Q&A, Wolf, Stiglitz, Singer [April 26th].

Carriage returns are when you skip to the next line using enter (or, like on the older keyboards, the return key). In old blogger, you had to use HTML, or your nicely spaced entry would turn into a wall of text.

A note on Jon Stewart's Interview with Friedman on The World Is Flat: that might not be such a radical idea. After all, the economic concept of the production gap between more developed nations and less developed nations states that the latter's growth rates will necessarily be higher (at least, in many cases) than those of the more developed nations, leading to a serious game of catch-up. If that has already more or less happened across the board (leaving out, say, the land-locked African nations), then the world is flat.

I was interested in Wolf's discussion of information asymmetry in Chapter 4; he lists as an "upshot" of principle-agent clashes in corporations the vulnerability of corporations to "managerial incompetence, self-seeking, deceit or malfeasance"; while this is to some degree true, these companies are often pushed out of the economy only after they've done massive damage, like Kenneth Lay's Enron scandal. Sure, the company is doing some measure of repayment now, but it's hard to say how much damage the scheming that went on did to individual investors and those affected by their creative energy policies. Along those lines, Wolf admits that getting rid of unhealthy competitors means the government needs to back off on bailing these companies out--that means fewer subsidies, as hard as that is for people whose livelihoods depend on them. Supporting failed industries weakens the collective market.

It's also information asymmetry that allows college graduates to make more money on average than laborers with no more than a high school degree or GED.

On to Stiglitz; I have to admit, all I know about Mumbai comes from emails desperately soliciting assistance with bank accounts, which is to say there are many rich widows and widowers over there. But the contrast of the events in Mumbai and Davos (as described by Stiglitz) was interesting, and the results not uncommon. I have taken classes where the blame for any harm caused by globalization is placed squarely on developing countries, and read books by "paranoid" authors like Klein who place the blame on complacent consumers and greedy corporations, and sat through lectures exhorting the necessity of 100% participation from all parties in order to even out the playing field and share the benefits of this flattening world with everyone. Though Stiglitz doesn't say so in this first chapter, the implication on page 8 about perceived wellbeing is that believers in globalization's success are, at least in part, relying on GDP to support that idea. GDP is not and never has been an indicator of individual well-being. It is simply too broad to allow that use.

Both authors agree that it is absolutely necessary that trust be developed--trust of the people in regards to each other and the government, and even the government's faith in itself to work properly; this implies, as Stiglitz points out, that a change in mindset is necessary. The U.S. has strong property rights for hard and soft assets (including ideas), which encourages investments; developing countries must develop the same if not equivalent rights and protections and shed the corrupt systems and bureaucrats that lead citizens to operate a market beyond the government's purview. And, finally, according to Singer's thoughts on the Golden Straitjacket, the government really must trust itself enough to shrink the bureaucracy as a whole and keep its hands out of the market.