A holiday reading week for Bernard Bernanke (1,050)

It’s a sorry state of affairs when the three main economic players in the world are all on a razor edge of disaster. America has a debt problem; the Eurozone has a budgeting problem; China has an inflation problem. Such are their trading interconnections, however, that blunders by any one of them would inevitably — and immediately — have devastating effects on the others (including the writer and the readers of this piece). What makes it even sorrier is that each of their governments (quasi government in the case of the Eurozone) spends a lot of energy telling the others what their faults are and how they ought to correct them rather than get on with solving their own.

It’s a case of: “Why beholdest thou the mote that is in thy brother’s eye, but considerest not the beam that is in thine own eye?” (St Matthew, ch7, v3). [Translation: “mote” is a speck of dust; “beam” is a larger intruder.]

Actually, the “motes” and “beams” in the present case are the same things — large financial imbalances both within each of the players and between them — as all of them strives for more economic growth. America wants more growth because it needs to regain the prosperity for all that seemed close to taking place until 2007. The Eurozone needs to do so in order that its southern member nations can reach the prosperity of its northern members. China needs to do so because two-thirds of its population are still living in poverty.

The situation is that all three main players have too much money and are short of it at the same time. So far, the fact is that the economic growth of the last 300 years or so has involved an explosive leap in the number of transactions. These, in turn, have needed more and more money. Thus the original world-wide currency (gold coins) has had to be vastly expanded in subsequent Stages. These are: 1. banknotes (printed by banks), 2. personal cheques, 3. banknotes (printed by governments), 4. house mortgages/hire-purchase/personal credit cards, and finally 5. derivatives. Each stage of new money involved a distinct quantum leap upwards in the total amount that was available to be exchanged as prosperity proceeded from the few to the many.

For example, the growth of wider prosperity would have ground to a halt in the late 19th century if personal cheques had not taken over the main burden of transactions. In England (preparing the way for all other aspiring nations) there were far more personal cheques than banknotes in circulation. It was only the marginal balances between cheques going to and fro that needed to be settled up at bank level with banknotes. In turn, the still large number of banknotes (at Stage 1) could be exchanged for gold coins if necessary. However, most people didn’t bother; banknotes were much more convenient and safer to carry around than gold coins.

Similarly all of the above Stages, can be referred back to a preceding Stage and then ultimately to gold coins. Yes, even now. Despite the immense pressure that America put on its Allies in 1944 (Bretton Woods Agreement) to get rid of their gold and use only the dollar for international trade balances, the European central banks did so very reluctantly. When America cut the link between the dollar and gold in 1971 (President Nixon’s fiat), the European central banks still valued the gold that remained in their vaults for the sake of their own currencies. At end-1999 when America hauled the central bankers up to Washington as though they were naughty schoolboys and gave them yet another warning that they must continue to sell their gold until there was none left for currency purposes (the Central Bank Gold Agreement), the European central banks slowed down sales even more and, finally, by 2009 had stopped completely and had started buying it again.

This is the underlying reason why the price of gold has been going up since 1999 (fivefold so far) and continues to do so. Among the central bankers there are those (particularly the Swiss and the Germans) who well enough know the history of finance during the 19th century. They know that gold was the foundation for no inflation at all in that century even though man was then taking economic strides bigger than ever before in history. And then there is an exponentially growing number of individuals who are now buying gold coins. Gold mines are now re-opening (even ancient Greek and Roman ones). Mints are working overtime. Gold shops and exchanges are opening in the more prosperous cities of Asia. Gold cash machines are now being installed in Europe and America for those who are frightened of where the dollar and the euro are heading.

In summary, all the Stages mentioned above came about naturally. They were not planned. They were quirky ideas that happened to fit a big need at the time (unfortunately, Stage 3 was money for warfare). If so, what is the next stage beyond derivatives? Is there one which will get us all out of our present scrape. If so, there’s no sign of it yet. And there have never been so many economists and financial whizzkids and journalists in the world as now — millions of them — quite besides eccentric bloggers on the Net (of whom I may be one. It’s for you to decide!).

However, the chances are that, in the course of the last century, we have now come full circle and are once more reverting to the useful bedrock that will prevent governments from continuing their money-printing games. Once the price of gold reaches the necessary level — and no-one can guess what this might be — then it will regain its natural place. Whether this takes place by agreement between the three main players or via a catastrophic breakdown in one of them remains to be seen.

What I would recommend to, say, Bernard Bernanke, the Chairman of America’s central bank (the ‘Fed’) — and President Barack Obama, for that matter — is to take a week off work and read the great classic work, The History of England by Thomas Babington Macaulay wherein he will read how the first central bank got accidentally started and thus why money has had to go through so many gyrations since then.

