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  1. #1
    The elder Holmes Mycroft's Avatar
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    Default Government involvement in economy

    I initially posted this in Reason's excellent thread, but I'd like to encourage discussion of the topic among a wider audience, so:

    I'm only beginning to understand the basics of economy, yet already I can see the problems inherent with governmental meddling in economic affairs. As Reason pointed out, governmental officials are, on the whole, in no way qualified to address economic issues. Even in situations where government officials do turn to people with some degree of expertise in the field, the pressure is still on these experts to crank out band-aid solutions so the politician can get the votes necessary to keep his job -- with little-to-no regard to long-term consequences. Not to mention that the "aristocracy of pull" that leads to all of the unfairnesses and absurdity bleeding hearts are so quick to point out is only possible in a government where officials have the authority granted to them to tamper with the economy!

    A perfect example:

    American farms have been cranking out well more corn than the nation can even consume. At present, the demand for corn in relation to the supply is so low that farmers, were it not for the checks handed out by the government, would actually be losing money on each ear of corn they grow. However, cheap corn benefits giant corporations like General Mills (for obvious reasons) and McDonald's (which feeds the corn to thousands of cows at what can only be described as "meat factories") -- corporations which have tremendous pull. Pull that wouldn't be possible if the government hadn't the authority to meddle with matters of economy!

    The results? Among other things, as corn is incredibly cheap as a result of the process mentioned above, corporations have a financial interest in finding as many things to make of it as possible. Most of the things these corporations make are horrible for Americans' health and are fueling the obesity crisis. Not to mention that turning corn into all of the various nigh-but-unpronounceable chemicals that are now present in virtually everything Americans ingest (Along with a few things they don't!) requires the burning of tremendous amounts of fossil fuel.

    Further, all of these cows that go into Big Macs are being fed corn in a diet that destroys their health and leaves them a wide-open mark for disease and infection. (Hot tip: cows don't naturally dine on corn!) To combat this, the cows are pumped full of antibiotics as part of their diet, and to compensate for the lack of proper protein the cows are fed the lard of the cows that were "processed" before them. Needless to say, the cows live in extremely close proximity with one another. Can you venture a wild guess what may come of this scenario?

    All of this is made possible by government regulation! And yet, when some one posts a sad video to You Tube showing the living conditions of all of these poor cows, know-nothing bleeding hearts point to the corporations, which wouldn't be able to perpetuate this cycle if not for the artificially low price of corn, and demand more governmental meddling!
    Dost thou love Life? Then do not squander Time; for that's the Stuff Life is made of.

    -- Benjamin Franklin, Poor Richard's Almanack, June 1746 --

  2. #2
    I am Sofa King!!! kendoiwan's Avatar
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    You're asking a chicken or the egg kind of question. If the corporations pull the strings of the government then is government really the problem? If government didn't control it, then who would? What is your alternative method of regulating the economy?
    http://www.typologycentral.com/forum...ml#post1161526

    "They the type of cats who pollute the whole shoreline. Have it purified. Sell it for a $1.25"

  3. #3
    Glowy Goopy Goodness The_Liquid_Laser's Avatar
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    I've been told that one reason farmers are subsidized is for national defense purposes. I.e. if our nation were under serious threat then we'd want land available to sustain ourselves on our own food. That doesn't really mean I agree with the subsidy, but I tend to think we are spending way too much on defense anyway. If you look at the subsidy to farmers as a part of defense spending, then it's a relatively small percentage. The real issue I think is the government obsession with dumping tons of money into defense.
    My wife and I made a game to teach kids about nutrition. Please try our game and vote for us to win. (Voting period: July 14 - August 14)
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    Senior Member Lateralus's Avatar
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    Corn syrup is in just about everything we eat.

    Corn also requires a lot of water to grow, more water than the annual rainfall in places like Nebraska usually get. So, during the drier years farmers drilll wells into a massive aquifer (Ogallala Aquifer) that covers much of the state of Nebraska, among others. This underground lake replenishes itself very slowly, much more slowly than the farmers use the water. Given current trends, this lake will run dry in about 25 years.

