Tuesday, 27 May 2014

Imperial Preference

Michael Gove's educational policy of "Buy British" continues to wind-up liberals, as he fully intended. The consequence of his changes to the English Literature curriculum may well be to demote such works as The Crucible, Of Mice and Men and To Kill a Mockingbird, but it is a prodigious leap to interpret this as a "ban", let alone assume it reflects a lack of tolerance. You might as well suggest that his antipathy to Arthur Miller's play derives from a secret sympathy for the devil. Of course, only a cynic would suggest that the "ban" story (or "rogue meme" as Gove put it) was intended to set up a strawman for the Education Secretary to demolish.

On the right, the three American works are casually assumed to be icons of progressive cant: anti-McCarthyism, the inhumanity of the Depression and racial injustice. In fact, The Crucible can just as easily be read as a critique of Stalin's show trials and praise for all-American personal liberty and defiance of the state (more High Noon than Atlas Shrugged, admittedly). Of Mice and Men centres on the dream of property ownership rather than revolution, and is casually misogynistic. To Kill a Mockingbird is a conservative lament for lost courtesy and Christian ethics, in which both blacks and poor whites are seen as crippled and half-formed. It ends with the forces of law and order and liberal conscience conspiring to cover-up an extra-judicial killing.

Instead, says Gove, schoolkids in the UK should study: "at least one play by Shakespeare; at least one 19th century novel; a selection of poetry since 1789, including representative Romantic poetry; and fiction or drama from the British Isles from 1914 onwards". The objection to this is not so much that it is prescriptive, but that the canon is little more than a genuflection to "heritage". A braver policy would have been to ditch Shakespeare altogether, much as his sonnets and his contemporaries have been marginalised from poetry. The pre-eminence of the Romantics is the critical equivalent of buying a Lakeland tea-towel. The final prescription, which has triggered the fear of an American cull, is Gove's standard chauvinism. He is not advocating a ban on non-British fiction of the twentieth century, but instead arguing for a quota in favour of domestic producers. This is a protectionist policy of which the French would be proud.

Unless you believe that twentieth century British literature was technically superior to that of other anglophone countries, or that British themes have a greater didactic value, this preference is unnecessarily parochial, which sits oddly with the oft-claimed need for British students to compete in the "global race". The Labour spokesbot was on-message in emphasising the instrumentality of the subject: "His vision is backward-looking and preventing the rich, broad and balanced curriculum we need in our schools if our children are to succeed in the future economy." The risk of a "trade war" is slight. The US is unlikely to deny its students the opportunity to study Shakespeare because he was born in the Midlands rather than the Mid-West.

The expectation is that Gove's diktat will lead to more Dickens and Austen, who are seen on the left as suspiciously conservative and thus tedious and hard-going to modern minds, which is ironic given that few criticise the choice of Shakespeare. The better reason for avoiding them at GCSE is that you need a few years under your belt to fully appreciate them. Dickens's best work deals ambivalently with experience and memory (thus Great Expectations is better than David Copperfield), and a recurrent motif is regret. Austen's work is poised on the cusp between the realisation of dreams and resignation to fate, which gives psychological depth to her ironic treatment of wealth and its corruptions. You're not going to get a lot of this at 15.

The appearance of the story is not wholly accidental, coming on the back of disappointing election results. Assuming UKIP are on course to cause more damage to the Tories than Labour in 2015, Cameron's failure to win an outright majority in two elections will surely lead to a leadership contest. Gove has spent years positioning himself as an anti-elitist patriot for just such an eventuality, and his changes to the curriculum, History in particular, have played a key part in this. Though a graduate of English, he is happy to encourage anti-intellectualism (directed at "lefty academics") and the John Bull school of literary criticism. What's depressing is the unthinking eagerness of his critics to commodify literature and play the role of free-traders in opposition to his campaign for imperial preference. The one consolation is that Henry James will not be forced on our poor schoolkids.

Sunday, 25 May 2014

Talking About the Things that Matter

The big fuss in the wonksphere over the last 48 hours has not been the aftermath of the UK local elections. Contrary to the febrile build-up and the claims of post-poll angst ("Miliband told to raise game" was particularly chortlesome), the results were both unsurprising and reassuring about the sanity of the electorate: Labour did OK, the Tories not so, the LibDems are the walking dead, and UKIP's domestic vote has probably peaked. Despite the best endeavours of journos and spin-doctors, there's really not much to see here: move along now, please.

The bigger fuss has been the reaction to the FT's "debunking" of Thomas Piketty's analysis of rising inequality. According to Chris Giles, Piketty's conclusions "do not appear to be backed by the book’s own sources". I'm not going to go into a detailed analysis of the fisk itself, not least because there will be a tidal wave of more expert interpretations on the way, but I do want to look at the political aspects. In other words, the choices made by Giles in his interpretation of what is wrong and why it matters, and the cacophonous wonk-spasm this has triggered. Most of the errors Giles highlights are just noise, mistakes in transcription or the smoothing of incomplete data series, which have no material bearing on the overall picture or conclusions.

