Economics Questions

Re: Immigration And Economy

David B — Mon, 27 Aug 2012 15:23:35 GMT

Here's some more specific data on Germany :

http://www.businessinsider.com/germany-economy-2011-7?op=1

The points that jump out are :

Post WWII economic reforms
- Currency reform
- Removed Price Controls
- Longer work week
- reduced marginal tax rate
Decentralized Economy - multiple cities act as major economic hubs
less average household debt
early 2000s cuts in taxes and social benefits
no housing bubble, german banks required higher down payments to buy.
germans tend to save instead of spending

Cheaper materials(cost) will increase the profit margin, thus you can lower prices slightly and increase your sales in the global market. Lower quality materials mean your product is just lower quality. Again you may still be able to sell it, and probably at a cheaper price, and if the costs make sense, it may be more profitable.

Also, with low savings rates and high debt rates, the local economy may not have enough capital saved up to invest in the types of capital goods needed to create goods for export. Roads and rails are important. But without corresponding private investment in factories and plants, there's no way to make back the money invested in transportation.

More generally every tax that enters at any point in the production process (and the production processes of the goods used) will increase costs. Any regulation that must be complied with, regardless of it's "good" value, will increase costs.

Make it easy to save, make it cheap to invest and run a business, and greece will rapidly (and I mean very rapidly) spring back onto the global stage as a strong economic player. But the government has to lower taxes and spending. If they people won't let them, or demand it from them. It's gonna be a long lonely road, and you'll end up losing all the wealth, and all the people who want to succeed will leave.

Re: Immigration And Economy

LandJ — Mon, 27 Aug 2012 14:06:48 GMT

Yes, I do not have specific knowledge about European exports, I was talking generally.

Surely, cheap labor is one way for production cost reduction. Another may be the use of low quality materials. Well, I don't think that Germany has low wages and its export products are of low quality.

I do not know any other ways that a company can reduce its production costs. Can anyone who knows write some?

Re: Immigration And Economy

David B — Mon, 27 Aug 2012 13:57:53 GMT

The requirement is not cheap labor specifically that's necessary. To sell your product just requires sufficiently low production costs, such that the business can make a profit and the sale price of the good is still competitive.

To know exactly why you would have to look at the regulations in the specific country and look at what they export.

Re: Immigration And Economy

LandJ — Mon, 27 Aug 2012 13:20:23 GMT

It is referred in previous posts, that cheap labor is necessary because domestic businesses are more competitve in domestic and in international market (exports).

But how can some north/west European (ex. Germany, Sweden etc) countries achieve high exports levels and simultaneously their wages are high?

Re: Immigration And Economy

David B — Tue, 21 Aug 2012 22:13:20 GMT

LandJ:

Q 1: So, don't you agree that Monarchy is a regime depended on the perfect, wisest man and the man that it is guarranted that he will never be corrupted or make harmful decisions? Is it worth the risk?

(Republic/Democracy does not guarantee success but you have the chance not to elect the politicians that governed harmfully)

In Liechtenstein, Monarchy is effective because the population is 37,000 people who have full civil and human rights (freedom of speech, no censorship, expression, freedom of press, opposition to the monarch).

In UAE, I do not know if they have those civil and human rights. And even if the don't, citizens are OK because income per capita is 49,000 $. But this is because of the oil (*).

Suppose, UAE citizens & immigrants do not have civil rights, but have high income due to oil. (As far as I am concerned, civil rights contribute to increase in economic freedom). This would lead them to earch much higher incomes.

Read Hoppe's Democracy: The God that Failed. He argues that under Monarchy there is the possibility that the monarch will have good intentions. Combined with self-interest and long term ownership, it is possible that he would act in the best interest of the people who live under him by providing a stable, peaceful, and equitable economic and political environment.

If one has multiple city states privately owned in this way, the naturally compete with each other for people (labor) providing a powerful feedback mechanism (incentive) to change the environment in ways that attract capital and labor.

