Book: The price of civilization

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jacob
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Post by jacob »

http://www.amazon.com/The-Price-Civiliz ... 812980468/
Detailed description of how US politics really works (pork, segregation, "middle-class", Tea Party, two-year cycle,...). Also why certain keywords are often used in debates: "small businesses, education" (regarded as the most thrustworthy amongst the electorate) are used all the time ... the opposite end of the spectrum being "big business and big government".
Some stats showing that US numbers on taxes and Gini inequality falls among certain other nations like Portugal, Italy, Ireland, Greece, and Spain ...
Suggests that the only solution to having Europe style numbers in terms of infrastructure, national health, poverty levels, education, is to raise taxes because cutting the budget is nigh impossible.
However, because raising taxes has been taboo since Reagan, there are only two solutions. A new public spirit ala Kennedy (Ask not what your country...) or probably more likely, monetizing the debt into inflation (although I think that inflation will be corporate subsidies, like now---own stocks).


J_
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Post by J_ »

I second the more likely solution as you describe, that means further....

more poverty, more Gini inequality, more tension between the have's and not's.
Poor rich US.
( in my heart I keep hoping on that new public spirit.. )


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jennypenny
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Post by jennypenny »

Sachs usually has too much of an agenda for me. Is this book the same?


Dragline
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Post by Dragline »

I have no doubt that it is thoughtful and well-written. Yet I find such works to have a certain myopia, because they tend to rely on an unstated assumption that these issues did not exist prior to the founding of the United States and the writings of Adam Smith, or that only solutions within those memes are relevant.
If you read something like "The Lessons of History" by Durant, you will come to appreciate that over thousands of years, societies with great inequality tend to be unstable. The instability is eventually resolved in one of two basic ways - some sort of legal redistribution (a/k/a the ancient "jubilee") or a violent overthrow of the ruling class (a/k/a the French Revolution). Pareto also observed that stable European societies had had an 80/20 type wealth distribution for centuries. When they vary too much from that for a long time, they tend to blow up.
Read this excerpt here re the choices -- we're really no different than ancient Greece or Rome, modern economic memes nothwithstanding: http://windyanabasis.wordpress.com/2011 ... -of-solon/
Unfortunately, I'm not seeing any modern Solons out there at the moment -- at least none in power or running for office. Instead, the preferred temporary solution seems to be slight-of-hand currency devaluations that are not reflected in governmental measures of inflation, which will tend to exacerbate the inequality, as those dependent on wages and pensions will see their standards of living decline and benefits will inure to large financial institutions.


dragoncar
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Post by dragoncar »

Own stocks, eh? So you expect the P/E ratios to increase due to inflation?


jacob
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Post by jacob »

@dragoncar - No, just earnings.


secretwealth
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Post by secretwealth »

Sounds like ideological axe grinding to me, even if I might agree. I think there's a larger income differential between skilled and unskilled labor, which is what you'd expect with globalization and technology. Is this necessarily a bad thing? We are more prosperous and there is more wealth being created, in aggregate.


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Post by jacob »

@secretwealth - There's definitely some axe grinding in the book. Looking beyond that, while the US is leading(*) in average GDP [for a diverse economy, i.e. Belgium is out] it's not impressive on many other development measures, e.g. longevity, four year degrees, infrastructure, obesity, middle school scores, social mobility, poverty.
(*) Well, actually, Norway is doing better, so the US is number two. Both are strong on natural resources which gives some free tail wind.
But ... in any case, the point of the book is that these problems can only be solved by higher taxes since further government debt leads to Greece and budget cuts are immaterial. But ... that raising taxes won't happen because neither party can go for it due to the 30+ year zeitgeist.


secretwealth
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Post by secretwealth »

