This seems to come from the same place as the argument of "trickle down economics". Yea no, I've seen similar things done in Japan with abenomics (with one of the targeted goal even being more inflation; without achieving it) and studies show it doesn't work.
Those spending never reaches the "lower classes", and seldom even reach places where it would have the potential to increase productivity.
It's a tired, old argument that is done to justify stupid spending and enriching certain pockets while claiming to benefit all with a shoddy reasoning that omit the important details
His argument is that the government can do 2 things:
1. Interest-free money for businesses to launch, grow, and advance. This leads to more goods in the market and thus lower prices
2. Free money straight to the people which means more money in the market and thus, inflation, empty shelves, etc.
His general point is that having interest-free money keeps existing players honest since newcomers can come in and start a competing business. Now that the money is drying up, existing players are increasing their moat.
The US has had extremely low interest rates for a very long time, and yet effective competition is further than ever in many industries. Something I'd observe is how unreasonably difficult it can be to legally sell things in the US. For instance hitting on this topic (of food prices), why can't I simply start baking bread and selling it? You can make an amazing loaf of bread for a tiny fraction of what people pay in a grocery store, but somehow actually being able to legal sell it is painful, at best.
By contrast I now live abroad in a developing country and it's quite amazing how ripe small business is. Want to sell bread? Okay, bake it and sell it. You can even get it stocked at "convenience marts" easily enough since a that's often just some guy's lower floor transformed in a shop. Talk to the owner, who's probably the guy at the counter, and make a deal. If people like your bread, you're now officially a baker - congrats.
Make it easier for people to sell stuff, and there will be more stuff. And the prices of stuff will trend downwards. While money is a way around these issues, a regular joe who happens to make a great loaf of bread probably isn't especially keen on taking on 5-6 figures of debt just to see if selling his bread actually works, let alone being something he really wants to dedicate himself to.
This is a highly relevant point. The more difficult it is to learn about and comply with regulations, the fewer businesses will attempt to do so.
In some cases, business simply ignore regulations that that are obscure or inefficient to comply with; this leads to corruption and/or shadow economies.
In more cases, business is simply discouraged and doesn’t grow, or just doesn’t start at all.
The messy patchwork is city, (sometimes) county and state licensing and taxation framework in the US is a huge drag on small business.
I am not arguing for no regulation, licensing, or taxation, only that these entities recognize that requiring businesses to file paper tax returns every quarter, even if they have done zero business in a given city is a significant hindrance to business activity.
Safety, including healthcode safety, is a good thing. A level playing field ensures that everyone in the market is making safe, hopefully good quality, products for that market. Reviewing, streamlining, and creating easier for small businesses to follow guidelines about the regulations that exist in a given field also sounds like good ways of improving consumer choice and safety.
> Safety, including healthcode safety, is a good thing. A level playing field ensures that everyone in the market is making safe, hopefully good quality,
Sure, you can raise the standards so much that only multi billion companies will be able to comply. In fact that is what we witness today. How many mom and pop shops still exist compared to the '60s?
> A level playing field ensures that everyone in the market is making safe, hopefully good quality, products for that market
I don't believe "safe" and "good quality" are necessarily aligned. I live close to a dairy farm where they sell (their own) unpasturised milk. You bring your own bottle, fill it, and pay in the honesty box. The farmer has a (small) disclaimer suggesting that the milk be boiled prior to consumption, but I don't believe any of the local buyers actually do that.
My OPINION is that it should not be forbidden BUT that it should be clearly labeled.
UNPROCESSED Raw Milk (animal species)
There should probably be a poster or something created by the FDA that quickly summarizes the risks involved with not performing each of the mandatory safety steps for normal retail 'Milk', and it would be helpful if more detailed information were available on a website and from the local health agencies.
There has been a complete and confusing lack of deregulation talk in the inflation discussion and I don’t know why. Your example could also be taken with housing - why is construction not deregulated in smart ways to jump start residential building? Building a house is a total red tape disaster.
Because home prices are tracked so closely, sited widely, and used as a barometer of economic success and political success.
But yeah I think that's weird and destructive. Wouldn't it be better to prominently track and celebrate how much new housing is built?
OTOH, many people have all or most of their net-worth tied up in their home price. So even though NOTHING CHANGES when that price goes up or down, it has a psychological affect on them, who vote a lot.
HOAs are even worse than county & state governments when it comes to building a house. Many HOAs have building codes which include a minimum square footage. Some HOA regulations require over a 1000 sq ft livable footprint (garages don't count). The problem is HOAs have an incentive to raise property value, which makes it far more expensive for people to build a home to live in. HOAs are incentivized to increase property value of the neighborhood & large houses increase property value.
