And Then There Were None

According to Spanish Prime Minister José Luis Rodríguez Zapatero speaking in an interview with the Wall Street Journal last Tuesday the European sovereign debt crisis is over. “I believe that the debt crisis affecting Spain, and the euro zone in general, has passed,” Mr. Zapatero said.

This is excellent news, but it comes with just one proviso, and that is that despite all such reassurances most financial market participants seem to be far from convinced that he is right. True Spain recently raised nearly €4bn in a successful government bond sale, with some observers suggesting the sale constituted but one more sign that what is still the eurozone’s fourth-largest economy had finally broken free from the group of “peripheral” European economies who have severe economic problems and whose debt is viewed by investors as especially risky. Continue reading


More sunshine. Bloomberg:

So-called warning strikes by steelworkers at ThyssenKrupp AG and Salzgitter AG that began yesterday will “definitely” continue unless employers meet demands for 6 percent more pay, Helga Schwitzer, an IG Metall board member responsible for wage negotiations said in a Sept. 21 interview in Frankfurt.

While exports give Germany a “very strong leg to stand on,” increases are justified because the recovery is at risk without consumer spending, Schwitzer said. “If you’re only standing on one leg, you start to limp,” she said. “The second leg, domestic spending, has to be strengthened.” ..

“We could use a level of redistribution in this wage round, but we shouldn’t overdo it,” Andreas Scheuerle, an economist at Dekabank in Frankfurt, said by phone. “Pay increases would mean a win for the domestic economy, but it would come at the cost of exports.” ..

The government should use its trade surplus, the European Union’s biggest, to “foster domestic demand and ease reliance on exports that are contributing a huge trade imbalance on the euro-zone’s periphery,” said Juergen Kroeger, a director in the EU Commission’s Economic and Financial Affairs department.

“Why aren’t we paying people higher wages in this country?” he said Sept. 13 in Berlin. “That might be a start.”

Premature evaluation – The Spirit Level

Richard Wilkinson and Kate Pickett’s The Spirit Level is a vigorous polemic for social democracy, something we’re probably in need of as the neo-liberals recover from the 2008 experience.

Unlike most such, this one is based on data – specifically, a whole battery of socioeconomic indicators that turn out to be strongly correlated with income inequality. In fact, the paperback comes with a handy table of the R-squareds and p-values of all the indicators used, which range across life expectancy, imprisonment per capita, patents issued per capita and much else. Everywhere, it seems, more egalitarian societies tend to do better.

This observation is rather more impressive than quite a bit of the book – there’s too much back-of-a-fag-packet neuroscience of the sort that actual neuroscientists run a mile to avoid about mirror neurons and such, as well as a fair bit of 1970s-ish romanticisation of the supposedly ideal status of hunter-gatherer societies. Steven Pinker’s work on the history of violence hasn’t landed here; in places it’s almost nostalgically sweet.

The data, however, speaks for itself. It’s true that quite a few of the charts derive a lot of their correlation from a few outliers, but the outliers invariably point to the same results – specifically the United States, which reliably turns out to have truly awful results for many, many tests – and also very high inequality. Similarly, there are a whole string of statistics that are driven by a group of post-Soviet states that turn out to be dramatically unhappy, conflicted, violent, unhealthy, etc for their level of income; of course, these societies underwent a historic explosion of inequality.

Many of the results have been checked by carrying out the same analyses with the 51 US states, which gives rise to the same conclusion and another crop of interesting outliers. The states of the Deep South are reliably terrible. They are highly unequal, and they get the effects – but they are far off to the top right of the trendline. In a sense, their marginal productivity in terms of inequality is unusually high – for every extra point on the Gini coefficient, they manage to produce a sharply higher degree of suffering than the national average.

On the other hand, there’s the importance of being urban. The more metropolitan the state, the less it suffers from the impact of inequality – New York has the social problems of the average, despite being very unequal. And there’s the Alaskan question.

The Alaskan question? Many people on the left are keen on the idea of a citizens’ basic income, and oddly enough, there is one territory with one in this study. Alaska, famously, distributes its oil revenues equally among the citizenry, and is therefore the most equal society in the United States. However, it also succeeds in being reliably among the worst on every other measure you can think of. Clearly, the statecraft of Sarah Palin must have some impact, but it’s equally clear that it can’t be the whole explanation.

Unless there is some huge missing factor that invalidates the whole data set, we have to consider that this particular basic income experiment has failed to deliver the benefits of equality. Alaska is, of course, a very special and atypical place – but it’s not that different to, say, Norway, another sparsely populated, mountainous, northern territory bordering on Russia whose economy is heavily influenced by oil and gas, forestry, fishing, and metals and whose government decided to take a radical approach to the oil revenues, and where a lot of people own guns. And Norway is both very egalitarian and reliably in the very top of all the metrics in The Spirit Level.

