... is just big business run by and for big businessmen.

I wrote here earlier about the willingness of athletics officials to disregard people's basic human rights.

We are pretty lucky that this kind of organised sport only comes to a city nearby once in several decades.

Actually the IOC seems to be a mobile state! New concept.

Rio Tinto is something like the third or fourth largest miner in the world. Recently BHP Billiton, which is the largest, tried taking it over. This prompted a counter move by a Chinese state-owned firm called Chinalco. Their bid was rejected by the Australian Foreign Investment Review Board, basically because it did not wish to see a foreign state owning a substantial slab of Australia's resources. A couple of weeks ago that decision was entirely vindicated when the Chinese authorities arrested a senior manager of Rio (the head of their China operation) for 'bribery' and 'espionage'. It has taken a couple of weeks for the basic details to leak out, but it seems that what Hu was engaged in doing was what the team leader of a sensitive price negotiation over the price steel firms would pay for iron ore would normally do - i.e. get hold of as much information about the buyer's bidding strategy as possible. The trouble is that in China steel is a commodity of 'national strategic importance' and attempting to play the steel firms off against each other and persuade some to accept a higher price than the others are holding out for is criminal activity. It seems likely that Hu also purchased information from some of the steel makers (hence the bribery charge). Now the investigation is reported to be 'widening' - which means presumably that they will be looking to see who sold what to Hu.

It's hard to see Hu as a babe in the woods. He surely must have known how the Chinese government/Party views steel and also about the absence of a hard border between firms and the state. The Chinese negotiators are a bit vulnerable because their growth rate (7.9% this year) means that they are gobbling up iron ore as fast as it can be produced - the market price is consequently nearly 20% above what it was when Rio and BHP concluded earlier deals with countries like Japan and Korea. On the other hand, according to the FT, China took 9.4 m tonnes of iron ore from Australia last year while Japan took only 2.2 m t. Therefore the Australian mining industry's continuing health is very dependent on China. It's a fine balance in which the Chinese government has decided that arresting the opposing negotiator for espionage and bribery looks like a good strategy.

The experience has been humiliating for Australian politicians. They are getting their details off the web and from journalists. When the Prime Minister asked the Chinese government to please expedite the matter he was given a rap on the knuckles. So they've asked the US Commerce Secretary to say something - which is about the biggest gun (probably the only one) they have in their arsenal. Meanwhile, Rio Tinto have not allowed the arrest to interrupt their business as usual in China. But they must've been asking around the neighbourhood to see if they can afford to support Hu or they have to sacrifice him. They just issued a statement of support. It will be interesting to see who blinks first. Will the Chinese trade Hu for a cut in the price? Or will they act like the new bully on the block to keep us all in line?

People here are tending to pronounce the name Madoff as in "Bernard MadeOff with the funds".

I wonder which banks will go down this round.

The Somali coast, especially the Gulf of Aden, is supposed to be the most dangerous maritime route in the world at the moment. While this statement is pretty much borne out for 2008, Somalia is by no means the only site of regular piracy. Further, in 2007 the situation seems to have been far worse and was matched by piracy in the South China Sea-Indonesian area. The year before that, Southeast Asia was easily the most dangerous maritime area - at least as dangerous as the Somali coast is today.

Clearly it is not the level of piracy, in itself, that is causing all the fuss right now. The newsworthiness of Somali piracy is related instead to the strategic importance of the region to - dare I say it - the supply of oil to the USA, as well as the absence of any state authority in Somalia itself. Instead we have a number of proto-states in Somalia. The Islamic Courts Union seems to have some control in the far south (where a raped teenage girl was recently stoned to death for "adultery"). Mogadishu is in Ethiopian hands for the time being. Further north, in the province of Mudug or quasi-independent Galmudug is the port of Hobyo. Hobyo, once a major sea port, is now half-buried in sand drifts and controlled by armed pirate gangs. The supertanker Sirius Star is apparently moored not far away. Still further north is Eyl, in the southern part of Puntland. It is allegedly a boomtown due to the pirate industry and possibly where the Faina was taken. Then there is Bosaso (formerly Bender Qassim) in the Gulf of Aden - a city of roughly half a million which has also grown rapidly in recent years and the main port of Puntland. Apart from being named, along with Hobyo and Eyl, as the 'pirate capital', it is also the main departure point for Somali emigrants to Yemen and Saudi Arabia.

