Quotulatiousness

March 18, 2013

Will the Cyprus bailout set the fuse to a new Great Depression?

Filed under: Economics, Europe, History — Tags: , , , — Nicholas @ 00:01

History may not repeat itself, but it’s quite likely that it paraphrases itself instead:

So, this is going to be a very sour reading of what has happened in Cyprus this weekend. It will also be a very partisan one, possibly even a partial one. But if Milton Friedman and Anna Schwartz were right in their insistence that it was actually the Federal Reserve that caused the Great Depression (which is something that Ben Bernanke himself has insisted that the Fed will not repeat) then one way of interpreting what has happened is that the European Central Bank has just set us all up for another Depression. The trigger is that “tax” of a little over 6% on all depositors.

This isn’t an analysis that you’ll be able to get all economists to sign up to. But the basic story told by Friedman and Schwartz in A Monetary History of the United States was that the 1929 crash was indeed a serious crash. But it would not have led to the Great Depression without the Federal Reserve making some serious mistakes. Two of which were to allow the intertwined collapses of both the money supply and the banking system. Given that it is the banks that create credit and thus the wider money supply they are, to a great extent, the same thing.

[. . .]

But please note the central part of Friedman’s argument. Yes, there was the crash. Yes, there would have been a deep and painful recession as a result. But the tipping of that recession into depression was a result of the cascading series of bank failures in the absence of deposit insurance: that led to the calamitous shrinking of credit and the money supply.

So let us now look at Europe and the eurozone. Certainly there’s been a crash (or even a Crash). We’ve so far avoided the depression part (although not everywhere. Greece is certainly in one, Spain possibly and looking out my window at rural Portugal I see certain signs of a reversion to a non-cash economy.) but the important question is whether we manage to continue to do so?

[. . .]

Yes, I do know, they’ve called it a tax: but here we’ve got to make reference to that duck thing. The difference between a 6% or more “tax” on your bank deposit and a failure of the previously agreed deposit insurance to protect your deposit is quackery enough that it’s a duck.

As I’ve said before the importance of this is moot at present. It depends on who believes what. If the citizenry believe that they don’t have deposit insurance any more (whether we call this a tax or a duck) then we will see more mass withdrawals from banks and we will see more bank failures. And cascading bank failures are exactly the thing that will tumble us into a new depression.

March 17, 2013

Proposed British press regulation will apply to bloggers as well

Filed under: Britain, Law, Liberty, Media — Tags: , , , , , — Nicholas @ 11:55

Guido Fawkes offers a warning to those bloggers cheerleading for the British government to impose controls on the tabloid press:

One thing that surprises Guido is that his comrades in the liberal, progressive blogosphere have seemingly not noticed that the proposed Royal Charter aims to control and regulate them as well as the tabloids.

Schedule 4, Point 1 of both the government and the opposition’s versions of the Royal Charter will bring blogs under the regulator’s control:

    “relevant publisher” means a person (other than a broadcaster) who publishes in the United Kingdom: a. a newspaper or magazine containing news-related material, or b. a website containing news-related material (whether or not related to a newspaper or magazine)”

[. . .]

To all those bloggers who support this press control Charter because they hate Murdoch and Dacre, Guido offers this cautionary counsel, remember that the new regulator will cover you as well. You will have all the expense and bureaucracy of compliance as Murdoch and Dacre face, without the means. Unless like Guido and the Spectator you plan to become media outlaws too…

Celebrating 60 years of being Stalin-free

Filed under: History, Russia — Tags: , , , — Nicholas @ 11:19

In Reason, Cathy Young looks at the bloody legacy of the Soviet dictator and his startling popularity in modern day Russia (and the west):

The 60th anniversary of the death of one of history’s most murderous tyrants has passed with relatively little notice. Yet the shadow of Soviet dictator Joseph Stalin, who died on March 5, 1953, still hangs over post-communist Russia — and has yet to face proper judgment in the West. This is one bloody ghost still waiting for its final exorcism.

