Trade anxiety!

http://fortune.com/2015/06/22/top-fast-track-david-ricardo/
Students in any macro-economic class will have encountered David Ricardo and his theory of comparative advantage, which is pretty much the cornerstone of global trade today. A straightforward theory explaining that when countries 'specialize' in producing whatever they are good at producing, they will trade those goods or services with countries who specialize in something else. Both countries benefit financially when they trade making governments and merchants on both sides of the transaction better off. No serious person refutes Ricardo's theory on the merits today; the dispute on most free-trade issues is over whether or not other countries will abide by the same standards they sign up for in this massive deals that presumable cover everything from agriculture and automobile standards to pay for displaced workers and anti-dumping laws.

As someone who is in favor of free trade, I am sympathetic to concerns most Americans (citizens of other democracy as well) have about the loss of sovereignty in the exercise of the government authority. For example, Greece is a country in the center of a financial disaster due to mismanagement and negligence on the part of former government officials. They are in such a hole that the EU has to put together bail out packages every couple of months to keep them from collapsing into insolvency. Many German and French citizens would love to cut Greece off and let them fix their own mess. Problem is, much of their sovereignty has been tied into by a collective governing body known as the EU, which decides how much money and how often economies like Greece get bailouts and under what conditions. If the Germans took a vote over whether or not to fund insolvent Greece the result would be a definitive NO! But they don't get a vote because they ceded the authority to decide on financial issues to a giant central bank. I don't want this for America; we need to retain the ability to vote out bad deals while maintaining open trade with other countries. It is nearly impossible to satisfy every industry or concerned party in sweeping trade legislation, but diligence must be observed.

The upcoming piece of legislation on the Trans Pacific Partnership (TPP) is supposed to lower tariffs and increase exports of goods and services from the United States. Well...maybe. When looking at upcoming legislation, the best example of future performance is past performance. Unfortunately the nearest example is the North American Free Trade Agreement (NAFTA) but I can't find anything resembling a coherent argument for or against the massive overhaul. I know the trade classifications, or rather re-classifications, were updated for the U.S, Canada and Mexico to keep much of the money within the region. Trade classifications are those designations that products crossing international borders must be labeled with. So if Japan sends BMWs to the U.S. on cargo ships, those automobiles would have a corresponding label that fits an automotive description recognized by every country. NAFTA created it's own classification book essentially, that labels products like automobiles created in the U.S different from ones manufactured in Japan.  To say the least, it is confusing and messy but I don't really know whether or not it is considered beneficial to the overall economy. I'll keep looking at this as well as the new TPP deal currently being debated in Washington. I am cautiously on board though so far.

Constructing Identity

Truth is not relative. Bruce Jenner and Rachel Dolezal have both been in the news lately for different ‘identity’ type conflicts within themselves. Jenner wants to become a women and Dolezal thinks she is black but is obviously not. The most painful element to all of this 'is she or isn't she black?' nonsense is the inability of so many in media to state the obvious; she is white. She is a liar. She is quite possible crazy. The rest of the story about why she 'identifies' the way she does is dishonest and makes truth relative. Bruce Jenner becoming a woman because of how he feels is a problem for him, but when writers don’t discuss it in the light of the truth that a being does not change fundamental and biological aspects of their humanity because they 'feel' like it is dangerous. Journalists encourage the victim narrative by writing syrupy nauseating articles about the individual's 'discovery' or past family pain that might have led to the transformation. This is the unavoidable weepy interviewing style that started trickling into stories when Oprah was getting the big stars. ESPN even nominated Jenner for the Courage Award. This essay from Slate however, takes a different approach. Instead of arguing that Dolezal's ethnicity or race is a matter for her to decide, he replaces the is-she-or-isn't-she question with a larger explanation of how black identity is tied to struggle and hardship. This is a textbook bait and switch tactic meant to steer the debate toward cultural issues that the left is concerned with. Like an insurance salesman who finds a myriad of ways to sell plans, the ideologically driven (hopelessly biased) journalist will turn a prominent news item into promotional material for his own revolution. Instead of supporting or rejecting this woman on the merits, the reader is fed bits of social constructs the author has created in which being black equals passing a litmus test of struggles. Rachel Dolezal is not black and nothing should be made of how she 'identifies'.

