Hardcore for Nerds

» Yeah, but no, but yeah, but no

“Gerard Sheehy, a financial-services adviser from Cahir, Co Tipperary, expressed almost exactly this view on Twitter a few nights ago. “Yes, but … no, but. That’s where I am at the moment.” Or as David Begg put it this week: “Damned if we do, damned if we don’t.”

Later, Sheehy tells The Irish Times: “I’m still in a state of complete flummox. As of tonight, I’m voting Yes, but I need some reassurance from the Government that they will be doing everything in their power not to draw down more money, ie, [they should] make more cuts. If they don’t need to borrow more money, then don’t. Your typical household wouldn’t/ shouldn’t do it, so we need to get the national house in order.””

Can we please have a moratorium on comparing governments to private households, or macroeconomics to microeconomics? You don’t have to be a rigorous Keynesian to point out the problems with this.

“Cochrane says there is nothing “alien or radical about the concept that a government should only spend the money it has. But that’s how it’s being presented. What panics me is when Ministers come out and say – in the first person – ‘we’ need this treaty so there is no more reckless spending by governments. But this isn’t just about Ireland; it’s about all the other member states too.”

Actually, it is rather alien and radical - even Germany ran deficits in the 90s - especially if you’re going to enforce it legally (which is why I doubt this treaty will actually work, but that’s another debate). Even for the private household - I know this sort of contradicts my plea above, but it needs to be said - the same concept would preclude any kind of mortgage, while for a private company it wouldn’t be able to benefit from outside investment… obviously there’s been a problem with the level of debt (private and, to a lesser extent, public) in the past decade or so, but that hardly negates it as a concept*.

Not to mention that as much as the creation of too much debt has been a problem, the insistence on keeping it intact to preserve ‘financial stability’/the plutocracy has been a much greater difficulty, and has created the pressures on sustainable government financing that have necessitated this mirage - this whole debate is a dread farce.

*which the treaty doesn’t either, for public debt - allowing a ratio of 60% of GDP. of course households don’t have GDP - not unless all the family members buy food and clothes from each other - so that’s another reason why the comparisons don’t work.

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“ The answer to solving Ireland’s economic woes is inherently built in to its natural assets, especially its seabed and quality of grass, President Michael D Higgins said yesterday

—

Classic Michael D.

although I wonder how his constant repetition of this contemporary line is going down:

“The President said the country’s natural assets should be harnessed “to provide a real and lasting economy”, as opposed to “a speculative false economy”, which was symbolic of the Celtic Tiger.”

when a lot of people made their money (although most subsequently lost it, or were saddled with enormous debts) in that speculative era, and Ireland remains a predominantly service sector economy in which the lines and linkages to such speculation are blurred, or the progress to growth remains reliant on renewed consumer spending. I’m sure there are plenty of people who are genuinely regretful about past obsessions, and I hope we change direction too - but there are a lot of people I imagine who see the term “speculative, false economy” as an attack on genuine money-making. As maybe they should, and that’s the debate he wants us to have… but how do we get there?

Michael D. Higgins irish politics economics

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Martyn Turner’s cartoon on the front page of the Irish Times today.

“I think it would serve us all well to “kill all the economists” (to paraphrase Shakespeare): very few of them add to the sum of social or scientific knowledge, but a substantial minority of the profession contributes actively to confusing citizens about how to think socially.”

Tony Judt, Thinking the Twentieth Century, 382

While there’s obvious glee at Sinn Féin being caught out* blatantly misrepresenting the views of centrist economists as somehow supporting their own radical views - if FF/FG are viewed as merely cute in their self-representation, SF are distinctly dodgy - but I’m dubious about the validity of the original, ‘uncorrupted’ message. Whether we can access certain stability funding if we reject the treaty - or indeed whether the measures of fiscal discipline inherent in the treaty would be effectively implemented - is rather more of a political issue than an economic one. It’s something the politicians will decide on, not the social scientists.

Even the rise of the so-called ‘technocrats’ amongst the politicians in Europe belies the fact that their technical knowledge is reliant on the exercise of power - the ‘techno’ to their ‘-cracy’. The core intergovernmental nature of the EU means that despite the apparent influence of the Commission, it is beholden to the power of Merkel and Sarkozy (or likely to be shortly Merkel and Hollande), the former of whom above all has the power to alter the Germanic course of the European Central Bank, if she ever gets the inclination.

Economic debate can strengthen the political argument, but it can’t substitute for it. Which is rather the opposite of the point here, that the political debate is substituting for some kind of economic common sense - even if very little about economics (at least as generally presented) has made sense for the past four or five years.