Quiet jubilation? (500)

My posting of yesterday may well turn out to be irrelevant with regard to the childhood and adolescence of Anders Breivick, the Norwegian assassin of Friday. He turns out not to have the ‘loner’ profile that’s often the case of perpetrators of similar acts of violence. (And, curiously, he didn’t turn the gun on himself when faced by the police, as so often occurs.) His killing of 92 people was highly political. Although he may have acted alone on this occasion, he had already been enmeshed in an anti-Muslim, anti-immigrant group called the Knights Templar, a putative resurrection of those knights of the Middle Ages who rode forth to Palestine to fight the Saracens and regain Jerusalem for the Roman Catholics Church.

He turns out to be nearer the equivalent of Osama Bin Laden, though with opposite religious polarity. Without doubt, the modern Knights Templars are psychologically similar to the 19 extremists who carried out the 9/11 attack. But there’s a deeper and more disturbing level to all this. Just as millions of Muslims in Middle East countries were jubilant in the streets about the success of the New York outrage in 2001, so there are possibly — probably — millions of anti-immigrant, anti-Muslim Europeans who are equally, though privately, jubilant about Breivick’s act.

And this is what the more perceptive of European politicians will be considering. Publicly, they’ll express the pain that most of us feel that so many Norwegians in the prime of their lives were cut down. Privately, within their own enclaves, they’ll realize that the problem of multiculturalism among the masses in Europe will have now risen further and that their pro-immigration policies of the last 20 years for tax-base reasons were not so clever after all. The politicians have had more than enough hints already — what with the growth of numerous anti-immigrant groups, the appearance of would-be demagogues here and there, and the broad shift to the right in recent elections (and, no doubt, many confidential opinion polls and focus groups) — that immigration, and particularly that of Muslim people, is now reaching the threshold of acceptability.

In times of high, and probably growing, unemployment in most European countries, and the ghetto-like growth of concentrations of immigrants in many cities, it’s to be wondered whether even the present threshold will hold in the coming years. Maybe it will, maybe it won’t. Maybe governments will be able to stem the level of immigration. Maybe they won’t. Maybe governments will be able to afford welfare payments to both indigenous populations and immigrants alike in the coming years. Maybe they won’t. Maybe Anders Breivick will regret his terrible act as he spends the rest of his life in prison (surely even liberal Norwegians won’t be able to let him out sooner?). Maybe, behind bars, he’ll quietly applaud subsequent terrible events — both by, and against, governments — as they might take place in the coming years.

The shibboleths of “human rights” and “the free market” (600)

Thank goodness, the 32 year-old Norwegian multiple assassin on Utoya Island yesterday was arrested by the police and not killed. This way, we might find out more of what has gone on inside the aberrant mind that caused the deaths of so many innocent young people (apparently more than 80 according to some media this morning). Too often, lone killers like this are themselves quickly killed in turn and, apart from hearsay and supposition after the event, we never fully discover the reasons more precisely.

Was it a brain tumour growing in a crucial part of his brain and which affected his emotional control? Unlikely, because the preceding bombing in Oslo and the killings on the island were premeditated. Does he have a genetic defect which makes him prone to violence? Improbable, because this would have already revealed itself. Did he have an unusual upbringing as a child? At puberty, was his behaviour strangely different from the norm? As an adolescent and young adult, did he tend to be a loner with few, if any, close friends?

As to the last three questions — highly likely. At least, that is the usual profile of lone killers. The same might also apply to the nurse, currently under arrest in England, who is alleged to have killed five or more patients in her care by interfering with their saline drips. Why do we need to know the minds of these people? It isn’t to prevent mass murders in the future. These happen so rarely, and the childhood symptoms are often so hidden, that we can never hope to precisely identify such individuals in the years before the act.

We need to know more about the childhood and adolescence of rare abnormals because this is the quickest way into understanding the minds of normals. For example, the fastest pace of knowledge about the precise structure of our brains came from the work of Alexander Luria in the 1950s who studied brain-damaged survivors of World War II and the specific handicaps that were caused by bullet and shrapnel damage in small specific areas of the brain. This knowledge could never have been gained from normal brains because our ethical culture would have prevented the sorts of controlled experiments that scientists usually carry out. (Although today we can probe the brains of normal people harmlessly by using magnetic imaging machines, the whole field of brain science would have been delayed by many years without Luria’s pathfinding work.)

In the same way, we need to know more about the accidents of abnormal childhoods and adolescence in order, if possible, to avoid them in the upbringing of the vast majority of children and young people. In our original hunter-gatherer days, most children within a group or a tribe were brought up in almost identical circumstances and were treated similarly by all the adults as they grew up. Increasingly since then, children within any given culture have very different experiences. Today, in every advanced country, even by the tender years of puberty, there are several years of difference in educational skills and social abilities between the lowest classes and the elites.

