Saturday, March 06, 2010
Excellent new American blog
A great new blog for anyone interested in American politics, economics or culture. The American Situation is run by Sean Collins, a fellow spiked contributor and a native New Yorker.
Tuesday, February 23, 2010
"New" economics in America
America’s EF Schumacher Society is transforming itself into the New Economics Institute. The name change seems to at least partly reflect a closer link with Britain’s New Economics Foundation (NEF). Stewart Wallis, the executive director of the NEF, is on the board of the new organisation. Among those involved in the new organisation are Gar Alperovitz (professor at University of Maryland), Bill McKibben (veteran environmental campaigner) and Gus Speth (professor at Yale).
Speth recently gave a lecture in Washington DC on “a new American environmentalism and the new economy”. The main thrust of his argument is that: “we see that the new economy – the prime objective of the new environmentalism – must be about more than green. We need a broader, more inclusive framing of our goal. We need to answer the probing question posed by John de Graaf in his new film: What’s the economy for anyhow? The answer, I believe, is that we should be building what I would call a “sustaining economy” – one that gives top, over-riding priority to sustaining both human and natural communities. It must be an economy where the purpose is to sustain people and the planet, where social justice and cohesion are prized, and where human communities, nature, and democracy all flourish. Its watchword is caring – caring for each other, for the natural world, and for the future. Promoting the transition to such an economy is in fact the mission of the New Economy Network, which I’m now working with many others to build. It will be a broad, welcoming space for all those pursuing diverse paths to these goals.”
Essentially he is giving what I call growth scepticism - with its emphasis on environmental, moral and social limits - a positive spin.
Speth recently gave a lecture in Washington DC on “a new American environmentalism and the new economy”. The main thrust of his argument is that: “we see that the new economy – the prime objective of the new environmentalism – must be about more than green. We need a broader, more inclusive framing of our goal. We need to answer the probing question posed by John de Graaf in his new film: What’s the economy for anyhow? The answer, I believe, is that we should be building what I would call a “sustaining economy” – one that gives top, over-riding priority to sustaining both human and natural communities. It must be an economy where the purpose is to sustain people and the planet, where social justice and cohesion are prized, and where human communities, nature, and democracy all flourish. Its watchword is caring – caring for each other, for the natural world, and for the future. Promoting the transition to such an economy is in fact the mission of the New Economy Network, which I’m now working with many others to build. It will be a broad, welcoming space for all those pursuing diverse paths to these goals.”
Essentially he is giving what I call growth scepticism - with its emphasis on environmental, moral and social limits - a positive spin.
Labels: America, economics, environment
Sunday, February 14, 2010
Disdain for the fat in fiction
I have argued for several years that one reason for the popular obsession with obesity is its symbolic value (see my 2005 essay on “Why people hate fat Americans” on the left hand bar). Human fat is the most visible manifestation of a society which the growth sceptics see as plagued by over-consumption. That in turn helps explain why overweight and obese people are so often looked down on with disdain.
An article by Beth Carswell on the Abe Books website looks at the portrayal of fat people in fiction. As she argues: “If a character is fat, it's a struggle for them, and often the central theme of the book. It often goes hand-in-hand with unflattering character traits, such as laziness, sloppiness or greed.”
An article by Beth Carswell on the Abe Books website looks at the portrayal of fat people in fiction. As she argues: “If a character is fat, it's a struggle for them, and often the central theme of the book. It often goes hand-in-hand with unflattering character traits, such as laziness, sloppiness or greed.”
Labels: America, consumption, health, obesity
Monday, February 08, 2010
Obsession with China masks West’s inertia
This is my comment from this week’s Fund Strategy.
It is easy to become so focused on someone else’s problems that you fail to grapple with your own. That is a lesson that the West’s leaders, fixated with China, would do well to learn.
No doubt China has its faults. It is arguably keeping its currency artificially low to help bolster its exports. But western leaders are too eager to scapegoat China for their own failings. America and Britain would have a weak export sector even if their trade with China was in balance. Both Anglo-Saxon economies have suffered a long period of deindustrialisation. Nor are the spats restricted to economics. America has got into rows with China recently over the Copenhagen climate summit, the Dalai Lama, Google, Iran and Taiwan arms sales. These disputes are happening against a backdrop of a western debate over how best to respond China’s rise. It is the cover story of this week’s Economist and the theme of a new book by Anatole Kaletsky, an economics commentator on The Times (London).
There are two key reasons why this obsession with China is unhealthy. First, there is a danger that the conflict between the West and China will spill out of control. Given the importance of China in the world economy this risk is particularly worrying. China is already retaliating against punitive measures by the West. Last week it announced anti-dumping duties on American chicken imports in a response to American tariffs on Chinese steel. But, even more important, the verbal assault on China is a distraction from the West sorting out its domestic economic problems. If the western economies are restructured the main motivation should not be to compete more effectively against China. More likely, though, the West will do little restructuring at all rather than tackle the formidable challenge of its domestic weaknesses.
Western economic debate focuses on the relatively easy questions rather than the hard ones. It is obsessed with the correct monetary and fiscal policy to help offset the immediate impact of the economic downturn. But long-term structural weaknesses get scant attention.
Last week’s Green Budget from the Institute for Fiscal Studies and Barclays Wealth gave some idea of the scale of the problem. It estimated that Britain’s trend rate of growth was only 1.75% rather than the 2.75% the Treasury assumes. Although one percentage point might not sound a lot it makes a huge difference when compounded over several years.
Western leaders should stop fretting over China and tackle their domestic weaknesses.
It is easy to become so focused on someone else’s problems that you fail to grapple with your own. That is a lesson that the West’s leaders, fixated with China, would do well to learn.
No doubt China has its faults. It is arguably keeping its currency artificially low to help bolster its exports. But western leaders are too eager to scapegoat China for their own failings. America and Britain would have a weak export sector even if their trade with China was in balance. Both Anglo-Saxon economies have suffered a long period of deindustrialisation. Nor are the spats restricted to economics. America has got into rows with China recently over the Copenhagen climate summit, the Dalai Lama, Google, Iran and Taiwan arms sales. These disputes are happening against a backdrop of a western debate over how best to respond China’s rise. It is the cover story of this week’s Economist and the theme of a new book by Anatole Kaletsky, an economics commentator on The Times (London).
There are two key reasons why this obsession with China is unhealthy. First, there is a danger that the conflict between the West and China will spill out of control. Given the importance of China in the world economy this risk is particularly worrying. China is already retaliating against punitive measures by the West. Last week it announced anti-dumping duties on American chicken imports in a response to American tariffs on Chinese steel. But, even more important, the verbal assault on China is a distraction from the West sorting out its domestic economic problems. If the western economies are restructured the main motivation should not be to compete more effectively against China. More likely, though, the West will do little restructuring at all rather than tackle the formidable challenge of its domestic weaknesses.
Western economic debate focuses on the relatively easy questions rather than the hard ones. It is obsessed with the correct monetary and fiscal policy to help offset the immediate impact of the economic downturn. But long-term structural weaknesses get scant attention.
Last week’s Green Budget from the Institute for Fiscal Studies and Barclays Wealth gave some idea of the scale of the problem. It estimated that Britain’s trend rate of growth was only 1.75% rather than the 2.75% the Treasury assumes. Although one percentage point might not sound a lot it makes a huge difference when compounded over several years.
Western leaders should stop fretting over China and tackle their domestic weaknesses.
Labels: America, china, economics, Fund Strategy, trade
Monday, February 01, 2010
Rules will not quell economic troubles
This is my comment from this week’s Fund Strategy.
A lesson that should have been learned from the economic crisis is that there are severe limits to the efficacy of rules and regulations.
Although rules have their place they cannot quell problems if the underlying troubles are sufficiently bad. Indeed over-regulation can make matters worse.
Barack Obama’s plan to add additional restrictions to the size and activities of banks shows he is either unaware of the limitations of rules or choosing to ignore them. It is hard to see how his proposed regulations could quell any financial crisis. For example, they do not cover “non-bank” financial institutions–a category which included AIG, Bear Stearns, Lehman Brothers and Merrill Lynch. Nor do they have any impact on the likelihood of bail-outs.
Fixation with regulation is not unique to America. It is easy to forget that until a couple of years ago New Labour was boasting about its two fiscal rules. These were meant to a way of stifling any return to the bad old days of boom and bust.
In the event both rules were busted. The Sustainable Investment Rule stipulated government debt should be set at a “prudent level”. This was taken to mean below 40% of GDP. Yet according to the latest pre-budget report the net debt of the public sector will be 55.6% this year and will exceed 75% for several years in a row.
No doubt the government would claim the rules needed to be breached because of the global recession, just as it explains away the return to bust. But it was the government’s fault that the economy remained so heavily dependent on financial services rather than becoming more diversified. In any case Britain’s performance in the downturn is among the worst of the developed countries.
What the breaking of the rules really shows is that Britain’s fiscal framework, supposedly so clever, had little effect. When economic troubles emerged the rules were swept aside.
A similar failure is apparent in the European Union’s stability and growth pact. Under these rules annual budget deficits were supposed to be no higher than 3% of GDP and national debt was meant to be lower than 60% of GDP. Yet many governments have breached these levels.
Rather than obsess over devising more rules and regulations it is time for governments to pursue a different approach. The sooner they start promoting economic dynamism the better able they will be to cope with any challenges ahead.
A lesson that should have been learned from the economic crisis is that there are severe limits to the efficacy of rules and regulations.
Although rules have their place they cannot quell problems if the underlying troubles are sufficiently bad. Indeed over-regulation can make matters worse.
Barack Obama’s plan to add additional restrictions to the size and activities of banks shows he is either unaware of the limitations of rules or choosing to ignore them. It is hard to see how his proposed regulations could quell any financial crisis. For example, they do not cover “non-bank” financial institutions–a category which included AIG, Bear Stearns, Lehman Brothers and Merrill Lynch. Nor do they have any impact on the likelihood of bail-outs.
Fixation with regulation is not unique to America. It is easy to forget that until a couple of years ago New Labour was boasting about its two fiscal rules. These were meant to a way of stifling any return to the bad old days of boom and bust.
In the event both rules were busted. The Sustainable Investment Rule stipulated government debt should be set at a “prudent level”. This was taken to mean below 40% of GDP. Yet according to the latest pre-budget report the net debt of the public sector will be 55.6% this year and will exceed 75% for several years in a row.
No doubt the government would claim the rules needed to be breached because of the global recession, just as it explains away the return to bust. But it was the government’s fault that the economy remained so heavily dependent on financial services rather than becoming more diversified. In any case Britain’s performance in the downturn is among the worst of the developed countries.
What the breaking of the rules really shows is that Britain’s fiscal framework, supposedly so clever, had little effect. When economic troubles emerged the rules were swept aside.
A similar failure is apparent in the European Union’s stability and growth pact. Under these rules annual budget deficits were supposed to be no higher than 3% of GDP and national debt was meant to be lower than 60% of GDP. Yet many governments have breached these levels.
Rather than obsess over devising more rules and regulations it is time for governments to pursue a different approach. The sooner they start promoting economic dynamism the better able they will be to cope with any challenges ahead.
Labels: America, economics, Europe, finance, Fund Strategy
Saturday, January 09, 2010
American development policy
Those interested in American development policy should read the recent speech (PDF) by Hillary Clinton, the secretary of state, on the subject. Although the significance of various concepts has to be decoded she made six main points:
* Development should be based on partnership not patronage. This seems to mean that poorer countries should strive for good governance and root out corruption. Although she did not say this it seems to suggest more western interference in the running of poorer countries.
* Development should be integrated more closely with defence and diplomacy. This suggests America is more concerned with threats to its own social cohesion than development as a good in itself.
* Improving coordination of America’s development efforts across different agencies.
* Focusing on key areas such as agriculture, education, energy, health and local governance.
* Investing in innovation. In addition to technology this apparently includes microfinance.
* Focusing more on women and girls.
She also pointed out the Obama administration is in the middle of two reviews of its development policy.
* Development should be based on partnership not patronage. This seems to mean that poorer countries should strive for good governance and root out corruption. Although she did not say this it seems to suggest more western interference in the running of poorer countries.
* Development should be integrated more closely with defence and diplomacy. This suggests America is more concerned with threats to its own social cohesion than development as a good in itself.
* Improving coordination of America’s development efforts across different agencies.
* Focusing on key areas such as agriculture, education, energy, health and local governance.
* Investing in innovation. In addition to technology this apparently includes microfinance.
* Focusing more on women and girls.
She also pointed out the Obama administration is in the middle of two reviews of its development policy.
Labels: America, corruption, development, health, science
Monday, December 14, 2009
Obama called for growth sacrifice
Barack Obama argued during the presidential campaign that some economic growth should be sacrificed for fairness according to this blog post on the Forbes website. The remarks were evidently made last year during an interview with Charlie Gibson of ABC news. Unfortunately I cannot find an original source to verify this claim.
Labels: America, growth, inequality, Obama
Tuesday, December 08, 2009
German magazine backtracks on Obama
Der Spiegel, a leading German newsmagazine, has recanted three weeks after attacking Barack Obama’s record on climate change (see 17 November post). According to an editorial by Thomas Kleine-Brockhoff argues: “Obama has done all that a single person can possibly do. He has become the greenest president his country has ever seen.” However, it maintains more general criticisms of Americans including conservative unions and companies which see the burning of fossil fuels as key to profits.
Labels: America, climate, environment, Germany, Obama
Sunday, December 06, 2009
Warhol's art of plenty
Andy Warhol’s paintings of Campbell soup cans are among the most widely recognised images of American pop art. But I had not thought about their symbolic value until a read a review in yesterday’s Financial Times by Jackie Wullschlager of several books on him. She makes the point that:
“His Campbell soup cans and Coke bottles speak a vernacular language anyone can understand; like Joseph Beuys’ fat and felt, they resonated too with widespread memories of cold and hunger for a postwar generation. Their repetition, and Warhol’s obsession with working in series, are not just formal devices – though they were a slap against the individualism of abstract expressionism – but emblems of political equality. As a child, face pressed to the windows of downtown stores packed with desirable, unaffordable products, Warhol had known real want: here were his dreams of assembly-line plenty and security.”
“His Campbell soup cans and Coke bottles speak a vernacular language anyone can understand; like Joseph Beuys’ fat and felt, they resonated too with widespread memories of cold and hunger for a postwar generation. Their repetition, and Warhol’s obsession with working in series, are not just formal devices – though they were a slap against the individualism of abstract expressionism – but emblems of political equality. As a child, face pressed to the windows of downtown stores packed with desirable, unaffordable products, Warhol had known real want: here were his dreams of assembly-line plenty and security.”
Labels: America, consumption, growth, progress
Thursday, November 26, 2009
Happy Thanksgiving
I have never been in America at Thanksgiving time but it seems to me that celebrating prosperity is an excellent idea. In that context this article from the Washington Post by Ezra Klein probably qualifies as the saddest article of the year. He argues for people to follow economic principles so they can limit their food intake.
Labels: America, consumption, food
American health improving
The Wall Street Journal has run a piece by Melinda Beck giving lots of examples of how the health of Americans is generally improving. I do not agree with all of her points – for example I oppose bans on public smoking – but the piece is worth reading.
Labels: America, health, progress
Thursday, November 19, 2009
Hunger in America
An article in USA Today reports on a Department of Agriculture study which estimates that one in six Americans – 49m people – went hungry at some point in 2008. The newspaper goes on to say that: “17 million people in the U.S. went hungry or did not eat regularly for a few days of each month over seven or eight months last year.”
Labels: America, consumption, food
Wednesday, November 18, 2009
Californian greens stunt economic growth
Joel Kotkin, writing in Forbes, argues that middle-aged “progressives” in northern California are stunting economic growth at the expense of the working class and largely Hispanic population.
Thanks to Sean Collins for the link.
Thanks to Sean Collins for the link.
Labels: America, environment
Tuesday, November 17, 2009
German attack on Obama and Americans
Christian Schwägerl, writing an opinion piece in Der Spiegel, exhibits a strident moral superiority when criticising Barack Obama’s rejection of accepting binding limits on carbon emissions at the forthcoming Copenhagen summit. Schwägerl makes the worst possible criticism he can of Obama – likening him to George W Bush:
“Barack Obama cast himself as a ‘citizen of the world’ when he delivered his well-received campaign speech in Berlin in the summer of 2008. But the US president has now betrayed this claim. In his Berlin speech, he was dishonest with Europe. Since then, Obama has neglected the single most important issue for an American president who likes to imagine himself as a world citizen, namely his country's addiction to fossil fuels and the risks of unchecked climate change.”
