Tony Curzon Price

Many of the sessions at the convention here today are about the state of our politics. We have had 30 years of governments who talk the talk of Liberty. They have presided over an era of centralisation, nannyism, a drip-drip erosion of civil liberties and a perpetual disregard for the spirit of democracy? What can we do about it?

In this context, a session on "Love and Liberty" may seem strange, almost an embarrassment to bring "love" into play at a political convention. The proposition we are exploring -- even proposing -- here is that "love", somehow understood, is a critical missing ingredient in our attitude towards the social and political world, and that without it we have no foundation for civil society or for the true flourishing of humanity that is at the heart of liberty.

Our four panelists will all bring a different interpretation of what that "love" is. For Mike Edwards, thinker, writer and development expert, there are personal attitudes and dispositions of care and friendship which can build mutually reinforcing cycles of political and personal change. Sheila Rowbotham, historian and philosopher of feminism, describes in her recent biography of Edward Carpenter a life that seeks to unite "inner" and "outer" democracy, making a politics out of the everyday experiences of work, sex, home and community. Marina Warner, cultural critic and feminist writer, highlights the importance of the imaginary and the aesthetic in shaping political possibility. Satish Kumar, a spiritual voice of ecology, brings the love of nature and the change of consciousness it requires to centre of building a good, just and sustainable world.

So what has love got to do with it?

For the very radical early nineteenth century Jeremy Bentham, a world ordered by the calculation of utility---the greatest good for the greatest number---is one that has at its core all the natural sympathy and egalitarianism that progress requires. Social problems become technical problems of calculation; society is a causal and computational nexus of utilities. Utility was a kind of civic religion.

However, the "short 20th century" was marked by the horror of the hubristic, dehumanising reason that this sort of technocratic view eventually produces. We should remember Hannah Arendt's view of totalitarianism: it is not evil that creates horror, it is action in the absence of thought. Much of the loss of civil liberty that forms a reason for our coming together can be seen as excused and caused by that view of politics as "the rational adminsitration of things" (in the words of Saint Simon, strange John the Baptist for the database state). Security and efficiency, all go with discretionary executive power.

We will be exploring the role of the emotional, affective, aesthetic, personal, cultural and dispositional in creating another sort of politics, one which really can deliver a modern liberty. There is a long tradition of the serious examination and analysis of "civic religion" -- of the types of consciousness that society must make possible in order to be a good, just and free society. From Rousseau through JS Mill, as well as later in the syndicalist and anarchist traditions, there is a sense that the emotional attachments to society matter to politics. This is what this session is about.

Tony Curzon Price

I've just completed my second turn on the front page rota, handing over to Kanishk tomorrow, who hands over in turn to David, who hands over to Tom, then Rosemary then Susan. The system is getting a little less hectic, both in terms of my own preparing for the weekbut also with all the sections on the site getting used to highlighting material that should be considered for the front page. The goal is to make a distributed publication with components all sharing a "family resemblance" that amounts to the openDemocracyy core brand and values. It requires a trade-off between control and freedom that proving exciting to experiment with.

The week had some excellent reflections on the Iranian revolution (I particularly liked this). We carried a lot of material on civil liberties---a current focus given our sponsorship of the Convention on Modern Liberty---for example these posts on the disturbing question of the UK as a torturing state, and a long, three part piece that I have been working on for a while about the relationship between technology and liberty (here, here and here). The Russia section is producing a lot of excellent material, for example distressing piece on the economy of the regions.

We had just under 110,000 page views this week on the main site - that excludes forums and the wiki (about 15,000 pageviews on top) but includes the sections. The most popular articles are shown in the picture here:

Tony Curzon Price

Tony Curzon Price (London, oD): Yvette Cooper says (Today, Radio4) that banks that need money from the taxpayer from now on will be subject to tight bonus and pay caps. The good news is that this is all the big British banks. The taxpayer has provided two types of capital to the banks in the last 18 months: cash in the form of share purchases (the "part nationalisations"), and there are some banks, like Barclays and HSBC who have avoided using this form of financing. But all of the banks have used and cannot survive without the second form: the swap of bad, illiquid assets for Treasury Bonds under the Special Liquidity Scheme. Under this facility, the taxpayer is taking on the risk represented by the bad assets. The banks would not today be standing without access to the liquidity we have underwritten. So, it would seem, those bonuses can be constrained from today according to Cooper's pronouncements.

Tony Curzon Price

I hand over front page duties to Kanishk next week, then David, then Susan, then Rosemary then back to me. Anthony will join in when the Convention is over.

Why the rota? The idea is that we all work on various parts of the site, commissioning, writing and editing. But bringing the front page together everyday requires thinking about all sorts of trade-offs and about the contribution of each part to the whole. There is no better way of making each part aware of the constraints of the whole by having many people take the reins for a period.

When I explained to a mathematician friend the basic constraints ofpublishing on oD - what capacity we have for articles on the front page; how many readers per day we have; how the various parts of the site develop their own readership, and I further explained that I thought everyone should have responsibility for a part of the whole - heclaimed that sharing in space and sharing in time should come to exactly the same thing. It would be as good to divide the front page into some number of zones, with each person with responsibility over "theirs" as to divide up the year into slots where each person would have responsibility. Clearly, he had taken the level to a level of abstraction too high - splitting in time still imposes the task of creating a unified whole, from quote to lead to which block goes where to pacing ... which a split in space of the front page would never have offered. Anyway, we're experimenting with the sharing through time rather than space.