Norway is a lot more dependent on natural resources, isn't it? I'm not sure if it's as diverse an economy as the U.S., but I don't know much about Norway.
It's true that there are a lot of problems in America, but I don't think the issues you raise can be classified as purely economic--such thinking seems too reductivist to me.
1. Longevity: Surely a result of economic prosperity, isn't it? Food production has gotten so efficient that we can easily consume 10,000 calories a day without going bankrupt. This was not possible 100 years ago. The steep growth in longevity gains thanks to penicillin et al. is more of a historical anomaly than a consistent manifestation of a wealthy economy.
2. Four year degrees: I thought four-year degrees were at their highest rate in history, and growing? Unless you mean compared to other countries--yeah, it's pretty low, but American universities are much better than comparable HE institutions in other countries in the world, which is why they attract the best and brightest from the rest of the world, such as yourself. ;) I'm not sure if the growth in four-year degrees abroad has more to do with their lower quality institutions or the fact that a lot of people can get pretty decent jobs without them in the U.S. Either way, I'm not sure if this is an economic issue.
3. Infrastructure: Yeah, got me on that, but America's crumbling infrastructure is the result of overinvestment in two needless wars abroad and mismanagement--i.e., it's a matter of policy more than economics.
4. Obesity: See point 1.
5. Middle school scores: I think this is solely a cultural problem. For various reasons, America has an anti-intellectual culture (cowboys, rap artists, athletes as role models doesn't create a nation of engineers). This might change--I hope it does--but even if it doesn't, America has had worse primary and secondary test scores than other countries since the 60s, so I'm not sure how much of a crisis this is.
6. Social mobility: Yeah, this is definitely an economic issue, but I think it's also a policy issue as well. Funding of higher education has been cut, creating more rigid class divisions and making it harder to cross those lines. I remember when it took a summer job to pay for a year's worth of tuition at Berkeley. Good luck doing that now that California has cut its funding to its once incredible public university system...
7. Poverty: Got me there. America has a shamefully high level of poverty, and income inequality to boot. I don't think tax policy will change this--it's an economic issue, and not an easy one to fix.


Chad
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Post by Chad »

I've had that book on my to read list for a while. I will have to take a look.


J_
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Post by J_ »

What can Europe learn from US?

Europe is struggling to become a federation on monetary level. It is likely that in the very near future the richer states have to write off (most) of the Greek debt, because the Greek are technically bankrupt.
How does that work out in US, where there is a 200 years expierience in state/federation. Are poor states helped financially by the richer ones?
It seems to be a kind of "the price of civilization"


Spartan_Warrior
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Post by Spartan_Warrior »

@J_: Absolutely. Ironically, in the U.S., the predominantly conservative states--who cry loudest about "hand-outs" and "big government"--pay the least in federal taxes and yet receive the most in federal assistance.


Chad
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Post by Chad »

@J

The difference is that other countries would have to agree on the bailout plan for Greece. If a state went bankrupt the federal government would make bailout plan from the tax money already collected from the states. Yes, the states congressmen would have a say, but the states themselves would be out of the decision making process.
The US federation of states is going to be tested more over the next 10 years than at any time since the Civil War.


Spartan_Warrior
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Post by Spartan_Warrior »

@Chad: Yeah, that lack of a central governing body to arbitrate those economic decisions is exactly why I can't fathom how these attempts to unify the European money system will work without necessitating a unified European government--New World Order, anyone? </tinfoil hat>
As for the future of the U.S., I feel like I've elaborated my position on that here enough. ;) Needless to say, I agree with you.
Anyway, book added to my way-too-long reading list.


Chad
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Post by Chad »

My library had an audio version of the book. Really really well thought out. One of the best books at covering the macro (and even a few micro) causes of our current mess. He gets more right than most anyone else I have read, heard, etc. It makes the upcoming election even more depressing than normal.


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Post by JohnnyH »

@Spartan: "Ironically, in the U.S., the predominantly conservative states--who cry loudest about "hand-outs" and "big government"--pay the least in federal taxes and yet receive the most in federal assistance."
Why is this surprising? Rome had many a building program to win over colonials.... Lol, I have to roll my eyes every time I see a road construction sign:

TAXES PAID: Federal = 20,000,000... STATE = 2,000... LOCAL = ZERO!!! :D
Rome builds my roads, so I don't mind paying them tribute!


Stahlmann
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Re: Book: The price of civilization

Post by Stahlmann »

Lost long post on Jeffrey's Sachs activity -.-'

Why has he changed his mind so... drastically?

He advised Very Important Country ca. 1990 with no mercy capitalism, took loot (or his Masters did this) and then... in 2000 he has audiacity to say something on "price of civilization"? Was it advancement of his views (and change of his Masters)? Or he acknowledged there won't be much to take over in the future so he proposes (finally) taxing fellow citizens (in America)?

I'm rather enraged as I can choose between working for some suppliers in mech eng for 600$/mo., or... making rich richer by checking fund accounting as Mr CEO John Smith created such opportuinty for 700$/mo. (by removing this kind of job from America) or helping Herr Helmut Schmidt in using his computer in some BPO, also for 700$.

(real life choices)

(Middle Income Trap hasn't been anouced here (and anywhere else), but I bet it'll be sooner or later)

What times to live.

PS. As I'm writing this post second time, below list contains what was lost:
- rage
- link to "23 things they don't tell you about capitalism" (as argument for how to make poor countries stronger)
- ackonowledgement that people can have different tool sets for different problems

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