The two key charges are that Piketty has cherry-picked his data sources, specifically for relative UK wealth since the 1970s, and that he has incorrectly averaged European data series. This leads Giles to conclude that "wealth inequality has not been rising in the last 30 years in Europe" and that this is "a fundamental challenge to Prof. Piketty’s thesis that all advanced economies have been witnessing a turnround in a long historic trend of falling wealth inequality after 1980". Let those statements boggle your mind for a moment or two. The context is that Piketty is trying to measure wealth over the long run, which is complicated because it takes many different forms (property, shares, bonds etc), much of it is hidden offshore, data sources are inconsistent and discontinuous, and the numbers since 1980 are heavily skewed by property values, which for the "middling sort" is wealth that is more apparent than real.

The politically salient point is the focus on the "richest". In other words, Giles is pleading the case that the rich have not accelerated away from the mass of the population. Inequality is relative, so you could challenge Piketty either by claiming that the rich are poorer than we think, as Giles does, or that the poor are richer. Some of the less adroit right-wing commentators and windup artists have attempted the latter ("you've all got flat-screen TVs and smartphones, you whiny bastards!"), but the evidence of stagnating wages, commodity deflation and a buoyant payday loan market makes this a tough one outside of a tabloid column. It's hard to convince people that they were wealthy all along when you've spent the last 5 years deploring high levels of household debt and insisting that we all tighten our belts. Even rising house prices, which were once seen as a symptom of general prosperity, are now seen as a baleful sign of rising inequality for "generation rent".

The chief problem with the "rich not so rich after all" thesis is that it requires us to believe that the neoliberal programme since 1979 has been an abject failure in its own terms. Its public and unashamed goal was to stimulate greater inequality - i.e. the just desserts of entrepreneurial risk-taking and innovation - which would in turn lead to higher aggregate growth and thus a beneficial trickle-down for all. The rising tide would lift all boats, even if this meant allowing a few super-yachts in the harbour. In fact, growth has been only so-so, and lower than in the preceding 1945-78 period. What has indisputably happened is rising income inequality, which has been driven by technical change and globalisation (automation at one end and skill/network effects at the other) and exacerbated by tax policy. We also know that rising income inequality fuels capital growth, due to the higher marginal propensity of the rich to save and the encouragement of pro-capital tax regimes (e.g. executive stock options). On top of all this, there is no doubt that offshore wealth has grown far faster than GDP since the lifting of capital controls in the 1970s and 80s.

Giles's second charge is that using a simple average (i.e. an average of averages) to illustrate the aggregate European inequality trend across three countries - the UK, France and Sweden - is misleading. According to Giles: "it gives every Swedish person roughly seven times the weight of every French or British person. Using an average weighted by population appears more sensible". This is debatable. A weighted average makes sense if the datasets are consistent, i.e. you could mix them up without affecting the individual data points. But it is problematic when doing international comparisons of a relative measure within a country, such as wealth inequality, which is heavily influenced by national factors, such as taxes on wealth, tax morale/avoidance and rates of home-ownership. This is a problem that has long bedevilled the use of Gini coefficients, which tackle the similar, but much easier, task of measuring income disparities.

The implicit question is whether a poor person in the UK is comparable with a rich person in Sweden, and the answer is both yes and no. Clearly, translated to a common scale (e.g. Dollars), the Swede is wealthier than the Brit, but inequality as experienced daily is a measure of that Brit's wealth relative to other Brits, not to Swedes. Someone on a  comfortable income in the UK will feel uncomfortable buying a round in a Swedish bar. Sweden started with lower levels of inequality than the UK and France in the 70s, but it has converged on the same levels since. This means it has seen a faster rate of growth in inequality over the period, which explains why Giles is keen to under-weight it at the aggregate level.

The significance of Giles's two charges is that once you massage the UK increase in inequality away (through the heroic assumption that Thatcher and her legatees failed to reverse the progressive gains of the 60s and 70s), and dilute the Swedish impact, the European trend largely disappears due to the much smaller increase in France. In other words, the over-nationalised, high-tax regime of those cheese eating surrender monkeys proves that inequality isn't rising. Ironic, no?

It might appear as if the Piketty reaction has now reversed all the way back to stage 1, denial, however I think this is still a species of bargaining. The right largely gave up trying to defend rising income inequality as just desserts and necessary incentives after 2008. The casino has partially shut, so the immediate priority is making sure you hang on to your winnings. Giles's claim is that accumulated wealth is not a problem: "wealth concentration among the richest people has been pretty stable for 50 years in both Europe and the US". This is why conservatives have started to warm to the idea of taxes on capital income and estates as preferable to a wealth tax. If Piketty's r > g formulation is correct (the return on capital will normally exceed GDP growth), modestly taxing returns can still allow for capital growth, whereas taxing wealth might lead to a gradual erosion of the capital base if income did not cover the tax bill in years of depressed returns.

Some right-wing commentators have gleefully thrown Reinhart & Rogoff into the mix. Sauce for the goose, and all that. In reality, this is a misunderstanding of the R&R debacle, which was less about their claims than the deliberate abuse of their data by politicians who had already decided on austerity and were looking for academic credibility. R&R's mistake was to posit an iron law: when public debt exceeds 90% of GDP, growth is suppressed. The correction of their spreadsheet error revealed that there was no iron law, and that there was more evidence of reverse causation (i.e. low growth drives up the debt ratio). That should have been more of an embarrassment for the politicians than R&R, but by then the damage was done and austerity embedded. In Piketty's case, none of the claimed errors have such a dramatic impact (at best they weaken a tendency), as those well-known lefty publications the Economist and the Washington Post have noted, and no mainstream politician has come remotely close to constructing policy on the edifice of the Frenchman's work.

