How to improve heaven

A binary praxis of antagonistic reciprocity
A binary praxis of antagonistic reciprocity

Today’s article is by Andy Martin, Lecturer in the Department of French at Cambridge University. His latest book is The Boxer and The Goal Keeper: Sartre versus Camus

I was once having a chat with a Great Writer. I was an ardent admirer of his work, so I was probably a little awe-struck (now I would probably tone down the awe, but I was in a phase of youthful enthusiasm). Naturally, I raved on about one of his earlier works. He was not just modest (in fact he wasn’t really a modest guy at all), he had genuine doubts about everything he had done. He wasn’t really sure that all those novels deserved the accolades. He thought they could have been better. “And what about your women characters,” I said. “It’s funny how you have two basic types: one is sensational, beautiful, funny; and the other is a monster, cruel, evil.” “It’s the same woman,” he said, “only after I’ve married her.”

Strangely enough, I think this conversation is quite instructive as regards the OECD Better Life Index. Specifically the mystery of the “French Paradox”: how does it come about that a nation which on the face of it appears to be pulling all (or nearly all) the right stops nevertheless complains about feeling significantly sub-optimal? The fact that the OECD HQ is in Paris is not irrelevant (it is now officially on my Index of Paris-based organisations publishing Indexes).

The Great Writer above had a habit (you will have guessed) of acquiring and then dumping wives. This is not a pretext for discussing the liaisons dangereuses of any number of well-known French men and women. Rather, the Great Writer argued that his personal vicissitudes were largely down to the zeitgeist he had lived through, with its utopian over-emphasis on Lennon/Oko peace and love, which no real relationship could ever quite live up to.

He reckoned it was a cultural problem; I want to argue it’s cognitive. There is clearly a link between creativity and melancholia. I don’t want to list here all the poets and artists who have ended up jumping off the bridge (John Berryman, Sylvia Plath, my old friend Nick etc). Self-destruction is only an extreme manifestation of self-deconstruction. Which can clearly be collective as well as individual (perhaps all emotions are really en masse and the notion of a purely personal experience makes no more sense than a private language).

In measuring well-being, the OECD rightly takes account of such external indicators as environment, education, employment, health, and so on. On a less quantitative and yet still empirical level, I want to draw attention to only two phenomena that give a sense of what the OECD is up against, especially in France: toe-sucking and déjà-vu.

The neuro-cognitive logic of foot-fetishism has to do with the brain carrying around a map of the body. But the map of course is not of the same structure as the body: in this rather more compact electro-chemical synaptic form, the feet are stored somewhere in the vicinity of the genitals, so that there is a “neural crossover” from one to the other. Hence a sexualized impression of toes. V. S. Ramachandran derives the whole phenomenon of the “phantom (yet amputated) limb” from this same mix-up, the inability of the brain to overcome its own archetypes.

Do you ever go into a house you know you have never been to before and yet have an eerie sense that it is all very familiar? Maybe you used to live here in a previous life. But more probably, you are experiencing something we generally don’t notice, which is that our information-processing is 2-phase. Haven’t I been here before? Ah yes, of course—just a few nanoseconds ago—when I (my brain) was making an initial reconnaissance and processing the sense data in a relatively unstructured spontaneous way. And now I am re-configuring my preliminary picture and, very briefly, slipping between images, interweaving the present and the recent past (in this sense Plato was right to argue that all knowledge is recollection).

It is this first-phase, a “primal”—preliminary, provisional, but enchanted—state of consciousness (before the more analytic, disenchanted phase kicks in) that I think Albert Camus is invoking when he speaks of flashbacks to a lost paradise and feeling himself at one with trees and seas and silence. It also explains why paradise is always a lost paradise. Happiness is the phantom limb of human consciousness.

Jean-Paul Sartre had a memorable phrase for it (one that I suspect will never catch on quite as much as “Hell is other people”, even though they must be closely related): “a binary praxis of antagonistic reciprocity.” The brain, like all decent computers, is binary. The difference is that it is more neurotic. We have to keep going back and obsessively checking the data against some previous formulation. In other words, we are inescapably indexical in our behavior (thus the OECD is only doing on a grander scale what we are doing all the time anyway: OECD contains OCD). But some (eg the French) are more indexical than others.

