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Ignorance, debt and losing elections deliberately
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Author Topic: Ignorance, debt and losing elections deliberately  (Read 4216 times)
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« on: April 24, 2009, 12:20:03 EDT »

I've been reading a lot of Jeffrey Friedman recently.  One of his main themes is how the general public's ignorance of cause and effect cause bad decisions.

For example, Andrei told me a while ago that he always judges the success of a particular government on the success of the country during their time in office.  If I recall the discussion correctly Andrei said that he understood that his heuristic is wrong, but to him it is the only sensible heuristic to use.  In what Friedman would call the "blossoming confusion of facts", Andrei pick's out particular ones.  A strategy like this one is really the only sensible strategy a voter can take.  Though of course our interpretation of facts is coloured by our ideological viewpoint.

One thing that is passed between successive governments is the national debt.  Another is the health of the economy.  In 1997 Tony Blair's Labour party won against John Major's conservatives in Britain.  The previous conservative government had a given them a low level of government spending and a relatively low level of debt.  It was also a period of growth, though the conservative government had not done well earlier on that score.  As a result when Tony Blair came to power he had a very easy job.  The same is true for George W Bush, Bill Clinton left things in quite good shape when he left office.  In both cases when I mean "in quite good shape" I mean that by current standards, which are rather low.

Now though many states are in bad financial and economic shape.  Governments in Britain and Ireland acted foolishly during the boom.  In Britain deficits were increased year on year during good times, which are clearly the time to pay off debts.  Even Keynes' supported paying of national debts during periods of growth.  In Ireland the state cut direct taxes and sales taxes (VAT) and relied on income from stamp duty - the taxes on exchange of property.  This worked until the property market tanked, now the government have been force to increase direct taxes.

I mention Britain and Ireland because unlike the US they have not had a recent election (I could talk about Italy too but I don't know much about Italy).  GWB has already been kicked out.  Also, the US situation is not bad enough to seriously affect the governments creditworthiness.  In Britain and Ireland there is the possibility of government bonds (sovereign debt) being downgraded by credit ratings agencies.  It that happened it could be disastrous.

The current governments in Britain and Ireland will probably be thrown out in the next election.  The opposition Conservatives will likely win in the UK, while in Ireland the opposition Fine Gael will likely win in a coalition.  The subsequent governments though will face very large problems.  The bulk of the problems caused by their predecessors will occur on their watch.  There will probably be widespread unemployment and tax rises.  They are very likely to get blamed for it.  So, their time in office is likely to be brief, after it they will likely be replaced by the current governments (Labour in the UK and Fianna Fail in Ireland).

The best long-term strategy for the oppositions I mention is probably to deliberately lose the next election.  That way they will not be in office for the painful clean-up job.  The current governments will have to stay in place to fix things.

I don't think though that either party are clever enough to do this.  Those that are truly committed to their political cause will want to come into government as soon as possible.  They are unlikely to be swayed by cunning arguments like mine.  Those who are in parliament for more cynical reasons, for the money or the power, or to support particular special interest groups, they also will want to win as soon as possible.

So, I predict politically volatile times ahead.

What is more interesting though is this: What political institution could be used to prevent a government from planting problems for its successor.  Or what institution could be used to bring them to light?

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« Reply #1 on: April 25, 2009, 12:42:15 EDT »

I actually suspect that the reason why Canada fares as well as it does economically is the long-cycle leadership which comes out of 10-12 years terms.

I have no idea how this could be exported, as on the face of it the system is the same as the english system, yet the voting population in Canada tends to desire monarchial-type control.  It may be one of those North-South things, who knows (I have a bunch of theories, but they mostly relate to how cultures develop).

It may also be because voter turn out rates are so low and logic so vapid that everyone involved essentially gives up being serious about it.  There seems to me little question that each election cycle in the states Americans get dumber and shallower in their choice of Candidates (anyone who watched the "debates" without confrontation could not in good conscience call either of the two men parading around during them "bright").

