After Lockdown, Now What?

A number of countries are emerging from lockdown and New Zealand is in the select group in which there are very few new cases, and indeed we have days in which no new cases are recorded. Now comes the damage. The Economist ran an article that summarized what happened in China following the release of lockdown. Rides on public transport are down by a third, restaurants have 40% fewer clients, and hotel stays are a third of normal. Bankruptcies may be up to 20%. People are still wary, either of the virus or their wallet.

It is one thing to open shops, but another thing to get people to go to them and buy stuff. If the disease is still around, while some will take the risk, many others will not, although on this front, in NZ shops initially had huge days. It is not totally bad for those shops that can last the distance because for many things provided people have the money, they will still buy the same amount, other than, perhaps luxury consumables. However, the question then is, will they still have money? Different countries will have different problems here. Apparently in Europe a fifth of the labor force are in special schemes where the state pays their wages, but that presumably, cannot go on indefinitely. In NZ, after a week following lockdown, the jury is still out. People are working, but are they becoming wary?

In New Zealand, the State offered wage assistance to companies that had their income reduced by 30% due to the lockdown, which was a lot, but a number of companies, including the airlines, shed a lot of staff because it was obvious they were not going to operate at anywhere near their previous level. Airlines create a rather unusual situation: pilots rightly earn a lot of money, so would they be prepared to share work with another pilot, each at half-pay? The company keeps pilots on its books for when things improve, and most importantly for the pilots, they keep their minimum required flying hours up to date. That approach won’t work for low-paid workers. But then airlines may not have much work anyway. Here, there has to be social distancing. The passengers may at last get reasonable leg room (Yay!) but either ticket prices increase sharply or the airline realizes there is no point in losing money with half-full planes through social distancing.  The simplest way to raise ticket prices is to cut out the “specials”, so designed to fill aircraft. If the expensive ones with a small markup still sell, the airline may remain viable. So what should the pilots do? The question then comes down to predicting the future.

Herein lies the problem: most people will have choices, and those who more correctly accommodate themselves to whatever happens prosper. Those who make unfortunate choices, or worse, bad choices, will suffer. Governments also have choices, and they tend to be influenced by the next election, which in our case is this year. Propping up zombie companies is bad for the economy, but mass unemployment is bad for votes. What will happen? The pandemic will uncover some scabs in our society. Here, half of our deaths came from badly run rest homes. My guess is the biggest economic price will be paid by the poor, or the small business owner who is joining the poor. Furthermore, governments may still not be able to stem the downturn. In New Zealand, the Government announced a big spend-up in infrastructure, and shortly afterwards the biggest construction and civil engineering company shed 10% of its staff.

What happens to globalization? What most people do not realize is how interconnected the world economy is. As an example, Boeing assembles aircraft, but the parts come from a wide-ranging source. For a Rolls Royce motor, it too will depend on parts from a wide range of sources. If any of these sources break down because of the pandemic, there will be a problem. Equally, with a great reduction in international flights, maybe Boeing will stop buying when it can’t sell. Widespread unemployment could cascade out. Meanwhile, selected industries will clamour to their governments for bail-outs. There will be a cry for protectionism, without realizing how much “local” industry depends on elsewhere.The odd thing is, we now have a rather unique chance to shape the future. Can we do it sensibly? And what, really, is sensible? And how do you prevent the spoils, such as they are, going to the already super rich?

Government bails them out, but then what?

In New Zealand, I am far from certain that anyone knows what to do when our lockdown ends. The economist thinks that the money supply will fix all things and reserve bank has done what it has not done before: embarked on quantitative easing, Many other governments have done the same and the world will be awash with money. Is this a solution? It is supposed to compensate for the lockdown Two questions: is the lockdown worth it, and is the money supply the answer? To the first question, here the answer appears to be so, if you value lives. After two weeks of lockdown, the number of new cases per day were clearly falling, and by Good Friday the number of new cases had dropped to almost a third of their peak. They continue to drop and the day before this post, there were only 20 new cases. However, if we look at the price, our Treasury Department has predicted the best case is something like 10% unemployment, and if the lockdown lasts significantly longer than the four weeks, unemployment may hit 26%.

To the second question, the jury is out. Around the world, Governments think yes. The US Congress has prepared a gigantic fiscal stimulus of $2 trillion, which is roughly 10% of GDP. Some European countries have made credit guarantees worth as much as 15% of GDP to stop a cascade of defaults. New Zealand is rather fortunate because its national debt was only about 28% of GDP prior to the virus. Some predict the stimulus may reach 22% of GDP, but it has room to move before reaching the heights of some other countries. However, it is far from clear that it will successfully prevent a raft of defaults.

