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On governments, taxes, rent and debt

by das monde Tue Mar 10th, 2009 at 06:33:38 AM EST

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


We associate the people government with democracy. However, by now it is clear that democratic routines do not guarantee independence of political and economic powers. It looks like democratic systems around the world are being hijacked by converging political and economic powers. The people can effectively exercise only electoral powers once a few years, but even that is well manipulated by coordinated media and stagnating patterns. Now the short electoral cycle only facilitates short-sighted and narrow-focused control. As economic power gets concentrated as well, the government acquires more feudal features - in particular, the rentier class is gathering more power and benefits. The ongoing deep economic crisis might complete this shift.

In other words, running a feudal government within a democratic system looks no more inconceivable than running Windows XP on a Mac computer. And the code for this transition is spreading and developing fast, through corporate experience in the US, wild economic reforms in Russia or China, and corruption practices in much of ever developing world. You don't need much more than control of public opinion through concentrated media and economic motivations.

Now we come back to government activity and taxes. In a feudal government, a tax is basically an imposition or levy on the common population to support the ruling elite. It is as if the population is indebted something to the elites, or renting basic living conditions from them.

Vice versa: a deeply indebted and/or predominantly renting population is basically at mercy of the rentier class. Mortgage payments and rents are nothing but additional taxes. They walk like taxes, and they quack like taxes.

For example, the problematic outlook of most East European countries is indebtedness of their productive citizen after busts of their speculative markets. Even if their governments are not necessarily in deep debt, citizen obligations to foreign-controlled banks will impend their economies for years to come. Not only is there monetary outflow adding dreadfully to their appalling trade balances; the people will have to reduce continuously their spending by the amount they can pay back their mortgages. It works precisely as high taxes are said to work. But the people won't even have a chance to see any benefit of their payments.

It does not matter much that we pay taxes to governments, but rents and debts to private rentiers. Especially if governments will fall under full control of the same rentiers.

The people government could be different. One model is the US of the 1960-1970s. Top bracket taxing was high, but the middle class - the deserving people by any account - was expanding and improving its living standards. Fast forward to today: they have to work harder to pay the taxes, plus mortgage and rent payments are 70% higher. (Watch the video here.) The balance of economic power is clearly skewed - and with that comes disparity of political power as well, even if in the same democratic clothes.

The recent history shows that once progressive taxation is compromised, the economy dynamics becomes too similar to a "Monopoly" game - resulting soon in a few big winners and too many good people dropping out.

Once you have a people government, progressive taxation is a good way to keep it. The people government is a problem only to wannabe rentiers. Feudal freedom is a real freedom only for a few.

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European Tribune - Comments - On governments, taxes, rent and debt
The recent history shows that once progressive taxation is compromised, the economy dynamics becomes too similar to a "Monopoly" game - resulting soon in a few big winners and too many good people dropping out.

Addressing this issue was how the game came about....

Monopoly (game) Game Player Board Property Version Players

Although Monopoly is frequently said to have been invented by Charles DarrowCharles Darrow is widely considered to be the inventor of the board game Monopoly, although he may in fact have used an idea by Lizzie Magie, a supporter of political economist Henry George. in 1935, its origins actually go back to 1904, when the Georgist Lizzie MagieLizzie Magie was a follower of Henry George who invented the first version of the board game Monopoly in 1904., (that is, a supporter of political economist Henry GeorgeHenry George ( September 2, 1839 October 29, 1897) was an American political economist, and the most influential proponent of the " Single Tax" on land. His Life Born in Philadelphia, George went to sea at age 16 before eventually settling in California.), patented a game called "The Landlord's Game" with the object of demonstrating how rents enrich property owners and impoverish tenants. She knew that some people can find it hard to understand why this happens and what might be done about it and she thought that if Georgist ideas were put into the concrete form of a game, they might be easier to demonstrate.

There's a good argument that Henry George and his thinking has been air-brushed from Economic History through

The Corruption of Economics

by those who enjoy the untaxed privilege of private property in the Commons of land/location.


"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Mar 5th, 2009 at 07:21:44 AM EST
This is exactly where Obama's plan to raise taxes on the wealthy is running into opposition by Republicans and some Democrats.  The Democrat opponents are saying increased taxes would discourage the wealthy from giving to charities.  What a crock.

I can swear there ain't no heaven but I pray there ain't no hell. _ Blood Sweat & Tears
by Gringo (stargazing camel at aoldotcom) on Thu Mar 5th, 2009 at 11:18:19 AM EST
But what government do they mean? If it is so evil, how it came along and why it is staying?

Because it has the monopoly of violence.

of the people, by the people and for the people

This idealisation of democracy assumes a Rousseau like a priori common good. I don't see such a fundamental difference between democracy and feudal gov't structures. Democracy can be the tyranny of the majority. The far more important difference is between a state within the rule of law, and a state without the rule of law. I anytime prefer constitutional monarchy a la Germany 1900 over a democracy, that doesn't recognise individual rights like the south of the USA before the civil war and to some degree into the 60s.

You don't need much more than control of public opinion through concentrated media and economic motivations.

Any reasonable argument about democracy has to take public opinion as exogenous. To say people have the wrong opinion for whatever reason, and you know what would be their right opinion, isn't democracy. It is feudal rule by YOU.

Mortgage payments and rents are nothing but additional taxes.

No they aren't. You are not born into a mortgage contract. You have willfully entered into such a contract. Taxes you have to pay without having ever agreed to pay them.

[Eastern Europe ...] But the people won't even have a chance to see any benefit of their payments.

They have already gotten something for their payments. They have borrowed money and are now paying back. If it is amoral to demand the pay back of loans from people who have the means to pay back, it is amoral to ask for a loan as well.

Feudal freedom is a real freedom only for a few.

One can argue this. But the lack of super high income taxes isn't the issue. If you are talking all the time about the rentier class, and praise the 60s, I ask you what do make of this information from the US treasury? For most of the 60s the maximum tax rate on capital gains was 25%. The high taxes were only on people trying to get into the rentier class, not for the members of the rentier class itself. Ok, there was higher inflation, so one has to relativate that, but today, income tax really isn't the  issue.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Thu Mar 5th, 2009 at 01:22:11 PM EST
Martin:
Any reasonable argument about democracy has to take public opinion as exogenous.
Any reasonable argument about society has to take both public opinion and the political system as parts of a feedback loop.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 01:27:31 PM EST
[ Parent ]
Ok, that was badly formulated.

What I want to say is, that public opinion is never illegitimate in a democracy. There is no 'right conscience' or something like that. So you can't claim the gov't to be illegitimate, if they have the consent of the people, even when your analysis finds, that people affiliated with that gov't create that consent.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Thu Mar 5th, 2009 at 02:22:17 PM EST
[ Parent ]
Martin:

Mortgage payments and rents are nothing but additional taxes.

No they aren't. You are not born into a mortgage contract. You have willfully entered into such a contract. Taxes you have to pay without having ever agreed to pay them.

You have to live somewhere and you either pay rent or mortgage... Or you are born into a family that owns its accommodation and then save up (or get as a gift) a place to move out of your family's home.

So you are either an owner or pay rent/mortgage.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Migeru (migeru at eurotrib dot com) on Thu Mar 5th, 2009 at 01:31:29 PM EST
[ Parent ]
But, the contention was that rent is not a tax.  Is the cost of food and clothing a tax just because it has to be purchased from someone?

I can swear there ain't no heaven but I pray there ain't no hell. _ Blood Sweat & Tears
by Gringo (stargazing camel at aoldotcom) on Thu Mar 5th, 2009 at 02:01:39 PM EST
[ Parent ]
"But, the contention was that rent is not a tax."

Mostly, it is.

"Is the cost of food.."

The point is that the natural resources are "commons", they are not produced. The food producer has the right to his labour and capital, but the soil production does not belong to the "rentier".

"..and clothing a tax just because it has to be purchased from someone?"

Clothing is mostly industrial production. There is nothing like that in a "location." Still location carries a huge amount of wealth.

by kjr63 on Thu Mar 5th, 2009 at 03:59:06 PM EST
[ Parent ]
The point is that the natural resources are "commons", they are not produced.

Land value is mostly human made. The value as shelter, is entirely human made. Look what a piece of wood somewhere costs and what a piece of land in a city costs. The land is valueable, because there are buildings around. Without human interference the land value is spectacular little. In the area where I lived for most of my live, before humans urbanised the land, it was just a swamp. Only through hard work it was made useable at all.

Propertisation [In German I would use the word Vereigentümerung; in German there is the word Eigentum and Besitz, the latter, litteraly something you sit on, meaning the physical possession of something. The latter meaning a legal title to own something. In this case I'm talking about the legal title, when I say propertisation] is the only meaningful invention in the profession of economics in thousands of years. The age of industrialisation would never have happened, without propertisation, including the propertisation of land. The very high recent Chinese growth is the effect of propertisation. Money is mostly backed by land property, and some time ago money was backed by metals - a natural resource as well. Credit hardly works without collateral - and access to natural resources is a vastly better collateral than work, especially, when even slavery is illegal.

You may read a book, the best if you can read German is "Eigentum, Zins und Geld" from Heinsohn and Steiger. Peter Sloterdijk called it the equivalent of Marx' 'Das Kapital' for the 21. century in his 'Weltinnenraum des Kapitalismus'. While not all economists follow all ideas of debitism, the basic idea, that property is the basis for credit is hardly controversial.
If you don't read German, I can only recommend the inferior 'The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else' from de Soto. Actually capitalism doesn't fail everywhere else totally, but especially in Africa, where propertisation sometimes is in conflict with traditions, it often fails pretty much.

So the society, that has created the institution of legal titles to natural resources within its boarders  (as well of course not a 'natural right', but something created by relatively modern societies) have greatly profitted from it - and just by the way, the people that today own valuable land are usually not the original owners, that 'just got' the land. They have paid for the right to own the land to others, that ultimatively paid to the state.

Now some people may not like the modern society and don't feel to be part of it or profit from its wealth. They may disagree with the idea, that the state can create such an instution as legal title to own. But that small minority is essentially denying the other people on the planet the right to live, as without the productivity gains, enabled by propertisation, many people simply would die.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Thu Mar 5th, 2009 at 08:14:02 PM EST
[ Parent ]
I think you have that the wrong way around - many people are already casualties of propertisation. Millions die every year, through starvation, homelessness, work stress, or - ironically - through too easy access to food.

That's not counting the regular wars which are a side-effect of oligarchical land and property ownership.

It's not really land ownership that's the problem so much as the concept of ownership in general. I don't think we can do away with property rights altogether. But more shared ownership, more participatory ownership, and less ownership for exploitation and appropriation - all of those might not be bad things.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Mar 5th, 2009 at 08:45:18 PM EST
[ Parent ]
As usual, you say in ten clear words what I say in 100 obscure ones!

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Mar 5th, 2009 at 09:10:51 PM EST
[ Parent ]
Martin:
Land value is mostly human made.

Indeed it is. The value of a location in large part derives from public/ collective investment.

The "money's worth" of (say) fertiliser, effort, bricks and mortar (I think of this as "Capital") invested in a location, is another issue.

The increase in the rental value of a location which is derived from (say) a new Metro, constitutes an unearned windfall gain for lucky land owners living near the stations. Henry George's case was that those who have exclusive rights of use of the Commons of land/location should compensate those they exclude. This tax on the privilege of exclusive use of the Commons of land was his "Single Tax", and it enables the capture by Society of publicly funded unearned or windfall increases in land values.

Martin:

Propertisation [In German I would use the word Vereigentümerung; in German there is the word Eigentum and Besitz, the latter, litteraly something you sit on, meaning the physical possession of something. The latter meaning a legal title to own something. In this case I'm talking about the legal title, when I say propertisation] is the only meaningful invention in the profession of economics in thousands of years. The age of industrialisation would never have happened, without propertisation, including the propertisation of land. The very high recent Chinese growth is the effect of propertisation. Money is mostly backed by land property, and some time ago money was backed by metals - a natural resource as well. Credit hardly works without collateral - and access to natural resources is a vastly better collateral than work, especially, when even slavery is illegal.

Agreed, with the caveat that it is exclusive physical possession.

Unfortunately there is a conflict of interest between the absolute owner of land, and the provider of temporary finance capital (credit) who secures a temporary claim over the land with a mortgage agreement. Similarly there may be a similar conflict between an absolute owner, and a temporary user or tenant.

We take these conflicts for granted, and they are inherent in the very nature of finance capital.

I am pointing out that there is now emerging a new third possibility based upon the use of an "Open" Corporate - such as the UK Limited Liability Partnership (LLP), or its close cousin the US LLC - where the governing agreement may take any form the members agree.  

We may encapsulate all of the rights of use and usufruct which actually constitute the property relationship (it is not actually an Object) within such an "Open" Corporate as a framework.

We may then issue Units (not unlike a Redeemable Preference Share in a conventional Corporation) which are redeemable in rental value, and sell these to Investors in order to fund development or otherwise.

The outcome is that it possible using what I call a "Land Partnership" to create what is in fact a new property right of indefinite duration ie for as long as I use the Capital invested in the land I pay a "Capital Rental" to those who provided it. And for as long as I have exclusive use of the location, I should pay a "Location Rental" or "Location Benefit Levy" to the local community whom I exclude.

Martin:

Everywhere Else' from de Soto. Actually capitalism doesn't fail everywhere else totally, but especially in Africa, where propertisation sometimes is in conflict with traditions, it often fails pretty much.

In places like Africa, land is perceived as a Commons belonging to the tribe, rather than to individuals. In other societies eg genuinely Islamic societies, the position is that absolute ownership of land is God's alone, and it is expected that a payment will be made to society for the use of it.

Martin:

Now some people may not like the modern society and don't feel to be part of it or profit from its wealth. They may disagree with the idea, that the state can create such an instution as legal title to own. But that small minority is essentially denying the other people on the planet the right to live, as without the productivity gains, enabled by propertisation, many people simply would die.

I disagree. I believe that no man has the absolute right of ownership of a Commons such as land, non-renewable resources, water, or knowledge.

ie there is no Divine Right of Capital.

However, I believe that it is essential that there be a right of exclusive use of such Commons in certain respects, and that those who are granted such privileges for an indefinite period should compensate those they exclude for as long as they do so.

The innovation I am proposing and developing consists of the novel use of new partnership-based (as opposed to statutory or judge-made)legal protocols for the sharing of production/ revenues on the one hand, and the sharing of risk on the other.

So I agree that propertisation is necessary. But it should be a form of propertisation benefiting the many, rather than - through the mathematics of compound interest, coupled with the enclosure of Commons - concentrating wealth inexorably in fewer and fewer hands - as we have seen, and which is asystem even now melting down.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Mar 5th, 2009 at 09:06:39 PM EST
[ Parent ]
The increase in the rental value of a location which is derived from (say) a new Metro, constitutes an unearned windfall gain for lucky land owners living near the stations. Henry George's case was that those who have exclusive rights of use of the Commons of land/location should compensate those they exclude. This tax on the privilege of exclusive use of the Commons of land was his "Single Tax", and it enables the capture by Society of publicly funded unearned or windfall increases in land values.

Many countries to have some taxes on land ownership. Some even quite significant. Usually they are adjusted, when the land is sold.
A problem I have with the idea to adjust them regularly for valuation is, that it can happen that way, that you are taxed out of your home without a change in your income, e.g. you have a house and have calculated, that with your income in a relative save position, e.g. in the public service, are able to pay for it. Now a new Metro is build. This can double the value of your house in the market (e.g. in Munich suburbs this a realistic scenario). If the tax is adjusted for the valuation gain, the tax will double, and you might not be able anymore to pay it. Maybe your partnership based approach has a solution for that. But the 'old economy' model doesn't provide such possibilities easily. [Not to mention that in villages the local land owners are often the ones, that are politically active and shove windfall gains on to each other; e.g. real world politics is corrupt]

I don't think that such a tax should be the single tax. Land ownership is important but it isn't the only thing that determines the capacity to contribute to the public budget. Why should a family with a chronically ill parent pay the same for the public budget as childless people earning lots of money by work, just because they occupy the same amount of space? Income and consumption are as well approximate measures for capacity to contribute.

In places like Africa, land is perceived as a Commons belonging to the tribe, rather than to individuals. In other societies eg genuinely Islamic societies, the position is that absolute ownership of land is God's alone, and it is expected that a payment will be made to society for the use of it.

Yes. So they can't mortgage their land e.g. to buy fertiliser. Somebody who has access to fertiliser will have to form a partnership with them...


Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Thu Mar 5th, 2009 at 10:45:28 PM EST
[ Parent ]
A problem I have with the idea to adjust them regularly for valuation is, that it can happen that way, that you are taxed out of your home without a change in your income, e.g. you have a house and have calculated, that with your income in a relative save position, e.g. in the public service, are able to pay for it.

So you're for strict rent control with vacancy resets? In other words, landlords shouldn't be able to raise rents except when the tenant moves out and is replaced by someone else?  After all, it's an even worse problem for renters since rent tends to be rather more than property tax.

by MarekNYC on Fri Mar 6th, 2009 at 12:47:41 AM EST
[ Parent ]
Rents could be index-linked. My tenancy agreement says that my rent will be reset with the CPI index every year for the duration of the contract.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Fri Mar 6th, 2009 at 03:18:49 AM EST
[ Parent ]
Martin:
Many countries to have some taxes on land ownership. Some even quite significant. Usually they are adjusted, when the land is sold.
A problem I have with the idea to adjust them regularly for valuation is, that it can happen that way, that you are taxed out of your home without a change in your income, e.g. you have a house and have calculated, that with your income in a relative save position, e.g. in the public service, are able to pay for it. Now a new Metro is build. This can double the value of your house in the market (e.g. in Munich suburbs this a realistic scenario). If the tax is adjusted for the valuation gain, the tax will double, and you might not be able anymore to pay it. Maybe your partnership based approach has a solution for that.

You identify valid issues, and yes, I do have a solution.

The occupier of the land will have the option of paying taxes by joining the Community Partnership and transferring Units of land rental value to the community via the location levy.

ie he may pay in kind.

One of the outcomes of the model I am describing is of the gradual introduction/evolution of a Rental Pool.

The key mechanisms for introduction of unitised rentals as what is essentially a new geographically bounded currency are:

(a) a solution for "distressed" property owners. So anyone wishing to refinance their mortgage may do so;

(b) an optimal and non-toxic, means of equity release (which is what is happening, above to pay the taxes).

Martin:

I don't think that such a tax should be the single tax. Land ownership is important but it isn't the only thing that determines the capacity to contribute to the public budget.

I agree totally with you. Henry George lived in simpler times, when land value constituted a much greater proportion of value in circulation than it does today.

There are other privileges available upon which to make a levy.

First, I would make a carbon levy on the use of carbon-based fuels (ie the privilege of use of non-renewables) and also on other mined resources. This would be used to fund the transition to renewable energy.

Second, I would replace all corporate taxes, taxation on dividends, and VAT with a simple levy on the gross revenues of any entity where investors benefit from the untaxed (or inadequately/imperfectly  taxed) privilege of limitation of liability.

Simple, unavoidable, easily collectable (via networked clearing), and getting rid of a massive burden of cost and overheads (ie government tax bureaucracy, and the private sector accountancy/avoidance/minimisation industry) to society.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Mar 6th, 2009 at 04:24:04 AM EST
[ Parent ]
[...] Actually capitalism doesn't fail everywhere else totally, but especially in Africa, where propertisation sometimes is in conflict with traditions, it often fails pretty much.

In places like Africa, land is perceived as a Commons belonging to the tribe, rather than to individuals. In other societies eg genuinely Islamic societies, the position is that absolute ownership of land is God's alone, and it is expected that a payment will be made to society for the use of it.


