Economics 24/06/2010: Irish exports & trade stats

Trade stats are out today for Ireland. Here are few illustrations and trend discussions.
Clearly, exports have rose in April, after a seasonally adjusted decline in March. We are now again above the trend line, and since January 2009, the trend line is flatter than over the entire sample, which means exports performance remains relatively strong. However, this does not mean things are great. April 2010 exports are down 9.9% on April 2009 and up only 2.22% on April 2008. They are down 6.6% on April 2007. Exports were down 7.7% in March 2010 in year on year terms. So despite flashing above the long run trend line, exports are still under pressure.

Imports have posted significant rise. Imports increased by 8% between March and April 2010.

In Q1 overall, exports fell from €21,911m to €20,789m down -5%. This was driven by:

• Organic chemicals falling by 17%, Computer equipment by 42% and Other transport equipment (including aircraft) by 85%, offset by
• Exports of Medical and pharmaceutical products increase of 8% and Metalliferous ores increase of 75%.
  

Over the same period, imports decreased from €12,527m to €11,030m, down -12%:

• Computer equipment decreased by 54%, Other transport equipment (including aircraft) by 42% and Electrical machinery by 11%.
• Imports of Petroleum increased by 25%, Medical and pharmaceutical products by 19% and Road vehicles by 30%.
  

Trade balance remained flat in April relative to March:
Trade balance is now below long-term trend line. Between April 2009 and April 2010 trade balance fell a whooping 25.7%, much larger drop than the decrease between March 2009 and March 2010 -9.5%. However, trade balance is extremely healthy compared to 2008 - up 38.4% on April 2008.

Terms of trade stats are not updated from December 2009:
But, due to our exports reliance on imported inputs (see my earlier post on IMF statement today), there is basically no relationship between Ireland's terms of trade and our exports activity:
Geographic snapshots for top 30 countries by volume of exports in Q1 2010:
US down, UK down. Total EU exports down. Euro zone down in double digits. All double-digit gains are in the smaller trading partners (less than 1% of total trade volumes).

Economics 24/06/2010: IMF statement on Irish fiscal policies

IMF released today its Concluding Statement for the 2010 Article IV Consultation from May 31, 2010.

1. Through assertive steps to deal with the most potent sources of vulnerability,

Irish policymakers have gained significant credibility.

2. Along the complex and long-haul path to normalcy, retaining policy credibility will require active risk management. The appropriately ambitious fiscal consolidation plan demands years of tight budgetary control. Likewise, the weaning of the banking sector from public support and its eventual return to good health will proceed at only a measured pace. In the interim, unforeseen fiscal demands may occur. …With limited fiscal resources for dealing with contingencies, maintaining a steady policy course will require mechanisms for oversight and transparency, and high quality communication to minimize risks and sustain the political consensus and market confidence.

[The really significant bit here is the IMF voicing their position that “maintaining a steady policy course will require mechanisms for oversight and transparency, and high quality communication”. In a diplomatic world of IMF’s statements, neutered by the ‘consultative’ bargaining with the Government, this is likely to mean the following: “Ireland has no mechanism for transparency and oversight (enter Nama). Ireland has no quality communications mechanism, with the preference given to ‘hit-and-run’ announcements of successive cash injections into the banks preceded by no policy debates, and followed by meek Dail talking shops in which discordant voices of fiscally and financially unqualified opposition and backbenchers bicker over minutiae, missing the big picture.”]

3. Ireland is likely to emerge from its output contraction into a period of relatively modest growth potential and high unemployment. Current Irish and global conditions make forecasts subject to much uncertainty. Various indicators point to a return to economic growth during this year, but following its earlier steep fall, GDP in 2010 is projected to be about 1/2 percent lower than in 2009. As the post-crisis dislocations are undone, annual growth rates should rise gradually to about 3.5 percent by 2015. After peaking around 13.5 percent this year and, absent additional policy measures, a sizeable structural component will likely keep unemployment at around 9 percent in 2015.

[Now, these numbers fly in the face of our budgetary projections – see table from the Budget 2010 estimates submitted to the EU Commission. And they imply much more significant challenge on fiscal consolidation side than what the Government has been aiming for.]

4. The improved global outlook will help, but to a limited extent. With some reversal in the earlier loss of competitiveness and improvements in the global economy, exports will lead the recovery. But spillovers to the domestic economy will be limited because of exports’ heavy reliance on imports, their tendency to employ capital-intensive processes, and the sizeable repatriation of profits generated by multinational exporters.