Piketty's basic contention is that inequality tends to inexorably increase in a capitalist economy due to r > g, and that the 1914-1970 period of falling inequality was the exceptional product of massive capital destruction and subsequent public investment, rather than the natural evolution posited by the Kuznets curve. This isn't a novel idea, but Piketty has provided the most detailed study to date in support of it, and other studies are now reinforcing his findings. The forward implication is that inequality will inexorably rise once more, short of a world war or deliberate redistribution. This will remain a compelling argument even if the growth in inequality between 1979 and today is shown to be weaker than Piketty claims (NB: nobody is claiming that inequality is still falling). The Frenchman's offence is not data manipulation or incompetence, but having the temerity to focus on accumulated wealth.

Thursday, 22 May 2014

Democracy and the Idea of Europe

On Monday's Newsnight, Slavoj Zizek (in between the exasperated sneers of an uncomprehending Jeremy Paxman) pointed out that the crisis of European democracy (the EU's "democratic deficit", the Troika, the ignoral of referenda etc) is less a crisis of Europe and more a crisis of democracy. China may now be proving, in a way that Singapore and South Korea were too small to convincingly do, that capitalism does not need democracy. Liberal ideology has traditionally claimed that they are mutually supporting and best thrive in tandem.

The idea of Europe is fundamentally liberal, but this means that it is wedded more to the rule of law (the Rechtsstaat of Ordoliberal tradition) than it is to democracy. The rule of law boils down to the defence of property and is thus inescapably suspicious of the demands of the propertyless. As liberals prove when they actually secure power, they are ambivalent about democratic practice, seeking to create a "protected sphere" through constitutional institutions and supra-national commitments. Localism is trumped by the national interest, while the national interest is deemed to lack the legitimacy to challenge international capital. Liberals remain starry-eyed about the idea of Europe precisely because it appears to float above the messy reality of democracy.

The European Parliament has long been a progressive icon, a pointer to a better future, even when characterised as an unruly child gorging on sweets and throwing tantrums (Nikki Sinclaire berating Nigel Farage over his dodgy expenses was an emblematic full-house). The metaphor embodies both hope for the future ("growing pains") and parental caution (the Commission and the Council of Ministers being the concerned adults setting boundaries).
Disillusion with the Parliament is believed to reflect the weakness of the institution itself, the growing unpopularity of European integration, and the more general disillusion with representative politics since the 1980s. In fact, this has been an era of neoliberal hegemony. The "centre party" - the various species of liberal, spanning big capital conservatives to modernising social democrats - has remained electorally dominant over the last three decades, both in national and European elections, and that won't change this week. The greens, nationalists and eurosceptics of today have simply substituted at the margins for the communists and neo-fascists of the first elected European Parliament in 1979.

Similarly, the oft-cited "polarisation" of US politics reflects the increased prominence of the culture wars and the media need for confrontation as economic and social policy has ossified into a neoliberal consensus (UKIP is benefiting from the same dynamics, partly by avoiding all discussion of economic and social policies outside of immigration and the EU). Since the apotheosis of liberal democracy as ideology in the early 90s (famously marked by Francis Fukuyama's essay The End of History?, which lost it's question-mark when expanded to book length), democracy in practice has been the target of increasingly cutting remarks by its presumed admirers. Of course, the modern trope of "democratic decay" and the attractions of the "Guardian State" are just an updating of the historic demand of the Party of Order for decisive intervention in support of elite interests. Nigel Farage's sympathy for Vladimir Putin is quite genuine.

Before 1989, communism provided a comprehensive justification for anti-democratic intervention in the West, both in terms of its perceived threat to undermine the state from within and without and to terrorise individual citizens. Militant Islam has provided a substitute for the latter but cannot credibly substitute for the former, despite media guff about the Caliphate and Sharia Law. Consequently, the corrosive "enemy within" has been recast as the inability of democracy itself to deal with current and future challenges, from burgeoning welfare rolls to climate change. The paradox of UKIP is that it is a symptom of the continuing strength of democracy, not its weakness.

The current and relatively sudden disillusion with Europe stems from the dropping of the social market mask in 2009-10, rather than from some slow accretion of red tape over the decades. The Eurozone crisis laid bare the reality of elite preference: sound money, austerity and wage repression. We have lost faith in a better capitalism, which is worse news for social democrats than for conservatives. In Europe, the historic expansion of liberal democracy sputtered to a halt by the Dnieper River a decade ago, coinciding with a similar failure on the banks of the Tigris and the Euphrates. The reverses of Crimea and Syria are the end of a long turn, not a new pivot. Meanwhile, the tocsin of demographic doom ("greying Europe") reminds us that the glory days are over and we must curb our aspirations.