During the years of his absolute rule over the Soviet Union from 1928 to 1953, Stalin was responsible for the deaths of at least 20 million people. They included victims of state-engineered famines, particularly in Ukraine, intended to starve the peasantry into submission to collective farming; people from all walks of life shot on trumped-up charges of subversive activities; and others sent to the Siberian labor camps known as the gulag, never to return. Untold millions who survived lost years of their lives to the gulag. (Among the latter were my own paternal grandparents, who were arrested in 1947 and released after Stalin’s death; ironically, unlike most of their fellow prisoners, they were actually guilty as charged — of “betraying the motherland” by trying to escape the Soviet Union and go to Palestine.)

If there was ever a true devil in the flesh, Stalin was one of the prime candidates for the title. A tyrant with a deeply sadistic streak, he reportedly howled with laughter when told about the final moments of a former associate who had been promised clemency in exchange for a false confession and vainly begged his executioners to “please call Comrade Stalin” and clear up the misunderstanding. He jailed the wives of several men in his inner circle, presumably just for the pleasure of seeing his underlings squirm and showing them who’s boss.

Yet four years ago, this monster came close to being chosen as history’s greatest Russian in a nationwide Internet and telephone vote. Though the voting was not representative, actual polls also yield discouraging results. In a survey conducted last month by the Levada Center, a respected independent polling firm, almost one in 10 Russians said that Stalin’s role in Russia’s history was “entirely positive” while another 40 percent saw it as “mostly positive.” Fewer than a third believed it was entirely or mostly negative, while the rest were not sure.

Debunking St. Patrick

Filed under: Europe, History, Religion — Tags: , , — Nicholas @ 10:02

In Slate, David Plotz separates the myth from what is known about the real St. Patrick:

Today we raise a glass of warm green beer to a fine fellow, the Irishman who didn’t rid the land of snakes, didn’t compare the Trinity to the shamrock, and wasn’t even Irish. St. Patrick, who died 1,507, 1,539, or 1,540 years ago today — depending on which unreliable source you want to believe — has been adorned with centuries of Irish blarney. Innumerable folk tales recount how he faced down kings, negotiated with God, tricked and slaughtered Ireland’s reptiles.

The facts about St. Patrick are few. Most derive from the two documents he probably wrote, the autobiographical Confession and the indignant Letter to a slave-taking marauder named Coroticus. Patrick was born in Britain, probably in Wales, around 385 A.D. His father was a Roman official. When Patrick was 16, seafaring raiders captured him, carried him to Ireland, and sold him into slavery. The Christian Patrick spent six lonely years herding sheep and, according to him, praying 100 times a day. In a dream, God told him to escape. He returned home, where he had another vision in which the Irish people begged him to return and minister to them: “We ask thee, boy, come and walk among us once more,” he recalls in the Confession. He studied for the priesthood in France, then made his way back to Ireland.

He spent his last 30 years there, baptizing pagans, ordaining priests, and founding churches and monasteries. His persuasive powers must have been astounding: Ireland fully converted to Christianity within 200 years and was the only country in Europe to Christianize peacefully. Patrick’s Christian conversion ended slavery, human sacrifice, and most intertribal warfare in Ireland. (He did not banish the snakes: Ireland never had any. Scholars now consider snakes a metaphor for the serpent of paganism. Nor did he invent the Shamrock Trinity. That was an 18th-century fabrication.)

Cyprus delays emergency parliamentary session over banking haircut

Filed under: Economics, Europe, Government — Tags: , , — Nicholas @ 09:50

Apparently not all the politicians in the Cypriot parliament are on-board with the mandatory levy on savings accounts:

Cyprus’s parliament has postponed until Monday an emergency session to vote on a levy on bank deposits after signs that lawmakers might block the surprise move agreed in Brussels to help fund a bailout and avert national bankruptcy.

