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Old 15th January 2018, 12:59   #286
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Re: Understanding Economics

Quote:
Originally Posted by DigitalOne View Post
Since you brought in HDI, lets see a few data and trends.
Digitalone, Just one question -- when right leaning statistics always diss the socialist countries like Cuba and Venezuela, why are they happy with the number one capitalist country, the country that supposedly decides how every other country should work, being 10, and not 1 ? The way world had looked in the beginning of the modern Era, after the wars, US was poised and played out a world economics leader, pretty much with USSR as the only opposition. USSR collapsed, and somehow that is being touted as validation that US's economic policies are right. We all know Germany's condition after the world war. Even after a part of it still in shambles by 90s(thanks to USSR), they did pretty well. There is difference is economics.
In your point itself it is mentioned that it was 7th in 2010. Now 10th -- why ?

The second thing is, you are twisting my argument on its head without looking at what I am saying.
Cuba is the poster boy of everything we shouldnt do as per capitalist theories. And it is not that the rest of the world left it as is, the other side stifled Cuba out with trade embargos. In spite of this, I am stressing, in spite of this, they did well with HDI -- so there must be something right going on amongst the many wrongs. What could have been an extended Casino for US, had an uprising, they formed a Govt which ran socialist and in spite of the giant neighbour suffocating it, they managed to reach till here. But the argument from the other side is about why they are only at 68.

If I have to explain the issues with Venezuela, I would have to dedicate an entire thread with it. You cannot take absolute numbers without history and the politics that panned out. I guess everybody knows the way Capitalist leaders of the world play out in the socialist leaning countries with resources they would like. You are stating out the Glass is half empty argument only with these countries, and stating the glass is half full argument with the countries with globalization.

This is the standard non-economic argument when problems of capitalism is pointed out. Some how the failures of other countries becomes the success of capitalism and globalization. How ?
You want to do an absolute number HDI comparison with Socialist and capitalist -- you should do it with sentences ending in spite of trade embargos by X, Y and Z. The argument about Globalization being the only way to improve human life has no basis. The countries which managed to reach here in spite of other political pressures prove it.

Last edited by ampere : 15th January 2018 at 17:31. Reason: Trimmed quoted post
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Old 15th January 2018, 15:30   #287
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Re: Understanding Economics

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Originally Posted by ashokrajagopal View Post
Digitalone, Just one question -- when right leaning statistics always diss the socialist countries like Cuba and Venezuela, why are they happy with the number one capitalist country, the country that supposedly decides how every other country should work, being 10, and not 1 ?
The statistics are from http://hdr.undp.org/en/composite/trends. It is a UNDP site, not any blog.

I am not happy or sad or anything that US is at number 10. In your earlier arguments you had said that higher GDP or growth doesn't mean better HDI. I think these statistics conclusively proves otherwise.

Also you have chosen to ignore statistics about India and China - how they have grown both in GDP terms and HDI terms in this reforms/globalization period.

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Originally Posted by ashokrajagopal View Post
The second thing is, you are twisting my argument on its head without looking at what I am saying.
Cuba is the poster boy of everything we shouldnt do as per capitalist theories.
As I said 68 is not bad, but it isn't great either. It was a surprise to me since many leftist friends of mine bring Cuba's HDI in any discussion.

Quote:
Originally Posted by ashokrajagopal View Post
The argument about Globalization being the only way to improve human life has no basis.
[/quote]

Nope. The argument is that statistics shows that both HDI and GDP has grown dramatically because of Globalization for vast number of world population (China and India being the biggest examples). The extreme systems on the left (Command economies of the Soviet era) has failed.

I think once countries achieve a certain prosperity, they settle down to a centrist, partly socialist economic systems (like in Western Europe), but till they reach that point, countries like India/China/Brazil etc need globalization to get jobs for their vast populations. And this doesn't mean they have to forego Human Development.
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Old 15th January 2018, 15:52   #288
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Re: Understanding Economics

Globalization has nothing to do with the forms of economy countries are run with. Globalization is intermingling/spreading of supply chains and markets across sovereign borders. It doesn't really matter if individual firms/businesses trade between countries or two governments do the trade through state-run enterprises.

