My thanks, in my Daily Maverick column this week, goes to the Treatmen Action Campaign, Cosatu and Doctors Without Borders, for embarrassing South Africa during the World Cup, while US vice president Joseph Biden was in town, under a balloon that said “the world is watching”. Read it here: Have some self-respect.
Free market advocates often hear the charge that they don’t care about the poor. That their belief in the power of markets driven by self-interest and the profit motive implies they’re selfish and egotistical. That the rich exploit the poor. That without government help, the poor would starve.
“Bah!” says the research data, “Humbug!”
Those who place themselves on the right of the political spectrum, according to the General Social Survey in the United States, “are happier, more generous to charities, less likely to commit suicide - and even hug their children more than those on the Left.”
The article in the UK’s Daily Mail is written by Peter Schweizer, a research fellow at the Hoover Institution at Stanford University. It begins light-heartedly, but makes a few telling observations.
It would seem that those who believe in the altruistic power of government merely shift their own feelings of reponsibility (or guilt) onto others. They feel they have the right to force their own notions of what is good, and what needs doing, on their fellow citizens, so they don’t have to bear the cost themselves.
By contrast, capitalists recognise that poverty is good for neither the poor nor the rich. You can’t get rich selling stuff to people with no money. They also can, and do, organise well-targeted charity intervention, promoting voluntarily the things they believe will help other people. Nobody has to accept the charity, and nobody is forced to pay for it against their will. If it doesn’t work, they pull the plug, and the freed capital is allocated to where it might do more good. Just like in the real world. That’s why it works.
What, then, explains the apparent leftward tilt of so many non-governmental organisations and charities? Perhaps they recognise that it is far easier just to get money from government, than to have to answer to private donors who actively manage their charity funding. Perhaps they seek to profit themselves from the “generosity” they enforce on others, and fail to recognise that the funding they draw a salary from has to be created by someone in the first place. Perhaps they just feel the selfish need for self-validation. “Look how unbearably good I am!”
Meanwhile, they apologise for having babies (truly, a friend of mine did so the other day!) and alarm those who share their pessimistic world-view with stories of population explosions and running out of resources. Who was it that said, “If he be like to die, he had better do it, and decrease the surplus population”? Oh yes, that was Scrooge, in Charles Dickens’ rendition of the fictional character.
The survey data quoted by Schweizer puts larges holes in the popular notion that free-market capitalists are simply greedy, or define their self-interest narrowly, or have a “stuff the poor” attitude towards the world. On the contrary: those on the left who (incorrectly) call themselves “progressive” or “liberal” are more likely to fit the generalisation of self-absorbed misanthropy.
Private charity, whether inspired by religion, personal morals or economic interests, predated the modern welfare state by centuries. It now has formidable competition, however, from monopoly services funded by the taxes of the rich. Let’s hope the private charity of generous capitalists doesn’t bleed to death, as the welfare state cuts away at the tastier bits of the goose that lays the golden eggs.
Via a mailing list I discovered a stunning series of photograhs of machinery taken at the Hagley Museum, set among beautiful gardens at the original gunpowder mill built by Eleuthère Irénée du Pont in 1803 in Delaware in the US. The museum includes several restored buildings, and offers a romantic, languorous view on America’s industrial past.
Selecting just one example of the photography was hard, because the composition, textures, colours and lighting in all shots are just beautiful — do view the rest of the set — but I particularly like this press:
The photographer, Harold Ross, specialises in techniques such as light painting, used in the Hagley series, and has a great porfolio at the Ross Studios website.
Who said machines are ugly? Who said Charles Dickens wrote all you need to know about the industrial revolution?
The PublicAffairs division of Perseus Books has published a memoir by former White House press secretary, Scott McClellan. The book is titled, What Happened Inside the Bush White House and Washington’s Culture of Deception.
It somewhat overshadows an editorial by Douglas Feith, Undersecretary of Defence for Policy for four years from mid-2001. Published in the Wall Street Journal, How Bush Sold the War is a highly critical assessment of the White House’s foreign policy positions — and one with which I find myself largely in agreement. But unlike Feith’s well-reasoned and carefully considered judgement, McClellan’s tell-all memoir is getting all the press. After all, a book by a man on the lecture circuit needs selling.
Here’s how I reckon the conversation between McClellan and his publisher went:
Scott McClellan, author: Hey, I want to cash in on a book deal, like all the other losers who’re out of jobs and get ghostwriters tell their inside-track stories. At least I was actually employed by the White House. Unlike, say, Joe Wilson.
