Category Archives: economics

by | 30 November 2010 · 5:31 pm

A Japanophile Dutch Banker’s Disillusionment, 1970s

From The Magatama Doodle: One Man’s Affair with Japan, 1950–2004, by Hans Brinckmann (Global Oriental, 2005), pp. 210-211:

My ‘Magatama Doodle’ metaphor was inspired by the whimsical linking of an observed physical habit (the doodling of comma-shapes on tabletops and chair arms) of certain functionaries, when confronted with a problem or pressed for an answer, to their assumed preference for evasion and procrastination. Japan’s leaders, I had always felt, were fully capable of taking decisions, and if they did not, that was because they chose not to.

I still believed this analysis to hold good for the corporate sector, but I no longer could credit the government and the bureaucracy with similar ability. After all, the cabinet members, from the prime minister on down, were beholden to their party colleagues waiting in the wings for their turn at government. And all politicians lived at the mercy of the business establishment, which financed their election campaigns. They were also constrained by the bureaucratic elite, which provided continuity and expertise for the government of the day. Some bureaucrats in turn were rumoured to be supplementing their income with donations from the major corporations, to whom they also looked for their eventual amakudari on their retirement from the civil service in their early fifties. Few senior civil servants could afford to retire at that age, so they were all interested in a second career as adviser or senior director at a major bank or corporation. The result of these cosy relationships was a woeful lack of discretionary power on the political level, and even a prime minister travelling overseas had to weigh every word and frequently backtrack on his public statements in the face of opposition at home.

I could now see that it was the stasis in Japan’s body politic that had bedevilled its relations with other countries, most of all the US, for decades. Earlier on I had, like probably almost every Japanese, habitually blamed the periodic strains in Japan-US ties largely on American impatience or intransigence. American leaders and negotiators, I was convinced, did not understand Japan, and their patronizing attitude only managed to infuriate their Japanese counterparts and thus stall progress in the talks. But without exculpating pushy American negotiators altogether I had come to suspect that the cause of the recurring tensions, especially in matters of trade and investment, lay mostly with the Japanese.

Through my Investment Committee at the American Chamber of Commerce and other sources I had heard stories about the ‘impossibility’ of dealing with Japanese negotiators on issues such as regulating the flow of car exports and improving access to Japan’s still heavily protected consumer market. The negotiators had no mandate and had to refer to Tokyo on every detail without in the end coming up with any kind of helpful response or compromise. The US side would be kept waiting interminably while their counterparts tried to placate them with pleas for understanding Japan’s slow-moving consensus system and promises of an eventual satisfactory outcome. More often than not, no such outcome ensued, and the Americans either had to back off with gritted teeth or threaten unilateral action to force an agreement. On several occasions the US Congress stepped in with mandated sanctions when negotiations stalled, to the consternation of the Japanese, whose own parliament had no such power.

All this would not have been so bad if the Japanese had put their cards on the table. But they seldom did. To the home audience they usually played the victim card, blaming the heavy-handed Americans for bullying them into concessions, and asking the public to accept these ‘sacrifices’ in the interest of preserving good relations with the American ally. In this way they not only shifted the blame for any unwelcome outcome to the Americans, but they also obfuscated the system’s structural inability to produce effective and timely decisions, actually turning this shortcoming into an advantage.

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Filed under economics, Japan, Netherlands, U.S.

by | 21 November 2010 · 2:12 pm

A Japan-trained Dutch Banker’s Impressions of Chicago, 1968

From The Magatama Doodle: One Man’s Affair with Japan, 1950–2004, by Hans Brinckmann (Global Oriental, 2005), pp. 184-185:

Seven years earlier, our first US visit was no confrontation. We were wide-eyed tourists then, basking in America’s sun and easy smiles without care or consequence. Even our brief stay in Illinois in 1965, a year after my bank’s takeover by the Chicago bank, was little more than a courtesy call made out of our safe and trusted Japanese home base.

But this time it was different. This protracted stay was intended to be confrontational. There were wise men in the head office suspecting their ‘man in Tokyo’ of alien sympathies. They were right, twice over.

First, there was my typical European prejudice against the might and swagger of America, its superficial, money-based way of life, its waste and hyperbole, even that questionable concept – the ‘pursuit of happiness’. This spoon-fed mindset was overlain by a less expressible, more internalized reserve about the United States, Japan-grown and stubborn. It was directed at the American mentality, the casual arrogance that is the birthright of the strong. It was a silent protest against the overweening, patronizing manners of so many Americans towards anyone and anything foreign, and especially Asian. Above all, it was a deep-seated resistance against the immodest American approach to life itself, its aggressive ‘conflict model’, its blatant emotionalism and lack of restraint, its materialism and physicality and holier-than-thou Christian orthodoxy.

