Zombie Journalism

Sunday 18 Sep 2011

In one of Plato's dialogues Socrates describes the idea of judging issues by constructing parallel arguments and then choosing the most compelling side. This was the traditional style of debate used in law courts and political assemblies back in Ancient Greece just as it is today. In Ancient Greece, those skilled in parallel arguments were called "sophists". The Ancient Greeks were extremely intellectually developed, and famous sophists such as Protagoras were so accomplished that they claimed to be able to persuade anyone of anything. Protagoras was also famous for appearing to know everything about everything. He could give lectures on politics one minute, on wrestling the next, on poetry the next, etc. In one of Plato's dialogues someone asks "How is possible for Protagoras to know everything about everything?".

Socrates was highly critical of the parallel augment debating style, he said that to find truth in politics and social science and other soft disciplines, one has to deploy the same sort of mental discipline one associates with mathematics and other hard disciplines. Socrates said one can get totally lost trying to feel ones way through an argument using the inspirational asethetic skills of a Dionysian poet, one must also learn to cut arguments apart in a detached philosophical way looking for what is not true rather than what is true. So whilst the sophists were famous for being able to convince ordinary people of anything with their moving speeches, they were completely unable to defend their positions against Socrates under detailed cross examination.

Socrates demonstrated how the sophist's strength relies on the fact that all propositions contain at least a grain of truth, but as soon as you force him to respond to questions with short to the point responses he falls apart in contradictions. Everyone knows, for example, that modern politicians never answer questions and never allow themselves to be boxed into corners, they are forever throwing the subject open by drawing in broad parallels. Socrates was the genius who developed the art of cross examination and used it to totally discredit the sophists. What Socrates refused to do, because the divine voice inside him forbade it, was become a sort of good sophist himself and win over the hearts of the masses to his own ethical position. Socrates instead devoted himself to teaching the up and coming elite the art of analysis.

Socrates demonstrated that sophists are illusionists or magicians who win arguments by sleight of hand, and if you watch them carefully you can see they are just rambling in a muddle headed way. Modern thinkers such as Bertrand Russell talk about this "annoying Socrates" problem. Russell says if you dig into a persons opinions you run into moral assumptions which are subjective and unarguable. We can think of this moral opinion layer as human personality, and the difference between Russell and Socrates is that Socrates is judgemental about psychological characteristics whereas Russell is not.

Top sophists such as Protagoras were brilliant tricksters who used principles such "we are one" or "we are many" to convince you of whatever they wanted. What happened in Ancient Greece was that unenlightened muddle headed sophists with no self knowledge, starting believing they were geniuses instead of tricksters. They drank their own Kool-Aid, they started deluding themselves, and then they started deluding society. Traditional values collapsed and society began to revolve around the black art of sophistry. Artists, craftsmen, scientists, soldiers and other people with practical useful skills were demoted to a lower social rank, and society was ruled by the sophists who controlled people or business. Because we let go of emotional illusions with age, popular sophists are invariably younger people. Athens began to idealise youthfulness, the elderly were seen as useless, and old age became increasingly painful. People became less and less able to think straight, everything revolved around emotional tricks and bald faced lies, and eventually the Greek's minds were so weakened and maddened their civilization collapsed.

Now what I would like to do to try and teach you about sophistry, is to take a look at some modern journalism. I recently wrote an easy to read article which included some of Rudolph Giuliani's journalism. What I want to do here take a careful look at a more insidious type of journalism which looks much more upmarket but which is in reality much more downmarket.

So I am going to reproduce a slightly technical article about the Eurozone crisis by Sebastian Mallaby which was published in the Financial Times this weekend. As you read the article think to yourself "is this guy trying to trick me?", "is this reasoned or emotive?" etc. Later you will see my analysis of the article. Note that Mallaby is a British Journalist who studied Modern History at Oxford University and made his name working for The Economist and the Washington Post. After talking about the ECB's recent intervention in the dollar funding market, Mallaby continues:

The European Central Bank has consistently been better at backstopping the continent’s banks than at propping up its governments. Since the sovereign debt of Spain and Ireland was, to a large extent, created by its bankers, where is the justice in generosity just to the banks? Since Europe’s problem now consists of two simultaneous equations – weak banks and weak governments – why focus lopsidedly on half of the challenge?