First, defaults always happen. In the OECD about 8% of businesses go bust each year, while 10% of the workforce lose their jobs. Of course, since economies have been expanding there was an equal or greater creation of business and jobs before this virus. That won’t happen post virus. Take restaurants as an example. Restaurants closing down may well re-open under new management, without the old debt, and not so many workers. That may not happen post-virus because people under financial strain or fear that unemployment might be imminent will not eat out, and the tourists, who have to eat out, will not be here. Therein lies the problem. If people fear there will be a slump, there will be; such fear is self-fulfilling. 

There will be changes, and some may be guided by the virus problem. Some businesses will cut costs by specializing in home delivery, and they should be doing that now because first in that performs well probably wins. For manufacturing, the relief of the lockdown may well retain heavy restrictions, such as expecting people to devise a way for working so they remain two meters away from others. That requires significant investment to do this. Will it be worth it? It seriously raises costs, so will people buy the more expensive products? But will this happen? The basic problem for small business is that it is almost a waste of time planning until the government makes its future laws and regulations clear, and once stated, sticks to them. I have run a small business since 1986, and the one thing that has always made things difficult is a change of rules. You get to know how to operate in one set of rules, but when those change the small business has too many things for too few people to do, and a successful small business is light on management. The owner tends to do everything, and I found new regulations to be a complete pest.

Meanwhile, the governments of the world have some interesting choices. Historically, when governments intervene, they seldom let things go back to where they were. If governments get used to regulating, will they let go? If you prefer to leave it to market forces, will that lead to greater wealth for all? As I heard one man say on the radio today, those with money will be looking to buy up assets, i.e. company shares that have become somewhat undervalued. Unfortunately, while that makes some richer, it does nothing for the general public.All of which raises the question, what should they do? That depends on what is required to get out of the slump. The obvious answer is to start additional businesses to replace what has failed, but how do you do that? One of the things that is critically required is money, but while that is necessary, it is not sufficient.  Throwing money at such things is usually a waste. A business needs three basics: technology (more broadly, how to make whatever you are selling), the ability to sell whatever you are making, and management, which is essentially getting the best us of your money, staff, and other assets. Only a very moderate number of people are skilled in even one of those, very few can handle two, and nobody can cover all three well. This is why so many small businesses fail. And that raises the possibility that what governments need to do is to somehow bring the required people together. And that is something with which governments have no experience.

Ebook discount

From April 13 – 20, A Face on Cydonia,  the first in a series, will be discounted to 99c/99p on Amazon. In 2129, Fiona Bolton has her life before her. She is a world expert in sonic viewing with a corporation-funded University chair, but when her husband protests against that corporation she finds herself recording his murder. She wants justice.

Jonathon Munro so wants to be important in a corporation, but he has no talent that should be needed by any corporation, until he finds himself in a position to help a senior conceal a murder. If he wishes to advance he must ditch his girlfriend, Sharon Galloway, who is developing a special digging device. Meanwhile, there is growing pressure to explain why, on a TV program, a battered butte on Mars morphed into the classical face and winked. Grigori Timoshenko forms an expedition to settle this “face” for once and for all. He needs Fiona to image the interior of the rock, he needs Sharon and her digger, and he gets Jonathon anyway. With hidden agendas, a party in with members hating each other, the gloss of visiting another planet soon wears thin. A story of corruption, greed, murder, the maverick, the nature of Mars, and with the problem of why would an alien race be interested in such a disparate party. Book 1 of the First Contact trilogy.

The Virus Strikes

By now it is impossible to be unaware of the presence of a certain coronavirus (SARS-Cov-2, causing COVID-19) that is sweeping around the world. (Wouldn’t it be better if some nit-pickers could stop changing the name and do something more constructive to deal with it?) Unfortunately, the time for containment has passed. It may have been that the only chance was early on in Wuhan because China can do things to stop the personal lack of consideration of others; the possibility of 5 years in a Chinese jail would inhibit most from personal stupidity, but the authorities did not get started quickly enough. This, in turn, may have been because the officials in Wuhan did no alert Beijing until it was impossible for Beijing not to notice. That golden opportunity was missed.

In New Zealand, we started with a law passed by which all people coming into the country had to self-isolate for two weeks. Within about two days a small number had been arrested for breaking that rule. In Wellington here we had someone fly in from Brisbane. He had been tested in Brisbane, but would he wait for the test results? No, he felt he wasn’t sick (so why was he tested?) Did he stay isolated until the test results? Of course not. When you are that self-centred, you do not suddenly become responsible. Wellington now has the second most cases in the country.

There was one woman who arrived in Auckland from overseas and was feeling ill.  At this stage she was advised to self-isolate but the law requiring her to had yet to come into play. So what did she do? She convinced herself she wasn’t so ill after all, so she flew to Palmerston North, where she discovered that maybe she really was sick so she flew back to Auckland. The net result of this is we shall get some idea of how easily this virus really does spread. So far, Palmerston North has three cases, but if there is an inexplicable surge over the next few days, we shall find out something. If, on the other hand, there are no such cases, we may be able to breathe a little easier. (It is not just the people sitting close on the aircraft; recall how people behave prior to boarding, during boarding, collecting luggage, and if using public transport, getting to and from the airport.)

