Ending the Nation-State Myth - Project Syndicate

Summary:
Devin Stewart on the nation-state myth. Whereas the idea of a state is useful and necessary, the idea of the nation-state is an illusion, and, like religion, requires a leap of faith. Identities within nations are often as varied as they are between nations. E.g. China's "Han majority" is linguistically, culturally, and even genetically diverse. China is much more than a nation-state. The concept “Chinese” is a meaningless word that was fabricated to justify rule over minorities. The Japanese are particularly keen to think of themselves as one "people" and talk of "Japaneseness", but actually comprise Ainu, Koreans, Chinese, Filipinos, and Ryuku. Closely related to the Nation-State Myth is the Origin Myth. The origin myth continues ad infinitum until we reach humanity’s common ancestor. The nation-state concept offers a way to consolidate and legitimize a state’s rule over a group of people, although the contours of a cultural community rarely coincide with a political entity. It obscures the fact that humanity's greatest threats are global and do not respect national sovereignty. If policymakers are to address today’s problems, they must think more broadly. An introduction to ethics in international affairs — moral philosophy, human rights, and the role of non-state actors — should be mainstreamed in international relations curricula. (Published: 03/09/08)

Notes:

• nation-state myth conflates two ideas
• one that is concrete: the state
• one that is fuzzy: the nation
• the state
• utility of the state is clear
• a necessary organizing principle that allows people to pool their resources for the common good and mobilize against common threats
• whether they are floods or invading armies
• the state is also the final arbiter of law
• state power is even on the rise
• partly as a backlash to globalization and as a result of growing wealth from energy markets
• the nation-state
• the nation-state as a basis for statecraft obscures the nature of humanity’s greatest threats
• pollution, terrorism, pandemics, and climate change are global phenomena.
  
• do not respect national sovereignty
• necessitate global cooperation
• origin of the nation-state idea is unclear
• most agree that it offered a way to consolidate and legitimize a state’s rule over a group of people
• whether defined by a common language, culture, or ethnicity
• problem is that the contours of a cultural community rarely coincide with a political entity
• nor does the ideal of national unity account for internal diversity and conflict
• like religion, the nation-state myth requires a leap of faith
  
• identities within nations
  
• are fluid, even from minute to minute
• division of core and periphery is common in many countries
• person’s identity would change during the course of a conversation
• China
• often thought to be governed by the Han majority
• but: this group is linguistically, culturally, and even genetically diverse
• Ian Buruma: it is not clear what people mean by “China.”
• e.g. Taiwan is an independent state but is officially part of China
• Chinese culture and language has spread all over the world
• “China” is much more than just a nation-state
• Taiwanese scholar Lee Hsiao-feng
• recently argued that the concept “Chinese” is a meaningless word that was fabricated to justify rule over minorities
• Japan
• some argue that Japan is an example of a nation-state
• Japanese people actually comprise Ainu, Koreans, Chinese, Filipinos, and Ryuku
• stubborn Japanese response: “Yes, but we want to believe that there is a Japanese people.”
• they even have a field of study devoted to examining what it means to be Japanese
• Japanese scholar Yoshihisa Hagiwara
• argues that since it is not grounded in fact, the nation-state myth is bound to dissolve, giving way to an understanding that we are merely individuals who are part of a global community
• laments that the Japanese are especially fond of the idea of “Japaneseness,” making it possible that Japan may become the “last hero” of a dying ethos
• the Origin myth
• e.g. ancestors from Norway
• actually from Sweden
• but where do you stop
  
• the origin myth continues ad infinitum until we reach humanity’s common ancestor
  
• or an actual myth
  
• a black egg in China, a spear in the ocean in Japan, or the interaction of fire and ice in France
• implication for policy
• if policymakers are to address today’s problems, they must think more broadly
• one place to start may be to reexamine the concept of the nation-state
• which students around the world are taught is the basic unit of international relations
• beyond the core Realist theories of balance of power, an introduction to ethics in international affairs — moral philosophy, human rights, and the role of non-state actors — should be mainstreamed in international relations curricula
• a united front against the biggest problems facing the world will require a fundamental shift in attitude
• away from parochialism and toward a redefinition of self-interest
• enlightened self-interest can be state-based
• but interests would be re-defined to encompass universal principles
• such as the Universal Declaration of Human Rights
• if these interests are to gain universal recognition, we will need to shed the nation-state myth once and for all

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Quote of the Day

"It is much easier to be critical than to be correct." - Benjamin Franklin

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Quote of the Day

"The problem is that we have socialism for the rich and rugged free enterprise capitalism for the poor." Martin Luther King

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America’s Addiction and the New Economics of Strategy - HarvardBusiness.org

Summary:
Umair Haque we're not just addicted to oil, but to everything. We're not entering Peak Oil, but Peak Consumption. Current financial system is a house a cards that's in the process of collapsing. Consumption in developed world has been subsidised by developing countries: goods at low prices, and reinvestment of their revenues into our government and mortgage debt. Ignored costs like pollution, community fragmentation, and abusive labour standards. Our economy is built on firms whose very purpose is to sell, to relentlessly push people into endlessly consuming, without ever considering the long-run consequences. But we're entering a world where consumption must slow. Haque proposes that being able to break yesterday’s maladaptive consumption addiction is at the heart of next-generation advantage. Next global financial system will be powered by firms that can shift past nihilistic, meaningless industrial-era corporate purpose, beyond acting as mere pushers of an addiction. (Published: 29/07/08)

Notes:

• house of cards that is the global financial system
• emerging markets seek export-led growth
• they undervalue their currencies, so their exports are more competitive purely in terms of price
• amounts to essentially a subsidy to consumers on the other side of the table – those in the developed world
• emerging markets accumulate surpluses, and recycle them:
  
• lend them back to the US and UK in the form of government and mortgage debt, stabilizing their economies
• amplifies the existing consumption subsidy in developed countries through leverage
• artificial cheapness further amplified by simple fact the true costs of production haven't been factored in - until now
• very real costs like pollution, community fragmentation, and abusive labour standards
• we’ve been able to consume mercilessly and remorselessly – with no regard for the human, social, or environmental consequences, to us or to others
• not just cheap oil we’re addicted to: it’s cheap everything
• world we’re entering isn’t really of Peak Oil as it is one of Peak Consumption
• tentative economic history of the 21st century:
  
• Emerging markets – and the people that broke their backs in them – lent the developed world tremendous amounts. What did the developed world do with it? Instead of investing it in tomorrow, they spent it on McMansions, Hummers, and strip malls.
• could have chosen, instead, to invest
• anything would have been a more sensible choice than naïve consumption
• education, energy, healthcare, transportation, even a more sensible and rational kind of finance
• problem with strategy
• our economy is built on firms whose very purpose is to sell
  
• to relentlessly push people into endlessly consuming, without ever considering the long-run consequences
• tough choices for boardroom
• entering a world where consumption must slow
• Does it continue to hawk stuff that “satisfies” largely artificial needs?
  
• Or does it choose to do something authentic, meaningful, and purposive – something that makes us all radically better off than we were before?
• new strategy
  
• At the heart of next-generation advantage is, paradoxically, being able to break yesterday’s maladaptive consumption addiction – not fuel it
• It is firms who can shift past nihilistic, meaningless industrial-era corporate purpose – beyond acting as mere pushers of an addiction – who will power the next global financial system.

