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Friday 28 October 2011

Life Among the 1%


By Michael Moore, Open Mike Blog
27 October 11

wenty-two years ago this coming Tuesday, I stood with a group of factory workers, students and the unemployed in the middle of the downtown of my birthplace, Flint, Michigan, to announce that the Hollywood studio, Warner Bros., had purchased the world rights to distribute my first movie, 'Roger & Me.' A reporter asked me, "How much did you sell it for?"

"Three million dollars!" I proudly exclaimed. A cheer went up from the union guys surrounding me. It was absolutely unheard of for one of us in the working class of Flint (or anywhere) to receive such a sum of money unless one of us had either robbed a bank or, by luck, won the Michigan lottery. On that sunny November day in 1989, it was like I had won the lottery - and the people I had lived and struggled with in Michigan were thrilled with my success. It was like, one of us had made it, one of us finally had good fortune smile upon us. The day was filled with high-fives and "Way-ta-go Mike!"s. When you are from the working class you root for each other, and when one of you does well, the others are beaming with pride - not just for that one person's success, but for the fact that the team had somehow won, beating the system that was brutal and unforgiving and which ran a game that was rigged against us. We knew the rules, and those rules said that we factory town rats do not get to make movies or be on TV talk shows or have our voice heard on any national stage. We were to shut up, keep our heads down, and get back to work. If by some miracle one of us escaped and commandeered a mass audience and some loot to boot - well, holy mother of God, watch out! A bully pulpit and enough cash to raise a ruckus - that was an incendiary combination, and it only spelled trouble for those at the top.

Until that point I had been barely getting by on unemployment, collecting $98 a week. Welfare. The dole. My car had died back in April so I had gone seven months with no vehicle. Friends would take me out to dinner, always coming up with an excuse to celebrate or commemorate something and then picking up the check so I would not have to feel the shame of not being able to afford it.

And now, all of a sudden, I had three million bucks! What would I do with it? There were men in suits making many suggestions to me, and I could see how those without a strong moral sense of social responsibility could be easily lead down the "ME" path and quickly forget about the "WE."
So I made some easy decisions back in 1989:
  1. I would first pay all my taxes. I told the guy who did my 1040 not to declare any deductions other than the mortgage and to pay the full federal, state and city tax rate. I proudly contributed nearly 1 million dollars for the privilege of being a citizen of this great country.


  2. Of the remaining $2 million, I decided to divide it up the way I once heard the folksinger/activist Harry Chapin tell me how he lived: "One for me, one for the other guy." So I took half the money - $1 million - and established a foundation to give it all away.


  3. The remaining million went like this: I paid off all my debts, paid off the debts of some friends and family members, bought my parents a new refrigerator, set up college funds for our nieces and nephews, helped rebuild a black church that had been burned down in Flint, gave out a thousand turkeys at Thanksgiving, bought filmmaking equipment to send to the Vietnamese (my own personal reparations for a country we had ravaged), annually bought 10,000 toys to give to Toys for Tots at Christmas, got myself a new American-made Honda, and took out a mortgage on an apartment above a Baby Gap in New York City.


  4. What remained went into a simple, low-interest savings account. I made the decision that I would never buy a share of stock (I didn't understand the casino known as the New York Stock Exchange and I did not believe in investing in a system I did not agree with).


  5. Finally, I believed the concept of making money off your money had created a greedy, lazy class who didn't produce any product, just misery and fear among the populace. They invented ways to buy out companies and then shut them down. They dreamed up schemes to play with people's pension funds as if it were their own money. They demanded companies keep posting record profits (which was accomplished by firing thousands and eliminating health benefits for those who remained). I made the decision that if I was going to earn a living, it would be done from my own sweat and ideas and creativity. I would produce something tangible, something others could own or be entertained by or learn from. My work would create employment for others, good employment with middle class wages and full health benefits.
I went on to make more movies, produce TV series and write books. I never started a project with the thought, "I wonder how much money I can make at this?" And by never letting money be the motivating force for anything, I simply did exactly what I wanted to do. That attitude kept the work honest and unflinching - and that, in turn I believe, resulted in millions of people buying tickets to these films, tuning in to my TV shows, and buying my books.

Which is exactly what has driven the Right crazy when it comes to me. How did someone from the left get such a wide mainstream audience?! This just isn't supposed to happen (Noam Chomsky, sadly, will not be booked on The View today, and Howard Zinn, shockingly, didn't make the New York Times bestseller list until after he died). That's how the media machine is rigged - you are not supposed to hear from those who would completely change the system to something much better. Only wimpy liberals who urge caution and compromise and mild reforms get to have their say on the op-ed pages or Sunday morning chat shows.

Somehow, I found a crack through the wall and made it through. I feel very blessed that I have this life - and I take none of it for granted. I believe in the lessons I was taught back in Catholic school - that if you end up doing well, you have an even greater responsibility to those who don't fare the same. "The last shall be first and the first shall be last." Kinda commie, I know, but the idea was that the human family was supposed to divide up the earth's riches in a fair manner so that all of God's children would have a life with less suffering.
I do very well - and for a documentary filmmaker, I do extremely well. That, too, drives conservatives bonkers. "You're rich because of capitalism!" they scream at me. Um, no. Didn't you take Econ 101? 

Capitalism is a system, a pyramid scheme of sorts, that exploits the vast majority so that the few at the top can enrich themselves more. I make my money the old school, honest way by making things. Some years I earn a boatload of cash. Other years, like last year, I don't have a job (no movie, no book) and so I make a lot less. "How can you claim to be for the poor when you are the opposite of poor?!" It's like asking: "You've never had sex with another man - how can you be for gay marriage?!" I guess the same way that an all-male Congress voted to give women the vote, or scores of white people marched with Martin Luther Ling, Jr. (I can hear these righties yelling back through history: "Hey! You're not black! You're not being lynched! Why are you with the blacks?!"). It is precisely this disconnect that prevents Republicans from understanding why anyone would give of their time or money to help out those less fortunate. It is simply something their brain cannot process. "Kanye West makes millions! What's he doing at Occupy Wall Street?!" Exactly - he's down there demanding that his taxes be raised. That, to a right-winger, is the definition of insanity. To everyone else, we are grateful that people like him stand up, even if and especially because it is against his own personal financial interest. It is specifically what that Bible those conservatives wave around demands of those who are well off.

