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Automation, Space Colonization & The Post-Transactional Economy

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Image: NASA

“How is this even a business?” my late father asked when I described a notional model for human space colonization. “How are you going to make money? What product are you going to sell?”

Admittedly the model — developing a swarm of self-replicating , self-repairing decentralized, solar-powered construction automata and using them to mine asteroids and produce more such automata as well as habitable colonies— is not monetizable in the same fashion that building a picture-sharing smartphone app, or social network, or web search engine is.

And although there are ways to monetize space colonization — it is, essentially, a very extreme kind of full-stack real estate development — I think my father hit upon the fact that this kind of venture is of a fundamentally different nature to the modern economy as it exists on Earth today.

And the more I think about this kind of economic development, the more fascinating I find it.

I would never have started thinking about this process if it wasn’t for the Moore’s Law-style cheapening of solar energy and the accelerating development of robotics and AI. We are heading toward a world where plentiful solar energy is very cheap to capture, cheap to store thanks to breakthrough in batteries, and where advanced computing and robotics technologies give us very many options in terms of what to do with that energy.

I believe that aside from ending global poverty and hunger (which are already falling at very rapid rates) and powering complex virtual reality simulations, space exploration and colonization will form a very major aspect of what we do with our newfound energy inheritance.

Why? Well, consider that enough energy from the Sun hits the Earth in an hour than we use in a year. Then consider that only 0.000000045292 percent of the Sun’s energy hits the Earth. There’s a whole lot of energy up there, radiating out into space. Energy we could do useful things with. And that’s just one star.

Then consider the fact that natural resources on Earth such as water, hydrocarbons and metals exist in very finite quantities. There are vastly more of all of these things up in space.

Finally, consider the dangers of not colonizing space. A one-planet species is a very endangered species. One global cataclysm — like a nuclear war, or asteroid strike, or pandemic bug — could wipe us out. Colonizing space would remediate this problem.

So, what is going to change?

At the most basic level, economics all boils down to physics. As humans our behaviour is circumscribed by physical limitations, and physical needs and wants.

We use markets and monetary systems as means to efficiently satisfy needs and wants given the finite resources that are currently accessible. Markets work by matching willing buyers and willing sellers, simultaneously allowing the buyers to get the most they can given the sellers’ needs, and allowing the sellers to get the most they can given the buyer’s needs.

We bring new resources into the orbit of the economy via human labour, which is a finite resource subject to feeding, clothing, housing, transporting, educating. Human labour is subject to tiredness, and emotions, and competing desires, and quitting the job and finding another better paying or less tiring one, and all kinds of things. Satisfying these needs requires the development of a highly fungible medium of exchange, such as money to coordinate all of these complexities.

Replacing human labour with automated labour removes many of these complexities and replaces them with a simpler framework altogether: the cost of energy. The more automated a system becomes, the less important the flow of a fungible medium of exchange becomes. Access to sustainable and replenishable sources of energy — to run the robots, drones, AI and other such automata — becomes the key determinant factor. This is a whole new post-transactional economy.

Obviously money will remain an essential factor for coordination in inter-human economic relations. But for highly-automated ventures — particularly those operating in space, where there is currently no such thing as the rule of law, no easy access to subcontractors, and plentiful natural resources in asteroids, moons, planets, and solar energy, and so forth — it is more of a case of capturing resources and deploying them as needed, at least at the frontier where there is no clear system of property ownership beyond the law of the jungle. And space — unlike Earth — is a huge and endless frontier.

This kind of development, of course, is only really possible given very high levels of technology and massive economies of scale and given massive pre-existing resources. You need to have control of a swarm of highly-developed robots in the first place to be able to get to the stage where they can become self-replenishing and self-perpetuating (so long as they can gain access to energy). And you need highly efficient energy capturing technologies (like nuclear fusion or high-efficiency photovoltaic cells) to keep your EROEI ratio positive.

But once you have these things (all of which are gradually coming to fruition) it becomes plausible to ride the swarm all the way up until you have constructed a Dyson sphere around the Sun. And once you have a single Dyson sphere capturing the entirety of the Sun’s energy output, sending new swarms out to other stars to repeat the process seems just a matter of hitting the repeat button.

Of course, I expect arms races will reduce the efficiency of any such process. The potential gains from expansion into space in terms of power and reach and resources are so massive that many different actors will want to get a piece of the action, and grab what they can get. I would be surprised if many of the huge gains in resources we get from colonizing space aren’t wasted on endless warfare between different groups and ideologies.

But that has been a major pattern throughout human history. And we have made it a long way already.

 

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Political Correctness And The Extreme Fragmentation Of Society In Modernity

One of the defining cultural events of the 2016 election season so far has been the overwhelming rejection of the notion of political correctness expressed in the Republican selection of Donald Trump as presidential nominee. Here is Trump expounding his view on political correctness:

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What is the political correctness that the Trump supporters are rejecting?

