Dilemma on Rodrik’s trilemma

More than eleven years ago, Professor Dani Rodrik had posted the ‘inescapable trilemma of the world economy’. You can see the chart in his post.

He wrote:

I have an “impossibility theorem” for the global economy that is like that. It says that democracy, national sovereignty and global economic integration are mutually incompatible: we can combine any two of the three, but never have all three simultaneously and in full. [Link]

My question is this: Regardless of whether the government is a democracy or authoritarian, is it possible to have global eocnomic integration and national sovereignty which means national policy autonomy?

I think not. So, it is really a dilemma. One can have global economic integration or one can have national policy autonomy/sovereignty but not both.

By the way, Paul Tucker’s book ‘Unelected Power’ is also about a form of ‘Global Economic Integration’ inasumuch as policy is increasingly made by unelected elites in global forums that then become binding on nations. No debates; Democracy or not – does not matter. These norms apply to India; apply to Russia.

Paul Tucker, summarising his book, for promarket.org wrote,

central banking has drifted into being, or always was, a vehicle serving the interests of a globalized metropolitan elite: policy by and for “Davos Man.” [Link]

In other words, if policy elites stayed away from Davos, Rodrik’ trilemma (or, dilemma) can be largely addressed or attenuated.

Read Paul Tucker’s interview with promarket.org here. I doubt if many would read his (needlessly) dense book. In fact, I think Willem Buiter’s paper written in 2012 anticipates much of Paul Tucker’s arguments on democratic non-accountability in the domestic context. So, if you do not have time to read Tucker’s book, reading Buiter’s paper (speech) will do just fine.

Food Inc. and ethics in business

Morgan Housel’s twitter handle took me to a NYT article on a Mexico village that is drowning in coke because they have no water! From there, I read articles about Colombia’s fight against the soda industry , Chile’s fight against obesity, etc.

The article on Malaysia where nutritionists take money from food giants opens up interesting questions on ethics vs. prgmatism.

All the articles are brilliant fodder for B-Schools, for students of pubic policy and for the food industry practitioners.

Many questions arise in my head:

Precisely, who are the food industry leaders trying to benefit? The managers themselves? The shareholders? Who are these shareholders? Mutual Funds? Asset Management Companies? Pension Funds or managers themselves again, as shareholders?

Don’t they have children and grandchildren and do they feed them soda, burgers and sugar, regularly?

How would they like to be remembered by posterity?

What should a laissez faire government do?

Should it let the food industry do what it does while it runs educational campaigns against sugar, soda and fat? Is that feasible? Will the government do it? Are governments somehow insulated from capture, coercion and co-dependencies with the industry? In some of the cases above, even educational campaigns have been muzzled, campaigners threatened or the campaign diluted.

Do these staid campaigns run by government departments stand a chance against cartoons, animations that lure children to consume unhealthy foods?

In the world where information is available at the touch of a few key strokes or punching of buttons in the phone, can parents not do a better job of informing themselve and their children? Or, am I underestimating the seduction of ‘sins’ in these times?

What is the moral equivalent of tempting children to consumer sugar, fat and soda and luring them to smoke? I am watching the 4-hour ‘Century of the Self’ documentary that aired on BBC. I have watched two episodes. Ed Barnays, the nephew of Sigmund Freud, came up with the tactic to get women to smoke, calling it the ‘torch of freedom’! More on that later and in a separate post.

These issues and conflicts open up dilemmas for management education and educators. Multinationals and big domestic companies fund these institutions. Students there learn business ethics. They go and work for these companies too. Look how fiendishly complex all these become?

Is it possible at all for someone to reform these institutions from inside and is there a win-win solution that exists? If it does, is it grasp-able within a horizon that is relevant, meaningful and profitable for management and managers to personally gain from it? Otherwise, they have no incentive to pursue them.

Even activists who come to office promising to reform such practices and make society more humane immediately realise the gravity of the challenges and their internal contradictions. They depend on these companies for employment generation – direct and ancillary. How does one arrive at a meaningful costs and benefits? Costs are immediate – when these businesses threaten to and do close down  but benefits in terms of better health for children and citizens are more diffuse and long-term and hard to measure.

