Tag Archives: Politics

How Wall Street Captured Main Street

If you have the time, read James Kwak‘s interview in The Straddler. He has some interesting things to say about how our culture is oddly enamored of the idea of the swashbuckling wall streeter, and yet intimidated by economics and finance, and how that has influenced policy decisions. He’s a smart cat.  Here is a small sample:

“And Wall Street’s argument that it has this mysterious power, that you have to trust it that it’s using it for good, and that if you take it away, the world will end, is obviously obnoxious—but it’s a hugely successful debating point.  Congressmen are afraid of it.  They’re afraid that they don’t understand what’s going on, and they’re hearing these lobbyists say that if you push too hard on the banking industry, the world will end.”

When Presidents Break the Law (e.g. Bush)

There is a new book out called Because It Is Wrong: Torture, Privacy, and Presidential Power in the Age of Terror. Written by Charles Fried, a Harvard law professor who served in several legal roles in the Reagan administration, including Solicitor General, and his son Gregory Fried, a philosophy professor at Suffolk University, the book explores “the ethics of torture and privacy violations in the Bush era.”

Harvard Magazine recently ran some excerpts from the final chapter, where the Frieds move off of torture per se and more into the general obligations of a president to the people.

They discuss that at times a president might break the law because he thinks the law will not allow him to do what is necessary to save the country, as did Jefferson in 1807 and Lincoln in 1861.The Frieds liken this law breaking to civil disobedience, with “a fundamental allegiance to the political community and its system of laws and government.” Executive law breaking while maintaining ultimate fidelity to the state and its system is civil disobedience; law breaking outside this fidelity is a coup.

But the Frieds also emphasize that civil disobedience, with fidelity to the state, requires admitting your law breaking. Like civil rights protestors who willingly went to jail, executive law-breakers under the Fried model…

“…break the law in a way that emphasizes their allegiance to the rule of law and the existing system of laws and institutions in general, with the exception of the law or set of laws in question. They break the law openly. They break the law reluctantly only for reasons of deep principle and in situations of great urgency, after making a good faith effort to change the law by legal means. They do not resist or avoid the representatives of the state when they arrest them. The practitioners resist by pleading their case in court, and they accept their punishment if the court goes against them, trusting that their fellow citizens will see the light eventually.”

The Frieds note that unlike MLK, a president takes an oath to uphold the law. Yet quoting Aristotle, they claim that the law cannot always foresee what is in the public interest. But if the executive gets to decide what is in the state’s best interest, what is to prevent the executive from becoming a tyrant? Here is where their call for open law-breaking is essential. The risk of being found guilty by the jury of citizenry will keep executives from going too far. “A chilling effect is exactly what we need when it comes to the rule of law.”

In other words, the Frieds believe that an executive law-breaker should stand up and say “yes, I did commit that act” and let the citizens decide. They compare this, unfavorably, to the law-breaking in the Bush administration, wherein the law-breakers to this day refuse to acknowledge what they did. The Frieds make clear that they are not necessarily calling for prosecutions of Bush officials; they only point out that “there is a great danger to secret executive lawbreaking. What is done in secret could metastasize into the arbitrary, lawless power of the tyrant—as it did in the Weimar Republic, with Hitler’s rise to power.”

Benefits of the European Economic Model

Salon recently interviewed Thomas Geoghegan, author of Were You Born on the Wrong Continent?: How the European Model Can Help You Get a Life, a book which, in addition to having a ridiculously long title, discusses the benefits of the European economic model (higher taxes, generous benefits), particularly in terms of improved quality of life. I haven’t read the book, but he made some interesting points in the interview.

He notes that while Germany (his main focus within Europe) has high wages and strong unions, it is also a leading exporter. With one-third the population of the US, Germany still manages to export more than we do. Thus the claim that America can only be competitive with low wages and weak unions is belied by Germany’s success.

He also takes on the GDP statistics that seem to indicate that America is much wealthier than Europe. He notes that GDP doesn’t measure things like leisure time, or a free college education, or liberal parental leave rules:

“One day we’ll get beyond that and see that the European standard of living is rising. You can pull out these GDP per capita statistics and say that people in Mississippi are vastly wealthier than people in Frankfurt and Hamburg. That can’t be true. Just spend two months in Hamburg and spend two months in Tupelo, Mississippi. There’s something wrong if the statistics are telling you that the people in Tupelo are three times wealthier than the people in Germany…..So much of the American economy is based on GDP that comes from waste, environmental pillage, urban sprawl, bad planning, people going farther and farther with no land use planning whatsoever and leading more miserable lives. That GDP is thrown on top of all the GDP that comes from gambling and fraud of one kind or another. It’s a more straightforward description of what Kenneth Rogoff and the Economist would call the financialization of the American economy.”