The recent policy towards Italy has been a case in point. In early August, yields on 10-year Italian bonds climbed above 6 per cent. A further rise threatened to turn Italy’s manageable debt burden into an unbearable deadweight. The ECB responded by buying Italy’s bonds and driving the yields below 5 per cent. But instead of defending that victory, the central bank squandered it: Italian government yields are now back up at 5.6 per cent. The first rule for central bankers facing down markets is not to show weakness. We need shock and awe, not a house call from an empathetic shrink.

Why won’t the ECB do for Europe’s governments what it happily does for Europe’s banks? The crude answer is Germany – and particularly the top German central bankers who have consistently opposed buying government bonds. But logic of these hawks is elusive. They cannot really believe that government bond purchases will stoke inflation. The ECB has a better record on price stability than did the Bundesbank, and with growth in the eurozone weakening, inflation is a distant threat. Nor can they seriously think that the bond purchases conflict with the central bank’s mandate. The ECB is not supposed to buy government bonds in the primary market, but it has done so before in the secondary market. Under its mandate to ensure financial stability, it has the right to do so on a larger scale.

The best explanation of the German position is that, by seeming crazy enough to allow Italy and Spain to go under, the central bank can terrify politicians into slashing their deficits. But this bluff is hugely risky. In Italy, unemployment for under 25s stands at 29 per cent. In Spain, the share is 44 per cent. Further austerity in these countries is neither economically sensible nor politically defensible. In these circumstances, outside efforts to impose austerity via tough conditionality are unlikely to work – a point that NYU’s William Easterly demonstrated more than a decade ago in his critique of conditionality in World Bank programmes. Anyone who thinks Europe can be the magical exception to Easterly’s evidence should ask themselves how well conditions are succeeding in the case of Greece.

With luck, the involvement of the authorities outside Europe may help the Germans and their neighbours out of this intellectual cul-de-sac. Just as bank rescues must consist of liquidity without conditions, so, like it or not, government-bond rescues must be the same. Liquidity with strings attached is, by definition, not liquidity: it says you might provide some money when the markets crave certainty. Bailing out feckless states may be unappealing, but then so are bail-outs for bankers. The longer the ECB hesitates, the larger the rescue will have to be in the long run.

The first paragraph runs:

The European Central Bank has consistently been better at backstopping the continent’s banks than at propping up its governments. Since the sovereign debt of Spain and Ireland was, to a large extent, created by its bankers, where is the justice in generosity only for banks? Since Europe’s problem now consists of two simultaneous equations – weak banks and weak governments – why focus lopsidedly on half of the challenge?

I can explain this by saying Irish people and Irish companies bought property with loans from Irish banks, and as the economy slowed and property prices fell they found they couldn't repay the loans, so Irish banks started going bankrupt. At that point the Irish used government money to rescue the banks, and now the government is struggling to service its debts.

Today many Europeans feel their elected politicians were sleep walking when they rescued the banks. Had they woken up whilst dreaming about morality and justice, the politicians might have wiped out both bank share holders and bank bond holders. The politicians feared such radical action at the time because it reeked to them of excessive socialism (remember Gordon Brown's paralysing fear of Northern Rock nationalization), but sometimes dodging today's decisions makes tomorrow's decisions even harder.

As a result of the banking rescues, Europe's banks now satisfy the EU's regulatory solvency standards and stress tests etc. However, the financial markets are worried that if the European economy continues to weaken and major sovereign states start defaulting, Europe's banks are going to end up bankrupt in spite of those earlier rescues. An Italian default, for example, could ripple thought the system and bankrupt many banks, which will therefore force the politicians to again confront the thorny rescue problem. Even a Greek default, which could happen any day now, but which is trivial by comparison, has everyone seriously scared. Because American banks are increasingly unwilling to deal with European banks, European banks recently struggled to fund their dollar liabilities, so the ECB has now started lending European banks dollars as well as Euros.

Central Banks were created to keep the money flowing in such times of financial stress, that's their prime directive. Before Central Banks were invented the banking system used to seize up in times of panic doing terrible damage to the economy. Right now we are at a time of extreme banking stress, and the EBC is doing what it is supposed to do by keeping the banking system running. Mallaby makes it sounds as if the ECB is doing something morally questionable, but the ECB is just doing it's job, the morality of bank rescues is a political issue that goes back to the beginning of the crisis a few years ago.

