Opinion

Edward Hadas

The spirit of Christmas presents

Edward Hadas
Dec 20, 2011 19:39 UTC

By Edward Hadas

The opinions expressed are his own.

Ah, the curse of materialism. The true spirit of Christmas has been obliterated by a landslide of gifts. The crass commercialism which surrounds the experience of holiday shopping, not to mention the returns and post-Christmas sales, has turned this joyous holiday into little more than an exaltation of the worst aspects of our modern consumerist economy.

Or so it is often said. But is the complaint fair? It’s certainly true that the exchange of gifts on a large scale is a relatively new feature of Christmas festivities. In the 1840s, Charles Dickens has the Spirit of Christmas Present take the miser Ebenezer Scrooge to witness joyous celebrations of the feast. Food, drink and good cheer are in abundant supply, but there are no presents.

In the 1880s, hand-made gifts were making the day special for many American children. By the 1920s, a more commercial spirit had triumphed in the land of mass production and the factory-made Christmas was already causing complaints about inappropriate gifts. According to historian William Waits, some businessmen felt a little queasy about advertisements for such supposedly ideal Christmas gifts as a can of paint, a cooperative apartment, potatoes and floor wax.

Waits notes that Santa Claus had starred in many seasonal advertisements. He plausibly interprets this as a sign of discomfort with the invasion of the cash nexus into a holiday which was then still considered predominantly religious. The desire to make people buy things and the search for profit seemed to fit poorly with the poor infant of Bethlehem. But the reworked Saint Nicolas took gifts out of the marketplace. In Waits’ words, Santa “did not use money and was not engaged in making profit…. His gargantuan giveaway was antithetical to pecuniary self-interest and its only reward was the satisfaction of making recipients happy.”

The jovial generosity in the North Pole workshop can certainly be interpreted as no more than a feeble attempt to escape the dark reality of “pecuniary self-interest” (aka greed). There is no question that Christmas is now a big business. Holiday presents account for about 0.6 percent of U.S. GDP, based on spending intentions reported in a Gallup survey. Producers and retailers alike cannot easily separate the spirit of the season from the call of the cash register.

Casting the runes on climate change

Edward Hadas
Dec 14, 2011 14:58 UTC

Something has gone wrong with global warming. It’s not that the world has stopped heating up. It’s that the anti-warming political movement, which seemed almost unstoppable when the Intergovernmental Panel on Climate Change won the 2007 Nobel Peace Prize, has stalled.

Last week’s United Nations climate change conference in Durban ended with little more than an agreement to talk some more about what to do next. Even that was too much for Canada, which has just said no to emission-reduction targets. The activists blame recalcitrant governments and many commentators blame economic distractions. They are probably both right, but I think the activists’ own approach bears much of the responsibility.

While only experts can judge the strength of the scientific evidence for man-made climate change, no technical knowledge is required to be troubled by the way the activists present their case. The willingness to describe knowledgeable opponents as “deniers,” a word previously used only for fantasists about Nazi atrocities, suggests a very unscientific attitude.

Cheeseburgers and death: de-socializing health care

Edward Hadas
Dec 7, 2011 15:43 UTC

By Edward Hadas
The opinions expressed are his own.

Americans are both the fattest people in the world and the biggest spenders on health care. Both those facts can be traced, at least in part, to a common attitude.

First a few numbers. The latest global handbook from the Organization for Economic Co-operation and Development (OECD) shows that 34 percent of Americans are obese by the criteria of the World Health Organization. In health care spending, the United States leads with 17 percent of GDP. In both categories, U.S. numbers are almost twice as high as the average numbers of OECD members.

The extra fat accounts for only a small portion of the extra American spending on health care. Researchers recently estimated that the medical expenses caused by obesity, which is connected to problems such as high blood pressure, heart disease and diabetes, amounted to $147 billion in 2008. That number suggests that even if Americans were no fatter than the OECD average, they would only spend 3 percent less on health care than they do now.