Out of the inevitable disjunction between before and after, the raw and the cooked, the savage and the symbolic, fly up creativity, philosophy, art, but also aching nostalgia and anxiety. Will anything ever “bring salvation back” (as Michael Jackson poignantly wondered)? A faster internet? I doubt it.

Freud blamed our being miserable on (among other things) the Christian concept of heaven. The trouble with heaven is it is fundamentally boring (like Dante’s Paradiso – the Inferno is way more fun). Nothing ever really happens in heaven. I defy even Hugh Hefner not to get tired of his non-stop playmates around the eternal pool. We need a new concept of bliss that is not naively single-phase. As Roland Barthes argued, the concept of jouissance should include pain as well as pleasure; perhaps he could have added that it has to be indexical (why else would the Kama Sutra index so many variations on well-being?).

I am reminded of something my son said to me recently, as we were passing beneath a leafy tree on a sunny day: “Why do we like dappled light so much?” And he had an answer: “It’s because the shadow dramatizes the light. We want light but not too much of it. The same with shade – we don’t want total darkness either.” Even heaven would need an Index on Light.

Useful links

How’s life? 2013 – Measuring well-being

Freedom of choice, bitcoins and legal tender

bitcoinToday’s post is from Adrian Blundell-Wignall and builds on his OECD working paper The Bitcoin Question: Currency versus Trust-less Transfer Technology. The views expressed here are his own and do not necessarily reflect those of the OECD or of its member countries.

The working paper argues that some of the technologies associated with crypto-currencies are very interesting and may one day become a serious disruptive technology for financial intermediaries—but that these technologies should be thought about separately from the crypto-currencies like Bitcoin that have some very dubious uses. These coins, the paper argues, can never replace legal tender like dollars. However, some Bitcoin proponents seem to be very confused about the place crypto-currencies occupy versus legal tender. Referring to the working paper, one such author [Why the OECD Needs to do its Homework on Bitcoin] states:

“The author fundamentally views bitcoin as something that must replace legal tender in order to be successful, so he is dismissive of bitcoin the monetary unit. Moreover, the author fears bitcoin more as a competitive alternative within a freedom-of-choice scenario and thus outlines policy behavior that attempts to extinguish any interface with established institutions.”

This is pretty close to the opposite of what the working paper says. Neither Bitcoin nor any other crypto-currency can ever replace legal tender no matter how successful it is on any other criteria. Bitcoins are a parallel currency; i.e. adjacent to and not intersecting with legal tender. The author doesn’t “fear Bitcoin as a competitive alternative” to legal tender. It is impossible for Bitcoins to compete with legal tender as an alternative monetary system because the central bank has a very special monopoly that is impossible to attack – in the limit because people have to pay their taxes. The policy conclusions with respect to the crypto-currency have nothing whatever to do with fear of Bitcoin replacing legal tender—that can’t happen—and have everything to do with money transmission that bypasses surveillance for certain purposes before coming happily back into the legal tender system afterwards (with neither tax, criminal or regulatory authorities able to follow the money trail in between).

Some Bitcoin proponents are very frightened of the idea of bans on the interface of crypto-currencies with exchangers whose banks participate in the central bank’s clearing system. The author of the above quote talks combatively about the free world taking on the monopoly of legal tender and how they just might jolly-well have to create alternative clearing systems to win the battle. This completely misunderstands the basics of the clearing system that the central bank participates in—i.e. the central bank that creates the currency in which Bitcoin prices are quoted and that the traders of crypto-currencies want wisely to be able to get back into when done trading.

Let’s explain it in simple terms. Banks must settle between themselves and the central bank in what is deemed by the authorities to be ‘cash’—and that cash is always the central bank’s own liabilities (currency and bank reserves with the central bank). Mr. Smith writes a cheque on his ABC bank to Mr. Jones who banks with XYZ bank. ABC bank can transfer $1000 to XYZ which accepts ABC liabilities. Now suppose Mr. Smith writes a cheque to the government to pay his taxes. The government’s bank is the central bank and the essence of the monopoly is this—the central bank doesn’t accept ABC bank liabilities to settle—it will only accept its own liabilities. So if ABC bank has excess reserves at the central bank, then it can run them down. If it doesn’t have excess reserves it can borrow another bank’s excess reserves at the overnight interest rate. If it can’t do that it must borrow from the central bank itself at the overnight cash rate (like the Fed Funds rate).

