I think the converse is also true. The US has China by the beatzim as well. What would happen if we stopped buying their stuff or honoring their loans? This economic co-dependency strikes me as positive and a countervailing force to the geopolitical zero sum game.

Ray Jay, you do raise a very good point - the trend towards economic globalisation makes us much more inter-inked. There are dangers there - such as how a commodity price rise combined with a short slowdown in US growth led to a credit crunch in the US that spread across the world and kickstarted a recession.

If China were to undergo a major change, it could affect the rest of the world economically. Equally, if China is to grow, and India, and Brazil and South Africa and Mexico and Indonesia and.. and.. each will need to at some point address some major internal problems, which could easily be exacerbated by quick growth (especially if the benefits are felt mainly by those already with power).

Is geopolitics really a zero-sum game though? I'd like to see evidence that it really is. It's certainly possible for both sides to lose.

danivon wrote:Ray Jay, you do raise a very good point - the trend towards economic globalisation makes us much more inter-inked. There are dangers there - such as how a commodity price rise combined with a short slowdown in US growth led to a credit crunch in the US that spread across the world and kickstarted a recession.

If China were to undergo a major change, it could affect the rest of the world economically. Equally, if China is to grow, and India, and Brazil and South Africa and Mexico and Indonesia and.. and.. each will need to at some point address some major internal problems, which could easily be exacerbated by quick growth (especially if the benefits are felt mainly by those already with power).

Is geopolitics really a zero-sum game though? I'd like to see evidence that it really is. It's certainly possible for both sides to lose.

Overall I think globalization is for the good. In fact, when charting the progress of human civilization, I'd say there are two major factors that have consistently improved (with some small exceptions along the way), and those are: advancement of technology and advancement of trade.

I also agree that you are right to point to other fast growing nations, particularly those in Asia. India, Vietnam, and several others will continue to be counterweights to China's power; they will all look to the US to balance Chinese hegemony.

Regarding geopolitics and the zero sum game, I suspect that you are right. What I should have said is that power is zero sum because one country's increase in relative power is another country's decline. However, the relative power positions can result in good or bad geopolitical results. History is filled with examples of one nation rising at the expense of the other, and other examples of nations rising together for the benefit of both or all. That seems like a whole topic all to itself. Steve is asserting that China's rise suggests the US's downfall, and therefore should be countered aggressively and directly. I don't see that as the most helpful or most accurate way to view these things. We would all do well to read Kissinger's new book on the subject. Like Zakaria, he's another immigrant who can help us better understand ourselves and our world.

dan

If China were to undergo a major change, it could affect the rest of the world economically

If?
china has been undergoing major change for a couple of decades. Urbanization has been significant and so has the growth of a middle class. As china tries to accomodate the aspirations of its peasants and growing middle class it largely funds this expansion through exports. But as it grows as a consuming nation it is createing another consuming economy that rivals that of the US.
Probably none too soon for exportiing nations, as the US consuming economy is in decline.
The belief that military might is particularly effective weapon against economic decline is a strange concept. Indred the only real potential for conflict is probably the scarcity of water. Even back under Bush, a Pentagon task force had predicted that water shortages (and attendant food shortages) would have the most potential for conflcit in the near future. and that military might would have little effect.source: http://www.guardian.co.uk/environment/2004/feb/22/usnews.theobserver
The Chinese need not engage in a single conflict to advance its interests. At the same time, in investing in its military disproportionately to the world, the US hampers its own economic growth.
The UK reduced its dis proportionate military spending when its economy contracted at the failure of laissezz faire trade policies ... its inevitable that the US will do so as well. it will take some time for people who've been raised to beleive there is always some foe on the horizon, for without an enemy ready to fight why would the military industrial complex be necesary?, to dial back its investment in the military... However even today, many Republicans in Congress are ready to talk about budget cuts to the military now...

In general, I don't have an issue with Ricky's post. I just wanted to pick on this one point that he makes:

US consuming economy is in decline

You'll see this a lot in the liberal press right now. It's twin, often stated by Ricky, that 70% of the US economy is individual consumption, is everywhere, but not true either.

On the "decline" of the US consuming economy, here are some facts:

http://business.financialpost.com/2011/ ... t-in-year/

The US had 10 months of increases in consumer spending, which suffered a small reduction in May. That's hardly meaningful in the scheme of 30 years of explosive growth in the Chinese economy, or reasonable growth (3% ish per year) in the US economy.

Regarding the statement that 70% of the US economy is individual consumption, and the statement's endless repetition without attribution, here's an interesting article on what is included in that 70%. http://www.nationalreview.com/exchequer ... er-economy

Ray Jay wrote:Overall I think globalization is for the good. In fact, when charting the progress of human civilization, I'd say there are two major factors that have consistently improved (with some small exceptions along the way), and those are: advancement of technology and advancement of trade.

