Mrniji From , joined Dec 1969, posts, RR: Posted (5 years 1 month 1 week 6 days 9 hours ago) and read 1929 times:
Dear All,
I hope that we can start an interesting debate (without this thread to be 'grounded' in polls - and I hope it won't be declared as double thread, since I believe the topic is isolated in a theory discussion out of the A v B issue) about the topic in the subject line.
In particular, I am interested in different views on Economic Liberalism vs. Regulation (or uncompetitive environment) in the Airline industry. It is a very diffiicult topic in my eyes. What are the pro's and contra's, and how do you assess the question?
As introduction, I paste one of my statements in another context (question whether QF should order ULR a/c, which went off-topic to the subsity issue) from the following thread (below):
Please see the context of the statement and don't shun me as communist or so in the first instance (which I am not). I would like to see my weakness in my argument, some affirmative points et al, and your views.. OK, thanks, and let's be civilized!
_____________________
We all know that there is a big recession in the world at the present. We all know that many people are unemployed. We all want to act upon that to combat unemployment and hence poverty in all countries (i.e. also the so-called industrialized countries). I ask myself very often whether our policy framework is extremely wrong.
I prefer a government to give subsidies and preserve jobs than to go in accordance with the free market forces and loose jobs in the hope for more efficiency. Hava a look what happened in the US.. so many airlines almost bancrupt, people losing their jobs - and managers always arguing labor should do with less wages, but at the same tome they earn the heck.... But on the other side cases in front of the courts in order to combat competition-disorting subsidies. All on the cost of labor. There are some many cases in front of the European Court and WTO. I agree, competition has brought down prices. But in the long term, people loose their jobs or work under unfavorable conditions. Hence, social costs rise, for what everyone has to pay.
Other example: look at the EU case against Volkswagen Subsidies.. they need them, also in order to preserve jobs.. and it is all on the cost of the employed people
The US may be right that the subsidies are illegal in accordance to WTO law. But that only shows me that the WTO law might be inappropriate and has to be challenged in order to meet the interests of many people - the victims of the system.. - We should never leave conditions unchallenged but always be ready to modify the present conditions in order not to stagnate on the status quo... Only reforms make us vital (and competitive!), as Ex-Chancellor of GErmany Willy Brandt said. yes, my fellow people, call me a communist now, as you do with everyone who challenges aspects of the system.. but if you wanna convince me, bring up arguments - and I agree there are very good arguments against my opinion. I think it is necessary that all of us analyze the present conditions and see whether we could change the rules in the interest of the vast majority.. - I have more than sympathy for the FAs and staff of UA, DL, US et al, who are in danger of loosing their jobs and hope that there will be an institutional arrangement in order to preserve their jobs - should it be subsidies by the US government, I am more than happy to accept this and will even support it (one of teh reasons I will vote for Kerry in the hope that he will affect changes - sorry for going political) - and same for the aircraft manufacturing industry: I am happy to accept subsidies for boeing, too, if their business is improved and the engineers et al have a safe working environment - I know this is a general position of mine
Please do not understand me wrong. But I prefer targeted subsidies and the preservation of jobs, also in the airline industry. The competition-lead framework will lead to a decline of many standards. I am ready to be slaughtered now..
Sorry for my alternative opinion, but I see many disadvantes in the framework and prefer cooperation and alliances to competition, which in the end decreases social costs and hikes world standard. Agreed, simplified analysis, but the main argument should be comprehendable..
N79969 From , joined Dec 1969, posts, RR: Reply 1, posted (5 years 1 month 1 week 6 days 7 hours ago) and read 1879 times:
Mrinj,
No need to apologize for what you believe is an unpopular opinion. I want to make a clarification of a couple of things you raised. The EU case against Germany against Volkswagen does not involve subsidies. Rather it is about shareholder's rights and nationality. The German law allegedly violates an EU law regarding the free movement of capital.
Secondly I would not focus too much on the US airline industry when weighing laissez faire versus regulated industries. The volatility there is not representative of most other US industries. It is unusually bad.
Europe has done reasonably well with their own airline deregulation considering the history of state ownership there. Sabena and Swissair are gone but a lot of new airlines have popped up. I do not if it is even fair to say that the European aviation regulatory system is that much different from that of the US.
If you look at long term unemployment rates and job creation rates, I think the US has outperformed Europe by most measures. The price that Europe pays for their job protections is sluggish job creation.
Leskova From Germany, joined Oct 2003, 6075 posts, RR: 82 Reply 2, posted (5 years 1 month 1 week 6 days 7 hours ago) and read 1854 times:
N79969, I am reasonable sure that Mrniji isn't specifically targetting the current case of Brussels against Germany/Lower Saxony/Volkswagen - there have been a number of cases in the past, the last one regarding subsidies that VW received for their production facility in, I think, the area of Leipzig or Dresden: the subsidies were calculated based on a new factory being built, while it was later judged to have "only" been the reworking of an existing facility... while technically probably correct, I'd say the only things that were reworked were the walls of which the facility consisted: practically everything else was new (machines etc.).
The result was that a portion, not sure how much, of the received subsidies had to be repaid.