    

 I understand the urge to sympathize with people undergoing emotional distress or mental instability. Often it takes a celebrity voice or high profile incident to highlight mental disorders most of us don't see close up. Temple Grandin showed Americans a creative side to reducing stress among dairy cows and feeding patterns for other livestock while bringing attention to autism, something she has dealt with personally. A change in perception can be beneficial in business, philosophy or education as long as concrete principles and truths are observed. If Apple inc. decided making a profit was less important than producing the most visually appealing products and clean aesthetics they are known for, the enthusiasm would last for a little while but the money would soon run out. What is needed for Apple is to find a way to understand the primary truth of business, turning a profit, while not ignoring creative components that make their business a cutting edge industry. No matter how much designers may want to ignore costs of production it remains a concrete principle of creating goods and services. The sympathy for disturbed people like Jenner and Dolezal runs the gamut from the heart-felt "Tell me what I can do to help?" to the inconsequential "I've got more important things to discuss". When society doesn't present a clear understanding of truth and lies the resulting mush will be relativity in all areas of life, not just socio-cultural. The more space we carve out for ‘identities’ that have never been recognized by society as anything other than mental disorders, the less chance those confused individuals have of being helped. Stop treating Bruce Jenner like a hero and stop using Rachel Dolezal to advance personal notions about societal inequalities.

 http://www.slate.com/articles/news_and_politics/politics/2015/06/rachel_dolezal_claims_to_be_black_the_naacp_official_was_part_of_the_african.html

The Crackdown Continues...

http://www.bbc.com/news/world-asia-china-26349305

Convicted on corruption charges and leaking state secrets, another of Bo Xilai's acolytes gets sentenced to life in prison. Truthfully the charge could have been anything. Corruption among Communist party apparatchiks is a laughable thing to be investigated for given the regularity of graft. Xi Jinping is gaining legitimacy by showing a restless population that his war on corruption is real.   The immediate purpose of the trial is for show and to get rid of powerful leaders outside of president Xi's faction. The larger purpose though is to protect the Communist party and its position as the leader of the world's largest country. Evan Osnos of the New Yorker wrote a great piece on Xi Jinping and his realistic understanding that the party's control is tenuous and must be seen to be acting in the interest of the people. One quick look at the "Arab Spring" from a few years ago proves how quickly populations can overthrow governments. China is hardly Egypt, but stirrings of discontentment have started already in Hong Kong this last year. I am curious to see what happens in the mainland, as well as the government's reaction to it. The next few years will set the tone for the Xi regime.  

hollowed out institutions

http://www.washingtonpost.com/opinions/for-american-pundits-china-isnt-a-country-its-a-fantasyland/2015/05/29/24ba60e0-0431-11e5-a428-c984eb077d4e_story.html

Two things that will surprise most Westerners when and if they happen are the corruption of the banking system and the weak nature of the Communist Party. Weak growth in the economy over the next few years will start the crack in the foundation of both institutions.

Beijing Bullies

http://nationalinterest.org/feature/time-america-get-tough-china-12960

The way forward in the South China Sea is stronger ties with Taiwan and China's neighbors in the region as a buffer against Beijing's assertiveness. The big question for the region is, how committed are the Chinese to building and defending military outposts on tiny islands? Clearly they believe no power (Japan or the U.S) will push back sufficiently enough to cause them to remove the ramshackle bases already in the process of being built. Beijing is making a gamble that Americans won't risk insisting that international waters are keep free and open. The U.S. via the navy needs to increase its presence in the strait of Taiwan and start sending anti-aircraft artillery to bulk up Taiwanese defenses; Japan and the Philippines could be included in the pact as well. Obviously this is a framework to start with the details could be hammered out. The important aspect of dealing with China is deeds not words. Diplomatic condemnation is bullshit and Beijing will treat is as such. The mainland still sees Taiwan as a renegade province and even the suggestion that they enter into an agreement with other world powers is salt in an open wound. Any new weapons or technology with pacific powers could be removed, and should be, as part of a quid pro quo with the mainland over its claims on the Spratly Islands as well as the Senkaku Islands. Only firm resolve and commitment to work with pacific partners will force Beijing to back off. 