[I’ve been saying this for some time now. Exports will not get us out of this corner. More importantly, since our exports rely on inputs imports so heavily, we are staring at the situation where positive effects from the weaker euro on exports will be offset by the negative effects of rising cost of imported inputs. Also notice – this statement clearly puts IMF at odds with the Government, in so far as the IMF is explicitly stating here that for fiscal balance, it is Irish GNP, not GDP that matters most. Again, good to see another one of my long term concerns validated.]

5. Moreover, home-grown imbalances from the boom years will act as a drag on growth. The unwinding of these imbalances—arising from rapid credit growth, inflated property prices, and high wage and price levels—will limit the upside potential.

Financial sector weakness, fall in real estate prices, and high unemployment could continue to reinforce each other.

[In other words, as I have recently pointed out in the press and on the blog – the twin credit and asset markets crisis is likely to last long time. Years in fact. And this really blows apart the entire Nama strategy of getting the transferred loans back to the par with 10% (or was it not 5% before that?) appreciation in property values.]

But deleveraging to reduce the loan-to-deposit ratio and banks’ risk aversion will constrain lending and the pace of economic recovery, at least in 2010–11. Higher than expected losses, uncertainties in global regulatory trends, and renewed financial market tensions—that may restrict access to funding—create downside risks. In this environment, the targets for SME lending need to be combined with strong prudential safeguards as the non-performing loans of this sector have grown rapidly.

[So unlike the Irish Government, IMF sees banks deleveraging impacting adversely the real economy, higher margins pushing homeowners deeper into insolvency, higher banks charges and banking costs destroying operating capital capacity in the economy, etc. All the things we’ve been warning the Government about – Karl Whelan, Peter Mathews, Brian Lucey, myself – but to which our policymakers paid no attention whatsoever.]

7. Three restructuring priorities deserve attention:

NAMA should schedule an orderly disposal of the property assets acquired aimed to reduce the large overhang of property in state hands, restart market transactions and, thus, help normalize the property market. Oversight of NAMA operations, which is provided for in the legislation, is desirable.

[Thank you, IMF, for supporting exactly the criticism that myself and others have been levying against Nama. Nama needs transparency, oversight, clear business plan. Unfortunately, the legislation does not provide for proper oversight. Nama is an insider-run institution with no meaningful oversight capacity given to anyone, save for the Minister for Finance. Of course, the IMF is saying this indirectly. If the legislation did provide oversight systems sufficient enough, why is the IMF concerned about the need for oversight of Nama operations?]

Mindful of the moral hazard risks, narrowly-targeted support measures for vulnerable homeowners would limit the economic and social fallout of the crisis. …This process will be aided by an overdue shift to a more efficient and balanced personal insolvency regime.

[Again, everything here is a repeat of what we, the critics of the Government approach to the crisis, have been saying for months now. Including the need for reforming our atavistic bankruptcy laws (the calls that have been falling on Government’s deaf ears for some months now) and the need for a support package for homeowners in negative equity and distress (the calls that the Government is responding to by preparing to introduce new taxes on the same homeowners already stretched financially).]

10. Looking ahead, substantial challenges remain. Following the already sizeable consolidation in 2009 and 2010, further consolidation measures, although not as large as that already achieved, of at least 4.5 percent of GDP are required to reach the 2014 target. If GDP growth outcomes are weaker than those currently foreseen by the authorities—a clear possibility within the current range of scenarios—the additional effort needed may even be greater. Staying on target is critical to retain the hard-earned credibility. But the risk of “consolidation fatigue” and, hence, a fraying of the necessary social cohesion cannot be ruled out. For this reason, greater specificity on further proposed measures is necessary. Sustainable expenditure savings will be central, including through efficiencies in public services. Broadening the tax base for revenue enhancement will also be necessary.

[This is clearly the heaviest-edited section of the statement from the point of view of ‘consultative’ additions added by the Government. The language clearly states that the IMF does not believe Government current plans for reducing the deficit to 3% target by 2014. Just month and a half ago, IMF showed its estimates of Government deficit and they are clearly above 5% mark in 2015. Yet, a month ago the Government already had in place plans to further reduce the deficit by 4.5% before 2014. So either the IMF is saying that the Government will require a fiscal adjustment of 4.5% on top of previously announced 4.5% - to the total of 8.8% of GDP or roughly speaking €14.5 billion in total between now and 2014, or their numbers do not add up – per link above.