Mr. Fine Suit visits Europe

Edward Hadas
Nov 30, 2011 06:00 UTC

Once upon a time there were 11 prosperous merchants who lived in a land of peace and plenty. They decided to form a league that would work together for everyone’s greater good. But then a charming man in a fine suit came around with a tempting speech: “I love your project and trust your businesses. I will lend you money at a very attractive interest rate”. How nice, thought the merchants. Our customers will love us if we use the money we borrow to give them better deals.

All went so well that six other merchants were proud to join the league. Mr. Fine Suit seemed pleased. He reduced the already low interest rate on the loans. The merchants all planned to repay, but today was never quite right. Today, in fact, was always a good day to borrow more, while tomorrow always looked like a better day to raise prices.

Then one day Mr. Fine Suit changed his tune. “You know, you have a mighty nice little enterprise going here. But business is business, my friends. Interest rates are going to rise for some of you.” The merchants were angry, but what could they do? They promised to be more frugal, but still had to pay up. As the months went by, Mr. Fine Suit became more hostile. Just last week he came to the G-store, the most prosperous and prudent of all the merchants, with a really nasty threat. “You know, between us, I’ve never liked your stupid league. You’re much smarter than the rest. Leave the league and I’ll keep on lending you money at a low rate. If not, well, here’s a little reminder of what I can do.” He increased the interest rate by two notches before leaving the room with a menacing smirk.

The two sides of inequality

Edward Hadas
Nov 23, 2011 15:30 UTC

Around 100 BC, a Roman nobleman calculated that it took about 100,000 sesterces a year to live comfortably. That was roughly 200 times the amount of money a poor city dweller needed to eke out a living. If an American needed the same multiple of the subsistence income to join the upper middle class today, the threshold would be $3.5 million. The United States economy has become less equal lately, but it remains much more egalitarian than the ancient Roman Republic.

The modern news on economic inequality is much more good than bad. The good news is very good. The greatest moral problem caused by inequality – the unequal access to the most basic economic goods, those which support life – has become less severe. The portion of the total population that suffers from this bottom-inequality is probably the lowest ever in history.

True, we do not know how many ancient Romans were on the wrong side of the bottom-inequality, but statistics for the most recent decades are encouraging. In 1970, 26 percent of the world’s population suffered from hunger, according to the UN’s Food and Agriculture Organisation. The proportion is now 13 percent – still scandalously high, but the gain in food-equality is clear. Nor is food an isolated example. Electricity is a relative new development, but the Soviet dream of universal electrification has already nearly become a reality; more than 80 percent of the world’s population can plug in, according to the International Energy Agency. Health care and sanitary living conditions are now considered basic goods – and access to them has become more equal. The average life expectancy at birth is 65 or above in countries accounting for roughly 80 percent of the world’s population.

Is the euro history?

Edward Hadas
Nov 16, 2011 14:24 UTC

“The Owl of Minerva takes flight only as the dusk begins to fall.” Or, to speak more directly than G W F Hegel, we can only become wise about the direction of history late in the day. The aphorism is pertinent to the euro crisis. Is this the twilight hour for the single currency or are the clouds over the euro no more than an early morning mist in pan-European history? The euro’s fate will look inevitable in retrospect (that is Hegel’s point), but for now the balance of historical forces is far from clear.

The technicalities of the euro crisis are bewildering, even to financial professionals. There are rescue funds constructed with baroque techniques of financial engineering, arcane details of labor market reforms and political feuds that have festered for decades. But something much bigger is at stake – whether or not there should be, in the words of Angela Merkel, “more Europe.” If so, the crisis can be resolved relatively simply: lenders would accept the losses caused by their past mistakes and errant governments would promise to play by the fiscal rules henceforth.

But should there be more Europe? Most British politicians think not and most mainstream continental politicians are in favor, if only warily. The reasons on both sides are fundamentally Hegelian. It is a question of which historical forces should prevail.

Can financial greed be contained?

Edward Hadas
Nov 9, 2011 14:08 UTC

“Our culture must be one where the interests of customers and clients are at the very heart of every decision we make; where we all act with trust and integrity.” The words are from a recent speech by Bob Diamond, chief executive of British bank Barclays. In a way, this is just the usual corporate guff. No boss will tell the world about untrustworthy workers who try to harm customers. But Diamond’s aspirations are a particular challenge for the financial industry.

