Anti-strike laws not ruled out ahead of union summit (UK)

[Starglider]

Than what? Insurance is more important than making stuff? Since when?

Perhaps you are actually unable to comprehend that some parts of some sectors are more important than some parts of other sectors and vice versa. It seems likely, but I am going to be generous and assume you are not actually clinically brain damaged, just too lazy to spend even a second thinking about other people's arguments. Of course the majority of people would stop buying Ipads and 50" HDTVs before they stop paying their home insurance, car insurance, life insurance or (where applicable) medical insurance. Of course they would say that the security of not being utterly screwed by a freak house fire is worth more than many of the physical, manufactured things they buy. So yes, you are making exactly the same mistake as the people who say 'the public sector is completely parasitic and worthless' when you claim the tertiary sector is parasitic. You can of course forcibly nationalise all insurance activity, but that changes nothing; the private/public distinction is disjoint from the primary/secondary/tertiary sector distinction.

As for healthcare and pensions, neither of that can really exist without a robust underlying industry.

Of course they can. Health care specialists existed since the start of human civilisation and were reasonably effective and widespread before the industrial revolution. Improvements in the effectiveness of healthcare have depended much more on scientific progress than industrial development.

That fallacy aside, modern enterprise is inherently vastly interdependent, and this dependency is certainly not one way from services to industry. International businesses are just wholy unable to operate without at least moderately sophisticated banking support. While it is reasonable to say that there is in total more dependency from services to industry and agriculture, this has no bearing on whether either are inherently more valuable, which is the argument you were trying to make.

(like your example above, where a haircut is more important than, say, a state program of making thermonuclear plants)

Your total failure to read or comprehend anything outside your own ranting gets more amusing with each post; I specifically mentioned that a massive nuclear building program would be my top priority earlier in this thread. In fact you are making a strawman by taking half of my example and comparing it to an arbitrary item of your own choosing. My point is that you think only in the absolutes 'manufacturing good services bad' while in fact much manufacturing is trivial (even you can dimly perceive this with your anti-consumerism) and a significant fraction of services are essential to reasonable quality of life. Of course the reality is that a large fraction of the power output of said massive nuclear building program would end up powering 'frivolous consumption'; the consumerist economy we want to retain including large numbers of electric cars, manufacturing of such fivilorities as HDTVs and of course keeping all those bank towers lit and electronic trading systems running. I am sure that I should be ashamed for using Glorious Soviet Heavy Industry to support such human-relevant things, certainly in the Stas Authoritarian Hellhole (tm) electric cars that would be banned and replaced with trams, HDTVs would be replaced with cheerful propaganda posters and heavy industry would exist entirely for its own sake.

How many First World economies are capable of sustaining their economic position, employment and life standard AND their huge, bloated "services sector" without all those dirty industries in the Third and Second world?

What is your argument for putting those industries back in the first world again? Because it would genuinely help first world standard of living or because you're just pissed off about other countries getting 'dirty' (p.s. make up your mind, first heavy industry is wonderful and glorious and backbone of the People, next it is 'dirty' and undesireable). Every country that industrialised had to go through a period of environmental degredation and packed unpleasant worker towns, the latecomers are actually having it somewhat easier due to technological progress and better ecological understanding. You seem to think that only the first world needed to go through this, and some magical force should spare others the indignity?

I bet if we would try to build an economic model of a shock wherein outsourced manufacturing just vanishes or suffers a horrific hit, the First World would crash and burn before I can properly celebrate this Chinese New Year.

I can see that you desperately want this to happen.

[aerius]

Services do not have such an impact on industry.

I don't care about the impact of the Service Sector on industry - I care about its impact on living standards. And I've yet to see that moving towards a Service Sector-dominated economy (something that has happened in virtually every developed nation) has had a negative effect on living standards.

Yet. But we're starting to see it now. The US which has a larger services sector as a percentage of GDP than say, Canada, Australia or Germany is getting its economy & living standards crunched a lot worse than we are.

How many First World economies are capable of sustaining their economic position, employment and life standard AND their huge, bloated "services sector" without all those dirty industries in the Third and Second world?

So what? Are you arguing that trade is bad, since this is a consequence of trade? Would you rather we go back to autarkic economies with only domestic industries, regardless of the hit to living standards and efficiency?

The argument is the same one that applies to the financial industry, it works until someone else gets sucked dry or pissed enough to fuck your trade deals. It builds a fragile web of dependence where too many things can go wrong. What if the price of oil doubles and you can't afford to ship the goods? What happens if letters of credit aren't available to charter ships and move things around? The answer is you're fucked.

There's nothing wrong with trade, but offshoring damn near everything in the interests of costs & efficiency will kill you in the long term.

[Guardsman Bass]

Yet. But we're starting to see it now. The US which has a larger services sector as a percentage of GDP than say, Canada, Australia or Germany is getting its economy & living standards crunched a lot worse than we are.

Not by much. The Service Sector in the US represents 76.7% of the economy. That's compared to 71.2% for Australia, 71.3% for Canada, and 71.3% for Germany.

It builds a fragile web of dependence where too many things can go wrong. What if the price of oil doubles and you can't afford to ship the goods? What happens if letters of credit aren't available to charter ships and move things around? The answer is you're fucked.

That's one of the risks of trade that you have to take if you want to capture some of the major gains possible. I'm not ignorant of that, but I also don't exactly know what you're proposing. Are you proposing a more autarkic economy, even at the expense of living standards?

Moreover, that sort of dependency is something we all live with, even within nations. If my city got cut off from food re-supply within the US, we'd be starving in mere days (I imagine it would be even worse for those living in bigger cities like Toronto). Yet we accept that dependence because the benefits outweigh the risks of it.

[K. A. Pital]

So yes, you are making exactly the same mistake as the people who say 'the public sector is completely parasitic and worthless' when you claim the tertiary sector is parasitic. You can of course forcibly nationalise all insurance activity, but that changes nothing; the private/public distinction is disjoint from the primary/secondary/tertiary sector distinction.

I did not claim the entire tertiary sector is parasitic. Besides, how much are firemen, police and daily services like barbershops related to the expansion of the relative size of the service sector? Since these services are correctly identified by yourself as critical for many citizens, they have existed since god knows when, and this points us to the unwelcome idea that the majority of the "expansion" which made services such a huge sector in terms of GDP share lies somewhere else. Unless you can, of course, show me that the services sector is mostly comprised of essential services like the above.

Improvements in the effectiveness of healthcare have depended much more on scientific progress than industrial development.

Scientific progress, education and industrial development are inseparable and go hand-in-hand. Agrarian shitholes cannot and may not have an advanced medicine because they don't have (a) optics (b) chemistry to procude the necessary antibiotics and drugs, etc. End of argument. There cannot be a scientific progress without an industry which applies advanced tools and pushes science further and further.

...this dependency is certainly not one way from services to industry. International businesses are just wholy unable to operate without at least moderately sophisticated banking support. While it is reasonable to say that there is in total more dependency from services to industry and agriculture, this has no bearing on whether either are inherently more valuable, which is the argument you were trying to make.

Actually, this dependency is much, much less important than the interdependency between industry and industrialized agriculture. I did not say the entire tertiary sector is worthless, merely that it's worth is grossly overestimated due to the idiotic consumerist system we have now.

Your total failure to read or comprehend anything outside your own ranting gets more amusing with each post; I specifically mentioned that a massive nuclear building program would be my top priority earlier in this thread. In fact you are making a strawman by taking half of my example and comparing it to an arbitrary item of your own choosing. My point is that you think only in the absolutes 'manufacturing good services bad' while in fact much manufacturing is trivial (even you can dimly perceive this with your anti-consumerism) and a significant fraction of services are essential to reasonable quality of life. Of course the reality is that a large fraction of the power output of said massive nuclear building program would end up powering 'frivolous consumption'; the consumerist economy we want to retain including large numbers of electric cars, manufacturing of such fivilorities as HDTVs and of course keeping all those bank towers lit and electronic trading systems running.

Alas, you were so high on your horse that you failed to see the core of my argument. I never said manufacturing is an absolute good or services are an absolute bad. Besides, HDTVs and electric cars are manufacturing. And they are far from trivial, considering that only so few powerful industrial complexes can actually produce them. Now making AK-47s is a trivial manufacturing task. Problem is that present consumption diverts resources from this program. So this "massive nuclear program" you're dreaming about will not happen in a consumerist model, because people want to consume NOW, without regard for the future. This was my entire point. As for "powering up frivolous consumption", I am all for that - you might note that I specifically decried luxury consumption whenever it comes to consumption as a concept, not the entirety of it. However, right now this frivolous consumption is not powered by a terribly efficient energy grid, but instead by a repeat of brutal industrialization in the Third World so that it may feed the First World with the products of its manufacturing sector. Even making the same mistakes - gasoline-guzzling cars instead of electric or yes, trams and trains, inefficient powergrids and stupid luxury consumption.

I am sure that I should be ashamed for using Glorious Soviet Heavy Industry to support such human-relevant things

If you start using Glorious Heavy Industry to light up banking towers, which you said is non-essential, instead of making antibiotics, which are essential, you will soon discover a peculiar problem. No matter how well-trained are your doctors, medicine as a "service sector" will collapse and no longer be able to provide the same level of "services". If you start lighting up banking towers and making IPads at the expense of making MRT apparates, "medical services" will experience another shock. And so on, and so forth.

You seem to be of the opinion that monetary worth of an industry or sector is the end of all which demonstrates its level of importance. That's not so. Production of antibiotics is not as big an industry as, say, IPads or hairdressing, but INFINETELY more important. Reallocating resources to cater to secondary needs is only possible when ALL first needs are satisfied. But that's not so.