I'm working hard with Julian to make the publishing process -- everything from picture research to sub-editing to creating shortened versions for syndication and preparing the emails for dispatch -- so standardised that we can start to expand the distributed network of helpers and volunteers. 

Between the rota and the volunteer-based publishing network, we're moving towards the goal of having a mechanism that will wikify the production of agenda-driven analysis.... 

Tony Curzon Price

Today was pretty Gaza-dominated on the site again. Over in the forums, Gaza-related threads are getting very long and heated. Just asn an example, Iron Mike posted this one on Hamas being the blame for the war, and it now has 110 replies. I think that Avi Shlaim's devastating history of Israel's post-1947 treatment of Palestinians should be read by all those in that thread. It is very powerful to hear this story told by "someone who served loyally in the
Israeli army in the mid-1960s and who has never questioned the legitimacy of
the state of Israel within its pre-1967 borders."

We published on the economy too. Godfrey Hodgson celebrates the return of the economically powerful state, while Simon Zadek sees the hope for real accountability in capital allocation mechanisms. Simon links the solution of the financial crisis and the environmental crisis: both are failures to hold the powerful to account for all the consequences of their actions. I hope Simon is right. I feel that the solutions may be less technocratic than he seems to suggest---redesigning incentive systems is unlikely without a firm purpose, and that needs a strong, positive vision to take hold. On that, we could do better.

 There is a very moving story of vision in Jane Gabriel's interview of legend film-maker Theo Angelopoulos. He is interesting on the riots ... but also on the optimism of his own generation: 

"
I belong to an older generation, a generation that believed that
change was possible, that it was possible to change the world, that it
was possible to open up a new path. My generation believed that it was
possible not only to dream of a new world, but also to turn dreams into
realities. It didn't happen. I think we are all carrying the shadow of
disappointment and failure. "

 But read to the end. It is brimming with hope.

We have a huge amount of good material coming in. That's one thing crises do -- send thinking people to write. We don't have the capacity to transform all of it into publishable material. Hat tip to the volunteers in the publishing network without whom output would slow to a trickle!

Oh ... and yesterday's intruder on the Gaza box. He's now written suggesting some writers we might like to commission. That's an improvement in method :)

Tony Curzon Price

Back on the Front Page rota. During the long Christmas break, we had the "Best of" taking up the right hand side and occasional pieces on the left hand side. The crisis in Gaza started before we had planned to start active, disciplined publishing again. Paul Rogers wrote an analytical, clear and devastating assessment of the security aspects. The piece has attracted a great deal of commentary - polarised but serious.

Over the week-end I set up a Diigo group to collect must-reads on the crisis. I emailed the openDemocracy staff suggesting they add material to it. I added a few other people to the distribution list whom I thought would be doing some interesting reading on the crisis. I told everyone that whatever they tagged in the group would be reproduced in the "Gaza" box on the top right of the page.

Fine ... it all seemed to be working v.well. Until this afternoon, when I received a shocked email from a loyal reader: "I am writing to share my surprise (and disgust) at the fact that opening open democracy.net today to access a (fantastic) article about climate change I discovered a “gaza” tab on the right listing no less than 5 posts that are 100% pro Israel. Open Democracy had shown better balance than this in the past and I am deeply disappointed."

When I went to the tab, I indeed recognised none of the articles there. A bit of digging and I discovered that a certain Michael Bremmer had joined the diigo group and was posting this very unbalanced material. I have no idea who Michael Bremmer is. I tried a little sleuthing to see if I could figure who had let him into the group -- there was no simple way to tell. I presume that at some degree of remove, my email inviting a small number of trusted readers had somehow made its way to Michael Bremmer who immediately spammed the Gaza box. I think I fixed the leak and the box is now back to being something I am happy with.

Thank you to our concerned reader. Many eyes make light work, as Wikipedians know. The episode also made me realise how rapidly I could come to a sense of violation --- someone unwelcome had sneaked in and  left an illegitimate trace on the site. My heart goes out to all those who have had treasured domains hacked or otherwise taken away from them. 

Tony Curzon Price

Denis Dutton at Arts & Letters Daily featured Theo Hobson's very interesting Milton piece and we got the spike in readership that comes from Denis' selection. I have written about the ALDaily effect, over here in relation to the unbundling of editorial roles that is happening all over publishing. If you go to the comments on the Milton piece, the 15 from Sunday are, I assume, from amongst the followers of Denis' recommendations. They are articulate, intelligent, opinionated---just the sorts of readers we love to have. Thanks, Denis!

Our own unbundling had a slight hic-up today. First, I spent a good part of last night restoring 2 new computers replacing the stolen ones. (Digression: my laptop had a Time Machine on an external hard-drive in the house. I got a total clone of the computer that was stolen in hours. Selina's had key files backed up on Mac's iDisk which was much less smooth restoring. Of course, iDisk is somewhat safer in that it is off-site. The lesson is that we should always be backing up both on and off-site, both complete mirrors and critical files).

