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anonymous

The Inevitability of Foreign Entanglements - 0 views

www.stratfor.com/...tability-foreign-entanglements

shared by anonymous on 08 Jul 14 - Cached
  • There is a common longing for an America that takes advantage of its distance from the rest of the world to avoid excessive involvement in the outside world.
  • Whether Jefferson's wish can constitute a strategy for the United States today is a worthy question for a July 4, but there is a profounder issue: Did his wish ever constitute American strategy?
  • The United States was born out of a deep entanglement in international affairs, extracting its independence via the founders' astute exploitation of the tensions between Britain and France.
  • ...25 more annotations...
  • America's geopolitical position required that it continue to position itself in terms of this European struggle.
  • The United States depended on trade with Europe, and particularly Britain. Revolution did not change the mutual dependence of the United States and Britain. The French Revolution of 1789, however, posed a deep dilemma for the United States. That later revolution was anti-monarchist and republican, appearing to share the values of the United States.
  • This forced the United States into a dilemma it has continued to face ever since. Morally, the United States appeared obligated to support France and its revolution. But as mentioned, economically, it depended on trade with the British.
  • The Jeffersonian Democrats wanted to support the French. The Federalist Party, cautious of British naval power and aware of American dependence on trade, supported an alignment with Britain.
  • With minimal north-south transportation and dependence on the sea, the United States needed strategic depth.
  • The conflict between France and Britain was intensifying once again, and by 1803, Napoleon was planning an invasion of Britain. Napoleon's finances were in shambles, a fact Jefferson took advantage of to solve America's strategic problem: He negotiated the purchase of the Louisiana Territory from France.
  • He probably did just that, but either way he had managed to expel the French from North America and achieve strategic depth for the United States, all without triggering a crisis with Britain. For a man who didn't care for entanglements, it was a tangled, but brilliant, achievement.
  • The Americans had been protected before independence because they had treaties with Britain, but the treaties did not apply to the independent United States. Rather than negotiate a treaty, Jefferson chose to go to war, fighting on the same Libyan soil that is so discussed today: The Marines' Hymn, which references the shores of Tripoli, is talking about Benghazi, among other places.
  • The geopolitical reality was that the United States could not maintain its economy on domestic trade alone. It had to trade, and to trade it had to have access to the North Atlantic. Without that access it would fall into a depression. The idea that there would be no entangling alliances was nice in theory. But in reality, in order to trade, it had to align with the dominant naval power in the Atlantic, namely, the British.
  • Self-sufficiency was a fantasy, and avoiding entanglement was impossible.
  • All of this culminated in the War of 1812.
  • The British lack of manpower led London to order the seizure of U.S. ships and the impressment of British-born sailors into the Royal Navy. The British were also allied with Indian tribes to the west, which could have led to a reversal of the achievements of the Louisiana Purchase.
  • The British were not particularly interested in the Americans. Instead, it was their obsession with the French that led them to restrain trade and impress seaman.
  • Regardless of desires for peace with everyone and the avoidance of war, the United States accordingly declared war on Britain. Although the war resulted in the burning of Washington, the ultimate strategic outcome of the war is generally regarded as satisfactory to the United States.
  • This account wouldn't be complete if I didn't mention the Monroe Doctrine, issued in 1823 with the goal of regulating the extent to which European powers could be involved in the Americas.
  • Interestingly, the United States was in no position to enforce the doctrine; it could do so only in cooperation with Britain. Yet even so it asserted its unwillingness to allow European powers to intrude in the Western Hemisphere.
  • In his farewell address, frequently cited as an argument for avoiding foreign adventures, George Washington had a much more complex and sophisticated approach than Jefferson's one-liner did (and Jefferson himself was far more sophisticated than that one-liner). It is worth extracting one section:
  • The republic was born from that entanglement and survived because of the skill and cunning with which the founders managed their entanglement.
  • Our detached and distant situation invites and enables us to pursue a different course. If we remain one people under an efficient government, the period is not far off when we may defy material injury from external annoyance; when we may take such an attitude as will cause the neutrality we may at any time resolve upon to be scrupulously respected; when belligerent nations, under the impossibility of making acquisitions upon us, will not lightly hazard the giving us provocation; when we may choose peace or war, as our interest, guided by justice, shall counsel.
  • Washington noted that American distance gave it the hope that "the period is not far off when we may defy material injury from external annoyance." For him, this was a goal, not a reality.
  • But he could not make it a reality because the United States was economically entangled with Europe from the start, and its geography, rather than protecting it from entanglement, forced it into trade, which had to be protected against pirates and potentates. As a result, the United States was fighting in the Middle East by the turn of the 19th century.
  • nlike the French Revolutionaries, who took the revolution to its bloody reduction ad absurdum, the Americans had modest expectations for their revolution
  • It's not clear that that time has come or that it will come. What undermined the peace Washington and Jefferson craved was the need for trade. It made the United States, weak as it was, vulnerable to Britain and France and even the Ottomans and forced the United States to engage in the very activity Washington and Jefferson warned against.
  • The desire of the president, the left and the right to limit our engagement is understandable. The founders wanted their prosperity without paying the price of foreign entanglements, but prosperity depended on careful management of foreign relations.
  • You cannot be economically entangled in the world without also being politically and militarily entangled.
  • anonymous on 08 Jul 14
     
    "The Fourth of July weekend gave me time to consider events in Iraq and Ukraine, U.S.-German relations and the Mexican borderland and immigration. I did so in the context of the founding of the United States, asking myself if America has strayed from the founders' intent with regard to foreign policy. Many people note Thomas Jefferson's warning that the United States should pursue "peace, commerce, and honest friendship with all nations -- entangling alliances with none," taking that as the defining strategy of the founders. I think it is better to say that was the defining wish of the founders but not one that they practiced to extremes."
anonymous

Bin Laden's special complaint with the World Trade Center - 0 views

www.slate.com/2060207

politics architecture

shared by anonymous on 20 Aug 10 - Cached
  • At the base of the towers, Yamasaki used implied pointed arches—derived from the characteristically pointed arches of Islam—as a transition between the wide column spacing below and the dense structural mesh above.
  • After the attack, Grabar spoke of how these towers related to the architecture of Islam, where "the entire surface is meaningful" and "every part is both construction and ornament." A number of designers from the Middle East agreed, describing the entire façade as a giant "mashrabiya," the tracery that fills the windows of mosques.
  • Having rejected modernism and the Saudi royal family, it's no surprise that Bin Laden would turn against Yamasaki's work in particular. He must have seen how Yamasaki had clothed the World Trade Center, a monument of Western capitalism, in the raiment of Islamic spirituality. Such mixing of the sacred and the profane is old hat to us—after all, Cass Gilbert's classic Woolworth Building, dubbed the Cathedral to Commerce, is decked out in extravagant Gothic regalia. But to someone who wants to purify Islam from commercialism, Yamasaki's implicit Mosque to Commerce would be anathema. To Bin Laden, the World Trade Center was probably not only an international landmark but also a false idol.
  • anonymous on 20 Aug 10
     
    "We all know the basic reasons why Osama Bin Laden chose to attack the World Trade Center, out of all the buildings in New York. Its towers were the two tallest in the city, synonymous with its skyline. They were richly stocked with potential victims. And as the complex's name declared, it was designed to be a center of American and global commerce. But Bin Laden may have had another, more personal motivation. The World Trade Center's architect, Minoru Yamasaki, was a favorite designer of the Binladin family's patrons-the Saudi royal family-and a leading practitioner of an architectural style that merged modernism with Islamic influences." By Laurie Kerr at Slate Magazine on December 28, 2001.
anonymous

China: Crunch Time - 0 views

www.stratfor.com/...20100329_china_crunch_time

shared by anonymous on 30 Mar 10 - Cached
  • It is that, but it is much, much more.
    • anonymous
      anonymous on 30 Mar 10
       
      This statement links to a great StratFor article from 2008 that looked at European efforts to reorient the structure of Bretton Woods.
  • For the Europeans, Bretton Woods provided the stability, financing and security backbone Europe used first to recover, and in time to thrive. For the Americans, it provided the ability to preserve much of the World War II alliance network into the next era in order to compete with the Soviet Union.
  • Militarily and economically, it became the bedrock of the anti-Soviet containment strategy.
  • ...13 more annotations...
  • Applying this little history lesson to the question at hand, Bretton Woods is the ultimate reason why the Chinese have succeeded economically for the last generation.
  • But this may be changing
  • the shift in tone in U.S. trade policy is itself enough to suggest big changes, beginning with the idea that the United States actually will compete with the rest of the world in exports.
  • If — and we must emphasize if — there will be force behind this policy shift, the Chinese are in serious trouble.
  • Japan’s economy, in 1990 and now, only depended upon international trade for approximately 15 percent of its GDP. For China, that figure is 36 percent, and that is after suffering the hit to exports from the global recession.
  • First, Chinese currency reserves exist because Beijing does not want to invest its income in China.
  • Second, those bond purchases largely fuel U.S. consumers’ ability to purchase Chinese goods.
  • Third, a cold stop in bond purchases would encourage the U.S. administration — and the American economy overall — to balance its budgets.
  • the United States has more disposable income than all of China’s other markets combined.
  • Beijing perceives the spat with Google and Obama’s meeting with the Dalai Lama as direct attacks by the United States
  • With the Democratic Party in the United States (historically the more protectionist of the two mainstream U.S. political parties) both in charge and worried about major electoral losses, the Chinese fear that midterm U.S. elections will be all about targeting Chinese trade issues.
  • If there has already been a decision in Washington to break with Bretton Woods, no number of token changes will make any difference. Such a shift in the U.S. trade posture will see the Americans going for China’s throat (no matter whether by design or unintentionally).
  • STRATFOR sees a race on, but it isn’t a race between the Chinese and the Americans or even China and the world. It’s a race to see what will smash China first, its own internal imbalances or the U.S. decision to take a more mercantilist approach to international trade.
  • anonymous on 30 Mar 10
     
    A great StratFor article about the coming full-blown trade dispute with China. From March 30, 2010.
anonymous

