They Have Spoken

Two recent articles, in Foreign Affairs and HBR, feature the views of two Harvard professors about the road ahead.  I commented on each one of them, and conclude here that the kind of intellectual leadership that has brought us where we are, through 2008, is alive and well.  Have a look for yourself, and draw your own conclusions!

The Future of American Power
Dominance and Decline in Perspective
Joseph S. Nye Jr.
Summary: It is currently fashionable to predict a decline in the United States' power. But the United States is not in absolute decline, and in relative terms, there is a reasonable probability that it will remain more powerful than any other state in the coming decades.
JOSEPH S. NYE, JR., is University Distinguished Service Professor at Harvard University. Parts of this essay are drawn from his forthcoming book, The Future of Power (PublicAffairs, 2011).

Yes, our perceptions about the future have gone up and down through our history, yet people's lives went also up and down unless they counted themselves among the lucky/Ivied. Each time our common fortune went up, it followed some long period of pain and was the result of some major transformation.

Professor Nye doesn't say a word about the type of transformation ahead. He talks generalities and quotes selectively in support of his argument. For example, he counts us as leaders in biosciences, but then why doesn't he look at the flip-side, to the requirement for this? A lousy and expensive medical system whose results are half as good, for twice the money, as in other developed economies. Surely, the argument could be extended to his dear universities--compare $50k to quasi-free in annual college tuition. Oh, his list of where we are #1 is almost comprehensive, for if he added military and financial innovation, the list would have been complete.

What do these observations make me think?

1) That our being #1 cannot be sustainable under status qvo, even in a reduced number of areas. Indeed, for example, an overburdened and socially under-performing medical system cannot be counted on to keep going forever.  The author's prescriptions amount to folklore. 
2) That Professor Nye may be, well, a bit out of touch. I guess, they don't call some the Boston Brahmin for nothing...

No, China won't go up and higher forever; Yet, a question lost on the author is, How big China's economy needs to be to turn it into a challenger? Going into GDP or per capita comparisons is not as relevant as the author makes it sound. Switzerland may get higher grades on many dimensions, yet it is hardly a menace for the US.

Nor will we reach the bottom in free fall. More likely to happen is a world choosing between our type of capitalism and state-capitalism. If we overcome the political gridlock (à la Fallows/Nye), the two types of capitalism will converge. Meanwhile, texts like this are meant to put the middle class to sleep.

The Big Idea: Creating Shared Value
by Michael E. Porter and Mark R. Kramer
The capitalist system is under siege. In recent years business increasingly has been viewed as a major cause of social, environmental, and economic problems. Companies are widely perceived to be prospering at the expense of the broader community.

Alas, this has been written by:

* E. Porter is the Bishop William Lawrence University Professor at Harvard University. He is a frequent contributor to Harvard Business Review and a six-time McKinsey Award winner.
* R. Kramer cofounded FSG, a global social impact consulting firm, with Professor Porter and is its managing director. He is also a senior fellow of the CSR initiative at Harvard’s Kennedy School of Government.

For the reader skeptical of my comment, let me quote from the article:

"Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center. We believe that it can give rise to the next major transformation of business thinking."

How many times has it been that we've heard such calls? Each time, they are similarly worded and meant to supplant government responsibility&action for a clean environment, sustainable societies and so on.

Now, allow me to state what the problem is with this: I have little control over how businesses operate, for they are subject to their institutional imperative of making short-term money. Arguably, the government is responsible to me. Do you see the problem? I can do little to nothing to influence business, I can vote every electoral cycle to keep the government honest. For those countering that we vote for business everyday with our wallet, I'd say, not anymore when you are in debt and/or the business in question is a monopoly. Moreover, if the behavioral requirement is not normative, as in a law subjecting all players to the same constraint, there will always be businesses trying to get advantage of not respecting otherwise self-generated social objectives.

So, the rule must be the same for all businesses, and the enforcer should be from the sphere of government/society, not businesses themselves.


Yes, I know, we don't do government, lest someone calls us socialist, but then why all the talk about business-this and business-that?  To pacify us while waiting for the next bubble?  If so, why not stop sucking on the damn rubber?

covering mirrors

The 2nd installment of wikileaks, Cablegate, has been partially released, as in 1/000.

The story behind the whole data-spill seems to have been initiated by Bradley Manning, 22, one of those we like to cheer about in terms such as our brave men and women serving in harm's way. Until he was locked up in solitary confinement, Manning used to be an intelligence analyst with the Army, outside Baghdad. In his own words, the facts were: "I would come in with music on a CD-RW labeled with something like 'Lady Gaga' … erase the music … then write a compressed split file. No one suspected a thing ... [I] listened and lip-synched to Lady Gaga's Telephone while exfiltrating possibly the largest data spillage in American history." He said that he "had unprecedented access to classified networks 14 hours a day 7 days a week for 8+ months." He even anticipated some reactions, "Hillary Clinton and several thousand diplomats around the world are going to have a heart attack when they wake up one morning and find an entire repository of classified foreign policy is available, in searchable format, to the public ... Everywhere there's a US post, there's a diplomatic scandal that will be revealed. Worldwide anarchy in CSV format ... It's beautiful, and horrifying." Stated motivation: "Information should be free. It belongs in the public domain."

Now, how symptomatic is this for the state of our empire, er, nation? Did we need a 22-year old to come and show how ugly empire is? Below are what can be two answers:

Monsey, NY

This is what I call treason!
Recommended by NYTimes 237 Readers

New York

To Commenter #4, [Dovid] I'd say, No, compiling and releasing documents, 'none of which was marked top secret,' is not treason, it's democracy in action.

For a truly treasonous act, see the outing of an undercover CIA operative, Valerie Plame, who had worked for years setting up very successful false operation directed at uncovering 'weapons of mass destruction.' Her husband told the truth about the lies being that would justify getting into war, lies told by very powerful and deeply unpatriotic war profiteers, and she was 'outed' in revenge. She--and our country--continue to pay the price; the war profiteers continue to go free.
Recommended by 371 NYTimes Readers (highest number of recommendations)

I'd posit that running a large and complex system like the US, implies effective and efficient control mechanisms.  Effective as in get the job done, efficient as is make those controlled do the control themselves.  Efficiency comes wrapped in all the talk about our being a nation of laws, fighting for human rights and justice for all.  So, is it that a smart young man, driven by patriotism, enlists with the Army, yet his self-control breaks when he gets deployed and sees our relations with the world out there being so different from what we espouse at home?  

From a slightly different angle, let's review all the above from a 1992-perspective in Hollywood, a year after the official demise of the USSR due to our upholding higher values. You'll recognize Colonel Nathan R. Jessep, from 'A Few Good Man' in the You Can't Handle the Truth-moment.


To each his own, but considering the mounting problems we face, both internally and internationally, I'm afraid that not wanting to know the truth is akin to covering mirrors in the house after someone died.  It may be efficient but hardly effective.  

12/12/2010 Update
Whatever one may think of Bradley Manning, who took an oath when joined the Military, the situation with Julian Assange is a whole different matter.  Being on offensive will erode our standing, it's about principle not about any one individual.  We should accept OUR mistake(s), e.g. of not setting up proper systems, and leave Assange in peace. The earlier we do this, the less painful for all involved. This is neither the way to set an example, nor the type of example you want to set.

