The Long View 2005-03-08: Very Bad Things

I hadn't remembered this term, but John brings up 'debt strikes' here. This is apparently a thing, but it is a thing that hasn't quite caught on yet. John is right that this would have bad consequences on the financial system if it ever got really popular. Any debt strike bad enough to really hurt the financial system would hurt everyone else too. There isn't a lot of difference between what happened in the housing crash in 2008 and the likely effect of a debt strike on mortgages, for example. I suppose in theory you could use the resumption of payments as leverage, but even with the Internet that would be hard to coordinate on a mass scale. Right now, the ability of the Internet to foster discontent is limited to small groups of enthusiasts.


Very Bad Things

 

Once upon at time, college students majored in English literature if they were not pursuing a career in medicine or engineering or science. Then it was history. I myself majored in political science. I had long supposed that, eventually, nothing would be left of the curriculum but courses related to business or science degrees.

Once again I find that I am out of touch, if we can believe this piece by Elizabeth van Ness in the New York TimesIs a Cinema Studies Degree the New M.B.A.?. This new make-weight degree seems to differ from its predecessors in that the people who pursue it take it dead seriously:

"People endowed with social power and prestige are able to use film and media images to reinforce their power - we need to look to film to grant power to those who are marginalized or currently not represented," said [a student], who envisions a future in the public policy arena. The communal nature of film, he said, has a distinct power to affect large groups, and he expects to use his cinematic skills to do exactly that.

Look, if your undergraduate or graduate degree will give you the power to cloud men's minds, that's just wonderful. However, please have the grace to employ these dark arts for your own selfish purposes. You at least have some idea what you want, and you can tell when you are satisfied. If you try to do this kind of thing for what you imagine other people want or need, then neither you nor the victims of your benevolence are going to be happy.

* * *

In addition to a political science degree, I also have a law degree, a qualification of which stories like this make me deeply ashamed:

VIENNA (Reuters) - U.S. and Austrian lawyers have filed a lawsuit demanding Thailand, U.S. forecasters and the French Accor group answer accusations they failed in a duty to warn populations hit by December's Tsunami disaster, a lawyer said Monday. ...The lawsuit was filed Friday at a New York district court on behalf of tsunami victims by lawyers including U.S. attorney Edward Fagan, internationally renowned for 1990s lawsuits against Swiss banks over Holocaust-era accounts. It demanded an account of their actions on Dec. 26.

Anyone interested in the suit can pursue the matter here, in German and English.

Lovecraft did not have enough words for "reptilian" in his vocabulary to express what I think of this use of the courts.

* * *

Moving on from litigation, we come to legislation. In particular, we move on to the blood-sucking bankruptcy-reform bill now before the United States Senate. Newsday put it like this:

In the name of ending bankruptcy abuse, the bill would impose a means test to determine who could have their debts wiped out and who could only have them adjusted with a repayment schedule. It would do nothing to rein in companies that flood consumers with credit, high interest rates and long, costly repayment schedules. And in their zeal to pass a bill the House will accept without changes, Senate Republicans rejected Democratic amendments intended to take the focus off income and to take aim instead at willful deadbeats.

Earlier versions of this bill have failed of passage, chiefly because insanity attracts insanity. This latest version may actually fail today, because Senator Schumer of New York plans to introduce an amendment that would exclude prolife activists from any bankruptcy protection, if they have been loaded with civil penalties for demonstrating at abortion clinics. Such an amendment would be a poison pill: the House would not pass the bill if the prolife exclusion were added. However, it is possible that the amendment will fail, and the bill will pass both houses.

What would the significance of that be? Quoting Paul Krugman of the New York Times just encourages him, but in this case, he is almost right:

Warren Buffett recently made headlines by saying America is more likely to turn into a "sharecroppers' society" than an "ownership society." But I think the right term is a "debt peonage" society - after the system, prevalent in the post-Civil War South, in which debtors were forced to work for their creditors. The bankruptcy bill won't get us back to those bad old days all by itself, but it's a significant step in that direction.

The "almost" here is that peonage is not an option in America. Debt strikes are, however. That's what the bankruptcy laws were originally enacted to avoid. If that safety valve closes, the Internet will make collective debtor resistance easier to organize than it has ever been. The mere whiff of this will threaten the financial system from a wholly unexpected direction. Watch.

