ADAM TOOZE https://www.adamtooze.com Historian - Author - Critic - Blogger Sat, 20 Jan 2018 22:30:01 +0000 en-US hourly 1 https://wordpress.org/?v=4.7.9 https://www.adamtooze.com/wp-content/uploads/2016/03/cropped-AdamTooze-1-32x32.png ADAM TOOZE https://www.adamtooze.com 32 32 America’s Political Economy: The local structure of labour markets and bargaining power https://www.adamtooze.com/2018/01/20/americas-political-economy-local-structure-labour-markets-bargaining-power/ https://www.adamtooze.com/2018/01/20/americas-political-economy-local-structure-labour-markets-bargaining-power/#comments Sat, 20 Jan 2018 13:19:16 +0000 https://www.adamtooze.com/?p=69444 There's only one game in town. Local labour markets across the US are highly concentrated in favor of employers.

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Across much of America (and many other countries) the concentration of monopoly power in the hands of a handful of employers in local labour markets, gives them huge bargaining power in relation to workers, even when labour is scarce nationally.

It is an incredibly intuitive finding revealed by a recent NBER paper by José AzarIoana MarinescuMarshall I. Steinbaum. Using data gleaned from America’s largest online jobs site CareerBuilder.com they show the extent of monopsony power (monopoly power enjoyed by a purchaser of goods or services) enjoyed by employers across much of the US.

The measure of concentration they use is the Herfindahl-Hirschman Index (HHI) index. It is a clever analytical and argumentative move. Usually HHI is used in anti-trust suits to measure concentration in product markets. The originality of the paper is that it applies the measures to another facet of corporate power: their power as purchasers of labour.

The results are stark. They show a truly dramatic concentration of labour market power in the hands of employers. Across thousands of labour markets the average HHI index based on advertised vacancies is 3157, well above the 2500 threshold that would raise anti-trust concerns in product markets. Based on applications rather than vacancies i.e. the jobs that people actually wanted, the HHI index was 3480. These were the averages including big city regions where many employers compete for workers. Outside the big cities the level of concentration rockets to 10,000.

Concentration matters because it is tightly related to wages. Higher concentration on the side of the employer makes for lower wages.

Any anecdotal experience of small town or rural life in America (or anywhere else) would confirm this result. Likewise the fact that investors seek out rural locations in which they can maximize their bargaining power, is a commonplace. But as the authors modestly state: “This paper provides for the first time to our knowledge a measure of labor market concentration for many of the largest labor markets in the US.”

All power to them!

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War in Germany 1618-2018 https://www.adamtooze.com/2018/01/18/war-germany-1618-2018/ https://www.adamtooze.com/2018/01/18/war-germany-1618-2018/#comments Thu, 18 Jan 2018 21:13:19 +0000 https://www.adamtooze.com/?p=69432 Notes on teaching a German military history course in the US in 2018.

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When I arrived at Yale back in 2009 I was deeply impressed/shocked by the degree to which the assumption of “forever war” had become entrenched there. I sat in on courses at the law school where the only interest was in jus in bello. Questions of jus ad bellum were cast aside as utopian irrelevance. Having been raised in West Germany and absorbed the end of the Cold War against that background, it was a considerable shock. My reaction was to put together an undergraduate course on War in Germany from the Thirty Years War to the present, which was an effort to historicize the arc of modern militarism and to insist on its historicity. This term I’m reviving the course at Columbia, under the sign of an American administration which is far more explicit in its commitment to the timeless importance of great power competition.

It is also a rather personal project in another sense. My early childhood was entirely formed by the military/World War II play culture of 1970s Britain. Victor and Commando comics, Airfix soldiers and war gaming were my obsessions. From an early stage I was drawn, for reasons I cannot fully explain, towards the German side.

The shock of actually moving to Germany in 1973, to Heidelberg, an academic, left-wing university town deep in the heart of the Federal Republic was considerable. I turned out to have not one (the ordinary one) but two imaginaries subject to a more or less explicit taboo. It was not that there was no culture of militaria in West Germany, but it belonged in the shadows rather than the central position it occupied in 1970s Britain. Children were not particularly welcome where the memories of the Wehrmacht lurked.

Much of my formation from that point forward was shaped by that tension.

It will be my weekly preoccupation for the next three and a half months. I’d be delighted to have people’s reactions, comments and suggestions on the syllabus and powerpoint, which I will post on a semi-regular basis.

The powerpoint for Lecture 1 is here: WinG2018 Lecture 1.

The syllabus is as follows.

War in Germany 1618-2018

Spring 2018

For much of modern history Germany was Europe’s battlefield. Its soldiers wrote themselves into the annals of military history. But it was also a place where war was discussed, conceptualized and criticized with unparalleled vigor. Nowhere did the extreme violence of the seventeenth century and the early twentieth century leave a deeper mark than on Germany. Today, as we enter the twenty-first century, Germany is the nation that has perhaps come closest to drawing a final, concluding line under its military history. This course will chart the rise and fall of modern militarism in Germany. For those interested in military history per se, this course will not hold back from discussing battles, soldiers and weapons. But it will also offer an introduction to German history more generally. Through the German example we will address questions that haunted modern European history and continue to haunt America today. How is state violence justified? How can it be regulated and controlled? What is its future? How did Germany become the state that has come closest to drawing a final, concluding line under its military history?

Lecture 1         Jan 17 War in German History

Lecture 2         Jan 22 The Thirty Years War as civil war, religious war and apocalypse

Lecture 3         Jan 24 Westphalia, the European state system and the rise of Prussia

Lecture 4         Jan 29 Frederick the Great and Prussian militarism

Lecture 5         Jan 31 Perpetual war or perpetual peace? Cabinet wars and their enlightenment critics

Section 1:      Prussia’s precarious rise: Thirty Years War to Frederick the Great

Lecture 6         Feb 5 Napoleon, Prussia and the destruction of the ancien regime

Lecture 7         Feb 7 1813: people’s war and national liberation

Section 2:      Absolutist war, enlightenment criticism and Kant’s vision of Perpetual Peace

Lecture 8         Feb 12 Clausewitz a philosopher of war?

Lecture 9         Feb 14 The Congress of Vienna and the threat of revolutionary war

Section 3:      Napoleon, Clausewitz and Hegel – war as historic shock.

Lecture 10       Feb 19 Prussia, Bismarck and reunification

Lecture 11       Feb 21 Moltke and the invention of the modern General Staff

Section 4:      Bismarck, Moltke and the problem of German unification

Lecture 12       Feb 26 Imperial Germany in an age of global militarism

Lecture 13       Feb 28 1914

Section 5        Debating the July crisis of 1914

Lecture 14       Mar 5 “Blood mill”: Towards attrition

Lecture 15       Mar 7 Midterm

Spring Break No Section

Lecture 16       Mar 19 1917-1918: Germany’s attempt to win World War I

Lecture 17       Mar 21 From war to civil war? Making peace in Germany

Section 6        The storm of steel: war, revolution and the front generation

Lecture 18       Mar 26            German soldiers and the making of Hitler’s dictatorship

Lecture 19       Mar 28            Blitzkrieg: a new model for twentieth-century war?

Section 7        Myth of the Blitzkrieg

Lecture 20       Apr 2  Narvik, the Atlantic, Tobruk, Ostfront: Hitler’s world war

Lecture 21       Apr 4 Racial war

Section 8        Race war

Lecture 22       Apr 9 Defeat

Lecture 23       Apr 11 Justice at Nuremberg

Section 9        Nuremberg: Judging Hitler’s War.

Lecture 24       Apr 16 Looking back: Legacies of German militarism

Lecture 25       Apr 18 The question of rearmament

Section 10      Coming to terms with the past: cold war memory politics

Lecture 26       Apr 23 Under the Shadow of destruction Cold War Germany

Lecture 27       Apr 25            Post-military security policy – a new German model?

Section 11      From Cold War to post-military society?

Lecture 28       Apr 30            Final

 

Weekly sections:

 

Section 1:      Frederick the Great and the Rise of Prussia

Questions: Why was the impact of the Thirty Years War on Prussia so devastating? From sandpit to superpower – how do you account for the rise of Prussia? How enlightened was Frederick the Great? Should Frederick the Great be a German national hero?

 

Section 2:      Absolutist war and its critics: Kant and the project of Perpetual Peace

Questions: What made absolutist war so controversial? What was the logic of Kant’s project of perpetual peace? Was Kant’s project realistic?

 

Section 3:      Napoleon, Clausewitz and Hegel: War as historic shock

Questions: How could Napoleon crush Prussia in 1806? Why is Clausewitz, a Prussian patriotic rebel against Napoleon, still required reading for American soldiers today?

 

Section 4        Bismarck, Moltke and the Wars of Unification

How did Bismarck and Moltke enable Prussia to escape from the impasse of the 1848 revolution? What risks did they run in the wars of unification? How did they contain the risks of revolution exposed by the Franco-Prussian war?

 

Section 5        Debating the July crisis of 1914

Questions: Was Germany principally responsible for the drive to war in 1914? How important was “military culture”? Was the Schlieffen plan of August 1914 a “Clausewitzian” mirage or a reflection of geostrategic necessity?

 

Section 6        Storms of Steel: War, revolution and the Front generation

Questions: Revulsion at the horror of war and the trench warfare of World War I in particular is natural. How did certain German intellectuals and politicians form an affirmative vision of war? How did they see it reshaping society? What conclusions did they draw?

 

Section 7        Myth of the Blitzkrieg

Questions: The victories of Hitler’s Wehrmacht between 1939 and 1941 were more stunning than anything since Napoleon. The term Blitzkrieg is commonly used to describe this revolution in warfare. What substance, if any, lies behind this term? Was it a formula for success or ultimate defeat?

 

Section 8        Racial War and its legacy

Questions: Hitler’s war was a racial war. How do we account for the complicity of the Wehrmacht in acts of racial war, including participation in the Holocaust? Was it the result of ideological motivation? Was it a matter of peer pressure or the context of particular campaigns? Were there legacies of German colonialism?

 

Section 9        Judgement at Nuremberg

Questions: Germany’s army committed extraordinary crimes between 1939 and 1945. How were they to be judged? Who would sit in judgment? How does one judge responsibility in military command chains? Beyond judging war crimes can war itself be criminalized? When should soldiers disobey orders? Were the victors wrong to pronounce judgment at Nuremberg?

 

Section 10      Coming to Terms with the Past: Cold War Memory Politics

Questions: Germany prides itself on having its Vergangenheitsbewältigung, coming to terms with the past. But how was that work done? When was it done and by whom? How were the politics of memory shaped by the Cold War? And which history did the Germans come to terms with, their history as perpetrators or their history as victims?

 

Section 11      After war: Post military strategy

Questions: German rearmament in the 1950s was controversial. The effort to win the Cold War in the 1980s with a further round of rearmament split German society again. How did this legacy shape how Germany took advantage of the end of the Cold War? How did Germany face the new dilemmas of international security and intervention? Will its post-military security strategy be viable given the rebirth of geopolitics. Is the richest democracy in Europe a model global citizen or a free-rider?

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Notes on the Global Condition: Of Landscapes of Feed and Oceanic Dead Zones https://www.adamtooze.com/2018/01/07/notes-global-condition-landscapes-feed-oceanic-dead-zones/ https://www.adamtooze.com/2018/01/07/notes-global-condition-landscapes-feed-oceanic-dead-zones/#comments Sun, 07 Jan 2018 13:45:22 +0000 https://www.adamtooze.com/?p=69212 From Iowa to Brazil's cerrado by way of the Gulf of Mexico - the dizzying hemispheric agro-industrial and ecological connections.

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One spectacular global news story catches your eye. Then another. You can’t really get either of them out of your head. But, at first, they form two distinct impressions. Then over the following days you widen your reading by one or two clicks. You go a bit deeper. You see one or two more ramifications. And, suddenly, it is the same story, now even more dizzying in scope.