    Should government regulate the water use? Or should they stop subsidizing an activity that promotes wasteful water use?
    "We grow up thinking that beliefs are something to be proud of, but they're really nothing but opinions one refuses to reconsider. Beliefs are easy. The stronger your beliefs are, the less open you are to growth and wisdom, because "strength of belief" is only the intensity with which you resist questioning yourself. As soon as you are proud of a belief, as soon as you think it adds something to who you are, then you've made it a part of your ego."

  5. #5
    DoubleplusUngoodNonperson
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    Quote Originally Posted by The_Liquid_Laser View Post
    I've been told that one reason farmers are subsidized is for national defense purposes. I.e. if our nation were under serious threat then we'd want land available to sustain ourselves on our own food.
    Correct. It would be difficult to count the number of times in history that an advancing army or defending city had to capitulate due to nourishment issues. They pay farmers not to farm because they want to keep commondity prices stabilized yet have farms ready to go if shit hits the fan

  6. #6
    Senior Member ptgatsby's Avatar
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    Quote Originally Posted by Mycroft View Post
    All of this is made possible by government regulation! And yet, when some one posts a sad video to You Tube showing the living conditions of all of these poor cows, know-nothing bleeding hearts point to the corporations, which wouldn't be able to perpetuate this cycle if not for the artificially low price of corn, and demand more governmental meddling!
    I fail to see the connection between 'poor cows'/'meat factories'/etc and government regulation.

    If anything, that's exactly what a lack of regulation does - force the bottom line by finding ways to slice away at all costs of production. Economy of scale is in full force in the meat industry. Changing the cost of feed, available to all meat producers, would make no notable difference, unless the food chain requirements were not bound together (they are: land to grow food < land to graze for food, and the difference in arable land is irrelevent as anything that is growable for feed can be churned at a higher rate through specialization).

  7. #7
    Senior Member creativeRhino's Avatar
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    Ah, but in the US you have lobbying in a way that doesn't seem to happen overseas (intensity, donations etc) or there are corrupt countries that decisions are fueled by personal bribes. The influence of lobbyists is probably one of the biggest "non democratic" distortions of the US. I am sure that maintaining the farms is a national security issue - as well as an economic independence issue, but the farming lobbies would be playing on that one as an excuse. Heck the only time it would be a real issue is if the US had no allies to trade with!

    So the corn growers lobby, and then there's all the subsidies given for all sorts of things that preserve "farming life" but also go to agri-business. So then the corn growers find ways of influencing food manufacturers to create a market and viola - corn syrup in everything! One distortion leads to another. The free market is not necessarily rational.

    Years ago Australia dropped all subsidies and protections of farming at the request of the US based "free marketeers" - we had a very protectionist/tariff laden system for farming and all manufactured goods. The US and Europe still subsidise their agriculture. Australia has some of the most efficient farmers - the only relief they tend to get is in times of drought (ie natural disaster). There was a shake out - quite a few farmers left the land (or rather their children decided not to stay in the business) but our farming sector still works. NZ did likewise - a short sharp shock - the approach was called. It recovered in a changed form..

    I find it strange that in Europe and the US there is still so much "protection" of many industries. They say they believe one thing, but do something different or sometimes "good" reasons electorally.

    As far as the recent US meltdown is concerned. The subprime loans that helped start all this were being sold in a bit of a pyramid scheme - collections of liabilities bundled and rebundled and sold from more money at each stage (relying on the "greater fool" theory). Now, there may not have been a law against it, but it wasn't sustainable as a business practice - except for those who got fees for transactions. Ethically and from a sustainability pov it was questionable.

    Ethics in business seems to be MIA. If every product had to go through an ethical vetting process like medical experiments I wonder how many would be left? Science has peer reviews for checking "facts" and validity of ideas.

    So, one thing that could be useful is "standards" vs regulations. A business can create products that meet "standards" or not. That way the buyer can choose.

    But what amazes me in this mess (in the US) is how those now asking for bailouts have insisted on having "freedom" (from regulations/taxes) to profit (senior management & shareholders) and have still asked for subsidies/protections etc in the good times and now scream "if you don't help us, you'll go down with us". And then to receive help and not want what they do with it to closely supervised. They seem to want all the benefits of a free market but not have to deal with all the consequences of being in one - decent quality product, needing to compete, adapt, and think long term.

