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Economy

Who are the elites?, by Alberto Mingardi

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In my blog post on Helen Dale’s article on liberalism and technocracy, I asked who is an expert – how can we see somebody qualifies as such? The same question can, and should be, asked about “establishments” and “elites”. This is hardly irrelevant now that so many of our political champions/advocates are vehemently “anti-establishment”, but it is sometimes difficult to understand what they mean by that. Is Trump “anti-establishment”, even though he has been in office for three years now? Are true “anti-elites” the many University professors who criticize both the political and the business elites, in spite of the fact they themselves live in neighboring circles?

Martin Gurri thinks that behind the current waves of the anti-establishment movement stands the way in which public opinion has been disrupted by digital innovation, which has somehow leveled down the public debate. The Internet killed arguments “ex authoritate”, perhaps forever. The legitimacy of a given opinion or view used to stem from the fact its holder belonged to a certain institution; now, such a link between an institution and the authority bestowed upon ideas is becoming weaker and weaker. This may not be all bad when one reflects on the nature of elites. The reason people are on top is often simply that they have been there before. Gurri maintains that elites

are herd animals, who graze contentedly on the upper reaches of the institutions that sustain modern life. They are political people, government people, media people – members of some established order that amplifies their reedy voices into thunder, and wreathes their coiffured heads with high status and prestige. The most remarkable thing about them is how unremarkable they are, once they step down from their lofty perches.

Elites are there because they were there, so to say, and they tend to “export” themselves one field to another. For Gurri, they share

“a worldview and an attitude. The worldview is as old as Plato’s Republic and as contemporary as a Hollywood red-carpet walk: those who possess power and fame are believed to own an equal measure of virtue and intellect, otherwise, why are they there? Success, in other words, is always deserved. In a just society, many are called, but only sturdy pillars of the establishment must ever be chosen. They are the Platonic guardians of the modern world”.

Such confidence makes elites think they are best: sometimes, they are simply more organized, more compact, more homogeneous- and therefore capable to keep their grip on society. Yet from the great Italian “discoverers” of elites theory, from Mosca and Pareto onward, such grip is seen as dependent upon the rest of society recognizing elites are on top because they should be. Whatever form legitimacy takes (from the divine right of kings to liberal democracy to socialism), it defines why a certain group ought to be enjoying political power at the expense of the others. Vilfredo Pareto thought that elites were complex networks which, far from being monolithic, had constantly to renew themselves by co-opting—by whatever mechanism—new talents to avoid degeneration and decline. Yet if they closed themselves down that decline can accelerate sharply. I think it will be interesting to see how this broad scenario applies to the current crisis of elites- and in the face of almost endless talk about “diversity”. Is it that the more Western elites became obsessed by talking up diversity, the less diverse in truth they became? I suppose this would be the (arch)conservative view. But at the same time, at least prima facie, it is hard to deny that elites have been better to spot and acquire talents on the outskirts of society in recent years than they have ever been.

Elites and experts do not perfectly coincide, but, in our world, because of the long wave of the Platonic dream—and also, quite frankly, of the fact of the ever-growing complexities of government—breed a worldview in which competence and knowledge (or the appearance thereof) is a key factor of legitimacy, they do somehow. An interesting perspective, in the face of the crisis of expertise and elites, could be that of elites that want to keep to avoid decline. It seems to me that this recent piece by Arnold Kling, annotating a conversation between Linkedin’s Reid Hoffman and Stripe’s Patrick Collison, can be read as such. Arnold’s tips may be enough for a business, or a think tank, or a university department – but not sufficient as a tip for the upper strata of society as such. Still, there is plenty of good advice there for a persona of responsibility – to avoid, first and foremost, her own intellectual decline (which may mirror society’s one).

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Economy

Market Talk – January 28, 2020

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ASIA:

Global firms are stopping staff travel to China and urging their workers inside the country to stay out of the office as coronavirus has continued to spread from the central city of Wuhan to the rest of China and beyond. HSBC has banned all staff from traveling to Hong Kong for two weeks and to mainland China until further notice. Standard Chartered is also restricting travel to China and Hong Kong and asked their staff to work from home for 14 days after their return. Wall Street bank Goldman Sachs has told staff who have visited mainland China to work from home for the next fortnight. The virus has spooked stock markets over the past week amid the growing threat to the global economy. Airlines, hotel groups, and luxury goods firms have been among the worst hit.

