Archive for June, 2016

Brexit or 2016 and all that

June 29, 2016

“Every might at six o’clock Alvar Liddell brought us news of fresh disasters. ….Never you mind the thousands of dead, I said, you put on the kettle and we’ll have a nice cup of tea.” (Beyond The Fringe skit).

What will happen next? The most accurate answer is that no one knows. We are pretty good at reporting what has happened and fairly hopeless at what will happen after some major event. In order to have forecast today’s global economic circumstances, investment advisor John Maudlin writes as follows (from his website for June 25, 2016).

“If I had come on to this stage four years ago and told you … that we were going to have 40% of the world’s governmental debt at negative interest rates, $10 trillion on central bank balance sheets, and $10 trillion worth of dollar-denominated emerging-market debt, and that global GDP growth would average only 2%, unemployment would be below 5%, and interest rates would be negative in much of the world and less than 50 basis points in the US, you would have laughed me out of the room. You would have all hit the unsubscribe button. Today’s world was unthinkable a mere four to five years ago.”

Maudlin causes pause for consideration for those who think that anyone has a good grasp of what is likely to happen in the political-economy sphere over the next five even two years. Economic and political forecasting is far less reliable than weather forecasting and that’s not saying much. The forces of globalization perhaps sums up what is happening, but that overused term needs interpretation and refinement in today’s world.

What appears to be happening?

The Brexit vote is described by some as a tectonic shift in world events. I have my doubts. In the past 110 years there have been two world wars, many smaller ones, as well as a great depression and numerous recessions. Another source of disruption is technological change. It has affected a wide range of activities with the introduction of the steam engine, trains, planes, ships, cars and more recently computers and communications technology. Schumpeterian “creative destruction” took place. Economies were shocked by these technologies, but adapted, sometimes more quickly than others, and life went on. Some people were affected more than others, but in general the standard of living in the world improved. There were winners and losers.

Coinciding with these developments world population was increasing, so that whereas median world income rose there would be more people in the lowest quartile of incomes. It’s a good or a bad news story depending how you spin the statistics. If your income is below the mean today, you are worse off than those above it, but you may be significantly better off than those below the mean twenty or fifty years ago.

With many more people, the current world economy also has more international trade and investment, and more crossborder movement of people as migrants, workers, tourists, criminals and refugees. Developments in communications technology allow people in different countries to have immediate information about conditions around the world, including through the use of social media. In this sense, the world has shrunk, not physically but in the ability of people to be informed about what is happening elsewhere, and in being able to visit and trade with each other. Just listing and mapping trade and investment agreements between countries produces a spider’s web of people and firms connecting around the world.

A similar set of linkages can be mapped by listing the supply chains of firms manufacturing goods and services. The inputs of items like cars come from many countries where part of the value-added is undertaken before shipping to another location in the same or another country. A Japanese car sold in North America may have been made there with few actual Japanese inputs.

Along comes an event like Brexit. Some view it as an unraveling of the movement towards economic and political union in Europe since 1945, and a return to nationalism and the antagonisms between nation states, especially if other countries decide either to leave the EU or weaken their ties to it. Others see it as a restoration of state sovereignty and the desire of countries to shape the social and economic environment within their borders. For reasons similar to why clubs are formed, people want to live beside other like-minded persons, as they do in neighborhoods, clubs and religious communities. Concerns are raised because state sovereignty can lead to nasty nationalism, but this is something that the promotion of human values tries to ameliorate, not always that well as the record of conflict shows.

My take is that things will settle down as people and firms view their options and make adjustments. These will occur in trade agreements, defense alliances, the way industries are structured and organized, .and the ability of people to move between countries.

What is the alternative?

If Brexit had not occurred something else would have to relieve the pressures caused by a combination of the crossborder movement of persons whether as refugees, illegal migrants or others, the debt situation outlined in the Maudlin quote, and the environmental movement.

The last does not seem part of the Brexit debate. It takes place in other circles but will likely become part of the dialogue. My take on this is that there are obvious visible signs of environmental problems such as air pollution in Asian cities, and water pollution in rivers, lakes and oceans. The plastic junk pictured in the Pacific and other oceans is a visible cause of concern with viable alternatives available to address the situation. The link between human activity and global warming is, in my mind, an interesting hypothesis but not one where the facts collected so far confirm the linkage, but that is for another day.

