The Saif House

Saifedean Ammous' occasional blog

EURO 2012 Preview and Predictions

Posted by saifedean on June 8, 2012

There is a moment before every major football tournament where I put my knowledge of football to the ultimate test by sticking my neck out and making some outlandish predictions for which I could be brutally mocked. Today, I do that for the European Championships which kick-off in Poland and Ukraine.

The winner should be either France or Germany, with Russia a possible surprise winner.

Germany and France are most likely to meet in the semi-final. The winner of that semi-final, more likely France, will probably play one of Spain, Holland or Russia in the final. This is how I view the favorites for the title, in order of likelihood of their winning:

1- France
2- Germany
3- Russia
4- Holland
5- Spain

France have a fantastic team filled with some of the best players in Europe. Benzema is probably the most in-form striker in the tournament, and should be top contender for top scorer. He’ll have the excellent Ribery, Nasri and Cabaye behind him. In defense they have a very good backline with Rami, Mexes and Clichy. These players together form a core that is arguably stronger and in better form than any other team in the tournament. Add to that a great team-spirit and togetherness bringing these players together under a popular coach, and you have the makings of success.

Germany are second favorites. Gomes, Schweinsteiger, Ozil, Khedira, Muller, Podolski, Lahm and Neuer are the core of an excellent team that is very familiar playing together and has the unique benefit of being the only German team, and we all know what that means in football. They play beautiful passing football and are a joy to watch when they click well. But they are defensively slightly suspect, and after Bayern’s defeat in the Champions League final (as well as the German league and Cup) a lot of their players might not be in the best mental shape for this tournament. They are in the group of death, against Holland and Portugal and Denmark. It is not inconceivable that they might get eliminated in the first round, with the Danes and Dutch always super motivated to defeat their neighbors.

Russia are my tip for the surprise of the tournament. The team does not have any real excellent players, but together they are a very solid team, and that counts for much more in international tournaments. They are coached by the Dutch genius Dick Advocaat and they have been under special fitness coaching by another genius Dutchman, Raymond Verheijen, which has them going into the tournament in the best shape of all other teams, if their form in the friendly games is any guide. This is the last chance for a good generation of Russian players which played very well in 2008, defeating the excellent Dutch and losing to eventual winners and world champions Spain in the semis. They somehow failed to make the World Cup in 2010, and so will be desperate to succeed in their last chance together at a major tournament. This is a solid unit that has been playing together for years. They will be motivated for this. Add to that the fact that seven of the probable starting eleven play together in Zenit St. Peterburg. Finally, they will be playing very close to home and will have enormous support in the stadium. Don’t be surprised if they win it all.

Holland still have a great team, but they are not as good as they were in the last world cup or European championship. Their defense is suspect, and Robben has proven over and over again that he is not a big game player and will always choke when it really matters. They have two excellent strikers in Robin Van Persie and Klaus-Jan Huntelaar, but are unlikely to be able to field them together. The great Sneijder has had a terrible season at Inter and is out of form, but he might be saving his best for this tournament. If they do well, it will most likely be due to van Persie, van der Vaart and Sneijder. But they could be easily undone by Robben, by the barbarity of central midfielders van Bommel and de Jong, by their suspect defense, or the extremely negative tactic of coach Bert van Mawrijk. The tragedy of this team (and there’s always a tragedy in Dutch football) is that such a great generation of wonderful players are being coached by such a mediocre and negative coach, at a time when Dutch coaches are some of the most successful and respected in the world.

Spain, on paper, have the best team in the world without a doubt. But football is not played on paper, it is played on pitches with real players. In reality, this current Spain team is a shadow of its former self. Two of their most important players, who were absolutely essential to their world cup and European cup wins are missing: striker David Villa and defender Carles Puyol. They have the best midfielders in the world, but at the end of the season all of them looked very tired and out of form. This is natural, for the amount of games that these players have played for Spain and the clubs is incredible. It is the price of success that Xavi, Iniesta, Silva, Mata, Fabregas, and Pique looked dead at the end of this season and are unlikely to reproduce their best form this tournament. They still have a lot of strength in depth but they’re unlikely to drop their underperforming players and find suitable replacements that work together as well.

