Jeremy Warner goes to Davos

26 Jan 2012    

News: It's now up to China to save capitalism (Jeremy Warner, UK Telegraph)

We are in the midst of a financial and economic crisis, so the people who are going to find the new vision first are naturally going to be the experts working in financial markets, and the smartest people in financial markets are the proprietary traders in banks and hedge funds. Warren Buffet and Jim Rogers, for example, are smart men, and smarter than George Soros because they are still hands on experts rather than politicians who spend their time giving speeches at places like Davos. Also it's far better to go to someone like Alan Howard who is an expert in interest rate derivative bets rather than Mohamed El-Erian who simply invests in US bonds. The general public seem to think bankers are mindless and slavish, but there is a huge difference between the vapid smooth taking CEO politicans, and radical hands on technical experts such as Kyle Bass. Warren Buffet campaigns for greater taxes on himself, it's true that he does still struggle with interventionist visions that cut prices and reduce corporate profits for companies like Wall-Mart and Gillette which have economy of scale pricing power advantages; but like scientists the real whiz kid bankers love their subject more than their own ego, ultimately allowing them to detach from self interest and embrace the greater good.

What I am trying to say is that whilst Lord Turner once said too much of the worlds intellectual talent was diverted into the City Of London and used to engineer pointless new financial products instead of doing useful things, and whilst Lord Turner is absolutely right, one should also understand that the City of London contains or did contain some of the smartest people in the world, and some of these people are the ones most likely to have seen the vision that can turn the UK around. Even the more political CEO types shouldn't be completely written off. Lord Turner was the UK's chief financial regulator, so the politician most responsible for the UK's demise, but today he has reformed and he is one of the UK's leading intellectual radicals pushing for new economic models. Remember the story of Paul the Apostle, he persecuted Christians before seeing the light. The greatest revolutionaries are usually professional people who were inside the evil and saw the light and felt crushing shame and set out to change the world. The worst revolutionaries are typically thuggish little bohemians outside the intellectual evil who feel no guilt and are ready to cast the first stone (eg Hitler).

Everyone can talk about finance and economics, but the difference between a proprietary trader and a financial journalist is that the trader really knows what it means to be wrong, he has been tempered by the fires of the marketplace like one of those pieces of iron repeatedly beaten by the blacksmith in his workshop. When it comes to finance and economics, armchair observers have a sort of kool-aid drinking religious unprofessionalism that is absent from traders who have spent their life being punished for false assumptions and rewarded for correct assumptions. Lord Turner was not a trader, but he too has felt the terrible pain of being wrong searing his soul. Lord Turner recently said rational expectations has been totally discredited, it is clear that people are not rational, and one of their most obvious failings is their inability to let go of bad investment ideas. Lord Turner said most people cling hopelessly onto failing positions even though their theory has clearly been completely discredited. They cling onto them because their opinions come out of their ego, and as the data piles up against them they become more and more neurotic and irrational. For most people politics and financial markets is a curse that destroys them, proprietary traders and people like Lord Turner do better because they have spend a lifetime being ripped apart, teaching them to let go of political and economic dogma and embrace pragmatism.

Now let's think about Jeremy Warner at the Telegraph. This week the Economist Magazine has devoted itself to the subject of "state capitalism", and it has a picture of Carl Marx on its cover smoking a cigar. The leading article is called "the invisible hand", and it talks about how Singapore has built competitive aggressive state owned enterprises that don't suffer from the inefficient working practices that Western state owned enterprise in the 1970s suffered from, and how these companies are promoting growth and employment and delivering lower prices and better products that private sector competitors. China is following in Singapore's footsteps, all its banks are government owned and almost all of the biggest and best companies in China are to some extent state owned or controlled. These companies pay workers market rates, they don't have labour unions, they are run by highly educated and professional people not bozos, and as a result they are doing as well or even better than Western state owned enterprise back in the 1950s. In China the private sector is increasingly perceived as inefficient, unprofessional, greedy, environmentally destructive and inequality promoting. So the competition in economic models today is described as a battle between the laissez-faire "Washington Consensus" and the statist "Beijing Consensus".