Small plots of land are dominated by HOAs. Finding small plots of "unregulated" (no HOA) land often requires one to live very far from a city & decent grocery stores.
I'm not a big fan of the red tape of regulation & how regulations can be abused by large capital, but in the case of housing, HOAs are a bigger problem. Of course, there are also municipal regulations which require small plots of land to be more tightly regulated re: housing.
A solution is to improve house design which can be modularly expanded as one gains more wealth. That way, a family can start small & gradually build additions or attach additional modules as time goes on.
> Make it easier for people to sell stuff, and there will be more stuff.
This is an excellent idea. Just lower the barrier whatever that barrier is.
Some people can think that lowering the entry barrier can result in subpar products and services but in fact the higher the competition, the higher the quality will be.
> but in fact the higher the competition, the higher the quality will be.
If this were true, then appliance manufacturers who produce higher-quality goods would be rewarded. But instead, we're at a weird state where appliances are still not cheap while also not being built to last.
Competition isn't guaranteed to keep the market honest; I'd argue once a market passes a certain size the number of people who can spot lemons becomes insignificant, and then it's a race to the bottom.
If that was true... You might end up with mass bacterial infections everywhere as only those cutting standards while providing highly addictive products survive etc. There was a reason why those regulations started initially. Overburdening with new more and more expensive regulations might be the issue.
There is always a tension between economic growth and consumer protection. Selling bread is hard mostly due to health regulations. We used to have a lot of people die due to contaminated food. Now that's so rare that it makes the news when it happens. Food safety rules were written in blood.
Some states such as California do have special exemptions for "cottage" production of low risk foods such as bread.
> Selling bread is hard mostly due to health regulations. We used to have a lot of people die due to contaminated food. Now that's so rare that it makes the news when it happens. Food safety rules were written in blood.
Bread was just an example. Just try to open a small corner shop and see how easy it is. Almost any small business has legal obstacles and a barrier as a high to entry as a large corporation. While the corporation can pass that barrier, little guys can't.
> Want to make screwdrivers and sell them to the local hardware store? Go ahead.
I doubt you can do it without having to pay attention to thousand of different regulations.
Your claim is trivially falsified. There are literally hundreds of small restaurants and retail stores within a few miles of me that are run by small businesses or individual proprietors. The barriers are more in high rents than in regulatory compliance.
The bread example seems pretty bad too. There are tons of local bakeries that take more of an artisanal spin on things in my neck of the woods, and I bet all over the US. They'd have to be niche because it's not like they're going to compete with a national brand that has automated factories that crank bread out. That's who a corner store in the US is going to buy from.
But the point is that you can compete against these national brands, quite trivially. I wasn't exaggerating on the cost. You can make a loaf of bread literally for pennies. And it's better in every single way than what you buy in the store besides the fact that it will tend to go stale within a few days if not refrigerated. But even that's arguably a benefit as well. It goes stale because it's not jam full of chemical preservatives.
It's only when you start making all sorts of things for yourself that you really start to see how completely irrational the markup on many things is, which then begs the question - why isn't anybody simply dropping the prices by 50% and making a killing? And the only answer I can really see is because it's become really quite painful to be able to sell things in America, unless you want to go all-in on it.
I'd also add that in terms of food safety, the big concern is not small business, but big business. Buy food from an individual or a family and you're eating what they're also eating for dinner, and probably have been for decades. By contrast at e.g. McDonalds, those executives probably aren't touching their "product" except for photo ops. Their only motivation is to maximize profit, which often comes in the form of sacrifices in quality or even safety of what's sold. [1] And this has always been true. "The Jungle" wasn't about Joe Bob's streetside shop.
The answer that you see is just totally wrong and ignorant. Instead of making a fool of yourself here perhaps go talk to an actual commercial baker. Ask them how much they spend on licensing and regulatory compliance versus other costs like rent, labor, insurance, utilities, machinery, etc.
Sure if you bake a few loaves of bread at home then that probably seems cheap in terms of ingredients. Now add in your labor, allocate costs for utilities and kitchen appliances, and figure out what it would cost to drive around all day delivering that bread to retailers. Suddenly it's not so cheap.
