Jim's Blog

For many years, US statistics have been obviously fake, understating inflation by about two and a half percent a year, thus overstating real GDP growth by about three percent a year, and understating the fall in living standards by about three percent a year.

Thus, according to official statistics, US real GDP is still higher than that of China.

Yet, by every measure of actual stuff and technological capability, Chinese production is substantially greater than US production, though Chinese GDP per head is still below the US. China produces more cars, more concrete, more electricity, Chinese buy more cars, more concrete, more electricity, China exports more stuff, China imports more stuff. China produces and consumes more beer, more pork, and far, far, far more steel.

And it is not just tee shirts. China exports twice as much high tech stuff as the US does. China produces and consumes more high tech stuff than the US does. We sell them low tech stuff like wheat, we import high tech stuff like phones. China has the fastest trains in the world, and very large numbers of ordinary people using those very fast trains. China has the coolest airports, and these airports have far more people using them than the US.

OK, what about GDP per capita?

Officially, US GDP per capita is growing. In actual fact, it is obviously falling. Last time I walked around familiar places in America everything was shabbier, older, dirtier, more in need of a coat of paint. US GDP is falling at about two percent a year (used to be falling at about one percent a year, but the decline is visibly accelerating).

US population growth is about 0.6% per year (white population collapsing rapidly due to inability to reproduce without an enforceable system of marriage) so real GDP per capita is falling at about two and half percent per year. This represents a rapid acceleration in the rate of decline.

Chinese real GDP per capita is rising at about seven and a half percent a year. Assuming current trends continue, rather than continuing to accelerate, Chinese real GDP per capita will exceed US real GDP per capita in sixteen years, in 2030.

Capitalism, in the sense of wealth creating wealth, wage labor, power derived from wealth, and trade, is a bronze age social technology. “Capital” literally means “head” in the sense of “head of cattle”. Originally, the amount of capital one had was the number of beasts in one’s herds. The biblical bronze age patriarchs were capitalists, in that their wealth was their herds, and their power derived from their wealth, their power was their employees. The actual figures on whom the biblical patriarchs are based are probably considerably less ancient than they are depicted in the bible as being but since Moses dates from the collapse of bronze age civilization and he, or the people who wrote him up, are very early iron age, his predecessors have to have been at least late bronze age, possibly earlier. The biblical patriarchs are depicted as fighting, and winning, battles with kings, which would suggest that they were figures of the very late bronze age, since chances are that nomads only gave kings a hard time during the decline and collapse of the bronze age civilizations. The size of states, and the size of armies, declined during the collapse of bronze age civilization, to the point where the sword of a single hero could make a big difference, only to rise again in the early iron age.

But, obviously there is something importantly different about today’s capitalism, something that changed around the time of the restoration.

The phrase “Industrial Capitalism” is misleading, for it was this new form of capitalism that created industry, not the other way around.

The big difference, the social technologies that caused the big difference, were double entry accounting, which made the joint stock corporation possible, made it possible to separate ownership of capital from enterepreneurship. Investors could put an entrepreneur in charge of their capital, and use double entry accounting to keep an eye on him. This is the foundation of western civilization, which began to soar when Charles the Second cut joint stock corporations loose from strong government oversight.

This means that owners of capital can employ people smarter than themselves to manage their capital, increasing the effective intelligence applied to production.

Which caused productivity to consistently and substantially rise faster than population, for the first time in history.

Double entry accounting is a critical part of this system. Unfortunately, double entry accounting has been profoundly disrupted in America by Sarbanes-Oxley, making it impossible to tell how a business is doing. This ham fisted government intervention was officially intended to prevent businesses from misleading investors and creditors, but instead it has made it mandatory to mislead investors and creditors. Sarbanes-Oxley consists of thousands of pages of law, each page of law giving birth to thousands of pages of regulation. It is of course impossible to comply with all this, for if one was to comply with any one page of Sarbanes-Oxley, it would put you out of compliance with hundreds other pages of Sarbanes-Oxley, so what the big firms do instead is hire accountants sufficiently well connected with the government, accountants on the revolving door between regulators and regulated, so that any figures the accountant conjures up will be deemed compliant with Sarbanes-Oxley.

The practical effect of this became apparent in the financial crisis, when it became obvious that many banks simply had not been keeping track of their finances, and had no idea what assets they owned, what financial obligations others had to them, and what financial obligations they had to others. Sarbanes-Oxley replaced the intentionally misleading figures of Enron with fog, with meaningless figures.

Which brings us back to the old system, where rich people cannot, and do not, entrust their wealth to smart people.

More right quoting “Men among the ruins”

The preliminary condition would naturally be the overcoming of the typical situation in democracies, where the political element makes promiscuous alliances with the plutocratic element, opening itself to corruption and pretending to represent a “Right” in opposition to Marxism. Again, the pure political power must be released from every bond—first from the bonds of capitalism, and then from those of the economy

This is, the state released from every bond, is the old communist fantasy. If the state is released from every bond, it can decree that everything be lovely.

The state does so. Strangely, everything fails to be lovely. Obviously evil people, wreckers, are disobeying the decree. They must found and destroyed. Then everything will be lovely.

But things still are not lovely. Obviously there must even more wreckers, who must be sought out even more vigorously and destroyed even more thoroughly.

At some point Stalin declares that Utopia has arrived, notwithstanding appearances to the contrary, thereby stopping the madness, or Vietnam invades Cambodia, thereby stopping the madness.

The state cannot be free from the bonds of capitalism, because it needs money and goods, and therefore needs capitalists to tax and to purchase technology from. As for being free from the bonds of the economy, we saw how that worked out for the communists.

Reality is that for the reasons explained by Mises and Hayek, and colorfully dramatized by Ayn Rand, the state cannot directly run the economy, nor directly sponsor science. Private individuals, with private wealth, have to be free to create wealth and knowledge, without which the state has nothing to tax, and no means to pay the army, nor any source for the technology to equip the army.

The state is at best a stationary bandit that keeps mobile bandits at bay. If it consumes everything, it destroys itself. Stalinist Russia kept itself afloat on an illegal but essential and tolerated black market, by letting capitalism that it had thrown out the front door in by the back door and by seizing and pillaging additional capitalist economies.

Stalin’s successors faced an ever more serious conflict between ideology – that everything should be devoured – and reality – that they needed the market and wealthy people, a conflict that gradually became more serious as no more advanced economies fell under their power.

Which eventually led to the open abandonment of the “seize everything” ideology