Yesterday I was rather surprised to find that I agreed with Charles Lane’s assessment in his Washington Post column. The Scandinavian countries do have better governance than we do here in the United states:

Undoubtedly, the Nordic nations, with their high incomes, low inequality, free politics and strong rule of law, represent success stories. What this has to do with socialism, though, is another question.

And the answer, according to a highly clarifying new report from analysts at JPMorgan Chase, is “not much.”

Drawing on data from the World Bank, the Organization of Economic Cooperation and Development and other reputable sources, the report shows that five nations — Sweden, Denmark, Finland, Norway and the Netherlands — protect property rights somewhat more aggressively than the United States, on average; exercise less control over private enterprise; permit greater concentration in the banking sector; and distribute a smaller share of their total income to workers.

“Copy the Nordic model if you like, but understand that it entails a lot of capitalism and pro-business policies, a lot of taxation on middle class spending and wages, minimal reliance on corporate taxation and plenty of co-pays and deductibles in its healthcare system,” the report notes.

Sanders and other left-leaning Democrats promise to pay for tuition-free college and Medicare-for-all with higher taxes on the top 1 percent of earners. Most Nordic countries, by contrast, have zero estate tax. They fund generous programs with the help of value-added taxes that heavily affect middle-class consumers.

In Sweden, for example, consumption, social security and payroll taxes total 27 percent of gross domestic product, as compared with 10.6 percent in the United States, according to the JPMorgan Chase report. The Nordic countries tried direct wealth taxes such as the one that figures prominently in the plans of Sen. Elizabeth Warren (D-Mass.); all but Norway abandoned them because of widespread implementation problems.

He underestimates U. S. taxation somewhat. In the United States in addition to the taxes listed above we have other state and local taxes adding to the tax burden. With all of that our total tax burden is still lower than that of Sweden but not that much lower. Depending on the state it’s probably between 15% and 20%. Our tax system is a bit more progressive than Sweden’s.

The Nordic countries’ use of co-pays and deductibles in health care may be especially eye-opening to anyone considering Sanders’s Medicare-for-all plan, which the presidential candidate pitches as an effort to bring the United States into line with European standards.

His plan offers an all-encompassing, government-funded zero-co-pay, zero-deductible suite of benefits, from dental checkups to major surgery — which no Nordic nation provides.

Let’s dig a little deeper. The last time the U. S. population was the size of Sweden’s today was 1820. A couple of generations ago, when Sweden adopted its cradle-to-grave welfare system not only had it been prosperous and growing for some time but its population was 90% ethnic Swedes. As economic growth has slowed, its welfare system has become less generous.

Sweden’s present population is about the same in number as that of the metro Chicago area. I suspect that Chicago would have better governance, too, if it were 70% ethnic Swedes and cultural Lutherans as Sweden is today. Instead we have different factions vying for larger government outlays for themselves and enormous corruption, something practically unknown in Sweden.

For the U. S. Congress to be as representative as Sweden’s parliament is of Swedes, we’d need to have 10,000 Congressio9nal representatives.

When the Swedes faced a financial crisis a few years back, it nationalized the banks, the banks’ shareholders lost their equity, they liquidated the banks’ remaining assets, reorganized, and moved on. During our financial crisis we preserved the banks and their stockholders and are continuing to prop them up. We’re pretty sure we’ll do it again in the next financial crisis and there will be a next financial crisis.

When the Swedes’ large auto company was in financial problems, they let it go. When our largest auto company was in trouble, we preserved it.

All of the countries with which Sweden has land borders have median incomes within 15% of that of Sweden’s. We have a long land border with a country in which the median household income is a quarter of what it is here.

In Sweden the typical physician earns about $80,000. That’s about double the income of the average Swedish household. It’s also about a third of what American physicians are paid which is about four times the typical American household income.

In short the differences between Sweden and the U. S. are substantial. As I have pointed out before countries are systems not cafeterias. Their cultures, politics, and economics are all interrelated. If your objective is for the United States to become more like Sweden, start by explaining to me your plan for making us 70% cultural Lutherans. That’s part of the system.

Here’s a question for all of you financial types out there. How large a tax on trades on the NYSE would it take to kill the stock market? I think it would take a lot less than some people appear to be assuming. A lot of trades these days are very short term trades with extremely small margins.

I haven’t looked lately but I think the daily trading volume is something like $200 billion.

