A parable for the world economy. (This is the Afterword that appears in my book The Globalization Paradox.
It is an attempt to state the book's central argument in the form of a bedtime story.) Once upon a time there was a little fishing village at the edge of a lake. The villagers were poor, living off the fish they caught and the clothing they sewed. They had no contact with the other inland villages, which were miles away and reached only after days of travel through a dense forest. The economics of a parable, explained. I thought it would be useful to clarify the economic theory that lies behind my parable on the global economy.
The book covers these issues at length, so I thought that the links with the parable, coming at the end as it does, would be obvious to the reader. Obviously this need not be the case for those who haven't read the book and encounter the parable on its own. So at the risk of explaining the obvious, here we go. The parable identifies three problems that call for collective action and exemplify one the central arguments in the book that markets and the state are complements.
There is common-pool problem that markets cannot solve, in the form of incentives to overfish and deplete a commonly shared resource. The paved road enables much higher volumes of trade, but it also creates two additional problems. It aggravates an existing market failure. These issues generate conflict between different groups in society. Two further notes on this outcome. The Mauritius Miracle by Joseph E. Stiglitz. Exit from comment view mode.
Click to hide this space NEW YORK – Suppose someone were to describe a small country that provided free education through university for all of its citizens, transportation for school children, and free health care – including heart surgery – for all. You might suspect that such a country is either phenomenally rich or on the fast track to fiscal crisis. After all, rich countries in Europe have increasingly found that they cannot pay for university education, and are asking young people and their families to bear the costs. For its part, the United States has never attempted to give free college for all, and it took a bitter battle just to ensure that America’s poor get access to health care – a guarantee that the Republican Party is now working hard to repeal, claiming that the country cannot afford it. But Mauritius, a small island nation off the east coast of Africa, is neither particularly rich nor on its way to budgetary ruin.
The Wealth of Nature. The Wealth of Nature proposes a new model of economics based on the integral value of ecology.
Building on the foundations of E.F. Schumacher's revolutionary “economics as if people mattered”, this book examines the true cost of confusing money with wealth. By analyzing the mistakes of contemporary economics, it shows how an economy centered on natural capital—the raw materials that support human life—can move our society toward a more productive relationship with the planet that sustains us all. The Wealth of Nature suggests public policy initiatives and personal choices that can help alleviate the economic impact of peak oil. These strategies must address not only financial concerns, but the issues of resource depletion and pollution as well. Another Harsh Reality. In A Harsh Reality I wrote about the Green Revolution and its effects on food production.
In this article I’d like to focus your attention on our ocean fisheries. World fisheries are in a state of collapse – caught between plagues of jellyfish, overfishing, nutrient pollution, bioaccumulation of toxics in marine mammals, carbon emissions turning our oceans acidic, the oceans phytoplankton declining by about 40 per cent over the past century, dead zones, garbage patch’s, increasing ocean temperatures and changing currents - our entire marine food chain seems to be in peril. The endgame of the credit card nation – 40 year bull market in revolving debt expansion comes to a sudden halt. U.S. consumers on average have 4 credit cards with 1 out of 7 having 10 or more. Credit cards are the gateway financial opiate of choice for many spenders.
Banks understand that if consumers begin mistaking debt for actual wealth then this would lead to more willingness to borrow on bigger ticket items like cars and homes as the appetite for credit expands. This psychological gamble paid off multiple dividends over the decades as many real income strapped Americans started confusing housing debt, auto loans, and plastic shiny cards in the wallet as some kind of newfound wealth. Access to debt suddenly became a new definition for wealth. No other country has manic usage of debt like the United States. 1 out of 7 Americans carries over 10 credit cards.
Another 1 in 7 uses at least half the balance on their credit card. Credit card debt ends 40 year bull market Since the first credit card was introduced to the American public it took off like apple pie, pinball machines, and gnomes on the front lawn. Why has credit card debt contracted so quickly?