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anonymous

A Brief History of the Corporation: 1600 to 2100 - 1 views

  • In its 400+ year history, the corporation has achieved extraordinary things, cutting around-the-world travel time from years to less than a day, putting a computer on every desk, a toilet in every home (nearly) and a cellphone within reach of every human.  It even put a man on the Moon and kinda-sorta cured AIDS.
  • The Age of Corporations is coming to an end. The traditional corporation won’t vanish, but it will cease to be the center of gravity of economic life in another generation or two.  They will live on as religious institutions do today, as weakened ghosts of more vital institutions from centuries ago.
  • this post is mostly woven around ideas drawn from five books that provide appropriate fuel for this business-first frame. I will be citing, quoting and otherwise indirectly using these books over several future posts
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  • For a long time, I was misled by the fact that 90% of the available books frame globalization and the emergence of modernity in terms of the nation-state as the fundamental unit of analysis, with politics as the fundamental area of human activity that shapes things.
  • But the more I’ve thought about it, the more I’ve been pulled towards a business-first perspective on modernity and globalization.
  • The human world, like physics, can be reduced to four fundamental forces: culture, politics, war and business.
  • Culture is the most mysterious, illegible and powerful force.
  • But one quality makes gravity dominate at large space-time scales: gravity affects all masses and is always attractive, never repulsive.  So despite its weakness, it dominates things at sufficiently large scales. I don’t want to stretch the metaphor too far, but something similar holds true of business.
  • On the scale of days or weeks, culture, politics and war matter a lot more in shaping our daily lives.
  • Business though, as an expression of the force of unidirectional technological evolution, has a destabilizing unidirectional effect. It is technology, acting through business and Schumpeterian creative-destruction, that drives monotonic, historicist change, for good or bad. Business is the locus where the non-human force of technological change sneaks into the human sphere.
  • Culture is suspicious of technology. Politics is mostly indifferent to and above it. War-making uses it, but maintains an arms-length separation.
  • Business? It gets into bed with it. It is sort of vaguely plausible that you could switch artists, politicians and generals around with their peers from another age and still expect them to function. But there is no meaningful way for a businessman from (say) 2000 BC to comprehend what Mark Zuckerberg does, let alone take over for him. Too much magical technological water has flowed under the bridge.
  • It is business that creates the world of magic, not technology itself. And the story of business in the last 400 years is the story of the corporate form.
  • There are some who treat corporate forms as yet another technology (in this case a technology of people-management), but despite the trappings of scientific foundations (usually in psychology) and engineering synthesis (we speak of organizational “design”), the corporate form is not a technology.  It is the consequence of a social contract like the one that anchors nationhood. It is a codified bundle of quasi-religious beliefs externalized into an animate form that seeks to preserve itself like any other living creature.
  • What was new was the idea of a publicly traded joint-stock corporation, an entity with rights similar to those of states and individuals, with limited liability and significant autonomy
  • two important points about this evolution of corporations.
  • The first point is that the corporate form was born in the era of Mercantilism, the economic ideology that (zero-sum) control of land is the foundation of all economic power.
  • In politics, Mercantilism led to balance-of-power models.
  • In business, once the Age of Exploration (the 16th century) opened up the world, it led to mercantilist corporations focused on trade
  • The forces of radical technological change — the Industrial Revolution — did not seriously kick until after nearly 200 years of corporate evolution (1600-1800) in a mercantilist mold.
  • Smith was both the prophet of doom for the Mercantilist corporation, and the herald of what came to replace it: the Scumpeterian corporation.
  • The corporate form therefore spent almost 200 years — nearly half of its life to date — being shaped by Mercantilist thinking, a fundamentally zero-sum way of viewing the world.
  • It was not until after the American Civil War and the Gilded Age that businesses fundamentally reorganized around (as we will see) time instead of space, which led, as we will see, to a central role for ideas and therefore the innovation function.
  • The Black Hills Gold Rush of the 1870s, the focus of the Deadwood saga, was in a way the last hurrah of Mercantilist thinking. William Randolph Hearst, the son of gold mining mogul George Hearst who took over Deadwood in the 1870s, made his name with newspapers. The baton had formally been passed from mercantilists to schumpeterians.
    • anonymous
       
      So, Mercantilism was about colonizing space. Corporatism is about colonizing time. This is a pretty useful (though arguably too-reductionist) way to latch on to the underpinning of later thoughts.
  • This divide between the two models can be placed at around 1800, the nominal start date of the Industrial Revolution, as the ideas of Renaissance Science met the energy of coal to create a cocktail that would allow corporations to colonize time.
  • The second thing to understand about the evolution of the corporation is that the apogee of power did not coincide with the apogee of reach.
  • for America, corporations employed less than 20% of the population in 1780, and over 80% in 1980, and have been declining since
  • Certainly corporations today seem far more powerful than those of the 1700s, but the point is that the form is much weaker today, even though it has organized more of our lives. This is roughly the same as the distinction between fertility of women and population growth: the peak in fertility (a per-capita number) and peak in population growth rates (an aggregate) behave differently.
  • a useful 3-phase model of the history of the corporation: the Mercantilist/Smithian era from 1600-1800, the Industrial/Schumpeterian era from 1800 – 2000 and finally, the era we are entering, which I will dub the Information/Coasean era
    • anonymous
       
      I think it would be useful to map these eras against the backdrop of my previously established Generational timeline (as well as the StratFor 50-year cycle breakdown) in order to see if there are any self-supporting model elements.
  • By a happy accident, there is a major economist whose ideas help fingerprint the economic contours of our world: Ronald Coase.
  • To a large extent, the history of the first 200 years of corporate evolution is the history of the East India Company. And despite its name and nation of origin, to think of it as a corporation that helped Britain rule India is to entirely misunderstand the nature of the beast.
  • Two images hint at its actual globe-straddling, 10x-Walmart influence: the image of the Boston Tea Partiers dumping crates of tea into the sea during the American struggle for independence, and the image of smoky opium dens in China. One image symbolizes the rise of a new empire. The other marks the decline of an old one.
  • At a broader level, the EIC managed to balance an unbalanced trade equation between Europe and Asia whose solution had eluded even the Roman empire.
  • For this scheme to work, three foreground things and one background thing had to happen: the corporation had to effectively take over Bengal (and eventually all of India), Hong Kong (and eventually, all of China, indirectly) and England.
  • The background development was simpler. England had to take over the oceans and ensure the safe operations of the EIC.
  • eventually, as the threat from the Dutch was tamed, it became clear that the company actually had more firepower at its disposal than most of the nation-states it was dealing with. The realization led to the first big domino falling, in the corporate colonization of India, at the battle of Plassey.
  • The EIC was the original too-big-to-fail corporation. The EIC was the beneficiary of the original Big Bailout. Before there was TARP, there was the Tea Act of 1773 and the Pitt India Act of 1783. The former was a failed attempt to rein in the EIC, which cost Britain the American Colonies.  The latter created the British Raj as Britain doubled down in the east to recover from its losses in the west. An invisible thread connects the histories of India and America at this point. Lord Cornwallis, the loser at the Siege of Yorktown in 1781 during the revolutionary war, became the second Governor General of India in 1786.
  • But these events were set in motion over 30 years earlier, in the 1750s. There was no need for backroom subterfuge.  It was all out in the open because the corporation was such a new beast, nobody really understood the dangers it represented.
  • there was nothing preventing its officers like Clive from simultaneously holding political appointments that legitimized conflicts of interest. If you thought it was bad enough that Dick Cheney used to work for Halliburton before he took office, imagine if he’d worked there while in office, with legitimate authority to use his government power to favor his corporate employer and make as much money on the side as he wanted, and call in the Army and Navy to enforce his will. That picture gives you an idea of the position Robert Clive found himself in, in 1757.
  • The East India bubble was a turning point.
  • Over the next 70 years, political, military and economic power were gradually separated and modern checks and balances against corporate excess came into being.
  • It is not too much of a stretch to say that for at least a century and a half, England’s foreign policy was a dance in Europe in service of the EIC’s needs on the oceans.
  • Mahan’s book is the essential lens you need to understand the peculiar military conditions in the 17th and 18th centuries that made the birth of the corporation possible.)
  • The 16th century makes a vague sort of sense as the “Age of Exploration,” but it really makes a lot more sense as the startup/first-mover/early-adopter phase of the corporate mercantilism. The period was dominated by the daring pioneer spirit of Spain and Portugal, which together served as the Silicon Valley of Mercantilism. But the maritime business operations of Spain and Portugal turned out to be the MySpace and Friendster of Mercantilism: pioneers who could not capitalize on their early lead.
  • Conventionally, it is understood that the British and the Dutch were the ones who truly took over. But in reality, it was two corporations that took over: the EIC and the VOC (the Dutch East India Company,  Vereenigde Oost-Indische Compagnie, founded one year after the EIC) the Facebook and LinkedIn of Mercantile economics respectively. Both were fundamentally more independent of the nation states that had given birth to them than any business entities in history. The EIC more so than the VOC.  Both eventually became complex multi-national beasts.
  • arguably, the doings of the EIC and VOC on the water were more important than the pageantry on land.  Today the invisible web of container shipping serves as the bloodstream of the world. Its foundations were laid by the EIC.
    • anonymous
       
      There was an excellent episode of the original Connections series that pointed this out, specifically focusing on the Dutch boats and the direct line to container ships and 747 cargo planes.
  • A new idea began to take its place in the early 19th century: the Schumpeterian corporation that controlled, not trade routes, but time. It added the second of the two essential Druckerian functions to the corporation: innovation.
  • I call this the “most misleading table in the world.”
  • corporations and nations may have been running on Mercantilist logic, but the undercurrent of Schumpeterian growth was taking off in Europe as early as 1500 in the less organized sectors like agriculture. It was only formally recognized and tamed in the early 1800s, but the technology genie had escaped.
  • The action shifted to two huge wildcards in world affairs of the 1800s: the newly-born nation of America and the awakening giant in the east, Russia. Per capita productivity is about efficient use of human time. But time, unlike space, is not a collective and objective dimension of human experience. It is a private and subjective one. Two people cannot own the same piece of land, but they can own the same piece of time.  To own space, you control it by force of arms. To own time is to own attention. To own attention, it must first be freed up, one individual stream of consciousness at a time.
  • The Schumpeterian corporation was about colonizing individual minds. Ideas powered by essentially limitless fossil-fuel energy allowed it to actually pull it off.
  • it is probably reaosonably safe to treat the story of Schumpeterian growth as an essentially American story.
  • In many ways the railroads solved a vastly speeded up version of the problem solved by the EIC: complex coordination across a large area.  Unlike the EIC though, the railroads were built around the telegraph, rather than postal mail, as the communication system. The difference was like the difference between the nervous systems of invertebrates and vertebrates.
  • If the ship sailing the Indian Ocean ferrying tea, textiles, opium and spices was the star of the mercantilist era, the steam engine and steamboat opening up America were the stars of the Schumpeterian era.
  • The primary effect of steam was not that it helped colonize a new land, but that it started the colonization of time. First, social time was colonized. The anarchy of time zones across the vast expanse of America was first tamed by the railroads for the narrow purpose of maintaining train schedules, but ultimately, the tools that served to coordinate train schedules: the mechanical clock and time zones, served to colonize human minds.  An exhibit I saw recently at the Union Pacific Railroad Museum in Omaha clearly illustrates this crucial fragment of history:
  • For all its sophistication, the technology of sail was mostly a very-refined craft, not an engineering discipline based on science.
  • Steam power though was a scientific and engineering invention.
  • Scientific principles about gases, heat, thermodynamics and energy applied to practical ends, resulting in new artifacts. The disempowerment of craftsmen would continue through the Schumpeterian age, until Fredrick Taylor found ways to completely strip mine all craft out of the minds of craftsmen, and put it into machines and the minds of managers.
  • It sounds awful when I put it that way, and it was, in human terms, but there is no denying that the process was mostly inevitable and that the result was vastly better products.
  • The Schumpeterian corporation did to business what the doctrine of Blitzkrieg would do to warfare in 1939: move humans at the speed of technology instead of moving technology at the speed of humans.
  • Blitzeconomics allowed the global economy to roar ahead at 8% annual growth rates instead of the theoretical 0% average across the world for Mercantilist zero-sum economics. “Progress” had begun.
  • Two phrases were invented to name the phenomenon: productivity meant shrinking autonomously-owned time. Increased standard of living through time-saving devices became code for the fact that the “freed up” time through “labor saving” devices was actually the de facto property of corporations. It was a Faustian bargain.
  • Many people misunderstood the fundamental nature of Schumpeterian growth as being fueled by ideas rather than time. Ideas fueled by energy can free up time which can then partly be used to create more ideas to free up more time. It is a positive feedback cycle,  but with a limit. The fundamental scarce resource is time. There is only one Earth worth of space to colonize. Only one fossil-fuel store of energy to dig out. Only 24 hours per person per day to turn into capitive attention.
  • Then the Internet happened, and we discovered the ability to mine time as fast as it could be discovered in hidden pockets of attention. And we discovered limits. And suddenly a new peak started to loom: Peak Attention.
  • There is certainly plenty of energy all around (the Sun and the wind, to name two sources), but oil represents a particularly high-value kind. Attention behaves the same way.
  • Take an average housewife, the target of much time mining early in the 20th century. It was clear where her attention was directed. Laundry, cooking, walking to the well for water, cleaning, were all obvious attention sinks. Washing machines, kitchen appliances, plumbing and vacuum cleaners helped free up a lot of that attention, which was then immediately directed (as corporate-captive attention) to magazines and television.
  • The point isn’t that we are running out of attention. We are running out of the equivalent of oil: high-energy-concentration pockets of easily mined fuel.
  • There is a lot more money to be made in replacing hand-washing time with washing-machine plus magazine time, than there is to be found in replacing one hour of TV with a different hour of TV.
  • . To get to Clay Shirky’s hypothetical notion of cognitive surplus, we need Alternative Attention sources. To put it in terms of per-capita productivity gains, we hit a plateau.
  • When Asia hits Peak Attention (America is already past it, I believe), absolute size, rather than big productivity differentials, will again define the game, and the center of gravity of economic activity will shift to Asia.
  • Once again, it is the oceans, rather than land, that will become the theater for the next act of the human drama. While American lifestyle designers are fleeing to Bali, much bigger things are afoot in the region. And when that shift happens, the Schumpeterian corporation, the oil rig of human attention, will start to decline at an accelerating rate. Lifestyle businesses and other oddball contraptions — the solar panels and wind farms of attention economics — will start to take over.
  • It will be the dawn of the age of Coasean growth.
  • Coasean growth is not measured in terms of national GDP growth. That’s a Smithian/Mercantilist measure of growth. It is also not measured in terms of 8% returns on the global stock market.  That is a Schumpeterian growth measure. For that model of growth to continue would be a case of civilizational cancer (“growth for the sake of growth is the ideology of the cancer cell” as Edward Abbey put it).
  • Coasean growth is fundamentally not measured in aggregate terms at all. It is measured in individual terms. An individual’s income and productivity may both actually decline, with net growth in a Coasean sense.
  • How do we measure Coasean growth? I have no idea. I am open to suggestions. All I know is that the metric will need to be hyper-personalized and relative to individuals rather than countries, corporations or the global economy. There will be a meaningful notion of Venkat’s rate of Coasean growth, but no equivalent for larger entities.
  • The fundamental scarce resource that Coasean growth discovers and colonizes is neither space, nor time. It is perspective.
  •  
    This is a lay friendly, amateur, mental exploration of the Corporation. It's also utterly absorbing and comes with the usual collection of caveats that we amateurs are accustomed to rattling off when we dunk ourselves into issues much bigger than ourselves. Thanks to BoingBoing, via Futurismic, for the pointer: http://www.boingboing.net/2011/06/23/a-brief-history-of-t.html http://futurismic.com/2011/06/22/a-brief-history-of-the-corporation-1600-to-2100/ "The year was 1772, exactly 239 years ago today, the apogee of power for the corporation as a business construct. The company was the British East India company (EIC). The bubble that burst was the East India Bubble. Between the founding of the EIC in 1600 and the post-subprime world of 2011, the idea of the corporation was born, matured, over-extended, reined-in, refined, patched, updated, over-extended again, propped-up and finally widely declared to be obsolete. Between 2011 and 2100, it will decline - hopefully gracefully - into a well-behaved retiree on the economic scene."
anonymous

