Why did Spain, the Netherlands and Britain Conquer the Philippines, Indonesia, and India? Where was China?

By 1850, Britain controlled the coast of India, Spain controlled the Philippines, and the Netherlands controlled Indonesia. Where was China? Japan was a small power, very poor and isolated, so it couldn’t have done much then. But China was a state of over three hundred million people, it had an economy larger than all of Europe, and, had its government the will, it could have easily ousted the Europeans from India, Indonesia, and the Philippines in the centuries before 1800.

Much for the same reasons European powers didn’t conquer each other. Chinese military technology was too its neighbors for China to be able to have done so if it tried. Plus, if China conquered India, it would not have had the same type of gains from trade, tribute, and specialization Britain had, as China, like India and unlike Britain, was very rural and abundant in goods India and Southeast Asia produced. For Britain, the marginal benefit of more tea, clove, and rice imports was high. This was even true for more agricultural countries like Spain and Portugal. For China, it was very low, indeed. India didn’t have much to offer China, but it had much to offer to the West.

If the the Philippines, Indonesia, and India had substantial silver reserves, the situation might have ended up much different, with China having a much greater incentive to conquer them. Throughout the 18th century, China was a large net importer of silver, and had constant problems with low nominal GDP.

Israel: A Typical Southern European Country

Israel is often seen as some kind of exceptional country in U.S. discourse. And, for the Middle East, it is. But not for Europe, even Southern Europe.

Israel’s 2012 PISA score is a mere 454, 483 for Hebrew speakers and 350 (lower than in Qatar) for Arabic speakers. This makes Israeli Hebrew-speakers about equivalent in school-related test performance to Italians, Spanish, and Portuguese. Considering the fact the Jews are the most (on average) intelligent race of man, and continue to wield disproportionate influence in the West, I can only conclude that the vast majority of Jews deciding to raise their children in Israel are solidly on the left side of the Jewish IQ bell curve.

Israel’s economic performance since 1950 is also unexceptional for Southern Europe. Before 2005, it was somewhat worse than that of Greece and Portugal (though after the crash, it was clearly quite a bit better). Perhaps this is misleading, as Israel is a much more fertile country in people than either Greece and Portugal, and contains a sizeable population of comparably unproductive Arabs, but, even after the crash, Israel’s economic performance is clearly no better than that of, say, Italy, and is comparable to that of Spain. Germany it isn’t, in any respect. However, its economic leadership was clearly wise in its avoidance of the Southern European post-Great-Recession supply-side economic stagnation.

https://research.stlouisfed.org/fred2/graph/?g=396n

Why Isn’t Everyone A Slave?

Some say that if Abraham Lincoln didn’t end slavery by force, it would never have ended in the South. Now, of course, that is ridiculous. But, the question is, why is it ridiculous? Southern politicians pushed hard for slavery to expand into new territories, and yet, it barely did. Why did wage labor supersede slave labor, first in the northern states, then in the territories? Why didn’t slavery expand, not just into the territories, but into the northern states as well, thus becoming the dominant form of labor in the world? In short, why isn’t everyone a slave?

The areas where slavery was predominant were overwhelmingly ones where they were used for the production of cash crops -cotton, tobacco, rice, hemp, indigo. Slaves were apparently nearly useless in wheat (Kansas) and maize (Iowa) areas. For some reason, slavery only made sense for cash crops, not food crops, and even less so in areas (like Appalachia and western Massachusetts) dominated by subsistence agriculture. Slaves were very expensive. Consequently, it only made sense to use them when hired labor would have been too expensive. And, without slavery, much of the cash crops of the lowland South would have not have been grown. Meanwhile, labor was not too expensive in Iowa and Kansas as White people actually wanted to settle there to create family farms.

It’s curious to note that for fifty years after the end of slavery, very few Black people moved to the North, despite very low nominal wages in the South. Though their labor hours declined, they largely stayed in the same places as they did before. They certainly didn’t move to Iowa and Kansas en masse. I suspect this is due to Blacks having a comparative advantage in cash crop production as opposed to settling the midwest with family farms. They also seemed to have a comparative advantage in urban industrial labor in the mid-20th century, as opposed to the kind of service-sector jobs that form the backbone of today’s American economy.

