“Take Honor from me, and my life is done” – A review of The Honor Code: How Moral Revolutions Happen by Kwame Anthony Appiah
 

Different people have different definitions and interpretations of what a revolution is. Looking up the word on Wikipedia, I see it defined as a drastic political or social change that usually occurs relatively quickly. I think that’s as good a definition as any. The concept of revolution, especially in politics and revolution, is embedded in most educated people’s knowledge of human history. Countless books have been devoted to examining political and economic revolutions over time. Every year in the United States many books are written and many reenactments staged to commemorate the political revolution of the late 18^th century that saw British monarchical rule terminated and a new sort of representative democracy established in what will become the United States. The American Revolution has been almost studied to death but every year some other scholar, or politician with a historical bent, manages to release one more book that promises a new twist on some obscure aspect of the whole saga. Same goes for the French revolution of 1789, which had a collateral effect of sending King Louis XVI to the guillotine. Revolutions in the economic / business sphere have also being studied and published about extensively. We all learn and talk about the historical significance and causes of the Industrial Revolution that started in Great Britain in the late 18^th century and spread across Europe and North America in the decades of the first half of the 19^th century. In more recent times we have all gotten used to speaking of the information / internet revolution that has swept the world since the early 1990’s with the commercialization of the internet and invention of the World Wide Web. Given the fascination with revolution in many parts of our lives, it is somewhat baffling that the concept of “moral revolutions” is not more central to our every-day vocabulary and historical consciousness. I think it is the absence of robust everyday discussion of the significance of, and requirements for, moral revolutions that this excellent book by the noted philosopher Kwame Anthony Appiah is ideally placed to fill.

 

Why is the examination of honor important to understanding not just moral revolutions but human existence? I would say it is because honor is so central to human life. Most people desire, consciously or otherwise, to be regarded as honorable and not to have their honor diminished or maligned. This is something the great bard William Shakespeare realized and acknowledged when in the play Richard II he placed in the mouth of Thomas de Mowbray, the banished Duke of Norfolk, the following words “Mine honor is my life; both grow in one: Take honor from me, and my life is done: Then, dear my liege, mine honor let me try; In that I live and for that will I die”. There is nothing inherently wrong or right about the human sense of honor, it is just there in us. There are many times when the honor codes of individuals or particular societies are very congruent with what we can all agree to be morally upright or beneficial to society (e.g., ensuring protection for vulnerable children, selflessly working to free people stuck in burning buildings etc.). However, there are many situations when the honor codes conflict with what will be broadly accepted as being morally just and beneficial to society. A good contemporary example of this situation is the practice of “honor killing” of women by members of their own family in response to some behavior that they perceive to have brought disrepute to the family. Mr. Appiah’s book helps readers understand the factors that sustain such evidently harmful honor practices and the factors that were responsible for their decline (in cases where such practices are thankfully no more).

 

The author does a great job of explaining this phenomenon of harmful honor practices and the process of fomenting the moral revolutions that can end them by giving an excellent historical summary of three situations when morally repugnant honor practices were successfully ended. These include: the decline of the duel in 19^th century England; the move to stop the binding of the feet of young girls in turn-of-the-20^th century China and the movement in England in the first half of the 19^th century to abolish the transatlantic slave trade. The author also spends a good deal of time examining the unfortunate durability and the valiant efforts being made to eradicate the existing practice of honor killing.

 

Of the thankfully defunct practices that the author profiled, I found the history and practice of dueling to be the most interesting for a variety of reasons. Dueling was a colossal waste of human talent as the practice claimed the lives of many aristocratic men of means at the prime of their lives. A good example was the death of Alexander Hamilton, the first Treasury Secretary of the US, at a duel at the age of 47. Also, for most of the time that dueling was practiced across Europe it remained an unambiguously illegal activity that was frowned upon by governments and civil leaders. And these leaders had a good reason to be against dueling. European monarchs and civil servants had worked diligently over many centuries to establish the concept of a state as one in which the sovereign / government held a monopoly on the legitimate use of physical force and by so doing managed to drag Europe out of the fractious lawlessness that pervaded the continent in the dark ages. The quasi-execution aspect of duels flew against the monopoly power of the state to render judgment and deliver capital punishment. It was bad enough that this practice was illegal, it was also widely viewed as immoral by many. The practice was fundamentally immoral. It is reasonable to view a moral outcome as one in which the quest for truth is successful and the perpetrator of a lie or some other form of bad behavior is brought to justice. Given the varying quality of dueling pistols and differences in the quality of duelers’ marksmanship, this outcome was far from assured. A better marksman is much more likely to prevail in a duel than a bad marksman is, even if the great shot was the perpetrator of an offence. So let’s think about this: you impugn the honor of another man who then feels duty-bound to challenge you to a duel unless you do the honorable thing by apologizing for your statement or act. You refuse to apologize and you then show up on the day of the duel and because you are a better marksman you shoot him dead in broad daylight and you end up paying no price because there is a gentleman’s agreement that dueling gentlemen are not prosecuted for murder. By the way, all the religious authorities are also vehemently against this activity. In a nutshell, the practice made absolutely no sense. So why did all these educated upper class men keep participating in such a senseless activity? It’s simple, they thought dueling was necessary for them to defend and maintain their honor. If you went back and really quizzed some upper class type in early 19^th century England about his support for dueling you would probably not get a better answer than “this is what we do”.


So how did the duel fall out of favor in Victorian England? It was not because people pointed out to potential duelers that the practice was illegal, there were already well aware of the fact. The practice didn’t all of a sudden become immoral, it had always being immoral! What happened was that opponents of the duel worked within the confines of the honor code to redefine what honorable conduct meant for a gentleman such that it actually became dishonorable for an aristocrat to participate in a duel. A similar strategy was adopted by the brave members of the Chinese intelligentsia that formed the core of the resistance against foot binding. These people had a deep appreciation for the honor traditions of their society and took great pains not to impugn the honor code of the society. Rather, they succeeded in redefining the honor code such that it became a dishonorable thing to bind your daughters’ feet. These Chinese reformers couched their opposition to foot binding in terms of the honor of China (e.g., “this practice is making our country look bad in the world”, “all modern societies no longer do this” etc.).

 

These moral revolutions hold great promise for some of the moral challenges that confront us in the 21^st century, including the scourge of violence against women. If humanity will successfully beat back honor killings and other acts of violence against women, the movements will need to be led by local groups of committed people who live in the affected societies and have a deep appreciation for the culture of their people. Reformers are unlikely to meet with great success if they simply dismiss the honor codes of these societies as atavistic behavior. Rather they will need to work within the confines of their cultures to redefine what honor means and have the protection of the dignity and physically wellbeing of their wives, daughters and sisters be the highest consideration for the honor of the members of her family.

 

Overall, I found it to be a great and accessible book that should be read by politicians, social activists and anyone with an interest in seeing positive change in their society and the world at large. It also gives the lie to the view, held by some, that philosophers hardly write books with tangible real world practical value.