That's how I remember the case - but my memory on that is a bit sketchy, so I'm not sure if I'm right on the details.
As for subsidies for airlines, or - more general - the aviation sector, I've always seen them as somewhat of a mixed blessing: I fully agree with Mrniji that there are instances where subsidising a company can be preferrable to letting it go down the drain, because - often enough - the cost of letting a company fail will be quite high as well, with unemployment benefits being just one small part of it: the damage that this usually does to the economy of the region where a company was based should never be underestimated - including the snowball effect that a company's failure can create through suppliers of the failed company getting into trouble and, perhaps, going out of business as well.
The flipside of the coin is, quite obviously, that subsidies should - in my opinion - never be used to prolong the death of a company that has no realistic perspective of ever being profitable again.
Whenever help is required, I do think that due diligence must be applied in finding out if money invested by the state will give the company a reasonable chance of survival - if yes, then I see it as a good and wise investment - if not, then it is essentially throwing money away.
There is, of course, the matter of giving subsidies to further the market position of a company - and that's a point where I get the biggest pains from. I do not see a problem in governments giving out loans, but especially in the case of giving them to further the market position of the recieving company, these must be bound to specific conditions - not the least of which must, in my view, be the repayment of the loan regardless of what the loan was used for, as well as regardless of the program is profitable or not.
I don't mind governments giving out these loans at below market rates, seeing that they profit through jobs being secured, as well as the other obvious advantages for a country of having a strong company within it's borders.
To finish things up, I agree with you that Europe pays a high price - unemployment - for the job security that is mandated here... not sure how the situation is in other countries in Europe, but it's a huge pain here in Germany: obviously, giving up all of it to have a complete "hire-and-fire" situation is not a solution, because I see this as creating far more problems than it could ever solve - but giving up on some things that we have grown used to should be a relatively small price to pay for increasing the number of jobs being created here. As strange as it sounds for most people here, giving up some of your job security will, in the end, probably increase the security of your job.
Pelican From Germany, joined Apr 2004, 2451 posts, RR: 9 Reply 3, posted (5 years 1 month 1 week 6 days 6 hours ago) and read 1841 times:
The price that Europe pays for their job protections is sluggish job creation.
This is a common misconception. Countries like UK, Denmark, Sweden are part of the EU but they don't have high unemployment rates unlike Germany, Italy...
Mrniji,
I think, although I've no figures, nowadays there are more people working in the aviation business than before the deregulation. Companies like Jetblue, Frontier, Ryanair and Easyjet.... have created thousands of new jobs. And people like me (a poor student that I am ) are able to afford more than just one or two flights per year. The disadvantages are probably not so favorable working conditions. This should be okay as long as there are certain legal limits to exploitation.
The big question of subsidies is where does the money come from? From the taxpayer of course. Undoubtful there is a correlation between high taxes and high unemployment rates. Therefore I could argue the prize of subsidized jobs is the loss of not subsidized jobs.
Don't get me wrong on this, the free market isn't a holy cow to me. But I think that subsidies should remain an exception, because they can do much harm.
N79969 From , joined Dec 1969, posts, RR: Reply 4, posted (5 years 1 month 1 week 6 days 6 hours ago) and read 1825 times:
Mrinj and Frank,
Ok I was not aware of subsidies paid to VW. That is actually the first I have heard of them. I just saw the latest news. My mistake.
I agree that there should be some mechanism for allowing otherwise viable companies from failing completely because of one economic downturn and one misstep. I think the US has met that need with bankruptcy laws. The purpose of bk laws is to allow otherwise viable firms survive a short term cash crunch. Although I think there is a fair argument that US bk laws are being abused by airlines to prolong a zombie existence.
Since subsidies are paid by governments they inevitably become driven by political considerations rather than economic sense. I think that as a rule (with very, very few exceptions) subsidies are unworkable public policy for democratically ruled societies. Virtually any politician would love to claim credit for bringing subsidies but none ever wants to pull the plug regardless of how bad the subsidies are.
Planemaker From Tuvalu, joined Aug 2003, 3812 posts, RR: 22 Reply 5, posted (5 years 1 month 1 week 6 days 5 hours ago) and read 1773 times:
A complex topic at the macro and micro level - but a good one!
I believe that subsidies are, for the most part, a misallocation of resources that have a very negative effect on economic growth.
Keeping failing carriers afloat (Alitalia for instance) provides only short term relief for their employees. Meanwhile, the 100's of millions of Euros that have been poured into failed/failing airlines have been flushed down the toilet - wasted funds that could have gone to other pressing social needs.
InnocuousFox From United States, joined Dec 2003, 2578 posts, RR: 25 Reply 6, posted (5 years 1 month 1 week 6 days 4 hours ago) and read 1752 times:
Remember, if you want something from the government, you may as well ask the permission of the working man next to you. Government can't give anything without taking from that guy in the first place.
Dave Mark - Intrinsic Algorithm - Reducing the world to mathematical equations!
