John Q

I’ve been reading William Dalrymple’s The Last Mughal: Fall of a Dynasty about the Indian Rebellion of 1857 with great interest. The complacent reports of the British commanders as they went about destroying the last remnants of independent Indian power are startlingly reminiscent of the “Good News from Iraq” we got so much of in 2003, and which was briefly revived during the now collapsing surge/awakening/truce. More generally, Dalrymple gives an evocative account of the Mughal court on the eve of destruction.

But I was, perhaps unfairly, amused by Dalrymple’s introduction where he extols the merits of archival research, as against the kind of “subaltern history” that pads out existing secondary sources with large dollops of theory to produce more or less interchangeable articles with titles of the general form “Othering the Imagined Construct” (feel free to permute the parts of speech to derive your own). I’ll leave it to others to decide whether this is better or worse than the old standby “Nonsensical Phrase Drawn From Primary Source: Random Word, Random Word, and the Actual Topic of this Book,” or the generic economic article of the form “Hot Current Idea, Established Field and Putative Application”.

The Maliki government’s offensive in Basra seems to have taken most observers by surprise. Possibly as a result, reporting of the event has been unusually revealing about the implicit presumptions that guide the news we get to read. The New York Times, for example, leads with a photo of “Fighters loyal to renegade Shiite cleric Moktada al-Sadr”, taking up positions in Basra. Later on, the article notes

If the cease-fire were to unravel, there is little doubt about the mayhem that could be stirred up by Mr. Sadr, who forced the United States military to mount two bloody offensives against his fighters in 2004

Like most of the other militia leaders in Iraq (including the leaders of mercenary militias like Blackwater), Sadr is not a particularly attractive character. But in what possible sense can he be described as a “renegade”? He was a consistent opponent of Saddam and became a consistent opponent of the US occupation. This might justify descriptions like “rebel” or “recalcitrant”, but Sadr is one of the few Iraqi figures who hasn’t switched sides, in many cases more than once.

More important though, is the second paragraph. The US was not, in any sense, forced to launch the 2004 offensives. These were miniature wars of choice within the broader war of choice in Iraq. The assumption was that Sadr’s supporters could be crushed by military force, leaving the way open for the US occupation government to reshape Iraq along the lines it wanted. In the end, after much bloodshed, nothing was achieved. Arrest warrants for Sadr, the pretext for the first offensive, quietly disappeared when they became inconvenient, and much the same happened the second time around.

We are now seeing a repeat of the same strategy, adopted by the Maliki government. On past performance, the likely pattern will be one of initial success, followed by a lot of tough talk, and then a bloody stalemate, ending in a patched-up compromise.

We’ve had a few more offensive trolls and sockpuppeteers than usual (that is, more numerous and more offensive) recently, and it seems to be time to make an explicit statement of our policy in this respect. You can read the comments policy in the left-hand sidebar. We’ve just added the following:

We respect the preference of many genuine commenters for pseudonymity and will protect their privacy. However, this respect does not extend to those who abuse pseudonymity to launch personal attacks on posters or other commenters, post racist or sexist comments or employ sockpuppets. We will, if appropriate, publish the identity of such abusers and share their identifying information with other sites.

There’s nothing new here, and we’ve acted on this policy in the past. But it seems like a good time to spell it out.

It’s just been announced that JP Morgan will buy Bear Stearns for $2 a share, implying a value of about $250 million. Given that the company headquarters is said to be worth about $1.2 billion, that gives the BS banking business a value of negative $1 billion. And that’s only after the Fed agreed to take on $30 billion worth of toxic waste from the BS portfolio, politely described as “less-liquid assets.”

Clearly, under any normal circumstances, a company like this would have been left to go bankrupt. The problem is that this would jam up the entire credit market because BS is a counterparty in a vast range of transactions with other banks. (We debated this issue a month ago with a number of commentators arguing that the problem of counterparty risk was not such a big deal).