And these differences tend to perseverate for the rest of their lives. It is this childhood phenomenon which is far more important than the fashionable parrotings of “human rights” by the left-wing or “the free market” by the right-wing. They’re just ideological abstractions uttered by the would-be manipulators. The fate of an individual lies far more the luck of the draw of his or her childhood than in any political shibboleths. Similarly, the health of a culture (what we now call economic success) depends far more on the collectivity of childhoods throughout rather than in the particular type of governance.

Kicking the can further (250)

Like Schrodinger’s quantum cat — alive and not alive at the same time — Greece has defaulted and not defaulted after the decisions of the 17 Eurozone bigwigs yesterday. Greece will remain in the Eurozone; its debt servitude will be slightly relieved but stretched out over a much longer period of years.

So far, financial analysts are equivocal over the complex five-point bail-out and roll-over package, not the least because it was summarized confusingly at a press conference by three Presidents, one Chancellor and one Prime Minister in differing states of bombast. Afterwards, they only took two questions from the journalists and evaded the essential points of both.

But what the financial journalists will write or broadcast today scarcely matters. What will matter is whether European and American banks will voluntarily agree to share the burden (because this was implied by the decision), whether private investors will continue to buy eurobonds (particularly those coming up of Portugal, Ireland and Spain), whether German, Finnish and Dutch workers will be happy to be taxed more in order to subsidize Greek workers, whether the riots in Athens will become more or less frequent, whether the queues of the charity food stations in Greece will become longer or shorter, and suchlike.

It is the summation of these verdicts, not those of the Eurozone ideologues, that will have the final say. And my guess is that, over the week-end and the coming week, this will be the same refrain as before: “Nothing has been solved. They’ve kicked the can further down the road.”

A surprise for the Eurozone? (650)

If today’s high-level Eurozone talks prove fruitless (or, more importantly, are considered to be fruitless by outside investors) and Greece starts collapsing — as many fear — there is only one practical solution to the Eurozone’s fundamental impasse. The idea has already been much talked about for some time now, though fiercely resisted by the present crop of Eurozone politicians. This is that the Eurozone should split into a Northern Eurozone and a Southern Eurozone. As a consequence, two new Euro currencies would be created. However, this must be done within days if Greece’s catastrophe is to be prevented from spreading too widely into Europe and then cause mayhem in trade with the rest of the world.

It could be done. The national origination of the present Euros (and bonds and CDSs, etc) could be quickly identified at governmental and bank level in the accounts of third parties. Financial records could be changed almost overnight. At consumer level, all existing banknote and coin Euros are already printed and minted with their individual countries of origin.

The Northern Eurozone zone could consist of Germany, Finland, Holland, Austria and the Flanders part of Belgium (a country in two halves already and with no political government at all!). These are countries which already export enough high-tech producer goods and high quality consumer goods to the rest of the world to keep their heads above water economically and which, in effect, have been subsidizing the rest of the present Eurozone. The new N.Euro currency could probably be initially set at about the same level as the present Euro.

The Southern Eurozone could consist of at least Greece, Spain, Portugal and Ireland which have already been able to borrow way beyond the hilt only because of the reputation of the countries mentioned above. They would have to decide on a lower valuation of the S.Euro that would give them a fighting chance of re-establishing satisfactory exports with the rest of the world and gradually getting on their feet economically.

As to France and Italy, respectively the second and third largest economies in the present Eurozone, they would have to make decisions as to which New Eurozone to join. In those countries, the decisions would rest rather more on cultural reasons than economic ones. Happy-go-lucky Italy (or ‘laid back’ if you wish to be kinder) would be a natural partner to the S.Eurozone (already quipped by many as the ‘Latin Eurozone’). If it were sensible, France would go into the N.Eurozone. Individualistic France badly needs the social discipline and scientific research that Germany could offer even though it is still retains its 200 year-old fear of Germany. (Indeed, it was the reunification of East and West Germany in 1990 and the fear of a larger Germany which caused France to strongly promote the Eurozone in the first place.)

However, it would involve so much loss of face by Eurozone politicians — particularly of French and Italians — that, to be realistic, a desirable division of the Eurozone is most unlikely to take place during the collapse of Greece. It might happen, and could happen, in later months but, by then, there might be much wider mayhem in world trade. We could quickly relapse into the same high trade-barrier world that occurred in the 1930s.

