Are You Confused?

Primary Results Upend Both Established Politics And Political Establishment

2010-05-19T08:22:00.001-04:00

This is something of an odd article. On the one hand, we have progressive Democrats like Setsak and Halter making waves, then on the other end of the spectrum we have Rand Paul. All three of those candidates can be taken as a progressive shift.

But, on the other hand, we have Mark Critz. Critz is a Democrat who was forced rightwards by the Tea Party, in the same state where Specter lost the Democratic primary for being too conservative and, the popular mindset goes, for being a flip-flop. The combination of the Tea Party and the progressive backlash is creating interesting counter-currents.

What all this tells me is that people really don't know what they want, they just want it to be not what we have now. On the one hand, this could be interesting, and provide a much-needed shake-up to business as usual. On the other hand, voting just because someone "isn't the establishment" can be a dangerous business in itself.
Read the Article at HuffingtonPost

1,000 American Deaths In Afghanistan: A Sad Milestone

2010-05-18T15:24:00.001-04:00

The real question we should be asking is whether security and public service provisioning have improved since the surge began. The administration actually has the right idea - it's unfortunate that this type of occupation is necessary now, but given the number of times Afghanistan has been essentially dismantled over the past 100 years (British, USSR, and now USA), I think we owe it to the Afghani people to do it right this time. That means not cutting and running, but instead putting a real focus on social programs, education, and infrastructure geared towards developing local markets (as opposed to drug export and military import).

Bottom-up social development should be supported, and is necessary, but until there is a modicum of security and stability - along with some basic services - it's hard for local people to do much when under a system of competing warlords.

None of this should be interpreted to suggest I support Karzai, or our apparent lack of sustained efforts to combat the opium trade and provide viable livelihood alternatives, but those programs that have been implemented (by USAID and others) have been surprisingly effective in Afghanistan. We should try to rebuild some of the international coalition on the non-military aid front, to support a long-term solution to instability, so it doesn't come back to bite us yet again in 20 years.
Read the Article at HuffingtonPost

HAMP Update: Twice As Many Homeowners Kicked Out Of Obama Foreclosure Program As Given Permanent Relief, New Data Show

2010-05-17T20:46:00.001-04:00

Before indulging in vitriol, why don't we look at the actual facts and policies associated with the program. What are the specifics of program eligibility? The home must be a primary residence, the mortgage must be less than $729,750, the applicant must be having difficulty making payments, have payments greater than 31% of his/her income, and have received the mortgage before Jan 1, 2009. For a permanent modification, borrowers must make all trial payments on time. The relevant criteria to the current article is (1) the size of the payments relative to income and (2) the timliness of the trial payments.

(2) is fairly straightforward; if you don't make payments on time after the trial modification, you don't qualify. What about (1)? The most important question in this: how is income initially determined for the trial period? According to the HAMP FAQ http://makinghomeaffordable.gov/borrower-faqs.html#200) "Your servicer may initially accept verbal income and expense information; however, you will need to provide verifying documentation before a final modification is approved... If you successfully make all of the required trial payments during the trial period and the income and expense information you provided is determined to be accurate, your servicer will execute an official modification agreement."

If you misrepresent your income verbally to the lender - whether intentionally or because of an honest mistake - the trial modification becomes invalid. The borrower also has a responsibility to know his/her financial situation.
Read the Article at HuffingtonPost

A Letter to Progressive Pundits

2010-01-27T16:16:00.004-05:00

The following is a letter I wrote today, as a comment on Paul Krugman's blog (not sure if it passed moderation - might have been too long), expressing my frustration with recent progressive negativity about Obama - despite agreeing with a few of their points (Geithner and Summers, in particular).

------

Dr. Krugman,

Full disclosure to begin with - I am a wholehearted progressive, with a passion for political economy, who reads your column, as well as others (Dean Baker, occasionally Dani Rodrik and Simon Johnson) regularly.

Sometimes I wonder if we progressives, just as with hard-right conservatives, are too quick to judge moves on the surface without really analyzing them. While it is true that Obama hasn't done much to radically change the narrative, to book him as JUST a centrist seems a little harsh. To use the current example, the anti-deficit plans that have come out of the White House seem aimed at trimming excesses that don't benefit current programs or goals (e.g canning the F-22). The current deficit-reduction bill seems to be one of these, spun in a "fiscal responsibility" manner. Trimming $25 billion a year over the next decade (pocket change for the US Gov) from non-critical programs (both security and major entitlement programs are exempt) can help politically - but it can also free up some marginal cash for potentially high-multiplier initiatives (e.g. high-speed rail, other energy initiatives). It certainly isn't worth railing against, as if we were talking about revisiting FDR in 1936.

Obama is not a radical game-changer, but the ONLY candidate with the potential for that in the primaries was John Edwards. So what is he then? He's a consensus-builder - but one with an eye towards long-term goals. That means an emphasis on smart industrial policy initiatives which lead the market. This can be very beneficial - in particular when dealing with green energy, and attempting to rebuild the manufacturing sector of the US (or at least the non-financial sectors, generally). He is much more in favor of incentives to innovation, rather than restrictions on behavior, save in blatantly obvious areas (e.g. pre-existing conditions).

Lastly, why did we expect him to change the narrative overnight? For that matter, would a more polarizing figure (even one with excellent grassroots mobilization) be able to get anything done in Washington - when you yourself have pointed to the Blue Dogs as a major roadblock to reform? Obama may not have pushed as hard in certain places, but he hasn't been lying down on the job, either. We've gotten major credit-card reform, phased withdrawal from Iraq on a timetable, progress towards closing Gitmo, and a 2-year stimulus package worth 3% of GDP per year. Yes, we boosted troops in Afghanistan - but Obama was very clear about doing that during the election (and their is a case to be made for it, unlike Iraq). Yes, the stimulus was too small, but did we expect the American people to suddenly become educated Keynsians overnight? "Trillion" is still a number most people have trouble comprehending - my political economy students included.

Perhaps our strategy is wrong. We need to remember that, for all that grassroots support elected Obama, progressives - by definition - are not the mainstream of society. This means we need to take the longer view at times. Rather than automatically saying "this isn't enough, it isn't why we elected you," we should actively promote Obama initiatives that broadly match up with our ideals (admittedly, you have been doing this on Health Care). Constant criticism from left-wing pundits does not help Obama's political capital - and, Wall Street reform excluded (except the potential Voelcker rule) - Obama's agenda has been, broadly speaking, a progressive one.

Ben Bernanke, Alan Greenspan, and the 8 Trillion dollar bubble...

2009-12-07T22:41:00.003-05:00

With Fed Chairman Ben Bernanke up for confirmation of his new term, it bears remembering that - although he wasn't known by the public at the time - now-Chairman Bernanke was on both the Fed Board of Governors (under Greenspan) and the US Council of Economic Advisors. As Dean Baker points out (and has repeatedly mentioned in the past), Bernanke thus bears a substantial amount of responsibility for not reigning in the rampant financial and real estate speculation that led to this whole mess in the first place.

In the midst of all the political changes associated with the Obama era, it is important to remember that the current crisis has its roots as far back as Clinton's second term. In fact, if there is one thing I object to about the Obama administration, it is that the current economic policy team has been in the halls of power for well over a decade, and has presided over the persistent deregulation of financial markets worldwide. Bernanke, Summers, Geithner, and Greenspan were largely responsible for many of the causes of the current mess. I previously posted a discussion of the domestic causes of the crisis here.

For a refresher, they were:
(1) Interest rates, since 1980s stagflation, were kept perpetually below 6%, even in boom periods. These low rates helped feed the dot-com boom, speculation in Mexico and Asia (and Russia) in the mid-1990s, and the bubbles preceding the current crisis.
(2) Deregulation of financial markets under Clinton, approved of and argued for by both Larry Summers and Alan Greenspan (and implicitly by Ben Bernanke, given the Fed's position at the time). This is eerily reminiscent of the problems surrounding nearly every major financial crisis since 1990 - including the Savings and Loan Crisis, the Mexican peso crisis, and the Asian Financial crisis.
(3) The persistent maintenance of a strong dollar vis-a-vis, particularly, the Chinese renminbi. This led to a persistent current account deficit, and related capital account surplus, fueling the speculative bubbles. Again, as Dean Baker has pointed out, these imbalances are well within our control (though his proposed solution might be a bit extreme). Incidentally, this is also why the "China will dump US debt" scare is a sham.

The imbalances discussed above are readily recognized by any graduate student in economics or political economy - in fact, some of my undergraduates with minimal economics training have noticed them as well. It is utterly inexcusable that Bernanke, Summers, et al. failed to recognize their importance, and such ignorance can only be explained by either (a) greed or (b) ideological blindness in the face of clear evidence. In the first case, these individuals are corrupt; in the second, they are wholly incompetent.

It is time we said enough is enough.

Chavez rounds up the bankers

2009-12-06T19:08:00.003-05:00

Barack Obama could learn a lot from Hugo Chavez - at least in how to deal with the bankers. Maybe if we would follow his example, we could finally break the "Wall Street-Treasury Complex" and prevent the ridiculous lobbying by the financial industry.

BIS targets wrong people....

2009-12-06T18:57:00.003-05:00

Apparently the BIS is worried about China's loosening of monetary policy potentially creating systemic risk.

That's all well and good, except for the fact that (a) the economy is still growing rapidly, (b) China's growth is fueled by exports, so an international investment glut is unlikely, to say the least, and most importantly (c) large lenders in China are maintaining Capital Adequacy ratios over 11 per cent.

When the banks collapsed in the Asian crisis of 1997-8, capital adequacy ratios were a mere 2-3%. In fact, standard provisioning under Basel II still runs in the 4% range. So, financial collapse, especially now that the major crisis has stabilized and international regulations are (hopefully) tightening, seems unlikely to say the least - especially in an economy where growth is NOT fueled by speculative bubbles. In short, China's looser monetary policy is far more constrained than the US and EUs policies, and backed by a much more solidly growing economy.

Dear BIS, please stop picking on the developing world, and start paying attention to the speculative financial markets fueling the current crisis - the ones in the US and EU!

Proposed Financial Transactions Tax is...

2009-12-04T21:59:00.003-05:00

The single best idea for preventing another financial crisis and ensuring job growth in the middle class.

See the proposal here: http://www.defazio.house.gov/index.php?option=content&task=view&id=532

Justifications can be found here (the PDF file is especially useful; other links indicate broad-based support).

Right to Life and Universal Health Care

2009-11-30T12:18:00.001-05:00

If you read the headlines on the health care debate, you know that the most recent excuse to oppose a public option is that it might fund abortions. Understandably, this is opposed by most right-to-life advocates. What is ironic is that many right-to-life advocates also oppose universal care on grounds of cost or socialism. After all, the right to life also provides the strongest case for the health care package as a whole!

If you find yourself opposed to universal coverage, especially if you are an advocate of the right to life, ask yourself this: is it any more "moral" for a premature infant to die because her parents don't have insurance and couldn't afford proper postnatal care? What about a four year old boy with leukemia - do worries about US debt levels trump his right to live? Are our capitalist ideals more important than making sure a baby girl with pneumonia continues to breathe?

It is time we realized that we can't have it both ways. Either we support a right to life, in which case we support universal coverage, enforced by a public option - or we don't support a right to life at all.

I'm Sorry, But Iran's Election is Not a Fraud.

2009-06-29T00:05:00.003-04:00

Here's some evidence:

See this op-ed from CEPR.

See this survey reported in the Washington Post.

See this expert opinion, and this explanation of why American "Iran experts" are misguided.

None of this means that the protests are unimportant, but it does mean that we should think before uncritically accepting media "experts" reports as the truth.

Potential Progressive Victories...

2009-05-25T12:15:00.003-04:00

... which I interpret to mean progress in health care, education, and worker's rights. Here are a few interesting links:

(1) the Healthy Families Act (still in Congress) would require employers of 15 or more workers to provide a minimum 7 days of sick leave to full time employees (30+ hours per week).

(2) It looks like education loan originators (like Sallie Mae) and the health insurance companies are backpedaling and toning down their demands based on where they think the political winds are blowing. See this link

(3) The Paid Vacation Act (just introduced by Alan Greyson) would mandate a full week of paid vacation for employers of 50 or more workers, and would increase the minimum to two weeks of paid vacation three years after enactment.

Geithner's plan to save the banks...

2009-03-23T18:57:00.003-04:00

In order to help everyone cut through all the nonsense being spouted about financial bailouts and Geithner's plan, here's the basic concept of what the government is trying to do. I've tried to keep in as non-technical as possible, but there is some accounting lingo, because you can't get away from it in banking. I've also provided, below my quick op-ed, the link to the treasury documents and a thorough op-ed by Dean Baker of the Center for Economic and Policy Research. Baker is a lefty economist, similar to Stiglitz and Krugman, but this particular article provides very solid analysis of the pitfalls of Geithner's approach.

Essentially, to fix the financial system, the government had three broad options:

(1) Sit back and do basically nothing, while encouraging the Fed to keep interests rates low. Allow "zombie" banks (those in the red) to borrow money from the Fed at 0 or 0.25%, invest that money in stable assets (e.g. 90-day treasury bonds) and use the spread on those bonds to gradually pay the losses on bad loans. This is the worst option for the economy, and similar to what Japan did in the 1990s. Under that approach, it could take a decade for the banks to recover, prologing the recession and keeping credit tight. People would still suffer, but they couldn't easily point a finger at the government, because they wouldn't have an obvious policy with big numbers to blame. Besides, the zombie banks are still being subsidized at the expense of those wanting to save in the economy (because of low interest rates), its just a blanket subsidy that those without economics/finance background won't notice.

(2) Temporarily nationalize the banks, inspect their books, and forcibly divest them of all the toxic assets. This approach would require the government to somehow value the assets - either by using the current market value (currently about 30 cents on the dollar), or some other method. Stiglitz, Baker, Krugman, and other left-of-center economists prefer this approach, and would like the valuation to be close to the reduced market price, to minimize the potential subsidies to the bank. Sweden used this approach in it's banking crisis, and had good success with it.
--- The upside: This approach also functions as a stress test, telling the government which banks are merely illiquid (don't have enough short-term cash to cover their debt) versus those that are insolvent (have more debt than assets, period). Given the government control of the banks, they could leave the illiquid ones alone, after removing the bad assets, but could use the nationalization to break up the insolvent banks - allowing the risky divisions (e.g. those focused on home lending) to go under, while keeping the profitable divisions as seperate companies. This also reduces the problem of banks that are "too big to fail." Also, if it turns out that the market is underpricing assets (possible, in the current panic), and the government pays less than they're worth, later on the road we make a profit (this has happened before, when the US bailed out Mexico in the mid-90s).
--- The downside: This arguably takes much more up-front government money, because they directly purchase the asset - which makes it a hard sell. Also, if the assets lose value, the government takes a loss (though this can happen under Geithner's plan, too). Lastly, the government might be under pressue from the bankers to overvalue the assets when they buy them - particularly because the public has no idea what they're worth.

(3) Some form of hybrid public-private approach, where the government entices private investors to purchase the bad assets, to remove them from the bank's balance sheets. Essentially, under Geithner's plan, the government creates a restricted market for these assets, by guarenteeing a loan to private investors. So, an investor will put 15% down, borrow the remaining 85% from the government at a low rate, and buy the asset. Also, the investor wouldn't have to pay back the government for the loan, if the asset went bad - so the only loss they would take is their initial investment of 15% of the asset price.
--- The upside: This approach takes less money down. Also, it harnesses the market to do the pricing for the government, requiring less staff time and (again, arguably) potential for screw-up by the government officials. It also (arguably) minimizes the potential losses on the part of the government, because they are simply providing a loan.
--- The downside: The biggest problem is that this "market" is distorted, because the government is subsidizing the purchase of the assets. Investors will be more willing to take risks, overpricing the assets of the banks, and leaving the government to pick up the tab. The higher price asset means that the government may end up spending as much or more money than it would in a simple nationalization plan. Also, the government is not as likely to make money on this plan, because they are loaning investors money at a low fixed rate, in order to buy mortgages that are likely to default. That low rate is likely much less than the potential value of the bad asset if it eventually pays off. After all, why take out a loan if you (the investor) won't profit on the deal? Lastly, the government doesn't have control over the individual banks, however temporarily, so we are likely to be left with the current "megabanks" who - in the event of another bubble - will put us through all of this again.

Hopefully that wasn't too confusing. In any case...

Here are the actual documents distributed by Treasury: http://financialstability.gov/

Here is an interesting op-ed analyzing the potential downfalls of this approach: http://www.guardian.co.uk/commentisfree/cifamerica/2009/mar/23/timothy-geithner-toxic-asset-plan

Spitzer as Columnist

2009-03-20T15:21:00.003-04:00

Just a quick one here - Eliot Spitzer is apparently an excellent columnist, despite his personal problems. For some excellent commentary on the current economic crisis, problems facing governors, AIG, and the stimulus package, see the link below.

http://www.slate.com/?id=3944&qp=49481

Indian attacks in Context

2008-11-29T23:49:00.004-05:00

For those looking to really get a glance at the root causes behind the recent Mumbai attacks, and previous incidents, I would suggest this op-ed from the Globe and Mail.

It does an excellent job of putting the attacks in the broader context of Hindu-Muslim tensions - with dual flashpoints in Hindu nationalist extremism and Muslim instigators in Kashmir. However, it also adds the extra step reminding people that this is a pluralist, mostly peaceful democracy. Indeed, the pluralism is such that it is mind-boggling to most Americans.

One excellent quote, which provides the important context to keep in mind amidst the sensationalism of the media:

From this, you may believe that India has been overtaken by sectarian divisions and religious polarization. That also would be wrong.

This is, after all, a country whose people, 80 per cent of whom are Hindu, have overwhelmingly elected a government with a Prime Minister who is Sikh, a President who is Muslim and a governing party led by a Roman Catholic woman.

Most Hindus have no interest in the politics of religious nationalism. And most of India's 150 million Muslims have nothing to do with Islamic politics – they're the Muslims who rejected Pakistan, an Islamic state, during the Partition of 1947.

India has the honor of being, by far, the world's largest democracy - and has been a stable one for sixty years. This is not a country on the verge of collapse or instability from terrorist attacks. Indeed, relative to some of the disruptions from mass protests India has seen, this attack is a minor "flash in the pan." Small comfort to the victims, but true nonetheless. No government, no matter how stable and prosperous, can prevent all misfortune. India's stability, despite the persistent poverty of millions, is a testament to how (broadly) tolerant and accustomed to plurality its citizens are. Indeed, the best step we can take in preventing instability is to is to remove the poverty itself. After all, it is poverty that often breeds a bitter mindset and enables people to look for someone to blame.