Central banks also intervene from time to time in currencies and other things when dysfunctional conditions are judged to exist, and the ECB has bought about 150 billion euros worth of Eurozone sovereign bonds during this crisis. It is a murky area and it is not exactly clear where the dividing line is, but what Mallaby is suggesting obviously goes way beyond what the European Central Bank was setup to do. The European Central Bank certainly does not have the mandate to prop up indebted governments, responsibility for that lies with politicians or organizations such as the IMF. Rescuing Greece, for example, was a huge political decision and the enormously expensive bailout program comes with all sorts of conditions. Banks are regulated and governments are not, the ECB is supposed to be a wheel in the capitalist cog not a political organization that can make momentous decisions. Mallaby is comparing chalk and cheese, throwing in a morality play that has nothing to do with the ECB's technical banking operations, and turning an enormous political issue into trivia. It's a confidence trick.

What Mallaby is suggesting is a whole new ball game, and if you want to talk about it you should do so in an honest and open way, you can't just slip it in someone's drink whilst they are not looking. Begin by building a working model in your mind, and cross examine it from various different directions, so you can describe all the ways in which it works and doesn't work. You must avoid just creating a flat picture, or a flat principle such as "rational expectations" or "turn the other cheek". If your creation is to be a real world solution to a situation it has to be stronger in some ways and weaker and others etc, don't make the mistake of looking for one mechanical truth like a naive ideologue.

Let's suppose the ECB puts a 5% ceiling on all Eurozone government bonds, because the ECB can't go bankrupt, what we are talking about is setting up a structure which works like common Eurozone bonds with higher rates for wayward countries. Sometimes Mallaby seems to suggest that the ECB should implement this behind the backs of politicians, then he talks about German politicians stopping them, his writing is confusing and unclear; but the truth is the ECB can not of course really do something like this unilaterally. What might happen is that EU politicians agree to let the ECB set up such an arrangement because their own democratic decision making structure is so dysfunctional they can't respond to the crisis themselves. The ECB could well develop into the vehicle by which policy makers bypass democracy. In other words the ECB could gradually be developed into something that is more powerful than the parliaments, so greater technocracy could be foster onto Europe in a subtle way, diluting the incompetence of democracy and saving Europe. The problem is that whilst the EBC can easily create a federal union by purchasing sovereign bonds, how can it control the creature it has by this act so boldly given birth to? Can we imagine the ECB interfering in trade union laws, taxes, benefits, health and the other major factors that make such a difference to the competitiveness of economies?

If the ECB did put a 5% ceiling on all Eurozone government bonds, it would be a huge relief for banks because the entire stock of outstanding Eurozone sovereign bonds would be jointly guaranteed. Right now we don't know if the banks are going to get the money they lent Italy back, and as long as that situation persists the banking sector can't leave the emergency ward. The ECB would have to spend an astronomical sum of money, but it would earn a nice spread on this investment because it can borrow the money to buy all these bonds at less than 5%. Mallaby talks about inflation, but he is getting confused because this isn't money printing, it's what we call a sterilized operation without inflationary consequences. Money printing on this kind of scale is out of the question. I think in the real world I think the ECB would be far better off just guaranteeing a 5% ceiling in the primary market, in other words just funding governments as they spend more money rather than insanely hovering up the entire debt stock. Mallaby says the ECB is not supposed to buy bonds in the primary market, but we are well beyond worrying about existing rules at this point. It's still technically problematic, because unless the ECB starts to issue its own bonds it can't match the interest rate risk, so setting up a proper common Eurozone bonds program inside the democratic decision making structure is much more desirable.

If wayward states institute economic reforms and austerity packages and the world goes back to normal, everyone is a winner. But if Italy continues the way it is, in a state of political gridlock and failing growth and political unrest, it could end with Italy walking away from the Eurozone and leaving everyone with catastrophic losses. Italy has been a dysfunctional country since the 1970s, dare one gamble on it turning itself around? How can you force Italy to reform after you jointly guarantee their bonds? You can never kick the Italians out or stop giving them money because default would kill your own tax payers. Look at Greece right now, the troika are fighting tooth and nail to make the Greeks reform, and the big stick they beat them with is the possibility of no more money and disorderly default. That stick vanishes, so what instruments do you have left to impose responsible government on them? At this point it becomes a very technical conversation. Nevertheless, you can see the danger is that: it becomes a one way ticket from which you can no longer walk away, and whether that ticket is to heaven or hell all depends on the wisdom of Italian democracy.

