Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

When the Profit Motive Is Unnecessary or Harmful

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On August 3, 2022

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Markets are good for some activities, but for others they are actively harmful. There are a lot of jobs that people want to do, and all you have to do is give them a decent salary and whatever tools are necessary, and they’ll work hard. A good example is curing cancer, or, indeed, most medical research. People love the idea of helping people and saving lives. As long as they know that, if they do cure whatever it is, they can move on to curing something else (i.e., their economic welfare is not dependent on not solving the problem), they’ll bust their asses.

On the other hand, if the profit motive is involved, some problems don’t get solved. If you’re a pharmaceutical company, you don’t want to cure diseases: You want to sell a pill, shot, or treatment that people have to take over and over again. You want to develop palliatives, not cures. Using for-profit companies to try and cure something, including Covid, is deranged. It would cost them hundreds of billions of future profits if they actually cured the plague or cancer, or anything else.

This is also why, when they do come up with actual cures, they price them massively high. After all, you only get to sell a cure once to each patient.

People like doing useful work. What you have to pay people for is to do bullshit work, and the more bullshit it is, or the more harm it does, the more you have to pay them. Meanwhile, work that is good and useful is underpaid, or not paid for at all, because our economy tries to free ride on the fact that people will do that work for less or nothing.

Doesn’t quite work — because no matter how idealistic you are, you need to eat, pay rent, and sock away some savings, and so work that is genuinely important goes undone, and Wall Street pays multi-billion dollar bonuses.

Capitalism thus often optimizes for activities that are actively harmful, or unnecessary, and actively makes it hard to work on what is important and good.

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Spring Of A Down, By Stirling Newberry, Chapters XIII-XV

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On August 2, 2022

Невідомі води[lv]

They watched the world wake-up from history, there was no place they wanted to be.[lvi]

Pockmarks over the sea air. Wisps and black cinders grew up, up, up to the air billowing мистецтво. The mill was the last refuge of Ukraine. Junk was the line. Z Goliath lined up tanks and self-propelled rocket launchers for rent, while the David took the underground. Close to the unknown waters the day the music died.[lvii] Spires multiple of factory smokestacks rising towards the tumble rubble dark air in space.

From above the destruction is immense: metal roofs shattered, cars dispersed as toys across the parking lots, all burning on the streets all mimsy were the borogoves.[lviii] Brick walls stand with nothing to guard. White dross of paper and wooden chaff of some blown maze where all of the denizens lie in wait. Cradles of the new dying fur and an aerie of fluttering wreckage.[lix] Even now, bands of irregulars hurled Molotov beer at the Russians in the corner of the Azov Iron Works. Judge Dredd might know this place: a riptide of industrial destruction next to the seashore with salt wind. The wind blew away the smoke of shells.

It was in these warrens that a few boys waited by the earthen trenches, at a point that was no more than single file dug, opening the sky and slithering in the mud. In the open warehouse, pipes ran everywhere – some drops combed off from somewhere, 20 meters up.

In the clouds a ray of moonlight pierced through. And one of the soldiers stood in the bask of it. With arms like a mother cross. Gentle and serene.

Краплинка.[lx] Pause. Краплинка. Pause. Краплинка!

It was Borysko the first to itch.

He felt the oil on his sweater.

“I needed a parasol every day.” He played with an unlit cigarette and then put it down.

“It is the Champs-Élysées here all the time.” Neither Borysko, nor anyone else, had seen the boulevard in Paris. Though Borysko had tasted Gauloises, then made in France.[lxi]

Краплинка. Pause. Краплинка. Pause. Краплинка!

“It could be the Styx, or the paradise theater.”[lxii] Everyone looked over at Kostyantyn.

But it was Maksym that replied: “Nothing ever goes as planned.”[lxiii]

Borsyko laughed: “Just ask the other side.” There was nothing jovial in the way he said it. Then a wail peaked. His voice was annoyance, or perhaps his annoyance found an outlet.

Краплинка. Pause. Краплинка. Pause. Краплинка!