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World must look to Europe as capitalisms clash - FT.com

Summary:
John Thornhill argues that if the world does not become more like Europe then Europe will be in trouble. But if the world does become more like Europe, the world can only gain. We seem to be entering a more adversarial world, where a global scramble for resources is permanently changing the balance between supply and demand. Europe in danger of being the only vegetarian economic power in a world of carnivores. The Anglo-Saxon model of capitalism is in decline. Many different forms of a capitalism have evolved. May result in clash of capitalisms. Europe's model most vulnerable: configured for economic peace. Biggest challenge will be maintaining its welfare state (built to neutralise the social tensions that fuelled aggressive nationalism). But it's model of "permanent negotiation" could be an advantage. Needs to marshal its forces more effectively. (Published: 24/07/08)

Notes:

• if regions resembled stock market investments over the past few years:
• US is a racy (leveraged) technology play
• Asia is an explosive growth story
• Europe is a defensive utility stock happy to bumble along and throw off big social dividends
• appear to have reached that point in the stock rotation cycle when dull is good
• may explain strength of the euro and the fact that Warren Buffett, the legendary US investor, has recently been sniffing around Europe for value investments
• but: this may not be a standard economic cycle
• frightening about the current situation is that commodity prices have been surging while demand in the US and Europe has been slowing
• global scramble for resources is permanently changing the balance between supply and demand?
  
• entering a more adversarial world?
  
• Europe in danger of being the only vegetarian economic power in a world of carnivores?
• France's Cercle des économistes
• argue that the apparent ascendancy of Anglo-American capitalism has been an illusion
• i.e. philosophy of a small state, minimal regulation and capital market finance
• proven by the US-originated credit crisis that has been distributed to the rest of the world
• global financial markets may have encouraged many companies into mimicking Anglo-American behaviour in emphasising shareholder value
• but: striking how resilient other forms of capitalism are and how potent some of the new mutations are becoming
• different forms of state capitalism evolving in China, Russia, the Middle East and South America
  
• vibrancy of family capitalism and private equity
• fear that globalisation will bring about a clash of capitalisms
  
• cfr fuss over sovereign wealth funds
• each capitalism is desperate to assert its own superiority in a process akin to economic natural selection
• clear that new rules of the game need to be established if there is to be efficient and equitable use of resources, fair competition and an adequate response to global challenges such as climate change
• worry is that there are few supranational bodies capable of enforcing reciprocity
• most of the multilateral organisations are viewed as occidental clubs that have limited legitimacy in the developing world
• will Europe be vulnerable in a more conflictual world?
• European Union is configured for economic peace
• has abandoned the arms of war
• naive in running liberal trade, competition and exchange rate policies
• Europe is in danger of becoming the "idiot in the global village"
• according to Hubert Védrine, France's former foreign minister.
  
• but: Europe could itself play a big role in shaping the new economic order if it could only marshal its forces effectively
• 27-member EU is now the world's biggest economy thanks to enlargement and the euro's strength
• also the world's biggest single trading bloc setting many of the world's de facto regulatory standards
• McKinsey Global Institute: Europe's capital markets have probably now outgrown in size those in the US - if you throw in non-EU countries such as Switzerland, Russia and Norway
• corporate Europe
• in many areas European companies may be doing a better job of moving up the value chain than their rivals in the US or Japan
• European companies have maintained their share of the aggregate market capitalisation in the FT500 ranking of global companies over the past decade
• US companies' share has dropped from 57 per cent to 38 per cent
• Europe's companies have held steady at 32 per cent.
• Europe's biggest challenge
  
• whether it can afford to maintain its welfare states in a hyper-competitive world
• only sure answer to that question is: we had better hope so
• welfare state was built to neutralise the social tensions that fuelled aggressive nationalism
• European model is an arbitrage between capitalism's winners and losers
• as a result, Europe has been light on the accelerator but heavy on the brakes
• considerable handicap when careering along the straight
  
• but has its advantages when steering round bends
• Europe's example may be of particular use in a world currently experiencing such a scary ride
• EU's model of "permanent negotiation" has been remarkably successful in establishing common economic rules between once-warring nations
• if the world does not become more like Europe then Europe will surely lose. But if the world does become more like Europe, the world can only gain
  

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Stirrings in the suburbs - FT.com

Summary:
China's middle class is growing in numbers, is becoming more educated and assertive. Is the position of the communist party in danger? Government is starting to be challenged by new social groups, which are growing rapidly and want to be heard. The urban middle class played a pivotal role in the transition to democracy in South Korea and Taiwan. Many in West believes capitalism will inevitably bring democracy in China. The process is likely to be very slow and gradual. China's middle class is still relatively small. Its small size begets political conservatism. It is a middle class with strong ties to state, reluctant to challenge the status quo. Recent protests are evidence that middle class citizens are concerned to defend the good name of the government. Moreover, protesting against the system still carries great risks. Overall, China's middle class is still not very mature. It is prepared to challenge the authorities only when its immediate interests are threatened. (Published: 21/07/08)

Notes:

• Chinee communist party
  
• shows no sign of retreating from its dominant position in politics
  
• but: faces challenges on a series of fronts from a society that is becoming more complex, educated and assertive
• biggest potential threat to the party comes from the educated urban middle class
• rural protests tend to be isolated and local police are often not afraid to crack heads, far away from probing eyes
• but: if company executives, lawyers and university professors challenging the political status quo: the party’s hold will become much less secure
• urban middle class played a pivotal role in the transition to democracy in South Korea and Taiwan and, more than a century earlier, in western Europe and the US
• China’s leaders are well aware
• vigorous debate in elite circles in Beijing about transparency in government, media freedom and legal due process
  
• just how quickly the party embraces such changes will depend to a large degree on how much pressure it faces from the new suburbs
• government is starting to be challenged by new social groups, which are growing rapidly and want to be heard
• even people who support a lot of things the government is doing can change their view if they do not feel they are being listened to
• response to Sichuan earthquake
• more than 200,000 people travelled to Sichuan to lend a hand with the relief effort
• has prompted a vigorous debate both at home and abroad about whether it has opened new room for civil society in China
• notion that the Chinese middle class is becoming more politically active is a deeply seductive one for western observers
• plays into one of the most powerful ideas of the age: that capitalism will inevitably bring democracy
• why harp on about human rights, some diplomats ask, if the country is moving in that direction anyway?
• also implies that, in an important way, China is becoming like the west
• but: plenty of reasons to be wary
• many argue that it will be only a slow and gradual process.
• middle class is still relatively small
• 800m Chinese live in rural areas, where most struggle to make ends meet through farming
• large percentage of people in cities now own their homes
  
• but: this is a deceptive indicator of wealth because many bought property at cut-rate prices during government privatisations
• car ownership, another indicator of middle-class status, is growing rapidly
  
• but: from a very low base: the proportion of Chinese who own a vehicle is still only around 3 per cent
• small size of the middle class also begets a political conservatism
• to live in the wealthy suburbs of a city such as Shanghai is to enjoy social privileges in terms of education and healthcare
• many middle-class Chinese lean towards the political status quo
  
• because they suspect that a democracy would have to spread those resources more thinly across the country
• China’s middle class has strong ties to the state
  
• much stronger than was the case in most of western Europe or in most Asian countries that have become democracies
• thus less likely to challenge the party-state
• particularly true of the new generation of private entrepreneurs
• many private companies began as offshoots of local government departments or state-owned enterprises
• even today, business people who wish to build national operations need to cultivate strong political connections around the country
• one-third of China's richest people are members of the Communist party
• party has gone to great lengths to win the loyalty of professionals
• e.g. university teachers have been given regular and in some cases large pay increases
• party membership is an attractive asset because of the connections it brings
• boost job prospects of ambitious students
  
• protesters defending the good name of the government
• e.g. Tibet unrest, Olympics torch relay in London and Paris
• many outraged at what they saw as attempts to humiliate China in its Olympics year
• internet users began to call for a boycott of French goods
• protesting against the government also brings huge risks
• arrest or other punishments if they caused too much trouble
• eluctance of people to become campaign leaders
• “The shot hits the bird that pokes its head out first.”
• some observers believe middle-class China is prepared to challenge the authorities only when its immediate interests are threatened
• recent events fall short of a challenge to the system
• overall, the Chinese middle class is not very mature

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Word of the Day: the Uncanny Valley

Summary:
In video gaming and robotics, the paradoxical point at which a simulation of life becomes so good it's bad. A term coined by the Japanese roboticist Masahiro Mori.

