Sense

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Roger Bootle of Capital Economics is making sense.

There are umpteen countries which are running huge current account surpluses: last year, China’s surplus was 6pc of GDP, Taiwan’s 11pc, Malaysia’s 17pc and Singapore’s 19pc. The oil producers also ran huge surpluses – 5pc in Saudi Arabia (down from a massive 28pc the year before), 16pc in Libya and Qatar, and 26pc in Kuwait. Within Europe our two big oil producers, Russia and Norway, ran surpluses of 4pc and 14pc respectively.

Among non-oil producers in Europe, Germany and Holland ran surpluses of 5pc, and Switzerland 9pc. Moreover, these countries are in general sitting on huge international reserves. This is where the money is and it is where demand should expand.

China remains the key to Asia. The Chinese government cleverly changed the exchange rate regime governing the renminbi just before the G20 summit. However, this was nothing more than a cosmetic move designed to head off criticism. The consequent rise of the currency will be minimal.

Anyway, the more important issue is the willingness of the Chinese to rebalance the economy towards consumers and away from reliance on exports…

You can’t expect much from a journalist at that level

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Alex Perry, an Africa correspondent Africa bureau chief for Time magazine, writes on China’s involvement in Africa. In the process, he describes the DRC as a “sucking vortex”, citing the corrupt rule of Mobutu Sese Seko. Julie Hollar at FAIR (Fairness and Accuracy in Reporting) takes Perry to task for failing to mention US / Belgian involvement in the overthrow of Patrice Lumumba (and their subsequent support of Mobutu). Perry then makes the terrible mistake of responding to Hollar in comments while not in full control of his own sense of self-importance. Self-harming behaviour (not to mention Time-harming behaviour) then follows.

Jonathan Schwarz (Tiny Revolution) summarises the Perry / Hollar spat and takes the opportunity to quote an apposite passage from Devlin’s book about his time as CIA station chief in the Congo. It’s good, so I’ll quote it myself here:

We moved onto Ambassador Houghton’s office where we were joined by Ambassador Burden for more detailed talks concerning the Congo and its problems…During our discussions, Tim brought up a delicate matter: “Time magazine plans to do a cover story on Lumumba with his picture on the front of the magazine.” He continued, “Celebrity coverage at home will make him even more difficult to deal with. He’s a first-class headache as it is.”

“Then why don’t you get the story killed?” Burden asked. “Or at least modified?”

“I tried to persuade the Time man in Leopoldville until I was blue in the face,” Tim replied. “But he said there was nothing he could do about it because the story had already been sent to New York.”

“You can’t expect much from a journalist at that level,” Burden said pulling out his address book and flipping through the pages. He picked up the phone and put a call through to the personal assistant of Henry Luce, Time’s owner.

So: Time. Apparently at the beginning it was going to be called Facts. May I just say at this point that if news reporting on the internet as we currently know it should happen to get wound up in favour of dedicated news magazine ‘apps’ running on tightly controlled platforms, then – since you can’t link from the web to the content of a proprietary app – no one will be linking to the bullshit with an explanation of why the bullshit is bullshit. It’s pretty obvious that Steve Jobs is nostalgic for the corporate futurism of the 1960s – only now he gets to implement it, woo-hoo – and it just doesn’t look as though end user selectivity features large in any part of the Jobs vision. You’ll get what you’re given and call it knowledge.

Pretty much the only part of Africa I’ve spent any time in at all is Madagascar. I’ve visited twice. They’ve just celebrated fifty years of independence from France. Andy Rajoelina has failed to gain international recognition since he took over (with the support of the army): for what it’s worth, celebrations are reported to be muted as a consequence. I think you have to give the Malagasy population credit for two things. First, they know a stitch up when they see one. Pre-Rajoelina, a South Korean chaebol had some deal under negotiation where (in broad terms) they’d produce corn and bio-fuel on some immense percentage of Madagascar’s arable land (half of it?) and then get to keep all the corn and all the fuel. In return, the Malagasy at large would get, not rent exactly, but at least the promise of being allowed to work as agricultural labourers for the South Koreans. News of this ‘deal’ prompted the ouster of Ravalomanana. You wonder if even Philip K. Dick could have foreseen it. As it happens, Alex Perry sees good things in the ‘deal-making approach’ for Africa:

