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On The Guns of August

I recently finished reading The Guns of August, the Pulitzer Prize-Winning Classic about the Outbreak of World War I, by Barbara W. Tuchman.

Below are key excerpts from the book that I found particularly insightful:

Wilson, facing this group of “ignorant men,” as he called them, and accompanied by his fellow officer and future chief, Sir John French, “who knows nothing at all about the subject,” pinned up his great map of Belgium on the wall and lectured for two hours. He swept away many illusions when he explained how Germany, counting on Russia’s slow mobilization, would send the bulk of her forces against the French, achieving superiority of numbers over them. He correctly predicated the German plan of attack upon a right-wing envelopment but, schooled in the French theories, estimated the force that would come down west of the Meuse at no more than four divisions. He stated that, if all six British divisions were sent immediately upon the outbreak of war to the extreme left of the French line, the chances of stopping the Germans would be favorable.

Coming from Haldane this conclusion had a profound effect upon Liberal thinking and planning. The first result was a naval pact with France by which the British undertook at threat of war to safeguard the Channel and French coasts from enemy attack, leaving the French fleet free to concentrate in the Mediterranean. As this disposed the French fleet where it would not otherwise be, except by virtue of the agreement, it left a distinct obligation upon Britain…This curious document managed to satisfy everybody: the French because the whole British Cabinet Government had now officially acknowledged the existence of the joint plans, the antiwar group because it said England was not “committed,” and Grey because he had evolved a England was not “committed,” and Grey because he had evolved a formula that both saved the plans and quieted their opponents. To have substituted a definite alliance with France, as he was urged in some quarters, would “break up the Cabinet,” he said.

War pressed against every frontier. Suddenly dismayed, governments Struggled and twisted to fend it off. It was no use. Agents at frontiers were reporting every cavalry patrol as a deployment to beat the mobilization gun. General staffs, goaded by their relentless timetables, were pounding the table for the signal to move lest their opponents gain an hour’s head start. Appalled upon the brink, the chiefs of state who would be ultimately responsible for their country’s fate attempted to back away but the pull of military schedules dragged them forward.

How far reduced, how distant the end, no one yet knew. No one could realize that for numbers engaged and for rate and number of losses suffered over a comparable period of combat, the greatest battle of the war had already been fought. No one could yet foresee its consequences: how the ultimate occupation of all Belgium and northern France would put the Germans in possession of the industrial power of both countries, of the manufactures of Liege, the coal of the Borinage, the iron ore of Lorraine, the factories of Lille, the rivers and railroads and agriculture, and how this occupation, feeding German ambition and fastening upon France the fixed resolve to fight to the last drop of recovery and reparation, would block all later attempts at compromise peace or “peace without victory” and would prolong the war for four more years.

At the time of the disaster General Marquis de Laguiche, the French military attache came to express his condolences to the Commander • in Chief. ‘We are happy to have made such sacrifices for our Allies,” the Grand Duke replied gallantly. Equanimity in the face of catastrophe was his code, and Russians, in the knowledge of inexhaustible supplies of manpower, are accustomed to accepting gigantic fatalities with comparative calm. The Russian steam roller in which the Western Allies placed such hopes, which after their debacle on the Western Front was awaited even more anxiously, had fallen apart on the road as if it had been put together with pins. In its premature start and early demise it had been. Just as the Grand Duke said, a sacrifice for an ally. Whatever it cost the Russians, the sacrifice accomplished what the French wanted: withdrawal of German strength from the Western Front. The two corps that came too late for Tannenberg were to be absent from the Mame.

But Francois faced battle, whereas Kluck, thinking he faced only pursuit and mopping up, ignored the precaution. He believed the French incapable, after ten days of retreat, of the morale and energy required to turn around at the sound of the bugle and fight again. Nor was he worried about his flank. “The General fears nothing from the direction of Paris,” recorded an officer on September 4. “After we have destroyed the remains of the Franco-British Army he will return to Paris and give the IVth Reserve the honor of leading the entry into the French capital.”

