Saturday, 6 February 2016

Varoufakis as Mathematician.

Yanis Varoufakis got a lower second class degree in Mathematical Economics from the University of Essex.  How good is his Maths? Can he multiply and subtract? What's more can he multiply and subtract in an Economic context? Let us look at the evidence- the following is from a Project Syndicate article (not actually a Spank Mag- believe me, I checked) published last month. My comments are in bold.

'Imagine a depositor in the US state of Arizona being permitted to withdraw only small amounts of cash weekly and facing restrictions on how much money he or she could wire to a bank account in California. Such capital controls, if they ever came about, would spell the end of the dollar as a single currency, because such constraints are utterly incompatible with a monetary union. https://www.project-syndicate.org/commentary/greece-dual-currency-regime-by-yanis-varoufakis-2016-01#Lhm32CE5g1edaVbx.99

Suppose Arizona has just one bank. It is insolvent. The Fed could agree with the Receivers of the insolvent Bank, that small transactions can go through because they will net out in a predictable manner but that large transactions or cash withdrawals will not be permitted. Clearly, this is a stop gap measure of a type familiar to Insolvency practitioners.  In the long term, Arizonan depositors will take a haircut whose size depends on relevant Deposit insurance provisions. Shareholders are likely to be wiped out and different classes of creditors will settle for cents on the dollar. There is no implication for 'monetary union'. True, there may be an Arizonan political party which demands secession from the Union and the refinancing of the troubled Bank through the establishment of a new currency. If Arizona does a lot of trade with the rest of America or receives net transfers, this course of action would be suicidal even if it were politically or militarily feasible. Why? Creditors in other States would be able to get Court orders to distrain assets owned by, or remittances to, relevant Arizonan counter-parties so as to satisfy their own claims. Those Arizonans with positive net assets or transfers with respect to the rest of America will have to be coerced to accept the new currency or the intermediation of the re-financed Arizonan Bank. If this is not done, then the new 'funny money' will rapidly inflate away into toilet paper. 

Varoufakis thinks otherwise. Why? Turns out he's been doing a bit of Mathematics. Let us see how good he is at multiplying and subtracting.

Greece today (and Cyprus before it) offers a case study of how capital controls bifurcate a currency and distort business incentives. The process is straightforward. Once euro deposits are imprisoned within a national banking system, the currency essentially splits in two: bank euros (BE) and paper, or free, euros (FE). Suddenly, an informal exchange rate between the two currencies emerges.
Urm...Capital Controls lead to Currency Black Markets and/or 'Multiple Exchange Rates'- everybody knows this. If Tax evasion and money laundering are going on there is already going to be an effective 'Black' exchange rate depending on the level of risk and size of the transaction involved.  A guy running a kebab shop in Kensal Green who launders his money through Cyprus is probably paying about a 7 to 15 percent premium. If VAT goes up along with stricter enforcement and hence detection rates, the premium goes up (unless there is a compensating Supply shock). If VAT falls, the premium falls because demand decreases.



