A Free-Market Perspective

[Armenian]

Re: Free-Market Economics

I don't think we have any fundamental disagreements. Our only point of contention seems to be the issue of nationalization. Who are "hostile entities" that would "exploit it"? What is "it" that they will exploit? I fail to see the connection between what you are asserting and what can be. If a foreign company wants to invest and buy capital and infrastructure in Armenia, what is so bad about it? How is it exploitation if they make an offer for a bid, and there is a sale? If they can invest capital and create jobs and perhaps handle a certain industry more efficiently, how would that be "exploitation"?

Anon, seriously think about this issue. It's really a no brainer. Official Yerevan simply can't allow nations that have serious political problems with it to simply buy up assets in Armenia just because they have money to invest. In other words, we can't allow wealthy nations with disposable funds investing money into longterm/short-term agendas that seeks to undermine their opposition/competition. Simply allowing the highest bidder into your sensitive/strategic national infrastructure, especially when you are a small and vulnerable nation, is dangerous on many-many levels. It's suicidal, in my opinion.

Just think of someone in the US like Ted Turner or William Soros (two individuals that have more than enough money to purchase every single country in the Caucasus and still maintain a billionaire's status) purchasing every single radio station, newspaper and television station in Armenia... Just imagine a Turkish business conglomeration purchasing Armenia's communications network... Just imagine Azerbaijan purchasing Armenia's energy grid... Just imagine the US purchasing Armenia's nuclear power station...

Any Armenian president that would even 'think' about allowing such a thing should be shot in the head. Opening up a nation for complete and utter exploitation economically, culturally and politically is precisely why various institutions in the West have been pushing the "Free Market" concept worldwide because it simply benefits the rich and the powerful. I like the "concept" per se, but regardless of how wonderful it looks on paper it's simply yet another tool wealthy nations use to subjugate and dominate lesser nations without the use of the gun.

As I said, the Fee Market concept works for the world's most powerful and the most wealthy. For the rest of the lesser nations, as Nazi Germany, the Russian Federation, and China have revealed, a form of "National Socialism" is the 'only' way to safeguard one's nation against predators - yet also allow for economic growth.

[Anonymouse]

Re: Free-Market Economics

Mouse, do you really want a turkish firm to own property in Armenia, let alone property in security related sectors?

To my knowledge, no government on this earth allows anything relating to its national security to be sold.

[Anonymouse]

Re: Free-Market Economics

Anon, seriously think about this issue. It's really a no brainer. Official Yerevan simply can't allow nations that have serious political problems with it to simply buy up assets in Armenia just because they have money to invest. In other words, we can't allow wealthy nations with disposable funds investing money into longterm/short-term agendas that seeks to undermine their opposition/competition. Simply allowing the highest bidder into your sensitive/strategic national infrastructure, especially when you are a small and vulnerable nation, is dangerous on many-many levels. It's suicidal, in my opinion.

Just think of someone in the US like Ted Turner or William Soros (two individuals that have more than enough money to purchase every single country in the Caucasus and still maintain a billionaire's status) purchasing every single radio station, newspaper and television station in Armenia... Just imagine a Turkish business conglomeration purchasing Armenia's communications network... Just imagine Azerbaijan purchasing Armenia's energy grid... Just imagine the US purchasing Armenia's nuclear power station...

Any Armenian president that would even 'think' about allowing such a thing should be shot in the head. Opening up a nation for complete and utter exploitation economically, culturally and politically is precisely why various institutions in the West have been pushing the "Free Market" concept worldwide because it simply benefits the rich and the powerful. I like the "concept" per se, but regardless of how wonderful it looks on paper it's simply yet another tool wealthy nations use to subjugate and dominate lesser nations without the use of the gun.

As I said, the Fee Market concept works for the world's most powerful and the most wealthy. For the rest of the lesser nations, as Nazi Germany, the Russian Federation, and China have revealed, a form of "National Socialism" is the 'only' way to safeguard one's nation against predators - yet also allow for economic growth.