Notes:

• Mori observed that the more humanlike his robots became, the more people were attracted to them, but only up to a point:
  
• if an android become too realistic and lifelike, suddenly people were repelled and disgusted.
• The problem is in the nature of how we identify with robots
  
• When an android, such as R2-D2 or C-3PO, barely looks human, we cut it a lot of slack.
  
• It seems cute.
  
• We don't care that it's only 50 percent humanlike.
  
• But when a robot becomes 99 percent lifelike—so close that it's almost real—we focus on the missing 1 percent.
  
• We notice the slightly slack skin, the absence of a truly human glitter in the eyes.
  
• The once-cute robot now looks like an animated corpse.
  
• Our warm feelings, which had been rising the more vivid the robot became, abruptly plunge downward.
  
• Mori called this plunge "the Uncanny Valley."
• As video games have developed increasingly realistic graphics, they have begun to suffer more and more from this same conundrum.
  
• Games have unexpectedly fallen into the Uncanny Valley.

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Diverging Interests: Company and Country at a Crossroads - Global Strategy Watch

Summary:
Gomory and Baumol argue that globalization is not always a win-win proposition for developed countries. Key argument is that globalization is not simply free trade, but trade plus shifting productivity. Similar to Larry Summers' closed versus open economy idea. Simply trade: e.g. selling semiconductors to China, buying t-shirts from it. Benefits both parties. Complication: in properly pursuing the interests of its shareholders, a company may decide to set up a high-tech manufacturing plant in China. I.e. we have not sent China consumer goods, but the capability to produce more effectively. At some point, the ongoing productive progress of the newly developing partner becomes harmful to the more industrialized country. Ultimately due to a misalignment between the interests of the company and those of the country (see also Summers' 'stateless elites' idea). Authors propose measures realign these. E.g. tax rate reduction for companies having high value-added jobs in the United States. (Published: 23/06/08)
Notes:

• Charlie Wilson, Chairman GM, 1953: "What is good General Motors is good for the country"
• then, close to the truth
  
• American workers could indeed hope to see their wages rise as their employer companies invested and prospered
• Ccompanies gave American workers the tools that enabled them to out-produce the rest of the world.
  
• Companies thrived by having the best plants, equipment and information processing, and the American people shared in the productivity and prosperity.
  
• but: that was before globalization created huge business opportunities for companies to increase profits by shifting production of both goods and services abroad
• standard analyses of trade
• economists assign fixed values to a country’s productive capabilities
• define trade as the exchange of the goods and services
• each country supplying those items in which its productive capabilities are relatively greatest
• With this definition: trade offers benefits to both parties
• Hence: economists emphatically reject tariffs and other forms of protectionism as impediments to those benefits
• for the assumed scenario, this is the valid conclusion
• e.g. US trading semiconductors for Asian t-shirts
• trade in the narrow sense
• concur with the most basic theoretical conclusion that this exchange clearly benefits both countries
• reality: productive capabilities may change, i.e. not fixed
• world enters whole new ball game
• e.g. Intel builds a multi-billion dollar semiconductor plant in China rather than the United States
• properly pursues the interests of its shareholders
• but: a shift in comparative productive capability suddenly occurs
• Globalization is not simply free trade; it is trade plus shifting productivity.
  
• We have not sent china consumer goods, but the capability to produce more effectively.
• Paul Samuelson
  
• shown that end result of that productivity change, even after the period of adjustment, may be better for one’s country or it may be worse, depending on circumstances
• cfr. Larry Summers' quote of Paul Samuelson:
• the valid proposition that trade barriers hurt an economy does not imply the corollary that it necessarily benefits from the economic success of its trading partners
• Productivity shift and degree of development of trading partner
  
• Increases in a trading partner’s productivity can favorably affect the home country if those increases occur in a highly undeveloped country
• under these circumstances, both countries benefit from globalization
• But: this mutual benefit becomes less certain as the developing nation acquires greater capabilities and assumes a larger share of world production
• After a certain point the further development of the formerly undeveloped trading partner becomes harmful to the more industrialized nation.
• globalization is not always a win-win proposition
• at some point, the ongoing productive progress of the newly developing partner becomes harmful to the more industrialized country
• analysis shows clearly that the people of this country cannot count on some benign outcome, even in the very ong run
• If steps are not taken to realign the interests of companies with those of the country, that day may never come.
• measures can be taken to help realign the interests of company and country
• One answer lies in what other nations are doing
• e.g. adopting tax benefits and other economic incentives that make it attractive for companies to invest in their country
• tax rate reduction for companies having high value-added jobs in the United States

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Quote of the Day

"It's such a fine line between stupid and clever." - David St. Hubbins (Spinal Tap)

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Sustaining growth is the century's big challenge - FT.com

Summary:
Martin Wolf on Jeffrey's Sachs new book. Sach's sets three goals for humanity: elimination of mass poverty, population control and environmental sustainability. First goal, according to Sachs, can only be achieved through a massive aid effort. Wolf is sceptical of effectiveness but believes there is no moral/credible alternative. Biggest question of all, however, is whether global prosperity and economic growth can be maintained. Sachs: requires latter two goals to be achieved. Sach's calls current era the "Anthracene:" world dominated by human activity. Environmental sustainability. Achievable, provided incentives are put in place (less than 2% of global GDP). (Published: 10/06/08)

Notes:

• Jeffrey Sach's new book
• Common Wealth: Economics for a Crowded Planet (Allen Lane, 2008)
  
• arguably, the biggest question confronting humanity in the 21st century:
• Is it possible for the vast mass of humanity to enjoy the living standards of today's high-income countries?
• challenge is stark:
• world real incomes per head could rise 4.5 times by 2050 and world population by 40 per cent
• would mean a sixfold increase in global output, concentrated in the developing world
  
• Is such an increase feasible?
• Jeffrey Sachs: yes and no
• yes and no
• yes, because changes in incentives, technology and social and political institutions would make a benign outcome feasible;
  
• no, because the path we are now on is unsustainable.
  
• Sachs's 3 goals:
1. "the end of extreme poverty by 2025 and improved economic security within the rich countries as well"
• i.e. prosperity for everybody or elimination of mass poverty
  
2. "stabilisation of the world's population at 8bn or below by 2050 through a voluntary reduction of fertility rates";
   
• i.e. population control
  
• related to prosperity because the world's poorest people are burdened by the costs of rearing its largest families
  
3. "sustainable systems of energy, land and resources use that avert the most dangerous trends of climate change, species extinction, and destruction of ecosystems".
   
