Sunday, December 10, 2017

The End Of The "Islamic State."

There are two aspects of this debate, one about the term, "Islamic State," and the other about the its application. So, until about a month ago the entity calling itself " al-Dawla al Islamiyya fi al-Iraq wa al Sham(s)," was claiming to be the most important Muslim political entity in the world, the center of its "Caliphate" which claimed to be the only legitimate and supreme ruler and polltical state for the entire Islamic/Muslim world. As of this moment it remains unclear what the status of the self-proclaimed al-Khalifa, Abu-Bakr al Baghdadi. Rumors have had him dead while others say he remains alive and in charge of the remnants of his group.

Regarding its real world actual existence, well, I am posting this because about a month ago this group lost control of the last good sized town that it controlled, Abu Kamal, reported by the seriously ignorant western media as "Bukamel," about 40,000 in population, a town on the Euphrates River just over the border from Iraq on the Syrian side.  Apparently it now controls no town or city of any size, although supposedly it continues to operate in rural desert areas along the Syria/Iraq border. But as an entity that rules any sort of meaningful government as a "state," well, it has ceased to exist  as that as of the takeover of Abu Kamal by Syrian state forces backed by both Russia and  Iran as well as the US to a lesser degree, and has returned to its earlier roots as a guerrilla rebel movement, not a status as a "state," according to any serious definition of that term.

The second part of this involves mainstream western media.  Somehow somebody in control of these things decided and enforced that what al-Dawla al Islamiyya fi al-Iraq wa al Sham(s) would be known as "officially" in western mainstream media (to be specific the "papers of record," the New York Times and the Washington Post), would be the seriously misleading and ideologically/theocratically inaccurate term, "the Islamic State."

The term "Islamic State" in the eyes of many observers implies that indeed the entity follows the views of a variety of observers or dissidents oppressed,    It is the defining form of a state devoted to Islam; that its claim to represent a universal ruling caliphate of greater Islamic legitimacy in the entire world is correct.  No one knows which media maven decided that this was the term that should be used over all others, including ones used by the western population among themeelves. When even government officials spoke referring this group as the far more popularly used "ISIS," stories in the Washington Post and other such outlets relentlessly corrected such people by adding after their preferred term, "another term used to describe the Islamic State." These official guardians of official truth knew better than the masses, although some who defend their continuing usage even in the face of the collapse of any real rule over a state may have insisted on using this IS formulation over ISIS (or ISIL) because it is shorter and easier to read and understand.

Of course, "ISIS" has long been the most widely popularly used named for this outfit in at least the US, and it is not a bad translation of the Arabic acronym for "al-Dawla al Islamiyya fi al-Iraq wa al Sham(s)"   as "the Islamic State of Iraq and Syria." Calling it just "the Islamic State(IS)" cuts off everything in that name after "Islamiyya" and grants them implicitly their claim to be the one and only true Islamic state in the world, the real caliphate rejevanated since the end of the Ottoman Empire, whose long ruling Sultan claimed the title of Caliph, or "al Khalifa," the true successor of the Prophet Muhammed as the political-religious ruler and leader of the world Umma, the global Islamic community, implicitly even a family given that "Umm" is the word for "mother" in Arabic.

So even now with the end of any remote pretense that this group actually rules anything that can be called a "state" since the fall of Abu Kamal they continue with this incredibly misleading formulation that no identifiable party decided they should use when some official calls them "ISIS," that they are the "Islamic  State," with "ISIS another name used to describe the Islamic State."  I have seen this ridiculous and inaccurate formulation so many times I have lost my capacity to vomit.

Of course we have the minor but more accurate term, "ISIL" based on how to translate "al Sham(s)," which can mean "Syria" or "Greater Syria" or "the Levant," which is essentially Greater Syria, although with fuzzy borders but including certainly Lebanon as well as portions of Turkey, Jordan, and even Israel, "the Levant" being a western term from the French referring to the rising of the sun in the East, or "Near East" at the eastern end of the Mediterranean, an old term used by the English and French dating back a few centuries.  The Obama administration decided to use this "ISIL" as advised from some tiresome academics, although far better informed than the idiot journalists who for no good reason became propagandists for this nauseating entity by insisting that it was and remains "the Islamic State" or "IS."

Needless to say in most of the Arab world and among such well informed parties as Juan Cole, the preferred way to refer to this horrible entity was to Anglicize its Arabic acronym as Da'esh, or just "Daesh."  This how virtually all Arab spokespersons outside of the entity itself referred to it, wininng from the moronic western media the corrective when they did so, "Daesh, another name for the Islamic State," with this indeed having political significance as the Arabic acronym came to be rejected by the entity itself to the point that they killed anybody using it in territories under their control, despite its complete accuracy from the official name.  But these barbaric monsters wanted to be known as the official ruling global  Islamic caliphate, and the western media abetted this absurd and nonsensical and despicable claim on their part against the all-but universal claim among Arabs of the more accurate label, "Daesh."

Official western media may persist in this nonsense now that as even an unrecognized "state" that rules over any unwilling populace of any concentrated population in a city or even good sized town has ceased to exist.  But it is high time they ceased propagandizing for these horrendous criminals and joined Arabs and well informed western observers by calling them "Daesh," or at a minimum stopped correcting those who continue to use the more popularly know term "ISIS" or its slightly more esoteric variation "ISIL" with this now utter nonsense.  There is no longer an organized government ruling any real territory that deserves being called a "state," much less "the Islamic State."  That entity, despite its own demands to be called that, has ceased to exist in any meaningful form and has returned to being a purely guerrilla movement, even as many other groups inspired by it continue to kill people in places such as Nigeria and Yemen in its name.

The "Islamic State" is khalas, over, done, dead, and I do not wish that it Rest in Peace.

Barkley Rosser


Saturday, December 9, 2017

Max Zilch: A New Game for Three People

So for something not economics or politics, my oldest daughter and oldest grandson and I have invented a new game for three people, which we call Max Zilch.  it is a variation on the game known as Zilch or Oh Hell.  in those games, usually played with four people, you start out dealing out one card to each person, then two for the second round and on up.  At each round except the last (which is no trump) next card is turned up and determines trump suit (play is like Bridge).  At each round people bid the number of tricks they think they will take.  If they make their bid, they get 10 points plus the square of the number of tricks they bid.  If they miss either up or down, the lose the square of by how much they missed in points.  Dealer cannot bid amount that would make total tricks taken equal total tricks bid, so dealing moves around.  That is standard Zilch (a zero bid) or with some variation, Oh Hell.

Our variation is to play with three people and simply deal out all  the cards every hand.  There is then always a trump suit with the last card.  It removes the probability calculation over whether cards are out or not, making it more like Bridge.  It is quite challenging with 17 tricks.  We have really enjoyed playing it.  Good for holiday season and family gatherings.

Barkley Rosser

Monday, December 4, 2017

A First Step for Organizing Counterpower from Below

I’ve been posting a lot of critical stuff on gaps and faulty assumptions in the rhetoric and strategy (such as it is) of the US Left.  A reasonable person might say, OK, enough already.  We know what we’re doing isn’t working, but what would?  What’s the alternative?

Good question—I’m glad you asked.  Actually, for about 40+ years I’ve had the same idea, which I’ll now try out on you. 

First, consider the basic conundrum of organizing the Left.  On the one hand, what’s needed is structure on every scale from your neighborhood or workplace to the whole country.  We need to bring the millions of people who share our outlook, in some general sense, into a common organization.  Conservatives will always have more money to draw on; those on the other side have to rely on numbers—and not hypothetical or once-in-a-blue-moon election numbers, but everyday, signed up and available for mobilization numbers.  In other words, the organizational basis for ongoing collective action.

But here’s the thing: the Left has had only flashes of success at this game because it has a powerful tendency to factionalize.  Every time it looks like an organization is getting over the hump it breaks apart.  Why this is so is an interesting question, but I won’t go into it here.  In some ways the dissentious character of the Left is a good thing, since social change is complicated and we need many points of view.  Still, it gets in the way of solving the organizational dilemma, and I will assume this will remain the case.

So how to build a measure of organizational unity on a fractious base?  Scale down the scope of this hypothetical organization in order to scale up across differences in beliefs and strategy.  Imagine an organization with many of the characteristics organizations are supposed to have, like membership rosters, officers, budgets, facilities, and activities, but prohibit it from taking sides in any electoral, legislative or judicial dispute, or promulgate manifestos as an organization.  Make it so there is no political program to fight over, nothing to make members want to quit or drive out those who disagree.  Then allow it to succeed at a more limited role.

And what would this role be?  Above all, it would make visible, countable even, the existence of a massive Left constituency in America.  People would feel differently—they would have more self-confidence and be willing to take bolder action—if they knew they were not alone but part of a movement with millions of supporters.  They could begin to think in “we” terms, where “we” is a fairly well-defined group with game-changing potential.  In addition, such an organization could create opportunities for networking, incubating smaller groups centered on particular issues or ideologies or self-identities, free to be as political as they want, and facilitate media with a wider reach than what we currently have.  It could schedule debates and film series, organize festivals and commemorations, and foster other activities to keep people informed and connected to one another.  It would not do everything—we would still need explicit political organizations to take stands, lobby, organize protests and win elections—but it would be a giant step forward.

