Thursday, 29 December 2016

Creodes' Cannibal roads

Though my Thought was decidedly not a Daedalus too dazzled its own maze to escape
But such noble rot as- 'Dionysius' just deserts yet sweeten the grape.'
Even so, I dug my grave with fork and knife. Ah! it gapes for me now I sicken
How bitter to feed, life after life, a sole, self-staling, battery chicken!

Prince! Value is Work's kinetic breeding turbulence in viscosity
As Creodes' cannibal roads sire Seigniorage on Reciprocity

Monday, 26 December 2016


I suppose Mum must have picked up an extra shift
Or maybe the old Jew on the market stall had over stocked
Still, it was Christmas and as globed snow began to drift
In my new Chelsea Strip, Wembley rocked!

For a moment, Kairos/Christos, for a moment is all that Time is
Till the wally with the brolly passes on your bribe of orange squash
& Mum's green chutney sarnies; Ah! how English is this bliss!
To feel Blacks can be Becks tho' our spice isn't posh

Prince! Memory is the question who asks begs it
Like thy Uber too abrupt, my hip flask's Brexit 

Sunday, 18 December 2016

Dad's lads & Bad Dads- Andrew Sanchez's theory of the precariat.

'Dad's lads' was a term I came across when I was first studying Industrial Economics. The notion was that, at the margin, Craft Unions recruited only the sons of members, preventing other unskilled workers from being able to move into better paid niches within the industry, thus entrenching mutual antagonism and a divisive stratification within the Labor pool. The plethora of Craft Unions, each jealously protective of its inherited privileges, contributed to the parlous state of Britain's declining industrial base. It also hurt the Labor party, because the better off skilled worker had begun to see any gain his Union could make for him would be at the expense of the unskilled workers who either belonged to a different Union or else were disqualified from entry into his own line of work by a sort of self perpetuating caste system. Thus 'Dad's lads' was part of the reason for Mrs. Thatcher's election victory as well as an explanation for the worrying survival of racist and communal sentiments (for example, in Northern Ireland) within the working class.

Employers reacted by favoring 'Company Unions' on the Japanese model because, during the course of the 1970's, it became clear that Government mediations- even the proverbial 'beer and sandwiches' meetings at Downing Street- were not able to curtail the 'Dad's lads' based Craft Unions opposition to rationalization and their insistence on maintaining or widening wage differentials.

However, as property rights in jobs became more and more financially salient- in particular with respect to ballooning pension obligations- Companies were forced down the road of casualisation creating duality within the Labor pool with new entrants increasingly consigned to 'zero hours contract' status who could be hired and fired at will. This phenomenon added a new term to our vocabulary- the 'precariat' i.e. precariously employed proletariat. Middle aged people, like myself, began to feel guilty for having secured our own economic security and affluence at the expense of the life-chances of the rising generation.

Previously, in Economic theory, the Enterprise was considered as the proper body to take on risk for which it earned the reward of profit. However, improved property rights in jobs as well as greater longevity due to affluence and better health care (which meant pension obligations greatly increased) made the risk/reward ratio, for providing permanent employment, untenable for globally competing Enterprises. Hence, the burden of risk was shifted onto those least able to bear it- viz. young, asset poor, entrants to the labour market.

The question arises, why did Enterprises not just reconfigure themselves to get rid of the inherited 'Dad's lads' permanent workers?

Andrew Sanchez, writing of Tatas in Jamshedpur, enables us to discern a wholly novel reason why such 'deadwood' might be retained.
In this context, it should be borne in mind that Tatas ran a paternalistic 'Dad's lads' recruitment policy. However, since property rights in jobs are better entrenched in India- people can't be fired- and also because Tata's blue collar workers are, on Sanchez's report, drug addled, 'proto-male Bihari ideal' type, hooligans with a negative marginal product- the question arises in its acutest form- why does a rational Enterprise not just surgically remove the 'deadwood' which permanent employees represent? Why do they not employ only casual workers?

The obvious answer is that it is a subterfuge required by India's bizarre Labour laws and thus has no universal significance. However, the puzzle remains, why not just pay these doped up hooligans to go sit somewhere else rather than let them run amok on the shop floor?

The answer, according to Sanchez, is that the spectacle of these ganja smoking, glue sniffing, shitheads who get subsidized housing and higher wages and a ton of other benefits from the company, reminds the casual worker, who is himself a 'dad's lad', that his precarious future was ruined by the greed and laziness of his own 'bad dad'. Thus Tata's retains its paternalistic image- it's just that a generational problem occurred and the sons have to pay the price for the worthlessness of their middle aged, workshy, drug addled, fathers.

Why do Tata's keep the permanent staff around on the shop floor? Sanchez says the contribute 'only indirectly' to production. What is that 'indirect contribution'? Sanchez paints a vivid picture-

So there you have it. The young casual worker doesn't want to end up like the crazy, dope smoking, Nepali with a tumor the size of a golf ball bulging out of his cheek.
The message is clear- work hard and even if you don't get paid much or enjoy subsidized housing and job security and so on, at least you won't end up an utter degenerate like Sandeep. What sort of husband and father do you suppose he is? Is that the pattern you want your own life to conform to? Hasn't Jamshepur had enough of 'Dad's lads' turning into 'bad dads'?

Not that Sandeep is a bad man. It's just that the security of permanent employment has turned him into an undisciplined sack of shit. If he were truly evil, he'd have entered the Union racket and killed a few people by now.

Trade Unions and Property Rights in Jobs don't necessarily turn 'Dad's lads' turn into 'bad dads'. But, in 'sunset industries' in a criminalized, 'tribal' backwater like Jharkhand, that's what is bound to happen.

At least, that's what Sanchez's book is telling us.
But, this raises the question- could India have taken another path?
What if the greed of 'bad dad' permanent employees hadn't ended job security for their sons?
Well, older Indians already the know the answer to this question.
Consider the following item from the Times of India, April, 1997

It appears, casteist hiring policies- 'Dad's lads'- produces not just bad dads but murderous sons.

Saturday, 17 December 2016

Andrew Sanchez & why Capitalism isn't the only antidote to endemic Criminality.

 V.G Gopal, like my maternal grandfather, was a Tambram freedom fighter, Parliamentarian and Trade Union leader. There the resemblance ends.
Gopal, came out strongly against the Communist attempt at fomenting unrest at the Tata Steel plant in Jamshedpur in 1958 and was notably conciliatory in his attitude to management thereafter.

In 1993, he was shot in so theatrical and public a manner that shock-waves of grief and anguish radiated out from Jamshedpur shaking up the entire nation. This Mafia style execution was carried out, it seemed, by an ethnically Bihari faction seeking control of the Tata Workers Union as part of a larger extortion racket concerned with rent seeking opportunities associated with scrap metal, sub-contracting, and other such activities in which leverage against the Tata Management might come in handy.

In a recent book titled 'Criminal Capital: Violence, Corruption and Class in India', Andrew Sanchez gives prominence to his meeting with a Tata middle manager, named Ashok, who alleges that his employers were actually complicit in bumping off Gopal despite the latter's resistance to the use of the secret ballot in Union business which would have increased the chances of industrial action and thus cost the Tatas a pretty penny.

Andrew Sanchez is probably a white dude. What's more he's a Professor of some sort and thus probably as stupid as shit. If you're a brown dude, named Ashok or Jaslok or whatever and live in fucking Jamshedpur, it is entirely reasonable for you to pass the time of day by trying to sell any visiting gora the Taj Mahal or the secret to the rope trick or a pack of lies featuring 'Neo-Liberalism' prowling around killing innocent Trade Unionists and raping women and taking down the pants of Paleo-Liberalism and saying sarky things about the size of its genitals.

However, in this day and age everybody's got a smartphone and the wikipedia app on voice command. So, all you Ashoks or Jasloks out there reading this need to understand that one shouldn't say- 'Tatas haven't had a strike since the 1920's' coz the '58 strike is well documented and part of Commie folklore and the subject of plenty of books and articles.
Goras may be ignorant of how stuff goes down in India but fact-checking is now so easy you can't spin just any old yarn you like.
The other point is,  goras who write books- like this Sanchez dude- check their facts once they get home because they don't want to come across as illiterate buffoons. Unless, clearly, they are Professors of 'Social Anthropology' at Cambridge or else the bogeyman of 'Neo-Liberalism' features prominently in the text.

Suppose Sanchez had done a spot of Googling before writing his book, what would he have discovered about Gopal's murder?
1) Gopal was shot on the same day that a Court was due to give a judgment on 'voice votes' vs 'secret ballots'. Killing Gopal so publicly sent the message that it didn't matter who got elected or whether or not industrial action was resorted to. Power lay with the 'Dons'. In the jargon of incomplete contract theory, 'appropriable (as opposed to residuary) rights of control' of a certain type had been asserted.