Sovereignty, Supranationality and the Future of EU Integration - 0 views

www.stratfor.com/...lity-and-future-eu-integration

shared by anonymous on 02 Jul 13 - Cached
  • The European Union is an entity like no other in world history. After the end of World War II, the international system was configured around a series of multilateral organizations such as the United Nations, the International Monetary Fund and NATO. But the process of economic and political cooperation that West Germany, France, Italy, the Netherlands, Belgium and Luxembourg began in 1951 is fundamentally different from the rest of the post-war organizations.
  • The project was a direct challenge to the classical idea of ​​the nation-state and generated new forms of government and administration hitherto unknown.
  • Immanuel Kant believed that Europe would only overcome its constant state of war by achieving some form of political unity.
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  • From the Roman Empire to Nazi Germany, all the attempts to unify Europe meant war and conquest. It took World War II to convince the Europeans that the future of the Continent depended on overcoming age-old antagonisms and building a lasting political settlement to boost trade and prevent another war.
  • The central problem to be solved was the historical emnity between France and Germany
  • The French government understood that the only way to achieve lasting and sustainable economic growth in France was by ensuring a stable peace with Germany.
  • The European Economic Community, the institutional heart of the emerging continental unity, had three main objectives.
  • Its immediate goal was to create a customs union, which would eliminate trade restrictions between member states and establish a common external tariff for trade with the rest of the world.
  • It would also seek the consolidation of a common market, to allow the free movement of people, goods, capital and services.
  • Finally, it would seek the progressive coordination of social and fiscal policies among its members.
  • The rationale behind the European Communities was that if countries gave up sovereignty in specific areas, over time a greater amount of national prerogatives would be transferred to the supranational institutions.
  • Throughout the process, unanimity would be replaced by majority voting (so that the interest of the majority would overtake individual interests) and concessions of sovereignty would not be limited to economic issues, but also political and military affairs.
  • In other words, the process of European integration would progressively weaken the nation-state and its strategic interests.
  • Six decades later, many of these goals have been achieved.
  • The Commission, the Parliament and the Court of Justice today have powers that notably exceed those designed in the 1950s. More impressively, the European Union currently has 28 members, 17 of whom share the same currency. In 1945, with Europe in ashes and occupied by foreign powers, it was unimaginable to think that six decades later France and Germany would share the leadership of a continental alliance stretching from Portugal to Finland and Cyprus.
  • However, the remarkable growth of the European project did not bring about the abolishment of the nation-state that many analysts predicted.
  • EU institutions tend to generate their own agendas, which often go against the national strategies of some member states. As a result, the clash between national and supranational interests is often unavoidable.
  • This friction did not begin with the current economic crisis. In 1965, the French government withdrew its representation in the European Commission in protest of a plan that would give more power to Brussels in the management of the Common Agricultural Policy. To resolve the crisis, the Europeans reached an agreement under which a de facto veto power was given to member states on issues that were considered crucial to national interests. This agreement (commonly known as the Luxembourg Compromise) was designed to protect the intergovernmental nature of the European Communities and virtually froze the process of supranational integration in the 1970s and 1980s, until the Single European Act in 1986 introduced new mechanisms for qualified majority voting.
    • anonymous
      anonymous on 02 Jul 13
       
      This paragraph is a good example of something I would never have known about otherwise. I wish I had been shown (much earlie) how history is shaped by the continuity and discontinuity of policies. Among, you know, an infinite soup of other variables. :)
  • On top of the traditional tensions between national governments and supranational institutions, in times of crisis member states also tend to distrust each other.
  • The creation of the euro has further complicated things. Seventeen countries with very different levels of economic development and competitiveness now share a common currency. This has particularly reduced Mediterranean Europe's room to maneuver, because it has deprived those countries of the possibility of applying independent monetary policy to tackle crises.
  • Governments must find a balance between their foreign policy objectives, pressure from the European Union and their desire to be re-elected -- which means decisions that may make sense for the future of the European Union (such as fiscal consolidation efforts) would probably not be made if governments consider them too unpopular among voters.
  • Other institutions, such as constitutional courts, often threaten to block decisions accepted by national parliaments. The recent investigation by the German constitutional court on the validity of the European Stability Mechanism and the decision by the Portuguese constitutional court to block some austerity measures promoted by Brussels and implemented by Lisbon are examples of this situation.
  • The deep unemployment crisis in the eurozone adds yet another complication to this problem. The European elites are still largely pro-European, and most of the voters in the eurozone want to keep the euro. But with the European Union's promise of economic prosperity weakening, its members have begun to rethink their strategies. Fidelity for the European project is not unbreakable. Nor is it strong enough to support an indefinite period of extremely high unemployment.
  • Despite its remarkable evolution, the European Union is still a contract. And contracts could be modified or even canceled if they stop being beneficial for their signatories.
  • Non-eurozone countries in Central and Eastern Europe have also begun to think of a more independent foreign policy. They remain formally aligned with the European Union and NATO, but the pursuit of closer ties with Russia is no longer taboo. And for most of them, joining the eurozone is no longer a priority.
  • Because of the pervasiveness of the nation-state, the future of the European Union will not be in the hands of the EU institutions, but in those of the same actors of 1951: France and Germany. Since the beginning of the economic crisis, Paris and Berlin have reiterated their commitment to the European Union, but as the economic downturn moves to the core of Europe, the differences between them become more obvious.
  • Like most economies in Mediterranean Europe, France's has lost competitiveness since the creation of the euro, and the common currency has led to a constant trade deficit with Germany. France will seek to change its relationship with Germany without breaking it (as Paris is still interested in containing Berlin), but Paris is increasingly aware that the European project should be remodeled.
  • In this context, Paris and Berlin will need to find a balance between their desire to preserve their alliance and the need to protect their national interests.
  • The Germans are interested in preserving their alliance with France and protecting the currency union because it benefits its exports to its neighbors and out of fear of the immeasurable financial consequences of a breakup of the eurozone.
  • Europe's main challenge will be to prevent these frictions from paralyzing the bloc. The European Union will also face the test of mitigating the alienation of its eastern members and closing the gap between eurozone and non-eurozone countries. In the meantime, Brussels and national governments will have to find ways to alleviate the bloc's corrosive unemployment crisis before it leads to dangerous levels of social unrest. In all these challenges, the European Union is running a race against time.
  • anonymous on 02 Jul 13
     
    "Tensions between the European Commission and France have escalated in recent weeks. After Brussels suggested that Paris should apply structural reforms to reactivate the French economy, French President Francois Hollande said that the Commission cannot dictate policy to France. A few days later, the Commission's president, Jose Manuel Barroso, criticized the French pressure to exclude the audio-visual sector from the negotiations for a free trade agreement between the European Union and United States."
anonymous

The Inequality That Matters - 1 views

www.the-american-interest.com/article-bd.cfm

shared by anonymous on 07 Jul 13 - Cached
  • there’s more confusion about this issue than just about any other in contemporary American political discourse.
  • The reality is that most of the worries about income inequality are bogus, but some are probably better grounded and even more serious than even many of their heralds realize. If our economic churn is bound to throw off political sparks, whether alarums about plutocracy or something else, we owe it to ourselves to seek out an accurate picture of what is really going on.
  • Let’s start with the subset of worries about inequality that are significantly overblown.
  • ...107 more annotations...
  • Most analyses of income inequality neglect two major points.
  • First, the inequality of personal well-being is sharply down over the past hundred years and perhaps over the past twenty years as well.
  • by broad historical standards, what I share with Bill Gates is far more significant than what I don’t share with him.
  • Compare these circumstances to those of 1911, a century ago. Even in the wealthier countries, the average person had little formal education, worked six days a week or more, often at hard physical labor, never took vacations, and could not access most of the world’s culture.
  • when average people read about or see income inequality, they don’t feel the moral outrage that radiates from the more passionate egalitarian quarters of society. Instead, they think their lives are pretty good and that they either earned through hard work or lucked into a healthy share of the American dream.
  • In narrowly self-interested terms, that view may be irrational, but most Americans are unwilling to frame national issues in terms of rich versus poor.
  • There’s a great deal of hostility toward various government bailouts, but the idea of “undeserving” recipients is the key factor in those feelings. Resentment against Wall Street gamesters hasn’t spilled over much into resentment against the wealthy more generally.
  • their constituents bear no animus toward rich people, only toward undeservedly rich people.
    • anonymous
      anonymous on 07 Jul 13
       
      Which is how the policy can be reframed to the benefit of those that understand this more cleanly.
  • in the United States, most economic resentment is not directed toward billionaires or high-roller financiers—not even corrupt ones. It’s directed at the guy down the hall who got a bigger raise.
    • anonymous
      anonymous on 07 Jul 13
       