They all moved out from under the pipe making a bit of noise as they did so. Any awareness of the droplets erased from the boys’ minds. Boys will be The Boys.[lxiv]

Then another figure came up the tranche. He was bolder, once beefier, and bearded but spatter with grime. His name was unimportant, for all called him Starshyna. The boys shivered. The old man softly said: “Do you want to see the блакитний?”[lxv] All agree that they want to see the heavenly blue. Just. One. More. Time.[lxvi] Each one a siren sound, when each one may be your last. “Then keep quiet.” he added in a controlled tone of voice. He then thought a bit and lined them up, but quietly: “First. Second. Third.”[lxvii]

They lined-up, but grumpily.

The man they called Starshyna, old rank for Master Sergeant, was Bohdanko Petrovitch Mikhailov. He was born of a Russian mother and a Ukrainian father, back at a time when which language you spoke was seen as an indicator of your political leanings: Ukrainian was said to lead towards Kyiv and Russian meant towards Moskva. It was horseradish at the time, but much stronger horseradish. As a young boy, he burned at the insults, especially “Ублюдок” which was the equivalent of “Bastard.” He could not even make his mind up, in utero. But he never said “All Apologies”[lxviii] for the mixed-up tongue even over Pennyroyal tea.[lxix] Give Bohdanko a Cohen world every single time not a box of chocolates.[lxx] Everybody knows the dice are loaded with nirvana.[lxxi] He burned, and that is why he joined the far-right to expunge the sound, the sound, the sound of everyone else being gay. Then it was a natural expansion to the Patriot Ukraine to the Azov Regiment in 2014. All-natural and pure. It was the purity of essence that drove Bohdanko because there was so little of it around.[lxxii] A tourniquet of expiry.

Bohdanko looked back one more time. What he saw were kids who probably were not going to see daylight. He saw ghosts in their faces, turned in shades of grey with shrapnel sucking out the blood. Then he went off into the darkness. The trees denude, walls denuded, bodies denude, all along the bomb out streets.

Once he started to leave the boys whispered under their breath: “First. Second. Third.”[lxxiii] Once again, the insults came Bohdanko’s way.

Then 50 meters or so away Bohdanko looked back one more time. What he saw were kids who probably were not going to see daylight. He saw ghosts in their faces, turned in shades of grey. Then he went off farther into the darkness. He watched the plumes from the ships at sea torrenting the coronets skyward in a nascent display streak strophe splendor. He watched every burst, realizing one day he would be in the target zone.

He began talking to himself. “You should not be hard on them. They probably do know the feeling of being a father. Not the way you do. Remember holding up the soft flesh for the first time. So delicate and pure of essence to the core.

He looked out over the sea. Old man was now thin as he was once undefeated but now broken on the inside. An open door was waiting. A harpoon was aiming. He looked around because somewhere he knew a sniper was taking aim.

He knew that it was not him. He remembered the pouch of tobacco. Red was the glow of the match. The first light would be too short. The second light the sniper would aim. The third light – never three on a lucifer.

The shot called true. But it was a RAM grenade. Piercing slicing shell shock. Then all of them were dispatched. At least there was no agony or painpainpain.

Up above the oil went from a dribble to a spurt.

It was a lesson that you learned whatever your persuasion: you think you will live forever, when you’ve done a line or two.[lxxiv] They drill that out of you in basic but, for whatever reason, it crepts back in. It was a warning of universal application: quiet gets one killed last.

Pretty lights, beneath the stars and sea.

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Are Our Elites Starting to Get It?

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On August 1, 2022

22 Comments

Back in May, in Sri Lanka:

Recently, they also burned down the President’s home.

Meanwhile, the Canadian government:

The tax will apply to new cars and aircraft with a retail sales price over $100,000 and to vessels over $250,000. It will be calculated at the lesser of 20 percent of the value above a set threshold ($100,000 for cars and personal aircraft, and $250,000 for vessels) and ten percent of the full value of the item subjected to tax.

And the US Senate’s Climate bill, which Manchin approved:

The bill includes $60 billion to boost domestic clean energy manufacturing, including $30 billion in production tax credits for solar panels, wind turbines, batteries and critical mineral processing. It also offers lower- and middle-income motorists a $7,500 tax credit for clean vehicles, while states and electric utilities would see $30 billion in grants and loans to expand clean energy. The bill also includes $60 billion for environmental justice communities and a fee on methane emissions that will rise to $1,500 a ton by 2026.