The really important stuff in this statement is just what risks concern the IMF. The risk of ‘consolidation fatigue’ – referring most likely to the Croke Park deal that effectively shut down any new savings in the public sector wage bill through 2014 would be one. The risk of the Government falling off the target – the risk reinforced by the continued delusionary rhetoric emanating from the ‘turnaround is upon us’ crowd. The risk of weaker growth than forecasted in the Budgetary estimates (table above).

Note that the IMF insists on central role in the adjustment to be played by ‘sustainable expenditure savings’. This is certainly divergent from the approach adopted so far, with tax measures and capital spending cuts (one-offs) being responsible for the lion’s share of fiscal adjustments.]

[On the net, the IMF is clearly seriously concerned about the ability of the Government to achieve meaningful consolidation of the budgets. On the day when Irish Government 10-year bond yields hit 5.38%, this concern means that means that IMF polite wording is just catching up with the bond markets’ clear and loud vote of low confidence in Ireland’s ability to match its tough rhetoric with equally resolute actions.]

Economics 23/06/2010: Russia scraps CGT

While neo-liberal and free-market Ireland is scrambling to find any new forms of tax to raise against its rapidly depleting household incomes and savings, Russia - an economy also badly impacted by the current crisis - is planning some real reforms.

Speaking at St Petersburg Economic Forum - annual leadership summit held in the Northern Russian city every year in June - Russian President Dmitri Medvedev said that his Government will abolish the capital gains tax on all long-term investments (including foreign direct investment). The measure is seen as a stimulus for non-oil and gas related investment in new technologies, manufacturing and services - areas that Russian Government established as priority for development over the next 10 years.

Russia already sports a flat-rate 13% income tax and a corporate tax of 20% (reduced by 4 percentage points in 2008 from 24%). Regional governments can cut the corporation tax to 16% on their own authority. There is zero tax on royalties from patents, know how and other forms of IP for domestic receipts and a 20% tax on payments from abroad - except where specified otherwise by bilateral treaties. Companies also enjoy an unlimited carry forward on losses.

The Government will also reduce its enterprise holdings by 80% to allow private (domestic and foreign) ownership of many 'strategic' national enterprises currently numbering around 200. "I am cutting the number of strategic companies five times...I have signed a decree to this effect today," Medvedev said.

Russian economy grew by 4% in 5 months between January and end of May 2010 and Medvedev also opened the door for future tax cuts on businesses, but this will be subject to continued economic growth and, presumably, continued displacement of extraction industries at the top of growth pyramid by other sectors.

"We shall return to the issue of a tax burden easening for businesses in the next few years if the global and Russian economies recover in favorable conditions. If everything goes to a favorable scheme," Medvedev said. Before then, there is a need to strengthen country fiscal position which means that some privatizations of the companies previously off the private investors' radar due to state restrictions will be forthcoming.

Medvedev also proposed the government will set up a joint investment fund with state and private investors to develop strategic projects. "...where state money will be augmented with private capital - say, we expect one ruble of state investment to attract three rubles of private investment. I think the idea should be implemented within a year," Medvedev said.

Economics 23/06/2010: On Financial Services Tax

This is an unedited version of my article in the current issue of Business & Finance magazine.


Behind the headlines about the ongoing eurozone fiscal crisis, three significant events have taken place on both sides of the Atlantic in recent weeks.

First, in April, assets under management in hedge funds domiciled in North America reached above $1 trillion mark for the first time in 18 months. Currently, North American funds account for two thirds of the total global assets under management.

Second, both the US and Canadian governments, preparing for the upcoming G20 summit have signalled their unwillingness to join European leaders in their crusade against financial markets. In fact the US has taken a distinctly different approach to dealing with the aftermath of the financial crisis, focusing on banks stability and addressing balance sheet risks in the recent finance reform packages that cleared US Congress.

Third, bloodied and bruised by the bonds markets and the voters, European politicians, led by Angela Merkel, have been gearing up for an all-out fight with so-called financial speculators.

As unconnected as these events might appear today, make no mistake, should the EU continue down the path consistent with its recent rhetoric, Toronto, New York, Chicago and Boston, alongside other major financial services centres around the world will be boom towns courtesy of the investors fleeing populist and politicized EU.


