Dr. Tim Morgan and The Perfect Storm

At the end of last year a ComRes poll revealed that only 6% of respondents understood that the national debt was rising rather than falling.  That's because most people don't understand the difference between the deficit (our annual overspend) and the debt (the aggregation of all our past annual overspends).

I'm explaining it in case you are one of the 94%.  If you're not, apologies.

In the face of such ignorance, it's hard to see how we're going to come to terms with the economic problems facing the country. Which are legion.

I was reflecting on this after reading the latest of Dr Tim Morgan's magisterial series of reports into the state of the British economy.  Dr Morgan is Head of Global Research at brokers Tullett Prebon, and over the last year or so he has published three or four of these blockbusters.  They are easy to find on the net.  Just Google Dr Tim Morgan Armageddon.  Yes that's right.  Armageddon.

Broadly speaking Dr Morgan's thesis is that most of the growth we enjoyed during the Brown boom was due to borrowing.  If you assume that this borrowing - government, consumer, housing-related - is at or near its peak, there is little likelihoood of a similar stimulus to the economy in future.  So no wonder the economy is not growing.  It's not going to.  This is sobering, but for most people outside the Keynesian-lite cadre of Ed Balls and his fellow-travellers, not terribly surprising.

How did we get into this situation?  Now Dr Morgan has released a new report, entitled "Perfect storm: energy, finance and the end of growth", which addresses the issue.

"Fundamentally, what had happened here was that skilled, well-paid jobs had been exported, consumption had increased, and ever-greater quantities of debt had been used to fill the gap. This was, by any definition, unsustainable . . . anyone who believed that a globalisation model (in which the West unloaded production but expected to consume as much, or even more, than ever) was sustainable was surely guilty of wilful blindness. Such a state of affairs was only ever viable on the insane assumption that debt could go on increasing indefinitely . . . the process of globalisation has distorted the normal relationships between production, consumption and debt beyond the point of sustainability. The West is in deep (and perhaps irreversible) trouble because it has consumed more, just as it has produced less."

I'm aware of course that I enjoy reading Dr Morgan's work partly because I like a frisson of horror every now and again; but also partly because I agree with most of his conclusions.  There's nothing like a bit of external self-validation.

"The real causes of the economic crash are the cultural norms of a society that has come to believe that immediate material gratification, fuelled if necessary by debt, can ever be a sustainable way of life . . . "  Amen to that.

And confirming my suspicion that all the financial services industry did was enable us to keep on borrowing, "There has been widespread public vilification of bankers, the vast majority of whom were . . . only acting within the parameters of the ‘debtfuelled, immediate gratification’ ethos established across Western societies as a whole . . . Bankers, trying to establish an even larger borrowing market . . . created the ultimately disastrous phenomenon known as subprime, in which mortgage funds were advanced to borrowers who were not remotely capable of keeping up 

repayments".

Dr. Morgan is right about almost everything.  No, really.   

"Alongside wasteful investment allocation and disastrous labour market policies, the West has allowed the rise of two extremely damaging cultural norms. The first of these is the unchecked rise of consumerism, fostered by an advertising industry which spends close to $470bn annually (and about $143bn in the United States alone)."

"The second is a sense of entitlement, both at the individual and at the national level. Welfare systems, originally intended as safety nets, have been allowed to price Western workers out of international markets. Benefits systems, even if they are not (as is often claimed) “lifestyle choices” for the recipients of benefits, certainly have been exactly that for the armies of administrators that flourish in almost all such systems. The rise of welfarism has imposed huge social costs and taxes on businesses, placing them at an ever greater competitive disadvantage which has been exacerbated by well-meaning labour legislation in which considerations of profitability and efficiency are also-rans when measured against supposedly ‘progressive’ social objectives.  Worst of all, Western countries and their citizens have behaved as though their affluent lifestyles are some kind of divine entitlement rather than the reward of productiveness."

