Print Story I do not know, says the great bell of Bow
By TheophileEscargot (Wed Aug 24, 2011 at 03:20:38 PM EST) Reading, Watching, Economics, MLP (all tags)
Reading: "The New East End". Watching: "Impressionists", "Antics Roadshow". Economics: why isn't the developed world recovering? Links.

What I'm Reading
The New East End: Kinship, Race and Conflict by Geoff Dench, Kate Gavron, Michael Young. Fascinating social and economic study of the various groups living in Tower Hamlets in the East End of London, and the conflicts between them.

One group is the Bangladeshi population coming from a small region in Sylhet. Originating from a small population of Lascars, sailors living temporarily in the docks, after the split from India left them unable to work in Indian ports, the numbers grew. Some worked in local industry, some originally moved to the garment industry in the North of England but resettled in London, and a growing number of the young people are unemployed.

They maintain strong links with Sylhet The authors have visited Sylhet and find that the homes owned by "Londonis" are usually bigger and more prosperous than others. However, property prices have been raised and it's no longer easy to buy land: one respondent complains that he can't persuade any younger members of the family to farm the land he bought there.

The book has a very good chapter on the role of women and religion in this group. The common assumption that women are oppressed and reluctantly subservient to Islamic fundamentalist men, is not accurate. Women frequently control the household budget and make financial decisions, sometimes taking in the wages and issuing their husbands with pocket money. The traditional tensions within the family is usually that of the wife with her mother in law, who is traditionally the head of the household. Women actively seek out more religious men as husbands, who they believe to be more committed to the family and self-controlled.

The second population is the traditional white working class of the area, who still make up about a third of the population. They're generally hostile to the Bangladeshis. While they're often dismissed as racists, the book is fairly sympathetic to them.

It points out that there was a transition from a community-based welfare system to a needs-based system. Under the older system, you got council accommodation based on the length of time you waited, and extended family connections to others living there. This system was changed to a needs-based system, where overcrowding and children get a higher priority. This underlies the constant complaints that Bangladeshis "jump the queue": their view is that the old system still holds or should hold.

The book is also perceptive when it points out the extensive bombing of the East End docks in World War Two, and that thus population believed that the purpose of social housing and rebuilding was in some way a reward for keeping the docks going: they perceive it as unfair that people who weren't there in the war get social housing.

The third population is occasionally referred to as "yuppies". General while people who have moved into the East End as part of city gentrification, the book spends relatively little time on them. However it points out that in local politics they essentially wield the balance of power between the other two communities, often siding with the Bangladeshis.

The book is short but dense and detailed, it's hard to cover much of it. It combines personal testimonies with statistics and analysis.

Very good book. Absolutely essential reading if you're interested in the area. Could well be an interesting social study even if you're not.

What I'm Watching
Saw the BBC 4-part documentary The Impressionists, presented by Waldemar Januszczak. Liked it a lot, though it's a bit gimmicky in places. Though they're pretty familiar, the Januszczakesque style is energetic, and he goes into a lot of detail on the techniques and tools they used.

What I'm Watching 2
Saw the Banksy produced documentary on various pranksters The Antics Roadshow. Describes various public oddballs like Michael Fagan who managed to wander into the Queen's bedroom, Comedy terrorist Aaron Barschak, and so on Fairly interesting, but it's a pretty conventional documentary. Not as good as "Exit Through the Gift Shop".

Economics: why isn't the developed world recovering?
I follow several economics blogs, this isn't based on any particular one but the impression I get from all of them.

The original recession wasn't that hard to understand. There is debate about the significance of the various causes at play, but there have been plenty of recessions before, and the basic mechanisms are fairly well understood.

But the failure to recover, except in a very slow and fragile way, is not well-understood at all. Most people would have expected a much stronger revival in growth and jobs by now.

Lots of explanations are being offered, but we don't really know which of them are significant at all. Some of them follow.