A Better System of Representation

In the U.S. and U.K., the lower house of the legislature is decided by a first-past-the-post system in roughly equally populated congressional districts decided on election days every few years. As a result, many people don’t like the representatives they’re represented by, the legislature tends towards a two-party system, and incumbents sit around for far too long. I’ve long thought of a superior voting system. To become a representative, a certain number of signatures would have to be collected by a candidate, say, .5% of the population. Each voter among the general public would have the right to vote for any representative in the country. There would be no districts. Each representative’s power in the legislature would be equal to the number of votes he or she receives. Votes may be switched by the voter at any time. This, I think, would be a much superior system to the present one, and would more authentically show the desires of the voters. No longer would gerrymandering be a problem, or people be unsatisfied with whom they are represented by. Maybe some U.S. state might adopt this proposal in the distant future, if the public is made aware of it.

Why the 2016 U.S. Presidential Election is Not a Realigning Election

So far, the transitions between the last four United States political party systems have been as thus:

#1 Third to Fourth Party System -Same very high level of political polarization (almost no swing districts, voting record polarization in Congress, etc.), but different and less stable geographic party bases (Republicans winning Manhattan, Democrats winning Colorado and Nebraska), with soaring geographical party polarization. Arguably, there were new partisan issues, but the Third Party System Greenbackers weren’t all that different from the Fourth Party System’s Populists, Socialists, Progressives, and Farmer-Laborers. They mostly wanted the country to go in a similar direction.

#2 Fourth to Fifth Party System -Similar and mostly stable geographic party bases, but rapidly declining level of polarization due to rapidly changing meaning of DW-NOMINATE first dimension during the beginning of the party system.

#3 Fifth to Sixth Party System -Similarly low level of polarization, but newly wildly variable geographic party bases

#4 Sixth to Seventh Party System -Much higher level of polarization and newly stabilized geographic party bases

I’m not seeing any sign of #1. Trump may sound like he’s bringing new issues to the table (like Bryan did), but he’s not destabilizing or even changing the geographic party bases at all, and, unlike Bryan, isn’t increasing the level of geographical party polarization -he’s decreasing it. He might, like Bryan, be bringing new issues to the table, but Republicans’ role as protectors of the Old Economy began in 2000, when they captured West Virginia after the Democrats nominated prominent environmentalist Al Gore (who lost his home state due to his insufficient support for family values). Trump isn’t changing that dynamic.

#2’s possible only if Trump gets elected President. But I simply can’t see Trump being as transformative a figure to the Republican Party as FDR. Sure, Mike Pence might be his John Nance Garner -a typical party figure whom the President almost entirely ignores- but I think Trump is going to act mostly like a typical Republican as President. He’s not going to turn the Fifth Party System and later DW-NOMINATE first dimension back to the mostly protectionist-based Fourth Party System one (I think). If Trump does this, however, and succeeds in depolarizing today’s very polarized Seventh Party System, he will succeed in realigning the country. But I doubt that’ll happen. Mike Lee will remain on the Far Right. Bernie Sanders will remain on the Far Left. The GOP isn’t going to get kicked out of the Great Plains and Mountain West, nor will it expand into Rhode Island.

BTW, if Trump is the GOP’s FDR, it must be noted there was no Al Smith to foreshadow the party’s future in the election before him. The 1928 election really was demonstrably a realigning election, as it cracked the Solid North in Massachusetts and Rhode Island. Trump isn’t doing anything like that. Romney didn’t do anything like that either.

#3 is obviously not the case.

#4 -This is today’s party system.

So the 2016 election, no matter what people tell you, is very probably not a realigning one, but simply another one in the Seventh Party System.

Protective Tariffs: Who Places Them on Whom?

I am against protective tariffs. They weaken economic efficiency, give out special benefits to industry, hurt consumers, and reduce freedom. Nevertheless, they have been used by any countries, both large (U.S., Brazil) and small (Mauritius, Tunisia) in the furtherance of industrialization. Why is this so?

