December 30, 2002
A useful contribution

The Dutch press has over the last days been carrying reports how two patrolling Dutch F-16 fighters rescued an American Black Hawk helicopter over Afghanistan. The helicopter came under fire from the ground and requested assistance. The two Dutch jets came to the rescue, and their mere presence was enough to stop the enemy fire. The incident took place at night, and the Black Hawk was flying without any lights on, so the F-16's had to use their infrared sensors and night vision equipment to track the helicopter down. According the reports, the USAF was impressed by the quick response of the Dutch F-16's.

I'm glad to see that the Netherlands is contributing something useful to the American effort, even if it is only in such a small way. The general state of the Dutch armed forces is not particularly up-to-scratch, but at least they are keeping the F-16's flying. Having a full set of armed forces here in the Netherlands is just plain silly. The Dutch armed forces can only be meaningful in a broader alliance such as NATO. The defense budget is spread much too thinly over too many aspects, as the Dutch military is still trying to do too many things. There are two ways in which the Dutch defense budget can be used productively: either focus on a few tasks and do them really well so as to support other NATO (i.e. US and British) forces when necessary, or the simpler option of scrapping all Dutch armed forces and sending the money to the Pentagon. We're completely dependent on the US for our security anyway, and the marginal dollar spent by the Pentagon is going to be much more useful than spending it on the Dutch military.

Finally, I can't help but wonder whether the USAF was simply being courteous to an ally when it said it was "impressed" with the Dutch F-16's response. With radar, infrared sensors and night vision equipment, isn't finding the Black Hawk easier at night than during the day? Still, with all the complaining I do here I thought I'd focus on something more positive for a change. I'm glad to see that the Netherlands can and does do something useful in support of the US.

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This is a joke, right?

I have been blogging about some weird stuff in Japan and the economy that's falling apart,, but I am seriously beginning to wonder whether someone's having a good laugh at gullible westerners when I read stories like this.

In a response to my previous item on bizarre Japan, reader Clem Snide mentioned the book Wisconsin Death Trip. I'd never heard of it before, but reading the description on Amazon the events in late 19th-century Wisconsin do seem to have parallels with the madness infecting Japan. If I ever get through the backlog of a few dozen books I have lined up, I may add it to my list. Compared to the Wisconsin of the time, the situation in Japan is different in two important respects: the population is much larger, which means that statistically rare events will occur in higher numbers, and secondly the improved means of communication also mean that any upwelling of weirdness gets spread much more quickly.

I'm still not sure what to think about Japan though.

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From slum-dweller to citizen

In the rocky and uneven path to globalization, it is usually the macroeconomic reforms that take center stage. Privatization and liberalization are big and easy concepts to grasp, even if their implementation leaves much to be desired. Fixing the macroeconomic framework is a necessary, but not sufficient condition for generating economic growth and prosperity. The macro-level reforms need to be complemented by progress on the micro-level. Building the grass-roots structures that establish civil society and a productive economy are just as important, but often neglected. That's why it's good to see stories like this one about how the slums of Rio de Janeiro are turned into neighborhoods with paved streets, sewage systems, gas and electricity. The favelas of Rio de Janeiro are the archetypal third-world slums, huge expanses of rickety shacks built on muddy ground on the outskirts of the Big Town. Impoverished rural populations come to see work and riches, and end up scraping together a meager existence on the perimeter of society. Past attempts to "solve" the problems of the slums usually involved building enormous expanses of pre-fab housing and resettling the population there. This never worked. Now they're trying a new approach, in which the city is providing the slums with the amenities of civilization, such as roads, sewage and electricity. The most important aspect is that the slum-dwellers get legal title to their shacks. They move from being illegal squatters to home-owners. The recognizes de iure the ownership that had been established de facto. The effects of this transformation are dramatic, as the article explains:

The noise of children at play resounds from a new, two-story building; anyone who wishes, may enroll a baby or young child at the child care center. The streets are clean, with the La Grota Residents' Association organizing garbage disposal itself. A small wooden sign reminds residents: "Não jogue lixo" (Don't litter). A couple of men sit out in front of a small bar, playing cards; next door, a small shop has opened for business. On a front lawn, seedlings lovingly planted in old plastic containers are sprouting despite the searing sunshine. A woman has nailed a tin sign to her house: "Faço concertos em roupas" (Clothing repaired here).

[...]And being listed in the land register, which turns the tiny plot of land each of the residents once illegally occupied into their legally owned property, lifts them out of the state of illegality. As a favela develops into a residential neighborhood, each "favelado" develops into a citizen.

As the infrastructure expands, says Sandra Miguel Nogueira, president of the La Grota Residents' Association, the social structure slowly grows stronger. She points out that the small community building on the new village square, for example, was built by the residents themselves. The city did not need to contribute even a centavo. Ms. Nogueira's modest office, with just a wooden table and a folding chair, is in the building's lower floor. At their last meeting, the residents decided that a small medical practice is to be established on the upper floor. And at its next meeting, the Residents' Association will pick names for the new streets.

This kind of scheme has Hernando de Soto's fingerprints all over it even though he's not mentioned anywhere in the article. Lifting people out of illegality and giving them a stake in society is the theme of his book The Mystery of Capital, which has the subtitle "Why Capitalism Triumphs in the West but Fails Everywhere Else." You can read the first chapter of his book online at the website of his organization, the Institute for Liberty and Democracy in Peru. The insight de Soto offers in the book is that the reason why capitalism fails in the third world is because the poor are shut out of the legal property system. The poor aren't completely destitute, for they possess their shacks and some items, such as TV sets. But the property they de facto own is dead capital, as they have no legal title to their dwellings or anything else. Unlocking this dead capital, by giving the people legally what's already theirs in practical terms, opens up new possibilities for them. Once you have clear title to a piece of land, you can sell it or use it as collateral. Dead capital becomes productive capital. People don't want to live and work illegally, but often the costs of going legal are prohibitive. In his book, de Soto chronicles the steps necessary to formalize a legally obtained home in Peru. It consists of 5 stages, with stage 1 alone taking 207 steps (bigger version). There are similar graphs in his book about formalizing informal urban property in the Phillipines (168 steps, 13 to 25 years), procedure for gaining access to desert land for building purposes in Egypt (77 steps involving 31 entities) and obtaining a sales contract in Haiti (111 steps, 4,112 days).

So even if people wanted to "go legal," the obstacles are insurmountable to all but the most determined. The process advocated by de Soto of legalizing already existing extralegal ownership claims turns out to have ample precedent in the west too. We now only see the end result of the long historical process of assigning property rights in the west with little memory of what happened a century or two ago. For instance, de Soto describes how land in the Great Plains entered into formal possession of the pioneers who ventured West. The Homestead Act of 1862 was mostly a post-facto acknowledgment of what was going on on the ground anyway. Likewise, the California Gold Rush also led to grass-roots delineation of claims once the number of prospectors rose dramatically. Again the law of the land came later, fixing into law what had been practiced on the ground. De Soto advocates exactly this kind of process for bringing the third world economies into the capitalist system, in order that at the grass roots level people be given the opportunity to move from extralegality into the formal system of property rights and ownership.

The biggest resistance to this comes from the established elites in third world countries. After all, they're living very comfortably under the current system, and tearing down arcane laws and bureaucracy not only endangers their jobs, but it also extends the imprimatur of respectability onto the unwashed masses. Trusting the people is a hard thing to do, which is why I am skeptical that de Soto's program will be implemented by all those leaders who praise it. But projects such as this one in Rio de Janeiro show that de Soto's ideas can be implemented, and can be succesful. More importantly, de Soto offers a vision that provides a powerful alternative to socialists. By stressing private property and private enterprise, it builds on the existing extralegal structures that exist in the slums anyway. It is no surprise that the ILD become of the main targets of Sendero Luminoso, the Maoist terrorists who tried to bomb Peru back into the stone age in the early 1990's.

Seeing De Soto's ideas applied successfully is gratifying. Theory and ideas can take you only so far before the pudding must be cooked and tasted. Now we need more cooks who're willing to try de Soto's recipe.

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December 29, 2002
Psychotic sunrise

License plates are a little bit of cultural identity, that reflect either the message the state wants to convey or some individual preference if you have vanity plates. This does not apply to most countries in Europe, where there is very little variation in the plates. You just get whatever the state decides you should have. In the US on the other hand, states have their individual license plates, each with the individual message. North Carolina claims to be the "First in Flight," New Jersey makes sure everyone knows it's the "Garden State" and Colorado has a mountainscape on the plates. Alabamans suffer from falling stars; as a friend of mine said, "That's why all the people are leaving Alabama; the stars keep falling on their heads and they're getting hurt." (Best rendition of the song I know is Sinatra's 1957 version on the "A Swingin' Affair" album. The Louis & Ella version is great too.)

Once every so often the plates will get redesigned, and the state of Kentucky took this opportunity to show how friendly it is. Yes, it's that friendly. Soon most cars in the Bluegrass State will have plates with psychotic smiling sunrises staring out at you, making sure you know they're friendly. I've never been to Kentucky, so I can't comment on the friendliness of people there. The only connection with Kentucky is Jim Beam or Wild Turkey Bourbon, although I still prefer the product of Tennessee, Jack Daniels. Curiously, their site has an option for displauing information in Czech and Turkish in addition to more widely spoken languages such as English, Spanish and German.

What's up with the blue grass anyway? It's also mentioned in the song "You're in Kentucky," which I know from a great recording by Rosemary Clooney on the "Dedicated to Nelson" album. The Nelson here is Nelson Riddle, one of the great arrangers of American music in the 1950s and 1960s. He arranged many of Frank Sinatra's greatest hits, including his theme song "I've Got You Under My Skin." The 1956 arrangement for the "Songs For Swingin' Lovers" album has pretty much been the definitive version of the song. Nelson worked with many of the great singers of the Great American Songbook, and apart from Frank Sinatra, many of his best arrangements were for Ella Fitzgerald. The Gershwin Songbook is a fantastic work of art, as are the albums "Ella Swings Brightly With Nelson" and "Ella Swings Gently With Nelson." As is often the case, during his lifetime Nelson Riddle never got the recognition he deserved, and it's only now that his great contribution to American music is being recogonized.

After a great dinner with great steak and a great Bordeaux, the appropriate thing to do is to have a shot of Jack Daniels now. Cheers!

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December 27, 2002
Senator Frist takes over

Sen. Frist Unveils GOP Racial Segregation Plan.

(Just a link this time.)

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The Gulag on Europe's doorstep

When Poland joins the European Union next year, the EU will border a state that is still in the grip of communist-style totalitarian rule. The country is Belarus, or White Russia, where president Alexander Lukashenko rules with an iron fist. The Czech newspaper Lidové Noviny ran a report on the sad state of human rights in Belarus. It tells the story of two journalists who have been sentenced to "limited freedom" for publishing articles critical of the government. In practice, this "limited freedom" means forced manual labor, also during the Belarussian winter which sees temperatures far below freezing. The journalists say with a wry sense of humor, "If we had Siberia, we'd be moving there."

The journalists are Pavel Mazheiko and Mikola Markievich, whose newspaper Pahonia was shut down after Mazheiko wrote an article before the last presidential election in which he said that no-one, who did not respect others' rights, should be president. He never even named Lukashenko (or anyone else specifically) in the article, yet it was enough to sentence both him and his editor in chief Markievich to forced labor. The authorities also shut down the newspaper. The paper's web site is still up, and on the left column they're counting down the days of forced labor for Markievich (top, 427) and Mazheiko (middle, 246). There's a third, Viktor Ivashkievich at the bottom, who's still got 719 days to go. After some googling, I found this article which identifies him as the editor of the paper Rabochy. Apparently since that page was written he's been imprisoned too.

Aside from the minor issue of commitment to human rights and foreign policy high horses and all that, there's also a selfish reason for Europe to work towards toppling Lukashenko. Although it's not a threat to us at the moment, having a totalitarian regime like this on Europe's doorstep is not a good idea. It's only a matter of time before Lukashenko joins the ranks of other unsavory regimes in the world in actively aiding anti-western forces. Luckily the country land-locked, but the borders with the Ukraine and Russia are porous. It's not a matter of highest urgency from a selfish point of view (the people of Belarus would very much disagree), but we're storing up trouble if we allow Lukashenko to run a totalitarian regime right on our border. The sooner we get rid of him, the better.

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Slogging through the mire

Prominent Dutch idiotarian Mient-Jan Faber, the head of the IKV "peace movement," spoke at the silent procession at the World War II concentration camp Westerbork yesterday, despite protests from Jewish organizations. His speech was predictably, well, idiotarian. He claimed that the Netherlands is no longer a multicultural society (so far, so good). But why? Well, he asks himself how immigrants must feel in Dutch society, having been here all these years, and suddenly they're not part of it anymore:

"They've been in the Netherlands for years and now suddenly they're told tht their mosques are incubators for terrorism."
Eh, perhaps that's because their mosques ARE incubators for terrorism? It's not something that they're told, it's something they're actively doing with funding from Saudi Arabia. Islamic schools in the Netherlands preach hatred of the West and the Jews, again with Saudi funding. The fault lies not with Dutch society, but with those who preach hatred and call for the destruction of the infidels.

After the criticism that Jewish organizations had had about his speaking at the procession, Mient-Jan Faber also addressed the situation in the Middle East. He had previously called on Israel to get rid of its Jewish character, and now added these words to his record of shame and infamy:

"[...] both [the] Jewish and the Palestinian communities live in constant panicked fear. People yell at each other from fear and hate, but there is lack of a dialog. In the Netherlands too it is hard to have a good discussion about, as I have experienced again."
Yes, poor Faber is being held accountable for the idiocy he spews. Let's take this one at a time. The Jewish community lives in fear because the Palestinians are trying to murder as many of them as they possibly can. The Palestinians live in fear because the PLO is running a totalitarian police state where deviating from the official line means torture and death. Note the moral equivalence: Palestinians who deliberately murder civilians are put on the same moral basis as the Israelis who are trying to stop the Palestinian terrorists and take great care to avoid civilian casualties. Faber trudges even deeper into the swamp of moral equivalence: he claims people shout at each other from fear and hate. There's plenty of hate on the Palestinian and Arab side; after all, they've been trying to destroy the state of Israel for the last half century, and still see that as their ultimate goal. Arab and Palestinian official news media are reviving and recycling Nazi anti-semitic propaganda. They're actively fanning the flames of hate. Now, show me the equivalent of this hate on the Israeli side. There is none. Israeli newspapers and politicians don't call for the destruction of the Palestinians, they don't call on God to destroy the Muslims, they don't wish to eradicate them from the face of the earth.

If he'd had any credibility to begin with, Faber would have lost it now. But he's hit absolute zero a long time ago, in the days when we was Moscow's useful idiot during the cold war. Now he's Islamofascism's useful idiot. Quite a career.

Poland's eyes on the future

There are reports that Poland will be buying F-16's from the United States, rather than European-built combat aircraft. The news was leaked by the chairman of the French defense contractor Dassault, which had been hoping to sell its Mirage fighters to the Poles. Aside from the technical aspects the deal has obvious political symbolism too, and this was not lost on Dassault's chairman:

Dassault broke the news of its own defeat, saying it dealt a blow to attempts to build a common European defence identity less than two weeks after the European Union invited Poland and nine other countries to join in 2004.
Good! Talk about positive externalities.
"I felt for a long time that they were very much in favour of the Americans," Dassault chief executive officer Charles Edelstenne told French radio.
Puzzling, isn't it? What have the Americans ever done for Poland? Especially compared to the French, whose contributions in selling them out have been so memorable. Have the Poles forgotten already?
"The political element was the dominant element, well above the quality of the equipment and its price."
Ooooh, overly acidic grapes anyone?
"Above all, they have made an American choice," he said.
Absolutely. It's a very wise move too. Staying friends with America is far more important than ingratiating oneself with the garlic munching capitulation weasels. At a time when it's popular in western Europe to bash the Americans, the Poles can be sure that President Bush will remember. The Poles have chosen wisely.

Dziękujemy bardzo!

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More societal problems in Japan

After the bizarre stories about Japanese children, I came across reports of teenage prostitution that's thriving on the internet there. Girls as young as 13 sell themselves online, some earning several million yen (tens of thousands of dollars) in the process.

Japan's sex industry has flourished despite the country's decade-long economic slump. Prostitution was outlawed in 1956, but Japanese still spend an estimated £9 billion a year for sex.

In recent years, the spread of the Internet has led to a rise in teenage prostitution. An estimated 5 percent of girls in Tokyo's middle and high schools have turned tricks in order to buy the latest fashions.

The sex industry does not seem to be very cyclically sensitive; if more brothels were to list on stock markets, would they be classed as part of the Consumer Staples sector? I'm sure somebody at MSCI is working on the problem right now.

I do wonder what on earth is going on in Japan. That the economy is in trouble is no news, but these reports of widespread teenage prostitution among girls as well as the problem of teenage hermits leads me to wonder whether there is something more deeply going wrong with Japanese society. These things can be written off as isolated problems, but if you get enough of these things happening at the same time, the search for an underlying connecting cause (or set of causes) becomes tempting. I don't know enough about Japanese society, but there's enough cause for worry I would think. An entire society seems to be derailing itself and confronting problems is not one of Japan's strongest points.

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December 25, 2002
Seeking a way out of North Korea

So what did Saddam get for Christmas? An atomic clock that's automatically synchronized with the cesium fountain clock in Boulder, Colorado. Instead of showing the time though, it shows the amount of time he has to live, and it counts down days rather months or years. It even has a built-in sound system that supplies him with the psychological feedback of the tick-tock. Soon there will be the general sound of booming.

While this is going on the Middle East, the situation in North Korea is becoming more serious. After the North Koreans admitted they had violated previous agreements they'd signed, they now demand more concessions from us even while they're reactivating their nuclear reactor that can produce weapons-grade fissile material. Steven Den Beste had an characteristically thorough analysis of the situation. He concluded that the North Korean leadership, as best we can tell, is insane and cannot be counted on to react rationally to anything we do. The only option is to isolate North Korea and wait it out. There are no easy options here.

The victory by the go-soft candidate in the South Korean presidential election has encouraged Kim Jong Il to be bolder with his provocations. The reactivation of the nuclear reactor is just the first. Expect more, not in the least because the situation in the north can't be getting any better. With pressure mounting on Kim Jong Il as his country staggers towards final collapse, he's going to have to find more creative ways of staying in power. All of those ways point to increasing conflict with the US.

