Why Chicago?

The editors of the Chicago Tribune lament the large number of shootings in Chicago:

A day after Chicago’s weekend from hell, when outbreaks of gunfire killed 12 people and injured at least 62, the carnage continued.

Derrick Hall, 22, was waiting for a bus in the 9100 block of South Cottage Grove Avenue on Monday morning when a man approached and shot him to death, the Tribune reported. In the afternoon, three men were shot on West Iowa Street in South Austin. Later, a man was shot in the wrist by someone in a passing car. A man was hit in the stomach. A man was struck while getting into a vehicle. At least 10 people were shot in eight incidents Monday on the South and West sides.

Don’t look for a pattern. Gun violence in Chicago is random the way destructive wind gusts are random. You can brace yourself but still not anticipate the location or severity of a blast. Monday easily could have been the quiet after the storm. We know of no connection between a man killed at bus stop Monday and a 17-year-old girl killed at block party Sunday, except that both were homicide victims in a city awash in illegal guns, and tormented by gang activity and the drug trade.

But why Chicago? Back in the early 1990s, the homicide rate in Chicago was as ugly as it was in New York and Los Angeles. Then began a steady national decline, Chicago included — until the abrupt recent upswing in violence here.

Allow me to answer their question.

  1. Chicago and Illinois politicians are in bed with the gangs.
  2. Chicago has a larger, more concentrated black population than New York or Los Angeles.
  3. Chicago’s population and economy are declining.
  4. Chicago and Illinois are more corrupt than New York, Los Angeles, New York State, and California.
  5. The Chicago police have essentially given up on the six neighborhoods in which most of the killings take place
  6. The communities in those neighborhoods have given up on the police.

Shorter: thanks, Mike Madigan.

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What Happens When China Cracks Down?

Speaking of thought-provoking, here’s Doug Bandow’s prediction at National Interest of what would happen when China cracks down on the demonstrators in Hong Kong which both I and, apparently, he think is inevitable:

The SAR would lose its relative autonomy, almost certainly ending up under direct Chinese rule, and, likely temporarily under military control. Business and investment would flood outward, not likely to return for years, if ever. Wealthy individuals would look to transfer their wealth overseas while seeking any possible foreign refuge.

The commercial impact elsewhere on China would be modest, but some foreign firms likely would prepare for Western economic and political retaliation. With foreign relations almost certain to collapse, businesses that remain in the PRC could become collateral damage.

The United States would revoke Hong Kong’s special trade status. Economic sanctions of some sort would be equally inevitable. A trade embargo would remain unlikely, but in contrast to 1989 the debate over American policy would occur during the nadir of post-Mao Sino-U.S. relations. The economic relationship already is under siege; human-rights concerns are on the rise; the Pentagon is emphasizing security issues in the Indo-Pacific region. A bloody crackdown would shatter what remains of bilateral ties and strengthen arguments of hawks who believe that a new Cold War is imminent, if it has not already arrived.

Europe also would face significant pressure to act. Despite their desire for expanded economic ties, European governments have become more concerned about recent Chinese behavior. When NATO members met in April the PRC topped the agenda. “China is set to become the subject of the twenty-first century on both sides of the Atlantic,” opined German Foreign Minister Heiko Maas. Earlier this month Secretary General Jens Stoltenberg urged greater attention to Beijing: “This is not about moving NATO into the Pacific, but this is about responding to the fact that China is coming closer to us.” Europe could ill afford not to impose at least some economic penalties on the PRC.

Asian countries would be more reluctant to act. However, those reliant on America for their defense could ill afford to continue business as usual with China. Even in its own region Beijing would find its neighbors more wary and hostile, and readier to strengthen their own militaries. Whatever additional stability the CCP might believe it gained by cracking down would be dearly bought.

Here are my questions.

  1. Will China crack down on Hong Kong?
  2. What will result from the crackdown?
  3. What would the consequences of the end of “one country two systems” be for the Asian financial system?
  4. What has Hong Kong’s role in the rise of China been? Note that much of China’s rise has occurred subsequent to the adoption of “one country two systems”.
  5. Whatever that role does China still need it? I don’t believe that the Chinese authorities think they do or, at least, they don’t believe its cost is worth maintaining.
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What Happens If the World Population Stops Increasing?

