Newsnotes 2011 07

Notes On The News

by Gwydion M Williams

How Thatcher Made Us Poorer

The Mystical Concourse of Market Forces [Economic ‘Rationalism’]

The Distant Rich [US Inequality]

A Global Overclass [Rich get richer]

Strauss-Kahn and the amazing vanishing rape case

US Decline

Thailand Battles For Democracy

Taiwan Indicts Another Ex-President.

Legalise Heroin?

US Hackers Lose Decisively.

Big Moon and Little Mars


How Thatcher Made Us Poorer

“Thirty years ago, Britain moved from welfare to market capitalism, on a promise of economic dynamism and renewed efficiency. The result has been rather different. While those at the top have become very rich the disappearance of many middle-paid, skilled occupations and an ongoing squeeze on wages has led to a poorer, more divided Britain. This pamphlet deconstructs the different elements that, together, have led to ‘Britain’s Livelihood Crisis’, before setting out the changes that government, business and unions must make if we are to deliver more wealth and greater equality.” [A]

This is the introduction to a recent TUC report, which was briefly reported and then forgotten about. It should have been mentioned by every Trade Union leader making a protest at government policy, but it wasn’t. The dominant New Right ideology mostly does not get challenged by those who challenge the little bits of it that harm their sectional interest.

Labour and the TUC can make a strong case that the changes of the last 30 years have taken the economy in the wrong direction, made it less equal than it used to be without improving wealth creation. That the Mixed Economy created in the 1940s was a better system than the Fundamentalist Capitalism that they’ve been imposing on us since. (And which New Labour failed to seriously challenge.) They should remind everyone of the promise of ‘trickle-down’, extensively talked about in the early Thatcher years and then quietly dropped when it turned out to be false.

‘Trickle-down’ was the promise that by letting the rich get richer, the economy would be greatly boosted and that benefits would trickle down in terms of a smaller slice of a much bigger cake. It wasn’t true, except perhaps in China. Contrary to what’s usually insinuated nowadays, the Chinese economy was growing quite fast under Mao, including the final ten years, the Cultural Revolution era. (I say “insinuated” because you don’t find any experts actually saying it: they obviously know it was not so but prefer to leave out such off-message facts and imply the reverse.) China under a highly collectivised system grew faster than the UK in the same era and also faster than India. But it is true that it grew even faster under Deng.

Outside of China, ‘trickle-down’ was a myth, and the trade unions should be hammering the point home when they make their grand protest over public sector pensions. There is plenty of money, though less than if we had stuck to the Mixed Economy or ‘Social Capitalism’ that we had from the 1940s to the 1970s. Lack of money for the needs of ordinary people is down to enormous amounts of money flowing to a tiny minority, a fabulously rich Overclass that has mere millionaires as its lowest stratum.

“Many people in middle and low income jobs have barely seen any improvement in their incomes over the past 30 years, a report from the TUC says.

“Low income workers have seen their pay rise by 27% in real terms over the past 30 years but rises for the top 10% of earners have been four times higher.

“Its report found a ‘sharp divide’ in earnings growth between professions.

“While medical practitioners saw a 153% rise since the late 1970s, bakers’ wages fell by 1%.

“Wages grew by over 100% for judges, barristers and solicitors, while they fell by 5% for forklift truck drivers and 3% for packers and bottlers in the same period.

“Its report, called ‘The Livelihood Crisis’ by Stewart Lansley, says there has been a steady growth in ‘bad jobs’, offering poor wages and job security.

“It says there are almost twice as many people now earning a third less than the median compared with 1977.

“It added that a significant proportion of workers have received little if any financial benefit from the doubling in size of the British economy in the last 30 years.” [B]

It also says that Britain could have done better if Thatcher had been a proper conservative and restored the existing system rather than promoting Radical-Right ideas:

“As the proceeds of growth have been very unequally divided, inequality has soared – without the promised pay-off of improved economic progress. Financial crises have become more frequent and more damaging in their consequences.

“This is made clear by dividing the post-war era into two distinct periods. The first is the 23 years from 1950 to 1973, the year of the first OPEC oil shock and the one that perhaps best marks the end of the post-war boom. The second is the 29 years that covers 1980 to 2009, beginning with the first full year of the new economic experiment…

“Growth averaged 3 per cent a year in the UK from 1950 to 1973 – a period dubbed the ‘golden age’ by economic historians because it was characterised by higher and more sustained growth, less unemployment and lower inequality than earlier pre-war periods.54 While 3 per cent was low by international comparisons – Germany, Japan and France all did better – it was high by historical ones. Since 1980, in contrast, the growth rate has fallen to an average of 2.2 per cent a year.

“This fall in the rate of economic progress has had a big impact on the life chances of significant sections of the population and has been an important factor in the rise of the livelihood crisis. Although the British economy experienced a number of exchange rate and stop-go crises in the two decades from 1950, leading to some quarters of slow or zero growth, GDP (adjusted for inflation) fell only in a handful of quarters. Indeed, this period experienced only one very shallow and short-lived recession (defined as two successive quarters of negative growth). In 1961, output fell by 0.2 per cent over two quarters.

“In contrast, the period since 1980 has brought more frequent and more severe economic shocks and three deep-seated recessions – in 1980–01, 1990–01 and 2008–09. In 2008–09 output fell by close to 6 per cent compared with 2.5 per cent in the early 1990s and 4.7 per cent in the early 1980s

“This pattern does not apply just to the UK. The last three downturns have all been global in nature. As well as these recessions, the last two decades have seen a number of global financial crises – from the Latin American and East Asian crises of the 1990s to the dot-com bubble at the turn of the millennium.

“Market liberals argue that the recession of 2008–09 is not a product of the failure of markets, but of failed monetary policies, especially the loose fiscal and monetary policies carried out by Alan Greenspan, chairman of the Federal Reserve, who allowed the credit bubbles to get out of hand. An alternative view is that the recession can be traced to the deep-rooted economic, social and political upheavals ushered in by unrestrained finance capitalism.