But — who knows? — the putative N.Eurozone countries might already be in tentative negotiations with one another. I’d be very surprised if the senior civil servants of those countries have not privately talked about this on many occasions in the last year or two. We could be in for a surprise even now. Twin Eurozones wouldn’t be the ultimate solution for today’s world-wide currency imbalance problems but it could be a breathing space while America and China get down seriously to agreeing a world reserve currency. Today will be fascinating, almost whatever happens.

The relative frippery in London (450)

As to the importance of the power of small groups in the modern world, we saw a fascinating glimpse, though not a deep one, into two of them in yesterday’s Parliamentary Select Committees’ proceedings in London. I refer to the representatives of the two groups being questioned there: (a) the evasive group of senior men at the top of the London Metropolitan Police; (b) the evasive group of News Corporation executives under Rupert Murdoch (and particularly the evasiveness of his son, James Murdoch).

The two senior policemen had already resigned in disgrace a few days ago and both Murdochs might also be forced to resign by non-executive directors and shareholders — Rupert Murdoch from News Corporation on account of his age and James Murdoch of News International on account of the slyness of his answers.

But the above was mere frippery compared with two more events that were going on yesterday in America and Europe. I refer to the slowly gathering train wreck of the American government debt and also that of the Eurozone which is taking place at a much faster rate. The politicians in both cases are in a state of almost complete paralysis with no decisive views being offered. Both events — separately or together — have the potential to bring about a second collapse of the financial system of the Western world with at least the same disastrous consequences for millions of ordinary folk as the 2008/9 credit-crunch (from which we are still far from recovering).

Both crises have been caused by the printing of banknote currencies during the last century without reference to underlying value. Without intrinsic value of their own, banknotes (plus, these days, electronic digits) become only tokens which are mainly used by governments to inflate away their debts and by clever financial groups such as Goldman Sachs to play with. Time and again throughout history, such banknote systems have failed, the last one being Argentina’s in 2000, the first one being that of the Ming Dynasty in China almost a thousand years ago (and the century’s long economic depression which ensued while gold made its way back as the underlying currency). Undoubtedly, this is why China is the chief proponent of a new value-backed world currency to replace the increasingly worthless dollar and euro.

But, as always with necessary reforms, we’ll probably have to await one or both train crashes. In the meantime — as for the last decade — those who know the history of gold better than most politicians and economists are quietly buying the yellow metal as the likeliest candidate for the underlying value of tomorrow’s world currency.

We’re all Urukians now (850)

The great fallacy of most economists today is that they believe that economic growth as presently figured is the natural state of affairs. It is assumed that, somehow, somewhere, there is a great swathe of consumer goods lying ahead of us that will cause masses of people to save hard for them. For the savings to be invested in the production equipment to make the goods. For the goods to be finally available in the shops (or, these days, via the Internet).

But that pretty well ceased at around 1980. By then, most people in the advanced countries had bought all the ‘big ticket’ consumer goods that had come into existence — television, cars, central heating, for example. Hitherto only affordable by the rich, even the poor could afford these goods by 1980/90. There are still many big ticket consumer goods that the rich can afford which the masses may only fondly wish to have. For example, second homes in beautiful locations, personal planes or helicopters, sea-going luxury yachts. But, as the economist Fred Hirsch pointed out 40 years ago, the necessary space is limited. The goods themselves may, in theory, be mass-producible, but the space they need — beautiful locations, (commutable) airspace and (berthable) sea coast space — is already taken up by the super rich.

By 1980, the real steam had gone out of the economic machine that had spluttered into life at around 1680 (for the rich), had got going by 1780 (for the middle-classes) and was going full-pelt (for the masses) by about 1880. By 1980, what is now known as the ‘financial sector’ was unconsciously aware of this and, starting with personal credit cards, had to invent all sorts of wonderful and weird financial scehemes by which hard saving was not necessary any longer. Live now, pay later. By now, the total of private and governmental debt is so huge that, to be realistic, it will never be paid off in the usual way, whatever the politicians may pretend. Instead, by one means or another (inflation or deflation), all conventional assets will have to be down-priced in the coming years and most debts written-off.

So what is the solution for the West today (and perhaps China, India and Brazil in 30/40 years’ time)? Since about 1980 the masses, too, have been having their say in the economic scheme of things. Because the cost of raising children has been going up like a rocket, they have been reducing the size of their families steeply in order to afford both the big ticket items that they’re accustomed to and also the plethora of low-priced gadgets which entertain them today. Of course, it’s possible that they may change their minds in future years and have more than the two children per female that is necessary to replenish their country’s population. But it’s hardly likely that the present parental trade-off between goods and children will change much.

