Saturday, September 16, 2006

Can we learn lessons from history on the source of economic crises?

There are storms gathering over the global economy: geopolitical risks in the War on Terror, large trade imbalances between the major trading nations and threatening demographic change in the developed world and some developing nations such as China. However, there is no clear consensus on when shocks such as a commodity shortage or a stock market reversal will be translated into a crisis. As a result, Desmond Lachman has argued that each economic crisis is uniquely dysfunctional, in Tolstoy’s words, “every unhappy family is unhappy in its own way” and that the lessons we can learn from how past crises have unfolded are limited. I would beg to differ: there are important lessons to be learnt from past crises about how the next crisis might unfold.

A more traditional approach is the Galbraithian view, that capitalism tends to crisis thanks to the greed and irrationality the economic system is based upon. However, there is a third option: that economic crisis is caused not by the economic system’s inherent instability but by institutions designed to manage this instability that cannot adapt to new conditions and wind up turning instability into a crisis.

Galbraith pioneered the classic account of irrational excess as the cause of the Great Depression. The greedy, irrational actors who populate the economic system saw an opportunity to get rich quick in the ever rising stock market and built it up to such a level that a crash was inevitable when their greed turned to fear. This approach has received some empirical support from modern studies by DeLong and Shleifer and Rappoport and White but for various reasons these studies are far from convincing. Studies from McGrattan and Prescott, Sirkin, Nicholas and have all confirmed the view of Irving Fisher before the crash that the 1929 stock market was not, a priori, overvalued and the Friedman and Schwartz analysis that the Depression was caused by Fed policy exacerbating the minor setback of a relatively moderate initial stock market fall. However, the refinement offered more recently is that the reason policy failed in this way was the constraint imposed by the Gold Standard. Ben Bernanke, the new chairman of the Federal Reserve, did an empirical study showing that the sooner a country left the Gold Standard the sooner it recovered from the depression. A rule that had played its part in the stability of the 19th century created a mess in the first half of the 20th.

The other crises of the 20th century had much in common with this story of institutional rigidity. It is impossible to separate the crisis following the 1970s oil shock from the collapse of Bretton Woods. The early 1990s recession in the UK can be connected to the ERM and the collapse of that attempt to fix interest rates. Finally, the Asian Financial Crisis can be related to an outmoded institution of a different kind. Krugman’s analysis of ‘crony capitalism’ is too simplistic. The East Asian economies use of relation based contracting was successful in earlier years when formal rules were costly to enforce. However, the close knit business relationships were a source of bias in the investment decision and created a financial instability that would be exposed with liberalisation of financial markets that was necessary as the East Asian economies developed.

The common thread running through the origins of all these crises is institutions past their sell by date. These institutions are attempts to control the instability that comes with free markets which can have new products or dramatic changes in costs thanks to technology or suffer shortages thanks to political or physical changes. The volatility that emerges from these changes in expectations of the future state of the economy is put down to speculators, to a greed for filthy lucre and is seen as dangerous. Such attempts at control can appear successful. The Gold Standard presided over the long stability of the pre-WWI economy. Fixed exchange rates set under the Bretton Woods system watched over the European Golden Age. However, the source of stability can usually be found elsewhere and the institutions play a supporting role at best: free trade, technological advance and political stability in the case of the 19th century and liberalisation of trade and sensible policy choices encouraged by the Marshall Plan in the European Golden Age. The instability these institutions create in their death is not matched by stability created during their life.

Attempting to form institutions to defend the stability of the global economy often fatally underestimates the ability of the capitalist system to adjust to external shocks. This underestimation can cause wise men of great experience and solid temperament with state power to be far more dangerous to economic stability than any ignorant fool trying to get rich quick but with only the funds he possesses himself or can borrow. It is institutions, whether the Euro or East Asian Currency manipulation, which try to work against rather than with the corrective forces of the market that should be watched for signs of the next economic crisis rather than the more brutally obvious danger of geopolitical stand offs with Iran.

The Death of the Swedish Model

It continues. Earlier this year we had an account from Martin Wolf, summarising a Swedish study, of the costs of the Swedish Model. Now Bronwen Maddox in the Times sums up quite neatly its political unravelling.

The ability of its state to channel the unemployed away from the official numbers has been exposed, bringing double digit unemployment to light. Immigration has hurt the homegeneity that made it possible to run a welfare state without any serious redistribution and has, therefore, complicated the political task of forming a majority. With a homogenous population a welfare state is far less likely to have to prioritise between the interests of different groups and it is, therefore, easier to find a majority in its favour.