He then goes on to make a sweeping attack on Americans for being parochial:
“For most Americans, the world beyond the US's borders is nothing more than an irritating nuisance. Hence arguments based on appeals about drowning Bangladeshis, starving Africans and flooded islands in Indonesia have little effect. In Hollywood, the United States has an industry that continually pushes the materialistic ideal of Western prosperity to billions of people around the world, while at the same time bombarding them with apocalyptic visions in the form of disaster movies.”
Perhaps Schwägerl should interrogate his own ideas before making such sweeping attacks on others. There is good reason to question whether climate change is the most important issue facing humanity. And in his own way Schwägerl betrays a parochial outlook. He should ask himself why countries – including Germany - find it much easier to make pious statements about climate change than to actually cut emissions.
“Barack Obama cast himself as a ‘citizen of the world’ when he delivered his well-received campaign speech in Berlin in the summer of 2008. But the US president has now betrayed this claim. In his Berlin speech, he was dishonest with Europe. Since then, Obama has neglected the single most important issue for an American president who likes to imagine himself as a world citizen, namely his country's addiction to fossil fuels and the risks of unchecked climate change.”
He then goes on to make a sweeping attack on Americans for being parochial:
“For most Americans, the world beyond the US's borders is nothing more than an irritating nuisance. Hence arguments based on appeals about drowning Bangladeshis, starving Africans and flooded islands in Indonesia have little effect. In Hollywood, the United States has an industry that continually pushes the materialistic ideal of Western prosperity to billions of people around the world, while at the same time bombarding them with apocalyptic visions in the form of disaster movies.”
Perhaps Schwägerl should interrogate his own ideas before making such sweeping attacks on others. There is good reason to question whether climate change is the most important issue facing humanity. And in his own way Schwägerl betrays a parochial outlook. He should ask himself why countries – including Germany - find it much easier to make pious statements about climate change than to actually cut emissions.
Labels: America, climate, Germany
Thursday, November 05, 2009
Back in action
After a three week break I am getting back into blogging. Once I receive comments from my publisher I also will have to rewrite my book manuscript by the end of the month.
So far the links I have found are as follows. If you think I have missed anything particularly important while I have been away please email me.
* I was particularly said to miss this year’s Battle of Ideas festival in London. However, several sessions, including one on post-recession ideologies, are already available on audio. Others will hopefully soon follow on video. Rob Killick has also written up his speech on economic growth and its discontents.
* Worldwrite’s regular Worldbytes television magazine programme includes an item on austerity and the alleged lesions of the Second World War.
* Al Gore is in the news a lot with a new book coming out entitled Our Choice: A Plan to Solve the Climate Crisis. He is also the subject of the cover story in this week’s Newsweek while a New York Times article examines the possible conflict of interest between Gore as an investor and as an advocate for action on climate change.
* Angela Merkel, the German chancellor, made much of the battle against climate change in her address to the American congress.
* Meanwhile, the implication of this BBC article and the related radio programme is that nostalgia for East German values is a form that growth scepticism is taking in Germany. I am not sure this is correct but it is certainly worth investigating.
So far the links I have found are as follows. If you think I have missed anything particularly important while I have been away please email me.
* I was particularly said to miss this year’s Battle of Ideas festival in London. However, several sessions, including one on post-recession ideologies, are already available on audio. Others will hopefully soon follow on video. Rob Killick has also written up his speech on economic growth and its discontents.
* Worldwrite’s regular Worldbytes television magazine programme includes an item on austerity and the alleged lesions of the Second World War.
* Al Gore is in the news a lot with a new book coming out entitled Our Choice: A Plan to Solve the Climate Crisis. He is also the subject of the cover story in this week’s Newsweek while a New York Times article examines the possible conflict of interest between Gore as an investor and as an advocate for action on climate change.
* Angela Merkel, the German chancellor, made much of the battle against climate change in her address to the American congress.
* Meanwhile, the implication of this BBC article and the related radio programme is that nostalgia for East German values is a form that growth scepticism is taking in Germany. I am not sure this is correct but it is certainly worth investigating.
Labels: America, book, climate, environment, Germany, radio, television, Worldwrite
Tuesday, October 13, 2009
Inconspicuous consumption
James Surowiecki, writing in the New Yorker (12 October), argues that the recession has not changed American consumption habits as much as many pundits are assuming. His article concludes:
“But the evidence for a radical shift in the way we consume seems more like the product of wishful thinking (there’s a palpable longing among pundits for Americans to become more frugal) than anything else. In many categories, spending has dropped only slightly, if at all. And, while these are very tough times for retailers who believed that spending could only go up, retail sales rose briskly in August. Before we go proclaiming this the age of the American tightwad, a little perspective is in order. Even after the worst recession of the past seventy years, retail sales this year will be about where they were in 2005. Does anyone really think that four years ago Americans were misers?”
“But the evidence for a radical shift in the way we consume seems more like the product of wishful thinking (there’s a palpable longing among pundits for Americans to become more frugal) than anything else. In many categories, spending has dropped only slightly, if at all. And, while these are very tough times for retailers who believed that spending could only go up, retail sales rose briskly in August. Before we go proclaiming this the age of the American tightwad, a little perspective is in order. Even after the worst recession of the past seventy years, retail sales this year will be about where they were in 2005. Does anyone really think that four years ago Americans were misers?”
Labels: America, consumption
Monday, September 21, 2009
Cooperation breakdown risk
This is my comment from this week’s Fund Strategy.
No doubt the G20 summit of world leaders in Pittsburgh will come out with a pious declaration about the need for international cooperation. Most likely too it will blame the bankers for the economic crisis of the past year. But it will skirt over some of the key tensions that are emerging in the global economy.
On this side of the Atlantic last week we saw a spat between Britain and Germany over the fate of General Motors’ former subsidiaries in Europe. Lord Mandelson asked the European Union to ensure that German subsidies for Opel do not start a “subsidy war”. London fears that such subsidies might convince Magna, the new Canadian owner of the former GM businesses, to sacrifice Vauxhall for the sake of Opel.
Meanwhile, China reacted angrily to Barack Obama’s decision to impose a 35% tariff on the imports of vehicle tyres. Strangely, the president argued that such a tariff would somehow lead to more trade rather than less.
At the G20 summit itself America and Europe are evidently planning to lead a drive to reduce global imbalances. But China, with some justification, seems to be assuming it will come under pressure as a result of this initiative.
These spats point to two competing trends in the global economy. On the one hand, countries benefit from international cooperation. On the other, the economic downturn is intensifying competitive pressures between countries.
Cooperation is immensely beneficial because it strengthens the resilience of the global economy. If one country gets into trouble it can be bailed out by others. International organisations could also play a role in ensuring the global economy runs smoothly.
But the economic downturn puts such cooperation under threat. It increases the pressure on countries to take unilateral action to defend their narrow sectional interests. Such measures, including tariffs and subsidies, threaten retaliation by other parties.
Ultimately the result could be a total breakdown of international relations. In essence that is what happened in the build-up to the second world war. Economic tensions gradually morphed into political and military ones.
Mercifully, the world is a long way from a global war. International cooperation remains broadly intact despite growing tensions around the edges.
But the robustness of such cooperation remains one of the great unanswered questions of the economic downturn.
Despite the earnest statements at forums such as the G20, the world’s leaders are at the same time undermining global cooperation.
Violations of free trade or state subsidies for investment may not be large in themselves but they create a dangerous precedent. If international cooperation cannot be maintained the price will be high.
No doubt the G20 summit of world leaders in Pittsburgh will come out with a pious declaration about the need for international cooperation. Most likely too it will blame the bankers for the economic crisis of the past year. But it will skirt over some of the key tensions that are emerging in the global economy.
On this side of the Atlantic last week we saw a spat between Britain and Germany over the fate of General Motors’ former subsidiaries in Europe. Lord Mandelson asked the European Union to ensure that German subsidies for Opel do not start a “subsidy war”. London fears that such subsidies might convince Magna, the new Canadian owner of the former GM businesses, to sacrifice Vauxhall for the sake of Opel.
Meanwhile, China reacted angrily to Barack Obama’s decision to impose a 35% tariff on the imports of vehicle tyres. Strangely, the president argued that such a tariff would somehow lead to more trade rather than less.
At the G20 summit itself America and Europe are evidently planning to lead a drive to reduce global imbalances. But China, with some justification, seems to be assuming it will come under pressure as a result of this initiative.
These spats point to two competing trends in the global economy. On the one hand, countries benefit from international cooperation. On the other, the economic downturn is intensifying competitive pressures between countries.
Cooperation is immensely beneficial because it strengthens the resilience of the global economy. If one country gets into trouble it can be bailed out by others. International organisations could also play a role in ensuring the global economy runs smoothly.
But the economic downturn puts such cooperation under threat. It increases the pressure on countries to take unilateral action to defend their narrow sectional interests. Such measures, including tariffs and subsidies, threaten retaliation by other parties.
Ultimately the result could be a total breakdown of international relations. In essence that is what happened in the build-up to the second world war. Economic tensions gradually morphed into political and military ones.
Mercifully, the world is a long way from a global war. International cooperation remains broadly intact despite growing tensions around the edges.
But the robustness of such cooperation remains one of the great unanswered questions of the economic downturn.
Despite the earnest statements at forums such as the G20, the world’s leaders are at the same time undermining global cooperation.
Violations of free trade or state subsidies for investment may not be large in themselves but they create a dangerous precedent. If international cooperation cannot be maintained the price will be high.
Labels: America, china, economics, Germany, trade
Sunday, September 13, 2009
"Responsible" cosumption in America
An interesting article in Time magazine on what it calls “a responsibility revolution” among American consumers. After describing how companies, even including Walmart, are becoming more “responsible” it goes on to discuss the attitudes of American consumers.
“Our poll found Americans divided pretty evenly into three categories we're calling the Responsibles, the Toe Dippers and the Skeptics. The Toe Dippers embrace some of the ideas of responsible consuming but don't act on many of them, while the Skeptics just think [Milton] Friedman was right.
“The Responsibles, however, are in the vanguard and represent 38% of Americans 18 and older, or about 86 million people. They are more likely than Toe Dippers or Skeptics to be female, married, African American and college-educated. They tend to be well-off but not wealthy, and they have done many things that people in the other groups haven't, such as buying a household appliance on the basis of its energy rating or a product because they like the values of the company that made it. While they are particularly concerned about the environment, they are much more willing than the others to pay more in federal taxes to deal with social issues like universal health care. They do not fit neatly into any political category: a third are liberal, 37% are conservative, and 28% are moderate. They are younger than the Skeptics and more diverse and look more like what America will look like in 20 or 30 years.”
It is interesting that the “responsibles” are apparently largely middle class and roughly evenly split between liberals and conservatives. It is also noteworthy that the “toe dippers” constitute a significant category.
The article is accompanied by an interview with Barack and Michelle Obama in which the president welcomes the trend towards “responsibility”:
“Well, I think this is a positive thing, and it speaks to something we've tried to express during the campaign — Washington hasn't quite caught up to it yet — and that is that a traditional argument was between those who thought government could do everything and those who thought government shouldn't do anything. And even the way you framed the description spoke a little to that old paradigm: liberal, moderate, conservative. My sense is what people are looking for now is a sense of responsibility and intentionality, in that your actions have consequences, and we want our government to be responsible.”
“Our poll found Americans divided pretty evenly into three categories we're calling the Responsibles, the Toe Dippers and the Skeptics. The Toe Dippers embrace some of the ideas of responsible consuming but don't act on many of them, while the Skeptics just think [Milton] Friedman was right.
“The Responsibles, however, are in the vanguard and represent 38% of Americans 18 and older, or about 86 million people. They are more likely than Toe Dippers or Skeptics to be female, married, African American and college-educated. They tend to be well-off but not wealthy, and they have done many things that people in the other groups haven't, such as buying a household appliance on the basis of its energy rating or a product because they like the values of the company that made it. While they are particularly concerned about the environment, they are much more willing than the others to pay more in federal taxes to deal with social issues like universal health care. They do not fit neatly into any political category: a third are liberal, 37% are conservative, and 28% are moderate. They are younger than the Skeptics and more diverse and look more like what America will look like in 20 or 30 years.”
It is interesting that the “responsibles” are apparently largely middle class and roughly evenly split between liberals and conservatives. It is also noteworthy that the “toe dippers” constitute a significant category.
The article is accompanied by an interview with Barack and Michelle Obama in which the president welcomes the trend towards “responsibility”:
“Well, I think this is a positive thing, and it speaks to something we've tried to express during the campaign — Washington hasn't quite caught up to it yet — and that is that a traditional argument was between those who thought government could do everything and those who thought government shouldn't do anything. And even the way you framed the description spoke a little to that old paradigm: liberal, moderate, conservative. My sense is what people are looking for now is a sense of responsibility and intentionality, in that your actions have consequences, and we want our government to be responsible.”
Labels: America, consumption, corporations, ethics, Obama
Sunday, September 06, 2009
Obama green adviser resigns
It is hard to work out what to make of the resignation of Van Jones as Barack Obama’s adviser on green jobs. In my Fund Strategy cover story of 2 March I described Jones as a key intellectual influence on the drive to implement a green new deal. This followed some flattering portraits of him in the media as a black community activist and environmentalist (see 18 January 2009 post). But since I wrote my cover story he has been appointed to the Obama administration and now resigned from this position.
Jones resigned after it emerged he had called Republicans “assholes” and signed a petition suggesting the federal government was involved in the 11 September attacks. But it seems likely that the Obama administration is terrified of being connected with any opinions seen as outside the respectable mainstream. However, the extreme fear-mongering and Malthusianism of the likes of John Holdren, his chief science adviser, apparently remain perfectly acceptable (see 14 August 2009 post).
Jones resigned after it emerged he had called Republicans “assholes” and signed a petition suggesting the federal government was involved in the 11 September attacks. But it seems likely that the Obama administration is terrified of being connected with any opinions seen as outside the respectable mainstream. However, the extreme fear-mongering and Malthusianism of the likes of John Holdren, his chief science adviser, apparently remain perfectly acceptable (see 14 August 2009 post).
Labels: America, environment, Obama
Friday, August 14, 2009
Obama adviser favoured forced abortions
According to an article on Fox News John Holdren, President Obama’s science adviser and an arch Malthusian, favoured forced abortions and sterlisations as means to curb population growth. The proposals came in a 1977 book in co-wrote with Paul and Anne Ehrlich on “Eco Science”.
The article even reproduces several pages from the book to support its case. For more on Holdren’s Malthusianism see posts of 19 March 2009 and 25 April 2009.
The article even reproduces several pages from the book to support its case. For more on Holdren’s Malthusianism see posts of 19 March 2009 and 25 April 2009.
Sunday, July 26, 2009
Mental
The way things are going it looks like it will not be long before virtually everyone is defined as mentally ill. If you think this is an exaggeration you should read this article by Christopher Lane in Slate. He points out that the American Psychiatric Association (APA) is seriously considering classifying shopping, among other everyday activities, as a sign of mental illness:
“The fifth edition of the association's Diagnostic and Statistical Manual of Mental Disorders is expected in 2012. The APA isn't just deciding the fate of shopaholics; it's also debating whether overuse of the Internet, "excessive" sexual activity, apathy, and even prolonged bitterness should be viewed, quite seriously, as brain "disorders." If you spend hours online, have sex more frequently than aging psychiatrists, and moan incessantly that the federal government can't account for all its TARP funds, take heed: You may soon be classed among the 48 million Americans the APA already considers mentally ill.”
Since the diagnostic manual Lane refers to in effect sets the global standard for defining psychiatric disorders the widening of the definition does not just affect Americans.
For more on the broadening of the definition of mental illness see my review of Oliver James on “affluenza” on the left hand side of the homepage. Also read Helene Guldberg’s review in spiked of Christopher Lane’s most recent book (see post of 24 December 2007).
“The fifth edition of the association's Diagnostic and Statistical Manual of Mental Disorders is expected in 2012. The APA isn't just deciding the fate of shopaholics; it's also debating whether overuse of the Internet, "excessive" sexual activity, apathy, and even prolonged bitterness should be viewed, quite seriously, as brain "disorders." If you spend hours online, have sex more frequently than aging psychiatrists, and moan incessantly that the federal government can't account for all its TARP funds, take heed: You may soon be classed among the 48 million Americans the APA already considers mentally ill.”