Perhaps the answer is precisely that the Alaskan basic income is free money? Despite all the stuff about mirror neurons, etc, etc, it seems that the trade secret of equality is – equality. It takes a long time for Wilkinson and Pickett to get to this, but the difference between handing out oil windfalls and real egalitarianism is that only one of them is founded on a different balance of power between classes. A lasting reduction of income inequality must be founded in a lasting reduction in the inequality of political power – otherwise it may not last, and it may not even have much effect.

Another interesting point is that changes in relative economic success among nations seem to have little effect on human happiness or security. Obviously, a total crash will do it. But once a certain threshold level of per-capita GDP is passed, Wilkinson and Pickett argue, pushing into the G8 doesn’t change much. They therefore argue that economic growth is useless. However, they then note that a whole range of their metrics, like life expectancy, do seem to go up a percentage point or two a year in the rich nations anyway. Which sounds a lot like growth.

It might be more accurate to say that growth relative to other industrialised states is not particularly important within the normal range of variation, although in absolute terms it is. However, the chart in question is quite heavily driven by the US outlier – which suggests that the costs of enough inequality will essentially swallow all your economic growth.

Eventually, the upshot of TSL is that the world, and especially China, needs trade unions.

Leaking Oil Well Rocked By Massive Explosion

So they capped the leaking oil well in the end. What about the other one? Not so much.

Back before the summer break, we’d just had the eruption of the “microparties”, and Nicolas Sarkozy had discovered that it was suddenly imperative to lock up gypsies. Everyone knew very well that the scandal would take the summer off, getting out of Paris to the sea as if it was itself a character in the story. And now, it’s back. There’s been a certain amount of fallout about the Roma, by the way; this week’s leak reveals that Brice Hortefeux’s original circular to all prefects did indeed mention them by name as an ethnic group, which isn’t meant to be something that the Republic believes in. In fact, that’s precisely what Immigration Minister Eric Besson has been saying in public – so he’s been left to protest that he didn’t get the e-mail.

This is, however, now a side issue, one with the passing summer, even though the European Commission is officially displeased. As August came to an end, a few new tarballs began to wash up on the beaches. Eric Woerth turned out to have intervened to get Patrice de Maistre, Liliane Bettencourt’s financial adviser and his wife’s employer, a Légion d’Honneur. He’d initially denied this. Then, Le Canard Enchainé ran a slightly gnomic story mentioning that one David Sénat, an official on Justice Minister Michéle Alliot-Marie’s staff, had been forced to resign.

The significance of this has just become more obvious than it perhaps was.

Le Monde opened this week by announcing on the front page that the newspaper was about to bring criminal charges alleging that persons unknown had been spying on communications between one of its reporters and a source. Communications between journalists and their sources are legally privileged in France under a measure introduced by Nicolas Sarkozy. The source, it turns out, is none other than David Sénat, and in practice, the persons unknown can only have been agents of the state.

Wham! It’s a gusher!

The UMP, through its general secretary Xavier Bertrand, responded immediately:

Pourquoi un journal comme Le Monde se permet d’accuser sans preuve, pourquoi une telle agressivité du journal Le Monde?

He also blamed the Socialists and the Communists and claimed there was no proof of anything in the story. This may not have been the best decision ever, as within the day, the Director General of the National Police confirmed in an interview with the same newspaper that the DCRI – Central Directorate of Internal Intelligence, the reorganised counter-intelligence agency – had indeed carried out an investigation into leaks to the press in which they had monitored Sénat’s office phone. To sum up: Le Monde alleged that the DCRI had been ordered to find out who was communicating with the press, had “examined” Sénat’s phone, had demanded communications data from a mobile operator, and had identified Sénat. Bertrand denied all this.

The DGPN Director then confirmed that the DCRI had been ordered to find out who was communicating with the press, had examined the phone, had demanded data from the operator, and had identified Sénat. Xavier Bertrand would therefore appear to be in a certain amount of trouble.

The only difference in their accounts is that the DGPN Director denies that they intercepted Sénat’s phone calls, only that they retrieved the call-detail records showing who he had been telephoning, when, and for how long (and also possibly from where and under which billing codes). He seems to be relying on this distinction to claim that this exercise was legal. Le Monde‘s sources, whose PGP keys are presumably getting a workout, claim that they also obtained geolocation data.

Keen and agile minds will recall that this is precisely the argument the US National Security Agency asserted in the case of STELLAR WIND, its mammoth and illegal Bush-era surveillance operation which also relied on the analysis of CDRs rather than on the interception of calls. It is a telecomms industry truth that the real business is all about signalling and billing and operations support – telephony itself is a relatively small part of the machine. This is never more true than in surveillance cases.