Leskova From Germany, joined Oct 2003, 6075 posts, RR: 82 Reply 7, posted (5 years 1 month 1 week 6 days 3 hours ago) and read 1715 times:
InnocuousFox, you're right - but the problem is that the "working man next to you" might, in the opposite situation, suffer from the economic drain if the company in question fails due to not getting subsidies to help it out of a tight spot.
We've got some possible examples here in Germany at the moment, with General Motors - regarding it's European subsidiaries Opel and Saab - considering "downsizing" (nice word for firing people) or even closing plants in Rüsselsheim (the original Opel plant) and/or Bochum: both towns would lose quite a bit of revenue if either a reduction or a closure were to happen, which - in turn - will hurt other companies there, the town itself will be paid less taxes and will, in turn, have to either reduce it's services even further or will have to raise taxes...
It comes down to deciding which one is the "better" choice: giving the company relief in the form of cash or in the form of lowering taxes for them - either way, helping them - and having to get the money from somewhere else - which at least opens up the chance that the plant (and it's employees) will at some point fully contribute to the economy again, or - as the alternative - let it all go down the drain, hope that other companies come to your town and provide jobs for at least some of the newly-unemployed.
Planemaker From Tuvalu, joined Aug 2003, 3812 posts, RR: 22 Reply 8, posted (5 years 1 month 1 week 6 days 3 hours ago) and read 1689 times:
Frank, with the expansion of the EU, there are already dozens of situations across western Europe where production is moving east to the new members.
As you know, politicians in France and Germany are already crying for a new tax to be imposed on companies that move production in an attempt to inhibit the loss of local jobs. But that will not stop the loss of jobs as eventually companies will start up production in the east anyhow (or their competitors) and the plants in the west will eventually be shut down for being "uneconomic."
I believe that in todays increasingly globalized economy that it is very difficult for governments to choose winners or losers, be they companies or industries. Eventually there will be a restructuring of the subsidized companies and the costs will be that much higher to the economy.
Aa757first From United States, joined Aug 2003, 3038 posts, RR: 11 Reply 9, posted (5 years 1 month 1 week 6 days 2 hours ago) and read 1674 times:
I don't see any advantages to regulation. I think I remember seeing a Pan Am ad on eBay for European services. Only $499 in 1959 (the year was somewhere around there) dollars. That's $3,000 in today's dollars. That's not even wealthy people anymore. That’s super rich people.
In the current market, consumers have a lot of choice and personally, I don't think that employees at most airlines are worrying. Sure, DL, UA and US employees are fretting at the moment, but FL, WN, B6, F9, AA, NW and CO employees are just fine.
I really do think that gate agents and ticket agents are very well paid. At AirTran, CSAs are paid $16.75 at the highest seniority ranking with only a high school degree. That's about $30,000 a year with only technical training. I'm not trying to offend or flame anyone, but where would most CSRs be working if they lost their airline jobs? Macy's?
I'm seriously not trying to offend anyone. I'm not trying to offend those that prefer regulation, just expressing my views.
TwinOtter From United States, joined Oct 2004, 97 posts, RR: 0 Reply 11, posted (5 years 1 month 1 week 6 days 1 hour ago) and read 1638 times:
Aa757first,
I agree with the substance of your post: de-reg HAS made airline travel affordable to the masses. But there is one disadvantage: small, economically insignificant markets are not served or are served monopolistically -- expensively.
My opinion is advantages of deregulation outway the dis, but I'm also sympathetic to the guy who lives in Albany.
Does society/government have an obligation to insure there is air service to all population centers? Do the benefits (if any) of government regulation outweigh the obvious inefficiencies?
Mrniji From , joined Dec 1969, posts, RR: Reply 13, posted (5 years 1 month 1 week 6 days ago) and read 1622 times:
People, due to your really valuable posts we have reached an interesting point. Thank you. Let me just recapture some of the main arguments, pro and contra:
Secondly I would not focus too much on the US airline industry when weighing laissez faire versus regulated industries. The volatility there is not representative of most other US industries. It is unusually bad.
N79969, I agree. We have interesting discussions going on world-wide, and interesting examples. The European deregulation has changed the lansscape significantly. As you say, SN and SR have suffered, but carreers like FR, Eazy, Germanwings, Germania and many others have popped up and/or increased their share
If you look at long term unemployment rates and job creation rates, I think the US has outperformed Europe by most measures. The price that Europe pays for their job protections is sluggish job creation.
I see it differently. In Europe, we have many different labor markets as opposed to one European market. France and Germany for instance are rather classified as regressive (see f.i. Robert Solow), while Britain stands as flexible. On the other side, Britain has suffered the biggest negative change in wage inequality. Moreover, I am sceptical whether 'the living on credits' in Britain can sustain in the long term. OK, consumption often results in new jobs, but buying without really possessing can be very unfavorable at some point of time. On the other side, I agree that something has to happen in Germany. The so-called "Reformstau" ('reform-traffic-jam' ) is a very dangerous situation.
The flipside of the coin is, quite obviously, that subsidies should - in my opinion - never be used to prolong the death of a company that has no realistic perspective of ever being profitable again.
