2014 02 – Newsnotes

Notes On The News

by Gwydion M Williams

Thatcher started squeezing the Squeezed Middle

Honour Our Donkey Generals?

Getting More Irrational?

Why Not Restore Boredom to Banking?

The Dung-Beetles of Wall Street

Chinese leaders use British Virgins!

Snippets.

 

Thatcher started squeezing the Squeezed Middle

Even many people on the left accept the Tory notion that something drastic had to be done in the 1980s to cure the problems of the 1970s.  They believe that Thatcher turned round a sickly economy.  But did she?

We’re all better off than we were in the 1970s, obviously.  But post-war wealth creation had been about the same, up until the crisis that began in 2008.  This graph shows it:

005 UK growth

(This uses figures from Angus Maddison’s The World Economy: Historical Statistics (OECD 2003), which is generally accepted as the best source.  It uses 1990 US dollars, with GDP per head shown as thousands.  GDP growth per 5-year interval is shown, which is obviously much greater than the annual growth, and means that the two sets of numbers plot neatly together.)[A]

Wealth per head – the black bars – rises fairly steadily from the 1950s, the “disastrous” period of the Mixed Economy, the so-called Keynesian Era.  Thatcher’s years in office are mostly inferior, even though she had a tremendous boost from North Sea Oil.

Life would have gone on getting better without Thatcher.  What she did was shift the benefits of the existing system so that the rich got a much bigger share.

If someone were to work out the incomes per head of the working mainstream, leaving out the richest 10% and the poorest 10%, the negative effects of the Thatcher Era would be much clearer.  They could also calculate how much better this middle 80% would be if there had been no Thatcherism: something a Trade Union research department could easily do.

Looking further back into history, the “purer” capitalism before World War Two or World War One was always worse at wealth creation.  The USA and Germany were overtaking Britain because Britain still favoured a small state.

 

Honour Our Donkey Generals?

When Michael Gove said that the “First World War may have been a uniquely horrific war, but it was also plainly a just war”,[B] lots of people took him up on it.  But I’ve not yet seen a reply that I’d count as adequate.  Among other things, they manage to avoid mentioning the assassination of the Austrian Archduke, heir to the throne, shot along with his wife.  Or that this assassination was strongly related to the Serbian claim to Bosnia-Herzegovina – the same claim that Britain re-classified as criminal wickedness in Grove makes a whole slew of different claims and criticisms.  A serious analysis must disentangle the various items:

a) The courage and skill of British troops is sneered at.

By who?  I’m not aware of anyone at all who criticised the courage or skill of the ordinary British soldier, in this or any other war.  It’s quite different from saying that the war was pointless, or fought for the wrong reasons.  Or that the generals were brutal bunglers, which a lot of the ordinary soldiers said.

It’s worth quoting what Siegfried Sassoon said about it in his famous poem, The General:

“‘Good morning, good morning!’ the General said

“When we met him last week on our way to the line.

“Now the soldiers he smiled at are most of ’em dead,

“And we’re cursing his staff for incompetent swine.

“‘He’s a cheery old card,’ muttered Harry to Jack

“As they slogged up to Arras with rifle and pack.

“But he did for them both with his plan of attack.”[C]

b) Criticism of Britain‘s Great War participation has been imposed on the rest of the society by a few leftists.

Blatantly false.  When the war ended and while memories were still fresh, there was massive rejection of the war from right across the political spectrum.  It’s only now, with most participants dead, that a lot of historians prefer to smooth over the past, and may also genuinely confuse the two wars.  The left are more interested in keeping the criticism alive as part of a general anti-establishment line.  But you don’t find many defending the war as such.

Nor was it really a British victory.  The line-up of France, Tsarist Russia and the British Empire should have been much stronger than the alliance of Germany and Austria-Hungary.  In fact it was weaker.  Bringing in Italy on the Allied side didn’t end the stalemate.  It needed the help of the USA to win, and the price of that was dependence on the USA.

The German Army was indeed not “defeated in the field” before they agreed to an Armistice that was later treated as if it has been a surrender.  It everywhere stood on enemy soil.  And in World War Two, it proved vastly easier to push the Germans out of France than to push on into Germany.

What finished the war was the presence of vast numbers of US troops, plus the general exhaustion of Germany.  A major cause of this was the British Navy preventing overseas food supplies reaching Germany.  This was intended to cause starvation, and it did just that.