Since the diagnostic manual Lane refers to in effect sets the global standard for defining psychiatric disorders the widening of the definition does not just affect Americans.
For more on the broadening of the definition of mental illness see my review of Oliver James on “affluenza” on the left hand side of the homepage. Also read Helene Guldberg’s review in spiked of Christopher Lane’s most recent book (see post of 24 December 2007).
Labels: affluenza, America, consumption, happiness
Thursday, July 02, 2009
Treason against the planet?
I have not posted for a couple of days as I have been incredibly busy. However, Paul Krugman’s column in the New York Times on Sunday particularly amused me. The Nobel prize winning economist denounced the “deniers” who opposed the Waxman-Markey climate change bill as guilty of “treason against the planet”. It is hard to see what this means. How can someone be loyal to what is essentially a lump of rock?
It is certainly possible to be concerned about the impact of environmental degradation on humanity. But “treason against the planet” is absurd.
Krugman is undoubtedly clever but his argument on this point makes no sense.
It is certainly possible to be concerned about the impact of environmental degradation on humanity. But “treason against the planet” is absurd.
Krugman is undoubtedly clever but his argument on this point makes no sense.
Labels: America, climate, environment
Saturday, June 20, 2009
Conservatives have always been green
Many commentators, including many greens themselves and free market critics, are under the false impression that environmentalism is in some senses a left wing outlook. But this useful article by Geoffrey Lean in today’s Telegraph shows how mainstream conservatives have often backed environmentalist measures:
• Angela Merkel, Germany’s conservative chancellor, was instrumental in passing the Kyoto protocol on climate change.
• Richard Nixon, a Republican president, founded America’s Environmental Protection Agency.
• George Bush senior ran for presidential election as “the environment president” and endorsed the global declaration on the environment coming out of the 1992 Rio summit.
• Ted Heath, a Conservative prime minister, created Britain’s environment ministry.
• Margaret Thatcher was the first world leader to call for vigorous action on climate change.
Indeed Edmund Burke, the father of conservatism, described society as: "a partnership between those who are living, those who are dead, and those who are yet unborn".
• Angela Merkel, Germany’s conservative chancellor, was instrumental in passing the Kyoto protocol on climate change.
• Richard Nixon, a Republican president, founded America’s Environmental Protection Agency.
• George Bush senior ran for presidential election as “the environment president” and endorsed the global declaration on the environment coming out of the 1992 Rio summit.
• Ted Heath, a Conservative prime minister, created Britain’s environment ministry.
• Margaret Thatcher was the first world leader to call for vigorous action on climate change.
Indeed Edmund Burke, the father of conservatism, described society as: "a partnership between those who are living, those who are dead, and those who are yet unborn".
Labels: America, environment, Europe, Germany, sustainability
Thursday, June 11, 2009
Top academic against consumerism
A sophisticated attack on consumerism from a particularly influential source. Amitai Etzioni, a former president of the American Sociological Association, argues in an article in The New Republic (17 June) for a cultural change in America: “What needs to be eradicated, or at least greatly tempered, is consumerism: the obsession with acquisition that has become the organizing principle of American life.” In its place he proposes communitarian pursuits (relations between individuals and with their community ) and trescendental ones (spiritual activities including religious contemplative and articistic ones).
Etzioni three channels through which a new shared understanding of consumption can evolve:
* Education. Including, among other things, school uniforms to counter conspicuous consumption.
* Workplace. For example, limits on overtime, shorter working weeks, more felxible work.
* Legislation. Including taxes to encourage people to have smaller cars and use public transport rather than cars.
Growth scepticism really does come from the top rather than being a bottom-up movement.
Etzioni three channels through which a new shared understanding of consumption can evolve:
* Education. Including, among other things, school uniforms to counter conspicuous consumption.
* Workplace. For example, limits on overtime, shorter working weeks, more felxible work.
* Legislation. Including taxes to encourage people to have smaller cars and use public transport rather than cars.
Growth scepticism really does come from the top rather than being a bottom-up movement.
Labels: America, consumption, ethics, sustainability, work
Monday, June 08, 2009
Rift with Germany is a worrying trend
The following comment by me appeared in the latest Fund Strategy (8 June).
A rift is growing between Germany, on one side, and America and Britain on the other, in relation to economic policy
The latest spat followed comments by Angela Merkel, Germany’s chancellor, on quantitative easing. She reportedly broke an unwritten rule by criticising central banks – including the Bank of England, European Central Bank and the Federal Reserve – for their loose monetary stance.
Her comments precipitated howls of protest from America and Britain. Ben Bernanke, the Fed chairman, reportedly said: “I respectfully disagree with her views.” Coming from a central banker, a species which generally communicates with guarded language and the raising of an eyebrow, this was strong stuff.
Perhaps the harshest comment came from Charles Dumas, a director of Lombard Street Research: “Merkel and the German elite are divorced from the realities of the global economy, as well as flouting received economic wisdom from Keynes to Friedman.”
The Financial Times was not as blunt, but also critical. It suggested Merkel’s comments were motivated by short-term political considerations: “With a general election looming in September, German politicians have competed to sound more hair-shirted than one another, frantically attacking foreign profligacy as a means of depicting themselves as inflationary hawks”. However, The Wall Street Journal went against the trend, praising her anti-inflationary language, with a leader wryly headlined “Merkel for the Fed”.
For an outside observer it is possible to see both sides of the argument. Germany’s main concern is the threat of inflation and the re-emergence of asset bubbles. America and Britain, in contrast, are more worried about the risk of a deflationary spiral. Each set of arguments broadly reflects the particular economic interests of those parties involved.
The row reflects longer-running tensions between Germany – often together with France – and the Anglo-Saxon world. From a German perspective it was financial excess in America and Britain that largely caused the economic crisis. Germany also sees itself as often having to take unilateral action to sort out the mess others have created. Germany’s role in the bail-out of Opel from General Motors is a prime example.
In a sense it does not matter which side, if any, is right. The opening of an overt rift between such big players is a serious matter.
A rift is growing between Germany, on one side, and America and Britain on the other, in relation to economic policy
The latest spat followed comments by Angela Merkel, Germany’s chancellor, on quantitative easing. She reportedly broke an unwritten rule by criticising central banks – including the Bank of England, European Central Bank and the Federal Reserve – for their loose monetary stance.
Her comments precipitated howls of protest from America and Britain. Ben Bernanke, the Fed chairman, reportedly said: “I respectfully disagree with her views.” Coming from a central banker, a species which generally communicates with guarded language and the raising of an eyebrow, this was strong stuff.
Perhaps the harshest comment came from Charles Dumas, a director of Lombard Street Research: “Merkel and the German elite are divorced from the realities of the global economy, as well as flouting received economic wisdom from Keynes to Friedman.”
The Financial Times was not as blunt, but also critical. It suggested Merkel’s comments were motivated by short-term political considerations: “With a general election looming in September, German politicians have competed to sound more hair-shirted than one another, frantically attacking foreign profligacy as a means of depicting themselves as inflationary hawks”. However, The Wall Street Journal went against the trend, praising her anti-inflationary language, with a leader wryly headlined “Merkel for the Fed”.
For an outside observer it is possible to see both sides of the argument. Germany’s main concern is the threat of inflation and the re-emergence of asset bubbles. America and Britain, in contrast, are more worried about the risk of a deflationary spiral. Each set of arguments broadly reflects the particular economic interests of those parties involved.
The row reflects longer-running tensions between Germany – often together with France – and the Anglo-Saxon world. From a German perspective it was financial excess in America and Britain that largely caused the economic crisis. Germany also sees itself as often having to take unilateral action to sort out the mess others have created. Germany’s role in the bail-out of Opel from General Motors is a prime example.
In a sense it does not matter which side, if any, is right. The opening of an overt rift between such big players is a serious matter.
Labels: America, economics, Fund Strategy, Germany
Tuesday, June 02, 2009
On American inequality
A couple of interesting articles on the American inequality debate.
Brink Lindsey, vice president of research at the Cato Institute, has written a critique of what he calls “nostalgianomics”. This is the tendency to romanticise the “golden age” of relatively low income inequality from the 1930s to the 1970s. Paul Krugman, Nobel laureate and New York Times columnist, is the arch-exponent of this view.
Krugman favours the system under the “Treaty of Detroit” (1950) in which the United Auto Workers (UAW) agreed not to strike in return for such gains as health, unemployment and pensions benefit. More generally it refers to a more conciliatory approach to relations between capital and labour.
Yet according to Lindsey the treaty was deeply flawed:
“The Treaty of Detroit was built on extensive cartelization of markets, limiting competition to favor producers over consumers. The restrictions on competition were buttressed by racial prejudice, sexual discrimination, and postwar conformism, which combined to limit the choices available to workers and potential workers alike. Those illiberal social norms were finally swept aside in the cultural tumults of the 1960s and ’70s. And then, in the 1970s and ’80s, restraints on competition were substantially reduced as well, to the applause of economists across the ideological spectrum. At least until now.”
Lindsey goes on to conclude:
“Paul Krugman may long for the return of selfdenying corporate workers who declined to seek better opportunities out of organizational loyalty, and thus kept wages artificially suppressed, but these are creatures of a bygone ethos—an ethos that also included uncritical acceptance of racist and sexist traditions and often brutish intolerance of deviations from mainstream lifestyles and sensibilities.”
Meanwhile, Benjamin Page and Lawrence Jacobs have written what sounds like an insightful book on American inequality judging by a review on Miller-McCune. Class War: What Americans Really Think About Income Inequality evidently argues that: “Americans are both philosophically conservative and operationally liberal”. It calls this belief system “conservative egalitarianism”. According to the review this outlook “admires individual self-reliance but accepts public intervention as necessary to help citizens strive for the American Dream on an ostensibly level playing field”.
Brink Lindsey, vice president of research at the Cato Institute, has written a critique of what he calls “nostalgianomics”. This is the tendency to romanticise the “golden age” of relatively low income inequality from the 1930s to the 1970s. Paul Krugman, Nobel laureate and New York Times columnist, is the arch-exponent of this view.
Krugman favours the system under the “Treaty of Detroit” (1950) in which the United Auto Workers (UAW) agreed not to strike in return for such gains as health, unemployment and pensions benefit. More generally it refers to a more conciliatory approach to relations between capital and labour.
Yet according to Lindsey the treaty was deeply flawed:
“The Treaty of Detroit was built on extensive cartelization of markets, limiting competition to favor producers over consumers. The restrictions on competition were buttressed by racial prejudice, sexual discrimination, and postwar conformism, which combined to limit the choices available to workers and potential workers alike. Those illiberal social norms were finally swept aside in the cultural tumults of the 1960s and ’70s. And then, in the 1970s and ’80s, restraints on competition were substantially reduced as well, to the applause of economists across the ideological spectrum. At least until now.”
Lindsey goes on to conclude:
“Paul Krugman may long for the return of selfdenying corporate workers who declined to seek better opportunities out of organizational loyalty, and thus kept wages artificially suppressed, but these are creatures of a bygone ethos—an ethos that also included uncritical acceptance of racist and sexist traditions and often brutish intolerance of deviations from mainstream lifestyles and sensibilities.”
Meanwhile, Benjamin Page and Lawrence Jacobs have written what sounds like an insightful book on American inequality judging by a review on Miller-McCune. Class War: What Americans Really Think About Income Inequality evidently argues that: “Americans are both philosophically conservative and operationally liberal”. It calls this belief system “conservative egalitarianism”. According to the review this outlook “admires individual self-reliance but accepts public intervention as necessary to help citizens strive for the American Dream on an ostensibly level playing field”.
Labels: America, book, consumption, inequality, review, work
Tuesday, May 12, 2009
Redefining the American dream 2
More attempts to redefine the American dream in diminished terms (see post of 6 March 2009).
The traditional conception of the American dream, as put forward by James Truslow Adams in his book The Epic of America in 1931 was of: “that dream of a land in which life should be better and richer and fuller for everyone”. But the desirability of becoming richer, or the link between wealth and a full life, is increasingly being called into question.
William Greider, a veteran left wing journalist, suggests an alternative idea which is explicitly opposed to the goal of becoming richer in an article in the Nation (and in turn an extract from his new book on Come Home America (Rodale Press)): “Here is the grand vision I suggest Americans can pursue: the right of all citizens to larger lives. Not to get richer than the next guy or necessarily to accumulate more and more stuff but the right to live life more fully and engage more expansively the elemental possibilities of human existence.” In essence Greider is proposing that Americans accept austerity – although he is too coy to use the word – and a vague hope that this will somehow lead to more fulfilling lives. The idea that the end of scarcity is a necessary condition for true freedom is alien to him.
Even more explicit is Ted Kulongoski, the governor of Oregon. He was recently quoted in the New York Times as arguing: “Other than taxes … the hardest thing I find to talk with my constituents and my citizens about is about changing lifestyles.” By “changing lifestyles” it is clear he means reduced living standards.
Finally, there is the story of stuff a 20 minute environmentalist video rant which has apparent had over six million viewings. At a conservative estimate I counted at least 20 serious misconceptions in 20 minutes. My favourite was her insistence that human baby milk is incredibly toxic one minute followed by her reassurance that breastfeeding is still best straight afterwards. It is hard to understand how she can justify giving what she claims is a highly poisonous substance to babies. I am no expert in child care but it seems to me incontrovertible proof of a mentality that is, to put it politely, confused.
The traditional conception of the American dream, as put forward by James Truslow Adams in his book The Epic of America in 1931 was of: “that dream of a land in which life should be better and richer and fuller for everyone”. But the desirability of becoming richer, or the link between wealth and a full life, is increasingly being called into question.
William Greider, a veteran left wing journalist, suggests an alternative idea which is explicitly opposed to the goal of becoming richer in an article in the Nation (and in turn an extract from his new book on Come Home America (Rodale Press)): “Here is the grand vision I suggest Americans can pursue: the right of all citizens to larger lives. Not to get richer than the next guy or necessarily to accumulate more and more stuff but the right to live life more fully and engage more expansively the elemental possibilities of human existence.” In essence Greider is proposing that Americans accept austerity – although he is too coy to use the word – and a vague hope that this will somehow lead to more fulfilling lives. The idea that the end of scarcity is a necessary condition for true freedom is alien to him.
Even more explicit is Ted Kulongoski, the governor of Oregon. He was recently quoted in the New York Times as arguing: “Other than taxes … the hardest thing I find to talk with my constituents and my citizens about is about changing lifestyles.” By “changing lifestyles” it is clear he means reduced living standards.
Finally, there is the story of stuff a 20 minute environmentalist video rant which has apparent had over six million viewings. At a conservative estimate I counted at least 20 serious misconceptions in 20 minutes. My favourite was her insistence that human baby milk is incredibly toxic one minute followed by her reassurance that breastfeeding is still best straight afterwards. It is hard to understand how she can justify giving what she claims is a highly poisonous substance to babies. I am no expert in child care but it seems to me incontrovertible proof of a mentality that is, to put it politely, confused.
Labels: America, book, consumption, film, growth
Sunday, April 19, 2009
New York Times embraces green authoritarianism
Today’s New York Times magazine is a special green issue. It includes several interesting – although flawed – articles on the subject including:
•Why isn’t the brain green?. Implying that failure to accept environmental priorities suggests some kind of mental disorder and suggesting people need to be “nudged” in the right direction. This form of insidious authoritarianism is deeply trendy at present (see my post of 21 July 2008). It also links in to the idea that those who “deny” climate change (that is critics either of the mainstream scientific views on the subject or of the idea that it can only be tackled by austerity) must be mentally ill.
•The end is near! (yea!). An article on the “transition movement” – which sounds like a kind of survivalism: “The Transition movement was started four years ago by Rob Hopkins, a young British instructor of ecological design. Transition shares certain principles with environmentalism, but its vision is deeper — and more radical — than mere greenness or sustainability. “Sustainability,” Hopkins recently told me, “is about reducing the impacts of what comes out of the tailpipe of industrial society.” But that assumes our industrial society will keep running. By contrast, Hopkins said, Transition is about “building resiliency” — putting new systems in place to make a given community as self-sufficient as possible, bracing it to withstand the shocks that will come as oil grows astronomically expensive, climate change intensifies and, maybe sooner than we think, industrial society frays or collapses entirely. For a generation, the environmental movement has told us to change our lifestyles to avoid catastrophic consequences. Transition tells us those consequences are now irreversibly switching on; we need to revolutionize our lives if we want to survive.”
