Underneath all the cloak and dagger of politics, there are real issues that all too often get covered over by the latest political drama. The maddening thing about all this is that nothing seems to get resolved. It just appears that every action gets a reaction. Perhaps the laws of physics are perpetually reaffirmed but this type of dynamic which generates heat and entropy in the system. Perhaps the manifestation of heat is chaos and knee jerk reactions that end up hating the government and becoming paranoid about the evil genius that is the ghost in the machine of absolute power. Fox news has made a lot of money propagating this tragic drama. Unfortunately, the electorate has demonstrated more of a propensity for loving the manufactured lie than digging into the pesky details, the anomalies that call for thought and wisdom. What is it that calls for resolution and solutions? The answer that political chaos calls for is not eternal, emotional vigilantism or otherworldly cynicism for this world but principles that address justice. We all come to this calling with historical deficiencies and biases that easily derail and confuse us. In any case, this is the situation the Founding Fathers faced even with their advantage over us as the most highly, liberally educated scholars of their day. However, we are, as they were, constrained to try to answer the questions of our day, to heed an inner necessity for a yet to be determined justice. Cynicism is always snapping at our heels and tempts us to yield to hate, fear and apathy. Apathy is most seductive and can take many forms. Apathy absolves us from responsibility from ‘my’ call for resolution, for solution, for justice. Apathy is the lassie faire of the rabble; let the market decide, not me. However, capitalism is not about passivity but production and action from the individual. It is unfortunate that a long history of economic reductionism has lost the connection to personal responsibility to heed the call for justice as what is most noble in human production. Our understanding of what it means to ‘be’ has taken on a certain stubborn, habitual embedded-ness to a metaphysic of materiality and its antithesis, spirituality. Body and soul, accident and substance, no-thing and thing, mortal and divine have split us into fragments, historical pieces of our call to ‘be’, to do justice in spite of our overwhelming injustices. The face of every child, every victim of suffering continually calls for remembrance and reawakens us to our personal and absolute responsibility for justice, response and answer. Let’s take a few concrete, current examples of how this gets worked out in our politics.

The far right can concoct conspiracies and vile governmental demons in a vacuum but now oxygen has been heaped on their delusions in the form of the phantasmal IRS scandal, the Benghazi attack and the Associated Press surveillance. Let’s refresh our convenient short term memories and see if a need for an unanswered question arises.

After 911 many folks had a burning desire for vengeance that fueled a political fire for two wars, Guantanamo and the Patriot Act. The cost of the wars and effect on the national debt, the torture of “war combatants” and the invasion of personal liberties on U.S. citizens was only met with crickets chirping. Only a few voices were raised in unpublicized hearings and court cases to counter the onslaught of public aggression. The government was not evil back then but the arm of the almighty fighting the just war. The vile liberal laws (which really were not enacted by liberals) that prohibited CIA assassinations and much covert activity were readily dispensed with in the name of hanging the perpetrators high. The onslaught of drones was welcomed by the chirping crickets. The call for justice was silenced by the call for revenge at any price. The CIA could listen in on any calls they wanted including U.S citizens; businesses were not exempt either. The tax exempt status of immensely funded political machines was given carte blanch for any “social service” group including neo-Nazis and the KKK…remember Citizens United, the Wisconsin Right to Life decision, tax exempt status and corporations right to free speech?¹ Not a chirp was heard from conservatives when all this was working for them. Did many of us really think through the loss of revenue from these tax exempt groups and whether tax exempt was being unfairly endowed on puppet groups opening the flood gates to political circus and “targeted groups” for any organization that did not get tax-exempt status? Who will be the next targeted “social service” group…Serial Killers of America? Isn’t more money in politics rust to any iron left in our politicians?

Now, in the aftermath of impending danger we are left with some nagging questions. Can segments of our society be interned in various ways as slaves in the early U.S., the Japanese in World War 2, the Islamic community now, and the latest, conservatives in the Tea Party? Apart from a comedic grand conspiracy of President Obama, how do we justify bias and favoritism in our own calling and personal responsibility for an answer? We did so in the Bush administration while garbing ourselves in the clothes of the Divine. Now, our holiness is not so pure and we are left with nagging questions. Yes, it always easier to devise a devil like President Obama to squelch our conscience but the truth is that we are our own worst, diabolical conspirator. We setup, welcomed and allowed the conditions for these injustices while the crickets were chirping.

So, let’s say we get rid of those unjust, liberal laws that were supposed to protect us against terrorism according to President Bush and Dick Cheney. Let’s go back to NOT being able to spy on Americans, intern enemy combatants, water-board terrorists, propagate our clones and keep national security secrets from the American public to protect top secret sources. Let’s give every group that wants it tax exempt status. Let’s cut the national debt indiscriminately. When another terrorist attack gets our attention, unemployment goes back to depression levels, everyone’s pet government handout including Social Security and Medicare gets slashed or eliminated, when we can no longer justify our hypocrisies, we can go back to the silence of crickets chirping and start the whole insane cycle all over again OR we might try to think proactively.

We may actually have to suffer a little pain to be true to ourselves and our highly praised, Founding Father’s ideals. We may have to stop looking for easy, purely reactive indulgences and heed the call for justice even when it hurts us. We may actually have to live our ideals instead of revering them. If we, the electorate, reward mindless political thrills we will create a political machine in our own image. This will not be the image envisioned by the Founding Fathers but a hideous underside that will mock truth and justice. We need to ask ourselves and settle the issue, are we ok with perceived “war time” invasions of privacy? What are the limits we should not cross in the name of national security? What are conditions for mass expenditures and waging wars? What groups do we sanction and what groups do we oppress…gays, Arabs, conservatives, KKK, neo-Nazi, etc. or do we give carte blanch to everyone? Wisdom and measure is required to think through these issues. Government institutions are also required to ensure that we enact our collective wisdoms. The rabble of the market has no indebtedness to enduring wisdom only self satiation. There is no given goodness to the market only the perpetuation of the war of all against all. If we are to overcome our injustices we will have to become capitalists of a sort that are personally responsible for justice, which cannot abdicate our debt to the market but only continually answer to ourselves. We will have to rediscover what human being is, our being and our indebtedness to the other cannot be suffocated by the evil genius we hate or fear, the Great Satan that opposes God, the not-my-problem cop out of apathy. We must decide, act and live resolutely with the consequences of our desire for justice or shrink back into living oblivion. I hope to explore the depths of these questions more in my upcoming philosophy series.

 

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¹ See http://mixermuse.com/blog/2012/08/08/formalism-when-a-lie-becomes-truth-really/

See http://benjaminstudebaker.com/2013/05/13/the-irs-tea-party-muddle/

Logic, logos in classic Greek, has a kind of intrinsic compulsion; the notion of identity. Aristotle spent much of his discussion in the Metaphysics¹ on the principle of non-contradiction (PNC). He thought that any claim of knowledge was essentially bound to PNC. Therefore, knowledge itself is not absolutely relative to personal belief. It must continually prove itself in the foundry that separates iron from slag, the true from the false. Truth is never complete but existentially contingent upon contradiction and error. However, “It is impossible to hold (suppose) the same thing to be and not to be (Metaph IV 3 1005b24 cf.1005b29–30).” If I make a claim that x is universally true then I also make the corollary claim that all particular cases of x will demonstrate the universality of the claim. Therefore, for example, if I suggest that large government leads to more corruption and am faced with significant examples of large government and less corruption, I must either modify my original universal premise to account for this discrepancy OR give up the claim IF the PNC is given essentially and intrinsically in the identity of universality². This is not a matter of civility or incivility, opinion or fact, relativity, etc., it must necessarily always come along with any claim of knowledge. Of course, I agree with Jeff that civility is very important especially in light of the fact that PNC is existentially contingent and no one can lay claim to having arrived finally, teleologically (telos-completion, wholeness and logos), at universal truth. We are all paupers in the face of the richness of PNC. Yet, non-contradiction does remain in a non-relative assumption, always already implied every time we make a universal claim. We can only deny this in bad faith.

Bad faith is a claim to knowledge that violates PNC while maintaining PCN. As Aristotle stated, something cannot be and not be. A cannot be both A AND NOT A in any sense without violating PNC. If identity is taken as a singularity, an ontological (ontos, being, isness) unity then, it cannot be itself and not itself. This would be nonsense. Yet PNC is not the whole story. I will deal with that in my upcoming philosophy series. However, for now, I would like to take particular example in which the question of PNC is a concern. Bad faith is what Aristotle would have referred to as a logical fallacy. Aristotle cited formal fallacies in the form of logical syllogism. One form of a necessarily, tautologically, true syllogism is:

All humans are mortal.

All Greeks are human

∴ All Greeks are mortal.