Then there was a big ModernLiberty planning meeting -- exciting things happening there, more news soon. And finally our twice weekly physical group get-together... So it was great that the publishing team got  Sophie Roberts'  piece on the disappearances of civil society and opposition figures in Zimbabwe. She tells the history of Zimababwe's first post-colonial "dirty war" againstZapu-supporters and analyses disappearance as a tactic of putting people in a place that is beyond law. People disappear, and, this way, so too does accountability.

Tomorrow -- the traditionalism of the French Socialist party, three scenarios for Somalia ...

Tony Curzon Price

I added the Polymeme feed to the front page the other day. Polymeme was created by openDemocracy author Evgeny Morozov. It is Evgeny's own semi-automated news aggregator, and I had found myself selecting so many of Evgeny's stories in my "The World" entries that I eventually saw the web logic of this -- why not  spread the energy and just give Polymeme its own slot.

Evgeny has built a database of a huge number of sites and blogs which he has categorised into broad subject areas. Every day, his machine discovers which stories are being referred to by several of these sites. He then does a manual cull for the most interesting ones. The result is a very interesting and distinctively personal selection of news stories.

Tony Curzon Price

Yesterday's fron page plans did not all come together in time. There was the very nice surprise of having John Palmer's piece on the Irish referendum and the sureal spectacle of having Europe's leaders promise that they will not do any number of things that they never had the intention or the right under the treaty of doing. Palmer wonders whose victory it will be if the Lisbon Treaty does not get through before the UK Tories are in power with the ability to veto it.... Time is surprisingly short, and the Irish in a rather good negotiating position.

We did not have all the Stalin/Memorial pieces ready to go last night, and anyway it seemed as if the SWISH report and its extraordinary daglo picture --- this is described on flickr as a picture of a soldier concealing himself  with a smoke bomb after his vehicle is hit by an IED --- could spend a few more hours in the top slot. A strange notion of concealment ... maybe there is a metaphor there.

The Russian pieces should be ready to go tonight. The two together tell a very disturbing story. I hope that we see the Zimababwe article too.There has been very good discussion on Archibugi's Human RIghts piece - what exactly is the role of NGO's in improving governance?The immigration pieces we featured from OurKingdom last week continue to elicit important debate.

I had the nasty experience of having our house broken into last night. My laptop was stolen, as was Selina's (my wife's) ... So today has been a scramble of glaziers, police visits and all the while making sure that we do have backups of everything (and especially Selina's manuscript). I think we're going to be OK, but it is a long process getting the personal computing cloud back up and running.

Tony Curzon Price

I'm doing front page duty this week -- essentially, I look at what articles we have either coming up or published in different areas on the site and chair the process by which we decide some get highlighted on the front page.

I loved the solar thermal power station that we featured as an example of the kind of green infrastructure that will make for a good Keynesian stimulus and good green policy in Ralf Martin's very sensible squaring of the budgetary / environmental circle. Talking of which, William Sigmund and David Mackay are working hard to get "Energy Without Hot Air"ready for a group read. The goal is to have Chapter 1 up before the holiday break so that we can get started on some reading/annotating. One thing I thought about the book is that all the examples and numbers relate to the UK - the point is to make it very comprehensible in everyday terms. I wonder what it would take to localise the book to other places ... Might be a project to think about as we read.

I think we will put the Paul Rogers SWISH report into the front page slot today. We had a discussion in the office yesterday over whether it was in any way in bad taste to frame these SWISH reports as coming from security consultants to Al Qaida ... The worry is that this paints a view of the world as run by amoral, besuited consultants, each working as desk-bound mercenaries, and suggests a amoral, or at least morally totally relativistic world. Kanishk argued persuasively that Paul's pieces are of such sober sense and sound judgement that there was no possible interpretation of this kind. Reading this one, I have to agree. 

We have an excellent piece about memories of Stalinism in the Russia section which we will feature on the front page. The piece makes it very clear the ways in which history lives in the present, and how the present will become history that will continue to reverberate in society. This, of course, is a theme that is clear in the SWISH reports too, with their reminder of the time scale and relationship to history that radical eschatological movements adopt.

There is a really good Zimbabwe unsollicited submission in the pipeline. I hope we can get that ready for publication soon.

Tony Curzon Price

• Laski - The Roosevelt Experiment - The Atlantic (February 1934)

Harold Laski's 1934 assessment of FDR (hat tip Anthony) is full of echoes for Obama and 2009.

What is different today is that we are now so aware of the 1930s and the parallels. The New Deal invented the restoration of confidence as it went along. It was part of FDR's greatness that he got so much of this muddling blind progress right. But today, we had got used to Bernanke being the expert on the economics of the Depression when Obama appointed Christina Romer, also the expert, to chair the Council of Economic Advisers.

The self-consciousness means that there is a certain script-like feel to the unfolding of the crisis. The car makers ask for a bail-out; the government asks for symbolic humiliation and a business plan; pay-checks will keep being sent ... Little by little, year by year, fear will subside and the the government will slowly retreat.

But if we know this, then what do we need to fear? If the whole process is too script-like, the crisis may be wasted beacuse the period of fear is when public policy can  make change. The change will be slowly dismantled over generations after the fear is over, but, just as the 1930s legislation defined the broad outlines of consumer capitalism for us, so our policy changes over the coming years will define the context (and the countervailing ideology) for three generations of social development. Chicagoism needed Keynes; what we do today will determine the dominant counter-ideology of tomorrow.