* * *

And then, in the frozen Ninth Circle of Hell, we find the Spengler at Asia Times. In a column entitled They made a democracy and called it peace, he explains that the Middle East would not long survive the success of the Bush Administration's universal democracy strategy. Consider World War II:

That victory by the United States replaced German, Japanese and Russian tyranny with democracies is not in doubt. The problem is: where are the Germans, Japanese and Russians? If the United States had set out to exterminate its erstwhile enemies, it could not have done a more thorough job. ...In any case, the former Axis powers and the former Soviet Union and its satellites occupy every one of the top positions on the death row of demographics. I refer to the United Nations' report "World Population Prospects: The 2004 Revision"...None of this would have surprised the Nazis, who believed with paranoid fervor that Germany's national existence was in danger. One can hear the shade of Adolf Hitler saying, "You see, that is just what I anticipated and wanted to avoid! I warned the Germans that their national existence was in danger, and now you see that decadent democracy has finished us off."

Understand that the column is in no way a pro-fascist argument; Spengler is just suggesting that the Kantian Peace may turn out to be the peace of death.

This hypothesis needs work. The UK was on the winning side in World War II, but its demographics are not so different those of Continental Europe. Actually, the same is true of Massachusetts in the United States. The depopulation of Russia began before the end of the Soviet Union. Elsewhere in the world, China seems headed for a demographic crisis of its own; so are parts of India, believe it or not.

I am quite willing to believe that civilizations can die of despair, but a great deal else is happening, too.

Copyright © 2005 by John J. Reilly

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The Long View 2002-09-19: Historical Accidents

In general, John was a cautious advocate of George W. Bush, but he wasn't a fool.

The US will probably get its chance to change the regime in Iraq very soon. For myself, I am inclined to think that everyone is making a lot of fuss about a 72-hour raid. However, we might remember that Henry V's campaign in France was tactically brilliant, but a strategic failure.

John also had a better appreciation of economics than most critics of the war in Iraq.

One of the points often made about US Iraqi policy, and about US policy in that part of the world in general, is that it is based on nothing more than US desire for oil. This is true only indirectly. Certainly it is not the case that the US "wants Iraq's oil," as that country's hapless foreign minister recently put it. Actually, I suspect that the domestic oil producers with whom the Bush family is so familiar would like nothing better than that the Iraqi fields be capped and buried under ziggurats; peace and new oil fields could bring back the days of $18 per gallon crude. Nonetheless, it is true that the US is so interested in the Middle East because the world has a petroleum economy. It does not follow, however, that a non-petroleum economy would mean a peaceful world, or even a peaceful Middle East.

The oil boom brought about by fracking is a consequence of $100 a barrel oil. We get oil from Saudi Arabia for the same reason we get electronics from China: the importers save a few cents on each transaction, which adds up in a big country like ours. Nonetheless, what happens in the Middle East influences oil prices, which affect the US economy and US citizens, so US politics pays attention.

Finally, imagine a "Green" world, in which renewable energy is not the unreliable, capital intensive monstrosity that it is in our world, but in which people in developed regions live in "frugal comfort" on sunflower oil and electricity from windmills. That would mean that many regions would be an order of magnitude poorer and more chaotic than they already are. Without petroleum exports, the whole Middle East would be Afghanistan.

With the death of the king of Saudia Arabia, many have wondered whether time has come for the US to cut our ties with the Saudis. If we were able to successfully extricate ourselves from the Middle East, it would require a big change in both US politics and our economy. While difficult, the changes seem plausible. These changes would mean the end of the petrostates all over the world. However, the big question is whether the Middle East would again be a sleepy backwater, or would explode in violence from desparation.

Historical Accidents

 

George Bush is rarely compared to Shakespeare favorably. Still, all through the president's address to the United Nation's General Assembly last week, I could not help thinking of the oration early in Henry V (Part II). That is when the bishop explains that, by any reasonable interpretation of the Salic Law, young King Henry was the rightful king of France. George Bush made an argument of much the same order to the Assembly, using UN resolutions instead of Merovingian constitutional law. The difference between George and Henry is that the people whose cooperation George needs, both foreign and domestic, all seem to have found his argument persuasive. At any rate, they found it politic to say they did. The legal preparations for an Iraqi campaign began in earnest.

The supposed concession by the Iraqi government to unconditional inspections was long predicted and well timed, from their point of view. However, the initiative does nothing to alter the course of events.