All of these are what I would class as “good news,” though insufficient. Adam Smith once quipped that “there is a lot of ruin in a nation,” but a country like Sri Lanka has less ruin than many others. England’s decline could be considered to have begun in 1914, and it’s only this decade that they’re likely to lose Scotland — and it’ll be a while yet before Brits start burning down toff mansions wholesale.

The problem with Sri Lanka is that almost all of the debt which is crippling it is to Western institutions, not to China (which is at about ten percent), but China is the country which will wind up bailing it out after the initial IMF stopgap, because China needs a stable country to have a naval base in. If India was smart, they’d step in instead, to deny the Chinese the base. As for the West, they don’t care and just want their money. China is likely delaying in part because they’d rather not send a ton of money to the West by paying for Sri Lanka’s debt.

Elites finally seem to be starting to understanding that climate change is serious, and that the rich are out of control. I think that the rich will come to regret the Russian oligarch sanctions hunt, because it taught everyone how easy it actually is to take everything from rich people, a lesson of the post-war era which has been forgotten because most who remember it are old or dead.

This is all very slim “good news.” With respect to climate change, I am of the opinion that we will not hold it at two degrees C, though some climate scientists disagree. I have found that the more “pessimistic” forecasts have consistently been more reliable, and I believe that self-reinforcing cycles, such as methane release from permafrost and swamps, and the destruction of most of the world’s remaining great forests, have been triggered. We can and should mitigate climate change by reducing emissions, but we have left it too late to contain catastrophic climate change. (I also expect a couple of marine inundations this century (colloquially, great floods) — and earlier than most people think likely.)

As for the rich, they’re still in control, but that control is unlikely to remain as firm as they expect. They were warned of this many times; that they couldn’t allow rampant inequality, poverty, catastrophe, and gouge on necessities like water, food, fuel, and life-saving medicines and expect to escape unscathed.

They key variable to watch is food, or rather, hunger. When people can’t eat (or drink), social controls break down. The Chinese understand that; every dynasty has known that if they didn’t feed the people, they were in great danger, and the Communist dynasty (that’s what it is, and it’s still essentially “rule by bureaucrats”) understands it as well. The Indian government, on the other hand, obsessed with fucking over non-Hindus and cleansing the country, seems to have forgotten.

The West, as a whole, has a great deal of agricultural surplus, and it will take some time for hunger to really hit, unless neoliberal ideology blinds politicians to the danger of continuing to allow rampant food inflation. If people can’t afford to eat, it’s the same as there not being enough food for them, and hunger leads to people with little to lose.

Interesting times, etc. Might as well enjoy the show as best we can, because we’re going to suffer through it as well.

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Week-end Wrap – Political Economy – July 31, 2022

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On July 31, 2022

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by Tony Wikrent

Strategic Political Economy

Will elites be allowed to “cull the herd”?

Lambert Strether [Naked Capitalism Water Cooler 7-27-2022]

We’re engaged in a massive social experiment to see whether an elite (ruling + governing classes) can “cull the herd” in six-figure quantities, and still retain hegemony (TINA); the Covid pandemic is only the latest and most obvious example. So far, the answer seems to be yes, or even “Hell, yeah!” Viewed in that light, is “the system” “at risk” at all?

 

Global power shift as USA and west commit “suicide by neoliberalism”

Is this or is this not a recession? It doesn’t matter, there are much bigger changes afoot — Philip Pilkington

Philip Pilkington [Macrocosm, via Mike Norman Economics 7-29-2022]

What is going on? Simply put, the West is getting poorer. We are seeing two things at once. First of all, policymakers have lost the plot and started intervening heavily into the economy with lockdowns and various other policies that destroy the supply-side of the economy. Secondly, we are seeing an enormous geopolitical shift centered around the war in Ukraine. The old model where the rich West runs large trade deficits with the poorer developing countries in exchange for worthless paper is coming to an end. We are exacerbating this transition by engaging in self-destructive sanctions policies that interfere with markets in everything from energy to fertiliser.

