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August 19, 2019
This column is about the short-term costs of a no-deal Brexit. Like many economists, I tend to think any disruption will prove temporary, even in the case of no deal. It’s in the nature of temporary costs that, in the long term, they disappear. It’s the long-term costs that we will be left with, and they will exceed the short-term costs by many orders of magnitude. Nonetheless, the only way to the long run is via the short run. As the short run looms before us, we are all understandably fixated on a single issue: what will happen next?
According to yesterday's leaked disclosures, the Cabinet Office’s Operation Yellowhammer report predicts the short-term consequences of a no-deal Brexit: a three-month paralysis of Britain’s maritime trade, a hard border in Ireland, shortages of fresh food and medicines, and many other things. This is the central estimate, not a worst-case scenario.
One side of what passes for Britain’s Brexit debate has seized on the findings as confirming what was claimed all along: Brexit is an act of national self-harm. The other side derides them as more “Project Fear.” The government itself now claims that the report is already out of date: the government has everything in hand.
Uncertainty over the likely short-term outcome of a no-deal Brexit (or any kind is often blamed on the idea that this has never happened before. Never before has a major trading nation deliberately disengaged from deep integration with its nearest and wealthiest neighbours. But this is not entirely true. There are two precedents: 1939 and 1914. The precedents are not recent, of course. Still, they might offer something to discover.
The outbreak of World War I was preceded by what some today might call an Edwardian version of “Project Fear.” Liberally minded commentators – best known were the banker Ivan Blokh and the journalist Norman Angell – warned that war among the industrial powers would lead inevitably to disaster. They offered two predictions, one, that industrialised war would be horrible; and two, that it would prove economically and socially intolerable.
On the first prediction, Angell and Blokh were correct. Total war was horrible. But their second prediction was wrong – at least in the short term.
The industrial powers, they argued, had become so economically integrated that they could no longer tolerate the interruption of trade by war. Within a few months they would run out food – first Britain, then France and Germany. After that, they would starve and surrender. Russia might survive, based on its food surplus. But this is not what happened.
When Germany went to war in 1914, the direction of their attack was against their main trading partners. Britain alone accounted for more German trade than all Germany's allies. Russia was a major source of German food and fodder. Yet as the war dragged on the German economy did not collapse. Like Britain and France, which were even more exposed to the global economy, Germany mobilized its resources for four years of total war.
In every country the war imposed wrenching adjustments and sacrifices on soldiers and civilians alike. But the results were not intolerable, for the people tolerated them. Two forces were at work that Angell and Blokh had neglected, that prevented collapse or at least staved it off for several years. One was the basic flexibility of market economies, which enabled the industrial powers to adapt much more easily to the loss of trade and the demands of war than anyone predicted. The other was the arousal of national feeling among the peoples now at war, which led them to hate the enemy and to tolerate readily the changes and sacrifices necessary for war mobilisation to proceed.
It is true that after several years of total war the populations of Russia, Germany and Austria-Hungary gave up the struggle. But it was Russia, most self-sufficient in food, with the least industrialised economy, that dropped out of the war first. So Blokh and Angell were wrong about that too.
If the Second World War was different, it was that the great powers entered it knowing what had happened in the First. They prepared accordingly. From September 1939, the British blockaded Germany at sea and German submarines waged war on British shipping. Britain, importing 70 per cent of calories for human consumption, was as vulnerable to blockade in 1939 as in 1914. The volume of food imports into Britain halved between 1939 and 1942. Yet the economy and the people adjusted. Domestic farming expanded and prices and rationing shifted diets from meat to cereals and potatoes. The calories available for human consumption barely changed from year to year through the war.
What should we take from such experiences?
- First, market economies were generally more adaptable than government and public opinion expected. When particular goods were suddenly in short supply, it was natural for those who needed them to find substitutes and work around the shortages. As a result, shortages were usually temporary and rarely, if ever, endangered the economy.
- But second, in some countries, survival was endangered eventually, after years of war. In Germany, for example, this was much more because of war mobilization than because of the loss of trade. Still, trade had been lost, and substitutes and workarounds for missing supplies were never costless. Such costs accumulated and were added to the costs of the war. It took time for the overall costs to become evident to the point where they might drag down the war effort itself. The costs of lost trade were hidden from sight at first, partly, because the processes of market adjustment redistributed them around the economy, so that they were rarely salient and were lost in the general step-by-step erosion of everyone’s standards of living.
- Third, in the process, governments took over more and more responsibility for the basic functions of economic life. The methods of command economies were invented during World War I and were widely used from the outset in World War II. While these were usually effective in directing resources into the war effort, the consequences for ordinary people varied. In Britain, food rationing was limited to luxury foods, and was generally effective, so the nutrition of poorer households was levelled up. But where clean government and non-corrupt administration failed, food was diverted into black markets and inequality grew.
- Fourth, while the war continued, most people were motivated to accept the resulting sacrifices by leadership that provided the sense of a shared national struggle, that focused their anger at the enemy who imposed these losses on them. War leaders created an atmosphere of national unity and solidarity in which the overwhelming majority became willing to “keep calm and carry on” through years of hardship.
Since 1945 the nature of economic life and the structure of international trade have changed nearly beyond measure. Despite this, all four lessons are deeply relevant as we contemplate what will happen on 1 November, the day after Brexit.
- First, don’t underestimate the flexibility of the market economy. Any real disruption is likely to be short lived. (Unless the government makes shortages worse by adopting price controls, say.) Whatever is suddenly missing from our lives, we will adapt, find substitutes, or work around what is missing. Our lives will certainly change, but we will probably get by. If Russia and Iran can survive trade sanctions, we will survive Brexit.
