The New Land of Opportunity
“This city is great. It’s beautiful. It’s cheap. The climate is agreeable. And it’s becoming a haven for Internet savvy marketers.
“I think they’re coming partly because it’s a great place to live. And I think young people want to get away from the U.S., too. It’s just not the land of opportunity that it used to be.”
So sayeth our dinner companion last night. He was the second young man in the last 24 hours to make the case that Medellín is a “buy.”
Medellin is Colombia’s second largest city and one of the country’s main economic hubs.
“It just seems to be catching on with people who work on the Internet. I guess because it is such a great place to live. People are helpful and nice here. And everything is unbelievably cheap.”
We can back him up on both points: Our taxi driver went far out of his way to help us find our hotel. (We had the wrong name.) And after driving us around for a half an hour, he was delighted to take the equivalent of $8 for the fare.
Medellín – city of the future
Photo via turismoenmedellin.com
A Country for Old Men
Several readers have commented on the coming generational storm in the U.S., which was the theme in last week’s Diary.
“Billie Boy, I don’t like where your head is lately. Your writing depicts our debt situation as being caused by baby boomers when it is the Fed and the government who never listen or do what the public desires…”
“You are beginning to sound like “Obuma” in his class warfare dialogue. I am one of those old people who is not benefiting from the greed and lack of morals evident on Wall Street and in particular in Washington, DC. Leave me out of it and do not blame all old people for the actions of the elites in DC and state governments…”
To clarify, we are not blaming innocent beneficiaries… or innocent victims. And we readily admit we couldn’t get a conviction for willful larceny. Most of the people involved stole unwittingly. They were just playing the piano; how could they know what was going on in the back room?
Few of us baby boomers exercised much direct influence on public policy. But most of us voted… and our elected representatives put in place a corrupt system that favors old people and old businesses at the expense of young ones.
They got the title wrong – it is a country for old men.
Image credit: Paramount Classics
What Happened to Creative Destruction?
Everyone knows that most of the wealth gains of the “recovery” have gone to the One Percent. That those people are also old is more than a coincidence. Most large political donors are old. Most politicians are old. Most voters are old. Most special interests are old. Most media owners are old.
The entire system is old.
Over time, people find ways to game the system – any system – to get more of what they want with less risk and less effort. They use the government – the only institution that can force people to do its bidding – to help them.
According to a study we cited on Friday, the U.S economy would be three times larger today if Federal regulations had remained at their 1949 level. Had the rules remained as free and easy as they were when we were born, in other words, young people today would have a much higher chance of earning as much as their parents did.
We have shown this chart (by Competitive Enterprise Institute) in our recent article on the regulatory State – it illustrates the wild growth in regulations since the 1940s nicely – click to enlarge.
Another study says those regulations seem to be working. “The business sector of the United States […] appears to be getting ‘old and fat,’” says the Brookings Institution. Entrenched businesses have been able to raise the ramparts even higher!
The business sector is getting old and fat because it has managed to stifle competition and stop the process of what Austrian-American economist Joseph Schumpeter called “creative destruction.”
According to Schumpeter, the process – whereby new innovations constantly replace outdated ones – was the “essential fact of capitalism.” But in 1992 – in the supposed epicenter of capitalism – the share of U.S. firms older than 16 years was 23%. Twenty years later, the share of old firms had grown by almost one-half to 34%.
And the share of private sector workers employed in these old businesses increased from 60% to 72%. Employment in younger firms declined. The number of new firms went down. And the number of jobs went down, too. The only increase being of old people working in old firms.
Joseph Alois Schumpeter – Eugen von Boehm-Bawerk once called him his brightest student, who would definitely leave a mark on the science of economics. However, similar to other proponents of the free market, his influence has waned greatly. In today’s interventionist State, his concepts are at best given lip service.
A Disinherited Generation
Old businesses get loans, bailouts, revenues, and profits. Old people get jobs, pills, and medical services. They also get Social Security benefits. And when they leave this vale of tears, they also leave behind them more than $210 trillion in unpaid bills.
As economist Laurence Kotlikoff recently told the Senate Budget Committee, that’s the size of the current “fiscal gap” – the difference between Washington’s projected financial obligations and the present value of all projected future tax revenues.
Young people have been “disinherited,” says the Manhattan Institute:
“This is the first generation of young Americans that our government systemically disfavors and the first generation whose prospects are lower than those of their parents.”
Disinherited? That suggests they start out even. But their parents and grandparents have put them in the hole. Robbed? Cheated? Scammed? Flimflammed? Rolled?
Take your pick.
There is even a book on this very topic available as we have found out….
The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.