"The poor are a goldmine"

Fattest hand is first in the till

Noel Pearson is a great, fearless writer who combines deep analysis with scathing, excoriating description. By now much of his analysis of how passive welfare makes things worse for aboriginal people has filtered through to mainstream consciousness. In the above article he elaborates on a misunderstood aspect of his analysis. The aboriginal industry is made up of people who benefit before any aboriginal person benefits. Although some elements of welfare are essential it can easily reach a point where the helpers are taking responsibility out of the hands of the recipients. Once this becomes a problem it is hard to undo because many of the helpers would then become unemployed. Pearson is much more in touch with this than I am and far more scathing.

After quoting African-American economist Thomas Sowell, "The poor are a goldmine", Noel Pearson goes onto illustrate how this aphorism applies to indigenous Australians:

The leviathan of government bureaucracies make the payday lenders, the drug dealers and sly grog sellers pale in comparison with their commandeering of the income streams that are nominally allocated to the indigenous poor on the ground ...

So the first problem is an age-old one of ever-pullulating bureaucracies: like maggots engorged on a roadside carcass, whenever there is a new budget line the frontline departments of government serve themselves first. This is the real Aboriginal industry ...

The second form of welfare - passive service delivery - was not understood at the time of our critique, and has little public policy understanding even today. When we say that a large part of our welfare problem is government service delivery, people do not understand what we mean. After all, service delivery is supposed to be what is needed. Aboriginal disadvantage supposedly needs to be fixed by more comprehensive and more co-ordinated service delivery.

This is how you end up with 400 service providers for just 1200 people.

Our point that indigenous passivity is very much a consequence of government service delivery has been completely lost to the debate on indigenous policy.

The problem is that essential and beneficial government service delivery is mixed up with a vast panoply of services that displaced Aboriginal individuals, families and communities taking up their own responsibilities.

What my opponents and sceptics from the Left have failed to understand is that when we talk about disempowerment being the singular and devastating feature of Aboriginal Australia, we mean that our people have had their responsibilities taken away from us. Responsibility is power. If we want our people to be empowered, then we need to take back the responsibilities that the welfare state has stripped away from us.

fascist regimes are undermined by the internet

I may no longer be able to say that Google does some evil.

XIAO QIANG, director, China Internet Project, University of California at Berkeley

XIAO QIANG: Well, this -- we really should put this context of the Google event in a larger context, which is, it's not Google vs. China. It's more Internet vs. the authoritarian regime, the Chinese authoritarian regime, because, fundamentally, the Internet is an enabler.

It's empowering people the capacity to organize information, to effectively use information, and also to work together, collaboration, and even mobilize collective actions.

From those point of view, Google's services and products are just, for those leading services, empowering people to do so. And the Chinese government fundamentally cannot live in peace with such empowering factor of technology. Therefore, they cannot live in peace with Google, period.

So, when the Internet is getting larger and larger in China, the Internet users are more and more politically active, and the political speeches have become more and more proactive, then the government has to intensify its censorship measure higher and higher degree, and then to the point that the company like a Google cannot take it any more. So, this is fundamentally an issue of China's government vs. Internet.

Whether Google is there or not, the story will continue.
- Google's Threats to Leave China Renew Censorship Concerns

The offical Google blog announcement: A New Approach to China

Ethan Zuckerman has a more detailed analysis: Four possible explanations for Google's big China move:

• Google decided to stop being evil
• Google retreated from a very tough market
• Google abandoned Chinese users
• Google is about to join the front lines of the anticensorship wars (very interesting)

ignoble award in economics

Real World Economics Review blog is running a competition for the ignoble award in economics:

With other learned professions entrusted with public confidence, such as medicine and engineering, it is inconceivable that their professional bodies would not at the very least censure members who had successfully persuaded governments and public opinion to ignore elementary safety measures, so causing epidemics and widespread building collapses.

To date, however, the world’s major economics associations have declined to censure the major facilitators of the GFC or even to publicly identify them. This silence, this indifference to causing human suffering, constitutes grave moral failure. It also gives license to economists to continue to indulge in axiom-happy behaviour. Nor has the economics establishment offered recognition to those economists who were not taken in by fads and fashion and whose competence, if listened to, would have prevented the collapse …

The nomination, evidence and final winners procedures are explained at the site.

Click here to see recent nominations with some comments / reasons. So far, nominations include Greenspan, Bernanke, Summers, Prescott, Fama, Stigler, Friedman, Scholes, Geithner, Sachs, Krugman, Samuelson, Stiglitz and Gordon Brown / Ed Balls

Real World Economics Review is a communal blog for alternative economists. See their About page for more detail, including pdf downloads of papers to recent journals.

the aftermath of financial crisis

What we can expect on average from historical precedents of severe financial crises:

• Real Housing Prices will drop by 35.5% and take 6 years to recover
• Equity Prices will drop by 55.9% and take 3.4 years to recover
• Unemployment will increase by 7% and take 4.8 years to recover
• GDP will drop by 9.3% and take 1.9 years to recover
• Real public debt will increase by 86% over 3 years

This is based on a historical study of 22 major banking crises in different countries for which data was available

Most of the crises in the study group were regional (with the exception of the Great Depression which was included). So the current crisis may be worse in this respect:

The global nature of the crisis will make it far more difficult for many countries to grow their way out through higher exports, or to smooth the consumption effects through foreign borrowing. In such circumstances, the recent lull in sovereign defaults is likely to come to an end. As Reinhart and Rogoff (2008b) highlight, defaults in emerging market economies tend to rise sharply when many countries are simultaneously experiencing domestic banking crises.

Source: The Aftermath of Financial Crisis by Carmen Reinhart and Ken Rogoff

steve keen's 2010 prediction for the economy

Steve Keen's concludes his 2009 retrospective with a prediction for 2010:

My expectation is that, some time during 2010, the disconnect between the financial markets’ euphoric expectations and the hard reality of a deleveraging private sector will bring the optimism of both “born again Keynesian” neoclassical economists and the markets to an end. Growth will not resume once the stimulus packages are removed, since deleveraging will then assert itself in the absence of government stimulus. Falling debt will subtract from growth, as it once added to it, and unemployment will start to rise again.

I expect that governments will react to this as they did in 2009–by turning on the stimulus packages once more, while continuing to ignore the private debt levels that caused the crisis in the first place. They will “turn Japanese”, to coin a phrase–since this is the same thing the Japanese government has been doing for two decades since its Bubble Economy burst at the end of 1989.

This process may repeat itself two or three times before serious attention is finally turned to the Ponzi-dominated financial sector’s parasitic impact on the real economy. But for now, the parasites are clearly still in control of the host

Unique visitors to Keen's blog have increased from 15,000 to 50,000 per month during 2009. I'm one of the new ones.

Steve Keen is a prolific Australian economics writer and publishes most of his material, including his university course, on line, see Debunking Economics. He supports a Post Keynesian or Minsky analysis of the economy, that capitalism is a fragile system in its internal dynamic (Financial Instability). One aspect of Keen's work is that he connects Post Keynesian analysis to Marxist dialectical philosophy, arguing continuity between the ideas of Marx and the ideas of Minsky (The Minsky Thesis: Keynesian or Marxian?).

I have bought and am reading the mobipocket eBook version of Keen's book and have recently ordered a couple of books by Hyman Minsky (1919-1996), that have been recently republished in the light of the crisis:

• John Maynard Keynes: Hyman Minsky's influential reinterpretation of the Keynesian revolution
• Stabilizing an Unstable Economy