Other teams:
England are terrible. They never fail to disappoint and even with the very low expectations this year, they will still likely disappoint. They could easily get knocked out in the first round, but if they don’t, they will be knocked out in the second round.

Italy are almost as bad as England. The team is distinctly lacking in quality, with only Buffon, Balotelli and Pirlo the real world class players. Coach Prandelli seems to have simply failed in building anything like a coherent team in two years in charge. His attempt to change Italy into an attacking team has only worked in the sense of weakening them defensively. They have no shape or coherence going forward, and their only hope of scoring seems to be long balls from Pirlo for Balotelli to finish. They’re a mess at the back. They need a proper defensive midfielder, or a third center-back to play behind Pirlo, but that would mean sacrificing an attacking midfielder, and Prandelli doesn’t look likely to do it. With Pirlo as the deepest midfielder, and their wing-backs’ proclivity for going forward, their center-defenders and keeper will have an awful time. They should be eliminated in the first round by Spain and Croatia.

Croatia could be another surprise team. They’re a solid team that has been playing together for a while and is united behind a popular smart young coach, Slaven Bilic. Modric is one of the best midfielders in the world, and if he is in form, a big if, they will sparkle. Jelavic, Rakitic, and Srna are all excellent players and this could be their year to make their name.

Predictions:

Winner: France, Germany or Russia
Final: France – Russia
Semi-finals: Germany-France and Russia-Spain
Quarter-finals: Germany-Poland; Russia-Holland; France-Croatia; Spain-Sweden

Topscorer:
Karim Benzema
Robin van Persie
Mario Gomez
Miroslav Klose
Nikita Jelavic
Robert Lewandowski

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Posted by saifedean on February 3, 2012

I was interviewed again on the Keiser Report. The discussion with Max was about Corporatism and Capitalism, Egypt’s debts, and Intellectual Property. The discussion starts around 13:10.

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Blaming corporatism for capitalism

Posted by saifedean on February 3, 2012

Professor Edmund Phelps and I have written an editorial piece with Project Syndicate on corporatism, capitalism and the fatal confusion between the two. I reproduce the whole essay here, courtesy of Project Syndicate

The future of capitalism is again a question. Will it survive the ongoing crisis in its current form? If not, will it transform itself or will government take the lead?

The term “capitalism” used to mean an economic system in which capital was privately owned and traded; owners of capital got to judge how best to use it, and could draw on the foresight and creative ideas of entrepreneurs and innovative thinkers. This system of individual freedom and individual responsibility gave little scope for government to influence economic decision-making: success meant profits; failure meant losses. Corporations could exist only as long as free individuals willingly purchased their goods – and would go out of business quickly otherwise.

Capitalism became a world-beater in the 1800’s, when it developed capabilities for endemic innovation. Societies that adopted the capitalist system gained unrivaled prosperity, enjoyed widespread job satisfaction, obtained productivity growth that was the marvel of the world and ended mass privation.

Now the capitalist system has been corrupted. The managerial state has assumed responsibility for looking after everything from the incomes of the middle class to the profitability of large corporations to industrial advancement. This system, however, is not capitalism, but rather an economic order that harks back to Bismarck in the late nineteenth century and Mussolini in the twentieth: corporatism.

In various ways, corporatism chokes off the dynamism that makes for engaging work, faster economic growth, and greater opportunity and inclusiveness. It maintains lethargic, wasteful, unproductive, and well-connected firms at the expense of dynamic newcomers and outsiders, and favors declared goals such as industrialization, economic development, and national greatness over individuals’ economic freedom and responsibility. Today, airlines, auto manufacturers, agricultural companies, media, investment banks, hedge funds, and much more has at some point been deemed too important to weather the free market on its own, receiving a helping hand from government in the name of the “public good.”

The costs of corporatism are visible all around us: dysfunctional corporations that survive despite their gross inability to serve their customers; sclerotic economies with slow output growth, a dearth of engaging work, scant opportunities for young people; governments bankrupted by their efforts to palliate these problems; and increasing concentration of wealth in the hands of those connected enough to be on the right side of the corporatist deal.

