Michael Eriksson's Blog

A Swede in Germany

Sabotage and criticize/abolish/whatnot

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Trying to keep myself distracted during construction noise:

I have long contemplated the possibility that some groups, especially Leftist politicians and decision makers, could follow a strategy of “sabotage and X”, where X can be “criticize”, “abolish”, “use as an excuse to get funding”, etc. Two unfortunate hitches is that plain incompetence is often a reasonable alternate explanation and that the planning horizon often would need to be decades into the future.*

*Which does not rule out after-the-fact opportunism, e.g. with nuclear power below, or with the many, many cases of governmental incompetence causing a problem that the government then tries to solve—and takes credit even for attempts that ultimately fail.

Consider the following potential examples:

  1. Recently, the nit-wits around Joe Biden have pushed through an (almost) global regulation of a 15-percent minimum corporate tax. The true reason for this is almost certainly to remove the ability for other countries to compete over tax rates—and the result will be a (further) distortion of markets and market forces, which will reduce growth and, I suspect, is more likely to hit poor countries the harder.

    In a next bonus step, capitalism* and globalization** (the two things sabotaged), or even imperialism and old colonialism, can be used as scape-goats for the lack of growth and the “inequitable” distribution of international wealth—you must vote Left, so that we noble knights of the Left can fight these problems caused by the evil capitalists on the Right (except that we on the Left are really to blame, but you stupid voters are not supposed to understand that).

    *It might be better to speak of “free markets”, here and elsewhere, but I stick with “capitalism” as this is the term typically used in Leftist attacks.

    **With some reservations for what country we discuss. In the current U.S., the Democrats might be keener on globalization than the Republicans, but in e.g. my native Sweden “globalization is evil” and “globalization exploits poor countries” have been long standing Leftist mantras. (A similar, but weaker, U.S. drift seems to apply to capitalism too.)

    Generally, most modern Western nations contain absurd market distortions that cost virtually everyone in the long term, through preventing growth and wealth creation. Some are on the international level, like the above or the EU-wide minimum VAT of 15 percent; some on the national, like overly* high minimum wages, artificial monopolies, subsidies for unprofitable businesses, etc.

    *Any minimum wage is an example, but a sufficiently low minimum wage might be acceptable in the big picture. Even the > 8 Euro German one is too high, however; and the suggested 15 (?) Dollar U.S. one is a complete insanity.

  2. COVID is a potential source of multiple examples, e.g. that the lockdowns and other countermeasures cause immense damage, which is then blamed on COVID (instead of the decision makers and their countermeasures), which is then used to argue how bad COVID is and how vital continued countermeasures are. A very good potential example, depending on future developments, is the risk that lockdowns and leaky vaccines lead to more dangerous versions of COVID, where a more relaxed approach would have led to less dangerous versions. (See [1] and an outgoing link for a little more information.)
  3. Various aptitude tests, especially for academic entry, usually profit from having a high “g loading”. This in particular when we compare with school grades as a predictor of college success, because school knowledge, literacy, and similar are already reflected in the school grades (even if less so today than in the past).

    However, again and again, there is fiddling with e.g. the U.S. SATs or the Swedish Högskoleprovet to remove unpopular (but usually fair) differences in outcome between groups. This leads to a continual lowering of the g loading, because the correlation with g is what causes most of the group differences. With the lowering of the g loading, the tests become worse predictors, and the additional predictive capability over school grades is reduced.

    But now that the additional predictive capability is reduced, the tests can safely be maligned for bringing little value, which makes it easier to abolish them. (This often combined with claims like grades being a “fairer” criterion, which is dubious even today and outright idiotic when a strongly g-loaded test is allowed.)

  4. Let us say that we do have a problem with too much greenhouse gases and whatnots. Why is that? Largely, because nuclear power has been unfairly maligned, to the point that nuclear capacity has been reduced instead of increased. Who has done the maligning? Mostly various “green” parties (notably, in Germany). Who do now, with success, cry for more votes so that they can combat the greenhouse gases? The very same “green” parties!

    (Here we see the problem of the planning horizon: This maligning has been going on since at least the 1970s, while greenhouse gases might have grown into a non-trivial topic in the 1980s or 1990s, and has only taken off as that single, all-important, nothing else matters environmental question in, possibly, the last ten years.)

Of course, this could extend into many other areas, e.g. that a company that wishes to get rid of a certain product (possibly, in favor of one with a higher markup) could drop quality artificially, so that sales numbers will decrease over time, after which the lower sales numbers can be used as an excuse.

Excursion on game theory and the Left:
A partial explanation for idiocies like e.g. a minimum 15 percent tax is that the Leftist leaders and/or their voters do not understand how a changing situation leads to changes in behavior. A common attitude seems to be that “if we raise corporate taxes, corporate profits will grow smaller, and no-one else will be hurt”. In reality, chances are that corporate profits will not change very much, while prices rise, low-level workers are replaced by automation, wage increases are held back, quality compromises are made, etc. (Of course, not all of this is negative to a Leftist politician, as e.g. reduced employment can be used as a welcome argument for why the Leftist should be re-elected, so that they can fight the unemployment they caused the last time around. From Biden’s point of view, rising prices in other countries might be a very good thing, as it would increase U.S. competitiveness relative them. Etc.)

Then again, if profits do sink, this could lead to bankruptcies or investors moving their money somewhere else, as well as a drop in the stock market. Would the country at hand and its citizens truly be better off, compared to unchanged taxes?

Excursion on trade restrictions:
Trade restrictions, as suggested by e.g. Trump, are an interesting example of market disturbances in two regards. Firstly, they are themselves such disturbances. Secondly, the many other disturbances might imply that they are a good idea in at least some situations. (But not as good an idea as removing the other disturbances!) For instance, if two countries (A and B) manufacture and trade a certain product, then (all other factors equal) the one (A) with the lower minimum wages, lower taxes, weaker unions, less pointless or excessive regulation,* whatnot, will have a competitive advantage. The industry of country A will then tend to out-compete the industry of country B, country B will need to import more, will see unemployment rise, and likely a move of e.g. manufacturing plants to country A. If country B sets up an import tax on the products in question, this might well be to the net-benefit of country B (but not country A).

*Which is not to say that all regulation is either of the two. However, such problems are very common and can be very detrimental. Interestingly, areas where more regulation might make sense are usually absent or for show, as e.g. with consumer protection and “truth in advertising”.

Excursion on global taxes and self-serving politicians:
A strongly contributing reason why so many countries have fallen for this nonsense is the self-interest of the politicians: If the tax rate was already above 15 percent, it costs them nothing to agree, while they reap the benefits of other countries weakening their competitiveness. If the tax rate was lower, they now have an excuse to raise the taxes, which politicians seem to love. (Even be it through a naive or absent understanding of economics.)

Excursion on global taxes and democracy:
This looks like a major democracy fail to me. Effectively, the current rulers of this-or-that country make a bargain, while by-passing normal democratic procedures, and knowing that they will very often get a rubber-stamp later because voiding the agreement would look bad. (Similarly, there are rumors that many governments have entered legal agreements with COVID-vaccine makers to even institute new laws, should it become necessary to protect the makers from legal risks. While I do not vouch for this being true, such actions could also subvert democracy—and an already three-quarters dead democracy at that.)

Written by michaeleriksson

October 13, 2021 at 6:47 pm

Posted in Uncategorized

Tagged with , , , ,

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