Although Roosevelt was right that fear was fearful, that it needed to be conquered to re-establish some normality to the economy, he must also have known that only fear permitted a genuine, if not permanent, reallignment of interests.

Things to absolutely keep on the agenda: anti-poverty, international, green. Ford understood this in the green business plan it offered up to Congress, but was it only for show?

========
Highlights from the article

• • He is attempting a revolution by consent; and it is the latter term in his equation that is fundamental to the formation of a judgment.
  • In Europe and the Far East, in fact, force and unreason dominated the minds of men. Traditional values were in the melting pot; and, as in all epochs where basic changes are under discussion, panic and doubt and even persecution prevented any calm estimation of the effort Mr. Roosevelt had undertaken.
  • than the sober conservatism upon which they have been built.
  • a question as to whether Mr. Ickes and his colleagues can discover undeniable objects of beneficent expenditure.
  • For it cannot be too often insisted, as Mr. Keynes has so often emphasized, that capitalism, by the law of its psychological being, needs to be immensely more successful than any alternative economic arrangement if it is to retain the allegiance of a multitude which possesses political power. The disparities of its results are too irrational for any alternative attitude to be possible over any long space of time. And the changed temper was made the more inevitable by the crude optimism of its defenders in the era of Coolidge and Hoover. They had raised the expectations of the multitude to such dizzy heights that their failure to satisfy them was bound to result in a scrutiny of foundations.
  • We must not forget that the election of 1932 was the expression of nothing so much as a demand for this scrutiny by angry and bewildered men who had entered the Promised Land only to discover that it was a desert. In dealing with their discontent, President Roosevelt has shown high qualities of enterprise and courage; but those who doubt the wisdom of his effort ought to remember that unless he had shown those qualities the patience of the multitude would have been brought to breaking point. He is not a revolutionist pursuing some private Utopia by the light of an inner wisdom. He is the logical expression of social forces and could hardly have acted otherwise if he wished to retain the characteristic contours of American life.

Posted from Diigo. The rest of my favorite links are here.

Tony Curzon Price

Belgian defense minister lashes out at blogosphere after having his juncket reported.

Tony Curzon Price

Of many fascinating things he said, three stood out:

1. that there should be publicly funded financial advisors who are not also selling products. As he said, only the rich get real advice about financial products. Imagine, he said, a world in which we had only drugs companies and no doctors ... This is what we have when it comes to financial health.

This is an application of Lessig's "no shill" principle---this times proposed by Shiller about our shillings:

2. a New Deal is not a return to the Old "New Deal": we have to realise that economic policy, especially in such extreme circumstances, works on animal spirits. And the new spirit that the New Deal ushered in cannot be ushered in by copying the policies. We need to implement policies -- including reflationary policies -- that make sense in the context of the next 100 years, not in the context of the next 100 days. Thinking about 100 days will not change the animal spirits ... indeed quite the opposite.

3. (... and this followed from a question I asked him prompted by "2"): Economists have to become more like Keynes: an understanding of animal spirits requires an understadning of sociology, history, psychology, and responsible economists are one who will integrate all of these in policy pronouncements. He said something like: "I did not become a theoretical physicist. Many economists wish they were theoretical physicists. I admire theoretical physicists. But our responsibility is to understand the wider world." Bloomberg apparently video'd the event. I'll post a link to it if I find it on the free side of their web site.

Since Shiller seems so good at timing his books with great prescience, I think it is important to know that he has a book with George Akerlof on Animal Spirits coming out in March that will be talking about sociology in economics. Now, we just need to work out why that will have been so prescient...

Tony Curzon Price

David MacKay, physicist at Cambridge's Cavendish laboratory, has written and made available for download a wonderful looking book: Sustainable Energy: without the hot air. The whole PDF is here. Chapter 1 is here. The book goes on sale in early December here.

The author takes seriously the scientist's role in teasing apart Fact from Value. He -- mostly -- want to give us facts.  Here is from the end of the introduction:

I went straight to the nuclear power chapter, because I think this is the issue where fact and value get most confused. Witness, for example, Mark Lynas's apostasy in the eyes of the Green party after he came out "not-against" nuclear.

David MacKay does a masterful job of the facts on nuclear power. It doesn't make any of the ethical questions go away, but it clears the air.

One of the political implications that I got from the chapter---and this is a forecast, not a desire---is that nature will not do the work for us of forcing change to our energy-hungry way of life. I have often thought of the political configurations around energy/environment issues with this kind of matrix:

Politically and ethically, people sympathise with materialists or simplicitarians. In their judgement of "facts" they tend towards the pessimistic or optimistic in terms of the sustainability of energy-rich life-styles. Value and facts overlap for the pessimist/simplicitarians and for the optimist/materialists.

I am suspicious of conclusions that derive from this convenient overlap. I think of myself in the bottom right corner---a simplicitarian energy optimist. Vast amounts of energy are plausibly available for human use, and nuclear energy does not pose a climate change threat. That is why I think that politics and consciousness need to do the work of changing our lifestyles. Nature will not ride to the rescue.

