on spending. If you slow the growth of government to some level below inflation and population growth, the relative size and scope of the state shrinks.

In other words, conservative meant small, financially responsible government. That meant the aversion to borrowing of the deficit hawks and the desire to shrink government. The novelty of using tax policy to force spending restraint was a means to an end, not an end in itself.

There were objections to this on the Right. The old-school conservatives preferred to fight the spending fight on its own terms. They contended that the inevitable deficits from tax cuts would not force spending cuts, but normalize chronic borrowing. The fact that they were proven correct has been lost to the mists of time.

There was also another “conservative” principle in the use of tax cuts and that was simplification. The Progressive view on taxes was as another tool to shape behavior. The myriad of loopholes, shelters and breaks was a way to force behavior that otherwise would not occur, without the carrot of tax breaks. Conservatives always rejected that and pushed for simple tax systems.

Today, what passes for a conservative holds views no conservative would recognize forty years ago. For starters, demanding trivial reduction in taxes as some sort of great goal is just silly. The tax cuts of Bush, for example, had no impact on the lives of 90% of Americans. If twenty bucks a week is making a difference, you’re not paying taxes anyway. For most families, the Bush tax cuts were a rounding error.

Worse yet, today’s “fiscal conservatives’ are in favor of all sorts of social engineering through the tax code. The credits and breaks demanded by conservatives could fill a warehouse. The Reform Conservatives are calling for a proliferation of breaks and credits making tax lawyers rich and further entangling the state in the lives of citizens.

Tinkering with tax rates and expanding the complexity and scope of the tax code is what defines the term “fiscal conservative” today, along with an embrace of reckless borrowing to finance a metastasizing welfare state. I’m old enough to remember when moderate Democrats would mock that as woolly-headed liberalism.

That’s one example of where I am at odds with the modern conservative. Taxes are honest when they are frictionless. They should have as little impact on behavior as possible. They should be clear and in plain site. Hidden taxes are a crime against the free citizen. Taxes should also be universal. Citizens pay taxes.

The tax level is whatever is required to finance government. If the people want a lot of government, then they pay a lot of taxes. If they want lower taxes, then they have to cut spending. The core principle of conservatism is that public policy is about trade-offs. Borrowing conceals these trade-offs and deceives the public, just like hidden taxes and special tax breaks, thus making deficits at odds with a free society.

Altered Reality

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If you want to know a society, study their money. I no longer remember who told me that, but I always circle back to it when noodling through the issues of our day. We think of money as the bits of paper in our wallets, but money is simply a store of value that is easily transferred. For most of us, money is electronic bits of data these days. Almost all of my transactions are done electronically.

We live in the information age and that means information has become a form of currency. It always has been, but it has not always been very portable. Fifty years ago the guy who knew something big about a publicly traded company could trade that with a small circle of people, mostly in person. Today he can sell it to the world in seconds. Just as sound societies have sound money, sane, well run societies have sound information.

In the Cold War, the Soviets routinely told lies to their people. They did this to devalue information, to make it useless. If the people cannot trust their currency, they don’t use it. If they can’t trust information changing hands, they won’t act on it. We don’t think of information as currency, but it is probably our chief currency today. Most of our labor is put to the task of creating information.

It’s why I’m surprised governments have not become much tougher on this sort of stuff we see going on with public companies.

Those record profits that companies are reporting may not be all they’re cracked up to be.

As the stock market climbs ever higher, professional investors are warning that companies are presenting misleading versions of their results that ignore a wide variety of normal costs of running a business to make it seem like they’re doing better than they really are.

What’s worse, the financial analysts who are supposed to fight corporate spin are often playing along. Instead of challenging the companies, they’re largely passing along the rosy numbers in reports recommending stocks to investors.

“Companies are tilting the results,” says fund manager Tom Brown of Second Curve Capital, “and the analysts are buying it.”