The rich, and their retinue of professionals and scientifics which is necessary to understand and administer the increasingly complex economic machine will survive, of course. Steadily and gradually, mass production and mass sales will no longer be necessary in the coming decades. More automation and more flexible (and customizable) production methods will require less and less muscular and mental attention by the masses. And then, as populations of advanced countries decline, the huge volume of circular personal services that go on within them will diminish. We are not moving into a new post-industrial, ‘services’ economy as many economists proclaim. As regards the mix between food, consumer goods and personal services we have much the same sort of economy today as occurred within the high clay walls of Uruk in Mesopotamia 5,500 years ago.

The only objection to this modern scenario — and it is a big one — is that substantial immigration into the advanced countries will be allowed to continue by governments and thus maintain high populations, or even grow them for the sake of maintaining their taxable base. At the present time and for the foreseeable future, fierce resistance to immigration is swelling and it is difficult to say whether the masses or governments (mainly impelled by their civil servant departments) will win. But even if governments win in the coming years (which is doubtful given the likely powerful social repercussions) then second and third generations of immigrants inevitably adopt the culture of the indigenous populations. They, too, will have less-than-replacement sized families in order to stock up with the standard range of consumer goods. It only means that the whole procedure of population reduction in the West will take place over a longer period.

Of course, I’ve ignored the fact that world population is already decelerating and that it’s likely to start declining anyway by 2050 at the latest. The scenario described above is only a more sophisticated addendum to the main trend. However, it still means that today’s and tomorrow’s economists had better come up with a more realistic notion of what is actually happening in the advanced countries already. Economic growth in terms of GDP figures no longer makes any sense at all. By all means — given our amazing innovative abilities — there is no reason why man should not make ‘progress’ but this doesn’t necessarily mean the increasing production of consumer goods.


A gift of The Times as a grand gesture? (450)

Newspapers (as we know them) are dying. Rupert Murdoch of News International knows that. This is why, lately, he’s been even more desperate to raise his present 39% holding in British Sky Broadcasting to 100%. However, he is also desperate to protect Rebekah Brooks from prosecution in case she fingers James Murdoch, his son, as giving permission for the News of the World phone hacking.

Rupert Murdoch is apparently flying over today to ‘take charge’ of News International’s strategy. Now that the take-over is on the back burner for at least several months, an Enquiry is awaited and police investigations proceed, it’s to be wondered whether there’s any available strategy just at the moment. But one thing is for certain today or tomorrow. He’ll be having a confidential chat with Prime Minister David Cameron. But even Cameron is compromised at the moment by having been a close friend of Rebekah Brooks — at week-ends both of them were “forever popping round to supper” apparently. He’s got little room for adjustment at present. He’ll only be able to allow the BSkyB take-over in due course — and take the public along with him — if some extraordinary change of circumstances allows this.

What could be more extraordinary than the gift of The Times to the nation? At present it’s only a pathetic echo of the days when it used to be known as The Thunderer but it’s still a British icon for all that. Not now, of course. But to be announced at the best psychological moment in the coming weeks and months. If The Times were gifted, along with a substantial endowment to make it truly independent, then this might, just might, allow all the present controversy to die down, for the Enquiry judge (whoever he may be) to realize on what side of his bread is buttered, for police prosecutions to be attenuated and for the reputation of News International to be restored.

An endowment of $1 billion ought to do it. This is only 8% of what Murdoch is prepared to spend on the remaining 61% shares of BSkyB. This would give sufficient income to make up for its losses for many years to come and also sufficient capital that may be required in re-fashioning The Times for long-term survival as a niche product in the Internet age. (I’m presuming that, like the violin, or the game of curling, or books with paper pages, there’ll always be some sort of role for newspapers in the future.)

So I’ll leave that little thought here for the while, and wait to see whether some rumours will start to emerge in a few weeks’ time about some marvellous plan that a penitent (?) Rupert Murdoch may be thinking about.

An inevitable future (950)

All effective decisions (and discoveries and innovations) are made either by individuals or by small groups of no more than about eight or nine experienced members. This has been so throughout all history. The only difference between older times and now — and it is a big one — is that today there can be many more cliques operating simultaneously within an ‘advanced culture’ than in simpler governances of yesteryear. Sometimes they are contending vigorously against one another, sometimes privately, sometimes publicly. Sometimes some of them are in collusion with others at particular times for particular purposes. Sometimes their differences are low key. Sometimes the cliques quietly get on with their own activity, keeping on good terms with the others. Sometimes a minority of the most outstanding members of some groups may actually transfer their membership or even be members of two or more groups simultaneously — the so-called ‘revolving door’ syndrome.