Imagine the current situation as one side of the river bank, and the endpoint as the other side of the river. Deng Xiaoping said "Do not try to jump across the river, wade across feeling for the stones". This huge rescue operation requires an enormous leap with no intermediate steps and no turning back midway. Big bang solutions are dangerous, only irresponsible people walk into positions from which a huge leap is the only escape, and only complete fools take leaps when steps are available. In the history of geopolitics, how many giant leaps have ever worked? The most likely outcomes is some kind of French Revolution style disaster.

That brings us to the most absurd part of Mallaby's article:

The whole reason we have this Italian sovereign crisis is that there is a perception that Italian democracy is unable to reform and will eventually default. If that wasn't the case there wouldn't be a problem. As the Chinese Prime Minister said last week: put your house in order before you come knocking at our door for loans. In Italy's case default has little to do with wayward bankers, it's just the combination of years of gradual decline and an appalling economic outlook across the developed world. Mallaby just ignores all this, he calls those who worry about Italy's long term future and seek sticks to force better policy on Italy "bluffing risk takers". He doesn't notice that his own strategy is a huge gamble as well, he doesn't even so much as hint at positives and negatives on each side, his arguments look like crude cardboard cut outs. Incredibly, he also doesn't notice that what he is proposing is just the same old Eurobond idea that people have talking about for years, except he leaves out the federalism bit, the vital stick that contains democratic incompetence! He thinks he is original, but he is actually completely clueless.

Can you see how incredibly bad this article is? It's far worse than the tabloid press, they look at morality of the situation and a lot of time they get it right. On the surface this article looks as if it is written by a tabloid type who has given up morality and tried to embrace science, but because he has no expertise at all he just ends up talking total gibberish. Deep down, however, Mallaby's viewpoint is not in fact random, it is motivated by psychological constructs just as tabloid articles are, Mallaby just tries to hide his motives whereas the tabloids are more open about how they feel. The really important difference is that the tabloid journalist has a certain humility and honesty that Mallaby completely lacks, and therefore comes much closer to the truth. Can you see that whereas tabloid journalists sometimes picks up on objective psychological insight into the world around them, Mallaby just picks up on himself and reflects his own personal motives?

Mallaby's a zombie, he is completely blind to the bigger picture, completely stuck in the present tense, completely incapable of intelligent discussion of becoming instead of being. His skill, his profession, is the act of concealing his own monumental stupidity in intelligent looking words. Unlike Protagoras he believes in his own Kool-Aid. Unlike Mallaby Protagoras knew his arguments were a trick, he freely admitted he didn't actually believe in anything. What do Protagoras and Mallaby have in common? They are both Dionysians who work by attaching to the psychological energies in the moment. Mallaby grasps at the pain America will suffer if the Eurozone collapses, then grasps the closest connected solution. He doesn't perform any kind of what if analysis on that solution, he has no ability to analyse the falsity of beliefs, only the veracity of beliefs. That's why you can't rescue him by showing him the errors of his ways, he can't be reasoned with, he can only be saved by connecting him with whatever vestige of good still remains inside himself. You need to play a flute, like the Pied Piper of Hamelin, to hook a Mallaby, he swims right through nets. You can show him this kind of analysis and he just stares back at you, only the most spectacular thunder and lightening strike can wake them up. Understand that the Dionysians create an untruth concept by looking for what evil is. Mallaby is the degenerate Dionysian who has gradually turned whatever doesn't suit him into his concept of evil. His whole life is dedicated to lies for the sake of his ego, he becomes blind to not only all idealism, but even to the psychological factors that underlie the simplest decisions. So in this article, he doesn't judge Italy any more than himself, in his lust for the moment he can't comprehend why marrying Italy is a risk and could end up in a very expensive divorce.