What is your argument for putting those industries back in the first world again? Because it would genuinely help first world standard of living or because you're just pissed off about other countries getting 'dirty' (p.s. make up your mind, first heavy industry is wonderful and glorious and backbone of the People, next it is 'dirty' and undesireable). Every country that industrialised had to go through a period of environmental degredation and packed unpleasant worker towns, the latecomers are actually having it somewhat easier due to technological progress and better ecological understanding. You seem to think that only the first world needed to go through this, and some magical force should spare others the indignity?

It seems you've been following my posts well enough to know I support every inch of Third World industrialization. What I don't support is the situation that has been created - the First World getting more spoils out of it (1) and the Third World making a lot of the First World's mistakes (2).

I can see that you desperately want this to happen.

It is no big secret I hate the hypocritic state of affairs that the First World perpetrates daily and its history which is full of hypocrisy. However, at no point I wished the Third World to lose all its industry. What I did wish for, on many occasions, is the Third World to start using its industry as a leverage to get more out of the First World, to "shorten the gap" - make the wages higher, goods more expensive and thereby raise their life standard, even if the standard of life in the First World goes down a bit. I've been over this many times.

You not only failed to misunderstand my argument, but construct a dozen strawmen out of it to knock them down. Next time, try to pay more attention. Besides, the fact that I support the process of industrialization par se does not mean I do not realize the costs industrializing nations incur, and do not see venues to make the process better.

On the other hand, whenever someone like you or Ryan comes into a thread with such a discussion, you come off as posh, self-centered hedonistic maniacs who will build any and all arguments necessary to "prove" that the current life standard in the First World is (a) justified (b) sustainable (c) should be conserved at all costs.

[aerius]

Not by much. The Service Sector in the US represents 76.7% of the economy. That's compared to 71.2% for Australia, 71.3% for Canada, and 71.3% for Germany.

Yep, but look at the industrials column, as a percentage of GDP we have about 20% more industry than the US. The US is just under 22% while we're at 26-26.8%. That's a pretty significant difference.

It builds a fragile web of dependence where too many things can go wrong. What if the price of oil doubles and you can't afford to ship the goods? What happens if letters of credit aren't available to charter ships and move things around? The answer is you're fucked.

That's one of the risks of trade that you have to take if you want to capture some of the major gains possible. I'm not ignorant of that, but I also don't exactly know what you're proposing. Are you proposing a more autarkic economy, even at the expense of living standards?

Just because a nation has more domestic industry does not mean it will have a crappier living standard. I'd argue that Canada has a better living standard than the US, particularly for the poor & middle class, same thing with Germany. Then add the costs of pollution & environmental damage, industry in the 1st world is fairly clean & we have lots of laws & regulations to keep it that way. 3rd world countries generally don't have that. So yes, I'm in favour of a more autarkic economy.

Moreover, that sort of dependency is something we all live with, even within nations. If my city got cut off from food re-supply within the US, we'd be starving in mere days (I imagine it would be even worse for those living in bigger cities like Toronto). Yet we accept that dependence because the benefits outweigh the risks of it.

Points of failure. It takes a lot of failures to cut off a city from food, in Toronto we'd need to have all our rails, roads, & shipping go down. I suppose a general transport strike could do it but then they'd just call in the army to run things. These things can be resolved in short order.

This is not the case when dealing with countries on the other side of the world. Let's say the Chinese dock workers go on strike and refuse to load outbound shipments, now what are you going to do? You can't go in there and make them load your goods, and if the goods don't flow you're fucked. Say goodbye to 90% of the merchandise in WalMart, I'm sure the people will love that. A single failure in any one of hundreds of places can royally screw you over.

Or let's just say you guys want to build a bunch of nuclear power plants because you've miraculously seen the light on energy policy. The standard design in the US is a pressurized water reactor which requires a large 1-piece forging for the pressure vessel. Which you can't make since the tooling for that is in Japan, South Korea, China, and a couple other countries outside the US. You'll need to squeeze your orders in with everyone elses', you'll get'em when they're done which likely won't be when you want them or need them.

Canada? We can start cranking out all the parts for a CANDU plant whenever we feel like it. A more self-sufficient country is more in charge of its own destiny. This also means it has less need to go dicking around in the affairs of other countries.

[K. A. Pital]

A more self-sufficient country is more in charge of its own destiny. This also means it has less need to go dicking around in the affairs of other countries.

Indeed. Not only has aerius put up excellent points as to why greater independence when it comes to critical industrial manufacturing is important, he also made a point which I can't stress enough. If you build an economy with a clean and very efficient, low-labour intensive industrial complex at home, this gives you a good living standard and stops you short from sending your troops somewhere or crapping bricks over every revolution in the Third or Second world - like "think tanks" do now over the revolutions in Tunisia and Egypt because of oil, gas, Suez etc. - because the opressed peons decide they have had enough of serving the White Mister in the First World.

The vision of a perpetual state of wealth that is created by forcing Third World nations into using their dirty industries not for the benefit of their own citizens, but to produce cheap shit for the First World instead, and crushing anyone who starts speaking against that with a jackboot and Yankee Doodle is horrendous. Yet for some reason some people on this board have expressed a great deal of approval towards this. I'm all for industry. And industry should serve the people. The needy people first. And only afterwards it should serve the First World, which already has enough industry to supply its needs.

[Simon_Jester]

Yet. But we're starting to see it now. The US which has a larger services sector as a percentage of GDP than say, Canada, Australia or Germany is getting its economy & living standards crunched a lot worse than we are.

Not by much. The Service Sector in the US represents 76.7% of the economy. That's compared to 71.2% for Australia, 71.3% for Canada, and 71.3% for Germany.

All right, now turn that around. For Australia, Canada, and Germany, sectors other than service make up 28.7% of the economy. For the US, sectors other than service make up only 23.3%

The difference between 28 and 23 is fairly significant, I'd say.

It builds a fragile web of dependence where too many things can go wrong. What if the price of oil doubles and you can't afford to ship the goods? What happens if letters of credit aren't available to charter ships and move things around? The answer is you're fucked.

That's one of the risks of trade that you have to take if you want to capture some of the major gains possible. I'm not ignorant of that, but I also don't exactly know what you're proposing. Are you proposing a more autarkic economy, even at the expense of living standards?

To a point, this is reasonable. You say "we accept that dependence because the benefits outweigh the risks of it." But in a sense that's not really true: we don't accept our dependence on foreign resources; no one made a conscious policy decision to do this. It just sort of evolved as a consequence of small-scale market actions.

When every single factory owner in the country decides to relocate to Kazakhstan because they can make 10% more money that way, where is the interest of the nation in that calculation? It's not even considered. So we can't make an argument of the form "well, we accept our factories being moved to Kazakhstan, so it must be all right."

What people are getting at here is that, like it or not, an economy is an engine for the creation and distribution of tangible goods. It can also distribute services, but services are meaningless without goods, while the reverse is much less true.

When particular chunks of the service sector expand and are glorified at the expense of the industrial sectors, we risk creating economic problems. Does it really do the economy any good if 10% of our nominal GDP is just financial companies juggling numbers on their computers, without anyone actually doing anything? Does it do the economy good if we hire a million lawyers to sue each other into immobility? At some point, expansion of the service sector becomes the equivalent of hiring men to dig holes in the ground and fill them in again: you're not really improving the economy's ability to do any concrete thing, you're just pouring money into the parasite sectors.

And yes, I do mean parasite. Finance and the rest of the economy can have a commensal relationship normally- the banks and venture capitalists allocate money to people who need money to do good and useful things. But the larger the financial sector gets, the less commensal this relationship becomes. By the time they approach the 10% mark (and we're getting close to this in the US, if I read the numbers correctly), you have to question whether the relationship is commensal at all. Does the financial sector really add value to the economy that justifies giving them 10% of all the money made by everyone in the country?

At that point, the profits of the financial sector would seem to impose overhead costs on the rest of the economy.

[Guardsman Bass]

Yep, but look at the industrials column, as a percentage of GDP we have about 20% more industry than the US. The US is just under 22% while we're at 26-26.8%. That's a pretty significant difference.

You're also a significantly smaller economy ($1.335 trillion vs $14.72 trillion for the US), which gives you a much smaller industrial sector in absolute terms. The smaller your economy is, the more likely that particular industries will make up a large chunk of your GDP.

Just because a nation has more domestic industry does not mean it will have a crappier living standard. I'd argue that Canada has a better living standard than the US, particularly for the poor & middle class, same thing with Germany.

If it's keeping domestic industry domestic in spite of higher prices, then yes, you're lowering living standards. It's a lot of little things, like paying $50 for a pair of jeans instead of $5 because you're subsidizing the domestic textile industry, that add up.

Moreover, Canada is fairly open to trade.

Points of failure. It takes a lot of failures to cut off a city from food, in Toronto we'd need to have all our rails, roads, & shipping go down. I suppose a general transport strike could do it but then they'd just call in the army to run things. These things can be resolved in short order.

You've quoted some specific nitpicks that doesn't really challenge my main point, which is that we all have largely accepted dependency on outside sources of vital food and material in the First World, whether or not it's inside a nation or between them.

Canada? We can start cranking out all the parts for a CANDU plant whenever we feel like it.

Really? So the CANDU parts manufacturers in Canada don't have outstanding orders that might interfere with a mass build-up of nuclear plants? You act as though this capacity is simply lying around, waiting to be utilized.

The vision of a perpetual state of wealth that is created by forcing Third World nations into using their dirty industries not for the benefit of their own citizens, but to produce cheap shit for the First World instead, and crushing anyone who starts speaking against that with a jackboot and Yankee Doodle is horrendous.