The false dichotomy you're assuming is precisely the problem I'm talking about. There's a huge range of production between 0 and industrial scale commercial baker. At least there can and should be. But this false dichotomy isn't really so false in America, precisely because of our systems. Go to most of any (and to my knowledge literally any) "developing" country, and you'll see everything I've described here, and it's awesome! The effects on prices, independence, society, 'neighborliness', and more just have such great knock-on effects.
At my corner store, you can buy a taco wrapped in foil that was clearly made by some local next to a crack pipe and milligram scales. The bread is Mrs. Baird's or some other national brand. If you think that strict regulation is what created this state of things, then you may want to re-evaluate that.
> For instance hitting on this topic (of food prices), why can't I simply start baking bread and selling it?
Excessive bureaucracy and excessive legislation have the perverse effect to seemingly protect the consumer while in reality helping the big players. Small players will go out of business while new players can't enter. It wouldn't be much surprise if powerful lobbies ask for such legislation while they pretend they think of the public good.
No one likes competition, even entering the bar as a new lawyer is difficult.
>1. Interest-free money for businesses to launch, grow, and advance. This leads to more goods in the market and thus lower prices
We tried that. It all went into real estate and stocks and gave birth to a massive scam industry involving crypto and other get rich quick schemes as the world is full of stupid people and opportunists.
The average joe didn't see much trickle down to him unless he was already invested in real estate or stocks.
It was basically a wealth transfer. Housing is now about 30% more expensive than pre pandemic but take home wages are not.
Giving away free money without any strings attached to individuals or corporations is a bad idea.
Exactly this. And it’s not anecdotal either. In the UK, 75% of that new money goes to asset purchases[1], that’s likely a similar number in the US. Chronically low interest rates is a wealth redistribution program to the ones who get the biggest loans (guess who). The legend of the honest guy who needs a tractor or a fishing boat may as well be a mythical creature.
At least giving money directly to poor people is spent on things that can grow local economies. It is not perfect, but a lot more “stimulating” than giving money to institutions, corporations and rich people.
> Chronically low interest rates is a wealth redistribution program to the ones who get the biggest loans
What's the mechanism? A big loan is a big risk. With a big risk you can have either a big reward or a big failure. Smaller loans, smaller risks, smaller rewards and smaller failures. It's proportional. Why do you think of wealth redistribution?
Big risk are if you use that big loan to start a new business, but not if you dump it all on stocks and desirable real estate in hot or future hot areas.
> We tried that. It all went into real estate and stocks and gave birth to a massive scam industry involving crypto and other get rich quick schemes as the world is full of stupid people and opportunists.
You tried the wrong thing. You shouldn't hand money without conditions. Instead of letting speculative assets grow, you should only let productive bussineses borrow money with low interests. Businesses which produce tangible goods and are creating jobs.
I always thought "trickle-down" economics was about giving money to businesses via tax-breaks and that money would make it's way back to the people as wages. We know this doesn't happen and companies do stock-buybacks with that money.
Here, we're discussing a different paradigm: interest-free money vs free money. The issue is that interest-free money has little to no use for individuals. They can't put that interest-free money into an existing business and reap the returns. That's why most people just use that "interest-free" money for stocks (margin trading) and even then it wasn't fully interest-free.
The fundamental issue is how to give individuals interest-free money and have them see returns. Maybe using that money toward job training, or starting incubators that find small businesses and infuse them with money, mentorship, etc.
The government can also buy things (like infrastructure) and employ people to provide public services, which directly injects money into the economy by paying it to the people who do that work.
The current UK government has not been doing much of this.
> The government can also buy things (like infrastructure) and employ people to provide public services, which directly injects money into the economy by paying it to the people who do that work
With interest free money, people will just borrow money and spend them massively which will raise inflation. Just what happened in the US with very low interest rate or in EU with negative interest rates.
Borrowing + consumption doesn't in particular generate inflation.
Debt is a heat sink, which is why Japan failed to spur inflation for two decades despite pulling every spending lever they could come up with. Debt kills economic dynamism, robbing the economy of the capital it requires to invest, expand.
To get to inflation out of borrowing + consumption, you need supply to not keep up. For most of the prior two decades for the US, supply kept up (courtesy of the China manufacturing juggernaut, which was a deflationary force for US consumers). The China effect has reached its end in terms of peaking, the next two decades will not see that kind of offset benefit (at least for the US).
Over the coming decades, the US will see similar problems that Japan did in terms of being unable to spark expected levels of inflation, despite high spending and debt problems. The cause will be the same, more and more of the economy will be locked up in the freezer as debt (typically yielding ever lower interest, in a downward spiral).
No, but communist countries were the poster child for "public owned".