(*the small speech bubbles say “The PROVOS… now MURDERING the TRUTH…”, and “and PHOTOCOPYING it”, while the figure of Gerry Adams wears a bandolier of ink cartridges, in reference to a recent controversy where Sinn Féin TD Aengus Ó Snodaigh was revealed to have been charging an exceptionally large amount of printer cartridges to his official expenses… pretty silly, but politicians are rather literally held to account here these days - especially those who purport to be of the people and wishing to completely restructure the people’s finances)

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“ The real benefits were psychological. Indeed, one might almost say that the Marshall Plan helped Europeans feel better about themselves. It helped them break decisively with a legacy of chauvinism, depression and authoritarian solutions. It made co-ordinated economic policy-making seem normal rather than unusual. It made the beggar-your-neighbour trade and monetary practices of the thirties seem first imprudent, then unnecessary and finally absurd.

—

Tony Judt, Postwar: A History of Europe Since 1945, ‘The Rehabilitation of Europe’

Finally got round to starting this book. What clinched me was Judt’s description in Thinking the Twentieth Century of his purpose in writing Postwar, which was in part to “nudge the prism a little […] trying to get the reader to think of something other than the ‘rise of the EU’ when she thought about these decades”. Which prompted me to have exactly that thought, but then those lines were written slightly before the Eurocrisis reached its current proportions. What could the history of social democracy say about the current economic and political moment in European affairs?

Much of Europe, indeed the shared concept of Europe itself, is in need of recovery again, in a slightly less dramatic sense (Greece is getting pretty bad, but it was even worse - full-blown civil war - at the end of World War II) though with the same aim, to prevent us sinking deeper into the economic mire. The irony is that currently the EU as a whole is supposedly doing better than the US, in terms of overall debt levels, but economic growth is very unevenly distributed with no effective federal means of correcting those imbalances. At most the European leaders can bodge together ‘firewalls’, ‘bailouts’ and ‘stability mechanisms’ to keep each country’s balance sheet stumbling along, but aside from the fiscal and macroeconomic politics of Eurozone debt, there are more basic economic divisions at play.

One thing I learned about recently, thanks to the Irish media’s attempts to find out what the Germans are thinking, was the concept of Ordoliberalism. Which is paradoxically, and perhaps also somewhat philosophically Germanic, the combination of ‘order’ and ‘freedom’ in economic theory. Freedom in the sense that business is free to pursue its private ends, much like the ’liberalisation’ component of late capitalism under neoliberalism; but order in that companies have social responsibilities and must provide, along with the state, for their employees - as evinced by Germany’s extensive social insurance system (first established by the Prussian Bismarck).

This, to me anyway, shines a good deal of light on the economic attitides purportedly emanating from Germany, and on the interplay between the various conservative movements in power in Europe. It’s obviously an ideology of the right, but when urging reform and increased competitiveness on Ireland as a country ‘living beyond our means’ in Europe, it neglects to note that while Ireland scores high in terms of having an open, neoliberal economy (with all the attendant consequences) we lack the balancing effects of well-developed, comprehensive social insurance system such as exists in Germany (although the welfare elements of it have been significantly trimmed back in the past decade or two, as part of a general neoliberalisation of the Germany economy). And while what services we do provide we may appear to do so inefficiently and wastefully, we lack the overall level or structure of social expenditure common in northern Europe*. That’s the crucial policy element lacking in the debate, such as there is, between broke Ireland and thrifty Germany - precisely because it is foreign to the pro-austerity reformers in Ireland, but also both taken for granted and elided where possible by the conservative Christian Democratic leadership of Germany.

Where this ties in with the above quote is that part of the theory of ordoliberalism, its history, is that it was its reforms and liberalisation that engineered Germany’s post-war economic miracle, not the Marshall Plan. But reading Judt’s account of a Europe in crisis, and being reminded of how the Plan actually worked (freely provided goods sent from America to European governments, which were then bought by the populace and the money allowed to be then used in domestic industry, rather than the desperate scrabble for hard currency used to purchase imports) underlines out that it wasn’t a reform or even a stimulus as much as it was a survival package. One which allowed for reorganisation and growth, and which without which any success would have been difficult if not impossible** - much like Ireland’s growth-through-austerity now, at least without wide-scale restructuring of our debts. The Marshall Plan was an actual bailout, not like our ‘bailout’ which is in fact a large, to-be-paid-for loan facility. Not that there’s any comparison in terms of degree of suffering between post-war continental Europe and Ireland’s current recession, but the principle is the same: don’t kill the patient.

