Atanu Dey: What “free” (state-subsidized) education has cost India

[While I disagree with his premise that public goods should be subsidized, Dey does make an excellent argument that the subsidy of higher education ended up being a subsidy of foreign corporations and economies. Yet another of the unintended consequences of statist benevolence….]

“India suffers from very low literacy even compared to other developing countries. Yet one gets to hear about the tremendous impact that Indian doctors, engineers and scientists have had around the world. This conveys the impression that the Indian schooling system works. I believe that that impression is wrong and that in fact the Indian school system is inefficient and biased against the poor.

Free Education

I spent many years the Indian school system and I must admit that I received very good schooling. My eleven years in a pretty good high school in Nagpur was practically free. I was given a scholarship during my bachelor’s degree in engineering. At IIT Kanpur, while doing a master’s degree in computer sciences, I received a stipend which was sufficient to pay for all normal expenses. I estimate that my entire education in India, including a master’s in computer science, cost me less than US$ 100 in today’s terms.

How is it that a poor society can afford to educate its children for free? I come from a middle class family and I am sure we could have afforded more than that. I am also sure that if the education had been priced at full cost, we could not have paid for it up front. [There is a way to circumvent this problem. See “Full cost pricing” at the end of this page.]

Someone else paid for my education. That is true for a very large number of people who are educated in India’s premier institutions–someone else paid.

Nagpur is a medium-sized city by Indian standards. It has a bunch of good high schools. You have to have a middle-class or better background to get into those because competitive pressures keep the poor out. But if you get in, and don’t goof off too much, you can do well in the competition for admission into a good engineering or medical college. And then you get heavily subsidized education in college. Armed with all the advantages, you fill out a bunch of applications, write the GRE and the TOEFL and off you go to the US, never to return.

Brain Drain

It was fashionable in the 1970s and 80s to refer to the migration of trained doctors, scientists and engineers to the advanced industrialized countries as a “brain drain.” Actually, it was a “resource drain” rather than a “brain drain.” India never really had a shortage of basic brains. There are hundreds of millions of basic brains in India. However it takes resources to train a basic brain and turn it into a useful brain. These scarce resources are lost to the economy when used to train brains that eventually migrate.

Just like capital flight from poor economies to the rich ones, the migration of trained manpower, human capital flight, is enormously expensive. It is an even more of a burden when the training is publicly funded. When a trained engineer migrates to the US, it is totally indistinguishable from a gift of US$ 100,000 from India to the US. Over the years, the total implicit subsidy from India to the US could be estimated to be of the order of hundred billion dollars.

Losses

When an educated person leaves India, there is a first-order loss to the economy if the education was publicly funded. There is no comparable first-order loss if private resources were involved in the training. But in either case, the economy loses the life-time stream of economic contributions that the migrant would have made. This is a second-order loss. There is what can be considered a third-order loss that is harder to estimate but whose impact may be the most damaging in the long run. This arises from publicly subsidizing higher education at the expense of primary education.

Primary education, somewhat like primary health care, has characteristics of what economists call a “public good.” The positive effects of primary education spill over into the larger economy more than that of higher education, which is more like a private good. Markets efficiently provide optimal quantities of private goods but are known to under-provide public goods. The market understandably fails in the case of primary education. The solution is straightforward: the public subsidy of primary education.

The essential point is that the subsidizing higher education is an inefficient use of resources which could have been used for primary education. And this distorted system has real-world consequences: the shameful neglect of primary education.

Dismal Statistics

The Indian constitution mandates universal primary education for all (see Article 8 of the Indian Constitution). Yet, 41% of children do not reach grade 5 in India. Compare that to some other countries:

   	  Gambia             20%
	  Mali               18%
          Senegal            15%
          Tanzania           17%
          Burkina Faso       25%

[Source: Human Development Report 1999. UNDP.]

Of the countries that rank lower than India in the human development index, only about four have higher percentage of children that do not reach the fifth grade. Mozambique does worse than India, for instance. But never mind small strange sub-Saharan African countries. Take Indonesia for example: only 11% of its children don’t go past the fifth grade. Or take Mexico with its 14% figure. Compare India with neighboring Sri Lanka with its 17%.