According to this article, the key factor is lack of urbanization. Singapore and Hong Kong were both solidly free-trade from the beginning because they had no substantial rural population. Mauritius, Brazil, Taiwan, the People’s Republic of China, and Tunisia, meanwhile, all had large rural populations.

This makes some sense.

What is the effect of a protective tariff? It is to shift domestic consumption from the products of foreign exporters to those of domestic producers. Who’s hurt by the protective tariff? Consumers, especially who don’t work in protected factories or benefit from their business. Who benefits? Domestic producers.

Hurting the farmer to benefit domestic manufactures is easy.  But what if there is no farmer to encourage to move to the factory, but only a city-dweller? What if there’s no one for uncompetitive domestic manufacturers to sell to but urban dwellers? Then protective tariffs just redirect resources which could be used for the advancement of cutting-edge modern urban services to manufacturing for no good reason. It’s redistributing resources from most city-dwellers to a few city-dwellers. This is the opposite of the case in which there are numerous farmers to buy protected goods, as cities as a whole can benefit from farmers as a whole via the protected urban manufacturing sector. Thus, Chicago supported the Republicans, who were the champions of protective tariffs, before the Great Depression.

Protection in partly rural societies.

Protection in partly rural societies.

Protection in fully urban societies. Notice the net benefit to the cities is much lower.

Protection in fully urban societies. Notice the net benefit to the city is much lower.

It’s notable U.S. protective tariffs began in 1816, when the U.S. was just beginning to industrialize and still very much an agricultural nation, with its infant industries threatened by foreign, especially British, competition. And it’s notable they mostly ended in the 1930s, when the U.S. had mostly urbanized, the manufacturing sector had fully bloomed, and foreign trade had collapsed to a trickle.

When domestic firms can benefit from the profits of foreign manufacturing and get greater political power than those protected domestic manufacturing firms that can’t do so, that’s when protective tariffs come to a permanent end as a significant means of stimulating domestic industry, and outsourcing begins. This is especially true if domestic firms can own factories overseas. Thus the National Association of Manufacturers’ condemnation of the Republican presidential nominee’s domestic industrial protection plan to benefit grandparent industries for the benefit of domestic industrial workers in, say Ohio and Pennsylvania, at the expense of most Americans, as in, say, California and Washington.

A Big, Giant, and Mostly Ignored Reason for Jobless Recoveries


Note: above graph from 2013 and is, thus, outdated.
FireShot Screen Capture #009 - 'FRED Graph - FRED - St_ Louis Fed' - research_stlouisfed_org_fred2_graph__g=4x6f

https://research.stlouisfed.org/fred2/graph/?g=4x6f

The decline of manufacturing! During the 1950s, a great deal of the job losses that occurred in recessions, as well as job gains that occurred following them, were either in the manufacturing sector or closely correlated with changes in manufacturing jobs, which tended to be created and re-created very quickly. In 2008, the non-manufacturing sectors were hit by far to the the hardest degree they ever were since the Great Depression, while the manufacturing sector was hit pretty normally.

Since the recession of 1990, there has also been an end to manufacturing recoveries leading the recovery in the rest of the job market. Manufacturing jobs lost due to temporary shocks to aggregate demand or supply are much easier to re-create than other types of jobs lost during recessions. However, since 1990, due to deindustrialization, they haven’t been being re-created; instead permanently vanishing from the pages of time (or moving to China).

The other part of the jobless recoveries, of course, has been a noncyclical decline in male (and, after 2000, female) labor force participation, as well as the demographic transition.

The Hilarity of the Polls

Democracy is Poll-ocracy. So what makes the election day polls so special? Tiny difference in timing can make an enormous difference in general election preferences. Democracy is not simply the tyranny of the four percent who actually decide the election, but the tyranny of the four percent who actually decide the election during a single day. Why not have an election day be every day, and simply allow people to change their votes for the candidate they desire at any point in the year? Why not make the telephone polls just as authoritative as going to the ballot box? And if elections are bad, primaries are a disaster. What makes caucuses a good idea in the first place? A presidential nominating caucus can easily get results far different from an open primary held on the same day and in the same state. And an open primary, which includes independents, can easily get results far different from those of a closed primary. Had the entire Democratic race been composed entirely of caucuses, Bernie would have already won. Had the entire Democratic race been composed of closed primaries, Bernie wouldn’t have won ten states. In any case, popularity has only a tenuous relation with justice. Most people are so misinformed as to think government-funded free preschool is a good idea.

