Edward Hadas

Modern history can be told as a story of new communications technologies which both undermine authority and reinforce the power of the state. The last week has shown that the Internet and social media are playing these two roles well.

Start with the contrasting historical narratives. In the 15th century, printing undermined the autocratic Catholic Church. A few centuries later, cheaper printing made possible the newspapers and pamphlets which helped destroy monarchies and then spread democracy, nationalism and revolution around the world. Telephones and now the Internet have sped up the process.

But there is also the expanding state. Printing allowed central governments to set up and monitor extensive bureaucracies. Cheaper printing gave governments the means to take control of the education and indoctrination of children. Add in telephones, communicating computers and now the Internet, and liberal governments feel free to set up an extensive bureaucracy which monitors and guides almost any aspect of life.

Until Tuesday, it looked like Turkey might be demonstrating the disruptive power of new technology. It took only a few days for a protest over a building project in Istanbul to spark a national movement and become a global cause. A small group of people without anything like a clear agenda was able to jump ahead of the unpopular traditional opposition parties and the cowed old media. Recep Tayyip Erdogan, the popular prime minister of Turkey, rightly held social media responsible. He called it “the worst menace to society”.

Tear gas and rubber bullets have scattered the demonstrators, but it’s too early to say that Erdogan has won. I think of the rebels who eventually unified Italy in the 1860s. Inspired by one of the first media-aided anti-authoritarian successes, the American Revolution, they spent decades using the popular press to win hearts and minds, both inside Italy and in several European powers. The new popular opinion eventually prevailed.

Apple is the latest multinational to feel the heat on cross-border tax management. The news that the tech giant used Irish law to lower U.S. tax payments should not have been surprising. After all, “Do no evil” Google had no second thoughts about recording what were essentially British sales as Irish, for the sake of a lower tax rate. It’s hardly likely that Apple, which has cultivated a certain anti-establishment air, would have hesitated.

Indeed, until a few months ago, I don’t think there was a corporate treasurer anywhere who would have taken justice into account when deciding on tax strategy. At most, there might be worries about bad publicity, but the well-established corporate practice of tax dodging had generated little attention.

And who would complain? Lower taxes on profit bring benefits to most people connected with companies; the money that doesn’t go to the government goes to workers, customers and shareholders. Besides, most experts who understand the arcane rules of international taxation are paid to use them to keep payments down.

“Keynes was a homosexual and had no intention of having children. We are NOT dead in the long run … our children are our progeny.” This tirade came from Niall Ferguson, the financial historian, Harvard professor and pundit, speaking in the third capacity at an investor conference two weeks ago. Though largely misguided, part of that comment is interesting. The idea that fertility has something to do with economics is due for a revival.

The sexual slur, for which Ferguson apologised, is tedious, as is the wilful misunderstanding of John Maynard Keynes’s quip: “in the long run we are all dead”. That was a complaint about the glib willingness of rival economists to endorse temporary suffering, which Keynes thought was largely unnecessary, for the sake of some distant good, which he thought was far from certain to arrive.

But Ferguson’s comment assumes, correctly, that our economic activity cannot be separated from an almost biological desire to create a good society which will endure into the future. In other words, there is a valid analogy between our biological drives to survive and reproduce and the economic desires to satisfy our needs and to thrive, now and in the future. Economists have captured the close ties of biology and society with two different images: growth and fertility.

The 1911 Triangle Shirtwaist Factory was a turning point in the history of American labour relations. It led directly to a slew of new laws on safety and labour practices in New York State, and indirectly to a less exploitative approach to industrial labourers throughout the country. Last month’s Rana Plaza disaster in Bangladesh, where the collapse of a clothing factory killed more than 700 people, demonstrates that the lessons need to be learned again, this time on a global scale.

It is not a coincidence that both these accidents involved the garment trade. This is an industry of mostly small, poorly capitalised companies, which jostle against each other in a long and rapidly shifting supply chain. Retailers shop around aggressively, suppliers sub-contract freely and the price pressure is relentless. No one takes responsibility, and it can seem like almost everyone involved is irresponsible.

It does not need to be like this. In the first few decades after Triangle, the common good increasingly prevailed in the clothing trade in the United States, and eventually in other rich countries. Trade unions protected workers, customers learned to pay enough for their clothes to support fair wages, and price competition was muted.

In retrospect, last week’s debunking of one of the key conclusions of Kenneth Rogoff and Carmen Reinhart about government debt looks inevitable. The whole story, from the initial lavish praise for the Harvard professors to the current harsh criticism, is a sad reminder of the power of ideology in the angry debate over economic policy.

In 2011, the two eminent professors claimed to show a tipping point for government borrowing. If the debt amounted to more than 90 percent of GDP, the GDP growth rate was typically much slower than in more fiscally prudent countries. When Thomas Herndon, a mere graduate student at the University of Massachusetts, redid the maths this year, he also found a correlation between higher government debt and slower growth. But there was nothing remotely like a tipping point.

The new paper was a blow to the politicians who relied on the Rogoff-Reinhart 90 percent line to support fiscal “austerity” (smaller government budget deficits). But they were always foolish to trust a study which drew a universal conclusion from a small sample of countries in vastly different situations.

