Thursday, February 26, 2009

She comes to bury Aid, not to praise it

Dambisa Moyo is the author of an important new book entitled "Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa". The book's foreword is by Niall Ferguson. Yes, that Niall Ferguson.

The book is important because it tackles, head on, one of the most enduring myths in economic history: that aid, or more specifically what Dr. Moyo (D. Phil., Economics, University of Oxford) calls "systematic aid", i.e. regular transfers of money from governments in developed countries to governments in developing countries for the purpose of fostering economic development, actually works. She contends that aid is not merely ineffective, but hugely detrimental to development in Africa.

Dr. Moyo proposes that aid be completely discontinued in five years time. The long dead should be finally buried, as it were.

Tuesday, February 24, 2009

A little-navel gazing

In the very first post on this blog in January 2006, I posed the following question:
[Is] this [blog] really just another instance of self-indulgent online narcissism?
And this is how I answered it:
No, this really isn't just another instance of self-indulgent online narcissism. I hope to cover a great many other topics besides those surrounding the individual yours truly refers to by the vertical pronoun. Naturally, a little navel-gazing will be unavoidable from time to time, but even then I hope it will be free of the odour of self-indulgence. One can but try. We'll see.

Today is one of those unavoidable times for a little navel-gazing, for today is my birthday. And, so, I am here contemplating the meaning of life, the Universe and everything.

Well, almost everything.

I'm currently contemplating the nice little gift Arsenal FC gave me a few minutes ago: a one-nil victory over AS Roma in the Champions League. But such gifts from Arsenal are rarely an unalloyed joy. They missed some golden chances; chances they may rue when they travel to Rome for the return leg.

My final thoughts and prayers are with the only one of my heroes (as far as I'm aware) who shares my birthday: Steve Jobs. I wish him well in his current battle with ill-health.

Odourless navel-gazing I trust.

Sunday, February 22, 2009

Moore on Wittgenstein

In the summer of 1929, Ludwig Josef Johann Wittgenstein presented himself for the oral examination for the degree of PhD at the University of Cambridge. His doctoral thesis was the Tractatus Logico-Philosophicus, a work completed some ten years earlier and adjudged by some (even then) to be one of the greatest works of philosophy of the 20th Century. His examiners were Bertrand Russell and G. E. Moore. Laurence Goldstein has published a reconstructed account of the examination. With characteristic understatement, Moore made the following remarks in the actual examiner’s report:
It is my personal opinion that Mr. Wittgenstein’s thesis is a work of genius; but, be that as it may, it is certainly well up to the standard required for the Cambridge degree of Doctor of Philosophy.

Qualified Capitalism?

There have been several recent calls from some unlikely quarters for what might be termed qualified capitalism. It is somewhat unfortunate that the name of capitalism, the system of free market economics first systematised by Adam Smith in The Wealth of Nations (1776), was coined by its arch-enemy, Karl Marx. Indeed, many of the misconceptions that persist to this day about free market economics can be traced directly back to Das Kapital (1867) (or simply Capital in English) and Marx's other works.

Here are three examples of calls for qualified capitalism that I have heard recently:

  1. Inclusive Capitalism
    (Dr. Mo Ibrahim, Founder of Celtel International and the Mo Ibrahim Foundation)
    Dr. Ibrahim has often discussed the notion of inclusive capitalism e.g. in a May 2005 speech at an IFC (International Finance Corporation) conference. He defined Celtel's "inclusive capitalism" strategy as follows: (a) sharing equity with management and staff; (b) including local equity partners; and (c) developing local entrepreneurs.

  2. Creative Capitalism
    (Bill Gates, Founder of Microsoft and the Bill and Melinda Gates Foundation)
    In his 2007 Harvard commencement address, Bill Gates spoke on the theme of creative capitalism. This is what he said in part:

    If you believe that every life has equal value, it’s revolting to learn that some lives are seen as worth saving and others are not. We said to ourselves: “This can’t be true. But if it is true, it deserves to be the priority of our giving.”

    So we began our work in the same way anyone here would begin it. We asked: “How could the world let these children die?”

    The answer is simple, and harsh. The market did not reward saving the lives of these children, and governments did not subsidize it. So the children died because their mothers and their fathers had no power in the market and no voice in the system.

    But you and I have both.

    We can make market forces work better for the poor if we can develop a more creative capitalism – if we can stretch the reach of market forces so that more people can make a profit, or at least make a living, serving people who are suffering from the worst inequities. We also can press governments around the world to spend taxpayer money in ways that better reflect the values of the people who pay the taxes.