The prospect we face is further "management" of democracy in the name of stability, freedom and the rule of law. But we also face a choice, though "we" are unlikely to be exercising it. It would be an error to presume that neoliberals are so wedded to free-market capitalism that the erosion of democracy is an unavoidable consequence. This ignores the Ordoliberal influence and in particular the primacy of the RechtsstaatThomas Lemke notes that: "the Ordo-liberals try to show that there is not just one capitalism with its logic, its dead-ends, and its contradictions, but an economic-institutional entity which is historically open and can be changed politically". In other words, both capitalism and democracy are contingent, and the preservation of each can be used to justify intervention in the other. In the current cycle, neoliberal Europe is sacrificing democracy to preserve capitalism, but it may choose to tack the other way once circumstances change. What won't change, the sine qua non of liberal democracy, is the defence of property.

Monday, 19 May 2014

Wenger and Wonga

Now is a time for celebration, even some modest crowing. I predicted we would finish the season on 78-80 points, and we ended up on 79. Whoo-hoo. I also thought that Man City were the most likely of the top teams to pull away and clinch the title, though I hadn't expected that they would leave it so late, and that Aaron Ramsey would make the key contribution to Arsenal's fortunes at the death, though I confess I was hoping more for a cheeky "Michael Thomas" than an "Alan Sunderland". My other prediction, that Wenger would commit to a new contract, now looks odds-on, but I always felt this likely regardless of silverware or league position. He will have given his word in advance but insisted on seeing out the current contract. That gives the club some wiggle room, but they're clearly not scouting for a replacement.

The FA Cup final was short on quality, as it often is, but the two exceptions to this, Cazorla and Ramsey's goals, made us fitting winners. Once the Spaniard had opened our account, I was confident that we would win, notwithstanding an error-prone referee. For all the drama and Hull's fight, this was a technically accomplished display of how to wear down an obdurate opponent, something we have had to do many times in the league. Wenger is routinely accused of being tactically inflexible and incapable of making impact substitutions, but his interventions were spot on. The perennial focus on character and belief also proved sound. Mikel Arteta even laid to rest the myth that Wenger doesn't talk at half-time (his critics usually advocate hurling crockery and shouting "Come on!" till veins pop).

Despite the "new chapter" effect of silverware, I suspect the media template for next season was fixed after the defeat at Anfield, much as that also rewrote the Liverpool narrative. We are now the team that manages to discover new ways to implode at the crucial moment, such as the first ten minutes of a cup final, even more so than "unlucky but plucky" Liverpool. We are equally capable of snatching victory from the jaws of defeat and vice versa. With a trophy on the sideboard, we are no longer "specialists in failure" or "weak-willed chokers", but we're clearly combustible and thus not the stuff of champions, no matter how entertaining. We have rediscovered our inner cavalier. In reality, a sober assessment of the data suggests we may be closer to rediscovering some of the roundhead virtues that underpinned Wenger's title-winning squads.

I wrongly predicted that we would finish second in the league, based on the assumption that it would be a low-points year all round. In the end, Citeh regressed to the mean with a typical winners tally of 86, while the runners-up total was a high 84. Overall, this was a season of improvement for us, despite the falling away in the New Year as injuries sapped our attacking dynamism. The key change has been a better balance of attack and defence, which the high-profile slip-ups have distracted from. Wenger is a fan of "efficiency", which can be thought of as maximising the return of points from goals and goals from chances at one end, while minimising the opponent's chances and conversion ratio at the other end. Though the example of Citeh and Liverpool both scoring a ton gives heart to romantics, trying to run up a cricket score is usually not the key to success.

We had the best points per goal ratio among the top four of 1.16, ahead of Chelski on 1.15, Citeh on 0.84 and Liverpool on 0.83. That in itself is not particularly significant - the Spuds had the best ratio at 1.25 and spanking other teams, as Citeh and Liverpool did, inevitably forces the ratio down. It becomes significant when it is allied with a low goals against tally. If you win most games 1-0, your ratio will approach an ideal 3. Our obvious problem was in conceding 41 goals, though this obscures two very different types of performance. Across 31 games we conceded a total of 14, but in the other 7 games we conceded a total of 27, with 17 coming in only three matches: away at Citeh, Liverpool and Chelski. If we'd lost those three games by a single goal each, our points tally would have been the same but we'd have had the best goals against record in the league, matching Mourinho's little pony.

Looking forward, our challenge in attack is to improve our conversion ratio of chances to goals from 13% to nearer 18%. Ozil, Cazorla and Wilshere can certainly create sumptuous chances, but they need to emulate Ramsey in scoring more. Our defensive challenge is to cut out the heavy defeats against title-challengers, which paradoxically requires a more clinical striker. We've shipped goals when the full-backs have had to chase the game, leaving the centre-backs exposed. A more cautious approach, certainly away from home, would keep us in the game longer. A top-quality striker, who can both outpace defenders and create his own chances, might snaffle a point or three in those key games and perhaps bridge the gap to the title. This might appear hard on Giroud, but having a substitute striker of his quality on the bench (technically accomplished if insufficiently mobile), and the option it gives to play two-up front if chasing the game, is exactly the sort of squad strength that we now need if we are to improve further. Which brings us to the matter of the moolah ...

According to The Economist, money matters more than managers, with relative spending on player wages accounting for 55% of the variation in final league points. This is about as surprising as the sylvan preferences of bears, but the detail is interesting in a couple of respects. The overall distribution shows diminishing returns above 300% (dominated by Citeh and Chelski), with points flattening out to the 85-90 range, which reflects the overall competitiveness of the league. While out-spending everyone else has clearly worked since the arrival of Abramovich in 2003, and is unlikely to be restrained by UEFA's Financial Fair Play rules, the chart also shows that coming first is still achievable with a relative spend in the region of 250%.

