Tuesday, August 31, 2004

The Fourth Green Field is in the Red

Last month Garrett Fitzgerald gave a lecture (still not available online) proposing that financial considerations make a united Ireland unlikely. Michael Smyth of the University of Ulster was quoted in the Irish Independent as supporting Dr Fitzgerald's view.

Marking the tenth anniversary of the IRA ceasefire in 1994, the FT today had a story on the North's economy headlined "Province's economy relies heavily on public sector". I thought it would be worth reproducing here before it dissappears into the subscription-only archive.

Marks and Spencer, that stalwart of the high street, offers a telling snapshot of the changing nature of Northern Ireland's economy.

The dramatic decline in the province's textile sector - once, along with engineering and food manufacturing, a pillar of the economy - was highlighted recently when the retailer cancelled a contract with Desmonds of Londonderry, a long-term supplier. The move added 260 job losses in a sector that has seen its numbers more than halve during the past 10 years.

Against that, M and S has been among the leaders of the retail investment surge in Northern Ireland. Along with services and tourism, retailing has been one of the drivers of recent robust economic performance in the province.

According to First Trust Bank, part of Allied Irish Bank, the economy will grow by 3 per cent this year and by between 2.5 and 3 per cent in 2005.

Second-quarter unemployment stood at a seasonally adjusted 5.3 per cent although this is flattered by a labour market activity rate of 70.5 per cent, markedly lower than the British average and a reflection of high rates of disability and retirement.
[The Republic's rates were 4.5 percent in 2000 and 77.8% in 1998, according to chapter 7 of John O'Hagan's book The Economy of Ireland]
Business optimism was reflected in Ulster Bank's purchasing managers' index report, which highlighted a 16th successive month of output growth in July.

Looking ahead, tourism - currently 2 per cent of gross domestic product compared with 7 per cent in the Irish Republic - is seen as having growth potential, although fears remain that some act of violence could jeopardise progress.

Broadband, which thanks to the province's role in a pilot project should be universally available from next year, is another source of optimism.

But on closer inspection, the situation is more mixed. "The economy is growing strongly but a lot is dependent on the public sector," says Nigel Smyth, local director of the CBI employers' group.

Some 62 per cent of gross domestic product is accounted for by public spending. Roughly a third of those in work are employed in the public sector. <[According to O'Hagan, the proportion of total government spending to GNP in the Republic was 42.9% (Table 3.2) and about 20% of the workforce was employed in the state-dominated sectors of public administration, defence, health and education (Table 6.10).]

The reasons for this are obvious, given Northern Ireland's troubled history. "The private sector got on a plane in the 1970s," says Michael Smyth, from the University of Ulster. "The public sector became the substitute for the private sector."

This situation is reflected in earnings where the private sector continues to trail the public sector.

Other legacies of "The Troubles" include a risk-averse banking sector and anti-discrimination laws for hiring that also demand continuous monitoring by businesses.

Local business people say they have learned to live with such things. Most say devolution does not directly affect their work, although they acknowledge that local rule made it easier to approach decision makers. "There was a high degree of response to such issues as high transport, energy and waste costs," says an executive from one prominent business.

The latter potentially holds implications for business elsewhere in the UK where there are fears that plans to bring together all Northern Ireland's equality and employment legislation in a single bill might form the template for a similar initiative elsewhere.

Against that, the province will also have to make the public-sector efficiency gains ordered by Gordon Brown following Sir Peter Gershon's review of government waste. The chancellor's influence can be seen in a recent decision to charge consumers for water usage for the first time.

The estimated £300m raised will go towards servicing a borrowing facility provided by Mr Brown after the signing of the Good Friday agreement, which allowed Northern Ireland to borrow cheaply but only if it could service the loans with a domestic revenue stream.

To mix metaphors from Frank Kitson and U2, it seems that London tried to drown the revolution in baby milk, but the revolution learned to swim.

Signed and Sealed

Environment \& Statecraft by Scott Barrett

The North Pacific Seal Fur Treaty of 1911 is seldom counted among the main events of twentieth century diplomacy. A new book, Environment and Statecraft: The Strategy of Environmental Treaty-Making by Scott Barrett, analyses this treaty and other successful models, including the Montreal Protocol that halted production of the CFC gases depleting the ozone layer, to give a thorough and insightful analysis of the process of coordinating international action on environmental problems.

