Indo-Pak Update: A Future of Nudges and Hopes || via Meadia
Few bilateral relationships matter more for the long-term stability of Asia than that between New Delhi and Islamabad. But few, too, are as seemingly intractable….
[A recent report by the International Crisis Group on Indo-Pakistani relations] provides some room for the one resource scarcer in the Indus Basin than water, optimism. The legacy media’s coverage of Indo-Pakistani relations usually takes place through the lens of Kashmir, militaries, and terrorism, but, the Crisis Group report emphasizes, there has actually been significant improvement in trade relations between the two countries. The ruling Pakistan People’s Party (PPP) government agreed to grant most favored nation (MFN) status to India in November 2011, to be implemented by the end of 2012, a decision that the largest opposition party, the Pakistan Muslim League-N (PML-N) also supported. This decision ‘is not merely an economic concession but also a significant political gesture. Departing from Pakistan’s traditional position, the current government no longer insists on linking normalization of relations with resolution of the Kashmir dispute. India no longer insists on making such normalization conditional on demonstrable Pakistani efforts to rein in India-oriented jihadi groups, particularly the Lashkar-e-Taiba, responsible for the 2008 Mumbai attacks and hence suspension of the composite dialogue.’
This matters. Decoupling trade from other contentious issues could have significant consequences. Pakistan’s current trade with India represents only one percent of its total balance, while Indian exports to Pakistan accounted for only 0.93 percent of its total exports. ‘India-Pakistan trade is a win-win situation’, says former Pakistan State Bank Governor Ishrat Hussain. Says a Pakistan economist, Asad Sayeed, ‘Economic growth can take place either through major structural transformation or through trade. Since Pakistan’s economic structure has remained the same for at least the last 40 years, the only way to ensure growth is regional trade and investment.’ Pakistan’s two largest industries, textiles and food processing, are sophisticated enough to compete well in Indian markets, while energy-hungry India would benefit from access to the world’s second-largest coal mines in the Thar Desert in Sindh Province.
Why We’re Losing: How free market ideas suffer from being counterintuitive || Reason
People don’t understand the private sector. They don’t like it. Intuitively, it seems selfish. Most people are busy trying to run their own lives. They’re grateful to politicians who want to take charge. It seems intuitive to think that a smart group of planners concerned about the collective good can accomplish more than free people pursing their own interests individually in the private sector. But history is filled with examples of how the solutions politicians propose create new problems without solving the old. Urban renewal wiped out entire neighborhoods without improving cities, mortgage subsidies created a damaging financial bubble, the war on drugs created a prison-industrial complex while barely taking a dent out of drug abuse. The list goes on and on.
The few politicians who manage, often against overwhelming odds, to successfully expand the sphere of private action rarely get rewarded for their trouble. Margaret Thatcher saved Britain—and got thrown out. Wisconsin Gov. Scott Walker (R) may get recalled for trying to cut the budget and push back against public sector unions. Hong Kong went from Third World to First World in just 50 years because it had economic freedom. But when I went to Hong Kong and interviewed people, they didn’t know why they were prosperous. They just talked about their problems and how government should solve them….
Liberty is counterintuitive. It takes hard work to overcome the brain’s attraction to simple-sounding solutions. It’s not easy to convince people that sometimes the best way for governments to address a problem is to do less, not more. It’s easier to admire the activist or politician who talks about helping the less fortunate than it is to cheer on a hustler who wants to get rich by selling you stuff. Those of us who see expanding the private sphere as the best way to help the most people have an uphill battle in making our case…. Most people see a world full of problems that can best be tackled via wisely applied laws. They assume it’s just the laziness, stupidity, or indifference of politicians that prevents the problems from being fixed. But government is force, and government is inefficient. The inefficient use of force creates more problems than it solves….
Economics is complicated. That’s one more reason to be grateful for the Constitution: With its relatively simple rules, it helps keep government within bounds. Some Tea Party activists understand that, and it’s one reason they call for a return to constitutional, limited government.
But getting the majority of America to sign on to these ideas might require an impending crisis. Looking around the world, the next flashpoint after Greece will probably come elsewhere on the periphery of Europe or in Japan. The populations of those countries are graying—young workers are shrinking relative to the retirees they’ll need to support—faster than America’s. Watching their problems, we will get an advance look at the financial poison we are foisting on America’s young people.
But I’m not sure voters will pay attention. If Americans didn’t learn the folly of central planning from the collapse of the Soviet Union and the stagnation of socialist economies around the world, they may not learn about the danger of unsustainable budgets from the catastrophes in Greece, Spain, and Japan….
There is nothing that government can do that we cannot do better as free individuals—as groups of individuals, working together voluntarily, not at the point of a gun or under threat of a fine. Without big government, our possibilities are limitless.