It does not seem to be the strongest argument ever that journalistic sources are protected as to the content of their communications but not as to the fact of being a source, but that’s a matter for the courts. The police have also claimed that they ran the idea by the national commission for the supervision of surveillance, which unfortunately denies this as well, and it seems to be confirmed that the leaks in question were ones about the Woerth-Bettencourt affair.

Who is David Sénat, anyway? A judge by training, he’s been working for MAM for years, at the ministries of Defence, the Interior, and now Justice, and also in her capacity as head of the RPR in its shadow existence as part of the UMP.

MAM considered running for president in 2007, during the period when it appeared that the traditional Gaullist wing of politics and the circle around Jacques Chirac might stand a spoiler candidate to derail the Sarkozy campaign. Not surprisingly, she’s considered much more of a conservative conservative than Sarko, and a potential future presidential candidate. Even her microparty seems designed to contrast with either Sarko’s Rolex-and-yacht look or the IT-director professionalism of someone like Francois Fillon – it’s called Le Chêne, The Oak. Feel the Burkean traditions on that. So the fact that…someone…called the spooks on her office implies a certain tension, to say the least.

Meanwhile, the “someone”? Who he? Well, the President did have the DCRI investigate the source of rumours about his wife. So he’s got form for making use of the intelligence services personally. She’s in the news as well, by the way:

..avoids charity work, held up filming on Woody Allen’s Midnight in Paris, and had three former lovers as houseguests when Nicolas Sarkozy first visited her Mediterranean villa.

Who was it who said that the cavalry lent tone to what would otherwise be a vulgar brawl?

Anyway, it’s hard to overstate and understate the importance of this story. Imagine if the Bush administration had been spying on the New York Times‘s phone calls to, say, Valerie Plame – not perhaps the biggest leap of fantasy ever undertaken – and the Times both detected this somehow, and called the FBI to 1600 Pennsylvania Avenue, under a source-protection law introduced by the same administration. On the other hand, the weirder any political scandal gets, the greater the pressure to find some sort of amicable resolution. (See the quote above.) The system, after all, must preserve itself. But the exit strategy from here is very far from obvious.

Press freedom in Ukraine: bad, worse

Just three months ago I wrote this about Ukraine’s new President:

Yanukovych’s young administration is interesting for two things: what he’s done, and what he hasn’t… [S]o far, he hasn’t cracked down on Ukraine’s lively press and media. Nor has he moved aggressively to purge the judiciary and the civil service, bring corruption indictments against political rivals, or change the laws to make himself and his supporters immune to investigation or prosecution… Watch this space, I guess.

At that point Yanukovych’s administration was just a few weeks old. Unfortunately, a lot has happened since then:

Most television networks in Ukraine are now owned by oligarchs friendly to Yanukovych. The most-watched Inter channel belongs to State Security Service chief Valeriy Khoroshkovskyy. The nation’s top spy also serves on the High Council of Justice, which appoints judges…

Khoroshkovskyy has maneuvered to expand his media empire through court actions against his competitors, the independent outlets Channel 5 and TVi. In June they were stripped of their broadcast frequencies. A journalists’ group, Stop Censorship, demonstrated outside a recent court session that confirmed the decision… their action was not covered on central television stations.

Khoroshkovskyy also sits on the Board of Directors of Ukraine’s Central Bank; he’s been an ally and backer of Yanukovych for years.

Meanwhile, the crusading editor of a local newspaper has disappeared and is presumed dead:

The one fact everyone agrees on is that Klymentyev vanished. His family reported him missing the next day and Kharkiv police opened a murder inquiry. His friends are convinced he is dead, though so far there is no body. On 17 August a boy discovered his mobile phone and keys in a small rubber boat floating in a rural reservoir…

Klymentyev’s friends and colleagues say they have no confidence in the official investigation into his disappearance. The journalist was a savage critic of local prosecutors who have now been given the task of finding his killers.

Meanwhile, in the background, the laws on press freedom are being amended:

A law protecting personal information, signed by President Yanukovych on 26 June and due to take effect in January 2011, will significantly complicate the work of journalists and expose them to the possibility of criminal prosecution. Under this law, journalists will have to ask a person’s permission before publishing virtually any information about them aside from their name and surname… Draft law No. 6603, which has been submitted to the Verkhovna Rada (parliament) following approval by the cabinet on 30 June, would require news agencies to register with the state every year. Disseminating news without being registered (or re-registered) would be punishable… The bill has been criticised by [free speech organisations] as an attempt to bring Internet media under political control by treating them as news agencies.

Reporters Without Borders came out with a report in July, but the media situation has continued to deteriorate rapidly since then.