The issue of membership is crucial, because it essentially defines what it means to be on the Left.  Here I think the key move is to emphasize values and not means.  What makes someone part of the big family of the Left is not adherence to a particular system of ownership of the means of production or support for any single strategy for social change, but acceptance of democracy, freedom and equality as the primary criteria for valuing any of these.  Wording would be tricky, but I can imagine a short list of core values that the organization would stand for and that joining it would endorse.  It would probably be necessary to make the values binding in the sense that a clear pattern of violating them would be grounds for being denied membership.  White supremacists or other bigots, for instance, should not be permitted to infiltrate, nor others whose underlying philosophy indicates their purpose is disruption or domination rather than collaboration with broadly like-minded activists.

Dues should be kept as low as possible, perhaps on a sliding scale to remove economic status as a condition of membership.  But some payment is needed so that members are making at least a nominal commitment, with self-financing a crucial buffer against external influence.

There should be chapters of this organization at every scale, from a few city blocks to states and the whole country.  Officers would need to be elected to manage funds, coordinate activities, communicate to the media and guarantee the principles of the organization are being followed.  Of course, there should be transparent procedures for recalling officers who prove to be deficient—but again it is crucial that the organization be prohibited from taking sides in any political dispute so that battles over leadership are not about control over political orientation.

A useful alternative to manifestos and official statements of political position would be frequent polling of the membership.  If a reasonable hurdle, such as support from a minimum percent of the organization, could be met, polls would be conducted to convey the range and weight of views.  In this way majorities would not presume to speak for the whole, and minorities would not be silenced, but the existence of both would be acknowledged.

I don’t have all the details figured out.  Above all, I don’t see an obvious solution to the problem of media.  One of the main functions of such an organization should be to stimulate the growth of left-oriented publications and similar outlets.  These would need to be curated, since there is already a superabundance of material directed at those on the Left (and every other political stripe), and there is no point to simply piling on.  At the same time, to select the “best” or “most important” content is to apply judgment over which factions will tend to factionalize.  I don’t see an obvious solution.

The general principle is that what we need to do, what we always need to do, is take the next step.  The step must be large enough to be worth taking, but not much more than that, since if we succeed we’ll be in a better place to take another step, and then another.

Has Dean Baker Joined Team Republican?

The dishonesty ab out the Trump tax cut for the rich from certain Republican leading conservatives are been extensively noted so let’s not go there. But why is Dean Baker writing this?
There are two ways in which we can say that a deficit/debt is will hurt our children. The first is by slowing economic growth and therefore making the economy and our kids less wealthy in the future than they otherwise would be. The route through which this is supposed to happen is that deficit pushes up interest rates and crowds out investment, thereby slowing productivity growth. (We can also see a rise in the value of the dollar, which means larger trade deficits and more foreign debt.) There are no projections that show any substantial negative effect in this way. In fact, most projections show at least a modest positive boost to growth. So this one doesn't make any sense.
There are no projections that the Trump tax cuts for the rich will lower national savings? If not, there should be. We tried this back in 1981 and what was the result? A massive increase in real interest rates and a massive appreciation of the dollar. The former did crowd out investment and the latter did lead to large trade deficits. I’m sure Dean remembers this. I would assert that the proposed tax cut today is a lot like the 1981 tax cut. If Dean disagrees – might he tell us why.

The Great Awokening


There’s a theory about the sins and shortcomings of society: they are all due to our failures of consciousness.  If people were purer, given to understanding and following the true path, the problems of this world would cease to exist.  According to this view, poverty and inequality are the result of greed, wars occur because people fail to see the humanity in the “enemy”, and bigotry feeds on fear and ignorance.  The solution is to cleanse our consciousness and achieve enlightenment.  This is the way of religion, which has endeavored to perfect the world for thousands of years, with mixed results.

I’d like to think a more promising approach is to identify the structures in society—the laws, customs, institutions, and rules—that are responsible for these problems and change them.  This is the way of politics, preferably informed by deliberation and experience.  From a political perspective, trying to change people’s consciousness has some value as an end, but it is mainly important as a means, part of building a movement for collective action.

What I sense is that, for many on what considers itself the left, politics in the sense of the previous paragraph is a delusion, a repeating nightmare that one can only awake from, not transform.  Instead, passionate energy is funneled into demanding changes in language, personal behavior and conceptions of one’s identity.  Done right, that’s worth doing—better consciousness and behavior is better for all of us—but not as a substitute for politics.  And if you take politics seriously, battles over culture and consciousness should be strategic, taking into consideration how they can best contribute to collective action.

As I’ve tried to imply in my subtler moments, the biggest, hugest, screamingest problem we face is a grotesque imbalance of power, and amid all the chatter over policy, investigations and reports, and cultural struggles, hardly any work is going into the organizing we need to build a counterpower to that of the Right.  My fearless prediction is that, unless power is rebalanced, no accumulation of evidence, clever policy idea or righteous act of cultural subversion is going to make a damned bit of difference.

(Night thoughts on reading “The Koch Network and Republican Party Extremism” by Theda Skocpol and Alexander Hertel-Fernandez.  Image credit: Venngage.)

Saturday, December 2, 2017

Is Bitcoin A Speculative Bubble?

There are at least two definitions of a speculative bubble.  The first, and most widely accepted, is that it involves a price of an asset that rises substantially above its fundamental and then falls back towards that fundamental.  The other, not necessarily all that clearly distinguishable from the former, involves an asset price that rises due to people buying due to an expectation that they will get a capital gain from its expected future price rise, with this then happening due to a self-fulfilling prophecy, with eventually the price falling sharply, with this not necessarily involving a fall towards a fundamental because the asset may have no fundamental at all.

I note before proceeding futher that there is an enormous debate and literature on identifying fundamentals at all, even when they might theoretically exist.  There is a serious body of opinion dating from Flood and Garber a quarter of a century ago that one cannot identify them econometrically ("Tulipmania").  This has been shown to be false by me and many others in various papers, including particularly on closed-end funds where the net asset value of the fund minus taxes and fees is a fundamental, and when those soar to twice the value of the underlying net asset value, well, we are looking at a bubble. The lit is there and decisive.  I asked Garber to comment on a paper presented a long time ago at a conference on this point, but the chicken shit did not show up to admit that he was just plain wrong.  He had no legitimate excuse for his absence.

Of course Bob Shiller has made pretty reliable estimates regarding housing prices based on price to rent and price to income ratios.  His studies of these by 2005 were pretty decisive to anybody who was remotely paying attention (including at the Fed, Janet Yellen, the only one there to take this seriously at the time), that the US housing market was in a serious bubble that was going to crash big time.  The matter of forecasting how bad it would get with the Great Recession became a matter of who had figured out how deeply the financing for all that had gotten involved in world financial markets at a fundamental level, and very few did figure that out.

But then there are assets that have no fundamental at all, even theoretically, quite aside from all the horrendous econometric identification problems pointed out by such serious people as Jim Hamilton, for whom I have the deepest respect. The question for cryptocurrencies in general is whether they have a fundamental, and it may well be that they do not. If that is the case, then only the second definition of a speculative bubble may be relevant, and that is much harder to determine than the former, already admittedly a difficult matter.

How might bitcoin have a fundamental?  One reason might be for its use as a medium of exchange.  However, while it is certainly being used as that, for regular commodity transactions as of now it remains as a sometimes difficult alternative to cash dollars.  As near as I know there are no regular commodity transactions in the real economy that require it.  So, it may have no fundamental, and from what I have heard, this is widely accepted among the more sophisticated bitcoin traders.  This would make it like art, such as the recent sale for $450 million of the possibly faked "Salvator Mundi" supposedly by Leonardo da Vinci.  And, of course, there is good old gold that has a long had a value as a store of wealth about an order of magnitude above its likely strictly commercial fundamental value.

However, it may be that bitcoin has a fundamental value above zero, if wildly fluctuating and hard to estimate, far beyond the econometric difficulties identified by people such as Hamilton, much less Flood and Garber.  It is that to buy most of the other cryptocurrencies one must use bitcoins to do so.  Oh, this is really a gas.  The fundamental for one asset is based on its ability to purchase even more lacking in fundamentals and totally speculative assets one must own it.  Wow.

Thus we have that any real fundamental for bitcoin is a derived demand for any among the vast universe of other cryptocurrencies, and we should keep in mind that bitcoin itself is horrendously inefficient compared to others because of its accelererating and already very large "mining" costs.  As near as I can tell there are only two other cryptocurrencies that have any relation to the real world out of the multitude of crytpos. They are ethereum and ripple.  The first has been a matter of much speculation itself, given its potential for writing contracts, giving it a serious possibility of much longer use and actual usefulness in the real world.  This may yet occur, although for its future it would probably be better for it if it could be bought directly with cash/dollars from the real world rather than having to use the horribly socially inefficient bitcoin, a bad example of first mover advantage, or perhaps the ultimate proof that the first mover should be sent to last.

Which gets us to the quiet and most obscure member of the crypto world, ripple.  This cryptocurrency, which is the hardest to buy of them all, is probably the one with the most serious actual real world use, and thus possibly providing a real foundation for bitcoin to have a fundamental, although I confess at this point that I am not certain to what degree purchasing it does rely on using bitcoins.  I know that as of fairly recently one had to use bitcoins to buy ethereum, but I am not sure about ripple, which moves with bitcoin, but probably more weakly than any other of all the cryptocurrencies.

The source of its value is that has been adopted by a significant number of banks for their interbank transactions.  This now appears to be firmly established, not to go away whatever happens to bitcoin or any of the other cryptocurrencies.  Indeed, the underlying idea of blockchains is clearly a brilliant and useful forward movement in managing financial and economic transactions, assuming that is managed in a reasonable and efficient manner, without me remotely dealing with issues of transparency or legality.  But it seems that at least some banks have decided to use ripple, which I understand uses a more efficient mining technology.