“Central to this explanation of the crash and the wider economic instability of the last three decades is the rise in domestic and global inequality, a trend closely related to the collapse of wages and the hiking of profits. In the UK, the share of national output accruing to wage-earners fell from a peak of 64.5 per cent in the mid-1970s to as little as 53 per cent by 2008, with the slack taken up by soaring profits that reached a near post-war peak in 2008. Similar falls in the wage-share occurred in other developed economies, especially in the USA…

“According to the annual Wealth Reports published by Merrill Lynch Capgemini, the value of funds invested by the global rich with investable assets of more than $1 million more than doubled in the decade to 2008 to reach over $40 trillion. Far from triggering a boom in productive investment and improving economic potential, most of this rising pool of wealth was invested in speculative activity (commercial property, hedge funds, private equity, commodities and takeovers) and at heavily leveraged rates, thereby creating the unsustainable asset bubbles that triggered the credit crunch.” [A]

There is a lot more that could have been said. Remind everyone that Alan Greenspan was praised as a brilliant regulator by almost all of the people who now demand public service cuts. And make it clear what it means to have fallen from 3% average annual growth to 2.2%, Thatcher’s long-term achievement.

I did a quick calculation, and figured that the economy as a whole would be 27% richer if the older system of Social Capitalism had been restored. Of course that would mean much better than 27% for the squeezed middle, if inequality had stayed at 1970s levels. But the richest 1% – the super-rich Overclass who have at least a million and mostly much more – have done very much better than if Thatcherism had never happened.

‘Trickle-down’ was a myth. Most people have got a smaller slice of a cake that is smaller than it should have been. But a rich minority have got an enormously increased slice of this undersized cake, and so want more of the same.

[Labour in 2015 stuck to the New Labour habit of trying to be a milder version of Thatcherism, instead of denouncing it as a failure. And failed to turn the tide: Labour would have lost even if they had held all of their Scottish seats, rather than losing all but one. The Scottish Nationalists did better by being a credible governing party with a bit more radicalism]


The Mystical Concourse of Market Forces [Economic ‘Rationalism’]

J D Bernal, a communist and a distinguished scientist, one referred to the theory of competitive markets finding the true value “by a mystical concourse of wills”. And that it was unlikely to be true, which is simple common-sense. Those who take mysticism seriously are almost always hostile to money as such and greed as such. Only a decayed version of the Protestant variety of Latin-Christian faith could get the two concepts muddled.

Current economic theory – which is more like economic theology – depends heavily on this “mystical concourse of wills” happening routinely when money is involved, but not at all when public welfare is considered. This is then called ‘Rational Economics’. It is rational in the sense you can express it as algebra, but the core concepts are quite as weird as anything you find in Quantum Mechanics. And whereas Quantum Mechanics makes detailed predictions that are highly accurate and mostly inexplicable by Classical Physics, ‘Rational Economics’ has a history of failing to predict either real-world successes or real-world disasters.

The popularity of this economic theory or economic theology is not based on success at economic prediction or economic management. It is based on being a justification for ‘feed-the-rich’ economic policies. Policies that have restored the sort of inequality that existed before the 1940s.

It is based also on feeding the prejudices of large numbers of ordinary people who inherently distrust the state and are suckers for a propaganda line that persuades them that less taxes and less state regulation will benefit them. Actually the reverse has been the case: the working mainstream are worse off and independent small businesses have been vanishing steadily. But the media are dominated by commercial interests. They are run as businesses and also they get about 50% of their revenue from advertising, with the supply or withholding of adverts being a key element in cover price and long-term survival. And also a lot of them survive while making a loss thanks to banks taking a sympathetic view of them.

(This trend is strongly identified with particular individuals, notably Rupert Murdoch. Actually it is much older and wider and would have been much the same if Rupert Murdoch had never existed.) [See Yellow Journalism.]

It’s easy to create a false impression by picking out just the failures of one side and just the successes of the other. You can create a very false impression without any specific lies, just by cherry-picking the facts that suit your case. If for instance I were to make random bets in a hundred different horse races on horses at odds of 10-to-1, the most likely outcome is that I would get 7 or 8 winners and make a considerable net loss. But if I showed you a mix of those 7 or 8 with just 30 or 40 of the losers, it would appear that I was making a healthy profit and had some wonderful system that you should copy.

The 1980s system of massive deregulation hasn’t really worked. The idea was to keep the state as far away as possible, on the assumption that the free flow of money would find its natural level. In 2008, it looked like that ‘natural level’ would be the gutter. Anti-state rhetoric was shut down for a time, because only the state had the power to stop a massive collapse. But once funding for the banks was secured, it was switched on again. The crisis has been used to justify more privatisation.

I think we should be making a distinct response – insist that Corporatism works, that the system of the last 30 years has remained Corporatist but adjusted to give most of the benefit to the rich.

I’d also suggest that it was the drastic social changes of the 1960s and 1970s that upset Social Capitalism. Social Capitalism implies a shared set of social values, which was what broke down. The ‘golden quarter century’ was also a period in which the dominance of white males was broadly intact, if softened and weakened from what it had been. Left-wing parties felt obliged to change this: the right dragged its heals and reaped electoral benefit. They managed to sell the Thatcher / Reagan package by suggesting that ‘normal’ social relations had been undermined by unnatural corporatism. It was indeed true that the 1950s understanding of ‘normality’ had been softened and weakened. But when social controls were removed, everything changed faster than ever. If your main aim is to make money, anyone’s money will do. The drastic decline in manufacturing undermined the confidence of workers who were mostly white males with fairly traditional attitudes.

Brooker T. Washington argued against US racism by saying “you can’t hold a man down without staying down with him”. Sadly, the US South has preferred to stay down in the dirt rather than admit fault or give up its pride in being on top. It looks like Britain and the USA have made the same choice, and the rest of Europe is failing to challenge it.

The most positive thing is that both East Asia and South Asia are rising fast while remaining confidently Corporatist. Latin America is mostly going the same way. This has to tip the balance eventually.


The Distant Rich [US Inequality]

I think the USA will ruin itself rather than change its ways. I think continental Europe will break the Atlantic Alliance within the next 20 years, as the USA gets more intense in its ideology and more blatant in its failures. The inequality that the TUC report described in Britain is much worse in the USA, but the losers are very unwilling to challenge it.