I have asked David if we could do a group read of the book. He's happy for us to do it, and we are working through the technical headache of translating the book into html. If you'd like to get involved -- and even lend a hand at creating the html, get in touch with me at tony dot curzonprice at opendemocracy dot net.

Tony Curzon Price

The big headline is that recession for the next 12-18 months is almost certain.

A comparison with August's forecast is interesting:

Although the shape of the downturn is broadly similar, the current forecast has essentially shifted down between 3/4% and 1.5%. Note also that the BoE has been consistently optimistic in its forecasts---if you look at the balck "ONS Data" line, that is how things actually turned out. You might have thought that the statisticians at the BoE might have learned by now to take the pinch of salt into their own forecasts by now. (Actually, the optimism seems even worse than the graphic suggests. The Quarter 3 out-turn growth was a whisker above 0%, which is right on the outside edge of the outside August probability band. However, the BoE has decided to represent this graphically in the November chart as being on the inside edge of the outside band. (Ah! The rhetoric of charts!)

Anyway ... what we now know is that the BoE thinks we have a nastier and sharper depression coming than it thought in August. It is interesting -- particularly so given the election cycle that sees a general election by May 2010 -- to see what kind of shape they predict for the end of the depression.

Their central estimate is that things are getting better very fast by May 2010, with growth around 2% and the rate of change of growth very rapid --- things have been pretty bad just 6 months earlier. Sounds good for Brown. Indeed, one assumes that an independent bank must play the election calendar into its scenario-building, and must be assuming heavy government action in its central case.

In this respect, it is interesting to compare the August and November inflation forecasts. This is the current forecast of inflation:

And this was the August forecast:

In August, the rate of price growth rate was expected to fall for the whole 3 year forecasting period. Now, inflation starts to rise again (although from a lower base) already by mid-2010. This seems clearly compatible with a change in the basic assumptions about increased government borrwing and a lower sterling exchange rate.

Based on these BoE forecasts, Brown's window for an election in 2010 looks very tight---when incomes have started growing again and before inflation has shown the economy to come out of the depression in a pretty unproductive state.

And remember the BoE pinch of salt -- that will make the window even tighter.

Tony Curzon Price

The Group of 20 meeting in Washington this week-end will do little in the way of solving the financial crisis, let alone designing a new World Economic Order (WEO). The Green New Deal (GND) hopefuls would like to see  environmental concerns built into the fabric of the WEO --- if banks can have reserve requirements, then why not carbon per dollar loan limits too? --- or at least make the idea of Keynesian reflation focused on programs for renewable energy. Whatever the fundamental problems with the suggestion (see my response here), the two practical problems for the GNDers are firstly that Obama will not be present at the Washington meeting and secondly that there is a remarkable lack of support for an international-level tie of the financial and green agendas in the economics community. The creative and very timely Vox ebook edited by Barry Eichengreen and Richard Baldwin has many radical suggestions, but not a mention of any GND ideas.

This may be disappointing for all of us concerned with the environment. But it seems right. We can still avoid depression, and we should focus our attention on that. The unforeseen consequences of the crash of 1929 were horrific, as could be the consequences of depression over the next decade (Simon Maxwell and Dirk Messner in oD are very good on this). This is especially true for emerging nations and powers whose social stabiltiy and geopolitical good behaviour requires delivery of improving economic conditions.

Maxwell and Messner get the balance just right, I think -- the November 30th Copenhagen climate change summit must keep the environmental agenda moving with an eye firmly fixed on the middle-distance. The G20 summit must deal with the immediate and dangerously close.

Tony Curzon Price

The European Investment Bank's deal, announced yesterday, whereby it made €30bn available for lending to the Europe's small and medium sized companies is interesting for the model of emergency banking that it suggests and pilots.

Westminster is delegating two ways: first, the administration of these loans is going to the big clearing banks, who know the businesses in question, have their credit records and bank movements; second the source of the funds is coming from a European institution that is used to spending and accounting for public money.

So when we've had enough investing in propping up bad banks, here is what we do: we massively increase the capital available to the EIB---as taxpayers, we put our money there rather than in idle accounts with the banks through their equity account---and we employ the bankrupt bad banks to be our agents in lending the money.

We'll need to design the incentive contract with the bad banks ... but with financial sector employment falling fast, that negotiation shouldn't be too tough on us. The banks can get some variable amount depending on a host of effectiveness indicators: volume lent, default rates, GDP growth ... with a bonus "kicker" in the contract on average median incomes and carbon emmissions for the whole economy over the next 20 years.

Tony Curzon Price

I have just published Mary Kaldor's latest column, which I think makes a really valuable contribution to our view of the financial crisis. The economics commentary, however much it professes to have learnt its new growth theory from Schumpeter, does not think about the actual characteristics of the technology development phases we are in or relate this to the current crisis.

MK's view (which borrows much from Carlota Perez) is that this crisis should be understood in relation to the new technologies as the 1930s crisis was understood in relation to Fordism and mass consumerism. MK sees deregulation and liberalism not just as the advance or retreatof some ideology, but rather as a phase which is suited to the early development of a technological/economic/institutional epoch --- a phase which finds justifications to shake off institutions from a prior age. But initial investments and returns are not sustained, and the financial sector becomes "creative" in the search for the return it has started to consider to be rightfully its own. This is what happened after the dot com bust and the mass move of finance into the extraordinarily unexciting business of (over)-financing home building.