While we were relying on voluntary compliance, the virus was actively spreading. The government has now required a complete lockdown, going out only for essential services. Will that work? In principle, if everyone on the entire planet stayed home for a month, all would be well. Those who had it would have to recover, but the virus would run out of people to transmit to. Simple? The problem there lies in everyone doing it at the same time. In the West, people want freedom of movement. Asking them to give this up seems to be beyond them. In New Zealand this might work. The police and if necessary the military are there to enforce it, and China appears to have shown this can work. We shall see.

As for me, I am self-isolating, only going out for groceries, but in my case, because I am retired it is no big deal. My day-time job used to be to do chemical research on contract for companies wanting to develop new products. That work has dried up completely. When potential clients are having problems staying open and paying their wages, research is the first to be stopped. As it happens, I was approached to write a chapter for an academic book on hydroliquefaction of algae, so writing that will keep me occupied. Searching the scientific literature can be done on-line these days.

The main tactic is not to get close to people. However, there is also the problem that the virus may land on something and you touch it. Staying at home is fine, but you still have to get groceries, and some people have to work.  Hand washing is important, but if you touch something after washing hands, that wash does nothing for what follows. The virus on the hand does no damage, but how often do you touch your face? What I intend to do is make a blocking gel to smear on my hands when visiting the supermarket. Two functions are desirable. One is to kill viruses. The second is to make the virus immobilized on the gel, like flies on flypaper. The coronavirus has a “crown” of protein so something that binds protein is called for. I won’t know for sure it works, but one advantage is that while I cannot get it tested for efficiency, I can back my own theoretical ability for myself.So, keep well, everyone. If all goes will and we all cooperate, this will pass. Finally, good luck all.

Conspiracies and Fake News

Heard any good conspiracies lately? Global warming is a plot by scientists to get more funding and have an easy life?  2019-nCoV was developed in Wuhan as a bioweapon? NASA beat the Russians to the Moon by faking it all in Arizona? The US government is hiding evidence of aliens? President Kennedy was shot by someone else? Vaccines are designed to infect and are just outright dangerous. Conspiracy theories come in all sorts of forms, some just plain ridiculous, some are sufficiently possible that they cannot be put to sleep as they should. The Kennedy assassination comes to mind. Oswald was that good of a shot? A top-grade sniper with a top-grade weapon, yes, quite plausible, but Oswald? Then, just to add to the confusion, every now and again such a conspiracy theory will be shown to be a fair representation of the truth. Oops! So why do these theories emerge and spread so widely? The simplest reason is people do not trust the government to tell the truth.

Sophia Rosenfeld, a Professor of history at the University of Pennsylvania, has written a book called “Democracy and Truth. A short history.” According to Rosenfeld, the occurrence of “fake news” has a long history, and the democratic ideal of truth never lived up to its promise. Gaius Julius Caesar was a master at promoting what he needed to get to the fore, and possibly the first to report about himself in the third person. The net result was the end of the Res Publica

However, things are getting worse, through technology.  Photos that have had serious adjustments, or are just plain fake, lies asserted to be true, truth “shown” to be lies, and the problem is, no single person can wade through this morass, yet the concept of representative democracy requires people to analyse and vote. What is supposed to happen is the wisdom of the crowd prevails, but what actually has happened for a very long time is information has been vetted and evaluated by an elite that controls what they do not want you to “know”.

Deterioration has got worse recently, and Rosenfeld argues this is because there is an increasing distance between the governed and governing classes. Because there has been clear evidence of the governing being less than truthful at times, the governed simply do not believe them. Sometimes those governing have been just outright clumsy. An example, in my opinion, is the Roswell wreckage. To assert it was a weather balloon was stupid when locals who saw the wreckage could clearly see it was not. Had they come out straight away and said it was a failed experiment from the nearby Defense weapons development site, everything would have been forgotten. “The military made something that did not work,” would have ended everything right then because it would be believable. Mind you, I gather it was not exactly a failure as Roswell is an otherwise unlikely tourist attraction.

Rosenfeld apparently believes science is part of the problem since science has “experts” and these are out of touch with the people. Maybe that is true. Whatever, the problem then is that people embrace emotions, intuition and “truths of the heart” over dry scientific evidence. Of course science can also be wrong, because it is based on the interpretation of observed evidence. The fact that scientists often resort to complicated mathematics does not help, and sometimes their explanations remind me of that TV show “Sledge Hammer”: trust me, I know what I am doing! Intuition will tell many people that if scientists did know what they were doing, they could explain everything in reasonably simple terms. The ordinary person can accept that he or she has to take “how they worked it out” on faith and a broad statement of the evidence behind a conclusion should be adequate. If the conclusion is wrong, other experts will clear that up. 

