Tag Archives: politics

It’s official, we’re now being taxed to pay back Peter Thiel

I posted a while ago about how the Biden administration was bailing out SVB without calling it a bailout. Basically Silicon Valley billionaire and hedge fund managers (like Peter Thiel) put all their money in a bank well in excess of the 250,000$ FDIC insurance limit. That limit is a known risk. If the bank you use goes bankrupt, and if you exceed that limit, the FDIC is only obligated to give you back 250,000$. Doesn’t matter if you had 250,001$ or 999,999,999,999$, FDIC is only obligated to give you 250,000$.

But that would be unfair to the billionaires. After all, why should they ever suffer the consequences of their actions? So instead the administration promised that every single depositor would be made fully whole. This was spun as them protecting the little guy, but the little guy was already covered by the 250,000$ insurance. I don’t have more than that in the bank, neither does anyone else I know. If my bank goes bankrupt, I will be fully paid back because my deposit is far less than 250,000$. If you have more than that amount, then you are solidly rich and do not need a government bailout.

But the bailout came anyway. The FDIC handed out money to cover the billionaires and hedge funds. Now that money has to come from somewhere. Biden promised it wouldn’t come from the taxpayers of course, but it still is coming from the little guy. It’s coming from our bank accounts.

Every person who owns a bank account is paying a small amount of tax into the FDIC insurance program. It won’t show up as a line item in your bank statement, but it’s there all the same. But for every bank account held by a bank, they have to pay a little bit into the FDIC. That cost naturally gets passed on to the holder of the bank account, just like every other tax. When the tax on cigarettes rises, the price of cigarettes rises. So too is it with bank accounts. You won’t see the tax as money rushing out of your account, but you will see it as less money going in. The bank will pay you less interest on your deposits because they have to take some off the top to pay for the FDIC insurance. And if there was no FDIC insurance, you’d get more interest.

You can see this exact same scenario if you look at big bank accounts. There are some banks with accounts which hold millions, even billions of dollars. The FDIC is only obligated to pay back 250,000$ in the case of bankruptcy, but a responsible billionaire who does not need a government bailout will pay for deposit insurance which covers more than the 250,000$ FDIC limit. That deposit insurance will decrease the amount of interest paid on the deposit, or even remove the interest entirely to pay the insurance. If you have to pay for insurance, you get less interest.

Everyone with a bank account has to pay for FDIC insurance, we don’t even get a choice. And now we need to pay for even more insurance to refill the FDIC’s account since they emptied it to bail out Peter Thiel

The FDIC plans to hit big banks with a tax to refill its account. This is being spun as a progressive redistribution from the rich to the poor. It’s the opposite. If a tax is levied on Walmart, Walmart just raises its prices, and the Walmart customers pay that tax themselves. The vast majority of Americans have their money in a big bank like Bank of America. So the big banks are going to pass this new tax onto their depositors, just as they pass the FDIC insurance tax onto us. You and I will be receiving less interest on our deposits now, because the FDIC spent all their money on Peter Thiel and co. Take from the poor to give to the rich, socialize loses and privatize profits. It’s 2008 all over again.

I know the amount is small. It’s probably going to be no more than a few dollars in lost interest in my account. But a few dollars times the 100 million or so Americans who bank with big banks makes the few billion dollars needed to bail out Peter Thiel and co. And it shouldn’t be this way, we should not be paying for their mistake.

And I know I keep harping on Peter Thiel, but it’s because a bunch of so-called “progressives” are refusing to even contemplate that this is a bailout taking money from the poor. By ignoring the context you can see SVB and its depositors as “the little guys” and Bank of America as “the rich” so taking money from Bank of America to give to SVB depositors is re-distributive. But it isn’t so. SVB was the bank of billionaires and hedge funds, Bank of America is the overwhelming bank of America’s poor and middle class. Taking from Bank of America to pay back SVB’s depositors is taking from the poor and middle class to pay back the billionaires. And reminding those “progressives” of exactly who is being paid back is just something I feel I should do.

