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Wags:
How does my having an opinion different than yours make me a Rachel Maddow or Keith Olberman fan?
How does my having an opinion different than yours make your news sources credible and mine not?
These are gargantuan logical lapses.
non se qui tur
1. An inference or conclusion that does not follow from the evidence or premises. 2. A statement that does not follow logically from what preceded it.
Latin: “It does not follow”.The American Heritage Dictionary, Second College Edition.
Joe
Wags:
My Political Science final exam refutes my professor’s claim that the United States has become a “rentier nation”. You may want to skip to the tenth and eleventh paragraph where I refute your claims regarding American manufacturing:
Joseph Corlett
Political Science Final
12/07/10A definition of rentier nation must precede any attempt to ascertain whether or not the United States of America meets the definition. Economist Hussein Beblawi, the first to popularize rentier theory as related to Middle Eastern oil producing countries, delineates four characteristics of a rentier economy: “First, rent situations must predominate in that there really is no such thing as a pure rentier economy. Second the rent must come from outside the country. Third, in a rentier state only the few are engaged in the generation of rent, while the majority is involved in its distribution and consumption. Translated, this means that government leaders make the deals and take in the revenue and then allocate to the public, which is not involved in creation of the wealth. Fourth, the government must be the principal recipient of the external rent in the economy.” (Suburban p.1)
Additionally, Douglas Yates in The Rentier State in Africa: Oil Rent Dependency and Neocolonialism in the Republic of Gabon defines rentier state as follows: “By treating rent as an economic category, economic theory can tell us little about the rentier. For the rentier is a social agent who does not actively participate in the production process yet still shares in the fruits of the product. Leaving aside the question of the origins of rent, be it physical or social, it is clear that rent is a factor income unlike the other traditional costs of production. Wages are paid for labor, interest for capital employed, profits for the successful management of risk. For each of these factor incomes some element of sacrifice and effort is involved. But the rentier is a member of a social group that is devoid of such value added. The purest rentier is but a parasite feeding on the productive activities of others. Only nature is sacrificed.” (Yates, p. 1)
With the comment “Only nature is sacrificed.” Yates, like Beblawi, ties the rentier nation definition to that of oil-producing countries selling oil to consuming countries or paying “rent” on a finite natural resource. This definition varies from that of Thomas J. McCormick, in his book America’s Half Century who portrays America as a rentier nation not for selling a natural resource, but for living off the income of its direct and indirect overseas investments. (McCormick, p. 164)
McCormick makes the case that the “rent” paid to oil producing countries flows back to the United States in the form of “petrodollars” pumped back into New York and London financial institutions which they invested wherever the best profits were to be had. (McCormick, p. 164) It is interesting to note that the oil-producing countries chose to invest their petrodollars with New York and London financial institutions considering all other investment choices available to them. Their “vote” with their dollars seems to contradict Yates’ contention that rentier nations or their proxies, New York and London financial institutions, constitute “parasite(s) feeding on the productive activity of others.” New York and London financial institutions are providing a valuable investment service to customers, epitomizing capitalism and refuting the parasitic theory.
McCormick’s characterization of rentier nation doesn’t jibe with the third and fourth criteria as described by Beblawi in that American government doesn’t directly make the deals and take in the revenue and the American government is not the principal recipient of rent. However, the American government does pass laws, allocate money and military might to facilitate corporate profit making and taxes those profits. This is an important distinction as it more accurately depicts America’s more indirect status as a rentier nation.
McCormick states that by 1983, more than one-third of the United States’ income was from interest alone, furthering its status as a rentier nation. (McCormick, p. 192) He fails to make a case as to why this is a bad thing. Unlike the OPEC nations receiving “rent” on a likely finite resource, oil, the United States receives “rent” on wealth already created, likely to increase in value and managed properly, inexhaustible. On the same page, he claims that the “virtual elimination of corporate income taxes” resulted in an upward redistribution of wealth, but fails to substantiate a casual relationship between the two. McCormick wrote this before observing that Ireland set its corporate income tax rate at 12.5% in the mid-eighties, resulting in a huge influx of industry and jobs. (Tax p. 1) A “huge influx of …jobs” means the downward, not upward, redistribution and subsequent creation of wealth. American corporate tax rates are one of the world’s highest at 35%. (Kimmitt p. 1)
According to Robert M. Kimmitt and Matthew J. Slaughter in their Wall Street Journal article of 12/06/10, Insourcing: The Secret To Job Growth, we need more, not less, of the type of rentier nation that McCormick laments. They document a report by the Bureau of Economic Analysis finding that a group of American companies create high paying American jobs based on significant capital investment and export prowess. These companies are the U.S. operations of multinational firms based abroad. Opposite McCormick, they call for the lowering of the US corporate income tax, increasing trade and exports and find particularly ominous the protectionist tone of “Buy American” as in the 2009 American Recovery and Reinvestment Act.
Alex Alexiev defines Mexico as a “quasi rentier state” in his article Give Us Your Social Problems in National Review Online due to the 20 billion dollars or more per year illegal aliens sends home and the oil revenues Mexico generates. (Alexiev p. 1)
Assuming the United States meets the definition of a rentier nation when defined as a country receiving income from investments abroad, we can examine the effects of such investment as it relates to other countries of the world and American foreign policy. China’s Great Leap Forward’s forced industrialization failure made the reality of American investment, capitalism, engineering and technology painfully apparent to the Chinese. (McCormick p. 166) To American business and especially American government, the establishment of better diplomatic relations with the Chinese was critical. The benefits of improved diplomatic relations were not lost on the former Soviet Union either. With detente, literally ‘a relaxation of tensions’ in French, the soviets were able to utilize western capital and technology and slightly ease repression in satellite countries. (McCormick p.168) Détente benefited the United States by lowering military risks, giving rising defense spending even more value.
