I was going to respond to a discussion on taxation in the Inequality diary - but my piece got long enough for this diary.

Rather than talk about earned versus unearned income, I suggest to think about taxation of surplus capture (or appropriation). Bear with me.

The basic story in the economy theory is how labour and capital (material and financial) and real estate (land and accommodation) cooperate nicely to produce more wealth. The big problem which is sometimes abused but more often vulgarly ignored is distribution of the newly produced wealth.

Classical economists broadly agreed that generally labor is at the most disadvantageous position, as its wages depend on labor market competition and bargaining power, not ion the surplus produced. We are returning to the times when labor rewards are disgustingly skimpy indeed.

Sure, some highly skilled labor is still richly rewarded, sometimes out of proportion to produced value - think of football (and other sports) star contracts that did turned out delusional. But generally, the impact of globalization was harsh on labor wages.

The recent article of Archdruid Report references this article

Growth, debt, and the World Bank
by Herman Daly

It offers a straight perspective of the gears turning the world in the last decades:

When I was in graduate school in economics in the early 1960s we were taught that capital was the limiting factor in growth and development. Just inject capital into the economy and it would grow [....] Capital was magic stuff, but scarce. It all seemed convincing at the time.

Many years later when I worked for the World Bank it was evident that capital was no longer the limiting factor, if indeed it ever had been. Trillions of dollars of capital was circling the globe looking for projects in which to become invested so it could grow. The World Bank understood that the limiting factor was what they called "bankable projects" -- concrete investments that could embody abstract financial capital and make its value grow at an acceptable rate, usually ten percent per annum or more, doubling every seven years.

Right, this is well visible in recently liberated economies. Quite a few services and infrastructures are abandoned as not yielding enough for "decent" living.

Without much preface, I will turn here on two articles currently top-headlined at "Asia Times". The authors are Spengler (David P. Goldman) and Chan Akya. The economic commentary of these regular contributors was timely interesting in 2008. But by now their insight and argumentation are reduced to simplistic "National Review"-lite anti-liberal chatter.

Disheartening developments at the Fukushima Daiichi nuclear plants continue, as nuclear elements take on their own course. Is it getting too late for human responsibility?

IAEA Confirms Very High Levels of Contamination Far From Reactors

Today the IAEA has finally confirmed what some analysts have suspected for days: that the concentration per area of long-lived cesium-137 (Cs-137) is extremely high as far as tens of kilometers from the release site at Fukushima Dai-Ichi, and in fact would trigger compulsory evacuation under IAEA guidelines.

The IAEA is reporting that measured soil concentrations of Cs-137 as far away as Iitate Village, 40 kilometers northwest of Fukushima-Dai-Ichi, correspond to deposition levels of up to 3.7 megabecquerels per square meter (MBq/sq. m). This is far higher than previous IAEA reports of values of Cs-137 deposition, and comparable to the total beta-gamma measurements reported previously by IAEA and mentioned on this blog.

This should be compared with the deposition level that triggered compulsory relocation in the aftermath of the Chernobyl accident: the level set in 1990 by the Soviet Union was 1.48 MBq/sq. m.

This is from a Bloomberg Businessweek article Can the Euro Survive?:

It's been known for years -- centuries, really -- that monetary unions are hard to hold together [....] As theorized by Robert A. Mundell, the Nobel Prize-winning economist at Columbia University, a monetary union can't survive without something very close to political union, including free mobility of labor to nations where jobs are more available, flexible wages, a tax system that transfers funds from the winners to the losers, and strict rules preventing members from running up big budget deficits.

Now that we know what "free mobility" and "flexible wages" mean: If these neoliberal components are indeed vital for monetary unions, what was the hope for labouring masses? It was actually "third way" Europe's labourists and socialdemocrats who did the final push for euro. Did they already think along the same theory?!

Dean Baker, one of the economists that foresaw the US housing bubble and the financial crisis, wrote an article with the same title, "Why Printing Money Makes Sense", in the Guardian:

For the tens of millions of people who are unemployed, underemployed or have given up looking for work altogether, we are in a crisis. The economy is an absolute disaster, ruining their lives and also jeopardising the futures of their children and grandchildren.

