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Silash Ruparell

Erich Maria Remarque - Arch of Triumph (1945)

8/19/2015

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My one liner:  A sculptured glimpse into the resigned gloom of Pre-WWII Europe brought to life through the travails of a Parisian refugee inhabiting a twilight world.

In the opening scenes the protagonist Ravic first meets his lover-to-be Joan on a cold November night in the shadows of the Pont de l’Alma  in Paris after literally bumping into her, sensing her distress about some event unknown, and taking her home with him.  Only to find out shortly afterwards that her (now-former) lover has just collapsed and died.
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That sets the tone for the rest of the book, set in the seedy underbelly of Parisian life of the epoch. 

Erich Maria Remarque is “of his generation”.  His works reflect a life that straddled two world wars. Arguably his more famous work is All Quiet on the Western Front (note to self: re-read).  Remarque’s themes are oppression, and Ravic, a German-speaking Czech, is the epitome of the stoical existence of those who fled the Nazis.

“Don’t you know that refugees are always as stones between stones? To their native country they are traitors. And abroad they are still citizens of their native country”.

Ravic, a refugee in Paris is a doctor, a surgeon.  As an illegal, he cannot work officially, so he works as a “shadow” surgeon, performing operations for lazy or incompetent French practitioners who pay him a small cut of their fee – the patients of course, do not notice: they are under the knife by the time Ravic appears.

The title Arch of Triumph is for me an ironical metaphor for what was about to sweep across Europe, a tidal wave of oppression, reaching its apex as it converges on the actual Arc de Triomphe.  And I think Remarque paints this scary vastness exquisitely in his descriptions of the grey Paris cityscape:

“The Arc de Triomphe emerged, gray in the silver downpour, and disappeared. The Champs Elysées with its lighted windows slipped by. The Rond Point smelled of flowers and freshness, a gay-colored wave amid the uproar. Wide as the ocean dawned the Place de la Concorde with its Tritons and sea monsters. The Rue de Rivoli swam closer, with its bright arcades, a fleeting glimpse of Venice, before the Louvre arose, gray and eternal, with its unending courtyard, all its windows dark. Then the quays, the bridges, swaying, unreal, in the gentle rain. Lighters, a towboat with a warm light, as comforting as if it concealed a thousand homes. The Seine, the boulevards, with busses, noise, people, and shops. The iron fences of the Luxembourg, the garden behind them like a poem by Rilke. The Cimetière Montparnasse, silent, forsaken.”
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This is what happened next...
Remarque’s character construction is remarkable.

Some explored in rich deep colours, others with rapid brushstrokes conveying the essential traits that mark them out. This of Veber, one of Ravic’s more honourable French “clients”:

“It was Veber’s invitation. That tinge of pity in it. To grant someone an evening with a family. The French rarely invite foreigners to their homes; they prefer to take them to restaurants. He had not yet been to Veber’s. It was well meant but hard to bear. One could defend oneself against insults; not against pity.”

Or the young lad Jeannot, who fulfils a kind of jester role in the novel, when he wakes up in the operating theatre after a car accident:

“"The leg has been amputated,” Ravic said. “Above the knee or below the knee?” “Ten centimeters above it. Your knee was crushed and could not be saved.” “Good,” Jeannot said. “That makes about fifteen per cent more from the insurance company. Very good. An artificial leg is an artificial leg, whether above or below the knee. But fifteen per cent more is something you can put into your pocket every month."”

Indeed dark humour suffuses the novel, often as a means of illustrating the politics and attitudes of the era, a method perhaps oddly reminiscent of the sardonic, mocking style of Molière:

"“Veber,” he said, “you are a magnificent example of the convenient thinking of our time. In one breath you are sorry because I work illegally here—and at the same time you ask me why I don’t rent a nice apartment—”"

In amongst all of this depth of character, stoical acceptance, gritty greyness and political upheaval you may be thinking that the plot is somewhat incidental.  And in a way it is.  Yes, there is a love story.  Two actually.  And a holiday to the south of France to get away from it all. And a deportation.

Together with an opportunistic exacting of revenge for an old wrong. 

There are historical lessons too, and perhaps those who eagerly call for breaking up the current European political construct should reflect on how recent it is that is was so hard just to move from one European country to another:

"“To Italy? The Gestapo would wait for me there at the frontier. To Spain? The Falangists are waiting there.” “To Switzerland.” “Switzerland is too small. I have been in Switzerland three times. Each time the police caught me after a week and sent me back to France.” “England. From Belgium as a stowaway.” “Impossible. They catch you in the harbor and send you back to Belgium. And Belgium is no country for refugees.”" 

Also a timely reminder that complex challenges await our current crop of leaders.

And so ultimately, you cannot escape the fact that this is a political novel, immersing you at each turn of the page, every location, every interlocution, in the reality of what it was like to live at the time, and why:

"“Suddenly Ravic had the feeling that all the misery of the world was locked into this ill-lighted basement room. The sickly electric bulbs hung yellow and withered on the walls and made everything seem even more disconsolate. The silence, the whispering, the searching of papers which had already been turned over a hundred times, the re-counting of them, the silent waiting, the helpless expectation of the end, the little spasmodic acts of courage, life a thousand times humiliated and now pushed into a corner, terrified because it could not go on any farther.”"

Here is the movie based on the book

And the Wikipedia link for the book is here.
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John Julius Norwich – Byzantium, The Early Centuries (1988)

6/11/2015

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The ancient city of Constantinople
My one liner: Fratricide, Patricide, Matricide, Infanticide, Blood, Guts, Gore, Pillage, Murder, Incest, Intrigue, Betrayal, Incompetence, Brilliance, Genius, Aggression, Passion, Fervour, Docility, Stupidity, Hubris. In other words the first five hundred years of the Byzantine Empire as described by John Julius Norwich in this classic account.
 
“After over half a century of contact with the Romans, his people had become perhaps one degree less bestial than at their first arrival; but the vast majority still lived and slept in the open, disdaining all agriculture and even cooked foods – though they would often soften raw meat by putting it between their thighs and their horses’ flanks as they rode.  For clothing they favoured tunics made, rather surprisingly, from the skins of fieldmice, crudely stitched together; this they wore continuously, without ever removing them, until they dropped off of their own accord.  And as they had always done, they still practically lived on their horses, eating, trading, holding their councils, even sleeping in the saddle.”
 
The Huns were a savage tribe which smashed their way out of the Central Asian steppes around 376AD.  Attila the Hun, “the scourge of God”, led a series of attacks on the Byzantine Empire and built up a vast dominion stretching from Constantinople to the Balkans in the East to Italy and France in the West. He came within a whisker of invading Rome itself.   
  
The Hun invasion is  just one example of the incursions and travails that beset the Byzantine Empire during the period covered in this book, 300 to 800AD. 
This colourful account by John Julius Norwich tells the story of the early Byzantine Empire, established by Emperor Constantine I (“Constantine the Great”) in 311 AD in the new city of Constantinople on the banks of the River Bosphorus.  The New Rome.
 
Whilst the Pope, and hence the religious centre, of the Roman Empire continued to be seated in Rome, the political centre had now gravitated towards the East.  

It was not a smooth and unambiguous transition, and often there were
Co-Emperors, one for Byzantium and one for the West of the Roman Empire.  
 
However, throughout the period of this volume, there was one inalienable and unargued article of faith for every Byzantine (and from which they drew strength of unity in times of turmoil), namely that the Emperor (or Co-Emperor) was the sole Vice-Gerent of God on earth.  This volume ends with the shattering of that practice in the most remarkable way in the year 800AD.  Pope Leo III produces a document (proved to be fraudulent only several centuries later) entitled the “Donation of Constantine”, pursuant to which Constantine the Great had allegedly, 500 years earlier, “retired” to the “province” of Byzantium, having bestowed on the Pope the right to confer the title of Emperor. 

