The imminent arrival of a US recession has led Republican sympathisers to intensify their efforts to pin the blame on the outgoing administration and its Wall Street allies, most notably Citibank, which employs former Treasurer Robert Rubin. The strategy is to paint Rubin as a latter-day Andrew Mellon (see below), the roaring 90s as a repeat of the roaring 20s and Clinton as Calvin Coolidge. The problem is to avoid the obvious corollary that Bush is Herbert Hoover and that we’re in for a repeat of the 1930s. The Republicans would prefer another identification, but, to paraphrase Lloyd Bentsen, “He’s no FDR”.

AndrewSullivan presents THE CASE AGAINST RUBIN, saying ” I can’t do better than reprint this email from highly astute reader and financial analyst:

You’re right. Rubin’s nefarious role in Enron and his overall responsibility in helping to create the bubble (along with Greenspan) has not received proper attention. In my opinion, Rubin is even worse than Greenspan. If you recall, he was the one who initially dismissed Greenspan’s “irrational exuberance” comments, and I believe he virtually created government for and by Goldman Sachs during his tenure in office. He frustrated the development of legislation to make the derivatives market more transparent (along with Phil Gramm), which could have prevented the Enron bankruptcy, and managed to get Brooksley Borne of the CFTC sacked when she pressed for such derivatives to be regulated by the Comex. He also cut the SEC’s budget by 60% when he was in office, which frustrated the fine work of Arthur Levitt and enabled many of the unsavoury practices now coming to light to be perpetuated. He was the architect of the strong dollar policy which helped to create such huge imbalances in the US current account in order to attract more money into the US capital markets and thereby create a hugely destabilising bubble. I suspect that Rubin will ultimately undergo a historical revision in reputation comparable to Andrew Mellon (who in 1928 was viewed as the greatest Treasury Secretary since Alexander Hamilton and left office in disgrace in 1932). Rubin was smart enough to get out before things got really messy, but he is even more culpable than Mellon.
I think we’re due for a major re-evaluation of the Clinton-Rubin-Greenspan legacy, don’t you?”

Jason Soon follows Heath Ledger (sorry! Heath Gibson) in pointing out the danger of comparing apples and oranges, but misses the biggest example of such a comparison, and the central point of Ross Gittins’ article. The big story from supporters of microeconomic reform has been the growth in labour productivity over the last decade (there’s also something called multifactor productivity, which is supposed to take account of capital, but the real action is in labour).

Labour productivity is the ratio of total output to labor input. Gittins starts off with the point that, in important respects, the quality of output, particularly in relation to services delivered by human beings, has declined.

But the really important point is in the denominator. Labour input is measured in hours, but the increase in the intensity and pace of work over the last decade means that there is an ‘apples and oranges’ problem with productivity measures. People produce more in an hour than they used to, but an hour of work is more stressful and tiring than it used to be. To the extent that the two cancel out, there is no real gain in productivity in an economic sense.

According to Forbes.com IBM is making big use of an instant messaging system. Also, Apple has just released its own contender, called iChat, which I guess I will be buying as part of my next OS X upgrade. As with SMS (but even more so) I’ve never seen the appeal of this kind of technology. Used for two-person chat, it seems like an inferior substitute for a voice call. Used for multi-person chat it’s like talking in a crowded bar (as far as I can see most chat rooms are online versions of pickup joints, which fits with this view). And used for exchanging messages, it seems like a cut-rate version of email, with the checking frequency turned up to the max.

The article doesn’t enlighten me – the only stated benefit is a reduction in the load on the email servers. I thought the servers were supposed to reduce the load on us, not the other way around.

Heath Gibson responds to my observation that, per bit transmitted, SMS is about 100 000 times as expensive as Internet or voice telephony. As he says, cost per KB isn’t everything. If you don’t have easy access to email, don’t have or want to use a home phone, only want to transmit a little bit of info and don’t need a reply (which doubles the cost relative to a voice call), SMS looks pretty good. But how can a niche like this account for 75 million messages a month?

The Telstra publicity Heath links to reveals the answer. Mum and Dad are paying the bill

Salon enters the world of blogging with a commercial service (first month free!). Given that the redoubtable Dave Winer is involved, it might provide some competition for blogger/blogspot and perhaps a useful revenue source for the Internet’s best magazine .

Robert Gottliebsen writes that Recession in the US appears almost certain. My prediction in January that,

‘Despite the collapse of the Internet bubble, the state of the corporate sector remains dire. Bloated and overpaid management are the rule rather than the exception. More importantly, the corruption of Wall Street analysts and major accounting firms alike means that profit-and-loss statements and projections are now virtually worthless. It will take at least another year of recession or zero growth before this mess is cleaned up. ‘

was not looking too good after the strong growth (annual rate of 5 per cent!) in the first quarter. But both the analysis and the prediction now look over-optimistic, if anything.