Frank, I think almost everyone would agree on this, me included
Since subsidies are paid by governments they inevitably become driven by political considerations rather than economic sense
N79969, This is a common problem. Keeping in view the infant-industry argument, it is very difficult to identify future profitable sectors (here companies). This mechanism needs to be optimized, I agree
Companies like Jetblue, Frontier, Ryanair and Easyjet.... have created thousands of new jobs.
I agree, Pelican. But with which costs? As you say:
The disadvantages are probably not so favorable working conditions. This should be okay as long as there are certain legal limits to exploitation.
I think youu got the both sides of the coin, which need to be balanced. Labor standards can affect a comparative disadvantage. So, probably we need a global system in the interest of everyone in the end so that there is no bargaining for lower labor-standards by companies
Undoubtful there is a correlation between high taxes and high unemployment rates. Therefore I could argue the prize of subsidized jobs is the loss of not subsidized jobs.
You mean positive correlatiion, I assume? I see it a little different. One needs to see the correlation on the time-line. In the beginning, when an industry is new, it might be a negative correlation. After some time, you may be right that the correlation might turn positive. This is the simple version of the infant-industry argument. But I think there can be many exeptions in these cases, too
And people like me (a poor student that I am ) are able to afford more than just one or two flights per year.
Definitely a core argument from the consumer-point of view.
I believe that subsidies are, for the most part, a misallocation of resources that have a very negative effect on economic growth.
Here I would ask the question whether a good management could be better than the free market forces, especially in view of the interest of the people?
By the way, This is one of the main problems I wanted to hint upon. Economic growth might be great. But even free-trade guru Baghwati says that if we grow fast today, we might grow less tomorrow. Hence, the question is whether a maximation of economic growth is favorable or long-term, sustainable economic growth..! In the interest of many people and other aspects, I argue that the latter is the best approach, because society can be better considered. Hence, a good argument for subsidies. We should not forget that subsidies could prevent a market-failure too, which by the way is an euphemism the representatives of the liberalism approach use for the failure of their own theory in some instances !
Keeping failing carriers afloat (Alitalia for instance) provides only short term relief for their employees.
AZ is a good empirical example to counter my main argument. Admitted
As you know, politicians in France and Germany are already crying for a new tax to be imposed on companies that move production in an attempt to inhibit the loss of local jobs.
I agree that this is a unfavorable attempt if one favors economic integration!
I don't see any advantages to regulation. I think I remember seeing a Pan Am ad on eBay for European services. Only $499 in 1959 (the year was somewhere around there) dollars. That's $3,000 in today's dollars. That's not even wealthy people anymore. That’s super rich people.
Principally agreed. Overregulation, like the determination of fares by the IATA to the 70s can be a real obstacle. But we should not forget that that time was characterized by a worldwide overregulation. Now, the situation is better
In the current market, consumers have a lot of choice and personally, I don't think that employees at most airlines are worrying. Sure, DL, UA and US employees are fretting at the moment, but FL, WN, B6, F9, AA, NW and CO employees are just fine.
The question is how long the latter will be fine?? Isn't this permanent incertainty terrible? Today, it might be US, UA and DL, but the other ones could be the victims tomorrow.. Markets can turn very quickly
I'm seriously not trying to offend anyone. I'm not trying to offend those that prefer regulation, just expressing my views.
No one feels offended by you, I personally think your views are quite well expressed and valid
My opinion is advantages of deregulation outway the dis, but I'm also sympathetic to the guy who lives in Albany.
Does society/government have an obligation to insure there is air service to all population centers? Do the benefits (if any) of government regulation outweigh the obvious inefficiencies?
I think a good way of reformulating the topic. Let me bring an example. The Indian domestic market is becoming more and more liberal. IC, the state-owned carreer, has the comparative disadvantage to privates of being a 'state-actor' and having to serve certain inefficient markets. But there is a regulation in the new version of the Air Transportation act saying that privates have to have at least 10 % capacity on remote traffic.. this balances this a little and is a good example how regulation and deregulation can be the the two sides of teh coin, but they are still on the same coin! (I hope this metaohor makes sense )
In this sense: just my 2 cents
People, thanks again, your posts have made me thinking a lot of this topics - and thanks for being very civilized - a good example for a nice thread. I think everyoe has brought very valid arguments, and no right no rong! Seeing the realities, I would appeal for a middle-way, a synthesis. Liberalism is good but needs to be regulated!
Pelican From Germany, joined Apr 2004, 2451 posts, RR: 9 Reply 14, posted (5 years 1 month 1 week 6 days ago) and read 1582 times:
Liberalism is good but needs to be regulated!
I agree completly! The remaining question is to what extend is regulation needed?! I think in Germany we have too much regulation, although this has some advantages, too...
Planemaker From Tuvalu, joined Aug 2003, 3812 posts, RR: 22 Reply 15, posted (5 years 1 month 1 week 5 days 22 hours ago) and read 1554 times:
Here I would ask the question whether a good management could be better than the free market forces, especially in view of the interest of the people?
It has been demonstrated time and again that free market forces are the most efficient in providing the goods and services that "the people" want to spend their own money on.
...having to serve certain inefficient markets.
I believe that the U.S. EAS approach, for example, is better... have carriers bid to serve the "inefficient" market. This way the government ensures the best use of tax dollars.
