Tag Archives: Politics

In Our Hands – Charles Murray

“The real problem advanced societies face has nothing to do with poverty, retirement, health care, or the underclass. The real problem is how to live meaningful lives in an age of plenty and security.”

The idea of a negative income tax is one of the few public policies that seems to appeal to both left and right, though admittedly the left prefers the name basic income or guaranteed minimum income. In brief, the idea is that people making less than a given amount get money from the state until they are making that amount: those that make more than that get a reduced subsidy or nothing. In principle, it can then replace a diverse set of loophole-rich, easily abused welfare programs, appealing to the right; and ensures that no one in society is without a certain basic wage, appealing to the left.

Tax reform is not exactly an issue with wide appeal. In Our Hands makes the case for a negative income tax by talking not just of the cost savings but also of the social and political implications, making the book of wider interest than just to economists. Murray lays out the possibly savings from eliminated welfare programs, and argues that though a negative income tax isn’t economical yet, it will be in the next few years as costs and populations increase. By ensuring everyone has a stake in society and some source of income, he argues, it also encourages responsible citizenship and participation in the world.

He neglects some questions that seem of interest, however. Long run, some might worry that pseudo-classes defined by whether someone receives the benefit could form. The policy is also vulnerable to politics: as soon as it is created it will be subject to massive political fights which, based on the current disputes about minimum wage, will have little to no relationship to reality on either side, and keeping it to the optimal level might be difficult.

The book is unabashedly an argument from the right, and in some ways that’s the book’s greatest weakness; many on the left might also support the policy, but I’m not sure In Our Hands is the book to sell them on it. That said, for a left wing reader willing to make the effort, the book does have information and arguments for both sides. Murray’s design also has some odd parts, such as giving $5,000 to all citizens, rather than eliminating it over a certain income bracket to reduce costs. Still, an important policy, and a good way for someone without a background in tax to start thinking about some of the issues, though much more needs reading (and writing!) to reach conclusions.

The End of Normal – James K. Galbraith

“The 1970s were not an interlude brought on by shocks, bad management, and policy mistakes – but instead, in certain respects, a harbinger of the world conditions that we now face and from which we will not, on this occasion, so easily escape.”

“There remains one alternative. It is to engineer the economy to grow at a low, stable, positive rate for a long time, and to adjust ourselves materially and psychologically to that prospect. It is to pursue slow growth: a rate above zero but below what cheap energy and climate indifference once made possible.”

For all the books on the financial crisis, I think most people struggle to understand what happened, or even differentiate it from the European sovereign debt crisis or related issues. James Galbraith, as befits the son of one of the best known economic historians of earlier in the century, John Kenneth Galbraith (a Canadian!), takes a long view of it, looking at broad trends of demography, world finance, and technology.

Galbraith emphasizes the oft-ignored role of resource prices in driving – and slowing – economic growth. At root, he argues, we rely on resources to fuel our economies and our bodies. When they become scarce or expensive, we must give up our resource-intensive activities and accept a lower intensity of civilization, or face destruction. When the meteor hit, and sunlight became scarce, the dinosaurs gave up space to smaller mammals that were less resource intensive: he suggests we should think of our society from a similar frame, and choose a level of resource intensity appropriate to resource availability. The financial crisis isn’t a deviation from the mean, but rather a signal of things to come.

The book addresses an important issue, and from a relatively novel perspective. Predicting the future is always hard, and Galbraith wisely spends more time on first principles than on trying to predict future conditions, other than saying they won’t be great. The book’s weakness is in structure: non-economists may find it difficult to follow. Galbraith leaps around from idea to idea and engages with things he disagrees with rather than advancing his own ideas, so some ideas can be hard to keep track of unless you already know the literature. In his attempts to make it accessible, it also feels a bit superficial at points: criticizing economists for finding their models beautiful seems a bit irrelevant. Not the last word on the subject, but definitely a start, and very much an underdiscussed issue.