But, having grasped the connection another process sets in. The bigger picture loses its startling shock-value. Rather than two disconnected deep impressions you end up with some some familiar, reified generality:

“Sure! Of course! I get it. It’s globalization, the anthropocene, whatever, etc ….”.

But that shoulder shrug is, presumably, what we have to resist. We do, indeed, have labels for all this. Everything is connected and on a massive scale. We know it. That knowledge overshadows our existence. But, as such, it also becomes all too familiar rather than profoundly disconcerting.

What do we have to do to restore the jaw-dropping, eye-popping, stomach-churning quality of our global condition? How can we get its measure? How can we make our knowledge specific, quantified, immediate, historical?

I

This week, the first story was about American agriculture. The farm team at the WSJ’s Plowed Under are excellent and I ended up reading a vaguely Trump-flavored essay by Jesse Newman and Jacob Bunge about American farmers facing global competition.

It starts like this:

“On a pancake-flat stretch of land not far from the Mississippi River, Illinois farmer Jerry Gaffner thumbs through weather forecasts and crop reports on his tablet computer, searching for clues about when to market his soybean crop.

The data streaming in isn’t from Illinois or even the American Midwest. It is from half a world away in Brazil, where farmers are harvesting what’s expected to be a record soybean crop. With 43% of the export market—up from just 12% 30 years ago—Brazil can sway global prices with a weather hiccup or transportation snarl, spurring U.S. farmers to sell crops and capture profits, or to bunker grain and hold off until prices improve.“We’re going to have to learn the table manners of sitting at a bigger table,” says Mr. Gaffner, whose soybeans often make their way down the Mississippi to be shipped overseas from New Orleans ports. For U.S. farmers, he says, “that’s hard for our psyche.”

The piece achieves its effect by juxtaposing the mid-West and Brazil. Gaffner’s counterpart thousands of miles to the South is a certain “Mr. Gilioli, 37” who has “pulled record yields from his 5,000 acres in Brazil’s Goiás state.

“Inside the farm, it looks just like the U.S.,” says Mr. Gilioli, who wears an Iowa State Cyclones hat, Levi’s T-shirt and Wrangler bluejeans. Mr. Gilioli lived on a farm in Iowa for a year as an exchange student and has made four visits to tour farms across the Midwest.”

“Brazil’s agricultural growth-spurt began about four decades ago”, the WSJ tells us. It dates back to the military dictatorship in the 1970s and early 1980s, “as farmers were lured north to its sweeping savanna, known as the cerrado, by the promise of cheap land and climbing soybean demand and prices. The region stretches over 500 million acres, an area three times the size of Texas and nearly 50% bigger than all the land in the U.S. used to grow crops. … Farm operations can dwarf U.S. counterparts in size, including some with multiple parcels that when added up are larger than Yosemite National Park.”

As the WSJ emphasizes, Brazil’s development was not simply a matter of national competition:

“Also part of the silver lining” (from the point of view of the average reader of the WSJ rather than farmer Gaffner) are the returns for American corporations. Brazil’s agricultural growth generates ”booming international revenue for U.S. companies such as Monsanto Co. , Deere & Co. and Mosaic Co. , who sell genetically engineered seeds, satellite-guided tractors and fertilizer to farms outside America. In some cases, U.S. companies design products and seeds specifically for foreign markets.”

Amongst those investing in the giant expansion of Brazilian agriculture is none other than TIAA-CREF, which manages the 401k retirement funds of many American academics. According to a New York Times report:

“TIAA-CREF’s disclosures show that its farmland holdings in Brazil climbed to 633,391 acres at the start of 2015, up from 257,877 acres in 2012, around the time when it began ramping up deals through a venture formed with Cosan, a Brazilian sugar and biofuels giant.”

Now I want to know about this “cerrado”, this  vast 500 million acre expanse, which is changing the balance of power in world agricultural markets, that has some of my retirement dollars invested in it.

Googling brings up a story from The Economist back in 2010, a typically informative and ebullient piece titled “The Miracle of the cerrado”. Characteristically for The Economist what was at stake was not just the scale of agricultural development or the pressure it exerts on American farmers. What was remarkable about the cerrado story was where it was happening and the political economy of that transformation.

That the cerrado miracle is happening in places like Gioas state or “Piauí—the Timbuktu of Brazil, a remote, somewhat lawless area where the nearest health clinic is half a day’s journey away and most people live off state welfare payments—is nothing short of miraculous. …. No less astonishingly, Brazil has done all this without much government subsidy. According to the Organisation for Economic Co-operation and Development (OECD), state support accounted for 5.7% of total farm income in Brazil during 2005-07. That compares with 12% in America, 26% for the OECD average and 29% in the European Union. And Brazil has done it without deforesting the Amazon (though that has happened for other reasons). The great expansion of farmland has taken place 1,000km from the jungle.”

As a later Economist piece explains:

“in 1990 Brazil’s then president, Fernando Collor, slashed tariffs and dismantled many import and export controls. Since then the total area under crop cultivation in Brazil has increased by 38% and production has more than trebled. Total factor productivity has been growing by 4.6% a year. “In these new areas [such as MaPiToBa – the states of Maranhão, Tocantins, Piauí and Bahia – that encompass the cerrado] they rarely even mention the government,” says Mr Gasques. “There’s no culture of subsidies; it was broken 20 years ago.”

But the cerrado story is not simply a matter of letting the market rip. This was not neoliberalism 1.0. At least in the The Economist‘s telling of it, Brazil’s agricultural revolution is the triumph of an efficient, low cost public private partnership. Above all the cerrado illustrates the important role played by Brazilian agronomical research.

The story turns around an organization known as Embrapa “short for Empresa Brasileira de Pesquisa Agropecuária, or the Brazilian Agricultural Research Corporation. It is a public company set up in 1973, in an unusual fit of farsightedness by the country’s then ruling generals.” Embrapa’s “main achievement”, the Economist gushes, “has been to turn the cerrado green.”

“When Embrapa started, the cerrado was regarded as unfit for farming. Norman Borlaug, an American plant scientist often called the father of the Green Revolution, told the New York Times that “nobody thought these soils were ever going to be productive.” They seemed too acidic and too poor in nutrients. Embrapa did four things to change that. First, it poured industrial quantities of lime (pulverised limestone or chalk) onto the soil to reduce levels of acidity. In the late 1990s, 14m-16m tonnes of lime were being spread on Brazilian fields each year, rising to 25m tonnes in 2003 and 2004. This amounts to roughly five tonnes of lime a hectare, … Embrapa scientists also bred varieties of rhizobium, a bacterium that helps fix nitrogen in legumes and which works especially well in the soil of the cerrado, reducing the need for fertilisers. Second, Embrapa went to Africa and brought back a grass called brachiaria. Patient crossbreeding created a variety, called braquiarinha in Brazil, which produced 20-25 tonnes of grass feed per hectare, many times what the native cerrado grass produces and three times the yield in Africa. That meant parts of the cerrado could be turned into pasture, making possible the enormous expansion of Brazil’s beef herd. Thirty years ago it took Brazil four years to raise a bull for slaughter. Now the average time is 18-20 months.”

GM-modified grasses, even more luscious than original Brachiaria, are on the way.

Third, and most important, Embrapa turned soyabeans into a tropical crop. Soyabeans are native to north-east Asia (Japan, the Korean peninsular and north-east China). They are a temperate-climate crop, sensitive to temperature changes and requiring four distinct seasons. All other big soyabean producers (notably America and Argentina) have temperate climates. Brazil itself still grows soya in its temperate southern states. But by old-fashioned crossbreeding, Embrapa worked out how to make it also grow in a tropical climate, on the rolling plains of Mato Grosso state and in Goiás on the baking cerrado. More recently, Brazil has also been importing genetically modified soya seeds and is now the world’s second-largest user of GM after the United States. This year Embrapa won approval for its first GM seed.Embrapa also created varieties of soya that are more tolerant than usual of acid soils (even after the vast application of lime, the cerrado is still somewhat acidic). And it speeded up the plants’ growing period, cutting between eight and 12 weeks off the usual life cycle. These “short cycle” plants have made it possible to grow two crops a year, revolutionising the operation of farms.”

Thanks to Embrapa, Brazil has achieved nothing less than “the genetic transformation of soya”.

Lastly, Embrapa has pioneered and encouraged new operational farm techniques. Brazilian farmers pioneered “no-till” agriculture, in which the soil is not ploughed nor the crop harvested at ground level. Rather, it is cut high on the stalk and the remains of the plant are left to rot into a mat of organic material. Next year’s crop is then planted directly into the mat, retaining more nutrients in the soil. In 1990 Brazilian farmers used no-till farming for 2.6% of their grains; today it is over 50%.”

The detritus of this no-till farming technique, I suspect, is why pictures from the cultivated cerrado always look so bleak:

source: https://ipad.fas.usda.gov/highlights/2008/04/Brazil/

The essential point about the Brazilian case from The Economist’s point of view is that it is not simply a story of natural endowments. “So although it is true Brazil has a lot of spare farmland, it did not just have it hanging around, waiting to be ploughed. Embrapa had to create the land, in a sense, or make it fit for farming.”

This echoes key works on modern economic history by Paul David and Gavin Wright (1997). As they famously put it about the ascent of the United States as a mineral exporter after the civil war: ‘natural resource abundance’ is an “endogenous, ‘socially constructed’ condition that was not geologically preordained.” The exploitation of natural resource potential is a function of “complex legal, institutional, technological and organizational adaptations that shaped the US supply-responses to the expanding domestic and international” demand for a particular resource. “Natural resources” are not separable from capital, scientific research, legal structures etc.

In the Brazilian case The Economist in a later article continues the argument.

“The transformation of the cerrado is often dismissed as Brazil’s belated discovery of a competitive advantage. That leaves out a lot, and not just Embrapa’s role and the courage of the gaúcho pioneers. Farming in the tropics is in many ways more difficult than in a temperate climate. Without cold winters, pests and crop diseases are harder to control. Intensive soil preparation and large amounts of lime and fertiliser require scale and capital. According to Rodrigo Rodrigues of Agrifirma, a company that buys and farms virgin cerrado, preparing land for its first crop—deep-tilling, root-picking, liming and so on—means passing over it 15 times, which costs as much as the land itself.”

The result is an economic miracle and a political transformation. Brazil’s hot house industries may depend on endless protection to shield them against worldwide competition. But its farmers are different.

“Unlike their counterparts in the United States and the European Union, farmers are now Brazil’s most ardent proponents of free trade. They want an EU-Mercosur deal, which has been mooted for years and is becoming urgent for Brazil, since from next year it will be rich enough to lose its trade preferences. Bahian farmers want to cattle-ranch on cerrado that has too little rain for crop-farming, but for that to be profitable they need new markets. “We’d love to sell to Europe,” says Mr Busato. “Their meat is so expensive.””

And this is not all. For The Economist the “cerrado miracle” is not just about getting market-based political economy right. It is not just about solidifying the political base of globalization. It is nothing less than the swing variable in the global food balance. It is, as such, also the answer to the Malthusian challenge of the 21st-century. It is a story not so much about Iowa as about Africa.

“Between now and 2050 the world’s population will rise from 7 billion to 9 billion. Its income is likely to rise by more than that and the total urban population will roughly double, changing diets as well as overall demand because city dwellers tend to eat more meat. The UN’s Food and Agriculture Organisation (FAO) reckons grain output will have to rise by around half but meat output will have to double by 2050. This will be hard to achieve because, in the past decade, the growth in agricultural yields has stalled and water has become a greater constraint. By one estimate, only 40% of the increase in world grain output now comes from rises in yields and 60% comes from taking more land under cultivation. In the 1960s just a quarter came from more land and three-quarters came from higher yields.So if you were asked to describe the sort of food producer that will matter most in the next 40 years, you would probably say something like this: one that has boosted output a lot and looks capable of continuing to do so; one with land and water in reserve; one able to sustain a large cattle herd (it does not necessarily have to be efficient, but capable of improvement); one that is productive without massive state subsidies; and maybe one with lots of savannah, since the biggest single agricultural failure in the world during past decades has been tropical Africa, and anything that might help Africans grow more food would be especially valuable. In other words, you would describe Brazil.”