So, there may well be a fundamental for bitcoin, despite what I understand to be the current consensus among smartass bitcoin traders.  But, of course, that fundie is probably way below the current price, as if that matters at all.

Barkley Rosser

Addendum, 12/2:  This has been picked up by Naked Capitalism where some commentators have pointed out that apparently one no longer needs bitcoin to buy other cryptocurrencies, especially ripple and etherium.  If anything it is etherium that is being used to buy other cryptos.  In any case, that reduces the case for bitcoin having a fundamental greater than zero.

Friday, December 1, 2017

Flynn Bails, but Don’t Get Your Hopes Up

I haven’t seen anything yet to convince me that the Putin-Trump collaboration was a big deal.  Ugly and unprincipled, sure, but politically consequential, probably not.

A contrary view, expressed by Harry Litman in today’s New York Times, is that this is the beginning of the end for the Trumpster.  The evidence is accumulating that, between his election in November of last year and his inauguration on January 20 of this one, Trump and his inner coterie worked back channels to undermine Obama’s foreign policy.  Litman characterizes these efforts as “abuses of power arguably well beyond those in the Watergate and Iran-contra affairs.”  He further sees the possibility that Trump will be cited for obstruction of justice in his attempts to keep these activities secret.

I’m not convinced.  On the face of it, Trump intervening in foreign policy after his election is less condemnable than Nixon’s secret disruption of a Vietnam peace deal during the 1968 campaign.  The Nixon escapade was an open secret almost from the beginning, and he got away with it.  Iran-Contra was nasty stuff, but Reagan made it through intact, as did his Nicaragua policy, and even the underlings caught red-handed survived and prospered.

But let’s not compare Trump to Nixon and Reagan; that just shows how old some of us are.  Let’s speculate on the political fallout from a potential prosecutor’s report that Trump cut deals with Putin before taking office.  Litman says this is something “that nobody on either side of the aisle could possibly defend.”  Why not?  What happens if the Republicans in the House and Senate say, hey, it’s just a bureaucratic detail, since he was already elected?  And why wouldn’t they say this?  How would that be any more outrageous than anything else they’ve said or done in recent memory?  Who would stop them?

The “who would stop them” thing is what it’s all about.  Modern movement conservatism is about winning, period.  To worry about honesty, consistency or any other check on your political options is to be a loser.  This is why we hear made-up stories about the effect of taxes and voter fraud laws, when the ones promulgating them know they’re false and know you and I know they’re false.  They don’t care, except about winning, which they’ve become good at.  Give me a scenario in which the Republican congressional establishment shrugs off a report against Trump, and some other force pushes Trump out anyway.  Oh right, there will be editorials in the New York Times screaming bloody murder; that should do it.

Trump is not invulnerable, and scandal may drag him down, but it won’t be over points of law that matter only to people who believe in the rule of law.  The 2018 election could change that, but only if it breaks a lot bluer than currently expected.  A damning report against Trump could influence the vote, but only if it appears in the last week or two of the campaign, before tribal cohesion reestablishes itself.

The underlying problem with the Times piece and similar obsessions with the l’Affaire Russe is that they are based on the belief that what we need is some additional bit of evidence—of foreign meddling, the effect of tax cuts on inequality and revenues, the impact of climate change on storms or our coastline, something the Right “can’t ignore”—to turn things around, but it won’t.  What our side needs is not more evidence but more power.  This is not to defend unscrupulousness—we do want to be on the side of the evidence—but simply to recognize the true deficit we face.

Sunday, November 26, 2017

Tolerance And Terrorism In Saudi Arabia

On the one hand this past week, Thomas Friedman at the New York Times has written a praising column about Crown Prince Muhammed bin Salman (MbS).  He is going to bring a new "wave of tolerance" into Saudi Arabia, along with more generally modernizing it.  This claim is not totally without  substance given his setting up for women to drive starting next June as well as letting them go to sports events with men and also curbing some of the excesses of the Mutaween, the religious police.  It is not clear what further liberalizations are in order, but Friedman assures they are coming.  A newly tolerant Saudi Arabia is on our doorstep, whoopee!

OTOH, it has since been announced that MbS is overseeing a rewriting of the criminal code of the Kingdom of Saudi Arabia (KSA).  A major part of this rewriting is to help the government combat terrorism, with the death penalty available for helping to aid in this.  Just as we all oppose corruption, which MbS fought by arresting 201 people, many of whom also seem to have been potential political rivals or critics, we all oppose terrorism.  But just as with corruption, terrorism can be stretched to mean many things.  And indeed, it turns out that one of the items appearing in the new criminal code is that criticizing the king is an act of terrorism, punishable by death. This is how one has tolerance while fighting terrorism at the same time in the new Saudi Arabia, whoopee!

Barkley Rosser

Friday, November 24, 2017

A Race To Suppress Academic Freedom?

The race is between the two nations competing for global dominance, the US and China.  This post is triggered by an unnamed editorial in today's Washington Post (probably authored by Fred Hiatt) criticizing China for imposing ideological limits on Chinese universities.  Since the recent party congress, 40 universities have set up centers for studyiing Xi Jinping Thought.  14 universities have come under attack for being "ideologically weak."  Joint operations between US and Chinese universities must appoint a party secretary as a vice chancellor.  There have also been restrictions on the internet and other matters.  Without doubt, putting restrictions on higher education will make it harder for China to move into a position of full global leadership.

Of course, the WaPo editorial did not notice trends in US academia that also may lead to suppression of research activity and threaten the current leading position of US higher ed in the world, although there have been reports and columns commenting on these trends.  Among them are the push for political correctness coming from students, but probably more important is the assault on higher ed coming from the Trump administration.  This is seen in the attack on tax breaks for students but also the push to distort funding for research on certain topics. While not directly on higher ed, probably the most damaging has been the attack on science in government agencies, especially the EPA, with such nonsense as banning scientists who have received funding from the agencies on their scientific advisory boards, even as those receiving funding from corporations at odds with goals of these agencies are allowed to be on those boards.

Really, it looks that the two most powerful nations on the planet are having a race to suppress academic freedom and suppress the free development of knowledge in this world at a time when we need more of that.

Barkley Rosser

Wednesday, November 22, 2017

Proposing A Judicial Coup Via A Tax Bill

On today's Washington Post editorial page in a column entitled "Packing the courts like a turducken" (a deboned duck within a deboned chicken within a deboned turkey, or something like that, all for Thanksgiving, thank you), Ronald A. Klain not only reports on the actual push to pack courts with lots of young, incompetent extremists that is going on after Congress sat on judicial nominees by Obama in recent years, but also a proposal coming from a co-founder of the Federalist Society, Steven Calabresi.  He both wants to expand the judiciary by 50% and have them all appointed in the next year, but to  replace the 158 administrative law judges with lifetime appointments by the president.  The latter are currently only appointed for one term and are civil service personnel passing on issues dealing with such agencies as the EPA and the SEC. 

Most particularly, he suggests that this be packed into the current tax bill, a true turducken. The only good thing about this is that it does not look like anybody in Congress is pushing it.  But if they did, this would put the US even more in the same category as nations like Turkey, Russia, and Hungary where executive authorities move vigorously to take direct control over formerly independent judiciaries.  It is bad enough the degree to which this sort of thing is actually happening as it is.

Tuesday, November 21, 2017

Two Powerful Women Losing Power

That would be respective Angela Merkel and Janet Yellen, both reported to have lost a lot of power in today's Washington Post.  During at least the last year, if not the last four, they have been probably the two most powerful women on the planet.

In the case of Merkel, what has happened is that she has failed to form a coalition government after last month's election, which put her and her party in the lead, but not enough so to allow her to push through to a coalition government, with the hard right Alternative for Democracy (AfD) getting seats.in the Bundestag.  She had been trying to form a "Jamaica" coalition with the Greens and the Free Democrats, but the latter withdrew from the negotiations for reasons the WaPo story did not clarify (quality of reporting at WaPo has been declining steadily for some time).  Apparently she then made a last gasp effort to negotiate another "grand coalition" with the Social Democrats, but having lost a lot of support due to having been in such an arrangement prior to the last election, they refused.

It looks like she will call for another round of elections in January, and the AfD is crowing with delight for an apparent triumph on their part.  I guess we shall see.  In the meantime, aside from her personal embarrassment, EU-Brexit negotiations are now reportedly in a stall pattern as nobody wants to sign on to anything without a definitely in-place government in Germany to approve or disapprove of it.   Merkel may yet regain her power if the January elections go more firmly her way, although she may well be forced to step aside as Kanzler der Bundes Deutsches Republik and more completely and thoroughly lose power. Many fear the results of the latter, although if it were to be due to a government led by the SocDems, many hear might cheer.

As for Janet Yellen, obviously she had already taken a hit with Donald Trump violating precedent by failing to reappoint her as Chair of the Board of Governors of the US Federal Reserve System, even though he had praised her job performance, but claimed that he needed to "make his mark."  I fear we have had all too much of that already.  In any case, while she could have remained as a governor until 2024, today's WaPo reports that she has sent a letter of resignation to Trump and will remove herself from the board when she steps down as Chair in February, thereby giving him yet another seat to fill on the board.

