Non-sense

Poverty is a much debate issue but not a lot of people worry about the issue of wealth.  In the Western world it is widely accepted that wealth is a desired state.  The rich and famous are envied by the rest of us mortals.  If only we can have money to flaunt.  If only we had a second or third mansion.  If only we can be fortunate enough to be richer than a small African country.  Or a large African country for that matter.

It is not that being excessively rich is a awful state from which the rich should be rescued.  It just feels so unnecessary: why on earth do they need ALL those earthly possessions?  Worst of all is the time to maintain the fortune.  Days and nights spent at work, stress and financial pressure, traffic upon traffic.  The rich don't have any time and the poor don't have any money.  It seems to me that both can be happier if they share the work.

If the economy is a cake and everybody just get a slice, it would mean that being excessively rich cause poverty somewhere else.  The solution to this always comes in the form of a progressive tax system.  The problem with this is tax that it is bad; no one likes it and the rich is still spending night and day at the office.

Some great minds such as British philosopher Bertrand Russel and economists from the New Economic Foundation went one step further.  Don't redivide the income with tax, just redivide the work.  One extreme is Timothy Ferriss that wrote The 4-Hour Workweek.  Working only four hours a week is a bit extreme; after all work should not be something you avoid above all else, it is suppose to be fulfilling life calling.  But if the rich and super rich works less hours per week and get less money accordingly; there will be an excess of work to be done and salaries to be payed.

Now, that seems nice... supply and demand! The rich works less and supply extra work and we know the poor is in urgent demand.  The poor supply time (as they have a lot of free time), which the rich demands, oh so, desperately!  That is one market that can surely deliver!

Common Wealth

I remember when I was a per-teen I got these intense growth pains.  It was this numbing feeling in my legs; almost as if someone is sitting on them and simultaneously stretching them out.  It was hell and I would lay there crying praying it would stop.  And somebody listened because at only 1,61 meters I would say it stopped prematurely. 

So I associated growth with pain all my life.  You can imagine my surprise when I got to university and learnt that the answer to all the problems facing our world, the answer to mal nutrient, poverty, child abuse, war even environmental degradation was… GROWTH.  

"Just grow..." the fat economist would smirk.  "All this world need is growth, kid, and then everybody will have more because you grew.  The market will deliver!"

You know what the capitalist system done?  It grew alright, but while some people got the length, others got the pain.  While some got the bargain, others paid for it.  While some got away with murder, others laid dead (probably in a ditch).  The system is not the answer - it is the problem.  Growth is never as simple as you think, there is always pain accompanying it and people praying for it to stop.  Schumpeter said the capitalist system will fall apart not because it is incompetent but because it is too powerful. 

I am not some kind of hippie or crazy one-eyed witch, I am not a communist, I am not an anarchist or a nationalist or a Zionist, or a religious fundamentalist, I am not labeled in any way.  I am one thing – and one thing alone – I am against what we are doing right now. 

 

The funny thing about excessive growth in the human body is that is not that rare.  We just don’t call it excessive growth, we call it cancer.  Cancer is a broad range of illnesses, all involving unregulated cell growth. In cancer, cells divide and grow uncontrollably, which frequently end with death.  I know I am short and I don’t mind because if a human grows and grows and grows and grows… they will soon have to go for chemotherapy.  Cancer has permeated in our society

Non-sense

I recently received an e-mail that had my blood boiling. Many of you have probably received it - the so-called statement made by Bill Cosby about being "76 and tired". Though the e-mail has been confirmed a hoax, it certainly has made the rounds. So here's my reply to "I'm 76 and tired". (You can read the "original" at http://urbanlegends.about.com/od/billcosby/a/I-Am-76-And-I-Am-Tired-By-Bill-Cosby.htm)

I'm 25 and I'm tired

I’m 25. I’ve worked hard to obtain an education and try to make a contribution to research and higher education. I, too, work long hours and never call in sick. I too, didn’t inherit my job or my income. But I do realize that, though I didn’t inherit my job or income, I inherited many opportunities. I did not get where I am alone. I have had parents, friends, family members and employers who were willing to take chances on me throughout my life. Given the state of the world, it looks as though few other people realize this and are thankful for it, as I am, and I’m tired. Very tired.

I’m tired of being told that people are not willing to “spread the wealth” because they are arrogant enough to believe in a thing such as a self-made man. I’m tired of people thinking that, if you’re poor, it’s because you are too lazy to earn money. It is an insult to the extremely hard working, honest people I know who perform back breaking labour for a pittance.

I’m tired of people thinking that any religion out there is, or ever has been, “a religion of peace.” Have Christians forgotten about the Crusades? The Spanish Inquisition? The way they have treated their own women through the ages? Most of all, I’m tired of these very people who claim to follow the “true” religion of peace, who use their faith as an excuse for not tolerating other cultures and religions, when the very founder of their faith that they claim to love above all ordered: “You have heard the law that says, ‘Love your neighbor’ and hate your enemy. But I say, love your enemies! Pray for those who persecute you! In that way, you will be acting as true children of your Father in heaven. For he gives his sunlight to both the evil and the good, and he sends rain on the just and the unjust alike. If you love only those who love you, what reward is there for that? Even corrupt tax collectors do that much. If you are kind only to your friends, how are you different from anyone else? ."