Peter Osnos, publisher: Not sure a PR’s story is going to sell well. You lot are not much more sympathetic than lawyers and estate agents, in the eyes of the public, and the media hate your kind. So what do you propose writing about?
McClellan: Bush, and what a great job I did defending him in difficult times.
Osnos: Bye-bye. Nice talking to you. May I recommend Vantage Press? Vanity publishing won’t cost you that much, and most people never even notice.
McClellan: Okay, what would you need?
Osnos: To make money? How about inside-track confessions? Sordid tales of sex and betrayal? Did you know Bush lied about the war? Did you have doubts about White House policy?
McClellan: No, not really. If I had, I would have taken my own advice, as I said about Dick Clarke when he published his memoir, Against All Enemies: “Well, why, all of a sudden, if he had all these grave concerns, did he not raise these sooner? This is one-and-a-half years after he left the administration. And now, all of a sudden, he’s raising these grave concerns that he claims he had. And I think you have to look at some of the facts. One, he is bringing this up in the heat of a presidential campaign. He has written a book and he certainly wants to go out there and promote that book. Certainly let’s look at the politics of it. His best buddy is Rand Beers, who is the principal foreign policy advisor to Senator Kerry’s campaign. The Kerry campaign went out and immediately put these comments [that Mr. Clarke made] up on their website.”
Osnos: Best you never bring that paragraph up in public again. We can’t have people questioning our publishing ethics, now can we? Okay, let’s try another angle. Did Bush and Cheney confide in you?
McClellan: No, they didn’t. I just made press statements. Karl Rove actually ran the show.
Osnos: Then here’s an idea: write how the evil twins, Karl Bush and George W. Rove, didn’t confide in you, and told you only what they thought you needed to know to lie to the media.
McClellan: Like what?
Osnos: Take Katrina.
McClellan: Her name was Monica, and that wasn’t Bush, anyway.
Osnos: No, you idiot, the hurricane.
McClellan: Oh yeah. Forgot about that. What about it? I had my hands full defending the White House against charges that they should have violated states rights to send in the cavalry, when the fools in charge of Louisiana didn’t bother to summon federal assistance. Not one reporter would believe that Bush’s powers are actually limited by the constitution.
Osnos: You were the spin doctor, right? Did you set up disaster photo-ops?
McClellan: That’s my job. PRs stage photo-ops.
Osnos: Excellent. Nobody likes staged photo ops. Like spin, or PR, they’re synonymous with insincerity and lies. So just explain matter-of-factly how they were staged, and your book will sell like hotcakes. Nothing of actual substance required.
McClellan: And then?
Osnos: Well, just write how Bush screwed up on this, that or the other, in your extremely well-informed opinion. Without hindsight, book publishers like me would be out of business, and great authors like you would never make the bestseller lists.
McClellan: But my opinion wasn’t well-informed.
Osnos: Who cares? You stood on the podium in the White House briefing room, didn’t you? You have hindsight, don’t you? So you were the only dolt who actually said “yes” to a question on whether Saddam was involved in 9/11. Most people think that was a Freudian slip anyway, because they think a press secretary is supposed to be well-informed of what goes on in the inner circle. People will believe whatever you say now, just because of that White House seal behind you, and the hindsight in front of you. Hindsight will not only make you look well-informed, but it will make you look like you were smarter than them all along.
McClellan: Yeah, I guess. So I write about what I think about Iraq, and the PR job leading up to it — before I was in charge of PR, mind you — that sort of thing?
Osnos: Exactly! Or take the Plame affair. Everyone knows a special investigation failed to turn up anything incriminating at all, except maybe against that Armitage fellow over at State, who wasn’t even being investigated. Bush, Cheney and Rove never did tell you about their role in leaking her identity, did they?
McClellan: Of course not. They knew nothing about it. Well, except that Joe Wilson was a proven liar, and then offered to campaign for John Kerry. Even Kerry washed his hands of him. I advised the White House that if he’s too toxic even for the Democrats, they’d better not comment at all, because that would only give his story credit it didn’t deserve.
Osnos: No, you prat. Want to make money from your book? Just write that the cabal didn’t tell you anything, but they did “collude” to get their stories straight, so they wouldn’t make the mistake that poor fool Libby made. Presumably, this is standard PR advice, but don’t mention that. Just say they met at the time to discuss the Plame case and how Fitzgerald’s investigation might affect the White House. This makes them look like liars, without actually calling them liars, and without implicating you in any way. So you get to dodge lawsuits, and the book will sell millions. Then, when they heed your advice about Joe Wilson once again — not to respond to your book, for fear of looking defensive — everyone will believe they’re guilty as sin. The headline will read: “Bush White House doesn’t deny that Rove and Cheney were in cahoots”. They’re hung by what everyone will think is their own petard — not knowing it’s yours — and you’ll come out smelling like roses.