It is no secret that I am and long have been a great fan of Janet Yellen's, having been the very first person to call for her appointment as Chair all the way back in 2009.  I regret this decision, but understand that probably her husband, George Akerlof, is pleased and looking forward to moving back to the Berkeley hills.  I wish them both the best, even as I regret her departure.

While there may be a touch of sexism in Trump's decision, I do not think that has much to do with Merkel's current difficulties.  Nevertheless, I think it is unfortunate that these two very capable women who have wielded great power recently will not be doing so at least in the near future.

Barkley Rosser

Friday, November 17, 2017

ARAMCO CEO Is Delusional

Financial Times reported yesterday that Amin Nasser, the CEO of the Arabian American Oil Company (ARAMCO, currently 100% owned by the Saudi government, although originally founded by four former US oil company majors), has declared that investors should feel pleased that Crown Prince Muhammed bin Salman has arrested and purged over 200 Saudi princes, government officials, and private businessmen.  This is because this was strictly an anti-corruption move, and foreign investors can be assured that there will now be no corruption in the Kingdom. Really, he said this.

Now I declared in my post title that Nasser is delusional, but I doubt it.  I suspect that he is a very smart guy. The question is whether he can convince any potential buyers of the upcoming possibly $2 trillion Initial Public Offering of 5% of ARAMCO stock that indeed this purge sends a good signal to them about buying ARAMCO stock.  Wow, the nation will now be rid of corruption, and, no, future investor, you need have no fear of being arbitrarily arrested or having your assets seized by MbS, none whatsoever, not that you were worrying about those things previously, but now you really do not need to worry about them at all.

Of course on the very same page of the FT there was another article about how MbS's purge has rattled world oil markets, with oil prices now sharply falling after sharply rising after he made his purge.  Nobody knows what the implications are or what the heck is going on, but, hey, no problem, no need to worry, Inshallah bukra maalesh (God willing tomorrow no problem, a fave line in KSA).  In any case, Nasser's public statement will undoubtedly completely reassure everybody, and all will become extremely calm before we know it.

Oh, there is also the matter of where this IPO will happen, touted to be the largest in history.  New York and London stock exchanges have actually been competing with each other to host it, but in fact in the end this may not be such a good idea and they may not be in the running for real anyway.  According to the FT the Saudis are also considering Hong Kong and Tokyo, but at the end of the article it was floated what I have all along expected and predicted: that the IPO will be handled out of Riyadh's own exchange with specially targeted sales to specially targeted individuals, with a lot of them being local big money Saudis.  So maybe Nasser's speech was not for all the foolish foreigners, but for the well-off locals: buy when we tell you to or else you can join the officially designated-to-be-corrupt 200 plus..

Barkley Rosser

Monday, November 13, 2017

Stranded Assets Rewind

There’s a Dangerous Bubble in the Fossil-Fuel Economy, and the Trump Administration Is Making It Worse...
"In reversing many of Obama’s keystone climate and environmental policies, Pruitt and Trump are conveniently ignoring these market signals in order to help out the fossil-fuel millionaires and billionaires who put them in office. Their actions could have disastrous consequences, not only for the climate but also for the global economy."
Where are the economists on this? Oh, right -- talking about tax cuts and Fed rate hikes. Using Economist's View as my sample, I found no links whose title indicated it was about the stranded assets carbon bubble in the two weeks following publication of the above article by Carolyn Kormann in the New Yorker on October 19th. Zero. 

I actually think that Kormann is unduly optimistic in her analysis. My suspicion is that there was already a massive carbon bubble prior to the 2016 election that was being wound down excruciatingly slowly. The election of the coal-guzzling orange groper stopped that winding-down in its tracks and ushered in a fossil-fueled feeding frenzy at The Last Chance Texaco.

And where are the economists?

Sunday, November 12, 2017

Saudi Crown Prince Attempts To Destabilize Lebanon

Of course that is not what Muhammed bin Salman (MbS) or his mouthpieces claim, but it is pretty much what every commentator I have seen outside of Saudi Arabia thinks is the likely outcome of his most recent actions, taken on the heels of his purge/arrests of over 200 people, with apparently more possibly about to be swept up in a supposed anti-corruption drive, although as Anne Applebaum put it, "In some countries a person is charges with corruption and then arrested, while in others they are arrested and then charged with corruption, with Saudi Arabia being among these latter."  An unfortunate aspect of the current situation is that there are many loose ends and uncertainties, with many people in Lebanon making accusations that are being denied by Saudi authorities, but with no credible denials of the charges coming from those most affected and involved.

What KSA has done is invite the premier of Lebannon, Saad al-Hariri to visit KSA and then have him announce Riyadh his resignation from that position.  While he seems to have said little of any substance in his resignation speech and has said basically nothing since then nor made any public appearances that I am aware of, Saudi authorities said that the reason for this resignation was that he was in danger of being assassinated by Hezbollah or other enemies, which had happened to his father Raif in 2005, making this suggestion/accusation have some credibility.  Raif had also been premier, a position guaranteed to a Sunni as part of the Syrian government and Hezbollah, the latter a longstanding relationship.

As it is, nobody in Lebanon has accepted al-Hariri's resignation, including the members of his own party, the Forward Movement, although they have so far defended the Saudis against criticism of their actions.  All the major political figures have demanded that he return to Lebanon so that he can resign there if he so wishes, including both his rivals such as Aoun and Nasrallah, the Hezbollah leader, as well as the members of his party.  Those in the rival parties, although all in the coalition together, have charged the Saudis with putting al-Hariri under house  arrest and forcibly preventing him from returning to Lebanon.  What he actually can do or wants to do is unknown.

It is reported today in WaPo that the Saudis have forced al-Hariri to step down for not confronting Hezbollah and trying to reduce Iranian influence in Lebanon and its ruling coalition.  Reportedly they are trying to convince his older brother, Bahaa, to take over as premier, but Bahaa is refusing so far.  They also have urged other brothers (I do not know how many there are) who are hanging out in KSA (where their father made over a billion dollars) to return to Lebanon to support this effort and to pick a fight with Hezbollah.  So far apparently none of them have responded favorably to these entreaties.

I shall only briefly note that MbS has been making a variety of seriously dumb moves.  I guess we shall have to wait and see if his purge/arrests of over 200 high level Saudis will work out internally beyond simply temporarily cementing his power and wealth.  However, his two foreign ventures prior to this matter have turned into complete botches, with one a full-blown disaster.  That would be Yemen, where a massive cholera outbreak is happening, along with famine, both of these aggravated by the recent blockade put in place against the Houthis. MbS started a war against them two years ago, with all the noise being that they would make short work of the Houthis, but it has not come to pass, only a massive humanitarian disaster. Of course, President Obama supported this war by KSA against Yemen, if not as enthusiastically as President Trump reportedly has.

The other botch, not nearly as humanly destructive, has been the Qatar farce, with MbS leading UAE, Bahrain, and Egypt into their boycott and embargo and numerous demands against Qatar for being supposedly too friendly with Iran (who is also supposedly behind the naughty Houthis in Yemen).  Needless to say, Qatar has not only completely succeeded in not falling or giving in to KSA, and indeed has become much friendlier and more openly so with Iran.  So, MbS seems to have a terrible track record regarding foreign affairs, and this move towards Lebanon seems to be his stupidest move yet, more obviously a hopeless botch upfront even more than these other two, which many thought would succeed when he first got them going.  This Lebanon venture is hopeless, although it could bring war in Lebanon with death and destruction, just as has happened in Yemen.

Trump has supported the war in Yemen, the purge/arrests of top Saudis, and also the move on Qatar, although his top foreign policy people have tried to undo the latter.  However, so far he has had nothing to say about this Lebanon move, while SecState Tillerson has come out against it.  Maybe on this one, even he is aware that MbS is messing up big time.  We shall see.

Barkley Rosser

Addendum, 11/13: An article in Washington Post this morning reports that Saad al-Hariri gave an hour long interview yesterday in Riyadh on his own TV station.  He said he is free to move about, resigned "without being coerced," and will return to Lebanon "soon."  He said his resignation will provide a "positive shock" and demands that for him to withdraw his resignation, Hezbollah must "commit to remaining neutral in regional conflicts."  Reportedly Hezbollah has provided training for Houthi forces in Yemen, which may be of special concern for the Saudis.   Reactions from Lebanon seem to be all over the place, although nobody in al-Hariri's party seems to be fully supporting his story, while also not specifically denying it.

A curious note is the following in the article, which I shall simply quote without comment:

"At times his eyes appeared to dart away from the interviewer, Paula Yacoubian, to a man behind a window of the studio."


Friday, November 10, 2017

Freedom of Speech for Fascists?

I just finished reading the Chronicle of Higher Ed’s profile of Mark Bray, author of Antifa: The Anti-Fascist Handbook.  I don’t know how accurate it is as a portrayal of Bray and his ideas, but it seems like a sober, fair-minded overview of the debate over anti-fascist tactics and freedom of speech.

What the article doesn’t say, however, is that there are two very different bases for opposing public appearances by white supremacist and similar groups.  One is dangerously wrong, the other, which Bray presents, makes much more sense.

First the wrong approach, that groups should not be permitted to express themselves in public if they cause emotional distress to me or other people I care about.  You hear this one a lot: speech that I find demeaning is a form of violence, and there can’t be freedom for it.  There’s no difference between saying something horrible to me and punching me in the face.  No freedom for one, no freedom for the other.