    If we can find approaches that meet the needs of the poor in ways that generate profits for business and votes for politicians, we will have found a sustainable way to reduce inequity in the world. This task is open-ended. It can never be finished. But a conscious effort to answer this challenge will change the world.
    [Emphasis added]

  3. Moral Capitalism
    (David Cameron, Leader of the UK's Conservative Party)
    At the 2009 World Economic Forum (WEF) meeting (28 January-1 February 2009) held in Davos, Switzerland, David Cameron made an impassioned speech calling for moral capitalism, "a new, more popular capitalist system - capitalism with a conscience." He suggested three reasons why capitalism has become so unpopular: (i) Markets without morality. (ii) Globalisation without local competition. (iii) Wealth without fairness. Mr. Cameron then outlined his vision for a new moral capitalism ("A capitalism with a conscience"):
    So I think it's time to update the free market orthodoxy that has dominated the past few decades. It's time to assert a fundamental truth: that markets are a means to an end, not an end in themselves. Markets are there to serve our society, not to suck the joy out of it or trample over its values. So we must shape capitalism to suit the needs of society; not shape society to suit the needs of capitalism.

    That is what I mean by responsible business. Business helping to create a society that is greener, safer, fairer - and where opportunity is more equal. Business helping to create a society that is more family-friendly, where responsibility and power are decentralised, and where we value and build up the institutions of the public realm and civic society.

    So if markets, and capitalism, and the activities of individual businesses conflict with our vision of the good society and a better life if damage is being done to our environment, or if family life is being undermined we must not sit there and take it, going along with the old orthodoxy that nothing should be allowed to impede the pursuit of profit. We must speak out.

    Yes, as I've said many times, we must stand up for business, because it's businesses, not governments or politicians, that create jobs, wealth and opportunity, it's businesses that drive innovation, and choice, and help families achieve a higher standard of living for a lower cost. But we must also stand up to business when the things that people value are at risk. So it's time to place the market within a moral framework - even if that means standing up to companies who make life harder for parents and families.

    It's time to help create vibrant, local economies - even if that means standing in the way of the global corporate juggernauts. And it's time to decentralise economic power, to spread opportunity and wealth and ownership more equally through society and that will mean, as some have put it, recapitalising the poor rather than just the banks.

    The best chapters in our economic history are those that embrace the many, not the few. In America in the 1950s there was a sense that everyone could have a slice of the pie. In the 1980s Margaret Thatcher led an ownership revolution that gave millions a new stake in our economy. That was truly popular capitalism, and we've never needed it more than we do today.

    All of us - politicians, campaigners, economists, business leaders - need to help lead the change. Our financial system boasts people so bright they've created financial instruments beyond even their own understanding. Now they need to use those talents to help the poorest build assets. To go into our most deprived communities, giving them the tools to make the most of the market, to help them with banking and saving and owning.

  1. Inclusive Capitalism
    Dr. Mo Ibrahim's inclusive capitalism sounds to me like good old-fashioned free market economics and common sense. Consequently, Dr. Ibrahim's qualified capitalism is no different from unqualified capitalism.
  2. Creative Capitalism
    Mr. Gates proposal, seems to me, to be based on ideas that are fundamentally opposed to the principles of free market economics. It is based on the notion of "market failure". But in order to ascertain whether markets have failed, we need to be clear as to what exactly the purpose of the markets is. If we approach the issue from that angle, we see quite clearly that what Mr. Gates calls failure is actually something that lies outside the scope of markets. Healthcare markets, for example, do exist in both rich and poor countries, as do markets for other goods and services, but their exact characteristics are determined by (0ther) factors outside their direct scope and control. Humanitarian initiatives, such as those spearheaded by the Gates Foundation, can help alleviate human suffering in the short-term, and perhaps even eradicate certain diseases. That is commendable. But the long term solutions lie in poor countries putting their own houses in order. Mr. Gates' qualified capitalism is misguided and would ultimately be ineffective (or perhaps even counterproductive) in achieving its stated aims.
  3. Moral Capitalism
    Mr. Cameron's proposal is, unfortunately, the most mistaken of all. Initially this seems rather surprising coming from a Conservative Party leader, but on reflection perhaps not such a surprise given the seismic (leftward) shift that Tony Blair's decade in power wrought on British politics. Mr. Cameron's proposal is highly interventionist and, if carried out, would exacerbate the UK's already dire economic situation. The morality Mr. Cameron is saying should be added to capitalism is already there: a free market economy cannot function outside a strong moral framework of trust, respect for the law, respect for contracts, and so forth. Mr. Cameron's qualified capitalism would be an economic disaster.