But admirers of Dr. Morgan will find new shocks in his paper.  The first is that he thinks that the markets will "in the very near future" realise that central banks can never reverse their massive Quantative Easing.  "If – or rather, when – the credibility of eventual reversal is lost, a dire chapter of recklessness is likely to end in money-printing, hyperinflation and collapse."  

But there's worse.  The long  period of economic growth across western economies has coincided with and depended on the availability of cheap energy.  But energy is now going to get even more expensive, partly because of rising living standards and rising demand in India and China, and partly because of the increased cost of extracting oil from the ground.  

Put simply, the more it costs to extract energy the greater the percentage of a country's national income which has to be devoted to pay for that extraction.  Initial oil deposits - the low hanging fruit if you like - were cheap and easy to extract.  Now it's getting much much more expensive, and paying for that extraction will cripple economies, particularly those that don't have big reserves themselves.

Our way of life will be over, within a decade!

If I believed everything Dr. Morgan wrote I'd be stocking up on rice and pasta.  I don't, or at least, not completely.  For one, he seems to be enjoying his doomsaying slightly too much.  And we shouldn't assume that because his analysis of how we got to where we are looks unnervingly accurate his prognostications will come true.  After all, twenty years ago, when Britain was emerging from Black Wednesday and the longest period of economic growth in our history was just beginning, you could have stuck a hundred clever and well informed economists in a room and not one of them would have come up with the current scenario.  The chances of Dr. Morgan being right in every particular are very small.  Harold Macmillan's "events, dear boy" have a way of making idiots of us all.  

Secondly, I think Dr. Morgan underplays the ability of technology to transform the way energy is consumed and supplied.  Oil won't run out - it'll just become too expensive and we'll have to use something else.  The something else could itself provide an opportunity for growth (the question of whether growth is of itself a good thing is for another day.  Or days).

Lastly, although humans are very bad at preparing for change they are very good at adapting to it when it arrives.  The world will look different, but we will probably cope with it.

The 94% who didn't know the difference between the debt and the deficit worry me much more than Dr. Morgan.  Because it's in the dawning realisation for them that there may be no return to the old days of reckless plenty, and in the painful adjustment which must follow, that the true danger to civility lies.

Slavoj Zizek, Zero Dark Thirty and the Royal Opera House

The Slovenian philosopher Slavoj Zizek is in the news again for having written disparagingly about Kathryn Bigelow's new film Zero Dark Thirty.  A re-telling of the hunt for Osama bin Laden, ZDT shows Jihadists being waterboarded (ie tortured) by the CIA.  I haven't seen the film, but by common consent it adopts a neutral position on waterboarding.  When Barack Obama appears on TV announcing the practice will stop, the watching CIA operatives are unmoved.

Zizek is horrified by this.  "To depict it neutrally", he wrote in the Guardian, ". . . is already a kind of endorsement.  Imagine a documentary that depicted the Holocaust in a cool disinterested way as a big industrial-logistic operation . . . Such a film would either embody a deeply immoral fascination with its topic, or it would count on the obscene neutrality of its style to endgender dismay and horror in spectators.  Where is Bigelow here?  Without a shadow of doubt, she is on the side of the normalisation of torture".

When his fellow Marxists have been responsible for at least as much torture in the last century as any other political group, it's refreshing to see Zizek keen to display his opposition to the practice.

But surely he is talking hogwash.  Is it really art's function to tell us what to think?  Would Zizek have liked ZDT any more if Bigelow had come down in favour of torture?  Or is he suggesting that the only kind of art worth its salt is the kind congruent with his own political, moral or aesthetic views?  If so, doesn't that reduce art to mere Brechtian polemic?  And what if someone had made a documentary about waterboarding which didn't adopt a view?  Would that be bad too?  Should news gathering tell us what to think about world events?

It used to piss me off no end when the BBC News would report an atrocity with the words "the IRA has admitted responsibility".  You admit something when it's wrong.  I am perfectly capable of concluding that blowing people up is wrong without being told to think so.  Someone somewhere will have thought blowing people up was right.  That's their prerogative.