“It was the 1970s, and the chief executive of a leading U.S. dairy company, Kenneth J. Douglas, lived the good life. He earned the equivalent of about $1 million today. He and his family moved from a three-bedroom home to a four-bedroom home, about a half-mile away, in River Forest, Ill., an upscale Chicago suburb. He joined a country club. The company gave him a Cadillac. The money was good enough, in fact, that he sometimes turned down raises. He said making too much was bad for morale.

“Forty years later, the trappings at the top of Dean Foods, as at most U.S. big companies, are more lavish. The current chief executive, Gregg L. Engles, averages 10 times as much in compensation as Douglas did, or about $10 million in a typical year. He owns a $6 million home in an elite suburb of Dallas and 64 acres near Vail, Colo., an area he frequently visits. He belongs to as many as four golf clubs at a time — two in Texas and two in Colorado. While Douglas’s office sat on the second floor of a milk distribution center, Engles’s stylish new headquarters occupies the top nine floors of a 41-story Dallas office tower. When Engles leaves town, he takes the company’s $10 million Challenger 604 jet, which is largely dedicated to his needs, both business and personal.

“The evolution of executive grandeur — from very comfortable to jet-setting — reflects one of the primary reasons that the gap between those with the highest incomes and everyone else is widening.

“For years, statistics have depicted growing income disparity in the United States, and it has reached levels not seen since the Great Depression. In 2008, the last year for which data are available, for example, the top 0.1 percent of earners took in more than 10 percent of the personal income in the United States, including capital gains, and the top 1 percent took in more than 20 percent. But economists had little idea who these people were. How many were Wall street financiers? Sports stars? Entrepreneurs? Economists could only speculate, and debates over what is fair stalled.

“Now a mounting body of economic research indicates that the rise in pay for company executives is a critical feature in the widening income gap.

“The largest single chunk of the highest-income earners, it turns out, are executives and other managers in firms, according to a landmark analysis of tax returns by economists Jon Bakija, Adam Cole and Bradley T. Heim. These are not just executives from Wall Street, either, but from companies in even relatively mundane fields such as the milk business.

“The top 0.1 percent of earners make about $1.7 million or more, including capital gains. Of those, 41 percent were executives, managers and supervisors at non-financial companies, according to the analysis, with nearly half of them deriving most of their income from their ownership in privately-held firms. An additional 18 percent were managers at financial firms or financial professionals at any sort of firm. In all, nearly 60 percent fell into one of those two categories.

“Other recent research, moreover, indicates that executive compensation at the nation’s largest firms has roughly quadrupled in real terms since the 1970s, even as pay for 90 percent of America has stalled.

“This trend held at Dean Foods. Over the period from the ’70s until today, while pay for Dean Foods chief executives was rising 10 times over, wages for the unionized workers actually declined slightly. The hourly wage rate for the people who process, pasteurize and package the milk at the company’s dairies declined by 9 percent in real terms, according to union contract records. It is now about $23 an hour…

“According to the CIA’s World Factbook, which uses the so-called ‘Gini coefficient,’ a common economic indicator of inequality, the United States ranks as far more unequal than the European Union and the United Kingdom. The United States is in the company of developing countries — just behind Cameroon and Ivory Coast and just ahead of Uganda and Jamaica…

“What the research showed is that while executive pay at the largest U.S. companies was relatively flat in the ’50s and ’60s, it began a rapid ascent sometime in the ’70s.

“As it happens, this was about the same time that income inequality began to widen in the United States, according to the Saez figures.

“More importantly, however, the finding that executive pay was flat in the ’50s and ’60s, when firms were growing, appears to contradict the idea that executive pay should naturally rise when companies grow.” [C]

Note that the firm in question makes dairy products. Not really open to competition from low-wage foreign countries.

I’d suppose that the important shift was cultural. Up to the 1970s you had authentic conservatism. The rise of New Right ideas encouraged the rich to detach themselves from the society, become an Overclass with more cash and less social control. And this is likely to ruin the society in the long run.

Lots of ordinary voters dislike what’s happening to them. But most of them would reject the idea of more state regulation. Some of them even blame ‘big government’ for making big corporations possible. The brief wave of criticism for deregulated capitalism that happened after the crisis of 2008 has been fading out:

“There was always going to be a backlash against more interventionist policies because those who fervently believe that markets never lie, that budgets should always balance and that government is always bad were well dug in on university campuses, in finance ministries and in some central banks.

“Even so, the world has returned to the pre-crisis mindset with remarkable speed. In 2008, policymakers prescribed a strong dose of John Maynard Keynes to stave off a full-scale slump. Today, the solution for Greece, burdened with debts it has not a hope of paying, is belt-tightening and privatisation. The way to bring down global unemployment, which stands at more than 200 million, is wage flexibility. The blueprint for reform of the financial sector is to do as little as possible lest it deter the money-changers from returning to the temple…

“It has to be acknowledged, also, that the forces of orthodoxy have played a blinder. They have constructed a narrative that blames Bill Clinton for the subprime mortgage crisis (he forced the banks to lend money in order to spread home ownership to the poor), and profligate governments rather than unchecked global finance for the worst recession since the second world war. They have been helped in the construction of this storyline by the feebleness of progressive parties, who have given the impression that they too would be more comfortable returning to ‘business as usual’ (or something closely approximating to it) as quickly as possible.” [D]

A relaxation was allowed in 2008 in order to save the system. Just as happened in 1987, though this is almost forgotten. All the talk is of the Soviet collapse two years later, and not how the West very nearly lost the Cold War in the 1987 financial crisis. It was forgotten that this key failure was kept within bounds by state spending.

Progressive parties are also burdened by an anti-state viewpoint that began with 1960s counter-culture and has become very pervasive. The New Right succeeded because they play up to this, while ignoring it when the public mood is against it, as with ‘law and order’ issues.

The success of Western governments after World War Two happened pragmatically, without any clear ideological underpinning. The most coherent notion was ‘the experts know best’, which wasn’t always the case. What was needed was a clear set of ideas that could say where it was or was not the case. This is still lacking.