I think that the endless Africa problems have roots in colonist capitalist dynamics, not in their tribal practices. The thing is, African (and several other developing) countries are chronically in debt. Often that debt was overwhelmingly originated by a dictatorship that had approving (or silent) support of the West. That money was spend on military toys, opposition suppression and clique's welfare. Now people are literally born into that debt generation after generation. They can't build a social network, or even own good businesses. The best people can do is to work for a multinational company or submissive government.

If you want to help Africa, forgive the debts. Give them a chance to build economies without a Tchengis Khan-lite levy of compounded debt repayments.

by das monde on Fri Mar 6th, 2009 at 12:12:43 AM EST
[ Parent ]
... and stop sending in the Marines every time someone makes a move of which we (read: United Fruit) disapprove.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 6th, 2009 at 02:33:36 AM EST
[ Parent ]
Actually regime changes are good opportunities to simply default on debt. The possibility to intervene by foreigners is greatly reduced since the end of the cold war.

While external debt may be a problem in some cases, I strongly doubt, that it is regularly the case. When you say, the best people can do is working for the gov't this is not exactly a sign of too little funds for the gov't.
Working for multinational corporations isn't bad - if the corporations have business in Africa.

One effect of questionable protection of property, is people in Africa, that somehow gathered funds, don't invest them in Africa, but (so far) in Switzerland. If not even the local people trust in the legal safety of business, foreigeners have even less reason to do so. Of course in recent years some countries have made progress, e.g. google 'gapminder' to see a tool to get access to UN statistics. Unfortunately there are countries like Zimbabwe, that have made steps backwards.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Sun Mar 8th, 2009 at 01:13:11 AM EST
[ Parent ]
Yes, regime changes would be good opportunities to repudiate odious debt. Unfortunately, it doesn't happen that way, for a variety of reasons (most of them not very good).

Another issue for Africa is that on most of the continent, the infrastructure really isn't anything to write home about, except in the sense that you'll have plenty of time to write home if you try to use it to get from A to B. And of course, there's the whole rainforest belt, where it's pretty limited how much European-style industrialisation you can do at all, due to the climate. Property protection really comes rather far down the list of Things To Do.

To illustrate, recall that Yeltsin's Russia had very good de jure property protection (considering the lack of popular legitimacy of the Yeltsin regime, de facto is another story...). This did not prevent a massive capital flight to flag-of-convenience countries.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Mar 8th, 2009 at 05:28:21 PM EST
[ Parent ]
de jure is rather useless, if people don't trust, that the law will be followed.

It is very clear, that Russian oligarchs tried to get their money out of Russia to get it out of reach of politics.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Sun Mar 8th, 2009 at 05:31:38 PM EST
[ Parent ]
Actually regime changes are good opportunities to simply default on debt.

That did not happen even in the "heroic" examples of South Africa or, say, Poland. They had to "honour" debts of their oppressing predecessors. Nothing was forgiven with "good" regime changes is Latin America either.

As the external debt acts as a tax or a tribute, it is a persistent problem in the developing countries. It is as if the West ended overt colonization, but succeeded in keeping a financial yoke.

African local economies were bulldozed long ago - we hardly knew them. Only blocks close to the corrupt governments can usually "gather some funds" - and they often seem to be more in friendship with neo-collonist "business partners" than own citizen. Corruption in those governments is not exactly a trouble for Western elites, still.

by das monde on Sun Mar 8th, 2009 at 10:51:12 PM EST
[ Parent ]
That did not happen even in the "heroic" examples of South Africa or, say, Poland. They had to "honour" debts of their oppressing predecessors. Nothing was forgiven with "good" regime changes is Latin America either.

Countries can just refuse to honour debt obligations, like Argentina did. The question is usually, if they remain credible to attract new credits afterwards. In case of Argentina, it seems yes.

If you wait for the creditor to say, hey, I don't want your money any longer, you can wait a long time. Why is the creditor a creditor in the first place?

As the external debt acts as a tax or a tribute, it is a persistent problem in the developing countries. It is as if the West ended overt colonization, but succeeded in keeping a financial yoke.

Where is this a problem? I looked at wikipedia List of countries by external debt.

This is gross debt, not net debt. Bit for most poor countries, even if they would have zero assets elsewhere, the external debt to GDP ration isn't problematic. The net external debt is ~20% for the US, which can't have catch up, high growth development.
Zimbabwe seems to be seriously overdebted, but that is probably more due to the shrinking GDP than due to the high debt before Mugabe.

Debts that really keep them from going would be something like net external debt several times the GDP, if all other stuff would be fine. There isn't a fraction of that.  

African local economies were bulldozed long ago - we hardly knew them.

When were these African local economies there? Today in most African economies the HDI should be higher than at the time when the first colonial efforts were undertaken.

Only blocks close to the corrupt governments can usually "gather some funds"

Right, that is where the money is, e.g. due to development aid. What they need is a functioning private sector.

and they often seem to be more in friendship with neo-collonist "business partners" than own citizen

There partners aren't neo-colonist. They may be business partners or just criminals or both in a sense. The existence of criminals isn't shocking at all. Of course you will find someone to transfer your wealth out of the country, if you want, if you pay him. Should I complain about Italians colonising Germany, because their Mafia makes great deals, here? Those business people don't have a mandate by our people. And actually I trust my gov't to make decisions according to their best knowledge and usually sufficient integer. Corruption of course exists here, too.

Corruption in those governments is not exactly a trouble for Western elites, still.

'Western elites' mostly simply ignore Africa. So why should it be a big trouble? If you never set foot on that continent, never buy or sell anything there, from where should the big trouble come?
Nevertheless most Western gov'ts have now laws, that make corruption in foreign countries a crime at home. It is not self evident, that one has to have such a law, because it hinders your own business people to make deals, when competitors from other countries engage in bribing.
One can as well say, this is a sovereign country, and if the officer demands a fee so be it. That is the opposite of colonialism. You accept the rules, the locals make. Colonialism would be, when we make their rules. We don't and actually we can't. Do you want more Bush wars in countries to bring them democracy and freedom?

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Mon Mar 9th, 2009 at 12:14:24 AM EST
[ Parent ]
Countries can just refuse to honour debt obligations, like Argentina did. The question is usually, if they remain credible to attract new credits afterwards. In case of Argentina, it seems yes.

If you wait for the creditor to say, hey, I don't want your money any longer, you can wait a long time. Why is the creditor a creditor in the first place?

It is no accident that a country like Argentina dares to experiment with a default.

I see the role of investors as overvalued. They provided just money - other aspects should be valued as well. As this crisis is settling down in East European countries (for example), reliance on external capital flows only increasingly looks like a doubtful strategy, especially when own industry is "gone" and trade balance perspectives are pure.

As the external debt acts as a tax or a tribute, it is a persistent problem in the developing countries. It is as if the West ended overt colonization, but succeeded in keeping a financial yoke.

Where is this a problem? ....

Debts that really keep them from going would be something like net external debt several times the GDP, if all other stuff would be fine ....

... What they need is a functioning private sector.


Even ~20% GDP debts continuously tax those economies, constantly draining capital. It is not as dramatic as a robbery, but if "restricts freedom" just as usual taxes. Building a functioning private sector is an uphill battle then.

If the global crisis is going to deepen, many countries may see their debts jump over total GDP, just as Zimbabwe. This is akin to going "underwater" with your mortgage.

African local economies were bulldozed long ago - we hardly knew them.

When were these African local economies there? Today in most African economies the HDI should be higher than at the time when the first colonial efforts were undertaken.


Beside GDP and capital flows, economy is mostly an ecosystem of productive relations. In particular, this crisis may remind us that, absent capital wonders, what is most important is to sustain basic economic exchange, even if at "socialist" or barter level of pricing.

I don't know how exactly you can measure Human Development Index (HDI) of past non-Western societies. But I guess that biological indications (thus excluding education, in particular) were less behind the West than they are now. And the tribes could possibly have social-economic tricks that, although not fitting into our general ideologies, were very useful in making the people happy.

and they often seem to be more in friendship with neo-collonist "business partners" than own citizen

There partners aren't neo-colonist. They may be business partners or just criminals or both in a sense ....

.... 'Western elites' mostly simply ignore Africa.

Some circle is still lazily profiting from dirty deals and debt collections. How much do we know, which 'Western elites' are not included? While there is so much disparity between human suffering and exported wealth, the term "colonist" applies.
by das monde on Mon Mar 9th, 2009 at 02:00:09 AM EST
[ Parent ]
I see the role of investors as overvalued. They provided just money - other aspects should be valued as well.

Valued by whom? I don't think that gov'ts anywhere in the world see investors as more than money providers.

As this crisis is settling down in East European countries (for example), reliance on external capital flows only increasingly looks like a doubtful strategy, especially when own industry is "gone" and trade balance perspectives are pure.

But their industry isn't gone. The problems in Eastern Europe seem to me to be the result of a credit crunch. I can't see big underlying problems.

If the global crisis is going to deepen, many countries may see their debts jump over total GDP, just as Zimbabwe. This is akin to going "underwater" with your mortgage.

Africa isn't hard hit by the crisis. The low international dependency of Africa is this one time a good thing. Nevertheless, yes, in can happen. It can happen as well to rich nations as Iceland or Ireland. But it is not the reason for slow improvements on the last decades.

But I guess that biological indications (thus excluding education, in particular) were less behind the West than they are now.

I'm pretty sure, that child mortality is now much lower than in precolonial times, or what do you mean with biological conditions. In linear terms the difference to the West should be as well smaller. On logarithmic scale, the difference may not be smaller, because the West had gains there as well.

And the tribes could possibly have social-economic tricks that, although not fitting into our general ideologies, were very useful in making the people happy.

Quite possible. I doubt there is any way back, though; or at least 'conventional' development will be as doable as going back.

Some circle is still lazily profiting from dirty deals and debt collections. How much do we know, which 'Western elites' are not included?

From sheer volume, we know, that probably not much are included. Most banks etc. simply don't have business in Africa.

While there is so much disparity between human suffering and exported wealth, the term "colonist" applies.

The bulk of denied wealth is denied by people, that have come to power in genuinely African movements. Westerners [individuals] stand by as bankers, dealers, advisors; (usually) not making African law with military invasions. The term colonist doesn't apply. Real colonialism probably would be better for Africans today than their own sovereignty. Despite all problems French oversea territories are better off than their independent neighbours. But who wants to do colonialism today, when pillage and robbery isn't accepted any more?
Not so long ago in the West aristocrats sold their subjects as soldiers [so no volunteering as mercenary, but mandatory military service] for foreign wars to finance opulent live styles. Seems to me to be similar to what African leaders do now. This is simply normal feudal ruling. Nothing unusual.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Mar 10th, 2009 at 12:34:47 PM EST
[ Parent ]
I see the role of investors as overvalued. They provided just money - other aspects should be valued as well.

Valued by whom? I don't think that gov'ts anywhere in the world see investors as more than money providers.

For one thing, financial gains became the most appreciated achievements in this world. You may save humanity, but if you failed to fetch apt money you are not in much regard. Investors and rentiers play for money by default, while other people have to offer their talents for a bargain, and compromise their leisure for a financial catch-up. Getting stations, music stages or university colleges named with your name is much a vanity - but it shows, what the society is trained to value. They took over decent-looking rationalizations from the "englightened" West as well.

Secondly, all policy decisions are made for the sake of pleasing the investor class. We may debate, whether those policy decisions are really improving economy in some or other sense, but one thing is clear: each new reform ir policy decision "somehow" is making money providers happier compared to other people. This is especially clear in "developing" economies like Eastern Europe, where everything is rationalized and done for the sake of investors.

As this crisis is settling down in East European countries (for example), reliance on external capital flows only increasingly looks like a doubtful strategy, especially when own industry is "gone" and trade balance perspectives are pure.

But their industry isn't gone. The problems in Eastern Europe seem to me to be the result of a credit crunch. I can't see big underlying problems.

Latvia was quite an industrial hub in the Soviet Union - hardly anything is left of that. Many factories (in particular) were purposefully grounded before privatization - and frequently finished up after privatization (as they fall under control of competitors, for example). To enter European Union, East European countries were "asked" to stop caring for their industries - everything was left to the mercy of slanted markets.

The underlying problem is: macro-economically East Europeans cannot offer anything significant to the world markets. Their dreadful trade balances were concealed by a credit bubble for some time. And it is not only the global credit crunch and trade imbalances made naked. Now their people have a big post-bubble debt burden to pay-off. In the contracting economy that looms very large.

While there is so much disparity between human suffering and exported wealth, the term "colonist" applies.

The bulk of denied wealth is denied by people, that have come to power in genuinely African movements. Westerners [individuals] stand by as bankers, dealers, advisors; (usually) not making African law with military invasions. The term colonist doesn't apply. Real colonialism probably would be better for Africans today than their own sovereignty. Despite all problems French oversea territories are better off than their independent neighbours. But who wants to do colonialism today, when pillage and robbery isn't accepted any more?

The evil of African dictators evolved in the image of Western pillage and robbery. They went considerably beyond "normal" (or their own) feudal ruling. Making people suffer is now a substantial element of renting elites' working model around the world. A new overt colonialism would look uglier than the "old French model" as well.
by das monde on Wed Mar 11th, 2009 at 03:38:59 AM EST
[ Parent ]
Martin:
'Western elites' mostly simply ignore Africa

Apart from the massively lucrative diamond, gold, oil and more prosaic mineral rights, and certain kinds of agriculture.

Africa is potentially a ridiculously rich continent, made poor by some very traditional colonial pillage.

Apartheid was always as much about diamonds and gold as it was about simple racism.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 10th, 2009 at 08:01:10 AM EST
[ Parent ]
Easy to explore natural resources tend to impede economic development.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Tue Mar 10th, 2009 at 12:37:36 PM EST
[ Parent ]
Only if there is a market for ill-gotten loot.

And that market exists in The West(TM).

Clamp down on all the diamond smuggling, dirty oil deals and so on and so forth, and you might actually create an incentive structure that isn't quite so badly skewed towards looting.

Kinda the same way that a British effort at prosecuting Russian oligarchs in London for tax evasions might have stopped the looting of Russia.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 10th, 2009 at 01:33:19 PM EST
[ Parent ]
"Land value is mostly human made."

Yes, it is. It is a value, that community produces. Without community, it would not have a value.

"The age of industrialisation would never have happened, without propertisation, including the propertisation of land."

Propertisation of one's labour and capital, not land. Just license to use land. Absolute monarchies owned most of the land in Europe in the 15th century. There started technological/scientific progress that never happened in latifundised Rome. Industrialisation started mostly in England in the late 18th centrury. Landlords in England just practically destroyed british textile industry. Germany was much more competitive by the late 19th century thanks to worker's much lower rents. (According to Fred Harrison in "Power In the Land")

"You may read a book, the best if you can read German is "Eigentum, Zins und Geld" from Heinsohn and Steiger."

Henry George is so impressive in "Progress and Poverty", that i have swallow that first..

"So the society, that has created the institution of legal titles to natural resources within its boarders  (as well of course not a 'natural right', but something created by relatively modern societies) have greatly profitted from it - and just by the way, the people that today own valuable land are usually not the original owners, that 'just got' the land. They have paid for the right to own the land to others, tat ultimatively paid to the state."

Russia turned into useless oligarchy by selling to a few people world's richest natural resources. Just poverty and no industrial development and no real economy followed. Now they have started to tax oil incomes with 90% tax. Only now they are starting to get funds to the development of the real economy. Thank's to getting the value of natural resources to the real economy. Real economy has a chance to grow only, when the owners of the land and natural resources are not able to tax away (collect rent) the results of the production (use) of land and natural resources.

by kjr63 on Thu Mar 5th, 2009 at 10:50:48 PM EST
[ Parent ]
Propertisation of one's labour and capital, not land. Just license to use land.

No. I should have explained the mechanism. Simple case: There is no use in licensing the use of land, when you are the one, who wants to use it. But for using it, you need seed, fertiliser, perhaps a tractor. As well you have to survive until your first harvest.
So you take a credit. But the bank, that gives you credit - especially in Germany industrialisation was to a good part financed by banks, that got their funds from many small savers; e.g. Raiffeisenbanken und Sparkassen, will give you credit only for horrendous interest rates, UNLESS you collaterise the credit. You can collaterise with your work, but that is a pretty unsave thing. If you collaterise with your land, the bank will be pretty happy.

Another case:
You start a software enterprise. You need money for the development of the program, the hardware and some funding for marketing. The banks don't believe you will be successfull. You think you will be. Therefore you collaterise your loan, with your home.

Both examples aren't totally fictional, but pretty much real world.
Just landuse licensing will probably not build up a lot of capital. The person that works on the land, will probably not earn enough to become ever really rich, and the land owner has no real investment opportunity and probably is anyhow happy with the status quo.

technological/scientific progress

Scientific progress starts usually financed by the gov't. Utilisation, especially for non-military purposes often by private people.

Russia turned into useless oligarchy by selling to a few people world's richest natural resources.

Yes, that was pretty dumb.

Just poverty and no industrial development and no real economy followed. Now they have started to tax oil incomes with 90% tax. Only now they are starting to get funds to the development of the real economy.

To extract the wealth of oil doesn't need that much sophistication. And oil is sold. It is rarely used as collaterisation for credit. Just selling the stuff further doesn't help a lot.

Thank's to getting the value of natural resources to the real economy. Real economy has a chance to grow only, when the owners of the land and natural resources are not able to tax away (collect rent) the results of the production (use) of land and natural resources.

Yes, if the land is just used for further renting it out, there is no use at all.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Thu Mar 5th, 2009 at 11:44:27 PM EST
[ Parent ]
"If you collaterise with your land, the bank will be pretty happy."

You can collaterise your land, but not your mortgage. And you will not own land, if the land owner rents out your labour. You have to own land first, then it works.

"Just landuse licensing will probably not build up a lot of capital."

It will, because then you will keep your own labour and capital. Anyway "licensing" is not a good word. Let's use "ownership" without licence to sell or something like that..

"The person that works on the land, will probably not earn enough to become ever really rich, and the land owner has no real investment opportunity and probably is anyhow happy with the status quo."

If the worker pays two taxes: rent to the land owner and income tax to the state (to provide services, infrstructure etc.) He will most likely not earn much.

Let's take the feudal system the diary writer, i believe, misrepresents. In feudal system, i believe, the monarch owned all land. He then gave this land to rule to different "government" institutions: The church, military, university (perhaps monarch ruled directly some land) etc. These institutions collected rent (taxes) from peasants and this way the peasants supported these institutions. The development that lead to renaissance (science, art, military) etc. happened in these institutions. Rents provided the "taxes" and the peasants could keep more of their labour. Perhaps even then peasants had savings and this because there was no other "taxer", the landowner.

by kjr63 on Fri Mar 6th, 2009 at 01:36:00 AM EST
[ Parent ]
Let's take the feudal system the diary writer, i believe, misrepresents. In feudal system, i believe, the monarch owned all land. He then gave this land to rule to different "government" institutions: The church, military, university (perhaps monarch ruled directly some land) etc. These institutions collected rent (taxes) from peasants and this way the peasants supported these institutions. The development that lead to renaissance (science, art, military) etc. happened in these institutions. Rents provided the "taxes" and the peasants could keep more of their labour. Perhaps even then peasants had savings and this because there was no other "taxer", the landowner.

It was not my purpose to talk specifically about the feudal system. Rather, I loosely divided governments into two types, and labeled one of it as "feudal".

