The Little Britain Election

We wake up today to the Democratic Republic of Little Britain.

Vladimir Putin, whose career in the KGB topped out at Lieutenant-Colonel, was a bit player on the Soviet side of the Cold War. The strategy was to undermine Western rivals by selling socialism as the alternative to capitalist exploitation. This message resonated most strongly among the poor. The response in the West was to tolerate a moderate amount of socialism – Social Democrat policies through much of Europe, the British NHS, the US New Deal – to blunt the demand for real socialism. In developing countries, the Cold War was a very hard war. Anyone seen as being in the Soviet camp was undermined even if they were not really Communists.

During the Soviet era, the Cold War ran like this. Anyone who was vaguely socialist was traduced as being a Russian Useful Idiot. There was an element of truth in this in that the USSR was not truly a socialist country but really an authoritarian oligarchy, and not a particularly efficient one. While it had some elements of socialism like guaranteed employment and public ownership, it was by no means democratic and to rephrase Orwell, some people were more equal than others.

Chomsky points out that it suited the interest of both the Soviets and their opponents in the West to view the USSR as socialist. For the Soviets, socialism had a positive connotation and enabled their support on the left; for capitalists, using the Soviet police state as an exemplar of socialism was great way to frighten people who would otherwise gravitate to socialism into believing it was a fundamentally evil concept.

Fast forward to today. Russia no longer has any pretence at being Communist. It has lost the worst of its authoritarianism but remains a police state. Opponents of the government are routinely jailed or die mysterious deaths – even if nowhere on the scale of the Stalinist terror. Russia today is an authoritarian ethnic nationalist state, much in the mould of the societies the Soviets claimed to despise. Their foreign policy is not much different than in Putin’s KGB days but the practical change is who their natural allies are and how they enable them – while simultaneously undermining Western society.

There is extensive evidence of Russian meddling in the Brexit referendum, which UK PM Boris Johnson is accused of covering up. We all know also of Russian meddling in US politics, particularly the 2016 presidential election.

Is this evidence that Donald Trump and Boris (Russian name) Johnson are Putin assets? Certainly, in his KGB days, he could not in his wildest dreams have imagined planting assets at such a high level. I doubt this is true though – they are merely opportunists who have ridden the wave of chaos that Russian interference has amplified.

That chaos was there to be exploited because the pre-1989 consensus has broken down. A limited degree of socialism is no longer tolerable to the forces of big capital because they no longer fear giving fuel to pro-Soviet revolutionaries. As so often happens, causality is hidden because big capital has the propaganda resources to point to anyone but them as the cause of problems that ail ordinary people. Consider globalisation for example: big capital scores in a big way from this. Apple can manufacture in China with scant regard for working conditions and the environment, while presenting a squeaky clean image in developed countries. Meanwhile big corporates such as Apple and Google can massage their cash flows so they pay minimal tax.

The cost of the takeover of policy by big business is a squeeze on poorer working people and the unemployed. The classic tactic to counter any drift to socialism – or even any moderate measures to reduce inequality that cannot by any stretch be called socialism – is divide and rule. Hence the rise of xenophobia, the resurgence of racism and the culture wars that are designed to divide societal groups that should have a common interest.

Trump’s divisive messaging is not a bug: it’s a feature. His string of lies is a huge distraction from the way he is redirecting the US economy to favour the super-rich and stacking the courts to deny ordinary people their rights. Short-term growth, reductions in unemployment, etc. are not sustainable as the budget deficit and hence national debt blow out. You can be sure that the remedy will not hit the rich.

Likewise, the Brexit campaign with its deeply xenophobic memes. One example: the threat that Turkey would join the EU and flood Britain with – ugh – Turkish workers. The fact that Turkey’s membership of the EU was not a near-term prospect did not reduce the impact of this racist campaign line. Ironically, with Britain out of the EU, employers will have more rather than less reason to employ foreigners from poor countries. Why? Because such potential employees will not longer be at the back of the queue behind EU residents, who will now need work permits, just like a citizen of Turkey (or Bangladesh etc.).

All of this masks the very obvious takeover of the body politic by agents of the wealthy and the gains made by Russia in dividing its rivals.

Since this is the day after the Brexit election, I focus on that rather than growing weakness of the US on the world stage. Britain as part of Europe is part of the second-biggest economy after the US. Europe and Britain lose from breaking this linkage. Britain itself is weaker as the impetus for Scottish independence is increased and the Good Friday Agreement is under threat, raising the risk of a resurgence of violence in Northern Ireland.

That is not the only issue in weakening the Europe project: authoritarian ethnic nationalism is becoming an increasing factor in other parts of Europe with the rise of the far right.

