Estonia will recover but not so sure about Keynes

The Estonian economy may be in the midst of the most solidly based recovery in the world and it is certainly the best amongst all of the European states. It has also based its recovery on classical principles and has totally discarded any thought of using a Keynesian approach.

A twitter war has now broken out between the President of Estonia, Toomas Hendrik Ilves, and the Nobel Prize winning New York Times columnist, Paul Krugman. Krugman chose to take on Ilves and may live to deeply regret the decision. Ilves has responded with a barrage of twitter attacks on Krugman to which Krugman has thus far said nothing at all. Beyond any personal loss Krugman may endure, he will also have highlighted the phenomenal recovery of the Estonian economy which has based its entire economic strategy on classical economic principles. This from The Huffington Post:

The president of Estonia chewed out Paul Krugman on Wednesday, using Twitter to call the Nobel Prize-winning economist ‘smug, overbearing and patronizing,’ in response to a short post on Estonia’s economic recovery.

Krugman’s 67-word entry, entitled ‘Estonian Rhapsody,’ questioned the merits of using Estonia as a ‘poster child for austerity defenders.’ He included a chart that, in his words, showed ‘significant but still incomplete recovery’ after a deep economic slump.

What Krugman needs to do is find somewhere that is doing better. Every recovery at this stage is incomplete, but a very small number of economies are actually on a road to recovery while most are not. The phenomenal recovery of the Estonian economy was discussed in an earlier post, but I will bring a couple of bits up from that earlier comments thread. This is from Jack Lacton:

I love the story about Mart Laar’s transformation of the Estonian economy post the fall of the Soviet Union.

Laar’s area of expertise were Europe’s 19th-century national movements. ‘It is very fortunate that I was not an economist,’ he says. ‘I had read only one book on economics – Milton Friedman’s “Free to Choose.” I was so ignorant at the time that I thought that what Friedman wrote about the benefits of privatisation, the flat tax and the abolition of all customs rights, was the result of economic reforms that had been put into practice in the West. It seemed common sense to me and, as I thought it had already been done everywhere, I simply introduced it in Estonia, despite warnings from Estonian economists that it could not be done. They said it was as impossible as walking on water. We did it: we just walked on the water because we did not know that it was impossible.’

And this was from JC:

When I read the Prez’s twitter attacks, I thought to myself this dude has living in America before because he’s attacking The Krugster like an American would.

The Estonian prez has a decent educational pedigree and is getting stuck into the Krugster like an American would.

Ilves was born in Stockholm, Sweden; his parents were Estonian refugees. He grew up in the United States in Leonia, New Jersey and graduated from Leonia High School in 1972 as valedictorian. He received a bachelor’s degree in psychology from Columbia University in 1976 and a master’s degree in the same subject from the University of Pennsylvania in 1978. In addition to his native Estonian, he is fluent in English, German and Spanish.

Keynesian economics is dying right before our eyes but this stoush with Krugman will be an important footnote within the full story when it is eventually told in years to come.

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311 Responses to Estonia will recover but not so sure about Keynes

  1. Fisky

    Right so a 1/3 drop in real wages over 40 years is no biggie if we have colour TVs. Thanks for clearing that up. Hey dot can you send your email via Sinc – got some data to send your way.

  2. .

    JC,

    The 19th century also had higher wages growth than now.

    Oh the horrors of the industrial era…not really. It dragged hundreds of millions out of poverty.

    These clowns are whinging that those who take on risk get rewarded more than those who do not take on debt, risk their own equity and prefer a more stable income with less responsibilities.

  3. .

    “This may as well be zero”

    What in the hell are you talking about.

    Are you claiming this?

    Are you suggesting others are?

    WTF – your imagination loose again?

    You are you friggen idiot. WTF do you think “essentially static” growth means? It means virtually zero growth –> ‘may as well as be zero % GDP growth’

    If you can’t understand this, you ought to have yourself institutionalised and disenfranchised.

    Fisk, just ask Sinc.

  4. JC

    These clowns are whinging that those who take on risk get rewarded more than those who do not take on debt, risk their own equity and prefer a more stable income with less responsibilities.

    Shorter Dot: They desire a public sector job.

  5. SteveC

    The thread was so convoluted (and interspersed with another long discussion between dot and John Doe) it was a bit hard to follow.

    So if we start in 1983 what was the real wages growth in that 30 years?

  6. JC

    Right so a 1/3 drop in real wages over 40 years is no biggie if we have colour TVs.

    Fme. He’s as stupid as Homer on a bad day.

  7. Fisky

    John Howard averaged 1.3 percent annual wage growth and anon says he reduced wages. What a clown.

  8. sdfc

    Only Dot try and argue against a tautology.