Back on that November day in 1989 when I sold my first film, a good friend of mine said this to me: "They have made a huge mistake giving someone like you a big check. This will make you a very dangerous man. And it proves that old saying right: 'The capitalist will sell you the rope to hang himself with if he thinks he can make a buck off it.'"

P.S. I will go to Oakland tomorrow afternoon to stand with Occupy Oakland against the out-of-control police.

Thursday 27 October 2011

Is modern science Biblical or Greek?


By Spengler

The "founders of modern science", writes David Curzon in Jewish Ideas Daily [1] of October 18, "were all believers in the truths of the opening chapter in the Hebrew Bible. The belief implicit in Genesis, that nature was created by a law-giving God and so must be governed by "laws of nature," played a necessary role in the emergence of modern science in 17th-century Europe. Equally necessary was the belief that human beings are made in the image of God and, as a consequence, can understand these "laws of nature."

Curzon argues that the modern idea of "laws of nature" stems from the Bible rather than classical Greece, for "ancient Greeks certainly believed that nature was intelligible and that its regularities could be made explicit. But Greek gods such as Zeus were not understood to have created the processes of nature; therefore, they could not have given the laws governing these processes."

Is this just a matter of semantics? Is there a difference between the "Greek" concept of intelligibility, and what Curzon calls the biblical concept of laws of nature? After all, the achievements of Greek science remain a monument to the human spirit. The Greek geometer Eratosthenesin the third century BCE calculated the tilt of the earth's axis, the circumference of the earth, and (possibly) the earth's distance from the sun. Archimedes used converging infinite series to calculate the area of conic sections, approximating the calculus that Newton and Leibniz discovered in the 17th century.

An enormous leap of mind, though, separates Archimedes' approximations from the new mathematics of the 17th century, which opened a path to achievements undreamed of by the Greeks. Something changed in the way that the moderns thought about nature. But does the rubric "laws of nature" explain that change? Curzon is on to something, but the biblical roots of modern science go much deeper.

Before turning to the scientific issues as such, it is helpful to think about the differences in the way Greeks and Hebrews saw the world. The literary theorist Erich Auerbach famously contrasted Greek and Hebrew modes of thought [2] by comparing two stories: the binding of Isaac in Genesis 22, and the story of Odysseus' scar told in flashback (Odyssey, Book 19).

Homer's hero has returned incognito to his home on the island of Ithaca, fearful that prospective usurpers will murder him. An elderly serving woman washes his feet and sees a scar he had received on a boar hunt two decades earlier, before leaving for the Trojan War, and recognizes him. Homer then provides a detailed account of the boar hunt before returning to his narrative.

Homer seeks to bring all to the surface, Auerbach explained in his classic essay. "The separate elements of a phenomenon are most clearly placed in relation to one another; a large number of conjunctions, adverbs, particles, and other syntactical tools, all clearly circumscribed and delicately differentiated in meaning, delimit persons, things, and portions of incidents in respect to one another, and at the same time bring them together in a continuous and ever flexible connection; like the separate phenomena themselves, their relationships - their temporal, local, causal, final, consecutive, comparative, concessive, antithetical, and conditional limitations - are brought to light in perfect fullness; so that a continuous rhythmic procession of phenomena passes by, and never is there a form left fragmentary or half-illuminated, never a lacuna, never a gap, never a glimpse of unplumbed depths."

Auerbach adds, "And this procession of phenomena takes place in the foreground - that is, in a local and temporal present which is absolute. One might think that the many interpolations, the frequent moving back and forth, would create a sort of perspective in time and place; but the Homeric style never gives any such impression."

Stark and spare, by contrast, is the story of God's summons to Abraham to sacrifice his beloved son Isaac. Where Homer tells us everything, the Bible tells us very little. God speaks to Abraham, and Abraham says, "Here I am." Auerbach observes, "Where are the two speakers? We are not told. The reader, however, knows that they are not normally to be found together in one place on earth, that one of them, God, in order to speak to Abraham, must come from somewhere, must enter the earthly realm from some unknown heights or depths. Whence does he come, whence does he call to Abraham? We are not told."

Abraham and Isaac travel together. Auerbach writes, "Thus the journey is like a silent progress through the indeterminate and the contingent, a holding of the breath, a process which has no present, which is inserted, like a blank duration, between what has passed and what lies ahead, and which yet is measured: three days!" Auerbach concludes:
On the one hand, externalized, uniformly illuminated phenomena, at a definite time and in a definite place, connected together without lacunae in a perpetual foreground; thoughts and feeling completely expressed; events taking place in leisurely fashion and with very little of suspense. On the other hand, the externalization of only so much of the phenomena as is necessary for the purpose of the narrative, all else left in obscurity; the decisive points of the narrative alone are emphasized, what lies between is nonexistent; time and place are undefined and call for interpretation; thoughts and feeling remain unexpressed, are only suggested by the silence and the fragmentary speeches; the whole, permeated with the most unrelieved suspense and directed toward a single goal (and to that extent far more of a unity), remains mysterious and "fraught with background".
Literary analysis may seem an unlikely starting-point for a discussion of science. But the Hebrew Bible's embodiment of what Auerbach called "the indeterminate and the contingent" has everything to do with the spirit of modern science. This emerges most vividly in the difference between the Greek and Hebrew understanding of time, the medium through which we consider infinity and eternity.

What separates Archimedes' approximation from Leibniz' calculus? The answer lies in the concept of infinity itself. Infinity was a stumbling-block for the Greeks, for the concept was alien to what Auerbach called their "perpetual foreground." Aristotle taught that whatever was in the mind was first in the senses. But by definition infinity is impossible to perceive. In the very large, we can never finish counting it; in the very small (for example infinitely diminishing quantities), we cannot perceive it. Infinity and eternity are inseparable concepts, for we think of infinity as a count that never ends.

For the Greeks, time is merely the demarcation of events. Plato understands time as an effect of celestial mechanics in Timaeus, while Aristotle in the Physics thinks of time as nothing more than the faucet-drip of events. That is Homer's time, in Auerbach's account. Biblical time is an enigma. That is implicit in Genesis, as Auerbach notes, but explicit in the Book of Ecclesiastes. Greek time is an "absolute temporal present."

