Robert Reich gave a speech at the Goldman School of Public Policy at UC Berkeley entitiled 'How Unequal Can America Get Before We Snap?'. He also recently commented on problem of declining real wages for most Americans in his blog. He also correctly points out that since 2001 even wages for those with undergraduate degrees have stagnated or declined (I am not counting those with grad school.)

Dr Reich talked about ‘snap back’ versus ‘snap break’ UC Berkeley speech. ‘Snap back’ being some kind of natural self correcting mechanism to the rising economic inequality operating within legal and normal political channels. ‘Snap break’ being something more radical.

I do not see people seeing a decreased value in their paycheck and somehow blaming government - at least not initially. People seem to want to blame themselves for their own failures. This is even more the case when looking at other people who have 'failed' economically.

Conversely people see the causality of success due to the individual who achieves it.

Now if the situation becomes rather more extreme I still do not necessarily see any meaningful snap back for a few reasons.

1. There is a sense that Lyndon B. Johnson's great society failed. This is now coupled with the failure of communism. This culminated in the 1990s where People saw ‘welfare’ as a black mark. The flip side of the coin on this issue is that people ironically do not have a problem with privileging rich interest groups while they are stingy to welfare mothers. Look at farm subsidies for example or the billions given to telecoms companies to build out a high speed internet infrastructure.

2. People will blame easy targets like immigrants, minorities, criminals, a lack of patriotism or a lack of social morals before dealing with a complex economic system.

3. As I said above we love to blame the individual for their own failings.

4. If we do get to 2020 and there is no change we will be faced with the following situation. We will find that all of a sudden we can’t fund Medicare and we have massive structural deficits, there will be millions more uninsured Americans, a majority of new college graduates will find themselves in crushing debt and the majority of the middle class will find themselves in significantly depressed economic circumstances.* Under such strains I am not sure that the populace will be particularly enamored by 'moderate' solutions. Such a scenario will be a platform for demagogues, not for thinking people. I see a snap break. (Of course if we get to 2030 and no such thing has occurred I will be relieved to be proven wrong.) I.e. if it gets bad enough for people to finally notice the problem we will have problems that challenge our political system as a whole.

*The paradox of such a situation is that real GDP per capita in the USA will probably be at least 25% more than what it is currently. Economic growth as a whole will not necessarily be in peril - its benefits will just be allocated to a very few.

Iran and its Credibility

Iran refuses to budge on nuclear plan. 'The European Union's foreign policy chief said Friday he was "disappointed" by the latest talks with Iran over the nation's nuclear program, a failure that could result in more sanctions for the Middle Eastern nation.' (CNN)

It is sheer madness to expect Iran to climb down on the nuclear issue. They wont. It goes to the core of their national self esteem - their credibility. It is why countries hang on in crazy situations. It is why the US holds on now in Iraq and why it held on so long in Vietnam and the USSR held on so long in Afghanistan.

Déjà vu - The madness of it all

There is no obvious rational for the placing of sanctions on Iran. Hell will freeze over before they work. This reminds me of the madness of invading Iraq in 2003. What did Saddam have to do with events of 9/11? Why was suddenly more of a threat that a few years earlier. Would not the consequences of invasion be awful for everyone involved?

Same points here:

Faulty Rational:

If the ostensible reason for sanctions is to prevent or inhibit the development of nuclear technology it will not work.

Negative Consequences:

Imposing sanctions on Iran will just make them even more intransigent and even more determined to develop nuclear technology.

Perhaps we should engage Iran in meaningful dialog? Yes clearly they are adversaries as of right now. But we did engage the USSR during the cold war. Yes, it does seem quite obvious that they are pursuing nuclear weapons - however we need to consider what is realistic in that regard.

Why the hell does anyone bother with sanctions on Iran?

I do not understand why anyone is advocating placing sanctions on Iran. The regime is hell bent on ignoring them. The population by large margins supports the use of nuclear technology. Sanctions have the effect of bolstering the popularity of the regime. Is this a game as a pretext to later bomb Iran? By using sanctions when they are quite clearly impotent one devalues their importance. It also makes the average Iranian suffer enormously. So why is it morally acceptable to impose sanctions?

Private Consciousness Raising



We have all have heard of those times in the late 70s and early 80s when a bunch of women would discuss and discuss and somehow from it all they would alter their perceptions, their consciousness and their sensibilities. But what if it could be done be done alone – by consideration alone. And then one communicates that social change to others. Now x is wrong, not right. Y is ambiguous and no longer certain. And that arcane subject other yonder is of paramount importance. But no-one has heard of the discussion leading to such change. The new purveyor of such new ideas is utterly alone. Such a situation opens itself to ridicule. And such pain…

Some comments about the fiasco surrounding huricane Katrina:


1. I wonder how much money will be raised and given out by the federal government when compared with 9-11. 10,000 may be dead. About triple the number in 9-11. Half a million to a million people may be left homeless. Very few people were left homeless by 9-11. So when very rich people lose their jobs and can’t pay their million dollar mortgages but still have considerable assets we have compassion. When poor people who have nothing left then we lack it. I thing it would putrid if we paid out more money to fewer rich people in 9-11 but less to very poor people now.