McClellan: But I have no idea what they actually discussed.
Osnos: Who cares? Write exactly that, in fact. In fact, not taking you into their confidence suggests dishonesty. So why don’t you call it a “culture of deception” or something?
McClellan: But I don’t think calling the White House deliberately dishonest is very smart. Or very honest.
Osnos: So write about “Washington’s culture of deception”. If Barack Obama can say it, why can’t you?
McClellan: Won’t all this look rather dishonourable?
Osnos: Look, Scotty. Mind if I call you Scotty? There are a million people out there who already believe all the adjectives in the world aren’t enough to describe the evil of the Bush cabal. They already believe every word you have yet to write, and more importantly, every word you won’t write. Most won’t even bother to read the book, but will blog about it anyway. Just write them something that doesn’t conflict with their partisan prejudices, and you’ll come out looking like the brave dissenter who did your duty but whose honour now compels him to go public. Who cares that you’re not going public with anything of actual substance? For that matter, who cares about honour? This is Bush we’re talking about, remember?
McClellan: Wow. And I thought I was pretty hot stuff as a spin doctor.
Osnos: No. You gave two-page press releases to journalists who are paid to read them. A mechanical monkey can do that. I’m hot stuff. I have to sell turgid 500-page tomes filled with the partisan drivel of non-entities to a million illiterate nobodies, and get them onto the NYT and Amazon.com bestseller lists to boot. You’re an amateur. That’s why you’re on that side of the desk, and I’m on this side. You have no idea how to spin stories.
McClellan: I see now what you mean by your “innovative and aggressive new model of publishing” that ensures profitability. I’m impressed. Just remember to put in the blurb something like that I was kind of the power behind the throne — one of Bush’s closest aides, or something — and that the White House couldn’t say anything without going through me. I hear what you say. You’re a professional. So am I, so let’s go make some money. I must say, this book-writing business is pretty cool. Used to be you had to actually save for your retirement, and protect your integrity. Now you can just turn around and screw everyone you worked for and make a killing. Here I thought PR was a pretty dishonest but profitable job. It’s clearly got nothing on book publishing.
Osnos: Indeed it doesn’t. Now let’s go find some rare whiskey to toast with. I’m buying.
McClellan: Och aye. A wee dram would numb the pain of prosperity.
Osnos: That it does, Scotty. That it does.
If you really care about global warming, there are a whole bunch of things you probably think you shouldn’t be doing that you should, and vice versa. The environmental religion of the modern age, in which an angry Gaia will punish us for our sinful ways, but we can redeem ourselves by sacrifice and self-denial, has spawned a mythology of classical proportions. The problem is that many of those myths, spouted as accepted wisdom by an uncritical media and special-interest activists, appear to be just plain wrong.
Wired magazine goes to the actual science — remember science? — and makes some proposals for those who really care about climate change, and think not only that reducing carbon emissions will actually help, but delude themselves that it is possible to reduce them enough to make even a little dent in anticipated warming.
Here is its list, each of which is explored further in a separate article:
It doesn’t say all of these are good ideas, of course. There are excellent reasons to slash-and-burn overgrown, bug-infested jungles, to plant more productive crops, sure. But there are also plenty excellent reasons not to cut down old-growth forests. However, if your policy goal is to reduce carbon emissions, which seems to be the sole fetish of environmentalists and policy makers, then all of these points, including razing the rainforests, are valid.
Meanwhile, the US Congress is about to debate a cap-and-trade scheme that will vastly expand government powers and revenue, cost consumers trillions in bureaucratic red tape, tax and lost economic growth, and achieve very little indeed. In welcoming an open floor debate on these mushy measures, the Wall Street Journal writes:
The vehicle is a bill that principal sponsors Joe Lieberman and John Warner are calling “landmark legislation.” They’re too modest. Warner-Lieberman would impose the most extensive government reorganization of the American economy since the 1930s.
Ouch. Nothing like a fat bureaucracy to infringe on the liberty and prosperity of the people. Nothing like a first-country moral crusade to give developing-country leaders ideas to foist upon their long-suffering people. Nothing like an overbearing state to hold down the development of the poor.
As if $130 oil isn’t reason enough to consider more fuel-efficient cars, reduce energy usage in industry and invest in alternative energy sources.