The Western fortunes that funded the industrial revolution were largely acquired through acts of piracy, or worse, so it's hard to get very excited about these latest episodes. Ordinary trade may be more efficient, but first you have to have something to trade and what seems to have happened in the Somali case is that Hobyo, Eyl and Bosaso were fishing ports whose fish were depleted by a mixture of over-fishing by foreign fishing boats and dumping of toxic wastes. Piracy is, I suppose, now supplying many of these people with jobs, albeit increasingly dangerous ones as Western navies become involved in policing efforts. It is certainly making considerable fortunes for their bosses and, in the long run, it will help to determine the shape of any states that emerge in the region.

Every day, lately, I thank my lucky stars that I became an academic in an era in which tenure still happened. Nonetheless, a portion of my salary is still being diverted each fortnight to a superannuation fund that has, in turn, invested in god-knows-what. It will be interesting to receive my end of year statement. I suppose, at my age, I should see the government pension as a sort of public bailout - though intially it was supposed to be the other way around: have people paying into private sector funds because they don't like paying taxes and the private sector is MUCH MORE ABLE to manage the money better!

The Reserve Bank yesterday reduced the interest rate by a full 1%. I don't think they've ever done that before and it's a decade or more since they moved it by even 0.5%. I suppose they have some sort of model of how the economy behaves, but one is tempted to ask why they put it up so far in the first place. Mind you the private banks have been raising it above the RBA rate and that, in itself, is an indication of tightening credit markets - well before the US crash. The big four commercial banks have, since yesterday's announcement, cut their lending rates by 0.8%. The argument is over whether they could afford the full 1% cut, in light of their record profitability, or whether they couldn't because after the US crash their own costs of borrowing are too high. So far we have nothing but newspaper hypothesizing about this question (the news media don't themselves think of investigating, they are waiting for somebody else to do it for them).

Meanwhile the stock market continues downwards. Amazingly the US dollar has recovered its strength, while the Oz dollar and the Euro have both weakened. A couple of months ago there were USD 0.96 to the Oz $. Now there are only 71 cents. It is hard to understand why this should be the case - one can only suppose that the Asians (particularly the Chinese) are pouring so much money into propping up American purchasing power that this causes the $ to rise. In the absence of a better explanation I'd have to say that we are nowhere near the end of this process - I don't know quite how long the US debt can continue to expand.
What is especially disturbing is that it is not only the US private sector that is heavily indebted, it is also the public sector. In Oz we have a very large public sector surplus, so if government starts bailing out private firms it means that the overall debt level is reduced; i.e., it is a genuine bailout. In the US, on the other hand, it means just transferring debt from the private sector to the taxpayers; i.e., it transfers more of the burden from the rich to the poor (or from those who don't pay taxes to those who do).

Some things are quite amusing. Yesterday the Commonwealth Bank acquired Bank West (formerly a subsidiary of HBOS). The competition rules were set aside. The Prime Minister said that the top priority of his government is to "stabilize the financial system." In reality, the competition (anti-trust) rules are a silly device invented in order to persuade consumers that they are not being ripped off. But they have nothing to do with competition, which actually involves a sort of Darwinian process of big fish eating little fish. Ripping off is competition. In the economists' ideal world of 'perfect competition', on the other hand, there is no actual competition because nobody can make a profit (everyone is a 'price taker').

Tomorrow I have a meeting at 3 and then I have to drive to Canberra. I hope the meeting doesn't go on too long, because I'd really like to get to Canberra before dinner (the truck stops have such awful food!). I have an all-day meeting in Canberra on Friday. On Saturday I plan to have coffee with n2kaja and see a few sights before driving back here. I'd quite like to visit the National Museum which is relatively new and I have not seen before, but there is also a photography festival on in Canberra this month.

I woke up this morning to the news that 133 republicans and 95 democrats had voted against the rescue. Well, I hope they all get to be last in line at the soup kitchen.

I do understand that there's a lot of magical thinking in the US these days - you know creationism and all that. Maybe they believe that this really is the rapture. Sigh!