Spending on wages at Arsenal, relative to the average spending in the league, has been steadily increasing. Though this hasn't yet improved the final position, it has improved the final points tally. In 2010-11, a 215% spend produced 68 points; in 2011-12, 230% delivered 70 points; in 2012-13, 246% delivered 73 points; and this season saw 253% produce 79 points. These figures suggest a careful balancing act by Arsenal during the stadium development years and perhaps a pointer to better days if increased revenue translates into consistently higher wages and transfers. Certainly, the Ozil investment looked like a statement of intent, specifically to raise spending to the 250-300% range. In retrospect, the bid of £40 million for Luis Suarez looks like part of a clear-eyed strategy, rather than the provocative punt of legend.

It's safe to assume we will be bringing in a new keeper and right-back to replace Fabianski and Sagna, and possibly an extra central defender even if Vermaelen stays. We may also invest in a defensive midfielder as an alternative to Arteta (the rumour is that Wenger wants to reinvent James Milner, which would be eccentric even for Le Professeur). The key signing will be up-front, with Loic Remy and Karim Benzema widely mentioned. The latter is certainly the type of striker we should be targeting, though his availability might ironically depend on Luis Suarez's calculation of Liverpool's chances next season (with more knowing opponents, and without a new defence, they're probably not so good). Snatching Diego Costa from under Chelsea's collective nose would be even better, though for wholly petty reasons.

Friday, 16 May 2014

I Do Not Care To Remember

There are two ironies in the case of Mario Costeja González, the Spaniard who wants Google to suppress a search results link to an old newspaper article concerning the repossession of his home to pay off a debt. The first is that since embarking on his Quixotic quest through the courts, the publicity generated has gradually pushed the offending article down the search results for his name as other pages published on his case have proliferated. Assuming Google comply, the original link will disappear but the subsequent ones won't, as they are now clearly "relevant" and likely to remain so indefinitely. This is because of the second irony, which is that the substantive detail of his past embarrassment is now immortalised in the ruling of the EU Court of Justice. Altogether, a nice example of the Streisand Effect.

Costeja González says: "I was fighting for the elimination of data that adversely affects people's honour, dignity and exposes their private lives" (the parallel with the old hidalgo is not wholly fanciful). Most reports see this as the first fruit of the "right to be forgotten", a principle that the EU introduced into its last round of data protection reforms in 2012. The original intent was to give private citizens the ability to suppress personal data they had come to regret publishing (e.g. drunk pics on Facebook), or that had been published mischievously by others but was not defamatory (e.g. revenge porn). It's a hazy area, so individual member states will have to decide in court how far this right extends in practice. The claims of "chilling effects" and censorship are just tilting at windmills. Search engines routinely suppress links for legal reasons or out of commercial caution, and what they do index is only a fraction of the entire Web. It's important to remember that Google isn't a publication of record.

The significance of the Court's decision is not to do with the time-limited topicality of private debts in Spain but the judgement that Google is a "data controller" in respect of EU regulations. The political context is the refusal to exempt US firms from EU law. As the EU Commissioner Viviane Reding put it, "Companies can no longer hide behind their servers being based in California or anywhere else in the world". She also noted that "The data belongs to the individual, not to the company". This is not so much the right to be forgotten as the right to control ones own assets. The ruling then should be seen in the context of the wider struggle over the control of the Internet and "national big data".

Some have framed the right to be forgotten as a cultural difference. Writing in the Stanford Law Review in 2012, Jeffrey Rosen traced it to the French droit a l'oubli, which "allows a convicted criminal who has served his time and been rehabilitated to object to the publication of the facts of his conviction and incarceration", a right trumped by the First Amendment in the US. In fact, the cultural imperative lies in a postwar European respect for due process and a fear of property dispossession, rather than the memory of Jean Valjean. The US focus on free speech does not imply a lesser regard for property rights, but the reality of current power relations. The US tech giants have control of the property - our data assets - and see free speech as a way of defending the status quo, while the EU (oddly, perhaps) finds itself pushing a pseudo-nationalist position: get orf moi land. What it is not arguing for is a negative freedom (i.e. a freedom from), in the sense of the right to be obscure and thus not individuated. Instead, it is advancing a positive freedom, the freedom to own and manage.

The other interesting aspect of the judgement is the continuing European evolution of personal data as an extension of the person, which contrasts with the US fashion for seeing the person as an extension of data: the quantified self. The Court considers that Google Search "enables any internet user, when he makes a search on the basis of an individual’s name, to obtain, through the list of results, a structured overview of the information relating to that individual on the internet ... [which constitutes] a more or less detailed profile of the person searched against". And (with allowances for free-speech and the balancing of competing rights) "that even initially lawful processing of accurate data may, in the course of time, become incompatible with the directive where, having regard to all the circumstances of the case, the data appear to be inadequate, irrelevant or no longer relevant, or excessive in relation to the purposes for which they were processed and in the light of the time that has elapsed".