Your remark shows that my distinction is quite valid. In the feudal system, there is not much difference between taxes and rent. I extended this coincidence to the case when taxes and rent (and debt) are formally different, but weight on economic productivity in the same way.

by das monde on Fri Mar 6th, 2009 at 02:03:46 AM EST
[ Parent ]
Capitalism is inherently feudal. If I want somewhere to live and I'm not in an ownership class, I have to tithe my time and income both to an employer and a bank or landlord.

If I mortgage, the bank owns my house until the tithe has been paid in full. If I rent, the landlord owns the house and the tithe is a straight tribute.

My employer owns such time as I'm able to persuade him (usually it's a him) will increase his relative social standing through surplus value.

The obligations are entirely assymetric. I'm obliged - forced, in fact - to tithe a substantial part of my social productivity to people and organisations in the ownership class.

There's some mobility so it's possible for canny players to become owners themselves. But for most people freedom of action and interest is very tightly proscribed.

The only difference between feudalism and capitalism is that capitalism adds a second tier of tithing through consumerism. I'm allowed to create some surplus value of my own, in the form of disposable income, but I'm then encouraged to dispose of it in very tightly proscribed ways.

This looks like freedom, but in fact it's a closed market. It's difficult - sometimes unimaginably difficult - for most people to spend disposable income in ways which don't feed straight back to profit for the owners.

This wouldn't be a huge problem if mobility was fluid, so everyone could become an owner and trade equally with other owners.

But in practice the largest owners - specifically the banks and the largest corporations - act as oligarchies and monopolies which makes equal trading impossible.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 10th, 2009 at 08:20:52 AM EST
[ Parent ]
In feudal system, i believe, the monarch owned all land. He then gave this land to rule to different "government" institutions: The church, military, university (perhaps monarch ruled directly some land) etc. These institutions collected rent (taxes) from peasants and this way the peasants supported these institutions. The development that lead to renaissance (science, art, military) etc. happened in these institutions. Rents provided the "taxes" and the peasants could keep more of their labour. Perhaps even then peasants had savings and this because there was no other "taxer", the landowner.

It's been a while since I read about feudal economics and political structures, but IIRC, nobody 'owned' the land. Rather everybody had a set of rights and obligations relating to specific areas of land. What exactly those were depended on whether you were a noble or a peasant, and in the specific time and place you were operating. Furthermore, the nobility was organized in a hierarchical pattern with a set of rights and obligations relative to each other (and to the serfs and others on a given territory). Land could not be bought or sold. The king, or whatever the local top dog was called, had the allegiance of a set of nobles, plus direct control and rights on his own royal lands where he simply functioned as a noble. There were also royal courts which provided the opportunity for people to sue each other over violating their legal obligations. The Church had similar noble style rights on certain lands, plus tithes. Among the duties of a feudal lord was military service and provision of a certain set number of men, plus administration and justice. The territory of a 'country' was simply the collected fiefdoms of the various nobles who owed allegiance to a given suzerain.

The one place where the king did own all the lands was Tsarist Russia. Though even there in practice he tended to give feudal style hereditary rights to various nobles.
 

by MarekNYC on Fri Mar 6th, 2009 at 02:27:12 AM EST
[ Parent ]
Spot on.

In fact property is not an object it is a relationship.

As Bentham pointed out we should in fact refer to eg land as "the object of a man's property" ie an object which is "proper" to the man.

Property is that bundle of rights and obligations which go with land. In England & Wales (Scotland is a bit different) the Queen technically owns all the land, and a fair chunk of it she owns in practice.

Since a simplification in 1925 we peasants now have two alternative types of tenure (there used to be all sorts of feudal complexities).

Freehold - an absolute, permanent - well,as long as you live and then it passes to your heirs if you have any, but if you have none, and do not have a will, it goes to the Crown....

Leasehold - for a temporary or defined period.

Beyond these statutory rights there are complexities in relation to rights of use involving Trust law ( a goldmine for lawyers) or contractual rights of occupation based on other statutes, eg through membership of a housing Coop which has a freehold or leasehold.

I am identifying a new option, which is keep land permanently in the stewardship of a "Custodian" and to encapsulate the property relationship in an "Open" corporate.

It is then possible to share the rights, benefits and obligations between stakeholders in new ways - particularly

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Mar 6th, 2009 at 05:06:18 AM EST
[ Parent ]
The political elites, apparently, have fallen in love with the "Russian" patrimonial model of governing and doing business. The wild 1990s illustrated the idea.

The following review excerpt clarifies the feudal/patrimonial distinctions.

[In Pipes' view], Russia differed from all other European countries because, even after the monumental attempt of Peter the Great to transform it in conformity with the Western model, its rulers clung stubbornly and immutably to their own autocratic privileges instead of evolving along representative and democratic lines. In an influential book, Russia Under the Old Regime, which appeared in 1974, Pipes expounded a wide-ranging theory that endeavored to explain this anomaly.

Briefly stated, it was a view of Russian society as being "patrimonial," a term initially used by Hobbes and then taken over and amplified by Weber. What it means is that when "the prince organizes his political power ... in the same essential manner as he does his authority over his household, there we speak of a patrimonial state structure." The czar thus "owned" everything within the state, which was simply considered his own property. No one individual or group had any right to counteract his power, nor was any distinction made between society and the state. Such a regime is different from despotism because "a despot violates his subjects' property rights; a patrimonial ruler does not even acknowledge their existence." In his new book Pipes cites Machiavelli, who in the sixteenth century contrasted the sultan of Turkey with the king of France by pointing out that the former was "a ruler who treated his subjects like slaves"; and Russia was much closer to Turkey in this respect than to any European country. This "patrimonial" mentality continued to dominate Russian politics up through the collapse of the Soviet Union, and seems to have found a new lease on life under Vladimir Putin.

Other factors also enter, such as the submissive habits inculcated by the Mongol conquest of Russia for two centuries (and, by contrast, the influence of Roman law on European monarchies). Even feudalism in the West played a part, because it involved a contract between lord and vassal, with mutual obligations on both sides that theoretically placed restraints on the power of the lord -- something totally unknown in Russia. But it was the control of the purse strings that made the most crucial difference. A whole host of authorities, beginning in the thirteenth century, are cited by Pipes to illustrate "the sanctity of private property [as] an axiom of European political thought and practice."

by das monde on Fri Mar 6th, 2009 at 06:04:20 AM EST
[ Parent ]
Are you a fan of Pipes?

You seem to bring him up a lot.  Which is fine.  So long as you read him with a critical eye and an understanding of his glorious past and and life-long crusade regarding Russia.  :)  That man is a piece or work...

(Totally OT: given all this discussion of the patrimonial system in Russia, I thought I'd throw in the fact that in Tsarist Russia, property was passed down through women, and Russian women had remarkable property ownership rights compared to much of the western world.  I know that isn't how you are using "patrimonial," exactly.  But worth mentioning in all this talk of "patrimony.")

"Talking nonsense is the sole privilege mankind possesses over the other organisms." -Dostoevsky

by poemless on Tue Mar 10th, 2009 at 12:31:04 PM EST
[ Parent ]
Pipes early stuff is quite good. His later work is seriously flawed by his deliberate decision to ignore a huge chunk of recent scholarship because he dislikes the scholars' politics. Though even there, it must be admitted that he has an excellent knowledge of the factual details. But yeah, he needs to be read with an understanding of his agenda, and preferably in conjunction with other scholars.
by MarekNYC on Tue Mar 10th, 2009 at 01:45:21 PM EST
[ Parent ]
I haven't read a whole lot of Pipes directly. Sure, I like to keep a critical eye.

I thought I'd throw in the fact that in Tsarist Russia, property was passed down through women, and Russian women had remarkable property ownership rights compared to much of the western world.
My understanding was that the Russians were very keen on dividing their properties equally to the children.  
by das monde on Wed Mar 11th, 2009 at 06:25:54 AM EST
[ Parent ]
One of the reasons put forward for Wales and England combining with relatively little trouble is that it allowed the Welsh nobility to change from a similar system to that ogf primogeniture, where all the land goes to the firstborn son. The problem with equal splits over time in the eyes of the powerful is that it gradually weekens the power of the nobility as they come to have less and less land concentrated.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Wed Mar 11th, 2009 at 06:50:31 AM EST
[ Parent ]
Russia is a much larger country - divisions could go on for several more generations.

How much did the educated class of small nobles help the Bolshevik revolution?

The Russians found an effective way to concentrate wealth anyway. When you think about it, a "side" effect of most libertarian policies is always concentration of wealth, no matter how randomly.

by das monde on Wed Mar 11th, 2009 at 07:08:12 AM EST
[ Parent ]
I forget who the quote is from but it runs something like "a revolution is a way to decide which faction of the middle class is in charge".

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Wed Mar 11th, 2009 at 07:10:07 AM EST
[ Parent ]
Another reason was that King Edward scared the shit out of the Welsh nobility...

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Wed Mar 11th, 2009 at 07:24:18 AM EST
[ Parent ]
Hey you  want to try reading Welsh school history curriculum. the differences between the English and the Saxons and Normans is strangely missing, so instead of the general invasion of Britain by the Normans you get "The English invaded Wales in 1071"

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Wed Mar 11th, 2009 at 07:41:53 AM EST
[ Parent ]
The provincialism of modern History curriculums is sad...

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Wed Mar 11th, 2009 at 07:48:17 AM EST
[ Parent ]
Out of Interest, how does the  Spanish curriculum treat the Moorish kingdoms?

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Wed Mar 11th, 2009 at 08:01:35 AM EST
[ Parent ]
I don't know any more - but my history textbook 16 years ago was pretty good about them.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Wed Mar 11th, 2009 at 08:04:56 AM EST
[ Parent ]
MarekNYC:
It's been a while since I read about feudal economics and political structures, but IIRC, nobody 'owned' the land.

In a pure feudal system. The king owned the land absolutely, usually by right of implied violence.

The king would gift or un-gift favourites and un-favourites with estates and titles to indicate preferment or disfavour. Although most nobles had one or more home estates, it was possible to have tens of different land grants. So many estates were run in absentia by estate managers who collected tithes and dealt with the finance and accounting, but rarely met the owner directly.

If nobles could threaten enough coordinated violence they could threaten or replace the king to improve their own position.

Once the merchant class started to prosper, the threat of violence became more legal and mercenary. Merchants and bankers rarely had their own war bands, but they regularly hired mercenaries to do their enforcement for them.

The aim was the same though - concessions, further land grabs, or occasionally the complete overthrow of the local top dog and replacement with someone more amenable. But merchants could also use money in less direct ways, which often outflanked the noble classes who weren't used to that kind of abstract financial engineering.

The Medici famously funded a criminal and made it possible for him to become pope. He repaid them with a monopoly on management of church tithes across all of Europe, which made them insanely wealthy almost overnight.

Either way, estates and land were very definitely owned explicitly. Although there was a tradition of common land, it was likely to be common land on an estate - i.e. common in a very local sense, in that everyone in a village was allowed right of pasture. There was no question of it being un-owned.

The UK still has the tradition of crown ownership with grants through the land registry. Even if land is owned freehold it still nominally belongs to the crown and is granted as a freehold. The giveaway is that if land stops being part of anyone's estate it reverts back to crown ownership rather than becoming government or common land.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 10th, 2009 at 08:39:52 AM EST
[ Parent ]
Common land - Wikipedia, the free encyclopedia
Depending on which part of the world, Common land (a common), is a piece of land owned by one person, but over which other people can exercise certain traditional rights, such as allowing their livestock to graze upon it. The older texts use the word "common" to denote any such right, but more modern usage is to refer to particular rights of common, and to reserve the name "common" for the land over which the rights are exercised. By extension, the term "commons" has come to be applied to other resources which a community has rights or access to. Common land, an English development, was used extensively in England and Wales and in many former British colonies, for example in Ireland and the USA. Today commons still exist in England, Wales, Scotland and USA, although their extent is much reduced from the millions of acres that existed prior to the 17th century

Is a reasonable explanation

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Tue Mar 10th, 2009 at 08:47:36 AM EST
[ Parent ]
If the worker pays two taxes: rent to the land owner and income tax to the state (to provide services, infrstructure etc.) He will most likely not earn much.

If he can use the land for free, he will most likely not earn much, neither. Subsistence farming doesn't make you really rich.

Perhaps even then peasants had savings and this because there was no other "taxer", the landowner.

What are they doing with their savings?

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 04:25:14 PM EST
[ Parent ]
"If he can use the land for free, he will most likely not earn much.."

Of course he will, because he gets to keep all his labour and capital.

"What are they doing with their savings?"

Buy a new horse?

by kjr63 on Fri Mar 6th, 2009 at 04:42:15 PM EST
[ Parent ]
Checked reality lately?

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 04:45:08 PM EST
[ Parent ]
There is no use in licensing the use of land, when you are the one, who wants to use it. But for using it, you need seed, fertiliser, perhaps a tractor. As well you have to survive until your first harvest.
So you take a credit. But the bank, that gives you credit - especially in Germany industrialisation was to a good part financed by banks, that got their funds from many small savers; e.g. Raiffeisenbanken und Sparkassen, will give you credit only for horrendous interest rates, UNLESS you collaterise the credit. You can collaterise with your work, but that is a pretty unsave thing. If you collaterise with your land, the bank will be pretty happy.

There is no reason that you have to own the land in order to be able to take out a mortgage on it. You can have the land in trust, subject to specific conditions, and mortgage this trust instead. Yes, this increases the risk premium that the bank will charge - because there are more ways you can lose control of the land, and thus lose your collateral. But that's not quite the same thing as saying that it cannot happen.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 6th, 2009 at 02:54:58 AM EST
[ Parent ]
You can have the land in trust, subject to specific conditions, and mortgage this trust instead.

Can you make an example for conditions you would like to apply. Something that the bank can reasonably accept?

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Sat Mar 7th, 2009 at 03:37:57 PM EST
[ Parent ]
Suppose that all land is owned by the municipality instead of by private individuals. You want to build a factory on a bit of land, so you go to the municipality for permission (you have to do this anyway, because they have to approve emissions levels, noise levels and so on and so forth and etc.).

The municipality says "OK, you can build a factory on the bit of land, subject to these or those criteria for construction, and provided that you're not a nuisance to the neighbours. As long as you stay within the limits laid down here, the owner of the factory has the right to use the land."

Now you go to your local, friendly loan shark an investment banker and take out a mortgage on the factory that you are going to build. Note that since you don't have to buy the land (presumably, you're paying some kind of rent to the municipality instead of a one-off sales price), you don't have to borrow as much.

After a couple of years, the factory becomes unprofitable, and you decide to close down the factory. If you had owned the land, you could have bulldozed the factory and sold the land to some other dude, who could (subject to local planning restrictions) have built something else on it. But instead, the use right just goes back to the municipality (and you cease to pay rent).

What has happened in this example is that access to a piece of land has been separated from the stuff that's built upon the piece of land. Of course, there will have to be a very transparent and easy to understand way to award those use rights, because otherwise you'll get a thriving shadow market in gaming the access rules, and that would work pretty much like an actual property market for real estate, except completely out of reach of the regulators. But it should be possible.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Mar 8th, 2009 at 05:44:01 PM EST
[ Parent ]
JakeS:
Suppose that all land is owned by the municipality instead of by private individuals. You want to build a factory on a bit of land, so you go to the municipality for permission (you have to do this anyway, because they have to approve emissions levels, noise levels and so on and so forth and etc.).

The municipality says "OK, you can build a factory on the bit of land, subject to these or those criteria for construction, and provided that you're not a nuisance to the neighbours. As long as you stay within the limits laid down here, the owner of the factory has the right to use the land."

The municipality (the Custodian) maybe gets a rental for the exclusive use of the location aka land. For a commercial or agricultural use this could be some sort of proportional share of production. (there are precedents for tithes....)

For individuals one could be a bit more imaginative. There are several options open, but a Georgist tax on Land Rental Value is the effective result.

JakeS:

Now you go to your local, friendly loan shark an investment banker and take out a mortgage on the factory that you are going to build.

No mortgage.

You go to the contractor and get a quote, broken down into costs and profit margin. You offer him the chance to invest his costs, but he probably needs cash. His profit margin he must invest, or there's no deal.

What he does invest gets him an agreed proportional equity share in your gross revenues as a Capital Partner.

Having minimised your cash requirement you find a punter/ venture capitalist to put up the money, in return for which he gets x% of your gross revenues, if there are any.

Once it's built, the contractor and the VC can sell their Units in your (now existing) gross revenues at any time at a market price, and you really don't care, because your interests are aligned with the investors, whoever they are, and they have no say in the management of your factory.

And note here that it's a damn site easier to get a handle on gross revenues than net profits, which is why Income Trusts became so popular in Canada, and Australia before that.....

If the factory closes for whatever reason, then a new Occupier can come in once he's made his peace with the municipality, found investors yada yada.

JakeS:

What has happened in this example is that access to a piece of land has been separated from the stuff that's built upon the piece of land.

Close, but maybe not quite. We are separating the use of the value of  the location (the Commons), from the use of the Capital invested in that location.  We are sharing risks and rewards and aligning the interests of stakeholders in a new way, and in fact created a new "co-ownership" property right, which is a sort of "evergreen" leasing arrangement of indefinite duration.

I reckon such a Capital Partnership is probably an optimal enterprise model. But it's not magic. It can't make a silk purse out of a sow's ear.

There are some enterprises that won't stack up using any enterprise model.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Mar 8th, 2009 at 06:54:33 PM EST
[ Parent ]
Perhaps so, but I was tasked with constructing a model of use value that could work within the existing currency system.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Mar 9th, 2009 at 04:54:25 AM EST
[ Parent ]
Land value is mostly human made. The value as shelter, is entirely human made. Look what a piece of wood somewhere costs and what a piece of land in a city costs. The land is valueable, because there are buildings around.

There are a couple of remarks that one can make to that. The first is that this is not the value of the work that has been put into cultivating the land in question - it is the value of the work that has been put into cultivating the surrounding land. Or more specifically, it is the value of the positive externalities of the work that has been put into the surrounding land.

The second is that there is a scarcity premium on top of the value of the externalities of the surrounding development, because land is limited.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 6th, 2009 at 02:49:21 AM EST
[ Parent ]
The first is that this is not the value of the work that has been put into cultivating the land in question - it is the value of the work that has been put into cultivating the surrounding land.

Which was done by other members of the same society. My argument is, that every normal person has profited. When somebody argues, that propertisation of land is immoral, I ask, immoral against whom? For sure not the people that form the state.

The second is that there is a scarcity premium on top of the value of the externalities of the surrounding development, because land is limited.

That is a very small premium. A piece of forest somewhere is pretty cheap.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 01:45:01 PM EST
[ Parent ]
My argument is, that every normal person has profited.

Um, no. Not the people who don't own land. Or rather, they have profited, but they have profited less, and they have profited less solely because they didn't own land - not because they were less productive, but because they didn't take on the speculative risk of purchasing land.

Now, making money by taking on speculative risk is a legitimate enough business... as long as the risk you take on is transferred from hedgers (witness insurance companies, for instance). But that's not the case here. Risk is transferred from other speculators, which makes it substantially a matter of gambling.

Further, there is a barrier to entry into land ownership, in that you have to be able to get credit, which is only available to (lower) middle incomes and up. The only time that this is waived is in the terminal stage of a bubble, ensuring that if the less well-to-do get their hands on land, it's almost always at or near the top of the market.

So essentially, land price increases (whether due to increasing value of the surrounding society or due to price inflation) makes the (lower) middle incomes and up gain.

If the price increase is purely inflation, this is a direct transfer from the poorest members of society to everyone else (because the actual value of the land does not go up because of inflation - so society does not get richer overall. And when society does not get richer overall, any benefit to some members must come out of someone else's pocket).

