Why Is Youth So Left-Wing?

[Mise]

What I see is that the more liberalised the economy the more successful.

Of course this has to take into account history, don't expect South Korea to suddenly surpass Germany. But they(the liberal* nations) are moving forward. Can I say the same about center-left social-democracies?

*Traditional sense of the word.

I've seen no suggestion that European economies are shrinking. I agree that the more liberal the economy, the faster it grows. But a liberal economy can (and IMO should) have some form of social safety net without a negative effect on economic growth. Take the UK for example. The UK has a decent (if not exemplary) welfare state, AND a liberal economy, and the economy is doing well (Gordon Brown, our finance guy, has a lot to do with this). Social safety nets and a liberal economy are not mutually exclusive. In fact, they work best together.

The welfare state prevents people from falling below a minimum standard of living, and from the rich getting richer and the poor getting poorer (relatively speaking of course). While the total growth of the economy may be accelerated by reducing the tax burden, deregulating industry and commerce, etc., such growth is not sustainable if the population below the poverty line is also growing.

 

[newfangle]

The welfare state prevents people from falling below a minimum standard of living, and from the rich getting richer and the poor getting poorer (relatively speaking of course). While the total growth of the economy may be accelerated by reducing the tax burden, deregulating industry and commerce, etc., such growth is not sustainable if the population below the poverty line is also growing.

Every single leftist on planet earth repeats this ad nauseum. It doesn't make it true.

 

[Mise]

Every single leftist on planet earth repeats this ad nauseum. It doesn't make it true.

Reality makes it true.

 

[luiz]

I've seen no suggestion that European economies are shrinking. I agree that the more liberal the economy, the faster it grows. But a liberal economy can (and IMO should) have some form of social safety net without a negative effect on economic growth. Take the UK for example. The UK has a decent (if not exemplary) welfare state, AND a liberal economy, and the economy is doing well (Gordon Brown, our finance guy, has a lot to do with this). Social safety nets and a liberal economy are not mutually exclusive. In fact, they work best together.

The welfare state prevents people from falling below a minimum standard of living, and from the rich getting richer and the poor getting poorer (relatively speaking of course). While the total growth of the economy may be accelerated by reducing the tax burden, deregulating industry and commerce, etc., such growth is not sustainable if the population below the poverty line is also growing.

Europe's economy is not shrinking (although German economy is), but it's not growing at a decent pace either. Some are exceptions, like the UK. That's caused as you said by perhaps the most liberal economy in the EU. The welfare state in England, albeit big, is not as big as the german or the scandinavian ones.

As for a liberalised economy increasing the number of people below poverty line. That is not what happened in South Korea or Singapore, for exemple. In fact the opposite happened.

 

[Mise]

Admittedly, the German economy is stagnant and could do with lower tax rates. But it's unfair to say that countries with a strong welfare state and large gov't spending on health, education, and other public services are growing considerably slower than countries with (for want of a better word) a "small" government. Like I said, a liberal economy WILL grow far faster than a heavily tax burdened economy. But it doesn't have to be this way. It doesn't have to be a choice between a welfare state and economic growth. And in the UK, it isn't.

It's funny you should mention South Korea, since, IIRC, it had a bit of a wobble between 1997 and 1999. Not to mention the strong government intervention in acheiving such growth! (I don't want to bring philosophical arguements into this, since we are having a good debate on economics, but IIRC, the working week in South Korea was 6 days until 2003! It's 5 days a week now.)

 

[insurgent]

If we keep this up, this thread is going to be longer than the introduction thread...

But why stop there - let's supersede the babe thread! Mwahahaha! (Yeah, right!)

 

[luiz]

Admittedly, the German economy is stagnant and could do with lower tax rates. But it's unfair to say that countries with a strong welfare state and large gov't spending on health, education, and other public services are growing considerably slower than countries with (for want of a better word) a "small" government. Like I said, a liberal economy WILL grow far faster than a heavily tax burdened economy. But it doesn't have to be this way. It doesn't have to be a choice between a welfare state and economic growth. And in the UK, it isn't.

It's funny you should mention South Korea, since, IIRC, it had a bit of a wobble between 1997 and 1999. Not to mention the strong government intervention in acheiving such growth! (I don't want to bring philosophical arguements into this, since we are having a good debate on economics, but IIRC, the working week in South Korea was 6 days until 2003! It's 5 days a week now.)

Big government spending equates to high taxation. If you admitted that high taxation is bad for economic growth, then you should acknowledge that there is a trade-off between economic growth and government spending.