I think we should distinguish between governments from purchasing such things (or other entities such as a George Soros), who are not a product of the market themselves, but of government granted subsidies and monopolies and help, with entities that actually have come about out via private and voluntary means.

I still don't see where the "exploitation" comes in. Perhaps I may by 'myopic' but where you see war, I see opportunity. And this idea to you may sound crazy and radical but I don't see how protectionism and isolation will benefit any country in the long run, even Armenia. Even then Armenia is very economically free according to the Heritage Foundation. Furthermore, allowing other governments to purchase stock in Armenia is not exactly a 'free market'.

As far as China, that is the best example of a capitalist country that has roundly effect free market reforms and continues to do so. Arguably, China is becoming more capitalist than the U.S.

[Armenian]

Re: Free-Market Economics

I think we should distinguish between governments from purchasing such things (or other entities such as a George Soros), who are not a product of the market themselves, but of government granted subsidies and monopolies and help, with entities that actually have come about out via private and voluntary means.

You simply 'cant' distinguish government entities purchasing things because governments are simply too smart for that. Governments set up proxies, surrogates, to do their work. Examples are many. I thought this would be obvious for you, Anon. Moreover, your suggestion is in essence implying that a government should 'control' who can purchase what... Isn't this against the Free Market concept?

I still don't see where the "exploitation" comes in.

I know you would be able to see it if you put aside your personal convictions regarding economic models and begin to look at the real world we live in. However, a simple little example: Just two days ago Iranian authorities hanged an Iranian telecommunications worker who they accused of spying for the Israeli Mossad. Apparently, the worker turned spy was using his access to Iran's telecommunications infrastructure to do his spy work. Now, just imagine: It's bad enough that we have xxxxedup citizens that would even sell their mothers to the highest bidder, imagine how much more dangerous the situation would be if let's say Yerevan allowed a Turkish or an American entity to purchase Armenia's telecommunications network... Instead of simply protecting yourself from individual agents, you would essentially be handing over your sensitive assets 'directly' to your enemies. And in doing so you would simply be inviting disaster. Another example: Yerevan recently sold one of their small gold mines in southern Armenia to a North American firm. Soon after the "gold mining firm" set up operations locals in the region in question began making accusations that agents were using the site in question as a surveillance/observation point spying on Iran...

Perhaps I may by 'myopic' but where you see war, I see opportunity.

That experiment can run the risk of ruining a nation. I am not about to risk such an experiment with Armenia. I rather err on the safe side...

And this idea to you may sound crazy and radical but I don't see how protectionism and isolation will benefit any country in the long run, even Armenia.

Protectionism yes, isolation no. And you can have one without the other. Western officials have been spewing the BS about protectionism leading to isolation. Their reasoning behind this is obvious, they want unhindered access into the economies of vulnerable nations.

Even then Armenia is very economically free according to the Heritage Foundation. Furthermore, allowing other governments to purchase stock in Armenia is not exactly a 'free market'.

Look at what is occurring in Armenia closely. Officials in Armenia have been selling virtually everything of strategic value in Armenia to Russia. This is giving the false statistical impression that Armenia is practicing "Free Market." In reality, Armenia is practicing protectionism of sorts. Do you think an American or Turkish company has a chance of purchasing anything of real strategic value in Armenia?

As far as China, that is the best example of a capitalist country that has roundly effect free market reforms and continues to do so. Arguably, China is becoming more capitalist than the U.S.

Look at China again. They impose high tariffs on their imports thereby encouraging domestic products. Chinese authorities have direct control over their nation's strategic assets. Moreover, certain sectors of China's economy is out-of-limits for foreign purchasers. You can 'invest' in China but you can't purchase anything of real value there...

The closest economic model that China (and Russia) resembles today is - National Socialism on top, Free Market below...

And that is the soundest economic model to follow for a nation like Armenia.

[Armanen]

Re: Free-Market Economics

To my knowledge, no government on this earth allows anything relating to its national security to be sold.

Armenia is an example as Armenian highlighted in his post.

but where you see war, I see opportunity.