This was image number one: the dynamic development of a huge swath of the planet to meet massive population pressure; the cerrada as one of the keys to the human condition in the early twenty-first century.

II

A few days later the Guardian feed highlighted a spectacular story on environmental change. An astonishing new report on zones of martime deoxygenation had just been published in Science.

The pictures are horrifying. The data are graphic.

For laconic apocalypticism this paragraph from the Science paper takes some beating:

“The open ocean lost an estimated 2%, or 4.8 ± 2.1 petamoles (77 billion metric tons), of its oxygen over the past 50 years (9). Open-ocean oxygen-minimum zones (OMZs) have expanded by an area about the size of the European Union (4.5 million km2, based on water with <70 μmol kg−1 oxygen at 200 m of depth) (10), and the volume of water completely devoid of oxygen (anoxic) has more than quadrupled over the same period (9). Upwelling of oxygen-depleted water has intensified in severity and duration along some coasts, with serious biological consequences (11).”

As The Guardian explains: “The open ocean has natural low oxygen areas, usually off the west coast of continents due to the way the rotation of the Earth affects ocean currents. But these dead zones have expanded dramatically … .”

The Science piece outlines a truly nightmarish run away process in which climate change induces declining oxygen levels, encouraging biological changes that then pump out even more dangerous climate change gases at ever faster rates. As the Guardian puts it: “There are also dangerous feedback mechanisms. Microbes that proliferate at very low oxygen levels produce lots of nitrous oxide, a greenhouse gas that is 300 times more potent than carbon dioxide.” Skimming the Science paper I wonder, did the Guardian get this right? Is it microbes or “biogeochemical” (sic) processes of nitrification and denitfrication? Either way it sounds terrifying.

In fact, it is a three-tiered story. There are the deep sea oceanic processes and then there are the costal strips. The Science paper highlights the Baltic sea. But, bringing it home to the US the Guardian picked out the huge zone of oxygen depletion is the Gulf of Mexico. Dead zones in the gulf have recently been a regular occurrence. But the summer of 2017 witnessed the most massive dead zone since records began.

This takes the Guardian to the third level of the story.

The collapse of oxygen levels in the Gulf of Mexico turns out to be a story about the Mississippi. It is nitrogen and phosphates flowing down America’s greatest river system that tip the chemical balance of the Gulf.

It is an ongoing disaster. More nitrogen pollution flows into the Gulf every year than tonnage of oil was released by the BP Deepwater Horizon disaster.

And what is responsible for these gigantic nitrogen and phosphorous run offs? Not the oil and gas industry in the Gulf, but Midwestern agriculture, far up stream, in places just like the one where this skein of connections began. Remember where the WSJ piece opened, on a: “a pancake-flat stretch of land not far from the Mississippi River” where Illinois farmer Jerry Gaffner is anxiously watching weather reports from Brazil.

III

The Guardian piece linked to a fascinating looking report on the US agro-industrial complex. Click bait as far as I am concerned. So, it was not long before I found myself plowing through a beautifully illustrated, richly sourced report on nitrogen pollution in the mid west, by an outfit called “Mighty Earth”.

The scales of pollution are massive. They are driven by the high intensity agro-industrial complex centered on Tyson the giant meat producer and its feed suppliers. Together livestock farming and the agriculture is depends on, create what the report eerily calls, “landscapes of feed”.

Their political economy is stark. It is a gigantic US-based but globally extended oligopoly. Tyson, and the gigantic grain and commodity processors ADM, Cargill and Bunge are the main players. Setting the terms for local farmers this agro-industrial complex creates a large expanse of the US where the water is undrinkable due to excessive nitrate concentrations. What doesn’t seep into the local water supply, is what washes down to the rivers to the Gulf.

The people who supply this conglomerate system are, of course, people like Mr Gaffner who was interviewed by the Wall Street Journal. And they are struggling to compete and meet the demands of the system by bringing as much land as possible into production. The result over the last decade has been a remarkable destruction of one of America’s last great habitats, the prairie grasslands. More rapidly than at any time since the dustbowl era, American grassland have been brought into agricultural production.

As the authors of a recent PNAS paper put it:

“Our results show that rates of grassland conversion to corn/soy (1.0–5.4% annually) across a significant portion of the US Western Corn Belt (WCB) are comparable to deforestation rates in Brazil, Malaysia, and Indonesia, countries in which tropical forests were the principal sources of new agricultural land, globally, during the 1980s and 1990s. Historically, comparable grassland conversion rates have not been seen in the Corn Belt since the 1920s and 1930s, the era of rapid mechanization of US agriculture. Across the WCB, more than 99% of presettlement tallgrass prairie has been converted to other land covers, mostly agricultural, with losses in Iowa approaching 99.9% of an original 12-million ha of tallgrass prairie. Potential expansion of corn and soybean cultivation into remaining fragments of tallgrass prairie in the WCB presents a critical ecosystem conservation issue.”

It is when I got to the prairie destruction that the penny finally drops. Clearly this is the other end of the cerrado story!

Indeed, it turns out that the NGO that is tracing the nitrogen story, Mighty Earth, are also running a campaign on the cerrado (plus one on cocoa and chocolate – one of my preoccupations in early 2017, before Crashed entirely took over my life).

In an imaginative and beautifully put together report, Mighty Earth focus on Burger King’s supply chain. BK, that staple of US strip malls, is now owned by 3G, a Brazilian private equity group. Like all the other fast foot outlets, it is umblically linked to the agroindustrial complex. And the Mighty Earth team travelled around cerrado documenting the scale of land transformation involved and the commercial entanglement of all the key concerns. What to the Economist was the “cerrado miracle” is for them a landscape in crisis, a savanna in a “state of emergency”. The World Wildlife Fund also has a cerrado campaign.

The cerrado is not the Amazonian rain forest. Nor does it enjoy the same protections. Farmers are required to preserve only 20 percent of their land in something approximating to its “natural” condition. And that, the campaigners argue, is dangerously small amount. The cerrado may not be charismatic but in ecological terms it matters.

“It is home to five percent of the world’s biodiversity, including threatened species like the jaguar, giant anteater, fox, maned wolf, and marsh deer. The Cerrado’s soils store significant amounts of carbon that are released when the ground is ploughed up for agriculture. The Cerrado is also a vital source of water for millions of people living in the region. Half of Brazil’s watersheds have their sources there, including the Pantanal, which is the largest wetland in the world. The Cerrado even powers Brazil’s economy: 90 percent of Brazilians rely on hydroelectric power generated from watersheds originating in the Cerrado.”

It is that abundance of water that draws in the farmers. But it cannot be sustained under the new, high intensity cropping regime. Cerrado’s plant life though it may not be pictoresque was once unique.

source:

Indeed, in the late nineteenth-century it was in a study of the cerrado that the Danish naturalist Eugenius Warming founded the modern discipline of plant ecology and ecosystems.

The gnarled and twisted trees with their deep root systems that Warming once studied are now confined to dwindling strips and the occasional local zoo and wildlife reservoir, with corporate sponsorship, of course. Embrapa the agronomists who were the heroes of the Economist’s narrative are now scrambling to devise integrated farming regimes that will sustain the green revolution that they helped to launch.

IV

From Iowa to Brazil by way of global markets for soya and meat, the Gulf of Mexico, aquatic “dead zones” and terrestrial “landscapes of feed” are connected on a hemispheric scale.

As I’m making a cup of tea digesting the way these two stories have melded together, my mind wanders: “So, this is the anthropocene in action, in “real time”. You can follow one of Burger King’s Whoppers and see this entire process unfolding.” But then, when I sit down to write this post that no longer seem quite right:

“The anthropocene in “real time”? What other kind of anthropocene is there? Silly! Once again you are underestimating the radicalism of what is going on. There is nothing but the anthropocene in real time. It doesn’t come any other way. That is the whole point.

Everything, on all scales is happening at once, at astonishing speed. There are fewer and fewer “slow, background processes” against which to contrast the present. There is no longue durée. No, that’s an overstatement. The longue durée retreats. There are fewer domains that belong to one temporality exclusively. The neat ordering of temporalities breaks down. The temporalities into which nature and human affairs are cast are intermingled. And we can no longer count on nature’s patience. The processes unleashed are massive and immediate and happening on a time scale not of millions of years, or millennia, but on the scale on which we normally think about business-cycles, or Schumpeterian growth spurts. With only a bit of time lapse we can watch them unfolding as if on film.

Source: Homi Kharas Brookings 2017 

As another jaw-dropping report recently pointed out, we are now entering a phase when the number of people entering middle class affluence globally will hover around 160 million, per annum. The impact of their demand on the world food supply chain will be more spectacular than anything we have seen to date.

We ain’t seen nothing yet.

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Crashed: How a Decade of Financial Crises Changed the World – Out August 2018 https://www.adamtooze.com/2018/01/04/crashed-decade-financial-crises-changed-world-august-2018/ https://www.adamtooze.com/2018/01/04/crashed-decade-financial-crises-changed-world-august-2018/#comments Thu, 04 Jan 2018 16:37:31 +0000 https://www.adamtooze.com/?p=69118 Book in works. A post of thanks!

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Yesterday was the last day of serious work on the manuscript of Crashed: How a Decade of Financial Crises Changed the World. 

Only proof reading to come. I like the cover design. I hope you do too.

 

The book is now “in production”, in the hands of teams of people, most of whom I do not know and will never meet. In due course it will be translated into languages I cannot speak or read. Thanks to their labour it is slipping out of my hands. It is becoming an object, a commodity.

It is, needless to say, an ambiguous moment. But it is a relief to have arrived at this point. And it is certainly a moment to say a heartfelt thank you to some of the people who have helped to make this happen.

The book emerged out of teaching a course on the history of the Great Recession and a dialogue with students and teaching fellows. At Yale and Columbia my collaborators included Ted Fertik, Gabe Winant, Nick Mulder, Madeline Woker, David Lerer and Noelle Tutur. This is not an exhaustive list but I am enormously grateful to all those who helped to develop and deliver the course. Nick Monaco, Kevin James Schilling and Ella Plaut Taranto helped bang the manuscript into shape.

In addition, from an early stage, the project benefited from the attention and ferociously intelligent commentary of Ted Fertik, Grey Anderson, Stefan Eich, Anusar Farooqui, Nick Mulder, Hans Knundani and Nick Monaco. Dana Conley, Martin Sandbu, Wolfgang Proissel and Barnaby Raine added their comments to particular sections. The conversations with these readers, particularly over the summer of 2017, were vital in sustaining momentum and giving the project focus. The fact that in the process old friendships from Yale have melded so seamlessly with a new life in New York has been a particular joy. These friends and interlocutors know individually and collectively how much I owe to them. Our conversations stretch back over the best part of a decade.

Even older friends, above all Chris Clark and David Edgerton, served, as always, as indispensable sounding boards.

Directing the European Institute at Columbia has provided me with the opportunity to discuss contemporary European affairs with a remarkable collection of guests. None of the EI’s activities would happen without the work of François Carrel-Billiard who I am privileged to have as a collaborator.

Beyond this intimate group I have been extraordinarily fortunate to discuss the project with audiences in many different academic venues. I am particularly grateful for the hospitality of the Hamburg Stiftung für Sozialgeschichte (Tim Müller and Co), Mark Blyth and the gang at Brown University, a great group of colleagues from history and political science at Stanford, the Eisenberg Institute University of Michigan, the European University Institute, NYU Florence, the New School, the German Historical Institute Paris, the FPLH workshop in London, as part of the Science Po public debt project (Nicolas Delalande and Nicolas Barreyre) and at the NYU Kandersteg workshop (thanks Stef!).

