Why Were Europe’s Asian Colonies So Poor in the 1940s?

Before their occupation by Japan.

I have often been fascinated by this question: why, if European institutions were so good, did the Asian colonies (e.g., Vietnam, Indonesia, Cambodia, India, Burma) experience an economic stagnation under European rule? Indeed, why, while Japan experienced mild per capita growth, did Japan’s colonies also experience economic stagnation while they were under Japanese rule? Why was European investment into the Asian colonies so low, with most European investment going to the 90%+ White world (Russia, U.S., Argentina, Australia, etc.)? The Asian colonies had the people in place to allow for quick economic transformation. Some (Vietnam, for instance) even had the human capital to do so on their own. And, yet, the Asian colonies in 1940 were barely improved from their state in 1840.

And why did it take until the end of imperialism for first-world countries to begin mass importations of Asian labor to cheapen domestic labor in cases where capital could not be invested overseas? Couldn’t the capitalists of that age understand the wisdom of importing foreign labor in order to cheapen the wages of domestic labor? Yes; in America, the 19th century import of Chinese labor was blocked due to labor union and White nationalist concerns in a democratic context. But did those concerns apply in, say, Germany, which was not even a democracy? Today, the White-majority countries automatically allow millions of legal Asian immigrants to flood into their country every year. Why didn’t that happen in the 19th or early 20th centuries, when the mutual gains from migration could have been almost as large?

If anything, this shows that political integration does not have to translate into either demographic or economic integration.

110 Predictions for December 31, 2017

Last year’s predictions (with updates as needed) here.

1. More posts will be posted on this blog this year than last year: 70%.

2. U.S. real GDP will expand slower this year than in 2014 (year-to-year; not Q4 over Q4): 90%.

3. U.S. real GDP will expand slower this year than in 2016 (year-to-year; not Q4 over Q4): 60%.

4. The Syrian government will hold more territory on December 31, 2017 than today: 70%.

5. The Kurds in Syria will hold more territory on December 31, 2017 than today: 80%.

6. https://www.torproject.org/download/ will remain accessible on the open Internet in Russia on December 31, 2017: 80%.