Thus I arrived in Chicago heavily burdened with opinion but also willing to change my views ‘in the light of new experience’. Well, experience is what we got. From the first day I had to place my mental constructs on the back-burner. Actual, visceral life, took precedence. The accommodation the bank had arranged for us, a small, furnished apartment in Old Town, turned out to be an address of ill repute, teeming with prostitutes. Within our stingy rent allowance we found a better place, near the Ambassador East Hotel, with mostly decent tenants. But we had to decide how to deal with the neighbours across the hall, a friendly well-groomed woman with an attractive grown-up daughter for whom – Toyoko had to conclude to her astonishment – she was acting as a ‘discreet’ pimp.

The confrontation with American reality brought home to me the vast cultural gap that separated that society from the Japanese – and the Dutch. But the comparison was not necessarily negative. The office, for instance, far from being a nasty environment steeped in power-crazy adrenaline, was more like a large living-room filled with people exchanging easy banter while glancing at a document or two, or discussing golf scores with a customer on the phone. The informality was deceptive. While telling jokes or kidding around these well-educated bankers kept a beady eye on the boss’s door, to see who would go in next or to wait for an opportunity to slip in with a ‘hot deal’. I was amazed to see that in spite of their relaxed style of communication they did get their job done.

The looser structure was an immense relief from the tensions and social rules of Japan. What is more I soon discovered that the much-maligned ‘shallowness’ of American social relations was actually more like an open, unprejudiced kind of hospitality which we tight-arsed Europeans and fastidious Japanese would do well to try and emulate, to our benefit. Americans, I found, opened their doors first and then sorted out what they had let in. Europeans and Japanese, distrusting spontaneity, were forever trying to determine the suitability of others before deciding whether they wanted to get acquainted.

My lifelong latent resistance against America’s ways had collapsed inside a week. Not on fundamentals, but – let us say – on the attractions of their lifestyle. These Americans lived their lives instead of fretting about them. They had no time for wrenching soul searching or weighing up the relative merits of their civilization. They were victors, and victors are free of doubt.

Vietnam was supposed to have changed all this. But not here, not yet, in this heartland of assured capitalism, where seating a single black graduate from Northwestern University on my bank’s carpeted ‘platform’ for all to see, was deemed to constitute an adequate gesture to the irksome demands of the Civil Rights movement. The headlines of the Chicago Tribune copies scattered about the desks might be screaming indignantly about the seizure of the US Navy ship Pueblo by the North Koreans or about the Communist Tet offensive just launched by the Viet Cong, but loan requests had to be processed and the 17.37 back home to the comforts of Winnetka had to be caught.

The self-assuredness was astounding. Laced as it was with magnanimity and the decency of family concerns it was a far cry from the imperial hauteur of the British and French or the self-conscious pride of the Japanese. But it was daunting nonetheless. Paraded around Chicago as ‘our man in Japan’ I had to make frequent appearances at meetings, both inside the bank and on calls to important corporate customers, to shed light on the mystery that was Japan. I was expected to explain the peculiarities of the market and dispense hot tips on how to breach its protectionist shell.

My audience was eloquent, courteous and sceptical.

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Filed under economics, industry, Japan, Netherlands, U.S.

by | 15 November 2010 · 5:54 pm

Wordcatcher Tales: Yakinokori-zei, Yoyū-jūtaku-zei

From The Magatama Doodle: One Man’s Affair with Japan, 1950–2004, by Hans Brinckmann (Global Oriental, 2005), pp. 99-100:

She had contracted tuberculosis towards the end of the war, and had spent her teenage years in hospital and at home to fight the disease and recuperate. American-made streptomycin, not available in Japan at the time, saved her. Bought at great expense on the black-market, it consumed a good part of what remained of the family’s fortune after MacArthur’s confiscatory property taxes, including the infamous yakinokori-zei, ‘having-survived-the-bombings tax’ [焼き残り税 ‘burn-remainder tax’], levied on houses that were left standing, followed by the yoyū-jūtaku-zei, the ‘excess living space tax’ [余裕住宅税 ‘surplus residence tax’]. As she had been unfit to attend class, she had been tutored at home to prepare her for higher education.

