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[...] Before the Golden Age, per capita income in the rich capitalist economies used to grow at 1-1.5 per cent per year. During the Golden Age, it grew at 2-3 per cent in the US and Britain, 4-5 per cent in Western Europe, and 8 per cent in Japan. Since then, these countries have never managed to grow faster than that.
1950-1973 in rich countries, coinciding with growth in progressive taxation and social welfare spending
[...] without subsidies from government or international donors, microfinance institutions have to charge, and have been charging, near-usurious rates. It has been revealed that the Grameen Bank could initially charge reasonable interest rates only because of the (hushed-up) subsidies it was getting from the Bangladeshi government and international donors. If they are not subsidized, microfinance institutions have to charge interest rates of typically 40-50 per cent for their loans, with rates as high as 80-100 per cent in countries such as Mexico. When, in the late 1990s, it came under pressure to give up the subsidies, the Grameen Bank had to relaunch itself (in 2001) and start charging interest rates of 40-50 per cent.
as a result of this, people are more likely to take out loans for consumption smoothing than to actually start businesses, since it seems so unlikely that they'll make enough profit to pay off the loans ... even when they do, the high interest rates mean that it's unlikely to help them get out of poverty
the other problem for businesses is that as a particular market segment gets crowded (e.g., renting phones), profits will of course fall ... and it's very difficult to simply switch to a different segment, due to limited skillsets, poor infrastructure, and limited access to capital (for example, you can't expect them to just start writing software for the phones)
he cites Milford Bateman's Why Doesn't Microfinance Work? for further reading
[...] what makes the poor countries poor is not the lack of raw individual entrepreneurial energy, which in fact they have in abundance. The point is that what really makes the rich countries rich is their ability to channel the individual entrepreneurial energy into collective entrepreneurship.
specifically, you need the right infrastructure in place: access to the initial knowledge and capital needed; a respected framework of company and intellectual property law; an educational system that produces capable employees. it's not that entrepreneurs in rich countries are better, it's that they're given an environment in which they can more easily flourish, whereas those in poor countries are in a much more hostile environment (at least when it comes to the same level of success)
[...] Even when it comes to higher education, which is supposed to matter more in the knowledge economy, there is no simple relationship between it and economic growth. What really matters in the determination of national prosperity is not the educational levels of individuals but the nation's ability to organize individuals into enterprises with high productivity.
in other words, systemic factors over individual (analogous to note 402)
at the same time, there are some questions which he doesn't really address, that I feel would be very relevant: how do you improve the nation's ability to organise these individuals? isn't a better educated workforce a necessary--though maybe not sufficient--step for that? what policies are needed to make that happen?
[...] evidence is emerging that, in defiance of the law, throughout the war GM secretly maintained its link with Opel, which built not only military cars but aircraft, landmines and torpedoes. So it seems that GM was arming both sides and profiting from it.
Opel being a German subsidiary acquired in 1929 that provided Nazi Germany with some of the technology needed for its war machine
[...] all these actions [...] have ultimately not been good even for GM itself--unless you equate GM with its managers and a constantly changing group of shareholders. These managers drew absurdly high salaries by delivering higher profits by not investing for productivity growth while squeezing other weaker 'stakeholders'--their workers, supplier firms and the employees of those firms. They bought the acquiescence of shareholders by offering them dividends and share buybacks to such an extent that the company's future was jeopardized. The shareholders did not mind, and indeed many of them encouraged such practices, because most of them were floating shareholders who were not really concerned with the long-term future of the company because they could leave at a moment's notice (see Thing 2).
makes u wonder why the stock exchange is still a thing when it's clearly SUCH A BAD IDEA
Sometimes regulations help businesses by limiting the ability of firms to engage in activities that bring them greater profits in the short run but ultimately destroy the common resource that all business firms need. For example, regulating the intensity of fish farming may reduce the profits of individual fish farms but help the fish-farming industry as a whole by preserving the quality of water that all the fish farms have to use. For another example, it may be in the interest of individual firms to employ children and lower their wage bills. However, a widespread use of child labour will lower the quality of the labour force in the longer run by stunting the physical and mental development of children. [...]
Businesses plan their activities--often down to the last detail. Indeed, that is where Marx got the idea of centrally planning the whole economy. When he talked about planning, there was in fact no real-life government that practising planning. At the time, only firms planned. What Marx predicted was that the 'rational' planning approach of the capitalist firms would eventually prove superior to the wasteful anarchy of the market and thus eventually be extended to the whole economy. To be sure, he criticized planning within the firm as despotism by capitalism, but he believed that, once private property was abolished and the capitalists eliminated, the rational elements of such despotism could be isolated and harnessed for the social good.
cool
[...] Why should people who have worked hard and obtained a university degree against all odds be rewarded in the same way as someone, coming from the same poor background, who goes into a life of petty crime?
This argument is correct. We cannot, and should not, explain someone's performance only by the environment in which he has grown up. Individuals do have responsibilities for what they have made out of their lives.
However, while correct, this argument is only part of the story. Individuals are not born into a vacuum. The socio-economic environment they operate in puts serious restrictions on what they can do. Or even what they want to do. [...]
his example: working-class children who think university is not for them. or, for a more personal example: girls who dont think the tech industry is for them
Yes, in theory, a shoeshine boy from a poor provincial town in Peru can go to Stanford and do a PhD, as the former Peruvian President Alejandro Toledo has done, but for one Toledo we have millions of Peruvian children who did not even make it to high school. Of course, we could argue that all those millions of poor Peruvian children are lazy good-for-nothings, snice Mr. Toledo has proven that they too could have gone to Stanford if they had tried hard enough. But I think it is much more plausible to say that Mr Toledo is the exception. Without some equality of outcome (of parental income), poor people cannot take full advantage of equality of opportunity.
i really liked this passage, but wish he had taken it a step further, with a thought experiment: imagine if, by some fluke, a bunch of his peers had also been super brilliant and would have excelled at Stanford. or even not by some fluke--imagine he and his friends made a study group and helped lift each other up despite all the obstacles in their way. imagine if his entire high school graduating class were brilliant and all worthy of Stanford--maybe even more worthy than any other applicants. Does that mean Stanford will accept them all? No, of course not. Stanford can't accept more than a few token brilliant, poor Peruvians in any given year. The goal of institutions like Stanford is not to meritocratically allocate spaces to the most deserving or most promising students. The goal is to use these so-called meritocratic stories as a shield while, covertly, allocating spaces predominantly to children of alumni and others who fit the ideal that Stanford has created over the years. This facade of meritocracy is what allows people to pretend that the system is fair and thus override their natural squeamishness around inequality.
also ties into exceptionalism re: Obama