Wednesday Night #1482

1482 on Wednesday-Night.com

Daniel Léger was introduced and spoke briefly about his doctoral subject,  “Neo-conservatism and the philosophical, moral and political differences between it and realism”,  mentioning that Bill Kristol had sat on his committee. A lively debate explored whether the neo-cons’ view of the world is more common-sense based vis à vis the realists who rely on ‘robust diplomacy’ (with accommodation in their back pocket). Daniel spoke eloquently to the exceptionalism of the U.S., pointing to the record of blood and treasure expended on wars since South Korea. A  number of Wednesday Nighters responded, extending the discussion to the role of America internationally in the 18th and 19th centuries and up to the Marshall Plan,  raising questions about America’s support of a number of corrupt regimes and dictators, altruism versus self interest, and assuming the role of gendarme to the world. Does the motivation come only from the defense industry?

The maintenance of the pervasive, ubiquitous myth of the glory of war serves to preserve the integrity of nations and leaders of nations, frequently waged for the purpose of domination and/or political exploitation. Following the end of  World War I and the signing of the Treaty of Versailles, the League of Nations was founded with the stated goal of preventing war through collective security, disarmament and the settling of international disputes through negotiation and arbitration. It would appear that these lofty altruistic goals were never achieved with the partial exception of the United States (which did not join the League) who, since 1823, established and maintained the Monroe Doctrine, assuring U.S. non- intervention against any aggression other than attacks/attempts at colonization directed against Western Hemisphere countries. At the outbreak of World War II, FDR was limited by the Neutrality Act ; thus,  although aiding England in its fight against Germany’s creeping acquisition of neighboring countries, the U.S. only joined the war after it was attacked by Japan at Pearl Harbor. England (more correctly, the Commonwealth) was unique in having declared war on Germany before being attacked.
If the stated goals had taken precedence over personal and national agendas, world peace might have been attained, but too often commercial interests, as well as human nature appear to continue to trump personal, national and international good judgment. Had the League of Nations, and its successor, the United Nations subverted national, commercial and personal issues to the stated goal of world peace, wars might have been prevented.

The economy
It’s  a struggle: two steps forward, one step back; two steps forward, three steps back- It’s messy – causing much angst in the markets and that’s why there is volatility
The current financial recovery has proven to be slow and painful. Time is not a friend in this environment. The only good news is in productivity which has not, as in the past, fallen in a period of recession/depresion.  Although there has been some improvement, neither the optimists nor the pessimists can claim victory. It will take a considerable amount of time for the situation to improve significantly. The necessary growth is just not happening. Unlike for economists, for most people, recession will be over only when we return to pre-recession conditions. Growth is the magic cure for economic ills, but we are not getting it.  There is no shortage of money. There is a shortage of people willing to spend it.
A note of optimism can be found in the incredible ingenuity of Americans  and the essentially strong economy of the country, provided that the administration does not go too far in the direction of regulation (the Dodd-Frank Bill is considered by this view to be excessive, and Health care legislation unnecessary).
While some suggest  that growth depends on cheap energy, which is likely to become less available, others maintain that energy represents only a small portion of the money that is spent by people, and that prices will ultimately bring supply and demand into balance while fostering the growth of new technologies.
Recognizing that war has proven to be a highly successful stimulus to growth, the (we hope) facetious suggestion was made that perhaps what the world needs is a war with an oil rich country which would make the military industrial complex happy – and profitable – and give everyone else time to develop alternate sources of energy. In semi-serious response it was pointed out that the only wars that inflate the economy are euphoric wars whose outcome makes the population happy.
Deficits will become a problem when the bond market says they are a problem – that’s what happened in Greece
As long as the U.S. dollar remains the world’s reserve currency, the U.S. can tolerate an otherwise unbearably high debt at present payments represent only 7% of tax revenues. The situation of the states and municipalities is another issue and much more serious problem.  However, in the final analysis, debts may be delayed but must be paid, presumably by future (perhaps declining and/or aging) populations. Most dangerous for the economic outlook is structural unemployment – in the US the social contract  is that Americans have an opportunity to work. This bargain only works if unemployment is  around 6%. Thus, the argument that regulation must be incredibly thoughtful in order to generate business prosperity and job creation to meet the social contract
We in Canada prosper because of our richness in commodities. These days emerging markets and commodities are much loved asset classes for a high preponderance of investors, but one expert warns “it is a crowded market”. Historically, real commodity prices always fall, except in wartime (and in the ’70s which was the only peacetime inflation) because there is always a supply to meet the demand. The current continuing price rise in commodities is probably due not to any shortage, but rather a chronic underinvestment in commodities over the past 20 years. Today, however, with strong commodity prices, the production incentive is there.
Asia – and China in particular – continues to be popular for emerging markets investors – a debt-free, cash rich and growing economy. Some, however point to the problems of the demographics of an aging, declining population as in Japan (China is headed in the same direction, with the added factors of the one-child policy and overall central planning that eventually collapses on itself.