In a radical departure from previous aid packages, euro zone finance ministers want Cyprus savers to forfeit up to 9.9 percent of their deposits in return for a 10 billion euro ($13 billion) bailout to the island, which has been financially crippled by its exposure to neighboring Greece.

The decision, announced on Saturday morning, stunned Cypriots and caused a run on cashpoints, most of which were depleted within hours. Electronic transfers were stopped.

[. . .]

Many Cypriots, having contributed to bailouts for Ireland, Portugal and Greece — Greece’s second bailout contributed to a debt restructuring that blew the 4.5 billion euro hole in Cyprus’s banking sector — are aghast at Europe’s treatment.

Cyprus received a “stab in the back” by its EU partners, the daily Phileleftheros said.

But it and another newspapers highlighted the danger of plunging the banking system into further turmoil if lawmakers sat on the fence.

EFF press release on the win on National Security Letters

Filed under: Government, Law, Liberty, USA — Tags: , , , , — Nicholas @ 09:32

The EFF posted more information about the court decision that National Security Letters violate the constitution:

The controversial NSL provisions EFF challenged on behalf of the unnamed client allow the FBI to issue administrative letters — on its own authority and without court approval — to telecommunications companies demanding information about their customers. The controversial provisions also permit the FBI to permanently gag service providers from revealing anything about the NSLs, including the fact that a demand was made, which prevents providers from notifying either their customers or the public. The limited judicial review provisions essentially write the courts out of the process.

In today’s ruling, the court held that the gag order provisions of the statute violate the First Amendment and that the review procedures violate separation of powers. Because those provisions were not separable from the rest of the statute, the court declared the entire statute unconstitutional. In addressing the concerns of the service provider, the court noted: “Petitioner was adamant about its desire to speak publicly about the fact that it received the NSL at issue to further inform the ongoing public debate.”

“The First Amendment prevents the government from silencing people and stopping them from criticizing its use of executive surveillance power,” said EFF Legal Director Cindy Cohn. “The NSL statute has long been a concern of many Americans, and this small step should help restore balance between liberty and security.”

March 16, 2013

More on the Cyprus banking situation

Filed under: Business, Economics, Europe — Tags: , , , , — Nicholas @ 11:44

At Forbes, Tim Worstall explains why the mandatory levy on bank accounts is an epic facepalm:

There’s nothing particularly bad about making depositors carry some of the load of a bank failure. Indeed, it has something to recommend it: if it happens occasionally then people will take more care over where they put their money and what the banks do with it.

However, there’s a very great difference between allowing depositors without government insurance to take losses and actually reneging on the previously promised government insurance. And it’s that second that they’re actually doing here. [. . .]

Under the system until yesterday all depositors in Cypriot banks were insured up to the value of €100,000 with any one bank. Today that solemn and governmental promise has been shown to be false. And not even the European Union nor the European Central Bank are going to make them stick to it. Indeed, very much the other way around. The EU and ECB are insisting that the Cyprus authorities breach this deposit insurance provision.

As I say, there’s nothing wrong with making uninsured depositors take some of the pain. Certainly nothing at all wrong with making those with large deposits take a haircut. The problem is when government has said “we’ll insure this” and when push comes to shove they say “err, no, we won’t”. And the problem with this is that it makes all future EU deposit insurance worth that much less.

The Cyprus “rescue” includes nasty haircut for savings held in consumer banks

Filed under: Economics, Europe — Tags: , , , , — Nicholas @ 11:23

The BBC reports on the way Cypriot bank accounts are being levied as part of the “rescue”:

Cyprus may be one of the eurozone’s tiniest economies — its third smallest — but for the next 48 hours or so, it may be the single currency area’s most important.

The point is that there could be serious repercussions for other financially over-stretched economies, such as Spain’s and Italy’s, from the nature of Cyprus’s 10bn-euro (£8.7bn) bailout — which includes, for the first time in any eurozone rescue, losses imposed directly on depositors in banks.

