Category Archives: political economy

Not that Complicated

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In a Wall Street Journal article centered on why 3% inflation isn’t close enough to 2% inflation, even for government work, there was this bit:

Anticipating the public’s reaction is tricky, not least because economists still argue about why people hate inflation so much in the first place. In textbook models and in many real-world instances—including during the 2020s—wages tend to catch up to prices, so inflation doesn’t, over time, erode the purchasing power of the average worker’s paycheck.
Even so, inflation makes people feel that they are falling behind….

It’s not that complicated.

This is a case where opportunity costs become real and realized costs. Wages do catch up over time, but during that time, people keep right on aging. By the end of the inflationary period, the time behind them has in concrete terms eroded their purchasing power. The opportunities to do the things they’d wanted to do are lost forever. The abilities to do many things for themselves or with family and friends may no longer possible as they now may no longer be young enough to do them, depending on when in their lives the inflation struck them. The opportunities to acquire many of the things they wanted to acquire are permanently lost as they have less time left in which to enjoy those acquisitions, or in the case of a larger house to better accommodate a growing family, some if not all the children have left the nest and the larger house no longer is useful to them.

Over that time, too, and beyond it, wages don’t necessarily exceed the inflation, so catch-up, practical, useable catch-up—the ability, for instance, to expand savings to get back to where folks would have been had their savings regime not been interrupted by the inflationary period—does not exist.

Inflation makes people feel like they’re falling behind, because during the inflationary period they are falling behind. Then people remain behind because even with after the fact rises in wages, their opportunity to catch up is so heavily limited, and especially is the time available in which to catch up much more tightly constrained.

All of this especially is the case for folks on the lower rungs of our economic ladder. They start out with narrow margins for things like savings and acquisitions of highly useful things—that larger home, for instance, or a car to replace the increasingly expensive to maintain beater—much less to do or acquire things are fun to do or to have. In the best of times, they have trouble keeping up; with the losses from an inflationary period, they only fall farther behind, with no hope of recouping even that arrearage.

Dealing with an Enemy Nation

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The good editors of The Wall Street Journal wrote a piece on the challenges to Treasury Secretary nominee Scott Bessent, on the assumption he’s confirmed. The editors, though, have misunderstood some of those challenges.

Hitting China with enormous tariffs will compel Beijing to dig in, not change its economic model, but Mr Bessent might use the threat to urge China to recognize its self-interest in rebalancing.

It’s not important whether the People’s Republic of China changes its economic model. The nation is an enemy of the United States, openly averring its goal of supplanting us on the world stage, and from there controlling our actions on that stage. The PRC needs to be isolated and contained.

By contrast, a mercantilist purchasing deal would fail to address China’s fundamental problem. The Trump administration would be better positioned to rebalance with China if it weren’t simultaneously declaring economic war on the rest of the world.

Mercantilism is irrelevant to the PRC’s fundamental problem, which the editors don’t recognize in their piece. The PRC’s fundamental problem is their shrinking population which is caused by their birth rate being far below even the replacement rate necessary to maintain an existing level. A critical subset and outcome of that problem is that its population is aging and already doesn’t have enough workers to sustain their retired and aged citizens, much less to man its factories. Aside from raw bigotry, this is another reason for the forced labor of Uighurs in PRC factories.

There’s less than no need to rebalance with the PRC: that nation is an enemy nation bent on replacing and controlling us. Rebalancing, along any dimension that doesn’t include gaining, regaining, and expanding our superiority, would only facilitate its effort.

It’s true enough that an economic war with the rest of the world is counterproductive, but it’s relevant to the need to isolate and contain the PRC only to the extent that mercantilist tariffs on so much of the rest of the world waters down the effects of foreign policy tariffs on the PRC and our ability to get other nations to support that isolation.

At bottom, the editors have confused tariffs used to influence an enemy nation—foreign policy tariffs—with mercantilist tariffs—protectionist tariffs used to make other nations’ exports to us more expensive relative to our domestically produced products. I’m surprised that the editors do not understand the distinction.

Imaginary Risk

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Mark Zuckerberg, Meta‘s boss, has said he’s opening his Facebook and Instagram to free speech and no longer managing what advertisers’ spots appear alongside postings. Advertisers are concerned.

