Thursday, September 20, 2018

Book Review: Life After Google

George Gilder's book Life After Google is hot off the press, published earlier this year. It predicts the demise of Google, along with its kindred, cloud-computing competitors such as Facebook and Amazon.

Mr. Gilder is a marvelous writer--I've read much he has written. (My essay on Knowledge & Power is not my best work, but here it is.) I'm deeply sympathetic to Mr. Gilder's argument because he predicts a much more libertarian internet.

Mr. Gilder offers a larger philosophical argument beyond simply business and technology. I enjoyed that discussion, but I restrict my comments here to economic issues.

Famously, Google gives most of its content away for free, or (in comments Gilder credits to Tim Cook) if it's free, you're not the customer; you're the product. That's the least of it. Spanish has two words for "free"--gratis and libre. In our context it means gratis.

Let's count the ways gratis benefits Google:
  • They are completely immune from any antitrust prosecution and most other regulatory oversight. 
  • They can roll out buggy, beta software to consumers and improve it over time. 
  • They don't have to take responsibility for security. Unlike a bank, Google is at no risk if somehow your data gets corrupted or stolen. 
  • They provide no customer support. 
  • Your data doesn't belong to you. Instead it belongs to Google, which can monetize it with the help of AI. 
  • You get locked into a Google world, where everything you own is now at their mercy. (I'm in that situation.) Your data is precisely not libre
Note that Google didn't even bother to show up at the recent Congressional hearings about "fake news." They consider themselves above the law (or, perhaps more accurately, below the law). They can get away with this because it's free.

There are some disadvantages.
  • It's not really free, but instead of paying with money you pay with time. Attention is the basic currency of Google-world. 
  • People hate ads. "[O]nly 0.06 percent of smartphone ads were clicked through. Since more than 50 percent of the clicks were by mistake, according to surveys, the intentional response rate was 0.03 percent." This works only for spammers. Ad-blockers are becoming universal.
  • Google thinks it can circumvent that by using AI to generate ads that will interest the user. No matter--people still hate them.The result is the value of advertising is declining. Gilder does not believe that AI will ever solve this problem. (I agree with him.) 
  • Most important--Google loses any information about how valuable its products are. Airlines, for example, respond sensitively to price signals when determining which routes to fly, what equipment to use, what service levels to provide, etc. Price is the best communication mechanism known for conveying economic information. You immediately know what is valuable to consumers, and what isn't. Google loses all that information by going gratis.

    Is Gmail more valuable than Waze? Google has no idea. As a result it has no way of knowing where to invest its money and resources. It's just blindly throwing money at a dartboard.
The above disadvantages are manageable as long as the marginal cost per user is very small. Google invested billions of dollars in huge data farms (Gilder visited the one in The Dalles, OR), located near sources of cheap electricity and cold water (for cooling). Iceland is a prime location for these things. Each center contains thousands of racks of high-end servers connected by millions of miles of fiber-optic cable. This investment has paid off--the marginal cost per search is essentially zero.

But the world is changing fast--according to Gilder the tipping point is the transition from 4G to 5G; from the internet of web pages to the internet of things; from the internet of text and images, to the internet of virtual reality and video rendering; from the internet of computers to the internet of mobile phones, smart watches, and medical devices. To accommodate this new world Google will need to make a massive new investment.

The marginal cost--far from approaching zero--is now becoming near infinite. Without any price information the company has no clue who its most valuable "customers" really are, and cannot determine how best to allocate its resources. Further, the new world opens the door for much nimbler and low-cost competitors. So while Google may be a successful search engine, it will lose its hold over our data. We will own our own data.

Among those nimbler competitors is a Warsaw-based start-up called Golem. Realizing that most CPU clock cycles around the world go unused, the company is trying to tap into that wasted resource. For example, even while I'm busily typing away, my computer's CPU is mostly sitting idle doing nothing. If it were possible for me to rent out those excess clock cycles, then I'd make a little extra cash, and somebody else gets extra computing power they can use.

That's Golem's business model--by installing their software they enable me to rent out my clock cycles in exchange for payment. (In Michael Munger's language Golem is selling a reduction in transaction costs--i.e., making it easier to match my computer resources with somebody who is willing to pay for them.)

Two things need to happen before Golem's business model works. First, my computer needs to be on a 5G network. 5G eliminates the need for fiber-optic cables (at least over the last mile) by enabling high-bandwidth, wireless communication between my computer and the world. Without 5G I can't compete with Google. With 5G, my connection is just as efficient, or--put another way--Google has a few million miles of useless fiber-optic cables on its hands.

Second, Golem needs to handle micropayments--I will be paid pennies per minute of CPU time. The user--who is likely doing a massively parallel calculation--will owe pennies to thousands of computer-owners like me. Golem has got to keep track. The way they do that is through a blockchain currency known as GNT (Golem Network Tokens). The user will buy GNT's from Golem, and use them to pay me and all the others who contribute their clock cycles. As GNT is built on top of bitcoin, at the end of the day I can convert my GNTs to bitcoin, and hence to whatever currency I prefer.

This is more profound than it sounds. In our cloud-centered Google-world, processing and storage have become centralized, as required by fiber-optic technology. But as wireless displaces fiber, then there is no longer a reason for Google's huge data farms--everything can be decentralized. But this new technology requires a new operating system--a different computer architecture. The organizing principle of this new architecture is the blockchain--in all its forms, from distributed ledgers to secure financial transactions.