A Lincoln or Roosevelt moment?

The latest elections were remarkable for lacking surprise, no wonder many don't bother to vote!

The democratic machinery may be a little overrated to take us out of the many-decades-in-the-making slump. Somehow, the voters are still to figure this out, for this being one among the few dramatic swings, which otherwise would take several electoral cycles to happen, which shows that people still think they control the machinery by playing with a fake knob. Not to forget the enlightened skeptics, who may or may not vote, they think not much can be done anyway since the system is complex, as in don't bother to learn anything about it with the idea of improving. They hope, yet pass it for thinking, that somehow whatever it is they have been doing would keep them in their positions, while the world turns upside down round them. Of course, you recognize their ivory towers as skewers for the meat and vegetables exposed to the flame.

To return to major political/electoral swings, the one before was when we thought Obama and Democratic majorities would go for change. I guess, the 2010 swing is to appease the folk on the right, whereas the one before, in 2008, was to appease the left after 8 too many years of aggravation under Bush the lesser.

That we are going for a gamble has become obvious. It is not so clear how things will go from here. Internally, everybody is going to take a hit on everything they hold in cash--see the $600Bn as fuel for inflation eroding cash and confidence. Another way change will be effected internally is by virtue of the recommendations of the Obama's bipartisan debt-reduction commission.
"Cap revenue at or below 21% of G.D.P.”
“Lower Rates”
“Reduce the Deficit”

I read these to mean, status qvo on taxes and cut spending! The conservative approach towards taxes is to keep the elites happy, cutting the federal budget to size is to say 'swim or sink!' to the rest. The risk here is for the most people to perceive that budget cuts are somewhat unjust. If the twin issue of taxes & budget splits the electorate along the same line, I am afraid, it's time we reckon a Lincoln or Roosevelt moment in our nation.

But then again, we may also have war. No, it's not about Bush's open wars. For one, it could be economic war. The other countries are probably running through their options after the recent G20 in Seoul. Nobody wants to give up an inch, make it centimeter, or at least not in the open. If the Chinese-American relation gets rebalanced anew round an exchange rate, chances are that conflict is postponed. Otherwise, it's maybe wise to stock up on some trinkets; of course, I'm joking.

For another variant on the last point, brush up on your pre-1914 history. A good place to start may be here: Is globalization enough carrot...

Thoughts on stimulus
To break the deadlock we need a plan before we need more money

There is an economic school of thought in the U.S. that is advocating for more and earlier stimulus as a way to revive the economy.  This school has in Paul Krugman its most vocal supporter, and claims no less than Keynesian roots/legitimacy.

I employed "claims" instead of a more categorical verb, for a couple of reasons.  On the one hand, Keynes was much more aware of context whenever he made a recommendation than the scores of economists who followed him in all but spirit.  On the other hand, Krugman offers NO mechanism by which yet another money supply can stimulate anything except for a bigger bubble.

Given that Krugman, no less than Nobel laureate for economy, has been calling for a bigger stimulus for about 2 years, at least once a week in his NYtimes editorials,  I decided to comment on one of his recent pieces.  Here it is:
Krugman keeps talking about stimulus, yet what could a stimulus have done other than reignite another consumption-fueled bubble? And this could be so only if outsiders kept buying US paper.

We should have started rebuilding the country in 2000, yet we cut taxes, started a war on terror, and invaded Iraq in 2003. Bush should have signed Kyoto so the de-industrialization of America could have slowed down. Except that a future Nobel laureate economist was still praising trade liberalization, without concern for the unaccounted negative externalities associated with cheap imports. What was the middle American doing? Playing at the hands of the Government (Bush, Greenspan, Bernake), rating agencies, investment banks, and media&intellectual elites. Anyone still remembers the Republican Congress dealing with such important matters as doping in professional sports in June 2004? The public discourse had been about redoing the desert sands into oases of this and that while the bubbles in housing, defense, banking, healthcare and education (at all levels) were inflating.

At personal level, we should look at lowering expectations and increasing commitments. And, to avoid social collapse, let's make sure everybody puts skin in this game proportionate with their standing. People will mobilize to levels long-unseen if the burden of reinventing America is spread across, in a general climate of fairness. Treating us like responsible adults would be a good place to start. We did it, we'll do it again, just try us! 
Being treated like adults is a right we gave up long time ago, just see how the other guys keep pushing non-issues such as the Ground Zero Mosque(-rade).  Krugman, as if to appease a bunch of kids, is thinking short term and the reason for people like him to ask for stimulus, without a plan to spend it that would actually rebuild our economy, is his complete pessimism and/or his distance from the real economy.  The real economy is yet to find a way to move one car 1 mile with Twitter, yet that would be one of the more valuable pieces of American innovation in the last decade.

As a study in contrasts, consider how the Germans have approached their crisis. After 2 years of almost ignored calls for dumping money into banks, the Germans are rebuilding their post WWII cities:
Photo Gallery:A New City Quarter for Hamburg
Living with Sin: Germany Comes to Terms with its Ugliest Buildings (08/20/2010)
SPIEGEL Interview with Architect Christoph Ingenhoven: 'Modernism Is an Attitude, Not a Style' (08/13/2010)
Out of the Ashes: A New Look at Germany's Postwar Reconstruction (08/10/2010)
Interview with Architect Albert Speer: 'Calamity of Postwar Construction Came from Rejecting History' (08/11/2010)
The Germans, sometimes more capitalist than the US, have not fallen for the services economy, or the sanctity of the self-regulating market. They take their time to understand the consequences of their actions, and that goes even for their relation with China.

What are the Germans doing, do their cities need a makeover? Be it as it may; I think the Germans are investing in quality, for what else can you do in advanced capitalist economies?  Just as I called it in 2008, Encourage quality.  And we should say, there is a lot of unmet demand for quality in the US.  Unless you are, say, in some northeastern American state going through the annual ritual of re-paving the same traffic-jammed highways.

In closing, let's admit that what passes for stimulus has been of little consequence for the real economy.  It was meant to slow down the fall and give the decision makers some time.  From that perspective it was a qualified success.  A bigger stimulus could only have bought us more time, yet we also needed to signal fiscal responsibility/toughness to our partners.  Bernake has just told us that he is willing to move a lot of money from one pocket to the other.  I wonder who's going to be caught holding a mountain of paper in their hands.  To break the deadlock we need a plan before we need more money.

Break in reason vs. Rational narrative props

Here's a recent quote from the Nobel laureate economist Paul Krugman:
Appeasing the Bond Gods
As I look at what passes for responsible economic policy these days, there’s an analogy that keeps passing through my mind. I know it’s over the top, but here it is anyway: the policy elite — central bankers, finance ministers, politicians who pose as defenders of fiscal virtue — are acting like the priests of some ancient cult, demanding that we engage in human sacrifices to appease the anger of invisible gods.
In this case, the invisible gods are bond merchants, those who move lots of pension/insurance money into lower yield and risk investment vehicles. Given our reliance on reason, at least at every official narrative level, is a moment like this a wake-up call? A call for a return to the whole man, as in the Vitruvian Man's mix of art and science?  In our quest to build a better society, by emphasizing the rational, have we come to a point where reason breaks, or reason-based narratives are proven to be just the clever backdrop against which the unabated drama of our human condition goes on?