For all the heat, IMF officials admit that the Chinese model for African development has some advantages. First, it’s quick. Loan talks with multilateral agencies take years. The China-Angola discussions took weeks. “With the West, there are studies, analyses and bureaucracy,” says the Western official. “The Chinese just ask what the government wants, and they don’t question or comment or judge. They just do it.”

My understanding is that the South Koreans took a similar approach: they just asked the then president what he wanted. Lickety-split …

The other thing about the Malagasy is this. When they have a coup, they generally do it with the minimum of violence and fuss. Madagascar is not a wealthy country but it’s smart enough not to waste too much time and effort on civil war when what’s wanted is a change in the administration.

Extra cooks wanted for hot kitchen

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It’s dawning on me that everyone is off on their holidays just at the moment, or is otherwise enjoying the nice summer weather, far from the screen of any computer or mobile device. Which is why it’s so quiet. Anyway, that must mean that I get to play the role of late night radio DJ for afoe, except that instead of lining up a few gentle Isabelle Boulay tracks for the benefit of Norbert Dentressangle truckers, I’ll be putting up a post every couple of days for y’all, mostly on an extremely dry topic of my choosing.

But now, back to the ArcelorMittal Orbit. It was announced today that architects Ushida Findlay have designed a ‘silver coil’ to wrap around Kapoor and Balmond’s Olympic tower of sadness. At first I thought this was a guerrilla publicity move by Ushida Findlay – a bit like the stuff the Smithsons used to do when some major project was announced and they weren’t invited to contribute – and I was quite excited. I like the idea of designers piling onto a failed project in an attempt to effect some positive change, or alternatively perhaps a terminal subversion. But turns out Ushida Findlay are part of the official team. You can see their contribution here (link intermittently paywalled, but there’s also some images here, apparently gotten from the official planning application).

And it has to be said there’s not much new to see. The ‘silver coil’ seems to have been there all along, clashes and bad geometry and all. What’s more, it’s not even very silvery.

Our organisation does not tolerate failure?

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Re my earlier post, in case you were wondering if there were any actual cases of politicians making ambiguous calls for market reassurance, well, here’s a nice example from the G20 Toronto Summit Declaration:

There is a risk that synchronized fiscal adjustment across several major economies could adversely impact the recovery. There is also a risk that the failure to implement consolidation where necessary would undermine confidence and hamper growth. Reflecting this balance, advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016.

Whose confidence? And (fiscal) consolidation is necessary where? Halving deficits by 2013 is no small aim. It’s also a highly political aim – affecting many people in many constituencies – and so it seems to me that explicit justification is needed; not hand waving and vague talk of ‘confidence’.

Incidentally, the G20 organisation seems to talk quite a bit about ‘taking steps’ and ‘delivering concrete outcomes’. What, if anything, gives them legitimacy to even attempt to ‘take steps’? Many national constitutions require governments to ratify international treaties as and when they’re negotiated. Shouldn’t the G20 ‘steps’ count as treaties? My question here is only partly facetious. Shouldn’t they?

Hey, why don’t we requisition the Royal Hospital Chelsea for productive workers?

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Some telegraphery from Iain Duncan Smith here. In short, IDS thinks we need to physically move people of working age on benefits to where employers want them; to make space, we need to relocate pensioners in council houses to smaller homes.

It looks as though the guy has swallowed his own rhetoric about the state sector constituting some sort of ‘command economy’: we need to shrink it, all right – he seems to be saying – but as long as it exists there’s going to be some god damn commanding going on. Is it that he was in the army once? It used to be that ‘the command economy’ meant putting vital-to-the-nation industries into the regions (like building submarines in Barrow); now we look to be working up a policy of putting the regions into the industry; specifically, that of west London and Bristol, the two places IDS seems to have on his radar.

