China's transition to higher value manufacturing

I'm skeptical that China's government(s) will manage this transition successfully (WSJ):

At the same time, however, China is pushing its companies to automate, boost research budgets and make more higher-value products. It has also encouraged companies to acquire European and U.S. rivals with advanced technology. Beijing has targeted 7% annual growth for manufacturing and a 15% jump in corporate investment to support industrial upgrades between now and 2018.

Its success so far in moving upmarket is seen in its machinery and transport-equipment exports, which grew to 46% of the nation’s total exports from 21% between 1995 and 2015, even while its share of lower-value exports declined, says HSBC.

If China succeeds at encouraging more-advanced industries, it could subject companies in developed countries to growing competition in once-secure markets. But the strategy carries risks. If China fails to shift from basic industry to high-end manufacturing and its costs continue to rise, it could get stuck in what some economists refer to as the “middle income trap.” That in turn could fan social tension in a one-party system that has staked its legitimacy on rapid growth and upward mobility.

Remarkable interview by CNN's Christian Amanpour

I can entirely understand how Brexit happened. What I find a bit bizarre is how there seems to be no introspection as to why anyone wants to leave the EU. It's like an article of faith despite its "democratic deficit" that you'd have to be a racist prick to want to leave.

I confess I very rarely watch CNN, but it's incredible how bad Christian Amanpour comes across not only as an interviewer but in how poorly she prepared for this interview with Daniel Hannan (knowing little if anything about him):

Amanpour writes a follow up article that James Taranto squishes in the WSJ.

Freemarkets != "right wing"

In the same way too many people confuse crony capitalism with capitalism(fee.org) - with discouraging examples from India and Poland.

The case against military interventions...

"Capitalism ALWAYS wins" (SovereignMan):

Rather than fight the war, the US government would have been a lot better off saying, “Oh you want to be Communist? Wonderful! You go ahead and enjoy that, and give us a call in 20 years once you’re totally impoverished…”

It would have saved a hell of a lot of time, money, and lives.

Capitalism always wins because people want the comfort and lifestyle that become possible when talented people have the incentive to work hard and innovate.

2016: The Year Poverty Fell to a New Low

It's interesting to watch the differing world views being expressed in the media on the same data sometimes (HumanProgress). Should we celebrate or envy success? It would seem there are many who believe not only that it should be envied, but it should be actively taken away.

Before capitalism...

Yep:

Why are [Americans] so rich?

Because "ordinary" people are allowed to pursue their dreams to get rich. For some perspective when you read the news (WSJ):

An American earns, on average, $130 a day, which puts the U.S. in the highest rank of the league table. China sits at $20 a day (in real, purchasing-power adjusted income) and India at $10, even after their emergence in recent decades from a crippling socialism of $1 a day. After a few more generations of economic betterment, tested in trade, they will be rich, too.

Actually, the “we” of comparative enrichment includes most countries nowadays, with sad exceptions. Two centuries ago, the average world income per human (in present-day prices) was about $3 a day. It had been so since we lived in caves. Now it is $33 a day—which is Brazil’s current level and the level of the U.S. in 1940. Over the past 200 years, the average real income per person—including even such present-day tragedies as Chad and North Korea—has grown by a factor of 10. It is stunning. In countries that adopted trade and economic betterment wholeheartedly, like Japan, Sweden and the U.S., it is more like a factor of 30—even more stunning. And these figures don’t take into account the radical improvement since 1800 in commonly available goods and services.

[...]Once we had the ideas for railroads or air conditioning or the modern research university, getting the wherewithal to do them was comparatively simple, because they were so obviously profitable.

If capital accumulation or the rule of law had been sufficient, the Great Enrichment would have happened in Mesopotamia in 2000 B.C., or Rome in A.D. 100 or Baghdad in 800. Until 1500, and in many ways until 1700, China was the most technologically advanced country. Hundreds of years before the West, the Chinese invented locks on canals to float up and down hills, and the canals themselves were much longer than any in Europe. China’s free-trade area and its rule of law were vastly more extensive than in Europe’s quarrelsome fragments, divided by tariffs and tyrannies. Yet it was not in China but in northwestern Europe that the Industrial Revolution and then the more consequential Great Enrichment first happened.

Read the whole thing.

Even the poorest countries are getting wealthier, so it's time to redefine poverty?

That's the argument Bill Gates makes (WSJ):

Today, more than 70% of the world’s poorest people—those living on less than $1.90 per day—live in countries defined as middle income, according to the World Bank. Once countries cross the threshold from low-income to middle-income status, the grants and below-market loans that have helped them rise often come to an end. Countries with huge pockets of poverty like Nigeria, India, Pakistan, Ghana and Vietnam could lose as much as 40% of their development assistance in the next few years, a study sponsored by our foundation found.

For example, the average income in Nigeria is nearly twice what it is for sub-Saharan Africa as a whole. Yet, more than half of Nigerians still live in extreme poverty. And although Nigeria has a higher average income than countries like Ghana and Vietnam, World Bank data indicate it ranks lower across a range of human development indicators such as life expectancy, literacy, and maternal and child mortality.