Now a right wing party is expected to win power. Its manifesto is for an attack on the Swedish model which will go a significant way towards killing it in its hometown. Even if the current Prime Minister survives and the Social Democratic party limps along in power the political settlement that made allowed such an all encompassing welfare state to survive as long as it did is now shattered.

An important question for Sweden will be how a people long accustomed to the state looking after them will cope as the welfare state's retreat requires a relearning of habits of self reliance that are bound to have atrophied; this Mises Institute study suggests the damage may have been severe.

The Pope on Islam

A good friend of mine has been having something of an exchange with Michael Ledeen and others on the Corner (there are more posts on Alykhan's blog). Essentially their debate is turning on whether the quote chosen by the Pope should necessarily be offensive given its context and source and whether or not it is correct. I think this is kind of missing the point.

The real question has to be why, of all the quotes in the world, the Pope chose to use that one. If I were to look for an example of the religious arguing that the will of God is not subject to reason I would have chosen this one. Of course, that might be a little beneath the Holy Father but surely he could have come up with some other example over the last millenium?

I'm not saying it should be necessary for him to avoid the topic of Islam and violence. I'm not saying that the Muslim world is right to be throwing such a tiz. My best guess is that it is a ridiculous generalisation to call it a religion of peace or war. However, I find the idea that the Pope, when looking for an example of religious people with a dislike of reason, would leap straight to a 14th-15th century quote about Islam and holy war entirely at random ridiculous. This must have been a conscious choice to focus on the provocative question, for the head of the Catholic church more than anyone, of Islam's irrationality as well as his broader topic and it is entirely legitimate for Alykhan to question this choice.

Friday, September 15, 2006

Sailer on War and the West

Steve Sailer has written up a new perspective on the military history and future of the West. I'm not impressed.

"America actually does have a long term strategic rival that is worth worrying about. It's a country with about 18 times the population of Iran and about a standard deviation higher average IQ."

Most likely the West won't lose its preeminence because China is just too strong. I am not as impressed by cultural IQs as Sailer. The two most flattering to Chinese potential, and less methodologically suspect, ways of understanding their future power are population and economic growth. Now, the population gap looks huge if you compare China and the US but that is what I would expect Europe to bring to the mix if there were a genuine civilisational clash. Europe's half a billion people begins to make the numerical odds far better.

As such, China would need incomes a lot closer to the Western norm to be able to rival us for sheer economic power. Here people rely on assumptions that China can maintain its current level of growth for significant lengths of time; it cannot do this and it cannot maintain impressive growth beyond a certain level with the mix of institutions it has now. Grand projections of the future power of the Chinese state should always be taken with a pinch of salt. China is one to watch but it need not necessarily be an enemy and it will not necessarily become remotely as powerful as the West.

"Three years ago the big threat to America was supposed to be Saddam Hussein, but he turned out to be an old man pursuing his literary interests (when he was captured in his hole in the ground, he was reading Dostoevsky's Crime and Punishment) by writing romance novels. So this year, the most dangerous man in the world is supposed to be Iran's newly elected President Borat, who is said to be re-assembling the Persian Empire of Cyrus the Great, mostly, it seems, by running his mouth off nonstop."

Leaving aside the ridiculous in this paragraph, Sailer is working on the assumption that our civilisational defeat is going to happen when the power of the next greatest civilisation exceeds ours. I see no reason to think this will be the case. While there is a strong case, the Ferguson core hypothesis, that Britain's imperial power was spent in war with its most powerful adversaries most great powers are defeated by a steady erosion of their will to defend their interests.

Rome and Constantinople are the classic cases here but others exist in Keegan's selective account of cultures he sees as less martial. All of these nations declined, in Keegan's view, not because they were opposed by a smarter, larger or richer West but because they were peaceable folks not willing to fight the West. If this is the case, the historical analogy holds, and our defeat will not be caused by the strength of our enemies why is the relative strength of our enemies of such concern to Sailer in his assessment of different threats?

The Keegan hypothesis I find equally weak. The Chinese were capable of fighting wars with some spectacular casualty figures throughout their history. Similarly, while the Japanese managed to restrict the drive to more powerful weapons this would seem to be more a matter of a lack of competition between nations and samurai social dominance than any lack of martial instinct. It seems contradictory that in this period people chose to stick to combat 'face to face' with swords because anything else was too brutal whereas earlier in Sailer's extract Keegan's thesis is all about how brutal combat with swords is.

His thesis works if you treat the eras in which empires are created, the Mamelukes, the Mongolians or Early Islam as outsiders and, therefore, to be excluded from an analysis of the cultures themselves. However, that he has excluded the periods in which these empires rose to power emphasises that the less martial cultures were the declining forms of the same cultures which had been deeply violent earlier on. In their rise they were all warrior peoples.