German plans for an EU-wide revision of fiscal and financial architecture range from suspending voting rights of the member states to national bankruptcy proceedings, from regulating hedge funds to introducing a tax on financial transactions.

A global or at the very least an EU-wide financial services transaction tax has been an on-and-off topic of discussion amongst the member states and Brussels for some years. Back in 2006 I was asked to review one of such proposals for a senior European decision maker from one of the continental member states. Having systematically overtaxed and overspend their economies, European sovereigns have been seeking new means of getting their hands on taxpayers cash since at least 2002-2003. Like a junkie in a desperate search of the next hit, the EU states are now searching for a convenient and politically, if not economically, easy target to mug. A Tobin-styled transaction levy on financial instruments is just that.

Transactions tax has been proposed back in 1972 as a theoretical construct to reduce the volumes of high frequency trading in foreign exchange markets. The rationale for it was a naïve belief that currencies should only be traded internationally for the purpose of physical commerce – exporting and importing. Any other trading, such as using foreign exchange as either a hedge or a flight to safety instrument against inflation, low economic growth, excessive state graft on personal income, sovereign insolvency and other fundamentals was viewed as speculative. In reality, modern currency is cash and cash is more than a facilitator of physical transactions. It is an asset.

Fallacious in application to Forex markets, Tobin tax would be even more erroneous were it to be applied to a broader set of financial instruments.

Take Ireland: a gravely sick financial system with plenty of financial services taxes, including a stamp duty on transactions. Has the presence of the Tobin tax here helped to prevent or even moderate the crisis? No. Worse than that, over the last 5 years, Irish markets have shown remarkably high volatility, despite having one of the highest stamp duty rates in the developed world. If anything, our stamp duty can be blamed for artificially reducing liquidity in the Irish stock market and, as a result, for adversely (albeit extremely modestly) contributing to the collapse of Irish shares.

Sweden toyed with transactions tax on financial markets back in 1984, imposing moderate levels of a stamp duty on stocks and derivatives. Within one week of the new law coming into effect, Swedish bond market saw an 85% collapse in volumes traded, futures trades fell 98% and options trading ceased all together. Swedes finally abandoned this self-destructive tax in 1991. Finland faced exactly the same experience. Japan was forced to abandon Tobin-style tax in 1999. Switzerland – a global financial services hub – does charge, in theory, a transaction tax, set at a fraction of the one Germany is rumoured to favour. However, in a typical example of Swiss flexibility, authorities there have power to grant exemption from this tax for specific investors.

OECD has issued the following official position on Tobin-style taxes back in 2002: “A “Tobin tax” penalises high frequency trading without discriminating between trades which may be de-stabilising and those which help to anchor markets by providing liquidity and information. Indirect evidence from other financial markets where a securities transaction tax has been in place suggests a substantial effect on trading volume but either no effect, or a small one of uncertain direction, on price volatility.”

Tobin tax will not work for Europe:

The tax is avoidable by conducting trades and structuring portfolia outside the EU. The end game will be higher cost of capital raising for European companies, selection bias in favour of larger companies in access to the capital market, selection bias in favour of larger financial assets trading platforms, to the detriment of smaller exchanges, and lower after-tax returns to investors. Which part of this equation makes any economic sense?

The tax will not fund sufficient insurance cover for future crises. Given the magnitude of bailouts witnessed in the last two years, the levels of taxation would have to be so high – well in excess of benign rate of 0.1-0.2% currently levied in some countries – that there will be no European financial markets left.

This tax on financial transactions will retard economic development in Europe for decades to come.

One of the reasons why European banks are so sick right now is European companies’ disproportionate, by international standards, over-reliance on debt financing. This contrasts the US corporates, which use more equity financing to raise capital. When the debt financing meets an asset bubble, banks balance sheets swell with bad loans. There is no equity cushion on European corporate balancesheets to underwrite the resulting losses. Instead, taxpayers get thrown to the wolves to rescue banks. Mrs Merkel & Co latest plans for ‘reforms’ will, therefore, mean even greater risks of bailouts in the future, and less growth and fewer jobs.