The blockade on Germany was continued after the Armistice, and was used to force Germany to sign the Versailles Treaty, which was blatantly unfair.

c) The British High Command has been unfairly criticised.

Again, while memories of the war were still fresh, a view they were brutal bunglers was held right across the political spectrum.  The New Right evidently includes a few characters trying to rehabilitate them, but it doesn’t seem convincing.

The phrase “lions led by donkeys” in relation to British generalship was circulated in the memoirs of Evelyn, Princess Blucher, who reported hearing it said (presumably in its German equivalent) in the headquarters of General Ludendorff, [D] Hitler’s ally in the Munich Putch after the war.  It more recent times it was used most notably by Alan Clark, Tory MP and junior minister in Margaret Thatcher’s governments, in his 1961 book “The Donkeys”.

In the 1960s, very few Britons wanted to fight any more wars.  But after British public opinion enthusiastically backed the Falklands War, saving Thatcherism, the advantage of a warlike outlook was seen.  The failure of most left-wingers to distinguish between sensible wars and unjust wars was a gift to them.

The BBC’s 1964 documentary The Great War series wasn’t leftist. but was very clear about the ambiguous causes.  And about the incompetence of British generals who had learned their trade fighting lightly-armed tribesmen.  But these days, the BBC prefers to defend those bunglers, saying things like “one undeniable fact is that Britain and its allies, not Germany, won the First World War.”[E]  Which is an instance of “Bliaring”, giving a misleading impression without telling any actual lies, a trick that merits being named after Tony Blair for his notorious “45 minutes” claim and other misleading remarks aimed at starting a disastrous war.  For as I said earlier, the military potential of “Britain and its allies” should have secured an easy victory, not a stalemate with Germany everywhere standing on enemy soil.  Since the troops fought well, who else but the generals can be blamed?

d) Starting the war was unavoidable, because of Germany‘s appalling intentions for general expansion.

Very doubtful.  As I said, the immediate trigger was Bosnia-Herzegovina.  The deeper reason was the strong alliance between Tsarist Russia and Republican France, an alliance of opposites that made no sense unless Germany was the target.

Had Germany been seriously interested in dominating Europe, they would have attacked Tsarist Russia during the Russo-Japanese War of 1904-5, or in the revolutionary chaos after Russia lost that war.  At that time, Britain was deeply hostile to Russia and Germany would almost certainly have won such a war.

e) Continuing the war to the bitter end was unavoidable, because of Germany‘s appalling intentions for general expansion.

Definitely wrong.  When its initial advances bogged down, Germany was quite ready to go back to the position as it was in August 1914.  And near the end, Germany was not allowed to make peace on basis of 14 Points that Wilson had floated after joining the war, in defiance of what the electorate thought they had voted for.

Since Wilson also let the 14 Points be ignored at the Versailles Peace Talks, a reasonable belief is that they were war propaganda rather than his serious beliefs.  It was open to him to walk out of the talks, even to send food to Germany under US military escort.  That would have produced a very different future, with Hitler insignificant if he had even become involved in politics.

There is a view that poor well-meaning Wilson was duped by the wicked Europeans.  I’ve read Wilson’s own History of the USA: he does not sound gullible.  And he several times expresses admiration for trickery for what he sees as a good end – such as getting the US Constitution adopted.

f) It was for democracy.

Every single European participant in the Great War had a Parliament elected by a majority of adult males in their European mother-countries.  All of them had multi-party democracy and a press with considerable rights to criticise government policy.  All of them needed and got a vote from those Parliaments to join the war.

Between the two World Wars, almost all of the new nation-states created by the Versailles Peace moved to some form of popular autocratic government.  Dictatorships were also established in Italy, Spain and Greece.

It’s clear enough why Mr Gove would prefer that people ignore the nasty facts about the war and produce patriotic gush.  But it can’t be allowed.

 

Getting More Irrational?

For much of the 20th century, many intellectuals have been moaning about the “defeat of reason” or a “lack of faith in rationality”.

What has actually been defeated is abuse of rational arguments.  Which can also cast a slur on valid arguments.  But admitting the trickery is necessary to get the record straight.

Most of what passes for Rationality should be called Simplified-Reality Rationalism.  This is particularly true of conventional economics, the sort of thing Adam Smith began.

“Rational” economics treat links between humans as existing automatically.  Some of the time, complete selfishness is assumed.  But this can also be switched to the level of group, corporate or national self-interest, depending on what they want the answer to be.