- Second, adaptation and substitution will incur many minor costs, and the costs will cumulate and may well grow over time as Britain decouples from the European economy. The sharper the shock, the more trust will be broken. Since trust underpins all long-term relationships, the more our long-term relationship with Europe will be damaged.
- Third, demands for the government to “do something” about disruption and shortages will push the government to intervene more and more in our economic life. For a time at least, scarcity pricing will be regulated by public pressure if not by law. Supplies will be prioritised. Failing firms will be bailed out. Once in place, these controls will take on a life of their own. Don’t forget that food rationing, which began in Britain in 1939, did not end in 1945; the last controls were not relaxed until 1954.
- Fourth, our willingness to “keep calm and carry on” will be much less than was the case in 1939 or 1914. We are not at war. We are divided among ourselves. Our government is representative of an extreme, not of a broad national coalition. Half the country expects Brexit to be painless or quickly beneficial. The other half sees it as a self-inflicted wound. Neither of these constituencies seems likely to put up with much pain for the good of the cause.
This can change, only if the government is successful in persuading the majority that we are in fact at war, that Europe is the enemy, that pro-Europeans are the “enemy within,” and that departure from the European Union is worth any sacrifice.
August 24, 2018
Writing about web page https://www.rfa.org/english/news/uyghur/infected-08082018173807.html
Sometimes it is said that a popular image or tweet or a video clip has "gone viral." That means that it has been shared from person to person many times, like an infection.
When we use this image, we think of ideas spreading on an epidemiological model. Some people have little resistance and so they are highly vulnerable. After just one exposure, they are taken over by the idea and become carriers. Then, they pass it on to more people like themselves who are also of low resistance. A pool is formed of people who pass the idea in question backwards and forwards and, in the process, expose many others. These others might be more highly resistant, and are captured by the idea only after repeated exposure, which happens over a period of time. Eventually, as more and more people are exposed more and more times, the infection will spread to everyone who is not for some reason immune.
The same model, according to which ideas spread like a disease, is often found in the practical thinking of authoritarian regimes. Such regimes often prescribe a particular set of ideas as "healthy" -- for example, obedience to the state and loyalty to the ruler, each embodying or personifying the nation. A source of danger to the regime is then the spread of "unhealthy" ideas, which might encourage disrespect of authority or public demonstrations of discontent. They worry that ideas about free speech or the accountability of rulers, if unchecked, might go viral, undermining the stability of the regime.
The epidemiological model also prescribes the remedy. Risks to public health are contained by keeping the community under continuous surveillance, by quickly identifying outbreaks of disease, and stepping in immediately to isolate the people who have become ideologically sick, preventing them from passing on their infection more widely.
This remedy can be seen at work today in China's province of Xinjiang, where the Chinese state is trying to manage the largely Muslim ethnic minority of Uighurs. On August 18, The Economist reported:
During the past year campaigners, academics and journalists have been shedding light on the detention for “re-education” of vast numbers of ethnic-Uighur Muslims in China’s far-western province of Xinjiang. On August 13th the topic was raised at the UN, when experts undertaking an audit of China’s policies towards ethnic minorities said they had heard that as many as 1m Uighurs are being locked away.
The Economist's report went on to cite a recording by the Xinjiang Uighur Autonomous Region communist party youth league, made last year and published on WeChat. The full transcript can be found on the Radio Free Asia website, and that's where I have taken the following excerpt:
In recent times, amid a growing heavy crackdown, a small number of people—particularly young people—have gone to re-education camps to study. However, their parents, friends and relatives, and the general public don’t understand the benefits of re-education, and as a result they are worried and fearful. So let us give answers to their questions and their concerns today.
Members of the public who have been chosen for re-education have been infected by an ideological illness. They have been infected with religious extremism and violent terrorist ideology, and therefore they must seek treatment from a hospital as an inpatient. In recent years, there have been violent incidents occurring in Xinjiang, one after another, instigated by the “three evil forces [of “terrorism,” “religious extremism,” and “separatism”], which has threatened the safety of people from all ethnic communities and caused serious damage and losses. These terrorists have one thing in common: they were infected by religious extremism and a violent terrorism disease.
The religious extremist ideology is a type of poisonous medicine which confuses the mind of the people. Once they are poisoned by it, some turn into extremists who no longer value even their own lives … If we do not eradicate religious extremism at its roots, the violent terrorist incidents will grow and spread all over like an incurable malignant tumor.
Although a certain number of people who have been indoctrinated with extremist ideology have not committed any crimes, they are already infected by the disease. There is always a risk that the illness will manifest itself at any moment, which would cause serious harm to the public. That is why they must be admitted to a re-education hospital in time to treat and cleanse the virus from their brain and restore their normal mind. We must be clear that going into a re-education hospital for treatment is not a way of forcibly arresting people and locking them up for punishment, it is an act that is part of a comprehensive rescue mission to save them.
In order to provide treatment to people who are infected with ideological illnesses and to ensure the effectiveness of the treatment, the Autonomous Regional Party Committee decided to set up re-education camps in all regions, organizing special staff to teach state and provincial laws, regulations, the party’s ethnic and religious policies, and various other guidelines. They mobilized the public to learn the common language [Mandarin Chinese], complete various technical training courses, and take part in cultural and sport activities, teaching them what is correct and incorrect … so they can clearly distinguish right from wrong … At the end of re-education, the infected members of the public return to a healthy ideological state of mind, which guarantees them the ability to live a beautiful happy life with their families.