*we basically have a lite version of the universal provision of the British welfare state, hamstrung by economic weakness and the conservative influence of the Catholic church, but which has allowed mainly Fianna Fáil politicians to feel good about increasing payments when possible, for poor people to be frustrated but to have their poverty somewhat ameliorated, and for everyone who has money to purchase the necessary services privately.

**this is the country-size version of the self-made man myth, whereby it is individual determination (and adherence to certain economic assumptions) rather than external assistance which is the main cause of development; much the same idea is held in Ireland, as Judt points out on several occasions, about our liberal economic miracle being driven by domestic factors, and endorsing a subservience to footloose capitalism, and largely ignoring the role of European social investment - although Judt goes too far in the other direction in giving it a role in the continuing the boom, by which time our runaway economic success had rendered the contribution neutral.

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» Silver bullet to resolve our economic woes is a fantasy

There’s some fantastic bending of language and logic in this article by Brendan Howlin, the Labour Party Minister for Public Expenditure and Reform, which encapsulates most of what I detest about the political orthodoxy in this country and in Europe. I wish I could write something more coherent about this, but it’s just so full of things that make me angry about the direction of Ireland:

“We are committed to thinking creatively about freeing up resources for investment in the economy – the part-funding of the national children’s hospital by an upfront payment of the next lotto licence being a case in point.”

In other words, ‘freeing up resources’ means liquidating and privatising public monopolies, which are the nation’s assets. It sounds like it’s just moving things around in the economy, but it is a permanent transfer of wealth from the public to the private sector. And the lottery is essentially a voluntary tax on those wishing to be rich - why should the profit on that go to the highest bidder?

“Contrary to the view articulated, the Government is not pursuing an “austerity” strategy. The opposite is the case. We are borrowing enormous sums of money to sustain the Irish State and to protect the living standards of its citizens. We have extended the time available to the State to reach its 3 per cent deficit target from that agreed in the original troika agreement.”

So now the government, which has been proclaiming that we must recognise the ‘reality’ of our situation and the policy prescriptions it supposedly requires, is denying the far more tangible and actual reality of austerity? What kind of Orwellian madness is this? Sure, the current austerity (as in, reduction in public spending, certain increases in taxation, a general freeze on expansionary activity by the government) could be more severe, but that doesn’t change the direction of the strategy, even if we’re still borrowing just enough to keep afloat or with reasonable levels of public services in operations. Saying austerity doesn’t exist because it could be worse is like saying that because it’s only drizzling outside, it doesn’t rain in Ireland.

“While the so-called left-wing critique of the stability treaty suggests it is about austerity alone, the opposite is also the case.

Had an appropriate structural deficit strategy been a priority of the Fianna Fáil governments since 1997 we would have had more in the locker to deal with the crisis in the public finances.”

Governments which, as the left-wing critique repeatedly points out, never broke the Stability and Growth Pact, and frequently ran budget surpluses (albeit keeping them small), and which ran up a sizeable enough wealth fund with Celtic Tiger windfalls. The notion of an “appropriate structural deficit strategy” is hard to define and politically tricky, something even Brian Cowen explained pretty well recently. Sure, we could have done better, but…

“Sadly, that was not the case. The Government is now confronted with the problem of a catastrophic deficit, the result of a catastrophic policy failure without precedent in the State’s history.”

It suits a government with an austerity agenda to describe everything as “catastrophic” - it’s self-justifying. Except it’s not applied to absolutely everything - policy failed, but this was policy that was well-known, agreed and subject to little mainstream debate about its potential for catastrophe: what was important was that it served capitalist demands for more growth, more wealth and more economic freedom. In other words, what was catastrophic was not just our policy or even our politics, but our economic assumptions and the structure in which they were contained. Which austerity seeks to preserve by merely ‘adjusting’ policy and government expenditure, but not attacking the destabilising and inhuman effects of capitalism as in themselves catastrophic.

But onwards to the selective realities:

“The first reality facing this State is we need to borrow money to fund our day-to-day living. The second is that there is only one group of lenders prepared to lend to us at the moment. And they will only do so if they believe we are intent on both eliminating our existing borrowing requirement and repaying the debt. That is their firm condition.”

