11 to 7 on the Paradigm Shift

There are great amounts of quality disparagements of business schools in general (intentional or not), and MBA programs in particular. The singular ethos, such as it exists, or lack of concern beyond profiteering for anything involving people, environments, good governance or even public safety opens a very wide field in which quite little is possible other than the growing of predator industries and the election of frauds.

But the hedge-fund guys and girls have largely gotten a pass for a long while now, though that just will not suffice and they refuse to have their lack of acumen for or understanding of the industries they destroy not properly respected for precisely what it is:

To me, this and so many other closings of quality publications leads to a broader question of whether journalistic outlets can even exist under this current age of capitalism. In short, I think the answer is basically no. Journalism can exist in a capitalist system of course, but only when the people who own these outlets have some higher purposes, at least in part, whether it is some belief in the truth or at least a willingness to accept relatively moderate profits instead of instant gold. But we now live in an era of venture capitalist schemes, where rank idiots stumble into massive wealth and believe that they are rich because they are smarter than everyone else. When this happens, as it did in the initial Gilded Age, these morons run roughshod over the world around them.

Just so. The jump comes from a ledge of dangerous combination: You make a great deal of money – however quickly – and also systematically evade any education that would have given you access to some self-awareness that might save you and others something a little more important than two points below prime. The serial misunderstanding of terms will be the subtext of the best work of many future historians and not-a-few extradition treaties. CRaP, for example, is a re-purposed acronym that should be far more useful that it is.

Around to See It

Whether it’s color, cash, inexperience or the ins and outs of renewable energy development in general, I often find myself tacking away from the original intent of the meaning of the essence of this site. But then some new article comes out to bring it all back around:

Another conclave of the global great and good is looking at what should be done in the much trickier area of climate change. The premise of the Global Commission on the Economy and Climate is that nothing will be done unless finance ministers are convinced of the need for action, especially given the damage caused by a deep recession and sluggish recovery.

Instead of preaching to the choir the plan is to show how to achieve key economic objectives – growth, investment, secure public finances, fairer distribution of income – while at the same time protecting the planet.

The author provides us the Kennedy space-race analogy as an illustration of the kind of efforts and leadership needed to curtail the effects of climate change, which is fine and well-meaning enough. But then he drops the second Pop-Tart® by suggesting that we need first to show/guarantee business the long-term benefits of greening the economy. I have one: how about you get to still have an economy?

That’s what the whole question is about: do we have enough greed to stifle the impulse toward self-preservation?

Okay – no one can use Enough Greed as a band name or an album title, because I just thought of it and realized its multitudes. Individual songs are fine as long as WDGM is ID’d in the bridge someplace.

 

 

Civilisations

I’ve been re-reading an old issue of Harper’s Magazine from 2007 that I came across in the home kids office while looking for something else – love when that happens, though it’s something that is being disappeared by our ability to search the internet and find only what we want (but that’s another issue for another Friday).

Anyway, there’s a fantastic article by Pankaj Mishra in that issue, a review of two books on India and China. A man after my own heart, the article is called It’s a round world after all: India, China, and the global economy and Mishra provides full service by going back to the musings of Henry Luce in Time and Life to show how western commentators, governments, markets and financial sectors (currently, we are ruled in all but name by a mash-up of these last three two) have consistently gotten China and India wrong, with vast and mostly irredeemable consequences for all of us. Unfortunately, this fine piece of history and journalism is behind a paywall and hence, will not be our focus right now, but I encourage you to seek it out if at all possible (come hither, internets!).

What I will share is this review by Mishra of Civilisation: The West and Rest by Niall Ferguson, wherein he essentially uses Ferguson’s book to chart the same map – the folly of our solipsistic worldview regarding Asia, history, basically any other people. After starting off with an analogy using my favorite protag and yours, Nick Carraway, for a side riff on Ferguson’s earlier book, the Pity of War, he gets on to the matter at hand:

This wistful vision of an empire on which the sun need never have set had an immediately obvious defect. It grossly underestimated – in fact, ignored altogether – the growing strength of anti-colonial movements across Asia, which, whatever happened in Europe, would have undermined Britain’s dwindling capacity to manage its vast overseas holdings. At the time, however, The Pity of War seemed boyishly and engagingly revisionist, and it established Ferguson’s reputation: he was opinionated, ‘provocative’ and amusing, all things that seem to be more cherished in Britain’s intellectual culture than in any other.

