Thursday, May 29, 2008

Review: Pathologies of Power

Pathologies of Power: Health, Human Rights, and the New War on the Poor by Paul Farmer

I liked it best for introducing me to the concept of "structural violence" - essentially whenever the way an economy is set up guarantees that people at the bottom will be victims of violence - whether de jure (rape, murder) or de facto (preventable diseases, hunger). And also for introducing me to some excellent liberation theologians who reminded me that not all religious people are despicable hypocrites, and some top, top poets.

Farmer's perspective on countries full of structural violence like Haiti and "shock therapy" Russia is intensely personal, and his entire book comes from one who spends more time curing people than sitting in an office or library and writing. Not to say that is a good or bad thing, but that is the style in which the book is written.

Wednesday, May 14, 2008

Review of Monthly Review part one

The Guerrilla in Colombia - An Interview with Rodrigo Granda, Member of the FARC-EP International Commission, interviewed by Jean Batou

As George Orwell wrote in Notes on Nationalism, "[t]he nationalist not only does not disapprove of atrocities committed by his own side, but he has a remarkable capacity for not even hearing about them." This applies with even greater accuracy to atrocities committed by allies of one's own side; if Unitedstatesians have so much as heard of the war in Colombia, they are likely to know only that the FARC is considered a "terrorist organization" by that neutral arbiter of political morality, the U.S. government. Perhaps they will have heard, in addition, that the FARC are kidnappers and drug-runners as well.

But I would just about faint if I were to meet a Unitedstatesian who has any idea of the reason why people sacrifice their lives to join the FARC, or of the atrocities committed by the Colombian state and its narcotrafficking death squad allies against the FARC and the Colombian rural poor. So make me faint. Read this interview and get a perspective entirely absent from the U.S. media, right and left.

Rodrigo Granda: "In general, if we analyze the behavior of bourgeois states over time, we observe that they have various ways of applying what they call “representative democracy” and that they combine practically all forms of struggle to exploit the people. The “gringos” call it the “carrot and stick approach,” which they practice in the following way: if they consider that the masses are meek, they can let them develop certain forms of restricted democracy for a time; if they consider that those masses are becoming radicalized, then they take troops into the streets and impose repression. But if they notice that those mass movements have already become radicalized, then they employ state terrorism, and wage genocide against their opponents and the extermination of the mass organizations. It is this terror at its most horrifying that was experienced by nearly all countries here in our America in the recent past and still persists in Colombia.

From this viewpoint, it is legitimate for the revolutionary movements of Colombia and the world to employ every form of mass struggle to achieve the revolutionary changes that society needs at a given moment in its development.

We have not declared armed struggle by decree, nor can it be declared by decree, or by the will of person or party X or Y. Armed struggle is born of the overriding need to defend class interests at a particular moment in time, when the bourgeoisie close every door of democracy and expression the masses may have.

Unfortunately, Colombia’s history has shown what I’ve just said to be true: seeking national reconciliation in 1982, the FARC–EP entered into dialogue with then-president Belisario BĂ©tancourt and the Uribe Accords were signed. As a corollary of these accords the broad movement called the Patriotic Union (UP) was founded.

This movement erupted into national political life with enormous support among the inhabitants of town and country, the middle classes, students, etc. In other words, it was a movement that brought together very wide-ranging sectors. When the UP began to develop, the bourgeoisie panicked and commenced the planned systematic extermination—first of its leaders, then they massacred its members. This all ended in the most abhorrent political genocide ever seen in Latin America. The FARC–EP learned from this experiment, which was curtailed by state terrorism, and will not let history repeat itself."

Review of Monthly Review part two

Against the Market Economy - Advice to Venezuelan Friends, by Robin Hahnel

This is one of the best short explanations of why capitalism does not achieve what its proponents claim it does. "As a well-published, professional economist who has taught theory at the highest levels in economic doctoral programs in the United States for over thirty years I want to testify as an 'expert witness' if you will, that the conclusion that markets can be relied on to yield efficient outcomes is completely unwarranted. It is well known among professional economists that markets allocate resources inefficiently when they are out of equilibrium, when they are noncompetitive, and when there are external effects." All three of these conditions obtain in the real world - therefore, markets do not allocate resources efficiently, which is their only reason for existence, and the only reason proponents of capitalism can offer to defend their ideal of free markets.