2. George Bush seemed to care more about the fact that people were looting than people were starving. Its Jean van jean from Les Miserables all over again. Conservatives have no compassion. They seemed to not 'get' the fact that when people are starving and have no roof over their heads they don’t act very normally. To expect orderly behavior in such circumstances is absurd. The reason for law and order is to allow society to survive. If there is a situation where keeping the law means you are going to die then there is no point. Conservatives seem to like law and order not for high and mighty moral and philosophical reasons but because it’s so aesthetically pleasing. Kind of like a neatly mowed lawn. And in their mind, if people die as a consequence of all this neatness - they don’t care.

3. Where are all the conservatives now? Why won’t they 'take responsibility'? They always go on and on about morality and integrity. Monica Lewinsky ruined our nation's morality. Thousands dieing and hundreds of thousands destitute before out eyes when we could alleviate their suffering - that’s ok. That’s not a lack of integrity according to these hypocrites. Makes me sick....

4. I am amazed that conservatives have lots of money to kill people and to incarcerate people but no money to save people's lives and to alleviate their suffering. Where are all the Terry Sheivo people now? Let them save all those hurricane refugees. How comes they care so much about one brain dead person but nothing about thousands or fully alive poeple. How anyone can take the pro life people seriously after Katrina, I don’t know.

4. I hope they THINK when rebuilding. If they rebuild in the same place what is to stop this happening all over again. Global warming to said to increase the frequency and intensity of hurricanes. What if we rebuild and 20 years later New Orleans gets hit directly. Then what? So perhaps the city should be built North West, far away from menacing costal waters. Otherwise this disaster could happen all over again. How about here in Columbia, La and to its West. Of course we would need to build a new highway linking I20 to I49. Yes it would involve changing zoning laws and environmental laws. But a million people are homeless. They take priority. It would give New Orleansa chance to rebuild without its old corruption. They could look around at what had worked and build a city that people want to live in and that is pleasant to live in. :)

I thought I might speculate about long term strategic threats to the United States and follow up with some predictions about what may happen. The US is so fixated on terrorism that it has forgotten that the real long term foe is China. The Pentagon just released a report saying so and many people in the IR community have been saying so for since the mid nineties.

Our relationship with China can be divided up as follows:

1. 1990 – 2000 – what I call ‘Absolute and Overwhelming Advantage’ of the USA over China. In any scenario the USA could have obliterated China in any conceivable war. The US could steamroll so fast that any war would be over in days or weeks. Total devastation for China. (I assume they will not worry about ‘collateral damage’.)

2. 2000 – 2010 – ‘General Absolute Advantage’ of the USA over China. Sure there would be casualties in a war between the two nations but it would be manageable. Maybe a few thousand dead on the US side. Maybe not even that. Total devastation for China. Such a war would last no more than 90 days.

3. 2010 – 2020 – ‘Relative Advantage’ of the US over China. The US could win in any war with China but it would be very messy and could end up lasting a long time. It might last years. China by then would have aircraft carriers which would enable it to project power well past its territory. Minimum of 50,000 dead to 100,000 to 300,000 on the US side. The US economy would suffer very greatly. The cost of winning such a war may guarantee military, economic and political weakness for decades afterwards. The Chinese could put up a good fight but would find their country devastated to the point where it would take over 100 years to recover. The US would lob every possible modern missile. The lives of civilians would not come in to calculations. All major Chinese cities would be laid waste. This would have to occur for the US to prevail.

4. 2020 – 2040 – ‘Stalemate’ - neither side could prevail. The Chinese economy by 2020 will be bigger than the USA in PPP. (I justify this below.) China will have a larger overall economy and greater manpower. The US will have greater technological capability. It will have a greater GDP per Capita (PPP) enabling it to more efficiently gain revenues. (I assume that one can get away with higher marginal taxes in richer economies.) Neither side could prevail alone. Only with allies could either side prevail. The consequences would be awful for the US, China and the world. China could take back Taiwan but the US could attack mainland China in retaliation. (In the even that China took Taiwan, the US may understand the futility of counterattacking and may instead choose to do nothing.)

5. 2040 – 2050 – ‘Relative Advantage’ of China over the US. Due to revaluation of its currency GDP per Capita in China would roughly equal that of the US. It would hold the technological advantage. It could at great cost peruse a war with the US and win. It could afford to lose more men making the absolute pain of losing many men less relatively painful. China could mount serious attacks on the US mainland.

6. 2050 – 2060??? - ‘General Absolute Advantage’ of China over the US. The USA would have to kowtow to China. Without allies all war with China will be useless. China will be the ‘first among equals’ of great powers in much the same way that Britain was in the nineteenth century. The next great power after China will be India.

Note about calculation of GDP.

According to the Pocket World in Figures by the Economist I get the following figures.

GDP PPP, $bn – USA – 10,308

GDP PPP, $bn – USA – 5,861

Currently China is growing by about 10% per annum. Even if it grows by 8% it will overtake the USA by 2020. I think it’s reasonable to assume that the average difference in rate of growth will be 5%.

Thus 5,861 * 1.05¹⁵ = 12,184.6

Even if one is much more cautious and assume an average difference in rate of growth will be 4% the Chinese economy will overtake the USA by 2020.

Thus 5,861 * 1.04¹⁵ = 10,555.3

Note that currently the difference in growth rate is currently about 6.5%.