A memorial conference for Francesca Carnevali in Birmingham was a sad occasion to discuss Europe’s banks with our teacher Les Hannah.

You can all imagine how grateful I was to have the chance to present a version of the project to a seminar of the Siemens Stiftung moderated by Knut Borchardt and attended by Jürgen Habermas. Their gracious engagement was a real honor.

Since the fall of 2015 I have engaged with social media as never before. This adventure has more or less coincided with the writing of the book. I feel particularly lucky to have fallen in with a brilliant and deeply informed crowd on twitter and facebook who have changed my understanding of how an intense, real-time debate can develop in the twenty-first century. For the daily stimulation of their company on line I would like to thank (in no particular order): Duncan Weldon, Brad Setser, Martin Sandbu, Daniella Gabor, Robin Wigglesworth, Tom Clark, Danilo Scholz, Adam Posen, Nicolas Véron, Matt C. Klein, Karthik Sankaran, Yakov Feygin, Brad DeLong, Cornel Ban and many, many others.

Kate Marsh built the excellent website that has provided structure to my online intellectual life.

Cowriting pieces with Stefan Eich and Danilo Scholz helped to sharpen parts of the argument, as did the reviews published by New Left Review, LRB and New York Review of Books. A particular thanks to Tom Clark and Prospect for taking a chance on a long essay about wholesale bank funding and swap lines.

Off line it has been great to talk over the project with Perry Mehrling, Clara Mattei, Shahin Vallée, Eric Monnet, Chuck Sabel, Tano Santos, Daniella Gabor Cornel Ban, and Bruce Kogut.

This project marks a departure for me in moving forward in time into the field of contemporary history and back into an intense dialogue with economics. It has reminded me of debts I owe to two teachers.

Alan Milward, my doctoral supervisor, was a brilliant but difficult man. For me, given my personal makeup, the engagement with him was particularly high-risk. But I survived and Milward remains a towering figure. I don’t know whether he would have agreed with my take on the Eurozone crisis, but you cannot think or write about the EU without feeling Alan’s presence.

Wynne Godley was a mentor and teacher of a very different kind. Spontaneously warm and generous in spirit he took me under his cape in my first year at King’s and introduced me, and a group of my contemporaries, to what was, at the time, a highly idiosyncratic brand of economics. In so doing he provided a model of intellectual warmth and vitality. He also confirmed doubts that had been gestating in me about the IS-LM macroeconomic model that was my first great love in economics. Wynne introduced me to the importance of looking beyond the flows and insisting on stock-flow consistency in macro models. I don’t think this book, written almost thirty years later would have been the same without his early influence.

I owe thanks to literally dozens of people. It may in fact be hundreds. It is dizzying when you think about it. But when it comes down to the actual writing, the day to day mechanics of production, the circle narrows.

I am someone who does not write or think principally in “the office”. It happens mostly at home, or anywhere where life takes me. The line between the professional and the domestic, the personal and the public is chronically blurred. It’s a flexible, but tricky balance and in sustaining it, making it productive and agreeable I owe everything to Dana Conley, whose love and support energized and sustained the project from start to finish. To have such a deeply intelligent, engaged, curious, courageous and loving partner, someone so open to me and to my world is a blessing beyond words. It is no formality that this book is dedicated to her. I simply can’t imagine it without her.

Puppy Ruby – a marvelous gift from Dana – added joy, warmth, walks, endless distraction and an entire community of companionship and support. All hail to the gang from the “small dog hill”.

My daughter Edie has jolted dinner table conversation with a burst of political radicalism and sharp insights. When current events were robbing me of my senses she offered precocious wisdom. Her energetic but grounded engagement with the world is a source both of inspiration and encouragement.

There is no doubt that these three forces are the keys to my current happy combination of productivity and emotional stability. The fact that this book has not driven us apart but given us things to talk about and brought us in many ways closer together, is my greatest personal satisfaction in the project.

The fact that I can say all this, is due in large part to the wise counsel of an outstanding psychoanalyst. He shall remain nameless. But everyone should be so lucky.

As Nicolas Véron put it to me once in Washington Square Park, making sense of what has happened since 2008 is a collective project. As a historian, it has been an extraordinary privilege to be included in that urgent collective effort. I hope this book repays the support and encouragement I have received from so many sides. As of today Crashed is on its way into the world. It will be out first week of August 2018. So we shall soon see.

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Europe’s Political Economy: Mario Draghi and the eurozone’s crisis winter of 2011-2012 https://www.adamtooze.com/2017/12/31/europes-political-economy-mario-draghi-eurozones-crisis-winter-2011-2012/ https://www.adamtooze.com/2017/12/31/europes-political-economy-mario-draghi-eurozones-crisis-winter-2011-2012/#comments Sun, 31 Dec 2017 20:14:36 +0000 https://www.adamtooze.com/?p=69028 Revisiting two revealing interviews from December 2011 and February 2012 throws light on the economics and politics of the eurozone crisis.

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Early in the morning of June 29 2012, after agreement was reached at the European Council both about banking union, a growth pact and a mechanism for bond market stabilization, Italy’s Prime Minister Mario Monti could be heard exclaiming, “Europe’s mental block is broken”. A month later Mario Draghi declared that the ECB was ready to do “whatever it takes” to preserve the euro. Between the December 2011 agreement on the Fiscal Compact and the finalization of the ECB’s OMT bond market support program in September 2012, the acute and general phase of the eurozone crisis was finally brought to an end.

What Europe’s “block” – mental or otherwise – consisted of and how it was overcome remains a subject of fascination, at least for some of us. Going back over the footnotes for my forthcoming book on the crisis I’ve come to feel that two interviews that Mario Draghi gave to the Financial Times and the Wall Street Journal in December 2011 and February 2012 are quite revealing. The interviews cover his first four months as president of the ECB, they bracket the first phase of the Long-term Refinancing Operation through which the ECB eventually pumped 1 trillion euro into the European banking system, as well as the fiscal compact of December 2011.

Draghi features in many ways in recent European history. There is super Mario, the American Draghi, a “maximum force” interventionist, the man with the “big bazooka” who saved the Euro. There is Draghi the Florentine diplomat smoothing Europe’s path as he shuttles between Frankfurt and Berlin. There is the Draghi of the European left, the servant of the markets, the ex Goldman Sachs banker with an uncanny resemblance to Dr Evil.

The Draghi we can glimpse in the WSJ and FT interviews is rather different from all of these. The Draghi we see is

  1. the inheritor of the Italian crisis of the early 1990s.
  2. an economist who couples together questions of macroeconomic balance, fiscal sustainability, capital markets and a program of structural reform aimed a transforming the European social bargain.
  3. a grand strategist of European integration.

He is on the other hand neither a Bocconi boy, nor a Bernanke style advocate of central bank activism.

The Wall Street Journal interview from February 2012 contains the two most striking punch lines. The first is on the macroeconomic impact of austerity.

WSJ: But some people say Greece is really suffering depression-like conditions, GDP off 15% or 16% peak to trough. What is your view of these austerity policies in the larger strategy right now, forcing austerity at all costs in order to bring the budget deficits down?

Draghi: This is actually a general question about Europe. Is there an alternative to fiscal consolidation? In our institutional set up the levels of debt-to-GDP ratios were excessive. There was no alternative to fiscal consolidation, and we should not deny that this is contractionary in the short term. In the future there will be the so-called confidence channel, which will reactivate growth; but it’s not something that happens immediately, and that’s why structural reforms are so important, because the short-term contraction will be succeeded by long-term sustainable growth only if these reforms are in place.

WSJ: Austerity means different things, what’s good and what’s bad austerity?

Draghi: In the European context tax rates are high and government expenditure is focused on current expenditure. A “good” consolidation is one where taxes are lower and the lower government expenditure is on infrastructures and other investments.

The crucial point here is that Draghi does not deny that fiscal consolidation is contractionary. He rejects the idea of expansionary austerity associated with the “Bocconi boys“. Indeed, he makes a point of saying that “we should not deny” the likely contractionary effect – truth in advertising. Indeed, for Draghi the urgency of structural reform follows precisely from the need to counteract the contractionary effect of fiscal consolidation.

And Draghi is similarly forthright when it comes to the likely impact of structural reforms.

WSJ: Which do you think are the most important structural reforms?

Draghi: In Europe first is the product and services markets reform. And the second is the labour market reform which takes different shapes in different countries. In some of them one has to make labour markets more flexible and also fairer than they are today. In these countries there is a dual labour market: highly flexible for the young part of the population where labour contracts are three-month, six-month contracts that may be renewed for years. The same labour market is highly inflexible for the protected part of the population where salaries follow seniority rather than productivity. In a sense labour markets at the present time are unfair in such a setting because they put all the weight of flexibility on the young part of the population.

WSJ: Do you think Europe will become less of the social model that has defined it?

Draghi: The European social model has already gone when we see the youth unemployment rates prevailing in some countries. These reforms are necessary to increase employment, especially youth employment, and therefore expenditure and consumption.

WSJ: Job for life…

Draghi: You know there was a time when (economist) Rudi Dornbusch used to say that the Europeans are so rich they can afford to pay everybody for not working. That’s gone.”

“The European social model has (sic) already gone …”. This is the bombshell of the WSJ interview. But, placed in context, what Draghi is talking about is the inequality generated by insider/outsider barriers in European labour markets. It is hypocritical under such conditions to proclaim the virtues of a European model. Of course, such structures are only part of a complex of factors generating inequality and they do not explain the huge surge in youth unemployment after 2008 (unless the point is that such rigidities make Europe unresponsive to shocks). But, in this regard as well, Draghi’s position is essentially the conventional wisdom of a 1990s centrist complete with memories of the “bad old days” of the 1970s.

The FT’s team of Lionel Barber and Ralph Atkins conducted their interview on 14 December 2011 just after agreement was reached on the Fiscal Compact. The interest in this case lies less in punch lines than in the clear view we gain of Draghi’s understanding of the politics and economics of the eurozone crisis at the end of 2011.

One point that emerges clearly is the urgency of the LTRO operation. The ECB was seriously worried in December 2011 about a major credit squeeze triggered by the need of European banks to refinance the short-term funding to which they had resorted since the 2009 credit stop. The huge dollop of liquidity injected by way of LTRO was preemptive and Draghi is at pains to insist that it was facultative.

“The important thing was to relax the funding pressures. Banks will decide in total independence what they want to do, depending on what is the best risk / return combination for their businesses. One of the things that they may do is to buy sovereign bonds. But it is just one. And it is obviously not at all an equivalent to the ECB stepping-up bond buying.”

Over the winter of 2011-2012 with German conservatives on the warpath further bond buying by the ECB was taboo. The FT would return to the question of European QE, but this initial observation about the link between bank funding, balance sheets and the purchase of sovereign bonds led on to a further observation by Draghi:

“Last week, we had the results of the European Banking Authority (EBA) “stress tests” exercise. But ideally, the sequence ought to have been different: We should have had the EFSF in place first. This would have had certainly a positive impact on sovereign bonds, and therefore a positive impact on the capital positions of the banks with sovereign bonds in their balance sheet. So the ideal sequencing would have been to have the recapitalisation of the banks after EFSF had been in place and had been tested. In fact, it was done the other way round, so the capital needs identified by the EBA exercise reflect stressed bond market conditions. That may exert pressure on banks to achieve better capital ratios by simply deleveraging.

Deleveraging means two things; selling assets and/or reducing lending. In the present business cycle conditions, I think the second option is by far the worst. I understand regulators have recommended to their banks that they shouldn’t go this way, so let’s hope they follow this advice.

FT: Couldn’t somebody just say to the EBA, look, just hold off now, this is completely unhelpful?

