Economic Tomfoolery

Economic ignorance allows us to fall easy prey to political charlatans and demagogues.” ~ Dr. Walter Williams

The world economy is six times larger than it was half a century ago, growing at an annual rate of 4 percent during the period. New technologies have paved the way for more efficient production systems in a wide range of industries and promoted economic growth. From 1965 to 2013, the average annual growth rate of world GDP per capita was about 2 percent, and in more than half of the past 50 years, the world grew faster than this average. As a result, global per capita GDP more than doubled between 1965 and 2013 despite a major increase in population.” ~ IMF

Judged by the huge strides that people all over the world have made in overcoming poverty and want, it is only a slight exaggeration to say that little of economic consequence happened before the last three centuries. Before that, most of the world not only took poverty for granted, but also assumed that little could be done about it. Even the most optimistic early writers could not imagine that more than a few percent of the population would ever be well off; they thought that the best we could do for the masses would be to minimize their suffering on Earth.

Poverty and inequality

Money - ResourcesThe world population grew from 3 billion in 1965 to about 7 billion in 2013, but the global economy grew faster than the world population, leading to a better standard of living for the average world citizen.” ~ IMF

Life expectancy grows even though the population growth rate decreased.

The average world citizen is richer than ever thanks to the growth the global economy has enjoyed over the past 50 years. However, the benefits of this growth have not been equally distributed—the result is enduring poverty and inequality.” ~ IMF

When we read about the great civilizations of ancient Egypt and Rome or of the Aztecs and the Incas, we tend to compare them with the empires of Britain or the growth of the United States. This comparison, judged in economic terms, is highly misleading. Although the great civilizations in Egypt and Rome were able to construct big buildings, the vast majority of their citizens, by today’s standards, were dirt poor.” ~

Technology drives world progress. Certainly having sufficient energy, clean water, and adequate food supply, are foundations for advancement. Governments play a huge role. The most drastic comparison between how governments affect an economy, examine North and South Korea. Each country started as similar in background, however their respective governments are vastly different in the level of control they apply to their population. The short summary is that North Korea is a highly controlled, central managed economy, whereas South Korea allows more individualized control and free markets. Embargoes by the west exacerbate North Korea’s problems, but even without those, the government restricts business to a degree where it can’t create, adapt and overcome market obstacles on a competitive basis.

China and Honk Kong

When the United Kingdom’s lease ended on Hong Kong in 1999, China was handed a jewel in that region of the world. Myself, having traveled and transacted business there before the change over, I saw a vibrant overall economy with a significant amount of freedom. Evidently, China found they didn’t want to kill the golden goose, and incorporated many of the free market ideas from this island economy.

The IMF states, more than a billion people, mostly in sub-Saharan Africa and south Asia, are in extreme poverty. What they claim are some of the causes, are more along social-democrat ideology, rather than the obvious. Those who live within the borders of despotic, highly centralized, corrupt governments, suffer the most with inequality and poverty. It’s free market economies and those who have governments with less corruption, less emphasis on large military’s that are the biggest winners.

It’s popular to condemn greed but it’s greed that gets wonderful things done. When I say greed, I don’t mean stealing, fraud, misrepresentation, and other forms of dishonesty. I mean people trying to get as much as they can for themselves. We don’t give second thought to the many wonderful things that others do for us.“ ~ Dr. Walter Williams

People in the education and political establishments pretend they’re not motivated by such “callous” motives as greed and profits. These people “care” about us but which areas of our lives do we derive the greatest pleasures and have the fewest complaints, and which areas do we have the greatest headaches and complaints? We tend to have a high satisfaction level with goods and services like computers, cell phones, movies, clothing and supermarkets. These are areas were the motivation is greed and profits. Our greatest dissatisfaction are in areas of caring and no profit motive such as public education, postal services, and politics.” ~ Dr. Walter Williams

.. economics studies the consequences of decisions that are made about the use of land, labor, capital and other resources that go into producing the volume of output which determines a country’s standard of living. Those decisions and their consequences can be more important than the resources themselves, for there are poor countries with rich natural resources and countries like Japan and Switzerland with relatively few natural resources but high standards of living.” ~ Dr. Thomas Sowell

Economic Equality

Economic equality is firstly a false concept. It ignores market fundamentals as basic as water level & gravity, meaning different inputs are going to produce different outcome. I’ve heard advocates of basic income for all. Their belief is the economy would improve as everyone would at least have enough to sustain themselves and would increase demand for goods and services.

When aspiring entrepreneurs are brought into the TV reality show, Shark Tank, they present their product or service, then asked a series of questions. The “Sharks” are successful entrepreneurs in their own right. Their goal is to get a return on their investment and own a piece of the next big business idea. Three things should be obvious to the casual observer.

  • You need to be prepared with a good idea with market research.
  • Capital will flow to you from those with greater wealth.
  • The government doesn’t create wealth.

There’s an ongoing effort to counter marketplace realities with explanations and statistics stating “trickle down economics” doesn’t benefit anyone. A simple catch phrase or populist econo-babble doesn’t negate the basics behind economic success.

  • a market with less barriers and cost will be more successful.
  • products & services must be sufficiently desirable for people to want to engage in trade.
  • in order to launch and maintain a product or service in the marketplace startup and working capital must be obtained.

If you want to place a coined phrase on this process, “trickle down” is a poor representation of the entire process. It may be simplified to suggest capital flows from places of sufficiency or even excess, to those who have skills, products, or services that are sought after, but doesn’t necessarily come to those with little or no skill. Despite the efforts of the IMF to suggest the world doesn’t benefit from free market economics is disingenuous. To the contrary, they owe their existence to the wealth produced by prosperous nations, primarily the United States.

What is the IMF?

The IMF was created in 1945, with the goals of fostering global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. the IMF is governed by and accountable to the 189 countries that make up its near-global membership.

The IMF has had two recent disgraced leaders, Dominique Strauss-Kahn was charged with allegedly brutally attacking a New York hotel maid, Nafissatou Diallo on 14 May 2011. The charges were dismissed at the request of the prosecution which described serious doubts in Diallo’s credibility and inconclusive physical evidence. The physical evidence indicated a sexual encounter but did not prove use of force or non-consent. Strauss-Kahn admitted his liaison with Diallo was a moral fault and described it as “inappropriate” but that it did not involve violence, constraint or aggression. He said that Diallo had lied and that he had no intention of negotiating with her over a civil suit she had filed against him. The suit was later settled for an undisclosed amount, but subsequently reported to have been $1.5 million.

In his defense, Diallo had previously fabricated a detailed story of being gang raped by soldiers in Guinea, which was later found to be untrue.

The next Managing director of the IMF, Christine Lagarde, was found guilty of criminal charges on 19 December 2016. She was linked to the misuse of public funds dating to her time as France’s finance minister. She didn’t serve jail time or have to pay a fine. She maintained her innocence throughout the trial, calling the charges politically motivated. The IMF has stood by her, and her IMF biographical page doesn’t mention this case or conviction.

These individual leaders have escaped severe legal consequences for their actions. It doesn’t however speak well of their judgement. People don’t operate in a vacuum. Their personal lives do affect other aspects of their business without often being conscious of it.