Nobody is forcing Third World countries - such as China, for example - to export industrial goods instead of producing them for their citizens at home (the Chinese do both). If they suddenly decided that they didn't want to be dependent on export markets in the First World tomorrow, they could start passing laws phasing out cooperation between foreign companies and domestic chinese companies, greatly constrict FDI, and so forth.

What people are getting at here is that, like it or not, an economy is an engine for the creation and distribution of tangible goods. It can also distribute services, but services are meaningless without goods, while the reverse is much less true.

I never said that manufacturing goods was unimportant, just that it doesn't need to be a significant part of the economy in GDP terms OR largely or wholly based domestically for the demand for goods to be met.

And services are a tangible good in economic terms. They can be bought, sold, and traded.

Does it really do the economy any good if 10% of our nominal GDP is just financial companies juggling numbers on their computers, without anyone actually doing anything?

Only if you elevate manufacturing to some sort of holy status that places it above mere "services" in terms of economic value. I don't.

At some point, expansion of the service sector becomes the equivalent of hiring men to dig holes in the ground and fill them in again: you're not really improving the economy's ability to do any concrete thing, you're just pouring money into the parasite sectors.

We get productivity gains in the Service Sector just like the manufacturing sector, and services are something you can do just as concrete as making clothes, cars, and iPads. Nor is the Service Sector somehow "parasitic", unless you think the industrial sector is parasitic on the agricultural sector because we and it can't survive without food (and no, the agricultural sector is not counted as part of the industrial sector when we break down GDP just because they use machines and fertilizer to farm).

Finance and the rest of the economy can have a commensal relationship normally- the banks and venture capitalists allocate money to people who need money to do good and useful things. But the larger the financial sector gets, the less commensal this relationship becomes. By the time they approach the 10% mark (and we're getting close to this in the US, if I read the numbers correctly), you have to question whether the relationship is commensal at all. Does the financial sector really add value to the economy that justifies giving them 10% of all the money made by everyone in the country?

Your mistake is in only looking at the US economy in comparison to the US financial sector. The US financial sector is enormous not just because the US economy is enormous, but also because New York (the heart of the financial sector in the US) is an international finance center, like the UK. In other words, we're not just distributing capital and funding within the US - we're distributing it on a global scale, and the global economy has grown immensely over the past two decades, bringing with it new demand for capital.

[K. A. Pital]

Nobody is forcing Third World countries - such as China, for example - to export industrial goods instead of producing them for their citizens at home (the Chinese do both).

Indeed. I hope people don't get outraged when China stops exporting rare earths or starts raising prices for its goods, though, to raise the living standard here. However, there are nations other than China here (and China, for what it's worth, can no longer be adequately described as a Third World country; it is more fitting the Second World, due to many reasons). The nations which don't have a lot of options on hand.

As for "nobody is forcing"... well, well, well. You can't really fart in the wrong direction if you're a Third World nation. You have to "liberalize trade" and follow other "instructions" from wealthy nations, which is what many did, and then crashed and burned. But the crashing and burning was only beneficial, because it allowed to lower labour prices, which then contributed to a longer period of cheapness of Third World goods (the aforementioned $5 jeans).

and no, the agricultural sector is not counted as part of the industrial sector when we break down GDP just because they use machines and fertilizer to farm

It isn't, but seriously, are you denying agriculture now is an industry regardless of whether there's a special column for it in a GDP breakdown or not, whereas agriculture 100 years ago was non-industrialized? And like I said, there's nothing wrong with frivolous consumption and diversion of resources to secondary goals like lighting up banking towers at night, etc. unless all needs of the first order have been met. This is profoundy not so; neither in the US of A, nor in the world as a whole, of course.

[Guardsman Bass]

Nobody is forcing Third World countries - such as China, for example - to export industrial goods instead of producing them for their citizens at home (the Chinese do both).

Indeed. I hope people don't get outraged when China stops exporting rare earths or starts raising prices for its goods, though, to raise the living standard here. However, there are nations other than China here (and China, for what it's worth, can no longer be adequately described as a Third World country; it is more fitting the Second World, due to many reasons). The nations which don't have a lot of options on hand.

I don't. China did go and constrict the export of rare earth products, and one side-effect of it is that companies are looking at re-opening some of the old mines outside of China.

Even the worst-off nations usually have some options, even if it's just labor-intensive industries and exporting people to send remissions back Turkmenistan-style.

[K. A. Pital]

Even the worst-off nations usually have some options, even if it's just labor-intensive industries and exporting people to send remissions back Turkmenistan-style.

Turkmenistan's industry was allowed to degrade (just as the industry of many post-Soviet resource-giving nations), because if domestic industry does not consume oil, there's more oil and gas for export (and it's cheaper for the end consumer). This is why neither Europe nor the USA do not view Turkmenistan as a tragedy (as they don't really give a shit about Congo, Egypt, etc. either).

Because Turkmenistan is so poor and cloutless, actually, it sells oil much cheaper than even Russia. Which is quite beneficial for everyone except Turkmenistan. Or Congo's coltan exports, another brilliant example.

The whole world trade system is not intentionally aimed to create a "world division of labour" where some, sadly, are delegated the role of not being much more than slaves, but it is creating such a system nonetheless.

[Guardsman Bass]

Even the worst-off nations usually have some options, even if it's just labor-intensive industries and exporting people to send remissions back Turkmenistan-style.

Turkmenistan's industry was allowed to degrade (just as the industry of many post-Soviet resource-giving nations), because if domestic industry does not consume oil, there's more oil and gas for export (and it's cheaper for the end consumer). This is why neither Europe nor the USA do not view Turkmenistan as a tragedy (as they don't really give a shit about Congo, Egypt, etc. either).

What industry was that? Even in the Soviet era, it was mostly a producer of natural resources (oil and gas) plus cotton.

The whole world trade system is not intentionally aimed to create a "world division of labour" where some, sadly, are delegated the role of not being much more than slaves, but it is creating such a system nonetheless.

These are largely countries that were already extremely poor, supplying little more than some natural resources and agricultural products. Light, labor-intensive industry is a massive improvement.

[K. A. Pital]

What industry was that? Even in the Soviet era, it was mostly a producer of natural resources (oil and gas) plus cotton.

Chemical industry and machine tool construction were among the two primary victims, and they were also comprising a large share of the Turkmen SSR output before 1991. It obviously had adverse consequences, because mechanization and chemization of cotton industry in turn lowered, and cotton industry collapsed - from 430 000 tons of cotton in 1991 to 170 000 tons in 2002. Primitivization of industry made people turn to a more primitive agriculture and primitive, personal cattle breeding - which obviously lead to a fall of incomes... cheap labour and low mechanization decreased both the internal consumption of oil and the wages paid to people extracting it. Mission accomplished. Well, not to say there was a mission, but that's what happened.

These are largely countries that were already extremely poor, supplying little more than some natural resources and agricultural products. Light, labor-intensive industry is a massive improvement.

See above, though. Not everywhere. Not always. Often the more advanced industries are the ones to get destroyed because that's NOT what the First World wants this nation to make or supply to the world market. Not needing something means, in terms of a liberalized world trade system, that there'll be no funds to build an advanced industry producing X, if the world market is not having byers of X. Alternative allocation also means that even if there are byers of X, when they are on the market along with byers of Y, and a nation is underdeveloped and poor, its economy will be forced into a choice between X and Y (like Turkmenia choosing - oil and gas or cotton?). The consequences of that are "one-good" economies, unbalanced, fake or bubble growth and entire nations geared to making a main product which may not be the best thing to make.

And I'm not saying that, say, a nationalized system would help here - the USSR, for example, forced the Cuban economy to be as sugar-dependent, as it was under U.S. domination, which is why almost all post-1959 growth from Soviet sugar acquisitions evaporated when the USSR collapsed.

The problem is that the capitalist world economy is doing the exact same thing. Separating entire nations and regions into menial labourers, blue-collars, white collars, creating one-shot wonders and sore losers. And doing nothing about it, even calling it "the natural flow of things".

P.S. Damn, that typing above basically summarizes why sometimes I can support a First World "industry reinvigoration" movement - because that might cause other nations to develop more diverse economies. My position remains the same - industrialization is good everywhere, what is bad are disbalances in industrialization (e.g. being geared towards one sector or one product) and low diversity for both large and small economies alike. It killed the USSR, it caused countless crises in the world, it pauperized many nations as a result of said crises, et cetera et cetera.

I oppose the method and some consequences of this chaotic and damaging "natural" flow of this process, not the process of industrialization par se. And finally, gotta give it to the First World - they no longer use forced labour to build shit in their colonial posessions, and few have any colonial posessions left. Yes, the world is still terribly unequal, brutal, injust and hideous no matter how you see it for the level of technology we have now, we should have done much, much better, but at least people aren't putting corvee labourers to make iPads like they did when making the Suez canal. Duh.

[Guardsman Bass]

What industry was that? Even in the Soviet era, it was mostly a producer of natural resources (oil and gas) plus cotton.

Chemical industry and machine tool construction were among the two primary victims, and they were also comprising a large share of the Turkmen SSR output before 1991. It obviously had adverse consequences, because mechanization and chemization of cotton industry in turn lowered, and cotton industry collapsed - from 430 000 tons of cotton in 1991 to 170 000 tons in 2002. Primitivization of industry made people turn to a more primitive agriculture and primitive, personal cattle breeding - which obviously lead to a fall of incomes... cheap labour and low mechanization decreased both the internal consumption of oil and the wages paid to people extracting it. Mission accomplished. Well, not to say there was a mission, but that's what happened.