By this document the Frankish ruler Charles (“Charlemagne”) was crowned
Emperor by Pope Leo and despatched to Byzantium to replace the supposed Empress Irene whose reign over Byzantium had been an economic and political
disaster.

Of course, the transition was helped by another factor: “That the Empress was notorious for having blinded and murdered her own son was, in the minds of both Leo and Charles, immaterial: it was enough that she was a woman.  The female sex was known to be incapable of governing, and by the old Salic tradition was debarred from doing so.”  
  
In between the bookends of Constantine the Great and Charlemagne, we read of a fascinating period of Christian history.  Of Emperors who were disastrous.  Of others who ruled Byzantium with skill, care and competence.  
  
For example Heraclius came to the throne in 610 AD.  He introduced a new structure into the eastern side of Byzantium, organising it along military
lines:
 - The part of Asia Minor (the northeast coastline running from Selifke in the Mediterranean to Rize on the Black Sea) which had recently been recaptured from the Persians was divided into four “Themes”, or regions.  The choice of word was significant, because tema was the Greek word for a division of troops, thus underlining the warlike division of the region. 
- Each tema was put under the governorship of a“strategos”, or military governor.  
 -  A reserve army was maintained by providing potential soldiers with inalienable grants of land, in return for hereditary military service if called up.  
 - The net result was that Heraclius did not have to rely on ad hoc recruiting or on doing deals with dodgy barbarians in order to raise an army.  
  
On the economic front he fixed the parlous fiscal position of the Imperial economy through:
 - Taxation and government borrowing
 - Restitution from supporters of the previous corrupt regime
 - Subsidies from “friends and family” in Africa
 - Most importantly however, he persuaded Patriarch Sergius, the Archbishop of Constantinople, to declare that the coming war would be a religious war.  Hence all of the Church assets and treasure would be at the disposal of the Emperor. 

Leadership 101 for aspiring modern warmongerer.  
  
You will need to read the book to find out what became of Heraclius.  

Every Emperor was confronted by tribes trying to nick territory.  The Gauls and Franks perennially switching their loyalties to and from Rome.  The Lombards (from modern Germany and Austria) settling in Northern Italy. The Slavs trying to take the Balkans. The Goths, the Vandals and Huns having to be bought off or fought off.  
 
But, there are two stand-out foes of Byzantine Christendom over this period.  
 
First, the Persian Empire, whose rulers always seemed to have the knack for knowing when they had the upper hand. As an example, in 359AD Emperor Constantius II receives a letter from the Persian King:
 
“Shapur, King of Kings, brother of the Sun and the Moon, sends salutation...
 
Your own authors are witness that the entire territory within the river Strymon and the borders of Macedon was once held by my forefathers; were I to require you to restore all of this, it would not ill-become me...but because I take delight in moderation I shall be content to receive Mesopotamia and Armenia which were fraudulently  extorted from my grandfather.  I give you warning that if my ambassador returns empty-handed, I shall take the field against you, with all my armies, as soon as the winter is past.”
 
I guess a lawyer would call that a Letter Before Action.

And of course the other formidable challenge to Byzantium was the rise of Islam.  

In 633 AD, shortly after the foundation of the religion, it suddenly “burst out of Arabia.”  First Damascus, then Jerusalem.  Next, the whole of Syria.  Egypt and
Armenia fell within the decade. The whole Persian Empire was subsumed within 20 years.  And then Afghanistan and Punjab within another 10 years. 
To the West, North Africa and Spain. Across the Pyrenees and finally checked
at the banks of the Loire.  
 
The rest, as they say, is history.
 
The various Emperors acceded and reigned using diverse styles of governance and deployed some interesting procedural instruments.  

The Emperor Maurice, though fundamentally a good man, faced financial
pressures as a result of the extravagance and incompetence of his predecessor.  Around 602AD he introduced austerity measures, but went too far, at one point cutting military rations by 25%, refusing to ransom 12,000 captives of the Avars (leading to them being put to death), and decreeing that the army should not return to base for winter but should sit it out in inhospitable territory beyond the Danube.  Eventually he become so unpopular that he took the decision to flee to Persia (with whose king he had previously  concluded a truce), taking his family with him.

His successor Phocas, embarked on a brutal purge of all his enemies. 
 
“Debauched, drunk, and almost pathologically cruel, he loved, we are told, nothing so much as the sight of blood..; it was Phocas who introduced the gallows and the rack, the bindings and mutilation which were to cast a sinister shadow over the centuries to come.”
 
First, Phocas despatched troops to Asia and killed Maurice and family. Then he exterminated his own brother and nephew. Plus a whole bunch of military men.  He even managed to kill Narses, his best general in the East.  Unsurprisingly, the Persians took their chance, invaded, and took
significant chunks of territory, including Mesopotamia, Syria, Armenia,
Cappadocia, Paphlagonia, and Galatia.  
  
Other examples abound. 

Julian the Apostate, who eventually became Emperor in 361 AD, had to bide his time (indeed he didn’t really have imperial designs, and in fact was a sort of travelling scholar, and by all accounts a little bit of a geek).  

His cousin Constantius II preceded him as Emperor.  He had had Julian’s father and stepbrother killed when Julian was a young child.  Constantius made the error of elevating Julian, appointing him as the Caesar of Gaul.  Julian must have had a festering hatred for Constantius II.   He bided his time, and then led an army against Constantius.  
 
This book has some other useful features.  The tables of lineages, emperors and family trees, the maps and illustration all add to understanding.  Moreover there is a tourist guide, providing a list of the Byzantine monuments still surviving in Istanbul today.  
  
I agree with the author in his Introduction that Byzantium is an era of history under-taught in schools, yet it has more than enough material to capture the imagination of a schoolchild.  
  
The narrative of this book is tight, so it leads you swiftly from one reign to another quite seamlessly.  
 
And that perhaps, is a clue to the central message of the book. 

Dynasties come and go.  Some leaders are good people, some are bad, most a bit of both. They are able to wield huge power. And yet they are all merely human beings powerless against the passage of time and events.

The wikipedia link to the book is here.
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Anthony Price - Other Paths to Glory (1975)

5/1/2015

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My one liner: The trenches of the First World War were horrific killing fields. Why would the French Secret Service be interested in their topography six decades on ? Other Paths to Glory is both a spy novel and a reminder of 20th Century European military heritage.

Other Paths to Glory won the Gold Dagger award of the CWA for its author Anthony Price.  Dr David Audley is the hero of this, and other novels, by Price.

Paul Mitchell is a historian and expert on the French and Belgian battlefields of the  First World War.  He spends much of his time in the archive rooms of the British Commonwealth Institute for Military Studies. 

Researching.

His mentor and hero is Professor Emerson, for whom Mitchell worked as a researcher at Cambridge.   One day Mitchell is interrupted in the archive rooms by two men, and his life changes:

“Number Two spoke this time.  And whereas Number One was a huge, rumpled, soft spoken, Oxbridge type, Number Two had “soldier” written all over him, from his carefully cropped red hair, and the mirror-shine of his boots, to the bark of his voice.”

Searching questions to Paul Mitchell about a small torn piece of German trench map produced by the two men.  That night, Mitchell, who lives with his mother, is brutally attacked and thrown into the canal near his house.  He manages to somehow clamber out, and make it back home, to the astonishment of the police constable, who have found his “suicide note.”  And Professor Emerson has died that day.  In a house fire.  Except it wasn’t the fire that killed him.