The same issue arises if ABC bank wants to buy from or sell government bonds to the central bank—it is dealing with the central bank that only accepts its own liabilities. With this monopoly the central bank can make interest rates whatever it likes—for example, by buying and selling government bonds to increase or decrease the amount of cash in the system (offsetting the impact of tax payments and any other unwanted influences on cash). If the central bank wishes to change the stance of monetary policy, it changes the cash base of the system: if it creates more cash compared to the demand for it, interest rates can be induced to fall and vice versa. Bitcoins don’t and can’t matter.

Now let’s suppose Mr. Smith wishes to go into the Bitcoin world. He might debit his dollar bank account in favour of an exchanger who provides Bitcoins at the going exchange rate. He then begins transmitting Bitcoins in a series of transactions to do whatever it is he does in that anonymous parallel currency world. But then comes the day that Mr. Jones has to pay his taxes to the government or deal with other transactions involving the banking system with its pesky need to clear with other banks including the central bank. But the central bank doesn’t accept Bitcoins. It accepts its own liabilities. So the erstwhile crypto-currency adherent has to come back to the exchanger, cross the fee/spread, and get back into the banking system. Buying and selling Bitcoins affects only the exchange rate of dollars for Bitcoins with the exchangers, in the same way that dealing in bottles of wine on an internet wine exchange drives the price via supply and demand. The prices of bottles of wine and Bitcoins go up and down, but the dollar price fluctuations in Bitcoins and bottles of wine can never affect the determination of interest rates, where the central bank with its monopoly over cash runs the show. But rest assured, every Bitcoin user down to the last one will very much want to be able to get back into dollars at some point. Little wonder that some people in the industry want to fend off regulations: all in the name of freedom of choice of course.

But what are some of these in-and-out Bitcoin activities in the name of freedom? The original working paper notes that there is a speculative and transactions demand for Bitcoins. On the speculative demand there are the founders who need to be able to extract value at some advantageous point, and others who participate in the ‘greater fool’ trading strategy believing they will get out ahead of the other ‘fools’ in the market if prices tumble.

With regard to the transactions demand, it seems unlikely that the crypto-currencies are in general use to buy the weekly groceries because their use might be cheaper than credit and debit cards. This is because the transactions fee/spreads with exchangers must be high to compensate for all the volatility and regulatory risk, and holding the crypto-currency carries the risk of capital loss.

There is a clear demand on the part of some individuals, however, who are happy to cross the spreads with exchangers and those offering ‘darkening services’ as a price to pay for anonymity (darknets and mixers expressly designed to further enhance the anonymity features of Bitcoin). Who might some of these people be who operate in complex cross-border structures, often in countries with little or no surveillance of or laws concerning Bitcoins? Businesses using virtual coins that pass through complex structures and ‘darkening’ procedures, trade on the Internet and from mobile phones anonymously are impossible to trace. Such businesses do this presumably because they need to be anonymous. Then, when their untraceable business dealings are all done, the crypto-coins can then re-emerge in a new ‘legitimate’ transaction. For example, a real estate company decides to accept Bitcoins in Australia. The name of a ‘clean’ individual or company appears on the deed of a beautiful property overlooking Sydney harbor.

It is very unclear in the global digital world as to who should or can be responsible for monitoring crypto-currencies and in which jurisdictions—but someone should; and if the technology is such that all users can’t be registered and identified, then more serious policy action should presumably follow. Dealing with things like terrorism, drugs, arms trading, and people smuggling, as well as preventing the evasion of taxes, are all very essential in a civil society. Were ‘freedom of choice’ to facilitate such activities then that ‘freedom’ moves into direct conflict with the notion of a civil society.