Next, of course, in Berlin’s line of fire were the hedge funds. Per populist rhetoric in European capitals, they had to be reined in because… well, no one actually knows, why. Hedge funds did not cause the current fiscal crisis (they had no control over the EU governments’ borrowing and spending excesses), nor did they cause the crash of our financial systems (hedgies did not pollute banks balance sheets and account for no more than 5% of the global financial assets). The hedge funds are not responsible for the property bubble or for exuberant stock markets overvaluations achieved in 2007-2008 worldwide.

The sole reason for this ‘reform’ is that for European leadership, ‘Doing right’ means ‘Doing politically easy’. Hedgies have no strong political lobby backing them, unlike banks, property developers, sovereign bondholders and issuers, or civil servants. So the EU prefers to attack a bystander in order to pretend that we are tackling the criminal. While taxpayers are being skinned alive to rescue reckless governments and banks, hedge funds are being presented as villain supremo. Farce? No – it’s politics.

After hedgies, came in even more sci-fi villains. Following Mrs Merkel’s ‘reforms’ talk, Germany banned naked short-selling and the trading of naked credit default swaps in euro zone debt. It turns out that European crisis was, after all, not about absurdly high levels of public debt carried by the PIIGS, nor by fraudulent (yes, fraudulent) deception by some countries of European authorities and investors about the true extent of national deficits. It was not exacerbated by the decade-long recessions turning into bubbles of exuberant lending and borrowing by companies and households, nor by a resultant severe depression that afflicted Euro area since 2008. The cause of these were the investors who were betting on all of these factors adding up to an unsustainable fiscal and economic situation in Europe. Farcical, really!

Worse than that, on top of the ridiculous financial services policies decisions Chancellor Merkel has also been working hard “on far-reaching changes to the treaty underpinning Europe's common currency”. German government would like to increase monitoring of member states' annual budgets, the introduction of stiff sanctions for those in violation of euro-zone debt rules and the suspension of voting rights in the European Council. Furthermore, Germany wants to establish “bankruptcy proceedings for insolvent euro-zone countries.”

The problem with the first part of Mrs Merkel’s fiscal policy proposal is that there are no independent organizations in Europe left that could oversee member states’ budgets. The ECB is a full hostage to Europe’s whims on monetary policy, engaging in the most reckless forms of monetary interventionism known to mankind – direct purchases of risky states’ debt. Outside the ECB ‘Yes, Minister’-styled ‘independent’ states-sponsored institutes populate the realm of European economic policymaking. By-and-large, they have no capability of delivering any independent analysis. Even the likes of the OECD – a very capable organization with some degree of independence – is subject to direct political and bureaucratic interference from its own members.

As far as German proposals for euro zone rules enforcement go, member states that do not conform to deficit reduction rules will be temporarily cut off from receiving structural funds. The galling dis-proportionality and lack of realism in this proposition does not even occur to the EU leaders supporting the idea.

Greece today is recipient of €110 billion bailout. Will suspending a few billion worth of discretionary structural funds commitment be a significant deterrent to a state like that?

This idea is potentially quite dangerous economically. Structural funds go to finance long term infrastructure investment programmes which often rely on co-funding from the Member States and/or private partners. All have private sub-contractors. Withholding EU funds will either destabilise these investments (if the measures to have any punitive powers), thus preventing economic growth necessary for fiscal stabilization or will do nothing. In short, Mrs Merkel’s proposal is a cure that threatens to make the disease incurable.

Earlier in May, German officials also mentioned the possibility of suspending member states' votes should they find themselves in violation of European debt rules. Of course, should this come to pass, Italy, Greece… no wait virtually the entire Eurozone, including Germany will have to be suspended from voting.


In short, in contrast to the US Congressional blueprints for financial sector reforms, European proposals to date can be described as a bizarre amalgamation of the impossible, the improbable, and the outright reckless. Their likeliest outcomes would be a large scale capital flight out of Europe and perpetuation of the status quo of continued sovereign and banks bailouts across the continent. Already struggling under the unsustainable burden of European taxation, the real economy – exportable and non-traded services and manufacturing – will be left holding the bag for these politically driven ‘reforms’. In addition to having an acute solvency problem, the EU will be saddled with a crippling lack of liquidity that only financial markets can provide.

Economics 21/06/2010: Innovation economy - Irish Banks' Style

Corrected version: hat tip to Mack

One must commend the Sindo team for putting forward series of articles this weekend on negative equity. One linked here refers my statement, contained in a series of posts on the subject I published here, here and here.