No, the point about art is that it allows room for ambiguity.  One of the delicious things about Pride and Prejudice is that Austen leaves open the possibility that Elizabeth Bennett finally decides Mr D'Arcy is OK when she sees the size of his, ahem, estates at Pemberley.  We are joyously free to make up our own minds what we think about that.  Was it wrong of Dostoevsky to just show us Raskolnikov murdering his landlady and feeling bad about it afterwards?  Should Camus have included a postscript to The Outsider to the effect that killing Arabs is wrong?  I doubt they would have been better books as a result.

Slavoz Zizek's ubiquity is a puzzling thing.  He regularly features in the London Review of Books.  He holds academic posts at Birkbeck as well as in Slovenia, and has taught widely in the US (Columbia, Princeton etc).  And yet every time I read one of his articles I come away thinking, "The man's an idiot".

(A variety of recent experiences suggests that some of these lionised academics are actually not as clever as your average QC - the experience of reading Richard Dawkins on theology started me off on this, and I'll come back to it in future).

Not only is Zizek's faintly bizarre criticism of ZDT baffling (perhaps Marxists just dislike seeing the US get something right), but he also misses a crucial and obvious point about the film.

Director Bigelow and writer Mark Boal were apparently helped to make it by the CIA, being granted access to confidential material.  I am not a knee-jerk anti-American by any means, but it seems to me that an Agency which can kill people by unmanned drones operated from the far side of the world and can set up a fake immunisation programme to gain access to the DNA of Bin Laden's children, is an organisation with large resources of money and cunning.  It is also an organisation which, rooted in a democracy, has a vested interest in portraying itself in a favourable light.

If the CIA told me it was raining, I'd go to the window and check.  And yet Bigelow and Boal were happy to take what they were told and base a film on it.  That's naive.

I'm very much looking forward to seeing Zero Dark Thirty, but I have absolutely no idea of whether the story it tells is true in any particular.  I won't be any wiser when I've seen it either.

As for Zizek, a story in the paper the other day stated that the Royal Opera House has commissioned four new operas "inspired" by his writings.  Yes, that's the ROH, which pays its Music Director over £600,000 (some of it raised from British taxpayers), commissioning work inspired by a Marxist who one presumes despises the privilege and elitism his world-view says it stands for.

Incidentally, the ROH Director at the time this scheme was dreamed up just happens to be Tony Hall, the new Director General of the BBC.

To say this is a situation rich in ironies does not come close to encapsulating its jaw-dropping nature.  As so often with Zizek, one doesn't know whether to laugh or cry.

Muslim Patrol and Quadistan

I once heard a young British woman of African extraction say she had never experienced racism.  Whilst I expect she's in a minority, it still strikes me as significant that any such person could say so.

In the same way, whilst I don't think it is the end of the world when young Muslim men have been patrolling the East End of London driving away unsuitably dressed women, people drinking in the street and, in one unpleasant incident, a gay man, it clearly says something about Britain now which I think is interesting and baleful.

You can find the videos by searching for Muslim Patrol on Youtube.

Before Christmas the 2011 Census results revealed that non-whites living in London were for the first time a majority.  I don't find this as surprising or as appalling as the Tory press seems to.  Even when I was living there twenty years ago it was clear that London was an international city rather than a British one (one of the great things about Manchester is that it still retains a good deal of its Mancunian character; London on the other hand lost almost all of its London-ness).

But also I think the issue of skin-colour is a red herring.  Who cares if people are white or not?  I don't; or not much.  For me what's much more important is their culture.  I've often observed that I have more in common with my friend of Ghanain origin than I do with most of the white adults I meet in this corner of SK8.  Culture is not a fixed thing - it flits across individuals with a fluidity that physical characteristics cannot match.

Are the majority of Londoners British?  The answer appears to be yes.  It seems that only about a third of people living in London were born outside the UK.  That's still an awful lot of people though, and it brings me to why culture matters.