What is true of the so-called coin is not so for the technology to which crypto-currencies have given rise. The technology of ‘trust-less transfer’ is very interesting and it is quite possible (or even likely) that it will become a disruptive technology for many financial intermediaries in the future. The idea of eliminating the need for a trusted third party in finance is revolutionary—the world of finance has never faced such a technological innovation that questions the need for intermediaries and the huge share of earnings in the economy that they appropriate for this role. Given that the trust-less transfer of financial quantities is already a proven technology, it is only a matter of time before it encroaches on business models of banks, credit card businesses, monetary transfers and the trading of assets.

For the policy maker the lesson is clear: permit the development of the trust-less transfer technology with appropriate oversight, but shine sunlight on the dark aspects of the virtual coins. In this respect the working paper noted that the Ripple protocol, which works via a network of servers, is an example or a system that facilitates regulation and improved efficiency. All Ripple transactions appear to be verified by a decentralised computer network, using Ripple’s open source protocol, and recorded in a shared ledger that is a constantly updated database of Ripple accounts and transactions. This sort of approach is quite suitable for regulatory perusal.

Useful links

OECD work on financial markets

In my view: The Structural Gap approach offers a new model for co-operation with middle-income countries

ECLACToday’s post from Alicia Bárcena, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), is one in a series of ‘In my view’ pieces written by prominent authors on issues covered in the Development Co-operation Report 2014: Mobilising resources for sustainable development.

Middle-income countries differ widely in their reliance on official development assistance (ODA). While for some, ODA represents less than 1% of their gross national income, for others it is more than 30%. This divergence reflects countries’ differing capacity to access financial resources and capital markets.

The DAC List of ODA Recipients shows all countries and territories eligible to receive official development assistance. The list includes low and middle-income countries, as well as the least developed countries, defined according to their gross national income (GNI) per capita. As we review the future of ODA, we need to ask: Is per capita income the best criterion for allocating official development assistance? And how can we deal with the heterogeneity of middle-income countries?

The use of income per capita as an allocation criterion relies on two assumptions: that as countries increase their income per capita they will be able to mobilise a larger pool of international and domestic resources to finance their development needs and become less dependent on ODA; and that income levels reflect a given stage of social and economic development.

Evidence shows that a country’s capacity to access external resources depends on many factors besides income per capita. These include conditions outside their control, such as country risk ratings and perceptions, external demand for the products from that country and country size (i.e. population). Similarly, domestic resource mobilisation depends on numerous factors, including levels of savings, development and strength of financial markets, and the capacity and willingness of the government to levy taxes and collect duties (Chapter 7 and 14). Evidence also shows that despite similar income levels, countries may have different development realities. For example, people may vary widely in their access to social protection mechanisms, formal financial institutions and quality education, as well as in their resilience to economic and social shocks.

Far from being a homogeneous category, middle-income countries are a widely heterogeneous social and economic grouping with a large diversity of needs. For example, in 2012 income per capita in these countries ranged from $1006 to $12,275.

As a way forward, ECLAC proposes the Structural Gap approach as an alternative criterion to that of per capita income. This approach is based on the premise that there is no single classification criterion applicable to all countries and underscores the fact that income level cannot be equated with development level. It identifies key areas where there are obstacles to sustained, equitable and inclusive growth in middle-income countries (or “gaps”): equality and livelihoods, investment and savings, productivity and innovation, infrastructure, education, health, taxation, gender and the environment. Countries themselves are responsible for identifying the main gaps that hamper their social and economic development.

In my view, the debate on the future of ODA can benefit from the Structural Gap approach, which offers a basis for inclusive and egalitarian co-operation. It should be part of the post-2015 framework, helping to reorient co-operation away from the “donor-recipient” dichotomy towards a new model of co-operation among equals, following the principle of common-but-differentiated responsibilities.

Useful links

OECD work on external financing for development

The state of the state: building confidence, trust and political will

1914 2014To mark the centenary of The First World War, we will be publishing a series of articles looking at what has changed over the last century in a number of domains. In his second article, Alan Whaites team leader, Governance for Peace and Development at the OECD discusses statebuilding and the role of the state.