      Provincialism!
  • The high status of the wealthy in America, or for that matter the high status of celebrities, seems to bother our intellectual class most. That class composes a very small group, however
  • All that said, income inequality does matter—for both politics and the economy.
  • To see how, we must distinguish between inequality itself and what causes it. But first let’s review the trends in more detail.
  • Income inequality has been rising in the United States, especially at the very top.
  • The data show a big difference between two quite separate issues
  • income growth at the very top
  • greater inequality throughout the distribution
  • When it comes to the first trend, the share of pre-tax income earned by the richest 1 percent of earners has increased from about 8 percent in 1974 to more than 18 percent in 2007. Furthermore, the richest 0.01 percent (the 15,000 or so richest families) had a share of less than 1 percent in 1974 but more than 6 percent of national income in 2007. As noted, those figures are from pre-tax income, so don’t look to the George W. Bush tax cuts to explain the pattern. Furthermore, these gains have been sustained and have evolved over many years, rather than coming in one or two small bursts between 1974 and today.1
  • Caution is in order, but the overall trend seems robust. Similar broad patterns are indicated by different sources, such as studies of executive compensation. Anecdotal observation suggests extreme and unprecedented returns earned by investment bankers, fired CEOs, J.K. Rowling and Tiger Woods.
  • At the same time, wage growth for the median earner has slowed since 1973.
  • But that slower wage growth has afflicted large numbers of Americans, and it is conceptually distinct from the higher relative share of top income earners. For instance, if you take the 1979–2005 period, the average incomes of the bottom fifth of households increased only 6 percent while the incomes of the middle quintile rose by 21 percent. That’s a widening of the spread of incomes, but it’s not so drastic compared to the explosive gains at the very top.
  • The broader change in income distribution, the one occurring beneath the very top earners, can be deconstructed in a manner that makes nearly all of it look harmless. For instance, there is usually greater inequality of income among both older people and the more highly educated, if only because there is more time and more room for fortunes to vary.
  • Since America is becoming both older and more highly educated, our measured income inequality will increase pretty much by demographic fiat.
  • Economist Thomas Lemieux at the University of British Columbia estimates that these demographic effects explain three-quarters of the observed rise in income inequality for men, and even more for women.2
  • Attacking the problem from a different angle, other economists are challenging whether there is much growth in inequality at all below the super-rich. For instance, real incomes are measured using a common price index, yet poorer people are more likely to shop at discount outlets like Wal-Mart, which have seen big price drops over the past twenty years.3 Once we take this behavior into account, it is unclear whether the real income gaps between the poor and middle class have been widening much at all.
  • And so we come again to the gains of the top earners, clearly the big story told by the data.
  • It’s worth noting that over this same period of time, inequality of work hours increased too. The top earners worked a lot more and most other Americans worked somewhat less. That’s another reason why high earners don’t occasion more resentment: Many people understand how hard they have to work to get there.
  • A threshold earner is someone who seeks to earn a certain amount of money and no more.
  • If wages go up, that person will respond by seeking less work or by working less hard or less often. That person simply wants to “get by” in terms of absolute earning power in order to experience other gains in the form of leisure—whether spending time with friends and family, walking in the woods and so on. Luck aside, that person’s income will never rise much above the threshold.
  • It’s not obvious what causes the percentage of threshold earners to rise or fall, but it seems reasonable to suppose that the more single-occupancy households there are, the more threshold earners there will be, since a major incentive for earning money is to use it to take care of other people with whom one lives.
  • For a variety of reasons, single-occupancy households in the United States are at an all-time high.
  • The funny thing is this: For years, many cultural critics in and of the United States have been telling us that Americans should behave more like threshold earners. We should be less harried, more interested in nurturing friendships, and more interested in the non-commercial sphere of life. That may well be good advice.
  • Many studies suggest that above a certain level more money brings only marginal increments of happiness.
  • What isn’t so widely advertised is that those same critics have basically been telling us, without realizing it, that we should be acting in such a manner as to increase measured income inequality.
  • Why is the top 1 percent doing so well?
  • Their data do not comprise the entire U.S. population, but from partial financial records they find a very strong role for the financial sector in driving the trend toward income concentration at the top.
  • The number of Wall Street investors earning more than $100 million a year was nine times higher than the public company executives earning that amount.
  • The authors also relate that they shared their estimates with a former U.S. Secretary of the Treasury, one who also has a Wall Street background. He thought their estimates of earnings in the financial sector were, if anything, understated.
  • Many of the other high earners are also connected to finance.
  • After Wall Street, Kaplan and Rauh identify the legal sector as a contributor to the growing spread in earnings at the top.
  • Finance aside, there isn’t much of a story of market failure here, even if we don’t find the results aesthetically appealing.
  • When it comes to professional athletes and celebrities, there isn’t much of a mystery as to what has happened.
  • There is more purchasing power to spend on children’s books and, indeed, on culture and celebrities more generally. For high-earning celebrities, hardly anyone finds these earnings so morally objectionable as to suggest that they be politically actionable.
  • We may or may not wish to tax the wealthy, including wealthy celebrities, at higher rates, but there is no need to “cure” the structural causes of higher celebrity incomes.
  • If we are looking for objectionable problems in the top 1 percent of income earners, much of it boils down to finance and activities related to financial markets. And to be sure, the high incomes in finance should give us all pause.
  • some investors opt for a strategy of betting against big, unexpected moves in market prices.
  • Most of the time investors will do well by this strategy, since big, unexpected moves are outliers by definition. Traders will earn above-average returns in good times. In bad times they won’t suffer fully when catastrophic returns come in, as sooner or later is bound to happen, because the downside of these bets is partly socialized onto the Treasury, the Federal Reserve and, of course, the taxpayers and the unemployed.
  • To understand how this strategy works, consider an example from sports betting.
  • if you bet against unlikely events, most of the time you will look smart and have the money to validate the appearance. Periodically, however, you will look very bad
  • Does that kind of pattern sound familiar? It happens in finance, too. Betting against a big decline in home prices is analogous to betting against the Wizards. Every now and then such a bet will blow up in your face, though in most years that trading activity will generate above-average profits and big bonuses for the traders and CEOs. To this mix we can add the fact that many money managers are investing other people’s money.
  • If you plan to stay with an investment bank for ten years or less, most of the people playing this investing strategy will make out very well most of the time. Everyone’s time horizon is a bit limited and you will bring in some nice years of extra returns and reap nice bonuses.
  • And let’s say the whole thing does blow up in your face? What’s the worst that can happen? Your bosses fire you, but you will still have millions in the bank and that MBA from Harvard or Wharton.
  • For the people actually investing the money, there’s barely any downside risk other than having to quit the party early.
  • Moreover, smart shareholders will acquiesce to or even encourage these gambles.
  • They gain on the upside, while the downside, past the point of bankruptcy, is borne by the firm’s creditors.
  • Perhaps more important, government bailouts minimize the damage to creditors on the downside.
  • Neither the Treasury nor the Fed allowed creditors to take any losses from the collapse of the major banks during the financial crisis. The U.S. government guaranteed these loans, either explicitly or implicitly.
  • For better or worse, we’re handing out free options on recovery, and that encourages banks to take more risk in the first place.
  • In short, there is an unholy dynamic of short-term trading and investing, backed up by bailouts and risk reduction from the government and the Federal Reserve. This is not good.
  • But more immediate and more important, it means that banks take far too many risks and go way out on a limb, often in correlated fashion. When their bets turn sour, as they did in 2007–09, everyone else pays the price.
  • And it’s not just the taxpayer cost of the bailout that stings. The financial disruption ends up throwing a lot of people out of work down the economic food chain, often for long periods.
  • In essence, we’re allowing banks to earn their way back by arbitraging interest rate spreads against the U.S. government. This is rarely called a bailout and it doesn’t count as a normal budget item, but it is a bailout nonetheless. This type of implicit bailout brings high social costs by slowing down economic recovery (the interest rate spreads require tight monetary policy) and by redistributing income from the Treasury to the major banks.
  • The more one studies financial theory, the more one realizes how many different ways there are to construct a “going short on volatility” investment position.
  • In some cases, traders may not even know they are going short on volatility. They just do what they have seen others do. Their peers who try such strategies very often have Jaguars and homes in the Hamptons. What’s not to like?
  • The upshot of all this for our purposes is that the “going short on volatility” strategy increases income inequality.
  • In normal years the financial sector is flush with cash and high earnings. In implosion years a lot of the losses are borne by other sectors of society. In other words, financial crisis begets income inequality. Despite being conceptually distinct phenomena, the political economy of income inequality is, in part, the political economy of finance.
  • If you’re wondering, right before the Great Depression of the 1930s, bank profits and finance-related earnings were also especially high.8
  • There’s a second reason why the financial sector abets income inequality: the “moving first” issue.
  • The moving-first phenomenon sums to a “winner-take-all” market. Only some relatively small number of traders, sometimes just one trader, can be first. Those who are first will make far more than those who are fourth or fifth.
  • Since gains are concentrated among the early winners, and the closeness of the runner-ups doesn’t so much matter for income distribution, asset-market trading thus encourages the ongoing concentration of wealth. Many investors make lots of mistakes and lose their money, but each year brings a new bunch of projects that can turn the early investors and traders into very wealthy individuals.
  • These two features of the problem—“going short on volatility” and “getting there first”—are related.
  • Still, every now and then Goldman will go bust, or would go bust if not for government bailouts. But the odds are in any given year that it won’t because of the advantages it and other big banks have.
  • It’s as if the major banks have tapped a hole in the social till and they are drinking from it with a straw.
  • In any given year, this practice may seem tolerable—didn’t the bank earn the money fair and square by a series of fairly normal looking trades?
  • Yet over time this situation will corrode productivity, because what the banks do bears almost no resemblance to a process of getting capital into the hands of those who can make most efficient use of it.
  • And it leads to periodic financial explosions. That, in short, is the real problem of income inequality we face today. It’s what causes the inequality at the very top of the earning pyramid that has dangerous implications for the economy as a whole.
  • A key lesson to take from all of this is that simply railing against income inequality doesn’t get us very far.
  • We have to find a way to prevent or limit major banks from repeatedly going short on volatility at social expense. No one has figured out how to do that yet.
  • It remains to be seen whether the new financial regulation bill signed into law this past summer will help.
  • The bill does have positive features.
  • First, it forces banks to put up more of their own capital, and thus shareholders will have more skin in the game, inducing them to curtail their risky investments.
  • Second, it also limits the trading activities of banks, although to a currently undetermined extent (many key decisions were kicked into the hands of future regulators).
  • Third, the new “resolution authority” allows financial regulators to impose selective losses, for instance, to punish bondholders if they wish.
  • We’ll see if these reforms constrain excess risk-taking in the long run. There are reasons for skepticism.
  • Most of all, the required capital cushions simply aren’t that high, so a big enough bet against unexpected outcomes still will yield more financial upside than downside
  • What about controlling bank risk-taking directly with tight government oversight? That is not practical. There are more ways for banks to take risks than even knowledgeable regulators can possibly control
  • It’s also not clear how well regulators can identify risky assets.
  • Some of the worst excesses of the financial crisis were grounded in mortgage-backed assets—a very traditional function of banks—not exotic derivatives trading strategies.
  • Virtually any asset position can be used to bet long odds, one way or another. It is naive to think that underpaid, undertrained regulators can keep up with financial traders, especially when the latter stand to earn billions by circumventing the intent of regulations while remaining within the letter of the law.
  • For the time being, we need to accept the possibility that the financial sector has learned how to game the American (and UK-based) system of state capitalism.
  • It’s no longer obvious that the system is stable at a macro level, and extreme income inequality at the top has been one result of that imbalance. Income inequality is a symptom, however, rather than a cause of the real problem.
  • The root cause of income inequality, viewed in the most general terms, is extreme human ingenuity, albeit of a perverse kind. That is why it is so hard to control.
  • Another root cause of growing inequality is that the modern world, by so limiting our downside risk, makes extreme risk-taking all too comfortable and easy.
  • More risk-taking will mean more inequality, sooner or later, because winners always emerge from risk-taking.
  • Yet bankers who take bad risks (provided those risks are legal) simply do not end up with bad outcomes in any absolute sense.
  • We’re not going to bring back torture, trial by ordeal or debtors’ prisons, nor should we. Yet the threat of impoverishment and disgrace no longer looms the way it once did, so we no longer can constrain excess financial risk-taking. It’s too soft and cushy a world.
  • That’s an underappreciated way to think about our modern, wealthy economy: Smart people have greater reach than ever before, and nothing really can go so wrong for them.
  • How about a world with no bailouts? Why don’t we simply eliminate the safety net for clueless or unlucky risk-takers so that losses equal gains overall? That’s a good idea in principle, but it is hard to put into practice.
  • Once a financial crisis arrives, politicians will seek to limit the damage, and that means they will bail out major financial institutions.
  • Had we not passed TARP and related policies, the United States probably would have faced unemployment rates of 25 percent of higher, as in the Great Depression. The political consequences would not have been pretty.
  • Bank bailouts may sound quite interventionist, and indeed they are, but in relative terms they probably were the most libertarian policy we had on tap. It meant big one-time expenses, but, for the most part, it kept government out of the real economy (the General Motors bailout aside).
  • So what will happen next?
  • One worry is that banks are currently undercapitalized and will seek out or create a new bubble within the next few years, again pursuing the upside risk without so much equity to lose.
  • A second perspective is that banks are sufficiently chastened for the time being but that economic turmoil in Europe and China has not yet played itself out, so perhaps we still have seen only the early stages of what will prove to be an even bigger international financial crisis.
  • A third view is perhaps most likely. We probably don’t have any solution to the hazards created by our financial sector, not because plutocrats are preventing our political system from adopting appropriate remedies, but because we don’t know what those remedies are.
  • Yet neither is another crisis immediately upon us. The underlying dynamic favors excess risk-taking, but banks at the current moment fear the scrutiny of regulators and the public and so are playing it fairly safe.
  • They are sitting on money rather than lending it out. The biggest risk today is how few parties will take risks, and, in part, the caution of banks is driving our current protracted economic slowdown. According to this view, the long run will bring another financial crisis once moods pick up and external scrutiny weakens, but that day of reckoning is still some ways off.
  • Is the overall picture a shame? Yes. Is it distorting resource distribution and productivity in the meantime? Yes. Will it again bring our economy to its knees? Probably. Maybe that’s simply the price of modern society. Income inequality will likely continue to rise and we will search in vain for the appropriate political remedies for our underlying problems.
    • anonymous
      anonymous on 07 Jul 13
       