•Natural happiness. Arguing conservation on the basis of the pleasure it gives to humans: “Real natural habitats provide significant sources of pleasure for modern humans. We intuitively grasp this, and this knowledge underlies the anxiety that we feel about nature’s loss. It might be that one day we will be able to replace the experience of nature with “Star Trek” holodecks and robotic animals. But until then, this basic fact about human pleasure is an excellent argument for keeping the real thing.”
It is hard to distinguish such pieces from the kinds of arguments that could be found in such publications as the Ecologist magazine.
•Why isn’t the brain green?. Implying that failure to accept environmental priorities suggests some kind of mental disorder and suggesting people need to be “nudged” in the right direction. This form of insidious authoritarianism is deeply trendy at present (see my post of 21 July 2008). It also links in to the idea that those who “deny” climate change (that is critics either of the mainstream scientific views on the subject or of the idea that it can only be tackled by austerity) must be mentally ill.
•The end is near! (yea!). An article on the “transition movement” – which sounds like a kind of survivalism: “The Transition movement was started four years ago by Rob Hopkins, a young British instructor of ecological design. Transition shares certain principles with environmentalism, but its vision is deeper — and more radical — than mere greenness or sustainability. “Sustainability,” Hopkins recently told me, “is about reducing the impacts of what comes out of the tailpipe of industrial society.” But that assumes our industrial society will keep running. By contrast, Hopkins said, Transition is about “building resiliency” — putting new systems in place to make a given community as self-sufficient as possible, bracing it to withstand the shocks that will come as oil grows astronomically expensive, climate change intensifies and, maybe sooner than we think, industrial society frays or collapses entirely. For a generation, the environmental movement has told us to change our lifestyles to avoid catastrophic consequences. Transition tells us those consequences are now irreversibly switching on; we need to revolutionize our lives if we want to survive.”
•Natural happiness. Arguing conservation on the basis of the pleasure it gives to humans: “Real natural habitats provide significant sources of pleasure for modern humans. We intuitively grasp this, and this knowledge underlies the anxiety that we feel about nature’s loss. It might be that one day we will be able to replace the experience of nature with “Star Trek” holodecks and robotic animals. But until then, this basic fact about human pleasure is an excellent argument for keeping the real thing.”
It is hard to distinguish such pieces from the kinds of arguments that could be found in such publications as the Ecologist magazine.
Labels: America, consumption, environment, happiness
Friday, April 03, 2009
Obama against consumption
Another tantalising glimpse of Barack Obama’s growth scepticism. In his joint press conference with Gordon Brown this week he said:
“In some ways the world has become accustomed to the United States being a voracious consumer market and the engine that drives a lot of economic growth worldwide. And I think that in the wake of this crisis, even as we're doing stimulus we have to take into account our own deficits. We're going to have to take into account a whole host of factors that can increase our savings rate and start dealing with our long-term fiscal position, as well as our current account deficits” (added emphasis).
As with many growth sceptic formulations this one is ambiguous. It can be read as a reference to the specific bubble that emerged in America before the crisis broke or as a more general criticism of “overconsumption”. No doubt Obama will interpret it to mean whatever suits him at the particular time he is speaking. Either way it gives a strong hint of austerity ahead.
“In some ways the world has become accustomed to the United States being a voracious consumer market and the engine that drives a lot of economic growth worldwide. And I think that in the wake of this crisis, even as we're doing stimulus we have to take into account our own deficits. We're going to have to take into account a whole host of factors that can increase our savings rate and start dealing with our long-term fiscal position, as well as our current account deficits” (added emphasis).
As with many growth sceptic formulations this one is ambiguous. It can be read as a reference to the specific bubble that emerged in America before the crisis broke or as a more general criticism of “overconsumption”. No doubt Obama will interpret it to mean whatever suits him at the particular time he is speaking. Either way it gives a strong hint of austerity ahead.
Labels: America, consumption, Obama
Sunday, March 29, 2009
Time magazine on “era of excess”
The cover story of Time magazine’s American edition seamlessly moves from blaming bankers to placing responsibility on everyone for the economic downturn. In its view it is a crisis of generalised excess.
The starting point of the piece by Kurt Andersen, a novelist and former Time columnist, is the Reagan era of the 1980s. In Andersen’s telling the free marketer president irresponsibly allowed people’s desires to run amok:
“In the early 1980s, around the time Ronald Reagan became President and Wall Street's great modern bull market began, we started gambling (and winning!) and thinking magically. From 1980 to 2007, the median price of a new American home quadrupled. The Dow Jones industrial average climbed from 803 in the summer of 1982 to 14,165 in the fall of 2007. From the beginning of the '80s through 2007, the share of disposable income that each household spent servicing its mortgage and consumer debt increased 35%. Back in 1982, the average household saved 11% of its disposable income. By 2007 that number was less than 1%.”
For Andersen the Reagan era led not just to financial but to economic and environmental excess. We are now suffering as a result. The solution proposed by Time is that we should cure our “addiction” by consuming less:
“Given that we've brought on the current crises through a quarter-century of self-destructive financial excess and overdependence on debt and fossil fuels, during the same quarter-century we've all become familiar with a way of thinking about self-destructive excess and dependence. The vocabulary of addiction recovery could come in handy just now. We are like substance abusers coming off a long bender, hitting bottom (we can only hope) and taking the messes we've made as a sobering wake-up call. I've always thought many of the 12 Steps were superfluous, so here is a streamlined, secularized Three-Step Program for America — Bubbleholics Anonymous? — to start getting back on track:
“• Admit that we are powerless over addiction to easy money and cheap fossil fuel and living large — that our lives had become unmanageable.
“• Believe that we can, individually and collectively, restore ourselves to sanity and normal living.
“• Make a searching and fearless moral inventory of ourselves and be entirely ready to remove our defects of character.
“Of course, when addicts finally quit, it feels awful for a while, and that's where we are right now. The recession, provoked by the sudden, essentially cold-turkey abandonment of spending, lending and borrowing, is something like our national equivalent of the jitters, sweats and seizures that addicts experience right after they give up the junk. Actually, the applicable addiction trope is more like food (or sex) than drugs or booze, since as economic creatures, we can't quit; we just have to teach ourselves to buy and borrow in moderate, healthier ways. The new America must be about financial temperance, not abstinence.”
Evidently the story is a little more muted in the European edition but the message is the same.
The starting point of the piece by Kurt Andersen, a novelist and former Time columnist, is the Reagan era of the 1980s. In Andersen’s telling the free marketer president irresponsibly allowed people’s desires to run amok:
“In the early 1980s, around the time Ronald Reagan became President and Wall Street's great modern bull market began, we started gambling (and winning!) and thinking magically. From 1980 to 2007, the median price of a new American home quadrupled. The Dow Jones industrial average climbed from 803 in the summer of 1982 to 14,165 in the fall of 2007. From the beginning of the '80s through 2007, the share of disposable income that each household spent servicing its mortgage and consumer debt increased 35%. Back in 1982, the average household saved 11% of its disposable income. By 2007 that number was less than 1%.”
For Andersen the Reagan era led not just to financial but to economic and environmental excess. We are now suffering as a result. The solution proposed by Time is that we should cure our “addiction” by consuming less:
“Given that we've brought on the current crises through a quarter-century of self-destructive financial excess and overdependence on debt and fossil fuels, during the same quarter-century we've all become familiar with a way of thinking about self-destructive excess and dependence. The vocabulary of addiction recovery could come in handy just now. We are like substance abusers coming off a long bender, hitting bottom (we can only hope) and taking the messes we've made as a sobering wake-up call. I've always thought many of the 12 Steps were superfluous, so here is a streamlined, secularized Three-Step Program for America — Bubbleholics Anonymous? — to start getting back on track:
“• Admit that we are powerless over addiction to easy money and cheap fossil fuel and living large — that our lives had become unmanageable.
“• Believe that we can, individually and collectively, restore ourselves to sanity and normal living.
“• Make a searching and fearless moral inventory of ourselves and be entirely ready to remove our defects of character.
“Of course, when addicts finally quit, it feels awful for a while, and that's where we are right now. The recession, provoked by the sudden, essentially cold-turkey abandonment of spending, lending and borrowing, is something like our national equivalent of the jitters, sweats and seizures that addicts experience right after they give up the junk. Actually, the applicable addiction trope is more like food (or sex) than drugs or booze, since as economic creatures, we can't quit; we just have to teach ourselves to buy and borrow in moderate, healthier ways. The new America must be about financial temperance, not abstinence.”
Evidently the story is a little more muted in the European edition but the message is the same.
Labels: America, consumption, environment, ethics, finance, sustainability
Thursday, March 19, 2009
Environmentalists impoverish Americans
An excellent article in Forbes by Joel Kotkin, presidential fellow and director of the urban futures program at Chapman University, on how environmentalism creates shortages:
“the new scarcity does not simply advocate humane ways to deal with shortages, but seeks to exacerbate them intentionally. This reflects a doomsday streak in the contemporary environmental ethos – greatly enhanced by the concern over climate change – that believes greater scarcity of all basic commodities, from land and water to energy, might help reduce the much detested "footprint" of our species.
“One key element of this agenda has to do with reducing access to critical resources like water beyond those required to support existing uses. To be sure, two years of below-average precipitation helped create central California's current water shortage. Planting crops such as cotton, which needs lots of water, may also have contributed to the problem.
“However, this only explains part of the problem, which increasingly has to do not with vicissitudes of nature but conscious political action. In prior dry periods, the state has managed its water resources to supply farmers and other users as effectively as possible. Today, in response to seemingly endless litigation to protect certain fish in the Delta region west of Sacramento or to "revitalize" valley streams, enormous amounts of water have been allowed to flow untapped into San Francisco Bay.”
Kotkin is also interesting on the distinctive policies of “de-development of the Obama administration:
“It is critical to understand that anti-growth politics diverges from the old conservationist ethos in radical ways. No longer is it enough to talk about growing intelligently or using technology to meet long-term problems. Instead, scarcity politics seeks to slow and even reverse material progress through what President Obama's science adviser, John Holdren, calls "de-development."
“"De-development" – that is, the retreat from economic growth – includes some sensible notions about conservation but takes them to unreasonable, socially devastating and politically unpalatable extremes. The agenda, for example, includes an opposition to population growth, limits on material consumption and a radical redistribution of wealth both nationally and to the developing world.
“In much the same way as seen in California's water crisis, many of the administration's "green" energy policies pose a direct threat to blue-collar workers employed in extracting and processing fossil fuels. The resultant high energy prices caused by the proposed "cap and trade" system – essentially a system for creating scarcity – also will cost middle-class consumers, blue-collar workers, truckers and manufacturers. These constituencies could well face the kind of water policy-related decline that is destroying farming communities throughout central California.
“Yet at the same time, such policies make the well-to-do and trustafarians in San Francisco and Malibu – for whom higher energy prices are barely a concern – feel better about themselves. In what passes for progressive politics today, narcissism usually takes priority over reality.”
Thanks to Sean Collins for the tip.
For more on John Holdren’s rampant Malthusianism see the briefing from the Competitive Enterprise Institute here (PDF).
“the new scarcity does not simply advocate humane ways to deal with shortages, but seeks to exacerbate them intentionally. This reflects a doomsday streak in the contemporary environmental ethos – greatly enhanced by the concern over climate change – that believes greater scarcity of all basic commodities, from land and water to energy, might help reduce the much detested "footprint" of our species.
“One key element of this agenda has to do with reducing access to critical resources like water beyond those required to support existing uses. To be sure, two years of below-average precipitation helped create central California's current water shortage. Planting crops such as cotton, which needs lots of water, may also have contributed to the problem.
“However, this only explains part of the problem, which increasingly has to do not with vicissitudes of nature but conscious political action. In prior dry periods, the state has managed its water resources to supply farmers and other users as effectively as possible. Today, in response to seemingly endless litigation to protect certain fish in the Delta region west of Sacramento or to "revitalize" valley streams, enormous amounts of water have been allowed to flow untapped into San Francisco Bay.”
Kotkin is also interesting on the distinctive policies of “de-development of the Obama administration:
“It is critical to understand that anti-growth politics diverges from the old conservationist ethos in radical ways. No longer is it enough to talk about growing intelligently or using technology to meet long-term problems. Instead, scarcity politics seeks to slow and even reverse material progress through what President Obama's science adviser, John Holdren, calls "de-development."
“"De-development" – that is, the retreat from economic growth – includes some sensible notions about conservation but takes them to unreasonable, socially devastating and politically unpalatable extremes. The agenda, for example, includes an opposition to population growth, limits on material consumption and a radical redistribution of wealth both nationally and to the developing world.
“In much the same way as seen in California's water crisis, many of the administration's "green" energy policies pose a direct threat to blue-collar workers employed in extracting and processing fossil fuels. The resultant high energy prices caused by the proposed "cap and trade" system – essentially a system for creating scarcity – also will cost middle-class consumers, blue-collar workers, truckers and manufacturers. These constituencies could well face the kind of water policy-related decline that is destroying farming communities throughout central California.
“Yet at the same time, such policies make the well-to-do and trustafarians in San Francisco and Malibu – for whom higher energy prices are barely a concern – feel better about themselves. In what passes for progressive politics today, narcissism usually takes priority over reality.”
Thanks to Sean Collins for the tip.
For more on John Holdren’s rampant Malthusianism see the briefing from the Competitive Enterprise Institute here (PDF).
Labels: America, consumption, environment, Malthus, Obama, science
Sunday, March 15, 2009
Niebuhr and Obama's growth scepticism
A tantalising glimpse into Barack Obama’s growth scepticism in the form of a review of books by and about Reinhold Niebuhr (1892-1971), a Protestant theologian and Christian socialist, in the New York Review of Books.
* Obama has described Niebuhr as “one of my favourite philosophers. The rest of the quote from an interview in the New York Times with David Brooks on “Obama, Gospel and Verse” (26 April 2007) is telling: “I take away … the compelling idea that there’s serious evil in the world, and hardship and pain. And we should be humble and modest in our belief we can eliminate those things. But we shouldn’t use that as an excuse for cynicism and inaction.” To me this seems to be saying there are severe limits to what humanity can achieve but these should not be expressed in a downbeat way.
* The review describes the views of Andrew Bacevich, a “devoted disciple of Niebuhr” on the “crisis of profligacy” allegedly afflicting modern day America:
“Bacevich traces the "crisis of profligacy" in which the American way of life has outstripped the means available to satisfy it. In 1947 America's economic position was unrivaled. That moment soon passed. By 1950 the US had begun to import foreign oil, which Bacevich calls "the canary in the economic mineshaft." The first negative US trade balance occurred in 1971; in 1972 US oil production peaked; and the 1973 "oil shock" caused a 40 percent rise in gas prices. Later in the decade Jimmy Carter's warnings of "a fundamental threat to American democracy," which he described as the "worship of self- indulgence and consumption" and a "constant conflict between narrow interests ending in chaos and immobility," fell on deaf ears. By the 1980s the "Empire of Production" had become the "Empire of Consumption." Carter does not escape, however. Of his statement that control of the Persian Gulf was a vital US interest, Bacevich writes, "not since the Tonkin Gulf Resolution has a major statement of policy been the source of greater mischief."
“Ronald Reagan has a special place in Bacevich's rogue's gallery. He is a "faux-conservative" and "the modern prophet of profligacy" who encouraged the fantasy that credit had no limits and bills would never come due. He had a "canny knack for telling Americans what most of them wanted to hear" and presided over eight years of "gaudy prosperity and excess" based on cheap credit and cheap oil. Bacevich remarks that Reagan's beliefs "did as much to recast America's moral constitution as did sex, drugs, and rock and roll." By 1990 the United States imported 41 percent of its oil and was embroiled in the Islamic world as a result. Deficits and the national debt had soared, and the United States was no longer a creditor country. "Americans have yet to realize," Bacevich writes, "that they have forfeited command of their own destiny."”