Consider a Greek depositor keen to convert a large sum of BE into FE (say, to pay for medical expenses abroad, or to repay a company debt to a non-Greek entity). Assuming such depositors find FE holders willing to purchase their BE, a substantial BE-FE exchange rate emerges, varying with the size of the transaction, BE holders’ relative impatience, and the expected duration of capital controls.
On August 18, 2015, a few weeks after pulling the plug from Greece’s banks (thus making capital controls inevitable), the European Central Bank and its Greek branch, the Bank of Greece, actually formalized a dual-currency currency regime. A government decree stated that “Transfer of the early, partial, or total prepayment of a loan in a credit institution is prohibited, excluding repayment by cash or remittance from abroad.”
Actually, what happened was this. Varoufakis was Finance Minister when the Banks closed. A couple of weeks after he resigned they reopened with stringent limits on withdrawals. The decree he mentions came into effect at that time- i.e. 20th July- two weeks after he resigned. It was the Government of Greece, led by Tsipras (with whom Varoufakis had not yet broken ties) who passed this law. Incidentally, the Bank of Greece is not a branch of the ECB. Its Governor is the Greek economist who invited Varoufakis to take up a Professorship at Athens University. 
The eurozone authorities thus permitted Greek banks to deny their customers the right to repay loans or mortgages in BE, thereby boosting the effective BE-FE exchange rate. And, by continuing to allow payments of tax arrears to be made in BE, while prescribing FE as a separate, harder currency uniquely able to extinguish commercial bank debt, Europe’s authorities acknowledged that Greece now has two euros.
The Eurozone authorities did not have the power to prevent Greece passing the law Varoufakis complains about. Europe's authorities 'acknowledged' nothing. They did not say 'our Banks will only accept Euro transactions emanating from Greece if they are of a particular sort'. No rules were changed by Eurozone authorities. The Greeks had made certain sorts of transactions illegal and this had consequences for Banks dealing with Greece no matter where they were registered. 
The real effects of the dual-currency regime on Greece’s economy and society can be gleaned only from the pernicious interaction between the capital controls and the “reforms” (essentially tax hikes, pension reductions, and other contractionary measures) imposed on the country by the eurozone authorities. Consider the following beguiling example.
Greece’s companies fall roughly into two categories. In one category are a large number of small firms asphyxiating under the tax office’s demand that they pay in advance, and immediately, 100% of next year’s corporate tax (as estimated by the tax authorities). The second group comprises listed companies whose depressed turnover jeopardizes their already diminished share value and their standing with banks, suppliers, and potential customers (all of which are reluctant to sign long-term contracts with an underperforming company).
The coexistence, in the same depressed economy, of these two types of businesses gives rise to unexpected opportunities for shadowy trades without which countless businesses might close their doors permanently. One widespread practice involves two such firms, say, Micro (a small family firm facing a large advance tax payment) and Macro (a publicly traded limited liability company that needs to demonstrate higher turnover than it has).
Macro agrees to issue invoices for (non-existent) goods or services rendered to Micro, up to, say, €20,000 ($22,000). Micro agrees to pay €24,600 into Macro’s bank account (the price plus 23% value-added tax) on the understanding that Macro will reimburse the €20,000 to Micro. This way, at a cost of €4,600, Micro reduces its taxable revenue by €24,600, while Macro boosts its turnover figure by €20,000.
Alas, due to capital controls, Macro cannot reimburse Micro in FE, nor can it wire €20,000 to Micro’s BE bank account (lest they be found out by the authorities). So, to seal the deal, Micro and Macro approach a cash-rich vendor. This is usually a gas-station owner who is flush with cash at the end of each day and who, for security reasons and in order to pay for his fuel supplies, is obliged to deposit his cash daily at his bank, turning valuable FEs into less valuable BEs. The mutually beneficial deal is completed when Macro wires €20,000 in BE to the gas-station owner, who then hands over a smaller sum of FE (cash) to Micro’s owner, pocketing the difference.
The fact that this informal deal benefits all sides exposes the terrible inefficiency of current fiscal policy (namely, punitive business taxes) and how capital controls magnify it. The state collects additional VAT from Micro (at a loss of corporate taxes that Micro cannot pay anyway); Macro enjoys the benefits of seemingly higher turnover; and the gas-station owner reduces his losses from converting FE into BE. The downside is that economic activity is overstated and, more important, that reform becomes even harder as entrepreneurs internalize the necessity to find new, creative ways of bending the rules.
So, Varoufakis thinks 'Micro' will want to escape the 26 percent Corporation Tax by committing a crime which involves paying 23 percent VAT! What's more, Macro- a big company- and this cash rich petrol station owner will also be willing to commit crimes just to get a share of the 3 percent difference between the VAT rate and the Corporation Tax rate! Are Greek business men crazy? Who in their right mind will commit a crime for just a one percent margin? Suppose Greek business men really are like the utility maximizers of Game Theory. Will 'Micro' be any better off? No. He paid his Corporation Tax in advance. The assessment is based on previous earnings. The sudden appearance of an invoice for services from 'Macro' won't get him a refund but it may get him an audit. The immediate effect of Micro's action is that he first pays Advance Corporation Tax and then pays VAT on a bogus transaction, so as to reclaim some of that tax, but then, because Tax authorities assume people are rational and if their Cost of Sales went up, so must their profits, ends up either paying double or else getting caught and ends up paying a huge fine or going to jail. At no point does Micro end up with more money in his pocket than he would have if he had stayed honest.  
What about 'Macro'? By issuing the bogus invoice, he has to hand over not just VAT but also Advance Corporation Tax on his profit from the supposed sale.  Suppose his net profit is ten percent. Though, Revenue and Cost of Sales went up equally- by 20,000- Net Profit will be predicted to rise by 2000. The Advance Corporation Tax liability, at 26 percent, will be 520.  So, to chase a one percent illegal profit of 200 Euros, 'Macro' incurs an immediate Advance Corporation Tax liability equal to 520 Euros! What's more, sooner or later, he can look forward to a Tax audit and a big fine and a cozy jail term.

