Saturday, 25 October 2008

Why Economists Are in Need of Some Greek Tragedy

This week, Alan Greenspan, the man who held the world's purse strings in his hands from 1987 to 2006 as Chairman of the Federal Reserve, admitted to a congressional committee that his hands-off, free market ideology was beginning to spring leaks. His words make for fascinating reading. Asked by Congressman Henry Waxman "Were you wrong?", Greenspan replied:

Partially...I made a mistake in presuming that the self-interest of organisations, specifically banks, is such that they were best capable of protecting shareholders and equity in the firms...I discovered a flaw in the model that I perceived is the critical functioning structure that defines how the world works. The overall view I take of regulation is, I took an oath of office when I became Federal Reserve chairman. I'm here to uphold the laws of the land passed by Congress, not my own predilections.
What's really surprising about Greenspan's admission to the House of Representatives is just how flimsy his basic dogma seems in the wake of recent developments. Conventional economics has always treated people and organisations as rational actors who will always act in their own self-interest. The absurd presumptiousness of this position, even its silliness, should be clear to any layperson. Most people would surely concur with Jonathan Swift, writer of Gulliver's Travels, when he wrote to his friend, the poet Alexander Pope, of "the falsity of that Definition animale rationale, and to show it should be only animale rationis capax." Put simply: man is not a rational actor, merely capable of rationality.

People do things all the time that are damaging to their self-interest: abuse drugs or alcohol, sleep with an unsuitable person, fail to control their temper or emotions. The Greek's even bequeathed us a word for it - cacoethes, defined by Chambers Dictionary as "a bad habit or itch; an uncontrollable urge or desire". Shock horror, driven by greed or just a desire to continually create and open up new markets rather than shore up existing ones, bankers might not always act in the interests of their banks or clients. They are fallible, not acting for our best interests in the best of all possible worlds.

Still, given that ideology is so unfashionable in both American and British politics at present, Greenspan's words seemed almost otherworldly, as he presented his realization of "flaws" as a kind of religious doubt, a wavering of his faith in complete deregulation. When Congressionman Waxman pressed: "You found that your view of the world, your ideology, was not right, it was not working?", Greenspan essentially agreed: "That's precisely the reason I was shocked because I'd been going for 40 years or so with considerable evidence that it was working exceptionally well."

So how has the media responded to Greenspan's bombshell? Jim Randel at the Huffington Post applauds Greenspan's forthcomingness "in acknowledging that he miscalculated the events which have led to the worst financial crisis in the United States since the Great Depression." Randel paints the former Fed Reserve Chairman as an ideologue living in the "Washtington bubble", blind to the anarchic reality that deregulation has created.

This airy attitude to risk does seem to characterise Greenspan's tenure in the Federal Reserve. For instance Greenspan was an enthusiastic backer of deriatives, the chopped-up parcels of saleable debt that brought inter-bank lending to a standstill. As Greenspan told the Senate Banking Committee in 2003:

"What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn't be taking it to those who are willing to and are capable of doing so. We think it would be a mistake to more deeply regulate."

Come the credit crunch, Greenspan was left floundering: "Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity, myself especially, are in a state of shocked disbelief. Such counter-party surveillance is a central pillar of our financial market's state of balance."

Thursday, 24 July 2008

Using military edifices for sporting ends

An idea from left-field here: Israeli filmmaker Eytan Heller and international NGO, OneVoice, have floated the idea of a joint Israeli-Palestinian bid for the 2018 World Cup.

Now this got me thinking. Whilst the military checkpoints and lack of infrastructure would appear to be a insurmountable obstacle to hosting a global football tournament, the 700km security wall would be perfect for a game of "Wally" (pronounced wall-e).

No, not the new Pixar movie, that's Wall-E. And not the guy you have to find in the red-and-white stripey jumper. This is "Wally": the childhood game in which you kick the ball against a wall in such a way that your opponent can't return it. There was a raft of tactical possibilities: you could go for power in the hope that the ball would travel sufficiently far that you're opponent couldn't reach the wall with his kick, or strategic placement - hitting the wall at such an angle that the ball ricocheted violently off somewhere that made it near impossible to hit the wall unless you were some kind of footballing wizard. If you were a conniving bastard, you could just run in their way and stop them kicking it.