Atmx2000 From United States, joined Oct 2004, 4576 posts, RR: 42 Reply 16, posted (5 years 1 month 1 week 5 days 22 hours ago) and read 1543 times:
I see it differently. In Europe, we have many different labor markets as opposed to one European market. France and Germany for instance are rather classified as regressive (see f.i. Robert Solow), while Britain stands as flexible. On the other side, Britain has suffered the biggest negative change in wage inequality. Moreover, I am sceptical whether 'the living on credits' in Britain can sustain in the long term. OK, consumption often results in new jobs, but buying without really possessing can be very unfavorable at some point of time. On the other side, I agree that something has to happen in Germany. The so-called "Reformstau" ('reform-traffic-jam' ) is a very dangerous situation.
The assumption that increasing wage inequality is automatically bad is wrongheaded. If there were no wage inequality, most people would tend to take the easiest job or the job with the least training requirements. If there isn't a substantially higher income for jobs that are more productive, more difficult, require more training, involve more responsibility, require unique skills or some combination of the previous, it's unlikely that there would be any improvement in that society with regards to prosperity because all but a few exceptional people would not put the effort into their jobs and becoming proficient in it.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
Mrniji From , joined Dec 1969, posts, RR: Reply 17, posted (5 years 1 month 1 week 5 days 22 hours ago) and read 1546 times:
It has been demonstrated time and again that free market forces are the most efficient in providing the goods and services that "the people" want to spend their own money on.
Where? Give some examples. I can give you some opposite examples, as
the financial deregulation
- in Mexico
- in Argentina
- in East Asia
- Use of free market-forces in post-cold-war Eastern Europe
- and don't forget the great depression..
Depends from which angle you are looking - who benefits??. While you may be right in cases where you measure economic growth, the question is whether or not the latter is an appropriate index for measuring the success of free market forces.. you could also try to measure wage inequality, education etc (or the HDI) any many other things which are opposed to your assessment
I believe that the U.S. EAS approach, for example, is better... have carriers bid to serve the "inefficient" market. This way the government ensures the best use of tax dollars.
Indeed an interesting approach
This entire debate of course reveals whic general approach someone has to economic questions.. interesting debate..! Helps me to rethink and reconsider my opinion, or even sustain it..
Mrniji From , joined Dec 1969, posts, RR: Reply 18, posted (5 years 1 month 1 week 5 days 22 hours ago) and read 1534 times:
If there isn't a substantially higher income for jobs that are more productive, more difficult, require more training, involve more responsibility, require unique skills or some combination of the previous, it's unlikely that there would be any improvement in that society with regards to prosperity because all but a few exceptional people would not put the effort into their jobs and becoming proficient in it.
Yeah I know this is a very neo-liberal view. But I see it difficult to classify a job as being difficult or not. while one person might find it difficult and won't be able to construct a house, another one might think the same about a management job. If one takes neo-liberalism literally, one could pay each input of labor in the relation to time, i.e. 1 hr labor for whatsoever costs the same.. on the other side, if I have a high demand for lots of unskilled labor, and no real demand for skilled labor, demand and supply would determine the wages in an interesting dimension..
Atmx2000 From United States, joined Oct 2004, 4576 posts, RR: 42 Reply 19, posted (5 years 1 month 1 week 5 days 20 hours ago) and read 1499 times:
Yeah I know this is a very neo-liberal view. But I see it difficult to classify a job as being difficult or not. while one person might find it difficult and won't be able to construct a house, another one might think the same about a management job.
Well that is problem that a society that favors jobs that require education and looks down on manual labor may have. Hence a shortage of construction workers and higher wages for them, until workers start to get imported from afar. But really I don't think that you will find many management people who couldn't figure out how to build a house. The management person may not be able to build a house when initially presented with the task, but he might be able to study up on how to do it. As long as he has use of his arms and legs and isn't a clutz he ought to be able to do so. Afterall we haven't evolved much from our agrarian ancestors who had to engage in all sorts of manual efforts to survive. Business management on the other hand wasn't so important for many people.
If one takes neo-liberalism literally, one could pay each input of labor in the relation to time, i.e. 1 hr labor for whatsoever costs the same.. on the other side, if I have a high demand for lots of unskilled labor, and no real demand for skilled labor, demand and supply would determine the wages in an interesting dimension..
If you paid people the same amount money for the same amount of time for any job, most people will go for the job they find easiest or most appealing, which in many cases will be the easiest for them. Maybe you will be lucky that some people find certain tasks more difficult and/or less appealing than others and your workers will apportion themselves in the proper ratios for the various jobs and you can get away with your pay scheme. If you don't get enough people to fill positions, you will either have to force people to take jobs they didn't want or you will have to pay more to induce people who weren't willing to fill a job to take that job. Also if a job requires training and that training must be paid for by the job holder, then the employer will also have to pay more to cover the sunk costs of training, otherwise no one would take the job. What we see today in terms of wage differences is a result of a long term continuous process of markets evaluating the value of particular types of labor, modulated by government and union induced market distortions.