In other words, the Court is upholding the right of the individual to curate his profile to suit his current self-image. This idea of constant tending and performative personality is a key neoliberal trope (Foucault's "entrepreneur of himself"). The more perceptive commentators, like Viktor Mayer-Schönberger, have noted that this is "creating an image that is both incomplete and strangely devoid of time", which points to its fictional nature, while Jemima Kiss correctly observes that the design of social media governs what we can do with it, so our sense of control is misplaced. Your aggregated avatar is not you but, to borrow the words of Mario Costeja González, a more noble and dignified persona. But that is surely a delusion.

Don Quixote famously opens with an act of deliberate forgetting: "Somewhere in La Mancha, in a place whose name I do not care to remember, a gentleman lived not long ago, one of those who has a lance and ancient shield on a shelf and keeps a skinny nag and a greyhound for racing". Long story short: the ultimate restoration of his sanity requires Alonso Quixano to remember himself.

Friday, 9 May 2014

The Grand Bargain

The contre Piketty cottage industry continues to delight. A week ago, the FT published an amusing analysis of the nine stages of the Piketty bubble, which put me in mind of the classic Kübler-Ross model of grief (OK, I had to look the name up, but I did remember that there were five stages), namely: denial, anger, bargaining, depression, acceptance. I think it's fair to say we are way past denial and anger (everything Piketty says is wrong and he's a Soviet fellow-traveller to boot), so there should be no surprise that more recent critiques have skipped the insults and attempted to justify inequality. We're into the bargaining stage.

Tyler Cowen got the ball rolling by claiming that it spurs creativity and that most wealth is the product of innovation rather than inheritance (the facts suggest otherwise). Now Kenneth Rogoff (of austerity epic-fail fame) and Andrew Lilico are claiming that inequality is the necessary price for aggregate global growth. In other words, it's a quid pro quo. Says Rogoff: "The same machine that has increased inequality in rich countries has leveled the playing field globally for billions. Looking from afar, and giving, say, an Indian the same weight as an American or a Frenchman, the last 30 years have been among the greatest in human history for improving the lot of the poor". In its appeal to equality, progress and "the lot of the poor", this is a neoliberal defence that proudly displays its utilitarian roots. Jeremy Bentham and John Stuart Mill would have been proud.

Andrew Lilico takes a more free market perspective, smuggling in nods to Greg Mankiw and Sherwin Rosen: "In our modern globalised economy, the gains from a new idea or skill can now be leveraged over enormously more people. Instead of your new and better mousetrap being sold just to the fair folk of Wolverhampton, the whole world beats a path to your door. In such a world, improved added value creates large inequalities. But that is precisely because the added value of a Windows or Facebook or awesome evening's football skill benefits so enormously many people – even if each only benefits a little compared with the huge aggregate benefits benefits taken by the value-creator". This ignores the monopolistic tendencies of Microsoft and Facebook, not to mention UEFA and FIFA.

The dog that didn't bark in these thumbnail sketches of the awesomeness of free trade is finance. Globalisation has been the workhorse of growth in accumulated capital over the last 30 years, but not just in the obvious sense that the international market has grown in size, thereby amplifying the normal rate of growth in productivity delivered by technological progress. That alone would increase the number of private fortunes, particularly in emerging markets, but it would also distribute profits by producing high yields for savers in both developing and developed economies, despite the tendency of wages in developed economies to stagnate as developing nations caught up.

The liberalisation of capital flows in the 70s and the deregulation of banking in the 80s created a much larger field for investment, and greater scope for financial managers to extract rents. Easy leverage allowed capital to generate returns higher than GDP growth rates. Ultimately, this was funded by diverting a growing share of the yield on savings (mainly bank deposits and pensions) from global savers to privileged borrowers (i.e. high net worth individuals and proprietary trading desks in banks). As median incomes stagnated and household saving rates declined in developed nations, the finance system sought to continue the growth in leverage through derivatives and mortgage-backed securities, which led inexorably to 2008.

The ongoing decline of investment banking is due to the tighter regulation of capital since then. This, together with the increased liquidity of QE, reduces the total demand for capital and dissuades banks from investing scarce resources in high-risk opportunities. The consequence is lower but safer returns for most savers, but also an increasing importance attached by banks to the servicing of wealth, i.e. the surplus capital prepared to countenance more varied risk. As Frances Coppola notes: "There will always be a need for the services that investment banks offer: M&A activity is starting to increase again after being flat for the last few years, and corporate investment is also expected to rise. Wealth and asset management, too, seem set to become increasingly important as the world’s capital glut shows no sign of dissipating and interest rates remain stubbornly low. What does seem to have ended – for the moment – is banks primarily making money by doing leveraged trades with each other. Proprietary trading is dead: customer service is the latest fashion in banking".

In ignoring the way that capital has sucked value out of median-income households, Rogoff and Lilico are justifying inequality as a rent (or tax, if you prefer) on aggregate global growth. The rising tide has lifted some boats, while others remain aground, but a large pump has siphoned off much of the water. In this light, the continuing opposition to a financial transaction tax, let alone the global wealth tax advocated by Piketty, is ironic, but that merely serves to throw a light on the basis of the right's opposition, which is the simple defence of privilege dressed up in the ideological clothes of "freedom" and "opportunity".