      Painfully straightforward.
  • anonymous on 07 Jul 13
     
    "Does growing wealth and income inequality in the United States presage the downfall of the American republic? Will we evolve into a new Gilded Age plutocracy, irrevocably split between the competing interests of rich and poor? Or is growing inequality a mere bump in the road, a statistical blip along the path to greater wealth for virtually every American? Or is income inequality partially desirable, reflecting the greater productivity of society's stars?"
anonymous

Who free-rides on American military power? - 0 views

www.economist.com/...defence_spending

geopolitics military

shared by anonymous on 19 Apr 10 - Cached
  • Mr Salam notes that Mr Auslin also "raises an important question, namely whether the fact that much of metropolitan Europe and East Asia 'free-rides' on American military power creates benefits that outweigh the costs."
    • anonymous
      anonymous on 19 Apr 10
       
      This is about American control of the international trade system. If there are any "free rides", it's only because the trade-system has been explicitly engineered in that fashion.
  • China is heavily dependent on its export trade to sustain economic growth at home. It has no incentive to disrupt or “stress” trade flows or to embark on policies abroad that would lead to this.
  • seems to me to be a non-fact
  • ...3 more annotations...
  • 1. The major European powers spend a healthy 2%-plus of GDP on defence
  • 2. No major European country faces any serious military threat.
  • otherwise "foreign governments will expand their regulatory and confiscatory powers against their domestic economies in order to fund their own military expansions."
    • anonymous
      anonymous on 19 Apr 10
       
      Again, the fear here is that America will lose its leverage in blue-water operations. I think that the bulk of these arguments are sort of beside the point. This is about *control* and America, having been thrust into the world of empire (trade-based though it is), feels the need to maintain that control. Crying about how other nations will act 'badly' is a cute cover.
  • anonymous on 19 Apr 10
     
    By M.S. at The Economist on April 19, 2010.
anonymous

The question libertarians just can't answer - 1 views

www.salon.com/..._libertarians_just_cant_answer

shared by anonymous on 10 Jun 13 - Cached
  • There are 193 sovereign state members of the United Nations—195, if you count the Vatican and Palestine, which have been granted observer status by the world organization. If libertarianism was a good idea, wouldn’t at least one country have tried it? Wouldn’t there be at least one country, out of nearly two hundred, with minimal government, free trade, open borders, decriminalized drugs, no welfare state and no public education system?
  • Libertarian theorists have the luxury of mixing and matching policies to create an imaginary utopia. A real country must function simultaneously in different realms—defense and the economy, law enforcement and some kind of system of support for the poor. Being able to point to one truly libertarian country would provide at least some evidence that libertarianism can work in the real world.
  • Some political philosophies pass this test. For much of the global center-left, the ideal for several generations has been Nordic social democracy—what the late liberal economist Robert Heilbroner described as “a slightly idealized Sweden.”
  • ...13 more annotations...
  • Libertarians have often proclaimed that the economic failure of Marxism-Leninism discredits not only all forms of socialism but also moderate social-democratic liberalism.
  • If socialism is discredited by the failure of communist regimes in the real world, why isn’t libertarianism discredited by the absence of any libertarian regimes in the real world?
  • Communism was tried and failed. Libertarianism has never even been tried on the scale of a modern nation-state, even a small one, anywhere in the world.
  • But none of these countries, including the U.S., is anywhere near a libertarian paradise.
  • Even worse, the economic-freedom country rankings are biased toward city-states and small countries.
  • With the exception of Switzerland, four out of the top five were small British overseas colonies which played interstitial roles in the larger British empire.
  • Even though they are formally sovereign today, these places remain fragments of larger defense systems and larger markets. They are able to engage in free riding on the provision of public goods, like security and huge consumer populations, by other, bigger states.
  • These countries play specialized roles in much larger regional and global markets, rather as cities or regions do in a large nation-state like the U.S. Hong Kong and Singapore remain essentially entrepots for international trade.
  • Switzerland is an international banking and tax haven. What works for them would not work for a giant nation-state like the U.S.
  • The Heritage Foundation is free to define economic freedom however it likes, by its own formula weighting government size, freedom of trade, absence of regulation and so on. What about factors other than economic freedom that shape the quality of life of citizens?
  • According to the CIA World Fact book, the U.S. spends more than Mauritius—5.4 percent of GDP in 2009 compared to only 3.7 percent in Mauritius in 2010.
  • In economically-more-free Mauritius there are about 11 deaths per 1,000 live births—compared to 5.9 in the economically-less-free U.S.
  • Libertarians seem to have persuaded themselves that there is no significant trade-off between less government and more national insecurity, more crime, more illiteracy and more infant and maternal mortality, among other things.
  • anonymous on 10 Jun 13
     
    A most cogent argument. I don't think it's the author's job to balance itself out (as was suggested in G+). Against what, exactly? The piece had nothing to do with the two-party system. I completely agree that our two party system is a joke, but I fail to see how inserting an additional joke adds anything. The LP serves a vote-getting purpose for the GOP. That is all. Once the GOP gets enough votes, they reserve the right to kick the LP ideas/candidates to the curb - and often do. That's been the cycle for decades. Years back, it made me angry. I'm pretty ambivalent now. Circle of political life. The official LP positions on a whole host of issues is beyond unpalatable even for our heavily right-leaning electorate. Abolishing the WoD is a great policy idea, but it needs to be accompanied by more great ideas before Americans do more than pay lip service and pretend to Go Galt. Oh, and they have to rip out their Objectivist-center and hurl it into the sun.
anonymous