Now if you have a lots of demand for unskilled labor, your economy is either pretty primitive or everything is so automated that all you need are people that can push a button every once in awhile.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
Jano From Slovak Republic, joined Jan 2004, 775 posts, RR: 9 Reply 20, posted (5 years 1 month 1 week 5 days 19 hours ago) and read 1481 times:
Mrniji wrote
Where? Give some examples. I can give you some opposite examples, as
the financial deregulation
- Use of free market-forces in post-cold-war Eastern Europe
Hm, the way it happened, at least in Slovakia, is quite opposite. It literally took free market forces at least 10-12 years to start working. Immediately after the end of the Cold War, and the end of the communism and the first free elections, the worst (read as connected to the former communist regime, not necesarily by being former members, but by the way they ran the goverment) stayed at the top. They stayed there for long 8 years.
I really do not think that it is fair to argue against free market forces as being the most efficient and use Eastern Europe post Cold War as an example. Simply free market forces were not there in the post Cold War Eastern Europe right away. The system that was there right after Cold War end was still very regulated and it took long time for the free market forces to be 'put at work'.
What I can say, at least about Slovakia from the comfort of my apartment here in TYS (I live with one leg at the other side of the Pond), is that they are putting the free market forces at work. They are getting the government out of peoples' way, simplyfying income tax (one tax rate only), simlyfying sales tax (one tax rate only), businesses pay much less taxes, etc. And it seems we finaly have an airline that flies to more places than we were used to.
PS: Planemaker you made it on my Respected Users list for saying It has been demonstrated time and again that free market forces are the most efficient in providing the goods and services that "the people" want to spend their own money on.
Planemaker From Tuvalu, joined Aug 2003, 3812 posts, RR: 22 Reply 21, posted (5 years 1 month 1 week 5 days 18 hours ago) and read 1462 times:
Where? Give some examples.
Easy... the airline industry!
I can give you some opposite examples, as
the financial deregulation
- in Mexico
- in Argentina
- in East Asia
A valid critique of the very badly managed transition process from a highly centralized/regulated (and very "cronyistic") system in developing countries... not of a functional free market system.
Why not bring up London's "Big Bang" or the successful financial deregulation in Spain?
- Use of free market-forces in post-cold-war Eastern Europe
Again, a valid critique of the transition process to an environment that is a cross between the "wild west" and anarchism - anything but the free market.
- and don't forget the great depression..
What?? 1929??? Come on... Wall Street was run by "robber barons" and "con men" -- and it never would have happened if Mr. Spitzer was around back then!!
Depends from which angle you are looking - who benefits??. While you may be right in cases where you measure economic growth, the question is whether or not the latter is an appropriate index for measuring the success of free market forces.. you could also try to measure wage inequality, education etc (or the HDI) any many other things which are opposed to your assessment
No matter which angle you look at it, society as a whole benefits from the free market system as it makes for the most efficient use of resources to provide the goods and services that people want. It is not perfect (and unethical people will cheat and steal just as they would in any system) but to borrow what Churchill said about democracy - "it is the best we have."
Lufthansa From Christmas Island, joined May 1999, 2261 posts, RR: 10 Reply 22, posted (5 years 1 month 1 week 5 days 15 hours ago) and read 1397 times:
Mrniji
As an economist, I feel i can comment here on this with some credibility.
You see the basic error in your reasoning comes down to this. When governments attempt to regulate, subsidise etc, they are distorting the economy.
Now guess what, we've all got limited time and resources. Time, of course, is one of those reasources. Which means, we can't do everything. We are faced with a choice. That isn't just the poor either.
To give you a simple example, think of the wage of a high income couple. They can afford all of the things they need, but, they are still faced with a choice. Do we buy a new Volvo, or do we go on a grand South American holiday?
Well, the economy is much the same. The trouble is, when governments interfer in the form of subsidies and protentionist/regulated policies, a few ppl usually do benifit, but society as a whole pays for the great loss. The reason it pays for the loss is resources are used in less efficient ways than normally possible. This results in a greater inefficieny in the whole economy, which in turn means lower GDP, which means lower living standards for all.
You mentioned the great depression earlier. The great depression was made worse due to the fact Currencies were regulated. It was primarily the result of tariff wars, plus an attempt to keep the 'gold standard' of currency. This was where prices of currencies were fixed in relation to gold reserves. The UK was the first country to abondon this, and funnily enough, things started improving first in the UK. The reason it was such a problem was it prevented governments from exercising fiscal policy. During a resession, governments need to increase their spending and/or decrease their taxation in order to stimulate economic activity. The problem was, at the time, governments were concerned with trying to maintain their gold reserves to preserve their currency. So, instead of spending more, the ended up saving more and driving their economies into deep recession in order to protect their gold standard and try and maintain gold reserves. A foolish policy by all counts, but you have to remember, that a student who has done any second year economics subject would know more about the economy than President Roosevelt (i have no idea how that is suppose to be spelled) did during the years of the great depression. Also, before the great depression things like accounting standards and the publication of results were unheard of. This lead to a lot of "speculation" on stock markets in an almost Casino like fashon as nobody was quite sure how each company was really performing. So obviously, when the truth came out, there were a lot of factors combining to make things go pretty bad. The reality is, most of them couldn't happen today because laws are in place that would place company directors in Jail for that kind of conduct.