To pretend that the Mongolians, who would become the Yuan dynasty, could not fight a war with European brutality is to ignore the histories that Islamic culture has handed down to us. When the West came to dominate China it dominated a, Manchurian in origin, Qing dynasty which was, itself, no stranger to serious wars in its earlier years when it conquered Han China.

The West's uniqueness is not, then, that it was a martial culture able to dominate those not willing to do so themselves, these fill history. The proper question to be asked is how these martial cultures transition to something more peaceable but fatally vulnerable rather than trying to answer the false question of what we do about an imagined unique characteristic of the West.

Thursday, September 14, 2006

Hillary Benn and the World Bank

I knew it! Hillary Benn, our International Development Secretary, makes himself out to be the good, reformed, Blairite. He knows that being identified as another Bennite dinosaur would mean spending his time in Marxism 2006 conferences opining on how great Scargill was to an audience of smelly old men and Islamists. That's a depressing prospect for an ambitious Benn so he jumped on the centrist bandwagon. Now he appears to be jumping off.

His true colours are coming to the fore: Apparently he finds the idea of us imposing our economic creed on developing countries undemocratic. Of course, this isn't a principle as he's quite happy with IMF conditionality in matters of corruption and good governance but when it comes to privatisation he's threatening to stop a contribution to the World Bank in protest.

There is no principle here. Respecting sovereignty means allowing nations to do what they want with their own citizens and their own money. It doesn't mean we have to throw our own money down a hole because we need to wear democratic blinders to avoid telling the difference between a loan which is going to end up spent on subsidies for the Chad auto industry and one which will get used constructively.

There is a sensible debate to be had over whether or not conditionality needs adjusting to, for example, move more slowly in privatising key industries, my inclination from reading respectable analyses such as the Economist's a year or so ago is that the World Bank does a decent job these days. The Bank has learnt lessons from decades seeing the money it is responsible to us for distributing pissed away on countries without the political will to reform. As far as international development organisations go this is a good one. Reforms which may still be necessary are clearly under discussion and don't need posturing to shunt them along.

What I really hope Hillary Benn will remember, but expect he won't, is the economic history of the Marshall Plan and its role in the European postwar Golden Age. The amount provided by the plan was large but not nearly sufficient to have created growth like was seen in post war Europe. Instead, its role was in encouraging, through conditionality like policy requirements, policy reform and providing the funds to make the process of reform more comfortable in the short term. This is a model the World Bank should and does follow.

World Bank conditionality is an easy target for lazy snipes about democracy from socialists who haven't absorbed the historical experience of what privatisation, Britons should know, and trade liberalisation, all Europeans should remember, can do to improve a country's economic performance.

UKIP and the EU conspiracy meme

The devil is remonstrating with Richard North over at EU referendum about his skepticism of the UKIP. I have two experiences of the UKIP which lead me to suspect they are not up to much:

The First was meeting the then head of their delegation to the London Assembly. The man started by sharing out swedish hairdressing magazines; where he made his money apparently. He then introduced himself with a bizarre story about some tangle with a car which I neither comprehended nor really wanted to. His speech consisted of him sharing his sad memories of the ERM while performing a bizarre hitching procedure with his trousers which made the audience vaguely uncomfortable.

When, after the speech, I suggested to him that a strong pound policy might not have originated in the European Union, the Gold Standard being one case he might want to think about, he stared at me vaguely dumbstruck before letting me know that it had, in fact, been a very hard time for us all.

The Second was at a meeting of a venerable speaking group in which, thanks to letting the audience know I was a Tory, a member of the UKIP told me that it would be legally proper for me to be hanged as I was a part of a party that did not advocate withdrawing from the EU and was a traitor (he said this with a matter of fact calmness which made it sinister if amusing). However, he was happy to tell me that he was a moderate and, as such, would be happy to offer me the option of exile.

What made this doubly amusing was that the substance of his speech was letting us all know that he'd switched to the UKIP because the Liberal Democrats had, fascistically, refused to select him to fight a parliamentary seat thanks to his views on Europe. Fascists, eh?

I have no confidence that the rest of the UKIP is much better; I know of so many others with similar stories to tell. As such, even if I did feel the need to leave the Tories for a single issue party because I cared that much about Europe I'd probably retreat to hermitry before being able to swallow my intellectual pride and join the UKIP.

I don't know Mr Farage personally but I don't really demand brains from my politicians: I demand that they turn up to discussions, that they attack things that are wrong, support things that are right. They do not need brains (fuck me, surely the bunch of useless cunts in Westminster have proven that adequately): that is what policy advisors are for.

