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Archive for the ‘Books’ Category

Democracy Demotion

Posted by hkarner - 13. Juni 2019

Date: 12-06-2019
Source: Foreign Affairs By Larry Diamond

How the Freedom Agenda Fell Apart

For three decades beginning in the mid-1970s, the world experienced a remarkable expansion of democracy—the so-called third wave—with authoritarian regimes falling or reforming across the world. By 1993, a majority of states with populations over one million had become democracies. Levels of freedom, as measured by Freedom House, were steadily rising as well. In most years between 1991 and 2005, many more countries gained freedom than lost it.

But around 2006, the forward momentum of democracy came to a halt. In every year since 2007, many more countries have seen their freedom decrease than have seen it increase, reversing the post–Cold War trend. The rule of law has taken a severe and sustained beating, particularly in Africa and the postcommunist states; civil liberties and electoral rights have also been declining.

Adding to the problem, democracies have been expiring in big and strategically important countries. Russian President Vladimir Putin, for example, has long been using the power granted to him through elections to destroy democracy in Russia. More recently, Turkish President Recep Tayyip Erdogan has gone down a similar path. Elected executives have been the principal agents of democratic destruction in some countries; in others, the military has. The generals seized control of the government in Egypt in 2013 and in Thailand in 2014, and they continue to wield de facto power in Myanmar and Pakistan. Across Africa, the trend has been for elected autocrats, such as President Uhuru Kenyatta of Kenya and President John Magufuli of Tanzania, to manipulate elections, subvert independent institutions, and harass critics and political opponentsto ensure their continued grip on power. Den Rest des Beitrags lesen »

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‘Socialism for the rich’: the evils of bad economics

Posted by hkarner - 9. Juni 2019

Date: 08-06-2019
Source: The Guardian By Jonathan Aldred

The economic arguments adopted by Britain and the US in the 1980s led to vastly increased inequality – and gave the false impression that this outcome was not only inevitable, but good.

In most rich countries, inequality is rising, and has been rising for some time. Many people believe this is a problem, but, equally, many think there’s not much we can do about it. After all, the argument goes, globalisation and new technology have created an economy in which those with highly valued skills or talents can earn huge rewards. Inequality inevitably rises. Attempting to reduce inequality via redistributive taxation is likely to fail because the global elite can easily hide their money in tax havens. Insofar as increased taxation does hit the rich, it will deter wealth creation, so we all end up poorer.

One strange thing about these arguments, whatever their merits, is how they stand in stark contrast to the economic orthodoxy that existed from roughly 1945 until 1980, which held that rising inequality was not inevitable, and that various government policies could reduce it. What’s more, these policies appear to have been successful. Inequality fell in most countries from the 1940s to the 1970s. The inequality we see today is largely due to changes since 1980. Den Rest des Beitrags lesen »

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The trouble with economics

Posted by hkarner - 8. Juni 2019

Date: 06-06-2019
Source: The Economist

Jonathan Aldred thinks economists are too reductive. Is he right?

Licence to be Bad: How Economics Corrupted Us. By Jonathan Aldred. Allen Lane; 320 pages; £25.

In thomas gradgrind, Charles Dickens created an educator who saw his pupils as “reasoning animals”, with heads that should be filled with facts and little more. In “Licence to be Bad”, Jonathan Aldred, an academic at Cambridge University, casts economists as the modern Gradgrinds. They exercise a baleful influence on political discourse, he maintains, by taking a narrow view of humans as essentially selfish creatures, forever trying to maximise their own well-being.

As Mr Aldred points out, economists have not always thought this way. Adam Smith is a hero of free-market enthusiasts but, as well as “The Wealth of Nations”, he wrote “The Theory of Moral Sentiments”, in which he opined: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him.” In the 20th century John Maynard Keynes wrote that “economics is essentially a moral science and not a natural science. That is to say, it employs introspection and judgments of value.” Den Rest des Beitrags lesen »

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Ein Leitfaden für Finanzkrisenmanager

Posted by hkarner - 30. Mai 2019

Howard Davies, the first chairman of the United Kingdom’s Financial Services Authority (1997-2003), is Chairman of the Royal Bank of Scotland. He was Director of the London School of Economics (2003-11) and served as Deputy Governor of the Bank of England and Director-General of the Confederation of British Industry.

