The Earth is Made of Atoms and Ideas

Intro to Ideas about Globalization

Globalization is fodder for no casual opinions. Loved by most economists and loathed by many (most?) politicians and social thinkers, globalization is a phenomenon that affects everyone. I put opinions about globalization into these categories.

1) Maximizing wealth argument (Free-trade)
2) America supremacy argument (GM style protectionism)
3) Local supremacy (Michael Pollen consumer choice protectionism)
4) Third-world sweat shop argument (Fair-trade)
5) Third-world sweat shop argument (Marxists anti-corporation)
6) Third-world sweat shop argument (Free-trade)
7) Ecological argument (semi-protectionism)

I don’t think I need to put too much explanation into these given that many are likely familiar with most of these arguments and talking points. The first is the unsalable idea that each nation is better off through free trade , though certain individuals and groups may not be. The second is the backward idea all too present in modern politics to “protect American jobs” by subsidizing American companies through tariff privileges. The third argument is an interesting approach in which consumers preference local over global according to personal social and sustainability concerns, instead of cost or technical quality.

Arguments 4-6 are based on a talking point used to defend a spectrum of political and economic starting points. Fair Trade says the workers of the world are often paid too little and consumers should choose goods produced by companies that pay their workers a decent wage. The Anti-corporation argument says that corporations are using their power to extract a surplus from the proletariat of the world. The Free-Trade argument says only by trading with these companies will the poor of the world have the jobs they need to claw out of poverty. Last of all, the ecological argument says that corporations seek out nations with lightly regulated natural resources they can plunder and sell to other countries with highly regulated natural resources.

I personally see categories 1, 3, 6, and 7 as valid arguments or concerns. Category 2 is rightfully shunned by most economists, 4 is like putting duck tape on a broken table leg, and 5 needs some help. The Marxist argument and the ecological argument will come into play with my argument showing how wage slavery is related to globalization.

Wage Slavery and Globalization

My argument is that globalization makes third world countries richer but less sustainable while exacerbating class separation. The proletariat are only marginally better off or, in some cases, worse off.

Third world countries are richer because category 1 above is valid. Due to comparative advantages, countries that trade are better off than countries that don’t trade in net aggregate wealth. This is a fact and essentially uncontested by professional economists.

Countries that trade freely tend to be less sustainable because category 7 is valid above. Free trade is not ecologically neutral. Country A may levy any number of fees or regulations to normalize ecological externalities from business activity, all of which come at a cost to businesses in country A, but if Country B does not keep the same level of fees and regulations, then free trade between countries A and B will cause country B’s natural resources to be plundered for the benefit of country A in so far as there is marginal benefits to doing so. In short, free trade is just like removing boarders. If west Canada prohibits logging while east Canada does not, you can be assured that logging from the east will move west. Likewise between Canada and the US if no tariffs are levied. In this regard, nations with strong environmental laws effectively force the increase of environmental degradation in other countries – third world countries in particular.

Class separation follows from category 1 above due to the rent argument I laid out in the original post. As nations grow wealthier, property is bid up such as to eat up the lion’s share of the increase in wages to the proletariat. The proletariat is often marginally better off in the long run and may be exceptionally better off in the short run depending on the situation and the culture. China, for example, had a booming middle class through the early 2000’s followed by exploding rents. Those lucky enough to have locked in rents early via 30year mortgages and the like will be better off in the long run. Late arrivers will be worse off even if their wages are comparable or better. In the end, though, early owners of capital, real property in particular, will be overwhelming better off by large margins compared to the proletariat. Hence the class separation. Hence the “wage slavery”. Though the proletariat may very well be producing exponentially more than before industrialization, their net wages after rent will likely only be marginally better. Like slavery, they are not able to free themselves from these chains of injustice.

15 Ways to Fix the World

Idea #8 - End All Taxes, Except One

An interesting blog post by my pastor on a disturbing topic: http://unexpectedemergence.wordpress.com/2009/06/19/the-american-patriots-bible/

I think the idea of wage slavery is fascinating. How could it be that free individuals in a society defined by laws protecting individual freedom could find themselves enslaved? Many argue that this state of being has in fact arrived in part in America but more clearly on the shores of many of our trading partners. Is this really happening? If so, what is the cause of such an off phenomenon? How is it that freedom might beget slavery?