The Geopolitics of Turkey: Searching for More - 0 views

www.stratfor.com/...politics_turkey_searching_more

geopolitics

shared by anonymous on 02 Aug 10 - Cached
  • STRATFOR begins its assessment of Turkey at the Sea of Marmara because, until the Turks secured it — most famously and decisively in May 1453 with the capture of Constantinople — they were simply one of many groups fighting for control of the region.
  • This consolidation took more than 150 years, but with it, the Turks transformed themselves from simply another wave of Asian immigrants into something more — a culture that could be a world power.
  • Modern Turkey, with its Asiatic and Anatolian emphasis, is an aberration. “Turkey” was not originally a mountain country, and the highlands of Anatolia were among the last lands settled by the Turks, not the first.
  • ...26 more annotations...
  • the Turkish core is the same territory as the core of the Byzantine Empire that preceded it, namely, the lands surrounding the Sea of Marmara.
  • Such lowlands ease the penetration of peoples and ideas while allowing a central government to spread its writ with ease. One result is political unity; rivers radically reduce the cost of transport, encouraging trade and thus wealth.
  • In terms of political unity and agricultural production, the region’s maritime climate smoothes out its semiarid nature.
  • It may not be a large, unified, well-watered plain — split as it is by the sea — but the land is sufficiently useful that it is certainly the next best thing.
  • In terms of trade and the capital formation that comes from it, by some measures the Sea of Marmara is even better than a navigable river.
  • First, Turkey is highly resistant to opposing sea powers.
  • Second, the geographic pinches on the sea ensure that Marmara is virtually a Turkish lake — and one with a lengthy shoreline.
  • As a result, the core of Turkey is both capital-rich and physically secure.
  • The final dominant feature of the Turkish core region is that, while it is centered around the Sea of Marmara, the entire region is an important tradeway.
  • It is a blessing in that the trade that flows via the land route absolutely must travel through Turkey’s core
  • As with all isthmuses, however, the land funnels down to a narrow point, allowing large hostile land forces to concentrate their strength on the core territory and to bring it to bear against one half of the core
  • Establish a blocking position in Anatolia. Expand up the Danube to Vienna. Develop a political and economic system to integrate the conquered peoples. Seize and garrison Crimea. Establish naval facilities throughout the eastern Mediterranean.
  • if the Turks turned inward, that would restrict trade between Asia and Europe, virtually inviting a major power to dislodge the plug.
  • Establish a Blocking Position in Anatolia
  • the Turks had little interest in grabbing all of Anatolia early in their development; the cost simply outweighs the benefits. But they do need to ensure that natives of Anatolia are not able to raid the core and that any empire farther afield cannot use the Anatolian land bridge to reach Marmara.
  • A secure block on Anatolia starkly limits the ability of Asian powers to bring war to Turkey, which can use the entire peninsula — even if not under Turkish control — as a buffer and be free to focus on richer pastures within Europe.
  • Expand up the Danube to Vienna
  • First, at only 350 kilometers (220 miles) away from the Marmara, it is the closest major river valley of note.
  • Second, there are no rival naval powers on the Black Sea.
  • Third, the Danube is a remarkable prize. It is the longest river in the region by far and is navigable all the way to southern Germany; ample tracts of arable land line its banks.
  • There are also four natural defensive points
  • The first lies in modern-day Bulgaria.
  • The second point is where the Black Sea nearly meets the Carpathians
  • The third point lies in the Danube Valley itself, on the river where modern-day Serbia, Romania and Bulgaria meet.
  • The final — and most critical — defensive point is the city of Vienna, located at a similar gap between the Carpathians and the Alps.
  • The problem is getting to Vienna.
  • anonymous on 02 Aug 10
     
    "StratFor begins its assessment of Turkey at the Sea of Marmara because, until the Turks secured it - most famously and decisively in May 1453 with the capture of Constantinople - they were simply one of many groups fighting for control of the region." August 2, 2010.
anonymous

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

www.ribbonfarm.com/...f-the-corporation-1600-to-2100

economics predictions longnow

shared by anonymous on 23 Jun 11 - Cached
  • 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
  • ...73 more annotations...
  • 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
      anonymous on 23 Jun 11
       
      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
      anonymous on 23 Jun 11
       
      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
      anonymous on 23 Jun 11
       
      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.
  • anonymous on 23 Jun 11
     
    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 U.S. gave Russia 10 spies in exchange for four prisoners. Was that a good deal? - 0 views

www.slate.com/2259935

geopolitics russian spies

shared by anonymous on 11 Jul 10 - Cached
  • Two airplanes met on a tarmac in Vienna on Friday morning to swap the 10 Russians who pleaded guilty to charges of conspiracy in the United States for four men accused by Moscow of spying for the West. Ten spies for four—is that a fair trade for the U.S.?
  • anonymous on 11 Jul 10
     
    "Two airplanes met on a tarmac in Vienna on Friday morning to swap the 10 Russians who pleaded guilty to charges of conspiracy in the United States for four men accused by Moscow of spying for the West. Ten spies for four-is that a fair trade for the U.S.?" By Christopher Beam at Slate Magazine on July 9, 2010.
anonymous

The Geopolitics of France: Maintaining Its Influence in a Changing Europe - 0 views

www.stratfor.com/...tralized_system_guarding_plain

geopolitics france

shared by anonymous on 14 Sep 10 - Cached
  • Mountain ranges inhibit trade and armies alike while peninsulas and islands limit the ability of larger powers to intimidate or conquer smaller ones. Because of such features, it isn’t as much of a surprise that Europe has never united under a single government as it is that anyone has ever tried.
  • two other geographic features that push Europe together
  • The first is the North European Plain
  • ...58 more annotations...
  • Northern Europe is home to the densest concentration of wealth in the world
  • The second feature — the Mediterranean Sea — plays a similar role to the continent’s south
  • Mix the geographic features that inhibit unification with the features that facilitate trade and communication and Europe becomes a very rich, very violent place.
  • three places on the Continent where this pattern of fragmentation does not hold
  • The first are the Seine and Loire river valleys
  • The second and third places where the fragmentation pattern does not hold are the Garonne and Rhone river valleys
  • The one thing these three geographic exceptions have in common is that they all have long resided in the political entity known as France.
  • France is nearly always engaged but is only rarely ascendant.
  • Mountain chains, rivers and seas therefore enclose France at all points save for one: the North European Plain.
  • Internally, aside from the Massif Central in the southeast, France is a country of relatively low-lying terrain with occasional hills.
  • The Beauce region is therefore the French core.
  • Paris is also close enough to the Atlantic — connected by the Seine — to benefit from oceanic trade routes but far enough away to be insulated somewhat from a direct naval invasion.
  • In comparison with its continental neighbors, France has almost always been at an economic advantage because of its geography.
  • Phase I: Centralization (843-1453)
  • The Beauce region of France has always been the core of the French state because of its fertile land and strategic location on the North European Plain.
  • Early France faced two problems, both rooted in geography.
  • The first dealt with the plains.
  • The solution to this military reality was feudalism.
  • French, one of the Langue d’oil, did not become the official tongue until the 1500s, and linguistic unification was not completed until the 1800s.
  • England considered continental France their playpen for much of the Middle Ages. In fact, the Norman leaders of England did not distinguish much between their French and English possessions
  • As in the conflict with the Muslims, it was a technological innovation that forced France’s political system to evolve, and this time the shift was toward centralization rather than decentralization.
  • The combination of the political disasters of the feudal period and the success of consolidation in the battles with the English served as the formative period of the French psyche.
  • Phase II: The Hapsburg Challenge and Balance of Power (1506-1700)
  • Europe’s Hapsburg era was a dangerous time for the French.
  • In three major wars — the War of the Spanish Succession (1701-1714), the War of the Austrian Succession (1740-1748) and the Seven Years’ War (1754-1763, against Britain in North America) — France expended great financial resources in efforts to dominate one region or another, only to emerge at each war’s end with little to show for its efforts.
  • Phase III: Nationalism and the Rise of Germany (1789-1945)
  • two equally damning results
  • First, the depleted treasury led to a general breakdown in internal order, contributing to the French Revolution of 1789.
  • Second, Paris’ distraction with England and Spain led it to miss the emergence of Prussia as a serious European power that began to first rival and ultimately superseded Hapsburg Austria for leadership among the cacophony of German kingdoms.
  • One of the many unintended side effects of the French Revolution was the concept of nationalism,
  • From nationalism grew the nation-state, a political entity that harnesses all people sharing a similar ethnicity into a single governing unit.
  • The result was the one near-unipolar moment in European history.
  • Not only was France the only state to have embraced the concept of nationalism, but it also grafted the concept onto an already centralized system, allowing French power to pour forth across Europe and North Africa.
  • From 1803 to 1815, France nearly overwhelmed the rest of Europe before a coalition of nearly every major and minor power on the Continent combined forces to defeat her.
  • The lesson was a simple one, again rooted in geography. Even when France is united and whole, even when she is not under siege, even when her foes are internally distracted and off balance, even when she is led by one of the greatest organizational and military minds in human history, even when she holds the advantage of nationalism — she still lacks the resources and manpower to rule Europe.
  • But most of all the advantage of nationalism spread. Over the next few decades the political innovation of the nation-state spread throughout Europe and in time became a global phenomenon.
  • The culmination of this dichotomy was the events of May-June 1940, when the French military crumbled in less than six weeks. The defeat was by no means solely the result of geopolitical forces, but it sprang from the fundamental imbalance of power between France and a unified Germany.
  • Phase IV: Managing Germany
  • as France is concerned, however, STRATFOR views the entire post-World War II era as a single chapter in French history that has yet to come to a conclusion. In this phase, France is attempting to find a means to live with Germany, a task greatly complicated by recent shifts in the global political geography.
  • And far from being exposed and vulnerable, France found itself facing the most congenial constellation of forces in its history.
  • The stated gains of the EEC/EU have always been economic and political, but the deeper truth is that the European project has always been about French geopolitical fear and ambition.
  • Eventually the Cold War ended, and the Soviet collapse was perceived very differently in France. While most of the free world celebrated, the French fretted.
  • the Soviet collapse led to the reunification of Germany — and that was a top-tier issue.
  • Twenty years on, Germany cannot abandon the European Union without triggering massive internal economic dislocations because of the economic evolutions Maastricht has wrought.
  • that leaves the French with two long-term concerns.
  • First, the cage breaks, Germany goes its own way and attempts to remake Europe to suit its purposes.
  • Second, the cage holds, but it constrains France more than Germany.
  • Geopolitical Imperatives
  • Secure a Larger Hinterland
  • France is the only country on the North European Plain that has an option for expansion into useful territories beyond its core without directly clashing with another major power.
  • Always Look East
  • Being situated at the western end of the North European Plain makes France the only country on the plain that has only one land approach to defend against.
  • Maintain Influence in Regions Beyond Western Europe
  • Unlike the United Kingdom, whose expansion into empire was a natural step in its evolution as a naval power, France’s overseas empire was almost wholly artificial.
  • These colonial assets served one more critical role for Paris: They were disposable.
  • Louisiana was sold for loose change in order to fund the Napoleonic wars, while Algeria was ultimately abandoned — despite being home to some 1 million ethnic French — so that Charles de Gaulle could focus attention on more important matters at home and in the rest of Europe.
  • Be Flexible
  • Geopolitics is not ideological or personal, although few countries have the discipline to understand that.
  • anonymous on 14 Sep 10
     