The Tatas, already weakened by their spat with Russi Modi (like the current contretemps with Cyrus Mistry), were being put on notice that their market cap was in danger unless they increased 'disintegration'- i.e. subcontracting- and soaked up excess 'black' liquidity with scrap metal and other such auctions.

2) It was, the C.P.I MLA, Kedar Das who had taken up the cause of the non-permanent workers and adivasi laborers, not Gopal. But Das died in 1981- a year Sanchez memorializes as featuring 'the violent suppression of a contract worker's strike'. This is not to say that no voices were raised against the injustice being done to the 'temporary' workers or that the same basic problem was not found elsewhere. On the contrary, Labor learnt some very bitter lessons during the Eighties. So did we all.

 Gopal, quite properly, wanted a better deal for his members but, being politically very experienced, would never have called a strike in '93 because the State Government, under Lalu, would have broken it with great enthusiasm so that the Bihari clique could pick up the pieces. On the other hand, once Indrajit Gupta became Union Home Minister, Gopal- had he been alive- would have extracted his full pound of flesh.
There is a 'meme' going round that both Gopal and Prof. Abdul Bari were killed by the Tatas. This is quite ridiculous. Trade Unionist/M.LA's of their caliber were vital for the Tatas to fight off local politicians keen to plunder them. I recall hearing the story of Jaganath Mishra trying to get Russi Modi indited on some false M.I.S.A charge to extort money from the Tatas. People like Kedar Das (i.e. pro-Moscow Communists who supported the Emergency) were in a position to protect this 'Capitalist oppressor'! Why would they do so? The answer is simple. If the Capitalist hands over his profit to the Mafia/Politician, only crumbs will be left for the workers.

My grandfather started off as a demagogue, like Prof. Bari. The fact is, workers were able to make quite substantial advances at that time and, strangely enough, even Scottish mill owners got on side because they found that their own profits could go up because there were efficiency gains to be made from having a well fed work force free of the twin evils of the grog shop and the usurer. It was entirely rational for Capitalists to want to build 'model' company towns. Capital and Labor have to co-operate, not try to destroy each other. Gopal was of a younger generation and got his first job with the Tatas. He really was a Company man in that sense.

 He well knew the story of the first Parsi trade unionist- his name has been airbrushed from history- who organized the Bengalis to protest against the vastly superior treatment given to White employees. Unfortunately, Subhas Chandra Bose intervened and so nothing came of it. It was politicians who first fucked up the Unions by pretending that workers were weak and need protection.
But such soi disant Protectionism prevented both Indian Capital and Labor from coming up through hard work. Instead, corrupt Rent Seeking became the only game in town.

Sanchez tells the story of what happens to the son of a permanent employee who gets an 'apprenticeship' as part of the Tata in house hereditary caste system. The young man is stuck on a low salary. He will never be made permanent and given housing and so on. Why? Because he'll stop working the moment he gets that coveted status and it will be impossible to fire him. Still, there's a 'Coasian' solution. His supervisor hints he can start sub-contracting. The young man draws up a business plan and goes to the Bank for a loan. He is turned down because he has no business experience or collateral. 'Boo to you, Neo Liberalism! Oh woe is me!- the whole system is corrupt- fucking Tatas, they are all gangsters. Don't you know Ratan Tata held down Cyrus Mistry and fucked him in the ass till he agreed to resign? I bet he also threatened to rape my Bank Manager and post the video on You Tube if I got my loan. What's that you say? Oh. I was supposed to go touch the feet of my local Don was I? By borrowing from a guy who will break my legs if I don't pay up, I send a signal that I've 'skin in the game' and am gonna work my ass off.  Makes sense. Wish they'd taught this stuff in my Poli Sci class! Fuck the Professors. They talk bollocks continually. Oookay, just ran the numbers... Hey! this actually works out even better! Once I'm under the Don's wing, I get no Labor or Landlord problems and can soon get all sorts of sweet sweet soft loans and business development grants and fucking environmental awards and shit. Sorry, Sanchez dude, it was swell talking to you, but I've got places to go and people to meet!'

Of course, Sanchez didn't really point out to this young guy that people needed to see he had skin in the game. Instead, he nodded his head as this native informant burbled on about how like Capitalism is a crooked conspiracy dude and there gonna be a Revolution real soon coz the Bank Manager didn't just hand me a sackful of cash even thought I'd like printed up this Excel sheet which showed I was so gonna be a billionaire.
In other words, Witchcraft is real provided it is called neoliberalism.
The fact that no one lends money without taking collateral or verifying properly audited Accounts demonstrating exceptional commercial acumen- except a guy who will break your legs if you don't pay- is irrelevant here. Why? Because the native informant is speaking of a type of black magic only the learned foreign Professor is foolish enough to believe in.

That's the problem with Western Professors who actually do field work in the dirty old East. If they are smarter, less gullible, in their verbal interaction than even the stupidest of the 'native informants' they meet, then they defeat their own purpose by ameliorating the picture of dirt and sloth and stupidity which makes their study 'Ethnographic'.

So Sanchez is saying that Indian workers think that Trade Unions are run by gangsters. Since there will be no Trade Union if the factory shuts down because the people running it have all been killed or have run away or don't have any money left, it follows that Indian workers feel that spending all their time agitating rather than doing what they are paid to do will provoke an 'implicit disciplining' which might well take the shape of 'coercion' because gangsters will fuck you up if you thoughtlessly set fire to a cash cow of theirs.

Do Indian workers also think that Capitalists- not Trade Unionists- are all a bunch of gangsters? No. If they did, there would never have been a Trade Union in the first place- that's Gangsterism 101 dude.
When Gabbar Singh said 'kitne aadmi the?'  Kaliya did not reply- 'Management is totally out of line to ask how many opponents we faced. This is a blatant provocation and denial of fundamental rights of the worker. We will now gehrao Management till our legitimate demands are met!'

Nobody really believes that the Tatas are a bunch of gangsters. Why? Because they produce things that are of obvious utility and do so in a highly rational manner. Ratan Tata did not really punitively sodomize Mistry. He didn't even go on Twitter threatening to kill his mother. No doubt, both sides have retained lawyers and tempers are heated but nobody expects to see anyone involved being actually gunned down in the street.
Sanchez mentions Vadim Volkov's notion of Capital as having a 'enforcement partnership' with organized crime but, clearly, no Indian thinks the Tatas or Birlas or Ambanis actually have such partnerships because otherwise they would settle their own internecine disputes with gun play as happens in movies about Russian oligarchs. Where the rule of law has been vitiated by opaque or unenforceable property rights or contractual obligations; yes a rent opportunity for Mafia style intermediation exists but this is not and has never been the case for the top end of the Industrial sector- which is well served by top notch lawyers and a storied and sophisticated legal code.

No doubt, some of our current big players started off on the shady side of the street but no physical coercion was required or involved in their burgeoning. Once such players go public, India's well developed system of commercial law is the Schelling focal solution all gravitate to and no amount of political clout can muzzle the wrath of the market or prevent the Courts delivering their, no doubt very dilatory, doom.

Sanchez argues that Indian working class discourse- which accuses Trade Unions and populist politicians of greed and gangsterism- also indicts 'economic liberalisation'.
This is fantasy. Indian workers don't sit around gupshupping about 'Neo-Liberalism' or 'Repressive Desublimation' or 'False consciousness vs Gramscian hegemony' or any other such academic availability cascade. Sanchez himself, even when talking to a worker with an M.A in Politics, can't produce any evidence that this happens. He does, however, provide evidence that Indian workers share the oft stated view of Right Wing nutjobs everywhere that Trade Unions are actually a Mafia style conspiracy against Labor and that Socialism- even in its home-grown 'Naxal' incarnation- is just another word for a Hobbesian state of Nature. Moreover, since Jamshedpur's workers are often third or fourth generation 'wards', everybody knows that Union officials & Communist agitators have always been either rabid murderous nutters or greedy murderous cunts or rabid murderous nutters who are also greedy murderous cunts.