Even in Chile, where the battle appears to have been won, notice the possiblity of a reversal after the elections. Where and when does one declare victory? Or is it ephemeral? Or, are these initiatives doomed to failure and that martyrdom is the only glory? Am I being too pessimistic? Or, that some children and some parents will have irrversibly lerant their lessons for the better and they will carry on the torch and that the message will slowly diffuse? May be, it will.

Amidst all this, is the nutritionist in Malaysia, the most pragmtic where idealism might not produce results but will produce news-stories and secure martyrdom but not much else beyond that?

For his part, Dr. Tee said the obesity risk in Malaysia would be worse without companies’ help, and he couldn’t accomplish his goals without their support.

“There are some people who say that we should not accept money for projects, for research studies. I’m aware of that,” Dr. Tee said. “I have two choices: Either I don’t do anything or I work with companies.” [Link]

The myth of the liberal order

Just finished reading Professor Graham Allison’s ‘The myth of the liberal order’ in ‘Foreign Affairs’ (possibly behind a paywall). For the most part, Professor Allison has a very good essay on the antecednets of the liberal order that America supposedly constructed and it is now allegedly destroying.

He states categorically in one place:

Had there been no Soviet threat, there would have been no Marshall Plan and no NATO. The United States has never promoted liberalism abroad when it believed that doing so would pose a significant threat to its vital interests at home. Nor has it ever refrained from using military force to protect its interests when the use of force  violated international rules.

Similarly, in Europe, there would have been no peace and prosperity for seven decades but for the shock of the previous thirty-five years – a point I make in tomorow’s MINT column.

He is bang on target here:

Long before Trump, the political class that brought unending, unsuccessful wars in Afghanistan, Iraq, and Libya, as well as the financial crisis and Great Recession, had discredited itself. These disasters have done more to diminish confidence in liberal
self-government than Trump could do in his critics’ wildest imaginings, short of a mistake that leads to a catastrophic war.

and here as well:

When, in 2017, members of the World Economic Forum in Davos crowned Chinese President Xi Jinping the leader of the liberal economic order—even though he heads the most protectionist, mercantilist, and predatory major economy in the world—they revealed that, at least in this context, the word “liberal” has come unhinged.

‘Unhinged’ – bravo!

But, when it comes to concluding the article, he stumbles. No big mistake that is. It s true for all of us. We are good at analysis, examination and diagnosis (ex-post) but we are remarkably poor at anticipating and proposing answers. Most of the time, answers are reactive and responses to crises that force us to confront the situation. Then, we come up with some responses. If we are lucky and if the  ontext is right, the response works out well and one is hailed as a great leader. Otherwise, history condemns us. That is the truth. So, no shame on not concluding his article well.

The reason why the article does not conclude well is that there is no ‘liberal order’ for the sake of it. It is a myth, as he puts it. There is only the ‘order of power’ and sometimes a liberal order may be its consequence and sometimes, an illiberal order may be its consequence because the ‘power order’ can feature the chaos and tussle of transitions and vacuums from time to time.

Our Final Hour

The subject line is the title of the book by Sir Martin Rees who was also the President of the Royal Society, UK from 2005 to 2010.  I don’t regret spending time on it. With my limited science knowledge and reading, I hadn’t come across scientists who openly admit to the limitations, uncertainties and dangers of their research. Yes, after the Hiroshima-Nagasaki bombs, there was a push against further nuclear tests and development of bombs. Robert Oppenheimer himself felt a lot of emotions after the bombs were actually dropped and they could see the devastation they caused. The Pugwash Conference happened some fifteen years too late, perhaps. The first conference was held in 1957.

So, it was good to find a scientist who was calling for restraint, for a rigorous evaluation of costs and benefits of science, etc. I found it difficult to concentrate only with the last four to five chapters. Not that they were uninteresting but they did not fit into the overall theme of the first six to seven chapters. At least, that is what I thought.

But, he is going to be 76 soon (end of this week) and I found his overall views on the places of science and religion quite healthy, clear and level-headed. You can read an article here and an interview here. His comment on Stephen Hawking’s comment on God is worth noting:

He is equally scathing about Hawking’s more recent comments about there being no need for God in order to explain creation. “Stephen Hawking is a remarkable person whom I’ve know for 40 years and for that reason any oracular statement he makes gets exaggerated publicity. I know Stephen Hawking well enough to know that he has read very little philosophy and even less theology, so I don’t think we should attach any weight to his views on this topic,” he said. [Link]

This is what he had to say about scientific research:

The views of scientists should not have special weight in deciding questions that involve ethics or risks: indeed, such judgements are best left to broader and more dispassionate groups.