Thus, I will end with another quote, this time from Suketu Mehta's recent op-ed in the NY Times:

But the best answer to the terrorists is to dream bigger, make even more money, and visit Mumbai more than ever. Dream of making a good home for all Mumbaikars, not just the denizens of $500-a-night hotel rooms. Dream not just of Bollywood stars like Aishwarya Rai or Shah Rukh Khan, but of clean running water, humane mass transit, better toilets, a responsive government. Make a killing not in God’s name but in the stock market, and then turn up the forbidden music and dance; work hard and party harder.

Good Op-eds on Economic Policy & My Take

2008-11-28T13:27:00.004-05:00

There have been quite a few excellent op-eds on economic policy over the past few days, due in large part to Obama announcing his economic team.

Paul Krugman on financial crises and the need for regulation: Lest We Forget

David Brooks on forcing stimulus to have a long-term strategy: Stimulus for Skeptics

Dean Baker on the selection of the current economic team: Geithner at Treasury: Can He Learn?

For a bit more innuendo on why this economic team might be suspect, see this article in the Washington Post: Familiar Trio at Heart of Citi Bailout

My Take:
On the one hand, I am somewhat heartened to see that Obama seems to have something of a long-term strategy attached to stimulus - green technology, infrastructure, and patching the holes in the safety net. I will note one caveat there - he has also mentioned "aid to local and state governments" but has not mentioned what the aid would be used for. Might I suggest local public transit initiatives as an excellent option? Connected with a real rail infrastrucure (at least in California and East of the Missisippi), a good network of local public transit would do a lot to solving energy problems and building integrated markets. There are still a number of major cities that lack a real metro system, for instance (Philidelphia is but one example).

On the other hand, I am worried that Obama has been so cautious in his selection of his economic policy team. I expected to see a few old hands in top policy positions - particularly Geithner. But I was also hoping to see Obama do a little reaching out to the left - the source of his core support. In fact, his economic team is arguable more conservative than Bill Clinton's - after all, Clinton had Joeseph Stiglitz has his chairman of the Council of Economic Advisors. Christina Roemer is a solid choice, giver her expertise on the Depression, but having all of the other top positions held by centrist figures (Summers, Voelcker, Geithner, and Goolsbee) makes one wonder exactly how much debate there will be on economic policy.

Furthermore, all of these gentlemen (excepting Goolsbee), have had a hand in serious policy blunders. Summers is well-known for his part in the deregulation leading to this crisis - he was Treasury Secretary when the bank holding provisions of Glass-Steagall were repealed, and when the SEC avoided regulating credit default swaps (at the behest of Hank Paulson when he was at Goldman Sachs, among others). Voelcker spearheaded the end of stagflation, but he did so by strangling the US economy and raising interest rates to ridiculous levels. In doing so, he also sparked the debt crisis in the developing world, known as the "Lost Decade" in Latin America.

Geithner, on the other hand, was a member of the team that ensured IMF austerity conditions would be attached to loans in the 1997-8 Asian crisis. In essence, he forced countries facing an outflow of investment capital to spend less on their economies and to raise their interest rates... and these were countries that had balanced their budgets for years (unlike the US). These policies are known as "pro-cyclical" in economics jargon, and they have the effect of exacerbating a pre-existing crisis. In fact, the country that recovered most quickly from the crisis was Malaysia, who ignored IMF advice and imposed controls on capital flight, cut interest rates, and increased spending. This is exactly the opposite of what the US is doing now, and the exact opposite of what economists recommend should be done in a crisis.

Whether these gentlemen have learned from the past twenty years of supposed "consensus" that led to this fiasco remains to be seen. Until I see proof that they have, however, I worry that any response to the current crisis will be luke-warm - too small and too short-term. That was the mistake FDR made in the Depression, and if we learn from history, we should not make the same mistake again.

Two worries about Obama

2008-11-25T17:54:00.006-05:00

Given the amount that we have heard about "change" coming to Washington in the Obama administration, let me mention that for all my support for some of the President-Elect's new policies (e.g. renewable energy, infrastructure spending, and health care), and guarded optimism about others (e.g. higher education finance reform), I still have worries about his willingness to tackle the biggest issues in national politics - the two "complexes" that constrain policy the most. They are (1) the "military-industrial complex" (term coined by President Eisenhower) and (2) the "Wall Street-Treasury complex" (term coined by centrist Columbia Economist Jagdish Bhagwati).

Military-Industrial Complex:

To really understand this issue, let me refer you to three sources. The first is a recent article in The Nation that is an excellent primer on the problem. This article identifies two central concerns and challenges related to our military spending.

The first is simple and straightforward: we should not be spending money on weapons systems adapted to an outmoded geopolitical situation - namely the Cold War. Big culprits include the F-22 Raptor, the Ballistic Missle Defense System, and arguably most of the US nuclear arsenal. An excellent line-by-line report identifying key programs to be targeted for reduction was done by Foreign Policy in Focus, and is entitled "A Unified Security Budget for the United States, FY2009."

The second issue is more fundamental and concerns the position of the US in the world. We have, since WWII, become accustomed to using our military to project influence into the world. Part, though not all, of this is related to energy politics (one of the many reasons for renewable energy). Overall, we have over 700 bases and outposts stationed in foreign countries. Perhaps the most comprehensive coverage of this issue has been done by esteemed political scientist Chalmers Johnson, emeritus at UC San Diego. For a list of some of his fairly regular op-eds, see this page at AlterNet. More importantly, see the trilogy he wrote on US intelligence, military, and the potential decline of the American Republic - including parallels to Rome and Britain. The books can be found on Amazon, and are titled: Blowback, The Sorrows of Empire, and Nemesis.

As the article in The Nation mentions, Obama has signaled that he wants a shift out of Iraq and into Afghanistan, but he hasn't signaled that he is willing to take on the Pentagon's ever increasing budget requests or its unwillingness to phase out old programs - to say nothing of whether we should take a fundamental look at where we have bases and why. I voted for Obama because I think he understands that we're looking at a multipolar world. Unfortunately, I don't have any indication that he's willing to take on the established old guard at the Pentagon. Toning down our militarism is the central component to finding a new place in the world. We need to remove our "big brother" and "world policeman" mentality and return to a simple concern with our own national security. Besides, the only thing that will force more military responsibility on other countries is if we don't have the resources to do it all for them.

The Wall Street-Treasury Complex:

My problem here is much simpler - Obama's economic team is populated by old-guard economists, many of whom contributed to the rise of the "Washington Consensus" and the deregulation of financial markets that got us into this mess. When your house falls down, do you hire the same contractor who built it in the first place? I take a little hope that the Treasury Secretary is Tim Geithner, and having a respected hand there is important, but I would be much happier if the economic policy posts weren't completely filled with Robert Rubin's protégés. Rather than complaining about it too much myself, let me suggest two good sources. The first is this article from the NYTimes, and the second is this op-ed by Dean Baker at CEPR.

In short, it remains to be seen if change is really coming to Washington. Old habits die hard, and people are often loathe to unlearn ideas they formed over decades-long careers. Who will Obama listen to, and how will he synthesize their opinions? Is there enough diversity to ensure a proper balance? All of his advisors are bright, well-educated, and experienced - but it remains to be seen if they are stuck in their ways.

Update: Cabinet announcements

2008-11-23T10:54:00.008-05:00

Here's the most recent list of cabinet announcements:

Economy:
Treasury: Timothy Geithner (Current President of the NY Fed, helped craft bailout plan)

Chief of White House National Economic Council: Larry Summers (Treasury secretary under Clinton)

Chair of Council of Economic Advisers: Christina Romer (UC Berkeley Economist, specialist in Great Depression)

Chairman of Economic Recovery Council: Paul Voelcker (Former Fed Chairman who hiked rates in 1980s to get us out of Stagflation)

Staff Chief of Economic Recovery Council: Austan Goolsbee (U of Chicago economist, Senior Economist at Progressive Policy Institute)

Commerce: Bill Richardson (Governor of New Mexico, was a presidential primary candidate)

Foreign Policy:
State: Hillary Clinton (Senator from NY, primary candidate)

Defense: Robert Gates (at least as a transition for 1-2 years)

Homeland Security: Janet Napolitano (Governor of Arizona)

National Security Adviser: General James L. Jones (Retired Feb 2007 - former Supreme Allied Commander, Europe; Commander of the United States European Command; and Commandant of the Marine Corps)

Social Policy:
Health and Human Services: Tom Daschle (Former Senate Democrat Leader, published a book on Health Care recently, strong supporter of health care reform).

Director of Domestic Policy Council: Melody Barnes (Executive VP, Center for American Progress)

Director of Office of Management and Budget: Peter Orszag (Director of Congressional Budget Office; has focused particularly on health care)

Legal:
Attorney General: Eric Holder (Deputy AG under Clinton)

Cabinet so far

2008-11-20T18:31:00.007-05:00

Cabinet announcements so far....

Attorney General: Eric Holder (Deputy AG under Clinton and career prosecutor, wants to restore independence to AG office)

Health and Human Services: Tom Daschle (Former Senate Democrat Leader, published a book on Health Care recently, strong supporter of health care reform).

Homeland Security: Janet Napolitano (Governor of Arizona, tough on illegal immigration)

Edit: National Security Adviser: Unconfirmed talk that it could be General James L. Jones (Retired Feb 2007 - former Supreme Allied Commander, Europe; Commander of the United States European Command; and Commandant of the Marine Corps)

Edit: Secretary of State: Hillary Clinton has apparently made up her mind to accept the post, and vetting is finished and OK (see Bloomberg article). Sources say she is set to be nominated after Thanksgiving.

Shadow Summit details

2008-11-14T14:54:00.001-05:00

If anyone is looking for more specifics on what events are being held when and where at the Shadow Summit - here is a link: http://globaljusticeaction.wordpress.com/

Shadow Summit to G20 this weekend!

2008-11-13T22:50:00.001-05:00

November 14-16 2008
Forum will be held November 15th at Luther Place, 1226 Vermont Ave NW
People's Summit Against the G20

While George W. Bush hosts a meeting to promote flawed top-down ideology, IPS and friends invite you to a summit for "the rest of us."

We know the global financial crisis cannot be fixed by those who created it. Join us this weekend for the People's Summit to demand new ideas, people over profit, and democratic control over resources.Nine events are planned for the summit this weekend. For the full schedule of events, please visit Global Justice Action. The weekend's activities will culminate in a People's Forum on Saturday, November 15 and will include:

* An introduction to the financial crisis and its foundation in global capitalism
* Breakout groups, with experts, to further explore energy, the housing crisis, and other factors that contributed to the financial crisis
* A fishbowl discussion on alternatives to capitalism, exploring local, national and global models
* A movement discussion and networking opportunities

The closing panel on international perspectives will feature:

* Martin Khor, Director of the Third World Network, and board member of the International Forum on Globalization
* Njoki Njehu, long-time Director of the Fifty Years is Enough Network
* Lidy Nacpil, Filipina activist and long-time leader of Jubilee South
* Moderator: John Cavanagh, Director, Institute for Policy Studies

Read the Global Call to learn more about the People's Forum and add your voice to those calling for a new, democratized economic system.

Sponsors: Bank Information Center, Casa de Maryland, Global Justice Action, International Forum on Globalization, Institute for Policy Studies, Jobs with Justice, Students for a Democratic Society, US Action, and the Washington Peace Center

Hank Paulson's Bailout Shift...

2008-11-12T18:32:00.007-05:00

Apparently, the US Department of Treasury may be coming gradually to its senses. Earlier today, Hank Paulson announced that the focus of the bailout plan would shift, focusing more on direct capital infusions from the government (in association with private investors) rather than purchasing of toxic assets. Rather than bailing out the bankers, as we have all feared, this welcome move is intended to bolster liquidity in credit markets and insure reliable access to consumer credit, while granting the government direct authority to ensure that banks do their number one job: keep lending. For more on this change, see this article in the Financial Times and this one in the New York Times.

On the other hand, Paulson has maintained that the focus on the bailout should be targeted at the financial sector, rather than giving aid to Detroit auto manufacturers. On the face of things, this might make sense, until you consider the fact that car manufacturers are major financial institutions in their own right. After all, every company-owned dealership extends credit to consumers to facilitate buying cars, and all those loans are kept on the books. It is more than a bit naive to assume that the auto industry, which employs a lot of workers in typically hard-hit "Middle America" (Michigan, Indiana, Ohio especially), can weather a credit crisis when the goods it sells are so dependent on access to consumer credit. Unfortunately, in typically narrow-minded fashion, still-President-for-now Bush has made his approval of any economic stimulus (including for automakers) contingent on Congress dropping opposition to the Colombia Free Trade Deal.

None of this is to argue that cars are a good thing, or that we should continue producing cars. However, even those long-sighted auto manufacturers like Toyota and Honda, with their hybrid marketing and fuel-efficient lines, have taken a sales hit over the past year or so. In the medium-term we need to get off of foreign oil, but real public transport (both local and interstate) takes time to build, and until then we need to keep our auto workers employed. The collapse of any of the Big Three would have a devastating impact on what manufacturing economy this country has left. The private car isn't going away anytime soon, and these companies have been hard-hit by an external shock. Like it or not, they need government assistance to retool (and even to prevent job cuts), and frankly enough of the burden to justify using government funds lies on the American taxpayers' historic aversion to rail and public transit in favor of cars and jets.

As I indicated in my letter to President-Elect Obama, the key here is to capture synergies. We need to provide funds to automakers, but those funds need to be contingent upon a significant retooling of their automobile lines - away from SUVs and towards fuel-efficient city vehicles, hybrids, plug-in hybrids, electric cars (like those being developed by Tesla Motors), and hydrogen fuel cells (Note: I do not include ethanol because it has devastating impact on food prices, particularly in the developing world). Then, when the President-Elect takes office, we can hopefully turn our attention to public transit infrastructure (light rail and high-speed rail, especially), green energy generation, and the supporting infrastructure for alternative fuels (especially hydrogen and public plugs for plug-ins/electrics).

Income inequality...

2008-11-12T01:50:00.005-05:00

Throughout the election, Barack Obama was attacked as a "redistributor" and a "socialist" by the right. The implication is that a downward distribution of income from the wealthy to the middle classes is somehow a bad thing, and that all of the benefits of economic growth are equally shared. Those who perpetrate these claims are either (a) wealthy, (b) cronies of the wealthy or (c) bamboozled by rhetoric and lacking evidence or the skills to interpret the evidence.

As just one simple piece of evidence, from 1979-2004 the real (that is, adjusted for inflation), after-tax income of the top 1% of society rose by 176%. The top 20% of society saw an increase of 69%. The bottom 20% saw an increase of only 6%. No quintile below the top saw an increase of over 30%, and the pattern is distinctly regressive. Here is my source, and I would like to point out that the data used comes from the Congressional Budget Office.

So, either the wealthiest in our economy are suddenly much better entrprenuers than they were 30 years ago (given boom-bust cycles, I doubt it!) or they have benefited from a set of policies related to international trade and investment, as well as domestic welfare policies, that favor an upward redistribution of income at the expense of the lower and middle class. I might point out that Reagan was elected in 1980, and in the period mentioned there has been only one Democratic president, Bill Clinton. Even Clinton was hamstrung by a Republican Congress for much of his term, and was a pro-free trade, pre-free investment, financial deregulator and fiscal conservative.

Small wonder this election saw a mandate for change in Washington policies - indeed, its a wonder that Obama's victory was not a landslide. Sadly, this may be a testament to the pervasive and simplistic "free market" ideology long advocated by the right, and the manipulative anti-communist rhetoric employed to promote it. One wonders if John Maynard Keynes, the chief architect of the post-WWII international economic regulatory structure, would be labelled a socialist in today's politics! We need to move past such divisive ideology to get to the point where people understand (at least roughly) that economics is fundamentally about manipulating incentives to produce a beneficial outcome - and that the "free market" vs. "socialism" is a dangerous false dichotomy that hinders real progress in the USA.

Keynes, revisited...

2008-11-10T23:49:00.003-05:00

In case people remain worried about the cost of economic stimulus + the bailout, and don't trust my economics, may I suggest an editorial by a Nobel Prize-winning economist? Paul Krugman's take on a stimulus package and the New Deal can be found here.

Dear President-Elect Obama...

2008-11-08T19:54:00.006-05:00

Dear President-elect Obama:

You've been elected, and with a broad mandate, but the devil is in the details. How will you deliver?

You ran on a platform advocating change and unity, bringing accountability to government, and rejuvenating a suffering middle and lower class. However, most of the concrete policies you specified in your campaign are rather moderate, aimed at targeted small interventions, and seem to lack a cohesive vision. In one sense, this is good, because it grants you flexibility to respond to changing circumstances. In another sense, however, it is worrying - particularly given the broad array of challenges facing you.

Perhaps the most important point is this: do not let the size of recent financial bailouts or the government deficit distract you from deeper goals. Please remember the wisdom of Sir John Maynard Keynes, the great British economist: target a deficit in times of trouble towards sustained employment and economic renewal, so that you can increase revenues and balance the budget in times of economic health. In crafting your economic stimulus package, you would do well to remember your commitment to the middle and lower class, to the most vulnerable in society. Furthermore, you should try to aim at finding positive synergies that allow you to harness the crisis stimulus for longer-term goals. This is particularly relevant in terms of environmental, social welfare, and infrastructural objectives.

To illustrate, consider the following example. Lagging infrastructure in the United States is most apparent in two areas: energy and transportation, particularly rail transport. At the same time, we are embroiled in two wars abroad, at least one of which (Iraq) is significantly tied to oil. These two categories of infrastructure represent an enormous opportunity to achieve multiple objectives and follow through on the message of change and pro-lower class growth that propelled you to the White House.

Investing in the construction of rail transport - particularly high speed passenger rail - would provide hundreds of thousands of jobs to an industry deeply hurt by the burst of the present asset bubble, while reducing our long-term dependence on foreign oil, reducing harmful greenhouse gas emissions, and reducing America's long-term dependence on wasteful automobile, jet, and truck transport. Along similar lines, the provision of federal subsidies to local and state governments promoting mass transit systems, would have a similar impact. Such measures might run into some opposition (particularly from oil and auto industries), but that type of opposition could easily be cast as relying on corporate self-interest rather than the public good.

A very similar case can be made for clean energy subsidies and construction, particularly smaller scale technologies with less potential harm which can be utilized in local settings, maximizing the safety and security of our energy infrastructure while minimizing the long-distance transport of oil and coal. Wind (particularly in the Midwest and Appalacians) and Solar (particularly in the southwest) both provide excellent alternatives, and should be supplemented with other locally applicable solutions - such as tidal power and geothermal. Other initiatives, such as clean coal and nuclear should be explored, but have a larger number of detrimental side effects - coal mining and radioactive waste both cause ecological issues if mismanaged. Once again, these initiatives provide jobs and have the potential to reduce american utility bills, to the benefit of the middle class. They may be opposed by the coal and oil lobbies, but these lobbies again have selfish corporate profits as their interest, not the public good or the long-term health of our economy.

