A couple of days ago, I noted the “developing attitude of the Republican establishment towards government debt, which is essentially that of banana republic populism. “. Now the same characterization has hit the pages of the NYT, in a piece by Floyd Norris on the decline of the dollar

To John Paul Rathbone, an economics commentator on breakingviews.com*, such borrowing is evidence that the United States is “taking on the financial characteristics of a banana republic.”

That’s a hostile view from Britain. But borrowers need to worry about what lenders think of them.

Norris is careful to put exactly the right amount of distance between himself and the “banana republic” characterization. But who would have imagined, in the late 20th era of US economic triumphalism, that such a thing would be said at all, let alone in the NYT Business section.

*The breakingviews.com site requires registration -free for a 30 day trial. The article to which Norris refers discusses the shift from direct FDI into the US to debt, then goes on to observe

In a typical emerging markets crisis, this deterioration would go two steps further. Investors would require ever shorter maturity debt, which then has to be rolled over. And increasingly they would demand that the debt be denominated in a foreign currency, which removes any chance that the country inflates away the problem by printing money. The US doesn’t have the latter problem. But the steepness of the yield curve does suggest some investors are turning to shorter-term bonds.

Furthermore, as State Street strategists point out, the US is not an obvious home for value-conscious bond investors anyway. For one, the Federal Reserve has a high tolerance for inflation, at least compared to the European Central Bank. That suited the US when equity capital flows ruled the currency markets. But it doesn’t in these risk averse, bond-driven days. From that point of view then, it doesn’t matter for the euro that the European economy is struggling. Indeed, quite the contrary is true. The euro will probably continue to rally against the dollar, despite a worsening eurozone economy, simply because euroland bonds are a safer bet.

This is all spot on, though I don’t rule out the final stage of a resort to the printing press and a flight from dollar-denominated assets.

Bertram is back after a hiatus of a couple of months, with a new software setup called Bloxsom. And d-squared digest is allegedly produced by a “A fat young man without a good word to say for anyone”. Check out his one-line summaries of mammoth posts by Steven Den Beste

I’ve nominated Ari Fleischer for Slate’s Whopper of the Week feature. His latest big lie is even bigger than the one that won him last week’s award. In referring to Iraq’s Al-Samoud missiles, Fleischer says

Well, here’s the Catch-22 that Saddam Hussein has put himself in: he denied he had these weapons, and then he destroys things he says he never had. If he lies about never having them, how can you trust him when he says he has destroyed them? … It also contradicts the fact that he said he doesn’t have any weapons in violation of the United Nations resolutions.

Every part of this is untrue. Saddam openly admitted having the missiles and has consistently maintained that they don’t violate the resolutions and that, in destroyng them, he is simply deferring to the judgement of the UN inspectors that they do. This is all on the public record, as Hans Blix observed (quote from NYT)

In another sign of the poisoning of relations between the inspectors and the United States, Mr. Blix directly contradicted the White House spokesman, Ari Fleischer, who said on Monday that Mr. Hussein had earlier denied he had “these weapons,” meaning the missiles. Mr. Blix said the missiles “were declared” and that “they were not clandestine.”

He was referring to Iraq’s original arms declaration in December. “

And from Fleischer’s own mouth in response to Saddam’s interview with Dan Rather

Fleischer said Saddam’s comments about the Al Samouds represented “open defiance” of the United Nations. “He refuses even to acknowledge that the weapons are prohibited,” Fleischer said.

The fact that Fleischer is a blatant liar is not surprising and does not mean that Saddam is truthful. But how can anybody advocate following people like Fleischer (and Bush and Rumsfeld and Cheney) to war. And regrettably, the only credible person in the Administration, Colin Powell, now seems to have signed on to the Fleischer line that whatever is convenient to the demands of the day is true.

A US case in which a man was arrested for wearing a T-shirt bearing the slogan “Give Peace a Chance” has attracted a fair bit of attention. To be more precise, the man in question went to a T-shirt shop in a mall, had the shirt made to order and put it on. He was then approached by mall security guards who asked him to leave. On refusing, he was arrested for trespass. There’s a news story here. This kind of incident reinforces one of my main reasons for opposing privatisation of public spaces, including universities. In a piece entitledFree speech sits ill with a free market, I observed

Freedom of speech, in universities, public spaces and elsewhere, is ultimately incompatible with privatisation and unfettered freedom of action for corporations.

The piece was motivated by an article by CIS board member Steven Schwartz, attacking academic freedom.

Kevin Drum has more on this, noting that in California, shopping malls are required to allow reasonable exercise of free speech. I’m more and more inclined to the view that Australia needs an equivalent to the First Amendment.

