Get Over It

As we come to grips in Ireland with our risotto recession - and the prospect that our standard of living next year will fall to, well, where it was last year - then maybe we just need to keep things in perspective. A global perspective, come to think of it.

The World Bank has been reviewing the numbers and has established that they got it wrong about China. They had thought that some 250 million people had been lifted out of poverty during the past 14 years. They've issued a correction: turns out the real number was 407 million. By the way, they're talking dollar-a-day poverty: not the "we'd better ski in Gstaad rather than Aspen this year" kind of lifestyle adjustments.

I do hope we don't lapse into a bout of poor mouth begrudgery in Ireland. Now's the time to be looking outwards, not inwards. We all of us are faced with challenges in relation to energy and food, but some of us are better placed than others to deal with the consequences. That in turn puts the onus on those of us who are wealthy beyond comparison with the bottom billion of our fellow human beings to act responsibly - not selfishly.

And that means supporting initiatives such as AIMS - the African Institute for Mathematical Sciences - designed to find the Next Einstein. Ignore the self-serving parochialism of the Irish Farmers Association and remember that free trade and globalisation are the best means yet invented to end poverty. Just ask the Chinese.

It Won't Be So Bad

There's a nice post on PsyBlog about Impact Bias. This is:

our tendency to overestimate our emotional reaction to future events. Research shows that most of the time we don't feel as bad as we expect to when things go wrong. Similarly we usually don't get quite the high we expect when things go right for us.

We all suffer from impact bias of course, both in our private lives and sometimes in our public lives (think election manifestos). It also explains the wild fluctuations in business and consumer confidence indices which are based on what people expect for the economy and their own financial situation or business in the near future. Likewise, the bias can drive our capacity to think about the future, including the risks we face and the impact they could have.

Awareness of Impact Bias is kind of comforting: even if all the things that could go wrong do go wrong then it won't be so bad as we might fear. Then again, maybe not - especially when we think about global risks and threats. I recently read a remarkable essay by Peter Thiel, founder of PayPal and now a hedge fund president. Thiel places our current global uncertainties in a long run historical context, describing the ebb and flow of various 'heaves' towards globalisation over the past 500 years or so - of which the present one is perhaps the greatest and most likely the last.

He describes three 'bubbles' driving the current globalisation: the China Bubble, the Technology Bubble and the Hedge Fund Bubble. Likewise he brilliantly frames the context for much that challenges Ireland at present (though Ireland isn't mentioned) - including financial volatility, house price collapses and competition. As he says about China:

there is no good scenario for the world in which China fails.

Thiel describes the extraordinarily narrow path to the future we are now traversing: we either arrive at a globalisation that works (not just for the wealthy) or we fall off the path into failure and the last world war. It's sobering stuff, and the kind of impact we'll all be biased about.

We Only Plough The Deep

For, why are we surrounded with the Sea?
Surely that our Wants at home might be supply'd by
our Navigation into other Countries, the least and
easiest Labour. By this we taste the Spices of Arabia,
yet never feel the scorching Sun which brings them
forth; we shine in Silks which our Hands have never
wrought; we drink of Vinyards which we never
planted; the Treasures of those Mines are ours, in
which we have never digg'd; we only plough the Deep,
and reap the Harvest of every Country in the World.

Henry Martin, Considerations on the East India Trade, 1701

We are blessed, some three hundred years after these words were penned, to be the first generation in which most of us can truly enjoy the benefits of free trade and globalisation - to 'only plough the deep and reap the harvest of every country in the world'. In the intervening period wars, xenophobia, and dull-witted protectionism has denied billions of humans before us the fruits of free trade.