Lastly, please remember your commitments to social welfare, health care, and education. Please remember that all commitments should be funded with a progressive tax structure aimed at minimizing inequality (while maintaining incentives to entrepreneurs) and minimizing speculation. Measures like a small tax on financial transactions, or a Tobin tax on currency transactions, have minimal impact on long-term investment and savings (or normal business operations), but a substantial impact on "casino capitalism." Furthermore, these progressive tax measures could be earmarked to pay for health care and unemployment insurance, both of which would achieve substantial demand-side fiscal stimulus in their own right.

Mr. President-Elect, you have set yourself lofty goals. However, you have also signaled a willingness to play political hardball. You have a Vice President who is a major figure in the Senate and wields enormous respect. You have a Chief of Staff who is a similarly high-ranking member of the House of Representatives, and is a close political ally. You have built a mass movement that can be mobilized to provide support for your initiatives, and have tremendous personal charisma to rally the people. Coupled with an appropriate political strategy that begins with decisive and successful immediate action - through a stimulus plan that captures the synergies between many of your goals - you could achieve long-lasting and visionary success for this country.

In short, Mr. President-Elect, you have tremendous potential. Please do not waste it.

Financial Crisis: Revisited

2008-11-08T03:28:00.004-05:00

Hey folks, since I finally finished my series on the financial crisis, and since we now have a new administration - I thought I would re-post the links.

Financial Crisis Part I: The Antebellum - details the fairly immediate domestic historical causes of deregulation and the housing bubble. There is more that could be said here about the impact of international globalization, portfolio account liberalization, parallels with the East Asian crisis of 1997, and if the IMF has a role - but for now I'll leave those issues alone.

Financial Crisis Part II: The Conflagration - details the majority of the major banking collapses (I wrote this before Washington Mutual collapsed and merged with JP Morgan Chase). It also gives a sketch of the bailout and impact on national debt, trying to keep things in perspective. I think, in retrospect, that my critique was a bit conservative in this section, and the move towards actual equity shares in the banks is a good one, because it confers additional and more sustained oversight. One thing to keep in mind: the social role of the financial sector is not to make profits, it is to provide stability, transparency, and liquidity to producers and consumers alike - so that the economy continues to function. It needs to do this efficiently, but we need to remember that financial profits do not generally reflect actual productivity increases or the health of the real economy. In fact, when fueled by speculative investment, they typically prop up bubbles like the one we just saw. If there is any segment of the economy that should be stringently regulated, even to the point of quasi-nationalization, it is the banking sector (I do make this point in part III).

Financial Crisis Part III: A New Regulatory Framework - details my take, based partly on analysis from Dean Baker at CEPR (who, incidentally, is one of the few economists who has legitimately predicted all of this for years), on how we can input smart and targeted regulation to prevent the excesses of speculative activity, provide public oversight, and root the calculus of financial companies in long-term sustainable profits - rather than short-term bubble-burst activity.

So - for those who missed it the first time, or who are new readers, or only read part of it - there is my take on what we should do (roughly).

To come later - I will probably try and provide a framework for the Obama administration - how we should be focusing on changing or restructuring our society to be more dynamic, sustainable, and capable of providing legitimately equal opportunity for all.

Cabinet scuttlebutt

2008-11-07T15:05:00.003-05:00

Here are a few more articles on potential cabinet members: CBS discusses most open posts, specifically on foreign policy
we have this article from the Hindustan Times, and Reuters reports that former Clinton Secretary of Treasury Robert Rubin has ruled out a return to the post.

I'm going to mention a few of my preferences here, though I won't guess on many, because a lot of this is behind-the-scenes chatter and hard to predict:

(1) Treasury - NOT Rubin or Larry Summers - this whole financial crisis run-up started under the Clinton administration, so returning to the people who were wrong is a bad idea. Also, Summers has a big mouth and a large ego, and got into trouble at both the World Bank and Harvard for them. Paul Voelcker, former Fed chairman, is a possibility, but he is too much of an anti-inflation-hawk for my tastes and bears the stigma of the 1980s debt crisis. He's also getting old. Tim Geithner, current chair of the NY Fed, is a solid possibility because he was involved in crafting the bailout and can hit the ground running. Warren Buffet is seen as an outside shot - I might like that idea because Buffet is big on business fundamentals and stability, and agaisnt the over-financialization of our economy that has happened in the past few years. He's not a banker, which some take as a minus, but I see as a solid plus - the Wall Street-Treasury complex needs to take some time off.

(2) State - Bill Richardson is my pick, and almost a prediction. I think he's been angling for the role since the primaries. Plus, with a resurgent Latin America starting to have a voice in international affairs, a Hispanic secretary of state can go a long ways in casting a friendlier face. Richardson campaigned hard amongst latinos and broke with the Clintons to endorse Obama, so Obama also owes him a favor. He's also an old hand as Ambassador to the UN and has negotiated with Kim Jong-Il. It is worth noting that whoever is in charge of State will probably butt heads with Joe Biden.

(3) Defense - Personal choices are to stay with Robert Gates or to bring Colin Powell back into the fold. Gates is one of the best/most moderate people in the Bush administration and has openly stated that Defense needs to yield to state; that the US needs to focus less on hard power and overextending resources and more on soft power as other countries become global players. Plus, he can hit the ground running. Colin Powell is one of the most respected people in the US, including internationally, and his credentials are peerless: Chairman of the Joint Chiefs and Secretary of State under both Democrat and Republican administrations. He also underastands that military intervention is a last resort, and is not afraid to speak his mind - but does so in a calm, balanced, quiet, and respectful manner. Whoever is in DoD needs to be able to bridge the aisle and bring consensus on an orderly withdrawal from Iraq.

(4) Energy - I like the gubernator for this one - Arnold Schwarzenegger is another moderate Republican, who has done a lot as governor of California. He's promoted alternative energy, and has also been a proponant of improving US rail infrastructure. One project approved on election day was the first leg of funding for a bullet train in CA connecting Sacramento to LA. High Speed rail should be our #1 priority for infrastructure - it provides jobs, reduces oil consumption, reduces carbon footprint, and can streamline air travel so that we don't need to fly within a 800-1000 mile radius. Another potential place for Arnold, following this, is Dept of Transportation. See this link for the rail project.

(5) Council of Economic Advisors - A few people who should be included and listened to: (a) Amartya Sen (Nobel Prize 1998 on Famines, at Harvard, also on the IMF Governance Reform panel), (b) Joeseph Stiglitz (Nobel Prize twice, at Columbia, known for alternatives to globalization, and understands Latin American cooperative movements), (c) Dani Rodrik (arguable the best development economist for understanding how institutions impact the economy, also at Harvard) - along the lines of Rodrik, other possibilities include Nancy Birdsall at the Carnegie Endowment or Arvind Subramanian at the Peterson Institute, (d) Paul Krugman (Nobel Prize for work on trade this year, might be a bit vitriolic at times, but also understands the need for careful governance of globalization), (e) Maybe Jeffery Sachs at Columbia or William Easterly at NYU - both are known and respected internationally, but they also hate each other, so they might be better as people to consult on a part-time basis.

One last comment is this - to bring real change, Obama needs to start listening closely to the alter-globalization movement, best represented by the International Forum on Globalization (IFG). Some of those organizations are listed on my sidebar.

Thoughts on Staffers?

2008-11-02T23:17:00.002-05:00

So, assuming no gigantic upsets and Obama wins the election, any thoughts on potential cabinet posts? Here's a list of the names being circulated in top Democrat circles: http://dyn.politico.com/printstory.cfm?uuid=542710E6-18FE-70B2-A8A346B36828470E

John McCain: Maverick or Miscreant?

2008-10-07T00:47:00.004-04:00

Thus far in my political blogging, I've questioned only John McCain's policies. I have, and still do, believe that his ideology is fifteen to twenty years out of date. Furthermore, though he clearly knows foreign policy, despite the occasional gaffe (though I'm dubious on his Middle East knowledge), he lacks any real understanding of economics. Plus, I've felt throughout this campaign that McCain has been willing to say anything it takes to get elected, including flip-flopping far more than Kerry dreamed of.

However, one thing I have not done is question the man's character. Frankly, I bought the media aggrandizement of his time as POW and thought his recent political career showed his commitment to fighting corruption - as McCain led the fight against torture, against the more extreme of President Bush's judicial appointments, and for campaign finance reform. Yet, I have recently read a lengthy biographical article that makes me question these assumptions - after all, I have never done any serious research on McCain's past. Could it be that the good Senator is little more then the volatile, petulant son of military brass?

Probably not, regardless of his past there is likely some truth about the media spin that his years as a POW created a resolve to serve his country. Besides, there are always those willing to slander you, perhaps because of a grudge, perhaps for personal reasons. However, it is also likely that there is more than a grain of truth in the claim that McCain was a spoiled, misogynistic, alcoholic military brat whose entire career was mediocre, and whose advancement came almost entirely on the coattails of four-star general lineage.

I suggest you read the article, and decide for yourself.

My Picks... Election 2008 Map Prediction

2008-09-30T20:17:00.004-04:00

<p><strong>><a href='http://projects.washingtonpost.com/2008/pick-your-president/'>2008 Election Contest: Pick Your President</a></strong> - Predict the winner of the 2008 presidential election and enter to win a $500 prize.</p>

Well, I'm being a little optimistic on a few states, but this is my pick for how the election unfolds. I was close on the Democratic primary - I only missed on Indiana in my private picks - so I thought I'd share these. I will admit that I know the Democratic mindset better than Republican, so I might be a bit off. Here's my reasoning on a few key states:

Pennsylvania: New York/New Jersey border will be heavy Obama, and I think middle america here can overcome their reservations.

Ohio: No geographic "Obama-friendly" borders, the rust belt still suffers from some racism, and Hillary won the primary.

Indiana: Home of the KKK, went slightly Hillary in the primary. Large swaths of the countryside are also fairly religious and conservative. Should go McCain.

North Carolina: Large African-American population and massive victory for Obama in the primary indicates a good chance of turnout carrying this state for him. I predict enthusiasm and organizational skills win the day for Obama here.

Virginia: Demographic changes in Northern Virginia, Mark Warner's Coattails, an Obama victory in the primary, and solid organization imply that Obama should squeak out Virginia as well.

Georgia: This should be closer than the polls suggest, and a significant African-american population and strong organization help Obama, but I think that Georgia's "southern Republican" mindset will win the day.

Florida: With Lieberman stumping for McCain, and Obama lenient towards Palestine and favoring talks with Raul Castro, I see the Jewish and Right-wing Cuban votes going McCain. Florida may go McCain by a solid margin.

New Mexico: Bill Richardson wins the state for Obama.

Nevada: Close call - I think general Obama enthusiasm and the California border should help, here. I don't know much about Nevada.

Colorado: I'm optimistic, I think Obama will pull through based on momentum and turnout, even though strong conservative elements suggest a good core turnout for McCain.

Overall - I think the polls are underestimating turnout and enthusiasm in the Democratic party. This won't be a blowout election, but Obama should win by a clear margin.

Financial Crisis: Part III – A New Regulatory Framework

2008-09-27T01:08:00.003-04:00

One thing that is clear, following the debates last night, is that the candidates are a little sketchy on the precise reforms that are necessary to prevent another crisis. In Part II of this series, I cataloged the damages of the past few months, and proceeded to explain that we need to accept the reality that a large bailout, like it or not, is necessary for our country’s renewed financial health. The candidates, fortunately, seem to accept this reality. However, they seem unsure on exactly what we should do in terms of long-term reform. In this post, the third and hopefully final post on what I think needs to be done to resolve the crisis; I provide a set of suggestions on how we can reform our governance of financial markets to prevent a recurrence of the current situation. As I mentioned in the last post, some of my suggestions take a cue from Dean Baker at CEPR, though I do differ from him in a few areas.

Before I move into the diagnosis, however, here is a brief comment on my take on the candidates’ economic philosophies. From what I heard last night, I think that Senator Obama’s general philosophy coincides with my impression of specific measures that need to be taken, while Senator McCain seems to still oppose additional regulation in favor of finding bureaucrats to use as scapegoats for a crisis that they could not fully prevent. As I explained in Part I of this series, the Republican Congress of 1999 removed key regulations and handicapped regulators in dealing with this crisis. Blaming regulators for not having the tools at their disposals is nothing if not counterproductive. We need to fix the problems, not look for yet another person who we can blame.

Building with Bricks, Instead of Straw

So, exactly what should we do to prevent another catastrophe? Here are five potential reforms that could have a great deal of impact in reducing volatility and the bubble-bust cycle.

First, all forms of traded assets need to be traded on public exchanges regulated by either the Securities Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). Believe it or not, not all of the instruments that are traded happen on these exchanges. Debt swaps, which are a major part of this situation (mortgage packages are debt securities, after all), are traded off of the exchanges. This makes it very difficult for regulators to access reliable information on the volume and volatility of trading.

Second, Fannie Mae and Freddie Mac need to be subject to more stringent oversight, and perhaps should remain renationalized. Their job, after all, is to repackage mortgages to maintain market solvency. They are a market facilitator, not a profit-focused institution, and a focus on short-term profits is a good part of what got us into this mess. At minimum, there should be two conditions: (1) Fannie and Freddie should be limited in size (in terms of the percentage of the mortgage market they are backing), and (2) Restrictions placed on the riskiness of mortgages that are backed by the institutions. Limiting their size ensures they don’t become overburdened and carried along with asset waves, and limiting the riskiness of their investments ensures they remain solvent and prevents Wall Street from gambling with taxpayer money.

Third, we should establish a public administrative body to assess the riskiness of investments, much as Moody’s and Standard and Poor do now. One of the chief problems leading up to the crisis was the incestuous and corrupt nature of the rating organizations. In essence, they were “in cahoots” with the investment bankers. This public organization should work in tandem with the Federal Reserve. In fact, one key measure that could be put in place to add some teeth to the body would be to place a risk premium on the interest rates charged by the Fed, if a bank allows its balance sheet to sour. A declining credit rating could also automatically trigger negotiations and intervention by the Fed. This could operate in much the same way as debt covenants between private corporations and banks do today. A side benefit of this system is that it forces banks to lend more conservatively, which could stem the trend of Americans piling up their debt until they can barely make minimum payments. It could help reinvigorate a culture of saving now and spending later, rather than the opposite trend that has appeared in today’s consumer culture. High domestic savings rates are almost universally accepted as signs of a healthy and sustainable economy.

Fourth, we need to find a way to break into what has been dubbed the “Wall Street-Treasury Complex” by Columbia economist Jagdish Bhagwati. Hank Paulson, for example, was CEO of Goldman Sachs from 1999-2006 – presiding over the height of the bubble – before becoming Secretary of the Treasury. Preventing this is even more important with respect to the Federal Reserve. Federal Reserve members should go through a full appointment process, requiring the “advice and consent of the Senate” (see Article II, Section 2, paragraph 2 of the US Constitution), as is the case for most other federal officials (e.g. Supreme Court Justices). This could be a requirement of a full senate vote (the standard procedure). Another approach that might make sense is the approval of both the Senate Banking and House Financial Services committees (current Chairs: Chris Dodd and Barney Frank), since many congressmen may not understand the “ins and outs” of finance. In either case, there needs to be an approval process by which the duly elected representatives of the American people have a voice.

Fifth, we should implement two targeted and small tax policies that can minimize speculation and volatility, while at the same time taxing those responsible for this mess in the first place – making them pay for most of it, and not the average taxpayer. The first tax would be a tax on financial transactions, valued at less than 1%. This tax has negligible impact on those investors who are buying and holding for a longer time period, but has a significant impact on the profit margins of speculative day-traders. One estimate suggests this tax could bring in $100 billion in extra revenue. The second tax is a parallel measure attached to currency trading (another 1% or lower tax), known as a “Tobin tax” for the economist who came up with the idea. It has the same impact, removing the profit incentive on speculative currency trading and forcing people to buy and hold for longer periods. This helps to prevent the flight of portfolio capital and precipitous currency devaluation. The proceeds of this tax could be diverted to the foreign exchange reserves, allowing for the US to manage our currency more effectively and combat Chinese currency undervaluation. This will be particularly useful as our economic clout diminishes relative to rapidly developing economies (e.g. China, India, Brazil, Russia), and the dollar ceases to be the “standard” currency of international trade.

The list I have outlined above is in no way meant to be exhaustive. I do think that the above measures could have a beneficial impact, stabilizing the global economy and focusing our energies on productive economic activities, rather than speculative finance. As usual, I welcome any comments you all may have.

Financial Meltdown: Part II - Bailing Out the Banks

2008-09-26T01:25:00.002-04:00

As I write, Congress and the President are wrangling over what to include in a massive bailout package, intended to save Wall Street from itself. In Part I of this series, I provided what a friend termed the "antebellum" to this lovely financial conflagration. I'm going to assume you've all read that post, so you might want to read it before tackling this one. Part I details the domestic economic and regulatory causes of the current crisis, and can be found here. The current post is divided into two parts: an overview of the current situation and an assessment of what is needed to bail out the system. There is going to be a third part, discussing what to do to prevent a recurrence.

Overview: They Huffed, and Puffed, and Blew the House Down

Over the past few months, and especially in recent weeks, the entire operations of Wall Street have been turned upside down. Earlier this year, there were five major stand-alone investment firms on Wall Street. Earlier this month, the four largest still remained. Now there are none. Both major publicly guaranteed housing firms had to be nationalized by the government. Even normal mortgage institutions, protected by regulations governing loan-loss provisions, have required substantial assistance. The federal funds rate, in a time of upward pressure on inflation due to commodity prices, remains at a mere 2%. Given the speed of things, let's take stock of the principal damages. Here is a list of those companies requiring significant government intervention thus far.

Investment Banks: Smallest to Largest
Bear Stearns: Government brokered a buyout by JP Morgan Chase, valued at $10 per share. The government issued a $30 billion to JP Morgan Chase to support its purchase.
Lehman Brothers: Bankrupt, government unwilling to save, currently being scavanged by Barclay's PLC.
Merrill Lynch: Purchased by Bank of America to avoid insolvency.
Morgan Stanley: Announced it would become a "bank holding" company (like Citigroup), subject to stricter regulation.
Goldman Sachs: The giant investment firm, long the envy of Wall Street, also announced it would become a bank holding company, subject to stricter regulations. Warren Buffet has announced he will but $5 billion in preferred stock, and the company will issue another $5 billion in common stock to raise capital.

