Posted on 03/14/2011 6:49:52 AM PDT by SeekAndFind
A few years ago, a senior official at Japan’s finance ministry shocked a foreign guest by making a deliberately provocative statement. “What Japan’s economy needs is a really good earthquake,” he said. Now, tragically, his tongue-in-cheek wish has come true.
What the official was trying to say was the following. First, the country was stuck in deflation. Since the mid-late 1990s it had failed to shake off the debilitating drip of gently falling prices. One way of tackling that, the official suggested in remarks that echoed the thinking of Ben Bernanke, now chairman of the US Federal Reserve, was to pump huge amounts of money into the economy.
All the better, said some unorthodox economists, if the Bank of Japan would directly finance all or part of the extra spending, a policy suggestion that is anathema to senior officials at the central bank.
The second point was psychological. Japan had lost its confidence, the official said. A good crisis was all it would take to rekindle the remarkable ability of the Japanese people to pull together in the cause of the nation.
Paradoxically, natural disasters – and the need to rebuild – can prove a catalyst to economic activity.
Naoto Kan, Japan’s prime minister, could capitalize on the crisis to push his regular budget through a parliament that had been blocking its passage. He is also likely to propose a supplementary budget to fund the rebuilding projects that will now be necessary.
One optimist even suggested he might use the disaster to rally support for a rise in consumption tax, now just 5 per cent and seen by some as the key to repairing Japan’s precarious public finances.
(Excerpt) Read more at cnbc.com ...
From his essay --- Ce qu'on voit et ce qu'on ne voit pas (1850) (That Which Is Seen and That Which Is Unseen) :
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Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—"It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"
Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen."
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.
Progressives LOVE to see people working hard. They just don’t want to see people accumulating wealth.
Remember in Orwell’s 1984 the elites used perpetual war to grind up the wealth created by the prolls.
Notice there is no statistic that measures Gross Domestic Wealth.
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. [...] In short, he would have employed his six francs in some way, which this accident has prevented.This assumption is false when people are afraid to spend their six francs at all (such as when you have unsure economic times created by and unpredictable, bizarre Administration). A disaster can force that economic activity that would not otherwise have occurred.
Of course, that's not the whole picture... the overall effect is to reduce the prosperity in the long run, but it's important to note that the short-term boost may occur. If we ignore that, we are missing part of the Administration's strategy of stalling the economy and then trying to boost it again by getting us on the government bread line.
Neither do they look at Net Domestic Product, since Gross Domestic Product rewards inefficiencies such as the Broken Windows (I'm referring to Bastiat's, not Wilson's).
The Kenesians ( John Maynard Keynes himself ) knew about Bastiat’s essay but argue that in some circumstances the little boy may actually be a benefactor, though not the best possible one.
Facing severely underutilized resources (as in the Great Depression), John Maynard Keynes argued that it may make economic sense to build totally useless pyramids in order to stimulate the economy, raise aggregate demand, and encourage full employment ( I think I read it in The General Theory of Employment, Interest and Money, Chapter 10, Part VI )
I’ve never heard anyone say they were economically better off after totaling a car or having to rebuild their house after a tornado.
WWII stimulated the US economy, raised aggregate demand, and encouraged full employment--but the toll was horrific. He who loses the broken window is not happy, but the townspeople reap benefits in the short term.
Talked to my sister this am and she said:”to relocate the Japanese to Detroit and Cleveland.They would re-build,stimulate the economy and clean those two cities up”.
Chapter One of Henry Hazlitt’s “Economics In One Lesson”. True, true, true. The minister is wrong as usual.
I know,I’m from Cleveland,what a wonderful city it used to be.All our families homes gone,torn down.My neighborhood was a mix of Polish,German,Lithuanian,Slovenians etc...then the masses from the south engulfed the area and people fled.It became dangerous to ride buses and in a matter of time,garbage on the streets,boarded up houses,businesses gone.
Sad to say, the decay continues to spread outward.
The folks who are into building Nuke reactors should probably watch Japan when they rebuild theirs, I’ll bet the next ones will not be subject to EQ’s or Tsunamis.
It happens. After the Oakland Hills firestorm the burnees politically pressured the state to require insurers to essentially rebuild their properties with whatever they "said" they had, even in situations where they were grossly under-insured. Lots of three story homes went back up where there had been two story homes before.
I have friends who worked on them.
Actually, there is. If you hunt around enough you will find the total value of all the assets (stuff) in the USA is roughly $200T.
Find out the total value of all the debt owed by governments, corporations and individuals, deduct B from A (unless, of course, you need to deduct A from B) and there you go.
As if “economic activity” was a good in and of its self! and why limit it to “natural disasters”? Look at the economic activity spurred by WW2! Send the bombers! Bring Japan more economic activity! Natural disasters are too unpredictable!
Yes, and no. It would be much cheaper to bulldoze those factories one at a time and rebuild them individually than to wipe out half the country and rebuild everything at one time. And no sane person would say that flattening productive factories in order to rebuild them is a good economic strategy. There is some benefit to rebuilding, and everything will be new and perhaps more efficient, but that is not enough to cover the cost of replacing those cities.
Also, the correct quote is:
History shows again and again how nature points out the folly of man.
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