To a degree you can do it, have the state own companies. But it will kind of be economically inneficient, high position employees and some politicians will steal money. No one will have the motivation to push farther.
That's not an accurate way to describe HK MTR or Japan Rail and it's definitely not accurate for Brightline.
Most US transit systems are bad because the government puts even more effort into stopping them from working (via bad land use, incredibly slow decision making, power-harassing Andy Byford) than it does operating them.
So in yourcideology it is wrong for governmnet to invest i to economy directly and it is wrong for government to give money to individuals for them to invest it
It is only acceptable to give money to corporations.
Seems very convenient and totally unbiased
So I go and register an LTD company now I am eligible for free government money.
Yeah, the reality is that this will always be the case as long as the national minimum wage (rebranded as the living wage) is in no way related to inflation or the GDP of the country.
As long as execs and CEOs are free to reap the benefits brought by their staff without paying any of it back this problem will continue to be exasperated.
Another contributing factor in the matter is the fact that politicians seem to be immune from the affects of their policies.
This gives them very little incentive to actually help people at the bottom of the totem pole as their funding is coming from the very same people whom are essentially exploiting a desperate workforce.
Is a shelf stacker in Sainsburys a high skilled job? No. Is it absolutely crucial in order for Sainsburys to have a working business? Yes.
The same is true for the cleaner in a bank. If a bank is covered in dirt and stinks people are not going to bank there. Likewise with cleaners of trains and pretty much any other industry.
When you pair the fact that governments are funded by the same people whom are also funding a divisive narrative throughout all media outlets you end up with a grim and bleak outlook for society.
As someone that has come from below 0 to get a good job and try and get out of the council estate poverty cycle it really strikes a nerve when people act as though we get given handouts for nothing.
My mother worked her damn arse off through my childhood and continues to do so now as a 69 year old woman with chronic health issues. She has been left behind and forgotten by society and ill informed people seem to lack any ability to see beyond the outliers in shows like benefits Britain.
> This gives them very little incentive to actually help people at the bottom of the totem pole
Err, votes are the biggest incentive for politicians.
> Is a shelf stacker in Sainsburys a high skilled job? No. Is it absolutely crucial in order for Sainsburys to have a working business? Yes.
Not really, they will soon use robots.
> The same is true for the cleaner in a bank. If a bank is covered in dirt and stinks people are not going to bank there. Likewise with cleaners of trains and pretty much any other industry.
I think in Japan cleaning is robotized already.
> When you pair the fact that governments are funded by the same people whom are also funding a divisive narrative throughout all media outlets you end up with a grim and bleak outlook for society.
Votes matter a lot less in an FPTP voting system, and the point about media division and ownership plays into the fact that people can easily be mislead into voting against their own interests.
Not sure if you are aware of the little old B word which was proven to have been based on a campaign of lies.
As for your remark about robots replacing shelf stackers and cleaners. I’ll leave that as the ill-informed and provocative comment it is.
Regarding government funding, governments spend public tax payer money, yes. Political parties receive their funding from private donors who ultimately end up expecting some kind of payback for their donation/bribe. Which ultimately comes out of the tax payer’s pocket.
This creates a cyclic system which is built to extract wealth from the bottom and middle classes in order to feed it back to the society’s richest people.
"Trickle Down Economics" is a talking point of those who oppose whatever it is that they want to attack at a given moment.
It can, and has at times, meant:
- Corporate bailouts and "welfare"
- Tax cuts
- Deregulation
- Lobbying / big money donations
Sometimes it means some of the above, other times it means all of the above. But the point is that no one on the fiscal conservative side of the aisle has ever come out and used the term "trickle down economics." Their opposition uses that word because it is loaded and it speaks to their base.
> Those spending never reaches the "lower classes"
What spending are you talking about? The OP was talking about removing barriers to creating business and attributed these barriers to good intentions. We can probably safely assume that the OP is a fiscal-conservative who favours deregulation and a business-friendly environment. And for what it's worth I am not trying to take one side over the other, you just lost me at "spending." The OP is talking about the exact opposite of spending. They are taking a "private solutions over public solutions" position. One where you spend less by having less overhead and red tape standing in the way of those who want to produce goods & services thus creating abundance of supply which lowers prices in addition to more jobs which puts more money in peoples' pockets.
Those spending never reaches the "lower classes", and seldom even reach places where it would have the potential to increase productivity.
It's a tired, old argument that is done to justify stupid spending and enriching certain pockets while claiming to benefit all with a shoddy reasoning that omit the important details