If the price increase is due to increased value, the distributionary effects depend on how that increased value was financed.

  • If a poll tax was levied to construct a new metro, the increase in land value would be a transfer from poor to rich.

  • If the metro was financed purely out of progressive wealth taxes, it would likely be a transfer from rich to poor (because the rich would recoup less value from the use value of the metro plus the increased land value than they would have lost to the wealth tax. While the poor would gain the use value of the metro, even if they did not capture any of the increase in value of the surrounding land).

  • Somewhere in-between those two examples is the range in which everybody gets a positive return (assuming that the value of the metro is higher than the cost of building it). And somewhere in the everybody-benefits range is the point where the financing is distributionally neutral.

That is a very small premium. A piece of forest somewhere is pretty cheap.

But land in cities is very limited.

I suppose that it's hard in practise to distinguish between scarcity rent and the value of the positive externalities of the city, though. So it's mostly a question of semantics.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 6th, 2009 at 02:10:16 PM EST
[ Parent ]
JakeS:
The only time that this is waived is in the terminal stage of a bubble, ensuring that if the less well-to-do get their hands on land, it's almost always at or near the top of the market

Important point.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Mar 6th, 2009 at 02:45:50 PM EST
[ Parent ]
Um, no. Not the people who don't own land. Or rather, they have profited, but they have profited less, and they have profited less solely because they didn't own land - not because they were less productive, but because they didn't take on the speculative risk of purchasing land.

I think we talk about different things. I talk about what has initiated the industrial revolution in the second half of the 18th century and you talk about land speculation. Of the increase in productivity in the last 250 years for sure everybody who participates in the society has profited.

Further, there is a barrier to entry into land ownership, in that you have to be able to get credit, which is only available to (lower) middle incomes and up.

Or somebody donates [e.g. via a land reform] it to you or there is a rule, that somebody who urbanises a piece of land can own up to certain amount [USA, 18th century or so] or it is anyhow 'your' land in the sense, that your family has a subsistence farm on the land for centuries, and now you get legal codification. Or you have worked in the past and saved enough to acquire a piece.

But land in cities is very limited.

Why the hell do you want land in cities, if not for the other people there? How is the increased value of a piece of land in a city NOT made by humans?

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 04:05:11 PM EST
[ Parent ]
I think we talk about different things. I talk about what has initiated the industrial revolution in the second half of the 18th century and you talk about land speculation. Of the increase in productivity in the last 250 years for sure everybody who participates in the society has profited.

That's all well and fine, but unless you can show a causal relationship between individual ownership of land and industrialisation, you still haven't made the case that everybody benefits from individual land ownership.

Otherwise, the wealth created by the industrial production economy is really beside the point.

Or somebody donates [e.g. via a land reform] it to you

Which has not happened in any Western(TM) society since the 19th century, AFAIK. And back then, land was "reformed" from the poor to the rich, by the way.

or there is a rule, that somebody who urbanises a piece of land can own up to certain amount [USA, 18th century or so]

That involves chasing the existing occupant out of said land.

or it is anyhow 'your' land in the sense, that your family has a subsistence farm on the land for centuries, and now you get legal codification.

Again, this does not apply to mature industrial economies.

Or you have worked in the past and saved enough to acquire a piece.

And how many land purchases were cleared in cash in the Bundesrepublik last year?

Why the hell do you want land in cities, if not for the other people there? How is the increased value of a piece of land in a city NOT made by humans?

It is made by humans, but that is beside the point. It's not made by the owner of the land. It's made by society as a whole - in other words, the owner of the land cashes in on value that has virtually nothing to do with his own endeavours. I call that either a speculative gain or a rent.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 6th, 2009 at 05:37:22 PM EST
[ Parent ]
That's all well and fine, but unless you can show a causal relationship between individual ownership of land and industrialisation, you still haven't made the case that everybody benefits from individual land ownership.

The link is, that propertisation has allowed to make a lot more credit. Independent of any possible gold standard, the commercial banks collaterise(d) there loans with the land. That is not to say, that it is impossible to invent different models for collaterisation. But it is a very good one, because land value is so stable. Mohammed Yunus with his Grameen bank takes good will and shame as collateral. This is already quite sophisticated. Still he demands 20-30% interest rate on loans, and the loans have a very low volume.

That involves chasing the existing occupant out of said land.

Yes, that was a collection of measures that happened in the past. We can invent new measures, but this is a measure that happened really in the past.

Again, this does not apply to mature industrial economies.

It has once applied to economies that are today industrial. It has initiated capitalism. To undo it, would undo capitalism (unless you have a smart replacement).

And how many land purchases were cleared in cash in the Bundesrepublik last year?

Most purchases of blank land that happend. Not many overall, as we are in a rather stable situation. But even in the remaining cases it is a portion of every deal. The rest you borrow by collaterising what you just bought. But then over time the debt is repaid. Land ownership isn't something to which only 0.1% of the population have access to and it isn't entirely by heritage.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Sat Mar 7th, 2009 at 03:36:19 PM EST
[ Parent ]
Martin:
To undo it, would undo capitalism (unless you have a smart replacement).

Exactly.

The land is held by a Custodian, so it is never sold again. Co-owner Occupiers may change and Co-owner Investors may change but the land is never sold again.

For as long as he has use of the land (ie an indefinite term) the Occupier pays a rental for the use of the location (to the community) and to Investors (for the use of the capital invested in the location).

Anything an Occupier pays more than the rental due buys him Units. And if he maintains the property himself he gets Sweat Equity.

No borrowing. Just Units created within a partnership framework redeemable in rental value.

There we go. Reinvented Capitalism.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Mar 7th, 2009 at 04:14:10 PM EST
[ Parent ]
"When somebody argues, that propertisation of land is immoral, I ask, immoral against whom?"

To every one whose access to land is denied. Why should people pay for a place? For water or air?

"For sure not the people that form the state."

There is phenomenon called "homelessness". Why are people homeless? Because they can't pay an apartement maintenance costs? They are only 50e/month. They can't pay the land, but do they form a state?

by kjr63 on Fri Mar 6th, 2009 at 04:03:23 PM EST
[ Parent ]
To every one whose access to land is denied.

There is sufficient public space. You just can't do there everything. Most land in most countries is accessible.

Why should people pay for a place? For water or air?

Because it helps to allocate limited resources in an efficient way.

There is phenomenon called "homelessness". Why are people homeless? Because they can't pay an apartement maintenance costs? They are only 50e/month. They can't pay the land, but do they form a state?

Actually homeless people are pretty much a border case. As the society requires obedience to the law, one can require it to give something in exchange especially, when the grab is on nearly all available land - and we give:
Usually the cause for homelessness is a mental illness. If you are able to ask for help. It will be granted to you. If you pledge to work within your ability, our society will grant you a home. At least in Germany, but I guess in all of western Europe nobody becomes homeless, because his ability to earn money in the market doesn't earn him enough to pay for a home.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 04:22:46 PM EST
[ Parent ]
"Because it helps to allocate limited resources in an efficient way."

Yes, but not with the expense of the real economy.

by kjr63 on Fri Mar 6th, 2009 at 04:54:52 PM EST
[ Parent ]
Famine is efficient.
by Colman (colman at eurotrib.com) on Fri Mar 6th, 2009 at 04:57:32 PM EST
[ Parent ]
If you believe that, then at least I know, why you oppose policies that would make famine history.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 05:26:53 PM EST
[ Parent ]
You know, that's the second ad hominem you've resorted to in this thread. Not a good sign of confidence in your position.
by Colman (colman at eurotrib.com) on Fri Mar 6th, 2009 at 05:29:29 PM EST
[ Parent ]
You have started this.

I'm 100% confident in my position. I'm annoyed that I have to explain over and over again things, that are either not related to my original point, or are already completely clear from what I have written before.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 05:39:46 PM EST
[ Parent ]
And could you please show me my other ad hominem attack?

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 05:47:09 PM EST
[ Parent ]
You have to eat and cloth, too, and the first one is even more important for survival than housing. Where is the difference, if you depend on others capital or on others work?

Taxes are by definition without something in exchange. You may need housing, but you can still decide which house you like to rent or buy, just as you can decide, what kind of food you want to buy, even if there are little ways to escape the need to buy food - they are as attractive as to live without proper housing.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Thu Mar 5th, 2009 at 02:11:20 PM EST
[ Parent ]
Ah, I didn't see Gringo had already replied somewhat of that form.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Thu Mar 5th, 2009 at 02:12:18 PM EST
[ Parent ]
Martin:
Taxes are by definition without something in exchange.

No, this is utterly, spectularly wrong - and it's probably the core dishonesty of the conservative world view.

Taxes are paid in exchange for social services, social stability and freedom of opportunity. Goals are set - or should be set - democratically.

Interest on money is something which gives the payer nothing in exchange, except access to a resource which is only limited by fiat - a nice trick, if you're one of the lenders and can make it work for you.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Mar 5th, 2009 at 08:48:21 PM EST
[ Parent ]
ThatBritGuy:
Interest on money is something which gives the payer nothing in exchange, except access to a resource which is only limited by fiat - a nice trick, if you're one of the lenders and can make it work for you.

I used to think this, but I have come to the view that credit intermediaries aka Banks provide the value of an implicit guarantee of the borrower's credit, which they support with an amount of proprietary capital.

ie interest is a charge made for a framework of trust, and of a small amount of capital backing it.

Unfortunately excess profits are made in the good times (over and above the bank's operating costs, and the cost of defaults) and Society picks up the guarantee in the bad times.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Mar 5th, 2009 at 09:20:49 PM EST
[ Parent ]
No, this is utterly, spectularly wrong - and it's probably the core dishonesty of the conservative world view.

From wikipedia:
Als Steuer wird eine Geldleistung ohne Anspruch auf individuelle Gegenleistung bezeichnet, die ein öffentlich-rechtliches Gemeinwesen zur Erzielung von Einnahmen allen Personen auferlegt, die einen steuerlichen Tatbestand verwirklichen, wobei die Erzielung von Einnahmen wenigstens Nebenzweck sein sollte (Definition der deutschen Abgabenordnung [so this is the definition by law. Not all words get such honour]). Damit sind Steuern eine öffentlich-rechtliche Abgabe, denen keine bestimmte staatliche Leistungen gegenübersteht und die zwecks Deckung des allgemeinen Finanzbedarfs ohne Ansehen der Person alle zahlen müssen, die den Tatbestand der Steuerpflicht erfüllen.

Taxes are paid in exchange for social services, social stability and freedom of opportunity. Goals are set - or should be set - democratically.

So people that don't pay taxes don't get social services or social stability? How can people without income than get anything from the welfare state? Why would the police hunt robbers of some driving through Dutchmen? Or are there other things they do to get these goodies instead of paying taxes or what? Maybe you should tell that trick.

And yes, goals are set democratically. The payment of taxes hasn't even influence on the role you take in the process what is done with the money.

Interest on money is something which gives the payer nothing in exchange, except access to a resource which is only limited by fiat - a nice trick, if you're one of the lenders and can make it work for you.

This is utter nonsense. Interest is like the rent on money. You use the car of a car rental, so you pay car rent. You borrow a DVD from a shop, so you pay DVD rent. You borrow money from somebody else, so you pay money rent. And yes, money is limited by fiat. But if you borrow the money just to have the money laying around, you are a complete idiot. But most people that borrow money use it to buy something, that is limited NOT by fiat, e.g. a machine, or rent of something else. So a very similar thing to borrow money would be to borrow whatever you buy with the money and paying rent for that. With appropriate contracting there is no practical difference.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Thu Mar 5th, 2009 at 11:15:30 PM EST
[ Parent ]
So people that don't pay taxes don't get social services or social stability?

They get them because other people pay taxes. Distribution of taxation is a different question.

In the limit, if no one paid taxes, none of these services would exist - at least not in a form that most people would want to experience and live with.

Interest is like the rent on money.

Yes, exactly - and getting people to pay rent on something which doesn't exist physically and which some people are allowed to create out of thin air for the most arbitrary reasons, while others aren't, is the nice trick.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Mar 6th, 2009 at 06:02:46 AM EST
[ Parent ]
Any reasonable argument about democracy has to take public opinion as exogenous.

That's a bit of a reach, saying that all arguments that dont take public opinion as exgeneous are unreasonable. so much of a reach that you need to justify it.

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Thu Mar 5th, 2009 at 01:39:43 PM EST
[ Parent ]
But what government do they mean? If it is so evil, how it came along and why it is staying?

Because it has the monopoly of violence.

It has that monopoly until it doesn't have it. Quite a few feudal rulers experienced that.

of the people, by the people and for the people

This idealisation of democracy assumes a Rousseau like a priori common good. I don't see such a fundamental difference between democracy and feudal gov't structures. Democracy can be the tyranny of the majority. The far more important difference is between a state within the rule of law, and a state without the rule of law. I anytime prefer constitutional monarchy a la Germany 1900 over a democracy, that doesn't recognise individual rights like the south of the USA before the civil war and to some degree into the 60s.

I do not equate democracy with "people government". Quite contrarily: I argued that you can run in effect an old-fashioned "feudal government" within democracy. I did not even touch totalitarian ramifications. As for the rule of law, the Nazi Germany qualifies, does it not?

Small tribes/societies do not need much formal encoding of rules, or unifying ideologies how to live together. But large societies need some general framework - privilege and obligation rites, an ideology, or a religion. The general framework does not have to be entirely fair or objectively "right".

You don't need much more than control of public opinion through concentrated media and economic motivations.

Any reasonable argument about democracy has to take public opinion as exogenous. To say people have the wrong opinion for whatever reason, and you know what would be their right opinion, isn't democracy. It is feudal rule by YOU.

We're talking opposite things. Arguing against a widely held opinion is a very poor method of public control. You agitate too many people - and that's where your "feudal rule" ends. Gee, if that's where people perceive feudal/fascist domination, I should be hopeless.

I talk of much subtler techniques of forming public opinions by apparently pandering to them, manipulating your perception of self-interest and your confidence in undoubtable "truths". With the modern media, a lot of influential judgments are made in the name of "common wisdom".

Mortgage payments and rents are nothing but additional taxes.

No they aren't. You are not born into a mortgage contract. You have willfully entered into such a contract. Taxes you have to pay without having ever agreed to pay them.

In Japan I heard of cases of mortgage contracts stretching into next generations. Can't this happen in the US?

One of my points is that taxes, rents and debts are historically very similar, if not the same sometimes. A democratic free market does not force you to enter into mortgage "tax"... but at certain times it is very hard to avoid that. Any "self-respecting" family was compelled strongly to enter a mortgage contract in the last decade. It has been a real bonanza for rentiers.

In the recent culture, if you could choose to live without own house... you "could" choose to avoid taxes by being poor. Or you could approvingly immigrate to a "tax-competative" country.

[Eastern Europe ...] But the people won't even have a chance to see any benefit of their payments.

They have already gotten something for their payments. They have borrowed money and are now paying back. If it is amoral to demand the pay back of loans from people who have the means to pay back, it is amoral to ask for a loan as well.

You have a point. But then you should add amorality of eager offer of a loan. The "awakening" East-European could hardly know it better than accept anything the West was offering or showing as the best practice.

But again, I wish to talk about effective circumstances rather than formal distinctions. Not only dumb loan takers will suffer, but relatively smart residents as well, because the whole economy is burdened by runaway obligations. Mortgage payments will hamper the economy just in the same way as tax payments. In particular, it won't help much to cut taxes another 1% if the effective mortgage burden is disproportionally higher.

Feudal freedom is a real freedom only for a few.

One can argue this. But the lack of super high income taxes isn't the issue. If you are talking all the time about the rentier class, and praise the 60s, I ask you what do make of this information from the US treasury? For most of the 60s the maximum tax rate on capital gains was 25%. The high taxes were only on people trying to get into the rentier class, not for the members of the rentier class itself. Ok, there was higher inflation, so one has to relativate that, but today, income tax really isn't the  issue.

The higher barrier towards the rentier class was probably instrumental. One of the greatest follies towards a crisis like this is the induced belief that everyone could be a rentier. That's precisely how "everyone" gets involved into speculative bubbles. But logically, a rentier society is clearly a self-destructive illusion. Plain labour has to be valued higher than a forced bargain, or we get something ugly.

I do not argue for outlawing renting, or hating rentiers per se. Perhaps paradoxically, I am quite comfortable with a small but not too powerful class of rentiers. Real-world dynamics shows that speculative rentier rushes result in a few big winners (mostly the experienced old rentiers, I suppose) and a crowd of unlucky or dumb loosers. That's how the welfare and power of successful rentiers breaks through to feudal levels.

by das monde on Thu Mar 5th, 2009 at 11:49:19 PM EST
[ Parent ]
As for the rule of law, the Nazi Germany qualifies, does it not?

The fact that Hitler became chancellor in a legal way obfuscates the fact, that the constitution doesn't grant unlimited power to the chancellor. The Nazis broke the law very clearly later. That is the reason I used the constitutional monarchy as an example. Even the monarch has to obey the rules of the constitution. In case of the Nazis one break of law was, to eliminate elections.

But large societies need some general framework - privilege and obligation rites, an ideology, or a religion. The general framework does not have to be entirely fair or objectively "right".

That depends on the degree of coherence of the society. A society of great diversity in religion, ideology and cultural rites depends stronger on a fair and objective ruling than a more homogenious society.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 12:49:35 AM EST
[ Parent ]
das monde:
In Japan I heard of cases of mortgage contracts stretching into next generations. Can't this happen in the US?

good question.

here's another one: if someone pays into a pension fund for 40 years then dies one year into retirement, or even before for that matter, why can't the accrued retirement funds be passable on to kin?

sorry if that's OT.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Mar 10th, 2009 at 03:52:56 PM EST
[ Parent ]
In the US debts die with death. Not sure how it works with an underwater secured debt, presumably if an heir wants to take it over they can, but there is no obligation.
by MarekNYC on Tue Mar 10th, 2009 at 04:00:37 PM EST
[ Parent ]
I believe that defined contribution plans are hereditary, defined benefit ones aren't. (That is you can inherit money in your parents 401(k) That sort of makes sense, the contributions to defined benefit plans, including both employer and employee payments, are meant to add up to what the expected payouts will be. That involves using actuarial stats on life expectancy - i.e. they assume that a certain percentage of the beneficiaries will die earlier than others. Though spouses often do get benefits after death. But IANA accountant or lawyer, so I may well be wrong about all of this.
by MarekNYC on Tue Mar 10th, 2009 at 04:05:54 PM EST
[ Parent ]
In general, "defined contribution" refers to contract terms of periodic variable payments into an Employer Sponsored Retirement Plan, such as a 40*(*), or tax sheltered investment fund. So far as I know, these types of tax-sheltered, deferred compensation schemes do not warrantee cumulative value of funds available or amount or periodicity of distributions at date of retirement. Here is an informative source. Scroll to the table near the bottom of the window.
Death benefits to be paid under a 403(b) plan depend on when death occurs and who is the designated beneficiary [surviving spouse or other] on the plan. The Internal Revenue Code states that distributions generally must be made from a 403(b) plan by the participants required beginning date, which is April 1 of the year following the year in which the participant attains age 70 1/2. Different rules apply to death benefits depending on whether or not death occurs before the required beginning date.
Distributions must liquidate the account. And these are taxable as ordinary income. Here is important advice about limitations on survivor interest in ESRP and other annuity product distribution.
MRD stands for "minimum required distribution." The Internal Revenue Code established these minimums to ensure that you actually use your Employer Sponsored Retirement Plan account balance for retirement (and not, for instance, to pass onto your heirs). ... If you do not take an MRD from your retirement account each year, the Internal Revenue Code imposes a 50% penalty tax on the amount that should have been withdrawn in each calendar year. This tax is in addition to regular income taxes.
"Defined benefit" refers to contract terms of periodic fixed payments from an tax-sheltered annuity (TSA) fund, such as a pension, the value of which is guaranteed irrespective of investment performance over the life of contributions.