Advertisers have expressed concerns over the past few weeks—in meetings with Meta as well as with their own agency partners—that Meta‘s tools might not be enough to stop ads from showing up near offensive content as the new content-moderation approach comes into effect, and that user feeds could become inundated with misinformation.

Advertisers’ concerns are wholly unfounded. Any serious risk is entirely in their own timid imaginations. There always will be folks who manufacture objections and smears based on the appearance of an ad alongside a posting that someone decides to find objectionable. As long as those timid ones accede to those someones’ manufactured ire, their reputation—the safety of their brand—will be in the wind. Were they to find, instead, the backbone to ignore the someones and their artificial beefs, those someones would remain the vast minority of viewers, potential customers, and customers who might see the pairing, and the advertisers’ brand safety would remain soundly tied to the quality of their product and to nothing else.

The someones are just bullies, and they’re best dealt with by ignoring them and second best dealt with by directly confronting them and pushing back, hard. Their mis- and disinformation is best handled, not by running away from it, but by answering it with actual facts and logic.

Bureaucratic Passive-Aggressive Resistance

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It’s in progress, as Federal agency personnel pretend they don’t know how to do their jobs in light of President Donald Trump’s (R) directives to them.

The Transportation Department temporarily shut down a computer system for road projects. Health agencies stopped virtually all external communications in a directive that risked silencing timely updates on infectious diseases. A hiring freeze left agencies wondering how parts of the government could adapt to new demands. Confusion loomed over how agencies should disburse funds allocated by the previous administration.

Computers are confused about how to deal with existing and proposed road projects. Sure.

Health agencies personnel are holding their breath until they turn blue in the face—or get their way. These personnel are self-selecting for the coming RIF.

Managers who can’t figure out how to use the personnel they have—and have had all along, less retirements and resignations—to continue their statutory mission are demonstrating their unfitness to be managers.

Funds allocated by the Biden administration—allocated, mind you, not spent—should not be spent. It’s not that hard.

Then there’s this bit of resistance:

[S]ome longtime federal employees said the chaos seemed more extreme this week due in part to wide-spanning differences between the agendas of the previous administration and the incoming one.

This is an example of the failure of the current civil service system and why it needs to be replaced. There’s no reason for the chaos: the so-called wide-spanning differences don’t exist. The previous administration’s agenda no longer exists, so there’s nothing from which to differ.

To be sure, there is a new agenda and a new corporate culture in place; if those long-time Federal employees can’t adapt, and do so quickly, they need to be retired or RIFed. They’re just in the way, wasting us taxpayers’ payroll.

Folks, mostly on the Left and in the Progressive-Democratic Party, wonder why there’s so little confidence, much less trust, in Federal bureaucrats and the Bureaucratic State. We average Americans, who aren’t as dumb as the Left tries to make us out to be, understand full well why.

Nothing to Fear but Fear Itself

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Somebody said that a while ago; it’s still true today.

The milieu this time, though, concerns drones and the People’s Republic of China, and the headline lays out the matter:

Drone Makers Looking to Steer Clear of China Fear Beijing’s Wrath

And this, to put the gooseflesh on the skin:

For US companies, dependence on China has become untenable, particularly as Beijing shows it is willing to cut off their access to essential supplies.
In Taiwan, that spells opportunity. ….
However, recent examples of Beijing punishing companies for their ties to Taiwan have made US businesses cautious in their efforts to avoid China in the production of drones, an industry where commercial ambitions and national security intersect.

“Cautious” is it? This is just one more shameful example of the cowardice of American business managers.

The way to avoid PRC wrath and repercussions over no longer sourcing essential supplies from the PRC and sourcing them from the Republic of China is to stop sourcing from the PRC and source them from the RoC. And from anywhere else.

When the goodies no longer come from the PRC, the PRC can no longer threaten their cutoff. When all the goodies, for everything else besides drones, no longer come from the PRC, the PRC can no longer use any cutoff for leverage or retaliation, or any other purpose. Don’t overthink things. Don’t artificially complexify things. Just do it.

Even managers of American companies can understand that.

Certainly, the transition will be short-term expensive, but in the mid- and long-term things get so much cheaper, so much more stable, and so much less threatening that the time to incur that expense is today.

Lose the fear.