19 June 2009

weekend notes #7

• I note we have another convenient scapegoat for the collapse of a dumbed down banking system. To 'greed', 'lack of consultation' and 'insufficient training' we can now add 'too much testosterone'. The solution, apparently, is to have many more women in top management positions in the financial sector. The Financial Times is all for the idea.

Many boards, especially in financial services, are in flux after the testosterone-fuelled excesses that led to financial disaster. There is a desperate need to rebuild trust, more easily achieved if boards better reflect customers and the public ... it is time for more radical action ... A declaration that at least 30 per cent of board members should be female, applied for the next 10 years, would attest to serious intent. Using the “comply or explain” principle, companies with a lower proportion would have to explain if they proposed to fill a vacancy with a man.
The quantity of hard evidence for the theory that this would help to prevent financial crises? Less than zero. The number of women in financial services has been going up over the last thirty years, but the risks of dumb behaviour have (apparently) not been reduced as a result. But who cares whether the theory makes sense? It sounds good, as it fits with mediocratic ideology, and looks vaguely rational, presumably referring loosely to research which links investment trading to testosterone. Never mind that the research correlates higher testosterone levels with investment success rather than failure (failure as in: Lehman Brothers, Northern Rock, Landsbanki, etc). Pseudo-rationality is all that is required in the mediocratic age. Find a piece of 'research' that seems to prove what you want to believe, and base a new government initiative on it. Teach it in schools as dogma or, better still, use it to reform the constitution.

• No British newspaper, not even the Guardian, has been more effective than the Financial Times at giving the impression that the financial crisis has falsified (for good) the free market hypothesis, i.e. that markets work best when unregulated. Some pretty ludicrous stuff has been written by people — who, given they are working for an economics-based publication, might know better — alleging that we have been living in age of “excess free market capitalism”. I do not know about other Western countries, but as far as I am aware state interference as a whole has steadily increased over the last 15 years or so in the UK, in the US, in Germany and in France. Think of interventions in education, universities, childcare and so forth, all carried out in the name of 'social justice'. Privatisation, often trumpeted as proof that governments are being 'right-wing', has merely been a superficial gloss over the state behaving in a leftist manner, whatever its notional political colours.
Gideon Rachman, for example, has blamed the financial crisis on “promotion of home ownership, financial deregulation and a fervent faith in the market”, allegedly all planks of the same ideology. But promotion of home ownership by means of government policies is an interventionist, not a free market, policy. “Democracy promotion”, another of the movements which Rachman links to an alleged “overshoot” of right-wing ideology, also has nothing to do with either free markets or conservatism, however much it became linked to policies confusingly described as “neoconservative”. It is basically a leftist idea to think that the principle of majority vote is so wonderful that it should be instituted in every corner of the globe and in as many areas of life as possible.
It seems paradoxical* that the FT, whose readers probably have the highest average income of any British newspaper, should be the one whose columnists now sound most authoritative in their dismissal of the free market. But perhaps there is a parallel here with another paradox: that the people responsible for crippling Western capitalism appear to have been those in power at the very heart of it.

• Have readers noticed that those critical of the leftist ideological project are starting to be described as “whingers”? I think this is a good indicator of the real cultural hegemony in force, as opposed to the right-wing one fantasised by many leftist intellectuals. It is hard to imagine, for example, that members of the Russian bourgeoisie were described as whingers by the Bolsheviks prior to 1917, though they may well have been called something similar during the years that followed.
Mediocracy needs to maintain the fiction that rival ideologies represent a serious threat, and that the fight against them can never cease. The smallest sign of opposition is magnified to suggest that the old enemy is still powerful. It can never be admitted that it is mediocratic ideology which is dominant, since that would undermine its attraction of being supposedly non-conformist and avant-garde. (Mediocracy p.94)
• Funny how times change. Three years ago, when my book came out satirising the foibles of the real ruling class (cultural apparatchiks, educationalists, local council officials etc.), hardly anyone was talking about "the elite".
[In Telluria] a new philosophy started to become dominant, according to which the opinion of the community — meaning the opinion of an elite who (it was supposed) represented community interests — was the appropriate criterion of what should happen in every area of life. The opinion of the elite was also increasingly taken to be the appropriate criterion for deciding what was true or real. (Mediocracy p.12)
Now everyone seems to be at it, using the word as shorthand for those in positions of power or influence who are able to impose their silly and destructive ideology on everyone else. Many of the people now condemning "the elite", however, are well-paid authors, or journalists on national newspapers, which seems a bit rich.