* In an unpublished document James Heartfield has pointed out that:
“In 1955 theologian Reinhold Niebuhr's Christianity and the Crisis bemoaned America 's 'ever-expanding economy' in which the pressure was on Americans to 'consume, consume and consume whether we need or even desire the products forced upon us'. The Church's prescient economic analysis suggests that the system requires that we 'be persuaded to consume to meet the needs of the production process' (in Packard, 1962: 23). Journalist Vance Packard took up the Church's cause in his books The Hidden Persuaders, The Waste Makers and The Status Seekers, which were source material for Baran and Sweezy's Monopoly Capitalism. Protestant austerity informs the argument that 'the model changes that are incessantly imposed upon us, the slums that surround us, the rock-and-roll that blares at us exemplify a pattern of utilization of human an material resources which is inimical to human welfare'”.
* Obama has described Niebuhr as “one of my favourite philosophers. The rest of the quote from an interview in the New York Times with David Brooks on “Obama, Gospel and Verse” (26 April 2007) is telling: “I take away … the compelling idea that there’s serious evil in the world, and hardship and pain. And we should be humble and modest in our belief we can eliminate those things. But we shouldn’t use that as an excuse for cynicism and inaction.” To me this seems to be saying there are severe limits to what humanity can achieve but these should not be expressed in a downbeat way.
* The review describes the views of Andrew Bacevich, a “devoted disciple of Niebuhr” on the “crisis of profligacy” allegedly afflicting modern day America:
“Bacevich traces the "crisis of profligacy" in which the American way of life has outstripped the means available to satisfy it. In 1947 America's economic position was unrivaled. That moment soon passed. By 1950 the US had begun to import foreign oil, which Bacevich calls "the canary in the economic mineshaft." The first negative US trade balance occurred in 1971; in 1972 US oil production peaked; and the 1973 "oil shock" caused a 40 percent rise in gas prices. Later in the decade Jimmy Carter's warnings of "a fundamental threat to American democracy," which he described as the "worship of self- indulgence and consumption" and a "constant conflict between narrow interests ending in chaos and immobility," fell on deaf ears. By the 1980s the "Empire of Production" had become the "Empire of Consumption." Carter does not escape, however. Of his statement that control of the Persian Gulf was a vital US interest, Bacevich writes, "not since the Tonkin Gulf Resolution has a major statement of policy been the source of greater mischief."
“Ronald Reagan has a special place in Bacevich's rogue's gallery. He is a "faux-conservative" and "the modern prophet of profligacy" who encouraged the fantasy that credit had no limits and bills would never come due. He had a "canny knack for telling Americans what most of them wanted to hear" and presided over eight years of "gaudy prosperity and excess" based on cheap credit and cheap oil. Bacevich remarks that Reagan's beliefs "did as much to recast America's moral constitution as did sex, drugs, and rock and roll." By 1990 the United States imported 41 percent of its oil and was embroiled in the Islamic world as a result. Deficits and the national debt had soared, and the United States was no longer a creditor country. "Americans have yet to realize," Bacevich writes, "that they have forfeited command of their own destiny."”
* In an unpublished document James Heartfield has pointed out that:
“In 1955 theologian Reinhold Niebuhr's Christianity and the Crisis bemoaned America 's 'ever-expanding economy' in which the pressure was on Americans to 'consume, consume and consume whether we need or even desire the products forced upon us'. The Church's prescient economic analysis suggests that the system requires that we 'be persuaded to consume to meet the needs of the production process' (in Packard, 1962: 23). Journalist Vance Packard took up the Church's cause in his books The Hidden Persuaders, The Waste Makers and The Status Seekers, which were source material for Baran and Sweezy's Monopoly Capitalism. Protestant austerity informs the argument that 'the model changes that are incessantly imposed upon us, the slums that surround us, the rock-and-roll that blares at us exemplify a pattern of utilization of human an material resources which is inimical to human welfare'”.
Labels: America, consumption, Obama
Sunday, March 08, 2009
A confused doom-monger
Thomas Friedman, the New York Times foreign affairs columnist and doom-monger-in-chief, has written an op-ed piece claiming the economic growth model must come to an end:
“We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese ...
“We can’t do this anymore.”
This passage makes the elementary mistake of conflating two different things. It is true that the economic imbalance between American consumption and Chinese production looks unsustainable. Either the Americans will have to produce more than they are or consume less relative to the Chinese. America cannot simply continue borrowing huge amounts of Chinese money to finance its consumption. But this is a fundamentally different problem from the supposed natural limit to economic growth that Friedman is suggesting.
“We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese ...
“We can’t do this anymore.”
This passage makes the elementary mistake of conflating two different things. It is true that the economic imbalance between American consumption and Chinese production looks unsustainable. Either the Americans will have to produce more than they are or consume less relative to the Chinese. America cannot simply continue borrowing huge amounts of Chinese money to finance its consumption. But this is a fundamentally different problem from the supposed natural limit to economic growth that Friedman is suggesting.
Labels: America, china, climate, economics, environment, growth
Friday, March 06, 2009
Redefining the American dream
The purpose of David Kamp’s cover story on “Rethinking the American dream” in the April 2009 issue of Vanity Fair seems to be to argue that economic growth has reached its limits. He comes to the conclusion by way of the likes of John Kenneth Galbraith and Gregg Easterbrook (plus a nod to Simon Cowell):
“And what about the outmoded proposition that each successive generation in the United States must live better than the one that preceded it? While this idea is still crucial to families struggling in poverty and to immigrants who’ve arrived here in search of a better life than that they left behind, it’s no longer applicable to an American middle class that lives more comfortably than any version that came before it. (Was this not one of the cautionary messages of the most thoughtful movie of 2008, wall-e?) I’m no champion of downward mobility, but the time has come to consider the idea of simple continuity: the perpetuation of a contented, sustainable middle-class way of life, where the standard of living remains happily constant from one generation to the next (original emphasis).”
“And what about the outmoded proposition that each successive generation in the United States must live better than the one that preceded it? While this idea is still crucial to families struggling in poverty and to immigrants who’ve arrived here in search of a better life than that they left behind, it’s no longer applicable to an American middle class that lives more comfortably than any version that came before it. (Was this not one of the cautionary messages of the most thoughtful movie of 2008, wall-e?) I’m no champion of downward mobility, but the time has come to consider the idea of simple continuity: the perpetuation of a contented, sustainable middle-class way of life, where the standard of living remains happily constant from one generation to the next (original emphasis).”
Labels: America, consumption, growth, progress
Monday, March 02, 2009
Critique of Green New Deal
Fund Strategy has published my critique of the Green New Deal as a cover story. Meanwhile, there follows my latest comment from the magazine (2 March issue).
It is becoming increasingly common for commentators to overestimate the newness of key economic trends.
A striking example is the tendency to regard key problems in the American and British economies as new. It would be more accurate to see the current blatant weaknesses as a continuation of existing underlying trends.
Some of the more astute economic commentators, such as Stephen Roach of Morgan Stanley, had long made the point that the global economy was fundamentally unbalanced. America could only maintain its high levels of consumption as a result of huge capital flows from Asia and the Middle East.
Many wrongly saw this trend as a sign of America’s economic strength. The world was “flying on one engine” and the American consumer was providing the propulsion. It would have been more accurate to argue that Asian growth was propelling the world economy, including America, forward.
Britain’s weakness was disguised by City of London success. But the City’s revenues depended largely on international capital flows and institutions. When these started to dry up the weakness of Britain’s productive base was cruelly exposed.
Another trend with greater longevity than normally assumed is the demise of free market economics or “neo-liberalism”. Many commentators argue that the bail-outs of financial institutions signal an end to belief in the free market. In reality the idea of the free market died many years ago.
Western economies, including America and Britain, have long had a consensus in favour of what could be called a regulated market. They do not propose any alternative to capitalism but at the same time they support an extensive system of regulation. It is a long way from the minimal state advocated by staunch advocates of free market economics.
The reality of state intervention should be apparent from the high levels of public spending in both America and Britain. Such spending is inconsistent with a genuine free market.
Many of the key economic trends in the world today are far less new than is generally assumed. The only reason this is not widely understood is the impressionism of much of contemporary economics. The temptation to take things at their face value should be avoided.
It is becoming increasingly common for commentators to overestimate the newness of key economic trends.
A striking example is the tendency to regard key problems in the American and British economies as new. It would be more accurate to see the current blatant weaknesses as a continuation of existing underlying trends.
Some of the more astute economic commentators, such as Stephen Roach of Morgan Stanley, had long made the point that the global economy was fundamentally unbalanced. America could only maintain its high levels of consumption as a result of huge capital flows from Asia and the Middle East.
Many wrongly saw this trend as a sign of America’s economic strength. The world was “flying on one engine” and the American consumer was providing the propulsion. It would have been more accurate to argue that Asian growth was propelling the world economy, including America, forward.
Britain’s weakness was disguised by City of London success. But the City’s revenues depended largely on international capital flows and institutions. When these started to dry up the weakness of Britain’s productive base was cruelly exposed.
Another trend with greater longevity than normally assumed is the demise of free market economics or “neo-liberalism”. Many commentators argue that the bail-outs of financial institutions signal an end to belief in the free market. In reality the idea of the free market died many years ago.
Western economies, including America and Britain, have long had a consensus in favour of what could be called a regulated market. They do not propose any alternative to capitalism but at the same time they support an extensive system of regulation. It is a long way from the minimal state advocated by staunch advocates of free market economics.
The reality of state intervention should be apparent from the high levels of public spending in both America and Britain. Such spending is inconsistent with a genuine free market.
Many of the key economic trends in the world today are far less new than is generally assumed. The only reason this is not widely understood is the impressionism of much of contemporary economics. The temptation to take things at their face value should be avoided.
Labels: America, climate, consumption, economics, energy, environment, Fund Strategy
Sunday, March 01, 2009
The 1960s backlash
Sean Collins, writing in the latest spiked review of books, makes an important point on the conservative backlash against the 1960s counterculture in America. Many working class Americans supported the backlash in response to liberal condescension, including on the question of mass affluence. Collins quotes Rick Perlstein as arguing in Nixonland that:
“The liberal capitalism that had created this mass middle class created, in its wake, a mass culture of consumption. And the liberals whose New Deal created this mass middle class were more and more turning their attention to critiquing the degraded mass culture of cheap sensation and plastic gadgets and politicians who seemed to cater to this lowest common denominator.”
“The liberal capitalism that had created this mass middle class created, in its wake, a mass culture of consumption. And the liberals whose New Deal created this mass middle class were more and more turning their attention to critiquing the degraded mass culture of cheap sensation and plastic gadgets and politicians who seemed to cater to this lowest common denominator.”
Labels: America, book, consumption, ethics, inequality, review, spiked
Saturday, February 28, 2009
Environmentalism: beyond redemption
Steven Hayward, a fellow of the Claremont Institute in California, has written a scathing review essay on American environmentalism drawing out its pessimism, misanthrope and authoritarian character. Admittedly his aim is to identify a progressive trend in contemporary American environmentalism – likely to be a forlorn task – but that does not detract from the usefulness of his piece.
Among his astute points:
•“A trip down the environment and earth sciences aisle of any larger bookstore is usually a tour of titles that cover the narrow range from dismay to despair.”
•“unlike the eschatology of all major religions, the eco-apocalypse is utterly without hope of redemption for man or nature.”
•“The greens turn purple at the suggestion that most environmental conditions in rich nations are actually improving, and they bemoan the lack of "progress" toward the transformation of the human soul that is thought necessary for the planet's salvation.”
•”One of the most popular books of 2007 among environmentalists was The World Without Us by Alan Weisman, which projects a "thought experiment" about what would occur if human beings were suddenly removed entirely from the planet. Answer: nature would reassert herself, and ultimately remove nearly all traces of human civilization within several millennia—a mere blink of an eye in the planetary timescale. Environmentalists cheered Weisman's vivid depiction of the resilience of nature, but what thrilled them was the scenario of a humanless earth. Weisman made sure to stroke his audience's self-loathing with plenty of boilerplate about resource exhaustion and overpopulation. The book rocketed up the best-seller list, the latest in a familiar genre stretching back at least to Fairfield Osborn's Our Plundered Planet in 1948, arguably the first neo-Malthusian doomsday tract of modern environmentalism. Time magazine named The World Without Us the number one non-fiction book of 2007.”
•“McKibben and many other environmental writers affect an indifference toward, or transcendence of, politics in the ordinary sense, but ultimately cannot conceal their rejection of the liberal tradition. Here we observe the irony of modern environmentalism: the concern for the preservation of unchanged nature has grown in tandem with the steady erosion in our belief in unchanging human nature; the concern for the "rights of nature" has come to embrace a rejection of natural rights for humans. McKibben is one of many current voices (Gore is another) who like to express their environmentalism by decrying "individualism" (McKibben calls it "hyperindividualism").”
•“Al Gore employed the same "communitarian" trope in his first and most famous environmental book, Earth in the Balance (1992), where, in the course of arguing that the environment should be the "central organizing principle" of civilization, he suggested that the problem with individual liberty is that we have too much of it. This preference for soft despotism has become more concrete with the increasing panic over global warming in the past few years. Several environmental authors now argue openly that democracy itself is the obstacle and needs to be abandoned.”
Those who Hayward sees as representing a positive backlash against mainstream environmentalism include Ted Nordhaus and Michael Shellenberger, the authors of Break Through: From the Death of Environmentalism to the Politics of Possibility (Houghton Mifflin 2007).
Among his astute points:
•“A trip down the environment and earth sciences aisle of any larger bookstore is usually a tour of titles that cover the narrow range from dismay to despair.”
•“unlike the eschatology of all major religions, the eco-apocalypse is utterly without hope of redemption for man or nature.”
•“The greens turn purple at the suggestion that most environmental conditions in rich nations are actually improving, and they bemoan the lack of "progress" toward the transformation of the human soul that is thought necessary for the planet's salvation.”
•”One of the most popular books of 2007 among environmentalists was The World Without Us by Alan Weisman, which projects a "thought experiment" about what would occur if human beings were suddenly removed entirely from the planet. Answer: nature would reassert herself, and ultimately remove nearly all traces of human civilization within several millennia—a mere blink of an eye in the planetary timescale. Environmentalists cheered Weisman's vivid depiction of the resilience of nature, but what thrilled them was the scenario of a humanless earth. Weisman made sure to stroke his audience's self-loathing with plenty of boilerplate about resource exhaustion and overpopulation. The book rocketed up the best-seller list, the latest in a familiar genre stretching back at least to Fairfield Osborn's Our Plundered Planet in 1948, arguably the first neo-Malthusian doomsday tract of modern environmentalism. Time magazine named The World Without Us the number one non-fiction book of 2007.”
•“McKibben and many other environmental writers affect an indifference toward, or transcendence of, politics in the ordinary sense, but ultimately cannot conceal their rejection of the liberal tradition. Here we observe the irony of modern environmentalism: the concern for the preservation of unchanged nature has grown in tandem with the steady erosion in our belief in unchanging human nature; the concern for the "rights of nature" has come to embrace a rejection of natural rights for humans. McKibben is one of many current voices (Gore is another) who like to express their environmentalism by decrying "individualism" (McKibben calls it "hyperindividualism").”
•“Al Gore employed the same "communitarian" trope in his first and most famous environmental book, Earth in the Balance (1992), where, in the course of arguing that the environment should be the "central organizing principle" of civilization, he suggested that the problem with individual liberty is that we have too much of it. This preference for soft despotism has become more concrete with the increasing panic over global warming in the past few years. Several environmental authors now argue openly that democracy itself is the obstacle and needs to be abandoned.”
Those who Hayward sees as representing a positive backlash against mainstream environmentalism include Ted Nordhaus and Michael Shellenberger, the authors of Break Through: From the Death of Environmentalism to the Politics of Possibility (Houghton Mifflin 2007).
Labels: America, book, climate, consumption, environment, ethics, review
Sunday, February 22, 2009
Critique of Krugman on inequality
Brink Lindsey, the vice president for research at the Cato Institute, has written a critique of Paul Krugman’s views on American inequality.
Labels: America, economics, inequality
Wednesday, February 18, 2009
US living standards forecasted to plummet
Howard Davidowitz, a retail analyst, predicts a long term decline in living standards for the average American consumer. He says ‘the worst is yet to come” as a result of several factors. According to a report on Business Insider they include:
* An $8 trillion negative wealth effect from declining home values.
* A $10 trillion negative wealth effect from weakened capital markets.
* A $14 trillion consumer debt load amid "exploding unemployment" leading to "exploding bankruptcies."
"The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car," he says. "A lot of that is gone."