The Wikileaks
The leaks regarding the military in Afghanistan, although not revealing much that was not already widely known, have cast a needed light on the relationships between the NATO commands and the native population. Because of the tribal nature and loyalties of that country, the reality of the battlefield is that information will leak to the enemy. Although those who sacrifice and risk their lives deserve the recognition they receive and national self-defense is a sine qua non, perhaps, if the myth of the glory of war were to be exposed to the population of the world, some self-serving proponents of war might be deterred.
Curiously, England’s self-serving, though relatively liberal colonial policy, appears to have ultimately generally served its former colonies well once they gained independence. In the years following the end of World War II, Britain’s role of policing the world passed to the United States, a role that continues to be a costly drain on U.S. resources to this day.

The Great Canadian Census debate of 2010 and a possible election
Only in Canada could impassioned debate be aroused by statistics.
Among the myths prevalent in the ongoing debate are those that state that the Europeans have long-since abandoned census and obtain the necessary information in a less onerous manner. In fact, the European data collection is in many ways far more invasive and far less anonymous. Can the changes propose by the Harper government yield the same results as in the past? As has been explained over and over, without the comparison to previous data, the new data would be flimsy at best for purposes of public policy – and possibly useless. Meantime, the hyperbole arising in the long-form debate regarding its content, utility and effect on citizens, is thought by some to be a prelude to an autumn election – not the central issue, but an indicator of the difference in ideology of the parties. The Liberals have largely stood back from the issue, allowing other voices to be raised, and agreeing that the imposition of a jail term as a penalty for not compliance should be removed.
If democracy is – and it undoubtedly is – the best form of government and if this issue becomes central to an election call, one must ponder how to educate the electorate on what constitutes important directions in which our would-be elected representatives take us. Although its existence bears witness to the degree of our country’s adherence to democratic ideals, the presence of the Bloc virtually ensures a minority government and legislative philosophy which do not necessarily reflect that of the majority of Canadians. Although some Wednesday Nighters believe that the Bloc has been the most effective opposition (in terms of meeting its own objectives) in Canada, others believe that party leaders who would expand more on what their party stands for and less on what they believe their audience wants to hear, would enable Parliament to be more representative of the political philosophy held by the majority of Canadians.

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The Prologue

The past year has been marked by some delightful returns to the fold of long-absent Wednesday Nighters. This Wednesday we will greet yet another one, Daniel Léger who attended with our son Marc in the earliest days of the Salon, and was a member of the Concordia Model UN team. Since then, Daniel has completed a doctorate in political philosophy and international relations (from Notre Dame). His dissertation was on Neo-conservatism and the philosophical, moral and political differences between it and realism. – That should give pause to some of our Wednesday Nighters! However, seeing the error in his ways, he abandoned his academic pursuits for the enticements of the investment world and now works in New York for a young (3-year old) global long/short equity hedge fund (about $1 billion under management) that invests in the natural resources and commodities markets. It seems, however, that he retains his deep interest in Canadian politics, so we look forward to serving up dollops of both worlds this week. And, as a bonus, we have Martin Barnes in town from B.C.

Afghanistan and Pakistan would be at the top of the list, given the explosive wikileaks of yesterday and the extensive analysis by the beneficiaries of advance notice, the NYT, Guardian and Der Spiegel . For Wednesday Nighters (who have been paying attention) it comes as little surprise that Pakistan’s ISI is revealed as a decidedly double-dealing agency, however, there are a number of other revelations that will require digesting – after all, the three media giants had several weeks to read, distil and check, as the NYT explains in A Note to Readers: Piecing Together the Reports, and Deciding What to Publish While not of direct bearing on Canada, as one Wednesday Nighter points out: “I hope our MPs read this and refrain from being quite so quick to judge our military and their relationship with local Afghani authorities.”