What about the Garage owner? He has cash Euros which he wants to deposit outside Greece (only a nutter would put his money into Greek banks after what happened last year). Many Greek businesses are re-locating to Bulgaria. They have a proven business model but need working capital which is costly for them to acquire because foreigners don't know them and will charge a premium. Clearly, this is an arbitrage opportunity of a sort which Greeks have been successfully exploiting since the the time of Homer! I don't know off hand what the cost of laundering 'Petrol Garage' Euros is but it can't be higher than what the local West London doner kebab king is paying because British enforcement is tougher than anything that yet obtains in Greece. 
Varoufakis thinks the Garage owner will invoice Macro for 20,000- incurring God knows how much VAT and fuel tax liabilities in addition to the Advance Corporation Tax on the supposed profit from this transaction- in order to get a wire transfer of 'BE'. Why on earth would he be crazy enough to do this? If he is so patriotic as to want to keep his money in a Greek Bank, he can do so at zero risk and less than one percent cash collection cost rather than getting in bed with Macro and Micro. If he wants to get into the Currency black market- handing out paper packages of 20,000 euro notes to guys he's never met- he should do so without getting involved in a paper trail. In any case, the guy needs to be super-liquid to pay his suppliers. He's the last person on earth who wants to be caught currency poor if the Banks close again.
The sole purpose of the capital controls imposed on Greece last summer was to force the country’s rebellious government to capitulate to the eurozone’s failed policies. But an unintended consequence was the formalization of two parallel (euro-denominated) currencies. Combined with the punitive taxation caused by Europe’s refusal to recognize the unsustainability of Greek public debt, the dual-currency regime produces unforeseen incentives for informal transactions in a country that desperately needs to defeat informality.
The reality of Greece’s two currencies is the most vivid demonstration yet of the fragmentation of Europe’s monetary “union.” In comparison, Arizona has never looked so good.
The Greek Government, not the ECB, passed the law Varoufakis complains off. Exchange Control was never demanded by the Eurogroup. The Greek Government, of course, is perfectly at liberty to introduce 'FE' auctions, or formalize a multiple exchange regime, like other IMF defaulters. The course they have taken is that of least resistance. However, it must be said, Varoufakis's own plan would have been significantly worse. 
Last August he wrote as follows-
In Greece, where the central bank is unable to support the state’s endeavours, government arrears to the private sector — both companies and individuals — have been a drag on the economy, adding to deflationary pressures since as far back as 2008. Such arrears consistently exceeded 3 per cent of gross domestic product for five years.
The phenomenon is both the cause and consequence of delayed tax payments to the state, reinforcing the cycle of generalised illiquidity.
To address this problem, our simple idea was to allow the multilateral cancellation of arrears between the state and the private sector using the tax office’s existing payments platform. Taxpayers, whether individuals or organisations, would be able to create reserve accounts that would be credited with arrears owed to them by the state. They would then be able to transfer credits from their reserve account either to the state (in lieu of tax payments) or to any other reserve account.
Suppose, for example, Company A is owed €1m by the state; and it owes €30,000 to an employee — plus another €500,000 to Company B, which provided it with goods and services. The employee and Company B also owe, respectively, €10,000 and €200,000 in taxes to the state. In this case the proposed system would allow for the immediate cancellation of at least €210,000 in arrears.
Okay, lets try this. My cousin Vivekides Iyeromogolou pays 100 Euros cash in bribes to get a Govt. contract to supply 100,000 of worthless rubbish- profits to be split according to the time honored formula such that all relevant wheels are greased. 
Currently, since the ECB won't play ball, Vivekides gets nothing because the Govt. has no funds to disburse - which discourages him from such activity. 
Under Varoufakis's scheme, however, he can immediately- no questions asked- trade this notional 100,000 to some guy who genuinely owes that much in taxes. Vivekides can now proceed to pay off the Greek Bank Accounts of the other crooks involved such that it appears that the worthless rubbish has been delivered and found to be of acceptable quality. Currently, Vivekides's conter-party  is paying the Greek Treasury in Euros using his domestic Bank account because that Bank might go bust anyway. Under Varoufakis's new scheme, however, he can have his cake and eat it too. Vivekides will trade his 100,000 for a fraction of the counter-party's Bank Balance. The Govt. gets stuck with 100,000 of worthless rubbish and also loses whatever Vivekide's share of Greek Bank Euros could otherwise have legitimately purchased. 
But the game doesn't stop there. Essentially you now have the possibility for a complicated deal whereby a criminal with some 'black Euros' can get a 10,000 credit in his Bank account so as to create a 'legal' front for his criminal gang, by paying Vivekides 1000 Euros cash down in return for which Vivekides hands over his 100,000 credit for worthless rubbish. This 100,000 credit eventually finds its way to a genuine tax payer- a, perhaps, not over scrupulous businessman holding 'blue Euros' (on an analogy with the Argentinian blue dollar, which functions like an unofficial foreign exchange auction)  arising from off the books, or falsely invoiced, transactions by exporters, who now settles with the Greek Treasury at a much smaller sacrifice of Internationally accepted fungible assets than would otherwise be the case. Everybody wins- except the Greek Treasury which gets stuck with its own worthless scrip. Varoufakis just fucked over his own Govt.- again!
Suddenly, an economy such as Greece’s would acquire important degrees of freedom within the existing European monetary union. In a second phase of development, which we did not have time to consider properly, the system would be made accessible through smartphone apps and identity cards, guaranteeing that it would be widely adopted.
In other words all current tax payers with access to black or blue Euros would immediately be able to buy 'tax Euros' for pennies. The Treasury gets worthless 'tax Euros' which no one will be willing to receive for the supply of stuff which aint worthless simply. Govt. can't buy anything. It can't raise any revenue. The State has withered away- thanks to Varoufakis's genius. No doubt, as a former President of the Black Student's Alliance at Essex university circa 1978, Varoufakis will be declared President for Life by the grateful Greek people whose desire to adhere to the 'Europeanist' project actually meant joining Zimambwe and Somalia and Sudan as IMF defaulters because as Varoufakis said 'Greeks are the Blacks of Europe'.
What is your verdict on Varoufakis as Mathematician? Yes he can multiply 20,000 by the VAT rate and get the right answer which is 4,600. He says that a total of 24,600 can be deducted by 'Micro' from his taxable revenue. This isn't true. It is a bogus transaction bound to attract an audit unless Greek tax authorities are incompetent- in which case the simpler and safer method is simply to lie to them ab ovo. 
Moreover, since Greece is moving to 100 percent Advance Corporation Tax, this does not mean Micro gets any money back today. It seems, Varoufakis can multiply all right but if he does so then he can't subtract properly.
Moreover Micro has to pay a commission to the Garage Owner. Thus he is losing more than 4600 today in order to avoid paying 5200 at a later date and committing a crime in the process. Assuming even purely computerized checking by the Tax authority- the increase in his Cost of Sales by 20,000 will actually cause him to receive a demand for as much as 10,400 extra Euros (assuming typical Gross Profit mark ups for micro enterprises) ! Of course, if the Greek Tax authorities are utterly worthless, this may not happen- but in that case why not just under-report Profits in the first place? Even if this were not the case, would any sane person sacrifice liquidity at this time for so paltry and problematic a reward?