EDINBURGH – Journalisten, so heißt es, verfassen „eine erste grobe Version der Geschichte”. Es ist ein großer Anspruch, aber die Besten unter ihnen kommen dem nahe. Während der Großen Finanzkrise 2008 gelang es Andrew Ross Sorkin von der New York Times mit seinem Buch Die Unfehlbaren. Es ist noch immer eine zutreffende Beschreibung dessen, was an der Wall Street los war, als die Märkte zusammenbrachen. Sorkin hatte einen guten Zugang zu den beteiligten Schlüsselpersonen. 

Die zweite Version der Geschichte wird oft von den wichtigsten Beteiligten selbst geschrieben. Nach dem Zweiten Weltkrieg war Winston Churchill zuversichtlich, die Geschichte würde ihn freundlich behandeln, weil er beabsichtigte, „diese Geschichte selbst zu schreiben”. Als die Finanzkrise ausbrach, könnte derselbe Gedanke auch Hank Paulson, Ben Bernanke und Tim Geithner angetrieben haben, die US-Finanzminister, Vorsitzender der Federal Reserve Bank und Präsident der New York Fed waren. Den Rest des Beitrags lesen »

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A Vulnerable U.S. Really Does Need a Space Force

Posted by hkarner - 13. Mai 2019

Date: 12-05-2019
Source: The Wall Street Journal By Jim Sciutto

China and Russia are developing new weapons that can attack crucial American satellites, and the U.S. has been slow to respond to the danger

In May 2014, a small team at the Joint Space Operations Center at Vandenberg Air Force Base in California noticed something they had never seen before. A Russian rocket had lofted a communications satellite into space, along with what appeared to be the usual collection of space junk—ranging in size from massive spent rocket stages down to chips of paint. But a few weeks later, one piece of that “junk” came to life.

The team at the space operations center watched for the next few days as that seeming piece of space debris made 11 close approaches to one of the rocket’s discarded stages. Such an elaborate space dance would be possible only if the object had thrusters and enough fuel to maneuver very precisely. These are the basic capabilities necessary for what defense experts call a “kamikaze satellite”—that is, one capable of zeroing in on other satellites to attack them. Den Rest des Beitrags lesen »

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The Psychology of Nations

Posted by hkarner - 26. April 2019

Date: 25-04-2019
Source: The Economist

Jared Diamond explores how countries respond to crises

“Upheaval” fails in its ambitious goals—but in an illuminating way

Upheaval. By Jared Diamond.Little, Brown and Company; 512 pages; $35. Allen Lane; £25.

By its own lights, this book fails. And yet, as a meditation about a world on edge, it is also well worth reading.

Jared Diamond sets out to construct a diagnostic framework for political systems in turmoil. What enables some societies to cope with a crisis but condemns others to mayhem? Do past crises reveal patterns that could guide today’s leaders as they gaze into the contemporary abyss? Mr Diamond readily acknowledges that his book is just a first stab at answering these questions. He hopes that “Upheaval” will encourage other scholars to take up his ideas and mould them into something more rigorous. It may instead convince them that the project is doomed.

Even so, the journey towards failure, via seven countries at turning-points in their pasts, is enjoyable and informative. Mr Diamond is the doyen of a class of scientifically literate, anthropologically aware and culturally astute thinkers. He is an enlightened guide and a sympathetic observer. Though “Upheaval” cannot achieve its implausible goals, this quixotic effort illuminates what it means to learn from history.