Trump-supporting website Infowars.com gives the following definition:

In his novel 1984, George Orwell imagined a future world where speech was greatly restricted.

He called that the language that the totalitarian state in his novel created “Newspeak”, and it bears a striking resemblance to the political correctness that we see in America right now.

According to Wikipedia, Newspeak is “a reduced language created by the totalitarian state as a tool to limit free thought, and concepts that pose a threat to the regime such as freedom, self-expression, individuality, peace, etc. Any form of thought alternative to the party’s construct is classified as ‘thoughtcrime.’”

Infowars then lists 19 examples, from “The Missouri State Fair… permanently bann[ing] a rodeo clown from performing because he wore an Obama mask” to “a Florida police officer” losing his job for calling Trayvon Martin a “thug”, to “the governor of California signing a bill to allow transgendered students to use whatever bathroom and gym facilities they would like”.

The overriding concern expressed by the Trumpians appears to be that liberals are trying to enforce their worldview through the use of language. They are trying, in other words, to promote their own worldview through making it difficult to dissent from the “politically correct” version of reality.

I disagree that political correctness is an entirely or even largely liberal phenomenon. To be blunt and upfront with my thesis, this is because what is politically correct is a matter of subjective opinion. We each — as human beings — have our own notion of what is the politically correct way to frame an argument or think about a situation or system. So that which is “politically correct” for one person or group of people is absolutely politically incorrect for another person or group of people. In other words, every side of the argument has its own “politically correct” version of reality.

For example, advocates of transgender rights and particularly the notion that it is possible for a person to be born transgender would likely be outraged at the notion that Caitlyn Jenner was born as a male, and so is still a man in spite of transitioning to living as a woman. The notion that Caitlyn Jenner is a man is politically (and factually) incorrect to this first group. And by contrast, advocates of rigid and unchangeable gender roles would likely be outraged by the notion that Caitlyn Jenner is now a woman, and can use the women’s bathroom. The notion that Caitlyn Jenner is a woman is politically (and factually) incorrect to this second group.

I even disagree that political correctness is a new phenomenon. What was McCarthyism, if not a hardcore form of right-wing political correctness? What was the Bush Administration renaming French Fries as Freedom Fries as protest over the French government’s refusal to participate in the Iraq war if not trying to use language to police reality?

Of course, it is completely possible for someone to believe that X is true and respectfully disagree with the opposing view that X is not true, and vice versa.

But that is hardly the direction that the country is headed. Many metrics show that Americans are becoming more and more politically polarized, as this chart via Pew illustrates:

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Perhaps what people really mean when they say they are frustrated with political correctness is that they are frustrated with just how disengaged they are from the other side.

With that in mind, what the selection of Donald Trump represents is not so much a rejection of political correctness as a scorched-earth rejection of the other side’s version of reality. In other words, the polarization is becoming more extreme and both sides’ versions of what is “politically correct” are becoming more distinct and noticeable.

This all, of course, is an outgrowth of the pluralism of modernity. American society has become increasingly pluralistic as it has become increasingly diverse and tolerant of alternative lifestyles.

This is entirely unsurprising. With more freedom and liberty comes divergence. People are variable and heterogeneous. They are not all motivated by the same things and in pursuit of the same goals. Giving people freedom to pursue their own goals and interests inevitably leads to pluralism, if not to full-blown polarization.

This is why Trump’s policies are necessarily authoritarian. In order to beat back the pluralism of modernity, Trump advocates authoritarian policies that reduce liberty with the design of building a more cohesive society. Banning Muslims from entering the U.S. decreases diversity and pluralism. Deporting undocumented migrants decreases diversity and pluralism. Building a wall at the border is an instrument of reducing diversity and pluralism. And the show of naked authoritarianism itself makes society fearful. The most successful totalitarian states are the ones — such as North Korea — where a sheepish public polices itself.

Trump, of course, would point out that these measures were the norm throughout most of American history and that the status quo is some kind of freakish digression. But to boil it down to its core essence, “Making American Great Again” is about turning back multiculturalism toward monoculture. It is, ultimately, about enforcing an idea — that a more cohesive and less diverse society is a good thing — on everyone else.

Of course, when you have two groups whose understanding of the world fundamentally disagrees, it is very hard to achieve unity and stability. Lots of wars have been fought over this very kind of thing. The notion of a culture war is actually quite prescient as cultural warfare is exactly what is occurring between the Trumpians and the liberals.

I doubt that either side will be victorious. The fragmentation of the world that has led to these divergences is probably not the result of a liberal conspiracy or liberal control of government. It is much more likely to be a result of technology. Why? Well, consider the way that technology is fragmenting the media. It is much easier to live in a local monoculture when your main source of global news is a town notice board, or two radio channels, or four TV channels, or even fifty cable channels, than it is when your main source of global news is the huge and varied and exponentiating internet. As technology continues to fragment communication and the spread of ideas, people will continue to pursue their own individual interests with the effect of further cultural divergence. Virtual reality will be a very important technology in developing this, as it will begin to let us not only listen to our own FOX News/MSNBC echo chambers, but live in virtual worlds to suit our own tastes. We are heading toward a world where we can build our own echo chambers and shut off anything we find offensive or unpleasant.