This shift of power from owners and innovators to state officials is the antithesis of capitalism. Yet this system’s apologists and beneficiaries have the temerity to blame all these failures on “reckless capitalism” and “lack of regulation,” which they argue necessitates more oversight and regulation, which in reality means more corporatism and state favoritism.

It seems unlikely that so disastrous a system is sustainable. The corporatist model makes no sense to younger generations who grew up using the Internet, the world’s freest market for goods and ideas. The success and failure of firms on the Internet is the best advertisement for the free market: social networking Web sites, for example, rise and fall almost instantaneously, depending on how well they serve their customers.

Sites such as Friendster and MySpace sought extra profit by compromising the privacy of their users, and were instantly punished as users deserted them to relatively safer competitors like Facebook and Twitter. There was no need for government regulation to bring about this transition; in fact, had modern corporatist states attempted to do so, today they would be propping up MySpace with taxpayer dollars and campaigning on a promise to “reform” its privacy features.

The Internet, as a largely free marketplace for ideas, has not been kind to corporatism. People who grew up with its decentralization and free competition of ideas must find alien the idea of state support for large firms and industries. Many in the traditional media repeat the old line “What’s good for Firm X is good for America,” but it is not likely to be seen trending on Twitter.

The legitimacy of corporatism is eroding along with the fiscal health of governments that have relied on it. If politicians cannot repeal corporatism, it will bury itself in debt and default, and a capitalist system could re-emerge from the discredited corporatist rubble. Then “capitalism” would again carry its true meaning, rather than the one attributed to it by corporatists seeking to hide behind it and socialists wanting to vilify it.

Saifedean Ammous is a professor of economics at the Lebanese American University and Foreign Member of Columbia University’s Center for Capitalism and Society. Edmund Phelps, the 2006 Nobel laureate in economics, is Director of the Center.

Copyright: Project Syndicate, 2012.
http://www.project-syndicate.org

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Christopher Hitchens

Posted by saifedean on December 16, 2011

This piece started off as a twitter long-post, and was then published on Antiwar.com, one of my favorite websites for whom I am proud to write. 

In Arab culture there is a strong imperative to not speak ill of the dead, but I’m going to have to make an exception for Christopher Hitchens. Knowing Hitchens, I’m sure he’d approve. Hitchens had a tenacity and ferociousness that would not compromise for considerations of tact, tradition, or politeness. That was something I admired about him, and will pay tribute to it in the only fitting way possible.

I only met Christopher Hitchens once, on March 9th, 2006. The New York University Remarque Institute held an event entitled “What Happens Now? Israel And The Palestinians after Gaza, Sharon, And Hamas.” Hosted by the great late Tony Judt, it brought Hitchens to speak along with Lebanese novelist Elias Khoury and Israeli journalist Gideon Levy.

The discussion was very interesting and intelligent, until Hitchens took the pulpit and started hyperventilating about Hamas winning the Palestinian elections. He went on for 20 minutes on the evils of religion in politics. A theocracy, he said, could never make peace with its neighbors and will always discriminate based on idiotic religious grounds. Palestinians thus deserved to be isolated and punished by the USA for choosing a religious regime.

After his talk, I took Hitchens aside and asked him why he didn’t feel the same way about the other religious fundamentalist regime in Palestine: Zionism. If he was so concerned about Hamas’s religious fundamentalism, why was he silent about the religious fundamentalism that is driving millions of Palestinians out of their homes, occupying their land and denying them freedom because of their religion? Shouldn’t America deal with Jewish fundamentalism in the same way he wants it to deal with Islamic fundamentalism?

