(p. B1) MUMBAI, India — A jeans maker saw his delivery costs cut by half when the highway police stopped asking for bribes. An aluminum wire factory faced only three inspectors rather than 12 to keep its licenses. Big companies like Corning, the American fiber-optic cable business, found they could wield a new bankruptcy law to demand that customers pay overdue bills.
Prime Minister Narendra Modi promised nearly five years ago to open India for business. Fitfully and sometimes painfully, his government has streamlined regulations, winnowed a famously antiquated bureaucracy and tackled corruption and tax evasion.
. . .
(p. B5) Mehta Creation, a jeans maker in a dilapidated concrete building in the northern outskirts, paid a welter of taxes until two years ago. That included the dreaded octroi, a British import from medieval times that allowed states and some cities to collect taxes whenever goods crossed a boundary.
Mehta Creation’s budget was contorted by corruption. To avoid the octroi, which could triple the cost of a delivery and add delays, Mehta paid drivers about $5 for each parcel of jeans and then reimbursed them up to $6 per parcel to bribe the local police at every border, said Dhiren Sharma, the company’s chief operating officer.
Mehta’s costs dropped after the government abolished 17 taxes, including the octroi, two years ago and established instead a national value-added tax on most business activity. Continue reading “Modi Cut India’s Taxes, Corruption, and Regulations”
Category: Economic Growth
Many Fewer Killed in Natural Disasters Than Were Killed 50 Years Ago
(p. A13) . . . it’s deceptive to track disasters primarily in terms of aggregate cost. Since 1990, the global population has increased by more than 2.2 billion, and the global economy has more than doubled in size. This means more lives and wealth are at risk with each successive disaster.
Despite this increased exposure, disasters are claiming fewer lives. Data tracked by Our World in Data shows that from 2007-17, an average of 70,000 people each year were killed by natural disasters. In the decade 50 years earlier, the annual figure was more than 370,000. Seventy thousand is still far too many, but the reduction represents enormous progress.
The material cost of disasters also has decreased when considered as a proportion of the global economy. Since 1990, economic losses from disasters have decreased by about 20% as a proportion of world-wide gross domestic product. The trend still holds when the measurement is narrowed to weather-related disasters, which decreased similarly as a share of global GDP even as the dollar cost of disasters increased.
For the full commentary, see:
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Aug. 3, 2018, and has the same title as the print version.)
Pielke’s op-ed piece quoted above, is related to his book:
Pielke, Roger, Jr.. The Rightful Place of Science: Disasters & Climate Change. Tempe, AZ: Consortium for Science, Policy & Outcomes, 2018.
As Some Occupations Decline, Others Advance
(p. B3) . . . the impact of automation is increasingly spreading to the service sector as well. Government economists expect steep declines in employment for typists, telephone operators and data-entry workers. Even jobs that might once have seemed relatively secure, such as legal secretaries and executive assistants, are expected to decline in coming years.
At the same time, technology is creating new opportunities for statisticians, engineers and software developers — the workers developing the algorithms that are changing the global job market.
For the full story, see:
(Note: ellipsis added.)
(Note: the online version of the story has the date Oct. 24, 2017, and has the title “A Peek at Future Jobs Shows Growing Economic Divides.”)
Democrat Warren Buffett Admits to Being “a Card-Carrying Capitalist”
(p. B1) The most prominent face of capitalism — Warren Buffett, the avuncular founder of Berkshire and the fourth wealthiest person in the world, worth some $89 billion — appeared to distance himself from many of his peers, who have been apologizing for capitalism of late.
“I’m a card-carrying capitalist,” Mr. Buffett said. “I believe (p. B3) we wouldn’t be sitting here except for the market system,” he added, extolling the state of the economy. “I don’t think the country will go into socialism in 2020 or 2040 or 2060.”
There is something oddly refreshing about Mr. Buffett’s frankness.
. . .
Mr. Buffett’s moral code is one of being direct, even when it is not politically correct. In his plain-spoken way, Mr. Buffett, a longtime Democrat, acknowledged that the goal of capitalism was “to be more productive all the time, which means turning out the same number of goods with fewer people or churning out more goods, with the same number,” he said.