The failure of Indian primary education is hard to escape. Sixty years after India’s political independence, India is places 126th out of 175 countries ranked in the 2006 Human Development Report. India’s adult literacy rate is a dismal 61%, below Cameroon (68%), Angola, Congo, Uganda (67%), Rwanda (65%), and Malawi (64%). That 40% of today’s Indian adults cannot even “both read and write a short, simple statement related to their everyday life” implies that they did not get the equivalent of the most basic of primary education. Compare that to China’s 90% adult literacy. [Source: UNDP Human Development Report.]

Successful NRIs

The argument is often advanced that the Indian education system must be world-class. After all, doesn’t it produce world-class NRIs (non-resident Indians) like Vinod Khosla and Rajat Gupta? Yes, of course. And don’t they turn around and give millions of dollars to support the IITs? Yes, of course. Sure the NRIs send some money home. But what is the ratio of the amount India spends on their education to what these worthies send back home?

Even then, who could be so crass as to measure everything in terms of dollars? Surely there is something more important than money. Yes, there is. And it is the untapped human capital that India has in abundance and which it criminally neglects. It neglects them because the powers that be have it made under the current system and it serves their narrow purposes.

In practically every measure of education, India’s rank is so abysmal that it is depressing to even look at the figures. Even if the solution to India’s education problems were as little as a week’s worth of clean drinking water, India would still be in trouble. Around 60% of Indians don’t have access to clean drinking water.

For all our vaunted world-class scientists, doctors and engineers, India ranks miserably in the number of scientists and technicians it has: 0.3 such per 1,000 population. Compare that to: China 0.6, Islamic Rep of Iran 0.7, South Africa 1.7, Korea 2.9.

Hyperbole and Hubris

We in India lack many things. One thing appears not to be in short supply–the hyperbole and the capacity for self-delusion. We have pretences of being an information superpower. Our IT sector is supposed to make us great. It stretches the imagination beyond belief that this idea can be entertained by anyone. We account for less than 1% of the global $600 billion IT business. Remember we represent 17% of the world’s population. Even if we were to increase our share 10 times (and this is unreasonable by any account) we’d still be below the world average.

Judging the Indian education system based on a Chandrashekhar or a Ramanujan is misguided and delusional. It is like weighing a pinch of mustard seeds against a herd of elephants and declaring that the mustard weighs more. How do we manage to delude ourselves so? I believe that those doing the judging live in very rarified atmospheres. Their world is populated by jet-setting intellectuals and internet millionaires and H1-B visas and ecommerce and NRIs. Hard evidence to the contrary, it is more comforting to believe that we are not that badly off.

Is there any point in confronting the hard evidence, you may ask. Yes, there is. Unless we recognize the basic problem, examine it dispassionately, we are unlikely to even consider solving the problem. In a sort of defense through denial, we can go on with business as usual by declaring the problem does not exist. But the problem does exist. And the problem is not one that does not have wide ranging implications. The most devastating impact of our dismal educational system is that we are condemning ourselves to a future of exceedingly low economic development. If there is one thing that developmental economists have learnt, it is this: education is the most important factor in economic growth. Education has more impact on economic growth than natural resources, foreign investment, exports, imports, whatever. Neglect education and you may as well hang yourself and save yourself the pain of a slow miserable death.

