Confessions of an Economic Hit Man

Economic Hit Man
Hit Man in Amsterdam

While working on yesterday’s post – Why your Nation’s IQ matters more than yours – and while checking my notes that I have on the book Hive Mind by Garett Jones I came upon some eyebrow-raising stuff:

“And that brings us to why countries—high-average-IQ, low-average-IQ, and in-between—might actually want to run up massive international debts: it’s a way to commit to having a strong economy in the future. This may sound absurd, but corporations seem to do this all the time.”

And then the author proceeds to write about financial economist Michael Jensen and his “Nobel-deserving” theory.  This reminded me about the tactics that “economic assassins” use in order to enslave a country with debt. They go in, make exaggerate economic growth projections and based on those inflated growth projections they convince – through one way or another – the leaders of that country to receive loans from the World Bank or IMF (International Monetary Fund). Of course that the projected economic growth doesn’t happen and the country becomes stuck with having to pay interest and to offer other kinds of perks to the “master” such as voting in the UN Council with whatever policy the master says. Note: much of that borrowed money goes back to American companies that build the infrastructure, companies like Bechtel.

These economic hit men have gone to great lengths in order to make those fabricated projections, they hired skilled economists and mathematicians to come up with bogus yet convincing economics:

“I brought a young MIT mathematician, Dr. Nadipuram Prasad, into my department and gave him a budget. Within six months he developed the Markov method for econometric modeling. Together we hammered out a series of technical papers that presented Markov as a revolutionary method for forecasting the impact of infrastructure investment on economic development.” The New Confessions of An Economic Hit Man (John Perkins)

“I thought about the core tools we EHMs used in my day: false economics that included distorted financial analyses, inflated projections, and rigged accounting books; secrecy, deception, threats, bribes, and extortion; false promises that we never intended to honor; and enslavement through debt and fear. These same tools are used today.” The New Confessions of An Economic Hit Man (John Perkins)

If you don’t have much economic education their arguments might be convincing and you might end up being enslaved by debt. Always be skeptic about raising up debt. It’s not only countries and corporations that the bankers are after, it’s you too.

“We use the same tools as you EHMs — on our own folks.” He proceeded to tell me that in recent years bankers had convinced clients to purchase houses that were beyond their means. “A young newlywed couple comes in,” he said, “and asks for a mortgage on a $300,000 home. We convince them to buy a $500,000 one.” He swished the wine in his glass and studied the residue. “We say, ‘You may have to tighten your belt a little, but soon your house will be worth a million dollars.’” He shook his head sadly. “They’ve been told to trust their banker”.”

Don’t trust your banker, he is not your friend.

Reading The New Confessions of An Economic Hit Man  by John Perkins was quite informative and a good reminder of the underlying reality. We tend to get sidetracked with our daily problems and worries, with politics, little wars and cheap entertainment while in the background there is a group of people whose number one preoccupation is to constantly think on how to exploit and make a buck out of you.

Why your Nation’s IQ matters more than your Own

When it comes to the National IQ, nations are not made equal. Let’s see why the IQ of your countrymen is more important than yours.

National IQ
Source: Intelligence: A Unifying Construct for the Social Sciences, Lynn/Vanhanen, 2012

Humans are social animals as a consequence of aeons of evolutionary timeline that favored individuals with group selection bias that cooperated with each other in small communities. The reason that you are afraid to speak in public is because the fear of social rejection is innate. That’s why solitary confinement in prison is the harshest way to punish someone. In a survival context social rejection can equate to low chances of survival. That’s why usually animals gather in packs and organize themselves in a hierarchy, zebras, lions, wildebeests, rhinos, elephants and so on are pack animals – no matter where you stand in the food chain you have a better chance of survival when you belong to a group. The lone wolf is an anomaly and not a common occurrence in nature.

The Greeks used to punish the least desirable elements of their society by voting with shards of pottery called ostrakon – hence the name ostracization – and exiling them for a period of ten years.

Since society is formed by people organized in various types of groups, unless you are living by yourself in a lone cabin somewhere deep in the woods being inspired by Henry David Thoreau or due to some other reason, you are largely depended on your group and peers. You are dependent on their skills, their cognitive abilities, their knowledge, their IQ.