It’s not a bailout unless it comes from the bailout region of DC

America is bailing out the banks again, but like Josh Barro writes, we don’t want to say we are. When the government hands billions of dollars to Silicon Valley hedge funds by guaranteeing their deposits, it makes us wonder why they can’t hand billions of dollars to those of us struggling with inflation. Maybe they can guarantee our rents? But this totally isn’t a bailout, just ask Biden.

For those who don’t know what I’m talking about, Silicon Valley Bank (SVB) was a bank holding deposits from hedge-fund backed startups and using them to make very risky plays. Those risks cased them to crash and burned due to rising interest rates. So the government had to bail them out, but it doesn’t want to call it a bailout.

So why isn’t this bailout really a bailout? Well, only the depositors will be getting all their money back, the bond and equity holders of SVB will be getting little to nothing. This has led some to even applaud this bailout as being re-distributive: money is going from the wealthy to the poor.

Let’s get one thing straight, this is a bailout of the rich. Depositors are ALREADY guaranteed to get their money back p to $250,000. The FDIC already made sure anyone with less than $250,000 in the bank got their money back. But what about the poor hedge funds and VCs with millions, even billions of dollars locked in the bank? Well normally they would get back $250,000, but it’s not fair that rich people lose money so that’s what this bailout is supposed to cover.

The wealthy depositors will be made whole at the expense of bond and equity holders of course. But that’s just moving money from the rich, politically connected people to the rich, not-so-connected, it’s classic graft of making sure your boys get the best from the government.

More to the point, the money may not come from the government per se but it is coming from the people, or at least the people with bank accounts. FDIC is the insurance that is paid by every bank account, and it in turn pays to cover all bank accounts up to 250,000 dollars should their be a bank run. The fact that the FDIC will now be covering more, potentially up to billions in dollars, means that money has to come from somewhere. It will come from all the other people with FDIC ensured bank accounts, all the people with a few hundred or thousand dollars in the bank.

The FDIC isn’t a line item you’ll see in your bank statement, it’s an invisible insurance policy to most people. But make no mistake it is paid by the account holders. If FDIC insurance did not exist, the bank would give you a higher interest rate on your savings account because they wouldn’t need to pay insurance on your bank account. Instead, interest on deposits is likely to be lower than expected as the FDIC will have to drawn on the insurance premiums from every small account in order to cover the billions of dollars they’ve pledged to rich hedge fund managers. Poor people with small bank accounts will be made tangibly more poor in order to ensure hedge funds get all their money back.

Not only that, there is a definite moral hazard with bailout out the rich in this manner. When a bank goes under, there is supposed to be a protocol of who gets what. Depositors up to 250,000 dollars will be covered by FDIC no matter what, everything else including bond holders, equity holders, and large depositors is fair game depending on the results of the bankruptcy.

Instead, it is know going to be assumed that depositors will always be bailed out at the expense of bond holders. People who want to make low interest money have a few options: they can give it to the bank and get interest, or they can buy a bond and get the coupon. They know that if their money is large, both of these carry risks. The deposit and interest are only covered up the 250,000 while bonds can be defaulted on or banks can go bankrupt. However now, the calculus changes. Deposits will always be bailed out by the FDIC at the expense of bonds, meaning that they are now much safer and bonds are much riskier. This could even make it worse for some banks as they will find they cannot raise money through bonds as easy as they used to. Who will buy your bond if a high-yield savings account gives roughly the same interest rate and is guaranteed zero risk by the FDIC no matter how much money you put in?

So this is a bailout that isn’t a bailout, it gives money to the rich at the expense of the poor.

Follow up: what did Joel Kurtzman think of the 90s and 2000s?

I wrote a post last week about Joel Kurtzman’s “The Decline and Crash of the American Economy,” a book from the 80s that posited that America’s best days were behind it. Kurtzman’s central thesis appears to be:

  • Manufacturing is moving overseas, causing America to run a trade deficit
  • To buy foreign goods, America and Americans are becoming indebted to the rest of the world
  • Foreign investment is flooding into American stocks and American debt, causing us to lose control of our own economy
  • The much touted “service jobs” and “information age economy” are a mirage
  • As a result of the above four facts, the American economy is entering a period of decline and crash which can only be solved by strong protectionism and government control of the economy

This was all written in the 80s, and to an old-school leftists I guess it all seemed very sensible. I could imagine Jeremy Corbyn or Bernie Sanders making these exact arguments in 1980, while adding a few more worker-centric chapters of their own. The problem is that this thinking has largely been supplanted by modern economics.