A Global Overclass [Rich get richer]

“We are not all in this together. The UK economy is flat, the US is weak and the Greek debt crisis, according to some commentators, is threatening another Lehman Brothers-style meltdown. But a new report shows the world’s wealthiest people are getting more prosperous – and more numerous – by the day.

“The globe’s richest have now recouped the losses they suffered after the 2008 banking crisis. They are richer than ever, and there are more of them – nearly 11 million – than before the recession struck.

“In the world of the well-heeled, the rich are referred to as ‘high net worth individuals’ (HNWIs) and defined as people who have more than $1m (£620,000) of free cash.

“According to the annual world wealth report by Merrill Lynch and Capgemini, the wealth of HNWIs around the world reached $42.7tn (£26.5tn) in 2010, rising nearly 10% in a year and surpassing the peak of $40.7tn reached in 2007, even as austerity budgets were implemented by many governments in the developed world.

“The report also measures a category of ‘ultra-high net worth individuals’ – those with at least $30m rattling around, looking for a home. The number of individuals in this super-rich bracket climbed 10% to a total of 103,000, and the total value of their investments jumped by 11.5% to $15tn, demonstrating that even among the rich, the richest get richer quicker. Altogether they represent less than 1% of the world’s HNWIs – but they speak for 36% of HNWI’s total wealth…

“Generally, HNWIs are most concentrated in the US, Japan and Germany: 53% of the world’s most wealthy live in one of those three countries, but it is Asian-Pacific countries where the ranks of the rich are swelling fastest. For the first time last year the region surpassed Europe in terms of HNWI individuals…

“Britain is lagging behind in the league of affluence – it has not yet enjoyed a return to pre-crisis levels of wealth as sluggish economic growth holds back prospects. The growth in the number of rich individuals in the UK was among the slowest in the top 10 nations, showing a 1.4% rise to 454,000 and remaining below the 495,000 recorded in 2007…

“The performance of investments made by wealthy individuals in shares and commodities, and their willingness to take more risks, helps drive their wealth, which in turn fuels ‘passion’ purchases of multimillionaire must-haves, ranging from Ferraris to diamonds, art and fine wines. Demand for such luxuries is especially high among the growing number of wealthy individuals in the emerging markets.” [E]

An unstable economy hurts most people but benefits those with a lot of wealth to shift around. And better information than the ordinary investor.

The hunger for profits encourages managers to look to the short term. If the firm goes bust in 10 years time, it is not their loss if they can bail out in time.

Politically, the dominant element are 3.1 million ‘high net worth individuals’ in the United States, and another 454,000 in the UK. They’ve managed to bend politicians to their will, especially in the USA, where unlimited amounts of money can be spent on election campaigns and the rich are the source of most of the money.


Strauss-Kahn and the amazing vanishing rape case

Last month I said “We may have to wait till the trial to get the facts clear. If indeed there is a trial: I would be less than astonished if the issue somehow vanished and Mr Strauss-Kahn walked free after his main financial and political significance had ended.”

At the time of writing (5th July), Mr Strauss-Kahn has indeed walked free from bail conditions that amounted to house arrest, though he is still not free to leave the USA. The maid whom he allegedly raped is now being presented as a persistent liar with possible links to drug dealers.

I have no more confidence in this new version than in the old one. There may have been some sort of fix. What it does show is that the USA’s justice system is a complete mess. Electing judges at lower levels and politically-based appointments at higher levels skews the whole system. Likewise decisions to prosecute are in the hands of District Attorneys who are often politically ambitious and almost always open to partisan appeals and political pressure.

The immediate effect of the case has been to confirm that the IMF will take a hard line with cases like Greece, squeezing ordinary people and protecting a financial system that is heavily biased towards the rich.

[The New York case did indeed vanish. He is currently being harassed and charged over various other unrelated matters.]


US Decline

The success of the USA’s Overclass has been at the expense of its fellow citizens. Manufacturing has been moving out. Even at the high end, the USA is now losing to foreign competition. Including the key market for global aircraft, where Airbus is winning out:

“Airbus has staked a claim to be the world’s number one aircraft maker after it notched up a series of deals at the Paris air show that will take its total for the week to $57bn (£35.4bn).

“With Boeing struggling in its wake with a mere $22bn worth of sales for the week, the pan-European manufacturer described the bounty as ‘overwhelming’.

“On Wednesday it received an order worth $16bn for 180 planes from India’s low-cost carrier IndiGo. According to reports the IndiGo order will be followed by another huge deal with Malaysia-based AirAsia for 200 of the same aircraft, thought to be worth $17bn.

“Airbus and Boeing dominate the global civil aircraft market with two brands: the short haul A320 that is familiar to easyJet passengers; and the Boeing 737 that transports millions of Ryanair customers around Europe.

“However, Airbus has stolen a march on its rival by deciding to build the A320neo, a model that retains the fuselage design but installs new fuel-efficient engines with reinforced wings. With a promise of a 15% improvement in fuel efficiency amid soaring oil prices, the revamp has proved a hit with buyers with more than 700 sold this year alone.

“It is also good news for British manufacturing. Airbus employs 17,000 people in Britain at 25 different sites and the aero-space sector accounts for 100,000 jobs.” [H]

“Airbus piled up the orders at the Paris air show as it announced the largest single order of commercial aircraft in history.

“Malaysia’s low-cost carrier AirAsia is buying 200 of the A320neo jets, in a deal worth about $18bn (£11bn)…

“Airbus, owned by EADS, has left rival Boeing far behind in terms of orders at the event, as high fuel costs increase the demand for more fuel-efficient aircraft.” [J]


Thailand Battles For Democracy

There are many countries in the world where there are multi-party elections and the press is fairly free to criticise the government, but where democracy has not been established. Britain extended the vote to a majority of adult males living in the British Isles in the 1880s, but I’d not say it was democratic until the election of 1945, when the Labour Party got its first secure government. And in terms of social mobility and the authority of the elite, it was still much less democratic then than it became in the 1970s.