I don't expect Rogoff and Lilico's bargaining strategy to work - neither a levelling-up in India nor the just rewards of Mark Zuckerberg will excite most people - so in coming months we can expect to see depression set in on the right as the indefensibility of extreme inequality becomes ever more entrenched in popular opinion. Alternative bargaining strategies will be attempted, of which the guaranteed income may ultimately prove the most fruitful, not least because it potentially allows the rich (via their political representatives) to keep control of the spigot of distribution. Unlike grief in the face of an irreversible event, acceptance in this case will mark not surrender to the inevitable, but a stitch-up: a grand bargain, if you will. Capital will concede the need for partial wealth redistribution to prevent strife as technological change reduces social mobility, but it won't concede control of the means of production, distribution and exchange. The robots will not be part of the commonwealth.
The same machine that has increased inequality in rich countries has leveled the playing field globally for billions. Looking from afar, and giving, say, an Indian the same weight as an American or a Frenchman, the last 30 years have been among the greatest in human history for improving the lot of the poor.
The same machine that has increased inequality in rich countries has leveled the playing field globally for billions. Looking from afar, and giving, say, an Indian the same weight as an American or a Frenchman, the last 30 years have been among the greatest in human history for improving the lot of the poor.
The same machine that has increased inequality in rich countries has leveled the playing field globally for billions. Looking from afar, and giving, say, an Indian the same weight as an American or a Frenchman, the last 30 years have been among the greatest in human history for improving the lot of the poor.

Wednesday, 7 May 2014

The Free eBook of Dave

Will Self has bemoaned the imminent decline of the serious novel. I suspect his tongue was not far from his cheek as he lamented how the irresistible distractions of connectivity (curse you, broadband!) and the cornucopia of Amazon will reduce the serious novel to a minor art-form: "big bestsellers commanding still more sales, while down below the digital ocean seethes with instantly accessible and almost free texts". The pulp writers of the twentieth century, like the denizens of Grub Street before them, would wonder what all the fuss was about. The truth is that serious novels (or even semi-serious novels, which is Self's forté, such as Great Apes or The Book of Dave) have always been a minority interest.

Where I think Self errs is in employing a Leavisite view of cultural goods as hard-won: "the hallmark of our contemporary culture is an active resistance to difficulty in all its aesthetic manifestations, accompanied by a sense of grievance that conflates it with political elitism. Indeed, it's arguable that tilting at this papery windmill of artistic superiority actively prevents a great many people from confronting the very real economic inequality and political disenfranchisement they're subject to, exactly as being compelled to chant the mantra 'choice' drowns out the harsh background Muzak telling them they have none". The qualification is intended to prevent a charge of elitism being laid at Self's door, though the idea that "a great many" give a toss about aesthetic difficulty is ridiculous.

Every new medium has evoked the twin fears that a few Philistines will monopolise the benefits, while the gates of the academy will be levered off their hinges by the vulgar mob. Gutenberg's printing press put the fear of God into medieval scholastics, and the fear of the people into church and state. Even today, the "freedom of the press" remains an issue more to do with property rights than conscience. The elite notion of the cultivated sensibility, which attempts to navigate a middle way between these two fears, is itself a species of property. It takes much time and money to develop; much difficulty. What made this particularly salient for me was the coincidental death of Gary Becker, the Chicago School economist who led the expansion of rational choice theory beyond economics into the wider fields of sociology and public policy (in a nutshell: everyone is a calculating solipsist).

Central to this expansion was Becker's introduction of the concept of human capital, which was sufficiently flexible to appeal across the orthodox political spectrum. Conservatives assumed this capital was variably endowed, so inequality was fine, while neoliberals and social democrats saw it as a field for investment: "education, education, education" etc. Michel Foucault pinpointed Becker's innovation as the change of perspective in economics from "the analysis of the historical logic of processes [to] the analysis of the internal rationality, the strategic programming of individuals' activity". The individual worker is no longer an object (a component of labour as a factor of production) but a subject: "The stake in all neo-liberal analyses is the replacement every time of homo economicus as partner of exchange with a homo economicus as entrepreneur of himself, being for himself his own capital, being for himself his own producer, being for himself the source of his earnings".

This idea of the worker as an atomised business unit has become increasingly common in two ways over the last decade and a half. The first is in the growth of precarious self-employment and zero-hour contracts (the latter is the logical consequence of treating workers as mini-businesses that must bid for every piece of work, but without any negotiating leverage). The second is in the fear of creatives that the Internet is democratising production, by lowering the costs of entry and promoting the ubiquity of free content, thereby eroding the returns to training and apprenticeship.

This not just the traditional worry about a loss of status, but a suspicion that the particular circumstances of the artist are being employed as a template for the wider management of human capital.  Astra Taylor in The People's Platform notes how "more and more of us are encouraged to think of ourselves as artists no matter what our line of work. It’s a way of framing some of the unappealing things about our current economic condition - the lack of stability or of a social safety net - as something desirable and empowering. The ethos of the artist - someone who is willing to work with no guarantee of reward, who will sacrifice and self-exploit around the clock - is demanded of people across the board".

Though the economic returns to a cultivated sensibility (and education more generally) appear to be in decline, the ideology of human capital ("lifelong learning", "keeping your skills up to date") insists that we must strive ever harder to "make the most" of our talents, or fall behind in "the race". This psychotic contradiction may finally have jumped the shark with the current vogue for mindfulness, which has long had elite endorsement: "Just as physical exercise is vital to a desk-bound workforce, so mindfulness will come to be seen as vital for dealing with the complexity of our information-rich lives". Personally, I'd suggest that downgrading your phone might be easier than rewiring your brain.