For once, I saw him flustered and speechless. It was clear he genuinely had not thought of this and now he felt thoroughly embarrassed. He smiled, looked around, tried to find something to say, but came up with nothing. He then tried to ignore me by going back to his comfort zone and engaging in a shouting match with a Muslim and calling him a “fucking peasant.” (That man was Ashraf Laidi, a currency trader and author whose CV indicates he’s never really been a peasant.) I asked Hitchens if he’d make my point in his next talk about Palestine/Israel, and again, he had nothing to say. I ended with: “well, either tell me why I’m wrong or admit you’re wrong and that in your next speech you’ll denounce Islamic and Jewish fundamentalism in the same way.” The stupid smirk left his face, and he walked away.

This was post-2001 Hitchens. The over-riding directive of his life was to make money by pleasing American right-wingers by dressing up their idiotic nationalism, chauvinism, and jingoism with Big Words and an English accent. It was a highly rewarding career, because he sold to morons who watch Sean Hannity the illusion that they are not complete cretins, and they pay top dime for that sort of intellectual deceit.

Clearly, it was not part of the New Hitchens act to include material critical of Israel, since the awful Islamo-Fascist-Satan-Beast had to be defeated at all costs. This life-long crusader against religion had perfected his new act to the point that he had stopped noticing, entirely, that Israel was a state based on religious discrimination, and was championing its case as it went on ethnically cleansing people who came from the wrong religion. Still, I’m sure on his death bed he would have imagined that this was all worth it, since it helped Israel and George W. Bush, the two greatest forces of secularism of our time, to spread the gospel of enlightenment, freedom, rationalism and tolerance to the “fucking peasants” of the Arab world.

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The problem of regulation

Posted by saifedean on November 11, 2011

Economist Hernando De Soto has a good piece in the Financial Times about the Tunisian economy, particularly pertaining to the heartrending story of Mohammad Bouazizi, the fruit-seller who set himself alight after the Tunisian government banned him from selling his fruits and confiscated his fruit cart.

De Soto makes the point that Professor Edmund Phelps and I had made in our FT Op-Ed in January: the fact that the government controlled the fate of normal people like Bouazizi with its restrictive laws and regulations makes it impossible for people to prosper and live in decency. Bouazizi’s was an extreme reaction to this fate, but it should not distract from the fact that millions of people in Tunisia and the rest of the world face the same predicament.

De Soto writes:

Bouazizi flicked his lighter on at 11.30am, one hour after a policewoman, backed by two municipal officers, had expropriated his two crates of pears ($15), a crate of bananas ($9), three crates of apples ($22) and an electronic weight scale ($179, second hand). While a total of $225 might not appear to justify suicide, the fact is that, as a businessman, Bouazizi had been summarily wiped out.

Without those goods, Bouazizi would not be able to feed his family for more than the next month. Since his merchandise had been bought on credit and he couldn’t sell it to pay his creditors back, he was now bankrupt. Because his working tools were confiscated, he had lost his capital. Because the customary arrangement to pay authorities three dinars daily for the property right to park his vendor’s cart on two square yards of public space had been terminated, he lost his informal access to the market. Without property and trade, his reputation as a reliable administrator of goods was now undermined in the only market he knew.

He was not on a salary. He was a budding entrepreneur. According to his mother and his sister, his goal was to accumulate capital to grow his business. But this was impossible as we discovered when we investigated the records and the laws he had to comply with.

To get credit to buy the truck he so needed, he needed to demonstrate he had some kind of legally recognised collateral. The only legal collateral he had access to was the family house in SidiBouzid. However, he had never been able to record a deed in the property registry, an indispensable requirement for using the house as a guarantee. Compliance requires 499 days of red tape at a cost of $2,976.

To create a legal enterprise he would have had to establish a small sole proprietorship. This would require taking 55 administrative steps during 142 days and spending some $3,233 (12 times Bouazizi’s monthly net income, not including maintenance and exit costs). Even if he had found the money and the time to create a sole proprietorship firm the law did not enable him to pool resources by bringing in new partners, limit liability to protect his family’s assets, and eventually, issue shares and stocks to capture new investment.

Today, the majority of people, particularly the highly-educated, still see nothing wrong in principle with this arcane set of restrictions on the freedom of people to trade. Most everyone will agree that this burden is excessive, and that some ‘reform’ is needed to make the process faster, more transparent, or more responsive. The World Bank and IMF have issued countless reports on the importance of public sector reform, good governance and efficient institutional arrangements (or whatever the latest buzzword is). But rarely does anyone question whether such restrictions should exist at all.