However, under a democracy, the skill required to ascend to the governing role (analogous to ownership) are such that there is a high likelihood that the ruler will be skilled at lying and deceit in order to get the votes necessary to win. Secondly, the claim to the office, is for a short period of time, and there is no persistent value to be gained from the office beyond what can be gained during one's time in office. This is the equivalent of a rental. Thus the time preference for elected officials will tend to be lower, since what they cannot gain from the office while they are in office, does not have any direct impact on them... Thus the incentive to reduce a deficit, or balance a budget, or to engage in sound money practices are all behaviors that require a long term view, and for a ruler to stop thinking in the short term (2-6 years...) but instead focus on the long term (10-20+ years). While possible it's highly unlikely under democracies or anyother form of representative government.

LandJ:

Q 2a: Thus, wouldn't be better to gain their civil rights?

The question, I believe, is the form that property rights take in the society and whether or not they lead to free movement of capital and labor between methods of production. Private ownership of wealth and capital without external interference to protect owners from the negative side effects of their use of property is I believe the key factor to pay attention to. The ideas and norms of a society may include prohibitions against certain types of personal behavior. These tend to be strongly influenced by the general culture and by the specific predominant religions. If a religion has norms that are antithetical to strong and unbiased application of property rights, then that society will most likely experience economic growth. This can happen even when there are relgious and other social norms which might interfere with some personal behaviors, like a free and open sexual life, liberal drug use, and other victimless crimes.

However, these other rights are consistent with the more general property rights and equality before the law, and so one would expect to see these become predominant in society over time. I wouldn't get too hung up on civil rights in terms of freedom to do things that are considered morally bad, but have no victim but one's self. In terms of equality between men and women in the law. The social norms might differ in regards to how men and women are treated, but the extent to which property laws are enforced equally then such a society is more likely to become more productive at a faster rate and thus to generate more wealth and a higher standard of living, than societies which treat women differently in terms of property law.

The more general freedom from social stigma when you engage in non-property violating behaviors is not the same as freedom from theft, assault, and fraud. But when the society engages in theft, assault, or fraud to enforce such social norms then I believe it's destructive to the economic health of the society.

LandJ:

Q 2b: What if UAE didn't had the oil?

(*) I am not so sure about the oil. I was told that is consist 7% of GDP. If this is true, there is huge economic freedom in other sectors.

I'm can't comment on this, specifically. However, generically any privately owned resource that can be converted and sold at a profit is a source of wealth. If they have a large amount of oil and are able to attract labor that allows them to get this oil to the market and sell if then it will be a huge source of wealth.

LandJ:

Q for * : Doesn't this mean that UAE and immigrants have their civil rights or not?

Anyway, what I expect to understand by placing the regime issue is:

Either you support Monarchy or Constitunal Republic/Democracy, do you believe that all citizens & immigrants of a society should have their civil and human rights? (speech, expression, opposition to governors etc)

Civil rights are important for economic freedom and why?

In other words, what would you answer to someone who says " I do not care if I can't speak freely , if i can not support my political/religious etc ideas in public, if I can not criticize governor-s freely. Since there is economic freedom and my income is high, it's ok for me". (This question presupposes that economic freedom exists even if people do not have civil rights.)

(P.S. Maybe you have already answer me to the coloured questions in previous comments. Maybe you have done these discussions numerous times in your life. However, excuse me for my ongoing or repeated questions. I just try to make clear in my mind some things about these issues and the view of Libertarianism)

The most important question was "how would I answer someone who doesn't caare about political/religious freedom as long as they can generate personal wealth?"

I don't personally think you need to answer. That's a personal choice. We all take tradeoffs in many of our choices, "time preference". However, if you offered him personal freedom in these other areas, he might want them too. It depends, I might prefer to live in a community where children were reprimanded by strangers for violating certain social norms. I might wish to live in a community where the majority of the individuals were Christian or Muslim or Buddhist. I might prefer to live in a community where most of the other people shared a common background or common ideology, or more naively there will be people who think race is the most important bond for their community relationships.