 

The Forgotten Empire – A review of “Lost to the West: The Forgotten Byzantine Empire That Rescued Western Civilization” by Lars Brownworth

If someone in a history class, or just an overly nerdy friend, asked the question: “when did the Roman Empire end?” the answer to the question is likely to be varied. Some may say that the empire ended in AD 476 when the commander Odoacer deposed Romulus Augustulus (the last Roman Emperor) and proclaimed himself King of Italy. Others may trace it even earlier to AD 410 when the Visigoth king Alaric sacked Rome and put paid to the myth of Roman invincibility. Others may even have more “out there” choices for a date of the empire’s demise. What is not very likely is that many people will say the Roman Empire ended in 1453 (a millennium after) when Constantine XI Palaiologos died defending Constantinople (present day Istanbul) during Ottoman Sultan Mehmed II’s conquest of the city. However, that choice is probably the closest to being the most factually correct answer, as it was technically the Western Roman Empire that fell in the 5^th Century AD. The eastern half of the empire lived on for another millennium until it was overthrown by the Ottoman Empire, which itself ended at the end of the First World War. That many history buffs will miss the date of the de

mise of the empire by a full 1,000 years goes to support the title of this excellent book (i.e., “Lost to the West”). In fact most people’s association with anything Byzantine is through the adjective used to describe a process that is overly complex and intricate but ultimately devious or duplicitous in nature - not sure who we should thank for the reduction of an illustrious empire into an uncharitable adjective! This book by Lars Brownworth, a speaker and author who happens to be a high school history teacher in his day job, is a laudable step in correcting this sorry state of affairs as it provides a great introduction into the fascinating world of this great but somewhat strange empire.

The author’s decision to adopt a personality-driven historical narrative was a brilliant decision. Telling the history of an empire through the lives, actions and circumstances of its emperors certainly made the book a more engaging read than a straightforward chronological work would have been. The author’s thrilling narrative transports the reader back to an age largely lost to common memory, when men with large armies and even larger egos played geopolitics in such a way as to make even the most scheming 21^st century statesman seem like some dowdy old matron. The author describes colorful men such as Justinian the Great, the 6^th century emperor who reclaimed huge swathes of the lost western empire and ruled over a kingdom stretching from Constantinople to Rome and parts of present-day Gibraltar, Portugal and Spain. Not only did Justinian conquer vast lands and enact a uniform code of Roman law that still serves as the basis of civil law in many European states, he also embarked on massive building projects including the world famous Hagia Sophia: a building which served as a Greek Orthodox church for almost a thousand years, a Roman Catholic church for half a century, a mosque for about 500 years and a museum since 1935. We also meet Justinian’s most illustrious general, Belisarius: a man who is probably the most successful military commander in all of antiquity. A widely successful and popular man whose exploits on the warfront was perhaps only matched by his unwavering loyalty and commitment to a scheming emperor and bureaucracy that often tried to sabotage his best efforts.      

 

One of my favorite stories is that of Leo III the Syrian, the man we have to thank for the word “iconoclast” (literally translated as “icon breaking”). This was a man so wedded to a puritanical and fundamentalist reading of the Christian scriptures that he sought to rip out all graven images and icons in his empire and have them destroyed. Leo III and his band of original iconoclasts were so successful in their quest that they effectively tore apart their church and retarded the arts and culture of their society so badly that it took a very long time after the death of Leo III and his son for some semblance of the fine arts to germinate again in the empire.

 

Surprises also abound in this engaging read. Probably the most intriguing is that of Emperor Basil I “Basil the Macedonian”, if only because his rags to riches story is not something one would associate with monarchy. Born into a peasant family, he ended up ingratiating himself (due to his wrestling prowess) with the ne’er do well and perpetually drunk Emperor Michael III. Once in the emperor’s good graces, he merrily proceeded to murder the emperor’s uncle (obviously with the dim-witted emperor’s support). Since someone of Basil’s ambition could not possibly be expected to contend himself with getting rid of just an uncle of an emperor, he proceeded to dispatch the emperor in a particularly gruesome murder and usurped a throne for which he did not even have the most tenuous of legitimacy. Despite this particularly inauspicious start to his reign, Basil turned out to be a particularly effective emperor. Ruling for 19 years, a long time by Byzantine standards, he established a dynasty that was so enduring that over two centuries later one of his direct descendants still occupied the throne of Byzantium. Another interesting character was Basil II “the Bulgar Slayer”, who probably gets honors for having the most interesting nom de guerre of all the emperors. Orphaned at age five, Basil II spent most of his youth being pushed around by courtiers with the general consensus being that he was another timid and ineffective emperor in the making. However, upon managing to secure control he became a very effective emperor who ruled for almost 50 years. If Basil II had a fault, it was his penchant for excessive display of force and a ready willingness to be crushingly brutal towards its opponents. During a campaign against the Bulgarians (the source of the grotesque “Bulgar Slayer” nickname) he captured 15,000 prisoners and proceeded to blind 99 out of every 100, sparing the sight of only 1 man out of 100 so the “lucky” man could have the necessary task of leading his blinded colleagues back home to further inflict terror in the civilian population.

 

Reading this book is to become engrossed in the dozens of these stranger-than-fiction stories that showed how rich and tragic the history of this most fascinating empire is. All things considered, I found this book to be a very engaging and accessible introduction to the history of a place and era that I knew nothing about.  

Tinkering with Leviathan – Review of “The Fourth Revolution: The Global Race to Reinvent the State” by John Micklethwait and Adrian Wooldridge
 

“The ten most dangerous words in the English language are ‘Hi, I'm from the government, and I'm here to help’” – Ronald Reagan
 

Anyone following American politics will be familiar with quotes similar to the one from America’s 40th president. There is no shortage of people eager to echo sound bites like the above or the even simpler charge to “shrink government to a size that we can drown it in a bathtub”. While these statements make for effective campaign rhetoric, they do not make for elegant policy prescriptions and are also guaranteed to elicit reflexive opposition from their adversaries on the opposite political spectrum. A lot of air time is spent by the right in denouncing the “evils of big government” with their counterparts on the left responding in kind by describing any attempt to trim the government as an attempt to starve poor kids. What has been sorely lacking is a debate or examination of what the proper role of government should be in modern society, what the structural challenges are that prevent governments from being responsive to the needs of its citizens and, most importantly, what steps could be taken to right the ship. This excellent book by two journalists at The Economist goes beyond doing much needed justice to these essential topics, it also provides an intellectually coherent and beautifully written sweep of the evolution of what could be termed “western democracy”.

The authors’ essential point is that the values and governing structures of western democratic societies (broadly defined to include much of Europe and Anglophone North America) have undergone distinct dramatic changes or revolutions over the past half millennia. These changes have happened in response to the needs of society or to correct the excesses that result when successful revolutions are transformed into a staid status quo by the passage of time and the calcification of the governing elite.

The first revolution identified by the authors is the emergence of the modern European state in the 1600s. This is a revolution personified by its intellectual godfather, Thomas Hobbes who in his seminal work: Leviathan (or The Matter, Forme and Power of a Common Wealth Ecclesiasticall and Civil) advanced for the first time the concept of a social contract between the governed and their (absolute) sovereign. While modern readers may wince at the powers that Hobbes sought as ideal to bestow on the sovereign - essentially a call for dictatorship - it is important to put the work in its proper context. Europe in Hobbes’ day was a place where life was truly nasty, brutish and short. The entire continent was a relative backwater (compared to China) that was been torn apart by senseless wars started by every petty lord or minor aristocrat who could muster men under arms and proceed to find something to be offended about. The most important thing that 1600 Europeans needed was order and security, so the first revolution in government occurred to grant them the much needed order. In the 1600s and subsequent centuries, Europe’s monarchs grew much more powerful. Gaining greater control or successfully co-opting previously troublesome noblemen and establishing dominance over religious activities within their realms through the concept of cuius regio, eius religio (“whose realm, his religion”). They effectively succeeded, in many cases, in establishing a monopoly on the legitimate use of physical force within their kingdoms. France’s monarchs went to such great length to keep tabs on their country’s nobility that they come up with the concept of “The whole of France around the king”, keeping anywhere from 1,000 to 10,000 noblemen as hangers on at court and occupied with frivolities to keep them from dangerous thoughts of war. The net effect of these moves was the emergence of a stronger and more prosperous Europe that was able to shift its attention and resources away from the wasting competition of civil wars to the productive competition of commerce.