One of the nice things about this way of looking at the crisis and at economic history is that it contextualises economic ideologies and offers a creative synthesis that might take us beyond state/market arguments. It encompasses each in different phases of the epochs of development.It also allows us to look at the 1930s asking not so much about the lessons in terms of technicalities of money supply management, but more in terms of the political and institutional shifts that took the world economy beyond 1930. Can we hope that creative destruction might be a little less destructive this time around?

I'd still like to see the analysis become more specific. From the vantage point of the early 1930s, could one see that Fordism would require/engender national welfarism, American economic hegemony, etc? And if we can, what does the nature of new information and energy technologies imply is needed for the next epoch? World-wide welfarism? Democracy support? A new finance infrastructure, including learning from micro-finance? Anti-consumerist values ...

Is there a Schumpeterian who would like to stick their neck out with a forecast? 

Tony Curzon Price

Tony Curzon Price (London, openDemocracy): George Osborne gave the Today program an opportunity to demonstrate the great emptiness of the media-political conversation this morning.

Paraphrasing, here was the interview:

SM (interviewer): "What is wrong with Darling's plan?"

GO: "You can't spend your way out of a recession with a Keynesian splurge on big projects"

SM: "What would you do differently?"

GO: "Freeze council tax, give small businesses help and let the bank of England cut interest rates, putting money in people's pockets."

SM did not then ask why this wasn't itself Keynesian splurging. There are three points here:

1. what should be the level of fiscal largesse?

2. is it better to spend this mainly on public investment or to delegate that spending to households and small businesses?

3. who eventually pays for fiscal largesse?

Tony Curzon Price

George Osborne gave the Today program an opportunity to demonstrate the great emptiness of the media-political conversation this morning.

Paraphrasing, here was the interview:

SM (interviewer): "What is wrong with Darling's plan?"

GO: "You can't spend your way out of a recession with a Keynesian splurge on big projects"

SM: "What would you do diffferently?"

GO: "Freeze council tax, give small businesses help and let the bank of England cut interest rates, putting money in people's pockets."

SM did not then ask why this wasn't itself Keynesian splurging. There are three points here:

1. what should be the level of fiscal largesse?

2. is it better to spend this mainly on public investment or to delegate that spending to households and small businesses?

3. who eventually pays for fiscal largesse?

GO pretended to answer "1" by answering "2", and Today let him get away with it. "3" is a very interesting question which GO proposed one answer to that was never challenged by SM. The point about "who pays?" is closely linked to Ricardo's equivalence, the argument that claims that there is no difference between financing government spending through borrowing or through the raising of taxes. Public borrowing has to be paid back, eventually through higher taxes. Taxpayers, if they understand this, will know their lifetime consumption possibility has fallen by exactly the amount of the public spending, so who cares if it is financed through taxes now or higher taxes later (higher in order to cover interest payments)?

The argument is fine in a classical regime - as long as we do not currently face the risk of a Keynesian recession. The point of a Keynesian recession is that capital markets do not work; hence the equivalence argument based on households comparing present and future consumption is simply not applicable. The only question that Today's interview should have drilled towards was this: does GO think there is no risk here (there is certainly a case to be made -- Tim Congdon has made it recently -- but is GO really taking the political risk of supporting this view)? Or does he deny Keynesian efficacy in such an eventuality? 

One day, Today will ask the hard questions.

Tony Curzon Price

The BoE quarterly report has a table (reproduced below) of all the measures that have been taken by central banks world-wide to get banks lending again. The fact that, after all we are doing, they still are keeping all the cash they can get their hands on for themselves, shows that their difficulties are much worse than these solutions envisaged. I have written several times about the Credit Default Swap market, and here is a really insightful article (hat tip Eurointelligence) describing exaclty how the "CDS overhang" (or should that be hang-over?) is causing a sort of financial black hole into which any cash that comes into the orbit of a bank gets whooshed.

What the article makes clear is that taxpayer funds and guarantees -- worldwide amounting about £4.5 trillion -- do not cover the losses that banks are exposed to on their unregulated CDS dealings. A CDS is just an insurance contract: a bank agrees to pay out some stated amount if some specified  loan (bond)  goes bad. Banks, hedge funds and insurance companies found they could sell thisinsurance in large quatities -- far larger than the value of the loans being insured. In the casino on which the sun never set --- our modern financial markets --- there was a market in bets on other people's ability to pay, whether you had a stake in the game or not. There are $50 trillion of outstanding CDS contracts. It is fear of these liabilities that is making banks cash-hoarders.

But liabilities may well be capped below the $50 trillion number. When Lehman's was bankrupted, institutions that had insured Lehman bonds had to find cash to pay out on the insurance. CDS's are non-regulated, non-standardised, 'over the counter' (OTC) products and come with a wide variety of terms. According to the article, some of the CDS's required that the insured party deliver the underlying debt in order to get paid. This limits the size of the CDS payout overhang. Unsurprisingly, insurers have been asking for delivery of Lehman debt before paying out. It will be interesting to see if the price of bankrupted Lehman bonds starts to move up. 