Any direct military conflict would have prohibitively high expected casualties, so initiating military action against North Korea can only be a last resort. Our best hope is to hollow out the north and destabilize the regime without this being seen as a direct provocation; much easier said than done, obviously. About the only way I see achieve something like this is to enlist China's cooperation. Although China has had relatively warm ties with Pyongyang (insofar as this is possible), the nuclear warheads and long-range missiles North Korea is trying to build are just as much as a danger to China as they are to Japan. The distance from Seoul to Tokyo is 716 miles, while the distance to Beijing is 598 miles. (The server had no data for Pyongyang, but the idea is the same.) Assuming that the Chinese leadership is rational, they rules in Beijing should be worried by the prospect by a certifiable madman with nuclear missiles that can reach them in their capital. China would be much more subject to nuclear blackmail by Kim Jong Il than the US; to hit the continental United States, the North would need a ballistic missile with a range of well over 5,000 miles. So the danger coming from North Korea should be just as a big a worry for the Chinese as it is for the US, if not more so. The Chinese don't seem to be worried though. Either they know something we don't, or they think they can handle Kim Jong Il. This is a very fine line to tread; such handling could quickly become appeasement. China is opening its economy and relying ever more on world trade. It's now the world's largest cell-phone market and the fourth-largest car market. The Chinese have more to lose from a conflict in their region by the day.

The calculation the Chinese are making is probably that they can somehow handle Kim Jong Il, and that his lunatic foreign policy is useful for keeping the US at bay. As long as we believe that the Kim Jong Il could launch an attack against the south, it means a substantial number of troops and materiel is tied down in the Korean peninsula. More importantly, as long as the threat from the north persists, these are assets we can't employ should a conflict arise over Taiwan.

How many US troops would remain on the Korean peninsula if the regime of Kim Jong Il were to fall? Based on the experience after the end of the cold war in Europe, there could be a substantial reduction in the US presence in Korea. This should be something that the Chinese ought to welcome. The projection of US military power in the region would not suffer too much, since the current presence in Korea is tied down anyway. The remaining smaller force could actually be more effective in projecting US force there. Eliminating the madman of Pyongyang would be beneficial in reducing the number of troops, increasing the effectiveness of the remainder and in giving China the satisfaction of an apparent reduction in US force in Asia. And of course it would remove a threat to Beijing as well.

The trick then is to find a way in which the North Korean regime can be hollowed out without this resulting in a military escalation. The closest situation resembling a precedent we have is again the case of East Germany. The thing that pushed the regime over the edge were developments elsewhere in the eastern bloc. The Hungarians had more or less completed a transition from communist dictatorship to the first steps on the way to freedom. Once the chances of another Soviet crackdown (as in 1956) had seemingly become remote, the Hungarians got bolder and moved further with their liberalization. They tore down the barbed wire that had kept eastern Europeans captive for two generations. The most important thing they did was to allow East Germans to exit the country to Austria, from where they could then go to West Germany, which had generous financial aid waiting for them. From this point on, the unraveling of Honecker's regime accelerated. It was not without risks. There was always the threat that the Soviets might crack down again (perhaps after a coup in Moscow), or that the German and the Czechoslovaks (the other hard-line regime at the time) woudl order their forces to shoot their own people. Fortunately it never came to that.

If the Chinese were to stop deporting North Koreans who are fleeing across the border we could end up with a similar situation. Even if they would not actively welcome refugees, a silent change in policy that woud allow North Koreans to stay in China would be momentous in its importance. The tab for feeding and housing the refugees could be picked up by South Korea, Japan and the US. All of this would need to be done in a very low-key way so as to avoid public provocations of the North Koreans. Nor is this a risk-free policy, as it could still provoke an escalation from the North, but aside from doing nothing it's probably one of the least provocative things we could do. But it depends on the cooperation of China.

It also depends on how quickly word would spread throughout North Korea. It's hard to tell how much the people who're held captive in North Korea know about the outside world. The Voice of America does broadcast in Korean on shortwave, but how many have radios in the North and dare to listen I don't know. In the former East Germany there was a valley where the TV signals of the West Germany broadcasters could not reach. It was called the "Tal der Ahnungslosen," the Valley of the Clueless. North Korea is likely to be a country of the Clueless. On the other hand, the people do know that they're not living in the paradise that the propaganda wants them to believe in. Starvation and an oppressive totalitarian regime will do that to you. But as long as the power structure is in place, the risk of voicing dissent is too high. Once it crumbles, it will come down quickly I suspect. But after the fall, you're going to end up with a country where everyone has serious mental issues. The rot of communist rule infected the minds of the peoples of eastern Europe too, and they were relatively lucky compared to the North Koreans.

We do know that people are trying to flee North Korea and they are trying to flee to China. Whether they're desperate because of starvation or the lack of freedom, the fact is that they know about the way out. The government can't completely keep everything and everybody locked down all the time, so word of the ability to flee to China will spread. I think. I will also admit that it's very easy to theorize from my computer chair half a world away about a society about which we know very little. Still, apart from the sit-it-out option I don't see what else we could do without entering into a major armed conflict. The latter might still become necessary, but that would very ugly indeed.

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December 24, 2002
Commemorating the past

During the Nazi occupation of the Netherlands the town of Westerbork became the home to a concentration camp. It was just a transit camp though, and the Jews who were imprisoned here were soon sent on their way to be murdered in Auschwitz and other German camps. To commemorate the evil that took place here, a committee has been organizing annual silent processions at Westerbork. This year though, a Dutch Jewish organization is protesting against the choice of speaker to address the crowd. Somehow the head of a Dutch "peace" movement, the IKV, got the job. This is someone who during the cold war invariably chose Moscow's side, wallowing in a deep mire of moral equivalence. He and his organization were the Evil Empire's useful idiots who protested against the US for keeping the Netherlands free and prosperous. Of course, he's learnt nothing from the cold war, and he and his ilk are not content with having been on the wrong side of history once in a lifetime, but they're going for two. Thus the usual anti-American protests, which you would expect from a "peace" movement. But part and parcel of that is also an anti-Israeli attitude, which is manifested by the IKV steadfastly taking the side of the Palestinians terrorists who are trying to destroy the state of Israel. In his wisdom the IKV's leader said that Israel should distance itself from its Jewish character. The insanity of multiculturalism from the mouth of an idiot. His long track record of pacifist depravity should have disqualified him from being taken seriously in the first place. Anti-semitic? I won't go that far yet.

This will be the 50th, but also be the last silent procession. The group who's been organizing these marches since 1992 can't find anybody to continue the tradition.

December 23, 2002
Bizarre Japan

Continuing the Japanese flavor here, I found this disturbing story at Shoutin' Across the Pacific. I wanted to warn that there's adult content in that link, but that does not quite grasp the essence of the situation. Read at your own peril. Then also read Ron Campbell's report from the trenches.

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Fishing for sanity

he idiocy and inefficiency of the European Union's Common Agricultural Policy is well-known and well-documented. A less well know offshoot is the Common Fisheries Policy which is just a perverse in the effects that it has on the market, fishermen and fish stocks. The setting of new quotas by the EU over the weekend has been hailed as a major reform of the CFP. It's anything but. In true EU fashion, the real source of the problem has been left unaddressed while lots of tax payer money is still being distributed freely. The immediate problem is that fish stocks are becoming seriously depleted. In the case of cod, it's now in danger of becoming extinct in EU waters.

How did it ever get to this point? Two things are to blame. First, the fish stocks have been treated as common property, and secondly the EU's subsidies have been encouraging fishermen to fish more. Treating the fish stocks as common property means that nobody owns the fish, which in turn means that whoever fishes most gets the maximum benefit. Even if individual fishermen wanted to conserve fish stocks and were to fish less, this would simply mean a bigger catch for the more aggressive fishermen. There is no incentive whatsoever in a common property system to conserve: a classic case of the tragedy of the commons. Abolishing individual property eradicates the incentive to make good use of common property. Of course, nobody used to "own" the fish stocks in the past, but the amount of fish was so large relative to the harvesting capacity that it did not matter. With the introduction of modern, highly efficient fishing techniques the balance has shifted to the point where fish stocks are no longer a de facto infinite resource. On top of this comes the second problem, which is the EU's subsidy program. Some of the subsidies the EU disburses are specifically targeted for increasing capacity by modernizing the fleet. At the same time, the EU is also subsidizing the removal of capacity because there's already too much of it. It's the worst of all worlds: not only are fish stocks common property, the EU is encouraging capacity expansion and then paying others to reduce capacity.

This is of course completely ridiculous, but that has never stopped the EU before. The current system is not only tremendously wasteful, it also generates a lot of ill will on the part of the fishermen, who are dependent on whatever the EU decides in terms of quotas and subsidies. Cutting back on quotas and stopping any further capacity-enhancing subsidies, as decided this weekend, is hardly a serious reform of the system. The solution to the problem is known and workable, but there is no political will to implement it, as European politicians are far too fond of their roles as Wise Regulators and Santa Claus.

The solution for the first problem of common property is to assign property rights to fishermen in the form of Individual Transferable Quotas, or ITQs.These are already in use in various parts of the world, such as the Chile, Canada, the US and Iceland. The ITQ system allows fishermen to buy and sell a quota of the Total Allowed Catch (TAC) at a market price. The TAC is determined by looking at how depleted the fisheries are and is adjusted accordingly. The ITQs the fishermen buy make them owners of a share of the TAC, which also gives them a vested interest in maximizing the value of their ITQs, which is not the same as maximizing the TAC. This actually aligns the interests of the fishermen with those of conservation as fishermen will want to preserve the market value of their ITQs. If the TAC is set too high, this will reduce the prospects for future TACs, which in turns means fewer fish to be caught per ITQ. The situation now is that fishermen only take the amount of fish they can catch now into account, so it is always in their interest to have as large a TAC as possible, which leads to horrible overfishing. Introducing a market mechanism based on property rights is the way to create a self-sustaining fishing industry. This is not just idle theoretical speculation. The report linked to above lists the experiences with ITQ systems, and in virtually every instance these effects have been seen. Instead of arguing for higher TACs every year, the fishermen have become interested in conservation too, because it affects the capital that's tied up in the ITQs.

The second part of the problem is the subsidies. The solution there is simple: abolish them. The effects of subsidies are negative in all realistic scenarios. Subsidies result in lower equilibrium biomass (i.e. fewer fish) with lower profits and higher effort. It's a loss all round. But this study assumes that there is some form of a market mechanism at work, which will reduce harvesting capacity when profits are low or negative. Due to the market-distorting policies of the EU, the situation is even worse because overfishing has been allowed to go on for so long, and losses have been compensated by increased flows of money from Brussels. Right now most of the European fisheries industries are in a situation where subsidies have a short-term positive effect on fishermen's profitability at a long-term cost.

So by moving to a property-based system of ITQs the recurring whining and moaning of the fishermen and the posturing of politicians can be eliminated. Fish stocks will be preserved, a profitable and self-sustaining industry will be created. Most importantly of all, it will give to fishermen hope for the future by allowing them to work as entrepreneurs in a business. Some will fail, others will prosper. But they no longer will be supplicants living on welfare.

Posted by qsi at 06:33 PM | Comments (1) | TrackBack (0)
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December 22, 2002
Making friends in Japan

When going abroad I like to know at least a little about the language that I will be subjected to. In most European countries, I can usually understand something of what's spoken (with a few notable exceptions). But even when I'm not going to other places, I still like to dabble with languages. I've never been to Japan, but that hasn't stopped me from buying a number of books on the Japanese language. My favorite is Wicked Japanese, a phrasebook for business travelers. The actual phrases themselves are useless because they poke fun at the Japanese. It's a highly instructive book though, and good for many laughs. It of course depends on stereotypes for its laughs, but in most cases they do point to some underlying truth. A sample of phrases the book teaches Japanese philosophy:

Follow the hierarchy or get crushed like the October plum. Soshiki ni shitagawa naito, umeboshi mitai ni hosareru yo.
And it also gives advice how to praise disemboweling Noh actors:
How gracefully their guts fell to the floor! Harawata no kobore guai ni hin ga atta!
In case of an emergency how to describe your current whereabouts:
I am at the corner of two nameless streets! Nanashi no nihon no michi no kado ni imasu!
This is followed by phrases to explain that you're near a sushi bar or electronics store. The book also has sections explaining Japanese customs with the occasional phrase. In the unlikely case that you should get invited to someone's home, there are the obligatory compliments:
And in the living room, I am struck by the Hello Kitty motif. Ima no kitty-chan no kazaritsuke niwa kando shimashita.
The pages titled "Avoiding Ambulatory Food" give handy phrases for use in a restaurant and dealing with the very fresh ingredients:
How the honorable shrimp struggle as they choke to death! Ebi no idaina saigo desu!
Then there are the inevitable phrases for surviving in a Japanese company, such as agreeing with your superiors even if they're completely wrong. Then there's the motivational stuff for life in a Japanese company:
My dream is to be a tiny cog in a huge and honorable machine. Yumei na daigaisha no hitotsu no haguruma ni naritai.
Of course, there's much more. The book's copyright notice is from 1991, a time when the circumstances in Japan were very different. The phrase asking for a loan of 10 billion yen at 4% interest does not quite pack the same punch these days as it once did.

Even if you're not going to Japan, this is a fun book to have. (No, I'm not making any money off of this. I just thought I needed some lighter fare after all the dour and dreary economics stuff in my previous post.)

Kampai!

Posted by qsi at 12:39 AM | Comments (3) | TrackBack (0)
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December 21, 2002
Japan's two faces

Some time ago, Samizdata linked to "Is Japan Faking It?", an essay by Eamonn Fingleton arguing that Japan's problems were nowhere near as bad as we here in the west seem to think. It's about as contrarian as you can get these days without completely losing sight of reality, but it was worthwhile reading nonetheless. Not because I agree with it, but because it's plausible enough to be true, which in turn forces you to think about what's really going on the Japanese economy. It is certainly true that the reflexive reaction to Japan now consists of chanting the from the Holy Basketcases Hymnbook, starting with "All Debts Great and Small." This is an abrogation of thought and analysis in favor of convenience. I too have often been guilty of this, so I took Fingleton's article as a starting point for re-examining Japan, focusing in on some of the out-of-consensus calls he makes.

In terms of fundamental data, I find the article wanting. To get an overview of macroeconomic data, I highly recommend the OECD's database. All data I will be using here is taking from the spreadsheets you can download from that page, unless otherwise noted. To start, there's this claim in Fingleton's article:

The latest "disaster" is Japan's allegedly out-of-control government spending. But Japan's budget problems are grossly exaggerated. OECD figures show that in the first eight years of the 1990s, Japan actually ran large budget surpluses. Since then the government's position has deteriorated somewhat but is still no worse than many other nations.

This is relatively easy to find in the OECD data, and it's simply not true. This graph shows the government balances as a percentage of nominal GDP for the US, Eurozone, UK and Japan. As you can see, Japan has been running a budget deficit since 1993. This also holds true if you look at the other OECD budgetary indicators, such as cyclically adjusted deficits and the primary budget balance. This latter is the deficit the government is running excluding debt servicing. The very low interest rates that the Japanese government is paying on its debt have kept debt servicing from becoming an additional problem. Even looking at gross or net financial liabilities his line of reasoning does not hold up. The footnotes the OECD provides in its spreadsheets note that these latter number are not necessarily comparable across countries due to differing methodology. Still, even if the level is not perfectly comparable, the first derivative is. Fingleton also claims that:
Living standards increased markedly in Japan in the so-called "lost decade" of the 1990s, so much so that the Japanese people are now among the world's richest consumers.

Japan's consumer have been amongst the world's richest, although perhaps not on a purchasing power parity basis. However, the OECD does provide data on this as well. Net household wealth as a percentage of disposable income has been shrinking in Japan over the last decade. What's missing here are the disposable income numbers, and unfortunately the OECD does not provide them. However, this data we can find in the Statistical Handbook of Japan 2002. Scroll down to figure 12.2, where you will see that real disposable personal income saw its last significant increase in 1991, and even that was less than 2%. In comparison, real DPI in the US has been growing at a 3-6% pace over the last ten years. So here too Japan has been losing ground, rather gaining it.

Another aspect of Fingleton's case rests on Japan's superior trade performance during the 1990's. He points out that the trade surplus has risen by a factor of 2.4 since 1990. Japan's current account is also showing a healthy surplus, while the Japanese savings rate is the envy of the industrialized world at 8.7% according to Fingleton, while the OECD data puts it even higher. There is a trap in talking about trade balances in terms of "surplus" and "deficit" as I have done just now (and as is usually done) because those terms have connotations of "good" and "bad." The trap is that a trade deficit is not necessarily a bad thing. It depends on the circumstances. Let's scale the example down to a household. As a result of the job you're doing, you add to your hoard of little green bits of paper. Now suppose you decide you need a new hammer. You could go to a mine, get your own iron ore, smelt it, bang it into shape and use wood you cut down to make a hammer out of it. Chances are you're going to go to yuor hardware store and choose from one of dozens of hammers someone else has produced for you. In order to obtain the hammer legally, you then hand over some piece of green paper to the store and go back home with your new hammer. You've just increased your personal trade deficit. Unless you sell more goods than you buy, you have a trade deficit. Cause for panic? Not really, as long as you continue to earn enough bits of green paper to finance your trade deficit. This applies in a wider sense to the US economy as well: as long as the sum total of value added in the US economy grows sufficiently to finance the purchases from abroad, there is not a problem. Americans give green pieces of paper to the Japanese and get shiny consumer goods in return. It's the aggregate wealth of the US economy that has made this possible. To keep this working, not only has the US economy to produce enough wealth, but it also requires a continued willingness of the part of the Japanese to trade shiny consumer goods for green pieces of paper. As long as they're happy to do that, there is no problem and both sides benefit.

A similar story also applies to the current account balance, where again the US is importing capital while Japan is exporting it. In essence, the low savings rate in the US is compensated in part by the Japanese sending their money to the US. This is one of the things Fingleton points out as a positive for Japan. The large capital outflows indeed enable the Japanese to buy stuff abroad. But they're not doing it because they want trophies on their mantlepieces (well some of them might), but because they want to earn money. And because they're sending their capital to the US, they're also giving an implicit vote of no confidence in the Japanese economy. Actions speak louder than words, and these actions mean that the Japanese think they can get a higher return on their capital if it is invested in the US than in Japan. So the current deficit could become a problem if for instance another region in the world gets its act together and becomes the preferred destination for international capital. This does not seem likely in the very short term, but you never know. Congress could suddenly raise taxes or pass regulatory bills that affect American companies' competitiveness, and money might go elsewhere. Right now, America is still the default place to invest your money though.

