Category: Economics

Good News After A Long Time.

Parts of our state had already received relaxation of lockdown rules last week but, our city and district was among those that did not as the daily covid cases were still high compared to the other parts.

Many businesses were suffering due to the lockdown rules and so their associations staged protests in many places which obviously registered with our political masters. After consulting so called experts a relaxation has been announced with effect from this morning.

Here is the news item announcing the same.

The lockdowns may have prevented further spread of the pandemic but the price that ordinary people have had to pay in terms of loss of earnings and employment has been very high. I personally know of cases where housewives have had to go to work as domestics or start catering services from home to keep up with mortgage payments and to meet other domestic expenses.

With this easing of the conditions, I hope that the economic situation of our city and state will start to recover.

Effect Of The Pandemic On The Balance Of Power Between Nations?

No man is an island,
Entire of itself.
Each is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.
As well as if a promontory were.
As well as if a manor of thine own
Or of thine friend’s were.
Each man’s death diminishes me,
For I am involved in mankind.
Therefore, send not to know
For whom the bell tolls,
It tolls for thee.

~ John Donne.

I personally believe that the Pandemic itself will not have any effect on the balance of power between nations but, the period during which the pandemic came into being and affected lives, saw many developments that certainly will.

Let me list the events that I think were/are important for the world’s future in terms of Balance Of Power, henceforth BOP, between nations.

The first and most important, in my view, development was the breakdown in relations between the USA and China. The impact of this breakdown will unfold over the next few years with devastating effect on both economies till offsetting alternatives are found by both. That this period also saw the very nasty last year of the POTUS 45’s term which has changed the USA for ever and its future as an economic power is likely to face very strong winds though militarily little is likely to change.

The next was BREXIT. I strongly believe that this is a major development which will affect the BOP within Europe and may even hasten other exits from the union. Britain is likely to come out of it relatively unscathed but, will have to redraw its relationships with the countries of the Commonwealth, which in turn will impact many of them particularly India. British nationals of South Asian origin will have to rethink their loyalties and this is likely to be a major game changer in the sub continent.

The next in line is the military confrontation between China and India during almost the whole year which has broken their relationship and its impact economically is likely to affect China more than India.

Breakdown of relationship between China and Australia is another factor that will have serious impact in the global economic order during the rest of this decade. This coinciding with the strengthening of the Quad alliance has sent strong signals to China which is likely to react in unpredictable ways.

The crackdown in Hong Kong by China has already started to see exodus of highly qualified professionals and companies from the island and this is likely to impact the Chinese economy in unpredictable ways.

The Islamic world has been rent with violence since before the pandemic and if anything it has only increased during the last year. Oil based economies of the ME states have suffered and it has affected countries like Pakistan and India which send labour there. Quite how the Middle East will come out of the present strong winds of electric vehicles will impact the Islamic world and Muslim populations of the whole world which will overshadow any impact that the pandemic might have had.

Lastly, the latest developments in Mayanmar and Nepal do not bode well for the region as a whole. Quite how that plays out is yet to be seen and how China will play its cards there will give some indications of the shift in the BOP in the region.

All in all, the decade offers interesting ring side seats for people like me with nothing better to do than to read a number of news papers every day and speculate. While it will be interesting, I do not foresee any major shifts in the BOP during the decade. If anything, some polarisation will take place but, it will have little effect on the BOP.

This is my contribution to this week’s Friday 8 On 1 blog post topic. The other seven bloggers who write on the same topic every Friday are Maria. Sanjana, Padmum,  Raju, Shackman , Srinivas and Conrad.  This week’s topic was suggested by Shackman. Please do go over to their respective blogs to see what they have to say on the topic. Thank you.

Degrowth.


I draw my readers’ attention to the comments by Nick and Mike in my post “Do You Believe In The Great Reset?”

These two comments reminded me of a very significant book Degrowth by Giorgos Kallis which I read before Covid hit us early this year. Covid has brought in focus many worries that had occupied thinking minds about our world and the book sounds in retrospect almost prophetic.

I was reminded of the book by another reminder in the form of an interview that Georgos Kallis gave to our Economic times three days ago.

Some of my other recent posts have been trying to convey to my readers that living a simple life with few wants can be very satisfactory and more important, possible.

I urge my readers to read the book.

Unemployed.

I received this image as a forward in WhatsApp from a friend who felt that I should get some printed like this for myself.

I did not think that this would serve any purpose for me but, on seeing it as a forward from me, another friend who has the necessary infrastructure of an office with staff suggested that he order for a hundred cards with my name and with some modifications.

I agreed and when it gets printed, I shall write another blog post on it.

In the meanwhile, the “Unemployed” description on the card took me to one of my favourite exchange of letters in The Economist between a reader and The Undercover Economist.

The Letter.

AUGUST 6, 2005

Dear Economist,

My son-in-law has been unemployed for a couple of months now. As far as I can make out, he’s enjoying a PlayStation lifestyle while being supported by the state and by my daughter, who has had to find a temporary job. What concerns me is that he’ll get used to this. Should I tell my daughter to apply pressure by quitting her job?

