Posts Tagged ‘Graphing Government Economic Friction’


Thursday, March 1st, 2012

Dear Friends,

It seems to me that if a person was to examine the issue open eyed, the reasoning person would ascertain that the primary source of friction in a modern economy, is the bureaucratic organization that is quickly becoming omnipotent. This should challenge everyone, to think of a way by which, the bureaucratic organization can be tamed. But it may very well be, that the time has passed to actually tame the bureaucratic beast, before we are gored by it’s horns of intransigence.

Look at the countries that used to have very effective economies and now have poorly performing ones. Japan is a perfect, and recent, example. Formerly Japan’s growth rate was unparalleled. People extrapolated that growth rate into the future and stood in awe. Japan would rule the Earth in a few decades… was the opinion in the 1980’s. Of course… that didn’t happen.

Instead, Japan went into recession, followed by slow growth. Japanese GDP has been slow for two decades. The government has gone from huge surpluses to giant deficits. The government has thrown billions of Yen at the slow growth, but slow growth seems to be the new norm, in Japan and elsewhere. This despite the good work ethic in Japan as well as the high education level.

Japan should be booming economically but it is not. Why do you suppose? They have used demand side economic stimulus. Far more than the bankrupt USA ever could. Yet, the Japanese economy remains in the doldrums. Many claim it is due to the aging of Japan. But in a true entrepreneurial society, change presents economic opportunity, to meet new needs.

Here we have touched the problem but we have yet to grasp it fully. In an entrepreneurial society, change is always opportunity but in a socialist society, change means hardship, because no one fills the new needs. Those needs are not filled so the people with them suffer, the potential entrepreneur suffers, because he or she didn’t get rich and the economy suffers because, it’s missing all the jobs that were not created when the entrepreneur didn’t get rich.

With the high level of educational achievement of the Japanese people why do you think there is not sufficient entrepreneurial energy to meet the new needs and enrich a new generation of entrepreneurs? The answer is the bureaucracy. Bureaucracy grows as a government matures. The good public servant never bends a rule no matter how idiotic that rule is. Bureaucracy is unbending and rigid. The real world is fluid. Bureaucracy seeks to change a complex system into a simple one.

The fundamental natures of human existences are complex systems, from our family life through neighborhood politics to the macro economy, we interact with complex systems all the time. The role of bureaucracy is to limit that complexity so we can more easily see the local peak. But bureaucracy begets bureaucracy. It quickly outgrows the need and smothers any economic recovery like a pillow a baby. Bureaucracy is unaffected, by the smothering of this or that, bureaucracy is it’s own best good.

Especially when it is a source of monopoly and hack jobs. Bureaucracy naturally breeds corruption, due to the fact that bureaucracy makes it’s own law, polices it’s law, then adjudicates it. No need for traditional governmental structures, that limit the power of any one unit by means of separation of powers, or some other outdated notion. No, it is much more efficient to invest all the power of government into one body, that is appointed for life and unaccountable. No way that could ever be a problem…

But, of course, it is. The material welfare of us and our children are manifestly lowered. Unless we get some kind of control over the growing bureaucracy we will be consumed by it. The very reason the Elite love it, it’s efficiency in passing regulation, and enforcing that regulation, is why it is so very dangerous. The only real means I can come up with is the citizen protection department of the NUMA.


John Pepin

Graphing Government Economic Friction

Sunday, May 29th, 2011

Dear Friends,

It seems to me it is a self evident fact that government could regulate poverty. In other words, government could enact regulations that are so absurd, all economic activity would come to a halt. In fact we see this very thing in North Korea and in other impoverished places around the World.

Let’s make a ruled line, with this level of absurd regulation at one end, and the other end being zero government regulation. The ruled space between the ends will be the various levels of regulation that a government can have as they pertain to economic activity. The scale would be 1-10.

If government regulation is at the zero end, it is peddle to the metal, economic growth (as far as regulation is concerned). With the all the shenanigans that go along with zero regulation. Like the 1920’s in the US. Low regulation very high growth. Or regulation can be closer to the other end of the scale like the slow growth of the 1930’s in the US.

Another factor in economic output is the level of taxation. It is self evident that government could enact such a high level of taxation that all economic activity, above the table, would cease. This would be the end of another ruled line with zero taxation at the other. The scale would again be 1-10.

We can then place the two ruled lines on a graph. Regulation being the x axis and Taxation being the Y axis. Then we can plot the level of government interference with economic activity. With this scale we can clearly see the implications of government policies on economic activity in a country. The other factors effecting actual economic outcome are cultural effects like animosity to capitalist, thought, behavior, work ethic etc… These cultural effects can outweigh anything a government tries to enact to improve the lot of it’s people.

That is not to say, if cultural effects are such that economic activity is effectively suppressed, that government should not try to be as frictionless to economic growth as possible. Doing so allows the paltry local relative advantages to be better exploited. This in turn allows the people to better their standard of living.

To use cultural animosity to market activity as a reason to coddle people is simply a means to trap them in poverty. Government providing for people who have been taught to hate market activity is a recipe for famine and want. People live best when people can provide for themselves. Independence in a market economy is as close to real independence a human being can have.

Engaging in the market system in this way knocks the rough edges off cultural ethics that are in conflict with the market system. Just like it did Christianity at the end of the Dark Ages. People who grow up in later generations will find the market system to be less vexing. The cultural animosity will be lessened by the obvious improvement in the standard of living of the people.

This scale of government’s friction to an economy is helpful to countries with mature economies as well. Mature economies tend to build up more and more absurd regulation. It might have had a place and time but the nature of government is to grow not to self control. So regulations tend to build up on the books. Leading to needless Red Tape. The bureaucratic friction gums up even the lowest taxed economies.

It is important for government to occasionally look at it’s regulation. Perhaps even having a semi annual audit of it’s regulation. Every effort should be made to find people who are honest brokers to pour over every page of regulation and suggest ways to lower not only the amount but the intrusiveness as well.

Were this to happen; I believe the economies of the World would be unleashed. The standard of living of the people of the World will go up dramatically in every way. Take government‘s foot off the throat of the people and people will thrive. But step down even harder to maintain control, because the Elite have destroyed the people’s ethos, and you have universal poverty.

So it boils down to this… Measure and control government’s effect on the economy and have universal opulence or allow government to bear down harder and harder on our collective economic throats and have universal poverty.

In the end it is our choice; not the Elite’s.