Senior diplomat Taranjit Singh Sandhu will be the next Indian Ambassador to the United States. Mr. Sandhu, a 1988 batch officer of the Indian Foreign Service, is the current Indian envoy to Sri Lanka and will succeed Harsh Vardhan Shringla, who will take charge as the Foreign Secretary on Wednesday.

Qatar initially declined India’s request to delink the price of its imported gas from that of oil under long-term deals. India requested this negotiation in order to make supplies cheaper for price-sensitive customers after a sharp fall in spot prices of the cleaner fuel. “The current formula of benchmarking gas prices with crude oil is not correct,” India’s Oil Minister Dharmendra Pradhan, said after meeting industry officials including Qatar’s energy minister, Saad Sherida al-Kaabi, and Indian state-owned oil company officials. Kaabi said Qatar would not renegotiate pricing under the existing contracts and was ready to supply more gas to meet India’s growing demand for gas. Indian officials at the meeting said the negotiations had only started and will go on for some time. Qatar is the world’s largest supplier of liquefied natural gas (LNG) and wants to boost its production of LNG to 126 mtpa by 2027 and India is leading buyer of Qatari LNG.

The major Asian stock markets had a negative day today:

  • Shanghai closed
  • Kospi decreased from 69.41 points or -3.09% to 2,176.72
  • ASX 200 decreased 96.00 points or -1.35% to 6,994.50
  • NIKKEI 225 decreased 127.80 points or -0.55% to 23,215.71
  • Hang Seng closed
  • SENSEX decreased 188.26 points or -0.46% to 40,966.86

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.0003 or 0.04% to 0.6758
  • NZDUSD decreased 0.0009 or 0.14% to 0.6537
  • USDJPY increased 0.1970 or 0.18% to 109.1460
  • USDCNY decreased 0.01278 or -0.18% to 6.96762

Precious Metals:

  • Gold decreased 13.7 USD/t oz. or -0.87% to 1,571.11
  • Silver decreased 0.6227 USD/t. oz or -3.44%% to 17.4834

Some economic news from last night:

Japan:

Corporate Services Price Index (CSPI) (YoY) remain the same at 2.1%

Australia:

NAB Business Confidence (Dec) decreased from 0 to -2

NAB Business Survey (Dec) decreased from 4 to 3

Some economic news from today:

Japan:

BoJ Core CPI (YoY) increased from 0.2% to 0.3%

South Korea:

Consumer Confidence (Jan) increased from 100.5 to 104.2

Indonesia:

Car Sales (YoY) increased from -9.90% to -1.40%

EUROPE/EMEA:

EU’s chief Brexit negotiator said that the EU will never compromise the single market for anyone (referring to the UK Brexit talks). He mentioned the single market was the biggest strength the EU had.

The UK ministers attended the last EU meeting prior to Brexit on Friday. Foreign Office Minister Chris Pincher said the UK was “looking forward to the next chapter” in its relations with the EU.

US President Trump highlighted a proposed peace plan, with the creation of a Palestinian state with the capital securing a portion of Jerusalem. Trump called the deal a win-win for both sides. Israeli PM Netanyahu called the plan a “realistic path” for peace.

The Turkish Foreign Minister Mevlüt Çavuşoğlu wrote a letter to the EU urging them to consider expanding the EU to include Turkey and to be fair when assessing new member states, highlighting their own application.

A US military plane has crashed in Afghanistan, with two bodies being found amongst the wreckage. The cause of the crash is currently unknown. However, according to Iranian media (via Jerusalem Post) the CIA agent responsible for killing General Soleimani was on board.