7. The unemployment rate in the U.S. will be higher in December, 2017, than in January, 2016: 40%.

8. The Black-White ACT score gap will not narrow in 2017: 50%.

9. The Houthis will hold more territory on December 31, 2017, than today: 30%.

10. The Iraqi government will hold more territory on December 31, 2017, than today: 90%.

11. The Yemeni government will hold more territory in Yemen on December 31, 2017 than today: 60%.

12. The Syrian army will hold Jisr al-Shughur on December 31, 2017: 40%.

13. Al-Mukalla will be held by Yemeni government forces on December 31, 2017: 80%.

14. The Marginal Counterrevolution shall make at least 365 posts during its second year: 90%.

15. The territory held by the Syrian government in and around Aleppo City will expand this year: 90%.

16. This blog will gain more pageviews this year than it did last year: 60%.

17. China will remain formally Communist on December 31, 2017: 90%.

18. Kim Jong-Un will still remain king of North Korea on December 31, 2017: 80%.

19. Robert Mugabe will still be alive on December 31, 2017: 60%.

20. Putin’s approval rating will remain above 40% in every reputable poll in December, 2017: 90%.

21. This blog will achieve a day with at least 400 pageviews: 50%.

22. Comments on this blog this year will be more than last year: 60%.

23. Mosul will be fully under control of the non-Islamic State forces on December 31, 2017: 90%.

24. Palmyra will be fully under the control of the Syrian government on December 31, 2017: 60%.

25. Raqqa will remain under the control of the Islamic State on December 31, 2017: 40%.

26. No Gaza War this year: 60%.

27. No intifada in the West Bank this year: 60%.

28. The Marginal Counterrevolution will have more posts published than Against Jebel al-Lawz in 2017: 90%.

29. The Marginal Counterrevolution will have more pageviews than Against Jebel al-Lawz in 2017: 90%.

30. The Marginal Counterrevolution will have more pageviews per post than Against Jebel al-Lawz in 2017: 30%.

31. The Islamic State will continue to not hold Syrtis on December 31, 2017: 80%.

32. Poroshenko will remain President of Ukraine on December 31, 2017: 90%.

33. The dollar price of oil will be higher on December 31, 2017 than today: 60%.

34. The price of oil will never be higher than $70 per barrel in 2017: 70%.

35. The price of oil will be lower than $60 per barrel on December 31, 2017: 70%.

36. Same-sex marriage will continue to be unrecognized in India, Russia, and Saudi Arabia: 100%.

37. Same-sex marriage will continue to be unrecognized in Japan: 80%.

38. Same-sex marriage will continue to be unrecognized in Vietnam: 90%.

39. Same-sex marriage will continue to be unrecognized in Indonesia: 100%.

40. Same-sex marriage will continue to be unrecognized in Germany: 60%.

41. Same-sex marriage will continue to be unrecognized in the Philippines: 70%.

42. China will record growth of 8% or higher in 2017: 10%.

43. China will record growth of 4% or higher in 2017: 90%.

44. China will record growth of 5% or higher in 2017: 80%.

45. China will record growth of 6% or higher in 2017: 50%.

46. China will record growth of 7% or higher in 2017: 40%.

47. Ethiopia will record per capita growth of 7% or higher in 2017: 50%.

48. Ethiopia will record per capita growth of 3% or higher in 2017: 90%.

49. Trump’s approval rating will be above 30% in the latest polls of 2017: 90%.

50. Trump’s approval rating will be above 50% at some point in 2017: 80%.

51. Russia’s economy will record Q4-over-Q4 real GDP growth in 2017: 70%.

52. Russia’s unemployment rate will end the year below 7%: 80%.

53. Russia’s unemployment rate will end the year below 4%: 10%.

54. Russia’s unemployment rate will end the year below 6%: 50%.

55. Russia’s unemployment rate will end the year below 5%: 30%.

56. Not one country will go off the Euro: 100%.

57. Mexico’s per capita GDP growth will be under 3% in 2017: 70%.

58. Mexico’s per capita GDP growth will be under 4% in 2017: 90%.

59. There will be at least two IS-inspired terrorist attacks in the United States that will each kill at least five people: 60%.

60. Belarus’s per capita GDP growth will be above 0% in 2017: 90%.

61. Belarus’s per capita GDP growth will be below 5% in 2017: 60%.

62. Belarus’s per capita GDP growth will be above 1% in 2017: 60%.

63. Africa will experience the start of one new civil war this year: 60%

64. U.S. nominal GDP growth will be under 7% (year-to-year; not Q4 over Q4) in 2017: 100%.

65. U.S. nominal GDP growth will be under 4% in 2017 (year-to year; not Q4 over Q4): 60%.

66. Trump’s approval rating will be below 70% at every point in 2017: 90%.

67. Russian life expectancy will increase in 2017: 70%.

68. The Wilshire 5000 Full Cap Price Index will be lower on December 31 of this year than today: 80%.

69. The U.S. will enter a recession in 2017: 40%. Normally, a yield curve like this would not indicate a recession for next year, but we do not live in normal times.

70. Iran will not get a nuclear weapon: 100%.

71. Russia will not invade any of the following: Finland, Alaska, the Baltic States, Poland: 100%.

72. Legislation on constructing Trump’s border wall will be signed by Trump in 2017: 90%

73. Netanyahu will still be Prime Minister of Israel at the end of 2017: 80%.

74. Afewerki will still be dictator of Eritrea at the end of 2017: 90%.

75. Tunisia will still be a democracy at the end of 2017: 90%.

76. Libya will not be reunified in 2017: 60%.

77. The Tobruk government will hold 100% of Benghazi on December 31, 2017: 80%.

78. Somaliland will remain unrecognized by the U.S. government: 70%

79. Hillary Clinton’s favorability rating will not rise above 60% in 2017: 80%

80. Le Pen will win the French elections in 2017: 40%.

81. Yemen will not be unified on December 31, 2017: 100%.

82. Syria will not be unified on December 31, 2017: 100%.

83. Keith Ellison will win the DNC Chair election: 60%

84. Turkish Cyprus will reunify with southern Cyprus: 0%.

85. Russia will hold on to Krim: 100%.

86. Russian-backed forces will hold on to both the cities of Donetsk and Luhansk: 80%.

87. Not a single act of terror will be prevented in 2017 where formerly and presently secret NSA mass surveillance programs made a crucial difference: 80%.

