31 August 2013

Let Them Eat Bullets

Let's start with the clarification. Mixing metaphors isn't as guaranteed to work as mixing a martini, shaken or stirred. The previous installment found me looking at a meaningful thread through some of the day's reporting. Alas, I wrote
That's the potatoes and onions. Here's the meat for the stew.

When I should have: That's the warp and the weft, now here's the pattern. A small detail, but since title selection gets nearly as much of my attention as content, an egregious confusion.

Another day, another thread weaves its way through the news.

The literary world is prototypically Darwinian, only the good survive. Or, at least, that's how it's supposed to happen. Lennon and McCartney sung of the paperback writer, but serious authors are, well, serious. J.K. Rowling, by my lights anyway, is just a paperback writer who lucked out. While I've never had the stomach to actually read any of the Potter saga, she has attempted serious writing post-Potter. The first attempt, an "adult comedy of manners", was a flop with the critic class. And so was the second, a mystery, "The Cuckoo's Calling", and didn't sell but a middling number either, until it was revealed that Robert Galbraith was J.K. Rowling. Here's the humour: John Kenneth Galbraith, generally referred to by J.K., was a very left-wingy economist. No, he didn't have a son named Robert; but his kids are generally famous if you run in their circles. Somehow I don't think this was coincidence. What, exactly, Rowling was trying to say? No idea.
Nor did "The Cuckoo's Calling" get much critical attention. I asked Little, Brown for reviews that appeared before the identity of the author was known, and the only examples it provided were from Publishers Weekly, Library Journal and Booklist, all trade publications. Several newspapers reviewed it in London, but no mainstream American book critic did. The early reviews were positive -- far more so than those for "Casual Vacancy" -- which must have been heartening to Ms. Rowling. But those in Publishers Weekly and Booklist were a single paragraph, and they failed to generate much buzz or help it stand out from the masses of genre fiction published each year.

Was the leak staged? No one has admitted so, claiming that it was an accident. But the birdy who steals other birds' nests was saved from oblivion. Not so much for other "first time" mystery writers.
"I invested tens of thousands of dollars and a lot of publishing capital over nine months because I believed in that book," Mr. Entrekin said. "This is what publishers can do to add value. It's not slapping on a name like J. K. Rowling."

Entrekin runs Grove Atlantic, and is describing what he did to promote a new writer. The exception proving the rule.

Staying in the arty world, the Minnesota Orchestra continues to be locked out. Once again, management blames the peons for the problem; the orchestra's endowment just can't stand to pay the players.
The standoff began last year, when the orchestra, whose endowment suffered in the recession and which has been running deficits, proposed a contract cutting the base pay of the musicians by nearly a third, to $78,000 a year from $113,000.

Anyone who's kept track of Mr. Market since March, 2009 knows that, to quote J.K. Galbraith, "financial genius is a rising market". In other more pointed words, management of the orchestra were incompetent if they indulged in CDOs and such in the runup (or, rundown) to the Crash, and far more incompetent if they've not ridden the rise, no matter their decisions into the Crash. The endowment should be, at least, as fulsome now as before the Crash. Some background, not from management. Yet another case of Darwin visiting the hovels, and not the McMansions.

Now, on to that exotic marigold hotel. The rise of the BRIC, particularly the IC axis, has always irritated me. Not that I deplore industry and hard work, and all that. Rather that I deplore fascist style capitalist exploitation. Ask oneself this simple question: with more than a Billion People each, why do India and China not develop an indigenous, domestic, demand? There's a huge market in each country. Why ignore it? It was Nixon's avowed reason for going to China; opening such a massive market to American goods (didn't turn out that way, and was never about securing markets for capital). And simple answer is that neither country has a history or predilection for equity in wealth. It was simply easier to exploit 'free trade' with Western countries, and get dollars, than it was to develop organically. Eventually, the golden goose, the Western middle class consumer, dies a lingering death. And, so too, the BRIC. Being export dependent is kind of like being a dependent welfare queen, or Blanche DuBois depending on the kindness of strangers.
Structural problems were inherent in India's unusual model of economic development, which relied on a limited pool of skilled labor rather than an abundant supply of cheap, unskilled, semiliterate labor. This meant that India specialized in call centers, writing software for European companies and providing back-office services for American health insurers and law firms and the like, rather than in a manufacturing model. Other economies that have developed successfully -- Taiwan, Singapore, South Korea and China -- relied in their early years on manufacturing, which provided more jobs for the poor.

More to the point: by relying on cheap, by US/EU standards, labor which is "exported" to those places, much less (perhaps, little) is done to develop the domestic economy. While the author, an Indian by the way, does compare with other poor countries which turned to manufacturing, those other countries are closer to the ideal exporter: small in relation to the target economies. With capital productivity, output couldn't be expected to be consumed domestically. India and China, on the other hand, have ample consumers, if only said consumers had income to provide 'real demand'. Yet China exports a stunning percentage of its manufacturing (read the paper, it's a gas), as high as 35% before the Great Recession.
( from that paper:
Domestic demand could not absorb this massive production growth and China went from being a net importer of steel, as late as 2004, to the largest net exporter in the world.

India can still become a manufacturing powerhouse, if it makes major upgrades to its roads, ports and power systems and reforms its labor laws and business regulations. But the country is in pre-election mode until early next year. Elections increase pressures to spend and delay reform. So India's weakness and turbulence may persist for some time yet.

So, in the end, the author, covertly, asserts that India's best solution is to diminish distributional effects from its growth. One can't have it both ways. Either an economy is structured to provide the greatest benefit to the greatest number, or provide additional comfort to those already comfortable. The former is essentially socialist, the latter fascist. Who's to say that a fat and happy guy who sits at a desk all day mindlessly typing numbers into an Excel spreadsheet, which he didn't "program" or understand, is any more worthy of moolah than a farmer who tends a field? Which provides a greater contribution to the economy? It's a policy question, not a quant question.

Now, for the bullet. More reporting on the suicide of the Zurich Insurance CFO.
Mr. Ackermann's abrupt resignation a few days after Mr. Wauthier's death interrupted a career spent fearlessly shaking up the European business world and advocating American-style standards of corporate performance. For many Europeans, the suicide raised questions about how far hard-charging captains of industry should go in their quest for profits.

Darwin uber alles. While we don't yet have reporting of how Wauthier died, the classic .45 in the hard palate fits the theme.

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