In Hebrew time, it is the moment itself that remains imperceptible. Here is Ecclesiastes 3:15 in the Koren translation (by the 19th-century rabbi Michael Friedländer): "That which is, already has been; and that which is to be has already been; and only God can find the fleeting moment." As I wrote in another context, [3] Rabbi Friedländer's translation probably drew upon the celebrated wager that Faust offered the Devil in Goethe's drama. Faust would lose his soul will if he attempted to hold on to the passing moment, that is, to try to grasp what only God can find. The impulse to grab the moment and hold onto it is idolatrous; it is an attempt to cheat eternity, to make ourselves into gods.

A red thread connects the biblical notion of time to modern science, and it is spun by St Augustine of Hippo, the 4th-century Church father and polymath. His reflection on time as relative rather than absolute appears in Book 11 of his Confessions. And his speculation on the nature of number in time takes us eventually to the modern conceptual world of Leibniz and the calculus Aristotle's description of time as a sequence of moments, in Augustine's view, leads to absurdities.

To consider durations in time, we must measure what is past, for the moment as such has no duration. Events that have passed no longer exist, which means that measuring past time is an attempt to measure something that is not there at all. Augustine argues instead that we measure the memory of past events rather than the past itself: ''It is in you, my mind, that I measure times,'' he writes. Our perception of past events thus depends on memory, and our thoughts about future events depend on expectation. Memory and expectation are linked by ''consideration.'' For ''the mind expects, it considers, it remembers; so that which it expects, through that which it considers, passes into that which it remembers.''

Time is not independent of the intellect in Augustine's reading. Expectation and memory, Augustine adds, determine our perception of distant past and future: ''It is not then future time that is long, for as yet it is not: But a long future, is 'a long expectation of the future,' nor is it time past, which now is not, that is long; but a long past is 'a long memory of the past.''' This is the insight that allows Augustine to link perception of time to the remembrance of revelation and the expectation of redemption.

A glimpse of what Augustine's theory of time implies for mathematics appears in his later book, Six Books on Music. I argued in a 2009 essay for First Things: [4]
In De Musica, Augustine seeks to portray ''consideration'' as a form of musical number, that is, numeri judiciales, ''numbers of judgment.'' These ''numbers of judgment'' bridge eternity and mortal time; they are eternal in character and lie outside of rhythm itself, but act as an ordering principle for all other rhythms. They stand at the head of a hierarchy of numbers that begins with ''sounding rhythms'' - the sounds as such - which are in turn inferior to ''memorized rhythms.''

Only the ''numbers of judgment'' are immortal, for the others pass away instantly as they sound, or fade gradually from memory over time. They are, moreover, a gift from God, for ''from where should we believe that the soul is given what is eternal and unchangeable, if not from the one, eternal, and unchangeable God?'' For that reason the ''numbers of judgment,'' by which the lower-order rhythms are ordered, do not exist in time but order time itself and are superior in beauty; without them there could be no perception of time. Memory and expectation are linked by the ''numbers of judgment,'' which themselves stand outside of time, are eternal, and come from God.
That is an intimation of a higher order of number. Because it is buried in a treatise on musical time, Augustine's idea about "numbers of judgment" has elicited scant scholarly interest. But it is clear that his "numbers of judgment" are consistent with his much-discussed theory of "divine illumination." He wrote in Confessions, "The mind needs to be enlightened by light from outside itself, so that it can participate in truth, because it is not itself the nature of truth. You will light my lamp, Lord."

Descartes' "innate ideas" and Kant's "synthetic reason" descend from Augustine, although Kant recast the concept in terms of hard-wiring of the brain rather than divine assistance. The founder of neo-Kantian philosophy, Hermann Cohen (1842-1918) built his career out of the insight that the fact that infinitesimals in the calculus add up to a definite sum proves the existence of something like synthetic reason. That is why Kant triumphed in philosophy and the Aristotelians were reduced to a grumpy band of exiled irredentists.

Augustine's idea finds its way into modern science through Cardinal Nicholas of Cusa (1401-1464). Theologian and mathematician, Cusa noticed that musicians were tuning their instruments to ratios that corresponded to irrational numbers. The "natural" intervals of music tuning clashed with the new counterpoint of the Renaissance, so the musicians adjusted (or "tempered") the intervals to fit their requirements.

The Greeks abhorred the notion of irrational number because they abhorred infinity. Aristotle understood that infinity lurked in the irrational numbers, for we can come infinitely close to an irrational number through an infinite series of approximations, but never quite get there. And the notion of an "actual infinity" offended the Greek notion of intelligibility. To medieval mathematicians, the irrationals were surds, or ''deaf'' numbers, that is, numbers that could not be heard in audible harmonic ratios. The association of rational numbers with musical tones was embedded so firmly in medieval thinking that the existence of an irrational harmonic number was unthinkable.

The practice of musicians, Cusa argued, overthrew Aristotle's objections. The human mind, Cusa argued, could not perceive such numbers through reason (ratio), ie the measuring and categorizing faculty of the mind, but only through the intellect (intellectus), which depended on participation (participatio) in the Mind of God.

Cusa's use of Augustinian terminology to describe the irrationals - numbers ''too simple for our mind to understand'' - heralded a problem that took four centuries to solve (and, according to the few remaining "Aristotelian realists," remains unsolved to this day).

Not until the 19th century did mathematicians arrive at a rigorous definition of irrational number, as the limit of an infinite converging sequence of rational numbers. That is simple, but our mind cannot understand it directly. Sense-perception fails us; instead, we require an intellectual leap to the seemingly paradoxical concept of a convergent infinite series of rational numbers whose limit is an irrational number.

The irrational numbers thus lead us out of the mathematics of sense-perception, the world of Euclid and Aristotle, into the higher mathematics foreshadowed by Augustine (see my article, ''Nicholas of Cusa's Contribution to Music Theory,'' in RivistaInternazionale di Musica Sacra, Vol 10, July-December 1989).

Once irrational numbers had forced their way into Western thinking, the agenda had changed. Professor Peter Pesic [5] recently published an excellent account of the impact of irrational numbers in musical tuning on mathematics and philosophy. [6]

Another two centuries passed before Leibniz averred, ''I am so in favor of the actual infinite that instead of admitting that nature abhors it, as is commonly said, I hold that nature makes frequent use of it everywhere, in order to show more effectively the perfections of its author.'' Theological concerns, one might add, also motivated Leibniz' work, as I sought to show in ''The God of the Mathematicians'' (First Things, August-September 2010).