Diversity is the key to economic and political evolution.
by Cat on Wed Mar 11th, 2009 at 09:57:42 PM EST
[ Parent ]
"Tax-sheltered deferred compensation scheme" is a really nice term for "private pension plan." I'm gonna steal that line, if you don't mind.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 12th, 2009 at 06:25:44 AM EST
[ Parent ]
G W Bush was arguing along these lines in the 2000 campaign. But I see this as an element to nail Social Security or other public pension plans. The drive for retirement on investments is quite a step back towards feudal times.

The view that Social Security is a privilege, a right, or an entitlement is not quite healthful. The phenomenon of pensions as we know them is less than a century old, actually. Social Security was rather created as a social construct to reduce some (elder care) burden for the middle class - and it worked well this way for several decades. The system was far from Ponzi-type problems, because any "baby boom" discrepancy between payers and benefactors did not require exponential corrections. Although politicians claimed that Social Security would "go belly up" by 2018, the actual official estimate was that the system would still receive income by 2018. Many people were truely fooled.

The private pension plans have the disadvantages of higher administrative costs (much higher...), more dramatic reaction to economic downturns and demographic bumps (just because boomers have to buy competitively and then sell competatively). Other difference might be the rule of passing the saving to your descendants. Is it unfair that people dying just at the pension turn pay fully but get nothing? If your main concern is the relative position of everyone participating, that is unfair. If you are mostly enthusiastic with a social mechanism to relieve the productive population somewhat, things become neutral.

In the current political climate, framing pensions as a "fair" payoff helps to phase out the whole idea of public pensions. I would rather admit that Social Security is a bit of a gamble for a reasonable sake of society.

by das monde on Wed Mar 11th, 2009 at 01:24:58 AM EST
[ Parent ]
They have already gotten something for their payments. They have borrowed money and are now paying back. If it is amoral to demand the pay back of loans from people who have the means to pay back, it is amoral to ask for a loan as well.

In a great many cases, what they got was a song and a dance.

There is a very strong case (made in Stiglitz' Making Globalisation Work and elsewhere) that the lender should be the one to bear the currency risk, not the borrower - i.e. that lending people money in a currency that isn't theirs is immoral. This is in many cases the reason why Eastern European (and various developing) countries are paying a large fraction of their GDP to service loans.

Additionally, the international financial system is badly skewed towards seeing to the interests of creditors, which means that not all creditors exercise due diligence in their lending. And due diligence is clearly the creditor's (moral) obligation, so failing to exercise due diligence makes a creditor morally suspect.

Asking for a loan, on the other hand, is (only?) morally suspect if you do not have reason to believe that you can and will pay it back. Most developing countries had the best reason in the world (according to the lending institutions, at least) for thinking that they could and would repay: The IMF said that they could and would (otherwise they would not have been considered credit-worthy in the first place).

In a way, credit extended to developing countries resembles the subprime mess, with the IMF in the role of investment bank, mortgage broker, credit ratings agency and enforcer for the creditors at the same time...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 6th, 2009 at 02:23:53 AM EST
[ Parent ]
There is a very strong case (made in Stiglitz' Making Globalisation Work and elsewhere) that the lender should be the one to bear the currency risk, not the borrower - i.e. that lending people money in a currency that isn't theirs is immoral.

I disagree with that. If the country of the borrower simply has no credible money [that is most countries in the world], the alternative to lend in one's own currency or a third currency is not lending at all.

In the case of Eastern Europe, the gov'ts were fully aware, that the private sector takes on currency risk. They could have reacted, and its not some small uneducated private borrower, but a gov't with full access to a broad expertise.

Asking for a loan, on the other hand, is (only?) morally suspect if you do not have reason to believe that you can and will pay it back.

Why do you think the lending institutions know better, if somebody can pay back the loan, than the one asking for the loan?

In a way, credit extended to developing countries resembles the subprime mess, with the IMF in the role of investment bank, mortgage broker, credit ratings agency and enforcer for the creditors at the same time...

Actually unless the details of a contract aren't hidden or misrepresented during the process of making it, there is no misbehavior against each other. The borrowers of subprime mortgages have not necessarily a reason to complain. Mostly the workers in the banks have fouled the bank owners and the general public.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 02:19:11 PM EST
[ Parent ]
I disagree with that. If the country of the borrower simply has no credible money [that is most countries in the world], the alternative to lend in one's own currency or a third currency is not lending at all.

Yes? So?

By most reasonable metrics, most IMF loans since the fall of the Berlin Wall have made the recipients worse off, not better off.

In the case of Eastern Europe, the gov'ts were fully aware, that the private sector takes on currency risk. They could have reacted, and its not some small uneducated private borrower, but a gov't with full access to a broad expertise.

Except that the "broad expertise" in question was a gang of neoliberal quacks, that the lenders insisted on imposing on the countries in question.

Why do you think the lending institutions know better, if somebody can pay back the loan, than the one asking for the loan?

Whether they actually do know any better is beside the point. It's their job to know. That's what "due diligence" means, and it's the duty that banks take upon themselves in exchange for the privilege of being allowed to create money. Money that is, to a very large extent, actually backed by the government rather than the individual bank.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 6th, 2009 at 02:32:42 PM EST
[ Parent ]
By most reasonable metrics, most IMF loans since the fall of the Berlin Wall have made the recipients worse off, not better off.

The IMF played a pretty little role in the latest chapter of global capitalism.

Except that the "broad expertise" in question was a gang of neoliberal quacks, that the lenders insisted on imposing on the countries in question.

No. The individual banks have zero power to impose anything. And western European countries for sure didn't impose anything like that. Borrowing in yen and Swiss currency? And western European countries did ask eastern ones, to commit stronger to Euro membership, which would have reduced risks. The answer of the current holder of the EU presidency and head of gov't from one of those eastern European countries Vaclav Klaus:
Read it

And no, we haven't imposed Klaus on the Czech.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 03:31:29 PM EST
[ Parent ]
The IMF played a pretty little role in the latest chapter of global capitalism.

I was talking about the previous round, in the '90s. Which is where many of the Eastern European countries accrued most of their debt.

No. The individual banks have zero power to impose anything. And western European countries for sure didn't impose anything like that.

The European Union has (unwisely and inappropriately) insisted on capital market deregulation without extending the necessary systemic safeguards to new entrants. Capital market deregulation is stupid in any event, but failing to extend systemic safeguards to vulnerable economies is downright criminal. Yes, Schröder and Bliar, I'm looking at you.

Borrowing in yen and Swiss currency? And western European countries did ask eastern ones, to commit stronger to Euro membership, which would have reduced risks.

Once they were in. But it also prevented them from an orderly devaluation in time. Instead, we got the messy currency collapses we see now. It's not the whole story, but it's part of it.

The answer of the current holder of the EU presidency and head of gov't from one of those eastern European countries Vaclav Klaus

Your point? That Vaclav Klaus is an idiot? Well, what else is new? That he has done the Czech Republic no favours? Indisputably true.

Now please tell me how that affects the obligation of lenders to observe due diligence?

And no, we haven't imposed Klaus on the Czech.

That's a debatable point, given the extent of Western(TM) meddling in the internal affairs of former Warsaw Pact countries in the immediate aftermath of the collapse of the Soviet Union. But also one that falls far outside the scope of this thread.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 6th, 2009 at 05:48:04 PM EST
[ Parent ]
I was talking about the previous round, in the '90s. Which is where many of the Eastern European countries accrued most of their debt.

Are you sure? I doubt that. Given the high growth in the last years combined with a high trade deficit, debt from the 90s should play a minor role, compared to the debt in the last years.

The European Union has (unwisely and inappropriately) insisted on capital market deregulation without extending the necessary systemic safeguards to new entrants. Capital market deregulation is stupid in any event, but failing to extend systemic safeguards to vulnerable economies is downright criminal. Yes, Schröder and Bliar, I'm looking at you.

That saveguards are on the national level in western Europe, too. I don't know about which action you are talking exactly, but I have strong doubts, that western countries have forbidden the Baltics to bring in the same kind of regulation we have for ourselves.

Once they were in. But it also prevented them from an orderly devaluation in time. Instead, we got the messy currency collapses we see now. It's not the whole story, but it's part of it.

No, it is all about expectations. A credible comittment to membership in good times would have been enough. Orderly devaluation? I think most of the time their currencies went up, not down. Why should they have devalued their currency? For getting market share by currency dumping? I don't think the eastern European currencies are overvalued in the long run. There is a reasonable expectation of a catch up process.

Now please tell me how that affects the obligation of lenders to observe due diligence?

There is no such obligation towards the borrower. And demanding the impossible isn't reasonable. The long term prospects for eastern Europe have been and are still good. The fluctuations that create now so much trouble could have been avoided by representatives of the people in trouble - if there really is so much trouble; in contrast to the subprime debacle in the US I believe that the assets underlying the mortgages in Eastern Europe have fundamentally the value, that they shall cover.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 06:06:50 PM EST
[ Parent ]
Are you sure? I doubt that. Given the high growth in the last years combined with a high trade deficit, debt from the 90s should play a minor role, compared to the debt in the last years.

Reasonably sure. I'll have to run through Globalization and its Discontents and Making Globalization Work to get the figures, but that'll have to be when I'm more awake.

That saveguards are on the national level in western Europe, too. I don't know about which action you are talking exactly, but I have strong doubts, that western countries have forbidden the Baltics to bring in the same kind of regulation we have for ourselves.

Leaving to one side for the moment that the regulation in "old Europe" has been grossly insufficient, Eastern Europe has more fragile economies, so they need to be able to impose harsher regulation on their financial systems. Deregulated capital markets are of debatable value even to mature industrial economies - they're disastrous to developing countries.

No, it is all about expectations. A credible comittment to membership in good times would have been enough.

Yes, but when times are not good, you need to either be able to devalue your currency in an orderly way, or have a credible guarantee from a big central bank - such as the Bundesbank 2.0 ECB. The exchange rate mechanism does not, as far as I am aware, contain a serious guarantee from the ECB that it will defend the candidate country's currency in the event of crisis.

Orderly devaluation? I think most of the time their currencies went up, not down. Why should they have devalued their currency?

To reduce their exposure to loans denominated in foreign currencies.

There is no such obligation towards the borrower.

The borrower is bankrupt. He does not exist anymore, as a financial entity. So somebody will have to pick up the tab. It can't be the original borrower, because you can't give a bald man a haircut. So it has to be either a) the lender, b) the citizens of the lender's home country or c) the citizens of the borrower's country.

In other words, due diligence is not a duty to the borrower. It is a duty to the taxpayers who otherwise run the risk of having to pick up the tab.

And demanding the impossible isn't reasonable. The long term prospects for eastern Europe have been and are still good. The fluctuations that create now so much trouble could have been avoided by representatives of the people in trouble - if there really is so much trouble; in contrast to the subprime debacle in the US I believe that the assets underlying the mortgages in Eastern Europe have fundamentally the value, that they shall cover.

If there's no trouble, then there's no problem - the banks can keep the loans on their books until maturity and everybody's happy. The question is about who gets to pay for the cases where there is trouble.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 6th, 2009 at 06:36:38 PM EST
[ Parent ]
If there's no trouble, then there's no problem - the banks can keep the loans on their books until maturity and everybody's happy. The question is about who gets to pay for the cases where there is trouble.

It is a term transformation problem even that case. Banks have borrowed short term maturity and lend long term maturity. Due to the credit crunch their costs to refinance are no higher than the yield on the assets.
Less problematic though, as a bailout by the gov't that still can borrow for low costs can earn money with those assets. HOLC or the Swedish bank bailout more recently are examples for that.

In case there are real long term losses - what should be done is of course letting the creditors of the banks bleed, e.g. through transformation of credits into equity etc.

What to do in case of a gov't default - asking neighbours for help risking high indebtness afterwards or a real default is a more difficult and I think among economists controversial question.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 07:42:04 PM EST
[ Parent ]
I think we're substantially in agreement on what should actually be done, just approaching it from different angles.

I don't find sovereign default all that problematic, though. Stiglitz has a whole chapter on it in Making Globalisation Work, where he essentially argues that sovereign defaults don't happen unless the creditors have been behaving like drunken sailors in a brothel. If that's the case, then morally there is no problem (and in any event, the state's obligation to its citizens trumps any obligation to its creditors). And since sending in the marines to enforce unpaid debt is no longer considered a respectable option by the major powers, there's no legal difficulty either - sovereign debt is in a jurisdictional vacuum.

Economically, there are several examples of sovereign defaults - Russia and Argentina to take the two most prominent examples to illustrate that there is no economic problem in sovereign default. Russia and Argentina had access to new credit lines (on somewhat more responsible terms) less than a year after their defaults. And if anything, it helped attract investment, because it removed a stress on their economies.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Mar 7th, 2009 at 01:37:16 AM EST
[ Parent ]
JakeS:
I think we're substantially in agreement on what should actually be done, just approaching it from different angles.

You're assuming that borrowing, rather than investment, is necessary.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Mar 7th, 2009 at 10:32:25 AM EST
[ Parent ]
I'm sure that you could find smarter ways to structure the liability side of balance sheets than what we have today. I'm not sure that one-size-fits-all equity is necessarily a good idea, though. Equity is for dudes who know something about what they're getting into. Joe Schmoe should not be investing in equity, inasmuch as he should be investing at all.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Mar 7th, 2009 at 11:19:24 AM EST
[ Parent ]
JakeS:
Equity is for dudes who know something about what they're getting into. Joe Schmoe should not be investing in equity, inasmuch as he should be investing at all.

You are talking about equity in the form of shares in the deeply inequitable entity known as the Corporation. And yes, that is for consenting adults only.

I'm talking about reinventing equity within a partnership law framework (rather than a company or Trust law framework) simply by dividing revenues and production into proportional shares in flows of production on the one hand, and units redeemable in production on the other.

It's not Rocket Science.

It's a Flight to Simplicity

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Mar 7th, 2009 at 12:18:37 PM EST
[ Parent ]
Actually I appreciate your work.

The claim that you can do something better doesn't justify to say everything what happened up to now was bad, though.

And the new ideas should be introduced without declaring all existing structures null and avoid.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Sat Mar 7th, 2009 at 04:09:16 PM EST
[ Parent ]
Martin:
The claim that you can do something better doesn't justify to say everything what happened up to now was bad, though.

I'm not claiming that. I'm just observing people use these new structures because they work, and because they can.

Martin:

And the new ideas should be introduced without declaring all existing structures null and avoid.

Correct.

It's not a matter of either/or, though. These solutions are complementary, and work in the here and now. The Hilton group didn't create a £1bn Capital Partnership in the UK because I suggested it (more's the pity). They did it because it worked, and because they could.

If my suspicion is correct - that partnership structures are in fact optimal - then those enterprises that do not use them will be at a disadvantage to those who do.

Classic emergence.

I think that conventional capitalists will be hoist by their own petard and simply out-competed

Why pay money to a rentier shareholder when you can get your funding from stakeholders? This is what the Cooperative movement call the "Cooperative Advantage", albeit they've been hamstrung by poor legal and financial structures which are essentially genetically modified Companies.

I think we'll find that Profit is inefficient, Martin: sharing surplus value on the other hand, actually works better, I think we'll find.

The proof of that pudding is in the eating.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Mar 8th, 2009 at 07:05:51 PM EST
[ Parent ]
"I think we'll find that Profit is inefficient, Martin: sharing surplus value on the other hand, actually works better, I think we'll find."

Isn't "surplus value" profit, too, and isn't profit the whole purpose of the business? Without even going into any Rand kind of exaggeration, isn't competition and private interest a natural fuel for individualism against cooperative movements? And isn't this all having materialism as ultimate cause?... Sorry for wandering off...

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Sun Mar 8th, 2009 at 07:33:38 PM EST
[ Parent ]
Profit and loss are a zero sum.  Sharing a surplus is not. One of the problems of our society is that too many believe that profit is a purpose in itself.

Within a partnershp framework there is no profit and no loss, merely the sharing of value in all its forms - and interest-bearing claims over value issued ex nihilo by credit institutions is not one of them, IMHO.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Mar 8th, 2009 at 08:51:57 PM EST
[ Parent ]
ChrisCook:
Profit and loss are a zero sum.  Sharing a surplus is not.

Indeed.

And that pretty much dynamites Adam Smith and Ayn Rand, never mind their followers, right there.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Mar 8th, 2009 at 09:00:19 PM EST
[ Parent ]
Depends. Freemarket evangelists will say that competition fuels innovation, and eventually progress. Rand went too far (I hesitate to call her work philosophy), but people do have personal motivations and goals, involving material gain.
What I'm saying is that "sharing a surplus", which does occur, if "institutionalized" *, seems to deprive the society of one of its main engines. Then again cooperative movements don't by all means exclude healthy competition - at least from what I understood.

I say society - some might simply call it capitalism.
*
for lack of a better english word at this late hour

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Mon Mar 9th, 2009 at 08:42:36 PM EST
[ Parent ]
Free-market evangelists also say that imposing capital adequacy requirements on banks and insurance companies is unnecessary, because banks and insurance companies would capitalise adequately in order to avoid bank runs.

And we know how well that prediction worked out...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 10th, 2009 at 06:14:29 AM EST
[ Parent ]
Purpose in itself.. the question is, to whom. To a company, I suppose it most oftenly is, were it only for the fact that otherwise it goes bankrupt.
To everybody else - employees, managers, shareholders - it probably often isn't -  shouldn't be. Salary isn't a purpose in itself, dividends aren't either, but a company lives on profit and dies upon lack thereof. OTOH men's ambitions or dreams often are a purpose in itself.

Credit institutions... they do provide a service, right. I mean, that's their reason to be. Fee claims on the other hand are a totally different story. Come to think of it, computers look like the main culprit of the financial capitalism going crazy. Before, you needed to work to win an insurance contract, intermediate, provide a financial service. Now it suffices to run billions throught securised networks to earn those fees, and mathematical models to prove there's no risl so no need to collateralize a dime. Aren't we victims of our own fantastic technical prowess, gone completely unmastered? I'm digressing, really just thinking out loud.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Mon Mar 9th, 2009 at 09:00:35 PM EST
[ Parent ]
The directors are required by law to treat profit as the highest purpose in their (working) life. That's called fiduciary responsibility. And yes, that means that collectively, a corporation behaves like a sociopath. It's required to by law.

While computers have not materially affected the speed with which money can be moved around - speculative runs on currencies only require a phone line and a lax regulatory environment.

The problem is that bankers, brokers, traders and the rest of the speculative cottage industry have been gambling with other people's money. And that the people who were supposed to tar and feather them and run them out of town on a rail when they gambled with other people's money were either obstructed by corrupt politicians or on the take themselves.

That also happened in the 1920s, which is thirty or so years before the first computers.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 10th, 2009 at 05:52:39 AM EST
[ Parent ]
A corporation behaves like a corporation, I guess, and you'll agree finance in 1950 has nothing to do with finance today: phone orders is not AT ALL the same thing as computer software exchanging billions of billions of orders per second worldwide. We're overrun by computers just like we are by the flow - I should say flood - of information in general. You were speaking of short termism, but who needs detailed reports on a company every other week? Without ubiquitous computers and internet, people could think long term because there was no immediate info available and even less so publicly.

Finally, the politicians, I suspect, were as corrupted as they were ideologised, and without repeating my former anti-ideology predictions, the finance laissez faire carries a well known name, which is, libertarianism, cousin of anarchism - which is what we live today (and of which of course some fatcats profit, as usual).