Like every innovation, the move to more powerful governments embodied by the sovereigns - while serving a real need at that time to tame the fractious tendencies of petty nobles - soon became long in the tooth and self-serving. Government, especially in the UK, became largely a vehicle through which elites extracted rents from the economy and society. This was the era of “rotten boroughs”: parliamentary constituencies so small (one had 3 houses and 7 votes) that wealthy landowners basically treated them as heirlooms that were passed from father to son and in that way secured an absurdly disproportionate influence on the legislative process. This concentration and abuse of privilege was not only restricted to the legislature. What counted as a civil service was little more than a system of sinecures, with stories of privileged appointees to government offices not showing up for a single day of work for decades. To correct this unfortunate turn of events, the 2^nd revolution identified by the writers was launched by thinkers such as John Stewart Mill and politicians like William Gladstone, a Liberal politician who served as Prime Minister and Chancellor of Exchequer on four separate occasions each. William Gladstone was a man so committed to reforming the corrupt and inefficient public service of his time that he earned the nickname “The People’s William” and had a most famous parsimonious quote: “No Chancellor of the Exchequer is worth his salt who is not ready to save what are meant by candle-ends and cheese-parings in the cause of his country”. If Gladstone is the political embodiment of this movement, its intellectual godfather will be John Stuart Mill: a thinker who championed the rights of the individual in opposition to unlimited state control. These liberal reformers made important tweaks to the apparatus of the state: instituting competitive exams for civil service roles; reforming the parliamentary process and laying the foundation for a laissez faire economic system.

This trend towards utilitarianism however met with its inevitable reversal as 19^th century England became an increasingly harsh place. This was the era of workhouses, debtors’ prisons and other cringe-worthy mainstays of life now immortalized in the great works of Charles Dickens. By the dawn of the 20^th century, many people had come to find the situation untenable and the authors did a masterful job of explaining how the yearnings of the citizenry for a more humane society led to some deemphasizing of utilitarianism as a governing philosophy and the advent of Fabianism (in the UK) and Social Democracy (in much of Scandinavia and Northern Europe). This movement, embodied by intellectual and organizer extraordinaire Beatrice Webb, had the establishment of a universal welfare state coupled with strong workers’ rights at the core of its governing structure and philosophy. Proponents of this philosophy often viewed government control of “the commanding heights of the economy” as a necessary condition for an ideal society. This thinking led to the establishment of social security in the US in 1935 and universal health care in the UK through the founding of the NHS in 1948. Governments all over the western world become more assertive in the economy and more willing to intervene in the markets when they felt the markets were not helping to achieve desired public policy. Franklin Roosevelt established the Tennessee Valley Authority (“TVA”) to electrify America’s deep south when it appeared profit-maximizing utilities were more than happy to ignore the, often poor inhabitants, of these sparsely populated farms in favor of the North’s more industrialized centers. In the UK, the post-World War II government of Clement Attlee proceeded to establish the foundations of the British welfare state and embarked on a vast nationalization agenda that covered coal mining, railways, telecoms, road haulage, electricity and the steel industry. The Swedes went much further in putting a safety net under their citizens and a paternalistic glow on their nation by coming up with the concept of Folkhemmet (“the people’s home”). A concept that says society should effectively function like a small family with everyone’s needs taken care of and the richer members subjected to the crushing taxes required to maintain such a generous “cradle to the grave” style welfare system. The social democrats’ long unbroken tenure running Sweden’s government (from 1932 to 1976) gave them enough time to put this concept into action that people started to refer to a Swedish “middle way” between socialism and capitalism.
 

Like everything conceived by man, the appeal of Social Democracy / Fabianism / The Welfare State - or whatever term can be used to describe the intellectual justification of the brand of activist government popular in much of the western world in the post-war years – soon began to fade and its warts became all too apparent in the 1970s. And if the backlash against the welfare or corporatist state has a guardian angel, it will be Margaret Thatcher, a grocer’s daughter made good, who decided she was going to force a sought of striver’s thriftiness on her countrymen. To put into perspective how much of a trailblazer she was, it is important to think about how involved the government was in the lives of ordinary Brits when she came on the scene. A Briton getting up to catch a flight to America in the late 1970s, would have put on his bed lamp with electricity from the state; left a message for his superiors on a phone line provided by the state; fixed himself breakfast on a stove using gas supplied by the state; rode to the airport on a train owned by the state; arrived at an airport owned by the state and travelled on a wide bodied aircraft owned by an airline controlled by the state. And this is all before 10am in the morning! Margaret Thatcher was not going to put up with this for much longer and proceeded to launch a major privatization program, which ensured that by the end of her tenure almost all of the services earlier referred to would have been provided by private firms. Her kindred spirit across the Atlantic, Ronald Reagan also embarked on a task to shrink the state. Although he had much less to cut because the state in  America was never as big (in relative terms) as it was in the UK. These reforms were not limited to the western world. India, a nation in love with Fabianism as any, also embarked on a series of lauded liberalization programs in the early 1990s that effectively put the “License Raj” to a well-deserved death. The Brazilians also launched a series of ambitious privatizations in the early 1990s and the Russian privatizations, though seriously flawed, achieved a real objective of shrinking the state.  

So why, one may ask, was the Thatcherite / Reaganite only described as a “half revolution” by the authors? The answer lies in the lack of durability of their revolution. After a lull in the 1990s, the governments of the western world have continued to grow at a fast clip. Both conservatives and liberals continue to find things to spend money on (e.g., defense and homeland security for conservatives, education and other welfare spending for liberals). Essentially, the authors argue, in much of the western world there is no real party of small government. Each party is perfectly willing to be big spenders when it comes to favored constituencies or projects and often times unwilling to raise the tax revenue necessary to fund this expenditure, leading to deepening fiscal problems.  

If the authors of this book did an admirable job of explaining the evolution of government in western democracies, they did a much more outstanding job in examining and distilling the current ills that plague western democracies. Of the “Seven Deadly Sins” of modern government that the authors raised, using California as an example, the two that resonated the most with me are: Olson’s Law and the problem of the “Overactive State”. Olson’s law, first proposed by American economist Mancur Olson, essentially states that because lobbying and collective action in a democracy is inherently time-consuming and expensive only the people with the most interest in a topic or issue will be sufficiently motivated to organize to effect change on that issue. This “law” provides a good explanation for why so many issues that affect society at large are effectively controlled by a few people. Examples of this abound and they range from the influence the National Rifle Association (“NRA”) has on US gun policy; the impact of the teachers’ union on shaping public K-12 education and the very significant role that the prison guards’ unions have played (especially in California) in advocating harsh criminal law policies of questionable value such as the “three strikes” law. For these constituencies the issues they care about are “voting issues” and they can effectively dictate the agenda since most of citizens don’t pay enough attention.

