I wrote last week on Bank of America's CEO Brian Moynihan and his statement lambasting whining investors who bought a Chevy Vega and then complained that it wasn't a Mercedes.
Having already discussed how that statement fit in to the MBO fiasco I wanted to use it to address a different but disturbing angle.
Chevrolet is a division of the General Motors Corporation, producing a range of vehicles from the mighty Corvette to the lowly Vega. Mercedes also produces a wide range of vehicles.
In comparing a Chevrolet Vega to a Mercedes Mr Moynihan was mixing apples and oranges, on many levels.
The low end of the Mercedes range is the A-Class. It is still a Mercedes, and commands the relevant pricing, to the extent that it would have been sufficient to compare a Vega with an A-Class. But no. Mr Moynihan, with one fell swoop, highlighted the demise of American manufacturing, the stature of German manufacturing, and perhaps the decline of America.
I recently watched "A Requiem for Detroit". It was incomprehensible to me that a city such as Detroit could have fallen into such ruin and despair.
This summer I traveled to the former East Germany and to that part of Poland which had been German before the War. This was a region which had been through the terrors of total war. Stettin, or Szezcin, Poland, as it is known now was a major rail and harbour city and was bombed accordingly. You can still see shrapnel scars on some buildings, but even there buildings have been rebuilt, or demolished.
In former East Germany the renovation and restoration since 1989 of cities which had been flattened during the war requires museums to illustrate the degree of the desolation wrought. This rebuilding was financed by what was West Germany and the "Solidarity Tax" which was a 1% surcharge on income tax initiated in 1989, and extended just recently.
We have not had a traditional war on American soil since the Civil War. But if you look at cities like Detroit,Michigan, or like Gary,Indiana, you would think we have. And you would be right. America has been wracked by the divisions of rich and poor. Our segregationist history has helped shape this as a Race War, but it is really a Poverty War.
There was the hope that perhaps the election of President Obama was the beginning of the end of this war. The Tea Party, misled by people like Sarah Palin are determined to ensure that this war intensifies.
It is an axiom of statesmanship, which the successful founders of tyranny have understood and acted upon, that great changes can best be brought about under old forms. The call for a return to an imaginary past by the Tea Party, predicated on the lies and distortions of organisations such as Fox News to push a scared public into the arms of America's fascists is the both sinister and dangerous as it follows on this adage-gaining power through the democratic process.
The only way to combat this is to get out and vote to defeat them!
Friday 29 October 2010
Buyer Beware?
Always on the lookout for the next accident the mortgage documentation fiasco looks to be the newest baby for the ambulance chasing law firms smelling blood, or at least some rotten flesh. But don't think the lawyers or their prey, the holders of Mortgage Backed Securities (MBO's)are concerned about the homeowners who might or might not be dispossessed.
These investors in the securities the mortgages backed- the holders of MBO's- are only worried about the plummeting value of the securities they purchased, and are looking for ways to recoup their losses. The law firms are suggesting that faulty documentation might be a way to force the banks to buy them back.
Now I am not a defendant of the big banks. It is clear that they have no one's interest in mind but their own and will go to great lengths to achieve their golden calf. Unfortunately for the lawyers and the holders of MBO's, the letter of the law, not the spirit, is what counts.
This distinction is where I believe the the problem began. The pursuit of profit, selling misleading products protected by finely worded contracts which assign legal responsibility to anyone but the bank. The products they describe were designed to appeal to the investor's greed to such an extent that they would overpower fear, and rationality. How else can you explain the success of structured products which claimed to take low rated assets and turn them in to AAA rated assets?
The MBO market was on the less sophisticated end of the this game. And on the basis of Bank of America CEO Brian Moynihan's recent statement intended to criticise investors, some of the sellers were of the same ilk. In an attempt to dismiss legal challenges Mr Moynihan virtually self-indicted himself as he claimed that investor complaints essentially amounted to "I bought a Chevy Vega, but I want it to be a Mercedes".
Precisely. The bankers took a Chevy Vega, buffed it up and presented it as being as good as a Mercedes. Check their documentation. They never sold it as a Mercedes. They might have mumbled when they admitted it was a buffed up Chevy Vega, but if an investor were stupid enough to pay Mercedes prices for a Chevy Vega, who was really at fault?
It is perhaps telling that in the Q&A sessions at the various presentations by lawyers to MBO investors the focus is not on the merits of a legal challenge-but on the likelihood and costs of winning. Of course investors rarely let pride get in the way of money-driving up to the courthouse in their Chevy Vegas, with a crooked Mercedes Stern on the hood.
These investors in the securities the mortgages backed- the holders of MBO's- are only worried about the plummeting value of the securities they purchased, and are looking for ways to recoup their losses. The law firms are suggesting that faulty documentation might be a way to force the banks to buy them back.
Now I am not a defendant of the big banks. It is clear that they have no one's interest in mind but their own and will go to great lengths to achieve their golden calf. Unfortunately for the lawyers and the holders of MBO's, the letter of the law, not the spirit, is what counts.
This distinction is where I believe the the problem began. The pursuit of profit, selling misleading products protected by finely worded contracts which assign legal responsibility to anyone but the bank. The products they describe were designed to appeal to the investor's greed to such an extent that they would overpower fear, and rationality. How else can you explain the success of structured products which claimed to take low rated assets and turn them in to AAA rated assets?
The MBO market was on the less sophisticated end of the this game. And on the basis of Bank of America CEO Brian Moynihan's recent statement intended to criticise investors, some of the sellers were of the same ilk. In an attempt to dismiss legal challenges Mr Moynihan virtually self-indicted himself as he claimed that investor complaints essentially amounted to "I bought a Chevy Vega, but I want it to be a Mercedes".
Precisely. The bankers took a Chevy Vega, buffed it up and presented it as being as good as a Mercedes. Check their documentation. They never sold it as a Mercedes. They might have mumbled when they admitted it was a buffed up Chevy Vega, but if an investor were stupid enough to pay Mercedes prices for a Chevy Vega, who was really at fault?
It is perhaps telling that in the Q&A sessions at the various presentations by lawyers to MBO investors the focus is not on the merits of a legal challenge-but on the likelihood and costs of winning. Of course investors rarely let pride get in the way of money-driving up to the courthouse in their Chevy Vegas, with a crooked Mercedes Stern on the hood.
Thursday 28 October 2010
The Blather of Lord Heseltine
In keeping with good government practice the Coalition government will abolish the Regional Development Agencies (RDA) and replace it with the new and improved Regional Growth Fund (RGF). The government has decided to drag out old the old warhorse Lord Heseltine to chair the panel responsible for distributing the RGF funds.
In an interview on his new role he started off by saying he didn't understand all the fuss surrounding the loss of 500,000 jobs in the Public Sector. These are, according to Lord Hes, the same jobs that would be lost through attrition and/or retirement. This might be true. If so however, either announcing cutting them is a farce, or he just happened to forget that the difference is that those 500,000 won't be replaced.
Skirting that issue he jumped into "The private sector will provide" refrain, coupled with the retort that relying on taxpayer's money in order to support the regions is "yesterday's language". Oh really. The RGF will provide a fund-out of either thin air, or more likely taxpayer's money-and then "make the best judgements available" in order to distribute it to the private sector?!