The blockchain will keep track of who owns what, who is owed what, and how people get paid. A hash of that whole transaction will be embedded in the software as a watermark. My few cents worth of CPU time will be embedded in the output for the ages.

There are currently two competing platforms on top of which the blockchain edifice can be built: bitcoin and ethereum. Bitcoin is very simple and secure--and slow. Ethereum comes with a Turing-complete programming language, in principle making it much easier to use. But it is manifestly less secure.

It turns out Mr. Gilder is agnostic on this choice. That surprises me--from Knowledge & Power I would have expected him to favor the simpler, more reliable bitcoin. Golem, after starting with Ethereum, switched to bitcoin.

I highly recommend reading Life After Google.

Further Reading:

Monday, September 10, 2018

Jeff Mackler on Trade

Jeff Mackler pens a piece in Socialist Action (SA) entitled Inside Trump's trade bluster. It is an opinion which, while I think is mistaken, deserves a serious response.

Regarding Trump's trade policy, Mr. Mackler states:
Obviously, he is an embarrassment to the majority of the ruling-class elite. Virtually every major corporate newspaper and media outlet in the country daily pillories his too overtly right-wing tweets and pronouncements, but the essence of his direction, as opposed to the form, is not too dissimilar from mainstream ruling-class views.
This is unusual for SA--normally they write Trump off as a bone-headed klutz. Now they give him credit for substantial policy, however poorly advertised. I agree with them--the world has changed, and Trump's efforts are redirecting American policy in response to that change. It is not simply random outbursts from a senile old man.

Where Mr. Mackler fails is in identifying what has changed. He quotes Marxist economist Michael Roberts.
"... The Great Recession of 2007-8 and the ensuing Long Depression since 2009 has changed the economic picture.
In a stagnating world capitalist economy, where productivity growth is low, world trade growth has subsided and the profitability of capital has not recovered, cooperation has been replaced by increasingly vicious competition—the thieves have fallen out.”
All of the premises are arguable. Certainly, at least in the US, corporate profits are currently at record highs, so that claim seems undeniably false. The statement about poor productivity growth can be disputed. The slowdown in growth is probably due more to demographic factors--low birth rates and an aging population--than any failure of "capitalism."

By blaming Trump's tantrums on the 2007-8 financial crisis, Mr. Mackler misses the big picture. He doesn't see what is really going on.

Mr. Mackler asserts that, circuses notwithstanding, Trump's policies represent America's ruling class. This is not true. Every business organization--from the Chamber of Commerce to the National Association of Manufacturers, to the car manufacturers, to big and little Ag, and so on down the line--has come out strongly against Trump's tariffs. Whenever he announces them the stock market goes down.

The people who do like the tariffs are the unions. AFL-CIO chief Richard Trumka has stated his support. So at least part of Trump's motivation is political--he wants to keep his word to his blue collar constituents. Promises made--promises kept.

The unavoidable fact is that tariffs will hurt the economy. Everybody knows this, barring Mr. Trumka, Pat Buchanan and a few Trotskyists. I think even Trump knows this--otherwise why would he have Larry Kudlow on the White House staff?

The implication of all this is that "Trump's trade bluster" has nothing to do with the economy at all. Instead, it is about geopolitics--an effort to weaken China, who is today America's greatest military competitor. Mr. Mackler alludes to this.
Trump’s denunciation of China for “stealing” U.S. technology was followed by his administration’s widely publicized list of proposed tariffs on Chinese imports. The list includes 1102 categories of goods, all focused on high-tech industries like nuclear reactors, aircraft engine parts, ball bearings, bulldozers, motorcycles, and industrial and agricultural machinery. These are precisely the categories in which China has employed the advanced robotics and related super-modern production technologies—that is, intellectual property rights.
Though he doesn't mention it, the military applications of those technologies are what is most in Trump's mind. The president is willing to take the economic hit now to avoid having a rival superpower in the future. They don't call it a trade "war" for nothing.

So the question is not how tariffs help the economy (they don't) but about how to minimize the blowback they will inevitably cause. And here one can separate the conversation into three topics: China; Fracking; and NAFTA.

China: Mr. Mackler's opinion very much resembles that put forward by Lynn Henderson. I responded to that gentleman here, so no need to repeat it.

Fracking: A milestone was reached in 2010--in that year for the first time in ages the United States exported more oil and gas than it imported. We became energy self-sufficient. Today we import ZERO oil from the Persian Gulf.

This has huge consequences: First, the Straits of Hormuz are no longer a core national security interest of the US. Iran's threat to close them is no longer compelling--we only care about their nukes. That is the essential difference between Europe and the US on the Iran nuclear treaty. Europe is very worried about the Straits of Hormuz, while we are not. Our strategy toward Iran is accordingly much less compromising than the Europeans would like.

Likewise, as Mr. Mackler points out, the US is no longer a reliable defense partner for Europe. If Iran were to close the Straits of Hormuz, it is Europe that will have to send in the cavalry, not the US. That means Germany is going to need a blue water navy--and fast. They're working on it already.

Second, we used to pay for our Persian Gulf oil in dollars, that were then known as petrodollars. But the petrodollars got deposited in dollar accounts in Switzerland, Hong Kong, the Cayman Islands, and elsewhere offshore, whence they acquired the (misleading) name eurodollars.