Ideological illnesses are the same as physical illnesses, in that they must be treated in time, and should never be ignored and allowed to become serious. Otherwise, later we will regret it, as it will be too late … Being infected by religious extremism and violent terrorist ideology and not seeking treatment is like being infected by a disease that has not been treated in time, or like taking toxic drugs … There is no guarantee that it will not trigger and affect you in the future. If people don’t attend re-education class because there is no one to take responsibility for the household chores, or if they choose to run away from re-education, that can be considered being very irresponsible to themselves, their families and society.
You can see that the Chinese communist party youth league's model of the spread of ideas, expressed in this long quotation, is not intellectually consistent. The unhealthy ideas are sometimes called a "virus," sometimes a "poisonous medicine." But the general idea of ideological infection could not be clearer: "Ideological illnesses are the same as physical illnesses."
One feature of this perspective is that people who have been infected are not to blame (unless they refuse treatment). Another is that they are not seen as lost to the community; they can be saved (or they must help to save themselves). Nonetheless, as long as they are inflected by unhealthy ideas, they are a danger to the community as well as to themselves -- even if they are legally innocent of any crime. Therefore, compulsion is justified to treat them.
Why am I interested? In another context, the Soviet KGB (security police) used the terminology of "unhealthy" ideas and behaviours, and of methods of "prophylaxis" (a medical term for prevention), all the time in internal correspondence and reports. If you would like to read more about this, there are some human-interest stories and more discussion in my book, One Day We Will Live Without Fear, especially chapter 5.
August 06, 2018
A great new paper by my CAGE colleague Thiemo Fetzer was in the news last week. It asks: Did Austerity Cause Brexit? Thiemo is one of those that know how to write a good abstract so, rather than try to summarize the paper in my own words, I’ll use his:
Did austerity cause Brexit? This paper shows that the rise of popular support for the UK Independence Party (UKIP), as the single most important correlate of the subsequent Leave vote in the 2016 European Union (EU) referendum, along with broader measures of political dissatisfaction, are strongly and causally associated with an individual’s or an area’s exposure to austerity since 2010. In addition to exploiting data from the population of all electoral contests in the UK since 2000, I leverage detailed individual level panel data allowing me to exploit within-individual variation in exposure to specific rules-based welfare reforms as well as broader measures of political preferences. The results suggest that the EU referendum could have resulted in a Remain victory had it not been for a range of austerity-induced welfare reforms. These reforms activated existing economic grievances. Further, auxiliary results suggest that the underlying economic grievances have broader origins than what the current literature on Brexit suggests. Up until 2010, the UK’s welfare state evened out growing income differences across the skill divide through transfer payments. This pattern markedly stops from 2010 onwards as austerity started to bite.
Thiemo’s paper has already been widely reported (e.g. hereand here). The reports have tended to sustain a simple political narrative: In 2010, as Chancellor of the new coalition government, George Osborne set the course towards austerity. Austerity provoked the rise of UKIP and anti-EU sentiment. By implication, austerity was a mistake for which we are paying now with Brexit.
Not so fast.
Thiemo’s findings should be considered in the context of another story in last week’s news. In the Financial Times on 2 August, Chris Giles reported on the latest fiscal sustainability report of the Office of Budget Responsibility The report showed that, if the economy grows and if we continue to tax and spend on pensions, long-term care, health, education, and welfare at current rates, by 2050 there will be no funding for anything else. The government will be unable to pay anything towards defence, police, transport, arts and museums, business, and local authority services such as bins, libraries, and parks.
Driving this conclusion is two problems. One, the British population is ageing. Two, the economy is growing more slowly than in the past. Spending on old age will necessarily encroach more and more on a pool of resources that is finite and will fail to keep up.
In an era of low-interest rates it is tempting to suppose that the government can simply borrow more to pay for these things. Certainly, it can do this for a while. But that can only kick the fiscal can down the road. As deficits rise and once more accelerate the growth of the public debt, the burden of debt interest payments will also grow more rapidly, tightening the screws ever more harshly.
What does this have to do with Thiemo’s paper? It affects the implications that may be drawn.
First, when slow growth makes deficits unsustainable, austerity is inevitable at some point. Certainly, this does not deprive us of all choice. For example, we can choose to have austerity now or later. But for every unit of austerity that we postpone now, we will have more than one unit down the road; that's in the nature of the accumulation of debt. As Chris Giles points out, the government’s relaxation of fiscal targets in 2016, and its more recent boost to health spending, have brought forward the point at which the government will run out of money for “other” spending by six years. We can also choose who will bear austerity’s burdens. Are welfare benefits too generous? Should graduates pay higher contributions? Should companies pay higher taxes, or their shareholders, who include both relatively wealthy households and the pension funds responsible for the retirement incomes of the middle and lower classes?
These are all choices that could have been made differently, and that we can still make. But, as growth prospects diminish, what we cannot do is choose not to have austerity at all, ever.
Second, if you’re thinking that the government should not have imposed austerity in 2010 because that policy induced people to turn to UKIP and Brexit, think again. Rightly or wrongly, George Osborne was trying to return the UK economy to fiscal sustainability by following transparent targets and rules. The purpose of such rules has been to try to bind governments, so that they do not exploit their discretionary powers to time taxing and spending decisions in order to reward supporters, win their votes, and so manipulate elections.
Which is a good thing—right?
If your present thinking is that Thiemo’s paper shows that austerity was a bad policy, ask yourself what you thought of austerity before you knew his findings. If you already had reasons to believe that austerity was a bad policy, then stick to them, whatever they were. Thiemo’s findings have not added to them.
If, perhaps, Thiemo has changed your mind—previously, you thought austerity was necessary, and now you have turned against it—then be careful. The risk you face is that you may soon get what you now wish for: a government that systematically manipulates its electoral base with fiscal generosity that must be paid for later.