Empire’s Ally: Canada and the War in Afghanistan – Klassen and Albo

“The Hindi kid would soon learn what the British learned earlier in the century, and what the Russians would eventually learn by the late 1980’s: that Afghans are an independent people. Afghans cherish customs but abhor rules. And so it was with kite fighting. The rules were simple: No rules. Fly your kite. Cut the opponents. Good luck.” – Khaled Hosseini, The Kite Runner

Afghanistan is the 42^nd most populous country in the world and was a major stop on the Silk Road linking China and Europe. As a result of its central location, it has also been the site of multiple military campaigns, from Alexander the Great to Genghis Khan, and more recently by the British, Soviets, and NATO. Before the Taliban destroyed them, it had some unbelievably important ancient sites and relics.

The war in Afghanistan is an enduring source of controversy; not as widely condemned as Iraq, perhaps, but still much debated. Both wars tend to be seen as American wars, since the US contribution in blood and treasure has dominated the total effort. At a per capita level, however, many countries have contributed far more: the Netherlands and Canada in particular are known both for large contributions and for being willing to take on relatively large tasks, in contrast to the Germans, for example, who heavily restricted the possible roles their troops could take.

Since the start of the war, Afghanistan has seen marked progress on some indicators, like women’s education or schools, but the violence has persisted and to many it is not clear it can be satisfactorily ended. Klassen and Albo’s collection of essays on the topic is one of those: a selection of Marxist essays taking a critical perspective on the war and trying to understand Canada’s involvement through a broader lens of analysis, including the history of Afghanistan, the motivations for the intervention, and the anti-war movements.

Such analyses are often worthwhile, but unfortunately the book suffers two challenges. First, the last 6 months have seen significant events in the Middle East, and so many essays already feel out of date. Unavoidable but unfortunate. Still, some essays maintain their relevance, perhaps particularly John Warnock’s history of the country. More disappointing for the non-specialist, however, is the lack of solutions. For all the analysis, in the end the book offers little that hasn’t already been suggested by left and right; cooperate more with surrounding countries, convince the Taliban to give rights to minority groups, etc. For a specialist seeking to review some articles about Canada and Afghanistan that’s fine, but for a layperson I suspect it will be frustrating.

Disclosure: I read Empire’s Ally as an advance reader copy – it is available August 26th.

Whatever Happened to the Music Teacher: How Government Decides and Why – Donald J. Savoie

“It is exceedingly difficult for front-line workers and their managers to have a sense of responsibility in their place of work. It is true that their work was once guided by fairly rigid administrative rules, but it is also true that a number of these administrative rules have been done away with. In their stead, the work of front-line managers and workers is subject to many voices, many hands, and many oversight bodies.”

The public service is a classic whipping boy in the press and in the living rooms of the people. It is, the story goes, bloated, corrupt, inept, overstaffed, overpaid, underworked, and takes too many holidays. Statistics seem to support this impression to some extent: between 1995 and 2006, the Canadian public service ended up with 51% more executives, 46% more financial managers, 98% economists, and 40% fewer general service staff, including music teachers. While the private sector was in crisis between 2007 and 2010, the number of public servants paid over $100,000 a year doubled.

Savoie, a respected academic with a long history of work with the public service, proposes an explanation for why. The past few decades have seen, with the best of intentions, a push to use lessons from the private sector in the public service: extensive performance audits, centralizing final authority, making sure that things are cost effective.

These are doomed to failure, says Savoie. Cost-benefit analysis requires a bottom line, and that’s something the public sector, by definition, does not have. These attempts to create a private sector culture have sacrificed public service ideals like frugality and service without gaining commensurate benefits. The result has been steadily decreasing emphasis on front line workers like music teachers, and steadily increasing centralized control powers that have little to contribute to the overall public service mandate, leading to a reputation for bloat, overpay and underwork.

The book can sometimes be a bit heavy into political theory, but the bottom line message is interesting. Savoie is also sometimes a bit overeager to interpret things in a way that supports his theory, when it could as easily go the other way. Still, it takes on an interesting question, and if you flip through the political theory bits, it does so in an interesting way. If this is something you’re interested in, I suspect it’s one of the best books in the field. Well worth the read.

Clinton’s Favourite Books

A favourite blog of mine, Farnamstreet, just shared Bill Clinton’s 21 favourite books. Keep in mind this is from 93, and so says about as much as the regions and groups whose support he wanted as much as books he likes. For all that, interesting!

