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CAPITOL LETTERS (Ep. 9): The Green New Deals Tango
It is currently common sense (regardless of the amount of actual sense) to proselytize the teachings of “climate-changes-caused-by-man-and-to-be-reversed-also-by-man”. Before long, “Dubito” will be summarily excised from René Descartes’ famous witticism, which will suddenly become more laconic (as well as lacking in meaning, apparently) and will go like this: “I think (that something might exist), therefore it exists”! Then, we may get down to business: taxes, subsidies and regulations. Thus, we have the cocktail, the cool panacea brewed by the “majores terrae” (the planet’s greatest, in literal translation), served to a world stuck in the heat of the developments following the First Industrial Revolution. In the name of progress, we need to help temperatures regress back to pre-industrial levels, and we need to do so by “decarbonizing the green economy” and by socially just taxes. More
The Passions of France
Monday, April 15th 2019, was the third day of the Holy Week for Catholic Christians, the week that commemorates the Passion of Jesus Christ preceding His crucifixion and resurrection. The day followed another weekend of protests in France, when 30,000 people demonstrated in several major French cities against President Emmanuel Macron. It is therefore a most unfortunate coincidence that, on that day, one of France’s most recognisable monuments, the 850-year old Cathedral of Notre-Dame, caught fire and was nearly destroyed before the fire was eventually put out some 15 hours later. The cathedral’s spire was completely wrecked by the flames, and the building suffered notable structural damage; some of the artefacts stored within it were touched by fire and smoke to varying degrees. The incident took France and the world at large by storm, drawing strong reactions from the general public as well as from celebrities and world leaders. It did not take long for some of France’s wealthiest personalities to pledge vast sums to the reconstruction of the cathedral, while president Macron promised to rebuild the cathedral within five years. More
The Theory of Inflation Expectations on Trial
The concept of expectations has, arguably, been the crown jewel of contemporary macroeconomics. In itself, it represents roughly half of all so-called “micro-foundations” innovations that distinguishes modern macroeconomics from its Keynesian origins. Incorporated into economic modelling beginning with the 1970s, it is the theory of expectations more than anything else that basically lays the foundation for modern-day central bank policy which – until a decade or so ago – seemed to have finally mastered the ups and downs of the economy. Inflation targeting, policy guidance, transparency, commitment, credibility, time consistency and so on are just another way of saying the successful central banks manage the economy by managing expectations. Thoughts are future actions and words can shape reality before it even comes into being, altering 19th century style classical causality – this is in a nutshell the Sci-Fi appeal and semiotic charm of a concept that undergirds current economic theory! Recent economic events has put the theory of expectations to the test like never before, but the outcomes are far from satisfactory. More
Blood Is Thicker than Oil: The Throes of Venezuela’s Crisis
As the smoking gun of Venezuela’s unrest clears away, onlookers wonder whether it is about to be holstered back or cocked for another shot. To most observers, the socio-political crisis in Venezuela came as a big surprise, as if out of nowhere. Owing perhaps to its remote geographic location and the prominence of more spectacular geopolitical events, it is easy to overlook the fact that we are not speaking about a recent outbreak. Instead, the current presidential scandal is but the very latest addition to a long-lasting crisis that began somewhere in 2010 due to economic shortages and worsened with the upheaval of the existing political equilibrium following the death of long-standing president, Hugo Chávez, in 2013. Venezuela has been a powder keg for nearly a decade, as the country’s unsustainable oil-reliant economy has shown its unfortunate limits, which were further compounded by the government’s ineffectual policies, strongly influenced by the anti-Western leanings common to both Chávez and current president Nicolás Maduro. More
CAPITOL LETTERS (Ep. 8): Profit to the People!
“Profit to the People!”. But not by taking from (i.e., taxing) Peter in order to give to (i.e., to spend on) Paul (or putting it more bluntly, “robbing Peter to pay Paul”), but by letting Peter being Paul’s partner, employer or employee, supplier or customer and, if there is no other way out, benevolent benefactor in times of hardship. The American economics-&-business way of thinking mirrors the second part of the phrase. Except for the periods when the Democrats take over the power from the Republicans at the White House and/or the Capitol. At the National Museum of American History, there is an 8,000-square-foot space covering the role of business and innovation in building America as we know it today in the last 300 years. Called “American Enterprise”, it hosts, besides exhibits amongst the most prominent practical offshoots of the US-borne ingenuity and inventiveness, some billboards covered with condensed tribulations reflecting the competing narratives grouped under the heading “Debating Enterprise”. This reminded me of an article published two years ago, entitled “«Mens Sana in Sound Corporations»: A Principled Reconciliation between Profitability and Responsibility, with a Focus on Environmental Issues” (authors: Octavian-Dragomir Jora, Matei-Alexandru Apăvăloaei, Vlad I. Roșca, and Mihaela Iacob), where we argued that corporate social responsibility (CSR) and the creation and running of for-profit organizations are not two distinct objectives that are at odds with one another, but complementary, even co-generative ones. Briefly put (for the detailed expose see the article here), we found (at least) three lines of defense in the attempt to rediscover (not to “re-invent”!) the common-sense (“wheel”) that moves forward a basic truth: “the generous have to be let to generate (wealth)”. More
Mihail Manoilescu – Beyond Taboos and Clichés