Now, this makes sense for a single issue party. If you have no aspirations to government then all you really do need is an attack dog and attack dogs can be stupid if they have sharp teeth. However, this does not appear to be DK's chosen path for the UKIP:

But wouldn't it be better if UKIP could actually get people to see them as a credible party of government, not a protest vote? This is what I shall be dedicating my thinking to over the next two or three years.

If you're a government policy advisors are not enough. MPs will be offered different, and all entirely plausible, policy advice from different advisors and it is up to their intelligence and judgement, and particularly that of their leadership, to choose between these options. While there are some in the current government who do not give the impression of having had an identifiable thought in many years even I can, as an occasionally fierce critic of the government, see plenty of intelligent people in the Labour party. Britain isn't nearly resilient enough to survive a true government of idiots.

The question I have to answer is why, if the UKIP as a party is so moronic, it attracts some supporters, such as DK, who are clearly not. I think this is caused by the same thing that makes the UK's blogosphere somewhat stunted by comparison with the US; the EU conspiracy meme. This meme runs as follows:

'The EU is awful; unremittingly sordid, venal, sinister and dreadful. Most of the public agree with us (cite some public opinion poll which highlights public dissaproval of Europe). However, no one appears to care (same opinion poll has Europe towards the bottom of voter priorities). The media rarely gives prominence to stories of European folly. Therefore, voter apathy about Europe must be fuelled by a media which wants us to stay in Europe and avoids stories which reflect negatively on the European project.'

Some see blogging as the solution to this; bypassing the traditional media to get their message directly to the public. There are at least a dozen, some extremely good, blogs dedicated exclusively to cataloguing what is going wrong in Europe. Others aren't sharp enough to see this option and their rage drives them to become UKIP activists.

However, the truth is that, most likely, neither will find an effective means of tackling public apathy about Europe because it is not born out of ignorance. Rather, it is rational and, like most rational public perceptions, mistakes in either direction average each other out to produce that rational result.

Enthusiasm for expanding our commitment to Europe, in the Liberal Democrat mould, is clearly misguided. Those who signed up to the Euro are now regretting it as it does its part in making a mess of the German economy among others. European regulation on working time does not have public support and is economically stifling as well as plain illiberal. Equally, much of European regulation now is flawed and Britain should be pushing for a rethink where this is the case.

However, the EU is also really not going to come for you in the night. It does involve a sacrifice in sovereignty but so do all international treaty obligations, NATO, the UN etc. Unless you wish to go the Switzerland route this is a difference of degree not principle. Given that it does increase, while far from the perfect free trade animal, free trade within the important market of Europe and leaving would cause a severe institutional disruption there seems no driving need to leave immediately.

Britain has played a diplomatic blinder in Europe. Neither side of the debate on Europe in Britain appears to have absorbed this but most of the Continentals know. While the French were shifting their priorities from maintaining their voting equality with Germany, to building up common foreign policy and defending agricultural subsidies we were focussed, even despite changes in government, on pushing EU expansion. EU expansion has probably killed the dream of ever closer union which was feasible between Germany, France, Belgium and the like but cannot function from Budapest, or further, to London.

It is possible I'm wrong. It is possible that the EU will surprise me with the tenacity of its federalist drive but at the moment the integrationists just sound comical. There seems no particular imperative to deal with the possibility of a superstate sooner rather than later.

Whether or not I am right my view of events is, at least, plausible. It is important to recognise that apathy about something important does not always imply ignorance or conspiracy.

Wednesday, September 13, 2006

What if Permanent Vegetative States aren't so Vegetative?

"The wheels lock, the car skids, you see the 18-wheeler heading for your windshield. You have just enough time to open your mouth. Then the bite of glass and metal, and merciful blackness.

Somebody's talking. You try to open your eyes, but nothing happens. You can't move or feel anything. In the murmurs around you, you make out a few words: prognosis, unresponsive, permanent. They keep talking about somebody who's here, somebody who never speaks and is never spoken to.

A child cries. You've heard that cry before. Out of the blackness, the
thought comes at you, engulfing you: The unspeaking person is you. You're dead. And then a more horrible idea: Maybe you're not.

You try to call out, to scream. No one knows you're here, awake inside your skull. No one will ever know."

I am not sure if there is a more awful fate possible. Surely it would lead to anguish followed by madness. Take the fate of Natascha Kampusch, the poor Austrian girl, and multiply it by something unnatural and you get close to what such a complete cutting off from natural human experience would mean. William Saletan's article for Slate describing the scientific understanding of the discovery that some, rare, cases of permanent vegetative state may be accompanied by a still aware mind must change the debate over 'pulling the plug' and the right to life of those in a Schiavo like state. It would appear that most PVS cases are not of this type. In particular, the more serious cases such as Schiavo are probably genuinely vegative. However, the possibility of it must change the equation, particularly if discovering whether a case of PVS is mentally aware is difficult as this article suggests.