These losses, running to almost 6bn euros, stem from an emergency levy of 9.9% on bank deposits over 100,000 euros (£86,600) and 6.75% below that.

The levy serves as a caution to lenders to banks that they should take care where they place their funds and avoid banks which overstretch themselves — as Cypriot banks did.

But precisely the same arguments — for what is known as a “bail-in” by private-sector creditors — were put by liberal-market purists at the peak of the banking crises in Ireland and Spain.

In the end, eurozone governments were terrified that if lenders to Spanish and Irish banks were punished, there would be a devastating domino effect of withdrawals of funds from banks in other weaker economies — a domino effect that would jeopardise the survival of the eurozone.

So, reckless lenders to Spanish and Irish banks were not punished.

There’s a strong possibility that savers in other European countries with weakened banking systems to draw the correct conclusion quickly … and start pulling their money out of the banking system. And also expect the EU to react with draconian currency restrictions. It’s a potential banking sauve qui peut.

First big blow against the cult of secrecy

Filed under: Government, Law, Liberty, USA — Tags: , , , , , — Nicholas @ 10:32

The “most transparent administration” may be forced to be a bit more transparent after a US federal judge declared National Security Letters to be unconstitutional:

Ultra-secret national security letters that come with a gag order on the recipient are an unconstitutional impingement on free speech, a federal judge in California ruled in a decision released Friday.

U.S. District Judge Susan Illston ordered the government to stop issuing so-called NSLs across the board, in a stunning defeat for the Obama administration’s surveillance practices. She also ordered the government to cease enforcing the gag provision in any other cases. However, she stayed her order for 90 days to give the government a chance to appeal to the Ninth Circuit Court of Appeals.

“We are very pleased that the Court recognized the fatal constitutional shortcomings of the NSL statute,” said Matt Zimmerman, senior staff attorney for the Electronic Frontier Foundation, which filed a challenge to NSLs on behalf of an unknown telecom that received an NSL in 2011. “The government’s gags have truncated the public debate on these controversial surveillance tools. Our client looks forward to the day when it can publicly discuss its experience.”

[. . .]

NSLs are written demands from the FBI that compel internet service providers, credit companies, financial institutions and others to hand over confidential records about their customers, such as subscriber information, phone numbers and e-mail addresses, websites visited and more.

NSLs are a powerful tool because they do not require court approval, and they come with a built-in gag order, preventing recipients from disclosing to anyone that they have even received an NSL. An FBI agent looking into a possible anti-terrorism case can self-issue an NSL to a credit bureau, ISP or phone company with only the sign-off of the Special Agent in Charge of their office. The FBI has to merely assert that the information is “relevant” to an investigation into international terrorism or clandestine intelligence activities.

Greg Jennings signs with the Vikings

Filed under: Football — Tags: , , — Nicholas @ 10:01

The Minnesota Vikings have signed former Green Bay receiver Greg Jennings. There was no puff of smoke — white or purple — from the head office of the team, but many reports went for a Latinesque title, like Christopher Gates at the Daily Norseman:

Habemus Packem: Minnesota Vikings Sign Greg Jennings

After letting the initial rush of free agency settle down a little bit, the Minnesota Vikings finally made a move at the wide receiver position on Friday, signing Greg Jennings.

(That promo headline and the headline that you saw on Twitter was all Ted, by the way. Have to give him credit for that one.)

Well, ladies and gentlemen, there’s white smoke coming from Winter Park. And since Percy Harvin is in Seattle and I think Jerome Simpson is out of town, that can only really mean one thing.

We have a new receiver.

The five-year deal Jennings accepted was for $47.5 million with $18 million guaranteed. It is not quite as rich a deal as he was offered by Green Bay, but the opportunity to be the number one receiver was probably the difference maker (he’d be third or fourth receiver in Green Bay).