One doesn’t have to be a “small government conservative” to be sufficiently miffed by the overactive state and the move to ever more licensing and regulation. When Hippocrates was hanging out in ancient Greece around 400 BC and codifying some of the early precepts of medicine or Benjamin Rush was helping to lay the foundation of modern American medicine in 18^th century Pennsylvania, they may have contemplated a situation where the practice of medicine will require a state license obtained after rigorous examinations and many years of postgraduate medical education. What both men will probably find deeply ridiculous is that it takes about 300 hours of coursework to work in the wig trade in Texas or that many American states require multiple hours of coursework, exams and licenses for people wishing to be barbers, florists and even fortune tellers. While it is important for government to protect the unsuspecting from an unqualified brain surgeon, I think it should not be a high priority for the state to protect citizens from receiving a terrible haircut, or from buying an incompetently arranged bouquet of flowers; or from wearing wigs that are just not cut exactly right or receiving an inaccurate forecast of their future. People are perfectly capable of dealing with these things. While consumer protection may be the headline reason for the proliferation of licenses, the net effect of this excessive licensing is increased costs to consumers as prices are kept artificially low due to the barriers to entry that licensing provides. You could wake up a medieval guildsman in the 21^st century and he will quickly recognize much of occupational licensing as basically the same stuff they did back in the day. Liberals, with an interest in protecting the poor and striving, should have an interest in taming the overactive state as it increases costs to the people least likely to afford the extra cost. This is one area of reform in which liberals and conservatives can make common cause.

In concluding the book, the authors laid out a series of common sense reforms that could go a long way in improving governance and providing an avenue for western democracies to regain the edge in the competition with alternative Eastern governance models (notably those of Singapore and China). The idea I find most appealing is setting a sunset clause for every new law that is passed. Every law that is passed should have an expiry date, at which time it would be reexamined for relevance and if there is sufficient public support it will be reaffirmed and if not, the law will be struck off. That seems like a good antidote for anachronistic laws.

Overall, I believe this is a great book that should be read by every politician or person interested in how people organize themselves for effective governance in a democracy. And if you are just a history buff, the sweeping history of western political philosophy and organization should tick some boxes as well!

From Sea to Shining Sea – A review of “The Men Who United the States: America's Explorers, Inventors, Eccentrics and Mavericks, and the Creation of One Nation, Indivisible” by Simon Winchester

Of the 193 sovereign nations that are member states of the United Nations (as good a definition of a “country” as any), only 21 border on two or more oceans. Of these 21 countries only a small group of 11 countries share the distinction of bordering on the earth’s two greatest bodies of water: the Pacific and Atlantic Oceans. The United States is not just one of these 11 countries; it manages to get on the list in grand style. The country has a massive land mass and long coast lines on both oceans unlike some other members of the “club of 11” such as Chile, which can be uncharitably described as being effectively a strip of land on the Pacific that just happens to touch the Atlantic.

Translating the phrase of “sea to shining sea” in the (unashamedly patriotic) song, “America the Beautiful” into a real physical and cultural reality took centuries of diligent and often mind-bending and back-breaking work by courageous pioneers and adventurers. These people decided they were going to bend untamed wilderness to their will and embark on engineering marvels that still manage to boggle the mind. In the process, these pioneers wove regions and lands as disparate as the cotton fields of Louisiana; the rugged hills of Appalachia and the windswept coastal fishing towns of New England into a multicolored, imperfect but ultimately enduring quilt that is the modern United States. These people had to put together rail networks; draw up cartographic and geological maps; build steamships and carve out broadcast networks and flight routes literally out of thin air to create the physical and cultural bonds that hold the country together. Some of these pioneers remain famous; some have seen their fame lapse with the passage of time while a great number never achieved any renown that could be subsequently lost. Simon Winchester’s new book (“The Men Who United the States”) provides a great service to all these people, the well-known and the barely-known, by telling their stories in as compelling and completes a manner that surely deserves an award by some august body that hands out such laurels.

I found the book to be an absolutely great read, with a lot of things to commend it to readers. Chief among the many commendable qualities of the book was the author’s decision to organize the book in a thematic fashion. Given the large cast of characters that were involved in “Uniting the States” and the considerable span of time this uniting took, there was a temptation that a less able writer could easily have fallen for to organize the book chronologically or, worse still, as a series of mini-biographies. That would have resulted in a book that reads more like an encyclopedia. Thankfully for readers everywhere the author avoided that trap. Instead Mr. Winchester, who lived many years in Asia, chose to organize the book using the five elements (or the Wu Xing) of Chinese philosophy: Wood, Earth, Water, Fire and Metal. The author was helped by the various elements aligning pretty reasonably with the broad chronology of American progress. The theme / element of wood corresponds closely to the early years of post-independence America when logging activity was a key driver of economic growth and the famed Lewis & Clark expedition took place to the period from 1835 to the current day which is dominated by metal (i.e., electricity grids, cable TV, radio transmission, telecoms / telegraph etc.).  

The cast of characters and events so richly described by Simon Winchester range from popular people and popular stories such as Samuel Morse and the invention / commercialization of the telegraph; to the Lewis & Clark expedition to cross the west after the Louisiana purchase to the construction of the transcontinental railroad. Lesser known people and stories also come alive in this book. My favorite story is that of John Wesley Powell, the one-armed soldier who climbed mountains, led expeditions and finally served as the 2^nd director of the US Geological Survey. For the stories most likely to be well known by his readers, the author sheds new light and provides a fresh perspective that makes reading a story you already know still pass for a very engaging read.

This book is one of the best I have read in a long time but it is not without its flaws. One is that it adopts a sometimes overly adulatory tone towards these men and the America they created, a minor flaw that is probably linked to the enthusiastic patriotism often exhibited by naturalized citizens (“Americans by choice”) such as the author. The second and slightly irritating flaw was the author’s constant reference to Native Americans as “Indians”, a deliberately non-political correct term that most of the literati in America has jettisoned by now. I found the constant use of the term to be particularly silly, especially since “Indian” is a term that Christopher Columbus applied to Native Americans when he got lost, landed on American shores and thought he had arrived in India!

All told, this is a truly good book that deserves to be highly placed on best seller lists.  

A Land Facing Both Ways – Review of Ari Shavit’s My Promised Land: The Triumph and Tragedy of Israel

For a geopolitical junkie, no region holds more fascination than the Middle East: with its alluring mix of rich cultural heritage, strategic importance and a particularly combustible style of politics. Of the nations that occupy this subcontinent that that the French and British carved out of a vanquished Ottoman empire in the wake of the 1^st world war, the State of Israel stands out in a very unique way. Like most of its neighbors (Jordan, Saudi Arabia, Syria etc.), it is a young country that did not exist a century ago. However, the differences far outweigh the similarities: in a region populated largely by ethnic Arabs, Israel has a Jewish majority. While most of its neighbors are monarchies, theocracies or secular Baathist dictatorships, Israel has been a parliamentary democracy since its founding in 1948.

I have read a fair amount of essays and books on this important nation and they, for the most part, tend to be well-researched and fun to read. However, these books tend to be hampered either by: i) being written by insiders with an agenda to push or an ax to grind – the worst of the lot tend to be little more than partisan screeds; or ii) an objective and dispassionate observation penned by an outsider who struggles to muster the same level of passion or intimacy that insiders can. This new book by Ari Shavit (a celebrated writer at the Israeli left-of-center paper: Haaretz) seems to be the Holy Grail: a book by an insider that manages to be both passionate and objective and which examines the country in a deeply personal way: warts and all.

This book has many virtues to commend it. Mr. Shavit displays a deep love for his country, a love so deep that while he celebrates its triumphs and strengths he is also willing to explore his country’s shortcomings. Mr. Shavit narrates in very honest terms the expulsion of over 50,000 Palestinian Arabs from Lydda and Ramle in 1948, after both towns fell to the army of the new State of Israel. These towns were resettled by the victors, the empty houses of the vanquished occupied by new immigrants and the towns given new names of Lod and Ramla respectively. This was an event so indelibly etched in Arab minds that they refer to it as al-Nakba (“the catastrophe”). While not papering over this tragic event, it is important to put the event in historical context. Earlier in that decade, paragons of human rights such as the United States and the United Kingdom committed acts that top the incident at Lydda. While the nuclear bombing of Hiroshima & Nagasaki is well known, the arguably needless joint British and American aerial bombing of Dresden in the waning months of the 2^nd world war left over 25,000 people dead (most of them civilians).  