• i.e. environmental sustainability
  
• only by managing the global commons will it be possible to sustain rising living standards
• to achieve these ends, he recommends
  
• "a new approach to global problem-solving based on co-operation among nations and the dynamism and creativity of the non-governmental sector".
  
• Sach's "anthropocene"
• the era in which human activities dominate the world
  
• ways in which humanity has appropriated the bounty of the earth for its own use (Peter Vitousek, Stanford University):
  
• human beings now exploit 50 per cent of the terrestrial photosynthetic potential;
  
• they have put up a quarter of the carbon dioxide now in the atmosphere;
  
• they use 60 per cent of the accessible river run-off;
  
• they are responsible for 60 per cent of the earth's nitrogen fixation;
  
• they are responsible for a fifth of all plant invasions;
  
• over the past two millennia they have made extinct a quarter of all bird species;
• they have exploited or over-exploited more than half of the world's fisheries.
• how can growth in developing countries catch-up?
• Sachs:
  
• recommendation of an aid-supported, big-push investment strategy, aimed at lifting the world's poorest people, predominantly Africans, out of the poverty traps into which, in his judgment, they have fallen
  
• Martin Wolf: more sceptical than Prof Sachs of the returns to the big-push strategy
  
• In many cases, it will fail.
  
• But: it has to be tried, because there is no morally tolerable or credible alternative.
  
• Agrees, too, that huge efforts must be made to accelerate the fertility decline in the world's poorest countries, albeit on a voluntary basis.
• can economic growth once spread across the planet be sustainable?
• Jeffrey Sachs:
  
• optimistic on direct resource inputs into growth
• his view is that fossil fuel resources, renewable energy and availability of fresh water should be sufficient to support continued growth over the next half century
• would almost certainly require a transition from oil-based energy technologies to ones based on coal and renewables
• energy would, almost certainly, be much more expensive than in the 1985-2000 period, but not prohibitively so
• challenge: to make growth compatible with sustaining the global commons:
• species survival and, above all, climate change
• believes climate change can be dealt with at modest cost
• provided suitable incentives are put in place
• less than 1 per cent of global income
• believes we can achieve all the goals he has set for less than 2 per cent of global incomes
• Martin Wolf:
• One might not be quite as optimistic about the cost of the solutions. But one must recognise the salience of the challenges.
  
• If economic growth halted, conflict among the world's people would risk becoming unmanageable.
  
• If the environmental consequences proved overwhelming, the costs of growth would become unbearable.
  
• We are the masters of our planet now. The great question for the 21st century is whether we can also become masters of ourselves.
  

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Who’s Afraid of Friedrich Hayek? - Dissent Magazine

Summary:
Jesse Larner reviewing Hayek's Road to Serfdom. Good critique of central planning. Not as extreme a position as that of some of his followers. Hayek's main concern is human freedom. Not dissimilar to some versions of socialism (even libertarian collectivism). Hayek's limitation is that he only considers one type of socialism (Stalin's). Hayek admits that there are economic circumstances in which market forces cannot deliver the optimum result, and when the state may legitimately intervene. (Published: Winter 2008)


Notes:

• Hayek revered at
  
• American Enterprise Institute
• Cato Institute
• National Review
• Weekly Standard
• book: The Road to Serfdom (1944)
  
• 350,000 sold in US
• Hayek nowhere near as extreme as his ideological descendants
• admits that there are a few rare economic circumstances in which market forces cannot deliver the optimum result, and that when these occur, the state may legitimately intervene
• recognizes such a thing as the social interest and will even endorse some limited redistributionalism
• goes so far as to suggest that the state ensure a minimum standard of living
• idea surely to embarrasses people at Cato
• Hayek concerned with human freedom
• in contrast to many modern conservative intellectuals
• writes with passion against class privilege
• not as rational and irrefutable as the right would have it; often eccentric
  
• makes a powerful and far-ranging critique of state control of economic life in Road to Serfdom
• Keynes on Road:
  
• “it is a grand book. . . . Morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement with it, but in deeply moved agreement.”
  
• but followed up his seven famous lines of praise with eighty-four little-known lines in favor of expanded economic planning
• George Orwell on Road:
• “In the negative part of Professor Hayek’s thesis there is a great deal of truth . . . collectivism is not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisitors never dreamt of.”
• core of Road is an exploration of why a planned, state-managed economy must tend toward totalitarianism
• Road: Economic planning assumes a social goal at which the plan aims.
  
• But whose goal?
  
• In a society of competing interests—a condition that would describe every human society—any goal, any plan, inevitably favors some interests against others.
  
• Who is to say whether the favored interests are “better” for society as a whole?
• There may be consensus in government, or on a delegated planning board, but this only reflects the consensus of immediately interested parties.
• A complex economy is something no person or institution can understand.
  
• But it can generate a sustainable order, with a rational allocation of resources, as individuals respond to their own circumstances and make choices as consumers and entrepreneurs, signaling the subjective value that they place on goods and capital stock through the price mechanism
• One of Hayek’s most original contributions to economic theory:
• insight that economic systems are based primarily on information rather than resources
• To plan an outcome and to direct economic inputs and outputs toward this outcome is to stifle the emergence of a spontaneous, democratic response to the needs of the individuals who make up the community
• a response that will necessarily have winners and losers
• but will not privilege the vision or depend on the limited information of a governing elite
• furthermore, will encourage further experimentation
• responsibility of a government that fosters individual freedom is
  
• to set up transparent and impartial rules so that the legal reaction to personal choices can be predicted for all, regardless of social station;
  
• to tolerate no privileged access to the law;
  
• to provide security; and
  
• to protect contracts and private property
• so long as doing so does not conflict with the very small set of social assumptions on which there truly is broad consensus
• ensure a minimum standard of living (?)
  
• Hayek disapproved of prebendal institutions that increase the wealth and power of an elite at the expense of other members of the class in whose interests the elite is supposedly working, and of society at large
• whether that elite be composed of
  
• union members,
• holders of exclusive concessions,
• hereditary lords
• recognized that institutions that interfere with the price mechanism encourage relations of patronage.
• Hayek understood at least one very big thing:
  
• that the vision of a perfectible society leads inevitably to the gulag
• human societies are jerry-built structures, rickety towers of ad hoc solutions to unforeseen problems.
  
• their development is evolutionary
• as in biological evolution, they do not have natural end-states
• Comprehensive models of how society should work reject the wisdom of solutions that work and deny the legitimacy of individuals who demonstrate anti-orthodox wisdom
• models from Lenin to Mussolini to Mao to Ho to Castro to Qutb deny the very right to exist of individuals who demonstrate anti-orthodox wisdom

• Hayek makes little distinction between socialism, communism, and collectivism
• the only kind of socialism he considers in Road is state-managed, perfect-society utopianism, in which the direction of the economy and all of its inputs and outputs are planned, with the accompanying political and moral degradation that Hayek demonstrates quite convincingly
• this focus on state-led socialism should not be particularly surprising in 1944
• but: other visions of socialism, and other socialistic traditions, were certainly available to Hayek when he wrote
• libertarian, less top-down approaches
• socialisms of Luxembourg, Kropotkin, Proudhon, many others
• the possibility of nontotalitarian models of social democracy, like those that emerged in Europe after the war
• therein lies limitation of Hayek
• Hayek’s ideological descendants often assume, either sincerely or disingenuously, that in a world very different from that of 1944, socialism by definition still means state control of the economy in the interest of perfecting social relations

• Because they understand very little of the thoughtful left, it is hard for many on the right to acknowledge that as a critique of socialism, Hayek’s ideas are limited rather than devastating
• Hayek doesn’t seem to grasp that human beings can exist both as individuals and as members of a society, without necessarily subordinating them to the needs of an imposed social plan
• although he acknowledges that the state can legitimately serve social needs, he contradictorily views collective benefits as incompatible with individual freedom
• Hayek rejects the very concept of social justice
• for much the same reasons that he rejects the arbitrary valuation of labor
• in Hayek’s view there is no way to put an objective value on a grievance or to weigh it against other claims
• because he locates all responsibility and agency only at the level of the individual, he sees no way in which any claim can be generalized to society
• Hayek’s political philosophy recognizes only negative rights.
  