While we wait for this legislative disaster, however, would the disciples of St Al please report to the consistory, so they can get cracking on Wired’s measures?
(Hat tip: Climate Skeptic.)
Well, that’s it then. The Al Gore Inc special interest lobby has won another victory. The US has declared the polar bear to be an endangered a threatened species. So from today, global waffling alarmists can cite the doomed polar bear in support of their doctrinaire opposition to energy production, industrial projects and economic development.
Care to make further strides in reducing poverty, increasing life expectancy, growing prosperity and improving quality of life? Sorry, poor pretty polar bear cubs with small plaintive voices will stand astride history yelling, “Stop!” This is what, these days, they call “progressive”.
Yesterday’s press release was to the point:
Secretary of the Interior Dirk Kempthorne today announced that he is accepting the recommendation of U.S. Fish and Wildlife Service Director Dale Hall to list the polar bear as a threatened species under the Endangered Species Act (ESA). The listing is based on the best available science, which shows that loss of sea ice threatens and will likely continue to threaten polar bear habitat. This loss of habitat puts polar bears at risk of becoming endangered in the foreseeable future, the standard established by the ESA for designating a threatened species.
I’ve pointed out in considerable detail before, polar bears should not be listed by any reasonable interpretation of the various criteria that apply. The motives for listing them as endangered threatened — opposition to oil exploration and pathological fear of climate change — are also quite explicitly stated by the green lobby. The only possible scientific reason for listing them (the reason cited by Kempthorne) is wild speculation about future changes in their habitat, combined with the assumption that polar bears won’t bother to adapt to their environment, if it did indeed change.
But here’s what’s really happening to the population:
(Studies, in chronological order, are by: IUCN, Schuhmacher, DeMaster & Stirling, Nowak & Paradiso, Watson, Garner, Truett & Johnson, Schliebe, Lunn et al, IUCN, IUCN. Background photograph is by Steve Amstrup of the US Geological Service.)
Alarmists have a nasty habit of citing the high estimate in 1996, and the low estimate in 2006, to make their case for being alarmed. This technique, of carefully selecting time intervals to “prove” a dubious point by noting changes from an outlier, is a very common and simple means of lying with statistics. Given these studies, the more honest interpreter would use the longest available data series along with the most conservative estimates, to guess at a doubling in the population in the last 40 years. Or, if you prefer, you can assume the early research for technical reasons to be incomplete and inaccurate, and argue that the population appears stable at worst. However, that would appear to be unnecessarily pessimistic, as this article from last year points out:
“There aren’t just a few more bears. There are a … lot more bears,” biologist Mitchell Taylor told the Nunatsiaq News of Iqaluit in the Arctic territory of Nunavut. Earlier, in a long telephone conversation, Dr. Taylor explained his conviction that threats to polar bears from global warming are exaggerated and that their numbers are increasing. He has studied the animals for the Nunavut government for two decades.
Native wisdom, usually treated with great reverence by the environmentalist left, is undoubtedly a crock of self-serving lies in this case:
Inuit hunters make their own estimates of the polar bear population based on the number of animals they encounter on their travels. Taylor says scientists have ignored the anecdotal evidence of the Inuit, who say bear numbers were rising. Inuits also report more polar bears wandering into their towns and villages, where they are a threat to children.
“I’m pretty sure the numbers [of polar bears] are climbing,” says Pitselak Pudlat, an Inuit hunter and manager of the Aiviq Hunters and Trappers Organization at Cape Dorset, Baffin Island. “During the winter there were polar bears coming into town.”
(To be fair, note the chart in my earlier post, which shows growing, stable and declining populations.)
I reckon if the environmentalists are really so concerned about tiny areas of industrial activity in the vast wildernesses of the Arctic, they should just ship the fluffy little maneaters to the Antarctic. It’s uninhabited by people, full of nutritious food, and the ice is getting thicker, over there.
This suggestion is, admittedly, not as funny as the pathetic caveat Kempthorne, having caved to the pressure groups, adds to his press release:
In making the announcement, Kempthorne said, “I am also announcing that this listing decision will be accompanied by administrative guidance and a rule that defines the scope of impact my decision will have, in order to protect the polar bear while limiting the unintended harm to the society and economy of the United States.”
Good luck, Mr Kempthorne. You have a polar bear’s chance in hell. Perhaps you can get a job with Al Gore’s investment company, though. The self-serving capitalists of Kleiner, Perkins, Caufield & Byers certainly owe you one. Maybe he’ll let you be a roadie on his next great rock star tour.