Original list here, and Farnam Street discussion of each book here.

• I Know Why the Caged Bird Sings, Maya Angelou.

• Meditations, Marcus Aurelius.

• The Denial of Death, Ernest Becker.

• Parting the Waters: America in the King Years 1954-1963, Taylor Branch.

• Living History, Hillary Rodham Clinton.

• Lincoln, David Herbert Donald.

• The Four Quartets, T.S. Eliot.

• Invisible Man, Ralph Ellison.

• The Way of the World: From the Dawn of Civilizations to the Eve of the Twenty-First Century, David Fromkin.

• One Hundred Years of Solitude, Gabriel Garcia Marquez.

• The Cure at Troy: A Version of Sophocles’ Philoctetes, Seamus Heaney.

• King Leopold’s Ghost: A Story of Greed, Terror and Heroism in Colonial Africa, Adam Hochschild.

• The Imitation of Christ, Thomas a Kempis.

• Homage to Catalonia, George Orwell.

• The Evolution of Civilizations: An Introduction to Historical Analysis, Carroll Quigley.

• Moral Man and Immoral Society: A Study in Ethics and Politics, Reinhold Niebuhr.

• The Confessions of Nat Turner, William Styron.

• Politics as a Vocation, Max Weber.

• You Can’t Go Home Again, Thomas Wolfe.

• Nonzero: The Logic of Human Destiny, Robert Wright.

• The Collected Poems of W.B. Yeats, William Butler Yeats.

Capital in the 21st – Quotes

Having reviewed Piketty’s Capital earlier this week, I thought I’d also pass along a few choice quotes. If you haven’t read the review yet, though, I’d start there.

On his thesis

“A society structured by the hierarchy of wealth has been replaced by a society whose structure depends almost entirely on the hierarchy of labor and human capital. It is striking, for example, that many recent American TV series feature heroes and heroines laden with degrees and high-level skills, whether to cure serious maladies (House), solve mysterious crimes (Bones), or even to preside over the United States (West Wing).”

“Inequality is not necessarily bad in itself: the key question is to decide whether it is justified, whether there are reasons for it.”

“When the rate of return on capital exceeds the growth rate of the economy (as it did through much of history until the nineteenth century and as is likely to be the case again in the the twenty-first century) then it logically follows that inherited wealth grows faster than output and income.”

On ideology

“I was vaccinated for life against the conventional but lazy rhetoric of anticapitalism, some of which simply ignored the historic failure of Communism and much of which turned its back on the intellectual means necessary to push beyond it.”

“Both the antimarket and the antistate camps are partly correct: new instruments are needed to regain control over a financial capitalism that has run amok, and at the same time the tax and transfer systems that are the heart of the modern social state are in constant need of reform and modernization, because they have achieved a level of complexity that makes them difficult to understand and threatens to undermind their social and economic efficiency.”

Interesting Facts

“There is no historical example of a country at the world technological frontier whose growth in per capita output exceeded 1.5 percent over a lengthy period of time.”

“Billionaires today own roughly 1.5 percent of the world’s total wealth, and sovereign wealth funds own another 1.5 percent.”

“Capital is a better indicator of the contributive capacity of very wealthy individuals than is income.”

Capital in the 21st Century – Thomas Piketty

“The overall conclusion of this study is that a market economy based on private property, if left to itself, contains powerful forces of convergence, associated in particular with the diffusion of knowledge and skills; but it also contains powerful forces of divergence, which are potentially threatening to democratic societies and to the values of social justice on which they are based.”

This is a longer review than I normally write, so I thought I’d summarize takeaways first (who has the time to read long reviews with all those cat videos?)

Overall very good: lots of interesting information on wealth and income inequality.
Before world wars, inequality was from wealth inequality; now, it comes from income inequality. Rise of the supermanager.
Policy analysis weak – hasn’t really considered other options or read the literature. Still, capital tax may be good idea: can replace the common and unfair real estate tax. WIsh he had discussed a consumption tax.
Long run, the only cure to inequality is better education.
No big surprises: basically just fleshes out ideas that most people would have believed true intuitively, if without data.