This argument has its roots in a mindset that has become popular in much of the left, that the ultimate political goal is equal well-being for all, that well-being is essentially having a positive emotional state (or not being in a state of stress/despair/fear/etc.), and that actions should therefore be judged by the emotional response they engender, especially among marginalized groups.  It’s a deeply subjectivist conception of life and politics, one that puts feelings above “objective” conditions like economic status, access to social or institutional networks, risk of physical harm, or other measurable outcomes.  In fact, the primacy of subjective feelings is often asserted by denying the very possibility of “objective” anything.  (Objectivity is said to be a tool of knowledge/power to silence the oppressed.)

From a logical point of view, the identification of personal well-being with a series of transitory positive emotional states is indefensible.  First, there’s more to life than that.  Second, and crucially, one’s subjective emotions at one moment are weak predictors of future happiness; those much-derided objective conditions do a better job on that front.  As a teacher, I sometimes engender frustration in students, temporarily lowering their emotional hedonometer.  If I’m doing my job well, this is more than compensated by increased learning, which will be of more benefit down the road than an extra hour of emotional ease.  Feelings matter, a lot, but not at the expense of everything else.  And speech that causes negative feelings can’t be evaluated just on that basis; you have to think about the other consequences, direct and indirect, of listening to it, allowing it but not listening, or not allowing it at all.

Politically, the ideology that subjective feelings are everything is catastrophic.  It’s a claim with a long history on the repressive right: if students don’t recite the pledge of allegiance each morning at school my feelings are insulted, or if they burn a flag, or if professors denounce America, or if athletes take a knee.  It’s the same argument, just a different group’s feelings being hurt.  The only counterargument of the left is that some people’s feelings (people of color, gender nonconforming, etc.) count more than others’ feelings, but really, do you want to hang your politics on this?

At the deepest level, the struggle for social change butts up against the force of cognitive dissonance.  People have made commitments to the existing order.  They have dedicated their lives to getting a job and moving up, if they can.  They or their parents or children have served in the military, exposing themselves to horrific risks of violence (and not just speech) with often horrific results.  They have supported politicians hoping to get a better break on some government policy.  Then a social change activist comes along and says, these commitments were wrong, or fruitless or not good enough.  You should make different commitments, to a different economic or political system.  Whatever else activists may say, they are asking the people they are talking with to absorb the psychic costs of seeing their past actions in a harsher light—to cope with cognitive dissonance.  In the extreme case, imagine trying to convince the parent of someone who has died in a war of aggression that this death was in vain.  It’s not easy.

Serious activism can’t elevate subjective feelings to an all-important position.  You’d have to hang it up before you even get started.  Activism always confronts denial, a defense mechanism of the emotions.  It’s based on a view of the world that there really are objective conditions that need to be changed, whether that makes you psychically comfortable or not.

But the second argument, the one that Bray seems to embrace, comes from a different place, the paradox of tolerance.  If we want a free society, at some point we may have to restrict the freedom of those who want to get rid of it.  Fascists, religious fanatics and other extreme authoritarians are what we have to worry about.  Complete, unlimited freedom for these groups to organize and express themselves exposes the rest of us to a serious risk, one that has resulted in tyranny in countries that were once freer.  This is Bray’s point, and he has in mind the rise of fascism in Europe during the 1920s and 30s.  Of course, since it’s a paradox we’re talking about here, it’s important to keep both ends of it in mind: intolerance for the intolerant is also a form of intolerance.  This should lead us to keep the “good” intolerance close to its necessary minimum.

And what is that?  It’s complicated.  And people can disagree.  Which specific speakers should not be given a public forum at universities?  Which rallies should not be permitted?  The answer is not none, and it’s not “everyone who pisses me off”.  It depends on how we assess the risk to our future freedom if these events take place.  The paradox of intolerance gives us a framework for talking about it rationally.

It also gives us a basis for discussing the role of direct action—what aware citizens ought to do when their institutional authorities fail to act.  But that discussion is fundamentally political: what’s right is what has the best chance of protecting and extending our freedom in light of its consequences.  That’s the context for thinking about direct action tactics.

Thursday, November 9, 2017

President Trump Must Release His Tax Returns

I know, boring boring boring old news.  But now that he has had his hind end kicked by the recent off-off election results, it is time to get real.  He has managed to cover up massive amounts of crimes and violations of ethical norms because he has violated so many.  Nobody could keep track of them. But now that he has his behind kicked, and Mueller is zeroing in on him, it is time for him to deal with his most important violations and 'fess up.

So, in my view the biggest violation of them all has been his refusal to release his tax returns.  Of all the humongously numerous violations of ethical norms and actual laws, this refusal on his part increasingly becomes clear to be the most important.  Of all the mistakes the American people made in electing this worst president ever elected, this is the worst mistake of all, electing a person who refused to release their tax returns.

There are two clear reasons why he must release his tax returns, and I call on all media to begin demanding relentlessly and repeatedly, every day, even though the media views this as a dead and boring issue, that President Trump release his tax returns. The way I see it, every day that passes that he does not release his tax returns is another day piling up that he should not only be removed oa as  president, but that  he should be put in jail for a very long time.

So the first reason is just obvious and immediate.  The Republicans in Congress have proposed a major change in the US tax system.  It is not obvious that any such change is needed, given that the economy is doing pretty well, but, anyway, we have the biggest proposal for a tax change since 1986.  I am not going to get into the details of this proposal or how it is far less worthy than the one in 1986s, which it is, but there is this screaming out loud problem that this proposal appears to  have at least five if not more provisions that personally benefit him and his family, possibly to the tune of one than a billion dollars. 

However, the American people do not know and cannot know the exact size of this massive benefit he will personally receive until he releases his personal tax returns, which he promised to do and has not done so.  This tax proposal should not be passed until he releases his tax returns and lets the American people know just exactly how much he and his family will benefit from this tax proposal, misleadingly labeled a "reform."

The second reason is one he will resist more, but it is just sitting out there and stinking.  It is the matter of just how much money he owes Russians.  This may be why he will resist really hard releasing his tax returns, and why he had done so so fervently previously.  After all, when one of his returns did get out (from 2005, I think), he jumped on bragging about how he had taken advantage f all loopholes he could to pay as little as he could.  He said it showed what a good businessman he was, and lots of people bought this, and it distracted from this more unpleasant issue of his multiple financial relations with various Russians.

It may well be that this latter issue is why he refuses to release his tax returns.  But I thin kthat the former matter is why the American people must  now demand that he release them.  He and his family stand to gain from this proposal in the billions of  dollars.  Maybe the people and the  Congress will decide that this is just fine.  But we should know how our utterly corrupt and incompetent president and his family will gain from this current proposal before it is passed.

The American people must demand that President Donald J. Trump release publicly all of his tax returns as have all presidents for the last 40 years, including even Richard Nixon when he was under impeachment proceedings.  There is no longer any excuse for him not to do so, and this demand is so supreme it must override all the ongoing minor controversies and infelicities that are constantly being put forward by this worst by a longshot of all American presidents.

Release your tax returns, Donald Trump, or resign as president!

Barkley Rosser  

Tuesday, November 7, 2017

An Important Centennial

Today marks the centennial of the Great October Socialist Revolution, known when I was young in the US as the Russian Revolution, and also perhaps more accurately described as the Bolshevik Coup. On March 8, 1917, people rose up from the streets behind women marching on International Womens' Day, leading troops to refuse to fire on them, a real revolution, which led to the overthrow of Tsar Nichoalas II and the putting in place of a democratic government eventually led by Alexander Kerensky.  He failed to end the war with Germany, and riding on a peace and "land to the peasants" platform, Lenin led the Bolshevik coup on November 7 that overthrew Kerensky's regime. Peace was made with Germany, and peasants did take land from aristocrats, even if more than a decade later they would have to give it up during the Stalin agricultural collectivization.  Arguably this taking of land by peasants did constitute a revolution, and certainly a different regime was put in place, the first officially inspired by the socialist ideas of Karl Marx.  Many would say that it would fail to follow ideals laid forth in Marx's writings, especially the horrors under Stalin, although others would argue that the bad things that followed were inherent or implied in his writings, if not explicitly there.

In any case, given the many Marxist-Leninist revolutions that followed, with the world's largest nation currently ruled by a party that adheres doctrinally to this view, which has recently been reinforced officially by a party congress, the second Russian Revolution in November is of world historical significance, for better or worse.  It is curious that in Russia itself it is currently viewed with mixed feelings.  There is a special this week on TV on Lenin, which is apparently showing his life with warts and all.  There is also one on Trotsky as well, amazingly enough, although he played a far more important role in the revolution than did his great rival for power, Stalin.

Views of these figures now in Russia are not what one might have expected.  Indeed, both Lenin and Trotsky are viewed as mixed figures, partly good, partly bad.  The figure who is undergoing full-blown rehabilitation with the support of Vladimir Putin is in fact Stalin, now viewed favorably by 50% of the population. Bookstores are full of books praising him to the skies.  Of course it is not his role as a great communist or socialist leader that is emphasized.  It is his role as the leader of the nation in the victorious Great Patriotic War against Germany ruled by Adolf Hitler.