The middle term, human, establishes an identity between the major term, mortal, and the minor term Greeks and, on the basis of this identity, truthfully concludes that the major term and the minor term are identical in the universal sense of Greeks and mortality. They are bought together under the rubric of the same (mortality applies to all Greeks). This is necessarily so or tautologically true. If I maintain that,

All large governments are over regulated

All over regulation (necessarily leads) to corruption

∴ All large governments are corrupt

 

the existential fallacy here would be demonstrated by use of the terms “all” and any particular case that could be cited in which the conclusion is false. The way to fix this argument would be to make a contingent claim by replacing “all” with “some”. However, to maintain a universal generalization it must include existence as a necessary component of the “universal”. Another way to avoid contradiction would be to qualify what “large” is such that we are not referring to a linear relationship of ever larger governments and corruption but some critical mass wherein the stated universal relationship to corruption applies. Additionally, to simultaneously cite data that both proves and contradicts the conclusion, the universality of the claim, is a bad faith argument. Perhaps another way to avoid this would be to question the validity of the existential data but that cannot be laid hold of if one maintains the veracity of the data in some cases and not in other cases (using the same criteria for establishing the data as “true”).

There is another particular form of a bad faith argument that I really want to address, more as an imposing question, than a proven case. In order to do this I will put it in its most radical form. If I maintain that public debt is not a stimulus and economic stabilizer over the long run but a recipe for endless boom and bust WITH a correlation of the magnitude of public debt to the magnitude of the boom and the bust then we have a recent existential example that should at least pose a valid question. How is it that Europe and the European Central Bank (ECB) which has followed a policy of public frugality and reduction of public debt has seen higher unemployment and social upheaval while the US which has pursued a more Keynesian route, using the Federal Reserve to stimulate the economy with more public debt in the form of public bonds, has seen a lower unemployment rate and economic recovery?

It seems to me that one way to address this by the Austrians would be to appeal to an order of magnitude in which the correlation occurs that is not linearly related as in the previous example (magnitude of public debt to bust). Historical examples would be more pertinent in this tact. Another fallacious way to address the issue is to perpetually push off the final proof of this to the future. In other words, the BIG bust will come and that will prove our case. If a small bust would occur, even for a very large public debt, then the claim to correlation with magnitude of public debt and magnitude of bust could not be claimed as “universal” but perhaps only contingent. A non-correlation to magnitude of public debt to economic calamity is tantamount to saying nothing about public debt. There will always be larger and smaller economic busts at some point in the future unless one is a utopist. In order to draw a conclusion it must have a universal quality that is shown in the micro-economic, existential case. In fact, all historical existential cases must prove the case and not defer the case to an ever looming future.

I know the Great Depression has been the subject of much revisionism but the policies of FDR and the World War did greatly increase public debt and there was a recovery that followed this expenditure. It was not public austerity that was the catalyst for the recovery. Austerity prolonged the Great Depression and created unemployment and soup lines. Economic stimulus appears to have been a necessary and historically accompanying factor that changed impoverishment to recovery. Please note that I am not recommending throwing tax payer dollars indiscriminately at an economic crisis but selectively using the advantages of public resources to create jobs and build infrastructure as a historically proven stimulus when the private sector is imploding economically. I am aware of how the Austrians process the lessons of the Great Depression but am not convinced by their arguments yet. It appears to me to be a bit of revisionist history but I would not argue that all history may be essentially revisionist as Marx and Nietzsche noted.

Aren’t we seeing the same thing today with real world examples of Europe and the US? Here we have two different economic philosophies in concurrent existential laboratories and the apparent winning philosophy seems to be on the side of the Keynesians. I know we can make the claim that the big bust is coming and scare the bejesus out of everyone as they prep for the apocalypse but that may only be a futile exercise of an overactive amygdala³ and not a claim to universal knowledge. If existential import is minimized, denied or put off indefinitely, the claim can only remain as hypothetical and not a claim of knowledge.

In any case, it does appear to me that this subject has gotten bogged down in the endless ‘circle of hermeneutic’ discussions where evidence remains in the eye of the beholder and not in the logical claims that either hold up to their universality OR become a continent claim that may or may not be the case. It is the “faith” part of Austrian economics that appears to get cloaked in endless interpretation and apocalyptic vision that is a disservice to the logical truth claims against macroeconomic, brute historical results. It is as if we are all Alice in the rabbit hole trying to decipher if what we see is a big or small Armageddon while holding a tea party to debate the intimacies of our upcoming oblivion. If we separate and isolate the logic of the claims to see if they are contradictory in themselves we may get further than endlessly “re-stating” the claims to obfuscate and diminish the universality the Austrian school is trying to lay hold of in economic theory. As such, I would love it if someone could provide a relatively simple argument that does not appeal to the true, complicated, scholarly arguments that take years to understand and merely highlight the logical principles of the Austrian school that cannot be diminished without losing its integrant veracity to itself. I am not asking for over-simplification, only logical arguments that do not get lost to further “clarifications”.

 

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^{1 See link: http://plato.stanford.edu/entries/aristotle-noncontradiction/}

^{2 See link: http://critical-thinker.net/?p=1929#comments}

^{3 See link: http://critical-thinker.net/?p=1074}

 

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Congratulations President Obama!

In spite of all the dust kicked up by the Republicans in this presidential campaign, there is an enduring shine on our future. In spite of the Citizens United decision and all the billionaires wasted billion+ dollars, albeit a fiscal stimulus from the private sector , the regular folk have stood the test, weathered the BS, separated the wheat from the chaff and preserved the union for the many and not the few. Those whose ideologies protect a shrinking populace from a growing populace cannot survive in this democracy. There are other countries more suited to that pursuit but our citizens have once again affirmed “by the people, for the people and of the people”. Oh yes, it is messy but our optimism, over time, keeps our eyes toward the future and not embroiled in the past. If we will not or cannot change to meet the challenges of the future we will rot in the ‘good ‘ol days’. The economic, free market, purists may prefer their utopist ideals to international and domestic realities but they will continue to get marginalized if they keep telling us to wait for the private market to decide in the face of decades of no decision for health care, elderly, poor, crime, education, disease and fairness. If we had waited for the market’s decision on these matters we would not be a democracy but a plutocracy as every other country in history has repeatedly proven when they embarked on that path. The comes a time when the PEOPLE have to decide. The people have decided that the market is not the panacea for all social ills AND made the decision not to wait for the market’s purported solution. Of course, the elitists will continue to claim that unicorns really do exist and we should wait for them but reality seems to get the attention of the common folk more. Perhaps those that ‘know’ would benefit from a little Socratic ignorance and pay less attention to their sophistic, capitalistic ‘tenure track’ interests.

In addition to the Republican message getting out of touch with changing demographics, they would also do well to not try to “fool all the people all the time”. The strategists obviously thought that given the right amount of money they could position Mitt has a far right winger during the primary and a moderate Republican in the general election. As elitists typically do, they believed that they were smarter than the masses (the 47%) and that people would forget the primaries, forget the lost decade of 2000, and sheepishly follow the correctly pitched party line. What they proved is that people have a better memory than they give them credit for AND trust has to do with ideological consistency. Sophistry does have some short term benefits at times as every liar knows but over time the Sophist acquires a reputation as a liar that cannot be trusted. When the Sophist loses credibility and trust is damaged, the tried and true propagandist tactic of truth as repetition is much harder sell. The Romney strategy of ‘tell them what they want to hear’ duplicity made Romney himself look like a phantasm, not real, and common folk want real people that can perform in real situations in the real world. This is the reason that President Obama won the election. President Obama has an even hand, says what he means, and won the trust of enough of the electorate to stay in office.