Interesting history. What strikes me as mostly problematic is the decline in the cotton industry, although that might have also been because it's simply not profitable to mass-produce cotton for the world market in Turkmenistan.

The other industries lost - chemical and machine tools - are problematic, but I do have to point out - should Turkmenistan be producing machine tools and chemical en masse? It's not a large country - 4.9 million people - and I doubt there was a realistic chance of its machine tool and chemical industries ever competing with First World products. That's subsidy money that could be going somewhere else, particularly since it's also a poor country.

These are largely countries that were already extremely poor, supplying little more than some natural resources and agricultural products. Light, labor-intensive industry is a massive improvement.

See above, though. Not everywhere. Not always. Often the more advanced industries are the ones to get destroyed because that's NOT what the First World wants this nation to make or supply to the world market. Not needing something means, in terms of a liberalized world trade system, that there'll be no funds to build an advanced industry producing X, if the world market is not having byers of X. Alternative allocation also means that even if there are byers of X, when they are on the market along with byers of Y, and a nation is underdeveloped and poor, its economy will be forced into a choice between X and Y (like Turkmenia choosing - oil and gas or cotton?). The consequences of that are "one-good" economies, unbalanced, fake or bubble growth and entire nations geared to making a main product which may not be the best thing to make.

The problem with economies like Turkmenistan is that they're very small. Like I mentioned above, it's a poor country of 4.9 million, which is far too small of an economy to realistically have great diversity in its economy in a liberalized world trading environment unless it had First World levels of wealth and income (and even they tend to run into issues with this). Some degree of specialization could actually be helpful for them, if they can become very good at some particular export or group of them.

The problem is that the capitalist world economy is doing the exact same thing. Separating entire nations and regions into menial labourers, blue-collars, white collars, creating one-shot wonders and sore losers. And doing nothing about it, even calling it "the natural flow of things".

I think you're exaggerating the process. Like I mentioned above, over-specialization in one particular industry or product is mainly an issue for small economies (and countries at risk of the resource curse due to the presence of large amounts of oil, gas, etc). We don't see that happening with the Chinese, for example, who have branched out into a whole range of areas in both the domestic and international economy from the original "final assembly" labor-intensive production in special zones amidst a largely socialized economy. Nor do we see it happening with India.

P.S. Damn, that typing above basically summarizes why sometimes I can support a First World "industry reinvigoration" movement - because that might cause other nations to develop more diverse economies. My position remains the same - industrialization is good everywhere, what is bad are disbalances in industrialization (e.g. being geared towards one sector or one product) and low diversity for both large and small economies alike. It killed the USSR, it caused countless crises in the world, it pauperized many nations as a result of said crises, et cetera et cetera.

The problem with that is most of the impoverished economies simply don't have the size or resources to develop a wide variety of efficient, advanced industries - the economies of scale are too small. Any sort of open trade system is probably going to push them towards specialization, because it's the best way for them to get competitive on the world market.

[Simon_Jester]

What people are getting at here is that, like it or not, an economy is an engine for the creation and distribution of tangible goods. It can also distribute services, but services are meaningless without goods, while the reverse is much less true.

I never said that manufacturing goods was unimportant, just that it doesn't need to be a significant part of the economy in GDP terms OR largely or wholly based domestically for the demand for goods to be met.

And services are a tangible good in economic terms. They can be bought, sold, and traded.

Ah, I'm sorry. I was using the normal definition of "tangible:"

adj.
1.
a. Discernible by the touch; palpable: a tangible roughness of the skin.
b. Possible to touch.
c. Possible to be treated as fact; real or concrete: tangible evidence.

Economists may well define the services provided by a consultant who tells you to reshuffle your company's organization chart as "tangible." However, it is very difficult to touch them; they are most certainly not concrete objects. From the standpoint of, say, a physicist, they are not tangible.

Does it really do the economy any good if 10% of our nominal GDP is just financial companies juggling numbers on their computers, without anyone actually doing anything?

Only if you elevate manufacturing to some sort of holy status that places it above mere "services" in terms of economic value. I don't.

This is a nonsense reply.

Some services are extremely valuable. Some are, indeed, invaluable: literally priceless, because we cannot measure how much loss we'd suffer if they weren't there. However, others are of limited value, or reach diminishing returns as you pile on more and more of them.

For a company to have a legal department is good. For a company to have a legal department that consumes 50% of the corporate budget is most likely not good. The same goes for accounting, marketing, human resources, or any of the other 'service' departments that sustain the company's operations. After all, these things are valuable because they sustain operations, not in and of themselves. Their value exists, and is nonzero, but it cannot be increased indefinitely.

It is very much possible to create a situation where the sheer scale of the service sector creates an escalating, expanding overhead of paperwork, legal issues, red tape, consulting firms trying to sort out the complexities of the above, and financial companies trying to fold money fast enough to pay for all of the above. And that is not a desirable end-state, because it means an increasing fraction of society's resources get expended not in doing things, but in various white-collar workers' activities cancelling each other out so that something can hopefully get done.

The same can happen in industry if we hire men to dig holes and fill them back in again, or to build things and then smash them, or to grow crops and then burn them. In practice, this rarely happens in industrial sectors, except in perverse cases (wartime, a major surplus of unstorable goods, a government desperate to keep employment up in hard times). But it strikes me as much harder to prevent it from happening in the service sector, because in the white-collar world, it's harder to tell the difference between productive work and work that cancels itself out so that productive work can be done- or, worse yet, work that actively takes resources that could otherwise be used on productive work.

At some point, expansion of the service sector becomes the equivalent of hiring men to dig holes in the ground and fill them in again: you're not really improving the economy's ability to do any concrete thing, you're just pouring money into the parasite sectors.

We get productivity gains in the Service Sector just like the manufacturing sector, and services are something you can do just as concrete as making clothes, cars, and iPads.

Some are, some aren't. Not all economic activities you can get paid for are productive. Services may be productive (venture capital, barbershops, travel agencies). But they may also be nonproductive (financial firms juggling mortgage-backed securities that ultimately go bust and force the taxpayer to bail out the firm at expense comparable to fighting a small land war).

You cannot count productivity purely in terms of "did something happen that someone was willing to spend money to make happen?" Hiring a man to dig ditches and fill them in again cannot be a legitimate increase in GDP; neither can hiring a stockbroker to create ten million dollars in paper wealth and then trigger a stock crisis that destroys it again.

Nor is the Service Sector somehow "parasitic", unless you think the industrial sector is parasitic on the agricultural sector because we and it can't survive without food (and no, the agricultural sector is not counted as part of the industrial sector when we break down GDP just because they use machines and fertilizer to farm).

See my subsequent comments about commensal relationships.

Your gut flora are an important part of your body. You need them to live. In a sense they are "parasitic," but then in a sense they supply you with a vital service.

However, if your gut flora suddenly started multiplying beyond control, clogging up your innards and attacking the vital tissues of your body, then yes, those bacteria would be parasites all of a sudden, just as surely as a tapeworm would be.

There has to be a limit to all things, and on how much of those things you can have before they become a weakness rather than a strength. Building a bit of statuary can be a productive part of the economy, because people enjoy trading in beautiful things.

Spending 20% of GDP on statuary is usually a sign of a dysfunctional economy dominated by fools or tyrants, because no large group of rational people will value statues enough to spend 20% of their income on them- unless they have practically unlimited wealth and are looking for ways to use it in big competitive displays.

Having banks is important to a functioning economy, because you need them to move money around the system. Having banks, stockbrokers, and the like take up 20% of GDP would be a sign of a dysfunctional economy, because it would be very difficult for them to contribute to others, in reduced prices and increased availability of useful goods and services, on a scale that justifies the price of keeping them around.

Your mistake is in only looking at the US economy in comparison to the US financial sector. The US financial sector is enormous not just because the US economy is enormous, but also because New York (the heart of the financial sector in the US) is an international finance center, like the UK. In other words, we're not just distributing capital and funding within the US - we're distributing it on a global scale, and the global economy has grown immensely over the past two decades, bringing with it new demand for capital.

Perhaps. Then again, as others point out, this is only sustainable as long as the world economy continues to funnel wealth into and through the US financial sector for its dealing. When the NYSE drops badly as it has in the past few years, that stream of wealth is disrupted.

Chemical industry and machine tool construction were among the two primary victims, and they were also comprising a large share of the Turkmen SSR output before 1991. It obviously had adverse consequences, because mechanization and chemization of cotton industry in turn lowered, and cotton industry collapsed - from 430 000 tons of cotton in 1991 to 170 000 tons in 2002. Primitivization of industry made people turn to a more primitive agriculture and primitive, personal cattle breeding - which obviously lead to a fall of incomes... cheap labour and low mechanization decreased both the internal consumption of oil and the wages paid to people extracting it. Mission accomplished. Well, not to say there was a mission, but that's what happened.

Interesting history. What strikes me as mostly problematic is the decline in the cotton industry, although that might have also been because it's simply not profitable to mass-produce cotton for the world market in Turkmenistan.

The other industries lost - chemical and machine tools - are problematic, but I do have to point out - should Turkmenistan be producing machine tools and chemical en masse? It's not a large country - 4.9 million people - and I doubt there was a realistic chance of its machine tool and chemical industries ever competing with First World products. That's subsidy money that could be going somewhere else, particularly since it's also a poor country.

What you're missing is that this becomes a vicious cycle very quickly: the nation is poor, so its most advanced industries are sold off... which in turn makes other industrial sectors less viable. Sure, the petrochemical industry in Turkmenistan might not be profitable in and of itself, but if the products of that industry are increasing cotton production by a factor of three, you cannot simply close down the refineries and expect the economy to improve as a result. Especially not if the cotton farmers decide to quit trying to raise cotton for export and become subsistence cattle ranchers like their grandfathers were instead.