What about the counter-party- the big firm 'Macro'? Varoufakis correctly calculates that they have to pay 4,600 in VAT at the end of the quarter. But he forgets to add the Advance Corporation Tax on the profit from this transaction.  Furthermore, he neglects the role of the external auditor (Macro, presumably, is a public quoted company). 
Assume Macro's net profit margin is ten percent- then it has incurred 520 in immediate tax liability purely on the basis of increased turnover. However, because of its bogus transaction with the Garage owner- which boosts Cost of Sales and thus projected Gross Profit (unless the two transactions are set off against each other- which would immediately raise red flags and give the game away)  the total expected net contribution from the bogus transaction (because fixed costs remain unchanged) will look double that of genuine transactions- i.e. it will be close to the VAT rate. This happens even if the payment to the Garage owner isn't shown as 'above the line' (i.e part of Gross mark up) but appears to be directly related to boosting contribution to fixed costs. Since the relevant marginal contribution on novel below the line items must be high- otherwise the external auditor objects- the net profit rate appears to have increased. The more 'Macro' indulges in this sort of bogus transaction, the more it looks as though its net profit margin is actually much higher than what it really is- viz. eleven percent of which ten percent is legal and one percent illegal- and that it is hiding money.  This means, sooner or later (assuming Greek Tax authorities are competent) Macro gets a huge tax bill based on total turnover but computed at this new, purely fictitious, net profit rate. Of course, if tax authorities aren't competent, everybody would just pretend to be making a loss to avoid Corporation tax altogether. In either case, rational agents (even the artificial sort who figure in Game Theory) will never act in the manner Varoufakis suggests. Unless, that is, they are equally stupid and ignorant.

What is our conclusion? Varoufakis can multiply correctly but if he does so he then loses the ability to add or subtract relevant totals. Essex University gave this guy a Degree- a lower Second admittedly- in Mathematical Economics. They must be so proud.

Sunday, 31 January 2016

The double tragedy of Rohith Vemula

  Carl Sagan's widow has written a heart felt letter expressing her sorrow at the suicide of Rohith Vemula.
  Not being familiar with conditions in India, the lady naturally thought that Rohith had died because of prejudice- perhaps that of obscurantist Hindu priests against Scientifically inclined young people from working class backgrounds.
  'To read his (Vemula’s) suicide note and to learn the details of his predicament is to get a vivid inkling of the actual cost of bias to our civilization."
The problem here is that Vemula had received a generous Government scholarship to pursue a PhD program which included some Scientific and Mathematical courses. Had he chosen to concentrate on studies there was nothing stopping him from becoming a writer like Carl Sagan- other than the normal bureaucratic delay in the disbursement of his stipend.