March 15, 2018
Writing about web page http://www.bbc.co.uk/news/world-europe-43412702
This morning I had the pleasure of talking with Trish Adudu on BBC Coventry and Warwickshire Radio about the Russian state and skulduggery in Salisbury. In five minutes we only touched on a small proportion of what was covered in my notes. Here’s my full commentary on recent events.
Who is to blame for the Skripal affair?
We don’t yet know the persons directly responsible for the attempt to murder Sergei and Yuliya Skripal. Without that knowledge, why does the Russia government not get the benefit of the doubt? First and foremost, Russia’s rulers have form. Putin presides over a conspiratorial regime. Too many opponents, critics, and whistle blowers have come to a bad end under his rule.
The Russian government and connected Russians have offered a long list of alternative candidates for the crime: MI5, Ukraine, Georgia, the United States, and, bizarrely, the family of Yuliya Skripal's boyfriend, seeking to break his connection to a traitor. The fostering of doubt by scattering such allegations is also part of this form.
Second, Novochok, the nerve agent used in Salisbury, is a Russian product of the Cold War. It was intended to be undetectable, but decades have gone by and it is no longer. Russia claims to have destroyed all its stocks, but this is self-evidently not the case.
Third, yes, some third-party involvement is entirely possible. But that should not let the Russian government off the hook. There is a well-understood advantage for a party like the Russian state in using “third parties” to achieve goals by stealth that cannot be sought openly. Sometimes those “third parties” will go “too far,” whether by accident or design, but this is not necessarily an unwanted thing, because it increases complexity and improves the plausibility of denial.
If you think of the various ways in which Russia has challenged the international order in recent years, “third parties” were involved in many of them: seizing Crimea, invading Eastern Ukraine, and shooting down the MH17 jet liner, as well as in many domestic assassinations. Often the trail is not that long and the “third parties” are barely even that. The two men who British police believe assassinated Alexander Litvinenko were former KGB operatives.
Don’t we murder people abroad too?
Sometimes, yes. There are examples of people have done great wrongs or present great dangers, who have put themselves beyond the reach of justice. A case in point would be the execution of Usama Bin Laden. (But the US government made no secret of its role.)
I don’t consider myself to be an expert in such cases. If Western governments set out to kill people in circumstances other than the ones I just described, my guess would be that it’s usually the wrong thing to do. And any such cases should absolutely not be used to justify the attempted murders in Salisbury. (Besides, to defend oneself against a murder charge by saying "he deserved it" or "I'm not the only one" essentially concedes the allegation.)
Most importantly, Skripal was not a fugitive from justice. He was previously tried in a Russian court for being a British spy, convicted, and imprisoned. The Russian state could have shot him at the time, and they did not; the court put him in prison. Later, they decided to pardon him and release him. They could have kept him in Russia, and they did not. They let him go abroad in exchange for some of their own spies. There is absolutely no “what about” defence for trying to kill him now – let alone his daughter, who lives in Moscow and has never been charged with anything.
Should Britain respond? Yes, absolutely. The expulsion of diplomats thought to be undercover intelligence operatives is appropriate. So are measures against particular Russians now living in Britain on the basis of “unexplained wealth.”
It’s important to understand that nearly all forms of sanction bring risks of collateral damage, which we should try to limit. British and Russia have many cultural and business ties, most of them completely innocent and bringing large benefits. Most Russians living or studying in Britain are entirely innocent of connections to this or any crime. Britons living in Russia are as vulnerable to indiscriminate sanctions as Russians in Britain. Footballers and football fans are mostly innocent bystanders. Whatever are the rights and wrongs of football’s international governance, we should try not to damage these links.
We should also keep talking to the Russians, but, as the Prime Minister said yesterday, the value of high-level contacts is low when the tone of the Russian side is currently limited to sarcasm and passive aggression.
One of the most important responses should be to investigate the Skripal affair thoroughly and to publish the results, as after the assassination of Alexander Litvinenko. It was a bad mistake of the government in 2006 to try to limit the damage from the Litvinenko affair by suppressing evidence for the inquest. Lasting damage resulted; possibly, Putin or the FSB concluded that Britain was a soft target. If the individual wrong-doers in the Skripal affair cannot be brought to justice, their public exposure is still vitally important.
Beyond these things, Britain can do little alone. That’s why we have allies in the European Union and in NATO – to help defend us when we are attacked.
What will the Russians do next?
Because both sides need to maintain the appearance of injured innocence, there will be a period of tit-for-tat. These processes do not usually go to many rounds. But everything depends on intentions. If the Russian government intends to escalate the situation, and is not frightened of the consequences, there is little we can do immediately to limit the process. But it should surely give us pause for thought: why we have allowed a situation to arise in which a potential adversary feels able to act against us with impunity?
Are we risking war with the Russians? The risk of unintentional war is very low, and is nearly always lower than many people think. Many believe, wrongly, that the First World War came about through unintended escalation from trivial starting points. This is wrong: the First World War was planned in Berlin and Vienna, and went ahead in 1914 because London and Paris allowed deterrence to fail.
Today the main risk of escalation comes from the possibility that the Russian government might intend to benefit from increased international tension or from conflict. In Russia there’s a presidential campaign under way. Whatever the motivation, the only way we can protect ourselves against this is by deterrence, which requires reliable defences and a strong alliance.
October 28, 2017
Writing about web page https://www.elindependiente.com/opinion/2017/10/28/por-que-colapso-la-economia-sovietica/
This column appeared (in Spanish) on 28 October on the website of El Independiente.