The high savings rate in Japan is extolled by Fingleton as a great positive. It could be, but it isn't. And the reason for that is the broken banking system. The people are saving money, but the banks aren't lending. One of the key tasks of a healthy banking system is to provide risk capital to entrepreneurs, and this is simply not happening in Japan. The banking system is seriously broken; the Bank of Japan has been printing money (metaphorically) at a tremendous rate. The monetary base has been expanding at a 30% year-on-year rate for some time now, but the broader monetary aggregates are not picking it up. M3 and M4 are growing at 1 to 2% year-on-year. So despite the creation of large amounts of additional yen, this is percolating into the broader economy. The money multiplier is dead in Japan for now. And that's because both the banks and industry are in a mess. As a final comment on the high savings rate, it should be pointed out that Japanese savers are getting virtually no nominal return on their savings, and haven't been getting return for many years now. The Zero Interest Rate Policy of the Bank of Japan has ensured that both lending and borrowing rates are very low. The real return on cash is slightly positive, but it's still puzzling that the Japanese would be so risk-averse as to put so much of their income into an essentially dead asset. As Fingleton points out, the net national savings position of Japan is considerably lower than the government's, if you count personal savings too. So he's right that there is no solvency issue at the moment, but that's looking at the country as a whole. If interest rates ever go up, the debt servicing burden on the government will become very onerous very quickly. Sure, Japan can afford it, but only by transferring money from private to public coffers. This means taking money away from the consumers and giving it to the government by taxation. This is not going be popular or short-term positive for the economy. What we're seeing is perhaps a case of Ricardian equivalance, which states that the timing of how government debt is financed has no impact on the real economy. So whether you tax now or issue debt now (to be paid later) makes no difference. A perpetuity of $50 at 5% interest has a present value of $1000. So whether you pay $1000 in tax now or $50 in perpetuity makes no difference. But the people who'll be paying off the debt will in the end be the children of the people who issued the debt and presumably benefited from it. So an intergenerationally altruistic household will put the $1000 in non-levied taxes to buy the bonds issued and then use the coupon income to pay the $50 perpetuity. Do real people really think like this? There is some evidence that in the aggregate the expectations of future taxes are influenced by current debt issuance and levels. So a high savings rate would not be a surprise in such a context.

If the monetary base is expanding so rapidly but broad money supply isn't, where is the money going then? It's certainly not going to Japanese consumers, nor does Japanese industry seem to be benefiting much from it either. It's not going into real estate or land, nor is the stock market benefiting. Instead, the money is going into funding the JGB bubble. JGBs (Japanese Government Bonds) have real yields that are surprisingly low for a country with a fiscal position as dire as Japan's. It's partially due to the structure of the Japanese savings system, which tends to invest disproportionately in JGBs, as well as the printing of money by the Bank of Japan. At some point, this bubble will have to burst, just like the Dot-Com Bubble in the US and Europe burst.

One last point of criticism of Fingleton's piece is his comparison of the deflation currently rampaging through Japan and the US experience in the latter half of the 19th century. There are some significant differences between the two situations. First and foremost is the structure of the economies. Even back then, the United States was attracting foreign direct investment (FDI) to finance the growth of the economy. In fact, the United States has pretty much throughout its history run trade deficits, with the exception of the depression years of the 1930's. (Sorry, couldn't find a link). While the US was importing capital, Japan is exporting it now. Furthermore, he quotes LaFeber as saying that the 25 years to 1897 were "economic hell" because of persistent deflation. The date chosen is no coincidence, as that is the year in which the US returned to the gold standard at the pre-civil war parity. During the war, the US had three currencies: the greenback, the Confederate dollar and the yellowback. The yellowback was the original US dollar backed by gold and continued to be used in the West. Both the greenback and the Confederate dollar were fiat currencies (i.e. not backed by gold or any other metal. Virtually all currencies now are fiat money). After the war, the greenback and the yellowback needed to converge again, and this process took till 1897. It took so long because to restore the price level more quickly would have caused a massive recession. This long period of deflation was engineered and deliberate, and the US economy grew during the period. Japan's economy has not grown much in the last ten years. (Data taken from this dataset compiled by NBER's MacroHistory project. More information on post-civil war currencies can be found here. Inflation data downloaded from Global Financial Data.)

I'm not impressed with Fingleton's case. Japan's economy does have serious problems, and I simply don't buy his analysis. However, this article is title Japan's Two Faces, and that's where I think he does have a point, although it is not as controversion or contrarian as his call on the economy. There are some really, really good Japanese companies, and they've been doing pretty damn well over the last ten years (and before too). Some of them are well-known names in the West, such as Toyota and Sony. Others are doing well again after having come to the brink of collapse; Nissan had to be rescued by the French, for instance. Japan's corporate landscape shows a mixed picture. In general, the companies doing best are those that have been exposed in full force to the rigors of the international marketplace. That forced them to become well-run, modern companies, exactly the kind that the rest of Japan is still lacking. As the Japanese market becomes more open (and not just to Chinese imports) and red tape is slowly abolished, market mechanisms will force more Japanese companies to become competitive again or face death. As long as bank are not willing to foreclose on non-performing loans though, this is not going to happen. So it's certainly not all gloom and doom in Japan. But it's exactly that part of the Japanese economy that has been most exposed to Western-style free markets that is doing best. Japan has a deep base of knowledge and excellence in products that need to be unleashed, quite literally. As long as the arcane, indeed pre-capitalist, structures and linkage continue to prevail, the spread of Good Companies in Japan will remain limited. The risk is rather that the bad, zombie companies will infect the good ones by undercutting them. If you're essentially dead and have no hope of paying off your debts, why not sell below cost? At least you'll get market share and you can pretend to be alive for a bit longer. Good companies are then forced to compete with the zombies, and can't last very long usually. Bankruptcies are sorely needed in Japan.

Not all of Fingleton's arguments are on the mark in the company area either. For instance, the supercomputing lead Japan has is not directly related to manufacturing expertise. Rather, the US and Japan took differing approaches to supercomputing about a decade ago. US researchers thought that by bundling together lots of cheap computers, you could create a cost-effective machine that is very fast. The Japanese continued the "old-style" supercomputing tradition, which has proven superior.

Finally, where Fingleton goes off into fantasy land is when he posits that the Japanese have deliberately been talking of crisis to get the rest of the world off their backs. It's supposed to be part of a centuries-spanning plan that would put Asia back in the number one position in the world, having been supplanted by the West, and specifically the US. That's just nonsense. Japan is not welcoming China's exports "with open arms," but instead there's an enormous amount of bellyaching about Chinese exports. Japanese versions of Ross Perot with their Giant Sucking Sounds are popping up all over the place. Instead what's happening is that Japanese companies are trying to create better profit margins, and that means shifting commoditized manufacturing offshore to China, which is becoming Japan's reservoir of cheap labor. It's benefiting both countries, of course: Chinese become wealthier and Japanese companies become more efficient. But the adjustment process is painful. Rather than a sinister long-term plot, it's just another sign that Japan is slowly rejoining the world economy by opening up a bit. It's becoming more western, more free-market, even if only at the margin. There is a core of good companies upon which Japan can build to try to regain its economic strength. It's up to the Japanese government to take further action in liberalizing the Japanese economy and opening it up to market forces.

December 20, 2002
Killing two insects with one stone

The United States has asked Germany to provide protection for its bases from the end of January? Another piece of the puzzle falls into place, and Iraq is another step closer to liberation. The German reaction will be interesting to watch. A spokesman for the German defense ministry said that Germany had actually agreed to help to guard US bases, but it had made no commitments as to the extent of the aid. This is going to be a highly explosive issue for the coalition of Greens and Social Democrats, as Schröder won re-election by running against the US. There's a very large number of pacifist idiots in Germany who're opposed to any German aid to the US, no matter how indirect. Overflight rights? Of course not. Limiting US troop movements? Well, sure. (I wonder how they would want to put that into practice, being pacifists and all). In fact, they would oppose military action against Saddam even if all other countries in the UN came crawling on their knees to beg for German support. War is wrong, they say, violence never solves anything, so let's allow the madman to build weapons of mass destruction (you know, the kind that never solve anything). One day they might not solve anything by leaving a radioactive crater in Frankfurt, Munich or Berlin.

So the pacifists in both coalition parties are likely to be in explosive mood when the shooting in Iraq begins. Schröder will have to make a stark decision at that point, and no matter what he chooses, he has a problem. Since the election he has realized that sticking to his dogmatic unilaterist approach of no German aid whatsoever is going to cause Germany great harm internationally. He also knows that the left wing of his SPD party is going to be even more upset with him than it already is, and the see-no-evil-unless-its-American Greens with their pacifist roots are going to go into spontaneous combustion. If Schröder does accede to the US demand for protection of US bases and overflight rights, there's a good chance that his coalition will fall. If the does not, then the opposition will have a field day with piling on to Schreöder's already dismal position in the polls by pointing out that internationally he's a disaster for Germany too. Either way this is going to result to more damage to the already sinking ship of the Red-Green coalition. The Reds and the Greens are so far behind in the polls now that there's no chance that they could win another election now.

What I really wonder is this: are American forces really stretched so thin that they really, really need German aid in guarding American bases? Sure, it helps and allows American military personnel to be used more fruitfully in Iraq, but is it really necessary? Or is Bush killing two disgusting insects with one stone here? War in Iraq takes care of both Saddam and Schröder. You gotta love it.

Posted by qsi at 11:16 PM | Comments (3) | TrackBack (0)
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Suing Big Chocolate

Silly lawsuits are not limited to the United States it seems. Today we learn that a German judge lost his lawsuit against Big Chocolate. He claimed chocolate bar maker Masterfoods had gotten him addicted to Mars bars which had then led to diabetes. The linked article is very British in claiming he gained 16 stone. One stone is 14 pounds, so apparently his weight gain amounted to 224 pounds. That's a lot of weight, but it's way more than two Mars and Snickers bars a day will do to you. In any case, his claim was thrown out by a court in Düsseldorf which said that no link between his diabetes and his chocolate consumption could be proved.

Another intesting facet is the amount he sued for: about 5,000 dollars. That's hardly worth going to court for in the US, is it? Had this lawsuit been filed on the other side of the Atlantic, we'd be talking about a claim for at least 5 million dollars. Depending on the sleaziness of the lawyer, perhaps much more. On the other hand, if you really had contracted a disease like diabetes due to others' willful negligence or malice, wouldn't you want to sue for much more?

Having said that, the absurd lawsuits and equally absurd verdicts that we've been seeing in the US are signs that the system is broken and needs to be reformed. But that's hardly a new insight. I need more chocolate.

Posted by qsi at 09:04 PM | Comments (0) | TrackBack (0)
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The threat unveiled

Another example of how the Islamofascists are treat others, even their fellow Muslims who dare to disagree with them:

Suspected militants killed three young women in their homes just days after posters appeared in the disputed Jammu and Kashmir region ordering women to wear a veil.

Two of the women, both aged 21, were shot dead in their house in the Rajouri district in the south of the revolt-torn Muslim-majority state.

An official says a third woman, 22, was taken away and beheaded.

If they can't brainwash people into following them blindly down the path to self-destruction, the Islamofascists are perfectly happy to terrorize them. If that fails, they kill them, even if it means killing their fellow Muslims. They cannot be reasoned with, they can only be crushed.

Posted by qsi at 05:05 PM | Comments (0) | TrackBack (0)
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December 19, 2002
Some miscellaneous rambling

It's been a long day, which started off with a conference call I had all but forgotten about and ended with a slight panic in our Tokyo office that was instigated by overzealous legal & compliance officers. That actually was rather amusing given the fact that it was much ado about nothing (it's a long story) and it still kept several people up until 2 AM Tokyo time. I had actually been hoping that the pre-Christmas lull in business would have started to set it by now, but somehow work just keeps piling up, which means I actually have to do things at work, for many hours on end.

In any case, I am not going to be blogging much today; instead, I'll try to vanquish the last vestiges of the cold that has been pestering me for some days now. So I'll stick to some short notes. As many of you will already know, Lileks has another brilliant screed up. Aside from the brilliance of his writing (when I grow up I want to be a Lileks - except it would have happened by now, so I'm not counting on it), there's a seredipitous typo: seculiar. I think that it should be elevated to neologism status. "Have you seen that seculiar interpretation of the Mahabharata?"

Meanwhile, for those interested in matters Dutch, I refer you to fellow Netherblogger Michiel Visser who has a lot of good stuff on the Pim Fortuyn investigation. On a slightly different tack, there's a great post on "Guns and Freedom" at Rachel Lucas's blog. While there are things in Bill Whittle's comments that can be quibbled with, it's a fantastic piece of writing. The comments also contain some vitriol from people who should be applauding this article; then again, morons who refer to Lincoln as "Abraham Lenin" are seriously unhinged. Beyond that, they only serve to perpetuate the left-wing stereotype of us who support gun-rights as dangerous nuts. It appears that guy is not even a troll.

Anyways, more regular blogging will resume when I have refilled my reservoirs of sleep, probably tomorrow (unless work intervenes again).

Posted by qsi at 11:56 PM | Comments (0) | TrackBack (0)
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December 18, 2002
Evading painful truths

Mindlessly clicking on links sometimes takes you to interesting places. And "interesting" comes in many guises, from the kind of stuff the tickles your fancy with a the feathers of a peacock to the kind of interesting that results from being crushed by a grand piano that happened to fall out of the 50th floor window. The Muslim Directory Online is interesting in the sense that it evokes wistful and exasperated sighs. Take for instance The Rise and Fall Of Muslim Scientists. Most of the article is devoted to Arab science and history, rather than Muslim though; but for a large part of history, the two were broadly synonymous, with the exception of the Persians.

The basic message in the article is that the Mohammed and the Quran exhort pious Muslims to learn and acquire knowledge. Being a good Muslim means seeking new knowledge:

1. Seek knowledge "even though it be in China".
2. "The acquisition of knowledge is compulsory for every Muslim, whether male or female."
3. "The ink of the scholar is more sacred than the blood of the martyr."
4. "Seek knowledge from the cradle to the grave."
5. "God has revealed to me, Whoever walks in the pursuit of knowledge I facilitate for him the way to heaven".
This goes on for a while like that. There's little to object to in this, except for the fact that it does intertwine science and religion to an alarming degree. But this is also something the Christianity grappled with over the centuries, from heliocentrism to genetic engineering (although actually doing science is now completely separate from religion in most cases; it's left to the individual scientist). Charting the rise of Arab scientists, the article continues:
The Islamic Empire for more than 1,000 years remained the most advanced and civilised nation in the world.
A somewhat arguable point here. It's definitely true that from a Eurocentric point of view, the Ottoman empire with its Arab and Muslim culture was far advanced scientifically for many centuries. Stretching it to 1,000 years is taking it a bit too far.
This is because Al-Islam stressed the importance and respect of learning, forbade destruction,
Would somebody please tell this to the Islamofascists who attacked us in the hope of destroying us? Perhaps undertaking not to try to destroy western culture (and throw in Israel for good measure) might be a good start here. They definitely need to take this non-destruction thing more seriously.
developed in Muslims the respect for authority,
And this is a good thing?
discipline, and tolerance for other religions.
Well, it was tolerance in the sense that the conquered peoples were allowed to practice their religion. However, in order to obtain full rights in the Ottoman empire you had to convert to Islam, not be a slave and also not be a woman. I guess it's tolerance of a sort.

The article goes on to explain the various achievements of Muslims over the centuries. Again, there is no argument that for a long, long time Arab culture was more advanced than the Christian Europe of the Dark Ages. Some of the claims the article makes strech the truth a bit, while others strech the elastic band truth to the point where it snaps, recoils and takes out an eye: "[...] Muslims are directly responsible for the European Renaissance." *ahem*

The article is titled "The Rise And Fall Of Muslim Scientists." It spends much time talking about the Golden Age of Arab science (such as the glowing description of 10th century Córdoba), but the problem becomes obvious on the page actually listing Arab scientists. The most recent one listed is Ibn Khaldun, in the year 1332. The "rise" is clear, but the article completely fails to address the "fall"-aspect. Instead, we are taken in the next paragraph to a description of the current sad state of Muslim learning:

The status of the Muslim Ummah is of great concern to all the Muslim intellectuals. No one can deny that the Muslim Ummah occupies a position which is at the lowest rung of the ladder in the world. The share of the Muslims in Nobel Prizes and the Olympic Games is close to nothing.
Olympic Games? Where did that come from? I thought we were talking about science here. Still, the Arabs' most prominent contribution to the Olympics was in 1972 in Munich, led by all-star athlete Yasser Arafat.
Muslims contributions to literature both general and scientific is marginal at the best. It is very sad to see the status of Muslims in the present world at the bottom. Muslims have been economically exploited and politically subjugated.
And this is as close as the article gets to exploring the fall of Muslim science. It shows the great achievements of centuries past, it describes the sad state of Muslim learning now, but it just can't bring itself to ask the all-important question: What went wrong? The author only affirms the Victim status of Arabs today without any attempt at introspection or exploration. That would require the seeking of knowledge and confronting of painful truths. But until the Arabs manage to look past their self-inflicted backwardness and self-deception, there's not much hope for a revival in Arab science, or in Arab culture more generally. There are brighter spots in the Muslim world, such as Malaysia, where the economy is doing a lot better than anywhere in the Arab world, and where at least the beginnings of a middle class are emerging. But that far east the suffocating aspects of Arab culture never weighed as heavily as in regions closer to the holy places of the Arabian peninsula.

Now it's a matter of connecting the dots, from the heyday of Arab learning to its current backward position in the world. At some point the cognitive dissonance may overcome the deeply rooted victim complex and the pathological obsession with Israel and lead to the triumph of reason over dogma in the Arab world. I'm not holding my breath though.

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Free education in Missouri

A judge has ruled that alumni of the University of Missouri are entitled to free education, based on a 1889 law which gave free education to "all youths of the state of Missouri, over the age of 16 years." After this lawsuit was filed the law was quickly changed, but the fact remains that by charging tuition, the University of Missouri has for years been acting illegally. It could cost $450 million dollars (approximately its annual operating budget) to repay the illegally charged tuition, a prospect that would sure bankrupt the university.

Legally the plaintiffs appear to be on firm ground. The University's defense that it was charging "education fees" rather than "tuition" was shot down by the judge:

"Dr. Pacheco's testimony was nothing more than pure pretense, incredible and sadly not believable," Judge Romines wrote in the decision, issued on Dec. 6. "Resort to all editions of all dictionaries and honest scholarship demands the conclusion that `tuition' and `educational fees' are synonymous."
It looks like the judge was not very keen on ruling in favor of the plaintiffs, but had no other choice. But what's to gain from suing in this case In the words of Frederick Eccher, one of the plaintiffs:
"Getting the judge's opinion was worth the wait, but saying something was wrong is one thing, and justice is putting things right," he said of the absence of any remedy so far. "What would make me feel better would be them paying back the tuition, and interest."
The pursuit of money is obviously a big factor in all of this. While the legal position of the plaintiffs seems impeccable, this whole thing still feels deeply wrong, because by winning this lawsuit the plaintiffs could well sink the University of Missouri education system, denying the opportunity of getting an education to others. This is clearly an instance where being technically right is not exactly edifying. The law is an ass again. On the other hand, throwing this ruling out simply because it's inconvient rankles too, and I'd find that deeply unsatisfactory. The plaintiffs should not have sued in this case, although I realize they were fully within their rights to do so.