As far as Brexit is concerned, it will cause adjustments to be made. If the vote had gone the other way, the pressure for change would still have been there and would have become manifest in other ways. The pressure for change exists in continental European countries for reasons similar to that in the UK. In the current US presidential campaign, the desire for change is manifest by the widespread support of Trump on one side and Sanders on the other, together with a visceral dislike for Clinton by some. But for now as the opening quote said about the WW2 bombing of Britain,

“Never you mind……you put on the kettle and we’ll have a nice cup of tea.”

The Idea of Canada – a review

June 21, 2016

David Johnston, The Idea of Canada, Letters to a Nation (Penguin 2016).

A challenging topic is addressed in an interesting and highly readable style. The contents certainly justify the title, which should be required reading for all foreign diplomats posted to Canada, and probably all Canadian officials posted abroad. Although not written as a history of Canada, it is one, with morsels of the historical record in each chapter. Each is written as a letter to some Canadian or foreigner past or present who has excelled in some manner. Many could be expanded into a chapter for understanding some aspect of Canada.
The Idea of Canada could also be used in school and university classrooms for the presentation and discussion of Canadian history, a subject woefully under-taught at the moment, judging by what students today seem to know about their country. It would also require that teachers having a better knowledge of Canada, which I fear may often also be missing. My understanding of the country is vastly improved by this book. Especially how the parts fit together and how values have emerged.

The author’s hero is Samuel de Champlain (1574 – 1636), one of whose skills was to learn about coping with all aspects of the environment, from those already living in what was to become Canada. (Note, these natives were themselves immigrants from earlier years as humans moved out of the African continent. All Canadians are immigrants of some generation. I am one from 1956). As an individual, Champlain achieved on land and sea with the limited technology available, at least by today’s standards, what NASA is achieving in exploring space supported by vast amounts of public funding.

Foremost in David Johnston’s life is his family, especially six womenfolk and twelve grandchildren, who continue to educate him. Through their lives and work they provide linkages to various aspects of Canada, especially those related to current conditions.

In the letters the author has written to a wide variety of persons, the combination of people, places, values, and events become both summarized  and intertwined, providing material for understanding Canada’s history. Few are able to take these pieces and fit them together so that the jigsaw becomes a comprehensible picture of a society, and what can be viewed as a nation. The author has done this.

The sections of the book are entitled What Shapes Me, What Consumes Me, and What Inspires Me. Summarized in each section are topics such as education, caring, innovation, philanthropy, volunteerism, and support for families and children. Many of these are in letters written to Canadians who have won awards in one of these areas.

Readers will have their own “aha” moments. One of mine was p.179  “…I’m a regular churchgoer, I tend not to get caught up in the doctrinal aspects of religion. To me church is a way to connect with friends and neighbours to get a sense of the views of others…..” (Though both my grandparents were vicars, I am not a regular churchgoer, but I understand how the various aspects of religion may satisfy individuals and contribute to societal wellbeing, as does club membership).

It would be easy to extend this review, but I recommend that readers read the book themselves, find out what interests them, and use it for discussion purposes. Each chapter is short, well written, understandable and thought provoking….easy to pick up and put down.

Galileo would be smiling

June 14, 2016

The climate debate

  • A lethal phrase about a highly contentious issue is that “the science is settled”. Climate change is one such subject. There is an ever expanding literature claiming that human activity, and especially the presence of carbon dioxide (CO2), is responsible for global warming. Galileo must have felt like today’s climate deniers, when he asserted that the earth rotated around the sun thereby contradicting the religious experts. Although eventually proven right, Galileo had to appear before the Inquisition whose membership of learned clerics held the opposing view that the sun circled the earth. In the end the clerics were found out to be charlatans. (The film The Name of the Rose, and in a lighter vein a Monty Python skit, illustrate how the Inquisition worked in a less than politically correct manner.) My colleague Michael Hart explains this and much more in Hubris: The Troubling Science, Economics, and Politics of Climate Change.

 

  • I enter this debate with no background in climate research, having written nothing on the subject except a blog posting on Dec 8, 2014 (cmaule.wordpress.com). But after a half century in academia, I do have some ability for detecting bullshit, how it gains financial backing and then becomes considered a financial entitlement.

 

  • The essence of the global warming argument goes something like this. The temperature of the earth varies over time, by the hour, season and era, either rising or falling. In the past few decades it has been stable, but in the last decades of the twentieth century, it rose by perhaps as much as half a degree. Human related activity is thought mainly responsible by causing increased CO2 in the atmosphere. The consequences are bad if not catastrophic for humanity, and thus the need to introduce policies to prevent the rise. So goes the argument.

