Why Europe beat China

In his book, Guns, Germs, and Steel, Jared Diamond outlines a convincing case that geographical differences in certain regions serve to either hinder or jumpstart a society’s overall progress.  Early success then generates more success, and thus a little head start can lead to the difference between a Civilization capable of seafare, metallurgy, and centralized government, and a huntergatherer tribe whose main characteristics are, in the words of Thomas Hobbes, “nasty, brutish, and short.” Diamond highlights the geographical sweetspots to be the Fertile Crescent and Asia, which accounts for the rise of two superpowers: Europe and China. 

However, his explanatory model, which precludes any nongeographical  explanations, has gaping holes when it comes to comparing the relative success of Europe with that of China in the middle ages. 

More than anything, a society’s ascension is based strength of its technological base.  Much of what can be attributed to Europe’s ascension can be numbered on a list of new inventions.  Including:

The water wheel marked a huge improvement in productive efficiency, allowing workers to labor on something else, either on more concrete appliances or intellectual endeavors, such as reading and writing.

Eyeglasses doubled the working life of a skilled craftsman.  Whereas before an artisan’s skill would plummet with the decline of his sight, rendering him all but impotent by the age of 40, eyeglasses allowed fine workers to continue their vocation decades longer.

The importance of the printing press can hardly be exaggerated. Although originally invented in China, the printing press never caught on because of the inflexibly of the Chinese Block type.  But when Gutenberg invented the printing press for alphabetical languages, the world would never be the same.  The literacy rates shot up, people began to read and think more, productivity increased from more reliable documentation and communication. 

For all the progress that Europe witnessed in the centuries preceding the Renaissance (11-1300’s), China was actually its superior at the time.  The Chinese invented the wheelborrow, stirrup, compass, paper, printing, and gunpowder.  But as Europe witnessed progress going into the Renaissance, China endured a steep decline.

Therefore, the question of why Europe, as opposed to China, emerged as the world’s premier superpower can be restated as to why Europe was more amendable to invent new technologies than China, and why China actually went backwards.  As for China’s regress, the Hungarian sinologist Etienne Balazs attributes it to its totalitarian constraints on private initiative, where monopolies reigned, bureaucracies were all-powerful, and Chinese ingenuity was sapped by the prevailing regulations that gripped its citizens from cradle to grave, all creating an artificial plateau that the Chinese could surmount.

As for Europe’s relative success, David Landes, author of The Wealth and Poverty of Nations, attributes it to several factors. 

• ·           "The Judeo-Christian respect for manual labor, as summed up in a number of biblical injunctions.” He gives the example of when God warns Noah of the flood, and how God doesn’t just save him, but instead tells Noah to build an ark.

• ·        The Judeo-Christian conception of Man being in control of nature, contra pagan nature worshippers.

• ·         But most importantly, just as China’s decline could be extrapolated from its command economic system, Europe ascended due to its relative economic freedom. The institutions of private property and free enterprise gave the Europeans more incentive to innovate and create than the Chinese. It wasn’t the pure, Laisse faire Dickinson capitalism, but it was sufficiently close to it.

Admittedly, this article only scratched the surface of the issues involved, but intentionally so.  One has to start somewhere.  

More economic claptrap

Benanke is talking nonsense, again:

The U.S. economy should continue to grow this year and next, but the pace won't be strong enough to fix the job market and cut a huge budget deficit, the Federal Reserve chief said Wednesday.

Fed Chairman Ben Bernanke told the House Budget Committee on Wednesday that a continued increase in consumer spending and business investment should make up for a fading government stimulus in lifting the economy....

He said the U.S. budget deficit should narrow over the next few years as the economy and financial markets continue to recover. But without further policy actions that won't be enough, Mr. Bernanke warned, because the economy's recovery is expected to remain moderate.

The Fed chairman said the recovery won't be fast enough to put 8 million people back to work in a short period. He also cautioned the housing market remains soft

This is hilarious. First, in the years preceding the 2008 crises, he insisted that the fundamentals of the economy were "strong." Then, ever since 2009 he has repeatedly said that worst of the current crises was over and 2010 will mark a year of remarkable recovery. Now that 2010 has obviously not been a year of recovery, he is saying that it will undoubtedly grow but just slowly. What is the most telling, however, is how he insists this despite the fact that the U.S is in an unprecedented debt crises.