I think we'd all be better off if the world slowly degenerated politically to city-states and loose confederations with free trade and free movement of labor and capital. Then the city-states can compete with varying property laws, and social norms to attract populations that want to subject themselves to those specific laws and norms.

Re: Immigration And Economy

LandJ — Mon, 20 Aug 2012 20:18:21 GMT

Q 1: So, don't you agree that Monarchy is a regime depended on the perfect, wisest man and the man that it is guarranted that he will never be corrupted or make harmful decisions? Is it worth the risk?

(Republic/Democracy does not guarantee success but you have the chance not to elect the politicians that governed harmfully)

In Liechtenstein, Monarchy is effective because the population is 37,000 people who have full civil and human rights (freedom of speech, no censorship, expression, freedom of press, opposition to the monarch).
In UAE, I do not know if they have those civil and human rights. And even if the don't, citizens are OK because income per capita is 49,000 $. But this is because of the oil (*).

Suppose, UAE citizens & immigrants do not have civil rights, but have high income due to oil. (As far as I am concerned, civil rights contribute to increase in economic freedom). This would lead them to earch much higher incomes.

Q 2a: Thus, wouldn't be better to gain their civil rights?

Q 2b: What if UAE didn't had the oil?

(*) I am not so sure about the oil. I was told that is consist 7% of GDP. If this is true, there is huge economic freedom in other sectors.

Q for * : Doesn't this mean that UAE and immigrants have their civil rights or not?

Anyway, what I expect to understand by placing the regime issue is:

Either you support Monarchy or Constitunal Republic/Democracy, do you believe that all citizens & immigrants of a society should have their civil and human rights? (speech, expression, opposition to governors etc)

Civil rights are important for economic freedom and why?

In other words, what would you answer to someone who says " I do not care if I can't speak freely , if i can not support my political/religious etc ideas in public, if I can not criticize governor-s freely. Since there is economic freedom and my income is high, it's ok for me". (This question presupposes that economic freedom exists even if people do not have civil rights.)

(P.S. Maybe you have already answer me to the coloured questions in previous comments. Maybe you have done these discussions numerous times in your life. However, excuse me for my ongoing or repeated questions. I just try to make clear in my mind some things about these issues and the view of Libertarianism)

Re: Immigration And Economy

Michelangelo — Sun, 19 Aug 2012 02:14:52 GMT

Employers would not presumably hire anyone who costs them more than they bring in. If a given marketplace, or Greece if you prefer, did not need more workers then it should stand to reason that no employer would hire additional immigrants. There is no reason then to enforce any restrictions on the labour market as employers themselves would refuse to hire additional people. The fact that these restrictions need to be enforced tells us that there still exists employers who believe that additional labour would bring them more revenue than their cost.

Hence why the market process should be allowed to decide if there really are enough jobs in a given marketplace. If there really aren't any jobs for migrants then there is no need for a central planner to enforce his vision - employers will already turn away new labour. If there is a demand for more labour though, then these restrictions will only end up doing bad by decreasing the potential wealth that could have been created.

The same is true for any other good or service.

For example; Suppose that we all wanted to buy Human Action. A central planner is given the decision whether to allow the production of Human Action or not by firms. If the central planner decides to deny firms the ability to print Human Action, then all of us are made poorer by this restriction. Alternatively suppose that none of us want Human Action. If the central planner decides to allow the printing of the book, we won't be made any poorer. Firms won't print the book because they'll realize that there isn't any demand for the book. At no point did the actions of the central planner give us only benefit. In fact, in one case it is a net loss.

Re: Immigration And Economy

LandJ — Sat, 18 Aug 2012 11:50:04 GMT

@Michelangelo, you said:

"No central planner decides how many immigrants are optimum. No more than any central planned should, or could, plan how many of any good or service is neccesary. The number will have to be arrived through the market process. "

I read that in an blog the other day. Can you explain to me the phrase in bold letters more analytically and with real world examples, please?