Update: The term “endangered” is a catch-all term (as in “Endangered Species Act”), but also indicates a particular classification, different from “threatened”. I have read the US Endangered Species Act (and its IUCN counterpart), and should have known to be less careless with these terms. Corrected where necessary.
The US government (and popular media) has a long history of blaming oil companies for “excessive profits” when the oil price is high. They don’t particularly care that when the oil price is low, oil companies risk huge losses, or that massive, long-term industrial investment projects can only be justified by future profits. No, every time Americans suffer at the pump, or think they do, oil companies are hauled before Congress to testify about their “price gouging”.
Turns out that they make less profit than you’d think, as Sterling T. Terrell shows eloquently in an article here. It’s a must-read, because it makes the price of fuel at the pump really, really simple. Taking into account inflation and tax, and despite higher demand from growing economies, higher demand from countries buying in currencies other than dollars, and restricted supply because of draconian environmental restrictions on exploiting domestic oil resources in the US, it turns out Americans aren’t paying all that much at all. Of the excess over base costs, two thirds goes to the government in the form of taxes. The “record profits” of billions of dollars that you hear about on TV might sound like a lot, but once you work it out in terms of the value of a typical oil company’s asset base, the volumes of product supplied, the cost base, and total revenues, they’re not “record profits” at all. Even water utilities make more profit, as do many other industries.
He argues, correctly, that price caps will lead, inevitably, to shortages. But that doesn’t stop politicians, here and abroad, from expressing grave concern about the impact of the high oil price on consumers. Smoothing the political path for intervention, no doubt.
I did a crude (haha) calculation myself, using various data obtained from Stats SA and the Department of Minerals and Energy Affairs. Starting with a 1998 base price of R2.28, which is what a litre of 91-octane unleaded used to cost inland, I compared the actual price to the inflation-adjusted price. For actual price I stuck to the highest octane available, as new levels (93 and 95) were introduced. If R2.28 is adjusted by inflation (average annual CPIX), the average fuel price in 2007 would have been R4.45. The average price in 2007 was actually R6.75. For the sake of simplicity, let’s put all of that disparity down to the steep oil price rise of recent years.
But we are a global leader in the production of synthetic fuel from coal. Sorry, says Sasol, we can’t give it to you cheaper than the government price. As a result, Sasol’s after-tax net profit margins, at 17%, are much higher than the 9.5% profit margin of US oil companies. Synfuel, however, accounts for only 30% or so of its business, but generates about 55% of the company’s profits. So the profit margin of the synfuels division alone is almost twice as high again, just because its costs are independent of the oil price, but its prices are determined by government and rise as the oil price goes up. So in reality, Sasol’s synfuel makes 3.3 times the profit that a typical US oil company makes. And the US companies are the ones being hauled before public hearings!
Profits would not be an issue in a free market, but they are an issue when they are made by a private monopoly in a highly-regulated, price-controlled sector. Worse than government-sponsored profits for Sasol, however, is that more than 20% of the fuel price goes towards unnecessary taxes (as opposed to the Road Accident Fund, which for all its bureaucratic chaos and mismanagement, is a more defensible levy). Take that arbitrary tax away, and the inflation-adjusted fuel price at the end of 2007 could have been R3.73, or if you account for the disparity between the inflation-adjusted price and the actual price — reflecting, in my simplification, the recent oil price rise — it could have been R5.29. (Disclaimer: So says the back of my envelope; corrections or refinements to this rough calculation would be welcome.)
Instead of R6.75 on average for 2007, we could have paid R5.29, and that’s without any change to the Sasol price policy or reduction in the price of oil. What effect might such a massive saving in transport cost have on food prices and general price inflation? Why does the government think it’s a good idea to tax fuel, and to keep raising those taxes?
Some might argue that fuel taxes discourage consumption, and therefore they are good for the environment. But fuel demand is notoriously inflexible. Face it, you’ve got to get to work, and producers have got to get bread and milk to the supermarket, no matter what the fuel price is. So the effect of taxation on demand is fractional. If you’re going to incur costs in the economy by using the fiscus to fund environmental improvement, almost any other investment would get you higher returns than fuel taxes.
So we have the absurd situation that on one hand, the US is holding hearings in populist efforts to claw back money from companies whose prices aren’t regulated, whose operations are bound by a myriad laws, and whose profits are by no means excessive. On the other, South Africa is doing nothing about sky-high monopoly profits that are a direct gift from the government, and which raise costs for every industry sector, limit economic growth, reduce our ability to alleviate poverty and create jobs, and limit our options in dealing with the energy crisis. And neither country has considered that of all the idiotic tax ideas a rapacious government can think of, slapping 20% taxes on fuel is possibly the worst. [Correction: that should read “27.2% taxes”. 27.2% tax results in a 21.4% share of tax in the final price, which I rounded to 20% here.]