The creepy, dangerous ideology behind Silicon Valley's Cult of Disruption - 1 views

  • The pro-Disruption argument goes like this: In a digitally connected age, there’s absolutely no need for public carriage laws (or hotel laws, or food safety laws, or… or…) because the market will quickly move to drive out bad actors. If an Uber driver behaves badly, his low star rating will soon push him out of business.
  • It’s a compelling message but also one with dire potential consequences for public safety, particularly for those who can’t afford to take a $50 cab ride to Whole Foods.
  • “Just because there are people who want to rape, murder, or rob you shouldn’t prevent me from making another million dollars,” he’ll argue.
    • anonymous
       
      not a straw man argument, sadly.
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  • The truth is, what Silicon Valley still calls “Disruption” has evolved into something very sinister indeed. Or perhaps “evolved” is the wrong word: The underlying ideology — that all government intervention is bad, that the free market is the only protection the public needs, and that if weaker people get trampled underfoot in the process then, well, fuck ‘em — increasingly recalls one that has been around for decades. Almost seven decades in fact, since Ayn Rand’s “The Fountainhead” first put her on the radar of every spoiled trust fund brat looking for an excuse to embrace his or her inner asshole. (For a delightful essay on that subject, I recommend Jason Heller’s “I Was A Teenage Randroid.”)
  • Let’s consider how Kalanick treated his Uber taxi drivers in New York. When he was trying to convince them to break the law to boost Uber’s footprint in the city, Kalanick offered yellow cab drivers free iPhones and promised to “take care of” any legal problems they encountered with the TLC. A few short months later, when the service was forced to close, those same drivers received a message to come to Uber HQ. Reports the Verge… Multiple drivers said Uber called them into headquarters, claiming they needed to come by in order to get paid and would get a cash bonus for showing up. When the cabbies came in, Uber surprised them by asking for the device back, informing them that taxi service was no longer available in New York. That’s classic Rand right there. The more replaceable the worker, the more they can be treated like total shit. After all, if they’re so damn special, they can always leave and find another job.
  • “The notion that there some sort of deal or arrangement or whatever was just not the case,” said Kalanick in an interview with the Washington Post. How embarrassing, then, when the Post uncovered documents proving that Uber had indeed tried to make under the table arrangements to operate in DC. Or as the Post’s Mike DeBonist put it: “If you’re going to be dismissive of backroom deals, it behooves you to stay out of backrooms.”
  • And there’s the rub. Given their Randian origins, we kid ourselves if we think most Disruptive businesses are fighting government bureaucracy to bring us a better deal.
  • A Disruptive company might very well succeed in exposing government crooks lining their pockets exploiting outdated laws, but that’s only so the Disruptor can line his own pockets through the absence of those same laws. A Disruptive company may give you free candy in your 50-dollar cab but, again, that’s only because doing so is good business. If poisoning that same candy suddenly becomes better business (like encouraging New York cab drivers to be distracted by their phones, or putting vulnerable people at risk of attack is better business)… well maybe that’s an option worth exploring too. After all, food safety legislation is just another attempt by the government to drive Disruptive businesses off the road.
  •  
    The pro-Disruption argument goes like this: In a digitally connected age, there's absolutely no need for public carriage laws (or hotel laws, or food safety laws, or… or…) because the market will quickly move to drive out bad actors. If an Uber driver behaves badly, his low star rating will soon push him out of business.
  •  
    I'm going to have to dig into this. I don't see the necessary connection between valuing "disruptive" and being a Randian. I'm sure there are sociopathic enterprises that claim to be disruptive, but that doesn't equate the two.
  •  
    Looking at the rest of the (lengthy) piece, I get the sense that the real nested claim here is that most people claiming to be disruptive are of this radical libertarian egotist ilk.
anonymous

Solar panels could destroy U.S. utilities, according to U.S. utilities - 0 views

  • That is not wild-eyed hippie talk. It is the assessment of the utilities themselves.
  • Back in January, the Edison Electric Institute — the (typically stodgy and backward-looking) trade group of U.S. investor-owned utilities — released a report [PDF] that, as far as I can tell, went almost entirely without notice in the press. That’s a shame. It is one of the most prescient and brutally frank things I’ve ever read about the power sector. It is a rare thing to hear an industry tell the tale of its own incipient obsolescence.
  • You probably know that electricity is provided by utilities. Some utilities both generate electricity at power plants and provide it to customers over power lines. They are “regulated monopolies,” which means they have sole responsibility for providing power in their service areas. Some utilities have gone through deregulation; in that case, power generation is split off into its own business, while the utility’s job is to purchase power on competitive markets and provide it to customers over the grid it manages.
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  • But the main thing to know is that the utility business model relies on selling power. That’s how they make their money.
  • Here’s how it works: A utility makes a case to a public utility commission (PUC), saying “we will need to satisfy this level of demand from consumers, which means we’ll need to generate (or purchase) this much power, which means we’ll need to charge these rates.”
  • The thing to remember is that it is in a utility’s financial interest to generate (or buy) and deliver as much power as possible. The higher the demand, the higher the investments, the higher the utility shareholder profits.
  • Now, into this cozy business model enters cheap distributed solar PV, which eats away at it like acid.
  • First, the power generated by solar panels on residential or commercial roofs is not utility-owned or utility-purchased. From the utility’s point of view, every kilowatt-hour of rooftop solar looks like a kilowatt-hour of reduced demand for the utility’s product.
  • (This is the same reason utilities are instinctively hostile to energy efficiency and demand response programs, and why they must be compelled by regulations or subsidies to create them. Utilities don’t like reduced demand!)
  • It’s worse than that, though. Solar power peaks at midday, which means it is strongest close to the point of highest electricity use — “peak load.”
  • Problem is, providing power to meet peak load is where utilities make a huge chunk of their money. Peak power is the most expensive power. So when solar panels provide peak power, they aren’t just reducing demand, they’re reducing demand for the utilities’ most valuable product.
  • This is a widely held article of faith, but EEI (of all places!) puts it to rest. (In this and all quotes that follow, “DER” means distributed energy resources, which for the most part means solar PV.) Due to the variable nature of renewable DER, there is a perception that customers will always need to remain on the grid. While we would expect customers to remain on the grid until a fully viable and economic distributed non-variable resource is available, one can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent. To put this into perspective, who would have believed 10 years ago that traditional wire line telephone customers could economically “cut the cord?” [Emphasis mine.]
  • Just the other day, Duke Energy CEO Jim Rogers said, “If the cost of solar panels keeps coming down, installation costs come down and if they combine solar with battery technology and a power management system, then we have someone just using [the grid] for backup.”
  • What happens if a whole bunch of customers start generating their own power and using the grid merely as backup? The EEI report warns of “irreparable damages to revenues and growth prospects” of utilities.
  • As ratepayers opt for solar panels (and other distributed energy resources like micro-turbines, batteries, smart appliances, etc.), it raises costs on other ratepayers and hurts the utility’s credit rating. As rates rise on other ratepayers, the attractiveness of solar increases, so more opt for it. Thus costs on remaining ratepayers are even further increased, the utility’s credit even further damaged. It’s a vicious, self-reinforcing cycle:
  • One implication of all this — a poorly understood implication — is that rooftop solar fucks up the utility model even at relatively low penetrations, because it goes straight at utilities’ main profit centers.
  • (“Despite all the talk about investors assessing the future in their investment evaluations,” the report notes dryly, “it is often not until revenue declines are reported that investors realize that the viability of the business is in question.” In other words, investors aren’t that smart and rational financial markets are a myth.)
  • So rates would rise by 20 percent for those without solar panels. Can you imagine the political shitstorm that would create? (There are reasons to think EEI is exaggerating this effect, but we’ll get into that in the next post.)
  • The report compares utilities’ possible future to the experience of the airlines during deregulation or to the big monopoly phone companies when faced with upstart cellular technologies.
  • In case the point wasn’t made, the report also analogizes utilities to the U.S. Postal Service, Kodak, and RIM, the maker of Blackberry devices. These are not meant to be flattering comparisons.
  • Remember, too, that these utilities are not Google or Facebook. They are not accustomed to a state of constant market turmoil and reinvention.
  • This is a venerable old boys network, working very comfortably within a business model that has been around, virtually unchanged, for a century.
  •  
    "Solar power and other distributed renewable energy technologies could lay waste to U.S. power utilities and burn the utility business model, which has remained virtually unchanged for a century, to the ground."
anonymous

Russian Modernization, Part 2: The Kremlin's Balancing Act | STRATFOR - 0 views

  • The Kremlin has already struck many deals with foreign businesses — especially U.S. and European firms — and set out the first steps to make Russia appear more attractive to investors. But the necessary deals and investments will have to be on Russia’s terms, making this modernization program very different from previous efforts in an attempt to prevent the errors of the past from being repeated.
  • In centralizing Russia’s economy, the Kremlin changed the laws, limiting how much a foreign business or citizen can own in Russia’s strategic sectors and nationalizing many assets owned by foreigners. This, along with shifts in Russia’s foreign policy, made Russia’s anti-Western sentiments very clear. Russia, with its oligarchs and organized crime, was already a risky market to invest in, but the legal changes made it even more difficult for foreign groups to work inside the country.
  • Typically, the Kremlin has thought that as long as it had energy wealth it did not need a diverse or modern economy, let alone foreign investments. But over the past two years, a series of events has made the Kremlin reassess Russia’s long-term economic capabilities.
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  • First was a tumble in global energy prices.
  • That resurgence led to a second issue: international reaction to Russia’s war with Georgia in August 2008. Russia’s confidence in starting a war with one of its neighbors made the West nervous and led many Western states to cease investing in Russia.
  • This, along with reaction to the Russo-Georgian war, led investors to take more than $130 billion — nearly 11 percent of Russia’s foreign investment stock — out of Russia in the last quarter of 2008.
  • These tremors in the Russian economy undermined the Kremlin’s confidence in its ability to hold its consolidated state and periphery in the long term.
  • Russia cannot modernize its economy by itself because it lacks the necessary capital, experience and technology.
  • in the late 1980s, then-Soviet leader Mikhail Gorbachev introduced Perestroika, which allowed Western influence and technology to flood the country. This was a major component of the Soviet Union’s collapse.
  • In order to entice foreign businesses and money back into the country — especially those with modern technology — Russia has had to do some restructuring to make itself more attractive for investors, yet it must stand its ground in certain areas to prevent a flood of foreign influence.
  • The Kremlin is also softening the strict laws on capping a foreign firm’s stake in Russia’s strategic assets and sectors.
  • The Kremlin’s first move was to give investors a certain amount of protection.
  • Additionally, the Kremlin has drafted new laws on the legal status of foreign workers in Russia.
  • The last step Russia needed to take was to appear more pragmatic in its relations with the West.
  • To do business in Russia, one still has to be on the Kremlin’s good side. The political, regulatory and judicial environments in Russia remain restrictive, and the regulations are still convoluted to the extent that the Kremlin, regional or local governments decide what to enforce and how. The changes are intended more as confidence-building measures aimed at firms who want to enter (or return to) Russia. The legal shifts also make it easier for foreign firms and investors to comply with domestic and international laws on investing abroad.
  • For the Kremlin, this is not just about controlling business and investments — it is about controlling influence and power inside the country.
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    "Russia is undertaking an ambitious modernization program in order to ensure its strength in the long term. However, it lacks the expertise, capital and technology to accomplish its goals on its own and must appeal to foreign firms and investors. The Kremlin is making changes to Russia's strict laws concerning foreign businesses and investment, but is taking care to maintain control and avoid importing potentially dangerous levels of foreign influence along with foreign business." At StratFor on July 27, 2010.
anonymous