Not that finance itself is an ignoble activity like drug dealing or contract killing. On the contrary, finance has a noble goal, the support of a just and effective economic community. Banks, fund managers and the like collect funds that is surplus to the owners’ current requirements. The funds are then made available to organizations and individuals which can make good use of them. The gains from that good use are justly shared between provider and user, with the intermediary taking a small fee for its valuable services.

That is a pretty picture, but in the pre-crisis finance world, the intermediaries often lost sight of their economic purpose. Customers came third, after employees and shareholders. Bankers, banks and other institutions were misled by a particular form of greed, the belief that finance is more about gaining than sharing.

7 billion reasons why Malthus was wrong

Edward Hadas
Nov 2, 2011 12:35 UTC

By Edward Hadas The opinions expressed are his own.

A child is born. For almost every parent, everywhere and always, the entry of a new person into the world is a welcome wonder. But economists generally have a different outlook on births. They prefer hard numbers to hope. And this week they have a big demographic number to discuss: the world’s population has just reached 7 billion.

When economists talk about demographics, Thomas Malthus usually comes up. The early 19th century British thinker decided (without providing any reasons) that people would always have more children than the physical world could possibly support. Population growth would always be restrained by death from want. At the time he wrote, the world’s population was about 1 billion. By the 1960s, the population had increased to about 3 billion people, and Malthus’s gloom was often cited. Some ecologists then claimed that the combination of industrial production and overpopulation would inevitably lead to environmental catastrophes – and many deaths from want.

And yet up to now, Malthus has been wrong, in two basic ways. First, human resourcefulness has proved much greater than he imagined. The economic story of the last two centuries has been one of increase – of people and production. The most recent years have been particularly impressive. The 135 million births this year will be almost 30 percent more than 50 years ago, according to UN data. Those lives will be longer; this year’s children can look forward to an average 68 years of life, 18 more than newborns a half-century ago. And the current crop will receive much more of the goods of industrial prosperity, from clean water and adequate food to free education and mobile phones.

What is the morality of debt?

Edward Hadas
Oct 26, 2011 14:18 UTC

Debt is a moral matter. While most economic activity is concerned with the “is” of how things are (investment, consumption and so forth), debts are always entwined with an “ought” – to repay. In discussing controversial debts–for example government borrowing in the euro zone and the U.S.–the moral question should be addressed directly: should these debts be paid off in full, or is some forgiveness justified?

Aristotle can help frame the argument. The philosopher condemned all lending at interest because money cannot create wealth by itself; a loan is just a way for the lender to take advantage of the borrower. Some proponents of Islamic finance make a similar argument, but it is not quite right. Capitalism has shown that loans can indeed produce wealth. If the lent funds are invested well, enabling the borrower to improve his lot and the world’s, then interest payments are the lender’s just reward for providing the fruitful funds.

But Aristotle’s moral logic remains relevant; his condemnation is appropriate for loans which do not share wealth justly between borrower and lender. Unfair loans should not be made, and where they have been, full repayment only compounds the original injustice.

Occupy Wall Street and the shallowness of discontent

Edward Hadas
Oct 18, 2011 15:51 UTC

By Edward Hadas
The views expressed are his own.

Occupy Wall Street can claim a tremendous heritage. In almost every generation – from the French Revolution of 1789 to the student revolts of the 1960s – popular movements have rejected a society which, they say, denies some sort of basic freedom. But for a protest to leave a lasting impression, it has to start or mark a significant cultural change. What could OWS signify?

The Occupy movement certainly expresses popular fury at high finance. But that sentiment is far from revolutionary. President Obama and many business dignitaries have expressed sympathy. There also seems to be anger at inequality created by unjust practices. In the words of an October 14 blog entry on Occupywallst.org, the “99 percent” of the population will “no longer tolerate the greed and corruption of the one percent.” Such righteous indignation could perhaps spawn a revolution, but only if it came with a more positive agenda. As it stands, though, the manifestos and soundbites coming out of the leaderless groups are long on complaints and short on both intellectual coherence and suggestions for new arrangements.

Still, this movement must have something going for it. It has spread around the world and attracts much friendly attention from the mainstream media. I see three forces at work.

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