And that's how you end up with a pauperized national economy: one where the nation has concentrated so ruthlessly on optimizing GDP by pursuing competitive advantage that the population suffers. All the oil/mineral/cash crop wealth winds up in the hands of a small number of elites, and the rest of the nation stagnates, living under conditions little better than those of pre-industrial times. All for the sake of marginally decreasing the cost of consumer goods in the First World.

Stas is right, this is a problem. And for a government whose duty is to pursue the interests of the citizenry, not to optimize the world economy, it's a sign that the government is doing something wrong.

See above, though. Not everywhere. Not always. Often the more advanced industries are the ones to get destroyed because that's NOT what the First World wants this nation to make or supply to the world market. Not needing something means, in terms of a liberalized world trade system, that there'll be no funds to build an advanced industry producing X, if the world market is not having byers of X. Alternative allocation also means that even if there are byers of X, when they are on the market along with byers of Y, and a nation is underdeveloped and poor, its economy will be forced into a choice between X and Y (like Turkmenia choosing - oil and gas or cotton?). The consequences of that are "one-good" economies, unbalanced, fake or bubble growth and entire nations geared to making a main product which may not be the best thing to make.

The problem with economies like Turkmenistan is that they're very small. Like I mentioned above, it's a poor country of 4.9 million, which is far too small of an economy to realistically have great diversity in its economy in a liberalized world trading environment unless it had First World levels of wealth and income (and even they tend to run into issues with this). Some degree of specialization could actually be helpful for them, if they can become very good at some particular export or group of them.

Which is exactly the problem. In a barrier-free world trading environment, nations like Turkmenistan find themselves existing for the sole purpose of supplying oil and gas to richer nations.

The problem is that "supply Europe with oil" is not an industry that can employ a population the size of Turkmenistan's. The oil industry could work just as well if half the population curled up and died... and this half of the population gets neglected so long as the government concentrates on becoming "very good at" exporting oil. Which leads to poverty, disease, ultimately to political instability, and so on.

Ultimately, this model of nation-sized single-product economies is not working for the nations that try it. It does not produce good outcomes. Standards of living decline, Gini coefficients rise, and ultimately the resources will be depleted and the nation will have nothing to support itself on, having effectively gutted all its other industries because those things can be done marginally more efficiently somewhere five thousand miles away.

And, again, the only real payoff of this is a marginal drop in prices of the goods being bought by consumers. A 10% decrease in the price of fuel oil in Europe is not enough to justify gutting the Central Asian economy.

[Guardsman Bass]

Economists may well define the services provided by a consultant who tells you to reshuffle your company's organization chart as "tangible." However, it is very difficult to touch them; they are most certainly not concrete objects. From the standpoint of, say, a physicist, they are not tangible.

Since we are talking about economic topics, I don't particularly care what a physicist's definition of a tangible economic good is.

This is a nonsense reply.

Some services are extremely valuable. Some are, indeed, invaluable: literally priceless, because we cannot measure how much loss we'd suffer if they weren't there. However, others are of limited value, or reach diminishing returns as you pile on more and more of them.

For a company to have a legal department is good. For a company to have a legal department that consumes 50% of the corporate budget is most likely not good. The same goes for accounting, marketing, human resources, or any of the other 'service' departments that sustain the company's operations. After all, these things are valuable because they sustain operations, not in and of themselves. Their value exists, and is nonzero, but it cannot be increased indefinitely.

It is very much possible to create a situation where the sheer scale of the service sector creates an escalating, expanding overhead of paperwork, legal issues, red tape, consulting firms trying to sort out the complexities of the above, and financial companies trying to fold money fast enough to pay for all of the above. And that is not a desirable end-state, because it means an increasing fraction of society's resources get expended not in doing things, but in various white-collar workers' activities cancelling each other out so that something can hopefully get done.

The same can happen in industry if we hire men to dig holes and fill them back in again, or to build things and then smash them, or to grow crops and then burn them. In practice, this rarely happens in industrial sectors, except in perverse cases (wartime, a major surplus of unstorable goods, a government desperate to keep employment up in hard times). But it strikes me as much harder to prevent it from happening in the service sector, because in the white-collar world, it's harder to tell the difference between productive work and work that cancels itself out so that productive work can be done- or, worse yet, work that actively takes resources that could otherwise be used on productive work.

You continue to trot out this strawman argument about inefficient and parasitic service sector, coupled with (as I pointed out) venerating manufactured goods above services for no good reason. The services sector does not revolve around the industrial sector, and generates value in of itself, as I've pointed out before.

As for the difference between "productive" and "non-productive" work, if it generates lasting GDP gains and rises in real income as a result of a natural market equilibriam, then I consider it productive work.

Some are, some aren't. Not all economic activities you can get paid for are productive. Services may be productive (venture capital, barbershops, travel agencies). But they may also be nonproductive (financial firms juggling mortgage-backed securities that ultimately go bust and force the taxpayer to bail out the firm at expense comparable to fighting a small land war).

You cannot count productivity purely in terms of "did something happen that someone was willing to spend money to make happen?" Hiring a man to dig ditches and fill them in again cannot be a legitimate increase in GDP; neither can hiring a stockbroker to create ten million dollars in paper wealth and then trigger a stock crisis that destroys it again.

Don't be ridiculous. It's quite often easy to measure productivity in the Service Sector - go look back at my medical treatment example earlier in the thread.

Having banks is important to a functioning economy, because you need them to move money around the system. Having banks, stockbrokers, and the like take up 20% of GDP would be a sign of a dysfunctional economy, because it would be very difficult for them to contribute to others, in reduced prices and increased availability of useful goods and services, on a scale that justifies the price of keeping them around.

Why 20%? Why is 10% okay, but not 20%? As I've pointed out, there are good reasons for why the US financial sector is so large - it's an international center of finance during a major period of world-wide economic expansion, which increases demand for financial services and capital.

Perhaps. Then again, as others point out, this is only sustainable as long as the world economy continues to funnel wealth into and through the US financial sector for its dealing. When the NYSE drops badly as it has in the past few years, that stream of wealth is disrupted.

Not so seriously yet. But suppose it does happen, and there's a significant shift in demand for financial services and capital away from the US financial sector. All that means is that the Financial Sector will be a less important part of the US economy, just like how industry has gradually become a less important part of the US economy over a period of decades.

What you're missing is that this becomes a vicious cycle very quickly: the nation is poor, so its most advanced industries are sold off... which in turn makes other industrial sectors less viable. Sure, the petrochemical industry in Turkmenistan might not be profitable in and of itself, but if the products of that industry are increasing cotton production by a factor of three, you cannot simply close down the refineries and expect the economy to improve as a result. Especially not if the cotton farmers decide to quit trying to raise cotton for export and become subsistence cattle ranchers like their grandfathers were instead.

I don't expect the economy to improve simply by closing down the chemical factories - I just pointed out that in any liberalized trading environment, they were unlikely to survive short of tariffs and subsidies. Which have real costs, particularly for the sectors of the economy that are productive and potentially competitive on the world market, yet are being forced to pay for higher costs making them less competitive, as well as the taxpayers of said country.

In other words, the costs of supporting that unproductive chemical industry supplying the cotton farmers (who might be able to buy cheaper chemicals from abroad) have to be paid by someone, and that is almost always the productive parts of the economy that actually are generating value and income.

And that's how you end up with a pauperized national economy: one where the nation has concentrated so ruthlessly on optimizing GDP by pursuing competitive advantage that the population suffers. All the oil/mineral/cash crop wealth winds up in the hands of a small number of elites, and the rest of the nation stagnates, living under conditions little better than those of pre-industrial times. All for the sake of marginally decreasing the cost of consumer goods in the First World.

The oil/mineral resource curse is a separate problem in terms of issues, but ultimately if the local industries are dying off, it's because not enough consumers in that country are willing to pay for their products (or the consumer base in the country is too small, and they don't have an export market). What you're calling for is for those consumers to sacrifice to keep a much smaller part of the population employed and an unproductive industry running because . . . why? It supposedly benefits them?

Stas is right, this is a problem. And for a government whose duty is to pursue the interests of the citizenry, not to optimize the world economy, it's a sign that the government is doing something wrong.

Forcing a country's population to take a major hit to their living standards to keep unproductive industries running is not pursuing the interests of the citizenry. It's pursuing the interests of a particular group of citizenry and cloaking it under national strength and patriotism rhetoric.

And once again, as I pointed out to Stas, nobody is forcing these countries to sell their products to the First World. If Turkmenistan wants to close off the economy to prop up their chemical industries, they can go ahead and do that. They'll be much poorer for it, though.

Which is exactly the problem. In a barrier-free world trading environment, nations like Turkmenistan find themselves existing for the sole purpose of supplying oil and gas to richer nations.

In Turkmenistan's case, it's because oil and gas themselves tend to distort an economy, which is something different from the fact that smaller economies have a tendency to drift towards over-specialization because of economies of scale.

The problem is that "supply Europe with oil" is not an industry that can employ a population the size of Turkmenistan's. The oil industry could work just as well if half the population curled up and died... and this half of the population gets neglected so long as the government concentrates on becoming "very good at" exporting oil. Which leads to poverty, disease, ultimately to political instability, and so on.

The oil industry does not operate in a vacuum in Turkmenistan (i.e., there's an economy outside of it). But more generally, the above sounds like an argument for more liberalized immigration flows, so that these people can move where they can put their labor to more productive uses (which is what many Turkmenis have done - a good chunk of their population works abroad and sends money back).