In other words, if you think that cultural fragmentation is bad now — or that the Trump supporters are suggesting extreme measures in order to reimpose a degree of cultural hegemony — you ain’t seen nothing yet. The decentralization of warfare through the adaptation of drone technology and things like 3-D printed guns and bullets means that many skirmishes will likely be fought over this stuff again.

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The Economics of Building That Wall

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Photo by: Matt Clark.

First things first: the U.S. already has a border wall with Mexico. This is a widely-documented fact, illustrated in detail by National Geographic. If Trump supporters had bothered to do so much as a Google search, they would realize that — whatever one might think of undocumented migration — it isn’t going to be stopped by a border wall. A border wall already exists, and undocumented migration continues.

But what about replacing the current border wall with a bigger one? Surely that will stop migrants from coming across the border? Well, not really. Israel has some pretty high and deep barriers with Gaza, and that hasn’t prevented Gazan militants from burrowing under them and getting in. What is going to stop Mexicans — including and perhaps especially the extremely well-financed drug gangs who surely could gain access to advanced tunnelling equipment — from doing the same thing?

So building a wall to prevent undocumented migration is really dodgy from a practical perspective.

From an economic perspective, it’s much worse than that. Getting Mexico to pay for it by confiscating it from money sent to Mexico by Mexicans in America — as Trump contends he can — would simply incentivize the use of internationalized and decentralized technologies such as Bitcoin, which could evade Trump’s confiscations. And with an estimated cost of $15 to $25 billion, that has a very high opportunity cost, regardless of who pays for it. That’s more than a dozen hospitals. Or a house for every homeless person in America. Heck, NASA could build two bases on the moon for the cost of Trump’s fantasy wall.

But all this is assuming that a wall that could successfully shut out undocumented migrants would benefit the U.S. The truth is that it wouldn’t. The reality is that shutting people out of your economy deprives it of skills and talent and labour. 100 people can produce more than 99. 1000 people can produce more than 999. When a Mexican crosses the border, they bring with them potential productivity, whether or not they are carrying papers. Shut that out, and you slow down the economy.

When people can move freely, they can find the niche where they are most efficient. Everybody is different. Everyone is in possession of unique and differing talents, and everyone’s most productive niche in the global economy differs. Mexicans stream across the border because there are niches in the U.S. economy where they can be more productive than in Mexico. Many Americans go abroad to work, too, as they find economic opportunities abroad. Denying people the right to freely move to find their most productive niche in the global economy is simply self-defeating, in economic terms. It forces people to become less productive than they otherwise could be.

Trump offers false hope to the victims of globalization. Yes, very many U.S. jobs have migrated overseas because overseas labour can do things cheaply and efficiently. Those jobs aren’t magically going to come back because a blonde buffoon is in the White House wasting resources by building walls on the Mexican border. The real hope for American victims of job migration is retraining and education and investment in new cutting-edge industries where America can gain a competitive advantage, so that people can find a new niche in the global economy.

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Universal Basic Income Is Inevitable, Unavoidable, and Incoming

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The last time I saw universal basic income discussed on television, it was laughed away by a Conservative MP as an absurd idea. The government giving away wads of cash responsibility-free to the entire population sounds entirely fantastical in this austerity-bound age, where “we just don’t have the money” is repeated endlessly as a mantra. Money, they say, does not grow on trees. (Only as figures on the screen of a computer).

In this world, universal basic income seems like a rather distant prospect. Yes, there are some proposals, like Switzerland and Finland, both of which are holding a referendum on universal basic income. But I expect neither of them to pass. The current political climate is just too patriarchal. We live in a world where free choice is unfashionable. The mass media demonizes the poor as feckless and too lazy and ignorant to make good choices about how to spend their income. Better that the government spend huge chunks of GDP employing bureaucrats to administer tests, to moralize on the virtues of work, and sanction the profligate.

But this world is fast changing, and the more I study the basic facts of economic life in the early 21st century, the more inevitable universal basic income begins to seem.

And no, it’s not because of the robots that are coming to take our jobs, as Erik Brynjolfsson suggests in his excellent The Second Machine Age. While automation is a major economic disruptor that will transform our economy, assuming that robots will dissolve jobs entirely is just buying into the same Lump of Labour fallacy that the Luddites fell for. Automation frees humans from drudgery and opens up the economy to new opportunities. Where once vast swathes of the population toiled in the fields as subsistence farmers, mechanization allowed these people to become industrial workers, and their descendants to become information and creative workers. As today’s industries are decimated, and as the market price of media falls closer and closer toward zero, new avenues will be opened up. New industries will be born in a neverending cycle of creative destruction. Yes, perhaps universal basic income will help ease the current transition that we are going through, but the transition is not the reason why universal basic income is inevitable.