Some light relief is provided by the announcement by Standard & Poors, the day before Bear imploded, that the worst was over. This will go down with Irving Fisher’s comment in late 1929, that the stock market had reached “what looks like a permanently high plateau”. But at least Fisher wasn’t being paid to judge the stock market. Surely it’s now time to kill off the quasi-official role of the ratings agencies, as Justin Fox has just argued in Time

Looking ahead, the limits of the white knight strategy employed in this case must be approaching. JPM will take a while digesting this mess, and Bank of America has already done its bit when it agreed to rescue Countrywide. The other big banks have their own problems. Any future maidens in distress will have to look directly to Uncle Sam for a rescue.

Update Readers used to the natural order of things might be concerned by the implication that with such a giveaway price, the top brass at BS might be forced to bear the financial consequences of events that were obviously beyond their control. Never fear. According to this Reuters report in the Guardian, while most employees up to junior executive levels will lose both their jobs and the shares they were encouraged to buy, with no “golden parachutes:

JPMorgan Chief Financial Officer Mike Cavanagh late Sunday said taking over Bear would generate about $6 billion in merger-related costs.
JPMorgan has not broken down those figures, but much of that will be earmarked for severance pay and potential exit packages for top executives like Schwartz.
A person familiar with the transaction told Reuters that roughly $1 billion of those costs would be earmarked for severance and retention.

The Fed’s bailout of Wall Street investment bank Bear Stearns has, unsurprisingly, been discussed in terms of the domino theory. A more appropriate metaphor is The Wonderful One-Hoss Shay . This was a carriage constructed on the theory that a system always fails at its weakest spot.

he way t’ fix it, uz I maintain, Is only jest T’ make that place uz strong uz the rest”.

On the Fed’s current approach, the system is unbreakable, provided that “too big to fail” protection is extended to every significant firm in the system. The result of this protection is that the kind of crisis where the failure of one firm leads to a cascade of failures elsewhere is prevented. But then

First a shiver, and then a thrill, Then something decidedly like a spill,– And the parson was sitting upon a rock, At half-past nine by the meet’n’-house clock,– Just the hour of the Earthquake shock!

–What do you think the parson found, When he got up and stared around? The poor old chaise in a heap or mound, As if it had been to the mill and ground! You see, of course, if you ‘re not a dunce, How it went to pieces all at once,– All at once, and nothing first,– Just as bubbles do when they burst.

I can’t resist a racing metaphor to describe the problem that’s now facing the US Democrats, but one that is a more-or-less generic problem for democracy. In any system of government, there is a problem of succession, which has a large contingent element. In monarchies, for example, the absence of an adult male heir can produce crises of all kinds (in England, this problem recurred in different forms for all the Tudors from Henry VIII onward). Dictators rarely nominate a capable successor until the last possible moment, so their sudden death often brings about the collapse of the regime. To avoid this, it’s common to see a quasi-hereditary succession which rarely works well, indeed, at all, for more than one generation.

In democracy, close election results can cause big problems, since there is always a range of uncertainty in which normally unimportant procedural decisions or rule violations become critical. Obvious recent examples include the Bush-Gore race in 2000, the Mexican election of 2006, the recent election in Kenya and now the Democratic nomination race. Such close races inevitably produce a lot of bitterness and can lead to disaster. At the moment it seemed as if the threatened breakdown of democracy in Kenya has been averted, but it’s by no means certain that the power-sharing agreement there will hold, and lots of people have already died. At a less drastic level, but one with big consequences for the world, it seem quite possible that the closeness of the race between Obama and Clinton will produce a vicious contest that sinks the eventual winner.

It’s tempting, and sometimes correct, to argue that the sharp divisions that emerge at times like these were there all along. But often this is no more valid than the kind of analysis which ascribes civil strife to “ancient ethnic hatreds” when these are, in reality, little more than rationalisations of contemporary power politics. Certainly, in the case of the Democratic nomination, it’s clear that the vast majority of Democrats would be happy with either candidate and likely that the majority would prefer an immediate end, regardless of the choice, to a continued contest.

Rather than reflecting deeper underlying problems, to a large extent, these succession crises really are problems of institutional design. Some kinds of institutions manage succession problems better than others. Confining attention to democratic systems (broadly defined), I’d argue that there are substantial benefits to simple and definite procedures. If US national elections (including primaries) were based on popular vote (whether first-past-the-post or instant runoff) the likelihood of a result so close as to permit serious dispute would be very small. By contrast, when the result is reached from 50 state ballots, each operating under local and variable rules, the only surprise is that crises are as rare as they are.