The UK is doing excellent compared to the Eurozone, but there is much room for improvment. The current growth rate of the UK is of 2,1%. While this beats the crap out of german or french rates, it's not exactly a reason to be proud either.
You probably won't admit it, but you can thank Lady Thatcher for having one of the most dynamic economies in Europe(even if she did screw-up occasionally)

As for South Korea and the rest of the Eastern "Tigers". Yep, there was a too large role of the government in running their economies, and I blame that for the boom-bust cicles that affected them.
The crisis of 1998 exposed the weakness of their development strategy, but they learned from their mistakes, what can't be said about everyone.
My original point was how relatively low taxation levels can produce economic growth.

 

[Stratofortress]

It's funny you should mention South Korea, since, IIRC, it had a bit of a wobble between 1997 and 1999. Not to mention the strong government intervention in acheiving such growth! (I don't want to bring philosophical arguements into this, since we are having a good debate on economics, but IIRC, the working week in South Korea was 6 days until 2003! It's 5 days a week now.)

When governments create programs and subsidies to entice business and industry they distort the market and unproductively absorb resources that might promote growth in different, unconsidered, industries. Inducements also create market inefficiencies and drain productivity by creating incentives for businesses to lobby for subsidies rather than focusing on consumers.

 

[Dann]

If we keep this up, this thread is going to be longer than the introduction thread...

But why stop there - let's supersede the babe thread! Mwahahaha! (Yeah, right!)

Impossible! There's way more blokes here interested in babes than politics.

 

[10Seven]

Lower growth in older economies is hardly surprising, given the amount of time passed for development to take place - most 'growth' is simply inflation, the remaining can be seen generally in the affect of new technology.

Other locations with a shorter history of industrial development, still evolving technological utilisation, and/or growing or shrinking population will present 'sexier' statistics.

More than anything, government spending is probably an inhibitor on inflation in a highly developed economy - it also presents a control mechanism on the economic cycle - affecting to reduce extremes.

 

[newfangle]

More than anything, government spending is probably an inhibitor on inflation in a highly developed economy - it also presents a control mechanism on the economic cycle - affecting to reduce extremes.

"Inflation is the only form of taxation that can be implemented without legislation." -Milton Friedman

 

[10Seven]

"Inflation is the only form of taxation that can be implemented without legislation." -Milton Friedman

cool quote. That's the cost of ever increasing profit, and never-ending 'growth'. Each year, everbody expects more - my company increases it's prices annually while pressuring it's suppliers to drop their's cheecky.

 

[luiz]

cool quote. That's the cost of ever increasing profit, and never-ending 'growth'. Each year, everbody expects more - my company increases it's prices annually while pressuring it's suppliers to drop their's cheecky.

Actually that's the cost of an interventionist government expanding the monetary base.

If the government is fiscally responsible, your company would not be able to increase it's prices much(with no increase in the supply of money, if they increase prices they lose consumers).

 

[Mise]

Actually that's the cost of an interventionist government expanding the monetary base.

If the government is fiscally responsible, your company would not be able to increase it's prices much(with no increase in the supply of money, if they increase prices they lose consumers).

I hope you're not suggesting that increasing the amount of currecy in circulation using the central bank (Fed in the US) directly induces inflation? Increasing the amount of currency in circulation mainly affects the economy by driving down interest rates. What 10Seven was talking about is supply-side causes of inflation, i.e. non-competitive markets with companies using their market power to raise prices (right?). In general, inflation is primarily demand-side driven, i.e. increase demand -> increased supply -> increase in labour, raw materials, etc purchased -> increase in price to compensate. The causes of increased demand vary. It is possible that lower interest rates might cause increased demand in certain areas, such as housing, but it's unfair to say that government intervention increasing the amount of money in circulation is the main cause of inflation, or that it necessarily leads to inflation.

EDIT: Hmm I just realised that might not have been what you meant by "expanding the monetary base". I just read "increase in the supply of money" and jumped to conclusions maybe.

 

[luiz]

I hope you're not suggesting that increasing the amount of currecy in circulation using the central bank (Fed in the US) directly induces inflation? Increasing the amount of currency in circulation mainly affects the economy by driving down interest rates. What 10Seven was talking about is supply-side causes of inflation, i.e. non-competitive markets with companies using their market power to raise prices (right?). In general, inflation is primarily demand-side driven, i.e. increase demand -> increased supply -> increase in labour, raw materials, etc purchased -> increase in price to compensate. The causes of increased demand vary. It is possible that lower interest rates might cause increased demand in certain areas, such as housing, but it's unfair to say that government intervention increasing the amount of money in circulation is the main cause of inflation, or that it necessarily leads to inflation.

EDIT: Hmm I just realised that might not have been what you meant by "expanding the monetary base". I just read "increase in the supply of money" and jumped to conclusions maybe.