Intention is one thing, capability is another. There is - and always has been - a serious body of economic opinion which suggests that both conditions are impossible to achieve in full, when austerity contracts the economy (thus making it more difficult to close the expenditure gap through tax) and our debts are artificially inflated (the private made public) to preserve the financial stability of the rest of the Eurozone and its banking system. The ‘firm condition’ makes a nonsense of reality, or vice versa (fair enough, politically there is a position the government has to appear to hold, for now, but it doesn’t make it a good argument.)

But what’s most twisted about this piece is the way that the close quotes Barack Obama in support of austerity:

“As President Obama said last year describing his administration’s response to the financial crisis:

“What’s guided us from the start of this crisis hasn’t been the search for a silver bullet, it’s been a commitment to stay at it, to be persistent, to keep trying every new idea that works and listen to every good proposal, no matter which party comes up with it.”

For its part this Government will do the same.

Of course, Obama has hardly been the shining knight of Keynesianism*, but he has engaged in stimulus and refrained from pursuing austerity on the federal level in the US. Where he has faltered most severely, however, is in pursuing this supposedly open-minded persistence, which has been an invitation for hard-line Republicans to press their own intransigence on economic matters under the justification of bipartisanship. Something similar I think is happening with our European ‘commitments’ and the unwillingness to confront the unfairness (yes, in the context of disparities of wealth and supposedly democratic power, that still means something!) and implausibility of the austerity agenda, which yes, exists.

*he’s probably the closest we’ve got, though: to paraphrase Arthur Koestler, we are the knights of rusty armour, crusaders without a cross.

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» Instagram As An Island Economy

tomewing:

This is interesting - essentially an expansion of the oft-cited “if you can’t see the product you are the product” saw as it applies to the Instagram deal.

The part I balked at was his description of colonization/expansion. “The Wild West ended up OK” - well, unless you already lived there. Even that thoughtless metaphor illuminates the argument, though.

Is there such a thing as an indigenous population of the internet, though? i.e.

“The third makes me think that the business of these virtual society companies (there are lots) is to isolate some settlement on an island, allow it to develop for a small amount of time, and then colonise it.”

Really, colonisation and settlement are the same first step (at least if there’s no-one else already living there, and thus no new political authority to impose) and annexation, like Hawaii,is the last step. So the metaphor can be saved with a few word changes.

What’s more interesting, I think, is the Marxist argument (at least via John Lanchester), familiar also from the New Inquiry’s writings on the subject, about labour value of social media use:

“Every “user” of Instagram is a worker. There are some people who produce photos — this is valuable, it means there is something for people to look it. There are some people who only produce comments or “likes,” the virtual society equivalent of apes picking lice off other apes. This is valuable, because people like recognition and are more likely to produce photos. All workers are also marketers — some highly effective and some not at all …”

and

“the word “user,” as in a user of Instagram or Facebook, is dangerous, because it hides all of this.”

I used to think, back when using the internet was a more passive experience, that the funding crisis it supposedly heralded for artists and creatives could be solved, ethically, by most of us growing up, getting jobs and having easy ways to pay reasonable amounts of money for whatever music or literature we consumed (this was an idealistic position, of course). Except advertising really took off, and interactive forms of media consumption like Tumblr which freely provide a base for ‘labour’ of a sort that somehow provides a value for the colonisers/annexationists further down the line.

There’s something about the latter situation that I feel much less comfortable with as the status quo, even if paid-for services are a challenging proposition. Much of social media’s ‘users’ are in a somewhat precarious position economically relative to having the solid ability to spend a lot of money directly on consumer goods, but lots of time and incentives to contribute virtual labour. The definition and understanding of the value of that labour is something really important to our future.

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“ …in fact, the self-interest of a well-regulated, stable capitalism lay precisely in limiting the consequences of its own success. Only because you do have universal health care can businesses operate efficiently. They can also, for what it’s worth, make people redundant without depriving them of a decent level of medical coverage - the equivalent of joblessness with lack of access to health care is something no society should ever accept.

— Tony Judt with Timothy Snyder, Thinking the Twentieth Century, p. 381, ‘Banality of Good: Social Democrat’

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“ - An examination of what structures and policies could be developed to make Ireland a world centre for managing and trading in intellectual property

—

Government plan aims for 100,000 new jobs by 2016

Is this really a good idea? Ireland (or more specifically, Dublin) was made a world centre for financial services, i.e. the managing and trading of another kind of non-physical property, and while I’m not sure the IFSC can actually be blamed for the (physical) property boom and the indebtedness of the banks, it certainly didn’t prevent the emergence of the reckless culture in the domestic economy nor protect us from the vulnerability of the world economy (rather, it contributed to that by being a conduit for speculative finance).