This sort of “rationality” ignores the immense complexity of individual feelings, self and probably a number of different groups, large and small.  It loses touch with reality.  It sneers at ceremonies and traditions that are useful for strengthening such ties, and can reasonably be supposed to have been developed for just that reason.

It also conveniently dodges the awkward fact that people can be mistaken and can be intentionally misled.  The pretence is that such things will even out in the long run.  What’s much more likely is that a few smart and unscrupulous individuals will fool the rest.

The current Labour Affairs editorial details how privatised water has been run for the benefit of financially sophisticated investors.  Managers might have some notion of serving their customers, but they know that it is the sophisticated investors who hire and fire them.  That it is short-term profits that will make or break their careers.

Simplified-Reality Rationalism can work. Newton was able to work out the dynamics of the Solar System by assuming that the sun, moon and planets could be treated as if they were dimensionless points rather than spheres of finite size (though he also noted the actual size of the Earth to explain how the moon creates tides).  He was right on this, and also in assuming that each planet’s orbit is based just on its interaction with the sun, ignoring other planets.[F]  Only when measurements got much better did such things have to be allowed for, successfully predicting Neptune from oddities in the orbit of Uranus and requiring the development of General Relativity to explain subtle oddities in the orbit of Mercury.  (There was also a mistaken belief that Neptune was being influences by some large outer planet, supposedly explained by Pluto but now shown to be due to faulty measurements.)

Economics looks to Newtonian Mechanics for its justification, ignoring the key point that it triumphed because it was brilliantly accurate.  If Simplified-Reality Rationalism predicts something that blatantly does not exist, then the theory is at best incomplete.  It may well be totally wrong.

Economic “rationalism” looks just at selfish desires and does not include miscalculations, greed or expectations of honesty.  (Which would anyway be hard – honest by whose standards?)  It wholly ignores the existence of sympathy and generosity and a sense of duty.  Adam Smith does have a lot about these things in his other big book, The Theory of Moral Sentiments.  But the two blatantly contradict each other in their underlying structure, and he ignores this contradiction.  Like Hobbs in Leviathan, he manipulated the logic to get the desired outcome to produce a result that his readers will want to believe.

Note also that false logic may include true facts.  One might say “Kangaroos are marsupials and the Duke of Wellington was born in Ireland, therefore Sofia is the capital of Bulgaria“.  In this case, the facts and “conclusion” are all true, but there is blatantly no relations between them.  But had I chosen facts that were much closer to the supposed conclusion, the argument might have past muster.  A great deal of rubbishy logic does just that, and it gets people suspicious of rationality.

Logic is a good tool for thought, but all too easy to abuse.  In the 20th century and particularly since the 1960s, there has been a vicious circle of increasing mistrust which has included mistrust of all rational thought, good or bad.  Thatcher may have genuinely believed she was curing it.  But it widened during her time as Prime Minister, and has got worse under New Labour and under her Tory successors.

The broad rebelliousness of the 1960s successfully changed Western culture, undermining Christianity as it was then understood, and in many cases overturning values that had stood since the Neolithic.  If it was sometimes extreme or unreasonable, there have been very few successful cultural changes that have not involved extremism.  Moderation mostly serves as a defence of existing abuses, even when the moderates sincerely wish to bring about changes by their own mild methods.  (Mostly they succeed when conservative forces are intimidates by extremists and look to the moderate reformers to save them.)

It wasn’t just the West that had a crisis of belief.  Leninism in Europe was disintegrating after Khrushchev destroyed faith in what existed and then failed to replace it.  (China later showed how it could be done, by allowing Mao to be criticised without letting him be seriously bad-mouthed or called criminal.)  In the West, both the Trotskyist movement and the Libertarians fed into a loss of confidence in socialist achievements.  This was logical enough for Libertarians, but very foolish for the left to emphasis failures and let it be forgotten how much was achieved.  Possibly it made sense for Trotskyists, whose actual history since emerging in the 1920s has been “Permanent Non-Achievement” rather than Permanent Revolution.  But it was foolish for so many people to take the Trotskyists seriously.

Meantime Libertarians easily connected with business interests and gave them a Grand Strategy, saying the West had taken a wrong turn in the 1940s.  This was turned into practical politics by an emergent New Right, which picked up a lot of the ex-rebels, including some who had gone via Trotskyism

The weakness of the New Right has been their inability to be much more than a complaint against Socialism.  They haven’t actually dismantled the Corporatism that sprang up in the 1940s, they have simply added a layer of profit-making to structures that are mostly still state-subsidised.  Whatever they intended, they have spread a vicious circle of mistrust within the society.