Other Institutions:
American International Group (AIG): Massive insurance company with over $1 trillion in assets. Government bailout of $85 billion for a 79.9% equity share in the company and ability to suspend dividends to common and preferred stock.
Fannie Mae/Freddie Mac: Federal takeover (79.9% equity) and bailout valued at $200 billion. Combined, the two institutions hold debt and mortgage-backed securities valued at around $5 trillion. The current agreement requires that "each GSE’s retained mortgage and mortgage backed securities portfolio shall not exceed $850 billion as of December 31, 2009, and shall decline by 10% per year until it reaches $250 billion."
IndyMac: Seventh-largest mortgage originator in the US, largest bank in Los Angeles area, with assets of around $32 billion (deposits valued at $19 billion). Taken over by FDIC, which guarentees deposits up to $100,000 (and 50% thereafter).
Washington Mutual: Largest Savings and Loan institution in the US, assets valued at over $300 billion. Worries persist about its financial health.

As far as I know, that covers all of the major problems in the past few months. Although, at the rate things are going, I might have missed one. In general, it might be an exaggeration to say that the financial sector is reverting to a pre-1929 conditions, but not by that much. The economy, despite media hyperbole, is not going to crash to Great Depression levels. The country should remain fairly well protected from that level of crash. Social security, Medicare, Medicaid, unemployment insurance, and the FDIC did not exist until the New Deal. Accounting standards and financial regulation through the SEC are also significantly stronger than before the Depression. Each of these measures affords some containment and security, a buffer against hard times.

However, if you will recall my previous post, one of the crucial post-1929 pieces of financial legislation was Glass-Steagall, which separated investment banks from mortgage banks. The repeal of that particular provision of Glass-Steagall in 1999 was a monumental mistake and opened the economy to systemic financial risk. The collapse, acquisition, or change of the investment banks into bank holding companies serves to exacerbate this problem, by and large. The increased concentration of capital into mega-banks concentrates management, distorts market incentives, and removes a layer of insulation from the financial markets. It connects personal deposits even more directly to risky investments taken on by the investment bankers. It also concentrates wealth in the hands of fewer institutions, meaning if one institution collapses, it in itself creates systemic risk. Imagine is Citigroup, with assets of over $2 trillion, were to go bankrupt! Perhaps the only ray of sunlight is that the bank holding companies are all subject to tighter regulation than normal investment banks, and access to deposits and the required loan-loss provisions can make the collapse of an institution more difficult.

Suffice it to say that the contagion has spread throughout the system, and no one has gone untouched. What is needed is a constructive solution with significant long-term components, based in an understanding of where the economy stands. What this means is that any bailout program needs to address long-term regulations as urgently as it needs to ensure short-term financial solvency. This trend could be disastrous if it continues.

I recently posted a link to an in-depth analysis by CEPR. What follows is my take on how we should modify financial governance in the wake of the current crisis. My take on long-term regulation is somewhat similar to Dean Baker at CEPR, but I do disagree with him on how to handle the current bailout. Also, his article is a bit technical and geared towards those with a significant background in economics and finance; I will try to make mine more accessible.

Bailing Out the Banks, but Not the Bankers

Given the sheer magnitude of the current situation, the primary focus of a bailout should be on efficiently flushing the toxic assets from the financial system. It is tempting to quail at the size of the Bush Administration’s proposal, but a full-fledged purge is exactly what the current situation requires. Japan in the 1990s attempted a succession of small stimulus plans and rescue packages, yet the economy remained in the doldrums for a decade, and the banks have only recently become profitable again. On the other hand, following the advice of the IMF, South Korea allowed the banking sector to collapse following the burst of the East Asian real estate bubble in 1997-8, and the economy underwent a severe contraction. In fact, the one country that survived the crisis with the least pain was Malaysia, which made sudden and decisive use of capital controls to prevent the flight of foreign portfolio investment (currently a problem for the US, as well).

In practice, this means that we need to put concerns about the national debt on hold until the financial system recovers. It is tempting to assume that debt, as debt, is a bad thing for the economy. However, government debt is not the same thing as your personal credit card debt. What matters is the cost of meeting debt-service obligations, and whether the debt-creating expenditures create more growth than debt-service. In the case of rescuing the US financial system, it is almost certainly money well spent. Additionally, talk of US debt problems are somewhat overblown. Government debt, by itself, has virtually zero correlation with the health of the economy. Consider that Japan has the 2^nd-highest debt-to-GDP ratio and remains at the center of innovation. A number of countries that have low debt-to-GDP ratios remain underdeveloped (see the CIA World Factbook). Keeping this in mind, a $700 billion bailout is only 5% of the USA’s $14 trillion GDP. Even if all that money is not repaid, this takes out debt-to-GDP ratio from 61% to 66% - hardly a dire increase. The United States is not likely to run out of creditors, as we are the main anchor of the global financial system, and 5% of GDP is certainly a reasonable price tag for the targeted removal of toxic assets from the financial system.

If we look around, we can also see a lot of recrimination and blame. This is tempting, but somewhat counterproductive. Certainly, we need to strictly limit “golden parachute” payoffs to the executives that ran their companies into the ground. Just as certainly, these limits will likely not be as strict as the CEOs deserve (if you make a company bankrupt, I don’t personally think you deserve anything). However, we should not attempt to blame the shareholders and wait until companies absolutely need rescuing to do anything. Dean Baker suggested that shareholders need to be punished – but most shareholders are not board members, most are people who invested their retirement savings in a 401(k) mutual fund that then invested in these companies. Even if they did invest on their own, given the faulty risk ratings on many of these assets, and a lack of insider info, they could not be expected to know that profits would not continue – particularly since this bubble has been 5-10 years in the making, and most financial analysis only goes back to ten year averages (at most). Perhaps board members deserve to take a loss, but we should not punish innocent investors for making a decision based on the information that was available to them before the bubble burst.

It might be thought that I’m coddling Wall Street, despite my claims that executive compensation needs to be limited. What I have in mind is a two-step process; the limitations on Wall Street come in the form of regulations intended to prevent a recurrence of this disaster.

There are two things that need to be addressed in making this bailout effective and efficient, without unduly burdening the government or rewarding institutions and executives who ran themselves into the ground. Here I take two cues from Dean Baker. First, given the corruption and incestuous nature of the private risk appraisal industry, preventing gaming of the proposed auction process is a real problem. One way to avoid this is to make executives personally liable for the misreporting of auctioned assets - allowing them to be sued for assets that underperform (e.g. default more often than) their risk rating (outside a statistical margin of error, say +/- 5%). Faced with potential lawsuits, executives would think twice about misrepresenting risk to the US Treasury. Second, the government should not be responsible for repaying loans to companies that it bails out, if those loans were made within the financial quarter preceding the bailout. The creditors who made those loans, for instance to Bear Stearns or Lehman Brothers, had access to their books and knew their financial situation when they agreed to make the loans – they should be forced to suffer the consequences. This should prevent creditors from making last-minute high-return loans risk-free in expectation of government bailouts should default occur.

Sorry for the length – it’s been a complicated couple of months on Wall Street. Part III of this series will address long-term regulations to prevent a reoccurrence of this mess.

Bailout Terms?

2008-09-22T22:18:00.003-04:00

Well, I haven't had time to do my own diagnosis of the current situation, to make long-term suggestions. In the meantime, here is an excellent and detailed piece by Dean Baker at CEPR on what the terms of the bailout should be. His take leans a little further towards heavy regulation then I would, but many of his suggestions have a great deal of merit.

Shameless Promotion II

2008-09-20T21:59:00.002-04:00

So, my wonderful girlfriend had a print of one of her paintings selected as "Today's Best" on Zazzle! Check it out here: http://www.zazzle.com/fate_untangling_our_mistakes_print-228309324394495039

Financial Meltdown: Part I

2008-09-19T21:01:00.007-04:00

Well, I think it’s about time I weighed in on the current financial crisis. Sorry this took me so long, but I needed time to do some real research to sort through all the opinions. What follows is an analysis of the root causes and history behind this crisis, as well as who to blame (because blaming people is so much fun!). This is part I of II, because the next post will assess the government’s response and what should be done.

First off, let’s get one thing clear. This is not the fault of the Bush Administration. Frankly, the only real things the Bush Administration did to contribute were (a) allow deregulation to stay around and (b) spend too much money on ill-founded wars. Their fault lies in overextending the government’s resources so they don’t have the resources to properly handle what they’ve been given. This crisis has been building since before Bush was elected.

If we can’t blame “everyone’s favorite target,” then who can we blame? No one person is 100% responsible, but a significant portion of the blame is shared by Alan Greenspan and the Republican Congress of 1999-2000. Each of these entities shares some responsibility the twin causes of the current crisis: the housing bubble and deregulation.

Let’s start with the easy case, and the immediate cause of this crisis: the housing bubble. The fault for the housing bubble lies squarely on the shoulders of the Federal Reserve. That means Alan Greenspan. Housing prices have declined 20% since this crisis began, but that’s only half of the 70% increase in real terms they saw from 1973-2007 (170%*-20% = -34%). In comparison, housing prices remained steady in real terms from 1948-1973 (source: CEPR). This has a direct correlation with average fixed-rate mortgage rates and the federal funds rate over that period. Mortgage rates peaked in 1981 at around 16-18%, and have steadily declined since. It’s understandable that Paul Voelcker would want to begin lowering these rates; the initial spike was a monetary policy move to stem the inflation of the late 1970s, and rates needed to come back down eventually. However, Greenspan continued the trend through 1992, with the federal funds rate bottoming at 3%. Since 1992, the funds rate has not peaked above 6.5%, and has remained below 6% for the majority of that time. In essence, Greenspan allowed the economy to overheat, precipitating the tech bubble burst, and now the housing bubble, by keeping the cost of credit at artificially low rates, allowing companies and homeowners to live beyond their means for an extended period of time. Eventually, that time runs out.

The second case, deregulation, is a little more complicated. However, if we want to play the blame game, the majority of the blame falls on three Republican Congressmen: Representatives James Leach (R-IA) and Tom Biley (R-VA) and Senator Phil Gramm (R-TX). These three gentlemen were behind one monumentally foolish piece of regulation: the “Gramm-Leach-Biley Financial Services Modernization Act of 1999” (official Senate site). Gramm-Leach-Biley repealed part of the “Glass-Steagall Act of 1933.” To begin with, let me provide a little history.

The Glass-Steagall Act was an extremely important piece of New Deal legislation intended to combat the collapse of the financial sector that precipitated the Great Depression. It had two crucial provisions: (1) establishing the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits up to a value of $100,000, and (2) prohibiting bank holding companies from owning investment banks, insurance corporations, securities firms, hedge funds, etc. The first key provision, the FDIC, is still in place. But Gramm-Leach-Biley repealed the second key provision, allowing the merger of mortgage banks with insurance, investment, and commercial banking services. For example, shortly after Gramm-Leach-Biley was passed, Citibank became Citigroup following its acquisition of Travelers Group (an insurance company). It is worth noting that Gramm-Leach-Biley was passed with well over a 2/3 majority and was veto-proof.

Now, why is all of this so bad? Doesn’t this simply make the financial sector more dynamic and flexible? Shouldn’t that be a good thing? Well, another word for “dynamic and flexible” is “volatile”.

Sometimes, a piece of legislation is put in for a legitimate reason. The reason for the Glass-Steagall provisions was to prevent another run on the banks, like the one that happened in 1929-1930. The FDIC ensures that people get their money, even if a bank collapses, and the separation of savings banks from commercial and investment banks prevented banks from taking huge losses on speculative investments and using people’s savings to back them up. Gramm-Leach-Biley changed all that, allowing the merger of the different classes of institutions. (Sidenote: European and Japanese systems allow the merged types too, but have a significant government dialogue and oversight over the types of investments made, which helps to minimize volatility and ensure longer-term investment goals.)

So what happened in the crisis? In order to raise capital, the savings/mortgage bank subsidiaries of financial corporations (e.g. the Citibank portion of Citigroup) issue mortgages. The investment portions of different corporations (e.g. Bear Stearns, Lehman Brothers) then packaged a number of mortgages into securities – including blending subprime and prime mortgages together under one risk rating – and purchased portions of those securities to provide extra operating capital to the banks, allowing the mortgage banks to make more loans (including mortgages). After all, the excess money had to go somewhere! The insurance portions of the new conglomerates (e.g. AIG, Travelers Group) then insure the risk of taking on these new mortgage-backed securities in case of default. The conglomerates are then faced with risk from the same mortgages in three different sections of their books. Originally, this was hailed as “risk-diversifying,” and in cases of normal operation, it might be – after all, in a period of stable housing, it provides a measure of security as mortgages are felt to be safe. Unfortunately, it happened during a housing bubble, and further exacerbated the number of mortgages being offered. Eventually, you run out of reliable clients. Some people don’t own houses because their credit isn’t good enough and they don’t have the income (I should know, I’m a graduate student!)

So, the subprime housing bubble bursts. Now, rather than losses being confined to one sector, they are magnified throughout the entire financial system. Bear Stearns was the first to fall, then Lehman Brothers, then AIG, and Merrill Lynch. Only two of the original five investment firms have escaped relatively unscathed – the largest two, Morgan Stanley and Goldman Sachs. Even the quasi-public mortgage backers – Fannie Mae and Freddie Mac – have needed a bailout. Quite simply, deregulation was a mistake, premised on a foolish assumption that growth can happen indefinitely. Well, it can’t. The market needs to undergo periodic corrections, and regulation exists to make sure that those corrections don’t cause the whole system to collapse. More on this and the government response in the next post.

Hypocrisy in High Heels

2008-09-14T12:17:00.005-04:00

So, after my last post about Sarah Palin, people suggested I was being too harsh - that she's a woman and was mayor and then governor of a republican state is impressive, that no one would ask questions about "who will care for my five kids - one pregnant and 17, the other five and Down syndrome?" if she was a man, that I was somehow wrong for calling into question the experience and moral fiber of a woman who wishes to be, arguably, the second-most powerful politician in the United States.

Malarky. Enough with the hypocrisy, people.

I got a bad vibe from Sarah Palin. I got a bad vibe from her life choices because she reminded me of the cheerleader captain who was dating the quarterback, who's parents' had money and was used to getting everything handed to her on a silver platter, but would cut your throat if you so much as disagreed with her. I got a bad vibe because she professed "family values" while deciding that being vice president was more important than making sure her children - one of whom needs emotional support, another who has special needs - have BOTH parents around. (Oh, by the way, I would call any man who did the same a misogynist jerk, too - not that it matters.)

Well, folks, it looks like my bad vibe has been confirmed. Ask yourself this: what would happen if you elected the high school cheerleader captain mayor of your town? Are you cringing yet? If not, maybe you should be. You would sit by and watch as she rewarded all of her high school friends, and then punished anyone who so much as disagreed with her. You would see experts fired from their jobs and replaced with incompetents, and watch as real government fell apart.

Maybe I'm exaggerating. Maybe not all high school cheerleader-beauty queens are like that. But one thing is for sure, Sarah Palin is like that. You want evidence? Here's a five page NY Times article, full of incriminating evidence and examples of why Palin isn't fit for the PTA, let alone VP: Once Elected, Palin Hired Friends and Lashed Foes.

Just for good measure, here's a nice op-ed in The Nation, as well: Lipstick on a Wing Nut

Shameless promotion

2008-09-06T02:39:00.002-04:00

The book I was doing research on for Dr. Robin Broad and her husband, John Cavanagh (director of the Institute for Policy Studies) has finally been published. It's a short volume (ca. 100pp) tracking the rise and fall of the "Washington Consensus" and the rise of alternative development movements. It coud serve as a decent introduction to the field, or an interesting alternate perspective for those who have read Jeff Sachs or Tom Friedman.

If anyone is curious, you can get it from Amazon, or Barnes and Noble, or Borders, or Paradigm Press. If you're a Barnes and Noble member, it appears chepest, at $13.72. Otherwise, Paradigm press (the publisher) is cheapest at $14.41. The other two sites charge the full list price of $16.95.

Book opening is at Busboys and Poets (for those of you in DC), October 10th from 6-8pm.

Clean, Green, Driving Machines!

2008-09-06T02:15:00.002-04:00

Well, given the incredible amount of press "green technology" is receiving, I decided it's about time I started bookmarking some sites to see what's actually out there. After all, news articles, even from respected publications, can only tell you so much. I firmly believe that the news is no substitute for think tank policy briefings, academic journals, and scholarly books. Of these sources, the first are typically free and readily available. They also tend to be more recent and provide plenty of statistics - though academics tend to be better about in-depth analysis and careful, narrow interpretation of statistics.

In any case - I found a decent site on new car technology, called the Green Car Journal - main website is here: http://www.greencar.com/. The website doesn't have the best layout, but it does have a fair amount of information on different types of automobile technology and op-eds. It's not just PR for the auto companies, either - some of the experts are from places like Sierra Club, Oceans Futures, and Natural Resource Defense Council, among others.

Some interesting sub-pages include: (1) expert opinions, (2) Reviews of specific cars, (3) Historical perspectives on clean energy advancement, and (4) Directory of environmental auto manufacturers and organizations.

I haven't had a chance to check it all out, but so far it looks promising. Anyone interested in the topic would do well to take a look.

Later posts in this "miniseries" may include different think tanks approaches to environmental economics and foreign policy initiatives.

Sarah Palin: McCain Blunders Yet Again

2008-09-01T12:49:00.005-04:00

Well, I've been saying over, and over, and over again that McCain is the wrong choice, and just does not understand how to get elected. Part of it is his age, part of it is his lack of tech-savvy (or even proficiency) in the information age, but part of it is just plain disconnect and foolish mistakes. The most recent blunder falls into this last category - McCain clearly doesn't have a clue what he needs for his Vice President, just as he doesn't know what to say to become President. In many ways, its the same issue: McCain isn't sure where to stand to get the best advantage, so instead he is waffling and flip-flopping - both on issues, and in terms of political calculus.

Let's think about this for a minute. What was it that McCain needed in a VP pick? He's running on a platform of independent-minded conservatism and experience to lead. Obama has responded, rather effectively, by picking one of the most independent and experienced Democrats in the Senate: Joe Biden - a pick in many ways reminiscent of JFK-LBJ, except that Biden is also likable, in addition to being well-connected. McCain needs to pick amongst four goals, then: (a) consolidate his leadership experience to bring out the distinction, (b) reach across the aisle to disillusioned democrats/independents who consider Biden too left-leaning (he is a textbook democrat), (c) consolidate the conservative base-vote, especially in vulnerable "pink" states (e.g. GA, NC, perhaps VA), and/or (d) find a way to appeal to younger voters or women.

So who did McCain choose? He picks Sarah Palin, The forty-four year old, first term governor of Alaska (only in her 2nd year), who's only other political experience include being mayor and city councilmember of Wasilla, Alaska (population 5,500). Oh, she was also a TV sports reporter, and owns a commercial fishing business. She is opposed to McCain on the one major national in Alaska - ANWR drilling. She supports it, he opposes it.