Well, I’m in no position to answer these questions adequately at this moment but I believe it is a worthy study. I hope to consider in more depth and post my thoughts as I learn more.

My starting position is that wage slavery does, in fact, occur in all capitalistic countries to varying degrees depending on the negotiating power of the proletariat. I differ from socialists, however, in that I do not blame the inner workings of capitalism, or class struggle, for the phenomenon. It is common because the common people have been systematically ripped off by capitalism – trading means of production for temporal gain.

The root of wage slavery is power and property. Insofar as workers have an alternative to their wage labor for subsistence, than wages will be justly regulated by market forces. If, for example, your name is Branden and you rock at backyard gardening, then you won’t put up with Wal-Mart only paying you beans. You’ll grow your own food and sell the surplus at the farmer’s market. Your refusal to work at such low wages, due to the alternatives available to you, will drive wages up. Hence, the power you have to supply your own means of subsistence is the antidote to wage slavery. And power is only made effective through property. Branden needs a backyard. And once he has his backyard, the wage Wal-Mart offers will be what is necessary to tempt Branden back into the workforce. Wages, then, will be based on freedom as Branden will only choose to work for a wage if he wants – not because he must.

But is it wrong that Branden must work for a wage? Say Branden’s landlord refuses to let him garden. What then? Well, my position is that Wal-Mart must drive his wage down to subsistence, not because they “want to” but because competition forces them to.

And what do I mean by subsistence? In short, it is defined by society and is different for each society. In America it is the “poverty level”. The wage is set as the “minimum wage”. In China, “subsistence” is far lower. It’s not that the mechanisms of capitalism wouldn’t force the wage lower in America, it’s that there is both taboo and legal restrictions against doing such – the later being a enforced form of the former. On this front there is in fact a class struggle and it might be beneficial to discuss further.

How is it that the working class, the proletariat, doesn’t have an alternative to wage labor? Why do they not have power and property? The answer, I believe, lies in history and will fill another post.

And what of other questions? Is it true that globalization creates wage slavery? Are whole nations enslaved because of poor negotiating power? It is certainly food for thought and future posts.

When Mark walks in my office and asks if I have heard anything yet, I am sorry to tell him I haven’t. I am still waiting for the phone call, still anticipating his acceptance. Two to three years living on the streets, camping in the woods, squatting in abandoned sheds, and I tell him two to the three more days should not be a big deal. But what do I know? There have been storms every night. One more sleepless evening trying to keep the water out of his sleeping bag could mean everything. And when I get off work, I get to go home to a decent house, a loving wife, a cute little boy, and a dry bed.

I went to college after two years of working construction with my dad. It did not take long for me to realize that pounding nails is something I would not do for the rest of my life. I just wouldn’t. Instead, I would go to school, study something interesting, and get a good job. Sounded easy enough, and eight years later – with numerous odd jobs, dropped classes, skipped semesters, and failed relationships – it happened. I made it. It took longer than most, and I did something no one else in my family had ever done, but I also did something Mark would probably never do. I may have had certain cultural and economic disadvantages that prolonged my achieving a university degree and made it difficult, but I also had definite advantages over my homeless client. I had a family that loves me, a fairly stable upbringing, and no mental illness society could hold against me. Continue Reading »

Ok, now that we’ve discussed Trevor’s definition of the supply and demand curves for a while, I’m going to set up the alternative definitions in this post, and argue why I think they are the “correct” ones, especially for analyzing the efficiency of a tax.

As I’ve stated before, I think its important to define both curves as functions that give you a quantity for any given hypothetical price, and these quantities are actually implied rates, so “100 acres” is actually “100 acres per year” or whatever time period is assumed.

We also recognize that in talking about land we are aggregating a group of unequal things and treating them as if they are interchangeable. In all that follows we assume that in defining “land”, we have some standard of equivalence that keeps the total acreage under consideration constant and each unit is close enough in value to each other unit that we can pretend they are interchangeable. Note that this implies that the per acre price of a 1-acre plot and a 100-acre plot should be roughly equal. If not, we would have a separate set of supply and demand curves for different size groups, which would be appropriate considering you are talking about representing the preferences of different groups of buyers (and perhaps also sellers.)