    "France is bound by the Alps in the southeast and the Pyrenees in the southwest, the Mediterranean Sea in the south and the Atlantic in both the west and north. In the east, France is bound by the river Rhine and the low mountains of the Ardennes, Vosges and Jura." At StratFor on September 13, 2010.
anonymous

The Real New Deal - 0 views

www.the-american-interest.com/article.cfm

money

shared by anonymous on 11 Mar 10 - Cached
  • Money, an item not necessarily intrinsically desirable or usable but serving as a stand-in for the complex wants and valuations of untold individuals, is an unnatural idea that required centuries to take hold.
  • Endism, especially when attached to the sort of nouns we were once prone to capitalize, can become a bad habit when used as anything more than a literary device to call attention to events worthy of it. The Great Depression was certainly worthy of its capital letters; even if nothing exactly ended, plenty changed. But what? And with what, if any relevance for present circumstances?
    • anonymous
      anonymous on 11 Mar 10
       
      Hat Tip to Robin Hanson at Overcoming Bias for pointing me toward this article. http://www.overcomingbias.com/2010/03/great-depression.html
    • anonymous
      anonymous on 26 Mar 10
       
      And this 'endism' is quite present in the current anger over health-care reform. It's not merely a loss, it is elevated to historical travesty.
  • Whether we realize it or not, we are still reacting to those portrayals more than we are to the actions themselves. What really changed was the way the world’s elite thought of themselves and their institutions.
    • anonymous
      anonymous on 26 Mar 10
       
      This falls under the category of "lies we tell ourselves." Of course, less cynically, we can call it the standard act of national mythmaking. It's akin to the fact that humans remember what they *need* to remember, not what was.
  • ...26 more annotations...
  • In crude political form, this Whiggish inclination toward progress was encapsulated in the functionalist view retailed by Norman Angell around the turn of the last century, which held that countries that traded with each other would develop economic self-interests too intertwined to justify war.
    • anonymous
      anonymous on 11 Mar 10
       
      This strikes me as something generally true, but not necessarily a truism. Libertarians will often postulate the "trade kills war" argument, without appreciating that it's not an iron-clad law or even - necessarily - the most likely outcome. It strikes me as more a naive, though admirable, conceit of what they *wish* as opposed to what IS.
  • If markets had come to play a more prominent part in the industrial West, it was not because markets had just been invented. It was because social and political systems had evolved in which powerful elites were willing to tolerate institutions that diffused economic power and weakened the state at the expense of private enterprise. This was the core meaning of liberalism in its original formulation.
  • The Crash of 1929, the subsequent economic slump and, particularly, the duration of the Depression took most contemporaries completely by surprise. Indeed, the uniquely severe catastrophe of the 1930s is so unusual that modern analysts should be cautious in drawing lessons from it.
    • anonymous
      anonymous on 26 Mar 10
       
      One way in which we fundamentally misunderstand a time period is in projecting our current political definitions on a period in gross violation of the political norms of the time.
  • Conventional wisdom tends to treat President Hoover as a clueless advocate of laissez faire who refused to stimulate the economy in the dramatic downturn. Franklin Roosevelt, on the other hand, was the heroic leader who both saved the day and transformed the American economy through his promotion of the New Deal. Conventional wisdom is still very much with us.
  • Hoover did not advocate “do-nothing” policies.
  • Roosevelt’s interventions were neither as thorough nor as systematically revolutionary as they have often been portrayed.
  • Above all, FDR’s worst policies were animated by a desire to repress business, by distrust of competition and a general disdain for the market. Those were, of course, precisely the qualities that made his policies extremely popular. FDR’s economic policies scored mixed successes at best, but his political strategy succeeded by any measure long before U.S. entry into World War II, and subsequent generations have not ceased to conflate the former with the latter.
  • So thoroughly has the West taken for granted the triumph of the more abstract liberal nation-state that its denizens must remind themselves how fragile its origins were and how little emotional loyalty it has commanded.
  • Even in America, where visceral support for individualism and self-reliance remains strong, this has always been so. In good times, economic systems are supported by inertia and utilitarian compromise that appeal to the broad center. In hard times abstract convictions tend to melt away. The American preference for the free market is neither as common nor as “American” as many suppose.
    • anonymous
      anonymous on 26 Mar 10
       
      But our identities are inventions and are mostly divorced from a close reading of history. As America nears a genuine crisis point, the current phenomenon of the "Tea Party" is going to be less relevant. It will eventually become "quaint" and irrelevant. At least, that is my hope (and current Generational prediction).
  • Seen as a reversion to older habits, the odd mix of regulation, make-work, intervention, protectionism, nationalism and (as in Germany and elsewhere) anti-Semitism that characterized the Western policy response to the Depression suddenly seems less like an incoherent flaying in all directions and more like elements of a uniform retrenchment in social relations.
    • anonymous
      anonymous on 26 Mar 10
       
      Which is why the narratives don't stick on a closer read.
  • It seems odd that humans in their day-to-day interactions think of buying or selling as the most natural of activities, recreating markets unprompted in the most dismal of circumstances. Yet there is something about the ideology of a market system, or of any generally decentralized order, that seems inconceivable to most people.
  • Economists have a hard time dealing with nationalism.
    • anonymous
      anonymous on 26 Mar 10
       
      Again: Nationalism - in its current form - is a modern social invention.
  • A severe economic crisis implicates the entire system of political economy, regardless of how narrow the source of that crisis may be. Thus those with long-simmering fears and resentments—as well as those with more venal or ideological motives—see crisis as an opportunity to strike out at the system.
  • Anti-market movements, whether pushed by Populists or Progressives in the United States or the various forms of socialism in Europe, took for granted that vigorous political action was the only way to impose order and bring social harmony to an unfettered market economy. But the specific remedies and the zeal with which reformers sought to repudiate the past belie ideological origins more than technocratic ones.
  • He had mastered the politics of trust.
  • Roosevelt deserves credit for largely resisting these ideological enthusiasms. On balance, he dealt with the crisis pragmatically and forthrightly.
  • If FDR had left out the high-flying rhetoric and only pursued an attenuated New Deal—namely the financial policies that economists now agree truly helped us out of the Depression—would he be as celebrated a figure as he is today? Not likely.
  • The end of World War II furnishes still more evidence that political images leave a wider trace in historical memory than actual policies.
  • Thanks to Truman we were once again moving in the direction of a competitive, open-access market economy. Had there been a lingering recession and a continuation of older, harmful regulations into the 1946–48 period, Truman, not his predecessor, would have been blamed. Yet Truman’s stellar reputation today owes nothing to his economic achievements, which most of those who today praise his foreign policy acumen know nothing about.
    • anonymous
      anonymous on 26 Mar 10
       
      I'll raise my hand on this one. Even with my better-than-nothing knowledge of US history, I knew nothing about this.
    • anonymous
      anonymous on 26 Mar 10
       
      They weren't in the stories I learned about.
  • In any event, we would do well to bear in mind how important, yet also how unnatural, the modern system of impersonal finance and trade really is. If we would preserve that system as a basis for our prosperity, we must recognize that many of the regulatory solutions we apply to our current crisis may themselves induce responses that can generate new crises. History suggests, too, that fears of the market and the political pressures it generates will wax and wane as crises deepen or ease. Patience and prudence are, therefore, the best watchwords for government amid the many trials and errors we will surely endure in the months, and perhaps years, ahead.
  • Indeed, many of his interventions—for example, his attempts to balance the budget by raising taxes in 1932, and strengthening support for the gold standard—worsened the economy for reasons orthodox theory would have predicted. On the other hand, Hoover initiated the Reconstruction Finance Corporation to support failed banks, to fund public works, subsidize state relief and otherwise engage in policies that presaged the widely praised interventions of the Roosevelt era.
  • Economic historians stress that it was in the realm of monetary and not fiscal policy that FDR had the most success.
    • anonymous
      anonymous on 26 Mar 10
       
      I can't even tell you the difference between those two things. I would venture to guess that a *lot* of people with strong convictions about government intrusion can't either.
  • What is one to make of the widespread popularity of protectionism and high tariffs throughout the Western world? Nationalist policies of every stripe, whether in the form of cartelization of industry in the United States or of more widespread regulation and control in Europe, especially in Germany, were not natural accompaniments to any neutral, technocratic view of recovery.
  • large-scale systems based on anonymous exchange were a recent phenomenon.
    • anonymous
      anonymous on 26 Mar 10
       
      We have a stubborn inability to understand that businesses are technologies like anything else we create. A chief conceit of neocons is the idea that our current economic system is somehow closer to a blank slate than those with more government power. Since it is our corporate system that is the "newish" thing, it puts supporters on the right in the uncomfortable position of being Progressives of at least one stripe.
  • The current Chair of the Council of Economic Advisors, Christina Romer, wrote in her widely cited article, “What Ended the Great Depression?” (1992), that “unusual fiscal policy contributed almost nothing to the recovery from the Great Depression.” The consensus view is that FDR’s policy success was the abandonment of the gold standard in 1933.
  • Harry Truman left office in 1953 a very unpopular man. Almost no one at the time gave him credit for overseeing a period of rapid recovery that was much broader and more impressive than anything that happened under Roosevelt’s tenure—and this at a time when most economists predicted a deep postwar recession.
anonymous