Soviet economic institutions were inspired by two western economic models of the early twentieth century. One was the German war economy of the Great War, which Lenin observed and admired for its government priorities, the control of supply chains by committees of industrialists, the rationing of commodities at fixed prices, and obligatory labour mobilization. The other was the American system of mass production of standardized products in great factories under centralized management.
Combined with an authoritarian single-party dictatorship, these two models made the Soviet economy as it emerged under Stalin and persisted until 1991. Everything was designed for mobilization, production, accumulation, and expansion. To ensure this, the state owned nearly everything and directed nearly everything from the centre, either by decree or by pressure to conform, backed up by the secret police. The citizens were motivated to comply with authority by a mixture of patriotic appeals, fear, and meagre rewards. The economy could supply basic consumer goods and services, but its special advantage lay in supplying the means of national power in the world, especially a mass army with vast quantities of standardized weapons. By the outbreak of World War II, Stalin’s Soviet Union had become one the world’s two leading producers of armaments, the other being Hitler’s Germany.
The Soviet economy was capable of growth, but it never proved capable of catching up with the innovative market economies of the time. Moreover, the growth rate of the Soviet economy steadily deteriorated through the postwar period. From the mid-1970s, the Soviet Union was falling further behind the United States in productivity and prosperity. While its economy began to stagnate, the Soviet Union faced additional challenges of the time. One challenge arose from the U.S. rearmament under Presidents Carter and Reagan. Another arose from the self-imposed burden of the Soviet Union’s entanglement in Afghanistan. In the international economy the Soviet Union was reliant on the oil market, where prices collapsed.
The Soviet leaders made repeated efforts to overcome economic constraints through reforms. The reforms sought to raise productivity by decentralizing management and improving incentives for efficient behaviour, while retaining the framework of state ownership and the party monopoly of power. All such reforms failed, as the economy reverted to its basic type. Later, the Chinese leader Deng Xiaoping would say that the last Soviet leader, Mikhail Gorbachev, was a fool for abandoning the party monopoly of power without reforming the economy. But this was unfair. Gorbachev did so only after all economic reforms had been tried, including most of the reforms that had been tried out successfully in China. Why they failed in the Soviet Union is an important story, but one for another time.
The end of the Soviet economy cannot be explained by economic factors alone. This should be clear from the example of countries like Cuba and North Korea, where ruling parties are facing vastly greater economic problems and threats than the Soviet Union ever faced, yet regimes have not collapsed. In the case of the Soviet Union, politics was decisive. The conservative generation of leaders such as Leonid Brezhnev, born in the early twentieth century, died out. A new generation took command, led by Mikhail Gorbachev. The new generation was more open-minded, and their open minds had been influenced by the ideas of the dissident movement – nationalist, liberal, or social-democratic. Gorbachev was decisively influenced by ideas about social democracy and rule by consent. He did not want to rule at any price, or to rule by fear. Once it became widely understood that resistance to power would not be punished, people stopped being afraid. The Soviet Union became ungovernable and fell apart.
Politics was decisive in the moment, but at the same time we should not ignore the deeper economic forces. The Soviet economy was designed for a world of mass production and mass armies. That is no longer the world in which we live. In the 1970s, the information revolution gave rise to flexible production and a services economy based on information sharing. In the same decade, precision guidance and miniaturized nuclear weapons put an end to the idea that the future of Europe could be decided by a great battle fought by thousands of tanks and planes and hundreds of thousands of soldiers in the central European plain. The world for which the Soviet economy had been designed was disappearing. The Soviet Union had no future. No one should want to see it return.
July 25, 2017
Writing about web page http://warwick.ac.uk/cage/news/20-07-17-advantage_magazine/
CAGE (Warwick's ESRC Centre for Competitive Advantage in the Global Economy) has just published the summer issue of its excellent Advantage Magazine. Claire Crawford asks: "Does offering more free childcare help parents work more?" Luigi Pascale writes about "Globalisation and economic development: A lesson from history." Nick Crafts ponders: "Building a new industrial strategy ... on shaky foundations?" Sascha O. Becker, Thiemo Fetzer and Dennis Novy discuss "Who voted for Brexit?" And Daniel Sgroi explains new work on "Measuring historical happiness using millions of digitised books." The last word, entitled "Parting Shot," is mine, and I reproduce it below.
Scholars involved in evidence-based policy research are sure to be concerned when “alternative facts” and “fake news” take over the agenda. By that, I mean more than just selection of the facts in a biased way. This is commonplace, and the expert’s task has always been to sift the data to correct for such biases. A more difficult problem is how to respond to alternative facts that are fabricated, although outrageously different from the truth, because that’s what their authors think ought to be true.
Alternative facts of the made-up kind are not new. As the economist Ed Glaeser once wrote, fabricated stories have typically spread through society in conditions of depression or defeat, when there is a popular thirst for explanation. Why has this happened and who is to blame? Foreigners, minority groups, and corporate interests can quickly become the target of “fake news” that points an accusing finger at the “enemies of the people.”
Alternative facts can emerge in any society, including liberal democracies. But the most diligent promoters of alternative facts are dictators, who are armed with the power to suppress the truth. Authoritarian rulers do this both to build support, and to expose covert resistance. Communist regimes, for example, required everyone, including experts, to salute fictitious achievements. To show scepticism or just indifference was not an option.
Exactly 80 years ago, in the spring and summer of 1937, Soviet statisticians were being arrested and imprisoned or shot because the facts they produced were in conflict with alternative facts that their rulers had authorized.
At the end of 1926, the Soviet population had been enumerated at 147 million. In the mid-1930s, to demonstrate the happy progress of Soviet society, Stalin announced an alternative fact: the population was growing every year by three million. On that basis, by the beginning of 1937, the population should have gained around 30 million people.
