The Meltdown Blog

Philip Greenspun recently published a great book report on "The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities", a book from 1982 written by Mancur Olson. I strongly recommend reading the entire report as it contains numerous examples of how interest groups work to build themselves a refuge from the free market and thereby "reduce a society’s efficiency and GDP".

Greenspun's depressing conclusion points out how relevant Olson's analysis is:

Money flows out to the folks on Wall Street who bankrupted their firms, to schoolteachers who’ve failed to teach their students, to government workers who feel that simply showing up to work is a heroic achievement, to executives and union workers in America’s oldest and least competitive industries. If times are tough and money is tight, that means almost nothing is left over for productive investment. What would have been a short recession will turn into a long depression and decades of higher taxes and slow growth to pay for all of the cash ladled out. Special interest groups will continue to gain in power.

So what should you do? Back in 1982, Olson still viewed Japan and Germany as dynamic economies and thought they did well "because their special interest groups were shattered by military defeat". Today, Japan is a synonym for stagnation and Germany is - in my opinion - one of the worst examples of a country firmly in the grip of special interest groups. Greenspun's suggestion to "invest in countries that have recently gone through a revolution or are recovering from an invasion (Cuba? Iraq?)" shows the global extent of the special interest death trap.

Do we really need a revolution or a war? Isn't one of the great features of a democracy that change from within is possible? Sadly, voters don't stand much of a chance:

The voter is better off devoting his or her energy to earning more rather than attempting to change the system (likely to require full-time effort, reducing income to $0, and be futile because the voter has no money compared to the special interests).

Let me try to finish this with a few glimmers of hope: Nowadays, the internet could reduce the effort required to change the system and if you can't find a job because of the dismal economy, your costs of opportunity are $0, anyway.