An analysis of results from 500 major companies by The Associated Press, based on data provided by S&P Capital IQ, a research firm, found that the gap between the “adjusted” profits that analysts cite and bottom-line earnings figures that companies are legally obliged to report, or net income, has widened dramatically over the past five years.

At one of every five companies, these “adjusted” profits were higher than net income by 50 percent or more. Many more companies are in that category now than there were five years ago. And some companies that seem profitable on an adjusted basis are actually losing money.

The stock market is vitally important to modern societies. In fact, it is the tent pole holding everything up now. It used to be said that Main Street is not Wall Street, but no one says that anymore. Everything counts on the equity markets, often in ways no one understands. The mortgage bubble is a great example. Even the pros did not fully understand what was happening. As soon as it faltered, however, everyone knew it had to be fixed no matter the cost.

That may be why the Feds are turning a blind eye to this. When they can no longer keep the plates spinning, maybe they put someone in jail for faking their numbers. As long as the lying works to keep the markets levitating, there’s no reason to clamp down on this stuff. Like it or not, the business of America is to keep the plates spinning.

Of course, the Feds could very well be faking their numbers too. Every month they tell us that unemployment is low, but that record numbers are not working. The BLS does this thing where they report numbers that seem good compared to last month, but then adjust those numbers down so that the next month’s figures look good in comparison. It’s a maddening game of whack-a-mole.

Regardless of the motivations, it is increasingly difficult to accept the official data at face value. Is inflation really averaging 1.9% since the crash? Is the unemployment rate really just 5.5%? Has the economy really been growing by 2% a year since the crash? I have no idea and I don’t know many people who would take those numbers at face value and most of the people I know are Progressives, who worship the state.

I think that’s what is at the heart of these record low public trust figures. It is assumed that the low trust ratings reflect dissatisfaction with public policy. Maybe it simply reflects the fact no one can trust the information we’re supposed to rely on as a society. Everything is a con where disinformation is peddled to the public so some sharp insider can profit. We are becoming a low trust society buried in bullshit data.

Robot Medicine

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I had my annual physical this week. That means two hours of my life wasted staring at the wall wearing an apron. I should not complain as the process for me is efficient compared to what others must endure. I get to the facility 15 minutes before my appointment and I’m sitting in a room somewhere within 30 minutes. In that time, I have submitted my urine sample and filled out some forms.

A pleasant black girl with neck tattoos took my blood pressure and had me strip and put on one of those ridiculous hospital gowns. I’ve always wondered why someone has not come up with a better hospital gown, but there’s zero motivation on the part of the medical profession to demand it. The medical business is not a business in the normal sense, where the suppliers compete with one another for customers.

I don’t actually see a doctor. Instead it is a nurse practitioner. Allegedly there is a doctor in charge of her and the other nurses, but I’ve never met him. I’ve never seen him. I’m sure he exists, but if not I would not be surprised either. The woman I see is nice, but a typical clock puncher. She comes to work for a check, not because she enjoys her work. To her, I’m just another meat stick on the schedule.

After twenty minutes of waiting, she arrived and commenced with the examination. That means taking my blood pressure, looking at my eyes and ears and feeling around for something weird. Most of the time she is in the room is spent asking me questions as she typed the answers into the computer system. Most of the questions seemed like they were for marketing purposes rather than anything to do with my health.

The point of this boring recitation of my annual physical is that very little of it requires me to interact with a human. Taking blood pressure can be done by a machine. I have one at home. Blood work is done by a machine. The clinic I use does their own blood work, allegedly, but there are huge national chains that do blood work for humans and animals.

As far as interpreting the results, the nurse I see is not bringing much to the table. She thinks my cholesterol is getting a little high, but Dr. Google and everyone I know has much higher LDL levels. I suspect there is a commission check in it for them when they prescribe these popular medications for cholesterol. Regardless, interpreting blood work is better done by a robot anyway. The same is true of the urine sample.