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Filed under disease, economics, education, Japan, language, U.S., war

by | 4 November 2010 · 5:26 pm

Danish Hedeby’s Heyday

From The Baltic: A New History of the Region and Its People, by Alan Palmer (Overlook, 2006), pp. 28-29:

Greatest of all merchant communities – and in 950 the largest town in the Baltic world – was Danish Hedeby (now Haithabu in Germany, east of the E45 autobahn, a few kilometres south of the town of Schleswig). There was a settlement at Hedeby many years before the Viking raids began, for it stood at a key geographical position, astride the main artery from the south in north-western Europe and at the centre of the narrowest isthmus between the Baltic and the North Sea. Hedeby faced north-east, down the winding Schlei fjord and about 38 kilometres from the open sea, a port far enough inland to receive warning of approach by pirates or enemies. West of Hedeby a mere 16 kilometres of moorland provided easy portage to the Eider, a short river that flows into the North Sea at Tonning, with an upstream quay at Hollingstedt. A ditch-and-embankment rampart, known as the ‘Danewirke’ and built in the eighth century, afforded Hedeby protection from Frankish incursions. The Danish King Godfred extended the rampart and encouraged merchants to settle in Hedeby in 808, after the raid in which his warriors sacked the Abotrite port of Reric, some 190 kilometres along the Mecklenburg coast. Yet, though ninth century Hedeby had the makings of a commercial port, it also served as a hideout for raiders who returned home with booty and slaves from Frisia, the Netherlands and England. The growing trade with the East transformed the town: Hedeby’s greatest prosperity came at the middle of the tenth century, the years of Varangian commercial ascendancy at Constantinople.

A Moorish merchant from Cordoba, visiting Hedeby about 975, was far from impressed. The town was too big, he thought; it was not, by his reckoning, rich; a high birth rate prompted families to throw unwanted babies into the Schlei; the main food was fish, because there was so much of it; and Viking singing was dreadful. It was a growling from the throat, ‘worse even than the barking of dogs’, he grumbled. There must have been a touch of the Wild North about Viking Hedeby. Yet archaeological evidence, from three major digs in the last seventy years, suggests that life in the port at its prime anticipated the commercial bustle of Thames-side London nine centuries later: ship repairing workshops; craftsmen tapping away at silver, bone or amber jewellery; potters, weavers, carpenters and leather-workers; and all the banter of barter in markets where bargains were struck for furs from the Lapps, soapstone from the Swedes, and wax, silk, spices and honey from the East.

Ironically Hedeby, the port that prospered most from the luxury trade with Novgorod and Kiev, was razed to the ground by the one Viking warrior known to have amassed a fortune in the East. For, in his attempt to add Denmark to his Norwegian kingdom, Harald Hardrada led a fleet up Schlei fjord in the summer of 1049 to destroy his enemy’s commercial capital. Nine hundred years later underwater exploration by divers and frogmen revealed that he had employed a tactic favoured by the Byzantines. Harald might not possess the secret of ‘Greek fire’, but he knew the panic a floating inferno would cause among the Danish defenders. At least one fireship – probably more – bore down on a wooden barrier outside Hedeby’s harbour. Soon the whole town was ablaze. The stock of goods in the warehouses must have fed the flames.

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Filed under Baltics, economics, piracy, Russia, Scandinavia

by | 15 August 2010 · 5:08 pm

Will Japan Surrender Its Economy This Time?

Japan surrendered 65 years ago today, after decades of initially triumphant and then draining military conflict marked by official denial of any possibility of losing militarily until the very day of surrender. A recent op-ed in the Christian Science Monitor by a financial investment researcher suggests Japan is going to lose its formerly triumphant economic “war” in the same way (with lessons for the U.S. and other debt-ridden economies).

Investors are understandably scared of the sovereign debt crisis unfolding in Europe, but they are ignoring a more definite and significantly larger sovereign debt catastrophe that is about to hit the world’s third-largest economy: Japan.

The prelude to Japan’s current crisis began in the early 1990s when its housing and stock market bubbles popped, leading to recession.

For the next 20 years, using flashy names like Fiscal Structural Reform Act, and Emergency Employment Measures, and Policy Measures of Economic Rebirth, the government cut taxes, increased spending, and borrowed money to finance itself. Once or twice the government found fiscal religion and raised taxes; however, the economy stuttered and taxes again were lowered and the stimulus story continued.

Today, 20 years into endless stimuli, the Japanese economy is beset by the same rot it was then, except that its debt has tripled – the ratio of debt to gross domestic product (GDP) stands at almost 200 percent, double those of the United States and Germany, and second only to Zimbabwe….

A country that has ballooning debt needs to have an expanding economy to help the country outgrow its debt burden. Economic growth is driven by two factors, productivity and population growth. Though the Japanese economy may continue to reap the benefits of productivity, population growth is not in the cards.