Scientific research, and our motives for pursuing it, cannot be separated from the social context in which such research is carried out.

For example, he cites Cass Sunstein here to talk about a ‘networked’ or connected world leads to more polarisation:

In his book republic.com , Cass Sunstein, a law professor at the University of Chicago , suggests that the Internet is allowing all of us to “filter” our input , so that each person reads a “Daily Me” customised to individual tastes and ( more insidiously ) purged of material that may challenge prejudices. Rather than sharing experience with those whose attitudes and tastes are different, many will in future “live in echo chambers of their own design” and “need not come across topics and views that you have not sought out. Sunstein discusses “group polarization,” whereby those who interact only with the likeminded have their prejudices and obsessions reinforced, and shift towards more extreme positions.

Another example: mood-altering drugs:

In Our Post-human Future Francis Fukuyama argues that habitual and universal use of mood – altering medications would narrow and impoverish the range of human character. He cites the use of Prozac to counter depression, and of Ritalin to damp down hyperactivity in high – spirited but otherwise healthy children: these practices are already constricting the range of personality types that are considered normal and acceptable. Fukuyama foresees a further narrowing, when other drugs are developed, that could threaten what he regards as the essence of our humanity.

I found that rather thoughtful of Francis Fukuyama.

However, the caveat:

The difficulty with a dirigiste policy in science is that the epochal advances are unpredictable.

Our (humans’) inability to predict the future is so well captured in this paragraph. In a way, it reminds us that we cannot be sure of what the future holds, when we unleash something:

In 1937, the US National Academy of Sciences organised a study aimed at predicting breakthroughs; its report makes salutary reading for technological forecasters today. It came up with some wise assessments about agriculture, about synthetic gasoline, and synthetic rubber. But, what is more remarkable is the things it missed. No nuclear energy, no antibiotics (though this was eight years after Alexander Fleming had discovered penicillin), no jet aircraft, no rocketry nor any use of space, no computers; certainly no transistors. The committee overlooked the technologies that actually dominated the second half of the twentieth century. Still less could they predict the social and political transformations that occurred during that time.

Bill Joy’s ‘Why the future does not need us’

I must be grateful to Sir Martin Rees for one important reference that I had not come across before. He mentioned about Bill Joy’s article, ‘Why the future does not need us?’ published in the ‘Wired’ magazine in April 2000. I read it this morning and I liked it immensely. The original is here. There are so many quotable quotes from that article. I think, if you had not read it before, you must read it. I am doing a separate post on Bill Joy’s article.

His idea of how the world could support 10 billion people by 2050:

A population as high as ten billion would be fully sustainable if everyone lived in tiny apartments, perhaps like the “capsule hotels” that already exist in Tokyo, subsisting on a rice – based vegetarian diet, electronically networked, travelling little, and finding recreation and fulfilment in virtual reality rather than the consumerism and incessant travel now favoured in the profligate West.

On extinction and its acceleration in the modern era:

Extinctions are, of course, intrinsic to evolution and natural selection: fewer than ten percent of all the species that ever swam, crawled, or flew are still on Earth today.

But human beings are perpetrating a “sixth extinction” on the same scale as earlier episodes. Species are now dying out at one hundred or even one thousand times the normal rate. Before Homo sapiens came on the scene, about one species in a million became extinct each year; the rate is now is closer to one species in a thousand.

There were vineyards in England and it was warmer in Northern Europe! So, climate keeps changing. But, the problem is the speed of change.

On Climate change:

Climatic change has, like extinction of species, characterised Earth throughout its history. But it has, like the extinction rate, been disquietingly speeded up by human actions.

It was warmer in Northern Europe a thousand years ago: there were agricultural settlements in Greenland where animals grazed on land that is now ice – covered; and vineyards flourished in England. But there have been prolonged cold periods too. The warm spell seems to have ended by the fifteenth century, to be succeeded by a “little ice age” that continued until the end of the eighteenth century.