“That is capitalism.” Two years ago at the same meeting, he bluntly said, “I’m afraid a capitalist system will always hurt some people.”
. . .
. . . at his core, he believes that the pursuit of capitalism is fundamentally moral — that it creates and produces prosperity and progress even when there are immoral actors and even when it creates inequality.
. . .
One prominent chief executive I spoke with after the meeting said he wished he could speak as bluntly as Mr. Buffett. He said in this politically sensitive climate, he often has to tiptoe around controversial topics and at least nod at the societal concern of the moment.
Therein lies the truth of the particular moment that the business community faces and one that, at least so far, Mr. Buffett, at age 88, may be immune from.
And so while Mr. Buffett may have missed an opportunity to use his perch, he comes to his views of a just business world honestly.
For the full commentary, see:
(Note: ellipses added.)
(Note: the online version of the commentary has the date May 5, 2019, and has the title “Warren Buffett’s Case for Capitalism.”)
Are We “Made of Sugar Candy”?
(p. 11) Less a conventional history than an extended polemic, “Capitalism in America: A History,” by Greenspan and Adrian Wooldridge, a columnist and editor for The Economist, explores and ultimately celebrates the Austrian economist Joseph Schumpeter’s concept of “creative destruction,” which the authors describe as a “perennial gale” that “uproots businesses — and lives — but that, in the process, creates a more productive economy.”
. . .
. . . , Greenspan’s admiration for the rugged individualists who populate the novels of Ayn Rand (who merits a nod in this history) and the frontier spirit that animated America’s early development shows no sign of weakening as Greenspan has aged. He and Wooldridge lament that Americans are “losing the rugged pioneering spirit” that once defined them and mock the “trigger warnings” and “safe spaces” that now obsess academia.
The authors quote Winston Churchill: “We have not journeyed across the centuries, across the oceans, across the mountains, across the prairies, because we are made of sugar candy.” But now, they conclude, “sugar candy people are everywhere.”
Their prescription for American renewal — reining in entitlements, instituting fiscal responsibility and limited government, deregulating, focusing on education and opportunity, and above all fostering a fierceness in the face of creative destruction — was Republican orthodoxy not so long ago. Before the Great Recession it was embraced by most Democrats as well, and more recently by President Bill Clinton, the recipient of glowing praise in these pages.
No longer. “Capitalism in America,” in both its interpretation of economic history and its recipe for revival, is likely to offend the dominant Trump wing of the Republican Party and the resurgent left among Democrats. It’s not clear who, if anyone, will pick up the Greenspan torch.
For the full review, see:
James B. Stewart. “Creative Destruction.” The New York Times Book Review (Sunday, Nov. 4, 2018): 11.
(Note: ellipses added.)
(Note: the online version of the review has the date Nov. 2, 2018, and has the title “Alan Greenspan’s Ode to Creative Destruction.”)
The book under review, is:
Greenspan, Alan, and Adrian Wooldridge. Capitalism in America: A History. New York: Penguin Press, 2018.
Australia’s 27-Year Economic Expansion
(p. A2) Australia is experiencing an amazing economic run—a 27-year expansion that survived a regional economic crisis in the 1990s, a global economic crisis in the 2000s, and a boom-boost cycle in its core commodity sector in the 2010s.
Its experience offers lessons for the U.S. and the rest of the world. Among them, the laws of economics don’t dictate that expansions run on preset timetables. Wise policy-making, and some good luck, carried Australia’s expansion into the record books.
For the full commentary, see:
(Note: the online version of the commentary has the date July 15, 2018, and has the title “THE OUTLOOK; How an Economic Boom Can Run Out the Clock.”)
One Billion Fewer People Live in “Extreme Poverty”
(p. A16) The global population living in extreme poverty has fallen below 750 million for the first time since the World Bank began collecting global statistics in 1990, a decline of more than 1 billion people in the past 25 years.
. . .
The World Bank defines “extreme poverty” as living on less than $1.90 a day, or about $694 a year. The sum, which is based off measures of poverty determined by many low-income countries, is the amount it takes to afford minimal basic needs.