I don't dare to look at what's happened to my superannuation fund. But here's a warning to all you young things out there: I'm not giving up my place in the workforce to the likes of you any time soon!

The current financial crisis certainly provides nourishment to the idea that the end of American hegemony is on the way. It would be tempting to indulge in a feeling of schadenfreude were it not for the fact that the most likely future is one dominated by China. It is not that I necessarily fear Chinese hegemony more than the US version, but there is much more uncertainty over how it will pan out.

In the end one tends just to feel anger - that so much could have been done to avert a disaster, the cost of which will inevitably be borne by society's most vulnerable. While the business cycle is unavoidable in market economies, the US financial sector's successful resistance to regulation over the past 3 decades is going to make things much worse for the rest of us. (Possibly, like an ex-German Finance Minister I heard on the radio, I should extend the anger to the "Anglo-Saxon" financial sector - by which he meant Wall St and London together.)

With luck, however, the full impact of the Financial Follies won't get played out - at least not yet. The reason this doesn't yet look like the Great Depression is that there is a rescue package - albeit one that the taxpayers will have to pay for. We don't know yet whether $700 billion will be enough and I don't really know how it will be financed (given that the US is already the most heavily indebted country in the world). The existence of the rescue package means that there will not be mass hunger and a breakdown of law'n'order, but it could mean simply yet another reinflation of the bubble - i.e. the policy that Greenspan and then Bernanke have pretty consistently followed for nearly two decades. In reality, if the pattern is not just going to repeat itself further down the track, the US economy, specifically its financial sector, is going to have to go through a pretty tough period of restructuring. Um, also London.

The above is the only interest I have had from the very beginning and was never shared by anybody else on LJ. I don't post about it much because it's hard to know what to say when everything that can be said - from the ludicrous on upwards - is in the mass media every day. Besides, it's definitely a seasonal thing. There are times when there is no mayhem at all. But right now we are in high season and the mayhem is multplying. It is rolling out like a slow-motion movie.

I woke up to this morning's news that Lehman Bros has failed to raise the capital. I liked the way the newsreader very deliberately pronounced the name as "Lemon Brothers".

Naomi Klein, The Shock Doctrine, Penguin 2007

This book is a real tour de force (466 pages of text) and at the same time highly problematical. I found myself deeply absorbed in the detail of Klein's narratives and having to pull myself back and say 'hey, wait a minute!' all the time. In one way it tells nothing new - the theme is that free markets are incompatible with democracy (one passing reference to Polanyi on p. 23) and that crises and disasters represent opportunities for capital and indeed are necessary to keep the system going (no references at all to Marx's economic theory, frequent use of the term "creative destruction" but not one reference to Schumpeter). In another way it leaves out some important parts of the story - the Asian crisis of the late '90s was apparently based on nothing more than a rumour. No, actually there was a material disaster - an unsustainable economy that was going to crash anyway. China is made to fit the story, though I don't really think it does. The lacunae or misinterpretations of some of the cases made me wonder how strong her case was for places I know little about (Bolivia and Argentina, for example). Mind you, this is likely to be a problem for any work as ambitious as this one is - going from the Pinochet coup in Chile to the Asian tsunami, Katrina and Iraq.

Bits I liked or just found interesting:

"Disaster capitalists share this same inability to distinguish between destruction and creation, between hurting and healing." (p. 47)

Friedman as the architect of 'shock therapy', his enthusiasm for Nixon's election (and disappointment with his domestic economic policy though - cf Krugman). "Democracy had been inhospitable to the Chicago Boys in Chile; dictatorship would prove an easier fit." (p. 63)

The Chicago Boys... believed in a form of capitalism that is purist by its very nature. Theirs is a system based entirely on a belief in 'balance' and 'order' and the need to be free of interferences and 'distortions' in order to succeed. Because of these traits, a regime committed to the faithful appplication of this ideal cannot accept the presence of competing or tempering worldviews. In order for the ideal to be achieved, it requires a monopoly on ideology; otherwise, according to the central theory, the economic signals become distorted and the entire system is thrown out of balance. (pp. 102-03)

Torture as 'curing' (pp. 111-14). Idea of society as having gangrene or cancer which must be excised.

