Random Variable

In my last post, I said that governments wont open up the free trade of food because domestic prices would increase, leading to discontent. But perhaps, I should make the point a bit stronger. Domestic consumers will starve.

Here’s Bryan Caplan, from his book The Myth of the Rational Voter:

“Maybe the rich are less protectionist because they are more rational; or perhaps income is a proxy for education or intelligence, and these make people more rational.”

Umm…maybe the rich are less protectionist because they’re the least likely to starve.

Final word from Daniel Davies (again), from the comments on Tyler’s response to Dani Rodrik:

[Just what is it that "we know reasonably well" that would indicate that a freer market in rice would raise its real price? Did you not agree in your own posting that freer trade would increase global supplies? How does this lead to a higher real price?]

Barkley, the World Bank estimates that Dani references are the best empirical work we have on this (rather important) question and they look pretty sound.

The global supply of rice is limited in the short term to the crop. Over the course of more than one growing season (a period of time during which it’s entirely possible to starve to death), freer trade in rice would tend to increase the supply. However, it is entirely possible for the following three states of affairs to hold simultaneously:

1) A larger global rice crop
2) A lower global price of rice in PPP terms.
3) In rice-producing countries, a higher relative cost of rice in terms of average wages.

(3) is clearly the problem, because it will lead to states of affairs where workers can’t afford to buy enough rice to eat. Which is what we call a “food crisis”, which was the whole motivating point.

Dani’s point is very clear here and quite obviously correct. An increase in the supply of rice doesn’t guarantee an increase in the ability of poor people to buy it. If rice is more expensive on the world market than it is in India, then if India opens up trade in rice, then the price of rice in India is going to go up. If Indonesia bans trade in rice, then the local price of rice is lower than it would be if Indonesian rice-growers were able to sell to Japanese rice-eaters instead of local peasants.

We might all, as Dani says, “want there to be free trade in rice”, but you pick your year for this sort of liberalisation, and you don’t pick a year in which the “adjustment issues” could involve hundreds of thousands of deaths from starvation.

Tyler Cowen writes in his latest column:

Lately, it’s become fashionable to assert that, in this time of financial market turmoil, the market-oriented teachings of Milton Friedman belong more to the past than to the future. The sadder truth is that when it comes to food production — arguably the most important of all human activities — Mr. Friedman’s free-trade ideas still haven’t seen the light of day.

…

The more telling figure is that over the next year, international trade in rice is expected to decline more than 3 percent, when it should be expanding. The decline is attributable mainly to recent restrictions on rice exports in rice-producing countries like India, Indonesia, Vietnam, China, Cambodia and Egypt.

However, even if we were to free up trade, this would likely irritate urban domestic consumers. Governments that want to stay in power are not likely to annoy this demographic. This is the opposite problem to Europe, where democratic governments have had to rely on the rural vote to stay in power throughout the 20th Century, although we only refer to the former as populism, despite the justifiability of domestic consumers’ grievances. As Dani Rodrik points out:

Freer trade would reduce prices of food (relative to other prices) only in countries that are food importers.  Food exporters would experience a rise in the relative price of food, and there is simply no way of escaping that reality.

These dynamics played themselves out in the Pakistani elections. Shaukat Aziz paid off the trade deficits with agricultural primary commodity exports, the result of which was huge hikes in the price of rice (can’t find a reference for the moment).

Daniel Davies, forcefully makes the argument against Tyler’s:

As Raj Patel correctly notes on the Guardian blog, we are shaping up for a fairly substantial risk of a free market democide. . There was certainly no shortage of people pointing out at the time that removing fertiliser subsidies and dismantling strategic grain reserves was a hell of a risky thing to do, but the neoliberals pushed it anyway, under the assumption that deregulated food markets would encourage investment and improve productivity. Which, given a very long run of good weather indeed, might have worked, but that was hardly the way to bet, and it really does not appear to be the case that anyone did a huge amount of detailed research into how this green revolution might have been carried out and financed. Beware, always beware, of long term solutions to short term problems.

