Bumper profits, for who?

Today Goldman Sachs announces first quarter profits of $13.8 billion dollars. This comes after it re-payed the $10 billion dollars it owed to the US Government, along with $426 million in dividends last month.

Brilliant! You might say. The banks are booming again!

However, there is another side to this story, which demands our attention. Namely; the return of massive bonuses for employees at Goldman Sachs and a return to the greed that played a large part in producing the mess the banks found themselves in last year.

In the first half of the year employees at Goldman Sachs recieved $11.4 billion ($386k each) in overall renumberation.

As a libertarian I believe in rewarding success and punishing failure, and that risk (when it pays off) should lead to reward. However it wasn't the bank whose money was at risk here! It was the money of the US taxpayer: and therefore it was the government who should have been rewarded.

This is not how Capitalism works! If banks are too big to fail they can take whatever risks they want, now and in the future, knowing that the government will have to provide a guarantee.

In short: The message that banks could well take from this is a simple formula:

HIGH RISK = BIG REWARD

...and this can only lead to another crisis.

Entropy

I've just tidied my flat. A tiring and arduous task, and one which will prove, ultimately, to be a fruitless endevour.

The reason is one word: Entropy!


Entropy

Entropy is the second law of thermodynamics. And it is a bitch!

It states that all systems will become more disordered over time. In fact: Although my flat is "tidier" by my estimation. The physical exertion that I put into the task: the buzzing of the hoover and the heat of my body will all have served to send particles whizzing around in a much more disorganised way: thus proving the law! My flat may look tidier. But, on a particle level, my exertions have actually caused chaos on a massive scale!

The same principle applies to complex molecules like DNA, with its characteristic double helix structure. This is because, just like in the example above, the energy required to construct the molecule will create disorder in the particles surrounding the reaction.

So, any quest for order amidst this chaos is fruitless. But that shouldn't stop you tidying your kitchen! Becuase entropy will ensure that you will have a mountain to climb the longer you leave it!

The Return Of History and The End Of Dreams

I've just finished reading a fantastic book by Robert Kegan (above). It is a very interesting discussion of some of the potential flash points which could lead to international tensions in the future, with the major international dividing lines being between a coalition of Autocratic governments on the one hand (Russia, China, Iran) and the Democratic governments of the West.

The idea of a world of shared, converging values is blown out of the water: and rightly so!

The tensions in question are already evident in Asia, over the status of an independent Taiwan, in Eastern Europe over the "colour revolutions" in Georgia and the Ukraine and over the sovereignty of states like Kosovo, Iraq and Afghanistan.

I share the view of the author that the next century will present many fresh challenges and that "the liberal world need to choose whether they want to shape it - or let others shape it for them."

How likely is World War 3?

I've just got back from teaching in The Gambia, where one inquisitive student asked me what my thoughts were on the possibility of World War 3.


I told him that in my opinion world peace relies on one crucial ingredient: Namely, the supreme military power of one state over all competitors.

The Cold War

We saw during the Cold War, that a fragile situation existed between the United States and the Soviet Union because two economic powerhouses were fighting for supremacy in a bi-polar world. Fortunately, the result was not the kind of "hot war" situation seen in 1914 and 1945, but a Cold War which gradually wore down the USSR.

Since the collapse of the USSR and the fall of the Berlin Wall, the US has been the supreme military power by a wide margin. They spend just 4% of their GDP on their military, but this expenditure ($651 trillion) is double what is spent by the entirety of the EU ($312 trillion) and almost ten times what is spent by their nearest rival, China ($70 trillion).

Should we be complacent?

I believe that the biggest threat to world peace is the rise of China. Their economy is growing much faster than the US and although this growth has slowed during the economic downturn, they have avoided recession and look set to grow by 6-7% in 2009, compared to a predicted contraction of 3.1% in the United States.

Even so. China are still a long way behind, and if we factor in the military budget of other NATO members, who would presumably ally themselves with the US in any new Cold War situation. I remain optimistic that we can look forward to peace for the foreseeable future.