The decoupling of 'human rights' from the systematic reasons for these abuses which was the need to 'cure' the cancer of democratic ideals in order to serve the interests of capital better.

Simone de Beauvoir quoted: "There are no 'abuses' or 'excesses' here, simply an all pervasive system." Klein says: "there is no humane way to rule people against their will" (p. 126)

Thatcher showed that it could be done in a 'democracy' by creating a crisis. Crisis as opportunity.
Friedman 1982: "Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable." Or Allan Meltzer: "Ideas are alternatives waiting on a crisis to serve as the catalyst of change. Friedman's model of influence was to legitimize ideas, to make them bearable, and worth trying when the opportunity comes." Klein adds: "Crises are, in a way, democracy-free zones - gaps in politics as usual when the need for consent and consensus do not seem to apply." (p. 140)

The hollowing out of the state through sub-contracting and privatization of the state itself. Klein argues that this was the real Rumsfeld-Cheney program from the start and they chose Iraq for their most thoroughgoing experiment because it was in an already-weakened condition through sanctions.

"Political cleansing" (p. 330) and "disaster apartheid" - the discarding of 25 to 60 per cent of the population, the creation of Green Zones all over the world - gated communities that leave the masses to survive as best they can in the Red Zones. The Israeli Apartheid Wall as just the latest and most sophisticated of these, creating a whole "gated country."

New reasons for the breakdown of Oslo. While most sources attribute the sheer viciousness of Israeli policy in recent years to a continuation of aggression that began in 1948 together with unremitting US support, Klein argues that the destruction of Oslo was made possible by the application of the 'shock doctine' to the FSU, leading to a mass emigration of Jews and, indeed, many with the most tenuous of claims to Jewishness trying to escape from the sudden, sharp increase in poverty. Former Soviet Jews now account for 14% of the Israeli population and many of them have not only fuelled the settlement movement in the West Bank, but also replaced Palestinian cheap labour within Israel - thus facilitating the "closure". The dramatic rise of "security exports" as the mainstay of the Israeli economy - they trebled between 1992 and 2006 (p. 436).

In general, the depressing idea that 'security' has replaced 'peace' as the desirable state of affairs.

The dramatic widening of inequality (together with increasing poverty) in Argentina, Israel and the US in the past 20 years (p. 444). Overseas parallels with Krugman's data on the US. Same in the new ex-Soviet kleptocracy of Boris Yeltsin (where some people went from zero to billionaire in the space of a decade and average life expectancy fell by 10 years). Speaking of which, she produces the stunning (to me) statistic that 46 per cent of the population of New Mexico is functionally illiterate.

An interesting tidbit from Krugman's book is the billionaire count. He uses Brad DeLong's definition, which is an individual with a wealth greater than the annual output of 20,000 average American workers. In the mid-1990s when DeLong devised the measure, 20,000 average workers produced about $1 bn.

So by this measure in 1900 there were 22 American billionaires and by 1925 there were 32. In 1957, owing to the New Deal, the number had dropped to 16 and 13 in 1968. By the time Krugman wrote his book there were about 160 people who met DeLong's criterion.

I've been reading stuff like this for a couple of weeks now.

Thai medium-quality rice, a global benchmark, traded at about $850 a tonne on Friday, up from $760 a tonne last week, while the price of less representative top-quality aromatic rice broke the $1,000-a-tonne level for the first time, traders said. They added that the grain was being sold to African destinations.

In Chicago, US rice futures hit an all-time high of $20.45 per 100 pounds.*

Rice is the staple food for maybe 2-3 billion people. The cost of eating it just went up by 12% in just one week and apparently by about 50% in the space of two weeks. If you're a poor person who spends about 70% of your budget on food, this rate of increase is going to push you into either eating rice and nothing but rice or switching to inferior alternatives like tubers for the bulk of your food.

Vietnam and India, the world's two leading exporters after Thailand, have completely banned exports. The Philippines is the world's single largest importer, but there are a lot of countries in Africa that depend to a large extent on imported rice too.