But it’s a hard sell. Things continue to get better in a free society, but nobody is out in front of the camera saying, “Yay for the marginal improvements that come with free markets!” It’s not as compelling or newsworthy as a report on someone who goes bankrupt because he got sick. If we are to foster prosperity, we must find better ways to promote the virtues of liberty.
America and the Value of 'Earned Success' || Arthur Brooks (Wall Street Journal)
In the end, I concluded, what set the United States apart from Spain was the difference between earned success and learned helplessness.
Earned success means defining your future as you see fit and achieving that success on the basis of merit and hard work. It allows you to measure your life’s “profit” however you want, be it in money, making beautiful music, or helping people learn English. Earned success is at the root of American exceptionalism.
The link between earned success and life satisfaction is well established by researchers. The University of Chicago’s General Social Survey, for example, reveals that people who say they feel “very successful” or “completely successful” in their work lives are twice as likely to say they are very happy than people who feel “somewhat successful.” It doesn’t matter if they earn more or less income; the differences persist.
The opposite of earned success is “learned helplessness,” a term coined by Martin Seligman, the eminent psychologist at the University of Pennsylvania. It refers to what happens if rewards and punishments are not tied to merit: People simply give up and stop trying to succeed.
During experiments, Mr. Seligman observed that when people realized they were powerless to influence their circumstances, they would become depressed and had difficulty performing even ordinary tasks. In an interview in the New York Times, Mr. Seligman said: “We found that even when good things occurred that weren’t earned, like nickels coming out of slot machines, it did not increase people’s well-being. It produced helplessness. People gave up and became passive.”
Learned helplessness was what my wife and I observed then, and still do today, in social-democratic Spain. The recession, rigid labor markets, and excessive welfare spending have pushed unemployment to 24.4%, with youth joblessness over 50%. Nearly half of adults under 35 live with their parents. Unable to earn their success, Spaniards fight to keep unearned government benefits.
Meanwhile, their collective happiness—already relatively low—has withered.
Socialism and Central Planning Still Can’t Defeat Human Nature || The Corner
As we watch Europe’s unfolding debt drama, it’s worth asking a question: If socialism and central planning can’t succeed in Europe, where can they succeed? After all, Europe possessed tremendous advantages when it launched its slow-running experiment in cradle-to-grave welfare statism and post-national political unity many decades ago: historically dynamic economies, educated citizens, relative religious unity (around a lack of belief), a commitment (born out of sorrow and blood) to peace, and military protection provided by the world’s great superpower. The result was something resembling a social-democracy Disneyland, a virtual theme park for believers in nationalized health care, progressive social views, soft power over hard power, and carefully managed democracy.
Yet human nature still prevails, doesn’t it? It turns out that the euro couldn’t turn Greeks and Italians into Germans, that cradle-to-grave welfare benefits have the same impact on the work ethic and productivity of millions of Europeans as they had on millions of Americans, and that “post-Christian Europe” was hardly a more-rational Europe.
We can’t just shake our heads at the Europeans, however, not when our current president looks across the Atlantic and sees not a cautionary tale but instead a model for our American future.
“ Socialists absolutely hate the Laffer Curve because it takes as its starting point the assumption that under real-world conditions a completely collectivist economy (in which there is no personal reward for working) will always stagnate to the point of complete paralysis. Unfortunately for the haters, the history of communist economies largely confirms Laffer’s assumption; one only need look at what happened in the Soviet Union in the ’20s and ’30s, and China in the ’50s, to see that productivity collapses and the economy implodes when you outlaw individual rewards for labor (which is what a 100% tax rate would do). ”
Two kinds of austerity || Washington Examiner
This approach to austerity, also known in the United States as the “balanced approach,” has unfortunately proven a recipe for disaster. In a 2009 paper, Harvard University’s Alberto Alesina and Silvia Ardagna looked at 107 attempts to reduce the ratio of debt to gross domestic product over 30 years in countries in the Organisation for Economic Co-operation and Development. They found fiscal adjustments consisting of both tax increases and spending cuts generally failed to stabilize the debt and were also more likely to cause economic contractions. On the other hand, successful austerity packages resulted from making spending cuts without tax increases. They also found this form of austerity is more likely associated with economic expansion rather than with recession….
While the debate over austerity continues, the evidence seems to point to the conclusion that austerity can be successful, if it isn’t modeled after the “balanced approach.” It’s a lesson for the French and other European countries, as well as for American lawmakers who often seem tempted by the lure of closing budget gaps with higher taxes.