88. I will have at least 1000 Twitter followers by the end of 2017: 60%.

89. Same-sex marriage will be legal in at least one more country in 2017: 100%.

90. Same-sex marriage will be legal in at least five more countries in 2017: 40%.

91. Same-sex marriage will be legal in at least ten more countries in 2017: 10%.

92. Vehicle miles driven per capita in the U.S. will be higher in 2017 than in 2016: 70%.

93. The Islamic State will carry out at least five terrorist attacks carried out by men within Turkey that will kill more than five people in 2017: 80%.

94. The Islamic State will not carry out a single terrorist attack carried out by men within Israel except against the Arabs that will kill more than five people in 2017: 90%.

95. The Islamic State will not carry out a single terrorist attack carried out by men within Saudi Arabia except against the Shiites that will kill more than five people in 2017: 80%.

96. The Islamic State will not carry out a single terrorist attack carried out by men within Qatar except against the non-Muslims that will kill more than five people in 2017: 90%.

97. Chinese GDP per capita (PPP) will be considered by the World Bank to be above that of Thailand in 2017: 90%.

98. A bill cutting personal income taxes will be signed into law by President Trump in 2017: 70%.

99. Neither of my blogs will reach 100,000 pageviews this year: 70%.

100. Neither of my blogs will reach 100,000 pageviews combined this year: 60%.

101. My blogs will reach at least one million pageviews combined this year: 10%.

102. Not one presently Communist country will become known as a formerly Communist country by December 31, 2017: 70%.

103. Rex Tillerson will be confirmed as Secretary of State: 70%

104. I will be banned or shadowbanned by at least one website, Twitter feed, Facebook account, or YouTube channel by the end of this year: 100%.

105. I will be banned or shadowbanned by at least five websites, Twitter feeds, Facebook accounts, or YouTube channels by the end of this year: 90%.

106. AHETPI/CPIAUCSL will be lower in 2017 than in 2016: 70%.

107. A Supreme Court justice will be confirmed in 2017: 90%

108. I will finish at least three books of over 100 pages this year: 60%.

109. I will finish Scott Sumner’s Midas Curse before the end of the year: 90%.

110. Not one person (myself excepted) will, as per the comment policy, post one or more PGP-encrypted comments encrypted with my public key on any of my blogs: 60%.

Understanding Protectionism

Often, protectionism is said to be basically equivalent with opposition to automation. This is a mistake.

The protectionists looked at a typical poor country, say, Honduras. What did they see? Little internal production, mass reliance on outside manufactured goods, a decent degree of internal primary exports, and outside foreign aid, as well as giant trade deficits all around. Then, they looked at a rich country, say, the U.S. in the 1960s. What did they see? A thriving manufacturing sector, high manufacturing output per capita, and a roughly balanced trade, with high imports of primary materials.

Then they saw what was happening to the U.S. in the 1980s: a stagnation in manufacturing output per capita, mass imports of manufacturing goods from abroad, and giant trade deficits all around. And they started saying that the U.S. was becoming a third-world country. Instead of paying its way for its imports by producing goods to sell to the world, the U.S. began to import far more than it exported, and to finance its imports with massive debt and real estate sales -something which the protectionists considered as a drain from the United States.

Contrary to many less insightful critics, protectionists did see that the U.S. got rich due to automation. The problem they saw that, during the 1980s, the automation was increasingly moving to other countries. The problem they saw with the poor countries was not lack of employment, but lack of internal production. They saw outsourcing not simply as something leading to internal job losses, but as something reducing internal output. Automation, unlike outsourcing, obviously has never been claimed to reduce internal output.

The protectionists always saw a country as losing from higher prices of its imports if the demand for these imports was inelastic. Protective tariff revenue went to the government. Revenue from higher import prices went to other countries. The goal of protective tariffs was to reduce imports so that the country imposing those protective tariffs could replace its imports with internal output.

There is much wrong with the above protectionist doctrine. But it is by no means equivalent to opposition to automation.

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.