In Japan, the externals of democracy have been there since 1947. Japan had in fact introduced a property-qualified electoral system as part of the ‘Meiji Constitution’ of 1890. In both Japan and Germany, an authoritarian system was introduced during the crisis of the 1930s with the consent of the existing parliaments.

Japan since 1947 has in fact been run by a combination of business and civil service interests, with most elected politicians seeing it as their job to look after the particular interests of their constituents within an overall system that they largely left alone to run itself. The state role was and remains large, and during the big economic surge there was protectionism and an effective one-party system with the Liberal-Democrats always in office.

Under Western pressure, the system was disrupted in the 1980s and particularly the 1990s. It has worked worse economically, without really becoming any more democratic. Parties sometimes replace each other, but it isn’t any more open and is maybe slightly worse at giving people the sort of government they’d prefer. Still, Japan is getting along fine and seems unconcerned at having been overtaken by China as the world’s second largest economy. In real terms it was always weaker than the combined power of Western Europe.

Meantime some interesting things have been happening in Thailand. It had points in common with Japan: it preserved its traditional culture while modernising and was never ruled by a foreign power. (Though it was under pressure and maybe survived because the British Empire in Burma and India and the French Empire in Indochina were each against the other taking it.) It gained a parliamentary system rather more messily than Japan: the Meiji Restoration restored a line of Emperors who had had no real power for centuries, whereas the Kings of Siam were absolute rulers. Thailand in 1932 had a coup or revolution that made it a Constitutional Monarchy, though a rather unstable one. The king who had been absolute ruler abdicated after failing to cope with a series of coups under the new system. His successor was a boy of 9 living in Switzerland, where he mostly stayed until 1945. Meantime Thailand was partly occupied by Japan and then became a Japanese ally, only switching back near the end of the war. The king then returned but was mysteriously murdered. He was succeeded by his younger brother, who is still king at the age of 83.

Thailand never did settle down. Coups were continuous and there was a major massacre of the left in 1976, following the fall of South Vietnam and the abolition of the Laotian monarchy. What was once a strong Communist movement collapsed. The economy grew quite well, though less well than the Asian Tigers.

Moderate reformist policies were carried through from 2001 to 2006 by Thaksin Shinawatra, a rich businessman who was never the less on the left by Thai standards. He was overthrown in a coup in 2006 and charged with corruption. He was prevented from standing, but one of his supporters won the election of 2007. This led to the continuing popular struggle between Red Shirts (Thaksinites) representing the poor and the north of the country against Yellow Shirts representing the south and the bulk of the establishment. In 2008 Thaksin’s man was pushed out again, after Yellow Shirt demonstrations and with some MPs being persuaded to switch. In 2009 there was another wave of Red Shirt protest, which however failed to bring down the government. Again in 2010, but with some of the Red Shirts becoming further radicalised and questioning the role of the king. The crisis of 2010 was defused with the promise of another election.

What’s now happened is an election won decisively by a Thaksinite party led by one of Thaksin’s sisters. Thailand’s Constitutional Court has been playing a dirty game ever since the 2006 coup, but it’s hard to see how they could prevent a Thaksinite restoration short of an outright coup.

As I’ve mentioned before, the West has been decidedly lukewarm about the issue. The Thaksinites have always been the clear democratic choice, and the West could work with them. But it seems that even moderate reformism has become obnoxious. It’s a chance for Obama to do something bold and ethical. But will he

[He didn’t, of course. The crisis ended with a coup in May 2014, which seems to have successfully suppressed those who dared use democracy in ways the West disliked.]


Taiwan Indicts Another Ex-President.

“Taiwanese prosecutors have indicted former president Lee Teng-hui, the state’s first democratically elected leader, on corruption charges.

“Mr Lee is accused of embezzling US$7.8m in government funds during his tenure as president in the 1990s, and faces possible life imprisonment if convicted. His top economic adviser, Liu Tai-ying, was also indicted. Lawyers for both men were expected to comment later on Thursday.

“The former president is a dominating figure in modern Taiwanese history. Aside from pushing through major democratic reforms, Mr Lee was the first native Taiwanese to head the nationalist Kuomintang party and become president of the Republic of China – the official name for the state of Taiwan.

“Mr Lee, 88, often drew the ire of mainland Chinese communist leaders for pushing democracy in Taiwan and fostering a sense of Taiwanese identity on the island….

“Mr Lee and Mr Liu are accused of siphoning off US$7.8m after the foreign ministry repaid the funds.

“That money – which was allegedly laundered through Ruentex Group – was used to establish the Taiwan Research Institute, which Mr Liu later headed. Mr Lee is currently the honorary chairman, a post he assumed after stepping down as Taiwan’s president.

“Prosecutors said Mr Liu and Mr Lee benefited because the institute used part of the funds to buy luxury apartments for them, which were built by the Ruentex Group. Mr Liu allegedly pocketed US$440,000 of the embezzled funds.

“Since stepping down from his presidency, Mr Lee left the Kuomintang party and founded the Taiwan Solidarity Union, a political party that advocates for Taiwanese independence. Mr Lee has in recent years also supported the opposition Democratic Progressive party, and is critical of current president Ma Ying-jeou’s pro-China policies.

“Mr Lee is the second former Taiwanese president to be indicted on corruption charges. In 2009, Chen Shui-bian, who succeeded Mr Lee as president from 2000 to 2008, was sentenced to life imprisonment for embezzling government funds.” [K]

A few years back, Taiwan was being cited as an example of multi-party democracy working fine among Chinese. Then the first non-Kuomintang president since the 1920s was jailed on corruption charges. Now they’re out to get the man who moved Taiwan from functional dictatorship to a genuine multi-party system.