So why is it inevitable? Take a look at Japan, and now the eurozone: economies where consumer price deflation has become an ongoing and entrenched reality. This occurrence has been married to economic stagnation and continued dips into recession. In Japan — which has been in the trap for over two decades — debt levels in the economy have remained high. The debt isn’t being inflated away as it would under a more “normal” rate of growth and inflation. And even in the countries that have avoided outright deflationary spirals, like the UK and the United States, inflation has been very low.

The most major reason, I am coming to believe, is rising efficiency and the growing superabundance of stuff. Cars are becoming more fuel efficient. Homes are becoming more fuel efficient. Vast quantities of solar energy and fracked oil are coming online. China’s growing economy continues to pump out vast quantities of consumer goods. And it’s not just this: people are better educated than ever before, and equipped with incredibly powerful productivity resources like laptops, iPads and smartphones. Information and media has fallen to an essentially free price. If price inflation is a function of the growth of the money supply against growth in the total amount of goods and services produced, then it is very clear why deflation and lowflation have become a problem in the developed world, even with central banks struggling to push out money to reinflate the credit bubble that burst in 2008.

Much, much more is coming down the pipeline. At the core of this As the cost of superabundant and super-accessible solar continues to fall, and as battery efficiencies continue to increase the price of energy for heating, lighting, cooking and transportation (e.g. self-driving electric cars, delivery trucks, and ultimately planes) is being slowly but powerfully pushed toward zero. Heck, if the cost of renewables continue to fall, and advances in AI and automation continue, in thirty or forty years most housework and yardwork will be renewables-powered, and done by robot. Water crises can be alleviated by solar-powered desalination, and resource pressures by solar-powered robot miners.

And just as computers and the internet have made huge quantities of media (such as this blog) free for users, 3-D printers and disassemblers will push the production of stuff much closer to free. People will simply be able to download blueprints from the internet, put their trash into a disassembler and print out new items. Obviously, this won’t work anytime soon for complex objects like smartphones, but every technology company in the world is hustling and grinding for more efficiency in their manufacturing processes. Not to mention that as more and more stuff is manufactured, and as we become more environmentally conscious and efficient at recycling, this huge global stockpile of stuff acts as another deflationary pressure.

These deflationary pressures will gradually seep into services as more and more processes become automated and powered by efficiency increasing machines, drones and robots. This will gradually come to encompass the old inflationary bugbears of medical care, educational costs and construction and maintenance costs. Of course, I don’t expect this dislocation to result in permanent incurable unemployment. People will find stuff to do, and new fields will open up, many of which we are yet to imagine. But the price trend is clear to me: lots and lots of lowflation and deflation. This, ultimately, is at the heart of capitalism. The race for efficiency. The race to do more with less (including less productivity). The race for the lowest costs.

I’ve written about this before. I jokingly called it “hyperdeflation.”

And the obvious outcome, at the very least, is global Japan. This, of course, is not a complete disaster. Japan remains a relatively rich and stable country, even after twenty years of deflation. But Japan’s high level of debt — and particularly government debt — does pose a major concern.  Yes, as a sovereign currency issuer borrowing in its own currency the Japanese government runs no risk of actual default. But slow growth and deflation are stagnationary. And without growth and inflation, the government will have to raise taxes to cover the deficit, spiking the punchbowl and continuing the cycle of debt deflation. And of course, all of the Bank of Japan’s attempts at reigniting inflation and inflating away that debt through complicated monetary operations in financial markets have up until now proven pretty ineffectual.

This is where some form of universal basic income comes in: ultimately, the most direct stimulus for lifting inflation and triggering productive economic activity is putting cash in the people’s hands. What I am suggesting is that printing money and giving it away to people — as opposed to trying to push it out through the complicated and convoluted transmission mechanism of financial sector lending — will ultimately become governments’ major backstop against debt deflation, as well as the temporary joblessness and economic inequality created by technological acceleration. Everything else, thus far, has been pushing on a string. And the deflationary pressure is only going to become stronger as efficiency rises and rises.

Throw enough newly-created money into the economy, inject inflation, and nominal tax revenues can rise to cover the debt load. Similarly, if inflation gets too high, cut back on the money-creation or take money out of circulation and bring inflation into check, just as central banks have done for the last century.

The biggest obstacle to this, in my view, is the interests of those with lots of money, who like deflation because it increases their purchasing power. But in the end, rich people aren’t just sitting on hoards of cash. Most of them do have businesses that would benefit from their clients having higher incomes so as to increase spending, and thus their incomes. Indeed, in a debt-deflationary spiral with default cascades, many of these rentiers would face the same ruin as their clients, as their clients default on their obligations.