In retrospect, The Pity of War’s Stoddardesque laments about the needless emasculation of Anglo-Saxon power announced a theme that would become more pronounced as Ferguson, setting aside his expertise in economic history, emerged as an evangelist-cum-historian of empire. He was already arguing in The Cash Nexus, published a few months before the terrorist attacks of 11 September 2001, that ‘the United States should be devoting a larger percentage of its vast resources to making the world safe for capitalism and democracy’ – if necessary by military force. ‘Let me come clean,’ he wrote in the New York Times Magazine in April 2003, a few weeks after the shock-and-awe campaign began in Iraq, ‘I am a fully paid-up member of the neoimperialist gang.’

Empire: How Britain Made the Modern World (2003), Ferguson’s next book, appeared in America with a more didactic subtitle: ‘The Rise and Demise of the British World Order and the Lessons for Global Power’. The word ‘empire’ still caused some unease in the US, whose own national myths originated in an early, short-lived and selective anti-imperialism. An exasperated Ferguson – ‘the United States,’ he claimed, ‘is an empire, in short, that dare not speak its name’ – set out to rescue the word from the discredit into which political correctness had apparently cast it. Britain’s 19th-century empire ‘undeniably pioneered free trade, free capital movements and, with the abolition of slavery, free labour. It invested immense sums in developing a global network of modern communications. It spread and enforced the rule of law over vast areas.’ ‘Without the spread of British rule around the world,’ he went on, in a typical counterfactual manoeuvre, colonised peoples, such as Indians, would not have what are now their most valuable ideas and institutions – parliamentary democracy, individual freedom and the English language.

America should now follow Britain’s example, Ferguson argued, neglecting to ask why it needed to make the modern world if Britain had already done such a great job. He agreed with the neocon Max Boot that the United States should re-create across Asia the ‘enlightened foreign administration once provided by self-confident Englishmen in jodhpurs and pith helmets’. ‘The work needs to begin, and swiftly,’ he wrote, ‘to encourage American students at the country’s leading universities to think more seriously about careers overseas.’

Ferguson’s proposed ‘Anglobalisation’ of the world was little more than an updated version of American ‘modernisation theory’, first proposed as an alternative to Communism during the Cold War, and now married to revolutionary violence of the kind for which Communist regimes had been reviled. It makes for melancholy reading in 2011. But in the first heady year of the global war on terror, easy victories over the ragtag army of the Taliban ignited megalomaniacal fantasies about the ‘Rest’ across a broad ideological spectrum in Anglo-America, from Ann Coulter arguing that ‘we should invade their countries, kill their leaders and convert them to Christianity’ to the unctuous ‘Empire-Lite’ of Michael Ignatieff and the ‘liberal imperialism’ peddled by Robert Cooper, one of Blair’s fly-by-night gurus. ‘Islamofascism’ seemed as evil as Nazism, Saddam Hussein was another Hitler, a generation-long battle loomed, and invocations of Winston Churchill – ‘the greatest’, according to Ferguson, ‘of all Anglo-Americans’, his resolute defence of English-speaking peoples commemorated by a bust in the Bush White House – seemed to stiffen spines all across the Eastern Seaboard.