When asked how this supposed reliance on the private sector to drive the economy forward squared with his previous title of "Mr Intervention"-a title he gained for famously saying when in government in the 80's that he would intervene before breakfast, before lunch and after dinner if it meant supporting British industry-he gave the most political of answers-"All my political career, and actually before it, we have seen the transfer of wealth, decision making and power from the provinces to London".
Not quite the answer I was looking for, but then again, it is very difficult to combine intelligent thought with ideological blather. Just ask Mr Osborne-a man who has never worked a day in his life-smirk his way through the nonsense that these cuts were ever anything more than an unsubstantiated gamble predicated on a shallow understanding of Milton Friedman's and dislike of John Maynard Keynes.
In an interview on his new role he started off by saying he didn't understand all the fuss surrounding the loss of 500,000 jobs in the Public Sector. These are, according to Lord Hes, the same jobs that would be lost through attrition and/or retirement. This might be true. If so however, either announcing cutting them is a farce, or he just happened to forget that the difference is that those 500,000 won't be replaced.
Skirting that issue he jumped into "The private sector will provide" refrain, coupled with the retort that relying on taxpayer's money in order to support the regions is "yesterday's language". Oh really. The RGF will provide a fund-out of either thin air, or more likely taxpayer's money-and then "make the best judgements available" in order to distribute it to the private sector?!
When asked how this supposed reliance on the private sector to drive the economy forward squared with his previous title of "Mr Intervention"-a title he gained for famously saying when in government in the 80's that he would intervene before breakfast, before lunch and after dinner if it meant supporting British industry-he gave the most political of answers-"All my political career, and actually before it, we have seen the transfer of wealth, decision making and power from the provinces to London".
Not quite the answer I was looking for, but then again, it is very difficult to combine intelligent thought with ideological blather. Just ask Mr Osborne-a man who has never worked a day in his life-smirk his way through the nonsense that these cuts were ever anything more than an unsubstantiated gamble predicated on a shallow understanding of Milton Friedman's and dislike of John Maynard Keynes.
Tuesday 26 October 2010
If I Were Chancellor of the Exchequer...
I was avoiding answering this question as I thought it would involve an inordinate amount of research to put together a comprehensive, and hopefully irrefutable answer. I have a tendency to be a bit too literal and so in this instance I was standing much in my own way.
For upon reflection I concluded that it was actually a very basic question amounting to either cutting the budget and thereby introducing a new austerity to Britain, or or to employ deficit spending by the government as a means of stimulating the economy until such time that economic growth achieved the critical mass to continue to grow without government intervention.
To answer the question I will split the world of economics into Monetarists and Keynesian's. Of course there are other variations, but if we concern ourselves with questions of monetary versus fiscal policy solutions to economic questions it will facilitate my answer.
To narrow the discussion down to this level requires answering some fundamental questions pertaining to the role of government, and theories of economics.
At a minimum I would maintain that governments are there primarily for four basic reasons: 1.)To protect the state from outside aggression; 2.)to ensure civil peace/obedience i.e. police and a legal framework; and 3.) to provide public services such as transportation, infrastructure, etc.
This is where the notion of political economics comes into play. The basic purposes of government as I have defined them have to be paid for. This means taxation, the fourth purpose. Any money taken in the form of taxes means that the private sector has less. Hence the question of fiscal policy and how taxation, the most basic form of government intervention effects the economy.
But there is still one more question or perhaps purpose to be queried. Is the government also responsible to introduce fiscal policies to promote employment, and if so, what is the fiscal policy/employment/inflation relationship?
The Keynesian's in the room would maintain that a mixed economy, predominantly private sector, but with a large role for government and the public sector is the correct route and that the introduction of massive spending cuts is the wrong choice.
The Monetarists would counter this maintaining that government interference in economics, especially in the creation of a massive budget deficit is anti-business and that the "crowding-out" effect of government debt supply would counteract any positive effects of government spending.
They-the Monetarists would have to explain how they wanted to get us out of the current "liquidity-trap" in which the Central Banks provide cheap funds to the banks who don't lend it on thus counteracting any positive effects of monetarist policy.
They would find this extremely difficult.
The private sector doesn't invest because there is either no current demand, or they don't foresee (rising) demand in the future. Of course they don't invest. There is no confidence, and cutting government spending by 25% to balance the budget, primarily at the expense of the public sector is a huge gamble. There has to be a distinction between benefits and the Public Sector.
As Chancellor I would introduce a massive overhaul of the benefits sector. Only those who truly can't work would continue to receive benefits. Everyone else would be made to fulfil some sort of work, even if it were just community service. I would also make cuts to the wealthy. Free Bus Passes, child benefit and other benefits such as winter fuel payments would have cut offs at income levels above £90,000. Strange but true I believe that marriage is a benefit to society, regardless of sexual preferences, and so households would be viewed, not individual working adults, despite the difficulties of means testing.
The Public Sector can be trimmed-it can always be trimmed, but only in conjunction with a viable growth program which will stimulate the private sector. I would establish a National Endowment to fund research and development in energy-all energy, including nuclear-with the stated goal to develop and manufacture in the UK. I would focus on infrastructure projects and would not sell off public assets such as the rights to run the Channel Tunnel.
Simply stated, all of the purposes of government as I have defined them require a functioning economy, and by that I mean a full-employment economy. It might mean that some parts of it are less profitable, that some parts could be more efficient. But it does not mean that the cheapest route is the best. It is not. I would go so far as to say that the pursuit of the cheapest is the problem, not the solution
For upon reflection I concluded that it was actually a very basic question amounting to either cutting the budget and thereby introducing a new austerity to Britain, or or to employ deficit spending by the government as a means of stimulating the economy until such time that economic growth achieved the critical mass to continue to grow without government intervention.
To answer the question I will split the world of economics into Monetarists and Keynesian's. Of course there are other variations, but if we concern ourselves with questions of monetary versus fiscal policy solutions to economic questions it will facilitate my answer.
To narrow the discussion down to this level requires answering some fundamental questions pertaining to the role of government, and theories of economics.
At a minimum I would maintain that governments are there primarily for four basic reasons: 1.)To protect the state from outside aggression; 2.)to ensure civil peace/obedience i.e. police and a legal framework; and 3.) to provide public services such as transportation, infrastructure, etc.
This is where the notion of political economics comes into play. The basic purposes of government as I have defined them have to be paid for. This means taxation, the fourth purpose. Any money taken in the form of taxes means that the private sector has less. Hence the question of fiscal policy and how taxation, the most basic form of government intervention effects the economy.
But there is still one more question or perhaps purpose to be queried. Is the government also responsible to introduce fiscal policies to promote employment, and if so, what is the fiscal policy/employment/inflation relationship?
The Keynesian's in the room would maintain that a mixed economy, predominantly private sector, but with a large role for government and the public sector is the correct route and that the introduction of massive spending cuts is the wrong choice.
The Monetarists would counter this maintaining that government interference in economics, especially in the creation of a massive budget deficit is anti-business and that the "crowding-out" effect of government debt supply would counteract any positive effects of government spending.