  It so happened that the University he was studying at had previously curbed the power of the Students Union because of serious bloodshed on campus. Since the political situation in the State has improved, the administration should have handed back power to the students. If they had done so then the dominant group could have beaten or harassed the weaker groups to their hearts' content without the police getting involved or any one getting suspended or being forced to quit their hostel. This was a terrible injustice, no doubt, but it was one of a purely political kind. The right of students to beat each other rather than do research is absolutely fundamental to Indian democracy. American Universities have discriminated shamelessly against Indian students- like the great Lalit Modi- and expelled them simply for kidnapping and beating a student in connection with a drug deal gone sour. The bias displayed by the Americans did not however prevent Lalit Modi, on his return to India, from making a great contribution to civilization. Why was Rohith prevented from making a similar contribution? The answer is he killed himself. Ironically, this desperate action of his may end up benefiting his mother and siblings- his brother, a 'Geoscientist', and his mother, a graduate, may get Government jobs- surely, an unusual outcome for a Student activist.

  Carl Sagan's widow writes- "If we could somehow quantify the totality of lost contributions and innovations as a result of prejudice, I believe we would find it staggering.'
  Prejudice, similar to that displayed by the American University to Lalit Modi, resulted in Rohith being censured, rather than celebrated, for some alleged beating or threatening behavior aimed at a rival. But, if student leaders don't beat each other who will? Do you think President Obama will send Marines to do the job? Will Angela Merkel suddenly descend from a cloud and start laying about her with her rolling pin? I am sorry, you have a very naive view of Late Capitalism if you continue to indulge in such day-dreams.
  Prejudice and Bias prevented Rohith from continuing to make a contribution to civilization by beating his fellow students. His suicide was a double tragedy- his no less brilliant peers lost a chance to contribute to civilization by beating him.
"Is it possible that the attention paid to Rohit’s story will lessen its chronic repetition? I am trying to find something hopeful in an otherwise heartbreaking example of needless suffering and squandered potential.'  
 Rohith's tragedy has highlighted the role of student organizations like the Communist SFI- which he accused of casteism- and the Ambedkar Students Association which is now dominant in his University thanks to an alliance with the SFI.

 ASA, SFI, anything and everything exist for their own sake. Seldom the interest of a person and this organisation match. To get power, to become famous or to be important in between boundaries and to think we are up to changing the system. Very often we overestimate the acts and find solace in traits. Of course I must give my credit to both groups for making, introducing me to wonderful literature and people.” - See more at: http://indianexpress.com/article/india/india-news-india/the-11-lines-rohith-vemula-struck-off-suicide-note/#sthash.i7cLn1bT.dpuf

  Clearly, we should not feel any prejudice or bias against the ASA or the SFI because they appear to have some sort of cognizable
+6 ideology but accept them as potentially equal to the Trinamool Youth Congress or even more disreputable Caste based Mafias.

  Vemula's death does have political implications quite separate from vindicating the inalienable right of PhD students to beat each other. These are

1) The wedge between Educationally Backward Classes and 'Dalit' Scheduled Castes. Vemula's father is OBC but his mother identifies as Dalit.  The same caste may be OBC in one State and S.C in another. On top of that, caste identities can be fluid. In this case, Vemula's mother was 'adopted' into the OBC caste of her husband but separated from him because of domestic violence. She raised her children in an exemplary fashion by her own efforts- her 'adoptive' mother, a highly educated woman, appears to have used her as a servant merely.
  Had Rohith brought a court case to claim the Dalit status of his mother (who was underage when married off), he might have won and established a valuable precedent.
   However, since Rohith entered in the General category, he could also fit the role of an OBC martyr, which is why his father now claims he was murdered by the Dalits. As a matter of fact, a modus vivendi is possible whereby Dalits claim Rohith for their propaganda abroad while the parties vying for the OBC vote claim him for their own in the domestic sphere.

2) The scandal that Govt. funded Universities feather-bed a class of student-politicians while the vast majority of students struggle to pay inflated fees for second rate instruction in private medical or engineering colleges.
 People like Vemula, who could have studied something worthwhile, received double the manufacturing wage to swan around repeating worthless Kancha Iliah type nonsense and either beating ineffectually or, more reprehensibly, not beating fellow students at all. When, for some reason, his monthly payments were delayed by red tape, he killed himself. This shows the bankruptcy of the student elite. Beating fellow students is a moral duty and healthful recreation, not something conditional on getting a hefty stipend. Incessantly repeating worthless nonsense is optional but this business of reading Carl Sagan (I've checked, it isn't porn at all) shows the low caliber of the fellow.