Now, in a farcical move, the Irish banks are apparently working on a scheme to allow negative equity homeowners to roll their mortgage in excess of the value of the house into a new mortgage (details are here, alongside some good analysis). Now, suppose you have a LTV 80% (at origination) mortgage for €400K on a property bought in 2006 and in 4 years since your family has grown in size. You weren't reckless then - borrowing only 80% of the value of the house, and you are not greedy now - requiring just an extra bedroom for those additions to the family. Below are summary estimates of the deal the banks are working out for you as we speak:
In other words, were you to fall for the trap being set up by the banks under the guise of 'We are doing our bit to help people in trouble', you will be either pushed into a 162% LTV ratio 30 year mortgage (good luck getting out of this level of debt with an asset in surplus value) or you'd have to pony up €197,400 for the privilege of seeing your mortgage shrink by €36,000 (the difference between what remains on your mortgage today and the mortgage you'll be taking out under the deal.

This deal is, in short, a pure hogwash for the majority of people in negative equity. The farce will be when, following the deal release into the market, our Government and its paid-for 'analysts' start cooing over the great rescue package for the hardest hit families... Watch their lips.

Of course another amazing thing here is that after all the talk about barring 100% mortgages, the new product will push more vulnerable households into mortgages multiples of the 100% leveraging. Happy times are just around the corner folks.

At 4% annual growth in house prices, the new mortgage will yield a break-even between the debt and the asset value by the end of 2023, not factoring in the costs of repayment. The old deal, were the household to continue with the existent mortgage, would have recovered by the end 2020. Hmmm... looks like our real estate brokers are just a month or so away from a rush of purchasers into the market with this kind of 'new products engineering' courtesy of the Irish banks.

But pardon me for asking. The same homeowners who are about to be offered this 'new deal' by the banks are also providing cost-free rescue to the banks themselves, their management and bond holders, while subsidizing shareholders and developers. 'Mortgage holders' from the development end of business have non-recourse loans worth tens and hundreds of millions. They are being offered a full write-off with virtually no consequences. Households in negative equity are being asked to pay for that, plus to engage in reckless financial engineering projects. Am I getting something wrong here, folks?

Economics 20/06/2010: Ideas that (allegedly) will change the world 2

Continuing with those 25 ideas for the 21st century:

Number 4:

“The Second Law of Thermodynamics, that every engineer knows well, says that the entropy of complex systems will inevitably increase over time. In other words, the system's capability will deteriorate. However, a more recent law, from evolutionary biology, says that the capability of complex systems evolves and improves over time. Engineering concepts guide not only machine designers, but also organization designers. Thus organizations are "engineered" and "reengineered," and "levers" are put in place for their masters to make the machine work and the organization to perform. …And in this concept, a boss on top with authority over the rest is necessary to put discipline into them.

In contrast, consider a rich tropical forest, humming with myriad forms of life supporting each other. Who is in charge? There is a mystery of organization in these forests. Complex self-adaptive systems, like the tropical forest, are organized according to the laws of evolutionary biology, and not the laws of machines.

[Ok, let’s pause and do take time to consider a rich tropical forest system. It is humming. Indeed, it is singing with individuals of various species consuming each other – not exactly a model for the ‘humanism’ of the contribution Number 3 to the list, is it? Over long run, entire species disappear. Not a real model for sustainable humanity. The balance of the forest eco-system is maintained by the precise order of life forms in the hierarchy of who kills whom. Not exactly a model for equality or for social mobility, or indeed for any sort of human rights. So if this stuff about ‘systems’ and ‘learning from the forests’ was to be really useful, it will have to apply only to hierarchical, non-horizontal or rights-based systems. A bit limiting, I’d say. By the way – in the tropical forest and indeed across the entire natural world, the one who’s on top of the food chain is “a boss on top with authority over the rest”… too bad Forbes’ visionary writing about this stuff didn’t bother to check it out himself by taking a camping trip to, say, Grizzly Bear territory armed with nothing more than a flashlight. He’d learn very quickly who’s the boss there and just how much ‘on top with authority’ this boss will get with our visionary]

“The first Enlightenment made man believe that he and his machines could master nature. [Well, we did master large chunks of the nature.] The second Enlightenment will come about with man learning from nature, and realizing that he is a part of it, not the master of it. [Fair play] …Within it lies an ability to produce innovations and to adapt and evolve. In the architecture of complex self-adaptive systems lie clues to the design of organizations in which the constituents work together to create a whole from which they all benefit...