In conclusion:

After the Marne the war grew and spread until it drew in the nations of both hemispheres and entangled them in a pattern of world conflict no peace treaty could dissolve. The Battle of the Mame was one of the decisive battles of the world not because it determined that Germany would ultimately lose or the Allies ultimately win the war but because it determined that the war would go on. There was no looking back, Joffre told the soldiers on the eve. Afterward there was no turning back. The nations were caught in a trap, a trap made during the first thirty days out of battles that failed to be decisive, a trap from which there was, and has been, no exit.

A recommended read in the areas of history and military conflicts.

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Pity the Nation

I recently finished reading Pity the Nation – The Abduction of Lebanon by award-winning journalist Robert Fisk. I had possessed this book for a while, but didn’t have the chance to read it until now. Being Lebanese this book particularly resonated with me as it covered the many dimensions of instability within Lebanon and the Middle East region for the last 50 years.

Below are some key excerpts from this historical masterpiece:

I think I was in Lebanon because I believed, in a somewhat undefined way. that I was witnessing history – that I would see with my own eyes a small part of the epic events that have shaped the Middle East since the Second World War.

At best, journalists sit at the edge of history as vulcanologists might clamber to the lip of a smoking crater, trying to see over the rim, craning their necks to peer over the crumbling edge through the smoke and ash at what happens within. Governments make sure it stays that way. I suspect that is what journalism is about – or at least what it should be about: watching and witnessing history and then, despite the dangers and constraints and our human imperfections, recording it as honestly as we can.

I hate the reporters who moaned about their ‘stress’, their need for ‘counselling, their walks through hell. We journalists are, after all, privileged folk. If we don’t like the heat, we can fly home. Club Class, to the glistening bubble of Europe or America, a glass of champagne in our hand. It was the Lebanese, the Bosnians, the Afghans who needed our pity, citizens of pariah countries for whom there were no planes, no visas, no safety, no life. And it was my doubtful, dangerous privilege – along with my colleagues – to be a witness to their suffering, to record their history, so that no-one could ever complain that no-one told them. So that no-one can ever say: ‘We didn’t know.’

What I did not realise then – but what I would discover the moment I embarked on my journey to those front doors – was that I had touched upon the essence of the Arab-Israeli war; that while the existence of the Palestinians and their demand for a nation lay at the heart of the Middle East crisis, it was the contradiction inherent in the claims to ownership of the land of Palestine – the “homeland” of the Jews in Balfour’s declaration – which generated the anger and fear of both Palestinians and Israelis. The evidence of history, not to mention the physical evidence of those land deeds, suggested a subject of legitimate journalistic inquiry: who legally as well as morally had the right to ownership of the property?

For another generation, this Covenant was to be held up as a model of political excellence within the Middle East, especially by the Western powers which gave it such approval but which did not have to suffer its consequences. It was supposed to be a paragon of democracy in an Arab world more familiar with dictatorship than freedom. But there were two fundamental flaws in the Covenant. The first was that the Maronite community which at best constituted only 30 per cent of the Lebanese – was almost certainly outnumbered by the Sunnis or the Shias. There had been no census since 1932 – nor was there ever to be a census again. The myth of a Maronite majority thus had to be accepted by the Muslims for Lebanon’s ‘democracy’ to work. For their part, the Muslims had already given up their claim to reunion with Syria as their price for participation in government under the Covenant.

To 1982 again, to the high-ceilinged room in east Beirut where Pierre Gemayel sits behind his large oak desk. He does not wish to talk further about his visit to Berlin in 1936. But he does not wait to be asked about the Palestinians. He calls them a ‘fifth column’ and he means it. They were a subversive presence here,’ he says. There was a war, not between us and the Lebanese, but between us and the Palestinians, who tried to conquer Lebanon and take Lebanon and occupy it. They wanted to dissolve Lebanon in the Arab world.’ And one is conscious as Pierre Gemayel speaks – unfairly perhaps but the parallel is there – of Gemayel speaks – unfairly of another, infinitely more vulnerable minority which another government blamed, back in the 1930s, for its own social ills.