I’m tired of people not being willing to lower their standards of living to fight global warming because they are arrogant enough to believe that their comfort is more important than the air I breathe. I’m tired of people fighting about “being allowed to debate” global warming, when scientists agree it’s a fact. 

I’m tired of people having no empathy for drug addicts, depression sufferers and people who self-harm because they refuse to see that the world they have created by their narrow minded focus on enriching themselves and then hoarding the wealth to themselves is indeed, a disease.

I too, am tired of hearing wealthy athletes, entertainers and politicians of all parties talking about innocent mistakes, stupid mistakes or youthful mistakes, when we all know they think their only mistake was getting caught. What I am even more tired of, however, is this system in which we have allowed wealthy athletes, entertainers and politicians – of all parties – to dominate our press and our lives to the extent that they do.

I’m also really tired of people who don’t take responsibility for their lives and actions. I’m tired of hearing them blame the government, or discrimination, or big-whatever for their problems. I’m even more tired, however, of people and governments who often are to blame and still don’t take responsibility for their part in creating our current realities. I’m tired of the church in South Africa, who still won’t apologise for condoning and actively participating in Apartheid.
I’m also tired and fed up with men and women in their teens and early 20’s and even 40’s who are self-righteous enough to criticise other people’s choice in what to do with their bodies, whether it be bedecking themselves in tattoos or face studs. I’m tired of the fact that we live in a society where having tattoos and face studs can make you “unemployable” – when will we finally stop judging our fellow human beings based on appearance, race or religious creed?

Yes, I’m damn tired. I’m especially tired of people who refuse to think for themselves, when a five minute fact check I ran after receiving the “Bill Cosby e-mail” revealed, in a statement from the man himself, that he is NOT the author of the e-mail. But I’m also glad to be 25. Because, mostly, I’m not going to stand by and allow this lack of sympathy, common sense, and respect for scientific fact. I’m young enough to make a difference. Thank God for that.

Common ground

Job Creators

Speaking of job creators and trickling down...

Common ground

Trick(le) or Treat?

A few weeks ago, a Ted Talk that was presented by Nick Hanauer did not air, because the content was felt to be too political. What was the talk on? Income inequality. Though income inequality is not really groundbreaking news to anybody, what did make this particular talk quite incendiary (apparently) was the fact that it features a venture capitalist who proclaims that the rich are NOT job creators in the economy.

Republicans in America are particularly upset about higher taxes on the rich, claiming that the rich should be taxed at lower rates, since they will then go on to spend their money, open new businesses and create more jobs. In this way, the benefits received by the wealthy are believed to “trickle down” to the rest of the economy. But is it so?

Well, no. The trickle down theory is not new at all, and we have not seen it actually leading to lower inequality where it has been applied. In fact, Greenwood and Holt (2010) argue that income inequality in America has worsened after Reagan, who was a proponent of the trickle down effect. There does actually exist a negative trickle down effect, where the economy grows, but because wealth is concentrated, instead of income trickling down to the lower classes in a positive way, it influences them in a negative way. For instance, more conspicuous consumption from the 1% at the top places a lot of pressure on the rest to “keep up”, meaning that consumption patterns have to change in order to maintain a certain level of status in your job and community, and this is detrimental to the average, middle-class Joe’s welfare. The more concentrated wealth is, the less investment there is in public goods which are meant to be beneficial for the commons. This is because the wealthy elite oppose higher taxes and are unwilling to pay their share in order to ensure the commons (this is what we see happening with the Tea Party in America). This makes essential goods such as health and education even less affordable to the poor, widening the income gap further. So what, you might argue? Remember that inequality is in itself a market failure in an economy. It distorts the allocation of resources even more than they already are. As Stiglitz points out, young people flood universities in order to study finance, because they believe that this is where the money is and want to be part of the rich elite. What the economy would actually benefit from most, though, is more teachers, researchers and scientists.

Lan and Hegji (2009) find no evidence of a trickle down effect which benefits lower income groups in America. Qureshi (2008) also does not find evidence of this effect in Pakistan.  The problem is that economic growth is once again confused with development – we want to argue that we should tax the rich at lower rates so that they can seize opportunities to grow the economy, which in turn will mean higher income and quality of life for other people lower down in the economy, but I have explained in previous posts why this is not so.

As Bill Maher states so very succinctly: “How else do you explain trickle down economics? They’re practically saying – we’re pissing on you.”

References:

Greenwood, D.T. & Holt, P.F. 2010. Growth, inequality and negative trickle down. Journal of Economics Issues, XLIV(2):403-410.

Lan, Y. & Hegji, C. 2009. A new look at the trickle-down effect in the United States economy. Economics Bulletin, 29(3):1743-1748.