An idea that will change the world for the better for everyone is a new architecture of organization learned from nature and other complex self-adaptive systems. With this architecture, we will get better governance and more co-operation across boundaries. Working together, many organizations may improve the condition of India's children. And, working together, humanity may accelerate its progress towards the Millennium Development Goals, and even mitigate climate change.”

[I’ve had enough. Two things –

1. Yes, self-adapting systems are cool. Not futuristic, really, but cool. And have room to be deployed more.
2. But the idea that cooperation is superior form of organization is pure ideological hogwash.
   

So far, human progress was driven by equal doses via cooperation and competition, with both being driven not by benevolence, but by self-interest. One can even interpret benevolence as a self-interest, with a small and fully legitimate re-interpretation of utility theory. So no, self-adaptive systems won’t do much for India’s children, unless there is a serious fully functional market system that assures a steady progression for India along growth curve. And no, the Millennium Development Goals won’t do much good either, for these goals are really more about taxing the developed countries of the West with a guilt charge to supply subsidies to the existent regimes in the poor parts of the world. The poor are, really, a bit like an actor in a commercial for bottled water. He might be thirsty, but he doesn’t get to drink that water.]


Number 5:

“The tragedy of modern atheism is to have ignored just how many aspects of religion continue to be interesting even when the central tenets of the great faiths are discovered to be entirely implausible. …In the light of this, it seems evident that what we now need is not a choice between atheism and religion--but a new secular religion: A religion for atheists.”

[Irony has it, but the good philosopher who wrote this doesn’t quite get the point that from the logic point of view, atheism is a form of religion – it is faith-based as any religion is, and is dogmatic in its acceptance of the first principle that God does not exist]

“What would such a peculiar idea involve? For a start, lots of new buildings akin to churches, temples and cathedrals. We're the only society in history to have nothing transcendent at our centre, nothing which is greater than ourselves. In so far as we feel awe, we do so in relation to supercomputers, rockets and particle accelerators. The pre-scientific age, whatever its deficiencies, at least offered its denizens the peace of mind that follows from knowing all man-made achievements to be inconsequent next to the spectacle of the universe.”

[Spot the contradiction here – if we are the first culture that has nothing transcendent at our core, then we are the culture that does not treat anything as being eternal. Which, of course, means that we cannot de fact believe that any of our achievements can transcend ‘the spectacle of universe’. By the same argument, past cultures, by believing that they left something behind – buildings, temples etc, but always man made – that transcended time had to believe that the ‘spectacle of universe’ was at the very least equaled by their own legacy left for posterity. In other words, the author is clearly logically wrapped up in contradictions here once again.]

“A secular religion would hence begin by putting man into context and would do so through works of art, landscape gardening and architecture. Imagine a network of secular churches, vast high spaces in which to escape from the hubbub of modern society and in which to focus on all that is beyond us.”

[Museums and art galleries as cathedrals? Unquestioned, accepted on faith? Not tested by either time or repetition? Artists as ‘creators’ of a divine license? This is really something closer to the heart of communists and fascists – both have attempted to use art as a vehicle for propagation of the ‘ultimate truth’ – although both have had some artificial (and disastrous in quality) systems of controls over the messengers.]

“In addition, a secular religion would use all the tools of art in order to create an effective kind of propaganda in the name of kindness and virtue. Rather than seeing art as a tool that can shock and surprise us (the two great emotions promoted by most contemporary works), a secular religion would return to an earlier view that art should improve us. It should be a form of propaganda for a better, nobler life.”

[Goebels would approve… as would Stalin. But would modern artists, operating on the basis of personal freedom of expression – which includes freedom to shock, to surprise, to… well, to ‘not be a part of any propaganda’ – approve? I doubt it.]

[At this point, I must say the idea of a secular religion – as espoused by the author here – just doesn’t appeal to me. It is a prescription for totalitarian control, with the ideology of a master race being replaced in its ‘posters’ by the ideology of ‘better and nobler life’… One wonders if there ever was a totalitarian regime, internecine and all that ever postulated its objectives of not achieving a ‘better and nobler life’? The road to Hell is always paved with good intentions... and, may I add, often well-decorated with art...]