The reception a writer receives in a favourable political context can be the making of him. This applies particularly well to Ferguson, whose books are known less for their original scholarly contribution than for containing some provocative counterfactuals. In Britain, his bluster about the white man’s burden, though largely ignored by academic historians, gained substance from a general rightward shift in political and cultural discourse, which made it imperative for such apostles of public opinion as Andrew Marr to treat Ferguson with reverence. But his apotheosis came in the United States, where – backed by the prestige of Oxbridge and, more important, a successful television series – he became a wise Greek counsellor to many aspiring Romans. He did not have to renounce long-held principles to be elevated to a professorship at Harvard, primetime punditry on CNN and Fox, and high-altitude wonkfests at Davos and Aspen. He quickly and frictionlessly became the most conspicuous refugee from post-imperial Britain to cheerlead Washington’s (and New York’s) consensus.

Flooded Threads

0503-mississippi-river-flooding-memphis_full_600

This is a good example of why the green issue is so complex, viz our modern ways and means, and corrections to it so complicated.

An emergency procedure intended to prevent the Mississippi and Ohio Rivers from flooding several river towns appears to be working Tuesday, as river levels have fallen more than a foot. However, water levels are rising as far south as Memphis, Tenn., where heavy rainfall could contribute to a river crest of 48 feet next Tuesday.

Late Monday, the US Army Corps of Engineers blasted a two-mile hole in a Mississippi River levee to relieve water pressure that, at its height Monday night, stood at a record-breaking 61.72 feet in Cairo, Ill. The historic river town is located at the bottommost tip of Illinois, where the Ohio and Mississippi Rivers meet.

But that’s only part of it. Originally, before it was straightened at any many points and levees built to protect settlements, town and cities the alluvial plain of the Mississippi Delta was about 300 miles wide. As much as it was a pain and a danger, its regular flooding by the sediment-rich river produced extraordinarily fertile croplands throughout the Delta region – not to be confused with the Mississippi River Delta at the mouth of the river, which is different.

The delta regularly flooded, so we set about changing its course and building levees to protect people and property from the flooding. In an alluvial plain. I certainly do not wish any of these residents any harm or ill-will at this time of hardship. These are the ramifications of our own attempts to master the largest river system in North America. When we made it impossible for the river to periodically dump sediments onto the land through flooding, we made it possible for the river to carry the same same sediment out into the river delta, where it creates massive biological dead zones, aka hypoxia zones in the Gulf of Mexico.

It’s weird and not much salve to see try to this in context of a longer time continuum. But as Fred said, we need more weird.

Woodshed

If you missed Krugman today… well, you shouldn’t miss Krugman today:

These days Americans get constant lectures about the need to reduce the budget deficit. That focus in itself represents distorted priorities, since our immediate concern should be job creation. But suppose we restrict ourselves to talking about the deficit, and ask: What happened to the budget surplus the federal government had in 2000?

The answer is, three main things. First, there were the Bush tax cuts, which added roughly $2 trillion to the national debt over the last decade. Second, there were the wars in Iraq and Afghanistan, which added an additional $1.1 trillion or so. And third was the Great Recession, which led both to a collapse in revenue and to a sharp rise in spending on unemployment insurance and other safety-net programs.

Sure we can talk about and quote long passages from books about the French Revolution, as I’m so fond of doing about any kinds of books, and draw comparisons between now and the run-up to that ghastly epoch. But I’m not sure how much good it will do (though I think a film about Saint Just would be great right about now).

But the more people with megaphones like Krugman take-on and takedown nonsense like the gospel of Greenspan and all of the other Randian balderdash that has so permeated the air waves, sunk most of the newspapers and razed the public squares, replacing them with parking lots for multi-aisle wish fulfillment, the harder the Greenspans et al will have to fight to maintain the BS level that now floats so effortlessly over us all.

Though there is no one like Krugman, there are plenty of others. I heard Stiglitz on NPR this morning and when Steve Inskeep (?) tried to question him about weren’t the stimulus and tax cuts strategies all just the same anyway and the debt was the most important blah blah blah, Joe was having none of it. And called him on the nonsense right away. Can’t believe they had him on. Listen here.

Anyway, these are important steps out of the cow field and here’s to sustaining them. But… no way around the woodshed.