Perhaps Sanchez has a theory about how 'Economic liberalisation'- i.e. Manmohan's vaunted reforms after the I.M.F put a gun to our heads- causes the spread of greed and the dissolution of moral values and thus creates gangsterish Unions and Politicians. Unfortunately, he chooses to put all the blame on Indira Gandhi's Emergency which by some magic managed to completely change the Indian political landscape in less than 2 years.
During the Emergency, the Constitution was changed so that India became a 'Socialist' Republic.
Not 'Liberal', not 'neo-liberal'- Socialist.
After Indira fell, even the fundamental right to property was removed.
There was no 'liberalisation'- economic or political or cultural.
Gangsterism flourished under the Left Front in Bengal for 30 years and continues to flourish under Mamta. By contrast, crime and communal violence have fallen in Modi's Gujarat. 
Everybody knows this.
So what is Sanchez actually telling us here?
The only logical answer is that, Capital is the only antidote to senseless Violence because, by definition, it has both the means and the motive to interest itself in promoting the Rule of Law as opposed to the Law of the Jungle.
But this is true only of Sanchez's reception of 'emic' working class Indian discourse. 
 It is with shame that I must confess to you that Sanchez is wrong. You see, in India- not just Delhi or Patna or Jamshedpur- I look and talk like a very low class fellow- a black Madrasi to boot. I engage in 'emic' discourse with workers coz no one believes I've ever been abroad. Etic is not on the table.

True, if I show a modicum of intelligence, the other guy ups his game and I find out something interesting. Still, I'm not a real high I.Q dude. I can't calculate the Shapley value of a game while chewing paan the way any sharp operator from the boondocks can. Still, I do come away having learnt something about 'etic' economics. In this instance, it is that Labor needs the Rule of Law a lot more than Capital which can always hedge in a different jurisdiction or Tiebout model. Old fashioned freedom fighters- people like my mum's dad, but also Prof. Bari or, truth be told, the firebrand Kedar Das, knew this in their bones because those bones had been broken by policemen who later on, were great pals or poodles to the Politician/Gangster nexus.

V.G. Gopal was in a different league intellectually. If he hadn't been killed, maybe he could have done something substantial for 'contract' workers once Congress fell.

But, that's not what Sanchez's book is telling us. He thinks the Indian working class sees, not Capital, but the cash-nexus as inherently criminal. If Sanchez is right, they will vote for Modi not despite but because of all the pain his cackhanded demonetization scheme is putting them through.
The will see it as a 'vishodhana' a purgation of the life-blood of the local dons.
It is a remarkable conclusion to draw from the lucubrations of a politically correct Cambridge Don.
But then, it takes one to know one.

Friday, 16 December 2016

The price of Liberty

a) Eternal Vigilance which means staying amped- doing a coupla lines every few minutes just to stay focused- and thus displaying
b) Eternal Belligerence coz that little old lady tapping confusedly at her i-phone might totally be like a KGB hacker working for Trump or sumpfin. OMG, she's glancing up this way! You looking at me bitch?! Ka-blammo!
c) Eternal Negligence coz if you hadn't neglected to purchase a gun and load it with ammunition you'd be doing time right now. 

Monday, 5 December 2016

Aiken & Talisse go all post-truth.

Let us suppose I am a Trump supporter. Let us further suppose that I believe that many of Trump's statements are false but I still don't think Trump is a liar. 
Am I a 'post-truthist?'
Judge for yourself.
This is how I would respond to the following diatribe by a pair of Professors of Philosophy (My comments are in bold

In Philosophy, there is a familiar distinction between internal and external criticism.  In the real world there is a familiar distinction between Academic debate and stuff which actually means something . When a claim is criticized from an external perspective, the critic attempts to show that the claim fails to satisfy some criterion of success that he himself imposes. Why should he impose a criterion of success himself, instead of genuinely looking for the Schelling focal criteria likely to be consensual for all relevant readers of the text he is criticizing? After all, the critic wants to persuade others rather than just ride his own hobby horse to death without influencing anybody. In any case, David Lewis covered all this long ago. 

External critics hold their targets to standards supplied by the critic himself, external criticisms are commonly met with counter-charges of question-begging. An external critic of what you have written may denounce your writing as failing to hit the mark because it does not cause its readers to immediately apply for gender reassignment surgery- which is the only way we will get a truly equal Society. Here, the critic has himself supplied the standard by which you are to be assessed. Will you really combat this external critic by a counter-charge of question begging? Wouldn't it be safer and simpler to just giggle nervously and edge away from such an interlocutor? And this is surely the response to expect were one to offer an external criticism of post-truthism. To simply assert that indeed there are politics-free facts is to invite the counter-assertion that the very idea of a politics-free fact is itself a covert assertion of a political viewpoint, one that the post-truthist rejects. Oh dear! You think Trumpistas are exponents of Post Modernism. Joe the Plumber is constantly quoting Derrida to Jack the Dry Wall guy. Still, even if this were the case, so long as there is a Schelling focal criteria for the target audience which the author has not 'internalized', it remains the case that an external critic does have an Archimedian point from which to overturn whatever is persuasive in the 'post-truthist's' argument.

Let's take a concrete example-
Paul Gottfried has been described as the 'godfather of the alt-right'. His notion is that America is no longer a liberal democracy but rather a 'therapeutic managerial state' and that this works to the disadvantage of a particular coalition which Gottfried himself thinks is more worthy than any other and which probably excludes low IQ, monkey-god worshiping, darkies like me. 

I excerpt the following from an article on Gottfried in the Tablet-

'Today, we are ruled by a class of managers who dress like bureaucrats but act like priests. This technocratic clerisy justifies its status by enforcing Progressive precepts like multiculturalism and political correctness, which pit different groups against each other as if they were religious edicts. As Gottfried tells it he was banished from the mainstream of political discourse for rejecting this liberal catechism. Now, versions of the same ideas that Gottfried says got him banished will be gospel in Trump’s White House.'

This is not a philosophical but rather a socio-economic argument-  one which privileges a particular coalition in a manner adversarial to the existing 'core'. It can be formulated game theoretically and then empirical studies can be conducted o determine whether there really is some malign rent dissipation associated with this soi disant 'therapeutic managerial' clique.

Once some empirical work has been done, one can certainly have a sensible discussion about this- it just won't be a philosophical discussion except in so far as we hit open problems in Maths.

What remains, then, is internal criticism. The internal critic attempts to show that his opponent's view fails to satisfy some desideratum that the opponent herself embraces. Accordingly, the gold standard for internal criticism is self-defeat. That is, one ironclad mode of internal critique is to show that the opponent's view is inconsistent with itself. What if the opponent subscribes to Dialethia or multi valued logic or a particular kind of intuitionism? Then no scandal obtains. In any case, there's always problem of disentangling the quid juri/quid facti distinction so as to get clear of the Duhem-Quine thesis
 To get the flavor, imagine the simple-minded relativist who asserts that "no statement is objectively true." This claim is commonly offered as a critical maneuver against some proposed candidate for an objectively true statement. The trouble is that the simple-minded relativist's claim is self-defeating, as it itself purports to express an objective truth. It is simple-minded to suggest that it is objectively true that a self-defeating claim can be distinguished from any other sort for all possible affirmations of that claim unless all language is necessarily intensional. So if there is a version of relativism that is internally coherent (an open question in Philosophy), it can't be simple-minded.  Nor, by the same token, can there be any refutation of it which isn't simple-minded.
The trick for the sophisticated relativist is to figure out a way to deny objective truth while also preserving relativism's critical edge.
One way to preserve the 'critical edge' of a way of looking at the world, is to show that it generates propositions with some novel conceptual tie to a type of action which appeals to people on deontological, consequentialist, thymotic or virtue ethical grounds or some mix of such grounds.

A similar line of internal criticism can be launched against the post-truthist. Recall that those who embrace the post-truth phenomena tend to offer post-truthism as a critique of the status quo. As we saw, the denial that Trump's lying is objectionable substantially blunts the critical force of the claim that Hillary is "crooked." Not really. Trump has never held public office. The claim against Hillary is that she was a crook while paid by the taxpayer not to be so. We understand that it is one thing to 'blag one's way into a job' and another to commit a fraud once employed. It's a big theme in Hollywood movies and TV series and also in shows like the 'Apprentice'. The same goes for the tactic of denial; if Trump's unrelenting denials are exonerating, the same must go for any other persistent denier. Nope. Not if there is a Newcomb type dilemma in the one case but not the other. Tactics can only be judged against the broader strategic picture.  Mahatma Gandhi made a policy of pleading guilty to anything the British charged him with. Many Brits felt this, by itself, was 'exonerating'- a true seditionist wouldn't plead guilty to sedition; at the very least he would refuse to recognize the authority of the court.  Gandhi faced a Kavka Toxin type problem of a Socratic or Christ like nature and this was eventually the view that prevailed among the British establishment. Other revolutionaries, however, were not exonerated no matter what their plea.

 Insofar as these varieties of post-truthism affirm anything, they lose their critical edge.
Anything novel that is affirmed can only have a critical edge if it coincides with a Schelling focal point with respect to dissatisfaction with the status quo. One reason Kennedy got elected was because he banged on about an imaginary 'missile gap'. This tapped into a feeling of dissatisfaction prevalent at that time which saw Eisenhower and Nixon as small town hicks who didn't understand how quickly the Republic had grown into a Global Hegemon endowed with limitless technological prowess. Sputnik was small potatoes. The Nation wanted a guy who could promise a moon shot.