The examples of Argentina, Mexico etc are all poor examples because these countries have suffered a host of other political problems at the same time. If you want to look at south America, have a look at Chile.
The arguements about jobs requiring harder skills/greater effort requiring greater payment are also very correct. It is funny you mentioned germany, because germany's more restrictive laws have led to a great deal of very capable germans leaving Germany for the UK, sweden, America and Australia. I know. My family are some of them.
But back to the topic. By 'protecting jobs' with the subsidies you are asking for, you are basically engaging in what economists call "rent seeking activies". These activities are basically benifiting a select few, at the expenses of the masses. The trouble is, although this cost may be small to each individual, and the benefits big to those who recieve them, the all add up and equal inefficieny. The best examples of this are Farmers in France and in the USA. Both are heavily protected, but it means a lot of europeans and americans pay more than they need to. But it isn't just that. All of those ppl working in farming could be working in something that generates more income for their countries.
This is exactly what happened in America with Boeing in the late 1990s. Leaving government policy aside, America's computer giants like Microsoft, IBM etc thrived and exported their technology around the world with amazing success. This lead to an appreciation of the US dollar. This ment, that other exports became less competitive internationally, and americans were more likely to import cars and planes etc. But did it matter? No, cause the US as a whole was wealther and better off for it. If you tried to implement a protectionist policy, the US would have never ever had this tech boom, and got the leading position it maintains today, and the US would have suffered slow growth as a result.
The loosers? The factory workers in Long Beach, CA, who were once building MD-80s, who know had to find new jobs. The winners... the whole of the USA, all users of advanted computer techonology worldwide, Airbus, and eventually, those same workers at long beach who eventually got jobs elsewear and still enjoyed working in a country with high living standards.
"Yeah I know this is a very neo-liberal view. But I see it difficult to classify a job as being difficult or not. while one person might find it difficult and won't be able to construct a house, another one might think the same about a management job. If one takes neo-liberalism literally, one could pay each input of labor in the relation to time, i.e. 1 hr labor for whatsoever costs the same.. on the other side, if I have a high demand for lots of unskilled labor, and no real demand for skilled labor, demand and supply would determine the wages in an interesting dimension.. "
It is funny you mention this because this is exactly what is happaning in Australia. Plasterers and brick layers are getting up to $600 per day because of a shortage of this work and lack of these workers. Which is a hell of a lot more than young lawyers are getting!!!! There is nothing wrong with that. Oh and btw, we here in Australia are definately not in recession... Things are going along just fine here, we've got low unemployemnt, low inflation and high growth. So i disagree that the world is in recession. A few big European countries are in Recession.... not the whole world.
Lastly.... if you claim you are not a communist, then why are you so concerned with wage inequity? In the real world, nobody will bother make extra effort if you take the incentive away from them. I've studied now for 19 years... soon to be 20. I expect that next year when i finish, i definately should be entitled to a lot more than most people. I've worked 70 hrs a week for an additional 8 years over the average person. Why on earth would i put that extra effort in if i am no better off? That attitude leads to mess exit of highly skilled labour. Just ask germany. They're trying their hardest to attract bright ppl back into germany now. The best thing you can do, is make Education was accessable as possible in order to help people help themsevles. That doesn't mean you just give it away, but it does mean you need systems of to grant universal access.
N79969 From , joined Dec 1969, posts, RR: Reply 23, posted (5 years 1 month 1 week 5 days 8 hours ago) and read 1360 times:
Lufthansa,
Very nice post.
Pelican,
You are factually correct but I think your comparison does not fit well. The US also has regional differences in economic performance. For instance, the San Jose area has outperformed Cleveland in recent years with differences in unemployment rates and income levels.
Two of the countries (Denmark and Sweden) you cite have populations smaller than a number of US cities and probably smaller GDPs than a few of those cities. They are relatively small economies even within the EU. The UK is, of course, a big economy. However the UK is not as socialistic as some of the continental heavyweights such as Germany, France, and Italy where unemployment is high.
I think the relationship between the regulated job market and sluggish job creation in Europe is widely-accepted among many economists.
**********
I think regulation has an important place in the airline industry and that is chiefly in safety. Unlike a ballpoint or running shoes, consumers cannot simply look at an airplane and figure out how safely an airline is operated. There is some serious information asymmetry that pretty much only government regulation (or perhaps a very large insurance company) can rectify.
I also believe that the government has a role in preventing collusion in an industry as concentrated as airlines. But other than that, I think it is better to let airlines live and die by their own strengths and weaknesses and not by political or bureacratic decision making.
Atmx2000 From United States, joined Oct 2004, 4576 posts, RR: 42 Reply 24, posted (5 years 1 month 1 week 5 days ago) and read 1292 times:
This is exactly what happened in America with Boeing in the late 1990s. Leaving government policy aside, America's computer giants like Microsoft, IBM etc thrived and exported their technology around the world with amazing success. This lead to an appreciation of the US dollar. This ment, that other exports became less competitive internationally, and americans were more likely to import cars and planes etc. But did it matter? No, cause the US as a whole was wealther and better off for it. If you tried to implement a protectionist policy, the US would have never ever had this tech boom, and got the leading position it maintains today, and the US would have suffered slow growth as a result.