What to pick among the assorted and unexpected Canadian public policy initiatives announced with more stealth than the F-35 during Parliament’s recess? Of course, there is the Census debate – to long form or not – but we fear that Tony Clement’s fortuitous assist (seems his wife and father-in-law were more effective) in the near-drowning over the weekend may polish his image a bit. We maintain a real-time account of the ups and downs of the debate and so far, our favorite items are Dan Gardner’s account of how your friendly neighbourhood bank monitors your every move –  on government orders, and La Presse’s delightful discovery that Stephen Harper’s thesis was based on long-form findings
Quand Stephen Harper aimait le recensement Maybe there’s something to Adam Radwanski’s theories about a hidden agenda?  (Do take a look at the photo of Stephen Harper in his (appropriately black) cowboy hat. You will have to agree that Michael Ignatieff looks ever so much better.)

There is however, another issue that deserves our attention and is not quite so easy to debate: The government is taking aim at an employment-equity policy that favours applicants from historically disadvantaged groups, saying no Canadian should be barred from applying for a job based on race. There is a certain logic on both sides of the argument, which is precisely why the intent to revise the policy should not have been whispered in the dead of summer.

On to other items of more profound global impact.

China is having a bad month: The floods in the south and central parts of the country are estimated to have already caused economic losses of at least $22 billion and affected 120 million people. In addition, there was the explosion of the two oil pipelines in Dalian – nowhere as big as the BP Gulf spill, but nonetheless causing devastating damage. Add to that the fact that China’s banks are facing serious default risks on more than one-fifth of the Rmb7,700bn they have lent to local governments across the country, senior Chinese officials say. (FT) Chinese banks face state loans turmoil

Some bits and pieces on the U.S. economy: Gail Collins and David Brooks set a high standard of civility in their discussion Should We Create Jobs or Balance the Budget? (Perhaps we could ask them to conduct courses for Canadian parliamentarians?)  The Economist asks Is America facing an increase in structural unemployment?, while Paul Krugman writes on Permanently High Unemployment and we contemplate the depressing findings that The Middle Class in America Is Radically Shrinking. Here Are the Stats to Prove it
The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.

Guy Stanley comments on this last item: The current problem can probably be summed as depreciation. Innovation is too slow, the populations are aging and marginal efficiency of capital is dropping (cost of new jobs in the west has been rising since I can remember–altho’ I can’t remember as much anymore…).  What about our favorite knight, productivity? With growing dependency ratios from an aging population whose social costs are rising each year, most western economies will do well to stay even. The solutions are obvious but so far non-implementable: stop throwing away billions on dubious wars and invest massively in the climate change transitions and break up the industry cartels that are throttling game changing innovation –among other things.   The problem is that we also live in large, complex industrial systems which are almost impossible to turn around in the short span of a political cycle. As we’ve just experienced, even the crack up of our dysfunctional financial systems has resulted in nothing but tinkering at the margins. Things might get better after we, The hula-hoop generation–quit the stage. I just hope people continue to read Homer and Stendhal, etc.

A footnote to the Dodd-Frank Bill on Financial Reform, which David Kilgour brought to our attention, relates to Conflict Minerals. An obscure passage buried in the bill’s Miscellaneous Provisions, will require thousands of U.S. companies to disclose what steps they are taking to ensure that their products, including laptops, cellphones and medical devices, don’t contain “conflict minerals” from the Democratic Republic of the Congo.

BP is (finally) dumping Tony Hayward and replacing him with an American (another effort to shed the British Petroleum shadow). The BBC tells us that Mr. Hayward will receive an immediate annual pension worth about £600,000 ($930,000)  and comments wryly that the pension entitlement was “bound to be hugely controversial”. We cannot help but wonder where we went off track – why can we not be paid close to $1 million p/a for our bumbling efforts? The Wall Street Journal points out that Dudley Has Long To-Do List at BP, while noting that BP is expected to report second-quarter earnings on Tuesday. Excluding spill-related costs, an average of analysts’ estimates forecasts a $4.9 billion profit for the second quarter-up 60% from year-earlier levels. But analysts have issued a wide range of projections for spill-related costs, so the company’s actual profit for the quarter remains hard to pin down.

And now for a skill-testing question: Any guesses? Which recently – or not so recently – axed head of a government agency or department is the anointed one? Whoever it is, if his/her predecessor’s nasty exit note is anything to judge by, there will be more than enough work to do.

Ban finds replacement to head anti-corruption unit
United Nations Secretary-General Ban Ki-moon has selected a Canadian to replace departed anti-corruption chief Inga-Britt Ahlenius as head of the Office of Internal Oversight Services. Ahlenius said the as of yet unnamed Canadian will face significant operational challenges, such as a lack of personnel in the units’ other senior posts. The office was created in 1995 as an independent body to investigate and address any corruption problems within the UN system. The Wall Street Journal