Adam Smith still has it broadly right, some 233 years after he figured out how it all works.

Here's what the great man said in The Wealth of Nations (among very many other things, of course):

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.

(Book One: Of the Causes of Improvement in the Productive Powers of Labour, And of the Order according to which its Produce is Naturally Distributed among the Different Ranks of the People, Chapter II: Of the Principle which gives occasion to the Division of Labour)

But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.

(Book Four: Of Systems of Political Economy, Chapter II: Of Restraints upon the Importation from Foreign Countries of such Goods as can be produced at Home)

The Prodigal Son in the Key of F

I love words. Their sound and their texture, their look and their feel.

I love words well selected, well used and well arranged. The following piece is one of the best applications of the literary device of alliteration that I've ever come across.

Years ago, I had the privilege of hearing the late Rev. John Garlock recite the piece live. The piece was originally written by Rev. Garlock and Gwen Jones in the 1940s (see p. 10 of A/G Heritage, Fall 1990). It has been copied and reproduced countless times since without attribution. The theme is one of the most famous Bible stories, the Parable of the Prodigal Son (Luke 15: 11-32). Here it is, the Prodigal Son in the key of F:

Melody in F

Feeling footloose and frisky, a featherbrained fellow forced his fond father to fork over the farthings. He flew far to foreign fields and frittered his fortune, feasting fabulously with faithless friends.

Finally facing famine and fleeced by his fellows-in-folly, he found himself a feed flinger in a filthy farmyard. Fairly famishing, he fain would have filled his frame with foraged food from the fodder fragments. "Fooey, my father’s flunkies fare far fancier," the frazzled fugitive fumed feverishly, frankly facing facts.

Frustrated by failure and filled with foreboding, he fled forthwith to his family. Falling at his father’s feet, he floundered forlornly, "Father, I have flunked and fruitlessly forfeited family favor . . ." But the faithful father, forestalling further flinching, frantically flagged the flunkies to fetch forth the finest fatling and fix a feast.

The fugitive’s faultfinding frater frowned on the fickle forgiveness of former folderol. His fury flashed but fussing was futile. The far-sighted father figured, "Such filial fidelity is fine, but what forbids fervent festivity-for the fugitive is found! Unfurl the flags. With fanfares flaring, let fun and frolic freely flow. Former failure is forgotten, folly forsaken. Forgiveness forms the foundation for future fortitude."

Saturday, February 21, 2009

Progress depends on retentiveness

"Those who cannot remember the past are condemned to repeat it."

This quotation, and numerous variations of it, has attained extraordinary ubiquity and immortality in the world of quotations.

But who first said it? And where?

The answer to the first question is George Santayana (1863-1952), the eminent Spanish American thinker.

The answer to the second (in context) is as follows.

Excerpt from: Chapter XII ("Flux and Constancy in Human Nature"), Volume One ("Reason in Common Sense") of The Life of Reason; or, The Phases of Human Progress (five volumes), 1905-1906
Author: George Santayana
Source: Project Gutenberg
Stable URL:

Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement: and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it. In the first stage of life the mind is frivolous and easily distracted; it misses progress by failing in consecutiveness and persistence. This is the condition of children and barbarians, in whom instinct has learned nothing from experience. In a second stage men are docile to events, plastic to new habits and suggestions, yet able to graft them on original instincts, which they thus bring to fuller satisfaction. This is the plane of manhood and true progress. Last comes a stage when retentiveness is exhausted and all that happens is at once forgotten; a vain, because unpractical, repetition of the past takes the place of plasticity and fertile readaptation. In a moving world readaptation is the price of longevity. The hard shell, far from protecting the vital principle, condemns it to die down slowly and be gradually chilled; immortality in such a case must have been secured earlier, by giving birth to a generation plastic to the contemporary world and able to retain its lessons. Thus old age is as forgetful as youth, and more incorrigible; it displays the same inattentiveness to conditions; its memory becomes self-repeating and degenerates into an instinctive reaction, like a bird's chirp.

Not all readaptation, however, is progress, for ideal identity must not be lost. The Latin language did not progress when it passed into Italian. It died. Its amiable heirs may console us for its departure, but do not remove the fact that their parent is extinct. So every individual, nation, and religion has its limit of adaptation; so long as the increment it receives is digestible, so long as the organisation already attained is extended and elaborated without being surrendered, growth goes on; but when the foundation itself shifts, when what is gained at the periphery is lost at the centre, the flux appears again and progress is not real. Thus a succession of generations or languages or religions constitutes no progress unless some ideal present at the beginning is transmitted to the end and reaches a better expression there; without this stability at the core no common standard exists and all comparison of value with value must be external and arbitrary. Retentiveness, we must repeat, is the condition of progress.