Could you expand on this? I think I know what you're getting at but I'd like to know for sure.

[Anonymouse]

Re: Free-Market Economics

Armenia is an example as Armenian highlighted in his post.




Could you expand on this? I think I know what you're getting at but I'd like to know for sure.

You simply 'cant' distinguish government entities purchasing things because governments are simply too smart for that. Governments set up proxies, surrogates, to do their work. Examples are many. I thought this would be obvious for you, Anon. Moreover, your suggestion is in essence implying that a government should 'control' who can purchase what... Isn't this against the Free Market concept?

I know you would be able to see it if you put aside your personal convictions regarding economic models and begin to look at the real world we live in. However, a simple little example: Just two days ago Iranian authorities hanged an Iranian telecommunications worker who they accused of spying for the Israeli Mossad. Apparently, the worker turned spy was using his access to Iran's telecommunications infrastructure to do his spy work. Now, just imagine: It's bad enough that we have xxxxedup citizens that would even sell their mothers to the highest bidder, imagine how much more dangerous the situation would be if let's say Yerevan allowed a Turkish or an American entity to purchase Armenia's telecommunications network... Instead of simply protecting yourself from individual agents, you would essentially be handing over your sensitive assets 'directly' to your enemies. And in doing so you would simply be inviting disaster. Another example: Yerevan recently sold one of their small gold mines in southern Armenia to a North American firm. Soon after the "gold mining firm" set up operations locals in the region in question began making accusations that agents were using the site in question as a surveillance/observation point spying on Iran...



That experiment can run the risk of ruining a nation. I am not about to risk such an experiment with Armenia. I rather err on the safe side...



Protectionism yes, isolation no. And you can have one without the other. Western officials have been spewing the BS about protectionism leading to isolation. Their reasoning behind this is obvious, they want unhindered access into the economies of vulnerable nations.



Look at what is occurring in Armenia closely. Officials in Armenia have been selling virtually everything of strategic value in Armenia to Russia. This is giving the false statistical impression that Armenia is practicing "Free Market." In reality, Armenia is practicing protectionism of sorts. Do you think an American or Turkish company has a chance of purchasing anything of real strategic value in Armenia?



Look at China again. They impose high tariffs on their imports thereby encouraging domestic products. Chinese authorities have direct control over their nation's strategic assets. Moreover, certain sectors of China's economy is out-of-limits for foreign purchasers. You can 'invest' in China but you can't purchase anything of real value there...

The closest economic model that China (and Russia) resembles today is - National Socialism on top, Free Market below...

And that is the soundest economic model to follow for a nation like Armenia.

I am not naive enough to believe there will be a truly free market, as long as governments exist. So the sole purpose of government has to be national defense and national security. Beyond that, government should have a very limited role in terms of capital and production. Despite Western imperialism, Western imperialism would not have allowed itself to flourish had they not undergone freeing up capital, and property rights which ushered in the biggest human growth and creativity.

Armenia has no vital importance on an international stage. It is insignificant, with barely and resources. The only way to improve it's economy has to be to encourage and foster foreign investment. It would have to be the equivalent or try to aim to be the equivalent of something specialized where other companies and countries would invest - akin to how Delaware is in America, where almost all corporations are incorporated in Delaware due to favorable laws, or Switzerland, with its hub of banking. In conclusion, Armenia needs to tap in some sort of role akin to that.

So if a foreign conglomerate, Turkish or otherwise, were to purchase a mine in Armenia let's say, what benefit would it be to invest there and wish the ill will of its workers? Businesses that are separate from government operate on a profit motive. If that were to occur, it would not be in its interest to see that operation fail, so I don't see where the "exploitation" that Armenian refers to comes in.