Trade Up

http://bigstory.ap.org/article/98407e93cae241adac57b857db1e38ca/obamas-senate-allies-hope-endorse-his-trade-bill-friday

Good or bad for free trade? The truth is no one really knows yet because all the Senate did was authorize Obama the necessary but important negotiating tool of signing a trade bill with other signatory countries, Congress can still reject the final version later on. The controversy in this bill is the same as with other international trade legislation; when does national sovereignty get overruled by a global trade court with the power to regulate business? Nothing has been agreed to yet so this could all be a moot point, but like NAFTA it could come with opaque legal requirements and messy tax issues. I'll be following this one...

Welfare's Hidden Waste

http://www.economist.com/news/finance-and-economics/21651897-replacing-welfare-payments-basic-income-all-alluring

Welfare is a generic term that could mean the health and general well-being of a person or a set of federal programs distributing money to either the poor and/or any organization set up to receive payments. Many elements make up welfare benefits to a country's poor and are all ruinously expensive in First World countries. Ideas about how to redistribute money more effectively from wealth producing to wealth consuming sectors, fail to convince me that they constitute real progress. Welfare always gets more expensive for governments, and by extension citizens, since the foundation for propping up the poor needs a consistent cash pile. A cash pile that stays full when the economy is growing but that dwindles when the economy slows down. Budget cuts and downsizing reduce the money for welfare recipients who have by now gotten used to being fed regularly like pigeons at the park. In truth, welfare is difficult to cut whether talking about food stamps for low income or the tax breaks enjoyed by large corporations. Congressmen and women are pushed and pressed to hold on to whichever benefit their respective region is enjoying while anyone suggesting cuts in the rate of increase or even a flat rise in taxes gets quickly labeled a sell out.

Politics are messy when money is being made by the truck load, doubly hard when it dries up. The author enlightens us about some of the thinking on national welfare programs meant to distribute money to everyone and avoid the complex bureaucratic maze that looses money between state and citizen. A straight line is what's needed, say some economists who worry about efficiency and nothing else. This solution leaves out the problem of chronically unemployed people who contribute seldom or nothing at all to the general fund and get a comfortable return on their laziness. This one I think irks regular folks more than most because of the inherent unfairness of such a system that rewards irresponsible behavior. Not to worry, assure other accountants, a person drawing benefits would have to prove they are working in order to draw a paycheck. One aspect that's always overlooked is the ability of welfare kings and queens to game any system set up to catch them. Tell them to show evidence they have work and they'll do just that, until you look away and they quit the job or learn how to fudge employment paperwork. Anyway, adding a layer of checks and balances to prevent scammers is pretty much what we have now and it works for shit. The question that really hangs over this whole debate about welfare and the how, should really be about the why. Why does welfare need to exist at all? It is difficult to think about a society in which some form of government aid doesn't exist, from student loans to HUD mortgages and even tax breaks on personal loans; the fact is the federal government has been in the banking business for such a long time most people can't conceive of private institutions without FDIC guarantees running the mortgage, student loan, and personal loan business. I am trying to imagine it myself and struggling; welfare, understood as wealth taken from productive sectors of the economy and distributed to unproductive ones will cease to exist in the future. Hard to say when exactly the bottom will fall out, but the levels at which governments (not just the U.S) are buying debt and distorting the marketplace, it is a certainty that a HUGE correction is coming. With this correction, welfare will be a thing of the past as central banks try to spike failing programs.

Here is where the real pain hits and why I am against welfare in general and subsidies for the poor in particular. Welfare for the poor has increased as percentage every couple of years since the late sixties, one exception being the mid-ninties when it was cut. Generations of kids have grown up with some form of food stamps and income related to not working and not gaining the higher earning potential that comes from steady employment. They could be forgiven for thinking a link card is basically a credit card that buys food and that someone replenishes every month; no thought is given to where the money really comes from. This is the definition of generational poverty and it is the real waste at the heart of the issue. When human potential is wasted and held down by the 'tyranny of low expectations' the whole country suffers. Debates about how best to distribute money more effectively or which program costs less in the long run are just wonkish debates among eggheads when the people affected have never been taught how to earn, save, invest and contribute. I am not convinced by arguments that use the same re-distributionist techniques because they rely on continuous funding that ultimately ruins lives and perpetuates the system. Real change requires taking away the free money and allowing businesses to hire and grow and sustain. I hope we learn this lesson before the entrenchment of free handouts has caused irreparable damage.