Capitalism, socialism and communism are the forms of economy. There are positives and negatives attached to each one of them, none being totally perfect.

Socialism puts citizens' welfare first, but give the responsibility (and power) to do that to inefficient (and corruption-prone) bureaucracy.

Communism, with all it's romanticized revolutionary thoughts, basically forces parity/income equality by punishing the over-achievers

Capitalism provides equal opportunities for everyone to earn and get rich, but increases income disparity by making availability of money cheaper (and easier) to those already rich and vice versa

Last edited by Nav-i-gator : 15th January 2018 at 15:58.
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Old 15th January 2018, 16:45   #289
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Re: Understanding Economics

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Originally Posted by Nav-i-gator View Post
Capitalism, socialism and communism are the forms of economy.
Communism is a political system, not economic system. Communism should be compared with democracy, monarchy, etc, and totally off topic in this thread.
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Old 15th January 2018, 16:57   #290
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Re: Understanding Economics

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Originally Posted by DigitalOne View Post
The statistics are from http://hdr.undp.org/en/composite/trends. It is a UNDP site, not any blog.

I am not happy or sad or anything that US is at number 10. In your earlier arguments you had said that higher GDP or growth doesn't mean better HDI. I think these statistics conclusively proves otherwise.
1. I dint doubt the source. That you pulled out the 10th country and slipped the first few countries which are socialist leaning makes it right leaning statistics; thats all.

2. Conclusively prove what ? That Globalization is the only way to eradicate poverty ? The stats are showing hugely globalistic countries not at the top and US is slipping from 2010 to 2017. The discussion in the last few pages is about the ill effects of globalization and the right leaning members here are explaining as if Globalization is the only way to eradicate poverty. The HDI studies show otherwise.
Globalization is not the only way for Human development, so saying that it is the only way to pull people out from poverty is factually wrong.

Quote:
Also you have chosen to ignore statistics about India and China - how they have grown both in GDP terms and HDI terms in this reforms/globalization period.
Yes, I did. That is because there is no study on what we could have done if Globalization did not play out like right now. And I pointed out industries. I also mentioned, globalization is just a few decades in these countries, you have to wait a while to arrive at any conclusion. If we are poised for a full scale crash of some of our very well prosperous industries because of Globalization, obviously the last 20 years of growth loses its shine.
The second thing is, there is a clear assumption from your part. India applied Globalization from early 90s. Yes. But there has been no study of effect of HDI had we not been globalized to this scale. Please do not confuse the economic reform of Government allowing private players -- this is different from Globalization.
In fact, the highest HDI in India is in a state which is not really foreign business friendly.
You cant use India and China to prove anything about Globalization just yet. We did not face the crash yet.

Quote:
As I said 68 is not bad, but it isn't great either. It was a surprise to me since many leftist friends of mine bring Cuba's HDI in any discussion.


Nope. The argument is that statistics shows that both HDI and GDP has grown dramatically because of Globalization for vast number of world population (China and India being the biggest examples). The extreme systems on the left (Command economies of the Soviet era) has failed.

I think once countries achieve a certain prosperity, they settle down to a centrist, partly socialist economic systems (like in Western Europe), but till they reach that point, countries like India/China/Brazil etc need globalization to get jobs for their vast populations. And this doesn't mean they have to forego Human Development.
Cuba's HDI is a surprise because majority of the globalization literature would find that inconvenient. History and politics must state it is not just okay, but wonderful given the economic sanctions against it.

All the three countries you have suggested did not start off as pure globalization samples, but they ran socialist or dictatorial governments until they built up human capital. Globalization does not develop a country, it just uses the country's resources. To build up the countries human capital is the government's job and the countries which have let Globalization come in between have all fared poorly. This is what people who are opposing globalization are saying.
In your basic argument above, you have just replaced North Korea with USSR because it is convenient. Between Globalization and command economy, there is a vast distance of shall we say, less extreme left economies. There are African countries, our neighbours etc who had been fairly globalized and did not progress much. It basically depends upon how the country's resources build themselves up, and Globalization basically comes in between.
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Old 18th January 2018, 12:35   #291
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Re: Understanding Economics

From serial entrepreneur, philanthropist, tech guru and billionaire Gururaj Deshpande's TOI interview today:

Quote:
How will Trump’s immigration rhetoric affect Indians?