Japan has one of the oldest societies in the developed world; every fourth Japanese person is over 65 years of age, and the population is shrinking. Due to cultural mores, workers are largely compensated not on merit but on seniority. Thus, young adults marry later in life, and have kids later.

This helps explain why the Japanese birthrate is one of the lowest in the world, a meager 1.37 per woman, well below the 2.1 figure needed to sustain a population….

Though debt has tripled over the past two decades, government spending on interest payments has not changed; in fact it even declined a little in the mid-2000s. This happened because the government’s average interest rate paid on its debt declined from more than 6 percent in the 1990s to 1.4 percent in 2009.

This is about to change. Historically, more than 90 percent of Japanese government-issued debt was consumed internally by its citizens, directly or through its pension system. In the 1990s, the savings rate was very high, pushing the mid-teens, but as people get older, they retire and start drawing down their savings and pensions. Today, the Japanese savings rate is approaching zero, and will probably go negative in the not-so-distant future.

The Japanese economy operates on the (soon-to-be-proved-false) assumption that the government will always be able to borrow at low interest rates. As internal demand for debt evaporates – and it’s approaching this level already – the Japanese government will have to start hocking its debt outside Japan.

When it does, it will face a rude shock in the form of higher interest payments. Japanese 10-year Treasuries now yielding 1.0 percent will not stand a chance against US or German bonds of the same maturities that yield 2.89 percent and 2.59 percent, respectively….

Along with China, Japan is the one of the largest holders of US government debt, and its demand for our fine paper will decline. Most likely, Japan will start selling Treasuries. And to make things worse, Japan will start competing with the US, not just in cars and electronics, but for buyers of sovereign government debt. Japan will export inflation, inflation will rise globally, and so will interest rates.

Had I written a similar article five years ago, I would have been “wrong,” as today the Japanese economy is still ticking. Timing bubbles – and Japan is in the late stages of an enormous debt bubble – is very difficult, as bubbles tend to last longer than rational observers expect. But every year that the Japanese bubble doesn’t burst and debt swells, the eventual pop just grows more catastrophic.

Japan is past the point of no return; its fiscal and demographic problems were created over decades and will take decades to be resolved. In the meantime, its citizens will pay the painful price. Japan is proof that a country cannot borrow itself to prosperity.

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by | 15 August 2010 · 12:05 pm

China’s Chopstick Threat

Today’s LA Times contains an op-ed calling attention to the forests being consumed by China’s enormous output of disposable chopsticks, which I suspect have nevertheless played a significant role in reducing the spread of communicable diseases (as have disposable hypodermic needles, which constitute another sometimes nasty environmental threat). China’s government is now trying to discourage their use.

The disposable chopstick, made largely from birch and poplar (and, less so, from bamboo, because of its higher cost) begins to look deeply menacing — an environmental disaster not to be taken lightly. Begin with China’s 1.3 billion people. In one year, they go through roughly 45 billion pairs of the throwaway utensils; that averages out to nearly 130 million pairs of chopsticks a day. (The export market accounts for 18 billion pairs annually.)…

Calls to abandon the use-and-toss type began more than 10 years ago and have since persisted unabated. By 2006, the activism had become more strenuous: Citizens launched a BYOC (Bring Your Own Chopsticks) movement, which continues to gather momentum….

Yet, more than 10 years later, the targeted disposable remains with us. Why?

First, while we in the West don’t give much thought to a chopstick “industry,” in China, where 100,000 people in more than 300 plants are employed in the manufacture of the wooden utensils, it’s most definitely a flourishing enterprise. And just as jobs trump environmental issues in the West (think the coal, oil and logging industries), the argument that 100,000 jobs are at stake is a refrain that carries considerable weight. As Lian Guang, president of the Wooden Chopsticks Trade Assn., told the China Daily in 2009, “The chopstick industry is making a great contribution by creating jobs for poor people in the forestry regions,” adding that melamine-resin chopsticks are hardly a sanitary substitute with their “high formaldehyde content.” His mention of melamine resin is an effective touch, I admit.

Then there are the restaurants. The alternative to wooden disposables is sterilizing the tableware (plastic, metal or durable wood chopsticks) after each use. But the cost differential is significant: Disposables run about a penny apiece, while sterilization ranges from 15 to 70 cents. Restaurants, especially the low-end ones, worry about passing the costs on to customers. And the worry would seem to be warranted: Consumer advocacy groups from 21 Chinese cities published an open letter in March arguing that the costs of sterilization should not be passed on to consumers as the food safety law obligates restaurants to provide free, clean and safe tableware.