Conspiracy theories tend to arise in part from attempts by ordinary people to make sense of often overwhelming information, based on personal values, and they do not wish to make the effort to sort out the truth. As an example, “Chemicals are bad!” Yes, some are, and here comes a problem: if the governing can be shown to be lying at some other time, then it is not a problem to assume they are lying now. Now, it is easier to spread distrust than make the effort to use logic. In my example, the statement is simply deficient. If we amend it to “Some chemicals are bad” most people would agree and there would be no problem, except that the conspirator would have to do some work and find evidence for the particular chemical. The bad news here is that many are at fault. The evidence is often either unobtainable or so widely scattered as to have the same effect; the government often wants to keep unpalatable news away from the voters; officials often conceal for no particularly good reason. So the governing tend to remain simply by spending more money on remaining., and that means those governing are even more separated from the governed. Positive feedback that makes the problem worse!

Brexit Strikes Again

Last week, I reblogged a post that I found to be quite interesting. It appears that currently there is chaos in Britain regarding Brexit, and it is worth looking at how we got here. As Philip Henley pointed out, the vote to leave the EU in accord with the results of a referendum was passed by Parliament by 498 votes to 114 votes. That became law and is the default position should a deal not be made. The May government then set about negotiating a deal with the EU, and the EU became very hard-nosed: its attitude was that it would make the situation as tough for the UK as it could reasonably do to discourage others from leaving, but also leave an easy route to remain. One of the provisions of this deal was the so-called Irish Backstop, nominally a transition period to ensure the Irish border could be kept open, but with the proviso that it would remain in force until the EU decided that it was no longer needed. The net result of this is the possibility that it could refuse indefinitely, in which case Northern Ireland would effectively become part of Eire. This deal was rejected by Parliament three times.

As her tenure as PM came to an end, Parliament came together and the ordinary MPs rebelled and took over the House, claiming they were trying to reach an agreement. At first they came up with eight possible options, but when put to the vote, all eight were rejected. Obviously, they were a negative bunch. After a panicking weekend, they reduced the number of options, but again nothing got a positive vote. Missing from the choice was “no deal”; the reason being that the Speaker stated that was the default option. That meant that everybody who wanted the “no deal” exit voted no to everything and those who wanted various deals cancelled each other out. Of course, there was no alternative deal that was realistic; both sides have to agree for there to be a deal and the EU stated there were no alternatives. Accordingly, the “no” vote won. What we learn from that is that in such a situation, the order you do things is important.

Part of the problem appears to be there are a number of hidden agendas. Nicola Sturgeon wants another referendum, as do the “Remainers”. Sturgeon simply wants a precedent for another referendum for Scotland leaving the UK, and presumably taking the North Sea Oil revenues with it. The “Remainers” simply won’t accept they lost the Parliamentary vote. Corbyn merely wants to be Prime Minister. I have heard no clue what he really wants to do about Brexit, other than annoy the government.

How could this have been different? First, decisions should be final, and the first decision was whether to leave or not leave. An overwhelming majority took the leave option. MPs then had the obligation to make that decision work. That vote was the time to argue whether the first referendum was fair, binding, or what. They declined because they did not want to come out and tell their own constituents they don’t care what they think.

The next step is to negotiate a deal. The mathematics of decision-making is called Game Theory. In terms of mathematics, there are clear requirements to get the best from a negotiation, one of which is that if the bottom line is not met, you will walk. For that to mean anything, it has to be credible. If the UK politicians want anything better than the May deal, then “No Deal” must be on the table, and it must be credible that will apply. Johnson is as near to credible as possible. If he is undermined, the UK is highly likely to lose.

At this point, the behaviour of some MPs is unconscionable. They have no proposal of their own, they have heard Johnson say he will try for a deal, and Johnson has laid down just one condition – the Irish backstop must be replaced. He should be supported in his efforts unless they have a better idea. There is talk of Johnson being undemocratic for suspending Parliament for 23 days. As Philip Henley has pointed out in the previous post, 23 days is far from being unprecedented. Johnson has the job of negotiating some sort of deal with the EU with a pack of yapping dysfunctional MPs offering a major distraction. The fact is, none of them have come up with something workable.