Matters differ somewhat with respect to the alternative media and intellectual nihilism. If anything, the difficulty here is more severe. "Alternative" news runs centrally on uncovering and publicizing the biases alleged to be driving the mainstream news media. But this activity draws its critical force from the tacit presupposition that news media are supposed to be unbiased. Nonsense! Nutters who think everybody in the Media is a homosexual Jewish Free Mason bought and paid for by the Rothschild Lizard People of Planet X don't want an unbiased news media at all. Nobody with any sort of axe to grind wants an unbiased Media or an unbiased Judge or an unbiased Umpire for that Tennis game in which I will smash the Williams sisters at Wimbledon and get the money for gender re-reassignment surgery. However, if post-truthism prevails, there is no such thing as unbiased reportage. Consequently, it's not clear what critical force there is in exposing the biases of a mainstream media outlet. To put the point in a different way, the practice of exposing bias derives its critical edge from the implicit claim that the exposing party is itself offering an unbiased objective assessment of its target.  Nope. It is enough to say that there is some alternative narrative which is more biased in favor of whichever in-group is being appealed to. But if the post-truthist holds that there is no unbiased perspective, then her perspective is simply another expression of bias. It is not clear how the clash of biases amounts to anyone being exposed or debunked. Actually, nothing could be clearer. In so far as the Media affects 'agenda control' and policy space is multidimensional, the McKelvey Chaos theorem predicts that rational agents will want biased Media, biased Representatives, biased Judges etc. What matters in any incomplete contract- including the Social Contract- is 'residuary control rights'. It is perfectly rational to seek a rent from the creation of a coalition which can be decisive if it acts cohesively to block or otherwise change the 'core' of the political game.
The same goes for the intellectually nihilistic version of post-truthism, since the view is supposed to be that those who think that there can be proper inquiry and evidence are either na├»ve or shills for the powerful. The view has its critical force in unmasking something that had been hidden. But if the nihilist is right, it itself cannot be in any better position to make such a critical point. Unless it is urging the capture of a rent- i.e. has a superior instrumental value.

And there's ultimately the rub. Although frequently presented as a means for speaking truth to power, cutting elites down to size, and shredding the pieties and practices that serve the interests of Washington politicians, post-truth politics ultimately has no critical force at all. 
You say the term 'post truth politics' was invented by left liberals angry and bewildered at Trump's triumph as an explanation of how such an improbable event had come about. Surely that means, if  the term has a non paranoid acceptation, it does have 'critical force'? After all, Hillary was a Washington politician. Trump was and always has been a private citizen. Even now, he and his supporters have made certain gains, though he hasn't yet become a Washington politician. So, this 'post truth politics' turns out to have actually changed something very visibly in the real world. A non politician, a non public servant, has been elected to the highest office in the land for the first time in History. Was there really no 'critical force' at work here?

Or, rather, it renders us all defenseless against the will of whoever happens to have power.

Really? When Trump becomes President, we will all be defenseless against his will coz of 'post-truthism'? OMG, what if he wants us all to turn into leggy East European blondes! Lucky I've kept my Margaret Thatcher wig from my student days...

Oh! Sorry, I was being dense. This article is just an exercise in 'post-truthism'. Gee, you guys sure gave me a scare!

Sunday, 4 December 2016

Impossibility of Hayekian Wealth

In Economics, Income is what you can spend without diminishing your Wealth and Wealth is stuff which generates Income.

Notice that, if Knightian Uncertainty obtains, neither Income nor Wealth have any objective measurable value, or indeed, existence. Rather they arise in the course of economic transactions, not as their raison d' etre or by any essential or substantive process but merely adjectivally and under the rubric of chrematistics- not 'choice under scarcity'.

Hayek's insight was to see Markets as information aggregation mechanisms and to stand up for the notion that a stupid drunken nigger like me is better able to judge what is good for me, or what is in my interest, than some super-smart Oxbridge or Ivy League patrician. Why? Well, it's coz I spend a lot of time thinking about myself and how to satisfy my ignoble cravings and, what's more, face no 'preference revelation' problem because I have a window of Momus into my own squalid soul.

Unfortunately, Hayek as an unctuous refugee anxious-too-anxious to please, wrote a foolish book in which he committed the vulgar error of ascribing to 'the Rule of Law' an adjectival Chrematistic function.
Yet, the Law is either 'artificial reason'- i.e. a protocol bound dialethia with a different domain and range from Chrematistics- or it is nothing. If Knightian Uncertainty obtains; if Darwin, not Dueteronomy, has salience for ordoliberalism; it cannot be the case that Judicial ratios will magically accord with whatever is necessary for Wealth's golden path burgeoning unless, in truth, there is no 'Rule of Law' at all but only 'Mechanism Design' got up in a horsehair wig and fishnet stockings or whatever it is that Judges wear under their ermine.

The truth is, under ordoliberalism, Wealth is adjectival to the Law in a manner which only highlights the latter's reactively coercive power thus negating the one appealing aspect of Hayek's polemics.
What I mean is this. If you have Wealth, you would be wise to keep at least a portion of it safe from any given Legal Jurisdiction because the Rule of Law can burgeon upon any resources it can subsume procedurally.
No doubt, if you have already 'hedged' your position, you can use your 'hidden' resources to get a better deal for yourself by gaming the 'artificial reason' of any given jurisdiction. But, what is actually being made sport off, at the margin, is the unwieldy Punch & Judy show of what Bentham called 'Dog's Law'.

Hayek published his 'Constitution of Liberty' at a time when the Rule of Law permitted the expropriation of the wealth, through inflation, of a tenth of the population. It also stood silently by as thuggish Trade Unionists used highly coercive means to raise Labor's share of National Income by about 10 percent.

Margaret Thatcher, more by luck than design, reversed the inequity of the Law by Executive action- or bungling- but Hayekian Wealth, as something conserved by the Rule of Law, remains, for us 'Thatcher's children', a mocking mirage.

When I was 14, it was possible for me to believe that Friedman type indexation would restore the Rule of Law to a Hayekian Chrematistic function. But, Friedman himself made no such claim. He very well knew that 'the Rule of Law' had permitted contracts stipulating for payment in gold to be rendered a nullity.
Hayek, as a displaced person, was too polite to point this out.  In any case, a fucking Austrian lecturing us about Liberty was a delicious enough irony to keep him in business.

Jacob T Levy's lazy post-Truth Psilosophy

Authoritarianism features State legitimized physical coercion and thus the discourse it produces is irrelevant in political context where Hirschman 'Exit' is permitted or where 'Voice' has a primary existential function of demonstrating 'Loyalty' and thus mitigating the possibility of arbitrary arrest or execution.

Orwell, Arendt and Havel may have pretended that the nomenklatura or 'intelligentsia' had some sort of countervailing power, under Stalin or Hitler, which they surrendered for a mess of pottage, or by reason of some epistemological primal error, but the truth is they never had any power at all. There was no Gramscian 'hegemony' subtly influencing you; there were goons who were ready and willing to beat you to death if you looked at them cross-eyed.

This is not to say 'Totalitarian language' isn't worth investigating. The Kremlinologist did not catalog in vain minute inflexions in Pravda's turgid prose because it was bilaterally acknowledged as a Schelling focal solution to a particular co-ordination problem and thus served a signalling function.
The trick was to separate 'cheap talk' from 'costly signals' so as to arrive at a stable Nash equilibrium which may or may not have had a feasible Aumann correlated improvement depending on the sort of signals one's own side was obliged to send.
In other words, signalling itself involved a machinery which constrained policy space. But, the important lesson to be learned from the genuine analysis of Totalitarian language which the West invested in (not what belle lettrists like Orwell or Arendt dashed off) is that our own discourse includes cheap talk and costly signals which are difficult to distinguish and which introduce hysteresis effects and which destabilise correlated equilibria.

Does this mean, liberal discourse has no place in the real world?

No, if it is part of the ethos of our nation, though it may indeed only add noise to signal in International Relations.
Perhaps Allan Gibbard, to whom Mechanism Design owes the Revelation Principle, is showing us a way forward in the analysis of 'mixed' propositions which appear to have some alethic component. In this case, the crucial test, to demarcate 'cheap talk' from a potential 'costly signal, is whether there is a 'conceptual tie to action'.
Trump's signalling has been received as tactical- because we only started paying attention to him during the course of a bitter 'Social Media' driven election contest. We are only now, very slowly, trying to link these tactical signals to an implementable strategy. There are two types of uncertainty here. One has to do with what Trump thinks is feasible. The other is concerned with the nature of the 'core' in the new GOP game in Washington.
What is exciting and gives room for the optimism the Market currently displays is that there is an implementable strategy which will be good for the median American and also less destabilising for the World. Will the GOP embrace this opportunity? Or will vested interests line their own pockets leading to a further crisis down the line?