There is no reason for any of these rules to exist. There should never be a government authority that decides who can and cannot sell fruit, what fruits they can sell and how they can sell them or for how much. Such an authority could never exercise this power to the benefit of those regulated by it. It can, at best, be a mild waste of time and effort, but it will more likely be an insurmountable burden for millions of Bouazizis whose livelihoods are destroyed because a bureaucrat somewhere believes he knows what’s best for them.

No one, anywhere, should need to apply for a license from anyone to sell fruits. The only person to whom a fruit-seller should be accountable is his customers, who in turn should never have their freedom to buy anything restricted in any way. This is the very simple yet powerful idea of free exchange: Any transaction undertaken freely between two consenting adults must be mutually-beneficial to both of them. Otherwise, they would not have undertaken that transaction. A simple idea, but with powerful implications.

When a fruit-seller has no recourse whatsoever to violence to impose his will on his customers, the only way he can get the customers to buy from him is if he provides them with desirable fruits at a price that suits them. When the customers have no recourse whatsoever to violence to impose their will on the fruit-seller, the only way that they can get him to give them his fruit is by paying him a price he finds suitable. As such, both parties have an interest in meeting each other’s expectations–otherwise the transaction would not happen. This, on its own, is what motivates people to provide for one another peacefully and satisfactorily on a free market.

With the freedom of the customer to chose from different providers, there is no need for any other form or regulation or authority to infringe coercively on the providers. The fruit-seller has no interest in selling bad fruits, as that would displease his customers, who will go somewhere else. He has no interest in cheating his customer as that would make him lose business. This is how a free market functions: you do well by doing good, not necessarily because you want to be good, but because you cannot prosper otherwise.

The imposition of regulation in such transactions is usually done with the best of intentions. High-minded bureaucrats think they are making life better for fruit vendors by ensuring proper licensing is observed and certain standards are adhered to. They aren’t. Consumers get the standards they want from the providers they want simply by voting with their feet: The providers that don’t give people what they want go out of business. Regulation wastes a lot of resources on compliance, and causes all sorts of market failures like price distortions, shortages, and surpluses. Most importantly, it closes the door in front of the likes of Bouazizi from freely providing for willing customers.

To believe that regulation is unnecessary and harmful is not an idealistic and detached view. It flows necessarily from a belief in human equality. If you firmly believe all humans are equal, what is it that allows a third person to infringe with the threat of violence on the right of two people to transact freely with one another? Bouazizi and his customers were both made worse-off by both being denied the right to transact freely by government. There is no reason for these regulations to exist. Bureaucracies that enforce these regulations should not be reformed or streamlined or made more efficient–having more efficient mechanisms of regulation means more efficient mechanisms of repressing people’s freedoms. These agencies should simply be abolished. If they’re not abolished, we should at least hope and pray that they become as incompetent and ineffective as possible.

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The Luddites are back

Posted by saifedean on November 7, 2011

I was disappointed to read today an article by Martin Ford arguing that technological advancement will destroy the jobs of workers, and that as a result the world is headed towards a jobless economy. This is pure nonsense.

Such nonsense isn’t new, of course. Since the beginning of the Industrial Revolution in the late 18th century, many people with a limited understanding of economics have made the same mistake. These Luddites have always fought technological advancement thinking it would destroy jobs and ruin society. The automated loon, they warned, was going to destroy the livelihood of the British textile worker. Mechanized farming was supposedly going to starve farmers. The steam engine was going to make redundant large chunks of the labor force. Indeed, much of Karl Marx’s confused economic theories are based on just this fallacy, positing that as capitalists grow richer, they can afford to replace more workers with machines, leaving behind large numbers of disgruntled proletariat that must then unite and revolt to… I don’t know, go back and work disgusting menial jobs, I guess.