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 05:07:19 PM EST
[ Parent ]
ValentinD:
Without ubiquitous computers and internet, people could think long term because there was no immediate info available and even less so publicly.

That's a good point and one it's easy to underestimate. People were forced to think long term because there was no alternative.

But that dodn't always make a difference. Bubbles and fraud have always happened, and computers didn't make them more possible.

What computer economics could do is make them more difficult. You can legislate choke points, taxes, delays, stops, tithes and limits on markets which would never be possible with paper.

You can hide paper. But if you mandate total information transparency with full accounting and audit trails, computer economics gives you a reasonable chance of getting that.

It's not trading speed, it's lack of transparency and differential access to intelligence (of both kinds) that create problems.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Mar 11th, 2009 at 05:39:08 PM EST
[ Parent ]
Each age its crisis, 'ey. The other bubbles had different causes, which is why I'm only focusing on the present one - even those in the '80s are not comparable and serves nothing to compare.

As to computers, I mean to say I trust the humans' natural speed of reaction. I'm not comfortable going 100 mph and leaving the control to the computer. There's something inherently wrong, to my intuiton, about an industry based on infrastructure which so widely overpasses humans. The best and most solid company, bank or not, can fall and be destroyed in a few minutes of illiquidity, without anyone being able to intervene. This was not possible before. There was a certain inertia and space to things and events before that was leaving us time to ponder and react.

I wouldn't like to be regulated by a computer btw, who in a second can make the decision that I'm on a terrorist black list and before anyone can do anything, ban me from taking my flight, or throw me in prison (policemen not having the authority to disregard its orders).

And how can you have transparency with such complexity and such volumes of information?

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 07:55:56 PM EST
[ Parent ]
A corporation behaves like a corporation, I guess,

What a corporation is and how it behaves is not set in stone. Society has granted the corporation the privilege of limited liability - it can revoke that privilege, or make changes to how that privilege is exercised.

For example, one could mandate that all entities operating under limited liability had half their board of directors elected in direct, secret elections among their employees, and that these representatives had work conditions as their contractual obligation, rather than fiduciary responsibility towards the shareholders.

and you'll agree finance in 1950 has nothing to do with finance today: phone orders is not AT ALL the same thing as computer software exchanging billions of billions of orders per second worldwide.

Computers misbehaving may crash individual stocks, or even weak currencies, but they do not crash entire economies. That only happens when there is already a bubble or other serious imbalance. And serious imbalances form over months or years, not days or hours, so computerised trading does not materially change our ability to cope with them. That is, and remains, a political question.

Without ubiquitous computers and internet, people could think long term because there was no immediate info available and even less so publicly.

The stock ticker was reported in real time on the TV, and before that by wire to your local bank. The time lags we're talking about here are in terms of hours, not days or weeks, nevermind anything recognisable as "long term."

But the stock ticker isn't "information" I hear you say. That's true, of course, but people were treating it like it was. Which, I guess, is not so different from most of the tea-leaf reading and outright garbage that gets passed around by financial analysts soothsayers these days.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Mar 11th, 2009 at 05:41:19 PM EST
[ Parent ]
"one could mandate that all entities operating under limited liability had half their board of directors elected in direct, secret elections among their employees"

I would not mind experimenting something along this line, although we must consider the raw reality: employees change all the time, most of them are not interested in running a company in any way, but care far more about their life besides work, and, most importantly, I'm quite sure democracy would harm innovation, free enterprise, and ultimately the economy and the interest of the public. There is little to gain in submitting, say, ambassador appointments to democratic vote. Or military hierarchy or strategy to soldier vote. Or hospital management to nurse vote. Democracy is not a panacea, even if it is one of the easiest (along with accusations of dictatorship or of corruption) justifications to use in situations when we don't agree with hierarchy decisions.

"What a corporation is and how it behaves is not set in stone"

Of course it isn't, the actual issue concerns (as usual) the definition we intend to give the notion of "corporation": is it a way to create value and make profit, or something else?  

"Computers misbehaving may crash individual stocks, or even weak currencies, but they do not crash entire economies"

Not by themselves of course - last time I knew computers did not possess personality yet, or a mind of their own; but they can provide the highway to hell. Computers and internet bring reactions that invite short-termism in. They provide a way to make profit by ways of fees without moving a finger, on an unprecedented scale. They provide a way to move capital  on an unprecedented scale, and by this, bring ruin to a company or even a country. Computers and internet provide a way to trade derivative products in ways impossible before, despite all TV tickers financiers would surround themselves with. Computers can provide a means for quants to put into practice hedging models and so bring finance into a whole different age.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Sun Mar 15th, 2009 at 04:49:46 PM EST
[ Parent ]
employees change all the time,

Umm, no. High employee turnover is a sign of a dysfunctional company. And at any rate, employees may change, but the unions stay - and of course the unions are likely the ones who will end up with most of these votes, on account of them being the ones most likely to run.

most of them are not interested in running a company in any way, but care far more about their life besides work,

The same can be said for stockholders. That's why I'm talking about representative democracy, not direct democracy.

and, most importantly, I'm quite sure democracy would harm innovation, free enterprise, and ultimately the economy and the interest of the public.

Democracy does not seem to have harmed innovation at universities, where employee (and student) democracy has been practised with great success for a long time.

"Free enterprise" is just a content-free buzzword. You can't harm "free enterprise" any more than you can harm "our national spirit."

The economy has been practically destroyed by lack of accountability over the last 30 years. Democracy can't do any worse than MBAs already have.

There is little to gain in submitting, say, ambassador appointments to democratic vote. Or military hierarchy or strategy to soldier vote.

Ambassadors and generals do not make political decisions. Corporate boards make political decisions (they call it something else, but that doesn't make it any less political). If the generals were the ones who decided where and when the country should go to war, then I should very much think that subjecting them to democratic elections would be a good idea.

Or hospital management to nurse vote.

Um, why not? Doctors and nurses know a hell of a lot more about running a hospital than some New Public Management type MBA fresh out of bizniz skool.

Of course it isn't, the actual issue concerns (as usual) the definition we intend to give the notion of "corporation": is it a way to create value and make profit, or something else?

Corporations as currently configured do not simply create value - they also expend valuable resources, and distribute value. What I propose to change has less to do with the creation of value than it has to do with the extraction of value from employees (through, for instance, harmful or unpleasant working conditions), and the distribution of value (more to labour, less to capital).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Mar 15th, 2009 at 05:13:50 PM EST
[ Parent ]
"employees may change, but the unions stay"

Most companies are small and don't have unions, let alone that unions are not famous as beacons of competence in running companies. The idea itself that employees change while the unions remain sounds like yet another playground for fiefdom infighting.

"the same can be said for stockholders"

Not really, especially when the company is private.
I thought you mentioned employees joining in the board of directors, not just sending in some representatives. Besides there is the small issue that owing a company is not quite the same kind of decision entitlement as working for one, I guess - unless we're in a proletarian state; but there would be no private ownership there, so the problem wouldn't be posed.

"Democracy does not seem to have harmed innovation at universities
Have I mentioned universities? :) That subject is debatable, for instance I for one don't really believe in student democracy.

"Ambassadors and generals do not make political decisions"
Of course not, that was precisely my point - a company does not make political decisions, but tactical and strategical ones in order to win market share. Just like in the case of rentiers, we should distinguish mammoth companies, particularly multinationals, and the xillions of small companies which provide most of the value and employ, I think, the most.

"Doctors and nurses know a hell of a lot more about running a hospital than some New Public Management type MBA fresh out of bizniz skool"

Employees do know a lot about how a hospital works, but  that's not quite the same thing as running it, or voting someone to run it.
We agree that a diploma, no matter how brilliant, does not automatically mean real life competence. I do have some doubts about the principle of economical management schools, just like I have some about political management schools (especially the French ones). You can put this problem about most of the finance corps anyway - experts in investment banking, hedge funds and other analysts with little exposure to what actually happens in the company they help dismantle.

"they also expend valuable resources, and distribute value"

True. I don't see how working conditions would give rights over the management of the company though. Improving conditions is a different matter. The distribution issue is normally said to be a matter of negotiation on the job market. I argued once that this is often skewed in favour of employers - except top positions or niche jobs. Maybe salaries should be completely regulated, as in, a percentage (fixed or mobile) of the benefits, negotiated by unions for each industry and job level.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Sun Mar 15th, 2009 at 06:13:44 PM EST
[ Parent ]
Most [publicly traded] companies are small [citation needed] and don't have unions [citation needed], let alone that unions are not famous as beacons of competence in running companies.

They don't have to be famous beacons of competence at running companies. They just have to be better than your average MBA. Which isn't saying all that much.

Not really, especially when the company is private.

You mentioned earlier that you owned stock. When was the last time you voted at a general assembly, or attended a meeting at the board of directors in any of the companies you held stocks in?

I thought you mentioned employees joining in the board of directors, not just sending in some representatives.

Union reps are normally employees themselves.

Besides there is the small issue that owing a company is not quite the same kind of decision entitlement as working for one,

Why not? The "owners" supply only money, and they only supply it once. The workers supply labour, and they supply it every day. Why shouldn't the workers have as much say in the running of the company as the "owners?"

Of course not, that was precisely my point - a company does not make political decisions, but tactical and strategical ones in order to win market share.

In which alternate universe does that not involve political decisions?

Just like in the case of rentiers, we should distinguish mammoth companies, particularly multinationals, and the xillions of small companies which provide most of the value and employ, I think, the most.

Small companies are not publicly traded, and usually do not benefit from limited liability, so my proposed reform would not apply to them.

The distribution issue is normally said to be a matter of negotiation on the job market. I argued once that this is often skewed in favour of employers - except top positions or niche jobs. Maybe salaries should be completely regulated, as in, a percentage (fixed or mobile) of the benefits, negotiated by unions for each industry and job level.

That's certainly one way of doing it. I'm not sure it's necessary to go quite that far, though. I think much could be achieved simply by enshrining the right to organise, strike and blockade, and making union busting punishable by very serious fines (to the tune of a perceptible percentage of gross revenues). But that's mostly because I believe that the local union rep has a better handle on what should be done in a specific company than parliament does.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Mar 16th, 2009 at 06:17:59 AM EST
[ Parent ]
I'm pretty sure our bone of contention starts and ends here:

"Besides there is the small issue that owing a company is not quite the same kind of decision entitlement as working for one (me)

Why not? (you)

Simplifying, the idea of the nanny having a say in how I run my house strikes me as a bit odd :) I know that's not at all what you propose, but it's a matter of principle nonetheless: to me, the right to own property and the right to speak freely go before everything else, and any kind of adjustment you would bring to the society, these two should not be trespassed, under no circumstance. There is no capitalism and no freedom without these two. When I built a house, bought a car, or set up a company, I am not ready to and I think it fundamentally wrong to  discuss the issue of ownership and decision making. I don't even think this is a matter of rightwing vs leftwing, but of a fundamental human right as important as any other.
Beyond appropriate work conditions and equitable pay, it is for the individual and the state to assume - be it social security, medical insurance, retirement insurance or pension system, and so on. The state can of course levy taxes, exactly when and how it sees fit, and regulate the job market and the economical environment as it pleases, as long as it doesn't infringe on my own fundamental rights as an individual(exceptional situations aside).
Social inequalities should be tackled, but not serve as a motivation to step upon fundamental rights, and this applies to any such right.
Workforce can under no circumstance be considered as a merchandise, but enterprises are hardly meant as social care entities, and regulation should be limited to work conditions and the job market - the rest is for the society to provide (and we're all part of the society, so this is not a matter of protecting the property of the rich and powerful, but dealing with it without stepping upon principles).
This is why I'd be ready to accept any kind of remuneration cap, remuneration incentive regulation, particularly via fiscal tools, in short, any kind of sharing into the profit. The issue of ownership and decision making though is a whole different thing.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Mon Mar 16th, 2009 at 03:10:40 PM EST
[ Parent ]
I'm pretty sure our bone of contention starts and ends here:

I think that's an astute observation, even if I disagree with you on whether it's a left-right issue.

But the way I see it, nobody forces companies to be publicly traded and benefit from limited liability. If the companies' owners think that the demands that society places upon them in return for these privileges are too onerous, they are perfectly free to withdraw the company from the Exchange, as provided for by the applicable rules.

More generally, I don't think that property scales. I have nothing against the corner-store owner with two employees deciding how he wants to run his business - he doesn't have notably more bargaining power than his employees do individually. But when a company spans an entire country and employs hundreds of people... then it becomes a political entity, as much as a commercial one. And then different rules apply. Or ought to apply.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Mar 16th, 2009 at 03:38:27 PM EST
[ Parent ]
And the key point is that at that point a large company is no longer private property. It's effectively a mini-state in its own right, directly affecting the welfare of hundreds if not thousands (or millions...) of people.

It's no longer purely a private concern. The mythology that it should be a private concern, irrespective of social and political influence, is one of the flawed neo-feudal cornerstones of the rightwing edifice.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Mar 16th, 2009 at 04:42:04 PM EST
[ Parent ]
I wonder if even rightwingers still claim that, regarding multinationals and other giant companies. That's a category in itself, and I wonder if anti monopoly regulation should not go as far as block the new wave of fusions we see today, and in general stop a company not only from going monopolistic, but from reaching a certain size.
The only possible counter argument would be, I think, not about "private concern" or right to property, but about economies of scale and the benefits this brings to the society. This is the only possible use for mammoth corporations. Besides that, all strategical corps' should be state owned, and the rest, dismantled.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
by ValentinD (walentijn arobase free spot franša) on Tue Mar 17th, 2009 at 09:23:00 PM EST
[ Parent ]
I wonder if even rightwingers still claim that, regarding multinationals and other giant companies.

Yes. Unfortunately, they do.

Now, if you'll excuse me, I have to go take a shower.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Mar 18th, 2009 at 06:43:17 AM EST
[ Parent ]
Well. I always thought healthcare should not be subject to market conditions. It remains that even from a rightwing point of view, monopolies and multinationals are an obvious obstacle to healthy competition. I mean, either you're a freemarketeer, or you're not. OTOH there are many "rights", some of which are not really conservative, and others which are not freemarket obsesssed. As an aside, I really think terms like left and right are completely obsolete these days - as are communism, humanism and so on.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
by ValentinD (walentijn arobase free spot franša) on Wed Mar 18th, 2009 at 04:40:40 PM EST
[ Parent ]
It remains that even from a rightwing point of view, monopolies and multinationals are an obvious obstacle to healthy competition. I mean, either you're a freemarketeer, or you're not.

I would think so too. But apparently I'm wrong, at least according to several people I know whose credentials as "right-wingers" I have no reason to doubt (their sanity, yes, but not their political leanings).

There exists an unfortunately influential ideology in some right-wing circles that says that regulation of transnational companies is a greater imposition on personal liberty than permitting these transnational companies to run wild. The same doctrine also states that the "free" in "free market" means "free from government intervention," but does not say anything about freedom from exercise of monopoly power (the Austrian school of thought [I use the term loosely] even deny that monopolies can exercise power).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Mar 18th, 2009 at 05:34:21 PM EST
[ Parent ]
It's less a question of power though, as is of competition. A monopoly (or a couple of multinationals ruling unchallenged) means that there simply is no free-market worthy of the name. When Microsoft pushes out all competition in operating system then office software market by OTC agreements with PC producers, innovation suffers, prices go up, new incomers have no chance and so on - the well known chain of effects of a monopoly. That is no free market anymore, and this is not a theoretical statement, and even less a socialist one. I find mind-boggling the idea that anyone, no matter the political colour, can see this differently.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
by ValentinD (walentijn arobase free spot franša) on Fri Mar 20th, 2009 at 04:05:19 PM EST
[ Parent ]
"the same doctrine also states that the "free" in "free market" means "free from government intervention"

I wonder if the circles circulating this doctrine would exist elsewhere than the United States. Due to many factors, the idea that the state is "bad" in principle is unfortunately almost cosubstantial with the US.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Fri Mar 20th, 2009 at 04:13:41 PM EST
[ Parent ]
ValentinD:
I know that's not at all what you propose, but it's a matter of principle nonetheless: to me, the right to own property and the right to speak freely go before everything else, and any kind of adjustment you would bring to the society, these two should not be trespassed, under no circumstance.

I agree that we should have the right to exclusive occupation of land.

But IMHO land is a Commons to which no-one has absolute rights of ownership and those exercising this privilege of exclusive occupation should compensate those they exclude ie the rest of Society.

So I agree with the principle that taxes should be levied on privilege, not people, and therefore advocate a tax on land rental values or "Location benefit levy"

Other privileges, such as exclusive use of non-renewables, or the privilege of limitation of liability, should also be taxed, and taxes on profits and earned income should be abolished.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Mar 18th, 2009 at 09:00:08 PM EST
[ Parent ]
That does not change the underlying point. If I don't know anything about producing ball bearings, I'm not going to invest in equity in a ball bearing factory, because I have no way to know whether I'm paying too much for my share of the value it produces. It does not matter whether that value is paid out in the form of capital gains, dividends, ball bearings or pink, fluffy bunnies. If I don't understand what goes on inside the factory, then I have no way to judge the fair value of a percentage of the output. "This stuff goes in at one end, that stuff goes out the other" simply isn't sufficiently detailed knowledge to make investments on.

Some dudes know what's going on "under the hood," and are thereby capable of judging what it's reasonable to pay for a certain fraction of the use value of an enterprise.

Other dudes haven't the first clue, nor the time, energy or inclination to get it. They need an instrument that pays out a fixed amount of value every month, and is collateralised by some real, tangible assets, with a reasonably easy to assess value.

And then you have all the possible configurations in-between.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Mar 8th, 2009 at 05:55:15 PM EST
[ Parent ]
I'm pretty sure this is the exact opposite of how most trading works.

Most traders seem to be chartists and statisticians who try to pull value out of noise, completely detached from fundamentals. If you don't mind the odd pratfall, even a very simple strategy like momentum investing will put you ahead of the market average.

Knowing about widgets is largely unnecessary. And that's very much the problem - one corporation becomes much like another, and functionally interchangeable. Every so often there will be some noise about a market sector being unusually good or unusually bad, but in principle trading is based on the fact that not only are inputs and outputs irrelevant, but that a tiny collection of abstracted numbers defines the value and health of the company.

Social costs and social value don't figure. Future prospects don't figure unless analysts comment on them. Specifics figure even less.

There's a fundamental fracture line there between the real economy and investment/speculation.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Mar 8th, 2009 at 06:52:35 PM EST
[ Parent ]
Heh. When I argued the point with Mig, he said that my attitude towards investing was "so 19th century" :-P

Seriously, though, they can play these games because they're gambling with other people's money - Joe Schmoe does not have enough money to reasonably diversify his holdings in order to pull profit from noise. In a reasonably run economy, that kind of wealth concentrations would be broken up, because they are hazardous to democracy. So in a reasonably run economy, you can't run hedge funds.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Mar 9th, 2009 at 04:50:29 AM EST
[ Parent ]
depends what you mean by hedge fund :)

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
by ValentinD (walentijn arobase free spot franša) on Fri Mar 20th, 2009 at 04:16:33 PM EST
[ Parent ]
JakeS:
And then you have all the possible configurations in-between.

Sure.

You can be inside the box, sharing revenues; outside the box on a fixed amount, or both.

It's entirely configurable, because in an "Open Corporate" LLP you start with a blank sheet of paper.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Mar 8th, 2009 at 07:12:02 PM EST
[ Parent ]
But debt is just non-voting preferred shares who are harder to give a haircut than ordinary non-voting preferred shares in the event of a contraction in asset values. If you allow preferred shares, you'll still have leverage (that's how the hedge funds leveraged in the 1920, and we know how that went...).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Mar 9th, 2009 at 04:59:04 AM EST
[ Parent ]
According to Veblen's Theory of the Business Class (1904) both debt and equity in all their forms are "loan finance".