That quote makes me wonder: if you took out all the casino components of real estate and wall street speculation, what would the US GDP statistics look like then? I’m sure that someone has done this analysis, but I couldn’t find it online.

Geoghegan makes clear that he is an American and that he loves America and loves living here. He merely notes that when we discuss, as we are in the current election, those great American values of individualism and free markets and the heroic capitalist, we should remember that there are benefits to other systems. Germans work, on average, nine weeks less per year than we do (two months!), and yet they seem to have a pretty nice standard of living. I’m not saying I want to move to Frankfurt tomorrow, because I don’t. I too love living in America. But there is no reason we shouldn’t learn from other countries and from what they do well.

Are Businessmen Evil?

Jane Mayer’s article in the New Yorker about David Koch and his brother Charles and their massive funding of right wing political causes is an absolute must read. Regardless of political leaning, I think everyone should be disturbed by the ability of two incredibly wealthy men to so powerfully affect the political discourse in our society, and to do so anonymously.

But the article also made me think about how the Kochs and other businessmen are so determined to lobby government to support “free enterprise,” or at least to quash regulations that might hurt their business. The article discusses how the Kochs are using the same strategy on global warming – fund enough junk science to convince people that there is no scientific consensus – which the tobacco companies used so effectively to stall regulation of nicotine.

The issue I’m contemplating is not one of maximizing profits, but a broader moral issue. What makes a CEO who knows his product is harmful fight so hard against regulation? Does he take his fiduciary duty to maximize shareholder profits that seriously? Is he so focused on his own compensation that he doesn’t care what health problems he causes? The Kochs are nutjob John Birchers, so I expect them to screw over the world, but what about all the other CEOs? What about those who are fighting against environmental regulations even though they know that the global warming science is solid? Or Wall Street CEOs fighting against regulations when they know that their companies caused the financial meltdown? Or coal mining CEOs fighting safety regulation after an explosion in their mine killed 29 workers?

Look, I’m not anti-business. To the contrary, I am solidly pro-business. I’ve worked at companies, I’ve started companies, I consult to companies. My whole life is built on business. I understand the profit motive. What I don’t understand is the willingness to screw over the public in order to make more money. These CEOs would never in a million years think it was OK to stab a man and steal his wallet, but they have no problem poisoning him with industrial waste in order to save money. When do these people have enough? Where is their sense of human decency?

Northern Budgets vs. Southern Corruption

Slate recently ran an article by Anne Applebaum claiming that the division that now matters in Europe is no longer east vs. west, but instead north vs. south. According to Applebaum, communist east vs. capitalist west no longer matters. The important division is austere northern countries that manage their budgets and affairs vs. profligate southern countries that spend like drunken sailors, hoping others will pick up the tab.

As Applebaum puts it:

“The South contains all those countries whose political classes have not been able to balance their national budgets, whose bureaucrats have not been able to reduce their numbers, whose voters have not learned to approve of austerity….The North contains the budget hawks”

After reading the Slate article, I read Michael Lewis’ article in Vanity Fair about the Greek financial crisis. Lewis describes Greece as less of a country than a national pool of corruption in which the entire populace knowingly plunders the government treasury.

Pairing these two articles really made me think about this dichotomy between governance and chaos, between bureaucrats who do their jobs and those whose job is merely a path to a bribe. And it’s really just a small leap from governance vs. corruption to civic good vs. selfishness and then to democracy vs. despotism. But once I started expanding Applebaum’s dichotomy into a broader range of behaviors, I started to wonder whether her north vs. south division could be expanded beyond Europe. I think it can be.

After all, the northern hemisphere is generally a lot better managed than the southern: Canada vs. Venezuela, Estonia vs. Syria. Of course, Russia is really far north, but it acts south. And North Korea vs. South Korea reverses the pattern. But I think if you were to average across the hemispheres, Applebaum’s north vs. south dichotomy holds. Germany is to Greece as Greece is to Zimbabwe? Even within the US, the southern states tend to be far more profligate than the northern, as in this awesome blog entry, or this table showing which states spend more federal dollars than they pay in taxes.

Americans Want Income Equality

Despite all the rhetoric out there about free markets and entrepreneurship and meritocracy and winners getting just rewards, results from a new survey (done by a professor at Harvard Business School, the fountainhead of free enterprise) show that Americans actually want a more equal distribution of wealth. Moreover, it turns out that most Americans have no idea how unequally wealth is currently distributed.