Let the professional left eat cake!
symptom of a 1-term president

"I hear these people saying he’s like George Bush. Those people ought to be drug tested," Gibbs said. "I mean, it's crazy."

The press secretary dismissed the “professional left” in terms very similar to those used by their opponents on the ideological right, saying, "They will be satisfied when we have Canadian healthcare and we’ve eliminated the Pentagon. That’s not reality."

Of those who complain that Obama caved to centrists on issues such as healthcare reform, Gibbs said: “They wouldn’t be satisfied if Dennis Kucinich was president."

Without psychoanalyzing Gibbs, I take it that we have no chance for change.  Obama's middle name could be status qvo, just as well.  By 2012 one can say, Der Mohr hat seine Schuldigkeit getan, der Mohr kann gehen.   Moreover, by the time we are ready to inflate another bubble the Chinese may well be #1.

Speaking of bubbles, a very real one is in education, where the situation is just as in healthcare, even including the need for a national system* similar to a single payer.  Local budgets being already bankrupt and universities being so expensive relative to the earning power of their graduates, turn education into a luxury item.   Besides costs, the other taboo in education is the quality of the graduates relative to the needs of an economy that is competitive beyond Twitter or American Idol--just ask the executives at Intel or Microsoft.  We have run for so long an economy that functionally distorts education that even if we were able to correct the situation today, we'd still be 20 years away from the results.  It was also with this second taboo in mind that, at one point in time, I pledged for turning the US universities in the 21st Century Ellis Island.  Obama is considering instead the legalization of the millions of illegal low-skills/intensive laborers when a work permit, if anything less than repatriation, would be the way.  So, between the pressures coming from 3rd world low wages and illegal immigrants, and considering the disappearance of the school as a leveling social force, we'll converge quietly to a low station.  Will polarization be internalized or tear us apart?

Why is education important in any revival scheme?  To match human potential with the needs of the world.  How responsible is Obama?  At certain level, no more than any individual who's put up with made-up stories about better education for several decades now.  Oh well, we really have a chance to see how feedback works in capitalism, won't we?

* For those objecting on principle about the idea of a national education system, consider that many a school superintendent makes probably just as much as the secretary of education in a country like France.  If that's not enough, consider also the billion dollar industries round testing and textbooks.

Good summary from blogosphere

The Truth About the Bailout

There’s so much information (not to mention “information”) about the big banks, the Bailout regime, and the financialized economy the banks and government constructed and now use as the vehicle of tyranny.

How to process it all? How to separate the good information from the bad, the useful from the pointless, the truth from the lies? How to weaponize each idea, anecdote, and piece of data?

Here’s a list of criteria which are true and, I think, useful.

1. The big banks caused the crash. They hold the overwhelming responsibility for a Tower of Babel which was bound to come down and is bound to come down again. Any other responsibilities are trivial. The proximate causes are irrelevant.

2. The Bailout artificially props up insolvent banks. But in spite of their phony profits, the banks remain collectively insolvent, and most if not all of them individually so. Every cent they gamble and loot comes directly or indirectly from the Bailouts, from free QE money, from the TBTF premium. It’s ALL taxpayer money. The big banks are now permanent wards of the state. We the people OWN them once and for all, and are free to do anything we want with them, the moment we are inclined to do so.

3. The Bailout accomplishes no socially valid end, but only enables the banks to reopen the casino.

4. The Bailout only intensifies monopoly concentration, which lay at the core of the Too Big To Fail extortion dilemma. (The policy of TBTF only helps confirm the structure in a positive feedback loop.)

4A. (Wealth and power concentration in themselves are anti-democratic, socially and economically destabilizing, and morally perverted.)

5. The finance sector is a purely rent-seeking monopoly. We can place pretty much anything it does on the list of feudal tactics. Every cent they extract is a TAX upon us. All their “innovations” are con jobs, and all their lobbying is bribery and extortion. Rentier Wall Street is the driver of all federal government policy, with the corporatist government serving as a functionary, a conduit, and as a goon.

6. No true reform will be legislated thanks to corruption. We can extend this: The system is so corrupt beyond redemption that there will never be constructive major legislation again. All major bills will be Potemkin at best (like the finance “reform” bill is looking to be), or a further assault (like the health racket bill). In either case they will only seek to further entrench the rackets oppressing us.

7. Anything which is legislated will not be enforced thanks to corruption and capture. We can extend the principle: The law itself is a battleground, and the rule of law in great jeopardy.

8. We don’t need the big banks for recovery, for lending, for international competition, for anything else. All the evidence is that smaller banks provide the real value here, while big banks are not only unable and unwilling to engage in constructive action themselves, but their monopoly power actively hinders the smaller banks.

9. The size of the banks runs counter to our need for a decentralized economy with greater resiliency and robustness. The stimulus has been remarkable for how little money has headed in a constructive direction. This is because of the banks.

10. Only the rich have benefited from the Bailout. Only they will continue to benefit. Everyone else is prey.

11. The banks (and therefore the Bailout) fund the permanent war, which in turn militarizes the country for the benefit of the banks.

12. The stock market is the terrorist wing of finance monopoly. Its purpose is to punish all public interest government action (for example letting the market work in Lehman’s case, or the Congressional rejection in the first Bailout vote). Such punishment is a tool of disaster capitalism, generating the sense of immediate crisis, the Shock Treatment, to terrorize and stampede policy-makers, the media, and the public into allowing or enabling the power and loot grabs.

(On the other hand, it rewards official crime. Thus health insurance stocks have been a barometer of the policy debate on health reform, for example going up after every racket-friendly action on Obama’s part.)

Appendix: The mainstream media’s coverage is systematically biased in favor of corporatism, often atrociously so. The infrequent good articles are accidents, incidental to the media project.

The Bailout is a war upon America. This is Bailout Nation, Bailout America. (We should settle on a name for this debased regime, this perversion of America.)

The basic principles of freedom and humanity tell us that the only measures of an economy’s health, practically and morally, is how well it empowers the people of a society to produce real goods and services for themselves, and how many good jobs it empowers them to create and preserve for themselves.

No other metric has any inherent validity, and nothing else as far as money flow has any value. The rest is just a shell game.

These truths dictate the right positive principle, relocalization, and the necessary negative principle, anti-corporatism. the need to smash the banks. For we are at war.

The call – Smash the banks! Break up Too Big to Fail! Too Big to Fail is Too Big to Exist.

Of any policy we must ask first, What will it do to help Smash the Banks? Of any alleged leader or would-be leader: Where is their call to relocalize? And what have they done to help Smash the Banks?


most look for the past, the lucky seize the moment, the very few look round the corners

At the thinking person level, the economy is mostly a narrative line or another. Sometimes, we feel like joining narratives, yet the ideologues in charge with economic policy would have none of that. This would matter only little had the economic narratives remained constrained to the space of ideas. But economic narratives drive policy and passions, they commingle dialectically with reality.

Looking ahead, in normal times, consists of plotting the dominant narrative in some future, accounting for those kind of medium-term foreseeable changes one can come up with. Our time does not allow such comfort.