The idea at the heart of “Upheaval” is that the insights which help people cope with personal crises, such as crushing disappointment, divorce or bereavement, can also shed light on those that afflict states. Therapists seek to get their patients to acknowledge that they are in trouble and that they are empowered to do something about it. Individuals can learn from the behaviour of others. They can identify what it is about them that needs to change—and what should remain the same. Den Rest des Beitrags lesen »

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Capitalism’s Great Reckoning

Posted by hkarner - 21. April 2019

Date: 20-04-2019
Source: Project Syndicate by James K. Galbraith

James K. Galbraith is a professor at the Lyndon B. Johnson School of Public Affairs, University of Texas at Austin. His most recent books are Inequality: What Everyone Needs to Know and Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe.

As the maladies of modern capitalism have multiplied, fundamental questions about the future of the world’s dominant economic model have become impossible to ignore. But in the absence of viable alternatives, the question is how to reform a system that is increasingly at odds with democracy.

  • Joseph E. Stiglitz, People, Power, and Profits: Progressive Capitalism for an Age of Discontent, W.W. Norton, New York; Allen Lane, London, 2019.
  • Paul Collier, The Future of Capitalism: Facing the New Anxieties, Harper, New York; Allen Lane, London, 2018.
  • Branko Milanovic, Capitalism, Alone: The Future of the System That Rules the World, Belknap Press, Cambridge, 2019 (forthcoming).

AUSTIN, TEXAS – What fate awaits capitalism, and to what extent do our current economic conditions reflect its shortcomings? With deferential references to Adam Smith, and firmly anchored in the high critical tradition of political economy, all three books under review seek to answer these questions. Their authors are all capitalists, resigned if not enthusiastic; they share a conviction that there is no viable alternative system. Thus, whatever its flaws, capitalism must be reformed.

In People, Power, and Profits, Nobel laureate economist Joseph E. Stiglitz, the great chronicler of globalization and its discontents, offers a lucid assault on the economics and policies of the Trump era. In The Future of Capitalism, Paul Collier, an Oxford University economist best known for his critiques of the prevailing approach to development aid, assumes the mantle of the moral philosopher, like Smith in The Theory of Moral Sentiments. He argues that capitalism is “morally bankrupt,” but that it can be redeemed, if only by – somehow – building a new ethical foundation.

Finally, Branko Milanovic, an intrepid economic statistician at the City University of New York Graduate Center, best known for his work on global inequality, provides a contemporary taxonomy of capitalism, dividing it broadly into the “liberal meritocratic” version found in the West and the “political authoritarian” dispensation that has emerged in China and elsewhere in Asia. (Where Japan fits in this dichotomy I could not tell.) His forthcoming book, Capitalism, Alone, considers which species will emerge as the dominant variant of the world’s only viable economic system.

WHO BROKE IT?
Stiglitz hews more closely than Collier and Milanovic to the conventions of mainstream economic thought. A formidable opponent of conservative free-market orthodoxy, he criticizes economics from within, usually by modifying its basic assumptions. Thus, he has shown that when information is asymmetric, key certainties of the mainstream worldview do not hold: competition is imperfect, or markets do not clear. Yet, because Stiglitz makes his case from within the framework it targets, those reading his book will not encounter broader critiques such as the late Hyman Minsky’s “financial instability hypothesis,” University of Minnesota lawyer/economist William K. Black’s thesis of “control fraud,” or the new biophysical economics of non-renewable resources and climate change.

People, Power, and Profits

Stiglitz does acknowledge that “one can manipulate perceptions and beliefs” – a discovery, which he attributes to “advances in behavioral economics and marketing,” that cuts the heart out of the mainstream notion of consumer sovereignty. I hope that readers won’t consider it special pleading to point out that another economist named Galbraith – my father – made this case more than 60 years ago. Meanwhile, another hot topic that goes unmentioned is Modern Monetary Theory, though Stiglitz does endorse one of its central and most extensively developed policy proposals: the job guarantee.