So who paid for my education? It is the poor rural children, thousands of them, who paid for my education by losing their opportunity to become semi-literate. The system is tilted against them and unless there is a radical change in the way that education is funded, they will continue to pay the price for subsidizing the US for decades to come.

~~~~~~~~~~~~~~~~~~

FULL COST PRICING

A brief solution to the problem of full-cost pricing is easy to state. Price all higher education at full cost. If a year of engineering school costs Rs 3 lakhs, price it at that. Then give loans to every student that needs it to pay the price. The loan is repayable upon employment and in terms commensurate with the level of employment. If you earn big dollars in the US, pay in big dollars. If you work as a doctor in a small village in India, pay small amounts in rupees. Essentially, with the loan system in place, there is no need for public subsidies for higher education.”

AP reports that Chinese billionaires aren’t inclined to follow the power elite’s favorite piece of flim-flam – hyper-public philanthropy. Seems the canny Chi-Coms aren’t buying into the “good little rich boys” club:

“Some of China’s super rich are skeptical about Gates’ and Buffett’s approach. China’s wealthy don’t have to “copy the U.S. charity mode,” billionaire Guo Jinshu told Xinhua in a story Wednesday. “In China, an entrepreneur’s top responsibility is to keep his own business sound, to fulfill taxation payments, and create jobs. This is also out of a philanthropist heart.”

“So all those hillsmen in Idaho, with their Colt 45s and boxes of krugerrands, who sent furious emails to the Telegraph accusing me of defending a hyperinflating establishment cabal were right all along. The Fed is indeed out of control.

The sophisticates at banking conferences in London, Frankfurt, and New York who aplogized for this primitive monetary creationsim – as I did – are the ones who lost the plot.

My apologies. Mercy, for I have sinned against sound money, and therefore against sound politics.”

—  Ambrose Evans-Pritchard

Eric Blair (via LRC) on the marketing of food shortages:

“The recent market speculation has now driven food commodity prices for corn and soybean to their 2-year highs. An emergency meeting Friday by the U.N.’s Food and Agriculture Organization in Rome to address the urgent shortages and sudden surge in prices had this to say:

In the past few weeks, global cereal markets experienced a sudden surge in international wheat prices on concerns over wheat shortages prompted by the drought in the Russian Federation. These unexpected events raise important questions not only about the stability of markets but, even more importantly, about the accuracy of production forecasts and ultimately the overall supply and demand prospects. However, with an increasing proportion of world grain supplies originating from the Black Sea region, an area known for large variations in yields, unexpected production shortfalls are likely to emerge more as a common feature rather than an exception in the years to come.

The Guardian reported on the meeting that, “Environmental disasters and speculative investors are to blame for volatile food commodities markets, says U.N.’s special adviser.” The article went on to quote from a research paper by the U.N.’s “special rapporteur” on food, Olivier De Schutter, which summarizes how speculation is inflating a food bubble:

‘[Beginning in ]2001, food commodities derivatives markets, and commodities indexes began to see an influx of non-traditional investors,; De Schutter writes. ‘The reason for this was because other markets dried up one by one: the dotcoms vanished at the end of 2001, the stock market soon after, and the US housing market in August 2007. As each bubble burst, these large institutional investors moved into other markets, each traditionally considered more stable than the last. Strong similarities can be seen between the price behaviour of food commodities and other refuge values, such as gold.’

He continues: ‘A significant contributory cause of the price spike [has been] speculation by institutional investors who did not have any expertise or interest in agricultural commodities, and who invested in commodities index funds or in order to hedge speculative bets.’

Certainly, the flurry of reports about the growing concerns over global food production, extreme weather, and a record-weak dollar have offered sufficient excuses for the speculation.  While at the same time, the human ramifications of these events are immeasurably awful. Here’s just a few headlines from this week alone:

• Global food risk from China-Russia pincer
• USDA reduces grain-production estimates
• Australian prime wheat in demand, supply outlook tight
• Canadian farmers hit by rain face latest foe — frost
• Brazil Crops Shrivel as Amazon Dries Up to Lowest in 47 Years
• Gold Climbs to $1,300 on Dollar Concern; Silver at 30-Year High

These are very real concerns for feeding the human population.  And indeed, they are urgent matters to be solved.  However, it seems too convenient to see the banksters profit, the public suffering turn to outrage, and the bank-owned government agencies to scramble for a “solution.” Haven’t we seen this Three-card Monte game enough by now? It’s a scam.

Almost right on cue, here comes the reaction from the food aid groups desperately calling for “swift action.”  An ActionAid‘s hunger campaigner, Alex Wijeratna, was quoted in the Guardian article: “The emergency U.N. meeting in Rome is a clear warning sign that we could be on the brink of another food price crisis unless swift action is taken. Already, nearly a billion people go to bed hungry every night — another food crisis would be catastrophic for millions of poor people.”