While Fox news is in the business of re-creating a ‘brand new world’ the real facts have a pesky way of staying relevant. Fox and friends wanted the American people to believe that the economy was horrible and all of it was due to President Obama but the facts kept popping back up. Fox labels the tendency of facts to keep popping up as the ‘liberal media’. They want to believe that the ‘facts’ they created are not subject to question or debate. Fox has to continually pump up the congregation with a better sermon. This is the problem with creating automatons…they need constant feeding. They cannot feed themselves, fish for themselves, so they need fresh meat daily. It is a Fox News handout of sorts at least as long as they can keep the church large enough to pay their bills. The Heritage Foundation, American Enterprise Institute, and the Cato Institute have a monotone approach in their analysis that makes them overtly partisan and thereby, not credible. Yes, there are liberal think tanks that would like to mimic this behavior but it does not work as well with their natural constituencies. Liberals are plural, more heterogeneous in ethnicity, ideology, self-identity. Homogeneity does not work so well for them. What does work for them is critical thinking, error detection, a sense of facts that I may not like or agree with but still retain the status of ‘truth’. With regard to liberals, they are much more like herding cats than cattle. This is where the conservative ‘think tanks’ go wrong in their assessments. Some folks that are more fear bound and determined, more amygdala dominated, are easier to coral. Folks that are more concerned with responding appropriately to real situations are more engaged in error correcting, anterior cingulate cortex dominated. They need to first believe that there are facts ‘out there’ that is other than what I want or need or like. These folks do not want convenient truths but real truths. Fear paralyzes and creates fantasies in its chronic form. Fear was really only meant in an evolutionary sense to get us to run when a tiger approaches us. It was never meant to create illusions of ever approaching tigers to get us to listen to its council as to how to keep from getting eaten. As such, chronic fear is dysfunctional, delusional and non-adaptive. Eventually, as Joseph McCarthy discovered, the myth of impending doom becomes more of a personal problem that a social ill. This is what Fox, conservative ‘think tanks’ and Republicans risk if they push their methodology too far. Credibility is not faked. Credibility is acquired by having beliefs that are researched from non-partisan, good sources and being open to change if the facts warrant it. This is how folks that are not prone to fear paralysis want to respond to new challenges. Insulting these folks may make the fear mongers feel better about themselves but will not get them into national office when social change is called for to effectively address pressing issues.

For those that believe the end of the world is upon us, I know a lot of folks are going through Fox News withdrawal now and waking up to smell the coffee that many of us think the economy is improving and the future is bright not dark and dismal. The next four years will be even better for the economy and the Democrats. If the Republicans continue to deny the numbers economically and demographically they will find it harder and harder to win national elections. Obstruction, whining and negativity may feel good and make Fox lots of money but becoming part of the solution will keep you in national office. I know many of the doom and gloom prognosticators will only dig in harder but I hope, this time -PLEASE, remember your dire predictions and in four years when we still have a great country with a strong economy…do us all a favor and reflect please!

I think it will be very interesting to see how the Republicans digest this failure. It seems that demographics will absolutely not allow them to dig in deeper and keep on keeping on. Part of their party will absolutely insist that this is the only course. Another part of their party will want to win future national elections and are smart enough to understand why the status quo will not get them there. Change has been thrust upon the conservative base that they cannot ignore any longer. I believe we need authentic conservatives that understand the need to be cautious and preserve what has worked in the past. However, I think the current conservative movement has abandoned the real world that changes and may require ‘adaptations’ to the old ‘tried and true’ methods to continue to be relevant. The balance must be struck with results not ‘ought to be’s, ‘should be’s, denials, anger, insults or utopist idealism. I am not so sure that all of the Republican Party is ready or willing to make these changes and therefore, a great divorce is imminent. When the Dixiecrats were unwilling to make the changes Democrats where demanding they abandoned the Party and joined the Republican Party. If the hard core of the Republican base cannot live with the required practicalities of survival in the national arena they will not join the Democrats but create their own identity to the right of the base that can adapt. I think they would rather die in their ‘rightness’ than live in the requirements of the real world…but I am open to being wrong…we will have to see.

I know that I have been critical at times with the Obama administration with regard to not moving fast enough on issues especially the wars. However, I do want to thank President Obama for all that he has done. The Republican Party wants to say that President Obama was an ineffective leader AND that he was an effective leader in corrupting the nation, the economy and the masses of folks that want handouts. He obviously was an effective leader as they acknowledge at times…they just, in true Sophist fashion, call his effectiveness ineffective. Thanks to Rachel Maddow for compiling this data, I want to end with the accomplishments of the past four years of the Obama administration:

Democratic Government Accomplishments:

Fair Pay Act

New rules on credit card companies

New regulations on tobacco

Federal hate crimes bill

Children’s Health Insurance Protection bill

College student loans by the Department of Education

Serve America Act

Cash for Clunkers

Economic Recovery Package (single largest tax cut in history)

Affordable Care Act

Financial Reform Bill

First Hispanic Supreme Court justice

Cut US and Russia nuclear arms

911 Health Bill

Gays in military (DADT)

Out of Iraq

Getting us out of Afghanistan

No new wars

Killing Osama Bin Laden

Overthrow a dictator in Libya

Most severe sanctions ever on any country against Iran

Marriage equality for same sex couples

Stop deportation of immigrant kids

Stock market doubled

Historic job growth following the Bush recession.

Saving auto industry

 

PS…

Republican Government Accomplishments:

NO!

 

What the Data Shows

The chart below shows the Great Depression and all the recessions since.

The lines show the drop in GDP during the upheaval and the period of the recession.

The colored dots show the unemployment rate for each event and the peak unemployment date.

Each event shows who the president was and his party at the start and end of the event.

10 events started with a Republican president in office.

4 events started with Democratic president in office.

7 events ended with a Republican president in office.

7 events ended with Democratic president in office.

The “Early 1990s recession” took 15 months from recession end (George H.W. Bush) to peak unemployment.

The “Early 2000s recession” took 19 months from recession end (George W. Bush) to peak unemployment.

All other recession ends to peak unemployments took 4 months or less including the one with President Obama.

Conclusions

President Obama has been blamed for a slow recovery.

If the standard is who is president when the recession ends to peak unemployment then President Obama took 4 months and both Bush Sr. and Bush Jr. took 15 and 19 months respectively.

15 and 19 months to hit peak unemployment from recession end is highly unprecedented from the Great Depression onwards.

Most recessions started when a Republican was in office.

The “Late-2000s recession” started under Bush Jr.

The political rhetoric that the RNC has repeatedly made about President Obama’s handling of the recession is, historically speaking, a lie.

As a Republican, Romney’s track record and economic ideology would be no different than his predecessors.

Please vote according to facts and not lies if you are a responsible voter.

This is the data (the spreadsheet .xls can be downloaded here):

Data Sources:

National Bureau of Economic Research

Wikipedia

Bureau of Labor Statistics

Bureau of Labor Statistics

Here is an interesting chart of the top 51 overall donors to the current political campaign.

The web site is here.

You can download my spreadsheet with the charts here (.xls).

This chart is the sum total of direct campaign contributions and superpac contributions.

The total Democratic contributions for the top 101 donors is $187,590,262.

The total Republican contributions for the top 101 donors is $326,833,735.

Here is the top 20 donors by industry.

I was wondering why I did not see more Koch brothers so I did a search of Kochs that were donors and surprisingly almost all of them were Republican contributors. I am sure there is no relation – right?

With regard to Jeff’s post here.

The data source is here.

Jeff quotes Mandani’s blog claim:

The World Bank’s Investment Climate Department (CIC) has reviewed the recent literature on the relationship between restrictive regulation, corruption and business environment reforms, finding that corruption is positively correlated with restrictive regulation.

Jeff disagrees with Mandani. Here is Jeff’s hypothesis

Correlation does not imply causation. When two events A and B are correlated, one of the following is true:

1. A caused B

2. B caused A

3. Some third factor C caused both A and B

4. A and B happening together are just a coincidence.

The correlation appears significant enough that #4 is unlikely.

It also seems unlikely that the length of time it takes to start a business would cause corruption. Correct me if I’m wrong here.

That leaves either #1 or #3.

I hereby hypothesize that #3 is the culprit, and further that factor C is the power brokering-rich environment resulting from a too-large government.

Jeff thinks that the other factor is “too-large government” which results in a “power brokering-rich environment”. I suppose this means that if the government is too large, corporations will use the government to create regulation to benefit themselves and therefore, result in corruption. I take it that Jeff’s solution would mean a small government which would, in theory, keep large corporations from getting corrupt regulations that benefit themselves. Additionally, in true Austrian School economics fashion, if the government is small the free-market will work more efficient over time and, I assume the conclusion would be, result in less corruption in the system (and certainly in less booms and busts according to Austrian economics). If this is the case, the problem with the purity of the Austrian utopian dream is that this data does not back up that claim. To the contrary, this data counters that claim.

Here is my hypothesis:

Jeff is right with regard to #3 being the culprit. However, Jeff is wrong about the specific other factor (C).

First, I have graphed all the data that the World Bank has accumulated based on their 2011 data, the latest data they provide. You can download their data with my added graphed sheets here. They have 5 benchmarks that they measure for 215 countries:

Political Stability, Government Effectiveness, Regulatory Quality, Control of Corruption, Voice and Accountability

Each of the benchmarks are defined above the graphs and the definitions can be found here.

Each benchmark spans the approximate range from -2.5 to +2.5. Estimates range from approximately -2.5 (weak) to 2.5 (strong).