3) The student wing of the ruling party is licking its lips at the thought of capturing Rohith's University. The truth is the majority of students are Hindu and don't like Muslim terrorists and don't want to get a reputation as beef eating nihilists. Once Student Unions gain autonomy they will realize they can beat their fellow students with impunity and will do so with vim and vigor as part of their contribution to Civilization.

4) Indian youth has a choice between Hardik Patel and Rohith Vemula. Patel is in Jail- i.e. is enrolled at the most prestigious and best possible Research Institution concerned with 'making a contribution to Civilization'- whereas Rohith hanged himself after his stipend got held up. Older people like myself- who believe all these young fellows nowadays are Nancy boys simply- may take a dim view of the future. The day may come when our youth does not beat each other up with vim and vigor. Even the art of uttering obscene insults is declining. On my last visit to the village, I was distressed to see elderly men whose skulls had not been fractured by their hefty sons wielding agricultural implements. This is the main reason more and more Hindus are abandoning turban and flaunting their bald patches for all to see. Verily this is Kali Yuga.


Anwar M Shaikh's Magnum Opus

   Prof. Anwar Shaikh's magnum opus- 'Capitalism: Competition, Conflict and Crises'- is due out from O.U.P in February. This is a must read book for anyone with an interest in Political Economy.

  Unlike Piketty's famous tome, this is proper textbook presenting a Unified Theory of every aspect of the Economy without any reliance on standard assumptions of Utility Maximization, Perfect Competition, Rational Expectations and so on. This book has two great strengths
1) Shaikh is a superb scholar of Classical and 'heterodox' Economics- his exposition is magisterial and not tendentious in any way.
2) Shaikh has embraced the methods of 'Econophysics' and produces compelling empirical evidence for some truly innovative, indeed revolutionary, insights and predictions.

   Make no mistake- this is a path-breaking academic textbook but the author has worked very hard to express himself as clearly as possible so as to reach the intelligent layman who has no time for Academic point-scoring or Epistemological Methodenstreit.
   Shaikh is a very very bright guy who could easily dazzle us with his literary skills and encyclopedic knowledge of fashionable things like 'chaos' and 'turbulence'. But he simply isn't interested in celebrity status.
  He is a man of the Left- he volunteered to go teach in a school in Harlem in the late Sixties- and has been a Professor at the New School for many years. Yet he doesn't wear his heart on his sleeve or play the 'race' card. This is because his Theory is based on Reality and he wants us to use it to make things better.

  It may be objected that Marxism, nowadays, is represented by the likes of Varoufakis. It is a pose, a gimmick, nothing more. Shaikh's empirical and original theoretical work already attracts attention and gets incorporated in the models of the truly smart. But Marxism isn't about being smart its about 'attitude' and being entitled enough to indulge in 'retro' histrionics- thus Shaikh's book can't become a best-seller like Piketty's. All this may be true. However, the fact is, whether you are a young person choosing a career or a middle aged man worried about your pension, or a retired person wondering how much you can afford to gift away to your children, we all need to have a better model of what is going to happen in the Economy. Shaikh's book helps us do this.


Monday, 18 January 2016

Mein Kant- Chapter One- Rise of the Philosopher Penguin.

In 1963, a drunken penguin with delusions of grandeur escaped from the Bonn Zoo by pretending to be the new born child of a passing Tam Bram couple. Sadly, the penguin- though correctly predicting that Bonn would one day be ruled by a South Indian- had attached himself to the wrong family. In any case, after the fall of the Berlin Wall, Bonn's potential to become the seat of a more larcenous Fourth Reich greatly dwindled, which is why the penguin in question does not resent Herr Ashok Sridharan, the current Mayor of the latter City, too much.

Nevertheless, the above factum creates a scandal for a stare decisis Kantian Jurisprudence because, the philosophical penguin's life-plan as conceived in 1963- i.e. well before Herr Sridharan's birth- would class with, for wrongly perceived as res judicata, uncontested Deduktionsschriften which- had the legitimacy of something like the Hague Concert of 1710 been prolonged in the manner Kant valorised- would have validated the following imputatio legis- 'It is Vivek Iyer, not any subsequent interloper with a South Indian name, who should be lording it over the Germans from their legitimate Capital City of Bonn and launching blitzkriegs against those bastard cousins of mine in Hampstead and T.Nagar and San Franfuckingcisco who still tease me for waddling around at weddings jutting out my belly which is like totally insensitive dude coz, let me tell you, for your kind information, it's no picnic being a flightless bird.'

The objection that some necessary imputatio facti is lacking for the above to hold is easily defeated by pointing out that I'm a fucking penguin dude. Qaestio juris can only be settled by me coz like fuck anybody else knows about what fucking law applies to fucking drunken penguins with South Indian names who were born in fucking Bonn? Get a grip.



Monday, 11 January 2016

Subramaniyam Swamy's 'Krishna' offer.