Those offshore banks lent out those eurodollars to finance international trade. The abundance and liquidity of eurodollars is what made the dollar the reserve currency, and what enabled the WTO. Since the US ultimately controlled the flow of dollars (euro- or otherwise) around the world (the SWIFT system), the US became the enforcer of WTO rules.

The absence of new petrodollars, along with rising interest rates in the US, means that the supply of eurodollars is drying up--there is now a severe shortage. The liquidity needed for international trade is sharply reduced. This has two big implications.
  1. The dollar will cease to be the reserve currency, and there is nothing that in the short term can take its place.
  2. The WTO will fall apart--without a reserve currency and without US enforcement, it can't survive.
All of this is a disaster for any country not called the United States.

NAFTA: The new Mexico-US trade agreement will insulate the US from the coming trade disruption. The basic idea is to move manufacturing from China to Mexico. This will be a huge boon to the Mexican economy, which is why they eagerly signed it. It's described very well by Gloria van Rees--here is the money quote.
The big question about the impact will be the economic efficiency of the impact of trade diversion into NAFTA and away from other countries. By this I mean, what will be the impact of buying more parts intra-NAFTA rather than outside NAFTA and layering on top of that the low skill parts outside of NAFTA and the high wage parts intra-NAFTA? Here is what I suspect, and feel free to disagree respectfully of course. Assume there are currently, for simplicity sake, four parts needed to make a car. Each part costs $20, $15, $10, and $5 respectively. For simplicity sake, let’s assume that currently the $20 and $15 parts are made inside NAFTA and the $10 and $5 parts are not. Under the new agreement, I think we can expect the $20 part to remain unchanged, the $15 part rise to a $16 part, the $10 part move to Mexico, and the $5 part stay outside of NAFTA. Again, this is a very simple model, but this would meet the general requirements before and after. What we see primarily is a diversion of trade to Mexico as the primary recipient with some increased work likely going to the US and Canada. However, the major question, which is very difficult to know with good foresight is the impact of trade diversion from the rest of the world to the trade agreement partners.
In summary, Mr. Mackler, for all his facts, misses the elephant in the room. It's fracking. Fracking changes everything.

Further Reading:

Sunday, September 2, 2018

Book Review: Tomorrow 3.0

Tomorrow 3.0, by Michael Munger, is subtitled Transaction Costs and the Sharing Economy. That's actually a much better title--more descriptive of the actual thesis. The "three-point-zero" claim is, in my view, over the top. Version 1.0 was the Neolithic revolution, when hunter-gatherers settled down and became farmers. Version 2.0 was the industrial revolution, when said farmers moved to cities, got "jobs" in our modern sense of the word, and created the consumer cornucopia we enjoy today.

Version 3.0, upon which we are just now embarking, is when workers (most of them, anyway) will lose their jobs because the new economy will not depend on production in the way it has in the past. Instead of finding new and better ways to produce things, entrepreneurs will instead "sell reductions in transaction costs."

The first fruits of this new world are represented by Uber, a company which does not sell taxi services. Instead, taxi services are sold by drivers, for which they are paid by passengers. This exchange is unchanged from the good old days.

What Uber sells instead is a reduction in transaction costs. Consider the bygone era: on a rainy NYC evening after the theater you had to go outside and try to hail a cab. You spend a lot of time waving at yellow cars as they whiz by, already taken. If you're lucky you'll find a taxi within 10 or 20 minutes--or possibly you'll wait an hour.

None of this helps the cabbie. Despite the desperate desire for taxi services, he can't raise his rates by even a penny. He has no incentive to spend his Saturday evening sitting in Broadway traffic in the rain. Better to go someplace else where a passenger can be found with less hassle. (As a former cab driver I am intimately familiar with these sorts of trade-offs.)

So now comes Uber, which solves three problems: triangulation, transfer, and trust. Triangulation is the problem of the driver finding the passenger--the phone tells him exactly where you are. Transfer is the problem of getting you to your destination--the driver already knows where you're going along with the best route to get you there. Finally trust means that you've already given your credit card information--the driver knows he's not gonna get stiffed. And further, the driver has been vetted by all his previous passengers--you are unlikely to be assaulted or robbed.

Beyond which, Uber knows where more cars are needed. No, it doesn't keep track of when the theaters let out, but it realizes that all of a sudden lots of people on Broadway need cabs. So to incentivize the drivers to put up with the traffic, a "surge" is added to the price--which means you'll have your cab within 10 minutes. (Uber now gives you the option to pay a cheaper rate, in exchange for waiting until all the surge payers have already gotten their rides.)

In short, Uber clears the market. It's selling reductions in transactions costs. It saves passengers long waits in the rain, and it compensates drivers for putting up with traffic and hassle. It automates payment, security, and transfer problems, to the advantage of both passenger and driver.

Expand the Uber concept to all sorts of goods and services. Airbnb isn't selling lodging--instead it's selling a reduction in transaction costs for both landlord and tenant. Uber itself is expanding its business in the form of Uber Eats--again not selling take-out food, but instead a reduction in transaction costs.

Mr. Munger argues that this transition from selling products to selling reductions in transaction costs will be as profound a change as the Neolithic and industrial revolutions--Tomorrow 3.0. Somehow I doubt that, but there is no question it will change the way we live.