Now Parliament has voted to block a “no-deal” exit. Does that mean there must be a deal? No, of course not. First, the bill must be passed by the Lords. Since they are largely “Remainers”, they probably will pass it, although when is another matter. However, for that to be effective, there actually has t be a deal on offer. The only one that is the one they have voted out three times. The EU says they will not offer another one, although what would happen if Johnson offered a workable option to the Irish border is uncertain. The Commons also voted that the UK request another extension. Whether the EU would be interested in that is less certain; they must be on the verge of saying they want rid of this ridiculous situation. Note if only one EU member votes against it, it fails. Then after demanding an election for the last few months, Corbyn has vetoed one before Brexit date, deciding instead he wants another referendum. (His problem is that many of the Labour seats come from regions that voted strongly for leaving.) Just what that would solve with this dysfunctional lot of MPs eludes me. However, the so-called blocking vote has arisen because a number of Conservative MPs have defected. They were always “Remainers”, but their defection means Johnson at best runs a minority government that will not accept anything, or everybody else votes in Corbyn as Prime Minister. That is unlikely, so it will be Johnson who goes to Brussels to ask for a deal or an extension. The question then is, how intense will his asking be?

Space Law

One of the more notable recent events was the launching of a non-government rocket by a company run by Elon Musk to the International Space Station. Apparently Boeing is going to do something similar in the not too distant future. In some ways this is exciting, because one way or another, human ventures into space will increase markedly. I recall in 1969 sitting in front of a TV one morning (I was in Australia) getting direct feed from Parkes to see the first Moon landing in real time. (OK, there was a slight delay due to the speed of light, and probably more due to feed looping, but you know what I mean.) There was real tension because while everyone was reasonably confident that NASA had selected a good site, it was always possible the ground was not as solid as it might appear and it only needed for the lander to roll over and the ending might have been less than happy. Additionally, the landing was not entirely optimal, and fuel consumption was a little higher than anticipated. This may not seem important, but it did at the time. But all ended well. There were several more Moon landings, and apart from Apollo 13, the program was brilliantly successful. The recovered rocks are still yielding scientific information.

Then the program ended. And nothing more happened. We constructed the International Space Station, with reusable shuttles, but somehow this has had limited value. Certainly, it has permitted the testing of the effects of long periods of weightlessness on people and on other life forms. The best part of this was we got international cooperation. Arguably, humanity was going into space and not just various countries. We have sent a battery rovers and space craft through the solar system, and we genuinely know a lot more about our planetary system. When I was a schoolboy, I believe I knew as much about the planets, other than their orbital details, as anyone. That may sound ridiculous, but I believe it to be true because basically nobody knewvery much at all. They guessed on the basis of their observations, and their guesses were largely wrong. So that part of the space program has been a resounding success, but it brings into question, what is the point of acquiring that information if we do nothing with it? If we do, who does? If different parties go to space, what will be the rules they must follow? Who decides? It is much better if we can get this sorted before various parties get there.

There are two schools of thought. One is, we should stay here and leave the rest of the solar system for careful study, or if we do go somewhere, like Mars, again it should be for study, and we should leave it alone. The other school of thought is the solar system is a resource, and we should be free to tap into it. Which brings up the question, who decides? And what happens if someone does something another group decides should not be done? What happens if one government decides to do something, and a private company decides to do something similar in the same place? How are issues such as these to be resolved?

On Earth, we use the courts to resolve many such issues, although for some issues, governments decide, and of course the split between governments and courts varies from country to country. Worse than that, there is often no real logical reason to prefer one route over another, and the decision is made through politics. Again, different countries have different political systems, so two countries might reach very different decisions based properly on the way they conduct their affairs. Often enough, the various countries find that there is an impasse in finding common ground. What then? Carl von Clausewitz’ “war is a continuation of politics by other means” is not where we want to end up.

There is another problem. For a court to resolve something, there has to be law, and law follows from sovereignty, that is, the right to impose the law, AND the means of enforcing it. So, what happens in space? There is no sovereignty, and suppose there were settlers on Mars, why should they not have their own sovereignty? While they might start off as a colony, through needing a lot of support from people on Earth, their laws should not be imposed by people who have no concept of what life is like there. For example, environmental laws to conserve nature on Earth should not be imposed on Mars, where settlers would struggle just to get what they need to stay alive. Additionally, why would Russian settlers on Mars have to obey American laws, or vice versa? We might argue that the United Nations should set the laws for space, but unless all countries interested in exploring space agreed to them, why should they? Why should countries with no interest in space have standing in setting such laws?

Then there is the question of enforcement. The US is creating a “Space Force” so what happens if they try to stop Russians, say, from doing something in space that the US does not like? Settlements on planets are another matter. There, in my opinion, enforcement will have to fall on settlements, if for no other reason than if a crime is committed on Mars, we cannot have the situation where everyone has to wait for possibly a year and a half to get investigators from Earth. And if anyone thinks there will be no crime, I say, think again. The history of colonization is littered with crime. The US had its “wild west”, Australia its bushrangers, and the history of New Zealand has serious crime, the most spectacular being armed hold-ups of gold during the gold rush days. There will also be other opportunities for crime that are a little more sophisticated, such as in my novel “Red Gold

But there will also be serious commercial disagreements, particularly if some want to use something and others want to preserve it. I believe everyone has the right to their opinion, but there have to be rules and a means of enforcing them to avoid conflict. This procedure should be fully established beforeit is needed. There is plenty of time to argue now, but not in the middle of a dispute, and it is wrong to impose restrictions on an activity when huge sums of money have already been spent.