They-the Monetarists would have to explain how they wanted to get us out of the current "liquidity-trap" in which the Central Banks provide cheap funds to the banks who don't lend it on thus counteracting any positive effects of monetarist policy.
They would find this extremely difficult.
The private sector doesn't invest because there is either no current demand, or they don't foresee (rising) demand in the future. Of course they don't invest. There is no confidence, and cutting government spending by 25% to balance the budget, primarily at the expense of the public sector is a huge gamble. There has to be a distinction between benefits and the Public Sector.
As Chancellor I would introduce a massive overhaul of the benefits sector. Only those who truly can't work would continue to receive benefits. Everyone else would be made to fulfil some sort of work, even if it were just community service. I would also make cuts to the wealthy. Free Bus Passes, child benefit and other benefits such as winter fuel payments would have cut offs at income levels above £90,000. Strange but true I believe that marriage is a benefit to society, regardless of sexual preferences, and so households would be viewed, not individual working adults, despite the difficulties of means testing.
The Public Sector can be trimmed-it can always be trimmed, but only in conjunction with a viable growth program which will stimulate the private sector. I would establish a National Endowment to fund research and development in energy-all energy, including nuclear-with the stated goal to develop and manufacture in the UK. I would focus on infrastructure projects and would not sell off public assets such as the rights to run the Channel Tunnel.
Simply stated, all of the purposes of government as I have defined them require a functioning economy, and by that I mean a full-employment economy. It might mean that some parts of it are less profitable, that some parts could be more efficient. But it does not mean that the cheapest route is the best. It is not. I would go so far as to say that the pursuit of the cheapest is the problem, not the solution
Friday 22 October 2010
So Much for the Vaunted Private Sector
There is an interesting battle going on regarding the foreclosure mess in the U.S. and the role of the Reston, Virginia based company Mortgage Electronic Registration Systems (MERS).
It is a wonderful example of efficiency in the private sector.
Traditionally the mortgage business in the U.S. was predicated on a clear understanding of who held title to a specific property. If a lender on a mortgage wanted to sell the lien they were required to fill in new forms and pay filing fees each time a loan changed hands.
This was a cumbersome process which had a benefit that the documentation to title would be scrutinized by the purchaser in their normal due-diligence procedures. It took time, and time is money in the world of high-finance. So the giants of the Mortgage industry including Fannie Mae, Freddie Mac, GMAC and the Mortgage Bankers Association got together and created MERS in 1995 to facilitate the trading of mortgages at speed, bypassing local property laws.
Efficiency. The use of electronic systems to track mortgages as they were traded between firms in the creation of Mortgage Backed Securities (MBS) at lightning speed. As long as everything was going up there were no problems.
Now prices are declining, and the cracks begin to appear. MERS was created to smooth the securitisation process, and to allow lenders to avoid paying registration fees. Cost savings. What is not clear in this cost-saving efficency machine is if MERS is an agent or a principal.
This is a very important distinction. Apparently you can't be both, and yet being only one could be a real problem. An agent can't list itself as a principal. MERS states cleary that it is an agent-it was created as such. And yet it lists itself as a mortgagee. An agent doesn't hold title so in it's role as an agent it doesn't actually own the loan. Acting as an agent and as a principal could be contravening a precedent which states that you cannot separate the loan from the mortgage, and to do so makes the mortgage null and void. Null and void.
And in this case, although the borrower still owes the money, the mortgage can no longer be enforced-the house cannot be foreclosed on, and, my favorite, the house could be sold without paying off the mortgage as the borrow retains title!
Of course the lender can sue the borrower, and will. But most of the homeowners in question are financially distressed, and as the old saying goes, you can't reach into a naked man's pocket...
And the efficiency goes further. As MERS began submitting affidavits in foreclosures signed by "vice presidents" of the firm it turned out that the vice presidents had never seen the files as the affidavits stated they had. Even better, MERS allowed financial institutions that are its members to name anyone a vice president so none of these people actually worked for MERS.
And you wonder why our financial system needed to be bailed out by TARP.
It is a wonderful example of efficiency in the private sector.
Traditionally the mortgage business in the U.S. was predicated on a clear understanding of who held title to a specific property. If a lender on a mortgage wanted to sell the lien they were required to fill in new forms and pay filing fees each time a loan changed hands.
This was a cumbersome process which had a benefit that the documentation to title would be scrutinized by the purchaser in their normal due-diligence procedures. It took time, and time is money in the world of high-finance. So the giants of the Mortgage industry including Fannie Mae, Freddie Mac, GMAC and the Mortgage Bankers Association got together and created MERS in 1995 to facilitate the trading of mortgages at speed, bypassing local property laws.
Efficiency. The use of electronic systems to track mortgages as they were traded between firms in the creation of Mortgage Backed Securities (MBS) at lightning speed. As long as everything was going up there were no problems.
Now prices are declining, and the cracks begin to appear. MERS was created to smooth the securitisation process, and to allow lenders to avoid paying registration fees. Cost savings. What is not clear in this cost-saving efficency machine is if MERS is an agent or a principal.
This is a very important distinction. Apparently you can't be both, and yet being only one could be a real problem. An agent can't list itself as a principal. MERS states cleary that it is an agent-it was created as such. And yet it lists itself as a mortgagee. An agent doesn't hold title so in it's role as an agent it doesn't actually own the loan. Acting as an agent and as a principal could be contravening a precedent which states that you cannot separate the loan from the mortgage, and to do so makes the mortgage null and void. Null and void.
And in this case, although the borrower still owes the money, the mortgage can no longer be enforced-the house cannot be foreclosed on, and, my favorite, the house could be sold without paying off the mortgage as the borrow retains title!
Of course the lender can sue the borrower, and will. But most of the homeowners in question are financially distressed, and as the old saying goes, you can't reach into a naked man's pocket...
And the efficiency goes further. As MERS began submitting affidavits in foreclosures signed by "vice presidents" of the firm it turned out that the vice presidents had never seen the files as the affidavits stated they had. Even better, MERS allowed financial institutions that are its members to name anyone a vice president so none of these people actually worked for MERS.
And you wonder why our financial system needed to be bailed out by TARP.
Thursday 21 October 2010
Is the Public Sector the Golden Goose?
I saw today that the Province of Alberta is considering tinkering with the National Health Care System by introducing "for profits" providers into the mix.
The biggest complaint by Albertans is the length of the waiting lists for major operations for conditions which aren't life threatening such as knee replacements.
Quite how introducing profit-based providers into the public health system is going to improve this problem is beyond me. The usual laissez-faire chant is "efficiency, efficiency, efficiency". It is true that wastage exists in the public sector. It is also true that wastage takes place in the private sector.
What generally happens is when things are going well the amount of careless spending increases. Contracts or subscriptions aren't cancelled although the services provided are no longer needed. Suppliers are not reviewed to insure they are still delivering value for money. It all adds up and what seemed like a pittance in times of plenty suddenly becomes outrageous when times are tough.
So we get the $400 hammer or the £10 pencil in the public sector, as if they didn't occur in the private sector. The belief in the invisible hand of the market to ensure that such "inefficiencies" don't happen in the private sector is garbage. Of course they do. They just don't come under the same scrutiny as the public sector, and it is strange how the invisible hand of the market is easily transformed into the visible hand of the manager. .