Also at the Daily Norseman, Ted Glover explains the Vikings’ painful recent history with their wide receiving corps:

A mercurial wide receiver wears out his welcome, but not before his team makes a playoff appearance against Green Bay. After the season, which ends in an early playoff exit, the superstar receiver finally pulls out the straw that breaks the camel’s back, and he’s traded to the West Coast for a first round pick, giving the team two first round picks and a golden opportunity to upgrade the roster.

No, I’m not talking about Percy Harvin. The year was 2005, and the receiver was Randy Moss. Moss wore out his welcome with the Vikings (maybe specifically Red McCombs), and the Vikings were able to trade him to Oakland for their first round pick and LB Napoleon Harris. Harris wasn’t the big catch in that trade, it was the Raiders first round pick, #7 overall.

The Vikings infamously used that pick from the Raiders to draft Troy Williamson, who has been the biggest bust in recent Vikings draft history not named Demetrious Underwood. I remember writing at the time that the Vikings needed to draft any position other than WR with that pick, because no matter how good that player might have been, he would always be compared to Randy Moss.

Williamson moved fast to make sure those comparisons would never had to be made, though. And other than a Pro Bowl season from Sidney Rice in 2009, the Vikings receivers as a group haven’t really recovered since then.

Which is why, on the heels of the Harvin trade, Greg Jennings is such a big deal for the Vikings. He’s been a top NFL wide receiver for several years, and his signing might be the first step in replenishing what has historically been a position of strength for the Vikings.

March 15, 2013

This week in Guild Wars 2

Filed under: Gaming — Tags: , — Nicholas @ 11:34

My weekly Guild Wars 2 community round-up at GuildMag is now online. The end of culling, ArenaNet’s relaunched website, interviews with developers and the usual assortment of blog posts, videos, podcasts, and fan fiction from around the GW2 community.

Will the death of Google Reader also be the death of RSS?

Filed under: Business, Media, Technology — Tags: , , , — Nicholas @ 10:14

Felix Salmon on the knock-on ramifications of Google’s announcement that it is killing Google Reader:

But whether or not Reader was ever going to be a good business for Google, it was from day one a fantastic public service for its users. Google started as a public service — a way to find what you were looking for on the internet — and didn’t stop there. Google would also do things like buy the entire Usenet archives, or scan millions of out-of-print books, or put thousands of people to work making maps, all in order to be able to get all sorts of information to anybody who wants it. [. . .]

The problem with the death of Reader is that it was the architecture underpinning lots of other services — the connective tissue of just about all RSS readers and services, from Summify to Reeder to Flipboard. You didn’t even need to use Google Reader; it was just the master central repository of your master OPML list, all the different feeds that you were subscribed to. Google spent real money to provide that public service, and it’s going to be sorely missed. As Marco Arment says, “every major iOS RSS client is still dependent on Google Reader for feed crawling and sync.”

Arment sees a silver lining in the cloud, saying that with Google gone, “we’re finally likely to see substantial innovation and competition in RSS desktop apps and sync platforms for the first time in almost a decade.” I’m less sanguine. Building an RSS sync platform is a hard and pretty thankless task, it costs real money, and it might not work at all — especially in a world where less and less content is actually available in RSS format. (You can subscribe to my Tumblr feed in RSS format, but there’s no such feed for my posts on Twitter or Facebook or Instagram or Path or even Google+.)

RSS has been dying for years — that’s why Google killed Reader. It was a lovely open format; it has sadly been replaced with proprietary feeds like the ones we get from Twitter and Facebook. That’s not an improvement, but it is reality. Google, with Reader, was really providing the life-support mechanism for RSS. Once Reader is gone, I fear that RSS won’t last much longer.

Britain’s class system may have changed, but the snobbery is still all-pervasive

Filed under: Books, Britain, Food, Media — Tags: , , , , — Nicholas @ 09:06

Tim Black reviews Consumed: How Shopping Fed the Class System, by Harry Wallop.