Yet somehow the average Brit today is far better off than they were before those machines came about. British workers earn more, work less and work in much better conditions than two centuries ago. Unemployment in Britain is still very low (in spite of its increase after the recent depression.) Had the Luddites and Marxists been right, one would imagine that two centuries of technological progress would have left absolutely nobody with a job today.

The problem with this Luddite Fallacy is simple: technological advancement increases the productivity of labor and therefore makes labor more valuable. As a result, workers earn more. Technological advancement allows workers to produce more output for every hour they work. A farmer using a tractor can produce several times as much food as a farmer using a donkey. We live in a world of scarcity: we could always use more food, more clothes, more stuff. The only real constraint on our production of stuff is how much labor hours we have to devote to it. The more productive our labor, the more production we have. The more production we have, the more labor earns. Technological advancement does not take away the jobs of workers, it allows workers to do more productive jobs. We will never run out of jobs, because we could always use more humans making more scarce products to meet other humans’ never-ending wants.

To Luddites like Martin Ford, the invention of the wheel would have appeared an unmitigated disaster–just think of all the lost jobs in the carrying-painfully-heavy-stuff industry! But in reality, it was a great boon for humanity, as it freed humans from carrying heavy loads and instead allowed them to focus on more productive things like making food, clothes, houses, and so on.

Therefore, it is no coincidence that humanity’s economic conditions continue to improve with technological advancement. This is not going to change any time soon. The more productive our technology, the better off we are. If humanity were to listen to Luddites like Martin Ford and fight technological advancement, none of us would have any time to do any of the immensely productive things we do in today’s modern society. We would be too busy engaged in very primitive tasks like carrying heavy loads for us to do anything else.

We should not worry too much from people like Mr. Ford. The Luddites of the early 19th century did succeed in destroying many machines and some factories, but these victories against human advance were short-lived. Their movement died and their ideas became the butt of jokes, while technological advancement continued to make life better for everyone. While Luddites like Martin Ford may influence some people with their deceptively appealing ideas, they are utterly powerless to stop the ingenuity of billions of human beings from making life better for all of us. Or so I hope.

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Corporatism, Capitalism and the Arab Spring

Posted by saifedean on November 7, 2011

Corporatism, Capitalism and the Arab Spring is the title of a Working Paper I completed for the Columbia University’s Center for Capitalism and Society. It is freely accessible on the Center’s website. All feedback is appreciated.

This is the abstract of the paper:

This paper examines the economics of the popular revolutions that removed the ruling regimes of Tunisia and Egypt in early 2011, and presents the concept of a corporatist economy as a better framework for understanding the economic systems of these countries. The deposed regimes had instituted a deep corporatist governance system that placed control of most economic activity in the hands of the regime and its closest loyalists. This corporatist system was very beneficial for the regime and its cronies, but was very destructive of economic freedom of the majority of people, leading to economic stagnation, youth alienation and the eventual mass protests that deposed the regimes. Moving forward, what these economies need is not a return to socialism, nor a retrenchment of corporatism, but a move towards dynamic free market capitalist economies that allow individuals the freedom to make their own living and determine their own future.

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October Keiser Report interview

Posted by saifedean on November 7, 2011

I was interviewed on the October 18 Keiser Report. We discussed Mubarak’s debts, corporatism and Occupy Wall Street.

Interview starts at around 12 minutes into this clip:

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Keiser Report interview in June

Posted by saifedean on November 7, 2011

I was interviewed on the June 16 episode of the Keiser Report, to discuss the issue of foreign aid to Tunisia and Egypt, and the political and economic conditions of those countries after the revolutions.

Interview starts at around 12 minutes.

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On Mubarak’s odious debts

Posted by saifedean on November 7, 2011

On October 6th I had a piece published with Project Syndicate on the debt legacy with which Mubarak has saddled the Egyptian people. I argue that the Egyptian government should announce it is not liable for Mubarak’s foreign debts, and that the person who should be made liable for them is Mubarak himself. The piece is freely accessible on Project Syndicate’s website.

The piece is also available in Arabic, Spanish, Russian, French, German, Italian, Czech, and Mandarin Chinese.

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