Tony Curzon Price

Iceland's chill has led Bjork to tune in to her inner philanthrocapitalist. (Hat Tip CalendarGirl ). In this interview, Bjork describes her reaction to Iceland's economic woes and explains what she is actually doing to build a new economy based on green localist principles. Admirable for its pragmatism, is it a model for all of us?

Bjork is looking to encourage MBA students, geeks and rural workers in Iceland to produce business plans that provide good incomes in the knowledge and eco-tourism economies in order to avoid building more  aluminium smelting plants --- that's what Iceland resorts to when it is in a fix, exploiting its huge hydro potential.

The dilemma faced by Iceland today---pay bills by inviting  ALCOA (The Aluminium Company of America, whose CEO was Donald Rumsfeld) to build more dirty business, or feel financially poorer but preserve the environment---is one we will all face soon. Is environmentalism a luxury?

Bjork wants to attack the problem by offering an alternative to ALCOA, a vision of "a new, independent, environmentally friendly Icelandic economy". She is building -- or thinking of building, I am not sure which -- an incubator for these new businesses. Sounds very attractive:

It's one big institution where everybody who has a good idea goes and they all work together and help each other and then companies start to come out of there. But it takes like eight years. For me, it's sort of like a record company. It's like an indie label in a way. It's grassroots, where all these people can come and feed off of each other and get support. Where if one person gets a good idea, the other five will help them..

But there are pieces of the idyl that are much less attractive:

•  [We want to] "build this purely Icelandic thing up with Icelandic money, Icelandic companies."
• "We should make companies here made of Icelanders, both working class and the brainpower, discover new things that stay in the country."
• "Why not have the Icelandic people who are educated in high-tech and work already in those factories in the higher paid jobs, why not let them build little companies who are totally Icelandic with the knowledge they have? Then they get the money and it stays in the country."

There are hints of looking to use the incubator and environmentalism to keep the nasty world out in all these identitarian references. Why can't we have what David Hayes and Andrew Dobson have characterised as a Cosmopolitan Localism -- a localism and environmentalism that does not see the world as a threat, and that has the confidence to live its identities in the open? Iceland has just been slapped for its Viking raider hubris of the past 10 years. So a desire to retreat into autarchy is understandable. But it too should be resisted. It is just as much of a perversion as the raider mentality.

(Thanks to  verapalsdotir for the photo)

Tony Curzon Price

Tony Curzon Price (London, openDemocracy): Darling is going to announce that the budgetary prudence rules of his predecessor---to balance the budget over the cycle, unless the spending is on long term public good investment---don't apply. And he is right. But why does a rule that sounds so sensible have to be thrown out so soon after it was proposed?

Tony Curzon Price

Tony Curzon Price (London, openDemocracy): The Bank of England's report on the state of finance has about 3 worrying graphs per page.

Here's just one example - the amount that UK banks will need tofind next year to pay back loans that are coming due.

Any wonder the banks are hoarding all that taxpayer investment they
are getting and not lending on? And if you were asked to invest in a
business that you knew had to stump up these sorts of sums next year,
would you worry that your investment was just going to stright into the
pocket of a creditor whose lending terms are tougher than your
ownership terms?

I'm all for the State being the bank of last resort, but I don't have any taste for the taxpayer being the dupe of last resort. Why don't we let these banks go under while putting in place an emergency financial system. I am glad to see that Walter Munchau has started to suggest this option.

Tony Curzon Price

The Bank of England's report on the state of finance has about 3 worrying graphs per page.

Here's just one example - the amount that UK banks will need tofind next year to pay back loans that are coming due.

Any wonder the banks are hooarding all that taxpayer investment they are getting and not lending on? And if you were asked to invest in a business that you knew had to stump up these sorts of sums next year, would you worry that your investment was just going to stright into the pocket of a creditor whose lending terms are tougher than your ownership terms?

I'm all for the State being the bank of last resort, but I don't have any taste for the taxpayer being the dupe of last resort. Why don't we let these banks go under while putting in place an emergency financial system. I am glad to see that Walter Munchau has started to suggest this option.

Tony Curzon Price

Here is Jeff Jarvis in the Guardian today:

"I want a page, a site, a something that is created, curated, edited and discussed. It will include articles. But it's also a blog that treats a topic as an ongoing and cumulative process of learning, digging, correcting, asking, answering. It's a wiki that keeps a snapshot of the latest knowledge and background. It's an aggregator that provides curated and annotated links to experts, coverage from elsewhere, a mix of opinion and source material. Finally, it's a discussion that doesn't just blather but tries to add value. It's collaborative and distributed and open but organised.

Think of it as being inside a beat reporter's head, while also sitting at a table with all the experts who inform that reporter. Everyone there can hear and answer questions asked from the rest of the room - and in front of them all are links to more and ever-better information.

It's not an article, a story, a section, a bureau, a paper, a show, a search engine. It's something new. What do we call it? The topic table? The beat bliki (ouch)? The news brain? I don't know. We'll know what to call it when we see it."

Jeff talks about the unsatisfactory atomisation that blogism has brought, and I have tried to express this in my piece on "The Blind Newsmaker". There is a sort of fallacy of decomposition that says that the web can recombine all the bits of journalism to create a satsifactory whole. Blogism does not produce the right atoms for that, because how you create determines what you create.

