The horizon is not so far as we can see, but as far as we can imagine

Month: January 2013

Iraq wouldn’t have happened if it weren’t for oil, and Aaron Swartz died for oil too

Stirling Newberry has up an important piece on how protected works are used to pay for imports. You should read it.  There’s a reason the laws against “piracy” are more punitive than those against, say, negligent murder.

Justice is not Law, Law is Not Justice

A law is deserving of respect to the extent, and only to the extent, it is just.  A law which is not just deserves only the level of obedience one gives to any group or individual who says “do this, or I’ll hurt you.”  That is, to the extent that you believe their threat is credible, you may choose to obey to avoid the adverse effects of being caught disobeying.

The recent imbroglio over Aaron Swartz has seen a lot of people using the word “proportionality”. It does not matter if someone is guilty of a crime if the punishment is disproportionate.  In England the penalty for stealing a chicken, at one point, was death or being sent to a penal colony (Australia).  Juries started refusing to convict people even in the face of incontrovertible evidence of the accused’s guilt.  The sentencing had to be changed: stealing was not made legal, rather the penalty was reduced.

In the US at the current time, going to jail, for many people, means being raped.  Often repeatedly.  So I, personally, am not willing to send anyone but the worst criminals to jail, because I do not believe in judicial rape.  The punishment does not fit the crime.  Likewise it has come to be that if you are a felon you will never have a good job ever again.  Everyone does a background check.  Again, this is disproportionate to most crimes. It is also stupid, since people who cannot get a good job, or any job, are much more likely to turn to crime.

The US system provides for people having timely trials.  In most cases this is no longer true: you do not have a right to a timely trial.  People’s lives are destroyed in the pre-trial period, which can go on for years. This happens for the same reason that most cases never get to trial, but are plead out: the system could not afford to give a trial to everyone because there are too many people being shoved through the system.

Graph of incarceration in the US over time

From Wikipedia

The graph at the right tells that story well enough.

This is a social choice.  Americans chose to lock  up a lot more people by criminalizing drug possession, by removing judicial discretion, and by increased mandated sentences.  Laws such as “three strike” laws are the paradigm.

This happens, notice, exactly at the election of Reagan.  Something changed in America.

Pleading out is not fair.  It is not fair to society or to the felon.  Both deserve a trial, to find out the truth.  If society has laws which mandate X years, then those laws should be followed.  If they cannot be followed in a just way, with little pleading and speedy trials, if following them would take more resources than a country will commit, then the laws must be changed.  This is especially the case in a country where it is no longer always possible for the accused to face their accusers or to see the evidence against them, or even to know what the law is, since America now has secret laws and secret interpretations of laws.  (A secret law is, ipso facto, unjust.  If you do not understand that, I cannot explain it to you.)

Full trials, and the full protection of the law, such as it remains, now belongs only to those who are very wealthy, and sometimes not even to them.  Defending a trial can take hundreds of thousand or millions of dollars.  An ordinary person cannot afford it.  Public defenders are overworked, underfunded, and generally plead out.  This is on top of the fact that most rich criminals, such as the bankers who committed widespread fraud, are never charged with crimes, and if they are charged are allowed to settle with a token payment which immunizes them from further charges for their criminal acts, acts which demonstrably cost hundreds of thousands of people their houses, lost people their jobs, and even their lives.  Law which is enforced only against some classes of people, and not against others, is unjust.

And then there is civil forfeiture, in which people who have been convicted of nothing, have their assets taken away.  Even if you’re rich, you may find yourself using a public defender.

A social system only works if there are people willing to carry it out. The USSR collapsed when the people running it were unwilling to call out the army.  That same class of people, in the Prague Spring, did call the army out.  It collapsed because the factory workers weren’t working, the farmers weren’t farming, and so on.

The US legal system (it does not deserve to be called a justice system) works because people carry out its dictates.  The people who run the prisons put up with, or even encourage the rapes.  Private companies make money from prisoners, so need more prisons. The police make huge amounts of money by seizing the assets of “criminals” before they are even convicted.  The judges put up with the 3 strikes laws and mandated sentencing.  They allow trials to be put back and back rather than throwing them out due to lack of a speedy trial.  Everyone is onside with plea bargaining.  The rich are good with this because they either get a real trial, or they don’t get charged at all.  The middle class think that if they’re “good” they’ll be ok, till they find out otherwise, and the poor put up with it because of a boot in the face and much more.

The principles of fixing the system (never use the word reform, it means making things better for the rich and worse for everyone else) are simple enough.  No secret evidence.  No secret laws.  No secret interpretations of law. No tolerance of rape in prison.  Nobody gets plead out if the plead involves doing jail time or becoming a felon.  No criminal record checks for jobs which don’t really really need them, so that prisoners can  reintegrate into society.  End civil forfeiture.  Allow no private defense attorneys, everyone uses a public defender including the rich, and the defenders are drawn by lot (they will be very well funded very quickly, and they will be the best lawyers in the country.)   All this will make enforcing current laws impossible with the current budgets Fine. Give judges back discretion, remove three strike laws and overly harsh sentencing, repeal virtually all prohibition laws for most classes of drugs.  Stop sending people to jail for IP offenses, and create an economy which gives poor people real jobs.

