Playing the Indian Card

Thursday, September 29, 2011

How to Fix the Economy


Okay, we're all doomed. This current crisis over sovereign debt is not caused by the 2008 crash, and it is not just a cyclical downturn. The offal is hitting the ventilating system. Because of declining birth rates and growing government, we have rached the point of unsustainability, just as forecast by Ibn Khaldun, the founder of social science, four centuries ago. Government has outgrown the ability of the economy to support it. We cannot just keep borrowing money—there is a limit to the number of lenders and the amount of capital that can be soaked up, and it is being taken from more productive uses. We cannot just boost taxes—doing so will simply depress the economy further. The only option is to boost the non-government economy by cutting government.

Here's how.

  1. Outlaw strikes in the public sector.
  2. Set public sector pay rates automatically as a set percentage below the average rate for comparable pay in the private sector.
  3. Rescind current pension rates in the public sector in the same way.

This will fix the specific problem that has most directly gotten us into the current situation. Strikes in the public sector are simply a blank cheque written out to public employees. If the current incumbents in the public sector do not like this, no problem. There is a backlog of unemployed. Fire them all and hire anew.

But there is a lot more we can do. The cost of education, for example, has been spiralling out of control, while the results obtained, by most measures, have been holding steady or declining. Here's how to fix it by actually spending less money:

  1. Go to a full voucher system to introduce competition to the market.
  2. Eliminate any legal requirement for teacher certification. With the market able to decide, there is no need, and this works only as a restraint on trade.
  3. Remove any kind of government subsidy for the social sciences or the teaching of the social sciences at any level. They have had a couple of hundred years to show verifiable results, and have failed. They are conceptually in violation of human rights. Time to stop spending public money on them.

Health care is even more an area of spiralling costs. Here are a few simple ways to save:

  1. Allow pharmacists to dispense without prescription. This automatically eliminates a huge number of unnecessary doctor visits, and is more in accord with basic human rights. Pharmacists are knowledgeable enough to advise in many cases.
  2. Introduce a nominal user fee or deductible to discourage frivolous doctor visits.
  3. Introduce competition by allowing private, for-profit care providers.
  4. De-fund abortion.

Deregulation is the one obvious way to boost economic activity without spending more government money. A few simple ideas:

  1. Remove all limitations on employers hiring whomever they choose. This is a human right in any case, the right of free association, ends unjust discrimination, would boost efficiency throughout the economy, and would do away with a large bureaucratic structure.
  2. Remove all laws regarding sexual harassment in the workplace. Again, this eliminates a vast bureaucracy and a vast extra expense for most enterprises. Sexual harassment laws in their application are plainly sexually biased, and so produce systematic injustice. And they accomplish nothing of significance: if one is sexually harassed, one has the obvious remedy of finding a different job.
  3. Go to a flat tax. Simplifying the tax code ends efficiency-destroying distortions in the free market and eliminates the need for enterprises to hire expensive expertise in order to play the system. It makes the future predictable, and so makes investing more secure. It would also eliminate another huge government bureaucracy.
  4. Remove all restrictions on foreign investment. Investment is good.


It is perhaps too late to fix the demographic problem in the near term; but we need to give more support to the family in any case in order to allow it to replace government as the essential social structure.

One simple measure: strictly limit the liability for alimony or child support in case of divorce. This will remove an actual disincentive for wealthy people to marry and have children, and an actual incentive for some to divorce.

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