I'm obviously not an expert on Missouri law, so I wonder whether the judge can award symbolic damages only in this case. Or would the eighth Amendment provide a way out if they'd have to pay $450 million?

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Infocom adventures

When I saw the headline"4 arrested in federal terror probe into Infocom", my first reaction was "they still exist?" followed by "how on earth could it be linked to terrorism?" Of course, the Infocom in this case is not the same Infocom I used to know. The company no longer exists, but its memory lives on the in nether realm of computer nerds who spent way too much time playing Infocom's games. By common acclaim, Infocom made the greatest adventures, with such legendary titles as the Zork series, Planetfall and also The Hitchhiker's Guide to the Galaxy, which they did in cooperation with Douglas Adams. What used to require the full capacity of a computer twenty years ago, you can now play online in your web-browser. To those who're used to the whizz-bang graphics and sound of modern games, the Infocom adventures are unlikely to be very captivating at first sight. But the level of immersion into the worlds Infocom created was very high nonetheless. What the computer could not show, you had to make up for with your imagination.

The goal of an adventure is to solve puzzles as you go along. You can type simple commands to the computer, such as "look" and "get toothbrush," or "lie in front of bulldozer." One of the classic puzzles in the Hitchhiker's Guide to the Galaxy was getting the Babel Fish into your ear... I can still remember how to do it. (I compensate for this by not being able to remember birthdays, anniversaries, holidays or anything that happened before my last nap.) Ah, those were the days...

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Rebuilding Lower Manhattan

The new plans for the WTC site have been announced by the Lower Manhattan Development Corporation, following the lukewarm reception of the old plans. Out of the seven, four plans propose creating the world's tallest skyscraper, the highest coming in at 2,100 feet. This is considerably taller than the Petronas Towers in Kuala Lumpur which has a height of 1,483 feet. The LMDC has the new plans online, but the site is very slow right now, so it's hard to tell whether they actually look good.

Building anything less than the world's tallest building would be a betrayal of the spirit of New York, and indeed the American spirit.

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December 17, 2002
Banned substances in the Netherlands

It's that awful realization in the middle of the night. As an inveterate insomniac I am used to waking up in the middle of my Big Nap (as opposed to the Little Naps I take on occasion, although my office furniture is not conducive to Napping). Last night I awoke from the restless slumber which passes for sleep and immediately I sighed in exasperation, as a distinctly sore feeling was creeping up through my throat. If it had advanced any further it would have crept and tied a double knot in respiratory system. A cold is coming up, which means my ruminations will become increasingly febrile if the cold does indeed manage to vanquish my pharmacochemically reinforced defense systems.

Getting the right kinds of drugs here is surprisingly hard. In the country where marijuana is legal and even "harder" drugs are not entirely completely illegal in practice (sort of), if you try to find Nyquil, you're out of luck. They just don't sell it here. It's illegal. I kid you not. I once asked an acquaintance of mine who happens to be a pharmacist, and he rolled his eyes in exasperation: "Oh, we haven't had that stuff here for decades!" He recommended taking a paracetamol and some cough syrup. It does not work as well as Nyquil, I can tell you that.

Experience has taught me to stock up on drugs like Nyquil (or in this case, The Giant's generic version of it) whenever I am in the US. Since tend to be in the US fairly often, this is never a problem, but at one point I had actually run out of Sudafed. Oh, the horror! If I ever get searched coming back from the US, I'll have some explaining to do I think...

By the way, never take Sudafed into Singapore. They treat it as an illicit drug, and they're not kidding about it. Apparently you can make speed out of the pseudoephedrine that's the active ingredient in Sudafed. I wonder whether they sell Nyquil there.

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Progress and Romanticism

A fascinating and thought-provoking article by SF author David Brin looks at the Lord of the Rings saga in a very unconventional light. Titled "Tolkien: Enemy of Progress," Brin traces the Tolkien's philosophical background through the ages; he's a classic exponent of Romanticism. His revisionist history of Middle Earth is tongue-in-cheek, but it's a refreshing look at a work I'd been taking more or less for granted. Speaking of the origins of the Romantic movement:

Temblors began splitting a chasm between Romantics and Enlightenment pragmatists. The alliance that had been so formidable against feudalism began turning against itself. Trenches soon aligned along the most obvious fault line, down the middle -- between future and past.

In this conflict, J.R.R. Tolkien stood firmly for the past.

Calling the scientific worldview "soul-less," he joined Keats and Shelley, Sir Walter Scott, Henry James and many European-trained philosophers in spurning the modern emphasis on pragmatic experimentation, production, universal literacy, progress, cooperative enterprise, democracy, city life and flattened social orders.

In contrast to these "sterile" pursuits, Romantics extolled the traditional, the personal, the particular, the subjective, the rural, the hierarchical and the metaphorical.

By the turn of the century, Romanticism was fast losing all vestige of its initial empathy for the concerns of common folk. One solitary artist -- or entertainer or lost prince or angry poet -- loomed larger in importance, by far, than a thousand craft workers, teachers or engineers (a value system shared today by the mythic engine of Hollywood). Just as in Homer's time, 10,000 foot soldiers mattered less than Achilles' heel.

It's a conflict between pragmatism and idealism, can-do and should-do, doers and dreamers, those who see reality as it is, and those who want to live in a different reality. The contempt Romantics feel for reality (and indeed, the common man) has led them over the ages to construct dream societies where all the ills would be cured and mankind would be happy again. The most famous work of this genre is Thomas More's Utopia. In the vernacular, utopia means an elysian place of happiness. However, one common features of most utopias, including Thomas More's, is that all of these ideal dream societies are highly totalitarian and the rights of the people are severely circumscribed. The first Romantic in this sense was Plato, whose utopian fantasies of the ideal state was in effect a fascist oligarchy. Abolition of property has been recurring theme in utopian fantasies throughout the ages, as chronicled in the first chapter of Property and Freedom. The first exponent of the opposing force of realism and common sense came from Aristotle. The conflict between the two sides has been going on ever since, right down to the battle between the values of the Englightenment and the darkness of communism.

The original concept of a Golden Age also stems from Greek antiquity. In Greek mythology, the Golden Age existed after the creation of earth, ruled by the Titan Cronus, with all goods plentiful and everyone in a state of grace. The following Silver, Bronze and Iron ages were successively worse. It's not entirely different from the Christian version, where the Golden Age was Adam and Eve's time in Eden; they too, fell from grace and man is still suffering the after-effects. It's only been the Enlightenment that moved the Golden Age from the past to the future, as Brin explains in his article.

While socialism in its many forms has been discredited, the conflict between the utopian Romantics and the realist Modernists still persists, despite the overwhelming evidence that the Modern way of doing things is infinitely superior. It has brought unprecedented wealth and prosperity and indeed liberty. We are fortunate to live in a time where we are the freest members of homo sapiens ever to have trod on the face of the earth. And that freedom and prosperity is now under threat by a particularly violent non-western offshoot of Romanticism. The Islamofascists also yearn for the return to a Golden Age that never was, and do not shy away from using violence to impose that Golden Age upon. It is not very surprising that our home-grown Romantics of the anti-war movement should be aiding them in this endeavor. The siren call of the Romantic movement has its appeal in the fact that it proposes a simple answer to complex problems. Go back to doing X or Y, and all will be well. It's an easy way of avoiding the confrontation with reality. Obviously, it's doomed to failure. After all, reality is that which, if you stop believing in it, does not go away.

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Ring-fencing Amsterdam

This is one of those moments where I sit back, scratch my head and wonder, "did he really say that?" Crime is a problem in the Netherlands, but so are the law enforcement authorities, who have all but thrown in the towel on the fight against crime. Then we also have the chief of police in Amsterdam, who thinks that the police should not investigate crime if the victim had not taken sufficient precautions. Compulsory national IDs for everyone over 12 are one reaction from politicians, as are random searches.

But since combating crime probably does fall under his job description, the chief of police has now come up with a new idea: ringfencing Amsterdam. He says that the police wants to get a better grip on who's entering and leaving the city, so he proposes installing security gates at highway exits to scan all license plates. This will help find stolen cars, he says. It will also help people feel Watched. He also wants stricter traffic checks; they're like checkpoints where you're checked for alcohol in your breath, except at these checkpoints you can get stopped for any reason. I drove past one such checkpoint last Saturday. Apparently this sort of thing is constitutional. To top it all off, the chief of police also wants tighter checks on people who enter Amsterdam by rail or boat. I think we should call this the Erich Honecker Memorial Project.

People with ideas like this should not be in any position of authority, anywhere. Least of all should they be the chief of police. The fact that the Amsterdam police chief does not shy away from making such comments publicly (even if he might have them privately) is also frightening, because it means he's not too afraid of the reaction. And that tells you something about the sad state of people's affinity for civil liberties here.

December 16, 2002
Corporate migration

The death spiral of the Schröder administration continues in Germany, with the latest shot coming from German business leaders warning that the crisis that is developing is going to eclipse anything Germany has seen since the war. By inference one is tempted to compare the current crisis with the situation before the war and the conditions that led to the rise of the nazis. It's nowhere near as bad as that at the moment, but ten more years of stagnation will bring the spectre of those days a lot closer. Nonetheless, there is a crisis and there are no signs of it getting better. It's not just that the economy is depressed, but it's also the prospect that things won't get better anytime soon. The government has a wafer thin majority in the lower chamber of parliament, the Bundestag. The upper chamber, the Bundesrat is controlled by the opposition. The upcoming state elections in Lower Saxony look likely to skew the Bundesrat even further in the opposition's direction. This is the inverse situation of the last years of the Kohl government, when the SPD and Greens had a majority in the Bundesrat, which they promptly lost after their election victory in the general election on a wave of public disenchantment with the new government. But the gridlock that prevailed in the closing years of Kohl's reign is likely to be repeated now. The Bundesrat can block certain kinds of legislation, and most of the big reforms require the Bundesrat's approval. Stagnation is the prognosis.

This prospect is leading German businessmen to despair. The CEO of the chip maker Infineon has now threatened to move his company out of Germany.

Ulrich Schumacher said German taxation rates, often double those paid by competitors, were a dangerous burden on Infineon. "In a normal business year, where there is for example $2bn (£1.26bn) in profit, it means there is some $300m to $400m more [tax] than your competitor has. Think what you would have to do to compensate for that. It's a brutal disadvantage," he said.
Moving an entire company's headquarters is a big operation. We're not talking about the tax-efficient corporate inversions which have been popular lately in the US; what Schumacher is referring to is actually moving the company and the people. It'd be corporate brain-drain. More importantly, it would undercut the knowledge base that exists within the country. Once expertise like this is lost, it's expensive to rebuild it if you can do it at all.

Threatening to move a corporation is not unprecedented. Many Swedish companies had been threatening to leave the country because of the punitively high tax rates, and AstraZeneca actually did move its headquarters to London from Sweden. But this was under the cover of the merger of Astra and Zeneca, so it's not a pure departure either, and it still maintains R&D facilities in Sweden. Ericsson also moved some R&D functions out of Sweden because of taxation. The steady trickle of high value added jobs out of the country is something the government should be very concerned with. There's a world of difference between moving a widget factory to Estonia and moving the intellectual engine of your company elsewhere. Increasingly that's where the true competitive advantage lies, and losing that knocks a hole in the local economy.

I don't think Infineon is going to move its HQ out of Germany just yet. But a few more years of drift and stagnation and Schumacher will actually do it and take his company to greener pastures. German politicians better take heed.

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December 15, 2002
Dutch Libertarian idiots

With all my criticism of the Dutch political parties, what of the Dutch Libertarians? I tend to be sympathetic to the libertarian vision of the world, but the embodiment of that vision in the Libertarian Party is highly problematic. The Dutch LP is not, as far as I know, participating in the elections, so why they call themselves a party is a bit beyond me, but we'll leave that aside. I had not visited their web site for a long time, so I clicked on their "latest news" links. The second one takes you to a page that non-Dutch speakers can understand too: the Confederate flag is shown prominently. This is supposed to be a party in favor of freedom? I support people's individual right to put up symbols like the Confederate flag, but by there's a difference between supporting the right to do so and actually doing so. In the latter case you align yourself with the content of the symbol and in this case, it's slavery. The enslavement of millions of people. A party in favor of freedom that without even a word of criticism shows the Confederate flag and what it stands for is just beyond pathetic.

Most of the article is a translation of this article by Walter Block, which argues that the Union's victory in the Civil War is still hampering US foreign policy today. It refers to Abraham Lincoln as a "monster" and claims that amongst the many people who were killed in the Chechnya conflict there might have been someone who could have invented to cure for cancer. But wait, there's more! If you order now, you get an additional truckload of insanity for free! It's a $0 dollar value! The great professor Block has a solution for the conflict in the Middle East:

Jews and Arabs have been slaughtering each other for years in this troubled part of the world. One of these dead, conceivably, might have invented a travel machine or technique that could have allowed us to explore and colonize not only additional planets in this solar system, but in other galaxies as well.
Many Africans died as they were shipped into slavery in the South and in the harsh conditions under which they had to work. Many more would have died if slavery had continued; in the Jim Crow South, many blacks were murdered even after Restoration. One of these dead, conceivably, might have invented a machine or technique that could have allowed us diagnose and treat the mind-bending idiocy of people like Walter Block, whatever planet he's living on.

One simple answer to this firestorm is a geographical and political separation of these two peoples. (This would not entirely solve the crisis; there would still remain the issue of which pieces of land would be controlled by which countries, an issue outside our present focus. But such partition would at least be a step in the right direction).
This is of couse aside from the minor fact that the Arabs have been trying to exterminate the state of Israel and the Jews within it. Arafat was offered just such a secession plan, and reacted instead with more violence to try to expunge Israel. That's just a detail though: the real reason the Clinton mediation failed between Barak and Arafat was because the South was still part of the Union:
However, no American, not even a private citizen, could recommend any such plan with clean hands while the Confederate states are still held by the US Colossus. First we have to set straight our own house, before any of us can recommend separation to other jurisdictions, without fear of the justified charge of hypocrisy.
Quick, somebody tell Trent Lott that he was right after all! Let's allow the South to secede, track down all those blacks who've fled since 1864 and enslave them once more, so that US foreign policy not be hobbled by this any longer!

If the Libertarians ever grow up, I might consider voting for them. Right now they're a cringe-inducing embarrassment at best.

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The Dutch Conservative Party

The main cause for the fall of the Dutch government was the incessant strife and infighting in the LPF. Two members of parliament actually seceded from the LPF to form their own parliamentary group (I don't exactly remember why), and they've now set up their own party to contest the upcoming general election. It's the Conservative Party, and it does not stand the slightest chance of winning any seats if the current polls are to be believed. So what is a self-styled "conservative" party like in the Netherlands? Their web site has the answer. The translation of the bullet points at the top of the page:

  • Back to a safe Netherlands

  • Back to law and order in our country

  • Back to good health care for everybody who needs it, i.e. tackling waiting lists!

  • Back to normal prices for rents and houses

  • Back to good education for our children

  • Back to clear language!
There's another translation for this: beep-beep-beep-beep-beep-beep.That's the sound of the Truck of State stuck permanently in reverse gear. What a message to convey... you'd think they'd have learnt the lesson of the Bob Dole presidential bid in 1996. Trying to restore the mythical past is not a particularly fruitful tack to take. What I'd like to when these people think the better conditions actually obtained, to which we should return. They're taking the meaning of "conservative" a bit too literally. While I applaud that from a etymological point of view, I don't find it particularly attractive. Although they claim to be in favor of market mechanisms in preference to state intervention, the party program is still mostly a promise to run the welfare state better, rather than a fundamental rejection of the welfare state. Nowhere do they question whether the state should be in the business of providing education and health care. While they complain a lot about the welfare state, they're more than happy to keep supporting and extending it. For instance, they want to reinstate the state benefit to people who can't do their jobs in winter. This is a conservative party? Apparently the talk about personal responsibility elsewhere on their site does not apply here.

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December 14, 2002
EU enlargement

Here's a story that goes around in business school and consultant circles. I heard it from a colleague who picked it up during his education at INSEAD, a prominent European business school in France. The story concerns an experiment with a number of monkeys. They're placed in a room which contains a climbing pole. At the top of this pole, some nice juicy bananas are placed, so obviously the monkeys try to get at them. When any monkey climbs high enough to reach for the bananas, the entire room is soaked with cold water, which results in very unhappy drenched monkeys. This happens every time a monkey goes for the bananas and as they're pretty smart primates, they catch on. So when any of them makes an attempt at the bananas, the others quickly give him a good old pummeling to prevent getting drenched. Now the researchers remove one of the original monkeys in the room, as replace it with another one. The new one sees the bananas and tries to get at them, but gets a hefty beating at the hands of the drench-conditioned monkeys. The researchers keep on replacing monkeys in the room until none of the original ones remain. None of the monkeys in the room has ever gotten drenched or eaten the bananas. Yet the group still enforcers the no-pole-climbing rule, but without knowing why.

This story reminds me of the behavior of European politicians. They're stuck on autopilot where the future of the European Union is concerned, moving boldly forward into the barren snowcovered tundra of a European Superstate without exactly knowing why. Their predecessors set out on this course, and so did theirs, going back all the way to the times of Adenauer and De Gaulle. After the carnage of the Second World War, the post-war generation of politicians in Germany and France wanted naturally to make sure no such catastrophe could ever again befall the European continent. Aside from the military framework of NATO that extended American protection to Western Europe from the Soviet threat, the European set out on trying to integrate their economies. Prosperous and closely integrated economies would be less likely to attack one another militarily. The Treaty of Rome signed in 1957 established the European Coal and Steel Community, the precursor organization of the European Economic Community which in turn became the European Union.

Much has changed since 1957, of course. The ECSC consisted of six countries: France, Germany, Italy, the Netherlands, Belgium and Luxembourg, and the level of integration was minimal. The European Economic Community which flowed forth from it was essentially a customs unions, and later turned into a free trade zone. But the tone was set in the Treaty of Rome, which contained the fateful phrase of working towards "ever closer union." And thus it came to be. The ever closer union of European countries has been propelled by this original visionary document.

The key issue which the EU has never come to grips with is that the organization has been gathering new members through the years. The original structures, set up for six members, are already under severe strain from the current 15-strong membership. The Copenhagen summit has just resulted in the admission of a new wave of countries to the EU in May 2004. This will exacerbate the problems even more. The conceptual flaw that underlies the EU is not going to be addressed though, as solutions are going to be sought in reforming procedures rather than fundamental concepts. It's that vision thing.

The EU's problem is that none of the European politicians has a realistic vision for its purpose. They're still on the course of "ever closer union" that had been 45 years ago without really knowing why anymore. Aiming for ever close union is what European politicians do. Questioning this is just not done in polite (dare I say sophisticated) political circles. The process of integration pushed by the political elites has run far ahead of what the domestic electorate is willing to put up with, creating an internal problem. Thus far, it has been containable.