Each graph shows the data sorted by one benchmark, one column only, from lowest value to highest value. The other benchmarks on the graph falls where they may. We will call the sorted column benchmark the dependent variable as it is the outcome we are comparing to our non-sorted benchmarks, the independent variables. The sorted benchmark for each graph is shown as the thickest line on each graph. Linear trend lines are displayed for each of the other, non-sorted, benchmarks for each graph. This methodology will show the relationship of the other independent variable benchmarks, to the dependent variable, the sorted benchmark, to determine which of the independent variable benchmarks might have a causal relationship to the sorted, dependent variable benchmark. We will also look for any relationships we can see of the benchmarks to each other. Also, we should try to see if Jeff’s hypothesis concerning “too-large government” shows a pattern in any of the dependent variables tested.

What the data shows:

If each of the benchmarks are sorted from low to high, the other non-sorted benchmarks trend lines linearly follow the sorted benchmark upwards. This would indicate that each of the benchmarks play a role in improving the results of the others or, put another way, there is no necessary cause and effect relation established by this data to only one or only some of the independent variable benchmarks to the dependent variable benchmark. All of the independent variable benchmarks appear to effect the dependent variable benchmark causally. For example, less corruption results when improvements are made in political stability, government effectiveness, and voice and accountability and not just regulatory quality. The “Control of Corruption” graph shows that the “Regulatory Quality”, independent variable is not a factor of regulation
per se but of political stability, government effectiveness, regulatory quality, control of corruption, voice and accountability. In fact, there is nothing in the data about ‘regulation’ as too much or too little regulation but ‘regulation quality’. Additionally, this data does not add credence to the Austrian School’s claim that the free market is able to regulate itself (if that is indeed the claim of the purist fundamentalists). Neither does this data show any singular correlation to the “restrictiveness” of regulations (“regulation quality”) to corruption. If it did, some (perhaps one could argue some but not all of the benchmarks are overlapping to “regulation quality”) or all of the other benchmark trend lines would not have a positive slope. For example, if political stability is decreased, it seems to indicate that corruption goes up as well. There does not appear to be a singular benchmark that is independent from the others with regard to government corruption (“Control of Corruption”).

Additionally, if you look at the countries that are doing better (closer to 2.5) you will see no correlation between big and small countries or governments. This would seem to indicate the Jeff’s hypothesis is wrong with regard to the absolute or relative size of the government. Since all the countries will not fit on the horizontal axis without making the graph too big I will list where the United States rank is for each benchmark (N/As are not included) and the countries that are ahead of us (closer to 2.5):

Political Stability 136 out of 213

CYPRUS, MONGOLIA, CHILE, ITALY, ESTONIA, MACAO SAR, CHINA, COSTA RICA, FRANCE, OMAN, LITHUANIA, PUERTO RICO, MARTINIQUE, PORTUGAL, CAPE VERDE, HUNGARY, GUAM, SLOVENIA, SAMOA, GERMANY, BHUTAN, AUSTRALIA, ST. LUCIA, ST. VINCENT AND THE GRENADINES, MAURITIUS, BELGIUM, NAMIBIA, TAIWAN, CHINA, URUGUAY, UNITED ARAB EMIRATES, HONG KONG SAR, CHINA, SLOVAK REPUBLIC, TONGA, JAPAN, SEYCHELLES, AMERICAN SAMOA, ANTIGUA AND BARBUDA, VIRGIN ISLANDS (U.S.), MALTA, BERMUDA, IRELAND, MONACO, NAURU, PALAU, SAN MARINO, BOTSWANA, CANADA, POLAND, ST. KITTS AND NEVIS, DENMARK, CZECH REPUBLIC, BAHAMAS, THE, BRUNEI DARUSSALAM, NETHERLANDS, VANUATU, AUSTRIA, SINGAPORE, QATAR, ICELAND, DOMINICA, MICRONESIA, FED. STS., SWEDEN, SWITZERLAND, BARBADOS, NETHERLANDS ANTILLES (FORMER), ARUBA, LUXEMBOURG, ANDORRA, KIRIBATI, TUVALU, NORWAY, NEW ZEALAND, FINLAND, CAYMAN ISLANDS, JERSEY, CHANNEL ISLANDS, LIECHTENSTEIN, ANGUILLA, GREENLAND

Government Effectiveness 188 out of 212

IRELAND, JERSEY, CHANNEL ISLANDS, BARBADOS, ANDORRA, ANGUILLA, CYPRUS, GERMANY, UNITED KINGDOM, ICELAND, AUSTRIA, BELGIUM, HONG KONG SAR, CHINA, LUXEMBOURG, AUSTRALIA, LIECHTENSTEIN, NORWAY, NETHERLANDS, CANADA, SWITZERLAND, NEW ZEALAND, SWEDEN, SINGAPORE, DENMARK, FINLAND

Regulatory Quality 195 out of 212

LIECHTENSTEIN, GERMANY, CHILE, ANDORRA, UNITED KINGDOM, SWITZERLAND, IRELAND, CANADA, FINLAND, AUSTRALIA, SINGAPORE, SWEDEN, NETHERLANDS, LUXEMBOURG, HONG KONG SAR, CHINA, NEW ZEALAND, DENMARK

Control of Corruption 182 out of 212

URUGUAY, ANTIGUA AND BARBUDA, BERMUDA, ANGUILLA, ANDORRA, CAYMAN ISLANDS, BAHAMAS, THE, AUSTRIA, IRELAND, JAPAN, FRANCE, UNITED KINGDOM, CHILE, BELGIUM, GERMANY, BARBADOS, LIECHTENSTEIN, HONG KONG SAR, CHINA, ICELAND, CANADA, SWITZERLAND, SINGAPORE, AUSTRALIA, NORWAY, NETHERLANDS, LUXEMBOURG, FINLAND, SWEDEN, NEW ZEALAND, DENMARK

Voice and Accountability 184 out of 214

ST. VINCENT AND THE GRENADINES, MARSHALL ISLANDS, SAN MARINO, ST. KITTS AND NEVIS, PALAU, FRANCE, BARBADOS, ST. LUCIA, JERSEY, CHANNEL ISLANDS, GREENLAND, ARUBA, RÉUNION, UNITED KINGDOM, GERMANY, IRELAND, ANDORRA, BELGIUM, AUSTRIA, CANADA, AUSTRALIA, ICELAND, NETHERLANDS, NEW ZEALAND, FINLAND, LIECHTENSTEIN, LUXEMBOURG, SWEDEN, DENMARK, NORWAY, SWITZERLAND

A few of my comments:

There are multiple reasons for corruption and it is way too simplistic to blame it on ‘regulation’ (in regard to more or less) alone. It may be fair to suggest that ‘bad’ or ineffective regulation could be one factor in increasing corruption but the data does not independently verify this to be the only factor. We should look at how the World Bank defines corruption:

Control of corruption captures perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests.

Corporatism = Corruption

Their definition is probably the definition of corporatism (see my related essay on corporatism). By definition, corporatism is corruption. In this case, corporatism and corruption is effectively a tautology. However, the definition does not prove the case, the data does.

Corporatism does not necessarily lead to corruption if you believe the Supreme Court of the United States

This data cannot be contrived to make the claim that regulatory quality alone leads to corruption (or its effective tautological definition in this case – corporatism). It is possible to think that “corporations are people too” and they may actually have the best interest of their communities in addition to the best interest of their bottom line (as the ‘clean coal’ campaign would have us believe¹).

Regulation as defined by ‘restricting effectiveness’ does not have to be done by the government and many times is not done by the government

If the free market is to decide there will be large corporations and small businesses. Large corporations can effectively ‘regulate’ the market with or without the government as I have made the case elsewhere. The contention of the Austrians is that this type of private ‘free market regulation’ can be overcome by competition. This may or may not be the case. I would think some of the other benchmarks cited here like “Voice and Accountability” might have an impact on this but this is not demonstrated by the data. Additionally, very large multi-national corporations can effectively evade many regulations and taxes of any particular government by locating their operations in more ‘regulatory or tax friendly’ countries and thus create competitive advantages that would be difficult to overcome in the ‘real’ world.

What this data does not show

This data does not show how regulation may actually reduce corruption (i.e., vis-à-vis conflict of interest banking regulations, bribery, loan sharking and theft laws, abolishing slavery, outlawing child labor, ruining the environment, aircraft maintenance, lead based toys, etc.). If, by definition, public regulation is corrosive and the private market cannot be corrosive to market economies, we may have Austrian ideological purity but restraint of corruption is another issue altogether.

With these points in mind, I personally would conclude that corporatism may lead to corruption but that is not substantiated by this data, by the Supreme Court, by the Republican Party, by public policy alone (without ‘free market’, self-regulation also restricting effectiveness). It is also not apparent by this data that corruption may actually be restricted by public policy.