• Positive fulfillment beyond the most basic needs is a matter of individual striving.

• brief survey will show that there are all kinds of imaginative ways in which libertarian collectivism can coexist with capitalism and markets
• e.g. fishing co-operatives
• investors and crew are paid in shares of the catch
• form of economic organization that is found wherever fishing is pursued as a way of life
• has ancient origins.
• corporate stock ownership plans or the limited employee ownership of companies like Avis or United Airlines
• This is a socialism that is not incompatible with democracy, markets, or liberty.
  
• It is not subject to the perfectionist fallacy
• public disbursements in the social interest don't necessarily start us down a slippery slope to the totalitarian state
• Hayek, in suggestively conflating government spending with government planning, pulls a bit of a sleight of hand in Road.
• Democracy turned out to be a lot stronger than Hayek expected.

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Globalisation is good - The Guardian

Summary:
Peter Mandelson defending globalisation in response to the protectionist rhetoric heard during the presidential primaries. Feeling is that globalisation is out of countrol, no longer something we do but something that is done to us. But open markets and economic integration are far the best tool we have for increasing global economic welfare. "Only stable, cooperating states can manage the coming squeeze on resources."Globalisation and active welfare states are not incompatible. "Protective states do not have to be protectionist ones." (Published: 09/06/08)


Notes:

• The Atlantic world is no longer the centre of the economic world, because the economic world no longer has a centre.
• many Americans see global economic change in zero-sum terms
• as suggested by the protectionist and anti-trade rhetoric evident in the presidential primaries
• Economic inequality is reduced between countries, but widens within our own societies.
• Globalisation is no longer something we do, it is something that others do to us.

• "Nobody would disagree that globalisation has its dark side. But the open markets and economic integration that drive it are still by far the best tool we have for increasing global economic welfare. That is an essential contribution to global stability. Only stable, cooperating states can manage the coming squeeze on resources."
  

• US and Europe should recognise that in an interdependent world, they have nothing to gain from a stalling of growth in the developing world
• rather than worry about a relative decline in their economic weight, or retreat from international engagement
• should focus on renewing the global institutions needed to hold this new mix of states together through difficult debates on climate change, energy security and trade
• have to adapt these institutions - the UN, the WTO, the IMF - to give the emerging economies a chance not just to exercise their rights, but to assume their responsibilities.
  

• at the moment when we most need the tools of internationalism, our own politics has begun pushing in the other direction
• economic nationalism is the symptom of a deeper problem.
• we can't shape globalisation without tackling the causes of protectionism.
• means tackling our own economic insecurity and inequality.
  

• entrenched political myth that globalisation and active welfare states are incompatible
• OECD data for the last 20 years: strong welfare states have equipped countries for globalisation much better than weak ones.
• states that have encouraged labour market flexibility, high levels of education and retraining, and helped women and older people stay in the workforce
• Progressives in the US and Europe need to revive the New Deal case for governments that help people engage with open economies, rather than leave them exposed
• Protective states do not have to be protectionist ones.
  

• Gordon Brown has never erred in rejecting the false comforts of populism and setting out a positive politics of globalisation
• sees globalisation as part of the solution rather than part of the problem
• world needs to hear the same message from President Obama or McCain
  

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Nassim Nicholas Taleb: the prophet of boom and doom - The Times

Summary:
Interview with Nassim Nicholas Taleb, author of "The Black Swan: The Impact of the Highly Improbable." Problem with probability theory: Fat Tony vs. Dr. John. On buying "out-of-the-money" options: when markets rise, they rise by small amounts, when they fall, they fall dramatically. Mediocristan vs. Extremistan. On banks and failing of Long Term Capital Management. Importance of religion and being ecologically conservative. Investment strategy: 90% in safest government securities, 10% high risk. (Published: 01/06/08)

Notes:

• most economists, and almost all bankers, are subhuman and very, very dangerous
• live in a fantasy world in which the future can be controlled by sophisticated mathematical models and elaborate risk-management systems
• in December lectured bankers at Société Générale
• told them they were sitting on a mountain of risks – a menagerie of black swans
• didn’t believe him
• six weeks later the rogue trader and black swan Jérôme Kerviel landed them with $7.2 billion of losses.
• "Clothes matter; they send signals"
• risk management
• facing up to those aspects of randomness about which something can be done
• “Scientists don’t know what they are talking about when they talk about religion. Religion has nothing to do with belief, and I don’t believe it has any negative impact on people’s lives outside of intolerance. Why do I go to church? It’s like asking, why did you marry that woman? You make up reasons, but it’s probably just smell. I love the smell of candles. It’s an aesthetic thing.”
• "Take away religion, and people start believing in nationalism, which has killed far more people."
  
• Religion as way of handling uncertainty
• lowers blood pressure
• thinks religious people take fewer financial risks
• obsessed with probability
• Brooklyn-born Fat Tony and academically inclined Dr John: two of Taleb’s creations
• You toss a coin 40 times and it comes up heads every time. What is the chance of it coming up heads the 41st time?
  
• Dr John gives the answer drummed into the heads of every statistic student: 50/50.
  
• Fat Tony says the chances are no more than 1%.
  
• “You are either full of crap,” he says, “or a pure sucker to buy that 50% business. The coin gotta be loaded.”
• chances of a coin coming up heads 41 times are so small as to be effectively impossible in this universe.
  
• It is far, far more likely that somebody is cheating.
  
• Fat Tony wins. Dr John is the sucker
• 1985: France, Germany, Japan, Britain and America signed an agreement to push down the value of the dollar
• held options that had cost him almost nothing and that bet on the dollar’s decline
• 1987 – Black Monday
• options were suddently worth a fortune
• became obsessed with buying “out of the money” options
• was sitting on a pile of out-of-the-money eurodollar options
• realised that when markets rise they tend to rise by small amounts, but when they fall – usually hit by a black swan – they fall a long way.
• on fall of Long-Term Capital Management
• hedge fund set up in 1994 by, among others, Myron Scholes and Robert C Merton
• joint winners of the 1997 Nobel prize in economics
• had grandest of all possible credentials and used the most sophisticated academic theories of portfolio management
• went bust in 1998 and, because it had positions worth $1.25 trillion outstanding, it almost took the financial system down with it
• modern portfolio theory had not accounted for the black swan, the Russian financial crisis of that year
• Mediocristan vs. Extremistan
• Mediocristan: where early humans lived
• Most events happened within a narrow range of probabilities – within the bell-curve distribution still taught to statistics students.
• we don’t live there any more.
• Extremistan: world we live in
• created world we don't understand
  
• black swans proliferate, winners tend to take all and the rest get nothing
• our systems are complex but over-efficient
• no redundancy, so a black swan strikes everybody at once
• banking system is the worst of all
• banks make money from two sources
• they take interest on current accounts and charges for services
• this is easy, safe money
• but they also take risks, big risks, with the whole panoply of loans, mortgages, derivatives and any other weird scam they can dream up.
  