The EU will not survive in its current form. The imprint of the original small club of industrialized countries has already been coming under pressure with the admission of poorer countries like Spain, Ireland, Greece and Portugal which have economies greatly dissimilar from the original member countries. The Scandinavians and the British could be accomodated relatively easily. The others have received massive subsidies from the richer members. Only their relatively small size in relation to France, Germany and Britain made it possible to pull them along. Ireland in particular has done very well out of all this, in large part because of its domestic policies. In in its current state, it's doubtful whether enlargement is a good thing for the new entrants. They're more likely to get slowed in their economic development rather than helped with the ponderous weight of EU regulations weighing down on them. They may yet decide to decline the invitation.

There are two reasons why the new entrants will change the EU. First, the per-capita GDP of the new entrants is on average substantially below that of Portugal and Greece, the current worst performers in that regard. The gap now between the top and the bottom and per-capita GDP is going to be bigger than it ever has been within the EU. The second reason is the numbers. Ten new members with over 50 million extra inhabitants makes this the largest expansion the EU has seen thus far. So the EU is going to be much bigger and much more diverse than it ever has been. That's why it can't survive in its current form.

That could be a good thing. Could the EU become even worse than it is now? If the Euro-federalists get their way, certainly. The staggering inertia of the bureaucracy that has accumulated will not be deflected easily. But the changes that the EU will have to face are more fundamental than that. What is the purpose of the EU? Does it really want to become a country? Does it want to promote prosperity, civil society and a liberal democracy? The latter goal is much more achievable than the former, and more desirable too. The problem is of course that the EU is no place of moral authority to lecture on any of those subjects. Lately the EU's meddling with the economy has led to decreasing prosperity, while its opaque and elitist power structures have eroded the foundations of the social compact that makes civil society possible and democracy and the EU have been kept firmly separated.

Yet the EU's best chance for success and survival is to abandon its ambitions for creating a United States of Europe, and focus on more practical goals. Make the free trade area work. Help the new entrants in establishing and engraining the insitutions of a pluralistic society. Once you remove the prospect of the "USE" from the equation, many issues become more tractable. The key here is Turkish accession to the EU. If the goal is to create a single European Superstate, then there is no way Turkey can be admitted. But the Superstate idea would not work even now with the 15 members, as the divergences in culture and mores are too large to become part of a single country. If the EU becomes an enabler rather than the petri dish for a Superstate, then Turkish entry is no problem. In this whole debate it's not the Turkish domestic issues that are the impediment, it's the unresolved fundamental dilemma at the heart of the EU that has paralyzed the situation.

By allowing these 10 new countries into the club, the EU will be changing; it will never again be as politically or culturally homogenous as it was in 1957. The rearguard action to maintain the old spirit of those days (and the French vision of a Europe in its image) is now being fought at the constitutional convention. The new EU constitution will try to preserve the original spirit, and it may succeed in that on paper. But it will be overtaken by events on the ground. The positive outcome would be a reformed EU that makes more sense than the current structure, a Free Trade Area Plus. If things get ugly, then the EU will slowly disintegrate as it loses its relevance, and we'll see a Core EU develop in the west of the continent.

The is Old EU is dying. Let's hope the new one will do better.

Postscript: the story about the monkeys with which I started this article can be traced back to Competing for the Future by Gary Hamel and CK Prahalad. No references to any actual study can be found, so it's likely to be just a fable. These things tend to take on a life of their own and become a standard part of management consulting. As a parable they work fine, but it would have had much more impact if the story had been true. Oh well... welcome to the world of management consultants and their ilk.

December 13, 2002
The color of money

What does money look like? No, really. One of the interesting things I have noticed is the completely diametrical view European and Americans have on this issue. Many Europeans will say that dollar bills don't look like real money, because they're so dull and uniform, lacking the distinctive art work that goes into European bills. Conversely, Americans will cite exactly the same reason for claiming European bills are toy money, because they're so colorful and frivolous, lacking the gravitas of US dollar paper money. I guess it's a matter of pattern imprinting while growing up. The bills you handle every day become the benchmark for what you consider "money," and these perceptions become deeply engrained. There's no "natural" look to paper money, it's just what it is.

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Raising capital in Oz

Here's a new market for all those underemployed and underutilized investment bankers who still have jobs: the Daily Planet is set to go public in an IPO in 2003. What's newsworthy about this is that the Daily Planet is a brothel. The brothel is only aiming to raise 22 million Australian dollars, so it's by no means a huge IPO, but I am sure the investment bankers will be happy to take on the business. It should be enough for the Daily Planet to finance its further growth. One appealing aspect of its business that it's recession-proof, or so the proprietors claim. That will put it apart from the rest of the hospitality business, which tends to be highly cyclical. If the Daily Planet can generate a steady stream of free cash flow and return a good proportion of earnings to investors through dividends, it could be an interesting combination of a high-yielding stock with strong growth if they expand. Of course, the key question is: how will analysts investigate the Daily Planet's financials before buying the stock? Field research could become very interesting indeed. "All part of due diligence, sir!"

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Keeping tabs on the people

The Dutch Minister of Justice has announced plans that would make the carrying of an ID compulsory for everyone over the age of 12. Anyone who fails to produce a valid ID on demand is liable to be fined up to 2,250 euro or be jailed for a maximum of 2 months. Moreover, it's not just the police who'll be able to demand an ID under the threat of fines and incarceration, but other civil servants involved in checking compliance with government regulations will be able to do so too. For a supposedly "liberal" nation, such intrusions of the state into one's personal liberty are remarkably popular in this country.

It's bad enough that the police would be granted this power given the sad state of law enforcement in the Netherlands. But by giving every meddling two-bit bureaucrat the same powers is heaping madness upon insanity. These measures come in response to increasing worries about crime, but it's really just a proposal for creating the impression that something is being done, rather than truly tackling crime. But the deleterious effect on civil liberties will be felt nonetheless. Criminals will hardly be inconvenienced, while it'll be the ordinary citizens who'll be on the receiving end of this ID scheme. If crime in New York can be reduced without compulsory ID, then sure placid old Holland can do it as well, one would think. Why should the police and petty bureaucrats get this power, when the auhtorities are capitulating to criminals and the police will not deign to go after burglars?

Since we've got elections coming up, I've tried to find what the major parties think of this. The VVD, the party that calls itself Liberal (in the classical sense) comes out in favor. The reasoning is a bit contorted, because they say if the police can search you, they should also be able to ask you for an ID. But the thought that the searches might raise serious civil liberty concerns does not cross their collective minds. The PvdA (Labor) Party waffles on the issue, asking whether compulsory IDs will increase safety without answering the question. Instead, they go on the tried-and-failed road of spending more money on prevention. The Christian Democrats of the CDA are in favor of this measure. Only the eco-luddites of the Green Left party seem to opposed to it.

Not exactly inspiring, or indeed an encouragement to go voting in January.

December 12, 2002
Fixing the euro

No, they're not talking about the fundamental problems of the euro. That would be too much to hope for. However, one of the complaints of consumers in the Eurozone has been that prices have gone up in the past year as a result of the introduction of the single currency. It has been one of the big discrepancies between what people think they're experiencing and what the official inflation statistics are telling them. Looking at the Harmonized Indices of Consumer Prices (HICP), most European countries have fairly low inflation; it varies between 1% for Germany and around 3% for Italy, plus some outliers on either side. Yet in both Germany and Italy, consumers are up in arms about huge price increases.

The difference is due to the composition of the inflation indices and a bit of psychology as well. The inflation indices try to measure the overall cost of living, which includes longer-term purchases, such as computers and printers, as well as everyday items such as groceries. The biggest increases have been in the lowest-priced items, which people buy all the time. But in the inflation index, these rises are offset by cheaper inkjet printers, for instance. This accounts for some of the difference. But psychology also plays a part, as people feel the impact of high-frequency purchases more keenly than the low-frequency ones.

But there's another psychological effect here, at least according to politicians from certain European countries: the euro coins. Apparently people put a higher notional value on banknotes than on coins, so they're much more likely to spend a one euro coin than a one euro bill. So the ECB is now considering the introduction of one euro notes. I don't know whether this would work though. Prices have already been set, and printing one-euro notes now would take quite a while and of marginal impact. As with many things connected to the euro, this is going to be a political decision in the end.

What is amusing though is how deep the European inferiority complex runs though. Witness this comment from Guy Quaden, the governor of the National Bank of Belgium:

He suggested the introduction of one euro notes could be a boost to the internationalisation of Europe's single currency. "The one dollar note is one reason for the popularity of the US dollar . . . everybody knows and uses this note."
The dollar's popularity has very little to do with the one dollar note. It's more a function of the trust that people all over the world place in the US government to maintain the purchasing power of the dollar, especially in countries where the people have repeatedly been robbed by their own government's actions. The German mark had a similar status in parts of the Balkans, where the euro has succeeded it. But worldwide acceptance of the euro as a serious substitute for the dollar will only come if the euro is seen to be as stable, reliable and trustworthy a source of value as the dollar. It's going to take a long time to build that kind of reputation. In any case, the ECB and European politicians would be better advised to stop obsessing about the dollar and start focusing on the economic problems that beset the European continent. Once they fix those problems, the euro's acceptance will increase too. One euro notes are not going to make the slightest bit of difference.

Kim Jong Il's Bush problem

It looks like it's "Plug The Times" day here , but there's another interesting article in today's edition. Under the headling Bush is keeping Kim Jong Il in his sights," Roland Watson writes from Washington about Bush's visceral hatred of the North Korean dictator:

President Bush is an instinctive and often emotional performer. Explaining Saddam?s evil, he reminded an audience this year that ?this is the guy that tried to kill my Dad?.

The President has developed a similar grudge against the North Korean leader. ?I loathe Kim Jong Il,? he told the Washington Post reporter Bob Woodward in a recent interview. ?I?ve got a visceral reaction to this guy, because he is starving his people. And I have seen intelligence of these prison camps ? they?re huge ? that he uses to break up families and to torture people. It appals me.? [...]

When the subject of North Korea came up, Mr Bush became so emotional that Mr Woodward thought that he was about to leap to his feet.

Mr Bush said that he was ?not foolish? and that he understood the threat posed by the North Korean military. He also said that he was under pressure to go slow, because the plight of the North Korean people would worsen once the United States began tightening the screws. But he added: ?I just don?t buy that. Either you believe in freedom, and worry about the human condition, or you don?t.?

I hope this clarity of vision is not getting diluted by the Appeasocrats of the State Department. I actually don't think it is. Bush is serious about this, and that is very bad news for Saddam and the Dear Leader. The Times concludes the article:
But one thing is clear: Mr Bush will not rest on any laurels he may collect in Baghdad. Pyongyang is his next target.

Damn right.

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Immigration to the rescue

Although this blog is in danger of becoming completely obsessed with the dismal demographics of Europe, I will venture forth once more, this time to comment on Samizdata's lament about the treatment of immigration in the British press. Especially the right-wing British press, which is whipping itself into ever greater furore over the threat that immigrants supposedly pose.

The other right-wing broadsheet in Britain, the Times, ran op-ed on the same topic this morning by Anatole Kaletsky, himself an immigrant (or refugee) from Russia. Kaletsky's columns are usually interesting, although on many an occasion I have wondered what on earth he was smoking. Last year, he predicted for instance that the Republicans would get punished by the electorate for the Bush tax cut. Admittedly, this was before September 11th, but still... Anyway, back to the issue at hand. His column today is title "Why Britain needs more people like me," and makes the case convincingly. Excerpts:

As an Eastern European immigrant myself, I find this a difficult subject. I am very well aware of the benefits I have received from Britain – starting from the inspiring statefinanced education I received at grammar school and then at Cambridge, to the ready acceptance I enjoyed from the British Establishment, which seemed to be almost oblivious to my foreign birth. As someone who has gained so much from Britain’s openness to foreigners and foreign cultures, I know that it may be considered self-indulgent for me to argue that Britain, too, has benefited from this flow – and could benefit even more. But with antiimmigration sentiment still strong and now enjoying an upsurge among environmentalists and other “progressive” movements, it would be even more churlish to stay silent. Mr Straw’s bold decision deserves an enthusiastic welcome. And if a Russian immigrant fails to endorse it, who else will?
This is a very valid point, one that underscores how those who call themselves "progressives" have become the reactionary custodians of a statist past. The luddite anti-technologists who fight genetically modified foods, nanotechnology, and any electronic gadget more complicated than a 1960's IBM electric typewriter somehow manage to call themselve "progressive" without so much as feeling the slightest bit of etymological dissonance.

First, the Government’s new attitude should help Britain to recognise that it is already a country of immigrants – and always has been. What, after all, were the Angles and Saxons themselves?
This is probably the weakest argument in his entire column. Theoretically, they were immigrants indeed, but there's a difference between your ancestors of 1,500 years ago roaming through Europe and having a society of that is considers itself to be of immigrant descent. You need constant immigration over the ages for that. But this is a minor quibble.
For politicians to pretend that immigration is some kind of new and unwelcome development, as they often have in the past, is a recipe for social dislocation and economic under-performance. Immigrants (defined as all British residents who were not born in this country) comprise 8 per cent of the UK population and 10 per cent of the people of working age. This is only slightly smaller than the 11 per cent share of the US population that was born abroad. London, where immigrants now make up 26 per cent of the population, is just as cosmopolitan as New York, whose immigrant population is 28 per cent. [...]

The fact that immigrants contribute more to the Exchequer in taxes than they take out in public spending may surprise many Tory politicians, not to mention readers of the Daily Mail and other jingoistic tabloids. But this is one of the many important conclusions of detailed research commissioned by the Home Office and published this week in the first of a series of studies into the economic and social impact of immigration.

Read the whole thing, as they say. Large-scale immigration from eastern Europe can be mutually beneficial for both Britain and the countries themselves, as the immigrants send money back home. The payoff could become asymmetric in favor of Britain if the flow of people becomes an brain-draining exodus, leaving eastern Europe for good. Ultimately, the demographics of eastern Europe are no better than those in the west.

Immigration has also been a hot issue here in the Netherlands. Ever since Pim Fortuyn brought it to the fore, it has been in the forefront of political debate. The main question is what to do about the unassimilated immigrants, who've live in self-imposed segregation in depressing inner-city ghettos, such as Amsterdam West. I'm not sure how many of his supporters see the immigration problems purely in terms of assimilation, or whether they're just pining after ethnic purity. In any case, the governor of the Dutch Central Bank (De Nederlansche Bank) has been banging the immigration drum too, but he's been warning the Dutch that the country is going to need increasing numbers of foreigners, lest we come eye-to-eye with demographic armageddon. In a recent interview in Trouw, a daily newspaper, reinforces his message. He warns about the great disparity in economic development between the new countries joining the EU (an item for another blog entry someday), but then goes on to speak about immigration from even outside of the EU. Translated excerpt:

A very sensitive subject, he has found, because since he first mentioned this some time ago he's gotten an unprecedented amount of personal letters, 'some distasteful.' "Closing the borders, that's really the wrong argument. It's in our own interests to steer the migration process in a partnership with the affected countries. Then you can talk, for instance about a smooth return. Look at Germany, that's always had an open policy, there two-thirds of the 25 million migrants has returned to their native countries."
Quoting Germany as a country that has been successful in managing the immigration process is saying something about the poor state that the Netherlands is in. But the problem that exists now here is that we have a fifth column of immigrants who have irredentist fantasies of establishing an islamic theocracy here, while the demographics still argue for a big increase in immigration. And there's precious little sign of awareness of this on the part of politicians. Trouble ahead.

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French U-Turn on Iraq

Good grief. The French have come around to supporting the US on Iraq.

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Now we need the positronic brains

It turned out to be a rather longer day than anticipated, so I'll leave you today with a short item on Honda's new robot. It anthropomorphic, can recognize faces and gestures and can follow you around. In fact, you can lease it for a mere $162,000 a year. Honda has already been leasing the previous model to IBM and some other companies.

All we need now is the positronic brain.

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December 10, 2002
Subsidizing the paper & pulp business

In response to my entry "Nothing to worry about", Ellie comments:

How many pages of treaty, regulations, etc. has the EU produced? We (yes, the US does this too)seem to LOVE paper. I'm especially fond of the Negotiated Agreement with North Korea. I wonder how many pages that was?

Well, never fear, Ellie! The legions of Dilacerator ferret gnomes have been scouring the internet in search of answers. Tabulating the sum total of all EU regulations would instantly throw the server farms at Google into meltdown, so my crack team of deaf-mute moles limited the search to just the acquis communautaire. This is the basic body of laws, rules and regulations which all EU countries much have implemented. And new entrants must also push the acquis through their parliaments in order to be allowed to join. So how big is it? The Greek-Cypriot EU accession site has the answer:
Today the acquis communautaire consists of about 80,000 pages, but it is continually being changed, improved and increased as the EU continues to more forward.

And this is a from a site that's actually in favor of Cyprus joining the EU! Yes, it's only 80,000 pages now, but don't worry, they're making more laws! Jeeez folks, what a mindset...

As for the page count of the Agreed Framework with North Korea, the underlings and servitors are Dilacerator Mansion are being spurred to erase their sinful failure of finding the answer. Gentle electric shocks and the occasional flogging will, ultimately, produce results.

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The AEL spreads its wings

The Arab-European League (AEL) is an organization of radical Arab immigrants of the second generation, which found its origin in Belgium. Its leader has recently been arrested and freed again there; the entire chronology can be found on Live From Brussels. Now the organization is spreading to the Netherlands, led by 32 year old M'Hamed Zaghoubi, who has lived in Amsterdam since the age of four. He dropped out of the "HBO," a vocational training course and is now unemployed. The NRC Handelsbald newspaper had an interview with him. Here are some translated highlights. He says, There's an inequality in society. Moroccan youths are being disadvantaged." Then when asked about the high crime rate amongst Moroccans:

That surprises you? Since the 80's [Moroccan] youngsters have been educated to succeed their fathers on the factory floors. The Dutch educational system has failed. A difference is being made between immigrant and native youngsters. These are allowed to go to university, while most of the immigrants are sent to lower-level technical schools. Immigrants are being treated as a kind of Untermensch."

I am not a particularly big fan of the Dutch educational system (and my colleagues who have children in school are telling me it's getting worse), but it's not quite that bad. The complete refusal to accept any kind of responsibility for their own behavior and (lack of) achievements shows how thoroughly they've assimilated one part of Western culture: the vocabulary of victimhood. The gratuitous reference to the Nazis is deeply revolting. When Zaghoubi and his family get shipped off in cargo trains to be exterminated in concentration camps, then he'd have the right to complain of being treated as an Untermensch. He continues:
Dutch society is to blame for the societal problems caused by immigrant youngsters. That's why we have to increase awareness amonsgt Moroccan youngsters.