Manufacturing is not the only thing an economy does. The knowledge economy, which Kurtzman scoffed at as the “information age economy,” has rapidly eclipsed all the manufacturing that came before it and continues to propel American forward. Likewise foreign investment flooding into America is by no means bad, as it allowed American companies and the Government to finance themselves with debt or equity. If foreign investment was fleeing America, that would be cause for concern. Being in debt is not a biblical sin for an economy. We all take on debt all the time because the value of having a car or a house now is greater than the value of the money we will use to pay off that debt over 5 to 20 years. The same is true for companies expanding, and foreign investment flooding into America means companies can issue debt much more cheaply than they could otherwise.

Furthermore Kurtzman’s prescription was largely abandoned in the 90s. Both Republicans and Democrats largely made peace with free trade (although the 2 most recent presidents have bucked this trend). There is a strong argument to be made that tariffs on foreign goods hurt the American economy as much as they do the foreign economy for a number of reasons. Tariffs create a walled garden for certain goods, allowing noncompetitive industries to remain in business for longer than they should. In turn these noncompetitive industries suck up investment and compete for resources, making it harder for actually competitive companies to expand as they should be able to. There is only so much supply of money, parts, and workers, if Ford was heavily subsidized by tariffs, would Tesla have been able to take off? Finally tariffs alter the incentive calculus for a company because once tariffs are part of the political equation, companies can increase their profits more by demanding higher and higher tariffs from the government than they can by actually improving production. This caused some Latin American countries to enter a tariff spiral where goods became more and more expensive because rather than compete with the rest of the world, companies put their effort into demanding higher and higher tariffs.

In the 90s and the 2000s America largely abandoned Kurtzman’s thesis and his prescriptions. Angst and newsrooms aside, the trade deficit kept expanding, NAFTA remained in place, the service and information sector were seen as avenues of growth, and debt kept piling up. If Kurtzman then thought the Financial Crisis was proof of his theory, he would have been rather sad that America came out of the crisis much better than most of the nations he said it was indebted to, such as Japan, Latin America, and Europe.

Reading Kurtzman’s book is like reading politics from a bygone age. I once read a book about “the Crime of ’73,” a much maligned bill which removed the right of silver-bullion-holders to have their silver minted into dollars. Pro-silver advocates despised this bill so utterly that it eventually launched William Jennings Bryan as a presidential candidate, a candidacy he might not have gained had the silver movement not been so motivated and powerful. Yet reading it today, it’s hard to understand why this economic debate was filled with such hatred and vitriol. It’s hard to understand the motivations behind the players, and how for them this was the defining issue of their age. Because honestly, America has moved past that debate long ago: silver isn’t money and neither is gold, dollars are. I almost feel the same way with Kurtzman’s book. The last 2 presidents notwithstanding, most of my adult life has been shaped by a bipartisan agreement on free trade and the importance of the information economy over traditional manufacturing. I just wonder what Kurtzman would think now.

Send troops to the Fed?

Pardon me for wading into Twitter Drama, but Rohan Grey is a remarkably unserious “intellectual” and I couldn’t help myself.

Before I start, let me share a tiny story from “Zen and the Art of Motorcycle Maintenance.” This book was a thoroughly unenjoyable read for teenaged me, but it has one anecdote that still sticks with me. If memory serves, there is a university that is being threatened with losing its accreditation due to repeated failures and the students are naturally protesting as this would make their degrees worthless. One student talks to the narrator and claims that the University in fact can’t lose its accreditation, because if someone tried to take it “the Governor would send the national guard to protect us!”

I shouldn’t have to spell out the ridiculousness, but I want to hit word count so I will. Accreditation isn’t held in a vault, it isn’t something you can protect with guns and soldiers. Accreditation is the trust that other institutions have in you, and while some of it is legally codified most of its power is in the uncodified trust that a society is built on. You can’t protect accreditation with and soldiers any more than you can protect trust or friendship.

