Sunday, February 25, 2007

The Real China

2 in 3 Chinese graduates that have studied abroad never return.

That simple statistic tells you a lot about China.

How interesting it would be to collate and compare the same statistic across democratic and non-democratic countries (adjusting for GDP).


I am not eating meat for Lent.

Almost one week down, and five to go (no one told me that Lent lasts for 6 whole weeks, next year I'll do Ramadan instead, reckon it's shorter!).

Saturday, February 17, 2007

Crippled Capital and Crocodile Tears

Bob Geldof once said that extreme poverty in a world so affluent is an intellectual absurdity. He is completely correct. But why does extreme poverty exist?

I read recently that the 3 wealthiest people in the world are wealthier than the 48 poorest nations with combined populations of 600m.

Shocking, eh?

Another shocking example is Uncle Scrooge McDuck (Disney Duck Tales) a millionaire with *obscene* wealth -- his vault is a huge swimming pool of gold coins if I remember rightly.

Now, ask yourself what those 3 wealthiest people do with /their/ fortunes?

Most probably they invest 99% of their wealth in companies far and wide. Even if they save part of their fortune, a large proportion of their savings (as with all savings) will be recycled and invested into ventures by their savings bank.

So on the face of it these three /are/ obscenely rich, but they don't jealously hoard their wealth like Scrooge McDuck, it's put it to work and it in turn helps employ, educate and put meals on the table for tens of thousands (maybe a magnitude or so higher!) of people.

Obviously not much of this investment capital ever reaches those 48 poorest countries on earth. Why?

Contrary to common consensus, economics is an optimistic science. One of economics' main tenets is that the ratio of investment capital to labour should tend to even out across the globe over time. This is due to simple supply and demand.

Let's assume two broad production input categories. The first is investment capital, i.e. cash. The second is labour. Both are needed in varying quantities to produce output. The output is sold and the owners of capital and labour receive compensation for their efforts.

The returns to capital should be lower in areas with an abundance of capital, due to investors having to compete harder for investment opportunities. The same is true for labour, increasing labour supply drives wages lower, as there is less capital spread among more workers.

This gives investors an incentive to go to countries with an abundance of labour and workers to go where there are high levels of capital investment. This is precisely what we see in practice, for example, corporations look to invest in China which has a very low capital per person ratio, and Chinese citizens look to emigrate to Western countries with a high ratio.

The problem is that these flows of capital and people are being suppressed, resulting in boils and lesions of inequality and poverty.

Developed countries are mainly democracies, and the electorate want to stay affluent. To that end, they don't want too many immigrants competing with them for jobs, and they definitely don't want foreigners flooding their social welfare systems. On the other side they want to avoid capital going abroad, therefore they ensure that capital stays in their country by erecting barriers to trade -- i.e. a company can't expect to produce elsewhere and sell back in the home country without punitive tariffs.

Developing countries are beset with corrupt bureaucracies and dictators. In many cases this corruption is a form of legalised thievery due to corrupt legal systems. The risk is that high proportions of investment in corrupt countries are arbitrarily stolen from the investor. Moreover, capitalists within the developing country (who often have considerable influence and ties to government) may prefer not to have an influx of foreign capital in their country and look to create barriers to investment. These countries often subtly restrict emigration, or in extreme cases not so subtly, e.g. North Korea and Maoist China.

Most economists argue that freedom of trade will bring about a more affluent, more equal world. Freeing capital flows is only one part of the story however. I believe that the importance of the other half, that of freedom of movement has been woefully underestimated.

The kernel of the problem is that the "enlightened" plebs in developed democracies and the capitalist oligarchs of the developing world have forged an air tight cartel of wealth and power, which will lock out most of today's poor from peaceful, respectable lives for the foreseeable future.

Poverty /is/ intellectually absurd, but /our/ selfishness locks us and the poor into this status quo. The challenge is to find the courage and vision which can knock us out of this horrific equilibrium.

Labour Monopsony

[A "monopoly" of supply is called a monopsony.]