Venezuela in Chaos

Venezuela has enormous oil reserves, it has been selling oil for nearly a hundred years, and its people are impoverished. So what went wrong? Some say it is a fine example of the failings of socialism, but in fact it was plutocratic capitalism that set the rot in place.

Venezuela was possibly the richest country in South America before it struck oil. Because there was so much of it, foreign oil companies poured in, as did their money. This caused the local currency to increase wildly. The oil companies paid locals huge salaries or wages, and the growth was so pronounced that any reasonable contractor worked in the oil industry. That meant that people left agriculture and manufacturing by locals was squeezed for capital.

Worse, when the politicians become corrupt, which is easily done when law and order is weak and there is money flowing like water, the average person was overlooked and they slid into poverty. At first the plutocrats simply walked off with the profits but by 1950 the government reformed the industry and required half the profits to go to the state. This had the effect of making the government essentially totally dependent on oil money. For Venezuela the effect has been so dramatic that oil now accounts for about 98% of its exports, and up to 50% of its GDP. In the 1970s, the Venezuelan government received huge incomes, which led to rampant mismanagement and embezzlement. In the 1980s oil prices plummeted and Venezuela sustained rampant inflation and massive debts, in part due to government investments offshore that were not exactly wise. The IMF gave its usual recipe: austerity, and there were major riots. Austerity hurts the poor, while the rich remain unscathed, which may be why the bankers of the IMF favour it.

In 1998, Hugo Chavez was elected President on a socialist pledge, and while he did significantly improve the lot of the average Venezuelan, he also badly mismanaged the oil industry and the economy in general. Chavez also bailed out Cuba by supplying it with oil, and also managed to greatly increase national debt. His government was authoritarian, and when he was replaced by Maduro, the latter has probably become more authoritarian.

Maduro inherited a mess, and he was not gifted with luck. Between 2014 – 2016, oil prices slumped by a factor of three. The government gets out of its debt problems by inflating the currency, which may be running at a million per cent now. The effect of this is the impoverishment of the middle classes. The very rich get richer by picking up assets at a huge discount in forced sales. Currently, 90% live in poverty.

There are various opinions on what should have been done. The most obvious one is to have strong law and order and fiscal responsibility. The second is to ensure the wealth is controlled. A good example of this is Norway, where oil contributes 80% of its exports, but only 22% of its GDP, and huge reserves are being held for the future. Another good example where I have lived was Calgary. The state government poured money into health care, which was extremely cheap when I was there, and they had excellent roads and general infrastructure. My opinion is that such resource-rich economies must invest a large amount of the income in broadening the economy. In Venezuela’s case, there has been economic broadening, although agriculture contributes only 3% of GDP. It is largely a food importer, for no good reason. Nevertheless, while exports total $32 billion, imports only total $17.75 billion. The problem is with government finance. It has income of almost $93 billion, and expenses roughly twice that.

Maduro replaced Chávez in 2013 and narrowly won an election. There was a recent election that Maduro also won, but which the opposition boycotted. There are accusations that the elections would be rigged, and since then there are accusations that they were, but if there were no opposition candidates that seems somewhat moot. It is one thing to complain that elections were rigged; an entirely different matter to assert they were going to be rigged. Two weeks later, Juan Guaidó, leader of the legislature, declared himself acting President. The US government has declared support for Guaidó and refuses to recognize Maduro, and threatens that if he does not step down, they will make him. They declare the election was illegitimate, but do not cite any grounds. Exactly how Guaidó declaring himself President is more legal eludes me. If the opposition did not stand, it is hard to see how Maduro could not win, and if simply boycotting an election was sufficient to overturn an election, why Mr Trump could consider what would happen if Hillary had boycotted their election. The US claims the majority prefer Guaidó, but arguably the majority voted for Hillary, and I don’t see Trump stepping down. Nor should he, at least on that ground. The rules are the rules. Trump has even hinted at military intervention. Other countries have backed Guaidó. Macron has argued he should note the protests on the street. So should Macron. Hypocrisy runs strong when politicians have a deep problem and they can divert attention from their own failings.