 

Why Not Restore Boredom to Banking?

Banks should be a safe place to put money, and a good source of loans for people who have a serious need for them.  This is dull and it is successful.  When people try to make it exciting, things go wrong.  Because the “exciting” stuff does not generate much real wealth.  And because it depends on “silly money” to make the losses that balance the profits made by the Smart Money.

Alliance & Leicester, Abbey National, Bradford & Bingley are just three of the former Building Societies that became banks under Thatcherite influence.  And have now vanished as independent entities – all three are now merged into the Spanish banking group Santander.  It’s an odd sort of Conservatism that allows this.

The perils should have been obvious from the earlier failure of their US equivalent.  The Wikipedia describes it thus:

“The savings and loan crisis of the 1980s and 1990s (commonly dubbed the S&L crisis) was the failure of about 747 out of the 3,234 savings and loan associations in the United States. A savings and loan or ‘thrift’ is a financial institution that accepts savings deposits and makes mortgage, car and other personal loans to individual members – a cooperative venture known in the United Kingdom as a building society. In 1995, the RTC had closed 747 failed institutions, worth a book value of $402 billion, with an estimated cost of $160 billion. In 1996, the General Accounting Office estimated the total cost to be $370 billion, including $341 billion taken from taxpayers.”[G]

The rich stratum of people to whom that lost $341 billion would have flowed very much liked it, of course.  And have so far been very successful in promoting more of the same.  Brilliant at shifting the blame.

 

The Dung-Beetles of Wall Street

I’ve not yet seen the latest Hollywood offering, “The Wolf of Wall Street”.  But even mainstream reviewers find the film too relaxed about blatant dishonesty, trickery that damaged the real economy.  “Wolf” is hardly the right word: wolves are brave.  Jackal or hyena might be more fitting.  But what I’d chose if I had power over it would be a film called “The Dung-Beetles of Wall Street”.

Just as real-world Dung-Beetles feed on shit and also collect it as a safe hatching place for their offspring, so those characters make huge collections of dirty money, and sometimes justify it as for the benefit of their children.  Real-world Dung-Beetles are useful, though distasteful.  This lot have damaged the real economy and given nothing back.

Serious commercial lending needs a lot of skill.  I doubt most of the Wall-Street Dung-Beetles have it.  Warren Buffet has it, and is scornful of the fancy finance.

Hedge Funds have been a major factor.  And happen to be another illustration of the interesting fact that a disproportionate number of highly creative and successful people are either lifelong Marxists or else have been serious Marxists at some stage in their lives.  One example was the inventor of modern Hedge Fund, Alfred Winslow Jones, who studied and finally rejected the Marxist world-view.[H]  It evidently gave him a clear view of the overall system.  Probably also a contempt for “respectability”, which actually seems to be a necessary component of successful capitalism.

The Dung-Beetles might also have got their ideas from Proudhon, “Property Is Theft”.  His idea was well-divided small property, but he never had a serious notion of how to preserve it.  And the New Right have massively undermined the basis of functional conservatism.

 

Chinese leaders use British Virgins!

Not as interesting as it sound: The Guardian recently highlighted a story about Chinese use of a British-supported tax haven.  “Relatives of political leaders including China’s current president and former premier named in trove of leaked documents from the British Virgin Islands.”[I]

They don’t seem to wonder about how so much got leaked from a place that is normally leak-proof.  My guess is that someone behind the scenes arranged it as more ammunition for dissident Chinese.  People who are out to bust their own system without worrying about whether they can replace it.  Despite the example of Russia, which got steadily poorer and weaken when it followed Western advice, the possible hazards seem never to cross the minds of the Chinese dissidents.

China flourishes because it has what many poor nations lack, a functional and efficient political system.  And no more corrupt than Britain or the USA were in comparable stages of development, or Japan and the East Asian Tigers during their spectacular advance.  Under an autocratic system, the overall wealth of ordinary Chinese has gone up vastly.  Not like Africa, where elections are insisted upon and many leaders have a policy of looting when they get the chance.

Why, though, should there be micro-states like the British Virgin Islands which are havens for irregular commerce? Britain intentionally maintains these places, to let rich people avoid their fair share of taxes.