Mr. Shavit also charts (in a deeply personal way using his family’s history) the story and evolution of the state of Israel. We are swept from the days of Theodore Herzl’s publication in 1895 of Der Judenstaat (“the Jewish State”), a pamphlet arguing for the creation of the Jewish State, then to the early days of the immigrant farmers in the Kibbutzim, and their famed Jaffa Oranges. He lays out the evolution of the country from a few immigrants toiling in the Kibbutzim of the early 20^th century to the wave of immigration from the survivors of the holocaust in Europe and the pogroms of the Middle East in the 1940s and 1950s , to the emergence of the settlements movement in the 1970s and finally to the sophistication of the modern day.

A particularly touching part of the book which I believe has universal appeal is the description of Bizaron, a classic housing estate similar to many built in the 1950s to accommodate the thousands of immigrants streaming into the young country. These immigrants from Europe and the Middle East all had a few things in common: they had all suffered traumatic or near-death experiences, lost a great deal of their material possessions on their flight to Israel and, almost to a man, had to settle into jobs beneath their status in their prior lives. Recognizing that they would probably not reach their full potential, these people turned their efforts to educating their children to attain their fullest potential. These children of “down-on-their luck” immigrants achieved great strides: president of the Supreme Court of Israel, millionaire and billionaire entrepreneurs and many distinguished academics at various leading universities globally. This is a universal and classic immigrant story. Immigrant lore is replete with tales of the Nigerian doctor working as a healthcare assistant in Baltimore, the lawyer from Nepal driving a cab in Manhattan or the Ukrainian nuclear physicist working as a bookkeeper for a small firm in Queens. The high-energy and zealously-educated children of these people end up being disproportionately represented in high-powered positions in Corporate America.

Some of Mr. Shavit’s more potentially controversial statements revolve around the issue of Israeli settlement building, an enterprise which he vigorously opposes. The writer describes these settlements as “pregnancies outside the womb” and predicts that runaway settlement activity and ultra-nationalism exemplified by zealots such as Yehuda Etzion, a right wing activist previously imprisoned for a foiled plan to blow up the Dome of the Rock, will present challenges for the continued success of the country. Finally, summing up the essence of the Israeli-Palestinian conflict he talks about a continued conflict that leaves both sides worse off and unleashes a wave of everyday evildoing by non-evil people (in his own words “evil can take place without a need for evil people”). This section of the book is reminiscent of Hannah Arendt’s theory of the banality of evil.

All said, a great read and highly informative book that makes a gallant effort of being even-handed and balanced. Reading Mr. Shavit’s book I am reminded of the phrase: “militant centrist”, which I think is an apt description of the man. 

Finding significance in the mundane – Review of A History of the World in 100 Objects

It wasn’t very long ago (1963 to be exact) that the widely overrated historian: High Trevor-Roper, then a professor of history at Oxford University said “Perhaps in the future there will be some African history to teach. But at present there is none, or very little: there is only the history of Europe in Africa. The rest is largely darkness”. While many mainstream historians now correctly view this statement as being particularly narrow-minded, the key approach to historical analysis that informed the worldview of this condescending man has proven particularly hard to shake. Many people have a reflexive instinct to largely view history as written history, with most of history scholarship and teaching still being focused on the evaluation of written texts handed down by ancient societies and contemporary observers or visitors to such societies.

This emphasis is a really unfortunate one, not only because it largely confines the history of societies without a tradition of writing to the dustbins of history and leaves their achievements unsung. Further complicating this already sad picture is that what little information we have of these societies tend to come from the writings of other people they came in contact with. These interactions were often in circumstances that were less than amiable (i.e., enemies, competitors etc.) and the guys who did the writing often made sure to leave behind descriptions that were decidedly designed not to flatter their subjects. For example, much of the world’s knowledge of the Aztec civilization came from the writings of the Conquistadors that ended their subject’s civilization by - shall we say - taking a few items they were not entitled to while dispensing with the lives of those who posed any obstacle to their theft. Similarly, our knowledge of the life and activities of the Germanic tribes (out of present day Scandinavia) come largely from the writings of the Romans which they ended up defeating, a rare case of the vanquished getting to write the story. The list of biased reporting goes on: European settlers wrote about Native Americans, English visitors wrote fantastical tales about indigenous communities in West Africa etc.

This is why I really liked the approach of Neil MacGregor (Director of the British Museum) in writing this really great book. His great idea was to select 100 objects from all across the world through which he charts the progress of mankind from the Stone Age to the current day. He examines each object and explains the significance it held in the societies (and ages) in which it was created and used. These objects range from the two million year old Olduvai stone chopping tool to the modern-day credit card. The origins of these objects range from the Ife Bronze Heads (created in the 17^th century in what is now Nigeria) to an Egyptian sandal label from 4000 BC to the Seated Buddha of Gandhara (created in the 2^nd century AD in modern-day Pakistan) as well as a chronometer from the HMS Beagle (an early Victorian-Era naval vessel).

Despite the great diversity in the geographic origins and purposes of these various objects, they largely have one thing in common: they are largely mundane and pretty unremarkable in nature. There are very few grand and popular objects on the list: the Mona Lisa and other great works commissioned by the Medici are not held up to represent the renaissance era, rather we have mundane everyday items such as a note written in calligraphy and a miniature mechanical galleon that demonstrates the technical skill of 16^th century Germany and their seafaring ways. Representing the 2^nd part of the 20^th century is not a grand or sophisticated item like the Space Shuttle or the Mars Rover. Rather Mr. MacGregor’s choice is the humble credit card, a distinctly unremarkable rectangular piece of plastic lodged in billions of wallets the world over. The choice struck me as odd, but on further reflection I realized that a thousand years from now when our current civilization has been confined to the footnotes of history and an enterprising academic decides to write a thesis on how humans lived in the second half of the 20^th century, the credit card will be as good a window into understanding our lives as any other item I can think of. Encapsulated in that small, flat piece of plastic are themes such as: the emergence of the credit society and the attendant effects that personal debt brings; the rise of the “consumer society” that has led to there being 46 square feet of retail space per person in the US as well as the ubiquitous electronic networks that make all these incessant “swipings” workable.

I’ve always regarded Archaeology as a really cool discipline (hey, what other grown up occupation allows one to go around playing scavenger hunt games!). However, the end results of archaeology have too often been regarded as novelties that end up being gawked at in Museums and rich collectors’ living rooms. The close connection between history and archaeology is often not as closely linked as it should be, with very few books explicitly attempting to tell the history of everyday people in past eras through the simple objects they created and used in the normal course of their lives. This book did a great job giving voice to the voiceless as well as ink and parchment to the lives of often forgotten people who left little or no written text for succeeding generations to follow. 