A Virtual Weimar: Hyperinflation in a Video Game World - 1 views

mises.org/...nflation-in-a-Video-Game-World

shared by anonymous on 21 May 13 - Cached
  • But in the last few months, various outposts in that world — Silver City and New Tristram, to name two — have borne more in common with real world places like Harare, Zimbabwe in 2007 or Berlin in 1923 than with Dante’s Inferno. A culmination of a series of unanticipated circumstances — and, finally, a most unfortunate programming bug — has over the last few weeks produced a new and unforeseen dimension of hellishness within Diablo 3: hyperinflation.
  • In casual use, the term “inflation” is used in conjunction with price increases. From the perspective of the Austrian School of economics, though, that phenomenon is a secondary effect of increases in the money supply.
  • Furthermore, inflation is not simply an increase in the supply of money within an economy; it is the increase in that portion (if any) not backed by a commensurate increase in specie
  • ...28 more annotations...
  • As virtual currencies are digitally-created and not commodity-backed — therefore, not particularly dissimilar from real world currencies in this day and age — those such as Diablo 3’s gold are de facto fiat currencies.
  • Faucets are ways through which game currency is injected into the game. This generally involve players receiving currency from the game system itself, as opposed to other players.
  • Sinks are ways through which game currency is removed from the game. This generally involve players paying currency into the game system itself, as opposed to other players.
  • The establishment by Blizzard of a real money auction house (“RMAH”) alongside a virtual gold auction house in the game provided players with an incentive to both farm the game for real world profits and to pursue arbitrage opportunities. The RMAH was also created, at least in part, to disincentivize players from patronizing third party markets outside the game.
  • Nevertheless, bots — automated game participants whose sole purpose is to farm the game world for items to sell — quickly emerged.
  • Although its anonymity may make it subject to skepticism, several weeks after the game’s debut a source claimed that there were at least 1,000 bots active 24/7 in the Diablo 3 game world, allegedly “harvesting” (producing) 4 million virtual gold per hour.[4]
  • The combined effect of heavy bot activity and insufficient sinks immediately impacted the gold markets, and inflationary pressures were soon apparent.
  • The RMAH had minimum and maximum dollar amounts for in-game gold transactions: $0.25 minimum, $250 maximum. Market participants were also limited to dealing in increments of a certain size, called a “stack.” The “stack” was initially set to 100K gold. But as gold prices fell owing to rapidly building supply, the stack size was changed in August 2012 to 1 million. This practice, known as redenomination, is a fairly standard (if cosmetic) method of addressing inflation, but was viewed by some players as tacit devaluation.
  • To be clear, at the time at which the redenomination was introduced, gold was still trading above the floor rate. But being artificial, caps and floors not only prevent markets from clearing, but give black markets a target to undercut, to say nothing of offering players an opportunity to avoid the 15 percent fee — another intended gold sink — levied upon transactions within the auction house.
  • By early 2013, the gold price had fallen to the exchange floor set by the game managers — $0.25/million — and players began to show signs of concern.
  • Hyperinflation is the economist’s equivalent of an astrophysicist’s quasar cluster or a marine biologist’s dolphin “stampede”: a rare exhibition of a unique set of circumstances which arise infrequently and are closely studied when they materialize.
  • Such events are exotic enough that they become legendary: many individuals knowing little about monetary policy are aware of the recent outbreak in Zimbabwe, or familiar with the defining instance in the post-WWI Weimar Republic.
  • Economically, the tipping point in the transformation of inflation into hyperinflation is characterized by a profound drop in the outstanding demand for money
  • when holders of money expect the supply of money to increase — particularly without any sense of timing, bounds, or other guidance
  • monetary demand in the present drops in favor of surrendering money for vendibles.
  • The focus of possessors of money, therefore, devolves into an effort to capture known, present purchasing power against the likelihood of its decline in the near future.
  • If historical cases of hyperinflation — real, and now virtual — have one thing in common, it is the instinct among its victims to blame the symptoms rather than the disease.
  • The Austrian economist Hans Sennholz noted that during the German hyperinflation, “intrigue and artifice” were believed to be at work.[12] Similarly, a handful of Diablo 3 players, frustrated about the decimation of their purchasing power, expressed increasing suspicion of manipulation and conspiracy theories.
  • While RMAH prices for virtual gold rallied occasionally, the prevailing direction of black market prices for virtual gold was inexorably lower as third party sellers undercut the in-game gold floor.
  • Several competing definitions for hyperinflation exist, with the strictest — an increase of 50 percent in one month — defined by economist Philip Cagan in his 1956 book The Monetary Dynamics of Hyperinflation.
  • On May 7th 8th, 2013, Blizzard rolled out Patch 1.0.8, which contained the seeds of the last, hyperbolic surge of gold superabundance.
  • In just a few hours, the already gold-swamped economy saw trillions more created: a mammoth deluge of, by then, worthless virtual gold chasing finite goods, driving prices upward in leaps and bounds.
  • It was, at last, the hyperbolic blow-off characteristic of real world hyperinflationary episodes. Some of the price increases (in Diablo 3 gold) are shown below: 2013 avg price 1-6 May avg price 7-8 May price radiant star amethyst 17.4M 41.2M 85.8M radiant square ruby 187K 260K 337K flawless square topaz 491 5,170 8,700 star emerald 764K 1.1M 1.6M tome of jewelcrafting 694 3,400 3,100
  • And in a noteworthy departure from real world hyperinflation, rather than resorting to barter (which frequently takes the form of food for skilled labor), as runaway inflation became hyperinflation, many chat channels — through which some measure of trade was consummated — seem to have fallen empty: without a need to eat or clothe oneself in the virtual world, some players simply appear to have turned away.
  • Blizzard quickly closed the in-game auction houses and audited transactions which took place during the blowout, banning players who took advantage of the bug and donating the proceeds of certain sales to charity. The gold stack size was also moved back from 10M to 1M.
  • Remembering that game economies are private and players are voluntary members, there’s no explicit mandate to ensure rigid inflation control as one often sees (however rarely pursued) in public economies.
  • More critically, though, whether structured as auctions or exchanges, markets must be allowed to operate freely, without caps, floors, or other artificialities. Unrestricted (real) cash auctions would for the most part preempt and obviate black markets. [24]
    • anonymous
      anonymous on 21 May 13
       
      Kirk Battle remarked: "Which would completely kill the game."
  • By no means does this analysis intend to equate the actions of virtual gaming firms with the policies of governments or central banks, or to malign their indisputably talented managers, designers, and programmers.
    • anonymous
      anonymous on 21 May 13
       
      Kirk Battle's Comment: "Bullshit. It's a huge indictment of their capacity to fix or resolve market pressures because these number jockeys were sitting there with perfect info and still couldn't do it."
    • anonymous
      anonymous on 21 May 13
       
      Side note: I more fully understand why Valve hired a hotshot Economics dude.
  • anonymous on 21 May 13
     
    "in the last few months, various outposts in that world - Silver City and New Tristram, to name two - have borne more in common with real world places like Harare, Zimbabwe in 2007 or Berlin in 1923 than with Dante's Inferno. A culmination of a series of unanticipated circumstances - and, finally, a most unfortunate programming bug - has over the last few weeks produced a new and unforeseen dimension of hellishness within Diablo 3: hyperinflation."
anonymous

The Growing Importance of the Arctic Council - 0 views

www.stratfor.com/...wing-importance-arctic-council

shared by anonymous on 17 May 13 - Cached
  • The Arctic Council was established in 1996 by the eight countries that have territory above the Arctic Circle -- the United States, Canada, Iceland, Denmark, Norway, Sweden, Finland and Russia.
  • Its main purpose was to be an intergovernmental forum (also involving Arctic indigenous groups) that promoted cooperation primarily regarding environmental matters and research. The Arctic Council's central focus has remained on environmental issues in the Arctic, and the body has had no meaningful decision-making power.
  • However, during this year's meeting, the council's members signed a legally binding agreement coordinating response efforts to marine pollution incidents.
  • ...10 more annotations...
  • Satellite data collected since 1979 shows that both the thickness of the ice in the Arctic and range of sea ice have decreased substantially, especially during the summer months.
  • U.S. Geological Survey estimates from 2008 suggest that 13 percent of the world's undiscovered oil and 30 percent of undiscovered natural gas reserves are located in the Arctic Circle.
  • In 2012, 46 ships transporting a total of 1.3 million tons reportedly used the Northern Sea Route, which runs along the northern coast of Russia; this represents a considerable increase from 2011, when 34 ships transported approximately 820,000 tons. In response to the route's growing importance, Russia set up the Northern Sea Route administration in March to supervise shipping.
  • Europe has a vested interest in alternative shipping routes to Asia becoming more economically viable, since such routes would allow trade to circumvent numerous bottlenecks like the Suez Canal and increase access to Asia's growing consumer markets.
  •  China has also shown a particular interest in the Arctic, and has lobbied the Nordic countries to support Beijing's bid for observer status in the Arctic Council.
  • Sailing along the Northern Sea Route rather than through the Mediterranean Sea and Suez Canal significantly reduces the trip between Rotterdam and Shanghai -- the Northern Sea Route is around 20 percent shorter. This translates into significant savings in terms of fuel and crew costs.
  • The Arctic Council is just one of many bodies dealing with regional collaboration in the Arctic. The Barents Euro-Arctic Council, the Nordic Council and the Conference of Parliamentarians of the Arctic Region also coordinate intergovernmental or interregional collaboration in the Arctic on a number of issues.
  • Allowing six more countries to become observer states shows that the members of the Arctic Council -- even those initially skeptical of expansion, such as Canada and Russia -- see the expansion as an opportunity to give the Arctic Council greater relevance.
  • In the coming years, the debate among member states to determine whether the Arctic Council should move beyond environmental issues and become a forum to address issues related to militarization, natural resources and trade routes will become more prominent. 
  • On May 10, the U.S. government presented its new general strategy for the Arctic. Little concrete information was revealed, but a clearer plan for implementing the strategy reportedly will be worked out in the coming months.
  • anonymous on 17 May 13
     
    "The Arctic is expected to become more important in the coming decades as climate change makes natural resources and transport routes more accessible. Reflecting the growing interest in the region, the Arctic Council granted six new countries (China, India, Italy, Japan, South Korea and Singapore) observer status during a May 15 ministerial meeting in Kiruna, Sweden. By admitting more observers, the Arctic Council -- an organization that promotes cooperation among countries with interests in the Arctic -- will likely become more important as a forum for discussions on Arctic issues. However, this does not necessarily mean it will be able to establish itself as a central decision-making body regarding Arctic matters."
anonymous