Unlike Archimedes, who still thought in terms of approximations using rational numbers, Leibniz believed that he had discovered a new kind of calculation that embodied the infinite. Leibniz' infinitesimals (as I reported in ''God and the Mathematicians'') lead us eventually to George Cantor's discovery of different orders of infinity and the transfinite numbers that designate them; Cantor cited Cusa as well as Leibniz as his antecedents, explaining ''Transfinite integers themselves are, in a certain sense, new irrationalities. Indeed, in my opinion, the method for the definition of finite irrational numbers is quite analogous, I can say, is the same one as my method for introducing transfinite integers. It can be certainly said: transfinite integers stand and fall together with finite irrational numbers.''

Gilles DeLeuze (in Leibniz and the Baroque) reports that Leibniz ''took up in detail'' Cusa's idea of ''the most simple'' number: ''The question of harmonic unity becomes that of the 'most simple' number, as Nicolas of Cusa states, for whom the number is irrational. But, although Leibniz also happens to relate the irrational to the existent, or to consider the irrational as a number of the existent, he feels he can discover an infinite series of rationals enveloped or hidden in the incommensurable.'' Leibniz thus stands between Cusa in the fifteenth century and the flowering of the mathematics of infinite series in the nineteenth century. That is a triumph of the biblical viewpoint in modern science.

We can thus draw a red line from the Hebrew Bible (most clearly from Ecclesiastes) to Augustine, and through Nicholas of Cusa to G W Leibniz and the higher mathematics and physics of the modern world. The Hebrew Bible remains a force in modern science, despite the best efforts of rationalists and materialists to send it into exile.

Kurt Goedel, perhaps the greatest mathematician of the 20th century, approached all his work with the conviction that no adequate account of nature was possible without the presence of God. Inspired by Leibniz, Goedel destroyed all hope of a mechanistic ontology through his two Incompleteness Theorems as well as his work (with Paul Cohen) on the undecidability of the Continuum Hypothesis, as I reported in a recent First Things essay. [7]

There is always a temptation to offer simple homilies in honor of the Bible, for example, "intelligent design" theory, which in my view tells us nothing of real importance. An atheist like Spinoza also would contend that God designed the world, because in his philosophy God is the same thing as nature. Design contains no information about the unique and personal God of the Bible.

Curzon's discussion of the laws of nature is by no means wrong, but it would be wrong to leave the matter there. "The fear of God is the beginning of wisdom." As Ecclesiastes (3:11) said, "I have observed the task which God has given the sons of man to be concerned with: He made everything beautiful in its time; He also put an enigma [sometimes "eternity"] into their minds so that man cannot comprehend what God has done from beginning to end" (Ecclesiastes 3:11, Artscroll translation). Eternity is in our minds but the whole of creation is hidden from us. Steven Hawking has gone so far as to conjecture that something like Goedel's Incompleteness Principle might apply to physics as well as mathematics.

What divides Hebrews from Greeks, above all, is a sense of wonder at the infinitude of creation and human limitation. The Odyssey is intended to be heard and enjoyed; Genesis 22 is to be searched and searched again for layers of meaning that are withheld from the surface. The Greek gods were like men, only stronger, better-looking and longer lived, immortal but not eternal, and the Greeks emulated them by seeking become masters of a nature infested by gods. The Hebrews sought to be a junior partner in the unending work of creation. With due honor to the great achievements of the Greeks, modernity began at Mount Sinai.

Tuesday 25 October 2011

Will Western Liberal Values Hold Up During Difficult Times?

Millions of Asians - including Chinese, Indians, Filipinos, Sri Lankans, Pakistanis - and others from different corners of the world have made the West their home. What are the likely social and psychological consequences for us "others" in these hard times?

One of the defining features of Western democracies is said to be its liberal values. What it essentially means for people like us is that our presence is for the most part not considered a big deal. If the economist Benjamin Friedman is right, however, liberal values thrive and indeed depend on continued economic growth and prosperity of citizens.

"Economic growth - meaning a rising standard of living for a clear majority of citizens - more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness and dedication to democracy." In contrast, when there is economic decline, the "moral character" of citizens takes a hit.

They become less tolerant, less open and less generous towards the have-nots. Friedman contends that "merely being rich is no bar to a society’s retreat into rigidity and intolerance once enough of its citizens lose the sense that they are getting ahead".

In other words, a society's values are fickle. The future prospect of citizens largely determines the values they hold at any point of time. Economic growth matters more for a society's ‘moral character' than the country's overall wealth.

Clearly, the truth is more complex than what the stylized version of Friedman's thesis suggests. Any values that we hold do not change quickly. We let go of our old values and acquire new ones only over time.

But what if some kinds of values - in this case liberal values - are prone to easy abandonment because they never developed deep roots in ways we thought they did?

With no end to bad economic news, how many Europeans and Americans will retain or abandon liberal values? If more of the latter, which members of society are likely to become victims of growing intolerance and injustice?

The so-called "undeserving poor" certainly. Additionally, the victims are also likely to be from among what Canadians label as "visible minorities".

From this perspective, for the millions of visible minorities who live in the West, the hard times of today may be the beginning of worse to come. They face the prospect of greater discrimination in the economic and social spheres or more.

Are we then headed for an era of growing illiberalism in the liberal democracies of the West so far as "others" - whether the poor or visible minorities - are concerned? Are the foundations of liberal democracies really so shallow?

Some of us may recall Fareed Zakaria's seminal article in Foreign Affairs (1997) in which he drew attention to growing illiberalism in new democracies - countries which held reasonably free and fair elections without subscribing to constitutional liberalism. For Zakaria, "liberal constitutionalism" - that "tradition, deep in Western history that seeks to protect an individual's autonomy and dignity against coercion, whatever the source - state, church or society" - separates Western democracies from the rest.

The larger issue may well be whether the celebrated liberal values of Western societies - which together with constitutional and other legal provisions, provide the bedrock of liberal democracy - are really dependent on the continued prosperity of a majority of its citizens or whether they have replaced or compete with older traditions.

Perhaps Zakaria is right about the part where the "tradition" to protect individual autonomy and dignity - by which one should understand the referent to be all individuals irrespective of class or race - against coercion has developed deep roots among a large majority. If that is true, then liberal values may well hold their own in hard times.

What if, however, we overestimated the nature and extent to which liberal values have penetrated these societies without sufficient consideration to ethnic or other differences so that we became blind to its fragile bases?