I found Zachary Karabell’s review of a pair of books at Foreign Affairs on the relationship between capitalism and demographics thought-provoking:

For most of human history, the world’s population grew so slowly that for most people alive, it would have felt static. Between the year 1 and 1700, the human population went from about 200 million to about 600 million; by 1800, it had barely hit one billion. Then, the population exploded, first in the United Kingdom and the United States, next in much of the rest of Europe, and eventually in Asia. By the late 1920s, it had hit two billion. It reached three billion around 1960 and then four billion around 1975. It has nearly doubled since then. There are now some 7.6 billion people living on the planet.

Just as much of the world has come to see rapid population growth as normal and expected, the trends are shifting again, this time into reverse. Most parts of the world are witnessing sharp and sudden contractions in either birthrates or absolute population. The only thing preventing the population in many countries from shrinking more quickly is that death rates are also falling, because people everywhere are living longer. These oscillations are not easy for any society to manage. “Rapid population acceleration and deceleration send shockwaves around the world wherever they occur and have shaped history in ways that are rarely appreciated,” the demographer Paul Morland writes in The Human Tide, his new history of demographics. Morland does not quite believe that “demography is destiny,” as the old adage mistakenly attributed to the French philosopher Auguste Comte would have it. Nor do Darrell Bricker and John Ibbitson, the authors of Empty Planet, a new book on the rapidly shifting demographics of the twenty-first century. But demographics are clearly part of destiny. If their role first in the rise of the West and now in the rise of the rest has been underappreciated, the potential consequences of plateauing and then shrinking populations in the decades ahead are almost wholly ignored.

but flawed. For example human history did not begin in 1AD but about 2,000 years earlier and the human story is hundreds of thousands of years older than that. From 10,000 BCE to 1700 CE the human population increased by about .04% per year. And, depending on what you mean by “capitalism”, it’s a lot older than 300 years old.

Here’s another one.

Capitalism is, essentially, a system that maximizes more—more output, more goods, and more services.

That is certainly not what I learned in economics class and I have never worked for a company that had the objective of maximizing output. I doubt that Mr. Karabell has, either. What I learned is that markets optimize the production and distribution of goods, a far cry from maximizing output. Quite to the contrary, history tells us that command economies maximize production, often to their own detriment due to the misallocation of resources that is inevitable.

I see no conflict between a market economy and a static population but there may be such a conflict between a static population and a socialist regime that depends on an ever-increasing population to pay for its mistakes in the present. It’s an interesting question.

I had some issues with this observation as well:

Some societies, such as the United States and Canada, are able to temporarily offset declining population with immigration, although soon, there won’t be enough immigrants left.

Is that actually true? Is the native population of the United States actually declining and by how much? Or is the recent decline in the birth rate an artifact of a very high proportion of immigrant population with a sharply declining immigrant birth rate? Between 2008 and 2017 the immigrant birth rate declined three times faster than the native birth rate did. When you combine a historically high proportion of immigrants, a declining immigrant birth rate, and the effects of the second generation, it might mean that the U. S. native population is actually stabilizing. It’s hard to tell.

Still, I agree with his bottom line observation:

Either way, the reversal of population trends is a paradigm shift of the first order and one that is almost completely unrecognized.

I do not expect to live to see its implications realized. I’ll open the question to the floor. What would a world with a stable human population look like?

BTW the apothegm “Demography is destiny” appears to belong to author and demographer Ben Wattenberg. Whatever you may read Auguste Comte never said or wrote it. The word “demography” was not coined until two years before his death.

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We Change As We Age

Rather than commenting on Ben Carlson’s post at A Wealth of Commonsense about how our preferences change as we age, I will merely observe how I have changed over the years.

I am more skilled at everything I do except, possibly, those things requiring physical strength or agility.

I have learned more. I learn at least one new thing every day.

I am much more tolerant of BS than I was a half century ago. Ironically, that has come with an enhanced ability to detect it.

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Ex California Semper Aliquid Novi

I have reapplied Pliny the Elder’s famous wisecrack about Africa (“out of Africa there is always something new”) to California. Pliny the Elder was a master of brief, apt observations. If you know a Latin quote even in English, it is likely that it was originally one of his.

At MarketWatch Angela Antonelli takes note of a program recently started in California, CalSavers:

On July 1, private sector employers in California gained access to an innovative new program that enables them to facilitate retirement savings for their employees. In a state where half of all private sector workers do not have a retirement savings account or participate in a pension, CalSavers stands to make a significant difference in the lives of everyday workers.

The program couldn’t be simpler. Workers are automatically enrolled in individual retirement accounts (IRAs) with a default savings rate of 5% of their paychecks. They have the ability to opt out at any time or set a different contribution amount within the annual contribution limits of IRAs, which is $6,000 a year for savers under age 50 and $7,000 for people 50 and over.