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Mar 9th, 2009 at 05:03:06 AM EST
[ Parent ]
And also in

Creditary Economics

where the Gang8 analysis is pretty good in many ways.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Mar 9th, 2009 at 06:43:23 AM EST
[ Parent ]
Public debt in relation to the GDP from wikipedia.

ALL eastern European EU members had public debt below EU average in 2007. Hungary, Malta and Cyptus were the only new members with above average public debt to GDP.
Estonia 3.4%
Latvia  9.7%
Lithuania 17.3%
Poland  45.2%
Germany 65%
Belgium 84.9%
Italy  104%

Legacy public debt from the 90s can hardly have strangulated their public budget.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Sat Mar 7th, 2009 at 04:05:29 PM EST
[ Parent ]
Another report on CEE debt.

Once again, analysing the data the message is clear. Problems in CEE countries are much smaller than the press states it.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Sun Mar 8th, 2009 at 12:59:15 AM EST
[ Parent ]
Whether they actually do know any better is beside the point. It's their job to know

That is not beside the point. You argue like someone disappointed with his football team, saying hey, these guys get millions for playing, why are they playing so bad, while the players play the best they can. If this doesn't justify millions in salary, the idiots that pay out the millions have made the mistake. You can't require super human abilities, independent of salary.

Money that is, to a very large extent, actually backed by the government rather than the individual bank.

But not the gov't of the emerging market, but the gov't of the country of the bank. And this country has regulation power over the bank. So example above holds. I can't see any problem with that.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 03:39:55 PM EST
[ Parent ]
That is not beside the point. You argue like someone disappointed with his football team, saying hey, these guys get millions for playing, why are they playing so bad, while the players play the best they can. If this doesn't justify millions in salary, the idiots that pay out the millions have made the mistake. You can't require super human abilities, independent of salary.

I am not demanding superhuman abilities. I am demanding that they don't behave like nine-year-olds on crystal meth in a candy store. Surely, that should be within their capabilities.

These institutions have been granted the privilege of printing money that is backed by the government. This privilege comes with a very simple countervailing duty: To not create money when it is not justified. They have - for whatever reason - failed in that duty, when the loans they grant default on a much greater scale than anticipated.

When you fail in your duty, you should take a haircut. That's all I'm saying. A goalie that keeps letting in softballs gets fired, to use your analogy.

But the way the international financial system is configured right now, means that the people who failed so signally in their duties will be bailed out. They will not take a haircut. And they will be bailed out by loans from their governments to the debtor countries' governments. Those loans will have to be repaid. So either the taxpayers of the debtor countries will be put on the hook for a haircut that the creditor institutions should by right be the ones to take (if the money is repaid eventually), or the taxpayers in the creditor countries will be put on the hook for that haircut (if the debtor countries default).

How's it fair to put taxpayers somewhere on the hook for debts that they neither issued nor incurred?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 6th, 2009 at 05:59:07 PM EST
[ Parent ]
These institutions have been granted the privilege of printing money that is backed by the government.

No. It is backed solely by the collateral they get for the loans. Not by the gov't.

When you fail in your duty, you should take a haircut.

Fully agreed. There shouldn't be any bank rescues without hair cuts.

And they will be bailed out by loans from their governments to the debtor countries' governments. Those loans will have to be repaid.

No. They are getting bailouts from their own gov'ts directly. HRE wasn't rescued by the Irish gov't with a German loan. The Landesbanken weren't rescued by the Icelandic gov't or the US gov't with loans from Germany.

How's it fair to put taxpayers somewhere on the hook for debts that they neither issued nor incurred?

Because they are part of a state, that has granted banking licenses without proper control.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Fri Mar 6th, 2009 at 06:16:41 PM EST
[ Parent ]
No. It is backed solely by the collateral they get for the loans. Not by the gov't.

It is legal tender. That's a form of government backing.

Because they are part of a state, that has granted banking licenses without proper control.

I suppose you can make that case. I happen to disagree, but I suppose you can make the case.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 6th, 2009 at 06:39:02 PM EST
[ Parent ]
"Because they are part of a state, that has granted banking licenses without proper control."

Perhaps to some degree, but state's (not even democratic) mandate is not open-ended. There are limits, where individuals are not tied to government's decisions.

by kjr63 on Fri Mar 6th, 2009 at 07:03:53 PM EST
[ Parent ]
Obama's timid liberalism | Salon

Once, even Republican presidents like Eisenhower and Nixon believed in the public sector. Now, during a national crisis, a Democrat opts for inadequate, neoliberal, private-sector remedies. What happened?

Watching how Obama's administration and other pivotal governments try to avoid bank nationalization or direct government service as solutions to today's runaway problems, one may wonder: Are these governments interested in maintaining adequate governing?

They do not seem to recognize public interest as their concern. (Isn't Public Good = People's Good?!) The governments even try to avoid being effectual rentiers, as if seeking public profit at expense of irresponsible bankers or industries must be a tabu. Can't the whole libertarian ideology be summed up by the principle of gradually barring the public government from any rental activity, except collecting nominal taxes? Does the rental activity has to be the ultimate private business, "free" of any government involvement?

by das monde on Fri Mar 6th, 2009 at 05:28:59 AM EST
das monde:
(Isn't Public Good = People's Good?!)

Unfortunately, no. Public means the State. Not the People.

And as the graffiti at South Bermondsey station used to say:

"It doesn't matter who you vote for, the government always gets in."

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Mar 6th, 2009 at 05:51:46 AM EST
[ Parent ]
Basically, my motivation is to argue against this kind of nihilism.

In a formal sense, you are right: a state and the people are never the same thing. A government can dish responsibility for its people at any time, covertly or overtly. But what for?

In a comparative sense, we can make distinctions and observe differences. The Rousseau ideal might look naive, but somehow we get closer to it sometimes and somewhere. Just read the Salon.com article I reference above. Not so long ago politicians took their public duty very seriously - even in places like the Soviet Union. It took a good deal of "natural" indoctrination by self-interest theories, "invisible hand" stories and think-tank lobbying to make the politicians see their primal duty as serving their sponsors (and do not shy from power abuse). We forgot easily how actually solidary people can be.

by das monde on Fri Mar 6th, 2009 at 06:34:57 AM EST
[ Parent ]
das monde:
Basically, my motivation is to argue against this kind of nihilism.

I'm with you, but I prefer action to argument.

Participative consensual networked frameworks for self governance. Or maybe a State in which we are all members?

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Mar 6th, 2009 at 07:24:58 AM EST
[ Parent ]
What I increasingly see is governments for narrow classes of... rentiers and similar types. Since the actor Reagan, politicians confirm themselves more often as public relations specialists.

Regular folks should forget the competition imperative (or take it far less seriously), and start offering more help and services to each other, just as the elites do among themselves. That would be close to a sort of self-governing, I suppose.

by das monde on Fri Mar 6th, 2009 at 07:35:13 AM EST
[ Parent ]
That's why the Internet changes everything.

Peer to Peer Finance

bypasses rentiers.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Mar 6th, 2009 at 07:40:27 AM EST
[ Parent ]
But aren't there millions and millions of small rentiers, especially in the US ?... I like more the idea of every one becoming a bit of a rentier, rather than limiting them to narrow classes (which look quite little like elites, to be honest). Governments already argue that they are protecting not rentiers but people's savings, btw.

As to PR... when guys like Reagan or Clinton prove the political efficiency of controlling the media agenda, you can't blame them politicians anymore. People may be too gullible, or PR pros too good, in any case the fact is that PR is unavoidable, and that Democracy as a system is bound to lead to that by its very nature.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Sun Mar 8th, 2009 at 07:45:13 PM EST
[ Parent ]
Rentier competition is largely a zero sum game - see the "Monopoly" game. Psychologically, it is good when "everyone" owns something - but a very steep price is asked during the merry times of pushing for "ownership" society. I do not understood the fun of putting so much of your time and future earnings for a piece of real estate. I see better things to do with life.

Logical inconsistency of "everyone" owning results in the crisis like this. I am not for limiting rentship in a formal sense - but rentship should not be made as easy as possible. Communal usefulness of ownership "investments" is way overvalued. It we tend to value plain labour at slave wages, then the civilization did not move very far away from slavery yet.

It is indeed easy nowadays for governments to rationalize anything in any way they like. The PR evolution was very one-sided - and human gullibility was driven by the "feel-good" stories of personal versus social welfare. I even think that the mockery state of "regard" towards governments is a part of the viral PR campaign. When governments are controlled by circles that do not want governments function as good as declared, it should be no surprise if governments do their best to look bad. By now it is indeed dangerous to trust governments - except if you consider yourself profiting from the "government-is-a-problem" attitude.

by das monde on Sun Mar 8th, 2009 at 10:20:53 PM EST
[ Parent ]
Fully agree with your first paragraph. Still we must consider the possibility that many, if not most people might disagree, regarding the psychological part. The main issue here, IMO (and just like in the democracy case) is that people are not only not equal, but widely different. It's fascinating to me to see currents of opinion forming. How Germans came to support Hitler and his actions, even non nazi ones... I know the theories, still it's a mistery to me.

I might want to share, and I might be indifferent, if not contemptuous to material possessions, but most of us aren't, I guess, despite casual spikes of generosity or highmindedness. I might see some sense in history, and direction for progress, but making the point to others is a whole different story.
PRists will tell you that eventually they really only give people what they want - I hear that line all day long about reality shows, and I don't agree with it, but you can't argue highminded goals against audience - and profit.  
As to circles... maybe that was originally a problem of elites. I was looking at a superb chateau in the Berry, in the center of France, two weeks ago, and thinking that it might have been a bit unproductive to drive those people down from their high chairs and into the mob. They and others alike now use democracy and other advances of modern society for their own benefit, in ways the "mob" cannot control anymore. Before, it was easy (well, "easy") to revolt, strangle Paris with barricades, chase them out of the palaces, guillotine some of them. Now they ("they") learnt how to hide their power, protect themselves behind law and democracy. Even revolution will not change this - as long as there are mobs, there will be elites outsmarting them. I'm not being pessimist, just saying that the organization of the society needs the kind of overhaul going far beyond what some imagine.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Mon Mar 9th, 2009 at 09:29:22 PM EST
[ Parent ]
PR flacks may say that they only give people what they want, but that does not make it true. What you give people shapes what they want - PR may not be able to single handedly establish patterns of thought, but it can reinforce them, or let them wither on the vine.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 10th, 2009 at 06:00:32 AM EST
[ Parent ]
The elites make the mob, rather than the other way around.
by das monde on Wed Mar 11th, 2009 at 12:26:41 AM EST
[ Parent ]
The problem with making everybody "a little rentier" is that everybody cannot live off somebody else's work. Someone has to till the soil, drive the trains and manufacture the ball bearings.

Another problem is that the political economy of a society in which many people own very valuable but highly leveraged assets is much more conducive to highway robbery than an economy in which most people have no leverage and very low-value assets. Because it's hard to craft a tax code that will take back stolen assets when there are so many innocent assets to hide them among. And when Joe Schmoe is even more highly leveraged than an investment bank, then Joe Schmoe is going to go bust before the investment bank, if you just apply a blanket asset tax to recoup the stolen wealth.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Mar 9th, 2009 at 05:11:09 AM EST
[ Parent ]
Everybody is a bit of a capitalist I suppose, owing a few shares, a life insurance, a piece of land, a wall in an appartment block. As a rentier I provide capital to the company, in principle, that they need in order to develop - and I hope with my help they'll make profit - big enough so that I get paid a small fee - and that my shares raise.
The problem could also be put about the salaries in much the same way - you earn, you spend, you hope prices don't raise, except for the products yourself produce, that is, and then you complain the intermediaries (managers, shareholders, supermarkets) get the cream. I want my own pension fund to grow, my own shares to raise. Who can distribute equitably - and how? The US tax code is living proof of that failure. But in the precise case of leveraged assets, the problem seems to be the financial blackhole, rather than little rentiers renting their capital, their lawnmower, or a room in their home. I know for sure that most financiers get lost in their own entanglements and are unable to tell who is leveraged, who is safe and who deserves a triple a - no more than, say, rating agencies. But that concerns less those Joes and their little pension fund, and more the (unmastered) complexity modern maths and computers brought into finance. Take that away, and there will be no more AIG Financial Products, no more billion exchanges per second, more effective control - and far less leveraging.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
by ValentinD (walentijn arobase free spot franša) on Mon Mar 9th, 2009 at 10:01:37 PM EST
[ Parent ]
As a rentier I provide capital to the company, in principle, that they need in order to develop

No you don't. Most often, shares are bought in the secondary market. What you provide in the secondary market is liquidity for the investors, not capital for the company.

Now, to a certain extent, liquidity for investors is helpful for the company, because it makes it easier for the company to raise capital. But only up to a point, because such liquidity also gives rise to short-termism and the kind of gambling with other people's money that we've seen lately.

I want my own pension fund to grow, my own shares to raise.

There is nothing wrong with bankrupt private pension funds that cannot be solved by raising public pensions.

But that concerns less those Joes and their little pension fund, and more the (unmastered) complexity modern maths and computers brought into finance.

No, that concerns precisely the little Joes and their little nest egg - because those little Joes and their little chickenshit savings are bound up to the same mechanisms that the big fatcats are bound to. So when the big fatcats gamble and lose, Joe loses his shirt. Joe then demands to be bailed out - and not entirely without justification. But bailing out Joe means bailing out the fatcats who should be taking haircuts.

The advantage of getting Joe Blow out of investments that he doesn't understand and doesn't need is that you can let the entire casino crash and burn at regular intervals, and it's only the gamblers who'll take haircuts. It's the same reason that you want to build an air-tight cordon between investment banking and payment clearance - so that you can let the whole investment banking sector burn to the ground if you need to, without Joe Blow noticing it at the ATM.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 10th, 2009 at 06:11:45 AM EST
[ Parent ]
"What you provide in the secondary market is liquidity for the investors, not capital for the company"

Which means I'm not really a rentier then - I'm just gambling with my own money. You can be certain the goal of any rentier is not to "provide liquidity" to whomever the 3rd party may be, but to be an investor, in the hope that he'll be able to join in the profit - if and when profit will be.
On the other hand, your response is a mere technicality, I was putting a problem of principle about the role of a (genuine) rentier. I was arguing that his role is basically 'good', that he's not living on the back of the company like some sort of parasite, and in general that the economy is far more complex than that: we all rent stuff, loan stuff, borrow money and save, in different measures, and by that, to invalidate the idea that "we cannot all be rentiers". as a simplification - unless by rentier we only understand those who live exlusively on rent - in which case, I apologize for having misunderstood the matter.

A solution should be found to bail out Joe and not the fatcats. We should also give a more precise definition to fatcats: are they the traders, the fund managers, banks' managers, or shareholders, all of the above - or the Filthy Rich in general ?
And who is Joe? The one way to protect them Joes, is to provide the markets with proper regulation and render them transparent. This way a few rapacious fatcats won't manage to bring the whole economy down - not that easily, any way.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 04:43:32 PM EST
[ Parent ]
Which means I'm not really a rentier then - I'm just gambling with my own money.

You do not need to be an investor in order to be a rentier. And, depending a little on your definition of "rentier," you do not need to be a rentier in order to be an investor either.

You can be certain the goal of any rentier is not to "provide liquidity" to whomever the 3rd party may be, but to be an investor, in the hope that he'll be able to join in the profit - if and when profit will be.

The point of being a rentier is to control assets that permit you to claim dividends and/or capital gains. Whether you create those assets through judicious investment, buy them on a secondary market or inherit them from your clan patriarch parents is irrelevant.

On the other hand, your response is a mere technicality, I was putting a problem of principle about the role of a (genuine) rentier. I was arguing that his role is basically 'good', that he's not living on the back of the company like some sort of parasite,

Yes, and your claim was based on a wrong understanding of how the stock market works, which caused you to exaggerate the benefit of stockholders to society. Providing liquidity creates value, up to a point, because it makes other people more likely to invest. And it can provide efficiency, although this is even more tenuous, by permitting those who are good at starting companies to divest from mature companies, and use their talents productively in starting new companies.

What it does not do, however, is create new investment. Secondary markets - by definition - cannot do that. And this difference is important - it is like the difference between originating mortgages and building houses. Originating mortgages might allow more houses to be built (or it might just inflate the prices of houses by allowing people to do leveraged takeovers of already existing houses). But it does not build the houses.

A solution should be found to bail out Joe and not the fatcats. We should also give a more precise definition to fatcats: are they the traders, the fund managers, banks' managers, or shareholders, all of the above - or the Filthy Rich in general ?

The traders are in some cases and not in others.
Hedge funds are basically an abomination that shouldn't exist in any properly run economy, so anybody who makes a living off them needs to take a haircut.
Bank managers who drove their banks over a cliff are certainly fatcats.
Shareholders may or may not be fatcats, but certainly knew - or should have known - the risks of gambling on the stock market.
The filthy rich in general are usually fatcats, but even if you can find a couple of examples that are not, they can afford to take a haircut. So there's no need to protect them.

Functionally, I guess "all of the above," except some of the traders.

And who is Joe?

The dude who makes less than twice the median income and doesn't have any net wealth to speak of (i.e. less than around € 1 million).

The one way to protect them Joes, is to provide the markets with proper regulation and render them transparent. This way a few rapacious fatcats won't manage to bring the whole economy down - not that easily, any way.

Two other ways to protect Joe is by providing decent public pensions and putting the utility parts of banking in a straitjacket to prevent them from getting mixed up with the gamblers.

Don't get me wrong, regulation is fine and good - I support getting as many safety nets between Joe and the Ponzis as humanly possible. I just don't think that regulating the stock markets can or should replace fireproofing the payment clearance system or maintaining reasonable public transfers.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Mar 11th, 2009 at 05:27:15 PM EST
[ Parent ]
"Whether you create those assets through judicious investment, buy them on a secondary market or inherit them from your clan patriarch parents"

You forgot to add honest hard work - see my example.

"Yes, and your claim was based on a wrong understanding of how the stock market works

Then the problem is the organisation of the stock market.

" it is like the difference between originating mortgages and building houses"

I agree, and I could return your sentence and say that you cant even put one brick if you don't have the funds to buy it. Providing the means is just as important as managing the work or actually putting the bricks.

"they can afford to take a haircut. So there's no need to protect them"

I understand who needs to take a haircut, but you confirmed my thought - we can suspect who fatcats are, but not be certain, or generalize.

"The dude who makes less than twice the median income and doesn't have any net wealth to speak of"

The poorest, then? Why mind you the median incomes can't be Joes too - are they not most touched by this crisis, and are they not the most numerous, and those who pay most taxes?

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 07:28:04 PM EST
[ Parent ]
I include that "honest hard work" in "judicious investment," but if you want to give it an explicit bullet, then no skin off my nose.

I would note, however, that "honest hard work" does not, in the ordinary course of events, enable one to live off rents.

Then the problem is the organisation of the stock market.

Partly. There is no doubt that the stock market could serve its legitimate purpose with much less fuss and bother than today. But no matter what, it's hard to imagine that the stock market will ever be dominated by IPOs. That's what private equity does, and I don't see what the stock market can do there that existing structures don't do just as well.

I agree, and I could return your sentence and say that you cant even put one brick if you don't have the funds to buy it.

You do not need mortgages to build houses. Much of the value of the mortgage is backed not by the house, but by the land it stands on, which could be communally owned. In that case, it is certainly possible to build houses with equity alone, and no mortgage. That houses are leveraged five-to-one is a relatively recent phenomenon, as the history of political economy goes...