One of the big problems with talking about what Chris Mooney has called The Republican War on Science is that, on the Republican side, the case against science is rarely laid out explicitly. On a whole range of issues (evolution, passive smoking, climate change, the breast-cancer abortion link, CFCs and the ozone layer and so on) Republicans attack scientists, reject the conclusions of mainstream science and promote political talking points over peer-reviewed research. But they rarely present a coherent critique that would explain why, on so many different issues, they feel its appropriate to rely on their own politically-based judgements and reject those of mainstream science. And of course many of them are unwilling to admit that they are at war with science, preferring to set up their own alternative set of scientific institutions and experts, journals and so on.
So it’s good to see a clear statement of the Republican critique of science from John Tierney in this NY Times blog piece promoting global warming “skepticism”. The core quote is

climate is so complicated, and cuts across so many scientific disciplines, that it’s impossible to know which discrepancies or which variables are really important.Considering how many false alarms have been raised previously by scientists (the “population crisis,” the “energy crisis,” the “cancer epidemic” from synthetic chemicals), I wouldn’t be surprised if the predictions of global warming turn out to be wrong or greatly exaggerated. Scientists are prone to herd thinking — informational cascades– and this danger is particularly acute when they have to rely on so many people outside their field to assess a topic as large as climate change.

Both this quote and the rest of Tierney’s article are notable for the way in which he treats science as inseparable from politics, and makes no distinction between scientific research and the kind of newspaper polemic he produces. Like most Republicans, Tierney takes a triumphalist view of the experience of the last thirty years or so, as showing that he and other Republicans have been proved right, and their opponents, including scientists, have been proved wrong (illustrated by his blithe dismissal of complicated problems like population and energy as “false alarms”). Hence, he argues, he is entitled to prefer his own political judgements to the judgements (inevitably equally political) of scientists.

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My namesake, Canadian terrorism expert Tom Quiggin, takes a look at the Guantanamo Bay trials, and notes their adherence to the principles laid down by Stalin’s chief prosecutor, Andrey Vyshinsky.

Quiggin notes that

According to Col. Morris Davis, who is a former chief prosecutor of the military commissions, it appears that the plan was made ahead of time to have no acquittals, no matter what the evidence was to reveal. General counsel William Haynes is quoted as saying (according to Col. Davis) “We can’t have acquittals. If we’ve been holding these guys for so long, how can we explain letting them get off? … We’ve got to have convictions.”

As Australian readers will recall, Davis resigned his position in disgust after the only trial to reach court, that of David Hicks, was shut down when the Australian government intervened to secure a plea bargain, with Hicks pleading guilty in return for a sentence that saw him returned to Australia then kept in prison just long enough to ensure his silence for the election.

Hicks’ guilty plea led to his being described by the Howard government’s fan club as a “self-confessed terrorist”. Of course, the same description applies to many of those convicted in Stalin’s show trials, where charges of sabotage and terrorism were a routine part of the rap sheet (as with all show trials, some may even have been guilty, but their confessions prove nothing).

Daniel’s post on Stiglitz and the cost of the Iraq war reminded me to get going on one I’ve had planned for some time, as a follow-up to this one where I pointed out that the $50 billion in aid given to Africa over the past fifty years or so is not, as is usually implied, a very large sum, but rather a pitifully small one, when considered in relation to the number of people involved, and the time over which the aggregate is taken.

What are the sums of money worth paying attention to in terms of economic magnitude. I’d say the relevant order of magnitude is around 1 per cent of national income[1], say from 0.5 per cent to 5 per cent. Smaller amounts are important if you’re directly concerned with the issue at hand, but are impossible detect amid the general background noise of fluctuations in income and expenditure. Anything larger than 5 per cent will force itself on our attention, whether we will it or not.