Read the whole thing. That strikes me as a benign development and we should keep our eyes on it. Over time a program of that sort would be a good replacement for Social Security.

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About Those Jobs That Americans Won’t Do

In his Washington Post column about the fallout from ICE raids of a chicken processing plant in Mississippi, Henry Olsen provides support for a point I’ve been making for some time:

Such alleged flouting of the law is not a victimless crime. Each of the plants is located in cities or counties with high levels of poverty and extremely low incomes. There were plenty of workers available who probably would have loved to get jobs at the plants.

Jasper County, the location of one of the plants owned by Peco Foods, is a case in point. Jasper’s unemployment rate this June was 7.4 percent, more than twice the national average. A majority-black county, Jasper County has a median household income of only about $35,000 and a 23.8 percent poverty rate. Those who live there need those jobs, but the employer’s alleged scheme denied them that basic chance.

The other plant locations have similar demographics. Canton, Miss., is nearly 70 percent African American, with a 31.4 percent poverty rate for blacks. Scott County is 38 percent black, has a median household income of around $33,000 and a poverty rate more than 21 percent. Leake County is 42 percent black, has a median household income just under $36,000 and a poverty rate of nearly 22 percent. Pelahatchie, a town in Rankin County, is 40 percent black with a median income of just $35,000. Sense a pattern?

Given these figures, the economic impact of illegal immigration becomes clear. The Pew Research Center estimates that more than 7.5 million undocumented immigrants are in the U.S. labor force. Assuming their unemployment rate is roughly equal to the 3.7 percent national average, that means more than 7 million jobs are held by undocumented workers. That can’t help but depress wages and opportunities for native-born American. As the Mississippi figures show, those victims of illegal immigration are often exactly the poor people of color whose continued poverty is a national tragedy.

In interviewing the many applicants for the jobs recently made available by the ICE raids, reports I’ve read say that the employers are requiring six months of experience in deboning chickens which sounds like a good idea. I do wonder how they verified the experience of the illegal migrants they hired previously.

The point here is that illegal migrant workers are displacing native black workers. That has been the case for the 40 years we’ve had mass immigration from Mexico, Latin America, and the Caribbean. Why the rate of black youth unemployment is so high is no mystery. It’s just a problem that can’t be solved without border control.

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What’s Black and White and Red All Over?

The answer to the riddle above isn’t “a newspaper” but Chicago’s budget. The editors of the Chicago Tribune in anticipation of Mayor Lightfoot’s upcoming State of the City give her the following helpful advice:

  1. Don’t borrow more.
  2. Cut spending.

    Going hard at city expenses to balance the budget is the responsible strategy. Virtually every city operation will need to be vetted and then trimmed or restructured. Beyond core services, every program Chicago government provides will need to be justified or eliminated. Shrinking budgets and killing popular if unessential programs isn’t fun work for politicians. But it’s crucial and will give the mayor credibility. In tandem — provided she delivers the belt-tightening — Lightfoot can make her second ask: to raise taxes and fees.

  3. Get pension reform from Springfield.

    There are longer term fixes to pursue. Among them, the mayor can go to Springfield and ring the bell for pension reform. In Rahm Emanuel’s waning days in City Hall, he got on board with the idea of amending the Illinois Constitution’s pension clause to allow changes to government retirement benefits. He came to understand that there’s no viable alternative.

    Lightfoot has said she wants to protect the pension benefits city workers have earned. So do we all. But that doesn’t preclude a constitutional reform that would let City Hall limit pension benefits those workers earn in the future.

What remains unmentioned in the editorial is that Chicago’s population is declining. That Chicago cop in 1985 had three million people to support his pension. Now he has 2.5 million and the 2020 decennial census may reveal that it’s a lot lower than that. Don’t be shocked if Chicago’s population has fallen below 2 million. That means a lot less sales tax and fees than when there were 3 million Chicagoans. Making it up by raising property taxes is a mug’s game. High property taxes is one of the reasons they’re leaving.

Chicago’s teachers, police officers, and firefighters are all working under contracts up for renegotiation and it is not unreasonable to assume that they will want raises that the city simply cannot afford. The new mayor will be tested.

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Can’t Tell the Players

I’m losing track. Is Trump doing the bidding of Israel or is Israel under Trump’s thumb?

Just for the record I don’t care what two freshman Congressmen do or where they go as long as they don’t conduct foreign policy. Then I care. That would be a violation of the Logan Act for which they should be prosecuted. I’d just as soon that no sitting member of Congress travel outside the United States during his or her term of office.