Stiglitz argues that high inequality is the deadly sin of today’s capitalism, and he traces rising inequality back to the tax and spending cuts of the Reagan era, now replicated under US President Donald Trump. There is truth to this, but it isn’t the whole story. Barely mentioned in his account is the complicity of Democrats: that it was President Bill Clinton who deregulated Wall Street, and President Barack Obama who later rescued the big banks, without pursuing either criminal prosecutions or adequate structural reforms.

Moreover, one can find Republicans in both eras who were more committed regulators of big finance. Under President Ronald Reagan, it was Ed Gray of the Federal Home Loan Bank Board who brought the criminal S&Ls to book, and the most rigorous regulator of the 2008-2010 period was Sheila Bair, the Bush-appointed chair of the US Federal Deposit Insurance Corporation. When Stiglitz complains about Trump “stack[ing] his cabinet with … rich financiers,” one wonders why he doesn’t also mention Robert Rubin, Clinton’s Treasury secretary, who arrived from Goldman Sachs and decamped to Citigroup.

LOST WORLDS
Collier’s The Future of Capitalism envisions a return to the “Ethical State,” by which he means the structure of mutual support and restraint that characterized social democracy in its heyday. It’s a brave if nostalgic vision at a time when social democratic parties are in steep decline and hard-edged ethno-nationalism is on the rise.

The Future of Capitalism

For Collier, there are two species of intellectual serpent in the capitalist garden: “Benthamites,” as in globalists who espouse a technocratic utilitarianism, and “Rawlsians,” who have “promoted the distinctive identity of victim groups.” He accompanies this thesis with an arresting model – a thought experiment, really – according to which rising inequality shifts the locus of identity formation and self-esteem from the community to one’s own position in the hierarchy of income, wealth, and professional status.

On the top rung of Collier’s ladder resides a super-order – the global elite – that has transcended local, regional, and even national identities. (It seems Collier would not be particularly comfortable at the World Economic Forum’s annual gathering in Davos, though he has been there.) On the lower rungs are those who still rely on community or the nation to understand their place in the world. Having found themselves increasingly marginalized and unhappy, some have embraced ethnic and cultural identities to define themselves in contradistinction to others. From there, it is just a short step to racism and xenophobia, and to the National Rally (formerly the National Front) in France, the UK Independence Party, and the Republican Party in the age of Trump.

What is to be done? Collier proposes a version of the nineteenth-century American economist Henry George’s “single tax” on land, except that his version would especially target the young professionals who cram themselves into high-dollar urban agglomerations and command higher wages by mere virtue of their location. Common to all rich countries, these hubs of globalization, epitomized by Silicon Valley, Wall Street, and the City of London, are unquestionably one of the great social distortions wrought by financialized info-tech capitalism.

Collier’s proposal – a tax on globalism – is a brilliant idea. He proposes that it be used to reconstruct former industrial bastions like Detroit and Sheffield, thereby relying on geographic redistribution to restore the social balance lost under deindustrialization. In this, he is of a similar mind to Stiglitz, who begins his book by lamenting the decline of his hometown (Gary, Indiana) and the plight of all those who were not fortunate or far-sighted enough to leave.

Turning to the economics and governance of the firm, Collier attacks the doctrine of shareholder value and similar justifications for corporate greed. In his view, we should return to a time when companies like Britain’s beloved Imperial Chemical Industries (allegedly) practiced ethical production and marketing. With references to old-style building societies and the revolution in quality control pioneered by Toyota, he makes the case that corporate practices have fallen a long way from placing ethics above the easy dollar.

Collier here is on solid ground. Still – more special pleading – his argument would have benefited from a reference to John Kenneth Galbraith’s “concept of countervailing power” as a means of keeping corporate abuses in check. As I recently pointed out elsewhere, Galbraith’s ethos of the corporation (best expressed in The New Industrial State) remains ascendant over Milton Friedman’s profits-first mantra in important countries, notably Germany, Japan, South Korea, and also today’s China. And not by coincidence, these countries are home to powerful, stable firms that have consistently driven their feckless finance-dominated Anglo-American competitors to the wall.