…

It really is hard to see what qualitative difference one might draw between the way in which the World Bank and IMF have fucked around with the food security systems of third world countries in the name of “free markets”, and the way in which Stalin and Mao did more or less the same thing in the name of “collectivisation”. Peter Griffiths’ article and book refer. The great thing about the market mechanism, of course, is that when it kills a million people, it doesn’t leave fingerprints.

It’s time we went back to studying political economy, and ask more questions rather than proposing ideological solutions. Here’s your starter for ten: As far as agriculture goes, democracy and free trade is not an easy fit. Does anyone have reasonable solutions to this, which aren’t of the “let’s remove economics from democratic participation” variety?

PS: I mentioned in the comments an article, which suggested that the end of EU subsidies on dairy exports played a role in Japan’s butter crisis. Aaron Schiff points out however that there’s a 802% import tariff on butter imports. However, I don’t think this completely undermines the major point, but adds yet another complexity.

Below is a talk I prepared for my Formations of Modern Societies class on whether or not we live in a post-industrial society. It’s deliberately one-sided, and contains poor attempts at humour. Squirm now…

The origins of computers and the Internet lie in military history. The first computer to be built was Bletchley Park’s Colosus , designed by mathematician, Alan Turing to break Axis secret codes.

Unfortunately, Churchill ordered the destruction of all the components and designs of Colossus shortly after the end of the war.[i] In the United States however, mathematicians Wiener, Von Neumann and Shannon were developing cybernetic theory within a military unit called “Command, Control, Communication and Intelligence” which looked after the atomic bomb project. Their theories on information as a form of entropy (from the physical laws of thermodynamics) left a lasting impression on the social sciences, from economists such as Kenneth Arrow and Milton Friedman to sociologist Talcott Parsons and anthropologist Margaret Mead. To some extent, this explains sociologist’s early love affair with technology. There’s another side to this though….

One of the first comprehensive theories of computers and societies was developed by the Polish-born Soviet economist, Oskar Lange in his 1965 publication “Introduction to Economic Cybernetics” and the 1967 publication “The Computer and the Market.” Lange believed that a distributed network of computers could optimally price consumer goods in the centrally planned economy and push the Soviet state towards the Marxist utopia.

The US response was two-fold: first it pursued technological expertise by funding research in telecommunications in universities.

Although the initial ideas of the Internet as a packet-switched (in which data is componentised into short bursts, rather than being transmitted on a circuit, like a phone line) were developed in the telecoms department of the UK Post Office in the 1950s, they were rejected on the grounds that it had no purpose. Work on these types of networks were continued within the US Defense Advanced Research Projects Agency as the ARPANET – a distributed network that would be able to survive the destruction of individual nodes, in say a nuclear war. ARPANET was developed in conjunction with universities such as Berkeley, Stanford and European collaborators UCL and Twente in Holland.

The Internet was opened up to private firms in the late 1980s, and experienced a growth rate of 100% / year from 1990 onwards. The world-wide-web however, as a system for transmitting text and pictures over the Internet was developed at the European Organisation for Nuclear Research in Geneva by Sir Tim Berners Lee, to aid the work of particle physicists.

The other side of the US cold war strategy was to fund academics to theorise about what a computerised society would look like. Receivers of funding included Daniel Bell, who’s in the reading, and James Burnham, the creator of “unmarxism” or, if you like, historical materialism for capitalists, which led to the idea of “The Managerial Revolution.” The theories of Bell and his colleagues, such as Nesbitt, Stonier and Masuda where highly utopian. Bell thought that the West was heading towards an interconnected “global village,” a network society which is flat, non-hierarchical, egalitarian and involving the free association of peoples. Even war would disappear as the need for physical resources is replaced by the network.

It is these types of ideas that Marxists rightly criticised, but their rejection of Information Society as whole means they have to fall back on terms such as imperialism or exploitation theories of labour to describe technological change. Neoliberalism is not a grand US imperial strategy. It is linked to ICT because it was people working in information technologies who were the carriers of neoliberalism.