  1. Consumer confidence. Consumers just aren't willing to spend because they're in an unusually long period of emotional nervousness.
  2. Consumer debt repayments. Consumers aren't spending because they borrowed too much in the boom, and now their disposable income is going into debt repayments.
  3. The Great Stagnation. Tyler Cowen's theory is that we've run out of easy economic gains "low hanging fruit" and the pace of innovation has slowed.
  4. Credit drought. Banks aren't lending to businesses, so they can't grow and expand.
  5. Uncertainty shock. Firms, markets and consumers are all unsure what's going to happen.
  6. Recessions caused by credit crises and housing busts just last longer.
  7. Intellectual property gridlock is harming growth
Overall, we just don't know how important each of the factors above really is. So it's hard to know what should be done. If it's mostly 1 or 2, cutting sales tax might help. If it's 4, additional lending programmes to firms might help. What we really need is bold, persistent experimentation on an international level. If the different states of the world would just try different things, at least we could have some idea what works and what doesn't. If a sales tax-cut works well or a business lending programme works in one nation, the rest of the world could learn from it. But with the US is politically gridlocked, the Eurozone divided upon itself, the UK locked in to an ideologically purist austerity programme, nobody seems willing to try anything.

More economics
There are several other explanations that I don't think are realistic, but are commonly expressed.

  1. Over-regulation. I don't think this makes sense because the UK has relatively low regulation, and levels of regulation don't seem to be associated with better performance.
  2. International trade is to blame. Mostly expressed by people who don't understand Comparative Advantage. It doesn't explain the lack of growth. The high corporate profits at the moment are interesting but don't indicate everything is going well in the private sector. If some companies have gone bust, and new businesses aren't being formed, corporate profits can be high for the corporations that exist, but the sector as whole can still be suffering.
  3. Taxes are too high. The effect of high taxes on hindering growth are real, and can be profoundly important over the very long term: since growth is an exponential process, a tiny boost in growth can have great benefits over decades. But the effect of tax on growth is pretty small: cutting spending and taxes by a whopping 2.5% of GDP would only boost growth by 0.2% to 0.3%. Important over decades, but doesn't explain why growth is so weak over the last couple of years.
Economics. School leavers at back of jobs queue. Eurobonds won't work. Saving capitalism from itself. US is in depression not recession, more

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I do not know, says the great bell of Bow | 22 comments (22 topical, 0 hidden) | Trackback
wrong link by georgeha (4.00 / 1) #1 Wed Aug 24, 2011 at 03:37:14 PM EST
The Lgo link goes to Why Eurobonds won't worl.

Cheers, should be fixed [nt] by TheophileEscargot (2.00 / 0) #2 Wed Aug 24, 2011 at 03:49:01 PM EST

It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?
[ Parent ]
denied by georgeha (4.00 / 1) #3 Wed Aug 24, 2011 at 04:10:39 PM EST
too mature for my corporate web filters.

[ Parent ]
Could be a combination of things by Herring (4.00 / 2) #4 Wed Aug 24, 2011 at 04:30:38 PM EST
People are nervous about losing their jobs, paying back debt and also high prices for fuel/energy can't help.

House prices are still ridiculous (well, in the South East anyway) and that's part of the general high cost of living.

I just did some quick maths and added up (based on my costs):

So that's stuff we have to have, nothing like food or pensions included. It comes to around £20K per year. So, for a family of 4 the cost of living is already well above the national average income - and a massive amount more than the minimum wage.

So, without the stupid borrowing we had, the average person doesn't really have the cash to regenerate the economy.

Also it's why I'm switching to cycling into work more.

(That went off at a bit of a tangent but it's something I've had on my mind)

christ, we're all old now - StackyMcRacky

The same holds for across the pond by MartiniPhilosopher (4.00 / 1) #5 Wed Aug 24, 2011 at 04:55:32 PM EST
The source of the problem seems to be that real wages haven't increased in over a decade.

Find the answer to why that has happened and you'll find a way to get the economy going again.

Whenever I hear one of those aforementioned douche bags pontificate about how dangerous [...] videogames are I get a little stabby. --Wil Wheaton.