Dr David Audley (British Secret Service) arrives at Mitchell’s house, and persuades him to go into hiding.  Assumed identity...etc.

But Mitchell is also persuaded (seduced ??) into going further than that.  If he is to maximise his chances of survival he must help Audley find out what he and Emerson “knew” that has resulted in one murder and one attempted murder.

This book is somewhat of a trip down memory lane for me.  The school-trip that made the biggest impression on me as a teenager was a four-day tour of the battlefields of The Somme and Flanders, the main sites of the First World War trenches where millions of British, Commonwealth and German troops were killed.
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The Canadian War Memorial at Vimy, France
“ “Terrible – yes, it was that sure enough,” he nodded.  Only terrible wasn’t the half of it: if there was a word in the English language for the loss of fifty-seven thousand men in a few hours that first day he hadn’t been able to find it.”

Paul Mitchell has now become Captain Paul Lefèvre (pronounced “Lefever” – English Huguenot, you see) of the 15th Royal Tank Regiment.  Accompanying Audley to find out what is was that had so intrigued and excited Professor Emerson on a recent visit that he had made.  The problem is that every time they find a war veteran, or local, who has something useful to say, he drops dead.

Spy novels, when well-written have the air of imparting “inside” knowledge of the machinations of global geopolitics and secret services, as if they are facts.  This one is no different.  Whether it is indeed true or not, we are told of how “neutral houses” work:

“...That’s the curse of open diplomacy – one side’s got to be seen to win or lose, and if neither does then it’s just as bad.  So the first thing that they came up with was the hot line...Except that when its a matter of life and death nothing beats face-to-face talking...So then they set up the neutral houses...if two countries have a problem they just approach a third party for a key to a neutral house.  No publicity, no TV, no questions asked, permanent top security guaranteed at head-of-state level.  France is a popular country for meeting...”

We find out that the French Secret Service has called its British counterparts to help out because a “neutral house” meeting is about to take place at a farmhouse in the Somme.  And there has been some murderous activity in the area lately.  So they are worried.

One of Paul Mitchell’s specialities is the Hindenburg Line.  In particular he has done much research into the feats of a British Regiment called the Poachers.  Recognised as one of the most incredible feats of the Battle of the Somme was the manner in which the Poachers captured a ridge where there was a Prussian Redoubt, which borders onto “Bully Wood”, or Bois de Bouillet.  The objective had been to attack a village called Hameau which was near Bully Wood.  The Prussian Redoubt was considered impregnable, built as it was into the side of a chateau.  The story of how the Poachers captured it was one of both bravery and foolishness.

But maybe also interesting to someone trying, several decades on, to penetrate an even safer and more impregnable fortress on the border of Bully Wood.

The plot is clever, but the battlefield descriptions and the recounted tales of the veteran characters make this novel as much a work of military history as of fiction.

There is no Wikipedia entry for this book.  The Google Books link is here.
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Lessons from Fiction: Part 2 - How Societies adapt to Disruptive Change

12/31/2012

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My one liner: How do societies adapt to Disruptive Change? Exerting discipline through fear. Labour skills reflect society’s needs. Why “National Patrimony” matters.  Being local versus global depends on society’s current needs. We are crucially dependent on our modern communications networks. Opportunity Cost determines Resource Allocation. Life Experiences give us important intuitive skills. Just some of the lessons learned from World War Z.

As 2012 draws to a close, I have taken the opportunity to publish the second in the occasional series, Lessons from Fiction.  The subject is “How Society adapts to Disruptive Change”

The book which gives us some rich insights is World War Z (2006) by Max Brooks.  Written as the account of an agent of the United Nations Postwar Commission, World War Z is a series of post-war interviews with all sorts of people from all over the world who lived through a fictional apocalyptic war.

The war was a 10-year conflict against Zombies, following a Zombie pandemic which originated in China (and was originally covered up by the Chinese government), spread to South America via the illegal donor trade, and finally came to prominence following an outbreak in South Africa.  Zombies are devoid of intelligence and are motivated only by the desire to consume human flesh.  Shortly after being bitten by a zombie, a human will “die” and then become a zombie itself.  The only way to destroy them is to destroy the brain.  They do not tire, and are as strong as the humans they infect.  At peak, there were 200 million zombies threatening humanity, and the book alludes to the human race coming to the brink of extinction.

Here is a YouTube simulation of a Zombie attack (unrelated to the book), originating in Peru.
Which is obviously quite an unlikely thing to actually happen. However, it got me thinking what might be real-world applications.

An interesting paper on the mathematics of containing a zombie outbreak is here.  Its major conclusion is that only quick, aggressive attacks can stave off the doomsday scenario of the total collapse of society.  The paper points to some possible applications of the analysis, including martyrdom-based religious extremism.  Is that why we observe quick and aggressive military strikes against alleged terrorist strongholds ?

And what of the current financial crisis ? “Zombie banks” was a term first coined by Edward Kane during the Savings and Loans crisis of the late 1980s. It describes an insolvent financial institution that continues to exist simply because it benefits from government guarantees of its ability to repay its debts.  Such banks become a drain on the resources of the state whilst fulfilling no useful asset allocation function.  Many commentators argue, and I agree, that much of our current financial system suffers from this malaise.  Modelling the negative systemic impact of keeping zombie banks afloat (as opposed to letting them go) would I think be an interesting field of research. 

But that’s a digression.  Back to the book. The personal accounts tell of people’s survival stories, their roles in discovering or overcoming the threat, and the social, geopolitical, economic and physical changes that people, nations, the environment went through during that period.

Clearly an extreme fictional tale, but extremely well-researched, such that we may draw some interesting conclusions as to how societies behave during times of extreme disruption.

Discipline can be exercised through Fear

The Russian army had its own way of ensuring that its soldiers would fight for the cause.  It stripped the soldiers of their own humanity, and their ability to decide for themselves.  The result was total submission to the mission. An insight into how repressive societies coerce and co-opt their citizens into the national project, whatever that may be.  The 20th century saw this on a grand scale, with millions of people induced to oppress and murder to compatriots so that they become collaborators in the scheme of the dictator.  Decimation also incidentally appears in Roman and Greek mythology.  The three Parcae were the Roman female personifications of fate (see previous post on this subject).  Nona spun the thread of life, Decima measured the thread of life and Morta cut the thread of life.  Not much research available on the internet, but it makes one wonder why the name of the preserver of life refers to partitioning into tenth parts.

“To decimate… I used to think it meant just to wipe out, cause horrible damage, destroy… It actually means to kill by a percentage of ten, one out of every ten must die… and that’s exactly what they did to us…

The Spetznaz had us assemble on the parade ground, full dress uniform no less… ‘You spoiled children think democracy is a God-given right.  You expect it, you demand it ! Well, now you’re going to get your chance to practice it’

… ‘What did he mean ?’

We would be the ones to decide who would be punished. Broken up into groups of ten, we would have to vote on which one of us was going to be executed. And then we… the soldiers, we would be the ones to personally murder our friends… We could have said no, could have refused and been shot ourselves, but we didn’t.  We went right along with it. We all made a conscious choice and because that choice carried such a high price, I don’t think anyone ever wanted to make another one again.  We relinquished our freedom that day, and we were more than happy to see it go.”
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The Parcae (Nona, Decima and Morta) by Peter Paul Rubens. They are spinning the Fate of Marie de' Medici. Decima is responsible for determining the fate of a person.
Labour skills reflect Society’s needs

When disruption comes, the labour market changes abruptly.  In a Zombie war, modern weapons do not work. Additionally, say goodbye to modern manufacturing methods, large scale agricultural production, non-essential service occupations, mass-media as a leisure pursuit.

Gradual disruptions could also have this effect; if you believe that environmental or economic changes will in the future make people less mobile, then skills which emphasise real production and output will be more valuable than those which value intangible services or agency.

“You should have seen some of the “careers” listed on our first employment census; everyone was some version of an “executive”, a “representative”, an “analyst”, or a “consultant”, all perfectly suited to the pre-war world, but all totally inadequate for the present crisis.  We needed carpenters, masons, machinists, gunsmiths.  We had those people, to be sure, but not nearly as many as were necessary.  The first labor survey stated that over 65 percent of the present civilian workforce were classified F-6, possessing no valued vocation.  We required a massive retraining program.  In short, we needed to get a whole lot of white collars dirty.”

One by-product of this could be an improved sense of emotional well-being, with people feeling that what they do is socially useful.  The evidence on this is not clear-cut either way.  Some studies suggest that once basic human needs are met above a certain level (measured by GDP per capita) then there is no international correlation between happiness and income, although within countries rising income is related to rising happiness (the so-called Easterlin Paradox).  Others argue that there is indeed an international correlation also.  Not for debate here, but it does seem intuitive that what people value is "relative" well-being.   In a world where everyone has more equal personal wealth (in this case because of the need to fight a common enemy), then they derive more utility from contributing to their local community. 

Certainly the author seems to imply that people are happier when they are more connected to their community.
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Under what circumstances could this vocation become desirable ?
“I met one gentleman on a coastal ferry from Portland to Seattle.  He had worked in the licensing department for an advertising agency, specifically in charge of procuring the rights to classic rock songs for television commercials.  Now he was a chimney sweep.  Given that most homes in Seattle had lost their central heat and the winters were now longer and colder, he was seldom idle.  “I help keep my neighbours warm,” he said proudly.  I know it sounds a little too Norman Rockwell, but I hear stories like that all the time.  “You see those shoes, I made them,” “That sweater, that’s my sheep’s wool,” “Like the corn ? My garden”.  That was the upshot of a more localised system.  It gave people the opportunity to see the fruits of their labour, it gave them a sense of individual pride to know that they were making a clear, concrete contribution to victory.”

The modern communications network is irreplaceable

Satellites are used for a number of civilian applications: navigation and positioning; communication (including telephony, internet, television and radio); weather forecasting; earth mapping (including agricultural yields, forestry, and geology).  Not to mention military uses.  All of our modern communication depends on them: the world as we know it would literally fall apart without them.  In the novel a team of astronauts mans the International Space Station (ISS) in order to keep a small number of satellites in orbit. The team was not guaranteed any passage back to earth, but given the importance of keeping satellites working they decided to stay on the ISS anyway….
ConstellationGPS
Animation depicting the orbits of GPS satellites in medium Earth orbit.
National Patrimony determines economic well-being

One of the biggest lessons of World War Z is in my opinion the importance of a term which I think is much under-used “National Patrimony”.  The concept is has been the subject of a previous post, Why the West rules…For Now, and it refers to the accumulated store of a country’s wealth and resources.  In its narrowest definition it may consist of natural resources and financial holdings, but it should really be broadened to cover the entire endowment of attributes and heritage that a country possesses, for example its culture, national identity, homogeneity, role of government, integration with other countries.

In today’s globalised world Cuba’s isolation and self-dependence in relation to the above attributes has been very much a handicap.  In the post-apocalyptic world physical and   cultural isolation, a nationalistic mindset, disproportionate investment in healthcare, and the psychology of being accustomed to face a common adversary, all became important assets in the flourishing of Cuba as the world’s wealthiest country.  

This is surely true of any era in time.  When analysing the relative outlook and capabilities of different countries, do we not put too much emphasis on flow items (deficits / surpluses, income levels, growth items, outputs, etc) ?  Surely in any era or cycle it is the National Patrimony of a country that determines its economic well-being.

“Cases were small and immediately contained, mostly Chinese refugees and a few European businessmen.  Travel from the United States was still largely prohibited, so we were spared the initial blow of first-wave mass migration. The repressive nature of our fortress society allowed the government to take steps to ensure that the infection was never allowed to spread.  All internal travel was suspended, and both the regular army and territorial militias were mobilized.  Because Cuba had such a high percentage of doctors per capita, our leader knew the true nature of the infection weeks after the first outbreak was reported… By the time of the Great Panic, when the world finally woke up to the nightmare breaking down their doors, Cuba had already prepared itself for war… The simple fact of geography spared us the danger of large-scale, overland swarms.  Our invaders came from the sea, specifically from an armada of boat people.  Not only did they bring contagion, as we have seen throughout the world, there were also those who believed in ruling their new homes as modern-day conquistadors.”
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Catedral de San Cristobal, Havana. And Cuba as the world's financial centre ?
Opportunity Cost determines Resource Allocation

The first thing that my Economics teacher at school taught us in our first lesson was: “There is only one cost which matters: Opportunity Cost.” Governments and administrators face choices all the time, since they do not have infinite resources.  In the Zombie attack the realisation that governments came to was that it was impossible to protect and save the whole population.  And, more objectively, once you have decided which cohort of the population you are going to save, then the remainder can actually be turned into an asset to fight against the threat by acting as a decoy.  In the book, all governments eventually adopted a version of the “Redeker Plan” as first developed by Paul Redeker during the apartheid era in South Africa.

Brutal and chilling, yes.  And clearly much too extreme for any peace-time decision making.  However, it does remind us government policy-making must by definition favour one group over another.  This could have profound implications in areas such as healthcare, where currently most governments do not explicitly allocate resources based on quantitative measures of their outcomes.  Quality Adjusted Life Years (QALYs) were an early attempt at this (what will be the patients quality of life and how long will he live, if you apply a given treatment ?), and some stories in the media suggest that hospitals do operate such policies unofficially. I think that with budget constraints in the future, such resource allocation will become more explicit.  

“This is where [Paul] Redeker stepped in.  His revised Plan Orange, appropriately completed in 1984, was the ultimate survival strategy for the Afrikaner people.   No variable was ignored.  Population figures, terrain, resources, logistics… Redeker not only updated the plan to include both Cuba’s chemical weapons and his own country’s nuclear option, but also, and this is what made the “Orange Eighty-Four” so historic, the determination of which Afrikaners would be saved and which had to be sacrificed… Redeker believed that to try to protect everyone would stretch the government’s resources to the breaking point.  He compared it to survivors of a sinking ship capsizing a lifeboat that simply did not have room for them all.  Redeker had even gone so far as to calculate who should be “brought aboard”.  He included income, IQ, fertility, an entire checklist of “desirable qualities”, including the subject’s location to a potential crisis zone.  ‘The first casualty of the conflict must be our own sentimentality’ was the closing statement for his proposal, “for its survival will mean our own destruction.”  Orange Eighty-Four was a brilliant plan.  It was clear, logical, efficient, and it made Paul Redecker one of the most hated men in South Africa.”

Life Experiences give us important intuitive skills
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Fengdu Ghost City, China
The experience of the older generation is to be highly valued.  Regular readers of this blog will know that I rant about the inexperience of the 40-something world leaders that we have these days. What happened to the 60 and 70-year olds who have seen the world, achieved something in alternative careers, and truly understand how the world works ?  In World War Z, these were the people who understood the true ferocity of what was about to happen.  Sometimes it is just intuition.  One of the first interviews in World War Z is with a Chinese doctor called to an outbreak in Fengdu, where nobody yet understands that they are faced with a Zombie outbreak.  But one old lady senses something serious is about to happen because she has seen calamity many times before…

“I’ve never see Fengdu as anything but a cheap, kitschy tourist trap.  Of course this ancient crone’s words had no effect on me, but her tone, her anger… she had witnessed enough calamity in her years upon the earth: the warlords, the Japanese, the insane nightmare of the Cultural Revolution… she knew that another storm was coming, even if she didn’t have the education to understand it.”

And finally...

Many more accounts in the book than alluded to in this review, and much to reflect on.  Which makes this book a sci-fi / fantasy novel that is eminently accessible to the Reader on the Clapham Omnibus.

The Wikipedia link to the book is here.

There’s a movie due out in June 2013, by the way.  But it looks like it doesn’t really follow the structure of personal accounts where the outcome is already known.  It seems more like Brad Pitt Saves the World.

Which is fine I suppose. 

Here’s the trailer…
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James Barr - A Line in the Sand (2011). And a nod to "Information is Beautiful"

11/2/2012

2 Comments

 
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The line of demarcation of the Sykes-Picot Agreement 1916, by the French diplomat François Georges-Picot and British Sir Mark Sykes. As the Ottoman empire was collapsing, Britain and France attempted to carve up the territory outside of the Arabian peninsula.
My one liner: Viewed through the lens of the mutual back-stabbing between Britain and France in the first half of the 20th Century, the origins of the current strife in the Middle East become clearer.  An "infographic review".
 
Take the following quotes referring to a political debate in Britain about her presence in Mesopotamia (now Iraq), and you come to realise how historical cycles repeat themselves:

"However, by now the terms of the oil-sharing arrangement that Britain had reached with France...had become public and were attracting controversy, particularly in the United States which had been excluded from the deal...During the 23 June debate...[Prime Minister] Asquith systematically tore into Churchill's figures to demonstrate that the costs of Britain's presence were still unclear, and questioned the assumption that Britain would ultimately reap a divided from its mandate.  He attacked Lloyd George's root interest in the country, for its oil, as a 'fundamental violation' of the League of Nations covenant signed by Britain."

"At the beginning of July the small British garrison in the town of Rumaythah on the railway 150 miles south of Baghdad was attacked by thousands of well-armed and disciplined insurgents...Led by the nationalists and backed by the Shia's powerful religious leaders, the rebellion quickly spread among the tribes of the fertile Euphrates flood plain...The tribesmen cut the railway in several places, and within days much of the areas between Rumaythah and Diwaniyah...was in revolt.
"

Author James Barr has forensically analysed government and diplomatic papers up to the immediate post-war period to present a well-narrated account of how the two declining colonial powers Britain and France managed to undermine each other's interest in the region.  

An alternative style adopted for this review. 

I have taken inspiration from the book "Information is Beautiful" by David McCandless (highly recommended) to create a few charts (nowadays known as "infographics", I believe) that show the interplay between the two powers in the region, and the timelines by which some of the modern states were created. 

The charts are my own creation based on my interpretation of the book, and of course do not capture much nuance.  But hopefully they give a flavour of the extensive ground and material covered by the author.  Apologies to the author (and, no doubt, others more knowledgeable than me) for inaccuracies.

Syria. 9 September 1919. David Lloyd-George, British Prime Minister: "We could keep faith both with the French and the Arabs, if we were to clear out of Syria, handing our military posts there to the French, and at the same time, clear out of Damascus, Homs, Hama and Aleppo, handing them over to Feisal [for a short period King of independent Greater Syria].  If the French then got into trouble with Feisal it would not be our fault."

"On 27 May [1943], fighting erupted in Homs and Hama, the two main cities between Damascus and Aleppo.  In Hama a dispute between the French and the Syrian gendarmes about who controlled the railway station escalated.  After the Syrians ambushed a French relief column outside the town, capturing artillery and armoured cars, the French retaliated by mortaring, machine-gunning the town.  Eighty people died."
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Lebanon. "In June 1941 British and Free French forces invaded Syria and Lebanon to stop the Vichy administration providing Germany with a springboard for an offensive against Suez.  After the Vichy French surrendered a month later the British government entrusted the government of Lebanon and Syria to the Free French.  When that move caused Arab anger British officials decided that the best way to divert attention from Palestine was to help both Syria and Lebanon gain their independence at French expense.  With significant British assistance the Lebanese did so in 1943."
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Mesopotamia (Iraq). "Once the British government had decided that control of Northern Iraq mattered more than the question of who was allowed to join the Turkish Petroleum Company, [Chief Executive, John] Cadman went to the United States later in 1922 to hammer out a provisional agreement that offered the Americans participation in the company. That done American criticism magically evaporated, the Mosul dispute was eventually resolved in 1926 and the deal was signed in 1928. By its terms, four companies - Anglo Persian, Royal Dutch Shell, the French state-owned Compagnie Française des Pétroles and the Near East Development Corporation which represented the various US companies' intrests) each had an equal stake of 23.75 per cent in the TPC. 'Mr Five Percent', Calouste Gulbenkian, who had set up the company, retained the remainder."
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Palestine (Israel). The Balfour Declaration 1917 (Arthur Balfour, British Foreign Secretary): "His Majesty's Government view with favour the establishment of a national home for the Jewish people, and will use their best endeavours to facilitate the achievement of this object, it being clearly understood that nothing shall prejudice the civil and religious rights of existing non-Jewish communities in Palestine, or the rights and political status enjoyed by Jews in any other country."

From the author: "On 10 November [1945], [Georges] Bidault [French Foreign Minister] quietly told David Ben-Gurion [Zionist leader and subsequently first Prime Minister of Israel] that France would support the Zionist cause. Eighteen months earlier Ben-Gurion had  offered up the hope in public that, after the war, the Jews would find that a rejuvenated France would 'have an understanding attitude towards us'. That prayer had now been answered.  It was not long before France's grand policy of covert support for the Zionists would emerge. "
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There is no wikipedia page for this book.  The author's homepage is here
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Leigh Skene - The Impoverishment of Nations (2009)

9/30/2012

1 Comment

 
My one liner: A commonsense overview of post-crisis world economic trends. A global macro handbook for an international investor, and a basic primer for a non-specialist looking to understand what the future holds for the world economy.

I am surprised this book has not received more attention. This was another of the books I bought during the summer at the closing-down sale of England’s Lane books that I have referred to in various previous postings.  A reminder of the rightful place that local  independent bookstores should be playing but no longer can in this age of e-books (yes, I do own a Kindle)  and online shopping.  We are being fed content through our electronic networks, and perhaps we are forgetting how to seek out nice things in the physical world. But that is a topic for another posting.

When the global financial crisis began in 2008, we all started to (re-??) learn some fundamental truths, most of which were of the nature of “not everything can keep going up forever”. In the Impoverishment of Nations, author Leigh Skene introduces us to some further fundamental truths, which are also fairly obvious, but which still don’t seem to be grasped by many policy-makers. This is what can give this book wide appeal.  To the layman it can provide a roadmap of where our economies are likely to head over the next few years, and we can draw our own conclusions about what that might mean for us personally.   

There is also, I believe, much to digest in this book for the professional investor, since if some of Skene’s global macro predictions are true, then one could use them to construct an international investment portfolio.

Take for example, Skene’s Fifth Basic Truth (he has 10, which appear in a nice
one-page list at the end): We can’t borrow our way out of debt. Blindingly obvious if you put it like that, and yet, governments (or their Central Banks) are engaging in what is referred to as Quantitative Easing (QE).  Basically, this involves a Central Bank printing money which it then uses to purchase financial assets (typically government bonds) from banks. QE is supposed to stimulate economic activity because it increases the excess reserves of banks, so that they can lend this cash out to individuals and companies (particularly small companies). The problem is that this won’t work according to Skene.  That is because there is too much private debt already in the economy.  The man in the street already has a mortgage and other loans and credit card debt.  Hence, a polite “Thanks, but no thanks,” to the offer of additional credit. The chart below which I have hand-copied from Skene’s book illustrates this quite nicely. And if you want to follow up on what has happened in the last three years (more of the same, basically), then take a look at the latest NY Fed Household Debt and Credit Report Q2 2012.
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An additional effect, only peripherally addressed by Skene, is the move towards capital  tightening via the new Basel III Capital Adequacy rules.  In a nutshell, these are requiring banks to hold more “Tier 1” (allegedly  high quality) capital against their liabilities.  Which means that the supply of credit from banks is possibly tightening also. And with bond yields at all time lows, the“velocity” of money, or speed with which money goes round the economy may well have slowed down significantly as people hoard cash. May I be so bold as to suggest (as Skene indeed does) that now is in fact time to break the world’s habit of pro-cyclicality. Surely now is the time to be loosening regulations, capital requirements and barriers to business, and tightening them when economic activity eventually starts to pick up.  Yes, some allegedly “systemically important”institutions will then topple, but I would suggest that after 2008, this possibility is already “priced in” anyway.
 
I digress.  Back to the book.  Where are the upcoming battlegrounds for natural resources ? Well, some interesting perspectives from Skene. First, the world will not run out of oil.  Reserves from tar sands and shale gas will provide our energy needs for decades if not centuries to come. That said, this doesn’t mean energy prices fall. Indeed, quite the opposite, geo-political forces are the prime driver of energy prices and are pushing them upwards.  Developed-world consumers will adjust by consuming less energy, and hence will have lower living standards.  My own view, for what its worth, is that the newly accessible shale gas and tar sands reserves and fracking etc will constitute an in-built stabiliser on the oil price, both upwards and downwards.  It is hard to see $200
per barrel without a concomitant large infrastructure investment in new types of extraction.  Likewise, you wouldn’t think that much of this new investment would be sanctioned (unless by  a government with deep pockets) at $50/barrel-oil.  Sounds like a collar on the oil price to me.

Skene thinks, and I  sort of agree, that the elephant in the room is Water. Which is a little bit of a mixed metaphor. May I quote from the book, because I can’t express this any better:

“The world’s population has doubled since 1950, but global demand for water is doubling every 21 years.  Only 2.5% of the world’s water is fit for human consumption, and two-thirds of that is locked away in icecaps and glaciers. Unlike other commodities, no new water reserves will suddenly be discovered, there is no substitute for water and just about everything and everyone relies on it....Big reserves of fresh potable water lie in underground aquifers that provide more than half of the water in America, up to 80% in Europe and Russia and 25% worldwide.  They contain 30 times more water than all the world’s lakes, and hundreds of times more than all the world’s reservoirs...[T]he vast aquifers took millions of years to form and replace themselves extremely slowly...Depletion of global groundwater supplies by an estimated 4% annually...One in ten of the world’s major rivers fail to reach the sea for part of the year, including the Colorado, Yellow, Indus and Ganges...Agriculture uses 70% of the world’s water.”
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The Ganges Delta
Consequence: water shortages, food shortages and a much more potent brake on rising living standards than rising energy prices.  Desalination and other infrastructure improvement help a little, particularly for the 30% of demand that is industrial and residential. But it won’t impact on the 70% needed for agriculture.  And irrigation is becoming more difficult because of lack of access to water.

A couple of slightly negative comments. First, the author then gets all Malthusian on us. He starts by referring to Malthus, and saying that in 1798 Malthus predicted that population growth would outstrip food growth, but didn’t factor in the arrival of the industrial revolution. But then Skene falls into the same trap of suggesting that Malthus’prediction will now come to pass as the world’s population grows to 9 billion.  

But who is to say that we are not in the midst of a second, or third or whatever, industrial revolution already ? And anyway population is according to data cited by the author, predicted to peak at 9 – 9.5 billion by 2070. Or maybe we will eat less meat, which is the largest consumer of water.  Self correcting mechanisms again ? Second, I wish this item had been included in the list of Ten Basic Truths, as it is an extremely important issue.

The essence of the book is that advanced developed nations have a long period of adjustment to go through which will likely lead to lower living standards after six decades of rising ones. Having borrowed largely for consumption over the last century or so, rather than investing savings into productive assets (Basic Truth 8), advanced nations now find that they cannot borrow more, either at a personal or a national level.  

These fiscal burdens will only increase as populations get older in advanced
countries.  The number of people of working age available to support each pensioner is dwindling, so either the shoulders of each worker will have to support more burden, or pensioners will need to receive less state assistance. Interestingly, China has a similar problem, whereas India remains in fairly good shape for the rest of the century (see my reproduced chart below).
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Essentially, the forces could have pulled us out of the deflationary trap, such as Keynesian fiscal deficits, or monetarist QE are either unavailable or ineffective (Basic Truths 3-5). Rising energy prices and food and water shortages lower real standards of living.  Wage rises are unlikely to rescue people in advanced countries because globalisation is unleashing cheap labour onto the markets (Basic Truth 7).  And commodities and real estate are still overvalued and have further to fall, hence eroding personal wealth and balance sheets (Basic Truth 2).  A similar argument is also put forward for stock markets, although they have risen since the book was written.  Query however how much further they can go unless you believe predicted earnings growth (the “E” in P/E) will actually transpire. Assets will eventually have to be re-priced at fair value removes the effect of decades of leverage. Fiat money systems have been largely to blame for this.

I would broadly agree with the above analysis, with two exceptions.  Advanced economies have one huge “balance-sheet” item which is mostly ignored by economists’ appraisals. That is the Rule of Law.  Western legal systems have evolved over many centuries to the point where comprehensive property and legal rights exist with confidence. They are far from perfect (as this previous blog post of mine illustrates), but they do provide a basic foundation for widespread economic and social activity. This gives these  countries safe-haven status and will make them a favoured FDI destination.  
 
Which brings me on to why I think this book is of practical relevance.  If (as I do) you agree broadly with the conclusions, then it can also inform an appropriate  investment thesis.  There are many  possible investment conclusions one can draw. Here are  mine:

1. We are no longer in a period where financial engineering and in particular leveraged finance are the primary source of investment returns. Where bonds are low yielding and equities are volatile, don’t be afraid of unlevered equity-only investments in high-quality projects. Be happy with a yield of 4-6%.  You always have an option to raise debt in the future to leverage your returns. So what counts as a “high quality project”? Depends on many factors including time horizon and liquidity preference, but an example could be commercial real estate with high quality long-term tenants such as governments or highly rated corporates.


2. Infrastructure projects, particularly in the food and water sectors.  But pick countries where the off-taker is likely to pay up for duration of the project. For example renewable energy projects in southern Europe came a cropper, because many relied on government subsidies for the duration of the project, and these subsidies were pulled when deficits needed to be cut. So, a good test would be “does the government or other off-taker really  need the relevant infrastructure to be operational for its whole life ?”.  Less important in advanced countries, where contracts tend by and large to be honoured.

3. And this leads us nicely to geographical considerations. Falling living standards in advanced economies does not translate into  “don’t invest there”. Remember that big asset: the Rule of Law.  And following Skene’s thesis, with banks pulling out of corporate  lending, the opportunities for cash investors could be interesting. SMEs, perhaps listed on the smaller stock markets, may have a high amount of leverage on the books, find it hard to access primary equity capital, but have fundamentally strong operational cashflows. The opportunity for a cash buyer would be to take the company private, take the debt of the books and hopefully increase the efficiency and scale of the business with expansion capital. Exit by re-floating.  Many such opportunities abound, particularly in Europe. Private Equity investing will mean what it used to, ie, taking over companies and managing or operating them better.