Founding Pragmatist – A review of “Thomas Jefferson- The Art of Power” by Jon Meacham

I just finished reading the latest book by Pulitzer prize winning journalist and historian: Jon Meacham, the author of highly acclaimed historical works such as “American Lion: Andrew Jackson in the White House” (for which he won the Pulitzer in 2009). A former editor of Newsweek, he seems to have finally succumbed to the itch that plagues every American historian, which is a restless feeling that can only be sated by writing yet another book on Thomas Jefferson. While the 3^rd president of the United States can be said to have been studied to death, Jon Meacham manages to write a book that holds its own among the great works on this over studied great man. My sense of the author’s intent in writing this book is to paint a picture of Thomas Jefferson as a practicing politician and statesman of his time. A man skilled in the exercise of power and not simply the high minded philosopher and ideas man behind the lofty words of the American declaration of independence. I found this book to be refreshing and illuminating and I took away a couple of lessons that are often lost due to the all too human tendency to inflate the currency of the past

Revolutions – at least the successful ones – are typically run or enabled by the rich and/or the established. As Meacham wrote about the march to the American Revolution, “for the elite, revolution was the shrewdest economic choice”. While the history books are replete with stories of yeoman American farmers and striving craftsmen picking up arms in ragtag armies to secure their freedoms by defeating the “Redcoats” (as the British Army was not so affectionately called in those days). The truth is a little more encompassing than this, as the revolution was championed by the gentry, ruling classes and business elite of the colonies who had come to realize that continued rule from London was, well, not great for business and for their continued prosperity. One of the initial skirmishes on the road to the revolutionary war was the “Pine Tree Riot” in New Hampshire, during which royal officials were flogged and marched out of town. The leader of this revolt was Ebenezer Mudgett, a rich lumber mill owner who basically did not like the effect the royal ordnance to save the best trees for his majesty’s use was having on his profits. Counted among the signers of the declaration of independence were some of the richest men in the 13 colonies, they saw that throwing off the colonial overlords was not only good for the liberty of man, it was also good for business. This was probably not lost on Thomas Jefferson himself as Jon Meacham noted, “it was a rich man’s revolution and Thomas Jefferson was a rich man”. This is not just a relic of historical revolutions, the protesters at Tahrir Square started the revolution to overthrow Hosni Mubarak but the decision of the Egyptian Army generals to not attack the protesters but to abandon Mubarak basically sealed his fate.

The second important lesson is that partisanship and partisan bickering, like the poor, have always been with us. Listening to American media, one hears “talking heads” and politicians bemoan the partisan rancor in the country. They collectively long for the more amiable atmosphere of the past while not forgetting to add something along the lines of the “founding fathers rolling in their graves” at the sight of the bickering politicians. I am not so sure that these fathers will be as taken aback as pundits (who pine for a bygone era when political sages strode across the nation and engaged in calm, high-minded discussions) will like us to believe. Former US President Harry Truman was said to have remarked that “the only thing new in the world is the history you do not know” and that statement was quite borne out by this book. The election of George Washington was in many ways the last non-partisan election of a US president as Thomas Jefferson and John Adams were locked in highly partisan contests in 1796 and 1800. And each man was at the head of a political movement, Adams led the Federalists and Jefferson the Democratic-Republicans. Vicious publications in broadsides and pamphlets were the attack ads of the day and men such as James Callendar, a noted pamphleteer of his age, may even have one or two things to teach modern campaign hands like Karl Rove and David Axelrod about “defining the opponent”. Jon Meacham notes that the election between Adams and Jefferson was so hard fought that it drove a wedge between two men that had hitherto been very close (although they did make amends in their old age). Much has been made of the Jeffersonian practice of opening the White House for dinners with legislators every night, as it was a good faith effort to build bipartisanship. However, it must have been a sign of the times that the President avoided having congressmen of both parties together on the same day out of concern that such dinners may end in fist fights.

Also shining brightly throughout the book is the vivid image of Thomas Jefferson, the pragmatist. The portrait of Jefferson as philosopher king, devoted to such idealistic pursuits as crafting the declaration of independence and the statutes of religious freedom, has become quite ingrained in the popular imagination. In this book we see a new side to the man, we see Thomas Jefferson the politician skilled in realpolitik. The man who had a deep belief in a participatory democracy anchored on an active citizenry of his much beloved “yeoman farmers” also did as much as any president to expand executive power. He negotiated the purchase of the Louisiana Territory, which currently encompasses all or part of 15 American states and at 3 cents per acre it is considered by many to be the greatest real estate deal in history. The judicial “strict constructionists” of his time viewed this move as unconstitutional as the constitution did not explicitly make provisions for acquiring territory. However, he viewed it as imperative that the French influence in North America be curtailed and that the opportunity for the young country’s westward opportunity needed to be ensured. In foreign affairs, the man who had expressed reservations about standing armies (considering them a marginally less bad idea than banks) expanded the navy and launched the United States’ first foreign war. He sent ships to defend American ships that were being harassed by the Barbary states, getting the sanction from congress after the ships were on their way and establishing a precedent of vesting the power to conduct war and defend the country in the president even though the formal declaration of war was controlled by congress.

Overall, I found the book to be very densely researched but beautifully written in an engaging way that kept me going through the approximately 800 pages of this great book. It contained enough “red meat” for history and political nerds like me, while also having enough interesting anecdotes and engaging human interest content to engage the general reader. 

Melting Pot & Cauldron of Fire – A review of Levant by Philip Mansel

I thoroughly enjoyed reading Levant: Splendor and Catastrophe on the Mediterranean: a book describing the enigmatic history of the Levant by chronicling the vicissitudes of life over four centuries in Beirut, Alexandria and Smyrna (now the Turkish city of Izmir). The Wikipedia entry on the Levant region describes it as including “most of modern Lebanon, Syria, Jordan, Israel, the Palestinian territories, and sometimes parts of Cyprus, Turkey and Iraq”. This region of the world has quite distinct characteristics from the Middle East’s Gulf regions and the Maghreb region of West Africa. This unique identity however tends to get obscured in the statements and actions of those who prefer simplistic - and probably ignorant –terms such as “Arab world” or the much more annoying phrase: “Muslim world”. It is quite absurd to compare the multicultural, long established and often secular Levantine cities such as Beirut, Damascus, Alexandria and Istanbul with the more homogenous, conservative and recently founded cities of the Gulf Kingdoms.

The world we live in is not one that celebrates dual or split identities. It is considered an insult to be described as “two-faced”: a phrase we associate with traits such as insincerity and hypocrisy. We regard people or societies with “two faces” to be making an unwholesome attempt at “having it both ways”. There is even a biblical injunction assuring the “spitting out” of people who are “neither hot nor cold”. I have always found the scorn heaped on people trying to “have it both ways” to be quite silly: why should I or anyone else have it one way if we can have it two, three or even four ways! The ancient Greeks had the good sense to recognize the virtue of split personalities. Classical mythology is replete with figures such Janus: the two-faced god of beginnings and ends who looks both into the future and the past. Most of the heroes of Greek mythology have split human/god personalities and are therefore prone to perform god-like acts like slaying thousands of men but also capable of very human traits such as throwing fits over being jilted by lovers.

 I find the Levant region fascinating because it is a region that has throughout its history tried to have things both ways and to keep multiple identities. It is a region that looks both to the West and to the East; it is both ancient and modern; both Christian and Muslim; Arab and European. The author describes a region that was equal part melting pot of cultures, nationalities and religions and also equal part frighteningly combustible cauldron of fire. The Smyrna, Beirut and Alexandria of the17th, 18^th and early 19^th centuries described by the author were cities in which Turks, Greeks, Arabs and Europeans freely coexisted and were able to practice their Muslim, Jewish or Christian faiths as they wished. To understand how unique this was we should note that it was taking place at a time when Jews and Synagogues in Europe were largely still restricted to Ghettos and the Muslim population in Spain had been either forcibly converted or banished. These were multilingual commercial centers where thousands of European traders and their families lived with Turks and Arabs. Philip Mansel describes a Janus-faced region with men trotting about in European dresses adorned with Arab headgear; a society of debutant balls and Islamic marriages (Nikah) and a place with assimilated Europeans who had converted to Islam and taken on Arab names. I will not be stretching credulity by saying that 19^th century Levant gave the world a foretaste of globalization and multiculturalism. A poster child of this period was Mohammed Ali Pasha, founder of modern Egypt and patriarch of a dynasty that ruled the country 1805 to 1952. Ali Pasha was an Albanian born in Macedonia who first came to Egypt as an officer in the Ottoman Army. This is a more notable rise to the top than many ascents in our modern age that are often prefaced with the words “only in America will –“.