I contend that not only is Bernanke wrong this time, but wildly incorrect, the rest of 2010 and 2011 will not be a period of recovery. It will instead be a period of severe hardship. I suspect that the contraction that we will witness will be of similar proportions as the Great Depression in 1929-1933.

I would be remiss, however, if I neglected to commend him for at least coming to the obvious conclusion that the U.S. budget deficits aren't sustainable.

The Right, the Left, and Economics

From the Wall Street Journal. In which I am not surprised:

Zogby researcher Zeljka Buturovic and I considered the 4,835 respondents' (all American adults) answers to eight survey questions about basic economics. We also asked the respondents about their political leanings: progressive/very liberal; liberal; moderate; conservative; very conservative; and libertarian.....In this case, percentage of conservatives answering incorrectly was 22.3%, very conservatives 17.6% and libertarians 15.7%. But the percentage of progressive/very liberals answering incorrectly was 67.6% and liberals 60.1%. The pattern was not an anomaly.

One of the things that I realized when I began studying sound economics was how useful it was when refuting left-wing ideology. Because the reality is, left-liberalism is not based on reason or evidence, but mere emotional plea. The reason why so many leftists are willfully ignorant of economics is because if they had a reasonable knowledge of the subject, they wouldn't be leftists in the first place. And as the current recession that started in 2008 has demonstrated in real time, even leftists with seemingly impressive academic credentials in economics were confounded by the events that unfolded simply because they were inexplicable within their left economic framework known as Neo-Keynesianism.
But I think there is another element to this as well. And that is that Leftists-liberals simply cannot think logically. It is a rarity indeed when one hears a left-liberal politician actually present a coherent argument - and whenever one does it is usually based on a demonstrably incorrect fact or assumption. Also, if one looks at the questions of the survey, most of them are completely logical and could be answered answered correctly by someone who has never even cracked Econ 101. Either way, this study is an absolute darning piece of evidence against the leftist dogma that the democratic party is the party of intellect and sophistication.

Why I am against the Welfare State

I will be making my case against socialism proper in a later post, but for the time being, I will rest content in concentrating on a single aspect of socialist economics: Redistribution, otherwise known as spreading the wealth around.
While it is still promoted by the politicians who wish to rack up as many votes as possible, the idea of the welfare state is no longer a tenable position in the eyes of rational economists. And for a good reason; slowly but inexorably, the economic and technological sciences have rendered the entire foundation of redistributive economics outdated and intrinsically flawed.
It is has long been known that the process of expropriating wealth from one group and giving it another is strikingly inefficient. It has been said that as high as 50 percent of the money being distributed falls into the hands of bureaucrats - and thus being sucked out of the private sector. What this has lead many to conclude, unfortunately, is not that welfare is a program with numerous structural flaws inherent in the system and thus should be abolished, but rather that its current form simply needs revising.
All revisions that improve the efficiency of the redistributive process should be lauded, but there is a limit to how efficient one can make it. And there is no evidence that welfare can be a viable and efficient program and plenty of evidence to the contrary.
With that being said, the fact that welfare programs allocate wealth from the private-capital-creating sector to the public-parasitical sector is not the only reason to doubt the efficacy of redistributionism. The core problem with it and the reason why economists find it to be so untenable is that it diverts wealth from the rich, who demonstrably know how to manage and invest their money, to the poor, who demonstrably do not. This is not an argument from unfairness, but rather it is simply an extrapolation inferred from an observation as well as an economic fact that it is savings and investment - which create capital - that are the hallmark of a strong economy. By diverting wealth from the people who know how to invest in capital wisely to those who don't is a severe hindrance to the economy.
It is one of the most profoundly ignorant myths that the poor are hurt by the rich. In fact, in a capitalist society where one has to appeal to the consumer's interest to be successful, it is precisely the opposite. It is because Bill Gates founded Microsoft that poor people can enjoy the software he created; it is because a large company is lucrative and isn't taxed to death that it is able to pay its workers better.
But the biggest crime of the Welfare State is that it completely redefines the scope and purpose of the government. Once the government is committed to ensure the financial well-being of every citizen it is no longer a small and limited entity, but a Nanny state.
Conclusion: Welfare is not viable from an economic perspective, its primary appeal, that it helps the poor, is based on a demonstrably false understanding of economics and is the result of ignoring the undeniable fact that the poor in this country are far better off than even the relatively well-do-to in other countries where capitalism not been tested. Capitalism and the work ethic that it fosters has done far more for the poor than any welfare program ever has, it always will.