Clan of the Cave Bears

Although I don’t keep careful track, I had always thought of Alan Wood as being relatively optimistic about the performance of the US economy, and its implications for Australia. But his latest piece puts him firmly in the camp of the ultrabears. He endorses the calculations of British economist Wynne Godley

But according to Godley’s calculations, using conservative assumptions about US growth, interest rates and private borrowing behaviour, this can’t go on. As the private sector swings back to saving, even if only modestly, the US is heading for current account and budget deficits of the order of 8 per cent or 9 per cent of GDP, with implied foreign borrowing rising from about 25 per cent of GDP to 60 per cent.

The US may be able to sustain the deterioration for some time if it is seen as the best place to invest, as it may be because of the poor economic performance of Europe and even more so Japan. But it is unlikely to be sustainable politically or in financial markets indefinitely. Investors have already taken a pretty big haircut betting on US share prices and the dollar.

So how to adjust? A huge rise in US exports relative to its imports would do it, but that needs a powerful demand expansion outside the US, and how is that going to come about given the state of the European and Japanese economies? Well, a large depreciation of the US dollar could do the trick, but is likely to be resisted by US trading partners.

Godley’s conclusion, which seems all too plausible, is that the US economy will not recovery properly and there will be a long, depressing era of growth recession. Unless, of course, the US can revive the new-economy miracle. Don’t hold your breath.

I’ve been putting forward much the same viewpoint for years, and I’ve done the same calculations on the current account blowout. But a deficit of 8 or 9 per cent is one of those trends that can’t be sustained and won’t be.

I disagree with the assumption that, because US trading partners don’t want a depreciation, they can prevent it happening. I see the adjustment coming through a combination of low growth, inflation and real depreciation – basically a rerun of 70s stagflation.

For the record

Shortly before the fall of Basra (4 April), I noted a report in The Times, saying that the British were encouraging looters. The report said

The British view is that the sight of local youths dismantling the offices and barracks of a regime they used to fear shows they have confidence that Saddam Hussain’s henchmen will not be returning to these towns in southern Iraq.

One senior British officer said: “We believe this sends a powerful message that the old guard is truly finished.”

I thought I’d better record this before it went too far down the memory hole. When we come to allocate the responsibility for the destruction of archeological treasures and so on, it will be important to recall that this was the product of deliberate policy, not mere neglect.

Update I’m stunned. A string of commentators in the thread take the line that if the Coalition encourages desperately poor young men to loot government buildings, then stands back while they do a comprehensive job of stripping everything in sight, they’re not to blame because “they only meant Ba’ath party offices and the like”. I was struggling for an analogy for this but res ipsa loquitur .

Further update A further line of exculpation is that the Coalition forces couldn’t have anticipated, when they encouraged looters, that the looting would extend to sites like the Museum. Except that, as the WashPost reports, they were repeatedly warned about the likelihood that the Museum would be looted under the cover of civil disorder (it appears that professional thieves, looking for gold, played a major role in the attack, while generic looting helped them overwhelm any resistance and cover their tracks). The Coalition response was to create as much disorder as possible, then ignore pleas from the Museum for protection.

One last update Bargarz has been particularly sniffy about this post. Interesting, given that he himself approvingly noted the looting of a French cultural centre.

What I'm reading, and more

La Divina Commedia by Dante Alighieri. Well, not exactly. I’m not reading the original, but an English translation (the much-praised and much-criticised Dorothy Sayers version). And, as with Das Kapital, I’ve only read the first volume, L’Inferno, so far. On a previous reading, a few decades ago, I got to the end of the Purgatorio. My ambition is to read it all in Italian with the assistance of a translation, but I think that’s a long way off. In the meantime, I’m enjoying the image of the simoniacal Popes, stuffed headfirst in a hole, with each new arrival pushing the others further down. I also recently read At the Court of the Borgias, a relatively restrained private diary kept by the official in charge of protocol.

But my main activity for the weekend has been more physical – along with my son Daniel, I’ve been at a karate camp. Martial arts are an essential skill for modern academics , but not one of my natural strengths. So karate camp was like travelling back in time to school, except this time I was at the back with the slow kids. Top Deja vu experience – being made to do fifty pushups for talking in class.

Despite my limitations, I’m enjoying karate very much. Brisbane and Gold Coast readers might want to check out our dojo website.

Fairy gold

My opinion piece in yesterday’s Fin (subscription required) was about public-private partnerships (PPPs). Final para

As long as financial innovation is seen to be good in itself, politicians will continue to pursue these schemes, not as a method of optimally allocating a complex set of risk, but as a source of fairy gold, from which valuable public assets can seemingly be spun out of thin air. Of course, just like fairy gold, this illusion will disappear in the light of day, leaving a mountain of debt and poorly-structured projects.