Providing the means is just as important as managing the work or actually putting the bricks.

Depends on your definition of "the means" - if you mean the bricks and the mortar and the railroad to transport them from where they're produced to where they're needed... then yes. If you mean the "money," then no. Money is dependent on the real economy, not the other way around.

I understand who needs to take a haircut, but you confirmed my thought - we can suspect who fatcats are, but not be certain, or generalize.

We can provide general rules about who need to take haircuts. That's not a perfect match for who are the fatcats, but it comes close enough for practical political purposes.

We can also provide pretty good rules of thumb to identify fatcats directly. Any billionaire is a fatcat, for example, by the very fact that he is a billionaire. But not every fatcat is a billionaire (some are "merely" multi-millionaires, while some have little in the way of tangible assets, but are on the inside of the network of Good Old Boys).

But of course there is a sliding scale, and some will fall in a grey area which requires case-by-case evaluation, and permits a modicrum of personal taste to enter into evaluations.

The poorest, then?

No, everybody who makes less than two times the median income. That - by definition - includes more than half of the population. It's been a long time since more than half of the population of any industrialised economy could justifiably be called "the poorest."

Why mind you the median incomes can't be Joes too - are they not most touched by this crisis, and are they not the most numerous, and those who pay most taxes?

Last time I checked, "median income" x 2 > "median income"

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Mar 11th, 2009 at 08:06:14 PM EST
[ Parent ]
5-1 leveraged houses or 40-1 leveraged banks are a category in itself, we should leave them out.

By means I also mean the funds needed. Money is not dependent as is a part of the real economy become fluid, you can't give more value to one or the other. Banks are necessary, but companies run by financial barons can be just as weird as those run by their own employees - without that meaning that either one cannot possibly succeed.

I doubt a billionnaire has all those money in bank accounts and on his very name. He'll tell you he only owns stock in successful companies. We can count the houses they own under their name though - and the size of those houses. Or the private jets and the Ferrraris. Mmm. Checking every citizen's fortune then, all the time, all through their life?... I dont say you're wrong, but thinking how to put it in practice - I don't see how any sensible person should own 20 million.
Republicans would tell you those millions come back into the large pool of the economy anyway - and one way or another trickle down :) A NYT article was mentioning a certain belt-tightening starting to trickle up btw, very funny.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 08:24:56 PM EST
[ Parent ]
5-1 leveraged houses or 40-1 leveraged banks are a category in itself, we should leave them out.

5-1 leveraged means a 20 % down payment. That's actually the norm for responsible real-estate finance in most parts of The West(TM).

Of course, that leverage ratio goes down over time (assuming that you're not on an interest-only loan...).

Money is not dependent as is a part of the real economy become fluid, you can't give more value to one or the other.

Economies existed long before anything we would recognise as "money." And money existed long before anything we'd recognise as "banks."

Money is a way to decide who can exercise command over other people's labour. There are other ways that societies can decide that. Now, you can make a case that those are not as efficient, or as politically desirable. But that does not change the fact that money is a command and control structure, not a resource.

I doubt a billionnaire has all those money in bank accounts and on his very name. He'll tell you he only owns stock in successful companies. We can count the houses they own under their name though - and the size of those houses. Or the private jets and the Ferrraris. Mmm. Checking every citizen's fortune then, all the time, all through their life?... I dont say you're wrong, but thinking how to put it in practice - I don't see how any sensible person should own 20 million.

  • Force all banks to give the tax authority access to each individual's balance (although not their transactions - that would be an invasion of privacy, and isn't needed anyway).

  • Force stock exchanges to disclose the owners of stocks (they have to keep track of these things, otherwise they can't tell whether you actually have the stock you're trying to sell).

  • Block transfers to countries that fail to comply with such rules. (You can do this simply by ruling that your own citizens are not under any obligation to honour any contract with companies incorporated in that country. Said country cannot prosecute on your jurisdiction, so their companies will never know whether they can expect contracts to be honoured, and consequently will not sign them. That would pretty much nuke Switzerland back to the stone age.)

  • Keep an inventory of all factories and other means of production (this has to be done anyway, because it's a prerequisite for crafting sensible industrial policy).

  • Keep an inventory of all real estate in the country (this has to be done anyway, in order to do city planning).

Factories and real estate are easy to tax: Just apply a flat property tax to these productive assets, and confiscate the asset if it isn't paid in full. I don't care who pays it - the owners and their lawyers can fight that out among themselves. I just care that it is paid.

Motor vehicles and maritime vehicles are already registered as part of the licensing process, so they can be taxed the same way as factories and real estate. But actually, I don't really care if you have four yachts in the harbour (as long as you pay your fuel taxes...). That's not a problem. Control of seats in parliaments and control of the means of production are a problem.

Of course you can stash a billion € in the Bank of Serta, and there'd be bugger all the tax authorities could do about it without breaking into your home. But that has a negative net return on investment (due to inflation), so that problem goes away on its own.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 12th, 2009 at 06:05:08 AM EST
[ Parent ]
Keep an inventory of all real estate in the country (this has to be done anyway, in order to do city planning).

sensible planning? what's that? in the UK registration only has to take place at change of ownership, and consequently 40% is still unregistered, and that 40% is mainly owned by the Aristocracy, who are one of the main groups avoiding tax.

Land Registry : Press notice

Land Registry - the government department responsible for registering land ownership in England and Wales - is encouraging landowners to voluntarily register their land, securing their ownership with state-backed registration. In North Yorkshire 42 per cent of land remains unregistered. In England and Wales the amount of unregistered land is just under 40 per cent.


Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Mar 12th, 2009 at 06:15:26 AM EST
[ Parent ]
There is no problem with that situation that cannot be solved by declaring all unregistered land ownership null and void.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 12th, 2009 at 06:34:59 AM EST
[ Parent ]
ah but it would then revert to the crown, who may well be one of the large landowners.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Mar 12th, 2009 at 06:37:29 AM EST
[ Parent ]
There is no problem with that which cannot be solved by a proper constitution.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 12th, 2009 at 06:42:10 AM EST
[ Parent ]
work out a constitution, and have a realistic tax policy? do you want politicians to actually work for their money?

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Mar 12th, 2009 at 06:48:13 AM EST
[ Parent ]
Oh sorry, I have read "twice the median income" and I understood "half the median income". Forget my last sentence, your definition of Joe is fine and he can well afford those appartments I speak of below.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 08:12:29 PM EST
[ Parent ]
Straightjackets for banks are ok I guess, as are decent public pensions - as long as they're allowing people to get off work before 90, are equitable and properly financed (by those confiscatory billionnaire tax, I suppose). I remmeber you saying you live (or lived) in Denmark - have you got any information on the pension system?

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 08:48:51 PM EST
[ Parent ]
Public pensions used to be quite good, but they've been severely eroded, to the point of being little more than a token measure.

Various private and semi-private pension plans are more or less regulated. Huge mess, and a political liability to boot, because these pension funds are, of course, sacred cows who have to be bailed out when they go bust.

I did a diary on the Danish system a while back, and its contents is still valid today.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 12th, 2009 at 06:09:37 AM EST
[ Parent ]
I'm sure at the time of the kick off of pension privatisation in the UKthere was a statement of how much pensions were going to cost if we continued with them and how much money privatsisation was going to save.

Might be interesting to see how much money will be required now, and work out how much cash has been lost thatr should have gone to the government in supporting this and has instead vanished down the plughole.

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Thu Mar 12th, 2009 at 06:34:31 AM EST
[ Parent ]
That argument has always been bullshit. Payout to retirees from stocks and sovereign debt is functionally just a tax on corporations or a transfer from general revenue, respectively. Since most pension funds are explicitly prohibited from investing in anything other than mature companies (so no private equity or IPOs), and since stock markets don't need pension funds to perform their legitimate functions, there is no overall economic benefit here. Full stop.

In other words, pension privatisation is a zero-sum game (or negative-sum, if you count the time and effort spent on management, and all the other productive assets that are betrayed into hopelessly unproductive works).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 12th, 2009 at 06:40:57 AM EST
[ Parent ]
Yes but would be nice to hang them with their own words.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Mar 12th, 2009 at 06:47:11 AM EST
[ Parent ]


Friends come and go. Enemies accumulate.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 12th, 2009 at 06:51:00 AM EST
[ Parent ]
ValentinD:
Everybody is a bit of a capitalist I suppose, owing a few shares, a life insurance, a piece of land, a wall in an appartment block. As a rentier I provide capital to the company, in principle, that they need in order to develop - and I hope with my help they'll make profit - big enough so that I get paid a small fee - and that my shares raise.
Yes, the class war was won in part by convincing working people that their interests are aligned with those of the rentier class. Just because you have savings and own your home doesn't make you a rentier.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Tue Mar 10th, 2009 at 06:18:45 AM EST
[ Parent ]
More than aligning interests, that they can join in the other class. That democracy means not only one vote for each, but equal opportunities too.
I suppose further up the thread there is a definition of rentier - someone who lives exclusively on his rented house or share dividends ?

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 04:47:58 PM EST
[ Parent ]
More than aligning interests, that they can join in the other class.

That some can join the other class. Not a very large percentage, though.

And if you think they're selected by merits rather than ass-kissing, then I have a CDO I wanna sell...

That democracy means not only one vote for each, but equal opportunities too.

Yeah. Which is why billionaires are anti-democratic almost by their very nature: They have opportunities that others do not.

I suppose further up the thread there is a definition of rentier - someone who lives exclusively on his rented house or share dividends ?

Something along those lines.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Mar 11th, 2009 at 05:01:49 PM EST
[ Parent ]
Do we know who are the rentiers and where do they come from? Even though, I know people who more or less bought (by mortgage) then rent a house every 20 years or so, until they were 60 and owing 4, of which renting 3 of course - since they tend to finance each other more or less, and their regular income was increasing too. That's a rentier too, I suppose, and a member of their other class. Will you say they're a mere exception ?

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 05:22:47 PM EST
[ Parent ]
I'd say that's rentiering - it forms a substantial portion of their income, after all, and in times of crisis they have assets that they can liquidate without having to move out of their home or sell family heirlooms.

But do note that this is a case of one rentier feeding off three renters (or one and a half if you average it over their whole lifetime). So clearly this isn't something everyone can do. It depends on some people never being permitted to do it.

Now, if the lifetime average had been less than or equal to one half of a renter pr. rentier, then it would be possible for everyone to retire as a rentier (although there remains a question of distribution between different age groups). But that's not the case in this example.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Mar 11th, 2009 at 05:48:36 PM EST
[ Parent ]
They have those assets payed from their salaries and retreated from work at 65 like anyone else, even if for a while already they didn't need to work.
Savings on these salaries and their interest-like product are which they feed off now, rather than the renters - some being families in their 30s working for banks in La Défense (for your Joe couldn't afford those appartments).

If anyone can do so or not, it depends on luck, I guess, personal talents also, besides inheriting or other parasitic way (even though I don't find passing along my wealth necessarily immoral) and so on... we also need to define the word permitting, and assess the way the blocking happens, in order to think of a solution.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 08:05:26 PM EST
[ Parent ]
That's small scale, and not necessarily bad. It's more of a problem when one person has a monopoly on housing or retail space.

Huge areas of central London are owned by a relatively small number of aristo Landlords.

And even in a small example, there's always a cost of entry. Right now it would be very difficult for anyone without a good block of starting capital to set themselves up with a buy to let scheme.

But generally rentiers are people who are inherently parasitic - they do no productive work themselves (which even a landlord has to do at least some of to keep a house maintained.) Instead they work at arms length, moving money around in the hope that it will catch a market trend, or - more straightforwardly - betting against other rentiers.

As long as money markets are fed with Ponzi-like cash flows and rent is paid as tribute, they can live like that quite comfortably.

But this process isn't just detached from the real economy, it actually starves it, because both wages and committed investment capital become more scarce.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Mar 11th, 2009 at 06:00:08 PM EST
[ Parent ]
Okay, I understand - mostly people who already are wealthy, didn't start low and build their own wealth - who did and became like those who didn't. The problem is, how do you draw the line, how make the difference. My former landlords were a couple of nice elderly, enjoying long holidays in Bretagne, renting their houses and buying one just before I leave, doing a tolerable job at maintaining them (by paying contractors). I would have a problem to see them as parasitic, and you obviously don't mean their kind, but rather, in Paris, the kind that exploit immigrants in matchbox appartments, for instance.

But you won't ask people to justify their wealth, or what they do with it - and they may work through intermediaries anyway. That's why I was saying that today the democratic regimes and the rule of law provide perfect cover for "elites" (in the broadest sense, I find it nicer a word than fatcats :) ) and there's not much to do about it. How do you punish greed, other than through its most obvious consequences (like force them to repair electrical wiring in the rented house)

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 07:42:19 PM EST
[ Parent ]
The problem is, how do you draw the line, how make the difference.

When they can buy seats in Parliament, they are a problem. That seems to happen somewhere between 100 million € and 1 billion €. So let's play it safe and say confiscatory taxation on any fortune above 50 million €. Surely fifty million should be enough for anybody? That's something like fifteen apartments - thirty if you're a couple.

I don't actually have a problem with rentiers per se - sure, they're inefficient and a burden on the rest of us, but they're not that much of an imposition, as long as they stick to their fancy boats and expensive golfing shoes. Or nice vacations in Bretagne. No (or very little, at least) skin off my nose.

But I have a problem with people who can buy and sell political parties wholesale.

And I have a problem with inherited wealth, for much the same reason that I'm opposed to hereditary nobility. Oh, sure, by all means pass along the chandelier and the silver candlesticks Greataunt Martie hid from the Germans during the War. And keep the yacht, if you want to. But hand over the factory and the copper mine and the TV station. Those are not your personal fiefdoms, to rule as you please and pass on to your heirs.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Mar 11th, 2009 at 08:24:22 PM EST
[ Parent ]
Taxation could work, especially when there'll be no more tax havens.

Rentiers a burden?... Those two guys earned their own money, paid building companies to build apartments (so they indirectly gave work to -- algerian illegals,  well there might be something there), rented to people at fair price, maintained the property. I think your problem is with greedy, dishonest rentiers. I have that problem with all greedy dishonest, btw :)

The issue is not if they can buy seats or not, for we need to know who does, when and what it costs. It's illegal to buy seats. Inherited health may still have sane basis, right. My Breton landlords had a daughter too if I remember well, imagine her luck. I would tax inheritance - up to a point though, for I don't see any moral problem, except a risk of corrupting the offspring.
If we raise the scale and speak about factories -- give them back to the -- State, then?... To political fiefdoms ? Hmm.

I would rather have a problem with hereditary fiefs, rather than the nobility per se. And you should count the number of former nobility working in finance and who are now buying back their old castles and some new ones.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)

by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 08:36:46 PM EST
[ Parent ]
Rentiers a burden?... Those two guys earned their own money, paid building companies to build apartments (so they indirectly gave work to -- algerian illegals,  well there might be something there), rented to people at fair price, maintained the property.

I should re-phrase. Rentiering is a burden. The actual people involved may or may not be, overall, depending on whether they have previously contributed something of value to justify their current status.

I don't begrudge people who worked honest jobs for decades that they retire as rentiers. Although I would prefer if they could retire on adequate public pensions instead. But you work with the political economy you have, not with the one you'd like.

What I do begrudge somewhat is the people who buy at the bottom of the market and then, purely because rental values soar for a decade, can rent out and use the rent to pay interest on the mortgage and amortise the mortgage. Although that's still mostly small fry, and irritates me more because of what it says about the lack of counter-cyclical real estate policy than for the actual rentiering involved.

If we raise the scale and speak about factories -- give them back to the -- State, then?

The state can always auction them off, if you think that it's undesirable to have the government run factories.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 12th, 2009 at 06:24:09 AM EST
[ Parent ]
I think there's a kind of bell curve of economic health. Instead of trickle down you have a share factor - probably not a million miles away from a GINI coefficient.

Cultures which share too much stagnate through lack of incentive and reward.

Cultures which share too little stagnate through lack of majority opportunity and systemic top-down corruption.

The reality probably isn't as one-dimensional as that, but a Goldilocks economy which is designed with the explicit aim of balancing opportunity against opportunism could be an interesting thing.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Mar 11th, 2009 at 08:39:28 PM EST
[ Parent ]
Interesting that you speak about cultures, and not economical models - I always thought that's what matters most actually.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 08:54:14 PM EST
[ Parent ]
Bruce had a post up about the same subject a while ago.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 12th, 2009 at 06:43:16 AM EST
[ Parent ]
Where are you buying apartments ? In rather expensive Paris, two million euros will net you a centrally placed house...

Un roi sans divertissement est un homme plein de misŔres
by linca (antonin POINT lucas AROBASE gmail.com) on Wed Mar 11th, 2009 at 08:41:20 PM EST
[ Parent ]
True. The ones I spoke about were located in Sartrouville and... wait-- Maison-Lafitte, not far from there.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
by ValentinD (walentijn arobase free spot franša) on Wed Mar 11th, 2009 at 08:52:45 PM EST
[ Parent ]
My bad. I was using apartment prices in DKK, which gives a factor of seven and a half. So call it a hundred apartments or so, if we assume that a centrally located apartment goes to the tune of about half a million €.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 12th, 2009 at 06:49:56 AM EST
[ Parent ]
das monde:
Since the actor Reagan, politicians confirm themselves more often as public relations specialists.

yup, they're the 'user interface', (GUI?)

in other words, you can change the skin, but it's the same software under the hood.

very few can tweak that...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Mar 10th, 2009 at 04:34:46 PM EST
[ Parent ]
there's a fractal beauty in that, emerging from years of listening to your explanations.

ChrisCook:

Participative consensual networked frameworks for self governance. Or maybe a State in which we are all members?

there's a fractal beauty in that, emerging from years of listening to your explanations.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Mar 10th, 2009 at 04:40:58 PM EST
[ Parent ]
das monde:
They do not seem to recognize public interest as their concern. (Isn't Public Good = People's Good?!) The governments even try to avoid being effectual rentiers, as if seeking public profit at expense of irresponsible bankers or industries must be a tabu. Can't the whole libertarian ideology be summed up by the principle of gradually barring the public government from any rental activity, except collecting nominal taxes?

yes, and by poisoning the well of community trust in that way, allying with the embezzlers and throwing crumbs to the embezzled, they give red meat to the libertarians dementia that we can drown government into ineffectual irrelevance, which would only work in that most ineffable of utopias, a world where all were enlightened enough not to need governance.


'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Mar 10th, 2009 at 04:23:56 PM EST
[ Parent ]
at Daily Kos, just in case.
by das monde on Mon Mar 9th, 2009 at 03:20:12 AM EST
Wow, it's over 180 comments here... I am surprised that it's more than here :-)

Do we have a self-organized criticality distribution, Migeru?

by das monde on Thu Mar 12th, 2009 at 09:10:23 PM EST
[ Parent ]
That looks like an interesting debate too, unfortunately there's no reply link available - are comments closed after an idle period, I wonder.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
by ValentinD (walentijn arobase free spot franša) on Sun Mar 15th, 2009 at 05:02:46 PM EST
[ Parent ]
Yes, comments are closed by SCOOP when a diary is archived. Diaries on ET are archived after 30 days and on DKos it's just a couple of days.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Sun Mar 15th, 2009 at 05:04:37 PM EST
[ Parent ]
A pity, there must be quite a lot of people who can't or won't follow blogs daily.

Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
by ValentinD (walentijn arobase free spot franša) on Sun Mar 15th, 2009 at 05:40:37 PM EST
[ Parent ]


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