Wednesday, October 8, 2014

China is the world's largest in one way

The IMF today announced China now has the world's largest economy in terms of purchasing power, but jumping to the conclusion that China is number one also needs to take into account a lot of other factors:

  1. In terms of the raw size of the economy calculated by real GDP they are still only around $10 trillion versus America's $17 trillion.
  2. China and the United States have roughly the same distribution of income. This will have long-term effects on the power dynamics of China's government and access to opportunity.

Other things about China's economy I must point out:
  1. China's GDP was 44% from industry in 2013. It has been in the 40s since about the 1980s, which shows that their economic growth has been unusually even across all industries. This is probably due partially to keeping their currency artificially deflated by printing lots of currency to keep it cheap relative to the US dollar, which is probably the largest dispute between the two countries today. This is very different from the narrative that we often hear about China. (IMF)
  2. Their GDP per capita PPP is currently around $13,000 while the US is around $54,000. There is no question that the US beats China on this metric and it is going to take a long time for China to catch up to us on this. GDP matters for geopolitics, but China won't be a really serious contender for being the world's strongest power until their GDP per capita gets above the middle income stage, which is where it is right now. (IMF)
  3. Leaving inequality aside, and using statistics that sidestep this issue, America currently has the 4th highest median household income (which controls for inequality) in the world at around $31,000 (World Bank), while China's median household income is around $4,600 (27000 RMB) which shows a massive difference in the income of people in the United States and China. China has a long way to go to meet us on this mark. http://econweb.tamu.edu/gan/Report-English-Dec-2013.pdf
  4. When it comes to Household final expenditure per capita the United States is currently around $31,000 and China is at $1,300. China is rapidly rising and hopefully will continue to rise in the future. (World Bank)
  5. They rank 91st on the Ease of Doing Business Index, the United States ranks 4. The best city in China to start a business is Hangzhou and it takes an average of 31 days to start a business, which is close to the national average, versus an average of 5 days in the United States. The amount of capital you need to pay in on average is 71% of national income in China versus 0% in the United States. This has a very real effect in the ability of entrepeneurs who are not well connected and already wealthy to start a business.
  6. The rate of poverty in China below $5 a day remains above 50%, though the rate of poverty under $1.25 a day has plummeted from around 63% in 1992 to 6% today (adjusted for price inflation). China has come a long ways in the reduction of poverty and there is still a long ways to go in its reduction still. The trend however is towards less poverty.
  7. China currently has large problems with corruption, ranking at number 80, while the United States ranks at number 19. This is a deep threat to the economic and social stability of China. http://cpi.transparency.org/cpi2013/results/
IMF data: https://www.imf.org/external/datamapper/index.php

http://www.newsweek.com/chinas-economy-overtaekes-us-worlds-largest-276104

So the future of the global economy is going to see China continue to grow, and this will be a good thing for people in China. The following policy changes would fix or at least start to fix the current problems:

  1. Make it easier to start a business. This will immediately increase the demand for workers, push wages up, which will decrease their GINI coefficient, which will increase their multiplier, which will in the medium run increase their GDP growth again.
  2. Open up private banking to increase investment opportunities.
  3. Bring back the state health care system.
  4. Increase access to education in rural areas.
  5. Repeal all restrictions on migration around the country to increase the ability of people to seek out new economic opportunities.
  6. Implement trial by public jury to separate the courts from the political process. This will help reduce corruption.
There is still enough room for development of the political and economic situation to merely say that China has overtaken the United States is rather silly, and misses most of the picture. Hopefully China will continue to develop and see it move forward even further.

Given that China has a population over 4 times that of the United States it was inevitable that they would someday overtake us in one GDP metric or another soon, and is actually a good thing because it allows their economy to grow so their GDP per capita can start to approach a developed level, and hopefully continue to see a rapid decrease in poverty along with other problems.

Thursday, October 2, 2014

America loves Hong Kong and China

We are currently witnessing what could be the largest revolution in the history of the world in China, with the people of Hong Kong finally standing up against the government of China's illiberal policies. China currently ranks at 181 out of 201 nations and self-governing territories, while Hong Kong ranks at 18, higher than the United STates. But since Hong Kong is part of China and the Chinese authorities are trying to implement one of the worst human rights records in the world in one of the most free areas in the world. This of course is leading to trouble for the Chinese authorities because the people of Hong Kong don't want to be under such a government like all other people in the world.