We are all in something of an original position here. A PVS is generally caused by accidents and does not discriminate between wealthy and poor; healthy and unhealthy. Some may have a slighly higher chance of facing such an unenviable position, race car drivers perhaps, but most of us are all in the same boat. We have no idea if we will face a PVS and, if we do, there is the possibility that we will face the position of being entombed in our own heads as we are to wake up if not a lot more likely. That possibility scares me far more than missing out on the vague possibility sometimes cited by right to life advocates that I will wake up.

The debate used to be about heartache and cost to those left behind by people with no hope of revival. It used to be about practicality and allowing someone a dignified death rather than a non-life. Now, we must face the possibility that a vain hope of revival may be consigning the unfortunate to something awful.

Simon Jenkins... again

You know. His opinions aren't exactly original as they add up to the standard lefty line: 'Terrorism isn't the problem it's those neo-cons using it to advance their sinister security industry agenda or foist their American stupidity on us'. The contradictions are not what frustrate me; I have heard the same from many others but something about the god awful preachiness of Simon Jenkins drives me to distraction.

His latest effort, for the Guardian's repository of awfulness over at Comment is Free, is to celebrate a speech from Mr. Cameron that he appears not to have any interest in actually listening to.

"Bush is wrong. My parents endured one life-or-death struggle, against Hitler's fascism, and I grew up during another, against Soviet communism. Both were real threats. When Bush was dodging war service in Vietnam and Tony Blair was a supporter of CND, I had no qualms about backing nuclear deterrence. Foreigners did not just want to conquer my country and change the way I lived, but they had amassed sufficient state power to make that ambition plausible. I call that a threat to the security of the nation. It required massive defence."

Really? So Simon Jenkins believes that Stalin was planning on marching to London? Or Hitler? Both fought or confronted us on foreign fields. While they may have dreamed of invading us on some far distant day our defence against that was the navy. We did not invade Europe on D-Day in order to stop Hitler invading the UK; his Soviet entanglement had made that an unlikely prospect. We invaded because his regime was an evil one, its power hurt our interests and we could release millions from the horrible fate of being under his dominion. It is the lot and fortune of a nation of our power and geographical security to fight wars without the simplicity of an enemy on our doorstep.

The Bush 'dodging war service in Vietnam' bit is the most ridiculous of ad hominems for someone who is not in the army and is not pretending to be a pacifist. I suppose old Simon Jenkins is a veteran of every 20th century war he's supported.

"Putting Osama bin Laden (or Saddam Hussein) in this league is ludicrous. No force they could command could possibly have ranked with Hitler or Stalin as "a threat to the future of civilisation"."

Compare our military casualties in WW2 with our casualties in the War on Terror and it should be apparent that although Al Qaeda et. al. may be less of a threat to us we are also spending far less in our military confrontation of them.

"'the massive [$100bn] homeland security apparatus ... may be persecuting some, spying on many, inconveniencing most and taxing all to defend the United States against an enemy that scarcely exists'."

9/11 was not the only attack that the US or its allies have suffered at the hands of militant Islam. There have been others throughout the world before and after. Scarcely existing is a description that is easy for a commentator but would irresponsible of a leader.

"That Nato members are this week refusing to send more troops to die in Afghanistan is a measure of the gap opening between fine words in the White House and Downing Street and reality on the ground."

That the War on Terror is hard places it within that huge category of thing that are both difficult and necessary.

"The Taliban had bowed to western pressure (and bribery) in 2000-01 and briefly curbed poppy production."

This sentence forms the worst part of Jenkins' case for why the Taliban weren't that bad. Never mind that in terms of repression they were as awful a regime as could be found even before 9/11, the Economist described them as such. They were actively sheltering the bases in which men had trained to attack us. When we went to war with them the war on drugs could wait.

"The west was not threatened when it was notionally "undefended" before 9/11 and is not threatened now. Most western countries are healthy democracies with entrenched liberties, near invulnerable to military attack."

Again, complacency. States that are full of fear are created, not by hysteria as he would have us believe, but by a state which cannot guarantee the security of its citizens. The tired old cliche that citizens have most to fear from their own states ignores the stage before where insecurity undermines faith in that state.

"On Monday the Tory leader, David Cameron, lectured Bush, Blair and his putative successor, Gordon Brown, on moderation. He deplored the naive language of counter-terror and pleaded for more humility and patience in dealing with Muslim states." [..] "For an advocate of the Iraq war this is something of a U-turn. Cameron declared himself a born-again "libcon", a sanitised, semi-demilitarised neocon."