Various centres for dirty money should be declared “unfit to participate in international commerce”.  This should include Switzerland.  One could also give the poorer places a subsidy that would match their “skim” from the dirty money.  And the world would become a cleaner and fairer place.

 

Snippets.

In the eyes of the Western media, Democracy means people the West likes being liked by a majority of the voters.  A failure of Democracy mostly means people the West dislikes being liked by a majority of the voters.

Failure in Iraq and a clear failure of the Arab Spring outside of Tunisia doesn’t seem to teach them anything.  Nor the awkward fact that a vast number of people in the West now believe that politicians don’t keep their promises and there is no point in voting.

At least cynicism doesn’t get people killed.  Enthusiasm does that.  Gullible foreigners are told that if they only had Democracy, all would be well.  When they managed to get a serious system of Representative Democracy going and anti-Western elements win a clear majority, this is evaded with hazy references to relatively minor irregularities.  And when it leads to civil war, this too is not the fault of Western advice.

Successful systems of Representative Democracy usually start out as Representative Electoral systems that only include the richer citizens, and often share power with monarchs and aristocrats.

In Thailand, the elite want to roll back the process and restrict voting to the elite.  The West has been notably soft on the matter.

***

In Britain, we had another round of floods in December.  Flood Precautions have mysteriously been delayed.

I’d suspect the government of shadow-boxing, intentionally delaying to make more profits for the construction industry.  Only pretending to be concerned about the middle-class house-owners who vote Tory but are no longer valued except as idiots who vote for a party of the very rich.

In the same spirit, they are cutting supposedly unnecessary jobs in the government department that should be curbing bad practices by builders.

***

Meantime the USA has been abnormal cold.  Part of climate change, which is much more complex than earlier talk of “Global Warming” would have suggested.

To put it crudely, a warmer arctic has broken down the “polar vortex” that normally keeps the very cold air confined there.  This hits the USA, but can have the opposite effect in the wider world.  For Scandinavia, the winter weather is relatively mild.[J][K] Australia has a heat wave[L] and so does Argentina[M].

***

A nice summary of how the US recession is being mishandled at [http://www.alternet.org/economy/how-fix-economy-13-easy-charts].  Or rather, how it is being handled on the basis of politics that give priority to protecting the rich.  And by politicians who see all public spending as highly dubious.

***

A dog could run China’s banking system, says the former chief economist and spokesman of China’s National Bureau of Statistics. [N]   It’s a criticism of the system for not using the sort of sophistications that you find in Western banking.  But given the mess we now have in our economy, if that dog has puppies, please send us one.

Seriously, responding to the demands of various regional governments has worked out quite well. They are imperfect but also committed to the welfare of their region. And the overall result has been much better than places where conventional banking practice applies.

 

References

[A]              You can find some more detailed figures from a different source at [http://www.theguardian.com/news/datablog/2009/nov/25/gdp-uk-1948-growth-economy]

[B]              [http://www.dailymail.co.uk/news/article-2532923/Michael-Gove-blasts-Blackadder-myths-First-World-War-spread-television-sit-coms-left-wing-academics.html]

[C]              [http://goosebump-poetry.blogspot.co.uk/2012/10/siegfried-sassoon-general.html]

[D]              [https://en.wikipedia.org/wiki/Lions_led_by_donkeys]

[E]              [http://www.bbc.co.uk/history/worldwars/wwone/lions_donkeys_01.shtml]

[F]               He also encountered the Three Body Problem when he tried to explain the exact movements of the moon.  But for planets, he was spot on.

[G]              [https://en.wikipedia.org/wiki/Savings_and_loan_crisis#Tax_Reform_Act_of_1986]

[H]              [http://valueinvestorsleague.blogspot.co.uk/2012/06/introducing-league-alfred-winslow-jones.html]

[I]               [http://www.theguardian.com/world/ng-interactive/2014/jan/21/china-british-virgin-islands-wealth-offshore-havens]

[J]               [http://www.alaskadispatch.com/article/20131224/warmer-weather-scandinavia-affects-christmas-and-fur-industry]

[K]              [http://yle.fi/uutiset/exceptionally_mild_christmas_weather_warms_finland/7000845]

[L]              [http://www.accuweather.com/en/weather-news/record-setting-heat-wave-in-au/21789651]

[M]              [http://www.accuweather.com/en/weather-news/argentina-heat-wave-continues/21436557]

[N]              [http://www.scmp.com/news/china-insider/article/1389717/dog-could-run-chinas-banking-system-says-former-state-council]

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