A once-regular Redscaper (was it bluesman?) had a great sig, along the lines that technology is not good, and is not bad, but it isn't neutral either. I have similar feelings re: globalisation. It offers great opportunities, but also harbours some great potential threats. Increasing trade means that the race to the bottom is being applied to labour costs - companies are (understandably) sending jobs overseas where they are cheap. Sometimes those places don't have great social conditions, civil rights, health and safety law, environmental protection, child labour laws, lack of corruption etc etc, and so by pushing work out there not only does this mean less work in the West, but it may encourage less than savoury regimes to think that they are ok to carry on (and as China has less of a compulsion to lecture states it outsources to on things like those than Western nations do, this will likely only increase).

On the other hand, growth in jobs and more people at the lower ends of these societies with money and with more knowledge of how the wealthy live (even by observing what it is they are making for us) can create pressure for change within these countries.

And while we may lose on manual labour jobs, the outsourcing has a deflationary effect for a time, so if we can find new kinds of jobs in the West quality of life should improve. On the flip-side, I don't think that this will be sustainable in the long term - at some point we will run out of cheaper countries to relocate jobs to, and the expansion of the ones we have already done to will soon create competing consumer markets that will increase demand (and so price).

I also agree that you are right to point to other fast growing nations, particularly those in Asia. India, Vietnam, and several others will continue to be counterweights to China's power; they will all look to the US to balance Chinese hegemony.

India yes. Vietnam is still quite small. It will be interesting to see how Australia, Indonesia and Malaysia relate to China in the future, because each of them is potentially a great trading partner for China, but all would have reasons to fear an overly strong power there.

We also seem to be seeing a new 'Great Game' in Africa, as China tries to buy up investments in the continent. Others will be looking there too, I expect, and competition could be good, or it could create tensions.

Regarding geopolitics and the zero sum game, I suspect that you are right. What I should have said is that power is zero sum because one country's increase in relative power is another country's decline. However, the relative power positions can result in good or bad geopolitical results. History is filled with examples of one nation rising at the expense of the other, and other examples of nations rising together for the benefit of both or all. That seems like a whole topic all to itself. Steve is asserting that China's rise suggests the US's downfall, and therefore should be countered aggressively and directly. I don't see that as the most helpful or most accurate way to view these things. We would all do well to read Kissinger's new book on the subject. Like Zakaria, he's another immigrant who can help us better understand ourselves and our world.

Whatever else I may think about Kissinger, I know he's no idiot. And he's hardly an Anti-American as far as I can tell (I'm sure that Steve and Randy can disabuse me of such notions and show us what a crypto-Marxist he really has been all this time).

If we are talking about power, I agree that this is pretty much zero-sum, because having more power than someone else means to an extent having power over them. But there's more to life and politics that just power, and of course the economic side to it is important.

The USA as undisputed #1 nation and world power without rival is clearly something that may well change with the rise of China. I can see that this is very worrying for patriots and nationalists (the former being the more rational version of the latter in my understanding of the words). That China is nominally communist (but is actually looking more 'state capitalist' or 'mercantilist' than even the USSR could be accused of by Trotskyist) adds to the fear. That it doesn't appear to share even the European values of former major rivals is also of concern. But it seems to be to be just as much a provocation to beat your chests and declaim all who note the rise of China as it would be to (as some seem to be suggesting is policy at the moment) to curl up in a ball and let the PRC do whatever it wills.

And when it comes to military strength, the real problem is that China is a massive unknown. They have a lot of people, and a lot of materiel, but it's not been used in anger much of late (so over-estimates and under-estimates of it's capability will abound). Combine that with the fact that the USA is already thinly stretched and overspending on foreign military commitments, and I'm not too sure what the USA (or anyone else) really can do in terms of sabre-rattling.

Consumer spending, which accounts for 70% of U.S. economic activity

Know where I got this Ray? from the first article you linked to.... Is the Finanacial Post Liberal press now? Just wondering...

And your second opinion piece is interesting in that he parses what is considered domestic economy and "consumer spending". I guess technically he's right that actual; expenditures by consumers are only part of the domestic economy.But health care is part of the domestic economy, just as most goverment spending is... And both parts consume goods and services.

But he also said this Ray:

Health-care spending isn’t really driven by consumers (which is why our health-care market is so messed up, incidentally!), but by insurance companies, government, and other non-consumer enterprises. Something on the order of 15 percent of health-care spending actually comes out of consumers’ pockets. Chickenfeed, in the vulgate

Now which part of this statement do you support? the first part that says that supports the notion that there is no elasticity in the medical market place Or the part about only 15% of health care spending coming out of consumers pockets. That seems to disagree with the OECD numbers quoted earlier (wkipedia link) Maybe he means directly? since consumers, when they buy health insurance are spending on health care aren't they, and "consuming that service" from their pockets? I'm not sure what all his parsing is supposed to amount to other than clouding the issue of what can drive a recovery in the near term.
Arguing that production is all important, ignores the fact that there must be consumption, that is demand for that production... Your factory can make all the widgets in the world but if there is no demand for those widgets... soon production will wind to a halt.