One implication of the Uber model (especially after robots start doing the driving) is that people won't see any need to buy their own car--they'll just rent a ride when they need one. The result is the automobile market will be far smaller than it is today. So auto workers are gonna be put out of work, and not just because of automation.

Similarly, Airbnb easily puts all hotel front desk and reservations office employees out of a job. Indeed, it likely erases the distinction between a hotel room and an apartment. People--according to Mr. Munger--will be much more likely to rent. (Count me skeptical--most people want to put down roots.) Similarly, take-out food with sharply lower transaction costs competes with the home kitchen--the market for kitchen appliances goes south.

In short, a reduction in transaction costs means that 1) many more items will be rented rather than purchased, implying that 2) less space will be required for storage (you don't need to park your Uber car), and 3) a much smaller market for manufactured goods.

Yesterday we bought personal computers with big hard drives. Today we buy software as a service and store our stuff in the cloud. The size of your computer's hard drive becomes irrelevant. Mr. Munger suggests the same trajectory for many manufactured products--we'll rent them rather than own them, and the need for large garages and extra storage lockers will decline accordingly.  Further, manufacturing firms will also avail themselves of the reduction in transaction costs by sourcing their products from whatever facility in the world is cheapest.

Two things will result from this trend. First, many people, if not completely unemployed, will experience significantly lower wages. And second, prices for manufactured items will decline dramatically. (See my piece, Getting Richer While Feeling Poorer for a description of this trend.)

Mr. Munger describes two phenomena: saltation and separation. The former is a dramatic change in lifestyle because of a disruptive change in technology. Mr. Munger cites a woman named Parisa--a burkha-clad lady from Herat, Afghanistan, not permitted to attend school. But she had a smartphone through which she enrolled in coding class, enabling her to write apps that she posted on Github, for which she was paid in bitcoin. It earns her a first-world income. She's a beneficiary of saltation.

Separation, meanwhile, refers to those who can't adapt to new technology. Consider Parisa's hypothetical cousin (not mentioned by Mr. Munger) who was a seamstress--until the dramatic fall in apparel prices rendered that profession completely obsolete. She wound up unemployed.

The dual trends--saltation and separation--will blur the distinction between the advanced and developing world. The beneficiaries of saltation will get rich, regardless of where they live. Those who are separated, meanwhile, will become poor, again independent of location. Global inequality will grow--not between countries but within countries.

Mr. Munger's solution to a world in which large numbers of people are unemployed is a Basic Income Guarantee (BIG), also known as a negative income tax. In his version, BIG will replace all other social welfare spending: food stamps, housing vouchers, education costs, social security, Medicaid, etc.--maybe even Medicare. Everybody (not just poor people), in lieu of the panoply of vouchers will instead get cash--perhaps as much as $20,000/year per person--just for being alive.

I'm not against the idea, though I think it's a political non-starter.

There's lots more in Mr. Munger's book. It's well worth the read.

Further Reading:

Wednesday, August 29, 2018

Louis Proyect on "Radical Professors"

Louis Proyect pens a piece entitled Radical professors and the hazards of social media that cites four examples of leftist academics who have gotten themselves in trouble by intemperate tweeting: Steven Salaita, George Cicciarello-Maher, Johnny Eric Williams, and James Livingston.

The most egregious case is that of George C-M, a former professor at Drexel University, who was somehow inspired to tweet "All I Want for Christmas is White Genocide." Mr. Proyect offers some background. The tweet was
...prompted by the racist backlash against State Farm Insurance for purportedly advancing “white genocide” through a commercial featuring an interracial couple. This trope of “white genocide” is ubiquitous to the alt-right, including the business about white farmers in South Africa being killed off. After the fuckwit Tucker Carlson claimed that this was taking place, Trump followed up with a tweet even though it had no factual basis. Unlike the University of Illinois, Drexel University defended his free speech rights but George resigned eventually because the death threats and other forms of harassment became intolerable. Like Salaita, he was guilty of nothing except using Swiftian satire that might have been acceptable among leftists but not to Fox News’s audience.
Mr. Proyect claims some context of which I was unaware, e.g., that State Farm Insurance somehow advocated "white genocide" in a commercial. I find this hard to believe. He further maintains that we rightists are somehow fixated on said supposed genocide--I, for one, live in no fear of such an event, however disturbing recent events in South Africa might be.

The upshot of this is that we're supposed to excuse George's tweet as "Swiftian satire," i.e., just harmless fun that only a dedicated right-winger could take out of context.

Of course tweets come without context--almost by definition--and if George is foolish enough to proclaim his ardent desire for "white genocide" via that medium, then who am I to disbelieve him? Even after reading Mr. Proyect's explanation, I can't understand the tweet in any way besides literally.

I don't fear "white genocide," but at the same time I don't believe anybody who advocates it deserves to work as a professor. George has, whether purposely or foolishly, disqualified himself from the academic profession.

As an aside, if some right-wing professor (there are a few) had posted a similar tweet about African-Americans or LGBTQ people, the "Swiftian satire" excuse wouldn't have passed the laugh test. Such a person would have been fired before sundown--and rightly so.

As a second aside, the tweet can possibly be interpreted as a threat, in which case it is not protected speech. Of the four cases Mr. Proyect cites, this is the only one where I'm not sure First Amendment rights apply.