Right now it’s all noise, but in the longer term, it’s hard to say. There are two things that are impacting the world. One is globalization. In the past few decades, globalization was like magic. It brought in prosperity. The other one is automation. Technology is moving very fast. As technology automates things, it disrupts the world in a big way. When we went from the world with 98% agriculture to a world with 2% agriculture, it took 150 years. The current transformation, brought about by automation, will take place in 50 years or less. This disruption has negative consequences. For example, there are 4 million truck drivers in the US. In 10 years, they won’t have jobs. So what do you do? All these changes – the results of automation and globalization – are going to a small set of people, the ones with the capital. So almost every developed country in the world is moving away from globalization. They are trying to strengthen themselves so that they can get back into the game with an advantage. That’s going to go on for a while.

Last edited by AltoLXI : 18th January 2018 at 12:41.
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Old 18th January 2018, 12:50   #292
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Re: Understanding Economics

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Originally Posted by Samurai View Post
Communism is a political system, not economic system. Communism should be compared with democracy, monarchy, etc, and totally off topic in this thread.
Communism by definition means an economic model in which "the entire community owns the resources - country,land,currency,property etc.,". Bolshevik party is the forerunner of this economic theory and the political parties subscribing to this economic model were later named as communist party.

Western European economies are better labeled as Capitalist but "Welfare Economies".
All citizens get a basic unemployment benefit and education and healthcare sponsored by the Nation but if they have to own anything significant they have to work harder and prove their mettle. The Government does not involve directly in the market, just regulate it, thereby promoting capitalist industries. Its a win-win scenario - A state with socialistic mind and capitalistic market.

Last edited by aadya : 18th January 2018 at 13:01. Reason: additional info.
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Old 18th January 2018, 13:54   #293
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Re: Understanding Economics

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Communism by definition means an economic model in which "the entire community owns the resources - country,land,currency,property etc.,".
No. Communism is a political system (focuses on government) which used socialism as a their economic system. Socialism predates communism.

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Socialism predates the Communist Manifesto by a few decades. Early versions of socialist thought were articulated by Henri de Saint-Simon (1760-1825), who was himself an admirer of ur-capitalist Adam Smith, but whose followers developed utopian socialism; Robert Owen (1771-1858); Charles Fourier (1772-1837); Pierre Leroux (1797-1871); and Pierre-Joseph Proudhon (1809-1865), who is famous for declaring that "property is theft."

These thinkers put forward ideas such as a more egalitarian distribution of wealth, a sense of solidarity among the working class, better working conditions, and common ownership of productive resources such as land and manufacturing equipment. Some called for the state to take a central role in production and distribution. They were contemporary with early workers' movements such as the Chartists, who pushed for universal male suffrage in Britain in the 1840s and 1850s. A number of experimental communities were founded based on the early socialists' utopian ideals; most were short-lived.
Source

Now Chinese communism is following more capitalism than socialism. If communism is same as socialism, how can China have billionaires?

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Western European economies are better labeled as Capitalist but "Welfare Economies".... Its a win-win scenario - A state with socialistic mind and capitalistic market.
Basically Democracies with socialist leaning economy.

There are no pure socialistic or pure capitalistic economies anymore. It is always a combination of both. European nations are more socialistic, less capitalistic. USA is more capitalistic and less socialistic.

Both Socialism and Capitalism can be used by Democracies, Monarchies, Communists, and even Dictatorships.
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Old 18th January 2018, 16:48   #294
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Rising inequality: indictment of economic liberalisation?

One article which discusses the same things (liberalization, Inequality etc) we have been doing:



Some quotes (emphasis is mine):

Quote:
First, it is natural that with economic liberalisation and greater market opportunities, the already privileged and the rich would be better able to make use of the opportunities. As a result, both income and wealth inequalities would go up.