[ Parent ]
Easy by Herring (4.00 / 1) #8 Wed Aug 24, 2011 at 05:38:56 PM EST
In order to maintain profits, jobs (at lower levels) have to compete against automation and offshoring. Without the desire/ability to borrow money like a lung cancer patient, the man in the street can't afford to buy the shit to keep the economy going. If the man in the street was paid enough to afford the stuff then it would cost too much to make the stuff.

Any growth in the last decade or three has been illusory.

We're all fucked.

(also something amount money supply)

christ, we're all old now - StackyMcRacky

[ Parent ]
Typo? by ucblockhead (4.00 / 1) #6 Wed Aug 24, 2011 at 05:04:05 PM EST
The book is also perceptive when it points out the extensive bombing of the East End docks in World War One...

Don't you mean World War Two?
[ucblockhead is] useless and subhuman

House market in the US by ucblockhead (4.00 / 2) #7 Wed Aug 24, 2011 at 05:35:14 PM EST
I do think one factor is that in the US, the housing market is completely gridlocked.  A significant number of people are underwater, but still making their mortgages.  Such people literally cannot sell their houses and thus cannot buy new ones.  This depresses the housing market in general.  (And this is, of course, a negative feedback loop.)  This in turn is going to depress all the markets attached to housing, including things like construction (which was already hit by the bubble bursting.)

It also means that a significant proportion of the workforce is no longer mobile.   Having large numbers of people who can't change cities to follow a job has got to have a negative effect.
[ucblockhead is] useless and subhuman

heh by MillMan (4.00 / 1) #10 Wed Aug 24, 2011 at 07:20:35 PM EST
we'll have to come up with some policy mechanic that lets people with equally underwater mortgages swap homes in different cities.

(or possibly legalized short sales where the bank eats the difference after several years of civil unrest.)

"Just as there are no atheists in foxholes, there are no libertarians in financial crises." -Krugman

[ Parent ]
You are an optimist by ucblockhead (4.00 / 1) #11 Wed Aug 24, 2011 at 11:23:11 PM EST
I frankly think that any civil unrest will leave lots of dead poor and the rich bastards right where they are now.
[ucblockhead is] useless and subhuman
[ Parent ]
lots of variables by MillMan (4.00 / 1) #12 Thu Aug 25, 2011 at 03:53:03 AM EST
I think positive outcomes are possible until we're really running up against natural resource constraints. We've probably got some time left in the wealthier counties, but already I think the Arab Spring unrest is in part a food riot caused by supply constraints as much as economic inequality. Come to think of it I believe grain production per human peaked in the 80s, although I'd have to look that up.

"Just as there are no atheists in foxholes, there are no libertarians in financial crises." -Krugman

[ Parent ]
grain is the least of the first world worries by clover kicker (4.00 / 3) #15 Thu Aug 25, 2011 at 09:43:54 AM EST
If we need more grain we can just reduce the amount we feed to poultry/pigs/cows.

[ Parent ]
I thought by garlic (4.00 / 2) #17 Thu Aug 25, 2011 at 12:47:31 PM EST
the grain problem, was a comodity bubble problem, not an actual lack of grain -- which feels like it's been the problem over the last decade now -- too much money floating around looking for any good investment, overinvesting in that investment making it a bubble, thus ruining it. Not enough of that wealth gets destroyed in the bubble so it goes to the next bubble. Planet Money was talking about how Switzerland's economy (which has been doing fine) is starting to implode due to external investment larger than the country can handle.

[ Parent ]
grain problem as defined by who? by MillMan (4.00 / 1) #18 Thu Aug 25, 2011 at 02:01:26 PM EST
If grain output is dropping per person, it's an indication that we're heading into overshoot. Given the market mania we're in the midst of, though, it's hard separate price action between supply / demand, commodity bubbles, and the economics/politics of resource allocation.