In addition, for the future, Armenia cannot go the route of protectionism and isolation. It simply cannot afford to do so despite nationalistic fervor as this will only harm it. This goes beyond 'personal convictions', but only reflects that economics is a science, the study of human action in a world of scarcity, and there are certain principles which cannot be absolved by no matter how much personal conviction due to nationalism we invoke. For example, opening up the border with Turkey would be a tremendous boon to Armenia's economy. If there is a way to lift the blockade without having to give up the lands in Artsakh, it should be allowed as this could increase Armenia’s GDP significantly. Yet, we have many nationalists and protectionists who by their own personal convictions think this is harmful.

And besides that, the role of a free market in general, and in Armenia in particular, is not limited to who or what foreign company buys what asset, it is beyond it. It goes down to the basic level of voluntary relations between individuals, dealing with wages and labor and property rights and government regulations of intrastate activity and business.

Government's cannot absolve economic laws. In other words, just because a government is socialistic or regulates something, does not mean it is impervious or immune to economic laws, or that its interventions will not result in unintended consequences, such as inflation or unemployment via central banking manipulations.

So far, Armenia's continued privatization over time has benefited the Armenian economy, contrary to following a model of protectionism.

[Anonymouse]

Re: Free-Market Economics

Mythology of the Minimum Wage

Daily Article by D.W. MacKenzie

Once again politicians and pundits are calling for increases in the legal minimum wage. Their reasons are familiar. Market wages are supposedly immoral. People need to earn a "living wage." If the minimum wage went up at least to $7, or better still to near $10 an hour, millions would be lifted out of poverty.[1]

The economic case against minimum wage laws is simple. Employers pay a wage no higher than the value of an additional hour's work. Raising minimum wages forces employers to dismiss low productivity workers. This policy has the largest affect on those with the least education, job experience, and maturity. Consequently, we should expect minimum wage laws to affect teenagers and those with less education. Eliminating minimum wage laws would reduce unemployment and improve the efficiency of markets for low productivity labor.

There are a few economists who have been leading the charge for higher minimum wages. Some of these economists have obvious ideological leanings. Economists connected with the Left -orientated Economic Policy Institute and the Clinton Administration have concocted a rational for minimum wage increases. According to these economists higher wages make employees more content with their jobs, and this leads to higher worker productivity. Thus workers will be worth paying a minimum wage once their employers are forced to pay these wages. Of course, if this were true — if employers could get higher productivity out of less educated and experienced workers by paying higher wages — they would be willing to do this without minimum wage legislation. But the economists who make this case claim to have empirical evidence that proves them right. Economists David Card and Alan Krueger have published studies of the fast food industry indicated that small increases in the minimum wage would cause only minor job losses, and might even increase employment slightly in some instances. These studies by Card and Krueger show only that a small increase in minimum wage rates might not cause much of an increase in unemployment. Such studies ignore the fact that the current level of minimum wages are already causing significant unemployment for some workers.

The economic case for minimum wage increases has gained some ground with public and even professional opinion. Even some free market leaning economists, like Steven Landsburg, have conceded that minimum wages increases do not affect employment significantly.[2] Landsburg notes that critics of minimum wage laws emphasize that they have a disproportionate effect on teens and blacks. But he dismisses these critics because "minimum wages have at most a tiny impact on employment … The minimum wage kills very few jobs, and the jobs it kills were lousy jobs anyway. It is almost impossible to maintain the old argument that minimum wages are bad for minimum-wage workers."

Real statistics indicate that the critics of minimum wage laws were right all along. While it is true that minimum wages do not drive the national unemployment rate up to astronomical levels, it does adversely affect teenagers and ethnic minorities. According to the Bureau of Labor Statistics the unemployment rate for everyone over the age of 16 was 5.6% in 2005. Yet unemployment was 17.3% for those aged 16-19 years. For those aged 16-17 unemployment was 19.7%. In the 18-19 age group unemployment was 15.8%. Minimum wage laws do affect ethnic minorities more so than others.[3] The unemployment rate for white teens in the 16-17 age group was 17.3% in 2005. The same figures for Hispanic and black teens were 25% and 40.9% respectively. Of course, these figures decrease for older minorities. Blacks aged 18-19 and 20-24 had 25.7% and 19.9% unemployment in 2005. For Hispanics unemployment was slightly lower — 17.8% at age 18-19 and 9.6% at age 20-24.