No he didn't. He called for a subtler approach, no doubt, but he also described the need to be able to respond more rapidly than the UN machine allows for, that pre-emptive military action can be necessary, how the avoidance of further attacks has been thanks to our security services and not thanks to the threat always having been in our heads. Cameron's was a call for moderate changes in how we do things not an abandonment of the War on Terror.

"It means cancelling Eurofighters and Trident submarines and investing in
infantry and field armour. It means engaging with Iran rather than threatening
to bomb it."

Earlier in this article Simon Jenkins clearly accepted the need for a nuclear deterrent in the Cold War. Strategic nuclear weapons are not something you turn on and off like a tap. Our deterrent is maintained as part of the long term defence of the United Kingdom against threats of which we are not yet aware. Yet again, he is taking risks acceptable to lazy columnists but not elected officials who must consider our security in the long as well as short term.

Engaging with Iran as a friend will only convince them that they can ignore their commitments and be treated as if they had not. The threat of violence is the stick which can make engagement productive. The surreal idea that we can expect much from engagement alone goes nowhere.

"The stupid party in foreign policy is in retreat. Perhaps, at last, the intelligent party is returning to power."

When an ending is this inspired you know it's been a good column.

Democratic Sharia Law

The New York Sun blog reports the Dutch Justice Minister arguing that it would be undemocratic to dismiss calls for Sharia Law. His case is simple:

"It is a sure certainty for me: if two thirds of all Netherlanders tomorrow would want to introduce Sharia, then this possibility must exist. Could you block this legally? It would also be a scandal to say 'this isn't allowed! "

The majority counts. That is the essence of democracy."
Daniel describes this as demonstrating the need for a constitution which limits democracy and protects the liberty of its citizens. I do not think the case for having a constitution is as clear. If you had a 2/3rds Muslim population who wanted to introduce Sharia law does anyone think a constitution alone could stop them?

Constitutions can delay infringements on liberties; they can act as a rallying point for those trying to defend liberty but they cannot protect individuals or their natural rights. That requires a public willing to defend them and willing to allow minorities their rights. As such, the benefits of a constitution should not be overestimated and may be outweighed by the dangers to democratic decision making posed by an activist judiciary.

A better response to our misguided Dutch friend is that democratic legitimacy is not absolute. Suppose the entire population of the UK were to decide, tomorrow, that Simon Jenkins is a bit of a twunt and they feel the death penalty is appropriate. Would that make the action legitimate? Clearly not.

Democratically choosing madness or tyranny does not make that decision more sane or less tyrannical. Inflicting the repressive overkill of Sharia law on a third of a country who do not want it would be wrong. I would not suggest proscribing it legally through a constitution but making clear to all who will listen that being right is not a numbers game.

Blair's farewell to the TUC

Anne Treneman captures well what I could see of Blair's send off speech from the video on the BBC site. From the collosal lack of warmth in the union farewell to the vague sense that something awful was going to happen when the Prime Minister told us it was "getting warm up here".

The impression it left me with was that, for reasons entirely unknown to the RMT dinosaurs who left at the beginning, Blair really does look like a neocon these days. Irving Kristol, as close to a neocon father figure if ever there was one, described how "[a] neoconservative is just a liberal who got mugged by reality". Blair definitely looked mugged by reality.

Here he was telling his audience in simple language how greater spending was going to have to mean reforms they found uncomfortable if it was to be an effective measure credible with the public; telling them that greater regulation to protect employment could not achieve job security. All he was getting in return was the disaffection of people who didn't like what he was telling them and had never been open minded enough to really listen to what he has had to say. He looked resigned to the fact that his legacy was now in the hands of people for whom his Clause Four moment was an unpleasant memory they could now let go of.

Gordon Brown might succeed in keeping Labour within the boundaries of the sane to the extent that Blair has. However, even if he does keep the faith and hold his nerve to that extent it seems likely that, in the end, he'll be left in the same position as Blair; tired and beaten. What a prospect.

Tuesday, September 12, 2006

Union Trouble

Mr. E. comprehensively fails to hold back the rage in response to the union resistance to private sector involvement in their workplaces. I don't blame him.

I tend to judge British politicians particularly by their stance on the unions. It is like protectionism in the US as a test of whether you are really willing to confront popular, economically irrational, prejudices. It's the reason why I don't have quite the dislike for Livingstone that I once did. It shouldn't take bravery to side against a union striking over a man being fired for getting caught playing squash while off work with an ankle injury but, unfortunately, it does.

It's the reason why the Union Modernisation Fund is, in my opinion, easily the most politically sordid act of this government.