According to another report in the same paper, the financial services sector in Ireland hosts funds “with a value of more than $2.4 trillion” (i.e. well over ten times the current Irish GDP) - including a “substantial part” of Mitt Romney’s wealth - with “the administration and management of these funds employing up to 11,000 people”,which isn’t that many if you think about it. Even more so than hi-tech manufacturing, financial services is a capital-intensive (though it’s not used as productively) but not labour-intensive industry.

Pharmaceuticals, which make up the largest part of that manufacturing sector in Ireland, are particularly reliant on intellectual property to turn huge and risky investment in research and development into long-term profits on what is basically the biggest drain on public finances (or private insurance) in the developed world, healthcare. Intellectual property can be a good thing if it promotes and develops innovation, but that has to be balanced against the sustainability of the economic system it works with, and seeking to extract more money from the management of that process seems like a shaky way to grow the Irish economy.

Why don’t we make our intellectual property the knowledge and intelligence of our graduates, applied to real-world problems like the need for greener technology and a sustainable economics and society? The legal dimensions of IP could be a part of that structure, but to make it the centre point seems like a bizarre example of kowtowing to globalised neoliberal economics and, in short, intellectual poverty.

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economics thought experiment

q. if corporate drink sponsorship is needed to support sports, etc. doesn’t it imply that it creates sales worth at least as much as the value of the sponsorship itself, meaning therefore if it were banned people would buy less alcohol (otherwise, why are drinks companies doing it, and why are anti-drinking campaigners calling for it to be banned?) and have more money to spend directly on sport?

a. the aim of sponsorship isn’t to create sales of alcohol in general as much as sales of a particular brand, so rather than creating demand in itself it is an arms race between brands, essentially a sunk cost in maintaining or extending market share. advertising serves to direct as well as stimulate demand, so removing it may only level the playing field between producers (or more likely, shift the game to another context). also, there’s no guarantee that if consumers did save money by not purchasing a product they would redirect that saving towards the previously-sponsored entertainment - just like on the internet, an indirectly paid-for pleasure erodes the willingness to pay for something seemingly out of one’s own pocket, rather than out of the marketing budgets of whatever manufacturing or service companies you do still buy stuff from.

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“ Oh, I think we need some — instead of talking to economists like me, we need to be talking to psychologists and sociologists to try to get at the root of this problem.

—

Bruce Bartlett, “the supply-side champion who wrote the manifesto for the Reagan Revolution” (h/t Moneyfire)

This makes about the most sense of anything I’ve read about politics in the past few days. Though, even taking the ascribed historical context at face value, I’m slightly suspicious that as a “conservative economist” he doesn’t once criticise social spending in this interview, or is not recorded as such. Maybe that’s just me being cynical, or the effect of living in the politics of austerity where “public sector reform” is the mainstream left’s acquiescence/abandonment to the right’s “bloated public sector”, but I kept waiting for that other particular shoe to drop.

Someone, whose opinions I respect deeply, said in a response to a question about libertarianism

“I think that negative rights (Google negative/positive rights re: Isaiah Berlin if you’re not familiar with this term) are the only objectively warranted political system, and that each society should decide within itself which types of positive rights they want to add on top of that.”

To an extent I agree with that, but not totally (I’ve read enough of the history of the 20th century to see the problem in pursuing a pseudo-objective vision of how to transform society by political and physical means, but I also have enough sympathy with the source material not to completely buy into Berlin’s argument). Regardless of how you define ‘objective’ in a political context - arguably there is no such thing - the distinction strikes me as worrying in its implications. On the face of it, it suggests that we are destined to go back and forth between left and right, with no means of achieving rational consensus, for as long as society exists in its recognisably modern form?

Or, and this is the view I hold more closely, are some positive rights not in fact necessary for the operation of democracy in the first place? Not only in the sense of access to some kind of decent citizenship (through health, education, employment, even leisure) but the all-too-apparent fact today that if wealth and power are too easily accumulated by those at the top it negates the ability, or worse, the inclination, of everyone else to participate in democratic politics. In effect, the unequal distribution of positive rights (what Tumblr users might typically refer to as ‘privilege’, which is a de facto recognition of inequality) interferes with the application and even the meaningful existence of negative rights, no matter how much we all agree on their importance and/or self-evidence. So much for that neat political theory distinction*.

But cheer up, it’s not just the economy, stupid!

*I’m not saying it’s not true, I’m saying it’s maybe just not that useful.

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