Again the well-rehearsed language of victimhood. The criminal is the victim. Society is to blame. Above all, don't accept responsibility for your actions, but try to get others to feel guilty instead. Disgusting. Zaghoubi is also dismissive of the established immgrant organizations. As an example he says that when he wanted to organize an anti-American demonstration shortly September 11th (!), these organizations came out against him, because he was too radical, too militant. Thank heaven for that brief glimmer of sanity (or was it pragmatism?). The interview ends with the question why Moroccans in the Netherlands, who're mostly Berbers rather than Arabs, would want to join an Arab organization. He says: "Islam unites us all, all youngsters from North-Africa."

Ah yes, this is sure to ease tensions. The multicultural future is now.

Preaching and practicing

Keeping track of what the sheikhs and imams in the Arab world are preaching, Little Green Footballs is performing a valuable service in informing us of what the Religion of Peace is saying to its subjects. Here in the Netherlands, Saudi-funded schools promulgating similar messages. The problem also extends to Dutch mosques, where imams have preaching the same litany of hate. The current affairs program NOVA secretly recorded some of the sermons last June. The imams in mosques in Amsterdam, The Hague, Rotterdam and Tilburg were filmed calling for the destruction of the enemies of Islam while glorifying martyrdom. One of them called for Allah to destroy Islam's enemies, naming President Bush and Prime Minister Sharon. After an investigation, the public prosecutor has decided not to press charges against these imams, as they deemed the chances for a successful conclusion to a trial to be small. After all, the reasoning goes, the imams called on Allah, and not their congregation to destroy the enemies of Islam.

At what point do you cross the line that separates freedom of expression and incitement to violence? The structural poisoning of the mind in which these imams engage is a big danger for the long-term survival of a liberal civil society in Europe. The traditional antidote to hateful speech is not banning it, but confronting it and defeating it by argument. This is difficult to achieve, since many of the muslims who go to the mosques live in their own cultural cocoon. With the satellite dishes, they only watch Moroccan or Arabic TV. Too many of them still don't speak or understand Dutch, and their entire social lives are wrapped in an inward-looking closed-off circle with nary a Dutch influence on it. So how to get through to them?

It is clear to me that if we don't defang the poisonous imams, the situation will sooner or later descend into civil unrest and ethnic strife. Europe's history is an indication of how ugly these things can become. The best way of dealing with the problem is to cut off the flow of money, which is still coming from places like Saudi Arabia. Meanwhile, the Dutch economy requires a much-needed overhaul, and the prime place to start is the hypertrophic welfare state, which has been sucking the lifeblood out of private enterprise. It has provided perverse incentives for both native Dutchmen as well as immigrants of all kinds to prefer doing nothing over actually finding a productive job. Time is starting to run out though, on both counts.

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December 09, 2002
President Tony Blair?

The current British Prime Minister is a strange animal. Having come from a socialist background, he remodeled the old Labour party into the new Labour party, in the process shedding many of the old socialist policies. The rightward shift came as a response to the success of Thatcherism, which rendered old-style socialism all but unelectable in Britain. Just as the Tories were running out of steam and started to tear themselves apart, Blair's New Labour won a massive election victory in 1997, and repeated the performance in 2001. He's achieved the highest post available to a Briton. What more could he want?

Well, a Legacy of course. All politicians want a legacy, but those who deliberately set out to create a legacy end up in the most trouble. Blair's weak spot has always been Europe. The relationship between Britain and Europe has been a difficult one ever since Edward Heath took the UK into the EU in the early 70's. The Europhiles have urged Britain to join the European mainstream. It's a natural progression, away from the insular nation state to the warm embrace of the community of Europe. Not going along with the European Project would mean that Britain would get left behind, become irrelevant, its economy would suffer and its people would live in misery. Catching the European train is like catching the train to the future. Europe is the future. At least according to the Europhiles, and not being part of Europe means being left behind in the past.

It's a strain of argument that relies on the belief that the "European Project" is both benign and inevitable. It is neither. The European Union lacks democratic legitimacy. It's an instrument that the European political elites are using to remove decision-making and its accoutability ever further from the citizen. It's insulated by many layers of politicians, each of whom dilutes the message from the grassroots. Often European polticians even at the national level are well-insulated from the electorate. Nor is further integration in Europe inevitable, as the Europhiles in Britain claim. The aim of turning the European Union into a United States of Europe is more likely to be the undoing of the European Project rather than its grand achievement. But arguments about historical inevitability are dangerous too, because once you've convinced yourself that a certain outcome will happen anyway, then the temptation becomes overwhelming to take a shortcut to that outcome. Communism held that the downfall of capitalism was inevitable leading to economic collapse and poverty from which the wonderful communist future would rise. So the communists took the shortcut to poverty and misery without waiting for capitalism to deliver for them.

One of the biggest mistakes of Thatcher's career was to agree to British entry into the Exchange Rate Mechanism (ERM). This was the precursor to the fixed exchanged rates of the euro, and it served as a platform for managing currency fluctuations in Europe. Thatcher finally caved in to pressure from all sides: the usual kneejerk euro-cheerleading of the Liberals, the politically motivated euro-cheerleading of Labour and the constant harping of Europhile Tories. All of them said the same thing: the train is passing Britain by. We must jump on now. Membership in the ERM became symbolic with sound economic management. It was inevitable after all. There was no point in not joining. So finally Britain joined, and by tying its exchange rate (and thus indirectly, interest rates) to the German Mark, it almost wrecked the British economy. The early 90's saw an extremely painful and deep recession in Britain, from which the country only emerged after Britain had been forced out of the ERM by currency speculators. They did Britain a great favor by liberating it from the ERM straitjacket.

But the lessons of the past are hard to learn, it seems. The same arguments are being used now in favor of British entry into monetary union as were used at the time of the ERM debate. The difference is that escape would be a lot harder now. But Blair has that glimmer in his eye for a legacy, and he appears to have set his sights on Europe. Today's editorial in the Times by William Rees-Mogg spells it out:

The Prime Minister foresees other measures to increase the power of the European centre at the expense of the individual nations. He wants to reduce national vetoes to a minimum, though, implausibly, he hopes to keep Britain?s veto on taxation policies. He wants a large extension of qualified majority voting, even beyond what was agreed in the Nice Treaty. Tony Blair wants a ?fixed chair of the European Council?, a new President of Europe. Perhaps he sees himself in this role.

If the new constitution for Europe follows the lines of the Cardiff speech, let alone the still more extravagant federalist proposals of Romano Prodi, Europe will have a more centralised and far less democratic constitution than the United States. The European nations will have lost their independence; they will, in effect, be colonies of a centralised European empire, ruled by the Franco-German political class.

Perhaps a Blair or a Jenkins will occasionally be allowed the temporary appearance of authority as the President of the Council or the Commission. The British electorate will have lost the core power of democracy, the ability to throw out a failing government. There will never again be a 1945, a 1979 or a 1997. Even if a British government is thrown out, that will have no more consequence than the electoral defeat of a county council. The real power, the European centre, will never be thrown out. It will be a self-perpetuating bureaucratic oligarchy.

Tony Blair has his own description of this new Europe. He says that it ?can be a superpower, if not a super-state?. That is the kind of glib, false distinction that from time to time makes the Prime Minister?s rhetoric uniquely repulsive. The opening passage of his Cardiff speech makes it obvious that he has been taken over by the idea of a European empire, in which he himself hopes to be a leading figure.

President Blair of Europe? The concept must be appealing to a politician who's young enough to aspire to more. Yet he's already exhausted the opportunities at home, so the escape to some grand European role might just be the kind of escape he needs. Great schemes, great legacy: be afraid. Be very afraid.

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December 08, 2002
The inscrutability of modern art

I suppose I am one of those who's not sophisticated enough to appreciate modern art. The concept of "art" has been defined to be so broad these days, that it's actually hard to tell whether you're looking at a profound statement of 21st century urban angst that also satirizes western consumerism and the SUV, or whether it's actually just a piece of flattened horseshit on the road.

I take comfort from the fact that I am not alone in this. The visitors of an art show in Germany thought the body of a woman lying on the floor was a piece of performance art. It took them a while to realize that she was dead. (Via GeekPress.)

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Nothing to worry about

Ha'aretz reports on Saddam's steady march to the bomb. Nothing to worry about here at all.

Iraq's declaration of its activities in pursuit of nuclear arms sphere did not provide any details about the states and private companies that supplied its procurement program. For reasons that remain unclear, the United Nations Security Council failed to demand that Baghdad divulge such details.
Perhaps because it's too embarrassing to too many members of the UN?
American researchers and experts in nuclear affairs who have been monitoring Iraq's nuclear efforts have concluded that 15 companies from various countries, including Germany, Switzerland and also the U.S., were involved in the transfer of know-how and equipment to Baghdad's nuclear program before the Persian Gulf War.
See above.
Gary Milhollin, director of the Wisconsin Project on Nuclear Arms Control, told Ha'aretz that a course sponsored by the U.S. defense and energy departments in the 1980s provides an example of indirect support for Iraq's nuclear efforts that went undetected by the relevant host government. The course focused on detonators, and special explosive compounds. Three experts from Iraq took part in the course - it was subsequently established that the three were involved in Iraq's efforts to develop nuclear arms.
Why are the Defense and Energy departments giving courses on detonators and explosive compounds in the first place? Isn't that something that should be kept in-house? Perhaps you could share it with America's most trusted allies, but Iraqis? Granted, it was in the 1980 when realpolitik blinded the West to Saddam's true nature, but even this should not have happened.
Companies involved in the transfer of know-how and materials, including small amounts of enriched uranium, to Iraq include - from Germany, Leybold Heraeus, Metalform H, Degussa, Arthur Pfieffer Vakuun Technik, Dr. Reutlingersohne, Neue Magdeburg, Balzer, Scmiedemeccanica; from Belgium, Sebatra; from Poland, Chemadex; from Nigeria Oranam; from Sweden-Switzerland Asea Brown Boveri; from the U.S., Finigan-Mat and also the Department of Energy.
Jeeez. I should point out that many of the companies' names seem to be misspelled here (sloppy, sloppy; although the many typos on my blog should caution me to be circumspect with pointing this out). The misspelled companies are Arthur Pfeiffer Vakuum Technik, Dr. Reutlinger & Sohne and Schmiedemeccanica. I can't find any reference to Sebatra anywhere.

Also read this report on Saddam's bomb from 1992. The proper response if of course more negotiation. We should tell him that he's been very very naughty, and that we are going to send a strong Note of Protest. We should also aim for another treaty with Iraq, in which Saddam will promise not to be naughty anymore. Since it's a complex matter, let's make it 10,000 pages of treaty. Ship it to Saddam and hope he bleeds to death from paper cuts?

(Nah, military action would be so so unsophisticated.)

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Berlusconi flaps his wing

Which wing is Berlusconi flapping? Left or right?

The labeling of political preferences in crude terms such as a "left" and "right" can be useful as a shorthand with a high information density to characterize somebody's broad outlook on life. However, it's a lossy compression algorithm, meaning that when you decompress the "right" or the "left," you will end up with less information than with which you started. Such lossy linguistic compression is often used to avoid excessive verbiage. And by turning down the level of compression you can achieve a better correspondence between your original material and the output from the compression cycle. Liberal, conservative, christian-democrat or social-democrat all have a better-defined meaning than the "left" and "right" labels. Another problem with the "left" and "right" labels is that they imply a one-dimensional spectrum along which people can position themselves politically; when's the last time someone described himself as "top-left" politican or a "front-middle-right" one? Generalized vector spaces of political preferences? Applications of linear algebra to political taxonomy? Perhaps some other time. There's also the minor issue of different labels meaning different things to different people. The canonical example is "liberal," which has many different meanings, both in Europe as well as the US.

Having said all that, there's been a shift to the "right" in many European countries over the last years, with victories in France and Italy as well in some smaller countries. One of the exponents of this new wave of right-wing governments can be found in Italy, where Silvio Berlusconi heads is prime minister. In the run-up to the election, he cited various right-wing luminaries such as Margaret Thatcher as examples for him to follow. So he's made all the right noises too. Now that the pudding has been served, the nibbling at it has commenced. The taste thus far is, well, not-very-right-at-all, at least by American standards. By European standards, Berlusconi's government is part of the "right-wing" mainstream.

The latest ingredient that has gone into the Berlusconi Pudding is the crisis at Italian car manufacturer FIAT. This is a company that has the status of a hallowed institution in Italy, as it provided Italians with a taste of motorized freedom in the 1950s. As a consequence of doing that, it also became Italy's industrial powerhouse, employing tens of thousands of people. FIAT is more than just a company for Italians; for many years, FIAT was synonymous with Business and Industry in the country. At its peak, FIAT's share of the Italian car market was far above 50%.

Now the company has fallen on hard times. The old, cozy and protected domestic market has had to be opened to foreign competitors. Management of FIAT had become part of the ruling elite in Italy, running the company more for prestige than for profit. The labor unions representing FIAT's work force were (and still are) dominated by the communists. Management happily played along with the labor unions' pro-Soviet leanings, which led to the bizarre spectacle of Gianni Agnelli, the patriarch of the family that owned a majority stake in FIAT, embracing the Soviet minister of culture at an exhibition of Soviet Communist Art at FIAT headquarters in Turin. While the red flags were flying at Lingotto, the FIAT HQ, the people of Eastern and Central Europe were busily tearing them down. Agnelli himself also had an iconic status in Italy similar to that of his company. There's also a link to Italy's formerly inbred and incestuous investment banking community, which used to be dominated by Mediobanca. The salotto buono where Italy's industrial fate used to be decided in cigar smoke and behind closed doors is no more. Neither Agnelli, nor FIAT, nor Mediobanca have much of their influence left. The main reason is FIAT's disastrous performance and the realities of a modern market economy.

FIAT is in desperate straits after producing many poorly-received cars. Its only hope for survival is a bailout by minority shareholder GM. Just ten years ago the mere thought would have been unthinkable in Italy, but it now looks as though FIAT will end up as a piece in the global GM puzzle. Even so, FIAT needs to stem the tide of red ink that is flowing. In a bid to restructure, FIAT is trying to fire 20% of its domestic work force. This has led to massive protests by the labor unions, who demand that the government Do Something. In talks between the government and FIAT management, Berlusconi blamed management at FIAT for its problems and grandly said that he "save" the company.

Speaking on Italian television tonight, Silvio Berlusconi made some further telling comments. Apart from sniping at the unions and the opposition, he obviously tried to put the results he'd gotten into the best light. What do they consist of? FIAT has agreed not to close any plants, as originally intended. The plants will be idled instead without the workers getting fired. The government will pay them 80% of their salaries in the interim and the government will also give a sweetheart deal for early retirement for 2,400 employees. In the first year the taxpayer will give them their normal salary in return for them sitting at home doing nothing, in the second it'll be 80% and normal pensions after that (which are pretty generous anyway). For all the talk about not interfering in the economy, this is a pretty hefty non-intervention, and it's going to cost the taxpayer a nice bit of money. It's an indirect subsidy to FIAT, which will be able to reduce its costs in a byzantine way (at least temporarily). Not closing the unviable plants still means that chunks of FIAT's capital will remain tied up in unproductive assets.

Probably the most remarkable comment that Berlusconi made is about the semi-laid-off workers. He said:

he most determined and the luckiest among them will definitely find a second job, maybe not an official one, that will bring the family some extra income.
It's all but encouraging workers to go find a job in the underground economy, which is a strange thing to do for a Prime Minister. The unofficial jobs he refers to are the ones that don't suffer from the enormous tax burden that the Italian state places on normal jobs, such as those at FIAT. And those taxes are then used to fund bail-outs of companies who've been made unviable (in part) by the huge tax burden placed on them. Reducing taxation and regulation in the official job market would help solve both problems: fewer companies would need bailouts, and fewer jobs would unofficial.

Berlusconi's casual acceptance that the underground economy can play a role in finding the semi-laid-off workers new jobs shows that the role of the underground economy is well known and that it fills a substantial gap in the Italian labor market. Taking the next step to fix what's wrong with the official economy by looking at why people need to take refuge in extralegal employment is still something that the Italian government can't bring itself to do.

So the "right-wing" government in Italy has announced a massive subsidy for a struggling industrial giant. It has intervened in FIAT management's responsbilities in running the company and it's using more of the taxpayers' money to try to buy off the unions (who have come out against the deal). It's all perfectly normal for a European "right-wing" government. Who needs socialists with friends like this?

Posted by qsi at 12:25 AM | Comments (0) | TrackBack (0)
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December 07, 2002
Global Aging

I have blogged before about the problems that demographics pose for European countries. Within Europe, the only three countries that have a supplementary funded pension system are the United Kingdom, the Netherlands and Switzerland. All the others are in deep trouble one way or the other. But that's just looking at the pensions side. I only just discovered The Aging Vulnerability Index (pdf) published as part of the Center for Strategic and International Studies' Global Aging Initiative. The aim of the Aging Vulnerability Index is to measure how vulnerable countries are to the problem of an aging population. The index consists of four main areas of investigation, in the words of the authors:

  • public-burden indicators, which track the sheer magnitude of the public spending burden
  • fiscal-room indicators, which track each country?s ability to accommodate the growth in old-age benefits via higher taxes, cuts in other spending, or public borrowing
  • benefit-dependence indicators, which track how dependent the elderly are on public benefits and thus how politically difficult it may be to reduce their generosity
  • elder-affluence indicators, which track the relative affluence of the old versus the young?another trend that could critically affect the future politics of benefit reform

This analysis goes a step beyond looking at the demographics of each countries, and actually tries to calculate how expensive the pension commitments are. Modeling future developments, especially as far ahead as 2040 is fraught with difficulties. I think we should look at the results not so much as predictions of what will happen, but a what-if analysis of what might happen if no major changes occur. That's the key point to bear in mind in all of this, but it is a valid starting point as doing nothing is the comfortable default.

There are two sides to this kind of modeling: the liabilities and the economic development. Modeling the liabilities is usually very complex to do, especially if you want to integrate the finer details of current pension systems into the mix. You need a demographic model, with birth rate assumptions and mortality tables. Then, once you have the population development, you need to calculate how much in pension rights everyone gets. If it were an analysis of a pension fund, you'd also have to calculate the present value of these rights. So while all of this is very complex, this is something that can be done quite accurately in general. It's just a lot of painstaking work. In the kinds of broad-brush analysis like this one, you can make simplifying assumptions which reduce the amount of work considerably. It's the economic development side that's usually easier to understand in its parameters, but also much more contentious. The impact of taking a slightly higher GDP growth rate on overall results is enormous if you look at periods as long as 40 years. So again I come back to my earlier point: don't look at this as a forecast, but more as a what-if.

The results of the study are somewhat surprising. The report groups the countries into three tiers: Low, Medium and High vulnerability countries.