The core issue which cuts across the board here is that nobody with any brains really wants to be in government.  It is a group run by the stupid, for the stupid.  If you pick the best babboon out of a zoo, it'll still be a babboon.
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« Reply #2 on: April 27, 2009, 12:22:34 EDT »

That's an interesting point.  I've often thought that the reason the national debt is so high in Italy is because terms are so short.  The relative gain to screwing over successive generations is higher.  I think though there must be a smarter way to approach it than by fiddling with the electoral term.

I'm sure a way will be found in time.  I expect it to be found by a brutal process of Hayekian evolution though.  That is states that behave badly will see themselves bankrupt and impoverished in the long run.
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« Reply #3 on: April 27, 2009, 18:51:03 EDT »

Well, in the United States, I think the big problem is that the two parties in party have monetary policies that not only conflict, but contain elements that are very politically unpopular. Republicans promote low tax rates across the board and try to cut services to balance their budget. Meanwhile, Democrats promote improved services and try to balance their budget by raising taxes - particularly on those who earn most.

Naturally, its advantageous for voters to have both low taxes and a high level of service, so, even if one party was dominate long enough to balance the budget, it'd quickly loose its favor with the public. (I only think Clinton got the surplus because of the prosperity of the time and the fact he was willing to make cuts to things like Welfare.)

But, yeah, Current, I think you've highlight a certain truism with any representative form of government... those in office often leave before the consequences of their actions can be seen. The populace often don't give people proper credit or blame...
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« Reply #4 on: April 28, 2009, 03:57:08 EDT »

Clinton also pulled a lot of shit out of his ass.  He was in collusion with Johnny C. up here and they had so many backdoor trade deals it wasn't even funny (okay, I thought it was funny).

Real profit is derived through trade as much as anything else, and Clinton was great and navigating the heedy world of protectionism, because he knew what to say when and to who, and was willing to let third parties carry his bags.

Obama and Bush don't really -get- tariffs and how they inherantly undercut economies, which is not suprising as neither of them has ever done anything remotely involving money.  Trade channels are not something you can pick up on the fly, either.

Current, well, Italy claims it's okay because it has decent savings rates.  I suspect a big chunk of it is also that Italy sees itself as in the same weight class as Germany without having any of the manufacturing base to back it up.  At the core, Italy is not gonna swing pipe with social programs the way many states can and pull out ahead simply because it's...well...It's a southern state that really has only recently got it's feet under it.  It should consider itself Spain's peer, but Italy is a proud state and spends like a northern european state.
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« Reply #5 on: April 28, 2009, 07:34:14 EDT »

Well, in the United States, I think the big problem is that the two parties in party have monetary policies that not only conflict, but contain elements that are very politically unpopular. Republicans promote low tax rates across the board and try to cut services to balance their budget. Meanwhile, Democrats promote improved services and try to balance their budget by raising taxes - particularly on those who earn most.

Naturally, its advantageous for voters to have both low taxes and a high level of service, so, even if one party was dominate long enough to balance the budget, it'd quickly loose its favor with the public. (I only think Clinton got the surplus because of the prosperity of the time and the fact he was willing to make cuts to things like Welfare.)

But, yeah, Current, I think you've highlight a certain truism with any representative form of government... those in office often leave before the consequences of their actions can be seen. The populace often don't give people proper credit or blame...
There is the same dynamic in the UK, and I think most democracies.  There are though interesting differences.

In Britain it has mostly been left-wing labour governments who have run up the national debt.  This has often precipitated crises.  In the 1960s Harold Wilson had to devalue the pound in 1967.  After that the Bretton Woods system ended and devaluation lost it's old meaning.  Then in 1976 there was a collapse in the value of the pound. James Callaghan's government was force to borrow from the IMF.  Gordon Brown was been running budget deficits throughout the recent boom and so public finances are horrible now and the value of the pound has fallen significantly.

It is sometimes forgotten though that two Conservative governments, those of Harold Macmillan and Edward Heath also damaged the nations finances significantly.  (John Major's government did too but only quite temporarily).  Conservative governments have often been thrown out of office because of dissatisfaction with services.  Labour ones more often because of dissatisfaction with the economy or because of one of the financial crises I mention above.