If Friedman is right, then Western democracies face a challenge from within where "tradition" may not be of much help. Economic stagnation and decline will likely have immoral consequences because the same countries have other traditions too. The laundry list of these other traditions is long and well-known - racism, colonialism, slavery et cetera - and their existence shows up in the public spaces of "civilized" countries in the form of anti-immigrant rallies and demonstrations.

Under current conditions, the social fabric of many Western societies is strained to an extent not experienced at least since the times of the Great Depression. In Europe, as high rates of unemployment become endemic, a shrinking base of taxpayers is expected to support welfare handouts to not only the fair sons and daughters of the soil but dark-skinned others as well. Both in the US and Europe, there has been broad resentment against welfare for the undeserving poor (read African-Americans and Latinos) at least since the Ronald Reagan/Margaret Thatcher years.

The news about "others" from Europe - whether in Germany, the Netherlands or the United Kingdom - is not pretty. It remains to be seen how many American states will follow Alabama's lead in pushing for harsh anti-immigrant laws, invoking uncertainty, fear and worse.

I don't know about other liberal folks but I do wonder about my "moral character" holding up in hard times.

Pushkar is a Montreal-based researcher affiliated with the Institute for the Study of International Development (ISID), McGill University.

Wednesday 19 October 2011

In the Premier League the endgame of rampant capitalism is being played out


An unsustainable system where the rich win and the poor go to the wall. We see it in English football – and beyond
  • belle mellor
    Illustration by Belle Mellor
    It's a newspaper convention that the front and back pages are a world apart, as if news and sport inhabit two different spheres with little to say to each other. Indeed, it used to be an article of faith that "sport and politics don't mix", with the former no more than a form of escapism from the latter. And yet the Occupy Wall Street and London Stock Exchange protests that led the weekend news bulletins might not be entirely unrelated to the Premier League results that closed them. For the current state of our football sheds a rather revealing light on the current state of both our politics and our economy. Or, as one sage of the sport puts it: "As ever, the national game reflects the nation's times."
    What that reflection says is that Britain, or England, has become the home of a turbo-capitalism that leaves even the land of the let-it-rip free market – the United States – for dust. If capitalism is often described metaphorically as a race in which the richest always win, football has turned that metaphor into an all too literal reality.
    Let's take as our text a series of reports written by the sage just quoted, namely the Guardian's David Conn, who has carved a unique niche investigating the politics and commercialisation of football. Conn elicited a candid admission from the new American owners of Liverpool Football Club, who confessed that part of the lure of buying a stake in what they called the "EPL" – the English Premier League – was that they get to keep all the money they make, rather than having to share it as they would have to under the – their phrase – "very socialistic" rules that operate in US sport. In other words, England has become a magnet for those drawn to behave in a way they couldn't get away with at home.
    Start with first principles. Of course, inequality is built into sport: some people are simply stronger or faster than others. What makes sport compelling is watching closely matched individuals or teams compete to come out on top.
    But a different kind of inequality matters too: money. A rich club can buy up all the best players and win every time. That's the story of today's Premier League, as super-flush Manchester United sweep all before them, challenged only by local rivals Manchester City – now endowed by an oil billionaire – and Chelsea, funded to the hilt by a Russian oligarch. This, then, becomes a different kind of competition, a battle not of skill, pace and temperament but of pounds, shillings and pence. The clearest manifestation of that came at the close of the transfer window, when the biggest teams splashed out millions to buy the top talent. It means the half-dozen top sides, already at a different level from the rest, soared even higher towards the stratosphere and out of reach – in just the same way that the super-rich float ever further away from everyone else, the 1% in a different league from the 99%, as the Occupy protesters would put it.
    Nothing you can do about that, says dogmatic capitalism. You can no more stop the richest teams dominating football than you can prevent the fastest sprinter winning gold. That's the force of the market, all but a law of nature.
    Except along comes American sport to show us another way. First, there are those rules on revenue-sharing that so frustrated Liverpool's new owners. All the money that, say, a baseball team makes – from tickets, TV rights and merchandise – is taxed by the major league that runs the sport and spread around the other clubs, so that the richest cannot dwarf the rest. That isn't because the titans of Major League Baseball have read too much Marx. It's because they understand that their sport is worth nothing if it stops being a real competition, if only a handful of the wealthiest teams ever have a chance of winning. Redistributing the wealth around the league ensures their sport doesn't become boring. It does not level the playing field, but it comes very close.
    The proof is in the stats so beloved of sporting obsessives. Over the past 19 seasons, 12 different teams have won baseball's biggest prize. In the 19 seasons since the Premier League was created, only four teams have won; Manchester United alone have won the title 12 of those 19 times.
    It's not just revenue-sharing that ensures true competition. In American football and basketball a salary cap applies, limiting how much each club can pay in wages and thereby preventing the richest teams making their domination permanent by snapping up all the best players. (A "luxury tax" performs a similar function in baseball.) In the same spirit, teams in all major US sports submit to a "draft", in which they take turns picking from a pool of newly eligible players, so that the equivalent of Chelsea or Manchester City can't gobble up all the fresh talent, but instead have to let the Blackburns or Wigans have a go.
    Put like that, it seems fantastical. Who can imagine Old Trafford voluntarily snaffling less of the pie, so that clubs in smaller cities with smaller grounds, and therefore weaker gate receipts, get a look in? And yet English football used to work just like that. When the founders of the Football League gathered in a Manchester hotel in 1888, they fretted over how they might ensure that a fixture between, say, Derby County and Everton remained a real contest. They agreed the home side should give a proportion of its takings to the visitors, a system that held firm till 1983.
    Clubs shared the TV money when it came too, spreading it around all 92 league clubs. But the big teams always resented subsidising the minnows; indeed, the Premier League was formed out of the biggest 20 clubs' express desire to keep Rupert Murdoch's millions for themselves. That TV money is at least partly spread throughout the Premier League, but now there are noises about ending even that small nod towards wealth-sharing, so that the biggest half-dozen teams can keep every penny for themselves.
    Not for the first time, it's fallen to Europe to act. Upcoming Uefa "financial fair play" rules will require teams to live within their earnings, which should put an end to the sugar daddy handouts of Man City and Chelsea. But that 2014 change will push clubs to maximise their revenue, which is bound, in turn, to mean even less sharing. Football will still be a game determined by who has most money.
    There are three consequences of this strange gulf between our rules and those across the Atlantic. First, football's most storied clubs have become attractive to foreign tycoons who sniff a licence to print money, unrestricted. Second, we've established a model that is inherently unsustainable, involving colossal debts that cripple all those without a billionaire to bail them out. Since 1992, league clubs and one Premier League team – Portsmouth – have fallen insolvent 55 times. Third, we risk killing the golden goose, turning an activity that should be thrilling into a non-contest whose outcome is all but preordained.
    Hmm, a system that sees our biggest names falling to leveraged takeovers – think Kraft's buy-up of Cadbury – thereby selling off the crown jewels of our collective culture in the name of a rampant capitalism that is both unsustainable and ultimately joyless. That doesn't just sound like the state of the national game, that sounds like the state of the nation.