Piketty’s work has been ridiculously popular: for a 600 page economics treatise to outsell fiction on Amazon.com is amazing to me, particularly given that it wasn’t very popular in France, where it was first published. Still, any book that can manage that is worth a read.

Piketty argues that because the interest on capital (r) is larger than the growth rate of the economy (g), capital ends up growing faster than the economy. Over time, therefore, capital owners own a larger and larger share of the whole pie, which leads to inequality. Though there are compensating factors, like the diffusion of knowledge and skills, without comprehensive educational policies and redistributive taxation, this inequality can grow to extreme levels. He uses income tax and estate tax information to study wealth and income inequalities over the past 200 years, finding high inequality pre world wars, low inequality after world wars, and increasing inequality today, though unlike before the wars, it is largely due to income inequality, not wealth inequality (managers with high salaries, not landowners).

His fundamental insight, as anyone who has read a review will know, is the fact that r > g. I think that’s true, and it does have the effects he describes, but speaking as an economist it’s also not surprising. Interest rates on capital are relatively high partly because people are impatient and aren’t good at saving, at least judging by their ability to save for retirement. If society lowers the return on capital, people will save less, and I’m not sure that’s a good thing either, something Piketty doesn’t consider. Still, he’s right that increasing inequality can be a source of stress for society, and it’s definitely an important subject for study.

The book is divided into a section analyzing the data, a section predicting future trends, and a section discussing policy. The first section is excellent; the Financial Times has raised some problems with his data work, but by and large I think it’s well done and the results are unchallenged. Lots of interesting information. The second section has the bad habit of making a prediction then immediately disavowing it as a guess, which is common but I think a bit disingenuous.

The third section I found very weak. The policies he supports may well be good ones, and I think there are good arguments for a capital tax, since most countries have a property tax and that’s basically just a capital tax that’s very unfair to the middle class. It’s clear this is not an area Piketty has thought about much, though, and his discussion of education policy is pretty shallow. Dismissing a consumption tax based on total spending, which is often a popular policy, he rejects it in a single line as never having been done, before advocating a global capital tax that has also never been done before. Long run, as he points out, it appears the only cure to inequality is better education and better skills transfer, and I think almost everyone, left or right, would support that.

Whether when you think of capital you think of landed aristocracy, as the French Piketty does, or of Bill Gates, as I suspect a lot of North Americans do, may play a role in how you feel about the book. In the end, I think the power of Marx’s original Capital is that it provides a new way of thinking about the world. I didn’t find Piketty managed the same: perhaps it’s because I’m an economist, but most of what he said I would have assumed to be true. I also find anyone that introduces mathematical identities (like 2+2=4, things that are defined to be true) as “fundamental laws of capitalism” to be a little pretentious for my taste, but that definitely doesn’t relate to the overall quality of the book. It’s well worth a read, and thinking about inequality and its solutions is definitely an important issue.

You can see the Amazon reviews here.

George-Etienne Cartier: Montreal Bourgeois – Brian Young

“Tied to a specific mid-nineteenth-century milieu, Cartier, in his family, life-style, social ambitions, politics, and professional and business interests, serves as one barometer of the Montreal bourgeois experience.”

Canadian independence was rather less traumatic than the American experience, lacking a revolutionary war or even (so far) a civil war. Nevertheless, involved significant institutional change, as a country that initially consisted of only four provinces in Eastern North America attempted to develop its own institutions, culture, and society. One of the leaders in this process was George-Etienne Cartier, a French-Canadian statesman and partner of John A MacDonald.

I don’t really expect anyone who isn’t a Canadian history buff to have heard of Cartier, and since Brian Young’s book quotes liberally from French sources without translating, I wouldn’t recommend the book to anyone who wasn’t one either, or at least to anyone who doesn’t speak French. The book is interesting though: rather than attempting to retread old ground, it focuses on Cartier’s origins and bourgeois background, before skipping to his political life.