I have to take exception with this explanation of the dollar's appreciation. The dollar did not appreciate because of strong exports in the late 90s, since the US trade deficit started to balloon. It appreciated because foreign investors chose to put more of their money into the US, partly because of thriving companies. However, initially a major reason was that the Asian financial crisis shook confidence in Asian economies, so investors looked for a safe place to put their money and found the US. This helped to push the dollar up, even while the trade deficit was growing. And because the dollar kept going up and because of growing US stock market, foreign investors who put money into the US markets so their assets in their home currency grow even faster, which encouraged them to put more money into the US. The end result was ever growing US stock market, an ever appreciating US dollar, and an ever expanding US trade deficit all the while many US exporters and domestic producers were getting squeezed.
Now if all the investors had placed their money into companies that had legitimate business models and a reasonable chance of success, things would be better today. However, a lot of the investment dollars went up in smoke and just helped to finance/create the trade deficit. As for the tech boom, a lot of not so useful technology was created and a lot of useful technological know how was exported by American companies who felt that they couldn't manufacture locally and remain competitive, or bought by foreign companies who were flush from profits selling into the dollar zone. And while the boom made the US more wealthly than it might have otherwise been, it has hurt many sectors of the economy and it will take years to recover from its negative effects.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
Lufthansa From Christmas Island, joined May 1999, 2261 posts, RR: 10 Reply 25, posted (5 years 1 month 1 week 4 days 16 hours ago) and read 1233 times:
Atmx2000,
Now isn't the place to write a detailed anaylsis of the tech boom because it is a very complicated subject and I could easily write 10 000 words on it and still not explain it completely. You are right about the asian financial crisis contributing, but it wasn't as simple as that.
The reason that the USA was chosen as the investment of choice over european, or any other countries for that matter, is that there was a lot and still is a lot of very good technology being turned out. Something we all need to remember is that these companies, while primarily based in America, are no longer really just American companies. They're global entities in their own right, many having turnovers bigger than the GDP of some small countries. All though the dot.com boom did to some crazy things with the stock market, by and large, the overall effect has been positive in that the strong remaining companies that had good business models that did things ppl actually wanted and needed survived and flourished. Witness Microsoft, Cannon, HP, IBM, and even companies like Ebay or Nortel.
I think the USA, despite everybody's concerns about outsourcing, is still in a much better position today than it thinks. Do you realise that in some parts of germany, unemployment is at 15-20%!
The boom in part was caused by foolish investment but this is typical of any bull market. Look at the 1987 stockmarket crash. Or even the great depression. Within a few years, the market usually recovers and is stronger for it. It is just part of the standard rationalisation process and any trade deficits are usually equalised in the process, which is happening now. Americans are not consuming as many imported goods as they were a few years back. The US is still stronger for it, and still largely profited, even when it was a HP factory asia selling to South Africa, for example. The proof is that the US still as much lower unemployment, and a much higher GDP per capita adjusted for pricing pariarty than any other large nation. Sure, some industries where hurt, but if it were just a smoke and mirrors game, this wouldn't be the case. In any rationalisation process, there are some winners and some loosers. Otherwise, we'd all be subsistance farmers, or out digging for gold. My intial explaination was indeed oversimplfied, but this is an aviation forum, not an economics tutorial. Still, im glade you noticed....show's ur switched on!
PS- you may note that i said "leaving government policy aside" which ment trade/budget deficits/monetary policy.... its all a bit too complex to go into here. Im sure most a.net ppl aren't interested in a discussion about interest rates and international capital flows.
Cheers
LH
[Edited 2004-10-19 05:47:10]
26 Planemaker: Im sure most a.net ppl aren't interested in a discussion about interest rates and international capital flows. LH, perhaps you can answer the followin
27 Atmx2000: I'm not saying that things are miserable or anything like that. Historically speaking, things are good and the unemployment rate is relatively low, an
28 Lufthansa: Planemaker You've got me in my economics lab, but im really busy at the moment. If i get a chance i will look about for the data but im finishing off
29 Lufthansa: Atmx2000 What is happaning at the moment is known as "wage equalisation" and it is a result of certain industries moving into the middle phase of thei
30 Atmx2000: Lufthansa, I think Planemaker was asking about foreign holders selling their current T-bills, not the Treasury selling new t-bills. If they sold their
31 Starlionblue: First of all, I'm glad Lufthansa spared me the effort of digging out my old Economics notes. His knowledge is much more current than mine, and I basic
32 Mrniji: People, first apology that I haven't posted for some time in this really interesting, inspiring and educational thread.. I was caught in some obligati
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- and I hope it won't be declared as double thread, since I believe the topic is isolated in a theory discussion out of the A v B issue) about the topic in the subject line. 
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) are able to afford more than just one or two flights per year. The disadvantages are probably not so favorable working conditions. This should be okay as long as there are certain legal limits to exploitation. 
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) is a very dangerous situation.
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