Whatever. I think he’s basically incoherent on this one. To put things in the simplest terms, either recipients of benefits have agency – which implies that while some will ‘get on their bikes and look for work’ (or relocate, or whatever), some won’t – or they don’t have agency, in which case you can’t expect them to exercise it. If it’s the former, then benefits should come with few strings attached, should not be excessively and repeatedly assessed, conditions of receipt should not be changed at short notice, etc. In essence, benefits – within the obvious and accepted-by-everyone constraint of affordability – should be a matter of entitlement rather than grant. And it might be that one of the things IDS is missing here is a recognition that it’s not only the current recipients of benefits who take notice of what the benefit terms and conditions are, it’s just about everybody; that is, the whole of the private sector as well. We – the everybody – make our life plans accordingly. If we think that the safety net is going to be a certain way rather than another way, we plan for that. And if you – Iain Duncan Smith – relocate pensioners without warning, you’re in effect sticking two fingers up at whatever choices they’ve made in the past. How do you know they haven’t planned responsibly? Perhaps they chose to do a lower paid but socially useful job, trusting that there’d be a certain minimal support in retirement. Perhaps, if they’d thought they might risk getting booted out of their home in retirement, they might instead have chosen a less socially useful but better paid line of work. These are the sorts of counterfactuals relevant to this sort of policy-making. (You may want to question ‘socially useful’, but I’d bet that IDS himself recognises at least some occupations as socially useful. What’s more, the comparable ‘key worker’ category is one recognised in current housing policy.)

Bear in mind that IDS is no longer just some harmless former Tory leader: he’s Work And Pensions Secretary. It’s only been what – a month – but he looks to have had a full on Blunkett-style ‘machine gun the bastards’ moment.

Why should we reassure markets?

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Paul Krugman asks: does fiscal austerity reassure markets?. Well, maybe it does, maybe it doesn’t (For Krugman, it pretty much doesn’t). But why should we reassure markets? And what sort of reassurance should we give? I can’t give a very full or convincing argument by way of answering this question, but I’ll sketch out the way I think an argument might go.

For a start, it’s possible that ‘the markets’ aren’t part of our community: that is, there’s room for doubt as to whether they are or whether they aren’t. I’d suggest that it’s our coming to terms with this possibility that’s largely contributory to the sense of social obligation that we’ll develop with respect to ‘the markets’. So how do things work with this ‘coming to terms’?

On the way to answering this, we need to give ‘community’ itself some definition. What counts as a community? G. A. Cohen suggests that a characteristic of community is that ‘comprehensive justification’ can be applied to the policies of that community. Comprehensive justification takes all points of view into account: it’s a condition where any member of the community is able to defend a policy in the sight of any other member of that community. This seems to be a good fit for our intuition. Consider, says Cohen, a case where someone kidnaps your child. The police may say that it makes sense for you to pay the kidnapper, because then they’ll return your child. The police may be right; it may be sensible to pay up. But if the kidnapper were to say that it made sense for you to pay them, then, even though they too may be right – that is, it would be sensible to pay up – it’s very unlikely that we’d accept their claim as justification, with the result that we felt we ought to pay them. The only obligation you’d feel is the obligation – there all along, most likely – to try to do right by your children. There can’t be a comprehensive justification of the kidnapper’s demands; kidnap (fairly obviously) doesn’t make for community.

And this is where the notion of foreign-ness comes in. Apart from anything else, we might consider a kidnapper to be foreign to our community, simply in virtue of the fact that they’re prepared to do what they do. Now, take ‘the markets’. Harold Wilson (as Cohen reminds us) called them the ‘gnomes of Zurich’. I see three ways things might go.

(1) We assume that the gnomes are not part of our community (in Wilson’s view, the gnomes were clearly foreign). We may take account of what the gnomes say – it might be prudent to do this – but we won’t look to what they say as justificatory and we won’t feel obliged to them.

