I’m just about done listening to Haiti After the Earthquake
Farmer is not a believer in the old saying “If the government is big enough to give you everything you want, it is big enough to take away everything you have.” He wants governments in rich countries all over the world to raise taxes so that more money can be given to Haiti’s government (not spent directly by NGOs in the country). At the same time he decries traditional Big Government policies such as agricultural subsidies that render Haitian agriculture uncompetitive (thus requiring more people in Haiti to live on hand-outs from the countries that are providing hand-outs to their domestic farmers). Farmer doesn’t explain how governments can be as big as he wants them to be and at the same time immune from lobbying by farmers and other competing domestic groups looking for hand-outs. The U.S. provides a good example here. When Congress raised taxes on American workers and investors, it spent the money to subsidize the U.S. health care industry (“Obamacare”) rather than to help poor people around the world get better health care, clean water, etc.
One of the tactics that the Allies employed in German in WWII was to attempt to “de-house” the German urban population by area bombing, in the belief that this would damage war production (they couldn’t hit war production directly because it was housed in hardened facilities and the bombers of the time weren’t accurate enough to make pinpoint strikes). Anyway, it turned out that this only INCREASED war production – when people’s homes were destroyed, they stayed at work since they had nowhere else to go.
It’s pretty obvious that building houses and government buildings (other than schools) does nothing to increase your future GDP – the only kind of investment that can do that is investment in productive assets – factories and infrastructure and such. The problem is that it’s cheaper to build (and operate) factories in China, Mexico, etc. – lots of factories have been built with American capital in the last 30 years, just not in the US. And our system insures that we get very little bang for the buck on infrastructure spending – you spend billions and get one measly little tunnel or a mile or 2 of subway.
While I’m sure the US has a lot of GDP that isn’t invested toward actual productivity growth, it seems a stretch to say that because Haiti didn’t miss its government that we won’t miss ours.
Housing is purchased as a status good (look at a kitchen remodel these days) and so we could pare back quite a bit and not lose much actual health+ability (although of course the structure is only a fraction of the value – most of it goes toward membership in exclusive neighborhoods+school districts)
I agree that we are over-investing in government services, but I think Haiti is too different from the U.S. to be used as an object lesson for the U.S. I think one real problem is that we don’t know how to administer the government we need for this modern economy. Our current methods of administration were developed about a century ago by people facing very different circumstances.
Izzie: U.S. manufacturing output over the last 30 years has grown at more than twice the rate of population growth. That implies someone has done some investing here. Granted, the growth has been much higher in China, Mexico, etc., but they were also starting from a much lower base.
the earthquake had little long-term effect on Haiti’s GDP despite the fact that Haiti’s central government was mostly destroyed (ministry buildings in the capital city flattened; civil servants killed while at their desks) and approximately 1.5 million were rendered homeless.
The problem here has to do with what GDP measures. If 1½ million Haitians became homeless, that’s a major decline in the standard of living in a significant portion of the population. If it doesn’t show up in GDP, that just means that GDP has it limits as a way to measure the economic well being of a country.
The problem here has to do with what GDP measures….
If your house is destroyed and then you rebuild it, the rebuilding actually increases GDP (and the destruction is not counted against it). So if you want your GDP to go up, you should pray for earthquakes or maybe even blow up the buildings yourself and then when you put them back up the GDP will go up as Haiti’s did.