    The wrong regulations are a nightmare and no regulations (or "self regulation") can't be relied upon to create ideal results from a socio-economic POV even it it is technically an "economic success" (like the banking sector until recently). In effect, the recent events have lead to the nationalization of some banks which is exactly the opposite of what is deemed "good". In boom times the "corporate culture" can go into "binge" mode. Something had to be done to protect people's deposits/assets when it came unstuck, but that is the worst and most expensive time to intervene. Regulations/oversight etc could have reduced risks and also the boom that they fueled.

    Regulators/standards setting bodies need to be really representative and balanced that really earn their keep and not just rubberstamp entities.

    PS - I had a "dress circle" seat to the dot-com boom/bust when I worked for a big US IT corporation back then. I was in and out of board rooms, vendor sessions etc seeing how so much of a "bubble" it all was. It relied on people not stopping and thinking long and hard about the "right solution" but opting for the "cool solution".
    Last edited by creativeRhino; 01-05-2009 at 09:19 PM. Reason: add last paragraph

  8. #8
    pathwise dependent FDG's Avatar
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    Generally speaking: the more the government is centralized (i.e., the more tha national median voter counts), the more government intervention will be skewed and not beneficial. I am personally in favor of constructing an extremely small central goverment, coupled with mid-sized delocalized regional (smaller than the current american states, though), parliaments. Obviously, this solution should be specifically tailored in a way that allows the easy construction of interstate infrastructure, yet denies the central government any power on regional matters.
    ENTj 7-3-8 sx/sp

  9. #9
    Senior Member creativeRhino's Avatar
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    FDG, I think something along the lines of the swiss system (the good bits!) of referenda etc are very possible these days. The only problem with regional solutions was seen recently in the US when the Southern Republicans basically tried to thwart the Auto bailout - they have Auto makers in there states and they figured that if the big 3 went, it would go well for their states where they have created circumstances to attract the foreign companies.

    Competition is part of capitalism, but it can have unintended side effects that may end up playing a game of "beggar thy neighbour".

    an interesting read on mother jones from a tax professional on how distortions have happened and some new ideas -

    Fiscal Therapy

    for years now, whenever I've been invited to lecture students on how our tax system works, I have asked a simple question: What is the purpose of the United States of America? The most common answer, be it at prestigious universities, elite prep schools, rural community colleges, or crowded urban high schools, is this: To make people rich.

    This should come as no great surprise. For anyone born after, say, 1970, the world has been shaped by Ronald Reagan's remaking of government's relationship with private interestsa vision of lower taxes, less regulation, and maximum economic leeway for those at the top. In this view, the pursuit of wealth is the warp and weft of America; everything else will follow.

    By contrast, the preamble to the Constitution tells us the nation's reason for being in 52 words that can be reduced to six principles: society, justice, peace, security, commonwealth, and freedom. Individual riches don't make the list. They are a product of American society, not its guiding purpose. Progress, then, must begin with a return to the best of the values that created this Second American Republicone born, it's worth remembering, from the failure of the Articles of Confederation, whose principles (weak government, unfettered capitalism) found their resurrection in the economic policies of the past three decades.

    Even judged by its own yardstick, the trickle-down approach has failed to deliver: Rather than getting richer, we have been slowly impoverishing ourselves. While incomes at the very top have soared to levels beyond imagining even a generation ago, the average inflation-adjusted income of the bottom 90 percent of earners was lower in 2006 than it was back in 1973.
    The bolded words pretty well sum up where the government should be involved, and it would work well in most countries, not just in the US.
    complete equality is unfair, just as unlimited inequality is unfair. Life isn't fair, but it shouldn't be downright impossible for the average person. When a person has excessive power/money they can control and influence things outside the democratic process.

  10. #10
    Lallygag Moderator Geoff's Avatar
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    Quote Originally Posted by FDG View Post
    Generally speaking: the more the government is centralized (i.e., the more tha national median voter counts), the more government intervention will be skewed and not beneficial. I am personally in favor of constructing an extremely small central goverment, coupled with mid-sized delocalized regional (smaller than the current american states, though), parliaments. Obviously, this solution should be specifically tailored in a way that allows the easy construction of interstate infrastructure, yet denies the central government any power on regional matters.
    Wouldnt the cost of all that extra bureacracy/corruption be a problem?

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