Re: Immigration And Economy

LandJ — Sat, 18 Aug 2012 11:46:52 GMT

@justme335, you said:

"......I don't need any political rights, I dont' care who my president or king is, I need my ECONOMIC rights, I need my human rights and my freedom..."

Does this mean that you want to have freedom of speech and expression? The right to oppose legally and criticize government? Are these included in Human Rights? (I do not know, I am asking to learn)

Also you said:

" Democracy doesn't guarantee your rights, If the government is weak due to internal POLITICAL struggles and corruption (like many of the current democracies)... outlaws will outpower the government and take your rights and you would wish for a monarchy that is strong enough to crush the outlaws and give your rights back."

I agree with you. But

In a Democratic regime, there is the advantage to refuse to elect the same politicians if they governed ineffectively or if they became corrupted. Whereas, in a Monarchy(*), citizens do not have the opportunity to defence themselves when the monarchist oppress them, make bad decisions either intentionally either by mistake, or when he becomes corrupted...
Moreover, monarchy is a system based on the perfect man. Who is the perfect? And even if someone seems to be appropriate for absolute governor, who can guarantee that in the near/far future will not become corrupted or will not start governing ineffectively, or will not make bad decisions and mistakes?

(*) I am not opposed to a Monarchy which does not manage and direct the military, like Liechtenstein. But if the Monarchist directs and dictates the military, then riots, fights, injuries and deaths will occur when the Monarchist starts govern ineffectively or harmfully.

(P.S. Of course, the monarchy of Liechtenstein is effective because the population is extremelly small. With large population I do not think that it would be a good idea)

Re: Immigration And Economy

Michelangelo — Fri, 17 Aug 2012 19:09:31 GMT

No central planner decides how many immigrants are optimum. No more than any central planned should, or could, plan how many of any good or service is neccesary. The number will have to be arrived through the market process.

Re: Immigration And Economy

David B — Fri, 17 Aug 2012 17:06:12 GMT

justme335: Im not a UAE citizen, but coming from a democratic country with corrupt leaders, I would tell you, I don't need any political rights, I dont' care who my president or king is, I need my ECONOMIC rights, I need my human rights and my freedom, I need a descent job, or I need to be able to open my own business without going Bankrupt... I don't care who rules my country (hell, let it be a global leader who is alien)... Democracy doesn't guarantee your rights, If the government is weak due to internal POLITICAL struggles and corruption (like many of the current democracies)... outlaws will outpower the government and take your rights and you would wish for a monarchy that is strong enough to crush the outlaws and give your rights back.

I think you're making a very important point, about government being what it is, regardless of the philosophical or mechanical structure by which it acts. There will be a system in every place and in every time to manage disagreements and disputes between human beings. We all choose amongst available options to us. The population and wealth of a region will be directly related to the ability for people who live there to pursue a good living, by their own estimation. We need more competition between governments of whatever form. The only problem for us as human beings is that it takes time.

Greece has become sterile (as opposed to fertile) to the formation of capital and wealth. Well, the people that live there will leave, and the wealth that is there will either move elsewhere or be consumed. The good news is that once you're poor (really, really poor) you will be able to set up your own localized governments again, and once again you'll be able to accumulate wealth. Bad news is that will probably take a long time, and there's always the possibility someone nearby will try to take over Greece...

Re: Immigration And Economy

David B — Fri, 17 Aug 2012 16:50:16 GMT

@LandJ

The UAE is an example of privately owned government. If one is to ask why it's successful, it's because of it's ability to provide a stable risk-free environment for the people who go there to engage in production (even if it's not material goods). If they fail to do so, then they will see an exodus of capital and labor.

