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Culture War Roundup for the week of December 18, 2023

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Let me simplify a lot of the change in relative incomes.

Big tech platform rents largely flow to the US in terms of jobs, dividends, capital gains, and taxation.

I don’t know how to quantify this but it’s the big difference going on. And Canada was too small of a market to scale big tech so the US was always going to take this market.

Some of the other stuff you say has an effect. It would be nice if someone smarter than me could do all the analytics to quantify the advantage of America being the big tech ecosystem. It’s obviously a big fucking deal for the last 5-10 years of economics.

That can't explain why the US has had such a good recovery from the pandemic while Canada hasn't. Big tech is the only industry that has had mass layoffs while the rest of the US economy has been booming since the pandemic. The increase in wages has mostly gone to low skilled workers.

We didn’t do nearly as much as other places did which makes it far easier to get back to normal functioning.

Why would that mean the GDP growth rate would be higher? I would expect the opposite: if you shut down more of your economy, you get more growth when you start things up again.

Because it still takes some time to get things back up and running. You don’t store materials on hand to ramp back up immediately, and therefore you need to order them, but that company may have shut down as well and has nothing to sell until their suppliers mine the raw materials to use. The problem of shutting down a just-in-time logistics system is that there’s no slack in the system to hold reserves of unsold goods. If I can’t sell it, I won’t make it, and if the guy supply the inputs can’t sell them he won’t have any on hand, and so on. Starting back up takes longer.

Isn’t that just baumol costs disease? Highly paid professionals can afford a lot of service sector people therefore bidding up their price?

I would say there are other factors going on too but big tech rents flow into the US and has been a huge change since 2012.

Commodities also have been mostly down since 2018 which would have a disproportionate effect on Canada.

Canadá likely has higher IQ than the US which actually makes them at 72% of US income even more impressive. Though our top .5% are likely far smarter than their top .5% the overall average likely favors Canada.

Isn’t that just baumol costs disease? Highly paid professionals can afford a lot of service sector people therefore bidding up their price?

That's not what Baumol cost disease is, but in any case, no, service sector workers' wages have gone up while professionals' salaries have not.

Commodities also have been mostly down since 2018 which would have a disproportionate effect on Canada.

That could have something to do with it. The last time our economy really did well was during the 2000s commodity boom.

Big tech profits are still up even if employee wages are less. The money is flowing somewhere.

I greatly doubt this. Tons of middle-American states have much, much higher per capita GDPs than Canada. Nebraska and North Dakota isn't wealthy because of big tech.

It doesn’t matter. There’s an interesting question about why even boring, blue chip, nothing-to-do-with-tech US corporations trade at much higher multiples than similar businesses in other Western countries and in large part it’s because the entire market does, which in turn is because big tech does. The volume of wealth created in San Francisco inevitably trickles down to the rest of the country. Many people in Nebraska still have their pensions / retirement savings in the stock market, and pay even in parts of the US that aren’t booming is affected by the fact that workers can move to the parts that are and make a certain amount, driving up salaries across the board. FAANG software engineer pay really did drive up US engineering pay even for roles unrelated to big tech, which is why American programmers make 3x what their equivalents do in Western Europe even though the US is only ~50% richer. Just as several of the railroad booms in the 19th century lifted all tides, so too did what happened in tech from 2010 onward lead to huge global dollar inflows into the US economy, higher pay, higher consumption and higher growth built on rapidly rising prices for almost every asset class.

How big of a deal is this really? I'd be hard-pressed to figure out how much of America's economic advantage over other nations was due to big tech, but we can compare San Francisco to neighboring cities with less tech. That city does seem more prosperous than the typical Californian city, but not overly so.

It effects fiscal policy capacity too which helps all of America. I’m not saying all of Canadas decline is related to this but some of it.