If we believe Jacques Diouf, Director-General of the UN Food and Agriculture Organization, we can expect to be offered the solution of global food regulation. In June of 2009, in response to the 2008 food crisis, he called for “bolstered global governance system for world food security” under the cover of feeding the hungry.  He said, “We have to build a more coherent and effective system of governance for world food security; we have to correct the policies and international trade system that have resulted in more hunger and poverty.”

Incidentally, the organization’s plans for increased global governance seem to mainly focus on divvying up the elite’s table scraps to the poor hungry nations. Under this governance, we will likely see food continue to be used as an economic weapon. It is also likely that more “free trade” agreements will be forced for food.  And, finally, we can expect more focus on increasing crop yields — no doubt with the help of big agribusiness. The one thing that we are most likely NOT to see is the prosecution or regulation of the banking speculators who hold the real power to starve the poor.”

[Lila: Blair, writing from the left,Correction: I assumed Blair was writing from the left, but, on revisiting the site, I think the assumption mightn’t be warranted]

I’m not sure I agree that more regulation is the answer, since the fundamental drivers of commodity speculation are to be found in artificial interest rates, centralized banking, the size of the speculators, and the use of the media not to inform but to market]

AP is reporting that a powerful computer code that seems to be mainly directed against Iranian industry was probably created by a wealthy country/private group:

“The malicious code, called Stuxnet, was designed to go after several “high-value targets,” said Liam O Murchu, manager of security response operations at Symantec Corp. But both O Murchu and U.S. government experts say there’s no proof it was developed to target nuclear plants in Iran, despite recent speculation from some researchers.

Creating the malicious code required a team of as many as five to 10 highly educated and well-funded hackers. Government experts and outside analysts say they haven’t been able to determine who developed it or why.

The malware has infected as many as 45,000 computer systems around the world. Siemens AG, the company that designed the system targeted by the worm, said it has infected 15 of the industrial control plants it was apparently intended to infiltrate. It’s not clear what sites were infected, but they could include water filtration, oil delivery, electrical and nuclear plants.

None of those infections has adversely affected the industrial systems, according to Siemens.

U.S. officials said last month that the Stuxnet was the first malicious computer code specifically created to take over systems that control the inner workings of industrial plants.

The Energy Department has warned that a successful attack against critical control systems “may result in catastrophic physical or property damage and loss.”

Symantec’s analysis of the code, O Murchu said, shows that nearly 60 percent of the computers infected with Stuxnet are in Iran. An additional 18 percent are in Indonesia. Less than 2 percent are in the U.S.

“This would not be easy for a normal group to put together,” said O Murchu. He said “it was either a well-funded private entity” or it “was a government agency or state sponsored project” created by people familiar with industrial control systems.

A number of governments with sophisticated computer skills would have the ability to create such a code. They include China, Russia, Israel, Britain, Germany and the United States. But O Murchu said no clues have been found within the code to point to a country of origin.

Iran’s nuclear agency has taken steps to combat the computer worm that has affected industrial sites in the country, throughout the country, including its first nuclear power station just weeks before it was set to go online. Experts from the Atomic Energy Organization of Iran met this past week to discuss how to remove the malware, according to the semiofficial ISNA news agency.

The computer worm, which can be carried or transmitted through portable thumb drives, also has affected the personal computers of staff working at the plant, according to IRNA, Iran’s official news agency. The news agency said it has not caused any damage to the plants major systems.

German security researcher Ralph Langner, who has also analyzed the code, told a computer conference in Maryland this month that his theory is that Stuxnet was created to go after the nuclear program in Iran. He acknowledged, though, that the idea is “completely speculative.”

O Murchu said there are a number of other possibilities for targets, including oil pipelines. He said Symantec soon will release details of its study in the hope that industrial companies or experts will recognize the specific system configuration being targeted by the code and know what type of plant uses it.”

My Comment:

Several things strike me about this disturbing story.

First. There’s no reason why the worm couldn’t have been generated from within Iran itself, by some group of hackers funded by some opposition group and/or some foreign infiltrators/instigators.

Second. When I googled Stuxnet, I came across a piece at the Microsoft website from July 2010 that claims that Stuxnet has been associated primarily with India, Indonesia, US and Iran.

Third.  Wouldn’t identifying and fixing the worm entail intrusion into confidential/private/sensitive data bases as well?

More here on how Stuxnet works to not only steal data but take over processes:

“An attacker could use the back door to remotely do any number of things on the computer, like download files, execute processes, and delete files, but an attacker could also conceivably interfere with critical operations of a plant to do things like close valves and shut off output systems, according to O’Murchu.