All these good things notwithstanding, it’s important to realize that the Levant region of yore was not some multicultural nirvana where nice people gathered to hold hands and sing Kumbaya. This rich tapestry of nations, faiths and cultures was always on the edge of being ripped apart by partisanship, latent religious prejudice and the pursuit of narrow sectarian interests. Resentment of the special privileges or capitulations granted to Europeans and of the perceived impiety of the elite by the often more pious masses has always been a sticking point. This resentment often boils over and has been the cause of significant conflicts and bloodlettings from Smyra in the early 19^th century to the long drawn out civil war in Lebanon which lasted from 1975 to 1990. These tensions were considered sufficiently serious by many western powers that they took to stationing warships off major Mediterranean ports both as a deterrent and also as a means of quickly evacuating their citizens in the event of a conflict. Intermittent social conflict was not also the only challenge faced by the Levantines; also bubbling under the surface was a somewhat rigid social hierarchy. 19^th century and early 20^th century Lebanon has been described by some as a strict hierarchy with Catholics at the top and Shia Muslims at the bottom. In Mohammad Ali’s Egypt, European and Turkish officers were significantly better paid and more highly placed than their native Egyptian counterparts. These inconveniences and prejudices could be viewed as the worrisome Mr. Jekyll side to the more alluring Dr. Hyde side of the Levant where various nationalities and faiths coexisted.

However one constant theme, especially in Egypt, is the tension between the largely secular and pro-Western elite and the poor and pious masses over which they preside. This tension has become more important in the wake of the Arab spring: which saw the ouster of secular, pro-western strongmen such as Hosni Mubarak of Egypt. The hope of many western observers was that these strongmen would be replaced by secular democratic parties, alas the results of elections has given these people great pause. Islamist parties have won popular, free and fair elections in Egypt (Muslim Brotherhood) and Tunisia (Ennahda) while secular parties championed by the liberal educated elites have received sound drubbings. Turkey is also another country going through a similar transition as democratically elected parties with Islamic links have been rolling back much of the heavily pro-western regulations instituted by Kemal Ataturk. Described as the father of modern Turkey, Ataturk changed the Turkish alphabet to a Latin script; proclaimed Turkey to be a secular western country and banned the wearing of the Hijab (headscarf) by women in public. Parties campaigning on pledges to champion a bigger role for Islam have been winning elections with the wife of the current president also being known to wear the Hijab despite its official ban. While there are many challenges in the current-day Levant region, I regard the managing of the dual personalities of the region to be among the most important to get right.

In conclusion, this book validates the aphorism (attributed to US President Harry Truman) that “the only new thing in the world is the history you do not know”. Reading about the vicissitudes of life many centuries ago in these great cities, I am struck by how much of the lessons and challenges described by the author remain relevant today.

The European Cental Bank’s LTOR Initiative – furthering a deadly embrace?

To say the entire world has been fixated on the twin woes of a weak European banking sector and faltering sovereign fiscal situations will be stating the obvious. However, there is great justification for this fixation because of the extraordinarily tight connection between the economic fortunes of most European countries and their banks. Much has being made of the “too big to fail” issue as it concerns large American universal banks such as Bank of America, Citigroup, JP Morgan etc. While these institutions are large and have gotten larger in the recent past, their impact on the US economy seems really benign when compared to the impact their European counterparts have on their host countries.

Throwing out some numbers, the weakened Dexia Bank’s assets account for ~150% of host country Belgium’s GDP, RBS’ assets exceed 100% of UK’s GDP, BNP Paribas’ asset base is up to 100% of France’s GDP and so on. While a big driver of these numbers come from the far more international activities of European banks, it does not detract from the fact that in the vast majority of European countries we have less than 5 banks controlling substantially all of the banking system’s deposits and assets. French banking is basically controlled by BNP Paribas, Credit Agricole & Societe Generale, Unicredit & Intesa Sanpaolo have that distinction in Italy while Deutsche Bank has a kind of overwhelming influence on German finance that no American bank even comes close to having. If you couple this dominance with the fact that Europe has a more bank-centric financing system than the US, then the power of these banks become more glaring. Over the past couple of decades a shadow banking system, fuelled by securitization, has emerged in the United States to challenge the dominance of banks in extending credit to the economy. This has been far less developed in Europe with banks on the continent been more likely to hold assets on their books.

This has become apparent in the past couple of years with European nations basically turning a banking crisis into a fiscal one. Some of the fiscal problems currently ripping through Europe can be traced to the massive costs incurred by these nations as they tried to bail out their banks and ended up breaking their fiscal purses. One can easily link, to a non-trivial extent, the Irish fiscal crisis to the cost faced in bailing out such large lenders such as the Allied Irish Bank and the Bank of Ireland. As these banks have stabilized, the true costs of the (admittedly necessary) bailouts have become apparent as they are reflected in the higher borrowing costs of marginal European nation.

This now brings me to the potential danger in the ECB’s latest plan to shore up the European banking system through the recently introduced Longer Term Refinancing Operation (LTRO). Theoretically, the aim is to provide a liquidity backstop to European banks as they seek to jumpstart lending to the economy. I am however somewhat skeptical of LTRO’s benefits due to the potential for the carry trade. The December round of approximately EUR 500 Billion 3-year LTRO funds disbursed have an interest rate of 1%, while Italian, Irish and Portuguese government 3-year notes yield 3.9%, 4.5% and 1.91% respectively. From these numbers one can easily see a situation where the banks take money from ECB and just plough them into purchases of European sovereign bonds. For example, Intesa Sanpaolo (the big Italian bank) participated in the LTRO funding window up to the tune of EUR 24 Billion. Since the bank has an average Net Interest Margin (NIM) of ~1.6%, borrowing from the ECB and buying Italian bonds will yield a spread of 2.9% (almost double its NIM on loans). And to crown the good deal, due to banking regulations its purchase of these bonds will be deemed riskless and it will not need to set aside any capital for potential losses.

If this happens across the banking sector, we will end up in a scenario where bank holdings of sovereign debt increases in an era of increasing fiscal instability. If there are defaults on these debt holdings, the banks will suffer large losses and will have to be bailed out by the governments whose fiscal situations will then worsen as a result. In essence, this move may be locking European banks and sovereigns in a tighter deadly embrace.

I hope that the doomsday scenario does not happen, but I see a reason to be skeptical

Life post-PMS subsidy – Ensuring we do not let a “crisis” go to waste

I woke up on the morning of January 1^st to Facebook updates from friends denouncing and disparaging the Nigerian government’s “heartless” decision to remove subsidies on PMS (Gasoline) effective immediately. I completely relate to the sentiments expressed by many Nigerians as the pump price of Gasoline is expected to increase by at least 200-250% and this is money from the pockets of ordinary people. The government has advanced a fiscal argument for the removal of subsidies: since Nigeria lacks any meaningful refining capacity, the rise in crude oil and freight prices have made these subsidies increasingly expensive for the government. The finance minister and central bank governor have both stated that sustaining the subsidies will place the government on the path of higher deficit spending financed by unprecedented domestic borrowing. The major buyers of these bonds are Nigerian pension funds and banks, so a worsening fiscal condition can (in an extreme scenario) can potentially weaken our banks and threaten pensions. A clear result of this borrowing, which is probably beyond contestation, is that it has led to the crowding out of private borrowing as rising yields have made government bonds a lucrative risk-free and high-yielding investment that has increased the cost of private borrowing. However, whether you buy this argument or not, there is an opportunity for the country to use the removal of this subsidy to effect some structural changes in the economy

A key reason the removal of the subsidy is generating so much uproar is due to the Gasoline-intensive nature of the Nigerian economy. A possible unintended consequence of decades of government subsidy is that we have effectively subsidized and encouraged inefficiencies because of the artificially low cost of PMS. Nowhere are these inefficiencies as prevalent and absurd as those of the transportation and logistics sectors: two sectors that affect everyday things as the cost of getting to work and the cost of food. Anyone who has visited Lagos will witness the huge number of cars on the road as almost the entire middle class (or anyone who can afford a car) drives to work, with carpooling being taken up by only a minute percentage of the population. That’s why the recent moves being made to introduce commuter rail to Lagos is a big, cost-effective step in the right direction. We need every metropolitan center in the country working on similar schemes.

