The second part of the interview with David Berlinski is up at Intelligent Design The Future. If you missed the first part you really should read it first. There's a link to it at IDF.
Friday, March 10, 2006
Connect The Dots!
For one to understand what is taking place economically in America today one must attempt to connect the dots. They must follow different events and associate them in a way that leads to an explanation of what is happening. Here is an example of such an exercise.
The starting point is the realization that a minimum of 65,000 H-1B visas are granted annually for foreigners plus an indeterminate number of L-1 visas enabling foreigners to enter the U.S. to work. So it seems we have a policy of importing skilled labor and no policy regarding illegal immigrants (they can come as they please).
I've worked with people in the tech industry who are "visiting" the U.S. under such visas. These people are highly skilled and typically from India or China. Often their families still live overseas and they send most of the money they earn home for the family to live on and the rest gets put into various investments in their home country's markets. The same mechanism occurs within the Latino community.
It seems that the U.S. is importing labor at every level of the spectrum at the expense of citizens of the U.S.. Skilled and unskilled labor alike are welcome.
Why, one might ask would this be so? Let's connect the dots. First dot. All of these people put pressure on the prevailing wage rate to lower it or keep it from rising. An American software engineer will find it difficult to command a $50 per hour salary when someone from overseas will do the same job for $35 or less.
Second dot. Many illegal immigrants have found their way into less skilled jobs like construction. The American construction worker will find he can't compete for a job when the immigrant will do it for 40% or more less.
Third dot. Let's look at the cycle of events that causes inflation to be such a problem and for this example we will use oil. Let's say the cost of oil goes up due to a variety of reasons. First and foremost is that the value of the dollar is going down simply because we print so many of them. This price increase ripples through the economy because the cost of anything that is made from oil (which is almost everything) increases as does the cost to ship it from point of manufacture to point of delivery. These increased costs are passed on to the consumer and eventually impacts the cost of one's living expenses so they ask their employer for a raise to cover the costs.
Fourth dot. Historically, the employer had no choice but to comply with the employee demand because the expense of hiring a replacement would typically end up costing more.
Now that this event and others like it have just increased the costs of the employer, he reasonably concludes that he must raise the price of the goods or services that his company provides. And the cycle begins all over again. This is what causes inflation to "spiral" out of control.
So if I was a government bureaucrat charged with establishing policy that would enable my government to inflate it's currency and, at the same time, hide the evidence of doing so, or at least minimize the damage, what policy might I initiate to mitigate it?
Well, after much study, I would conclude I must break a link in the cycle of inflation that causes the nefarious beastie to manifest itself to the public in terms of ever increasing prices of goods and services. Since my employer is printing dollars at an ever increasing rate there isn't much I can do there. As I mentioned above, the increase of dollars is causing the cost of real assets like oil and services to increase in price. After all, can you blame OPEC for wanting more fiat dollars that we print with abandon for their real asset in the ground - oil? Of course not. To put things into perspective, a gallon of spring water cost $1. Fifty five gallons of spring water would be a barrel of spring water at $55. Given the investment costs to produce a barrel of oil compared to a barrel of spring water, oil is still a bargain.
Lastly, I can't do much about the increased cost of those assets trickling down throughout the economy causing prices in general to rise. Sheesh! If I don't find some way soon, I'll be fired and have to get a job where I contribute to the economy by being a productive individual! But wait...I've got it. I will let any and everyone into the U.S. and they will be willing to work for less than all those greedy American workers. So even though prices are rising, employers won't have to increase salaries as they did in the past which continues the virtuous cycle (spiral) of inflation. I've stopped it dead in its tracks! Surely I'll be promoted to a higher bureaucratic position of even more importance and influence...and higher pay rate. There is a God!
And here's the kicker. These people that I let into the U.S. will, for the most part, send their excess dollars, that would otherwise contribute to inflation by driving prices up, back home i.e. out of the U.S. so many of those dollars they earn won't be in the U.S. to cause prices to rise. What a genius!
But wait. There's only one problem. Such a plan will cause millions of Americans to find themselves unemployed, ruined, relegated to poverty with no hope. After a short deliberation I conclude...that's not my problem...that's their problem. I'm getting mine and after all, that's all I care about. Hah!
Here's an interesting article by Paul Craig Roberts. He was Assistant Secretary of the Treasury in the Reagan administration.
The United States is the first country in history to destroy the prospects and living standards of its labor force. It is amazing to watch freedom-loving libertarians and free-market economists serve as full time apologists for the dismantling of the ladders of upward mobility that made the America of old an opportunity society.
America has begun a polarization into rich and poor. The resulting political instability and social strife will be terrible.
It's really quite simple. I've maintained for a long time that one shouldn't listen to what they are told by our government and the news media but rather observe what they see going on around them and think for themselves. Only then will the truth be found.
Philosopher Alvin Plantinga dispenses with Judge John Jones' reasoning in the Kitzmiller case as the pretensions of a lightweight (my assessment, not Plantinga's). Along the way he also argues that any attempt to disparage Intelligent Design as "not science" is doomed.
It's good stuff and, unlike a lot of Professor Plantinga's technical work, very accessible to the layman.
Gordon Chang, author of The Coming Collapse of China, predicts a Chinese crackup. The only question seems to be whether it will occur before its clients, North Korea and Iran, lead us into a destructive war.
As China gets more prosperous, it is becoming less stable. Senior Beijing officials now face the dilemma of all reforming authoritarians: economic success endangers their continued control. As Harvard's Samuel Huntington has noted, sustained modernization is the enemy of one-party systems. Revolutions occur under many conditions, but especially when political institutions do not keep up with the social forces unleashed by economic change. And as history shows us, nothing irritates a rising social class like inflexible political institutions. The most interesting trend about protests in recent years is not that they are becoming more frequent, getting much larger, or growing more violent. The most interesting trend is that we are now seeing middle-class Chinese, the beneficiaries of the last quarter century of progress, taking to the streets.
Beijing's policies seem designed to widen the gap between the people and their government, thereby ensuring greater instability for the foreseeable future. Today there's unimaginable societal change at unheard of speed thanks in large part to government-sponsored economic growth and social engineering. Yet at the same time the Communist Party stands in the way of meaningful political change.
Because senior officials don't allow political change of substance, the authorities must resort to force to stop the spread of unrest. But the use of the coercive power of the state is only a short-term solution-force just makes protests even harder to control next time. The leadership will not, or cannot, come to terms with the causes of unrest.
Ultimately, the one-party system will be replaced by democratic institutions. The transition won't be easy, however. China will probably experience years of uncertainty, instability, and turbulence.
Swell. And the Democtrats will be doing all they can to insure that they are in charge during such a dangerous time. Let us pray.