There can be an alethic discourse about this but, I'm afraid, it can't feature irrelevant belle-lettrists like Orwell, Arendt or Havel because that's just lazy.

Take Jacob T Levy's recent article on 'Authoritarianism and post-truth Politics' which offers a useful summary of Frankfurt's notion of 'bullshit'-
Frankfurt’s “bullshit” (apologies, but I have to keep using the word) is characterized by the speaker’s indifference as to whether a claim is true—indeed, as to whether there is any truth of the matter at all. The liar or the fraud knows that there is a truth of the matter, and aims to deliberately conceal it. Neither is true of the bullshitter, who is making noise for some purpose that is orthogonal to the truth. Sometimes it is to make an impression as a knowledgeable authority, in which case the bullshitter does at least want to create the impression that there is a truth of the matter and that he knows it. So there is a deception at the level of impression, though not necessarily at the level of the claim; the pompous bullshitter might accidentally speak the truth, but still be guilty of bullshit.

The problem is, Levy thinks Trump aint jus' bullshitting. He is doing something much much more sinister-

But an untruth like this weekend’s tweet …

Donald J. Trump

In addition to winning the Electoral College in a landslide, I won the popular vote if you deduct the millions of people who voted illegally
8:30 PM - 27 Nov 2016


is different.

There are no winks or nudges. And I have no doubt that Trump knows this claim to be untrue. It’s not bullshit; it’s a lie, even though it comes with a spin-zone indifference to whether anyone believes it. It’s also not gaslighting. It’s too big, too obvious, and too free of any evidence. Some people will believe it, because they believe everything Trump tells them; but the people disinclined to believe him won’t believe this for a second. It doesn’t throw his opponents off-balance, or make them doubt themselves.

Why lie? Why call into question the legitimacy of the election that he won? Riling up nativist and racist populist anger isn’t especially tactically useful at this moment.

Is Levy correct? Does it make sense for a President elect, whose victory is being questioned in the Courts, to pretend that he actually got a majority in the popular vote as well?

Of course it does. The President's power increases if he claims that the people are behind him. Why? Well, there's a Newcomb's Problem type situation here. A President who thinks his program is what the people want will implement it. One who doesn't believe the majority backed him, will hesitate to do so. This in turn affects the expectations of others thus changing the pay-off matrix in a helpful way.
Trump did the right thing for himself. He sent the signal that he'd do what he promised because he believes the people are behind him and, what's more, hinted that he had the strongest possible incentive to act on at least one thing he'd promised- viz. deport illegal aliens.

Why does Levy not get that 'riling up nativist and racist populist anger' is a good tactic for Trump's victory lap because it puts pressure on the Republicans in both Houses to truckle to him in his first 18 months?

The answer is that Levy has his own axe to grind and thus needs to at least pretend to be stupid-

To understand this kind of political untruth, I think we have to look to theorists of truth and language
in politics; Frankfurt’s essay was only tangentially that. But the great analysts of truth and speech under totalitarianism—George Orwell, Hannah Arendt, Vaclav Havel—can help us recognize this kind of lie for what it is. Sometimes—often—a leader with authoritarian tendencies will lie in order to make others repeat his lie both as a way to demonstrate and strengthen his power over them.
Authoritarianism has never been created by 'a leader with authoritarian tendencies'.
It has been created by goons who beat the shit out of you.
Hitler, Mussolini, Stalin, every other authoritarian dictator, started off with a huge bunch of goons ready and willing to beat the shit out of anyone whom they thought not loyal enough.
Levy doesn't get this. He lives in a fairy tale world where one day the Dictator wakes up and decides to tell his courtiers a thumping great lie- 'pigs can fly!' says he. Immediately, the Luftwaffe is reconstituted on a porcine basis. However, the RAF are undeterred by flying pigs and bomb the shit out of the Fuehrer's bunker. Perhaps that's what Levy thinks actually happened to Hitler.

Saying something obviously untrue, and making your subordinates repeat it with a straight face in their own voice, is a particularly startling display of power over them. It’s something that was endemic to totalitarianism. Arendt analyzed the huge lies and blatant reversals of language associated with the Holocaust. Havel documented the pervasive little lies, lies that everyone knew to be lies, of late Communism. And Orwell gave us the vivid “2+2=5.”

Levy is a Professor. His students have to repeat with a straight face, in their own voice, the worthless shite that he writes in order to get a corrupt Credential. The Holocaust wasn't about lies and blatant reversals of language. It was about killing people- something a lot of goons wanted to earn money doing. Havel may have documented pervasive little lies under late Communism. So what? Once people knew there were no goons ready and waiting to beat them into submission, that stupid scam collapsed completely. Orwell wrote a best-seller which took up Churchill's 'Gestapo' trope and associated it firmly with Atlee's Socialism. To be fair, stuff like the 'Groundnut Scheme' was a sort of 2+2= 25 and widely ridiculed at the time.

Being made to repeat an obvious lie makes it clear that you’re powerless; it also makes you complicit. You’re morally compromised. Your ability to stand on your own moral two feet and resist or denounce is lost. Part of this is a general tool for making people part of immoral groups. One child makes a second abuse a third. The second then can’t think he’s any better than the first, the bully, and can’t inform. In a gang or the Mafia, your first kill makes you trustworthy, because you’re now dependent on the group to keep your secrets, and can’t credibly claim to be superior to them.

Okay, so that's what happens on Politically Correct Campuses- we all know that; but not every subject taught at University is as worthless as whatever shite Levy teaches. There are some alethic disciplines which have commercially important spin-offs. Castro's Cuba may have lied through its teeth about infant mortality and so on but the Pharma Sector which earned them hard currency was permitted to go forward on alethic lines.
However, Levy is right about the horrible effects of being made to 'repeat an obvious lie'- like when you join the Masons, or the Oddfellows, or the Fulham Chapter of the Jedi Knighthood (where you have to swear that Princess Leia is too a virgin and did not get off on Jabba the Hutt's ginormous tongue).
We must immediately ban all such pernicious organisations coz they are on a slippery slope bound to end up in satanic child abuse and Mafia like organised crime.
But in totalitarian and authoritarian politics, there seems to be something special about the lie, partly because so much of politics is about speech (and especially public speech) in the first place. Based on the evidence of his presidential campaign, I think Donald Trump understands this instinctively, and he relished the power to make his subordinates repeat his clearly outlandish lies in public. Every Sunday he provided fresh absurdities that Chris Christie, Rudy Giuliani, and Kellyanne Conway repeated on the talk shows. They didn’t persuade anyone who were strategically important to persuade; the audience for Meet the Press isn’t low-information, undecided, working-class voters, and the kinds of people who did watch those shows knew the claims were false. But making his surrogates repeat the lies compromised them; that tied them to him. And it degraded them, and made clear where power lay.

This is nonsense. Totalitarian and Authoritarian politics is about physical coercion and arbitrary punishment. Even if you spout all the required lies to demonstrate loyalty, you could still end up in a Gulag more especially if you weren't pulling your weight, or, more simply, pour encourager les autres.
Levy, lazy fellow that he is, habituated to tyrannize over slavish graduate students, pretends that Trump is actually a Professor of his own ilk. Christie and Giuliani and Conway are his graduate students. They have to repeat his worthless shite in order to have a shot at tenure.

Newsflash, Levy Sahib- Professors don't have power. They are ridiculous simply. No doubt, they assert themselves in a manner destructive to whatever Research Program they espouse or, indeed, the ethos of Paideia, but there's a reason we let them carry on fucking up in such a ridiculous fashion.  Not Socrates at the Symposium, Levy and his ilk are drunken helots paraded for the edification of Spartan Youth.

The Chinese have a saying- 'Science Students look down on Arts Students. Arts students look down on Politics student. Politics students look down on their teachers.' This does not mean a small percentage of Politics students don't end up with the bigger house and Swiss Bank Account. It just means that lazy hypocrites are universally despised. Rent dissipation isn't just a feature of Authoritarianism. It is also a function of mindless preference falsification and the prevalence of holier than thou academic availability cascades.

Was Rumi stupid?

Once upon a time there was a shite Sufi sage who liked watching a shite TV soap called 'Crossroads Motel'. There was a popular character on the shite soap, Meg, who was killed off in a car-crash or summat. This led to a huge write-in campaign to bring Meg back.
The shite Sufi sage, not understanding that TV soaps can resurrect whom they like, thought that the British audience for that shite soap lacked true Spiritual wisdom because they thought destiny wasn't inevitable or some such woolly headed shite.