Watch this space for an analysis of some of the really scary scenarios for the next few years

Ross Gittins says: The economic dog has bitten its tail – and we are all hurting. A great column showing the difference between rational economics and ‘economic rationalism’. For more on this theme, take a look here

Paul Krugman writes on THE RHINOCEROS EFFECT I’ve quoted the piece in full (it’s short and sharp) but it’s worth following the link to visit his site. Now read on:

I don’t know how many people have read or seen Eugene Ionesco’s?? Rhinoceros , a parable about conformity and the authoritarian impluse. It tells of a town in which people begin turning, one by one, into rhinoceri – yet few are willing to acknowledge what’s happening. The most memorable scene is one in which the hero’s friend (famously played by Zero Mostel) begins making excuses for his neighbors – maybe it’s not so bad to be a rhinoceros, after all – and, as we watch, turns into a rhinoceros himself.

What reminded me of the play was a visit to my old publication? Slate .? I’ve pretty much restricted my blog reading to? Brad DeLong? and? Josh Marshall? – but I couldn’t help noticing that Zero Mostel had nothing on Mickey Kaus.

Meanwhile, some of us refuse to ignore the rhinoceri running the country.

Tim Dunlop and Gareth Parker have been debating whether blogs should have long posts (like the one below) or short ones with links to the relevant material. Rob Corr has another approach, giving the first para and a “Continue …” link. I don’t think there is likely to be one best way, but I’d be interested to hear people’s views about what they’d prefer for this blog.

I got some interesting comments on mentioning my piece on Bush, notably from Tim Dunlop and, in email, from Jeff Hauser so I thought I’d post the whole thing:

One of the striking features of the aftermath of September 11 in the United States has been the absence of any significant upsurge in anti-Muslim or anti-immigrant sentiment. This contrasts sharply with the success of anti-immigrant parties elsewhere in the developed world.
American participants in the continuing ‘culture war’ between the US and Europe have been quick to seize on this point as proof of American cultural superiority. But even a cursory look at recent history shows that America is no more immune to racism than any other country. Contrary to the quasi-Marxist view that individuals make no significant difference to historical developments, the best explanation is one that gives a lot of personal credit to George W. Bush.
Not all aspects of Bush’s performance in office are creditable. Much of his campaign platform has turned out to be bogus. He ran as a self-made businessman, but owed his success to a combination of politically-motivated favours and dubious deals. His ‘compassionate conservativism’ has shown more compassion for the very rich than anyone else. But, despite campaign mis-steps like his appearance at the separatist Bob Jones university, Bush’s commitment to ethnic diversity and mutual tolerance appears to be quite genuine.
The Bush Cabinet includes two blacks, Secretary of State Colin Powell and National Security Advisor Condoleezza Rice, as well as Hispanic Commerce Secretary Mel Martinez. Bush himself speaks Spanish well enough to take questions on the campaign trail. (There is, inevitably, dispute over whether his Spanish is fluent, or merely adequate, but then, there is a similar dispute about his English).
All this might be regarded as tokenism, the product of political calculation. The tradition of assigning Cabinet and other positions to members of electorally powerful groups is as old as democracy itself. And with millions of Spanish-speaking voters to be won, a few phrases in a second language are not much of a price to pay.
But the fact is that the US Republican party has generally made the opposite calculation, preferring in the immortal words of Pat Buchanan (then an advisor to Richard Nixon) to “cut … the country in half” in the belief that they would be “left with the larger half”. The fruits of this policy of “positive polarisation” may be seen in the Republican delegation to Congress. Out of 250 or so members, only one is black (JC Watts of Oklahoma), and he has announced his retirement, largely because of disillusionment with his Republican colleagues.
Similarly, while Bush pitched for the votes of Spanish-speaking immigrants, fellow-Republicans like Pete Wilson, former governor of California, ran hard on border protection and preservation of the status of English as the dominant language. Wilson’s successful campaign in 1994 was based on ads showing grainy video footage of ‘illegals’ crossing the Mexican border, with the voiceover, “They keep coming.” Wilson hoped to ride anti-immigrant sentiment all the way to the White House in 2000, but, thankfully failed.
Leadership is a much-abused word. But the fact is that racism and prejudice are issues on which leadership, or the lack of it, can make a lot of difference. In most countries, hard-core racists make up a small part of the population, perhaps 10 per cent. At the opposite pole, perhaps 20 per cent of the population is consistently opposed to racism. Between these poles, most people basically agree with the idea of a multicultural and discrimination-free society, but are nonetheless prone to varying degrees of prejudice about other people who look different, speak differently and have different religious beliefs and cultural practices.
The current world situation is one in which appeals to such prejudice can yield significant political payoffs, at least in the short run. For a variety of reasons, this kind of appeal is easier for parties of the political right. The leaders of these parties are therefore faced with the temptation of making such appeals themselves, or of colluding with racist political forces. Sadly, the majority have succumbed. Apart from Bush, Jacques Chirac in France is the only significant right-wing leader to stand firmly against collaboration with racism. Many on the left have either failed to take a firm stand on these issues, or capitulated completely by adopting ‘me-too’ or ‘small target’ positions.
Some aspects of the Bush administration’s response to September 11, such as its unilateral approach to international action, and the cavalier treatment of civil liberties have been less than constructive. But in this crucial respect, Bush has set an example of leadership that others could well follow.