Chiang Kai-shek was Kuomintang boss from his military take-over and anti-Communist massacres in 1927 till his death in 1975. (At no time in real control of the whole of China.) Chiang didn’t always bother with the formal position of President: it was held from 1931 to 1943 by a fairly unimportant right-winger called Lin Sen, who died in office. Chiang Kai-shek took back the Presidency but got a major rival called Li Zongren as an unwanted vice-president in 1948 when the Kuomintang was clearly losing the Civil War and there was pressure for compromise. Li Zongren was actually President from January 1949, when Chiang resigned. Except Chiang still commanded most of the various regular or warlord armies, unconstitutionally but without serious challenge. Li Zongren tried to either negotiate a settlement or create an enclave in the far south, but failed and went into exile. Chiang Kai-shek came back as President while Li Zongren was marginalised. In 1965, he became reconciled to Communist rule and returned to China, dying in 1969.

The Chinese Presidency never did count for much after Sun Yat-sen surrendered his own disputed authority to the northern warlord Yuan Shikai, who had betrayed a reforming Chinese emperor a few years earlier. Yuan Shikai tried to make himself Emperor, but the other warlords rejected this and chaos followed. None of the later Presidents before Chiang are worth mentioning: some were decent men who might have done OK if functional politics had been established by someone else, but basically they did not matter.

Chiang Kai-shek died in office. His vice-president completed his term and was succeeded by Chiang Ching-kuo, a son of Chiang Kai-shek and long seen as successor. He had been Chairman of the Kuomintang and actually in charge since his father’s death. He too died in office, and was succeeded by Liu Tai-ying, his Vice-President and designated successor. Liu Tai-ying opened up politics, allowed contested elections and paved the way for the first non-Kuomintang President, Chen Shui-bian. That’s the man who got a life sentence for corruption, barely a year after losing office in a fairly open election.

I’d assume that the background is large numbers of Taiwanese doing very nicely out of trade with China and anxious to conciliate Beijing. Taiwan remains a multi-party democracy: time will tell if the voters mind having ex-Presidents jailed. There are elections due in 2012, the same year that China is expected to start handing power to the next generation of leaders. What I’d expect in Taiwan is that the Kuomintang will be re-elected and a policy of unofficial subordination to Beijing will be endorsed.

I’d suppose that the anti-corruption charges are genuine, despite being politically motivated. Massive corruption is the norm in East Asia. Politicians only get convicted if they make too many enemies.

[Lee Teng-hui was cleared. But the trend in Taiwan is for more and more integration.]


Legalise Heroin?

The law has failed to stamp out drug abuse: this is given as a reason to legalise it. Should we also decriminalise murder, burglary and rape, all of which persist despite the best efforts of the law?

Various things have been decriminalised since the 1950s. Almost all of them have become more common and more extreme with the removal of both criminal sanctions and social disapproval. In the case of the acceptance of homosexuality and divorce and the general sexual revolution, I’d say that this made us a better society. But would we be a better society if people consumed more drugs?

Most drug users know they are unwanted and have small prospects. Or else they are successful but under enormous pressure to stay at the same impossibly high level. Surely these are the social evils we need to fix.

There is a major problem, but only among a small minority of the population:

“Forty years after the introduction of the 1971 Misuse of Drugs Act, more than 2.8 million people report using illicit drugs every year in England and Wales. While cannabis remains overwhelmingly the most popular, this Home Office total also includes 800,000 mainly young adults who put the country at the top of the European league table for powder cocaine use.

“There are a further 300,000 people regularly using heroin, crack cocaine or other opiates who are officially described as ‘problem drug users’.” [K]

One solution is simple surrender. This view has its supporters:

“Dame Judi Dench, Sir Richard Branson, and Sting have joined an ex-drugs minister and three former chief constables in calling for the decriminalisation of the possession of all drugs.

“The high-profile celebrities together with leading lawyers, academics, artists and politicians have signed an open letter to David Cameron to mark this week’s 40th anniversary of the 1971 Misuse of Drugs Act. The letter, published in a full-page advertisement in Thursday’s Guardian, calls for a ‘swift and transparent’ review of the effectiveness of current drugs policies.” [L]

To me, it seems that the key question is how many extra users there would be, if the various illicit drugs became legal. Possibly we could live with a decriminalisation of cannabis, although the Dutch are now toughening up their laws to eliminate ‘drugs tourism’. [M] But any wider decriminalisation, I’d see as part of the errors that the West has made since the 1970s. Freedom in some areas has been good, but not everywhere. People aren’t good at foreseeing the likely long-term results of their own actions, so that’s where controls are needed.

At least one of the pioneers of New Right economics is also a consistent libertarian, also advocating a drugs free-for-all:

“In September 1989 Milton Friedman, the man whose views on economics influenced the policies of almost every government on the planet, wrote to Bill Bennett, ‘drug tsar’ to the first President Bush. As Bennett prepared for a new phase in the ‘war on drugs’, launched by President Nixon 18 years earlier – more police, harsher penalties, more jails, more military action overseas – Friedman wrote that ‘the very measures you favour are a major source of the evils you deplore’. He pointed out how illegality made the drugs industry more, not less, lucrative, how crime had flourished during alcohol prohibition in the 1930s and would flourish more under Bennett’s plans, and how ‘crack’ might never have been invented had it not been for the drugs war.” [N]

Prohibition in the USA was a struggle between the older rural and mostly Protestant USA and the newer and more liberal culture of the cities. US Puritans were and are a neurotic overstressed lot, so they had a lot of alcohol abusers. They might have stabilised their culture if they had banned alcohol, as some of the hard-line Muslim countries have done. But the balance of power was already against them and they lost. They were on weak ground: Christianity has always allowed alcohol while trying to curb its abuse. Jesus repeatedly praises wine and one of his first supposed miracles was making a fresh supply when it ran out at a wedding feast. Wine was also included in the only Christian sacrament that can be traced directly back to Jesus. So the bible-spouting Prohibitionists were talking nonsense and were rightly scorned.

It’s also a bit of a myth that gangsterism flourished because of Prohibition. There was always a strong underworld in the USA, as there is in most societies. Prostitution, gambling and protection rackets were major areas of business: illegal alcohol was simply an extra and they carried on fine after it became legal again. Gambling remains heavily criminal even where it has been legalised.