It seems to me that one place where the robot future should be a reality is in basic medical care. Instead of paying an arm and a leg for disinterested humans to act as a go between, let the patients talk to the robots direct. A mall kiosk could be used for blood pressure, urine and blood work. While you’re there you answer questions on a touchscreen. A week later the robot e-mails you the results and any recommendations.

Of course, the robot would also have access to your DNA. As we march into the humanless future, DNA will become the touchstone of medical science. Connecting the dots between genes and a wide range of diseases is a data problem, in most cases. Cheap collection devices in public places means masses of data to sort of collate.

Robot care would inevitably be cheaper and that means more people would get regular checkups by their local neighborhood robot doctor. If this sort of service were $50 a shot, most people would do it twice a year. Extend the services to things like flu shots, and nuisance things like colds and allergies and most of your basic care could be done on the cheap by the machines.

Another benefit is the payola schemes run by the pharmaceutical companies would be tamped down as robots are not easily bribed. During my visit, two sets of sharpies arrived peddling their wares. They were dressed in the best Men’s Warehouse has to offer and had arms full of freebies for the nurses.

It’s the same payola game the music industry used to play in the old days. It’s not technically bribery, but give a doctor free stuff and he is probably going to move your product. The medical profession denies it, but big pharma is not giving away tens of millions in trips, gifts and schmoozing because they are stupid. They do it because it works.

Of course, none of this is going to happen because the medical rackets are neatly aligned with the ruling liberal democrats. America does not have a government run system like Britain; it’s more of a partnership between the industry and the state. That way, we get the worst of both worlds. On the one hand there’s the avaricious private suppliers and on the other the mindless idiocy of government.

I’m fond of pointing out that we have all around us one of the greatest health care system on earth. American veterinarian medicine is better than what most humans enjoy on earth. It’s also cheap and plentiful. That’s because it is largely government free and parasitic lawyer free. Maybe when the robots take over, they can just kill all the lawyers and bureaucrats. Then maybe medicine will because a normal business again.

Free Trade Fantasies

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Yesterday the guy who wrote this piece tried picking a fight with me on twitter over my observation that some trade deals are good and some are bad.  Libertarians hear the phrase “free trade” and they fall into a trance-like state. I think if you labeled dog poop “free trade” they would gobble it up like candy. That would be after they name-dropped David Ricardo and Adam Smith.

I’ve never had a twitter fight and I would certainly be willing to give it a shot. The trouble is started by using uptalk which makes me think of punching people in the face. There’s nothing that screams smug pussy more than slapping a question mark onto a statement. I’ve made it a rule to ignore people who do it. Reading his twitter feed, I get the sense he wears his ignorance like a shield and there is no point in debating such people.

But, I don’t know him or his work so I could be all wrong. Still, life is too short to waste time on finding out. My sense is his site is mostly libertarian spank material and I have no interest in it. I know all the arguments and much of what libertarians say is reasonable, but a lot of it is nonsense too. Humans are not moist robots and our relationships are not transactional. Economic man has never existed and that’s why libertarianism has never been tried.

Anyway, after all the red Team-Blue Team stuff, he laments that many Republicans and Tea Partiers think trade has hurt the country. To libertarians, this is like learning that half the country believes in witchcraft. As I wrote earlier, the phrase “free trade” has a narcotic effect on these people.

Shockingly, the former Half Sigma has a post up that gets at the problem with libertarianism in general and free trade in particular. I don’t think his idea for socialized banking is a great idea, but the point about pure markets existing only in the imagination is important. Political systems work as long as they comport with reality. Libertarianism works only in a world with perfect economic men ruled by saints.

Similarly, free trade is a boon to both countries as long as both countries have the cultural ethics of Canada. That way, people in both parties can expect their claims to be upheld in both countries. When one party to a contract is not holding up his end, the state must step in and enforce the contract. When that party’s home government is just as corrupt or incompetent, you get something other than free trade.