Yet Jeremy Warner's article is called "It's now up to China to save Capitalism". Warner's meandering article talks about how much everyone at Davos annoyed him because nobody believed in capitalism anymore, then he suggests that China is growing so fast precisely because of capitalism, but the West is loosing faith because of fear over inequality, and he concludes by saying that only by thinking about China's wonderful example can we in the West regain our confidence in the amazing ability of capitalism to deliver growth. Tony Blair made the same point in his book a few years ago, but that was back when people like him still hadn't heard the words "Beijing Consensus". Do you see? Today it's just absolutely absurd to make this kind of argument! Warner is twisting the debate in the most childlike ways to reflect his own partisan position, hoping that the tiny children who read the Telegraph will fall for his non-sense. What did he bother going to Davos? Not to learn from the experts and come back and write some helpful articles, but rather it seems to try and fight against the expert consensus and promote his own childish opinions.

Socrates said it is the pain of the what is not ripping apart out false assumptions that makes us good men, and without this we get more and more puffed up until one day we crash disastrously and a tiny child walks out. If you have ever read an interview with Colonel Gaddafi you will know what I mean, deep inside he was just a clueless little child who talked more and more gibberish the older he got. When a trader falls in love with himself he looses money and his ego comes crashing back to earth. Likewise when a plumber falls in love with himself and looses his concentration his plumbing fails and he comes crashing back to earth. This painful ego destruction makes men wise. Yet there are some jobs in which this falsification force is practically non-existent - and in these jobs power and success often corrupt the man and destroy his brain. For example, Charley Sheen is an actor who makes millions being an imbecile. Many artists, poets, painters etc can actually improve their popularity by becoming less virtuous not more virtuous. Socrates said it's vital to build a society in which the different spheres of expertise are characterised by expert consensus, because it's the struggle against failure that makes us wise, and it's the muddle headed hand waving ego inflating crowd pleasing witch doctor arts and crafts that destroys society. Think about the difference between the elite Germany of Fredrick The Great and the UK today, the expert consensus has gone and everything is drifting back and forth in mindless commercialised populism.

Socrates said politicians and journalists in populist societies are the greatest danger to humanity because they escape into the dark arts where there is no falsification nor shame, where there is no truth but only what sells. Look at Margaret Thatcher, she is widely regarded as the UK's greatest leader, but many politicians and journalists on the left still hate her even today, and up until very recently even some on the right hated her too. If their is any consistency in their world at all it is things like political correctness which are no more rational than a medieval witch's spell book. These people can't be invalidated, they don't feel any shame when their views fall out of fashion, just anger at the world for not loving them. There is no greater evil or greater danger to the world that a shameless journalist or politician, because the individual never looses his ego and looks back into the light, he never evolves but rather goes on twisting and turning until one day he finds a new cave wall message that sells. So he is the kool-aid drinker who find a violent new formula that hides the failings of his last formula, and he and his new drink are more dangerous than ever. I know very little about Newt Gingrich, but it seems to me he might be this sort of man, because anyone who has been as wrong as he is would be crippled by pain today, yet I don't see any evidence of it in him, and it's this kind of evil that created Hitler the last time liberalism failed.

So the point of this article is to illustrate how the journalists lack falsification, how unlike proprietary traders they are still backing the Western economic model, how they are clinging onto their failing ideas because their opinions come out of their ego, and as the data piles up against them how they are becoming more and more neurotic and irrational. Given that they have called everything wrong for three years, and assuming they cared about truth and justice, Martin Wolf and Jeremy Warner etc would be racked by crushing shame and crying out in terrible pain today, yet I can't see it much sign of it in their writing. I don't really understand Jeremy Warner's article today because it is so absurd even he must know it is absurd, and I really can't face trying to think about what is really going on inside his mind. The Ancient Greeks said when these journalists and politicians have really seen the light and know everything they once believed is wrong, they either have to drop it all and become born again and revolutionaries who love the opposite, or they turn to stone. When they turn to stone they rid themselves of the love of truth and justice and they just seek personal power over their fellow man. All their shame is gone, like the character from Clockwork Orange their greatest love is ultra-violence because there is no greater power of our fellow man than violence. This stage is the end of democratic civilization and the beginning of tyranny, it is the final step into the fires of hell.