Was Rumi as stupid as the Crossroads watching Sufi sage?

No, though every story he tells us is obviously stupid. Take the story of a competition between the Greek and the Chinese painters. The Chinese paint a colorful mural. The Greeks burnish a mirror which reflects the mural. Rumi thinks the Sultan will give the prize for painting to the Greeks because a reflection is brighter than the original. This is incredibly stupid.
The Sultan may, if he doesn't know what a mirror is, prefer what appears to him to be the Greek mural because it includes his own form. What's more, that form is magical and endowed with life. 
However, when he sends his friends to view this magical painting of himself and they report back that it is only their own form that they can see because Sultan, dude, it's a fucking mirror is all it is he will take away the prize for painting from the Greeks and give it to the Chinese. 

Rumi was writing this shite at a time when people with genuine skills- painters, mirror makers, doctors- were likely to be enslaved and carted off to the capital city of some conqueror.  Drooling idiots- i.e. Sufi sages- were not in demand. Furthermore, there was a superstition militating against the killing of imbeciles and crazy beggars. Moreover, making out that Revealed Religion is actually a bunch of Racist shite always goes down well with whichever bunch of Racist shites have grabbed the throne and are busy enslaving people with useful skills. Thus Rumi, who wasn't actually a 'Rumi' i.e.  Anatolian himself, makes Zayd, the Prophet's emancipated slave, go on about how the Anatolians are saved and the Ethiopians are damned along with the Hindus coz God is so not into black people.

Attar in Nishapur was doing mechanism-design so that the beggar gained municipal support and training and became a bourgeois master of a trade useful to the commonwealth but Nishapur fell, as Baghdad fell, to the Mongols. Rumi, in Konya, could have put Hanafi jurisprudence on the path Attar had indicated. But, this would not have suited the feudal rulers. Poor fellow, he did the only thing he could and that has been a boon for the practice of mousike but a price has been paid in terms of, not metaphysics- that's always worthless- but mechanism-design which isn't.

In the Panchatantra there is a story of three fishes which overhear the plans of the villagers to come the next day with nets to their pond. The smart fishies find a channel to another pond and survive. The stupid fish remain behind and perish. Rumi's version- now hugely popular thanks to Coleman Barks- has a freshwater fish decide to go off to the Ocean to seek safety. That's fucked in the head. A smart fish can dodge the net by finding a shaded spot to lurk. Journeying to the ocean or playing dead reduces, not increases, the chance of survival.
Rumi's genius is to take up an obviously fantastic story, which nevertheless frames a prosaic, common-sense, message, and, while lending credence only to the fantastic portions of it, draw, in the name of Soteriology, the stupidest possible moral from it.

The hadith 'hubb al watan min al iman'- patriotism is part of Religion- is a sensible one. Yes, it is true, if you hear that your country is about to be invaded, you can run away somewhere else. Some people would call that smart.
But, it isn't really smart at all  if you are a good person and have affectionate ties to a number of your countrymen. The entire population can't flee a land under threat. No country will receive such a large number of refugees. 
The best strategy is to fight. Doves can co-ordinate- like the starlings' 'murmuration'- to ward off the hawk. Mathematical Game Theory has shown that this 'costly signal' (like the 'strotting' of the antelope) is actually eusocial for both hawks and doves.
Fighting includes guerrilla tactics- migrating to more difficult terrain and then resorting to a war of attrition.
Yes, it does involve risk and self-sacrifice. But then dolce et decorum est pro patria mori.
Running away isn't an evolutionarily stable strategy. It is stupid and sour and a fate fit only for gobshites.

Perhaps Rumi's popularity in the West was a function of faith in the 'liberal world order' where 'soft power' would attract and enslave every resource rich or strategically sited foreign nation and Obama or Clinton or Merkel could go on talking worthless shite about universal human rights and the rest of the World would just bow their heads and do whatever was best to ensure these gobshites got re-elected.

Rumi wasn't stupid anymore than a lot of displaced people who have made their home in the West were stupid. No doubt, because we have come from the East or our skins are a little duskier or our eyes aren't the right shape, we had to play up the notion that we were essentially as stupid as shite and buying into some supposed Western 'Universalism' in a naive manner. 

That dog won't hunt anymore.

Diaspora intellectuals have to now show patriotism to the land they have settled in and whose citizenship they have taken up. If they did so for purely economic reasons- let them tell the truth and shame the devil. The corollary is that one can champion economic nationalism with greater credibility.

Mechanism-design is about true preference revelation. Get smart. Identify what is in your interest and either send public signals consistent with your interest or, if incentive incompatibility obtains, be part of the coalition seeking improved mechanism-design.

If having a few drinks with your neighbor loosens your tongue & gives you a hangover such that you are better able to see what is in your interest and how that interest can be coordinated with others, then, yes, the literal, not metaphorical, Tavern is serving a good Sociological and Soteriological purpose. If prohibition is in force, drink coffee by all means.

Rumi wasn't stupid.
He was a survivor.
But, the death of the nation is not something one should scheme to survive.
If one ever genuinely knew Love.

The Universe, on the other hand, can just go fuck itself.
We are not at home in it.
Love is the Second Creation.
Its God Grief.

Friday, 2 December 2016

Varoufakis's Santa Claus turned Minotaur

Marxist's are bewitched by the notion of 'surplus value'- i.e. wealth created by workers which can be confiscated from them. They believe Capitalism is doomed because surpluses confiscated from the workers won't get 'recycled'. They will be hoarded. So the wheels of the economy will fall off. There will be a 'Crisis'- one of 'under-consumption' featuring mass unemployment. Finally the State will step in and nationalize everything and create a Utopia. Then the State itself will wither away because workers will be smart enough to keep their surplus value for themselves. Neither Capital nor the State can appropriate it.

Under fixed currency exchange rates, a different sort of 'surplus' can create a problem. This is a trade surplus which means a country exporting more goods and services than it imports. If this country lends its currency to the deficit country the exchange rate can remain as it is. The problem is that the borrowing country has to pay interest and thus its deficit will increase.
There is an easy solution- let exchange rates float and find their own level. There is still the problem that some countries may want to keep running surpluses and can do this by lending or investing in deficit countries. This could be considered an unfair trading practice. The surplus country goes on building up its industries while the borrowing country gets lazy. The problem is compounded by borrowing countries running a budget deficit- i.e. the Government spending more than it gets in tax revenue- using the resources provided by the surplus country. Long term this is not sustainable.

Varoufakis's big idea is that there is a problem with what he calls the Global Surplus Recycling Mechanism. America is running a deficit which means countries, like China and Germany can run a surplus.