If you can't have a cohesive society where people are treated differently because of their skin colour, neither can you have one where people live in cultural ghettos.  I always thought when I was young and idealistic that integration and acceptance would inevitably happen when children met and mingled at school.  Unlike some, I have walked the walk, and my children have been to state schools were Muslim children were sometimes a majority.  At their inner city Sixth Form College there is, sadly, very little mixing, something which has been formalised to the extent that the quadrangle where the Muslim students go at break is known as Quadistan, whereas the grass where the white kids hang out is called Vanilla Hill.  These are names devised by the kids.

One reason why Enoch Powell was wrong about immigration of the 50s and 60s was that he failed to see that people from sub-Saharan Africa and the Caribbean with a common post-Christian heritage would in the end rub along with and happily intermarry whites.  I suspect it's the children of those marriages that are making up much of London's non-white majority.

What immigration's subsequent apologists failed to realise was that such integration wouldn't necessarily happen when Muslims came to Britain.  Integrating cultures which differ so radically in their attitudes to family life, the role of women in society, relationships between men and women, the consumption of alcohol and sexual behaviour was always going to be much more difficult. The Muslim vigilantes in the East End are British people too. But whilst there are some things about their culture that I admire a lot, the sub-Taliban attitudes of Muslim Patrol are not mine.

Aditya Chakrabortty repents!

"Likewise, I say unto you," runs Luke 15:10, "there is joy in the presence of the angels of God over one sinner that repents".

Well there will be rejoicing this morning, because this blog's least-favourite economics commentator, Aditya Chakrabortty, seems to have had a Damascene conversion.

There has been nothing but ridicule, calumny and disparagement for Mr Chakrabortty in the past, for his ludicrous belief that the government can cure its economic ills merely by borrowing a bit more money. So I nearly choked on my home-made muesli when I read in his G2 column the following astonishing revelation:

". . . on the other (hand), you have the equally false position staked out by Ed Balls: that with a wave of a Keynesian wand we can be magicked back to 2006."

If I were a proper writer I'd be able to mimick one of those expostulations beloved of comic book characters, a kind of spluttering onomatopeia of the "WEURGHHLP!?" variety.

In a nano-second Chakrabortty has abandoned his former delusion and made a last-ditch grasp for reality's slender reed. Suffice to say that he has exhausted my capacity to render astonishment in print.

I know I should merely welcome this about-face and leave the carping for another day, but - if neither austerity nor neo-Keynesianism are the answer, what is?

It would be good if Chakrabortty could tell us soon.

Censoring Alan Rusbridger's piano

In the old days, before lured by the bright lights of the blogosphere, I used to post on the Guardian's Comment is Free website.  The first thing that quickly becomes apparent to CiF users is that, whatever else it is, comment is not free.  The threads are moderated by Guardian staff, and anything that infringes their "community standards" gets deleted.  You would think this would be confined to personal abuse or bad language; but actually I found it surprising how easy it was to infringe their sense of propriety.

Resorting to ad hominem attacks isn't my style - the last refuge of those losing an argument - but my impression was that the moderators had in mind range of opinions within which it was possible to say what you liked; but woe betide you if you strayed outside.  Which I often did.

I was going to write that I have been banned from CiF, but in fact what happened is that my comments were "pre-moderated".  That's to say, when someone from the Graun had time to read and approve them, they'd be posted.  In theory.  Actually once I had been cast out beyond the pale I never once found that they had been put up on the site.  But effectively this was a ban anyway, because the charm, if that's the word, of comment sites like CiF is the rapidity with which the argument moves.  Delay is fatal.  Without immediacy, there's no point in taking part.

What, you may be wondering, does this have to do with Alan Rusbridger's pianos?

Well, although my travails with CiF are of slight significance, it now appears however that the CiF has started "moderating" the Guardian's own staff.

Alan Rusbridger, the Guardian's donnish editor, is an enthusiastic amateur pianist.  He has written a musical memoir, which according to this week's Private Eye, "waxes lyrical about his two grand pianos, one of which is a 1978 Steinway that cost £25,000 and is housed in a specially built extension in the garden of his (second) country house".  Rusbridger also had lengthy extracts from his book run in last Saturday's Guardian and in, of all things, the Daily Mail.