Mathematicians, economists and computer scientists, especially on the Left Coast fell in love with the ideas of classical liberalism as they were expressed through a new wave of Libertarianism. Books such as Hayek’s The Road to Serfdom, and Ayn Rand’s Atlas Shrugged were, and still are, immensely popular in the Silicon Valley and amongst graduates who would found the global financial centres. The ideas in these books professed a future society where the state would wither away, and capitalism, unleashed from state control would create the perfect ideal world.

Rand’s idea of “man as a heroic being, with his own moral purpose and reason as the only absolute in life” would appeal to males engaged in mathematical disciplines by creating a feeling that they were these very heroes: bespeckled nerds.

In addition, the ideas of neoclassical economics and libertarianism could easily be developed in the context of an American society where economic inequality was largely diminished – the period from 1943-1977 known as “Middle Class America.”

The ideas of the libertarians embodied themselves in what Pekka Himanen calls “The hacker ethic.” By hacker, we do not mean someone who criminally breaks into systems, but a highly energetic ethic of free creation and destruction. Hacker groups could be found in almost every computer science department of the University of California system as well as MIT’s Artificial Intelligence Laboratory. What was important about the hacker ethic was that it is completely valueless. The only thing to be prided are acts of creation and destruction itself. Although, hacker groups were based around an idea of “gift-exchange”, as opposed to “money-exchange,” they were only able to do so because of military funding. In addition, the more noticeable manifestations of hacking, Open Source Software like Linux is now dominated by commercial interests, such as IBM, Sun, Novell, Red Hat and Microsoft.

So, did ICTs change society? For sociologist Manuel Castells, we do, in fact, live in a Network Society. Networks are not new. They have always existed throughout history. But they were easily destroyed and relatively small scale. What we have now are ICTs as the foundation of economic networks, such as the global financial market; politics, where government departments are more in touch with their counterparts across the world than with the next level up or down; media networks, such as the AP & Reuters wire services, but also now, the blogosphere; social movements such as those organised around Tibet (pro-Tibetan and pro-China), antiglobalisation, antiwar and also the transnational terror networks.

These networks intersect groups across societies, leading to fragmentation, polarisation and individualisation. Mass national culture is replaced by various networks which condense and polarise: such as the anti-religious movement organised around Dawkins, intelligent design, and nets for and against the idea of climate change. Diaspora networks can increase the flow of cultural goods, or where they come from minority groups in their host countries they can increase the opportunities for rebellion and civil war.

The linking of corporations by telecommunications has allowed them to go multinational. This has adversely affected the working classes in the developed world who have experienced a catastrophic loss of job security and the end of full employment. Those who cannot keep up with technological change are simply “disconnected” from the network. Thus, the digital divide is a primary concern for many governments.

The application of ICTs to the organisation of markets means that the global market is becoming more efficient at the utilitarian allocation of goods and services, but is fragmenting society with large amounts of inequality. In effect, ICT enabled economic globalisation moves us back a hundred years to a “new gilded age,” through the economic effects of the “great divergence.”

This rise in inequality across developed and developing nations is not just caused by the replacement of jobs. Developed nations labour markets look increasingly like that of the Global South under a process that Michael Lind calls “Brazillianisation,” caused by the threat of multinationals leaving countries forcing governments to reduce social welfare and labour regulation.

In addition, migration patterns can enhance or disrupt economies. Economies that play host to migrants are able to grow their economy, especially where migrants are skilled. Where migrants have the opportunity to create businesses back in their home countries, economies can also grow there. However, migration can haemorrhage failing countries as their best and brightest take flight, again exacerbating inequalities. This view of the world sits in stark contrast to the hyper-globalist view, as espoused by authors such as Thomas Friedman who believe that competitive advantage has been all but eliminated thanks to ICT, and that all the world can now share in the wealth of the world. World Bank economist Paul Collier is far more sceptical. The income of the average Malawian is less than that of preindustrial Britain and welfare stands lower than that of hunter gatherer societies. It’s not at all clear how “bottom billion” countries can be integrated into the global economy given the trend towards high productivity, ICT-enabled labour.