Varoufakis writes-
Before 1971, US global hegemony was predicated upon America’s current-account surplus with the rest of the capitalist world, which the US helped to stabilize by recycling part of its surplus to Europe and Japan.
This is nonsense. The US was militarily and economically stronger than the combined might of its allies. It could have chosen to run a current account deficit- the world was hungry for dollars- financed by 'seignorage'- i.e. the US could print money without inflationary consequences because foreigners would use that money to buy things off each other. Capital flight from a poor and starving Europe would have provided the off setting capital account surplus so that the US didn't lose gold reserves.
Instead, the US chose to administer a fixed exchange regime associated with Marshall Plan aid to help put its allies back on their feet. This was good for US exporters. It was bad for US consumers who had to pay more for imports. It was also bad for U.S investors who weren't allowed to own gold. Instead, the US govt. was prepared to sell gold for dollars at a fixed price to foreign Govts even if the open market price for gold was higher. De Gaulle took advantage of this putting the 'Bretton Woods' system in jeopardy.
However, the economist Triffin had already told Congress that, under fixed exchange rates, a country whose currency is used for international trade by third parties is going to have to either allow its country to appreciate or else suspend gold convertibility- otherwise it will end up exporting its reserves at an artificially low price. From the French point of view, the US  'seigniorage'- arising from its currency financing international trade- was an 'exorbitant privilege'. However, this was only an unmixed blessing for the Americans if they ended gold convertibility- which increased inflationary risk. Thus the US citizen, not allowed to own gold, had to watch as the French Govt. made an instant profit on gold it bought from the US at the artificial price.
Under fixed exchange rates, a country can run a deficit on the Balance of Payments as a whole. But, ultimately, it has to either export gold or other reserves or else devalue. The American deficit, in the Sixties, part of which is attributable to the inflationary financing of the Vietnam war, was unsustainable. American attempts to control 'the export of dollar's backfired'. It started exporting banks as well. It had become clear that Americans were becoming more and more impatient with bureaucratic restraints on their investment choices. It was also clear that fixed exchange rates didn't work. Sterling had to devalue- the Empire was gone and there was no way to bring it back. Meanwhile, the Gulf countries- which had an 'absorption problem'- i.e. they couldn't spend their money fast enough- running genuine structural surpluses wanted to invest them through freer markets so as to get better value for money.  Bretton Woods had to end, Nixon had to stop gold convertibility, inflation was the new enemy.
Varoufakis, however, has a different view- he thinks the US had a balance of trade surplus till 1971- actually, as the chart shows, it didn't, it broke even- which it magnanimously used to help Europe and Japan.
This is nonsense. The truth is that it had a Balance of Payments deficit- it was printing dollars not backed by gold which is why it had to go off gold and let its currency depreciate- i.e. suffer inflation. This was destabilizing for the world.
However, in Varoufakis's fact free fantasy world- 'This underpinned economic stability and sharply declining inequality everywhere.
So Varoufakis thinks that the US, prior to 1971, was a Santa Claus which stabilized the world and helped the poor so that inequality declined. What actually happened was that the post war world had inherited high tax rates and massive State capacity to reallocate resources. Fixed exchange rates were part of a global order whereby States kept power to themselves. However technology was changing in a manner bureaucrats didn't understand. Rent seeking was rampant. Inflation was a stop gap to postpone social conflict. Ultimately, the alternatives was were either stagnation or an increased role for markets. First, however, the genie of inflation had to be put back in the bottle. Nixon tried a Prices and Incomes policy. It didn't work. Nobody believed a democratic Government would put thousands of Trade Unionsts in jail just for demanding higher wages. The other problem was 'fiscal drag'. Working people had been pushed into higher tax brackets. This meant that Welfare payments could increase more than proportionately because the bureaucrats and politicians running things didn't want to hand money back to the tax payer. This meant there was a supply side shock in addition to the oil shock.
The good news was that floating exchange rates and competitive markets freed politicians from the recurring headache of the external balance. Trade could take off and become much freer. China, fortunately, entered the Global Economic system at a time when this lesson had been learned. Soon, their exports completely eradicated the inflationary bias which had bedeviled post War industrial democracy. Instead, there was the problem of asset bubbles. We have a situation where some countries- like China or India- can grow rapidly but which are financially and institutionally underdeveloped and thus opaque to the global investor. Knightian Uncertainty too has increased for technological reasons. There is clearly a lot of incentive incompatibility in Financial Services. Taken together, what all this means is that a lot of voters have an inarticulate sense that National Governments need to rebuild the sort of executive capacity they had in the post war years.

Varoufakis, in his own garbled manner, is channeling some such notion about a good post war Uncle Sam who brought presents to little children in Europe and Japan but which suddenly started suffering deficits and thus became a horrible monster.
 But, as America slipped into a deficit position, that global system could no longer function, giving rise to what I have called the Global Minotaur phase.

According to ancient myth, King Minos of Crete owed his hegemony to the Minotaur, a tragic beast imprisoned under Minos’s palace. The Minotaur’s intense loneliness was comparable only to the fear it inspired far and wide, because its voracious appetite could be satisfied – thereby guaranteeing Minos’s reign – only by human flesh. So a ship loaded with youngsters regularly sailed to Crete from faraway Athens to deliver its human tribute to the beast. The gruesome ritual was essential for preserving Pax Cretana and the King’s hegemony.

After 1971, US hegemony grew by an analogous process. The Minotaur was none other than the US trade deficit, which devoured increasing quantities of the world’s net exports. America’s burgeoning deficit was financed by billions of dollars of daily net inflows into Wall Street from the foreign (and often US) owners of these distant factories – a form of modern tribute to the Global Minotaur.

The more the deficit grew, the greater its appetite for Europe’s and Asia’s capital. What made the Minotaur truly global was its function: it helped recycle financial capital (profits, savings, and surplus money). It kept gleaming German factories busy. It gobbled up everything produced in Japan and, later, in China. But at the same time, Wall Street learned how to turbocharge these capital inflows through exotic financial instruments. The floodgates of financialization burst open and the world was flooded with debt.

In the autumn of 2008, the Minotaur was mortally wounded after running into the wall of private debt that was a by-product of its appetite. While the Fed and the Treasury refloated US markets (at the expense of weaker Americans left behind since the 1970s), nothing would be the same: Wall Street’s capacity to continue “closing” the global recycling loop vanished. The US banking sector could no longer harness America’s twin trade and budget deficits for the purposes of financing enough domestic demand to sustain the rest of the world’s net exports. From that moment on, the world economy would find it impossible to regain its poise.

2008 was an asset bubble which had a wealth effect which in turn affected aggregate demand. It wasn't about trade imbalances except in so far as quasi fixed exchange rates prevailed in some parts of the globe.
What made it so important was that it put an end to a type of optimism which dismissed Knightian Uncertainty and thus suggested that riskless positive return assets exist. They don't.
However, this story has nothing to with 'recycling surpluses' and everything to do with monetary policy.  China, a Communist country, wanted to build up foreign exchange reserves so as to increase faith in its own currency for its own citizens. The expected appreciation in the domestic currency puts a check on capital flight. Once they reversed this policy, put up interest rates and overvalued their currency, capital flight increased with a vengeance.

 It is true that China, like France's De Gaulle, espoused a stupid mercantilist view point. They talked of the Triffin dilemma after the crash because they were worried about two different thing- firstly that their dollar holdings would lose value and secondly that International Trade might grind to a halt because of a liquidity crisis.
In fact, this sort of mercantilism was stupid and the Chinese have dropped that sort of talk. They see that they have a long way to go to getting reserve status for their currency and that even when it happens that 'exorbitant privilege' can be a poisoned chalice.

Following the Minotaur’s mortal wounding, America has not only the Fed and the Treasury to thank for helping to avoid a new Great Depression. The US was also saved by the Dragon: the Chinese government cranked up domestic investment to unprecedented levels to pick up the slack created by the contraction in spending in the US and Europe. For many years, China allowed credit creation by its formal and shadow banks to run amok, even permitting them to benefit from the Fed’s easy-money largesse by taking out dollar-denominated loans. Put succinctly, the Dragon stepped in to rebalance the West when the Minotaur no longer could.