These inefficiencies are not limited to intra-city transportation; they also extend to inter-city travels. It is beyond absurd that the vehicle of choice for inter-state transportation in Nigeria is the 18-seater bus. This is an inefficient vehicle for providing mass transit services over long distances. Other countries have the good sense to consign these buses for shuttle services between airports, tour sites etc. Spreading fuel costs over only 18 people gives us more expensive transit than we would have if we used 42 or 50-seater buses for inter-city transportation. Hopefully, higher fuel costs we force us to make this switch into large-scale, efficient transportation choices.

Obviously, I have saved the most egregious for last. And that is the logistics and haulage system in the country, which is the primary reason food costs can be expected to skyrocket following the removal of subsidies. Nigeria must be one of a few countries in the world where bulky, non-perishable goods are shipped almost exclusively over long distances (i.e. over 1,000 Kilometres) by trucks. Name the bulky stuff (cement, grains, steel rods etc), we transport it by road! We even transport petroleum products (including Gasoline) using trucks, no wonder everything costs more than it should. As a country, we need to revamp our railway network to transport bulky products in a much more cost-effective manner and also better monitor our pipeline systems so we can stop the lunacy of transporting Gasoline over 1,000 Kilometres by road.

I know adjusting to a life without PMS subsidies will be difficult for most Nigerians but we should not let this opportunity go to waste, we need to use this opportunity to correct the structural deficiencies in our economy.

Mitigating the “Mancession” in the United States – the need for great endeavors

"the historian has difficulty in suggesting the degree to which the canal obsessed and enchanted Americans in the fall of 1825. It was taken to be a symbol of the boundless potentialities of the country, its resilience and its hopes” – contemporary newspaper article following the opening of the Erie Canal in October 1825.

Much has been said of the effects that the Great Recession and its aftermath have had on the employment picture in the United States as the unemployment rate has stubbornly refused to go below 9%. A level hitherto thought to be highly unlikely by some really smart and powerful people (including the White House’s economic team which predicted a maximum level of 8% in Q1, 2009 as they tried to sell the stimulus package). While a 9.1% unemployment rate is bad enough, it is important to realize that this is an average number. And like all averages it masks some really telling differences in the characteristics of the various sub-populations in the country. Through the recession, men lost jobs at a faster clip than women did. College educated men have a lower unemployment rate than men with high school diplomas, a group whose prospects are in turn better than those who never finished high school. All this information can by no stretch of the imagination be deemed to be new or insightful as everyone agrees that the recession and its aftermath have been particularly harsh on blue-collar men who tend to work in construction and other cyclical industries.

However, what is particularly scary about the situation is that this is not your typical cyclical unemployment driven by the boom & bust of economic cycles. The sustained household construction boom of the 2000s is gone and is likely not coming back; the Obama administration may have saved Detroit but these jobs don’t pay nearly as much as they used to and many of the manufacturing jobs that have flowed to low-cost countries are unlikely to flow back. This trend of burly men used to working with their hands being out of jobs has profound socio-economic consequences ranging from declining consumer demand to failed marriages and even heightened racial tension and xenophobia. It’s not unreasonable to expect social tension, domestic abuse and other ills to result from men being out of work and having to depend on their spouses or partners for sustenance.

A lot has been said about the need for innovation, reinvention and retraining for the new skills in demand in the new knowledge economy. I am in full support of these moves as it is clear that a lot of the well-paying blue-collar manufacturing jobs are not coming back to the US, neither should we expect nor even hope for the building boom of the 2000s to resurface. However, I think retraining is just one part of the answer as the more we look at what it entails, the less certain a solution this option appears to be. Firstly, the unemployment rate for college graduates is considerably less than that of high school graduates. So an obvious solution will be for unemployed folks to head back to college, right? Not so fast actually. Imagine telling a 50 year old guy who’s been either working in factories or construction sites to head back to college for 2 or 4-years and have to study calculus, macroeconomics or whatever it is college students learn these days. And while he is at it he will have little or no income to support his family. So while it is a sound and noble idea, many working people will balk at getting on the college track due to the difficulties involved in executing such a move.

It’s however not all gloomy as not every job that is projected to boom in numbers over the coming years requires a college education. However, only 8 out of the 30 fastest growing jobs being forecast by the US government requires nothing more than a high school diploma. These are: Personal and Home Care Aides; Home Health Aides; Medical Assistants; Social & Human Services Assistants; Gaming Surveillance Officers/Gaming Investigators ; Pharmacy Technicians; Dental Assistants and Gaming & Sports Book writers/runners. Looking through these eight job categories very few jump at me as being particularly well suited for a middle-aged man who has been pouring cement or hammering steel for decades. I am not sure it is very reasonable to expect a 50-year old worker laid-off from a closed refrigerator factory in rural Pennsylvania or Illinois to be particularly excited to work as a home health aide or as a dental assistant. Also not sure many people will also be rushing to hire a guy who has been shaping steel (and who looks the part) for a job tending to Grandma and Grandpa!

However, it will only be gloom and pestilence for the blue collar man if the country chooses to have it that way. I believe there is a way out and this lies in something counterintuitive: launching a massive and sustained construction boom. Not the housing construction boom that created a mess big enough to sink the global economy. I speak of a nationwide infrastructure boom that will fix the country’s crumbling infrastructure and equally as important: put millions of blue collar men back to work using the skills they have gained over a lifetime. The American Society of Civil Engineers estimates that the US will require about $2.2 Trillion over the next 5 years to fix its crumbling infrastructure. People could be put to work fixing these infrastructure gaps that are an impediment to economic growth and a threat to human lives. Beyond fixing problems, there is a place for “great endeavors”: the building of the Erie Canals and Transcontinental Railroads of the modern era. This is the century of renewable energy so people can be put to work building the platforms of a green economy: building windmills and solar panels; revamping transmission lines and retrofitting homes and public buildings to make them more energy efficient. These things can be done and people could be gainfully employed doing thereby enabling the nation to buy time to retrain the workforce for higher knowledge while insuring itself against infrastructural decay and obsolescence.

This need not be entirely financed by the government. If there has ever been a time for public private partnership in infrastructure, it is now! The transcontinental railroad, the Suez Canal, Eurotunnel and many other landmark projects were not wholly financed by governments. There is no reason why the United States cannot enact legislation to build a National Infrastructure Bank that will be mainly privately funded. The money is there, the projects are there and the ingenuity and skills are abundant. If the rest of the world keeps piling money into Treasuries after a downgrade and were willing to finance NINJA mortgages for overextended people then they surely will invest in the debt and equity of an infrastructure bank investing in the future of the United States. It is a win-win for everyone and the millions of unemployed men will thank policymakers and financiers for it.