Losing the race to university

Reuters reports that Britain has failed to increase the proportion of its young people at the same rate as other developed countries. While the British rate has increased from 48% to 52% since 1998 the OECD as a whole saw a rise from 40% to 53%. As such, the average has overtaken us.

The economic consequences of this failure, or insufficient success, should not be overstated. Proportions of your population in higher education shows little correlation to economic performance. Porter, in his study of competitive advantage, noted that it was not the total numbers attending university that made the difference to a country's performance but the number and size of those institutions whose reseach was of internationally competitive standards. As such, the OECD's figure has little to do with the variable which is most economically important.

The rationale for expanding the numbers in university is not economic but social. University builds the middle class. When someone has been to university they are equipped with the skills, aspiration and accent that make them able to move in middle class circles without fear. This makes a difference to their earning potential but is sought, and pushed for by parents, for status reasons as much as anything else, I believe. I'm not sure it will be entirely successful; it is far too easy to separate out the new entrants to university education from the others through an innocuous query as to which university they attended.

Despite this it is an entirely decent aspiration which will improve the fortunes and prospects of the young people in question. Even if those from the old guard universities can still identify their own those at the new universities are still broadening their minds, hopefully, gaining some abilities which will serve them well in future and gaining the aspiration to work with their minds rather than with easily replaceable hands. However, these benefits are largely private and do not have the 'public good' implications that increasing national income did and, therefore, undermine the case for publically funding universities.

Daily Kos vs. Free Speech

The Cartman law of television economics, the idea that censorship of television necessarily mushrooms as one censorship justifies more to avoid offending other groups, appears to have been fulfilled. It is now open season. South Park has seen multiple infringements with the censorship of Cartoon Wars, material Scientologists find offensive not repeated or sent to foreign stations and the Catholics getting a South Park episode censored in Australia. This follows the broad failure to emphatically defend the right to free speech of Jyllands-Posten.

Now the Daily Kos's disciples have come pretty close to getting the ABC miniseries The Path to 9/11 censored. Pretty soon television free speech will be limited to that which is utterly bland and uncontroversial or which only offends the precious few with enough principle not to take advantage of the lack of spine being demonstrated by television networks and the lack of resolve shown by our political leadership. Speech will be decidely less free. This post on the Kos made me want to beat the waste of space twunt who wrote it to death with his own lack of principles.

Thankfully this time the Kossacks appear to have failed and alterations have been minor. However, they came way too close to censoring a programme on an important issue just because they think it is wrong.

If the Devil thinks there is no God...

I have read the Devil's Kitchen's post on philosophy, atheism and the scientific method and I agree with the substance, that there is no evidence for a god and that logic therefore dictates not believing he exists any more than we believe that Klingons do.

However, I disagree with his belief that philosophy all ultimately comes down to semantics. I also disagree that agnosticism is necessarily logically weak. First, all philosophy is not semantic. I'll use a few examples from my favourite philosopher at the moment; Nietzsche:

"If we have our own why in life, we shall get along with almost any how. Man does not strive for pleasure; only the Englishman does."

Compare this to the utilitarianism that underlies the political stance exemplified by Layard and his search for popular happiness through security and you'll see more than a semantic difference.

N.B. The reference to the Englishman is, I think, analagous to modern day lamenting at Americans. When Nietzsche wrote we were the economic leaders and people expressed their envy in accusations of excess materialism directed at us.
"The formula of my happiness: a Yes, a No, a straight line, a goal."

The same point restated. Both are from the Twilight of the Idols.

Finally, possibly my favourite passage from any source, anywhere:

"God is dead. God remains dead. And we have killed him. How shall we, murderers of all murderers, console ourselves? That which was the holiest and mightiest of all that the world has yet possessed has bled to death under our knives. Who will wipe this blood off us? With what water could we purify ourselves? What festivals of atonement, what sacred games shall we need to invent? Is not the greatness of this deed too great for us? Must we not ourselves become gods simply to be worthy of it?"

From the Gay Science. The significance of this is worth a discussion that I don't want to linger on in this post but it should be pretty clear that it really isn't getting at semantics. How do we adjust to the effective death of faith that underlies traditional moral codes (with some hints at the answer)?

The death of God marks a fine point to move on to discussing whether agnosticism can be logically justified. I would justify it along the following lines.

If God does not exist then he is dead and it is up to me to come up with my own moral code. To use my own moral and logical senses to look at the world around me and decide what I treasure or despise without the crutch of bibilical scripture promising divine retribution against those who disagree with me.