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The problem is that no one wants to work with an acquisition system that’s so complex and so bureaucratic that only those like “the usual suspects” who’ve been enmeshed in it for years, ever really understand it. It can take a decade or more to get a large weapons program through the procurement cycle. Meanwhile, the technology is changing every two or three years: in the case of software, every six months. By buying software the same way it buys nuclear submarines, the Pentagon is simply sabotaging itself, especially in high-tech arenas like unmanned systems, robotics, and cyber-capabilities where the real future of military technology lies.
If you can’t actually reform the process — and God knows everyone except God has tried — it seems to me at least we need an alternate acquisition pathway that applies to those specific steep innovation-curve technologies. That’s something some of us are working on.
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[T]he real key to that massive surge of wartime production — 70% of everything the Allies made during World War II — was unleashing the productive power of American private business and industry, which had just been waiting for a spark to get itself going. That spark was the initial funding for plant expansion and conversion in certain key industries like the aviation and automotive sector, that started in the summer of 1940 — most in the form of loans — and then orders from the British and French military, who went on a shopping trip around the United States in the early months of the war in Europe — a shopping trip that eventually grew into Lend Lease.
They wanted to buy American because they knew, even though we had a tiny military by comparison with their own (Holland had a bigger army in 1939 than we did), that American companies like Lockheed and North American and Chrysler and US Steel could make what they needed more quickly and efficiently, and in tremendous quantities. So they came to buy planes, tanks, machine guns, aircraft engines, and artillery, as well as the first Liberty ships, made in shipyards that had to be built in record time by men like Henry Kaiser–one of the main characters of the book.
So when Washington decided it needed to start rearm the United States that summer of 1940, it simply tapped into the same fountain of productivity and innovation–multiplied over time by thousands of companies large and small around the country. Even before Pearl Harbor there were no less than 25,000 prime and 120,000 subcontractors at work in wartime production.
”Arthur Herman, author of Freedom’s Forge: How American Business Produced Victory in World War II. My granddad built Liberty ships in Baltimore. (via Time)
Median Earnings by Major (via The Chronicle of Higher Education)
The global happiness derby || Robert J. Samuelson (Washington Post)
We ought to leave “happiness” to novelists and philosophers — and rescue it from the economists and psychologists who think it can be distilled into a “science” and translated into pro-happiness policies. Fat chance. Government can often mitigate sources of unhappiness (starvation, unemployment, disease), but happiness is more than the absence of misery. If we could manufacture happiness, we could repeal the “human condition.”
Somehow this has escaped the social scientists who want to make happiness the goal of government. They argue that economic output (gross domestic product) doesn’t measure everything that’s important in life — family, friends or religion, for example. True, but it doesn’t follow that “happiness” can be targeted as an alternative. No matter. Their latest brief is the “World Happiness Report,” which ranks countries by their “subjective well-being” (the technical label for happiness) as recorded by public opinion surveys….
All these [top] countries share one common characteristic: They’re small in population and, except Canada and Australia, land mass. Small countries enjoy an advantage in the happiness derby. They’re more likely to have homogeneous populations with fewer ethnic, religious and geographic conflicts. This minimizes one potentially large source of unhappiness. Among big countries, the United States ranks first.
The irony is that Europe, where the happiness movement is strongest, generally registers lower happiness….
All rich societies already try to balance economic growth with social justice, security and environmental progress. The happiness movement would merely impose more intervention. It “boils down to having zealous politicians regulate the rest of us into their version of happiness,” argues Marc De Vos of the Itinera Institute, a Belgian think tank.
Creating an impossible goal — universal happiness — also condemns government to failure. Happiness depends on too much that is uncontrollable. For starters, personality. We all know people who seem blessed — stable marriage, healthy children, successful job — who are restless, grumpy and sometimes depressed. Meanwhile, others plagued by misfortune — sickness, shaky finances, family disappointment — persevere and remain upbeat.
Welfare and Private Charity || Cato @ Liberty
A new policy paper … analyzes the growth in the American welfare state and concludes that “throwing money at the problem has neither reduced poverty nor made the poor self-sufficient.” Michael makes an important point that—in my experience—most journalists don’t seem to appreciate:
In addition, whatever the intention behind government programs, they are soon captured by special interests. The nature of government is such that programs are almost always implemented in a way to benefit those with a vested interest in them rather than to actually achieve the programs’ stated goals… Among the non[-]poor with a vital interest in antipoverty programs are social workers and government employees who administer the programs and business people, such as landlords and physicians, who are paid to provide services to the poor. Thus, anti-poverty programs are usually more concerned with protecting the prerogatives of the bureaucracy than with actually fighting poverty.