So Varoufakis thinks Uncle Sam was a Santa Claus prior to '71 which recycled its surpluses by buying toys for poor kiddies in Europe and Japan. Then the US turned into a horrible minotaur running deficits. In 2008 the World finally got wise to this evil monster. Luckily there was a nice Dragon which stepped in and 'rebalanced the West'.
The question is why was the dragon so nice?
China’s leaders knew what they were doing. They were creating a bubble of unsustainable investment to give Europe and the US a chance to get their act together. Alas, both failed to do so: America because of the standoff between President Barack Obama and the Republican-controlled Congress, and Europe for reasons too painful to recount. And when the perfect storm hit in 2015, with US interest rates climbing while commodity prices fell, China had to crank up credit creation once more.
The truth is that China has a fixed exchange rate and this imposes costs. It isn't concerned with rebalancing anything globally but with developing its own productive power.
China understands that the US borrows in its own currency from abroad and thus can always shrink its obligations by a dollar depreciation which imposes a 'demurrage' charge on foreigners using dollars for their trade with each other. This speeds the velocity of circulation and ensures liquidity.
However, it also creates a distributional asymmetry whereby the export sector which can borrow in dollars to secure assets or extinguish liabilities in the official currency gains at the expense of the rest of the country in a manner damaging to the State's resolve to deliver balanced growth.
One way to curtail the resulting mis-allocation of resources is to let the currency rise on the back of interest rates to shake out the secondary banking system.
Today, China’s credit boom is underpinned by collateral almost as bad as that on which Bear Stearns, Lehman Brothers, and the rest were relying in 2007. Moreover, because the Chinese renminbi is grossly overvalued, corporations are borrowing dollars to repay their legacy dollar-denominated debt early, putting downward pressure on the exchange rate.
In other words, the market is taking care of the problem. Since Chinese private debt is held mainly by Chinese people there is no 'contagion risk' for the rest of the world. No doubt, a Chinese shake-out will have a wealth effect which reduces their imports but there are other things happening in China which, if they succeed in improving resource allocation, will put Chinese aggregate demand on a better trajectory long run.
Trump’s plan for helping those left behind since the 1970s, to the extent that one is discernible, seems to turn on two axes: a domestic stimulus and bilateral deal-making under the threat of tariffs and quotas. But if he plays hardball with China, pushing the Chinese to revalue the renminbi and employing threats of tariffs and the like, he may well end up pricking the bubble of China’s private debt – unleashing a deluge of nasty consequences that would overwhelm any domestic stimulus he introduces.
US exports to China have already taken a big hit but not had much effect. Going forward, their agricultural sector may be endangered but the Federal Govt can easily take up the slack with set aside schemes which serve other functions as well.
In that case, Trump’s infrastructure spending would morph into more corporate welfare, implying a negligible multiplier effect. That, in turn, would set the stage for future austerity, as panic over further US interest rate rises and federal budget blow-ups put the squeeze on the government’s 
If Trump’s medium-term economic strategy is to have any chance of success, he must grasp that it is not US public debt, but Chinese private debt, that needs to be restructured. Otherwise, US Treasury yields could go through the roof, severely weakening US debt sustainability.
If, as seems likely, Trump goes in for Corporate Welfare with more or less full employment while dismantling Obamacare, all that happens is that the efficiency wage in some sectors- including the Rust belt- goes up as does Baumol cost disease in services- i.e. income distribution worsens within the working class in a manner that favors White Blue Collar workers. Corporations are sharing a rent with their workers for a specific political purpose- viz. so Trump can make good his promise to a strategically significant minority.
Trump has no interest in and no say in how Chinese debt is structured. He does have an interest in allowing a depreciation of the dollar which shrinks its liabilities and recurring interest charge on the invisible account. This is because 'exorbitant privilege' has ensured that a lot of US debt - 5 trillion of Treasury Bills for example- is held by foreigners. US devaluation has a deflationary wealth effect on them, but there is a perverse income effect whereby some foreigners have to work harder to rebuild the real value of dollar reserves. Thus global economic activity as a whole does not go off a cliff.
Likewise, Trump must realize that he cannot make America great again by emulating Ronald Reagan’s unfunded stimulus. That trick worked when the Minotaur was chained and fed; it won’t work when the Dragon has run out of fire. Instead, if Trump truly wants to rebalance the US economy so that growth benefits the abandoned people to whom he has promised so much, he should emulate Franklin D. Roosevelt and pursue a Keynesian makeover of Bretton Woods.
All nonsense. China was in no position to fund Reagan's deficit. It was very poor back in the Eighties. In fact as the table shows the US current account went back in balance towards the end of the Reagan era. This was a good thing all round.
FDR's new Deal failed. Bretton Woods also failed. A Keynesian makeover of Bretton Woods makes as much sense as a Gramscian revival of the League of Nations in which everybody sits around worrying about how Capitalist 'hegemony' is going to inevitably turn Merkel into Hitler.
Thanks in part to Varoufakis, the ECB is going to implode as Target 2 unravels and the Euro is seen as 'funny money'. The same thing would have happened to Keynes's 'bancor'.
Countries genuinely exist and the management of national currencies is constrained by prudence because very heavy punishments exist for countries which monkey around with their monetary system. The Eurozone could discipline Greece and other peripherals. It probably can't discipline its core. The ECB under Q.E is probably the designated 'bad bank' which permits a German-Dutch exit in the event that France and Italy elect lunatics.

What of Varoufakis's Minatour which eats children? Under what conditions will he declare that has turned back into Santa Claus bringing pressies for little kiddies in Europe and Japan?
The answer is, if Trump succeeds in restoring a U.S Current Account Surplus which he uses to prop up deficit finance based demagogues abroad while US corporations prowl about buying up all the productive assets.
I've said it before and I'll say it again- Varoufakis is a Trumpista. There's a good reason Trump loves the poorly educated. The case of Varoufakis proves that cognitively piss poor, historically illiterate, educators serve his cause just as well.                                                                                                                                                                       

Monday, 28 November 2016

Prof. John Weeks on neo-liberalism's irresistible rise.

Remember 'Occupy Wall Street' and all the fuss about the 1 %?
 It was bound to fail. 
Prof. John Weeks of SOAS has an interesting theory- Neoliberalism makes US Presidents, whatever their party affiliation or ideological orientation, do bad things to poor people so as to make rich people richer. This causes poor people to vote for Donald Trump because...urm... well, it's all neoliberalism's fault.

Judge for yourself-

Ushering in Trump
Fifty years of democratic capitalism was the historic accomplishment of the New Deal. Relatively low and stable inequality provided the basis for what some call the “Golden Age” of US capitalism. In 1974 under a Republican presidency (Richard Nixon, replaced in mid-year by Gerald Ford) US income inequality dropped to its lowest as measured by the Gini coefficient.

Subsequently, under presidents both Democrat (Jimmy Carter, Bill Clinton, Barack Obama) and Republican (Ronald Reagan, George H W Bush, George W Bush) inequality rose inexorably. Rising inequality revived social divisions subsumed by prosperity during the “Golden Age.” Donald Trump encouraging and exploiting those divisions is the vehicle for a transition to authoritarian capitalism.

With Donald Trump neoliberalism fulfils its logic, destroying even the illusion of a just society.

Weeks is American. He must know the New Deal failed. What got the U.S out of the Great Depression was the Second World War and then high and sustained military expenditure thanks to the Korean War and the formation of what Eisenhower termed the 'Military Industrial Complex'.

Democratic Capitalism never existed. If it had, Weeks wouldn't have imbibed Marxist Economics back in the late Fifties and early Sixties. His life would have taken a very different turn- viz. hot gospelling the magic of markets and the virtues of the ballot box to the developing world.

What did exist, when Weeks was a young man, was high tax rates inherited from the War years. The US decision to finance the Vietnam War by printing money unleashed inflation which in turn pushed working people into higher and higher tax brackets. This is called 'fiscal drag'. At the same time, Welfare payments soared on the excuse of inflation and because the Govt. was awash with cash. By the time tax thresholds were index linked and monetary policy was reconfigured to squeeze inflationary expectations, the damage had been done. Ordinary people didn't trust the tax and welfare system to redistribute income to the poor or deserving. Rather they resented having to pay for 'welfare queens'. Bill Clinton got the message and did a U turn. This had nothing to do with 'neo-liberalism' or any other catch phrase featuring what had become 'the L word' under the first Bush. The fact is, Govts. don't like handing over cash to poor people. They do like taking cash from working people on some excuse or other but working people understand that Govts. waste most of what they take.
The other big problem was that the elderly were  more numerous, more politically active and also much wealthier and smarter than ever before. Being net creditors, they wanted both high real interest rates as well as soaring asset prices. They couldn't have both which is why we now have a liquidity trap. 

Perhaps what Prof Weeks means by 'neo-liberalism' is a situation where ordinary working people have to pay Income Tax and thus resent re-distributive fiscal policy- more especially in an increasingly heterogeneous society where people of a different ethnicity are visibly worse off or more deserving of help.
Clinton and Obama- the first and second Black Presidents- were aware that Welfare dependency was considered a curse by African American intellectuals and this view was quite prevalent among other minority communities as well. Thus neither Obama nor Hilary could put fiscal policy at the center of a reflationary policy to compensate for the monetary shock from the Financial sector. But then FDR too had failed with a reflationary Fiscal policy. Indeed, Kennedy wasn't a Keynesian- he cut taxes rather than raise Government expenditure. Nixon was the first and last avowed Keynesian. He was also the only President to try a Prices and Incomes Policy.

Perhaps if the Democrats had put up a proper 'tax and spend' Liberal- say Biden- in 2008, things might have worked out differently. Still, the Republican minority had a strong card- in the shape of a pretended zeal to see a Wall Street shake-out- which they used very effectively against the Democrats. Perhaps a President who came across as a stupid loudmouth could have called their bluff. Neither Hillary nor Obama fit that bill. Worse still, Obama, as a Black man, didn't want to put cash in the hands of poor and needy people because, for well known historical reasons, a lot of such people have darker complexions. If such people get a little more money in their pockets then their rate of incarceration will go down. They will disengage from Govt. bureaucracies. They will shit upon a 'talented tenth' who have built meretricious careers by claiming to represent their surd alterity. 

Oddly, things for them might be about to improve.

Unlike Hillary or Obama, Trump can do stupid. He can do it sublimely well. That gives the White House a 'threat point' which the wonkish Obama sadly lacked. The other thing about Trump is that a lot of people think he is racist. Suddenly redistributive fiscal policy doesn't look such a bad thing from the White working class point of view.

 Put cash in the hands of the needy while starving penal or paternalistic bureaucracies. Do infrastructure. Ensure regular 'bail-ins' and 'haircuts' to correct incentive incompatiblity in asset markets. That's what Economic theory counsels. 

Weeks disagrees. He thinks Americans have less agency than sub-Saharan Africans. Clearly there must be some sort of I.M.F- a secret Masonic Fellowship of the 1%- which imposes a 'neo-liberalism' invented for the Global South upon the richest and most powerful nation in the world. How does it do it? I think it must be the thought control rays emitted by the Television set. Time to put on the tin foil hats sheeple! Or maybe that's what neo-liberalism wants us to do...