If God does exist then this conclusion does not change. Firstly, while God may punish me for doing something wrong this can also be done by other figures of authority such as the state and cannot be the basis of morality. Murdering someone is not wrong because I will go to prison or hell for it. Something is not morally wrong because you are punished for it.

The alternative to this may be that we should do what God wills out of gratitude for our creation or his sending Jesus down to Earth to pay for our sins. However, creation is an easy give for the omnipotent and sending your son down to pay for sins that would not be sins but for a moral code that you (God) have yourself created seems mean spirited. For Jesus to be a sacrifice in good faith implies that there must be a moral code independent of God's will.

Finally, and most importantly, if God has created us it would seem that he has troubled himself greatly to provide us with the capacity to make independent moral judgements. If you wanted a follower you would create an ant. I think that if God exists he will think more highly of someone who makes use of the superb mind he gave us rather than someone who merely reads his morals off a cheat sheet.

As such, religion tends to the same nihilism as non-belief and this means that whether or not God exists I face the same freedom and challenge: to form a morality based on what I can see, hear and understand. This means that the existence of God is not a fundamental question for me and I consider myself a committed agnostic.

Monday, September 11, 2006

Input prices fall faster than expected

Falls in oil prices have led to a reduction in the input price pressure which should translate to less inflationary pressure through the supply chain. The conundrum this could pose if house prices continue to rise, and if that rise becomes particularly rapid, is the need to choose between an appropriate interest rate for manufacturing industry which is fragile and has no serious cost pressure and an appropriate rate for an overheating housing market. We've faced this problem before and it rarely goes well. However, on balance I would still be betting on interest rates rising slowly if at all.

The problems we're facing setting an appropriate rate for the different sectors and regions of the UK economy give something of a hint at the nightmare facing someone having to set an appropriate interest rate for Germany and Ireland. Wim Duisenberg wasn't Dim; the European Central Bank faces some awful decisions.

White Sun of the Desert

I've added a link to this oil industry expat's blog on the blogroll. It has recently escaped corporate control and is back to full form. Take a read over some of the older postings to get a flavour for what it has to offer, this account of Syriana's flaws is a good example.

Good old Google

Search Google for OFT investigates supermarkets and the first link you get is me telling you why they shouldn't. Bless.

Sort of an unintentional Google Bomb.

French person dislikes Britain

Apparently another book has been released in France about how awful we Britons are. I wouldn't see this as newsworthy but for what it reveals about the author. I found this particular excerpt telling although the Guardian does not appear to have spotted the irony:

"This makes for boring conversation. People talk only about what they know about"
Indeed. Our lack of 'intellectuals' without any specialist knowledge does mean we have fewer conversations on issues about which we are clueless. The French are fond of pronouncing on all sorts of matters of which they have no knowledge at all; that's the only way economics can still be discussed within the, increasingly, poor old Fifth Republic.

Up to two million terrorists?

The MCB, doing a sterling job of representing its constituents as decent and law abiding, has warned that if the "demonisation" of Muslims continues we could face 2 million homegrown terrorists. He has insulted Muslims far more than any Danish cartoons ever did by implying they are so irrational and violent.

Now, if you were to try and construct an empirical test of this hypothesis you couldn't do much better than a survey of European countries which contained information on the opinions of non-muslims on muslims and vice-versa. You could then see which Muslims were most demonised and compare that figure to how angry they were.

Fortunately, we have just such a survey and it turns out that British Muslims are the most trusted by their non-Muslim counterparts and yet the most angry and dissaproving in return; the MCB could not be more wrong. Perhaps the organisation should stop spending its time publically feeling sorry for itself and do something constructive about extremist Islam in the UK.

Sunday, September 10, 2006

The Cold War on Terror

That the Cold War and the War on Terror are, in fact, different things is one of those annoying truisms that are used by commentators seeking to establish their intellectual subtlety without any need to really think. It rarely adds much to an analysis and is often used for lazy sniping at the Bush administration.

I can see some holes in this particular truism. The Cold War featured a confrontation over Israel and had its main ideological struggle in Europe. In these regards it mirrors the War on Terror. These similarities might prove more useful for further analysis than further noting the differences. After all, ideological defeat in Europe appears to me to have been crucial in demonstrating to the Soviets that they faced an enemy they could not defeat. One nation, no matter how powerful, always looks like a lonely enemy, vulnerable to its own demons. The ideological struggle in Europe might be important in this great confrontation as well: in demonstrating that the Islamists do not fight a single nation, the US, which can be bullied into withdrawing or conceding ground, but an idea of freedom which will not be abandoned.

Interest Rates

With all the excitement of discussing the Global War on Terror I missed that the MPC matched my prediction/recommendation on interest rates. For now interest rates are staying where they are.