Oh, did I mention, she also has a pregnant 17-year old daughter; and her youngest daughter (4 months) has Down's Syndrome. (Edit: A quick explanation about where this is going. I have a Down's syndrome uncle whom I love - but I also know that they require a lot of time and energy to raise, time and energy a high-powered politician doesn't have, especially the VP of the United States. The family troubles and emotions caused by adjusting to having a young, pregnant daughter and shotgun wedding pose a similar "life challenge" and take time, at least in the short term. As my comments below suggest, it seems a poor choice on Palin's part to become a VP candidate at this time.)

So, time for a quick analysis:

(a) The choice of Palin - an underqualified, inexperienced politician - would already have tanked McCain's chances at buttressing his experience advantage. That's before considering that Ms. Palin doesn't really have the time or energy (at this juncture) to play catch-up. Quite frankly, and at the risk of sounding insensitive, she has too many family distractions. Her daughter is 5 months pregnant, and will be having the baby the moment she gets to the White Hourse (if she does). The youngest, Trig, is 4 months old and has Down's Syndrome, which means she will have to devote a significant amount of time to raising the child - a luxury she cannot afford as VP. She is probably a very nice person, and Trig is probably a wonderful baby, but the fact of the matter is that mental handicaps take time and energy. To devote proper time to her family, she cannot be a high-powered politician. Even worse, what happens if McCain has a heart attack or some other illness? He isn't young, and now an overexerted and inexperienced VP is forced to take command. It makes me more than a bit worried.

(b) Palin is unlikely to reach accross the aisle, she runs on a textbook "family values"/social conservative platform and supports ANWR drilling - neither appeal to Democrats. She's also from Alaska, which is conceived of as out of touch with or different from the lower 48, for better or worse.

(c) If she's running on a conservative platfrom, isn't she likely to consolidate the base vote? Maybe, but I doubt it. Again, here we have the "skeletons in the closet" issue. She's young, for one, which doesn't appeal to a lot of skeptical conservatives, who prefer age and experience in national security matters. For another, just as damaging, her 17-year old daughter just had an out-of-wedlock child. They are marrying, but that is quite obviously a "shotgun" wedding - don't we often expect better of our leaders than ourselves? Perhaps she garners some pity, but pity doesn't win a presidential election.

(d) Finally, wouldn't the struggles of a younger, attractive (she's had pictures taken by Vogue), mother-figure appeal to younger and women voters, and help to contrast with McCain? Maybe, but again I doubt it. First of all, her obvious youth will serve to contrast McCain's equally obvious age. If that was the goal, a better option would have been to pick a mid-50s VP candidate who still remains "in touch" with the changing landscape - but doesn't create huge "contrast" worries. As far as women are concerned, maybe that will help a bit, but I think this is a superficial attempt that underestimates the intelligence (or at least cynicism) of the voting public. Do we really think John McCain has women's interests in mind, in the same sense Hillary did, just because he picks a female governor as his running mate? I doubt it, I think people are too skeptical for that. He might get some votes, but not enough to offset the weaknesses involved.

Instead, I think McCain would have been better playing to his strengths, and using them to draw out Obama's weaknesses - particularly given the Republican attack machine behind him. Someone like Joe Lieberman or Michael Bloomberg would have scared me as a VP candidate, because they would seriously buttress McCain's "experience" advantage, and both are "across-the-aisle" candidates with serious pull. Lieberman strengthens campaigning in Connecticut and probably guarantees Florida, though he weakens the conservative base vote (never McCain's strength). Bloomberg is somewhat liberal on social issues, but he spearheaded the post-9/11 economic turnaround in NYC - though recent wall street troubles would hurt him - he still would have a buttressing effect and might guarantee Florida. Perhaps another candidate with experience and judgment could be found - Romney, for example - who has economic and health care knowledge, ran a conservative social platform, and has some pull in NE.

Whoever he picked, another choice would almost certainly have been better than Sarah Palin. She undermines his strengths and does minimal work to buttress his weaknesses.

The Republican Media Machine...

2008-08-31T14:24:00.005-04:00

Here is an excellent article from The Guardian that lays out one major reason US politics is so out of whack with the rest of the western world. In a nutshell - we have an army of pundits with no respect for the truth or facts, who are paid to warp, spin, and twist anything they can into one-line misinformation. And they let them masquerade as journalists (or quasi-journalist talk-show hosts) while they do it.

One of my Scottish friends brought this to my attention - and expressed his incredulity as follows: "They let a JOURNALIST (not a politician or something) on CNN (which is the main, mainstream source of TV news in the US yeah) call a boring centrist politician like Obama a MARXIST? Do people get away with this kind of total nonesense regularly?"

In any case, here's the article: http://www.guardian.co.uk/world/2008/aug/31/uselections2008.barackobama

Biden the Ideal Choice for VP

2008-08-23T14:27:00.021-04:00

This morning I received a 3am phone call from the Obama campaign - well, actually it was a text message - informing me that Senator Joe Biden, of Delaware, is now Obama's VP candidate. I could not be happier. Heck, I've wanted this ticket since the first Democratic Primary debate 16 months ago. So, keeping in mind my bias here, lets explore why Senator Biden is a brilliant choice.

(1) Experience: This is the most obvious advantage from picking Biden. Biden is the senior senator from Delaware, in the senate since 1973. He is every bit the "elder statesman" and has served as chairman (and ranking minority member in Republican years) of arguably the two most important Senate committees - the Judiciary Committee from 1981-1995 and the Foreign Relations Committee from 1997-2007. His record on both committees is prestigious, though not spotless. On the judiciary committee, he presided over the defeat of Robert Bork, and narrowly bungled the nomination of Clarence Thomas. Biden was a long-standing advocate of intervention in the Balkans, which became a hallmark success of the Clinton administration.

(2) Derailing the "straight-talk express": This is another obvious benefit to picking Biden. McCain has built a reputation over the past decade as a Washington reformer, as someone above partisan politics, who speaks to the people. The irony of this is that McCain's current campaign shows serious signs of flip-flopping on his past record in an effort to win over moderate voters, and a frightewning lack of knowledge about vital issues - notably the economy and environment. However, if there is any senator with a reputation for "speaking truth to power" that can match John McCain's pre-election reputation, it is Biden. Biden is well-known for his straight-shooting, sometimes blunt assessments of a situation, and for a wise-cracking sense of humor very akin to McCain's in many ways. True, this has gotten Biden into trouble in the past, but it does ensure that his statements are taken seriously by the media - and Obama's ability to draw subtle distinctions in a reasonable tone should help to defuse any tension it generates. At the same time, it means that Biden will not hesitate to attack McCain's flip-flopping in this campaign, or point out, in no uncertain terms, how and why the two candidates differ - and why Obama is the better choice.

(3) Connecting with Middle America: Here is another aspect of Biden's persona that helps shore up Obama's perceived weaknesses (though I, for one, think this perception is short-sighted spin). Biden, the son of a car salesman (born in Scranton, PA), is the least wealthy member of the Senate, commutes to work daily on Amtrak (a 90-min train ride each way, I checked), did not go to an Ivy-league school (alma maters: U of Delaware and Syracuse University), is Irish Catholic, and exudes down-to-earth common sense. Biden is someone who, for all his time in Washington, understands how most of the country lives. Oh, and did I mention that his son (Delaware's Attorney General and a Captain in the National Guard) is deploying to Iraq in October?

(4) Ideological Blend - Reinforcing the Message of Change: This is a less obvious parallel, one somewhat obscured by the media and McCain's spin. After all, Biden has been in the Senate for thirty-five years. But the question is not "how long" Biden has been in politics, but "what has he done?" The goal of the campaign is to change divisive politics, but that cannot be done without working with those who are already in politics. Joe Biden knows the people in Washington and has worked with them, but he has always done so in the spirit of meaningful change. This is a man who grew up in the 1960s Civil Rights movement. This is a man who sponsored and pushed through the Violence Against Women Act. Biden fought to bring Slobodam Milosovic to justice, to support independence and democracy in the Balkans - not as a false pretense, but as a fundamental goal. Biden represents a man who has fought, within Washington, for the change platform that Obama is campaigning on.

(5) Personality Blend - Working together in Office: In some ways, this may be the most important aspect here. How well will these two individuals work together, if they are elected? I think the answer has to be, very well. On the one hand there are the obvious agreements - Biden is a progressive Democrat who wants to bring opportunity to the middle class, who opposes the neoconservative "black and white" foreign policy of the past eight years. On the other hand, there is Biden's combative personality and sharp sense of humor. These are two men who can banter back-and-forth and establish a sincere working rapport, and will agree on our general goals. But, even given this rapport, Biden will insist that his views be heard and is not afraid to tell Obama: "Mr. President, you're wrong."

In short, the selection of Joe Biden is nothing short of brilliant. There is a deep synergy between these two candidates, they represent a team that complements each others strengths while shoring up each other's weaknesses. Biden is the pragmatic veteran warrior of change the Obama campaign needs. Finally, this is a ticket that can bring hope to America.

Bolivia: Morales's Victory

2008-08-12T17:55:00.002-04:00

Here is an excellent article and analysis of Morales's decisive (62% of the vote), yet not overwhelming victory in the Bolivian referendum. He now has a clear mandate, but still has his work cut out for him in terms of land reform and nationalization, particularly in Santa Cruz (though he won over 40% of the vote there, surprisingly). The wealthy, predominantly white minority will continue to block moves by Morales to grant some measure of social progress and equity to the overwhelming, impoverished indigenous majority.

I'm not an expert on Bolivian politics, but suffice it to say claims that Morales is a "leftist" are overblown melodrama - yes, he favors state control over some aspects of the economy, especially natural resources and some financial services/heavy industry - but these are policies that have worked to generate government revenue and provided the impetus for industrialization in South Korea, Taiwan, Thailand, Indonesia, Malaysia, China, and India. For that matter, land reform was a key aspect of generating an agricultural surplus in South Korea, Taiwan, and China as well.

Private enterprise is all well and good, but there needs to be sufficient government capital to provide social programs (e.g. education and basic health care) and public infrastructure. There also needs to be some sense of equal property distribution, at least to the point where there is enough demand to generate local consumption and ensure a market for locally-produced goods. Latin American Gini coefficients typically range from 0.6-0.7, compared with Asian and European Gini's in the 0.3-0.45 range (lower = more equal). Capitalism doesn't work without the prerequisites for a market, even neoliberals recognize that, and public control of commodities and finance can be an effective way of jump-starting industrial development - as the East Asian Miracle has demonstrated. Privatization, whether or not we like it, frequently needs to come later on in the process. Sometimes, what seems a "lefist" policy in an American context is simply pragmatic policy in another context (especially a development context).

Food Aid, Security, and Production

2008-08-11T19:04:00.003-04:00

Here is an interesting article on food production patterns, development, and humanitarian food aid, courtesy of BBC: http://news.bbc.co.uk/2/hi/science/nature/7553958.stm. Just a brief commentary, below.

It's an interesting article, though it could be organized a little better (his metaphor with the second law is a bit forced). I think it should be pretty obvious that we should be using cash to purchase food locally to the greatest extent possible, so as to build local supply links - the problem is identifying the "greatest extent possible". At a certain point, either approach can radically distort supply/demand. Shipping in too much food gluts supply and creates informal markets for food aid, harming producers. By the same token, purchasing too much food decreases supply, and while it helps local producers with the surplus to sell (typically better-off anyway), it can spike the cost of purchasing food for consumers - even as some of that food is distributed to the "worst off". In a country where most of the population is fairly destitute, that can be a problem in itself.

My personal take is that these problems are really only solved by diversifying the labor base and moving up the value chain - which includes industrialization, though it would be nice if it was in a more eco-friendly and not debt-financed manner. That type of diversification is needed to generate the type of demand necessary for farmers to be financially sustainable - at least in the current environment. The rest is just an attempted band-aid on a structural problem: it can alleviate suffering, but doesn't address the root causes. Another thing that would be interesting to see is what would happen to global food chains if most/all countries were industrialized and diversified - would production diversify or become increasingly concentrated (probably depends on legal/political factors as much as economic, but still interesting).

Halifax Initiative

2008-08-06T12:43:00.001-04:00

Just a short post here - I recently discovered an extremely helpful source for progressive/alternative development information, through my work at the Bank Information Center. It's a Canadian coalition of civil-society organizations called the Halifax Initiative: http://www.halifaxinitiative.org/

McCain's Ignorance and Incompetance, revisited...

2008-07-23T12:22:00.002-04:00

About a week ago I posted about how, though I'm relatively happy with the two candidates this time around, I'm still somewhat frightened by McCain - his inability to understand basic economics, complete lack of familiarity with modern technology, and (perhaps worst) incompetence in choosing worthwhile advisers. This op-ed by Frank Rich at the New York Times makes much the same point, and is extremely thorough. Republicans, read at your own risk!

http://www.nytimes.com/2008/07/20/opinion/20rich.html

Defense Secretary Sounding Smart...

2008-07-22T14:36:00.004-04:00

Here is a surprising message from a US Defense Secretary - particularly one nominated by Bush. Its a shame that it wasn't the prevailing mindset for most of the past seven years...

http://www.cipcol.org/?p=638

Clean, Green, Gore...

2008-07-18T22:56:00.004-04:00

As many of you have heard, no doubt, Al Gore gave a speech on Wednesday calling for the US to set a goal of powering itself 100% on clean or renewable sources within ten years. I don't normally embed videos, but here is the speech, it's worth watching:

As far as my take on the speech, let me say that I'm extremely happy about Gore's analysis and presentation (although some of his language is still a bit erudite). If he gave a speech with this much passion eight years ago, he may have been elected president. At the same time, the cynical part of me wonders if bold rhetoric translates into change, or not being taken seriously. Given that this is Al Gore, I imagine he is difficult to dismiss, so the bold rhetoric is useful - so long as we understand that 100% of our energy will not be generated using non-carbon sources within ten years, especially if one includes coal in the mix.

However - this caveat does not mean that similar bold goals aren't attainable - for instance, reducing the vast majority of our dependence on oil as a resource, and triggering significant cuts in emissions and heavy metals over the next ten years. Here is a useful document from the Edison institute. The most telling section is page five - where there are pie charts giving our energy production breakdown.

Using this data, a few things become clear. First, reforming coal power is perhaps the single most important short-term reform in terms of emissions: 50% of our electricity comes from coal. Policies on the adoption of clean coal technologies need to be prioritized. Second, renewable energy sources are currently a paltry 9% of our energy portfolio (not including hydro power, which is severely handicapped by the location of potential sources, only 2.4% of our power is renewable). However, nuclear power currently accounts for almost 20% of our electricity generation - and thus represents a useful technology to be expanded (the french, for instance, rely primarily on nuclear power). Contrary to popular myth and fears, modern nuclear power plants are some of the safest, most cost-effective, and most reliable sources of electricity we have access to. They are not "three mile island, take two" waiting to happen. Investment in nuclear plants likewise represents an excellent, less infrastructure-intensive option to revamping our electrical grid. So - in terms of how we generate our electricity, a number of relatively simple approaches exist - approaches that don't displace whole industries (e.g. the coal industry - referenced in Gore's admission of the need for new jobs for coal miners).

Given the still-present efficiency hurdles in solar, geothermal, and wind power, we should think about some more readily achievable steps in reforming how we generate electricity - though this is not to suggest that fully renewable sources shouldn't be explored in greater detail. This seems to be particularly true since the same is not the case in terms of our oil dependency and transportation habits. Consider, for example, our vast foreign oil dependency - yet only 3% of our energy is produced with oil. What this means is that the oil dependency is a matter of our transportation habits far more than our energy generation habits (assuming we switch to clean coal and expand effectively). That is a far thornier problem requiring substantial investments in new technology, public transit infrastructure (inter-city and intra-city), urban planning, and transportation regulations.

Presidents, Knowledge, Worldview, and Age

2008-07-12T18:47:00.003-04:00

Now that the general election is upon us, let me say that I'm actually reasonably pleased with the two candidates we have. McCain is a moderate republican with a history of bipartisanship (something he should be emphasizing in this election more than he is, but that's another discussion), and Obama preaches a message of bridging differences and including republicans in his administration - a pragmatic, goal-focused approach that takes input from all comers (incidentally, this is why current positions aren't "backpedaling" - Barack's just shifting the emphasis to those positions he holds which are centrist, rather than his democratic policies - smart pragmatism and selective emphasis, but not flip-flopping).

Having said that I'm generally happy with the candidates, let me raise a brief point - I'm not sure whether this is attributable to age, political inclinations, length of time served in national office, general worldview, or overall education/intelligence... but one major reason that I prefer Obama to McCain is his flexibility and the fact that he seems much more "in touch" with the rapidly changing conditions of the world we live in (for a good recent piece from CEPR, see this link). On the one hand this is a domestic point - energy policy, economic policy, education policy, health policy, etc. all need to be addressed after eight years of relative neglect - and Obama has a fairly substantial understanding of economics (partly training from his international relations undergraduate, partly inherited ability from his father - a Harvard-trained economist from Kenya). There's also points here about the increasingly multi-cultural, multi-religious society we live in, but I'll leave that alone for now.

On the other hand, and perhaps more importantly, this is a significant foreign policy point. It's true that McCain has been around the block more than a few times on foreign policy. But we need to consider the context of most of his experience and how valuable it really is. For most of John McCain's life, and a significant portion (if not most) of his time in office, we lived in a Cold War paradigm, and foreign policy was dominated by a Cold War, superpower-focused, quasi-colonial mindset. Experience is valuable, yes, but it also shapes the way in which we think, and we can have trouble adapting as we age (I'm not saying this to be insulting, only as a fact of life to be considered). This depth of experience leaves McCain vulnerable to assessing current problems from a framework that is finally past its shelf life. Its arguable that the Cold war mindset was useful in the 1990s transition era, but the current players now are China, India, Brazil, Korea, Singapore, Taiwan, and Russia... and Russia is far from the most important.

Obama is young only by the standards of the presidency, by any other standard he is a middle-aged man (forty-six). He's not a starry-eyed youth, someone fresh out of grad school. Even more telling - his advisors are well-seasoned, flexible foreign policy experts who have been around the executive office for eight years... nearly all are Clinton veterans who guided us through a difficult transition decade with remarkable success. I have faith that these advisors can show similar flexibility, intelligence, and pragmatism again. But, put simply, I have my doubts about McCain.

It really is hard to teach an old dog new tricks.

Housing Bubble and Education

2008-07-12T18:25:00.003-04:00

Here's something so obvious, I can't believe I didn't think of it before. First: A question. What is the chief source of financing for public education in the United States? Answer: Local funding comes, by and large, from property taxes. Next question: what happens to property tax revenues when property values plunge after a real estate bubble bursts? You guessed it - revenues drop off fast, and with them, so do school budgets (barring unpopular tax rate increases, of course). Given the shortfall and more general need to make up the shortfall in local and state budgets - Mark Weisbrot at CEPR has a rather common-sense proposal to help make up the difference: start taxing sales from online vendors, who are currently exempt from sales taxes.