So, why is it that some governments abuse the state's finances and some don't.  Despite what US Democrats think it's not just a matter that "the opposition are _evil_".  In other countries it is often the left wing parties that do the damage.

The interesting question is why?  I think one possibility is the chance of a politician becoming part of more than one government.  The Conservatives have ruled in the UK for 31 years from 1950-2000, Labour for 19 years.  Perhaps each particular Conservative politician doesn't want to destroy public finances (and his long term career) because he has a fair chance of returning to office.  That doesn't explain what happens in the US though.

Another possibility is that public visibility is very important.  In some gold standard systems governments were forced to devalue their currencies when things went wrong.  Causing embarrassment for them and perhaps encouraging them to be careful.  The Bretton woods system did the same in the past too.  Perhaps the problem today is that currency markets are not clearly linked to politics.  The public don't know to associate a drop in their currency with a policy or a failure of business or some other cause.  (And neither do I).  Currency unions such as the Euro make things even worse.  Each country is perpetually blaming the other for the state of the currency and blaming its public finances on the currencies state.

I can't see any good answers.  But I think that currency unions probably make this problem worse.


Heq, what did Clinton do?

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Current, well, Italy claims it's okay because it has decent savings rates.
I don't think claims or pride really have that much to do with anything.  You may be right though.
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« Reply #6 on: April 29, 2009, 05:51:24 EDT »

The Adam Smith Insitute propose a possible solution.  Tax bills broken out by parliament.

Of course if the Tories spend too much there should be a Conservative tax too.
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« Reply #7 on: April 29, 2009, 18:10:27 EDT »

Current, well, a lot of things were backdoored through third parties.

I'll just give the simple example of arms sales.  Canada can get away with a sales ratio of 60% UN countries, something that would get howled bloody blue murder in the states, as well as supporting middle eastern despots.  Now, the US makes a lot of crap it would like to sell to countries it pretends it doesn't like, so it backdoored these sales through Canada (who would then go to the UAE, the void into which trade secrets vanich).

Of course, that was aside from the tacit agreement that blind trusts would be allowed to operate in the islands so paper companies could trade goods outside of taxation.

Oh, sweet paper companies.  Anyway, Bush didn't much like this sort of fuzzy crap, and really wanted it to slow down, and Obama doesn't see how having "blind spots" actually can work to the advantage.

Basically, Clinton accepted there was a certain amount of corruption inherant in international trade.
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« Reply #8 on: April 30, 2009, 08:07:32 EDT »

Though I see your point I don't really agree.

Devious and slick salesmen like Clinton normally only ever work for themselves.  See Blair for a good example.  Clinton was a bit of an oddity in actually taking some real account of the nation he notionally led.

They may be useful in trade deals but they are not useful overall.  People like them belong in the private sector when they can be kept watch on by the professionally paranoid.
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« Reply #9 on: April 30, 2009, 15:56:44 EDT »

Well, we disagree there.

I love the machiavellian systems of trade routes and paper companies.  It's refreshing when the government at least acknowledges that's how things go.  Kinda like organized crime, it will always exist, and it's best to cut the deals then attempt to wipe it out.

Of course, my first ever work on accounting/economics was how to launder money (it's a great system I have), mmmm...Money laundering.  Yea gods, if only I knew some successful criminals rather then petty dimbulbs.  Then I wouldn't have to work at all, it's hard to circulate your resume with them though.
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« Reply #10 on: April 30, 2009, 16:12:59 EDT »

Heq, Would you vote for yourself?
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« Reply #11 on: April 30, 2009, 18:06:17 EDT »

Probably, but only because I'm me (or were it a clone of me, I'm in an industry that would see huge windfall from myself).

I only poll at about 50% with my close friends, but hey, I'd be a total bastard but within 8 years we'd all be rich as all hell (assuming we're talking about Canadian government, with all that unfettered power).  I'm sure some people would get wobbley about me getting out of all military alliances and setting ourselves up as a neutral state which oversees treaties and trade, but man-oh-man countries with little to no ethical compunctions can make a killing in the world economy.
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