The 1937 census showed only half the expected increase: 15 million were missing. Why? The regime had to choose among explanations. In secret, some experts reported that Stalin’s alternative fact was wrong. There were more deaths than Stalin projected, because millions had starved, or were shot or died in prison, or fled the country. There were also fewer births, millions fewer, as a result.
More loyal officials offered another explanation: the census did not confirm Stalin’s alternative fact because the census office was captured by traitors, who aimed to discredit the party. Stalin waited a few weeks, then decided. Those who went with the facts disappeared, along with the census. Those who went with the alternative facts were promoted, and their explanation was released to the public.
This story has two messages. On the side of pessimism, it shows that the logic of alternative facts can be self-sustaining. When experts refute the alternative facts, the believers are likely to blame them as enemies, whose aim is to confuse and undermine society.
I am also an optimist. In the age of social media no information can be suppressed for decades. Yes, tyrants and despots can exploit social media to spread lies and to identify critics. Nonetheless, more scope exists today for truth-tellers in Russia and China, let alone in the West, than there ever was under Stalin or Hitler.
June 01, 2017
On Forbes on 23 May, my co-author Paul Gregory worries about America's risk of a new McCarthyism. He warns:
Joseph Welch, the lawyer for the army in the McCarthy-Army hearings brought the McCarthy Era to an end by asking McCarthy, who had gratuitously ruined the reputation of a young colleague: “Have you no sense of decency, sir, at long last?” We are beginning to see the use of these guilt-by-association practices.
In picking up this theme, Paul echoed an exchange between US President Trump and Russian Foreign Minister Sergei Lavrov earlier in the spring. As the controversy over his campaign links with Russia intensified, on 3 March 2017 (at 2:38AM) Trump tweeted that leaks of information were turning into:
a total "witch hunt"!
Lavrov adopted and extended Trump's metaphor later the same day:
I can refer to a quote spread in the media today: all of this looks very much like a witch hunt or the days of McCarthyism, which we long thought have passed in the US, a civilized country.
And the following day, Trump returned the compliment:
Terrible! Just found out that Obama had my "wires tapped" in Trump Tower just before the victory. Nothing found. This is McCarthyism!
What is McCarthyism? For readers who are not sure what that's all about, Senator Joseph McCarthy was Republican Senator from Wisconsin from 1944 to his death in 1957. He played the leading role in a postwar search for undercover communists and Soviet agents in US public life. With or without reasonable cause, this search placed tens of thousands of people under suspicion, many of whom lost their jobs and careers, and some of whom were eventually imprisoned on criminal charges.
the practice of making accusations of subversion or treason without proper regard for evidence.
So, that's McCarthyism. Now for the parallel. Those who raise fears of a new McCarthyism suggest that we should compare today's beleaguered Trump campaign and White House officials to McCarthy's victims after the war. How well does that hold up? The comparison is reasonable up to a point. The chief similarity is the fevered atmosphere of suspicion and finger-pointing, inflamed by a widespread belief that America's public life has been penetrated by hidden enemies, who now lurk just beneath the surface of things.
On Vox on 18 May, Zack Beauchamp noted the spread of fake news about the Trump campaign and presidency, the Congress, and Russia connections:
President Donald Trump is about to resign as a result of the Russia scandal. Bernie Sanders and Sean Hannity are Russian agents. The Russians have paid off House Oversight Chair Jason Chaffetz to the tune of $10 million, using Trump as a go-between. Paul Ryan is a traitor for refusing to investigate Trump’s Russia ties. Libertarian heroine Ayn Rand was a secret Russian agent charged with discrediting the American conservative movement.
These are all claims you can find made on a new and growing sector of the internet that functions as a fake news bubble for liberals.
That same evening, my own Facebook feed provided a near-perfect illustration. The evening's news was that investigations into the Trump campaign's Russia links were homing in on a "current White House official" as a "significant person of interest." But who would that be? Nobody knew. I came across some comments by people, not my friends, or even friends of friends, just ordinary, good-hearted, liberal-minded Americans, whom I'll call A, B, and C:
A. Bannon I hope
B. Nope. He's not important. It's Kushner.
A. I wish it could be Pence just to get him out of the picture. So that makes sense why he got so close to top.
C. Please oh please oh please be Jared.
What struck me was not just how interested we have become in the hidden workings of the White House. It was more than that; it was the hunger and thirst for one or another hate figure to be found out for what, in our imagination, they really are -- or what we need them to turn out to be, if the hatred is to be justified.
Common to the new and old McCarthyisms is the burning desire of many to see proven what they feel they already know, in the absence of any hard evidence, to be true. We've made up our minds about Trump and his circle, and what sort of people they are. All we need is the facts that confirm it.
That is not all, however.
There is a deeper point that is buried in the history of the old McCarthyism, a problem that those who warn of the new McCarthyism appear to forget. They hold, and I agree, 100 per cent, that McCarthy and his supporters did despicable things. The McCarthyites ruined the lives of many people who had done nothing wrong. They injected a poison into American political life that persists to the present day.
But there is more. The suspicions that fuelled McCarthyism were not unfounded in fact. McCarthyism was not about nothing. And McCarthyism, in its time, was not technically a witch hunt, although I understand most of its victims felt it like that. For in fact witches do not exist, whereas the traitors that McCarthy hunted in his blind, destructive way, really existed.
Since the end of the Cold War, historians have been able to reconstruct the deep history of which McCarthyism was an evil outgrowth. During the 1930s and 1940s, particularly during World War II when the Soviet Union and the United States were allied, and so before the Cold War began, the American government was penetrated by hundreds of Soviet spies and undercover agents. It was easy for this to come about because many educated Americans had a spark of sympathy for communism, which made them susceptible to Stalin's fake news about the Soviet Union, and also because America at that time lacked the traditions and institutions of counter-intelligence.