In a democracy, the will of the people tends to prevail. But whether it should do so or not, it does so extremely imperfectly. There is too much ossification in democracy. Its present form should be challenged to further its improvement. To connect policymaking closer with the desires of the people, there should be far more direct referendums than there are today, and at least one house should have its members be selected randomly from the general populace. Whether that’s desirable or not remains to be seen.

Chart of the Day

Screenshot (291)
https://research.stlouisfed.org/fred2/graph/?g=4fD4
Also, maps of the day:

Screen Shot 2013-04-04 at 2.02.28 AM

Thus, this table of the day:

High Supply, High Demand (Nevada, Arizona, Florida, Delaware, small parts of California) Low Supply, High Demand (Massachusetts, most, but not all, of California)
High Supply, Low Demand (Utah, Colorado, Texas) Low Supply, Low Demand (Mississippi, Indiana)

Vermont leans toward Low Supply, High Demand. Indiana’s low demand problem seems to have become even worse after the Great Recession. Its home prices were always extraordinarily restrained, both before and after the crash. Its housing construction bust was dramatic, and it didn’t have much of a construction boom. It was just an open-access rust belt place suffering from the effects of globalization. Most of California was a closed-access New Economy place suffering from the effects of underdevelopment where it was needed. Overdevelopment where it eventually wasn’t needed did occur in small places with disproportionate shifts in house prices during the mid-2000s housing boom, like San Bernardino. As Kevin Erdmann says, except for areas such as this, the bizarre period of the U.S. housing market wasn’t between 2001 and 2006, but between 2006 and 2009. Just look at the High Supply, Low Demand areas. Why did demand crash there for no reason?

The Celtic Tiger is not in the PIGS

One of my favorite variables, all too often underused, is real GDP divided by the price level. It really only works as a useful measurement in large, populous single-currency areas, though -like the United States, China, or the Eurozone. Basically, it’s a measure of how efficiently a region is using its resources given its nominal GDP. For example, if a country enters a deflationary depression due solely to collapsing NGDP, its RGDP should suffer. But its RGDP should also fall at the same rate as its price level.

These are the real GDPs of Portugal, Italy, Greece, Spain, Germany, and Ireland:
Screenshot (268)
https://research.stlouisfed.org/fred2/graph/?g=3Qcy
And these are the price levels of the same countries:
Screenshot (267)
https://research.stlouisfed.org/fred2/graph/?g=3Qcv
At first glance, Ireland’s real GDP up to Q4 2014 seems in the same boat as that of Portugal, Italy, and Spain, except that Ireland had no double-dip recession.
But look at the real GDPs of the same countries divided by their price level:
Screenshot (266)
https://research.stlouisfed.org/fred2/graph/?g=3Qcx
Between Q1 1997 and Q4 2007, the largest improvements in real GDP divided by the price level were seen in Ireland, then Germany, then Greece, then Spain, then Portugal, then Italy. Between Q4 2007 and Q4 2014 (seven years of pain!) the smallest deteriorations in the same measure were seen in Ireland, then Germany, then Spain, then Portugal, then Italy, then, lastly, Greece.

Neoliberalism works! The Celtic Tiger lives! The only thing that’s missing is the aggregate demand (and even that’s coming back)! Meanwhile, anti-neoliberal Greece and Italy remain in their own boat of awful, which even the greatest quantity of monetary stimulus can’t fix. Italy had virtually the same inflation as Germany from 2007 onwards, yet it had a severe double-dip recession while Germany didn’t. Ireland remains a classic case of economic convergence, while Italy and Greece may soon be known as classic cases of economic divergence.