And yes, I know that there are legal obstacles to fully-blown helicopter money, chiefly the notion of central bank independence. But I am an advocate of central bank independence, for a variety of reasons. Indeed, I don’t think that universal basic income should be a function of fiscal spending at all, not least because I think that dispassionate and economically literate central bankers tend to be better managers of monetary expansion and contraction than politically motivated — and generally less economically literate — politicians. So everything I am describing can and should be envisioned as a function of monetary policy. Indeed, what I am advocating for is a new set of core monetary policy tools for the 21st century.

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Drone Strikes Against Alleged Terrorists Are An Abandonment Of The Rule Of Law

Watchkeeper UAV first flight in UK at MoD Aberporth. 14th April 2010.

I have no doubt that the vast majority of British people will support David Cameron’s decision to blow to smithereens two British jihadis fighting with the self-proclaimed Islamic State who were allegedly involved in planning and directing terrorist attacks on the UK, just as the vast majority of Americans support Obama doing similar things. I don’t think the Conservative government will harm its popularity in assassinating these people. The opposite, in fact, or as The Sun put it “Wham! Bam! Thank You Cam”

Going to Syria to fight with the Islamic State is seen as a form of treason: by aligning with a group directly and specifically hostile to the UK, these people (it is being argued) have effectively redesignated themselves as enemy combatants. In those terms, this was simply a mundane act of counterterrorism: the British state suspected an enemy force of plotting death and destruction upon the British people, and neutralized the threat.

At the same time, and while I am no legal expert, I see these killings as an abandonment of the rule of law, which I see as an essential and foundational component of Western civilization tracing back to Aristotle who wrote that: “law should govern”.

The UK government is not trying to argue that this was an act of war, per se. After all, the UK is not at present at war in Syria. Parliament voted against it in 2013. The UK government is trying to argue that there was “no other way” of stopping the attacks they suspected that the targets were plotting, much the same as if you walk into an airport with a gun and start shooting people, you should not be surprised if you are shot dead by an officer of the law in response. And that would be true with a gunman in an airport or shopping centre. But how can it be true of militants thousands of miles away from the UK? They might have been in contact with individuals in the UK who were planning on physically carrying out the attacks. But surely the people who were the imminent threat to the UK were the ones in the UK, not Syria? And nobody in the UK was as far as I can tell apprehended in the course of the act of carrying out an attack. What made the people in Syria such an imminent threat that they had to be killed instead of put on trial for their alleged crimes as anyone else would be?

I don’t think it is anything like as simple as saying that travelling to Syria, and joining the Islamic State should trigger a suspension of the rule of law. The British government is not by itself the law. Nor is The Sun newspaper, nor the man or woman down the pub. The British legal system is the law in the UK, and if someone is suspected of terrorist offences the only way to determine beyond reasonable doubt that they are guilty and establish a sentence is to put them on trial in front of a jury of their peers.

Obviously, Britain has no extradition treaty with the Islamic State. There was no simple and clear cut way to put these people on trial for their alleged crimes. I don’t have a brilliant plan to do it. But killing them outright makes it completely impossible to establish guilt and sentence in front of a court of law in accordance with the rule of law. It does not turn the wheels of justice. A trial may not be necessary for The Sun and The Daily Mail. But it is necessary for upholding the rule of law.

This, ultimately, is a very major element in what separates civilized countries from chaotic and despotic places like the Islamic State, where extrajudicial killing is rampant. If we abandon it, we are abandoning the principles of our own civilization.

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Correction or Crisis?

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After almost seven years of relative calm and stability, a stock market crash is finally upon us.

This is a very predictable crash stemming from a very widely known cause. Hundreds of analysts including myself — following the trail illuminated by Michael Pettis — have for a long time been banging on about a Chinese slowdown gathering an uncontrollable momentum, sending China into a panic, and infecting global markets.

What’s less clear yet is whether this is a correction or a crisis. My view is toward the latter, simply because confidence is fragile.  Once the animal spirits of the market turn negative, it takes a heck of a lot to soothe them. And the markets look increasingly spooked. The fear is rising. Last week I tweeted that I felt the risks of a new financial crisis are greater than ever.

The reasons why are simple: Western central banks have gone a bit nuts, and are trying to hike rates even though inflation is close to zero even after interest rates being at zero for seven years. And Western governments have gone a bit nuts (especially in the eurozone and Britain but also to a lesser extent in the United States) and are trying to encourage growth with austerity even though all the evidence illustrates that austerity is only a helpful policy in a booming economy, not in a slack one.

Those two factors weren’t too destructive in an economic situation where there was moderate economic growth. More like a minor brake on growth. Keep swimming forward, and sooner or later inflation will rear its head, and rates will have to be raised. But with a stock market crash and a growth downturn, and an unemployment spike, and deflation, things get very problematic very fast.