Those arguing that the United States surrendered manufacturing to become a rentier state are rebutted by the 1957 theory of Colin Clark: “This emphasis on differential productivity growth as the main cause of deindustrialization contrasts with Colin Clark’s (1957) influential hypothesis that the evolution of employment structure during economic development is explained by a well-defined sequence of changes in the composition of demand. Clark’s hypothesis essentially consisted of an extrapolation of Engel’s law to the case of manufactures. He argued that—just as, in a poor country, the share of income spent on food declines as per capita income rises, while a growing share is spent on other items such as manufactured goods—as the country develops further, demand shifts increasingly toward services and the share of expenditure devoted to manufactures stabilizes and then ultimately falls. As a result, the employment share of manufacturing should also stabilize and eventually
fall.Thus, according to Clark, deindustrialization in advanced economies would be a natural consequence of the shift in demand away from manufactures toward services.” (IMF p. 19) Viewed in light of the United States having followed Brittan in “surrendering” manufacturing, Clark’s theory seems prescient. Just as it would have been nearly impossible to convince a manufacturer to not develop automotive business in Michigan in the 50s and 60s because it was the most attractive, it would be nearly impossible for America to resist the natural transition from a manufacturing based economy to one centered on services and technology.
McCormick postulates “military Keynesianism” as a consequence of the United States rentier nation status, in that the government uses research and subsidies to prop up short-term profits while targeting high tech industries to blunt recessionary tendencies. From a foreign policy standpoint, military Keynesianism allowed foreign aid to flow in a politically palatable form. (McCormick p. 105) Expanding and, in more recent times, keeping military bases on foreign soil would protect American business interests and could be viewed as a foreign policy consequence of America’s rentier nation status.
Even the most cursory review of history from the country’s inception to the present demonstrates an American foreign policy exemplifying American exceptionalsim. From swiping the West from Mexico, the Floridas from Spain and the genocide of Native Americans along the way, America has and maintains a foreign policy of expansionism and looking out for its own best interests, militarily and economically. The closer a foreign nation is to the United States geographically, the more interest the United States has in the affairs of that country as exemplified by the Cuban Missile Crisis and our interventions in overthrowing the democratically elected Chilean government of Salvadore Allende in the 70s.
Nor is the United States below overthrowing a democratically elected Middle Eastern government as it did in Iran with Mossadegh. Through its majority control of the International Monetary Fund, the United States dangles the carrot of development loans on the stick of free trade, private property and social and military spending proportionate to a loan recipient’s gross national product, despite whether or not such policies are in the immediate best interest of the loan recipient. The United States imposes development loan restrictions on developing nations, restrictions that the United States did not have when it was a developing nation, such as import protection through tariffs. The United States promulgates its national value of democracy and capitalism throughout the world despite having to resort to thuggery on occasion to meet these ends.
Works Cited:
Alexiev, Alex, National Review Online http://www.nationalreview.com/articles/217772/give-us-your-social-problems/alex-alexiev
IMF Staff Papers Vol. 46 No.1 (March 1999)http://www.imf.org/external/pubs/ft/staffp/1999/03-99/pdf/rowthorn.pdf
Kimmitt, Robert M., Slaughter, Matthew J., Wall Street Journal, Insourcing: The Secret to Job Growth 12/06/10 http://online.wsj.com/article/SB10001424052748703989004575652663658132850.html
McCormick, Thomas J. America’s Half Century United States Foreign Policy in the Cold war and After, John Hopkins University Press, 1995.
Suburban Emergency Management Project, What is a Rentier State? http://www.semp.us/publications/biot_reader.php?BiotID=227
Tax Foundation, Tax Policy Blog, Ireland’s Low Corporate Tax Rate Leads to Prosperity http://www.taxfoundation.org/blog/show/626.html
Joe
Posted By Kowboy on 11 Dec 2010 11:26 AM
Wags:My Political Science final exam refutes my professor’s claim
Imagine that…
Posted By Kelsey Crisp on 11 Dec 2010 02:20 PM
Posted By Kowboy on 11 Dec 2010 11:26 AM
Wags:My Political Science final exam refutes my professor’s claim
Imagine that…
Kelsey,
Both Joe and his prof are sufferring from the illusion that economics is a “science” when actually its more liberal arts BS, like psychology, anthropology and sociology. Did I miss any ologys?
If economics was so exacting, why didn’t the GP (great plethora) of economists sound out an alarm before the last financial crash? A very few did, but not many. Kelsey, You and I both know why, because generally they did not have a clue about that past impending economic disaster. Nor do they have a clue or a path forward out of the current mess. They just have theories, contrived formulas and after the fact insights, which are always 20/20 because its after the freaking fact. Geez!
In honor of Joe’s PhD (piled higher and deeper) economics dissertation, I award him the coveted – “Order of the Dung Shovel ” which places him on a podium of honor with BS economists worldwide. 🙂
Posted By Lenny E on 13 Dec 2010 07:13 AM
Kelsey,Both Joe and his prof are sufferring from the illusion that economics is a “science” when actually its more liberal arts BS, like psychology, anthropology and sociology. Did I miss any ologys?
In honor of Joe’s PhD (piled higher and deeper) economics dissertation, I award him the coveted – “Order of the Dung Shovel ” which places him on a podium of honor with BS economists worldwide. 🙂
Lenny:
That is hilarious.
Joe
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