We assume the market is big enough that no owner or prospective buyer has “market power”. Both owners and prospective buyers are “price takers”.

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Land Tax Paper

Quick update for those who haven’t followed the comments:

The debate thus far has center on the question “what does the supply curve for land mean?” thought we were sidetracked for a while on other concerns, all of which have sufficiently resolved for the moment insofar as they are not connected to this base question.

For example, Kevin wants to show that the income effect (which I had misnamed “substitution effect”) present when a tax is levied on a good with inelastic demand curve is not actually a deadweight loss. Well, I don’t think it matters much so I don’t want to get hot and heavy over this but it turns out the income effect as I described it is a known economic phenomenon called a “Hicksian deadweight loss”. I don’t have a good answer to Kevin’s critique of this type of deadweight loss (if it’s really a deadweight loss, he argues it is not) apart from the observation that I seem to be with the establishment on this one. Since the first five concerns centered on confusion over this particular type of deadweight loss we’ve let those concerns be for now and centered our discussion on his last concern – the supply curve of land.

Kevin argues that the supply curve of land is not, in fact, vertical (perfectly inelastic) as I’ve lain out in my paper. He argues that we are dealing with two competing definitions of supply. My definition was given off handedly as:

“[The] supply is the quantity of goods available for sale at the transaction price.”

Kevin gives a definition from investopedia:

“Supply represents how much the market can [sic] offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when [actually!] receiving a certain price.”

As it turns out, I’m perfectly fine with Kevin’s more verbose definition – I just wish he’d use it consistently. As I see it, Kevin is guilty of equivocation. Here’s why:
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So I’ve made a change in my church affiliation. There is probably not a need for too much detail on the reasons and background intellectual development that brought me to this point. All that has been pretty well documented on this website through various conversations here over the last couple years.

Currently, we have finally settled on a new church home that has been a long time in the making. We are now actively attending Brentwood Christian Church. It is one I learned of from a local public radio advertisemet that grabbed my attention. They advertised themselves as a body of sojourners interested in issues of peace and social justice from the perspective of a faith community. My attraction should seem obvious to those who know me and have followed my spiritual journey over the years.

For anyone interested, their website is here: http://www.brentwoodchristianchurch.com/, although this one may be a bit more informative as to the work that initially appealed to me: http://www.springfieldawakening.com/.

Leaving the Catholic Church was a difficult, deliberate, and painful position for us to arrive at, but we now finally feel at peace with it. At last. Like I said, it has been a long time in the making, seeing as I first learned of Brentwood over two years ago, have had numerous contacts with their pastor since that time, have visited the church a handful of times, and have eventually realized that it would be the best fit for us.

For me, the decision was mainly ideological; for Amanda, it was mainly an issue of community. Whereas I grew tired of the friction of remaining in a body I constantly felt theological tension in, Amanda (well, and me too) grew tired of not having a sense of community with those we worship with.

We are now at home.

I’m in chapter 3 of Marx’s Capital and he’s hot and heavy about money. Which got me thinking…who cares about a Gold standard anyway? It’s certainly true that gold was the root of our money system but I see no reason to remain attached to it today.

Here’s the deal. The critique that our present money system is “fiat money” is, well, not helpful. Why does money have to represent a store of value? Gold is still around and can still be used for this purpose (I own Gold stocks presently, for this very reason). Modern money should act as a medium of exchange and on that front it does very well.

A critique to our modern money system is that “fiat money” opens the door for government intervention in the money supply. This, however, is untrue. Fractional reserve banking existed when money was backed by Gold as well – and that, I argue, opens the door to government intervention. In fact, there is no reason to assume fractional reserve banking would not exist in a perfect libertarian state – just the opposite. So blaming “fiat money” doesn’t seem to help.

Maybe we could regulate banks and restrict fractional reserve banking? Sure, go ahead and try it. Whatever you may wish to call that though, it most certainly isn’t free-market capitalism. And what good would come? I find unconvincing arguments that blame modern crisis solely on monetary policies and mechanisms. I believe there are deeper issues that, at times, are amplified by poor monetary policies, but are not the root cause.

As an example, some argue that poor monetary policy caused the recent boom in housing and the corresponding bust. No doubt it played a large roll. But who’s to say a free-market based monetary policy (so called gold-backed currency) would have put the reins on any better? I think the opposite may be true, actually.