Landsburg might maintain that most of these lost jobs are lousy jobs that teens will not miss. DeLong thinks that minimum wage laws can help to avert poverty — workers who keep their jobs at the minimum wage gain much, while unemployed workers lose little. Part of the problem with this argument is that it involves arbitrary value judgments. According to mainstream economic theory, we achieve economic efficiency when markets clear because this is how we realize all gains from trade. With teen unemployment in double digits — running as high as 40.9% — it is obvious that some labor markets are not clearing. If labor market imperfections led to such levels of unemployment, economists like DeLong, Card, and Krueger would call for government intervention to correct these "market failures." Yet they find double digit teen unemployment acceptable when it derives from government intervention. Why? Because they want to use such policies to redistribute income.[4]

Mainstream economic theory lacks any basis for judging the effects of income redistribution. According to textbook economics we attain the highest level of economic efficiency when markets clear, when we realize the maximum gains from mutually advantageous trade. Income transfers benefit some at the expense of others. Economists have no scientific methods for comparing gains and losses through income transfers.[5] Once economists depart from discussing efficiency conditions and begin to speak about income redistribution, they become advocates of a political agenda, rather than objective scientists. The jobs lost to minimum wage laws might not seem worthwhile to DeLong or Landsburg, but they obviously are worthwhile to the workers and employers whom these laws affect. Why should the value judgments of a few armchair economists matter more than the interests of would be employees and employers? These jobs may be "lousy jobs," but one could also argue that these jobs are quite important because they are a first step in gaining job experience and learning adult responsibility.

A second problem with the case against minimum wages is that they affect older workers too. As already noted, workers in the 20-24 age group appear to be affected by minimum wage laws. Unemployment rates in the 25-34 age group are higher than for the 35-44 age group. The unemployment rate for blacks and Hispanics aged 25-34 were 11.1% and 5.8% in 2005. Unemployment for whites and Asians in this age group were 4.4% and 3.5%. In the 35-44 age group the unemployment rates for these four ethnicities were 7.2%., 5.1%, 4.4%, and 2.7%. A comparison of black to Asian unemployment is revealing. In the United States, Asians tend to attain higher levels of education than blacks. Thus minimum wage laws are relatively unimportant to Asian Americans. Consequently, Asians are able to attain unemployment as low as the 2-3% range. For Asians aged 16+ the unemployment rate was only 3.3% in 2005. For Asians in the 20-24 age group unemployment was 5.1%. These figures are only a fraction of the unemployment rates experienced by blacks in 2005. There is no reason why white, Hispanic, and black Americans cannot also reach the 2-3% range of unemployment.

Supporters of minimum wage laws do not realize that prior to minimum wage laws the national unemployment rate did fall well below 5%. According to the US Census, national unemployment rates were 3.3% in 1927, 1.8% in 1926, 3.2% in 1925, 2.4% in 1923, 1.4% in 1919 and 1918, 2.8% in 1907, 1.7% in 1906, and 3.7% in 1902.[6] Even today, some states have unemployment rates as low as 3%. Virginia now has an unemployment rate of 3.1%. Wyoming has an unemployment rate of 2.9%. Hawaii has an unemployment rate of 2.6%. National unemployment rates seldom drop below 5% because some categories of workers are stuck with double digit unemployment. Given these figures, it is quite arguable that minimum wage laws keep the national unemployment rate 3 percentage points higher than would otherwise be the case.

Economist Arthur Okun estimated that for every 1% increase in unemployment GDP falls by 2.5-3%. If minimum wage laws are responsible for keeping the national unemployment rate 3 percentage points above where it would otherwise be, then the losses to minimum wage unemployment are substantial. Since Okun's law is an empirical proposition it is certainly not constant. Eliminating minimum wages might not increase GDP as much as this "law" indicates. However, the elimination of minimum wage laws would surely have a positive effect on GDP. In any case, economic theory and available data indicate that minimum wage laws do result in economic inefficiency. The implementation of a "living wage" would only increase these losses. Do proponents of living wages really want to see unemployment rates among ethnic minorities and teens climb even higher?