“For example, at an energy production plant, the attacker would be able to download the plans for how the physical machinery in the plant is operated and analyze them to see how they want to change how the plant operates, and then they could inject their own code into the machinery to change how it works,” he said.

Read more: http://news.cnet.com/8301-27080_3-20013545-245.html#ixzz10fYI0iE9

Paul Craig Roberts (via LRC) comments on FBI raids on antiwar activists:

“On September 24, Jason Ditz reported on Antiwar.com that “the FBI is confirming that this morning they began a number of raids against the homes of antiwar activists in Illinois, Minneapolis, Michigan, and North Carolina, claiming that they are ‘seeking evidence relating to activities concerning the material support of terrorism.’”

Now we know what Homeland Security (sic) secretary Janet Napolitano meant when she said on September 10: “The old view that ‘if we fight the terrorists abroad, we won’t have to fight them here’ is just that – the old view.” The new view, Napolitano said, is “to counter violent extremism right here at home.”

“Violent extremism” is one of those undefined police state terms that will mean whatever the government wants it to mean. In this morning’s FBI’s foray into the homes of American citizens of conscience, it means antiwar activists, whose activities are equated with “the material support of terrorism,” just as conservatives equated Vietnam era anti-war protesters with giving material support to communism.

Anti-war activist Mick Kelly whose home was raided, sees the FBI raids as harassment to intimidate those who organize war protests. I wonder if Kelly is underestimating the threat. The FBI’s own words clearly indicate that the federal police agency and the judges who signed the warrants do not regard antiwar protesters as Americans exercising their Constitutional rights, but as unpatriotic elements offering material support to terrorism.

“Material support” is another of those undefined police state terms. In this context the term means that Americans who fail to believe their government’s lies and instead protest its policies, are supporting their government’s declared enemies and, thus, are not exercising their civil liberties but committing treason.

As this initial FBI foray is a softening up move to get the public accustomed to the idea that the real terrorists are their fellow citizens here at home, Kelly will get off this time. But next time the FBI will find emails on his computer from a “terrorist group” set up by the CIA that will incriminate him. Under the practices put in place by the Bush and Obama regimes, and approved by corrupt federal judges, protesters who have been compromised by fake terrorist groups can be declared “enemy combatants” and sent off to Egypt, Poland, or some other corrupt American puppet state – Canada perhaps – to be tortured until confession is forthcoming that antiwar protesters and, indeed, every critic of the US government, are on Osama bin Laden’s payroll.

Almost every Republican and conservative and, indeed, the majority of Americans will fall for this, only to find, later, that it is subversive to complain that their Social Security was cut in the interest of the war against Iran or some other demonized entity, or that they couldn’t have a Medicare operation because the wars in Central Asia and South America required the money.

Americans are the most gullible people who ever existed. They tend to support the government instead of the Constitution, and almost every Republican and conservative regards civil liberty as a coddling device that encourages criminals and terrorists.

The US media, highly concentrated in violation of the American principle of a diverse and independent media, will lend its support to the witch hunts that will close down all protests and independent thought in the US over the next few years. As the Nazi leader Joseph Goebbels said, “think of the press as a great keyboard on which the Government can play.”

An American Police State was inevitable once Americans let “their” government get away with 9/11. Americans are too gullible, too uneducated, and too jingoistic to remain a free people. As another Nazi leader Herman Goering said, “ The people can always be brought to the bidding of the leaders. Tell them they are being attacked, and denounce the peace-makers for lack of patriotism and for exposing the country to danger.”

This is precisely what the Bush and Obama regimes have done. America, as people of my generation knew it, no longer exists.”

My Comment

I admire Paul Craig Roberts for his willingness to articulate things in a forthright manner. But reading the reports on the net so far, I think it’s wise to wait a bit to figure out what exactly is going on here first.

So, I’ll just note the following, from this article:

Mick Kelly, one of several activists whose homes were raided, played a central role in protests at the Republican National Convention in 2008, so we are talking, in his case, about someone who organized a confrontational demonstration and didn’t just make an oral or print statement [not that that isn’t protected by the Bill of Rights, as well].

Kelly is a member of/associated with a group called the Freedom Road Socialist Organization, whose website states the following:

“Freedom Road Socialist Organization (FRSO) is a revolutionary socialist and Marxist-Leninist organization in the United States. The members of Freedom Road are very active in movements fighting for justice, particularly in labor, oppressed nationality, anti-war and anti-imperialist, and student movements. Freedom Road is characterized by our understanding of national oppression in the United States. Freedom Road was founded in 1985 with the merger of 3 groups that were born in the New Communist Movement of the 1970s.  Since then other groups and many new activists have joined our ranks. “