In the U.K. the billionaire Sir Philip Green is contracted by the Conservative/LibDem government to write a report on the amount of wastage in the public sector. And then we are supposed to be surprised by his findings highlighting waste at every corner.
My favourite is the attack on the cost of telecommunications. IT is one of the most expensive items in any budget. The providers are essentially an oligopoly. They employ one of the most simple tricks in the book. They offer their hardware below cost, but only in conjunction with long term service contracts. Changing contracts is incredibly expensive. Mr Green can easily show where he could get a cheaper provider. But does he factor in the cost of breaking contracts? Of replacing old hardware?
It is really a question of management, or more specifically of that incredibly rare commodity, good management. This is a problem in both the public and the private sector. Stringent attention to cost control is a prerequisite regardless of the state of the economy and whether the institution in question is in the for-profit or non-profit sector.
It would be a step in the right direction to force private sector companies to declare that part of their business which comes from the public sector, and the profit margins they generate. The private sector company selling a $5 hammer for $400 is not an innocent bystander in this.
The biggest complaint by Albertans is the length of the waiting lists for major operations for conditions which aren't life threatening such as knee replacements.
Quite how introducing profit-based providers into the public health system is going to improve this problem is beyond me. The usual laissez-faire chant is "efficiency, efficiency, efficiency". It is true that wastage exists in the public sector. It is also true that wastage takes place in the private sector.
What generally happens is when things are going well the amount of careless spending increases. Contracts or subscriptions aren't cancelled although the services provided are no longer needed. Suppliers are not reviewed to insure they are still delivering value for money. It all adds up and what seemed like a pittance in times of plenty suddenly becomes outrageous when times are tough.
So we get the $400 hammer or the £10 pencil in the public sector, as if they didn't occur in the private sector. The belief in the invisible hand of the market to ensure that such "inefficiencies" don't happen in the private sector is garbage. Of course they do. They just don't come under the same scrutiny as the public sector, and it is strange how the invisible hand of the market is easily transformed into the visible hand of the manager. .
In the U.K. the billionaire Sir Philip Green is contracted by the Conservative/LibDem government to write a report on the amount of wastage in the public sector. And then we are supposed to be surprised by his findings highlighting waste at every corner.
My favourite is the attack on the cost of telecommunications. IT is one of the most expensive items in any budget. The providers are essentially an oligopoly. They employ one of the most simple tricks in the book. They offer their hardware below cost, but only in conjunction with long term service contracts. Changing contracts is incredibly expensive. Mr Green can easily show where he could get a cheaper provider. But does he factor in the cost of breaking contracts? Of replacing old hardware?
It is really a question of management, or more specifically of that incredibly rare commodity, good management. This is a problem in both the public and the private sector. Stringent attention to cost control is a prerequisite regardless of the state of the economy and whether the institution in question is in the for-profit or non-profit sector.
It would be a step in the right direction to force private sector companies to declare that part of their business which comes from the public sector, and the profit margins they generate. The private sector company selling a $5 hammer for $400 is not an innocent bystander in this.
Wednesday 20 October 2010
Who's Driving this Bus?
We recently had a long discussion about capitalism and socialism. The youthful representative presented the idea that they both wanted the same thing-to provide for the people- with two major differences. Socialism ends up not providing, and capitalism ends up only providing for the few.
It made me think of a conversation I had with a Chinese investment banker who had originally worked for the Central Bank of the People's Republic and then came to work for a French bank.
As we strolled down Tiananmen Square, shadowed by state security agents who followed us everywhere despite the fact that it was 2007, I asked him what he thought Mao would think of modern China in its new capitalist version. He paused for a moment and then said, "Mao would have been surprised by the methodology, but in the end modern China was achieving what Mao had striven for."
I looked around me as I stood in line to file past Mao's preserved corpse; to the west the parliamentary building, to the east the Chinese National Museum, and to the north the Forbidden City. Old China and Modern China. Walk in any direction and you will come to the first ring road, then the second, the third...they are up to the 9th. Each one appears to replicate what was inside the previous ring, until you reach the countryside.
It is bleak. Essentially a desert, although man-made. The air is terribly polluted. The water supplies are rapidly being depleted. And there is a massive gap between the rich and poor.
So capitalism as an economic approach is bringing China into the 21st century, where socialism/communism didn't. The constant is totalitarianism as a political system.
To be fair the political elite in China is very concerned about the plight of the masses-they have to be. Social stability is a prerequisite for them to remain in power.
Theoretically the political elite in a democracy is put in place by the masses who presume their politicians will then institute programs for the benefit of those who voted for them.
Except once they get elected and start to implement policies the electorate recently has decided to voice their displeasure.
Its interesting how the totalitarians are worried about social unrest, while the western democracies response to the financial crisis seems to be inviting it.
It made me think of a conversation I had with a Chinese investment banker who had originally worked for the Central Bank of the People's Republic and then came to work for a French bank.
As we strolled down Tiananmen Square, shadowed by state security agents who followed us everywhere despite the fact that it was 2007, I asked him what he thought Mao would think of modern China in its new capitalist version. He paused for a moment and then said, "Mao would have been surprised by the methodology, but in the end modern China was achieving what Mao had striven for."
I looked around me as I stood in line to file past Mao's preserved corpse; to the west the parliamentary building, to the east the Chinese National Museum, and to the north the Forbidden City. Old China and Modern China. Walk in any direction and you will come to the first ring road, then the second, the third...they are up to the 9th. Each one appears to replicate what was inside the previous ring, until you reach the countryside.
It is bleak. Essentially a desert, although man-made. The air is terribly polluted. The water supplies are rapidly being depleted. And there is a massive gap between the rich and poor.
So capitalism as an economic approach is bringing China into the 21st century, where socialism/communism didn't. The constant is totalitarianism as a political system.
To be fair the political elite in China is very concerned about the plight of the masses-they have to be. Social stability is a prerequisite for them to remain in power.
Theoretically the political elite in a democracy is put in place by the masses who presume their politicians will then institute programs for the benefit of those who voted for them.
Except once they get elected and start to implement policies the electorate recently has decided to voice their displeasure.
Its interesting how the totalitarians are worried about social unrest, while the western democracies response to the financial crisis seems to be inviting it.
Tuesday 19 October 2010
Integration, Assimilation, and Racism,
I just came back from a weekend in Belgium which even before any major influx of immigrants was a country struggling with the challenges of a multicultural society. The vagaries of European history managed to create a country in Northern Europe which crossed linguistic and cultural boundaries.
It was amazing how French the Walloons were, and how Dutch the Flemish were. The cause cannot be strictly on religious grounds as they are nominally all Catholics due to the fact that they were under either Spanish, Austrian or French rule for almost 300 years.
It can only partially be due to language. Regardless of where you live, the education system in both regions teaches the "local" language in primary school, then the "other" Belgian language followed by the offer of a third language-usually English- in High School.
There are obviously tensions in Belgium, and there are extremists on both sides of the language divide, but generally everyone is able to communicate with one another.
In Belgium's case the initial problems appear to be much more of an economic nature. Initially the French south was much stronger, and now the Flemish north is the more powerful. Over time this might shift again, but it is essentially an intra-Belgian/European spat.
