Tuesday, May 10, 2016

The Economy: "The Wonder Years Are Over"

"The Wonder Years Are Over"
by Bill Bonner

PARIS – “France?” We were in a cab on the way from Charles de Gaulle Airport yesterday. We had innocently asked our cab driver how things were going in the country. He had some thoughts… “France is a mess. We have 5 million people unemployed. And because the employment laws are so strict, nobody wants to hire anyone. The authorities noticed, for example, that employers use short-term contracts to avoid hiring permanent employees. So the government’s going to tax the short-term contracts. As though making it even more expensive to hire someone will somehow increase employment! There’s no way to do anything about it. We have to wait until the whole thing melts down. In the meantime, everybody’s unhappy…but nobody really wants to change.”

“Yes, that’s the strange thing,” Elizabeth added later. “I was reading a social commentary from France in the 19th century. People dreamed of having a country like today’s France. Back then, they didn’t have enough food to eat or clothes to wear or a place to live. They couldn’t imagine not being happy if they had those things. In today’s France, everybody has those things. It’s a worker’s paradise. If you don’t have a job, they give you money… and an apartment. And if you have a job, you almost can’t be fired. And yet, nobody is happy. Why not?”

Helmut Schoeck wrote a marvelous book in the 1966 titled "Envy". He explained why happiness is never just a matter of material wants or needs. We humans are wired to compare what we have to what others have… and to always try to find ways get one up on our neighbors. If we earn more than the guy next door, we are tempted to try to make him feel bad by flaunting it. If he earns more than we do, we will want to take something away from him… to bring him down a peg. That is the emotional foundation, says Schoeck, underlying socialist politics – envy, dressed up as social justice. But there’s more…

Wonder Years" The trouble with taking something away from your neighbor is that then he tries to take something away from you. Pretty soon, you are both spending so much of your time trying to enact rules and regulations that penalize one group and reward another that neither of you is producing more wealth. One group gets a subsidy for its products. Another gets a government contract. Another gets medical coverage, paid for by “the government.” And still another gets a tax credit. Then, they stand on tiptoes and look over the fence at the community next door… where people have been busy producing wealth rather than taking it from one another…and they are both even more envious.

That is essentially what happened to the Soviet Union: After 70 years of envy-driven politics, people looked over the Berlin Wall and saw BMWs and Mercedes. For decades, the truth was hidden behind economic statistics and propaganda slogans. And for decades, the response in the West was confused and foolish. Many U.S. economists believed that central planning actually worked (some still do!). And many economists and politicians wanted to rid the world of communism – apparently unaware that it was the communist creed that had put their biggest competitors out of business.

Only a few were shrewd enough to relax and enjoy those wonder years – when the U.S. and Europe were on top of the world… with little competition from abroad… and not yet ruined by the zombies and cronies within.

The BMW Effect: But by 1989, the jig was up. Everybody knew that a BMW built in West Germany was a whole lot better than a Trabant, built in the East. The “Trabbi” had an inefficient two-stroke motor. Owners had to mix oil and gas to fuel the car. Then, a long trail of smoke – nine times the average emissions of a car from the West – followed them around. The car had a top speed of 62 miles per hour (a speed it took the driver 21 seconds to reach). And since it had no fuel pump, the gas had to be carried above the motor so it could drip into the cylinders. This made for some spectacular, fiery crashes!

By the late 1980s, rich apparatchiks in Moscow and Beijing wanted to drive BMWs and Mercedes; the Wall had to come down. Now, the Chinese are making autos. The Russians are selling gas. The French aren’t happy. And judging by recent election results, neither are the Scots. Or the Austrians. Or the Germans. Or the Americans. The latter say they want to “Make America Great Again,” by building a wall to keep out the Mexicans (who are already leaving the country faster than they are coming in).

Neither Europeans nor Americans are underfed. Very few spend nights out in the cold. Almost none walk around naked for lack of clothing. Why aren’t they happy? Because no matter how well off they are, others are better off. The rich! The “One Percent!” People who have more money, more sex, more hair!

Life just isn’t fair, we conclude. It’s set up that way. Since the expulsion from the Garden of Eden, it was first a struggle to survive; now it is a struggle to show off. There’s always someone with a bigger, better car than you have…and if you have the bigger, better car…there’s always someone who wants to take it from you.”

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