Lovely passage in John Gray’s Review of Jesse Norman’s book on Edmund Burke.

As a consequence of her leadership, the Conservative Party is in some ways weaker than it has ever been. Turning it into an instrument of her personal will, she triggered a coup that has left every subsequent Tory leader on permanent probation. Alienating Scotland, she virtually wiped out her party north of the border and planted a large question mark over the Union. Within England, her indifference to the human costs of de – industrialisation deepened the north-south divide. The result is a hollowed-out and shrunken party that faces huge obstacles in ever again forming a government. For someone who has been described as the greatest Conservative leader since Churchill, it’s quite a list of achievements. If you wanted to shake up Britain and change it beyond recognition, Thatcher was, of all postwar leaders, the one mostly likely to have this effect.

Re-reading Paul Krugman on our rulers’ weird addiction to austerity policies that clearly aren’t working, I was struck by his comment that the failure to anticipate the banking crisis was “a relatively minor sin”. Economies are complicated, ever-changing entities; it was understandable that few economists realized the extent to which short-term lending and securitization of assets such as subprime mortgages had recreated the old risks that deposit insurance and bank regulation were created to control. But, says Krugman,

what happened next—the way policymakers turned their back on practically everything economists had learned about how to deal with depressions, the way elite opinion seized on anything that could be used to justify austerity—was a much greater sin. The financial crisis of 2008 was a surprise, and happened very fast; but we’ve been stuck in a regime of slow growth and desperately high unemployment for years now. And during all that time policymakers have been ignoring the lessons of theory and history.

It’s a terrible story, mainly because of the immense suffering that has resulted from these policy errors. It’s also deeply worrying for those who like to believe that knowledge can make a positive difference in the world. To the extent that policymakers and elite opinion in general have made use of economic analysis at all, they have, as the saying goes, done so the way a drunkard uses a lamppost: for support, not illumination. Papers and economists who told the elite what it wanted to hear were celebrated, despite plenty of evidence that they were wrong; critics were ignored, no matter how often they got it right.

The Reinhart-Rogoff debacle has raised some hopes among the critics that logic and evidence are finally beginning to matter. But the truth is that it’s too soon to tell whether the grip of austerity economics on policy will relax significantly in the face of these revelations. For now, the broader message of the past few years remains just how little good comes from understanding.

For those who believe that our democracies are still capable of managing societies in an equitable way, this resistance to evidence and reason must be pretty worrying. To those of us who suspect that the system is irretrievably rigged in favour of certain powerful interests, however, it just confirms our suspicions. This obduracy is a feature, not a bug.

The fault-line that runs through the Tory party over membership of the EU has opened up again in a most entertaining way. Cameron seems as helpless in dealing with his Europhobes as poor old John Major was in his day. I’ve often wondered why the issue is so toxic for members of Britain’s governing elites. The only explanation I can think of is imperial afterglow. Whole-hearted membership of the EU means accepting that Britain is just another country — like France, Germany or — Sacre Bleu! — Greece or Portugal! And that’s too unpalatable for a country that once had an empire on which the sun apparently never set. The same afterglow is what is currently driving the government to insist that Britain needs to spend £20 billion-plus on a new nuclear deterrent.

It’s pathetic, but it’s happening: authentic folie de grandeur. And at the taxpayers’ expense, naturally.

Or why we are governed by imbeciles. Great piece by Mark Blyth in Foreign Affairs. Sample:

Austerity is a seductive idea because of the simplicity of its core claim — that you can’t cure debt with more debt. This is true as far as it goes, but it does not go far enough. Three less obvious factors undermine the simple argument that countries in the red need to stop spending. The first factor is distributional, since the effects of austerity are felt differently across different levels of society. Those at the bottom of the income distribution lose proportionately more than those at the top, because they rely far more on government services and have little wealth with which to cushion the blows. The 400 richest Americans own more assets than the poorest 150 million; the bottom 15 percent, some 46 million people, live in households earning less than $22,050 per year. Trying to get the lower end of the income distribution to pay the price of austerity through cuts in public spending is both cruel and mathematically difficult. Those who can pay won’t, while those who can’t pay are being asked to do so.

The second factor is compositional; everybody cannot cut their way to growth at the same time. To put this in the European context, although it makes sense for any one state to reduce its debt, if all states in the currency union, which are one another’s major trading partners, cut their spending simultaneously, the result can only be a contraction of the regional economy as a whole. Proponents of austerity are blind to this danger because they get the relationship between saving and spending backward. They think that public frugality will eventually promote private spending. But someone has to spend for someone else to save, or else the saver will have no income to hold on to. Similarly, for a country to benefit from a reduction in its domestic wages, thus becoming more competitive on costs, there must be another country willing to spend its money on what the first country produces. If all states try to cut or save at once, as is the case in the eurozone today, then no one is left to do the necessary spending to drive growth.

The third factor is logical; the notion that slashing government spending boosts investor confidence does not stand up to scrutiny. As the economist Paul Krugman and others have argued, this claim assumes that consumers anticipate and incorporate all government policy changes into their lifetime budget calculations. When the government signals that it plans to cut its expenditures dramatically, the argument goes, consumers realize that their future tax burdens will decrease. This leads them to spend more today than they would have done without the cuts, thereby ending the recession despite the collapse of the economy going on all around them. The assumption that this behavior will actually be exhibited by financially illiterate, real-world consumers who are terrified of losing their jobs in the midst of a policy-induced recession is heroic at best and foolish at worst.

Thoughtful (if depressing) piece by Ian Buruma.

The tragedy of Korea is that no one really wishes to change the status quo: China wants to keep North Korea as a buffer state, and fears millions of refugees in the event of a North Korean collapse; the South Koreans could never afford to absorb North Korea in the way that West Germany absorbed the broken German Democratic Republic; and neither Japan nor the US would relish paying to clean up after a North Korean implosion, either.CommentsAnd so an explosive situation will remain explosive, North Korea’s population will continue to suffer famines and tyranny, and words of war will continue to fly back and forth across the 38th parallel. So far, they are just words. But small things – a shot in Sarajevo, as it were – can trigger a catastrophe. And North Korea still has those nuclear bombs.