The Next Great Consumer Society

One of these words does not belong. David Leonhardt’s NYT magazine article on China offers a lot to digest over a week heavily gilded with L-tryptophan, so take it slowly and don’t miss the subtext – what’s wrong with the entire formulation: mainly that the hope of all humanity and the fate of the known universe rests upon China kicking some old-school lavish consumption into high gear.

The larger idea is to build a more sustainable economy, or what Chinese leaders have called a balanced and harmonious society. In that economy, families would not have to save 20 percent of their income in order to pay for schooling and medical care, as many do now. They would instead be able to afford more of the comforts of modern life — better housing, clothing, transportation and communication. In time, China would become the world’s next great consumer society.

Okay, it’s sounds good, especially with sprinkles of harmony, but which of these ideas don’t go together? I know – the whole idea that there can be anything but a continuation of the way things have been is nothing but hippie. But that’s why this whole thing is so difficult and you need to get off the baby sitter, Joel, and figure out something new besides the old brand of consumption. Buy and save the world. You see how incoherent that sounds? well, that’s this plan in its entirety. Read the article – the best case scenario, that China props up the world economy by engaging some kind hyper-consumption mode, is absolutely bleak. How long will that last? Then what? Remember: closed system. Whatever else it is, another fossil-fueled buying spree that lets us all hang on a little longer is not enough… is not it, as the kids say. This is not anti-growth, it’s just a realization that we can no longer see everything only through the prism of growth – as important as that is. So, it’s really a comment on the weakness of this response, if we can even still call it one, of framing the next last best hope on China going down the path we have used to get where we are, which is turning them into us so that we can… what?

remember, also, cycles are for pedaling. In some ways, this is the story of China’s decline before it even starts, and in this way can be instructive. Our future is linked – there are no separate dimensions for prosperity and decline. It is this we will choose/fail to reckon with until we no longer cannot.

May you enjoy your bird with family and friends.

Helicopter Drop

We are all the financial crisis now.

But when you have bought so much debt and created so much money that rates are near zero, the public is saturated with liquidity; from that point on, they’re holding money simply as a store of value, which makes it no different from bonds — and hence a perfect substitute for bonds. And at that point further open-market operations do nothing — they just swap one zero-interest asset for another, with no effect on anything.

So why not forget about open-market operations, and just drop the stuff from helicopters? Well, remember that at this point cash and short-term bonds are equivalent. So a helicopter drop is just like a temporary lump-sum tax cut. And we would expect people to save much or most of such a tax cut — all of it, if you believe in full Ricardian equivalence.

Ricardian equivalence refers to the suggestion that it does not matter whether a government finances its spending with debt or a tax increase, the effect on total level of demand in an economy being the same. And it doesn’t seem that we believe this at all.

Definitely difficult for the casual observer to stay out front of the forward thinking on what to do about the meltdown, especially where unemployment is the lead canary staggering out of the mine – ostensibly the easiest thing to do something about – infrastructure!

Burying billions and hiring people to dig it up would be productive, to the extent that it put money in people’s pockets, money they would then spend. But what if instead we hired people to re-build bridges, and/or faltering water and sewer systems… much less super trains.

Green Faith

This could go without saying, but I guess if I really believed that, I would let it. There is no good faith element – as in, “We’re operating in good faith” – in a capitalist system. Nor does there have to be. There is only green faith.

WASHINGTON — Reversing its oft-repeated position that it was acting only on behalf of its clients in its exotic dealings with the American International Group, Goldman Sachs now says that it also used its own money to make secret wagers against the U.S. housing market.

A senior Goldman executive disclosed the “bilateral” wagers on subprime mortgages in an interview with McClatchy, marking the first time that the Wall Street titan has conceded that its dealings with troubled insurer AIG went far beyond acting as an “intermediary” responding to its clients’ demands.

They could clearly see it was toppling and vulnerable sector; opportunities abounded. Of course they were playing both sides, they would be stupid derelict in their duties, i.e., not competitive, not to. Just as we would be derelict in our duties stupid not to know this is what they are doing, particularly because of the despite the altruistic tone of their t-shirts and coffee mugs. The very notion that something, anything, is done by a company that is in the best interest of anything other than making more money is… worse than naive, it’s a sentiment that is itself counted on and used, where possible, to make more money – a tool like any other. No flag, no empathy, no brotherhood, no fidelity except to profit, where the loyalty is ruthless and unwavering. It has to be.