How to Save the Global Economy: Get Better Data - 0 views

  • The Great Moderation was no accident; it was the consequence of the financial institution-building that began at Bretton Woods in 1944. Determined to avoid the devastating economic shocks of the interwar period, a generation of leaders designed a framework of strong institutions, including the International Monetary Fund and World Bank, that could intervene when market forces alone could not maintain equilibrium.
    • anonymous
       
      This is worth remembering the next time a free-marketeer trumpets how America was some pinaccle of the laisse-faire wet dream before [insert demon here] ruined it.
  • Beneath the calm, though, the growing complexity of the global economy meant that over time, the magnitude and frequency of institutional interventions increased. John Maynard Keynes, the British economist whose ideas shaped the postwar economic order, himself never imagined that the powerful tools created in the Bretton Woods system would be used as frequently as they were, and by the early 1970s, more than a few economists began to wonder whether these measures were treating the symptoms of a problem and not its root cause. Perhaps the global economy was not an equilibrium system at all.
  •  
    "The 2008 crash was more than the start of a recession; it represented the end of what economists James Stock and Mark Watson labeled the "Great Moderation," a two-decade period of low business cycle volatility, moderate inflation, moderate unemployment, and steady industrial production. The Great Moderation lulled businesses into reducing their reserves and led some economists to speculate that perhaps we had moved beyond business cycles entirely. As Nobel laureate Robert Lucas proclaimed at the 2003 American Economic Association meeting, the "central problem of depression prevention has been solved, for all practical purposes.""
anonymous

What Your Culture Really Says - 0 views

  • The monied, celebrated, nuevo-social, 1% poster children of startup life spread the mythology of their cushy jobs, 20% time, and self-empowerment as a thinly-veiled recruiting tactic in the war for talent against internet giants. The materialistic, viral nature of these campaigns have redefined how we think about culture, replacing meaningful critique with symbols of privilege. The word “culture” has become a signifier of superficial company assets rather than an ongoing practice of examination and self-reflection.
  • Culture is not about the furniture in your office. It is not about how much time you have to spend on feel-good projects. It is not about catered food, expensive social outings, internal chat tools, your ability to travel all over the world, or your never-ending self-congratulation.
  • Culture is about power dynamics, unspoken priorities and beliefs, mythologies, conflicts, enforcement of social norms, creation of in/out groups and distribution of wealth and control inside companies. Culture is usually ugly.
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  • What your culture might actually be saying is… We have implemented a loosely coordinated social policy to ensure homogeneity in our workforce. We are able to reject qualified, diverse candidates on the grounds that they “aren’t a culture fit” while not having to examine what that means - and it might mean that we’re all white, mostly male, mostly college-educated, mostly young/unmarried, mostly binge drinkers, mostly from a similar work background. We tend to hire within our employees’ friend and social groups. Because everyone we work with is a great culture fit, which is code for “able to fit in without friction,” we are all friends and have an unhealthy blur between social and work life. Because everyone is a “great culture fit,” we don’t have to acknowledge employee alienation and friction between individuals or groups. The desire to continue being a “culture fit” means it is harder for employees to raise meaningful critique and criticism of the culture itself.
  • What your culture might actually be saying is… We have a collective post-traumatic stress reaction to previous workplaces that had hostile, unnecessary, unproductive and authoritarian meetings. We tend to avoid projects and initiatives that require strict coordination across the company. We might have difficulty meeting the expectations of enterprise companies and do better selling to startups organized like us. We are heavily invested in being rebels against traditional corporate culture. Because we communicate largely asynchronously and through chat, it is easy to mentally dehumanize teammates and form silos around functional groups with different communications practices or business functions.
  • What your culture might actually be saying is… Our employees must be treated as spoiled, coddled children that cannot perform their own administrative functions. We have a team of primarily women supporting the eating, drinking, management and social functions of a primarily male workforce whose output is considered more valuable. We struggle to hire women in non-administrative positions and most gender diversity in our company is centralized in social and admin work. Because our office has more amenities than home life, our employees work much longer hours and we are able to extract more value from them for the same paycheck. The environment reinforces the cultural belief that work is a pleasant dream and can help us distract or bribe from deeper issues in the organization.
  • What your culture might actually be saying is… We have enough venture funding to pay people to work on non-core parts of the business. We are not under that much pressure to make money. The normal work of the business is not sufficiently rewarding so we bribe employees with pet projects. We’re not entirely sure what our business objectives and vision are, so we are trying to discover it by letting employee passions take root. We have a really hard time developing work that takes more than a few people to release. We have lots of unfinished but valuable projects that get left behind due to shifts in focus, lack of concentrated effort, and inability to organize sufficient resources to bring projects to completion.
  • What your culture might actually be saying is… Management decisions are siloed at the very top layers of management, kept so close to the chest they appear not to exist at all. The lack of visibility into investor demands, financial affairs, HR issues, etc. provides an abstraction layer between employees and real management, which we pretend doesn’t exist. We don’t have an explicit power structure, which makes it easier for the unspoken power dynamics in the company to play out without investigation or criticism.
  • What your culture might actually be saying is… We fool ourselves into thinking we have a better work/life balance when really people take even less vacation than they would when they had a vacation policy. Social pressure and addiction to work has replaced policy as a regulator of vacation time.
  • What your culture might actually be saying is… Features are the most important function of our business. We lack processes for surfacing and addressing technical debt. We have systemic infrastructure problems but they are not relevant because we are more focused on short-term adoption than long-term reliability. We prioritize fast visible progress, even if it is trivial, over longer and more meaningful projects. Productivity is measured more by lines of code than the value of that code. Pretty things are more important than useful things.
  • Talk to your company about culture. Talk to other companies about culture. Stop mistaking symbology and VC spoils for culture. Be honest with yourself, and with each other. Otherwise, your culture will kill you softly with its song, and you won’t even notice. But hey, you have a beer keg in the office.
  •  
    "Toxic lies about culture are afoot in Silicon Valley. They spread too fast as we take our bubble money and designer Powerpoints to drinkups, conferences and meetups all over the world, flying premium economy, ad nauseam. Well-intentioned darlings south of Market wax poetic on distributed teams, office perks, work/life balance, passion, "shipping", "iteration," "freedom". A world of startup privilege hides blithely unexamined underneath an insipid, self-reinforcing banner of meritocracy and funding. An economic and class-based revolt of programmers against traditional power structures within organizations manifests itself as an (ostensively) radical re-imagining of work life. But really, you should meet the new boss. Hint: he's the same as the old boss."
anonymous

Eight Silly Data Things Marketing People Believe That Get Them Fired. - 1 views

  • It turns out that Marketers, especially Digital Marketers, make really silly mistakes when it comes to data. Big data. Small data. Any data.
  • two common themes
  • 1. Some absolutely did not use data to do their digital jobs.
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  • 2. Many used some data, but they unfortunately used silly data strategies/metrics.
  • Silly not in their eyes, silly in my eyes.
  • A silly metric, I better define it :), is one that distracts you for focusing on business investments that lead to bottom-line impact.
    • anonymous
       
      Within the context of my current project, the bottom-line impact would be increased engagement (in the form of donations, clinical study participation, and blood/fluid donation to scientific research).
  • Eight data things that marketing people believe that get them fired…. 1. Real-time data is life changing. 2. All you need to do is fix the bounce rate. 3. Number of Likes represents social awesomeness. 4. # 1 Search Results Ranking = SEO Success. 5. REDUCE MY CPC! REDUCE MY CPC NOW!! 6. Page views. Give me more page views, more and more and more! 7. Impressions. Go, get me some impressions stat! 8. Demographics and psychographics. That is all I need! Don't care for intent!
  • 1. Real-time data is life changing.
  • A lot of people get fired for this. Sadly not right away, because it takes time to realize how spectacular of a waste of money getting to real-time data was.
    • anonymous
       
      This is some REALLY FUNNY SHIT to me. But I'm a nerd.
  • I want you to say: "I don't want real-time data, I want right-time data. Let's understand the speed of decision making in our company. If we make real-time decisions, let's get real time data. If we make decisions over two days, let's go with that data cycle. If it take ten days to make a decision to change bids on our PPC campaigns, let's go with that data cycle." Right-time.
  • Real-time data is very expensive.
  • It is also very expensive from a decision-making perspective
  • even in the best case scenario of the proverbial pigs flying, they'll obsess about tactical things.
    • anonymous
       
      I get this completely. We get hung up on the tactical and lose sight of the strategic.
  • So shoot for right-time data.
  • That is a cheaper systems/platform/data strategy.
  • (And remember even the most idiotic system in the world now gives you data that is a couple hours old with zero extra investment from you. So when you say real time you are really saying "Nope, two hours is not enough for me!").
    • anonymous
       
      THIS is probably the best argument for our using Google Analytics and Google Search to collect data instead of paying large costs to firms that will offer questionable results.
  • That is also a way to get people to sync the data analysis (not data puking, sorry I meant data reporting) with the speed at which the company actually makes decisions (data > analyst > manager > director > VP > question back to manager > yells at the analyst > back to director> VP = 6 days).
  • The phrase "real-time data analysis" is an oxymoron.
  • 2. All you need to do is fix the bounce rate.
  • The difference between a KPI and a metric is that the former has a direct line of sight to your bottom-line, while the latter is helpful in diagnosing tactical challenges.
  • Bounce rate is really useful for finding things you suck at.
  • Along the way you also learn how not to stink. Bounce rate goes from 70% to a manageable 30%. Takes three months.
  • Stop obsessing about bounce rate.
  • From the time people land on your site it might take another 12 – 25 pages for them to buy or submit a lead. Focus on all that stuff. The tough stuff. Then you'll make money.
  • Focus on the actual game. Focus on incredible behavior metrics like Pages/Visit, focus on the Visitor Flow report, obsess about Checkout Abandonment Rate, make love to Average Order Size.
  • 3. Number of Likes represents social awesomeness.
  • it does not take a very long time for your Senior Management to figure out how lame the Likes metric is and that it drives 1. Zero value on Facebook and 2. Zero squared economic value or cost savings to the business.
  • many spectacular reasons
  • Here's one… We are looking at two consumer product brands, the tiny company Innocent Drinks and the Goliath called Tide Detergent.
  • Even with 10x the number of Likes on Facebook the giant called Tide has 4x fewer people talking about their brand when compared to the David called Innocent.
  • As no less than three comments mention below, Innocent is 90% owned by Coca Cola. Fooled me!
  • In a massively large company they've carved out an identity uniquely their own. They refuse to be corrupted by Coca Cola's own Facebook strategy of constant self-pimping and product ads masquerading as "updates." As a result pound for pound Innocent's fan engagement on its page is multiple time better than Coca Cola's - even if the latter has many more likes.
  • 4. # 1 Search Results Ranking = SEO Success.
  • Not going to happen.
  • as all decent SEOs will tell you, is that search results are no longer standardized. Rather they are personalized. I might even say, hyper-personalized. Regardless of if you are logged in or not.
  • When I search for "avinash" on Google I might rank #1 in the search results because I'm logged into my Google account, the engine has my search history, my computer IP address, it also has searches by others in my vicinity, local stories right now, and so many other signals. But when you search for "avinash" your first search result might be a unicorn. Because the search engine has determined that the perfect search result for you for the keyword avinash is a unicorn.
    • anonymous
       
      This is crucial to understand. I will be sharing this, at length, with my boss. :)
  • Universal search for example means that personalized results will not only look for information from web pages, they also look for YouTube/Vimoe videos, social listings, images of course, and so on and so forth.
  • Then let's not forget that proportionaly there are very few head searches, your long tail searches will be huge.
  • Oh and remember that no one types a word or two, people use long phrases.
  • There are a ton more reasons obsessing about the rank of a handful of words on the search engine results page (SERP) is a very poor decision.
  • So check your keyword ranking if it pleases you.
  • But don't make it your KPI.
  • For purely SEO, you can use Crawl Rate/Depth, Inbound Links (just good ones) and growth (or lack there of) in your target key phrases as decent starting points.
  • You can graduate to looking at search traffic by site content or types of content you have (it's a great signal your SEO is working).
  • Measuring Visits and Conversions in aggregate first and segmented by keywords (or even key word clusters) will get you on the path to showing real impact.
  • That gives you short term acquisition quality, you can then move to long term quality by focusing on metrics like lifetime value.
  • 5. REDUCE MY CPC! REDUCE MY CPC NOW!!
  • You should judge the success of that showing up by measure if you made money! Did you earn any profit?
  • Friends don't let friends use CPC as a KPI. Unless said friends want the friend fired.
  • 6. Page views. Give me more page views, more and more and more!
  • Content consumption is a horrible metric. It incentivises sub optimal behavior in your employees/agencies.
  • If you are a news site, you can get millions of page views
  • And it will probably get you transient traffic.
  • And what about business impact from all these one night stands ?
  • If you are in the content only business (say my beloved New York Times) a better metric to focus on is Visitor Loyalty
  • If your are in the lead generation business and do the "OMG let's publish a infographic on dancing monkey tricks which will get us a billion page views, even though we have nothing to do with dancing or monkeys or tricks" thing, measure success on the number of leads received and not how "viral" the infographic went and how many reshares it got on Twitter.
    • anonymous
       