The Anti-Walmart: The Secret Sauce of Wegmans Is People - 0 views

www.theatlantic.com/...254994

shared by anonymous on 10 Jan 13 - No Cached
  • Wegmans has also clearly benefited from being based in Rochester, a small but historically prosperous area in upstate New York that was the birthplace of Western Union, Kodak, Xerox, Bausch & Lomb and other companies. Wegmans treats its employees well in part to keep them from gravitating to other firms.
  • anonymous on 10 Jan 13
     
    "Executives say the company is also able to invest in its employees and focus on steady, strategic growth because it is not publicly traded. They said cutting jobs or shipping them overseas was, in part, the product of having to relentlessly please the stock market." Hell of a read with Hope inside.
anonymous

We've Entered The Volatile Postnormal Stage Of History - 0 views

www.fastcoexist.com/...le-postnormal-stage-of-history

shared by anonymous on 09 May 13 - Cached
  • Mark Twain once wisecracked, "History doesn’t repeat itself, but it rhymes."
  • Perhaps that metaphorical understanding of the self-similarity of human events is part of the work--or tools--that futurists find useful.
  • we have slipped inexorably out of the late industrial, postmodern era that started soon after the end of World War II.
  • ...16 more annotations...
  • I refer to this period as the postnormal. I did so partly to avoid the unwieldy "post-postmodern," but also to indicate the nature of the break: the old rules don’t apply any more, but there may still be some rhymes we can use to pierce the postnormal fog.
  • "facts are uncertain, values in dispute, stakes high and decisions urgent," that normal scientific methods of inquiry won’t work.
  • So, I turned the adjective into a noun to characterize our new era: a time when volatility, uncertainty, complexity, and ambiguity (known together by the acronym VUCA) are at an all-time high, and where established approaches to analysis and planning are increasingly ineffective.
  • In a nutshell, the world economy has become massively unstable and complex, far too interconnected to understand in any real sense.
  • the world’s most successful investors are unable to find low-risk investment
  • some points that echo:
  • what happened in the developing world following the end of World War II. The colonial empires through which European governments had dominated much of the world’s land, trade, resources, and people, rapidly disintegrated.
  • over 700 million souls were under the control of the British Empire outside the UK in 1945, falling to 5 million by 1965, 3 million of whom were in Hong Kong.
  • The echo of colonialism in the postnormal is subtle.
  • We don’t have colonialism any longer, but the neoliberal capitalist economic system is global, and largely grew out of the same countries that were colonial powers.
  • We’ve created a global financial and manufacturing system that has come to control and concentrate the world wealth and power into the hands of a small elite.
  • The only difference it that it is no longer the crowned heads of Europe setting policy, but the technocrat managers of large corporations, financial institutions, and the political class.
  • The rising concerns about inequity--shown in Occupy Wall Street, the Arab Spring, and the rewriting of the constitution in Iceland--are an echo of the early rise of anticolonial insurgents.
    • anonymous
      anonymous on 09 May 13
       
      Also the Tea Party, at least a shade of it. :)
  • If the past is prologue, we might see the fall of the European Union, the defection of regions like Catalonia and Scotland from their nation states, and the rising of trade barriers as a means to protect local workers and industries.
  • We can imagine the explosion of a new generation of manufacturing, one that doesn’t rely on either armies of semi-skilled laborers or industrial regions dominated by computer-controlled factories and their supply chains and logistics networks.
  • a new caste of millions of artisanal product designers will be building small runs of 3-D printed products, sharing designs and selling through a social web, using low-cost machinery, and sidestepping the control of large corporations. Such an advance has the opportunity to destabilize the world’s patterns as much as the rise of industrialism did.
  • anonymous on 09 May 13
     
    "By looking at the past, we can judge what this new era might bring: a lot of chaos, populist movements fighting off the old economic order, and a 3-D printing fueled return to a more local economy."
anonymous

A Smarter Alternative to Raising the Minimum Wage - 0 views

www.bloomberg.com/...-raising-the-minimum-wage.html

shared by anonymous on 14 Feb 13 - Cached
  • It would be preferable to increase the Earned Income Tax Credit, a government program that makes payments to workers in low-income households. Unlike a higher minimum wage, a larger EITC would not create any disincentive to hire; and while some of the benefits of a minimum wage hike will go to teenagers in middle-class households, everyone who benefits from the EITC is poor.
  • So why are we talking about a minimum wage hike instead of a bigger EITC? The big reason is that a bigger EITC would grow the federal budget deficit, while a minimum wage increase is “free.” Of course, it’s not really free -- just like the EITC, it’s a transfer to low-wage workers, though instead of being financed with taxes it will come mostly out of business profits; some of the transfer will come from consumers in the form of higher prices.
  • When the government is under pressure not to spend, it is likely to pursue inferior regulatory alternatives as a way to hide true economic costs.
  • anonymous on 14 Feb 13
     
    "One of President Barack Obama's biggest proposals in yesterday's State of the Union Address was a big minimum wage increase, from $7.25 per hour to $9. The trade-off with any minimum wage increase is that it reduces inequality and poverty, but may raise unemployment. As Evan Soltas wrote for the Ticker last month, within the wage range that is on the table, the former effect should be substantial and the latter effect small, if existent. So, raising the minimum wage is a better idea than doing nothing. But while a higher minimum wage is a way to address poverty, it's not the best way." Thanks to Theron Jacobs for the pointer.
anonymous

How Myanmar Liberates Asia, by Robert D. Kaplan - 2 views

www.stratfor.com/...liberates-asia-robert-d-kaplan

myanmar asia

shared by anonymous on 21 Mar 12 - Cached
  • Geographically, Myanmar dominates the Bay of Bengal. It is where the spheres of influence of China and India overlap. Myanmar is also abundant in oil, natural gas, coal, zinc, copper, precious stones, timber and hydropower, with some uranium deposits as well. The prize of the Indo-Pacific region, Myanmar has been locked up by dictatorship for decades, even as the Chinese have been slowly stripping it of natural resources.
  • Think of Myanmar as another Afghanistan in terms of its potential to change a region: a key, geo-strategic puzzle piece ravaged by war and ineffective government that, if only normalized, would unroll trade routes in all directions.
  • if Myanmar continues on its path of reform by opening links to the United States and neighboring countries, rather than remaining a natural resource tract to be exploited by China, Myanmar will develop into an energy and natural resource hub in its own right, uniting the Indian subcontinent, China and Southeast Asia all into one fluid, organic continuum.
  • ...5 more annotations...
  • The salient fact here is that by liberating Myanmar, India's hitherto landlocked northeast, lying on the far side of Bangladesh, will also be opened up to the outside.
  • But while the future beckons with opportunities, the present is still not assured. The political transition in Myanmar has only begun, and much can still go wrong. The problem, as it was in Yugoslavia and Iraq, is regional and ethnic divides.
  • Myanmar is a vast kingdom organized around the central Irrawaddy River Valley. The ethnic Burman word for this valley is Myanmar, hence the official name of the country. But a third of the population is not ethnic Burman, even as regionally based minorities in friable borderlands account for seven of Myanmar's 14 states. The hill areas around the Irrawaddy Valley are populated by Chin, Kachin, Shan, Karen and Karenni peoples, who also have their own armies and irregular forces, which have been battling the Burman-controlled national army since the early Cold War period.
  • Worse, these minority-populated hill regions are ethnically divided from within.
  • Myanmar, it is true, is becoming less repressive and more open to the outside world. But that in and of itself does not make for a viable institutionalized state. In sum, for Myanmar to succeed, even with civilians in control, the military will have to play a significant role for years to come, because it is mainly officers who know how to run things. But given its immense natural resources and sizable population of 48 million, if Myanmar can build pan-ethnic institutions in coming decades it could come close to being a midlevel power in its own right -- something that would not necessarily harm Indian and Chinese interests, and, by the way, would unleash trade throughout Asia and the Indian Ocean world.
  • anonymous on 21 Mar 12
     
    Myanmar's ongoing liberalization and its normalization of relations with the outside world have the possibility of profoundly affecting geopolitics in Asia -- and all for the better.
anonymous

Questions Surround the Netherlands' Future - 0 views

www.stratfor.com/...ns-surround-netherlands-future

shared by anonymous on 19 Jul 13 - No Cached
  • In light of its economic problems and its leadership's waning popularity, the Netherlands will likely soften austerity measures in the short- and medium-term. In May, the European Commission gave The Hague permission to miss its deficit target for 2013. The country will probably fail to meet the required EU deficit goals again in 2014 -- the Dutch government has become increasingly worried about the negative effects of expedited spending cuts. While the European Commission is likely to pressure The Netherlands to implement additional spending cuts, it probably will not punish the country when it does not comply with those demands.
  • This goes beyond austerity measures; the Dutch parliament is currently assessing its broader relationship with the European Union. In a document released in June, the Dutch Cabinet indicated that no additional concessions of sovereignty should be made to supranational institutions, and that The Hague should keep as many of its own prerogatives as possible.
  • Because of its physical location in Europe, the Netherlands keeps strong political and economic ties with France and Germany. The Dutch will avoid any meaningful policy decisions until after Germans elections, which are scheduled for late September. The Hague will not openly criticize Berlin or Brussels as Paris has, but it will pursue a more independent fiscal policy by relaxing austerity at home in order to avoid a further drop in popular support.
  • ...3 more annotations...
  • Regardless of who governs Germany after September, in the short term Europeans will have to debate measures to reactivate financing for small- and medium-sized companies to try to stimulate economic growth and create new jobs.
  • In the long term, Germany and France will have to begin discussions for reforming European treaties. EU institutions and member states simply are reaching the limits of what they can do in the bloc's current institutional framework.
  • Both negotiations will force the Netherlands to define its position in Europe. As a country that traditionally relies on trade, the Netherlands will support any measure that protects the European free trade agreements -- which means that The Hague will not opt out of the European Union.
  • anonymous on 19 Jul 13
     
    "In a new indication that the economic crisis has reached the eurozone's core countries, the Dutch statistics office announced today that seasonally adjusted unemployment reached 8.5 percent in June, up from 6.3 percent the previous year. Clearly the EU unemployment crisis is far from over, and the bloc's structural weaknesses continue to affect even Europe's politically and economically stable nations."
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