This article argues that labour market deregulation is bad for workers. Many unions (the world over) also make similar points.

When listening to these arguments one point should be kept in mind. There is a dichotomy between a nation's workers and its total workforce. In Indonesia just over half the workforce is unemployed or underemployed.

A more deregulated, properly working labour market would give a majority of the Indonesian workforce the opportunity to work hard and earn a decent living for their families.

One of the salient obstacles is that labour unions (who represent those in steady jobs) are better organised and have louder voices than the less fortunate majority.

The labour union's stance is perfectly understandable as their members are the ones with steady jobs, however their points are often disingenuous and one should keep in mind the broader picture.

Tuesday, February 06, 2007

Monopoly of Violence

All nation states are founded upon one core idea: the monopoly of violence.

The state strives to monoplise the use of violence within its jurisdiction.

Problems arise when a state loses that monopoly.

Examples of oligopolies of violence:


Sunday, February 04, 2007

Honesty is Stupidity

Rarely do you hear the positive sides of corruption, you only hear the negative.

Corruption is merely a market for power. Some have power, for example traffic police have the power to punish speeding drivers (supply). Some need power, i.e. one can purchase a traffic cop's discretion when caught (demand) in effect he has purchased some of the cop's power. The bribe is the price of power.

Of course when you purchase or sell something, you should keep in mind the net profit of the transaction. The purveyor of power could factor in the cost of the sale, e.g. will he be punished by superiors? Could he lose his job? The buyer also has to think about laws on bribery and perhaps his own job would be on the line if his bribe was made public.

So as with any market, corruption only occurs when the transaction gives a net benefit to both parties.

If I get caught speeding in Mumbai I would be a fool /not/ to pay a reasonable amount to the traffic cop.

If I get caught in an embrace with an illicit lover in a Sharia jurisdiction, I and my lover would be idiots /not/ to buy our way out of some sort of corporal punishment.

If I get caught by police on Bali with a funky weed, I would be on a par with any Catholic or Muslim martyr if my principles didn't allow me to stump up some cash to the arresting cop.

In these situations being honest is clearly irrational. Honesty only becomes rational when trying to bribe an official will land you in deeper waters - otherwise be corrupt and be proud.

There are more subtle forms of everyday corruption. For example:

If I see pirated PlayStation2 games in Jakarta being sold at 100th the price they are sold in Ireland I would be completely bonkers to /not/ buy them.

If my sister sees a cute fake (but great quality) designer watch in some shopping mall in Jakarta, she'd be mad /not/ to snap it up.

If someone offers me some cheap cocaine in a club or a pimp offers me the chance to sleep with some hookers, and I (uncharacteristically) think I might give it a try -- why on earth shouldn't I? -- no one's ever going to know the better anyway! -- the chances of getting caught are minimal!!

Again, all these products and services are supplied and demanded. These markets are supplied by huge organised (criminal) industries, which drive corruption (and selected other vices). The industries in these supply chains are not any more moral or immoral than those who demand their produce, they are /completely/ rational in the societies we all belong to.

Complete honesty is irrational or just plain stupid. Moreover, in societies which are largely corrupt, even being a little more honest than average is irrational. E.g. being a bit more honest than your corrupt bosses will ensure you won't be promoted too often.

The rational response to corruption in corrupt societies is more corruption. What is needed above of all in those societies is bloody-minded irrationality.

Saturday, February 03, 2007

Windows Vista Crapfest Part II

If you remember in part one an MS software dev details how MS made a complete mess of useability in Vista (at great cost of frustration, time and money) -- even though they had Macs on hand, so that they could clearly see how useability is done right.

Now in an email from MS's number 2, Steve Allchin, says that he'd prefer to use a Mac over Windows.

(The email is 3 years old, but tellingly, Allchin has recently jumped ship...)

Thursday, February 01, 2007

It's A Man's World

Ever wonder why "it's a man's world"? (as the song goes)

Because historically (and currently in many places) a man could win an argument by beating the pulp out of his female interlocuter.