The Power of One

Alex Dalmady is a 48-year-old Venezuelan independent financial analyst based in Florida. By his own account, Mr. Dalmady got a call from his friend Roberto in October 2008 asking for help with his investment portfolio, a substantial part of which consisted of CDs (Certificates of Deposit) at Stanford International Bank (SIB), an offshore bank based in St. John's, Antigua.

Mr. Dalmady visited SIB's website, downloaded the bank's financial statements and analysed them. He then presented his unequivocal conclusion to his friend: "Roberto, take your money out YESTERDAY." And this Roberto proceeded to do, somewhat slowly, but he was out by December 2008.

However, Mr. Dalmady's curiosity had been piqued and he kept on investigating SIB (all from his desk in Florida and using the limitless power of the Internet-Yay!). In January 2009, he sat down and wrote up his findings in an article that was published in the January 2009 issue of the monthly newsletter of VenEconomia (VenEconomy in English), a leading Venezuelan economic and financial publisher.

The article was entitled "Duck Tales". An English version is posted here.

Why "Duck Tales"? Well, here's the synopsis of the article:
One does not have to be a detective, or even a financial expert, to spot financial institutions that may prove insolvent, or worse, with the passage of time. As the saying goes, if it looks like a duck, if it waddles like a duck and if it quacks like a duck, it must be a duck.
Mr. Dalmady tells his tale in a witty and entertaining style. Unfortunately, the moral of the tale is not quite so amusing. SIB appeared to be a "duck", a massive financial fraud.

And so it has proved to be.

Mr. Dalmady's article ignited the blogosphere when it was posted on Miguel Octavio's blog on 9 February 2009. From there, the story was picked up by the mainstream media and the rest is very recent financial history. U. S. federal authorities (and no doubt other authorities elsewhere) are now investigating SIB and its flamboyant owner, R. Allen Stanford, Knight Commander of the Most Distinguished Order of the Nation (Antigua and Barbuda), World Finance's 2008 Man of the Year, and Forbes List billionaire (Forbes also has an in-depth profile of Mr. Stanford and features him in its Secrets Of The Self-Made series).

All this, the result of one single individual, Mr. Dalmady, applying his own mind to the facts that everybody else was seeing, but missing the significance of.

Truly, the Power of One.

Wednesday, February 04, 2009

U and I

(The title of this post is borrowed from the title of Nicholson Baker's deliciously quirky book on his literary obsession with John Updike.)

John Updike died last week.

He was one of the most skillful craftsmen (or is it craftspersons in these politically correct times?) of the English Language. One of my personal favourites certainly, right up there with Joseph Conrad, V. S. Naipaul, and G. H. Hardy.

He was a remarkably versatile writer: fiction and non-fiction; prose and poetry; art criticism and literary criticism; short stories and novels; plays and plays-on-words; a humourist and a "serious" writer; journalist and essayist; children's books and adults' books; and on and on it goes. He even tried his hand at an African novel (The Coup, 1978) and, post-9/11, a terrorism novel (Terrorist, 2006). Oh, and he was a cartoonist too.

He was also a remarkably prolific writer: literally hundreds of pieces for The New Yorker alone; almost 30 novels; and much, much else besides.

One of the tests of great writing for me is simply this: Does it live on in the mind long after it's been read?

Does Updike's writing pass this simple test?

Let me answer obliquely by reference to a personal reading experience of mine of a few years ago. It was The Oxford Book of Short Stories (1981) edited by V. S. Pritchett, himself one of the finest exponents of the short story form. The book contains masterpieces by a veritable who's who of the greats of literature in English: Hawthorne, Poe, Twain, Conrad, Kipling, Maugham, Joyce, Lawrence, Faulkner, Hemingway, Pritchett (no false modesty here), Narayan, Welty, Lessing, and others. But for me, the story that really stood out then and still stands out now was the very last one in the anthology: Lifeguard by John Updike, which was first published in 1961 in The New Yorker. Out of all those outstanding stories, it is Updike's story, as short and plotless and apparently ephemeral as it is, that has left the deepest impression on my mind. If you're not a subscriber to The New Yorker, there's a bootleg version of Lifeguard here.

A word about the name Updike. It's an Americanised version of the Dutch name Op de Dijk.