The author divides her critique into four major sections:
1. Why Labor Markets are Unfair "In a market economy we must either allow the market system to reward people unfairly, or, if we try to correct for inequities we must tolerate even greater inefficiencies."
2. Why Markets Undermine the Ties that Bind Us "Markets reward those who are the most efficient at taking advantage of his or her fellow man or woman, and penalize those who insist, illogically, on pursuing the golden rule—do unto others, as you would have them do unto you. Of course, we are told we can personally benefit in a market system by being of service to others. But we also know we can often benefit more easily by taking advantage of others. Mutual concern, empathy, and solidarity are the appendices of human capacities and emotions in market economies—and like the appendix, they continue to atrophy."
3. Why Markets Subvert Democracy "[M]arkets undermine rather than promote the kinds of human traits critical to the democratic process... [Also,] economic liberalization breeds concentration of economic wealth, and in political systems where money confers advantages it leads indirectly to the concentration of political power as well. Those who deceive themselves and others that markets nurture democracy ignore the simple truth that markets tend to aggravate disparities in wealth and economic power."
4. Why Markets Allocate Resources Inefficiently
A. Externalities Are Pervasive "Why should we assume that in market economies it is infinitely easier to expand private benefits through socially productive behavior than through socially counterproductive behavior? Yet this implicit assumption is what lies behind the view of markets as guided by a beneficent invisible hand rather than a malevolent invisible foot."
B. Markets Are Generally Not Competitive "[J]ust as it is easier to make profits at the expense of disenfranchised external parties than through socially productive behavior, it is often easier for a small group of sellers to make profits by restricting supply than producing the socially efficient amount of their product. All empirical evidence indicates that most goods are sold in noncompetitive markets and that market structures are growing less, not more competitive."
C. Markets Often Fail to Equilibrate "[I]t is rational for buyers to respond to an increase in price by increasing the quantity they demand before the price rises even higher, and for sellers to reduce the quantity they offer to sell waiting for even higher prices to come... [M]arket bubbles and crashes, which all economists agree cause efficiency losses, are generally the result of rational not irrational behavior, and much more likely to occur than mainstream economists would have us believe."
D. Practical Problems with Policy Correctives "There is a clear divide between 'free market fundamentalists' whose influence has grown significantly over the past few decades, and more pragmatic supporters of the market system who favor market interventions to create what some of them call 'socialized markets.' The ideologues’ enthusiasm for a laissez-faire market system literally knows no bounds as they brush aside qualifying assumptions as if they did not exist. Market pragmatists, in contrast, concede that we must sometimes intervene in markets with policies to internalize external effects, curb monopolistic practices, and counter disequilibrating forces. However, those who give qualified support to market intervention conveniently ignore practical problems that inevitably arise whenever we attempt to 'socialize'” markets... [C]ontrary to both popular and professional opinion, free markets lead to a very inefficient use of our scarce productive resources, and even when 'socialized' by policy correctives, a great deal of inefficiency inevitably remains."

Happiness is a broken condom!?

"Why Israel is the world's happiest country" by Spengler

I cannot conceive of a sadder event than Spengler quitting writing. His "Why Israel is the world's happiest country" has inadvertently tipped the scales in favor of the United States, due to the spike it caused in my own level of happiness. I was so pleased by the level of perfection he has reached in his quest for absurdity, I now desire to breed uncontrollably and have banished the thought of suicide forever: which two things happen to be the very hallmark of happiness for Spengler.

