Wednesday, July 09, 2003
I shall be even quieter than usual for a few days. Do suggest those of social scientific bent might get a blast out of Crooked Timber. Oh, and I've finally added the invaluable Arts & Letters Daily, too. Methinks the bloglist is growing uncommon long. Will learn how to list 'em in headed categories soon, promise.

BTW, a nice quote from Edmund Burke (ah, if only tories these days had half the wisdom and a quarter the readability, eh?) ... "'Not men but measures': a sort of charm by which many people get loose from every honourable engagement."

I've been leafing through some *Asia Times* archives to try to make sense of what's going on in Iran and what the US (and, perhaps, Australia) is doing about it.

We may expect Iran to be back in the headlines after tomorrow has had its way with the place. That's when the fourth anniversary of a singularly bloody protest falls, and by all accounts the survivors - doubtlessly, if needlessly, spurred on by divers US clandestine operatives - intend to mark the occasion in grand public style. In fact, 'needlessly' may not be strong enough a word. After all, Tehran's theocrats are shoring up their fragile stocks by framing every episode of dissent as a US plot.

Every nasty little gratuity Washington has been flinging at Tehran since that nutsoid 'axis of evil' rant plays into the hands of Mullahs intent on holding back a tide of popular indignation that has hitherto been growing to revolutionary proportions. As the rebels are organised mainly around leftist activists and aspirations, it may be that Washington is playing a difficult game: trying at once to fan dissent and strengthen the role of royalist conservatives within the protest movement. This game promises a chaotic and bloody transition. If Washington actually succeeds, it promises far worse than that.

Ayatollah Khamenei is despised by all and sundry and PM Khatami has all but disappeared into the wall paper, as his promises for political reform and economic rejuvenation lie broken, and US forces bay at his borders from Afghanistan, Iraq and Turkey. Geneva-based academic Mohammad Reza Djalili sums up: "Iranian society is about to implode. The system is totally blocked. First of all politically, because the reformers can't find a way to change the regime. And socially because the regime can't come to grips with unemployment among young people." The only thing that's currently holding back revolution is the gap that persists between rowdy students and wary populace - both groups are rebellious, but the latter's doubts are being fanned by Tehran's insistence that the students are merely the agents of US imperialism.

If the long-suffering proletariat of southern Tehran, Mashhad, Esfahan, Tabriz, and Shiraz join the kids, Khamenei'll be gone alright, but it's hard to imagine Washington being happy with the popular-front of battle-hardened comrades that might succeed 'em. Washington's main hope is that the leftist organisations - Mujahideen-e-Khalq (MEK - the people currently being picked on by the Australian government, incidentally - which shows we're in league with the US's fundamentally flawed pro-dissent-but-anti-lefty policy), the National Council of Resistance of Iran (NCRI), and the old pro-Soviet Tudeh Party - squabble among themselves sufficiently to allow the popularly weak but neocon-funded monarchists the inside running.

Iran's military defences are, by all accounts, seriously compromised. Seriously, but not necessarily sufficiently to make Iran a cheap target for invasion. The CIA has bought some brass-hats, but has apparently not made any inroads into the Republican Guard (Pasdaran). Tehran is aware of this and knows how valuable bought-and-paid-for Republican Guard senior staff were to the coalition's immediate prospects in Iraq, so a widespread reshuffle is in train at the top of all Iranian forces, with Pasdaran units integrating with regular units.

That the neocons are still bent on further military expansionism is evident in the latest ravings of PNACer and chief CIA-baiter Michael Ledeen. This bloke was apparently in the Iran-Contra thingy up to his neck, and is particularly close to Under Secretary of Defense for Policy, Douglas Feith, whose pro-Likud politics he largely shares; Vice President Dick Cheney's powerful chief of staff, I Lewis Libby; Elliott Abrams, the director for the Near East on the National Security Council, and Shrubya's frontal lobe, Karl Rove.

"I don't know of a case in history where peace has been accomplished in any way other than one side winning a war [and] imposing terms on the other side," he said two years ago. That's not what Keynes had said when he was busy predicting WW2. Neither does it explain the rather long bouts of peace we can thankfully all still remember. He's also said this: "The Franco-German strategy was based on using Arab and Islamic extremism and terrorism as the weapon of choice, and the United Nations as the straitjacket for blocking a decisive response from the United States." How DARE a US foreign policy wonk accuse ANYONE of using Islamic extremists! And here's where Ledeen sees us all going: "As soon as we land in Iraq, we're going to face the whole terrorist network," he told an interviewer in March. "Iran, Iraq, Syria and Saudi Arabia are the big four, and then there's Libya … You can't solve all problems I grant that. I mean, I wrote a book about Machiavelli, and I know the struggle against evil is going to go forever."

Admittedly, this time, Washington is not backing Islamic extermists. It may be talking up the leftists (who are the only people actually doing anything inside Iran), but it is lending its financial and facilitative clout to a mob who remain very much on the public nose, the monarchists. It is the left who maintain that Islam and democracy are compatible, so let us hope they are left to make their own connections with Iranian civil society and have their own popular revolution.

If Washington steals this moment, as Khomeini's mob stole the left's successful undermining of the Shah, Iran has before it yet more years or decades of poverty and bloodshed ...

Sunday, July 06, 2003

Am contemplating taking the clan for a few days' motoring through the backblocks. Up through Parkes, Dubbo, Lightning Ridge, and back to the wintry (read 'ear-numbing, nose-tingling, scrotum-shrivelling, nipple-hardening') Southern Highlands via Coonabarabran. Thought I might herd the loinfruit 'round the Parkes Observatory, bike 'em 'round the Western Plains Zoo, get 'em to dig me up some monolithic black opals, and then march 'em 'round the Warrumbungles for a while.

Anyone know of any other ways of rendering good children and/or bad adults tiredly content on this route?
ECONORRHOEA: World Recovery or PR-led Sucker's Rally?

Truth be told, I dunno, but …

I'm listening to all this talk of economic recovery with widening eyes. Nay, rolling eyes. Haven't we been hearing this 'it'll turn around the quarter after next' talk for, like, thirteen quarters now? And don't these optimists always forget to tell us WHY there'll be a turnaround?

Sure, the US has copped a huge tax cut, has seen its currency approximate more competitive levels, and has watched the central bank's interest rate go down thirteen times in a row, to nearly nothing. That's supposed to be good for manufacturing, which has been short on investment for years, has long been obliged to compete against tempest-whittled currencies, and has also been creaking under huge debts occasioned by nonsensical mergers, share buybacks, madly speculating finance officiers and advisers, executive 'compensation' and technohype-induced IT turnover. But manufacturing still lies a gaspin'. Oh, IT's going alright in terms of production, sales and investment, but even an increase in sales there won't change the overall picture. Productive capacity in this sector is rising more quickly still, and there just ain't the pricing power in the sector to turn a quid. And what's bad for the IT sector is worse for the rest. The whole US economy is flirting with deflation; in the first five months of 2003, annualized core CPI inflation has averaged just 1.2%. Little wonder the most common complaint heard from US businesses pertains to the lack of pricing leverage.

As I understand it, Marx's critique of capitalist political economy talks a lot about this kind of thing. It holds that competition induces technical innovation, which obliges the boojies to allocate ever increasing proportions of their capital on technology. Technology gets expensively turned over that has years of use left in it, and debt correspondingly rises in the race to produce cheaply enough to sell cheaply enough. Pressure increases to save money on labour, and every productivity increase (which is particularly hard to quantify in the IT sector) sees consuming workers duly become non-consuming non-workers. Loads of money gets invested in the capacity to produce capital equipment, whilst loads of effective demand is destroyed (unless credit creation goes out of control, in which case the consumption fund is supplemented by biting great chunks out of an ever more uncertain future). Eventually you have more productive capacity than you have demand capacity. Then you have debt crises, profitability crises and, consequently, investment crises. Then unemployment really starts to sting. Then there's a credit crunch. Heaps of bankruptcies and fire-sale takeovers. Competition is thus pruned back to a manageable oligopoly of corporate survivors. Sure, a few millions of workers' and pensioners' lives are have been ruined, but profitability returns, and it's time for another boom.

If that does describe what's going on, you'd expect tax cuts to the investor class and low rates to borrowers to do little but delay disaster. In a poorly disciplined credit market (ie. a deregulated finance sector choc-a-bloc full of 'non-bank loan originators'), debt would actually keep spiralling, because money's so cheap. There'd be an asset bubble, because those loath to invest in production would put their money in assets, and cheap money might even see debt-financed real-estate speculation to such a degree that mere talk of removing negative-gearing provisions could engender spectres of negative equity, and Leaders of Opposition publicly rebuking Shadow Treasurers.

We might also speculate that tax cuts to the asset-accumulating class would do buggerall for employment. As ever more of the production of technology is done by technology, a return to the investment and sales levels of yore would not imply a return to the employment levels of yore. As ever more investment goes into assets and not production, ever less of what is invested goes into jobs.

Bush is no Marxist, of course, and so he sold his tax-cuts-to-the-rich with the promise that even richer millionaires would mean the addition of 344,000 jobs per month over the next year and a half.

Well, the first of those eighteen months has just filed its return, and the Bureau of Labor Statistics reports a net loss of 30000 jobs for the month. In fact, the household survey shows a much bigger job loss - over 100,000.

It's early days yet, but my bet is that even if something of a recovery is in train, it'll be of the jobless variety.

One thing the concurrence of low taxes and low rates have induced is a halt to the greenback's decline. The greenback's recent stability against the Euro, indicates that the US current account deficit is on its way to 6% of GDP. US bond prices are drooping, which also implies higher interest rates in the near future. So much for the Fed's blunt attempts to trump deflation with near-zero rates …

And then there's Europe.
Investors have been studiously ignoring government bond sales in Germany and the UK, too. European Monetary Affairs Commissioner Pedro Solbes admitted on Saturday that Europe itself has hit the wall. Pointing at documented contraction in both Germany and Italy, and a pronounced drop in German factory orders going into the next quarter, Solbes stated that 'one percent growth is unlikely' for Europe. So Europe won't be buying those US producers out of trouble either.

Methinks an awful lot depends on China and their ability to bring more demand to the world market than they do more cheap capacity ...

political economic and cultural observations in the register of dismal dilettantism

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