RESEARCH AND REALITY
This brings us to Milanovic, who presents the future of capitalism as a choice between liberal meritocracy and political authoritarianism. Of the three authors, Milanovic marshals by far the greatest weight of economic research – including his own formidable achievements – and most faithfully acknowledges others’ work. Yet one wonders if findings from orthodox economic models are really the best tool for the task at hand, given that so much of what mainstream economists assert as received wisdom is actually misleading, unfounded, or false.

Capitalism, Alone

Consider assortative mating, or “homogamy,” in which individuals marry or form unions with those of similar socioeconomic backgrounds. Along with most economists, Milanovic argues that this tendency has driven up household income inequality. But has it? According to a wide range of studies, household net income inequality in the US rose in the mid-1980s, owing partly to the collapse of stressed families and the rise of impoverished single-parent households. Yet there has been little change in standard measures of household net income inequality since the early 1990s (even in Milanovic’s own figures).

What the favored narrative seems to miss is that families once sustained by one earner are now being sustained at a similar level by two earners. Household wage inequality is thus mitigated, not aggravated, by the additional earner. On this issue, as on many others, economists’ intuitions have been an unreliable guide to realities on the ground.

Milanovic has given ample thought to policies for remedying inequality. He favors increased spending on public goods and services (including education) and social insurance. And he correctly views the estate and gift tax as an underused tool for deflating capitalist dynasties. That is all well and good. But there is an additional point to be made here. In America, the nonprofit sector, which employs about 10% of the private workforce, has long been sustained by wealthy donors incentivized by the charitable deduction, in addition to their fear of the grim reaper.

Socialists are suspicious of philanthropy, and Milanovic also has a keen eye for those who use big gifts to wash their moral laundry. But it is worth remembering that this system channels revenue to universities, hospitals, and cultural institutions that otherwise might not survive, given the stingy and antisocial instincts of right-wing legislatures in our day and age. Milanovic flirts with the recurring fantasy of rolling the estate tax into a more generalized wealth tax to fund capital grants for the young – a scheme that would truly play Russian roulette with the social fabric. It would be better, here and in other reform proposals, to build on what is known to work.

ILLIBERAL CAPITALISM
Is Milanovic right to define the new cold war between Chinese and American capitalism as a contest between the liberal and the authoritarian, the meritocratic and the political? At a recent conference in Texas, a distinguished Chinese physicist who has long resided in the United States sharply challenged the notion that China is the only “authoritarian.” The true authoritarian, he countered, is actually the petty boss, the small-business owner with his employees under his thumb. And in democracies, money seems to matter more than votes. Is that liberal, meritocratic, or even democratic? Meanwhile, the seemingly closed Chinese system privileges expert opinion – scientists and engineers over bankers and donors. Is that approach to policymaking “political,” or is it something else?

Economists, applying their standard methods from a distance, cannot answer such questions. It is hard to imagine that anyone could, aside from those with deep local knowledge. It seems only prudent, then, not to reduce large, complex countries to invidious caricatures.

That said, one cannot deny that there are major differences between China and the US. For one thing, China underwent a communist revolution in which the land, expropriated by the state, became a source of wealth for local governments. As a result, many Chinese cities and provinces are rich, and now compete with one another to build infrastructure and expand services – while the central government is relatively small. In other words, unlike in any other developing country, the Chinese have already learned, from their own history, what David Ricardo and Henry George sought to teach.

To the late sociologist Giovanni Arrighi, modern China is also a direct descendant of the China that Adam Smith described in 1776. Smith wrote of China as having a vast internal market of small producers linked by rivers and canals, as a society that was preoccupied with internal stability and social harmony, with only minimal concern for the outside world. Notwithstanding its current ambitions for regional, if not global, influence, China is still a lot like that today.

The US, by contrast, seems to many to have become a global hegemon-turned-predator. Driven by the ambitions of a narrow elite and anxiety born of its own competitive decline, it relies on finance, technology, and military force to maintain its position. These sources of power are concentrated in a few super-wealthy locations: New York, California, and Greater Washington, DC – the capital of the national-security state. Much of the rest is neglected.