Monday 17 October 2011

How Quantitative Easing will not solve the problem - An alternative viewpoint

Professor Steve Keen was one of the few economists to predict the financial crisis. According to him, the “debt-deflationary forces” unleashed today “are far larger than those that caused the Great Depression.”

I stumbled out into the autumn sunshine, figures ricocheting around in my head, still trying to absorb what I had heard. I felt as if I had just attended a funeral: a funeral at which all of us got buried. I cannot claim to have understood everything in the lecture: Sonnenschein-Mantel-Debreu Theory and the 41-line differential equation were approximately 15.8 metres over my head(1). But the points I grasped were clear enough. We’re stuffed: stuffed to a degree that scarcely anyone yet appreciates.

Professor Steve Keen was one of the few economists to predict the financial crisis. While the OECD and the US Federal Reserve foresaw a “great moderation”, unprecedented stability and steadily rising wealth(2,3), he warned that a crash was bound to happen. Now he warns that the same factors which caused the crash show that what we’ve heard so far is merely the first rumble of the storm. Without a radical change of policy, another Great Depression is all but inevitable.

The problem is spelt out at greater length in the new edition of his book Debunking Economics (4). Like his lecture, it is marred by some unattractive boasting and jostling. But the graphs and figures it contains provide a more persuasive account of the causes of the crash and of its likely evolution than anything which has yet emerged from Constitution Avenue or Threadneedle Street. This is complicated, but it’s in your interests to understand it. So please bear with me while I do my best to explain.

The official view, as articulated by Ben Bernanke, chairman of the Federal Reserve, is that both the first Great Depression and the current crisis were caused by a lack of base money. Base money, or M0, is money that the central bank creates. It forms the reserves held by private banks, on the strength of which they issue loans to their clients. This practice is called fractional reserve banking: by issuing amounts of debt several times greater than their reserves, the private banks create money that didn’t exist before. Conventional economic theory predicts that when the central bank raises M0, this triggers a “money multiplier”: private banks generate more credit money (M1, M2 and M3), boosting economic growth and employment.

Bernanke, echoing claims by Milton Friedman, believed that the first Great Depression in the US was propelled by a fall in the supply of M0, which, he said, “reinforced … declines in the money multiplier.”(5) But, Keen shows, there is a weak association between M0 money supply and depression. There were six occasions after World War Two when M0 money supply fell faster than it did in 1928 and 1929. On five of these occasions there was a recession, but nothing resembling the scale of what happened at the end of the 1920s(6). In some cases unemployment rose when the rate of M0 growth was high and fell when it was low: results which defy Bernanke’s explanation. Steve Keen argues that it’s not changes in M0 which drive unemployment, but unemployment which triggers changes in M0: governments issue more cash when the economy runs into trouble.

He proposes an entirely different explanation for the Great Depression and the current crisis. Both events, he says, were triggered by a collapse in debt-financed demand(7). Aggregate demand in an economy like ours is composed of GDP plus the change in the level of debt. It is the sudden and extreme change in debt levels that makes demand so volatile and triggers recessions. The higher the level of private debt, relative to GDP, the more unstable the system becomes. And the more of this debt that takes the form of Ponzi finance – borrowing money to fund financial speculation – the worse the impact will be.

Keen shows how, from the late 1960s onwards, private sector debt in the US began to exceed GDP. It built up to wildly unstable levels from the late 1990s, peaking in 2008. The inevitable collapse in this rate of lending pulled down aggregate demand by 14%, triggering recession(8).

This should be easy enough to see with the benefit of hindsight, but what lends weight to Keen’s analysis is that he saw it with the benefit of foresight. In December 2005, while drafting an expert witness report for a court case, he looked up the ratio of private debt to GDP in his native Australia, to see how it had changed since the 1960s. He was astonished to discover that it had risen exponentially. He then did the same for the United States, with similar results(9). He immediately raised the alarm: here, he warned, were the conditions for an economic crisis far greater than those of the mid-1970s and early 1990s. A massive speculative bubble was close to bursting point. Needless to say, he was ignored by policy-makers.

Now, he tells us, a failure to address these problems will ensure that this crisis will run and run. The “debt-deflationary forces” unleashed today “are far larger than those that caused the Great Depression.”(10) In the 1920s, private debt rose by 50%. Between 1999 and 2009, it rose by 140%. The debt-to-GDP ratio in the US is still much higher than it was when the Great Depression began(11).

If Keen is right, the crippling sums spent on both sides of the Atlantic on refinancing the banks are a complete waste of money. They have not and they will not kickstart the economy, because M0 money supply is not the determining factor.

President Obama justified the bailout of the banks on the grounds that “a dollar of capital in a bank can actually result in $8 or $10 of loans to families and businesses. So that’s a multiplier effect”(12). But the money multiplier didn’t happen. The $1.3tn that Bernanke injected scarcely raised the amount of money in circulation: the 110% increase in M0 money led not to the 800 or 1000% increase in M1 money that Obama predicted, but a rise of just 20%(13). The bail-outs failed because M0 was not the cause of the crisis. The money would have achieved far more had it simply been given to the public. But, as Angela Merkel and Nicholas Sarkozy demonstrated over the weekend(14), governments have learnt nothing from this failure, and seek only to repeat it.

Instead, Keen says, the key to averting or curtailing a second Great Depression is to reduce the levels of private debt, through a unilateral write-off, or jubilee. The irresponsible loans the banks made should not be honoured. This will mean taking many banks into receivership(15). Otherwise private debt will sort itself out by traditional means: mass bankruptcy, which will generate an even greater crisis.

