what you get here

This is not a blog which expresses instant opinions on current events. It rather uses incidents, books (old and new), links and papers as jumping-off points for some reflections about our social endeavours.
So old posts are as good as new! And lots of useful links!

Tuesday, June 7, 2011

Money and drugs

Disparate bits and pieces. Start with Bulgarian art and seascapes.
On my way to the Spartak swimming pool in the last few months, I have watched with interest and respect as an impressive derelict old building in South Park has been lovingly restored not – as we first thought – for yuppy residences but for an art gallery. And today all became clear – with about 10 massive scupltures adorning plinths around the building whose protective covering had been removed to reveal spanking glass walls on 2 sides. And plaques at the front door indicate that it is to be a Museum of Contemporary Art – funded by the unholy trio of Iceland, Leichtenstein and Norway! Must get an invitation to the official opening – and plead the cause for older art!!
And I hope to link forces later in the week with the curator of the great Sofia City Gallery – thanks to my friend Yassen who knows her very well and is arranging for us to meet to explore a possible joint project.

Bulgaria has a glossy English bi-monthly - Vagabond – which is always worth reading. A recent issue has a nice article on the aesthetic attractions of the Northern coastline of the Black Sea. The painting above is a Pater Boiadjiev I acquired in January - which currently ranks as the favourite in my Bulgarian collection. It is of this northern coastline
The Hungarian Spectrum blog continues its relentless and commendable exposure of the Orban government’s antics – this time with a vignette of one of its oligarch’s „thinking”

I’ve lashed out several times in recent blogs at the growing trend of commercialisation of public services; and was therefore pleased to see that the anguished LibDem Treasury Ministry in the UK Coalition (Vincent Cable) is promising an investigation into the implications for that model of the most recent farce which has arisen in that country – this time on the scandalous mess which private companies have made of residential homes for the elderly.
The Guardian also had an interview on the same subject with a great writer who now lives in a residential home which is not run for profit and is, in her late 80s, very vociferous about the need to keep the profit motive away from such places.

Think Tanks are perhaps one of the most visible signs of modernity. Initially squeaky clean – but, slowly, exposed as the sophisiticated propoganda machines most of them are. I was delighted to come across a great initiative of Colorado University which has for some time been conducting critical assessments of the Reports which come from educational think-tanks in the US . The reports can be accessed here.

Next, from Real Economics, one of the pithiest critiques of US policy and systems of the past few decades I have ever come across -
Most everything the US has done over the last thirty years turns out to have been an error. The after effects of the Cold War left America with no plan B of how to behave. Its politics were ill equipped to deal with the more modern problems of serious economic competition and commodity constraints on its life style – by which I mean higher priced oil. When faced with a challenge, the response was to huff and puff about American “exceptionalism” and to pout. Worse: American style economic doctrine, so deeply flawed as it was to turn out to be, was foisted on others.
The error, or course, was to revert to happy face politics. That was what Reagan sold the country on back in 1980. The happy face was plastered everywhere in order to avoid confrontation with fundamental issues. The idea, such as it was, being that free market magic would solve any ills. All we had to do was get government out of the way and things would work out.
What actually happened is that we used debt to paper over the fact that real growth was insufficient. We never paid for the wars we engaged in. We never paid to renew our infrastructure. We allowed our factories to decay. We cut taxes, but not costs. We pumped money into fantasy assets in any number of get rich quick schemes – the result being the succession of destructive bubbles we have lived through. Our policy leadership drifted into a zombie like self congratulatory dream world where it genuinely thought it had conquered history. Business cycle history that is. The magic worked we were all told. As recently as 2004 and 2005 top officials were slapping themselves on the back for having solved the problems of infinite growth.
Economics became a Disney like cartoon of itself. It became disconnected from the serious goal of solving problems for the benefit of all. It simply served to justify the aggrandizement of a few. It constructed utopias and imaginary worlds to explore. This was because it gave up on the more messy problems encountered here on earth. Prizes were awarded on the basis of magic and sleight of hand.
When your intellectuals leave the real world to inhabit a parallel universe and convince themselves that’s fine, no one can blame everyday folk for believing in the market magic fairy as well.
Someday someone will write a great satirical commentary on just how stupid all our clever people were. Right now all we can do is turn away in disgust. But how do you tell a whole cohort of highly educated and self satisfied people that they wasted their own and our time? Or that they led us into a dead end that will cost a generation of hard work to recover from?
Those leaders – should we even dignify them with that name any longer? – fell into a trance. They were beguiled by the great illusion that they could construct something solid on the shifting sands of finance. More importantly they totally ignored the corrosive effect of the debt being piled up in our private sector as households desperately sought to maintain a rising standard of living in the face of very mediocre income growth. These were great times if you were highly educated and well connected. Your income soared. Your wealth accumulated. For the rest? Not so much. The middle class festered in an ever increasingly vain effort to replicate the golden years of the immediate post-war era.
The disconnect between productivity and wages has come home to roost. It was severed by corporate incompetence and short sightedness: the pursuit of shareholder value came at the cost of undermining the demand that drives stock prices and real value over the longer term.
Now we learn the hard way.
Private sector debt is still far too high to allow much long term growth. It will have to be reduced. It is our Great Constraint. We did not cure our banking system. We are still infested with badly mismanaged banks lurching about the landscape capable destroying value and sinking our economy at any moment. We held back from punishing poor investment decisions by creditors. We bailed them out. So the debt remains instead of having been written off.
We persist in discussing problems that don’t exist – debt and inflation – rather than ones that do – unemployment.
The irony is that we lectured the Japanese on exactly these topics when they drifted off course decades ago. Take your medicine, we said. Close those banks. Slash you debt. Rebuild from a realistic, and smaller base. Clean up. Face reality. Did we? Are we?
Is there any hope we will?
And our leading Republican candidate for the presidency, Mitt Romney, today announces that we are “inches away from abandoning capitalism”.
It was unfettered capitalism that drove this illusion. It was deregulation that allowed the banks to upend the economy. It was the unleashing of markets that drove bubble manias. It was capitalists, not workers, who gouged shareholders for enormous and undeserved bonuses. It was market driven finance that misallocated capital into real estate and away from factories. It was a belief in market magic that created the illusion we could borrow and not tax to pay our bills. Indeed it was that part of our leadership – that word again – who most profoundly sought to re-engineer society in the grand tradition of the neo-liberal thinkers like Hayek and his misguided or ill-informed followers, who led us furthest astray.
Institutions matter in actual economies. They matter mightily. Like the banks of our great rivers, they bind capitalism into a channel where we can extract value from it without falling prey to its anti-social extremism. We get the work. We get the energy. But we avoid most of the mayhem. When those institutions are kicked away, when the river banks are breached, the system wobbles off course. Strange and very nasty things happen. Ordinary people drown. In particular, democratic society is torn apart. Political cliques dominate over the majority. The agenda narrows to serve a few. Unrest builds. Until …
With our elite now indulging in a self-referential discussion about problems that exist only within its small and exclusive world. With the recovery clearly showing signs of slowing down. With debt burdens forcing household retrenchment.
And with unsafe banking ready to undermine everything. I have to ask
And finally, in the most obvious area where policy analysis fails utterly to penetrate – drug policy - comes a very important critical report from a Global Commission.

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