By the late 1940s, by means of partial decryption of Soviet diplomatic cables, the FBI knew of the existence of up to a couple of hundred Soviet agents in and around a variety of government departments and projects, including the Manhattan Project. But the FBI mostly did not know who these agents were. This was because the agents' identities were protected by cover names, which the FBI could not crack except by good luck, which did come around occasionally. Meanwhile, the FBI could only protect its limited capacity to decode the Soviet signals by hiding the authoritative source of its suspicions.
Beneath the surface of the McCarthyite search for traitors, in other words, lay two things. First was a pattern of covert collusion by American citizens with the Soviet Union, a country that was operating an intelligence assault on its wartime ally consistent with a state of undeclared war between them. Second was an investigation into them that could not be completed and would remain unfinished and undisclosed for half a century. It was in this context that public suspicion and the desire to expose traitors took hold, with the destructive results that we know.
There are three clear lessons for today.
First, justice is not served when guilt is determined in advance of the facts, or when evidence is sought only to confirm prior beliefs. That is why we should worry about a new McCarthyism.
Second, calling it McCarthyism doesn't mean there is nothing there. The allegations of underhand dealing between the Trump campaign and Russia need to be substantiated or cleared out of the way, based on evidence.
Third, nothing will fuel popular suspicion more than an unfinished investigation. The investigation of Russia's role in the 2016 US presidential election needs to be seen through to the end.
May 30, 2017
Dear Mr Cunningham
You wrote to me on 25 April: “I wanted to let you know that at the General Election, to be held on June 8th, I will be standing again. I have proudly represented Coventry South for 25 years, and I believe that I can continue standing up for Coventry.”
You asked for my support. I was a Labour supporter and voter in every General Election from 1970 to 2005. I voted for you many times. Led by Gordon Brown, Labour lost my support in 2010. I see no chance of Jeremy Corbyn winning it back.
Every major party in this election has good and bad in its manifesto, and that includes the Labour Party. But Labour’s present leaders are tarnished by their past hostility to our armed forces and security services, our nuclear deterrent, and our NATO membership. Whatever they say now is compromised by their sympathy, sometimes open and sometimes poorly concealed, for authoritarian regimes, anti-semitic causes, and terrorist factions around the world.
Jeremy Corbyn has justifed his past contacts with terrorists by the necessity to talk to "people you profoundly disagree with." But there is reason to think that, at the time, he saw the terrorists he talked to not as people he disagreed with but as friends. He explains the terrorists' actions, in part, as responses to our own past foreign policies. But this carries little weight when the overwhelming majority of terrorist attacks worldwide have no such explanation.
As well as having repellent views on these matters, Corbyn and Abbot stand out as incompetent. But not all your leaders are incompetent. McDonnell, Milne, and Murray are evidently capable people. That makes them worse, not better. Their competence is sinister. I fear for our future if such people ever got their hands on the machinery of the British state. That outweighs any other reason I might have to vote for you.
Your letter states: “The country needs change.” I agree. But, just when change is needed, the Labour Party has managed to offer an alternative that is also unacceptable. The Labour Party needs change. If you would acknowledge this, you would put country before party.
January 16, 2017
Writing about web page http://www.bbc.co.uk/news/world-us-canada-38589427
The Steele memorandum, with its lurid tales of Donald Trump and “golden showers,” has put kompromat in the news.
Kompromat is the Russian term, a colloquial abbreviation, for “compromising evidence.” When did it arise? Sometimes there's the impression that it is a recent thing – a feature of post-Soviet Russia. Andrei Soldatov, an expert on the KGB, describes kompromat as “a tactic to smear one’s opponents in the media” that “came into use in Russia in the late 1990s.” Likewise, Julia Joffe links kompromat to cases that became frequent in Russia in the 1990s, involving what Russians call “black PR” – the use of real or faked evidence of wrong doing to discredit political opponents in the public arena.
It’s true that, to judge from the Google Ngram viewer, kompromat was completely unknown until the mid-1980s, when Soviet censorship collapsed, and its use became widespread only in the 1990s. (The figure below shows both the abbreviated and unabbreviated forms of kompromat; they show similar patterns. I can't explain the spikes during World War II; they might just be a random consequence of relatively few books entering the Google Books corpus from that time.)
But this pattern also reflects the limitation to published print media. For the first seventy years of its life the term kompromat was used very widely, but only by Soviet government and party officials in the secret documentation that can now be found in archives. In Soviet times, kompromat denoted the security files that documented the political crimes, misdemeanours, and faults of the citizens. In this sense its use goes back almost a century. The Soviet secret police was founded in 1918, and it began storing kompromat as soon as the circumstances of civil war allowed it to turn from killing people to recording their weaknesses.
Here’s an example. You’re following suspect A, let’s say, someone who is suspected of passing information to foreigners. In the street, A greets a stranger, who now becomes suspect B. Someone else will now follow suspect B and identify him. After that, the officer in charge will write a note to KGB records: “Is there kompromat on B?” And the answer will come back, yes or no. If no, too bad. If yes, it might be that B listens to Western radio, or sends letters abroad, or comes from a family that once had property, or is Jewish, or gets drunk and, when drunk, is liable to curse the communist party and its leaders. For any of these is a sign that B might hold a grudge against the political and social order and should therefore be considered potentially disloyal.
Now, suppose there does exist kompromat on B. The question is, what do you do now? In the Soviet practice of kompromat the answer is that you do not, under any circumstances, take it to the media. On the contrary, you file it and store it.