Rank Country Index Score
1 Australia -1
2 United Kingdom +7
3 United States +18
4 Canada +42
5 Sweden +48
6 Japan +50
7 Germany +52
8 Netherlands +62
9 Belgium +63
10 France +83
11 Italy +84
12 Spain +93

The scores are scaled such that 50 is the average, and 0 and 100 represent respectively scores of minus and plus one standard deviation from the average in each score.

The trio of Australia, UK and US are the Low Vulnerability countries, which have their house in reasonable order and can face the future with some confidence. The Medium tier countries are Canada through Belgium, who all face substantial challenges. Lastly, the High Vulnerability countries are France, Italy and Spain, who will end up in deep trouble unless they take drastic action. But the scope for taking action is part of the analysis, which in part has pushed these countries to the bottom of the list. How likely is real reform in France? Not very.

The only country that can lay claim to having sorted out its pensions problem is Australia. Although it has favorable demographics to help, the key to its excellent score is the Superannuation Guarantee that was introduced in the early 1990's. This is a mandatory, private and funded retirement account, which by 2040 will reach 11% of GDP. With the "Super" contributing more and more over time to Australians' pensions, the current pay-as-you-go system is being reduced. The privatization of retirement provision is going to be a boon to the Australian economy and Australians themselves. The key feature is that the system is mandatory, so it does resemble a tax since you have no choice in paying it or not. But it's not really a tax since the money is still yours, except it's being put in an investment account, and you'll be using your own money for your own old age. This is a necessary feature if the government is to provide a fallback guarantee. Once you have a safety net, then the temptation will be great for some to skip their contributions entirely in the knowledge that the state will bail them out. The socialization of these costs necessitates an act of compulsion for the system to work.

The UK and US are doing relatively well, as both have supplementary funded pensions systems. The biggest problem for the US is the large increase in socialized heath care costs for the elderly in the form of Medicare. Perhaps surprisingly, it is Sweden that is the highest-scoring European country. Sweden is best known for its gargantuan public sector and high taxes, but on the pension front they are doing something right. They've set up a number of nationwide funded pensions systems (known as the AP Funds, numbered 1 to 5), and Swedes can decide to which they want to contribute. If they don't want to make a choice, the government does it for them. Still, the situation in Sweden is still far less favorable than in either of the top three countries The reason Japan scores so well (relatively) is simply because its pension system is extremely stingy.

The Netherlands scores poorly, coming in at 8th place with a score of 62. Given its large funded supplementary pension system, this comes as a bit of a surprise. The report authors explain it as follows (page 29):

its public pension benefits are so generous, its retirement age so early, and its family ties so weak that elders in the Netherlands are left just as vulnerable?and dependent on public benefits?as elsewhere.

The situation in France, Italy and Spain is pretty serious. Poor demographics, very generous public pension systems, no funded pensions at all and the prospects for reform are remote.

The conclusions are clear. Sticking with the current pay-as-you-go systems is going to cause very serious problems in many countries. Remember that the scores for the countries also include the ability to implement reforms. This means for Medium Vulnerability countries that doing nothing is not an option. For High Vulnerability countries, taking action is urgently required. Australia's Superannuation Guarantee is a good starting point for other countries to follow. The most obvious candidate here is Social Security in the US, which is long overdue a change to a funded system from its current pay-as-you-go format.

Posted by qsi at 12:52 AM | Comments (2) | TrackBack (0)
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December 06, 2002
Introducing the Saudi dating service!

At first I thought it was another spambot commenting on the blog, leaving a message about Nigerian millions or somesuch nonsense. But look at the comment for this post about Saudi dating, added by a certain Waeel. The entire comment reads:

i need a outgoing girl...054213801
and he lists his homepage as "Riyadh". I must commend him on his creativity; he found the blog entry by searching for "Saudi dating," and although the article only addressed the dysfunctional relationship between men and women in Saudi Arabia (and not in a very complimentary fashion either), he did leave a comment. If he can find the entry with a search for Saudi dating, so can girls in Saudi Arabia.

A new direction for the Dilacerator blog? The stern mien of the dour and grumpy Dilacerator contorted in shock as the blog is hijacked? Actually, I'd be delighted if I could help Saudi youngsters find a way of getting in touch with one another, even through the circuitous route of blog comments. Relationships based on romance and mutual attraction are bound to work better than arranged marriages, and should help reduce the unhappiness that is eating away at the hearts and souls of the captive population of Saudi Arabia. It's clear that people like Waeed want a more normal life than the current system of Saudi Arabia allows them to live. So for Saudi dating come here.

I am currently reading the classic Princess of Mars by Edgar Rice Burroughs, which tells the story of Captain John Carter's adventures on Barsoom. Captured by the violent, brutal and barbaric Green Martians, he discovers that their violent and brutal nature is due to the lack of a traditional family structure, in which children are loved and nurtured by their parents, and in which romantic relationships are forbidden. Instead, the elders of a Green Martian clan decide who is to mate with whom on a purely utilitarian basis. Dejah Thoris, the Princess of Mars, tells John Carter about the Green Martians when they were all but certain of getting killed by them:

At heart they hate their horrid fates, and so wreak their poor spite on me who stand for everything they have not, and for all they most crave and can never attain. Let us pity them, my chieftain, for even though we die at their hands we can afford them pity, since we are greater than they and they know it.
It's eerily appropriate to the current situation, except I don't think I'd be quite so ready to lavish pity on those who'd want to kill me. Perhaps I'm just too bloody-minded. Anyway, back to the main point. I think the chances of success in helping Saudi youngsters in the dating game are fairly limited, still it's worth a try (and it's an interesting experiment). You can help if you have a web site or blog that's being indexed by Google. Simply link to Saudi dating and let's see if we can help them. Introducing the insidious concept of dating to backward cultures such as Saudi Arabia's is also part of the wider war in which we are now engaged, so my motives in this are far from altruistic. Convert them to our ways. Help them attain the freedom they seek. Throw off the yoke of the Wahhabist tyranny.

And best of luck to Waeel!

Posted by qsi at 11:36 PM | Comments (11) | TrackBack (0)
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December 05, 2002
Increasing labor mobility in Germany

One of the problems the Eurozone faces as a single currency area is the low level of labor mobility. True interregional labor mobility only came about in the US in the 20th century, once the transportation network was sufficiently developed. Europe faces a different problem, and it is cultural and linguistic. Moving from one country to another is a much bigger change than moving from one part of the US to the other. At least in the US, you'll still be able to speak the same language (yes, even in Miami, although knowing Spanish there is a very big plus), and you'll be surrounded by familiar chains of shops and restaurants. In Europe, the language will be the first big barrier, followed by the differences in culture and habits. This is much more of a problem for the middle segment of the labor market than the either the top or the bottom ends. At the top end, people will be sufficiently well-educated and intelligent (one presumes) that they can adapt to new circumstances with aplomb. The large expatriate communities of scientists and businessmen attest to this flexibility (insert obvious joke about businessmen's intelligence here. If you limit it to finance, I'll even agree.) At the bottom end, manual laborers can get by doing menial tasks without needing to know much of the language. But middle-class labor mobility is still very low, and is likely to remain so.

Widescale labor mobility is a necessary ingredient of a successful modern economy. This would not be such a problem had Europe not embarked on the project of the single currency. Fluctuation of exchange rates, even within the rigid structure of the Exchange Rate Mechanism that preceded Monetary Union, was one escape-valve for regional differences in economic performance. A country that had high inflation could devalue its way back to competitiveness, albeit at the cost of impoverishing the entire country by the devaluation. Now this transmission mechanism has been removed, and the relative exchange rates have been set in stone. The effects of differentials in economic performance will ripple through the Eurozone economy in the form of divergent inflation and unemployment rates. Can Germany deflate its way back to competitiveness? Lowering the aggregate price level is not unheard of. The cumulative inflation rate in the US from 1870 to 1920 was about zero. But that was in the era when the currency was backed by gold.

The few examples that we do have a countries with fiat money deflating over protracted periods of time are not happy ones. The specter of Japan's last ten years are easily invoked in this context. Even a weaker yen has not had much impact on Japan's problems, and the current campaign by the Japanese government to talk the yen down to 150 or 160 is not going to solve the problems either. Japan has tried all the Keynsian recipes for rekindling growth. The last ten years have seen a stupenous amount of money being wasted on "infrastructure" projects, which were supposed to kick-start domestic demand. At the end, Japan is facing a wrecked economy, government debt of 140% of GDP, a staggering budget deficit and a financial system that is on the verge of collapse. There's another Japan too, that of the exporters who've been restructuring and sharpening their operations, but their prospects have the threat of a systemic collapse hanging over them. Everything has been tried short of implementing free-market, supply-side reforms. Tax and spend has been tried and the Bank of Japan has been running interest rates at zero for years. This still means that real interest rates are positive, as inflation is negative. Succumbing to political pressure, the Bank of Japan has done a remarkable thing in the last year: it started creating money at an amazing rate. The monetary base in Japan is expanding at a rate 30% year-over-year, with a similar increase in narrow money as measured by M1. But if pushing on a string was ever an appropriate metaphor, this is its quintessential moment of glory. Broad money, as measured by M3 and M4 has barely budged; M4 is growing at just 1% year-on-year. The money multiplier which exists in a healthy economy has put a big Closed sign on its door and gone into hibernation.

So deflation is not exactly a good option. But what can Germany do? It can go for reforms to restore the competitiveness of its economy, but at the moment it seems more bent on slowing it down rather than reforming it. While Germany is not doing much about it, the some Germans are. They're leaving the country. This is nothing new at the top end of the labor market, but now we are seeing the bottom end looking abroad. Germany is now facing paradoxical situation where its own working class is seeking employment abroad, while it is still attracting immigrants itself from poorer countries. The numbers are still very small, so it's not making much of a difference right now. I do hope that Germany never actually ends up in a situation where a significant part of its population seeks work abroad, simply because that would imply a massive economic meltdown there. The situation right now is bad, but a meltdown is not. It has the potential to become one quite easily.

Posted by qsi at 10:43 PM | Comments (0) | TrackBack (0)
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Trust them, they know what they're doing

On my visits to the US, I usually end up spending some time and money in various electronics stores to stock up on various electronic gadgets and toys. The price differences can be substantial so it's worth a try. There's always some good deal to be found with a whole raft of rebates on certain products. Best Buy is kind enough to print all the material you need for their rebate at the check-out; CompUSA gives you only one copy of the receipt, so you have to make another copy yourself to send in for the rebate. Shopping around for the best deal and comparing marked-down prices, rebates and juggling price-match guarantees are all a normal part of shopping in an environment where competition thrives. So while you're picking your way through the new tradition of pre-Christmas sales, spare a thought for the Germans. You see, offering rebates and discounts in Germany is illegal.

The bizarre world of Germany's Unfair Competition Law (known by its German acronym UWG) has been created in the name of protecting consumers. It's only since last summer than German retailers can offer some kinds of rebates on articles, while they can have sales only twice a year. The Frankfurter Allgemeine explains:

The UWG has some features that may strike foreigners as curious. It contains, for example, a ban on the “exaggerated luring“ of customers and certain restrictions concerning the size of the discount that can be offered. Its most controversial section forbids merchants from announcing that sales will remain in effect for only a limited period because the prospect of a looming deadline for the expiration of a special offer could put “psychological pressure“ on customers. Retailers are allowed to reduce prices for a limited period of time, but only if they do not previously announce that the reduction will be temporary.

For instance paragraph 7 of the UWG specifically outlaws extraordinary retail activity that serves the acceleration of turnover and that gives the impression of bestowing special deals on customers. The applicability of this law goes beyond rebates and discounts, as it can be and has been applied to innovative retailers who sought a competitive edge. For instance, not too long ago the owner of a kiosk in Berlin had the idea of stimulating sales by accepting once again German marks. There's still an enormous hoard (estinmated at 8 billion euro) of marks in people's possession. In any case, he quickly fell foul of the UWG and was ordered to pay a fine. The clothing chain C&A is now running a promotion this week accepting marks too. Since they had deeper pockets and afford lawyers, they actually won the case and can now legally use the acceptance of marks as a competitive advantage. The UWG is is not a law against unfair competition, it's a law against compeition in general. The law was made by people who think all competition is unfair.

In an article on this year's Christmas shopping, the FAZ explains the kinds of things the retailers are trying to do within the limits of the current law, but many are operating in a legal gray area anyway. With the economy as depressed as it is, retailers are eager to get any advantage they can in their bid for consumer euros. It looks like this is going to be the best bang-for-the-buck shopping season in Germany in ages, but not everybody is happy with this. The largest labor union, going by the incongruous name of Verdi, is riding into battle against the discounts and the sales, lobbying to prevent any further relaxation of the UWG. Quoting from the article:
Verdi has demanded an end to retailers' current discount frenzy and seeks to prevent amendments to the German law against unfair competition, which retail lobbyists favor. “We need regulations because the market alone clearly isn't capable of putting an end to this nonsense,“ said Wiethold, adding that if the year 2003 turned out as bad as 2002, several big companies would be on the brink of insolvency.
"This nonsense" is a great boon to consumers, and considered perfectly normal everywhere else. I don't understand why the union would be opposed to this. It seems Verdi is acting out of reactionary reflex against anything that could be called liberalization. As in many other countries, the labor union have long since stopped being the champions of a downtrodden working class, but have turned into political support groups for left-leaning parties. Three-quarters of SPD members of parliament are union members, so the positions that the unions take do matter directly in politics.

The UWG also applies to areas that are not directly connected to price. The services that retailers offer can also violate the law. One famous case is the Land's End guarantee, which was ruled illegal in Germany. Showing complete confidence in your own product is in the eyes of the German law also an act of unfair competition.

But think of the vision of consumers that the UWG has: apparently, people are so helpless, so stupid, so feeble-minded that they can't resist spending money when a nefarious retailer dangles a discount before them. You're not allowed to say when any rebates end, because that might put psychological pressure on shoppers. Of course it does! But that's only a bad thing if you think shoppers can't decide for themselves whether they make use of the current sale, or whether they'll wait for the next one. The UWG is a prime example of an authoritarian, elitist mindset, that simply can't conceive of "Them, the People" being sufficiently resourceful to fend for themselves.

Actually, even this is a very benign reading of the mindset of the framers of these laws. The UWG has survived more or less intact since its introduction in 1933 when the Nazis introduced the unfair competition law to protect the Master Race from manipulation by the evil Jewish shopkeepers. It's sad that such a vile anti-semitic piece of legislation has been able to survive this long, even if stripped of its original intent. Less surprising is that the law appeals to those with a collectivist instinct even now.

Posted by qsi at 10:26 PM | Comments (0) | TrackBack (0)
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December 03, 2002
Back to Italy

I'm on a ridiculously early flight to Italy tomorrow morning, and I won't be back till Thursday. This means blogging will resume around the time of my return.

Posted by qsi at 11:29 PM | Comments (0) | TrackBack (0)
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Citizenship Exchange Program

I don't want to do this issue to death, but something occurred to me in reading Steven Den Beste's response to my comments about the troubled prospects for Europe. He writes:

The remarkable thing about the brain drain is how one-sided it is. It's not so remarkable that Europeans are coming to the US; what's remarkable is how few Americans go the other way. European companies don't recruit here, and few here I've ever met have any interest in moving to Europe. That alone says enormous amounts.

The Americans whom I have encountered here in Europe tend to be here temporarily, sent by the companies they work for to spend a few years in their European operations. I used to drive past the American high school in the Netherlands on my commute to work, and you'll find similar clusters of American expatriates working here. But when their stint is over, the vast majority of them move back.

But it's not true that there are no Americans who want to come to Europe. In fact, I've met a few when was traveling through Silicon Valley this summer. No, they're not Silicon Valley engineers, but they're the humanities majors at the elite universities in the area. They're the folks who inhabit the warrens of Indymedia, the Naderites who think America is the root of all evil in the world and generally fawn over the sophisticated superiority of Europe.

So I'd to propose a Citizenship Exchange Program. It's obvious I'm a complete misfit here in Europe, just as they are in the US so both sides benefit. Under the CEP, any American could exchange his citizenship for that of a European country if he finds a willing donor. The change would be total: no vestigial rights, no green card. Just as if they'd never had American citizenship in the first place. An analogous situation would prevail for the European counterparty.

The snag is this: how many of them would actually be willing to take that step? How many would really give up their American passports? For all the whining we've heard from Hollywood liberals about George Bush's election victory, most of them still seem to be living in the US as citizens of the US. If they hate America so much, why not take the obvious next step? Let's make it easier for them and see what happens.

Posted by qsi at 10:50 PM | Comments (12) | TrackBack (0)
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Dutch politicians discover blogging

It looks like the blogosphere is having an impact on Dutch politics too. Or rather, the phenomenon of the blog has reached two Dutch politicians: Klaas de Vries of the Labor party. It was not so long ago that the previous Prime Minister Wim Kok was seen at a computer grasping a mouse and pointing it as a remote control at the monitor.

These sites may be blogs in name, but they're still a far cry from what goes on in the blogosphere. Gerrit Zalm is the VVD's top candidate, and if his party were to get most votes he stands a good chance of becoming Prime Minister. Right now, the polls make that unlikely. Zalm's blog is definitely the less interesting of the two. Most of his blog entries are boring. I don't care that he made breakfast at 11 AM last Sunday and that it consisted of eggs and croissants. I don't care whom he met for dinner, or whether the pea soup was any good. His blog is mostly a journal of what he did, where he went, whom he met. He does go into the meat of politics now and then, but there's way too much personal fluff. But Zalm is not a real blogger: he seldom types the entries for his blog himself. Instead, he uses the phone to dictate his entries. Often he'll even write the blog entries in longhand on paper for someone else to type. What next? Chiseled cuneiform script? Zalm's blog is very much a calculated tool, supported by the machinery and funding of a political party. There's nothing wrong with that, however it's a far cry from most bloggers who just type stuff at their screens for the hell of it.

Klaas de Vries is closer to what we would recognize as a pure blogger, as he does most of the work himself. He's even had his blogging burn-out already, but I find his tone more engaging and his content more politically relevant, even though I disagree with more of it. The political blogs appear to be succesful. They don't have open counter on their sites, but the VVD claims between 5,000 and 10,000 hits per day for Zalm's site. I suppose de Vries will be getting a similar amount of traffic. Apparently it's mostly young floating voters who visit the sites, so it certainly makes sense for them to continue with elections coming up in January.

Blogging is not easy, Zalm has found. He rewards himself with a cigarette for each entry completed...

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The election circus in the Netherlands

Since the fall of the Dutch government in October the political circus has been gathering momentum. Just as the LPF, the List Pim Fortuyn had made a complete joke of itself after its stunning election victory in may, most of the pre-election color has come from them. After much internal wrangling, including attempts by some ex-LPF ministers to set up their own parties, the situation seemed to have calmed down a bit until the LPF got sued by some of its members. Their complaint was that the current leadership of the LPF had not been duly elected, and that therefore they had no authority to make any decisions on behalf of the LPF. Amazingly they actually won, and for a few days it seemed as though the LPF might not even be able to put up candidate lists in time for the election because of this ruling. They seem to have scraped through though.