Argentina's Lionel Messi might think he's good with all his little dinks and dribbles, his tricks and tomfoolery, but let's see how he fares when faced with a little bit of "Wally". British defenders take note - extreme power with no thought of direction will win the day here. Forget picking a teammate out, just hoof it my son!

Anyway, I have no doubt that a dose of global Wally action would smoothe the way to peace in the Middle East more successfully than any global submit or Presidential peace initiative. Although...when I think back, Wally was quite a competitive game - we were always accusing one another of having taking an extra touch. Yes, now that I come to think of it, it's probably a bad idea...any hopes of a two-state solution will be cast out of the window forver when Mahmoud Abbas is seen gloating wildly after Ehud Olmert swings his right foot and "air kicks" before triping over his own shoelace.

Also, on a more technical level: with a wall that long, how would you miss?

Tuesday, 10 June 2008

Trials and Triangulations

Roy Hattersley wrote a very insightful piece in The New Statesman recently about New Labour's obsessive desire for consensus. The hubris of 'The Third Way' was the belief that it was possible to keep everyone happy, all of the time. The truth is, as Hattersley recognised, politics is about conviction, and sometimes you need to take unpopular decisions.

This was something that Margaret Thatcher understood implicitly. When unemployment spilled over the 3 million mark, a statistic that should have been a one-way ticket to electoral death, Thatcher simply shrugged and said that it was not part of government's role to regulate employment levels.

Monetarism was callous and dysfunctional, but the principle is sound - politics is not always about "consulting the electorate". Throughout the Thatcher period, millions of voters repeated the same mantra: "I don't agree with her policies, but she's a strong leader." From the beginning, New Labour has been petrified the press would see it as returning to Old Labour, "reverting to type", and has worked using Clintonesque 'triangulations' i.e.

- What we would like to do
- What the public finds it acceptable for us to do
- Find a 'triangulation' point between the two

If Labour is to have any hope of winning the next election, it needs to give up this facile wish to be liked, to appease all. Forget triangulation, just decide on a project, and follow it through.

Blair's third election win was a case in point. By that stage, the public were utterly disillusioned with him as a person but, crucially, continued to belief that he had an idea of where the country should go.

Tuesday, 27 May 2008

The Clunking Fist Goes Virtual

"The Brain" is wobbling. As a champion, throughout the Blair years, of Gordon Brown and his more cerebral approach, his recent fall from grace has been uncomfortable to watch. Once public opinion turns, it's like watching a stunted, anaemic child being ripped apart by a pack of schoolyard bullies.

What really disturbed me though, was Brown's response to the disastrous local elections: the pledge, like that of a beleaguered football manager, that he would "work harder". Brown has, according to observers, raised his already Hurculean workload to truly Stakhanovite proportions. He is reputedly getting by on a spirit-withering, Thatcher-esque four hours of sleep per night.

This desire for hard-graft, for "getting stuck in", is coupled with an obsessive desire to consult the public. Brown recently claimed that Labour's problem was that it hadn't been listening hard enough, and Downing Street advisers clearly agree, having decided that the way to combat Labour's calamitous showing in the local elections is to slingshot the PM into cyberspace, where he will be able to "engage" with those elusive young voters on YouTube:

Gordon Brown recognises that Labour is unwell, but his diagnosis is wrong-headed. If all Brown's "hard work" and engagement with the public is to pay any dividends though, he has to accept that merely refining policy is not enough. He refuses to be drawn into "the politics of personality", but he must accept that Prime Minister is a talismanic position, a figurehead. In The Political Brain: How People Vote and How to Change Their Minds: The Role of Emotion in Deciding the Fate of the Nation, Drew Westen writes persuasively about the preponderent role played by emotion in politics. Both Al Gore and John Kerry lost out to Dubya, Westen claims, because they harped on about policy, fixated by the minor details, whilst Bush made broad-ranging emotional appeals to his audience.

The thing that excited the nation about the New Labour project in the first place was not policy details, it was the emotional charge of it's "narrative" - Britain as a young country, on the cusp of a new dawn, ready to do away with stale grey men in grey suits and embrace the new millennium.

Monday, 26 May 2008

Toilets Not Included

The other day I overheard two girls comparing the Fritzl case with that of Natasha Kampusch, another Austrian, who escaped to freedom in 2006 after seven years in captivity, in a bid to decide which case was worse. One of the girls definitively claimed that the Kampusch case was worse, “because she didn’t even have a toilet”.