Now lets turn to the sorry case of Mr. Salaita, who opined that "At this point, if Netanyahu appeared on TV with a necklace made from the teeth of Palestinian children, would anybody be surprised?" among many other things. Mr. Salaita had been offered a tenured professorship at the University of Illinois, but because of antisemitic tweeting the offer was withdrawn before he could start work. Mr. Proyect writes "It should have been obvious that this was Swiftian satire but the board preferred to placate wealthy Jewish donors rather than uphold academic freedom."

For the life of me I can't see anything satirical in Mr. Salaita's tweets, Swiftian or otherwise. I have no trouble calling him an anti-Semite. That said, he does not directly threaten or libel anybody, so despite being hate speech it is clearly protected under the First Amendment. But he does not have a right to work at the University of Illinois as a professor, and the school was right to rescind the offer.

Mr. Proyect blames "wealthy Jewish donors" for the outcome. I don't know if that's true, but let's suppose it is. The University of Illinois--faculty and students alike--are dependent on donations, especially in Illinois where state funding has been cut to the bone. Mr. Proyect will put that all at risk just so that some clueless little twerp can run off at the mouth with his vile hate speech. Hiring Mr. Salaita would have severely damaged the institution, and the Board had no choice but to let him go.

So why do these people post such career-ending tweets? Are they really that stupid? Well, yes they are, but there is also a larger story to tell. They are all academics and as such they live in an echo chamber. Status in academia is achieved by loudly touting one's anti-racist, anti-homophobic, anti-misogynist, anti-Israel (Jewish) credentials. It's an arms race--the more and better your virtue-signalling, the higher your status within the community (and the more likely you are to get published, funding, tenure, etc.).

We recently endured such an episode on my campus. A long-time political science professor--often interviewed by The Economist and the New York Times--made the rather obvious observation that the Republican John Faso will likely win the congressional seat over the Democrat Antonio Delgado. He also had the temerity to criticize hip-hop music, leading to a faculty piling-on that lasted for several weeks, ended only by the offending professor's abject apology, though he had said nothing he needed to apologize for.

It's nothing but virtue-signalling all the way down. And sometimes this internecine, academic competition escapes its bounds, leading to tweets that, to people in the real world, are correctly interpreted as hate speech.

That brings us to the sad case of James Livingston, who tweeted
OK, officially, I now hate white people. I am a white people, for God’s sake, but can we keep them — us — us out of my neighborhood? I just went to Harlem Shake on 124 and Lenox for a Classic burger to go, that would my dinner, and the place is overrun with little Caucasian assholes who know their parents will approve of anything they do. Slide around on the floor, you little shithead, sing loudly you unlikely moron. Do what you want, nobody here is gonna restrict your right to be white.
I hereby resign from my race. Fuck these people. Yeah, I know it's about access to my dinner. Fuck you too. 
As Mr. Proyect points out, this isn't even political. It definitely is protected, and further, it's not hate speech, even though it sounds that way. There is no way that Mr. Livingston should lose his job at Rutgers University because of it.

But it is pathetic. This guy is so insecure about his own moral virtue that he has to condemn other restaurant patrons for their lack of "woke-ness." Most people visit restaurants for the food--not to demonstrate their political bonafides. Harlem Shake gets pretty good reviews on Yelp. How would the management and employees feel if all of a sudden white customers stayed away because they weren't "woke" enough?

He's definitely got a chip on his shoulder. Maybe he needs to visit a psychiatrist?

I'll take issue with Mr. Proyect's description of these professors as "radical." A radical implies somebody of independent thought. These people, far from being radical, simply can't control themselves, be it from some psychological defect or too much academic peer pressure. Instead, they are the slaves of a virtue-signalling mob.

Further Reading:

Monday, August 20, 2018

Three From The Militant

I'm failing at my job.

My job is to criticize the Trotskyist movement from the Right. I'm tasked with keeping my remarks civil, serious and friendly, but critical it still should be.

Unfortunately the recent issue of The Militant makes that very difficult. It contains three articles that I mostly agree with--it's hard to criticize something agreeable. Still, I'll try.

The first, by Bob Carter, is entitled Protests hit Quebec festival move to shut musical revue. It concerns a theater production about slavery that was shut down by critics who accused it of "cultural appropriation."
On June 26, about 100 protesters organized by the self-named SLAV Resistance Collective protested in front of the theater doors on opening night. The protesters, both Black and Caucasian, shouted, chanted and waved placards accusing internationally renowned Quebecois producer Robert Lepage and lead singer Betty Bonifassi of being “racists” and of appropriating Black history because they are “white” and the show didn’t have a majority Black cast. 
On July 4, Montreal Jazz Festival officials cancelled the production after only two of the scheduled 16 shows. More than 8,000 tickets had already been sold. Officials apologized to anyone who they said might have been offended by the performance.
The Militant quotes producer Robert Lepage:
“Everything that led to this cancellation is a direct blow to artistic freedom,” Lepage said in a widely circulated statement. “When we are no longer allowed to step into someone else’s shoes, when it is forbidden to identify with someone else, theatre is denied its very nature … and is thus rendered meaningless.”
Of course this is absolutely correct. Unfortunately many of my other Trotskyist friends (along with the entire academic Left) will side with the censors. The Militant is right to call them to task.