Let me explain how I think this plays out: interest rates are at zero. Inflation is almost at zero, and a stock market crash will only push that lower. Simply, this is the bottom falling out of the bottom. A crash here is like falling off the bicycle in spite of the Fed’s training wheels. Unconventional monetary policy has already been exhaustively tried, and central bank balance sheets are already heavily loaded with assets purchased in quantitative easing programs. Now the Fed’s balance sheet does not excessively concern me — central banks can print all the money they like to buy assets up to the point of excessive inflation. But will that be enough to reverse a new crash?

Personally, my doubts are growing. At the zero bound, I believe Keynes was right, and fiscal policy is the best answer. The post-2008 economic landscape has been defined by monetarists trying desperately to perfect new tools like quantitative easing to avoid outright debt-financed fiscal policy. But there have been problems upon problems with the transmission mechanisms. Central banks have succeeded at getting new money into the banking system. But the drip of that money into the real economy where it can do its good work and create growth, employment and prosperity has been slow and uneven. The recovery is real, but weak, even after all the trillions of QE. And it has left us vulnerable to a new downturn.

If the effects of the crash cannot be reversed with monetary policy, that leaves fiscal policy — that old, neglected, unpopular tool — to fight any breakouts of deflation or mass unemployment.

Or it leaves central banks to try really radical policies that emulate the directness of fiscal policy, like literally throwing money out of helicopters or OMFG.

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Is Jeremy Corbyn The Answer?

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Labour’s defeat in the 2015 election may have been as much of a function of demographics as anything much else. As I wrote earlier this week: “Britain is greying, and older people tend to be more conservative.”

If that’s the case, then the deck will be stacked against Labour in 2020, and even more so after constituency boundary changes that will help the Tories and hurt Labour.

Still, the question that Labour members and supporters should be asking themselves is: which one of the candidates can beat the Tories in 2020?

As a political movement, only in power can you wield power. In opposition, you — and your supporters — are the earth in front of the steamroller of power.

That’s not necessarily a call to reject Jeremy Corbyn, though. There are legitimate reasons to think that he might be the best choice on these terms.

My doubts about Corbyn begin with his portrayal as overly leftish. If Ed Miliband was perceived as too left wing for the British electorate in 2015, why would Corbyn — who is a good few swathes of territory to the left of Miliband — be right for an even greyer and more conservative Britain in 2020?

A second factor is that Corbyn is already on the defensive over alleged associations with anti-Semitic figures. I’m not in any way suggesting Corbyn is an anti-Semite — or wilfully associated with anti-Semites — but the tone of the conversation makes it look like a troubling factor in winning a general election against a hostile Tory press.

Furthermore, his conciliatory language toward such groups as Hezbollah, Hamas, Maduro’s Venezuela and Vladimir Putin’s Russia offers even more ammunition for the Tory press to use against him to portray as a dangerous choice for prime minister, just as they did to Ed Miliband. And that is the case even if his words were meant to open dialogue rather than endorse a particular set of views or policies.

And further, it would seem to split the Labour parliamentary bloc. The Tory press will ask the question: how can we expect him to lead the country when he can’t even lead his own party?

Still, it is hard to ignore what Corbyn has stirred up in the leadership battle. It looks increasingly like what the SNP has managed to stir up in Scotland. Hundreds of thousands flocking to register as supporters. A genuinely optimistic alternative vision of the future. As George Monbiot writes in The Guardian: “Labour’s inability to provide a loud and proud alternative to Conservative policies explains why so much of its base switched to Ukip at the last election. Corbyn’s political clarity explains why the same people are flocking back to him.”

Monbiot quotes openDemocracy‘s Ian Sinclair comparing Corbyn to Margaret Thatcher, noting she was: “Divisive, hated by the press, seen by her own party as an extremist… [and] widely dismissed as unelectable. The Tory establishment, convinced that the party could win only from the centre, did everything it could to stop her.”

Corbyn is a conviction politician like Thatcher, with a vision of radical change. Corbyn’s leadership election opponents aren’t. They tend to advocate chasing after the electorate. That is not necessarily a stupid thing to do. It worked to get Blair and Cameron elected. But times change. Chasing after the electorate — and reinforcing Tory myths about the necessity of slashing the deficit, reducing immigration and reducing public spending — didn’t work in 2015 for Labour. It just helped the Tories portray Labour as incompetent on their own terms. Corbyn won’t re-inforce deficitphobe myths. He is a principled anti-austerian in a field that otherwise concedes the narrative almost entirely to the Tories. And his economic views have a good deal of credibility and support from economists.

In the end, I chose not to back Corbyn as Labour leader. It just looks to me like too much of an uphill struggle to win in 2020 — or earlier should Cameron’s majority of twelve fall — from Corbyn’s position. But I might be wrong. And I will be happy to see him elected Labour leader and given a chance to change the narrative.

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On the Dehumanization of Immigrants

Britain is in the grip of a worrying trend.

Our own Prime Minister compared migrants in Calais to insects when he called them a “swarm”.