Okay, now I am a big list-maker, as a sports fan I love statistics and league tables and the idea of comparisons, but the idea that it was necessary to decide which involuntary detention and rape was “worse” left me slightly queasy. Call me crazy, but I’m not sure that the provision of toilet facilities entirely compensates for the extra 17 years of imprisonment and rape.

Sharon Hogan wrote an interesting piece in The Guardian about how her hunger for details on the Fritzl brouhaha made her feel like a pervert. I would argue that the need to know these baleful details is natural - there's nothing more human than curiosity. Also, stories of incest and imprisonment are piercingly dramatic. As my former English teacher once said: "the three most interesting things in life are sex, death and suicide."

The truth is, it's part rubbernecking, part empathy. Hogan frets about hoovering up the gory details whilst luxuriating in domesticity. As she puts it: "I want the full story. I want to read about it in the morning while I munch a croissant with SpongeBob on in the background. We imbibe these tales of gruesome horror while going about our everyday lives." That is the nature of suffering though. If we spent every waking moment pondering other people's suffering, we'd be blithering, jelly-like moral wrecks. As Auden put it in his wonderful 'Musee des Beaux Arts':

the dogs go on with their doggy life and the torturer's horse
Scratches its innocent behind on a tree.
In Breughel's Icarus, for instance: how everything turns away
Quite leisurely from the disaster; the ploughman may
Have heard the splash, the forsaken cry,
But for him it was not an important failure; the sun shone
As it had to on the white legs disappearing into the green
Water; and the expensive delicate ship that must have seen
Something amazing, a boy falling out of the sky,
had somewhere to get to and sailed calmly on."

Sharon Hogan, 'From Josef Fritzl to Fred West, why do I lap up every sick, perverted detail of these vile stories?'

Thursday, 22 May 2008

Fritzl and Fiction

The thing that really struck me when the details of the Josef Fritzl case first came to light was it's implausibility. It's that hoariest of cliches, the one that Tom Wolfe felt obliged to confront when he wrote 'Bonfire of the Vanities': truth really is stranger than fiction.

Nevertheless, when the case first appeared like a genetically-mutated deer in front of the headlight's of the world's media, there were two obvious cultural parallels that sprang to mind. The first was Chan-wook Park’s film Oldboy, a dark, keep-you-guessing thriller, in which a man is arbitrarily imprisoned in a single room for seven years before being released just as arbitrarily.

The other, slightly less explicit, was John Fowles’ 1963 novel The Collector (made into a film two years later by William Wyler), which tells the story of Frederick Clegg, a butterfly collector and city clerk who decides to kidnap the object of his affection – a beautiful art student at Slade – and induce her into loving him. After chloroforming her, Clegg stashes her away in his cellar and, after several aborted escape attempts, the student eventually succumbs to illness (echoes of Kerstin, Elizabeth Fritzl's daughter, the reason Fritzl was finally found out). True story: my mum once told me how disturbed she was when she read Fowles' novel because the lead character not only shared the same name - Miranda - but my mum also happened to be a librarian at the architecture library at UCL, next door to Slade, where the collector stands and observes his victim. The kidnapping itself takes place outside the Everyman cinema in Hampstead, one of her favourite haunts at the time.

As horrific as Fritzl's acts were, they were not entirely alien to us. I think Nicci Gerrard hit the nail on the head when she observed that the Fritzl case was "beyond the wilder shores of our comprehension and yet it fits with an unsettling neatness to a whole set of domestic stereotypes." The idea of a dark flipside to suburbia now seems rather trite - Twin Peaks is virtually a period-piece, and American Beauty seems, if anything, rather glib. In fact, there was even a Desperate Housewives plot involving a son kept chained in the cellar. The notion of the mirror image - above ground, a world of domesticity, family values and good, wholesome fun; downstairs, a subterrean realm of of murky sexuality, pain and torture, is a familiar trope of fiction. The tragedy of Josef Fritzl is that he misunderstood which was which. In his "confession" Fritzl rationalised his actions, claiming that he imprisoned his daughter in her makeshift penitentiary to “protect” her from the damaging influences of the modern world. For Fritzl, the "cellar family" was the utopain idyll, whilst the outside, "real" world was brimming with corruption and prurience.

Nicci Gerrard, 'A monster from the pages of a Grimm tale'