The second, by Terry Evans, is headlined US, EU rulers clash over trade, spending for NATO. It centers attention on President Trump's recent meeting EU president Jean-Claude Juncker. I actually disagree with much of this article, but Mr. Evans gets one thing very right.
Much of what is reported in the liberal media about the clashes between Washington and Berlin aims to hide this reality. It seeks to reinforce the notion that Trump’s actions are endangering Washington’s interests by threatening to tear up the decades-long “world order” through which the U.S. rulers have collaborated with their “traditional allies” that make up the EU.
While it is likely true that Mr. Trump is needlessly undiplomatic in his dealings with the Europeans, The Militant is quite right when they suggest the media and critics are hyperventilating a bit. The fact is that the world has changed since 1991, and even more so since 2010, after which fracking came fully on line. Americans simply don't need that old alliance anymore.

But many people--not just in government but also in the media, academia, the military-industrial complex, and think tanks--have built their careers around those old verities. They've learned to negotiate the halls of NATO, the catacombs of the EU, the byzantine rules of the WTO, along with the elaborate protocols of the United Nations. Seventy years of collective expertise are now threatened with irrelevance--whole PhD programs are about to go out of business.

Call it the Deep State if you will, but it's actually something much more mundane than that. It's a heartfelt plea for job security--a plea that will ultimately fail. As individuals I feel sorry for them, but for the rest of us the demise of this world is probably all for the best.

Mr. Evans appears to agree with me.
Workers face a world today where a series of historic shifts are unfolding in the “order” the U.S. rulers imposed after the second imperialist world war — in Korea, the Mideast, Asia and in Europe. Trump is working within these developments to put together alliances and arrangements that favor the U.S. rulers. Many of those involve steps that can tamp down wars and conflicts that have existed for decades. These are good for working people. They open political space for us to act and learn how to fight for our class interests.
As the above paragraph indicates, the article occasionally devolves into boilerplate Trotsky-talk. Ignore that, however, and most of what it says is very agreeable.

The third article is by Roger Calero--Venezuela: Workers, farmers face effects of capitalist crisis. The Militant never bought into the whole Chavez charade, for reasons explained by Mr. Calero.
The leaders of the Bolivarian Revolution never mobilized working people to take control of production and the land and replace the bourgeois government with a workers and farmers government on the road to expropriating the capitalist class. They rejected the revolutionary example set by workers and farmers in Cuba. That is the only road that offers working people the chance to confront the problems they face.
 I think this is pretty lame--especially since Mr. Calero admits elsewhere that Venezuela did expropriate foreign owners (boldface mine).
A U.S. federal court judge ruled Aug. 9 in favor of Canadian gold mining company Crystallex, saying it can collect $1.4 billion it claims to have lost when late President Hugo Ch├ívez nationalized the gold-mining firm in 2009. This could result in the company taking control and selling U.S.-based oil refineries owned by Citgo, which is part of Venezuela’s state-owned oil company PDVSA.
Still, The Militant thinks it's off the hook and can now criticize the Venezuelan regime with "I told you so" impunity. And its criticisms are right on the money, e.g.,
“I am better off selling empanadas than working as a nurse,” said Ana Rosario Contreras, president of Caracas College of Nurses, during a July 6 protest demanding higher wages. “An empanada costs 500,000 bolivars and I get paid 600,000 every two weeks.”
The problem with Venezuela is not that they didn't utter the correct magic words, nor that they failed to completely implement the exact policy prescribed Jack Barnes from his Manhattan penthouse. No--the problem with Venezuela is socialism.

Socialism has failed always and everywhere. And however much I agree with The Militant on any individual point--for that reason alone my job still needs to be done.

Further Reading:

Saturday, August 4, 2018

Solidarity on Trump & Trade

I'm way behind on following Solidarity, which a month ago published an article by Luke Pretz and Bill Resnick (P&R), entitled Trump's Trade Folly and the Virtues of Organizing for a Radical "Fair Trade". It's a good piece, worth analyzing in detail.

They get off on the wrong foot--at least by my lights--by completely misunderstanding Donald Trump. The lede:
While Trump has been careening between policy positions on near everything (China, the Koreas, Syria, NATO, DACA, and health care policy among others), he has in his public statements and tweets remained dedicated to the economic nationalism that was a central plank in his campaign platform. In recent weeks he has kept himself in the headlines announcing aggressive tariffs on steel and aluminum imports from Canada, Mexico, the European Union, also his blunderbuss tariffs on Chinese manufacture perhaps igniting a mini-trade war, his obsession with combating the US trade deficit, and his tantrum at the G-7 conference snubbing his European counterparts and especially attacking Canada.
          ...the media accepted Trump’s economic nationalist theatrics as the real Trump, ...

They view Mr. Trump as an ignorant bozo, not conscious of his own policy and incapable of forming a coherent strategy. I think this is precisely wrong--Mr. Trump knows exactly what he is doing, and why.

But if you don't understand the president's method, then you can interpret his supposed madness any number of ways. P&R suggest that Trump's rhetoric notwithstanding, his underlings are sticking with the "neoliberal" agenda of free trade, for which the failed Trans Pacific Partnership (TPP) treaty is a proxy. P&R infer this conspiracy because they can't imagine that the "ruling class" can be against free trade, and therefore it's Trump who doesn't know what he's doing.