MD: I think the press statement by EBA somehow hints at that, because they say that there wouldn’t be another exercise next year. To be fair to EBA, the shape of the exercise was decided at a time when the biggest economic threat seemed to be the banking system’s lack of credibility. People feared banks’ balance sheets concealed fragilities that in the end would strain the economies. So they started this exercise thinking that, being transparent, and marking-to-market sovereign bonds, would strengthen the credibility of the banking system and reduce risk premia. At the end, it did not work that way because of the sequencing. But I wouldn’t say it’s EBA’s fault.”

The issue of sequencing emerges as key to Draghi’s entire view of the Eurozone crisis. What is at stake is the fact that by dawdling over the European Financial Stability Facility (EFSF), which was supposed o stabilize sovereign bonds markets, but pressing ahead with bank stress testing, the Eurozone added to instability. The uncertainty in the sovereign bond market was transferred to the bank balance sheets, where it was then exposed by the stress tests.

Draghi then goes on to offer a multidimensional account of the rise of uncertainty in the sovereign bond market and what needs to be done to restore confidence:

“The first, lies with national economic policies, because this crisis and this loss of confidence started from budgets that had got completely out of control.

The second answer is that we have to restore fiscal discipline in the euro area, and this is in a sense what last week’s EU summit started, with the redesign of the fiscal compact.”

National and Eurozone fiscal consolidation were both essential according to Draghi.

“Improvement in budgetary positions should elicit some positive market response, lower spreads and lower cost of credit. But … it is necessary to have the right euro area design, implementing the fiscal compact, so that the confidence is fully restored. Austerity by one single country and nothing else is not enough to regain confidence of the markets – as we are seeing today.”

Indeed, once markets were panicking, neither national nor Eurozone wide austerity were enough.

“we are in a situation where premia for these [sovereign debt] risks overshot. When you have this high volatility – like we had after Lehman – you have an increase in the counterparty risk. In the worst case, you can have accidents and even if you don’t have accidents, you have a much reduced economic activity because people become exceedingly risk averse.

So the third answer to this is to have a firewall in place which is fully equipped and operational. And that was meant to be provided by the EFSF.”

The explicit acknowledgement of market irrationality (euphemistically referred to as “overshooting”) is significant here. It would provide the basic justification for ECB intervention. But so too is the past tense with regard to the EFSF. The EFSF was thrown together in May 2010. But in December 2011 it was still far from being a functional mechanism for market stabilization or even a credible backstop.

Nor does Draghi limit himself to financial matters. Once again he makes the link to growth and thus to the call for “structural reform”.

“The fourth answer is to again ask: why are we in this situation. Part of this had to do with fiscal discipline, but the other part was the lack of growth. Countries have to undergo significant structural reforms that would revamp growth.”

At this point the FT interviewers appear to have thought that they might persuade the new president of the ECB to widen his criticism of europe’s crisis fighting. On 19 October 2010 Merkel and Sarkozy had spooked the markets with their announcement from Deauville that in future there would be Private Sector Involvement (PSI), i.e. haircuts at the expense of creditors, in any future debt restructuring. This was widely decried as Europe’s “Lehman moment”. Trichet, Draghi’s predecessor, was particularly vocal on this score. A year later the FT was still on the warpath.

FT: And the fifth answer (to the collapse of confidence) is that the idea of introducing private sector involvement (PSI) in eurozone bail-outs was, in retrospect, a mistake?

But Draghi responds with another reference to sequencing.

MD: The ideal sequencing would have been to first have a firewall in place, then do the recapitalisation of the banks, and only afterwards decide whether you need to have PSI. This would have allowed managing stressed sovereign conditions in an orderly way. This was not done. Neither the EFSF was in place, nor were banks recapitalised, before people started suggesting PSI. It was like letting a bank fail without having a proper mechanism for managing this failure, as it had happened with Lehman.”

So far so conventional. But then, Draghi pivots. He is not about to disown Sarkozy and Merkel.

“Now, to be fair again, one has to address another side of this. The lack of fiscal discipline by certain countries was perceived by other countries as a breach of the trust that should underlie the euro. And so PSI was a political answer given with a view to regaining the trust of these countries’ citizens.”

This was, indeed, the key, far too often ignored in Anglophone criticisms of the Deauville announcement. Public opinion in Germany was furious at the bailouts. The SPD leading the opposition in the Bundestag made its cooperation with Merkel’s Eurozone policy conditional on PSI.

But still the FT was not satisfied. This was December 2011. Rumors of a Eurozone disintegration were in the air. Would it not be better, they asked, for countries that were under acute stress simply to exit the Eurozone.

“FT: … that was part of the answer in the early 1990s in Italy – it did have an exchange rate adjustment.

MD: If you take that as an example, remember there was no IMF around, there was no EFSF and gross [government bond] issuance in 1992 was a multiple of the figures that we see today. It’s true that Italy moved the exchange rate, but this cuts both ways. It brought a temporary respite to the economy, so that exports could grow, but it also widened sovereign bond spreads because exchange rate risk came on top of sovereign risk. Three or four years down the road Italy still had something like 600 basis point spread with respect to the German Bund. Furthermore, the effect of the devaluation would have been only temporary without the structural reforms (abolition of indexation among others) that followed. … Leaving the euro area, devaluing your currency, you create a big inflation, and at the end of that road, the country would have to undertake the same reforms that were due to begin with, but in a much weaker position.”

But did Draghi really feel, faced with the huge tension that had built up during 2011 that the Eurozone was viable? Were the decisions taken at the Fiscal Pact summit in December 2011 sufficient? In the eyes of most commentators they were totally inadequate. Germany had forced through fiscal consolidation but blocked any major increase in the backstop for the bond markets. Given Draghi’s earlier comments about the EFSF the FT pushed the point.

“FT: It sounds like you’re a bit disappointed then with the outcome of last week’s summit then?

MD: Actually no, because there was confirmation of previous figures on the EFSF’s resources – and of an additional €200bn that could be provided by the International Monetary Fund. What was also overlooked by many is that the date for a first assessment of the adequacy of resources has been brought forward to March 2012 – in just three months’ time, when the leaders ask themselves whether the resources for the firewall will be adequate. In the meantime, the ECB acting as an agent will make the EFSF operational. Important was also the commitment to clearly restrict the PSI to IMF practices, which should reassure the investors. FT: When do you think the EFSF will be operational? MD: Our aim is to be ready to provide agency functions in January next year.”

But did Draghi really believe that this was a viable compromise?

“FT: What do you say to those who say the solution is to have a very big firewall and ultimately put the ECB behind it, because that is the only thing which will tame the markets?

MD: People have to accept that we have to and always will act in accordance with our mandate and within our legal foundations.

FT: But if you look at the wording of the treaty, there is nothing that sets a limit on how many government bonds you buy ….

MD: We have to act within the Treaty. In general, there must be a system where the citizens will go back to trusting each other and where governments are trusted on fiscal discipline and structural reforms.

FT: Once the firewall is in place with the EFSF, perhaps as soon as the beginning of next year, might you actually stop the SMP (securities market programme)?

MD: We have not discussed a precise scenario for the SMP. As I often said, the SMP is neither eternal nor infinite. Let’s not also forget that the SMP was initiated with the view to reactivating monetary policy transmission channels. So as long as we see that these channels are seriously impaired, then the SMP is justified.

FT: Arguably, the monetary transmission channels are more impaired than ever before, if you look at interest rates in Greece or Italy compared with Germany?

MD: The cost of credit is bound to differ because it’s geared to some extent not on our short-term policy rate but on sovereign spreads.

FT: Would the ECB consider putting a limit on yields or spreads, or would that violate the treaty in your view?

MD: Sovereign spreads have mostly to do with the sovereigns and with the nature of the compact between them. It is in this area that progress is ongoing. Monetary policy cannot do everything.

FT: But if the economic situation deteriorated, would you be prepared to embark on “quantitative easing” in the style of the US Federal Reserve or Bank of England, in terms of large-scale government bond purchases to support economic growth?

MD: The important thing is to restore the trust of the people – citizens as well as investors – in our continent. We won’t achieve that by destroying the credibility of the ECB. This is really, in a sense, the undertone of all our conversation today.”

The WSJ interview allows us to glimpse Draghi’s wider vision of the necessity for Europe to reinvent its social model. The FT interview exposed the constraints that governed Eurozone crisis-fighting. There were the economic problems of fiscal discipline, sovereign bond markets and bank stability, all set against the question of long-run growth. But both the substance and the sequencing of crisis fighting was dictated by politics, law and the question of “the trust of the people – citizens as well as investors – in our continent”. Above all – as had become clear at the Cannes G20 in November 2011 – what mattered was the “trust” of the German political system and its tolerance for expanded eurozone firefighting capacities.

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German Question(s): The life and times of Habermas https://www.adamtooze.com/2017/12/27/german-questions-life-times-habermas/ https://www.adamtooze.com/2017/12/27/german-questions-life-times-habermas/#comments Wed, 27 Dec 2017 15:43:53 +0000 https://www.adamtooze.com/?p=68857 Two great reviews of a Habermas biography raise fascinating questions about his centrality to intellectual life in Germany since 1945.

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Highly recommend two insightful reviews of Müller-Doohm’s new Habermas biography one by Peter Osborne in the latest edition of New Left Review the other by Matthew Specter in the latest issue of Modern Intellectual History.

I’ve not had time for the book yet, but the reviews themselves are worth reading for a series of sharp observations about the development both of Habermas and Germany’s postwar intellectual and academic scene.

Osborne starts with a striking contrast between Ralf Dahrendorf and Habermas. Both these leading figures of postwar West German intellectual and political life were born in 1928. As the Nazi regime made its final stand in 1944 both experienced formative political shocks. Dahrendorf, son of an anti-Nazi SPD leader and teenage activist, was arrested and sent to a Gestapo jail in Frankfurt an der Oder from which he was liberated by the Red Army. Meanwhile, Habermas, whose father was a conformist nationalist and member of the Nazi party since 1933, was drafted into the Hitler Youth to defend the Siegfried Line.

I can’t get this image, reproduced by a local newspaper, out of my head. It puts Habermas’s early writings in the early 1950s under the influence of Heidegger, Gehlen, Rothacker in perspective. As Osborne remarks: “There is a tendency to think of German fascism as the experience of the generation of the Left in the 1930s, but the leading literary and cultural figures of Habermas’s generation—Heinrich Böll, Hans Magnus Enzensberger, Günter Grass and Christa Wolf—had a more intimate sense of the everyday actualities of its political culture.” In fact there is no reason to choose one perspective rather than the other. The experience of those who came of age in WWI/Weimar e.g. Arendt or Brecht, was simply different from that of the Flakhelfer/Hitler Youth generation. That difference would structure the interaction between the two generations in the 1950s and 1960s.

As Osborne glosses Müller-Doohm: “So, what, for Müller-Doohm, are the main biographical events of Habermas’s life? There are three that give distinctive meaning and justification to his narrative. First, the biological fact of having been born with a cleft palate that required childhood surgery, leaving Habermas with a speech impediment. Second, the public revelation in postwar Germany of the Nazi Judeocide. Third, Heidegger’s failure to acknowledge culpability for his own fascism, in the 1953 publication of his 1935 lectures on metaphysics. Together these three events are taken … to have led to a crusading attitude towards speaking out about the lack of public self-reflection on the history of German fascism, a self-reflection that Habermas came to see not only as the condition of building a democratic political culture, but as more or less synonymous with that culture itself. In this respect, although Müller-Doohm does not make the connection, Habermas’s Habilitation thesis and first book of 1962, on the ‘structural transformation of publicness’ (Öffentlichkeit), can be read as a direct polemical renunciation of the elitism of Heidegger’s Being and Time, in which Öffentlichkeit is a central category, constituted by ‘distantiality, averageness, and levelling down’ as ways of being of ‘the they’. ‘By publicness’, Heidegger wrote there, ‘everything gets obscured, and what has thus been covered up gets passed off as something familiar and accessible to everyone.’ (The translation of Öffentlichkeit as ‘public sphere’ in the 1989 English edition of Habermas’s book, The Structural Transformation of the Public Sphere: An Inquiry into a Category of Bourgeois Society, both obscures this philological-political connection and robs the concept of the residual, negative philosophical depth that shadows its relocation to the discourse of historical sociology.)”