The real issue is what do do about this.

Authoritarian ethnic nationalism caused two world wars centred on Europe; the selling out of established democracies to this threat is a serious problem. In the long run, even the oligarchs backing this trend stand to lose. If Europe fractures into right-wing ethnic national states and the US returns to isolationism, that puts us back to 1914 – but with Russia relatively stronger. That is not an era for nostalgia.

There is no clear solution to this: the best I can offer is educate yourself against propaganda, use social media to the full to counter it and follow the money.

Economics of climate: Step back from ideology

What is economics, in essence?

It is an optimization problem. You choose your measure of interest and make it as good as possible.

From there, opinions vary. What is your measure of interest? Some say growth – the rising tides raise all boats crew (they have never had a leaky boat). Others say equity – inequality they say is not an acceptable price for growth. Sustainability is another measure: it is all very well to pursue maximum growth, minizing inequality, maximizing access to quality health and education or whatever other goal you seek if, in the long run, everything falls apart.

The optimization problem and the hazard of local maxima.
Assume your score of interest is good if it is big. At points
A and B, getting better takes you to a place that is not the best
because you have to first pass through a point where things

look worse

 

There are two difficulties with simplistic markets-vs-socialism comparisons. First, not everything is an economic good. A social good may not have a monetary value and also may not be promoted by pure economic growth. Another problem is that a market is good at finding local maxima, and disadvantages players willing to endure short-term pain to reach a more optimum point.

Markets favour local optimization

Check out the picture.

Assume you are in an industry where players have achieved efficiencies that put them at point A or B. If they are under competition pressure, their best strategy is to move to the “local maximum” because moving in that direction makes them more competitive. If they attempt to move to the point marked “best?” they first have to move through a stage of getting worse.

This is in very generic terms – to make it concrete, if a totally new way of operating is proposed that is way more efficient than traditional practice but it takes a big investment to implement, anyone adopting the new concept goes through a period where they incur extra costs in making this investment. They therefore move away from the local maximum and head down the “worse” slope. Then, once the new investment starts to pay off, they need to make improvements to get ahead of the competition who is still playing in the “local maximum” space.

Social vs. Economic Foods

Some things either do not have a monetary value or are too important to leave to the possibility that the markets will fix them. One example is health. Up to a point, you can trade being healthy for having more money but debilitating or life-threatening conditions are things you would rather fix the best way possible that worry about the cheapest option. More broadly, a healthy population benefits society. Essential work is not left undone because someone is sick, etc. Much the same can be said for education. Though being educated confers personal advantage, society as a whole benefits from a more educated population.

Can markets alone optimize social goods? No. Because access to resources does not neccessarily correlate with ability. The stupidly rich can benefit from education even if they have very little potential. If the extremely poor get ill, they cannot be expected to work extra time while still sick to pay medical bills.

A borderline case is negative externalities, costs that do not fall on a producer but that cost society. These are economic costs but are not well-suited to the market model as the cost can be passed on to society. Examples include pollution and depletion of natural resources.

Climate Change

Where does climate change fit into all of this?

First, the cost is a negative externality, something that the markets demonstrably do not handle as they have not fixed the problem. Second, it is a social cost as it damages the poor disproportionately and generally will damage those not responsible for the problem. Third, it illustrates the problem of local optimization neatly. While it is increasingly plausible that renewable energy in the long run will cost less than fossil fuels – particularly when cheap sources deplete – in the short term the “worse” cost scenario has to be covered somehow, otherwise renewables cannot build to the sort of scale needed.

Some fundamentalist libertarians argue that climate science is flawed because it requires a large-scale government intervention. I argue the opposite. Their economic philosophy is flawed because it cannot remedy a situation like this. So instead of allowing someone else to fix the problem, they deny.

Tiramisu

Ladyfinger biscuits highly discounted – what are you going to do?

 

• 250ml cream
• 250g mascarpone
• 75ml marsala
• 5 tbsp sugar
• 2 shots of espresso
• 200g pack ladyfinger biscuits
• 100g good dark chocolate

Whisk the cream, sugar, mascarpone, marsala and sugar vigorously until the mix comes together and the cream thickens.


Line a bowl with the half the biscuits and drizzle over one shot of espresso, evenly spreading over the biscuits.

Spread over half the cream mix then finely grate over this half the chocolate.


Add another layer of biscuits and finish the layering with the rest of the cream mix and chocolate.

Cover and refrigerate.


Highly modified from a BBC recipe, which in my opinion uses too much cream and substitutes regular coffee for espresso.