When I said the US consumer economy is declining, I meant in relation to the global market. In importance. This has occurred not just because of the US recession and slow recovery but As China, India , brazil, Russia and the third worlds economies have expanded at a greater rate ... Its not like China is going to stop forging alliances with American companies to manufacture for the US, but they have important irons in the fire in other markets that at one time didn't represent much of an oportunity. And they are now competing in industries (aerospace) that the US once considered itself to be world dominant.
.

Dan:

A once-regular Redscaper (was it bluesman?) had a great sig, along the lines that technology is not good, and is not bad, but it isn't neutral either. I have similar feelings re: globalisation. It offers great opportunities, but also harbours some great potential threats. Increasing trade means that the race to the bottom is being applied to labour costs - companies are (understandably) sending jobs overseas where they are cheap. Sometimes those places don't have great social conditions, civil rights, health and safety law, environmental protection, child labour laws, lack of corruption etc etc, and so by pushing work out there not only does this mean less work in the West, but it may encourage less than savoury regimes to think that they are ok to carry on (and as China has less of a compulsion to lecture states it outsources to on things like those than Western nations do, this will likely only increase).

On the other hand, growth in jobs and more people at the lower ends of these societies with money and with more knowledge of how the wealthy live (even by observing what it is they are making for us) can create pressure for change within these countries.

And while we may lose on manual labour jobs, the outsourcing has a deflationary effect for a time, so if we can find new kinds of jobs in the West quality of life should improve. On the flip-side, I don't think that this will be sustainable in the long term - at some point we will run out of cheaper countries to relocate jobs to, and the expansion of the ones we have already done to will soon create competing consumer markets that will increase demand (and so price).

I agree with you that it is very complicated. But overall, this is all good for the world. I want the planet to be integrated in trade of goods and services, and exchange of ideas, and voluntary movement of people. Most private sector transactions are voluntary, and most increase value for both the buyer and the seller. The trading of ideas is also win / win. And as Kissinger and Zakaria point out by their example, the US strength is very much from our immigrant population and the vitality that they provide.

Dan:

India yes. Vietnam is still quite small. It will be interesting to see how Australia, Indonesia and Malaysia relate to China in the future, because each of them is potentially a great trading partner for China, but all would have reasons to fear an overly strong power there

Indonesia, Australia, and Malaysia are all good examples; South Korea, Taiwan, and Japan are also good examples, even though the latter isn't growing. All of these nations will welcome the US military umbrella. Hopefully many of them will pick up the tab.

Ricky:

Know where I got this Ray? from the first article you linked to.... Is the Finanacial Post Liberal press now? Just wondering...

I think you are picking a fight with me. You are also misquoting me terribly. I said this statement is repeated everywhere, and certainly by you in several other posts in several other places.

This is what I wrote on the subject:

Regarding the statement that 70% of the US economy is individual consumption, and the statement's endless repetition without attribution, here's an interesting article on what is included in that 70%. http://www.nationalreview.com/exchequer ... er-economy

Do you see how you are conflating my two points?

Ricky:

But he also said this Ray:

Health-care spending isn’t really driven by consumers (which is why our health-care market is so messed up, incidentally!), but by insurance companies, government, and other non-consumer enterprises. Something on the order of 15 percent of health-care spending actually comes out of consumers’ pockets. Chickenfeed, in the vulgate


Now which part of this statement do you support? the first part that says that supports the notion that there is no elasticity in the medical market place Or the part about only 15% of health care spending coming out of consumers pockets.

Where does he say there is no elasticity in the medical market place? He says that it isn't driven by consumers. Don't you see those are two different things? They are also different than your previous statement that there can be no elasticity of demand in health care.

By the way, just on the topic of elasticity of demand, my insurance company charges me 30% if we use a premier hospital, but 20% if we use a typical hospital. The local press was very angry about it, but I see it as a positive to control costs. A family member has to undergo a minor procedure, so I called to find out whether it was with one of those expensive hospitals. It wasn't so we didn't switch. Of course, if one of us had cancer I'd go to whichever hospital was most highly rated. Isn't this another example of elasticity of demand?

Ricky:

When I said the US consumer economy is declining, I meant in relation to the global market. In importance. This has occurred not just because of the US recession and slow recovery but As China, India , brazil, Russia and the third worlds economies have expanded at a greater rate ... Its not like China is going to stop forging alliances with American companies to manufacture for the US, but they have important irons in the fire in other markets that at one time didn't represent much of an oportunity. And they are now competing in industries (aerospace) that the US once considered itself to be world dominant.
.