Alcohol has become the recreational drug of choice for a great many cultures, precisely because it is fairly easy to control and use moderately. Cannabis is fairly harmless for most users, but does drastic damage to a minority, not identifiable in advance. New drugs can have unexpected problems – even those approved for use as medicines:

“Used safely as a medical anaesthetic and analgesic for decades, ketamine has also risen in popularity as a recreational drug. The first case of severe bladder problems linked with ketamine use was documented in 2007…

“‘It has a major impact on users such that they can be incontinent or have enormous pain,’ says Dan Wood, a consultant urologist at University College London Hospitals, who led the review. He has seen 20 chronic ketamine users with urinary problems in the last three years and had to remove four patients’ bladders.

“The review suggests that heavy users are more likely to suffer symptoms, and about 20 per cent of people who have taken high doses of ketamine several times a week over months to years have experienced urinary tract problems.” [P]

I also wouldn’t be against more controls on alcohol. Maybe a special licence to buy it, which could be taken away for a time or for ever from people who committed crimes while drunk. Or revoked at the request of someone who wanted to avoid being tempted. And the whole vast system of adverts for alcohol could be banned: if it is not there to make people drink, just what is it there for? Changes could also be made to the ownership of pubs, currently owned by breweries and largely geared to getting people to drink as much as possible. That’s the way I’d like things to go.


US Hackers Lose Decisively.

I always thought that the Cyber-Liberation crowd had no idea what they’d be running into if they got big enough to be taken seriously. It’s now admitted – contrary to earlier confident forecasts – that China has got its section of the web nicely under control. The web played a role in the overthrow of existing regimes in Tunisia and Egypt, probably because they viewed themselves as safe and Western-protected and were not really on guard.

In the USA itself, it seems that conventional law enforcement methods have been quite enough to deal with a hacker community that has been more concerned with petty fraud that politics:

“The underground world of computer hackers has been so thoroughly infiltrated in the US by the FBI and secret service that it is now riddled with paranoia and mistrust, with an estimated one in four hackers secretly informing on their peers, a Guardian investigation has established.

“Cyber policing units have had such success in forcing online criminals to co-operate with their investigations through the threat of long prison sentences that they have managed to create an army of informants deep inside the hacking community.

“In some cases, popular illegal forums used by cyber criminals as marketplaces for stolen identities and credit card numbers have been run by hacker turncoats acting as FBI moles. In others, undercover FBI agents posing as ‘carders’ – hackers specialising in ID theft – have themselves taken over the management of crime forums, using the intelligence gathered to put dozens of people behind bars.

“So ubiquitous has the FBI informant network become that Eric Corley, who publishes the hacker quarterly, 2600, has estimated that 25% of hackers in the US may have been recruited by the federal authorities to be their eyes and ears. ‘Owing to the harsh penalties involved and the relative inexperience with the law that many hackers have, they are rather susceptible to intimidation,’ Corley told the Guardian.

“‘It makes for very tense relationships,’ said John Young, who runs Cryptome, a website depository for secret documents along the lines of WikiLeaks. ‘There are dozens and dozens of hackers who have been shopped by people they thought they trusted.’

“The best-known example of the phenomenon is Adrian Lamo, a convicted hacker who turned informant on Bradley Manning, who is suspected of passing secret documents to WikiLeaks. Manning had entered into a prolonged instant messaging conversation with Lamo, whom he trusted and asked for advice. Lamo repaid that trust by promptly handing over the 23-year-old intelligence specialist to the military authorities. Manning has now been in custody for more than a year.” [F]

“The FBI agent took over the management of the DarkMarket crime forum frequented by more than 2,000 carders where they would buy and sell personal data for use in credit card fraud. For three years, unbeknown to the hackers who were congregating there, DarkMarket was turned into a sophisticated FBI sting operation.

“Working with an undercover officer from the Serious Organised Crime Agency in London, Mularski’s ploy led to 56 arrests across four countries, and brought down some of the biggest names in the world of ID-theft. The catch included DarkMarket’s founder, a Sri Lankan-born Briton called Renukanth Subramaniam, aka JiLsi, who was sentenced to five years in prison in the UK last year…

“Kevin Mitnick, dubbed the world’s most wanted hacker when he spent three years on the run from the FBI for cracking into banks and telecoms companies, has studied all the big hacker criminal cases over the past 20 years. In almost all cases, he says, hackers have been turned into informants out of the desire to save their own skins faced with long prison sentences.

“‘I’d say that 99.9% of informants are doing it because they want to reduce their own criminal sentences. In nearly every case, hackers get scared because they fear the government will throw the book at them.’

“Mitnick knows what he is talking about. In a forthcoming memoir, Ghost in the Wires, he tells how his long-term hacking partner, Lewis de Payne, co-operated with the authorities . ‘We were close hacking partners for 20 years, so it was disappointing, though not exactly surprising. He had lots of bravado – he wasn’t scared, he wouldn’t cave – but the moment the Feds came after him, he collapsed.’…

“It is the same time-worn technique applied to drug dealers or mobsters or any other community that stands outside the law – get the little guy to turn on the big guy. But it has been especially effective when applied to hackers who lack the collective resistance to police pressure afforded by a mafia family or organised drug gang. ‘Hackers like to talk tough behind the keyboard, but as soon as the handcuffs are slapped on them and they face federal indictment, everything changes,’ says Mitnick.

“The system for turning hackers into informants is morally corrupt, in Mitnick’s view, because it involves a material inducement. ‘The snitch is getting paid in terms of less time in jail in exchange for their testimony. I have a problem with that, it’s no different to paying someone $10,000 for their testimony, it’s still payment even if it is in reduced sentence not money.'” [G]

I’m not in the least surprised that “hackers lack the collective resistance to police pressure afforded by a mafia family or organised drug gang”. There’s no mention of any sanctions beyond calling people bad names, which is no way to run an underground. Any serious underground organisation survives by killing those who betray it, and being known to be willing and able to do this. (The only exceptions are religious, where defectors usually fear Eternal Damnation.)

Hackers never seem to have thought along those lines, or if they did they must have decided that the issues they had were not worth killing for. But on that basis, it was foolish for them to start and even more foolish of them to preen as future liberators from oppressive state systems.