There are countries² with much smaller and larger governments that are doing better than the United States regarding the benchmarks relative to their size and government spending versus GDP. If you will notice on the “Control of corruption” benchmark there are countries doing better than us like the “government controlled” health care countries of Canada, United Kingdom and France, the “Euro-Socialists”, and even the king of government bureaucracies, communist China (Hong Kong). I believe China is doing better on all the benchmarks except “Voice and Accountability” than the United States in addition to many of the “Euro-Socialists” and the government controlled health care countries. In my opinion, this disproves Jeff’s hypothesis that corruption (as defined by corporatism) is caused by the size of government vis-à-vis public policy regulation.

What we should all learn:

If an ideology makes short shrift of data in order to validate itself, the ideology functions like a religious dogma not like a falsifiable scientific claim. To the degree that we help each other become more rational (I include myself most of all) is to the same degree that we will have a real and positive effect on our community and help each other become better critical thinkers.

——————————————————————-

What is “governance” according to the World Bank?³

Governance consists of the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them.

World Bank Data Graphed

Political Stability – Political stability and absence of violence measures perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including politically-motivated violence and terrorism.

Government Effectiveness – Government effectiveness captures perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies.

Regulatory Quality – Regulatory quality captures perceptions of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development.

Rule of Law – Rule of law captures perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence.

Control of Corruption – Control of corruption captures perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests.

Voice and Accountability – Voice and accountability captures perceptions of the extent to which a country’s citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media.

_________________

¹ From the Republican Party Platform adopted in the 2012 convention (Link pdf):

 

A Failed National Security Strategy

The current Administration’s most recent National

Security Strategy reflects the extreme elements

in its liberal domestic coalition.

…

Finally, the strategy subordinates our national

security interests to environmental, energy, and

international health issues, and elevates “climate

change” to the level of a “severe threat” equivalent to

foreign aggression. The word “climate,” in fact, appears

in the current President’s strategy more often

than Al Qaeda, nuclear proliferation, radical Islam,

or weapons of mass destruction.

One word – SANDY

² This is a list of all the countries used to compile the data (Link):

AFGHANISTAN , ALBANIA , ALGERIA , AMERICAN SAMOA , ANDORRA , ANGOLA , ANGUILLA , ANTIGUA AND BARBUDA , ARGENTINA , ARMENIA , ARUBA , AUSTRALIA , AUSTRIA , AZERBAIJAN , BAHAMAS, THE , BAHRAIN , BANGLADESH , BARBADOS , BELARUS , BELGIUM , BELIZE , BENIN , BERMUDA , BHUTAN , BOLIVIA , BOSNIA AND HERZEGOVINA , BOTSWANA , BRAZIL , BRUNEI DARUSSALAM , BULGARIA , BURKINA FASO , BURUNDI , CAMBODIA , CAMEROON , CANADA , CAPE VERDE , CAYMAN ISLANDS , CENTRAL AFRICAN REPUBLIC , CHAD , CHILE , CHINA , COLOMBIA , COMOROS , CONGO, DEM. REP. , CONGO, REP. , COOK ISLANDS , COSTA RICA , CÔTE D’IVOIRE , CROATIA , CUBA , CYPRUS , CZECH REPUBLIC , DENMARK , DJIBOUTI , DOMINICA , DOMINICAN REPUBLIC , ECUADOR , EGYPT, ARAB REP. , EL SALVADOR , EQUATORIAL GUINEA , ERITREA , ESTONIA , ETHIOPIA , FIJI , FINLAND , FRANCE , FRENCH GUIANA , GABON , GAMBIA, THE , GEORGIA , GERMANY , GHANA , GREECE , GREENLAND , GRENADA , GUAM , GUATEMALA , GUINEA , GUINEA-BISSAU , GUYANA , HAITI , HONDURAS , HONG KONG SAR, CHINA , HUNGARY , ICELAND , INDIA , INDONESIA , IRAN, ISLAMIC REP. , IRAQ , IRELAND , ISRAEL , ITALY , JAMAICA , JAPAN , JERSEY, CHANNEL ISLANDS , JORDAN , KAZAKHSTAN , KENYA , KIRIBATI , KOREA, DEM. REP. , KOREA, REP. , KOSOVO , KUWAIT , KYRGYZ REPUBLIC , LAO PDR , LATVIA , LEBANON , LESOTHO , LIBERIA , LIBYA , LIECHTENSTEIN , LITHUANIA , LUXEMBOURG , MACAO SAR, CHINA , MACEDONIA, FYR , MADAGASCAR , MALAWI , MALAYSIA , MALDIVES , MALI , MALTA , MARSHALL ISLANDS , MARTINIQUE , MAURITANIA , MAURITIUS , MEXICO , MICRONESIA, FED. STS. , MOLDOVA , MONACO , MONGOLIA , MONTENEGRO , MOROCCO , MOZAMBIQUE , MYANMAR , NAMIBIA , NAURU , NEPAL , NETHERLANDS , NETHERLANDS ANTILLES (FORMER) , NEW CALEDONIA , NEW ZEALAND , NICARAGUA , NIGER , NIGERIA , NIUE , NORWAY , OMAN , PAKISTAN , PALAU , PANAMA , PAPUA NEW GUINEA , PARAGUAY , PERU , PHILIPPINES , POLAND , PORTUGAL , PUERTO RICO , QATAR , RÉUNION , ROMANIA , RUSSIAN FEDERATION , RWANDA , SAMOA , SAN MARINO , SÃO TOMÉ AND PRINCIPE , SAUDI ARABIA , SENEGAL , SERBIA , SEYCHELLES , SIERRA LEONE , SINGAPORE , SLOVAK REPUBLIC , SLOVENIA , SOLOMON ISLANDS , SOMALIA , SOUTH AFRICA , SOUTH SUDAN , SPAIN , SRI LANKA , ST. KITTS AND NEVIS , ST. LUCIA , ST. VINCENT AND THE GRENADINES , SUDAN , SURINAME , SWAZILAND , SWEDEN , SWITZERLAND , SYRIAN ARAB REPUBLIC , TAIWAN, CHINA , TAJIKISTAN , TANZANIA , THAILAND , TIMOR-LESTE , TOGO , TONGA , TRINIDAD AND TOBAGO , TUNISIA , TURKEY , TURKMENISTAN , TUVALU , UGANDA , UKRAINE , UNITED ARAB EMIRATES , UNITED KINGDOM , UNITED STATES , URUGUAY , UZBEKISTAN , VANUATU, VENEZUELA, RB , VIETNAM , VIRGIN ISLANDS (U.S.) , WEST BANK AND GAZA , YEMEN, REP. , ZAMBIA , ZIMBABWE

³ See Link

With regard to Jeff’s post here.

The data source is here.

Jeff quotes Mandani’s blog claim:

The World Bank’s Investment Climate Department (CIC) has reviewed the recent literature on the relationship between restrictive regulation, corruption and business environment reforms, finding that corruption is positively correlated with restrictive regulation.

Jeff disagrees with Mandani. Here is Jeff’s hypothesis

Correlation does not imply causation. When two events A and B are correlated, one of the following is true:

1. A caused B

2. B caused A

3. Some third factor C caused both A and B

4. A and B happening together are just a coincidence.

The correlation appears significant enough that #4 is unlikely.

It also seems unlikely that the length of time it takes to start a business would cause corruption. Correct me if I’m wrong here.

That leaves either #1 or #3.

I hereby hypothesize that #3 is the culprit, and further that factor C is the power brokering-rich environment resulting from a too-large government.

Jeff thinks that the other factor is “too-large government” which results in a “power brokering-rich environment”. I suppose this means that if the government is too large, corporations will use the government to create regulation to benefit themselves and therefore, result in corruption. I take it that Jeff’s solution would mean a small government which would, in theory, keep large corporations from getting corrupt regulations that benefit themselves. Additionally, in true Austrian School economics fashion, if the government is small the free-market will work more efficient over time and, I assume the conclusion would be, result in less corruption in the system (and certainly in less booms and busts according to Austrian economics). If this is the case, the problem with the purity of the Austrian utopian dream is that this data does not back up that claim. To the contrary, this data counters that claim.

Here is my hypothesis:

Jeff is right with regard to #3 being the culprit. However, Jeff is wrong about the specific other factor (C).

First, I have graphed all the data that the World Bank has accumulated based on their 2011 data, the latest data they provide. You can download their data with my added graphed sheets here. They have 5 benchmarks that they measure for 215 countries:

Political Stability, Government Effectiveness, Regulatory Quality, Control of Corruption, Voice and Accountability

Each of the benchmarks are defined above the graphs and the definitions can be found here.

Each benchmark spans the approximate range from -2.5 to +2.5. Estimates range from approximately -2.5 (weak) to 2.5 (strong).