The biggest challenge to our capitalist storyline is WAR--assuming no natural cataclysm. I am not taking about war with Iran, though most any war can turn into WAR. Such capital event can be imagined as the result of tension-escalation between a overly sensitive incumbent, magnifying some real or perceived wound, and an incumbent.

I wonder if a renewal of the US Congress with new faces can bring about lawmakers who are more aware of our grassroots-vulnerabilities, -possibilities, and -opportunities. Today, most people in Congress resemble too much the Soviet Politburo in the last years of Brezhnev.

Another challenge, against which the State started preparing after 9/11, is internal unrest. Lacking a support system and facing structural unemployment for years to come, the American fabric may be wearing thin. The legalization of the illegal immigrants can fuel the State for a while longer.  Nothing is guaranteed, though.  Indeed, think of the leaked names and addresses of the illegal immigrants in the state of Utah.  For one, from Utah hail many a patriot, this being the top contributor state to the US Army.  For another, such list could only come from inside the power enforcing mechanism...  Just as Bradley Manning, who also came from inside the power enforcing mechanism.

If we make it through, the big challenge becomes in structuring a post-capitalist society. Can we get so productive and have such a progressive tax system to (sustainably) land in post-capitalism? To those wishing a return to capitalism I can only say that it's tardy late, unless we are ready to lock ourselves in and wait for about two decades until we can achieve some level of self-sustainability.

In closing, I feel like I also need to stand in for today's elites. If a new world order were to happen things might go on for a few more decades. Several managed crises will be necessary, provided that the sense of injustice won't be too high/widespread. Again, the keyword is "managed."

P.S. At a time I used to be more optimistic I authored "Open Letter, for O8." It was a 7-point summary of what I thought we needed at the time Obama and McCain were presidential candidates in 2008.  I think President Obama has done more or less about most points with one exception, Let wages converge lower;  I have to say that this is the direction we are moving towards, and the slowness of getting there is commensurate only with the size of the task itself.  No easy there! 

the voice of big business

Especially at a time like this, views from the commanding heights of American business are a necessity.

Ivan G. Seidenberg, Chairman of the Board and Chief Executive Officer
Washington, DC - June 22, 2010

As Delivered

[Introduction by David Rubenstein, President, Economic Club of Washington.]

Thank you, David, and good afternoon, everyone. Thank you for the very nice introduction. It's very nice to be here this afternoon. The Economic Club of Washington stands at the intersection between policy and business, which is where my Business Roundtable colleagues and I spend a good deal of our time these days. Based on your invitation list I see you've had a number of business leaders here recently to give their prescriptions for putting the U.S. back on the path to growth.

So in my remarks this afternoon I will try to add to this same conversation today. But first, I'd like to tell you a bit about Verizon and the enormously exciting industry we're in.

Before I start though, I might be the only speaker to encourage you to stay on your Blackberries. It's good for business.

Today, almost 2 billion people - about a quarter of the world's population - are connected to the Internet. Twice that many - 4 billion people - have mobile phones, which are themselves becoming smarter and more connected every day. On Verizon's networks alone, we carry more than 1.7 billion text messages, 50 million picture and video messages, 1 billion phone calls, 400 million emails and the equivalent of 4 million full-length movies - all in a single day.

Verizon invests some $17 billion a year to put ourselves in the center of this expanding marketplace.

We operate Internet backbone networks that serve as the digital trade routes for the global economy. We're reinventing our legacy backbone telephone networks around fiber technology capable of delivering 100-megabit capacity directly to customers' homes. In wireless, we operate 3G networks across the country. Later this year, we'll start to roll out our fourth-generation wireless network, which will increase data speeds by up to 10 times and initiate the era of the "Internet of things." Soon, wireless will be embedded in everything we touch, infusing intelligence into all our systems and presenting us with a whole new way to run a home or an enterprise, or even a country.

When it comes to innovation in communications, the U.S. has a clear, decided edge. The smart phone revolution is centered in the U.S. The creation of tens of thousands of wireless applications is a U.S. phenomenon. Our 4G LTE networks - 4th generation networks - will leapfrog the world in wireless. Verizon alone has deployed more fiber-to-the-home than all the countries of Europe, combined. And a new ecosystem of devices, applications and operating systems is coming together around these platforms for innovation, spawning new businesses and driving our industry forward.

America's communications companies have made a big bet on this vision of the future, investing around $130 billion in 2009 alone. Last year, total investment in information and communications technology accounted for an astonishing 43 percent of all non-structural capital investment in the U.S. And while private investment in general fell by almost 23 percent from 2006 to 2009, communications investment rose by almost 9 percent over the same period.

These investments are a major engine of our economy. Businesses report that every dollar invested in Internet technology creates four dollars of value in return. Robert Crandall of Brookings says broadband investment can produce more than half a million new jobs over the next five years, while creating new demand for computers, software, network equipment and applications. And on a global basis, one study estimates the annual economic benefits of the commercial Internet to be $1.5 trillion - more than the global sales of medicine, investment in renewable energy and government R&D investments, all combined.

Broadband, wireless and global IP are at the heart of American competitiveness. At Verizon, we're excited about the future and believe - fervently - that our industry can continue to play a big role in addressing the challenges we face as a country.

Now, it's important that we not throw sand in the gears of this critical growth engine. You may have seen that last week the Federal Communications Commission began a proceeding to establish a new regulatory regime for broadband, which would impose old utility-style regulation on the Internet. We are very concerned that, in attempting to address legitimate issues about access to the Internet, the FCC has proposed basically an unimaginative and overbearing set of rules that essentially tries to retrofit a new industry into an old framework and expand their regulatory reach well beyond what is necessary. As we've said - and as we've demonstrated - communications companies will continue to work with the Commission and the other players in the Internet space to protect customers and ensure an open and robust broadband environment. The FCC's current course of action will really do little to achieve those objectives, but rather will cause uncertainty in the marketplace, create disincentives for investment and make one of the true success stories of the American economy less competitive on the global stage.


Now, Competitiveness is also on the minds of the 170 members of the Business Roundtable, which, as David said, I am the chairman. Together, Business Roundtable companies generate more than $6 trillion in revenues and employ more than 12 million people. We account for 60 percent of all corporate taxes, 60 percent of all charitable contributions, and one-half of all private R&D spending in the U.S. Our market capitalization is one-third of the total value of the stock market, and we pay some $167 billion in dividends to individual investors, pension funds and retirement accounts. For every person employed by a BRT company, there are two more employed by the medium and small businesses that supply the goods and services that we need to keep our businesses running.

So obviously, the companies of the Business Roundtable have a huge stake in the success of the American economy. We create jobs all along the food chain. We invent and manufacture and sell the things consumers need. And we have the technology, expertise and capital capacity to play a huge role in contributing to our nation's economic growth.

It should be equally obvious that our collective resources are not being sufficiently engaged.

The BRT has accepted our responsibility as partners in moving the country forward. My colleagues and I have worked closely with policy-makers across the political spectrum on matters from health care to trade and tax policy to energy and climate change. But frankly, we have become somewhat troubled by a growing disconnect between Washington and the business community that is harming our ability to expand the economy and grow private-sector jobs in the U.S. We see a host of laws, regulations and other policies being enacted that impose a government prescription of how individual industries ought to be structured, rather than produce an environment in which the private sector can innovate, invest and create jobs in this modern global economy.

