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A Tale of Two Countries

When I was young I've read about Nuremberg trials. What have struck me the most was the apparent lack of guilt on all sides. Everyone was just following orders. Or at least that's what they said. That made me think about whether an atrocity on the scale of holocaust could be committed entirely blamelessly.

If you see a person drowning, I reasoned, and you don't help them you will be blamed and punished. However, if a person is dying due to inability to purchase expensive medication and you don't give them money nobody is going to hold you responsible. So, if you used economics to kill a lot of people it's very unlikely you would end up as a defendant in Nuremberg trials.

The thought experiment I came up with was as follows:

  1. A country is split in two.
  2. New country A adopts strict market-focused policies with high amount of competition, low taxes, high inequality, no safety nets and so on.
  3. New country B adopts leftist policies like aiming for low inequality, robust social safety nets, high taxes.
  4. The people who generate the most wealth start moving from B to A. There are lower taxes there, more career opportunities etc.
  5. People who do not generate much wealth are happy to stay in B. It's a welfare state after all.
  6. In A, on the other hand, people who do not generate much wealth start to be priced out. At some point the only option is to move to B or become homeless.
  7. The wealthy individuals, no need to say, are happy to stay in A.
  8. At some point B doesn't collect enough in taxes to fund its welfare state. It therefore borrows from A.
  9. This goes on for a while until A says enough is enough and demand the debt to be repaid.
  10. B is unable to do so. A thus grabs all the remaining assets in B.
  11. As B's welfare system collapses, people start getting desperate.
  12. To prevent being run over by refugees from B, A builds a fence at the border.
  13. After everyone in B starves to death, A annexes B's territory.

Keep in mind that this is just a thought experiment done in early 1990's. It was not intended to model a specific reality. In fact, for a bunch of reasons I am not going to go into, this cannot be the full picture of what's happening right now. However, try using this narrative as a prism for looking on what's happening around the world today.

Have a look at it from the point of view of someone from West Virginia or whatever the name of the most God forsaken part of your country is. If you lived there this could sound like quite a plausible explanation of what's going on. And, quite understandably, it would make you pretty angry.

It may also shed some light on the separatist and anti-globalization sentiments.

In the poorer countries like Hungary, Poland, Slovakia people may be fed up with all the high-paid people moving to Britain, Switzerland or US rather than spending their money at home. With doctors and nurses moving westward leaving a shortage at home. With low-skilled people having to commute or do seasonal work abroad.

In the richer countries people may not want to sponsor poorer countries whom they may see as parasites living on welfare. I read, for example, that one of the main themes of Catalan separatist movement is the regret for funding the poorer regions of Spain.

After the Brexit vote there was a short-lived campaign to make London independent of the rest of the Britain. Luckily, it have died off, but if it did happen, it would be an excellent illustration of a rich region sucking the surrounding areas dry and then cutting them off.

The narrative may be even more pointed in Russia where not only everyone competent leaves but also large amount of wealth gained from exploiting local natural resources flees the country, e.g. an oil-baron will prefer to buy a flat in Manhattan or a house in London to building a luxurious residence in Norilsk.

People being priced out of Silicon Valley may also sympathize.

It can also explain the corrosion of democratic values that we are seeing nowadays: With intellectual elite being sucked out of poor areas there's a leadership vacuum left behind that is easily filled in by extremists. And if you look at electoral maps they very much support this interpretation.

October 8th, 2017