Nobel laureate Simon Kuznets observed this tendency, which has come to be known as Kuznets's 'Inverted U hypothesis', meaning income inequality goes up initially as countries go through the process of economic development and then comes down at a later stage.

Basically, with higher economic growth, inequality of both income and wealth goes up, while a large number of people are pulled out of poverty as some benefits of higher growth accrue to the poor in the form of additional job opportunities and pro-poor social welfare initiatives made possible by higher tax revenues. This has been the experience of both China and India, the two most populous countries in the world, in the post-liberalisation higher growth phases.
Quote:
In fact, poverty reduction has taken place at a higher pace in the post-liberalisation era compared to the past in both the countries.
Quote:
Differential opportunities, rather than outcomes in terms of income or wealth disparity, is a matter of bigger concern. That is why people from rural Bihar (with Consumption Gini of 0.17) go to urban Maharashtra (with Consumption Gini of 0.35) or, more generally, people migrate from less unequal rural areas to urban areas with greater inequality in search of more economic opportunities.
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Old 18th January 2018, 17:28   #295
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Re: Understanding Economics

Humor the non-economist here for a moment.

The below two excerpts from the quoted article seem to contradict each other, emphasis mine.

Quote:
...it is natural that with economic liberalisation and greater market opportunities, the already privileged and the rich would be better able to make use of the opportunities....
Quote:
Kuznets's 'Inverted U hypothesis', meaning income inequality goes up initially as countries go through the process of economic development and then comes down at a later stage.....
Once someone gets ahead because of their starting advantage and pulls away from a disadvantaged competitor, what could possibly narrow the gap except an external factor?

I have a hard time buying the 'give it enough time and inequality will correct itself' argument. How exactly is that supposed to happen? If I have an advantage that lets me pull away from competition and keep doing it, why & what would I do, unless coerced externally, to let that gap reduce?


These two seem to contradict themselves too.

Quote:
.....a large number of people are pulled out of poverty as some benefits of higher growth accrue to the poor in the form of additional job opportunities and pro-poor social welfare initiatives made possible by higher tax revenues.....
Quote:
....in reality nothing much can be done politically about rising inequalities.....
Wealth redistribution by govt. through social welfare schemes is cited as a factor 'reducing poverty', followed by a second quoted claim that seems to contradict the first claim.

Last edited by Chetan_Rao : 18th January 2018 at 17:36.
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Old 18th January 2018, 17:42   #296
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Re: Understanding Economics

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I have a hard time buying the 'give it enough time and inequality will correct itself' argument. How exactly is that supposed to happen?
Never has, never will, on its own.

What does often happen is that the poor can be better off than they were before apropos the rising tide lifting all boats. Not that this has always happened - because of external factors the poor can be suppressed to remain where they were - but it can happen and has happened in the last 100 years.
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Old 18th January 2018, 17:50   #297
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Re: Understanding Economics

Simon Kuznets' Inverted U hypothesis led to the debunked trickle down economics, which everybody now knows doesn't work. Kuznets himself warned that his work was 5% empirical, 95% speculation and “some of it possibly tainted by wishful thinking”.

https://www.theguardian.com/global-d...-new-economics

The author of that Deccan Herald article is thoroughly out of date with the current economic realities, if he is quoting a 70 year old hypothesis which has been debunked repeatedly.
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Old 18th January 2018, 21:09   #298
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Re: Understanding Economics

It's not that trickle down economics don't work - they do. Today, just about everyone from the minister to the maid has a mobile phone, often a smartphone. DTH antennae are seen even on the roofs of chawls and tin sheet huts, so safe to say TVs are commonplace too. 300 years ago, not even a king could have these, and just 15 years ago, mobiles were too costly to be mainstream.