Specter’s own biography of Habermas is highly recommended. It offers a compelling account of the continuity of Habermas’s thought, stressing the interconnection (that Habermas himself struggles to come to terms with) between his political engagements and his philosophy.

Both Specter and Osborne note that buried in Müller-Doohm’s massive book is a stinging critique of Habermas’s role in policing the public sphere of modern Germany. The question is not so much about the substantive coherence at the level of thought between Habermas’s philosophy and the positions he adopts in public, as the tension between his support for open, power-free communication and the vigorous and at times ruthless way in which he has engaged in public polemics and defended his own status.

As Specter remarks:  “No one has been harsher in his critique of Habermas than Peter Sloterdijk, who in 1999 pushed this argument to its reductio ad absurdum. As he is quoted by Muller-Doohm, “The whole left-liberal bloc consists of faint Habermasians . . . ¨ [It is in fact] a large majority [practicing cultural hegemony but] understands itself as a persecuted minority . . . [It has a] monological concept of truth which takes great pains to appear in dialogical camouflage . . . at bottom, Habermas has always remained nothing but a theoretician of reeducation” (316). Muller- ¨ Doohm does not go this far, but argues that,“According to Habermas’s ideal, intellectuals do not strive to exert strategic influence on the political struggle for power, but help create a pluralist public sphere” (253). The German “1968” was as divisive as its counterpart in the United States. In Germany, the backlash against the ’68ers’ demands for cultural and political reform took the form of the rise of a neoconservative intellectual tendency or “liberal-conservative” bloc.  Muller-Doohm correctly asserts that when Habermas battled the representatives ¨ of these tendencies, he “frequently and consciously made use of the arsenal of weapons used in ideological warfare . . . knowing full well that the politics of ideas he thus practiced would have a polarizing effect, would simplify the arguments, and would contradict his ideal of the enlightenment. [To him it must have seemed] that the ends did justify the means” (262).4”

In the MIH, Specter twins his discussion of Müller-Doohm with a respectful review of Martin Jay’s latest outing on the Frankfurt School and the history of reason. This for Jay is a lifelong commitment. But close attention to Habermas’s intellectual development from his youthful Heideggerianism to his linguistic turn in the 1970s leaves one puzzled as to the precise nature of the connection between Habermas and his supposed predecessors. Habermas did not start out as an adept of critical theory. His relations with Horkheimer were famously rocky.For his intellectual and professional path away from Heidegger, Heidelberg and Gadamer’s hermeneutics were more important than Frankfurt and the Institute. In the 1970s not only his linguistic turn, but the depth of Habermas’s engagement with Luhmann’s system theory and his espousal of an evolutionary framework raise similar questions.

Will a historicization of Habermas lead us to abandon the idea that he belongs to the Frankfurt School at all? As Specter puts it: “Writing in the Frankfurter Allgemeine Zeitung, Karl-Heinz Bohrer maintained, in Muller-Doohm’s paraphrase, that,“it was wrong to subsume Habermas under ¨ a Frankfurt School that had been inflated to mythic proportions” (166). For Muller-Doohm, too, it is little more than optical illusion to consider ¨ Habermas the representative of the Frankfurt school. “He is connected with the . . . Frankfurt School . . . because he was present . . . in the decades [of liberalization] . . . This role made him the main representative of the second generation.” Or it is the “trivial” effect of his assumption of Horkheimer’s old chair in 1964. Provocatively, he argues that what makes Habermas a recognizable representative of the tradition of critical theory is his interventionist stance in the public sphere more than any aspect of his philosophical program (4–5).”

But Specter does not want to leave it there. To argue for a connection that runs largely in terms of Habermas’s political engagement and not his philosophy is “peculiar” since both Müller-Dohm and Sepcter are invested int he idea that there is a “constitutive relationship at work between Habermas’s careers as citizen and philosopher”. So, Specter asks, “(h)ow could Habermas be critical theorist in one role and not in the other … ? Muller-Doohm could ¨ refer us to Habermas’s own statements: “What annoys me terribly,” he once remarked disapprovingly, “What gets to me, is the aggressiveness of people who do not see the role-differentiation in me” (5). But Habermas is not the final authority on the meaning and coherence of his career, the porousness or purity of its boundaries. To wit, Habermas has also contradicted himself on this point, saying at his seventieth birthday celebration, “The public sphere as a space of reasoned communicative exchanges is the issue that has concerned me all my life. The conceptual triad of ‘public space,’ ‘discourse,’ and ‘reason,’ in fact, has dominated my works as a scholar and my political life” (317, italics mine).”

As Specter rightly insists, it is this that makes Habermas “central to the critical tradition in German social philosophy” whether or not that is identified with the Frankfurt school. It is this, sharp elbows and all that makes him into such a key figure in modern German history, right the way down to the present day.

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Notes on the Global Condition: NSS 2017 https://www.adamtooze.com/2017/12/24/notes-global-condition-nss-2017/ https://www.adamtooze.com/2017/12/24/notes-global-condition-nss-2017/#comments Sun, 24 Dec 2017 14:37:55 +0000 https://www.adamtooze.com/?p=68830 Trump's National Security Strategy offers a bleak vision of history and the present.

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Since 1986 US administrations have been required to issue a statement of their National Security Strategy . The savvy take is that these documents are strategic boilerplate. In the case of the Trump administration it is not even obvious that POTUS is capable of reading reliably from the script. In the speech introducing the Strategy Trump transposed the strategy of “principled realism” that his administration supposedly espouses as follows: “Our new strategy is based on a principle, realism.”

But there are three reasons that the NSS issued by the Trump administration in early December 2017 is more interesting than its immediate predecessors. Not only is it an unusually political document, but it is marked by three features that set it apart from its immediate predecessors since 2001:

  1. though it contains the usual self-congratulatory nods to American exceptional success story – “among the greatest forces for good in history” (2), “most just and prosperous nation in history” (4) – this is not a self-congratulatory document.
  2. the NSS analysis of the situation immediately facing the US is, if taken at face value, urgent and drastic.
  3. to bolster this dark vision NSS 2017 is studded with references to history. These include general references to America’s “national experience” as well as references to specific moments in history like World War II and the Cold War. But the new NSS also confirms the presence in the Trump administration – at least amongst some of its members – of a bleaker philosophy of history than we have been used to from similar documents issued since the 1990s.

All three of these points are visible in the opening statement of the NSS, which starts with the succinct but powerful statement:

“America’s achievements and standing in the world were neither inevitable nor accidental.”

“… neither inevitable nor accidental” – not merely by chance, but not inevitable – this is the essential frame – should one call it metaphysical? – within which Trump’s strategists make their call to arms.

“America’s achievements and standing in the world were neither inevitable nor accidental. On many occasions, Americans have had to compete with adversarial forces to preserve and advance our security, prosperity, and the principles we hold dear. At home, we fought the Civil War to end slavery and preserve our Union in the long struggle to extend equal rights for all Americans. In the course of the bloodiest century in human history, millions of Americans fought, and hundreds of thousands lost their lives, to defend liberty in two World Wars and the Cold War. America, with our allies and partners, defeated fascism, imperialism, and Soviet communism and eliminated any doubts about the power and durability of republican democracy when it is sustained by a free, proud, and unified people.” (2)

This is the standard West Point version of America’s military history. No equivocation about the confederacy here. And there follows the McMaster et al rendition of the “postwar”, “Marshall plan” moment:

“The United States consolidated its military victories with political and economic triumphs built on market economies and fair trade, democratic principles, and shared security partnerships. American political, business, and military leaders worked together with their counterparts in Europe and Asia to shape the post-war order through the United Nations, the Marshall Plan, the North Atlantic Treaty Organization (NATO), and other institutions designed to advance our shared interests of security, freedom, and peace. We recognize the invaluable advantages that our strong relationships with allies and partners deliver.” (2)

All of this serves as a foil for what follows: a critique of the locust years. This is where the real punch is delivered:

“Following the remarkable victory of free nations in the Cold War, America emerged as the lone superpower with enormous advantages and momentum in the world. Success, however, bred complacency. A belief emerged, among many, that American power would be unchallenged and self–sustaining. The United States began to drift. We experienced a crisis of confidence and surrendered our advantages in key areas. As we took our political, economic, and military advantages for granted, other actors steadily implemented their long-term plans to challenge America and to advance agendas opposed to the United States, our allies, and our partners.” (2)

The memory of previous periods of activism – Civil War, World Wars, Cold War – highlights unflatteringly the period of complacency that followed since the 1990s. That sloth is what the Trump administration is determined to undo. America must rise to the challenge because it faces alarming new threats from actors who have “steadily” implement “long-term” plans to challenge US dominance. Not for nothing “competition”, “competitive”, “compete” are the key terms of the document. They appear 73 times across 56 pages.

A fuller statement of the historic narrative that underpins the view of security policy in the current Trump administration can be found in Section III entitled “Preserve Peace Through Strength” (25 and following). Once again this starts with a bold historico-philosophical claim: “A central continuity in history is the contest for power. The present time period is no different.” (25)

Then the NSS distinguishes: “Three main sets of challengers— the revisionist powers of China and Russia, the rogue states of Iran and North Korea, and transnational threat organizations, particularly jihadist terrorist groups—are actively competing against the United States and our allies and partners.”

The NSS acknowledges that these threats are distinct but then seeks to weld them together into a single challenge: “Although differing in nature and magnitude, these rivals compete across political, economic, and military arenas, and use technology and information to accelerate these contests in order to shift regional balances of power in their favor. These are fundamentally political contests between those who favor repressive systems and those who favor free societies.”

It is a characteristic sequence:

(1) postulate a general trans-historical principle of power struggle;

(2) itemize a washing list of threats;

(3) though they may differ in “nature and magnitude” assert technical similarities between them;

(4) subsume the entire heterogeneous collection under generic ideological oppositions i.e. repressive v. free.

The effect is dizzying. China is equated with ISS, Putin’s Russia with North Korea. They are all challengers. They use technology and information against us. They “favor” repression. We favor freedom. A plurality of differing threats is reduced to a simple self-affirming dichotomy bolstered by the dark certainty that there will always be struggle.

What gives NSS 2017 its political edge is that this strategic diagnosis is framed as a moment of illumination, as a return to essential strategic wisdom lost in the mists of liberal or neoconservative complacency: As the NSS December 2017 puts it:

“The United States must consider what is enduring about the problems we face, and what is new. The contests over influence are timeless. They have existed in varying degrees and levels of intensity, for millennia. Geopolitics is the interplay of these contests across the globe. But some conditions are new, and have changed how these competitions are unfolding. We face simultaneous threats from different actors across multiple arenas— all accelerated by technology. The United States must develop new concepts and capabilities to protect our homeland, advance our prosperity, and preserve peace.” (26) The timeless expanse of millennia (sic) sets the stage for technological futurism.

The United States must run to catch up because: “Since the 1990s, the United States displayed a great degree of strategic complacency. We assumed that our military superiority was guaranteed and that a democratic peace was inevitable. We believed that liberal-democratic enlargement and inclusion would fundamentally alter the nature of international relations and that competition would give way to peaceful cooperation.” (27)

This illusory liberal understanding of the likely development of international relations had its counterpart in domestic decline and decay:

“Instead of building military capacity, as threats to our national security increased, the United States dramatically cut the size of our military to the lowest levels since 1940. Instead of developing important capabilities, the Joint Force entered a nearly decade long “procurement holiday” during which the acquisition of new weapon systems was severely limited. The breakdown of the Nation’s annual Federal budgeting process, exemplified by sequestration and repeated continuing resolutions, further contributed to the erosion of America’s military dominance during a time of increasing threats.