In the United States and some other developed economies, wages for the least well paid are too low. A mandatory living wage is the best way to redress this injustice.

The idea of minimum wages is well accepted, but the American $7.25 an hour does not meet the simple standard of providing enough to support the worker who earns it. For an adult in New York State, self-support requires 55 percent more, $11.25 an hour in a full-time job, according to The MIT Living Wage Calculator. And a just minimum should really be enough to raise a family – something closer to the $23.58 an hour required to support a single wage-earner with one child.

The minimum wage is one part of the remarkably complex pay system found in all developed industrial societies. Economists often suggest that wages are determined by market forces, the supply and demand for labour, and by employers’ calculations of the value of labour. But actual wages influence both the market and the perceived value of labour. It is more accurate to include market forces and economic value somewhere in the middle of the long list of factors which contribute to the ever-shifting social agreement on pay levels. This agreement is established in the mysterious way that all social orders are built – the powerful push, the weak resist, traditions are followed and evolve, justice is respected and flouted, market forces and economic calculations nudge.

Obesity is a matter of free choice – no one forces people to get fat – but few people are happy with the result. In the last few decades, the freedom to eat has too often turned into slavery to the immoderate desire for more.

In the United States, the world leader in obesity, the trend toward higher body weights began more than a century ago. Researchers John Komlos and Marek Brabec show that the average body mass, weight adjusted for height, has moved upward fairly steadily – from too low for optimal health right through optimal to the current too high level. Most visibly, and alarmingly, the gap between the heaviest 30 percent and the rest has widened significantly in the last few decades. There is no end in sight.

The problem of obesity is an adverse side effect of one of the greatest economic liberations ever, the freedom from want of food. Until shortly before 1900, food shortages were nearly always and everywhere a lively possibility, and all too often a grim reality. Now, although inadequate nutrition still blights the lives of more than a billion people in the world, residents of developed economies enjoy food in excess.

“It has been computed by some political arithmetician that if every man and woman would work for four hours each day on something useful, that labour would produce sufficient to procure all the necessaries and comforts of life … and the rest of the 24 hours might be leisure and happiness.”

When Benjamin Franklin wrote that in 1790, the American thinker was a few centuries ahead of his time. But the modern economy is so productive that everyone would have far more “comforts” than were available in Franklin’s day, even if the standard working week were shrunk from 40 to 20 hours. The four-hour day, though, isn’t on the horizon. Benjamin Kline Hunnicutt, a professor of Leisure Studies at the University of Iowa, explains why not in a fascinating new book, “Free Time, The Forgotten American Dream”.

For more than a century, labour activists continually demanded – and were granted – shorter working hours. By the 1930s, futurologists were sure that the trend would continue. Workers wanted more leisure time, and, thanks to ever more efficient machines, they could have it, while still enjoying steady improvements in the material standard of living.

Greed contributes to all the economic and financial woes of prosperous societies. The United States and other rich countries produce much more than is needed to support all of their people in comfort, so if desires were all truly modest, there would be few problems. Greed encourages people to decide that their own share is too small. Greed influences the popular desire for GDP growth (more, faster), financial gains (higher house prices as a human right) and total economic security (guaranteed pension, come what may). Voters’ greed encourages governments to spend more and tax less.

During the boom years, politicians and economists consistently underestimated greed’s disruptive power. While few endorsed the extremist view that greed is actually good, even fewer acted as if it were dangerous. The rhetoric changed during the crisis. It has become fashionable to add “greedy” to the description of any unpopular group – bankers, highly paid executives, rich people in general, welfare cheats.

In theory, the entry of greed into the public discourse ought to be helpful. If those subject to immoderate desire could be identified with certainty, then society might take up arms against them. While we might never win the battle, we could at least hope to shame and restrain the malefactors.

Barack Obama did not win the election because more Americans thought he would be a better president than Mitt Romney. More Americans voted for the incumbent than for the challenger, but it is Obama’s superior campaign organisation, and not his personal appeal, that deserves most of the credit. In particular, his product managers were better than Romney’s at using the technique of “data mining”.

The technique, pioneered by supermarkets, is conceptually simple: measure everything and tweak as necessary. In practice, it is a delicate affair. Suppose a popular soft drink has 4 percent higher sales when it is stocked next to a salty snack than when healthier raisins are its shelf-neighbour. Should shelf locations be swapped? There are many variables: the effect on sales of salty snacks and raisins, the profit margins of the different products, and customers’ sensitivity to any price changes. Most of the effects are tiny, but the study of millions of data, including a large number of computer simulations, can increase a retailer’s revenue and profit by a few percent.

In elections, data mining can bring votes to candidates and can increase the supply of contributions which pay for vote-gaining advertising. The work is detailed. Time magazine reports that the Obama campaign carefully tested how much more likely undecided voters in each close state were to yield to the blandishments of local rather than to out-of-state volunteers. The superiority in detailed computer work – “We ran the election 66,000 times every night”, as one expert explained to Time – probably gave Obama a few more percentage points of votes than Romney. It was the margin of victory.