But that is not the way that the people paid to contemplate economic policy in Washington see things. This gang is busy congratulating themselves because things could have been worse. They point out that if they had been even more incompetent that we could be in a second Great Depression with unemployment staying in the double digits for a decade.

Instead of worrying about the millions of unemployed workers today, they are worried about their deficit projections for the years 2018, 2020 or even 2025. This crew, which could not even see the $8tn housing bubble that was about to wreck the economy, wants the whole country to genuflect before their projections of deficits for 10-15 years into the future ....

Reading a NY Times review of Michael Lewis's new book "The Big Short: Inside the Doomsday Machine" on the few winners of the financial crisis, I was struck by the following quote from the book:

An investor who went from the stock market to the bond market was like a small, furry creature raised on an island without predators removed to a pit full of pythons.

That it one of the most picturesque descriptions of predator vs prey environments I saw. How extreme is the bond market, really? What are the global populations of bond pythons and wannabe furry animals? Aren't bond traders those investors who fatefully evaluate fiscal policies and set credit terms for all governments? I recall the following quote of Bill Clinton's top advisor:

I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everyone.

Does anyone here have experience in that ecosystem?

I intended to write this diary not long after the publication of famed Paul Krugman's article "How Did Economists Get It So Wrong?", and my review of Nial Ferguson's book "The Ascent of Money". But my schedule drifted away to excitements of job related projects. So here it is at last...

There is this passage in Krugman's article:

I like to explain the essence of Keynesian economics with a true story that also serves as a parable, a small-scale version of the messes that can afflict entire economies. Consider the travails of the Capitol Hill Baby-Sitting Co-op.

This co-op, whose problems were recounted in a 1977 article in The Journal of Money, Credit and Banking, was an association of about 150 young couples who agreed to help one another by baby-sitting for one another's children when parents wanted a night out. To ensure that every couple did its fair share of baby-sitting, the co-op introduced a form of scrip: coupons made out of heavy pieces of paper, each entitling the bearer to one half-hour of sitting time. Initially, members received 20 coupons on joining and were required to return the same amount on departing the group.

Unfortunately, it turned out that the co-op's members, on average, wanted to hold a reserve of more than 20 coupons, perhaps, in case they should want to go out several times in a row. As a result, relatively few people wanted to spend their scrip and go out, while many wanted to baby-sit so they could add to their hoard. But since baby-sitting opportunities arise only when someone goes out for the night, this meant that baby-sitting jobs were hard to find, which made members of the co-op even more reluctant to go out, making baby-sitting jobs even scarcer...

In short, the co-op fell into a recession.

I did the exercise of downloading Dow Jones IA historical data from Yahoo Finance pages, and plotted the weekly closing DJIA values:

I thought that I saw these graphs, but I am struck by the overall shape. The right-hand side of the picture looks completely different from the "lethargic" middle and left parts. What kind of common parameters of economic goodness or random walk could fit the whole graph?

We can recognize that the Great Depression recovery was long, or that there was a mysterious deflation in the 1970s. But the growth rates since the 1980s do not look like anything of the previous 50 years.

Diary rescue: orginally posted August 20 - Nomad

This is a review of Niall Ferguson's book

The Ascent of Money: A Financial History of the World.

The same story is put into televised series. The author is a contentious historian, known also for two volumes The House of Rothschild, and for the touch apologetic Empire study. Recently he got involved in a debate with Krugman and others over Obama's economic policies.

A while ago I was asked by Migeru to extend a comment on government and economic synergy to a diary. I am not certain whether these musings satisfy Migeru's request exactly, but it should be close.

Here is the part of my previous remark I will be discussing:

Absence of synergetic considerations in economic theories is indeed interesting. Synergies are abound in the natural world - almost compulsively. The role of government should be seen primarily as synergetic - i.e., capturing large common wins. But common interest is politically dead, and the government is unabatedly promoted as a free-rider helper. The libertarian understanding of "There is no free lunch" appears to mean "There is no synergy through governing" (but they appear to believe in a "synergy" of making money out of thin air through credit extension).

The brief history of government as "for the people" is finished and is being erased. The only "legal" cooperation is corporation - it feels like no one else is allowed to take care of own interests in a coordinated matter, or do any good to others. The rhetorical mix-up of what is a cooperator, or a free-rider, or a rentier is amazingly Orwellian in this world.