This NYT report on a compromise being floated by the British is consistent with the analysis I’ve been pushing for some time. The difficulty is of course that the US Administration will do its best to rule out any compromise in the form of a clearly stated final demand “Do this, or else”, no matter how stringent the conditions, for fear that Saddam will actually do it. By contrast, the French want a compromise of this form, but would prefer one with conditions that have a fair probability of being met (unrestricted interviews, production of documents etc).

But game-theoretic reasoning helps us here. If the French believe that the US will reject any compromise in the form of a clearly stated final demand, they have no reason to quibble about the precise wording of the demand. This in turn increases the likelihood that any compromise proposed by the British will be accepted, with the result that the US will be forced to veto (or kill with the threat of veto) a British proposal.

Two possible inferences. The first is that the British government is prepared to pull out of war if necessary. The alternative is that they think they can persuade the US to accept a “final demand” compromise. The second seems more likely as a statement about British beliefs, but Bush has disappointed them before, and is likely to do so again.

Update The Guardian also has this story, supporting the second interpretation

The British government, which expects to secure the backing of the US for the change, is to offer a reworked resolution that would give Iraq “a little more time” and set a deadline on which most of the UN security council could agree.

I’ve added a bunch of book reviews. Feel free to review my reviews. If there’s any interest, I will post some extracts from the reviews over the next few days. Also, I’ve been updating the recent journal articles and working papers, reflecting a few acceptances and some long-awaited publications. Here’s a list of reviews I’ve added:

John Quiggin on progressive reform: review of Boris Frankel’s When the Boat Comes in, Pluto Press, 2002′, Arena 60(August–September), 47–49.

Myths of the Market; Review of: Thomas Frank, One Market Under God, Sydney, Vintage, 2001 & William Baumol, The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism, Princeton, Princeton University Press, 2002 ‘, The Drawing Board (Digest)

Economics of the Dark Side: Review of Jack Hirshleifer, The Dark Side of the Force: Economic Foundations of Conflict Theory, Cambridge University Press, Cambridge, 2001′, The Drawing Board (Digest)

A rough ride to freedom for information. Review of The Future of Ideas: The Fate of the Commons in a Connected World, by Lawrence Lessig, Random House (US), Australian Financial Review, 8 November

Review of Refashioning the Rag Trade: Internationalising Australia’s Textiles, Clothing and Footwear Industries by Michael Webber and Sally Weller, UNSW Press, 2001′, 21(1), 56–7.

Review of Debunking Economics: The Naked Emperor of he Social Sciences by Steve Keen, Pluto Press, 2001′, Economic Record 78(241)

Review of At the Crossroads – three essays by Jane Kelsey, New Zealand Economic Papers.

Most of the discussion on Monday’s Message Board concerned various personalities of the Hawke-Keating Labor government, elected 20 years ago. Yesterday’s Fin ran a picture of the incoming Cabinet in 1983, along with a ‘where are they now’ feature. While, as I’ve noted, I have mixed feelings about this government’s policies, the quality of the Ministry was exceptional. Position for position,I don’t think any member of the current government outclasses the corresponding minister in 1983. Even without considering positions, it’s hard to see many of the current ministry justifying a place. You’d have to include Howard himself, but that’s about it.

Another striking observation is how little renewal there was. The ministry that went out in 1996 was a lot weaker than the one that came in 1983. The effects can be seen on Labor’s frontbench today. Although it’s only seven years since they were in office, most of the prominent figures (with the exception of Crean himself) are newcomers who were not ministers in the last Labor government.

Turning to a more detailed assessment, I agree with the bulk of the recent commentary in ranking Hawke ahead of Keating. It’s often suggested that Keating was the ideas man while Hawke was the ‘chairman” but I think this was wrong. Hawke’s focus on consensus was an idea about process rather than policy, and it was what enabled Australia to implement a more moderate and sustainable version of the neoliberal policies that were pretty much inevitable in the 1980s. Keating, on the other hand, was not fundamentally driven by ideas. Rather, he picked up whatever ideas seemed useful to him at the time (neoliberalism or ‘economic rationalism’ in the 1980s, reconciliation and the republic in the 1990s) and expounded them with his characteristic vigour and intensity.

Keating’s case is helped by the fact that he was by far the most able Australian politician of the past thirty years and by the fact that, out of office, he has conducted himself, in private and public, with dignity and good sense, in marked contrast to Hawke’s personal follies (for example, doing the remarried celebrity bit for the women’s magazines) and sleazy political conduct like doing PR for Burmese dictators.