Yours sincerely,

Godfrey Pickens, via email

The Response.

Dear Mr. Pickens,

The issue here is whether your son-in-law’s preferences will change over time—will he “get used” to a life of leisure, and so be less likely to work?

There are two competing views here. One is that he will become hooked on leisure (the welfare trap hypothesis) and will work less in the future, even if his wife quits her job. The other, equally plausible in theory, is that he will become addicted to the extra income provided by his wife’s new job, and if she quits, he will go on to work harder than before.

Such competing hypotheses have been hard to test in the past. But economist John Kagel has succeeded in running a series of experiments that shed light on the matter.

Kagel first forces his subjects to work for their income. Then, for a while, he provides them a substantial unearned income—a kind of welfare, if you will. Unsurprisingly, they slack off at once. Later, he withdraws the welfare and observes whether they work more or less than before welfare had ever been paid. The answer: the interlude on welfare makes very little difference.

This implies that your daughter should keep working for a while and see what happens. No harm will result. The only question for you is whether Kagel’s findings apply to your son-in-law.

Kagel’s subjects were rats. Do you think the parallel with your
son-in-law is close enough?

Yours experimentally,

The Undercover Economist

Freedom.


“Where the mind is without fear
and the head is held high, 
where knowledge is free.

Where the world has not been broken up into fragments by narrow domestic walls.

Where words come out from the depth of truth,
where tireless striving stretches its arms toward perfection.


Where the clear stream of reason has not lost it’s way
into the dreary desert sand of dead habit.

Where the mind is led forward by thee 
into ever widening thought and action.

In to that heaven of freedom, my father,
  LET MY COUNTRY AWAKE!”

~ Rabindranath Tagore.

Need I say any more?

I have suggested this topic for this week’s Friday 2 on 1 Blog Post where Shackman and I write on the same topic.  Please do go over to Shackman’s blog to read what he has to say on the topic.  Thank you.

Healthcare – A Right Or A Privilege?

This Friday’s 2 on 1 blog post’s topic has been chosen by Shackman. I am sure that the recent spurt of anti Obama Care developments in the USA must have weighed heavily on his mind when he chose the topic. Being an Indian, I am concerned with what happens in India where we have a long way to go to extend full health care benefits and I use every platform to propagate my views which are not original but, practical any way.

Regular readers of my blog posts know that one of the credos by which I communicate is “Why reinvent the wheel?” My politics and economics is conditioned by A F Hayek. I would simply quote him from two sources to buttress my view that Health Care Is A Right that should be given to every human being.

“All modern governments have made provision for the indigent, unfortunate, and disabled and have concerned themselves with questions of health and the dissemination of knowledge. … There are common needs that can be satisfied only by collective action and which can be thus provided for without restricting individual liberty. It can hardly be denied that, as we grow richer, that minimum of sustenance which the community has always provided for those not able to look after themselves, and which can be provided outside the market, will gradually rise, or that government may, usefully and without doing any harm, assist or even lead in such endeavours. There is little reason why the government should not also play some role, or even take the initiative, in such areas as social insurance and education, or temporarily subsidise certain experimental developments.”
(The Constitution of Liberty of 1960 Pages 257 and 258.)

“There is no reason why in a society which has reached the general level of wealth which ours has attained [NW note: Hayek was writing not in prosperous post-war America, but in war-torn, austerity-ridden Britain in 1943] the first kind of security should not be guaranteed to all without endangering general freedom. …. [T]here can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody. … Nor is there any reason why the state should not assist the individual in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision.
“Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong. There are many points of detail where those wishing to preserve the competitive system and those wishing to super-cede it by something different will disagree on the details of such schemes; and it is possible under the name of social insurance to introduce measures which tend to make competition more or less ineffective. But there is no incompatability in principle between the state’s providing greater security in this way and the preservation of individual freedom.
“To the same category belongs also the increase of security through the state’s rendering assistance to the victims of such ‘acts of God’ as earthquakes and floods. Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make provision for the consequences, such communal action should undoubtedly be taken.
“There is, finally, the supremely important problem of combating general fluctuations of economic activity and the recurrent waves of large-scale unemployment which accompany them. This is, of course, one of the gravest and most pressing problems of our time. But, though its solution will require much planning in the good sense, it does not — or at least need not — require that special kind of planning which according to its advocates is to replace the market.

“Many economists hope, indeed, that the ultimate remedy may be found in the field of monetary policy, which would involve nothing incompatible even with nineteenth-century liberalism. Others, it is true, believe that real success can be expected only from the skillful timing of public works undertaken on a very large scale. This might lead to much more serious restrictions of the competitive sphere, and, in experimenting in this direction, we shall have to carefully watch our step if we are to avoid making all economic activity progressively more dependent on the direction and volume of government expenditure. But this is neither the only nor, in my opinion, the most promising way of meeting the gravest threat to economic security.

“In any case, the very necessary effort to secure protection against these fluctuations do not lead to the kind of planning which constitutes such a threat to our freedom.”
(The Road to Serfdom, Pages 148-149)

Please go over to Shackman’s blog to see what he has to say on the subject. Thank you.