The conservatives like to repeat that "too much government destroying human freedom with excessive activity and taxes".

But what government do they mean? If it is so evil, how it came along and why it is staying?

I wish to suggest a clarification. It does not cover all complexity of human politics, but brings up some distinctions to the face of that impulsive tirade.

Basically, the human history saw two kinds of governments. By far the more historically frequent type is, let's call it, feudal government. It is a government by power elites - kings, dukes, priests, military commanders. There is basically no differentiation between political, military, economic and social powers there. This is a government by a small power circle, focused on preservation of its own power.

The other kind of government is, ideally, of the people, by the people and for the people. This is historically quite a recent phenomenon, up to a few classical antiquity or tribal examples. It assumes, in particular, separation of political and economic powers - but that is not a given. And there lies a problem.

Promoted by Colman, from last Thursday

The following exchange is from a Foxnews' show. It's a "fair and balanced" passion of Brit Hume (until recently, their anchor newsman). Speaking on Obama's tax increases:

Hume: Well it's just so dishonest because the top what, 2% of tax payers in this country pay something on the order of 40% of the taxes already. The top 5% pay 60% of the taxes already, income taxes. And the top 50% pay all but, you know they pay like 95% of the taxes. So most of the people in this country, most of the people pay almost, either no income taxes at all or almost none. That's like half the income brackets. So the idea that the playing field is somehow tilted in favor of the few is bosh!

[...]

The share of income taxes paid by the higher income people over the years has not gotten smaller under the Republicans. It's gotten larger. Why do you...

Williams: And why is that Brit? Because they're earning more money.

[UPDATE: As remarked by Jake and Daily Kos readers, Brit Hume refers exclusively to income taxes. Regular folks appear to catch up on payroll and consumption taxes.]

Front-paged with an edit by afew

The libertarian ideology is suffering quite a few setbacks amidst the ongoing financial crisis. Say, the governments just can't stop expensive stimulations. Maestro Greenspan acknowledged that reliance on everybody's self-interest was a mistake. And what other way is there to prevent fools to bank everyone all in than some regulation?

But one of libertarian recommendations is still never criticized: Low taxes are always good, as they encourage economic activity, job creation and what not. No one ever tells how low the taxes eventually must be, but many insist that tax cuts are always wonderful.

But do low taxes really work that wonderful way under any circumstances? Are there not any ill side effects? Any theory, however nice, has its limits of application. Whoever looked for limits of tax cut benefits?

Here below I share some thoughts, how Bush-led tax cuts might had actually fueled the current economic crisis.

Yesterday was the second round of Lithuanian Seimas elections: 68 (out of 71) individuals seats were still open. In total, the parliament has 141 seats.

The outcome is favourable to the brightest winners of the first round. The Homeland Union/Christian Democrats picked up 26 more seats yesterday, totaling 44. The TV showman Valinskas party added 3 seats, and has 16 seats in total. If you add 11 seats of the Liberal Movement, you get 71 - the minimum majority. This likely coalition will likely be joined by Zuokas' Liberal and Center Union (with 8 seats).

In the following picture, from left to right in front: Artūras Zuokas, Arūnas Valinskas, Andrius Kubilius (Homeland Union) and Gintaras Steponavičius (Liberal Movement)



A table with results is below the fold.

Promoted by afew

I was asked once to post a diary on Lithuanian parties. This week is a fitting opportunity, as Lithuania has Parliamentary elections this Sunday (October 12), and I was most of the last 2-3 weeks there. The later factor didn't help much to feel a better insider, but... political detachment is an obvious part of modern social environment, visibly convenient for the political classes as well.

Voting now underway, until 20h local time = 19h CET. Promoted by DoDo

Update [2008-10-12 13:40:8 by DoDo]: now with results.

Update [2008-10-13 12:40:0 (LT) by das monde]: Here are preliminary results of nationwide party voting (for 70 seats). 2007 out of 2034 districts reporting.