An economist at the Nitze School of Advanced International Studies at Johns Hopkins University in Washington DC, Barrett uses some fairly basic game theory to analyse the self-interested behavior of nations bargaining over the global climate change regime that Kyoto was supposed to create.

He identifies the lack of an effective enforcement mechanism for punishing non-compliance as the key to the weakness of the treaty, and instead suggests setting new open global standards for energy technology, founded on collaborative research between the developed economies.

Like Lomborg, he points out that the benefits and costs of mitigation are by most estimates quite evenly balanced, whereas the Montreal process offered the chance to eliminate health problems like skin cancers and cataracts, leaving a benefit/cost ratio of over 17 to 1.

So far, I have only read several chapters of the book, but this is in my opinion, probably the best analysis of the diplomacy of Kyoto available, successfully combining economics and international relations into a useful explanation and practical guide for those involved in the issue. The Economist also reviewed the book in its "Economic Focus" column last year.

Monday, August 30, 2004

The Dismal Scientist

"Beware of false prophets, which come to you in sheep's clothing, but inwardly they are ravening wolves. Ye shall know them by their fruits", the New Testament counsels (Matthew 7:15-16).

Stanford's Paul Ehrlich has loudly and consistently publicised alarming predictions of catastrophes triggered by excessive population growth. His views might well be summarised as being that people are pollution.

Now, he is proposing that a body of scientists and thinkers come together to build humanity a new ethical framework, an authoritative body modelled on the IPCC group for climate policy.
"It would deal with tough questions," he said. "It could explore how to reconcile different ethical standards. It could discuss who should 'own' and have the right to exploit global resources like fossil fuels, whose use has consequences for all, including future generations. It could examine how to reduce racial, religious, gender and economic inequities and whether any nations can ethically produce or store weapons of mass destruction."
Luckily, people have thought of building such a framework - Moses, the Hebrew Prophets, Jesus, Rabbi Akiva, Mohammed, Buddha and John Bruton.

Exposing an overpowering emotional neediness, Ehrlich imagines it "would be sponsored by the United Nations and supported by the world's governments, which would work to provide wide citizen participation and substantial and continuous media coverage."

This modest proposal begs the question, how does Ehrlich measure up as a prophet of doom? In his essay Looking backward from 2000, published in 1970, he wrote of an imagined future America with a population of 23 million, after his four horsemen - infectious disease, radiation released from nuclear power plant accidents, chlorinated hydrocarbon residues (i.e. DDT and similar pesticides) and famine in America.

The only significant epidemic sweeping through America seems to have been AIDS, and avoiding high-risk behaviours acts as an effective defence.

DDT has not been shown to have any effect on humans whatsoever, although it can harm birds of prey.

The most serious nuclear incident in the US occurred in 1979 at the Three Mile Island plant in Pennsylvania. According to an NIH report on the incident "the projected number of excess fatal cancers due to the accident ... is approximately one". Indeed, it seems that, "[t]he major health effect of the accident appears to have been on the mental health of the people living in the region of Three Mile Island and of the workers..."

As for sixty-five million deaths by starvation in America during the eighties, I think I can give google a rest and just baldly assert that no such thing occurred. Or perhaps MacDonald's and Burger King deserve the Nobel Peace Prize for successfully averting it?

While Prof. Erlich is a population biologist, it's apparent that his training and most of his publications, and virtually all those in the peer-reviewed scientific literature, are on insects. While I lack any knowledge of biology, perhaps the application of such methods to humans is somewhat of an overstretch. Beetles never organise themselves in liberal democracies, nor ants run their societies on free-market principles and wasps aren't known for reasoning using the scientific method.

Yale economist, William Nordhaus, wrote in a 1973 analysis that, "The Mathusian model of population growth has generally been rejected by demographers and economists as inadequate for a general explanation of the behaviour of human populations". William Easterly's recent book The Elusive Quest for Growth summarises the more recent resarch, again reports that there is no evidence, even going back to the neolithic age, that population increases threaten prosperity or economic growth.