It is a grim prospect.
* An $8 trillion negative wealth effect from declining home values.
* A $10 trillion negative wealth effect from weakened capital markets.
* A $14 trillion consumer debt load amid "exploding unemployment" leading to "exploding bankruptcies."
"The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car," he says. "A lot of that is gone."
It is a grim prospect.
Labels: America, Austerity Watch, consumption, debt
Sunday, February 08, 2009
The social impact of the downturn
Belatedly caught up with an article on the likely social impact of the recession by Tyler Cowen, a professor of economics at George Mason University, in last Sunday’s New York Times. Among other things he predicts:
• A return to less expensive activities: “They may take the form of greater interest in free content on the Internet and the simple pleasures of a daily walk, instead of expensive vacations and NBA [National Basketball Association] box seats.”
• A larger than usual decline in consumption by the wealthy. Although the poor will suffer the most pain the rich have suffered a sharp decline in labour incomes owing to the problems in the financial sector. This is on top of the impact of declining asset prices.
• Popular culture catering to the wealthy, such as fancy restaurants, could decline.
• More mental health problems although paradoxically physical health could, on average, improve. On the latter accidents could decline as people make fewer trips while spending on alcohol and tobacco could also fall.
• Finally, a more “prudent” and risk averse climate could take hold.
I would not concur with all of Cowen’s predictions but the subject is worth considering.
• A return to less expensive activities: “They may take the form of greater interest in free content on the Internet and the simple pleasures of a daily walk, instead of expensive vacations and NBA [National Basketball Association] box seats.”
• A larger than usual decline in consumption by the wealthy. Although the poor will suffer the most pain the rich have suffered a sharp decline in labour incomes owing to the problems in the financial sector. This is on top of the impact of declining asset prices.
• Popular culture catering to the wealthy, such as fancy restaurants, could decline.
• More mental health problems although paradoxically physical health could, on average, improve. On the latter accidents could decline as people make fewer trips while spending on alcohol and tobacco could also fall.
• Finally, a more “prudent” and risk averse climate could take hold.
I would not concur with all of Cowen’s predictions but the subject is worth considering.
Labels: affluenza, America, Austerity Watch, consumption, economics, happiness, inequality
Wednesday, January 28, 2009
More flawed attacks on GDP
Today’s Financial Times has a substantial feature on the debate on the weaknesses of GDP as a measure of human welfare. It has some interesting material although ultimately is a weak piece. It does not appreciate that in many respects GDP underestimates the contribution of growth to human welfare. And it sees the discussion as a technical one rather than as part of a broader attack on economic growth.
Some things to note from the piece: “a 24-member commission of prominent economists led by Joseph Stiglitz and Amartya Sen, both Nobel prize winners, is due to report in April on ways of improving our economic bookkeeping. The aim is to render economic data more comprehensive, more intelligible to the public and more relevant for policymakers by taking into account such factors as environmental degradation and quality of life.”
Also: “This ambitious initiative was launched last year by Nicolas Sarkozy, France's president, who had grown concerned about popular distrust of economic statistics.”
The initiative is in line with France’s official drive for a more moral capitalism (see post of 11 January 2009). But such moves also have supporters in America: In testimony last year to the US Senate, Jonathan Rowe, a Californian writer, highlighted some of the absurdities of mechanically measuring the economy by counting how much it produces. Measuring healthcare by inputs rather than outputs - the sale of medical services and drugs rather than the number of (healthy) people - can lead to particularly perverse perspectives. In this view, the economic "hero" of GDP statistics would be a terminally ill cancer patient going through expensive medication and a costly divorce.”
An extract of Rowe’s testimony can be read here
A webcast of the Senate committee meeting can be viewed here.
For a more extensive critique by me of the attacks on GDP see the article on “A sneaky attack on prosperity” on the left hand side of the homepage.
Some things to note from the piece: “a 24-member commission of prominent economists led by Joseph Stiglitz and Amartya Sen, both Nobel prize winners, is due to report in April on ways of improving our economic bookkeeping. The aim is to render economic data more comprehensive, more intelligible to the public and more relevant for policymakers by taking into account such factors as environmental degradation and quality of life.”
Also: “This ambitious initiative was launched last year by Nicolas Sarkozy, France's president, who had grown concerned about popular distrust of economic statistics.”
The initiative is in line with France’s official drive for a more moral capitalism (see post of 11 January 2009). But such moves also have supporters in America: In testimony last year to the US Senate, Jonathan Rowe, a Californian writer, highlighted some of the absurdities of mechanically measuring the economy by counting how much it produces. Measuring healthcare by inputs rather than outputs - the sale of medical services and drugs rather than the number of (healthy) people - can lead to particularly perverse perspectives. In this view, the economic "hero" of GDP statistics would be a terminally ill cancer patient going through expensive medication and a costly divorce.”
An extract of Rowe’s testimony can be read here
A webcast of the Senate committee meeting can be viewed here.
For a more extensive critique by me of the attacks on GDP see the article on “A sneaky attack on prosperity” on the left hand side of the homepage.
Labels: America, economics, Europe, happiness
Thursday, January 22, 2009
Report on “green jobs”
Just came across a report on Green Jobs (PDF) produced by Worldwatch Institute and published by the United Nations Environment Programme in conjunction. The project was in conjunction with the International Labour Organization, International Organization of Employers and International Trade Union Confederation.
With the inauguration of Barack Obama as president the Green New Deal has become an even more pressing topic. I am hoping to do a critique of it in a few weeks’ time.
With the inauguration of Barack Obama as president the Green New Deal has become an even more pressing topic. I am hoping to do a critique of it in a few weeks’ time.
Labels: America, economics, Obama, work
Monday, January 19, 2009
Environmentalism with jewels on
Who every said environmentalism need not be elitist (see 18 January post)? According to an article on the ABC News website the following is available to well-heeled greens who want to attend Barack Obama’s inauguration as president:
“The Ritz-Carlton sold a "Politically Correct" package for $50,000, which includes four nights in one of the hotel's suites; two hard-to-come-by seats at the inaugural parade; two tickets to an inaugural ball; a luxury hybrid vehicle with chauffeur on call 24 hours a day; a ball gown and tuxedo from Saks Fifth Avenue; a private in-suite dinner for two at the hotel's restaurant, and more, including a special, inauguration-themed pendant of gold, diamonds, rubies and sapphires valued at $8,000.”
Nor are such standards limited to one swish hotel. The Obama “We Are One” is evidently not an egalitarian event:
“The concert was supposed to be part of "the people's party," said Shawn Paterniti, who had come with his wife Mia from Columbia, Md., to see the show. "But still, you have the VIPs who want their front-row seats. So I guess they get their tickets no one knows about," he said, as he and his wife headed to join the "general population," far away from the performances.
“‘It seems odd to have a VIP section for a concert about unity,’ quipped the local blog DCist.com. The blogger, Kriston Capps, suggested a new name for the event: ‘We Are One, but Some Are More One Than Others.’”
“The Ritz-Carlton sold a "Politically Correct" package for $50,000, which includes four nights in one of the hotel's suites; two hard-to-come-by seats at the inaugural parade; two tickets to an inaugural ball; a luxury hybrid vehicle with chauffeur on call 24 hours a day; a ball gown and tuxedo from Saks Fifth Avenue; a private in-suite dinner for two at the hotel's restaurant, and more, including a special, inauguration-themed pendant of gold, diamonds, rubies and sapphires valued at $8,000.”
Nor are such standards limited to one swish hotel. The Obama “We Are One” is evidently not an egalitarian event:
“The concert was supposed to be part of "the people's party," said Shawn Paterniti, who had come with his wife Mia from Columbia, Md., to see the show. "But still, you have the VIPs who want their front-row seats. So I guess they get their tickets no one knows about," he said, as he and his wife headed to join the "general population," far away from the performances.
“‘It seems odd to have a VIP section for a concert about unity,’ quipped the local blog DCist.com. The blogger, Kriston Capps, suggested a new name for the event: ‘We Are One, but Some Are More One Than Others.’”
Labels: America, consumption, economics, environment, inequality
Obama's green deal will not save economy
The following comment by me appeared in the latest Fund Strategy (19 January).
The pilot who landed his damaged aeroplane on New York’s Hudson river without suffering any casualties performed a remarkable feat. It is unlikely that Barack Obama will prove so lucky or so skillful in his stewardship of America’s ailing economy.
Obama was elected on the back of an understandable yearning for change among the mass of Americans. Unfortunately he is unlikely to offer anything fundamentally different to what came before.
Anyone who followed Obama’s campaign closely would notice his conception of “change” became ever narrower as time progressed. By the end it meant little more than Obama rather than George W Bush sitting in the Oval Office.
Obama’s political appointees are largely cronies of former President Bill Clinton rather than Washington outsiders.
To an extent the critics have also been unfair to Bush. There is certainly a lot he can be justly criticised for but the image of him as a doctrinaire free marketeer is a caricature. It was under the Bush administration that many billions of dollars were spent in bailing out financial institutions and the car industry. But even before that America was far from a free market economy. In 2007, for example, state spending accounted for over 37% of GDP.
Obama is a slicker orator than Bush but he is likely to continue his predecessor’s pursuit of muddled pragmatism. At present both have proved intent on spending huge amounts of money, both through fiscal and monetary policy, to shore up the flagging economy. No doubt when inflationary pressures start to emerge, likely to be in a year or two, this policy will be reversed.
It is true that Obama is promoting a “Green New Deal” but this looks set to make things worse rather than better. It is unclear exactly what it will mean but it is likely to involve investment in low technology and low productivity jobs.
Obama looks likely to follow Bush in failing to develop new sectors of the economy or revitalising old ones. Both fail to realise that the fundamental problem is not the lack of credit but the dearth of exciting opportunities to invest in.
Genuine change in America and the world economy would be welcome but Obama looks unlikely to provide it.
The pilot who landed his damaged aeroplane on New York’s Hudson river without suffering any casualties performed a remarkable feat. It is unlikely that Barack Obama will prove so lucky or so skillful in his stewardship of America’s ailing economy.
Obama was elected on the back of an understandable yearning for change among the mass of Americans. Unfortunately he is unlikely to offer anything fundamentally different to what came before.
Anyone who followed Obama’s campaign closely would notice his conception of “change” became ever narrower as time progressed. By the end it meant little more than Obama rather than George W Bush sitting in the Oval Office.
Obama’s political appointees are largely cronies of former President Bill Clinton rather than Washington outsiders.
To an extent the critics have also been unfair to Bush. There is certainly a lot he can be justly criticised for but the image of him as a doctrinaire free marketeer is a caricature. It was under the Bush administration that many billions of dollars were spent in bailing out financial institutions and the car industry. But even before that America was far from a free market economy. In 2007, for example, state spending accounted for over 37% of GDP.
Obama is a slicker orator than Bush but he is likely to continue his predecessor’s pursuit of muddled pragmatism. At present both have proved intent on spending huge amounts of money, both through fiscal and monetary policy, to shore up the flagging economy. No doubt when inflationary pressures start to emerge, likely to be in a year or two, this policy will be reversed.
It is true that Obama is promoting a “Green New Deal” but this looks set to make things worse rather than better. It is unclear exactly what it will mean but it is likely to involve investment in low technology and low productivity jobs.
Obama looks likely to follow Bush in failing to develop new sectors of the economy or revitalising old ones. Both fail to realise that the fundamental problem is not the lack of credit but the dearth of exciting opportunities to invest in.
Genuine change in America and the world economy would be welcome but Obama looks unlikely to provide it.
Labels: America, economics, environment, Obama
Sunday, January 18, 2009
A non-elitist environmentalism?
Can there be a non-elitist environmentalism? The is the question posed, implicitly at least, by an article on Greening the ghetto in the New Yorker.
The piece is a profile of Van Jones, the founder and president of Green for All, a California-based “national organization dedicated to building an inclusive green economy strong enough to lift people out of poverty”. His project is to reduce poverty by creating millions of “green jobs” in such areas as installing solar panels, “weatherising” buildings and constructing mass transit systems. Jones’s book on the subject, The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems (HarperOne 2008), has the endorsement of the likes of former vice President Al Gore, Nancy Pelosi (the speaker of the house of representatives) and Thomas Friedman (New York Times columnist).
The article acknowledges that environmentalists normally come from an affluent minority: “A 2006 study commissioned by Earthjustice, a nonprofit environmental-law group, found that the ecological base ‹defined as Americans who report the environment as being central to their concerns) is nearly ninety percent white, mostly college-educated, higher-income, and over thirty-five.” It is implied that Jones, who is black, could represent the future of a more broad-based environmentalism.
There is a problem with this argument. Even if environmentalism caught on among the mass of the population it would remain an elite ideology in an important sense. Any project with the goal of curbing economic growth is likely to reinforce the existing order. As far as it is possible to tell from the Green for All website the campaign shares the prejudices of mainstream environmentalism in relation to curbing energy use and penalising the use of fossil fuels.
The Jones campaign could be a pragmatic way of raising funds from the federal government and other sources. Clearly his pitch is likely to appeal in today’s intellectual and political climate. But even if he genuinely believes it the campaign will not solve America’s economic problems or benefit the mass of the population.
The piece is a profile of Van Jones, the founder and president of Green for All, a California-based “national organization dedicated to building an inclusive green economy strong enough to lift people out of poverty”. His project is to reduce poverty by creating millions of “green jobs” in such areas as installing solar panels, “weatherising” buildings and constructing mass transit systems. Jones’s book on the subject, The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems (HarperOne 2008), has the endorsement of the likes of former vice President Al Gore, Nancy Pelosi (the speaker of the house of representatives) and Thomas Friedman (New York Times columnist).
The article acknowledges that environmentalists normally come from an affluent minority: “A 2006 study commissioned by Earthjustice, a nonprofit environmental-law group, found that the ecological base ‹defined as Americans who report the environment as being central to their concerns) is nearly ninety percent white, mostly college-educated, higher-income, and over thirty-five.” It is implied that Jones, who is black, could represent the future of a more broad-based environmentalism.
There is a problem with this argument. Even if environmentalism caught on among the mass of the population it would remain an elite ideology in an important sense. Any project with the goal of curbing economic growth is likely to reinforce the existing order. As far as it is possible to tell from the Green for All website the campaign shares the prejudices of mainstream environmentalism in relation to curbing energy use and penalising the use of fossil fuels.
The Jones campaign could be a pragmatic way of raising funds from the federal government and other sources. Clearly his pitch is likely to appeal in today’s intellectual and political climate. But even if he genuinely believes it the campaign will not solve America’s economic problems or benefit the mass of the population.
Labels: America, book, economics, environment, inequality, work
The growing clout of the poor?
Barbara Ehrenreich writes on the “growing clout of the nouveau poor” in the Nation, a radical American weekly magazine. She is probably right to argue that: “the ranks of the poor are swelling every day with failed business owners, office workers, salespeople and long-time homeowners”. However, she is wrong to assume that simply because the ranks of the poor are swelling they are likely to have more political influence.
Labels: America, inequality
Monday, January 12, 2009
Flawed model masks nub of economic woe
The following comment by me appeared in the latest Fund Strategy (12 January).
There is no doubting the theme of last week's economics discussions: how can economies be boosted to offset the effects of the downturn? Such a limited outlook overlooks practical and more fundamental problems.
In Britain the focus was on the Bank of England lowering base rates to their lowest levels ever. There is also talk of "quantitative easing" - printing money - if lowering base rates does not ease the credit crunch.
In America the debate has centred on the fiscal stimulus. Barack Obama has proposed a $775 billion (£530 billion) package of which $300 billion will be in tax cuts. Meanwhile, the Congressional Budget Office (CBO) has forecast that the fiscal deficit will hit $1.2 trillion, or 8.3% of GDP, this year.
Yet just as America needs to borrow more it is likely to find it harder to raise funds. China will be increasingly reluctant to fund American consumption as it needs resources for its own fiscal expansion.
Much of the discussion of stimulus packages, both fiscal and monetary, is open to such practical objections. Another is that the economic boost could stoke inflation.
Although such objections are important they do not get to the nub of the problem. They are based, implicitly if not explicitly, on an underconsumptionist model of the downturn. In other words they assume the problem is that the economy is facing insufficient demand. Paul Krugman, whose latest book is reviewed in this issue, is a leading exponent of this outlook.
Unfortunately, such a model cannot be taken as given. Those who assume that the problem is lack of demand will propose an economic stimulus as a solution. But such a premise has to be proved rather than assumed.