Not content with letting the LPF get all the attention on the weird news front, the LN (Livable Netherlands) party also provided some amusement by appointing motivational guru Emile Ratelband as its top candidate. At best, the guy is a scary example of management consulting gone horribly wrong. At worst, he's not a very stable person mentally. His former wives have accused him of behavior that verges on the psychotic. His two sons he named Rolls and Royce. He also has the dubious distinction of having scored the lowest ever on political popularity since he got the LN job. No other politician of any party has ever had a favorable rating as low as his: 1.4 (out of 10).

The polls show that the LPF is headed for a massive loss, down from 26 seats in the current parliament to about 6 or 7. Still, this is a lot better than I had expected, because my initial reaction was to write them off completely. At the time of the fall of the government the LPF was down to 1 or 2 seats in the polls. So where are all the LPF voters going? The two other coalition parties of CDA and VVD are not benefiting much, gaining perhaps a handful of seats. The big winner is the SP, the Socialist Party, going from 9 to 24 seats in its most favorable poll, almost overtaking the Labor party at 27. Now, the SP is not your run-of-the-mill social democratic party. That is the PvdA (Labor). The SP is much, much further to the left of Labor and has always worn the mantle of a protest party. How far to the left? Well, calling them stalinist would not very far from the truth. Their party structure is modeled on the communist parties of the Soviet Union and Eastern Europe before they were liberated. Their party program is one that would recreate conditions similar to those. If they had their way, it would mean a de facto end to private enterprise and the introduction of expropriatory taxation. In short, if the SP ever got into power here, I would be leaving the country very quickly.

So what happened to the LPF voters that they're switching from the right-of-center LPF (well, they never had a really coherent philosophy) to the far-left SP? It must be that most of the LPF voters were the protesters who felt disenfranchised and ignored. Pim Fortuyn gave voice to concerns over the assimilation and integration of immigrants, rising crime, failing health care and failing schools. It was more the fact that he dared raise the previously unmentionable issues that attracted the voters, who hoped that since he raised them, he could also solve them. The voters were not ideologically committed to his solutions, but were willing to give them a try. Now they're flocking to the next-loudest voice of protest, that of the SP, again without much regard for the actual ideology or program. They just want the issues addressed, and the SP is cleverly positioning itself as the champion of those causes.

The electoral arithmetic is getting complex now. The VVD and CDA do not want another coalition with the LPF, given the mess that the LPF made during the government's short tenure. But CDA and VVD don't have a majority in the latest polls, and would have to rely on some smaller parties. They might try to get the small left-of-center D66 party to join, but that would not be a comfortable fit. The "small right" parties of Christian Union and SGP are the Dutch version of the Religious Right, but that would not be a good fit ideologically either, bot would they have a sufficient number of seats. The Greens are out of the question, as is Labor. So that leaves the LPF again. Who knows what political necessity will bring?

The frightening scenario is a pure left coalition of Labor, SP and Greens. They're currently on a combined 60 seats, well short of the 75 they'd need, so the risk is not too high. A big coalition of CDA and Labor also comes up short, but the addition of the Greens or the D66 might make it work. On balance it looks like the Netherlands is going get a government that is considerably further to the left than the current one, unless the VVD and CDA can rise in the polls before January 22nd. But that is still an eternity away.

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Educational excellence

The difference in the quality of primary and secondary education between the US and Europe has long since become one of the standard items in transatlantic comparisons. The received wisdom is that the US system underperforms Europe in educational achievement. A recent UNICEF study seesm to confirm this, as the US ranks 18th out of 24. It's certainly not a stellar performance, but looking at the scores the striking thing is that the countries that the US beat out are Germany, Denmark, Spain, Italy, Greece and Portugal. Beating the southern European countries really should not be too much of a problem, but Germany and Denmark? The top scoring countries are Korea, Japan, Finland, Canada and Australia. I don't know much about the education systems in those countries, but it would seem to me that they must be doing something right, at least as measured by scores on standardized tests. But what else can you use to compare? The problem with primary and secondary education in the US is not going to be solved by throwing more money at it. Figure 10a in the report on page 14 shows that the US is already the second-highest spending country as measured by average expenditure per child from the beginning of primary education till age 15, at around $70,000. Top-ranked Korea spends less than half that.

There's a whole lot more interesting information in the report, and I haven't yet had the time to go through it as thoroughly as I would have wanted. Their main conclusion is that the best explanatory variable of educational achievement in children is their parents' level of education. Given the good scores of Asian countries (see also the chart on page 27), it is tempting to conclude that their educational systems might be worthy of copying. Yet the insane pressure that parents put in their children < ahref="http://qsi.cc/blog/archives/000103.html#000103">in Japan cannot be healthy either. Perhaps a better role model would be the Canadian, Australian or Finnish system, which might make a better fit; at least it's worth exploring how they manage to score so much better and then experiment with the findings. There are many, many school districts in the US, so it should not be too hard to find a system that works better. It's a sad commentary on the state of public schools in the US that this has not happened yet.

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December 02, 2002
Europe's dismal future

One of the subjects I have been mulling over for a blog entry for some time has hit the blogosphere: the increasingly fraught relationship between Europe and the US. There's the article by Steven den Beste, and the follow-up by Eric Raymond. Both were touched off by this must-read article. Regular readers of this blog will know that I am not exactly optimistic on the future of Europe. The economic gap between Europe and the US is widening simply because of the economic structures that have been put in place. These discourage investment, risk taking and hard work, while at the same time they provide an excellent and cozy resting place for those who want to live more or less comfortably on government handouts. But the demographics of Europe make the situation even worse. Not only are European economies not capable of generating endogenous growth, the changing age distribution of the population is going to lead to major dislocations within the next decade. Unfunded pension systems are a financial catastrophe waiting to happen, and averting disaster is becoming ever more expensive to do. This problem also exists in the United States, but to a far lesser extent. For one, immigration is keeping the age distribution more favorable (immigrants tend to be young), while many more Americans have capital-funded pensions. The only countries in Europe that have comparable funded pension coverage are the UK, the Netherlands and Switzerland. All other face a huge black hole of unfunded pension liabilities that in themselves could cause serious damage to the economy. The pay-as-you-go systems that are now in place will become too expensive to fund from taxation. This problem will also have to be faced by America's great pyramid scheme, Social Security. The relative size of the problem is still far smaller than in Europe.

America's solution to its demographic problem is not available to Europe for political reasons. Unemployment is high already, and the current immigrant population is poorly assimilated and generally a drag on the economy rather than a boost to it. To put things into perspective: America's unemployment rate is just below 6% coming out of a recession, while the recent cyclical low in Europe-wide unemployment was around 8% (and this includes some low unemployment countries such as the Netherlands and Ireland). While Europe has not been able to provide jobs to its stagnant population, the US economy has had essentially full employment while at the same time absorbing huge numbers of immigrants, both legal and illegal. But on virtually every aspect of economic performance the US is beating Europe, and it's been getting worse from the European point of view. In 1981, Europeans worked on average around 1750 hours a year, and Americans about 1820. By 2001, the American is still working about 1820 hours a year, while the average European is down to 1550. The huge improvement in US productivity, which has not been mirrored in Europe at all, has meant that even in the areas in which Europe used to have an advantage, the situation is now reversed. Real GDP per hour worked is increasing at a faster pace in the US than it is in Europe.

Steven den Beste spends much of his article talking about the brain drain from Europe to the US, and the relative paucity of high-tech companies here. A big part of the problem is the lack of entrepreneurial spirit, which the socialist welfare state sucks out of all but the most enterprising soul. It also reminds me a joke a German friend of mine (now living in the US) told me (except when he told it, it was funny): if Steve Jobs and Steve Wozniak had been Germans, they would never been able to build a big successful company (Apple), because running a business in a garage is illegal in Germany. It does not meet the regulatory requirements for work-spaces (Thou Shalt Have Daylight), and besides, incorporating is an amazing bureaucratic hassle that takes forever. Or how would brilliant minds (well, Woz's anyway) have fared at a big European company? By now, they might have done all sorts of brilliant things for the company, and risen to the ranks of middle-management making $60,000 a year. Then again, since they were college drop-outs, they would not have been hired in the first place. Actual achievement is not the criterion; the right papers are.

In listing the European companies that den Beste thinks are worthy of being called high-tech, he mentions amongst other Siemens and Philips. Now, it is true that both these companies have good research staff and have produced some interesting advances in technology. However, as companies, they're not doing well at all. Siemens is a GE-wannabe, producing everything from light bulbs to nuclear reactors. Its financial performance has long been a blot on the German industrial landscape. (Whether GE's performance is as good as the myth would make it seem is a different matter. GE Capital is a large and opaque part of GE's overall balance sheet.) Philips is somewhat similar, although it's one of those companies that has been trying to find the right reorganization to really get it going. It too is a conglomerate; Philips originally started as a light bulb producer and then branched out. Everybody agrees there's a lot of potential in Philips; it just somehow seems it never gets realized. So while their research may be top-notch, the companies themselves are not. This is partly due to poor management, but to even greater degree it's also due to the fact that management's hands are tied by Europe's "social" legislation that makes firing people difficult. Closing inefficient parts of the business should be a management decision, but in Europe, it's a socialized decision in which the labor unions have considerable say. And the cost of closing down an inefficient factory or division can often exceed the drag that it poses on the bottom line. In fact, closing a marginally profitable factory is seen as an act of evil; it makes money, does it not? Never mind that the return on equity is far below cost of capital, and that having to drag these underperforming elements along hurts the company in the long term. Still, the process of moving companies abroad is continuing. At the current rate, most of the productive assets of big European companies will have been moved outside of western Europe in ten or twenty years' time, just like Sweden has been losing productive assets to lower-tax countries elsewhere in Europe.

Den Beste also mentions the large numbers of Nobel laureates (in the sciences) who live and work in the US rather than in Europe. I was in Italy when the physics nobel prize was announced, and the newspapers were full of stories about Riccardo Giacconi, an Italian who emigrated to the US after getting his degree, and who's been an American citizen since 1977. I only had time to read two newspapers, the Corriere della Sera and Il Sole 24 Ore. Both carried soul-searching editorials asking the question why. Why does Italy not have scientists who stay in Italy and win Nobel prizes? In the interview with the Corriere della Sera, I remember how Giacconi explained it (I can't find the interview online, alas). His advisor told him: Go West. He was a brilliant and ambitious man, and his advisor told him that if he wants to fulfill his potential, he has to go to a place that allows him to do that. And that place was the US.

All of this is well and good, but it's all descriptive and provides for no answers. There are two questions:

1) how can Europe escape from its trap?
2) what should be done about US-European relations?

Answer to question 1 is simple in the abstract: unshackle the economy, let inefficient companies die, encourage risk-taking. In short, make Europe more like the US. That's where the abstract part ends, because that's not going to happen. At least, it's not going to happen fast enough. Compared the European economies now and 10 or 20 years ago, there is considerable progress on liberalization and privatization. The job needs to be carried much further, without being undermined by statist ruses such as "tax harmonization" or "social protection." Moving to a more efficient economic structure ultimately can only be done with the consent of the European electorate, and there's pain involved. Voters don't like pain, not unless the pain of not doing anything is greater. We are nowhere near that point yet. Although the pain threshold for Europeans is likely to be lower than for the Japanese, the situation will have to deteriorate further before the electorate is ready to accept radical economic surgery. The problem is that time is running out. By 2010, the demographics in countries like Germany will be tipping into the danger zone.

The second question is much harder to resolve. It pains me greatly to see this upsurge of anti-American sentiment washing over the continent, so soon after the end of the cold war which was won for us by America. Yet I fear I must agree with Zinsmeister's analysis that Europe and America are growing apart. This is actually more important from a European point of view than an American, as Europe is sliding into irrelevance, so the tension between the US and Europe will be of ever less important over time. But as America's position relative to Europe will strengthen, Europe will have the choice of either being friendly with the most powerful country in the world, or whether it will make life difficult for itself by antagonizing the US. The process of accepting the reality of European decline will probably tend to the latter option; countries who've lost their empires have seldom taken it well. Although Europe is not losing an empire, it will be losing its pre-eminent position as the center of civilization. Europe will become Greece: a place that once upon a time had a sparkling civilization, but whose vestiges are only found in museums now. Worse, because it did have that contribution to the world all those centuries ago, it will feel entitled to be respected for that. And when that respect (and its attendant freebies) are not forthcoming, it will add further to the psychopathology that's poisoning the mind. Can you say "victim complex?"

The accumulated wealth of Europe will keep it muddling along for many decades yet. I also agree with Eric Raymond's conclusion that the situation in Europe could turn very nasty indeed if the economy collapses and ethnic tensions burst into flame. The first signs are already upon us.

None of this makes me feel better about living here, but I do not feel an immediate urgency to leave. There's still time, and my situation is not so desperate that I have to pack up and leave immediately. It's just a matter of finding the right job and I am out of here.

December 01, 2002
Getting people's attention

Some time ago I read an article in the Wall Street Journal (not available online for free) about the different attitudes to advertising in different country. The article focused on Germany, where the use of humor in ads is generally frowned upon, although it is gaining in popularity. The way to advertize to Germans is by giving them the facts, and lots of them. The reason I bring it up is because I remember a funny radio commercial for the Baltimore Opera while I was in DC. Their slogan: "Opera, it's better than you think. It has to be." Their latest commercials aren't online, but some older ones are. Especially Sacrifice is funny.

Then there are the rather more mysterious aspects of advertising. Perhaps it's meant as a incongruous reminder, but why would you employ Giant Parking Chickens to remind people to take their parking tickets with them?

Then there are those who seek attention by imitation. Since Mr. Seven and Mr. Eleven got together to build a major brand, two other numerically-named people thought they could follow suit. It just ain't the same.

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Blair's end game

The endgame for Tony Blair is now approaching. Or more precisely, the concept of the Third Way and its embodiment in Blair is facing its biggest test, and Blair has just one shot at getting it right. While the Conservative opposition in Britain remains weak and directionless, Blair is still reasonably safe in his commanding position in the British political arena.

The Third Way has always been nebulous. Even its inventors and guiding lights have never been able to articulate clearly what the Third Way is. It does not stand for anything, as much as it is defined by the things it is not. Coming from the failed Left of the 1970's and 1980's, the fall of communism in the east showed the Third Wayfarers that the old pure form of state socialism was dead. More importantly, they realized that the electorate would not vote for it anymore. But they also chafed at the predominance of the free-market ideology that had come with the defeat of communism. So they know what they did not want to be: neither old-style socialists nor free-marketeers. That is what defines the Third Way. It's a pragmatic blend of both strands, trying to occupy the political middle, but its gut instincts and beating heart are still on the left.

The most successful paragon of the Third Way is Tony Blair, who arguably is also the least socialist of the lot. The French experiment with the Third Way under Jospin was half-hearted at best, and can hardly be counted as part of the movement. Schröder in Germany is closer to the Blairite mould in that he cultivated a business-friendly image and certainly spoke the language of the Third Way much more than Jospin ever did. Over the course of the years, and especially since the last election, it has all fallen apart for Schröder, and he has moved back to a more traditional left-oriented political diet. That leaves Blair as the remaining examplar who still wields power.

The endgame I have been referring to rests on domestic policy. Having spent much of his term in office trying to convince the British electorate that the economy is safe in his hands, he now is moving on other areas of concern, most notably "public services," a term that encompasses the entire interface between the state of the citizen. Crime, health care and education stand out as areas where the public is highly dissatisfied with the provision of services. If Blair can't fix these problems, he's going to have a tough time getting re-elected, even with a weak opposition.

But the stakes are higher than that, because it is the entire concept of the Third Way that will face its reckoning. Britain under the leadership of Blair (and Gordon Brown as the Chancellor of the Exchequer) has done economically well, at least compared with the rest of Europe. Inflation is low, growth is reasonable and the budget is in balance. Of course, this was mostly due to the fact that they broadly continued the policies of the previous Conservative government.

The gamble Blair and Brown are taking is that they can fix the problems afflicting the public sector by throwing more money at it. The economic stability of the last decades allows them to spend more money without running up too big a deficit, and then to use that money in order to fix failing schools, soaring crime and abysmal health provision. The key point here is that they have just one shot at it. Right now, the British electorate seems willing to pay slightly higher taxes and tolerate a larger budget deficit in order to fund these improvements. This is culmination of Third Way ideology, such as it is. But people still don't like paying taxes, and if things don't improve relatively quickly, then the notion of higher spending to fix these problems will have been discredited.

The situation is already precarious. Although the British economy has done reasonably well, it's not doing as well as Gordon Brown had forecast. The large increases in public spending he has promised mean that the budget deficit is going to have to rise very substantially over the next years. Because the starting point is favorable, he can afford to do this. Once. And then the room for maneuver has run out. We are at this point now. More money than has been promised is unlikely to be forthcoming, so the billions of pounds in the pipeline for the next years will have to do the trick of improving the quality of delivered services. If they don't, Blair's project of New Labour is at an end. More importantly, it will sink the notion that the state can provide for these services efficiently. So for those who believe that the state has a major role to play in the provision of education and health care, the next years are crucial.

Despite all the Thatcherite reforms, the public sector in Britain remains a horrible throwback to the heyday of West-European socialism after the second world war. The National Health Service promises to deliver health care for free to anyone who needs it, for instance. Since none of the patients pays for care directly, there are no signals about supply and demand in the system. In fact, demand is artificially inflated because there is no perceived cost. Unless the structure of the services is fixed, no amount of additional money is going to solve the problems. The health system needs to change to a consumer-driven organization, and without direct financial involvement from the patients (i.e. paying in some way for what they consume) the essential feedback loop that makes commercial enterprises work will remain absent. In the current structure, the extra money may make a marginal difference, but most of it will be misallocated. The misallocation comes not so much from indifference or incompetence (although both exist), but simply from the fact there can be no efficient capital-allocation system without a price mechanism. The hallowed concept of Free Health Care will have to be abandoned. But Blair and Brown are not willing to take that step, because it is the last vestige of their socialist origins (and they're stronger in Brown than in Blair). To abandon that would mark their complete transition from "left" to "right." The latest Canadian reform efforts completely dodge the issue, showing how hard it is to break free from the past.

So Blair and Brown are embarked on their biggest mission yet, and they can't take the crucial step of introducing actual market mechanisms into the provision of what are now public services. Pumping more money into the current structures is like trying to make ship go faster by putting a bigger engine in it. But if it's already traveling at hull speed, more power from the engine will have a neglible impact on making the ship go faster. You need a new hull for that. And the steamship Third Way looks like it's going to run aground, and the Captain has just made the last course correction available to him.

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