The Venezuelan military is at this moment behind Maduro, and while that is the case, short of a massive US invasion, he is likely to stay there, and the Venezuelans are likely to stay poor. US sanctions are not helping, but US sanctions have been there for quite a long time and are not recent, although the recent freezing of oil money will hurt the poor even more. The history of US intervention is not good, the worst example being, in my opinion, the removal of Allende in Chile, which occurred because (a) he was a socialist, and (b) US corporations could control the copper. The fact that Pinochet murdered a large number of Allende supporters bothers not the US conscience. I heard one speech where it was stated that control of the oil industry would make things better for Venezuela and the US. So at least someone in Washington thinks US corporations should have the Venezuelan oil.

So how do they get out of this mess? Who knows? The economists say Venezuela must diversify its economy and do a number of other things, but the problem is with most of the population impoverished, they cannot start much. One thing I have learned while running my own business is that if you have no money, you are screwed. So what will happen, other than the poor becoming poorer? Who knows?

Brexit – Where is the Logic?

Governance is an interesting problem, and since I write novels, a number of them are about this. In my Dreams Defiled, one of the characters is given responsibilities on the highest governing body, and what she finds is that while some, as expected, oppose what she wants to do, others, who are supposed to be working for her are busy undermining her. If that sounds like what is happening to Theresa May, it is of course accidental because the novel was published well before this Brexit debacle, but had she read my novel, just maybe she would have taken some of the advice I had given to my character (who ignored it, of course) and would not be in this mess. Of course she could well be in a different mess.

Why logic? Logic may seem a funny requirement to some, but it is a means of reaching conclusions from a given set of premises in an orderly fashion, and it requires you to state the complete set of required facts, which include your objectives, then clearly identify the premises to be used.

In this context, the opportunities for Britain are to remain in the EU, exit with a deal, or exit with no deal. A deal involves both parties, and the EU has stated clearly that the deal Theresa May put to parliament is the onlydeal they will accept, there are precisely three possibilities. Corbyn has voted down the deal, he has stated that no deal must be voted down, which leaves only remain. Except he has not got the courage to say so. He has now proposed that there be a second referendum, except he also refuses to say whether he believes this to be the proper way to go. Brexit has been plagued with leaders who have behaved illogically, starting with Cameron. If you are happy with where you are, it is illogical to offer change. Cameron, satisfied that the people would vote to remain, offered the referendum to silence some vocal members of his party. Risking the country’s future to address a personal deficiency is not “top of the class material”.

If you set out on a journey, logic suggests you should have decided where you are going. It helps to point you in the right direction. Accordingly, before issuing the leave notice to the EU, the British politicians should have decided what they were trying to achieve. Of course they would not get all they wanted, but they most certainly would not get what they failed to request.

The first requirement in any negotiation is you should have a line below which you say, “No deal”. Each side usually starts with a position that is most desirable from their point of view. Each side then decides what from the other’s position they can accommodate, what they cannot give up, and how badly they want the deal. This last part is important, because the more you want it, the more you have to concede. However, the final result must not be too one-sided, because if it is, the losing side will then set about doing whatever to undermine it. However, one of the more bizarre facts of this situation is that the UK politicians are finally realizing they will have to accept some of what they do not want.

For the Europeans, they have several objectives, but one of the main ones is to protect the integrity of the EU. If a leaving country were to get the same advantages as a member, the EU would disintegrate, so the UK has to realize it has to give up something. I believe the major thing the UK values is the free movement of goods and people going into the EU, but what it does not like includes the free movement of people tothe UK, the imposition of Brussels rules, and the concession of sovereignty to the European Court of Justice. There are other issues, such as the potential for a European army, and the trend towards downstream political unity. They are not ready for the United States of Europe. 

If the UK leaves, they can do nothing about the free movement of goods and people to the EU, as the EU determines these. On the other hand, the EU should see advantages in keeping an association with the UK, so reciprocal rights come into play. The fear of sales declining is probably unwarranted. The UK has a trade deficitwith the EU, so the EU has an interest in keeping trade going. The UK is Germany’s biggest market for cars, and the UK could easily purchase vehicles from elsewhere, or even go back and make them, given electric vehicles offer a great start-up opportunity. Of course there have are advantages in being in the EU and these have to be given up, but a trade deal is not imperative. New Zealand has no such deal, and we trade quite harmoniously. Yes, there are limits to how much we can sell, but that is one of the facts of life. There is the rest of the world.

We also hear statement that there will be chaos with “No Deal”. This reminds me that chaos sufficient to bring the industrial world to its knees would occur on January 1, 2000, through the so-called millennial bug. I seem to recall waking and finding things going on more or less as expected. Unless politicians do something very silly, I expect the UK citizens will wake up on March 30 and feel more or less fine.