At some level they're right. The business community--from the Chamber of Commerce to Main Street to Wall Street have all come out vociferously against tariffs. Even Whirlpool (the appliance manufacturer), which had long demanded protection from South Korean competitors, is now complaining loudly that the steel and aluminum tariffs raise their costs far beyond any benefit from tariffs against LG and Samsung. So even they are now suggesting all tariffs be abandoned.

How different this is from 1930, when the business class broadly supported the Smoot-Hawley duties. Supply chains today are so complex and so global that nobody profits from tariffs anymore. The near universal opinion is that tariffs are bad and will lower everybody's standard of living. Even the very language--"trade war"--suggests as much. No war ever made people better off.

Only a few people proclaim protectionism as a solution to our economic woes. The lead voice is Pat Buchanan, who claims that tariffs are what made this country rich to begin with. Despite being a Buchanan fan, I disagree with every word of this piece, including most of his cited "facts."

Mr. Buchanan is a voice in the wilderness.

I don't believe Trump is against free trade. Like P&R, he claims to only want "fair" trade, though the interpretations of "fair" do not correspond. And the president does have point: the days when the US can afford to run persistent trade deficits--year after year, decade after decade--are over. There were reasons we did that during the Cold War, but the world has changed. The US is no longer willing to subsidize global commerce.

I've written about these topics elsewhere, including at some of the links below.

Getting back to P&R--they claim to have discovered a third way that's neither protectionism nor free trade. They call it "fair trade", which they think is somehow radically different from Trump's version of "fair trade." I think they're wrong--no matter how you slice or dice it, "fair" trade is just a form of protectionism. The only (very slight) difference between P&R and Trump is who gets protected.

In P&R's scheme, Americans should be allowed to buy products from Mexico only if Mexican workers are paid on an American scale and receive American-quality benefits (including things like environmental protections). Let's count the ways this won't work.

  1. Workers in Mexico are less skilled than American workers. That shows up today as only low-end vehicles are manufactured in Mexico, e.g., the Chevy Cruze. The important, high-end cars, e.g., F-150 pickup trucks, are all assembled in the USA. This is partly a function of skill level.
  2. Infrastructure in Mexico is way below the American standard. Electricity and water are much more expensive. Transportation costs way more--the country has a poor highway system and nearly no rail network. (One can blame geography for that deficit.)
  3. The infrastructure to provide workers with American-style benefits does not exist. The medical facilities do not exist because the population is too poor to afford them. The financial markets necessary to provide reliable pension plans also don't exist.
  4. The reason Mexico is poor is because there are too few rich people in Mexico. The number of Mexicans who can afford an F-150 pickup is negligible compared to, say, New Jersey. Ciudad Juarez is a thousand miles further from New Jersey than Michigan or Tennessee. Manufacturing of large, heavy objects (cars) is always cheaper near the marketplace.
Mexicans can compete with American labor only by reducing their prices, which is what they do. P&R want to prohibit them from doing that, which will put Mexican manufacturing completely out of business. P&R's solution is the same as a very huge tariff.

Beyond this, P&R miss some important distinctions. First is the difference between tradable and non-tradable goods. Tradable goods can easily cross borders--things like cars, textiles, airplanes. Non-tradable goods are not easily exported, e.g., food service, plumbing repair, medical care, education. By far the bulk of the US economy is in the non-tradable sector--workers there do NOT benefit from tariffs at all.

But they are hurt. As tariffs (or P&R's substitute) raise the cost of imports, non-tradable workers will be forced to pay higher prices and their standard of living will suffer. So P&R's proposal will (very hypothetically) aid Mexican workers (assuming they still have a job) at the expense of Americans employed in the non-tradable sector--i.e., the majority of workers.

One last point. It turns out that open borders and free trade are approximately the same thing (at least in the tradable sector). With open borders (which I assume P&R support), jobs are kept in the USA and workers are imported to fill them. With free trade, the workers stay in their home countries, but the jobs are exported so they have work. Either way there is labor arbitrage.

So P&R are proposing something completely ridiculous. They want to prevent Mexican workers from having jobs in Mexico, but at the same time welcome them to the US to take the same jobs here. I don't understand the justification for this weird and politically unpopular procedure. Indeed, I don't think P&R have thought their proposal through very carefully.

I appreciate P&R's good intentions. They want to improve the lives of Mexican workers at what they believe will be no cost to American workers. But they believe in a free lunch--and it will end in catastrophe. Good intentions notwithstanding, our two friends need to think through how it would all come down in practice.

Note: Mrs. Trotsky and I will be celebrating our anniversary by spending next week in Mexico City. Who knows--I might even visit the Old Man's fortress? Sadly, I don't read or speak Spanish, so I doubt I'll learn very much about politics. Though if I do you'll be the first to hear about it. However, I won't be getting anything posted next week--I'm leaving my laptop at home.

Further Reading:

Sunday, July 29, 2018

The "Bureau" on Immigration

The Fourth International Bureau (also known as the Bureau of the Fourth International) issued a statement entitled Stop inhumane policies against immigrants (cross-posted in Socialist Action). As with most articles written by a committee it tends toward the inarticulate--full of emotion and short on common sense.