However, unlike the majority of a culture’s population, the members of all these elite groups are all well-educated, well-informed, and pay a great deal of attention to one another’s activities, each usually respecting the intelligence, specializations and potential power of the other. Furthermore, because they all tend to send their offspring to the same minority of very good schools and elite universities, their same offspring tend to intersocialize and intermarry during those crucial years when young people are setting their pitch towards their future adult statuses and careers. It is during this hugely important life-period — when the frontal lobes of their brains are growing many more neurons, and new networks are developing — that young people may switch from the careers of their parents (or those that were expected of them) into others — or, indeed, into quite new ones that hadn’t been thought of before. But no matter. Because of the mutual esteem that their parents’ groups have for some or many others, young would-be careerists can usually be introduced to suitable temporary or permanent patrons who will be able to give them help or early opportunities.

That’s the way of the world, whether in communist China (so called) or democratic America (so called) or several other countries that are some significant way along the industrial revolution path of the last 300 years or so. The really important decisions are taken by cliques — so long as they are not totally vetoed by the power of others. Two more tendencies of these groups these days are that: (a) because of their specialized nature, groups are now tending to associate more with like-minded groups in other countries and cultures rather than exclusively within their own, and (b) because the modern world is becoming even more specialized, then we will continue to see more groups taking shape as necessary decision-making entities.

Of course, these groups don’t operate within hermetic boundaries. At present, they all depend on the wider population of their cultures for their taxes, or their salaries, or their profits, or their perks or their credibility. The more sensible of these groups make sure of keeping their public relations in good repair and also that their activities don’t impact too forcibly on the activities of other elite groups. Occasionally, however, some make bad mistakes. The present controversy attending the small group around Rupert Murdoch is a good example. Another likely group that faces being slapped down comprises the small number of individuals who head investment banks such as Goldman Sachs and JPMorgan whose present purpose is to maintain as much financial volatility and instability as possible in order to benefit therefrom. The result of the 2008/9 episode gave them a slight tap on the wrist. When the double dip finally arrives then it’s likely that their power will be much more strongly forced by other groups into more responsibility.

But just as the modern world is specializing more and more, the indigenous populations of all advanced countries are getting close to precipitous decline. Average family sizes are falling much lower than replacement, mainly because more and more parents can’t afford more than one child. It is noticeable, however, that although the political groups of various nations draw attention to the growing numbers and health costs of longer-living old people, they dare not mention what will happen when the latter finally start to die in significant numbers in about 20 to 30 years’ time. Without large populations where will taxes and economic growth and (most importantly of all) profits come from then?

Well, they’ll come from where they’ve always come from. Increasing efficiency of production. More particularly, increasing energy efficiency of production. Whereas the profits of neolithic tribes and empires used to come from the energy of slaves and then from feudal peasants and then, more recently, from regiments of workers in factories, production of goods is becoming increasingly automated. And this is also applying to a great deal of personal services.

In that case, so long as specialized groups still remain, personally supervising an increasingly automated world, then super-large populations will not be necessary for advanced civilizations in the future. So long as the elite groups can recruit enough young people from the wider population as their apprentices and successors — or can afford to breed sufficient numbers on their own (or use the latest genetic technology to avoid the laborious part of it) — then there’s no reason why an insufficiently educated majority of the population should exist at all in the longer term future.

A new much reduced world population with a new equilibrium between itself and the millions of other fascinating species of flora and fauna on the planet will be established. Unless we are somehow able to negate our genetically-imposed curiosity and our equally genetically-imposed propensity to work best in small specialized groups, then it’s difficult to envisage any other future, despite the upheavals that will undoubtedly take place.

Malthus was brutally correct after all (600)

There is one — and only one — reason for the present gross over-population of the world and the under-nourished and starving billions herein. It is Western medicine (plus Western plant genetics much more recently). If we date the start of this at around 1700-1750, the dawn of the industrial revolution, it has caused world population to grow tenfold from 700 million to 7 billion today — and still growing.

It could be argued that, in 1750, the world population was already over-populated. At that time, every possible square metre of the earth’s surface that could be practically cultivated by manual and/or animal labour was already exploited for food production. Steep mountain sides up to about a 40 degree elevation were terraced and, where there were available aquifers or underground streams, even rain-free desert areas were used to the hilt. Populations, constantly tending to grow, were mainly kept in check by disease, particularly in childhood and old age, and more occasionally by droughts or other natural visitations. The world population was largely in a new state of balance just as the hunter-gatherer world population had been 12,000 years ago before systematic agriculture was invented, albeit then at a much smaller figure (50 million? 100 million?)

Nevertheless, the new largely stabilized agricultural population of around 700 million was initially disrupted by Western merchants. With their recently developed and highly steerable sailing vessels, they were able to visit every coastline where desirable natural products were available in exchange for industrial goods. Very soon the individual adventurer merchants were overtaken by major trading corporations who not only set up depots and built vast plantations and factories but also persuaded their governments to send naval vessels and regiments to protect their new interests.