In Soviet times, kompromat had a mass application and a targeted application. The mass application was to grade people in very large numbers. Then, when someone sought promotion at work, or entry to higher education, or a foreign trip, the KGB would check its files for kompromat, and the files would tell it whether to say yes or no. The evidence would never be disclosed. Nonetheless, it is clear that most Soviet citizens understood the importance of not accumulating kompromat, and this influenced their behaviour in ways that were favourable to the stability of the regime.
Kompromat had a more targeted use. Although arguably of less importance in history than its mass application, this is the meaning of kompromat that is of greater interest today.
In cases where an individual person such as B was targeted, the kompromat would be useful, not when it was published to punish or discredit B, but because it was kept secret. And, used in this way, kompromat had the magical quality that it could turn people who might otherwise have been reluctant or recalcitrant into productive material for the regime.
Kompromat in this sense is blackmail, but no money changes hands. You would use the kompromat to persuade B to cooperate in your task, whatever that might be: for example, you might recruit him as an informer. You would apply the pressure slowly, over a long period of time, and during all this time the kompromat would remain secret, and would never be disclosed, but would be a gift that keeps giving.
This principle was applied not only in police matters, but more widely in politics. The party boss must promote one of two subordinates. Which should he choose, the one that is clean, or the one with a flawed past, documented by kompromat? The choice was clear. The untainted subordinate could become a rival; better promote the one the boss could control, the one who was obligated to the boss by his silence. In a low-trust organization, in other words, kompromat is the key that guarantees loyalty.
In these cases, you can see, the moment the targeted kompromat reaches the public, it loses its power to control the target, for that power lies in secrecy. You promise to keep the information secret while B works with you and your organization. You have given B something to lose. Hold the kompromat forever, and forever your collaborator will be obligated to you.
Today’s use of kompromat to cover the publication of discreditable information – real or fake – is, in comparison, a break with its traditional meaning. To hold kompromat is to hope that the target, the person on whom kompromat is held, might one day be useful. The dissemination of kompromat signals that you’ve given up that hope. The target has nothing left to lose, and can no longer be manipulated.
Here’s the bottom line. To read discreditable stories about our leaders is a worry. We should worry about these stories and try to evaluate them carefully, as best we can. But don’t worry about the stories too much. If they’re false, we should discard them, and, if they’re true, at least we know.
And we know, also, that kompromat that is published is spent and has no more value. The kompromat that still has value, that retains its magical power to induce cooperation, is the kompromat that is held back. If you like to lie awake at night and worry pointlessly about who is manipulating our leaders, you should think about the kompromat that we don’t know and will never hear. As I said, it's pointless.
PS Lots more like this in my book of stories, One Day We Will Live Without Fear.
December 31, 2016
Writing about web page http://www.metrolyrics.com/reasons-to-be-cheerful-part-3-lyrics-ian-dury-the-blockheads.html
I'll spend this New Year Eve with old friends. To keep our spirits up, we agreed some self-denying rules. Here are three things that we will not talking about around the dinner table:
- Donald Trump.
- Climate change.
This was not my suggestion. And in some ways you might think this would be hard on us, for we are all interested in the world of politics and policy, and those of us who will gather would all have something to say on such matters.
Yet, when it was put to me, it made immediate sense. I recalled a discovery made a few years ago by Angus Deaton. He was working with Gallup surveys of very large numbers of Americans (Deaton 2012). In these surveys, carried out in 2008 and 2009, respondens were asked to evaluate their own subjective well being. It turned out that their responses were strongly affected by whether or not the respondents had just been asked about their views of America's then-current political leaders. The effect of being asked these political questions was to lower the subject's reported well being, compared with others who were asked the questions in a different order. The negative effect was large -- an amount similar to the effect on well being of a major recession, such as the one that was actually taking place at that time.
I concluded that there was a scientific basis for avoiding talk of politics in everyday social interaction. If we all did so, we would feel the improvement.
More recently I found that Deaton has published a reassessment (Deaton and Stone 2016). This work is based on data from a more recent period. The result is a new finding, more complicated than before. As it now turns out, not everyone is depressed by being reminded of politics. Rather, people are depressed if (and only if) their own answers are depressing. Most likely this was already the case back in 2008 and 2009, but at that time there was not much optimism around, and most Americans disliked most of their leaders, so the general feeling that the country was on the wrong track overwhelmed the responses of the optimistic few in the Gallup survey sample.
To relate this to our own national context, we have just had a referendum that split our country into two nearly-equal halves. Suppose you belong to those that think Brexit will prove to be a detriment to our economy and society. When asked your view of British politics facing Brexit, your evaluation of your own life will go down. But if you think that Britain outside the European Union will be a magical success, then being asked your opinion will leave your personal mood as it was. It's only if you think things are going badly that being asked about politics will send your mood down.
Which has implications. One implication is that not all talk of politics is a downer. But when the country is evenly divided, and political issues are put on the table, half the people will find reason in politics to feel bad about their lives.
Another implication. There's a grain of truth in the Daily Mail tag "Remoaners." When reminded that we lost the referendum vote, those of us who preferred to remain in the European Union now feel down. It doesn't make us wrong, but it does make us depressed.
Until tomorrow, therefore, no more politics.
For tonight, at least, a Happy New Year to all my readers!
- Deaton, Angus. 2012. The financial crisis and the wellbeing of Americans. Oxford Economic Papers 64(1): 1-26.
- Deaton, Angus, and Arthur A. Stone. 2016. Understanding context effects for a measure of life evaluation: how responses matter. Oxford Economic Papers 68(4): 861-870.