Outside Brazil and Romania, Mihail Manoilescu is essentially a forgotten economist, and, even in the latter, when his name is mentioned he is generally taught as a trade or protectionist theorist, although he is a development, growth, trade and industrial planning theorist rolled into one. In the end, he was essentially an implicit macroeconomic theorist at a time when macroeconomics was just being established. What little was assimilated from him by post-war Anglo-Saxon economics happened indirectly and almost by chance, through out-of-the-Paul Samuelson-mainstream economists who – maybe because of his tainted ideological stands, or because of Romania’s fall into obscurity after the establishment of the communist regime – rarely mentioned his name, such as Paul Rosenstein-Rodan’s theory of development traps or Ráoul Prebisch’s theory of commodity dependency cycles, despite the fact that in the 1930s he commanded enormous intellectual and policy influence. Back then, he was as a sort of intellectual icon for the Geneva institutions’ group of less developed economies – the League of Nations’ nascent IMF/World Bank/WTO of the era – against the political economy orthodoxy of the day as well as a regular speaker at Davos-style conferences organised by the far right regimes of António de Oliveira Salazar, Benito Mussolini and also that of Adolf Hitler. More
The Geopolitical Game of Thrones and Europe’s Energy Crisis
Ever since the Russia-Ukraine conflict started, it has evolved into an economic war between Russia, on the one side, and the European Union and the United States, on the other. While the US and the EU imposed heavy sanctions to cripple the Russian economy due to its actions in Ukraine, President Putin has played the geopolitical “Game of Thrones” so well that now Europe is facing an economic crisis. The EU annual inflation rate for energy has touched a record high of 42%, food inflation has increased to 9.8% – the highest in 20 years –, and now the GDP growth rate is slowing down, with Russia being blamed for this. At the same time, rising inflation is ending an era of negative real interest rates and increasing the risk of a fracturing Eurozone economy. More
The Frontier of Science Is Expansive and Expensive
The CERN physicists announced, around mid-March 2013, that the particle discovered a year before, which they had claimed to be the Higgs boson “with 99% certainty”, had gained another “1% of certainty”. That is it, the verdict is in! The particle which bestows mass on us, the source of our weight, has become a factual given. We have found the Creator among quanta, but we still need to search deeply into our souls to find Him, if we want the mystery of Creation to ever be completely revealed to us. The attempt to re-create the Creation remains a costly business. More
CAPITOL LETTERS (Ep. 7): The Noble (and Nobel-Winning) Losing Fight Against Poverty
In the essay The Soul of Man Under Socialism, Oscar Wilde puts forth a mindboggling argument for socialism. The poet thereby finds poor people uncomely, so he’d want someone (or something) to redeem them from the desolation of this “picture”. The Wildean argument for socialism turns explicitly aesthetic in its essence: the artist within him wishes for a social order where the problem of aesthetic deficiency is central(ized). If the “aesthetically challenged” were eradicated and the “aesthetically gifted” were privileged, everything would be great. And there was no shortage of intellectuals who chose the comfort of complicity with the “cultural militia”. Nevertheless, both a priori and a posteriori, socialism, egalitarianism or, in other words, hyper-statism is a triple monstrosity: economically, ethically and, yes, aesthetically too. To wit: the social realism in “art”, the depersonalizing ethics of “the commune” and “the economics of penury” – the three heads of a hideous hydra. More
An Analysis of Basel III: An Accord That Risks Becoming Obsolete Even Before Coming into Force?
The Basel III accord was eagerly anticipated and its adoption had a significant positive effect on the banking stocks in late 2017. Of course, there were other considerations behind the positive sentiment, such as the progress recorded by the Brexit talks between the European Union and Great Britain at that time. For analysts, however, the lion’s share of this positive outlook was attributed to the fact that, after almost two years of negotiations with behind-the-scene stratagems and a great deal of lobbying, the leaders of the biggest central banks had succeeded to reach a compromise regarding the new Basel III regulations, which would have an important impact on the activity of the commercial banks. According to the statements of certain officials, this framework was intended to be final. More
Protecting Fiscal and Constitutional Integrity
Liberty thrives under rule of law when it applies equally to all. What Francis Lieber called institutional liberty hinges on a willingness of the public and their leaders to recognize and uphold constitutional limitations on the state. Civil liberty and self-government suffer when the law is misused as an ideological instrument to remold society. Given the relative ease with which institutions are captured and diverted from their original purposes, political courage is required to resist, oppose, and reverse any acquired needs or rights which might result. Two 19C American exemplars of principled resistance to plunder are President Grover Cleveland and Justice Stephen Field. More
CAPITOL LETTERS (Ep. 6): The Gam(bl)er (Former and Future?) POTUS
As a student, I used to sleep at night, as my days were fulfilling and filled with my studies and the like. My nights as a student in the dorm room were (for the most part) buzzing with an “audio-video” ecosystem. I contributed to the “video” aspect with a blindingly bright lamp that glowed with the power of the noon Sun itself, which watched over me as I dozed off to sleep under the sway of a book or gazette. The “audio” side was supported by my nocturnal roommates, masters/slaves (?) of games – video games, to be more precise. The poorly silenced background noise that occasionally startled me in the dead of night was woven of dialogues, spoken ritualistically and rhythmically with the melodic cadence of a talking lathe. Yet, it was not my companions that spoke. It was the “conversation” between the interfaces of the video games and the players viewing them on the screens, its phraseology both mechanistic and minimalistic. Into that blurry state between wakefulness and sleep, between reality and dreams, the environment would pour into my ears either the robotic “communiqués” of the proto-AIs in Age of Empires and Warcraft (strategy rodeos) or the commando-esque “communication” from Counter-Strike and Half-Life (adrenaline simulators), only rarely interrupted by rounds of human speech, except for when multiplayer sessions were in order. More