I thank God I've always been ugly, stupid, hateful or just plain barmy
The exact opposite in every way of Subramaniyam Swamy
Whose Vishnu is the colour of the winning vervet's Scrotum
Tho' but upaashruti is Krishna's Kunti Totem.

Notes
1) Vervet monkeys have a lot of blue skin, but most of it is covered by fur, However, the male scrotum is hairless and the bright blue colour is visible from almost every angle, and is interesting to other males who come to examine it. Brain and Gartlan reported that when a male vervet falls in rank, the bright blue fades to a powdery blue or sometimes turns completely white. This colour change takes about two weeks. I enquired what the colour is due to, and was told there was a blue pigment in the skin. This seemed interesting as it might reflect a reaction of melanophores, possibly mediated by some hormonal change in the blood supply. John Price.

2) The word totem comes from the Ojibway word dodaem and means "brother/sister kin".

3) UPAaSRUTI. a supernatural voice which is heard at night revealing the secrets of the future.

4) Krishna- he whose skin is black. Kunti- biologically, she is the paternal aunt of Lord Krishna but was adopted into a different Royal family. Still, the Lord discharges his duty to his cousins in the affectionate manner of a maternal uncle. Nevertheless, he does not take sides- except by reason of omniscience and an overriding duty to protect humanity.

Friday, 8 January 2016

I'm the ugly child I was

Once again in the mirror, abashed, dismayed
See the trick Time, sudden, has played!
Now, as then, sore loved because
I'm the ugly child I was

All Surface is my Narcissus tomb
& Cain my Abel's nom de plume
Such Unanimity must Acquittal win
From, to, Sorrows' Sanhedrin

Saqi! Let Gemini breed in Liriope's womb
Wine to blooden, Christ to doom
So Love get drunk on Plato's Laws
I'm the ugly child I was.

Monday, 14 December 2015

Why India banned the 'Satanic Verses'.



Inder Malhotra has an article in the Express today about how and why India banned Salman Rushdie's controversial novel 'Satanic Verses'.

'Around the time Rushdie’s book was published, Rajiv Gandhi was being inundated with strong representations from Muslim leaders of all parties, including the Congress, protesting against horrendous anti-Muslim riots in Meerut, Hashimpura and adjoining areas in UP. During these, not only were the killings heavy but also some victims were blinded. The highly provocative movement for the construction of Ram temple at Ayodhya had aggravated the situation. It was in this grave atmosphere that a note, informing him that since Satanic Verses was not published in India, several applications for the import of Rushdie’s book also landed on the prime minister’s desk. He called in his information adviser, G. Parthasarathy, who advised that the matter should be referred to the Union home ministry that was responsible for what is officially always called “law and order” despite Nehru’s repeated suggestion that the phrase “peace and tranquility” would be better.

'A couple of days later the PM heard on Doordarshan that the import of Satanic Verses had been banned. Parthasarathy’s RAX phone rang and he found that the call was from the PM asking him whether he had seen the news on Doordarshan, and if so, how the ban order was announced. The answer was available immediately. C.G. Somiah, then a highly-spoken-of home secretary, explained that under the government’s rules of business, it was his duty to deal with every major problem concerning law and order. On reading Rushdie’s book in its entirety, he added, he came to the conclusion that to allow it to be circulated in India in the existing law and order situation would be not only wrong but also dangerous. The home ministry issued the necessary orders. Rajiv evidently thought that this was the end of the matter.'


There are two points which can be made in this connection.

1) The political background was irrelevant. Rushdie's book wasn't connected to either anti-Muslim atrocities in U.P nor had anything to do with Ayodhya. The fact is a prominent opposition M.P, former diplomat, Syed Shahabudin had written an open letter calling for the book's import to be banned. By itself, this meant that no application for its import could be granted without ascertaining if prima facie it was noxious under the relevant act and, moreover, if it posed a threat to internal security.

2) The decision to ban or allow the import of a book is not made at the level of the Prime Minister. If the Home Ministry receives representations opposing the import of a book, it makes a decision based on certain objective criteria. These can be challenged in a court of law. However, it would still be open to anyone to approach the Court to ban the book and order copies destroyed on some other basis- in this case Hate Speech Law Section 295(A)- which was brought in after the scandal caused by the publication of 'Rangila Rasul', a book which was reminiscent of the Satanic Verses because of the inclusion of salacious material in connection with episodes in the life of the Prophet of Islam. Indeed, that's why Khushwant Singh, who trained as a lawyer, advised Penguin India not to publish the book.

This raises the question of Rushdie's open letter to Rajiv Gandhi- which the author now admits was 'cheeky' and 'arrogant, not to say hilariously ignorant- Rushdie called Khurshid Alam Khan an extremist and a fundamentalist!- and the dilemma faced by a democratic country under the rule of law when attacked by so-called 'public intellectuals' who affect not to know the Law and who pretend that Politicians are all powerful.