The major Europe stock markets had a green day today:

  • CAC 40 increased 62.80 points or 1.07% to 5,925.82
  • FTSE 100 increased 68.64 points, or 0.93% to 7,480.69
  • DAX 30 increased 118.92 points or 0.90% to 13,323.69

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.00002 or 0.00% to 1.10202
  • GBPUSD decreased 0.00366 or -0.28% to 1.30224
  • USDCHF increased 0.0030 or 0.31% to 0.9729

Some economic news from Europe today:

Swiss:

Trade Balance (Dec) decreased from 3.950B to 1.964B

Spain:

Spanish Unemployment Rate (Q4) decreased from 13.92% to 13.78%

UK:

CBI Distributive Trades Survey (Jan) remain the same at 0

US/AMERICAS:

The Congressional Budget Office (CBO) forecast a 2.2% growth rate for the US economy in 2020, which is in line with other agencies’ growth forecasts. The CBO believes the federal deficit will stand at $1.3 trillion annually from 2021 until 2030, which is a figure that alarms many analysts. Furthermore, the agency expects inflation to increase at a notable rate until 2023 when it is expected to settle.

The Trump administration expressed dismay over the UK’s decision to allow Huawei access to 5G networks. “There is no safe option for untrusted vendors to control any part of a 5G network,” a senior White House staff member told officials this Tuesday. The US has reiterated concerns over intellectual security, worrying that Huawei may provide Beijing with a backdoor to sensitive information.

The second case of coronavirus was reported in Canada, this time affecting British Columbia. In a joint statement, provincial Health Officer Dr. Bonnie Henry and Health Minister Adrian Dix said, “All necessary precautions are being taken to prevent the spread of infection.”

The Public Health Agency of Canada denounced rumors that the coronavirus began at the National Microbiology Lab in Winnipeg. According to rumors, two Chinese spies were removed from the center last year and brought a strain of the virus back to China with them to be used in chemical warfare. The chief of media relations for Health Canada and the Public Health Agency of Canada, Eric Morrissette, called the rumors “misinformation” that have “no factual basis.”

US Market Closings:

  • Dow advanced 187.05 points or 0.66% to 28,722.85
  • S&P 500 advanced 32.61 points or 1.01% to 3,276.24
  • Nasdaq advanced 130.37 points or 1.43 points to 9,269.68
  • Russell 2000 advanced 14.18 points or 0.86% to 1,658.31

Canada Market Closings:

  • TSX Composite advanced 58.36 points or 0.33% to 17,500.88
  • TSX 60 advanced 3.95 points or 0.38% to 1,045.14

Brazil Market Closing:

  • Bovespa advanced 1,997.14 points or 1.74% to 116,478.98

ENERGY:

Oil prices moved up slightly today after a string of down days. Still, questions regarding the coronavirus and its potential impact to Chinese businesses are in question.

The UAE’s nuclear power plant’s first reactor is ready to start operations, Emirates Nuclear Energy Corporation (Enec) said on Tuesday. Nawah Energy Company, an operator and subsidiary of Enec, which is responsible for developing and managing nuclear energy in the UAE, said tests by an independent body concluded that unit 1 of Barakah in the Abu Dhabi desert is ready to generate energy. The UAE is the 33rd country in the world and the first in the Arab world to have an advanced peaceful nuclear energy program.

The oil markets had a green day today:

  • Crude Oil increased 0.59 USD/BBL or 1.11% to 53.7446
  • Brent increased 0.44 USD/BBL or 0.74% to 59.6409
  • Natural gas increased 0.0227 USD/MMBtu or 1.20% to 1.9090
  • Gasoline increased 0.0286USD/GAL or 1.92% to 1.5168
  • Heating oil increased 0.04 USD/GAL or 2.38% to 1.7146
  • Top commodity gainers: Heating Oil (2.38%), Sugar (2.18%),Oat (2.07%), and Gasoline (1.92%)
  • Top commodity losers: Palm Oil (-7.35%), Silver (-3.49%), Rubber (-2.14%), and Cocoa(-1.50%)

The above data was collected around 16.40 EST on Tuesday.

BONDS:

Japan -0.03%(+1bp), US 2’s 1.46% (+1bps), US 10’s 1.65%(+5bps); US 30’s 2.09%(+4bps), Bunds -0.38% (+4bp), France -0.09% (+4bp), Italy 1.04% (-0bp), Turkey 10.02% (-14bp), Greece 1.20% (-48bp), Portugal 0.32% (+5bp) Spain 0.32% (+3bp) and UK Gilts 0.55% (+4bp).