Irish history shows the same pattern. Malthus himself wrote in 1817 that "The land of Ireland is infintely more peopled than in England; and to give full effect to the natural resources of the country a great part of the population should be swept from the soil". Ireland had more cultivable land per person than most of Europe, including England and Wales. A detailed county by county comparisons before the famine of the 1840's showing that poverty was correlated with higher population growth. During the famine itself, when food was available and indeed continued to be exported, limited purchasing power spelled death for hundreds of thousands of the poor.

My old acquainance, TCD and Heritage Foundation economist Gareth Davis, acutely pointed out the government and market failures that turned a natural disaster into a catastrophe in a 1995 article for the journal of the Edmund Burke Institute.

I believe that, had Ireland been independent, the tragedy of the famine could have been avoided, in the same way India has successfully feed its people since independence and eliminated the periodic starvation under the British and Moghul epmires. A native government would certainly be more responsive to its electorate, even on a less than universal franchise. The means available, in the form of the country's domestic and external funds, would have covered the costs an extensive programme of relief.

Thomas Carlyle is famous for christening economists as "respectable professors of the dismal science". The economists' optimism about the benefits of more humans seems better supported by the evidence and perhaps shows more humanity than Ehrlich's pessimism.

The Dismal Science?

I hadn't known the real origin of this amusing phrase, which excellently encapsulates the gloomy and quietist ideas of Malthus and other nineteenth-century economists until I was researching the post below and came across an essay by Dr Robert Dixon at the University of Melbourne.

Carlyle first employed it a pamphlet called (and here I must beg my readers' pardon) Occasional Discourse on the Nigger Question, exorcating those economists who, in the context of Jamaican planters complaining of labour shortages following slave emancipation, were "declaring that Negro and White are unrelated, loose from one another, on a footing of perfect equality, and subject to no law but that of supply and demand according to the Dismal Science".

It makes me proud to be an economist, sophist and calculator.

Saturday, August 28, 2004

A New Era

FT science editor Clive Cookson reports in yesterday's paper that scientists argue that we have now entered a new geological era - the Anthropocene - characterised by the dominant influence of mankind on the Earth's systems. That may be overblown - early humans' indiscriminate hunting or slash and burn agriculture did little to save the wooly mammoth or Australia's giant dodo-like birds or to preserve the primordial forests.

With modern computing power and improved models, scientists now seem to be spooked at realising exactly how unstable and complex all these planetary processes are and the fear of catastrophe. One says
"The Anthropocene is a very different era from the relatively stable and nurturing environment in which humans and our societies have evolved. We should expect more instability in the future."
One scary illustration was the fairly comprehensive failure of the attempt to create a stable ecosystem within the sealed environment of the Biosphere 2 domes, which sought to discover how to create and manage a small scale environment to support human life. Several times, they needed huge injections of oxygen from outside to avoid suffocating the testing staff. Insects ran amok. Most plants died off. Carbon dioxide and nitrogen went haywire.

Perhaps the panicked tone reflects a degree of scientific vertigo. Like a man on a mountain peak, once the mist of misunderstanding clears, we're feeling a bit nervous now we see what might go wrong.

Take that, Osama!

Today's FT (subscription only) reports that many countries around the world have applied financial sanctions against individuals and organisations against the world suspected of funding terrorism.

The central Asian state of Azerbaijan has not stood aside from the titanic struggle between justice and evil, the paper reports, seizing a total so far of forty dollars.

Keep up the good work lads!

Remembering my father

My father, Patrick Nolan, died in Dublin on Wednesday 18th August 2004 from Alzheimer’s disease, with my mother, my brothers Lorcan and John, sister Emer and I at his hospital bedside.

Obituaries appeared in the Irish Times on 21st August and the Mayo News on 25th August. John delivered a eulogy at his funeral. All of these are available at my homepage at www.peter-nolan.com


I took this on the evening of New Year's Day, with the light beginning to fade.