Are paper shopping bags a threat to North American forests?

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by | 19 June 2010 · 6:19 pm

U.S. Economic Recovery Prospects, 1934

From The Forgotten Man: A New History of the Great Depression, by Amity Shlaes (HarperCollins, 2007), Kindle Loc. 3321-3353:

Lillienthal and the TVA’s engineer, Llewellyn Evans, sailed to Britain to study something new that the United States might copy: what the Britons called their “grid,” which used power from both private and public companies. “The problem of linking public and private companies is similar to that of the Tennessee Valley,” Lilienthal told a reporter in New York at the Hotel Roosevelt before he sailed. In fact the UK grid owed some of its efficiencies to Sam Insull [a Chicago entrepreneur then facing prosecution by the FDR administration, but later found not guilty on all counts], who had advised Westminster repeatedly. The British press saw irony in the fact that Lilienthal of the TVA wanted to have a look at it. Lilienthal, the Electrical Review chuckled, said he was looking for a man of “seasoned specialized judgment, such as [Mr. Lilienthal] regards as essential for determining future policy in the States, but circumstances have deprived the American people of his experience and that of his associates.”  

THE BRITISH WERE ON TO something. Another reality was becoming clear that summer of 1934: the drama of the prosecutions and the spring cleanups was hiding something. While the Norris Dam and other New Deal projects might be ahead of schedule, the economy was not, at least not in the sense of being where it had been before. The American Federation of Labor had reported in late spring that 780,000 workers who had been reemployed by the National Recovery Administration in the autumn had been unemployed again by the spring of 1934. William Green, the AFL’s leader, began fighting with Richberg at the NRA over employment numbers: the AFL wanted industry, not relief agencies, to solve the economic problem. The job had to be done, and it had to be partly Richberg’s, since, challenged Green, “We cannot indefinitely support one-sixth of our population on money borrowed against future taxes.” There were still nearly eleven million unemployed. And the Dow was heading in the wrong direction; it would spend the summer below the 100 mark of the preceding winter. Looking up, the New Dealers were taken aback. “The Depression was refusing to disappear,” Tugwell later wrote of the whole period.

Roosevelt now regrouped. Midterm elections were that November. The prosecutions had originally been about punishing financiers for the crash. If Insull’s debentures had lost all their value, then Insull must be guilty. But now the prosecutions and investigations should also be about justifying the New Deal, economically and morally. The Fireside Chats would help. Roosevelt and others had noticed that the medium of radio really did seem to create a new reality, separate from the reality of old politics. If voters focused on the voice and the message, and not the tardy recovery, that might carry the Democrats forward.

It was a hope that the administration concentrated on—for even as government lawyers prosecuted, they were also finding themselves on the legal defensive. The National Recovery Administration, for instance, was under fire in Congress, and from business, as a bureaucracy out of control. A report submitted to the fifty-seventh annual meeting of the American Bar Association noted that by June 25 of 1934, some 485 codes and 95 supplements had been approved by the president and 242 more by the Administrator for Industrial Recovery. In the period of a year, 10,000 pages of law had been created, a figure that one had to compare with the mere 2,735 pages that constituted federal statute law. In twelve months, the NRA had generated more paper than the entire legislative output of the federal government since 1789.

To survive, Richberg and the Justice Department warned—accurately—that the NRA must pass review by the Supreme Court, and soon. In any case, the law required renewal by Congress in 1935. Its constitutionality was a big question: could such a large program really be legal under the Constitution’s commerce clause? Marking Constitution Day in September, the New York Times commented that in regard to such legislation, “the winds of controversy over this issue are already rising.” With the election coming up, the New Deal had to score victories in national politics; if it couldn’t win a genuine return to prosperity, then it might succeed with the negative victories of bringing down the villains.

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by | 3 June 2010 · 8:50 pm

American Travelers in the USSR, 1927

From The Forgotten Man: A New History of the Great Depression, by Amity Shlaes (HarperCollins, 2007), Kindle Loc. 1196-1250:

TO MAKE LANDFALL IN EUROPE was a relief for the travelers. Here at least the economic facts did not contradict their reform concepts so profoundly. There were some bumps along the road. In Warsaw they felt a jolt when their guide, Albert Coyle, acknowledged that he had misplaced the trip funds. In Dortmund, Tugwell got bored and skipped a meeting with trade union people at a steel plant to go to an art gallery. But from the time they met Soviet trade union leaders at the Polish-Soviet border, the travelers felt their spirits rise. This would indeed prove the junket of all junkets. It didn’t hurt that their hosts gave them first-class treatment—free transportation, cheap or free hotel service, and so on. And there were to be meetings with leaders—Mikhail Ivanovich Kalinin, the Russian prime minister, Leon Trotsky, already out of the Kremlin’s inner circle but not yet exiled, and others of high rank. For the travelers, who were at best respectable but not themselves of national rank at home, these introductions in and of themselves made for a high. There is nothing headier than finding one is more recognized abroad than at home. And that was not all: rumor had it there would be meetings at the highest level, perhaps even with Stalin himself.

