Daily Archives: November 8, 2011
Today’s economic statistical releases:
The NFIB Small Business Optimism Index came roaring back this month rising 1.3 points to a still depressed 90.2.
In the weekly retail sales numbers, ICSC-Goldman reports same-store sales rose 1%, though the year-on-year rate dropped to 2.7%. Redbook, meanwhile, says year-on-year sales slowed significantly to 3.1%.
Irony of ironies. The Chinese lecturing the supposed capitalist West on economics and the welfare state. Of course, as we’ve discussed many times, Crony Capitalism and/or Corporatism aren’t Capitalism. At best the West has a mixed economy with various levels of intrusion and market distortion caused by governments. In effect, what this gentleman is saying to Europe is the intrusion and distortion levels are such that they have caused a cultural malaise which is finally coming home to roost:
"If you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of the worn out welfare society. I think the labour laws are outdated. The labour laws induce sloth, indolence, rather than hardworking. The incentive system, is totally out of whack.
"Why should, for instance, within [the] eurozone some member’s people have to work to 65, even longer, whereas in some other countries they are happily retiring at 55, languishing on the beach? This is unfair. The welfare system is good for any society to reduce the gap, to help those who happen to have disadvantages, to enjoy a good life, but a welfare society should not induce people not to work hard."
Jin Liqun, the supervising chairman of China’s sovereign wealth fund
Of course that just touches the surface of the problems Europe faces, but essentially Jin is saying that the system in Europe, i.e. state welfare, is not only unsustainable, but discourages hard work – a vicious and self-defeating cycle.
Go figure. Most rational people understand that human beings respond to incentive. And that a good portion will always choose the easy way. Human nature 101. So when given the option of hard work or being a slacker and getting paid to be one, those who tend to slack will always choose the latter if an incentive to do so is provided.
His point about labor laws that require rules such as featherbedding for instance is true. And, by dictating wages, etc., government intrudes on market dynamics which properly price labor. Instead we see the distortion of labor’s worth, rules that cut into productivity and spiraling costs which kick up the price of goods and services beyond what a market would dictate.
And that’s just a very small part of the problem. Europe decided decades ago that it could use a mixed economy to somehow pay for a large welfare state. It thought it had it all figured out and then this crisis hit. But it was clear to many that it isn’t this crisis that precipitated Europe’s current financial problems, it just hastened them. Much like the revenue shortfalls we see here for the trillions in unfunded obligations for Social Security, Medicare and Medicaid, Europe has seen those for years. Its day of reckoning is at hand.
Greece was the weakest member of the Eurozone. But Italy, Spain, Portugal and Ireland aren’t far behind. What critics of the welfare state have said for decades can no longer be hidden. And, unsurprisingly, the culture that sort of a state breeds is fighting tooth and nail to preserve it, even if they really know that’s not possible.
But the irony is unquestionable. Lectures by communists on the dangers of the welfare state. Snowballs in hell are obviously possible.
While President Obama continues to claim that he and America can’t wait on Congress to act on his jobs bill, he apparently might delay a decision that would create hundreds of thousands of jobs till after the next election:
The Obama administration is considering a move that could delay a decision on the controversial Keystone XL pipeline by requiring sponsors to reduce the project’s environmental risks before it can be approved, according to people with knowledge of the deliberations.
The step might put off a decision until after the 2012 election and be a way for the White House to at least temporarily avoid antagonizing either the unions that support the pipeline or the environmental activists who oppose it as President Obama gears up for his campaign.
That’s right, it’s about politics. Need a job? Keystone XL pipeline might be the very project to provide that. But to heck with you, your President has an election to win and he can’t afford to alienate or antagonize anyone in his base. And this decision is going to hack off some of his supporters. He’s either going to make the environmental extremists that populate the left very unhappy or the labor unions that back the Keystone project and the jobs it will create.
So, in typical Obama style, he’ll just delay the decision till after the November 2012 election. He apparently can wait on that.