CHAOS-ONOMICS: Strangely Attracted to the Truth
Apr 29:
chaos-onomics.com
The charges in the Indictment that the defendants planned and waged aggressive wars are charges of the utmost gravity. War is essentially an evil thing. Its consequences are not confined to the belligerent states alone, but affect the whole world.
To initiate a war of aggression, therefore, is not only an international crime; it is the supreme international crime differing only from other war crimes in that it contains within itself the accumulated evil of the whole.
Judgment of the International Military Tribunal for the Trial of German War Criminals
In the murky world of international relations where history is written by the winners, today's wars of liberation can become tomorrow's wars of aggression and vice versa. It was, perhaps, with this in mind that William James popularized the philosophy of pragmatism, with its focus on the effects of an action and not its intents. That is, according to James, a war is one of liberation if people come to perceive it as such. Regardless of the intentions guiding the war efforts, the true test is ahead. Will the Iraqi people come to feel that they have been liberated? Will the international community come to feel that the US and Britain acted to "keep the peace"? Perhaps more important, will the global economy improve, thereby making dissenting points of view sound shrill, rather than resonant?
As the lone power on the world stage, the US is often compared to Rome. There are a number of striking similarities. Both began as rather small communities, in the northeast of the US and in the area around the Tiber River in what is now Italy. Both expanded their territories through a succession of wars and treaties. Both suffered through what would later be seen as civil war, which in the Roman case were called the Social Wars, whereby a model of political economy was consolidated and institutionalized. Both were, particularly early on, quite liberal in their integration of "the conquered" into their societies, granting citizenship to "foreigners" once "pacification" was perceived to be complete.
In this regard, the progress of the Roman Empire during its more expansive phases from the 3rd into the 1st centuries BC, can arguably be seen as a "liberation", freeing the Mediterranean World, largely Hellenistic, in culture from Monarchical rule in the main to the perceived betterment of the people. Equally, the more "occupational" efforts, such as Pompeii's excursions into Armenia, Mesopotamia, Syria and Phoenicia, Judea and Arabia, to name a few were nagging sources of always simmering dissent. This is to argue that the stability of the Empire, in part, was a function of the degree of integration between the new provinces and Rome. The more egalitarian the perception, i.e. the more the people felt roughly equal with the Romans, the more stable the relationship.
Keeping these lessons in mind, the issue of concern I have regarding the Middle East expansion of American Empire as well as the military imposition of seignorage, is this degree of perceived integration. Will the Iraqis find themselves better off than under Saddam? Will the US wake up to the drag rising seignorage costs impose on the rest of the world? If the answers to these questions prove to be "no" than my choice of comparative time slot, the Pompeii expansion, might prove quite accurate. By and large, the Empire shifted into a consolidation mode shortly after Pompeii's adventures. However, if the answers to these question prove to be "yes" then the empire will continue to grow. Thus the key importance of global economic growth in the months ahead. The questions of "liberation" or "occupation" will remain up in the air while people test the economic waters.
Turning to the economy, the just released Employment Cost Index (Q1 +1.3%, Wages and Sal +1.0%) should be raising red flags for those advocating further monetary stimulus. Given the lack of discernible pressure in labor markets, Q1's jump in labor costs, the highest since June 1990 (before Saddam moved in Iraq), suggests to me that inflation is rearing its head. While the market seers are likely to spin this as a good sign, harmonizing with the Keynesian tune of more money with which to consume, further declines in US rates are likely to make US treasury holders nervous. It seems almost a catch-22, the US needs an economic expansion to validate its military adventures, yet the imbalances have yet to be worked off. The US$ will remain vulnerable in the weeks ahead.
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SMS and SARS, a potentially lethal combination
The old Chinese expression, "may you live in interesting times" springs to mind as I consider the possible effects flowing from the emergence of SARS (Severe Acute Respiratory Syndrome) in a world where SMS (Severe Mendacity Syndrome) is one of the key policy choices. Unfortunately, unlike the general economic climate, which can be manipulated with a few well placed fibs, SARS doesn't appear to play by those rules. Pep talks and "think positive" dogma still leaves the ill, ill and the dead, dead.
This past weekend the Toronto and Canadian governments both cried foul over the SARS-related travel warning. Reading between the lines of the news stories though leads me to think that the WHO warning was not the cause of the distress but rather a population's normal response to an unknown illness. Travel and Business had already been severely disrupted in Hong Kong well before the WHO sounded their alarm.
Yet, it appears that the cries for help from the nations on the SARS travel warning list has borne fruit. The WHO now sees the disease largely contained except in China. Unfortunately, this is not the first time that the powers that be have thought the disease contained. Prior to its first day of 10 deaths, Hong Kong thought it had SARS contained, yet it did not.
Given the still sluggish economy the pressure to declare "all is well" will be enormous regardless of the facts on the ground. While I hope this disease is eventually contained, in the event it does not, one silver lining, assuming the state keeps sounding the "all clear" to bring shoppers back to the malls, may well be clear evidence of the weight the powers that be place on public health concerns vs. commercial interests. In the movie The Matrix, humanity is depicted as a huge array of batteries. We may be about to put that "theory" to a bit of a test. |