A member of the executive committee and a leader in the student wing of the group writes the following in an article:

“The central task of Marxist-Leninists in the United States today is to build a new Communist Party on a Marxist-Leninist basis. Without a Party guided by the most advanced revolutionary theory it is impossible for the working class to take power and build socialism, which is so desperately needed. Like so many students before them, we want students who join Freedom Road Socialist Organization to transform themselves and eventually to go into the working class and the masses of the oppressed nationalities to help lead the class struggle. Mao Zedong once asked, “How should we judge whether a youth is a revolutionary? How can we tell? There can be only one criterion, namely, whether or not he is willing to integrate himself with the broad masses of workers and peasants and does so in practice. If he is willing do so and actually does so, he is revolutionary.”(11) This was true when Mao Zedong said it in 1939 and it is true today.”

The FBI is apparently looking for more information on trips Kelly is supposed to have made on behalf of this outfit. The trips were, reportedly, to countries like Palestine and Colombia. The FBI is looking for any evidence that support was provided to terrorist groups like FARC in Colombia or Hezbollah (Lebanon) or the Popular Front for the Liberation of Palestinian.

What is interesting is that there’s no longer any pretense that “Homeland Security” refers to defense against those who committed the attack on 9-11 or to defense against Islamic jihad. “Homeland Security” apparently entails attacking any supporter of any group that stands in the way of US government (as opposed to American) interests anywhere in the world.

It’s a conveniently flexible definition.

From Truth On The Market, a plaintive note from the newly-declared “super rich”:

“The rhetoric in Washington about taxes is about millionaires and the super rich, but the relevant dividing line between millionaires and the middle class is pegged at family income of $250,000. (I’m not a math professor, but last time I checked $250,000 is less than $1 million.) That makes me super rich and subject to a big tax hike if the president has his way.

I’m the president’s neighbor in Chicago, but we’ve never met. I wish we could, because I would introduce him to my family and our lifestyle, one he believes is capable of financing the vast expansion of government he is planning. A quick look at our family budget, which I will happily share with the White House, will show him that like many Americans, we are just getting by despite seeming to be rich. We aren’t.

I, like the president before me, am a law professor at the University of Chicago Law School, and my wife, like the first lady before her, works at the University of Chicago Hospitals, where she is a doctor who treats children with cancer. Our combined income exceeds the $250,000 threshold for the super rich (but not by that much), and the president plans on raising my taxes. After all, we can afford it, and the world we are now living in has that familiar Marxian tone of those who need take and those who can afford it pay. The problem is, we can’t afford it. Here is why.

The biggest expense for us is financing government. Last year, my wife and I paid nearly $100,000 in federal and state taxes, not even including sales and other taxes. This amount is so high because we can’t afford fancy accountants and lawyers to help us evade taxes and we are penalized by the tax code because we choose to be married and we both work outside the home. (If my wife and I divorced or were never married, the government would write us a check for tens of thousands of dollars. Talk about perverse incentives.)

Our next biggest expense, like most people, is our mortgage. Homes near our work in Chicago aren’t cheap and we do not have friends who were willing to help us finance the deal. We chose to invest in the University community and renovate and old property, but we did so at an inopportune time.

We pay about $15,000 in property taxes, about half of which goes to fund public education in Chicago. Since we care the education of our three children, this means we also have to pay to send them to private school. My wife has school loans of nearly $250,000 and I do too, although becoming a lawyer is significantly cheaper. We try to invest in our retirement by putting some money in the stock market, something that these days sounds like a patriotic act. Our account isn’t worth much, and is worth a lot less than it used to be.

Like most working Americans, insurance, doctors’ bills, utilities, two cars, daycare, groceries, gasoline, cell phones, and cable TV (no movie channels) round out our monthly expenses. We also have someone who cuts our grass, cleans our house, and watches our new baby so we can both work outside the home. At the end of all this, we have less than a few hundred dollars per month of discretionary income. We occasionally eat out but with a baby sitter, these nights take a toll on our budget. Life in America is wonderful, but expensive.

If our taxes rise significantly, as they seem likely to, we can cut back on some things. The (legal) immigrant from Mexico who owns the lawn service we employ will suffer, as will the (legal) immigrant from Poland who cleans our house a few times a month. We can cancel our cell phones and some cable channels, as well as take our daughter from her art class at the community art center, but these are only a few hundred dollars per month in total. But more importantly, what is the theory under which collecting this money in taxes and deciding in Washington how to spend it is superior to our decisions? Ask the entrepreneurs we employ and the new arrivals they employ in turn whether they prefer to work for us or get a government handout.