These are short-term measures. I would like to see them leading to a radical reappraisal of our economic aims and moves to develop a steady-state economy, of the kind proposed by Herman Daly and Tim Jackson(16). Governments and central bankers now have an unprecedented opportunity to learn from the catastrophic mistakes they’ve made. It is an opportunity they seem determined not to take.


www.monbiot.com

References:
1. Professor Steve Keen, 6th October 2011. Alternative theories of macroeconomic behaviour: a critique of neoclassical macroeconomics and an outline of the alternative Monetary Circuit Theory approach. Nuffield College, Oxford.
2. Ben Bernanke, 20th February 2004. The Great Moderation. http://www.360doc.com/content/11/0402/23/67028_106822017.shtml
3. Jean-Philippe Cotis, May 2007. Achieving further rebalancing. OECD Economic Outlook. http://findarticles.com/p/articles/mi_m4456/is_81/ai_n27271380/
4. Steve Keen, 2011. Debunking Economics: revised and expanded edition. Zed Books, London.
5. Ben Bernanke, 2000. Essays on the Great Depression, page 153. Princeton University Press. Quoted by Steve Keen, as above.
6. Steve Keen, page 302.
7. Page 300.
8. Page 341.
9. Page 336-337.
10. Page 349.
11. Page 348.
12. Barack Obama, 14th April 2009. Remarks on the economy. http://www.whitehouse.gov/the-press-office/remarks-president-economy-georgetown-university
13. Page 306.
14. http://www.guardian.co.uk/business/2011/oct/09/france-germany-agree-plan-banks
15. Page 355.
16. http://www.monbiot.com/2011/08/22/out-of-the-ashes/

Friday 7 October 2011

Bank of England hits the panic button

By Jeremy Warner in The Telegraph on 7/10/11

Who was it who said that QE – printing money by another name – is the last resort of desperate governments, when all other options have failed?

As Labour's Ed Balls gleefully points out, it was indeed George Osborne, the current Chancellor. It is the sort of thing politicians say in opposition and then bitterly regret when they get into government and have to take the decisions.
Yet in a sense, his words are even truer today than they were then. You wouldn't choose further to expand the Bank of England's purchases of government debt unless you were desperate, and all other options had been exhausted. The Chancellor condemned it then; now he welcomes it.
Since nominal interest rates are already as low as they can realistically go and the Government has, rightly, ruled out easing back on deficit reduction - more QE is about the only thing left in the locker as the world slides, inexorably, towards depression.

As regular readers will know, until quite recently I've argued steadfastly against QE2, but on the never say never principle, I was always careful to add some riders. When faced by an extreme deflationary threat, almost anything can be justified, and that's precisely what we are seeing now. As the Governor of the Bank of England, Sir Mervyn King, put it on Thursday, "when the world changes, we must change our response".
Long-standing supporters of more QE will say that it has been obvious for some while that the economy was stalling anew, requiring some form of fresh stimulus.

I can't agree. No growth for nine months is not the same thing as a sudden lurch back into the abyss, a threat which thanks policy paralysis in Europe and the related upsurge of stresses in the banking system, is now only too evident. These dangers have risen markedly over the past two weeks, which explains why the Bank of England has acted both earlier than had been expected and, with £75bn of further asset purchases now sanctioned, more boldly. Sir Mervyn went further than he has ever done before on Thursday by saying that this is "the most serious financial crisis since the 1930s, if not ever". For the sake of appearances if nothing else, something had to be done.

Not that this seems to have been obvious to the European Central Bank (ECB), whose failure to cut interest rates on Thursday was almost as surprising as the Bank of England's decision to act so precipitously and pre-emptively.

At his valedictory press conference, the outgoing ECB president, Jean-Claude Trichet, announced some further "non-standard" initiatives to ease the European banking system's funding crisis, but it was small scale stuff, and frankly isn't going to make a great deal of difference.

Bizarrely, the ECB still seems to be looking in the wrong direction – ever vigilantly searching the horizon for the ghost of inflation – even as the noisy locomotive of economic catastrophe bears down on it from behind. Even for such a compromised institution, with 17 masters to answer to, the incompetence of the policy stance is quite breathtaking.

Glowing though the tributes have been to the departing Mr Trichet, I doubt the judgment of history will be kind.

There are big risks in what the Bank of England is doing, which despite its protests to the contrary, is as close to monetisation of the national debt as you can ever get without doing it outright.

By the time the new bout of asset purchases is over, the Bank of England will own nearly half of the market in three to 25-year gilts, or 32pc of the total stock of UK government bonds. Even when steeped in the economics of quantitative easing, this looks mad, and when things look mad, they generally are.

Let's get this straight. By switching on the printing presses, the Bank of England, which is 100pc owned by Her Majesty's Government, is buying up a third of the debt owed by Her Majesty's Government. The Treasury is becoming ever more in debt to itself. It's as strange as that.

To be doing this even as inflation is about to breach the 5pc mark makes the Bank of England's position more uncomfortable still. Let's not have any of this nonsense about how QE is not inflationary. By keeping the pound low, the inflationary impact is all too obvious.

Even the Bank of England's own analysis puts the inflationary effect of QE to date at between 0.75 and 1.5 percentage points. The same study finds that the addition to real GDP is just 2pc. That doesn't look a particularly good trade off to me.

Evidence from the US, moreover, is that the second bout of QE is both less powerful and shorter-lived than the first. It's like a drug; the more you take, the less potent it is. Yet most galling of all is the damage it does to savers, who are being further plundered to bail out the debtors.

If you are coming up to retirement, forget it. The price of an annuity just got a whole lot more expensive. What remains of our sadly depleted final salary pensions industry is toast. Companies will have to pay even more for the pension promises they have made, and so will the taxpayer, on the hook as he is for the unfunded pension pledges of the public sector.

The Governor says he shares the saver's pain. There is nothing he would like more than to return interest rates to "normal", and begin the process of making over-indebted Britain a nation of savers once more.
But right now you might as well do what he wants, which is spend your nest egg or blow it on higher risk assets, because with rising inflation, it will be worth less tomorrow than it is today.

I'm not saying the Bank of England is wrong to be doing this. There are no good choices left to policymakers. Europe's failure to resolve its debt crisis is creating a vicious downward spiral of contracting credit and economic activity. The Bank does indeed have little option but to react in the way it has. The almost suicidal, depression economics of the eurozone leaves it no choice.