And so it was with bewilderment that I read an Assistant Law Professor on Twitter making the same mistakes as the nameless student from a book. Rohan Grey wants to do an end-run around the debt ceiling by having the Treasury mint a one trillion dollar platinum coin and deposit it in the Federal Reserve. This coin would then pay for the USA’s financial obligations without the need to borrow money. A big (and usually ignored) problem is that the Fed would have to accept the coin, and as Josh Barro writes, the Fed has expressed the opinion that this chicanery is illegal and undermines Fed independence. (Read Barro’s article, it goes into great detail as to why this idea probably wouldn’t work). Undeterred, Grey thinks the Fed’s opinion doesn’t matter, and that if they refuse to accept the coin then Biden should send troops to the Federal Reserve and force them to accept it.

Grey’s mistake is thinking that guns can be used to enforce trust. The Federal Reserve has the trust of the markets, and its power to move markets is based on that trust as much as anything else. The Federal Reserve trades bonds and sets rates, but those bonds and rates have value because people trust the Fed to keep its word, Jerome Powell’s speeches about the Fed’s plans have as much or more power as any action taken by the Fed. Now imagine a scenario where troops are instructed to besiege and occupy the Federal Reserve, where Powell is held at gunpoint and forced to accept a one trillion dollar deposit from the Treasury which he and the Fed have gone on record as saying is illegal. Trust in the Fed would be shattered, nothing Powell says or does matters anymore because the troops (and by extension the President) are running the show. Investors would flee from US government bonds, causing yields (and thus America’s cost of borrowing) to skyrocket, because America’s currency will have been debased against the will of its central banks, and will now be at the whims of the President.

And you may say “that’s fine, I like Biden as President” but do you like DeSantis? Do you trust that DeSantis wouldn’t be willing to send his own troops to force his will on the Fed? Would you buy a 10-year government bond if there’s a chance that DeSantis or Trump will be controlling it 2 years? And furthermore, Powell’s remarks on inflation will become worthless. Maybe Biden doesn’t like the rate rising that Powell needs to do, or maybe when the election comes he wants to juice the economy. So what’s to stop him from leaning over and reminding Powell who’s boss? What’s to stop Trump or DeSantis from doing the same? People like Grey once griped that Trump’s complaining caused the Fed to pause rate rises in 2019 (ignoring of course that inflation went under the Fed’s 2% target, which should cause them to pause rate hikes all on its own). Now Grey wants to make the Fed wholly subsumed by the President, so Trump would be able to do whatever he wanted.

Once you’ve sent troops to the Fed, you can’t unring that bell. Investors invest in American Dollars and American bonds in large part because they trust the Federal Reserve to do its duty with regards to the currency. Shattering that trust with soldiers would shatter investor confidence in the American economy as a whole. You’d have a trillion shiny dollars, but they wouldn’t be worth a pence.

Maker vs Taker states

Last year, Elon Musk paid over 11 billion dollars in income tax, more than the amount paid by every single person I know COMBINED. Yet for all that I have no desire to see him get special privileges, or to have his complaints be heard over other people’s. I know we live in the real world where money buys access, but we should all strive to live in a better world where all are presumed equal regardless of wealth. So if Elon Musk shouldn’t get special favors, why should California or New Jersey?

California and New Jersey have been described as “maker” states, in comparison to “taker” states like Mississippi and New Mexico. California and New Jersey residents pay much more to the federal government than their state collectively receives, and vice versa for Mississippi and Mexico. This has led some lawmakers, like Josh Gottheimer (D-NJ) to call out the “moocher” states, and say that laws should be written to benefit the people of his “maker” state, by lowering their tax burden or enacting their preferred policies.

I’ve seen this exact line of reasoning before all across social media. When Republicans complain about the priorities of the government, Democrats come out of the woodwork to say that since blue states pay more tax, red states need to shut up and put up. Yet this is an absurd, Romney-esque line of reasoning that would have been utter heresy in 2012, the idea that wealthier groups of people should be heard over the voices of poorer groups. The next time Gottheimer complains about Musk, will he remember to shut up and put up since Musk pays more taxes than almost his entire state populations combined?