In Lebanon, one shot, one bomb, has served to immortalise a cause. to make words unimpeachable, arguments irreproachable. To question the dead is sacrilege of a special kind. Look at the legions of martyrs on the walls of Beirut, all those who followed this wisdom of the dead. Study the confident, smiling eyes of Bilal Fahas, lionised by the Amal militia as arouss al-jnoub the ‘bridegroom of the south’, his last moments captured by Amal’s official war artist, driving his Mercedes car bomb into an Israeli armoured personnel carrier. After a while, a routine started; the martyrs would have their own show on television.

Journalists who report wars have to be as dispassionate as doctors 3bout the physical aspects of mortality. We needed the psychological strength to convince ourselves that gruesome detail was also scientific fact; we had to interpret the smell of human decomposition not as something disgusting but as a process of chemical change that was natural if unpleasant. Yet all this is easier said than done. Death is frightening. If nothing else, the dead of Lebanon – the repeated experience of seeing bodies lying like sacks in roadways, ditches and cellars were a constant reminder to us of how easy it is to be killed. It is a necessary lesson. Just one little step across a very fine line, the slightest misjudgement over when to cross a road, when to smile or look serious in front of a gunman, could mean the difference between life and death.

For Arafat, the issues were simple if not simplistic. Palestinians and Lebanese had died in defence of a land that would ‘remain Arab through and through’. His was the path of the sleepwalker, the believer in the blood sacrifice. Those who had been steadfast in battle against the Israelis would know how to transform their ‘new revolutionary awakening into a beam of light and victory on the long road of pains, the road of Golgotha, towards liberated Palestine and to our noble Jerusalem. But Arafat was not going to Jerusalem. He was leaving Beirut onn a Greek cruise ship for exile in Tunisia.

Everyone is convinced that tithe IDF is more humane than any other army. “Purity of arms” was the slogan of the Haganah army in early ’48. But it never was true at all.’ , Politicians, according to Avneri, used the Holocaust as moral blackmail. But it’s real, it’s not invented – it’s there. It produces an odd kind of schizophrenic attitude. The Israelis will say: “We’ll never allow another Warsaw ghetto or Auschwitz to happen again.” Then they’ll tell you they can conquer the whole Middle East in forty-eight hours. No one feels any contradiction in this.’

But ‘terrorism’ no longer means terrorism. It is not a definition; it is a political contrivance. ‘Terrorists’ are those who use violence against the side that is using the word. The only terrorists whom Israel acknowledges are those who oppose Israel. The only terrorists the United States acknowledges are those who oppose the United States or their allies. The only terrorists Palestinians acknowledge ~ for they too use the The only terrorists Palestinians acknowledge — for they too use the word – are those opposed to the Palestinians.

The Lebanese Christians would have been the first to strip Israel of its illusions about the Shia Muslims of the south. If Sunni orthodoxy condemned the Shia as theological heretics, the Christians saw them ” in the words of one Lebanese academic as ‘the Albigensians of the Middle East’. In Lebanese politics, heresy meant betrayal, and the poverty of the hill villages of southern Lebanon, the historical neglect suspicion deep inside the framework of Lebanese Shia society. We would encounter this ourselves on visits to the south. Shia friends whom we had known for months, family members with whom we had stayed for weeks – men and women who had protected us during periods of would turn to us suddenly, without warning, at breakfast or on a car journey and ask: ‘Are you a spy?’