Not all countries have Anglo-Saxon sensibilities. Canada is not going to invest much into competing with America because both countries are culturally similar so cooperation is natural and mutually beneficial. China, on the other hand, is vastly different from the US. They see American and Americans as competitors, even adversaries.

That’s not to say there should be no trade with China. Like progressives, libertarians tend to see things in black and white. You’re either in favor of unfettered trade with everyone or you’re a close minded protectionist. Only libertarians and lunatics think this way. Most people fall into the middle area that thinks prudent trade deals with friendly countries are good, while reckless trade deals with rogue nations are bad.

All of this is germane to the TPP deal Obama is pushing. This deal is mostly a give-away to globalopolies, rather than a trade deal. The reason it is a secret deal is to keep people from seeing what’s in it, obviously. You don’t do that if you think the details are going to win you praise from the public. But, a lot of it has been leaked through various channels and it is what one would expect from a deal drawn up by global corporations.

It’s a reminder that being for free trade is like being for leprechauns riding unicorns. All of these deals should be looked at skeptically. The debate is not between free trade and no trade. The debate is over over how much power we want to cede to global corporations and foreign governments. Sometimes it makes sense to do deals with less than sterling countries. Sometimes the interests of multinationals coincides with those of Americans.

It can only be decided on a case by case basis.

 

My View on Taxes

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A while back, I took fire for defending death taxes. My failure to enthusiastically decry inheritance taxes was seen as something close to a mortal sin. Maybe just a severe wounding sin. Still, it was a reminder that taxes have become freighted with emotion, particularly outside the Cult of Modern Liberalism. My sense is most liberals think very little about taxes these days. They are the people in charge and therefore take a managerial view of government revenues.

But, the people outside the Cult are another matter. As best I can tell, libertarians imagine a world of no taxes. The respectable libertarians, from what I gather, like the idea of a simple flat tax paid by all citizens. All income is taxed at 15% with no exceptions. I’m sure there are variations on this from other respectable libertarians, but the gist of it seems to be simplicity, but also a minimalist approach. Set the rate low and leave it low to force austerity on Washington.

Conservative Inc. is all over the map when it comes to taxes. The so-called Reformicons imagine all sorts of social engineering that can and should be done through the tax code. Ramesh Ponnuru has been obsessing over child tax credits for years. That’s the heart of the GOP view on taxes. Instead of spending on social programs, they create them in the tax code. They sell them the same way Democrats sell spending programs – free stuff for their voters.

At the heart of all of it is the belief that we can move closer to the promised land if we just arrange tax policy a certain way.

My Tax Philosophy

My first rule on taxes is they must be high enough to pay for government. Borrowing to finance current spending is just taxing the unborn – at best. In most cases it is damaging to the middle-class because excessive borrowing warps credit markets. That quickly leads to the sorts of logrolling shenanigans we see today where banks churn credit activity to skim a profit without providi9ng services.

Pegging tax collection to spending has a clarifying effect on public policy as the bill comes with the services. If everyone’s current tax bill suddenly jumped 50% to close the budget gap, we would be having a different debate about the size and scope of government. Everyone is always in favor of spending the other guy’s money, especially when the other guy has not been born yet.

Of course, the traveling partner with the first principle is transparency. Hidden taxes are a crime against the citizen.The reason governments hide their tax schemes is they know the public would not be happy. If we are going to have self-government, the self better have all the information. Otherwise, the citizens, as well as the rulers, are guessing at public policy.

The most obvious example of this is the business tax. These taxes are always passed onto the employees or their customers. Payroll taxes come out of wages. Corporate taxes show up in the price of the goods and services. If employees saw all of the taxes on their pay stub each week, there would be riots in the streets.