Some libertarian intellectuals, promote the idea of privately-owned government even if it's territorially monopolistic. As long as there's competition between "city-states" then you capital and labor can move freely to the environments that are "better" for the increase of wealth. There is no guarantee that the private government will not oppress.

Look back at greek history and you will find that the empire of Greece rises out of this type of eco-system. The same is true in Europe after 1600+. Hans Hermann-Hoppe has some work he's done on tracking city populations historically, and then looking at significant political changes within a specific city community (or by a neighboring city) and looking for correlations between the side effects of policies and changes in population.

It's some interesting work, and very insightful. Basically, just like if you saturate a lake with salt you kill most of the biological life, the same is true with specific polities, if you saturate the environment with conditions that make economic growth hard, the economic activity dies off, and the smart people, move somewhere better.

The US, and Europe and Ancient Greece all started with small political units that operated with free movement of people and capital. They competed for resources, while simultaneously trading both tech and products. As they centralize power, the more wealthy political units (states and/or cities) end up normalizing government interference, taxation, tariffs, etc. And slowly choke the larger environment, instead of allowing the localized governing bodies to compete with each other.

Re: Immigration And Economy

justme335 — Fri, 17 Aug 2012 16:49:19 GMT

Are citizens and immigrants safe from the government? I am asking this because there is monarchy with absolute power there.

I see your point there. Yes, true, it is a monarchy, but with so much abundance in the oil rich country, all citizens are treated in extreme generosity, very easy loans with extremely low interest (which are often covered by the government as a grant), priority in any governmental job is given to the citizens (double or tipple the expatriate's salary). Not exactly sure how this happens, but also houses are provided to newly married people... briefly, no one is poor, no one has anything to complain about... It is almost a question of: "do you prefer a democracy where you have a choice to elect three parties, and all of them are corrupt, or a monarchy, with a generous and wise leadership?" Anyway, this is irrelevant to Greece, since I'm not proposing the Greece becomes a Monarchy, I just gave an example of the labour law.

Isn't these statements against employers rights on his property? I mean, what if employer benefits from immigrant's labor and wishes to keep him even if his contract expired?

The employer and the employee have the right to renew the labour contract, if both agree, this is done periodically, yearly or bi yearly...

Regarding the 2nd statement, probably the terms of the job are determined by the employer and not by government. Thus, employer asks for cheap labor, Greeks probably refuse and immigrants take the job.

Is this so bad? A Greek citizen doesn't want a job with certain conditions, someone else takes it... The industry is happy because it got cheap labour, It can be competitive in the outside and domestic markets and this will allow the industries to grow further and create job demands in other fields (for example services, insurance, food, hotels, transportation) in which the other field lets say Greeks constitue 95 % of the labour force. (hope you got my point, all economic sectors are interlinked) You can't see only a small portion of the picture, you need to see the whole picture.

Very reasonable. But I am afraid of strictness that leads to fascism. Of course, if one do something illegal should be punished. But does the monarch govern liberally? Do citizens and immigrants of UAE have their political rights and freedom?

Im not a UAE citizen, but coming from a democratic country with corrupt leaders, I would tell you, I don't need any political rights, I dont' care who my president or king is, I need my ECONOMIC rights, I need my human rights and my freedom, I need a descent job, or I need to be able to open my own business without going Bankrupt... I don't care who rules my country (hell, let it be a global leader who is alien)... Democracy doesn't guarantee your rights, If the government is weak due to internal POLITICAL struggles and corruption (like many of the current democracies)... outlaws will outpower the government and take your rights and you would wish for a monarchy that is strong enough to crush the outlaws and give your rights back.

Re: Immigration And Economy

LandJ — Fri, 17 Aug 2012 14:27:42 GMT

justme335, you wrote: " One of the safest countries in the world", for UAE.

Are citizens and immigrants safe from the government? I am asking this because there is monarchy with absolute power there.

Also, you wrote: " Each expatriate has a fixed labour countract, if expired, then the expatriate has to leave the country in a finite time."

and

" Any job shall be prioritized to Greek citizens before being offered to Immigrants...."