I think this belies the maddening hypocrisy of the maker/taker argument, it was true when Romney said it and it’s true when Gottheimer and lefties online say it. There is ALWAYS someone richer than you, and if you wouldn’t bend the knee to them then no one should bend the knee to you. Furthermore we live in a democracy, one man one vote. The votes of the poor carry just as much weight as the votes of the rich, and there is no special provision that says otherwise. That goes for poor people just as much as poor states. If Democrats want to be the party of the people, I’d better never hear another one of them insinuate that rich voters matter more than poor voters.

The End of Growth Part 4: At what point is China no longer a bubble?

I’m still reading The End of Growth by Richard Heinberg. As a reminder, Heinberg claimed (in 2011) that the world’s economic growth was essentially over, and that in the future any “growth” would be an illusion created by nations fighting over an ever shrinking economic pie. A nation may have a quarter or two of growth, or some prolonged growth as they stole more of the pie from their neighbors, but taken as a whole there was no more economic growth left for the world, largely because Heinberg also thought there was no more oil left for the world. The problem or course is how do you explain China?

It’s a lot easier to brush away claims of “growth” in the Western world, growth has been anemic (although still positive) for the last decade and a half since the Financial Crisis. And although US GDP has growth by 20% or more in that time, most Americans don’t “feel” any different, and so it’s easier for Heinberg to claim (as he does earlier in the book) that this growth is all just an illusion funded by debt. But China is different. Growing their GDP at near double digits for 3 decades straight cannot be easily ignored, and the Chinese middle classes have definitely seen massive changes in their lifestyles as almost anyone today in China can afford more and better stuff than their parents could. Houses are larger, food is more varied, technology is cheaper and easier to get to, China continues to experience massive economic growth, and that’s a difficulty for Heinberg who claims that’s impossible.

The first thing he does is punts, like anyone who doesn’t like the outcomes of China growing economically, Heinberg claims China’s growth is really just a bubble ready to collapse. I’m not about to say that China’s economy is perfect or that it doesn’t contain massive real estate speculation, but I’ve been hearing “China’s economy is a bubble that’s about to collapse” for over a decade now and I’m wondering when people will stop claiming this. A bubble is no longer a bubble is it never pops. China’s economy does experience downturns like everyone else’s, but I haven’t seen any evidence that the whole thing has or will soon collapse, as the world “bubble” would imply.

Heinberg goes on to say that China’s growth is also unsustainable because of falling exports to the West, depleting resources like coal, too many old people with too few young people, and all the other stuff that people have been claiming will implode China any day now. My question for today is: when does this end? If China continues growing at a steady clip, at what point do people update their theories to fit the facts? At what point can we conclude that China’s economy is not a bubble and has the momentum to withstand all the same shocks and stresses as a Western economy? China’s economy has more than doubled since Heinberg wrote his book, and I’m curious to know if he would accept this as disproving his theory or if he’s pushed “the end of growth” date back like so many pushed back “the end of oil.”

Now again, I’m not saying China or its economy is perfect. The Chinese Communist party is a totalitarian nightmare committing genocide in its own boarders and threatening war outside of them, the Chinese economy has vast structural problems that the government papers over, Chinese demographics are not ideal for a growing economy and there is no easy solution to any of these. But I don’t think China is going to collapse any time soon, I don’t think it’s economy is just a bubble, and I think people have been claiming the Chinese Sky is Falling for far too long without ever admitting that they are divorced from the actual facts.

People are always fighting the last war

We live in a time of high inflation and rock bottom unemployment, but I remember less than a decade ago reading the prognosticators of economics talk about how low inflation and high unemployment (or underemployment) were the inevitable future of our economy. It was said with as much certainty as could be mustered that the Financial Crisis had fundamentally changed the nature of our economic reality, no more could we expect governments to bail us out (they all had too much debt), instead we were going to keep suffering for a long while for the profligate lending of the banks. Of course that wasn’t true, and neither is it true that inflation and low employment are a certainty for the rest of time.