To get an idea of the amounts we’re talking about, US national income is currently about 12 trillion a year, so 1 per cent is $120 billion a year. A permanent flow of $120 billion a year can service around $6 trillion in debt at an interest rate of 4 per cent, so a permanent 1 per cent loss in income is equivalent to a reduction in wealth by $6 trillion.

For the world as a whole, income is around $50 trillion, so the corresponding figures are $500 billion and $25 trillion.

What kinds of policies and events fit into this scale?

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In the February edition of Prospect, William Skidelsky has a piece on the decline of book reviewing. As is standard for any adverse trend in the early 21st century, blogs get a fair bit of the blame. The write-off (lede for US readers) says

the authority of critics is being undermined by a raucous blogging culture and an increasingly commercial publishing industry

and the conclusion is

blogging is best suited to instant reaction; it thus has an edge when it comes to disseminating gossip and news. Good criticism requires lengthy reflection and slow maturation. The blogosphere does not provide the optimal conditions for its flourishing.

As a slow, mature critic, I’m sure Skidelsky is well placed to make authoritative judgements of this kind, based on the kind of lengthy reflection unknown to gossipy bloggers. Still, it would help us instant-reaction types to follow him if he had, you know, cited some actual blogs, perhaps even some that run book reviews.

In mathematics, the monster Lie algebra is an infinite dimensional generalized Kac-Moody algebra acted on by the monster group, that was used to prove the monstrous moonshine conjectures.
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Research on human stem cells has been at the centre of one the more ferocious science policy debates in the US, only partially cooled off by recent claims that the necessary cultures can be generated from samples taking from adults, rather than from human embryos destroyed in the process.

“Stem Cell Century: Law and Policy for a Breakthrough Technology”

by Russell Korobkin (with a joint chapter on patents by Stephen Munzer) is a useful guide to the way the debate evolved in the US. There doesn’t seem to have been anything like the same controversy in Australia, although there has been at least one notable example of what might be called common or garden scientific misconduct.

Perhaps because the US stem cell debate is a bit remote for me, I found more interest in the chapters showing how commercial interests in research collided with general scientific ideals of free communications and with donors’ anger when they found that their donated (or appropriated) body tissue had been used to make highly profitable products.Kieran

wrote the book on the latter topic

.

Much of the debate about the relationship between donors and researchers on these issues has been cast in the framework of “informed consent”, which I think is not very helpful here. Neither I think is a focus on property rights over body parts. The real issue is how to finance the provision of public goods like medical research, characterized by highly uncertain returns.

I’ve looked at how to pay for medical research before and generally reached the conclusion that patents are not the best way to go, a view that is strengthened by a reading of Stem Cell Century. Looking at the conflicts discussed here, it seems that they might be less severe if successful research were rewarded by prizes, including ex gratia payments to crucial participants such as tissue donors.

Most long-lived dictatorships have at least some positive achievements, and, the world being what it is, most dictators have some unattractive enemies. These facts have generated a couple of marathon threads here, following Chris post’ on Castro and mine on Suharto** , not to mention vast numbers on Saddam. Then there’s Algeria and Pakistan, where dictatorial governments have had plenty of fans.

What are the implications of these facts, both for the policies we should support and for the moral judgements we should offer? I have a couple of fairly obvious points to make about policy, and some less clear thoughts about moral judgements.

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My column in last week’s Australian Financial Review was about the spreading crisis in financial markets. In the same week, we saw the first indication* that the crisis was spreading to the market for credit derivatives. The possibility of a full-scale financial crisis arising from these markets, which financial market bears have been talking about for years. Whereas the losses from sub-prime loans and related derivatives markets are likely to be in the hundreds of billions, the nominal volume of outstanding contracts in the credit derivatives markets is in the tens of trillions, and interest rate swaps are in hundreds of trillions.

Such amounts cannot possibly be repaid by anybody, so a breakdown in these markets would imply either wholesale bankruptcy or a government rescue involving the abrogation of existing contracts on a scale unprecedented in history. Either way, as noted in the article, large classes of financial assets, and the associated financial markets, may simply disappear. Hundreds of trillions of dollars in derivative contracts may be unwound, reversing the explosion of asset and transaction volumes over the three decades since the Bretton Woods system of financial controls broke down in the 1970s.
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