The travelers’ enthusiasm was only strengthened by what they saw in the first few days. The failures of the economy were not all visible. Indeed, if one squinted, things looked almost reasonable in Soviet Russia. Lenin, before dying, had instituted his New Economic Policy (NEP), which allowed the survival of small artisans. The economy had finally begun to regain pre–World War I levels. The brutal collectivization of agriculture and the famines of the 1930s were still to come. The Soviets for their part tried to burnish their own reputation with unfavorable references to America. Everywhere the travelers went, Brophy would later note, they heard about Sacco and Vanzetti, who had been executed while the travelers were in Russia, just as predicted. For days after the execution, the towns the travelers arrived in were draped with banners hung in honor of Sacco and Vanzetti, “victims of ‘American capitalism.’” To the travelers it seemed that Russia understood what the land of Babbitt did not.

Roger Baldwin, who had corresponded with Vanzetti until his death, was deeply impressed with what he saw. Baldwin understood that Stalin’s Russia had a dark side. He didn’t enjoy his time in what he called this “irritating place.” But Russia still seemed somehow farther along than the narrow Massachusetts that could put the anarchist pair to death. Baldwin gave Leo Tolstoy’s son letters he had received from Vanzetti so that Tolstoy might post them for Russians to see at a state bank. As he wrote of Russia, Baldwin’s own conclusions were hopeful. “Everybody is poor together,” he wrote to his mother. “There is much discontent, much regulation of life, but not much terrorism or repression except of the old upper classes.”

For the high-spirited Tugwell, part of the trip was about having a good time. Half a century later, Stuart Chase would write Tugwell, asking whether he recalled when “you, Bart Brebner and I were the ‘Three Musketeers’ in Moscow in 1927.” At one point the group split up, and Tugwell traveled down the Volga on a barge, insisting that his interpreter and captain teach him a folksong about a Russian Robin Hood, “Stenka Rasin.” In exchange Tugwell taught the Russians “Beulah Land.” He rode in private railway cars—“ancient but gaudy” first-class wagons-lits from the days of the Romanovs—through Cossack country. Tugwell kept notes; he dined out. He wondered, as he always did when he was abroad, whether his life was on the correct path: after another preceding period overseas he had taken leave from academia for a year to farm beside his father before deciding the move was a mistake. The more earnest Douglas, himself considerably distracted by his own dying marriage, at one point reproached Tugwell for his lack of gravity.

But when it came to their work, Tugwell, like the other travelers, was serious enough. Committed to researching agriculture reform, he fought off offers to see factories and demanded visits to farms instead. He noted, first of all, that while conditions were still terrible within the Soviet Union, they were probably improving: “The manor houses are gone; only the drab villages remain,” he wrote, concluding that “here is a bit more to eat of a little better quality. There is a radio in the village hall. There is more wood for warmth,” he would later write. New England might be slowly dying; the Soviet Union to his mind represented “a stirring of new life hardly yet come to birth.” He loved the idea of economics being made subservient, itself like a serf, to the good of the rural village: “with us, prices are a result; in Russia they are agents of social purpose.” Tugwell insisted on more visits and was duly granted them.

Tugwell found himself admiring the active role of the Soviet government toward farming. He liked the idea of the agronom, the farm manager or bureaucrat, who oversaw a set of farms or a region. The Russian farmer, he noted, “suffers from price-disadvantage, it is true; but so also do farmers all over the world.” Tugwell pointed out a difference from the United States: in Russia, the farmer’s challenges were the subject of genuine government controversy. “There is a disposition to do something about it. Can this be said of the U.S. government?”

Most of all, however, it was the villages that impressed Tugwell. Many had not yet been collectivized, but they were still relatively cooperative compared to rigidly fenced New England. This cooperation he perceived to be natural, indeed, inevitable—“cooperation is forced in the nature of things.” In his own childhood, there had been similar cooperation. He remembered traveling over New York’s Ellery hills to a friend’s house with his father, only to find the family not at home. The pair had fixed a meal from what they found in the buttery nonetheless, a fact which did not bother their hosts, when they returned, in the slightest. That was the way things were, in the old agricultural community. Under the czars, Tugwell noted, village farmers too had shared—“Russia was communal in this sense long before it was persuaded to Communism in the Marxian sense.”