What’s crazy to me is that both predictions were made with the same data. Our population is aging, globalization inevitably moves certain jobs overseas and forces American workers and companies to compete with those in foreign nations. Our government has high debt, real wage growth is anemic or negative, and the job of fixing all this has landed solely on the head of the Federal Reserve since the rest of the government can’t or won’t do so. This describes 2012 as much as 2022, and yet this evidence is used just as confidently by the takemongers of 2012 who predicted an eternal low-growth as the takemongers of 2022 predicting eternal inflation. It reminds me of all the sci-fi books and movies from the 70s and 80s predicting a far future of the 21st or 22nd century in which the Soviet Union still existed, people routinely project their current reality onto the future without any further thought. If pressed they’ll then use any evidence at all to defend their predictions, even if the same evidence could be used for an entirely different conclusion.

The 2010s were a period of low growth, low inflation, and high unemployment/underemployment. The 2020s have so far been a period of higher growth, high inflation, and very low unemployment. Both decades have challenges, and many of the challenges are the same. But I see no reason to believe that the trends of today will last forever.

Gas is expensive, isn’t that a good thing?

So this post will be a little political, but laying all my cards on the table: global warming is happening and does need to be fixed. Decarbonization and renewables is a laudable goal that our country and world should be working towards. With that said, why are the environmental champions bemoaning the consequences of their own actions? For a long time, Democrats have been reminding us that raising the price of gas is the quickest way to make people use less of it. And this is absolutely true, as price goes up, demand goes down. In addition to direct carbon taxes, Democrats were proud to campaign on reducing domestic fracking and the production of oil and pipelines for the entirety of the Trump presidency. But now it feels like an “oh no, the consequences of my own actions” moment as the price of gas rises and Democratic administrations struggle to lower the price at the pump. The Strategic Oil Reserve has been emptying in order to reduce prices, many Democratic controlled states have suspended their gas taxes, some states are directly compensating drivers. All these things subsidize the price of gas and therefore increase it’s usage. Which is absolutely contrary to every effort and piece of climate messaging we’ve seen for the past 5 years at least.

I just feel like this should have been obvious, if domestic oil production goes down, then the price of gas will go up. We should have known that people wouldn’t like the price of gas going up, and someone should have thought about “how do we mitigate the harm to consumers if the price of gas goes up?” But instead that question was ignored, and now since the price of gas has gone up due to things outside the Democrats’ control (OPEC, Russia), the only response is to desperately try to bring the cost back down again. It makes a nonsense of all the efforts that came before it. There are ways to mitigate the harm to consumers brought about by the price of gas, but it should have been obvious that this would be the result of pro-climate policies.

“No one wants to work”

Inflation is up, unemployment is down.  This year there have been tons of stories about shortages and supply chains, and invariably a call has arisen from business owners: they’d like to hire more people but no one wants to work.  

When I see stories on local restaurants and businesses closing, inevitably I see an owner blaming their failures on no one wanting to work.  They had a good and profitable business going on, then after the pandemic suddenly no one wanted to work anymore.  This meant they couldn’t hire employees and so couldn’t do anything at all to make money and thus were forced to close down.  This is a dumb argument for many reason’s but to just pick one: labor has a market just like any other service. There is a supply and a demand for labor.  If you are demanding labor while the supply is constricted, the price you pay for labor will go up, and if you refuse to pay that price then you will go without, just as if I refuse to pay more for a Pepsi I can’t get one.  The price you pay for labor is the wage or salary so if you can’t get people to work for you then you need to increase the wage or salary you are offering.  No one is going to work for less than the market rate and so if you can’t afford the market rate of labor then I’m sorry but you’re going to go out of business just as if you couldn’t afford the market rate of rent or supplies or anything else a business needs.  People want to work, but no one wants to work for you if you’re not willing to pay them.

This “no one wants to work” nonsense got spread around a lot as the price of labor increased and many businesses found themselves unprofitable.  It was easier for owners to blame the moral failing of society than to admit that they weren’t good enough to turn a profit in a high wage environment.  But while this nonsense was rightly criticized by many, it reminded me of a similar economic trope that I don’t see get much criticism.