In our judgment, we have reached a point where the negative effects of these policies are simply too significant to ignore.

In the search for short-term revenue fixes, we're doing long-term damage to growth.

By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses.

Meanwhile, without a sufficiently comprehensive focus on growth and jobs, our unemployment rate continues to hover close to 10 percent. The CBO says debt will rise to 90 percent of G.D.P. in 10 years. And last month's job report showed the private sector creating only 41,000 jobs, a figure the Economic Policy Institute says is "nothing closely resembling the job growth needed to dig us out of our very deep hole."

So, from our perspective, it's time to refocus public policy on creating the conditions that will drive private-sector jobs.

Recently, in response to a request from Dr. Peter Orszag of the OMB, the Business Roundtable and the Business Council polled our members about laws, rules and regulations that are inhibiting growth. We summarized our concerns in an extensive report, which we have already delivered to OMB, and I am very much encouraged that the Administration has already reached out to us to set up a process for discussing recommendations and ideas and set the discussion for the future.

From the avalanche of examples included in our OMB submission, let me share some specifics in three categories: taxes, trade and financial reform.


One message we heard loud and clear from our members is that the current U.S. tax system is a major impediment to international competitiveness. Our corporate tax rate is the second highest among 30 OECD nations. We're one of only five OECD countries to tax companies on worldwide income. Moreover, since 1990 every other OECD country has lowered its corporate tax rates, while the U.S. is going in somewhat the opposite direction.

Recently, the House passed a tax extender bill containing several provisions that raise taxes on multinational companies. We believe these actions would impair America's competitiveness and harm American workers. Multinational companies account for 63 million jobs, nearly half of U.S. exports and most of the productivity gains in the U.S. economy - facts that need to be taken into account when making tax policy.

Sometimes the problem isn't too much action, but too little. Dividend taxation is one example. Next year, unless the Congress takes action, the tax on dividends is scheduled to rise to that of ordinary income, with rates topping out at 39 percent. On its face, this may seem to be an easy revenue-raising idea. But at a time of extreme market volatility, do we really want to disadvantage stable, dividend-paying stocks - and the retirement funds and millions of long-term dividend investors who depend on them?

Another area in which we fear good intentions will have unintended consequences is financial reform. Clearly, the government has an interest in ensuring a stable financial system, efficient capital markets and ethical and transparent business practices. That's why the BRT completely supports the idea of financial reform. However, we believe some of the current proposals with respect to derivatives and proxy access go a step too far, imposing one-size-fits-all solutions on highly dynamic and diverse businesses. Instead of focusing on the inputs to a transparent and efficient financial system, the proposed reforms will increase risk and volatility at a time when just the reverse is required.

We also see a disconnect between objectives and actions in the area of international trade. The Administration has indicated its intent to double U.S. exports over the next five years, recognizing that with 75 percent of the world's purchasing power and 87 percent of its growth coming from outside the U.S., an export-focused trade policy will grow jobs here at home.

The Business Roundtable agrees wholeheartedly with this goal. But while the European Union is moving ahead in implementing free trade agreements, we have seen very little movement on pending agreements with Colombia, Panama and South Korea to name a few. Nor have we made it a priority to seek more expansive trade negotiating authority to keep up with foreign competitors.

We also could do more to make America a more attractive destination for foreign direct investment, which fell by nearly 60 percent from 2008 to 2009. Now, to be fair, much of that is due to the global recession. But the truth is, the U.S. share of global capital inflows has been declining for decades. A new survey by Ernst & Young found that, whereas 48 percent of global investors saw North America as a desirable location for investment in 2006, by 2010 this percentage had fallen to just 22 percent. The most attractive market is China, favored by 39 percent. To quote the Ernst & Young study, we're competing for capital in a "new multi-polar world"in which investors can shop the globe for "growth, talent, technology and productivity."

We need to make sure that the U.S. isn't a fly-over zone when it comes to international trade and investment.


These are just a few of the issues we have laid out in our response to Dr. Orszag's request. The full report contains literally hundreds of separate actions and decisions that, taken together, create an increasingly hostile environment for investment and job creation here in this country.

As I said before, it would be better to re-focus public policy on creating private-sector jobs. In general, among BRT CEOs there is remarkable consensus around a few fundamental pillars to achieve this growth.

First, we need tax policies that promote capital formation. As Fred Smith, CEO of FedEx, noted recently in the Wall Street Journal, the correlation between domestic job growth and business investment is very strong. He calls for an extension of accelerated depreciation tax provisions as a way to give an immediate boost to the economy. According to the Institute for Policy Innovation, every $1 of tax cuts devoted to accelerated depreciation generates about $9 of growth in G.D.P.

Second, we need to increase exports and improve our international competitiveness. Here, the rhetoric from policy-makers has been right but the actions need to be better aligned through an emphasis on trade agreements, corporate tax reform and other initiatives to put us on more competitive footing internationally.

Third point, we need infrastructure investment to create jobs and build the platforms for 21st century growth. Jim Owens, the Chairman and CEO of Caterpillar, points out that since the 1970s, U.S. investment in infrastructure has grown at only half the rate of G.D.P. growth. Roads and bridges are in disrepair and the power grid is inefficient. In particular, we need to upgrade our transportation and energy systems with communications and information technology to create "smart"grids that will radically improve efficiency and productivity. You've heard the story before. Some of this will take public investment, but most can be done by the private sector, if we don't impose so many rules and regulations that it becomes an uneconomic proposition.

The fourth area is education. We fully support the Administration's actions to shore up America's educational system, particularly in science, technology, engineering and math. Verizon is directing more than $25 million this year from our charitable foundation this year to support education, working with partners like the New York Hall of Science, the National Academy Foundation, Jobs for America's Graduates and the many educational partners in our on-line educational resource, This is also a top priority for the Business Roundtable, which is leading a business-wide initiative to increase the number of American students with college degrees in STEM fields.

And the fifth area of Business Roundtable's CEO focus, we need to promote the innovation and entrepreneurism that are the beating heart of the economy. While the government has a lot of innovation initiatives, we need better focus and coordination in this vital arena. We need a permanent tax credit for research and development, more effective protection for intellectual property, and sustained federal investment in basic research. Both government and private sectors have a critical role to play here. Now, government invented the Internet, mapped the human genome and developed GPS technology - extraordinary advancements. But it took private industry to commercialize these discoveries, develop real businesses around them and make them available to average Americans. There are many areas, from renewable energy to transportation to homeland security protections, where government and industry can and should be working together to develop the technologies that will create new industries and new jobs. To do that, though, we need a more favorable environment for investment and new business formation.

The BRT believes that these five areas - capital formation, exports, infrastructure, education and innovation - are the necessary inputs for creating growth and private-sector jobs. We also believe that, if we can focus on the big goal and stop trying to micromanage industries, we could make real progress in these areas immediately by taking some of the pragmatic, targeted actions I just mentioned.