In short, class has stopped being the basis for a political identity; it has become a form of identity politics. As Wallop puts it: ‘Class is no longer what we do with our hands nine to five, it is what we do with our wallets at the weekend. How that money arrives in our wallets must play a part, but how we define ourselves and how others view us mostly comes down to the weekly drive to the local retail park, rather than the daily trudge to the factory.’

Consumed is a snarking and sniping attempt by Wallop, a consumer affairs writer at the Daily Telegraph, to anatomise these new consumerist class identities. At the upper end are the super-rich Portland Privateers, named after the private Portland Hospital in central London, where pregnancies come to fruition with the obligatory C-section at the cost of several grand and the toiletries are Molton Brown. Then in descending order come: the Rockabillies, defined by their love of a British holiday, ideally in the Cornish town of Rock; the Wood-Burning Stovers, who love a wood-burning stove almost as much as they love the Guardian; the Middleton Classes, who – like Carole Middleton, the Duchess of Cambridge’s mother – have vaulted up the social ladder, usually taking in a grammar school en route; the Sun Skittlers, a resolutely old-school working-class identity devolving upon reading the Sun, playing skittles, and earning enough to have bought one’s own home; the Asda Mums, who spend wisely, but take safety in big, well-known brands; and the Hyphen-Leighs, whose much sneered-at social aspiration is marked out by the unusually spelled double-barrelled names and the commitment to high-status brands, from Burberry to Paul’s Boutique. Other monikers crop up throughout, but these are the main ones.

If Consumed sounds rife with all forms of snobbery, from the inverse to the outright, that’s because it is. And this ought to be expected, too. In a society in which how you consume has been allowed to determine your identity, then snobbery, which was always a vice of the consuming class par excellence, the non-productive aristocracy, is bound to flourish. It allows groups to include initiates and to exclude the vulgar. Hence, as Wallop relentlessly details, the consumption choices of other people (and it is always other people) have now become objects of mockery and often condemnation.

[. . .]

As Wallop records, eating out in the 1950s was for many limited to Lyons Corner Houses or fish-and-chip shops. And it wasn’t just the high-cost of restaurants that deterred many; the arcane rituals of the hotel dining experience were equally off-putting. This is why, argues Wallop, the British embraced the classless, ritual-free environs of the fast-food joint, first in the form of Wimpy and latterly in the shape of McDonald’s or Burger King. ‘Of course, eating out in fast-food places, or indeed any places, never became a classless activity’, writes Wallop. ‘Classless merely became a euphemism for working class. No more so than with fast food, which over time took on a demonic quality, at least in the eyes of those who refused to eat it. Junk food for the junk classes.’

Junk food for the junk classes. In that one sentence, Wallop touches upon the crucial conflation of the object of consumption with those consuming. When Wood-Burning Stovers complain about McDonald’s, they are really complaining about the type of people that eat there.

Is Lockheed’s C-130 Hercules the all-time champion in US pork barrel politics?

Filed under: Business, Military, Politics, USA — Tags: , , , , — Nicholas @ 00:02

Ian Geldard linked to this rather interesting history lesson on the Lockheed C-130 transport aircraft (the RCAF is also a user of this type of plane, along with a large number of other air forces):

USAF Lockheed Hercules C-130 at Yokota Air Base in Tokyo (Photo from Wikimedia)

USAF Lockheed Hercules C-130 at Yokota Air Base in Tokyo (Photo from Wikimedia)

Here’s where the story starts to get interesting. After 25 years, the Pentagon decided that it was well stocked with C-130s, so President Jimmy Carter’s administration stopped asking Congress for more of them.

Lockheed was in trouble. A few years earlier, the Air Force had started looking into replacing the Hercules with a new medium-sized transport plane that could handle really short runways, and Lockheed wasn’t selected as one of the finalists. Facing bankruptcy due to cost overruns and cancellations of programs, the company squeezed Uncle Sam for a bailout of around $1 billion in loan guarantees and other relief (which was unusual back then, as William Hartung points out his magisterial Prophets of War: Lockheed Martin and the Making of the Military-Industrial Complex).