Each graph shows the data sorted by one benchmark, one column only, from lowest value to highest value. The other benchmarks on the graph falls where they may. We will call the sorted column benchmark the dependent variable as it is the outcome we are comparing to our non-sorted benchmarks, the independent variables. The sorted benchmark for each graph is shown as the thickest line on each graph. Linear trend lines are displayed for each of the other, non-sorted, benchmarks for each graph. This methodology will show the relationship of the other independent variable benchmarks, to the dependent variable, the sorted benchmark, to determine which of the independent variable benchmarks might have a causal relationship to the sorted, dependent variable benchmark. We will also look for any relationships we can see of the benchmarks to each other. Also, we should try to see if Jeff’s hypothesis concerning “too-large government” shows a pattern in any of the dependent variables tested.

What the data shows:

If each of the benchmarks are sorted from low to high, the other non-sorted benchmarks trend lines linearly follow the sorted benchmark upwards. This would indicate that each of the benchmarks play a role in improving the results of the others or, put another way, there is no necessary cause and effect relation established by this data to only one or only some of the independent variable benchmarks to the dependent variable benchmark. All of the independent variable benchmarks appear to effect the dependent variable benchmark causally. For example, less corruption results when improvements are made in political stability, government effectiveness, and voice and accountability and not just regulatory quality. The “Control of Corruption” graph shows that the “Regulatory Quality”, independent variable is not a factor of regulationper se but of political stability, government effectiveness, regulatory quality, control of corruption, voice and accountability. In fact, there is nothing in the data about ‘regulation’ as too much or too little regulation but ‘regulation quality’. Additionally, this data does not add credence to the Austrian School’s claim that the free market is able to regulate itself (if that is indeed the claim of the purist fundamentalists). Neither does this data show any singular correlation to the “restrictiveness” of regulations (“regulation quality”) to corruption. If it did, some (perhaps one could argue some but not all of the benchmarks are overlapping to “regulation quality”) or all of the other benchmark trend lines would not have a positive slope. For example, if political stability is decreased, it seems to indicate that corruption goes up as well. There does not appear to be a singular benchmark that is independent from the others with regard to government corruption (“Control of Corruption”).

Additionally, if you look at the countries that are doing better (closer to 2.5) you will see no correlation between big and small countries or governments. This would seem to indicate the Jeff’s hypothesis is wrong with regard to the absolute or relative size of the government. Since all the countries will not fit on the horizontal axis without making the graph too big I will list where the United States rank is for each benchmark (N/As are not included) and the countries that are ahead of us (closer to 2.5):

Political Stability 136 out of 213

CYPRUS, MONGOLIA, CHILE, ITALY, ESTONIA, MACAO SAR, CHINA, COSTA RICA, FRANCE, OMAN, LITHUANIA, PUERTO RICO, MARTINIQUE, PORTUGAL, CAPE VERDE, HUNGARY, GUAM, SLOVENIA, SAMOA, GERMANY, BHUTAN, AUSTRALIA, ST. LUCIA, ST. VINCENT AND THE GRENADINES, MAURITIUS, BELGIUM, NAMIBIA, TAIWAN, CHINA, URUGUAY, UNITED ARAB EMIRATES, HONG KONG SAR, CHINA, SLOVAK REPUBLIC, TONGA, JAPAN, SEYCHELLES, AMERICAN SAMOA, ANTIGUA AND BARBUDA, VIRGIN ISLANDS (U.S.), MALTA, BERMUDA, IRELAND, MONACO, NAURU, PALAU, SAN MARINO, BOTSWANA, CANADA, POLAND, ST. KITTS AND NEVIS, DENMARK, CZECH REPUBLIC, BAHAMAS, THE, BRUNEI DARUSSALAM, NETHERLANDS, VANUATU, AUSTRIA, SINGAPORE, QATAR, ICELAND, DOMINICA, MICRONESIA, FED. STS., SWEDEN, SWITZERLAND, BARBADOS, NETHERLANDS ANTILLES (FORMER), ARUBA, LUXEMBOURG, ANDORRA, KIRIBATI, TUVALU, NORWAY, NEW ZEALAND, FINLAND, CAYMAN ISLANDS, JERSEY, CHANNEL ISLANDS, LIECHTENSTEIN, ANGUILLA, GREENLAND

Government Effectiveness 188 out of 212

IRELAND, JERSEY, CHANNEL ISLANDS, BARBADOS, ANDORRA, ANGUILLA, CYPRUS, GERMANY, UNITED KINGDOM, ICELAND, AUSTRIA, BELGIUM, HONG KONG SAR, CHINA, LUXEMBOURG, AUSTRALIA, LIECHTENSTEIN, NORWAY, NETHERLANDS, CANADA, SWITZERLAND, NEW ZEALAND, SWEDEN, SINGAPORE, DENMARK, FINLAND

Regulatory Quality 195 out of 212

LIECHTENSTEIN, GERMANY, CHILE, ANDORRA, UNITED KINGDOM, SWITZERLAND, IRELAND, CANADA, FINLAND, AUSTRALIA, SINGAPORE, SWEDEN, NETHERLANDS, LUXEMBOURG, HONG KONG SAR, CHINA, NEW ZEALAND, DENMARK

Control of Corruption 182 out of 212

URUGUAY, ANTIGUA AND BARBUDA, BERMUDA, ANGUILLA, ANDORRA, CAYMAN ISLANDS, BAHAMAS, THE, AUSTRIA, IRELAND, JAPAN, FRANCE, UNITED KINGDOM, CHILE, BELGIUM, GERMANY, BARBADOS, LIECHTENSTEIN, HONG KONG SAR, CHINA, ICELAND, CANADA, SWITZERLAND, SINGAPORE, AUSTRALIA, NORWAY, NETHERLANDS, LUXEMBOURG, FINLAND, SWEDEN, NEW ZEALAND, DENMARK

Voice and Accountability 184 out of 214

ST. VINCENT AND THE GRENADINES, MARSHALL ISLANDS, SAN MARINO, ST. KITTS AND NEVIS, PALAU, FRANCE, BARBADOS, ST. LUCIA, JERSEY, CHANNEL ISLANDS, GREENLAND, ARUBA, RÉUNION, UNITED KINGDOM, GERMANY, IRELAND, ANDORRA, BELGIUM, AUSTRIA, CANADA, AUSTRALIA, ICELAND, NETHERLANDS, NEW ZEALAND, FINLAND, LIECHTENSTEIN, LUXEMBOURG, SWEDEN, DENMARK, NORWAY, SWITZERLAND

A few of my comments:

There are multiple reasons for corruption and it is way too simplistic to blame it on ‘regulation’ (in regard to more or less) alone. It may be fair to suggest that ‘bad’ or ineffective regulation could be one factor in increasing corruption but the data does not independently verify this to be the only factor. We should look at how the World Bank defines corruption:

Control of corruption captures perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests.

Corporatism = Corruption

Their definition is probably the definition of corporatism (see my related essay on corporatism). By definition, corporatism is corruption. In this case, corporatism and corruption is effectively a tautology. However, the definition does not prove the case, the data does.

Corporatism does not necessarily lead to corruption if you believe the Supreme Court of the United States

This data cannot be contrived to make the claim that regulatory quality alone leads to corruption (or its effective tautological definition in this case – corporatism). It is possible to think that “corporations are people too” and they may actually have the best interest of their communities in addition to the best interest of their bottom line (as the ‘clean coal’ campaign would have us believe¹).

Regulation as defined by ‘restricting effectiveness’ does not have to be done by the government and many times is not done by the government

If the free market is to decide there will be large corporations and small businesses. Large corporations can effectively ‘regulate’ the market with or without the government as I have made the case elsewhere. The contention of the Austrians is that this type of private ‘free market regulation’ can be overcome by competition. This may or may not be the case. I would think some of the other benchmarks cited here like “Voice and Accountability” might have an impact on this but this is not demonstrated by the data. Additionally, very large multi-national corporations can effectively evade many regulations and taxes of any particular government by locating their operations in more ‘regulatory or tax friendly’ countries and thus create competitive advantages that would be difficult to overcome in the ‘real’ world.

What this data does not show

This data does not show how regulation may actually reduce corruption (i.e., vis-à-vis conflict of interest banking regulations, bribery, loan sharking and theft laws, abolishing slavery, outlawing child labor, ruining the environment, aircraft maintenance, lead based toys, etc.). If, by definition, public regulation is corrosive and the private market cannot be corrosive to market economies, we may have Austrian ideological purity but restraint of corruption is another issue altogether.

With these points in mind, I personally would conclude that corporatism may lead to corruption but that is not substantiated by this data, by the Supreme Court, by the Republican Party, by public policy alone (without ‘free market’, self-regulation also restricting effectiveness). It is also not apparent by this data that corruption may actually be restricted by public policy.