Isn't that the point that aid is meant, not as a crutch, but as a path to sustainable development? Further, how much of the improvement in the condition of these poorest countries are the result of aid? Shouldn't that be the argument made? And why isn't it?

Why the Canadian government will fail at building the "next Silicon Valley"

From Reason.com:

Canada is not alone in their push to create the next great hub of genius. Dubai, London, Rwanda, and Shenzhen are just a few cities investing in the idea. But according to Eric Weiner, author of The Geography of Genius: A Search for the World's Most Creative Places, From Ancient Athens to Silicon Valley, these attempts will inevitably fail. "I wish I could sit here and tell you that there was a formula and if you applied that formula you could create the next Silicon Valley," he explained during an interview with Reason TV earlier this year. "There is no formula."

The real minimum wage is zero

As California moves to increase the minimum wage to $15, and New York follows, it's like they're entirely oblivious to the possibility of automation as a viable alternative (AmericanInterest):

Brown’s minimum wage scheme will, of course, artificially raise the cost of hiring the most at-risk workers. Though the robots are not ready to take over quite yet, an onerous wage floor only incentivizes further research into automation. This whole situation is a bizarre illustration of the layered contradictions contained in the blue coalition: anti-inequality crusaders want a radical minimum wage hike, which will likely have the effect of raising unemployment (and welfare eligibility) among economically deprived blue constituencies. Meanwhile, those most likely to benefit down the line from these kinds of moves are the socially liberal Silicon Valley executives and venture capitalists, who bankroll the Democratic Party despite some of their dearly held libertarian beliefs.

On the other hand, maybe that's the goal - "[like other policies supposedly aimed at helping the poor, this] will have the opposite of its intended effect, favoring privileged insiders at the expense of those it is intended to help."

The biggest threats to Western Civilization don't exist outside its borders...

Juxtaposition - "Why the West is Irresistible" (NationalPost):

It’s easy to laugh at the news that the Islamic State of Iraq & the Levant (ISIL) is so short of money that it has stopped giving its fighters free energy drinks and Snickers bars. Har, har, har. But it’s also profoundly important. [...]

This bitter, theologically obtuse concession to fiscal reality underlines the same insurmountable contradiction within Islamism generally as the free energy drinks, Snickers bars and jihadi Twitter accounts. These radical movements hate the West, not because of our policies or even our consumerism, but because our vertiginously dynamic creativity and cultural turmoil, the wellspring of our prosperity and power, is irresistible psychologically and practically.

Read the whole thing. On the other hand, "Ivy League crybullies vs. survivor of a Soviet labor camp; guess who needs ’emotional support’?" (WashingtonPost). As Reason points out, nevermind the tuition that costs $60k a year, "it's exhausting work, being offended all the time."

Chinese textile firm opens up in South Carolina to reduce costs

Comparative advantage can shift both ways also proving some people will never be happy (WSJ):

But Keer executives said they realized that the gap in wages between China and the U.S. was narrowing, plus South Carolina had cheaper land, energy and raw cotton than China. Keer opened its first plant in South Carolina last year and now employs about 180 people, said Lilian Chang, a sales executive at the South Carolina plant. Over time, it wants to add four more factories and build up its workforce to 500.

“What we lack (in South Carolina) is professional technicians” to run the company’s automated spinning machinery, Ms. Chang said. One reason the U.S. textile industry had such big layoffs, economists say, is that the industry became so automated that it needed far fewer workers to run computerized assembly lines.

For some in the Palmetto state, the investment by the state’s one-time archrival is worrying, despite the jobs the companies bring. The Chinese investment “is a sign of weakness,” said Jim Jamborg, a Little River, S.C., postal worker. “The Chinese are coming in and American businesses are moving out.”

"Why you can't afford a home"

I suspect that this applies as much for Canada as it does for the US (New Geography):

The connection between growing inequality and rising property prices is fairly direct. Thomas Piketty, the French economist, recently described the extent to which inequality in 20 nations has ramped up in recent decades, erasing the hard-earned progress of previous years in the earlier part of the 20th century. After examining Piketty’s groundbreaking research, Matthew Rognlie of MIT concluded (PDF) that much of the observed inequality is from redistribution of housing wealth away from the middle class.

Rognlie concluded that much of this was due to land regulation, and suggested the need to expand the housing supply and reexamine the land-use regulation that he associates with the loss of middle-class wealth. Yet in much of the country, housing has become so expensive as to cap upward mobility, forcing many people to give up on buying a house and driving many—particularly young families—to leave high-priced coastal regions for less expensive, usually less regulated markets in the country’s interior.

Unfortunately, I think statists have been far better at communicating their message and arguing for policies that are just making things worse as millenials apparently have a higher opinion of socialism than capitalism (Washington Post). I think this image is worth distributing:

When "investments" really aren't

China's ghost cities (Wired): a reminder that markets are far more efficient at capital allocation than governments.