The well-educated administrative personnel of Western trading corporations were principally interested in making money, of course, and weren’t much interested in the physical welfare of those they were exploiting. However, being of the same class as the Western missionary doctors and nurses who quickly followed them, the traders naturally gave them full scope in their activities. Whether in saving lives or souls, the new wave of worthy individuals were hardly to be considered as competitors. Indeed, in saving many lives of women in childbirth or children in their early years, Western missionary doctors and nurses were ensuring that the workforces in factories and plantations could only grow from then onwards. It validated the idea of the permanent exploitation of these native folks.

It was not to be permanent, of course. But the main point has been made and here I can jump straight back to the present time because we have now almost reached another stage of population stabilization. Major rivers suitable for practical adjacent agriculture are now running dry, underground fresh water basins and streams are already almost fully exploited. Substantial extra rainfall is hardly to be expected. What genetically-modified seed manufacturers don’t tell the public (like the Green Revolutionists of 40 years ago) is that even their wonder-plants require more water. World food production has now largely stabilized and cannot possibly be increased more than fractionally.

Whether the present world population of 7 billion will stabilize at 8, 9 or 10 billion in the 2030-50 era is really besides the point. The world population is already beginning to stabilize and will continue to do so. Whether 1, 2, 3 or 4 billion people die of starvation before 2050 is hardly important. To be realistic, the presently declining Western governmental and large-charity aid is to be welcomed because it is only adding to useless hope here and there around the world where, perhaps, there has been a particularly severe regional drought. Temporary relief in one locality is only increasing starvation somewhere else. Aid is not changing the essential dynamics of world population. The otherwise kindly and well-meaning Thomas Malthus was brutally corrct after all.

How to leapfrog Prince Charles (1,200)

From time to time over the years there have been rumours that when Queen Elizabeth II dies, or perhaps decides to retire, then the Crown will leapfrog Prince Charles and be placed on his son’s, Prince William’s, head, despite the fact that this would break the normal succession rules. These rumours were no doubt initiated by a group of senior politicians and civil servants who make up what can be called the royalty lobby. Discreet, largely invisible and probably with no fixed membership this group is still highly influential, however, and takes the best public relations advice. By and large, they usually succeed in manipulating a sufficiently large majority of the credulous public.

The royal supporter group makes mistakes from time to time, sometimes very bad ones. When Princess Diana died in the Paris car crash in 1997, they totally misjudged her popularity. They advised the Queen to stay where she was on holiday at Balmoral, Scotland and not to return to London, and also that the royal flag over the palace need not be raised to fly at half-mast — Diana, already divorced from Charles, was not important enough for that. A surge of anti-royalist feeling immediately erupted in the country. The Queen was quickly dispatched southwards, and the flag displayed. If the royalist establishment had delayed more than a day or two longer then the credibility of royalty could have gone for ever. Unbelievable though it seems now, the UK could easily now be a republic.

Suitably admonished, the discreet royal group then decided that loudspeakers were to be placed outside Westminster Abbey at Diana’s funeral so that the thousands of people who would gather outside could, as it were, be part of the congregation. But they hadn’t reckoned with Lord Spencer, Diana’s brother, when it came to his pulpit tribute. Despite saying nice things about Diana, which was to be expected, he also said some unkind things about the royal family which was totally unexpected from this aristocrat. The invited congregation within the Abbey was shocked and silent. The public congregation outside the Abbey was shocked also. But not silent. After a few seconds a few murmurs and then a few claps were heard. Then a few more. This grew until the whole crowd were applauding. And it become so loud that it could be heard inside the Abbey and on our television sets. Then the congregation inside the Abbey and nearest the doors started applauding — and then the whole congregation. This musty have shaken the royalty group rigid.

The select congregation within the Abbey were no doubt rationalizing to themselves that they were actually applauding the nice things that Lord Spencer had just said about Diana. But, in fact, they were giving way to what sociologists call ‘peer pressure’. They had no other option. The congregation inside the Abbey were perforce having to admit that, at least as far as the public were concerned, the Queen, Prince Charles and the rest of the royal family were at their very lowest point in the popularity stakes.

So the royalty propaganda group have been more than usually careful ever since. With astute methods they managed to restore the Queen to her previous popularity within a year or two. And then, occasionally, one would read in the press that there were rumours about the possibility of Prince Charles being sidelined. Although Prince Charles is regarded as a bit of a twit by the UK public, and although they haven’t taken to Camilla, his wife and long-time ex-mistress, Prince Charles, on balance, is rather more popular than unpopular. Two or three times the royalty group decided that the time wasn’t ripe and the rumours then quietened down.