Your clarification is accepted. That was my point. I agree that the US share of world consumption is declining in relation to the global market place. I don't see that as a bad thing. Why would we want US consumption to increase relative to the rest of the world?

ray

Where does he say there is no elasticity in the medical market place? He says that it isn't driven by consumers. Don't you see those are two different things?

Its exactly the same thing.
Who is the market for medical services? Consumers.
If they aren't either given the opportunity to respond to pricing OR don't respond to pricing difference if it is ofered ; demand volume doesn't change.
I submit that, with rare exceptions like laser eye surgery, there is little in the way of price competiton attempted. I'll change from my use of the word No elasticity to Little elasticity to be more precise and correct. I suppose there is a case to be made that some elasticity exists but it doesn't have any noticable effect. (Which kind of amounts to the same thing as no elasticity...)
I also submit that when health care becomes a question life and death or relief from suffering ...price isn't questioned by most consumers. What elasticity you see in the US is driven by unaffordability. That is segments of society who simply cannot afford medical care that they should recieve and delay the decision as a result. That elasticity is two edged however since the severity of the condition often increases, increasing the cost of the remedy.
I grant you that the nature of insurance has eliminated pricing from the medical industry. Perhaps before the invention and proliferation of insurance there were price offerings but not so much today.

As it is, there is more demand for medical services in almost any jurisdiction in the world than supply. If the US did come up with universal medicare I think the current uninsured would probably take up any slack that exists today due to unaffordability.

Your second example is an interesting example... IS the 30% 20% a difference in the co-pay?
Co-payment is used by many socialist systems to eliminate the nuisance medical visit and alleviate demand and provide a little user based revenue. But, it isn't that big a deal if when push comes to shove it wouldn't matter to you....

ray

That was my point. I agree that the US share of world consumption is declining in relation to the global market place. I don't see that as a bad thing. Why would we want US consumption to increase relative to the rest of the world?

If the US were sucessfully exporting more as a result it would be a great thing... It depends upon whether this means that there is more competition for commodities and therefore prices drive upwards... (Oil for example.)
Where China and other smalller Asian nations have driven the demand for oil, its been a huge negative.

I've given several examples of elasticity of demand from my own experience, from my son's eye care to a family procedure to my knee pain to my Mass. insurance mandate. Who am I to believe on health care: some guy who lives in Canada or my own experience?

I think the point is that there is price sensitivity for consumers on many health services. We agree that in some cases any rational person throws price concerns out the window. But you have to concede that there are many examples where there is elasticity. There's also elasticity for food or housing. Yes, we all need some, but that doesn't mean there is NO elasticity, which is what you've said. Finally, I think the point is that there should be elasticity. Utopia hasn't arrived yet: we don't have enough money to pay for everyone's health care in every situation. Therefore, we need to involve the consumer in the decision with some degree of price consciousness. The writer is lamenting that we are not doing that enough; he's not saying that there should be no elasticity, or that there has to be no elasticity.

Re your specific question, a copay is a $ amount that you pay when you visit a doctor. My copay is $25. Then there's the question of what is covered, and what isn't. For me, lab costs are not covered; doctor fees are covered. Once someone hits the deductible ($2,000 per individual in my case -- we've had a lot of experience in health care costs in my family this year) there's a question of how much the insurance company pays. That's the 20% or 30% in my example.

I support some co-pays to limit nuisance visits. That would be a good example of elasticity of demand, don't you think?

Ricky: If the US were sucessfully exporting more as a result it would be a great thing.

Haven't I already shown you stats that the US has export growth?

Ray, consider your response to what Zakkaria wrote.

I've given several examples of elasticity of demand from my own experience, from my son's eye care to a family procedure to my knee pain to my Mass. insurance mandate. Who am I to believe on health care: some guy who lives in Canada or my own experience?

Z

When considering health care, for example, Republicans confidently assert that their ideas will lower costs, when we simply do not have much evidence for this. What we do know is that of the world's richest countries, the U.S. has by far the greatest involvement of free markets and the private sector in health care. It also consumes the largest share of GDP, with no significant gains in health on any measurable outcome. We need more market mechanisms to cut medical costs, but Republicans don't bother to study existing health care systems anywhere else in the world. They resemble the old Marxists, who refused to look around at actual experience. "I know it works in practice," the old saw goes, "but does it work in theory?"

Your actual experience in health care is that costs are increasing and that whatever you think are controls don't seem to be working. But you're stressed to prove anecdotally that elasticity exists. If it existed, you would't have run a way costs. Affordability would have long ago changed market demand and the suppliers would have responded. And you'd have the price differentation that markets with true elasticity always present.
I may be a foreigner but I read American economists once in a while..