  • UK 10-Year Treasury Gilt Auction decreased from 0.794% to 0.500%
  • US 52-Week Bill Auction decreased from 1.550% to 1.490%
  • US 7-Year Note Auction decreased from 1.835% to 1.570%

 



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Economy

People are more consequentialist than they assume

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This confused me:

Most liberals have what I would characterize as a deontological opposition to discrimination. That is, they think that discriminating against or maligning someone on the basis of membership in a protected class — women, trans people, black people, and other racially oppressed communities, etc. — violates a rule that should be inviolable.

In this view, such discrimination (be it legal, or expressed through hate speech, etc.) is not just wrong because it has bad effects, or because it harms members of the groups in question; it’s wrong because we have a duty to treat humans as equals, and it is never acceptable to violate that duty, even when doing so seems politically expedient.

I’ve argued that liberals are basically consequentialists (more specifically utilitarians.)  This Vox article claims that liberal views on discrimination are deontological.  But the argument makes no sense to me.  If you deleted the term “protected” from the first paragraph, then it would make perfect sense.  But as written it looks like the author is claiming that the principle of non-discrimination only applies to groups where discrimination can and does major harm, and does not apply to groups where discrimination is not a big problem.  That’s probably a correct description of “liberal” (progressive) views on discrimination, but it’s a consequential argument.

I suspect this ambiguity reflects that fact that progressives are conflicted on this issue.  Deontological arguments seem more inspiring.  Think about the phrase “it’s a matter of principle”.  At the same time, progressives cannot easily escape their basically consequentialist moral intuitions.

This inconsistency is probably sensed (if only at an intuitive level) by the general public, which makes it hard for progressives to have electoral success on “identity politics” issues.  The public correctly senses that many progressive arguments are a bit phony.

PS.  On the right, white nationalists exhibit a similar inconsistency, wavering between deontological and consequentialist arguments.  They often try to justify their opposition to low income minorities on consequentialist grounds, but their sympathy for unsuccessful white groups (such as hillbillies) and distrust of successful minorities (Asians, Jews, etc.) is the “tell” that something else is at stake.)

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Economy

The Left's Plan to Make Cities More Powerful

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Why Cities Lose: The Deep Roots of the Urban-Rural Political Divide
By Jonathan Rodden
Basic Books, 2019
313 pages

Jonathan Rodden is unhappy. In American elections, Democrats often receive a larger number of votes than their Republican rivals, but they nevertheless frequently fail to win elections. “In most democracies, the path to victory is simple: win more votes than your competitors. For the Democratic Party in the United States, however, this is often not good enough.… Democrats must win big in the overall popular vote, as they did in the ‘blue wave’ elections of 2018 and 2006, in order to win a majority of seats in the House. The Democrats’ problem with votes and seats is even more pronounced in state legislatures.”

Rodden, who is a professor of political science at Stanford, specializes in political geography. In Why Cities Lose, he devotes enormous effort to finding out the reasons the situation just described has come about, but the gist of his answer is simple. Democrats are highly concentrated in cities, but Republicans are spread out in the suburbs and rural areas. As a result, a Democrat who wins in a city will likely gain a large majority. In our “first-past-the-post” electoral system, a large majority is no better than a narrow victory. The winner of a seat in Congress, for example, gets one seat regardless of the margin of his victory. “Surplus” votes do him no good. Republicans in rural areas are more spread out. Their votes tend to be more “efficient,” as Rodden puts it, than the wasted votes of the concentrated Democrats. They win by narrower margins but gain more seats. Rodden spends a great deal of time showing that partisan gerrymandering does not bear exclusive responsibility for the situation. Through careful comparison with Britain and the Commonwealth nations that have a “first-past-the-post” system but no gerrymandering, he shows that cities still suffer from “wasted” votes.