Which brings us to how this centennial was celebrated earlier today in Moscow, which ceremonies I have now watched on RT.  Putin was not there, nor Premier Medvedev.  There was no mention of Lenin or Trotsky or Stalin. Rather there was a military parade that focused on the city of Moscow itself, with the highlight and emphasis being on recreating the November 7, 1941 parade in Red Square that presaged by just under a month the counterattack against the German troops then just a few miles outside of Moscow, a successful counterattack that coincided with Pearl Harbor and indeed was able to happen because of the non-aggression pact between the USSR and Japan, which allowed the Soviets to bring troops from Siberia, who were represented by soldiers in white uniforms, along with others dressed in historical costume.  The main part honoring this counterattack was preceded by older history, with people in period costumes depicting the Alexander Nevsky resistance against the invading Teutonic knights, people resisting the Polish conquest of Moscow in 1613, also ones resisting Napoleon in 1812, and, with the only reference to the centennial itself, some depicting partisans defending Moscow during the civil war that followed November 7, 1917, and then those depicting the World War II troops in great detail.

The whole thing was overseen by the mayor of Moscow, who spoke, with some WW II vets sitting next to him and receiving flowers.  It closed with current military cadets marching, followed by some WW II  tanks and armored vehicles that parked themselves in the square at the end.

There lingers the question of what would have happened if there had been no Great October Socialist Revolution.  Presumably this would have involved either Kerensky or perhaps Kadet leader Kornilov making peace with Germany soon enough to forestall Lenin being transported by the Germans to what was then Petrograd.  It is impossible to know what would have followed, although Kerensky's own political ideology looks to have been a variant of social democracy.  But it is questionable whether he could have pulled off making Russia a Sweden, with some sort of military dictatorship of some sort probably more likely in the longer run, although probably not a restoration of the tsar.  From those who praise Stalin and really like this celebration that just happened, the question arises if this alternative history would have involved Hitler coming to power and starting World War II, and would this alternative Russia have been able to defeat him.  There might not have been as large of a steel industry to build those tanks for Stalingrad and Kursk, but there also would have probably been more people around, including leaders of the military who would not have been purged as they were by Stalin in the 1930s  In any case, we shall never know.

Barkley Rosser

Saturday, November 4, 2017

Saudi Crown Prince Consolidates Power With Anti-Corruption Arrests

Everybody is against corruption, so it has become the new cool way to concentrate power in dictatorial societies to engage in an anti-corruption drive, as Putin and Xi Jinping have done.  Actually corrupt people may well be arrested, but somehow included in the set of those arrested are rivals of the leader who are conveniently disposed of.

So we now see it in Saudi Arabia, where Crown Prince Muhammed bin Salman has been leading a special anti-corruption committee approved of by the Saudi ulama, and now it has arrested 11 princes accused of corruption.   As in other countries, many of them, possibly all of them are guilty, but included among them are some rivals of Muhammed's for power, and, indeed the full set of names has not been released.

The most important in terms of being a rival is the now former commander of the SANG, the Saudi Arabian National Guard, which was long commanded by Prince Meti bin Abdullah, son of the long time former King Abdullah.  Before Meti commanded SANG, Abdullah did so for decades and had the HQ of SANG on his own palace grounds within a wall.  SANG has long been the rival military in Saudi Arabia to the regular military under the Defense Department, which has been under the control of the crown prince since his father became king, succeeding Abdullah.  SANG has a base among the tribes, and it was SANG that finally defeated the Muslim Brotherhood (Ikhwan) uprising in 1979 that had led them to seizing control of the Grand Mosque in Mecca.  Abdullah was SANG commander at that time, and he had the reputation of having excellent relations with tribal leaders.  His sone was clearly a threat and rival to the crown prince, and now he is out.  The commander of the Saudi navy has also been replaced, although not clear if he has been arrested.

Among the others who are out is the Minister of the Economy, and among the arrested is one of Saudi Arabia's wealthiest men, Prince al-Waleed bin Talal.  His father was long the leader of the secularizing and liberalizing faction among the sons of Saudi Arabia's founder, Abdulaziz. 

The crown prince has also  been making speeches about how he wants to encourage a moderate form of Saudi Islam.  I wish him luck on that, and his move to allow women to drive starting next June does provide some credibility on this front, although probably with major limits.  As it is, Saudi Arabia is apparently funding the building of many madrassas in Southeast Asia, including Bangladesh and Indonesia, where the local forms of Islam are far more moderate than even a moderate form of Saudi Wahhabism would be.

In any case, under the guise of cleaning up corruption, which he may be doing at least partly, it looke like Crown Prince Muhammed bin Salman is cementing his power, following in the footsteps of such role models as Vladimir Putin and Xi Jinping.

Barkley Rosser

Wednesday, November 1, 2017

The Virginia Governor's Race

I rarely talk directly about specific political races, but I live in Virginia where in less than a week there will be the most closely watched election in the nation for governor.  It is very close, and the Republican, Ed Gillespie, might well win, even though his Dem opponent, Ralph Northam, leads by narrow margins in most polls.  Sound familiar?  Sure, but why am I going on about this?

It is because even the pro-Dem national media seems to have bought into inaccurate characterizations of Northam's positions.  Most specifically, Chris Matthews on Hardball just had a guest on and they both were repeating the false claim that Northam supports taking down all Confederate monuments in the state, although accurately noting that this is a tough issue in the Commonwealth that Gillespie has been using to effect against Northam.  If Gillespie wins, this issue will be part of it.

The problem is that Northam's position is not that they should all be taken down, although he has expressed dislike of the Confederate monuments.  His position is that this is a matter of local control over locally controlled statues, which is the case.  He has said he would take down those "at the state level," but there are very few Confederate monuments put up at the state level.  As a matter of fact, current state law is against local control, asserting that local municipalities do not have the right to move such monuments.  This is a live and hot issue in Charlottesville, where the city council voted to move the statues of Robert E. Lee and Stonewall Jackson off public parks.  However, they city has been blocked from doing so thanks to court rulings based on current state law.  This effort to move the statues is what led to the demonstrations and rioting and death in Charlottesville in August.

Of course the latest is that a Latino activist group has been forced to withdraw an ad against Gillsepie since the terror attack in New York yesterday.  That ad showed minority children running from a pickup truck with a Confederate flag flying and a pro-Gillespie sign on it.  Sure,  nasty,  but then we did see somebody killed by a Nazi running a car over somebody. Yeah, the ad was pushing the edge, but the hard fact is that the GOP has been running nasty and false ads against Northam relentlessly, which I am sick of seeing, which may be why I am boring everybody with this whiney post.

So, the Gillespie ads have been charging Northam with supporting the MS-13 gang, with horrendous photos of prisoners in El Salvador covered with ugly tattoos, with charges that Northam supports sanctuary cities, of which there are a big fat zero in Virginia.  There have also been scads of ads from the NRA against Northam, although some of these look sort of silly, at least to somebody like me who does not like the NRA.  So they have one where they show Northam saying, "I have a D- rating from the NRA," with them then shattering that with "That is a lie! He has an F!" but he was speaking to people against the NRA and he has spoken strongly against the NRA, but clearly the NRA is trying to get its people out to vote.

Another worry I have is a supposed "boredom" reported by WaPo about the race, which is why I worry that this darned New York terror attack and all these statues and NRA ads will get the Trump supporters out while the Northam people sit at home going "ho hum" like we have seen in so many off-presidential years.  I admit that I shall be totally disgusted if the Gillespie wins with these ads, which are repeated three times in a row.  They even have Northam aiding child pornography.

Barkley Rosser

Tuesday, October 31, 2017

Barzani Out, Puigdemont In Belgium

It seems that the two recent independence referenda have largely collapsed.  One was in Iraqi Kurdistan, with President Massound Barzani having it done with the eye that it would give him leverage in negotiations with the Iraqi central government.  That did not work, with the referendum triggering the central government to move to seize control of the oil producing areas the Kurds had controlled and quite a bit of other territory they had controlled, especially Kirkuk.  Barzani had not stepped down two years ago when he was supposed to.  Two days ago he announced he will step down from his position.  Looks like this is basically over.

Then we have Puigdemont, the prime minister of Catalunya/Catalonia.  He also put in place a probably badly timed and unwise independence referendum.  This was followed up on the weekend by the Catalan parliament voting for independence, even though many polls suggest a majority do not support independence (although a solid majority voted for the independence referendum, with a a low turnout).  Now the central government has cancelled the Catalan government and imposed direct central rule.  Puigdemont has fled to the Flemish part of Belgium where he has been given asylum.  So, it looks like this independence referendum has also ended up as a disaster.

I note that in my earlier posts I expressed more sympathy with the Kurdish declaration, even as it looked like very bad timing for it.  I had and have much less sympathy with the Catalan one given the level of autonomy they have over so many areas, with the main effect being a selfish economic result that would have them no longer sending money to poorer parts of Spain. The amount of self-righteousness on their part in regard to this I find pretty indefensible. The Kurds have suffered far more at the hands of those who rule them than have the Catalans, even accounting for the old Franco period when indeed the Catalans did suffer vicious repression, although I do not support violence on the part of the Spanish central government to impose their direct control.

Barkley Rosser

Saturday, October 28, 2017

Everything Is Going Great, So Let's Change It

Well, the actual headline on the front page of the Washington Post below the fold today reads, "Economy shows strong growth, could provide GOP momentum."  The strong growth is the 3.0% annual growth rate of GDP in the third quarter (supported by a strong stock market), with the momentum not being the obvious point that this might lead to general popular electoral support in the future for the GOP, but more specifically that this somehow might aid the GOP in Congress to change the current apparently successful fiscal and monetary policies inherited from Barack Obama.  Everything is going great, so let's change it.