• “Banks have never made a penny out of this, not a penny. They do well for a while and then lose it all in a big crash.”
• increased economic concentration has raised our vulnerability to natural disasters
• Kobe earthquake of 1995 cost a lot more than the Tokyo earthquake of 1923
• countless other ways in which we have built a world ruled by black swans – some good but mostly bad
• believes in tinkering
• Trial and error will save us from ourselves because they capture benign black swans
• three big inventions of our time: lasers, computers and the internet
• all produced by tinkering and none of them ended up doing what their inventors intended them to do
  all were black swans
• big hope for the world is that, as we tinker, we have a capacity for choosing the best outcomes
• good investment strategy is to put 90% of your money in the safest possible government securities and the remaining 10% in a large number of high-risk ventures
• insulates you from bad black swans and exposes you to the possibility of good ones
• Your smallest investment could go “convex” – explode – and make you rich
• High-tech companies are the best
• The downside risk is low if you get in at the start and the upside very high
• Banks are the worst – all the risk is downside
• Don’t be tempted to play the stock market
• “If people knew the risks they’d never invest.”
• We should be mistrustful of knowledge. It is bad for us.
  
• Give a bookie 10 pieces of information about a race and he’ll pick his horses.
  
• Give him 50 and his picks will be no better, but he will, fatally, be more confident.
• We should be ecologically conservative:
• global warming may or may not be happening but why pollute the planet?
  
• "Taleb's top life tips"
1. Scepticism is effortful and costly. It is better to be sceptical about matters of large consequences, and be imperfect, foolish and human in the small and the aesthetic.
2. Go to parties. You can’t even start to know what you may find on the envelope of serendipity. If you suffer from agoraphobia, send colleagues.
3. It’s not a good idea to take a forecast from someone wearing a tie. If possible, tease people who take themselves and their knowledge too seriously.
4. Wear your best for your execution and stand dignified. Your last recourse against randomness is how you act — if you can’t control outcomes, you can control the elegance of your behaviour. You will always have the last word.
5. Don’t disturb complicated systems that have been around for a very long time. We don’t understand their logic. Don’t pollute the planet. Leave it the way we found it, regardless of scientific ‘evidence’.
6. Learn to fail with pride — and do so fast and cleanly. Maximise trial and error — by mastering the error part.
   
7. Avoid losers. If you hear someone use the words ‘impossible’, ‘never’, ‘too difficult’ too often, drop him or her from your social network. Never take ‘no’ for an answer (conversely, take most ‘yeses’ as ‘most probably’).
   
8. Don’t read newspapers for the news (just for the gossip and, of course, profiles of authors). The best filter to know if the news matters is if you hear it in cafes, restaurants... or (again) parties.
   
9. Hard work will get you a professorship or a BMW. You need both work and luck for a Booker, a Nobel or a private jet.
   
10. Answer e-mails from junior people before more senior ones. Junior people have further to go and tend to remember who slighted them.
    

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Quote of the Day

"It is impossible to defeat an ignorant man in argument." - William G. McAdoo

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Quote of the Day

"Some things have to be believed to be seen." - Ralph Hodgson

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Food crisis is a chance to reform global agriculture - FT.com

Summary:
Martin Wolf on why the price of food has risen and what can be done. Weak growth of supply and strong increases in demand has caused stocks of cereals to drop to lowest levels since 80s. Price hikes not due to speculation. Supply is biggest problem. Prices will remain high until energy prices tumble. Poor most affected. Humanitarian intervention needed. Farming overly regulated. Needs to be market oriented. Move towards genetically modified food in developing countries is inevitable in order to increase productivity.(Published: 29/04/08)

Notes:

• Of the two crises disturbing the world economy - financial disarray and soaring food prices - the latter is the more disturbing
• high food prices threaten unrest at best and mass starvation at worst
• jumps in food prices are part of a wider range of commodity price rises
  
• forces that link prices of energy, industrial raw materials and foodstuffs
• rapid economic growth in the emerging world
• strains on world energy supplies
• the weakness of the US dollar
• global inflationary pressures
• but: food now hotter issue that normal
• questions: why have prices of food risen so strongly? Will these higher prices last? What action should be taken in response?
• demand side:
  
• demand for food raised due to strong rises in incomes per head in China, India and other emerging countries
• notably meat and the related animal feeds
• shifts in land use reduce the supply of cereals available for human consumption
• rising production of subsidised biofuels
• stimulated by soaring oil prices
• boosts demand for maize, rapeseed oil and the other grains and edible oils that are an alternative to food crops
• IMF: "although biofuels still account for only 11/2 per cent of the global liquid fuels supply, they accounted for almost half of the increase in consumption of major food crops in 2006-07, mostly because of corn-based ethanol produced in the US"
• supply side:
• aggregate production of maize, rice and soyabeans stagnated in 2006 and 2007
• partly the result of drought
• partly due to higher prices of oil, since modern farming is so energy-intensive
• cereal stocks have fallen to their lowest levels since the early 1980s
• due to weak growth of supply and strong increases in demand
• undermines belief that speculation has driven the rising prices
• if if prices were above market-clearing levels due to speculation, stocks would be rising, not falling
• biggest problem is is weak medium-term growth of supply
• rapid increases in yields of the 1970s and 1980s (the "green revolution") have slowed
• given the stresses on water supplies, longer-term supply prospects would look poor even if diversion of land for production of biofuels were not adding to the pressure
• Are prices going to remain high?
  
• Two opposing forces are at work
• First force is the market
• will tend to bring prices back down as supplies expand and demand shrinks
• latter is also what we want to avoid, at least in the case of the poor, since reducing their consumption is not so much a solution as a failure
• Second force is the current intense pressure on the world's food system
• true of both demand and costs of supply
• Prices are likely to remain relatively elevated, by historical standards, unless (or until) energy prices tumble
• what is to be done? answers fall into three broad categories:
  
• humanitarian
• important point: higher food prices have powerful distributional effects: they hurt the poorest the most
• Increases in aid to the vulnerable, either as food or as cash, are vital
• Equally important, however, is ensuring that the additional supplies reach those in greatest difficulty.
  
• trade and other policy interventions
  
• Protection, subsidies and other such follies distort agriculture more than any other sector
• rich countries are encouraging, or even forcing, their farmers to grow fuel instead of food
• present crisis is a golden opportunity to eliminate this plethora of damaging interventions
• focus should be on shifting the farm sector towards the market, while cushioning the impact of high prices on the poor
  
• longer-term productivity and production
• far greater resources need to be devoted to expanding long-run supply
• increased spending on research, especially into farming in dry-land conditions
• the move towards genetically modified food in developing countries is as inevitable as that of the high-income countries towards nuclear power
• more efficient use of water, via pricing and additional investment.
  
• "People will oppose some of these policies. But mass starvation is not a tolerable option."