It seems there will be famines. Amartya Sen showed, in his work on famines back in the 1980s or thereabouts, that when the speculators get their teeth into food stocks, food flows out of areas where there are shortages, exacerbating hunger. Famines are generally not caused by natural shortages, but by the normal functioning of the market economy (absent regulation). Some people are tending to blame biofuel for the current food prices, but I suspect that it isn't the case - or rather that any shortages in the food production sector are insufficient to explain the scale of the price rises and therefore the scale of the misery that will ensue.

* According to my calculations this = about $450/tonne.

I read a comment on some blog or other suggesting that the rise of creationism has less to do with religion than with the decline of rational thought. Apart from thinking that rational thought has never been very widely spread and it's probably more a case of the democratisation of the means of expression, I was fed a perfect example today - the day after it became legal to plant GM crops in NSW. This example consisted of two women having a slanging match on the BBC. One of them supported GM crops and works for some lab trying to develop GM biofuel crops. The other belongs to some green outfit (sorry I was only half listening) and was producing all and any assertion that has ever been made against the said crops. This mutual disinformation session was accompanied by quotes from people shopping at a farmers' market in London. I just remember one person saying that it was "unnatural" to have 25 cabbage crops every year because cabbage is a winter crop. The person, presumably, lives in the highly "unnatural" environment of London, but never mind. It was as if the program producers had actually set out to feed every imaginable prejudice on the subject. Consistent with my "democratisation" theme, I suspect that the production values of organisations like the BBC have shifted from the "authoritative voice" which used to derive from the establishment - whether government, the City, Oxbridge, whatever - to responding to the comments posted in 'Have Your Say'.

Deliberate obfuscation by the media aside, I'm convinced by the argument that GM crops are safe to eat, basically because I don't think that we take on the genetic characteristics of the food we consume. GM seems like a much healthier option than, say, heavy reliance on chemical pesticides (though I'm not clear that GM does actually reduce the need for chemicals). If the function of genes is to express proteins, which are the basic building blocks of life, then what we are going to eat is just protein, isn't it?*

I find the issue of biodiversity far more worrying as the corporations that invent these new plant varieties hold intellectual property on these building blocks. It is well known that GM seed, once introduced, spreads far and wide, contaminating non-GM crops. It seems to me that there are genuine issues relating to the long-term sustainability of GM farming practices - although, it must be said, these issues also relate to industrial farming systems as a whole. A further concern though is the power that ownership of seed confers on a handful of corporations. Again, however, it's not a radical change since corporations already exercise considerable control over food production and distribution. The GM technology is just another step in consolidating this control, while favouring the owners of GM technology over other corporations (economists call this competition).

NSW farmers are understandably worried because they don't know where the GM crops are going to be planted, they know there is (irrational?) public opposition to consumption of such products and they are afraid for the continuation of the market for their non-GM output. Most of them are used to selling their output to this or that corporation and what must be most unclear to them is which corporation is going to win the competition to monopolise the market for wheat, rapeseed, etc. Are they going to be sued because they were contracted to produce a non-GM crop and instead they have a contaminated one? How do they know if a farmer 50 km upwind has planted GM or not. Answer: they don't and nobody is going to help them find out. These concerns seem reasonable to me, but the state Minister said that it's none of his business and he's not interested in the question.The very absence of regulation requiring information is, of course, a policy to favour the GM varieties/corporations over others.

* I do not understand the objection of organic farmers/consumers to GM. GM is an essentially organic technology. To me 'organic' means free or inorganic chemicals - ETA: and toxins (which I admit could be organic, but most GM products don't seem to qualify).

I was reading last night, but the radio was still on in the background when suddenly it started to scream at me - something about a red card three and a half minutes into the game. Apparently the Arsenal team completely lost concentration for the rest of the half - and I don't blame them. I don't know what the penalty for this kind of thing is, but to my mind, the evidence is all there: assault with intent to cause grievous bodily harm. The leg is apparently broken in 3 places and it's possible that Eduardo's career is finished. I hope Taylor goes to gaol, together with the Birmingham City manager. I don't see how it is possibly different from, say, a businessman hiring a mafioso to kneecap his competition.

41 really shocking seconds. Don't look if you're squeamish: http://www.dailymotion.com/video/x4h5me_eduardo-broken-leg-birminghamarsena_sport