 

  • This doctrine has a large following around the world, and those who think otherwise are viewed as heretics. Elected politicians dare say nothing critical for fear of offending true believers, while pouring forth policies to support it. A recent example is the Ontario government’s Five Year Climate Change Action Plan, 2016 – 2020 – see (http://www.applications.ene.gov.on.ca/ccap/products/CCAP_ENGLISH.pdf).  There are many others in the bible of climate change.

 

  • (As an aside, less than flattering commentary is made about how Ontario has dealt with similar policies to-date.  “ The Liberal Government brought in the Green Energy Act and signed multibillion-dollar deals with manufacturers of solar- and wind-power parts and were very proud of it, and then they watered down parts of the law and carved billions of dollars off the manufacturing deals and are very proud of that too. They pushed for offshore wind farms and then scrapped them, and now we’re being sued for a billion dollars. They brought in variable pricing for electricity to make it more expensive to use when it’s more expensive to generate, but didn’t make the difference sharp enough to make a really big difference. Wynne (the Ontario Premier) herself promised an adult conversation about raising money to pay for a giant transit construction program, then backed away from all the(Ottawa  hardest ideas like increasing sales and gasoline taxes. Nobody’s built a new toll road either. (Ottawa Citizen, June 9, 2016, A7).

 

  • Similar behaviour took place when the Limits To Growth hypothesis was proposed in 1972, and later found to be wanting.”The original version presented a model based on five variables: world population, industrialisation, pollution, food production and resources depletion. These variables are considered to grow exponentially, while the ability of technology to increase resources availability is only. The authors intended to explore the possibility of a sustainable feedback pattern that would be achieved by altering growth trends among the five variables under three scenarios. They noted that their projections for the values of the variables in each scenario were predictions “only in the most limited sense of the word,” and were only indications of the system’s behavioral tendencies. Two of the scenarios saw “overshoot and collapse” of the global system by the mid to latter part of the 21st century, while a third scenario resulted in a “stabilized world.”

 

  • The science is settled was the cry of the “Limits To Growthers”. It turned out differently in many ways. For example, today the planet is awash with oil and natural gas. But examining this earlier religious belief, which turned out to be flawed, is for another time. For those interested, Wikipedia, source of the above quote, provides a summary account of what happened and why some still claim its validity while others disagree. A scientific approach is to state a hypothesis and then collect facts to support and refute it.

 

  • How might science be able to help regarding the present climate change debate?  “The science is settled” mantra reflects a misunderstanding of what is generally considered to be scientific methodology.  It involves stating a relationship which can be tested against available facts and information. The information is either supportive of or contradictory to the proposed hypothesis. Those wanting to support a hypothesis should search diligently for information which will reject it. If they find none, then they have not settled the issue, but they have reason to believe in it until conflicting information is found. Science is never settled as Galileo’s opponents found…..maybe one day we will find Galileo was wrong but at present most support his view.

 

  • What scientific inquiry aims to establish is whether global warming is taking place, whether carbon dioxide is increasing due to increased human activity and whether this is the cause of global warming today. By testing these hypotheses it will be possible to say that available evidence supports or rejects the relationships. It will never be possible to say that the science is settled, because it never is about any hypothesis. Religious beliefs can be settled for believers, but not scientific knowledge for scientists and those using their research. If you, the reader, know the science is settled, then there is no need to read any further. You are a believer not a scientist, and you will join a large band of believers, who unfortunately, in my view, are driving the debate for policy change.

 

  • How do you measure the temperature of a planet consisting of land and water, of places with different latitudes and longitudes, of seasons that vary from hot to cold, and of land areas and oceans with different altitudes and depths? These are only some of the variables that may affect how the temperature of planet Earth is determined.

 

  • There seems to be general agreement that the temperature of the planet changes over time, and that at present it is experiencing a warming trend from an earlier ice-age some centuries ago. There is also agreement that the population of the planet has increased from around 2.5 billion in 1950 to over 7 billion today, heading towards 10 billion by 2050 before it starts to taper off. Finally there is agreement that the amount of CO2 in the atmosphere is caused by a combination of factors, one of which results from human activity. There is no agreement that the increase in CO2 today is primarily due to human activity as opposed to the other factors which cause changes in the level of this gas.

 

  • In the past there have been periods when the amount of CO2 in the atmosphere increased but global warming was not observed. Something else was the cause of global warming. This should at least give pause to the views of some believers.

Finally, a modest suggestion to the Canadian Environment Minister,that she appoint at least one advisor who has  a scientific frame of mind and is willing to go beyond the “science is settled” mantra. It is not the number of people who take a particular position but the quality of their case that matters.The proposal here is for an adult conversation about these important issues.