The things people get offended by...

High up on the list seems to be that outcomes are influenced by personal choices (CBC - yes, the our state sponsored broadcaster):

Not wanting to face a lifetime of debt, Cooper sacrificed three years of his life to pay down a $255,000 mortgage on a $425,000 Toronto home he bought in 2012.

He worked up to 100 hours a week at three jobs: pension analyst; financial writer; and supermarket clerk. Naturally, the bachelor's social life suffered. Cooper also lived like a pauper, maintaining a strict budget and residing in the basement so he could collect rent on the rest of his house.

His story generated more than 2,000 comments on CBC News sites.​

[...] Media across the globe have now jumped on the story and also taken sides. "Well done, big fella, congratulations, an inspirational guy," gushed host David Koch on the Australian breakfast television program, Sunrise.

But America's Slate magazine had a different take, stating Cooper's story implied our money troubles were entirely our own fault. The Slate article suggested cash-strapped people wanted real economic change rather than just "inspirational stories of sacrifice and pluck."

General rule of thumb: when you're offended by what someone else has done that isn't hurting anyone else, that probably says more about you than anyone else...

2015: Best year to be alive, but also a year of absurdity

A juxtaposition - a pessimistic look of 2015 and the pain we, in the West, inflict on ourselves by George Will (Washington Post):

We learned that a dismal threshold has been passed. The value of property that police departments seized through civil asset forfeiture — usually without accusing, let alone convicting, the property owners of a crime — exceeded the value of property stolen by nongovernment burglars. [...]

The Internal Revenue Service persecutes conservative advocacy groups but does not prosecute IRS employees who are tax cheats: An audit revealed that over the past decade, the IRS fired only 400 of the 1,580 employees who deliberately violated tax laws, rather than the 100 percent required by law. [...]

A suburban Washington high school promoted self-esteem by naming 117 valedictorians out of a class of 457. Two Edina, Minn., elementary schools hired “recess consultants” to minimize “conflict” — children saying “Hey, you’re out!” rather than “Nice try!” The principal of a San Francisco middle school withheld the results of student elections that did not produce properly “diverse” results.

But a year of hope as well - from John Stossel looking at the world as a whole. While the US, along with much of the west, may be making incremental moves away from economic and personal liberty that has brought them prosperity, much of the rest of the world has been moving in the opposite direction with quantifiable, positive and predictable results (Fox):

Twenty-five years ago, 2 billion people lived in extreme poverty -- that meant surviving on about a dollar a day, often with little access to basic needs like water and food. “Experts” predicted that number would rise as the population grew. Happily, thanks to the power of free markets, they were wrong. In the space of a generation, half the people most in need in the world were rescued.

Ten percent of the world’s people still live in dire poverty, but the trend is clear: Where there is rule of law and individual freedom, humanity is better off. As Marian Tupy of HumanProgress.org puts it, “Away from the front pages of our newspapers and television, billions of people go about their lives unmolested, enjoying incremental improvements that make each year better than the last.”

Saudi Arabia's finances hit by low oil prices

It couldn't happen to nicer people... (Reuters) other than Russia of course:

The government ran a deficit of 367 billion riyals ($97.9 billion) or 15 percent of gross domestic product in 2015, officials said. The 2016 budget plan aims to cut that to 326 billion riyals, reducing pressure on Riyadh to pay its bills by liquidating assets held abroad and issuing bonds.

Next year's budget projects spending of 840 billion riyals, down from 975 billion riyals actually spent this year. The ministry said it would review government projects to make them more efficient and ensure they were necessary and affordable.

Revenues next year are forecast at 514 billion riyals, down from 608 billion riyals in 2015, when oil revenues accounted for 73 percent of the total. The Brent oil price averaged about $54 a barrel this year but is now around $37.

China slows...

An overview from the WSJ:

China's Communist Party promised to transform people's lives after decades of chaos. Higher living standards underpin the party’s rule, making limits on personal freedoms worthwhile for many. As the economy slows, that social compact is fraying.

There's a certain amount of nervousness, fear but also optimism and hope as to what comes next.

Plus other challenges: Xinjiang seethes under Chinese crackdown (NYT via Instapundit)

Because making some customers less profitable...

Will make banks want to serve those customers more? I'd say that the economic literacy/idiocy is remarkable but sadly I don't think it is (NYT):

Some who advocate the use of the ID cards question whether the refusal to accept them has less to do with security concerns and more to do with protecting the bottom line. Regulations reining in fees have reduced the profits banks can make from low-income customers, putting the city’s immigrants among the least attractive sources of potential customers.

“If New Yorkers who rely on IDNYC were perceived to be highly profitable customers, the big banks would no doubt change their tune,” said Deyanira Del Río, a co-director of New Economy Project, which works with community groups in New York.

Thomas Sowell: 'Poverty is the norm, wealth is the exception'

Well, yeah. Interview promoting his most recent book - Wealth, Poverty and Politics (Amazon via theArtsMechanical):