Can we always count on this luck? Phew!

Paul Crutzen, one of the chemists who elucidated how CFCs actually acted in the upper atmosphere , has pointed out that it was a technological accident and quirk of chemistry that the commercial coolant adopted in the 1930s was based on chlorine . Had bromine been used instead, the atmospheric effects would have been more drastic and longer – lasting.

The final words:

In the twenty-first century, humanity is more at risk than ever before from misapplication of science.

AND

I think the odds are no better than fifty – fifty that our present civilisation on Earth will survive to the end of the present century.

On ‘Bullshit’ jobs

Why are bullshit jobs created? The author of the book with the above title – David Graeber – offers this explanation:

The answer clearly isn’t economic: it’s moral and political. The ruling class has figured out that a happy and productive population with free time on their hands is a mortal danger (think of what started to happen when this even began to be approximated in the ‘60s). And, on the other hand, the feeling that work is a moral value in itself, and that anyone not willing to submit themselves to some kind of intense work discipline for most of their waking hours deserves nothing, is extraordinarily convenient for them. [Link]

Somewhere here, he has a point:

If someone had designed a work regime perfectly suited to maintaining the power of finance capital, it’s hard to see how they could have done a better job. Real, productive workers are relentlessly squeezed and exploited….

….This is one of the secret strengths of right-wing populism. You can see it when tabloids whip up resentment against tube workers for paralysing London during contract disputes: the very fact that tube workers can paralyse London shows that their work is actually necessary, but this seems to be precisely what annoys people.

He had written the above article in 2016 – little under two years ago. This is the cover of his new book.

His recent interviews are here and here. I get the impression that he has not figured out why bullshit jobs are created, even granting his pro-worker, ‘class revolution’ framework.

Clearly, he is focused on the possibilities of a working class revolution against capitalism of the day exept that he has not yet gone to the root cause.

This article in ‘The Economist’ in 2013 does better. The article talks about complexity of tasks being one of the factors for them to be broken up into ‘bullshit’ tasks. That is one step closer. But, how does complexity arise, in the first place? Is it only technology or is it something else? Rapacity has to be a factor.

The article goes on to predict a happy ending but the author is silent on how we would get there:

The issue is that too little of the recent gains from technological advance and economic growth have gone toward giving people the time and resources to enjoy their lives outside work. Early in the industrial era real wages soared and hours worked declined. In the past generation, by contrast, real wages have grown slowly and workweeks haven’t grown shorter.

The development of large-scale technological unemployment or underemployment, however, would force rich societies to revisit a system that primarily allocates purchasing power via earned wages. And that, in turn, could allow households to get by or even thrive while working many fewer hours than is now typically the case—albeit through a pretty hefty level of income redistribution.

This is how I see it:

Capitalist societies seem to want to pay only as little as possible to those who are not directly contributing to its bottomline. They are employed by the public sector who are paid out of the taxes that the well-heeled pay. Hence, the lower their pay, the better. Their tax dollars travel the most, in  that case.

If they are not in the public sector, they are then employed by contractors who pay even worse.

But, those who are employed by the capitalists (solely) for the purpose of catering to and furthering their greed are paid better. David Graber gives some examples of such professions:  private equity CEOs, lobbyists, PR researchers, actuaries, telemarketers, bailiffs or legal consultants.

It is mostly about greed and how modern capitalism is not satisfied. It is about ‘more is preferable to less’ and non-satiation being the building blocks of modern capitalism. That, to me, is the root cause of ‘bullshit’ jobs and that is what I had mentioned in my column last week.

Explicable silence

In this blog post, I had highlighted a forthcoming IMF working paper on global market power and its macroeconomic implications. That paper was flagged in a IMF blog post on the rise of the corporate giants. At the end of the blog post, there was a link to an enticing panel discussion at the IMF-World Bank Spring Meetings of April 2018. The title of the session was ‘Digitalisation and the new gilded age’. I was pleasantly surprised that IMF had arranged a panel discussion on a hot and crucial topic for our times.

This was the blurb for the session:

Are technological advances leading to greater market concentration in firms such as Google and Facebook and, in turn, creating what could be described as a New Gilded Age? [Link]

The blurb names two companies. Try catching their names in the panel discussion. I listened to the panel discussion which lasted a little over 70 minutes. To say that I was ‘underwhelmed’ would be an understatement.