Belgium also has a growing immigrant community, initially from its former Central African colonies, and now also increasingly from North Africa and the Middle-East. Riding on the train we happened to sit next to a woman who overhearing us speaking addressed us in English to give us directions.
She was Nigerian. She spoke Flemish, but preferred English although she had been there for 14 years. She had a Belgium passport. As she explained it, if you are "proper" i.e. worked and were a model citizen getting a passport after 3 years was not that onerous. What was difficult she continued, despite getting the passport, was the color of her skin.
Now I don't know what religion she was-Nigeria is basically 50-50 Christian/Islam- so I can't be certain that religion wasn't one of the barriers she had to overcome. But in her own words, the real problem was that she wasn't white.
I reflected on this. Across Europe there are many discussions about multicultural societies and their effect on the "domestic" culture. The discussion seems to center on language and religion, and of course the economic impact.
I would suggest that in the first instance the official embrace of multiculturalism has hampered the realisation that new immigrants must learn the language of their "host" country. Without that there is no chance of integration.
The second hurdle is the ease by which Islam is cited as a barrier to entering "society" and an explanation as to why some immigrants don't want to be integrated. I believe that when we speak of integration we actually mean assimilation, and I think that over time, in conjunction with language, that the practice of religion can be assimilated.
That leaves Race, the aspect no one wants to address and the one thing you can't change-except through miscegenation- as the real problem to integration/assimilation.
It was amazing how French the Walloons were, and how Dutch the Flemish were. The cause cannot be strictly on religious grounds as they are nominally all Catholics due to the fact that they were under either Spanish, Austrian or French rule for almost 300 years.
It can only partially be due to language. Regardless of where you live, the education system in both regions teaches the "local" language in primary school, then the "other" Belgian language followed by the offer of a third language-usually English- in High School.
There are obviously tensions in Belgium, and there are extremists on both sides of the language divide, but generally everyone is able to communicate with one another.
In Belgium's case the initial problems appear to be much more of an economic nature. Initially the French south was much stronger, and now the Flemish north is the more powerful. Over time this might shift again, but it is essentially an intra-Belgian/European spat.
Belgium also has a growing immigrant community, initially from its former Central African colonies, and now also increasingly from North Africa and the Middle-East. Riding on the train we happened to sit next to a woman who overhearing us speaking addressed us in English to give us directions.
She was Nigerian. She spoke Flemish, but preferred English although she had been there for 14 years. She had a Belgium passport. As she explained it, if you are "proper" i.e. worked and were a model citizen getting a passport after 3 years was not that onerous. What was difficult she continued, despite getting the passport, was the color of her skin.
Now I don't know what religion she was-Nigeria is basically 50-50 Christian/Islam- so I can't be certain that religion wasn't one of the barriers she had to overcome. But in her own words, the real problem was that she wasn't white.
I reflected on this. Across Europe there are many discussions about multicultural societies and their effect on the "domestic" culture. The discussion seems to center on language and religion, and of course the economic impact.
I would suggest that in the first instance the official embrace of multiculturalism has hampered the realisation that new immigrants must learn the language of their "host" country. Without that there is no chance of integration.
The second hurdle is the ease by which Islam is cited as a barrier to entering "society" and an explanation as to why some immigrants don't want to be integrated. I believe that when we speak of integration we actually mean assimilation, and I think that over time, in conjunction with language, that the practice of religion can be assimilated.
That leaves Race, the aspect no one wants to address and the one thing you can't change-except through miscegenation- as the real problem to integration/assimilation.
Tuesday 12 October 2010
The Defective Society?
In pondering the causes for poverty in our advanced, wealthy societies I have been reading Henry George's "Progress and Poverty".
Granted, it was written in 1879 and has therefore been superseded by history in some aspects, there are still some basic points he makes the gist of which is that the cause of want and poverty is social and not natural.
Mr George's basic premise was to refute the tenets of Malthus whose population theory he held essentially excused the presence of the poor and needy to the natural (Godly)order of things. His argument was that Malthus allowed laissez-faire capitalists to ignore both the have-nots and the attempts of the socialists/Marxists to provide an alternative political economic view of the world.
He maintained that the earth could actually provide for all humanity, and certainly that we in the advanced nations could at a minimum ensure no one in our society need go without the basic necessities of life. The fact that we don't is because our political economic systems don't cater to this sector of society-hence it is as a result of human intervention.
But recently I have been involved in a discussion which questions this basic assumption. What if there is a group in society which is naturally predisposed to need-either actively or passively. Is there a group that is content to be classified as "needy", and is happy to be provided for?
What I am asking is not if there are people through no action of their own who are incapable of working. Incapacity does exist. It might be physical; it might be mental. It is real and in a moral society I believe we have a responsibility to help those who can't help themselves.
The question I am asking is a more basic one. Is it in the natural order of things that there will always exist a section of the population that requires assistance, and if so how do we define them, and what percentage of the whole do they represent?
There is an ancillary question however. In addition to those that don't have the same access to education, to opportunity, is there perhaps a group that doesn't have the ambition to change its circumstances?
I am aware that this is dangerous ground- but I also believe the subject has to be addressed. Does there exist a group in society that is content to receive public assistance without entering into the basic social contract. It is a free lunch, notwithstanding the fact that the amounts being disbursed to any one individual might appear to be insufficient.
Unfortunately the discussion often centers around the amount distributed focusing on the fact that it is barely sufficient, if that, to provide for the most basic living requirements. And, so the argument goes, how can a wealthy society not provide more to its disadvantaged members.
Another argument is that the cost of discerning between those that cannot fend for themselves and those that are content not to is so expensive such that it is cheaper and somehow more efficient to subsidise all of them.
I disagree.
Regardless of the problems with the inequities in compensation and taxation that occur in our society we have to ensure that everyone who can work, does. Yes it might mean a large public sector. Yes it will mean that the costs to determine who can and who can't work will have to be paid; it also means that the costs associated with determining who receives social benefits, looking at the poorest, and the wealthiest, will have to be born.
It is not a question of either social spending or not. It is not a question of Socialism or Laissez-Faire Capitalism.
It is a realisation that spending has to be controlled- and so does Capitalism.
Generally it is said that war is much too serious to be entrusted to the military. I would say society is much to important to be entrusted to economists.
Granted, it was written in 1879 and has therefore been superseded by history in some aspects, there are still some basic points he makes the gist of which is that the cause of want and poverty is social and not natural.
Mr George's basic premise was to refute the tenets of Malthus whose population theory he held essentially excused the presence of the poor and needy to the natural (Godly)order of things. His argument was that Malthus allowed laissez-faire capitalists to ignore both the have-nots and the attempts of the socialists/Marxists to provide an alternative political economic view of the world.
He maintained that the earth could actually provide for all humanity, and certainly that we in the advanced nations could at a minimum ensure no one in our society need go without the basic necessities of life. The fact that we don't is because our political economic systems don't cater to this sector of society-hence it is as a result of human intervention.
But recently I have been involved in a discussion which questions this basic assumption. What if there is a group in society which is naturally predisposed to need-either actively or passively. Is there a group that is content to be classified as "needy", and is happy to be provided for?