On a concluding note:

A quarter of a century. When I thought about it, I felt old. Yet working in the same region, watching the same tragedy, involves a kind of eternal youth. I still felt as young and fit as I was when I first came to Lebanon in the hot and terrible summer of 1976.1 was 29 then, with my parents’ energy and wisdom and my own schoolboy enthusiasm. My father had fought in the trenches of France in 1918 and in the year he died, I was in the city that sent him there, watching the continuation of the European civil war in Sarajevo. My mother had died six years later. in 1998.1 had no brothers or sisters. Sometimes I felt very much alone. But I had come through, I told myself. I made it. How very easy it would have been to die in Lebanon.

Yet Still as I write now, I fear the monsters. Perhaps I fear history and the frightening authority it has over our lives, its ability to persuade us to repeat our tragedies, over and over again. Maybe this is what draws me back to the slums of Sabra and Chatila year after year, with its garbage and rats and hopelessness. Balfour and the British mandate of Palestine, Hitler and Zionism – yes, and the Arabs – all conspired to imprison these poor people in the slums. Arafat had abandoned them for his garbage statelet in Gaza. In February 2001 I was back in the camps again, still trying to find one more clue – one more unheard witness – to the massacre of 1982.1 walked again those same roads. Here is where I found the body of the old man with the stick, Mr Nouri. Just beyond is the execution wall and, to the left, the spot where I found the two women and the dead baby. Behind me is the ward where Loren Jenkins and I hid beside the dead body of the newly murdered young woman, the one with the clothes pegs lying round her head like a halo. And right here, on this stretch of muddy road, is where Jenkins, sickened by the smell of death and the personal responsibility of one man, screamed: ‘Sharon!’ A day after that last visit of mine to Sabra and Chatila, on 6 February 2001, Ariel Sharon was elected prime minister of Israel.

A must read for anyone looking to understand the geopolitics of the Middle East in general and Lebanon in particular.

On The General Theory of Employment, Interest, and Money

Being passionate about economics, reading John Maynard Keynes‘ classic – The General Theory of Employment, Interest, and Money – has been on my to do list for quite some time and I am glad I have finally been able to read it.

Below I wanted to share seven key learnings from this masterpiece:

Lesson 1: The equivalence of saving and investment:

Income=value of output = consumption + investment; saving = income – consumption; saving = investment.

The equivalence between the quantity of saving and the quantity of investment emerges from the bilateral character of the transactions between the producer on the one hand and, on the other hand, the consumer or the purchaser of capital equipment. Income is created by the value in excess of user cost which the producer obtains for the output he has sold; but the whole of this output of user cost which the producer obtains for the output he has sold; but the whole of this output must obviously have been sold either to a consumer or to another entrepreneur; and each entrepreneur’s current investment is equal to the excess of the equipment which he has purchased from other entrepreneurs over his own user cost. Hence, in the aggregate the excess of income over consumption, which we call saving, cannot differ from the addition to capital equipment which we call investment. And similarly with net saving and net investment. Saving, in fact, is a mere residual. The decisions to consume and the decisions to invest between them determine incomes. Assuming that the decisions to invest become effective, they must in doing so consumption or expand income. Thus the act of investment in itself cannot help causing the residual or margin, which we call saving, to increase by a corresponding amount.