The concentration of wealth in America has inevitably given rise to vast social, political, and economic inequalities. Or, to quote Smith: “Wealth, as Mr. Hobbes says, is power.” The “American model” that the wider world once admired is now widely questioned. Many among America’s allies now resent our pretensions, and our rivals are quickly becoming outright enemies. America retains a patina of liberal values and meritocratic structures – but can one seriously claim that the reality matches the image, if indeed it ever did?

If this is a fair description, then the future of capitalism cannot be about ensuring the triumph of “liberal meritocracy” over the authoritarian and the political. Nor, in the US, is it a matter as simple as replacing Republicans and Donald Trump with a self-professed liberal and meritocratic leader from the Democratic Party. Rather, the fate of capitalism implicates deeper and longer-term concerns – specifically, with keeping the peace until as the high values of “small-r” republicanism and “small-d” democracy can be restored, at least in the US and in Europe. Only then, perhaps, can progress resume toward the Ethical State for which Collier rightly yearns.

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Dirty lies: how the car industry hid the truth about diesel emissions

Posted by hkarner - 24. März 2019

Date: 23-03-2019
Source: The Guardian By Beth Gardiner

The ‘Dieselgate’ scandal was suppressed for years – while we should have been driving electric cars.

John German had not been looking to make a splash when he commissioned an examination of pollution from diesel cars back in 2013. The exam compared what came out of their exhaust pipes, during the lab tests that were required by law, with emissions on the road under real driving conditions. German and his colleagues at the International Council on Clean Transportation (ICCT) in the US just wanted to tie up the last loose ends in a big report, and thought the research would give them something positive to say about diesel. They might even be able to offer tips to Europe from the US’s experience in getting the dirty fuel to run a little cleaner.

But that was not how it turned out. They chose a Volkswagen Jetta as their first test subject, and a VW Passat next. Regulators in California agreed to do the routine certification test for them, and the council hired researchers from West Virginia University to then drive the same cars through cities, along highways and into the mountains, using equipment that tests emissions straight from the cars’ exhausts. Den Rest des Beitrags lesen »

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A doctor’s hopes for digital medicine

Posted by hkarner - 23. März 2019

Date: 21-03-2019
Source: The Economist

Artificial intelligence can never replace human doctors. Can it?

Deep Medicine: How Artificial Intelligence Can Make Healthcare Human Again. By Eric Topol.Basic Books; 400 pages; $17.99.

For all the technological wonders of modern medicine, from gene-editing to fetal surgery, health care—with its fax machines and clipboards—is often stubbornly antiquated. This outdated era is slowly drawing to a close as, belatedly, the industry catches up with the artificial-intelligence (ai) revolution. And none too soon, argues Eric Topol, a cardiologist and enthusiast for digital medicine. Den Rest des Beitrags lesen »

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What AI Is Still Far From Figuring Out

Posted by hkarner - 22. März 2019

Date: 21-03-2019
Source: The Wall Street Journal By Alison Gopnik

Machines have gotten better at applying rules, but will they ever match humanity’s ability to come up with new ideas?

Everybody’s talking about artificial intelligence. Some people even argue that AI will lead, quite literally, to either immortality or the end of the world. Neither of those possibilities seems terribly likely, at least in the near future. But there is still a remarkable amount of debate about just what AI can do and what it means for all of us human intelligences.

A new book called “Possible Minds: 25 Ways of Looking at AI,” edited by John Brockman, includes a range of big-picture essays about what AI can do and what it might mean for the future. The authors include people who are working in the trenches of computer science, like Anca Dragan, who designs new kinds of AI-directed robots, and Rodney Brooks, who invented the Roomba, a robot vacuum cleaner. But it also includes philosophers like Daniel Dennett, psychologists like Steven Pinker and even art experts like the famous curator Hans Ulrich Obrist. Den Rest des Beitrags lesen »

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