What I am asking is not if there are people through no action of their own who are incapable of working. Incapacity does exist. It might be physical; it might be mental. It is real and in a moral society I believe we have a responsibility to help those who can't help themselves.
The question I am asking is a more basic one. Is it in the natural order of things that there will always exist a section of the population that requires assistance, and if so how do we define them, and what percentage of the whole do they represent?
There is an ancillary question however. In addition to those that don't have the same access to education, to opportunity, is there perhaps a group that doesn't have the ambition to change its circumstances?
I am aware that this is dangerous ground- but I also believe the subject has to be addressed. Does there exist a group in society that is content to receive public assistance without entering into the basic social contract. It is a free lunch, notwithstanding the fact that the amounts being disbursed to any one individual might appear to be insufficient.
Unfortunately the discussion often centers around the amount distributed focusing on the fact that it is barely sufficient, if that, to provide for the most basic living requirements. And, so the argument goes, how can a wealthy society not provide more to its disadvantaged members.
Another argument is that the cost of discerning between those that cannot fend for themselves and those that are content not to is so expensive such that it is cheaper and somehow more efficient to subsidise all of them.
I disagree.
Regardless of the problems with the inequities in compensation and taxation that occur in our society we have to ensure that everyone who can work, does. Yes it might mean a large public sector. Yes it will mean that the costs to determine who can and who can't work will have to be paid; it also means that the costs associated with determining who receives social benefits, looking at the poorest, and the wealthiest, will have to be born.
It is not a question of either social spending or not. It is not a question of Socialism or Laissez-Faire Capitalism.
It is a realisation that spending has to be controlled- and so does Capitalism.
Generally it is said that war is much too serious to be entrusted to the military. I would say society is much to important to be entrusted to economists.
Monday 11 October 2010
Quick Follow-up to "Russia"
The short list of candidates for the Moscow mayoralty was publicly unveiled yesterday by Russian President Dmitiri Medvedev. The current chief of staff for Russian Prime Minister Vladimir Putin, a Mr Sergei Sobyanin, tops the list.
Sounds like the Kremlin continues to rule everything in Russia.
Sounds like the Kremlin continues to rule everything in Russia.
If I were King of the Forest....
I was recently asked to give an opinion on the economic impact of the austerity plans being introduced in the UK. Bluntly put, did I think that the result would be to push the UK back in to recession, or would the overall effect be positive for the economy.
My initial response was to start to answer from a political point of view. Unfortunately I had to quickly admit that the truth is that no one really knows what the effect of the austerity plan in the UK, or the stimulus plan in the U.S. will be.
That made me reflect for a moment. Each side of the discussion can show what the effects have been in the past of both austerity, as well as stimulus programs. There are historical precedents of where both have worked, and where neither has worked.
It is perhaps not as strange as that might sound. The initial studies of economics were actually called political economics. I am not sure when the term political was dropped. I have to assume it was to extricate the study of economics from the realm of politics, which is essentially a cross between social theory and some aspect of philosophy and moral thought.
Generally speaking, science is supposed to be free of moral and philosophical considerations. It is more difficult to maintain that distinction if the science intended is attached to politics. Hence the transition from 'political' economics to the 'science' of economics.
A clever move. It frees economists from any moral or ethical guilt. It provides a "best case" approach to a life where "all things being equal.....".
Even if for a moment in time all things were equal, they do not stay that way. Austerity plans and Stimulus spending will effect the economical and therefore the social health of a society.
And so I paused in my response, and rephrased the question. "What would I do if I were Chancellor of the Exchequer? That is a very different proposition which I shall endeavour to answer over the next couple of days. Not to write the full budget for the UK, but to think in terms of political economics.
My initial response was to start to answer from a political point of view. Unfortunately I had to quickly admit that the truth is that no one really knows what the effect of the austerity plan in the UK, or the stimulus plan in the U.S. will be.
That made me reflect for a moment. Each side of the discussion can show what the effects have been in the past of both austerity, as well as stimulus programs. There are historical precedents of where both have worked, and where neither has worked.
It is perhaps not as strange as that might sound. The initial studies of economics were actually called political economics. I am not sure when the term political was dropped. I have to assume it was to extricate the study of economics from the realm of politics, which is essentially a cross between social theory and some aspect of philosophy and moral thought.
Generally speaking, science is supposed to be free of moral and philosophical considerations. It is more difficult to maintain that distinction if the science intended is attached to politics. Hence the transition from 'political' economics to the 'science' of economics.
A clever move. It frees economists from any moral or ethical guilt. It provides a "best case" approach to a life where "all things being equal.....".
Even if for a moment in time all things were equal, they do not stay that way. Austerity plans and Stimulus spending will effect the economical and therefore the social health of a society.
And so I paused in my response, and rephrased the question. "What would I do if I were Chancellor of the Exchequer? That is a very different proposition which I shall endeavour to answer over the next couple of days. Not to write the full budget for the UK, but to think in terms of political economics.
Friday 8 October 2010
How Dangerous is Russia?
When I am in the U.S. thoughts of Russia are generally not part of my daily routine. The political and cultural aspects of America seem to be almost all-consuming and it is easy to fall into a form of isolationism.
When an international concerns arises it tends to be in conjunction with China and falls into the economic sphere-either currency manipulation or some form of interaction with the U.S. such as "they're taking our jobs".
In Europe however, and especially on the continent, the geopolitics of Russia are much more overt given the history of region be it the recent or the more distant past.
It is therefore much more disturbing to hear Russian President Medvedev call for a new European Security Framework. Couched in terms of introducing Russia as a security partner for Europe, Mr Medvedev was actually making subtle threats to Central Eastern Europeans who are grasping on to the NATO framework to protect them from Russia.
It is a clever move. What better way to insure against a Russian-European conflict then to bind the two blocs together in a unified military structure. I have my doubts as to the sincerity of the intention however. The history of Russian-European treaties is not a pleasant one.
Russia recognises that the U.S. is relatively stretched with two wars, a recession and an unsettled political environment. It has taken this opportunity to reassert itself in the former soviet republics of Uzbekistan, Kyrgyzstan, Tajikistan and Kazakhstan. They have been applying constant pressure to the Baltic States, have essentially engineered a Russian victory in the Ukraine and even resorted to military means in Georgia.
Now they have shifted their focus even further West, offering to help keep the peace in Central Europe, while they themselves are the biggest threat. It is perhaps telling of their real intentions that the case in point that they suggested as an example of where they could assist is in Cyprus.
Russia and Turkey have a long history of trying to assert dominance over the region. I see their offer to help in the eastern Mediterranean to be a continuation of this conflict. Greece and Turkey-who have conflicting claims on Cyprus are both members of NATO and Russia would want nothing more than to have a say in the solution to the problem, excluding the U.S.
This move bears constant scrutiny.
When an international concerns arises it tends to be in conjunction with China and falls into the economic sphere-either currency manipulation or some form of interaction with the U.S. such as "they're taking our jobs".
In Europe however, and especially on the continent, the geopolitics of Russia are much more overt given the history of region be it the recent or the more distant past.