There is one more thing to say, and it's absolutely terrifying. This guy Mallaby went to Oxford University and he has worked for elite newspapers all his life. His mindless article appeared in the Financial Times, the most prestigious newspaper in the Western World. He is connected to US politics, and his friend Timothy Geithner, US Treasury Secretary, is suggesting something similar. What people don't understand is that the Western World has gone stark raving mad. The elite have been lying and tricking their way through life for so long they have totally lost the plot. For example, the other day I was listening to BBC radio and I heard Martin Wolf of the Financial Times say: no serious thinker today believes Greece can escape default. A day or so later Jürgen Stark of the ECB resigned and said Greece can pay, Greece must pay, and if Greece refuses to pay we should crucify her. Zhou Xiaochuan, governor of the Chinese Central bank, has also recently said Greece should pay its debts instead of defaulting. In fact lots of people, including myself, think Greece can and should pay even if it means a lot of suffering. Martin Zombie Wolf is just raving, the words just come out of his mouth in a sort stream of consciousness way which reflects how he feels about life and has nothing to do with truth or justice etc. People talk about lying politicians, what people don't realise it that it goes way beyond the political class. This corruption has spread out like a plague across our society. My father is a criminal lawyer, and long ago he told me that if people are totally stupid you can't put them on the witness stand because they don't know what the concept of truth means. You see it in primitive countries, the people are like children who just tell you what they feel and want they think you want to hear, you can't get them to listen and concentrate, they have no mental discipline or pragmatism, and you can't get a straight answer out of them because they constantly go round and round in contradictions (much to DSK's delight). The West has become like that again, but instead of living out some nice little traditions, materialism has turned us into grasping selfish monsters, now there is nothing left but pure bestiality. Hell isn't awaiting us, we are living it.

I don't want to say that every single person out there is like Mallaby, but the sparks of light are extremely rare. I think Christine Lagarde, the new head of the IMF, is a good example of a rare spark of light. She knew she was a compromise candidate, but her humility and courage in facing up to self knowledge has allowed her to flourish. She gave a speech the other day to fellow leaders on how to solve the crisis, she said you have to look into the future and work out your goal, then plot your path towards it. This kind of psychological advice is exactly what the zombies need because they don't have that concept of time. She dared to talk about the need for banking recapitalization, and even though papers like the FT and politicians like Sarkozy attacked her savagely, others have been inspired by her example and are talking about the importance of being truthful, open and willing to confront demons. As it happens I don't think you can protect banks against sovereign default, you have to stop defaults or pick up the pieces in the aftermath, but I appreciate her contribution. She hasn't let the Greeks walk all over her, in fact since she joined the IMF the reform program has improved dramatically. Clearly Lagarde has good people behind her, and unlike the zombies she has put aside her ego and is listening to her team and learning from her team, and now she has become a channel for their wisdom. I think she has a beauty and lightness about her which I didn't notice a year ago. That's what happens if you truly give yourself to a cause outside yourself. However, most of these big names are nightmares. I find the worse ones, like Berlusconi and DSK utterly terrifying, they have this kind of terrible frozen blackness around them, and I literally shudder when see their photos.

The idea that the world is going mad was all the rage in the 1930s and 1940s. For example, the book "The Intellectuals and the Masses: Pride and Prejudice among the Literary Intelligentsia, 1880 to 1939" describes vividly how an expensive education is no barrier to stupidity. That was why the Germans elected Hitler, because they were horrified by their elite and desperate for new leadership to purge society, yet in their hopeless naivety they choose a certifiable psychopath. I think that mindless individualism had been building up in society for a long time, and it eventually turned everyone mad, and the Second World War was a natural karmic eruption which reinstalled idealism through the horrors of suffering. Today this corruption is surely far worse than it was in the 1930s. This is what Plato's all about, the corrupted Dionysians who follow themselves away from God into hellish self oblivion. It's the story of Ancient Greece, we are living out our own Peloponnesian War moment. From politics to journalism to social science academia there is basically no professionalism left. We have bright people in maths and science, but they haven't made the leap to human nature. Look at Bertrand Russell, maths is no barrier to sophistry. I think the Western world peaked in the Age Of Enlightenment and we are on the slippery slope to hell. I am deadly serious when I say this: right now the Western World is controlled by zombies, what we are living through is not just a crisis of capitalism, not just a crisis of democracy, not just a crisis of immorality, it is a crisis of human thinking.