But now that Prince William has been persuaded to marry his living-partner, Kate Middleton, now gloriously transformed into being the Duchess of Cambridge (a well-chosen name with just the right vibes), we have a new situation. Her job, of course (just like Diana’s previously), is to produce children, preferably a male, as soon as possible. In fact, only two months after the wedding, she’s already letting it be known that she’s “broody”. Unless there’s something wrong with William’s and Kate’s genes (though hers will have been thoroughly checked for generations back you may be sure) and they turn out to be infertile, then we can expect happy news any time soon.

And then, of course, the situation will be very different, particularly if it’s a boy. It would then seem all the more common sensical for a vibrant Prince William, still in his 30s, a fully-trained helicopter pilot, and handsome and popular to boot, to become the next king rather than a doddery (as he will be delicately described) 60 odd-year old who occasionally talks to flower and hugs trees.

Wrong though I was a couple of weeks ago about Christine Largarde and the IMF I don’t think I’ll be wrong about this one. But why am I writing about the royal succession? It is nowhere near as important as the IMF. And I don’t have strong feelings about royalty or republicanism either way. I’m writing it because I was prompted this morning to read that the Duchess of Cambridge is feeling broody, but mainly because it’s just another example — albeit a powerful one — of what biologists call a ‘super stimulus’, in this case peer pressure.

A mother blackbird, given an outsize artificial egg of the right colouration (naughtily introduced into her nest by a bird scientist) will try to incubate that monstrous egg to the exclusion (and ultimate demise) of all the others. The reason is that for millions of years her genes have never had the chance of being selected against such an unnatural egg because it had never occurred before. Similarly, for millions of years we have lived in small groups in which obedience to the leader or to its ongoing culture was explicitly followed for survival’s sake. We are heavily biased towards deference to the status quo because our genes have never needed to be selected for other behaviour in other situations of large assemblies. In large numbers and in multi-choice situations we all too readily swing heavily in one direction or another just as we used to when in small groups.

And this is what will happen in the case of the royal succession. So much publicity of the right sort will be given to William and Kate from now onwards it will be inevitable that, seemingly out of nowhere, and likeable though Prince Charles may continue be, the idea of Prince William as the future king will emerge. The public — the non-republican public (about 70-80% of the whole) — will swing behind this idea. And they won’t realize that they’ve been manipulated. Although Prince Charles is already known to want to be king next, even he might become enthusiastic such will be the peer pressure. From now on, the publicity given to the Duke and Duchess of Cambridge (though well mixed with plenty about their “ordinariness” and “humanness”) will be huge and relentless until at least one child is born. That will probably produce the required result, bar a few well-positioned proposals.

Credit-crunch II still awaits (400)

I see from this morning’s papers that Goldman Sachs is forecasting that consumer confidence will bounce back and all will be at its Panglossian best from now onwards. As well it might. After all, even Goldman Sachs is now making some of its staff redundant and badly needs a livelier stock market which it, and its fellow investment banks such as JPMorgan, can recommence fleecing investors such as pension funds with their high-frequency, algorithm-driven methods as they were doing last summer. The dawdling stock market this year, not knowing what to do, must be quite frustrating for them.

Yes, GDP will continue to grow at a low level (in the UK and Europe as well as the US), sustained by the continuing immigration of poor people who are busily taking up the low-paid jobs that still exist and stocking up with the standard range of consumer products. But what about the indigenous population? Consumer confidence is still in shock, retailers are failing in most major cities, house prices (except those in the highest range in choice locations) are still static, if not declining, as are real, rather than nominal, wages for the mass of the population due to inflation.

Goldman Sachs and its ilk have had a field day in the last 30 years as they accelerated the availability of credit far beyond anything that has occurred before in the whole history of the Industrial Revolution. The 2008/9 credit crunch was only a partial therapy. Realms of second and third degree derivatives have yet to be neutralized, and mountains of property debt, private and commercial, have yet to be either suffered or worked off in the balance sheets of the retail banks — whatever they, or their friends in governments may say.

And over and above all that, the major problem has yet to be solved. How can Western governments — with few exceptions — possibly pay off their growing government debts from taxation? They’ll only be able to do so by means of substantial assets sales. And these, in order to fully realize their value can only be spaced out over a period of many years. And these sales can only begin to start when there’s a non-inflationary world reserve currency available to them and which satisfies both the advanced and the emerging countries. The IMF and our most recent institution, the G20, show few signs of achieving this so far even though they’re aware of the problem. As is always the case in the affairs of man, it will take a catastrophe to fully concentrate our minds. Credit-crunch II still awaits.