Qureshi, M.A. 2008. Challenging trickle-down approach: Modelling and simulation of public expenditure and human development - the case of Pakistan. International Journal of Social Economics, 36(4):269-282.

Tragedy of Common (sense)

Imagine a day 2020 million years ago... let's say in June.

Everything was tranquil, still, peaceful and quiet... no humans, no crime, no corruption, even no dinosaurs yet, only equilibrium!  Somewhere on this peaceful planet there was a shallow inland sea (on today's maps that sea is 120km South West of Johannesburg, South Africa).

And then BOOM!! A meteorite, as big as Table Mountain, hits this shallow sea, explodes. Vast amount of energy are poured into every living and geographical thing, the Earth's crust is crushed, melted, moved, flipped, crumpled and pushed into new forms, the inland sea evaporates like a new years resolution.

And then it was over, within the time you would take to make a sandwhich and fall down on the couch... it was still again.  An eery shocked stillness.

This was the biggest meteorite to ever hit the earth, even bigger than the one that killed of the dinosaurs. The impact zone is about 300km wide.  It was massive, majestic, immense, aweful and awefilled.

This impacted our lives today as well.  Firstly, the gold of the Witwatersrand is said to have come the meteorite, which overturned the Earth crust and barried it deep enough to only be exposed in our time and drive our economy.  Even the South African currency, the Rand, is named after this gold ridge (rand is Afrikaans for ridge).

In the heart of the impact, the meteorite caused the stone to melt and set almost instantly, this made beautiful patterns in die granite; black lines and parts that looks like a river of stone.  This beautiful rock is said to be the oldest rock on Earth and it lies there, pretty in shades of pink.

And what did the humans do? 

Yip, we mined the granite, we blown it to bits and used it in our very import kitchen tops. For millions of years that rock was majestically untouched... even the Bushmen who roamed the area respected the old rocks.

Sure, we did not know what we were doing, we did not realise the magnitude of the area in which we dug for nice counters!

In neo-classical economics we calculate the value of a piece of land with cost-benefit-analysis.  A cost benefit-analysis is not to say that only money is important - it wants to include the TOTAL value of a natural entity by expressing everything in terms of money.  Then see if the value is more than the benefit from harvesting the natural entity.  In this total economic value, use and non-use values are included.  Use will include direct use and indirect use, such as timber from a forest and oxygen out of photosynthesis, respectively. Non-values include,  option use value, were you would pay to keep the option of harvesting the entity later open. Bequest value, would be how much you are willing to pay to protect it for future generations.  Existence value would be how much you just want the entity to live.  Most cost-benefit analysis only include these three non-use values. 

But there is a fourth, QUASI-OPTION VALUE!  Quasi-option value is the amount you are willing to pay to ensure you don't destroy something of value today and only realise it's true immense value tomorrow. 


I conclude; it is clear to see that the neo-classical system is not only failing in theory but also failing in implementation (example; some idiot forgot to include the quasi-option value before he blew a World Heritage Site to bits).  Ah, who cares for something a million times older than the story of Jesus - as long as we have nice counters to chop and dice on!!

Common ground

Risk

I am more and more astounded by the complete lack of empathy in our modern, capitalist system. A heated debate on income inequality, and particularly the discrepancy in salaries between CEO's and employees, led to this statement a while ago: "But the CEO's and venture capitalists out there are the ones taking the risks, of course they have to be rewarded accordingly." (This comment from a stock broker, naturally.)

Have we really become so twisted that we believe money is the only thing worth taking risks for? What about the miner in that big conglomerate of yours, Mr. CEO, who daily risks respiratory illness (best case scenario) and death (worst case scenario)? Are you rewarding his risks "accordingly"?

Or the teenager living on the streets who turns to prostitution to make a living. She's risking death and disease everyday.

The single mom working two jobs to support her children? Do we really think the risk she takes in missing being there for her child's first steps or first words are somehow less? What about the risks she is forced to take with her children's safety in having to leave them with strangers to take care of for the day?

It's not risk we want to reward. Secretly, it's status and social paradigms of what is acceptable that we reward. Of course that Ivy League graduate deserves that astounding salary for shifting funds around on the market all day - he studied hard to earn the knowledge about how derivatives work. Cut to the small farmer/builder, toiling in the sun and rain all day, performing back-breaking labour to earn a pittance. Like the knowledge he possesses about growing successful crops or laying a sturdy foundation is somehow less.

I guess the most sickening example of how we reward "risk" in this twisted system, is what's happening in Somalia. Italian conglomerates are dumping their toxic waste in this country, simply to save some money by not disposing of it in the correct way. The Somalis are now suffering serious health problems, and the rise of piracy in this nation has also been linked back to this problem - toxic waste has destroyed the local marine life, leaving fishermen with no other place to go.

But it's that Italian capitalist, who took the risk to establish a business of his own and now drinks his espresso's in designer Armani each morning, who carries the real risk. Right?