I posted recently about Timothy Noah’s long piece on income inequality; now he summarizes the results of the aforementioned survey. The survey shows that Americans generally think that the richest 20% of us own 60% of the wealth. In reality, the richest 20% own 85%. The survey also reveals that when shown graphs illustrating America’s income distribution, Sweden’s income distribution and an equal distribution, most American’s chose the Swedish graph. The equal graph was second, and the actual American graph came last.

Or, look at this graph from the survey (hat tip to Baseline Scenario for pulling the graph from the original pdf):

American's ideal wealth distribution

Americans very clearly want a more equal distribution of wealth than they have now. They aren’t agitating for it because A) they have no idea how unequal things really are; and B) there is an aspirational optimism in Americans whereby they always think that they will end up at the top.  But the next time some Tea Partier or Fox pundit starts talking about how Americans love the current system and are totally OK with hedge fund managers making $1 billion per year, remember this graph.

Income Inequality; Rise of Wacky Politicians

Here are links to two long and thoughtful articles worth reading.

The first is Timothy Noah’s ten-part (yes, 10!) piece in Slate on income inequality in America. He explores all the possible causes, in a non-ideological way, and then discusses why it all matters. Among the factors at play: taxes, overseas manufacturing, lobbyists and Wall Street. Check out this graph below to see how the share of the top 10% has grown over the last 40 years.

The second article is Matt Bai’s piece in the NY Times about Linda McMahon’s campaign for senator of  Connecticut. Bai explores how a staid, preppy state like Connecticut could possibly elect a cartoonish figure like McMahon, who based on her public statements seems utterly unqualified to be senator. He discusses the long-term trends, including white flight and the loss of industry, which lead to young adults leaving the state and public sector unions gaining power, which leads to a weakening of the traditional political system, which leads to wrestling impresarios running for senate. It’s a long article, but nuanced and thoughtful and well worth reading.

Hal Holbrook and Meg Whitman: Twins?

If you have been watching Sons of Anarchy this season (which I recommend…it’s a solid and well-acted show. It’s no Wire or Mad Men, to be sure, but enjoyable nonetheless) then you know that Hal Holbrook has joined the cast playing the senile, or possibly even dementia-addled, father of one of the main characters. Of course, he is great in the show — I mean it’s Hal freaking Holdbrook — but what I find most interesting is how much he looks like Meg Whitman, the former eBay CEO and current candidate for governor of California.

Here is a picture of Holbrook from the show:

Hal Holbrook in Sons of Anarchy

And here is a picture of Whitman:

Meg Whitman

I mean, seriously, don’t they look similar?

Time for America to Dig In

I have mostly given up on Thomas Friedman at the NY Times, since he generally seems hopelessly out of touch.  But he recently published a column talking about how America’s fiscal difficulties will force us to retrench in our foreign policy. We won’t be able to afford to be the world’s policeman going forward.  Unless, of course, we bear down and make the tough decisions necessary to get our economy growing again. You know, entitlement reform, tax reform, etc. All the stuff our politicians seem unable to do. So let’s encourage them to start making the hard decisions that will enable America to keep kicking ass.

Alaska Loves Federal Money

Yesterday I posted about how Alaska politicians talk a big game about wanting the federal government to leave them alone, but in reality they suck down more federal money than any other state. Having just spent a week in Alaska, I brought some photographic evidence of our biggest state’s big appetite for taxpayer money.

Here is the beginning of a beautifully built and maintained trail at the Mendenhall Glacier outside Juneau. You can see that construction of the trail, which must have employed several people to cut brush and grade the path, was paid for by the federal stimulus package. As for the big Bob Marley joint depicted on the sign….it’s unclear if federal dollars paid for that.

Trail paid for by US taxpayers

In Gustavus, a small town which is the gateway to Glacier Bay, a brand new $20 million dock is being built with federal stimulus dollars. I spoke with the owner of my hotel and with the pilot of my whale watching boat, and both said that the dock was completely unnecessary. But it was employing a whole bunch of skilled laborers, so many that they had to come in from Juneau, since Gustavus didn’t have that many construction workers.

The new dock at Gustavus

Here is a photo of all the pickups and SUVs owned by the people working on the dock. Again, these are local workers being paid with US taxpayer dollars.

Construction worker trucks

I have no problem with stimulus dollars paying people to build paths and docks; that is how a government stimulus package works. The government injects money into the system to boost employment and spending.  My problem is with a state that talks about how it doesn’t believe in the stimulus or in federal help at all while it continues to take as much federal money as it can.