  9. JC

    So if we start in 1983 what was the real wages growth in that 30 years?

    Fuck off, SteveC. Go do your own digging around the web, you moron.

  10. Fisky

    SteveC wages growth over 30 years was slower as it was starting from 10% U/E. You can’t move from that to 4% without moderating wages growth.

  11. Fisky

    And there were huge structural changes in the 80s too. We basically started afresh from 91 and have done swimmingly. 23% wages growth with even better colour TVs than ever!

  12. SteveC

    JC, google has a lot of data here, which may include what you want

  13. sdfc

    The recession of the early 90s was a watershed in Australia’s economic history.

  14. Fisky

    No just go to the Reserve Bank historical stat tables and tack the CPI onto the labour costs table. Piece of piss.

  15. .

    Steve – I used total weekly earnings from natl accs and CPI for Mar 1983 to Mar 2012 and I got 4.4%.

  16. Fisky

    Dot – way too low. Closer to 20 for that period.

  17. Anon

    Dumbo, “essentially static” is not, and has never been, and will never be, the same as “zero”.

    All your misrepresentatioins have been in vain.

    Enjoy your silly tangent about “virtually zero”. You are just attempting to cover one mistake with another.

  18. SteveC

    Thanks Fisky makes sense. Although 23% over 20 years is nearly identical to 47% over 40 years (0.96 vs 1.04). I guess the hawke/ACTU wages accord in the 80’s helped there.

  19. JC

    Ok SteveC

    GNI on PPP dollars per cap went from 9,000 to around $37,000 in the present day and Clown anon is suggesting it’s essentially static. Fucking static? That’s 4.5% compound growth.]

    In my Finkelstein world you two ought to be hung by the neck until you and Clown anon are dead.

  20. Anon

    Jesus where did I fuck up?

    Mother’s birth canal?

  21. .

    Fisk

    Col B in table G2
    Col I in B6

    Okay now we get the first and final figures and factor down for 29 periods.

    I just realised that I need to go from Jun 1983 as well.

  22. Gab

    Although 23% over 20 years is nearly identical to 47% over 40 years

    Must be Groundhog Day at the Cat.

  23. .

    “essentially static” is not, and has never been, and will never be, the same as “zero”.

    It is when you are talking about growth.

    You are just hideously dishonest.

    Jesus where did I fuck up?

    Mother’s birth canal?

    No Princess. JC confirms my result. About 4.4% growth in real wages.

    Although 23% over 20 years is nearly identical to 47% over 40 years (0.96 vs 1.04). I guess the hawke/ACTU wages accord in the 80?s helped there.

    “I guess the renewed fanatical communism of Andropov helped too”

    No, it was the microeconomic reform and the IR process started by Button that killed the accord.

  24. Winning the thread here means way too many of the comments are by or in response to the trolls. Tedious.

    I agree, blogstrop.

    People, that includes you JC, leave these trolls alone. You know they do not mean what they say. They only say it to wind you up. You guys are smart enough to know that, so why do dumb yourselves down to their level.

    THIS. When I come back to a thread after having worked all day and there are over a hundred new comments to read, most of them by seagull (fly in, make a lot of noise, shit all over the place, then fly out again) trolls with screen names I don’t recognise from other threads or responses to those no-name trolls, I just can’t be bothered catching up.

    Too many posts which might have generated interesting comments threads get derailed like this, and it’s a shame.

  25. .

    4.4% annualised growth to the left wing trolls and dullards that make hay out of crumbs.

  26. Infidel Tiger

    I see SDFC has stumbled in here mistakenly believing Catallaxy is his AA meeting.

  27. JC

    No, But I think I know who he is. I just need a little more time to confirm it.

  28. Infidel Tiger

    John Doe is Homer.

  29. sdfc

    Dog the best way to have fruitful discussion is to be challenged. Who’s a troll and why?

  30. sdfc

    Nice effort from your boys against Peel last week IT.

    You a dad yet?

  31. SteveC

    About 4.4% growth in real wages.

    Sorry, you lost me there. 4.4% growth p.a.?
    That’s 136% over 20 years. I though the original point was the RBA said 23% over 2 years.

  32. Splatacrobat

    Could any of our resident Christians please ask Lord Jesus what on earth we have done to deserve this influx of retarded trolls?

    JC said:

    Sinc 10:14 Suffer the little children to come unto me and forbid them not, for of such is the kingdom of Catallaxy Files.15 Verily I say unto you, Whosoever shall not receive the kingdom of Catallaxy as a center right child, he shall not enter therein. 16 And JC took them up in his arms, put his hands upon them, and kicked their leftard arse.

  33. Infidel Tiger

    Yep! All going very well.

    Wasn’t that a shocker? Don’t think they’ll go back to back.

