A comment on capitalism

I really enjoyed this op-ed column over at the Washington Post. It begins like this:

Never do I want to hear again from my conservative friends about how brilliant capitalists are, how much they deserve their seven-figure salaries and how government should keep its hands off the private economy.

The Wall Street titans have turned into a bunch of welfare clients. They are desperate to be bailed out by government from their own incompetence, and from the deregulatory regime for which they lobbied so hard.

I definitely think it is worth the time to read the whole article.

It reminds me of something I was thinking about recently. I was thinking just the other day about the economic stimulus checks that are scheduled to be sent out this summer and mentally comparing it to FDR's programs. At least with many, if not most, of those programs the people who benefited from them had to work to gain the benefit. Programs like the CCC and others involved public works programs that employed people who couldn't find work elsewhere. The current plan just gives people money to go out and spend. How is that so much more conservative than the programs FDR initiated that conservatives seem to hate so much and have worked so hard to get rid of? Just wondering.

Oh the irony!

Via CNN Money - Fed cuts rates by a quarter point

The Federal Reserve lowered an important short-term rate by a quarter of a percentage point Tuesday, the latest in a series of rate cuts that the central bank hopes will stimulate an economy some fear is on the brink of a recession.

But stocks plunged following the Fed's announcement as Wall Street was disappointed the Fed did not act more aggressively. The Dow dropped nearly 300 points, or 2.1 percent, while the S&P and Nasdaq each fell about 2.5 percent.

No real commentary on the issue, as I avoid discussions of economics at all cost, but I found the reaction ironic. I guess you just can't please Wall Street.

What is it all for?

WaPo reports - Tainted Chinese Imports Common

Dead pets and melamine-tainted food notwithstanding, change will prove difficult, policy experts say, in large part because U.S. companies have become so dependent on the Chinese economy that tighter rules on imports stand to harm the U.S. economy, too.

"So many U.S. companies are directly or indirectly involved in China now, the commercial interest of the United States these days has become to allow imports to come in as quickly and smoothly as possible," said Robert B. Cassidy, a former assistant U.S. trade representative for China and now director of international trade and services for Kelley Drye Collier Shannon, a Washington law firm.

As a result, the United States finds itself "kowtowing to China," Cassidy said, even as that country keeps sending American consumers adulterated and mislabeled foods.

It's not just about cheap imports, added Carol Tucker Foreman, a former assistant secretary of agriculture now at the Consumer Federation of America.

"Our farmers and food processors have drooled for years to be able to sell their food to that massive market," Foreman said. "The Chinese counterfeit. They have a serious piracy problem. But we put up with it because we want to sell to them."

To me, this story brings home the importance of answering the question, "What is the role of government?" Is it to protect its citizens or is it something else entirely? I understand that we need a healthy economy and that the economies of various states are becoming more and more intertwined. However, if we are willing to allow tainted foods into our country, just for the sake of economic growth or stability, are we not cutting off our nose to spite our face, so to speak? Is it worth it? That is always the ultimate question, "Is it worth it?" We allow so many things in the name of economics and short term gains. When are we going to start to look at long term health effects, or does that just fall under the category of acceptable losses?

China moves further toward capitalism

NYT - China Approves Property Law, Strengthening Its Middle Class

After more than a quarter-century of market-oriented economic policies and record-setting growth, China on Friday enacted its first law to protect private property explicitly.

The measure, which was delayed a year ago amid vocal opposition from resurgent socialist intellectuals and old-line, left-leaning members of the ruling Communist Party, is viewed by its supporters as building a new and more secure legal foundation for private entrepreneurs and the country’s urban middle-class home and car owners.

Wow, at first blush this sounds very promising, doesn't it? These first two paragraphs make it sound as if the Chinese legislature held a debate on a policy issue and in true democratic fashion reached a decision that will ultimately lead to a stronger middle class, and raising hopes of increased capitalist growth and democracy. Well, read on my friends, the rosy glow fades quickly.

But delays in pushing it through the Communist Party’s generally pliant legislative arm, the National People’s Congress, and a ban on news media discussion of the proposal, raise questions about the underlying intentions and the governing style of President Hu Jintao and Prime Minister Wen Jiabao, experts say.

[. . .]

The leadership did not so much overcome opposition to the property law as forbid it. Unlike in 2005, when leaders invited broad discussion about property rights, the latest drafts of the law were not widely circulated. Several left-leaning scholars, who favor preserving some elements of China’s eroded socialist system, said they had come under pressure from their universities to stay silent.

When one financial magazine, Caijing, defied the Propaganda Department’s ban on reporting on the matter and published a cover story last week, it was ordered to halt distribution and reprint the issue without the offending article, people associated with the magazine said.

So while it would appear that China is still moving forward in their advance toward capitalism, a similar move toward democracy is still a long way away.

While strengthening the Middle Class is often a necessary step toward establishing democracy, it is not a fait accompli. As long as the Chinese government continues to suppress civil liberties, democracy is not likely to take root. There is still a long battle ahead before that happens, if it ever does.

Lowering the Trade Deficit

BBC News - Strong exports narrow US deficit

Exports from the United States have reached a record-high, helping to narrow the country's trade deficit.

During January the gap between imported and exported goods fell to $59bn (£31bn), down from December's $61.5bn.

This is a good thing, right? Well, as you read on in the article, it almost begins to sound like a bad thing.

The strong performance of the US export industry, with exports of goods and services rising by 1.1% to a historic high of $126.7bn, was mainly driven by sales of aeroplanes, computers and agricultural products, especially soybeans and wheat.

US shoppers, meanwhile, held back spending their money on foreign cars, toys and television sets.

The trade imbalance with the European Union fell to its lowest level in three years, a reflection of the weak dollar and the strong euro, which makes US exporters more competitive and European products very expensive to American shoppers.

So we are evening out a little bit because we can't afford to buy expensive European stuff as much anymore, and Europeans finally want to buy our stuff because it is cheap. Hum. . .

I'm no economist (and really have no desire to be one), but it sounds like something of a mixed bag to me. I guess you've got to take the bad with the good.

Can you imagine?

NYT - DreamWorks Posts Loss

DreamWorks Animation SKG, the studio behind animated movies like “Shrek” and “Madagascar,” said Tuesday that it swung to a fourth-quarter loss on costs to write off “Flushed Away,” which performed poorly at the box office.

Can you imagine that? Flushed Away did poorly at the box office? Every time I see one of the those commercial I just cringe. Just the concept of the movie is gross. Okay, maybe little boys won't be deterred by that fact, but little girls will and so will moms.

US trade still in deficit

BBC News - US trade deficit hits fresh high

The US trade deficit rose 6.5% last year to hit a new record high of $763.6bn (£393bn).

Fuelled by last year's rise in global oil prices and the surge in Chinese imports, it was the fifth record annual US trade deficit in succession.

The gap with China alone was $232.5bn last year, the largest imbalance the US has ever recorded with one country.

Now I'll start by admitting that I hate IPE with a purple passion. Anyway, I've been told on multiple occasions that the fact that the US has a trade deficit only means that we have lots of money to spend so we spend it on things made in other countries. Okay, I get that, but how long can we maintain such a growing imbalance? It would seem there would have to be some outer limit or threshold.