Lessons from Russia's Economic "Stimulus"
Entrepreunurial Stimulus
A couple weeks ago (NYT Aug. 9, 2013) Russia announced a REAL economic stimulus plan:
let the business-people who are in jail for 'economic crime' (e.g. not being friends with Vlad Putin) out of the Gulag and let them practice their craft. The Times reports that there are 110,000 people in Russian jails for 'economic crimes'.
First we must deconstruct this. A stimulus plan in modern parlance simply means that people have given-up their independence and have given the right to the State their economic determinism. The whole idea being 'stimulus' is a 20th century concept, Keynesian economics. Where it is seen that it is up to the State to provide 'jobs'. This whole idea is counter-causal. It is business-people (entrepreneurs) seeking a profit by providing things that others want to buy which has given us such abundance (smartphones, IKEA furniture, $5 per bottle South American wine, unlimited music and film on youtube etc).
It is this people who need good employees. In fact the way to do this is to profit share (after of course their employees prove their worth) so in fact it is not a "job" but a cooperative partnership with a future. The whole notion of "jobs" is a scare tactic short-termism which again is what the State has become under the last 75+ years of Keynesian. (To be fair, perhaps J.M. Keynes would not appreciate all that is being done under his name, at least according to his friend Friedrich Hayek.)
The State cannot provide "jobs" in any sustainable way, because the State takes wealth from the productive and gives it to the unproductive (those seeking State subsidies or trade protectionism etc. Those seeking political favors from a monopolistic State as apposed to earning their worth in voluntary exchange).
So it is not "jobs" the State should create, but the correct political environment ("regime", see Robert Higgs) to allow investment and capital accumulation through a solid predictable rule of law which reduces the uncertainty of the future. Not one where the State is constantly trying this or that program and creating Us v. Them antagonism.
It is only through private investment that economic growth is achieved. Giving bureaucrats and politicians Other People's Money (OPM) to spend does not create growth due to the incompatible incentive structure. Bureaucrats and politicians just don't have the incentive to invest OPM wisely. Why should they? But most importantly of course, why on Earth does the voting populace think they might ?! Or as a friend of mine said, "Democracy is a scam".
(Hint, one answer is Rational Ignorance, the voter knows that his or her vote won't determine an election outcome, so why should they educate themselves in politics? The State takes advantage of this rational ignorance to grow itself and its power. Thus the reason that State labor union employees make twice that on average than the average American employed in the productive sector.)
Just a few day's later (NYT Aug. 12, 2013) Attorney General Holder stated that mandatory sentences for drug crimes would be reformed due to prison overcrowding. Well again deconstruction time. The USA "land of the free and home of the brave" has the highest prison incarceration rate in the world. Even more than the Peoples Republic of China, both in nominal and per person terms, and half of these are drug-crimes ! So then why don't we follow Russia's "stimulus" plan. Decriminalize drugs and set these imprisoned entrepreneurs free. Alcohol is worse for people than even the hardest of drugs so let's face that not only has the "War on Drugs" failed, but its hypocritical as well. The State has to always be at war in order to make taxpayers and other victims of the State's "jobs" programs kowtow ever more.
A couple weeks ago (NYT Aug. 9, 2013) Russia announced a REAL economic stimulus plan:
let the business-people who are in jail for 'economic crime' (e.g. not being friends with Vlad Putin) out of the Gulag and let them practice their craft. The Times reports that there are 110,000 people in Russian jails for 'economic crimes'.
First we must deconstruct this. A stimulus plan in modern parlance simply means that people have given-up their independence and have given the right to the State their economic determinism. The whole idea being 'stimulus' is a 20th century concept, Keynesian economics. Where it is seen that it is up to the State to provide 'jobs'. This whole idea is counter-causal. It is business-people (entrepreneurs) seeking a profit by providing things that others want to buy which has given us such abundance (smartphones, IKEA furniture, $5 per bottle South American wine, unlimited music and film on youtube etc).
It is this people who need good employees. In fact the way to do this is to profit share (after of course their employees prove their worth) so in fact it is not a "job" but a cooperative partnership with a future. The whole notion of "jobs" is a scare tactic short-termism which again is what the State has become under the last 75+ years of Keynesian. (To be fair, perhaps J.M. Keynes would not appreciate all that is being done under his name, at least according to his friend Friedrich Hayek.)
The State cannot provide "jobs" in any sustainable way, because the State takes wealth from the productive and gives it to the unproductive (those seeking State subsidies or trade protectionism etc. Those seeking political favors from a monopolistic State as apposed to earning their worth in voluntary exchange).
So it is not "jobs" the State should create, but the correct political environment ("regime", see Robert Higgs) to allow investment and capital accumulation through a solid predictable rule of law which reduces the uncertainty of the future. Not one where the State is constantly trying this or that program and creating Us v. Them antagonism.
It is only through private investment that economic growth is achieved. Giving bureaucrats and politicians Other People's Money (OPM) to spend does not create growth due to the incompatible incentive structure. Bureaucrats and politicians just don't have the incentive to invest OPM wisely. Why should they? But most importantly of course, why on Earth does the voting populace think they might ?! Or as a friend of mine said, "Democracy is a scam".
(Hint, one answer is Rational Ignorance, the voter knows that his or her vote won't determine an election outcome, so why should they educate themselves in politics? The State takes advantage of this rational ignorance to grow itself and its power. Thus the reason that State labor union employees make twice that on average than the average American employed in the productive sector.)
Just a few day's later (NYT Aug. 12, 2013) Attorney General Holder stated that mandatory sentences for drug crimes would be reformed due to prison overcrowding. Well again deconstruction time. The USA "land of the free and home of the brave" has the highest prison incarceration rate in the world. Even more than the Peoples Republic of China, both in nominal and per person terms, and half of these are drug-crimes ! So then why don't we follow Russia's "stimulus" plan. Decriminalize drugs and set these imprisoned entrepreneurs free. Alcohol is worse for people than even the hardest of drugs so let's face that not only has the "War on Drugs" failed, but its hypocritical as well. The State has to always be at war in order to make taxpayers and other victims of the State's "jobs" programs kowtow ever more.
posted by Cameron Weber at 12:49 PM
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