Wapping Sunset

Originally uploaded by dpnolan.
Many stretches of the Thames are surprisingly quiet for a busy waterway in the heart of a large city. Here the banks at Wapping (on the right) and Rotherhite (on the left) are monopolised by apartments where the bankers sit enjoying their river views. I have a marina view instead, but at least this gives me something shielding me from the North Sea.

Great Wall & Flag

Great Wall & Flag
Originally uploaded by dpnolan.
I visited the restored section of the Great Wall at Badaling while in Beijing this March. A strong dust storm was blowing to animate the flag.

This juxtaposition of the two Chinese symbols seemed too good to miss and promised to be a better souvenir than a little red books and any of the other tat on offer.

The photo owes its unusual shape to my editing out the electricity pylon next to the flagpole. In keeping with the tourist theme of the area, the pylon was decorated as if it were a traditional Chinese cloud column.

Friday, August 27, 2004

Some of my photos

I've resolved to post more often, perhaps with a target of at least a thousand words a day. Since a picture is worth a thousand words, I thought I would share some of the photos I've taken and posted on flickr.

Thursday, August 26, 2004

Visiting the Moonbat Cave

Tuesday just wouldn't be Tuesday without the Moonbat taking wing in the Guardian. Being something of a system-builder, our George has written in some detail of what he thinks is wrong with the world, like the injustices of non-negative interest rates [chortle, chortle]. Now, for the first time, I catch a glimpse of his putative utopia.

Again, he presents his apocalyptic scenario. Energy shortages and then universal Hobbesian anarchy caused by "peak oil" seem to be his favourite among the loony tunes, inspired perhaps by the opening segment of Mad Max Two.

Like the Essenes decamping to the Dead Sea in Roman Judea, he believes that he has found a sanctuary with which to shelter from the doom of the corrupt world during the coming Armageddon of the "Age of Entropy". I visited the Jordan Rift valley four years ago. The sheer mountain cliffs three kilometres high and a desert monochrome under a sun that seems to fill the sky could only inspire terrible visions of the death of all mankind in such a pitiless landscape.

Rather than pastoral visions, Monbiot's putative environmental Masada, Tinkers' Bubble, conjures up visions of my parents' childhoods on small farms on Ireland's western seaboard:
The raw and hungry hills of the West
The lean road flung over profitless bog
Where only a snipe could nest
from Dublin Made Me

As it was for them in the lean years of the thirties and forties, as it is among impoverished peasants of the third world now, the dozen inhabitants, "…fell trees with handsaws, heat their homes with wood, cut the hay with scythes and milk the cows, weed the fields and harvest the crops by hand". No pastoral scenes these: My father and his siblings exchanged a few acres of rock farm on a peninsula surrounded on three sides by the Atlantic for the more sheltered suburban lives of a teacher, journalist, Garda and housewife.

Their houses, built of mud and scrap wood, have, George says, "a minimal environmental impact". My knowledge of architecture isn't very detailed [Throw me a bone here, Frank!], but I can imagine that with these materials that the houses wouldn't impact the environment enough to keep the wet, cold, wood smoke and dirt out of their living space. Who knows, maybe the housing prevention unit over at An Taisce might start promoting this idea of living in holes in the ground? Personally, I'd try something more solid, like a Wendy house.

George admits, "They haven't yet solved all their problems". The most obvious one to my mind, is that this lifestyle couldn't yield more than a third-world income, leaving this "sustainable" lifestyle to be sustained only with my tax money, which undoubtedly pays for their welfare payments, social services and agricultural subsidies.

Coming Soon

  • Thoughts on my father's death
  • A Small - but Growing - Right-Wing Conspiracy
  • The Unquiet American - George Dempsey's book From the Embassy
  • The Inevitability of Hegemony - Does the World Need a Leader?
  • More from the Petroleum Poets
  • The Kyoto payoff (three months late!)
  • The Right Nation

Wednesday, August 25, 2004

The Case Against Free Trade

Apart from cautioning against methodological purism, Gilpin has offered an explanation as to why free trade proves to be the exception and not the ideal in practise.

Krugman is probably right that the economics profession (if you can call them a profession any more than you would social workers) have failed dismally to educate not just the public but also the intelligentsia as to the insights of writers from David Hume onwards.