But there are forces that would drag us back behind the borders and the trade barriers, and they don't get more dull-witted than nonsense such as RTE's Wheres My Job Gone, broadcast last night. We were treated to the spectacle of John from Celbridge meeting 'the man who got his job' Vaclav in the Czech Republic after Schneider manufacturing moved their operations there four years ago. The tone of the narration was extraordinary: we were constantly told that jobs were moving as if jobs are goods that could be packed up in crates and shipped across the sea. They aren't: jobs are the outcome of people, capital and finance coming together in a time and place to create products and services that other folk are willing to buy. Jobs aren't like trees that can be planted (or uprooted) when the people with the capital and finance want to move. Though that still doesn't stop people wondering why the Government doesn't do something - like grow jobs as if they were trees?

Ironically John from Celbridge seemed to have a better understanding of this than the doleful programme narrator. As did the folk in Poland, expectant recipients of a Proctor & Gamble factory replacing the one in Nenagh referred to in the broadcast. They understand that there is no job for life: a tough lesson for John and his generation to learn but one I can assure you the younger generation in Ireland have learned. And so it seems have the Polish who are already thinking about what they will do when it becomes cheaper to set up factories in Bulgaria or further afield.

Yet it is because of the global ambition of P&G and Schneider etc to produce their products at lower prices that we can all enjoy the vastly lower cost of the things we buy in the shops or online. Luxury has been democratized - thanks to globalisation and technological innovation (the two going hand-in-hand). Better still, Ireland has embraced this trend: one reason the average standard of living in Celbridge or Nenagh is vastly higher than in Poland or the Czech Republic. The story of trade has been ever thus.

The question then is: how will we create the wealth that will create the jobs of the future? Firstly we begin with the fact that we have wealth: financial and human capital. Combine this with ambition, a willingness to take risks and access to the best part of 6 billion customers thanks to globalisation and we are in a good place to build on what we have. Like these two young lads from Limerick.

Sure it won't be easy: and for sure the forces working against globalisation and threatening catastrophic alternatives are strong. But it wasn't easy in the 1980s nor in the 1990s when we faced a far, far grimmer future and yet we succeeded.

For, why are we surrounded with the Sea?

Lynch the Rich

There's nothing like an economic slowdown to put us all in touch with our inner socialist. Even the Financial Times has taken to advising the rich and wealthy on how best to avoid a lynching. As journalist John Thornhill puts it in today's FT:

What rankles are the “undeserving rich”: those who take risks with other people’s money but never suffer the consequences of their mistakes; those who receive massive pay-offs even when they have failed; those who evade taxes while benefiting from public goods. Here surely there is a case for more considered intervention.

Thornhill has in mind the finance and banking industry in general and the City of London in particular. As fellow journalist Martin Wolf put it recently, no other industry or sector has been as successful as banking at 'privatising gains and socialising losses'. UK taxpayers are presently learning the depth of this insight as they pay for the nationalisation of Northern Rock.

Should we therefore expect a resurgence of socialist politics and policies in Ireland and across Europe on the back of a populist backlash against capitalist excesses? I don't think so, for the curious reason that many socialists are losing their affection for state intervention. Here are socialists over at the excellent Red Pepper web site arguing that globalisation is good for you. They observe that:

In the end, the needs of the nation state override anything else. All the din of world politics, the babble of the ‘world community’, is about this hypocrisy – governments holding on greedily or trying to expand what power they have while conceding to markets only so much as is needed to maintain their revenues.

I can't see any of our local lefties adopting similar sentiments any time soon mind.

The key political issue is inequality. As I've written before, many on the left simply assume that poverty is caused by inequality and that reducing the latter will therefore alleviate the former. A more considered perspective, such as that set out by socialist Chris Dillow, recognises the limits to state interventionism whilst also challenging conservative assumptions that current class structures are somehow natural or inevitable.

I believe instead that the proper focus should be on poverty, not meaningless measures of inequality. But even in relation to poverty there are major definitional issues let alone difficult policy choices to be made. And at the end of the day, it is economic growth driven by private enterprise that will lift the majority of people out of poverty, not self-serving state intervention. It seems that (some) socialists and libertarians are now actually in agreement on that one.

'Tis far from sushi they were reared

The new sushi bar in Dundrum shopping centre. Snapped with my N95. Isn't globalisation wonderful?!