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The thing is that we can't both wish for third world countries to become rich (by proclaiming: "one mobile phone to every bedouin!"), and expect that once they do they will retain their culture.

To become rich nowadays means to embrace capitalism, and this means embracing notions of consumerism, possession, increased purchasing power, and in particular this means obtaining the possibility to purchase exotic/luxury items. And since one man's local product is another man's exotic/luxurious product, rich Bengladeshis buy vintage Indian cars, rich Indians buy Ferraris, rich Italians buy Rolls Royces ...

So either we stop wanting the third world to emulate our path (so that they can save their culture), or we choose another path, for example the one of degrowth, which I somewhat affect.

God what am I saying? Ok, this was just typed as I thought it.

by Alex in Toulouse on Tue Feb 28th, 2006 at 02:51:21 PM EST
[ Parent ]
We won't have to embrace degrowth. It will be force upon us by the rise of India and China. There are just so many PPP dollars to go around.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Feb 28th, 2006 at 02:55:58 PM EST
[ Parent ]
Good point, and that's why I think that we have to prepare for degrowth. Better be prepared for it than not.

The rise of global competitors and upcoming energy problems should start pushing us down this other path we haven't yet tested, an alternative to communism and capitalism. Europe could show the way ...

The very least we need to do is to start eating more potatoes and less bananas, like in the good old days.

by Alex in Toulouse on Tue Feb 28th, 2006 at 03:00:42 PM EST
[ Parent ]
down this other path we haven't yet tested, an alternative to communism and capitalism. Europe could show the way ...
or else, down that other path we have already tested, an alternative to communism and capitalism. Europe once showed the way ...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Feb 28th, 2006 at 03:03:20 PM EST
[ Parent ]
Not as long as China is dependent on our consumption.  After all, they can only sell what we can buy.  We're not going to experience degrowth.  American gains are European and Asian gains.  European gains are American and Asian gains.  And so on.  The only thing I see that poses a serious risk to long-term growth is the environment.  We need get off of the oil, yesterday.  And we need to dedicate ourselves to also helping developing countries, like China and India, to avoid the level of dependency America now suffers from.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Tue Feb 28th, 2006 at 03:58:02 PM EST
[ Parent ]
The Chinese are dependent on your consumption but they earn U.S. dollars from it. Some scholars argue that with these immense sums they buy U.S. treasury bonds and they possess so many of them that the Americans are paying the interests  through their taxes. And the economy is implicitly dependent on foreign owners of bonds. So you are right about the American dependency on countries with low-paid labor and cheap products.

I'm not ugly,but my beauty is a total creation.Hegel
by Chris on Tue Feb 28th, 2006 at 04:14:59 PM EST
[ Parent ]
Well, yes, Americans pay the interest through their taxes.  The main problem is the budget deficit.  Our interest payments in America are rising at frightening rates, and I've got to believe that this is exactly what the Republicans want, because it will cripple our ability to finance our welfare state.

But remember that, if America collapsed, China (and/or our other lenders) would be left holding useless pieces of paper.  Trade creates "inescapable interdependencies," as von Mises -- whom, for the record, I despise -- rightly, I think, referred to it.  It's the beauty and, at the same time, the horror of capitalism.  A crippled America translates to very bad news in Asia.

At this point in time, America is still, easily, the dominant partner in the relationship.  But, if America does not use that dominance to demand a liberalized yuan, both countries will wind up in one hell of a mess in the future.  (And I, my friend, will be well-insulated in Europe. ;-)

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue Feb 28th, 2006 at 05:03:54 PM EST
[ Parent ]
These peaces of paper will actually mean nothing without
America's financial and economic prosperity, as they are not anymore backed by gold. I guess this fact leaves carte blanche to financial speculators and bankers to play the role of semi-gods all around the globe ;)))