Pardon me, however, if I put off the move to Israel. I'll take a "trivial" joie de vivre over a "solemn celebration" of life any day. (Spengler scribbles: "...the state of Israel still teaches the world love of life, not in the trivial sense of joie de vivre, but rather as a solemn celebration of life." A "solemn celebration" - no two words in combination could possibly sum up any better the essence of what is wrong in the schizophrenic heads of American Protestants.)

Spengler's pseudo-scientific investigation of comparative well-being not only ignores serious, scientific studies of the same, but is marred by a biased sample, preposterous criteria (overbreeding and a taboo against voluntarily ending one's life is equivalent to happiness?), and another rehash of his typically chauvinistic theological critique of another Semitic religion, Islam. A perfect miss from his intended mark, yet a bullseye for my funnybone.

(Map at right: Happiness graded in color, the darker the merrier. Israel comes out at roughly the level of Saudi Arabia, and far behind their suicide-prone, contraception-friendly cousins in northern Europe.)

Scientist Spengler has inspired me to do my own scientific analysis. I recall hearing the results of some condom manufacturer's study of contraceptive use in the world's industrialized countries, which ranked Israel as the world's most bareback-friendly nation; and another study that suggested that semen may contain powerful mood-enhancing chemicals for women. So in my account of causality, Israel has both the highest birthrate and lowest suicide rate in Spengler's biased sample of countries not because it's religion is so wonderful or because a god (sorry, g-d) blessed it, but because it's people use fewer condoms. Brilliant!

Friday, May 09, 2008

A financier will lend the money to buy the rope used to hang him...

The Fed Sinks the Dollar By Michael Hudson

"Against the recommendations of most economists and even the Financial Times of London, the Federal Reserve Board [on April 30th] cut its discount rate by yet another quarter-point, to just 2%. Ostensibly, the intention is to try and spur economic “recovery” – as if a cut in the interest rates would do this.
But surely not even the ideologically hide-bound Federal Reserve can still imagine that a structural problem – the looming depression from the Fed’s favoritism to the banking sector promoting de-industrialization of the economy – can be solved by lowering interest rates yet again. While the Fed lowers its rate for lending to banks, these banks have not been passing on the rate cuts to their customers. Credit card rates are going up, and entire Christmas trees of penalties are further increasing banks’ rake-off. Mortgage rates remain high, so that real estate markets remain in the doldrums. The banks simply are not lending.

What they are doing is speculating, above all against the dollar. They thus are emulating what Japanese banks did after that nation’s financial bubble burst in 1990.
[F]iat US credit is being directed to Europe. US banks create or borrow credit at 2%, and lend it out at 6% or more – and get a speculative foreign-currency gain as the euro continues to rise against the dollar.
[B]ank lending and profitability has become decoupled from the economy at large. Banks are not lending to finance tangible capital investment and new hiring. Helping them thus does not help pull the US economy out of the deepening depression.
The ultimate effect is to inflate the power of finance, credit and real estate relative to labor’s wages and industrial capital. This is not a way to encourage new tangible investment. It is just the opposite of Keynesianism. Rather than signaling 'euthanasia of the rentier,' it is empowering finance and applying euthanasia to labor and industry.

And to Europe, I should add.
European central bankers for their part are so brainwashed with modern Chicago School monetarist ideology – and so unaware of their own continent’s economic history – that they pursue a knee-jerk reaction to domestic inflation by raising interest rates. This merely increases their currency value all the more, attracting yet more foreign “carry trade” loans. (Economists call this a “backward bending demand curve” and find it an “anomaly,” as they find most reality to be these days.) So while U.S. monetary policy helps subsidize the banking system relative to the industrial sector and labor, European monetary policy goes along with today’s parallel-universe thinking and undercuts its own industry."