When half the country is up to its neck in debt, and therefore cannot provide the demand necessary to get the economy growing again, the least worst option is to force-march those with the balance sheet strength to withstand it into the shops and the unknown returns of business investment.

If the Bank can drive yields on "riskless" gilts even lower, then those with the money might be more inclined to spend it or invest it, rather than lending to the Government. Even just leaving the cash on deposit with the bank ought to help ease credit conditions a little. That's the idea, anyway.

Whether QE2 works out that way is another matter. All too likely, it will merely end up feeding another investment banking bonus bonanza. Hey ho.

Tuesday 4 October 2011

Osborne, cut these items to reduce deficit

Bins, roads, unwinnable wars: this is a chancellor with money to burn

While the poor struggle to survive the crisis, George Osborne is happy to run a welfare state for corporations and billionaires
  • daniel pudles
    Illustration by Daniel Pudles

    Crisis, what crisis? There must be one: George Osborne, chancellor of the exchequer, said so 12 times in Monday's speech. But if it really is as bad as he says, why is he squandering what remains of our money like an aristocratic gambler in a Russian novel?

    This column is about the cuts the government has failed to make. It's about the profligate, pointless spending that has not been slashed, and the money Osborne could have raised but has instead decided to fritter away. For the sake of argument it accepts his estimate of the amount that will need to be saved. But it will show that over half of it could be found with much less pain.
    Let us begin with the easiest cut of all: one that would hurt no one except a few grasping corporations.
    By cancelling its planned re-organisation of the National Health Service, the government would save £2bn. That would allow it to drop three-quarters of the cuts to the NHS's capital spending budget planned for the next four years.

    To show how reasonable I mean to be, I won't adopt Simon Jenkins's arresting proposal that we cut the entire armed forces' budget. I'll suggest we drop only the military projects of such withering pointlessness that even the government can't decide what they are for.

    The strategic purpose of the war in Afghanistan changes by the week. Its prospects of achieving any of its fluctuating aims recede by the day. Pulling out would save us £4.5bn a year. That's equivalent to the entire cut in the government grant to local authorities, plus the entire cut to the housing budget, which will raise social rents to impossible levels. So here's the choice: Sure Start centres, libraries, Citizens Advice bureaux, affordable housing, all the other services that give the poor a chance of a decent life; or an unwinnable war likely to sow further conflict.

    Whatever else the Ministry of Defence gets wrong, however, you can't fault it for innovation. It's spending £6.2bn on a pair of aircraft carriers with a unique feature: they won't carry any aircraft. The jets they were to have supported won't be ready in time, or perhaps at all. They will drift around the oceans like the Flying Dutchman, the embodied ghosts of our imperial pretensions. Because of the commitments already made, cancelling them now would save only £1.2bn. But that's enough to avert all but £200m of the government's cuts to early intervention programmes for families that might otherwise run into trouble.

    While we're on the subject of pointless foreign intervention, could someone in government please explain the survival of the export credit guarantee department? Its purpose is to subsidise multinational companies by underwriting their business in other countries: such as drilling for oil in fragile environments or selling weapons to dodgy regimes. It costs the government £20m a year. This money could have saved the Sustainable Development Commission and the Royal Commission on Environmental Pollution four times over.

    The road schemes the government wants to fund would have been pointless and destructive in the boom years. In a time of crisis and contraction, they are a refined form of madness. A report by the Campaign for Better Transport analyses the local authority transport schemes listed as the "best and final bids" for new money by the government, which will decide in December. You have until 14 October to respond.

    Though it generates the least employment, does the greatest damage to the environment and creates the fewest social benefits, road building is in line for the greatest share of the new transport spending: £897m. Some of the schemes being proposed, such as the £86m Bexhill to Hastings link road (all of 6km) or the £108m Kingskerswell bypass (also 6km) have been fought by local people for years. Like the useless new roads the last Tory government built, they will simply bump the traffic problem along to the next bottleneck. The same money would have kept the education maintenance allowance afloat for 18 months – or, as we're talking about transport, provided mobility for disabled people in residential care (one of the cruellest of the proposed cuts) for 300 years.

    The Beast of Brentwood, known to his mother as Eric Pickles, has insisted – on the expert advice of the leader writers of the Daily Mail – that councils reinstate weekly bin collections, at a cost of £250m. This spending, unlike some of the examples I'm listing, will do no harm. But a government that believes it's a higher priority than, say, legal aid for people with no representation (now cut by £300m a year) is a government that's lost all sense of proportion.

    Such sums are trifling by comparison with the money the government has selflessly foregone. Wherever it has spotted a relatively painless means of plugging the spending gap, it has hurried away to find an excruciating alternative. It continues to hold out against a Robin Hood tax on financial transactions. Levied at just 0.05%, this would raise around £20bn a year from the people who brought us the crisis. That's equivalent to one quarter of all the cuts the government is making.
    When he slapped new charges on the North Sea companies making tanker-loads of money from a mineral resource that belongs to the nation, Osborne could have banked the £2bn he raised. He could have used the oil revenues to cancel almost all the cuts to disability living allowance. Instead he gave it, as a tax rebate, to a group some way from the top of the priority list: motorists. When he struck a deal with Switzerland, and British tax evaders stashing their ill-gotten gains in its banks, Osborne could have held out for £25bn. Instead he settled for £5bn, all malfeasance forgotten. He threw away the equivalent of another quarter of this year's cuts.

    Then there are the straight giveaways: acts of profligacy at any time, of Bullingdonian debauchery today. The government's cuts to corporation tax will cost us £1bn a year by 2014. Changes to controlled foreign company rules, capital gains tax, capital allowances, inheritance tax and similar levies (all of which reward only corporations or the ultra-rich) will deprive the exchequer of a further £1.5bn a year by 2015 – almost enough to reverse the fiscally destructive cuts to the tax collection service: a net £2.3bn. The freezing of air passenger duty, excise duty for lorries and the aggregates levy – which in all cases, like the spending on new roads, damages the environment as much as they damage the economy – will cost us another £175m.

    Far from running out of funds, this looks like a government with money to burn. While the poor and middle struggle to survive the crisis that George Osborne bewails, he's giving away our money to those who need it least. So let's support him when he calls for cuts, but demand that he directs them at the welfare state he's running for corporations and billionaires, which is turning this crisis into a calamity.