Category Archives: Business

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.
~ econlib.org

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.” ~ econlib.org

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.

References

_______________________________

Advertisements

The Constant Hum of Net-Neutrality?

I’m reading a lot of the “voices of reason”, telling us their hope for a brighter, better, fairer, more economical, world-wide-web is through FCC regulation. If only we do this one little thing, ask our representative’s for more regulation. As a matter of principle, and all that is net-holy, we need to demand more regulations, we have to get more bureaucrats to control this nightmare of an Internet that soon can befall us, without extensive government guidance.

When someone makes an extraordinary claim, they should be obligated to demonstrate their claim is real.

cartoon-people-clappingNet neutrality The common perception of net neutrality is positive. It’s supposed to require Internet service providers to treat all on-line content the same. They can’t deliberately speed up or slow down traffic from specific websites, block sites, or applications, nor can they put their own content at an advantage over rivals.

The claim “The elimination of the FCC enforcing net neutrality will give big cable companies control over what we see and do on-line. If corporations get their way, they’ll allow widespread throttling, blocking, censorship, and extra fees.”

Net neutrality advocates portray a problem, then without proper examination of facts, they want the government to control the Internet. Their proposals lack the essential explanations of, over what time period a remedy should occur, the cost, or how their regulations are going to monitor and insure the problem(s) were fixed.

Meanwhile a host of complaints, which almost any service provider routinely responds, are cited as hypothetical problematic issues.  Except where criminal conduct has been involved, there are no examples of any Internet-service provider preventing its customers from viewing content on-line. Comcast attempted to “throttle” or slow down access to certain data packets a decade ago; they were blasted in the court of public opinion and soon relented.

beware-false-claims-2There’s an illusion that somehow government can control enterprise better than individual companies. Nowhere can such a claim be demonstrated by facts, yet many persist we need more, not less government intervention. There’s a disconnect on how speeds and feeds would be monitored for each type of Internet application and entertainment source.

Having been involved with data communications over 30 years and responsible for managing the speed as well as the perceptions of individual users, complaints are the daily norm. In many instances a problem stems from user perceptions, equipment malfunction, and purposeful attacks on companies and infrastructure through clever hacking.

One of the frequent claims by those advocating net neutrality are that service providers will raise rates without government regulation. I know for reasonable certainty two things will occur in regard to pricing.

  •  price increases and advertisement revenue claw back is already in the works.
  •  regulations, monitoring, and compliance with increased government regulations most certainly will increase the cost to the consumer.

Google has an 88 percent share of the search-engine market. Facebook has a 77 percent share of mobile social media. Amazon, controls 70 percent of e-book sales, how would government effectively manage their access and cost to use with additional regulation?

If anything, net neutrality is a lose-lose scenario. Access that we take for granted would invariably be slower because providers would have to be increasingly watchful of data flow. Throttling techniques, (packet shaping) would be necessitated. Costs to the end-user would increase.

Summary

The Internet is made up of billions of users, millions of individual pieces of equipment, passed through complex routing by thousands of companies. We’ve seen exponential growth since 1994. Video tape rentals were the usual source for on demand entertainment. Facebook, YouTube, Twitter, and even Google were created during this period. The flexibility, adaptability, and skills required to meet this growth were all done without government supervision. You can almost guarantee if the government had been supervising, we would be still using ISDN or dial-up, waiting for connection, and certainly not getting video on demand.

“When I took office, only high energy physicists
had ever heard of what is called the World Wide
Web… Now even my cat has its own page.”
Bill Clinton

_________________________________________

Why the Net Isn’t Neutral

server rackI understand, you want things to be fair. You’re all about fair play and equality. You’re even willing to wear a silly hat and carry a sign if necessary in the name of fairness. I get it and respect that.

When I read many posts making claims about net neutrality, I realize the masses can be so readily manipulated. It’s one of the reasons I’m glad I’ve learned to be more skeptical and willing to dig for information. It’s because so few people are willing and able to dig in for themselves, preferring to accept the most frequent regurgitations as fact.

No matter how many times I’ve neutralized the arguments about net neutrality, even some people who I regard as highly intelligent, accept the following as fact.

Without net neutrality we will lose these benefits:
(these claims are false but many believe it to be true)

  • education on-line
  • employment opportunities
  • social media access
  • on-line shopping
  • ticket buying
  • cat videos
  • our favorite porn
  • explosive or chemical devices (see this link)

Before 2015, there were no legal protections requiring net neutrality. Before 2015 Internet providers could charge different prices for different speeds. You wanted faster Internet, you paid a higher price. After 2015, when “net neutrality” laws were passed, Internet service providers are able to charge tier level prices. Faster Internet = higher pricing. Notice any difference before 2015 and after? There isn’t any.

Let me explain it another way. The whole idea behind net neutrality, is to keep data flowing freely. You want to be able to watch those on demand cat videos and Internet porn, or your favorite net-fix video. You believe it’s your right, but it really bothers you that a company has the audacity to charge you more if you use more data. How dare they!

If the objectives of the law were to insure we receive services on an equal basis, then why is it other “utilities” charge more for their services? Water companies charge more for greater consumption. Electric companies charge more for additional capacity & usage. What are we asking for data services that differs from other utilities?

If Internet service slows or is completely off-line, I call the provider. The problem is identified and the issue is resolved. Municipalities (local government), created a localized monopoly when they chose a single provider for a specified geographic area. This eliminated a market aspect of control and correction through competition. Rates and services improve with competition. Politicians with government regulations created the problems. They later identify & amplify the problems they started, and promote their willingness to fix if only we would elect them.

Dianne Feinstein speaking

To put it succinctly, if the government were to be put in charge of a desert, there would be a shortage of sand in a few years.