Tuesday, May 06, 2008

If only they had strong patent laws to save them

I was recently in Bombay, where I had the misfortune of reading in the Times of India an op ed entitled "In Defense of Patents" by Tim Wilson of some Australian IP think tank. It straddled the line between infuriating and hilariously wrong (one example: he refers to the "infiltrated World Health Organization" - infiltrated by whom? Communists, space aliens?), so I felt compelled to write a counter editorial. Thanks to jet lag and another reason, from 12-4am I wrote my piece on a cell phone in my hotel room - then it got erased. So I rewrote a less coherent, more sleep-deprived version from 4-7am. Two friends with connections at the Times made requests to publish it, but nothing has happened so far. Rumor has it that the publisher puts the op ed pages up for sale to the highest bidder, and needless to say, my bid, at $0, is infinitely lower than anything a multinational drug company might have paid.

In qualification of patents

Intellectual Property (IP) is a niche policy area poorly understood by most. Policy wonks and lawyers are no exception.

The late, great American economist John Kenneth Galbraith noted that, though "not deliberately in its service," society's experts tend to propound certain falsehoods: those which serve, or are "not averse to, influential economic, political, and social interest." These popularly believed falsehoods he called innocent frauds, or, more famously, the Conventional Wisdom. The conventional wisdom on IP law is this: that IP protection is an absolute requirement for economic growth, as it provides the necessary material incentives that drive technological advance - which in turn drives economic growth.

However, besides being contrary to "free market," "neoclassical," or "neoliberal" economic theory, this conventional wisdom on IP is contradicted by the lessons of a robust historical record. In contrast to the strong IP laws they now currently advocate, today's Now-Developed Countries (NDCs) used flexible or weak IP policies to grow during their periods of economic development and industrialization. In the 19th century, flexible or even quite weak IP laws allowed countries like the United States, Germany, and Switzerland to informally transfer (or "pirate" in today's popular lingo) their neighbors' best technology, and use it to fuel their own growth. Korea and Japan, for instance, also used flexible IP policies to effect informal technology transfer during their periods of economic growth in the 20th century.

Although NDCs have many creative industries that thrive without any effective IP protection (e.g., fashion, restaurants), orthodox neoliberal economists are surely wrong in believing IP law to be a distorting, growth-retarding governmental interference with free market perfection. In reality, strong IP laws are virtually a precondition for the existence of a number of successful NDC industries like pharmaceuticals. For example, without the prospect of a government-enforced monopoly on future drugs, the NDCs' pharmaceutical companies would lack the incentive to invest in research, which they currently do in amounts that rival government and university research expenditures. Proponents of the conventional wisdom on IP argue correctly that the profits generated by IP protection of corporations' innovations are a major source of funding for future innovations. Yet what they innocently overlook is the inconsequential share of such profits contributed by developing countries - and the quite consequential economic costs developing countries incur by paying monopoly rents to NDCs for their IP-protected technology.

These costs developing countries incur in essentially helping to fund R&D in the NDCs help explain the results of the most careful study available of the relationship between IP law and economic growth, completed in 2003 by UNCTAD-ICTSD. Researcher Sanjaya Lall and colleagues found that below a per capita income of $7,750 (in 1985 dollars), strong IP laws effectively do nothing to promote growth. This is because developing countries are in the catch-up stage of technological and economic development, where before they can use IP law to stimulate domestic innovation, they must first adopt the existing technological state-of-the-art. And doing this by formal means is a far too expensive and slow process for developing countries, which is why all the NDCs used informal technology transfer, or IP theft as it would be called today, during their catch-up periods.

Nor do flexible IP laws hinder formal means of technology transfer by deterring foreign direct investment (FDI). In a 2006 survey of decision-makers in the world's top corporations, strong IP laws were rated as a fairly negligible factor in allocating FDI: strong IP laws were ranked fifth behind factors like the quality of a country's educational system. No wonder then that China's flexible-to-weak IP laws have not prevented a veritable deluge of FDI from inundating the country.

Not only does flexible IP policy facilitate informal technology transfer while not impeding formal transfer through FDI - hence spurring growth - but it also permits the production and sale of generic drugs that save millions of human beings from preventable deaths, and protect developing economies from crippling public health catastrophes.

IP demands serious analysis, not historically-ignorant, self-serving innocent fraud. India would do well to ignore the unsolicited and insistently offered advice of those preaching the conventional wisdom on IP.