Some economists say that South Africa is not headed for recession, despite the worldwide financial crisis, the weakening global economy, the critical shortage of electricity, and the rising oil price. I’m fairly pessimistic, however. I think the electricity crisis alone will be enough to cause a recession, because its effects permeate the economy. But even if the Bolt Effect, as I like to call it, is not as bad as I surmise, I’d be far more inclined to believe the optimists if the government were less keen to skim the cream off what’s left of the economy by taxing a basic commodity such as fuel.
Meanwhile, you have until this Friday, 25 April 2008, to comment on price cap proposals (Government Gazette link in PDF) on liquified petroleum gas. I’ve written about this before. If you want to know why you can’t find that nice cheap LPG at your local petrol station, look no further than government’s insistence on regulating every price in sight.
And every time we get shortages, or price inflation, or both, we wonder why. It’s because (and Mandy de Waal’s comment yesterday is a case in point) we simply don’t trust the profit motive as a driver of efficient capital allocation. We simply don’t trust the price mechanism to regulate supply and demand. In the end, we don’t trust our people with their freedom.
But really, do go read Terrell’s article. Evidence once more that Economics 101 is, well, elementary.
More even than George W Bush (Hail to the Chief!), the man everybody loves to despise is Dick Cheney. So what’s this all about? A standing ovation to welcome him? Laughter and mirth? Is it, to pilfer a line from Cheney’s speech, some right-wing gathering of bitter men who cling to their guns? Nope, this is the assembled media. Could he, belatedly, be winning them over?
Part one:
Part two:
The full transcript of this very amusing talk before the Radio Television Correspondent’s dinner can be found here. It’s better in the reading, if you don’t have the time/bandwidth for the video. Cheney really was joking about his natural charm and charisma.
Joseph Stiglitz says the Iraq war is a central cause of the sub-prime mortgage crisis. From which we can conclude that the Iraq war is not a central cause of the sub-prime mortgage crisis.
The press never tires of describing Stiglitz as a Nobel Prize winner. This is true. He shared a prize in economics in 2001 with George Akerlof and Michael Spence, for work on the asymmetric availability of information in markets. One application, on which Stiglitz in particular focused, involved credit markets, in which lenders know less about the likely repayment of a loan than borrowers.
So one would think he knows something about the credit crunch. And perhaps he does. But if so, he’s not telling. He’s got a war to fight, and a book to flog to the economically illiterate antiwar left. The former economic adviser to US president Bill Clinton teamed up with Linda Bilmes, another Clinton-era economist (not that I’d for a moment suggest partisan bias, you understand), to publish The Three Trillion Dollar War.
Stiglitz’s explanation for the credit crunch? When in doubt, blame Bush. According to him, the Iraq war is a primary cause:
The spending on Iraq was a hidden cause of the current credit crunch because the US central bank responded to the massive financial drain of the war by flooding the American economy with cheap credit.
“The regulators were looking the other way and money was being lent to anybody this side of a life-support system,” he said.
That led to a housing bubble and a consumption boom, and the fallout was plunging the US economy into recession and saddling the next US president with the biggest budget deficit in history, he said.
He’s partly right: inflationary monetary policy was a central cause of the housing bubble. Low interest rates made money cheaper, which not only boosted investment in fixed assets such as houses, but also led to great offers on home loans at rates that could never last, squeezing those who bought houses they couldn’t really afford.
He’s also right to note that expanding the money supply by keeping interest rates low is a favourite technique of governments to “inflate away” debt. In essence, monetary inflation debases a currency, imposing an invisible tax on income earners that has the effect of reducing public debt: your dollar becomes worth less, and you can buy less with it, but the government’s dollar-denominated debt is also worth less as a result.
But here’s the rub: the US debt has not been inflated away. It may be lower as a percentage of GDP than it was during the height of the Clinton years, but despite the economic growth of the Bush years, it isn’t exactly heading down.
That’s not Stiglitz’s biggest error, however. He attributes this inflation in money supply to the Iraq war. So I got some data from the Federal Reserve, and drew a chart of the monthly federal funds rate since 2000, with the Iraq war period highlighted.
You’ll notice that for most of the duration of the war, the fed rate has risen sharply. It hasn’t been kept low, or been lowered, as Stiglitz’s theory would have it. The cause of the credit crunch predates the Iraq war, and contrary to Stiglitz’s claim, the fed’s policy during the war was to make credit more expensive.
