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Friday, January 11, 20081200110883

Democracy and America's Non-Integrating Gap, or, I'm glad I don't live in Cleveland!

An interesting article, "City of Cleveland sues lenders over foreclosures.

Cleveland, a city currently with about half its 1930 population, is a good example of America's non-integrating gap: those ares within the United States generally unequipped for life in a free-market democracy.


A Failed State?


Cleveland is both helped and hurt by being within the United States. The subprime mess, which Cleveland is suing over, is an example of this. For those who haven't paid attention to the embarrasing fiasco, the excess capital in much of the world led to very low interest rates on "variable rate" mortgage, allowing many people who would have been unable to afford a home at the time a chance to move into it. Without the safety of the American property and adjudication systems, money would have never felt safe enough to wash into Cleveland: hence, many new Cleveland home-owners.

However, Cleveland's dying for a reason, and my guess is that one of the many factors in the city's death-spiral is low general intelligence. One consequence of low intelligence is reduced ability to calculate risk, shortened time preferences, and plain foolish decision making. So instead of using the historic opportunity of cheap capital, many Clevelanders promptly blew their windfall on houses they could not possibly afford. And thus Cleveland, which if it was a country would never have been trusted with so much cash in the first place, is now saddled with debt.

So now a most-likely incompetent government of a most-likely incompetent city is suing the source of the greatest generosity to hit it in some time.

A recent post by Curzon over at Coming Anarchy includes this quote from Robert Kaplan:

Hitler and Mussolini each came to power through democracy. Democracies do not always make societies more civil-but they do always mercilessly expose the health of the societies in which they operateā€¦ The lesson to draw is not that dictatorship is good and democracy bad but that democracy emerges successfully only as a capstone to other social and economic achievements.


Indeed, and it's quite likely that Cleveland is not at a level of "social and economic achievements" that would allow it to function as a democracy, but still has an elected city government anyway.

Too bad for the people of Cleveland.

Comments

Any analysis on the decline of industry within Cleveland? Steel, automotive, Great Lakes trade, factories etc.?

Are you suggesting that a decline in population means that a city is less intelligent? Did the population simply move to nearby suburbs that aren't incorprated into the city or did they move to different states?

Are you suggesting that the part of the population that left were more intelligent than what remained?

Are you suggesting that Cleveland shouldn't have the right to democracy because the electorate isn't intelligent enough?

Are you suggesting that because an electorate may or may not be intelligent that the civic leaders are therefor just as intelligent as the electorate?

Posted by: J. Kauffman | Saturday, January 12, 2008

J,

Wow! That's quite a list of questions. (That serve quite well as a "comment," too!)

Going through them,

"Any analysis on the decline of industry within Cleveland? Steel, automotive, Great Lakes trade, factories etc.?"

No, as such would be superfluous.

"Are you suggesting that a decline in population means that a city is less intelligent? "

It certainly might imply that. See also similar dynamics in Prince Edwards Island, the former East Germany, etc. A stagnant economy and a declining population typically means an outflow of population skewed to the more intelligent and the more ambitious.

"Did the population simply move to nearby suburbs that aren't incorporated into the city or did they move to different states?"

Superfluous for the analysis.

"Are you suggesting that the part of the population that left were more intelligent than what remained?"

Probably. Certainly there's in-group variation, but I'd also assume a non-trivial mean difference.

"Are you suggesting that Cleveland shouldn't have the right to democracy because the electorate isn't intelligent enough?"

They're American citizens, so their right to live under a republic (both in their State and their nation) goes without saying.

As for how much control the people of Cleveland should have over the city of Cleveland -- that's a policy question, and one this post addresses.

"Are you suggesting that because an electorate may or may not be intelligent that the civic leaders are therefor just as intelligent as the electorate?"

No, but I am suggesting that a less intelligent population would less intelligent (greater time discounting, etc) policy choices, and that such a population would have a narrower political class from which to choose.

Posted by: Dan tdaxp | Saturday, January 12, 2008

Thanks for the responses.

I have some concerns with your conclusion that most people leaving an area are the more educated.

My initial thought was that the people leaving Cleveland are the same people that have lost their manufacturing jobs. Perhaps leaving a more educated class as well as a less educated service class. After all, Case Western Reserve profesors will remain regardless of auto plants failing.

Anyone have any data on the intelligence levels of illegal immigrants entering the US from Mexico opposed to the intelligence levels of Mexican citizens?

Posted by: J. Kauffman | Saturday, January 12, 2008

J,

"My initial thought was that the people leaving Cleveland are the same people that have lost their manufacturing jobs."

Certainly the manufacturing population will be hard hit. The question is who among them goes, and who among them leaves? Within the manufacturing population there is variability, and those most able (because of higher general intelligence) and most willing (because of higher ambition) would presumably be the ones to leave, leaving behind those less able and less willing.

"Perhaps leaving a more educated class as well as a less educated service class. After all, Case Western Reserve professors will remain regardless of auto plants failing."