      In other words, use that odd-one-off to redirect attention to the source of that one-off. I'll have to ponder that given our different KPI needs (nonprofit, we don't sell anything).
  • Don't obsess about page views.
  • Then measure the metric closest to that. Hopefully some ideas above will help get you promoted.
  • 7. Impressions. Go, get me some impressions stat!
  • My hypothesis is that TV/Radio/Magazines have created this bad habit. We can measure so little, almost next to nothing, that we've brought our immensely shaky GRP metric from TV to digital. Here it's called impressions. Don't buy impressions.
  • Buy engagement. Define what it means first of course .
  • If you are willing to go to clicks, do one better and measure Visits. At least they showed up on your mobile/desktop site.
  • Now if you are a newbie, measure bounce rate. If you have a tiny amount of experience measure Visit Duration. If you are a pro, measure Revenue. If you are an Analysis Ninja, measure Profit.
  • Impressions suck. Profit rocks.
  • If the simple A/B (test/control) experiment demonstrates that delivering display banner ad impressions to the test group delivers increased revenue, buy impressions to your heart's content. I'll only recommend that you repeat the experiment once a quarter.
  • You can buy impressions if you can prove via a simple controlled experiment that when we show impressions we got more engagement/sales and when we don't show impressions we did not get more engagement/sales.
  • But if you won't do the experiment and you use the # of impressions as a measure of success
  • 8. Demographics and psychographics. That is all I need! Don't care for intent!
  • This is not a metric, this is more of a what data you'll use to target your advertising issue.
  • Our primary method of buying advertising and marketing is: "I would like to reach 90 year old grandmas that love knitting, what tv channel should I advertise on." Or they might say: "I would like to reach 18 to 24 year olds with college education who supported Barack Obama for president." And example of demographic and psychographic segments.
  • We use that on very thin ice data, we bought advertising. That was our lot in life.
  • Did you know 50% of of TV viewership is on networks that each have <1% share? Per industry.bnet.com. I dare you to imagine how difficult it is to measure who they are, and how to target them to pimp your shampoo, car, cement.
  • Intent beats demographics and psychographics. Always.
  • if you have advertising money to spend, first spend it all on advertising that provides you intent data.
  • Search has a ton of strong intent. It does not matter if you are a grandma or a 18 year old. If you are on Baidu and you search for the HTC One, you are expressing strong intent. Second, content consumption has intent built in. If I'm reading lots of articles about how to get pregnant, you could show me an ad related to that
  • The first intent is strong, the second one is weaker.
  • There is a lot of intent data on the web. That is our key strength.
  •  
    This is a really great read by Avinash Kaushik at Occam's Razor. Volunmuous highlights follow.
anonymous

Companies won't even look at résumés of the long-term unemployed - 0 views

  • Matthew O’Brien reports on a striking new paper by Rand Ghayad and William Dickens of Northeastern University. The researchers sent out 4,800 fake résumés at random for 600 job openings. What they found is that employers would rather call back someone with no relevant experience who’s only been out of work for a few months than someone with lots of relevant experience who’s been out of work for longer than six months.
  • Here’s what this looks like in chart form:
  • the long-term unemployed are struggling to find work no matter how many job openings pop up.
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  • there’s some ambiguity about whether companies are discriminating irrationally against the unemployed or whether they have good reason for screening out people who have been out of work for six months or more.
  • Dozens of states have been considering legislation that would make it illegal to discriminate against the long-term unemployed. Some proposals would even allow unsuccessful applicants to sue under the same discrimination laws that apply to race or gender bias.
  • These proposals have plenty of critics. But it’s also unclear whether they would have much impact.
  • The Obama administration, for its part, has proposed a few other ideas, including training programs and tax credits for businesses that hire the long-term unemployed. (The latter were even included in the American Jobs Act that Republicans blocked in Congress.)
  • Yet economists have argued that while these programs might help at the margins, they won’t necessarily bring down the overall unemployment rate. For instance, a company might just hire a subsidized worker over someone else.
  • It’s worth noting, as Matt Yglesias points out here, that long-term unemployment was a major structural problem after the Great Depression too. But as this old essay by Richard Jensen suggests, it took World War II to finally solve the problem: “The war, by removing millions of prime men from the labor market, by restructuring the work process, by subsidizing wages, and by massive retraining, finally gave the private sector the methods and the incentives to rehire the hard-core.” That’s not really an option today, but it underscores a bleak fact about the recession. When the labor market stays weak for years on end, the damage becomes long-lasting — and extremely difficult to reverse.
  •  
    "Here's one big reason why America's unemployment crisis may be here to stay. Thanks to the lasting effects of the recession, there are currently 4.7 million workers who have been out of work for at least 27 weeks. And new research suggests that employers will almost never consider hiring them."
anonymous

In Gurgaon, India, Dynamism Meets Dysfunction - 5 views

  • Gurgaon, located about 15 miles south of the national capital, New Delhi, would seem to have everything, except consider what it does not have: a functioning citywide sewer or drainage system; reliable electricity or water; and public sidewalks, adequate parking, decent roads or any citywide system of public transportation. Garbage is still regularly tossed in empty lots by the side of the road.
  • how can a new city become an international economic engine without basic public services? How can a huge country flirt with double-digit growth despite widespread corruption, inefficiency and governmental dysfunction?
  • India and China are often considered to be the world’s rising economic powers, yet if China’s growth has been led by the state, India’s growth is often impeded by the state.
    • anonymous
       
      Libertarians like to picture the state in a very fixed, binary position in relation to the economy. Further peeking, though, and you see that governments can be broadly pro-business, or anti-business, or both, or directed specificially in one or another sector. The Libertarian persistence that Government = Bad Things is hardly descriptive or useful.
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  • GURGAON, India
    • anonymous
       
      This would appear to be a wet-dream scenario for Libertarian/Anarchists. Let's see how this author portrays the many facets there most certainly are...
    • Erik Hanson
       
      Only certain types of anarchism allow for large, organized corporations. Recall that the workers' rights movement was largely spurred on by anarchists.
  • In Gurgaon, economic growth is often the product of a private sector improvising to overcome the inadequacies of the government. To compensate for electricity blackouts, Gurgaon’s companies and real estate developers operate massive diesel generators capable of powering small towns. No water? Drill private borewells. No public transportation? Companies employ hundreds of private buses and taxis. Worried about crime? Gurgaon has almost four times as many private security guards as police officers.
  • “You are on your own.”
  • It is experiencing a Gilded Age of nouveau billionaires while it is cleaved by inequality and plagued in some states by poverty and malnutrition levels rivaling sub-Saharan Africa.
  • Gurgaon was widely regarded as an economic wasteland. In 1979, the state of Haryana created Gurgaon by dividing a longstanding political district on the outskirts of New Delhi. One half would revolve around the city of Faridabad, which had an active municipal government, direct rail access to the capital, fertile farmland and a strong industrial base. The other half, Gurgaon, had rocky soil, no local government, no railway link and almost no industrial base. As an economic competition, it seemed an unfair fight. And it has been: Gurgaon has won, easily. Faridabad has struggled to catch India’s modernization wave, while Gurgaon’s disadvantages turned out to be advantages, none more important, initially, than the absence of a districtwide government, which meant less red tape capable of choking development. By 1979, Mr. Singh had taken control of his father-in-law’s real estate company, now known as DLF, at a moment when urban development in India was largely overseen by government agencies. In most states, private developers had little space to operate, but Haryana was an exception. Slowly, Mr. Singh began accumulating 3,500 acres in Gurgaon that he divided into plots and began selling to people unable to afford prices in New Delhi.
    • anonymous
       
      This smells a bit like the rise of Hong Kong. Filling out one piece of paper to start a business. This is Libertarian stuff that still resonates with me. That's very good. And then, the inevitable: BUT...
  • Mr. Singh had become the company’s India representative after befriending Jack Welch, then the G.E. chairman. When Mr. Welch decided to outsource some business operations to India, he eventually opened a G.E. office inside a corporate park in Gurgaon in 1997. “When G.E. came in,” Mr. Singh said, “others followed.”
  • Ordinarily, such a wild building boom would have had to hew to a local government master plan. But Gurgaon did not yet have such a plan, nor did it yet have a districtwide municipal government. Instead, Gurgaon was mostly under state control. Developers built the infrastructure inside their projects, while a state agency, the Haryana Urban Development Authority, or HUDA, was supposed to build the infrastructure binding together the city.
  • And that is where the problems arose. HUDA and other state agencies could not keep up with the pace of construction. The absence of a local government had helped Gurgaon become a leader of India’s growth boom. But that absence had also created a dysfunctional city. No one was planning at a macro level; every developer pursued his own agenda as more islands sprouted and state agencies struggled to keep pace with growth.
  • From computerized control rooms, Genpact employees manage 350 private drivers, who travel roughly 60,000 miles every day transporting 10,000 employees.
    • anonymous
       
      As an MR reader notes, in the absence of street laws, drivers are incentivized to speed and behave recklessly. This is one hell of a *feature* of little-to-no government? Cool.
  • The city’s residential compounds, especially the luxury developments along golf courses, exist as similarly self-contained entities.
  • “We pretty much carry the entire weight of what you would expect many states to do,” said Pramod Bhasin, who this spring stepped down as Genpact’s chief executive. “The problem — a very big problem — is our public services are always lagging a few years behind, but sometimes a decade behind. Our planning processes sometimes exist only on paper.”
  • Not all of the city’s islands are affluent, either. Gurgaon has an estimated 200,000 migrant workers, the so-called floating population, who work on construction sites or as domestic help.
  • Sheikh Hafizuddin, 38, lives in a slum with a few hundred other migrants less than two miles from Cyber City. No more than half the children in the slum attend school, with the rest spending their days playing on the hard-packed dirt of the settlement, where pigs wallow in an open pit of sewage and garbage. Mr. Hafizuddin pays $30 a month for a tiny room. His landlord runs a power line into the slum for electricity and draws water from a borehole on the property. “Sometimes it works,” Mr. Hafizuddin said. “Sometimes it doesn’t work.”
    • Erik Hanson
       
      This is one of the issues I take with anarcho-capitalism. It works great, so long as you only look at those on top.
  • Meanwhile, with Gurgaon’s understaffed police force outmatched by such a rapidly growing population, some law-and-order responsibilities have been delegated to the private sector. Nearly 12,000 private security guards work in Gurgaon, and many are pressed into directing traffic on major streets.
    • anonymous
       
      And where the private world of Gurgaon and everywherelse intersect, who's problem is it?
  • Sudhir Rajpal, the wiry, mustachioed commissioner of the new Municipal Corporation of Gurgaon, has a long to-do list: fix the roads, the sewers, the electrical grid, the drainage, the lack of public buses, the lack of water and the lack of planning. The Municipal Corporation was formed in 2008, and Mr. Rajpal, having assumed the city’s top administrative position a few months ago, has been conducting a listening tour to convince people that government can solve their problems. It is not an easy sell.
  • “The drains are broken and accidents are happening,” shouted one man. “Yet no one is answerable! There are problems and problems. Whatever water we get is dirty, but we have nowhere to complain.”
  • “Every day some agitation is taking place,” he said, shouting above the din of traffic. “People are not satisfied.” If people should be satisfied anywhere in India, Gurgaon should be the place. Average incomes rank among the highest in the country. Property values have jumped sharply since the 1990s. Gurgaon’s malls offer many of the country’s best shops and restaurants, while the city’s most exclusive housing enclaves are among the finest in India. Yet the economic power that growth has delivered to Gurgaon has not been matched by political power. The celebrated middle class created by India’s boom has far less clout at the ballot box than the hundreds of millions of rural peasants struggling to live on $2 a day, given the far larger rural vote, and thus are courted far less by Indian politicians.
    • anonymous
       
      Years ago, when I moved to Seattle, I worked with a mess of Indian programmers who complained that, coming from middle to middle-upper class households, their families had a difficult time doing the U.S.-style entrepreneur thing precisely because of (you put it:) byzantine laws and payoffs. I also take the nod that deriving broad trends from this isn't exactly wise. But it was worth noting because I have vague, youthful memories of the classic Capitalist-vs-Marxist quandry: Both can claim that there has never been a *true* example of one or the other. Reality is messy like that; it never provides perfect samples. By the way, thanks so much for joining in with my little bookmark-experiment, Erik. I love the idea of marking up a discussion document in order to probe an issue. I really shoulda gone to college. :)
    • Erik Hanson
       
      Hey, thanks for chunking out longer articles so that I can get through them (once I have time to open the Diigo emails in my inbox). I'm always a little upset about the juicy stuff I may be missing by skipping Buzz for a week or two.
  •  
    The anarcho-libertarian's wet dream: a city without a government. "In this city that barely existed two decades ago, there are 26 shopping malls, seven golf courses and luxury shops selling Chanel and Louis Vuitton. Mercedes-Benzes and BMWs shimmer in automobile showrooms. Apartment towers are sprouting like concrete weeds, and a futuristic commercial hub called Cyber City houses many of the world's most respected corporations. "
  •  
    India's government is especially byzantine and a truly active inhibitor of commerce and growth. I can understand how, especially to outside companies who don't know the system, there's a real appeal in being able to avoid the sort of daily struggles of someone claiming to be an official coming to your reception and demanding a fine for a law you're not sure even exists. But even if this city weren't rotting out from the inside, I don't think it would necessarily be a lesson applicable to all other governments. Not every piece of rope is a Gordian Knot, as not every government is India's.
anonymous

The Liberal Narrative is Broken, and Only Populism Can Fix It - 0 views

  • It is time to go populist.
  • A major reason for the limited support liberals gain (even within the Democratic Party) is a basic misunderstanding of the way democratic politics work.
  • Liberals console themselves, when they learn that for every American voter who identities as a liberal there are two conservatives, by saying, Ah, you don't get it; studies show that the majority only subscribe to conservative philosophies but they are 'operational' liberals.
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  • This lovely thought does not have a leg to stand on, because people cannot vote for these programs.
  • Instead, they must cast one vote that covers all the various programs and issues -- domestic and foreign -- before them. In doing so, they do not build some kind of index where they award five points for promoting Social Security, four for Medicare, three for parks, minus two for farm subsidies, and so on.
  • Rather, voters fall back on political philosophy as a shortcut to reach their summary choice -- the only one they have.
  • And when it comes to general philosophical leanings, the overwhelming majority of the population lean conservative, as these graphs show.
  • On the philosophical level, the liberal approach does not play for many because it is too abstruse.
  • When CNN asked a group of Democratic voters to recite the Republican message, they did so crisply, on the spot. When they same group was asked to recite the Democrats' message -- they hemmed and hawed.
  • Thus, President Obama stated in the 2013 State of the Union, "It's not a bigger government we need, but a smarter government that sets priorities and invests in broad-based growth."
  • Previously he told Americans, "I believe government should be lean; government should be efficient. I believe government should leave people free to make the choices they think are best for themselves and their families, so long as those choices don't hurt others."
  • He followed in the footsteps of the popular Bill Clinton, who made his mark by declaring that the age of big government was over and ending welfare as we knew it. Both cases reflect the pressure on liberals to kiss the we-don't-favor-big-government ring before they can hope that the majority of Americans will give their message a chance.
    • anonymous
       