If these cuts don’t work, we will sell our house – into an already spiraling market of declining asset values – and our cars, assuming someone will buy them. The irony here, of course, is that the government is working to save both of these industries despite the impact that increasing taxes will have.

The problem with the president’s plan is that the super rich don’t pay taxes – they hide in the Cayman Islands or use fancy investment vehicles to shelter their income. We aren’t rich enough to afford this – I use Turbo Tax. But we are rich enough to be hurt by the president’s plan. The next time the president comes home to Chicago, he has a standing invitation to come to my house (two blocks from his) and judge for himself whether the Hendersons are as rich as he thinks. “

At the Wall Street Journal, Brett Arends has already given Mr. Henderson some financial tips (use cash, budget, keep expectations low, be cheap and proud…) that are old hat to budget mavens like me.

Ha. I think I hold the world record for living on budgets, but I refuse to share tips any more. I figure all those people who sneered at thrift while borrowing on the back of the thrifty, whom the government will bail-out while it taxes savers directly and indirectly, who are “victims” when they lose their investments but “savvy” when they win and drive prices high for everyone – those people – need to feel something called pain.

But Mr. Todd Henderson doesn’t seem like a house-flipping, no-doc loan faking,. fast-talking trough-snuffling litigious professional victim.  He sounds like a hard working professional who just hasn’t figured out that there’s been a game change.

The mob wants blood…and/or….a payout. Right now,  it doesn’t care where it comes from.

I have better advice for you than Mr. Arends. I say move south, close to the border. Do your shopping in Mexico, make your money in the US. And stay clear of the drug gangs.

Here you were thinking that the bad guys were crooked bankers, corrupt pols, and corporate welfare kings. Now comes Market Watch to tell you that the real problem is small business. Yes. Forget all that sentimental stuff about small businesses creating jobs or needing to be given a few breaks.

The piece is “Time to Stop Worshipping  Kulaks Small Businesses,” by Rex Nutting.

Quote:

“America worships small businesses as the main engine of growth in the economy, but that’s largely a myth, perpetuated by leaders looking for simple answers to our economic problems.”

Size doesn’t matter, says author Rex Nutting.

Quote:

“If you define “small” as companies with fewer than 100 employees, small businesses employ about a third of U.S. workers.”

Actually, says Nutting, small businesses, once they get going, kill more jobs than they create them.

Quote:

“Once they pass their first birthday, small companies, on average, lose more jobs than they create. “

How this happens Nutting doesn’t explain. Is it that successful companies “take away” jobs from others? If so, it’s hardly “destroying” jobs.

Is it that they do things efficiently and reduce casual workers? Nutting doesn’t say.

But lest you think he’s against all business, he assures you he’s not.

Quote:

“Most startups are very small, of course. But it is not their smallness that creates the jobs, it’s their newness.

In other words, it’s entrepreneurship we want to cultivate, not some nostalgic memory of Floyd the barber as the hero of the economy. We need to get away from the idea that smaller is better. In fact, newer is better.”

Are you getting the picture now? Nutting just doesn’t like the present crop of successful business owners. He wants to move money to other hands, to newer ventures that haven’t made it in the market yet. You can imagine what they’ll be. Green companies, politically-favored ventures. Doesn’t matter if they succeed or not, just so long as they get started.

Because small biz doesn’t create jobs, right?

Oh and Nutting axes another red-neck superstition you might have been nursing. Lower taxes don’t help small businesses. That’s right. Small businessmen don’t think about how high or low their taxes might be when they hire workers.

Quote:

“Republican leaders are spreading another myth about small businesses. They say that if the tax hikes are allowed to go through for the 2% of taxpayers who earn more than $250,000 a year, it’ll keep small-business owners from hiring.

Their claim is nonsense. The tax rate that business owners pay is irrelevant to their decision whether to hire another worker.”

Talk about straw men. Tax rates on profits might not be the bottom line when hiring new workers but government regulations, tax rates, and every other form of meddling weigh heavily indeed when any businessman or woman considers if he is opening a new branch, expanding into a new town, or deciding to do a job or not.

So what is Nutting getting at in all this? The answer is in the conclusion of this insidious and deeply revealing piece:

“To foster a more dynamic economy, politicians and other leaders should think about nurturing entrepreneurs rather than coddling old companies, even the cute little ones. They represent the past.”

Translated, this means more breaks for start-ups and all kinds of one-off shots that go nowhere after the first year and close their doors by year-end. Thumbs up for any unviable scheme that has a paper from the state to prove it’s a business.  But thumbs-down for long-standing successful real businesses. In fact, tax ’em into the ground.

Call this any thing you want.

I call it redistribution from people who know how to turn a profit to people who don’t.

The kulaks must be put under the yoke.