Rushdie wrote as follows to Rajiv Gandhi- 'A further official statement was brought to my notice. This explained that ''The Satanic Verses'' had been banned as a pre-emptive measure. Certain passages had been identified as susceptible to distortion and misuse, presumably by unscrupulous religious fanatics and such. The banning order had been issued to prevent this misuse. Apparently, my book is not deemed blasphemous or objectionable in itself, but is being proscribed for, so to speak, its own good!

This really is astounding. It is as though, having identified an innocent person as a likely target for assault by muggers or rapists, you were to put that person in jail for protection. This is no way, Mr. Gandhi, for a free society to behave.

The Indian Govt had been kind to Rushdie. Rather than saying baldly that the book contravened Hate Speech Law Section 295 (A) and that its import had been banned in consequence, the bureaucrats sought to give Rushdie a fig leaf.  The fact is, quite soon after, the British Police had to take Rushdie into hiding for his own protection. By then, of course, even Rushdie could see that such a measure was necessary to preserve his life. What is alarming is that a man born in India and who had lived in Pakistan could not understand that his book provided material for Islamophobes as well as serving as a pretext for mob violence by Muslim activists. Rushdie could scarcely have been unaware that mobs in Pakistan had burned down the British Council Library because of a tasteless joke by Auberon Waugh about the birth of the future Messiah and the peculiar shape of the trousers men wore in the region. In the twenty succeeding years, Political Islam had gained rather than retreated. Yet Rushdie wrote a scabrous book and expected to be taken seriously as a Public Intellectual- one, moreover, as he reminded us in a pompous TV interview he gave at that time, who had studied Islamic History in Cambridge.

Rushdie does offer a possible legal defence relevant to a prosecution under Section 295. Here it is-
'The section of the book in question (and let's remember that the book isn't actually about Islam, but about migration, metamorphosis, divided selves, love, death, London and Bombay) deals with a prophet - who is not called Mohammed - living in a highly fantastical city made of sand (it dissolves when water falls upon it).

'He is surrounded by fictional followers, one of whom happens to bear my own first name. Moreover, this entire sequence happens in a dream, the fictional dream of a fictional character, an Indian movie star, and one who is losing his mind, at that. How much further from history could one get?

'In this dream sequence I have tried to offer my view of the phenomenon of revelation and the birth of a great world religion; my view is that of a secular man for whom Islamic culture has been of central importance all his life.'
This defence could work if the reader could believe that the crazy movie star could himself have had the hallucination narrated. An American or German might think, 'okay, maybe Indian movie stars from humble backgrounds grew up listening to stories about their Religion similar to what is depicted in the book. Indian Judges, on the other hand, have direct access to the vernacular traditions re. the Prophet. Furthermore, the prosecution could call actual Muslim film stars from humble backgrounds and establish that the hallucinations Rushdie fathers on his protagonist are not such as might arise as a result of mental illness. Rather, they are meant to impress the reader as a type of Revelation. 
Rushdie refers to Hazrat Salman Farsi- a special hero to Ajamis (non Arabs). Why on earth does he conflate this impeccable character with the reviled Ibn Sarh who was not Ajami? Would Rushdie have uttered a similar slur on Hazrat Bilal (who was Black)?
The problem here, from the legal point of view, is that a lot of Rushdie's writing is of a low grade 'scenes a fair' type, which, though a defense against the charge of plagiarism, is no good at all for a plea basing itself on aesthetic value or scholarly integrity.

Rushdie said- 'When Syed Shahabuddin and his fellow self-appointed guardians of Muslim sensibilities say that ''no civilized society'' should permit the publication of a book like mine, they have got things backwards. The question raised by the book's banning is precisely whether India, by behaving in this fashion, can any more lay claim to the title of a civilized society.'
A Civilized Society is one under the Rule of Law. In India, Democratically elected Legislatures had approved or extended Laws against Hate Speech.
Banning Rushdie's book was the Civilized thing to do for the Indian bureaucrat concerned because it was enjoined by a Democratically enacted Law and was clearly in the Public Interest.  Protesting against an unjust law or seeking to redefine the Public Interest is equally, if not more so, incumbent on members of Civil Society. However, there are civilized ways of enforcing or protesting Laws. Indian bureaucrats did their duty in banning a book but did so in a Civilized manner such that the least possible damage was done to the author's reputation.  Rushdie, by contrast, though adopting an Olympian tone, protested the ban in the least civilized manner possible- viz. by telling stupid lies and putting forward obviously fallacious arguments. The proper way to change the Law is to bring a test case on a genuinely worthwhile piece of literature. Sadly, Rushdie is yet to produce anything that meets that description.