I'm not ugly,but my beauty is a total creation.Hegel
by Chris on Tue Feb 28th, 2006 at 05:20:18 PM EST
[ Parent ]
Yes, but backing the currency with gold is a bad idea, because it essentially means pegging the currency to something that doesn't react in a reasonable way to the market.  Gold doesn't naturally fall in price when the economy slows.  In fact, it does the opposite, because investors know that the government needs to pump up the money supply and inflate away the recession.  (Gold has traditionally been the ultimate hedge against inflation.)  Speculators played the role of semi-gods -- or, more accurately, semi-Satans -- much more back in the days of the gold standard.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 1st, 2006 at 08:42:44 AM EST
[ Parent ]
With fractional reserve banking, it is the private banks and not the government that decide how much money to create. Sure, the government can set the very short-term interest at which they will lend money to the banks, but that is a very indirect way to control the money supply...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Wed Mar 1st, 2006 at 08:49:23 AM EST
[ Parent ]
It is very indirect.  Agreed.  And the government -- by "government," I mean the elected officials -- has no power over the lending rate.  (Its only power over the money supply is through spending.)  The central bank controls the lending rate, obviously.  The objective of the game should be to involve the central bank and government only to the extent that it is necessary.  It's good to try to find ways for the market to move rates as needed.  The problem with gold is that it doesn't move as the item should move for the given purpose.  Gold could be a shooting upwards in value while the economy plunges into recession.  It's better to let the economics and banking gurus determine the supply, even if it is an elitist model.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 1st, 2006 at 09:11:07 AM EST
[ Parent ]
I don't trust the private banking gurus, because they have a conflict of interest.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Wed Mar 1st, 2006 at 09:13:10 AM EST
[ Parent ]
I think the system is imperfect, obviously, but that it has worked fairly well, especially since the Volcker Era.  What are the other options?

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 1st, 2006 at 11:45:51 AM EST
[ Parent ]
I don't know. What do you think of these writings on money? Are they crackpots, or do they have a point?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Wed Mar 1st, 2006 at 11:49:32 AM EST
[ Parent ]
I'm going to reply, after I finish reading some of the articles, at the bottom of the thread, so that we have a bit more room to read.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 1st, 2006 at 12:12:57 PM EST
[ Parent ]
You could also make it a separate diary.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Wed Mar 1st, 2006 at 05:00:30 PM EST
[ Parent ]
Not sure if I can write enough to get an entire diary out of it.  But it's a good idea.  By the way, sorry for the delayed response.  A huge story broke on Katrina and a clear lie from Bush, and I'm getting a great deal of enjoyment out of watching these little bastards get fried, finally, for their incompetence in New Orleans.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 1st, 2006 at 07:48:22 PM EST
[ Parent ]
It's not incompetence, it's worse.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Thu Mar 2nd, 2006 at 05:46:28 AM EST
[ Parent ]
Yes, apparently it is.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Mar 2nd, 2006 at 07:50:06 AM EST
[ Parent ]
There is a theory that when the money supply in Ancient
Rome was reduced by 90% the common people lost their lands and homes.With the demise of plentiful money the people lost their confidence in the government and Rome
plunged into the gloom of the Dark Ages...

I'm not ugly,but my beauty is a total creation.Hegel
by Chris on Wed Mar 1st, 2006 at 03:46:59 PM EST
[ Parent ]
The only thing I see that poses a serious risk to long-term growth is the environment.

I would have put this precisely the other way around :-)

The difference between theory and practise in practise ...

by DeAnander (de_at_daclarke_dot_org) on Tue Feb 28th, 2006 at 07:50:56 PM EST
[ Parent ]
Only if long-term growth doesn't involve developing clean energy sources, which it will, since we have no other choice.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 1st, 2006 at 07:24:36 AM EST
[ Parent ]
this gets back to the Polyannic assumption that the only limiting factor is energy.

whereas there are whole clusters of limiting factors to growth, both sources and sinks, and unless we posit star trek technology, energy alone is not sufficient to solve them.  but this s/b a separate thread I think...

The difference between theory and practise in practise ...

by DeAnander (de_at_daclarke_dot_org) on Wed Mar 1st, 2006 at 05:25:05 PM EST
[ Parent ]
sorry, pollyannic with 2 L's -- if I'm going to neologise I should at least get the root right :-)

The difference between theory and practise in practise ...
by DeAnander (de_at_daclarke_dot_org) on Wed Mar 1st, 2006 at 05:25:47 PM EST
[ Parent ]

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