Despite decades of efforts to reform the way that the United States develops and procures new weapons, our acquisition system remained sclerotic. The Joint Force did not keep pace with emerging threats or technologies. We got less for our defense dollars, shortchanging American taxpayers and warfighters.

We also incorrectly believed that technology could compensate for our reduced capacity —for the ability to field enough forces to prevail militarily, consolidate our gains, and achieve our desired political ends. We convinced ourselves that all wars would be fought and won quickly, from stand-off distances and with minimal casualties.” (27)

This is all very worrying and all the more so, because, “… after being dismissed as a phenomenon of an earlier century, great power competition returned. China and Russia began to reassert their influence regionally and globally. Today, they are fielding military capabilities designed to deny America access in times of crisis and to contest our ability to operate freely in critical commercial zones during peacetime. In short, they are contesting our geopolitical advantages and trying to change the international order in their favor.” (27)

Isis, Putin and North Korea are worrying no doubt. But the most remarkable and alarming passage in the NSS surely comes in the regional section on the “Indo-Pacific”.

As the NSS states “The U.S. interest in a free and open Indo-Pacific extends back to the earliest days of our republic.” (46) “The region which stretches from the west coast of India to the western shores of the United States, represents the most populous and economically dynamic part of the world.” (45-46) And it offers the most dramatic example of America’s tendency to dangerous liberal optimism: “For decades, U.S. policy was rooted in the belief that support for China’s rise and for its integration into the post-war international order would liberalize China.” But, “(c)ontrary to our hopes, China expanded its power at the expense of the sovereignty of others. China gathers and exploits data on an unrivaled scale and spreads features of its authoritarian system, including corruption and the use of surveillance. It is building the most capable and well-funded military in the world, after our own. Its nuclear arsenal is growing and diversifying. Part of China’s military modernization and economic expansion is due to its access to the U.S. innovation economy, including America’s world-class universities.” (26)

As America’s trade policy hawks never tire of arguing, the gamble on the liberal incorporation of China was also a failure in economic terms. Chinese state capitalism is seen by the likes of Navarro and Lighthizer as a major threat to the US economy and US jobs.

Far from liberal convergence, according to NSS 2017, what the US now faces in the “Indo-Pacific” is a major grand strategic challenge: “A geopolitical competition between free and repressive visions of world order Is taking place in the indo-pacific region.” (45)

Most analysts would be hard-pressed to identify where exactly India, Singapore, the Philippines, Thailand align with the likes of Australia and New Zealand, Japan and the United States in this forcefield. Even at the height of the Cold War the dividing lines ran rather more crookedly in the Indo-Pacific region than NSS 2017 claims they do today. But the force of its alarmism is irresistible.

“Although the United States seeks to continue to cooperate with China, China is using economic inducements and penalties, influence operations, and implied military threats to persuade other states to heed its political and security agenda. China’s infrastructure investments and trade strategies reinforce its geopolitical aspirations. Its efforts to build and militarize outposts in the South China Sea endanger the free flow of trade, threaten the sovereignty of other nations, and undermine regional stability. China has mounted a rapid military modernization campaign designed to limit U.S. access to the region and provide China a freer hand there. China presents its ambitions as mutually beneficial, but Chinese dominance risks diminishing the sovereignty of many states in the Indo- Pacific. States throughout the region are calling for sustained U.S. leadership in a collective response that upholds a regional order respectful of sovereignty and independence.” P. 46

This is a new type of competition against a new/old type of adversary:

“… adversaries and competitors became adept at operating below the threshold of open military conflict and at the edges of international law. Repressive, closed states and organizations, although brittle in many ways, are often more agile and faster at integrating economic, military, and especially informational means to achieve their goals. They are unencumbered by truth, by the rules and protections of privacy inherent in democracies, and by the law of armed conflict. They employ sophisticated political, economic, and military campaigns that combine discrete actions. They are patient and content to accrue strategic gains over time—making it harder for the United States and our allies to respond. Such actions are calculated to achieve maximum effect without provoking a direct military response from the United States. And as these incremental gains are realized, over time, a new status quo emerges.” (27-28)

Seen from the vantage point of strategic competition, as NSS 2017 frames it, the contrast between those who favor freedom and those who favor repressions are rather less flattering. The US is constrained by law and by “thresholds”, by its openness and encumbrance of truth and personal rights, by its lack of patience and failure to think systemically about the shifting balance of power. International law is a particular encumbrance:

“The United States must prepare for this type of competition. China, Russia, and other state and nonstate actors recognize that the United States often views the world in binary terms, with states being either “at peace” or “at war,” when it is actually an arena of continuous competition. Our adversaries will not fight us on our terms. We will raise our competitive game to meet that challenge, to protect American interests, and to advance our values. Our diplomatic, intelligence, military, and economic agencies have not kept pace with the changes in the character of competition. America’s military must be prepared to operate across a full spectrum of conflict, across multiple domains at once. To meet these challenges we must also upgrade our political and economic instruments to operate across these environments.” (28)

As was true also in Trump’s speech in Warsaw, America’s own state apparatus, its own government machine is seen as a diminishing and undercutting its own power. Astonishingly, at the intersection of Trumpian domestic economics and security policy, bureaucracy is no longer associated with Communism, or Asiatic mandarins, but with the United States and its meddling liberalism. But there is hope.

“Bureaucratic inertia is powerful. But so is the talent, creativity, and dedication of Americans. By aligning our public and private sector efforts we can field a Joint Force that is unmatched. New advances in computing, autonomy, and manufacturing are already transforming the way we fight. When coupled with the strength of our allies and partners, this advantage grows. The future that we face is ours to win or lose. History suggests that Americans will rise to the occasion and that we can shift trends back in favor of the United States, our allies, and our partners.” (28)

This is the essential message. “The future that we face is ours to win or lose.” And then, rubbing salt in liberal wounds: “There is no arc of history that ensures that America’s free political and economic system will automatically prevail. Success or failure depends upon our actions. This Administration has the confidence to compete to protect our values and interests and the fundamental principles that underpin them.” (37)

The NSS 2017 is a highly political document. But this is its most pointed moment. It was of course Obama who in his victory speech in November 2008 called on his supporters to reject cynicism and fear and “put their hands on the arc of history and bend it once more toward the hope of a better day.” It was his adaptation of a deathless phrase by Martin Luther King – “The arc of the moral universe is long but it bends toward justice”. It was borrowed by King from the Unitarian minister and abolitionist Theodore Parker who in 1853 invoked the arc of the moral universe. “…the arc is a long one, my eye reaches but little ways. I cannot calculate the curve and complete the figure by the experience of sight; I can divine it by conscience. But from what I see I am sure it bends towards justice. Things refuse to be mismanaged long. Jefferson trembled when he thought of slavery and remembered that God is just. Ere long all America will tremble.”

The invocation of a right and wrong side of history was by no means original to Obama as President. By one calculation Bill Clinton referred to being on the “the right side of history” 21 times during his time in office, with hiss staff adding another 15 references.

But it was in fact the Bush administration that incorporated the notion of a historical arc into the NSS in 2006 in the following form: ‘Tyranny is not inevitable, and recent history reveals the arc of the tyrant’s fate. The 20th century has been called the “Democracy Century,” as tyrannies fell one by one and democracies rose in their stead. At mid-century about two dozen of the world’s governments were democratic; 50 years later this number was over 120. The democratic revolution has embraced all cultures and all continents.” (National Security Strategy 2006, 4)

A decade on from 2006 we are in a very different place. It is not just the Trumpists who have lost their confidence that “things refuse to be mismanaged long”.

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America’s Political Economy: The Double Life of Mariel https://www.adamtooze.com/2017/12/09/americas-political-economy-double-life-mariel/ https://www.adamtooze.com/2017/12/09/americas-political-economy-double-life-mariel/#comments Sat, 09 Dec 2017 12:33:48 +0000 https://www.adamtooze.com/?p=68584 How controversy swirled and still swirls around the arrival of 125,000 Cubans in Miami in 1980.

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Pressed by a New York Times reporter yesterday for evidence that immigration hurts American workers, White House senior adviser Stephen Miller said: “I think the most recent study I would point to is the study from George Borjas that he just did about the Mariel Boatlift.” 

The flight of up to 125,000 people from the Cuban port of Mariel to Florida between 15 April and 31 October 1980 was a milestone in the history of Cuban migration to the US. In May 1980 alone over 86,000 arrived in the US. It was chaotic. They came in small groups – 1700 boats were used in the boatlift. In Miami the authorities were overwhelmed. The Carter administration in its final months struggled to improvise a response. Meanwhile the refugees, of whom perhaps 30-40 percent were black or mulatto struggled to find places for themselves in a city suffused with a discourse of crisis. Rumors that the boatlift included thousands of inmates of Cuban prisons and mental hospitals caused a widespread “moral panic”. There was a much-discussed group of gay or queer Cubans from Mariel, in part because of the high profile of Mariel migrants like Reinaldo Arenas. Contemporary news accounts reported that some 20,000 gay Cubans had entered the U.S. via the boatlift. A more reasonable estimate would put the figure in the 1000-2000 range. After shuffling through improvised accommodation in and around Miami, those arrivals who had no immediate family sponsor were shipped off to Fort Eglin Air Force Base in the Florida Panhandle; Fort Chaffee, Arkansas; Fort Indiantown Gap, PA; and Fort McCoy, WI from where they struggled to make a life for themselves in the US.

In Arkansas the arrivals were fiercely resisted by locals and their governor, a young Bill Clinton. The ensuing riot is vividly described by the Washington Post:

“The scene would later remind one witness of the Vietnam War. “Plumes of smoke billowed high into the illuminated night sky from barracks that had been set afire,” David Maraniss wrote in The Washington Post. “Flames still flickered from a charred guardhouse. Whoops and fierce cries of defiance echoed across the camp. Shotgun-toting civilians in pickup trucks loomed a mile or so beyond the gate. The mood was tense and chaotic. But this wasn’t Vietnam — or Iraq in the wake of an Islamic State attack. This was Fort Chaffee, a military installation in Arkansas, on June 1, 1980, when refugees from Fidel Castro’s Cuba rioted. The refugees had been sent there at the behest of President Jimmy Carter over the vociferous objections of an Arkansas governor with quite a political future: Bill Clinton. “The White House message seemed to be: ‘Don’t complain, just handle the mess we gave you,’” former Arkansas first lady — and possible future president — Hillary Clinton wrote in her memoir “Living History.” “Bill had done just that, but there was a big political price to pay for supporting his President.”””

The option preferred by the Clintons was to screen the Cubans on an aircraft carrier and to deport the unwanted back to the US base of Guantanamo. Carter pressed on, leading Clinton to warn him that he was struggling to prevent “a bloodbath that would make the Little Rock Central High crisis look like a Sunday afternoon picnic.” He feared that he did not have the police resources necessary to prevent murderous clashes between protesting Cubans and heavily armed Arkansas locals. According to Clinton “There had been a run on handguns and rifles in every gun store within fifty miles of Chaffee.”

Not surprisingly many of the Cuban arrivals preferred to take their chances living rough on the streets of Miami. In the end approximately half the Mariel arrivals managed to establish themselves permanently in the city.

Violence or the threat of violence haunts the entire episode. The boatlift entered urban legend by way of Scarface (1983), Brian de Palma and Al Pacino’s ultra bloody portrayal of the Miami drug wars. The film’s opening sequence is set in a recreation of “Freedom Town”, an improvised tent city settlement put up under a Miami highway overpass, which erupted in riots in the fall of 1980. In fact the Miami Tourist Board was so sensitive about the reputational damage from the refugee crisis that Scarface had to be filmed largely in LA.

At a conference at the University of Michigan I recently had the pleasure of attending, the politics of “policing the (Mariel) crisis” were powerfully evoked by the fascinating and precise paper by Alexander Stephens (U-M LSA History) on the interaction between federal agencies and the local state in handling the crisis.