This points to the role of institutions in shaping today’s world as much as the role of technology. There is a danger that in much of the network society theorising, there is an element of technological determinism. Again, Marxists have been right to call on this. Much of the inequality between high tech workers and manual workers began in the stagflation period of the seventies. Economists Levy and Temin suggest that political factors led to a collapse of institutions, such as Breton Woods that maintained middle class America. What followed in the Washington Consensus, were not just macroeconomic packages revolving around monetarism, but a microeconomic reorganisation around deregulation of labour, closing of unions, low taxes and low wages. Since then, those at the top of the income distribution have further shifted policy in their favour. In effect, those who accuse others of rent-seeking are themselves the worst perpetrators.

What of the argument that postindustrial societies are increasingly post-material as was claimed by some theorists in the 1970s? By treating CO₂ emissions as a dependent proxy variable for material production, we can see in the IPCC emissions profile that the carbon intensity of value production still is only at 80% of that of 1970. In addition, global CO₂ emissions show no sign of reduction in the short-term, and are still set to rise massively as India and China become more middle-class. I would suggest that post-materialism can only appear where material goods are abundant, and this is reliant on energy and food security – the latter disappearing as governments push bio fuels at the cost of human misery.

So our present situation marks a continuation of capitalist society. One could cite Weber and say that we have stuck ourselves more and more in the steel-hard casing of the rationality. This has only been done through the application of scientific knowledge in a diverse range of disciplines. Also, ICTs are devices that have provided a crucial fixity to the social structures that we inhibit. Although they were created by human s engaged in political and economic practices, they now constrain decision making, through the proliferation of uncertain side-effects such as global warming, security and financial crises which escape Weber’s notion of rational calculation.

So, do current sociologists have anything to say about the future? John Urry has recently proposed two visions for the world in 2050. The first is warlord localism, AKA the Children of Men scenario, where a world adversely affected by global warming and a lack of energy becomes fragmented, states lose their ability to govern, leading to local territories controlled by force by warlords. How likely is this to happen? Futurology is a hard game to play.

In We Have Never Been Modern Bruno Latour, suggests that we should engage in experimental metaphysics and treat humans and nonhumans as first class objects of sociological study. Latour recently suggested that new datascapes available through ICT allow a new type of sociology to take place, relying on massive data collection on multiple aspects of our lives. In this sociology of datascapes, it is possible to trace the individual as they flow through society, establishing and removing relations with other individuals and objects (or actants). This is all very nice, but sociology could end up as a complicit in Urry’s alternative scenario for the world: A digital panopticon.

In 2006, the UK’s data protection agency, the Information Commissioner produced a report in which it stated that Britain is now a Surveillance Society [ii]. Britain has the highest concentration of security cameras in the world, with 1 camera for every 12 people. Here is a quote:

“In 2016…The digital divide has grown ever deeper with some condemned to a purgatory of surveillance and an inability to access information…However the culture of peer-to-peer surveillance has also splintered and produced new variants. There is a great deal of vigiliante surveillance by hardliners who feel that the state is ‘not doing enough’ to control terrorism, crime and illegal immigration, and unofficial websites of the ‘suspect’ have proliferated, leading to all kinds of mistakes and misidentifications.”

Journalist Adam Curtis believes that technocratic management has engineered a society where, possibly within a few years, almost all of our actions could be predicted by computers. Sites such as Amazon and Last.fm have uncannily picked up on my tastes in books and music for example. The threat is that, to cite the name of a Japanese sci-fi of the same name, at the end of the day, we may not even be “ghosts in the shell.”[iii]

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[i] Please read the patriotism in this talk ironically.

[ii] Possibly the best commentary on the surveillance society comes from the UK-based IT news site The Register.

[iii] Ghost in the Shell, at least the TV series is equal parts Deleuze, Weber and Jameson. Well worth catching.