Lesson 2: Credit Impacts Output and Wages

The notion that the creation of credit by the banking system allows investment to take place to which “no genuine saving” corresponds can only be the result of isolating one of the consequences of the increased bank-credit to the exclusion of the others. If the grant of a bank credit to an entrepreneur additional to the credits already existing allows him to make an addition to current investment which would not have occurred otherwise, incomes will necessarily be increased and at a rate which will normally exceed the rate of increased investment. Moreover, except in conditions of full employment, there will be an increase of real income as well as of money-income. The public will exercise “a free choice” as to the proportion in which they divide their increase of income between saving and spending; and it is impossible that the intention of the entrepreneur who has borrowed in order to increase investment can become effective (except in substitution for investment by other entrepreneurs which would have occurred otherwise) at a faster rate than the public decide to increase their savings. Moreover, the savings which result from this decision are public decide to increase their savings. Moreover, the savings which result from this decision are corresponding to the new bank-credit, unless he deliberately prefers to hold more money rather than some other form of wealth. Yet employment, incomes and prices cannot help moving in such a way that in the new situation someone does choose to hold the additional money. It is true that in the new situation someone does choose to hold the additional money, it is true that an aggregate saving and investment which would not have occurred if it had been sufficiently foreseen. It is also true that the grant of the bank-credit will set up three tendencies (1) for output to increase, (2) for the marginal product to rise in value in terms of the wage-unit (which in conditions of decreasing return must necessarily accompany an increase of output), and (3) for the wage-unit to rise in terms of money (since this is a frequent concomitant of better employment); and these tendencies may affect the distribution of real income between different groups. But these tendencies are characteristic of a state of increasing output as such, and will occur just as much if the increase in output has been initiated otherwise than by an increase in bank-credit. They can only be avoided by avoiding any course of action capable of improving employment. Much of the above, however, is anticipating the result of discussions which have not yet been reached.

Lesson 3: The Below Six Factors Drive The Propensity to Consume

The principal objective factors which influence the propensity to consume appear to be the following: (1) A change in the wage-unit. Consumption (C) is obviously much more a function of (in some sense) real income than of money-income…(2) A change in the difference between income and net income. We have shown above that the amount of consumption depends on net income rather than on income, since it is, by definition, his net income that a man has primarily in mind when he is deciding his scale of consumption…(3) Windfall changes in capital-values not allowed for in calculating net income(4) Changes in the rate of time discounting, i.e. in the ratio of exchange between present goods changes in the purchasing power of money in so far as these are foreseen(5) Changes in fiscal policy. In so far as the inducement to the individual to save depends on the future return which he expects, it clearly depends not only on the rate of interest but on the fiscal policy of the Government. Income taxes, especially when they discriminate against “unearned’ income, taxes on capital-profits, death-duties and the like are as relevant as the rate of interest; whilst the range of possible changes in fiscal policy may be greater, in expectation at least, than for the rate of interest itself. If fiscal policy is used as a deliberate instrument for the more equal distribution of incomes, its effect in increasing the propensity to consume is, of course, all the greater…(6) Changes in expectations of the relation between the present and the future level of income. We must catalogue this factor for the sake of formal completeness. But, whilst it may affect considerably a particular individual’s propensity to consume, it is likely to average out for the community as a whole. Moreover, it is a matter about which there is, as a rule, too much uncertainty for it to exert much influence.

Lesson 4: Three Types of Risk Affect the Volume of Investments:

Two types of risk affect the volume of investment which have not commonly been distinguished, but which it is important to distinguish. The first is the entrepreneur’s or borrower’s risk and arises out of doubts in his own mind as to the probability of his actually earning the prospective yield for which he hopes. If a man is venturing his own money, this is the only risk which is relevant. But where a system of borrowing and lending exists, by which I mean the granting of loans with a margin of real or personal security, a second type of risk is relevant which we may call the lender’s risk. This may be due either to moral hazard, i.e. voluntary default or other means of escape possibly lawful, from the fulfillment of the obligation, or to the possible insufficiency of the margin of security, i.e. involuntary default due to the disappointment of expectation. A third source of risk might be added, namely, a possible adverse change in the value of the monetary standard which renders a money-loan to this extent less secure than a real asset; though all or most of this should be already reflected, and therefore absorbed, in the price of durable real assets.