The lede paragraph, however, is mostly true. (Ellipses in original.)
Children separated from their families and caged in Trump’s USA, thousands drowning as they cross the Mediterranean, boats transporting migrants refused the right to dock by Salvini’s Italy, Orban’s Hungary declaring that helping refugees is a crime, 370 thousand Rohingya fleeing from [Myanmar] to Bangladesh after another military raid and massacres by Myanmar government, tens of thousands of economic refugees from Haiti and Venezuela spreading throughout South American countries, more than five million Syrian refugees outside the country and even more internally displaced .… Those who hold power in Old Europe and the Americas are joined in a holy witch hunt against the spectre of “migrants”: a wide ranging alliance embracing the populists of the right and what remains of the traditional Social Democrats. Salvini and Macron, Putin and Trump – chauvinists from the east and the west, French liberals and German police…
The Bureau leaves out other examples, e.g., the Banyamulenge of Eastern Congo. They're a Tutsi tribe who migrated to the region in the 16th Century. Their citizenship is hotly disputed by their neighbors to this very day--and that was the proximate cause of the Congo civil war that left five million dead before it was over.

Or the immigration of Jews into Palestine, which unlike the other cases the Bureau opposes, calling it an "occupation." They side instead with Hamas, demanding the extermination of the Jews. So much for free migration of all peoples!

There is such a thing as culture, and immigration beyond a certain point is just an invasion. Ask the native Slavs about the mass immigration of Magyars in year 850, or Native Americans about the immigration of Europeans. Some warn that Sweden will become a majority-Muslim country by 2040--after which the several thousand year old Scandinavian culture will simply disappear.

The Bureau-crats
...demand the right to migrate: freedom of movement and settlement. As internationalists we believe it is a fundamental right of every person to be able to live with dignity and enjoy all the political and social rights of the country where they reside.
This is just silly. No human society--capitalist or otherwise--has ever agreed to such a program.

The problem is most acute in Europe, adjacent to both Africa and South Asia--the only bits of the world where human populations are still rapidly growing. European fertility rates are so low that native populations are shrinking. The Bureau opines that "[t]he numbers arriving in the North – representing there between 0.5 and 1.5 per cent of the population – could easily be assimilated." They don't say as a percent of what, but I assume it's of the native population. Over twenty years, coupled with high immigrant birth rates, leads to the pickle that Sweden finds itself in right now. And no, these new immigrants cannot be easily assimilated.

The situation in the US is less dire, partly because we're such a big country, and mostly because fertility rates in most of Latin America are barely above the US average (if that high). Further, migration from Mexico is now reversing, with many returning to their home country. This is in part because of the significant improvement in the Mexican economy over the past 20 years.

To clarify the Bureau's errors, let's pick a hypothetical example. A certain Mrs. Wetback arrives illegally in Los Angeles with her six year old son. I pick that name not merely to pull the Bureau's chain (though that, too), but because it symbolizes a lot about her. She is from El Salvador, about 40 years old, illiterate, does not speak English, and has endured great hardships to come to the United States.

Mrs. Wetback's motives were not just economic, but also to avoid violence. The basic political unit in El Salvador is the street gang--and her neighborhood had become a battleground between rivals. The result was it became harder and harder for her to keep her $3/day job--she took her life in her hands just going to work.

In Los Angeles she gets a job as a nanny, caring for the children of Mr. & Mrs. Johnson. It's not a live-in position--she spends 90 minutes on the bus getting to work each morning. She is paid $7/hour in cash, weekly, but with no benefits. Her daily pay is $42, or 14x what she was earning in El Salvador!

About which the Bureau remarks:
As often in the past, migrants suffer a double exploitation, especially in some “exemplary” sectors like agriculture, logistics or social care.
By their lights Mrs. Wetback should be paid at least $15/hour with full benefits. Or better yet, she shouldn't have to work at all, but instead depend on welfare and free public housing.

Mr. Johnson is a truck driver, and is often away from home several days at a time. Mrs. Johnson is a nurse, and while she makes good money, she works overtime as often as she can. Between the two of them the couple bring home about $120K annually before taxes.

Mrs. Johnson is paid $30/hour, which after paycheck deductions yields her $20/hour. From that she has to pay Mrs. Wetback $7, leaving her $13/hour as a net profit from her labors. That's less than the Bureau's minimum wage.

If the Bureau gets its way, Mrs. Wetback will need $15/hour, plus benefits, which means that Mrs. Johnson takes a net loss. Obviously she would then stay home and take care of her own kids. Mrs. Wetback will be unemployed. The net effect of the Bureau's demands is to make everybody poorer.

So here is an interesting question: Why does Mrs. Wetback get a 1400% raise just for crossing the border? The standard answer is because American productivity is much higher than Salvadoran. Certainly Mrs. Wetback isn't any more productive--she still can't speak English, nor can she read or write. But her employers are more productive, which means they can afford to hire her (unless the Bureau succeeds in reducing everybody to poverty). In El Salvador very few people can afford nursing care or fresh fruits from foreign countries--so there's less need for nurses or truck drivers. Which means that Mrs. Wetback earns less money. Much less.

Mrs. Wetback benefits from being around rich people because rich people can afford to pay her money. The Bureau's solution is to confiscate the wealth of all the rich people, after which Mrs. Wetback's only option will be to go on welfare and become a slave of the state.

Meanwhile, Mrs. Wetback and her son settle in a Salvadoran neighborhood. As with all such neighborhoods the political unit is the street gang. As a teenager her son does what he has to do--he joins a gang, meaning in all likelihood he'll get killed or end up in prison.

So much for assimilation.

Further Reading: