The same old mistakes

War, wrote Carl von Clausewitz, “is merely the continuation of politics with other means.” Which implies that the mistakes made in thinking about war will be similar to those made when thinking about domestic policy. This is especially true of those, such as Dan Hodges, calling for a no-fly zone in Ukraine.

Of course, Mr Hodges is a squit who is best ignored. What’s significant is that his call reflects two widespread errors.

Error one is that you must base policy not upon what you hope will happen, nor even upon what you expect to happen, but upon the range of possible outcomes. For example, in the IC, I tell my readers to hold a decent proportion of cash to protect against the possibility not just of losses on equities, but of falls in equity and bond prices at the same time. Imposing a no-fly zone in Ukraine would require shooting down Russian planes which would risk triggering all-out war with Russia. There’s no point dismissing this risk: you don’t know enough about Putin’s mind to do so. What matters is avoiding it. And to their credit, Boris Johnson and Ben Wallace seem to be doing so.

You might think this principle is an obvious one. It’s not. Brexit was based in part upon wishful thinking to the neglect of the downside risk that the EU would prove a tough negotiator. A post-Brexit trade deal would be "one of the easiest in human history" said Liam Fox. “The day after we vote to leave, we hold all the cards and we can choose the path we want” said Michael Gove. Subsequent events have not necessarily vindicated such optimism.

Ditto fiscal austerity after 2010. There might have been a case for this if the world economy were strong and the UK sector sufficiently dynamic to take up the slack created by weak government demand. But they weren’t. Sensible fiscal policy would have heeded the risk of this. When in 2012 Vince Cable tried to excuse the UK’s weak growth by pointing to the euro crisis, he was actually drawing attention to how bad policy was, because it was not founded upon the distribution of probabilities.

Ditto Iraq. The lack of post-occupation planning was due in part to wishful thinking rather than to a consideration of probabilities, one of which was that the country would sink into chaos.

It’s not just government policy that can go terribly wrong by failing to consider probability distributions. So too can corporate policy. RBS’s takeover of ABN Amro – which contributed greatly to the financial crisis – owed much to Fred Goodwin thinking he could reap synergies to the neglect of evidence that takeovers have a high probability of poor returns for the bidder.

There is, though, a second error in calls for a no-fly zone which has a counterpart in domestic policy. It’s what I’ve called the pawn mistake – of regarding the objects of your policy as pawns who will do your bidding, rather than strategic actors with their own agency and objectives.

The first question to ask of a no-fly zone is: how would Putin react? The answer to which is: possibly not as we would wish him to.

Again, you might think this is obvious. But again, it’s not been obvious to our rulers. In 2019 Digby Jones tweeted:

Hey Mr Tusk. Those who pushed for Brexit did have a plan but it required your lot not to bully the UK, for Remoaners & the Establishment not to sabotage the wish of the majority & for Jezza’s mob not to play tribal party politics with a major National issue.

His discombobulation reflects the assumption of (some) Brexiteers that the EU would do the UK’s bidding, that they would defer to a posh English accent. But the EU wasn’t a mere pawn.

Brexiteers aren’t the only culprits here, though. One reason why target culture has not improved productivity (in the private as well as public sectors) as much as its advocates hoped is that workers are not mere pawns but strategic actors. So they meet targets not by doing more or better work but by teaching to the test; distorting clinical priorities; producing unreplicable academic research; or cooking the books.   

I suspect one reason why the Labour right has discovered an appetite for party unity – which it oddly didn’t have in 2015-19 – is an anger that the little people aren’t merely passive fund-raisers and door-knockers but have the temerity to have thoughts of their own. They don’t see, and still less appreciate, that people are agents not pawns.

Again, though, it’s not just in politics that we see this error. We see it too in stock markets. One of the best-attested anomalies is that of IPO underperformance: newly-floated stocks on average do badly in their first three years on the market. A big reason for this lies in investors’ failure to think strategically. They don’t ask: if this is such a great company why are its owners, who know more about it than anyone else, so keen to sell?

Calls for a no-fly zone are therefore indeed the continuation of politics in that they are the continuation of widespread errors.

But here’s the thing. These errors should be widely known by now: if a twat in Rutland knows them, so should anybody with political influence. The fact that they seem not to be tells us something significant – that a good portion of politics has become divorced from serious thinking about policy and unable to learn from past mistakes.

Comments

[ltr]

Brexiteers aren’t the only culprits here, though. One reason why target culture has not improved productivity (in the private as well as public sectors) as much as its advocates hoped is that workers are not mere pawns but strategic actors. So they meet targets not by doing more or better work but by teaching to the test; distorting clinical priorities; producing unreplicable academic research; or cooking the books....

[ Brilliant analysis all through, while this passage is especially interesting. ]

[D]

But..... does the same not apply to whatever policy we adopt, from do nothing to declare war?

Perhaps Putin won't react as we would wish him to in the case we continue as we are....

Now, it might seem clearly more risky to do something - it does to me - but perhaps previous indications that we would do nothing have led us to this point. Perhaps the risk of appeasement is the one we don't see?

[Dave Timoney]

"Perhaps Putin won't react as we would wish him to in the case we continue as we are..."

One of the aims of military strategy is to limit your opponent's room for manoeuvre, which serves both to make his actions more predictable and reduces to risks to yourself.

We obviously can't know what mad shit Putin will pull next (few predicted the full invasion of Ukraine), but creating a no-fly zone would expand his room for manoeuvre (giving him more targets) and increase NATO's risks hugely (a full-scale conflict) without necessarily bringing significant benefits (Russia's current advance is not dependent on air cover).

It therefore make sense to continue as we are, at least for now.

[ltr]

Error one is that you must base policy not upon what you hope will happen, nor even upon what you expect to happen, but upon the range of possible outcomes....

[ That is what makes this dilemma so frightening, "the range of possible outcomes." I prefer to be frightened, and go along with the tempered economic penalties being applied. ]

[Jim]

Was it Clausewitz who said 'strategy is nothing without tactics', or that other bloke. If you control the tactics you control the strategy.

Once you own a nuke, no one will make you desperate. What an advertising slogan. We don't get to say, you lose the onion domes and we'll sacrifice Westminster. He just might go Full Tonto. Which is a pity, a spot of creative destruction might loosen up the economy and planning laws a bit.

Even if Putin finds invading Ukraine was not a great idea he can't back down now. The game has to go to the second half and some sort of 'win'. The question is then what. That depends on Putin's reason to start this game and our ways to exploit any error.

One possibility is cheaper gas. Perhaps Putin can be made poorer with fewer options such that he has to drop the gas price. But summer is coming, that becomes October's problem. Then all those sanctions and property seizures might turn out to be illusory. Handy because then everyone except the Ukranians can go back to 'normal'.

Maybe Putin is not so daft. If global warming is really a thing the wheatfields of Ukraine may help keep Russia fed. The gas can go to China and India and help the world pivot that way. Europe can shiver and go hungry. Uncle Sam might help out for a while but will soon tire. But those wheat fields were on his doorstep and Putin is not short of money so why bother - except owning a breadbasket is always nice.

But the world moves on and 2024 will come round soon. All a bit tricky for Boris but even more tricky for Biden et al. The Putin adventure may be consolidating nicely, Biden will be looking feeble or dead by 2024 and Mr Trump can play the strong man protecting the US against those wicked commies - whilst taking their money. What is not to like.

[Gregory Bott]

Jim, Trump has Dementia and a lackey of Putin. Regime change in Russia is more likely. Not is Joe Biden running for office at 81-82.

More likely a different political era will have begun. The 2010's are over.

[Blissex]

«previous indications that we would do nothing have led us to this point. Perhaps the risk of appeasement is the one we don't see?»

That appeasement had resulted in hundreds of thousands of refugees and so many deaths during the vicious war of aggression by the Ukraine against the right to independence and peaceful life of the people of the Donbas:

https://en.wikipedia.org/wiki/War_in_Donbas
"3,393 civilians killed (349 in 2016–2021)
13,100–13,300 killed; 29,500–33,500 wounded overall
414,798 Ukrainians internally displaced; 925,500 fled abroad"

[Blissex]

«Trump has Dementia and a lackey of Putin»

It is just a bit strange then that Putin waited until his lackey had left the White House to invade Ukraine. But anyhow the press has already amply proven your point:

https://blissex.files.wordpress.com/2021/07/poliusatrumptreason.jpg
https://blissex.files.wordpress.com/2021/07/poliusatrumpftpuppetputin.png

As simple as that! :-)

[Blissex]

«Calls for a no-fly zone are therefore indeed the continuation of politics in that they are the continuation of widespread errors.»

Our blogger's high-minded convention of taking bullshit literally and then calling it "errors" seems still a bit unproductive to me... :-)

[Blissex]

«One of the aims of military strategy is to limit your opponent's room for manoeuvre»

This gives me the opportunity to mention here an old thesis I have: the latter is the definition of "weapon".

A weapon is anything that allows limiting other people's choices (at one extreme killing them and thus removing from them any choice). And vice-versa: anything that allows limiting other people's choices is a weapon.

Then there is a distinction between non-lethal and lethal weapons, and other details. But this insight I think illuminates many situations.

[ltr]

Blissex: remarkably thoughtful and incisive comments. Helpful to me, indeed.

[GrueBleen]

"a good portion of politics has become divorced from serious thinking about policy and unable to learn from past mistakes."

Has 'become divorced' ? Does that meant there was a time not so very long ago when 'a good portion of politics' was actually capable of serious thinking about policy and also able to learn from past mistakes ?

When did the change happen ?

[rsm]

What if the Fed dropped a dollar-denominated CBDC on everyone so they could more easily non-violently non-cooperate with authoritarian governments? What if Starlink provided uncensored internet to Russians (and Chinese...)?

[طب سنتی]

http://tebebuali.com

[طب سنتی]

http://jamsimkart.com

[Blissex]

«Does that meant there was a time not so very long ago when 'a good portion of politics' was actually capable of serious thinking about policy and also able to learn from past mistakes ?»

I guess that the assumption is that there was a mythical past in which politics meant fair and just "wykehamists" debating seriously which policies were best for the "national interest" at the Reform Club. :-)

[ltr]

https://www.theguardian.com/society/2022/mar/05/covid-pandemic-sparks-steep-rise-in-number-of-people-in-uk-with-long-term-illness

March 5, 2022

Covid pandemic sparks steep rise in number of people in UK with long-term illness
Figures have soared by 1.2m in two years of pandemic as long Covid takes its toll
By James Tapper - Guardian

More than a third of working-age people in the UK now suffer from a long-term illness, with new figures showing a dramatic rise since the pandemic began. Post-Covid conditions, including long Covid, breathing difficulties and mental-health problems, are among the causes, according to disability charities and health campaigners....

[aragon]

There is an interesting history/analysis book extract at the New Statesman.

https://www.newstatesman.com/ideas/2022/02/the-age-of-plutocracy

It posits energy as the fundamental issue.

"By inflating asset prices, quantitative easing has only strengthened the political position of those holding financial wealth over those who do not."

The article rejects fiscal dominance.

And of course current events are thrusting us into a new energy crisis along with the greens and global warming.

"As they struggle, the temptation will be once again to say that democracy is the explanation of the failure and to constrain the substantive policy contest about energy."

Windmills and Heat pumps do not an energy policy make...

[ltr]

Aragon, I appreciate the reference but do not understand your comment:

"Windmills and Heat pumps do not an energy policy make..."

Please explain, and possibly clarify the article which I read carefully but was confused by.

[ltr]

War, wrote Carl von Clausewitz, “is merely the continuation of politics with other means.” Which implies that the mistakes made in thinking about war will be similar to those made when thinking about domestic policy....

[ What a perfect implication, as is easily seen now. ]

[Blissex]

«It posits energy as the fundamental issue»

That is what many other people have said, most notably recently Gail Tverberg.

But however important the falling ROE of energy production is, the misfortunes of the working classes of "the west" root cause (and here "ltr" I guess will start screaming) is the development of Japan first and China-mainland later (the impact of the development of India, China-Taiwan and Korea-south has been rather smaller), in essence the global capital-labour ratio has become much less favourable to labour, in these respects:

* Lots more japanese and chinese competing for natural resources (from fish to oil) capital.

* Lots more japanese and chinese competing for jobs complementary to productive capital.

Secondarily, massive immigration of mexicans to the USA and north africans and eastern europeans to western Europe have had similar but smaller effects.

It is well true that for some natural resources output has increased, and so has the accumulation of productive capital, but much more slowly than the increase in the number of consumers of natural capital and the seekers of jobs complementary to productive capital.

Look at it from the point of view of "investors", whether owners of well known brands like Unilever or well known resources like Qatar: a massive increase in the number of customers and in the reserve army of labour can only be good for them.

[ltr]

But however important the falling ROE of energy production is, the misfortunes of the working classes of "the west" root cause...is the development of Japan first and China-mainland later...

[ Rubbish; prejudiced, shameful rubbish. ]

[Blissex]

“But however important the falling ROE of energy production is, the misfortunes of the working classes of "the west" root cause...is the development of Japan first and China-mainland later...”

«Rubbish; prejudiced, shameful rubbish»

Note that I am not saying that it has been a bad thing, I am just arguing that it has happened. From a benthamite point of view (that I think is that of our blogger, even with specious arguments), and assuming a fairly rapid diminishing ofelimity of income, it has been a huge worldwide improvement. From an investor point of view the lower classes of "the west" had it coming, being so "lazy", "uppity", "overpaid", "profligate" compared to "zealous", "docile", "affordable", "undemanding" asian workers.

For example the oil shocks of the 1970s were enabled by a long term surge in oil consumption by Japan; if the japanese people had stayed poor and thus unable to afford to buy much oil etc. for industrial and private consumption, western workers and consumers would probably still eventually have had oil shocks (because they they were consuming it wildly), but quite a bit later and milder (also because extraction from cheaper oilfields would have lasted longer), plus offshoring of so much industry to Japan also altered the western job market.

The combined effect of Japan's and Italy's economic miracle 1950-1975 was to make natural resource markets tighter and labour markets looser than otherwise. The effect of the economic miracle in France and Germany was much smaller because they were already richer and with more natural resource than Japan and Italy, and with a smaller population than Japan.

[Blissex]

«But however important the falling ROE of energy production is, the misfortunes of the working classes of "the west" root cause [...] is the development of Japan first and China-mainland later»

Note also that is happening *inside China-mainland too*: as the government tries to achieve rising employment and consumption in the inner poorer regions that means lower living standards than otherwise for the coastal regions, because of a lower inflow of cheap inner region workers to the coastal area, and greater competition for natural resources, from pork to wood to clean water to imported oil and wheat of course.

[Blissex]

«rising employment and consumption in the inner poorer regions that means lower living standards than otherwise for the coastal regions»

That is not happening much in India instead because development is happening mostly in a few hotspots, involving a small percentage of the population.

[ltr]

Note that I am not saying that it has been a bad thing, I am just arguing that it has happened....

[ Enough, this is no economics but merely a ridiculous fantasy about and rationale for the necessity of exploitation. The bettering of life for British workers in the wake of the industrial revolution allowed for a general bettering of life.

The program in China to end severe poverty has in no way harmed the Chinese middle class, rather the reverse since the middle class has steadily gained and been dramatically expanded.

The bashing of China is unjustified and intolerable and terrifying. Prejudice will consume us all if not resisted. This needs to stop.

Please, please, please stop. ]

[ltr]

https://fred.stlouisfed.org/graph/?g=F7Xa

August 4, 2014

Real per capita Gross Domestic Product for China, United States, India, Japan and Germany, 1977-2020

(Percent change)

https://fred.stlouisfed.org/graph/?g=F7Xg

August 4, 2014

Real per capita Gross Domestic Product for China, United States, India, Japan and Germany, 1977-2020

(Indexed to 1977)

[ltr]

Note also that is happening *inside China-mainland too*: as the government tries to achieve rising employment and consumption in the inner poorer regions that means lower living standards than otherwise for the coastal regions...

[ The whole point of Chinese development is that development should and must be inclusive. President Xi speaks to this repeatedly, especially right now as the national congress is meeting to shape policy for the coming year.

The Paralympics in Beijing speaks to national development participation and personal fulfillment of the disabled. All of China gains from the fulfillment of the disabled.

Xi repeatedly visits those who are building, for they are building for the entire community, building for all the Chinese. ]

[ltr]

The social-economic development of China, the lifting of millions of Chinese from poverty, in turn can and should make for better well-being for all Chinese as well as for better well-being in countries linked economically to China.

Britain gained beyond measure from her "possessions," but she should be gaining from the former possessions still and more profoundly as they develop freely.

[rsm]

Is it too advanced for mainstream economists to see ROE as determining maybe 10% of energy prices, because momentum traders spreading rumors in chat rooms buying oil calls are the most obvious cause of price rises (which price rises backwards economists equate with actual physical scarcity)?

Goldman Sachs in September of last year (2021):

《"we continue to recommend that gas consumers protect themselves via out-of-the-money calls for this winter. Further, we strongly recommend that European consumers in particular hedge their gas exposure further out the curve, where TTF appears especially underpriced relative to coal."》

To which the zerohedge article that included this quotation added:

《Translation: Goldman's clients (mostly hedge funds) are about to pour gasoline (or nat gas so to speak) on the hyperinflationary fire, and send nattie prices soaring even higher [...]》

In other words, is it too hard for traditional economists to understand that supply and demand for physical energy has but a small fraction of the effect on energy prices that supply and demand for options traded in paper markets has?

[Blissex]

«The whole point of Chinese development is that development should and must be inclusive.»

But that's SOCIALISM! :-)

Also think how devastated will be the middle classes of Shanghai and Shenzen if they will have to go carry home their takeaway meals or will need to clean their flats themselves.

They will soon understand how sad are the english middle classes when they say "it is so hard to find cheap help nowadays". :-)

[aragon]

A couple of stories from the Telegraph illustrate the point.

Energy
https://www.telegraph.co.uk/news/2022/03/08/virtue-signalling-mps-could-hardly-have-made-bigger-mess-energy/

Nickel
https://www.telegraph.co.uk/business/2022/03/09/electric-vehicle-makers-brace-set-back-price-nickel-soars/

Limited resources are often required for Electric Cars and Windmills (e.g. Magnets) this restricts their application unless alternatives become available.

The Government will have to address real issues like Energy resources rather than offshore them and argue about abstractions (while concentrating wealth among the Financial Elite).

This is an inflection point in Globalisation and living standards. Governments can nolonger avoid the issues.

ltr won't like this but:
https://foreignpolicy.com/2020/08/12/china-industry-manufacturing-cold-war/

Autarky is on the agenda.

Let's hope change results in a better world.

[aragon]

https://www.spiked-online.com/2022/03/08/this-energy-crisis-has-deeper-roots-than-ukraine/

I have to agree with much of the above article, but my view extends beyond Energy.

(Energy - The ability to do work)

The west has become distracted by abstractions and the distribution of resources.

It is Science and Technology which have delivered improved living standards for the poor.

And Science and Technology that allows us to address the physical problems of the future.

I don't include the projections of climate science as 'Science'
and technology provides the tools to address the issues if climate science (e.g. Geo-Engineering) have to be addressed (as does abundant energy (Fusion).

We should be racing towards a more technological future and more abundance not seeking more inequality and ineffective solutions.

Finance (Elite Control of resources), Property/Intellectual Property (Restricting Resources) and the Green agenda (Stone Age Beliefs - Rejecting Resources) are all driving us in the wrong direction. And resuting the decline of the West.