So what gives? Money is a complicated phenomenon. Do you think our present system is unjust? Is there a better way?

From Readers Digest:

We raise 60 billion animals for food each year - 10 animals for every human on earth. If you grow corn and eat it, you expend 2.2 calories of energy to yield 1 calorie of protein.

But if you process that corn, feed it to a steer, and take into account the other needs that steer has in its lifetime - land use, chemical fertilizers (largely petroleum based), pesticides, machinery, transport, antibiotics, and water - you’re responsible for 40 calories of energy to get that same 1 calorie of protein.

A steak dinner for a family of four is the rough energy equivalent of driving around in an SUV for three hours while leaving all the lights on at home.

The average American meat eater is responsible for one and a half tons of CO2-equivalent greenhouse gase - enough to fill a large house annually - than someone who eats no meat.

Read more here: http://en.wikipedia.org/wiki/Environmental_vegetarianism.

Other favorite music related YouTube videos… Continue Reading »

Link to the paper.

There is a lot in this section that would benefit from either being clarified or corrected. He is my brief responses to problematic passages, in the order they arise:

1) A note on figure 1, which will become relevent later: The full decrease in consumer and producer surpluses is much greater than the deadweight loss shown. It includes both the shaded region and the full rectangle that represents the size of the tax collected, between Wf and Wl. However, we subtract the tax from the drop in surplus to arrive at the deadweight loss. Why? We are supposing that the tax will be spent efficiently on goods or services that are valued equally highly by society at large. (Alternatively, we are assuming that each dollar of tax paid means that the consumers’ other taxes will drop, and the government budget will remain the same — but to do this idea justice would require analysis of whether the deadweight loss caused by the other tax shrinks!) Under the standard assumption or my alternative one, the taxpayers don’t actually feel poorer due to the tax — it is made up to them in A) government goods or serves or B) a reduction of other taxes.

2) That brings us to figure 3. Firstly (and I’m really nitpicking here) it should be called the income effect rather than the substitution effect. Substitution effects only refer to goods that are substitutes for another good in the sense that McDonalds might be a substitute for Burger King, since they offer the same kind of utility.

3) The location of the shaded area in figure 3 makes no sense to me. If you go find the consumer and producer surpluses before and after the change, their difference is the diagonal column of area between the two demand curves, to the left of the supply curve. The label “Deadweight loss” actually appears to be referring to the horizontal distance between the two quantities (i.e. the change in quantity purchased). That makes a little more sense - we are just pointing out that consumer spending drops.

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Quote from Murry Rothbard’s “For a New Liberty”

The geographical nature of the public school system has also led to a coerced pattern of residential segregation, in income and consequently in race, throughout the country and particularly in the suburbs. As everyone knows, the United States since World War II has seen an expansion of population, not in the inner central cities, but in the surrounding suburban areas. As new and younger families have moved to the suburbs, by far the largest and growing burden of local budgets has been to pay for the public schools, which have to accommodate a young population with a relatively high proportion of children per capita. These schools invariably have been financed from growing property taxation, which largely falls on the suburban residences. This means that the wealthier the suburban family, and the more expensive its home, the greater will be its tax contribution for the local school. Hence, as [p. 133] the burden of school taxes increases steadily, the suburbanites try desperately to encourage an inflow of wealthy residents and expensive homes, and to discourage an inflow of poorer citizens.

There is, in short, a breakeven point of the price of a house beyond which a new family in a new house will more than pay for its children’s education in its property taxes. Families in homes below that cost level will not pay enough in property taxes to finance their children’s education and hence will throw a greater tax burden on the existing population of the suburb. Realizing this, suburbs have generally adopted rigorous zoning laws which prohibit the erection of housing below a minimum cost level — and thereby freeze out any inflow of poorer citizens. Since the proportion of Negro poor is far greater than white poor, this effectively also bars Negroes from joining the move to the suburbs. And since in recent years there has been an increasing shift of jobs and industry from the central city to the suburbs as well, the result is an increasing pressure of unemployment on the Negroes — a pressure which is bound to intensify as the job shift accelerates.

The abolition of the public schools, and therefore of the school burden-property tax linkage, would go a long way toward removing zoning restrictions and ending the suburb as an upper middle-class-white preserve.