It is his political activities, in the context of a young country trying to grow, that are particularly interesting. He was instrumental in codifying the laws of Quebec, which still operates under a different legal code than the rest of Canada; helped establish the school system of Quebec, imposing a tax-supported system on a reluctant population; and most of all bringing Quebec into Confederation, his alliance with MacDonald instrumental in convincing Quebec to join. Cartier was a French nationalist, but one who believed that Quebec was better off in a union within a greater Canada, rather than outside it or paired only with Ontario.

Canada still struggles to reconcile the French and English elements within it, a cause that has endured from Cartier’s day. Without him, though, and people like him, Canada might never have existed as it does today.

Spillover – David Quammen

“Human-caused ecological pressures and disruptions are bringing animal pathogens ever more into contact with human populations, while human technology and behaviour are spreading those pathogens ever more widely and quickly.”

The elimination of smallpox is unquestionably one of humanity’s greatest achievements. Before it was eradicated, it killed upwards of three million people per year in the 20^th century, far more than the world wars or any other cause. Sadly, it also remains one of only two diseases to be eradicated in human history (the other is rinderpest): polio has seen a recent resurgence, partly due to unwillingness to accept vaccines, and we aren’t even close on most other diseases. A dramatic failure on humanity’s part, and one with an end goal that we all agree on: it doesn’t bode well for global warming.

Quammen, however, has some more bad (but interesting!) news. Many diseases are zoonotic: they use animals as reservoir hosts, often causing no symptoms, and are only noticed when they mutate and jump to humans. AIDS, Ebola, bubonic plague, Spanish influenza (and all influenzas), West Nile fever, rabies, anthrax, Lyme disease; all zoonotic, and the list goes on. That means elimination isn’t really an option, unless we’re prepared to resort to xenocide against the species in question, and as humans eliminate natural habitats and spread more widely we make cross-species infection, called spillover, more and more likely. In most countries, AIDS education materials recommend practicing safe sex or not sharing needles: in Cameroon, the signs recommend not eating apes.

What makes the book work is that the existence of reservoir hosts makes the study of the disease like a detective novel: scientists have to search for the reservoir and solve the mystery, though most of them don’t wear deerstalkers. Disease is one of those things it’s easy to forget about when we’re not in the grip of a crisis, but preparation, as with anything, is critical to reducing the impact later on. For that reason alone, I’d say it’s worth reading Spillover: the fact that it has some fun stories and interesting characters in it is icing on the cake. Even better, mind you, is seeing Quammen speak in person about it, as I was lucky enough to do: he’s a good speaker, and summarizes both content and stories well. Either way, a serious issue for humanity, and one the wise should definitely be thinking about.

You can get a copy of Spillover here.

The Economic Consequences of the Peace – John Maynard Keynes

“The policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness should be abhorrent and detestable – abhorrent and detestable, even if it were possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilized life of Europe.”

Keynes wrote the Economic Consequences in 1919, and it played a critical role in turning public opinion against the Treaty of Versailles as too harsh and unfair to Germany. In it, he argues that France’s desire to punish Germany and unwillingness to raise taxes to pay for the war has led to reparations wildly beyond Germany’s ability to pay, and worries about the future of Europe after a crippling peace treaty and continuing instability.

Keynes is fun to read because he’s ridiculously clever, and this book is no exception. He’s witty, he’s insightful, and he’s entertaining. Conveniently, history has also judged him right, with the punitive terms of the Versailles Treaty contributing to the outbreak of World War 2. Being Keynes, though, he also had opinions on a wide variety of other topics.

On History

“The great events of history are often due to secular changes in the growth of population and other fundamental economic causes, which, escaping by their gradual character the notice of contemporary observers, are attributed to the follies of statesmen or the fanaticism of atheists.

On Poverty and Inequality

“Men will not always die quietly, for starvation, which brings to some lethargy and a helpless despair, drives other temperaments to the nervous instability of hysteria and to a mad despair. And these in their distress may overturn the remnants of organization, and submerge civilization itself in their attempts to satisfy desperately the overwhelming needs of the individual.”

“Then a man shakes himself, and the bonds of custom are loosed. The power of ideas is sovereign, and he listens to whatever instruction of hope, illusion, or revenge is carried to him on the air.”

On inflation

“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth.”

On the Modern World

“The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep…The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent to this paradise, were little more than the amusements of his daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life.”