Tugwell believed that what remained of private arrangements also needed to be ended; it was time for “abandoning the old one-man, one-plow method.” After all, in a big communal field “a tractor can go as far and fast as it is capable of doing without the bother of fence corner turnings. Socially, the village has great advantages if it is not too closely built or too big.” Further rationalization might work if only the stubborn peasant would cooperate. And even though he disliked the Soviet dictatorship from the start, he was struck by the authority of Russian propaganda and its enormous success. Always, the Russians they met up with “told us what our country was like.” This simultaneously horrified the progressive in Tugwell and pleased the efficiency expert in him: “I knew from then on how determined dictators come to manage a people.”

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Filed under democracy, economics, travel, U.S., USSR

by | 29 May 2010 · 9:50 pm

Revisiting the 1920s & 1930s

From The Forgotten Man: A New History of the Great Depression, by Amity Shlaes (HarperCollins, 2007), Kindle Loc. 145-88:

It is time to revisit the late 1920s and the 1930s. Then we see that neither the standard history nor the standard rebuttal entirely captures the realities of the period. The first reality was that the 1920s was a great decade of true economic gains, a period whose strong positive aspects have been obscured by the troubles that followed. Those who placed their faith in laissez-faire in that decade were not all godless. Indeed religious piety moved some, including President Calvin Coolidge, to hold back, to pause before intervening in private lives.

The fact that the stock market rose high at the end of the decade does not mean that all the growth of the preceding ten years was an illusion. American capitalism did not break in 1929. The crash did not cause the Depression. It was a necessary correction of a too-high stock market, but not a necessary disaster. The market players at the time of the crash were not villains, though some of them—Albert Wiggin of Chase, who shorted his own bank’s stock—behaved reprehensibly. There was indeed an annihilating event that followed the crash, one that Hoover never understood and Roosevelt understood incompletely: deflation.

Hoover’s priggish temperament, as much as any philosophy he held, caused him to both misjudge the crash and fail in his reaction to it. And his preference for Germany as a negotiating partner over Soviet Russia later blinded him to the dangers of Nazism. Roosevelt by contrast had a wonderful temperament, and could get along, when he felt like it, with even his worst opponent. His calls for courage, his Fireside Chats, all were intensely important. “The only thing we have to fear is fear itself”—in the darkness, Roosevelt’s voice seemed to shine. He allowed Cordell Hull to write trade treaties that in the end would benefit the U.S. economy enormously. Roosevelt’s dislike of Germany, which dated from childhood, helped him to understand the threat of Hitler—and, eventually, that the United States must come to Europe’s side.

Still, Hoover and Roosevelt were alike in several regards. Both preferred to control events and people. Both underestimated the strength of the American economy. Both doubted its ability to right itself in a storm. Hoover mistrusted the stock market. Roosevelt mistrusted it more. Roosevelt offered rhetorical optimism, but pessimism underlay his policies. Though Americans associated Roosevelt with bounty, his insistent emphasis on sharing—rationing, almost—betrayed a conviction that the country had entered a permanent era of scarcity. Both presidents overestimated the value of government planning. Hoover, the Quaker, favored the community over the individual. Roosevelt, the Episcopalian, found laissez-faire economics immoral and disturbingly un-Christian.

And both men doctored the economy habitually. Hoover was a constitutionalist and took pains to intervene within the rules—but his interventions were substantial. Roosevelt cared little for constitutional niceties and believed they blocked progress. His remedies were on a greater scale and often inspired by socialist or fascist models abroad. A number of New Dealers, Tugwell included, had been profoundly shaped by Mussolini’s Italy and, especially, Soviet Russia. That influence was not parenthetical. The hoarse-voiced opponents of the New Deal liked to focus on the connections between these men, the Communist Party, and authorities in Soviet Russia. And several important New Dealers did indeed have those connections, most notably Lauchlin Currie, Roosevelt’s economics adviser in later years, and Harry Dexter White, at the Treasury. White’s plan for the pastoralization of Germany takes on a new light when we know this. Lee Pressman and Alger Hiss duped colleagues in government repeatedly.

But few New Dealers were spies or even communists. The emphasis on that question is in any case misplaced. Overall, the problem of the New Dealers on the left was not their relationship with Moscow or the Communist Party in the United States, if indeed they had one. Senator McCarthy was wrong. The problem was their naïveté about the economic value of Soviet-style or European-style collectivism—and the fact that they forced such collectivism upon their own country. Fear of being labeled a red-baiter has too long prevented historians from looking into the Soviet influence upon American domestic policy in the 1930s.