As Stephens writes: “In her landmark study, historian Mae Ngai argues that the twentieth-century U.S. regime of immigration restriction produced the “illegal alien” as a “new legal and political subject”—a subject whose “inclusion within the nation was simultaneously a social reality and a legal impossibility.” Ngai’s work has established an indispensable framework for the study of immigration policy by tracing the countervailing forces of inclusion and exclusion that structure immigration law. Although she recognizes that the enforcement of such statutes generally takes place far from Congress and Washington, her study focuses on federal policy to reveal how it constructs the social and legal landscape migrants encounter before, during, and after their entry into the United States. What I want to do today is reflect on how the subtle topography of that landscape—the sites where policy is felt most acutely by individual people—has been shaped profoundly by local policy and the discretionary authority afforded to law enforcement agents.”

As Stephens shows, after an initial wave of sympathy, the attitude towards the Marielitos amongst Miami’s Cuban population rapidly soured. Some in the established Cuban population in Miami took to referring to them disdainfully as “Castro’s animals”. Thirty-five years later the normalization of relations with Cuba under President Obama provided the New York Times with an occasion to reheat the old rhetoric of criminality. Apparently, as relations with Cuba began to normalize and the climate on immigration policy darkened in America, hundreds of the arrivals of 1980 who fell foul of the law now face deportation back to Cuba.

But it was not the politics of crime that led Stephen Miller to invoke Mariel in his exchange with the Times. It was economics.  Mariel has a double life. It is on the one hand an emblem of social and political crisis in Miami in the 1980s. But at the same time and in rather contradictory ways it also serves economists as a crucial field for studying the labour market impact of mass migration.

What has lured economists onto this fraught terrain is not the temptation of scoring a mention from a Trump spokesperson. What makes the Mariel Boatlift irresistible is a question of methodology. Economists don’t like complex entangled histories. It is hard to cleanly identify causation in complex social settings. So their gold standard are so-called “natural experiments” – both terms carry heavy weight – by which they mean moments when out of complex and entangled social reality emerge events or interactions that seem truly exogenous and random and thus allow the clear identification of what is cause and what is effect.

Generally in studies of labour markets and immigration such moments are not easy to find. Judging the impact of the large migrant flows from Mexico on US labour markets is difficult because those migrant flows are themselves heavily influenced by the level of unemployment in the US. By contrast, Castro’s decision in early 1980 to open the Mariel port to emigration was exogenous. We do not need to worry that our assessment of the impact of the Cuban migrants on the Miami labour market will be muddied by the fact that the Cubans chose to migrate to a labour market that was particularly well-suited to receiving them. The inflow of migrants from Cuba and Haiti raised Miami’s workforce by 7-8 percent in a matter of months over the spring and summer of 1980. Such an increase in the supply of labour ought to “show up” in increased pressure on wages, perhaps particularly at the bottom end of the labour market. The hope, of course, is that once we have cleanly identified mass migration’s impact on wages and employment in Miami in 1980 we can transfer those insights to other settings where the chain of cause and effect is more tangled.

Source: Card (1990)

So what did the “Mariel experiment” show? George Borjas is a well-known and reputable labour economist who teaches at Harvard’s Kennedy school. In 2015 he attracted considerable controversy when in a paper published by the NBER he claimed to have overturned one of the most influential results in immigration economics.

In 1990 Berkeley labour economist David Card had investigated Mariel and found, surprisingly, that there was no negative impact on local wages. Indeed, in the wake of the shock the prolonged downward trend in wages in Miami since the 1970s was interrupted. Wages stabilized or slowed their slide above the trend they had previously been on.

Borjas set out to revise Card’s conclusion by tightening the focus on those groups that were most vulnerable to substitution – those with less than high school education. For that group Borjas claimed to have found a substantial negative effect.

The result was a controversy that attracted attention across the entire world of wonk. There were pieces in the Economist, reports in the WSJ and mentions on the FT’s blog, Alphaville. It was this that drew the flies. Stephen Miller was not the only member of the Trump administration to cite Borjas’s work. In Congressional hearings Geoff Sessions also referred to his work.

I do not in this blog post want to take a position on the wider implications of Borjas’s work. I actually find the priority he places on examining the distributional impacts of US public policy and his skepticism towards some of the panglossian narratives of American liberalism bracing and productive. The transformation of America’s workforce since the 1960s has been dramatic. It contrasts sharply with the experience in Europe over that period. In the first wave of globalization in which there was migration on a similar scale, we have robust evidence for distributional impacts on both ends of the flow. At the very least one would expect such flows to exert considerable distributional pressure within the migrant workforce as each new wave of arrivals displaces the next. Certainly we should be on guard against the complacency that Borjas skewers. It would be more comfortable, no doubt, if he were wrong. But these are questions for another time.

In this blog I want to focus on Mariel and the way it sits in criminalistics and economic discourse. In the hands of Trump’s spokespeople, it serves once more to enforce a double bind. If immigrants work they displace workers. If immigrants don’t work they are welfare scroungers or criminals. On Card’s reading of the labour market impact of Mariel that double bind collapses. There is no negative distributional effect from the new arrivals. What struck me reading Stephens paper was not just the construction of the double bind at the level of anti-immigrant discourse. What I was struck by was the common undergirding of both the criminalization of the refugees and the analysis of labour economists by structures of state power and surveillance.

The paper by Stephens was remarkable in part because it traces so meticulously the way a large problem, a problem involving 125,000 people, the population of a small town, was broken down stage by stage into one of the policing of a few hundred folks who in one way or another did not fit in, did not get jobs, stay out of trouble, or settle down. Driven by the moral panics surrounding the boatlift, the administrative machinery ground on, producing a scaling of a thousand to one: 125,000 in the boatlift, 150 in the final round ups in Miami area over the winter of 1980-1981 that aimed to strip homeless Marielitos of their immigration parole. What policing produced were a few hundred cases of unusual violence or dysfunction, so well documented that even 35 years later they are ready for the New York Times to regurgitate as emblems of the “Marelito crisis”. The journos were able to track down a convicted murderer who now, after serving his time, faces deportation. In the process what disappears from view are the 99.9 % of the Mariel migrants who actually were absorbed into and contributed to the social networks, family and work life of Miami and wider America. Not, of course, that those people lacked individuality or purpose, just that their eigen-sinn does not register within the system of criminalized registration and discipline.

What is surprising is that if you dig into the technical arguments amongst the economists you find yourself following a logic that is similarly capillary. The work of Card and Borjas is used to make general pronouncements about immigration policy, affecting tens of millions of people. But what do their rival results rest on? Forensic work by Michael Clemens traces the econometric assessment of the Mariel refugee movement back to their database in labour market surveys conducted in Miami in the 1970s and 1980s. In particular the argument revolves around the returns for Miami from the March Supplement to the Census Bureau’s Current Population Survey, or CPS. Within those statistical compilations, the original finding by Card was based on returns taken from a population of c. 1200 of whom 185 were low-skilled workers with high school education or less.

The Borjas’s result hailed by the Trump administration was derived by looking more precisely not just at those with less than high school education, but those who were male, non-Hispanic and of prime age only. Hispanics were excluded to avoid counting Marielitos in the labour force, which would subvert the neat distinction between cause and effect.

As Borjas shows this more carefully selected group saw a sharp decline in wages. But what Clemens work reveals is that the total number of respondents who fit Borjas’s more restrictive definition is 17. So, claims about America’s immigration policy involving tens of millions of people, depend on the answers given to a survey in Miami in 1980 by 17 non-Hispanic men of prime age with less than high school education. Borjas restrictive definition excludes 91 percent of all low-skilled workers in Miami at the time, whose wages, as Card showed, increased relative to trend in the wake of Mariel.

Furthermore, it begs the question. Who were the non-Hispanic poorly educated men on whom Borjas’s finding rests? In the CPS they remain name and voiceless. But one thing about them is clear: they were overwhelmingly black. In 1980 as a result of political protests about bias the Census Bureau expanded its coverage to include a larger representation of low-skill black male workers. Not only were black workers lower paid, but the survey did not distinguish between different types of black respondent. In Miami the figures for the black workforce included exceptionally low skilled and poorly paid Haitian arrivals. Furthermore, this double shift in the share of the black population in the sample and the composition of the black population to include Haitians, systematically skews Borjas’s sample of wages for low-skilled non-Hispanic workers precisely at the moment of the Mariel arrivals. To neutralize that effect, one might attempt to focus the analysis only on white low-skilled workers. But at that point the limitations of the survey intrude again. The number of white, male, prime age workers with less than high school education interviewed by the Census Bureau in Miami in 1980 was four.

Mariel is thus constructed by two Jeux d’échelle. On the one hand we have the mechanisms and procedures of discipline, control and surveillance applied to the individual refugees, which identified individuals and assembled them into social categories and made them disposable in a scandalized tabloid discourse of moral panic. The Birmingham School classic Policing the Crisis (1978) comes to mind.

At one and the same time the Mariel of the economists is constructed around labour force data and economic theories that are designed to enable statistical logic to be brought to bear. But due to the fixation on the identification of causation they require Mariel to be torn out of its context and figured as a “natural experiment” a truly “exogenous event”. Furthermore, when examined in detail the identification of the effects that economists are fixated on, requires a treatment of data that turns out to be a strange form of anecdotage. It involves the calculation of confidence intervals for samples of barely more than a handful of respondents. But that does not prevent those results from being smoothly reinserted into the politics of the “bad hombre”.

On the one flank widely circulating rhetorics of criminality and social control are generated out of an apparatus of individualized surveillance and control – the NYT reporters tracking down the paroled Marielito murderer laying low decades later in Illinois. On the other hand we have an apparatus of social scientific expertise notionally committed to making real a vision of statistical aggregation, generative of generalizable knowledge, that in fact comes to rely on family-sized samples of tiny numbers of individuals.

Another common feature of both forms of power/knowledge, however, is that they leave systematic traces. As the work of Alexander Stephens and Michael Clemens so forcefully demonstrates, those traces allow for historical reconstruction and critique. Even if those critiques do not command the attention of high office, they illustrate once more what “applied history” might mean and how it might be brought to bear beyond the realms to which that term is presently being attached.

With thanks to Alexander Stephens for a great paper and comments on the blog. Quote by permission. 

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Recommended Links: 2 December 2017 https://www.adamtooze.com/2017/12/02/recommended-links-2-december-2017/ https://www.adamtooze.com/2017/12/02/recommended-links-2-december-2017/#comments Sat, 02 Dec 2017 14:44:57 +0000 https://www.adamtooze.com/?p=68496 Robots, Ireland in the age of the world crisis, employment hysterisis and more ...

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No robots please, we’re British. A stunning chart from the OECD survey of the UK.

 

Alarming UK-Germany productivity comparison.

Who remembers the “pinsetters” and the elevators operators? False alarmism about tech.

The Great Recession’s impact on American society ten years on: a great round up.

Best reading group discussion in ages on Geoff Mann’s brilliant book on Keynes, In the Long Run We are All Dead (London: Verso, 2017)

I’m excited about getting back to some Deluge-era reading. It will start with these two:

Bitter Freedom: Ireland in a Revolutionary World 1918-23, by Maurice Walsh

and Cemily Aydin, The idea of the Muslim World. A Global Intellectual history

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Reading: Nov 29 2017 https://www.adamtooze.com/2017/11/29/reading-nov-29-2017/ https://www.adamtooze.com/2017/11/29/reading-nov-29-2017/#comments Thu, 30 Nov 2017 01:23:18 +0000 https://www.adamtooze.com/?p=68448 The post Reading: Nov 29 2017 appeared first on ADAM TOOZE.

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Recommended Reading: Wednesday, November 29, 2017

How health care has held down US inflation

Coal – the dirty secret of Europe’s energy policy.

On the intangible economy by Martin Wolf

Stop worrying about public debt. Worry about public investment – Simon Wren-Lewis.

How tax havens distort international economic statistics

The archaeology of Hollywood and no this is not a Foucauldian cultural history:

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