Charles Tilly famously remarked that states make war and war makes states. The events of 100 years ago would suggest that he had a point. WWI swept away an era of empires, establishing new states and fuelling the rise of both democracy and one-party government. At the same time, the conflict increased the role of state institutions: mobilisation of entire workforces, rationing of food, increased taxation. The state began to engage in the lives of ordinary people in ways that were previously unimaginable – and ways that have left long-term legacies in terms of administrative structures and capacity.

But we should not be misled: the WWI example is far from universal – or persistent. The nature of modern warfare usually turns Tilly’s words on their head: societies making war often unmake the state. Combinations of factions, militias and gangs can emerge to provoke conflict; with state systems frequently torn apart in the process – and the effects can be prolonged. While working in Afghanistan at the end of the past decade, I was struck by the way friends and colleagues reached back to the 1960s in search of examples of government delivery systems. But then this was in a context where at the start of that decade (in 2002) a UN/World Bank preliminary needs assessment suggested that “even at the central level in Kabul, ministries or departments are war-damaged shells, without even the most basic materials or equipment, and with few experienced staff.”

Afghanistan has not been alone. For numerous communities torn apart by conflict, the state of the state can be a significant obstacle to rebuilding. Evidence shows us how the loss of the developmental scale and reach normally attributed to states can have a heavy impact on services and economic growth, even where civil society organisations are working hard to fill the gap. The African Development Bank has tried to calculate the developmental cost of conflict. Their analysis of three African countries suggests that it will take between 19 and 34 years to recover the levels of GDP lost to war and instability. The 2011 World Development Report found that the in countries most affected by violence, the poverty rate was 21% higher than in those not affected. These statistics mask very real human suffering: death, rape, malnutrition and displacement.

States, of course, are at best imperfect and may themselves be sources of predation, abuse and inequity. They may also become vehicles for political discord and exclusion, which in turn foster conflict.  Yet achieving a sustainable end to violence has long been linked to statebuilding – an endogenous process of state-society relations (as defined broadly by the OECD in 2008). This definition points to the importance of responsive country systems that have the potential to encourage trust and confidence, and the capacity to support inclusive politics.

The important role of states in enabling political settlements to develop puts a premium on the capacity of government systems. When participants met at the Fourth High Level Forum on Aid Effectiveness in Busan in 2011, they committed to using developing countries’ own systems by default when working on public sector issues. This implied a need to think differently about supporting state-society relations – a need that was in keeping with experience. A 2010 OECD report on how to avoid doing harm when supporting statebuilding found that the tendency to work through parallel (non-state) systems can have damaging effects.

The debate, however, remains contentious and is often couched in terms of risks – such as risks to providers of development assistance, although the risks run both ways. Fragile states have much to lose when resources flow through parallel or off-budget, mechanisms. In 2011, aid represented 104% of the GDP of Afghanistan, yet only 12% of it was delivered on-budget. A World Bank report indicated that much of the aid was delivered through parallel delivery systems (such as Provincial Reconstruction Teams), leaving legacy problems for the government in terms of co-ordination, maintenance and sustainability. Additionally, by keeping a tight hold on the use of development resources, external actors may actually inhibit the growth of responsive state society relations.

Recent research has challenged the assumption that certain types of service delivery – favoured by aid organisations – automatically build legitimacy and confidence in post-conflict states. One implication is that rather than delivering traditional development formulas, what matters for peacebuilding and statebuilding is responding to public fears, wishes and aspirations. To meet public demands, however, a state needs the freedom – and political will – to prioritise areas that will build confidence and trust, which are not necessarily those areas selected by consultants, advisers and funders. Yes, supporting states in determining their own priorities – in consultation with citizens – and then resourcing them to deliver does involve considerable risk for the funder, sometimes both financial and reputational. Yet one lesson from WWI is that conflict can either build or debilitate the responsiveness of states – and without confidence, political will and trust, it can become part of a prolonged and destructive cycle.

Useful links

OECD work on peacebuilding, statebuilding and security

1914-2014: Shifting the balance between peace and war

1914 2014To mark the centenary of The First World War, we will be publishing a series of articles looking at what has changed over the last century in a number of domains. In the first article in the series, Alan Whaites team leader, Governance for Peace and Development at the OECD, discusses peace-building and conflict. In a second article on Wednesday, Alan will look more in detail at the role of the state.