The day after

The military phase of the war has been neither the disaster I feared, and predicted, for much of the last two weeks, nor the bloodless victory I hoped for in the first few days.

As this NYT report says, the total number of Iraqis killed in the war will probably never be known, but it is clearly in the tens of thousands. The vast majority were guilty of no crime greater than serving in the army, mostly as conscripts, and subject to the threat of death for desertion or failure to fight.

Compared with Australian experience, the death toll appears comparable with that for the whole of World War II, but lower, relative to population, than that for World War I.

Saddam’s was an evil and brutal regime, but the war is not justified simply by his overthrow. The US and its allies are obligated to deliver the promise of a free, democratic and prosperous Iraq, and a just settlement of the Israel-Palestine issue. These will be difficult, expensive, and often thankless tasks. My opposition to the war (leaving aside the spurious debate about weapons of mass destruction) was based mainly on my doubt that the Bush Administration would have the capacity, or the will, to carry through with these obligations once Saddam was gone. My doubts have not been allayed by the conduct of the war

However, I was overly pessimistic about the course of the war, and perhaps Bush (or, more realistically, Blair) will prove me wrong about the peace. I hope so.

Peace

It looks as if the military phase of the Iraq war is almost over, and with less bloodshed than appeared likely a week ago. Whatever our views about the war we can all be thankful for this.

Word for Wednesday: Sovereignty definition (s)

Both globalism and internationalism imply some sort of limits on national sovereignty. The main source on this topic is Stephen Krasner’s book Sovereignty: Organised Hypocrisy. Krasner distinguishes four different concepts of sovereignty. International legal sovereignty is the acceptance of a given state as a member of the international community, and is, in most cases, relatively uncontroversial. Westphalian sovereignty is based on the principle that one sovereign state should not interfere in the domestic arrangements of another (supposedly, this was the principle underlying the Peace of Westphalia, which ended the Thirty Years War in 1648). Interdependence sovereignty is the capacity and willingness to control flows of people, goods and capital into and out of a country. Domestic sovereignty is the capacity of a state to choose and implement policies within its territory.

During the 1980s and early 1990s, the emerging literature on globalization focused primarily on the apparent erosion of interdependence sovereignty and Westphalian sovereignty. Much of this literature was primarily concerned to criticize ‘realist’ models of international politics in which the Westphalian notion of the state as a unitary actor are taken as axiomatic.

During the 1990s, a neoliberal account of globalization came to the fore. The starting point of the neoliberal account of globalization is the observation that states have abandoned or lost much of the interdependence sovereignty they possessed for most of the 20th century. It is then argued that this loss of interdependence sovereignty entails a loss of domestic economic sovereignty, so that states are constrained by the pressures of international capital markets to follow the neoliberal policy agenda of deregulation, privatization and small government, regardless of the wishes of their domestic electorates

A similar view is implicit, though not always clearly argued, in postmodernist and ‘Third Way’ accounts of globalization, notably that of Giddens 1999. In addition, left-wing writers such as Panitch and Strange, while deploring convergence on a neoliberal policy agenda, broadly accept the claim that such convergence is the result of technologically-driven developments in the world economy.

The most effective criticism of the factual validity of the neoliberal story of the end of domestic economic sovereignty has come from writers with a social-democratic viewpoint. The crucial observation is that globalization is not fundamentally new, but is, in large measure, a reversion to the economic institutions of the 19th century. The experience of the late 19th century casts doubt on claims that the loss of interdependence sovereignty implies the erosion of Westphalian sovereignty. The claim that the loss of interdependence sovereignty entails the adoption of neoliberal domestic policies is similarly problematic.

New on the website

I’ve finally got around to posting my Fin Rev piece on blogging. Although I didn’t use the much-debated word ‘parasitic’, I think I contributed to this characterization with my concluding paras:

claims that blogging will displace traditional media are not merely premature but unsound. Bloggers are dependent on the public record, and that public record is largely created by traditional media. It’s only possible to unearth a 1983 Trent Lott speech if that speech has first been recorded.

The mass media have more deeply-rooted advantages arising from the simple fact that they are mass media. Despite the growth of ‘narrowcast’ media like blogs, it is clear that the vast majority of people want to see and read the same things their friends and workmates do, at least some of the time. The fact of a shared experience that can form a basis for discussions, a source of catchphrases and so on is at least as important as the actual content of the experience.