Of the others, my favorite was probably John Button. An engaging character, and someone who managed to maintain Labor principles while adapting them to new conditions. My least favorite of the major figures was probably Peter Walsh. Politically, I agree with him on a lot of things and disagree on even more, but, as was observed in the Monday comments thread, he is basically driven by hate. ‘Good haters’ can be an asset in politics at times, but over time the hate tends to drive out the positive concerns that originally generated it.

One of the things that’s really bizarre about much pro-war discussion is the way in which various nations are being characterised as good or bad, depending on who happens to be making critical decisions. Thus, Australia, Britain, Bulgaria, Italy and Spain are “good”, Germany and France are “bad”, and Turkey was “good” until the weekend but is now “bad”. The fact is that there is no country in the world (not excepting the US) where a majority of the population supports the view that an invasion of Iraq should be undertaken when and if George Bush decides it is appropriate. The only thing separating the “good” from the “bad” is the existence of a government that can ignore public opinion for one reason or another. The Turks were “good” because everyone assumed Turkish democracy was a sham, but now that it turns out not to be a sham they are “bad”

In an update on previous discussion of the odds, this piece in The Guardian says

British troops are now so embedded into American war plans that there would be huge operational problems if the government let the US go it alone against Iraq, according to senior military sources.

“I don’t think the prime minister’s got any choice now. He’s gone too far to go back,” said a senior military official. “We are so embedded in this structure, so integral, that it would be very difficult for the Americans if we pulled out.”

This tends to confirm part of my argument, that Bush is unlikely to go ahead without Blair, but with the counterspin that, therefore, Blair is unlikely to refuse. What this means, though, is that Blair has immense leverage if he chooses to use it, for example, to support the Canadian compromise of a set of clear demands to be imposed on Saddam.

I’ve been pointing out for some time that it’s as least as likely that the US will be forced to use its veto power in the UNSC as it is that France will. This point has finally been noted by the Times

Britain and the United States are working behind the scenes to squash a Canadian-backed UN compromise.

The Canadian proposal calls for a deadline of March 28 for Iraq to fulfil a list of “key remaining disarmament tasks” drawn up by Hans Blix, the chief UN weapons inspector. If put to a vote, the Canadian plan could win majority support on the Security Council and force the US into a veto.

That would leave Britain in the position of deciding to go to war not just without a new resolution authorising action, but with a US veto overriding a potential compromise.

As the focus on Britain indicates, I can’t see Blair going ahead under these circumstances, hence the desire to prevent a vote. But, along with the renewed US demand for Saddam’s removal regardless of whether he disarms, and the continued failure to do anything concrete the Palestine issue, this may give Blair the push he needs to break away from Bush.

Here’s my view of the Hawke-Keating Labor government as a whole. It’s taken from a comparative assessment of the Australian Labor government (a qualified success) with the Lange-Douglas government in NZ (an unmitigated disaster, at least as far as domestic policy is concerned. You can read the whole thing , entitled Social democracy and market reform in Australia and New Zealand, on my website.

Despite its abandonment of many traditional social democratic policies, the Australian Labor government continued to defend its claim to represent the values of the labour movement. Until the recession that commenced in 1989, the government’s claims were supported by strong employment growth and reductions in the rate of unemployment. A more durable claim is that, although total spending on social welfare was constrained, the government improved targeting through means tests and introduced other innovative welfare programs such as family allowance supplements for low-income earners. This increased the redistributive impact of welfare spending and offset the rise in inequality in market incomes associated with policies of deregulation and privatisation.

Arguably, the Australian Labor government may be seen as having done relatively well in an unfavourable environment. Given the breakdown of Keynesian macroeconomic policy, the increasing irrelevance of economic development strategies based on tariff protection, the rising influence of financial markets and the fiscal demands created by increases in the demand for age pensions, unemployment benefits and publicly provided services such as health and education, any social democratic government would have faced a difficult task.

However, Labor’s rhetoric did not convey this message. Rather than presenting itself as adapting to undeniable realities while doing its best to protect its core constituency against the worst impacts of globalisation and competition, these two themes were embraced as the way of the future. In policy terms, the Labor government celebrated its successes in ‘opening up’ the Australian economy, and derided the policies of the 1950s and 1960s, a period remembered by most Australians as one of full employment and prosperity. At a personal level, the identification of leading Labor ministers with the wealthy beneficiaries of globalisation was too obvious to be ignored. By both opponents and supporters, Hawke and Keating are remembered primarily for ‘opening up the economy’, and not for innovations in social policy.

If I get time, I’ll post my assessment of some of the key personalities later on. In the meantime, you can read the views of many commentators on the Monday message board.