I am not suggesting anything, I am stating that when the ammount of currency in circulation increases without a proportional increase in wealth the result IS inflation.
Interest rates are driven down as a short-term result, indeed. But when the bubble explodes and inflation skyrockets, then interest rates will have to become higher then the original level to fight inflation. This is the Economic History of Brazil, since the late 70's.

The government intervention that artificially increases the monetary base can only lead to inflation. Of course the form that this inflation will take place is by an increase in demand, but what do you think that caused this artificial increase?

This is common sense. If you increase the ammount of currency in circulation without a porportional increase in wealth, there WILL be inflation.

PS: Inflation brings no good. The Phillips Curve is false, and if you want empirical evidence just look at the stagflation of the 70's.

 

[Mise]

I'm sorry, but monetary policy simply cannot increase inflation as much as it can reduce it. You can bring a helium balloon down by pulling on the string, but you can't make it rise again by pushing on the string.

Reducing interest rates (i.e. by increasing the total amount of money in circulation) does not lead to an immediate increase in spending. Increasing interest rates DOES lead to an immediate reduction in spending.

This is common sense. If you increase the ammount of currency in circulation without a porportional increase in wealth, there WILL be inflation.

The Quantity theory of money was never meant to be taken literally

 

[luiz]

I'm sorry, but monetary policy simply cannot increase inflation as much as it can reduce it. You can bring a helium balloon down by pulling on the string, but you can't make it rise again by pushing on the string.

Reducing interest rates (i.e. by increasing the total amount of money in circulation) does not lead to an immediate increase in spending. Increasing interest rates DOES lead to an immediate reduction in spending.

The Quantity theory of money was never meant to be taken literally

Mise, pure maths.
If quantity A of goods and services is avaiable and the quantity of money M1 avaible is X, the average price will be smaller then if the same quantity of goods and services A is maintaned with a quantity of money larger then X.

It's obvious that an increase in the supply of money without proportional increase in wealth will lead prices to rise.

A decrease in Interest Rates, if not together with an actual decrease in the cost of money, will also lead to inflantion. This is not only standard monetary theory, it's also common sense.

 

[Mise]

Dammit luiz that idea went out along with the 19th Century ! Economists merely pay lipservice to that kind of arguement. Increasing the amount of cash available to banks through the central bank DOES NOT have any significant effect on the economy(*)! That is standard monetary theory, and that is something I am sure about.

Also, a decrease in Interest Rates is the RESULT of an actual decrease in the cost of money. More money available to banks -> more lending by banks -> lower interets rates.

(*) Well, it did at selected intervals in history, for example when the French occupied the Ruhr (was it the Ruhr? Or the Rhineland?) after post-WWI Germany didn't pay reparations to the French, the German workers refused to work, but the government still paid them all. To do this, the government printed money. Of course, as you say, M1 increases, but A decreases, so hyperinflation set in. This is an extreme example, and simply is not the case when the central bank decreases interest rates.

 

[luiz]

Dammit luiz that idea went out along with the 19th Century ! Economists merely pay lipservice to that kind of arguement. Increasing the amount of cash available to banks through the central bank DOES NOT have any significant effect on the economy(*)! That is standard monetary theory, and that is something I am sure about.

Also, a decrease in Interest Rates is the RESULT of an actual decrease in the cost of money. More money available to banks -> more lending by banks -> lower interets rates.

(*) Well, it did at selected intervals in history, for example when the French occupied the Ruhr (was it the Ruhr? Or the Rhineland?) after post-WWI Germany didn't pay reparations to the French, the German workers refused to work, but the government still paid them all. To do this, the government printed money. Of course, as you say, M1 increases, but A decreases, so hyperinflation set in. This is an extreme example, and simply is not the case when the central bank decreases interest rates.

The 19th Century? Perhaps you never heard of our friends the Monetarists?

If you think that increasing the supply of money through the Central Bank has no effects on the economy, you ought to be taken some very potent toxine
Money matters.

It's quite simple, actually.
With a greater supply of money M1, but not a proportional increase in goods and services, the only possible result, on the mid and long term, is inflation
Of course, what will ultimatily cause this inflation will be an increase in demand. But what caused this artificial increase? The expansion of the monetary base, obviously.

As for the decrease in Interest Rates, of course it decreases the cost of money for the government, but not for the economy as whole. A government decision cannot change day over night the dynamics of an Economy. This contradiction will lead to inflation, and is typicall monetary irresponasbility. Interest rates can only be safely reduced when a decrease in the cost of money already took place. I admitt that decreasin Interest Rates has an almost instantaneous effect of heating the economy, but the cost is inflation and an eventual bust.

All Central Banks in the civilised world took the Monetarist advices, and don't go printing money like crazies.

 

[Archer 007]

Luiz is right on that.