The not-so-good best case scenario.

Megan McArdle writes on Korean unification:

Consider another, not wholly dissimilar case. In the late 1980s, just before reunification, it is estimated that per-capita gross domestic product in East Germany was approximately 30 percent lower than it was in West Germany. Joining the two countries together temporarily multiplied their disparities. Many of East Germany’s inefficient and pollution-heavy factories were shut down, creating high levels of structural unemployment that were eased only by massive transfers and substantial migration from east to west. The problem was greatly helped by the fact that East Germany’s five states contained only 20 percent of the population of the unified Germany. Nonetheless, by one estimate, the reunification of Germany cost about 1.6 trillion euros — about $2.08 trillion.

But that project looks comparatively simple when you consider the problems that will face South Korea if its North Korean brethren start hankering for a family reunion. North Korea’s per-capita income is among the lowest in the world. South Korea’s is at least 15 times higher. Economically speaking, this is like the United States trying to adopt Haiti — if Haiti were the size of Mexico. North Korea is a country in which the vast majority of people have no access to cars, cell phones, computers, antibiotics or an adequate food supply. How do you integrate 20 million new citizens who basically missed out on the 20th century?

The brutal efficiency of North Korea’s totalitarian regime will make it even harder. Though one hesitates to praise the late-era Soviet Union, it had at least grown beyond the worst excesses of Stalinist control. By all accounts, North Korea has perfected one of the creepiest propaganda states in history. The faith in the superiority of the system — and especially the “Dear Leader” — is so high that a government website actually thought it could get away with claiming that Kim Jong Il did not defecate. It’s tempting to dismiss this as so much propaganda, but many defectors say they genuinely believed what they were told … and were shocked and heartbroken when they started foraging for food in China, and realized that even on the remote farms of Jilin province, dogs were given food like white rice and meat that ordinary Koreans hadn’t seen for years.

The whole article is worth the read. I first learned of it through her blog.

My new favorite word: debacletacular

As in: “I’ve read some version of this lament about Netflix about a thousand times. And indeed, I completely agree that the Qwikster disaster was nothing short of debacletacular.”

Source.

Monday Smorgasbord

I don’t have time to post these by themselves. They’ve been sitting in my “to do” pile for too long, but I find them all to be interesting reads. Read what interests you.

“How to Prevent a Depression” by Nouriel Roubini.

France imposes a “fat tax” on sugary soft drinks to combat obesity.

CNAS publication: “Hard Choices: Responsible Defense in an Age of Austerity,” by LtGen David Barno, Nora Bensahel, and Travis Sharp.

Megan McArdle: “By 2020, cases of throat cancer caused by the human papillomavirus may outnumber those of HPV-caused cervical cancer.”

Hitch on the killing of Anwar al-Awlaki.

Maurizio Viroli: Silvio Berlusconi and the moral malaise of Italy.

“The Value of Values: Soft Power Under Obama” Mark P. Lagon

A debate on whether too many students are in college. (My answer is yes.)

Cliff May, “Autocracies United: Why “reset” with Russia and “engagement” with Iran have failed”

A journalist on the argument for better football helmets, and an economist on the trade-off.

Lot of stuff going on here. Enjoy.

“We may as well try to enjoy it while it lasts.”

China is producing cheap solar panels and essentially subsidizing our green energy. Should we rejoice at the free panels or feel a Sputnik moment for fear of letting this future industry slip away?

Megan McArdle:

But won’t they gain a permanent strategic advantage over us, I hear you cry?

Well, this does sometimes happen. But it’s actually really rare. Notice how all the electronics goods seem to be manufactured in China? Even though we invented many of them (and the Japanese are responsible for a lot of the rest?)  Notice that all the jobs assembling sneakers and looming textiles seem to have moved along with them?  Sure, we had know-how and strategic supplier networks.  But these were no competition for enormously cheap labor.

Green energy will only be the next great industry for us if we are the ones to profit from it. Being the first mover in an industry does not guarantee the profits. Subsidies do, however, guarantee that we pay the R&D costs. Let China continue to subsidize our solar power consumption while we work on advancements in industries in which we have a comparative advantage.

Who Besides Solyndra Got Loan Guarantees?

Megan McArdle explains, with many helpful infographics.

She also explains why the program’s success rate is misleading. Most of the firms receiving the money don’t need the help. They’d succeed with our without it. Those that most need the help – e.g. Solyndra – may fail, but the failure rate is hidden by the “success” of the other loans.

That is, I hope that the infographic will be broadly useful to people who support the program: I figure everyone should be interested to know where the money went.  (And here’s a spreadsheet for those who want to trundle through the data themselves). But I have highlighted what jumped out at me: most of the money has gone to enormous companies that should have no trouble accessing capital.  Established utilities, large multinational auto manufacturers, a global warehouse owner.  The bulk of these funds are not going to rectify some gap in the capital markets.  They’re straight subsidies to huge corporations.  Even some of the smaller firms/deals are owned by large corporations like Total SA.

Giving large, established companies extra-cheap loans to build power plants, run transmission lines, and fix up the roofs of their warehouses is, in the immortal words of P.J. O’Rourke, like paying a Dairy Queen owner to keep his ice cream freezers on.