I cannot imagine that a Nobel Prize-winning economist didn’t spot this, so I can only conclude that Stiglitz is simply lying when he attributes the Federal Reserve’s low interest rates to the Iraq war. Must be something he learnt from Bill Clinton.
A year ago, when presenting his paper, “The True Costs of the Iraq War,” he estimated that the war would cost between $1 trillion and $2 trillion, depending on how much longer troops stay.
Just a year later, he says the war will cost $3 trillion, and that’s a conservative estimate. Then his margin of error, at a conservative estimate, is between 100% and 200%. This seems rather higher than an economist should be comfortable with. Granted, such an estimate does indeed depend on how long the troops stay. Just like the price of an acid trip depends on how much acid you take.
Another way he arrives at this staggering figure is that Stiglitz uses a terrifically broad definition of war costs, including, for example, welfare costs for veterans. This leads to rather interesting conclusions.
One of the greatest discrepancies is that the official figures do not include the long-term healthcare and social benefits for injured servicemen, who are surviving previously fatal attacks because of improved body armour.
So let me get this straight: It’s a bad thing when soldiers don’t die, because then you have to keep paying them? Nice sentiments, Mr Stiglitz. At least we know now why you didn’t win the Peace Prize.
No less an orator than president George W Bush of them great misunderestimated United States, trotted out this line in an address to the Economic Club of New York just now. He promised to strongly promote his free trade proposals, and spoke eloquently against isolationism and protectionism — sentiments that I, as a foreigner, cheer.
This raised a laugh:
It makes no sense to deny capital, including sovereign wealth funds, from access to the US markets. It’s our money to begin with. It seems like we ought to let it back.
Proof that seven years of regular practice can make a moderately competent speaker out of anyone.
Every time another public-office sex scandal breaks, it’s the same tired old political fight. If it’s a Democrat, the Republicans demand that the sinner’s head rolls, and the Democrats call the Republicans partisan hypocrites. If it’s a Republican, the Democrats demand that the hypocrite’s head rolls, and the Republicans call the Democrats partisan opportunists.
So, who’s right in this political pickle and moral morass?
First, a warning. This post may contain generalisations. Generalisations are statements about groups that are often, but not always, true for individuals. Not all Republicans are moral conservatives, and not all moral conservatives are Republican. Likewise, not all Democrats are liberals, and not all liberals are Democrats. In my own case, as a classical liberal I largely share the modern liberal’s principles on morality. I believe in individual liberty. Within the boundaries of laws that protect such liberty, I think private behaviour is no business of the state, nor of or the public. There are exceptions, such as in cases of public officials breaking laws they swore to uphold, or exposing their offices to risks such as blackmail, but in general, what Paul does with his Peter is none of my concern.
Now, what about the liberal charge of conservative hypocrisy over morality?
The liberal left claims to be, well, liberal. It claims to tolerate just about anything in terms of private behaviour. Rightly, in my view, liberals say it’s none of the government’s or public’s business what goes on behind closed doors.
On the other side is the self-styled “moral majority”, who define morality in rather more narrow terms. They claim moral behaviour in private defines a person’s character, and therefore it is a prerequisite for public office.
Now when someone gets caught with his pants down the moral conservative simply says, “resign”. This is perfectly consistent with the conservative’s political position. With the liberal left it’s different, however. Their reaction depends not on their own objective principles, but on the subjective principles of the culprit. When a Democrat (like Bill Clinton) gets caught with his Peter where it doesn’t belong, they say it’s just a bit of hanky-panky and it’s not that serious. But when a Republican gets caught with his pants down, they’re all over it like a rash, if you’ll excuse the image. That’s when they accuse Republicans of hypocrisy.
But the Republicans aren’t being hypocritical at all. If you call something a sin, that doesn’t make you a hypocrite if you sin. It makes you a sinner. Declaring that you expect moral behaviour in yourself and others doesn’t make you an infallible saint. Frowning on moral failings doesn’t make you immune from those failings. Moral conservatives would be hypocrites if they didn’t apply their own standards of behaviour to their own politicians. But they do. They’re being perfectly consistent: they expect morality, and punish immorality.