That’s one reason why you have federal officials actually celebrating the fact that more and more Americans are signing up for food stamps. Sure, adding millions of people to the food stamps roll is good for the Department of Agriculture’s budget, but is it good for the country? Perhaps if one thinks that government bureaucracies are ideally suited to provide for the less fortunate. However, that’s a tough claim to make given the fraud, abuse, and wasteful bureaucratic overhead costs associated with the government model. And let’s not forget that the government is not a charity; rather, it must resort to compulsion and force in order to carry out its politically-inspired objectives.
Instead of celebrating government dependency, we ought to be celebrating those private charities that are effectively meeting the needs of the less fortunate through voluntary donations.
Disruptive Thinkers: More Thoughts on Disruption and National Security || Small Wars Journal
[It] reminded me of what is surely fast becoming the quote for our times when Sir Ernest Rutherford, the father of nuclear physics, once said to his staff: “Gentleman, we have run out of money. It is time to start thinking.”
In a world of long-term austerity, rapid technological change, declining importance of Westphalian concepts and later generation warfare that almost ceases to have any resemblance to traditional notions of war we can no longer afford to be prisoners to doctrinal precepts and organizational notions that are more applicable to the 1950s. The futility of large, inflexible military bureaucracies, procuring large, complex, over-engineered systems from the few large, inflexible remaining general contractors in a rapidly changing world seems evident. This system, which Anthony Cordesman has described as a “poisoned chalice” has long been broken and is no longer fully relevant to the emerging world of the “rise of the rest” and the proliferation of military technology. We need not only a revolution in military affairs; we need a revolution in military organization, design and procurement. We need to replace the military industrial complex with a military innovation complex, although the word “complex” is probably less than satisfactory to describe the dynamic that is most appropriate for the times. This emerging system would require far expanded notion of jointness: visions of security that extend beyond the battlefield integrating concepts from economic development, flexible manufacturing, commerce and social systems into the mix.
Toward the Conquest of World Poverty || Reason
Progress can often be defined as the stuff that happens while humanity is preoccupied with everything that is going wrong. On the surface, the first decade of the 21st century looks like an ugly parade of terrorism, war and economic convulsion. But in one important sense it stands as possibly the greatest decade in human history. And that’s no accident.
Among the most vicious enemies of human welfare is poverty. In a world plagued with limited resources, bad governments and unsound economic policies, it often appears to be an inescapable scourge. Most people paid no attention in 2000 when the United Nations proclaimed the goal of halving the number of earth’s inhabitants living in extreme poverty by 2015, compared to 1990.
But way ahead of schedule, the target has already been hit. For the first time since it began tracking, says a new World Bank report, “the data indicate a decline in both the poverty rate and the number of poor in all six regions of the developing world.”
In 1981, 70 percent of those in the developing world subsisted on the equivalent of less than $2 a day, and 42 percent had to manage with less than $1 a day. Today, 43 percent are below $2 a day and 14 percent below $1.
“Poverty reduction of this magnitude is unparalleled in history: Never before have so many people been lifted out of poverty over such a brief period of time.”…
The start of most global trends is hard to pinpoint. This one, however, had its big bang in the early 1970s, in Chile. After a socialist government brought on economic chaos, the military seized power in a bloody coup and soon embarked on a program of drastic reform — privatizing state enterprises, fighting inflation, opening up foreign trade and investment and unshackling markets.
It was the formula offered by economists associated with the University of Chicago, notably Milton Friedman, and it turned Chile into a rare Latin American success. In time, it also facilitated a return to democracy. Chile was proof that freeing markets and curbing state control could generate broad-based prosperity, which socialist policies could only promise.
If that experiment weren’t sufficient, it got another try on a much bigger scale when China’s Deng Xiaoping abandoned the disastrous policies of Mao Zedong and veered onto the capitalist road. The result was an economic miracle yielding growth rates that averaged 10 percent per year.
The formula was too effective to be ignored. Over the past two decades, poorer nations have dismantled command-and-control methods and given markets greater latitude. Economic growth, not redistribution, has been the surest cure for poverty, and economic freedom has been the key that unlocked the riddle of economic growth.
Long Payoff Time For Most Hybrids And Electric Cars || FuturePundit
The New York Times and TrueCar.com take a look at payback times for hybrid and other higher cost but more efficient drive trains.
Except for two hybrids, the Prius and Lincoln MKZ, and the diesel-powered Volkswagen Jetta TDI, the added cost of the fuel-efficient technologies is so high that it would take the average driver many years — in some cases more than a decade — to save money over comparable new models with conventional internal-combustion engines.
The full article gives a number of combinations of car models and gasoline prices with estimated payback times. What’s surprising is just how high gas prices have to go for many of the hybrids, pluggable hybrids, and pure electrics to start making economic sense.