They did the same thing just before the allied offensive in 1991, but too late to have any effect: the resolutions from the Security Council and the US Congress were already in place and military action was at the discretion of the executive. By making the ploy now, they have at least the potential to slow down the political process by some weeks. However, it became immediately apparent that unconditional inspections would have conditions. One reports says that only sites designated by the Iraqis as military bases would be open to inspection. Another says that the Iraqi negotiators have already said that Hans Blix, the head of the UN inspectors, is a "spy." Even the UN will not tolerate being made to look so foolish so soon.

The US will probably get its chance to change the regime in Iraq very soon. For myself, I am inclined to think that everyone is making a lot of fuss about a 72-hour raid. However, we might remember that Henry V's campaign in France was tactically brilliant, but a strategic failure.

 

* * *

One of the points often made about US Iraqi policy, and about US policy in that part of the world in general, is that it is based on nothing more than US desire for oil. This is true only indirectly. Certainly it is not the case that the US "wants Iraq's oil," as that country's hapless foreign minister recently put it. Actually, I suspect that the domestic oil producers with whom the Bush family is so familiar would like nothing better than that the Iraqi fields be capped and buried under ziggurats; peace and new oil fields could bring back the days of $18 per gallon crude. Nonetheless, it is true that the US is so interested in the Middle East because the world has a petroleum economy. It does not follow, however, that a non-petroleum economy would mean a peaceful world, or even a peaceful Middle East.

Let's do some alternative history:

 

Imagine we had come to the year 2000 with economic autarky and political isolation as the dominate principles of statecraft. That was, pretty much, what happened in the 1930s. It proved to have certain drawbacks.

Imagine another world, one that embraced nuclear power as soon as it became available. That is, in fact, the only currently feasible alternative to a petroleum economy; the French made just that choice, and it worked very well for them. Such a world, however, would require a shoot-on-sight non-proliferation regime far larger and more rigorous than the one we have now. There would be an Iraq-type crisis every few years.

Finally, imagine a "Green" world, in which renewable energy is not the unreliable, capital intensive monstrosity that it is in our world, but in which people in developed regions live in "frugal comfort" on sunflower oil and electricity from windmills. That would mean that many regions would be an order of magnitude poorer and more chaotic than they already are. Without petroleum exports, the whole Middle East would be Afghanistan.

Oil is only an occasion, not a cause. At this stage of history, global terrorism and wars to contain it are inevitable. Technology has made the world just a day or two across by commercial jet. Resentment, ambition, and need flow with few restrictions over a world that has not yet developed the institutions to manage the situation. The really scary thing is that ours may be the best of all possible worlds.

 

* * *

Cantor Fitzgerald, the bond-trading firm that suffered the worst casualties in the attack on the World Trade Center, has issued a report criticizing the calculations of the Victim's Compensation Board, which is supposed to award settlements in lieu of litigation to the survivors of the victims of 911. (Can we say, "September 11," or has that become confusing now that another September 11 has passed?) The report points out that the fund is operating more like a welfare fund than like an arbitrator in a wrongful death suit. Cantor Fitzgerald's staff was young and very highly paid; the average payouts of one and a half million dollars that the fund anticipates is really just a fraction of what the survivors of such people would receive in the courts. The report says that this is not fair.

Yes, it isn't fair. Murdering all those people certainly was not fair. It also is not fair that there is not enough money in the world pay off all the theoretical claims that could be made for 911 in lower Manhattan. I have seen figures as high as half a trillion dollars. You could rebuild all of Manhattan for that. Awards of that magnitude would wreck the world's insurance system and bankrupt several government entities. As a matter of fact, the victims' survivors have the option of pursuing their claims in court, but it will be intolerable if any large number of them do so.

There is something that the authors of the Cantor Fitzgerald report seem not to understand; neither do many of the other survivors, or even their attorneys. Tort damages are not a civil right. The tort system is a government service, one that is helpful and even necessary for society in normal times. In abnormal times, when there is war or natural disaster, the rules of liability are suspended. This is not a new idea. The law has always worked this way; it has to.

We must ask ourselves: suppose there is a next time, and a time after that?

Copyright © 2002 by John J. Reilly


Why post old articles?

Who was John J. Reilly?

All of John's posts here

An archive of John's site