In retrospect, this is exactly what one would have expected. Yanukovych was always an authoritarian — it was part of his appeal — and many of the people around him are worse. Still, it’s pretty depressing. Relatively high levels of press and media freedom was one of the few clear accomplishments of the Orange Revolution. It’s clear now that those freedoms are going to be rolled back; the only questions are how fast, how far, and how permanently.

the political thought of 1890 with the genetics of 1890, in 2010

There’s been a great deal of fuss about the Bundesbank director Thilo Sarrazin’s book, in which he argues that the “upper layers” of German society ought to be encouraged to breed for fear of Muslims, etc, etc. The SZ points out here that he confesses to just making up his numbers:

Es ging um die Frage, woher Sarrazins viel zitierte, im Brustton der Faktizität vorgetragene Behauptung eigentlich kommt, dass siebzig Prozent der türkischen und neunzig Prozent der arabischen Bevölkerung Berlins den Staat ablehnten und in großen Teilen weder integrationswillig noch integrationsfähig seien. Sarrazin gab zu, dass er keinerlei Statistiken dazu habe. Er gab zu, dass es solche Statistiken auch gar nicht gibt.

But I’m not sure if anyone has pointed out quite how strange Sarrazin’s thinking is.

Für ihn ist die Unterschicht sowieso schon lange abgeschrieben, der Genpool degeneriert. Denn bereits seit dem 19. Jahrhundert sei die deutsche Gesellschaft immer durchlässiger geworden, “auffallende Hochbegabungen” hätten damals in Preußen bereits die Möglichkeit bekommen, das Gymnasium zu besuchen. “Das bedeutet aber, dass die Entleerung der unteren Schichten von intellektuellem Potential bei uns weiter fortgeschritten ist als in Gesellschaften, deren Durchlässigkeit sich erst später entwickelte.”

He thinks, or at least claims to think, that because the German (and specifically Prussian) education system has given the lower classes the opportunity to go on to higher education since the 19th century, Germany has a problem – the masses have been emptied of “intellectual potential” too early.

What strikes me as telling here is that it’s not just that Sarrazin’s political thought is trapped in the Wilhelmine era – his understanding of genetics is, too. This post of Razib Khan’s on the great early-20th century debate between the biologists who rediscovered Gregor Mendel’s work, and the biometricians, who had been trying to link data gathered on the range of human traits with the Darwinian inheritance, explains why.

The biometricians were essentially trying to operationalise Darwinism with early statistical methods. This gave them a problem; a lot, but not all, of the variation in biological traits at least seemed to be nice and smooth, movement along a well-behaved curve. With no other model of inheritance available, they assumed that genetics was a simple process of blending – children were an average of their parents. This had wide-ranging consequences; it implied that regression to the mean would apply to people. We would all eventually be average. From there, it wasn’t hard to predict that we would all, eventually, be mediocre and that racial degeneration was inevitable.

This is one of the great intellectual accident black spots – a nauseous gap in the barrier by the roadside. Experimental work, like Mendel’s, showed that something else was happening. One of the problems was that statistics itself needed to advance to resolve the debate. There is a very good reason why Francis Galton was both an important early statistician and a eugenist, and why it would eventually be a statistician, R. A. Fisher, who demonstrated that a Mendelian process was observable in the biometric data.

But by that time, the original mistake had set off a great avalanche of analogies. Social Darwinism and everything that followed from it was out there. It’s a horrific thought that its consequences have a lot to do with statistical methods, and it’s telling that Fisher published in 1918. The important point about Mendelian genetics is that it’s discontinuous – it doesn’t blend down to the average. Variation is conserved; not only will the German working class continue to produce bright kids, the elite will occasionally toss out a Sarrazin.

Spain’s Economy Re-enters Contraction Mode In The Third Quarter

Well, that didn’t last long, now did it. Two consecutive quarters of minimal GDP growth seem to have exhausted the forces of a more than fragile Spanish economy. All the post-June data we are seeing suggests the economy has now turned the corner (in the bad sense), and we should expect a negative quarterly GDP reading in the July to September period. Continue reading

The Odd Couple

The modern world moves at a breathtaking pace, even when most of us find ourselves on holiday. No sooner do we receive, read and start to digest one set of economic data than we find ourselves pushed to think about what the next set will look like. The clearest recent illustration of this undoubted reality is to be found in peculiar twist of events which meant that just as the news reached us that the German economy had expanded at a record rate in the second quarter, at almost the very same moment Federal Reserve officials meeting in Washington decided to significantly downgrade their economic outlook for the United States, saying the “pace of recovery in output and employment had slowed in recent months” and was likely to be “more modest” than anticipated in the near term. But this followed a month of May when it seemed Europe’s economies were on the brink of disaster, while over in the United States some sort of recovery was on the cards. Continue reading