If you ask, what do border inspections achieve, you will conclude there is no need for a hard border, or border inspections. What would they achieve? Leaving aside the fact they cannot be put in place in time, tariffs do not need to be collected at the border. Sales of all goods have a VAT tax. That can be modified to collect tariffs at the same time. If the objective is to keep out people, why? If they are simply coming to spend money, who cares? If the objective is to stop illegal immigrants from working, then you do that through the tax system. They have to register to get a tax identification number. Sure, they could break such laws, but the simplest way of stopping that is to make it very expensive for the employer. The employer now becomes your immigration officers while you sort out these border issues. The prevention of criminals entering, or agricultural pests or viruses would be dealt with the same way as now. There is no reason why March 30 should be particularly different from March 28. So the EU might block things. That you cannot help; all the UK can do is make things sane where it controls them.Just to add to the complications, the Irish backstop is claimed to be necessary because of the Good Friday accord. As I argue above, the absence of border controls is not insurmountable, butthe recent terrorist attack by the New IRA may be making that accord lose value and harden attitudes. It will be interesting to see what the Republic does about such activities. In the meantime, good luck, UK. The current efforts suggest it might be needed.

Leaders failing.

Leadership is an interesting concept, and I have tried to make it the centrepiece of some of my novels, without being too obvious. The leader may appear to be obvious, but recall just because someone is in front and there are a lot behind does not mean the one in front is leading. The others could be queuing up for a backstab! And the bigger the problem, the easier it is for a leader to fail. Brexit is a clear failure of leadership. In the first place, Britain was comfortable in Europe. There were the inevitable politicians who wanted out, but there was no pressing issue requiring an immediate vote. The politicians who called it really wanted to stay in, so first, why did they call it, and second, if they felt they had to call the vote, why did they not wait until they had mounted a campaign that made it much more likely they would succeed? Having called it, they then should have campaigned hard to maximise their chances of winning. Instead, they went through the motions, and seemed like stunned mullets when they lost. They then accused the other side’s campaign of being full of lies. That might make them feel better, but if it were true, why did they not point out the lies during the campaign? Did it not occur to them that when the voters voted the way they did, just maybe what the politicians and their rich friends wanted was not representing what the voters wanted?

As for how to go about it, there are at least two pieces of advice from Sun Tzu that should have gone to the top of the list: first, know thyself, and second, know the adversary. The second one is a little more difficult but the first should be mandatory. Accordingly, the first step must be to decide whether to leave, i.e.whether to honour the referendum, and whatever you decide must be final. At first sight it might look like they did that, but nevertheless a lot of the politicians have been hoping some reason will arise whereby they can flag the whole thing away and stay. What I think Theresa May should have done was to individually make each member of her own party pledge to honour the referendum, and to work for the betterment of Britain, or resign. If they refused to do either, then she needed to call an election, and ensure those who refused to go by the decision of the party were prevented from standing for the party. That could effectively be a second referendum, but it is pointless to continue when about a third of your team are busily trying to undermine you. In any case, she called an election without anything to do with Brexit, and that was not a fortunate result for her. Had she got her party to commit, when she went to Europe she could say Brexit is going to happen, no matter what. What we are now discussing is what our relations will be then.

That leaves the question of negotiation. I have done a little of this with a multinational company that lead to two joint ventures, so I have some knowledge of what is required. The very first step is to meet with your own team and get agreement on what the bottom lines are going to be. These are the things that if you do not get them, you walk away from the negotiations. It is important that these are extremely important, and there must not be many of them. These are NOT to be used to gain an advantage over the opposition, and they are not to try to force the other side to give something up. They are simply the things that make walking inevitable. For the Brexit negotiations, one of those required bottom lines might be the question of Ireland; whatever the outcome, Northern Ireland must continue to be treated the same way as the rest of the UK. That they never recognised this until apparently now meant that they have got themselves into a position where it is difficult to see how they can progress the way they wish to progress. If you tell the opposition that something is a bottom line, and it is a reasonable one, then they will accept it and try to work around it if they want to negotiate.

Which gets to the next point: each side has to see an advantage in the end position. To some extent, Europe cannot help but see Brexit as a negative, so the emphasis has to be to determine what advantages there are for Europe for what the UK wants. That means there have to be concessions, and here the UK have made many. However, there also has to be a clear point at which if the opposition wants too much, you have to be able to say no and walk. And one of the most important points is that when you represent your team, the other side must believe that all the team will stand behind you. Of course there are also times when you must say, “I must consult my team,” over something. The leader must never wing it, other than for minor issues.

The EU leaders have also failed. They have done their best to get everything they could, which is all very well, but if they demand so much that the whole becomes unpalatable, they too end up with nothing. What they have failed to recognise is the person fronting for Britain was not really leading. So far Britain has made quite a lot of future concessions regarding payments of this and that. No deal means all those billions of pounds are lost to the EU. The EU can also lose, and the tragedy is, the various failures of the leaders have most likely ended with a lose-lose scenario.

To change the subject entirely, Christmas is near, so I wish you all a very Merry Christmas, and all the best for 2019. This will be my last post for the year, and I shall resume mid January.