There’s another piece to this puzzle. Taxes are not voluntary. They are collected by force. That’s why the power to tax is the power to destroy. It’s also why powerful people grease politicians to avoid paying taxes. Corporate giants spend millions lobbying Washington and every other Western capital for tax breaks. You can’t have self-government if the rich guys are bribing their way out of their obligations.

Corruption is always a part of human affairs. That’s never going to change no matter how you arrange things. You can limit corruption by removing the temptations that come with the power to exempt some citizens from taxes, regulations or laws. You can’t sell favors if you have no favors to sell. A sensible tax code removes, as much as possible, the favors the pols can sell to their rich friends.

Who Gets Taxed

More than half of Americans avoid paying federal taxes. They pay sales taxes, payroll taxes, fuel taxes and so on, but they avoid incomes taxes, despite having income. This is often pointed out by Conservatives and libertarians as a defect in the current tax code. Liberals, of course, argue that any tax on the poor is unfair because the poor are, well, poor.

What’s missing from tax discussions is who gets taxed and why. The egalitarian fantasy is that every man gets a vote and therefore has an equal stake in society. No such society has ever existed or ever could exist. Human societies are hierarchical. At the top you have the people in charge. At the bottom you have the people who do as they’re told. To pretend otherwise is self-delusion.

The people at the top have the most to lose if things fall apart which is another way of saying they have the greatest investment in the complex social arrangements paid for by taxes. At the other end of the social order, the people at the bottom have the least to lose. Being a peasant for one king is no different, in general, than being a peasant for some other king. The people in a typical American ghetto don’t care who is in charge, just as long as the EBT is charged on time.

Anthropologists have long noted that it is the wealthy who bear the bulk of the costs of social complexity. This spans all cultures and all times. The mathematics of social organization are immutable. In order to have a wealthy ruling class, you need a complex social structure. That social structure will always cost more than you can tax the peasantry – vastly more. That’s why the rich pay the bulk of taxes.

Taxing the rich at higher rates and higher amounts is inevitable, but the poorest of the poor have some stake in society. Taxes are the cost of citizenship. If you are not paying taxes, you are not a citizen. This has been true in all times and all places. No one taxes slaves or beggars. You simply cannot be considered a citizen in a modern society unless you pay taxes and you can’t have non optimo jure cives in a modern society so everyone pays something.

Conclusion

As you can see, I’m amenable to estate taxes because they are transparent, simple and fall predominantly on the rich. The trouble here is the pols can easily auction off exceptions and loopholes. Warren Buffet has been preying on family business for decades, mainly due to the inheritance tax and the many loopholes created in the tax code.

Otherwise, I’m open to any tax scheme that is clear, simple and difficult to corrupt. Government is not free so we have to pay taxes. Taxing food, children, dead people, kittens or whatever is not a moral issue, it is a math issue for me, just as long as the tax is clear, simple, applied to everyone and most important, pays for all of government today.

The Greek Complexity Problem

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Watching the Greeks cast about for a way to make math go away has been fascinating to me. Everyone knows the Greeks can never repay their debts. Everyone knows they will never make the reforms required to keep receiving aid from the rest of Europe. Yet, everyone keeps pretending otherwise and not just for appearances. It seems they really believe that mathematics will yield to wishful thinking.

Anthropologists assume that in modern times, complex societies cannot collapse. They can weaken and go through a process of reform, but they cannot collapse. The reason is every society is adjacent to another complex society. Collapse would lead to being taken over by a neighbor. Even a screwed up society like Greece will suck it up and do what is necessary to fix their walls and rebuild their core rather than become a province of Turkey or Bulgaria.

But, we don’t know that. It is just assumed to be true because it has always been true.  Things are true until they are not. Not so long ago, it was inconceivable that a member state would face financial collapse and now the Greeks are now preparing for bankruptcy.

Greece is preparing to take the dramatic step of declaring a debt default unless it can reach a deal with its international creditors by the end of April, according to people briefed on the radical leftist government’s thinking.