There have been many attempts and thought experiments in order to come up with the ideal, Utopian society like Plato’s Republic or Utopia by Sir Thomas More. Philosophers like Plato also tried to imagine what a less desirable society would be like, he did this in the allegory Ship of fools.

There are no Utopian countries – none that I know of – each have their own strengths and weaknesses, their beauty and their ugliness, their fools and their saints. So, it would be safe to say that countries are ships of fools of various degrees, some have some sort of direction and are heading somewhere, others have captains that are a little bit more deaf and have more infirmity in their sights.

“Fools” with higher IQ’s tend to think in the longer term, tend to have more patience, to have bigger incomes, to save more money. Long term thinking, patience, big income and more savings can lead to a more productive ship:

“The “Ramsey growth model” shows that one way for a nation to get richer is for it to build up a bigger stock of machines and equipment—and the way to build up more machines and equipment is for the average citizen to put more of her paycheck in the bank rather than spend it on consumer goods. That way, the bank has money to lend to businesses, money that can be used to rent offices, buy computers and lab equipment, and keep a business up and running until it starts turning a profit.” from Hive Mind – How Your Nation’s IQ Matters So Much More Than Your Own by Garett Jones

I also wrote a post about the benefit of being a capital-intensive economy rather than a labour-intensive economy.

Not only that you depend on your shipmates cognitive abilities and their decisions determined by them but you also tend to mimic their behavior – imitation is another deep innate human trait. It’s called the Veblen Effect:

“Veblen focused in particular on conspicuous consumption, on buying things that your neighbors can see, and buying items—or perhaps vacations to exotic locales—that demonstrate your social status. Cornell economist Robert Frank and Harvard economist Juliet Schor are modern proponents of the view that consumer spending is socially driven. And both say that our consumer decisions—to consume or to save, to work more hours a week or fewer—are deeply influenced by those around us. Our level of debt, our degree of frugality, our efforts to become prosperous, are all shaped by our environment.” from Hive Mind – How Your Nation’s IQ Matters So Much More Than Your Own by Garett Jones

Higher-IQ individuals have a better ability to understand the minds of others: the Keynesian Beauty Contest.

Higher-IQ individuals tend to be more cooperative: Higher Intelligence Groups Have Higher Cooperation Rates in the Repeated Prisoner’s Dilemma

Groups of people with higher average cognitive skills build governments that are better at creating long term wealth: the Nobel-winning Coase Theorem.

“Informally, we can sum up the Coase Theorem this way: if it’s easy for two or more parties to bargain with each other, they can bargain to an efficient, win-win outcome regardless of which party has the most power going in to the negotiation. Here’s an example of the Coase theorem, perhaps the most common one. A fishery is downstream from a heavily polluting factory; to keep it simple, let’s imagine no one else lives nearby. In a pro-environmentalist country, the fishery would have a right to a clean river, and therefore it could legally shut down the factory. But here’s what makes it a negotiation rather than an edict: in this particular country, the fishery is legally allowed to sell the right to pollute. The factory would pay the fishery, and they’d strike a pollution-permission deal. For the right price, the fishery could let the factory poison the waters a little or a lot. But if polluting more means paying more, the factory will start to look for inexpensive ways to cut back on pollution, not out of kindness, but out of pure greed.” from Hive Mind – How Your Nation’s IQ Matters So Much More Than Your Own by Garett Jones

Informed voters: IQ predicts short-term and long-term memory, people with higher-IQ are more likely to know more facts about more topics including current events.

The O-Ring Theory of teams: cognitive abilities are a good predictor of skills and “small differences in the average skill of workers across countries can cause massive differences in productivity across countries, and why the richest countries tend to produce entirely different goods than the poorest countries.”

There you go, I think that these are sufficient arguments in favor of having lesser “fools” on board your “ship of fools”. The high-seas of uncertainty and chaos have strong currents and unpredictable weather, your success in life and well-being are strongly correlated to the decisions that your shipmates make and their cooperation, so make sure you are on the right boat.