To forestall the obvious complaint that this could be an accounting nightmare for online vendors selling across the country - my answer is not more more so than for standard brick-and-mortar stores, particularly since UPC codes allow for individual product tracking, and most online vendors are large enough to handle the burden given that they already save on the cost of maintaining physical assets.

More generally, this is just a drop in the bucket compared to a much larger problem - why are we funding public education with property taxes in the first place? Given the inequality (even adjusted for Cost of Living) between property values (even within one county), and given the sheer importance of education as the bedrock of a society... does it really make sense to have the fuel for the system vary drastically by regions? I know there are legal (and arguably constitutional) issues in federal funding and standardization of education... but its about time we looked into the idea seriously. We consistently score at the bottom of the industrialized world in terms of education - and as other countries start to catch-up economically, we won't be able to count on our size to protect our economy (arguably, we already can't). That says nothing of the social, political, and lifestyle benefits of a well-educated population... though those are arguably even more important than the economic ones. Just some food for thought - I'm sure education will become a theme of this blog eventually.

Food Crisis: Root Causes and the Farm Bill

2008-05-21T13:49:00.005-04:00

The food crisis is, if you will pardon the pun, providing "fertile ground" for development articles. I would like to take the opportunity to share three excellent, recent articles on the issue, and how it relates to development as a whole. Each article helps to draw out how and why market imperfections and the international economic structure have "sown the seeds" of this crisis and are now bearing fruit (or a lack thereof, for most of the world).

(1) Walden Bello, "Manufacturing a Food Crisis," The Nation, May 15, 2008.

(2) K. Subramanian, "The Fund, Fed, and Finance Feed the Famine," The Hindu Business Line, May 16, 2008.

Both of these articles are excellent. Bello's article focuses on the role of the IMF and WTO in setting the stage for the current situation, while Subramanian's article provides a more general economic overview of how current speculation builds on the groundwork provided by Bello's piece. I should note that Walden Bello is one of the most respected scholars and public activists in development today - a native and professor from the Philippines and former director of Focus on the Global South.

(3) Martin Khor, "New US Farm Bill Will Anger the World," Malaysia Star, May 19, 2008.

One would think that we'd started to learn from our mistakes - especially given that even World Bank President Robert Zoellick is calling for reduced US agricultural subsidies and increased market access for Southern countries. Apparently not, as Khor, a Malaysian journalist, economist, WTO expert, and director of the Third World Network, explains.

Last week, both chambers of Congress passed the 2008 Farm Bill with more than a 2/3 majority, enough to override the President's threatened veto. For once, Khor and I agree with something that President Bush is doing - and, when he finally acts intelligently, the US Congress decides to be stupid en masse. The bill has two parts - one that is good, and one that is bad. First, it proposes $200 billion in domestic food aid. That's OK, and probably a good idea, since it helps those having trouble with grocery bills. But the remaining $89 billion in the bill is an expansion of US farm subsidies - without a cap on earnings. President Bush's main problem: it undermines out diplomacy and efforts in the WTO and doesn't restrict the benefits to smaller farmers. A quote from the article: "Bush had proposed limiting farm subsidies to those earning less than US$200,000 (RM643,180) a year. However, under the Farm Bill, even millionaires can receive the handouts."

Given the massive food prices and profits being earned by corporate agriculture in the inflated speculative market - do they really deserve the subsidies? Also, there's the fact that subsidies lower food prices in times of short supply, allowing farmers to lower prices in tight times for their business - the problem right now isn't that of a supply crunch, its one of manic-period market speculation causing a largely artificial price spike. Subsidies under those conditions will have minimal impact on actual market conditions, because they don't address the root cause of the price spike. So, we have $90 billion dollars of useless spending that only serves to prop up US corporate agriculture and anger the world even more.

The one time President Bush is actually thinking diplomatically, Congress goes behind his back and listens to the agriculture lobby. Well done, ladies and gentlemen.

The "Moderate White Woman"

2008-05-19T12:01:00.002-04:00

This is just a quick update regarding a post last week on VP speculation: Nick suggested in a comment that the "moderate white woman" could be Kathleen Sebelius, current Democratic Governor of Kansas in her second term. Two sources on her: Wikipedia page (includes some description of key decisions) and relevant articles from the Washington Post.

She looks to be a moderate, principled Democrat with midwestern appeal, and should represent a solid boost to Obama's campaign, particularly given 6 years experience as a state chief executive. Barring political necessities related to the nomination (e.g. Clinton, Edwards, or Richardson back-door deals regarding endorsements or superdelegate math), she would, as the Post argues, "further bolster Obama's strengths while not exacerbating his weaknesses."

World "Food" Crisis

2008-05-19T10:28:00.003-04:00

On my way to the metro this morning, I picked up a bagel and a full copy of the Washington Post. Normally, I just read the "Express" edition and get additional news online, but I felt generous today. I'm glad I did - I just found the best article on the current food crisis that I've seen in the mainstream press. The full article can be found here.

Perhaps the most fascinating part of this piece is an admission and supposed pressure on the US government by World Bank president Robert Zoellick. The section is worth quoting at length:

Last year, the World Bank commissioned an internal review of its agricultural programs in Africa, concluding that "over time, the importance of agriculture in the Bank's rural strategy has declined." The bank's Independent Evaluation Group noted that total international agricultural aid fell from $1.9 billion in 1981 to less than $1 billion by 2001, and that the bank cut its number of agricultural specialists for Africa from 40 to 17 over the past decade.

World Bank President Robert B. Zoellick has vowed to reverse the slide, proposing to boost annual lending for African agriculture from $450 million to $800 million. He has also pressed the United States, Japan and European governments to end agricultural subsidies that make it difficult for poor farmers to compete in global markets. "The world's agricultural trading system is stuck in the past," he said. "If ever there is a time to cut distorting agricultural subsidies and open markets for food imports, it must be now."

Zoellick has also called for reducing the sort of food donations favored by the United States. The World Food Program, which was established in the 1950s to distribute surplus U.S. and European food stocks, concedes that shipping too much food aid into poor countries can hurt local farmers, said Nancy Roman, the food program's director of policy planning. But the U.S. farmers and shipping companies that supply the WFP have resisted the change.

The WFP has already reduced its share of food donations -- known as "in-kind" aid -- to 50 percent of its overall giving, Roman said. In addition, the program has increased the portion of food it purchases in the developing world and is pressing states to give more cash than food.

These two measures, reducing US food subsidies and scaling back "in-kind" aid, are two of the three largest hurdles to working agricultural markets in the Global South. The reduction of subsidies, preferably codified and enforced by the WTO (although unilateral measures would be an OK second-best) provides needed market access to the agricultural sector in the South, and prevents cheap US and EU exports from crowding out small farmers in these countries. Reductions in in-kind aid, likewise, prevent massive food shipments from disrupting local food markets, allowing for a steadier, more predictable income stream to local, especially smaller, farmers. That is not to say that in-kind aid does not have a use, but it should be carefully targeted and managed to countries where agricultural markets are not working at all, and is perhaps best used in work-for-food programs - allowing for infrastructure development and cleanup efforts while helping mitigate the food crisis.

The final major hurdle is closely tied to these as well - it involves the reduction of monocropping and single-crop export strategies. In this context, the article makes one slight error in how it presents statistics relevant to World Bank lending. This erroris in not explaining the dates for the reduction in World Bank agricultural aid. The dates given are 1981-2001, and are significant for two reasons:

(1) 1981 marked a recognition by the Bank that its traditional agricultural extension programs and lending in the South had failed, largely because the Bank was promoting single-crop programs based on short-term market signals. The net result was that each program promoted a new "magic bullet" crop to local farmers, ended up flooding the market, and then depressed the price of the good to the extent that farmers were back in there original position - only, rather than growing foodstuffs, they now received a piddling income from non-edible/low food-value commercial exports (groundnuts, cotton, cut flowers, etc.). While the Bank has scaled back activities, it has also shifted its focus to diversification and agroprocessing initiatives. While I, along with many working in development, have gripes with Bank operations, these initiatives are aimed at reducing market volatility and adding value to current agricultural products, and represent a welcome phase-shift from the Bank.

(2) 1981 also represents the beginnings of the debt crisis in Latin America, which saw a shift in World Bank lending to backstop IMF structural adjustment policies. Such policies forced sudden, mass liberalization and scaling back of government spending on social programs, in order to bring macroeconomic stability. Leaving aside why structural adjustment's execution was (and remains) abysmal, the key notion here is that the shift was a necessary one (though the execution of that shift caused more harm than good) in the context of the fundamental shift in the global economic regime that occurred in the 1970s (removal of the gold standard, spiking oil prices, etc.).

The combination of these two factors explains why the Bank, an organization with substantial but nonetheless finite resources, underwent a phase shift in the amount and type of aid they give. The debt crisis of the 1980s and financial crises in the 1990s maintained impetus for structural adjustment through 1998, and the recent shift in more inclusive development mentality didn't really gain steam until 1999. Coupled with organizational inertia, the Bank is in the middle of a shift in mindset to approach new challenges caused by shifting international market structures.

Edwards for Obama : Time to Look for a VP?

2008-05-15T13:51:00.007-04:00

Now that I've given the bad news about Burma and how to help (see the post below), some good news is in order: John Edwards has endorsed Barack Obama. This is not entirely surprising, given the combination of Obama's delegate lead, Hillary's poor performance in Indiana, and pressure from the DNC for remaining superdelegates to choose sides.

However, it does mean that Obama has gained the support of three former rivals: Chris Dodd (senator from Connecticut), Bill Richardson (the Hispanic Governor of New Mexico), and John Edwards (former Senator from North Carolina and John Kerry's running-mate in 2004). Other than the two front-runners, Edwards and Richardson were the largest vote-getters (indeed, Edwards still managed to get 7% of the vote in West Virginia, even though he has dropped out of the race). It is also worth noting that Governor Richardson is a longtime Clinton supporter, yet endorsed Obama a while ago for ideological reasons.

Given Edwards and Richardson's expertise (trial lawyer and former diplomat, respectively), it seems likely that Edwards may be Attorney General and Richardson Secretary of State, should Obama be elected and they desire the positions. I know there has been a lot of speculation about whether either of these candidates should be VP - but my gut feeling is that they won't be. Here's why:

(1) Edwards has been the VP candidate before, and my guess is that he has some inkling how informal a role the VP plays. His skills point to AG, and there was some discussion right after he dropped out that Obama offered the AG position to him. Plus, while Edwards definitely wants change and appeals to blue-collar whites, he's also a very liberal candidate and may be less willing to compromise with business than Obama. Remember that his specialty as a trial lawyer is labor rights. One other issue to consider, though it may be seen as a minor factor, is that selecting a southern white male could increase the chances that Obama is the target of an assassination plot - after all, the VP succeeds him. We have come far since the 1960s in terms of racism - but there are still a lot of crazies out there. The assassination thing is probably an issue no matter who Obama picks as VP, so this may be minor, but it's still a factor to consider.

(2) Richardson, aside from being a skilled diplomat (was ambassador to the UN) and former cabinet official (he was Secretary of Energy), might be a slightly better option - in part because he could help Latino turnout for the Democrats, and prevent Republican inroads on "values" issues. However, he may also serve to alienate the voters Obama has trouble with - blue-collar whites, especially in swing states like PA, OH, and IN. Combine immigration attacks with the still-present misunderstandings about Obama's religion (many think he's a Muslim, despite the well-publicized scandals from Rev. Wright at Trinity) and racism... many voters might not be ready for that much "change".

My guess is that the best pick for him would be a moderate white woman, if one exists, whose name is not Hillary Clinton (can you say intra-administration stress?). Interesting note on that: such a choice, assuming Richardson is Secretary of State, would mean that the top four constitutional officials would all NOT be white men:
Obama - President
Moderate White Woman - VP
Nancy Pelosi - Speaker
Richardson - Sec. of State

Wouldn't that be something!

Myanmar: The Ongoing Fiasco

2008-05-15T13:19:00.003-04:00

Once again, I seem to be the harbinger of bad news - but one of the key reasons why aid workers, especially US aid workers, remain barred from Burma is that the junta is currently holding a "constitutional referendum" in "response" to the protests in September. The good news: Elections scheduled for 2010. The bad news: the document "guarantees a quarter of parliamentary seats to the military and bars from public office the detained leader of the country's pro-democracy movement, Aung San Suu Kyi" (see this article in the Guardian, and a second article in the UK Telegraph).

Oh, and did I forget to mention? Over 100,000 could be dead and 2.5 million remain without aid - according to the Red Cross and UN. Just as disturbing is the fact that, due to the Cyclone's timing, farmers in the Irrawaddy Delta may have missed the harvest and require aid to replenish seed, fish, and livestock destroyed by Nargis (see this article in the NY Times).

As devastating as this immediate situation is, let me make a suggestion: The Telegraph article above suggests a few large organizations to donate to (Oxfam, Save the Children, Christian Aid, etc.). These are all organizations that do good work, but they also have a large funding stream from major foundations and don't focus on Burma. If you really want to help this country, which is one of the saddest cases in development - a closed-off country in a region that has performed very well and seen significant improvement in the past twenty years - go to the US Campaign for Burma. They're a relatively small but effective NGO, and the main organization fighting for international action against the junta. I also know a number of people who have worked with them, and their founder is an American University alum.

Myanmar Mutilates Maverick McCain

2008-05-13T22:32:00.003-04:00

John McCain is the maverick of Washington! Indeed... apparently he's so much of a maverick that he hires lobbyists who support the Burmese military junta - a "government" soundly condemned by even the our own "selectively pro-democracy" foreign policy (in fact, the US is the #1 opponent of the Myanmar/Burmese junta). So, our favorite POW "war hero", the straight-shooter of the Republican party and supposed opponent of torture, hired advisers who actively lobby for governments with documented, atrocious human rights records.

Here's a little context: Perhaps the least of the Junta's sins is the continued detainment of Aung San Su Kyi - Burma's elected prime minister and Nobel Peace-Prize Laureate. The junta, in power for the past forty-six years (under multiple names - the most current is the "State Peace and Development Council"), has a long and colored history of violently oppressing the Burmese people. In just the past twelve months, two events are of note: The massacre of hundreds of Buddhist monks and thousands of pro-democracy demonstrators in the end of September, and the ongoing refusal to allow humanitarian aid workers to provide relief to its people in the aftermath of Cyclone Nargis (which has left over 60,000 dead - a total that continues to mount).

Of course, we have no way of knowing if Senator McCain was consciously aware of the less-than-savory ties among his advisers - but this incident, among some of McCain's more recent position "modifications", only serves to solidify the feeling that the good Senator may not be the straight-shooter he has worked so hard to be portrayed. Facing political reality is one thing, allowing pro-dictator lobbyists into your inner circle is quite another!

Hillary: Out for the Count

2008-05-12T16:50:00.003-04:00

It's not over until the fat lady sings - well, ladies and gentlemen, the fat lady has finally sung. In this case, the fat lady has a name: superdelegates.

That's right, as of earlier today, Barack Obama now leads Hillary Clinton in every category relevant to the democratic nomination: he has won more states, more delegates determined by the vote, a greater percentage of the popular vote, and now has gained even more superdelegates than the former first lady. Hillary's last hope - that of convincing enough superdelegates to her cause - appears to have abandoned her. For the full details of this latest development, see CNN.

This is not quite the landmark that the media makes it out to be, but it does represent the final nail in Hillary's electoral coffin. After being soundly defeated in North Carolina and barely squeaking by with an Indiana victory (demographics favored her, Chicago suburbs favored Obama), most papers were willing to ask Mrs. Clinton to take a reality check. Indeed, even the Economist, normally a paper to hedge its bets on political calculus, has called on Mrs. Clinton to give way to Obamamania.

The real question here is this: should any of us, after the first few contests following Super Tuesday, have been surprised? Of course not. The states have split almost exactly as they should have following Super Tuesday. Perhaps the only surprise has been that Obama performed as well as he did in large, white, working-class states (PA, OH, IN) while Clinton seemed unable to close within a 15-20% margin in most of Obama's states. Media commentary aside, any cold look at the numbers revealed this picture at the end of February - especially to those who watched John Fox's touch-screen presentations. The only thing that could have changed this picture would have been a major scandal and, contrary to what the media seems to think, one bombastic preacher does not a scandal make.

There are probably multiple reasons for Obama's victories - his obvious charisma and speaking ability; the fact that, by and large, he has remained graceful even under extreme pressure; and the "Clinton Dynasty" effect - most 18-30s are sick of having presidents in the same two families. I, for one, was born during Regan - but cannot remember a president not named Bush or Clinton. Lastly, and this may be contentious although the numbers support it, many Democrats are keenly aware that Mrs. Clinton probably would not carry the independent vote, especially against Mr. McCain. Indeed, Clinton might do the one thing McCain has trouble with: force the Republican base to vote in November. The name Clinton is still a loaded and often divisive one for the majority of Americans.

Obama, by contrast, is fresh and new - and also relatively young. He smacks of a cross between JFK and Woodrow Wilson, with an important caveat. While the idealism of JFK and Wilson led them to be a bit uncompromising (less noticeable for JFK, because LBJ was wheeling and dealing for him), Obama genuinely speaks of compromise and healing the rift in American politics. He wants us to talk to each other in a civilized fashion - and he leads by example. He is not only the best chance the Democrat's have of regaining the White House, but I - for one - will be glad to see him do it.

DC Public Transit: The Silver Line

2008-05-01T11:55:00.004-04:00

So - remember how I complained about the funding for a line to Dulles Airport being held up by the FTA? Apparently, they've finally seen good sense, and approved funding for the Silver Line to Tyson's Corner. For more on this one, I actually found an excellent blog called "Track Twenty-Nine" focusing on urban planning and public transit - run by a gentleman named Matt at U of Maryland. check it out here: http://tracktwentynine.blogspot.com/

The first three posts for April 30th are all worth a read - one is on Obama's stand on the new "repeal the gas tax for the summer" craze coming from McCain and Clinton. The other two are on the Silver Line.

I happen to agree with the general thrust behind his posts - although one of the serious problems for longer-distance transportation in the US is the lack of evenly distributed, high population density areas. Just look at a population map of the US and compare it to Europe. Of course, that doesn't mean we couldn't be doing much better than we are now...

Well, one change is better than none. I'd still really like to see the purple line.

DC Public Transportation: The Purple Line, Please?

2008-04-29T01:21:00.006-04:00

Normally, I post on international relations and development issues - because that's what I study. Today, I'm going to do something a little different - because I found a local issue that's really bugging me. So... welcome to the wonderful world of DC metro-area public transit.