I’ve been reading “The Rise and Fall of Nations” by Ruchir Sharma.  What stood out to me was his discussion of immigration where he used a very popular left-of-center talking point that “immigrants do the jobs natives don’t want to do.”  He justified this with several anecdotes, but to me this smacks of the same false narrative as “people don’t want to work”.  It’s not that natives don’t want to do those jobs, it’s that those jobs are unwilling to pay a higher cost for labor and so usually receive special carve outs and exceptions allowing them to pay less.  This in turn makes the jobs unattractive to natives who have other options, and when the job creators whine to the government saying “no one wants to work!” the government responds with selected programs to allow the importation of cheaper workers.

Just look at agriculture in America.  In Massachusetts the minimum wage is $14.25, but it’s just $8.00 for farm workers!  Farm workers are also except from overtime pay and some OSHA requirements alongside the NLRA and many state laws.  The law has excepted farm workers from a majority of the protections and benefits afforded to other workers, so why would anyone work on a farm?  Why work on a Massachusetts farm for $8.00 an hour with no overtime, no safety, and no protection when you could make $14.25 an hour working for Walmart.  So instead these jobs go to immigrants, especially immigrants on special visas which only allow them to work on farms!  There’s no fear of your workers leaving for a better job if your government forbids them from doing so!  So let’s be honest, are these jobs that natives don’t want to do?  Or are they jobs that natives refuse to do because they have low pay, low benefits, low safety, and there are plenty of better options available.  

Farm employers say that it has to be this way: they can’t raise wages or they’d go out of business, or prices would rise, or America’s food economy would be destroyed by cheap imports.  This is the same excuse the “no one wants to work” crowd gives for refusing to raise wages, and is strikes me as the same 19th century nonsense that people used to use to argue against the minimum wage and every single worker’s rights law for generations.  Which is why it’s so infuriating that many left-of-center voices believe in the “jobs natives don’t want to do” narrative, even while they rightly point out that “no one wants to work” is a false narrative.  If farm jobs were as good as Walmart jobs we’d see far more Americans take them.

The American Challenge Finale: Eurofederalism for the future?

I know I haven’t written much about the American Challenge for a while, but as I read through the book I realized most all of my critiques would be retreads of what I had already said.  In the end, Jean-Jacque Servan-Schreiber’s thesis was made clear from the outset: Europe was falling behind in technology and economics and his preferred cure was Eurofederalism.  As an aside, some of my American readers might not know what Eurofederalism is, it’s basically the idea that Europe (the EU to be more specific) should continue forming an ever closer union between the states, such that political and economic power rests more and more with the supranational EU rather than the nations themselves.  Exactly what the end goal of Eurofederalism is varies from person to person, some people envision a United States of Europe, some want more federalism, some want less, but most would agree that the current amount of cooperation is not enough.  

With Servan-Schreiber’s thesis laid before us, it’s tempting to look back and try to judge how right he was.  On the one hand, I can see all his arguments from 1968 being made today in 2022: Europe still falls behind in certain sectors to American multinational corporations, and many Europeans still think the cure is Eurofederalism, so it’s tempting to call him a true visionary who noticed these things well before others did.  On the other hand, many of the problems he identified from 1968 were solved by Europe without the kind of Eurofederalism he envisioned.  University graduation steadily climbed in Europe to reach the same highs it did in America, Europe’s growth rate climbed so that America never outpaced it to the extent he though they would, and although Europe does not control many of the tech companies of today, they still have not missed out on the productivity gains that tech has brought because buying a computer is still as good as building in yourself.  Perhaps the Four Freedoms on the EU have helped Europe reach this point, but it’s clear that a common, EU-wide industrial policy was not necessary to maintain Europe’s economic growth in the face of American corporations.In the final tally, I do believe Servan-Schreiber was prescient for his day, identifying key weaknesses in the European economies and key strengths in the American one.  But in other ways he was wide of the mark, many industries he wanted to throw money at are not the ones building the future, and his preferred answer was not necessary for Europe to “catch up” in many ways to America’s standard of living.  Overall though, a very enjoyable read: 8/10.