The figure is comparable, adjusted for inflation, to the $1-a-day threshold that became popular in the 1990s as the marker of extreme poverty.
For the full story, see:
(Note: ellipsis added.)
(Note: the online version of the story has the date Sept. 19, 2018, and has the title “World Poverty Falls Below 750 Million, Report Says.”)
Peter Boettke Offers Advance Praise for Openness to Creative Destruction
Prometheus didn’t ask permission for Zeus to bring fire to the humans. It cost him dearly, as Zeus punished him in a rather vicious manner. But human beings were made infinitely better off with fire. Art Diamond relays this story to us precisely because he wants us to understand the great benefits that entrepreneurial innovation deliver for mankind, and yet how the true innovator is often despised and disrespected by the prevailing orthodox establishment. If Prometheus had to get permission before giving fire to man, then man would have never gotten the benefits of fire. Similarly, if our entrepreneurial innovators had to get permission prior to introducing their innovation, we would still be walking around or perhaps at best riding on the backs of beasts but I doubt we would have seen the benefits of automobiles, let alone planes, and we would very well not have modern conveniences such as indoor plumbing, let alone air travel, cell phones, and the world wide web.
Peter Boettke, Professor of Economics & Philosophy, George Mason University; Director F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center.
Boettke’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.
Innovative Entrepreneurs Bring Prosperity to the Poor
(p. A17) As the economist Joseph Schumpeter observed: “The capitalist process, not by coincidence but by virtue of its mechanism, progressively raises the standard of life of the masses.”
For Schumpeter, entrepreneurs and the companies they found are the engines of wealth creation. This is what distinguishes capitalism from all previous forms of economic society and turned Marxism on its head, the parasitic capitalist becoming the innovative and beneficent entrepreneur. Since the 2008 crash, Schumpeter’s lessons have been overshadowed by Keynesian macroeconomics, in which the entrepreneurial function is reduced to a ghostly presence. As Schumpeter commented on John Maynard Keynes’s “General Theory” (1936), change–the outstanding feature of capitalism–was, in Keynes’s analysis, “assumed away.”
Progressive, ameliorative change is what poor people in poor countries need most of all. In “The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty,” Harvard Business School’s Clayton Christensen and co-authors Efosa Ojomo and Karen Dillon return the entrepreneur and innovation to the center stage of economic development and prosperity. The authors overturn the current foreign-aid development paradigm of externally imposed, predominantly government funded capital- and institution-building programs and replace it with a model of entrepreneur-led innovation. “It may sound counterintuitive,” the authors write, but “enduring prosperity for many countries will not come from fixing poverty. It will come from investing in innovations that create new markets within these countries.” This is the paradox of the book’s title.
Continue reading “Innovative Entrepreneurs Bring Prosperity to the Poor”
Luis Locay Offers Advance Praise for Openness to Creative Destruction
Openness to Creative Destruction is first and foremost a great read. Much of the book is devoted to skillfully chosen accounts of usually successful, but occasionally unsuccessful, entrepreneurs to illustrate the author’s arguments. At times these accounts made me feel like I was reading a series of short adventure stories. This use of examples to make the argument for the central role of the creative entrepreneur in generating innovation, and the benefits that can accrue to society from creative destruction, makes the book very accessible to the intelligent layman or beginning student, while its serious ideas will be of interest to professional economists and sophisticated policymakers. The theoretician of entrepreneurship or innovation will find it a one-stop source of real-world examples. I plan to make it required reading in my growth and industrial organization classes.
Luis Locay, Associate Professor of Economics, University of Miami.
Locay’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.
Roger Koppl Offers Advance Praise for Openness to Creative Destruction
Diamond shows us that entrepreneurial innovation is not just the best way to make a better world. It is the only way. If we care about our fellow humans, then we had better do what we can to enable entrepreneurial innovation. Diamond shows with an unusual depth and breadth of scholarship that the most important thing we can do to promote innovation is to let entrepreneurs test their impossible ideas in the free market. Diamond’s book is a gem. Grab it, read it, learn from it.
Roger Koppl, Professor of Finance, Syracuse University. Author of Expert Failure and other works.
Koppl’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.