[. . .]

So what did Lockheed do about the fate of the C-130? It bypassed the Pentagon and went straight to Congress. Using a procedure known as a congressional “add-on” — that is, an earmark — Lockheed was able to sell the military another fleet of C-130s that it didn’t want.

To be fair, the Air Force did request some C-130s. Thanks to Senator John McCain, the Government Accountability Office (GAO) did a study of how many more C-130s the Air Force requested between 1978 and 1998. The answer: Five.

How many did Congress add on? Two hundred and fifty-six.

[. . .]

The Air Force’s approach of passing unwanted Herks off to the Air Guard and Reserves worked out nicely for Lockheed. The company allied with Air Guard and reservist advocacy groups to lobby Congress further. In an era of base closures, heavily lobbied governors would use the arrival of new planes to argue for the continuing life of bases in their states. In turn, states and their congressional delegations would fight to get new planes or hang onto existing ones. It was a veritable Lockheed feedback loop. Washington Post reporter Walter Pincus quoted a Pentagon official as seeing C-130 politics as a twist on the old military-industrial complex: “a triangle of the Guard, Lockheed, and politicians.”

The result: the military was often prevented from retiring the oldest Herks, the ones that really needed to be put out to pasture. For example, as Pincus reported, the Joint Chiefs and the Air Force concluded in 1996 that they had 50 more C-130s than they needed, but Congress stymied efforts to retire any of them. One tactic used was to hold nominees hostage: a Kentucky senator repeatedly held up Air Force promotions until four Kentucky Air Guard C-130s were taken off the chopping block.

The real cuts to the military budget

Filed under: Cancon, Military — Tags: , , , , — Nicholas @ 00:01

In Maclean’s, John Geddes examines the way budget cutbacks are being implemented in Canada’s military:

Perry’s fine-grained analysis starts by setting aside the major parts of defence spending that are, at least in theory, protected from cuts. Last year’s fiscal plan called for more than $1 billion a year to be cut from the defence department’s overall budget of more than $20 billion by 2014-15. That doesn’t seem so tough. But the Conservatives pledged to do that while keeping up the troop strength of the Canadian Forces, at about 68,000 regular members and 27,000 in the reserves, and also protecting most planned capital spending. According to Perry, that means about $12 billion a year was deemed uncuttable — leaving all the reductions to be found somehow in the remaining $8 billion that is spent on the civilian workforce and on military “operations, maintenance and readiness.”

How hard is it to achieve those savings? The clearest indication so far came from Lt.-Gen. Peter Devlin, the commander of the army, in surprising testimony he gave late last year before a Senate committee. Devlin said his land force’s operating budget has been shrunk by an eye-popping 22 per cent—a figure that doesn’t show up anywhere in publicly available defence documents. “As you would expect,” Devlin said with classic officer-class understatement, “that has an effect on people, infrastructure and training.” And he took pains to counter any suggestion that the army should be eliminating desk jobs to save field assets, stressing that administrative and head-office functions occupy only four per cent of his workforce.

[. . .]

Harper’s letter echoed the thrust of Lt.-Gen. Andrew Leslie’s 2011 “transformation” report. Leslie, who has since retired, conducted an extensive study of defence spending and concluded that the department must “ruthlessly focus” on reducing its spending on outside consultants and private contractors, with the aim of redistributing resources to military units. He delivered his report two years ago. Yet the latest figures available show that the defence department’s spending on professional services and consultants continued to climb to $3.25 billion in 2011-12 from $2.77 billion in 2009-10. And that increase came after a period when head-office growth outstripped the expansion of the fighting forces. According to Leslie’s report, headquarters personnel numbers grew 40 per cent from 2004 to 2010, while the regular forces grew by just 11 per cent.

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