On fiscal policy, of course, this refers to the still not clearly formulated tax change ("reform" in the words of the GOP).  As we know cutting taxes for the rich is the one thing that seems to unite the party, so gosh darn it, they will probably do it, even if it takes a lot of effort.  As expected all those loud fiscal hawks from the Obama period are now fine with adding at least $1.5 trillion to the national debt, which will probably end up being more as some of the revenue increasing parts of the possible plan look like they may not pass.  After all, while Trump says the middle class will gain, indeed everybody, is going to get the hugest tax cut ever and it will pay for itself somehow.  But estimates have 80% of the cuts going to the top 1 or 2%, given the emphasis on cutting corporate taxes.  Anyway, here we have a pretty good growth performance that supposedly justifies a move to change the tax policy and system that has existed while this good performance happened.  Frankly, I do not know what the effect on growth will be as a result of whatever they pass, as they will pass something, although I doubt it will be all that big one way or the other on aggregate growth.

The more amusing part of this is the argument apparently been given by Treasury Secretary Mnuchin and others in the last few days that is decidedly ironic.  It is that the stock market increase we have seen has at least partly been fueled by the expectation of a nice big corporate tax cut that will boost profits, along with all the deregulation that has been going on .  So, the argument goes, if the tax plan (or some tax plan, heck, anything) is not passed, well folks, that nice stock market increase might be threatened.  No tax plan passed, well, maybe a sharp decline of the stock market!  I find this hilarious, although it might be true.  The stock market has begun to look a bit elevated, near the boundary of getting into bubble territory by some measures, so, you had better watch out!

The other matter has to do with monetary policy.  Everybody, including even Lou Dobbs, is telling Trump to reappoint Yellen, oh, with the exception of some House Republicans who want John Taylor and apparently Mnuchin who favors current Fed governor, Jerome Powell, a Republican appointed by Obama, who reportedly would more or less follow the Yellen policy, although be more open to ending the regulations on banks that Obama put in, which Yellen has publicly supported.  On Lou Dobbs' show, Trump said he had spoken with Yellen, and he kind of likes her, but also that he "wants to make a mark," which he indicated hurts the chances of Yellen, and WaPo yesterday said it is now down to just Powell versus Taylor.  I mean, hey, she was appointed by Obama, and simply nothing that Obama did must be allowed to stand, even when you have all sorts of Wall Street Republicans saying she should stay, and even populist looney Lou Dobbs as well.  Gotta go so Trump can make his mark and complete the changing of everything Obama, even though it is all just going so great.

BTW, this is just the opposite of what is going on in China.  There, everything is going great, so we are going to change not a bit of it, except for some of the leaders.

Barkley Rosser

Friday, October 27, 2017

A Serious Misreading of Coase

Corey Robin is very insightful about a lot of things.  I think his take on conservatism, that the thread running through it is opposition to attempts to demolish pre-existing hierarchies, explains ideological twists and turns that would otherwise remain mysterious.  Don’t take this post as an expression of anti-Robinism.

But CR seriously misreads economic texts that abut political theory.  I felt this way about his analysis of Hayek, which simply ignores the centrality of his lifelong revulsion at Vienna-school-style positivism, with its echoes in a certain style of economic formalism.  (Yeah, Hayek bought into a lot of the elitism of the right, but so did nearly every other conservative; that’s not what made him consequential.)  And now he gives us a terrible interpretation of Coase.

According to CR, “Coase divides the economic world into two modes of action: deal-making, which happens between firms, and giving orders, which happens within firms.”  He then goes on to paint Trump as an über-Coasian, at least in his own self-presentation, since these are the only types of action he recognizes.  I won’t dispute the portrait of Trump, but Coase?  Not a chance.

Coase is proposing a theory of the make-or-buy decision which faces every firm.  (This is the case even for firms in a socialist economy, assuming they can transact in some way with other enterprises.)  What goods does a firm produce internally, and what do they acquire from the outside?  Do you hire your own accountant, or do you buy the services of some accounting firm?  Does Toyota make its own seat cushions for its cars, or does it get them from a supplier (or group of suppliers)?

Coase assumes that going out onto the market is always best, in the sense that someone out there can do it better and cheaper than you can (or at least no worse and more expensive)—this is the market creed, with competition and all that—so there must be some other consideration at work.  He says the missing ingredient is transaction costs: sometimes the cost of negotiating and enforcing a contract, which is what “buy” implies for inter-firm business, is so great as to negate the intrinsic benefits of using the market.  The reason firms exist and have the boundaries they have (the result of a myriad make-or-buy choices), according to Coase, is the variegated presence of transaction costs.

(Oliver Williamson goes one step further and identifies the most crucial such cost as that of ensuring that one’s counterparty doesn’t lie, cheat, steal or hold you hostage to exploit your reliance.  CR might take note that the Williamson interpretation of the authoritarianism of the firm is essentially the same as Marx’s, except that Williamson thinks the boss is the repository of virtue.)

What makes CR’s reading of Coase so strange is that, in a Coasian world, “deals”, understood as singular, complex transactions that absorb immense effort in negotiation and enforcement, should be rare.  Only a failure of competition, due for instance to barriers thrown up by a regime of intellectual property rights, would put firms in a situation in which they had to submit to deal-making rather than internal production.  Businesses, if they followed Coase’s formula, would shun deals to the maximum possible extent.

The core problem with CR is that he doesn’t see that, for Coase, a “deal” is a very different creature from a routine market transaction, and this difference is what the whole theory is about.

Incidentally, there are many problems with Coase’s formulation.  Here are the two I believe to be the most important: (1) Coase assumes a unitary entrepreneur who owns the firm, profits from its success, and is the fountainhead for the entire order-issuing apparatus.  This is the case for many small and medium-sized enterprises but fundamentally false for most of the corporate world.  To some extent, the transaction cost theory can be tweaked to adapt to the corporate economy, but in the process it loses much of its explanatory power.  (2) Coase focuses on what I regard as a secondary aspect of the existence (why do firms exist?) and boundary (make or buy) problems.  Transaction cost factors are real but pale in importance beside the role played by the presence or absence of interaction effects between activities.  Firms exist in the first place because they bundle activities that would have little value (and would therefore not be undertaken) separately.  Or, if you prefer formalism, they exist to internalize nonconvexities.  This is equally an explanation for make-or-buy choices.

Coase’s analysis was compelling for economists because it reconciled nonmarket organization (the internal coordination of firms) with the assumption of the efficiency properties of a competitive market.  The much stronger argument based on nonconvexities is a harder sell because it also calls into question the premise of market efficiency.

Wednesday, October 25, 2017

Marxism-Leninism In China Update

The once-every five years Chinese Communist Party conference is now over.  It appears that Xi Jinping has not identified an heir to himself as his two predecessors did at the time of this equivalent meeting during their presidencies.  Furthermore, unlike either of them, Xi has joined Mao and Deng Xiaoping in having his work identified in the Chinese constitution as being an official part of Chinese ideology.  Most observers consider this a sign that even if Xi gives up one or maybe even two of his official positions, he is likely to continue to be the Paramount Leader in practice beyond the next five years.  A key part of his thought is the superior role of the Communist Party and its foundation on Marxist principles, even if a mixed economy is to be followed, "socialism with Chinese characteristics."  So, the assertion of Marxism-Leninism in China by Xi apparently means a justification for him to remain in power in China for the indefinite future.

The obvious way that Xi could pull off staying in power without changing the constitution would be to hang on to being Party Secretary as well as Chair of the Central Military Commission.  The job that has a two term limit is President, with him just starting his second five year term as that.  In five years he could easily select somebody who  is willing to obey him to replace him as President while he hangs on to the other two positions, which have no term limits to them.  The one rule he will have to break, although apparently it is not in the constitution and merely a recently accepted policy, is the upper age limit of 68.  That is apparently for all positions.  In five years he will be 69, so that would have to go as a rule, at least for him.

Barkley Rosser

Monday, October 23, 2017

Corporate Profit Tax Cuts and Wages: the UK Experience

Kimberly Clausing and Edward Kleinbard have each written some interesting papers on transfer pricing. Here they team up on a different topic:
The President’s Council of Economic Advisers claims that slashing the corporate tax rate to 20 percent would boost the average American’s wages by $4,000 per year (“very conservatively”) — and perhaps by as much as $9,000. If true, that would be a remarkable gain for working Americans. Unfortunately, it’s extraordinarily unlikely to be true. The two of us can think of dozens of objections to the CEA claim, presented in an official report, but perhaps the place to start is with the United Kingdom, which has already run this experiment. Over the past decade, the United Kingdom has slashed its corporate tax rate, in several steps, from 30 percent down to 19 percent. At the same time, the United States has kept its corporate tax rate constant at 35 percent. Like the United States, Britain has a large open economy, investors in British firms come from all over the world, and Britain provides a sound legal and regulatory environment.
They next document the decline in real median wages in the UK since the UK began its experiment with lower corporate tax rates. They then note:
Of course, the UK example is just one case, but this comparison is a great deal more relevant to the CEA’s claims than the slapdash comparison it presents near the start of its report. The report compares US wage growth over three years to wage growth in 10 unnamed “low-tax” developed economies. But the United States is simply not comparable to small-economy tax havens like Ireland and Switzerland. What’s more, the CEA comparison focuses on average wage growth, while our chart uses median wages.
Their critiques of what the CEA under Kevin Hassett continue. But let’s stick to the idea of using the experiences of other nations who have also reduced corporate profits taxes. KPMG provides corporate profits by nation over the 2003 to 2017 period. Other nations have followed the UK lead. For example, Japan’s rate has been lowered from 42% to less than 31%. One has to ask why didn’t the CEA do comparisons based on nations like Japan and the UK. Update: This CEA report touts Figure 1:
the covariation between the trajectory of inflation-adjusted wages and statutory corporate tax rates (Federal and sub-Federal) between the most-taxed and least-taxed developed countries (OECD) over recent years, visible in Figure 1, is indicative of these papers’ findings. Between 2012 and 2016, the 10 lowest corporate tax countries of the OECD had corporate tax rates 13.9 percentage points lower than the 10 highest corporate tax countries, about the same scale as the reduction currently under consideration in the U.S. The average wage growth in the low tax countries has been dramatically higher
Figure 1 shows the average real wage growth from 2013 to 2016. A lot of these nations have had low corporate tax rates for years so why only show the latest four years? And the term “dramactically” strikes me as hyperbole. One also has to ask what role does transfer pricing abuse play into the measured series? I get what Kimberly Clausing and Edward Kleinbard meant by:
Of course, the UK example is just one case, but this comparison is a great deal more relevant to the CEA’s claims than the slapdash comparison it presents near the start of its report. The report compares US wage growth over three years to wage growth in 10 unnamed “low-tax” developed economies. But the United States is simply not comparable to small-economy tax havens like Ireland and Switzerland.

