Tag Archives: Economics

“First, don’t keep money in banks”

As an undergraduate, my parents lived in Riga. It’s a lovely city (if you’re looking for a friendly travel destination largely untouched by American tourists, the Baltics are a good place to start) and Latvia’s bumpy transition from the Eastern Bloc to the European Union is one of the bright spots of the early 21st century. But it seems the economic crisis is hitting small countries particularly hard, and the latest from Clay Risen suggests the Baltics are still vulnerable to political backsliding:

In the United States, we put economists in the cabinet. In India, they make them prime ministers. In Latvia, they put them in jail–the pessimistic ones, at least. According to the Wall Street Journal, Latvian security agents recently detained university lecturer Dmitrijs Smirnovs after he told an audience, “All I can advise is this: First, don’t keep money in banks. Second, don’t keep money in lats,” the national currency. Smirnovs was released, but agents seized his computer and told him not to leave the country. Turns out that it’s illegal to speak ill of the Latvian economy–or, in Soviet-speak, spreading “untruthful information.” He’s not the first, and despite a press uproar, he’s unlikely to be the last.

Read the whole thing. In a broader sense, I think this episode demonstrates the inherent fragility of democratic governance. After the Berlin Wall fell, the Baltic States were among the most inviting targets for political and economic liberalization. Entry into NATO and later, the EU, ratified and reinforced their impressive national progress. Today, visiting Riga or Tallinn or Vilnius is much like visiting any other Northern European capital. Everyone speaks English; everyone’s friendly; the beer is fantastic, and the local McDonalds is cleaner and better staffed than any American franchise I’ve encountered.

For all our flaws, the thought of the United States imprisoning someone like Paul Krugman is beyond absurd. And yet arresting an economic pessimist was the option of first resort for the Latvian government. This degree of political insecurity is all the more surprising when one considers the Baltic States’ pro-Western orientation – Lutherans and Catholics outnumber members of the Eastern Orthodox Church, Germany’s cultural influence is inescapable, and the region’s recent entry into the Euro-American economic and security framework was widely described as a “Return to the West.”

So if Latvia – the proverbial “low hanging fruit” of democracy promotion – is in danger of lapsing into authoritarianism every time the stock market takes a dive, I’m genuinely baffled by people who still support promoting democracy in less hospitable environments. Even with all the right cultural precursors in place, things can still go wrong. We should keep that in mind the next time we’re leturing some hapless Third World parliament on the need for transparent elections.

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Inequality and Social Cohesion

I read this:

I think that living in an extended, law-bound, commercial society is deeply unnatural, and the product of many generations of work. Aspects of human nature are an acid that constantly undermines its foundations. Hordes of violent men are always outside the city gates ready to sack it, and those inside always threaten to turn into a mob and destroy it from within. One of many bulwarks against these threats is social cohesion, which is undermined by extreme inequality.

And wonder, is it inequality or absolute poverty that undermines social cohesion? When we think of the French Revolution, “Let Them Eat Cake” inevitably comes to mind, but had the French peasantry miraculously transformed itself into a class of middle income shop-keepers circa 1788, I imagine the monarchy would have hobbled along for another generation or two. Thanks to Jim Manzi’s helpful chart, I’ve also noticed that American levels of income inequality were comparably high during the roaring ’90s. I suspect this went unmentioned at the time because everybody was too busy enjoying broad-based economic growth.

So while I agree with Manzi’s premise – society is fragile; social cohesion is important – I’m not sure if his diagnosis is correct. Wouldn’t it be better to shelve the inequality debate in favor of addressing wage stagnation or the lack of educational opportunities available to lower-income workers? Alleviating either problem would probably do something to reduce income inequality, but I don’t think that should be our biggest concern. If the right policy choices provide broad-based economic growth, I doubt the top one percent’s limitless income will continue to attract the same amount of attention.

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Worthy Links

Roderick Long on the secret history of American capitalism.

Jim Manzi on the wisdom of bailouts.

Patrick Deneen on the relationship between economic growth and political liberalism. For a less pejorative (and more extensive) take, I also recommend Benjamin Friedman’s Moral Consequences of Economic Growth.

Matthew Sitman on the roots of conservative populism.

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It’s an eminent front!

To paraphrase Sam Cooke, I don’t know much about economics. But I’m now officially worried. I confess I had previously assumed that our economy remained fundamentally sound (shades of John McCain!) despite the recent downturn. Now Noah Millman at The American Scene writes:

Right now, the Fed and the Treasury are focused on preventing the complete collapse of the financial system. They are fighting a four-alarm fire, and trying to keep the building from coming down. The renovation after the fire is going to take years. Anyone who confidently tells you they know what it’s going to look like once that process is done has been paying as little attention to the financial crisis as, say, Sarah Palin has been paying to foreign policy.

Gulp.

For your daily dose of conservative doom-saying, I’d recommend Rod Dreher and Patrick Deneen (who has yet to post on this particular crisis, but always offers a heterodox – and eminently readable – conservative take on America’s culture of consumption). On the other end of the spectrum, my favorite liberal Cassandra is probably Ezra Klein.

UPDATE: A friend writes (tongue in cheek?): “Read Kudlow. Market. Self. Correction.” One can only hope . . .

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