Meanwhile, internet comment sections relating to the refugees are filled with hatred and venom. Asylum seekers are referred to as “invaders”, and the trolls encourage the British authorities to shoot them, to machine gun them, and hang them on meat hooks.

This dehumanization of immigrants frightens me. Not simply because dehumanization of large groups of people often foreshadows violence. It frightens me because this is just the tip of the iceberg. There is a lot more of this hateful stuff bubbling beneath the surface of our society. Anti-immigrant sentiment has been swelling in Britain for the last two decades, gently encouraged by tabloid journalists and other intellectually lazy people looking for an easy scapegoat for the economic and social problems of the age. As Richard Seymour noted last year in The Guardian, “77% of people in the UK want immigration reduced, and 56% want it ‘reduced a lot‘”.

Britain has been subject to soaring inflows of immigration in the past twenty years. This has meant large-scale changes to the fabric of society, some of which people may like, but many of which they may not. And there is an additional burden on public services. IPSOS-Mori, for instance, found that there is a strong correlation across Europe between anti-immigrant sentiment and people’s perception of strain on public services. In that sense, anti-immigration sentiment in itself may not be entirely irrational.

Still, it does ignore the fact that there may be cleaner solutions to Britain’s problems than simplistically blaming immigration, and trying to clamp down on human movement. None of the strains on public services, health care and infrastructure would exist if only the government would properly scale investment in infrastructure and public services to demand. Immigrants pay more taxes than they draw out in services, so immigration has hardly made such investment unaffordable. Not to mention the billions of pounds in cheap lending that the private market made available to the government at negative real rates during the last parliament — money that could have been invested in infrastructure and public services — but which the government passed on.

As America — with its millions of undocumented migrants — is discovering, trying to stem flows of humans is very hard. People are slippy, and they go where they wish. Walls and fences are impediments, but they are not absolutes. People can be incredibly singleminded. The stories of the migrants in Calais who have escaped warzones, famines and despots in Africa and the middle east to slip into Europe, and across the Channel are a testament to the resilience of the human will. That resilience is why the anti-immigration internet trolls are setting their sights upon machine guns and meathooks and other such savagery. Walls and barbed wire and officers with searchlights and sniffer dogs isn’t working.

In the bigger picture, as anti-immigrant sentiment has swelled, there may be an overflow into the demonization and ostracization of ethnic minorities, even those who are here legally. Even those who were born here. Even those such as myself who were born here and are the children of white, English mothers. Even, perhaps, to white Britons who favour multiculturalism and immigration. The data shows that Britain is getting more racist, with 1 in 3 admitting to racial prejudice, up from 25 percent in 2001.

In the long run, I have no doubt that the economic benefits of migration — it’s estimated that completely open borders would roughly double global GDP via more efficient matching of workers and firms — will win out and that humanity will become increasingly transnational, and postnational, and ultimately interplanetary.

But for now, with this tidal wave of anti-immigrant and increasingly racist sentiment, I feel frightened at what my own country — a country that I have lived in my entire life — might be becoming.

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Don’t Mention The War

angelamerkel

It is wrong to suggest that people should be held accountable for the actions of their ancestors. Blaming each other for the deeds of our ancestors is the cause of vast tracts of human suffering and conflict. Tribes and nations have fought each others for centuries — and, in some places, continue to do so — based on the actions of that tribe or nation’s forefathers. This is irrational. We cannot change the actions of our ancestors. That is perhaps one reason why John Cleese’s portrayal of an idiot hotelier beating down his German guests with a spiel of cringe-inducing World War 2 and Nazi clichés is so absurdly funny.

That being said, we do have a responsibility to learn from and not repeat the mistakes of our ancestors. Failure to learn from the mistakes of one’s ancestors is the point at which the actions of past generations become relevant in a discussion of the present.

There is a line of reasoning that suggests that the first person to compare their opponent to Adolf Hitler or Nazism in an argument on the internet just lost the argument. I tend to see this view as generally correct. The acts and beliefs of the Nazis were unusually horrific, and comparing your opponent or the person or group you are criticizing to the Nazis is often an act of rhetorical desperation, and often a symptom of a lack of imagination. However, what is generally correct is often locally wrong. Sometimes, a Nazi or World War 2 analogy really cuts to the core of a problem.

This, I believe, is one of those times. Having the German government and its allies trying to dictate to the Greek people the terms of Greece’s euro membership, the standards by which they should run their government, and economy, and civil service, and welfare state must feel painfully close to a new German occupation. Greece is a country, we should not forget, that suffered greatly under a German military occupation less than a lifetime ago. It is now experiencing a brutal and prolonged economic depression at the hands of a new generation of austerity obsessed Germans.

Greece has been a willing victim for German austerity. The Greeks have taken Merkel’s medicine. Greece has done a huge amount of spending cuts, so many in fact that by 2012 they had a primary surplus.