      See also: Clinton & Blair's "Third Way"
  • More important, many government activities have become indefensible.Reports are published daily showing very large parts of the government are no longer serving the people and that they have been captured by special interests.
  • One reads on Monday that Congress voted 394 to 1 to extend a subsidy program started in 1925 to ensure there would be enough helium for zeppelins, but now serves only a few private interests.
  • On Tuesday, that casino and private prison corporations who declare themselves real-estate investment trusts (REITs) although they have nothing to do with the real-estate business have gained IRS approval not to pay taxes on their profits.
  • On Wednesday, that a hospital chain requires its physicians to hospitalize 50 percent of the seniors who set foot into its ERs and automatically orders a battery of tests for them whether they need it or not, all charged to Medicare.
  • On Thursday, that when 19 of the largest Wall Street firms violated anti-fraud laws, rather than face criminal prosecution, they were made to promise not to break the law in the future. When they broke it anyway, in 51 different cases, no charges were filed and the offenders were simply made to repeat their promise to behave.
  • And on Friday one is reminded that not one of the fine people who brought us the finical crisis that lost millions their homes, jobs, and life savings have been jailed, including those who hired people to systematically commit massive fraud. And that that the banks we bailed out are still too big to fail, while their executives got big bonuses and are carry on brewing the next financial bubble.
  • On it goes. Moreover, one must assume that for every government capture by special interests the press reveals, there are quite a few others not aired.
  • No wonder many found that the Tea Party spoke to their anger. True, the movement also attracted some people who hold racial prejudices and oppose gay marriage.
  • But it is a serious mistake to hold that this is the main attraction, or ignore the Tea Party's key message: namely, that the government is not working for us, is not responsive to our needs, is not hearing our voices.
    • anonymous
       
      Salience.
  • Instead of dismissing Tea Partiers as a bunch of redneck hicks, liberals should tell them they are half right -- the government all too often is not serving the people -- but have the wrong address for their very justified anger.
  • It should be directed at the special interests
  • Readers may wonder why, if it is true that large segments of the public are open to populist appeals, did Occupy Wall Street fare so poorly?
  • First, because it had no clear narrative and was mainly an expression of a very diffuse sentiment; second, because it mixed populist with liberal messages; third, because it was unclear who the bad guys are -- Wall Street? The bankers? The one percent? The System?
  • A populist narrative must clearly focus on special interests, even admitting that they may include some with liberal feathers. And it must call for liberating the government from special interests so that it might once again serve the people. This is a thesis that could unite liberals with many others who have many very sound reasons to be furious.
  • The next step, a major first step to return the government to one for the people, by the people, is actually a relative easy one to outline: rolling back the negative impact of the Supreme Court's Citizens United decision.
  • However, few will be ready to support major limitations on the private monies gushing into elections until they have come to see the source of our malaise. It is as simple -- the message ought to be simple -- as this: The culprit is not the government but the unfettering of the special interests who all too often have captured its reins.
  •  
    "The left dare not answer conservatives by simply saying government is good. Instead, it must make special interests a rallying cry."
anonymous

How can we boost distributed solar and save utilities at the same time? - 0 views

  • On one hand, more distributed renewable energy is a good thing. It reduces carbon emissions, increases resilience, stimulates the growth of new industries with new jobs, and gives Americans a taste of energy democracy.
  • On the other hand, it just won’t do to have utilities view the spread of rooftop solar PV as an existential threat. Whatever you think of them, utilities still have tons of political power. If they want to slow the spread of distributed energy, they can. A lot.
  • the utilities’ primary objective, the impetus behind the recent report from their trade group, Edison Electric Institute, is to protect their business model and their profits.
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  •  it’s not clear why protecting utility shareholders ought to outrank other social goals. EEI’s recommendations should be taken with a grain of salt.
  • As solar customers pay less to the utility, they contribute less to the maintenance of the electric grid and other utility “fixed” assets. The utility’s fixed costs (as opposed to the variable costs of fuel and electricity) must be recovered from the other ratepayers.
    • anonymous
       
      It's so funny to think that solar was written off by so many, and now it's going to morph from joke to threat.
  • This is always the rap on solar PV programs from critics: They amount to forcing poor ratepayers to subsidize the green indulgences of the more well-to-do.
  • In some ways, EEI’s discussion reflects utilities’ instinctive hostility toward distributed energy. It makes a great deal of the costs of incorporating rooftop solar PV into the system, but says little about the benefits.
  • And there are benefits. In January, energy analysts at Crossborder Energy did a careful study [PDF] of California’s net-metering policy, tallying up costs and benefits.
  • (The study was commissioned by the Vote Solar Initiative.) The costs are those described above — all utility customers pay for credits to solar customers and for the metering and billing necessary to integrate them in the grid.
  • But as utilities get power from solar, they don’t have to get it elsewhere. There are “avoided costs,” which benefit all ratepayers, not just the solar few. Here are the benefits Crossborder considered (and the California PUC has considered in rate cases): • Avoided energy costs • Avoided capacity costs for generation • Reduced costs for ancillary services • Lower line losses on the transmission and distribution system (T&D) • Reduced investments in T&D facilities • Lower costs for the utility’s purchase of other renewable generation
  • Now, obviously this doesn’t mean distributed solar always and everywhere lowers costs for non-solar utility customers. But it does suggest that utilities shouldn’t assume the inverse either.
  • Midwest Energy News (which you should be reading) did a great piece on this subject recently. I thought this bit captured it well: “This is exactly the same as when a private company, an electric utility, for example, is approved by its regulator to build a conventional power plant ‘in the public interest’,” says [renewable energy analyst Paul] Gipe. The costs and benefits are studied, and if regulators think the plant is in the public’s interest, they will approve it even if it results in new costs for customers.
  • However, the prospect of a bunch of utilities going bankrupt isn’t exactly attractive. So what does EEI think it needs for utilities to avoid being swept away?
  • Not surprisingly, the short-term recommendations mostly amount to making rooftop solar customers pay more.
  • First, EEI wants all power bills to include a flat charge for fixed costs, which would apply to all grid-connected customers.
  • Second, they want solar customers charged for the services the grid provides them: “off-peak service, back-up interruptible service, and the pathway to sell [distributed energy resources] to the utility or other energy supply providers.”
  • And third, it wants net-metering programs revised to pay solar customers only the going market rate, not some fancy subsidized rate.
  • All these measures would have the same effect: reduce the economic incentives for rooftop solar and thus slow its adoption.
  • the utilities cannot be locked into a death spiral this far in advance. It’s not healthy for them to be in a pitched battle with their customers and the planet. It’s politically untenable.
  • On energy efficiency, which poses many of the same threats to utilities, the conflict has been somewhat papered over by “decoupling,” whereby a utility’s profits are disassociated from its sales of energy.
  • But decoupling has always struck me as a classic kludge. It amounts to forcing utilities to slowly dig their own graves, strand their own assets.
  • They’ll do it if forced by law, but they won’t do it enthusiastically. They won’t innovate. They’ll do what they have to and no more.
  • What’s needed, then, is something deeper, a more fundamental restructuring of the utility model, a way to escape once and for all the cross-incentives that are pitting utilities against energy democracy.
  • further reading:
  • Over at NDN, Michael Moynihan did a great report called “Electricity 2.0: Unlocking the Power of the Open Energy Network.” It wrestles with exactly these issues in an incisive and comprehensive way.
  • At the Center for American Progress, Bracken Hendricks and Adam James recently put out a report called “The Networked Energy Web” that addresses many of the same questions.
  • The Rocky Mountain Institute has a program called eLab devoted to creating a modern electricity system. Check out this video they made and see if it doesn’t sound familiar!
  •  
    "Yesterday I wrote that solar PV and other distributed-energy technologies pose a radical threat to U.S. power utilities and the centralized business model they've operated under for the last century. This is, I hasten to add, according to the utilities themselves."
anonymous

Americans Want to Live in a Much More Equal Country (They Just Don't Realize It) - 0 views

  • The inequality of wealth and income in the U.S. has become an increasingly prevalent issue in recent years. One reason for this is that the visibility of this inequality has been increasing gradually for a long time--as society has become less segregated, people can now see more clearly how much other people make and consume.
  • imagine that we took all Americans and sorted them by wealth along a line with the poorest on the left and continuing as wealth increases until on the right we have the richest. Now, imagine that we divide them into five buckets with an equal number of citizens in each. The first bucket contains the poorest 20% of the population, the next contains the second wealthiest tier, and so on down to the wealthiest 20% (see Figure 1).
  • With this in mind, from the total pie of wealth (100%) what percent do you think the bottom 40% (that is, the first two buckets together) of Americans possess? And what about the top 20%? If you guessed around 9% for the bottom and 59% for the top, you're pretty much in line with the average response we got when we asked this question of thousands of Americans.
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  • The reality is quite different. Based on Wolff (2010), the bottom 40% of the population combined has only 0.3% of wealth while the top 20% possesses 84% (see Figure 2). These differences between levels of wealth in society comprise what's called the Gini coefficient, which is one way to quantify inequality.
  • When economists consider the desirable level of inequality, they usually define the ideal inequality from the perspective of economic efficiency: What level of inequality will motivate people to be the most productive and move up the wealth ladder? What level of inequality will allow those at the top to lift up society as a whole (say, by having the resources to invent new technologies)? What level of wealth will keep salaries low and competition high?
  • inequality is not just about economic efficiency. It's also about our day-to-day experience as citizens, the influence of envy, our social mobility, the importance of equal opportunity, our mutual dependency on each other, etc.
  • We took a step back and examined social inequality based on the definition that the philosopher John Rawls gave in his book A Theory of Justice. In Rawls' terms, a society is just if a person understands all the conditions within that society and is willing to enter it in a random place (in terms of socio-economic status, gender, race, and so on).
  • They could be among the poorest or the richest, or anywhere in between. Rawls called this idea the "veil of ignorance" because the decision of whether to enter a particular society is disconnected from the particular knowledge that the individual has about the level of wealth that he or she will have after making the decision.
  • we did two things.
  • First, we asked 5,522 people to create a distribution of wealth among the five buckets such that they themselves would be willing to enter that society at a random place.
  • What was particularly surprising about the results was that when we examined the ideal distributions for Republicans and Democrats, we found them to be quite similar (see Figure 4).
  • When we examined the results by other variables, including income and gender, we again found no appreciable differences. It seems that Americans -- regardless of political affiliation, income, and gender -- want the kind of wealth distribution shown in Figure 3, which is very different from what we have and from what we think we have (see Figure 2).
  • in another task, we made things simpler (see Figure 5) and asked people to choose between two unidentified distributions (again under the veil of ignorance). The first option, unbeknownst to participants, reflected the distribution of wealth in America. For the second option we modified the distribution found in Sweden, making it substantially more equal (we referred to this fictional nation as "Equalden").
  • We discovered that 92% of Americans preferred the distribution of "Equalden" to America's. And if one were to assume that the 8% who preferred America's distribution was made up of wealthy Republican men, he or she would be mistaken. The preference for "Equalden" was slightly different for Republicans and Democrats, and in the expected direction, but the magnitude was very small: 93.5% of Democrats and 90.2% of Republicans preferred the more equal distribution.
  • similarity across the political spectrum is far more substantial than the differences.
  • There are a few lessons that we can learn from this.
  • The first is that we vastly underestimate the level of inequality that we have in America.
  • Second, we want much more equality than both what we have and what we think we have.
  • when asked in a way that avoids hot-button terms, misconceptions, and the level of wealth people currently possess, Americans are actually in agreement about wanting a more equal distribution of wealth.
  • In fact, the vast majority of Americans prefer a distribution of wealth more equal than what exists in Sweden, which is often placed rhetorically at the extreme far left in terms of political ideology
  • A third lesson concerns the political gap between Democrats and Republicans
  • how is it possible that we found so little difference between them in our study?
  • One reason for this could be our inability to separate our ideology from our current state of wealth.
  • Another reason could be politicians, who, in order to rally people to their side, try to generate feelings of greater difference and opposition--and therefore conflict--than actually exist.
  • The veil of ignorance accomplishes something similar to blind taste testing.
  • when we express opinions about politics and life in general, we can't help but be influenced by our own varying degrees wealth and ignorance of others' lives. The veil of ignorance works to separate our core beliefs from the biases and prejudices we develop over time and through the subjective experience of being part of a certain class and demographic.
  • It is one thing to get people to tell us what kind of society the would want to join, and another to get them part with their money in order to create that society.
  • Social justice and optimal wealth distribution are highly complex topics, and it's hard to imagine that any study could dramatically change opinions about education, welfare, or tax reform. But consider this. When we ran the same basic experiment in Australia, we found Australians did not differ much from Americans in their views of the ideal distribution. When we ran another version of it with NPR listeners, and then readers of Forbes Magazine, the results were still basically the same. And most likely, if you participated in one of our tests, your response too would have fallen in line with these findings.
  •  
    "We asked thousands of people to describe their ideal distribution of wealth, from top to bottom. The vast majority -- rich, poor, GOP and Democrat -- imagined a far more equal nation. Here's why it matters."
anonymous

