Thursday, January 1, 2015

Upon Further Review: Recession and the Master Plans of Politicos

“In 1982 Greensboro, North Carolina was rated as the #1 best place to live in America. In the years following everything went to hell. For 2015, ranked Greensboro at #91 but in 2008 CNN Money rated Greensboro at #50-- what happened? 41 places in 7 years-- how could any city fall so quickly? Our corrupt and inept "leaders" will tell you it was a result of the Recession but the Recession was nationwide, worldwide even.” - Billy Jones, What The Hell Happened To Greensboro?12/29/2014.


What about the local politico excuse of the recession? How valid or invalid is such excuse?


-The Virginia School of Political Economy-

A first step is a visit to the Virginia School of Political Economy. How so? The Virginia School of Political Economy is a good starting point regarding the study of political dupery and nitwitery. Political dupery and nitwitery is many times afoot.

Welcome to the politico and the “exogenous boogieman“. The exogenous boogieman comes in a zillion varieties, including recession. When times are tough for politicos, it is merely the result of some exogenous group and/or exogenous phenomena that is causing the problem.

More succinctly,  is a variation of: You can't make mistakes if it's everybody else's fault.

When it doesn’t work the way the politicos promised themselves, it surely failed due to the exogenous boogieman.

The boogieman spends night and day coming up with stratagems to thwart politicos and their master plans. Yes, believe it or not, the boogieman, that insidious make-believe character, singles out a particular set of politicos and their associated planning….. as the boogieman’s personal enemy. Who’d a thunk it? (1) (2)


-The Great Moderation 1982-2007

What about the excuse of the recession?

A next step is to consider a downward spiraling local economy in regards to: The Great Moderation 1982-2007. The Great Moderation is not a period of high growth, more of a period of above or at trend moderate growth. However, inflation was much less a factor during time period 1982-2007. (3)

Matching Greensboro’s downward spiraling local economy of 1982 to present, one can strongly discount the recession argument for time period 1982 to 2007 as the time period was punctuated with above or at trend moderate growth and low inflation. Stated alternatively, the vast majority of the thirty three year downward spiraling local economy, the downward spiral thereof, occurred during a twenty five year period of at-trend- moderate-growth and low inflation aka The Great Moderation which was, to a great extent, a non-recessionary period of only mild downturns.

-Boom and Bust-

What about the excuse of the recession?

One might consider the historical aggregate.

Expansions, recessions, banking crisis, housing busts, sovereign debt default, domestic debt default….. are a dime a dozen in history. If would be a stretch of the imagination to blame “recession”, as one would not only be discarding history, one would also be depicting what goes up, always stays up…except in this particular case. (4)


-Boom and Bust with a Textile/Furniture Flavor-

What about the excuse of the recession?

Regarding the "recession" as an excuse, embedded within that argument, regarding local politicos, is the relocation of textile and furniture manufacturing.

One must remember that it is not "cheap labor" that is one of the conditions (the fallacious argument is "cheap labor") for moving labor intensive manufacturing. The real condition is "unit labor cost". (5)

In most manufacturing scenarios unit labor cost in the U.S. is quite competitive with other countries or regions. Matter-of-fact, unit labor cost in the U.S. leads the world in an astounding number of cases.

Labor intensive manufacturing "move" for a multitude of reasons, of which, the leading two reasons are: taxes and regulation. Taxes and regulation being the domain of politicos. Go figure.

Speaking of the relocation of textile and furniture manufacturing, a bottom has formed, several years ago. Yes, what has left, has left, the remainder will stay for other reasons (bulky items such as mattress production/distribution and skilled labor items such as the need for "detailed fabric where the pattern has to match"). The remainder may well flourish. (6)


-Tax or Recession?-

What about the excuse of the recession?

Once a firm becomes established within the domain of a political taxing authority, the politicos thereof perceive the firm as non-mobile and have a habit of escalating taxes upon the firm as politicos believe the firm to be non-mobile and hence unable to escape the tax. (7)

The firm or firms are perceived as the proverbial deep pocket and as such a never ending fountain of tax revenue for politicos. Need an example? Try Detroit, Michigan.

The basic problem the politico notional proposition of escalating tax upon the supposed immobile firm is: All capital and all human capital is mobile. Over time most capital and most human capital will seek an environment of the lowest tax and regulation.


-The Great Recession Followed by the Not So Great Expansion: 2007 to present-

What about the excuse of the recession?

The Great Recession followed by the Not So Great Expansion was and is to a great extent a result of politico notional propositions. The housing bubble was fueled by politico legislation and associated bureaucracies thereof that set the stage for private sector shenanigans. If one sets the stage for shenanigans one should not be surprised when shenanigans occur. (8) (9)

For one set of politicos to blame the failure of their set of political notional propositions upon another set of politicos and their failed set of political notional propositions resulting in a boom-bust recession is quite the interesting proposition. -Or- You can't make mistakes if its everybody else's fault.


-The Black Swan-

What about the excuse of the recession?

A final stop is the oft used politico stratagem of depicting a known-known as an unknown-unknown. Regardless of the notional political proposition deployed, the deployment occurs within an environment of business cycles and associated expansions and contractions. By no means is a recession a black swan event. (10)

When one further considers the excuse of the recession for the failure of politico master plans, then does the excuse mean that master plans of politicos only work during expansions? That the master plan only works in a perfect environment for the master plan? That the master plan only works in an environment of perfect knowledge?




(1) Government Failure, Tullock, Seldon and Brady.


(2) Beyond Politics, Markets, Welfare and the Failure of Bureaucracy, Mitchell and Simmons.


(3) The Great Moderation.

(4) This Time Is Different, Reinhart and Rogoff.



(5) Unit labor cost:


(6) Furniture Firms Eke Out Gains, Richmond Federal Reserve, Econ Focus, Third Quarter, 2010, p.21.

(7) Applied Economics, Thomas Sowell.

(8) Getting Off Track, John B. Taylor.

(9) “The Great Recession Followed by the Not So Great Expansion”, TrendMacro, Donald Luskin, Chicago, Il.

(10) The Black Swan, N.N.Taleb.