Or spend the money necessary to keep laws as they are now, but also have them be enforced justly, even if they still aren’t just.  That will mean a LOT more money, but if it’s important to Americans to lock up people for non-violent drug crimes, they should put their money where their “values” are.

Otherwise, everyone who supports the current system, is part of a system which is unjust.  More crudely, if you don’t at least support fixing the prisons so people arent’ predictably raped, you are complicit in rape.  And by support I mean you are either willing to pay to imprison the current number of prisoners humanely, or you are willing to send less people to prison so the current amount of money will do the job.

There is no justice without proportionality, no justice in a land with secret laws, no justice in a country where the rich skate and the poor plead out.  There is only law, the same law the Stasi proclaimed: do what we say or else.

Sweden v. Canada: Taxation and Inequality

Ok, so Stephen Gordon in MacLeans feels compelled to weigh in on taxes, to suggest that the Nordic countries just redistribute money from the bottom 99% to each other to maintain equality and so Canada should increase its GST and give money to the poor and middle classes.

It’s true that Nordic countries redistribute a lot more than Canada does, but let’s examine what that means (these #s are slightly wrong as I’m taking them from different, though recent years, but they are within a percent of correct):

The Social Security tax rate in Sweden is about 30%.  This is paid by the employer, if not self-employed.  This is either a tax on the employee, if one assumes that the employer would have paid the employee this if not taxed), or it is a 30% tax on all labor costs for a corporation, and for most corporations, labor is the largest cost.

Pension insurance costs another 7%.  It’s capped, though, but since Gordon is only dealing with the bottom 99% we can ignore that.

The standard VAT rate is 25%.

70% of workers are unionized.

The top tax rate is 57%.

Corporate tax (I’ll use Gordon’s figures) is 26.3%.

Canada: Social Security (Canada or Quebec Pension) is about 10%, between employer and employee contributions.  Remember, the combined SS and Pension insurance tax in Sweden is 37% of  income.

Harmonized GST, in most provinces runs 10 to 15%.  10 to 15% less than Sweden.

Corporate tax rates, both nominal and effective, are so close there’s no difference (unless, of course, you count that employer paid SS tax, in which case Sweden’s are significantly higher.)

Unionization in Canada is about 31%.  Less than half of Sweden’s rate.

Gordon thinks that the best way to deal with income inequality below the top 1% is to increase the GST (because it does less harm to growth than corporate taxes, he claims).  Note that the GST (a VAT) is regressive, while SS taxes (if they aren’t capped) are not regressive.  So Gordon prefers a regressive tax.

What GST rate would we need to increase to, if we held everything else equal but wanted to to have total taxation, as a percentage, equal to Sweden’s?  Canada’s total tax as a percentage of GDP is 32.2%.  Sweden 47.9%. Canada would need to bring in approximately 49% more taxes to match Sweden’s rate.  VAT taxes made up, as of 2009, approximately 11.5% of Canadian tax income.  To use the GST/HST  alone to increase taxes to the Swedish rate would require approximately quadrupling the VAT taxes.  So, in Ontario, the rate would be about 60%.

That’s not happening.

Gordon’s article only deals with income inequality in the bottom 99%, but he notes that you can’t tax the top 1% to pay for transfers, they don’t actually have enough money.  I’ll just note that you don’t tax the richest (really, the top .1%) at massively progressive rates to get money from them, you tax them so they don’t have money to buy up the system, including both politicians and the market.  The US is the paradigmatic case of what happens to your political system when you allow the rich to get too rich, but the same process is happening in Canada.  (You also don’t allow a few media corporations to own almost all media, for the same reason.)

Finally, let’s just cut the bullshit. High progressive tax rates do not decrease growth.  There is no unequivocal empirical evidence that they do.  The best growth in the developed world happened in the 50s and 60s, when the developed world had much higher tax rates on both individuals and corporations.  Much, much higher rates, as in 90% on top income earners (pdf – pg. 17) in many cases, and corporate tax rates were much higher as well.

Correlation may not be causation, but causation w/o correlation is extraordinarily rare.

Corporations invest and hire more people when they have a reasonable expectation of more demand for their products and services.  If there is not enough demand, it does not matter if they have money to spend, they will not spend it.  This isn’t even economics, this is business 101.  The poorer someone is, the more they consume as a percentage of their income.  An affluent middle class, heck a working class that has disposable income, creates more demand than rich people do.

Demand alone is not enough, if there are supply bottlenecks, but the supply bottlenecks we are facing right now are not in money. Corporations have record amounts of money and are not spending it.  When individuals, whether corporations or people, won’t spend, it is the government’s JOB to take the money and spend it, and spend it in a way that will get rid of whatever supply bottlenecks exist.