Tech startups: A Cambrian moment | The Economist - 1 views

  • Digital startups are bubbling up in an astonishing variety of services and products, penetrating every nook and cranny of the economy. They are reshaping entire industries and even changing the very notion of the firm. “Software is eating the world,” says Marc Andreessen, a Silicon Valley venture capitalist.
  • “Anyone who writes code can become an entrepreneur—anywhere in the world,” says Simon Levene, a venture capitalist in London. Here we go again, you may think: yet another dotcom bubble that is bound to pop. Indeed, the number of pure software startups may have peaked already. And many new offerings are simply iterations on existing ones.
  • The danger is that once again too much money is being pumped into startups, warns Mr Andreessen, who as co-founder of Netscape saw the bubble from close by: “When things popped last time it took ten years to reset the psychology.” And even without another internet bust, more than 90% of startups will crash and burn.
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  • But this time is also different, in an important way. Today’s entrepreneurial boom is based on more solid foundations than the 1990s internet bubble, which makes it more likely to continue for the foreseeable future.
  • One explanation for the Cambrian explosion of 540m years ago is that at that time the basic building blocks of life had just been perfected, allowing more complex organisms to be assembled more rapidly. Similarly, the basic building blocks for digital services and products—the “technologies of startup production”, in the words of Josh Lerner of Harvard Business School—have become so evolved, cheap and ubiquitous that they can be easily combined and recombined.
  • Some will work out, many will not. Hal Varian, Google’s chief economist, calls this “combinatorial innovation”. In a way, these startups are doing what humans have always done: apply known techniques to new problems.
  • Economic and social shifts have provided added momentum for startups. The prolonged economic crisis that began in 2008 has caused many millennials—people born since the early 1980s—to abandon hope of finding a conventional job, so it makes sense for them to strike out on their own or join a startup.
  • startups are a big part of a new movement back to the city.
  • In essence, software (which is at the heart of these startups) is eating away at the structures established in the analogue age. LinkedIn, a social network, for instance, has fundamentally changed the recruitment business. Airbnb, a website on which private owners offer rooms and flats for short-term rent, is disrupting the hotel industry. And Uber, a service that connects would-be passengers with drivers, is doing the same for the taxi business.
  • It is a story of technological change creating a set of new institutions which governments around the world are increasingly supporting.
  • Startups run on hype; things are always “awesome” and people “super-excited”. But this world has its dark side as well. Failure can be devastating. Being an entrepreneur often means having no private life, getting little sleep and living on noodles, which may be one reason why few women are interested. More ominously, startups may destroy more jobs than they create, at least in the shorter term.
  • Yet this report will argue that the world of startups today offers a preview of how large swathes of the economy will be organised tomorrow. The prevailing model will be platforms with small, innovative firms operating on top of them. This pattern is already emerging in such sectors as banking, telecommunications, electricity and even government. As Archimedes, the leading scientist of classical antiquity, once said: “Give me a place to stand on, and I will move the Earth.”
  •  
    "Cheap and ubiquitous building blocks for digital products and services have caused an explosion in startups. Ludwig Siegele weighs its significance"
anonymous

Recognizing the End of the Chinese Economic Miracle - 0 views

  • A crisis can exist before it is recognized.
  • The admission that a crisis exists is a critical moment, because this is when most others start to change their behavior in reaction to the crisis.
  • First, The New York Times columnist and Nobel Prize-recipient Paul Krugman penned a piece titled "Hitting China's Wall." He wrote, "The signs are now unmistakable: China is in big trouble.
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  • Later in the week, Ben Levisohn authored a column in Barron's called "Smoke Signals from China." He wrote, "In the classic disaster flick 'The Towering Inferno' partygoers ignored a fire in a storage room because they assumed it has been contained. Are investors making the same mistake with China?"
  • Meanwhile, Goldman Sachs -- where in November 2001 Jim O'Neil coined the term BRICs and forecast that China might surpass the United States economically by 2028 -- cut its forecast of Chinese growth to 7.4 percent. 
  • The New York Times, Barron's and Goldman Sachs are all both a seismograph of the conventional wisdom and the creators of the conventional wisdom. Therefore, when all three announce within a few weeks that China's economic condition ranges from disappointing to verging on a crash, it transforms the way people think of China.
  • Now the conversation is moving from forecasts of how quickly China will overtake the United States to considerations of what the consequences of a Chinese crash would be. 
  • Suddenly finding Stratfor amid the conventional wisdom regarding China does feel odd, I must admit. Having first noted the underlying contradictions in China's economic growth years ago, when most viewed China as the miracle Japan wasn't, and having been scorned for not understanding the shift in global power underway, it is gratifying to now have a lot of company.
  • One of the things masking China's weakening has been Chinese statistics, which Krugman referred to as "even more fictional than most."
  • China is a vast country in territory and population. Gathering information on how it is doing would be a daunting task, even were China inclined to do so. Instead, China understands that in the West, there is an assumption that government statistics bear at least a limited relationship to truth. Beijing accordingly uses its numbers to shape perceptions inside and outside China of how it is doing.
  • The Chinese release their annual gross domestic product numbers in the third week of January (and only revise them the following year). They can't possibly know how they did that fast, and they don't. But they do know what they want the world to believe about their growth, and the world has believed them -- hence, the fantastic tales of economic growth. 
  • China in fact has had an extraordinary period of growth. The last 30 years have been remarkable, marred only by the fact that the Chinese started at such a low point due to the policies of the Maoist period.
  • Growth at first was relatively easy; it was hard for China to do worse. But make no mistake: China surged. Still, basing economic performance on consumption, Krugman notes that China is barely larger economically than Japan. Given the compounding effects of China's guesses at GDP, we would guess it remains behind Japan, but how can you tell? We can say without a doubt that China's economy has grown dramatically in the past 30 years but that it is no longer growing nearly as quickly as it once did.
  • China's growth surge was built on a very unglamorous fact: Chinese wages were far below Western wages, and therefore the Chinese were able to produce a certain class of products at lower cost than possible in the West.
  • China had another essential policy: Beijing was terrified of unemployment and the social consequences that flow from it. This was a rational fear, but one that contradicted China's main strength, its wage advantage.
  • Growing the economy is possible, but not growing profitability. Eventually, the economy will be dragged down by its inefficiency. 
  • As businesses become inefficient, production costs rise. And that leads to inflation. As money is lent to keep inefficient businesses going, inflation increases even more markedly. The increase in inefficiency is compounded by the growth of the money supply prompted by aggressive lending to keep the economy going. As this persisted over many years, the inefficiencies built into the Chinese economy have become staggering. 
  • The second thing to bear in mind is the overwhelming poverty of China, where 900 million people have an annual per capita income around the same level as Guatemala, Georgia, Indonesia or Mongolia ($3,000-$3,500 a year), while around 500 million of those have an annual per capita income around the same level as India, Nicaragua, Ghana, Uzbekistan or Nigeria ($1,500-$1,700).
  • China's overall per capita GDP is around the same level as the Dominican Republic, Serbia, Thailand or Jamaica.
  • Stimulating an economy where more than a billion people live in deep poverty is impossible. Economic stimulus makes sense when products can be sold to the public.
  • The Chinese have maintained a strategy of depending on exports without taking into account the operation of the business cycle in the West, which means that periodic and substantial contractions of demand will occur. China's industrial plant is geared to Western demand. When Western demand contracted, the result was the mess you see now.
  • The Chinese can prevent the kind of crash that struck East Asia in 1997. Their currency isn't convertible, so there can't be a run on it. They continue to have a command economy; they are still communist, after all. But they cannot avoid the consequences of their economic reality, and the longer they put off the day of reckoning, the harder it will become to recover from it.
  • The Chinese are not going to completely collapse economically any more than the Japanese or South Koreans did. What will happen is that China will behave differently than before. With no choices that don't frighten them, the Chinese will focus on containing the social and political fallout, both by trying to target benefits to politically sensitive groups and by using their excellent security apparatus to suppress and deter unrest.
  • The Chinese economic performance will degrade, but crisis will be avoided and political interests protected. Since much of China never benefited from the boom, there is a massive force that has felt marginalized and victimized by coastal elites. That is not a bad foundation for the Communist Party to rely on.
  • The Chinese are, of course, keeping a great deal of money in U.S. government instruments and other markets. Contrary to fears, that money will not be withdrawn. The Chinese problem isn't a lack of capital, and repatriating that money would simply increase inflation.
  • Had the Chinese been able to put that money to good use, it would have never been invested in the United States in the first place.
    • anonymous
       
      I'm having a hard time following all the econ stuff, but I understand this to mean that the U.S. is 'old reliable': Not an investment of last resort, but an investment to run to when you don't have a sure thing.
  • Rather than the feared repatriation of funds, the United States will continue to be the target of major Chinese cash inflows.
  • In a world where Europe is still reeling, only the United States is both secure and large enough to contain Chinese appetites for safety. Just as Japanese investment in the 1990s represented capital flight rather than a healthy investment appetite, so the behavior we have seen from Chinese investors in recent years is capital flight:
  • money searching for secure havens regardless of return. This money has underpinned American markets; it is not going away, and in fact more is on the way. 
  • The major shift in the international order will be the decline of China's role in the region. China's ability to project military power in Asia has been substantially overestimated.
  • Its naval capacity is still limited compared with the United States. The idea that it will compensate for internal economic problems by genuine (as opposed to rhetorical) military action is therefore unlikely.
  • In our view, the most important shift will be the re-emergence of Japan as the dominant economic and political power in East Asia in a slow process neither will really want.
  • China will continue to be a major power, and it will continue to matter a great deal economically. Being troubled is not the same as ceasing to exist. China will always exist. It will, however, no longer be the low-wage, high-growth center of the world. Like Japan before it, it will play a different role.
  •  
    "Major shifts underway in the Chinese economy that Stratfor has forecast and discussed for years have now drawn the attention of the mainstream media. Many have asked when China would find itself in an economic crisis, to which we have answered that China has been there for awhile -- something not widely recognized outside China, and particularly not in the United States."
anonymous

Do Not Link allows you to ethically criticize bad content - 0 views

  • If you doubt my thesis, read this New York Times article. It tells the story of how negative reviews of a particular business actually had the effect of catapulting that business to the top of the relevant search result, thereby bringing it more customers.
  • I’ve long recommended a best practice for skeptics to use the HTML NOFOLLOW attribute to prevent this from happening.
  • Donotlink.com works like a URL shortener, which many people use for practical reasons anyway in social media posts.  But unlike regular URL shorteners, which generally do not interfere with the ability of Google and others to count links, Do Not Link takes several steps to make sure the link will not be counted. I’ve tested out the service, and it does work as described.
  •  
    "I've written many times about how skeptics need to take care when linking to bad information that we intend to rebut. Because links are used by search engines to measure the importance of content, linking to a piece of pseudoscience or misinformation (in the process of rebutting or debunking it) might actually have the effect of making it more visible to others. That's not desirable. I would even say it is unethical to increase the visibility of such content, insofar as it has the potential to cause harm."
anonymous

The history of inequality (by Peter Turchin) - 0 views

  • Today, the top one per cent of incomes in the United States accounts for one fifth of US earnings. The top one per cent of fortunes holds two-fifths of the total wealth.
  • As the Congressional Budget Office concluded in 2011: ‘the precise reasons for the rapid growth in income at the top are not well understood’.
  • In his book Wealth and Democracy (2002), Kevin Phillips came up with a useful way of thinking about the changing patterns of wealth inequality in the US.
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  • He looked at the net wealth of the nation’s median household and compared it with the size of the largest fortune in the US. The ratio of the two figures provided a rough measure of wealth inequality, and that’s what he tracked, touching down every decade or so from the turn of the 19th century all the way to the present.
  • We found repeated back-and-forth swings in demographic, economic, social, and political structures
  • From 1800 to the 1920s, inequality increased more than a hundredfold.
  • Then came the reversal: from the 1920s to 1980, it shrank back to levels not seen since the mid-19th century.
  • From 1980 to the present, the wealth gap has been on another steep, if erratic, rise. Commentators have called the period from 1920s to 1970s the ‘great compression’. The past 30 years are known as the ‘great divergence’.
    • anonymous
       
      I'd like to pull this citation and superimpose another period-chart onto my timeline.
  • when looked at over a long period, the development of wealth inequality in the US appears to be cyclical. And if it’s cyclical, we can predict what happens next.
  • Does observing just one and a half cycles really show that there is a regular pattern in the dynamics of inequality? No, by itself it doesn’t.
  • In our book Secular Cycles (2009), Sergey Nefedov and I applied the Phillips approach to England, France and Russia throughout both the medieval and early modern periods, and also to ancient Rome.
  • And the cycles of inequality were an integral part of the overall motion.
  • Cycles in the real world are chaotic, because complex systems such as human societies have many parts that are constantly moving and influencing each other.
  • Understanding (and perhaps even forecasting) such trend-reversals is at the core of the new discipline of cliodynamics, which looks at history through the lens of mathematical modelling.
    • anonymous
       