4. In terms of emerging economies, BRICs have been in and out of vogue over the past ten years. Continuing with the theme of fiscal strength driving economic strength, I would be looking at countries which growing populations from an already large based, strong fiscal positions and are capable of being a “self-sustained eco-system”, and some semblance of an industrial base. Within advanced economies, Australia looks interesting.  The Gulf countries, (including, in the future, Iraq) are natural-resource backed economies with existing infrastructure and very little need to access international debt markets. There are some other examples in Africa, Latin America and Central Europe. A good starting point is the projected Debt/GDP ratios, which can be
found here.

I shall be developing these themes in future posts, but I would be very happy to engage in discussion, either via the comments section here, via email in private or through the various social media, Twitter and LinkedIn. 

There is no Wikipedia link for this book.  The Google Books link for the book is
here.
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Trevanian – Shibumi (1979)

6/29/2012

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The ancient Game of Gō
My one liner: Comparable to (better than ??) Le Carré and Forsyth.  A Japanese philosophy-way of life, as practiced by a stateless assassin who is the hero of the book. And remarkably prescient about technology, terrorism, business and geo-politics.

Trevanian is one of the pseudonyms of Rodney William Whittaker, an author of several genres of fiction during the 1970s and 1980s.  Reading Shibumi over thirty years after it was first written was an interesting experience for the fact that it seems to foretell a number of events and technologies that nowadays have more fin-de-siėcle associations. 

The 1970s version of the Google Algorithm and Social Media all rolled into one is “Fat Boy”, a giant supercomputer run by the Mother Company (you need to read the novel to find out what that is): “Fat Boy contained a medley of information from all the computers in the Western World, together with a certain amount of satellite-stolen data from Eastern-bloc powers...It contained the most delicate information and the most mundane. If you lived in the industrialized West, Fat Boy had you...Programming facts into Fat Boy was the constant work of any army of mechanics and technicians, but getting useful information out of Him was a task for an artist, a person with training, touch and inspiration.”

On terrorism and geo-politics, the novel “pre-calls” 9/11, centering as it does around a plot by Islamic terrorists to down an airliner (Concorde, in this case). Some healthy torture by occupying forces. And there is a distinctly post-Cold War feel to the vested business interests, both Western and Arab, colluding to control the world’s oil supply, together with other forms of renewable energy, whilst unashamedly polluting the planet.  Torture and oh yes, the demise of Concorde as a commercially viable operation is perfectly forecast.

What is Shibumi ? The term is a Japanese word, often used in the context of gardens or architecture, to connote an understated beauty.  As applied to human qualities, it is harder to explain. I won’t be able to paraphrase, so I will quote the novel. Shibumi indicates a “great refinement underlying commonplace appearances...understanding rather than knowledge...modesty without pudency...in art...it is elegant simplicity, articulate brevity...in philosophy...it is spiritual tranquillity that is not passive; it is being without the angst of becoming...Authority without domination.” 

Nicholai Hel, the hero of the novel, resolves to strive for Shibumi at a very young age. For those familiar with Ayn Rand, there is something of the Howard Roark in Fountainhead about Hel’s austere individualism, about striving for excellence when all around him are pushing for mediocrity.

Hel was brought up in Shanghai in the 1930s. His biological father is of German and Hapsburg stock, and his mother is a Romanov Russian, Alexandra Ivanovna, who fled the revolution and became a Shanghai socialite, and who throws out the father as she has no intention of getting married.  Hel receives a classical multi-lingual artistocratic education, and his mother even allows him to become highly skilled in pure mathematics as she is told that, in the aristocratic tradition, it has no commercial value. Hel complements this by escaping during the night and hanging out with Chinese street-kids.

The Japanese invade Shanghai, and one General Takashi is billeted to take over the mansion in which Ivanovna is staying.  He agrees to let her stay on, and after her sudden death, he becomes the father figure to Hel.  Primarily he trains Hel in the Japanese game of Gō (“What Gō is to philosophers and warriors, chess is to accountants and merchants”). Indeed when the Second World War breaks out, Takashi sends Hel (now Nikko, not Nicholai, because of the Japanese difficulty with the ‘l’) to Japan to train in Gō with Takashi’s close friend and Seventh Dan Gō player and teacher Otake-San. Through Gō, Hel learns strategy, tactics, and the art and science of combat. 

And we also get an early sense in the young Hel, of what will drive and define the older Hel: “ the egoism of a young man brought up in the knowledge that he was the last and most rarefied of a line of selective breeding that had its sources before tinkers became Henry Fords, before coin changers became Rothschilds, before merchants became Medici.”  And what more vivid personification of the parasitic “merchant” class than the Anglo-Saxon West, and in particular the United States of America ?  The country which also flattened Hiroshima, where the love of his life was living at the time.

Post-war Japan is brought to life through the eyes of Hel, the principal occupying forces being America and Russia.  Japanese finesse, culture, art and history is rapidly Americanised, and much of its former subtleties are sacrificed.  The Russians are not much better, and it is clear that the post-war years were essentially a dirty carve-up between the West and the Soviet Bloc.  Hel is stateless, and has no papers.  Although he manages to get some fake ones for a while, and works as a code breaker for the Americans.  But eventually US-Soviet politics intervenes, and a chain of events sees him tortured and kept in solitary confinement for three years, for no particular good reason.

Fast forward to the late seventies, and Hel has a new nemesis. 

By this time he has carved out a successful career as a highly paid assassin and is now in retirement at his castle deep in Basque Country.  He tends to his garden and his concubine Hana (the “Dominique Francon” to Hel’s “Roark”).  He has become an expert caver and spends his days exploring the deepest caverns with his close and hearty friend Beñat Le Cagot.

He is popular in the area, and is well-protected. It is surely impossible for anyone to get near his castle without everyone in every neighbouring village knowing.

The attraction of this novel is that you feel Hel to be the hero, despite his occupation.  We are the product of our upbringing, and our circumstances, and it makes you realise that it is possible to forgive someone, or understand someone, if society has totally cut them out. A blond-haired man of aristocratic birth who completely absorbs Eastern philosophy.

“Your scorn for mediocrity blinds you to its vast primitive power.  You stand in the glare of your own brilliance, unable to see into the dim corners of the room, to dilate your eyes and see the potential dangers of the mass, the wad of humanity...You cannot quite believe that lesser men, in whatever numbers, can really defeat you. But we are in the age of the mediocre man. He is dull, colourless, boring – but inevitably victorious...The roar of the plodders is inarticulate, but deafening.  They have no brain, but they have a thousand arms to grasp and clutch at you, drag you down.”

Back to the nemesis. Well, without revealing too much, you can imagine that Fat Boy has something to do with it.  In addition, there is a debt of honour Hel owes to an old Jewish friend of his, Asa Stern, that he must repay to Stern’s niece, Hannah.  But those darned energy big business interests have other ideas.  The denouement takes us to London, and an English country house, and then back to the Basque territory so familiar to Hel for the final showdowns. 

Overall, lots to learn from this book, not least, in the tradition of Shibumi, an appetite to explore more, and get a deeper understanding of the practice of self-improvement.  Namely, how in our real lives can we strive to attain the equilibrium of “casual elegance” ?  For that I would recommend you read “The Shibumi Strategy” by Matthew E. May, also reviewed on this blog page, here.

The Wikipedia link to Shibumi by Trevenian is here.
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H. Woody Brock – American Gridlock (2012)

4/7/2012

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What does this have in common with a classical economic theory of general equilibrium ? Read on...
My one liner: Subtitled "Why the Right and Left are Both Wrong - Commonsense 101 Solutions to the Economic Crises." Although it has some flaws, this book is a rarity in the post-financial crisis literature, as it heavily emphasises first principles rather than over-analysing with macro data. Highly accessible to the layman.

The Oprah Winfrey Book Club Lottery: 

“Suppose you and I are both accomplished writers of exactly the same age and reputation. We have both sold about the same number of books, yet we both only make $75,000 per year because we write “serious” books.  Now, suppose a random event occurs: Oprah Winfrey opens up her book club. We both now face an equal chance that she might notice one of our next two books when they are published, read the book, and recommend it strongly to her audience.  If I am the lucky one, then my income will soar from $75,000 to $5,000,000, and likewise for you if you are the lucky one.”  

Well, let’s just do a deal.  Let’s just enter into a contract whereby we agree to split the earnings 50/50, whoever gets the book deal. That way we both lock in a profit of $2,500,000. Pure free market economics right ? 
 
At the end of this review, you can find how the author H. Woody Brock, (Harvard then Princeton PhD, uses this example to show us why progressive income taxes are
fair.
 
Elsewhere, the part I like most in this book is the analysis entitled “Must there be a Lost Decade ?”, largely I suppose because it is the part that has most relevance internationally in terms of ameliorating fiscal deficits. Brock demonstrates how we can have our cake and eat it, by increasing GDP growth and at the same time reduce long term fiscal deficits, hence preventing a Lost Decade 2010-2020. The answer lies in ensuring Government Spending is redirected towards “productive spending” on profitable investments (human capital and infrastructure). A new Marshall Plan.  
 
Under conventional thinking it is most unlikely that these two goals can be achieved.  First principles tell us:
 
Government Deficit = Net Private Savings + Net Foreign Capital Inflows. 
 
Or, for the  non-equation-minded, a government deficit must be funded either by (1) the domestic private sector, or (2) by foreign capital.  That’s it. The late Wynne Godley of Cambridge University and the late Professor James Tobin of Yale were both proponents of this approach. So, if a government wants, say, to increase GDP growth by 2% (from the current 2% to 4%) and simultaneously reduce the government deficit by 7% (from an unsustainable 10% of GDP to a more sustainable 3%), then Net Private Savings must fall by 9%, as per the above equation.  Simple. 
 
Except that this is more or less impossible in current circumstances.  Households are overly indebted, business investment confidence is low, and unemployment is rising, so the chances of a boom in overall investment spending from the private sector are...b**ger-all.
 
But, the insight from Brock is to focus on what we mean exactly by Government Deficit”.  He engages in a Socratic Dialogue with President Obama, in order to propose a massive increase in Productive Spending.  
 
So, out of a $4 trillion budget, $1 trillion should be invested in investments which generate positive returns, and the remaining $3 trillion (matched by tax receipts of $3 trillion) on “unproductive” spending (defence, interest payments, administrative costs, social and medical care etc).  

Bond markets like this because this because the country is not running up
a structural deficit which must be serviced by future generations. 
 
What does  “productive”investment mean ? It means that an independent body would certify whether an investment is forecast to earn a positive return. It would take into account positive externalities, so that for example an interstate rail link would qualify because it generates employment opportunities in the areas which it services.  

Brock draws the analogy with private accounting, where investment expenditure is not expensed, but is capitalised on the balance sheet and only the amortised portion is expensed.  
 
There are a number of problems with Brock’s proposal. How you measure returns to take into account all those positive side effects ? Would, as proposed, international sovereign funds such as Norway or Abu Dhabi really come to the investment party, based on earning “social returns”? How do you prevent “Vested Interest Capture” of the Agency which is certifying new investments ? 
And the potential for trampling over private property rights would be
worrying.  
 
But, overall the proposal deserves serious consideration, (a) because it is of global relevance for those G20 countries (most of them) running enormous deficits and (b) because the reality is that those governments are going to spend the money anyway.
 
Brock’s book addresses four other Big Challenges facing the USA. Two of them are very US-centric, and in my opinion not addressed rigorously enough.  One is the Entitlements Crisis as exemplified by Medicare and Medicaid. Brock’s use of first principles is again to be admired, e.g. driving down the price of provision by shifting outwards the supply-curve of medical services (essentially, train more doctors and nurses).  Practical ? Hmm.  Of relevance to an international readership ? Limited.  And even worse on China-bashing.  Or, as Brock puts it: “The Need to Learn How to Bargain Effectively with Thugocracies”, in reference to China’s repeated outsmarting of the USA in
international policy matters.  Yes, but China is on a much much longer time-cycle of strategic decision-making, with which 4-5 year Western electoral cycles can never hope to compete.  Live with it. Democracy has some upsides too.  And global geo-politics is a bit more complex than USA v China, I’m
afraid. I'd suggest non-Americans skip these chapters.
 
Another issue which Brock addresses is “The Risk of Future Financial Market Meltdowns”.  On identifying the causes, his analysis is exceptional. Excess leverage in all sectors. An overreliance on classical economic theory over the last few decades had led decision-makers (public and private) to assume that there is no such thing as “excess” leverage, since investors will optimally leverage their positions in accordance with their own risk tolerances.  Mordecai Kurz of Stanford University has developed a theory of “Endogenous Risk” which shows that when some members of society indulge in leverage over and above what is optimal, this increases the volatility of the business cycle for the entire economy, hence making everybody worse off in terms of increased risk, for little or no gain as to how much society as a whole ends up with.  The policy prescriptions therefore, not surprisingly, reflect this.  
 
A “Leverage Czar” would be appointed to monitor leverage in different asset markets, with strict penalties for contravention.  I am very sceptical of the ability of a top-down agency to cope with this.  And he should address the question of what the effects would be today of a one-off deleveraging within Eurozone banks in order to bring their equity into line with US banks.  Brock is on surer ground in calling for bank break ups. In particular, the speculative parts of banks should not benefit from government guarantees.  And I would have liked to see something on the merits of counter-cyclical fiscal policy, as sending a strong signal to the market.
 
Finally, Brock addresses notions of Distributive Justice. This is useful as it reminds us that the discipline of Economics is essentially driven by Politics, whether we like it or not.  And whether you agree or not, Brock presents some compelling theory from the classical school (Leonid Hurwicz, Kenneth Arrow, Harvard) to demonstrate that redistribution through progressive taxes is indeed fair from a free-market perspective also. For the Economists, remember those theoretical “Arrow Securities” which allow you to hedge all risks in your life.  Now, recall the Oprah Winfrey example at the beginning.  Well, the  insurance contract we entered into would be an example of an “Arrow Security”.  But given that markets don’t operate fully efficiently to allow us to have enough information for these contracts, redistributive taxes do the job.  They re-transfer wealth back to less wealthy individuals, and therefore play the role of the payout of the insurance contracts.

Overall I like this book, despite some flaws. The reason being that it is always clear and consistent, and is accessible to the layman, as the complicated theory is, rightly, shoved into appendices.  And it is good at identifying much of what is wrong with today’s society. 

The absence of Socratic dialogues (à la Plato) in which people debate logically in order reach mutually beneficial conclusions rather than bandying around soundbites and tweeting (“The Dialogue of the Deaf”).  The overreliance on number crunching and data mining (“Students today believe that if they are equipped with a powerful database and the  appropriate spreadsheet program, the truth will reveal itself”).  And the mendacity of politicians (aided and abetted by a scandal-driven press) who are not subject to “irrationality scrutiny”when they introduce policies that are clearly against public benefit.

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    Silash Ruparell

    Reviews of books that I read in my spare time.  Enjoy.

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