As further evidence of our commitment to being a good partner to the public sector, the Business Roundtable is forming an initiative around fiscal reform with the goal of providing constructive suggestions and input to government about deficit and entitlement reform. The single most important step government could take to stabilize the financial markets and create an environment for growth would be to show a real commitment to fiscal discipline and a recognition that sustainable growth will only occur when the private sector - not the government - is expanding.


Now clearly we have a lot of work to do. The U.S. Department of Commerce estimates that each $1 billion of capital spending generates about 18,000 new jobs for U.S. workers. This means that if we could stimulate an additional $50 billion in capital spending we could create nearly 1 million new jobs. That same $50 billion in capital would also accelerate productivity growth by one or two basis points a year. Over the past 10 years, U.S. productivity growth has averaged 2.8 percent a year. Raising that by a single basis point -- to 2.9 percent a year -- would raise real incomes for Americans by 1 percent over the next ten years, injecting an additional $200 billion into the economy.

We have so much untapped potential, if we can come together around a pro-jobs economic strategy.

To do that, we need to focus on the inputs required to create investment and private-sector jobs.

We need a world view that embraces engagement abroad to support growth here at home.

Most of all, we need accountable leaders in government as well as the business community who reject the false choices between job creation or deficit reduction, growth or sustainability, serving consumers or investors, managing for the short term or the long term, being profitable or doing things right.

Real leadership isn't about making false choices - it's about finding solutions to real problems.

Every one of us should find it unacceptable that so much capacity for growth is sitting on the sidelines. It's time for us all to raise our game and embrace the power of the private sector that will create real value and real growth for our country. If we work together to unleash the private sector's investment and innovative power, I have no doubt that America can accelerate its competitive footing and lead the world in the industries that will create jobs and raise living standards for many decades to come.

For the US Government view, check this letter from Emanuel&Jarrett

what i wish i wrote


"John Maynard Keynes was still a practicing economist in those days, and his central insight about depressions — that governments need to spend when the private sector isn’t — was not widely understood."

This still isn't understood. His insight really isn't that governments need to spend. Its that governments need to borrow when the private sector isn't borrowing. The interest bearing debt based economy needs to "grow" constantly. If someone isn't willing to create a larger layer of interest bearing debt to support the previous layer of interest bearing debt then the pyramid will begin to collapse. Today the private sector refuses to go into debt to create this larger layer so governments have to. But now it seems that governments too are refusing to go into debt to create the larger base layer of debt. If no one steps up then the previous layers of the pyramid will collapse - i.e. previous loans will start to default and what will ensue is joblessness, foreclosures and shrinking corporate profits - all of which depend on a constantly growing pyramid of interest bearing debt.

BTW, the reason I keep mentioning interest is because it is the satisfaction of the desire for interest that necessitates a "growing pyramid" - without interest we would have a flatter debt structure and it would debt would be much more sustainable.

Colesville, MD

The tragedy of monopoly financial capitalism is that it grabs most surplus of the real economy and contributes almost no economic surplus to society. Its high non-productiveness monopolizes the societal economic activity and renders the low productiveness of the real economy even lower everyday. Enormous over-production hence over-capacity in the real economy make accumulation of profits emaciated whereas monopoly financial capital accumulation outshines its real economy junior partner.

To solve these tragic internal contradictions, the most basic approach is to reduce the over-production and capacity that resulted from competitions on the global market. In good times, the well-employed and –expending middle class of the world would have briskly made the over-produced economy well in hand. Now the heavily indebted and demoralized middle class as a result of the financial crisis wants to buy but finds themselves shy of funds. Are there other ways to break up the siege? Well, war is the most notoriously wasteful and cruel way to do the job of massive consumption of the over-produced goods and then to lift employment by expansion in production. The other way to waste off surplus goods is to buy them from the market and physically destroy or burn them. Both had been adopted during the Hoover Great Depression. The Second World War did indeed solve the problem of severe unemployment due to deflation.

Would a short-term deficit spending and stimulating program extricate the over-production-deflation debacle from the Bush Great Recession and now Obama Depression? Yes, for a short time of period when government spending replaces an anemic private spending but no, for long term. It is not a cure-all strategy but only a temporary relief tactics.

In connection with the deficit-reduction and austerity program, on the other hand, there is the tendency to aggravate bankruptcies and foreclosures, both to so much higher levels, that would serve the purpose of destroying not only surplus goods on the market but also, more importantly, means of production of the capitalists. As a consequence, drastically reduced inventories as well as destroyed capital surplus eventually would emerge over the world, renewed investment and production would start in earnest. The economy would reach its recovery stage, if every unfavorable condition would be made harmless and all conditions propitious to accumulation of capital. The petite and less profitable capital assets, however, would be auctioned off to the big and monopolistic capital, making the capitalist system further monopolized and away from democracy. Thus this deflationary approach would break out the debacle at great social costs of declining working class dignity and status, unemployment, bankruptcy, misery, destitution, and fierce class warfare. A protracted struggle between the two dominant classes would almost certainly engender the Second World Revolution after the first one that broke out in early 20th century. The First World Revolution retreated from the world’s political arena after holding power for almost half a century in the periphery of the capitalist world system. It was incomplete and not without mistakes due to its confinement to only the less developed areas. The Second one will occur most likely in the center because the crisis-prone area is now concentrated in the advanced capitalist countries rather than the peripheral areas as before.

In summary, both the inflationary and deflationary tactics are subpar. They may relieve severity to some extent and temporarily but can never eradicate the poisons of private profits and expropriations of the society-oriented means of production.

Its solutions will have to be sought elsewhere in the radical political economies.

condensed thoughts

The just concluded G-20, where the US was part of a minority of 3 calling for more spending, countries agreed to disagree, otherwise the default option in a quickly diverging (unraveling?) world.

On the one hand, smaller countries may be reluctant to keep spending, thus growing deficits and possibly losing some of their sovereignty--see Greece, that little economy that was used to remind some that they cannot undo 50 years of prosperity just by offering savings and trade alternatives to the dollar. 

On the other hand, if the US believes in stimulus, what's there to stimulate anymore, besides deficit-growing consumption?  The US move could be seen as an effort to make to world in the eyes of the bond-holders/buyers equally leveraged.

All in all, I expect that what I wrote more than 2 years ago to increasingly become part of our daily lives, protectionism.  Who said that the renewal part of capitalism was fun?

Given the current strengthening of the power of the US executive branch, I wonder how prepared the system will be to cope with a downward readjustment.  On paper, the government and the corporations look stronger by the day.  In reality, a major diversion will be required to put all that in motion.   

Their main mistake was acting too late to reform the elites

Perestroika Lost


PERESTROIKA, the series of political and economic reforms I undertook in the Soviet Union in 1985, has been the subject of heated debate ever since. Today the controversy has taken on a new urgency — not just because of the 25th anniversary, but also because Russia is again facing the challenge of change. In moments like this, it is appropriate and necessary to look back.

We introduced perestroika because our people and the country’s leaders understood that we could no longer continue as we had. The Soviet system, created on the precepts of socialism amid great efforts and sacrifices, had made our country a major power with a strong industrial base. The Soviet Union was strong in emergencies, but in more normal circumstances, our system condemned us to inferiority.

[N.B. The Chinese are about there now.]