The economic case for a living wage is unfounded. Current minimum wage rates do create high levels of unemployment among low productivity workers. Higher "living wages" would only make these problems worse. The alleged moral case for a living wage ignores the fact that minimum wage increases adversely affect the very people whom advocates of living wages intend to help. If politicians wish to pursue sound policies, they should consider repealing minimum wage laws, especially where teens are concerned. Unfortunately, most politicians care more about political expediencies than sound economic policy. This being the case, minimum wages will increase unless public opinion changes significantly.

http://mises.org/story/2130

[Armanen]

Re: Free-Market Economics

as long as governments exist. So the sole purpose of government has to be national defense and national security.

Governments will exist as long civilization exists, and will do more than just national defense and national security. I don't think we will ever see a true night watchmen state.

Despite Western imperialism, Western imperialism would not have allowed itself to flourish had they not undergone freeing up capital, and property rights which ushered in the biggest human growth and creativity.

Relative to other cultures of the time, western europe was more liberal in its property rights, but they got to that position due to many factors such as their favorable geographic location. Once there, they sustained that growth and took it to another level by imperialism on every continent. So let's not asign this to the free market working its magic, there were many factors. As you well know economics must be studied with history, politics, philosophy, psychology, and sociology. This is probably why I've come to really like international political economy.

In conclusion, Armenia needs to tap in some sort of role akin to that.

I agree and it seems this is the direction Armenia has been taking and will continue to take.

Turkish or otherwise, were to purchase a mine in Armenia let's say, what benefit would it be to invest there and wish the ill will of its workers?

Until Armenia and turkey have diplomatic relations it would be unwise to believe any turkish business wanting to expand into Armenia wouldn't have some sort of ties with offical ankara.

If there is a way to lift the blockade without having to give up the lands in Artsakh, it should be allowed as this could increase Armenia’s GDP significantly.

I agree and would add that the effects of opening up the border should throughly be studied by the relavent authorities in Yerevan as well as various Armenian scholars in that field.

[Anonymouse]

Re: Free-Market Economics

Governments will exist as long civilization exists, and will do more than just national defense and national security. I don't think we will ever see a true night watchmen state.

Which is why differences have always been in degrees, not kinds.

Relative to other cultures of the time, western europe was more liberal in its property rights, but they got to that position due to many factors such as their favorable geographic location. Once there, they sustained that growth and took it to another level by imperialism on every continent. So let's not asign this to the free market working its magic, there were many factors. As you well know economics must be studied with history, politics, philosophy, psychology, and sociology. This is probably why I've come to really like international political economy.

One quibble with this. One is not dependent upon the other. That factors for production were freed, property rights were recognized and the idea of capital accumulation was allowed is a sign of social property relations relative to those countries. The Dutch ended the theft practiced by the nobility and secured property rights for all individuals to a degree never seen before in the entire world. They did not need imperialism to undergo such a change. However, the profits that were generated via free and voluntary exchanges of goods and services, were used for building armies and fleets, which were then used to conquer and control. Let's not confuse a symptom or effect, with the cause.

The feudal economies of Western Europe were allowed to transition smoothly into the industrial revolution, which then spurned the growth. However, in many other parts of the world, including Russia, that transition from feudal economies to modernity was not made via an industrial revolution based on spontaneous forces, but was done via Communism under state fiat.

[Armanen]

Re: Free-Market Economics

The Dutch ended the theft practiced by the nobility and secured property rights for all individuals to a degree never seen before in the entire world.

I wonder if they would have done this if they had been overrun a few hundred years earlier by the Mongols, turks, or any of the other invasions that Armenia underwent and to a lessor extent eastern europe. The fact is if they had been a thousand miles to the east they would have never passed any property reforms, cause they'd have a lot bigger issues to contend with.

Which is why differences have always been in degrees, not kinds.

Indeed.