      Cliodynamics - Another thing to learn a bit more about.
  • First, we need to think about jobs.
  • One of the most important forces affecting the labour supply in the US has been immigration
  • it turns out that immigration, as measured by the proportion of the population who were born abroad, has changed in a cyclical manner just like inequality.
  • Another reason why the labour supply in the US went up in the 19th century is, not to put too fine a point on it, sex.
  • This connection between the oversupply of labour and plummeting living standards for the poor is one of the more robust generalisations in history.
  • The population of England doubled between 1150 and 1300.
  • causing the population of London to balloon from 20,000 to 80,000.
  • fourfold increase in food prices and a halving of real wages.
  • when a series of horrible epidemics, starting with the Black Death of 1348, carried away more than half of the population, the same dynamic ran in reverse.
  • The tug of war between the top and typical incomes doesn’t have to be a zero-sum game, but in practice it often is
  • Much the same pattern can be seen during the secular cycle of the Roman Principate.
  • Naturally, the conditions affecting the labour supply were different in the second half of the 20th century in the US. An important new element was globalisation
  • an oversupply of labour tends to depress wages for the poorer section of the population. And just as in Roman Egypt, the poor in the US today eat more energy-dense foods — bread, pasta, and potatoes — while the wealthy eat more fruit and drink wine.
  • Falling wages isn’t the only reason why labour oversupply leads to inequality. As the slice of the economic pie going to employees diminishes, the share going to employers goes up.
  • And so in 13th-century England, as the overall population doubles, we find landowners charging peasants higher rents and paying less in wages: the immiseration of the general populace translates into a Golden Age for the aristocrats.
  • the number of knights and esquires tripled between 1200 and 1300.
  • Only the gentry drank wine, and around 1300, England imported 20,000 tuns or casks of it from France per year. By 1460, this declined to only 5,000.
  • In the US between around 1870 and 1900, there was another Golden Age for the elites, appropriately called the Gilded Age.
  • And just like in 13th-century England, the total number of the wealthy was shooting up. Between 1825 and 1900, the number of millionaires (in constant 1900 dollars) went from 2.5 per million of the population to 19 per million.
  • In our current cycle, the proportion of decamillionaires (those whose net worth exceeds 10 million in 1995 dollars) grew tenfold between 1992 and 2007 — from 0.04 to 0.4 per cent of the US population.
  • On the face of it, this is a wonderful testament to merit-based upward mobility. But there are side effects. Don’t forget that most people are stuck with stagnant or falling real wages. Upward mobility for a few hollows out the middle class and causes the social pyramid to become top-heavy.
  • As the ranks of the wealthy swell, so too do the numbers of wealthy aspirants for the finite supply of political positions.
  • The civil wars of the first century BC, fuelled by a surplus of politically ambitious aristocrats, ultimately caused the fall of the Republic and the establishment of the Empire.
  • So far I have been talking about the elites as if they are all the same. But they aren’t: the differences within the wealthiest one per cent are almost as stark as the difference between the top one per cent and the remaining 99.
  • very intense status rivalry
  • Archaeology confirms a genuine and dramatic shift towards luxury.
  • Social Darwinism took off during the original Gilded Age, and Ayn Rand (who argued that altruism is evil) has grown astonishingly popular during what we might call our Second Gilded Age.
  • Twilight of the Elites (2012): ‘defenders of the status quo invoke a kind of neo-Calvinist logic by saying that those at the top, by virtue of their placement there, must be the most deserving’. By the same reasoning, those at the bottom are not deserving. As such social norms spread, it becomes increasingly easy for CEOs to justify giving themselves huge bonuses while cutting the wages of workers.
  • Labour markets are especially sensitive to cultural norms about what is fair compensation, so prevailing theories about inequality have practical consequences.
  • the US political system is much more attuned to the wishes of the rich than to the aspirations of the poor.
  • Inverse relationship between well-being and inequality in American history. The peaks and valleys of inequality (in purple) represent the ratio of the largest fortunes to the median wealth of households (the Phillips curve). The blue-shaded curve combines four measures of well-being: economic (the fraction of economic growth that is paid to workers as wages), health (life expectancy and the average height of native-born population), and social optimism (the average age of first marriage, with early marriages indicating social optimism and delayed marriages indicating social pessimism).
  • In some historical periods it worked primarily for the benefit of the wealthy. In others, it pursued policies that benefited the society as a whole. Take the minimum wage, which grew during the Great Compression era and declined (in real terms) after 1980.
  • The top marginal tax rate was 68 per cent or higher before 1980; by 1988 it declined to 28 per cent.
  • In one era, government policy systematically favoured the majority, while in another it favoured the narrow interests of the wealthy elites. This inconsistency calls for explanation.
  • How, though, can we account for the much more broadly inclusive policies of the Great Compression era? And what caused the reversal that ended the Gilded Age and ushered in the Great Compression? Or the second switch, which took place around 1980?
  • Unequal societies generally turn a corner once they have passed through a long spell of political instability.
  • We see this shift in the social mood repeatedly throughout history — towards the end of the Roman civil wars (first century BC), following the English Wars of the Roses (1455-85), and after the Fronde (1648-53), the final great outbreak of violence that had been convulsing France since the Wars of Religion began in the late 16th century.
  • Put simply, it is fear of revolution that restores equality. And my analysis of US history in a forthcoming book suggests that this is precisely what happened in the US around 1920.
  • The worst incident in US labour history was the West Virginia Mine War of 1920—21, culminating in the Battle of Blair Mountain.
  • Although it started as a workers’ dispute, the Mine War eventually turned into the largest armed insurrection that the US has ever seen, the Civil War excepted. Between 10,000 and 15,000 miners armed with rifles battled against thousands of strikebreakers and sheriff deputies.
  • Quantitative data indicate that this period was the most violent in US history, second only to the Civil War. It was much, much worse than the 1960s.
  • The US, in short, was in a revolutionary situation, and many among the political and business elites realised it.
  • The US elites entered into an unwritten compact with the working classes. This implicit contract included the promise that the fruits of economic growth would be distributed more equitably among both workers and owners. In return, the fundamentals of the political-economic system would not be challenged (no revolution).
  • The deal allowed the lower and upper classes to co-operate in solving the challenges facing the American Republic — overcoming the Great Depression, winning the Second World War, and countering the Soviet threat during the Cold War.
  • while making such ‘categorical inequalities’ worse, the compact led to a dramatic reduction in overall economic inequality.
  • The co-operating group was mainly native-born white Protestants. African-Americans, Jews, Catholics and foreigners were excluded or heavily discriminated against.
  • When Barry Goldwater campaigned on a pro-business, anti-union and anti-big government platform in the 1964 presidential elections, he couldn’t win any lasting support from the corporate community. The conservatives had to wait another 16 years for their triumph.
  • But by the late 1970s, a new generation of political and business leaders had come to power. To them the revolutionary situation of 1919-21 was just history. In this they were similar to the French aristocrats on the eve of the French Revolution, who did not see that their actions could bring down the Ancien Régime — the last great social breakdown, the Fronde, being so far in the past.
    • anonymous
       
      This heavily mirrors many aspects of Strauss & Howe's observations. Namely that generational cohorts roughly conform to archetypes precisely *because* memory of prior situations moves from accessible-memory (in those who have it) to history/myth once those who remember it have died.
  • It is no coincidence that the life of Communism (from the October Revolution in Russia in 1917 to the fall of the Berlin Wall in 1989) coincides almost perfectly with the Great Compression era.
  • when Communism collapsed, its significance was seriously misread. It’s true that the Soviet economy could not compete with a system based on free markets plus policies and norms that promoted equity.
  • Yet the fall of the Soviet Union was interpreted as a vindication of free markets, period. The triumphalist, heady atmosphere of the 1990s was highly conducive to the spread of Ayn Randism and other individualist ideologies. The unwritten social contract that had emerged during the New Deal and braved the challenges of the Second World War had faded from memory.
  • all of these trends are part of a complex and interlocking system. I don’t just mean that everything affects everything else; that would be vacuous.
  • Rather, that cliodynamic theory can tell us specifically how demographic, economic and cultural variables relate to one another, and how their interactions generate social change.
  • Cliodynamics also explains why historical reversals in such diverse areas as economics and culture happen at roughly similar times. The theory of secular cycles was developed using data from historical societies, but it looks like it can provide answers to questions about our own society.
  • Three years ago I published a short article in the science journal Nature. I pointed out that several leading indicators of political instability look set to peak around 2020.
    • anonymous
       
      2020-2025 is a date-range that continues to pop up in my forecasting readings - and from quite a variety of sources.
  • In other words, we are rapidly approaching a historical cusp, at which the US will be particularly vulnerable to violent upheaval. This prediction is not a ‘prophecy’. I don’t believe that disaster is pre-ordained, no matter what we do. On the contrary, if we understand the causes, we have a chance to prevent it from happening. But the first thing we will have to do is reverse the trend of ever-growing inequality.
  •  
    "After thousands of scholarly and popular articles on the topic, one might think we would have a pretty good idea why the richest people in the US are pulling away from the rest. But it seems we don't. As the Congressional Budget Office concluded in 2011: 'the precise reasons for the rapid growth in income at the top are not well understood'. Some commentators point to economic factors, some to politics, and others again to culture. Yet obviously enough, all these factors must interact in complex ways. What is slightly less obvious is how a very long historical perspective can help us to see the whole mechanism."
anonymous

Objectivism & "Metaphysics," Part 12 - 0 views

  • A philosopher may have the most extravagant notions of reality, yet after he’s finished propagating his peculiar species of balderdash, he goes about his business like everyone else and, despite his absurd doctrines, has no difficulty finding his way home. “Nature is always too strong for principle,” is how Hume described the phenomenon.
  • Since much of Rand’s metaphysics supports notions allied to common sense, it has more potential to, by leading people astray, exercise a baleful effect. These bad effects stem from three aspects of the Objectivist metaphysics:
  • (1) its attempt to determine matters of fact through logical and rhetorical constructions
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  • (2) its conviction that reality is “logical” (i.e., “contradictions cannot exist in reality”)
  • (3) its belief that philosophy has a “veto power” over science.
  • Objectivists seem to believe that ordinary perception provides us with a “logical” world, and therefore that all of reality should behave as grosser objects do in perception.
  • who decided that human perception, interpreted via common sense, is the final arbiter of what’s possible in reality, particularly at the quantum level?
  •  
    "A philosopher may have the most extravagant notions of reality, yet after he's finished propagating his peculiar species of balderdash, he goes about his business like everyone else and, despite his absurd doctrines, has no difficulty finding his way home. "Nature is always too strong for principle," is how Hume described the phenomenon." By Greg Nyquist at Ayn Rand Contra Human Nature on September 22, 2010.
anonymous

The Expanding Role of Russia's Youth Groups - 3 views

  • Over the past two years, the Kremlin has been steadily shifting its focus from consolidation within Russia and in Moscow’s former Soviet territory to planning for Russia’s future. Part of that planning involves launching a series of massive economic projects involving modernization and privatization. A more controversial component of Moscow’s plans is the use of the government’s nationalist youth groups, like Nashi and the Young Guard, to create the next generation of leadership.
  • The first step in Russia’s becoming a Eurasian power once again was consolidation
  • The concept of Nashi is nothing new. Aspects of it have been widely compared to the Soviet Komsomol and even the Hitler Youth. Throughout the years, Nashi inspired and incorporated many other groups (both officially and unofficially).
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  • Although these pro-Kremlin groups are not officially part of the government, they all receive a great deal of funding from the government. According to STRATFOR sources, the Russian government spent approximately $250 million on Nashi in the organization’s first year.
  • Nashi’s activities typically are nonviolent, but the group does have a government-trained paramilitary branch that has been used to ensure security and to incite riots. Nashi also took part in protests in Finland and riots in Estonia and is thought to have been responsible for the 2007 cyberattacks against Estonia.
  • Nashi and the other youth organizations have taken on a large social role in the country by organizing large programs with goals ranging from promoting education to discouraging drinking. These programs, plus the unifying element of the youth groups, are preparing the new generation for leadership roles in the government, business and civil society. This is meant to keep Russia strong, nationalistic and united.
  •  
    "When it was founded in 2005, the Russian youth group Nashi was meant to instill nationalism in the next generation of Russian society. Since its inception, Nashi has incorporated other youth groups and founded new groups with the goal of training their members to respect the primacy of the Kremlin; it has eventually evolved into something the Kremlin could use as a foreign policy. Now the Russian state's focus is to use the youth programs to train the next generation to take leadership roles in government, business and civil society."
anonymous

Russia's Evolving Leadership - 4 views

  • In the past decade, one person has consolidated and run Russia’s political system: former president and current Prime Minister Vladimir Putin.
  • Under Putin’s presidential predecessor, Boris Yeltsin, Russia’s strategic economic assets were pillaged, the core strength of the country — the KGB, now known as the Federal Security Service (FSB), and the military — fell into decay, and the political system was in disarray. Though Russia was considered a democracy and a new friend to the West, this was only because Russia had no other option — it was a broken country.
  • While an autocrat and KGB agent (we use the present tense, as Putin has said that no one is a former KGB or FSB agent), he hails from St. Petersburg, Russia’s most pro-Western city, and during his Soviet-era KGB service he was tasked with stealing Western technology. Putin fully understands the strength of the West and what Western expertise is needed to keep Russia relatively modern and strong. At the same time, his time with the KGB convinced him that Russia can never truly be integrated into the West and that it can be strong only with a consolidated government, economy and security service and a single, autocratic leader.
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  • Putin’s understanding of Russia’s two great weaknesses informs this worldview.
  • The first weakness is that Russia was dealt a poor geographic hand.
  • The second is that its population is comprised of numerous ethnic groups, not all of which are happy with centralized Kremlin rule.
  • Russia essentially lacks an economic base aside from energy.
  • These geographic, demographic and economic challenges have led Russia to shift between being aggressive to keep the country secure and being accommodating toward foreign powers in a bid to modernize Russia.
  • However, Russia cannot go down the two paths of accommodating and connecting with the West and a consolidated authoritarian Russia at the same time unless Russia is first strong and secure as a country, something that has only happened recently.
  • Which face they show does not depend upon personalities but rather upon the status of Russia’s strength.
  • Putin, who had no choice but to appeal to the West to help keep the country afloat when he took office in 2000, initially was hailed as a trusted partner by the West. But even while former U.S. President George W. Bush was praising Putin’s soul, behind the scenes, Putin already was reorganizing one of his greatest tools — the FSB — in order to start implementing a full state consolidation in the coming years.
  • After 9/11, Putin was the first foreign leader to phone Bush and offer any assistance from Russia. The date marked an opportunity for both Putin and Russia. The attacks on the United States shifted Washington’s focus, tying it down in the Islamic world for the next decade. This gave Russia a window of opportunity with which to accelerate its crackdown inside (and later outside) Russia without fear of a Western response.
  • During this time, the Kremlin ejected foreign firms, nationalized strategic economic assets, shut down nongovernmental organizations, purged anti-Kremlin journalists, banned many anti-Kremlin political parties and launched a second intense war in Chechnya.
  • Western perceptions of Putin’s friendship and standing as a democratic leader simultaneously evaporated.
  • When Medvedev entered office, his current reputation for compliance and pragmatism did not exist. Instead, he continued on Russia’s roll forward with one of the boldest moves to date — the Russia-Georgia war.
  • By 2009, Russia had proven its power in its direct sphere and so began to ease into a new foreign and domestic policy of duality.
  • Only when Russia is strong and consolidated can it drop being wholly aggressive and adopt such a stance of hostility and friendliness.
  • With elections approaching, the ruling tandem seems even more at odds as Medvedev overturns many policies Putin put into place in the early 2000s, such as the ban on certain political parties, the ability of foreign firms to work in strategic sectors and the role of the FSB elite within the economy. Despite the apparent conflict, the changes are part of an overall strategy shared by Putin and Medvedev to finish consolidating Russian power.
  • These policy changes show that Putin and Medvedev feel confident enough that they have attained their first imperative that they can look to confront the second inherent problem for the country: Russia’s lack of modern technology and lack of an economic base
  • Russia thus has launched a multiyear modernization and privatization plan to bring in tens if not hundreds of billions of dollars to leapfrog the country into current technology and diversify the economy. Moscow has also struck deals with select countries — Germany, France, Finland, Norway, South Korea and even the United States — for each sector to use the economic deals for political means.
  • two large problems
  • First, foreign governments and firms are hesitant to do business in an authoritarian country with a record of kicking foreign firms out.
  • At the same time, the Kremlin knows that it cannot lessen its hold inside of Russia without risking losing control over its first imperative of securing Russia.
  • The first move is to strengthen the ruling party — United Russia — while allowing more independent political parties.
  • While these new political parties appear to operate outside the Kremlin’s clutches, this is just for show. The most important new party is Russia’s Right Cause launched by Russian oligarch Mikhail Prokhorov.
  • Right Cause is intended to support foreign business and the modernization efforts.
  • The Popular Front is not exactly a political party but an umbrella organization meant to unite the country. Popular Front members include Russia’s labor unions, prominent social organizations, economic lobbying sectors, big business, individuals and political parties. In short, anything or anyone that wants to be seen as pro-Russian is a part of the Popular Front.
  • It creates a system in which power in the country does not lie in a political office — such as the presidency or premiership — but with the person overseeing the Popular Front: Putin.
  • The new system is designed to have a dual foreign policy, to attract non-Russian groups back into the country and to look more democratic overall while all the while being carefully managed behind the scenes.
  • In theory, the new system is meant to allow the Kremlin to maintain control of both its grand strategies of needing to reach out abroad to keep Russia modern and strong and trying to ensure that the country is also under firm control and secure for years to come.
    • anonymous
       