Big Moon and Little Mars

Twenty years ago, the history of the solar system seemed simple. Rocky planets like the Earth had formed near the sun, where it was too warm for ice exposed to the direct solar glare. Big planets like Jupiter had formed beyond the ‘snow line’, sucking in vast masses of hydrogen and helium and becoming ‘gas giants’. (A term invented by science fiction writer James Blish, which gradually infiltrated popular science.)

It was recognised that the Earth’s huge moon was an oddity. Most planets have moons, but the EarthMoon is gigantic compared to the planet it orbits. Only four moons in the solar system are larger than the EarthMoon: three of them go round Jupiter, which is 317 times as massive as the Earth. The fourth orbits Saturn, 95 times as big as the Earth. Most planets are thousands of times bigger than their moons: the Earth is a mere 81 times as big as its satellite. If Jupiter had a moon in proportion, it would be nearly four times bigger than the Earth. Jupiter’s biggest moon is Ganymede, about twice as massive as the EarthMoon.

It was for a long time believed that this was a rare accident. Now it looks like such moons are common among rocky planets:

“Last year, researchers from the University of Zurich’s Institute of Theoretical Physics in Switzerland and Ryuja Morishima of the Laboratory for Atmospheric and Space Physics at the University of Colorado in the US undertook a series of simulations to look at the way planets form from gas and smaller chunks of rock called planetesimals.

“Our own moon is widely thought to have formed early in the Earth’s history when a Mars-sized planet slammed into the Earth, resulting in a disc of molten material encircling the Earth which in time coalesced into the Moon as we know it…

“About one in 10 rocky planets around stars like our Sun may host a moon proportionally as large as Earth’s, researchers say.

“Our Moon is disproportionately large – more than a quarter of Earth’s diameter – a situation once thought to be rare.

“Using computer simulations of planet formation, researchers have now shown that the grand impacts that resulted in our Moon may in fact be common.

“The result may also help identify other planets [in other solar systems] that are hospitable to life.” [S]

The best prospects for undiscovered life in our own solar system is Mars. The chances would be greater if Mars were not such a small planet, one-ninth the mass of the Earth. With stronger gravity it might have kept more of its air and water. But it seems now that this is a relic of the very early days of the formation of the planets:

“Mars formed within two to four million years of the dawn of the Solar System, much faster than the Earth which took between 50 and 100 million years to reach its final size, which could explain why Mars is so small, say scientists reporting their discovery in the journal Nature.

“Mars is just 11 percent the mass of Earth, yet the dynamics of planetary formation say that Mars should have grown to a comparable size as its bigger siblings Earth and Venus, accumulating mass from smaller planetesimals. But Mars never seemed to make it out of the planetary nursery.

“‘Earth was made of embryos like Mars, but Mars is a stranded planetary embryo that never collided with other embryos to make an Earth-like planet,’ says Nicolas Dauphas at the University of Chicago.

“‘We thought that there were no embryos in the Solar System to study, but when we study Mars, we are studying embryos that eventually made planets like Earth,’ adds colleague Ali Pourmand of the University of Miami.

“The ratios of radioactive elements hafnium, tungsten and thorium were key players in Dauphas and Pourmand’s derivation of the refined age for Mars. When planets form, they differentiate into an iron-rich core and a silicate-rich mantle. Since tungsten likes to bond with iron, it can be found in the core, while hafnium remains in the mantle, the viscous layer of rock beneath a planet’s crust. Core formation is thought to occur at around the same time that a planet reaches its final mass, so the tungsten isotopic ratio recorded in the core provides its age.” [T]

A separate but compatible study suggests it was all down to Jupiter. When astronomers got hard evidence of planets round other stars, they were astonished to find that many of them were ‘hot Jupiters’, planets as big as Jupiter or bigger, but closer to their star than Mercury is to the sun. It was decided that they must have formed a long way out and then moved in:

“The study of exoplanets has revealed that certain giant planets can migrate near to their star. On the basis of this observation, Alessandro Morbidelli and his colleagues have proposed the hypothesis that the giant planets of our solar system (Jupiter and Saturn) migrated within the solar system before the formation of the terrestrial planets. The researchers based their study on Hansen’s work to envisage the following scenario: before the formation of Saturn, Jupiter could have migrated towards the Sun up to the present position of Mars (1.5 AU from the Sun). It could then have pushed aside or ejected all the material in its path, leading to the formation of a ‘truncated’ 0.3 AU-wide disk of material, with an outer edge at 1 AU (according to the work of Hansen). Saturn, once formed, may in turn have migrated towards the Sun. Under its ‘influence,’ Jupiter could have ‘veered off track’ and migrated until it reached its current position (around 5 AU from the Sun), beyond the asteroid belt.

“Using numerous digital simulations, the scientists have demonstrated that the migrations of Jupiter and Saturn are compatible with the formation of the asteroid belt between Mars and Jupiter. In addition, they have succeeded in explaining the coexistence of two types of asteroids in this belt: some very dry, others with high water contents. According to the ‘gas-driven migration’ scenario, Jupiter could have intercepted two populations of small bodies during its migrations. Those now situated in the inner part of the asteroid belt could have come from the zone between 1 and 3 AU from the Sun, whereas those located in its outer part could have come from a separate region, beyond 5 AU.” [W]

The status of Mercury remains uncertain. It is smaller than Mars, and also very dense, so that it may be the inner remnant of a protoplanet that suffered some drastic collision. It’s only now being looked at in detail, and we don’t have any of its rocks to study.

We should soon have more data on the asteroids. NASA’s Dawn probe is approaching Vesta, second biggest of the asteroids. On 16th July it should start to orbit it and get a close look. The most interesting feature we know about is a gigantic crater than must have nearly shattered it. But thinking back to what the Voyager probes found among the outer moons, I’d make a guess that something even stranger and quite unexpected will also be found.

In July 2012, the Dawn probe will quit Vesta and fly on to arrive in 2015 at Ceres, largest of all the asteroids. That too should show something quite unexpected.

[As of May 2015, they’ve found a cratered world with unexpected emissions of water vapor.]



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[P] From issue 2817 of New Scientist magazine, page 12.

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