It is unlikely then, that weblogs will displace traditional newspapers any time soon. Nevertheless, the dream that anyone who wants to should be able to publish their own newspaper is closer to reality than at any time in history. The implications have yet to become fully apparent, but are sure to be profound.

Cold Duck

The war has fogged my vision to the extent that I missed an important post on the central focus of civilisation, namely coffee. Gummo Trotsky selects “Latte” for his word of the day and writes

I think we can forego the Macquarie Dictionary link on this one – we all know what latte is. It’s what the out of touch inner city elites drink to wash down their lunch-time foccaccias or croques-monsieur while their less pretentious suburban cousins are happy to settle for a cappucino and a toasted sanger.

If this item from yesterday’s Age is any indication, there’s a lot of people in the out-of-touch inner city elite. And the numbers are growing. According to a survey by BIS Shrapnel, latte consumption grew by 50% over two years with 225 million dollars worth of lattes sold last year. Assuming that the retail price of a cafe latte is $2.50, that’s a total of 90 million cafe lattes.

Gummo follows up with some extrapolations suggesting that in a few years, latte drinkers will be in the majority.

I would view this prospect with horror, but I think it will not come to pass. Latte is the Cold Duck of the 21st century, and like Cold Duck will be shaken off with a shudder as people realise what real coffee is about.

Junk science

A couple of months ago, I made the observation that

there is now almost no academic discipline whose conclusions can be considered acceptable to orthodox Republicans. The other social sciences (sociology, anthropology, political science) are even more suspect than economics. The natural sciences are all implicated in support for evolution against creationism, and for their conclusions about global warming, CFCs and other environmental threats. Even the physicists have mostly been sceptical about Star Wars and its offspring. And of course the humanities are beyond the pale.

I didn’t extend this claim at the time to the Australian right, but looking at the most recent Quadrant, perhaps I should have. Quadrant has been the biggest backer of historical polemicist Keith Windschuttle (whose fabrications have just been exposed yet again) and a keen promoter of global warming ‘skepticism’.

But when writing the above, I assumed that creationism would not find any support on the Australian mainstream right. I was wrong. The April 2003 Quadrant has a piece by Jenny Teichmann attacking Darwinism and claiming that support for Darwinism arises from the fact that it promotes atheism. The piece is short (less than two pages) but very confused – not surprisingly given that it draws on Windschuttle’s massively confused mentor David Stove, also an opponent of evolution.

One article doesn’t define an editorial stance, and perhaps the next issue of Quadrant will contain a vigorous defence of evolutionary theory. But running a piece like Teichmann’s is yet another indication of the declining intellectual standards of what was once a major journal.

While I’m on this general topic, the same post noted that, having been caught in a piece of glaring dishonesty, the National Review Online covered it up by amending its Web Site without acknowledgement. This seems to be standard practice on the US right. Cato’s change of name from ‘Project on Social Security Privatisation’ to ‘Project on Social Security choice’ was similarly unheralded. And, more recently, Tim Lambert has caught the Independence Institute and the Heartland Institute amending or suppressing articles by John Lott of the American Enterprise Institute where he has been exposed making false claims about defensive gun use.

These people have read their Orwell of course, and seem to think of Websites as being like the memory hole, where the past can be erased. They don’t, however, seem to be aware of Google archives, let alone the Wayback Machine.

Of course, Orwell was talking about Stalinist rewriting of history. And, until recently, anti-scientific irrationalism was more common on the political left than on the right. But those days are gone, and it’s now advocates of truth and rationality on the political right who have to blush for the company they keep.

Update Professor Bunyip (permalinks not working) weighs in as assistant counsel for the defence in the Windschuttle case. As always with Windschuttle, the evidence of participants in the conflict who denied doing anything wrong is preferred to eyewitness evidence against them. By Windschuttle’s account, the fabrication of Aboriginal history is not the product of recent leftwing historians but a conspiracy stretching back to the beginnings of European settlement.

As I pointed out in an earlier piece on junk science, facts are inconvenient things. If you do science or history honestly, you will always come across facts that don’t suit your preconceptions, and will need to acknowledge this openly. Plenty of leftwingers have failed this test in the past. But Windschuttle fails it to an extent unparalleled outside the rigidly disciplined ranks of Marxism-Leninism from which he (and, I think, Bunyip) came.

Does this all matter? Well, yes. This is not an argument over old bones but part of an organised campaign to assure white Australians that if the Aboriginal population is suffering now, it is their own fault. In essence, the line is that, until they sort out their own problems (drink, violence etc), we (whites, that is) have no need to worry and no wrongs to atone for. This is even more false and dangerous than the mirror-image claim that, since problems like drink and violence are the result of oppression, Aboriginal communities cannot be expected to do anything about them.