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On trickle-down economics

Anyone who isn’t an acolyte of Reagan, Rand, Hayek or Friedman knows that getting money into circulation is the key: money is the lifeblood of an economy and it needs to be moving around.

My example is to imagine putting $1000 in the pocket of a guy who makes $20k vs one who makes $100k. The former will spend it, or most of it, probably on things he has put off buying or to pay down credit cards, etc. But that money will certainly pass through a lot of hands in a short time. Things will be made or repaired. Food service/restaurants will see some of that. The hardware store or home center will benefit. And the ultimate beneficiaries will be the people working at those places. And they in turn will spend that money…

The other guy will put it in the bank, invest it, or maybe buy a big ticket item, something nonessential. It likely won’t be groceries or home repair or something from Main Street. Maybe a new bauble, most likely of non-US manufacture as so many things are. But not much of it will go into local hands, through dining and tips and the incidental friction of the marketplace.

If there is a simpler, more direct argument for raising wages for the lowest earners, I haven’t heard it.

Underlying opposition to this is the deep and abiding disapproval of someone having an unearned good time. “If we give a bunch of mechanics and shop clerks a bump, they’ll only spend on themselves,” goes the predictable response. See above on money as the lifeblood of an economy.

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If business acumen is what’s needed, why not find a real businessman?

We hear a lot about the desirability of business acumen for elected officials, as if the provision of government services is responsive to market forces or has something like a profit motive.

Actually, being a success in business has nothing at all to do with running a responsive government of any size, let alone the world’s largest. But I get tired of hearing about Willard Mitt Romney’s awesomeness at capitalism without any evidence beyond his personal fortune. Capitalism at its best enriches more then just the proprietors and management, by making products or providing services that are cheaper, better, completely new and original or any combination. Sure, getting rich means you did something right but true success means you bettered the lives of your customers and employees, not just you and your investors.

Staples is mentioned as a big win for Romney. At first glance it looks like the idea was WalMart for office supplies, or another iteration of the “Lower Prices. Always.” idea. You’d think a Harvard MBA would realize that’s unsustainable, a variant on the Greater Fool theory: you buy into an unsustainable or short-run idea, hoping to sell out before the truth of it gets out. It’s not a Ponzi scheme or pyramid game, nothing illegal, just one of the twists of the market.

Staples was the first of the big three office supply chains but in looking over the history at Wiki, Romney isn’t even mentioned. His contributions were probably limited to financing and a seat on the board, as his own bio mentions. He lists a lot of other businesses to which he contributed expertise but I don’t see anything that looks imaginative or visionary. He didn’t start a car company to reinvent Detroit, for example, as a hat tip to his father’s legacy.

And there’s the LBO angle, that old notion from the 80s:

Romney soon switched Bain Capital’s focus from startups to the relatively new business of leveraged buyouts: buying existing firms with money mostly borrowed against their assets, partnering with existing management to apply the “Bain way” to their operations (rather than the hostile takeovers practiced in other leverage buyout scenarios), and selling them off in a few years.

So he’s not really a capitalist/entrepreneur but a consultant/financier. Nothing wrong with that but it doesn’t fit the narrative he wants us to buy, of the shrewd businessman. He’s not a team member so much as a team owner who hasn’t faced the risks that true capitalists face on a regular basis.

So I’m not buying the idea of the resolute capitalist so much as an opportunist with a bankroll. I’m sure he’s plenty smart (hey, he went to Harvard, just like our President and many others besides). But smart isn’t necessarily imaginative or creative. He certainly isn’t empathetic, doesn’t connect with the people he aspires to serve. And I have no idea why he wants the job other than to get Obama out of it or that it’s his turn, compensation for his father’s thwarted ambition. I think we’d be well served if we could trade the son for his father, since the son never learned anything from his father’s example.

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noted in passing

Income inequality, as seen from space

Last week, I wrote about how urban trees—or the lack thereof—can reveal income inequality. After writing that article, I was curious, could I actually see income inequality from space? It turned out to be easier than I expected..

Herewith, some from my own life:

Where I live now:
Screen Shot 2012-05-24 at 8.26.59 AM.png

Where I lived during my high schools years (left side of the image):

Screen Shot 2012-05-24 at 8.30.47 AM.png

Where we lived when our kids arrived:

Screen Shot 2012-05-24 at 8.39.39 AM.png

I need to look at more of this.

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noted in passing

housekeeping

Not that anyone will notice but I had to remove all the old comments (after dumping the database to preserve them). They had become linked to different posts than the ones they had been associated with and no longer made any sense. I suspect I broke all that when I cleared out a raft of automagically-saved drafts and revisions and then — stupidly — renumbered the remaining posts. Hmm, those post numbers must be important…

Goes to show how much attention I have been paying to this almost 10 year old wossname.