Lesson 5: The True Definition of the Rate of Interest is one of Balancing Liquidity

Thus the rate of interest at any time, being the reward for parting with liquidity, is a measure of the unwillingness of those who possess money to part with their liquid control over it. The rate of interest is not the “price” which brings into equilibrium the demand for resources to invest with the readiness to abstain from present consumption. It is the “price” which equilibrates the desire to hold wealth in the form of cash with the available quantity of cash; which implies that if the rate of interest were lower, i.e. if the reward for parting with cash were diminished, the aggregate amount of cash which the public would wish to hold would exceed the available supply, and that if the rate of interest were raised, there would be a surplus of cash which no one would be willing to hold. If this explanation is correct, the quantity of money is the other factor, which, in conjunction with liquidity-preference, determines the actual rate of interest in given circumstances…Nevertheless, circumstances can develop in which even a large increase in the quantity of money may exert a comparatively small influence on the rate of interest. For a large increase in the quantity of money may cause so much uncertainty about the future that liquidity-preferences due to the precautionary-motive may be strengthened; whilst opinion about the future of the rate of interest may be so unanimous that a small change in present rates may cause a mass movement into cash. It is interesting that the stability of the system and its sensitiveness to changes in the quantity of money should be so dependent on the existence of a variety of opinion about what is uncertain. Best of all that we should know the future. But if not, then, if we are to control the activity of the economic system by changing the quantity of money, it is important that opinions should differ Thus this method of control is more precarious in the United States, where everyone tends to hold the same opinion at the same time, than in England where differences of opinion are more usual.

Lesson 6: The General Theory of Employment Re-stated:

There will be an inducement to push the rate of new investment to the point which forces the supply-price of each type of capital-asset to a figure which, taken in conjunction with its prospective yield, brings the marginal efficiency of capital in general to approximate equality with prospective yield, brings the marginal efficiency of capital in general to approximate equality with the state of confidence concerning the prospective yield, the psychological attitude to liquidity and the quantity of money (preferably calculated in terms of wage-units) determine, between them, the rate of new investment.

Lesson 7: The Government has an Active Role to Play to Ensure an Effective Economy

In some other respects the foregoing theory is moderately conservative in its implications. For whilst it indicates the vital importance of establishing certain central controls in matters which are now left in the main to individual initiative, there are wide fields of activity which are unaffected. The State will have to exercise a guiding influence on the propensity to consume partly through its scheme of taxation, partly by fixing the rate of interest, and partly, perhaps, in other ways scheme of taxation, partly by fixing the rate of interest, and partly, perhaps, in other ways. Furthermore, it seems unlikely that the influence of banking policy on the rate of interest will be sufficient by itself to determine an optimum rate of investment. I conceive, therefore, that a somewhat comprehensive socialisation of investment will prove the only means of securing an approximation to full employment; though this need not exclude all manner of compromises and of devices by which public authority will co-operate with private initiative. But beyond this no obvious case is made out for a system of State Socialism which would embrace most of the economic life of the community. It is not the ownership of the instruments of production which it is economic life of the community. It is not the ownership of the instruments of production which it is resources devoted to augmenting the instruments and the basic rate of reward to those who own them, it will have accomplished all that is necessary. Moreover, the necessary measures of socialisation can be introduced gradually and without a break in the general traditions of society…The authoritarian state systems of to-day seem to solve the problem of unemployment at the expense of efficiency and of freedom. It is certain that the world will not much longer tolerate the unemployment which, apart from brief intervals of excitement, is associated and, in my opinion inevitably associated with present-day capitalistic individualism. But it may be possible by a right analysis of the problem to cure the disease whilst preserving efficiency and freedom.

On a concluding note, Keynes reminds us about the power of ideas and the hope they bring:

I do not attempt an answer in this place. It would need a volume of a different character from this one to indicate even in outline the practical measures in which they might be gradually clothed. But if the ideas are correct an hypothesis on which the author himself must necessarily base what he writes it would be a mistake, I predict, to dispute their potency over a period of time. At the present moment people are unusually expectant of a more fundamental diagnosis; more present moment people are unusually expectant of a more fundamental diagnosis; more particularly ready to receive it; eager to try it out, if it should be even plausible. But apart from this contemporary mood, the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.

I must admit the book is somewhat of a dry read, particularly as compared to some of the other work by Keyne’s colleagues such as Milton Friedman’s Capitalism and Freedom or F. A. Hayek’s Road to Serfdom. Nevertheless an important read for anyone with interest in economics.