There is a wonderful line in the musical Once Upon a Mattress: “We must think of a test that looks fair and sounds fair and seems fair and isn’t fair”. Think of that as you watch the debates of the Democratic presidential candidates. At RealClearPolitics Bill Scher concurs:

Presidential campaign debates should be fair. Everybody running for president deserves the chance to make their case to the public on a level platform.

And yet, they can’t be completely fair. Right now, there are 178 Democratic presidential candidates who have filed with the Federal Election Commission. They can’t all be on the same broadcast network soundstage. Someone has to draw the line.

Unfortunately, as we will see in the first presidential primary debates this Wednesday and Thursday, the Democratic National Committee has drawn a ridiculous line.

The entire purpose of the entire procedure, debates, primaries, caucuses, and all, is to allow the DNC to coronate the candidate they’ve picked while seeming to be fair and democratic.

I just love the graph above which I sampled from this post at The Atlantic by Lyman Stone on “how the Boomers ruined everything”. I would submit that it tells us exactly nothing other than, perhaps, the wages of illegal immigrants are pretty low. Why? Because it aggregates things that should not be aggregated. So, for example, why combine PhDs and MDs? I would suggest that if you disaggregated them it would tell a dramatically different story. Most people with PhDs earn less than $60,000 per year while most medical doctors earn more than $150,000 per year (the median wage is over $190,000/year). Similarly with Master’s degrees. The median starting salary for a Harvard MBA is $160,000. The median income for an MFA (Master of Fine Arts) is under $40,000. To put my complaint into statistical terminology the distributions within the categories are themselves not Gaussian but bimodal or polymodal.

About the article itself there are lots of things in it with which I disagree. For example, I don’t think you can blame the huge increase in licensing on the Baby Boomers. Quite to the contrary. Licensing allows people without experience to compete with people who have experience. Those who benefited most from the big bump over the last 20 years have been GenXers.

But this I agree with:

The average American was 32 years old in 2000, and 37 in 2018. The retiree share of the population is booming, while birth rates are plummeting. When a society gets older, its politics change. Older voters have different interests than younger voters: cuts to retiree-focused benefits are scarier, while long-term problems like excessive student debt, climate change, and low birth rates are more easily ignored.

all of which was completely foreseeable and completely ignored over a period of 60 years. Which brings me to the real culprits. The Baby Boomers do not now and never have controlled the United States. That would be the Silent Generation. Just look at the Congressional leadership and you’ll see what I mean.

There are lots of interesting charts and graphs, mostly excellent examples of how to lie with statistics. Just as an example, when the Baby Boomers were born the U. S. immigrant population was 4%. Now it’s 17%, many of them with poor command of English and not much formal education. That is a formula for many of the ills presented in the article. When the immigrant population was 4%, you didn’t need to disaggregate immigrants. Now you do or everything is just an inexplicable mystery.

Speaking of axes to grind, you might be amused by this article by Eric Levitz in New York Magazine. It seems that the Federal Reserve has been undermining economic growth:

Our esteemed technocrats produced a cornucopia of creative explanations for each of these phenomena. Overly generous disability benefits had lured able-bodied Americans out of the labor force and into irrevocable dependency. Or else excessively entertaining video games had persuaded a generation of young men to pursue a life of PlayStation and poverty over one of work and prosperity. Regardless, the decline could not be averted through economic stimulus—the labor market was not failing these workers; they were failing the labor market.

As for wages, globalization and automation had placed new limits on American workers’ bargaining power; ask for too much, and the boss will simply replace you with a robot or a less-demanding worker from the developing world. Or else workers simply hadn’t earned raises — productivity growth was too low for firms to increase wages without eating into profits. Or sluggish wage growth merely reflected demographics; as the population aged, senior-level workers were being replaced with entry-level ones with lower salary expectations. Or (more credibly) perhaps the long death of the American labor movement had left workers too atomized and demoralized to ask for what they’re worth.

Regardless, wage growth couldn’t be significantly improved through further fiscal or monetary stimulus. The economy was already nearing full employment. The labor market simply couldn’t get much tighter.

A few lonely voices disputed this consensus. In their view, these two distinct mysteries weren’t actually distinct — or all that mysterious. The reason wage growth wasn’t rising as one would expect with the economy near full employment was that the economy wasn’t near full employment. And the reason the economy wasn’t near full employment was that all those prime-age workers who’d supposedly exited the labor force for reasons totally unrelated to the strength of the economy hadn’t actually exited the labor force for reasons totally unrelated to the strength of the economy.