There are countries² with much smaller and larger governments that are doing better than the United States regarding the benchmarks relative to their size and government spending versus GDP. If you will notice on the “Control of corruption” benchmark there are countries doing better than us like the “government controlled” health care countries of Canada, United Kingdom and France, the “Euro-Socialists”, and even the king of government bureaucracies, communist China (Hong Kong). I believe China is doing better on all the benchmarks except “Voice and Accountability” than the United States in addition to many of the “Euro-Socialists” and the government controlled health care countries. In my opinion, this disproves Jeff’s hypothesis that corruption (as defined by corporatism) is caused by the size of government vis-à-vis public policy regulation.

What we should all learn:

If an ideology makes short shrift of data in order to validate itself, the ideology functions like a religious dogma not like a falsifiable scientific claim. To the degree that we help each other become more rational (I include myself most of all) is to the same degree that we will have a real and positive effect on our community and help each other become better critical thinkers.

——————————————————————-

What is “governance” according to the World Bank?³

Governance consists of the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them.

World Bank Data Graphed

Political Stability – Political stability and absence of violence measures perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including politically-motivated violence and terrorism.

Government Effectiveness – Government effectiveness captures perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies.

Regulatory Quality – Regulatory quality captures perceptions of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development.

Rule of Law – Rule of law captures perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence.

Control of Corruption – Control of corruption captures perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests.

Voice and Accountability – Voice and accountability captures perceptions of the extent to which a country’s citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media.

_________________

¹ From the Republican Party Platform adopted in the 2012 convention (Link pdf):

 

A Failed National Security Strategy

The current Administration’s most recent National

Security Strategy reflects the extreme elements

in its liberal domestic coalition.

…

Finally, the strategy subordinates our national

security interests to environmental, energy, and

international health issues, and elevates “climate

change” to the level of a “severe threat” equivalent to

foreign aggression. The word “climate,” in fact, appears

in the current President’s strategy more often

than Al Qaeda, nuclear proliferation, radical Islam,

or weapons of mass destruction.

One word – SANDY

² This is a list of all the countries used to compile the data (Link):

AFGHANISTAN , ALBANIA , ALGERIA , AMERICAN SAMOA , ANDORRA , ANGOLA , ANGUILLA , ANTIGUA AND BARBUDA , ARGENTINA , ARMENIA , ARUBA , AUSTRALIA , AUSTRIA , AZERBAIJAN , BAHAMAS, THE , BAHRAIN , BANGLADESH , BARBADOS , BELARUS , BELGIUM , BELIZE , BENIN , BERMUDA , BHUTAN , BOLIVIA , BOSNIA AND HERZEGOVINA , BOTSWANA , BRAZIL , BRUNEI DARUSSALAM , BULGARIA , BURKINA FASO , BURUNDI , CAMBODIA , CAMEROON , CANADA , CAPE VERDE , CAYMAN ISLANDS , CENTRAL AFRICAN REPUBLIC , CHAD , CHILE , CHINA , COLOMBIA , COMOROS , CONGO, DEM. REP. , CONGO, REP. , COOK ISLANDS , COSTA RICA , CÔTE D’IVOIRE , CROATIA , CUBA , CYPRUS , CZECH REPUBLIC , DENMARK , DJIBOUTI , DOMINICA , DOMINICAN REPUBLIC , ECUADOR , EGYPT, ARAB REP. , EL SALVADOR , EQUATORIAL GUINEA , ERITREA , ESTONIA , ETHIOPIA , FIJI , FINLAND , FRANCE , FRENCH GUIANA , GABON , GAMBIA, THE , GEORGIA , GERMANY , GHANA , GREECE , GREENLAND , GRENADA , GUAM , GUATEMALA , GUINEA , GUINEA-BISSAU , GUYANA , HAITI , HONDURAS , HONG KONG SAR, CHINA , HUNGARY , ICELAND , INDIA , INDONESIA , IRAN, ISLAMIC REP. , IRAQ , IRELAND , ISRAEL , ITALY , JAMAICA , JAPAN , JERSEY, CHANNEL ISLANDS , JORDAN , KAZAKHSTAN , KENYA , KIRIBATI , KOREA, DEM. REP. , KOREA, REP. , KOSOVO , KUWAIT , KYRGYZ REPUBLIC , LAO PDR , LATVIA , LEBANON , LESOTHO , LIBERIA , LIBYA , LIECHTENSTEIN , LITHUANIA , LUXEMBOURG , MACAO SAR, CHINA , MACEDONIA, FYR , MADAGASCAR , MALAWI , MALAYSIA , MALDIVES , MALI , MALTA , MARSHALL ISLANDS , MARTINIQUE , MAURITANIA , MAURITIUS , MEXICO , MICRONESIA, FED. STS. , MOLDOVA , MONACO , MONGOLIA , MONTENEGRO , MOROCCO , MOZAMBIQUE , MYANMAR , NAMIBIA , NAURU , NEPAL , NETHERLANDS , NETHERLANDS ANTILLES (FORMER) , NEW CALEDONIA , NEW ZEALAND , NICARAGUA , NIGER , NIGERIA , NIUE , NORWAY , OMAN , PAKISTAN , PALAU , PANAMA , PAPUA NEW GUINEA , PARAGUAY , PERU , PHILIPPINES , POLAND , PORTUGAL , PUERTO RICO , QATAR , RÉUNION , ROMANIA , RUSSIAN FEDERATION , RWANDA , SAMOA , SAN MARINO , SÃO TOMÉ AND PRINCIPE , SAUDI ARABIA , SENEGAL , SERBIA , SEYCHELLES , SIERRA LEONE , SINGAPORE , SLOVAK REPUBLIC , SLOVENIA , SOLOMON ISLANDS , SOMALIA , SOUTH AFRICA , SOUTH SUDAN , SPAIN , SRI LANKA , ST. KITTS AND NEVIS , ST. LUCIA , ST. VINCENT AND THE GRENADINES , SUDAN , SURINAME , SWAZILAND , SWEDEN , SWITZERLAND , SYRIAN ARAB REPUBLIC , TAIWAN, CHINA , TAJIKISTAN , TANZANIA , THAILAND , TIMOR-LESTE , TOGO , TONGA , TRINIDAD AND TOBAGO , TUNISIA , TURKEY , TURKMENISTAN , TUVALU , UGANDA , UKRAINE , UNITED ARAB EMIRATES , UNITED KINGDOM , UNITED STATES , URUGUAY , UZBEKISTAN , VANUATU, VENEZUELA, RB , VIETNAM , VIRGIN ISLANDS (U.S.) , WEST BANK AND GAZA , YEMEN, REP. , ZAMBIA , ZIMBABWE

³ See Link

Here is a comment from this article which I wrote.

Here is my response…

 

Juan,

Thank you very much for your comment. I always love it when I see rationality! I am sincere in wanting to understand this issue aside from the tongue-in-check way this was written.

I assume you meant “5 trillion over 10 years” (hate it when I can’t edit).

I was going off the Tax Policy Center study which made the following findings…

 

“Relative to a current policy baseline, the reduction in liability would be about $480 billion in calendar year 2015.” http://www.taxpolicycenter.org/taxtopics/Romney-plan.cfm

 

The Tax Policy Center is a joint venture of the Urban Institute and the Brookings Institute so I assume this is the study you are referring to. I find the Tax Policy Center to really be non-partisan since Republicans regularly refer to it and also suggest that it is non-partisan. However, I know the Romney campaign did not agree with their numbers on this. 480 billion dollars is 4.8 trillion in 10 years which is where the rounded 5 trillion dollar number came from.

If this is supposed to be from the report…

 

” The reduction in tax revenue from a 20% cut in tax rates is projected to be around $360 billion per year in 2015 or $3.6 trillion over 10 years. ”

 

then I think it may be wrong. If it is from another report, please let me know where to find it.

In addition, when you write…

 

” The Brookings report comes up with a much higher figure by counting the upcoming tax increases contained in Obamacare’s new surtaxes on investment and wage income on high-income earners.

The assumption is that Romney would repeal Obamacare and these tax increases will not go into affect.

It does not make sense since to include the repeal of a tax increase as a tax cut since the expenses associated with Obamacare will also not go into effect if it is repealed.

Also the only difference between Romney and Obama regarding the Bush tax cuts is Romney wants them to be permanent for everyone and Obama wants to repeal them for income > 250k. The loss in revenue from repealing the Bush tax rates for income >$250k is $89 billion.”

 

I see the Affordable Care Act (ACA) and letting the Bush tax cuts expire for the wealthy (>$250,000) as two separate things. Even if the ACA is not repealed, the Bush tax cuts for those making over 250K could go a few percentage points up to the Clinton administration rates if the Bush tax cuts are allowed to expire for them.

The 5.4 trillion dollars that I quoted is if ALL the Bush tax cuts expire according to the CBO. The 89 billion dollars you are using is only for those over 250K/year. It may be right but I would like to know where you got that number.