It is therefore much more disturbing to hear Russian President Medvedev call for a new European Security Framework. Couched in terms of introducing Russia as a security partner for Europe, Mr Medvedev was actually making subtle threats to Central Eastern Europeans who are grasping on to the NATO framework to protect them from Russia.
It is a clever move. What better way to insure against a Russian-European conflict then to bind the two blocs together in a unified military structure. I have my doubts as to the sincerity of the intention however. The history of Russian-European treaties is not a pleasant one.
Russia recognises that the U.S. is relatively stretched with two wars, a recession and an unsettled political environment. It has taken this opportunity to reassert itself in the former soviet republics of Uzbekistan, Kyrgyzstan, Tajikistan and Kazakhstan. They have been applying constant pressure to the Baltic States, have essentially engineered a Russian victory in the Ukraine and even resorted to military means in Georgia.
Now they have shifted their focus even further West, offering to help keep the peace in Central Europe, while they themselves are the biggest threat. It is perhaps telling of their real intentions that the case in point that they suggested as an example of where they could assist is in Cyprus.
Russia and Turkey have a long history of trying to assert dominance over the region. I see their offer to help in the eastern Mediterranean to be a continuation of this conflict. Greece and Turkey-who have conflicting claims on Cyprus are both members of NATO and Russia would want nothing more than to have a say in the solution to the problem, excluding the U.S.
This move bears constant scrutiny.
Wednesday 6 October 2010
Inequality and Democracy
I was asked last night at dinner which inequalities I held to be most dangerous to democracy. The answers in the main were short and sweet. Economic; Education; and Legal. But then we had to hear from our resident Libertarian-in-Chief who dismissed economic inequality as a danger and wanted to portray it in the halo of opportunity and hope. For him the inequalities in Education were the single most important danger to a democracy.
After the group had soundly rounded on the libertarian the discussion did take a rather unexpectedly turn. Didn't the concept of equality before the law emanate from the fact that societies are always made up of the rich and poor and the latter needed to be protected? And was it not also the case that the introduction of public education was again to combat the natural state of haves and have-nots?
From a basic question on the nature of democracy and its safeguards we rapidly moved into the area of society and the human condition. The social Darwinists in the group maintained that democracy was necessary precisely because of the fear and greed base instincts of humans.
No one wanted to be described as a social Darwinist, and yet the table went somewhat quiet. Equality before the law took on a much greater weighting in the deliberation. And education pushed forward as well. A well educated populace should provide competent candidates, and equally important, competent voters.
A fidgeting on seats revealed a slight understanding of the libertarian. And then it was gone.
Everyone agreed that there will always be differences in the financial wherewithal of the members of a society. Access to education and equality before the law are good and necessary counterweights to the wealth divide. They are however not sufficient.
In the developed democracies a huge divide between rich and poor was generally viewed as a drag on the growth of democracy. Such societies tended to be dictatorships, monarchies or other feudal systems.
Given that most of the developed countries evolved from feudal to constitutional monarchies to democracies it is not surprising that we viewed the world so. This is despite the fact that the rich poor divide remained. It was more a question of what level of financial inequality did society accept.
The growth in the financial gap in the U.S. over the last 25 years or so suggests that there is a change in the level that society accepts-or does it?
I think the concentration of money is crushing social mobility. And if you eliminate social mobility in the U.S., you are destroying the American dream, and that is the real danger to our democracy.
After the group had soundly rounded on the libertarian the discussion did take a rather unexpectedly turn. Didn't the concept of equality before the law emanate from the fact that societies are always made up of the rich and poor and the latter needed to be protected? And was it not also the case that the introduction of public education was again to combat the natural state of haves and have-nots?
From a basic question on the nature of democracy and its safeguards we rapidly moved into the area of society and the human condition. The social Darwinists in the group maintained that democracy was necessary precisely because of the fear and greed base instincts of humans.
No one wanted to be described as a social Darwinist, and yet the table went somewhat quiet. Equality before the law took on a much greater weighting in the deliberation. And education pushed forward as well. A well educated populace should provide competent candidates, and equally important, competent voters.
A fidgeting on seats revealed a slight understanding of the libertarian. And then it was gone.
Everyone agreed that there will always be differences in the financial wherewithal of the members of a society. Access to education and equality before the law are good and necessary counterweights to the wealth divide. They are however not sufficient.
In the developed democracies a huge divide between rich and poor was generally viewed as a drag on the growth of democracy. Such societies tended to be dictatorships, monarchies or other feudal systems.
Given that most of the developed countries evolved from feudal to constitutional monarchies to democracies it is not surprising that we viewed the world so. This is despite the fact that the rich poor divide remained. It was more a question of what level of financial inequality did society accept.
The growth in the financial gap in the U.S. over the last 25 years or so suggests that there is a change in the level that society accepts-or does it?
I think the concentration of money is crushing social mobility. And if you eliminate social mobility in the U.S., you are destroying the American dream, and that is the real danger to our democracy.
Tuesday 5 October 2010
Stuttgart 21
There is an interesting situation developing in Stuttgart triggered by the Stuttgart 21 project. Briefly stated, the plan is to rebuild the entire Stuttgart Central Rail Station by turning it 90 degrees and burying it under the city, build tunnels to the airport and complete the Paris to Budapest High Speed Rail Line.
It was a project first envisioned 15 years ago, discussed in earnest over the last 5 years and finally some time about 12 months ago all of the necessary political and commercial document were signed and sealed.
The strange thing about the protest is that it wasn't until they actually started to tear down the old station that people got (negatively) excited about it such that last night somewhere between 25-50,000 demonstrators were on hand to try and block it.
My wife comes from Stuttgart and we travel there by train relatively frequently and so we were recently caught up in the demonstration.
My initial impression of the protest, or perhaps more to the point of the protesters was that there were relatively large numbers of high school age students being organised by significantly older people-in their 30's and 40's, as well as a number of people in their 50's and 60's.
The younger group seemed excited-they were skipping school. The organisers appeared to be professional organisers, and the older group struck me at as if they had gone into their cupboards, found their old protest armbands and banners from the 70's, and were "off to the demo".
So far, so good. But last week things got a bit more serious. The police, who claim to have been attacked, responded with pepper spray and water cannons to repel the crowds. The resulting pictures showed students and older folk getting slammed to the ground transforming a local conflict into a national one.
Just what the demonstration is about is difficult to ascertain. Indeed, the project itself is very difficult to understand.
Is it a real estate venture? The current main station and the tracks leading to it cover prime land in the center of the city. Is it a massive public works project which will employ over 10,000 construction workers for 10 years? Will it bring economic growth by completing the Paris to Budapest rail link? Or is it just a showplace of modern German engineering know-how?
And the protesters. Are they angry because some trees are being cut down? Are they enraged because the costs have almost doubled from the initial estimates. Are they upset because the major beneficiaries appear to be big business? Or are they just looking for something to get excited about?
What is clear however, is that a local development project in southern Germany has reached national proportions. It has perhaps turned in to a public manifestation of a general political discontent in Germany.
Frau Merkel, who has managed to navigate through myriad political storms is in danger of finding herself in a very small boat in the middle of a very rough sea.
Regardless of one's political leanings, I see no serious alternatives to Frau Merkel. It is strange how the politics of "no", whether from the left or the right, in whatever country, is challenging incumbents regardless of their record.