Rodden argues that proportional representation would change matters. Under this system, votes are not wasted. “There are important variations from one country to another, but in most cases, the country is divided up into a series of multimember districts, and within each district, every party receives a number of seats that is proportionate to its share of the vote.…In highly proportional systems with large districts, like those in northern Europe, the geography of a party’s support is largely irrelevant for the transformation of votes to seats. It is just as useful to have 30 percent of the vote that is highly concentrated in cities as to have 30 percent of the vote evenly dispersed throughout the country.” I have said that Rodden is unhappy with the dilution of votes in American cities, but why does he regard this situation as bad? (One might object that this misreads him; he is simply an objective political scientist describing and analyzing an important trend in voting patterns. But his dismay is unmistakable.) Speaking of countries in northern Europe with proportional representation, he says: “Above all, the proportional systems of Europe have developed larger public sectors, more generous social expenditure, higher levels of redistribution, and more stringent efforts at environmental protection.”

These are the measures Rodden favors, but then the question arises, what is so good about them? Not only does Rodden fail to tell us, but his way of looking at political values prevents him from doing so. He never discusses the reasons in favor of and against any “progressive” legislation. Instead, he amalgamates all political values into “objective” scales. “In joint work with Aina Gallego, I [Rodden] have selected a series of questions about abortion, homosexuality, and other social issues.…We used these questions to generate a scale measuring how liberal or conservative each respondent is on this set of social issues. We have done the same thing for classic economic issues related to the role of the government in the economy.”

Rodden might reply that he has done this purely as a way to analyze trends, and that he has not claimed to have shown that progressive measures are good and conservative ones bad. But if that is so, he has not given us any reason to endeavor to alter the urban-rural disparity in voting about which he spends so much time complaining.

One might object to what I have so far contended in this way: “Even if you are not an urban progressive, we do after all live in a democracy. Shouldn’t people be equally represented, rather than have fewer representatives than others? Isn’t it unfair that some votes pack more electoral ‘power’ than others?” To which our answer must be, “No, not at all. It depends on aims sought by those voting. People cannot legitimately invade the rights of others, and to the extent they try to do so, a weakening of their voting power is to be welcomed.”

As Murray Rothbard, writing in Power and Market, noted with characteristic wisdom: “Democracy may be thought of, not so much as a value in itself, but as a possible method for achieving other desired ends. The end may be either to put a certain political leader into power or to attain desired governmental policies. Democracy, after all, is simply a method of choosing governors and issues, and it is not so surprising that it might have value largely to the extent that it serves as a means to other political ends. The socialist and the libertarian, for example, while recognizing the inherent instability of the democratic form, may favor democracy as a means of arriving at a socialist or a libertarian society. The libertarian might thus consider democracy as a useful way of protecting people against government or of advancing individual liberty.” Like democracy, equal voting power isn’t an end itself, but valuable only to the extent it protects people’s rights.

A similar point applies to the proportional representation that Rodden favors. It is true that voters have more choices than they do in a system with only two parties, but whether this is good or bad depends on the nature of the choices. More choices for socialism are not a good thing. Further, European political parties in proportional systems are often rigidly controlled by the central party organization. Those who vote against the party’s dictates will be expelled from the party. Voters have a choice only between ideological platforms, not persons.

Rodden at one point adopts a more sensible position. Given the unalterable fact that people differ so widely in their political preferences, is it not desirable to deal with problems at the state or, even better, local level rather than to engage in a futile effort to impose the same policies on diverse regions? “As federal politics becomes increasingly mired in gridlock, investigations, and partisan posturing, voters come to rely on state and municipal governments for practical policy solutions to everyday problems.…As long as people with strong preferences are clustered conveniently into different jurisdictions, decentralization can, at least in theory, increase the number of people who are satisfied with government policy.”

But decentralization from his perspective is of limited value. “A broad constraint on decentralization as a way of managing polarization is the fact that local governments must often compete with one another.…Wasteful taxes and regulation and poor governance can lead to capital flight, which forces local governments to be prudent. For the left, this has always been a liability, not an asset of decentralization. Strong labor unions and protections for workers were hard to maintain in the North when southern states began competing for investment, and today, intergovernmental competition makes it difficult for blue cities and states to enact generous welfare policies or costly regulations.” (Possibly, though, what Rodden calls the “third industrial revolution” may brighten the prospects for a leftist local government, at least in the wealthiest cities.)

Contrary to Rodden, the path to progress does not lie in tinkering with our political system to make it easier for the Left to enact its political and social agenda. Instead, we need a free people living in a free market.



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