In a few words: the West is in decline and our leaders are greatly accelerating and exacerbating this decline. They can cover this up with redundant arguments about what is and isn’t a recession for so long. But at some point either the inflation will get worse — perhaps by gas shortages in Europe this winter — and/or the unmeployment rate will spike. At that point, the underlying dynamics will become too obvious to ignore. For politicians and the general public anyway. Economists will likely find some other redundant nuance to debate and distract.

 

Russia’s Vostok 2022 has big messages 

M. K. Bhadrakumar [India Punchline, via Mike Norman Economics 7-27-2022]

[Bhadrakumar is a diplomat and former ambassador, retired from the Foreign Service of India.]

Vostok 2018, held exactly four years ago, was the first time such a massive military exercise was held after the dissolution of the Soviet Union. (At the height of the Cold War in 1981 under Leonid Brezhnev, the Soviet Union held its last Vostok exercise). In the event, Vostok 2018 turned into a Russia-China gun show.

The Russian Federation put more than 300,000 troops in the field—alongside tens of thousands of tanks, helicopters, and weapons of every sort—for a huge war game in Russia’s far-eastern reaches, and invited the Chinese People’s Liberation Army to play along, which it did.

And a whole new groove in international affairs began appearing, signifying that the interests of Russia and China have once again begun to align — this time around, in response to US military power under a pugnacious president, Donald Trump.

On the sidelines of the exercise, Presidents Vladimir Putin and Xi Jinping had a breakfast of blinis together in Vladivostok. It was a powerful signal that Russia no longer saw China as an adversary but as a potential military ally. It was widely noted internationally as heralding a major shift in the co-relation of forces in world politics.

 

21st Century Order 

Patrick Lawrence [Consortium News, via Naked Capitalism 7-27-2022]

Moscow/Teheran meeting: “[P]art of a long-in-the-making project that will connect Russia, Iran, and India by sea, road, rail, and, eventually, a very significant Iran–to–India oil pipeline.”

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Open Thread

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On July 30, 2022

27 Comments

Use to discuss topics unrelated to recent posts.

Correct Priorities in China’s Response to the Mortgage Boycott

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On July 29, 2022

7 Comments

So, China’s construction market has a problem, and vast numbers of Chinese have stopped paying mortgages on stalled out or behind construction projects.

The government’s likely response?

…a typical scenario would involve seizing land from a distressed developer and giving it to a healthier rival, which would in turn provide funding to complete the distressed developer’s stalled projects.

And there is this:

The focus on completing projects is the latest sign that policy makers are prioritizing homeowners over bondholders, who have been burned by a record number of defaults by real estate giants including China Evergrande Group.

This is a correct response. Investors who lend money (which is what bondholders are) are gambling. If whoever they gamble on can’t pay, they should lose their money. That’s how it’s supposed to work, and it’s how it has to work if markets are to do their job. A market assumes that someone making a profit is producing something other people want for less than they’re willing to pay. Investors are supposed to direct capital towards those sorts of producers. If they make bad bets, they should lose their money, and someone else should make the bets.

Lenders and developers exist to do things. Investors finance those enterprises which provide “utility” and make a profit. Developers construct buildings (which have utility) at a profit. If you can’t both provide a service or product with utility and make a profit, you should not survive in a market economy. That’s how it works.

So the bond-holders should lose their money, and the developers who can’t construct buildings at a profit should go out of business and, yes, the consumers should be protected as long as they acted in reasonable good faith. Ordinary people aren’t developers or financiers; unless there was an obvious reason to expect fraud which an ordinary person should have seen, they should be made almost whole. Not entirely, so that they become a little more wary in the future, but the delays already do that.

China’s central government should have acted on this much sooner, but if they go with this response, it’s a good one. Westerners should learn: Investors, traders, and businesses can’t be protected classes in a market economy.

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BA.5 Covid Is Incredibly Virulent and MonkeyPox Is in Exponential Growth

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On July 28, 2022

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Yeah…

https://twitter.com/mattcornell/status/1552082146143207424

Remember that even a mild case of Covid can cause organ damage without you knowing, or can give you Long Covid with symptoms, sometimes extremely severe symptoms and that damage can accumulate each time you get Covid.