      I would imagine that it seems that way to most Americans, but then we're tech-focused. We have a very hard time understanding that the only time Russia has ever felt geographically secure is *when* they're aggressive. This means upgrading tech, infrastructure, and social-glue all at the same time. Add: There are all those quotes from past leaders about feeling as though they had to expand their borders or influence just to feel secure at home. We Americans may as well be from Mars: We have two giant oceans and we culturally dominate our few neighbors with trade. This is why I agree with StratFor (read as: resignedly fear) that a confrontation with Russia is in the offing two decades hence. If they dominate central Asia and hold levers in Europe, as they are quite obviously trying to do, they will be perceived as a threat, and the U.S. is all too willing to help those who are afraid of Russia. All this strikes me as a prelude that we'll gloss over in future readings of the 'past'. But then, it's another case where I'm *begging* to be wrong.
  •  
    "Russia has entered election season, with parliamentary elections in December and presidential elections in March 2012. Typically, this is not an issue of concern, as most Russian elections have been designed to usher a chosen candidate and political party into office since 2000. Interesting shifts are under way this election season, however. While on the surface they may resemble political squabbles and instability, they actually represent the next step in the Russian leadership's consolidation of the state."
  •  
    I get the security concern, but Putin has always seemed to overemphasize and overextend the issue into something bigger and more offensive. It seems to me that the infrastructure and tech needs are much more pressing and would yield more results.
  •  
    There are still plenty of places where we're not willing to push back (the Polish Belorussian genocides being a prominent example in my mind), but you're right at how foreign that mindset is. Foreign or bizarrely 19th century.
anonymous

The Crisis of the Middle Class and American Power - 0 views

  • At the same time, I would agree that the United States faces a potentially significant but longer-term geopolitical problem deriving from economic trends.
  • The threat to the United States is the persistent decline in the middle class' standard of living, a problem that is reshaping the social order that has been in place since World War II and that, if it continues, poses a threat to American power.
  • The median household income of Americans in 2011 was $49,103. Adjusted for inflation, the median income is just below what it was in 1989 and is $4,000 less than it was in 2000.
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  • It is also vital to consider not the difference between 1990 and 2011, but the difference between the 1950s and 1960s and the 21st century. This is where the difference in the meaning of middle class becomes most apparent.
  • In the 1950s and 1960s, the median income allowed you to live with a single earner -- normally the husband, with the wife typically working as homemaker -- and roughly three children. It permitted the purchase of modest tract housing, one late model car and an older one. It allowed a driving vacation somewhere and, with care, some savings as well. I know this because my family was lower-middle class, and this is how we lived, and I know many others in my generation who had the same background. It was not an easy life and many luxuries were denied us, but it wasn't a bad life at all.
  • Someone earning the median income today might just pull this off, but it wouldn't be easy. Assuming that he did not have college loans to pay off but did have two car loans to pay totaling $700 a month, and that he could buy food, clothing and cover his utilities for $1,200 a month, he would have $1,400 a month for mortgage, real estate taxes and insurance, plus some funds for fixing the air conditioner and dishwasher.
  • At a 5 percent mortgage rate, that would allow him to buy a house in the $200,000 range. He would get a refund back on his taxes from deductions but that would go to pay credit card bills he had from Christmas presents and emergencies. It could be done, but not easily and with great difficulty in major metropolitan areas. And if his employer didn't cover health insurance, that $4,000-5,000 for three or four people would severely limit his expenses. And of course, he would have to have $20,000-40,000 for a down payment and closing costs on his home. There would be little else left over for a week at the seashore with the kids.
  • And this is for the median. Those below him -- half of all households -- would be shut out of what is considered middle-class life, with the house, the car and the other associated amenities.
  • I should pause and mention that this was one of the fundamental causes of the 2007-2008 subprime lending crisis. People below the median took out loans with deferred interest with the expectation that their incomes would continue the rise that was traditional since World War II.
  • The caricature of the borrower as irresponsible misses the point. The expectation of rising real incomes was built into the American culture, and many assumed based on that that the rise would resume in five years. When it didn't they were trapped, but given history, they were not making an irresponsible assumption.
  • American history was always filled with the assumption that upward mobility was possible. The Midwest and West opened land that could be exploited, and the massive industrialization in the late 19th and early 20th centuries opened opportunities. There was a systemic expectation of upward mobility built into American culture and reality.
  • The Great Depression was a shock to the system, and it wasn't solved by the New Deal, nor even by World War II alone. The next drive for upward mobility came from post-war programs for veterans, of whom there were more than 10 million. These programs were instrumental in creating post-industrial America, by creating a class of suburban professionals. There were three programs that were critical:
  • The GI Bill, which allowed veterans to go to college after the war, becoming professionals frequently several notches above their parents.
  • The part of the GI Bill that provided federally guaranteed mortgages to veterans, allowing low and no down payment mortgages and low interest rates to graduates of publicly funded universities.
  • The federally funded Interstate Highway System, which made access to land close to but outside of cities easier, enabling both the dispersal of populations on inexpensive land (which made single-family houses possible) and, later, the dispersal of business to the suburbs.
  • There were undoubtedly many other things that contributed to this, but these three not only reshaped America but also created a new dimension to the upward mobility that was built into American life from the beginning.
  • there was consensus around the moral propriety of the programs.
  • The subprime fiasco was rooted in the failure to understand that the foundations of middle class life were not under temporary pressure but something more fundamental.
  • the rise of the double-income family corresponded with the decline of the middle class.
  • But there was, I think, the crisis of the modern corporation.
  • Over the course of time, the culture of the corporation diverged from the realities, as corporate productivity lagged behind costs and the corporations became more and more dysfunctional and ultimately unsupportable.
  • In addition, the corporations ceased focusing on doing one thing well and instead became conglomerates, with a management frequently unable to keep up with the complexity of multiple lines of business.
  • Everything was being reinvented. Huge amounts of money, managed by people whose specialty was re-engineering companies, were deployed. The choice was between total failure and radical change. From the point of view of the individual worker, this frequently meant the same thing: unemployment.
  • From the view of the economy, it meant the creation of value whether through breaking up companies, closing some of them or sending jobs overseas. It was designed to increase the total efficiency, and it worked for the most part.
  • This is where the disjuncture occurred. From the point of view of the investor, they had saved the corporation from total meltdown by redesigning it. From the point of view of the workers, some retained the jobs that they would have lost, while others lost the jobs they would have lost anyway. But the important thing is not the subjective bitterness of those who lost their jobs, but something more complex.
  • As the permanent corporate jobs declined, more people were starting over. Some of them were starting over every few years as the agile corporation grew more efficient and needed fewer employees. That meant that if they got new jobs it would not be at the munificent corporate pay rate but at near entry-level rates in the small companies that were now the growth engine.
  • As these companies failed, were bought or shifted direction, they would lose their jobs and start over again. Wages didn't rise for them and for long periods they might be unemployed, never to get a job again in their now obsolete fields, and certainly not working at a company for the next 20 years.
  • The restructuring of inefficient companies did create substantial value, but that value did not flow to the now laid-off workers. Some might flow to the remaining workers, but much of it went to the engineers who restructured the companies and the investors they represented.
  • Statistics reveal that, since 1947 (when the data was first compiled), corporate profits as a percentage of gross domestic product are now at their highest level, while wages as a percentage of GDP are now at their lowest level.
  • It was not a question of making the economy more efficient -- it did do that -- it was a question of where the value accumulated. The upper segment of the wage curve and the investors continued to make money. The middle class divided into a segment that entered the upper-middle class, while another faction sank into the lower-middle class.
  • American society on the whole was never egalitarian. It always accepted that there would be substantial differences in wages and wealth. Indeed, progress was in some ways driven by a desire to emulate the wealthy. There was also the expectation that while others received far more, the entire wealth structure would rise in tandem. It was also understood that, because of skill or luck, others would lose.
  • What we are facing now is a structural shift, in which the middle class' center, not because of laziness or stupidity, is shifting downward in terms of standard of living. It is a structural shift that is rooted in social change (the breakdown of the conventional family) and economic change (the decline of traditional corporations and the creation of corporate agility that places individual workers at a massive disadvantage).
    • anonymous
       
      I would revise: "(breakdown of the contentional family) is too unclear. The 'conventional family' that Friedman notes was very much outlier behavior for most Americans. Having enough money for a wife to stay home was an unprecedented situation in American history.
  • The inherent crisis rests in an increasingly efficient economy and a population that can't consume what is produced because it can't afford the products. This has happened numerous times in history, but the United States, excepting the Great Depression, was the counterexample.
  • In political debates, someone must be blamed. In reality, these processes are beyond even the government's ability to control. On one hand, the traditional corporation was beneficial to the workers until it collapsed under the burden of its costs. On the other hand, the efficiencies created threaten to undermine consumption by weakening the effective demand among half of society.
  • The greatest danger is one that will not be faced for decades but that is lurking out there.
    • anonymous
       
      One decade, but not two, if you ask me.
  • The United States was built on the assumption that a rising tide lifts all ships. That has not been the case for the past generation, and there is no indication that this socio-economic reality will change any time soon.
  • That means that a core assumption is at risk. The problem is that social stability has been built around this assumption -- not on the assumption that everyone is owed a living, but the assumption that on the whole, all benefit from growing productivity and efficiency.
  • If we move to a system where half of the country is either stagnant or losing ground while the other half is surging, the social fabric of the United States is at risk, and with it the massive global power the United States has accumulated.
    • anonymous
       
      Which is why this is an effective tactic for linking 'evil Socialist' programs to national security.
  • Other superpowers such as Britain or Rome did not have the idea of a perpetually improving condition of the middle class as a core value. The United States does. If it loses that, it loses one of the pillars of its geopolitical power.
  • The left would argue that the solution is for laws to transfer wealth from the rich to the middle class. That would increase consumption but, depending on the scope, would threaten the amount of capital available to investment by the transfer itself and by eliminating incentives to invest. You can't invest what you don't have, and you won't accept the risk of investment if the payoff is transferred away from you.
  • The right will argue that allowing the free market to function will fix the problem.
  • The free market doesn't guarantee social outcomes, merely economic ones.
  • In other words, it may give more efficiency on the whole and grow the economy as a whole, but by itself it doesn't guarantee how wealth is distributed.
  • The left cannot be indifferent to the historical consequences of extreme redistribution of wealth. The right cannot be indifferent to the political consequences of a middle-class life undermined, nor can it be indifferent to half the population's inability to buy the products and services that businesses sell.
  • The most significant actions made by governments tend to be unintentional.
    • anonymous
       
      Unintended consequences: A thing that always happens but which politicians are allergic to.
  • The GI Bill was designed to limit unemployment among returning serviceman; it inadvertently created a professional class of college graduates.
  • The VA loan was designed to stimulate the construction industry; it created the basis for suburban home ownership.
  • The Interstate Highway System was meant to move troops rapidly in the event of war; it created a new pattern of land use that was suburbia.
  • The United States has been a fortunate country, with solutions frequently emerging in unexpected ways.
  • It would seem to me that unless the United States gets lucky again, its global dominance is in jeopardy. Considering its history, the United States can expect to get lucky again, but it usually gets lucky when it is frightened.
  • And at this point it isn't frightened but angry, believing that if only its own solutions were employed, this problem and all others would go away.
  • I am arguing that the conventional solutions offered by all sides do not yet grasp the magnitude of the problem -- that the foundation of American society is at risk -- and therefore all sides are content to repeat what has been said before.
  •  
    "When I wrote about the crisis of unemployment in Europe, I received a great deal of feedback. Europeans agreed that this is the core problem while Americans argued that the United States has the same problem, asserting that U.S. unemployment is twice as high as the government's official unemployment rate. My counterargument is that unemployment in the United States is not a problem in the same sense that it is in Europe because it does not pose a geopolitical threat. The United States does not face political disintegration from unemployment, whatever the number is. Europe might."
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