The government, which is rapidly running out of funds to pay public sector salaries and state pensions, has decided to withhold €2.5bn of payments due to the International Monetary Fund in May and June if no agreement is struck, they said.

“We have come to the end of the road . . . If the Europeans won’t release bailout cash, there is no alternative [to a default],” one government official said.

A Greek default would represent an unprecedented shock to Europe’s 16-year-old monetary union only five years after Greece received the first of two EU-IMF bailouts that amounted to a combined €245bn.

The warning of an imminent default could be a negotiating tactic, reflecting the government’s aim of extracting the easiest possible conditions from Greece’s creditors, but it nevertheless underlined the reality of fast-emptying state coffers.

Default is a prospect for which other European governments, irritated at what they see as the unprofessional negotiating tactics and confrontational rhetoric of the Greek government, have also begun to make contingency plans.

In the short term, a default would almost certainly lead to the suspension of emergency European Central Bank liquidity assistance for the Greek financial sector, the closure of Greek banks, capital controls and wider economic instability.

Although it would not automatically force Greece to drop out of the eurozone, a default would make it much harder for Alexis Tsipras, prime minister, to keep his country in the 19-nation area, a goal that was part of the platform on which he and his leftist Syriza party won election in January.

No one really knows what will happen if the Greeks default. There will be lots of hooting and hollering. Capital will rush out of the country as Greeks try to stash their savings abroad, but that’s most happened anyway. The banks will fail and close down. The economy, for a short period will seize up. Civil unrest will be inevitable. A military coup is not out of the question, as in times of turmoil, the guys with the guns tend to have an edge.

To the average Greek, this could feel like the end to the world, but it does not qualify as a collapse by the standards of anthropology. Greece is in no risk of dissolving. A coup would just mean new leaders in charge of the same society. Similarly, Tsipras crowning himself king would simply be a modification of the organizational chart and small one at that. Reform would simply be handed to an authoritarian.

It’s tempting to pin the reason for all of this on democracy. Critics of democracy have always pointed to the quote allegedly from Alexander Fraser Tyler, “A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury.” In short, democracy becomes organized looting that accelerates into chaos.

That’s pithy and useful, I suppose, but not accurate. It’s easy to pin the blame on the freeloaders and loafers. Democracy may increase their influence, but it also strengthens more responsible elements in society too. Modern elections are always over some problem that needs solving and the winner is almost always the one promising a solution.

Even in Greece, the main parties representing the ruling elite tried to force through changes in the face of their fiscal crisis. When all of your options on the ballot are calling for the same things, democracy has been suspended. It was only when the main parties failed to come up with a way to address the crisis that the lunatic parties moved to the fore, offering nothing of substance, just a catharsis.

It seems to me that what is happening in Greece is a part of a longer process that is happening in the West. The Greeks joined the Euro for a reason. The Euro, of course, was not created to give bureaucrats something to do during the day. The whole project, including the addition of Greece, was an attempt to solve a problem.

Publicly, the problem they claim to be addressing is the long history of conflict in Europe. Economic cooperation, then a single currency and eventually, political unity. That’s the part above the waves. The part below the waves is the diminishing returns of the organizational model developed over the last two centuries. They are grasping about for some way to make work the mathematics of social democracy.

The math of social democracy is all about diminishing marginal returns. The first big programs like public education and aid to the poor had big returns, far more than the costs. Subsequent investments in complex social management netted smaller returns, but still more than the costs. Over time, the inertia of progress forced greater investment in complexity, aimed at mitigated or ameliorating the human condition, well past the point of diminishing returns.

In this regard, the Greeks are an example of what lies ahead for all of Europe and the West. They joined the Euro because it looked like a solution to their problem, but it only delayed the inevitable. Now they desperately try to kick the can further down the road, but there’s not much road left. What comes next is anyone’s guess. Perhaps it will simply be a disorganized dismantling of decades of social complexity, a national version of a reorganization through bankruptcy.