"Just as there are no atheists in foxholes, there are no libertarians in financial crises." -Krugman

[ Parent ]
This coonty shyster is partly to blame: by ammoniacal (4.00 / 4) #9 Wed Aug 24, 2011 at 06:33:28 PM EST

"To this day that was the most bullshit caesar salad I have every experienced..." - triggerfinger

New Republic Article by jimgon (4.00 / 2) #13 Thu Aug 25, 2011 at 06:09:40 AM EST
"widespread uncertainty that has discouraged consumption and investment"

Uncertainly has discouraged consumption.  It's not uncertainty caused by government policies, but uncertainty caused by job loss concern.  When you are uncertain about your employment in the future you don't consume.  You save and pay down doubt.  As for uncertainty in investment all I can say is balderdash.  No capitalist has ever refused to make a dollar because he's uncertain about what the government may do, no has any capitalist refused a dollar due to the need to pay taxes.  Even a percentage of a dollar is a bigger increase than nothing. 

The author also went down the entitlement rathole.  The Ryan plan to use vouchers for Medicare and essentially privatize it solves nothing.  It actually increases the cost to the government unless you intentionally bankrupt the people who have to use the system.  The resolution to Medicare is cost control with as the author wrote high co-payments for discretionary procedures and refusal to pay for procedures with dubious outcomes.  Addtionally some cost controls around prescription drugs would help a lot.  Social Security is actually solvent through 2036 with no changes since it will draw down on the trust fund (yes the trust fund is composed of government bonds which will require general revenue to be used to cover the redemption of bonds, but that was always the plan).  Social Security can be made more solvent by increased the maximum income on which the payroll tax applies.  Currently it stops at $106k.  Ratchet that up and you're covered.  Oh and make it an automatic ratchet to cover for the future, but make sure you don't create a surplus by doing it since that just creates a trust fund that Republicans will bemoan having to make good on.

Technician - "We can't even get decent physical health care. Mental health is like witchcraft here."
My take by lm (4.00 / 2) #14 Thu Aug 25, 2011 at 06:58:39 AM EST
There are many causes of the present downturn. In the US, one of the larger, if not the largest, causes is cutting spending instead of investing in massive public works programs, especially transportation and communications infrastructure.

There is no more degenerate kind of state than that in which the richest are supposed to be the best.
Cicero, The Republic
At least in the US by wiredog (4.00 / 3) #16 Thu Aug 25, 2011 at 10:50:43 AM EST
Taxes aren't the problem.

Earth First!
(We can strip mine the rest later.)

The problem is debt based currency. by dmg (4.00 / 1) #19 Thu Aug 25, 2011 at 08:26:57 PM EST
The fix is a return to the gold standard.
dmg - HuSi's most dimwitted overprivileged user.
What is the developing world doing right? by Scrymarch (4.00 / 1) #20 Fri Aug 26, 2011 at 08:20:18 AM EST
I liked the point you made on twitface about most of the world doing pretty well. Why is that?

Low debt. Public and private.

At peace. Sub saharan Africa in particular is reaping a peace dividend. Wars are exy. Also lots of stuff to rebuild off low base.

Free trade. Economies like India and Vietnam are still reaping benefits of deregulation.

Young population. Lots of workers as a proportion. Education needed for entrance not prohibitive. Works better in booms.

Dependable government. Track record of paying debts and planning for future debt.

Why developed world not bouncing back: flip these. It looks a lot like Japan for the last 15 years, plus sovereign debt worries Japan never had.

Japan's still a nice place (poor buggers still trying to recover from the tsunami though). But it doesn't grow, and mot from a shortage of infra projects.

Of the theories you mention, I think you're right there's no expert consensus. But I favor the explanation that asset bubbles cook up nasty tangled recessions. Especially if the bad debt is not properly cleaned up - western banks are zombied currently.

Iambic Web Certified

Good points by TheophileEscargot (2.00 / 0) #21 Sat Aug 27, 2011 at 06:44:40 AM EST
But also, if you've got catch-up growth of 10% or so, and Cause X wipes 3% or so off that growth rate, you're still doing pretty well. Whereas if you're in the developed world and only grow at 3%, wiping 3% off your growth leaves you stagnating.
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?
[ Parent ]
True true by Scrymarch (4.00 / 1) #22 Sun Aug 28, 2011 at 10:53:05 AM EST
And honestly, some of those don't apply as much to this recession as the last 10-15 years.

Iambic Web Certified

[ Parent ]
I do not know, says the great bell of Bow | 22 comments (22 topical, 0 hidden) | Trackback