There is good reason to suggest the economic downturn has more fundamental causes that the underconsumptionists suggest. Developed economies have experienced relatively sluggish growth since the early 1970s. Indeed the enormous expansion of credit was largely an attempt to offset this tendency.
In more recent times the trend towards "green capitalism" has compounded the problem of slow growth. Economic growth is increasingly stigmatised as leading to environmental disaster and misery.
If the underconsumptionists are wrong in their diagnosis of the economic woes their solutions are also likely to be flawed.
There is no doubting the theme of last week's economics discussions: how can economies be boosted to offset the effects of the downturn? Such a limited outlook overlooks practical and more fundamental problems.
In Britain the focus was on the Bank of England lowering base rates to their lowest levels ever. There is also talk of "quantitative easing" - printing money - if lowering base rates does not ease the credit crunch.
In America the debate has centred on the fiscal stimulus. Barack Obama has proposed a $775 billion (£530 billion) package of which $300 billion will be in tax cuts. Meanwhile, the Congressional Budget Office (CBO) has forecast that the fiscal deficit will hit $1.2 trillion, or 8.3% of GDP, this year.
Yet just as America needs to borrow more it is likely to find it harder to raise funds. China will be increasingly reluctant to fund American consumption as it needs resources for its own fiscal expansion.
Much of the discussion of stimulus packages, both fiscal and monetary, is open to such practical objections. Another is that the economic boost could stoke inflation.
Although such objections are important they do not get to the nub of the problem. They are based, implicitly if not explicitly, on an underconsumptionist model of the downturn. In other words they assume the problem is that the economy is facing insufficient demand. Paul Krugman, whose latest book is reviewed in this issue, is a leading exponent of this outlook.
Unfortunately, such a model cannot be taken as given. Those who assume that the problem is lack of demand will propose an economic stimulus as a solution. But such a premise has to be proved rather than assumed.
There is good reason to suggest the economic downturn has more fundamental causes that the underconsumptionists suggest. Developed economies have experienced relatively sluggish growth since the early 1970s. Indeed the enormous expansion of credit was largely an attempt to offset this tendency.
In more recent times the trend towards "green capitalism" has compounded the problem of slow growth. Economic growth is increasingly stigmatised as leading to environmental disaster and misery.
If the underconsumptionists are wrong in their diagnosis of the economic woes their solutions are also likely to be flawed.
Labels: America, book, economics, Fund Strategy
Tuesday, January 06, 2009
Thoreauly simple
Mother Jones, a radical American publication, has an article by Michael Agger discussing several books on self-sacrifice in its November / December issue.
It starts by discussing Henry David Thoreau and his book Walden. For those not versed in American culture Thoreau was, among other things, a nineteenth century advocate of simple living.
The article then moves on to the present day with a discussion of Colin Beaven:
“The most notorious neo-Thoreauvian might be Colin Beavan, a 45-year-old New Yorker better known as No Impact Man, and even better known as The Man Who Doesn't Let His Wife Use Toilet Paper. That last detail was the highlight of a 2007 New York Times profile of Beavan, which portrayed how he, his wife, and their two-year-old daughter were attempting to live in downtown Manhattan with zero "net impact" on the environment. This goal involves eating only organic food grown within a 250-mile radius, composting inside their small apartment, forgoing paper, carbon-based transportation, dishwashers, TV, and adhering to whatever new austerities Beavan dreams up.
“Naturally, Beavan is hoping his no impact experiment has maximum impact. Like Thoreau, who, after all, was living on Emerson's land, Beavan is well connected. He has a book contract. His wife's friend has made him the subject of her documentary film, and he has a website, where people praise his boldness and question his motives.”
He almost makes Ethan Greenhart, spiked’s spoof environmental columnist, seem sane in comparison.
The article then goes on to discuss the following books:
* Judith Levine, Not Buying It
* Mary Carlomagno, Give It Up!: My Year of Learning to Live Better With Less
* Sara Bongiorni, A Year Without "Made in China": One Family's True Life Adventure in the Global Economy
* Alisa Smith and JB MacKinnon Plenty: One Man, One Woman, and a Raucous Year of Eating Locally
In conclusion Agger argues that: “The ultimate lesson of the new Thoreauvians seems to be that change is rarely drastic. We must strive for continuous, daily, incremental improvement toward whatever social, environmental, and economic goals we deem important.”
It starts by discussing Henry David Thoreau and his book Walden. For those not versed in American culture Thoreau was, among other things, a nineteenth century advocate of simple living.
The article then moves on to the present day with a discussion of Colin Beaven:
“The most notorious neo-Thoreauvian might be Colin Beavan, a 45-year-old New Yorker better known as No Impact Man, and even better known as The Man Who Doesn't Let His Wife Use Toilet Paper. That last detail was the highlight of a 2007 New York Times profile of Beavan, which portrayed how he, his wife, and their two-year-old daughter were attempting to live in downtown Manhattan with zero "net impact" on the environment. This goal involves eating only organic food grown within a 250-mile radius, composting inside their small apartment, forgoing paper, carbon-based transportation, dishwashers, TV, and adhering to whatever new austerities Beavan dreams up.
“Naturally, Beavan is hoping his no impact experiment has maximum impact. Like Thoreau, who, after all, was living on Emerson's land, Beavan is well connected. He has a book contract. His wife's friend has made him the subject of her documentary film, and he has a website, where people praise his boldness and question his motives.”
He almost makes Ethan Greenhart, spiked’s spoof environmental columnist, seem sane in comparison.
The article then goes on to discuss the following books:
* Judith Levine, Not Buying It
* Mary Carlomagno, Give It Up!: My Year of Learning to Live Better With Less
* Sara Bongiorni, A Year Without "Made in China": One Family's True Life Adventure in the Global Economy
* Alisa Smith and JB MacKinnon Plenty: One Man, One Woman, and a Raucous Year of Eating Locally
In conclusion Agger argues that: “The ultimate lesson of the new Thoreauvians seems to be that change is rarely drastic. We must strive for continuous, daily, incremental improvement toward whatever social, environmental, and economic goals we deem important.”
Labels: America, book, consumption, ethics, spiked
Thursday, November 27, 2008
Happy Thanksgiving!
An article on America’s Thanksgiving festival as a celebration of abundance and prosperity.
Labels: America, consumption, food
Wednesday, November 26, 2008
Critique of Obama’s Green New Deal
A critique of Barack Obama’s “Green New Deal” from a free market perspective from junkscience.com. I do not agree with all of it but it makes some valid points.
Monday, November 24, 2008
Protectionism could trigger global conflict
The following is my latest comment from Fund Strategy.
The proposed bail-out of Detroit's big three car manufacturers raises several potential problems.
For a start it raises the question of what capitalism means. Generally market economies are characterised by substantial private sectors. The state usually plays a role in the economy but its ownership of business assets is limited. Now it seems that even in America, generally seen as the world's pre-eminent market economy, key parts of the financial and auto sectors could soon be in state hands.
This in turn raises the question of the soundness of state finances. The more governments spend rescuing troubled companies the more their finances are likely to suffer. At some point they are likely to have to pay a high price in terms of higher taxes, reduced public spending or a combination of the two. They may be able to postpone the day of reckoning by increasing public borrowing but at some point their time will come.
But perhaps the biggest problem, and probably the least understood, is that of protectionism. Rescuing, say, General Motors (GM) raises the question of public money for other car makers such as Fiat, Toyota or Renault. Each could make a case to their own national governments that GM has an unfair advantage owing to its access to Federal funding. To make matters worse Barack Obama, the president-elect, has shown leanings towards protectionism with his criticisms of the North American Free Trade Association.
Protectionism is often wrongly understood as simply relating to tariffs. Yet there are many ways that states can back their own home-based companies besides tariffs. Providing subsidies of various sorts is probably the most important.
The rise of protectionism could easily undermine international cooperation. As economic circumstances get harder it could become increasingly difficult for countries to cooperate. The recent row between European Union countries over guarantees for retail bank depositors could be a sign of things to come. And the spat between Britain and Iceland could be a forewarning of larger-scale conflicts.
Of course all countries maintain some interest in international cooperation. Nobody is likely to benefit from all-out economic conflict. But the more protectionism takes hold the harder it will become to resist the forces pushing the world towards international rivalry.
The proposed bail-out of Detroit's big three car manufacturers raises several potential problems.
For a start it raises the question of what capitalism means. Generally market economies are characterised by substantial private sectors. The state usually plays a role in the economy but its ownership of business assets is limited. Now it seems that even in America, generally seen as the world's pre-eminent market economy, key parts of the financial and auto sectors could soon be in state hands.
This in turn raises the question of the soundness of state finances. The more governments spend rescuing troubled companies the more their finances are likely to suffer. At some point they are likely to have to pay a high price in terms of higher taxes, reduced public spending or a combination of the two. They may be able to postpone the day of reckoning by increasing public borrowing but at some point their time will come.
But perhaps the biggest problem, and probably the least understood, is that of protectionism. Rescuing, say, General Motors (GM) raises the question of public money for other car makers such as Fiat, Toyota or Renault. Each could make a case to their own national governments that GM has an unfair advantage owing to its access to Federal funding. To make matters worse Barack Obama, the president-elect, has shown leanings towards protectionism with his criticisms of the North American Free Trade Association.
Protectionism is often wrongly understood as simply relating to tariffs. Yet there are many ways that states can back their own home-based companies besides tariffs. Providing subsidies of various sorts is probably the most important.
The rise of protectionism could easily undermine international cooperation. As economic circumstances get harder it could become increasingly difficult for countries to cooperate. The recent row between European Union countries over guarantees for retail bank depositors could be a sign of things to come. And the spat between Britain and Iceland could be a forewarning of larger-scale conflicts.
Of course all countries maintain some interest in international cooperation. Nobody is likely to benefit from all-out economic conflict. But the more protectionism takes hold the harder it will become to resist the forces pushing the world towards international rivalry.
Labels: America, economics, trade
Sunday, November 23, 2008
Support for a "green new deal"?
An article in the Christian Science Monitor (19 November) on how an opinion poll in 21 countries shows support for more use of renewable energy sources even if it means higher prices in the short term. It talks favourably of President-elect Barack Obama’s plans to create jobs through the development of “clean technology” as well as the idea of a “green new deal”.
It is probably not yet clear to people that such a plan will mean substantially higher energy prices and the imposition of austerity.
It is probably not yet clear to people that such a plan will mean substantially higher energy prices and the imposition of austerity.
Labels: America, climate, economics, energy, environment, work
Wednesday, November 19, 2008
Yet more Green New Dealers.
Evidently an influential group of American business leaders is also backing what is essentially part of the “Green New Deal”. It believes that cutting carbon emissions can be combined with investment in new technology and infrastructure to create jobs and revenue.
The US Climate Action Partnership includes: Alcoa, AIG, Boston Scientific, BP America, Caterpillar, ConocoPhillips, Chrysler, John Deere, Dow, Duke Energy, DuPont, Environmental Defense Fund, Exelon, Ford, FPL Group, GE, GM, Johnson & Johnson, Marsh, National Wildlife Federation, Natural Resources Defense Council, The Nature Conservancy, PepsiCo, PG&E, PNM Resources, Rio Tinto, Shell, Siemens, World Resources Institute and Xerox.
The US Climate Action Partnership includes: Alcoa, AIG, Boston Scientific, BP America, Caterpillar, ConocoPhillips, Chrysler, John Deere, Dow, Duke Energy, DuPont, Environmental Defense Fund, Exelon, Ford, FPL Group, GE, GM, Johnson & Johnson, Marsh, National Wildlife Federation, Natural Resources Defense Council, The Nature Conservancy, PepsiCo, PG&E, PNM Resources, Rio Tinto, Shell, Siemens, World Resources Institute and Xerox.
Labels: America, climate, economics, environment
Tuesday, November 18, 2008
Sachs joins Green New Dealers
Jeffrey Sachs’ call for a government bail-out of General Motors, the most troubled of America’s car-makers, in yesterday’s Washington Post is in line with the drive for a “green new deal” (see 7 November 2008 post). He concludes his article by arguing:
“We face an unprecedented financial calamity, energy crisis and environmental threat. A vibrant, growing U.S. automobile industry should play an essential role in solving all three. The technologies that will win the day are in sight; industry has already made important advances. A partnership with government is vital and should begin this week.”
“We face an unprecedented financial calamity, energy crisis and environmental threat. A vibrant, growing U.S. automobile industry should play an essential role in solving all three. The technologies that will win the day are in sight; industry has already made important advances. A partnership with government is vital and should begin this week.”
Labels: America, economics, energy, environment, technology
Monday, November 17, 2008
U-turn leaders treat us with contempt
The following is my latest comment from Fund Strategy. I have also written the cover story which reviews the financial crisis so far
Another day, another U-turn. Western politicians seem to be in a competition over who can do the most. Unfortunately it is the rest of us who suffer as a result of their policy gymnastics.
Henry Paulson, the American Treasury secretary, was the latest culprit - at least at the time of writing. At the end of September he led a charge demanding that a $700 billion (£478 billion) programme to buy up troubled mortgage assets be passed. If it failed it would, we were told, lead to disaster.
Eventually, after an initial rejection by the House of Representatives, it was passed. But last week Paulson gave a speech saying the programme would not be used for its original purpose (see page 10). Instead its main focus would be to purchase equities directly from banks.
It is not that the first plan was necessarily right and the new scheme wrong. It is rather that politicians feel comfortable making U-turns without properly accounting for their actions. A particular course of action is first deemed essential and not long afterwards portrayed as unimportant.
The problem with such an approach is that it undermines confidence in markets and the economy still further. Rather than offering decisive leadership the politicians simply react to the latest news story. Their response is inherently short-termist.
Nor is such short-termism unique to Paulson or even America. Gordon Brown is a past master. It was he who for many years propounded fiscal "golden rules", which he has now broken with a fiscal stimulus. He claims that circumstances have changed but this begs the question: why have such rigid rules in the first place? He cannot have it both ways.
Brown also is now trumpeting the need for international economic cooperation. Yet Britain refused to join the euro when it had the chance.
Again, the point is not that one course of action is necessarily right and the other wrong. It is that politicians feel no need for consistency or accountability. They treat the electorate with contempt and then wonder why they are viewed with cynicism.
Politicians bear a large share of the blame for the severity of the current crisis. What we need is decisive action rather than leaders with the backbone of a jellyfish.
Another day, another U-turn. Western politicians seem to be in a competition over who can do the most. Unfortunately it is the rest of us who suffer as a result of their policy gymnastics.
Henry Paulson, the American Treasury secretary, was the latest culprit - at least at the time of writing. At the end of September he led a charge demanding that a $700 billion (£478 billion) programme to buy up troubled mortgage assets be passed. If it failed it would, we were told, lead to disaster.
Eventually, after an initial rejection by the House of Representatives, it was passed. But last week Paulson gave a speech saying the programme would not be used for its original purpose (see page 10). Instead its main focus would be to purchase equities directly from banks.
It is not that the first plan was necessarily right and the new scheme wrong. It is rather that politicians feel comfortable making U-turns without properly accounting for their actions. A particular course of action is first deemed essential and not long afterwards portrayed as unimportant.
The problem with such an approach is that it undermines confidence in markets and the economy still further. Rather than offering decisive leadership the politicians simply react to the latest news story. Their response is inherently short-termist.
Nor is such short-termism unique to Paulson or even America. Gordon Brown is a past master. It was he who for many years propounded fiscal "golden rules", which he has now broken with a fiscal stimulus. He claims that circumstances have changed but this begs the question: why have such rigid rules in the first place? He cannot have it both ways.
Brown also is now trumpeting the need for international economic cooperation. Yet Britain refused to join the euro when it had the chance.
Again, the point is not that one course of action is necessarily right and the other wrong. It is that politicians feel no need for consistency or accountability. They treat the electorate with contempt and then wonder why they are viewed with cynicism.
Politicians bear a large share of the blame for the severity of the current crisis. What we need is decisive action rather than leaders with the backbone of a jellyfish.