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I and My Brother Against My Cousin - The Weekly Standard

Summary:

Stanley Kurtz reviewing Philip Carl Salzman's "Culture and Conflict in the Middle East". Dominant theme of cultural life in Arab Middle East is the template of tribal life: collective responsibility, feuding, balanced power and honor shaping every action and thought; Islam and state merely superficial layers. Controlled anarchy. Tribal societies egalitarian and democratic. Islam: uniting all Arab tribes in ultimate feud against infidel outsiders. Western strategy for change should focus on tribal aspect not Islam; Islam sacred, tribal aspects not so and open for criticsim (14/04/2008)

 

Notes:

• Middle Eastern tribes: think of themselves as giant lineages, traced through the male line, from some eponymous ancestor
• each giant lineage divides into tribal segments, subdivide into clans, divide into sub-clans, etc down to families
• traditionally Middle Eastern tribes have existed outside of the police powers of the state
• keep order through a complex balance of power between these fusing and segmenting ancestral groups
• central institution of segmentary tribes is the feud
• security depends on willingness of every adult male in given tribal segment to take up arms in its defence; universal male militarization
• attack on lineage-mate must be avenged by entire group; vice versa, any lineage member is liable to be attacked in revenge for offense committed by relative
• results in system of collective responsibility: action of any one person directly affect reputation and safety of entire group; collective guilt
• Muslim tribal society is both fundamentally collectivist and profoundly individualist
• no man of the tribe can, by right, command another
• all males equal, free to dispose of their persons and property and to speak in councils that determine fate of the group
• fundamentally democratic
• Arab saying: "I against my brother; I and my brother against my cousin; I and my brother and my cousin against the world"
• liberal Westerners: why risk battle without first making a reasonable effort to talk problem out?
• sort of question liable to be posed by someone living where a state monopolizes the legitimate use of force and police and courts can be relied upon to keep the peace
• in non-state setting, where anarchy is kept under control only by the threat or use of force, it makes sense to send a war party first and ask questions later
• conveying impression of weakness
• preventing future abuse in lawless desert environment by publicly making capacity known to swiftly unify to preserve interests
• Arab tribesmen preoccupied with maintaining deterrence and are prepared to use force preemptively
• much like neocons: hawkish conservatives ("rightly") believe global anarchy underlies reality of international system; much like de facto stateless anarchy in which Bedouin Arabs live
• swift and seemingly disproportionate resort to retaliatory force against apparently trivial offenses is an effective technique for surpressing future challenges
• eg careful use of targeted force against Western critics of Islamism; overtly religious action actually shaped by a hidden tribal template
• eg fatwa against Salman Rushdie, rage against Muhammed cartoons, killing of Theo van Gogh, ...
• all examples of pro-active deterrence
• doves: use of force serves to unite foe; creating impression of an infidel war against Muslims, thus recruiting every Muslim lineage into bin Laden's civilisational war party
• true, but on the other hand, failure to strike back creates impression of weakness that invites further attacks
• Islamists view cooing of the doves as sign that their feud against the West has successfully weakened and split our own coalition
• disturbing lesson: in the absence of fundamental cultural change, the feud between the Muslim world and the West is unlikely ever to come to an end
• tribal feuds simmer on and off for generations, with negotiated settlements effecting only temporary respites
• Western liberal template takes an experience of peace under the lawful authority of a state as the normal human condition
• in this view, when peaceful equilibrium is disturbed, reasonable men reason together to restore normalcy
• in tribal template, low-level endemic feuding in conditions of controlled anarchy is the norm
• liberal "come let us reason together" model has little currency in Arab tribal culture
• Salzman: Tribal template is dominant pattern of Arab culture, not religion
• religion is overlay in partial tension with, and deeply stamped by, the dynamics of tribal life
• To think of Middle East as consisting of a number of states is mistake.
• Rather, collection of tribes.
• Governing party essentially tribe or tribal coalition with most power (e.g. Saddam Hussein)
• Statelessness increases as one moves towards periphery of nation.
• Statelessness seen by tribes as essential condition of dignity, equality, and freedom.
• State = predation under official guise
• Importance of avoiding dishonourable submission; avoiding life of peasant humiliation and exploitation
• Salzman: tribal template dominant pattern of Arab culture
• not details of tribal kinship matter, but underlying principles of "balanced opposition," in which collective responsibility, honor and feuding shape every action and thought;
• quick shifts in loyalty often called for
• unite with erstwhile enemies in opposition to a more distant foe
• all members of an enemy group are potential targets
• demand honourable behaviour from members of own group
• maintain own and group's honour by a clear willingness to sacrifice for the collective good
• Islam's founding triumph was to raise stakes of balanced opposition by uniting all the Arab tribes in an ultimate feud against infidel outsiders
• Muslim's treating tribal era of Muhammed and his early successors as golden age of Islam
• cultural influence of tribal template thus remains pervasive
• Gaza's feuding clans: revelation of bedrock of Middle Eastern social organisation
• ever-present and ever-influential beneath superficial layers of Islam and state
• political paradox posed by Salzman's tribal interpretation of Arab culture
• on one hand, pervasive tribal principles of balanced opposition are "precluding democracy" in Middle East
• to democratise Middle East, the particularist loyalties at the core of balanced opposition (kin, tribe, sect) need to be replaced by greater "individualisation"
• only then could an authentic liberal democracy based on constitionalism and the rule of law take root in the Arab world
• on other hand, tribal culture is largely egalitarian, individualist and democratic in character
• balanced opposition is democratic because decision making is collective and everyone has a say
• absence of government authority, combined with system of shifting coalitions of willing individuals, means that freedom, equality and personal responsibility - along with bellicosity and courage - are fundamental tribal values
• confusion about meaning of words "freedom," "equality," and "democracy"
• in liberal state, freedom is rights-based and universal
• in tribal society, freedom is freedom of freestanding warrior and his tribe to dominate and deprive others of their liberty
• equality refers to equal combat, as opposed to submission
• democracy is closer to a conclave of family heads in the Godfather, never far from potential violence, than to debate in a modern representative assembly
• not equality before the law, but equality outside of the law
• democracy requires something more fundamental than open consultation between descriptively free and equal parties
• Arabs know all about freely expressing their opinions in open council, yet have fundamental reservations about entering into the sort of social contract required to create a modern liberal state
• largely justified: state offers only thin alternative to "the war against all"
• most Middle Eastern states are just reincarnations of the predatory winner-take-all tribal coalitions of old
• why exchange protection of your family, tribe or sect for submission to a weak or predatory state?
• "tribal society contains just enough order to make a bit of violent anarchy bearable, and just enough grasping anarchy to make a liberal social contract unreliable"
• won't be easy to weaken cycle of particularism, ie the self-reinforcing loyalties of extended family, tribe and sect that dominate Arab countries at both state and local levels
• West needs to learn to understand and critique the Islamic Near East through a tribal lens
• Islam is only half the cultural battle
• tribal practices, however, are less swathed in sacredness than explicitly Koranic symbols and commandments
• therefore more susceptible to criticism and debate
• new and smarter strategy for change

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The political threats to globalisation - FT.com

Summary:
Gideon Rachman on risks to globalisation; globalisation was made possible by political changes at first; now political changes are threatening globalisation; modern timeline of globalisation, 1978-1991. (07/04/2008)


Notes:

• Most people, globalisation ~ economics, technology and business
• Globalisation was made possible by political changes first; underpinned by political consensus; now political changes are threatening globalisation
• political elites struggling to convince citizens that globalisation doesn't just benefit the rich; losing this argument in any of the major world economies may jeopardise political consensus
• political consensus recent creation; took place in very short period of time: 1978 to 1991, i.e. less than 15 years
• 1978: Deng Xiaoping's reforms; China turns from Maoism to market; most important development
• 1979: Thatcher takes power; abolition of foreign exchange controls; London's rise as global financial centre
• 1980: Reagan takes power; deregulation and tax cuts; huge boost to market ideology around the world
• mid 1980s: creation of single market in EU
• 1980s: discrediting of protectionist populists in Latin America
• 1989: collapse of Berlin wall; Eastern Europe and Russia join globalisation game
• 1991: India moves away from regulation and protectionism
• As a result, now feels as natural doing business in Beijing, Moscow and Delhi as in London and New York
• Could this period of globalisation end, like it did in 1914 and 1930s?
• Most obvious threat: crisis in most important political and economic relationship in the world, between US and China
• Risk in Chinese-American relations is of miscalculation, clash that escalates into something that does real damage; combination of looming recession in US, presidential election and Beijing Olympics are formula for potential trouble
• Other threats (long-term): terrorism and climate change; globalisation depends on ease of travel!
• Biggest risk: politicians losing argument for globalisation; 10 years ago, narrow majority in US in favour of globalisation, now majority against; politicians reacting to this shifts, eg. Democrats taking sceptical line on free trade, Republicans against illegal immigration, Sarkozy arguing for protectionism on EU level
• Indian government lost general election largely because poor, rural voters felt left out by boom; in China, authorities anxious about rural unemployment, environmental protests and wealth gap between rich coasts and poorer inland regions
• rising world food prices, sense that poor have lost out as a result of globalisation

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The Sting of Poverty - Boston Globe

Summary:
Drake Bennett on Charle Karelis' take on poverty. Traditional economics doesn't apply to the poor. Seeing world not in terms of goods to be consumed but problems to be alleviated. Bee sting metaphor. Need to reduce number of economic hardships the poor have to deal with. No strings attached. (30/03/2008)


Notes:

• Economists: poor people have strongest incentive to subscribe to a Puritan work ethic: each dollar earned worth more than to someone with higher income
• Opposite seems to the case: poor are disproportionately likely to drop out of school, have children in their teens, abuse drugs, commit crimes, not to save money, not to work
• Different interpretations
  
• Social conservatives: poor people lack smarts/willpower to make right choices
• Social liberals: racial prejudice and crippling conditions of ghetto to blame; denying poor any choice in their fate
• Neoconservatives: antipoverty programs to blame, bribing people to stay poor
• Charles Karelis (George Washing University): traditional economics doesn't apply to poor:
  
• when poor, economic worldview shaped by deprivation, seeing world not in terms of goods to be consumed by as problems to be alleviated
• Bee sting metaphor: person with one sting highly motivated to get it treated; person with multiple stings does not have much incentive to get one sting treated, other will still throb; the more of a painful or undesirable thing one has (ie the poorer one is) the less likely one is to do anything about any one problem
• Poverty less a matter of having few goods than having lots of problems
• Poverty and wealth not two ends of spectrum, but fundamentally different experiences, each working on human psyche in its own way
• at some point between the two, people stop thinking in terms of goods and start thinking in terms of problems; enormous consequences
• economists by and large well-of, failed to see this shift
• antipoverty initiatives all along ideological spectrum unlikely to work; economists and poverty experts need to reconsider "scarcity," one of most basic ideas in economics
• Econ 101 created tired, phony debate about cause of poverty
• Karelis taking issue with law of diminishing marginal utility (the more we have of something, the less any additional unit of that thing means to us)
• applies in many cases but logic flips when dealing with privation rather than plenty
• dents in car, dishes in sink
• Karelis: being poor = having to deal with a multitude of problems; even if one works hard enough to pay off half of costs, some fairly imposing ones still remain, creating large disincentive to bestir oneself to work at all
• Karelis: core of proble not self-discipline or lack of opportunity; cause of poverty is poverty
• policy makers worried that the more aid government gives the poor, the less likely they are to work to provide for themselves (the "helping conundrum")
• Karelis disagrees: reducing number of economic hardships that poor have to deal with makes them more, not less, likely to work
• simply giving the poor money with no strings attached rather than using it to try to encourage specific behaviors would be just as effective, with less bureaucracy
• early 1970s study: aid tends to discourage work
• Karelis: data from that experiment ambiguous

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Nationalism at core of China's angry reaction to Tibetan protests - International Herald Tribune

Summary:

Jim Yardley on perceptions by Chinese people of protests in Tibet and Western media coverage; underminin of Olympic Games; inflaming nationalist sentiment; China cannot be divided; Tibetan ingratitude for years of subsidies, benefits and investment (30/03/2008)

Notes:

• reaction of people: "government is being weak and cowardly," "Dalai Lama trying to separate country, not acceptable"
  • Chinese officials' labelling of Dalai Lama as "jackal," "terrorist" response to people's sentiment; call for "People's War" to fight separatism of Tibet
  • government trying to position itself as defender of motherland; playing to national pride and insecurities
  • but Chinese people want to see tougher stance still
• China wants to present welcoming image to world, with Olympics in 5 months time
  • playing nationalist card not without risk
• state media inundating public with reports from Lhasa about suffering of Han Chinese merchants and brutal deaths of Chinese citizens; no coverage about Tibetan grievances
  • government fanning racial hatred?
  • effect is to sharpen domestic ethnic tensions (rather than external focus, e.g. Japanese)
• government steering and inflaming nationalism, or nationalistic public attitudes beyond gov't control?
• many Chinese (home and abroad) viewing increasing attacks on China as attempt to undermine Games
  • Darfur, global warming, air pollution, human rights, Taiwan, Tibet
• Tibet usually low profile issue in China, compared to e.g. Taiwan
  • but many see it as attempt to split the country
• Wen Jibao: China willing to talk to Dalai Lama if he gives up desire for independence + acknowledged that Tibet and Taiwan are inseparable from China
• internet filled with angry comments about meeting between Pelosi and Dalai Lama
  • "Chinese people on verge of taking to the streets"
• Tibet crisis shows leadership has stepped back into the party's harsher past
  • Buddhist monks in Tibet subjected to punitive "patriotic education" campaigns
  • language used is Cultural Revolution hyberbole
  • propaganda machine operating in full gear
  • leadership lack of confidence?
• since government has shrugged off socialist ideology and made economic development country's top priority, nationalism new state religion
• Sun Yat-sen
  • Chinese revolutionary
  • described country's 5 ethnic groups: Han (92%), Manchu, Hui, Mongolian and Tibetan
  • "five fingers" of China; without one, country not whole
• nationalism as an ideology to keep China together
• many Chinese see Tibetan protests as attack on core identity; attack on state, but also attack on what it means to be Chinese
  • Chinese nationalist sentiment inflamed by perceived Western sympathy for Tibetan protests
  • anger focused on foreign media
  • media perceived more sympathetic to Tibetans in Lhasa than Chinese who lost lives and property in riots
  • mislabelling of photographs showing Nepalese police beating Tibetan protestors as Chinese
  • but government refused to allow media into Tibet
• Chinese nationalism in past has led to violence
  • cfr anti-Japanese protests; government had to intervene after first manipulating it
• for most Chinese, bottom line is you should never divide China
• little known in China about Tibet's different interpretation of its history
  • regard Tibetans as having been granted special subsidies and benefits because of ethnic status
  • years of building roads, high-altitude railroad and other infrastructure
  • protests come across as ingratitude
  • Tibetans taking advantage of Chinese tolerance towards all sorts of religions

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Summary only...