I don’t really ask much of the Federal Reserve. Only that they regulate banks, their primary charter, something they have steadfastly been unable to do and not stray beyond their mandates, something else they are apparently unable to do.

The Federal Reserve Board of Governors does not hold the responsibility of “running the economy” and they most emphatically do not have the responsibility of ensuring that the Dow-Jones Industrial Average rises, which seems to have become a primary objective.

In his Washington Post column Robert Samuelson laments that the economics textbooks widely in use are largely obsolete:

Mankiw’s introductory text, and surely some others, has been overtaken by events.

To be sure, in a book of roughly 800 pages, there’s a huge amount of useful, clearly presented information on many subjects: supply and demand; global trade; competition or its absence; wages; government regulation, spending and borrowing — and much more. When there are disagreements among economists, Mankiw does his best to summarize conflicting views.

But as a teaching device, “Principles of Economics” has fallen behind. There’s little analysis of the impact of the Internet and digitalization on competition and markets. I couldn’t find either Apple or Facebook in the index; Google gets a few mentions.

Likewise, little attention is paid to the 2007-2009 Great Recession, the worst business downturn since the Great Depression, which also receives scant coverage relative to its significance. (Together, the two recessions receive about three pages, from 725 to 727.)

There’s some misleading information about the Great Recession and parallel financial crisis. On Page 691, we have this: “Today, bank runs are not a major problem for the U.S. banking system or the Fed.” This would surely surprise the Fed, which poured trillions of dollars into the economy to prevent financial collapse.

Mankiw’s assertion can be defended on narrow, technical grounds. There was no run by retail depositors (people like you and me) against commercial banks. We were protected by deposit insurance. But there was a huge run — a panic — by institutional investors (pension funds, hedge funds, insurance companies, endowments) that withdrew funds from traditional banks, investment banks and the commercial paper market.

Allow me to present an alternative view. You will know that economics is primarily a science and only secondarily politics by other means when demands for relevancy disappear. Do people demand relevancy from physics, chemistry, or mathematics texts? If they do we have entered a very sad period.

I was taught introductory economics from Paul Samuelson’s text. I’ll need to take a look at it again. I suspect it’s about as relevant as it was 60 years ago.

The editors of the Washington Post have a simple strategy for eliminating ransomware attacks on cities and other institutions:

There is a way to break the cycle: pass a federal law barring ransomware payments. Along with such a prohibition, funds should be devoted to help cities and states become more secure in the first place, focusing especially on the need to have backups of critical data. Then the Department of Homeland Security could set up a digital ghostbusters task force to help municipalities come back online after an attack. Those that had implemented adequate defenses could get aid from the feds in footing the bill. Those who surrender to hackers would face fines sufficiently larger than the ransom.

That would eliminate ransomware attacks in the same way that laws against speeding have eliminated speeding and those against smoking marijuana have abolished use of the demon weed. Perhaps a more apt analogy would be to illegal immigration. We have laws against entering the United States without presenting yourself to a duly constituted authority. Those have been effective, haven’t they?

And subsidizing state and local governments for inadequate security? I can tell you with a confidence based on experience that governments would use less money for computer security and more to give raises to public employees.

By their very nature it’s hard to point the finger at where these attacks are originating but forensic evidence suggests that the overwhelming preponderance of the attacks originate from one or more of the following: Russia, Ukraine, China, North Korea, Iran. See a pattern here? Sanctions. What about China? I would suggest that it is nearly impossible for cyberattacks to originate in China without at least the tacit approval of the Chinese government.

What all of this suggests is that there is an urgent need to for an international accord on cyberwarfare similar to those governing bacteriological and chemical warfare and taken if anything more seriously.

Here’s another suggestion: hold the companies that produced the vulnerable operating systems (mostly Microsoft and Google) responsible.

I don’t think that in his New Yorker piece John Cassidy has entirely put his finger on the reasons that there’s been a resurgence of interest in the United States in a political-economic theory that’s been on life support for 30 years—state socialism. I think he’s got this part right:

In retrospect, a key moment for the revival of American socialism was the Wall Street bailout of 2008 and 2009, when taxpayers were forced to rescue the very rogues who had helped bring about the financial crisis, even as many ordinary families were being evicted from their homes for failing to service their mortgages. From an economic perspective, there were some sound reasons to prevent the financial system from collapsing. From a political perspective, the decision to save the banks persuaded many Americans—on the left, center, and right—that the political system had been captured. There is a direct linkage from the Wall Street bailout to the Occupy Wall Street movement, the Sanders campaigns of 2016 and 2020, and to the Presidential campaign of Elizabeth Warren, who made her reputation as a vocal critic of rapacious and irresponsible financiers.