(2) We aren’t sure whether or not the gnomes are part of our community. Then, since we may believe (with Cohen) that comprehensive justification is indicative of community, we’ll look to see whether what they advocate is defensible when said by any member of our community. If it is, our belief that the gnomes are part of our community will be reinforced.

(3) Finally, let’s say we fully believe that the gnomes do belong to our community. In this situation, we’ll expect them to say things that are comprehensively justified. Further, since comprehensive justification is reflexive (in the social sense), membership of our community obliges them to engage principally in advocacy of this sort.

Needless to say, I don’t see these three situations as absolute: I think we can assume that, most of the time, we have a mix of (1) through (3).

That then, gives us one way to answer the question: why should we reassure ‘the markets’? Above and beyond simple prudence – which might, note, involve no reassurance – we should reassure them to the extent that we understand them to be part of our community, and not foreign. This understanding will be driven by the kinds of demands that are made. What would partial reassurance look like? I don’t know. I don’t have any recommendations for how to go about rationing out reassurance.

Perhaps this is all too simple to need saying. But I think it’s worth spelling out, since there are plenty of commentators on this issue (that is, politicians and a spread of pundits) who are guilty of exploiting an ambiguity. On the one hand, they’re exhorting us ‘to take account of what the markets say’ because ‘the markets’ are not foreign; on the contrary – we’re told – they form a key industry, a critical part of us. And so we’re obliged. On the other hand, they’re pleading with us ‘to take account of what the markets say’ because they are foreign; there’s no stopping them; they must be placated. They’re the gnomes of Zurich.

However, as I’ve said, if ‘the markets’ are part of us, there are standards that apply. We can expect certain things of them. If not, it doesn’t matter to us what happens to them. Given that we are capable of articulating the difference, I think it’s reasonable to expect a politician who talks ambiguously of ‘the markets’ to be able to resolve that ambiguity: they should be able to tell us which view of ‘the markets’ they intend. In default of that, feel free to ignore.

Round of Sixteen

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Wasn’t there some sort of sporting event going on?

So both the finalists from last time have been sent home in various combinations of sorrow and shame. As one observer noted, “The really weird thing is how attractive I find most of the cultural products of these countries otherwise. Lots of people hate France on principle, [but] the puzzle is how two countries this great produce football teams that are so reprehensible…”

Mind, now that the initial euphoria over Italy’s departure has passed, in the cold light of day we must acknowledge that Holland-Slovakia is not quite as thrilling a prospect as Holland-Italy would have been. But at the end of the day, it’s hard to be sorry.

And, hey, England-Germany.

Consider this an open thread.

China: internal revaluation from below

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Geoff Dyer of the FT says that Chinese workers are demanding more money, and that’s nothing but a good thing – there’s even some demographics in there, if you like that sort of thing.

Instead, the salary hikes in Guangdong this week symbolise a broader shift in favour of labour that has accelerated in recent months and is likely to carry on for a number of years. They reflect powerful demographic shifts resulting from the three-decade old one child policy, with the numbers of new potential workers entering the economy dropping quickly. Economists say China has passed or is close to hitting the “Lewis turning point”, when the pool of surplus agricultural labour tapers off, sparking big rises in industrial wages….

Booming consumption will, in turn, lead to smaller external surplus, as China imports more goods from the rest of the world and helps encourage a rebalancing of the global economy. As long as potential spikes in inflation can be controlled without too much cost, China has a lot to gain from higher wages.

China Labour Bulletin has much, much about a new wave of labour activism in China; they report on a strike at a Honda supplier and a “healthy and dynamic system of labour relations”. The people involved are now following up on their success by giving the convenor of their official, and yellow, trade union the boot.

China Media Project reports on the concept of “stability preservation through exerting pressure”, which seems if I catch their meaning to imply that the Chinese authorities at the top level are willing to tolerate the strike wave as a means of imposing a policy aim of moving to broad-based growth on lower-level governments, Party agencies, and businesses that are doing rather well under current arrangements. The mountains may be high, and the Emperor far away, but that also means the troops may be a long time in coming to save you from the next Mass-Group Incident. Do you feel lucky, punk?