From the 2012 CBO report, Table I-6, cell P59, you will see the 10 year projection of 5.422 billion dollars of revenue that the Federal Government would have had if we let ALL the Bush tax cuts expire and go back to the way it was during the Clinton years. Here is the alternative fiscal scenario…

” Notes: The alternative fiscal scenario incorporates the assumptions that all expiring tax provisions (other than the payroll tax reduction), including those that expired at the end of December 2011, are instead extended; that the alternative minimum tax is indexed for inflation after 2011 (starting at the 2011 exemption amount); that Medicare’s payment rates for physicians’ services are held constant at their current level; and that the automatic enforcement procedures specified by the Budget Control Act of 2011 do not take effect. Outlays under the alternative fiscal scenario also include the incremental interest costs associated with projected additional borrowing.” http://cbo.gov/publication/43543

As you can see there are some other conditions on this besides letting the Bush tax cuts expire. These additional items are not current laws but ones that have either received Republican only support in congress or mixed Democrat and Republican support. Namely, there is:

Indexing the alternative minimum tax for inflation which reduces revenue for the Fed

Medicare payment to physicians does not increase (as many Republicans and Dems have proposed that we do). This is not a part of ACA. It is a separate bill (I can give you the house bill number if you need it – not sure if it ever got to the Senate). Paying Medicare physicians more would reduce revenue but arguments are made that without it, the elderly are going to have a harder time finding physicians that will take Medicare – not sure about that one)

We do not hit the fiscal cliff. If we do hit it, we sill severely cut spending for the Fed which will help the deficit but the experts I have read tell me that it will put the economy in a tail spin and a severe recession will take revenue away from the Fed (as it has with the Bush recession).

The interest payment s from the overall decreased revenues will hit the deficit and the national debt to the tune of 5.422 trillion dollars and accordingly, the interest we pay on the debt will go up.

By far, the most hit on the revenue side is from extending the Bush tax cuts for everyone. The Republicans and Romney have repeatedly stated that they will do this. Therefore, the 5.4 trillion dollars that I quoted for extending the Bush tax cuts is accurate.

Please note that the largest increase to the debt came from ALL the Bush tax cuts (https://www.mixermuse.com/blog/2012/07/17/myths-exposed-president-obama-is-responsible-for-historic-u-s-federal-debt-and-spending-levels-2/) estimated at the Center on Budget and Policy Priorities at 1.812 trillion dollars during the Bush administration. Since the rationale of the Bush tax cuts were to boost the economy and the economy went into the deepest recession since the Great Depression, I think the underlying ideology needs to be questioned (i.e., that tax cuts stimulate growth). The Bush tax cuts were bad economic policy then and still are – they did not grow the economy. In general, I think the Republican ideology espoused by Bush and now by Romney is BAD economics, failed the recent historical test, and boggles my mind how regular folk think it might work if we try it again…change can be for the worse not necessarily the better…it will not hurt me if the economy tanks but the very people that want to try it again may be bit by the overused axiom “be careful what you ask for because you may get it”.

When you state this…

” The total cost of all tax exemptions, credits, etc. is around $1.1 trillion in 2011. This is also from the White House Fiscal Year 2013 budget proposal.”

are you suggesting that all exemptions from 2011 are included in the White House 2013 budget? Here is the budget – http://www.whitehouse.gov/omb/budget/Overview/ I did not find any 2011 numbers in it. I also checked many of the 40 or 50 spreadsheets for the budget and found no detail in it about “all tax exemptions” amounting to $1.1 trillion dollars. Please let know precisely where I can get that information in the 2013 budget.

You also state that…

” Some economists have projected that the increased economic growth from a 20% tax cut could increase tax revenue from $25 to $58 billion per year.”

I would like to see links to these specific economists. What I do know is that during the Clinton years, before the Bush tax cuts, the economy was growing like crazy and after the Bush tax cuts the economy shrank like crazy (the recession that started in 2008 before Jan. 20, 2009 when President Obama took office). This would indicate that there is more to growing the economy that just cutting taxes. I have looked at various economist’s historical records that also indicate there is no correlation between tax cuts and economic growth.

The total number for the top twelve deductions that I listed come from the Tax Policy Center (http://www.taxpolicycenter.org/briefing-book/background/expenditures/largest.cfm) which, as I have stated before, is regularly used by both Republicans and Democrats so I am hanging with that unless you can give a specific source.

In conclusion, I have found over the years that political rhetoric needs to be constantly fact checked with non-partisan, solid sources. The rule seems to be that ‘facts’ float around that most folks never get into the weeds over…and generally the ‘facts’ on both sides of the isle are wrong.

I really am not so committed to an ideology that facts will not make a difference…with real, solid facts I will and have taken stands against Democrats and Republicans.

Thanks for caring and responding…

Mark

As a small business owner I have been trying to think through the rationale the Republican Party uses to sincerely make the claim that President Obama is raising taxes on small business. I understand the idea that limited liability corporations and S-Corps ‘net’ gain is taxable as personal income to the owner. Therefore, if a small business owner makes over $250,000/year in personal income and the Bush tax cuts for the wealthy are allowed to expire, paying the same taxes they did in the Clinton years, they will be paying a slightly higher rate in taxes.

With that in mind, let’s clarify another point. Whether you are a big corporation or a small business the general idea of taxes is that your net gain is what is taxed. For larger corporations, their taxable gains are ‘net’ and taxed with the corporate tax rate. If they expand the corporation or buy new companies, that is a tax write off for them. The taxes they pay are calculated by subtracting their profits from their losses to come up with the ‘net’ gain that is taxed with the corporate rate. This is how a company like General Electric can get away with paying no income taxes. No matter what the corporate tax rate is, if you effectively pay no taxes because you ‘create jobs’, zero is still zero. The difference is that the tax code gives you incentive to create jobs as opposed to letting the cash sit in a corporate account somewhere. The executives and owners of the company (even if they are merely investors) are paid as personal salary or capital gains (capital gains is still ‘net’ – after market losses). If they make over $250,000/year, letting the Bush tax cuts expire will give them more money to decide what to do with. This decision will effectively be the same calculation as discussed below for the small business owner.

If you are a small company and the owner makes 5 million dollars a year in income, the owner can decide to pocket that money and pay more taxes, in this case on the 4.75 million dollars if the Bush tax cuts expire, over $250,000/year. However, if the owner decides to put 4 million dollars into ‘creating new jobs’ he will either start a new business or add more positions to the business he already owns. The expense of creating a new business, employees salaries, capital equipment is all a loss (or deductible) on a profit and loss statement. Therefore, the owners ‘net’ gain is the offset of gains and losses. The effect of this is to reduce the ‘net gain’ of the small business owner and therefore to reduce the amount of taxes the business owner has to pay over $250,000/year. If the small business owner is a “job creator” then this necessarily implies that the creation of jobs is a tax write off for him or her. Effectively, this is the same as the “zero is still zero” concept for large corporations. If the small business owner decides to pocket that money and invest it, even if he or she loses money in the market on investments, that also can reduce the ‘net’ capital gains that are taxed. The only way that more taxes are incurred by the owner in letting the Bush tax cuts expire on the wealthy is if the owner takes the whole gain as ‘net’ gain…basically puts the money into savings or consumables. Therefore, if the small business owner is truly creating jobs then they save on the taxes they would otherwise have paid by simply pocketing the money. For wealthy folks, this calculation is an incentive to reinvest their money especially since they probably already have all the cash (savings and retirement), houses and cars (consumables) they need for the rest of their lives. Therefore, the incentive of reducing their taxes by not letting the Bush tax cuts expire is not to reinvest but to stuff more cash into their already bloated mattress (or to get to non-taxable foreign accounts).

Here is the rub…I am assuming that the smart, business Republicans already understand this concept since, as rich folks, they make these calculations all the time. I also know that all the money, time and expense they put into getting folks that are not needing to make ‘the calculation’ and do not understand the tax incentives for wealthy folks to create jobs is an expense for the wealthy. Therefore, if you take the money they put into getting their ‘wealth-friendly’ politicians in office as an expense versus the small amount of extra money that they would have to pay if the Bush tax cuts expire, the incentive (or net gain after the ‘political’ expenses) must be proportionally MUCH larger than simply biting the bullet and paying the extra taxes on their ‘personal’ (mattress stuffing money) income. First, this gives you an idea of how much opulence and luxury they really enjoy. Second, the ‘political’ expense is purely for manipulating those Republicans that are not as ‘calculating’ as themselves. Third, the old stereotype of rich pig-ish-ness (or better priggishness) is actually more true than I thought it was.

 

 

Here’s a couple photos of me and the kid working out in the gym. He is a bit of a lightweight but he thinks he is Atlas…(shrug)