Isn't these statements against employers rights on his property? I mean, what if employer benefits from immigrant's labor and wishes to keep him even if his contract expired?
Regarding the 2nd statement, probably the terms of the job are determined by the employer and not by government. Thus, employer asks for cheap labor, Greeks probably refuse and immigrants take the job.

and the 3rd statement: "Government is very strict... any illegal action by any of its expatriates, will cause in immediate doportation"

Very reasonable. But I am afraid of strictness that leads to fascism. Of course, if one do something illegal should be punished. But does the monarch govern liberally? Do citizens and immigrants of UAE have their political rights and freedom?

(P.S. Indeed Greece has rich history, but eventually it is a curse to us. This is because we just are adhered in the past, like the glory and majesty belongs to us. We think that everyone should worship Greece and that secret conspiracies against Greece exist, just because once in the past some people who lived here did great things in philosophy and sciences. Pffff....That's why nowadays we have low levels in many fields in comparison with so many Western countries).

Re: Immigration And Economy

justme335 — Fri, 17 Aug 2012 07:36:00 GMT

Well fellows, this is getting so interesting, I had to come back and take part in the convesation again. I read all the posts above, I'll try to reply to most of the questions above as much as possible:

Subject 1: Illegal Immigrants are causing high crime rate.

Subject 2: Should there be a limitation to the number of immigrants

Subject 3: Immigrants send money out of Greece

Well to start with, the first problem is that they are in the country illegally. But just like any slice of society... parts of these illegal immigrants are working hard for their living, receiving some hard earned money and sending it to their families... this seems fair and then there is the other part of the immigrants who probably don't work as hard and who survive through illegal activities and contribute to a higher crime rate, how do we identify each of those? How do I remove "the cancerous" portion of these illegal immigrants and keep those who are actually helping my economy?

Before I answer that, May I present to you the situation in a very successful labour/immigrantion system and that is United Aarab Emirates, 7 Emirates, out of which Abu Dhabi and the Dubai are the strongest, first let me present the numbers:

The UAE citizens are only 16.6% of the population
It has one of the highest immigration rates in the world, but almost all immigrants have entered legally
One of the safest countries in the world
Population increaded from 0.5 million to 8.2 million in 35 years

Question: How did they maintain the low crime rate? How can the local citizens survive with such a severe competition? How does the economy thrive, if all the emmigrants are sending money to their home country?

Each expatriate has a fixed labour countract, if expired, then the expatriate has to leave the country in a finite time.
Since all expatriates are there willingly and legally, these expatriates are not only spending money for accomodation, food, transportation... now they brought there families there now just like a citizen, they spend for schools, for liesure activities and they are part of the economic cycle
The country only allows the immigration, if requested by a company, so as soon as a labour contract is terminated, the expatriate leaves the country... so no one is unemployed, no one is forced to do illegal activities for survival and I believe this is the key to how safe the country is.
Government is very strict... any illegal action by any of its expatriates, will cause in immediate doportation

Now how can we apply this to Greece?

Make short term renewable contracts for these illegal immigrants who are already working in factories and agriculture and construction, make them legal...
Deport any illegal immigrant who is unemployed... because this immigrant is probably the one who will be contributing to the high crime rate
Immigrants are taking Greek citizen's jobs? Any job shall be prioritized to Greek citizens before being offered to Immigrants, If they don't want it, they It will be offered to the Immigrants.

Challenges would be, how to control the inflow of new illegal immigrants? I'm not from Greece... I can't tell which of these ideas is actually practical, but here is what I can think of:

1- Key activities in the country, such as money transaction and renting an appartment should requires a labour contract / working residency permit

2- random check points... someone looks suspicious, ask for his labour papers... illegal? send him home

With such reputation... word will spread and automatically... less illegal immigrants will attempt to enter the country... Goodluck folks, I love your rich history :)... say hi to all the Spartans for me :)