This however will hopefully not stay isolated to Hong Kong, since the rest of China has a similar situation of not having free, fair, and open elections. I am hoping that in the next week or two we will see the student rebellion expand to other cities in China which will scare the dickens out of the Chinese government. If the military realizes that they have the same interest as the students who will lead the protest then the emperor will have no clothes, and the Communist Party will fall. I hope this will happen so the people in China will see an improvement in their situation in the near future and the Republic of China will return to the mainland (which currently ranks at 43).

This is the latest chapter in the long struggle between the Confucian leaders of China who claim obedience to the government as one of the highest values and the Mohist faction which has survived 1500 years of persecution by the Chinese government and is one of the earliest if not the earliest form of liberalism in the history of the world. It is currently prevalent in Taiwan and hopefully the students across China can make it dominant in the political sphere.

America loves China.

Tuesday, September 23, 2014

I've never been so glad I was so wrong

An important issue when it comes to social change is how to effectively make the change because it isn't enough to just have good intentions but no strategy to make your plan a reality and ensure it will come out with the ideal result. Good intentions without meaningful action don't put bread on the table and end injustices.

One issue I have been skeptical of until recently is how effective gender quotas are. I have focused on many other issues that I have never studied this issue as deeply as I want to. I have now done reading from www.quotaproject.org and others. Fortunately gender quotas are effective in increasing representation for women and this means we have been doing the right thing for the last few decades, which makes me very happy.

Interesting reading:
http://www.ifes.org/Content/Publications/Articles/2012/How-to-Increase-the-Effectiveness-of-Gender-Quotas.aspx

Sunday, September 14, 2014

Lebanon's Elections

Lebanon is currently undergoing what I consider a constitutional crisis, and has been since the 23rd of April. In order for a President to be elected he must be elected by a 2/3rds majority of Parliament, more like a Prime Minister in other countries. This however means if no one receives a 2/3rds majority there will be a second election and this continues on forever until someone is elected.

The Presidential election was supposed to happen in April and it is now September. This has taken a total of 5 months so far, and is showing no signs of stopping. This makes me think it is time for Lebanon to look at alternatives to electing their president and the only mechanism I can recommend is to make the President popularly elected using IRV which will prevent future problems and ensure that every vote counts with no wasted votes or spoilers.

Hopefully someone with influence in Lebanon gets the message that a better system is possible. 5 months is just too long to wait for an election to finish.

Open up Relations With Iran

http://www.aljazeera.com/news/middleeast/2014/09/us-no-place-iran-at-islamic-state-talks-20149131350596285.html

Secretary of State John Kerry announced on Friday that Iran will have no place at talks regarding the Islamic State due to their support of the Syrian regime.

This however, does not represent the whole picture. It is true that the Supreme Leader of Iran holds almost all the political power, but the current President of Iran, Rouhani, is a reformer and has stated that the future of Syria should be decided by its people.

This has created tension within the Iranian government, between the ideologically right-wing supreme Leader Khamenei who has been in power since 1979 and Rouhani. We should not let this opportunity go to waste and should start dialogue between Rouhani and the United States. If we do this than there is a possibility of renewed protests like we saw in 2009 and since the majority of people support Rouhani as we saw in the 2013 elections we can be fairly certain which side the people are on. This is further proven by how the 2009 elections were clearly fraudulent and the 2005 elections had suspicious characteristics. Basically, most Iranians favor relations with the West along with liberal ideas which gives us a huge advantage over Khamenei.

So, the United States should not unilaterally go into Iran and take out the Supreme Leader given his opposition to his policies. That was a frequent occurrence of American foreign policy and is destructive because it is illiberal and causes people to not support our policies. It also makes it hard to be a liberal nation. George W. Bush (in Iraq), Ronald Reagan (in Grenada), and Richard Nixon (in Chile) performed these policies which made us hated abroad. The future should be more collaborative and focus on expanding the ability of people to determine their own future. When we depose people such as Allende in Chile our image abroad is damaged, decreasing global freedom, and making it harder for America to perform foreign policy. Hurting the people of a nation hurts our ability to have relations with that nation and can take decades to recover. If we want to make long-standing trade relations they need to be beneficial to both sides, make a situation where the people of the nation will favor of our policies and cooperate with foreign governments while respecting sovereignty. This is the most effective way to build long-standing relations, which is what we have done with Europe and Japan and has made those some of our strongest relations in the world with some of the highest approval ratings of the United States. Our relations with nations in the Middle East have been filled with decisions which make them distrust us which makes it the place where people most hate the United States to our peril, and theirs. Overthrowing dictators by bringing the people to our side and improving our image will make this world better in a more effective manner than any other method.