Ever since I moved into the District, about 9 months ago, there have been two obvious oddities about our public transportation system:

First, look at the airports. Regan-National is on the yellow/blue line, and BWI receives regular bus service from greenbelt and MARC train service from Union Station. Yet Dulles, the "nice" airport - and probably the most international hub in DC - doesn't get convenient public transport service, despite being reasonably close to the metro area. And, in yet another brilliant maneuver by the federal government, Metro was just denied anticipated federal funding to expand a dedicated light rail line to Dulles airport. What was the reason? Because Metro doesn't have a dedicated revenue stream from the government - in fact, its the only subway system in the country to NOT have a dedicated stream for capital improvements and repair. So, we can't get special project funding because we don't have normal funding - behold the brilliant logic of federal bureaucrats!

Second, and the real point of this post, is that the DC metro is basically a "hub-and-spokes" model... without the hub. So, there are a number of excellent spokes to facilitate transport in and out of downtown, but nothing to help with travel that parallels the beltway. That requires knowledge of the bus system, which is nice, but also stops service much sooner than the metro on weekends and is very route-specific. So, the bus system is well-used, but somewhat inflexible and geared towards longer-term residents. What is missing is a loop around the outside in the suburbs - and the farther out on the system you go, the farther apart metro stations are, because the spokes diverge. For those who need a visual picture, check out this link. Essentially, to travel the "outer loop", you need to use the beltway or know the bus system and be willing to transfer buses. To be fair, I assumed the loop was missing because Maryland and Virginia didn't want to shoulder the costs originally (Note the added fun of Maryland-DC-Virginia cooperation needed for most of these projects).

Little did I know, until very recently, that plans have been bouncing around to close the Maryland half of this loop since at least 2003. The proposed "Purple Line" would be a light rail line connecting Bethesda, to Silver Spring, to College Park/U of Md, to New Carrollton - some of the most congested suburbs around DC. It would be clean, efficient, significantly improve traffic congestion at rush hour, and represent an entirely new public transit option for Maryland commuters - especially those who live and work in the suburbs, instead of downtown.

Well, leave it to special interests to mess things up, and politicians to come up with a brilliant idea hurting everyone but the special interest they want to please. The one "problem" with the purple line is that it would have to run through Columbia Country Club - home to all the wonderful elite of Chevy Chase. So, to appease the protests from club members, the town of Chevy Chase has proposed to replace the purple line with a new route for diesel buses. Ah, politics at its finest. We already have efficient, natural gas bus routes that are well-used... so rather than upgrade to a reliable and effective new metro line with more carrying capacity, why don't we go backwards and add one more bus route to be reserved for polluting and outdated buses. What inspired genius!

Wait - there's more! An interesting feature of the purple line is that it parallels the Maryland section of the capital crescent trail - a nice walking/biking trail going from the Potomac, out into Bethesda, and continuing on through Silver Spring and beyond. The capital crescent trail is an old rail trail - so this wasn't too odd of a proposal, since the route was already there and it would continue the original purpose of the trail. Now, for a significant part of the new bus route, the proposal suggests a two-lane bus only road that runs directly alongside the nice walking trail. To keep up with the carrying capacity of the purple line at rush hour - a bus, a diesel bus, would have to pass by every 30-45 seconds! What a nice atmosphere and wonderful way to show that, as part of the urban renewal programs in the nation's capital, we really are committed to reliable public transportation and city services!

If you want to know more, or find out how to complain or help, I suggest checking out the Montgomory County Action Committee for Transit. Their website for the purple line can be found here. Also, Maryland Governor O'Malley's e-mail is: governor@gov.state.md.us.

Crisis at the IMF?

2008-04-28T11:38:00.002-04:00

In the midst of the current food crisis in much of the developing world, the international financial institutions (i.e. the International Monetary Fund (IMF) and the World Bank) are trying to cast themselves as saviors of the developing world. Would that this were true - but the IFIs have never been the saving angels they see themselves to be. At best, the IMF exists to provide emergency budget and balance-of-payments support loans to beleaguered governments, and does so with minimal interference. At worst, the IMF attaches strict conditions to these loans, requiring developing countries to slash public expenditures targeted at poverty alleviation, liberalize volatile portfolio flows to countries without a well-developed banking sector, and helps banks negotiate full repayment on loans made to previous corrupt dictators (like Ferdinand Marcos in the Philippines, or Mobutu Sese Seku in Zaire (now the DRC)).

Fortunately, for all the talk from the IFIs following their semi-annual meetings earlier this month, the IMF is faced with a financial crisis of its own, and its influence is waning. When I was researching the Bank of the South last semester, I also sidetracked onto the IMF to see how their finances looked - and what is obvious is that nearly every country in South America has repaid the fund (with Argentina forcing creditors to accept only 30% of what they were owed, arguing against the fund's bad lending practices and conditionalities). In fact, countries across the globe are repaying the fund at an accelerated pace - even Turkey, which now holds around 40% of the IMF's portfolio, prompting The Economist to call it the "Turkish Monetary Fund." Regardless of the rhetoric, the decline of the international credit hierarchy and the clout of the IMF may end up being a welcome thing, so long as countries with viable and responsible governments retain access to sufficient credit to keep themselves afloat. None of this is to suggest that we are seeing the end of the IFIs, but their influence is, and will probably continue to be, significantly reduced.

A recent CEPR piece presents similar research and analysis in more detail, I highly recommend it.

India's Liberalization: Is it Helping Reduce Poverty?

2008-04-28T00:28:00.002-04:00

So, I've spent the past two weeks under a very large rock, and its name is India. Now, the curious thing about India is that - regardless of the fact that its the world's largest democracy, or the most diverse country in the world, or any number of other things - they only started getting attention in the past five years or so. The economic logic behind that is simple: In 1991, India started opening its economy in response to a financial crisis, beginning a gradual but fairly steady process of liberalization in trade and investment, which has sped up since 2001. So, given lag time, its probably unsurprising that in the past two years India has suddenly joined China as a hotspot of international attention - especially with regard to investing and strategic policy - how to deal with the Elephant's rise.

What hasn't been done enough is an assessment of what the Indian reforms mean to the overall picture within the country (Note, there is one exception, a 2002 study by Jean Dreze and Amartya Sen). Have they helped or have they hurt? After all, liberalization is something of a double-edged sword: if properly harnessed it can bring in needed resources, but if improperly managed, policies often become prey to corporate special interests and countries waste all their resources trying to attract more investment. I spent the past two weeks writing a paper trying to explain what effects liberalization has had on the economic, social, and environmental development for India. Below are a few conclusions.

(1) Economics: Liberalization has been a great boon to overall indicators of economic growth and macroeconomic stability. The Indian government is in a much better position financially than they were 15 years ago, and has begun to accumulate significant international clout. The question is how effective they have been at converting this to social development.

(2) Inequality: Official poverty reduction indicators show continued progress, but the rate hasn't really changed since the 1980s. Plus, the rural-urban inequality divide, and inequality in the country overall, increased by around 20% (Gini coefficient) in the 1990s, and other reports suggest it has continued to increase in the 2000s. Agricultural wages improved by 5% per year in the 1980s, but only 2.5% per year in the 1990s. 60% of India is employed in agriculture - so this is not a good sign.

(3) Health and Education: India's public spending also seems to be co-opted by larger business interests. For example: India spends 2.6% of GDP on health and education combined, yet in the 2000s, spending on IT service infrastructure increased from 3.6% to 6.1% of GDP. India actually spends less on public health, as a percentage of national income, than sub-Saharan Africa, the rest of South Asia, East Asia, North America, or Europe. Mortality and enrollment figures also show that improvements in education and health have stagnated during the post-reform period.

(4) Rural Poverty: Indian policies towards agriculture continue to be focused on providing subsidies and price supports to the wealthiest commercial farmers, hypothetically to ensure adequate foodgrain production. Yet the public food distribution system is overflowing with grain and unable or too corrupt to adequately distribute its surpluses - and year after year the system buys far more grain than is necessary. Yet most of the country continues to be undernourished. The government needs to expand work-for food programming, reduce price subsidies to give poor laborers (including many small farmers) access to cheaper food, target input subsidies to smaller farmers on a scaled basis, and provide agricultural extension services - but these reforms encounter well-connected and entrenched special interests from larger growers who have benefited from scaling-up and food processing in the 1990s (e.g Basmati rice exporters in Punjab).

(5) Environment: As might be expected, the industrial and commercial-farming nature of the Indian development model has had serious environmental repercussions - including overexploitation of groundwater; degradation of water quality from industrial waste, fertilizers, and pesticides; and air pollution in urban centers well in excess of WHO recommended safety limits. Mumbai is now the city with the fifth-most air pollution in the world - behind only the big 3 in China (Beijing, Shanghai, Tianjin) and Mexico City - not the most illustrious company!

In short, liberalization has flooded India with resources and new opportunities - but the government has been slow to adapt and harness those resources to promote socially and environmentally sustainable development (especially in rural areas).

I ended up suggesting the following general policies: (1) a shift in government expenditure from economic infrastructure towards expanded public health and education provisions, (2) convening a task force of experts in rural poverty to suggest how agricultural policy can be rationalized to target the improved welfare of marginal farmers and increased environmental sustainability, (3) enhancing and enforcing pollution laws and investing in clean technology promotion and public transport and (4) imposing targeted restrictions on the most volatile forms and sectors of foreign portfolio investment to guard against sudden capital flight (e.g. South Korea and Thailand in 1997-8).

The policies were intended to be a moderate, generally pragmatic framework to helping the government harness opportunities for its people. In any case, that's a "brief" summary of my life in the past two weeks. Thanks for reading :-).

Quick update

2008-04-27T23:21:00.003-04:00

Hey all,

Sorry I've been off for a while - I had a 40+ page paper due last week on India's economic liberalization and poverty reduction. Finals are wrapping up, so I should be back to posting regularly again soon.

On that note - I have a couple of ideas bouncing around for new posts - one is going to be a quick summary of my conclusions from the paper, the other a local DC discussion on public transportation.

Thanks for being patient.

Urban Legends and Heart Attack

2008-04-14T11:55:00.003-04:00

Apparently an e-mail has been going around discussing coughing as a way to survive a heart attack if you are alone. Below is a message from a hospital saying the e-mail is simply an urban legend:

Here is information off http://www.viahealth.org/body_rochester.cfm?id=329 REFUTING the recent URBAN LEGEND attributed to Rochester General Hospital/Via Health.

Important Notice: 'How to Survive a Heart Attack When Alone'

Hundreds of people around the country have been receiving an e-mail message entitled "How to Survive a Heart Attack When Alone." This article recommends a procedure to survive a heart attack in which the victim is advised to repeatedly cough at regular intervals until help arrives.

The source of information for this article was attributed to ViaHealth Rochester General Hospital. This article is being propagated on the Internet as individuals send it to friends and acquaintances - and then those recipients of the memo send it to their friends and acquaintances, and so on.

We can find no record that an article even resembling this was produced by Rochester General Hospital within the last 20 years. Furthermore, the medical information listed in the article can not be verified by current medical literature and is in no way condoned by this hospital’s medical staff. Also, both The Mended Hearts, Inc., a support organization for heart patients, and the American Heart Association have said that this information should not be forwarded or used by anyone.

Please help us combat the proliferation of this misinformation. We ask that you please send this e-mail to anyone who sent you the article, and please ask them to do the same.

Sincerely,

Rich Sensenbach
Web Development Coordinator
ViaHealth Rochester General Hospital
(585) 922-2124

US Fearmongering and Venezuela: The Saga Continues

2008-04-11T13:29:00.003-04:00

As I've mentioned before, the US government is notable for its somewhat imperialistic approach to Latin America. Even more remarkable is that the mainstream newsmedia tend to be implicit accomplices in anti-Latin American fearmongering, comparing "leftist" leaders with Fidel Castro when any connections are tenuous at best. Well, surprise, surprise... looks like we're at it again.

In the wake of last-month's standoff between Venezuela's Hugo Chavez and Colombia's Alvaro Uribe, over Uribe's unauthorized attack against FARC rebels based out of Ecuador (and over the express protests of Ecuadoran President Rafael Correa), it appears that even the standard label of "communist dictator" that the administration applies to President Chavez is now too tame. Instead, the administration now seeks to add Venezuela to a list of states accused of harboring terrorists, in this case based on rather scanty evidence taken from laptops confiscated by Colombian officials. Surprising, isn't it, that Colombian officials conveniently discovered incriminating evidence to aim at Venezuela so soon after a military showdown?

Although, it's probably even more unfortunate that, even after all the lies this administration has told us, we're still so willing to believe the standard line on Chavez.

Iraq: Surge, Costs, and Likely Results

2008-04-11T01:12:00.003-04:00

Below are two articles from Foreign Policy on the current and evolving situation in Iraq:

First is a brief interview with Nobel Prize-winning Columbia economist Joseph Stiglitz who tends to be worth listening to, particularly for the well-balanced liberal perspective. According to his modeling, the real costs of the war could be in excess of $3 trillion. He also gives brief comments on Bear Stearns and the limits of monetary policy in stabilizing the US economy.

Second is an analysis of the likely effects of the vaunted surge - or lack thereof. The general argument - that a "positive" scenario for Iraq's medium-term future looks like Nigeria, and a "negative" scenario looks like Somalia or Sudan (admittedly, with more oil) - is a well-taken recognition of fundamental economic, political, and social realities as they relate to Iraq's level of development. Indeed, General Petraeus deserves some credit for holding the situation together as well as he has, though no military tactics can really change these realities. I should say that the one thing that may have helped would have been the proper management of development projects (e.g. the electricity grids in Baghdad, etc) - a task that the administration has seriously bungled. Of course, even that may only have had minimal impact, who knows?

Our Troubled Economy

2008-04-02T19:25:00.009-04:00

The other day, one of my professors (an economist w/ the Dept. of the Interior) mentioned the media coverage around our current economic situation and suggested that we may be limited in what we can do about it right now. He also mentioned that most media analysis is incomplete, right now. Below is an attempt to piece together the causes of our current troubles based on his take and what I know from my political economy research (focusing on India/China right now, so somewhat applicable).

There seem to be four identifiable causes of our current economic woes. I have outlined these causes below along with problems regarding potential US actions to help the economy adjust.

(1) Spiking commodity prices - particularly in food (wheat and corn) and energy (oil prices), but also in other industrial commodities and heavy industry (steel prices have been gradually rising on balance for a few years now, for example, and other mined commodities like copper and zinc have shown similar price increases). Most of this is due to rising demand from China and India, with biodiesel production having some impact on the food markets. This has both slowed growth and driven increased inflation.

Problem: The devaluing dollar (see #2, below) means that some of these prices are only rising for the US, or rising by a substantially larger margin in the US than elsewhere. The reason is that many commodities (including oil) are dollar-denominated, so the falling dollar keeps prices lower in Europe, Canada, and Japan than they are here. These energy costs also spill over into other sectors (e.g. food costs from transportation) more in the US than abroad. Similarly, the US is still a net food exporter (though less than in the 1990s), so other countries also reap cheaper US food imports in their country - driving up demand for US agricultural goods and continuing to force prices up at home.

(2) Devaluing Dollar - the slumping dollar relative to the Euro, Yen, Pound Sterling, and Loonie (a good historic lookup tool can be found here) has been a long time in the making, as a result of sustained government efforts in the 80s to maintain a strong dollar coupled with a significant and mounting current account deficit sustained over many years (with a number of causes).

Problem: China, the country to which the US trade deficit is the largest, still habitually undervalues its currency relative to the dollar, as we are a major Chinese trade partner and China relies on export earnings to finance domestic industrial transformation. For many countries it would be difficult to keep this up as the dollar devalues, but the Chinese hold 22% of the world's total foreign exchange reserves and can continue to maintain this peg for a significant period of time. This may prolong the devaluation of the dollar relative to the other major currencies.

(3) Post-war Transition - much of the growth in the past few years has been stimulated by significant wartime deficit spending by the government. We are now entering a period of scaling back as a result of somewhat lower conflict in Iraq, and potentially scaling back the troops. The shift from wartime to peacetime triggers frictional unemployment because labor cannot always immediately transfer between activities (see the Bureau of Labor Statistics "Recent Months" output, I focused on 2003-8 and used the chart output, but data goes back to 1996). Notice that the unemployment rate reached a low right as the Democrats consolidated power in Congress and started taking action against the President's war spending (Mid-2006 to Early 2007).

Problem: The war cannot be sustained indefinitely, and wartime spending can trigger inflation anyway. However, there is a limit to what Congress can do to accelerate the process given the lack of cooperation between the White House and the Hill. We're unlikely to see expansions to unemployment insurance or increases in domestic social spending or investment initiatives until the next administration, whoever that ends up being, because of the animosity between Congress and the Executive. Plus, in the current deadlock, the government is strapped for the cash to send a significant stimulus package.

(4) Housing Bubble Burst - This has been in the news a lot lately - and is a combination of outdated regulatory frameworks, trends towards market speculation - especially in real estate (remember the Asian Crisis in 97-98 as an example - both the Thai and Korean real estate bubbles burst), and investors that were bamboozled by supposed "risk-diversification" instruments that were over-hyped at best (risk is part of investment, it doesn't go away just because a mortgage has been fragmented and repackaged with other mortgages). Predatory lending practices probably also played a role (though this is likely exaggerated and sensationalized in the media - it makes a good story). Similarly, the US tendency towards not saving and acquiring credit card debt makes consumers and homeowners more vulnerable, and expands the problems in credit/finance markets.

Problem: The Fed is starting to run out of options. Somewhere between a base interest rate of 1-2%, we hit a "liquidity trap" where fed funds reductions don't do much to stimulate the markets. The current Federal Funds rate is at 2.25%, which means the Fed has about 75 basis points of wiggle room. Beyond that, it can help negotiate bail-outs of major firms to rescue the system from collapse and buy up some of the subprime securities to reduce the risk of many investments in the financial system (it has started to do both). Even these last-ditch responses from an activist Fed will, in all likelihood, only have mild-moderate effect. The Japanese central bank tried similar moves during the 1990s but eventually was forced to wait out the recession as it was unable to rescue all the institutions needing bailouts (here there is a moral hazard question regarding how much the Fed should do to rescue sinking institutions, with some arguing the Japanese tried too many generous bail-outs). Given the historical perspective on similar crises, it's likely that the Fed's actions will only moderate the crisis somewhat.

So - I've tried to lay out the causes and challenges of the current crisis. It might be worth noting that (1) and (3) bear some similarity to Carter-era stagflation. (4) is similar to financial crises in the 1990s in Japan and then SE Asia (which spread to Russia, Mexico, Argentina, etc.). (2) is a more unique element, at least for the US, as far as I know - partly because of the hoarding of exchange reserves that happened in East Asia following the 1997-8 crisis.

The question then is what we can do about it - which is a complicated issue in itself, and I'm not going to try to answer it here, since most economists seem confused.