Unfortunately, Merkel’s and the Troika’s medicine was a load of horse shit. Instead of recovering, the Greek economy just got even more depressed. Unemployment has been at Great Depression levels ever since Merkel and the Troika began dictating how the Greeks ran their economy. Greek real GDP continues to trend downward. Indeed, Europe itself remains in an epic depression. The austerians keep making it worse.

Now, nobody is saying that the Greeks are blameless. Obviously, they took on a load of relatively unproductive debt they couldn’t afford, and they colluded with financiers to falsify economic data to get into the eurozone. But the country has already suffered massively as a result of those decisions (which of course were not Greece’s alone — the creditors clearly did not do their homework).

The goal now should be getting Greece — and the wider continent and world, which would also suffer greatly from a default cascade or economic slump as a result of the Greek crisis — out of the mess they are in. What Greece really needs is debt forgiveness. Even the IMF recognizes that Greece’s debts are unrepayable. But that is not Merkel and Schaüble’s goal. Instead of recognizing that their policies have failed, and that a change in course is necessary, their goal for Greece is complete capitulation to the stormtroopers. Their goal for Greece is punishment, in order to set an example to other euro members who might get into fiscal trouble.

The great irony — and the thing that makes the Nazi references really begin to stick — is that earlier German governments received massive debt relief. Indeed, after Germany started the Second World War — which killed 50 million people, including 6 million who died in the holocaust — it had its war debt written off, allowing the West German economy to begin to recover and rebuild. Indeed, Germany was the biggest defaulter of the 20th century. Yet now the very descendants of those Germans refuse the same treatment for today’s Greeks, whose troubles pale against the crimes of Germany’s Nazi past.

This is sickening. Not only are they shredding to pieces the European unity and the European Union that has kept war-torn Europe at piece with itself for the past seventy years, they are doing it in the name of an ignorant program of austerity that does nothing other than punish and degrade. And they are doing it in complete ignorance of how their own ancestors benefited from others’ forgiveness. Do they not understand the value of European unity? Of economic growth? Of peace or prosperity?

In choosing the path of sadomasochism, punishment and German supremacism, Schaüble and Merkel and their allies are risking turning what is already a terrible depression for the continent — and a ravaging for Greece — into something deeper, gloomier and more painful.

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Deflation is Here — And The Government is Poised to Make it Worse

Consumer prices may not be deflating as quickly as Labour’s electoral chances did earlier this month, but — even after £300 billion of quantitative easing — price deflation for the first time in more than half a century is finally here. The Bank of England continues to throw everything at keeping prices rising at close to their 2 percent target. Yet it’s not working. And this is not just about cheaper oil. Core inflation has also been dropping like a rock.

I argued that “deflation was looming” for Britain last year, and feel a little vindicated that it has come to pass. But I don’t feel at all gratified about the thing itself.

In a highly indebted economy such as Britain’s — where private debt dwarfs government debt — deflation is a dangerous thing. Past debts — and the interest rates paid on those debts — are nominally rigid. Unless specifically stipulated as being inflation-adjusted (like TIPS) they don’t scale to price changes in the broader economy.

Under positive rates of inflation, inflation assists in keeping debt under control, by shrinking the present amount of goods and services and labour that equate to a nominal amount of currency. Under deflation, the opposite process occurs, and the nominal value of currency — as well as that of historical debt — rises, making the debt harder to service and pay down, especially with the ongoing accumulation of interest.

On the face of it, that is good news for net savers and bad news for net debtors. But raising the difficulty of deleveraging and debt service can often be bad for both, because debtors who cannot pay default, bankrupting themselves and injuring their creditors. It can also depress the economy, as individuals and firms are forced to stop spending and investing and start devoting more and more of their income to the rising real cost of deleveraging.

With growth last quarter dropping to 0.3 percent from 0.6 percent, this process might very well already be under way. This raises the prospect of the nightmarish debt-deflationary spiral above.

The last thing that the economy needs under that circumstance is more money being sucked out of it through slashing public spending. Sucking money out of the economy will make deleveraging even more difficult for debtors, and slow growth further as individuals and firms adjust their spending plans to lower levels of national and individual income. Yet that is the manifesto that the country elected to power in the election earlier this month. And although Osborne and Cameron can get out of it — via offsetting cuts in spending with tax cuts — if they go through with their election promises, the prospect of recession, continued deflation and rising levels of unemployment loom clearly.

What the economy really needed in 2010 was a deep and long commitment to public stimulus to provide the economic growth needed to let the private sector deleverage. Unlike the public sector, which is a sovereign creditor borrowing in its own currency — the private sector is far from a secure debtor. Private borrowers can — unlike the central government — “become the next Greece” and run out of money.

With interest rates in the last parliament having sunk down to new historic lows, such a thing was affordable and achievable. Instead, by trying to do public deleveraging at the same time as the private sector was deleveraging Osborne, Cameron and Clegg chose a much rockier path, one in which private deleveraging and public deleveraging are slow and grinding. With private debt levels still very high, the country remains vulnerable to another deleveraging-driven recession.