Thursday, October 19, 2017

Remembering Black Monday

The largest single one day decline in percentage terms of the Dow-Jones average (22.6%) happened 30 years ago today, on October 19, 1987.  It was a Monday, hence "Black Monday."  Although unlike after the second largest such one day decline in percentage terms (12.8%) on October 28, 1929, the US economy did not go into a decline, much less anything remotely resembling the Great Depression.  Indeed, the very next day, after starting to decline further in the morning, the market turned around and starting rising, led by the futures and options markets in Chicago.  Although the market would decline far more between August, 2007 and March, 2009 at the front end of the Great Recession, there was no single day during all that when the market fell nearly as much as on either of these two days listed above.

Robert Shiller has written an interesting column in the New York Times about Black Monday (linked to by Mark Thoma on Economists View).  He did a survey after it happened of participants and found that they were driven basically by pure panic.  The Brady Commission report said that it was about the trade deficit and a possible tax change, and also program trading via portfiolio insurance.  Yes, Shiller says that latter was some of it, but in fact he determined that fear of it was probably more important than the actual program trading.  There was very little going on with fundamentals, but vague rumors and reports set off a huge crash, the biggest one day one ever, even if in the end it did not really amount to much.  But Shiller says it can happen again (and, if he were alive, the late Hyman P. Minsky would probably agree).

Let me add a few observations of my own, based on things I was working on back then and have since, if with less attention than Shiller.  In particular I was worrying about how one could model such financial market crashes by considering financial markets as complex nonlinear dynamical systems.  The big candidates for helping to understand such phenomena coming out of that field were catastrophe theory and chaos theory.  As it happened, October 1987 was around the time that chaos theory was at its height as the intellectual fad du jour.  Indeed, it sort of looked like maybe chaos theory might be useful.  It is famous for the "butterfly effect," where supposedly a butterfly flapping its wings in a rain forest in Brazil can cause a hurricane in Texas. So, this apparent lack of anything really major happening in the economy or the markets prior to Black Monday brought forth a lot of commentary along the lines of "Wow, this looks like the butterfly effect and chaos theory!"

Well, the heyday of chaos theory has passed.  For better or worse, the econometrics of identifying whether or not a time series is actually chaotic or not is pretty hairy.  There are no significance tests.  Lots of time series, including plenty of financial ones, that exhibit the basic characteristics of having a butterfly effect (sensitive dependence on initial conditions, a positive Lyapunov exponent, to be more technically precise).  But estimated models based on these do not do well forecasting, not much better than random walks.  Actually, the nature of such butterfly effects is that if they exist, one should not expect to be able to make good forecasts. In any case, even though many such time series look like they might chaotic, we have all lost interest.  But, as it is, quite aside from all that, I do not think chaos theory is(was) really the best explainer of what happened on Black Monday.

Rather, of the family of complex dynamics, I think the relevant one was and is catastrophe theory, which was very much out of fashion at that time.  Let me note that as a sub-part of bifurcation theory, catastrophe theory is back in various parts of economics and ecology and other related disciplines. Pretty much any nonlinear system that shows multiple equilibria will be subject to bifurcations and dynamic discontinuities as they move from one basin of attraction to another.  While the economy did not collapse after Black Monday, and the stock market did not continue to decline, it remained well below where it had been prior to Black Monday for quite a long time.

I note that the very first paper in economics that used catastrophe theory was the second paper ever published in the Journal of Mathematical Economics back in 1974.  Without getting into the technical details, I note that it drew on a much older setup long discussed in the financial markets literature, one where two sets of agents were identified.  One was fundamentalists whose behavior is stabilizing and tends to push the market back toward its fundamental (assuming there really is such a thing), while the other set are the chartists or trend chasers, whose pursuit of bubbles as they rise and their dumping of assets when they fall tend to destabilize the market.  The paper, "The Unstable Behavior of the Stock Exchanges," was written by E. Christopher Zeeman, a major figure in the mathematics of catastrophe theory.  His story was one of a shifting balance of dominance in the market between these two sets of agents, with stability and instability oscillating back and forth within a cusp catastrophe setup, which included the possibility of a market crash.

I note that this basic sort of setup had been modeled in the 1950s by people like William Baumol in long forgotten papers without any fancy nonlinear dynamics.  More recently complexity economists have developed models that follow this Baumol-Zeeman approach, such as the Santa Fe stock market model using agent based modeling in the 1990s, by people like Blake LeBaron and William (Buz) Brock, along with others.  Models with multiple agents who shift their strategies according to recent performance and move back and forth between stabilizing behavior and destabilizing behavior are all over the place and continue to be studied, if not necessarily getting published in the top journals. But these models look pretty good as ways of analyzing these sorts of dynamics.

Addendum:  One other outcome of Black Monday also was that it was the beginning of the end for the dominance in economic theory of the rational expectations axiom.  Yes, it is still around and strong in the whole DSGE modeling world.  But increasingly people take more behavioral assumptions seriously, and Black Monday was a body blow to ratex big time.

Barkley Rosser

Wednesday, October 18, 2017

The Dow Chemical Demonstration In Madison, October 18, 1967

A half century ago today on the University of Wisconsin campus in Madison, Wisconsin was the first seriously violent demonstration against the war in Vietnam, which resulted in 76 injuries.  It brought a resounding end to the naïve idealism of the "Summer of Love" atmosphere that had gripped Madison and other parts of the country earlier during 1967, the peak year of flower power hippie love movements.  A hail of tear gas and billy clubs brought such views to a hard end in Madison on October 18,. 1967.

The protest was not initially violent.  Students attempted to block other students from interviewing for jobs with Dow Chemical Company, which manufactured napalm.  These interviews were being held in what was then the Commerce building, today Ingraham Hall, which then housed the Business School, now in Grainger Hall.  The hallway was narrow and when police came in to break up those blocking the doorway to the interviews, scuffling broke out and some initial violence.  As pretesting students left the building, full-scale violence broke out as the police began using tear gas and billy clubbing students.  Some observers claim they were provoked to do this by students chanting insults ("pigs") and making Nazi stiff armed salutes at the police, some of whom were WW II vets. 

The reaction to this violence by the police against students (in later demos students would fight back and throw objects and so forth, but not that day; it was all one-sided) was major shock by the rest of the campus population, with a 1700 person march to the State Capitol three days later to protest the police actions. A leader of that march was Paul Soglin, now in his third round of serving as mayor of Madison, and rumored to be contemplating a run for governor of the statre. 

A recently put together account from six different witnesses/participants of varying views is here.  A much more detailed account can be found in the best-selling book by David Maraniss, They Marched into Sunlight.  David walked into the demonstration thus personally witnessing it, without having been involved in the effort to block the interviews.  His book also tracked events in Washington and Vietnam at that time, with the latter focusing on the ambush that was covered at the end of the fourth episode of the recent Ken Burns documentary on the war.  According to Maraniss, this ambush convinced LBJ that winning the war was not possible, although he would not say so publicly then.

My own involvement with the demonstration resembled that of Maraniss.  While I had held hawkish views on Vietnam several years earlier, I had become gradually less supportive and more critical as time passed, becoming fully opposed to the war about a year prior to this demonstration after I read histories of French colonial rule in Vietnam that convinced me it was a nationalist cause with the US simply having taken over the role of the French.  However, at the time of the Dow demonstration, I was not for blocking students from interviewing for jobs with Dow, so did not participate in the opening part of the demonstration (described in some detail in the link provided above).  I walked into it as I was heading for an intermediate macroeconomics class (taught by Peter Lindert, an economic historian still active and now at UC Davis) that was to be in the building across the street from the Commerce building, then called the Social Science Building, now Sewell Hall (ironically named for the liberal sociologist, William H. Sewell, who was then chancellor of the campus and called in the police to the demonstration).  The open air violence occurred largely between the two buildings and I had my first taste of tear gas (not my last), although I managed to avoid getting billy clubbed.

This would open up an inevitable divide between me and my conservative and hawkish father, who was Director of the Army Math Research Center that would get bombed on August 24, 1970 by the New Year's Gang, resulting in the death of a physics grad student.  My father's office in Sterling Hall was very near where the Dow demo took place, and all enraged and tear gassed I went to his office to complain about the police actions, only to learn that he fully supported them.  And so it went.

Barkley Rosser