Raul Castro is not an idiot...

2008-04-01T13:49:00.003-04:00

Major newspapers today are reporting that the Cuban government is taking some fairly bold moves to re-orient itself and remove many of the more onerous restrictions the government had imposed over the years - including moves to give farmers greater autonomy over what is grown, allowing Cubans to use tourist facilities (for the few who can afford it), and allowing the sale of computers, cell phones, electric scooters, microwaves, and even car rentals.

Assuredly, the reception to such reforms will be lukewarm in the United States, but they may signal changing winds in Cuba - particularly since they come at a time when Cuba is not forced into these reforms and enjoys the support of many left-leaning leaders in Latin America. At the very least, these seemingly inconsequential reforms mean a great deal in the everyday life of ordinary Cubans. Raul Castro is not his brother, he's a pragmatic goal-oriented socialist, rather than the ideologue that Fidel is/was.

Abstinence-only sex ed and personal vs. public justification revisited

2008-03-28T17:38:00.004-04:00

Upon rereading my original post on abstinence-only sex education and whether or not it is justifiable as public policy, I realized that I may have seemed a bit muddled on a few things - or at least not crystal clear. So, below are a few clarifications. The original post can be found here.

First clarification: I do not deny anywhere that faith represents a form of knowledge and/or justification. In fact, the second half of part two of my original post addresses that form of knowledge. The argument is that such knowledge is inherently personal, not externally verifiable, and not transferable to a third party. The entire idea of listening with the heart, rather than the ears, seems premised on that fact and most mystic documents (including Christian mystics) confirm the indescribability of such experiences.

Second clarification: My point in part 3 is that there is a fundamental conflict between a freedom-promoting state (including religious protections) and forging a policy based on the beliefs of a portion of its members. Consequently, to argue that the Catholic values must drive state policy is to undermine the very justification of the representative state, and to implicitly argue in favor of a theocracy. You may wish to argue for a theocracy, which is a perfectly valid theological and philosophical position, albeit one that I disagree with - as have many Christians throughout history (Dante and Dino Compangi both spring to mind here). Furthermore, I think you would struggle to find a convincing justification of a theocratic state in the scriptures (although some justification is in Catholic tradition, beginning with Augustine).

Final clarification: Nothing that I outlined in the original e-mail is intended to argue that you or the church should curtail your actions in any way. The state is also philosophically prevented from ordering you to promote (or even provide) condoms in a religious institution/education program. The same should hold for Catholic schools, particularly those that do not receive funding from the state (I think, by and large, there are exceptions written into the laws and the courts have created space for this). Nor do I suggest that you stop trying to convert people - although I doubt that the public chastisement of others is the way most effective way to go about it. The state properly has no role in preventing such a discourse and should encourage such discussions to the greatest extent possible. One of the major, founding points of the modern state is to make it so that giving to Caesar does not conflict (or conflicts as little as possible) with giving to God.

Conclusion: In essence, all I am arguing is that the state is definitionally not Catholic (or Muslim, Protestant, Buddhist, Hindu, etc.). Thus, justification for public, state-run policies requires justification that is objectively verifiable. Faith-experience does not meet this criterion, as many of its own proponents admit. Thus, while it can provide personal justification (i.e. justification for all of my actions), it cannot provide public/state justification (in a non-theocracy). The argument is based on the epistemic sources of justification for both (1) Christian morality and (2) public policy in a pluralist state - and I find an inherent logical conflict/contradiction in merging the two. The consequence of my argument is that for public policy to be based on ANY theology, one must live in a theocracy - either de facto or de jure.

Jeremiah Wright: The Full Story

2008-03-27T21:04:00.003-04:00

You know - I find it interesting how the Media consistently spins things out of control, warping one-liners into their worst possible meaning. Below are the full speeches given by Rev. Dr. Jeremiah Wright, and I think people will see that the story is far more complicated than the media has made it out to be.

"America's chickens are coming home to roost!"

"God Damn America!"

Whether you agree with him or not, the points he makes are valid and deserve to be taken seriously, not to be presented as half-truths. And, whether you agree with Rev. Wright or not, you have to admit that he knows how to give a speech.

Abstinence-only sex ed

2008-03-22T22:16:00.009-04:00

So, there has been quite a little debate that a few of my friends are having about abstinence-only sex ed. One of them, a Catholic seminarian, posted an interesting piece on relativism vs. absolutism and the spiritual harm that promiscuity does to others as justification for the state. He also cited a few articles on how condom distribution has been less-than-effective in Africa. Below is my response (names removed):

---------

Dear _____,

You’ve managed to cast the debate as a dichotomy, a false dichotomy in this case. The question is not whether or not one bases a claim in a notion of philosophical anthropology, or whether a proper ontological perspective is lacking – rather, it is a question of which ontology is the correct one. Similarly, there are not simply two competing ontologies – one “relativistic” and the other “Christian” (although some comments can be taken that way). You implicitly accept this by addressing your comments to both relativism and hedonic utilitarianism at the same time. First and foremost, these are distinct philosophic positions, one holding that there is no truth or goodness, the other holding that the fundamental good is individual happiness which should be maximized (although obviously not made “perfect” or complete because of the limits of this world). Such a view is, at least, based on a conception that there is some similarity between humans regarding what they believe is good, and takes happiness and pleasure to be part of that similarity. There are problems with the view, and it is not one to which I subscribe, but to casually dismiss a valid philosophic position with a history that goes back to Epicurus shows a great deal of hubris (particularly to dismiss it with the same logic as you dismiss relativism).

There are really three questions at play here: (1) what is the ontological view you espouse, (2) how is that view justified, (3) how does the justification of that view apply to the current context (i.e. the regulation of social values and public education in modern society)? I use “modern society” so as to avoid the technical legal debates associated with the US Constitution. The answer to (1) is fairly straightforward, given that you are advocating for the Catholic worldview. Your ethical absolutism comes from the will of an infinitely powerful and wise creator God. That will is expressed and interpreted through the Word and the Spirit (which has expressed itself throughout history, giving rise to Tradition). (2) and (3) are more complicated, and I’ll try to address them in what follows.

With regards to (2), the justification of your ontology can come from two directions. The first is a conclusive proof of the existence of the Christian God and his moral tenets. This has been tried a number of times – Anselm (ontological), Aquinas (cosmological and teleological), and Pascal (pragmatic) are probably the most famous examples of attempted proofs. Each has been refined a number of times, but each has also met with potent objections. Anselm’s proof is most chiefly disputed by Kant and Russell’s arguments that existence is not a property (rather it is a quantifier), and as such cannot be analyzed a priori (propositions concerning existence are a posteriori propositions requiring direct evidence). To my knowledge, this objection has yet to be successfully refuted. Similarly, the cosmological and teleological proofs can, at best, show the existence of an architect or “first cause” of the universe – but cannot speak to the nature of that architect or cause. They may be able to prove the existence of some form of spiritual being, but not the existence of the Christian-specific God (again, see Kant on this). Finally, Pascal’s pragmatic proof makes no ontological claims, but simply argues that it is individually utility-maximizing to believe in God. Why? Because if I don’t believe and God does exist, I go to Hell (whereas if I do, I get Heaven). Similarly, if God does not exist, it makes not one whit of difference if I believe, because I get nothingness at the end either way. Pascal’s argument makes no claims about ontology, and really isn’t a proof in the classical sense. As such, it does not help the current debate.

Without conclusive philosophical proof of the Christian God’s existence, let alone scientific proof, we are left with option two: faith built on a personal relationship with God. While I will be the first to admit of the powerful effect that faith has on the individual, and while I wholly agree that faith can give personal knowledge of a loving God, there is a difficulty with the use of faith as a justification for any given ontology. The very nature of a faith-based experience, of a mystical experience, is that it is epistemically non-transferable (and potentially non-verifiable). Such experiences are personal encounters with the ineffable, and often manifest themselves in radically different ways. I have yet to meet a person who has not experienced such an encounter who can understand what it feels like, what it means. Nor have I met one who accepts that such experience comes from a non-psychological/neurological source. Thus, while such experiences may be powerful divine instruments in leading a person to faith, they are not an objective form of justification.

This brings us to (3): how do these forms of justification apply to regulation or social values in modern society? The only forms of potentially conclusive justification currently available for the existence of the Christian God (upon whom Christian morality depends), are subjective, non-verifiable, and non-transferable. Additionally, the context in which we find ourselves is a pluralistic one – culturally, religiously, and philosophically. In the absence of philosophic justification that is both conclusive and objective for the existence of God, we are left with the observable world and verifiable human similarities as the basis of our morality. It is similarly incumbent upon a representative state to give weight to the difference found within that society, and to limit itself so as not to infringe on our ability to express our opinions – in speech, press, or religion. Indeed, the creation of institutional frameworks to work out social compromises is part and parcel of liberal democratic regimes – with an eye to not only uphold the views of the majority, but also to protect the fundamental rights of the minority.

A liberal democratic state is limited both by purpose and design – and for good reason. Without such limitations and structures to facilitate compromise, the state has often become subject to the whims of those who would seek power for its own sake. While there are justifications to such power, as Augustine and Hobbes would be quick to point out, I think that history has shown authoritarian rule to be inferior to liberal democracy – for all the failings in liberal democracy. At the very least, their institutions allow for gradual change to take place as the social contract and the compromises inherent in such a contract change with the times.

In such a context, social regulations need to be based on verifiable social harm and a healthy skepticism towards what ethical pronouncements we can make. The modern state exists to provide a general framework of order and stability in society, to prevent obvious, egregious, and agreed upon violations of social norms. Given the lack of observable social harm, particularly in the face of the success of universal contraceptive provisioning at alleviating the earthly harms of such practices, the limitation of sexual education to abstinence-only is a decision that is beyond the reach of the modern state – just as requiring private religious schools to promote the use of contraceptives should be beyond the reach of the state (at least for programs that do not receive government funding, other cases may be more complex), and just as requiring that abstinence not be discussed should be beyond the scope of the state.

The promotion and state insurance of maximal-plausible real freedom (political, civil, and social) is not without cost, but we promote state intervention in the moral fabric of society at our own peril, particularly if such intervention flies in the face of proven results. It is not and should not be the place of the state to interfere in cases where morality is epistemologically uncertain. It is the role of the state to act upon what we, as a society, know. It is emphatically not the province of the state to act upon what one portion of its citizens believes. Personal justification may come through faith, but public justification cannot if it is to remain coherent and maintain the social contract (on this note, and on the need to step beyond individual perspective in politics more generally, I would suggest John Rawls’s A Theory of Justice).

Incidentally, on the articles you suggested in your comments regarding AIDS in Africa, I think you’ll find that the majority of scientific and development literature is against their arguments. It’s not that condoms don’t prevent AIDS transmission, nor do programs including their distribution increase the prevalence of HIV/AIDS due to enhanced promiscuity. What they may find is that it takes a while to overcome cultural hurdles towards their use, that high-risk groups are more likely to listen if provided with anti-retroviral treatment, and that it takes a while to scale up distribution programs until they are effective. These are all understandable points and underscore the need to include abstinence in any education program. The best and most proven method is to couple abstinence education with free and universal condom distribution, and anti-retroviral treatment for the disease. Abstinence is the safest way, but people will continue to have sex with a number of partners. Poor African men who move from location to location often cannot afford to move their families with them, and tend to seek companionship where each job is. Similarly, groups that advocate abstinence-only education to prostitutes with no other job skills are merely undermining the efforts of aid workers (although, to their credit, the articles do admit that). Once again, we need to be aware of the plural nature of these contexts and do what works best – which typically means tackling the problem from a number of angles. Development needs to be a holistic process to be done effectively.

Obama on Racism

2008-03-21T17:32:00.002-04:00

Below is the video of Barack Obama's recent speech on racism and Reverend Wright's comments. I think I will let the video speak for itself.

Chain Letters and Saudi Oil

2008-03-19T20:58:00.002-04:00

I always find it amusing when I get a chain letter proposing a wonderful solution to a social or political problem. The current fad seems to be getting off of Middle East and Venezuelan oil supplies. The typical solution basically says "boycott these companies who use middle eastern oil, and you will solve the problem." Unfortunately, boycotting specific companies on an inelastic good like oil won't work, even if we assume that the boycott works to start with. Here's why...

Basic economic logic says that if we all start buying from the companies suggested, they will see a sudden surge in demand leading to skyrocketing prices as they run up against supply constraints. One of two things then happen - either (a) boycotters notice that other companies (Mobil, Shell, etc) have much lower prices because they have seen less demand and switch back to them, or (b) Hess, BP, et al. purchase excess supply of oil from middle eastern sources to maintain enough supply to meet the increased demand. In either scenario, aggregate demand remains the same for oil, and given that the vast majority of oil reserves reside in OPEC countries, we will still be required to purchase from them in similar amounts (particularly since they underproduce to maintain high prices).

Always remember that firms respond to profit-incentives. Just because current suppliers are not from the middle east, doesn't mean that they won't shift to those suppliers if they need to. Investors will continue to demand profits, and corporate directors will continue to strive to provide those profits - even if it means buying Saudi oil. Profit incentives are hard to shake off in a liberal market economy.

Sovereign Wealth Funds and Democracy

2008-03-14T16:04:00.003-04:00

A pleasantly moderate article on the Sovereign Wealth Fund issue can be found here: http://www.opendemocracy.net/article/globalisation/global_politics/stolen_wealth_funds

It is worth noting that this issue is normally polarized along one of two lines: (a) non-transparent foreign wealth funds are evil and out to ruin the US economy or (b) wealth funds finally mean the south is less dependent on northern financial markets, which is a wonderful thing. I would usually tend to fall a little more into the "(b)" camp, but the wealth funds are typically found in OPEC countries and Singapore - not necessarily the most altruistic of governments towards other southern countries. Still, the variety of political agendas of those new significant shareholders could make development finance interesting in the coming years.

Emerging Markets, the Housing Crisis, and Decoupling

2008-03-14T15:48:00.004-04:00

The Economist is always a fun source for news, and this article is no exception: http://www.economist.com/displayStory.cfm?story_id=10808782&fsrc=RSS

Just a quick note on a potential problem with this analysis: The sampling and examples given are very China and India intensive. While it is true that China and India are home to about 2.5 billion people, and represent substantial emerging markets, the case for "decoupling" may be different in the rest of the developing world (some 120 countries in East Europe, Sub-Saharan Africa, South America, and other parts of Asia). The discussion of emerging economies it typically limited to around 15-20 countries - including China, India, S. Korea, Singapore, Hong Kong, Malaysia, Taiwan, Indonesia, Thailand, Brazil, Chile, and Turkey - but excluding most of Africa, South America, and East Europe.

What that means is that, on the face of things, those countries in the emerging markets category may be gradually decoupling from the global north, but other countries are still dependent on northern consumer markets for their exports and financial markets to fund their governments. Some of these countries may be indirectly insulated by the decoupling of emerging markets to a certain extent (Chinese aid to Africa is on the rise, and much of South America is pushing for increased regional integration to limit dependence on the US market), but many countries in the global south are still primarily dependent on the US and the EU for their continued growth (Especially East Europe, Central America, Mexico, and most of Africa). Furthermore, much of the "decoupling" tends to occur in resource-extraction industries, rather than agriculture. Consider, for example, that 70% of Indians are still employed in small-scale agriculture and informal rural activities.

Selective Accountability in the Media

2008-03-14T15:33:00.003-04:00

Here is an interesting article on AlterNet, courtesy of Mark Weisbrot at CEPR: http://www.alternet.org/columnists/story/79465/

While a lot of times the anti-media discussion is spurred on by people with an agenda (and Mr. Weisbrot is no exception, at least on Venezuela), the general point that the mainstream media should be home to a much larger variety of perspectives is well taken. Furthermore, the depth of reporting needs to be improved in many cases, as reporters frequently make statements without substantial evidential support and without presenting the opposing view. It is one thing to have an opinion (e.g. the Economist), it is another thing to implicitly bias an article through word choice and unsubstantiated opinion, especially when the journalist reporting is not an expert in the field (as Mr. Weisbrot points out with Iraq and the Housing Market).

Unfortunately, it seems (to me at least) unlikely that there will be much competition with the mainstream media until the current net-savvy generation is in their middle age (blog searches and net-magazines need to be used on a large scale - and that requires knowledge that they are out there - much more prevalent among the youth today).

Correa and Chávez toe-to-toe with Úribe

2008-03-04T23:52:00.001-05:00

To read most media accounts of the tensions building between Venezuela/Ecuador and Colombia, one would think that Correa and Chávez are vastly overreacting to a perfectly legitimate Colombian strike against an established terrorist organization (the FARC). Most media outlets are providing minimal background information on the unfolding events, and couching their articles in the standard line on Chávez – that Hugo is a bombastic socialist quasi-dictator out to overthrow America, this time through supporting leftist rebels in Colombia. Yet, while mobilizing the troops and sending 10 tank battalions to the Colombian border might be a bit over the top (Chávez is nothing if not emphatic in making a point), this is not a sudden, wholly unexpected event. In fact, tensions between Colombia and Venezuela have been building since November.

The reason for these tensions is not, as the media would suggest, because of Chávez’s support of the FARC, but rather it is due to the collapse of a hostage negotiation, largely the result of unbending militancy on the part of Úribe. A thorough report of the hostage issue and its current effects (from a main-stream media source) can be found here. The basic gist of things is that Úribe asked Chávez to help negotiate a hostage release by FARC. As the deal was almost closed (this past November), Úribe then removed Chávez from his role as mediator and, now that he had located the rebels, proceeded to mobilize forces in the region for an apparent military strike… which understandably drove the FARC contingent into hiding and jeopardized the hostage deal. While FARC did release some hostages in January and February (thanks in part to President Chávez), Venezuela was understandably irked by Colombia’s fickleness during the negotiations. Coupled with their ideological differences and what Correa and Chávez both view as Colombia’s tendency to act as an American “puppet state” in the region, the mobilization may be a bit extreme, but it is at least somewhat understandable.

As a general note, I would suggest the Center for Economic and Policy Research as a good news source for the alternate view on

Venezuela

(and left-leaning governments in Latin America more generally). This report on the Venezuelan economy is particularly interesting.

First Post/Introduction

2008-03-03T23:08:00.000-05:00

Howdy all,

This is my new blog (obviously). Mostly I've created this to give me a place to post my thoughts on politics, philosophy, and maybe even some stuff on food. Hopefully the posts will be thought-provoking, and I will try to include a variety of concerns when I discuss something - to "paint a picture" of what is going on, so to speak. The general idea is that the more people consider and think about what is going on... the more confused they should be, because life is genuinely complicated and there are shades of gray.

I welcome comments, so long as they remain respectful and no one starts any flame-wars. The whole point of blogs is to get a genuine discussion started, after all. In any case, I hope you enjoy.

-Sean