I’ve told this anecdote before but in the very first economics course I ever took the prof said “We don’t know how to create economic growth but we do know how to produce shortages”. That would be a good way to start answering P. J. O’Rourke’s question in his amusing post at American Consequences:
I had one fundamental question about economics: Why do some places prosper and thrive while others just suck?
He doesn’t offer an answer but let’s start formulating one ourselves, shall we?
There are countries with very few natural resources that have become rich (Japan) and countries with vast natural resources that are terribly poor (the Democratic Republic of Congo). If you look at history the countries that became richest earliest (U. K., Netherlands, the U. S.) had a few things in common: finance, a market system, limited government, and the absolute nuclear family. Starting with that base I think we can identify some of the factors that enabled countries to become wealthy:
- Good government including a functioning legal system
- Resources
- A solid financial system
- A market system
- Social structures
They all work together, sometimes in ways that aren’t obvious. No one of them is enough. China, despite enormous resources both human and natural, was horrifically poor due to bad government until about 1979. After 1979 it didn’t have good government but it had better government.
I’m skeptical that the U. S. can have terrible government, undermine the market system, the dollar, and the absolute nuclear family but remain a wealthy country. However, as Adam Smith observed there is a great deal of ruin in a nation.
And they don’t let their governments get too involved.
Prepare in 3-2-1 for Steve to blame greedy bankers…………just like last time.
WASHINGTON — President Joe Biden’s move to fire the top U.S. mortgage regulator is triggering calls from fellow Democrats to use the agency to expand access to loans for lower-income people, who have struggled to buy homes since the financial crisis.
That’s setting up a clash with Republicans over how far the government should go in shaping an industry that makes up one-fifth of the U.S. economy.
A long-awaited Supreme Court decision last month gave Biden the ability to remove the Trump-era leader of the Federal Housing Finance Agency, and he wasted no time. The president installed as interim director an agency veteran who says she’ll make affordable housing and combating discrimination a top priority, but who has underwhelmed those on the left, who say she is a mere caretaker.
Progressives are concerned that Biden will be too timid in changing course at the powerful agency overseeing Fannie Mae and Freddie Mac, the two companies that stand behind half of the $11 trillion U.S. mortgage market. Top Democrats are calling on Biden to quickly name a permanent leader — a position that Senate Banking Chair Sherrod Brown’s spokesperson said is “vital to the administration’s goals of building an equitable economy and must be filled quickly.â€
“They knew this moment was coming,†said Jesse Van Tol, CEO of the National Community Reinvestment Coalition, a housing advocacy group. “Why don’t we already have a nominee?â€
The pressure from the left poses a tough choice for Biden. Democrats for years have pushed the agency responsible for Fannie and Freddie to expand homeownership and narrow the racial wealth gap. But making mortgages cheaper and more accessible could also raise the risks of defaults and increase the odds that the companies would need another bailout in the future. Fannie and Freddie were seized by the government in 2008 to avert their failure during the subprime mortgage crash.
This time will, of course, be different……………..right?
The basis of prosperity is IQ. Everything else derives from it.
The big modifier is climate. The historical eras of economic and population booms occurred in warm periods: Minoan, Roman/Han, High Middle Ages, current era. Bad economies occur when the crops fail for years on end.