So, this is why we should open the door to the President of Iran who has the support of the people to someday make our relations stronger so Iran can be a land where people have the rights they deserve and we need to change course. We have a golden opportunity right now to help the People and expand freedom and if we are serious about our founding values we will take it. We need to be the peacemaker which will make people across the world love us and want to work with us. Iran is a nation of 77 million people, and if we have them as an ally in a collaborative way we will be better off, and Iran will be able to have freedom.

America loves Iran.

Tuesday, September 2, 2014

Beware the pigs

In the 1880s the British South Africa Company moved into what is modern day Zimbabwe and got a concession from the King for mining rights in the region in 1888. The British started to enslave Zimbabweans and established settlements of Englishmen. The natives no longer had any sovereignty and over the next 60 years until the 1950s they were in a feudal system. The colonial era saw the resources of the people of Africa be stolen by the colonial powers. This ended when the Africans grew tired of their colonial oppressors and formed independence movements to have more rights. In 1963 Rhodesia gained independence along with other African nations in that era, after which they were led by Ian Smith until 1979. Rhodesia was set up so there were separate voter rolls for people based on property (not indifferent from the United States when we were founded where you had to own land to vote) which effectively gave the landed white settlers most of the political power despite being a minority. In this era the government reserved a majority of seats in Parliament for whites and made it almost impossible for African political parties to get enough power to represent the majority. The way Rhodesia was set up was being decreed as racist by the rest of the world. (Source: Wikipedia) Of course, we can't blame Ian Smith completely because he was merely a figurehead of a massive governmental organization which was nominally democratic for those who had land, and was outspoken on supporting Mandela while the United States and Israel maintained good relations with the Apartheid regime, and he had started to work to try to bring majority rule to Rhodesia before 1979. It is easy to demonize him given that he was president of a country with minority rule (and while I started writing this article I found myself falling into the same trap given similarities between him and other African leaders who led for such long periods of time) but it is important to look at an individual with the context of his time and place and the power dynamics at play to diagnose the entire system as being racist and not blaming everything on the head of state when there is a congress or parliament with considerable power.

In 1979 however Mugabe came to power, under the guise of freeing Zimbabweans from their white oppressors. He promised progress and change, but his economic reforms quickly turned the country into one of the poorest and most backwards in the entire world. He has established a one-party rule where anyone who speaks against his regime is arrested or killed, frequently landing near the bottom of the rankings of all freedom indexes. He did not become as so many hoped a figure for freedom for all Africans and has frequently committed crimes against other tribes, and the white minority who are for the most part disenfranchised and have left Zimbabwe as refugees. He tries to portray himself as black empowerment and given how Africans have been abused for so many generations many see this as a good thing, but no one chooses the color of their skin and even though it isn't in the order we usually think of when it comes to racist regimes Mugabe is indeed a racist and continues to pursue policies which have made Zimbabwe a backwards state for all Zimbabweans, including targeting certain tribes of natives disspelling any notion of him being a freedom fighter for Africans.

This is in comparison to South Africa where after the truly brutal racist regime that lasted almost 50 years Nelson Mandela rose to lead South Africa to become the most economically advanced nation in Africa whose speed of economic development is close to that of China. He did this not by looking at it in terms of an us vs. them mentality but as a real liberal tried to bring all South Africans to a place where they could leave peacefully without creating a refugee crisis. They are now the freest nation in Africa for native Africans and all people compared to all other nations on the continent. The rights of people in nations in Africa where they didn't look for a multilateral liberty-based approach but instead a Marxist relativist approach where it is seen as a conflict between different classes (which were deeply aligned with people's ancestry being either European or African for the most part) have not improved since decolonization and their standard of living is the worst in the world.

When trying to advance rights for one group of people, be it Africans in Africa, women across the world, homosexuals, transsexuals, and other groups it is paramount to not turn it into an us vs. them mentality but attempt to make the value of all men being created equal a reality. A rising tide raises all boats.