Last Sunday, 20th January, a member of staff from the cash-strapped paper posted the following on CiF:

"Afternoon Alan - I'm a member of Guardian staff, posting anonymously.  As you know, it's a tough time for your journalists at the moment . . .  We're working harder and harder (because we love the papers), coping with dwindling resources and morale, we're badly mismanaged, and trying to cope with the life-changing threat of compulsory redundancies - all a result of the company's long-term financial illiteracy and lavish excess at the top.  So I just want to say thanks for the series of articles - three now, isn't it? - about learning to play your Fazioli piano.  They're brilliantly timed, and I know they'll lift spirits.  We always wondered how you filled your days, how you spent your fortune.  Now we know."

How was this bold contribution to Comment is Free received?  The Guardian moderators promptly deleted it.

Now CiF is a private website, and I have no objection to its owners running it in the way that they please.  What sticks in my craw is the pretence that they are carrying the torch for freedom of speech and debate.  They aren't.  Moderation is a weasel word for censorship, and although "Community standards" isn't a phrase in 1984 it might just as well have been.

Losing the moral high ground as well as losing money.  C.P. Scott must be turning in his grave.

Triple-dip and John Lanchester's balloon

George Osborne will be sickened by this morning's news of a 0.3% contraction in the last quarter of 2012.  When you consider the effect a fortnight of snowy paralysis will have on Q1 2013, it'll be astonishing if we don't get two consecutive quarters worth and a third technical recession.

I'm sceptical of the notion that this is a problem which can be seen off by a bit more borrowing and a tax cut here or there, certainly not if Britain tries to do it alone.  If there is anything more pointless than blogging about the economy, it's pumping money into it at a time when your biggest trading partners are all battening down the hatches.  You might as well try and blow up a balloon with a hole in it (this is the John Lanchester approach, and finds favour with those who like to criticise Osborne without the inconvenience of having a plausible alternative).

At a time when growth seems to be flagging everywhere, there is no sum available to HMG big enough to make a blind bit of difference to the economy.  Europe is in deep trouble, Chinese growth is faltering and the only reason the US isn't as deeply in the mire is because President Obama has resolutely avoided confronting America's enormous debts.  Too many countries (both at government and citizen level) owe too much money and all of them are trying to deleverage at the same time.  No wonder demand is flat.

At some point the politicians are going to have to devise a kind of Global New Deal, a mixture of inflation (which quickly erodes the true value of debt), QE, debt write-offs and extra spending by surplus countries to boost demand and confidence.

Things will have to get a lot worse before this happens.  In the Cadiz area of Spain, where I hope to be going for my summer holidays, unemployment is at about 40%.  Worse then even than this.

Cameron's hostage to EU fortune

First thoughts about David Cameron's EU referendum announcement -

One, obviously it's being done to stop the leaking of Tory support away to UKIP.

Two, five years is an awful long time in politics, and a lot can change (look back an equivalent distance to the sunlit uplands of early 2008 and weep for glad confident morning lost).  It's possible that things will look much better in the Eurozone in five years time, but it's equally possible that things will look even more of a shambles than they do at present.  (There's an interesting piece about this in the Torygraph here).  Moreover, as discussed on this site a couple of weeks ago, by next year the doors will have been opened to Romanians and Bulgarians to come to the UK and work.  If there is anything like a repeat of the Polish debacle ten years ago, public annoyance at  our inability to control our own borders will be even higher after the next election than it is now.

In other words, it's possible that disenchantment with all things European will be greater, and that any concessions David Cameron has managed to wring from EU will not be sufficient to guarantee Europhiles winning an In-Out referendum.

I suspect Cameron would want to stay in the EU even if he can't extract any significant treaty changes.  In which case he may find himself regretting today's promise.  For anyone running a great enterprise - a nation state, an orchestra, a family - it can be a mistake to ask constituents what they want.  It won't necessarily be the same thing you want.

Cameron is gambling that no unforeseen event will make his promise look like a mistake.  The words "hostage" and "fortune" spring to mind.