Voter participation - 1278989 (48.42%). Non-valid votes - 71747 (5.61%). The 5% barrier (derived from the number of all participating voters) is 63950. The last column gives (preliminary) numbers of candidates in run-off elections two weeks later in individual constituencies. Three individual mandates are already won.

Party	Votes	Percentage		Run-Off chances
		of valid votes	Seats	Likely + Toss-up + Underdog
Homeland Union - Christian Democrats	236071	19.55	17	16+18+11
Social Democrats	141917	11.76	11+2	7+12+5
Order And Justice (Rolandas Paksas)	153639	12.73	11	3+8+5
Rising Nation Party (Arūnas Valinskas, LNK TV)	182439	15.11	13	0+3+6
Darbo Partija (Labour Party)	109106	9.04	8	1+4+0
Lith. Rep. Liberal Movement (without Zuokas)	68591	5.68	5	3+3+3
The Liberal and Center Union (with Zuokas)	64179	5.32	5	0+7+3
The Polish minority party	58635	4.86	0+1	2+2+0
Lithuanian Peasant Popular Union (Prunskienė)	44965	3.72	0	1+4+1
Social Liberals	44078	3.65	0	1+0+0
"Frontas" (Paleckis)	39220	3.25	0
"The Young Lithuania" (Right nationalists)	21144	1.75	0	0+0+1
The Civic Democracy Party (Muntianas)	13440	1.11	0	0+0+1
The Russian minority party	10986	0.91	0
Social Democratic Union (Marxist-lite)	10378	0.86	0
Lithuanian Center Party	8433	0.70	0
Independents			0	2+3+0

Update [2008-10-14 06:40:0 (LT) by das monde]: I made changes only in the last column now. With 5 districts to report, percentages are almost the same, though Zoukas' liberals meet the 5% barrier by mere 90 votes.

This is a lazy photo-diary about people who are not allowed to be lazy.

A documentary about them won several film awards recently. The title is "Eisenfresser" ("Iron eaters").

The location is Chittagong, Bangladesh. It is very near in our globalized world.

A big sea-port, long beaches... stranded ships...

Pictures worth a thousand words - Diary rescue by Migeru

As commonly observed, the modern TV is not about news or education, especially in the US. TV programs hook up and play with most basic psychological reactions and dumb down our senses. Can't commercial TV really do no better than stimulate most basic brain circuits and entertain our egos?

Here below is an interesting view from the American continent to European TV experience. Does European TV indeed remain diverse and still enlightening, or is it getting trashy just as well? Does it indeed regularly offer not only confrontational entertainment, but likeably provokes all loving states on mind as well?

Here is the story from David Neiwert's blog:

Dave's [last post] points up just how complicit the media has become in perpetuating the kind of sticky, pernicious racial conflicts so much of the country is trying hard to get past. The deeper problem here, of course, is that conflict sells -- you really can't have any kind of dramatic narrative, fiction or non-fiction, without it. And it's very hard to get the American media to give up on a conflict narrative that's served so many social and political interests so reliably for so long -- even when it's become patently clear to everyone that that narrative is now savaging the soul of the country.

And the infuriating part of it is: It doesn't have to be this way. To prove the point, I'd like to offer two examples of how other countries are using media constructively -- and incredibly powerfully -- to actively help people get past this stuff, instead of staying stuck in it.

Power satisfies people, power corrupts, power moves people, power makes people despair. Why is power so important? How much does it affect humans and societies?

An important book on this subject is

The Parable of the Tribes: The Problem of Power in Social Evolution

by Andrew Schmookler. The author has a blog, writes also here.

The main thesis of the book is that

the history of civilization has been largely shaped by the way that, as a system, civilization has no mechanisms for restraining the raw struggle for power between societies.

I am quoting from these excerpts.

Just at the time when we start wondering how much world's developments are influenced by the richest and most powerful persons, which actually get ever more stupendously rich and powerful with ease, there appears the book "Superclass: The Global Power Elite and the World They Are Making" by David Rothkopf. I haven't seen the book, but picked up some reviews from Amazon.com and an article at Salon.com. The author is a humble insider of sorts: a former undersecretary of commerce in the Clinton administration, acclaimed author of Running the World: The Inside Story of the National Security Council and the Architects of American Power, now lecturing, serving at advisory firms (say, Kissinger Associates).