More than that, I am trying to wrap my head around what the panel moderator was trying to achieve. The moderator was none other than Christine Lagarde, the President of the IMF!

The session was neither about technology and its enabling role (or not) in market concentration nor was it about market concentration in the technology sector itself and how both of them or either of them were leading to the new gilded age or not.

I still do not know what the session was about. There were a couple of leading questions to the panelist from IBM as to how good a work they were doing in Kenya enabling credit for small borrowers through Big Data and how ‘Watson’, their super-intelligent computer was helping with oncological treatment in India.

The moderator wanted all the panelists to answer the following question:

What one change would make the world competitive, equitable, inclusive and innovative?

The question pops up at 1h 05m 10s. Here is the video link.

//players.brightcove.net/45228659001/rkPdEdoaW_default/index.html?videoId=5772879577001

Listen to the answers and decide whether you wish to laugh or cry, be angry, be worried or simply throw up your hands.

When I mentioned this to a friend, he said that this was not a surprise and that there was a deliberate ‘conpsiracy of silence’ in liberal establishments on the key questions, challenges of the day and their perpetrators.

In February, there was this wonderful long-form essay in ‘The New York Times’ magazine titled, ‘The case against google’. That could well have been the specific case -study discussion for this topic.

There was a simple and well-written blog post at the Bank of France website in February on whether monopolies were a danger to the United States. That could have been discussed. Of course, that blog post does not mention technology as a factor in creating monopolies or market concentration but the panelists could have been asked to challenge it or defend it.

Somewhat more provocatively but importantly, the @facebookbreakup movement could have been discussed. The movement took out a full-page advt. in MIT student paper’s commencement edition with quotes from former Facebook employees – some of the founding ones. The quotes are worth reading.

Importantly and interestingly, the blog post cites Luigi Zingales to make the point that even if large firms with their rising monopoly power are not cutting back on investment spending, it is important to understand that these investments are about:

… investment can be misused to create barriers to entry, by using these resources to finance lobbying for example. The fact that the most profitable firms invest relatively little may corroborate this theory. Buying emerging startups to reduce competition is another example of the misuse of productive investment to maintain monopoly rents. [Link]

There are two brief but very useful blog posts in aei.org. They provide references that are staple for discussion for this session. The blog posts are here and here.

For those interested in digging deeper, two OECD papers mentioned in these posts are available here and here.

Also mentioned in these posts is a paper written by Nicolas Bloom paper for HBR titled, ‘Corporations in the age of inequality’. I just saw his policy prescriptions in the end.  Have not read the paper in full. He advocates use of tax policy to support those left behind:

Boost low incomes through tax policy. Governments should also consider measures that put more money into people’s pockets, such as negative income taxes — meaning that citizens earning below a certain threshold receive money directly from the government. For example, the U.S. should consider expanding the Earned Income Tax Credit, which is basically a negative income tax with a work requirement. Rather than constrain companies with more onerous rules around compensation, negative income taxes supplement the incomes for workers whose skills are in less demand while allowing economies to organize efficiently. [Link]

How will governments put more money into people’s pockets unless it takes money out of some people’s pockets?

Anyway, this blog post was supposed to be about the breathtaking obfuscation and dissembling that went on, in the name of discussing the new gilded age. Given that this is what liberal establishments and elites in poweful positions in such establishments do, we should not be surprised at all that populism is on the rise and that populists are popular and winning.

The important realisation for us, the ‘hoi polloi’ is that there is not much point in all of these discussions. They exist to keep up appearances. Power resides and rests with money. Those who have it want to have more and do not wish to part with it. They do so only reluctantly and only if there are no other options to avoid doing so. Democracy is a figleaf that pretends to give equal power to the ‘Have Nots’ as ‘Haves’. But, funding of candidates and political parties is in the hands of the money-ed. So, just a wee bit changes at the margin.

Those who are endowed start with an advantage and engage in expanding that advantage. They create systems that enable them to do so and hinder them only minimally, if at all.

The rest of us believe that we are working to make the world better. If we wake up from our denial, we will also wake up to realise that there is not much meaning left in our pursuits. Slumber is better.