In the early summer of 1914 my great grandfather was a poor labourer working in the sprawling docks of the Manchester ship canal. He supported a large family in a tiny slum dwelling in the Hulme area of the city. Within a few months he was a soldier, and by the end of April 1915, after 28 days at the front, he was dead. For him, like millions of others, the political process that transformed civilians into participants in large-scale industrialised warfare was both prolonged and, at the same time, remarkably sudden.

Christopher Clark captured this duality in the title of his book, The Sleepwalkers. The actors in this drama were first lulled by a long sequence of events that slowly created the potential for conflict, and then they were carried along by a sudden chain of events. In the lead-up, the development of two major alliance systems, the purchase of new weapons and the expansion of militaries were seen by many as contributing to reducing risk. But an assassination quickly turned these precautions around, creating a system that propelled Europe towards war.

The consequences of 1914 are embedded in our collective psyche: millions dead, the horror of trench warfare, and a further chain of post-war changes that would play out through the rest of the 20th century. In essence, the fundamental problem that unfolded on a grand scale 100 years ago remains familiar, and continues to characterise many, if not most, conflicts today. Actors take steps in the belief that they are providing protection and security, often in a defensive rather than an offensive frame of mind. Over time, their positions become fixed and mechanisms for dialogue and crisis management are neglected, so that when a political crisis does occur, actions are often based on assumptions (e.g., regarding the motives of others) that may be unfounded. Von Clausewitz said that war is policy conducted by other means; in reality, it is too often an unintended consequence of actions whose repercussions seemed eminently limited and safe at the time.

This can be the case at whatever level conflict occurs. As a professional my focus is predominantly on areas of internal conflict: civil wars, insurgencies, and breakdowns of political systems because of violent competing interests. And as in 1914, the steps that lead people into such conflicts may seem rational. In Civil War is Not a Stupid Thing, Christopher Cramer points out that often there are serious, considered motivations at play. Important factors may include assessments of ideological or communal risks and interests. People think themselves into relational corners – from which conflict becomes a logical step. In 2011 the World Bank’s World Development Report pointed out that the “who” of conflict (including instigators of urban or organised crime) doesn’t necessarily change the strategic dimensions involved; behaviours centred on calculations of risk can be essentially the same.

But if the human dynamics that create the potential for conflict remain stubbornly similar across the decades, is it possible to change the outcomes? Perhaps. The challenge is to change the logic – to move the rationale towards peace, not war. While this theory is nothing new, mechanisms have been elusive. A positive change over the last decade has been the level of engagement and agreement among richer countries and conflict-affected states on collaboration in peace-building. These new approaches to co-operation are encapsulated in the internationally-agreed New Deal for engagement in fragile states.

The New Deal aims to change calculations of risks and the logic of conflict by mutually supporting factors that shift the realities for those involved: justice, legitimate politics, sound economic management, trust and focus on new ways of working. It potentially offers a framework for creating sustained support for peace; building confidence that the future lies in development – not war. Of course, human nature and politics mean that there are no guarantees of success, and changes are unlikely to be trouble-free. Shifting the balance between peace and war is often non-linear, a process of persistence buffeted by crisis and turmoil. But at least the New Deal offers a platform for local and international actors to engage and act – and to do so with fragile states themselves setting the direction.

It is important to stress that a dose of realism is still needed, or “strategic patience” in the words of Helder da Costa (general secretary of the g7+ group of fragile states). There are no miracle solutions and without real political will no approach can work. The New Deal will also come under scrutiny, potentially because of unrealistic expectations and timeframes that are far too short. But the willingness by the international community to engage constructively in these situations has clearly grown. The lessons that enabled the agreement of the New Deal – the hard-won experience of what does and does not work in changing the dynamics of conflict and distrust – offer all stakeholders something to work with when trying to resolve conflict, in whatever region or state.

It was only after a second, even more costly, world war that Europe understood the need to shift incentives to peace, and away from conflict. That of course took considerable investment, trust and new forms of partnership (including the creation of the antecedent to the OECD). The principles and needs have not changed, nor the importance of working toward long-term peace now.

Useful links

OECD work on peacebuilding, statebuilding and security