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Global Recession and the United States

In his column at Bloomberg Noah Smith warns of the potential impact of an economic slowdown in China on the world economy:

In order to weather the Great Recession, China shifted its focus from export-oriented manufacturing to domestic real estate and infrastructure, and from private companies to state-owned enterprises. That probably caused productivity growth to slow. Meanwhile, China’s working-age population is now shrinking and its supply of surplus rural labor has dried up. Retooling its economy to produce less pollution and cut greenhouse emissions will slow growth as well, even if the long-term environmental effect is worth it.

But it’s not just a Chinese recession that threatens the world economy. The trade war, along with looming geopolitical tensions between the great powers, are threatening to open a rift between China and the rest of the world economy. Tariffs have global manufacturers scrambling to move production from China to countries such as Vietnam and Bangladesh. Companies, both Chinese and otherwise, are being forced to decide whether to consolidate their supply chains inside China or go elsewhere.

This decoupling will probably be protracted, and costly. The past 30 years have seen the construction of a global trading system centered around a China-U.S. axis, and now that structure is breaking down. In addition to the cost of reorganizing supply chains and the economic inefficiency introduced by the separation, companies are facing deep uncertainty about where they will be able to source their inputs and sell their products.

Through some creative cherry-picking and proof by innuendo he points to the adverse effect that a Chinese recession would have on the U. S. economy.

The reality is somewhat different. 70% of the U. S. economy consists of personal consumption expenditures, i.e. retail, health care, education, and houses. That’s a much larger role than in Europe or China. Exports just aren’t that important to us. Exports to China could go to zero and its effect on the U. S. economy would be minor.

My story of the last 40 years would be somewhat different from Mr. Smith’s. Since 1979 China’s economy has grown, like the Soviet Union’s before it, by moving labor assets from relatively non-productive agriculture to more productive manufacturing. In the process hundreds of millions of Chinese people have been lifted from the direst of poverty. Due to distortions in the Chinese economy much of that has been at the expense of workers in the U. S. and Europe.

What would have happened without those distortions? I think the Chinese economy would have grown faster and not at the expense of workers here. Mr. Smith apparently believes otherwise.

China has reached the end of its ability to increase productivity using the strategy that has served it for the last 40 years due to limits on its ability to improve agricultural productivity, its policy of food independence, a declining working age population, and other factors. Additionally, both here and in Europe we’ve gotten fed up with China’s misbehavior.

Europe is much more exposed to a Chinese recession than we are. While it is likely true that when China sneezes, Europe, Germany in particular, gets a cold. It is not nearly as true that a Chinese recession will inevitably spread to the United States.

An end to the present U. S. economic recovery is inevitable. We will go into recession again. I don’t know when it will be and neither does anyone else. But a recession here is less likely to be triggered by a slowdown in China than practically anywhere else in the world.

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Mathematical Truths vs. Economic Truths

In an op-ed at the Wall Street Journal critical of the Democratic presidential aspirants in particular and the Democratic Party in general, staunch Democrat Alan Blinder points out three “economic truths” that Democrats “can’t handle”:

  • Truth No. 1: You can improve and expand health-insurance coverage without going to a Medicare for All plan that bans private insurance.
  • Truth No. 2: You can make great strides toward mitigating climate change without embracing the Green New Deal.
  • Truth No. 3: International trade is good for the country, even when the U.S. has a large trade deficit.

In response to Dr. Blinder I would like to suggest some mathematical truths that he, apparently, can’t handle.

First, the reason, beyond the neatness of the slogan, for M4A and the abolition of private insurance is that its advocates can’t make their numbers add up without it. The only way they can envision lowering health care spending while increasing coverage is by legislating a single price for medical services—the Medicare reimbursement rate. Any other alternative within the power of the federal government would result in a substantial net increase in federal taxes. Since I don’t believe that the Congress will hold the line on reimbursement rates I am distrustful of Medicare for All.

More importantly increasing GDP or aggregate income is not necessarily “good for the country”. A simple example will prove that for you. Imagine that you increased the income of the Walton family by $1 trillion while holding all other incomes in the country constant. That would increase aggregate income and average income but I think it would manifestly not be good for the country. In the early Aughts the U. S. economy lost more than 2 million manufacturing jobs in very short order, while most job growth was in low-end service sector jobs. I would submit that was not good for the country. Loss of the manufacturing jobs might have been inevitable but losing them that quickly wasn’t.

As for his second point, I think that any carbon tax will inevitably be finessed as has been the case in Europe but that isn’t a mathematical truth, it’s a political one.

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