Labels: America, economics, finance, Fund Strategy
Wednesday, October 22, 2008
Bush shares water bed with NGOs
A striking feature of yesterday’s speech by George Bush at the White House Summit for International Development was how much he agrees with NGOs such as Actionaid or Oxfam. The supposed conservative demagogue and the supposed radical activists are sleeping in the same bed. The following passage on water provision clearly illusrates this shared approach. None of them are campaigning for modern water utilities for the world’s poorer countries. Note the cute PlayPumps suggestion - children working treadle pumps:
“The United States works with partner nations to deal with the lack of clean water. Last year we dedicated nearly a billion dollars to improve sanitation and water supplies in developing nations. We're also wise enough to enlist the private sector to help, as well.
“I want to share with you an interesting program -- for two reasons, one, it's interesting, and two, my wife thought of it -- (laughter) -- or has actually been involved with it; she didn't think of it. But she thought of it for this speech. She has been involved with a public-private partnership called the PlayPumps Alliance. It brings together international foundations and corporations and the U.S. government. Now, catch this: PlayPumps are children's merry-go-rounds attached to a water pump and a storage tank. When the wheel turns, clean drinking water is produced. And as my good wife says, PlayPumps are fueled by a limitless energy source -- (laughter) -- children at play.
“The United States is working with our partners to install 4,000 pumps in schools and communities across sub-Sahara Africa, which will provide clean drinking water to as many as 10 million people. It's not that hard to help people get clean drinking water. It takes focus, imagination, and effort. And I call upon all nations around the world to join us. (Applause.)”
It is also worth noting that Bob Geldof was another speaker at the event.
“The United States works with partner nations to deal with the lack of clean water. Last year we dedicated nearly a billion dollars to improve sanitation and water supplies in developing nations. We're also wise enough to enlist the private sector to help, as well.
“I want to share with you an interesting program -- for two reasons, one, it's interesting, and two, my wife thought of it -- (laughter) -- or has actually been involved with it; she didn't think of it. But she thought of it for this speech. She has been involved with a public-private partnership called the PlayPumps Alliance. It brings together international foundations and corporations and the U.S. government. Now, catch this: PlayPumps are children's merry-go-rounds attached to a water pump and a storage tank. When the wheel turns, clean drinking water is produced. And as my good wife says, PlayPumps are fueled by a limitless energy source -- (laughter) -- children at play.
“The United States is working with our partners to install 4,000 pumps in schools and communities across sub-Sahara Africa, which will provide clean drinking water to as many as 10 million people. It's not that hard to help people get clean drinking water. It takes focus, imagination, and effort. And I call upon all nations around the world to join us. (Applause.)”
It is also worth noting that Bob Geldof was another speaker at the event.
Labels: America, celebrities, development, water
Sunday, October 19, 2008
A revisionist history of American plenty
Have just caught up with the first episode of Simon Schama’s BBC television documentary series on “The American Future: A History”. It might more accurately be called “reinterpreting American history to fit today’s culture of low expectations”.
The episode on “American plenty” focused on how America has, sensibly in Schama’s view, come to accept the need for limits. It starts symbolically with the Colorado river and expresses the view that “the land of plenty is running dry”. The building of the Hoover Dam and Lake Mead was basically presented as an act of hubris. Although it enabled the irrigation of several states and the creation of cities such as Las Vegas it was running dry as a result of over-use and climate change. The message was clear: America has to learn to live with fewer resources.
Schama presented the debate between expansion and restraint as a constant theme of American history. Expansion might have brought some short term gains in living standards but it was also responsible for such acts as the “ethnic cleansing” of native Americans. He also presented the 1980 American presidential election as a contest between the calls for restraint of Jimmy Carter and the drive for expansion by Ronald Reagan. He ended with the correct point that both main candidates this time around accept the need for restraint.
Schama’s history is a classic piece of growth scepticism. It downplays the huge benefits of economic growth and exaggerates the scale of problems that need to be overcome.
The episode on “American plenty” focused on how America has, sensibly in Schama’s view, come to accept the need for limits. It starts symbolically with the Colorado river and expresses the view that “the land of plenty is running dry”. The building of the Hoover Dam and Lake Mead was basically presented as an act of hubris. Although it enabled the irrigation of several states and the creation of cities such as Las Vegas it was running dry as a result of over-use and climate change. The message was clear: America has to learn to live with fewer resources.
Schama presented the debate between expansion and restraint as a constant theme of American history. Expansion might have brought some short term gains in living standards but it was also responsible for such acts as the “ethnic cleansing” of native Americans. He also presented the 1980 American presidential election as a contest between the calls for restraint of Jimmy Carter and the drive for expansion by Ronald Reagan. He ended with the correct point that both main candidates this time around accept the need for restraint.
Schama’s history is a classic piece of growth scepticism. It downplays the huge benefits of economic growth and exaggerates the scale of problems that need to be overcome.
Labels: America, economics, environment, growth, television, water
America’s inequality debate
William Tucker argues in an article in the American Spectator that Paul Krugman’s contention that inequality is widening in America – a view that has influenced Barack Obama - is wrong. Tucker starts by pointing out that absolute living standards in America are rising:
“One out of every twelve Americans annually visits Disney World, making Orlando the nation's 9th busiest airport. With children in tow, the trip easily costs several thousand dollars yet the place is always packed. Eighty percent of American homes now have air conditioning. Almost everyone owns a television set. Seventy-five percent have a cell phone. The poorest in America -- the people in the bottom ‘quintile’ - live as well as the average American did in 1970. Calorie intake is now perfectly level across all classes in America - meaning we have reached the millennial dream where everyone has enough to eat” (original emphasis).
Tucker then goes on to examine the methodology favoured by Krugman to show it is wrong. He claims that Krugman’s argument is based on a 2001 paper (PDF) by Thomas Piketty and Emmanuel Saez published by the National Bureau of Economic Research. Tucker argues this paper distorts the true picture because it is based on individual tax returns. This means, for example, that teenagers on holiday jobs and babies with a college fund are counted towards the average. Average household incomes rose from $44,000 in 1980 to $57,000 in 2006, a 30 percent increase. The compound the effect the size of an average household fell over the same period.
I am not sure who is right in this debate but it is a topic worth examining.
“One out of every twelve Americans annually visits Disney World, making Orlando the nation's 9th busiest airport. With children in tow, the trip easily costs several thousand dollars yet the place is always packed. Eighty percent of American homes now have air conditioning. Almost everyone owns a television set. Seventy-five percent have a cell phone. The poorest in America -- the people in the bottom ‘quintile’ - live as well as the average American did in 1970. Calorie intake is now perfectly level across all classes in America - meaning we have reached the millennial dream where everyone has enough to eat” (original emphasis).
Tucker then goes on to examine the methodology favoured by Krugman to show it is wrong. He claims that Krugman’s argument is based on a 2001 paper (PDF) by Thomas Piketty and Emmanuel Saez published by the National Bureau of Economic Research. Tucker argues this paper distorts the true picture because it is based on individual tax returns. This means, for example, that teenagers on holiday jobs and babies with a college fund are counted towards the average. Average household incomes rose from $44,000 in 1980 to $57,000 in 2006, a 30 percent increase. The compound the effect the size of an average household fell over the same period.
I am not sure who is right in this debate but it is a topic worth examining.
Labels: America, inequality
Apocalyptic climate change exhibition in New York
The New York Times has a scary article on the new climate change exhibition at the American Museum of Natural History in New York. The Times argues that the exhibition is catastrophist in its tone:
“There are real issues to be considered here — questions about probabilities, alternative technologies, industrial evolution, relationships between developed and undeveloped nations — but they are never really explored. The main impression, instead, is of an almost religious urgency. ‘Repent!’ these displays seem to call out, ‘Repent! Before it’s too late!’.”
The article also includes a useful reference to a piece by Freeman Dyson in the New York Review of Books. Dyson sees environmentalism as a “worldwide secular religion” – although for him its rise in a welcome development.
The climate change exhibition is due to go to St Louis, Cleveland and Chicago, as well as Denmark, the United Arab Emirates, Spain, South Korea and Mexico.
“There are real issues to be considered here — questions about probabilities, alternative technologies, industrial evolution, relationships between developed and undeveloped nations — but they are never really explored. The main impression, instead, is of an almost religious urgency. ‘Repent!’ these displays seem to call out, ‘Repent! Before it’s too late!’.”
The article also includes a useful reference to a piece by Freeman Dyson in the New York Review of Books. Dyson sees environmentalism as a “worldwide secular religion” – although for him its rise in a welcome development.
The climate change exhibition is due to go to St Louis, Cleveland and Chicago, as well as Denmark, the United Arab Emirates, Spain, South Korea and Mexico.
Labels: America, apocalyptic, climate, environment, technology
Monday, September 22, 2008
Millennium conference in NY
Who has the Financial Times got blogging on this week’s Millennium Development Goals conference at the United Nations in New York? None other than Bono and his sidekick, Professor Jeffrey Sachs.
Bono describes his week ahead as follows: “A sleepless cocktail of rabble-rousing, meetings with politicians, chief executives, faith leaders and NGOs. People such as Nicolas Sarkozy, President Jakaya Kikwete of Tanzania and Gordon Brown.” It seems that not only does he regard himself as extremely important but senior politicians, businesspeople and religious leaders do too.
A few things to note about this week in relation to the conference:
* The Clinton Global Initiative looks like it will play a prominent role. Clinton - Bill rather than Hillary - will be appearing on the Daily Show on Tuesday to promote the campaign. It is billed as: “the almost first husband talks about the Clinton Global Initiative”.
* According to Bono there will be a “historic and innovative announcement on malaria on Thursday”. I would guess it probably has something to do with anti-malarial bednets.
Bono describes his week ahead as follows: “A sleepless cocktail of rabble-rousing, meetings with politicians, chief executives, faith leaders and NGOs. People such as Nicolas Sarkozy, President Jakaya Kikwete of Tanzania and Gordon Brown.” It seems that not only does he regard himself as extremely important but senior politicians, businesspeople and religious leaders do too.
A few things to note about this week in relation to the conference:
* The Clinton Global Initiative looks like it will play a prominent role. Clinton - Bill rather than Hillary - will be appearing on the Daily Show on Tuesday to promote the campaign. It is billed as: “the almost first husband talks about the Clinton Global Initiative”.
* According to Bono there will be a “historic and innovative announcement on malaria on Thursday”. I would guess it probably has something to do with anti-malarial bednets.
Labels: America, celebrities, development, economics, health
Thursday, September 18, 2008
Real Clear Markets picks up myths article
Real Clear Markets has picked up my Spiked myths article in its “off the street” section today.
Labels: America, economics, finance, media appearances, spiked
Tuesday, September 16, 2008
Myths about the Wall Street crisis
Since the troubles on Wall Street at the weekend many key notions have been repeated as the accepted wisdom. However, on closer examination they are both old and inaccurate.
* Myth one: recent developments prove that Wall Street is nothing but a giant casino. This notion was stated explicitly by John McCain, the Republican candidate in the American presidential race, when he argued that the American worker has “been betrayed by a casino on Wall Street”. He was, probably unknowingly, echoing the ideas of Susan Strange, a leftist thinker, who in 1986 had an influential book published entitled Casino Capitalism.
In fact as I argued in my book Cowardly Capitalism (Wiley 2001) the contemporary financial markets are characterised by risk aversion rather than a hunger for big bets. This is much more than saying the markets are simply fearful. Rather I argue that the main reason for existence of financial markets has changed from raising capital to transferring risks. Financial markets used to provide a mechanism for businesses to raise funds or for individuals to obtain funds if they needed them. Today the purpose of many financial instruments is to transfer risk from one party to another.
This “cowardly” nature of the financial markets explains why the financial crisis has spread in the way that it has. Repackaging or “securitising” mortgages initially provided a way for lenders to sell on the risk to other parties such as investment banks. In the short term this had what was seen as the desirable effect of diversifying risk. But the risk was simply transferred rather than disappearing. Once problems emerged it could spread more easily from one institution to another. This explains what is sometimes misleading referred to as a “contagion” effect or virus in the market.
* Myth two: the markets were driven by greed. It would be more accurate to say that the developments are driven by fear rather than greed. However, it is not fear in the sense of a timeless human emotion. Rather it is a general climate of anxiety in contemporary society that affects the financial markets as everyone else.
* Myth three: it is all about confidence. It is true that confidence plays more of a role in the financial markets than in the economy as a whole. But it is a mistake of exaggerate the importance of confidence in the resolution of the crisis. The strength of the underlying real economy is a key factor to consider when trying to determine the likely outcome. The contemporary economy has a weak growth dynamic but it is not facing any fundamental crisis. It is characterised by sluggish growth but there are no signs of collapse.
* Myth four: it all started with irresponsible American subprime mortgage lending. The crisis is routinely blamed on irresponsible lenders and reckless borrowers whose debts have now gone bad. According to this caricature a combination of greedy bankers and “trailer trash” are to blame for the crisis. In reality the American housing bubble was simply a response to the low interest rates maintained by the Federal Reserve earlier this decade. This loose monetary policy was in turn a way of keeping an otherwise sluggish economy going by means of promoting a consumer boom. The fundamental problem was therefore a weak economy rather than subprime borrowers or lenders.
* Myth five: The recent actions of the American authorities, particularly last week’s bail-out of Fannie Mae and Freddie Mac, represent an end to the free market on Wall Street. Several commentators have bemoaned the fact that the American authorities have taken a strongly interventionist stance on dealing with the financial crisis (see recent posts). However, even on Wall Street, despite its reputation as a bastion for free markets, state intervention has long been pervasive. The American authorities intervene in the economy in numerous different ways and tightly regulate the financial markets. Indeed, as argued above, the roots of the current crisis can partly be attributed to the earlier actions of the Fed.
* Myth one: recent developments prove that Wall Street is nothing but a giant casino. This notion was stated explicitly by John McCain, the Republican candidate in the American presidential race, when he argued that the American worker has “been betrayed by a casino on Wall Street”. He was, probably unknowingly, echoing the ideas of Susan Strange, a leftist thinker, who in 1986 had an influential book published entitled Casino Capitalism.
In fact as I argued in my book Cowardly Capitalism (Wiley 2001) the contemporary financial markets are characterised by risk aversion rather than a hunger for big bets. This is much more than saying the markets are simply fearful. Rather I argue that the main reason for existence of financial markets has changed from raising capital to transferring risks. Financial markets used to provide a mechanism for businesses to raise funds or for individuals to obtain funds if they needed them. Today the purpose of many financial instruments is to transfer risk from one party to another.
This “cowardly” nature of the financial markets explains why the financial crisis has spread in the way that it has. Repackaging or “securitising” mortgages initially provided a way for lenders to sell on the risk to other parties such as investment banks. In the short term this had what was seen as the desirable effect of diversifying risk. But the risk was simply transferred rather than disappearing. Once problems emerged it could spread more easily from one institution to another. This explains what is sometimes misleading referred to as a “contagion” effect or virus in the market.
* Myth two: the markets were driven by greed. It would be more accurate to say that the developments are driven by fear rather than greed. However, it is not fear in the sense of a timeless human emotion. Rather it is a general climate of anxiety in contemporary society that affects the financial markets as everyone else.
* Myth three: it is all about confidence. It is true that confidence plays more of a role in the financial markets than in the economy as a whole. But it is a mistake of exaggerate the importance of confidence in the resolution of the crisis. The strength of the underlying real economy is a key factor to consider when trying to determine the likely outcome. The contemporary economy has a weak growth dynamic but it is not facing any fundamental crisis. It is characterised by sluggish growth but there are no signs of collapse.
* Myth four: it all started with irresponsible American subprime mortgage lending. The crisis is routinely blamed on irresponsible lenders and reckless borrowers whose debts have now gone bad. According to this caricature a combination of greedy bankers and “trailer trash” are to blame for the crisis. In reality the American housing bubble was simply a response to the low interest rates maintained by the Federal Reserve earlier this decade. This loose monetary policy was in turn a way of keeping an otherwise sluggish economy going by means of promoting a consumer boom. The fundamental problem was therefore a weak economy rather than subprime borrowers or lenders.
* Myth five: The recent actions of the American authorities, particularly last week’s bail-out of Fannie Mae and Freddie Mac, represent an end to the free market on Wall Street. Several commentators have bemoaned the fact that the American authorities have taken a strongly interventionist stance on dealing with the financial crisis (see recent posts). However, even on Wall Street, despite its reputation as a bastion for free markets, state intervention has long been pervasive. The American authorities intervene in the economy in numerous different ways and tightly regulate the financial markets. Indeed, as argued above, the roots of the current crisis can partly be attributed to the earlier actions of the Fed.
Labels: America, economics, finance