  34. sdfc

    Congratulations. It’s a huge event.

  35. JC

    John Doe is Homer.

    Of course. Jason picked it up first.

    Notice that false sense of confidence and arrogance in his step. He’s off the Woolies shelf stacking night shift and quite possibly doing his best now in sending a credit union broke.

    If you ask me, the shelf stacking was way over his head.

  36. sdfc

    They’re still on top though. Arseholes.

  37. C.L.

    Oh sorry.

    LOL. Yep, John Doe is Homer.

  38. Infidel Tiger

    Bird and Homer have the two most distinctive writing styles on the planet. Far more distinctive than a Dickens or Shakespeare.

  39. JC

    Lord knows the damage he’s done to the credit union. Just imagine. APRA won’t believe it when they are forced to move in.

  40. JC

    Yes, birdie at least in his madness is verbose and interesting. Homer is like a wet cold pancake. Sometimes he can be a little hard to recognize because he’s using the translation app he’s bought that converts Eastwoodlish to regular English. But sometimes his bad diction still gets through.

  41. .

    You tell me Steve C

    Jun 1983

    AWE (all employees) 296.7 CPI Index 62.9

    Mar 2012

    AWE (all employees) 1050.2 CPI Index 179.5

    If you use adult AWE you get Jun 83 367.7 and Mar 2012 AWE is 1341.3

  42. JamesK

    Isn’t the moniker just too bland for Homer?

    It’s a sign of end-stage decay if he switches to bland in quiet desperate fear of the Doomlordian debridement of all infected posts?

    It does sound mad enuff to be him tho’

  43. SteveC

    Ok, so the 4.4% is nominal increase, not real. The real is 24% over 30 years, or about 0.7% p.a. real.
    If Fisky’s quoted 23% over the last 20 years is right, then the increase from 83 to 93 must have been very close to zero. From a labor government, interesting.

    Where do you look up those numbers?

  44. JC

    Oh it’s him alright with that new spring in his step after the Woolies job.

  45. sdfc

    This site needs alternative view points. Why was Homer worse than any number of commenters on here?

  46. Infidel Tiger

    Agreed SDFC. I think Homer’s view that the Gestapo are the equivalent of Roy Morgan was a superb piece of analysis.

  47. sdfc

    So what IT. There are loads strange arguments made on this site. No one else seems to get banned.

  48. Infidel Tiger

    Times change SDFC.

    6 months ago my belief that we must publicly execute leftists was derided as “hysterical” and “extreme”. Now we are just arguing over the method of execution. It’s very pleasing.

  49. .

    sdfc

    Homer was getting away with misquoting a book (Tooze) until Fisk went out and bought it and exposed his sheer bullshitting.

    That’s pretty dishonest.

  50. .

    sdfc,

    Don’t you remember Skan Kee Ho?

    Homer seriously reckons Mark Latham was referring to a “Chinese warlord’s mistress”, not Janet Albrechtsen.

    “I got it from urban dictionary” LOL

  51. JC

    Okay. I think I worked it out. It looks like 3.5% since 1970. Dunno from 1983.

    GDP paid to employees from the RBA site you linked to shows it went from around $4.1 billion to last quarter of $180 billion.

    I thought it would be better using GDP paid to employees because it helps retarded leftwingers to accept it more.

    It rose unadjusted by 9% CPI for that period was around 5.5%

    this is all compounded.

  52. Anon

    Fisky

    No, real wages went up 16% under Howard; real hourly wages up 21%. I know you won’t do this, but if you want to check it for yourself, go here http://www.rba.gov.au/statistics/tables/index.html

    “Average” wages probably did behave like this. However the income distribution is very skewed so the average is distorted to the high side.

    Howards 16% probably covers First Q – 1996 to 4th Q – 2007 ie 12 years.

    This is growth of just over 1% (1.25%).

    It is easy to Check:

    100 * 1.0125^12 = 116 (a 16% increase).

    Average wage increases were not replicated in rates of pay pegged to Minimum Wage determinations.

    ==========================

    I usually use ABS data series A2734023X and etc. but I assume your calculations are OK.

    ===========================

  53. .

    Average wage increases were not replicated in rates of pay pegged to Minimum Wage determinations.

    The minimum wage determination does not drive real wages growth. FFS.

  54. Fisky

    How many times do I have to tell you? Minimum wage earners are a small fraction of total employees. The vast majority of workers were much better off under Howard.

  55. .

    Fuggedaboutit Fisky.

    It’s a nonsense theory. Even left wing Andrew Leigh estimated a moderate sensitivity of employment to wages. Raising the minimum wage just puts people out of work. It doesn’t raise real wages at all.

    All that matters is capital accumulation.

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