Do you think they'd be better off in a closed off economy, with unproductive industries offering them a meager and stagnant income? Because that's what you're really offering. Over-specialization is a problem for smaller countries and economies, since it makes them more vulnerable to trade issues - but it also holds out the promise of actual serious income gains. I think that's better than trying to support a smaller, weaker autarkic economy just because you're afraid of trade getting disrupted.

As for "not working", look at some of the countries that did benefit from initially specialized in the global trade environment. Countries like Taiwan (semi-conductors and computer parts), Korea (steel), Bangladesh (textiles), and so forth. These countries are better off because they made that decision, and in the long run, the income generated by the export sectors actually made it possible for the first two to go beyond the initial handful of industries into a more diversified economy.

Turkmenistan is more handi-capped, but that's because oil and gas industries in of themselves tend to distort poor, authoritarian countries, not because specialization in the world trade environment is impoverishing them.

And, again, the only real payoff of this is a marginal drop in prices of the goods being bought by consumers. A 10% decrease in the price of fuel oil in Europe is not enough to justify gutting the Central Asian economy.

As I've said before, nobody is forcing the Turkmenis to open their economy to trade. They could have just kept it closed, supporting weak industries and maintaining a poorer but more diverse economy.

[Simon_Jester]

Economists may well define the services provided by a consultant who tells you to reshuffle your company's organization chart as "tangible." However, it is very difficult to touch them; they are most certainly not concrete objects. From the standpoint of, say, a physicist, they are not tangible.

Since we are talking about economic topics, I don't particularly care what a physicist's definition of a tangible economic good is.

Since this is an argument about the underlying assumptions that go into economic models, examining your premises is a good thing.

In this case, the premise that service and industrial sectors are interchangeable and that a dollar spent on services is always as good as a dollar spent on industry needsd to be examined. Refusing to accept the idea that there can be a distinction between the you-can-touch-them products of industry and blue-collar labor and the you-cannot-touch-them products of the service sector... that is not a good place to stand while people are calling on you to assess your premises.

You continue to trot out this strawman argument about inefficient and parasitic service sector, coupled with (as I pointed out) venerating manufactured goods above services for no good reason. The services sector does not revolve around the industrial sector, and generates value in of itself, as I've pointed out before.

The service sector is sometimes a generator of value, and sometimes not. Just as the industrial sector generates value when it builds things people can use, and is not when it builds things of no real use.

Building a factory to make goods and then grind them up again is not productive. Hiring clerks to fill out forms and then fill out more forms to waive the first forms is likewise not productive. The service sector is quite capable of generating 'arms race' scenarios in which competitors wind up chasing themselves into a bad position because the locally optimal choice for each individual is not a globally optimal solution for the market. It is also capable of generating 'bubble' scenarios in which large numbers of people get paid to perform services that do not provide lasting value, due to the power of good marketing and the kind of paper wealth the financialsector can generate.

It's equally possible to do this in manufacturing or agriculture or anything else. But it's somewhat more difficult simply because the products of such sectors are concrete: you cannot easily fool yourself into thinking you've bought a working automobile when you have, in fact, not done so. You can fool yourself into thinking that a new management scheme is productive, or that you can keep generating new money to put into your 401k by investing in mortgage-backed securities.

As for the difference between "productive" and "non-productive" work, if it generates lasting GDP gains and rises in real income as a result of a natural market equilibriam, then I consider it productive work.

At which point we have to ask: does it? Are the GDP gains in the West sustainable? Can they last when the consumer savings run out, when the stock market's ability to generate large numbers of dollars in electronic accounts via bubbles collapses?

Likewise, real income hasn't been rising in the US as a function of the transition to a service economy, even as we go more heavily into services than other nations. Does this or does this not present a problem?

Some are, some aren't. Not all economic activities you can get paid for are productive. Services may be productive (venture capital, barbershops, travel agencies). But they may also be nonproductive (financial firms juggling mortgage-backed securities that ultimately go bust and force the taxpayer to bail out the firm at expense comparable to fighting a small land war).

You cannot count productivity purely in terms of "did something happen that someone was willing to spend money to make happen?" Hiring a man to dig ditches and fill them in again cannot be a legitimate increase in GDP; neither can hiring a stockbroker to create ten million dollars in paper wealth and then trigger a stock crisis that destroys it again.

Don't be ridiculous. It's quite often easy to measure productivity in the Service Sector - go look back at my medical treatment example earlier in the thread.

Oh, I'm not being ridiculous. This is at the heart of the issue. Some benefits of the service sector are measurable. Others are not, or cannot be measured naively.

How do you assess the productivity of a stockbroker who creates ten million dollars in paper wealth, then needs ten million dollars in bailouts to keep his company from collapsing when the house of cards he created falls apart?

Having banks is important to a functioning economy, because you need them to move money around the system. Having banks, stockbrokers, and the like take up 20% of GDP would be a sign of a dysfunctional economy, because it would be very difficult for them to contribute to others, in reduced prices and increased availability of useful goods and services, on a scale that justifies the price of keeping them around.

Why 20%? Why is 10% okay, but not 20%? As I've pointed out, there are good reasons for why the US financial sector is so large - it's an international center of finance during a major period of world-wide economic expansion, which increases demand for financial services and capital.

Bass, I will cheerfully withdraw that number if I can get out of you an acknowledgement that there has to be a limit.

Nations whose economy depends on finance so heavily get into trouble because it means the entire national economy depends utterly on the banks' ability to come up with new ways to pull more wealth out of the ether. That's what's screwed us over with the current financial collapse: the banks stopped adding lasting GDP gains and started turning out fairy gold, leveraging themselves out further and further and putting more and more money into unstable assets.

Look at Iceland for an example of how this can cause problems for even a small economy, let alone a nation-sized one.

What you're missing is that this becomes a vicious cycle very quickly: the nation is poor, so its most advanced industries are sold off... which in turn makes other industrial sectors less viable. Sure, the petrochemical industry in Turkmenistan might not be profitable in and of itself, but if the products of that industry are increasing cotton production by a factor of three, you cannot simply close down the refineries and expect the economy to improve as a result. Especially not if the cotton farmers decide to quit trying to raise cotton for export and become subsistence cattle ranchers like their grandfathers were instead.

I don't expect the economy to improve simply by closing down the chemical factories - I just pointed out that in any liberalized trading environment, they were unlikely to survive short of tariffs and subsidies. Which have real costs, particularly for the sectors of the economy that are productive and potentially competitive on the world market, yet are being forced to pay for higher costs making them less competitive, as well as the taxpayers of said country.

The taxpayers wind up paying costs regardless when the bulk of the population is pauperized while the high-competitive-advantage oil industry makes money for the oligarchs.

See, this is what Stas is getting at, and you don't seem willing to widen your perspective enough to get the point. Participating in the global 'world is flat' economy and being turned into "the nation that produces oil for Europe," getting slotted into some very narrowly defined economic role by the iron logic of competitive advantage... this may honestly not be better for a nation. Specialization is a good deal for an individual, but the principle may not scale well to entire countries. Especially not when the specialization is in something that doesn't provide a reliable source of income above subsistence level for the general public.

The oil/mineral resource curse is a separate problem in terms of issues, but ultimately if the local industries are dying off, it's because not enough consumers in that country are willing to pay for their products (or the consumer base in the country is too small, and they don't have an export market). What you're calling for is for those consumers to sacrifice to keep a much smaller part of the population employed and an unproductive industry running because . . . why? It supposedly benefits them?

Because they're next on the chopping block? Situations like the one in Turkmenistan don't just hurt a handful of petrochemical workers. They hurt the entire country, as every industry collapses and is not replaced, as the entire population finds its income and economic prospects depressed.

The merits of the pro-globalization model are very much called into question when countries that follow the model wind up worse off than they were before. In much of the Soviet bloc, this has happened to varying degrees. Nor are they the only ones.

[K. A. Pital]

Since we are talking about economic topics, I don't particularly care what a physicist's definition of a tangible economic good is.

Physics is harder science than economics. The physical definition of tangible is quite relevant.

You continue to trot out this strawman argument about inefficient and parasitic service sector, coupled with (as I pointed out) venerating manufactured goods above services for no good reason. The services sector does not revolve around the industrial sector, and generates value in of itself, as I've pointed out before.

As for the difference between "productive" and "non-productive" work, if it generates lasting GDP gains and rises in real income as a result of a natural market equilibriam, then I consider it productive work.

Wow, way to completely ignore Simon's point, Bass. His point was that a large share of services are auxiliary actions executed to aid manufacturing, supply and distribution of goods to the populace. And some of thes actions cancel each other out (like dozens of marketing grots competing in cubicles in a skyscraper, often cancelling each other's contributions out).

There's no "natural market equilibrium" as far as real economy goes; no one did ever prove with certainity economy is in a state of long-term equilibrium. In fact, most of what we have learned in the latter decade about advanced economices puts theories of a general equilibrium under severe doubt and their followers to shame.

What are "lasting" GDP gains? A luxury yacht bought by an oligarch is a lasting GDP gain. This transaction, once made, will put the yacht and its price into the GDP of a nation, and it will be "on balance" for years and years onwards. And it might even grow substantially, if they keep buying yachts. Or doing something else. A lasting GDP gain is only valuable in case there's no corresponding GINI increase that cancels out most of the GDP gain, keeping the relative incomes of the poor and the working rising very slowly or being flat. Only when the GDP gain is long term and benefits the majority of the population, which can be viewed by household consumption breakdowns, THEN it can be thought of as productive. There, I have expanded a bit on your definitions.