A good thought. Certainly more social stratification could result, but I would argue that having a healthy middle class is more important than a two-class society.

"Anyone have any data on the intelligence levels of illegal immigrants entering the US from Mexico opposed to the intelligence levels of Mexican citizens"

A better comparison would be those levels among illegal immigrants v. levels among other Mexicans in the same demographic profile.

Regardless, that the rust belt's depopulation is colored by both race [1] and poverty [2] definitely implies a lowering mean of intelligence.

[1] http://usj.sagepub.com/cgi/reprint/27/3/385.pdf
[2] http://www.springerlink.com/content/f097mk41472133n1/

Posted by: Dan tdaxp | Saturday, January 12, 2008

Your point may be solid but your impression of the situation and grasp of the facts surrounding the situation is off. The banks knowingly made bad loans, as nearly every financial observer of the subprime housing crisis has pointed out. The oversight of the system failed miserably. The system utterly crapped out on this. Any intelligent bank would never have offered loans like that to people, but this is America, and in America (and like a few other parts of the world, like a few Chinese businesses we know) our business class has suffered from an affliction of short-term greed fixation that has rendered them largely stuck on stupid.

Their race had nothing to do with the issue. Neither did geography, considering the crisis has hit towns from Florida to Iowa to Utah. Its about the system of credit failing in a way it never had before, not about a race or group of people. Furthermore, considering all the college-educated (some even with masters) yuppies who were flipping houses and got burned just as bad as these people in Cleveland (especially in cities like Phoenix, Las Vegas, Minneapolis and Miami) that further renders your argument here invalid.

There are compelling observations to make about Cleveland and other rust belt cities. Picking this issue as an example is definitely not one of them, or otherwise my colleague from Canada would not be in the ritzy section of Knoxville, TN buying homes repossessed from rich Americans for half or even less of their value because he has cash money up front.

The damn Canadians are invading and buying up all our property with their superior currency! Cue the nationalist Congressional reaction!

Posted by: Eddie | Saturday, January 12, 2008

Eddie,

Your first paragraph might be rephrased to read "Many large financial institutions extended capital to riskier clients with an expectation, perhaps not borne out, that such actions would lead to greater profitability."

Certianly companies make wise or foolish decisions, and are rewarded or punished by the marketplace for this.

Your second paragraph perhaps is wrong, as the bad efects cluster both by race and geography. Obviously these are intermediate variables.

Your third paragraph is interesting, and reminds me of the shake-out in the Great Depression, when many of the great landed farms were broken up.

On the fourth, Have you noticed that Lou Dobbs has shifted his rhetoric in the last few months, less against India and more against CEO. I think protectionism is heading down-market.

Posted by: Dan tdaxp | Saturday, January 12, 2008

Good post that challenges what we think we know.

Following up on Curzon's post you quoted from, I'd add a few other realities when talking about democracies:
* Democracies are dangerous until they mature. They are unstable elements with participants who may not trust or accept their roles. Look at the birth of the U.S. the strong desire to make Geo. Washington King, the pressures he was under when he left office, as well as the precendent he set.
* Democracies don't trust the people. Look at the debates behind the Constitution, the creation of the House, the Senate, as well as the Electroal College. it amazes me people hold Jefferson in such high regard when he was sure the common folk weren't smart enough to vote for President (among his other oft-forgotten behaviors in France, Hamilton, etc).

Posted by: MountainRunner | Saturday, January 12, 2008

MR, extremely good points!

Posted by: Dan tdaxp | Saturday, January 12, 2008

"The damn Canadians are invading and buying up all our property with their superior currency! Cue the nationalist Congressional reaction!"
I, for one, welcome our new Canadian Overlords and request payment for my dark services in the chance to meet my favorite Canadian musicians:)

Posted by: Michael | Sunday, January 13, 2008

Better watch out -- they don't take kindly to bloggers in Canada [1]

[1] http://tdaxp.blogspirit.com/archive/2008/01/12/canadian-dhimmitude.html

Posted by: Dan tdaxp | Sunday, January 13, 2008

Great, I can hide behind you if they get angry then:)

Posted by: Michael | Sunday, January 13, 2008

Yes us Canadians are just waiting to buy up distressed American assets with our mighty petrodollars - watch out!

On a more serious note - my bet is that immigrants tend to be more adventurous than the norm - The US has had a wonderful inlfux of brave risk taking people.

I wonder what closing the door will do to the US?

On PEI with large farm families, there was only room for one to stay. Many of the smartest Islanders ended up in Boston. The gene pool gets squeezed pretty quickly. Today most Islanders simply have their hand out and hope for the government to look after them. 100 years ago this would have been an anathema here. 15,000 yeoman farms and a society where hard work and grit defined you. No more. Yes there are a few who still have the Island spirit but this is not our culture. Nearly all who go to university leave now - I fear for where we will be.

Posted by: Rob Paterson | Monday, January 14, 2008

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