This was clear to me and others of the new generation of leaders, as well as to members of the old guard who cared about the country’s future. I recall my conversation with Andrei Gromyko, the foreign minister, a few hours before the plenary meeting of the Central Committee that elected me as the party’s new general secretary in March 1985. Gromyko agreed that drastic change was needed, however great the risk.

[N.B. The Soviet/Russian elites must have seen some of this during the time of Brezhnev when the war in Afghanistan could not be won. Other voices indicate the decrease in oil prices as a trigger.]

I am often asked whether my fellow leaders of perestroika and I knew the full scope of what we had to do. The answer is yes and no — not fully and not immediately. What we had to abandon was quite clear: the rigid ideological, political and economic system; the confrontation with much of the rest of the world; and the unbridled arms race. In rejecting all that, we had the full support of the people; those officials who later turned out to be die-hard Stalinists had to keep silent and even acquiesce.

[N.B. Had they known would they still have undertaken the changes? How much is the US today captive to "rigid ideological, political and economic system; the confrontation with much of the rest of the world; and the unbridled arms race?"]

It is much more difficult to answer the follow-up question: What were our goals, what did we want to achieve? We came a long way in a short time — moving from trying to repair the existing system to recognizing the need to replace it. Yet I always adhered to my choice of evolutionary change — moving deliberately so that we would not break the backs of the people and the country and would avoid bloodshed.

[N.B. The goals were probably to have another go at empire.]

While the radicals pushed us to move faster, the conservatives stepped on our toes. Both groups must bear most of the blame for what happened afterward. I accept my share of responsibility as well. We, the reformers, made mistakes that cost us, and our country, dearly.

[N.B. Self-serving?]

Our main mistake was acting too late to reform the Communist Party. The party had initiated perestroika, but it soon became a hindrance to our moving forward. The party’s top bureaucracy organized the attempted coup in August 1991, which scuttled the reforms.

[N.B. This should be sent on a postcard to president Obama, possibly rested as following: Our main mistake was acting too late to reform the elites.]

We also acted too late in reforming the union of the republics, which had come a long way during their common existence. They had become real states, with their own economies and their own elites. We needed to find a way for them to exist as sovereign states within a decentralized democratic union. In a nationwide referendum of March 1991, more than 70 percent of voters supported the idea of a new union of sovereign republics. But the coup attempt that August, which weakened my position as president, made that prospect impossible. By the end of the year, the Soviet Union no longer existed.

[N.B. Let's hope that all the divisive talk (gov. Perry of Texas) is hot electoral air.]

We made other mistakes, too. In the heat of political battles we lost sight of the economy, and people never forgave us for the shortages of everyday items and the lines for essential goods.

[N.B. Maybe that postcard to president Obama should include the above as a 2nd line.]

Still, the achievements of perestroika are undeniable. It was the breakthrough to freedom and democracy. Opinion polls today confirm that even those who criticize perestroika and its leaders appreciate the gains it allowed: the rejection of the totalitarian system; freedom of speech, assembly, religion and movement; and political and economic pluralism.

After the Soviet Union was dismantled, Russian leaders opted for a more radical version of reform. Their “shock therapy” was much worse than the disease. Many people were plunged into poverty; the income gap grew tremendously. Health, education and culture took heavy blows. Russia began to lose its industrial base, its economy becoming fully dependent on exports of oil and natural gas.

By the turn of the century, the country was half destroyed and we were facing chaos. Democracy was imperiled. President Boris Yeltsin’s 1996 re-election and the transfer of power to his appointed heir, Vladimir Putin, in 2000 were democratic in form but not in substance. That was when I began to worry about the future of democracy in Russia.

I understood that in a situation where the very existence of the Russian state was at stake, it was not always possible to act “by the book.” Decisive, tough measures and even elements of authoritarianism may be needed at such times. That is why I supported the steps taken by Mr. Putin during his first term as president. I was not alone — 70 percent to 80 percent of the population supported him in those days.

[N.B. Should our deviations from the Constitution be taken on this note?]

Nevertheless, stabilizing the country cannot be the only or the final goal. Russia needs development and modernization to become a leader in an interdependent world. Our country has not moved closer to that goal in the past few years, even though for a decade we have benefited from high prices for our main exports, oil and gas. The global crisis has hit Russia harder than many other countries, and we have no one but ourselves to blame.

[N.B Alright, a 3rd line would be in order: Fighting terrorism cannot be the only or the final goal!]

Russia will progress with confidence only if it follows a democratic path. Recently, there have been a number of setbacks in this regard.

For instance, all major decisions are now taken by the executive branch, with the Parliament rubber-stamping formal approval. The independence of the courts has been thrown into question. We do not have a party system that would enable a real majority to win while also taking the minority opinion into account and allowing an active opposition. There is a growing feeling that the government is afraid of civil society and would like to control everything.

We’ve been there, done that. Do we want to go back? I don’t think anyone does, including our leaders.

I sense alarm in the words of President Dmitri Medvedev when he wondered, “Should a primitive economy based on raw materials and endemic corruption accompany us into the future?” He has also warned against complacency in a society where the government “is the biggest employer, the biggest publisher, the best producer, its own judiciary ... and ultimately a nation unto itself.”

[N.B. We can echo and ask: Should an economy based on imports and endemic corporate and political corruption accompany us into the future?” Can the financial sector remain “the top employer, running its regulatory and judiciary ... and ultimately a nation unto itself?"]

I agree with the president. I agree with his goal of modernization. But it will not happen if people are sidelined, if they are just pawns. If the people are to feel and act like citizens, there is only one prescription: democracy, including the rule of law and an open and honest dialogue between the government and the people.

What’s holding Russia back is fear. Among both the people and the authorities, there is concern that a new round of modernization might lead to instability and even chaos. In politics, fear is a bad guide; we must overcome it.

Today, Russia has many free, independently minded people who are ready to assume responsibility and uphold democracy. But a great deal depends now on how the government acts.

Translation by Pavel Palazhchenko

From Taleb's Twitter Feed

From Nassim Taleb's Twitter Feed:

1. In nature we never repeat the same motion. In captivity (office, gym, commute, sports), life is just repetitive stress injury. No randomness about 6 hours ago via web
2. Using, as excuse, others' failure of common sense is in itself a failure of common sense. 9:33 AM Mar 12th via web
3. Dubai borrowed to put vanity buildings on postcards; America and W. Europe need to borrow to just survive. 4:52 AM Mar 12th via web
4. We unwittingly amplify commonalities with friends, dissimilarities with strangers, & contrasts with enemies. 3:30 PM Mar 11th via web
5. The mark of a mediocre mind is the subdued and passive reaction in front of the truly exceptional. 11:32 AM Mar 11th via web
6. [Explanation: The biggest error since Socrates has been to believe that lack of clarity is the SOURCE of all our ills, not the result. ] 11:22 AM Mar 10th via web
7. Mental clarity is the child of courage, not the other way around. 11:07 AM Mar 10th via web
8. What they call play (gym, travel) looks like work;what I call work (effortless daydreaming) looks like play.They lose freedom trying harder. 3:27 AM Mar 10th via web
9. The differences between Goldman Sachs & the mafia: GS has a better legal-regulatory expertise; but the mafia understands public opinion. 7:13 AM Mar 9th via web
10. Common minds find similarities in stories (& situations), finer minds detect differences [Essay on the Universal & the Particular] 12:47 AM Mar 8th via web
11. I wish to say some day about someone "Voilà un homme!" as Napoleon said upon meeting Goethe: mixture of passion & intellect (& elegance too) 5:45 AM Mar 7th via web
12. Übermen tolerate others' small inconsistencies though not the large ones;losers tolerate others' large inconsistencies though not small ones 6:16 AM Mar 5th via web
13. If you want people to read a book, tell them it is overrated. 1:07 PM Feb 28th via web
14. Their sabbatical is to work six days and rest for one; my sabbatical is to work for (part of) a day and rest for six. 7:05 AM Feb 28th via web
15. City-states organize by tinkering; nation-states produce bureaucracies, empty suits, Bernankes, deficits, and the toobigtofail. Too obvious. 6:49 AM Feb 27th via web
16. answ:[ If you can't detect (w/out understanding) the difference betw sacred & profane you'll never know what religion means. Same with art ] 7:36 AM Feb 26th via web
17. Atheism/materialism means treating the dead as if they were unborn. I won't. By respecting the sacred you reinvent religion. 4:47 AM Feb 26th via web
18. I wonder if a lion (or a cannibal) would pay a high premium for free-range humans. [modern bondage] 8:00 AM Feb 25th via web
19. Writing is the art of repeating oneself without anyone noticing. 12:40 PM Feb 24th via web
20. You know you have influence when people start noticing your absence more than the presence of others. 3:26 PM Feb 23rd via web

Nassin Taleb

A step closer to the core of one of our most common problems

Trading Away Productivity

FOR a quarter-century, American economic policy has assumed that the keys to durable national prosperity are deregulation, free trade and a swift transition to a post-industrial, services-dominated future.

Such policies, advocates say, drive innovation, which leads to enormous labor productivity and wage gains — more than enough, supposedly, to make up for the labor disruptions that accompany free trade and de-industrialization.

[N.B. In fact, labor productivity has been an eternal obsession of the US capitalist, shared at one point by the now-defunct comrades in the planned economies. Have a look at The Politicos vs An old man]

In reality, though, wage gains for the average worker have lagged behind productivity since the early 1980s, a situation that free-traders usually attribute to workers failing to retrain themselves after seeing their jobs outsourced.

[N.B. So what does it mean if this were indeed a failure of the workers? Too bad they could not retrain themselves to become neurosurgeons or derivative traders?]

But what if wages lag because productivity itself is being grossly overstated, especially in the nation’s manufacturing sector? Then, suddenly, a cornerstone of American economic policy would begin to crumble.

Productivity measures how many worker hours are needed for a given unit of output during a given time period; when hours fall relative to output, labor productivity increases. In 2009, the data show, Americans needed 40 percent fewer hours to produce the same unit of output as in 1980.

But there’s a problem: labor productivity figures, which are calculated by the Labor Department, count only worker hours in America, even though American-owned factories and labs have been steadily transplanted overseas, and foreign workers have contributed significantly to the final products counted in productivity measures.

The result is an apparent drop in the number of worker hours required to produce goods — and thus increased productivity. But actually, the total number of worker hours does not necessarily change.

This oversight is no secret: as Labor Department officials acknowledged at a 2004 conference, their statistical methods deem any reduction in the work that goes into creating a specific unit of output, whatever the cause, to be a productivity gain.

This continuing mismeasurement leads economists and all those who rely on them to assume that recorded productivity gains always signify greater efficiency, rather than simple offshoring-generated cost cuts — leaving the rest of us scratching our heads over stagnating wages.

[N.B. Why would few push this, where was the organized labor?]

Of course, just because productivity is mismeasured doesn’t mean that genuine innovations can’t improve living standards. It does mean, however, that Americans are flying blind when it comes to their economy’s strengths and weaknesses, and consequently drawing the wrong policy lessons.

Above all, if offshoring has been driving much of our supposed productivity gains, then the case for complete free trade begins to erode. If often such policies simply increase corporate profits at the expense of American workers, with no gains in true productivity, then they don’t necessarily strengthen the national economy.

[N.B. This seems a clear case when regulation should help protect capitalism from capitalists.]

In this regard, the case for free trade as a stimulus for innovation weakens, too. Because productivity gains in part reflect job offshoring, not just the benefits of technology or better business practices, then the American economy has been much less innovative than widely assumed.

How can we actually increase innovation and real productivity? Manufacturing, long slighted by free-market extremists, needs to be promoted, not pushed offshore, since it has historically accounted for the bulk of research and development spending and employs the bulk of American science and technology workers — who in turn spur further innovation and real productivity.

Promoting manufacturing will require major changes in tax and trade policies that currently foster offshoring, including implementing provisions to punish currency manipulation by countries like China and help American producers harmed by discriminatory foreign value-added tax systems. It also means revitalizing government and corporate research and development, which has languished since its heyday in the 1960s.

Much of government policy and business strategy rides on false assumptions about innovation, and although the Obama administration acknowledges the problem, it has done nothing to correct it. With the economy still in need of government life support and the future of American manufacturing in doubt, relying on faulty productivity data is a formula for disaster.

Alan Tonelson, a fellow at the United States Business and Industry Council, is the author of “The Race to the Bottom.” Kevin L. Kearns is the president of the council, which is an association of small manufacturers.

Brecht/Eco: Unhappy the land where heroes are needed

What is your idea of perfect happiness?
A state of satisfaction that lasts a little more than five minutes.

What is your greatest fear?
To lose my sense of humor at the moment of my death.

Which historical figure do you most identify with?
Baruch Spinoza.

Which living person do you most admire?
Let me wait until they die, so to be sure of my feelings.

What is your greatest extravagance?
I quit smoking.

What is your favorite journey?
The years during which I am writing a new novel. I am wandering through a private and secret territory, nobody knows what I am doing, and I feel happy.

What do you consider the most overrated virtue?
No real virtue, if such, can be overrated.

What do you dislike most about your appearance?
Everything—I do not like my image in the mirror. However, I do not feel disturbed, because several times I discovered that a lot of nice people had a different opinion.

Which living person do you most despise?
Once again, let me wait until their death. (They must have time to change.)

What or who is the greatest love of your life?
Since four years and a half, my grandchild.

When and where were you happiest?
When I had time enough for my hobby: work.

If you could change one thing about your family, what would it be?
To have another grandchild.

What is your most treasured possession?
My collection of old rare books.

What do you regard as the lowest depth of misery?
Intolerance (but because I have enough money to live well; otherwise it would be starvation).

What is your favorite occupation?
I said it above: work. But do not forget that I am one of those happy persons who identify their work with their hobby and vice versa.

What do you most value in your friends?
The capacity to keep a secret.

Who are your favorite writers?
Dante, Nerval, Joyce, Borges.

Who is your favorite hero of fiction?
Julien Sorel. No, perhaps Mickey Mouse.

Who are your heroes in real life?
As Brecht said, “Unhappy the land where heroes are needed.”

What are your favorite names?
Aureolus Theophrastus Bombastus, and Jim.

What is your motto?
As James Joyce once said to his brother, “The music hall, not poetry, [is] a criticism of life.”

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