My view is that commissioning is the ingredient that has too often been dropped from the auto-publish web. In his article, Jeff is asking for coherence, for meaning, for a discursive arrival at partial understandings. The editorial conversations that lead to commissioning are at the heart of the creation of temorary moments of understanding.

openDemocracy's "open source model for news analysis"  is trying to work towards Jarvis' ideal newsroom.

Tony Curzon Price

The Sunday Telegraph publishes a letter from the rump monetarists---many familiar names from the economic crusades of the 1980's.
It is interesting to see how those old arguments play today.

Take this chestnut:
"It is misguided for the Government to believe that it knows how much specific sectors of the economy need to shrink and which will shrink "too rapidly" in a recession. Thus the Government cannot know how to use an expansion in expenditure that would not risk seriously misallocating resources."

This is true, of course, in some absolute sense of "know". However, as these very same economists have been quick to point out whenever it comes to governments dealing with clear errors of markets, for example with environment or anti-competition issues, the ideal does not make for a good benchmark. Just a market failure should be remedied if imperfect government can do better, so imperfect governments should be compared to actual markets, not imagined ones.

Look at the argument again: the financial system, which brought us massive over-investment in technology, in housing, in commodities, in conceptual art ... this is the process that should be trusted with avoiding "serious resource misallocations"?
The financial crisis has brought the government back into policy not so much because it has any answers, but because the market has demonstrated so unequivocally that it does not.

Tony Curzon Price

While I am 100% with Yves Gingras that Economics should not have a Nobel, I am very pleased that Paul Krugman has been awarded the The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel.

 PK has been a voice of sense on many issues, not least the Financial crisis - I have often linked to his NYT column from this blog. My personal favourite amongst his wide-ranging economics are his books and articles on Economic Geography. His "Self Organising Economy" has a particularly nice account of the forces that lead to the emergence of Edge Cities. Clear, simple and essential.

Tony Curzon Price

Will Hutton writes in his Observer column that "big public stakes in banks and offer guarantees to the interbank market [...] is a necessary condition for stabilisation [but] it is not sufficient."

While I agree with Will that we need to sort out the "black hole" of the Credit Default Swap insurance pyramid, I think that the time for recapitlaisation is now passed. Recapitalisation is not a necessary condition for stabilisation. The rapid creation of a new state lending bank is what is needed.

Recapitalisation might once have worked: financial pyramids are a confidence trick, and a state recapitalisation of the order of a few percentage points of GDP might have allowed a gradual, orderly wind-down of the massive liabilities. But the kind of confidence that would allow a gradual, muddle-through solution of the sort that happened in the Latin American debt crisis of the 1980s is simply no longer there. Barclays and RBS alone are the ultimate insurers against default of contracts worth more than the annual income of the UK. These are the sorts of contracts which, in an auction on Friday of Lehman Brother's assets, went for less than one tenth of their face value. The trouble with nationalisation and recapitalisation is that the liabilities do not disappear. When the slate is this heavy, you need bankruptcy to wipe it clean.

The financial sector is scrabbling aorund for whatever cash it can lay its hands on because every institution is likely to find itself in the position of having to pay out on insurance contracts with other parts of the financial sector that they know they cannot currently cover. The taxpayer with our capital injectionshave become the latest source of that cash, and we will see it disappear into the black hole of CDS liabilities.

The time for confidence tricks is passed. The banks are bankrupt.Time to stop  putting in good money after bad -- it simply will not help.

Save the real economy by rapidly creating a State bank that will lend directly to business, and let the finance system diappear into the black hole that it has dug for itself.

Tony Curzon Price

Plan 'B"

Face up to it: the Brown re-capitalisation plan may not work. The banks have relied to a massive extent on Credit Default Swaps, a sort of insurance on lending. They have given themselves false comfort, and in some cases very real cash-flow, on an insurance pyramid that will not hold-up under even modestly higher default rates. Liabilities under these insurance contracts are vast. One hedge fund was insuring 100 times its cash base before it went under. If the banks that we are now the proud part-owners of end up being heavily exposed to these liabilities--the total CDS market is measured around $50 Trillion, almost 1000 times more than the Brown rescue--we should just cut our losses and let the banks go under.

The problem is the protection of the real economy. The Federal Reserve has shown the way here, with its direct lending to companies, started 2 days ago. We should start a new state bank, recruit bankers and accountants from the City, and get them to work on lending to the real economy. At first, they will not have the time to distinguish good and bad loans. They will have to be lax but short-termist in their lending decisions. Their task will be to rapidly and efficiently become ``relationship bankers''--understanding the underlying businesses they are lending to and setting appropriate and gradually tougher lending terms. Once financial flows to the real economy are safe, the state bank should be broken into 10 identical pieces and with 9 sold to private investors who will operate in a new regulatory regime. The tenth should remain in state hands, as a benchmark bank, a way for the state to stay close to what is happening in the markets.

It is disturbing that the Brown re-cap was hatched by the Treasury, the Bank of England and top bankers. The trouble any regulator has is that the people who best understand the business and the crisis are the people you are trying to regulate. This is the basis of every regulatory capture. You cannot trust what the knowledgeable say to you. If the liabilities of the banks start to mount, let's make sure this plan B is ready to be deployed.