• “Britain has been here before ... and the lesson, says this brilliant historian, should chill us all
Niall Ferguson, whom I used to spot occasionally while dining in the fellows’ luncheon room at Jesus College – before he escaped to America and became a celebrity – recently wrote an article for the Daily Mail, billed as above. Curious to see if he was thinking what I was thinking, I read on. It turned out that the period of history Ferguson has in mind is the 1820s, which apparently were
a time of acute financial crisis — of deflation, a crashing stock market and soaring unemployment — [and of] political corruption ...
Fascinating, but not quite what I had expected. Ferguson’s choice of historical parallel seems to hinge on his confidence that the risk of another Depression has been averted, thanks to the wise actions of central banks in flooding the world with money. The thesis that we have seen the worst of this crisis seems in the last few weeks to have become the conventional wisdom. Only a tiny minority of the elite, such as Angela Merkel, are sounding a note of caution. Ms Merkel implies that printing money is simply postponing the problems to another day, an observation which has not earned her much gratitude. Deferring the problem before, in 2001, by keeping interest rates artificially low to avoid the worst of a post-boom recession, was of course in part responsible for the current mess, since it distorted the credit markets and generated asset price bubbles.
Even leaving aside the question of whether current optimism is far too complacent for this stage of the game, the 1820s do not seem the most obvious analogy for the prevailing social climate. We seem to have the following features at present:
- severe recession
- printing lots of money
- ineffectual and chaotic parliaments
- charismatic political leaders, either revered as messiahs or adulated as celebrities**
- a cultural elite busy fiddling with leftist ideology, and increasingly intolerant of alternative world views
- significant sections of the populace resentful of a top-down ideology which they regard as hostile to their own values
- tendencies towards authoritarianism
- a social ethos characterised by dissipation and viciousness
- disaffected youth
- rise of anti-immigrant sentiment.
Me, I am reminded of quite another episode from history. Of course, I am not a trained historian.

• Elsewhere, trained historian Ferguson seems to have aroused the ire of trained economist Paul Krugman, by daring to question the latter's knowledge of economics. His description of Krugman’s response to a query during a joint debate makes for amusing reading.
I made the point that the running of massive fiscal deficits ... and the issuance therefore of vast quantities of freshly-minted bonds was likely to push long-term interest rates up ... I predicted a painful tug-of-war between our monetary policy and our fiscal policy, as the markets realise just what a vast quantity of bonds are going to have to be absorbed ... De haut en bas came the patronising response: I belonged to a "Dark Age" of economics. It was "really sad" that my knowledge of the dismal science had not even got up to 1937 (the year after Keynes's General Theory was published) ... Did I not grasp that the key to the global crisis was "a vast excess of desired savings over willing investment"?
This reaction — of the prestigious economics expert to a query by a lesser mortal — reminds me of similar ones I used to encounter when daring to ask simple but pertinent questions at Oxford graduate economics lectures. I particularly remember an occasion when one of the top professors simply refused to respond, contemptuously dismissing my question with the comment “I should not have to answer such a puerile point in a lecture at this level” (or words to that effect). As the old adage*** goes, “there’s nowt so arrogant as an expert in a weak position”.
Keynes biographer Robert Skidelsky tried to put a reassuring gloss on the Ferguson-Krugman skirmish, arguing that
this is not a debate between economists and historians. It is a battle within the economic profession — between the New Classical Economists and the New Keynesians.
This interpretation may be trying to save face, but it is misleading. Possibly there is some link here to the debate within the profession between the two principal brands of pseudo-mathematical macroeconomic theory (New Classical Macroeconomics and New Keynesianism), but there is no necessary connection between (A) continuous market clearing (the central tenet of NCM) and (B) the idea that government stimulus spending is likely to be self-defeating. (I happen to believe (B), but not (A). Does that mean I am a Keynesian? No.)
It is more instructive to see the spat as representing a clash between the arrogance of an over-technicalised academic subject, and an outsider, not initiated into its arcane mysteries, daring to question it. After poststructuralist lit.crit., theoretical economics is currently the most pretentious and surreal discipline in the academy. It is cookery pretending to be particle physics. That an outsider is even permitted to criticise one of its arch-practitioners in a public forum is noteworthy, though it would probably not be possible without others having braved this territory first. "A cat may look at a king" writes Professor Ferguson. Look? Yes. But only a cat with a Harvard professorship is likely to be able to express its reservations in an upmarket newspaper.

* After writing this, one possible explanation was provided by reading Mrs Moneypenny asserting that “the FT is not staffed solely with white, male, Anglo-Saxon alumni of Balliol College, Oxford”. Presumably, then, the FT has a significant contingent of white, male, Anglo-Saxon alumni of Balliol College, Oxford. Ah, Balliol: one of the most leftist — though, ironically, also one of the most self-consciously superior — of the Oxbridge colleges.
** e.g. Obama, Sarkozy, Berlusconi and, not so long ago, Blair.
*** If there is no such adage, consider it my contribution to the canon.