By contrast, the supposedly liberal left are being hypocritical by applying different standards to different people. They would like everyone to apply their own liberal standards to their own people, but then apply standards they don’t even agree with to others. Why was Larry Craig, the Congressman with the suspiciously wide stance, excoriated by Democrats? Because Republicans consider what he did wrong, the Democrats hold his behaviour up as evidence of hypocrisy. Cue shrill schadenfreude. But those Democrats would be wrong. Craig’s actions were not evidence of conservative hypocrisy. He wasn’t above the standards he espouses. The moral conservatives didn’t let him get away with it because he’s Republican. He resigned, and that’s perfectly consistent with the morals he claims to uphold. It was their own reaction that was hypocritical. Shouldn’t liberals be defending his moral right to have anonymous sex with uniformed fellows in toilet stalls? Shouldn’t they apply their own standards of privacy and moral choice to everyone? Instead, he got mobbed for reasons of partisan hypocrisy.
On Eliot Spitzer, for example, a real liberal — whether classical or leftwing — would say what he does with his Peter is his own business, but he did break the law in the state of which he was governor, and he did lay his office wide open to blackmail. So he should resign on those grounds, as opposed to moral grounds. A moral conservative would be perfectly consistent by saying the filthy sinner must burn. That some moral conservatives don’t live up to their own standards does not make this position hypocritical.
Liberals would have a lot more credibility if they didn’t yell “hypocrisy” every time a moral conservative gets caught in an immoral position. Because by doing so, they betray their own hypocrisy instead.
I’ll admit, I’m one of those people who are thrilled to see the back of Eliot Spitzer, New York’s law unto himself. I’m just disappointed that his fall was prompted by a petty sex scandal.
Spitzer made a career out of screwing people he shouldn’t have screwed. But since he went around destroying the careers of high-profile people, often with no basis in fact, and with little more moral justification than the puerile principle that every Goliath must be wrong and every David right, I really would have preferred him being taken down by one of his victims, such as Hank Greenberg or Dick Grasso. I wish the victims of Spitzer the judge, Spitzer the jury and Spitzer the executioner, had been able to defend themselves against their inquisitor.
Problem is, he didn’t often bring those victims before a court, where his self-aggrandizing crusades might have faced rational, independent scrutiny. He preferred extortion and public humiliation as his weapons of choice. He preferred to denounce the heretics from his bully pulpit, and club them with the extraordinary legal powers he wielded.
Take Dick Grasso, for example, who got publicly humiliated with disclosures and insinuations that were none of Spitzer’s business. By all accounts, Grasso did a great job keeping the New York Stock Exchange competitive against both upstart competition and foreign stock exchanges. The NYSE’s board thought fit to pay him handsomely for those services. Yet for some reason, Spitzer thought he had a right to second-guess the NYSE’s own shareholders. He thought he had the moral justification to publicly challenge Grasso over his remuneration, using absurd arguments about the stock exchange’s culpability for the behaviour of listed companies, or worse, that the performance of a stock exchange should be judged on whether share prices rise or fall. If that’s what Spitzer really wanted, he should have nationalised stock markets and got it over with, rather than singling out apparently innocent executives to strong-arm.
Speaking of innocent, the case of Maurice “Hank” Greenberg is even more blatant. Spitzer forced this long-serving head of an insurance company into a hasty resignation not by charging him in court, but by calling his actions illegal on television and threatening the company that employed him with indictment. If Greenberg had indeed broken the law, Spitzer’s duty was to charge and convict him in an independent court. It would have behooved him to do so without creating a media circus around it. But though he had been entrusted with the power to prosecute, Spitzer declined, preferring public insinuation as his billy-club. Last time I checked, falsely accusing someone of a crime on television constitutes defamation, not justice. As for the threat of indicting Greenberg’s employer, AIG, we know what such action can do to a company: Arthur Andersen was indicted, but was exonerated on appeal. By then, however, there was no company left to save. Justice delayed is justice denied, in such a case: indictment can be a death sentence for a company. It is an extraordinarily powerful, extraordinarily blunt instrument. Use it judiciously, or not at all. Spitzer abused it to ruin the careers of people he had no intention of giving their day in court. If he wasn’t entirely false, but had made good on that threat, he would have robbed shareholders, destroyed jobs, reduced competition and punished policy-holders, just to feed his monumental ego and burnish his political stature as a supposed corruption buster. In his crusade against what he saw as corporate corruption, Spitzer came to epitomise the corruption of state power.
If he wants to screw around and hurt his family, that’s between him and his family. It’s reprehensible, but a man’s private moral failings are his own business. Granted, he was breaking New York law, and no person given a position of public trust should get away with doing so. Granted also that he exposed an office of public trust to the risk of blackmail and extortion, which is a grave offence. But still, it is an unsatisfying end to his career. He should have crashed and burned in one of the dogfights he picked with innocent high-fliers. That would have been justice served.
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