Gilpin adds to the intellectual pick and mix that is the debate on trade policy an element of Realist analysis, cautioning that the gains to trade can be measured two ways, as improvements in general welfare and as relative gains among the sovereign states jockeying for position globally. So, for example, although US consumers tangibly gained cheaper and better cars and consumer electronics from trading with Japan, the US responded to what was in political terms a challenge to its position as the free world's leader which took the form both of prestige, some measure of economic dominance in East Asia and soft power too.

Thinking Globally

My sojourn here hasn't been fruitless though, as I have had the chance to read a lot, beginning with Global Political Economy by Princeton's Robert Gilpin. It's an interesting book by a political scientist on the interaction of economics with international politics. If, as I do, you feel that the focus of economic analysis on mathematical modeling isn't on its own sufficient to understand many of the big questions, then this can add much to your mental equipement.

Partly, I'd say this because I just don't have the mathematical knowledge to work with most of the models. Neither have I ever liked the very abstract approach to teaching the subject that I've heretofore had to suffer in my undergrad education. Finance and econometrics always offered both much better data and a much tighter connection to practical applications. Macroeconomics, by contrast, always seems to be the business of theorising with little data, none of it reliable. After experiencing the turmoil of the emerging markets and the upheaval in global energy over the past few years, I couldn't remain as nihilistic as I used to be and argue that the macro doesn't matter, dismissing any type of macroeconomics as being the unspeakable in pursuit of the unmeasurable or "Sunday newspaper economics" in the words of my supervisor Paddy Waldron.

Gilpin, while not an economist by background, is celebrated, I'm told, for adding the institutional and political elements to international economics so as to better understand the multinational corporation, how the global trade and monetary architecture is built and maintained and how sovereign states manage economic issues in order to maximise their power.

While Gilpin has worked to build a bridge from political science, economists have been working in the other direction, bringing institutions, geography and historical path-dependency into their frameworks. Paul Krugman in particular forms an interesting contrast: Showing savage rhetorical bloodlust, Krugman has attacked many of those such as Laura Tyson trying to employ the analysis of strategic trade he himself devised to argue for managed or limited trade.

News from the Home Front

Nothing beats a blog-addiction like a bad internet connection.

I've been here in Dublin for the last two weeks, relying on my brother's dial-up account, because broadband doesn't seem to have reached us here in the remote wilds of Dun Laoire, County Dublin. The eircom connection seems to work on a geological timescale. Compounding my frustration, there's some worm on the machine which seems to be Blaster's country cousin; it cuts off any downloads and won't allow me to open new windows or popups in Internet Explorer, hence the lack of hyperlinks and unchecked spelling in this post.

So apologies to my regular readers (both of you, and you too Mum) for not writing much. I'll try and set this up for syndication too, as soon as I figure out how to.

Tuesday, August 10, 2004

Dick does Development

I've just begun one of the best books on economics I've read in a long time, The Elusive Search for Growth: Economists Adventures and Misadventures in the Tropics, by former World Bank economist William Easterly.

I've always thought that development economics as a field of study was only slightly more ethical and effective than sex tourism and the book reinforces this prejudice.

Easterly hammers nail after nail into the coffin of the theories that were naively applied to justify giving poor countries aid money. The revelation that the financing gap theories that were still being used into the nineties were based on the theoretical models of Stalin's crash industrialisation of the Soviet Union left me amazed. Like Robert Barro, he deploys a thicket of multiple regressions to support his dismissals of the supposed importance of birth control, education, capital formation and other shibboleths.

In the opening chapter he tells the story of then Vice-President Nixon visiting Ghana for its independence ceremonies. Approaching some black journalists, he asked, "So, how does it feel like to be free?" They replied, "We don't know, we're from Alabama".

Saturday, August 07, 2004

Unrequited Love

Before the ra-heads come in to swamp the thread, I thought some comments by Frank and Abiola criticising the UK's indifference to Gibraltarians' desire to remain under British administration and drawing parallels to NI deserved a riposte.