The problem is that economists don't seem to use the right benchmark. Average income doesn't tell you much. Some very people keeping the lion's share of a large kitty, leaving only crumbs for the rest, will show the same average as that kitty distributed equally among all , or distributed proportionally higher to the less well off. What we ought to be looking at is the median income. Say if there are 10000 employed persons, the 5000th or 5001th person that is the median, is more telling than the average. Even more meaningful would be the bottom 5% - not good with statistics, but I guess that's 95th percentile?

Back in 1995 or so, a C segment sedan cost INR 5-6 lakh ; a C segment sedan today costs closer to INR 15 lakh - 3 times the price 20 years ago , but with more features - that's 3 times the price. A 2 BHK apartment then was INR 3.5 lakh , the same today is over 50 lakh , that's a 14 fold increment.

Yet, the average income of the average city dweller has not risen 14 fold. Mobiles are cheaper in comparison, but homes are not. Hospital treatments ? Way more costly now than back then. College education ? I finished by graduation in under INR 30000, today that won't even get you through school. High real estate prices have a cascading effect - everything else uses land - hospitals, colleges/schools, malls, restaurants and the prices reflect that.

My mother often asks, why is eating out so costly and I tell her, we're not paying for the food as much as we are for the rent/purchase of the underlying property.

So when the GDP grows, the richest, fattest 0.1% keep the most of increase, with the rest getting increasingly lesser crumbs. It's not that the poorest aren't growing - they have dish TV and mobiles - but they're still living in slums. If people are to raised out of poverty and the lower middle class to be promoted to mid-middle class, and mid-middle class to upper middle class , the growth must be biased to share more there, than the richest, elite club.

But growth is what the corporates and the big business owners aim for, today's 2000 crore net worth is tomorrow's 2500 crore , increasing the disparity between the haves and have nots. Some of the middle and upper middle class manage to gain in the process, via well paying jobs or personal businesses, but overall , it looks like an impending demographic disaster not too long from now.

Yet one can't simply write off billionaires. A 100 billion distributed equally among a billion gives everyone a 100 rupees more. Everyone eats for a day and it's gone. A 100 billion in the hands of an entrepreneur could give 100000 rupees to 10,000 people for months as employment, and use the remaining for assets to produce something, like a bridge, a pipeline, a hotel. 100 rupees each in the hands of a billion wouldn't amount to much.

Last edited by Ricci : 18th January 2018 at 21:18.
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Old 18th January 2018, 21:24   #299
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Re: Understanding Economics

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It's not that trickle down economics don't work - they do.
What you describe is more that the base benchmark has risen (what people call high tide lifting up everything in its wake), not that trickle down economics works. That model is based on the belief that handing more money to the rich (the 'job creators') will enable them to generate more employment and opportunities for those below them, which is a swell idea on paper but greed in the real world ensures that does not, and will not happen.

Quote:
A 100 billion distributed equally among a billion gives everyone a 100 rupees more. Everyone eats for a day and it's gone.
The money leaves one person's pocket, but enters the economy, so practically moves to another pocket. One man's expenditure is another's income, so nothing's 'gone'.

Quote:
A 100 billion in the hands of an entrepreneur could give 100000 rupees to 10,000 people for months as employment, and use the remaining for assets to produce something, like a bridge, a pipeline, a hotel
It could, in theory, and that's the concept behind trickle-down economics. In reality, nobody with capital will do something just because they have capital, they'll do it if there's demand for it and it's profitable to do so. Economic activity is demand-driven; available capital is an enabler, not causation.

Quote:
100 rupees each in the hands of a billion wouldn't amount to much.
Like I said before, 100 rupees I spend is 100 rupees earned for someone else, ad infinitum unless someone takes it out of circulation and stashes it as stored wealth.

Last edited by Chetan_Rao : 18th January 2018 at 21:28.
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Old 18th January 2018, 21:25   #300
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Re: Understanding Economics

Isn't this where progressive taxation and affirmative action comes in?

Market forces by itself will make the rich richer and the poor poorer. There may be disruption in technology and operations and that will lead to some churn but for the most part, the rich will become richer. The poor will become slightly better off in absolute numbers but will end up relatively much worse off (when compared to rich person)than what he was few years ago..
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