And then, of course, at the Davos/Martin Wolf level of these things, the grand speak to the grand. Ahead of the G20 meeting, the People’s Bank has first suggested that it might be resuming the policy of letting the RMB rise gradually, and then walked it back. Of course, a lot of this might be the typical central bankers’ Noh theatre of allusion. But then again, Renmin tielu wei renmin – the People’s Railway is the People’s.

The same may not be true of the People’s Bank. But I’m sure I’ve seen a translated document at AFOE contributor Jamie Kenny’s place which had senior Chinese officials recommending that social conflicts should be resolved by “giving the People the People’s Currency Unit”, i.e the renminbi, or in other words, by leaning on management to give in on their demands in so far as they involve pay rather than politics.

Internal revaluation in Exportland is a viable option. Especially, it’s an improvement over more bubbles.

Scenes from an internal devaluation

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I’ve recently been in Budapest. The city was stinking hot and full of abandoned construction projects, and the Danube was over its banks, flooding the tramway tunnels beneath the approaches of the Chain Bridge, closing the roads on the riverside.

Walking the plank

There were a remarkable number of people sleeping in the streets, although at 35 degrees’ heat, you might have thought they were doing it by choice. Until the incredible assortment of biting insects sailing down the river got to you; I’m still scratching. There weren’t many more than in London or Leeds 15 years ago; in the integrated core of the Euro-Atlantic community, we arrange these things more efficiently. Thatcher never attained a one-year decline of 8% of GDP, which implies that the UK achieved a much greater return of misery per unit of economic recession.

Meta-photo

On Erzsebet tel., there’s an abandoned tube station, brand new, empty. The huge stairwell into the ticket hall has been unofficially taken over and used as a nightclub; it’s invisible from street level. I suppose it’s the Big Society, but this doesn’t work as well for cardiac surgery as it does for hipsterism.

Sudden stop

All over there are monuments to the era of EU enlargement and forex loans; huge, crystalline investment ruins in the city centre, shockingly cheap mall developments in the airport suburbs. I stay in the Kempinski, a postmodernist battleship of Zizek’s Happy 90s decorated to please a German privatisation consultant. It’s the architecture of plunk!, not relieved by the cod-jugendstil detailing on the roofline God knows how far above the street, and it has a giant circular glass atrium that renders everything under it intolerably hot.

It’s just possible to make out the outlines of the hopeful era of revolution and accession; you can just about see it, if you screw your eyes up. Back then, the privatisations and shutdowns were justified with the better times to come. And now? The dead malls are often next door to the equivalent buildings of the Communist attempt at a consumer society. There are a lot of people visibly working the streets.

Our boys on the x front

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Uh oh. David Cameron’s moving into the phase of his leadership career where he says stuff out loud. For instance, he now has an official view on what our attitude to the military should be:

But supporting our Armed Forces isn’t just a government responsibility – it’s a social responsibility,” he said.

In the First World War those at home didn’t just sing ‘keep the home fires burning’, they practised it. In the Second World War, the military occupied a huge place in the national consciousness, partly because everyone knew someone in uniform.

I believe as a country at war we should see the same appreciation today, with the military front and centre of our national life once again.

Of course, we now have (a) an all-volunteer military and (b) a much smaller military, in terms of numbers in uniform. It’s odd that Cameron doesn’t seem to recognise these facts: they can’t but make for a large difference in the relationship between the military and the population in general. What’s harder to explain though, is why he felt the need to say something like this in the first place. I don’t detect any antipathy to the military itself, or towards its members: on the contrary, your typical Brit turns up at Navy Day, or any time there’s an RAF air show, and we are talking of attendances of up to 100,000. That looks like enthusiasm. So is it just that ‘public should support the military more’ is a current MOD talking point and he got briefed to say it? Or does it reflect Tory nervousness about the set of foreign policies inherited from New Labour?