Nationality is a little more reciprocal than this line of reasoning assumes. At 28,000 people, Gibraltar could probably elect an MP or two to Westminster. Who are they to decide Britain's foreign policy over the representatives of 60 million people? South Vietnam was in a similar situation vis a vis the USA

What possible national interest does Britain have in antagonising a close NATO ally?

Is Zapatero planning to bring back the auto-da-fe? Deport them all as forced labour to carve a vast mausoleum from the rock of the Madrid hills?

Who are the people a government should serve? Maybe in a colony with recognisably closer blood ties like the Falklands, policy would be more uncompromising, but you have some distance to go to persuade me that Gibraltarians have any more claim to Britishness than Hong Kong Chinese or Zimbabweans.

The Northern Ireland situation has the same dynamic. Very few English people express any affinity to Northern Ireland's Unionists. Most, even the soldiers who've served there, seem to question why a place with such an ugly culture and unappealing people on both sides should drain lives and money.

I think this attitude is completely justified. To borrow a phrase and a crude stereotype from Levi Eshkol, all they seem to do is throw stones and screw like rabbits. What has Ulster ever done for Britain that the south or the Republic hasn't?

The biggest irony is that only the Protestant backlash can make Northern Ireland ungovernable. Gerry Adams must have read Sun Su at some point in the early nineties. The SF strategy of confrontation over the RUC, Drumcree and decommissioning manoevers the Unionists to act against their own interests by cultivating disorder, alienating Nationalists and estranging London.

Tuesday, August 03, 2004

Fisking Gavin: Part One

Update One: Embedded links and tidied up grammar, added link to Moscow Times article

I don't read Mark Steyn very much, mainly because he's so predictable. He has an amusing style and isn't one for the Jackson Pollock journalism that Michael Moore specialises in. Now Gavin Sheridan has penned a great philippic against Steyn's recent article labeling European policy-makers as "girly-men".

I feel like throwing a few sun-dried tomatoes, so I'll fisk the fisking in my own steak and potatoes style. Given a lack of time this week, I'll do this in a few stages, starting with a narrowly targeted cruise missile, with the "shock and awe" and ground war to follow.

"...a quick look at the signatories (PDF), the numbers of governments that are attempting to implement the Protocol"

Humbly begging your pardon sir, but that's the wrong document. What you've got there lists the countries who've ratified not the Kyoto Protocol but the UN Framework Convention on Climate Change negotiated at Rio in 1992. Note that the US and Russian Federation are both listed as having executed it in the early nineties, years before Kyoto was drafted. The Kyoto Protocol is an amendment to the UNFCCC and the status of the signatories are listed here:

Kyoto becomes binding when it takes its place (above national law in the EU, as part of Federal law following approval of the US Senate). According to Article 25-1 of the Kyoto Protocol (see page 19), for this to happen:
"not less than 55 Parties to the Convention, incorporating Parties included in Annex I which
accounted in total for at least 55 per cent of the total carbon dioxide emissions for 1990 of the Parties included in Annex I, have deposited their instruments of ratification, acceptance,approval or accession."
So, as it stands, only Russia or America have the voting weight to put the treaty over the finishing line.

Only the Annex I (industrial) countries have anything substantive to implement under the Protocol. Of them, the USA isn't signing. Russia is unlikely to. Australia is using easy and ineffective offsets such as new tree planting. Canada has also fudged through accounting for its energy exports and is now coming under immense pressure from industry, especially in energy, to withdraw.

All of these countries probably have either little to lose or some gains to make from climate change; as President Putin has said "We could spend less on fur coats and the grain harvests would go up".

I'll go out on a limb here and forecast that the only movement we are likely to see will be in the regional and national agreements, like the EU emissions-trading system, the proposed McCain-Lieberman bill or New England initiatives at the state level in the US.

If Russia does sign up, which I think is frankly unlikely, it will only be in exchange for concessions in the only area in which the Europeans do have the status of a global power, namely trade. So unless WTO membership is on the cards as a quid pro quo, I don't think the economics for Russia are compelling, given its status as an energy exporter and its consolidating economic recovery. Trying to hike energy gas prices fivefold in a country where winter temperatures are minus thirty Celsius certainly qualifies as what Sir Humphrey Appleby would call "a brave decision".