They must also make sure that an actual free market exists and that no one has pricing power. It does no good to redistribute money if all that will happen is that companies with pricing power will just raise prices and take the money away, meaning no real new demand is created, and thus no new jobs and new real economic activity, whatever the nominal numbers show.

On edit: further investigation shows that almost all of the VAT is returned to low income earners.  This means the VAT functions as a luxury tax, starting about about the middle middle class.  Luxury taxes are on the best taxes, and by luxuries we mean “stuff that’s imported, and especially imported stuff ordinary people can’t afford anyway.”

Fire Ortiz, the prosecutor who hounded Aaron Swartz

Swartz, if you hadn’t heard, was being hounded by Ortiz for downloading millions of JSTOR academic articles.  They claim he was going to publish them, and were seeking decades in jail, and a million dollars in fines.

Swartz committed suicide.

Lessig has a petition to fire Ortiz.  You should sign it.  Either Obama will fire Ortiz, which is good, or he won’t, which will make clearer how broken the official systems of protest and redress are.

Fire Ortiz.

To know what to do is not enough

For the past year I’ve been writing a book on prosperity, by which I mean widespread affluence. It’s been slow going, not because I don’t believe I know the general technical requirements of prosperity (I do, if I didn’t, I shouldn’t be wasting anyone’s time, including mine, writing the book), but because the real problem isn’t the technical details like eliminating bottlenecks, or redistributing income, or setting up positive feedback loops, or avoiding fraud, or stopping financialization, or any of the dozens of other subjects I either visit at chapter length or touch on briefly.  The problem as with, say, stopping smoking, isn’t so much what to do, it is how it comes that we do it.  When do we make the decision we’re willing to do what it takes, sufferer the negative consequences of getting to a better place, and then push ourselves through those consequences?

This is a huge problem in individuals, as the weight loss, addiction, psychology, psychiatry and self-help industries attest.  There is, generally, more money in  not solving a problem, as drug makers with their palliatives understand, than in solving it.  The people who have power and money and influence in the status quo are not sure that in a new world, with a new economy, and the new ethics which must undergird that new economy, they will be on top.  They are right to believe so.  They are creatures of the current world, and in being created, have created the world they are unsteady masters of.  Their ethics and morals, their way of business, of living, of apportioning power and influence and money must go if there is to be widespread affluence.  Their methods have been tried for 40 odd years now, and if measured against the human weal, have failed.  They will not, they cannot adapt, not as a group. They were not selected for the skills it takes to create a new type of affluent society, they have not even been able to maintain the mass affluence of the old society, and not just because they have not wanted to.  They would be a different elite, made up of different people with different ethics, talents and skills if they did want to.

Ordinary people also have the wrong ethics, the wrong morality.  Much is written about why consumerism is bad, but the ultimate problem of consumerism is not how it makes us feel but that the consumer passively chooses from a menu created by others, not to fill the consumer’s real needs, but to benefit those who created the menu.  Such a passive people cannot understand that choosing choices without creating choices is not choice, it is the illusion of choice.

So while my book has a lot of general principles of the sort which books on prosperity often have, such as about trade, and productivity and technological change, that isn’t the most important part.  The part that matters isn’t about the technical requirements of prosperity, it’s about why and when people do what is required to achieve prosperity, and when they don’t.  And when, having obtained it, they throw it away.

Our society is ours.  A tautology, but one we forget too often.  As individuals we often feel powerless, as a mass, we have created our own society.  There are real constraints, physical constraints on what society we can have, based on the resources we have, the technology we have mastered and what we understand about ourselves and our world, but those constraints are not, right now, so tight as to preclude widespread affluence, to preclude prosperity.

They are, however, tight enough to preclude continuing to do the same thing, led by the same sorts of people, and expect anything but decline, repeated disasters and eventual catastrophe.  We can be affluent and prosperous, we can spread that affluence and prosperity to those who do not have it now, but we cannot do it if we insist on keeping the current forms of our economy, including our current forms of consumption.  This does not mean doing with less, it means doing with different things, valuing different things.  Those new values will be better for us, objectively, they will make us both happier and healthier, just as most addicts are happier once they’ve broken their addiction, or rather once they’ve gone through withdrawal and rebuilt their lives.

We can choose not to do so.  We have, in certain respects, already chosen not to do so, as with our refusal to do anything about climate change until it is too late (the two problems are combined, climate change is a subset of the political and economic problems we have).  We can, also, choose to make the necessary changes, not only to avoid the worst catastrophes (disasters are now inevitable, there are consequences to failure, stupidity and greed), but to create an actual, better, world, a world in which the vast majority are healthier, happier and doing work they care about.

The monster facing us, as usual, is us.  The monsters are always us, our brothers and sisters, and the one in the mirror.  And it is those monsters I’ve been wrestling this past year.

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