It was a project first envisioned 15 years ago, discussed in earnest over the last 5 years and finally some time about 12 months ago all of the necessary political and commercial document were signed and sealed.
The strange thing about the protest is that it wasn't until they actually started to tear down the old station that people got (negatively) excited about it such that last night somewhere between 25-50,000 demonstrators were on hand to try and block it.
My wife comes from Stuttgart and we travel there by train relatively frequently and so we were recently caught up in the demonstration.
My initial impression of the protest, or perhaps more to the point of the protesters was that there were relatively large numbers of high school age students being organised by significantly older people-in their 30's and 40's, as well as a number of people in their 50's and 60's.
The younger group seemed excited-they were skipping school. The organisers appeared to be professional organisers, and the older group struck me at as if they had gone into their cupboards, found their old protest armbands and banners from the 70's, and were "off to the demo".
So far, so good. But last week things got a bit more serious. The police, who claim to have been attacked, responded with pepper spray and water cannons to repel the crowds. The resulting pictures showed students and older folk getting slammed to the ground transforming a local conflict into a national one.
Just what the demonstration is about is difficult to ascertain. Indeed, the project itself is very difficult to understand.
Is it a real estate venture? The current main station and the tracks leading to it cover prime land in the center of the city. Is it a massive public works project which will employ over 10,000 construction workers for 10 years? Will it bring economic growth by completing the Paris to Budapest rail link? Or is it just a showplace of modern German engineering know-how?
And the protesters. Are they angry because some trees are being cut down? Are they enraged because the costs have almost doubled from the initial estimates. Are they upset because the major beneficiaries appear to be big business? Or are they just looking for something to get excited about?
What is clear however, is that a local development project in southern Germany has reached national proportions. It has perhaps turned in to a public manifestation of a general political discontent in Germany.
Frau Merkel, who has managed to navigate through myriad political storms is in danger of finding herself in a very small boat in the middle of a very rough sea.
Regardless of one's political leanings, I see no serious alternatives to Frau Merkel. It is strange how the politics of "no", whether from the left or the right, in whatever country, is challenging incumbents regardless of their record.
Monday 4 October 2010
How Much Profit, and for Whom?
In a recent meeting the Global Head of Quality at an engineering firm where a friend of mine works posed the somewhat rhetorical question, "what is the purpose of business?"
Now this was in the context of a discussion as to whether parts of the manufacturing process should be outsourced or not. It was simply a question of cost-to the bottom line-not to the employees and the surrounding community, and the desired answer was "to maximise shareholder value".
After the meeting my friend, also somewhat rhetorically offered an alternative answer emanating from his days at engineering school where the response was "to provide quality goods and services at a profit".
That answer elicited a rather bemused look from the Head of Quality who dismissed the idea out of hand. What could be more important than the pursuit of maximum profit?
I would have countered with "maximum profit for whom?" For we have created a binary society where the question has become a simple either/or. Either it's good for the whole,and by definition me; or it's good for me, and by definition the whole.
Our society has chosen to focus on what's good for me. Some people-primarily Republicans and libertarians- try and delude everyone else that in some arcane fashion doing what's good for the few will trickle down to the the benefit of the whole.
I am continually amazed at the willingness of the many to be swayed by the few to vote for top-bracket tax breaks, free trade and financial deregulation. The tax-breaks currently in place benefit the top 3% of the population. Free trades has hollowed out our manufacturing base, and financial deregulation has been a license to print money, for the same top 3%.
So when a man like Mr Obama tries to address these problems he is castigated for being un-American, a socialist, an intellectual and most damaging of all, or so it would appear, for being black.
Maybe that's the answer.
Now this was in the context of a discussion as to whether parts of the manufacturing process should be outsourced or not. It was simply a question of cost-to the bottom line-not to the employees and the surrounding community, and the desired answer was "to maximise shareholder value".
After the meeting my friend, also somewhat rhetorically offered an alternative answer emanating from his days at engineering school where the response was "to provide quality goods and services at a profit".
That answer elicited a rather bemused look from the Head of Quality who dismissed the idea out of hand. What could be more important than the pursuit of maximum profit?
I would have countered with "maximum profit for whom?" For we have created a binary society where the question has become a simple either/or. Either it's good for the whole,and by definition me; or it's good for me, and by definition the whole.
Our society has chosen to focus on what's good for me. Some people-primarily Republicans and libertarians- try and delude everyone else that in some arcane fashion doing what's good for the few will trickle down to the the benefit of the whole.
I am continually amazed at the willingness of the many to be swayed by the few to vote for top-bracket tax breaks, free trade and financial deregulation. The tax-breaks currently in place benefit the top 3% of the population. Free trades has hollowed out our manufacturing base, and financial deregulation has been a license to print money, for the same top 3%.
So when a man like Mr Obama tries to address these problems he is castigated for being un-American, a socialist, an intellectual and most damaging of all, or so it would appear, for being black.
Maybe that's the answer.
Friday 1 October 2010
Now the Republicans have a Plan-with Almost No Detail.
In the news here it is being reported that the Republicans have pledged to cut $100 billion from the federal budget next year by slashing discretionary domestic spending-i.e. education, health and public services..
This would be a 21% reduction of the current domestic discretionary spending budget. Of course they haven't specified any major targets before election day.
They have however earmarked where they wouldn't take it from: the military, and any programs for seniors or veterans.
Their argument is that spending is more effective than tax increases to start balancing the budget.
The overall budget is $3.6 trillion. Social Security, Medicare, servicing the National Debt and discretionary spending on defense eat up almost $3 trillion of the budget. Discretionary spending outside defense is less than $500 billion- and that is where they want to remove the 21%.
If the U.S. doesn't address Social Security and Medicare the cuts in health, education and public services will wreak hardships to many, without providing any real relief to the overall budget picture.
But this is an election year and the Republicans, and the Tea Party are targeting "big government". Cut taxes and you cut the government. So the Republicans advocate cutting $100 billion while they advocate maintaining the tax cuts for the nation's wealthiest that could cost over $40 billion.
It is strange how in a democracy some 5% of the population seems to rule the other 95%. I'm not sure that's what our founding fathers had in mind.
This would be a 21% reduction of the current domestic discretionary spending budget. Of course they haven't specified any major targets before election day.
They have however earmarked where they wouldn't take it from: the military, and any programs for seniors or veterans.
Their argument is that spending is more effective than tax increases to start balancing the budget.
The overall budget is $3.6 trillion. Social Security, Medicare, servicing the National Debt and discretionary spending on defense eat up almost $3 trillion of the budget. Discretionary spending outside defense is less than $500 billion- and that is where they want to remove the 21%.
If the U.S. doesn't address Social Security and Medicare the cuts in health, education and public services will wreak hardships to many, without providing any real relief to the overall budget picture.
But this is an election year and the Republicans, and the Tea Party are targeting "big government". Cut taxes and you cut the government. So the Republicans advocate cutting $100 billion while they advocate maintaining the tax cuts for the nation's wealthiest that could cost over $40 billion.
It is strange how in a democracy some 5% of the population seems to rule the other 95%. I'm not sure that's what our founding fathers had in mind.
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