See the circle? You’re soaking in it.

Leading from the Rear

Is that even possible? Can we make drastic cuts in greenhouse-gas emissions without destroying our economy?

Luckily we have a Nobel-Laureate economist on duty.

If there’s a single central insight in economics, it’s this: There are mutual gains from transactions between consenting adults. If the going price of widgets is $10 and I buy a widget, it must be because that widget is worth more than $10 to me. If you sell a widget at that price, it must be because it costs you less than $10 to make it. So buying and selling in the widget market works to the benefit of both buyers and sellers. More than that, some careful analysis shows that if there is effective competition in the widget market, so that the price ends up matching the number of widgets people want to buy to the number of widgets other people want to sell, the outcome is to maximize the total gains to producers and consumers. Free markets are “efficient” — which, in economics-speak as opposed to plain English, means that nobody can be made better off without making someone else worse off.

Now, efficiency isn’t everything. In particular, there is no reason to assume that free markets will deliver an outcome that we consider fair or just. So the case for market efficiency says nothing about whether we should have, say, some form of guaranteed health insurance, aid to the poor and so forth. But the logic of basic economics says that we should try to achieve social goals through “aftermarket” interventions. That is, we should let markets do their job, making efficient use of the nation’s resources, then utilize taxes and transfers to help those whom the market passes by.

But what if a deal between consenting adults imposes costs on people who are not part of the exchange? What if you manufacture a widget and I buy it, to our mutual benefit, but the process of producing that widget involves dumping toxic sludge into other people’s drinking water? When there are “negative externalities” — costs that economic actors impose on others without paying a price for their actions — any presumption that the market economy, left to its own devices, will do the right thing goes out the window. So what should we do? Environmental economics is all about answering that question.

The Path to Dominance

World dominance, that is. For China:

The main challenge from the world’s new industrial superpower is not that it will continue to use the dirty, old technologies of the past, but that it will come to dominate the new, clean, green ones of the future. 

As developed nations fail to put an adequate price on carbon, and thus to stimulate clean-technology development themselves, they risk handing market supremacy to the rival they most fear. Indeed, it could even be hypothesized that China’s blocking of agreement on rich-country emission targets in Copenhagen was intended to hold back the development of cleantech by its Western rivals.

An interesting question for business minds, at least. Business/finance/economic growth thinking – that drives investments in infrastructure, engineering and technology, not to mention general promotion of cultural shifts – has been consistenty wrong about the solutions to climate change. There’s a reason business interests – so-called – keep being on the wrong side of this issue. What exactly is the challenge that is being misunderstood? At its best, enterprise sees opportunity everywhere, even in threats. Check out the tone of the recent proceedings in Copenhagen. When has such an opportunity seemed like such a threat?

And remember: we’ve got quite a record in the face of really big challenges – 9/11 (Iraq did it?), the Soviet threat (from a rusting, empty shell of a superpower?). And while much of this ignorance might have been purposeful, it doesn’t make it look any less stupid in hindsight – though nothing will compare with even the middling scenario of irreversible environmental devastation that will result from doing nothing about climate change out of some affinity for cost-benefit analyses. Talk about stupid. In other scenarios we’d apply for a patent.

So this is the double-whammy for the world’s leading economy. If we [still] want to become something other than the world’s leading army, there must be serious improvement in geo-political business understanding. As the article points out, even Little Tommy Friedman gets this (which, I admit might normally undermine the reality. But not this time.) From a frantic, stock/futures market perspective, what happens in the next couple of years will determine if the U.S. and American companies will be competitive in clean energy development in the decades to come – or whether we will be colonized by Chinese solar and wind companies like the Chinese were with soft drinks, cell phones and fast food brands.

What happened to all that ruthlessness?