What then caused the Depression? Part of the trouble was indeed the crash. There were monetary and credit challenges at the young Federal Reserve, and certainly at the banks. Deflation, not inflation, was a big problem, both early on and also later, in the mid-1930s. The loss of international trade played an enormous role—just as both Hoover and Roosevelt said at different points. If the United States had not raised tariffs at the beginning of the decade and Europe had not collapsed in the 1930s, the United States would have had a trading partner to help sustain it. Part of the problem was the challenge of the transition to industrialization from agriculture. Part was freakish weather: floods and the uncanny Dust Bowl seemed to validate the sense of apocalypse. With money and the weather breaking down, men and women in America felt extraordinarily helpless. They were willing to suspend disbelief.

But the deepest problem was the intervention, the lack of faith in the marketplace. Government management of the late 1920s and 1930s hurt the economy. Both Hoover and Roosevelt misstepped in a number of ways. Hoover ordered wages up when they wanted to go down. He allowed a disastrous tariff, Smoot-Hawley, to become law when he should have had the sense to block it. He raised taxes when neither citizens individually nor the economy as a whole could afford the change. After 1932, New Zealand, Japan, Greece, Romania, Chile, Denmark, Finland, and Sweden began seeing industrial production levels rise again—but not the United States.

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by | 20 May 2010 · 6:23 pm

Three Past Outbreaks of Major Violence in Thailand

Hong Kong-based security consultant G. M. Greenwood offers some historical perspective on Thailand’s current turmoils in an article in the Asia Sentinel (19 May 2010) under the discouraging headline, Reconciliation or Retribution in Thailand: The odds are on retribution.

Thailand has experienced three major violent political upheavals in the 35 or so years before the present crisis began. All can be linked, and while each offers a differing insight into how the state has responded to being challenge, context makes them unreliable indicators of the country’s direction in the coming days and weeks.

  • On 13 October 1973, months of anti-government protests against the armed forces’ dominant role in government culminated in a huge demonstration in Bangkok. The following day troops attacked the protestors, killing at least 75 people and wounding hundreds of others. King Bhumibol directly intervened, superficial order was restored and the three politicians seen as largely responsible went into exile overseas.
  • On 5 October 1976, leftist students at Bangkok’s Thammasat University protesting against the killing of two students by rightists a few weeks earlier were attacked by well-organised militia personnel. The official death toll among the students, many of them the children of the elite, was 45 but hundreds more were widely believed to have subsequently murdered. Many fled into the bemused arms of the then revolutionary Communist Party of Thailand, whose fighting strength was drawn from the same northern rural communities that remain the hinterland of today’s reds. The subsequent anti-communist campaign by the Thai military was accompanied by a wave of extrajudicial killings that have been largely forgotten outside these communities.
  • Between 17 and 20 May 1992, at least 44 people were killed and hundreds injured when troops fired at demonstrators protesting against efforts to make a prime minister of a military leader who had seized power in a coup the previous year. In addition to acknowledged casualties, many of them drawn from the higher social classes, at least 100 people were presumed killed by the security forces after the immediate unrest. When containers were found on the seabed off the Sattahip naval base at the head of the Gulf of Thailand in 2009, there was widespread speculation that they might contain the remains of the missing of ‘Black May.’ The fact that they did not has not diminished the belief that the state is capable of killing its opponents.

These precedents, rather than vague talk of compromise and national unity, are likely to guide the actions of the Red Shirt activists and their countless thousands of supporters across the country as they prepare for the aftermath of the loss of their key redoubts in Bangkok. For them, any outcome to the crisis that erodes their present strength will be resisted.

The problem for Abhisit and his allies is as much cultural as political. While democratic institutions are developing roots across the region, the concept of ‘loyal opposition’ is still regarded as an oxymoron by many local politicians. It is within this context that an overly soft line against the Red Shirts will be interpreted by UDD activists, Abhisit’s opponents within government, the military and pro-establishment People’s Alliance for Democracy (PAD) Yellow Shirts as a sign of weakness rather than a display of pragmatism.

Nevertheless, an effort is likely to be made to re-emphasise the narrative that distinguishes the Red Shirt leadership from the ‘misguided misled.’ In this model, the red rank-and-file would be allowed – even helped – to return to their communities, accompanied by a chorus extolling their virtues as loyal but unwitting dupes of toppled Prime Minister Thaksin Shinawatra and his clique.

via RealClearWorld

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