Meanwhile, two days ago, from WHO:

 

Don’t assume that because you aren’t gay or don’t have a lot of partners you won’t get monkeypox; plenty of people who aren’t having anal sex are getting it. Most of the guidance I’ve read says “direct contact,” but…

While experts believe monkeypox spreads primarily in close contact through skin lesions, evidence suggests the virus can also be airborne, at least over short distances. For example, during Nigeria’s monkeypox outbreak in 2017, scientists recorded cases of airborne transmission within a prison and in health care workers who did not have direct contact with patients. However, it is not clear how much airborne transmission contributes to the overall spread of the virus.

What I suspect is that monkeypox can spread through droplets, which is not the same as Covid, which is fully airborne. Droplets is how most scientists originally thought Covid spread, which is why “social distancing” was emphasized so much at the start of the pandemic.

Generally vaccines are not available unless you’re queer and have multiple partners, but check locally. I suspect the directions at the start of Covid should be relatively effective vs. monkeypox: distance, use 70 percent ethanol or dettold, and wear a mask. (Soap alone will not do it – correction.)

This stuff is nasty, takes a month to clear, and can leave permanent disfiguring scars. So keep an eye on it and take it seriously if it’s spreading where you are.

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China Jumps Two Chip Generations Ahead: Why Chip Sanctions Backfired

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On July 26, 2022

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Faster than most expected:

Semiconductor Manufacturing International Corp (SMIC, 中芯) has likely advanced its production technology by two generations, defying US sanctions intended to halt the rise of China’s largest chipmaker.

The Shanghai-based manufacturer is shipping bitcoin-mining semiconductors built using 7 nanometer technology, industry watcher TechInsights wrote in a blog post on Tuesday.

That would be well ahead of SMIC’s established 14 nanometer technology, a measure of fabrication complexity in which narrower transistor widths help produce faster and more efficient chips.

Since late 2020, the US has barred the unlicensed sale to the Chinese firm of equipment that can be used to fabricate semiconductors of 10 nanometers and beyond, infuriating Beijing.

Now, there’s a question if they can scale, but this is still a huge step. This means that they are ahead of Europe and the US, and behind only Taiwan and Korea. This is also sooner than almost all experts predicted: China did what Western technologists thought could not be done so quickly.

This speed, as I have noted in previous articles, is not that surprising; the technological lead always moves to the country which holds the world’s manufacturing floor. When Britain fell behind the US, it took about 30 years for them to lose their tech lead, but lose it they did. The same will happen with the US and Britain, but likely faster for obvious reasons like jets, the internet, and so on.

To put it simply, when you are right there with the factory floor, your innovation cycles are far faster, or in modern-speak, you iterate more quickly. You also have more practical experience with what actually works.

The “ban semi-equipment and semi-sales” to China card was a card, like the freezing of Russian foreign reserves, that you only get to play once at a great power. China is more than happy to subsidize chip manufacturers to learn how to make this tech domestically, and they are also crashing other key techs they’re behind in (like aviation), because it’s clear if the West would put a ban on semis, they’ll do it to anything or everything else.

China’s Job , and Xi has stated this publicly, is to make it so that they can’t be choked out by the US (the “West” is mealy-mouthed; the US makes the decisions, and the EU, Japan, and so on just do what they’re told, with occasional exceptions). Making Russia a locked-in junior ally with the sanctions regime made it so that China couldn’t be choked out on natural resources, and making it clear that crippling sanctions are on the board caused China to scramble to close the deficiency.

Unlike with choking out Japan over oil before WWII (which is why the Japanese felt they had to attack the US), however, the partial sanctions on China were not crippling, because unlike pre-WWII, the US is not the world’s primary industrial power, and it has its own dependencies on Chinese trade.

In realpolitik terms, because this is the case, sanctions should have been all at once, followed by war (I’m not for this, I’m massively against it, not least because of the issue of nukes). Half-assing it just gave China time to decouple its key dependencies and, as noted above, the anti-Russia sanctions were a gift from heaven to China.

The game continues, and if it were not for climate change, all the smart money would be on China as the pre-eminent world power within 20 years, probably sooner. As it is, a lot will depend on variables that humans have chosen not to control and soon will lack the ability to significantly control.

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