Friday, 2 May 2014

How Big's Your Boat?

Gillian Tett made an interesting observation recently about the different reactions to Thomas Piketty's Capital in the Twenty-First Century in the USA and Europe. Over the pond, the book is a bestseller and the object of both awestruck admiration and dismissive contempt. For us cynical old worlders there is a feeling that his empirical analysis is excellent but the thesis is hardly a surprise. That the state and economy were being "reformed" to benefit patrimonial capitalism was crystal clear in the UK by the mid-80s, and only the credulous would have believed that the tide of money washing through the City thereafter was ending up in the pockets of ex-barrow boys rather than the usual elites.

In the US, Reagan's "Morning in America" schtick extended the shelf-life of the American Dream, but realisation appears finally to have dawned there as well. Tett suspects "that the real reason for Piketty’s rock-star reception is not the quality of his numbers but the fact that he has forced Americans to confront a growing sense of cognitive dissonance. Nearly two-and-a-half centuries ago, when the country’s founding fathers created the nation, they proudly believed they had rejected Europe’s tradition of inherited aristocracy and rentier wealth. Instead, it was presumed that people ought to become rich through hard work, merit and competition".

This immediately reminded me of the film The Patriot, which sought to repeat Mel Gibson's Braveheart formula of the big-hearted little guy taking on the empire, with only his preternatural fighting skills and a few scruffy mates to rely on. This had an unintentionally hilarious scene where the dastardly Brits discuss carving up Ohio as the spoils of a new landed aristocracy, an act treated by the film as one more in a long line of atrocities. In fact, the historical analogue most regularly used to express contemporary American anxiety is not the embattled Colonies but the late nineteenth century Gilded Age, a particular favourite of Paul Krugman.

The term, part-coined by Mark Twain and implying superficial opulence, refers to the three decades between the end of the Civil War and the start of the twentieth century, which saw the USA's spectacular growth as an industrial power and its debut as a global actor following the Spanish-American War. It was marked by the accumulation of massive fortunes by "robber barons" such as Andrew Carnegie and John D Rockefeller, enabled by laissez-faire policy and pork-barrel politics. The inevitable crisis of representation led to passing fears of socialism and anarchism, and more lasting attempts to divert popular anger through the "yellow press", whose finest fictional incarnation remains Citizen Kane.

There are two reasons for the popularity of the Gilded Age trope today. First, even though it was a period of massive inequality, it was also an era of rapid growth and burgeoning opportunity. The salient point about Carnegie and Rockefeller was that they lived the dream, dragging themselves up from poverty to riches. Second, the Gilded Age was succeeded by the Progressive Era, which was a self-conscious attempt to modernise the governance and culture of the USA between 1896 and 1929. This was the age of scientific management, prohibition and cultural propriety (the demotic Twain being succeeded by the elitist Henry James and Edith Wharton). While I doubt Paul Krugman wants to ban alcohol, there is an obvious parallel with liberal hopes that the last 30 years of growing inequality may give way to a more enlightened era, albeit without the sting in the tail of another Great Crash.

In reality, the Progressive Era marks the subterranean start of the long neoliberal age, though that term would not gain currency for many decades. An emblematic development was the restraint of abusive capitalism through anti-trust laws and improved consumer protection, though organised labour was vigorously resisted: the preferred economic model was the enlightened despotism of Henry Ford and the esoteric financial magic of JP Morgan. This was topped off by the "popular capitalism" of mutual fund share-ownership that would fuel the 20s boom. The idea of government as a market regulator and the protector of "ordinary people" dates from this time, as does liberal interventionism (famously embodied in Woodrow Wilson's League of Nations) and the growth of the international technocracy (e.g. standards bodies like the ISO) that would ultimately enable globalisation.

The reality of the Progressive Era was that wealth was barely inconvenienced and increasingly held up for public praise through the philanthropic funds established by the likes of Carnegie and Rockefeller, which served to project American soft power internationally as well as normalise elite interests domestically. The funds also served to obscure the extent to which the founders' fortunes continued to cascade down the generations as private wealth. Though war and reconstruction certainly reduced the relative wealth of the elite, it did little to erode their capital base, hence the resilience shown over the course of the twentieth century.

While I think Tett is right that the different reaction to Piketty in the USA is indicative of "a growing sense of cognitive dissonance", I don't think the underlying anxiety is that Donald Trump will become the Duke of New York. It's not even a concern about inheritance or rentiers: this is a society that love-hates Paris Hilton and Kim Kardashian, after all. It is rather a fear that as social mobility dwindles, the future increasingly looks like a caste system based on exclusion and curtailed rights, an anxiety played out in many modern films, from Elysium to 12 Years a Slave, as well as in the tussles of the Supreme Court.

Perhaps the most interesting recent take on this is another film, Noah, which explores the theme from the opposite perspective: an extended family, threatened by the dissolute mob, reliant on Golem-like servants, and led by a patriarch willing to kill his grandchildren and banish his son to satisfy an angry god. And he's got a massive yacht. It's easy to laugh at the 0.1% casting themselves as an embattled minority ("our critics are Nazis!"), but it does not suggest a healthy society.