Freedom in the world does not have a limited quantity and the amount of freedom in a society goes up and down over time. When one person gets the ability to speak freely this does not mean another person cannot publish their thoughts as much. My writing this blog without my government cracking down on me if I say something they do not like does not prevent another person from writing a blog of their own. This is how the world works and the great thinkers of liberalism, John Locke, America's founding fathers, and John Stuart Mill all understood this. When Europe passed the Schengen treaty the average amount of freedom in the world increased, but the amount of freedom that Americans had did not decrease because the border between Germany and Poland was opened. This is also of course what happened in Animal Farm by George Orwell who noticed this in the USSR and ended with one of the greatest quotes of modern literature, "The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which." which is applicable in Zimbabwe.

When expanding the rights of one group we need to ensure that we don't also make it harder for one group to have what they deserve. When we continue to expand rights for African Americans across the United States so that those who live in poor communities (because not all African Americans are poor) have police services that respect them we need to deal with the problem directly by implementing laws that hold police accountable for their actions so that they keep their actions within the law which doesn't always happen which is a great shame on our entire nation. Decreasing the quality of police in majority-white areas will not make people in majority-African American areas more free, in fact I would expect it would have the opposite effect. We need to write laws that directly address the issue along with caveats which will inevitably occur so that we can have programs that work effectively.

If we don't we will end up being no better than Robert Mugabe who talked about a Zimbabwe where Africans would be free only to turn back on his progress and make it worse for all Zimbabweans. We must be true liberals and focus on the rights as the end goal and divorce ourselves from the notion of one group always being the oppressor and one group always being the oppressed, because roles can and at times have switched in brutal fashion. When we realize this we can have freedom.

Sunday, August 17, 2014

Median Household Consumption

In economics when we are trying to describe the various quality of life of different countries we use different types of metrics. Each of these metrics has their own benefits and their own flaws. The following are the ones that I think are the most important:
  1. GDP per capita PPP. The advantage is it is super easy to calculate. The flaw however is it doesn't take into account income distribution so the number could be very different from what the average household actually feels like.
  2. GNI per capita PPP. The same as GDP except it includes income earned by expatriates of that country and excludes income of expatriates within that country. Same advantages and disadvantages.
  3. Real Median Household Income PPP. The advantage to this over GDP per Capita is that it takes into account income inequality, and excludes non-workers. If we had two nations with 100,000 households and a GDP PPP of $1,000,000,000 but in one of them one person had an income of $900,000,000 we would have a very skewed society, and Real Median Household Income will show that this nation is really quite poor at a Income of around $1,000 versus a Household Income approaching $10,000 in a more equal society. This is important because it gives a more accurate picture than using GDP per Capita relative to the average family.
  4. Average Wage. This is the same as the last metric except that it subtracts taxes. This is the most accurate we currently have except it has one problem. Let's say we have two nations like the last example with 100,000 households and a GDP PPP of $1,000,000, but in this case they have perfect income equality meaning that each household earns $10,000, and both of these countries tax their residents at at an effective rate of 20% of their income, leaving disposable income of $8,000. But the issue with this comes into play where lets say in nation 1 the person in the middle gets back 75% of their taxes in the form of services from the government meaning their actual consumption is $9,500 while in the second country only 10% of their taxes go back to the citizen in the middle in the form of services from the government meaning their actual consumption is $8,200. This has a large effect on true consumption when we talk about corrupt nations, and why I think we should include this in a further analysis.
I call this metric Median Household Consumption because it is measuring not the disposable income of residents but their actual average consumption. This would be calculated by taking the Average Wage and then adding in the value of government spending that is seen by the average family.

This would significantly clarify the picture when comparing the United States to countries such as Sweden when it comes to issues like education as I explain in my critique of Average Wage. The median person could see a massive increase in their total consumption if there is an extremely progressive tax structure and strong welfare state versus what average wage will state.

We would then to calculate the median household consumption only need to look at how many government services the average person consumes over the course of a year and add that to average wage. It should also calculate the multiplier effect of spending (such as military) which effects the income of all people which is data we have and does impact everyone else in the economy to a certain degree because people working for the military (for example) spend their money stimulating demand in other sectors which effects wages. This will give us a more reliable estimate for the actual consumption of people in different countries than any other metric used to date, because for most economists the question is about how to improve the quality of life for all people at the end of the day, and we need the tools to tell us which country's government policies are working correctly.

We need this to be able to better evaluate policies so we can improve our world and have more fair and accurate comparisons between countries.