They also put under serious doubt the idea that massive bureaucratic overheads in large corporations which are also tagged as services and comprise a massively massively huge sector in terms of monetary worth are near "productive" or generate lasting benefits for the majority of the populace and national economy in entirety.

I'm amazed you just skipped Simon's point about cancelling-out activites in favour of ranting.

Don't be ridiculous. It's quite often easy to measure productivity in the Service Sector - go look back at my medical treatment example earlier in the thread.

He is not ridiculous, but you are. Measuring productivity is hard when it comes to this. What was the productivity of the personnel of Lehman Brothers engaged in massive mortgage and "toxic asset" speculation? It was, by a sane account, negative, because it led to a rapid GDP decrease, which was especially bad - guess what - for the majority of the working class in America. However, by all financial accounts right until 2008 their productivity was EXTREMELY high. An hour of the work of any of these critters was worth much more than an hour of an automobile plant worker. And yet, their "work" caused massive damage to the entire economy.

So no, it's not simple. And it can't be, because a constant desire to muffle, conceal and hide the real worth of things in commercial secrets, behind legions of paperwork-robotpeople is very strong - it helps to keep the profit margins high, you know. Obfuscation is essential to commerce, whereas transparency isn't.

Not so seriously yet. But suppose it does happen, and there's a significant shift in demand for financial services and capital away from the US financial sector. All that means is that the Financial Sector will be a less important part of the US economy, just like how industry has gradually become a less important part of the US economy over a period of decades.

In the process damaging said economy seriously because of misplaced growth, misattributed worth (literally BILLIONS of misattributed worth!) Yeah, that's totally so productive.

I don't expect the economy to improve simply by closing down the chemical factories - I just pointed out that in any liberalized trading environment, they were unlikely to survive short of tariffs and subsidies. Which have real costs, particularly for the sectors of the economy that are productive and potentially competitive on the world market, yet are being forced to pay for higher costs making them less competitive, as well as the taxpayers of said country.

Tell you what, Bass. In most resource-trap nations, pumping out resources is the MOST competitive and productive sector of the economy. It also puts them into a resource trap. Now, it's either you admit from now that the effect CAN be harmful, or you continue being Captain Obvious, evading a moral judgement on "economic efficiency". Because you know full well, Pareto efficiency and economic efficiency in general are NOT moral categories.

In other words, the costs of supporting that unproductive chemical industry supplying the cotton farmers (who might be able to buy cheaper chemicals from abroad) have to be paid by someone, and that is almost always the productive parts of the economy that actually are generating value and income.

Static economics for idiots, Bass. In dynamics, though, when a nation taxes a productive sector (say, oil extraction) and starts building primitive airplanes, at first this is a drain on a competitive and productive sector. Later on, however, the airplanes may become not so primitive and quite advanced. And then, suddenly, when time has passed, an economy with TWO sectors, not just one, emerges. If they stuck to "doing what they're good at", they'd remain a fucking banana republic. That's what you're propagandizing. Separate the world into banana republics and advanced republics. And then be glad about it.

The oil/mineral resource curse is a separate problem in terms of issues, but ultimately if the local industries are dying off, it's because not enough consumers in that country are willing to pay for their products (or the consumer base in the country is too small, and they don't have an export market). What you're calling for is for those consumers to sacrifice to keep a much smaller part of the population employed and an unproductive industry running because . . . why? It supposedly benefits them?

See above.

Forcing a country's population to take a major hit to their living standards to keep unproductive industries running is not pursuing the interests of the citizenry. It's pursuing the interests of a particular group of citizenry and cloaking it under national strength and patriotism rhetoric.

Really? What "living standards"? You seriously think the profits from the oil sector benefit the poor people? Most nations of that type are ruthless oligarchies, struggling with industrial primtivization and "specialization" and unemployment at the same time. A taxation on oil export would not matter to the general person because it is unlikely he gets any big benefits from it. On the other hand, diversifying industry will generate employment and, in the future, possibly become a more developed nation.

Besides, a drop in living standards during the start of industrial growth is often expected. The creation of a small industry in one particular sector may require sacrifices at first which will be paid off later. But if you don't do it now, further along the road there's banana republic, murder, tyranny, poverty and collapse. And deaths, many death. And malnourishment. And tons of other things.

And once again, as I pointed out to Stas, nobody is forcing these countries to sell their products to the First World. If Turkmenistan wants to close off the economy to prop up their chemical industries, they can go ahead and do that. They'll be much poorer for it, though.

No, they wouldn't. They're already dirt-poor. Selective protectionism can and might work, if applied sensibly. It is brazen that you're talking about a nation whose leader called himself God while the population was barred from having even a 7-year education to keep them stupid (and keep state expenses down!) and who used the money he got from oil exports to erect a golden turning statue of himself in the middle of the capital, which is always faced towards the sun. The same person who initiated Year Zero-like actions in the nation, changing the entire system of education, the calendar and lots and lots of stuff, basically killing Turkmenistan's industries and science. I am sure you had the gall to say it because you don't give a fucking shit, right?

As for "nobody's forcing", you're so full of shit, Bass. You said it yourself - it is much easier (and more comfortable) for the elite to pursue overspecialization, because it usually bases on the so few sectors that are competitive and profitable - screw the rest - and do not require any great effort, since the demand is already there on the world market, as opposed to a demand which yet has to be created and is thus hard to get (like the demand for your new airplanes instead of your good ole profitable bananas).

The market IS forcing these people towards making this or that, and don't fucking say economic coercion is not a fucking force. I'm tired of that fucking bullshit.

In Turkmenistan's case, it's because oil and gas themselves tend to distort an economy, which is something different from the fact that smaller economies have a tendency to drift towards over-specialization because of economies of scale.

Oil and gas are a form of specialization, like bananas, and not much different. We call them petrostates just like we call banana republics banana republics. Stop pretending the process is in any way different. The rise of some and the primitivization of others are sides of the exact same coin.

But more generally, the above sounds like an argument for more liberalized immigration flows

So instead of improving the conditions in said nation, it is best to use their people as a form of cheap labour and ghetto underclass for the developed nations, creating tons of problems in the process - cultural, economic, ethical? Yes, I've heard that neoliberal idiocy more than a few times.

Over-specialization is a problem for smaller countries and economies, since it makes them more vulnerable to trade issues - but it also holds out the promise of actual serious income gains. I think that's better than trying to support a smaller, weaker autarkic economy just because you're afraid of trade getting disrupted.

You are ignoring the problem. There's not a choice between complete autharky and trade openness. There's a choice between controlled environment and chaos. Complete autarky is bad, but so is complete openness.

As for "not working", look at some of the countries that did benefit from initially specialized in the global trade environment. Countries like Taiwan (semi-conductors and computer parts), Korea (steel), Bangladesh (textiles)

Tell you what, Bass. Remember food cultures exports from Bangladesh in 1974 caused a famine in the nation, despite there being enough food? Because exporting was more profitable. There were people from other nations who outbidded Bangladeshi for their food. As a result, one million people perished. Please, tell me now again that you're supporting and condoning this. Are you now?

They could have just kept it closed, supporting weak industries and maintaining a poorer but more diverse economy.

You act as if the economy is static, and something that was a small and weak industry today cannot become stronger in the future. That's fucking bullshit and you know it.

Here's what, though. Answer my arguments above honestly, or I'll throw the gauntlet for the Coliseum - what say you?

[Simon_Jester]

Wow, way to completely ignore Simon's point, Bass. His point was that a large share of services are auxiliary actions executed to aid manufacturing, supply and distribution of goods to the populace. And some of thes actions cancel each other out (like dozens of marketing grots competing in cubicles in a skyscraper, often cancelling each other's contributions out).

Exactly. The same can go for large numbers of lawyers whose job is to maintain a balance-of-lawsuit-terror. Or large numbers of stockbrokers who make money purely by stock manipulations (as in, they do not serve to invest capital into businesses in need of capital, which was the original purpose of the joint-stock company).

What are "lasting" GDP gains? A luxury yacht bought by an oligarch is a lasting GDP gain. This transaction, once made, will put the yacht and its price into the GDP of a nation, and it will be "on balance" for years and years onwards. And it might even grow substantially, if they keep buying yachts. Or doing something else. A lasting GDP gain is only valuable in case there's no corresponding GINI increase that cancels out most of the GDP gain, keeping the relative incomes of the poor and the working rising very slowly or being flat. Only when the GDP gain is long term and benefits the majority of the population, which can be viewed by household consumption breakdowns, THEN it can be thought of as productive. There, I have expanded a bit on your definitions.

I'm not sure I'd go that far; I'd stick qualifiers in there. But yes, if a sector contributes only to the economic aristocracy, it's not necessarily contributing very much, given that trickle-down economics doesn't work all that well.

As for "nobody's forcing", you're so full of shit, Bass. You said it yourself - it is much easier (and more comfortable) for the elite to pursue overspecialization, because it usually bases on the so few sectors that are competitive and profitable - screw the rest - and do not require any great effort, since the demand is already there on the world market, as opposed to a demand which yet has to be created and is thus hard to get (like the demand for your new airplanes instead of your good ole profitable bananas).

The market IS forcing these people towards making this or that, and don't fucking say economic coercion is not a fucking force. I'm tired of that fucking bullshit.

Well, in this case the force is imposed by a combination of economic coercion and an evil, deranged government. If the government was doing its duty, overspecialization would not be such a problem- look at the Asian Tiger economies, which became more diversified over time, not less. South Korea did not become a Steel Mill Republic the way it might become a banana republic.

But in that case, the government would be achieving that by deliberately interfering with market forces to achieve long-term gains that are short-term unprofitable for local businesses. When the government's sole motives are to remain in power and enrich themselves while everything else in the country is free to go to hell, this cannot happen. And the market won't encourage it.