Our present crony capitalist system should be condemned loudly and often. It is at odds with liberal democracy.

It astonishes me that he has apparently never heard of Fabian socialism. Fabian socialism is a gradualist approach to socialism (rather than by revolutionary overthrow) that largely came to rely on control of the primary means of production—money. Bernie Sanders likes to cloud the issue by calling himself a “democratic socialist” but he’s actually a Fabian socialist.

Socialism is a completely inadequate way of characterizing the states that he and those who proclaim themselves democratic socialists claim to admire. Christian-ethnic democracy would be better. Everywhere that cradle-to-grave welfare states were adopted were tiny, Christian, and ethnically homogeneous. Religion is a key component. The countries of Scandinavia were all Lutheran and 90% or more Danish, Norse, Swedish, or Finnish when their welfare state systems were adopted. That they are abandoning their welfare states as they become more diverse is prima facie evidence for my case.

Whenever multi-confessional, multi-ethnic empires (like the United States) have adopted socialism it has been Stalinist state socialism. You may not like that it has been the case but it has been the case.

That’s what drives my hypothesis about why state socialism has survived despite its failures. It’s about power. There will always be people who want to control the rest.

I was somewhat shocked by this editorial from the Chicago Sun-Times urging newly-elected Chicago Mayor Lori Lightfoot not simply to balance Chicago’s budget by increasing taxes (as the State of Illinois has done) but by cutting costs as well:

Mayor Lori Lightfoot is telling Chicagoans to expect higher taxes and fees as she and the City Council work to close a budget gap this summer that could be $700 million to $1 billion.

That should surprise nobody. Skyrocketing pension obligations alone have long made it obvious that more revenue will be necessary — and that the city will have to pinch pennies in union contract negotiations.

But the immediate shock to the wallet will be easier for taxpayers to bear if they see city officials working overtime to close at least part of that fiscal year 2020 budget gap with more creative cost savings.

Here are their proposals:

• Finding ways to reduce the millions of dollars the city pays to manage pension investments. The city should look at turning to private fund managers or consolidating pension funds into the Illinois Municipal Retirement Fund.
• Holding tough in negotiating collective bargaining agreements. Most of city’s collective bargaining contracts are up for renegotiation, which creates an opportunity for the city to find cost savings. The savings would come, most obviously, from holding down salary increases. But as city Inspector General Joe Ferguson argued persuasively in a report two years ago, simple work rule changes, such as how the duties of a particular job are defined, could help the city contain costs.
• Rethinking the city policy of self-insuring itself as the city spends millions of dollars to settle lawsuits against the Police Department. A suggestion has been to use an outside insurance company, which might be able to bring down those costs. Professional auditors might be able to manage claims in a manner more beneficial to taxpayers.
• Ensuring the city follows through on Lightfoot’s initial steps toward professionally managing workers compensation claims, which are significantly higher than in comparable cities. Now that Ald. Ed Burke is no longer in charge of the worker’s comp program, running it like a private club, we would expect to see major finance savings.
• Replacing the scattershot “aldermanic menu money” system of funding repairs for streets, sidewalks, alleys streetlights and the like with a centrally coordinated and more cost-efficient system based on long-term planning.
  Creating an online portal for approving and issuing some types of permits. As it works now, they must go through the City Council, chewing up staff time and generating unnecessary red tape.
• Consolidating city and county election services. This one won’t happen anytime soon, given the need for legislation from Springfield, and it likely would save more money for the county than the city. But it represents the kind of long-ranging planning that can instill confidence in taxpayers.

Two major cost-savings strategies go unmentioned: converting all new city employees from the present defined benefit plan to a defined contribution plan and a critical overhaul of wages throughout the city. There are laborers employed by the city who bring down $75,000 a year plus a city-provided health care plan and a defined benefit pension plan. Everyone knows those “laborers” are mostly relatives of Chicago pols being carried on the city payroll.

Chicago is already teetering on the brink of a precipice. Chicago’s low credit rating places the time at which the city will be unable to borrow in sight. Half measures aren’t enough.