Also, looking forward to a coliseum debate.

[Guardsman Bass]

Here's what, though. Answer my arguments above honestly, or I'll throw the gauntlet for the Coliseum - what say you?

I don't have the time to do a proper Coliseum debate. As is, this will be my last post in this thread.

[K. A. Pital]

Here's what, though. Answer my arguments above honestly, or I'll throw the gauntlet for the Coliseum - what say you?

I don't have the time to do a proper Coliseum debate. As is, this will be my last post in this thread.

I'm short on time too - no problems. If you feel like resuming this discussion at any time, feel free to do so.

[Big Orange]

I'm short on time as well, but this article here is interesting and blood boiling in spite of being filed under 'No shit Sherlock!'...

Revealed: 50% of Tory funds come from City
Donations from the financial sector have risen steeply since David Cameron became leader of the Conservative party

Financiers in the City of London provided more than 50% of the funding for the Tories last year, new research revealed last night, prompting claims that the party is in thrall to the banks.

A study by the Bureau for Investigative Journalism has found that the City accounted for £11.4m of Tory funding – 50.79% of its total haul – in 2010, a general election year. This compared with £2.7m, or 25% of its funding, in 2005, when David Cameron became party leader.

The research also shows that nearly 60 donors gave more than £50,000 to the Tories last year, entitling each of them to a face-to-face meeting with leading members of the party up to and including Cameron.

The study shows the impact that Michael Spencer has had on party funding. He was appointed by Cameron as Tory treasurer in an attempt to reduce the influence of Lord Ashcroft, the party's former deputy chairman. Spencer was asked by Cameron to increase the number of relatively small donations of £50,000 to curb the influence of large donors such as Ashcroft, and for these smaller donations the City was place to look.

But there were still big City donations last year. David "Spotty" Rowland gave more than £4m. Stanley Fink, a hedge fund manager who was appointed the Tory treasurer last year in succession to Spencer, gave £1.9m while George Magan gave £485,000. Magan was also given a peerage.

The research comes at an awkward time for the coalition. Yesterday, George Osborne put an extra £800m tax on bank balance sheets for this year, increasing the bank levy from £1.7bn to £2.5bn. The move was immediately denounced by unions as being politically motivated, coming as it did just hours before Osborne's first encounter with the new shadow chancellor, Ed Balls, in the Commons.

In parliament, Balls lambasted Osborne for making the announcement about the levy at breakfast time, rather than in next month's budget, describing it as a "mini budget". He also said that even without the increased bank levy, Osborne had cut tax for banks this year because he had not reintroduced Labour's bank bonus tax and was also cutting corporation tax.

Osborne, however, was adamant that banks would pay more tax under the coalition than they would have done under Labour and insisted that he would not sign an agreement with the banks until he thought he had a "good" deal.

Meanwhile, the government and the banks are continuing talks over an agreement on bankers' bonuses and lending. An agreement on the so-called Project Merlin is to be announced within the "next week", Treasury officials said.

In response to the news of City donations to the party, John Cryer, a member of the Treasury select committee, said: "With over half of Conservative party funds coming from the City, it's no wonder this Tory-led government is letting the banks off the hook. George Osborne is giving the banks a tax cut compared to last year and is refusing to adopt Labour's plan to repeat last year's £3.5bn bank bonus tax as well as the bank levy. Even with yesterday's panic announcement the Tory-led government is taking less from the banks than the Labour government did last year. And there is still no sign of a deal on increased bank lending, greater transparency and restraint on bonuses. People will now suspect that the real reason why George Osborne has been so soft is that he cannot afford to upset his paymasters."

A Tory party spokesman said: "On the very day that the chancellor raised another £800m in tax from bankers – having already introduced the toughest rules on bankers' pay anywhere in the developed world – it beggars belief that anyone could claim that donors to the Conservatives are influencing policy. It would be more pertinent to ask why Labour continue to allow their policy to be dictated by the unions, who provide 80% of their funds."

Labour saw its business donations plummet after Tony Blair left and Gordon Brown struggled in the polls. Unions account for most of the party's funding.

The Guardian

2011-12 are going to be "interesting" times for Britain and Westminster, aren't they? What a con our democracy is, the supremely arrogant hubris of the Anglo-American super-rich (and of the collaborating oligarchs in China and Russia for that matter) is going to be their undoing sooner than we'll think. And I heard that Manchester's council has cut so far to the bone, practically all of its public toilets we'll be shut down!

And here's an interesting cartoon what con artists the Bank of England and Federal Reserve are:

[Zaune]

Link

Health adviser sacked for speaking out in the Guardian

David Richards pointed out that money for coalition's new mental health strategy was coming from existing NHS budget

The government has sacked an independent national health adviser for questioning in the Guardian whether the money for its mental health strategy was new or came from the existing NHS budget.

When Nick Clegg announced £400m to improve access to modern psychological "talking therapies" last Wednesday, David Richards, professor of mental health services research at the University of Exeter, told the Guardian that the money was not additional. Instead of being spent on training therapists, it could end up used to plug other gaps in the NHS, he said.

The case has echoes of that of Professor David Nutt, who was sacked by the then Labour home secretary Alan Johnson for publicly questioning drug policy.

Richards has been involved since 2006 in efforts to increase the numbers of trained therapists who can help the substantial numbers of people with anxiety and depression. For the last two and a half years, he has been a national adviser to the Department of Health's improving access to psychological therapies (IAPT) programme.

He said it had been explained at a meeting of the IAPT group just over two weeks earlier that the money would have to come from the existing NHS budget. "We were very disturbed when we found this out," Richards told the Guardian. "I personally feel very aggrieved that mental health is being used by this government to shore up its very poor opinion poll ratings and I don't want to be part of it."

In a letter to the paper today, Richards says his removal is "extremely disappointing". His comments and sacking resulted from his frustrated efforts to get an answer to three important questions, he says. He wanted to know to what extent the money would come from cuts elsewhere in the budget; what mechanisms there were to ensure every penny was spent on training and therapy; and what systems had been put in place to ensure existing funds were not slashed as NHS cuts bit.

Richards writes in his letter: "The questions are not a matter of mere detail but of vital import for the many thousands of people trapped in a cycle of untreated misery and fear."

There are potential problems in the interaction between the government and independent advisers from academia, he says, adding: "Politicians assume that independent advisers are just going to do what they are employed to do . There is a general issue about the use of advisers who come from a highly independent academic environment."

However, unlike Nutt, who objected to government policy, Richards says he was simply asking for clarification.

Richards's main achievement in the last few years has been the establishment of a highly trained group of around 1,500 psychological wellbeing practitioners, who deliver cognitive behaviour therapy-based, low intensity help to people suffering from anxiety and depression.

Their interventions are brief, but effective, he says – as recommended by the National Institute for Health and Clinical Excellence. They make up 40% of the 3,600 therapists trained in the past three years. The programme aims to eventually train a total of 6,000.

The shadow health secretary, John Healey, said: "Evidence from a range of independent experts gives lies to ministers' claims that the NHS budget will be protected next year. And this 'new' funding for talking therapies again appears to show them misleading the public."

Meanwhile, a thinktank founded by Iain Duncan Smith is criticising the government for failing to take account of the impact of family breakdown on mental health. The Centre for Social Justice says ministers should have assessed the impact of dysfunctional families on the mental health of children and adults.

Its report, which defines family breakdown as "divorce or separation, dysfunction or dad-lessness", says: "Working with the whole family not only prevents many children from being labelled as mentally ill but can also tackle the causes of their problems – often rooted in or sustained by the dynamics of family relationships."

Yet another shining example of what passes for democratic accountability in this country.

[Big Orange]

OK, here's another article on how out of touch and insulated in wealth/corporate influence Tory MPs (actually any significant MP) are:

Bus drivers and waitresses? Those sorts of people aren't important says Tory peer Lord Lang

Now that their party is back in power, the Tories feel more confident about saying what they really feel think about the ‘common people'.

The Daily Mail reports:

Bus drivers, waitresses and other people in ‘unimportant’ jobs are not fit to sit in judgement on the business interests of former ministers, a senior Government adviser said yesterday.
Tory peer Lord Lang said ordinary people were not qualified to judge whether former ministers such as Lord Mandelson should be allowed to take well-paid jobs in the private sector.

Lord Lang, chairman of the Advisory Committee on Business Appointments, which vets the jobs of former ministers, defended the ‘Establishment’ make-up make-up of his committee, which comprises four peers, two knights and a dame.

The Mail also has an interesting sidebar on his Lorship's business interests.

Lord Lang, who served as trade secretary under John Major, has carved out a highly lucrative portfolio of private interests since losing his seat at the 1997 election.

The 70-year-old peer, who was educated at Rugby School and Cambridge University, is a director of no fewer than five corporations.

His most prominent role is at giant U.S. insurance firm Marsh and McLennan, where he due to become chairman in May this year. He is also a non-executive director at the hedge fund Charlemagne Capital and the Russian energy firm SoyuzNefteGaz.

Other directorships include Ukrainian wine company OJSC Sun Valley and management consultants SI Associates.


Last year Lord Lang was one of a number of senior politicians caught up in a sting by Channel Four’s Dispatches programme. Researchers set up a fake lobbying firm to establish what politicians would be prepared to offer.


Lord Lang submitted his CV and went for an interview.

I don't know about you, but with his snobbish, elitist attitudes and his greed, I think Lang personifies everything that is rotten about Britain's political elite.

Neil Clark

[Zaune]

For the sake of being scrupulously fair, I'd like to remind everyone that the above source is a Daily Mail article, and therefore is quite likely to have been almost entirely made up.